P.E.I. Department of Finance is working to resolve issues identified in AG report, officials say

Prince Edward Island's deputy finance minister and other senior officials answered questions from MPs Tuesday about an auditor general's report that criticized their department.

Auditor General Darren Noonan's report, released in February, cited, among other problems, the government's lack of an internal audit function and the high costs of spending through so-called special mandates.

The report also notes $4.53 million in overpayments the province paid to 23 municipalities last year, which those communities were then asked to repay — in some cases after the money has already been spent.

Denise Lewis Fleming, the province's deputy finance minister, told a legislative standing committee Tuesday that the overpayments were due to human error.

Deputy Finance Minister Denise Lewis Fleming says there have been fewer special warrants this year than in 2023. (Stacey Janzer/CBC)

Regarding the government's use of special warrants – expenditures that fall outside the provincial budget and are authorized by cabinet without a vote in the Legislative Assembly – the Attorney General's report says 23 late special warrants were was issued after August 2023.

These amounts totaled approximately $143.8 million, the highest amount ever reported by the province.

Green Party MP Peter Bevan-Baker said Tuesday that using the warrants avoided oversight by the legislature.

“It takes away the trust and level of transparency that Islanders need to have in their government,” he said. “So we should really limit the use of special warrants to very specific circumstances.”

Green Party MP Peter Bevan-Baker says other provinces already have audit processes in their finance ministries. (Legislative Assembly of Prince Edward Island)

Bevan-Baker said other provinces and the federal government limit special warrants to urgent circumstances.

Fleming said efforts have been made over the past year to help government departments reduce the number of special warrants. She said there were many in use during the COVID-19 pandemic and into 2023, but the number was trending down this year.

“The number of special warrants may very well still be a little higher than it has been historically in the past,” Fleming said.

“We now have more appropriations lines because we have more individual appropriations lines for state corporations, so when you add more, you increase the likelihood that (the) budget will never quite be exact.”

Department seeking an audit consultant

The committee heard that the Department of Finance still does not have an internal audit function.

Judy Killam, the province's comptroller, said an internal audit is done daily to ensure payments are accurate and complete. When an internal audit function is created, it will fall under its purview.

She said her office would bring in a consultant to look at how it could work.

Killam said the creation of an internal audit office is not planned until the start of the 2025-2026 fiscal year.

“They can’t pay this money back.”

Fleming told the committee the department has measures in place to prevent mistakes like overpayments to municipalities.

In the case of the $4.53 million overpayment, she said a finance employee did not go back to the source documents to ensure the calculations were done correctly.

“When you get to that final stage, a hard copy is printed, and that's the copy that a second pair of eyes now look at separately and verify,” Fleming said.

Liberal MP Hal Perry said it's not right for municipalities to receive money for pending projects and then be asked to pay it back.

“Now they find themselves in a situation where they really can't pay that money back because of the limited revenue coming to these municipalities.”

Finance officials said some municipalities have already repaid the money, while others are using payment arrangements.