31 May 2012

The Root of the Problem #nlpoli

Mr. Speaker, if the members opposite think that the level of scrutiny that we do over a $3 billion expenditure in health care is to take every single health authority and work down line by line by line through every piece of that, I do not know what they are thinking over there.

Health and community services minister Susan Sullivan, House of Assembly, May 30, 2012

Let’s hope that health minister Susan Sullivan doesn’t sit on the treasury board. 

That’s a committee of cabinet created under the Financial Administration Act.  Passed by the House of Assembly in 1973,  the Financial Administration Act was one of several great reforms of public administration in the province introduced by the Conservatives after they defeated Joe Smallwood and the Liberals in the 1972 general election.

Every provincial government and the federal government has a treasury board.  It is typically the most important or one of the most important cabinet committee by virtue of its control over money and people within government. Treasury board is also the only cabinet committee whose existence is set down by law.

The treasury board’s main job is to oversee how the provincial government and its agencies spend public money. 

And while the treasury board members themselves may not go through expenditures line by line, as Susan Sullivan suggested, they used to make sure that that people through the public service do just that.

Comptroller General

The most important official for tracking how government spends money in the treasury board system is the Comptroller General, a job described in the Financial Administration Act.   The CG is appointed for the “purpose of maintaining more complete control over the administration of the Consolidated Revenue Fund” by the cabinet.

A decade ago, the treasury board had its own small department – called a secretariat – that included the Comptroller General’s section as one of its four major organizational areas.  Here’s an extract from the 2001-2002 annual report of the provincial Treasury Board Secretariat:

In its comptrollership role, the Secretariat establishes the policies and systems that enable Government to keep
accurate financial records and maintain stewardship of public financial resources. The Secretariat provides managers with timely and reliable financial information
and prepares the financial statements of the Province.

The diagram (below) is taken from the 2001-02 annual report:

TB org chart 2001

The President of the Treasury Board is a cabinet minister.  The Comptroller General had only one person between him and the minister.  As much as anything else, that’s a sign of the importance governments in the province used to assign to the Comptroller General’s oversight role under the Financial Administration Act.

Adios Treasury Board Secretariat

After 2003, the new Conservative administration re-organized some of the government departments.  By 2007, treasury board secretariat was gone.  The Comptroller General was an assistant deputy minister under the finance department.  The other sections of the old secretariat went to other parts of government’s central agency, the executive council.

As you can see from the chart below, the administrative support to treasury board wound up as a very small group reporting to an assistant deputy minister of the finance department.

tb org2

Now it’s interesting that Susan Sullivan should say that the government doesn’t keep a close eye on spending in the regional health authorities.  For one thing, the health authorities are responsible for spending pretty much 40% of the provincial government’s budget. What’s more interesting is that Sullivan came to government after the government broke up the treasury board secretariat and absorbed it within other departments. 

Lax oversight

Her statement wouldn’t reflect what used to happen before 2003, but it certainly matches what the Auditor General found in his report for Fiscal Year 2008 when he looked at how the provincial government managed the regional health authorities.  All parts of the provincial government use electronic financial management software that allows departments and agencies to maintain a very close watch on what they are spending.  Looking at what departments and agencies are spending “line by line” on a quarterly, monthly, weekly or even daily basis has never been easier than it has been within the past decade.

Yet, the AG found that:

“The Department did not always obtain the monthly financial information from the RHAs via the Teledata system on a timely basis.  For example, during 2008, RHAs submitted monthly information ranging from 5 to 194 days after the required submission date.” (page 334)

According to departmental policy, the department’s audit staff were supposed to visit the regional authorities quarterly, i.e. four times a year.  They visited twice a year, instead.

“Furthermore, site visit files did not contain adequate information to support either the work performed by staff or the conclusions reached and the files were not well organized. In addition, Department staff did not always have current financial information available during site visits because either monthly information was not obtained from the RHAs or RHA internal reports were not available. This could lead to significant issues not being identified and reviewed.”

People familiar with the provincial government’s financial controls over the past 30 years or so may be surprised to see how lax things appear to have been.  They will also figure pretty quickly that if the department was not conducting more detailed financial reviews on regional authorities, then the Comptroller General and treasury board weren’t interested.  And if the treasury board wasn’t concerned, then cabinet and the premier weren’t concerned about detailed financial controls.

The “Unsustainable” Link

The Auditor General released the report linked above a few months after health minister Paul Oram tried to cut regional health authority budgets less than halfway through the fiscal year.  His action precipitated a political crisis for the provincial government and within three months he had quit cabinet and left politics altogether.

On the way out the door, Oram said that provincial government spending was unsustainable.  In the three years since, his cabinet colleagues – including the Premier and finance minister – agreed with Oram’s assessment.  Earlier this year, Premier Kathy Dunderdale told the St. John ‘s Board of Trade that “we can’t let our spending continue to grow at the rate that it has.”

In hindsight,  though, the cause of the past week’s news from Eastern Health starts to come into focus.