Government Hits Historic High In Budget Overspending
For release December 5 -- Nova Scotia needs to improve accountability and transparency of budget overspending as the practice hit an all-time high of $1.7 billion in 2022-23, says Auditor General Kim Adair.
“It is not unusual for Governments to increase spending to address unanticipated needs from time to time. However, it's an issue of concern for Nova Scotians as there is no official opportunity for legislators to debate the reasons behind spending billions of dollars of public funds,” Adair said as she released her 2023 Annual Financial Report.
When a department determines it cannot stay within its original budget estimate, additional budget appropriations are necessary. Although Nova Scotia is following the Finance Act, the Act is not typical as it doesn’t require the legislature to review, vote on, or approve additional appropriations.
In 2022-23, $1.7 billion in additional appropriations were made on a budget of $14 billion, the largest amount approved since the current Finance Act was introduced in 2010. The accumulated total of budget overspending is now $6.1 billion over the last ten years.
Adair is the third Auditor General to flag this practice since 2008 and it’s the second year she’s made a recommendation to provide accountability through the House of Assembly.
“Currently in Nova Scotia, the legislature has limited ability to hold the government accountable for large overspending of public funds,” says Adair.
On a positive note, the AG Report shows that over the last five years, Nova Scotia’s economy and finances have generally improved. Operating surpluses have been posted in four of the last five years and the Net Debt to GDP ratio has improved.
The 2022-23 operating surplus of $115.7 million was due in part to provincial source revenue coming in $1.9 billion higher than budget as the provincial economy continued to rebound stronger than anticipated. The increase was mainly driven by higher taxable income, greater residential housing investment, and more consumer expenditures; expenses were $1.3 billion higher that budget.
The Annual Financial Report has two chapters and provides insights on topics of interest impacting the Province including:
- The Province’s liability to clean up Boat Harbour is now estimated at $350.1 million. This liability has grown significantly over the past few years with $82.6 million in increases due to inflation alone since 2019. Boat Harbour remediation cost is growing while the project awaits Federal approval.
- The Province spent $6.7 billion in health spending and capital asset acquisitions in 2022-23, with annual healthcare operating expenses up $1.7 billion over the last five years.
Nova Scotia Teachers’ Pension Plan:
- Nova Scotia Teachers’ Pension Plan is 75.1% funded as of December 31, 2022. The 2022 report of the independent Nova Scotia Teachers’ Pension Plan Panel with recommendations to address challenges facing the plan has not yet been publicly released.
- Net debt has increased $2.8 billion to $17.8 billion since 2018-19, with an upward trajectory in the growth rates year over year. Net debt to GDP Ratio of 31.7% improved from the prior year ratio of 33.1%.
The government provided reliable financial information for 2022-23 within the legislated deadline. For the 23rd year in a row, the Province of Nova Scotia received a clean audit opinion. That audit opinion means that the decision makers in Government, and all Nova Scotians, have assurance that they can rely on the financial statements.
While the financial statements are reliable and many processes work well, underlying significant control weaknesses need to be fixed at one government department and three government organizations. Significant control weaknesses increase the risk of unreliable financial reporting and misuse of assets in the future.