UPDATED: RCMP asked to investigate former Cumberland RDA

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Darrell Cole
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Cumberland RDA

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Nova Scotia’s rural and economic development minister said he feels his government has no choice but to call on the RCMP to investigate the financial affairs of Cumberland County’s former development agency.

“As a means to be accountable Nova Scotians and in light of the fact the audit does identify some irregularities and raises some question about improper accounting procedures we though it would be, as part of our due diligence and being responsible, to refer the matter to the RCMP and leave to their investigation to determine if any further action needs to be taken,” Michel Samson said in an interview July 10.

Samson said he doesn’t want to speculate about whether charges will come out of the RCMP investigation, adding he will leave it up to them to make those decisions. He said the file was just handed over to the police and it will take some time for the investigation to be completed.

“It is going to be significant task for them and it may take a bit of time before that’s completed,” the minister said.

Samson’s comments come as auditors PricewaterhouseCoopers have completed their independent forensic examination of the Cumberland Regional Development Authority’s financial transactions between 2007-08 and 2011-12.

The PricewaterhouseCoopers report is available here.

The auditors found gaps in controls and governance at CRDA and the Department of Economic Development Tourism during the four-year period examined. Samson said he’s disappointed in the report’s findings and said government has already begun making changes to ensure they don’t happen again.

The 700-page report contains the firm's findings and recommendations for improving the authority's governance, financial oversight and project management, processes at the department level, and the evolution from regional development authorities to regional enterprise networks.

The forensic examination was one of the recommendations of a report on the regional development authority from the Office of the Ombudsman in August 2012.

The ombudsman, Dwight Bishop, investigated the development authority after receiving complaints from two former employees who claimed they were dismissed after disclosing concerns to the board about alleged wrongdoings that were taking place.

Bishop found questionable accounting practices were taking place with a lack of oversight at the development agency. His findings appear to be backed up by the forensic examination.

“It’s disappointing anytime that you see the use of public funds may not have been done in an appropriate or accountable fashion and I’m looking forward to implementing some of the changes that were identified in the report,” the minister said. “Knowing CRDA no longer exists, our department knows it has taken great strides in assuring accountability for taxpayers and our government has initiated numerous changes as well.”

With the creation of new regional enterprise networks, Samson said the lessons learned from CRDA and other development agencies will be put in place. For one, the minister said, the new RENs will require an independent, accredited firm to audit their financial statements and as a condition of project funding all projects will have to have separate bank accounts.

“There will be regular financial reports given to their boards and the province of Nova Scotia and the board of governors of these organizations will be receiving governance training on a regular basis,” Samson said. “The terms of reference and responsibilities will be provided in writing and approved annually by the board. There’s no question we have learned from these instances and we’re going to put every safeguard possible in place with these regional enterprise networks to ensure there is proper transparency and accountability for taxpayers’ dollars.”

Now that the forensic examination has been completed, the minister said the development authority will officially be wound down. The minister is not sure what creditors there are remaining, but added all the other development agencies have had their affairs completed.

Baillie questions law firm's 'preferential' treatment

Cumberland South MLA and Opposition Leader Jamie Baillie wants to know why the Liberals gave the Cumberland Regional Development Authority’s legal counsel preferential treatment as a creditor of the closed development authority.

In addition to highlighting almost $800,000 in false claims and questionable invoices, the CREDA audit, released this morning, reveals that the Liberals paid CREDA’s legal counsel, Hicks LeMoine of Amherst, an undisclosed amount of money to hand over crucial audit evidence.

“How much did the Liberals pay the firm and why?,” Baillie asks. “It brings into question, the competency of the Liberals. Why use taxpayers’ money to settle a claim that should have been handled the same as any other creditor?”

Baillie, a chartered accountant, says withholding key audit evidence is wrong and taxpayers deserve answers from the Liberals.

The Tory leader said the audit was finally released Thursday, more than a year overdue. According to the audit, the delay was the result of CRDA withholding crucial information including hard drives from its law firm.

He said the audit confirms the Liberals paid the firm on Feb. 11, 2014. This information would have been known to the Liberals when Baillie asked minister Michel Samson the same question in Question Period, but he refused to answer.

The audit, which has now been referred to the RCMP, finds significant gaps in controls at both CREDA and the provincial Department of Economic and Rural Development and Tourism.

“This troubling audit highlights the importance of competency and accountability for anyone who has oversight of public funds,” said Baillie. “It’s a disappointing day for the people of Cumberland County and for all those across the province who expect more from their government.”

Economic and Rural Development Minister Michel Samson said the audit began in January 2013 and everyone wanted answers to remove the cloud that was hanging over a lot of people.

He said the province paid the law firm $8,500 for providing legal services and did not consider it to be creditor of CRDA’s.

“This became an issue, the fact the hard drives had been given to the law firm on behalf of some of the employees. There was a question of the law firm reviewing this to determine if there were issues of solicitor-client privilege and other issues and there was a question of who was going to pay the cost of carrying out that responsibility by the law firm,” Samson said. “My staff and the department negotiated with the law firm because I was not prepared to see this process take any longer than it was taking. It was decided to pay the law firm $8,500 for their services in reviewing those hard drives in order for PricewaterhouseCoopers to continue their audit.”

Samson said he is surprised with Baillie’s accusation, adding the law firm was not looked at as a creditor but as a firm that had a duty to its client to review matters on the hard drive from a solicitor’s perspective.

“Once that was done they were prepared to turn those hard dirves over to PricewaterhouseCoopers for their review,” Samson said. “It was also work that was being done by the law firm as part of the wind down of CRDA.”

The minister said Baillie is not showing leadership is the message he gets from the 700-page report is an $8,500 payment to a law firm for legal services.

 

Organizations: PricewaterhouseCoopers, RCMP, Cumberland Regional Development Authority Department of Economic and Rural Development South West Shore Development Authority Jobs Fund

Geographic location: Nova Scotia

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