Auditor General Kim MacPherson found many conflict-of-interest cases in the province's handling of 289 e-health contracts in a six-year period.
"We found there were many cases of conflict of interest in the use of consultants for the period 2005 to 2011 in the department," MacPherson's annual report said.
MacPherson was called in to review the e-health contracts in September 2011 after a previous internal audit found potential conflicts of interest in the way some of the contracts were awarded and managed.
The auditor general's report said it found 57 violations in the procurement of IT services.
The province's chief financial watchdog also raised questions about the use of consultants in setting up the electronic patient record system and other e-health services.
During the time period where the conflicts were discovered, the auditor general's report pointed out that external consultants were relied on "extensively."
MacPherson's report also raised questions about the payments made to the consultants. She said more than $3.4 million was paid to three consultants over six years, plus the department provided them office space and equipment.
"In these three cases, we believe the use of consultants was significantly more costly to the province than had this work been completed by departmental staff," the report said.
The auditor general recommended the health department develop a plan to "in-source" — or use departmental staff — for all IT operation and maintenance jobs over the next two years.
"In our opinion there are savings that could be realized by in-sourcing the performance of ongoing IT systems operation and maintenance work," the report said.
The financial watchdog's report also said health official said other departments were using similar practices with the use of IT contracts.
"This would imply many of the procurement and conflict of interest issues our office, and the [Office of the Comptroller], identified in connection with the E-Health initiative may exist in other departments and Crown agencies," the report said.
Comptroller report pointed out problems
MacPherson knows the e-health file well. She was the provincial comptroller who launched the initial audit that brought the problems to light.
The Office of the Comptroller looked at 15 e-health contracts in November 2010.
That audit found outside consultants brought into the Department of Health to oversee the e-health project were in a position to see invoices and documents from their competitors, giving them an unfair advantage in bidding on additional contracts.
In addition, some contractors were paid more than they were due and contracts were extended without proper procedure, the audit, obtained by CBC News under the Right to Information Act in May 2011, showed.
Madeleine Dubé, who health minister at the time, said problems with the contracts, which were signed under the watch of Michael Murphy, a former Liberal health minister, had been fixed. But she still asked for a full review of all 300 contracts.
Murphy defended his record on e-health contracts, saying no minister can be expected to investigate every company or every individual who works in the department.
The comptroller's report said the deputy minister of health was made aware of the concerns over conflicts of interest and procurement problems before the comptroller's review started.
The Department of Health redacted the names of all of the companies and consultants mentioned in the released Right to Information documents.
Several companies were working on the e-health project, including CGI, a national technology company based in Montreal, with offices in New Brunswick and Accreon, a Fredericton-based technology company that was working in partnership with Make Technologies, a Vancouver-based company.
The Alward government has pinned its hopes for controlling health care costs in part on getting an e-health system up and running.
At the heart of the e-health project is the move to an electronic patient record system. The government has said the one-patient-one-record system would be more efficient, cut down on costs and deliver services more quickly.
Under the system, information about a patient — including prior medical history, medications they are taking, prescriptions they should not be taking — would be on one record that could be accessed anywhere in the health system.