Nova Scotia

CRDA scandal highlighted by false invoices and cheque copies

A forensic audit alleges that nearly $790,000 worth of questionable invoices were filed at a defunct economic development authority in northern Nova Scotia.

End of fiscal year practice was dubbed 'March Madness' by employees

The Cumberland Regional Development Authority audit was ordered in August 2012 after the province's ombudsman detected what he called questionable accounting practices and a lack of oversight. (Google)

Nearly $790,000 worth of false and questionable invoices were filed at a defunct economic development authority in northern Nova Scotia, a forensic audit alleges.

The provincial government said Thursday that it has sent the 700-page report on the Cumberland Regional Development Authority (CRDA) to the RCMP.

"Obviously, we're very disappointed, said Minister of Economic and Rural Development and Tourism Michel Samson. "Anytime you know that there are procedures in place to protect taxpayers' investments that are either subverted or not followed, it is of great concern."

Progressive Conservative Leader Jamie Baillie was similarly displeased.

“It’s a disappointing day for the people of Cumberland County and for all those across the province who expect more from their government,” he said in a news release.

The audit was ordered by the former NDP government after a 2012 report by the ombudsman found questionable accounting practices and a lack of oversight at the Cumberland Regional Development Authority, which was shut down about a year ago.

The invoices highlighted by the audit total $789,548 between 2008 and 2012 and helped secure about $256,000 in funding from the province's Department of Economic and Rural Development and Tourism.

The audit, carried out by PricewaterhouseCoopers, says those claims represent 10 per cent of the project expenses reported by the economic development authority during that time period.

The report says the economic development authority failed to annually audit its project activity, leaving its funding partners, including the province, with no assurance its records were accurate.

It also alleges that the economic development authority's management and employees "routinely participated" in the submission of false invoices and cheque copies to the province to "conceal the impact of the fictitious documentation."

"This was CRDA's method of dealing with the province's funding condition requiring that, if a project was not complete when a fiscal year came to an end, approved funding would lapse," says the report.

This practice even had a name — employees called it March Madness.

The warden of the Municipality of the County of Cumberland says this practice is likely widespread.

"I think it happens a lot in order to preserve the funding that needs to be spent for the project," said Keith Hunter.

Province also blamed

The lack of monitoring enabled the use of a single bank account for all project funds, allowing the economic development authority to use funds designated for one project to subsidize others, the audit said.

Funding from the province and other partners exceeded project expenses by $594,109, according to the economic development authority's records, although the audit says it's "not possible to determine the ultimate disposition of these funds."

The report doesn't spare the province, citing deficiencies in project documentation within the Department of Economic and Rural Development and Tourism.

It said the department had no mechanism to monitor whether the funds distributed to the economic development authority were spent appropriately.

As a result, the department approved $700,000 in funding that was outside the scope of its mandate without conditions, the audit said.

"The findings from our examination indicated significant gaps in controls and governance," says the report.

"As a result, funding for CRDA expenses was provided that would not otherwise have been approved and disbursed by [the department]."

Baillie also took aim at the Liberals for paying CRDA's legal counsel an undisclosed amount of money in February to hand over crucial audit evidence.

"Why use taxpayers’ money to settle a claim that should have been handled the same as any other creditor?” said Baillie.

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

The audit stemmed from an investigation by former ombudsman Dwight Bishop that was launched after two former employees from the economic development authority contacted him in October 2011, alleging wrongdoing.

with files from CBC