Thank you. Oral questions. Member for Monfwi.

Thank you. This is a question for the Minister of Housing. My question to the Minister is whether she will consider taking the initiative in forgiving the mortgage arrears of the constituents who did not understand anything about mortgages and were not informed in their own language. Thank you.

Thank you, Member. Minister for Housing NWT.

Thank you, Madam Speaker. I will take this back to the department as well. And I just wanted to remind the Member as well too that we do have to follow the Financial Management Act as well too, and when we're going to be looking at writing off debts to this government it is something that is actually brought forward to this Assembly. Thank you, Madam Speaker.

Well, they are the executive council and they can change the policy. It is within their -- they can -- they have the authority to change the policy. So, like, in the past, FMB rolled out $4 million for a business loan, so I know they can do it. They can change the policy. They have the -- that is within their authority.

But I just want to ask the Minister, will the Minister commit to transferring North Slave district office to Tlicho region that deals specifically with Tlicho? Thank you.

Thank you. Thank you, Madam Speaker. At this point, we don't see any transfers happening to the Tlicho for a district office to be operating out of the Tlicho region. Right now, they are considered out of the North Slave but I can follow up with the Member. We also do have our working table with the Tlicho government as well too, and I haven't -- this hasn't been highlighted at those tables, that they had brought this up as a concern to the government. Thank you, Madam Speaker.

Yes. Well, I've been hearing from a lot of my constituents, because sometimes when they have housing issues they have nobody to go to. And that's what I keep hearing from the people. So when they do transfer the North Slave district office and hiring more local people, then I think the program will be more effective and efficient because right now it's not working. It is not working in our region, and everything is in Yellowknife. So that's all I wanted to say. And it's more of a comment, but it's up to her if she wants to respond to it. Thank you.

Thank you, Madam Speaker. The North Slave office does travel quite frequently into the Member's riding as well. But I can bring this back to the department. But like I had said, is that it hasn't been brought up at the Indigenous government table, and it wasn't highlighted with our housing working group table as well too. But I can follow up with the Member. Thank you, Madam Speaker.

Thank you. Member for Yellowknife North.

Thank you, Madam Speaker. My questions are for the Minister of Finance responsible for the procurement review.

When you look at schedule 3 of the Business Incentive Policy, there's a number of southern companies that have been grandfathered. I think it would be fair to frame this list as a number of monopolies that we seem to be dedicated to building up. There are three versions of Northwestel; there's Bellanca Developments; three versions of Northern Properties, all of which have been bought and sold many times; three versions of Northmart; and, 13 specified Northern Stores, some of which don't exist anymore, and most notoriously Walmart Canada.

So my question for the Minister responsible for this procurement review is when are we going to remove this list of grandfathered southern businesses from our Business Incentive Policy? Thank you, Madam Speaker.

Thank you, Member. Minister of Finance.

Thank you, Madam Speaker. Madam Speaker, the definition of a northern business is subject to the review. There have been a lot of inputs on that. I would note I think it might well be the very same Member who had previously suggested that the definition of "northern business" should speak to the number of employees in the riding and that might make it interesting to determine whether or not Walmart should be removed or not. But when we are complete the definition, which will happen in the life of this government, we will then be in a position to update schedules according to BIP because we'll be in a position to say, again, whether or not -- sorry, Madam Speaker, we'll be in a position to identify who should be on the list and who falls within the definition. Thank you, Madam Speaker.

Yeah, thank you, Madam Chair. You know, I recognize that but what we've done is actually we've specified a list, and on it are a number of companies that don't exist anymore. A number of numbered companies, I have no idea what those numbered corporations are. It's really -- I get there's a way to define the policy and whether or not Walmart falls in it is up to, you know, probably the way we write the policy and the business incentive review committee. I don't understand why we are keeping this schedule of a list of companies, many of which are outdated and many of which have no -- absolutely are not warranted to be BIPed anymore. I think they have long since left any sort of employees in the North. So is the plan to get rid of this schedule method where we list a number of corporations, some of which don't exist anymore? Thank you, Madam Speaker.

Thank you, Madam Speaker. Madam Speaker, I type quickly but not enough to pull up schedule 3 in the space of time that the question was being posed. So it's not appropriate for me to be committing to what will or will not look like the final schedules when the final definition of a northern business is complete. What I can say, Madam Speaker, is I think there's a fairly reasonable possibility that there is an update to various company names and corporations, corporate documents, and that may be the explanation.

That doesn't change the bigger picture of what is the definition of a northern business, how does BIP get applied to that definition, and to ensure that it's clear so we don't wind up with multiple schedules that get year to year updated. That's not effective, and that's certainly -- I take that point, and I agree with that point. That's the direction we're going to and the definition for "northern business" is being worked on right now. Once that's done, the schedules will align with that or, frankly, maybe go away. Thank you, Madam Speaker.

Thank you, Minister. Oral questions. Member for Great Slave.

Recognition of visitors in the gallery. Written questions. Returns to written questions. Replies to the Commissioner's address. Petitions. Reports of committees on the review of bills. Reports of standing and special committees. Member for Yellowknife North.

Thank you, Madam Speaker. Your Standing Committee on Government Operations is pleased to provide its report on the review of the 2020-2021 Public Accounts, and commends it to the House.

Introduction

Reviewing the Public Accounts to enhance Financial accountability

On December 8, 2021, the Minister of Finance tabled the 2020-21 Public Accounts. The public accounts are the financial statements that show the financial results of the Government of the Northwest Territories for a given year.

Each year, the Standing Committee on Government Operations reviews the public accounts. These reviews assess the credibility of the government's financial position and provide accountability for the government's financial results. Put differently, these reviews matter because they ask whether public money was spent prudently and as intended by the Legislative Assembly.

On June 29, 2022, committee held the public portion of its review. Committee received briefings from officials at the Office of the Auditor General and the Office of the Comptroller General. Their input was valuable to identify and clarify key issues.

In response, committee developed eight substantive recommendations to improve financial practices and reporting. These recommendations seek to achieve three goals:

1. Understand and address NTHSSA's growing deficit;
2. Enhance disclosure on environmental liabilities, resource revenues, and tangible capital assets; and
3. Make fiscal reporting more timely, frequent, comparable, and digital.

Committee is pleased to submit these recommendations and looks forward to their implementation.

Recommendations

Understand and address NTHSSA's growing deficit

When NTHSSA was established in 2016, its accumulated deficit stood at $51 million. Part of the promise of amalgamating the six regional health authorities was to "control spending" while "improving care." NTHSSA's creation was supposed to help use resources more effectively and improve accountability and risk management.

Yet now, six years later, NTHSSA's accumulated deficit has almost quadrupled. It stands at $194 million, up by over $140 million. The accumulated deficit has climbed because expenses have exceeded revenues by $10 to $35 million in each of the last six years.

NTHSSA reports that the reason for the operating deficit are "numerous." Five notable cost drivers include:

1. Cost of overtime due to staffing shortages;
2. Underfunded locum costs;
3. Unfunded or underfunded programs;
4. Unfunded growth in healthcare positions; and.
5. Underfunded COVID-19 costs.

To understand and address these and other cost drivers, the GNWT has pointed to a "Financial Sustainability Plan." The plan was finalized in December 2020. Shortly afterwards, the Minister of Health and Social Services said, What we are trying to do is reduce the size of NTHSSA's deficit to zero through the health system's sustainability plan, to understand the drivers that are adding to the deficit and address those and reduce them until we get to a point where we are not budgeting with deficits for the health authorities."

It's unclear whether the Financial Sustainability Plan is on track to reach its zero-deficit goal. Early reporting suggested that the plan was delayed and staffing efforts faced difficulties. This work may have been delayed due to the COVID-19 pandemic. In 2021- 2022, the first full fiscal year after the plan was finalized, NTHSSA's annual deficit reached an all-time high of $34 million. Other reporting in the Health and Social Services business plan document and the NTHSSA Annual Report does not indicate whether any savings have been achieved.

The territory's medium-term fiscal outlook adds to our concern. The GNWT's financial forecasts says it will run out of room to borrow money within four years, in 2026-2027. Meanwhile, the health system faces relentless cost pressures, an aging population, and a need to keep up with technological innovation, all while maintaining service levels. Without reforms to achieve better value from existing health system resources now, the GNWT may be forced to reduce healthcare services in the future. Committee is concerned that the GNWT's Financial Sustainability Plan may not be sufficient to ensure the healthcare system's long-term, or even medium-term, financial sustainability. The OAG, the Office of the Auditor General, believes that the recent changes to increase financial reporting capacity at the NTHSSA are not enough, on their own, to address the persistent deficits. Committee expects to see improved performance towards attaining the healthcare system's goals while respecting budget constraints. As the Minister previously said, this work starts with a better understanding of NTHSSA's deficit. Committee therefore recommends:

Recommendation 1

That the Department of Health and Social Services provide detailed reporting and analysis on each cost driver of the Northwest Territories Health and Social Services Authority's persistent operating deficit. The analysis should quantify how each driver contributes to NTHSSA's operating deficit. The analysis should also quantify, break down, and explain, for each driver, the difference between:

1. Budgeted expenses, positions, and programs; and
2. Actual results.

The Office of the Auditor General also raised concerns about internal controls at the NTHSSA. Internal control processes are important to protect the public sector from fraud, corruption, waste, and abuse. Internal controls also help governments measure the value-for-money of services. The OAG reported that many areas of internal controls needed improvement and noted this problem in a management letter to the authority. Better internal controls at the NTHSSA are a key element to improving the performance and restoring financial sustainability. Committee wants to reinforce accountability for the OAG's recommendations and therefore recommends:

Recommendation 2

That the Department of Health and Social Services disclose its response to the Office of the Auditor General's 2020-2021 Audit Observation that many areas of internal controls need improvement at the Northwest Territories Health and Social Services Authority. The department should also disclose its action items, progress on those action items, and timeline to improve internal controls.

I will now turn it over to the MLA for Kam Lake. Thank you, Madam Speaker.

Thank you Member for Yellowknife North. Member for Kam Lake.

Thank you, Madam Speaker.

Enhance disclosure on environmental liabilities,resource revenues, and tangible capital assets.

Environmental Liabilitities

Environmental liabilities represent the costs required to remediate contaminated sites for which the GNWT is responsible.

The 2020-2021 public accounts reported 277 contaminated sites with a total liability of $68 million. This liability is further broken down according to seven types of sites, such as "abandoned mines" and "landfills."

For years, committee has advocated for more transparency on the GNWT's contaminated sites. In 2018, committee recommended14 that the GNWT develop an online inventory modeled on the federal government's Federal Contaminated Sites Inventory.

The GNWT accepted that recommendation and, in the past year, released the GNWT Environmental Liabilities Dashboard.

Committee commends the GNWT for this work. The dashboard is a significant contribution toward more transparency on environmental liabilities. However, the GNWT's dashboard is missing key categories of information of interest that are available on the federal inventory. Take, for example, the Giant Mine Remediation Project, which is co-managed by the GNWT and the federal government. The GNWT's dashboard plots the site on a map, identifies the site type and contaminant of concern, and provides a brief description. The federal inventory provides this information and much more, such as the volume of contaminated media, population estimates at distances around the site, and a breakdown of remediation spending for each year.

Committee encourages the GNWT to build on its Environmental Liabilities Dashboard and provide more disclosure. Committee therefore recommends:

Recommendation 3: That the Department of Finance provide a plan with timelines to enhance reporting on the GNWT Environmental Liabilities Dashboard by matching reporting practices in the Treasury Board of Canada Secretariat's Federal Contaminated Sites Inventory.

Resource revenues

The public accounts reported that in 2020-2021, the GNWT collected $66 million in gross non-renewable resources revenues. Non-renewable resource revenues include mineral, quarry, oil and gas, and water revenues as defined in the Northwest Territories Lands and Resources Devolution Agreement.

The public accounts only break down the gross revenue amount into three broad categories: minerals, oil and gas royalties; licenses, rental and other fees; and quarry fees.

Committee wants to see a more detailed breakdown of each type of resource revenue and a clear presentation of gross revenues, disbursements to other governments, and the resulting net revenues for the GNWT. Thorough reporting is important to maintain the credibility of resource revenue collection and distribution.

While current reporting practices meet minimum standards in the Public Service Accounting Standards, the OAG indicated that "there is room for enhanced disclosure in a note." Committee agrees and therefore recommends:

Recommendation 4

That the Department of Finance provide more detailed resource revenue data on gross amounts received and calculations of amounts retained. This enhanced reporting should separate annual aggregate values from petroleum, mineral resources, and each other type of resource revenues.

Tangible Capital Assets

The public accounts reported that in 2020-2021, the net book value of the GNWT's tangible capital assets, or TCAs, was $3.7 billion. Tangible capital assets are the buildings, roads, equipment, and other assets whose life extends beyond the fiscal year and are being used on an ongoing basis.

Each asset is amortized over its estimated useful life. Some assets may be fully amortized even if they're still in use, making them assets with a zero book value. Committee is not aware of reporting in the public accounts on assets with zero book value. Information on accumulated amortization, which was $2.2 billion in 2020-2021, does not indicate how much of that amortization comes from fully amortized assets. Committee believes this type of reporting is important as an indicator of future asset replacement costs that are potentially imminent.

Committee wants to see more reporting in this area and therefore recommends:

Recommendation 5: That the Comptroller General add to the financial statement discussion and analysis section of the public accounts information on tangible capital assets with zero book value and provide a timeline for implementation.

Make fiscal reporting more timely, frequent, comparable, and digital.

For this review of the public accounts, committee took a special look at transparency in fiscal reporting. This kind of transparency refers to the comprehensiveness, clarity, reliability, timeliness, and relevance of reporting on public finances. Transparent fiscal reporting is important for effective fiscal management and accountability. It helps ensure members, businesses, and residents have information to hold government accountable. It provides government with accurate information to make better budget and policy decisions. And it strengthens the credibility of a jurisdiction's fiscal health to markets.

In recent years the GNWT has made several changes to make the public accounts more transparent. Significant changes include enhancing the financial statement discussion and analysis section and more detailed disclosure in the notes. Committee appreciates the Comptroller General's commitment to continually improve the public accounts and openness to committee recommendations.

In support of continual improvement, committee evaluated the GNWT's fiscal transparency compared with international standards - specifically, the IMF's Fiscal Transparency Code. The IMF, an international financial institution, calls the Code "the international standard for disclosure of information about public finances." The Code includes 12 dimensions of transparency in fiscal reporting.

Committee found that the GNWT met the highest advanced standard of transparency in five of the 12 dimensions. In the remaining dimensions, the GNWT could improve its fiscal reporting practices to meet the highest international standards.

Madam Speaker, I would like to, please, pass the reading of the report on to my colleague from Thebacha.

Thank you, Member. Member for Thebacha.

Thank you

Figure 2: Government of the Northwest Territories performance on 12 international best practices of fiscal transparency

There are three categories - the dimension, the principle, and the rating of the government practices.

1. Coverage of Institutions. Fiscal reports cover all entities engaged in public activity according to international standards. We got an "advanced" for that.
2. Coverage of stocks. Fiscal reports include a balance sheet of public assets, liabilities, and net worth. Advanced.
3. Coverage of flows. Fiscal reports cover all public revenues, expenditures, and financing. We got advanced for that.
4. Statistical integrity. Fiscal statistics are compiled and disseminated in accordance with international standards. Advanced.
5. External audit. Annual financial statements are subject to published audit by an independent supreme audit institution which validates their reliability. Advanced.
6. Timeliness of annual financial reports. Audited or final annual financial reports are published in a timely manner. We got a "good" for that.
7. Internal consistency. Fiscal reports are internally consistent and include reconciliations between alternative measures of summary fiscal aggregates. We got "good" for that.
8. Classification. Fiscal reports classify information in ways that make clear the use of public resources and facility international comparisons. We got a "basic" for that.
9. Comparability of fiscal data. Fiscal forecasts, budgets, and fiscal reports are presented on a comparable basis with any diversifications explained. Basic.
10. Coverage of tax expenditures. The government regularly discloses and manages revenue loss from tax expenditures. Less than basic.
11. Frequency of in-year reporting. In-year fiscal reports are published on a frequent and regular basis. Less than basic.
12. Historical revisions. Major revisions to historical fiscal statistics are disclosed and explained. Unclear.

Committee believes the GNWT should and can meet the highest standards of transparency. To that effect, committee is advancing recommendations to improve in three areas:.

1. The timeliness of annual financial statements;
2. The frequency of in-year reporting; and
3. The comparability of fiscal data.

Committee recognizes that our recommended improvements will take place. The improvements imply significant administrative, technological, policy, and even legislative work. The most significant challenge may be to develop the internal government collaboration needed to produce greater external transparency. With these factors in mind, committee is seeking the GNWT's commitment to take steps, with timelines, towards reaching the highest standards of fiscal transparency.

Timeliness of annual financial statements

Timeliness refers to the time lag between the end of the fiscal year - March 31st - and when the public accounts are published. Timely publication is critical to ensure that past fiscal performance can inform future budgets. It also ensures that any irregularities identified by auditors can be addressed quickly. Several international organizations, such as the IMF, recommend releasing the public accounts within six months of the fiscal year-end. The GNWT does not meet this standard. Legislation only requires the GNWT to complete the public accounts within nine months. Over the past five years, the GNWT has released the public accounts seven to nine months after fiscal year-end.

Figure 3: Release date of the public accounts since 2017

• The years for 2017 for the public account year, release month was November 2017, which was eight months.
• For 2018, it was released on October 2018, which is seven months.
• 2019, December 2019 was nine months.
• 2020, December 2020, it was nine months.
• 2021 was released on November 2021, which was eight months.

While the Comptroller General is required to produce an interim financial report within six months of fiscal year-end, this practice falls short of the international best practice. The interim financial report is non-consolidated, unaudited, and generally not available to the public. Committee believes a timelier release of the public accounts is achievable. Yukon's Department of Finance, for example, is working with consolidated entities and the OAG to move up the release of the Public Accounts. Committee therefore recommends:

Recommendation 6

That the Department of Finance amend the Financial Administration Act, section 35, to move the required release date of the public accounts by three months, from December 31 to September 30.

I will now turn the next item over to MLA Johnson from Yellowknife North.

Thank you, Member. Member for Yellowknife North.

Thank you, Madam Speaker.

Frequency of in-year reporting

Frequency of in-year reporting refers to publishing information on government revenues, spending, and debt financing over the course of the fiscal year and comparing these results with the budget. Frequent and regular in-year fiscal reports are important because they provide information on progress implementing the budget. This helps inform budget preparation for the next year. In-year reports also require government to create and enforce procedures to collect and consolidate data across public sector entities.

The GNWT does not appear to meet the "basic" level on this international standard: to publish in-year fiscal reports on a quarterly basis, within a quarter. In fact, committee is not aware of any in-year fiscal reports that the GNWT regularly releases to the public. Though the GNWT released an in-year fiscal update in 2021, this practice is not routine. That document also did not offer data tables to compare the results with the actual budget.

Other jurisdictions produce regular in-year fiscal reports. The federal government releases quarterly and monthly fiscal reports. Yukon releases a detailed semi-annual interim fiscal and economic update.

Committee wants to see more transparency on the GNWT's in-year progress implementing the budget, and therefore recommends:

Recommendation 7: That the Department of Finance take steps to publish in-year fiscal reports on a quarterly basis, within a month, and provide a timeline for implementation.

Comparability of fiscal data

Comparability refers to how information is presented in the public accounts to make easy comparisons over time and with other fiscal documents, like the budget. Comparable fiscal data matter because they enhance the integrity and transparency of government finances.

A key aspect of comparability is the use of consistent classifications in fiscal documents. There are four main internationally adopted classifications used for fiscal data:

1. Administrative, which identifies the department responsible for a financial item;
2. Economic, which identifies the type of spending, such as salaries or travel;
3. Functional, which identifies the socio-economic objective of a financial item, and
4. Program, which consists of a set of activities to achieve a policy objective.

The GNWT's budget and main estimates documents use, more or less, all four types of classification. By contrast, the public accounts use only three types, leaving out program classifications. The discrepancy makes it harder for users of the public accounts to scrutinize how well the GNWT implemented the budget.

An additional barrier to fiscal comparability is publication format. To committee's knowledge, the only publication format for the budget and the public accounts is PDF. Each PDF is limited to a single year's data, making it onerous and even prohibitive for users to manipulate the data and assess long-term trends beyond those included in the discussion and analysis section.

Take, for example, a public accounts user trying to assess the GNWT's spending on child and family services over the past ten years. The user would have to locate, open, and search ten PDF documents. This task would be practical on only certain devices. While the user would find reference to spending at the Department of Health and Social Services, an administrative data classification, they would not find information on how child and family services, a program classification. This example illustrates how the current publication format and data classifications reduce the usefulness of the public accounts.

Other jurisdictions provide examples of digital publication formats that make it easier to use the public accounts. Ontario provides a searchable, web-based table of spending items broken down by program, as well as .csv data files highlighting five-year fiscal trends. Quebec displays web-based graphs of high-level fiscal aggregates with ten years of historical data and links to the relevant page in the traditional public accounts document. And Yukon's Department of Finance is implementing a recommendation from its public accounts committee to digitize its public accounts.

Committee wants to see changes to make information in the public accounts more comparable over time and with the budget, using user-friendly publication formats. Committee therefore recommends:

Recommendation 8

That the Department of Finance take steps to digitize the public accounts and provide a timeline for the implementation and anticipated costs. The digitized presentation of financial results should align with the administrative, economic, functional, and program classifications used in the budget and main estimates documents.

Conclusion

This concludes the Standing Committee on Government Operations' Report on the review of the 2020-2021 Public Accounts. The committee looks forward to the government's response to these recommendations.

Recommendation 9: The Standing Committee on Government Operations recommends that the Government of the Northwest Territories provide a response to this report within 120 days. Thank you, Madam Speaker.