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.