Provincial Government Responds to Auditor General’s Report

The Honourable Jerome Kennedy, Minister of Finance and President of Treasury Board, responded today to the release of the Report of the Auditor General on Reviews of Departments and Crown Agencies for the fiscal year ended March 31, 2012. Minister Kennedy acknowledged the work that the Auditor General does on behalf of residents of the province.

“The reviews of Crown agencies and departments completed by the Office of the Auditor General and the report recommendations are important to this government,” said Minister Kennedy. “In the past we have been very successful in taking action on the Auditor General’s recommendations. In his last update report, the Auditor General noted that our government has taken action on 92 per cent of his recommendations. We will closely review the recommendations in this year’s report and take action as appropriate.”

The Auditor General’s report also includes the Audit of the Financial Statements of the Province for the fiscal year ended March 31, 2012. The Auditor General acknowledged in his report that increased activity in the resource sector, as well as major development projects, resulted in an increase in the Gross Domestic Product (GDP). This, combined with substantial increases in commodity prices, has had a positive impact on the province’s revenues and has resulted in surpluses in six of the past 10 years. Federal revenue as a percentage of total revenues has declined from 38.8 per cent in 2003 to 18.5 per cent in 2012.

“Offshore oil royalties increased by almost $590 million over budget in 2011-12, demonstrating the volatility of the province’s revenue streams,” said Minister Kennedy. “In the current fiscal year the global economy has continued to slow down, which has resulted in a reduced demand for oil and minerals, and the volatility has shifted in the opposite direction to produce a negative result for the province as we reported in the mid-year financial update.”

The Auditor General notes that per capita expenses in the province are the highest in Canada and that geography contributes to this growth in expenses. The Auditor General recommends that the Provincial Government consider alternative options to deal with deficits over the medium term. As noted in its mid-year update, the Provincial Government is committed to aligning expenses with projected revenues to support long term fiscal sustainability.

The Auditor General noted that while net debt has declined by $2.8 billion since 2003, as of March 31, 2012 the net debt is $7.8 billion. He also noted that the liability related to employee future benefits totalled $5.2 billion at March 31, 2012 and represents 67 per cent of the province’s net debt. Net debt as a percentage of GDP has declined from a high of 64.5 per cent in 2003 to a low of 23.3 per cent in 2012, indicating an increase in the borrowing capacity of the Province. Net debt as a percentage of revenues has improved since 2003.

“Our government has a solid history of sound fiscal management; however, we must remain diligent in ensuring that we manage the programs and services that we provide in the most effective and efficient way possible,” said Minister Kennedy. “As we get closer to the upcoming budget process, we must make difficult decisions to manage our spending, as recommended by the Auditor General. We must continue to make the right decisions now to sustain a bright and prosperous future for residents of our province and future generations.”

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Media contact:
Tansy Mundon
Director of Communications
Department of Finance
709-729-6830, 693-1865
tansymundon@gov.nl.ca 

2013 01 23                            2:25 p.m.