Finance
January 29, 2016

Strong Fiscal Management Remains A Priority

Minister Responds to Auditor General's Release of Report on Audited Financial Statements for the Province

The Auditor General has released his 2015 Report on the Audit of the Financial Statements for Newfoundland and Labrador for the fiscal year ended March 31, 2015. The report discusses not only the last fiscal year but also makes comment on forecasted numbers presented in the 2015-16 Fiscal and Economic Update.

"The work of the Auditor General is important and I would like to thank him for this report as well as the staff in the Department of Finance and the Comptroller General's Office that work each year to produce the Public Accounts. We recognize the difficult fiscal situation the province is facing. We have tough decisions to make and all of us are going to have to work together to correct the course. This will require focus, collaboration, long-term planning and a commitment to long-term sustainability. We will map out a deliberate new path to renew government, reshape the economy and create a stronger, more sustainable future for Newfoundland and Labrador."
- The Honourable Cathy Bennett, Minister of Finance and President of Treasury Board

The Auditor General outlined the financial position of the province in his report and the decline of the province's financial outlook since March 31, 2015. He noted the following:

• The province's economic forecast for 2016 to 2020 indicates steady Gross Domestic Product growth driven by anticipated increases in oil prices and oil production;
• The deficit for the year ended March 31, 2015 was $986 million - 2.5 times greater than the deficit in the previous year and a $448 million deterioration from the amount predicted in Budget 2014;
• For 2015-16, oil royalties are forecast to decline significantly from $1.6 billion in 2014-15 to $552 million, a decline of $1.0 billion in just one year. He states that given the lack of control over factors that impact oil royalties, government has to carefully consider the degree to which it can rely on this revenue source to fund programs and services; and,
• That 70 per cent of program expenses are directed to health, education and skills development sectors, with health attributing $3.0 billion of the total program expenses of $7.1 billion.

"The Auditor General's assessment supports what we have always maintained - oil is a non-renewable resource that must be leveraged to ensure a more stable and diverse economic future and not be used in isolation to create fiscal policy. It is important to remember that in 2013-14, when oil was averaging over $100 a barrel, this province had a deficit problem. Given the seriousness and scope of the current and forecasted fiscal situation, a new approach is required. That's exactly why we launched the Government Renewal Initiative. Action must be taken, engagement must be real and it must lead to substantial and measurable long-term change."
- Minister Bennett

The Auditor General's report reinforces the importance of the Government Renewal Initiative and engaging with Newfoundlanders and Labradorians on the long-term solutions as well as on the short-term actions for Budget 2016 to reduce spending to more sustainable levels based on short to medium-term revenue base.

QUICK FACTS

• The Auditor General released his 2015 Report on the Audit of the Financial Statements for the Province for the fiscal year ended March 31, 2015.
• The report states that the deficit for the year ended March 31, 2015 was $986 million - 2.5 times greater than the deficit in the previous year and a $448 million deterioration from the amount predicted in Budget 2014.
• The Auditor General's report reinforces the importance of the Government Renewal Initiative and engaging with Newfoundlanders and Labradorians on the long-term solutions as well as on the short-term actions for Budget 2016 to reduce spending to more sustainable levels based on short to medium term revenue base.

- 30 -

Media contact:

Jennifer Tulk Director of Communications Department of Finance 709-729-6830, 728-4104 jennifertulk@gov.nl.ca

2016 01 29                              4:55 p.m.