Office of the Auditor General
January 23, 2013

Auditor General Releases Report on the Audit of the Consolidated Summary
Financial Statements of the Province for the Year Ended March 31, 2012

Terry Paddon, Auditor General of Newfoundland and Labrador, today presented his Report to the House of Assembly on the Audit of the Consolidated Summary Financial Statements of the Province of Newfoundland and Labrador for the Year Ended March 31, 2012 to the Speaker of the House of Assembly.

The report highlights a number of areas which will impact the finances of the Province in the future:

• The Province recorded a surplus of $883 million for the year ended March 31, 2012, however, a deficit of $726 million is now forecast for 2012-13.
• The Province remains heavily reliant on the offshore oil sector for a substantial portion of provincial revenues.
• Commodity prices are set in global markets and are impacted by factors outside the Province’s ability to control. Volatility and uncertainty of commodity prices will continue to influence the provinces financial outlook.
• 2012-13 is the first year, since 1998-99, that the Province will not receive revenue from the equalization offset provisions of the 1985 Atlantic Accord. In 2011-12, the Province received $536 million under this arrangement.
• While Provincial Net Debt has declined to $7.8 billion at March 31, 2012, a forecast deficit in 2012-13 of $726 million will push Net Debt to an estimated $8.9 billion by March 31, 2013.
• Provincial obligations related to employee future benefits (Pensions and Group Health and Life Insurance) continue to increase. The combined liability exceeds $5 billion at March 31, 2012.
• Expenses have grown by $3.1 billion from 2002-03 to 2011-12, a cumulative growth rate of 66 per cent over this period.
• Per capita expenses in Newfoundland and Labrador are the highest of any province in Canada and are 50 per cent higher than the average of all other provinces for the year ended March 31, 2012.
• Spending on Tangible Capital Assets (infrastructure) averaged approximately $750 million in the fiscal years ended March 31, 2011 and 2012 – approximately 3 times greater than the average annual spending on Tangible Capital Assets from 2003 to 2010.
• Changing demographics in Newfoundland and Labrador will have a significant impact on the nature of services required, how they are delivered and their associated cost.

Government will have to continue to closely monitor the continued sustainability of program expenditures, the unfunded pension liability and the liability for group health and life insurance retirement benefits.

The Auditor General’s Report is available on the Office of the Auditor General website at www.ag.gov.nl.ca/ag/reports.htm

The Auditor General will be available to the media on an appointment basis.

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Media contact:
Terry Paddon
Auditor General
709-729-2700

2013 01 23                    11:10 a.m.