N.S. government again rejects calls for forensic audit of Island Employment

Senior officials in Nova Scotia's Labour Department have told a legislature committee they received almost no information from Island Employment after the Cape Breton agency received a draft report accusing its management of a misuse or gross mismanagement of public funds.

Deputy minister Ava Czapalay said Wednesday she would have expected the people running and overseeing the employment services agency to get in touch to discuss the findings of the report by provincial ombudsman Bill Smith.

But Czapalay said there was little contact from Island Employment after it received the interim report in December 2020.

In her opening statement to the public accounts committee, Czapalay described the "disappointing lack of action by Island Employment's board of directors and senior management" as one of the key reasons the government decided to terminate its contract with the non-profit agency last September.

It had been receiving about $2.2 million a year to provide employment counselling services on the province's behalf. The Sydney-based agency closed its doors on Nov. 21, 2021.

In response to questioning by the all-party committee, Czapalay provided details about her department's response to Smith's interim report, including "immediately" consulting with the Department of Justice and government auditors.

Those discussions centred on "the red flags raised by the interim report," she said.

Smith, who was also called before the committee, told the politicians complaints by several whistleblowers — employees at Island Employment — triggered his initial investigation into the organization's finances.

The subsequent search for documents was "met by a number of delays and excuses on why they couldn't be provided in a timely fashion," he told the committee.

"It took an excess of over 12 months, probably closer to 16 months, to get the documentation that we required to conduct our analysis," said Smith.

"In fact, we had to send three staff members at various times with our own scanning equipment to the agency to retrieve those documents."

Smith said it wasn't until the fall of 2020 that his office had all of the materials it required.

According to his final report, publicly released in June 2021, Smith noted his investigation "entailed scrutiny of hundreds of pages of documents, such as spending records and expense claims covering a four-year period."

Calls for forensic audit

The union representing the 30 employees who were let go as a result of the loss of funding has repeatedly asked the province to conduct a forensic audit to learn the extent of the wrongdoing and uncover who is behind it.

But Czapalay repeatedly told the committee she didn't think it would be a fruitful exercise that would lead to the truth.

"We believe that the records would be even more incomplete right now because the people responsible for the misuse of public funds have had full knowledge of Mr. Smith's work since, I'm going to say since his interim report was published in December 2020," said Czapalay.

"So they've had a full year, if not more, to cover their tracks."

Attempted to secure records

Despite that, an executive director with the Labour Department told CBC News the department recently sent people to Cape Breton in an attempt to secure records after telling Island Employment the province was terminating its contract.

"We took steps to put folks on the ground a number of weeks ago, before the new year for sure, to collect the records that were in the office and to make copies, and to remove those records off site to our offices," Nancy Hoddinott said in an interview following the committee meeting.

Following testimony from the witnesses, NDP members on the committee proposed a motion that the committee write to Nova Scotia's auditor general to request she investigate the matter.

Auditor General Kim Adair, who watched the proceedings virtually, briefly interceded to say she had conducted audits "of a forensic nature" in the past and that she had found the testimony "very enlightening and informative," but that she would leave it to the committee to decide whether to make a formal request.

PC MLAs used their majority to defeat the motion to the chagrin of Jason MacLean, the president of the Nova Scotia Government and General Employees Union.

"This all seems like a coverup to me," MacLean told CBC News following the meeting.

"It seems like government wants to hide something ... That isn't transparency. That is the opposite."

Police are looking into the claims made in the ombudsman's report.

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