Up to $58.6M in unspent COVID-19 relief will never return to N.S. government

The provincial government's rush to provide COVID-19 financial help to thousands of Nova Scotia businesses could mean almost $60 million earmarked for pandemic relief will go unspent — but will not be returned to provincial coffers.

That's one of the major findings of a report issued Tuesday by Nova Scotia Auditor General Kim Adair, who examined early COVID-19 relief measures including the province's decision last year to hand $100 million to Dalhousie University.

The school was tasked with distributing the money, including to businesses forced to close due to public health measures, aid for large tourism operators and some funding for workers who didn't qualify for federal programs.

The province, under the previous Liberal government, "handed control" of the money to the university, including interest generated from the fund, according to the auditor general.

"The quick response of government to the public health emergency is commendable; however, spending $100 million before relief programs were developed and costed is concerning," Adair wrote in her report.

"By spending and committing $100 million to Dalhousie University before relief programs were fully developed and costs were known, the province was no longer able to redirect any potential savings if the funding earmarked for relief programs was not needed.

"We are concerned that this money, spent before the government knew how much it would need, will never return to the province."

Of the original $100 million, $23.9 million had not been spent as of this summer, and another $34.7 million went to loan guarantees for the tourism sector and is "sitting at Dalhousie University" until the end of the program in 2027 or one of the operators defaults on their loan.

Although the original agreement, signed on March 31, 2020, included a clause about "residual funds," auditors felt the wording "created uncertainty regarding the outcome of any remaining funds" after the programs ended. The agreement was amended in September of last year directing that money to Research Nova Scotia in 2027. The seven-year time frame was to allow enough time to pass for the loan guarantees to expire and for the borrowers to pay back their loans. 

In 2020-21, the non-profit group, mandated to support, organize and co-ordinate the funding of research in Nova Scotia, handed out about $15 million in research grants and awards.

Research Nova Scotia has funded projects to track the COVID-19 virus in wastewater, grow better wine grapes and to build improved cells for solar arrays.

Residual funds to go to public health research

Stefan Leslie, Research Nova Scotia's CEO, said the group was not part of discussions that led to its being named the beneficiary of the residual funds. He said he found out about the clause about a year ago, and only just learned how much provincial money remains in Dalhousie's care from the new AG report.

If the full $58.6 million is still there by 2027, Research Nova Scotia stands to receive a significant cash influx. Most of its revenue comes from a provincial allocation, which has been about $15 million for the past two years.

"If we're talking about funds of the magnitude that people are anticipating, that the auditor general is anticipating as being possible, we would look to spend those funds wisely, at the appropriate time on research projects of value," Leslie said in an interview.

The money has to go toward public health research, but Leslie said that's quite broad. In the COVID-19 era, Leslie said public health research funded by Research Nova Scotia has included pandemic preparedness, vaccine development and impacts on vulnerable populations, to name a few.

The direction of Research Nova Scotia's spending is dictated by provincial priorities and what those priorities will be in 2027 remains to be seen.  

 Adair said by handing over more money than was needed to outside groups, the government was depriving itself of funds it could use for its own priorities or emerging ones.

"It's just, in my view, not the best use of public funds," she said at a news briefing.

Agreement review

She also worried about the level of accountability for the millions of dollars of taxpayers' money.

"By putting significant public funds in the hands of external third parties there [are] limits on the amount of oversight that government continues to have, and cannot have once they do that."

The report found that while there were no indications of "fraud or significant errors, the absence of a documented program framework leaves the province open to risk."

During the review of the agreement with Dalhousie University, auditors noted:

• Risk assessments were not consistently done.
• The agreement between the university and the province was missing standard contract clauses.
• Goals and objectives appeared to be understood but not all included performance measures.
• Monitoring was not documented by the province.

"The province needs to develop guidance for emergency relief programs including expectations for emergency funding situations," according to a key recommendation from the report.

The governing Liberals also gave the university full control over who it could subcontract work to, a problem for the auditor general.

"That means the province accepted a significant level of risk by relinquishing control," said Adair.

$30M to daycares

The auditor general's office also examined the province's attempt to keep daycare operations afloat and at-home daycare providers in business during the early months of the pandemic.

The report noted auditors found "no documented evidence of comprehensive monitoring" of the province's $30-million daycare support programs.

Auditors found the Department of Education and Early Childhood Development had no documented process to administer the emergency child-care grants, nor was there a secondary review process "to check the accuracy or appropriateness of grant application decisions."

In one case, auditors found a daycare that received an overpayments of $132,000. The error was noted as "a result of overcounting staffing costs for multiple rounds of the grant."

In her recommendations, Adair calls on the province to "develop guidance on providing grants in emergency situations," and urges the Department fo Education and Early Childhood Development to "perform audits to ensure the emergency child-care grants accurately went to entitled recipients."

The report does note that when it comes to keeping daycare operators viable, the money appears to have done the trick. According to the Education Department, 96 per cent of licensed child-care centres active in March 2020 had reopened by August 2020, and 89 per cent of family home child-care businesses returned to service by September 2020.