AG finds 'pervasive' financial rule breaking and oversight problems at NLESD

• Read the full report by the auditor general

The 60-plus page review outlined a history ofrepeated rule breaking and poor financial oversight at the board.

"Concerns were identified with the legitimacy and integrity of the quotation process for goods and services," she wrote.

These types of observations are known indicators of unethical behaviours and/or potential fraudulent activity.- Julia Mullaley

Mullaley noted that spending was often not properly authorized and reviewed, and there was no paper trail to support payments.

"These types of observations are known indicators of unethical behaviours and/or potential fraudulent activity," Mullaley wrote.

The auditor general also "identified numerous other indicators" of unethical behaviour or possible fraud that have been steered to the RNC and the RCMP.

Info redacted at request of police

The NLESD spent about a quarter of a million dollars on double billings, or "unaccounted for" items the auditor general couldn't find.

The details of those purchases were blacked out, at the request of police.

But those missing items may be just the tip of the iceberg.

Mullaley's report raised questions aboutsystemic and oversight problems that could add up to much more, but which can't be quantified at this point.

"What is the loss here to the taxpayer, really, if you're not operating in an open and fair and transparent manner," Mullaley told reporters.

The review focused on the facilities branch of the school district's eastern region. Themore "significant" observationsinvolved only some of the dozen or so employees there.

Mullaleyalso noted that there are less than a dozen "vendors of interest."

The report spanned five years from 2011 to 2016, when the province called in the auditor general after receiving an anonymous complaint.

'Pervasive non-compliance' with rules

Mullaley found "pervasive non-compliance" with tendering rules. Purchase orders were split so they didn't need to be approved by supervisors.

"This increased the opportunity to award work to select vendors," the report noted.

And she indicated that those in charge fell down on the job.

"We also found that the board of trustees and senior management had not exercised the required oversight over NLESD's internal control environment," the report noted about the district's lax accounting practices.

Mullaleytold reporters that much of this could have been avoided.

"It's always discouraging, I guess, when you go into a government- funded body and when you have people in positions of trust to see that such significant weaknesses exist.And I think what was more discouraging was that the weaknesses were known."

Among the "unusual transactions" in the AG's report were:

• $735 to renta wheelbarrow for two weeks.
• $740 to rent four extension cords for three months.
• Nearly $39,000 in pickup and delivery fees for tools and equipment thatcost $63,500.

'Insufficient controls in place'

The NLESD says it is working to address problems identified by the auditor general.

Board chair Goronwy Price says the actions of a few bad apples should not hurt the image of everyone else.

"A handful of individuals have fallen outside the law, and that activity does not define the culture of a pan-provincial organization like ourselves that has 8,000 employees," Price told reporters Wednesday afternoon.

That handful ofemployees fewer than five were fired after financial issues first came to light more than two years ago.

CEO Tony Stack says staff are getting ethics training and protocols have been tightened.

"The district did have financial management processes in place, but it's much clearer to us now that they were not always followed, nor as effective as they should have been," Stack said.

"And there were clearly insufficient controls in place to prevent or detect abuse. To be honest, that made us vulnerable."

Officials also noted that some of the problems occurred in the "transitionory" period when four school boards were being collapsed into one.

Stack said the NLESD agreed to accept all of the auditor general's recommendations.

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