'A bit alarming': House watchdog committee questions school board over fraud scandal

A watchdog committee of MHAs from all parties questioned top officials with the Newfoundland and Labrador English School District Tuesday about how a fraud scandal happened, and what's being done to fix the system.

A blistering report by the auditor general found endemic financial oversight issues at the school district.

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

"We find this a bit alarming," said the chair of the public accounts committee, Tory MHA David Brazil.

Brazil said it is important to ensure public confidence, in the wake of the auditor general's findings.

"We felt it was severe enough that we wanted to immediately address it," he said.

Damning report by auditor general

In September, Auditor General Julia Mullaleyissued a 60-page report that outlined a history of repeated financial rule breaking.

Her review focused on the facilities division for the eastern region.

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

• After years of oversight warnings, a financial scandal at the school district. What now?

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

The police have since been called in.

"Because there are ongoing criminal investigations, we can leave that to the proper authorities," NDP Leader Gerry Rogers, who sits on the public accounts committee, told reporters during a break in proceedings.

"But we have to ensure that all the processes that will prevent this from happening, but will also facilitate responsible procurement, are in place."

Proposal sent to education department

Top school district officials stressed to the all-party committee of MHAs that they are disappointed by the auditor general's findings, and take her report seriously.

They indicated that work has been underway since problems were first identified three years ago. That includes tightening up the process that had led to the abuse of so-called quick purchase orders, and adding an internal auditor position.

Last month, school board trustees unanimously voted in favour of a big-ticket "action plan" to fix financial oversight issues going forward.

• 'Costly' plan for financial oversight fixes gets green light at NLESD meeting

On Tuesday, NLESD chief executive officer Tony Stack told reporters that the Department of Education has since written back to say the district's request will be part of the 2019 budgetary process.

The department also wants an external consultant to look at whether the school district could piggyback on the government's financial system.

"We're dealing with a school district which is a different animal than most government agencies," Stack cautioned.

"There are 254 individual sites. So it has to work for our reality. And that's going to be part of the consulting process."

Problems 'pretty serious'

During the public accounts committee hearing, MHAs asked questions about the auditor general's findings.

"The problems highlighted in this report are pretty serious," Liberal MHA Scott Reid said.

Reid stressed the need for appropriate financial procedures.

"It's not just a few bad apples the root of the problem seems to be the lack of proper processes," he said.

Board officials acknowledged there was a "permissive culture," where the focus was on keeping schools open and avoiding the loss of classroom time due to maintenance issues and not on following purchasing rules.

They indicated that culture allowed other activities to occur.

'Cultural shift' now underway

NLESD board of trustees chair Goronwy Price told reporters work has been underway to change that culture.

"One of the big cultural shifts now is that it's not just the children in classrooms that the focus (is on)," Price said.

"Everybody in all our organization is aware of the financial component now, and the fact that we've got to do these things and processes correctly."

Price said transparency is vital, and stressed the importance of new financial management software to ensure "checks and balances" are in place.

"You've got to have the tools that allow you to do that and that's what we're requesting, and that's what we're really looking for," Price said.

"It's no good having responsibilities to do something unless you have the bodies that clearly have the accountability and the focus to be able to implement that. And that is part of this action plan that has been approved by the board."

At a board of trustees meeting last month, financial officials estimated there would be a price tag upwards of $2 million in each of the first two years to put new financial systems in place, then a consistent $1.3 million a year for staffing costs after that.

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