AG finds more than $1M mismanaged by defunct Cape Breton employment agency

The Nova Scotia government says it is already implementing recommendations from the province's auditor general, who confirmed on Tuesday that a now-defunct Cape Breton employment agency mismanaged funds totalling more than $1 million.

Auditor General Kim Adair said Cape Breton Regional Police are still investigating the former Island Employment Association two years after allegations of mismanagement were first made public by the provincial ombudsman.

Adair said managers and staff improperly bought equipment, paid out bonuses and expenses to themselves, were involved in numerous conflicts of interest and the executive director was allegedly involved in a kickback scheme.

"It was a perfect storm of mismanagement, which appeared to be deliberate and systematic and designed to benefit certain players at Island Employment," she said in a brief video posted to the auditor general's website.

In addition to problems with employees, the agency's board of directors provided poor governance and the province provided poor oversight, the auditor general said.

"Our investigation uncovered three major points of failure that persisted in the agency for almost a decade and led to the gross mismanagement of public funds that totalled more than $1 million."

The auditor general said her office is co-operating with police on their investigation into the agency, which employed 32 people in offices in Sydney, Chticamp, Inverness and Port Hawkesbury, and offered clients help with resums and finding jobs.

The province shut it down in November 2021 and replaced it the following year with the YMCA and le Conseil de dveloppement conomique de la Nouvelle-cosse in some of the Acadian regions of Cape Breton.

Adair is calling on the Department of Labour, Skills and Immigration to conduct a thorough review of the Nova Scotia Works program, which funded Island Employment and 16 other agencies like it.

She said there was evidence of a kickback scheme that involved staff donating cash to a fund intended for clients who couldn't afford workshop fees, but stopped short of calling any of the activities criminal, saying that determination is best left to the police.

"We have very carefully chosen the right descriptors and I would say this, in my time, is probably the most serious report ... and in summary, that's why, because of the accumulation of all of the findings, we label it as gross mismanagement of public funds."

The auditor general also found the department did not properly investigate three previous complaints before the ombusdman got involved.

Labour Minister Jill Balser said the department has accepted all of the auditor general's recommendations and begun to implement them.

"While it can be difficult to guard against deliberate acts of unethical behaviour and mismanagement of funds, we must guard against it, hold people accountable and continually review and improve our processes," she said.

That accountability will come when the police finish their investigation, she added.

Balser refused to answer any questions about why the financial problems were allowed to continue for more than a decade, saying when she became minister, she acted swiftly to end the contract with Island Employment.

The auditor general's report and the ombudsman's report before it were the result of some staff acting as whistleblowers, Adair said.

It's unfortunate that they lost their jobs as a result, she said.

'Employees deserve credit'

"I think the employees who did bring the issue forward to the ombudsman deserve credit for doing that," Adair said. "Otherwise, we wouldn't be here today."

Balser thanked them for stepping forward and said many would have had an opportunity to work for the successor agencies, but as employees of a private contractor, they were not afforded any whistleblower protection.

In a statement, the Nova Scotia Government and General Employees Union said its former members should not have been left to shoulder the consequences.

"Rather than deal with the issues at hand, government tried to make the problem go away by simply ending the contract with the agency, meaning that the workers who stood up and did the right thing were left unemployed," NSGEU president Sandra Mullen said.

"They did nothing wrong, but paid the price for government not providing the proper oversight."

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