Auditor general says N.S. gave up control of $193M for internet projects too soon

Nova Scotia’s auditor general says the province relinquished control of $193 million meant for high-speed internet projects long before any of the work was done and millions of dollars could be lost as a result.

In a report released Tuesday, Auditor General Kim Adair said she was concerned by a “lack of comprehensive analysis” to decide to use an external trust for the money dedicated in 2018 to improving internet connectivity for Nova Scotians.

“With a project this large, we would expect to see documentation on the various options considered to fund the Initiative,” she said in the report.

The province established the Nova Scotia Internet Funding Trust in 2018 and appointed a chair, who then appointed two additional trustees. 

$2.6M paid in taxes

The $193 million, taken from a settlement related to offshore petroleum royalties, went into the trust and then stayed there, under the legal control of the trustees. It was almost two full years before the first high-speed internet projects were announced.

Adair said the trust has paid $2.6 million in income taxes since the money went in.

“Had the province not relinquished control over the full $193 million to the trust in 2018, the funds could have remained within government until needed,” Adair said in the report.

Nova Scotia Auditor general Kim Adair. (CBC News file photo)

The government’s justification for using an external trust, according to the report, was to ensure that the money would remain available for the designated purpose, “without risk of reallocation to other government priorities from year to year.”

Adair said there was no documentation to show how the province arrived at the $193-million figure — another cause for concern.

“Before obligating taxpayers to the project for $193 million, we would have expected that the province would have determined a reliable cost estimate,” the report said.

Adair said a reliable cost estimate is especially important given the use of an external trust, meaning leftover money doesn’t flow back to the province.

If any money remains in the trust on March 31, 2028, it will be distributed to municipalities that still have areas with poor internet service, then to the internet service providers who won the bids for the trust’s projects.

Adair said there was $29 million in the trust that was unallocated for future projects, as of August 2021.

Adair recommended the province develop guidance on the use of trusts with specific direction on analyzing alternative options, determining how much money is needed for the trust’s designated purpose prior to committing the money and assessing the government’s level of control over the trust.

The auditor general report said the province has indicated it will act on that recommendation.

Adair also had some positive findings from her audit of the province’s high-speed internet initiative. She wrote in her report that the initiative had clearly defined goals and objectives that were based on a “reasonable and thorough” study of the province’s internet needs.

Adair said the Crown corporation Develop Nova Scotia has generally been successful in administering the internet projects, although she said it doesn’t appear to be adequately reviewing progress of the work done by companies it has hired.  

In 2018, about 70 per cent of Nova Scotians had access to high-speed internet. That number is now up to 85 per cent and the province aims to have 99 per cent of Nova Scotians connected to high-speed internet access by 2023.

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