N.S. auditor calls RCMP over 'concealment' by provincial Liberals of misuse of funds

HALIFAX -

Nova Scotia's auditor general is asking the Mounties to investigate the provincial Liberal party over its "apparent concealment" of the misuse of public funds by a former employee.

Kim Adair's report released Tuesday says her office is aware of "concerning information" that reveals the party tried to hide and delay the matter "until after the 2021 election," which the incumbent Liberals lost to the Progressive Conservatives.

During a news conference, Adair declined to reveal further details or the source of the information, but she said the allegation came earlier this year as her report was being completed.

The report says, "The (Liberal) association's delay in providing information to our office was not in compliance with the Auditor General Act," which gives her office unrestricted access to records of any organization that receives public funding.

The report says a former employee's misuse of travel claims and a party credit card led to the employee's resignation and the reimbursement of more than $194,000 by the employee. The reimbursements were to cover the cost of the missing funds and of the forensic audit that followed.

The document says the Liberal party had an audit of 2020 party finances prepared by April 2021, but the audit didn't reveal the unauthorized disbursements to the employee.

"It was not until the spring of 2022 that the public was made aware of the misuse of funds," when the party released financial statements that included a note indicating that misappropriation had occurred, says the report.

Adair told reporters that while at times private corporations do recover misappropriated funds without reporting to police or oversight authorities, there should be a higher standard applied when public money is involved.

All registered parties receive annual operating funds from Elections Nova Scotia. In the past 10 years, the Nova Scotia Liberal party has received $6.4 million in public funds.

The report says the Liberal association told the auditor general's office it would have been in breach of a confidentiality agreement with the former employee if it had gone to police. It also says when the party was approached by the RCMP, members of the executive told investigators the matter had "been resolved."

Meanwhile, the former employee went on to take a position at another publicly funded organization after resigning from their job at the Liberal party, said the auditor general's report.

Zach Churchill, who was elected party leader in July 2022, said he "fully supports" the auditor general's finding. He said after he received the auditor general's report this month, he went to police "and urged them to look into this matter further."

Asked why the party didn't provide more information to the auditor general after he became leader in 2022, Churchill said he had advised the party to co-operate with Adair's office.

Churchill said that both former premiers McNeil and Iain Rankin had written letters to the party's board "urging them to reach out to authorities if they deemed that to be the appropriate action."

Meanwhile, the former president of the Liberal party, Joseph Khoury said in an email sent Tuesday afternoon that he believes the auditor general's report is "inaccurate."

He said after the loss of party funds was discovered in December 2020, the focus was on ensuring the funds and costs incurred in retrieving them would be "repaid in full."

Khoury said the day the misuse of funds was discovered, he engaged a law firm and followed the legal advice they provided, and on Feb. 9, 2021, Deloitte was engaged to conduct a forensic examination of previous years so the party could fully understand the depth of this loss.

"Contrary to what the auditor general asserts in her report, the independent auditor for the (Liberal) association was completely aware that there were very likely previous years impacted by this loss and that the investigation was being conducted by Deloitte," wrote Khoury.

"To do this work properly took time. Simply put, we did not know what the previous years' investigation would unearth. In this area of her report, the auditor general is wholly and unequivocally mistaken or has been misinformed."

Khoury also said "any insinuation by the auditor general that this independent investigation conducted by Deloitte was purposely misrepresented as part of a political calculation is baseless and needlessly inflammatory."

In addition to the recommendation to send the matter to police, the auditor general's report recommends the Elections Act be amended to give the CEO of the elections agency the authority to deal with any similar issues in the future.

The auditor general's report is the latest political blow to the Opposition Liberals. Last week, Brendan Maguire left the party, crossing the legislature floor to become Premier Tim Houston's new minister of community services.

This report by The Canadian Press was first published Feb. 27, 2024.

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