Government spending scandals have been in the news lately. Although they’ve been simmering along for months now, the federal government’s ArriveCan mess and the Nova Scotia government’s transitional care affair hit the boiling point last week when Auditors-General in Ottawa and Halifax weighed in with their assessments. 

ArriveCan, for those who have not been following developments, is a computer app launched by Canadian Border Services during the height of the COVID-19 pandemic to screen in-coming travellers. It has been a source of political controversy in Ottawa for more than a year. Federal Auditor General Karen Hogan’s report didn’t add much that’s new to the affair  – it has already been examined by parliamentary committees and the RCMP announced an investigation months ago. But Hogan’s judgment of how officials handled the project was harsh.

A few samples.

  • There was “glaring disregard for basic management and contracting practices” and “many gaps and weaknesses” in the project’s design, oversight and accountability; 
  • Border Services  decided to contract out development of the app but “its disregard for policies, controls, and transparency” restricted opportunities for competition;
  • There was little documentation to support how and why the CGStrategies, the outfit that ended up pocketing one-third of the project’s documented  expenditure, was selected in the first place;
  • The project’s cost – at least $59.5 million – remains hazy because “documentation, financial records, and controls” were so poor.   

The auditor generals’s dressing down touched off a week of Question Period faux outrage, interrupted only by a scheduled week off for members of parliament.

Transition Care 

Meanwhile in Nova Scotia, Auditor General Kim Adair’s report also dealt with a project that has been in the news for a while. In December 2022, despite consultants’ reservations about its suitability, the PC government spent $34.5 million for an unfinished hotel (coincidentally situated on Hogan Court in Bedford) for conversion to a transitional care unit. 

It would serve the much-stigmatized bed blockers – people who no longer need hospital care but remain stuck there while awaiting scarce long-term care options. The government’s rationale was that converting a nearly finished structure would get transitional care beds in service faster than building from scratch. 

That seems reasonable enough. However, it appears that just as with ArriveCan, too much haste is making waste. According to A-G Adair’s report, purchase of the unfinished hotel “did not demonstrate adequate due diligence to obtain value for money.” 

Among other sins:

  • Inadequate market assessment of alternative locations;
  • No assessment of suitability of property for conversion;
  • $15 million conversion budget approved without detailed cost estimates;
  • Construction work for the conversion procured without public tendering.

The Nova Scotia auditor’s report focussed on two over-arching issues – one the acquisition of the Hogan Court hotel and two, the use of untendered contracts to convert the building and operate the transitional care program.

Starting with the sole-source contracts,  Kim Adair identified $81 million worth of them – $10.6 million conversion-related construction at Hogan Court and $67.5 million to nursing and retirement home giant Shannex. Shannex is  to operate the Hogan Court facility upon its belated opening, expected some time this year. 

Unusual transaction

The hotel acquisition represented, as the auditor general put it “a highly unusual transaction.”  Consultants hired by the government looked at the building and advised that it was unsuitable for conversion. But the advice came too late. The province had already decided to buy it, without even a market assessment to determine whether it was the best option among 17 possibilities.

And the Province did not buy the unfinished hotel directly from its owner, a mysterious entity described by the auditor’s report as Developer B. Instead, the government was somehow unable to contact the owner and had to deal with Developer A  (Cresco Home Builders). Cresco not only knew how to reach the owner, it put itself firmly in the driver’s seat by claiming – without providing evidence – to have right of first refusal on sale of the property by Developer B. 

The developers refused to disclose how much Cresco paid Developer B, but the report presents data from the Viewpoint real estate database suggesting the following transaction:

  • Cresco purchased the unfinished hotel and two parcels of land from Developer B for $37.7 million;
  • Cresco sold the unfinished hotel and one parcel of land to Nova Scotia for $34.5 million, retaining one parcel of 3.72 acres.

As the auditor concluded:

“…by serving as an intermediary between Developer B and the Province, Developer A was in a very advantageous position to minimize the cost to acquire the property and maximize the price paid by the Province, which may not have been conducive in generating value for money for the Province.” 

To recap: An unsuitable property, purchased before an assessment of alternatives from a a party with an unproven claim. 

The similarities

There is much more in the two reports, but while some details differ, there are common themes. In both cases, there were several government entities involved, making it difficult to assign responsibility for the dubious outcomes. 

At the federal level, in addition to Border Services,  Public Health and Public Services and Procurement were also involved in the ArriveCan shipwreck. In Nova Scotia, there are even more cooks to spoil the broth – the departments of Health and Wellness and Public Works as well as Service Nova Scotia, Nova Scotia Health and Build Nova Scotia. And in both cases, there was reliance on an untendered contractor – CGStrategies at the federal level and EY (formerly Ernst and Young) in Nova Scotia.  

More significantly, in both cases we see politicians and bureaucrats plunging ahead in response to real or perceived emergencies. It was a justification firmly rejected by both auditors. In Karen Hogan’s view, the pandemic  was “not an excuse for ignoring the most basic requirements of maintaining complete and accurate records.” For her part, Kim Adair maintains that addressing significant challenges in the health care system “should not promote a culture where expediency takes precedence over appropriate due diligence and value for money.”

The differences

As for the politics, there’s a difference between the impact in Ottawa and in Nova Scotia. Federally, the ArriveCan affair is one more blow against  a Trudeau government that can’t seem to get anything right. Former NDP Leader Tom Mulcair, now a media commentator, has said ArriveCan may be worse than the sponsorship scandal that brought down the Paul Martin government nearly 20 years ago.

Mulcair could be right, but if so it would be more akin to the proverbial straw that broke the camel’s back. On its own the story has been kept alive by some excellent reporting by the Globe and Mail’s Bill Curry spoiled by erroneous follow-ups and analysis by journalistic colleagues that have served to inflate the actual impact, to the benefit of Pierre Poilievre and his minions.

(For example, it has become a journalistic and opposition staple that the cost of the app increased from $80,000 to $60 million, a claim cited last week by, of all people,  Chantal Hebert on the CBC’s At Issue panel. But the notion that any project could go over budget by a mind-boggling 750 per cent extent is misleading. According to Border Services, $80,000 was the initial cost to create the app design, but project costs increased with numerous updated versions – 177 of them according to the A-G’s report – as well as associated operating costs like a call centre and data storage. Canada Border Services has a rough break down of costs on its website.

A second example comes from La Presse  which reported that CG Strategies, the outfit at the centre of the controversy,  collected some $258 million from government departments since 2015. Bill Curry checked that and reported, based on Public Accounts that the amount was closer to $58 million. La Presse was apparently confused by the way government websites report contracts. That deflation hasn’t stopped the Conservatives from repeating the inflated number.) 

While the Auditor general concluded that with all the gaps and weaknesses in the project’s design and oversight the government did not get “value for the taxpayer dollars spent” she was not able to determine how much was wasted. However, the $60 million (or more) involved in ArriveCan is barely a drop in the bucket  on a federal budget of $500 billion, amounting to only  0.00012 per cent of the 2023-4 budget. And opposition efforts to imply a direct connection between the ArriveCan fiasco and the Prime minister or Liberal partisans (as with the sponsorship scandal) have come up empty so far.  Numerous committee meetings over many months have pointed the finger of blame at public servants.

In Nova Scotia, politicians haven’t yet attempted to deflect accountability for the rocky start to their transitional care initiative. Indeed, the Health and Public Works Ministers have been upfront in defending their decisions. “Value for money represents much more than just the appraised value of a building,” said Health Minister Michelle Thompson. “Our hospitals are full in Halifax and around the province. We need more beds and we need them as fast as possible.”

If nothing else, you have to admire the minister’s bravado. 

So far there’s no indication Nova Scotia is on the verge of a full-blown controversy. The political and media landscape here are quite different, providing a shield for the government. But the legislature begins its spring budget session next week, providing the opposition with a chance to probe further into the issues raised in Kim Adair’s report. 

There is better political theatre around ArriveCan, but issues of competence and accountability in the transitional care initiative have greater significance. So far the Houston government has spent over $50 million on Hogan Court, the first of two planned transition care units, and is expected to spend   $13.5 million more to prepare a facility that, because of design issues, will serve 10 to 15 per cent fewer patients than planned. Another $70 million is committed, without going to tender, for operating the first facility and planning for the second. By comparison with ArriveCan, that’s almost one per cent of this year’s provincial budget – in budgetary terms about 800 times more significant than the ArriveCan budgetary impact.

More important is the question of what this affair says about the Houston government’s ability to manage the huge expenditures on health care infrastructure planned for the immediate future. Hogan Court pales in comparison to the multi-billion-dollar redevelopment of the Halifax Infirmary that the government is negotiating. Like Hogan Court, that project is months behind schedule but there has been no explanation for the delays.

“I hope that this file is not indicative of what’s to come,” Kim Adair told reporters. “With such significant infrastructure investments on the horizon, it’s imperative projects follow proper due diligence, sound procurement practices and value for money for the taxpayer.”