Auditor General, Denise Hanrahan, delivered her report to the House of Assembly today on the audit of the financial statements of the Province of Newfoundland and Labrador for the year ended March 31, 2020. In her first report on the audit of the province’s financial statements, Ms. Hanrahan shares observations about the financial condition of the province and highlights certain risks that affect the province’s fiscal outlook.
Financial indicators continue to show worsening trends. The province reported a surplus of $1.12 billion for the year ended March 31, 2020. While this surplus is an improvement over the deficits reported in recent years, it is the result of recognizing one-time federal revenue from the Atlantic Accord (2019) during 2019-20. Without the revenue of $2.36 billion from the Atlantic Accord (2019), there would have been a deficit of $1.24 billion.
Net deficits over the past ten years have contributed to a substantial increase in the net debt of the province – now at $14.4 billion or $27,575 on a per capita basis – one of the highest levels in the province’s history. At March 31, 2020, the province’s net debt as a percentage of its GDP is 40.8 per cent, which is significantly higher than the average of all other provinces. By March 31, 2021, the province’s net debt as a percentage of GDP is forecasted to increase to 55.7 per cent.
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“I look forward to working with my new team to promote accountability and encourage positive change in the stewardship, management and use of public resources.
With respect to the financial condition of the province, there are considerable risks associated with the fiscal outlook. Should these risks materialize and result in significantly less revenues or more expenses than expected, government would be challenged to address such a situation over the short-term.
The Province of Newfoundland and Labrador generates more revenue, on a per capita basis, than every other province. In addition, per capita spending in this province is substantially higher than per capita spending in every other province and is also generally higher than the province’s per capita revenues. This suggests that revenue is not the primary issue creating the deficits but rather the level of spending. Continued emphasis on sustainably reducing the province’s per capita spending will remain important.”
Denise Hanrahan
Auditor General of Newfoundland and Labrador
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