Auditor General Reports

On June 22, The Auditor General presented two reports to the Audit and Finance Standing Committee - the Capital Budget Audit, and the Audit of the Office of the Mayor. I'll break them down separately.

Capital Budget Audit:

In June 2026, The Auditor General released a comprehensive Capital Budgeting Audit (report here). Here are the key takeaways from the report and what they mean for the future of Halifax.

1. A Breakdown in Governance

The audit revealed that while Halifax has a structural hierarchy in place to build the capital plan, the gears weren’t turning the way they were supposed to during the development of the 2025-26 budget. Communication was mostly restricted to emails about timelines and funding caps. Without corporate-level debate, there is a real risk that major projects are being prioritized in isolation rather than weighing project trade-offs against the municipality’s overall needs.  

2. Missing Evidence and Inconsistent Estimating

Perhaps the most glaring find in the report centers on the quality of cost estimates underpinning our infrastructure projects. Out of 12 major projects tested across various business units, half lacked sufficient supporting documentation to allow an independent person to verify how the cost estimates were reached.  

Furthermore, the audit flagged a lack of corporate-wide standard procedures for cost estimation. Project managers frequently relied on personal experience or historical data, leading to inconsistent applications of net HST, un-documented inflation assumptions, and missing or unexplained variances between project files and the final Capital Plan.  

3. Disconnected Priorities

The municipality uses a Capital Prioritization Framework to evaluate projects based on risk, strategic alignment, and capacity to deliver. However, the AG found no clear link between these evaluations and the final recommendations that land on Regional Council's desks.  

When budget tightening is required, senior leadership has historically bypassed the framework scores entirely, opting instead to contact department heads individually to see what can be pushed down the road. This reduces transparency and leaves front-line evaluation data underutilized.  

Moving Forward: Management’s Response

The good news is that HRM Management accepted all nine recommendations put forward by the Auditor General, and noted that organizational shifts are already underway. A new Treasury Board structure was introduced in July 2025 to tighten fiscal accountability, and standard checklists are being developed to create minimum corporate requirements for project cost estimation. They also highlighted that fully modernizing this highly manual process will require funding and implementing previously planned integrated IT systems (like ERP Asset Accounting).  

9 recommendations from the Auditor General's Capital Budgeting Audit report:

• HRM management should ensure key roles and responsibilities are clearly defined in its capital budgeting governance structure.  
• HRM management should ensure the governance structure in place clearly provides direction and oversight to corporate-wide capital budgeting process.  
• HRM management should review and update the Capital Prioritization Framework to clearly define the roles and responsibilities of all participants in the evaluation and prioritization process.  
• HRM management should develop and implement clear minimum requirements and guidance for preparing capital cost estimates.  
• HRM management should include formal quality review requirements to ensure capital cost estimates are reviewed and supported before projects are included in the Capital Plan.  
• HRM management should develop and implement minimum documentation requirements for the rationale supporting capital project evaluation results.  
• HRM should clarify the intended purpose of the capital project evaluation process, including whether and how evaluation results are expected to inform corporate-level project prioritization and selection.  
• HRM management should review and update the Capital Working Group's Terms of Reference and establish a periodic review process.  
• HRM management should maintain formal records of the Working Group's meetings, including key discussions, decisions and action items, and distribute the meeting notes on a timely basis. 

Audit of the Office of the Mayor:

In early 2026, management within the Halifax Regional Municipality (HRM) raised concerns regarding specific financial transactions originating from the Office of the Mayor. This prompted Auditor General to conduct a targeted audit, to determine if these expenses followed HRM policies (report here).  The outcome is listed below:

Four Policy Breaches:

The audit focused on four specific transactions initiated between 2025 and 2026. The primary finding was clear: all four transactions were found to be noncompliant with HRM's procurement policy. The scrutinized transactions fell into two distinct categories: external legal fees and consultant procurements.  

External Legal Fees: The Need for Pre-Approval

According to HRM policy, the municipal solicitor must authorize any procurement of external legal services. The audit found this crucial step was skipped for two invoices submitted by the Office of the Mayor in 2025.

1. Invoice 1 (June 2025): This invoice was for $1,425. Before it was processed, senior management intervened, and the municipal solicitor approved it as a one-time exception while reminding the mayor's chief of staff about the authorization requirement in writing.  
2. Invoice 2 (November 2025): Despite the previous written warning, a second invoice for $6,272 was approved by the mayor's chief of staff. It was incorrectly charged to 'Other Goods and Services' rather than 'Legal Services', which the Office of the Mayor does not have a budget for. The requisition was processed by municipal staff, and the invoice was paid in December 2025.  

Senior HRM management discovered this second transaction in February 2026. At that time, the acting Chief Administrative Officer (CAO) required the mayor to reimburse the HRM for the charges, and the mayor subsequently reimbursed HRM for both invoices.  

Consultant Procurements: Bypassing the Competitive Process

The audit also reviewed how the Office of the Mayor brought on two consultants, finding both instances bypassed required competitive procurement policies, though payments were based on valid invoices.  

1. The HR Reorganization Contract: Valued initially at $50,000, this contract eventually reached approximately $90,000 for organizational design and recruitment services. The Mayor's office used an alternative (sole-source) procurement method, citing "confidentiality" as the reason. Senior procurement staff disagreed with this approach, noting it should have been competitive and that the Mayor's office communicated a preference for the vendor early in the process. The Auditor General concluded that the confidentiality justification was not reasonable for HR services and that an open process should have been followed to ensure value for the money spent. Furthermore, when the scope increased beyond $90,000, the contract was not formally amended to protect HRM's interests.  
2. The Speechwriter Contract: A procurement of approximately $14,000 was made for services related to the mayor's 2025 state of the municipality address before the Chamber of Commerce. Payment was arranged via a cheque request approved by the chief of staff, with no contract or statement of work in place. 

Following the presentation, the AG also revealed that he has sent his findings to Halifax Regional Police. HRP decided that they were too close to the situation, and forwarded on the case to the RCMP for investigation. The investigation remains ongoing, and Council has not heard the outcome of it. 

The Auditor General did not put forward any recommendations, as he stated that abiding by existing policy should be a given.  For my part, independent of that outcome, I believe we need to understand whether the current organizational structure provides adequate oversight and support to ensure this won't happen again. 

This investigation received wide media coverage. I found this podcast from CBC here with a good summary of the situation, and includes some further perspectives.