Auditor general report finds employees received thousands of dollars in payments that did not meet policy requirements
A recent auditor general’s report into Health P.E.I. found that managers received thousands of dollars in payments that did not meet policy requirements, and that rules governing job reclassification were not followed.
The agency’s CEO, Melanie Fraser, said she first heard of possible problems in 2024 when an employee raised “concerns with payroll activities.” She asked P.E.I. auditor general Darren Noonan to conduct a formal review.
The resulting report identified serious gaps.
As reported by CBC, one example saw an employee whose duties had changed receive retroactive pay going back 935 days, even though provincial rules limit such adjustments to 60 working days, resulting in an overpayment of $34,500.
In another area, managers who were classified as excluded staff were paid out overtime and vacation, despite their agreement stating that “under the terms and conditions of the excluded employees agreement, you're not supposed to pay out time-in-lieu.”
HR payroll policies not followed
In a statement, the Auditor General's office explained that outside of the thousands of employees on its payroll and compensation plan, "excluded" employees are governed by the Civil Service Act, with "specific terms and conditions of employment."
The audit revealed "instances of excluded positions that were created and filled by Health P.E.I. without being classified or reported to Treasury Board as required," the release said, also detailing that vacation and time-in-lieu payments to excluded employees showed "inconsistencies with approvals, rationale, and tracking of time."
Fraser has forwarded the report to P.E.I.’s attorney general, now also the premier, to determine whether the issues rise to the level of fraud.
She noted that the attorney general “may or may not refer the matter to police for followup … I wouldn't have the expertise to make that call, so I just follow the obligations that I have as a head of a public body.”
For HR leaders, the message is that intent is not the only concern; adherence to policy is. As Noonan put it, “We obviously confirmed that the rules weren't followed,” even though the audit did not conclude whether any individual acted deliberately.
Lessons for Canadian HR and employers
Fraser has begun tightening approval processes, including requiring her sign‑off before any further vacation or time‑in‑lieu payments are issued to managers.
She emphasized the value of using audits as a corrective tool.
“I think an audit can be a really important way to learn,” she said.
“Certainly we’ve learned through these findings where we can implement better processes, better controls and educate staff on the policies and processes that exist.”
According to Fraser, Health P.E.I. has already recovered many of the inappropriate overpayments, stating, “Where we did detect that there were overpayments made to particular staff that were inappropriate or not compliant with policy, in many cases we recovered those funds where we were able to do so.”
The report follows an earlier audit in 2024 that flagged issues with executive contracts and job classifications; Fraser said she wants greater transparency to help restore public confidence.
