Iqaluit (Feb 27/06) - Finance Minister David Simailak may have been wearing new kamiiks for budget day, but Auditor General Sheila Fraser is the one who put her foot down.

AUDIT FACTS The Auditor General's report to the Nunavut Legislature includes a list of "reservations," the office's most serious concerns. The report states, "reservations in our audit reports are not common. They indicate significant problems. They signal issues that we regard as critical, requiring the government's attention." Unapproved over-expenditures by the legislative assembly. Late audited, consolidated financial statements. Qulliq Energy Corporation: The energy corporation is permitted to borrow up to three times what it is actually worth. The report states that Qulliq is $4.7 million over that figure. Nunavut Business Credit Corporation: In 2002-03 the corporation wrote off one loan and issued another, but approval of the board of directors could not be found. In 2002-03, the corporation continued to manage an outside corporation beyond the date set for its withdrawal, and they were late in submitting their financial records. In 2003-04, a loan was granted but the board of directors' approval was not made available to the auditors. Source: Report of the Auditor General of Canada to the Legislative Assembly of Nunavut - 2005.

Fraser's department released its audit of the government of Nunavut a day before the territorial budget was released.

"Current financial management is weak and fragile. Six years after Nunavut's creation, I am surprised how slowly financial management has improved," stated the report.

When asked if his department was "weak and fragile," Simailak said: "Nunavut is a very young territory, and any new territory anywhere, setting up a system is going to cause problems. That is what Nunavut has been experiencing. It is a problem, it is something we are addressing."

There are 18 recommendations in the report. In 16 of those 18 cases, the government agrees with the auditor general.

The report points out time and time again that the government of Nunavut has known about nearly all these problems since at least 2001, and little to no progress has been made.

The two points of disagreement are over short-term options for accounting positions and recentralization of the accounting positions.

When it comes to hiring more accounts, the government agrees, with a caveat.

The report states, "Although the government agrees with this objective, it has been difficult to achieve in the past and will continue to be in the foreseeable future."

As for moving accountants, the minister of finance has stated his objections to that idea, but the department has promised a complete review of accounting to be completed by March 31.

Most of the points were agreed on by the auditor general and the government of Nunavut. These include training more land claim beneficiaries to be accountants, monitoring their debt cap, and a review of cost-sharing agreements with the federal government, to put that money in Nunavut coffers sooner.

One major concern for the auditor general was the government's attitude on spending.

"We found numerous cases of non-compliance with Nunavut's financial laws, including seeking the legislative assembly's approval to spend money after it had already been spent," the report states.

According to the report, the finance department is often operating in the dark. Nunavut has a $200 million cap set on their debt, but the basic accounting needed to keep track of this is not in place.

Most of the government's money comes from federal sources, but instead of the money sitting in Nunavut's coffers - where it could be generating more cash - the finance department is slow to collect what it is owed.

"The government's internal audit services branch should review all major cost-sharing agreements to identify opportunities for faster billing and collection," states the report.

Under the section titled "A History of Breaking the Rules," the Auditor General points out that the government has violated spending rules every year since 1999. They were spending money before it was approved by the legislative assembly.

"It is simply not normal for government in Canada to overspend," states the report.

Problems caused by poor accounting practices are costing the territory untold amounts of money, the report states.

About 50 per cent of leave records reviewed had errors. The forms are filled out and processed manually, instead of a computerized system.

In 10 per cent of payment vouchers reviewed, signing authorities were not followed, the report continues.

The number one recommendation from Fraser was to re-centralize accountants, an idea the government of Nunavut is reluctant to try.

"Nunavut's policy is to have a decentralized government, across Nunavut. If we start re-centralizing any job into any one community, then we would have to find other jobs to replace them," said Simailak.

The report had two other main recommendations: improve the accounting systems and launch a new program to encourage land claim beneficiaries to become accountants.

The report itself was prepared by 16 auditors from the Auditor General's office. Fraser herself visited Nunavut last year over the summer to get some first-hand knowledge on the territory.