Karen Mackenzie
Northern News Services
Published Monday, December 3, 2007

NUNAVUT - The Government of Nunavut should reconsider its decision to locate the Nunavut Business Credit Corporation (NBCC) in Cape Dorset, according to auditor general Sheila Fraser.

"It would be very important to assess not only this Crown corporation, but all Crown corporations in terms of capacity and skills..." Fraser said.

Canada's auditor general Sheila Fraser, second from left, presents her findings on the Nunavut Business Credit Corporation at the legislative assembly in Iqaluit on Nov. 27. The Standing Committee on Government Operations and Accountability questioned a number of witnesses throughout the hearings, which ran until Nov. 29. Members of Fraser's team look on. - Karen Mackenzie/NNSL photo

"Will the community be able to support that corporation with all the kinds of skills and competencies you need?"

She also questioned whether the lending agency should continue to operate as an independent body.

The federal official was in Iqaluit last week to present her findings on the NBCC to the Standing Committee on Government Operations and Accountability.

In a report released Nov. 5, Fraser outlined the grave mismanagement of millions of dollars in loans by the NBCC. She said it's difficult to say how many of these loans are not collectable. Her investigation found poor up-front analysis and little follow-up was conducted on many applications.

Although loans from the NBCC - to which Nunavut businesses may turn as a last resort - are riskier, "if there's no follow-up, there's going to be more loss," she said.

In one case, Fraser's audit found that a loan was made and the business defaulted after the first payment.

Some of the corporation's problems stem from a simple lack of resources and expertise rather than a wilful intent to defraud, she said.

Cambridge Bay MLA and standing committee member Keith Peterson questioned how the NBCC can properly serve all of Nunavut with only four or five staff, and little external support.

"Without lawyers, without bookkeepers ... you don't have a whole range of services typically you'd expect a lending agency such as this to have," he said. "I think decentralization for this particular organization is something that will have to be looked at very closely."

The corporation also lacked a comptroller for about a year beginning in 2005, because the GN was unable to fill the position.

However, Minister of Finance and Economic Development David Simailak appeared unmovable on the issue in his opening statement to the standing committee on Nov. 29.

"I want to be clear that I fully support the government's policy of decentralization, as I would have thought that all members present here today would have supported as well," he said.

Decentralization is necessary in order to provide more jobs for Inuit in smaller communities, to diversify business and develop social cohesion, he explained.

Currently only one Inuk is employed by the NBCC in Cape Dorset, and there have only been three local hires since the organization was placed in Cape Dorset, according to Allan McDowell, the current interim CEO for the NBCC.

Fraser's audit also pointed to the heavy levels of board involvement in the corporation's day-to-day activities, and an unusual reporting relationship between the deputy minister of EDT and the CEO at the time.

The audit of the agency's activities was carried out after the auditor general's office issued a rare denial of opinion on its finances for 2005-2006.

Fraser advised the standing committee that her office would be forced to issue another for the 2006-2007 financial audit, because the problems had continued on into much of 2006.

The only other denial of opinion in her memory was issued to CBC in the 1980s, due to a change in its accounting systems, she said.

Fraser also cautioned the standing committee not to allow the poor management of a few to tarnish the reputation of all businesses and bureaucrats involved with the NBCC over the years.

"We have to remain conscious that this is not all of government, this is one corporation," she said.