Newfoundland and Labrador's auditor general is questioning why more than $2.6 million in government funds was paid to three companies for items such as lapel pins, fridge magnets and key chains.

John Noseworthy reported Tuesday that more money was paid to a fourth company connected to a suspended senior official at the house of assembly.

Auditor General John Noseworthy has turned over his findings on suppliers to justice department officials.
(CBC)

"This is unprecedented," Noseworthy told reporters at a news conference. "I've never seen anything like this in my career."

Noseworthy's office found that payments totalling $2,651,644 were made between 1999 and 2005 to Zodiac Agencies, JAS Enterprises and Cedar Scents International for promotional materials.

Noseworthy said the money was spent largely on "low value novelty items," as well as a number of more expensive items, such as customized gold rings for members of the house of assembly.

Bill Murray, pictured in 1990, has been suspended from his post at the Newfoundland and Labrador legislature.
(CBC)

However, Noseworthy told reporters his staff could find no evidence that the items ever existed.

He criticized internal financial controls at the house, which he described as "basically non-existent."

Among other things, he said, no tenders were called for or financial quotes documented to support charges supplied on company invoices.

Noseworthy also identified a possible conflict of interest. His staff found that $170,501 was paid between 2001 and 2005 to Unique Keepsakes, "a company owned by the former director of financial operations at the house of assembly, and/or his spouse."

Premier Danny Williams confirmed Monday that the director in question, Bill Murray, has been suspended from his position.

On Friday afternoon, the government issued a memo indicating that Murray's security clearance had been revoked and that he is not allowed to enter Confederation Building.

Spending controversy continues

Noseworthy's investigation of spending at the legislature had already rocked the province's political establishment before the release of Tuesday's report.

Last week, former government house leader and natural resources minister Ed Byrne resigned from cabinet after Noseworthy revealed that Byrne and three other provincial politicians are being investigated for overpayments totalling more than $1 million on constituency allowances.

Noseworthy said he has turned his findings on the payments to suppliers over to the Newfoundland and Labrador Department of Justice. A police investigation has also started into the constituency allowances.

Most of the items cited in Tuesday's report were of little value.

"All officials questioned at the house of assembly indicated surprise with the significant cost and extent of the quantities indicated as being purchased," the report noted.

Noseworthy's staff found that Zodiac Agencies and Cedar Scents shared the same bank account, and that all three companies had similar invoices.

They also found that a provincial registration document for JAS Enterprises and a City of St. John's record on the "telephone number referenced on Zodiac Agencies invoices indicate references to the same surname."

The audit showed that payments to Zodiac, JAS and Cedar Scents rose steadily over the years. In 2000, the companies invoiced just over $191,000. So far this year, the companies billed more than $652,000.