The Nunavut Business Credit Corp., a Crown corporation thathandles millions of dollars in business loans, mismanaged some loans and didn't monitor others at all, Auditor General Sheila Fraser said in her most damning report yet for the territory.

'This is by far the worst [report] and it underscores that there's a very serious problem with the Business Credit Corporation.' —MLA Keith Peterson

Records for the NBCC were so shoddily kept that Fraser took the unprecedented step of refusing to approve the group's financial statements for 2005-2006, she said in a report tabled Monday before the territory's legislature.

Such an action is extremely rare for an auditor to take, Fraser said in her report, stressing that there was not nearly enough information available for her to even provide an opinion on the statements. That fiscal year, the NBCC handed out loans totalling $18 million.

Documentation was missing from all of the reviewed files, including some information that had been deleted from computer records, the report said.

The auditor also found that loans were mismanaged or not monitored, and some agreements were never even signed. To make matters worse, more thanhalf of the staff at the NBCC quit while the audit was underway.

"My initial reaction is shock. I've seen five or six auditor general's reports since I've become an MLA, and this is by far the worst and it underscores that there's a very serious problem with the Business Credit Corporation," Cambridge Bay MLA Keith Peterson told CBC News.

The NBCC is supposed to provide loans and financial advice to businesses to help boost the territory's struggling economy. The government says on itswebsite that the Crown corporation "provides a combination of last-resort funding and micro-financing support for higher risk enterprises that have difficulty obtaining financial support from traditional financial institutions."

'Shameful for our government'

Tagak Curley, MLA for Rankin Inlet North, said the situation was deplorable.

"It's shameful for our government," Curley said.

"There must be checks and balances and I don't believe there were any," he added.

Curley laid the blame squarely on the government — specifically territorial Minister of Economic Development David Simailak — for failure to monitor the agency.

Simailak was to be issuing a statement in the Nunavut legislature on Tuesday afternoon.

Concerned for years about NBCC: Tootoo

While Iqaluit Centre MLA Hunter Tootoo said he has been demanding answers about the NBCC's activities for years, he said he never imagined the situation could be so messy.

"Both the current minister, the previous minister and also I had discussions with other cabinet members, government members about my concerns and nothing's been done in all this time," he said.

Fraser recommended in her report that the government reconsider whether the NBCC should continue to operate as a separate entity.

If the millions of dollars doled out by the corporation cannot be tracked down, the matterwill likelybecome an RCMP investigation, some MLAs said.

The report was thesecond highly critical report for Nunavut in less than six months.

In June, the auditor general released a report that said the territory's student assistance program needed to do more to collect unpaid loans. Fraser found there was about $4 million in outstanding loans to 550 students and former students.