The Yukon government broke its own financial laws by placing $36.5 million of public money in a now-frozen investment, federal Auditor General Sheila Fraser said, prompting opposition Liberals to demand Premier Dennis Fentie's resignation.

Fraser released her findings Thursday from an investigation her office did on the territory's investments, which have been frozen since last summer, when global credit markets crashed.

Yukon finance officials put $36.5 million last summer into asset-backed commercial paper investments, or ABCP, issued by two trusts.

"Those two investments were not in compliance with the [Yukon] Financial Administration Act," Fraser told reporters in Whitehorse.

ABCP is a short-term investment backed by assets like mortgages and car loans, which generally pays higher interest than government bonds. The market for ABCP took a massive hit in 2007 when many of the underlying mortgages were found to be subprime.

The Yukon's two investments, Fraser found, violated the act in that they were not guaranteed by the federal government or issued or guaranteed by a bank, or issued by a company incorporated within Canada and given the highest rating by at least two recognized security rating firms.

Furthermore, finance officials did not get a legal opinion on whether the investments would comply with the act, Fraser stated in her report.

"The officials making those investments believed that they were guaranteed by a bank, and so they believed that it did meet the requirements. But when we looked at it more closely, there was not a guarantee by the bank," she said.

Fraser said she believed finance officials made the investments in good faith, even though they ended up losing money. She also noted that Fentie, who is also the Yukon's finance minister, was not involved in the investment decisions.

Still, Opposition leader Arthur Mitchell, a Liberal, said Fentie should step down over Fraser's report.

"In any other jurisdiction, a finance minister would be fired by a premier or [forced] to resign," Mitchell said Thursday.

"The buck stops at Mr. Fentie's desk. When the Titanic hits an iceberg, you're not asking what the cook or the third mate was doing. It's 'Where's the captain?' "

Government finance officials said they accept and respect the auditor general's report, but Fentie disagreed with Fraser's findings.

"The auditor general's report is an opinion on the matter. But I can tell you there are other opinions out there, of legal in nature, that state otherwise," Fentie said.

"But we're not going to bother with getting into a debate on which legal opinion is correct or incorrect. That's a waste of time."

Last month, Fentie ordered the Finance Department to stop investing in ABCP.

As for how much money has been lost, or how much of it can be recovered, Fraser said those details will not be known for some time.