Nunavut Housing Trust audit details overruns
Last Updated: Thursday, October 7, 2010 | 8:46 PM CT
An outside audit of the Nunavut Housing Trust has revealed that the territory's housing corporation ran up $60 million in cost overruns due to a flawed budget, supply shortages and higher labour costs.
The audit report by Deloitte and Touche, dated Sept. 22 but posted on the Nunavut Housing Corp.'s website this week, found a number of problems with how the $200-million housing trust was managed over the past four years.
The resulting $60 million in cost overruns has resulted in what Finance Minister Keith Peterson described in June as the largest shortfall in the territory's history.
The federal government had assigned the housing corporation in 2006 with managing the trust, which was to be used to build 725 public housing units in Nunavut's 25 communities.
The Deloitte and Touche audit said the problems began shortly after the trust was established, when housing corporation officials felt pressured to start building houses right away and felt rushed to meet shipping deadlines for supplies.
That rush, due in part to the timing in which the federal funding was allocated and the large scale of the program itself, led officials to draft a flawed budget, according to the audit report.
There was little consultation on the budget, or testing of the numbers. In fact, the auditors could not even find the original documents used to create the budget.
"Limited capacity and time pressures likely led to an inability to adequately document the guidelines and assumptions used in developing the original budget," the report states in part.
Building materials stolen
The problems became worse when contractors found themselves short of building materials on nearly every construction project.
The shortages were caused in part by thieves who stole materials after they arrived in communities by barge, according to the audit report.
"Theft is a major issue as the material is not supervised once it is shipped onto the shores of the various communities," the report states.
"To reduce theft, the crates containing materials remain sealed until the materials are required for use; however, this can create delays as the contractors do not know in advance if materials are missing from the original shipment."
The audit also found that many of the building contracts were changed during construction, and that increased labour costs by as much as 40 per cent on some projects.
In February, the Nunavut Housing Corp. estimated it would need $60 million more to complete 417 unfinished housing units.
A $6.2-million contingency allowance has also been created in case the $60 million is not enough. Auditors say up to $3.8 million of that contingency fund may be needed.
Just last month, the Nunavut Housing Corp. revealed it has an additional $50-million cost overrun on another federally funded program.
Together, the two botched projects have left the Nunavut government with $110 million in overspending.
Nunavut's politicians passed a plan in June to cut back on government spending and postpone some projects in order to cover some of the initial $60-million shortfall.
Housing Minister Tagak Curley said last month that the government can fund part of the latest shortfall — about $39 million — without going into debt.
The Deloitte and Touche audit said the housing corporation is taking steps to improve its financial management.
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