Jane MacAdam delivered her first auditor general report in an interim role, but was voted permanent auditor general in the legislature Thursday afternoon. (Kevin Yarr/CBC)

Some companies on P.E.I. could face fines for the inappropriate use of funds from immigrant investors obtained through the provincial nominee program, it was revealed in the provincial auditor general’s report Tuesday.

The report, written by the province's new auditor general Jane MacAdam, contained a special audit of Island Investment Development Inc’s  follow up of whether businesses that received immigrant investment were in compliance with use of proceeds agreements that they signed. IIDI was the Crown corporation responsible for the administration of the program.

While the program was operating, from 2001 to 2008, 1354 businesses received investments. Of these 878 signed use of proceeds agreements. Discovering whether the businesses were honouring the agreements was complicated by there being no single agreement over the course of the program. Rather there were a number of agreements, tending to become more liberal in their allowed use of funds as the years went on.

'Only those businesses that did not respond or that had inappropriate shareholder drawings were poised to be deemed non-compliant.' — Auditor general's report

IIDI chose a sample of 158 businesses to estimate the level of compliance with the agreements. It decided to use a single set of criteria to determine compliance, rather than try to hold the numerous different contracts signed.

"Based on its chosen strategy, IIDI was satisfied that as long as the business used the proceeds within the operations of the business, it was compliant," the report reads.

"Only those businesses that did not respond or that had inappropriate shareholder drawings were poised to be deemed non-compliant."

Some businesses transferred funds to related or parent companies. IIDI said they were in compliance, even though the companies that received the money weren’t eligible to receive funds under the PNP.

Two years after the review was initiated, MacAdam found that IIDI had not completed the reviews of 16 of the 158 businesses. No businesses had been deemed non-compliant, but MacAdam was advised four businesses that did not respond would be passed on to the IIDI board with recommendations that they be identified as non-compliant. Similar recommendations are expected for three or four other companies where the reviews are not yet complete.

Fines for the businesses are expected to be equal to the amount of money that was used inappropriately.

The 2009 auditor general report recommended IIDI report on its followup activities in its annual reports. There was an update in the 2009-10 report, MacAdam noted, but that was the last annual report published by the Crown corporation.

MacAdam recommended IIDI publish its annual reports on a more timely basis.