The chair of the House of Commons public accounts committee has accused staff of the Atlantic Canada Opportunities Agency of handing out loans to themselves.

Canadian Alliance MP and committee chair John Williams chastised ACOA president Dennis Wallace Tuesday. Wallace appeared before the committee with the auditor general, Sheila Fraser.

Fraser says ACOA staff used questionable means to get a project approved in the riding of the solicitor general, Laurence MacAulay.

The aim of the ACOA project was to set up an interpretation centre for some sand dunes on P.E.I.

In 1999, ACOA officials set up a not-for-profit corporation called Greenwich Development Inc. The project cost just under $2 million.

ACOA president Dennis Wallace said ACOA helped form the company and set up its board of directors.

But Williams said some staff at ACOA were essentially giving loans to themselves.

"I'm talking about the ethics of your staff saying 'Why don't we just go out and form a non-profit organization ourselves, and then we'll send the applications to ourselves, stamp it approved, send them the cheques, which is ourselves, and then pass the money on to whoever we're going to give the money to'. Ethical deficit is what I said, Mr. Wallace. The ethics were atrocious," Williams said.

Wallace said ACOA staff no longer request and approve their own loans. He added that money did go to the sand dunes project.