Political pressure and bureaucratic haste are behind a litany of financial management problems at the Canadian Northern Economic Development Agency, CBC News has learned.
A draft internal audit found that CanNor violated almost every financial management rule since it was set up in 2009. It has had five different financial officers in that time and currently has an interim president.
In March, the comptroller general noted in the report that the agency did not establish a financial management framework, which it is supposed to do according to its mandate. That meant that it violated almost every one of the basic management rules when it came to expense control, tendering contracts, credit card usage, travel and hospitality to its guests.
The CBC's James Cudmore reported Friday that according to sources, the financial mismanagement was the result of political pressure to get the new agency up and running and spending money.
Sources with knowledge of CanNor's business say the agency was asked to do too much, too fast. At the same time as it was hiring staff and setting up offices, it was also supposed to be evaluating grant applications and handing out cheques.
In its first year of operation, CanNor had to spend 12 months worth of cash, in seven and it also had the responsibility of doling out cash from the government's economic stimulus program and was expected to rush it out the door.
It was a recipe for mismanagement, sources told Cudmore.
Prime Minister Stephen Harper defended the North's economic development agency on Friday when he was asked if he regrets asking the agency to do so much so quickly.
"No. We've set up this agency for a very good reason. Northern Canada, the territories, did not have an agency and has, as you know, some of the most significant developmental challenges in the country, particularly Nunavut where the agency is based," he said.
Leona Aglukkaq, the minister in charge of CanNor, said last week that the report was a draft audit and that once she received the final one, she would review it and develop a plan to address its recommendations.
But Harper indicated Friday that the government has already taken action to tighten up the financial management of the agency.
"The reason we have regular internal audits is to ensure that organizations are being well-run. When they find they're not well-run, we take action. This is a draft audit, we're looking at the completed audit but we have already some time ago started to make changes to ensure better management of that organization, and we will," he said.
Aglukkaq on Friday also defended the agency, saying the North was the only region of Canada that didn't have an econmic development agency. Aglukkaq, who is the MP for Nunavut and the health minister, said the size of the geographic area and weather conditions present certain challenges to setting up the infrastructure needed to operate the agency. It is based in Nunavut and opening offices in the other two territories.
"It will take a bit of time but it's also delivering programs at the same time as it builds its own capacity," she said while at an event in British Columbia. "We'll continue to move forward in that."
She rejected the notion that CanNor was assigned more than it could handle in a short timeframe.
"I wouldn't say that," Aglukkaq said, noting that she was involved in establishing Nunavut as a new territory and that involved setting up an entire government and hiring hundreds of staff in a year. She said CanNor is "not a huge file" in comparison.