The federal government says it will implement all the recommendations of an audit on its northern development agency after the review found that CanNor was regularly breaking the law when it comes to contracts, travel and financial management.

The Canadian Northern Economic Development Agency, considered the centrepiece of the government's northern economic strategy, is accused of breaking two sections of the law, according to a final audit, CBC News has learned.

The audit also shows the agency broke all but one of 13 different government directives on financial administration. The rules were broken more than 20 per cent of the time, according to the audit.

"Our government takes any indication of poor financial management by officials seriously. We expect all agencies and public servants to follow the rules, and work has already begun to to make improvements," Leona Aglukkaq, the minister in charge of CanNor, said in a statement. "I have made it clear to my department we accept and will implement each and every recommendation contained in the audit."  

The auditors made 19 recommendations, which include CanNor developing and implementing a financial management framework, designing effective business processes for financial management for its head office and ensuring that "managers and executives receive the required training and validate their knowledge as required prior to exercising their delegated authority."

Among the many problems was a failure to properly award contracts, to ensure that the work was done at all, and to keep records of why decisions were made, the audit found.

There were also unauthorized and untrained bureaucrats handling agency cash and problems with credit cards, expenses and hospitality, according to the audit.

NDP MP Dennis Bevington said the agency, announced with great fanfare by Prime Minister Stephen Harper in 2009,  is in need of reform.

"We need to see that [CanNor] gets its act straightened out,"  said the MP for the western Arctic.

Bevington said the agency was set up for failure back in 2009 by a government rushing to spend money in the North without a plan.

"These are things that show that the agency was incapable of getting itself off the ground in the time that was given to it by its political bosses," he said.

With files from James Cudmore