Federal government to review ports funding after audit shows possible abuse

The federal government is reviewing some of its agreements to transfer ports to local authorities across Canada after an audit found the directors of a port in Digby, N.S., used a large portion of a $ three million operating grant for “non eligible expenses,” reports The National Post.

The government is also tightening the rules and conditions in the awarding of grants to local authorities that take over federal ports and wharves.

Under a $125-million Port Divestiture Fund established in 1996, 34 ports have so far received a government subsidy to operate and maintain facilities.

Eighteen of these ports are located in British Columbia, eight are in Ontario, seven are in Nova Scotia and one is in Quebec.

Minister of Transport David Collenette is seeking the review after an audit showed the directors of Maritime Harbours Society, a not-for-profit organization responsible for the port of Digby, spent close to 60% of a $3-million grant in less than 15 months on such things as unauthorized salaries and benefits, and on several untendered consulting contracts given to a private company.

The federal money was to have been used over 10 years for direct operating costs and the maintenance, repair and upkeep of the facility. Transport Canada transferred ownership of The Port of Digby to the group in late 1999.

The Digby port has already triggered a legal battle in the Supreme Court of Nova Scotia. Lawyers for the government this week requested an injunction to stop the Digby harbour society from spending the $1.1-million remaining in the grant until it provides accounts for it. No date has been set for the hearing.

The Department of Justice Canada has also asked the RCMP to determine whether a criminal investigation is warranted.

The harbours society, meanwhile, has filed a lawsuit against Transport Canada and PricewaterhouseCoopers, the accounting firm that conducted the audit.

The harbours society asked for a court injunction to keep the audit confidential, but the Nova Scotia Supreme Court rejected the request on July 20, saying “the public interest is overwhelming.”

Collenette demanded an audit of the group’s activities last fall after Bill Casey, the Conservative MP from Nova Scotia and the party’s then transport critic, raised questions in the House of Commons about the use of taxpayers’ money in this particular case.

PricewaterhouseCoopers said it was “unable to conclude” that close to $1.9-million spent by the group between Oct. 21, 1999, and Jan. 31, 2001, was done in accordance with the terms of the contribution agreement.

The auditors also said Transport Canada should have included clearer rules and conditions in its contribution agreements regarding expenditures done by organizations such as the harbours society.