By Greg Bennett
The Coast Guard
The provincial ombudsman is taking southwestern municipalities to task for wrongly providing almost $800,000 in loans and loan guarantees to the Southwest Shore Development Authority.
In a report released on Thursday, ombudsman Dwight Bishop said the loan guarantees fell outside municipal unitsâ authority under the Municipal Government Act and should not be honored.
âI am of the position the municipalities have no authority to pay the demands on the line of credit,â wrote Bishop. âAs well, public funds loaned improperly should be recovered.â
Those 2008 loans to SWSDA added up to more than $200,000, with the lionâs share provided by the Municipality of Clare at $116,600.
Bishop wrote that municipalities expected that SWSDA would repay the money once proposed amendments to the Municipal Government Act were made. Those proposed amendments were not accepted by the province though.
The report recommends that municipalities recover those funds through individual liability insurance or through lawsuits.
SWSDA is no longer operational and has filed a notice of intention under the bankruptcy and Insolvency Act.
Although the Royal Bank is now demanding payment from the municipalities on almost $600,000 in loan guarantees, the ombudsman recommended that those guarantees not be paid using public funds.
The following are the amounts each municipality agreed to guarantee;
Municipality of Yarmouth -$116,750
Municipality of Argyle -$100,750
Town of Yarmouth -$95,750
Municipality of Barrington -$92,250
Municipality of Shelburne $84,105 & $61,500
Town of Shelburne -$22,500
Town of Clarks Harbour- $12,000
Town of Lockeport -$8,500
The ombudsman pointed to regulations that prohibit municipalities from offering financial guarantees without ministerial approval and he commented on the result these errors can have on public confidence.
âElected officials and senior municipal staff have a responsibility to understand the legislative authorities and corresponding parameters guiding them in the exercise of their duties,â wrote Bishop. âOperating outside of these parameters compromises public confidence and raises issues of accountability, responsibility and reporting obligations.â
In his conclusion, Bishop placed the blame for the invalid guarantees and loans squarely on the councillors and municipal staffers involved.
âThe municipal units showed a lack of due diligence in the stewardship of this money and administered funds contrary to law as contemplated in the MGA (Municipal Government Act)â wrote Bishop. âElected officials are accountable for the decisions they make and a lack of knowledge of the MGA is not a defense for mal-administration of the law or public funds.â
Among other points, the ombudsman recommended the province provide annual training to CAOs, financial officers and municipal councillors.
The ombudsman also questioned why the province did not catch the improper financial dealings, despite the municipal units statements being audited annually.
âThis situation saw at least three potential levels of control fail in capturing violations of the MGA,â noted Bishop. âThis diminishes public confidence in government.