Municipal loans to SWSDA were improper says ombudsman

Greg Bennett
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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 units’ authority under the Municipal Government Act and should not be honored.

“I am of the position the municipalities have no authority to pay the demands on the line of credit,” wrote Bishop. “As well, public funds loaned improperly should be recovered.”

Those 2008 loans to SWSDA added up to more than $200,000, with the lion’s 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.

“Elected officials and senior municipal staff have a responsibility to understand the legislative authorities and corresponding parameters guiding them in the exercise of their duties,” wrote Bishop. “Operating outside of these parameters compromises public confidence and raises issues of accountability, responsibility and reporting obligations.”

In his conclusion, Bishop placed the blame for the invalid guarantees and loans squarely on the councillors and municipal staffers involved.

“The 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)” wrote Bishop. “Elected 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.”

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.

“This situation saw at least three potential levels of control fail in capturing violations of the MGA,” noted Bishop. “This diminishes public confidence in government.










Organizations: Coast Guard, Southwest Shore Development Authority

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Recent comments

  • Heather MacDonald
    May 16, 2011 - 19:28

    As a municipal councillor in my first term, the greatest challenge I have faced is trying to understand and help bring resolution to this distressing situation. Everyone knows it went horribly wrong, and we want to know how, especially as we go into discussions on the development of a new RDA. I recognize that I don't have the answers. But I believe in something called Community Economic Development. It's when government gets out of its own way and recognizes the value of building from the ground up and engaging our citizens and not only our business & tourism sectors, but also our developers and young entrepreneurs, our seniors and youth, our heritage, artistic, cultural and ethnic sectors, our service providers and our community leaders, to name but a few. I have been watching the people in communities throughout my district in the past six months reaching out to one another, helping one another, finding ways to partner in supporting and promoting our local businesses and young entrepreneurs, artists and musicians. I am watching the many initiatives beginning to take shape and the enthusiasm this is creating. I am convinced that engaged people become empowered people. I am so proud of the people of District 4 and want nothing more than to see them empowered with information and the support needed to succeed and thrive! I want the people of our municipalities to KNOW they are valued and that they are an intrinsic part of the economic development of our region. Our communities are the strength upon which we build. Maybe, just maybe, as municipal leaders, we need to revisit our mandate and discover just what it is we are called to be as elected officials... champions for our people.

    • Jim Someone
      May 17, 2011 - 08:06

      I just wanted to comment on the SWSDA problem. Back in 2007 Sterling Belliveau was one of several elected people who called for an audit of SWSDA. The final report from that audit was just released. People were complaining about what a poor job SWSDA was doing for several years before that 2007 call for an audit. It is hard to be impressed with the speed government works. Several people have dropped the ball here, starting with the day SWSDA got started, back in 1995. So many people dropped the ball so many times it would be impossible to write all of their names. It is now time to clean up the SWSDA mess and move forward. We should not be pointing fingers at people and placing blame forever and ever. There are Development Authorities all over North America. Some do some really good work. People can benefit from a good Development Authority in South West Nova Scotia