Nunavut housing fund overspends by $60 million

Nunavut housing minister Hunter Tootoo and Alain Barriault, the president of the Nunavut Housing Corp., said the $200-million Nunavut Housing Trust was badly planned and could not have met its original cost targets, set in 2006 when Ottawa gave Nunavut the money. (PHOTO BY CHRIS WINDEYER)

Updated May 7, 1:53 p.m.

The Nunavut Housing Trust, which pledged to build hundreds of homes across the territory, will be awash in $60 million of red ink, Government of Nunavut officials revealed Thursday.

Labour and construction costs drove the average cost of each of the 319 homes already built under the trust $75,000 higher than planned, housing minister Hunter Tootoo told reporters in Iqaluit.

Labour costs alone were 72-per cent higher than originally forecast, he added

“The Housing Trust was not planned properly and could never have met its original cost targets,” Tootoo said.

A lack of financial management expertise at the Nunavut Housing Corporation meant no one picked up on the problems until this past December, when a new chief financial officer, Lori Kimball, who had been on the job only four months, opened up the trust’s books.

“NHC missed this problem every year for four years,” Tootoo said. “If it had tracked expenditures properly, it could have regained control much earlier.”

Alain Barriault, president of the NHC, said the corporation will find $20 million in savings—including likely cuts to renovation budgets and homeownership programs—to make up part of the shortfall. NHC will need another $40 million in supplementary appropriations to cover the rest.

But Tootoo said the corporation will hit its target of 726 houses under the Nunavut Housing Trust and another 285 under the $100-million Affordable Housing Program announced in 2009.

But the budget for that program is based on the model of the housing trust and will also see a shortfall. Barriault said the corporation has ordered construction materials, but hasn’t closed labour tenders for that program yet.

“We will adjust our budget accordingly,” he said.

South Baffin MLA Fred Schell, who has frequently gone after Tootoo on housing matters in the legislature, said he thinks the final cost overruns could be as much as $5 million more than the housing corporation claims.

He wants a public inquiry and a forensic audit into the fiasco and said Tootoo should consider resigning as housing minister.

“It’s not just bad budgeting, there’s other things there,” Schell said in an interview Friday.

“I can’t really pinpoint it — that’s why an inquiry [should] come out — but…I think there’s some shystering going on,” Schell said. But Tootoo said Thursday there’s no evidence of theft, fraud or political interference.

Schell said the housing corporation shouldn’t cut renovation programs to pay for the housing trust’s problems and predicted the government will have a hard time convincing regular MLAs to pass emergency funding to cover the shortfall.

Barriault said the trust caused a massive spike in the housing corporation’s workload and instantly increased its budget by one-third. Before the trust, the housing corporation was building 50 units per year.

“The NHC’s construction volume doubled every year over three years and it continued to rise,” he said.

At the same time, the trust’s apprenticeship program and direct-negotiated contracts with companies who were the only available contractors in some communities further drove up costs, he added.

Tootoo said to fix the problems, the housing corporation will:

• hire an accounting firm to examine the housing trust’s books;

• file a monthly operations report with the housing minister and get those reports approved every three months; and

• improve its financial management.

Kathleen Lausman, the deputy minister of Community and Government Services, will also sit on the housing corporation’s board, Tootoo said.

The Nunavut Housing Trust was set up with $200 million included in the Conservative government’s May 2006 budget, a funding commitment that was originally part of the 2005 Kelowna accord. The Affordable Housing Program was set up with further contribution of $100 million included in the federal government’s 2009 budget.

Corporation staff had to scramble to order construction materials for the June sealift in 2006, which contributed to the planning problems, Tootoo said.

“That’s not a heck of a lot of lead time to develop and put something together,” he said.

And Tootoo made a point that he’s not blaming Olayuk Akesuk, who was in 2006 the housing minister, or Peter Scott, the housing corporation’s former president, for the debacle.

“It doesn’t do anybody and good to waste time with the blame game,” he said.