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Canadian Prime Minister Stephen Harper greets United States President Barack Obama during the official welcoming of the G-8 leaders to the G8 Summit in Huntsville, Ont., on Friday June 25, 2010.Sean Kilpatrick/The Canadian Press

Two buildings that cost $27-million in the lead-up to last year's G8 meeting in Muskoka have become symbols of a new political headache for the Conservatives as they fight an election campaign in which they are accused of failure to be accountable and transparent with Parliament.

According to draft reports leaked on Monday, Auditor-General Sheila Fraser is set to condemn the so-called G8 Legacy Infrastructure Fund that was used by the Harper government to shower the riding of a key minister with spending projects.

The report will not be tabled until after the May 2 election, but draft versions leaked to The Globe and Mail and other media have lit up the campaign trail ahead of Tuesday night's English-language leaders debate.

Ms. Fraser criticizes the government for a lack of openness toward Parliament, which unwittingly voted for the program as part of a border infrastructure initiative, and for letting Industry Minister Tony Clement pick the 32 projects that were approved for funding out of 242 applications. The draft report also leaves the Harper government exposed to charges of financial mismanagement in the $50-million program, which had a budget 10 times higher than the funding allocated to major summits in Quebec City and Kananaskis, Alta.

The initial draft of the report, dated in January and released to the Canadian Press, went as far as saying that the government "misinformed" Parliament and that obtaining approval for funds under the guise of a border initiative might have been illegal. The Conservatives, however, released a second draft to The Globe, dated in February, in which the Auditor-General was still sharply critical, but dropped the reference to breaking the law. In addition, the updated version did not refer to misinformation, but said the government was "not transparent" with Parliament.

Claude Doughty, mayor of Huntsville, the main site of the summit in Ontario's Muskoka region, defended the program, saying some of the projects were meant more as a "thank you" to area municipalities for being host than as G8-related facilities.

"I don't think there was ever any intent that some of them would be used by the world leaders," he said. "You have to appreciate that a lot of people in Muskoka did a lot of work to prepare for the G8, myself included. And for those municipalities that went out of their way to really do those things, this was a bit of a token of saying, 'Thank you.' "

However, some of the "legacy" items are largely unused. The University of Waterloo's environmental research centre, completed 11 months ago, remains deserted and without signage. The echoing hallways of a summit centre are largely bare save for pieces of community art, while a brand-new seniors centre, banquet hall and drop-in daycare were empty on Monday afternoon.

The program also financed a gazebo and public washrooms that were far from the summit centre, as well as municipal and airport improvements that aimed to revitalize the area but not all of which were used by world leaders and their entourages.

In her draft report, Ms. Fraser paints a picture of a government that was acting in haste and hand-picked proposals without any formal process as part of its stated goal to improve infrastructure in Muskoka.

"We are concerned by the lack of documentation around the process for selecting projects for funding," the draft report says.

The Auditor-General concluded the government obtained Parliament's approval for the expenditures by putting it under the heading of "funding for border infrastructure" in a spending bill.

"In our view, by presenting the request for funding in this way, the government was not transparent about its purpose," the report says. "Parliament was not provided with a clear explanation of the nature of the approval being sought."

The Auditor-General found no one in government who could explain how the funding was allocated.

"We could not conclude on how projects were selected as departments were not involved in the application intake or review process and, therefore, could not provide us with documentation," Ms. Fraser reports.

While politicians from all parties called for the report to be released, the law stipulates that Parliament must be sitting when the Auditor-General tables her reports with the Speaker of the House of Commons.

In a separate matter, the Conservatives apologized to the Auditor-General for a recent committee report in which they falsely claimed that Ms. Fraser was endorsing their G8/G20 security spending.

"This quote was wrongly attributed," said Stockwell Day, a cabinet member who is not seeking re-election.

With a report from Steven Chase



Why it's important: In the past, some regions that have hosted international events on Canada's behalf have received federal funds to compensate them. The June 2010 G8 host region received $50 million in funding for projects to enhance the area, provide a lasting legacy and help ensure a safe and secure summit. Of the 242 project proposals submitted, 32 projects were approved for funding.

Parliament's approval is needed before funding can be provided and monies spent. When Parliaments is asked to approve such funding, it should be provided with clear information on the nature of the request.

What we found: The Funding request presented to Parliament for the G8 Legacy Infrastructure Fund was aggregated within the Supplementary Estimates for Infrastructure Canada under the Border Infrastructure fund relating to investments in infrastructure to reduce border congestion. In our view, this categorization did not clearly or transparently identify the nature of the approval being sought for G8 infrastructure project expenditures or explain that these expenditures would not have to meet the existing terms and conditions for the Border Infrastructure Fund.

We could not conclude on how projects were selected as departments were not involved in the application intake or review process, and, therefore could not provide us with documentation. Once given the final list of 32 projects selected for funding, Infrastructure Canada set up mechanisms to administer the contribution agreements. The Department examined the 32 projects to ensure they met the terms and conditions of the G8 Legacy Infrastructure Fund, maintained project records and established management frameworks.