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2005 November Report of the Auditor General of Canada

November 2005 Report—Chapter 1

Case Study 1.1—Dispute remains unresolved between the Northwest Territories and the Government of Canada

In May 1991, the Treasury Board approved a decision requiring federal departments to start charging rental rates at market value on real properties they lease to third parties.

To comply with this new policy, in 1993 the RCMP significantly increased the cost recovery rates for staff housing, which had been below market value. It billed the Government of the Northwest Territories (NWT) for direct costs under the contract policing agreement.

The NWT immediately disputed its responsibility for paying the rent increase and argued that this was a new cost not included in the original agreement. It argues that such an increase would require receiving an equivalent increase in its funding from the federal government.

This unresolved dispute affects federal departments other than the RCMP—most notably the agreement signatory, Public Safety and Emergency Preparedness Canada. The NWT has not paid for the difference in the rent increase, which dates back to 1993 and now totals $8.2 million.

In a letter dated October 2004, the RCMP credited $6.9 million to the NWT, which covered the period from 1993 to 2002. It acknowledged that the slow dispute resolution process had diminished the chances of collecting the disputed sum. It also acknowledged that it is important to establish a better resolution process for the future.

The dispute also spread to Nunavut, which had adopted the same position as the NWT, and had an accumulated unpaid balance of $2.3 million. To fund the shortfall, the RCMP curtailed spending in other programs. The RCMP recently came to an agreement with Nunavut—Nunavut agreed to pay increased costs for pooled housing effective 1 April 2002. This dispute illustrates the negative consequences that result from an inadequate dispute-resolution process.