06/28/2015 09:00 EDT | Updated 06/28/2016 05:59 EDT

Audits led to arrests, tighter rules at Newfoundland and Labrador legislature

ST. JOHN'S, N.L. - Auditors had not been allowed to comb through expenses at the legislature in St. John's, N.L., for six years when the Progressive Conservatives under former premier Danny Williams invited them back.

A 2006 report on receipts from 2002 to 2004 exposed an eye-popping blend of double billings, lax or missing paperwork and criminal misspending that totalled about $1 million by four members of all political stripes.

Auditors also flagged suspicious payments to local companies worth another $2.6 million.

It was a system tailor-made for abuse run by a financial director who, it was later revealed in court, had a $500-a-day slot machine addiction.

He used those oversight gaps to fund his habit using kickbacks and bogus invoices. He wound up behind bars along with a former Tory party leader and cabinet minister, two Liberals and a New Democrat. Several more members had to repay improperly expensed items ranging from booze and airline tickets to questionable donations for various local causes backed by potential supporters in their districts.

The constituency spending scandal revamped how cash is tracked at the house of assembly and set new accountability standards hailed as a model across Canada. It's also a cautionary tale that bolsters calls for regular, open reviews of MPs' spending in Ottawa.

Demands for more scrutiny at the House of Commons have increased since auditor general Michael Ferguson's report on the Senate earlier this month found 30 current and former senators misspent almost $1 million. Nine of those cases were referred to the RCMP.

Ferguson has said the Commons can and should learn from his recommendations for greater transparency and independent oversight of Senate expenses.

Political scientist Christopher Dunn was an adviser to the commission of inquiry led by former chief justice Derek Green into spending at the Newfoundland and Labrador legislature.

Green's 2007 recommendations were enshrined in the House of Assembly Accountability, Integrity and Administration Act. It added layers of oversight and control with regular reporting by the provincial auditor general and a management commission that meets in public.

"I guess the big lesson is that the temptations for politicians, be they appointed like the Senate or elected like the Commons, the temptations are just too great with public money," Dunn said in an interview. "There's no room for a trust-based system."

In Newfoundland and Labrador, Liberals were in power in 2000 when the provincial auditor general was ejected from the legislature. His staff had questioned art and wine expenses by a former Finance minister who was also a member of the secretive Commission of Internal Economy at the time.

The bipartisan committee of Liberal and Tory members responded by asking the auditor general to leave the house of assembly and stop work on members' constituency allowances. The committee then orchestrated amendments to its governing legislation exempting the house from providing support documentation to the comptroller general for expenses.

Terry Paddon, who now serves as auditor general, said it was a recipe for fiscal mayhem.

"When you have no oversight, you're creating a huge amount of risk and lots of potential for abuse and those sorts of things," he said in an interview. "We obviously saw the evidence of all that."

Those calling for more scrutiny in Ottawa say there are similar warning signs. More than 60 MPs have been accused of misspending over the last five years. They include dozens of NDP MPs who've been ordered by the federal board of internal economy to repay almost $4 million for allegedly misusing parliamentary resources for partisan purposes.

The board made up of four Conservatives, two New Democrats and one Liberal polices Commons spending behind closed doors. The NDP has compared it to a kangaroo court and has filed a legal challenge of the repayment orders.

Follow @suebailey on Twitter.