A scathing internal audit has exposed a long list of wasteful spending at Transport Canada and found contracts that broke federal rules.

The audit, which looked at the way the department manages its office space, found examples of work that appeared to have been done before contracts were signed, and one apparent conflict of interest.

Although the department has not been hit particularly hard with staffing cuts, auditors who walked through its offices and examined records found that 25 per cent of workstations were vacant (essentially 783 empty desks), meaning the department is spending far more for space than it needs.

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For a department that is already under fire over its handling of a wide range of safety issues – from rail to aviation – the opposition NDP argues money wasted in areas like office space means less to spend in areas such as safety inspection.

Internal auditors submitted their report on June 14, 2013, and the department appears to have posted it online on Dec. 20. The work involved a review of the department's accommodation and stewardship of assets function between 2008-09 and 2012-13.

Auditors warned that receiving a service before having a signed contract could hurt the department's reputation and increase its costs. It found that six of 28 contracts that were examined did not comply with the Financial Administration Act, the law governing how public servants spend tax dollars. Auditors also warned about the "appearance of conflict of interest" in connection with relationships between public servants and long-term contractors.

Former public servant Allan Cutler, who blew the whistle on improper procurement contracts in the sponsorship scandal, criticized the cases in which work was done before contracts were signed.

"What they're describing is illegal activity, but they're not saying it," he said, adding that the examples are likely the "tip of the iceberg" in terms of problems at the department. Mr. Cutler said the responsible officials likely will suffer no consequences.

Internal audit reports tend to be muted in their findings, but this one is unusually detailed in its criticism. One issue that comes up several times is a concern that contractors are being hired to do work that a public servant could do for about half the price. For example, the department was paying a contractor $142,000 a year for five years as a planner/designer. Auditors said the salary of a public servant with the same experience would be $50,000 to $57,000.

The department was paying another contractor $97,600 a year for what auditors suggest was essentially a data entry position with a light workload.

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Auditors called this "a significant commitment at a time of cutbacks."

That work was eventually handed to a staff member for less than $57,000 a year.

NDP Transport critic Olivia Chow said the department cannot afford to waste money.

"If they're mismanaging their space, they're not keeping our transportation system safe," she said. "It's just complete mismanagement. It's unbelievable."

Transport Canada spokesperson Karine Martel said in an e-mail on Monday that the department is addressing the issues raised in the audit and that the purpose of internal audits is to find savings.

"Transport Canada is committed to the sound management of government resources on behalf of Canadian taxpayers," she said.

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The Public Accounts of Canada generate headlines every year when it reveals the list of items stolen from federal departments. The Transport Canada audit found the department has "weak" controls for preventing theft at its warehouses.

"The Gatineau warehouse has no security camera and the key can be duplicated," the report states. Even if some of the furniture is stolen, it's not clear anyone would notice.

The report says the department "has no current inventory of warehouse and storage room contents."

It also noted that "departmental controls were not effective to prevent unaccompanied or off-hours warehouse/storage room entry by staff or contractors."

A contract with a moving company also raised eyebrows. The department contracted an unidentified moving company in 2008 to provide service on an "as needed" basis.

In practice, four movers were paid at full-time rates for four years – and paid for eight-hour days rather than the 7.5 hours stated in the contract. The 2008 contract initially had a limit of $200,000, but after 13 amendments, it had grown to $1.1-million as of May, 2013.