A report prepared for the Alberta Department of Municipal Affairs has concluded Peter Kelly acted in contravention of the Alberta Municipal Government Act before he was hired as the chief administrative officer for Charlottetown.

Kelly, the former mayor of Halifax, served as CAO of Westlock Co., Alta., from September 2014 until March 2016. He was brought to Charlottetown in May 2016 to be its new CAO, a position that was made permanent when his one-year probation period expired in June.

Shortly after Kelly left Westlock County, allegations were brought forward from the county's former chief financial officer that Kelly had authorized $390,570 in non-budgeted spending without proper council approval. In response to this and other municipal issues, Westlock County council ended up asking the Alberta government to conduct a review.

That review, conducted by Strategic Steps Inc. on behalf of the Alberta Department of Municipal Affairs, concluded:

"Some actions were taken by Mr. Kelly in the absence of an authorizing council resolution, such as negotiating an industrial land lease and authorizing site improvements. Mr. Kelly seemed to feel that direction given in camera was sufficient for action, which is not accurate and contravenes the [Municipal Government Act] which requires a council to act by resolution or bylaw."

$200,000 write-off

The report further states that "at times, it appeared that Mr. Kelly did not exercise reasonable oversight of capital project costs" related to the development of an industrial lot owned by the municipality.

Kelly acted without proper authority and failed to advise council. - Report for Alberta government

The county's former CFO told council development of the Horizon North project, under Kelly's direction, led to a write-off of more than $200,000 for the county when development costs far exceeded potential resale value of the lot.

"In apparent enthusiasm for economic development, former CAO Kelly acted without proper authority and failed to advise council of their legislative responsibilities, such as requiring advertising when considering selling land for less than market value, and approving unbudgeted expenditures," the report states.

The report does note Kelly "was held in high regard by some Westlock County council members who truly appreciated his style. In one comment shared with the inspectors, a council member stated that Mr. Kelly was 'very responsible.'"

Charlottetown council reviewing report

Charlottetown Mayor Clifford Lee has supported Kelly throughout the Westlock controversy, at one point echoing an assessment from the former Westlock County reeve that the allegations were "dead wrong."

In announcing that Kelly's position would be made permanent this spring, Lee said Kelly had helped to find efficiencies, improve revenues and fill vacancies.

"Council felt it was only fair to make him a permanent employee," Lee said.

However, Lee also stated at the time that "Council did indicate in the offer to Mr. Kelly, that should he be convicted of being in violation of any law, his employment status would be reviewed."

On Thursday morning, a spokesperson for the City of Charlottetown said there would be no comment from council until it finished reviewing the report from Alberta.

CBC reached out to Kelly, but hasn't yet received comment.

In July, 2016, when the issues arose initially, Kelly provided a statement to CBC News saying, "I worked closely with the public works department and relied on their information and costings to provide myself and council with complete and accurate information."