The territory will not pour any more money into asset-backed commercial paper, the controversial investment that has frozen $36.5 million of government money.
Finance Minister Dennis Fentie announced the policy change Monday morning, two weeks before the Auditor General will release a report reviewing the investments.
Finance officials will examine alternative investments in the money market now that its policy bans so-called ABCP investments, which has been used by the government for 12 years.
The decision follows a review after a crash in the American money market this summer.
Asset-backed commercial paper investments are based on high-risk loans for mortgages on homes, cars and other large purchases.
About $36.5 million of government funds are frozen while investors wait for a restructuring proposal meant to repay the investment expected in the next couple of days.
The new restrictions shrink the investment-market options by one-third, said Clarke LaPrairie, assistant deputy minister of financial operations and revenue services.
“Asset backed commercial paper is the second largest category of investments so we’ll obviously have less to pick from,” he said.
“It will make the job more challenging in terms of the exact date we want assets to mature on, but we’ll accommodate.”
The decision comes in advance of a visit from federal Auditor General Sheila Fraser on February 7.
Fraser will release two reports: one on the territory’s role in the 2007 Canada Winter Games and a second on the government’s investments in asset-backed commercial paper.
The new policy is not connected to findings in Fraser’s report, said LaPrairie.
“We have some general ideas about the report, but they’re not connected,” he said.
“We’ve provided information to the auditor general, but I won’t presuppose what she’s going to say.”
Fentie has not been briefed on the audit, said a cabinet spokesperson.
The auditor general’s report includes responses from the government departments undergoing a performance audit.
A spokesperson from the auditor general’s office could not confirm if the audit of asset-back commercial paper will include response from the Finance department.
The report is “substantially completed,” but not yet printed, said the spokesperson.
The Liberals asked the auditor general to review the controversial investments last November.
The Finance department has been reviewing its procedures for several months, said LaPrairie.
“Given the unprecedented events in the money markets this summer, it was a good time to review our investment practices,” he said.