An audit on the spending practices of 146 Quebec cities demanded by the Canadian Revenue Agency shows that a public inquiry on how contracts are awarded and other irregularities in the construction industry is necessary, the Quebec Federation of Municipalities said Thursday.

This unprecedented request, which awaits approval from a federal court, is just the latest element adding to the suspicions that have surrounded the Quebec construction industry the past two years, federation president Bernard Généreux said,

"It contributes to the idea that there's something going on that isn't necessarily clean," he said, "This operation, by its very nature, adds to the climate of suspicion that could apply to every aspect of managing the awarding of contracts."

The Globe and Mail reported Thursday that the Canadian Revenue Agency will request the authorization from a federal court on Monday to have access to documents on the spending of 146 Quebec municipalities over the past four years in order to look for undisclosed income by contractors.

According to an affidavit filed in federal court the revenue agency wants each municipality to produce a CD listing all spending aside from salaries from 2007-2010, with the names of those who were paid, their addresses, telephone numbers and social insurance or business numbers.

Généreux says the exercise could expose companies that have tiptoed around tax laws, though it would not produce the more global view of a true public inquiry.

"This will be case by case," he said. "We will expose some situations, some individuals, some firms that have committed fraud or other illegal acts. But it will not allow us to look at the system as a whole, only a public inquiry would allow that."

The president of the Quebec Union of Municipalities, éric Forest, was stunned Thursday that the Canadian Revenue Agency would go through the courts to obtain the information it is seeking. Without calling the move abusive, Forest says the municipalities would have been forced to hand over the documents on demand, even without a court order.

"I'm not aware of a municipality that would have refused a request from the revenue agency," he said. "We do it on a regular basis with Revenue Quebec. This is a surprising procedure."

Forest says the municipalities are not under suspicion by the federal revenue agency, but that the information they have will help examine the tax returns of their suppliers.