One quarter of Canada's First Nations under financial scrutiny by feds

The remains of a Canadian flag can be seen flying over a building in Attawapiskat, Ont., on November 29, 2011. (Adrian Wyld / THE CANADIAN PRESS)

OTTAWA -- One-quarter of Canada's First Nations bands are under some kind of financial supervision ordered by the federal government, suggesting issues with money management on reserves stretches far beyond the bounds of the remote community of Attawapiskat.

Of the 615 bands across Canada, 157 are currently considered as having defaulted on their financial obligations, according to a list on the website of Aboriginal Affairs and Northern Development Canada.

Eighty are working in tandem with Ottawa to put in place a plan to get out of the financial doghouse, 63 have enlisted the services of an outside agency and 14 of the most dire cases have had their finances taken over altogether.

A band is thrown into default if it meets certain criteria laid out by the federal government, which can include a belief on the part of the minister that the health, safety or welfare of the community is at risk of being compromised.

Of the 157 bands listed, some have well-documented financial -- and, in some cases, criminal -- problems related to their money.

For others, the reasons they're on the list aren't immediately apparent.

But the books belonging to the remote community of Attawapiskat appear to be the only ones to have been thoroughly analyzed -- and publicized -- by the federal government.

When asked if any other band in Canada has ever been subject to such financial scrutiny, a spokesman for Aboriginal Affairs Minister John Duncan wouldn't say.

"(Aboriginal Affairs) conducts audits on a regular basis to provide assurance that the funding provided to First Nation communities is spent for its intended purposes and in compliance with the terms and condition of all funding agreement signed with AANDC and Health Canada," Jan O'Driscoll said in an email.

"Given the extraordinary conditions and ongoing housing issues in Attawapiskat, the minister asked an independent auditor to examine how money has been spent and what oversight measures have been taken over the past five years."

But just as many of the bands on the default management list have sat there for years, so too has Aboriginal Affairs been chastised again and again for the way it accounts for taxpayer funds.

In 1995, the auditor general uncovered a laundry list of problems related to how the department was managing its money. A follow-up two years later revealed no tangible improvement.

In her ten years as auditor general, Sheila Fraser's office produced 31 audit reports on aboriginal issues.

"Yet despite these reports, and despite some federal action in response to our recommendations over the years, too many First Nations people still lack what most other Canadians take for granted," Fraser said in her farewell speech in May 2011.

A recent internal government audit of housing on reserves was explicit about the problem.

"Regions do not undertake compliance audits of First Nations or inspections of housing activities undertaken by First Nations," the 2011 report said.

"Compliance audits and monitoring/inspection activities would mitigate the risk that housing funds are spent for unintended purposes and would enhance the department's ability to assess the completeness and accuracy of the housing information reported by First Nations."

It was housing that drew the attention of the federal government to Attawapiskat.

Chief Theresa Spence declared a state of emergency there last year over housing conditions on the reserve. Families were living in rundown shacks with no heat and the Red Cross was forced to fly in supplies.

That was despite the federal government having provided the reserve with an estimated $90 million since 2006.

The Attawapiskat audit released this week showed that some of the funds were used to pay down debt, a practice of which the government has long been aware. Other money couldn't be accounted for because the required paperwork couldn't be found.

Stan Louttit, grand chief of the Mushkegowuk Council, which includes the Attawapiskat First Nation, called the audit unfair.

"At the height of the Attawapiskat housing crisis over a year ago, the Attawapiskat First Nation made it very clear to the government that they would welcome a forensic audit to be carried out," Louttit said.

"The government chose not to conduct such an audit, only to settle for a limited audit by the firm of Deloitte. If the federal government is so hell-bent on insisting that there has been misappropriation of funds then they should do the right thing and conduct a forensic audit."

Of the 157 bands listed as being under federal oversight, financial documents for only a handful are available to the broader public, though members of the band can request them.

A new law currently before the Senate will require the information to be public for everyone.

When Fishing Lake First Nation in Saskatchewan had its books independently audited as part of its oversight, auditors laid out six pages of red flags.

Financial records for 2010 show the band received around $4.9 million from the federal government that year.

But a $60,000 payment by Health Canada wasn't recorded in the band's general ledgers, bank account transactions were missing, payroll accounts weren't up to date and housing records were incomplete.

"Management has not provided us with all necessary information requested," said the 2011 audit letter which the band has posted on its website.

"The magnitude of this lack of information has cast doubt on financial statements as a whole which has resulted in us not being able to provide an opinion on the 2010 financial statements."

Across the country in Newfoundland and Labrador, the Mushuau Innu band has been under third party management for more than 10 years.

The federal government relocated the band in 2002 from Davis Inlet to the reserve of Natuashish in an effort to deal with persistent social crises.

An audit of the band's finances suggests auditors weren't sure about their record keeping either.

"Our examination indicated that there were weaknesses in internal controls over the identification and invoicing of re-billable items for fuel sales, services, rent and electricity," said the Nov. 1, 2011 letter, published by the CBC.

The issue is far bigger than paperwork, said Grand Chief Derek Nepinak of the Assembly of Manitoba Chiefs.

Forty-two bands in Nepinak's area are under some kind of oversight.

"Accounting and standards applied to First Nations communities are entirely political, arbitrary, and manipulated to meet government objectives of containing and assimilating us while the vast wealth of our ancestral lands is exploited," Nepinak said in a statement.