An audit looking into the finances of Attawapiskat First Nation has cast a critical eye on the northern Ontario reserve’s record-keeping, finding little documentation to account for millions spent by the band.

But supporters of Attawapiskat Chief Theresa Spence are accusing the federal government of leaking the audit in an effort to discredit the aboriginal leader and her demands to meet with Prime Minister Stephen Harper.

The audit was launched to investigate whether approximately $104 million the reserve received from Ottawa between April 1, 2005 and November 30, 2011 was spent properly. Attawapiskat had received the funding for development purposes such as housing, infrastructure and education.

After wading into the First Nation’s books, Deloitte and Touche LLP found that out of 505 transactions, more than 400 were not properly documented. On average, 81 per cent of the reserve’s files did not have supporting documents, while 60 per cent had no documentation or reason for payment recorded.

In an attached letter dated Aug. 28, 2012 and addressed to Spence, Deloitte and Touche said it was unable to conclude whether Attawapiskat’s funds had been spent correctly. 

“There is no evidence of due diligence in the use of public funds, including the use of funds for housing,” the firm stated, referring to the reserve’s lack of supporting documentation as “inappropriate for any recipient of public funds.”

The audit indirectly took aim at federal authorities tasked with overseeing funding.

It was noted that Attawapiskat was struggling to record and manage previous financial obligations, contrary to government loan eligibility requirements. As well, the report found that inspectors with the Canada Mortgage and Housing Corporation had observed deteriorating housing conditions on the reserve but did not alert Aboriginal Affairs during the period under audit.

The independent audit’s release comes ahead of an already sensitive Jan. 11 meeting between Harper and First Nations leaders, including Spence.

The Attawapiskat chief has been on a liquids-only hunger strike since Dec. 11, demanding government action on First Nations treaty rights and other issues.

On Monday, Spence said she also wants parts of the recently passed omnibus budget bill repealed as soon as Parliament resumes at the end of the month.

"We are asking that the legislation related to (native) lands encoded in Bill C-45 must be rescinded,” she said in a release.

It’s unclear if or how the latest developments will affect the tone of the meeting, which stakeholders hope will help strengthen Ottawa’s relationship with Canada’s First Nations communities.

Spence’s spokespeople said Monday that the release of the Attawapiskat audit is an attempt to distract the public from the bigger issues at hand.

Her common-law partner and co-manager of Attawapiskat, Clayton Kennedy, said there are no allegations of “misappropriation or anything like that.”

Kennedy defended his and Spence’s reported combined household income of about $250,000 a year, saying: “I think it’s adequate for the job that is being done.”

Pam Palmater, chair of indigenous governance at Toronto’s Ryerson University, said the Attawapiskat audit is “not damaging at all” to Spence because the majority of financial transactions that lacked proper paperwork occurred before she took over as chief.

“It’s kind of a lame attempt to smear her,” Palmater told CTV’s Power Play on Monday.

“Even though they found that there were some transactions that didn’t have the proper paperwork, that in of itself isn’t corruption. That’s called underfunding of staff, professional development and training,” she added.

Palmater said each First Nation has to prepare about 168 reports on its finances and governance every year, “which is quite onerous.”

She also noted that Indian Affairs has approved every audit of Attawapiskat First Nation in the past.

But a former chief of staff to ex-prime minister Brian Mulroney, Norman Spector, said there is no question that “something is amiss” with Attawapiskat’s finances.

Attawapiskat declared a state of emergency in November 2011 as many families in the community, located near James Bay, headed into winter with crowded, un-insulated, and mould-infested homes.

Shortly after, Ottawa appointed a third-party manager to handle Attawapiskat’s finances, a move that the community of roughly 2,000 staunchly resisted. The manager was pulled from the Attawapiskat in April 2012, with Aboriginal Affairs indicating there had been progress made in reserve management.

Federal Court would later rule that the appointment of a third-party management was “unreasonable in all circumstances.” The court said it found no evidence that Attawapiskat spent its money incorrectly.

Before assigning a third-party manager to the reserve, it was Aboriginal Affairs Minister John Duncan who had suggested that “there are a lot of things that don’t add up” in Attawapiskat’s books.

More than 10 years ago, Attawapiskat First Nation was placed under co-management, a form of intervention intended to improve the community’s financial situation.

Harper to meet with FN leaders

Attention, in the meantime, is fixed on an upcoming meeting between Harper and First Nations leaders -- spurred by ongoing Idle No More demonstrations.

First Nations leaderssay any discussions must take place with an eye to changing legislation, particularly the federal government’s second omnibus budget bill.

Bill C-45 includes changes to the Indian Act, Navigation Protection Act and Environmental Assessment Act which impact reserve lands and waterways. Those changes were the impetus for the Idle No More movement, which was started last October by four Saskatchewan women who were concerned about what the legislation would mean for First Nations groups.

In a statement, Harper had indicated that his Jan. 11 meeting with First Nations leaders would be a follow-up to the Crown-First Nations Gathering last year. During the meet, the two sides discussed strengthening relations and governance but there were no tangible changes made.

Duncan is expected to join Harper during the Friday meeting, while the attending First Nations delegates will be coordinated by the Assembly of First Nations.

Spence intends to continue her hunger strike until the Friday meeting.

Her fast -- along with flash mobs, demonstrations and road and rail blockades -- has helped draw attention to the movement.

With a report from CTV’s Ottawa Bureau Chief Robert Fife and files from The Canadian Press