Tuesday, September 16, 2014
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New federal audits of native reserves find questionable spending


OTTAWA — The Globe and Mail

The federal government is airing its concerns with management practices on specific First Nation reserves and aims to recover hundreds of thousands in misspent cash, even as the Conservatives try to improve relations with aboriginals to gain support for natural resources development.

For the first time, Aboriginal Affairs and Northern Development Canada has posted 11 “Recipient Audit” reports of First Nation organizations – including nine governments – and more online releases are planned. This is in addition to detailed spending reports on everything from travel to salaries that all of the more than 600 band councils will have to disclose by late July because of a new law the Conservatives passed last year.

Aboriginal Affairs Minister Bernard Valcourt says the wave of new reports will be “transformational” in giving First Nation citizens an unprecedented picture of how chiefs and council manage funds on their behalf.

Mr. Valcourt said the vast majority of chiefs and councils are “responsible people who really care” and want to be transparent, but he does expect some to push back.

“I’m not kidding myself. I’m sure that there will be resistance in some quarters,” he said in an interview. “It is time that membership knows what kind of revenue is coming on reserve and what it being done with it by their leadership. To me, it’s about empowering individual First Nation members, which will lead to better governance and better results in the end.”

Terry Goodtrack, who helps communities prepare financial reports as president and CEO of the Aboriginal Financial Officers Association of Canada, said aboriginal governments are being held to more onerous rules than other groups that receive federal cash, and even other levels of government in Canada.

Mr. Goodtrack said communities are unclear about the new disclosure rules. He also says the latest reports are more like commentary rather than audits and their online release is a surprise that puts aboriginal-Crown relations at risk.

“It certainly can compromise the relationship,” he said. “It’s about building trust. First Nations are at different levels in their journey toward economic prosperity and so forth. So there’s many different ways these things could be handled. To me, this is not the way.”

The new reports take some band councils to task for holding meetings without notice and then failing to make a record of decisions.

The department is publishing the recipient audits because of a new policy decision, while the more detailed reports coming this summer are the result of the First Nations Financial Transparency Act, a law that received royal assent in March, 2013. It requires all First Nation governments to disclose detailed financial reports within 120 days of the end of the fiscal year.

Native leaders told Parliament at the time of the bill’s introduction that they support more transparency, but found the requirements to be excessive and unilateral. They also said many small communities don’t have the capacity to handle a heavier accounting load.

Of the first 11 recipient audit reports the department recently posted online, seven identified money that was not appropriately spent and could be recovered by Ottawa.

Saskatchewan’s Black Lake Band was found by auditors to have spent $403,651 – or 49 per cent of all audited spending – in ways that were “not in compliance” with rules for federal transfers. Auditors said they couldn’t find any documents about council meetings or records of decisions and no evidence the leaders regularly reviewed the community’s finances.

Another Saskatchewan community, Montreal Lake Band, spent $156,756 that auditors said was against the rules and also found no record of council meetings or decisions.

Manitoba’s Mosakahiken Cree Nation received a “denial of opinion” from auditors, because they could not find enough information to conclude an audit.

“The Chief and Council hold meetings on an ad-hoc basis only and the topics of discussions are not identified in a formal agenda,” said the report, adding that “The recipient has made a large number of advances to staff and Band members but has failed to account for these in the accounts receiver ledger.”

Auditors took issue with $67,381 in audited spending at Sayisi Dene First Nation – one of the most northern communities in Manitoba – and reported concerns from band members.

“In regards to transparency and communication, there are complaints from Band members of lack of communication and that Chief and Council are often absent from the community,” the report states.

The department gave all 11 organizations 30 days to provide a response that would be posted online, but no responses were received.

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