Expand New Audit Clause

The addition of a new audit clause to next year’s First Nation funding agreements is a welcome change, but it must be expanded.

Grand Chief Ron Evans of the Assembly of Manitoba Chiefs is correct in saying that First Nations do not need any more paperwork (Winnipeg Free Press, Enough Paperwork Already, April 8, 2008).

However, this is not what is required under the new audit clause in new First Nation funding agreements. With all due respect to Chief Evans, the auditor general’s report in 2002 did not say that First Nations are “over-audited,” she said that they are “overburdened” with paperwork. There is a difference.

According to officials with Indian and Northern Affairs Canada (INAC), the new clause will not create any new financial reporting requirements.

What it will do, they said, is ensure that spending on First Nation communities comes into compliance with auditing requirements that most other federal departments have in place. It will also bring Indian Affairs in line with the new requirements of the Federal Accountability Act.

The audit clause will allow professional auditors to examine only existing financial records. It will not by itself generate new records.

Currently, all First Nations in Canada must submit annual audited financial reports to Indian Affairs. These reports are posted on the INAC Web site for the public. However, these records show only the monies First Nations receive from the federal government. They do not include own-source revenue on reserves or the contributions from provincial governments. More importantly, they do not show how the money is actually spent in the community. This would require an audit, which the new clause will allow to happen.

This clause will allow for much more rigorous line-by-line inspection of spending in First Nation communities. Simply put, this will allow indigenous communities to go to their members or to regional tribal councils and demonstrate that they are spending the money appropriately.

Neither Chief Evans nor any other modern indigenous leader should have any problem with this.

Some people think that these reporting requirements are targeting First Nations. They argue that the requirements are unfair attacks that imply all First Nation communities are unaccountable. This is not the case. There are many examples of chiefs and councils going out of their way to demonstrate accountability. During the past two years, the Frontier Centre for Public Policy has travelled throughout Manitoba and collected data for inclusion in an Aboriginal Governance Index. Using this data – which comes directly from band members – we are able to rank communities on their systems of open governance. Communities such as Rolling River First Nation and Long Plain First Nation have shown leadership in opening up their financial books to their members.

Nevertheless, we know there are still problems. From 2002 to 2004, Indian Affairs reported 984 allegations of criminal and non-criminal wrongdoing by Aboriginal government bodies. This year’s statistics do not paint a much brighter picture. During the collection of data for the Aboriginal Governance Index, we heard from many grassroots indigenous people who were concerned about spending controls at the band level. They were also very concerned about the lack of financial transparency in their band government. Some had never even seen a financial statement from their band. There is also an unacceptably high level of third-party management interventions in First Nation communities, including in Manitoba. This indicates something is wrong, but it is not surprising given that the Indian Act, which was drafted in the 19th century, does not include mechanisms to ensure accountability and transparency. However, this is a structural problem and not a problem with First Nation culture, which historically had accountability structures.

Despite the inclusion of this new clause, there is much work to be done on First Nation accountability. At present, indigenous communities are still outside the purview of Access to Information laws. This means the public cannot subject these communities to scrutiny for tax dollars spent. That obviously needs to change.

First Nations have nothing to fear from these audit requirements. They will allow First Nations to be stronger as they move toward responsible self-government.