Evidence based, open government: That should apply to First Nations finances, too

Commentary, Tom Flanagan

In his speech to the Assembly of First Nations, Prime Minister Trudeau announced that his government will review the First Nations Financial Transparency Act, which requires First Nations to publish audited annual financial statements plus information about the compensation of chief and council.

Mr. Trudeau once said he would repeal the Act. It’s good to see that he has changed his mind, because the Act performs valuable functions. First Nation governments run mostly on revenue transferred from the government of Canada after being collected from taxpayers. All citizens should have a right to see how these governments spend their money, just as they have a right to see how municipal and provincial governments spend. If a First Nation were to reject all transfers and operate like a family-owned corporation, I would be the first to say, “Fine, absolutely no disclosure is required.” But until then, the public has a right to know.

Getting the truth out is helpful to public debate. For example, the average salary for a chief in 2013-14 was just under $70,000 and for a councillor, less than $40,000. Maybe these payment levels are too high; members of First Nations may want to debate whether they are getting value for money. But these figures are not the huge numbers sometimes reported in media anecdotes. Such exceptional cases do exist, but they are not the norm, and they are balanced to some extent by dozens of First Nations in which chief and council work as unpaid volunteers.

Publication of hard data helps members of First Nations to deal with abusive cases – a stated purpose of the Act. Members can now see how their own chief and council are paid, and compare that to information from other First Nations. After the 2013-14 figures were published, there were three reported band elections in which chiefs were attacked for being overpaid. Two of these chiefs were defeated and one was re-elected. That is exactly the kind of voter scrutiny that the Act was intended to promote.

So the Act is useful, but it is not perfect. Here are two ideas for amending it.

First, in many First Nations chiefs and councillors play executive roles in running band-owned business. Some of these are multimillion-dollar enterprises in which we would expect executives to be well compensated. Such mixing of business and politics would be considered a conflict of interest elsewhere in Canada, and it is not ideal for First Nations. But we have to remember how small most First Nations are. In many cases there aren’t a lot of members ready to take on high-level executive roles, and talented leaders may have to exercise double responsibilities for both government and business. It would help to dispel misconceptions if compensation levels were reported separately for governmental and business responsibilities (six First Nations did this voluntarily in 2013-14). Awareness of business responsibilities might often explain salary levels that otherwise seem out of line.

Second, it would be helpful to develop standard reporting categories for the audited annual statements of revenue and expenses. These statements are a useful source of data for researchers who want to find out what governmental practices work well for First Nations. For example, in a recent project for the Frontier Centre for Public Policy, a colleague and I found that earning own-source revenue (property taxes, business income) is positively correlated with the community’s well-being (income, jobs, housing, education). I’m confident in the direction of the finding, but we had to estimate own-source revenue from a confusion of different categories. Research could be more precise if these categories were standardized.

Our new prime minister has often endorsed open government and evidence-based decision making. That’s the right perspective for amending the Fiscal Transparency Act.