First Nations funds mishandled by Ottawa, audits show

Two government audits show Ottawa is earmarking about a billion dollars a year to build and repair First Nations infrastructure, but its myriad of officials are not keeping proper tabs on how the money is spent.

Even as Prime Minister Stephen Harper accuses the Attawapiskat First Nations of mismanaging federal funds, the internal audits posted recently suggest the criticism could apply to the federal bureaucracy as well.

The audits say there are "significant gaps" in how the on-reserve infrastructure funding is controlled, and that the financial reporting system is riddled with inconsistencies.

The audit of on-reserve community infrastructure says targets, standards and compliance systems are often ignored or inconsistently applied, leaving the government with an unclear picture of how well its money is working.

When it comes to water and waste water, for example, the report notes the department has ranked many water systems to be low risk.

At the same time, there were no inspections for more than a year on these water systems -- at least not until a national assessment of First Nations water systems prompted some regions to undertake testing.  

"As a result, there is a risk of inaccuracy of data reported in the departmental performance report related to the risk levels of water and waste water systems," the audit says. The national assessment, published in July, found that 39 per cent of First Nations water systems were at high risk of being unsafe, affecting 25 per cent of people living on reserves.

 It said Ottawa would need $1.2 billion in repairs, better infrastructure and training to fix the problem, as well as an additional $4.7 billion over 10 years to keep pace with growing demand.

But the continued monitoring by Aboriginal Affairs officials didn't thoroughly define such a widespread problem because they didn't properly apply the monitoring systems they had set up, the audit says.

The audit of money for First Nations water, sewage, schools, electrical power, roads, bridges and fire protection was completed in February 2011 but only posted recently on the department's website.

It concludes that management of major capital projects is "adequate", but that "there remain gaps" in governance, risk management and control frameworks for projects of all sizes. As for minor projects, and spending on operations and maintenance, "significant gaps remain over the management of funding."

In 2010-2011, the federal government put $1.2 billion into on-reserve infrastructure. That amount will drop to just below $1 billion this fiscal year because extra one-time funding from the federal stimulus program will expire.

First Nations chiefs complain repeatedly that they can't do any long-term planning for infrastructure improvements because funding arrangements are too short-term and too strictly defined.

First Nations leaders also say they are subject to layers and layers of accountability and audit, even as the federal bureaucracy in Ottawa grows larger and the communities grow poorer.

So the federal government is under pressure to back off and allow band chiefs and councils more leeway to spend their federal allotments as they see fit, while also under scrutiny to spend taxpayers' dollars wisely.

"We are committed to ensuring that transfer payments are managed in a manner that respects sound stewardship and the highest level of integrity, transparency, and accountability," said Michelle Yao, spokeswoman for Aboriginal Affairs Minister John Duncan.

A second recently posted internal audit looked at how officials managed $668 million in stimulus funding earmarked for housing and infrastructure on reserves.

That audit, also completed in February, found that officials tacked the new money onto existing programs so they could get the funding out the door quickly and efficiently.

But they did not add any extra risk management or monitoring to keep a close eye on the additional money.

As a result, "there is an increased risk that projects will not be completed as intended, that funds may be expended for ineligible activities, and that funds available for re-distribution will not be identified in a timely manner," the audit says.