Indigenous Services increased scrutiny of AFN cash flow amid call for financial review

Indigenous Services Canada secretly intensified its monitoring of cash flow at the Assembly of First Nations shortly after RoseAnne Archibald, who had called for a review of the lobby group's books, was elected national chief, unclassified internal memos show.

But even before that, departmental officials had "long raised concerns" about the AFN re-allocating program money to make up for deficits in operational funding, which the department's deals with the AFN wouldn't allow — and which the AFN denies has ever happened — according to a memo dated Nov. 5, 2020.

"ISC sectors have also expressed concern with the value added of some Assembly of First Nations' activities and proposals, including lack of progress on key activities and recurring carry-over requests," says the memo, which was released through access-to-information law.

As a result, the department hesitated to lean into AFN requests for more flexible funding. Citing "ongoing concerns and uncertainties," the memo instead recommended Indigenous Services undertake a "full review" of the department's AFN funding.

"It will be important to balance ongoing accountability and program considerations with the need to provide predictable and sustainable funding to partner organizations," it says.

The review would eventually lead to a new quarterly monitoring scheme.

Archibald raised questions shortly after

Before that happened, however, then-Ontario regional chief Archibald started independently questioning the AFN's finances too.

She brought her concerns to the Chiefs of Ontario, which is composed of representatives from 133 First Nations, during a February 2021 in-camera session.

Documents circulated at the time later leaked to the media along with a confidential resolution in which the chiefs demanded an independent review of the AFN's financial management policies.

A few months later, in June 2021, officials at Indigenous Services and Crown-Indigenous Relations linked up for "a technical working group" to address what the memos describe as "ongoing issues related to operational funding policy development" at the AFN.

In that fiscal year, which ended a month earlier, the departments together gave the lobby group $39 million for both program-specific activity and basic operational capacity. The cash flowed through an increasingly complex web of separate deals, according to the documents.

To keep closer tabs on these arrangements, Indigenous Services officials drew up a plan to present to deputy minister Christiane Fox.

In an Oct. 7 2021 memo, they proposed implementing a "quarterly financial report," which would involve producing regular line-by-line breakdowns of the AFN's current financial state.

The scheme was approved and rolled out soon after.

Reports reveal details of funding structure

By February 2022, the department had already forwarded Fox its second quarterly update. The report, which has not been made public until now, offers a look into how the Canadian government finances the AFN.

It reveals Indigenous Services funds the AFN through program-specific deals with ISC's various branches, such as the First Nations and Inuit Health Branch (FNIHB), which offers flexible 10-year deals for health and social services. Its other sectors offer less-flexible five-year deals for things like education, housing and policy development.

The memos have been censored, but they contain no evidence the department told the AFN about this new monitoring scheme.

On Nov. 29, 2021, deputy minister Fox and Daniel Quan-Watson, her counterpart at Crown-Indigenous Relations, sent AFN CEO Janice Ciavaglia a letter discussing "how best to manage the ongoing funding arrangements required to support your work."

Evidently, the AFN had concerns of its own about late payments, inflexible deals and clunky approval processes. The department conceded the cash the organization receives "is often responsive in nature," making long-term planning difficult.

The deputies pledged to try and improve the funding system, yet they didn't raise any of the issues causing hesitation internally.

They didn't express any of the department's "ongoing concerns" about "lack of progress" or cash re-allocation. Nor did they mention the proposed, and potentially approved by this point, quarterly reporting scheme.

The AFN says it doesn't know the details of Indigenous Services' internal reporting structure and was never told of the department's concerns, according to a statement from Jonathan Thompson, AFN vice-president of operations and administration.

"No one at ISC has communicated any concerns to the AFN, including during our periodic check-ins on funding," the statement says.

"If you look at our annual statements, you'll see no operational deficits."

'Activities on the department's behalf'

The documents also offer a rare glimpse of the department's deliberations on this issue.

For example, the October 2021 memo says Indigenous Services' sectors fund the AFN "to carry out activities on the Department's behalf." The November 2020 memo says FNIHB similarly funds the AFN "to support activities carried out on behalf of its programs."

A July 2021 memo to the minister says Indigenous Services supports paying for national Indigenous organizations' travel and engagement costs but believes these organizations need guidance "to ensure that they can continue to carry out activities on behalf of the Department within the financial directives."

In its statement, the AFN said it doesn't carry out its activities "on behalf" of the federal government, but rather the chiefs-in-assembly who delegate the AFN its lobbying mandate.

In response to questions from CBC News, Indigenous Services says these considerations aren't designed to control the AFN through money or use it as an agent of Liberal policy.

Neither Indigenous Services Minister Patty Hajdu nor Crown-Indigenous Relations Minister Marc Miller were made available for an interview. Their offices supplied a statement instead.

The statement says that AFN and Canada have "a mutual interest" in seeing the department achieve its "long-term objectives," which are to eventually transfer service delivery to First Nations organizations themselves.

The statement says the quarterly funding update is one of many tools it uses, and that, despite the overlapping timeline, the increased monitoring is not tied to Archibald's calls for a financial probe.

"Plans to implement a new quarterly funding update predates National Chief Archibald's call for a review of the AFN's finances, and represented, in large part, a need to put the appropriate financial management tools in place following the dissolution of Indigenous and Northern Affairs Canada," the statement says.

Indigenous and Northern Affairs was dissolved in 2017 and replaced by Crown-Indigenous Relations and Northern Affairs, and Indigenous Services, which was formally created two years later with a new service-delivery mandate but remains tasked with administering the Indian Act.

The national chief's office says via emailed statement Archibald "welcomes any process that brings truth, transparency, and accountability to the AFN."

Archibald has an ongoing commitment to the AFN's Resolution No. 03/2022, which the chiefs adopted in July, the statement adds.

The resolution directs a committee of chiefs to review the AFN finances and "if it is necessary" commission a forensic audit.