Federal auditors have found financial irregularities at the Roseau River First Nation but Chief Terry Nelson is outraged, saying some of the report is libelous.

"This is libel, some of the stuff they're presenting is libel. I said, 'if you have any evidence [of] criminal activity then certainly give us the evidence and we'll take it to the RCMP but they're not prepared to do that," Nelson said.

Indian and Northern Affairs Canada claims an account intended to fund an urban reserve was used to spend money on several unrelated expenses, including Christmas bonuses for chief and council — each of whom received $2,500.

Auditors say more than a half-million dollars in loans to band employees were not properly documented.

INAC's auditors said there is no evidence of criminal activity but some of the financial spending is questionable, such as $2 million to develop land for a gas bar and vlt lounge. The gas bar is owned by Nelson's daughter.

The money came from a fund intended to buy land for the community.

The findings of the audit were released to band members on Monday and Nelson immediately lashed out.

He says the auditors are releasing their report now because Roseau has an election next week.

"This is all political, to make sure that Terry Nelson is targeted. I know goddamn well that's what's happening," he said.

INAC auditors say the report's release has nothing to do with the election.

However, the band definitely needs tighter accounting procedures, the auditors concluded.

Roseau River First Nation is located 90 kilometres south of Winnipeg.