Idle No More: On Mismanaging Funds

Thank you to Valley Road Rambler and
Conservatives and Canada’s 41st Parliament
for re-posting this blog article on their respective  blog sites.

In the last few days, there’s been all kinds of comments flying about in the media and on the Internet about how First Nations band councils are guilty of financial mismanagement. Racist comments on websites of established newspapers abound. To publish some of those horrible comments would only encourage bigots to post more vitriol.

Instead, let’s focus on the subject of financial mismanagement as it pertains to two parties: Attawapiskat and the Federal government.

The first time most people heard the claim that the funds in Attawapiskat were mismanaged was in late autumn of 2011.

As it turned out, the Federal Court determined that the Harper government’s claim of mismanagement was misleading at best.  News of the Court’s judicial review findings didn’t catch the attention of the public though because tales of financial mismanagement by First Nations people appears to be a more licentious tale to tell.

When Ottawa decided to go ahead with audit back in the Fall of 2011, they asked the accounting firm of Deloitte Inc. to go through the band’s books.

No mention was made of the fact that Ottawa was already paying Deloitte Inc. $90,000 per day as financial consultants in the hope they would be able to assist the federal cabinet and senior officials with balancing Canada’s books by 2014. The firm was hired to perform this work from August 15, 2011 through to March 31, 2012 — or 229 days exactly.

I did the math on this and when I saw how much Deloitte Inc. may have been able to bill Ottawa for their services, I had to ask myself if the math was right. I did the math a second time. And then a third time. The fourth time, I went with a more basic formula.

Ten days at $90,000 equals $900,000.
One hundred days at $90,000 equals $9,000,000.
Two hundred days at $90,000 equals $18,000,000.
Twenty days at $90,000 equals $1,800,000.
Nine days at $90,000 equals $810,000.

So 229 days at $90,000 comes out to $20,610,000. That’s TWENTY MILLION SIX HUNDRED AND TEN THOUSAND DOLLARS for 229 days work at $90,000 per day.

I shook my head. Ottawa could be paying over $20 MILLION to an accounting firm for 229 days contracted work.  The media reported that it was a $19.8 MILLION contract, so I’ll go with that figure.

Now I don’t doubt that Deloitte Inc. can justify charging that amount of money to provide consulting services to federal cabinet and senior officials. Running a country is a lot of work and with so many agencies and departments involved at the federal level (never mind the many agencies and departments involved at the provincial and municipal levels), there’s a lot of work involved in doing audits and making viable recommendations.

But still, that’s almost $20 MILLION paid out to only one firm on only one specific contract.

And then the media also reported that the government had also “paid PriceWaterhouseCoopers a $2.5-million fee for advice on how to reduce 308 data centres to about 20.”

All right, so let’s go with the figure of $22.3 MILLION paid out on two contracts.

If Attawapiskat had spent $22.3 MILLION every year for six years (say from 2006 through to 2012), they would have spent $133.8 MILLION and the only thing they’d have to show for that kind of expenditure would be reports and recommendations.

Now, I’m not saying that Ottawa misspent that $22.3 MILLION. I’m just trying to help readers keep the numbers in perspective.

Yesterday, news was leaked that of the $104 MILLION Ottawa had “given” Attawapiskat between April 2005 and November 2011, Deloitte Inc. experienced a modicum of difficulty understanding if the payments made by the council was “in accordance with the terms and conditions of funding agreements with the federal government.”

Some took this to mean that the funds had been mismanaged by those in charge of financial affairs at Attawapiskat. More fuel was added to the fire when the general public was reminded that the federal government had appointed a third-party manager to take care of financial affairs over a year ago.

The reaction some were hoping for, of course, happened. Some were up in arms and posting furiously online that they had proof that First Nations people in Attawapiskat were shiftless spendthrifts.

But OH! what a difference a few hours make when the media began to post updated stories! It wasn’t only Attawapiskat that was at fault. Respected and reputable media were pointing fingers back at Ottawa since the Deloitte Inc. reports appeared to indicate that the federal government had also mishandled those very same funds!

In the report submitted to Aboriginal Affairs and Northern Development Canada (AANDC), the following was stated under the heading of “Audit objective and scope.”

“[quote] The scope for this audit was April 1, 2005 to November 30, 2011 and included an examination of the AANDC management control framework for housing and an examination of AANDC’s relationship with other federal funders for housing. The scope included audit procedures performed at AANDC Headquarters and the AANDC Ontario North Regional Office (located in Thunder Bay), which is AANDC’s primary support office for the Attawapiskat First Nation.

While the roles and responsibilities of other federal funders (i.e. CMHC and Health Canada) were reviewed and these departments were consulted for this audit, only AANDC internal controls were examined and tested as part of the audit scope. Where applicable, observations related to the practices of other federal funders were communicated to their respective senior management [end quote].”

Yes, you read that correctly.  Only Aboriginal Affairs and Northern Development Canada internal controls were examined and tested as part of the audit scope.

In other words, the failings that were identified by Deloitte Inc. were found to be with AANDC since no other internal controls were part of the audit. The internal controls at Attawapiskat weren’t part of the scope of the audit. The only internal controls that were part of the audit were those of Aboriginal Affairs and Northern Development Canada.

And under the heading “Observed Strengths” the following was stated by Deloitte Inc.

“[quote] Throughout the audit fieldwork, the audit team observed several examples of how controls are properly designed and are being applied effectively by management. This resulted in several positive findings as follows:

• AANDC, CMHC, and Attawapiskat First Nation, were working in partnership at the regional level to determine allocations of housing funds for the Attawapiskat First Nation;
• From a financial perspective, major core capital projects and Canada’s Economic Action Plan projects related to Attawapiskat First Nation housing were well monitored by AANDC;
• Assessments and approval decisions for Attawapiskat First Nation minor core capital activities, major core capital housing, and payments related to housing were executed in a timely manner by AANDC individuals with appropriate delegated authority; and,
• Monitoring controls as well as system controls built into AANDC financial systems were used adequately to ensure funding commitments for Attawapiskat First Nation housing activities did not exceed authority levels and program budgets [end quote].”

Management would be those who administered these programs at Attawapiskat, and according to Deloitte Inc., controls were “properly designed” and “applied effectively by management.”

Now, in comparison, consultant contracts run at about 1,500 per year for AANDC alone, and according to Lorraine Y. Land (a partner with OLTHUIS, KLEER, TOWNSHEND, L.L.P., in Toronto) that amounts to approximately $125 million paid out by AANDC every year. Ms. Land did some number crunching of her own and asked the question: Should Toronto be put under third-party management based on Toronto’s financial situation?

Continuing with my research, the Ontario Métis Family Records Center (OMFRC) provided some interesting facts to consider.

“[quote] Approximately $5.36 billion were allocated to First Nations in grants or contributions, or just over $7,200 per person. When the federal, provincial and municipal budgets are measured against population, the average citizen of the City of Ottawa receives services costing approximately $14,900. The City of Ottawa budget is just over $2 billion for its 775,000 people [end quote].”

The fact of the matter is, the $7,200 per First Nations person doesn’t go as far anywhere in Canada as the $14,900 per person goes in Ottawa, or anywhere else in Canada. It’s not a case of the cost of products and services being more expensive the farther north you look. It’s a case of uneven per capita spending. First Nations people receive per capita less than half of what non-Native people receive per capita.

So when you read or hear people talk about how First Nations people are mismanaging money, stop and ask yourself if what you’re reading or hearing is an accurate representation of the facts.

In fact, I can guarantee you that there’s lots of problems long before any government money lands in the hands of First Nations council members.

Elyse Bruce