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A financial statement of band spending is not an audit

By Adam Taylor
web posted April 21, 2008

Indian Affairs Minister Chuck Strahl has announced plans to overhaul fiscal management and accountability measures on Canada's native reserves.  His proposal to amend funding agreements to include an audit clause is long overdue.  Yet true to form, the Assembly of First Nations (AFN), the organization that purportedly claims to represent all Canadian aboriginals, criticized the change.  This can only mean one thing: it's a great idea.

Giving Ottawa powers to audit how native bands spend tax dollars is something the Canadian Taxpayers Federation has repeatedly demanded.  Minister Strahl's reform will take effect July 1 and finally permit his department to conduct audits of recipients when necessary.  Ottawa says adding the audit clause will ensure tax dollars are actually spent "for the provision of intended programs and services and that [native reserves] have appropriate management, financial, and administrative controls in place."  Translation: that federal money is spent responsibly and bands account for it.  This small, but necessary auditing reform, brings the Indian affairs department in line with virtually every other federal department including health, heritage and the RCMP.  And given that $10-billion is transferred to native bands across Canada each year, taxpayers say: it's about time.

This is the second time the governing Conservatives have tried to bring greater accountability to Canada's flawed native policies.  The Accountability Act was drafted to give the auditor-general powers to review how tax dollars are spent after they are transferred to native reserves.  But opposition members studying the legislation instead voted to remove this provision from the bill meaning it was business as usual.  Billions would continue to flow to reserves without any idea of how that money was being spent.

Predictably, the AFN opposes audits.  An AFN release states that Minister Strahl's announcement reinforces the "false impression that has been spread about First Nations and accountability."  The only false impression concerning transferring tax dollars to reserves and accountability is that there is any.

The AFN claims that band governments already complete four "fully audited" financial statements each year.  This might be true, but it is beside the point.  Bands do submit financial statements to Ottawa, but this is not the same as an audit.  An audit means those that provide the cash also have the authority to inspect how it is spent.  Native financial statements have no doubt been vetted by accountants, but this is altogether different than the federal government being able to ensure that money is being used as intended.

For example, if Party A gave $25,000 to Party B to renovate a bathroom and the conditions were to paint it yellow, replace the tile on the floor, and add a sink, a financial statement would only require Party B to acknowledge it received and spent the money.  An audit would give Party A the capacity to physically investigate for themselves that in fact Party B had painted the walls yellow, put in new flooring and added the sink, complete with receipts. 

At a time when Canadians want more -- not less -- accountability and transparency from governments, why would the AFN oppose measures to improve both?  Patrick Brazeau, the national chief of the reform-minded Congress of Aboriginal Peoples, believes there is widespread frustration among aboriginals toward their leaders.  He has described the AFN as being run by an "elitist few" who resist accountability.

And why wouldn't they resist oversight?  Billions flow from the pockets of taxpayers to native bands with virtually no strings attached.  The AFN says the only problem with native policy is not the lack of accountability but "inadequate funding."  The idea that more money will fix all is laughable.  Reserve conditions are appalling; yet over $80,000 is spent for every reserve-resident household each year.  More money might help the elitist few who get to decide how the funds are spent; but certainly not the many that often live in conditions of squalor on Canada's reserves. 

With greater accountability, tax dollars might finally do some good by improving conditions on native reserves.  Taxpayers want to be sure their money is helping, not perpetuating long-standing problems.  The AFN should drop its opposition to accountability and get with the program. ESR

Adam Taylor is national research director of the Canadian Taxpayers Federation.


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