Default management a Band-Aid solution on First Nations

Forty per cent of Manitoba First Nations have outside managers, which can improve the books, but still never fixes the underlying problems


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Nearly 40 per cent of all Manitoba First Nations have lost control of their finances due to mismanagement, a number that's the highest in Canada and on the rise.

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Hey there, time traveller!
This article was published 09/11/2013 (3313 days ago), so information in it may no longer be current.

Nearly 40 per cent of all Manitoba First Nations have lost control of their finances due to mismanagement, a number that’s the highest in Canada and on the rise.

The figures from Aboriginal Affairs and Northern Development Canada come in the wake of yet another First Nations financial scandal in Manitoba — the grand chief of the Southern Chiefs’ Organization was turfed last week over allegations he misspent thousands of dollars, including at casinos and amusement parks.

Though 25 of the province’s bands are in what’s called default management, it’s not a record. Six years ago, there were 27 bands in default management, but the number dropped to 21 in 2010 and then inched up again.

What that means is nearly $400 million in federal funds is being managed by an army of outside accountants rather than elected chiefs and councils, though it’s hard to get an exact total. Several bands have yet to file their one-page tally of federal funding from the 2011-12 fiscal year. That is the only public document available detailing each band’s finances, and it’s skimpy.

The list of bands in default management includes some of the biggest in the province — Norway House, Garden Hill, Peguis. And it includes bands suffering internal turmoil that frequently makes headlines, such as Roseau River and Lake St. Martin, the evacuated community that, even before the 2011 flood, had been largely run by an outside accountant. Lake St. Martin has been in default management for a decade.

The list also includes all four bands around Island Lake, where hundreds of homes still lack running water and indoor toilets. The list even includes Pine Creek, the hometown reserve of the province’s grand chief, Derek Nepinak.

Poor governance scourge of First Nations

Aboriginal Affairs and Northern Development Canada won’t say exactly why each band lost control of its finances. That information is secret. But, a general list of “triggers” includes complaints by band members denied services, calls from creditors, bad budgeting and financial management, a deadlocked council and bad-quality reporting to Ottawa.

Poor governance — from nepotism to rigged elections to exorbitant pay for chiefs and band councillors — is the scourge of First Nations. Stories of such petty corruption are frequent, and further stall the push for self-government, reinforce latent racism and undermine legitimate calls for more equitable funding for things such as education, child welfare and housing.

For years, chiefs — and even Canada’s auditor general — have criticized the practice of putting bands in default management, calling it paternalistic and ultimately ineffective. Outside accountants can improve the finances and administration of a band, but do little to tackle the underlying problems of poverty, rotting houses, marginal schools and poor health, which often catapulted the band into debt in the first place. The cash bands spend on those outside accountants — sometimes as much as $200,000 a year — is money most chiefs argue could be better spent on the basics. And, third-party or co-management does little to improve the skills of band staff and elected officials. It only bolsters the “Indian industry” of consultants, lawyers and accountants, most of whom are non-aboriginal.

Bloodvein First Nation is an exception. It was under third-party management from 1997 to 2006, then under co-management from 2006 until last year.

“Things are going OK,” said Chief Roland Hamilton. “The last few years, there have been good audits.

“I can’t really say why some of these communities are still under co-management after so many years.

“The co-manager we had for our community worked very closely with the finance people (we had) in place.”

The Bloodvein First Nation paid for management services that included training and it paid off, said Hamilton, who has served two terms as chief and isn’t sure if he’ll run for a third in June.

“It is a good investment, especially if you have the right people to do the work and the co-manager is one that’s willing to do the training and making sure everything is in place.”

If the default-management system worked in most cases, critics say, bands like Wasagamack wouldn’t be spending five years under the control of a third-party accountant.

But there’s no quick or simple way to turn a band’s finances around, said Wasagamack First Nation Chief Alex McDougall.

“It’s not one certain thing causing First Nations to be in third-party management,” said McDougall. “It’s the culmination of the amount of a First Nation’s debt and the continued demand on dollars there — a growing population and the stagnant funding the First Nations get. I think that’s pretty similar to all First Nations. The supply of funds is constant, meanwhile the community is growing exponentially and putting that much more demand on programs and services,” he said.

“It’s almost impossible to get out of,” said McDougall, who is optimistic they will get out of it.

He said Wasagamack First Nation is one of a handful across Canada chosen for a federal pilot project. Instead of sending in an outside manager who tells the band what to do, a manager works with front-line service providers in the community, such as education and health agencies to come up with a management action plan.

They are all aware of the band’s overall debt and working together to find ways to reduce it, like eliminating duplication of services, said McDougall. The band is more involved in getting its finances in order, he said.

“We are the ones setting the tone as opposed to having to try and fit into the terms of their process and all the hoops they have to jump through. There’s greater autonomy.”

Little evidence management improving

Despite some bright spots, there is little evidence overall band management in Manitoba is improving.

Jacqueline Romanow, a professor of indigenous studies at the University of Winnipeg and a former tribal council staffer herself, says band-governance problems can be traced to the Indian Act, which demands a mountain of paperwork to hold chiefs and councils accountable only to Ottawa, but not band members.

“The mechanism of accountability is missing,” she said. “The system fosters that.”

There is no provision forcing the chief and council to make budgets, audits and reports public, and band members who demand those often face ostracism. Elections are typically held every two years, making it tough for progressive chiefs to make unpopular improvements before being voted out.

Bloodvein’s Hamilton said it’s hard for outside managers to work with a First Nation where there’s a constant turnover of elected officials and band staff.

“You train one person and work with a chief and council and there’s change and you’re starting all over again as a co-manager.”

First Nations aren’t any more corrupt than non-aboriginal governments — a brief scan of city hall scandals in Toronto, Montreal and Winnipeg bears that out, not to mention the expense debacle now engulfing Canada’s Senate. But the reserve governance system, created by Ottawa through the Indian Act and in place for decades, is designed to reward those who engage in corruption, says Romanow.

By this time next year, there could be significantly more public accountability, though.

Despite the objections of many chiefs, Ottawa recently passed the First Nations Financial Transparency Act, which mandates the public disclosure of salary and expenses paid to chiefs and councillors as well as the band’s audited consolidated financial statements.

The new rules don’t kick in until the end of this fiscal year, so each band’s financial statements won’t be available until next summer. And, Colin Craig, the prairie director of the Canadian Taxpayers Federation who led a campaign for the new legislation, says it won’t be a silver bullet. It doesn’t do much to improve the fairness of elections or offer help for broader governance problems. But, for the first time, financial reports will be automatically available to band members, which is a step forward for basic accountability.

Carol Sanders

Carol Sanders
Legislature reporter

After 20 years of reporting on the growing diversity of people calling Manitoba home, Carol moved to the legislature bureau in early 2020.


Updated on Tuesday, November 12, 2013 11:44 AM CST: Removes reference to reserve location.

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