Canada

Money, Matters

A series of scanda have focused Ottawa's attention on how Canada’s nativeserves are handling their finances

John DeMont April 10 2000
Canada

Money, Matters

A series of scanda have focused Ottawa's attention on how Canada’s nativeserves are handling their finances

John DeMont April 10 2000

Money, Matters

Canada

A series of scanda have focused Ottawa's attention on how Canada’s nativeserves are handling their finances

John DeMont

Wearing green track pants, a black T-shirt and shiny black dress shoes, Allison Bernard leans forward on his sofa. He gestures around the living room of his red wooden bungalow, at the stuffed bear in the corner and the native memorabilia covering the walls. Then he points towards the kitchen where his wife,

Freda, and two of their eight children sit sipping tea. “Outside of being a chief,” the beleaguered 59year-old leader of the Eskasoni, N.S.,

Indian band says, “I’m just an ordinary guy.” That may be the case— but few ordinary guys have a Ford Expedition, a snow plow and a halfton truck parked in their backyard, alongside a pair of yellow school buses, two motor homes, a Ski-Doo and a stable where one son keeps a horse. Then again, few ordinary guys pulled in more than $425,000 tax free in the past 15 months for running a dirtpoor Cape Breton reserve whose 2,737 residents have an average annual income of $11,900, according to the 1996 census.

Bernard says how he spends his money is his business. But it is how he earns it that has folks in Eskasoni, not to mention auditors in Ottawa and Halifax, going through the bands books with a fine-tooth comb. Bernards hefty paycheque, meanwhile, is adding fuel to the widening controversy over how Canadas native reserves handle their money. When Robert Nault took over the Indian Affairs portfolio last summer, the rookie cabinet minister downplayed concerns about dubious band financial practices. But the situation at Eskasoni, and similar cases such as a recently publicized scandal involving the Acadia band in southwestern Nova Scotia, have forced him to consider action to clear the air, even if he contends that most bands are well run. “What I’m concerned about,” he told Macleans, “is

the perception of non-natives because of a couple of communities.” Nault said he plans to bring a proposal to an upcoming meeting of native leaders to open up band finances to public scrutiny. The model his officials are working on, in cooperation with the Assembly of First Nations and the Canadian Association of Chartered Accountants, would result in audited figures— complete with salaries of elected band officials—being posted on the Indian Affairs Web site. Nault stresses that his goal is to offer evidence of sound management—not to expose more Eskasonis. “I haven’t changed my attitude in terms of First Nations people being able to do what needs to be done,” he said. “But there is a continued misperception that there is an incapacity to govern.”

Nault admits that winning approval from native leaders to open up reserve books will take time. As well, he is pushing for an even more ambitious new “elections act” to govern band politics—legislation that would include an ethics and conflict-of-interest code for reserve politicians. Meanwhile, the minister has signalled that he means business. He recently deployed senior officials to meet with newspaper editorial boards in Nova Scotia to send out a warning that Ottawa intends to become more vigilant when dealing with First Nations. His officials are vowing to find out much more in the next few months about just how handsomely some band politicians are being paid. Their main quarry: those on reserves, like Eskasoni, that are in financial difficulty.

There are plenty of those. Of Canada’s 611 First Nation bands, 183 are so debt-laden that Indian Affairs—which spends $4.6 billion annually on native programs—has had to intervene in their financial affairs. But even then, the department’s ability to clamp down on overspending and enforce good government has often been limited by Ottawa’s reluctance to risk the charge that it is heavy-handedly usurping native rights.

Critics say that goes a long way to explain why Indian Affairs, at least in the past, has been unable to rein in chiefs like Bernard who receive huge paycheques on reserves where unemployment rates are stardingly high—in the case of Eskasoni, approaching 80 per cent. The Cape Breton band, which is Eastern Canada’s largest reserve, has run up a debt of $14 million, even though a team of outside consultants has been helping its members run their financial affairs since 1995.

The band’s co-managers—the Halifax office of accounting firm Deloitte &

Touche, along with Chignecto Consulting Group, a Sackville, N.B.-based company with an expertise in First Nations affairs—oversee the $24 million from Indian Affairs that Eskasoni receives each year. That means scrutinizing expenditures, co-signing on capital projects and otherwise trying to make sure that the band sticks to its plan to cut debt while still delivering education, housing and social assistance. “The co-manager’s is an interventionist role,” says Gerry Kerr, a partner in Chignecto Consulting. “From time to time there can be significant debates.”

But not, apparently, over Bernard’s pay, about which the co-manager could say little. Documents from the band office leaked to reporters indicate Bernard has taken in more than $425,000 since being re-elected in December, 1998. In an interview, the chief told Macleans the figure is inflated: he claims to have received only about $368,000 in salary, expenses and other payments during this period. Band officials

say they won’t know the exact amount until they look at their books for the fiscal year that ended on March 31. At this point, all they can say is that Bernard’s salary and expenses came from the $1.2 million the band takes in annually from video-lottery machine profits and on-reserve tobacco sales— money that is administered by the elected band council and beyond the jurisdiction of the co-manager. “Nobody seems to have been paying attention to the totals,” concedes Eskasoni band manager Clarence Smith.

Last December, council voted the chief a 6.4-per-cent raise, leaving his annual tax-free M salary at $140,488. Such an inI crease was perhaps not overly surprising: last year, the council voted itself a 14.5-per-cent pay hike, raising salaries for the fulltime politicians to $42,000 annually. But the 10-member council has also allowed the chief to draw advances against his entire 2000 salary. They approved the $60,000 Bernard claimed in travel expenses, as well as $27,402 for acting as band manager for five months while Smith was on sick leave.

Bernard says he is “worth every penny.” He points out that, since his re-election, the band has built 65 new houses on the reserve, opened a $ 5-million high-tech high school and broken ground on a new $ 1.8-million health centre. But whopping salaries like his only add ro the perception that native reserves across Canada are feudal communities where the chief and band council are able to exercise unchecked auMany bands say it is none of Ottawa’s business how much they make from on-reserve ventures

thority. Bernard’s critics say he has remained chief of Eskasoni for 20 of the past 22 years largely because few are willing to criticize a politician with control over who gets a new house, social assistance and other necessities of onreserve life. “Everyone is scared of the chief,” says Eskasoni elder Margaret Johnson, 85. “Vote against him and you won’t have a job.”

When the full facts are exposed, communities sometimes erupt. After learning how lavishly Bernard is being paid, Johnson and a few other Eskasoni residents last month swallowed their fear and marched on the band welfare office in protest. Around the same time, some 550 km southwest of Eskasoni, members of the Acadia band were asking

Ottawa to take over their finances after learning that Chief Diana Robinson, her six councillors and administrative staff took home $640,248 in salary and expenses in 1999—triple what they received two years earlier for running the 200-person band.

The pattern is hardly limited to Nova Scotia. Last year, angry members of the Saulteaux band near North Battleford, Sask., fired Chief Gabriel Gopher—at that time he was driving a 1999 Lincoln Navigator paid for by the band—when they found out he had collected more than $350,000 in salary and expenses from April to December, 1998. In the most widely publicized case of alleged band financial mismanagement, a forensic audit of Alberta’s oil-rich yet

poverty-ridden Stoney First Nation unearthed dozens of irregularities that were turned over to the Mounties in 1998. And while that attracted national attention, the underlying concerns are not unique: in 1998-1999, Indian Affairs turned over 48 allegations of fraud on reserves to the RCMP for investigation.

Despite all that, Ottawa has seemed hesitant to act. After Indian Affairs released an internal audit last year, federal Auditor General Denis Desautels called efforts to strengthen weak funding controls “unacceptably slow.” Indian Affairs has had a rule on the books since 1996 requiring that bands reveal all financial details as part of the yearly audited reports they must file to the department by the end of June. Even though, under the current rules, that information would be released only to members of First Nations communities, many bands have not complied. “We’ve been working closely with First Nations that have been resisting this,” said Cal Flegge, who heads the Indian Affairs’ transfer payments directorate.

Hegge said the department plans to concentrate this year on demanding full compliance from the roughly 25 per cent of bands that are in some kind of financial difficulty. But many bands have always felt it is none of Ottawa’s business how much they make from on-reserve gambling, tobacco sales and other business ventures—and how those profits are spent. Eskasoni did not provide a list of salaries until last month—after a pointed threat from Ottawa to halt about $1 million in discretionary Indian Affairs funding.

But Ottawa has no legal authority to impose limits on how much native politicians earn. Nault argues the government need not step in—as long as reserve residents are assured of getting clear, timely information on what their leaders are making. “That’s the fair way to approach this,” he said, “not to suggest that your opinion or mine should rule when it comes to elected democratic processes in First Nation communities.” If the throw-the-rascals-out reaction displayed by some bands is any indication, Nault’s prescription for more disclosure—not direct control from Ottawa—might just work.

With John Geddes in Ottawa