Attawapiskat financial statement error slips by Ottawa, auditors

Attawapiskat First Nation's latest auditedconsolidated financial statements contain an error that makes it appear as if tens of millions of dollars were being spent on social assistance under sectors such as infrastructure, economic development and governance.

The northern Ontario band near James Bay has had a history of financial troubles and has been working towardimproving both its accounting practices and its bottom line.

But in statements meant to detail the First Nation's spendingfor the 2012-13 fiscal year, it appears thatmore than $22 million was spent on social assistance payments under infrastructure. In contrast, the statements indicate only $81,656 was spent on social assistance payments under the actual category of social assistance.

We know there are a number of people [here] on social assistance, but not $22 million worth.Wayne Turner, band manager for Attawapiskat

When contacted by CBC News, Attawapiskat band manager Wayne Turner said he would look into it, agreeing that it did not make sense.

It turns outthere was a clerical error.

"We know there are a number of people [here]on social assistance, but not $22 million worth," said Turner. "Somewhere along the line the spreadsheets got out of alignment and it wasn't caught."

It turns outthe$22 million in question was not spent on social assistance, buton operations and maintenance under the band's infrastructure program, the bulk of which is going towardbuilding a new school. And once the line items are matched properly with the numbers, it becomes clear that a little more than $4.5 million was spent on social assistance to members of the band.

What's not clear is whether the error happened on the band's end when submitting its statements to their auditor, Timmins-based Ross, Pope & Company, or on the auditor's side when itbrought the numbers into its software program. But neither the band nor the auditor caught the mistake. The auditor responsible, Mark Dell'Erede, did not return numerous calls from CBC News.

• Read theAttawapiskat audit for 2012-13

The Department of Aboriginal Affairs and Northern Development said it "received and accepted" Attawapiskat's audited consolidated financial statements in August 2013.

"The First Nation was notified in December 2013 that a full review had been completed," according to a statement sent from the department to CBC News. "Please note that by accepting the audited statement it means the department has no concerns."

Ottawa focuses onthe consolidated statements of financial position, financial activities and accumulated surplus, change in netdebt and cash flows to determine the financial health of a band. It does not necessarily look at Schedule B, the band's segmented expenses, which isthe part of the audit where the error occurred.

But the federal government requires First Nations to lay out theirsegmented expenses as well as a schedule of band salaries, honorariums and travel expenditures in order to provide transparency and accountability to band members and the general public.

Band manager Turner said that although the descriptions of where the money was spent were wrong, the numbers themselves were not.

"We are a small organization, with four people responsible for managing the finances. It's significant undertaking," he said. "Perhaps there was not enough oversight on the description part. Generally the focus is on the numbers to make sure they jive and are correct."

"But when we do present statements, we want them not to have any errors," he said.

History of financial problems

In 2011, after the First Nation's housing crisis hit the headlines, the federal government hired auditing firmDeloitteto look at the band's financialsback to 2005. The audit, released in January 2013, found significant documentation lacking for the $104 million transferred to the band from the federal government between 2005 and 2011.

The band has been under co-management for more than a decade, which is supposed to mean it has access to additional resources from the federal government to manage its financial position. For a brief period of time the federal government put it under third party management, which essentially wrests control of the finances from the band and council.The band has been returned to co-management status and iscurrently recruiting for a new co-manager after its previous one left for another job.

Attawapiskatstill grapples with unpaid user fees from band members meant to help cover water, sewer and sanitation costs. For 2012-13, more than $2.3 million is considered "allowance for doubtful accounts," which is essentially money the band has little confidence in ever being able to collect.

ButTurner saidthe band has made progress in its financial documentation and reportingand hashalteda policy of allowing employee pay advances.

He said the statements are now being fixed and will be reposted to the band's website within a week. As well, he has notified both the Department of Aboriginal Affairs and the audit firm Ross, Pope &Company.

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