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Phil Fontaine, National Chief and chief comedian

Goodness knows we need something to laugh about during this long and brutal winter.

That's why we have to thank Phil Fontaine, the National Chief of the Assembly of First Nations, for giving everyone a good chuckle with his comments about the forensic audit of the Winnipeg office of Indian and Northern Affairs Canada (INAC, for short).

Winnipeg Free Press reporter Mia Rabson, playing the foil, set up the joke by asking Fontaine what he thought about the audit findings of gross mismanagement at INAC.

"People have been too quick to blame First Nations people for mismanagement, and what have you when the opposite appears to be true?" he said with Steven Wright deadpan.

"We've been repeatedly blamed for mismanagement practices, and our leadership is always accused of being corrupt." he riffed before delivering his punchline...

"There is no doubt in my mind we need to ensure there is greater power and authority in our hands, not less. "

Oh, stop. Our sides are hurting. We've got to catch our breaths.

Whatever props Fontaine gets for comic timing he loses for reading comprehension, or lack thereof.

Let us take you through the INAC audit. We try to use terms simple enough for even a Grand Grand Chief to understand.

The audit examined three matters:

· how Manitoba Hydro fudged the books and overcharged the federal government $7.9 million on a project to clean up soil contaminated by diesel power plants on reserves.

· how the Fairford reserve got a $1.2 million overpayment without anyone noticing, and

· how INAC managers bent, bent and bent the rules to channel more than $400,000 to the Assembly of Manitoba Chiefs for their pet project, a Legislature Building of their own.

Let's look at the last one first. We're sure Phil Fontaine found it a knee-slapper.

The AMC wants to build something they call a Governance House. It's literally a mini-Legislature to feed the gigantic egos of the local chiefs and let them feel important. The building is to be a "gathering place" as well as a "visual 'brand' for First Nations." (If the deal falls through, we could sell them Spirited Energy. Slightly used.)

First, the AMC needed an urban reserve to put it on.

In 2006 Manitoba Hydro (them again) sold a parcel of land at 480 Madison Ave. near Polo Park to the Long Plain Reserve for a proposed urban reserve. Long Plain paid $1.1 million, (using a portion of a $16 million land claims settlement they got in 1994). The AMC had found their urban reserve.

The auditors said that the AMC's May 2007 Business Plan " projected the total cost of construction and tenant fit-out at $91.8 million." But in early 2006 they were just looking for seed money.

And Indian Affairs came through for their buds.

First they gave AMC $143,440 for, as the auditors put it, negotiations "leading to the creation of the Governance House Project." They don't say what happened to a separate request for $56,560 for the Grand Chief's office.

The initial payment was slipped into the annual budget under the heading Contributions for the purpose of consultation and policy development.

But, concluded the auditors, "the investigation team found no wording in the authority that would justify its use to support negotiations for the acquisition of property or for adding lands to a reserve. Further, the team found no evidence on INAC's files to suggest that AMC had, within the context of this project, investigated, developed, proposed, reviewed, informed or consulted on any policy matters."

The initial payment didn't go far. By April the AMC was back with a "preliminary draft application" for $1.3 million in Governance House Phase 2 funding, including

- $205,000 for lawyers,

- $50,000 for media relations,

- $40,000 for travel,

- $450,000 for project management, coordination and R&D.

Oh, and $35,000 for land purchase costs.

INAC managers decided to start small. They knew that any funding over $400,000 had to go to Ottawa for approval. So they got creative.

The manager in charge approved $300,000 in Phase 2 funding under the guise of three separate items, a hundred grand each for architectural services, legal services and project management.


This time the funding came from the Community Economic Opportunities Program (CEOP) - a sub program of Economic Development Program.

The AMC Legislature had now become aboriginal economic development.

Not so fast, said the auditors. "Notwithstanding the merits of the Governance House Project, it is difficult to see how the costs involved in acquiring and developing a physical site can be considered as anything other than capital costs. Under both TB accounting rules and Generally Accepted Accounting Principles (GAAP), the cost of a capital project includes the costs of architects, lawyers and project management."

In other words, this was something other than economic development.

The INAC managers may have sensed as much. They kept Ottawa in the dark about the $300,000 in Phase 2 funding for five months. But when it finally became known, the wheels fell off the bus. And it's not like there weren't any red flags in the interim.

April 11, 2006
AMC project managers meet with MRO economic officer to discuss Phase 2 support, present plan for $1.3m, are told proposal is too rich, and represents more than 30% of total EcDev budget for Manitoba.

May 18, 2006
Grand Chief signs three $100k proposals (Proposals 1-3) for INAC support for architectural, legal, & project management 'phases' of the Governance House project.

Sept. 7, 2006
Third party assessor reports on the 4th (Phase 2) proposal identifying concerns about eligibility of certain costs reflected, recommending that further information be obtained & rating as high-risk.

January, 2007
HQ e-mails region re concerns about eligibility of expenditures for establishment of a physical site, land purchase, and questioning job creation claims.

May 2, 2007
Ministers Office instructs EcDev not to approve the proposal.

There was a pile of mismanagement on the Governance House file, but it was mismanagement on behalf of Manitoba's Chiefs. It put money into their hands which they weren't entitled to.

And it's hard to believe they didn't know and approve the "creativity" of INAC managers in hiding the funding from Ottawa.

What's that Phil said? "We've been repeatedly blamed for mismanagement practices, and our leadership is always accused of being corrupt."

Ya gotta laugh.

But the jokes keep coming.

There's the Fairford file.

In 1993, the Fairford Reserve, which now calls itself the Pinaymootang First Nation, sued the federal government over something or other. They lost. They appealed. The government cross appealed. So far, business as usual.

Then in 2001, the government made an offer -- look, we'll give you $1.2 million up front if you agree to take this out of the courts and settle it through negotiations. Fairford said yes, and the money was handed over, with two conditions. One, it was to be spent on housing. Two, it was an advance to be deducted from the final agreement.

Guess what? They finally settled in 2004 for $2 million. And, you guessed it, INAC "forgot" to deduct the $1.2 million from the final agreement.

From the Forensic Audit:
"For further insight into this transaction, the investigative team contacted the Minister's Executive Assistant for Manitoba at the time, who had attended the meeting with the First Nation. She stated her understanding as follows:


· The First Nation had understood and agreed to accept the $1.2 million as a repayable advance to be repaid when an agreement was reached.
· It was the negotiating team that suggested that the Minister make the advance to get the First Nation to the bargaining table.
· There was no "quid pro quo" negotiating leverage lost and there was no mistake as the advance was made at the request of the negotiating team.
· To her knowledge, the department had not increased the settlement mandate to $3.2 million.

So the Fairford Chief and council "had understood and agreed to accept the $1.2 million as a repayable advance to be repaid when an agreement was reached."

What did they think when they got a cheque for $2 million? It was a gift from the tooth fairy?

They knew they had been overpaid, regardless of what INAC did or did not do. But Fairford DID NOT abide by the agreement. They took the money they weren't entitled to and ran.

"There is no doubt in my mind we need to ensure there is greater power and authority in our hands, not less. " said Fontaine.

Phil, you kidder, you.

And there's still the worst example of INAC mismanagement, at least from the Canadian taxpayers' point of view.

It seems that Manitoba Hydro (yes, them again) used some creative accounting to hang onto $7.9 million they were supposed to return to the federal government.

The two were partners in a couple of projects started in the Nineties. In one, northern reserves were hooked up to the Manitoba electricity grid and their diesel power plants were decommissioned. In the other, the soil contaminated by years of spilled diesel had to be cleaned up. The federal government paid 75 percent of Project 1 to a maximum and 50 percent of project two to a maximum.

When the soil cleanup came in under budget and the power switch ran way over, Manitoba Hydro looked for ways to pass the costs to the federal government.

From the audit:

"The evidence available to the investigation team indicates that a recovery was certain as early as 2002, at which time officials from both Hydro and INAC were looking for ways in which to use the projected surplus."

When the INAC accounting manager for Manitoba was advised about a problem with the way spending was attributed, his attitude was "What's a million?"

Noted the auditors:
"The accounting manager, whose position description makes him responsible for certifying - under Section 33 of the Financial Administration Act (FAA) - the appropriateness and legality of almost all financial transactions in the Manitoba Region, responded:
"… what does [that] authority really mean....in any case it's [a] fait accompli it really doesn't matter at this point. Someone had agreed to [this] and it will [be] left to the forensic auditors to unravel it all…"

Ya gotta laugh to keep from crying.

Postscript
In all the stories done on the INAC audit, why hasn't anyone asked the NDP government why it hasn't announced an investigation of Manitoba Hydro's role in stiffing the federal government out of $7.9 million? Who at Hydro deserves to be fired?

And, we understand, Fairford expects to sign a Municipal Development and Services Agreeement with the City of Winnipeg this month or next. That's the agreement to what an urban reserve consents to pay in lieu of taxes for city services.

Will this be another back-room deal dropped in the laps of city councillors an hour before a council meeting, leaving them no time to read it or understand the fine print?

The MDSA is the last step before Fairford can apply for an urban reserve.

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