:
Good afternoon, Mr. Chairman
I would like to thank you for inviting the office to speak about Bill , an Act to Enhance the Financial Accountability and Transparency of First Nations.
With me is Ronnie Campbell, Assistant Auditor General, who was formerly responsible for first nations' audits.
[English]
Since 2000, the office has tabled 16 chapters that address first nations and Inuit issues directly, and another 15 chapters that deal with issues of importance to first nations people.
[Translation]
In 1996, we tabled a study entitled “Study of accountability practices from the perspective of first nations”. We noted that the relationship between the first nations and the federal government had evolved from direct service delivery by the department to service delivery by first nations. As a result of this evolution, the issue of accountability presented difficulties for both parties. In particular, the accountability of that government to Parliament became more complicated as departments were no longer directly responsible for the delivery of programs at the community level.
At that time, we met with first nations and were told that they were willing to explore ways to ensure that the information needs of Parliament were met, and they stressed the importance of internal accountability. From their perspective, accountability is non-hierarchical and is based on shared objectives.They stated that the reporting framework was of limited value to them, was onerous, and did little to enhance accountability to the community.
[English]
In 2002, based in part on what we had learned from the 1996 study, we proposed our definition of accountability: a relationship based on obligations to demonstrate, review, and take responsibility for performance, both the results achieved in light of agreed expectations and the means used. We defined five principles that support an effective accountability relationship: clear roles and responsibilities; clear performance expectations; balanced expectations and capacities; credible reporting; and reasonable review and adjustment.
We noted that delivery of programs through partners creates new and complex accountability relationships. In these arrangements, accountability is shared. With respect to reporting, we suggested the need to be clear about the measurement strategy as well as the required information and how it is to be collected, verified, and analyzed, and by whom and when.
In this work, we also stated that transparency is the sustaining element of accountability; transparency implies that one can see clearly into the activities of government. Transparency and accountability mean stronger institutions and more credible government.
[Translation]
Also in 2002, we tabled a study on first nations reporting. We stated that reporting needs to provide meaningful information to first nations and to the federal government and that fundamental change was required to reduce the burden on first nations.
In 2011, we identified four structural impediments that limit the delivery of public services to the first nations and hinder improvements in living conditions on reserves: lack of clarity about service levels; lack of a legislative base; lack of an appropriate funding mechanism; and lack of organizations to support local service delivery.
[English]
We strongly support the principles of accountability and transparency. We hope this background on accountability will be useful to the committee as it reviews the proposed legislation.
Mr. Chair, we do not feel that our office can comment on the merits of Bill . That being said, we would like to make a few remarks on some technical aspects of the bill.
First, subclause 5(1), on how first nations are to maintain their accounts, contains the expression “generally accepted accounting principles” and a reference to the Canadian Institute of Chartered Accountants handbooks. There are currently no accounting standards in Canada that explicitly mention first nations. Although the handbooks referred to in subclause 5(1) are generally pertinent to the activities of first nations governments, they have not been designed or amended to take those particularities of the first nations situation into account.
Second, under subclause 5(2), when auditing the accounts of first nations having transactions that do not easily fit a particular standard, the auditors must assess the acceptability of the accounting framework, including the reasonableness of the accounting policies adopted by these first nations. Different auditors may come to different conclusions for similar transactions.
Third, in clause 6, the requirement for an audited or reviewed schedule of remuneration is unique. This information is normally provided as a note to the financial statements or as supplemental information in an annual report. There are no accounting standards made applicable to the preparation of this schedule of remuneration or to the auditor's report or review engagement report. Also, it is not clear who would decide, and on what basis, whether the schedule is to be audited or reviewed. This ambiguity increases the risk of confusion and inconsistent practices.
Finally, the definition of remuneration in clause 2 combines both salary and reimbursement of expenses. When other levels of government report salary and reimbursement of expenses, they do so separately. Among other things, this ensures a clear distinction between official salaries and wages and the reimbursement of travel and other expenses. For example, at the federal level, there are separate disclosure requirements for salaries and for travel and hospitality expenses.
Mr. Chair, this completes my opening remarks. We would be glad to answer any questions the committee members may have.
:
First of all, I would like to thank the Auditor General's office for presenting. Certainly, at AFOA Canada, we believe in many of the things the Auditor General said. We appreciate following the Office of the Auditor General.
Thank you, Mr. Chair, vice-chair, committee members, colleagues, and friends for this opportunity to speak on the substance of Bill , the First Nations Financial Transparency Act.
My name is Terry Goodtrack, and I am the president and chief executive officer of the Aboriginal Financial Officers Association of Canada, or AFOA Canada. With me is Dana Soonias, who is the AFOA Canada chair.
It is the views of the AFOA Canada membership and these views alone that I express.
The Aboriginal Financial Officers Association of Canada is a non-political, not-for-profit organization. Our mission is to contribute to aboriginal social and economic prosperity by building a professional workforce that supports effective governance and administration. The bill before this committee speaks to goals that are at the very core of AFOA Canada's mandate. AFOA Canada not only agrees with the principles of transparency and accountability, but has spent over a decade developing capacity development tools and products to advance these principles in all aboriginal communities across Canada, including Inuit, Métis, and first nations communities.
Our resources and products include education, certification programs, and the development and promotion of aboriginal finance and management credentials, including the certified aboriginal financial manager, or CAFM, designation. The CAFM designation is based on rigorous competency and ethical standards and a combination of education and experience requirements. It is quickly becoming the preferred designation for aboriginal finance and management professionals. We're very pleased to be able to say this, and pleased also to have been approached by the Canadian Institute of Chartered Accountants to weigh in on the CICA Public Sector Accounting Handbook as it relates to first nations reporting.
As mentioned by the Auditor General's office in 2009, a number of AFOA Canada professionals were part of a study group on financial reporting by first nations. This group of AFOA Canada professionals and other interested parties, including the Office of the Auditor General, recommended to the CICA that the common government reporting model described in the CICA Public Sector Accounting Handbook should apply to first nations governments.
Unfortunately, this is the first opportunity AFOA Canada has had to participate in Bill C-27. From AFOA Canada's perspective, the underlying principles of Bill C-27 are laudable. Canadian citizens may view this proposed act as primarily a financial issue associated with fundamental principles of transparency and accountability. However, we feel as though this proposed bill touches upon broader issues, some of which have been raised here by first nations leaders. We would like to discuss these and related issues from a slightly different perspective. One question our members are asking is why this proposed bill is necessary.
The requirement for consolidated audits and disclosure of salaries, honoraria, travel, and other remuneration has been within the funding agreements between first nations and the federal government for over 15 years. It is included within an AANDC document entitled the Year-end Financial Reporting Handbook, with which first nations must comply. Failure to comply means that the federal government withholds funding from the first nation. When we examine the requirement for preparing and disclosing consolidated audits, a question arises when these audits are considered under the lens of accountability. That question is this: accountability to whom, and for what?
We've heard our members working in first nations communities clearly state that they have no disagreement with providing consolidated audits and salary disclosures for their members. This is the primary accountability of first nations. In terms of the accountability relationship between first nations and the crown, our first nations members have no issue with providing financial information on the funds provided by the federal government. Why is it necessary to disclose to the federal government, or to the general public, including potential competitors to first nations businesses, those funds that are not provided by federal government transfers, such as own-source revenues?
It should be noted, however, that first nations do provide consolidated audits to the federal government because it is a requirement within the funding agreement and in the year-end reporting handbook. However, the federal government cannot disclose this information to the general public because it is protected as confidential under another piece of government legislation called the Access to Information Act.
I bring to your attention the Sawridge decision, which may have some bearing on this issue.
In terms of comparability, I ask, does this act hold first nations to a higher standard, a lower standard, or to the same standard as other like entities?
The schedules of salaries, honoraria, and travel of different levels of government have different models. Some, such as those of the Province of Ontario, have a threshold where salaries must be disclosed over $100,000, with taxable benefits, or there are the municipalities within the Province of British Columbia, where the remuneration over $75,000 is disclosed.
In terms of when audits are due, first nations are required to finalize and submit their audits 120 days after the fiscal year-end, which is July 29. Yet the Province of Ontario tables their public accounts before the assembly 180 days after year-end, except in extraordinary circumstances. The federal government must lay the public accounts before the House of Commons on or before December 31.
The current bill reads that the requirement is that a first nation's consolidated audit shall remain accessible to the public on an Internet site for 10 years. We are uncertain why this length of time was chosen.
We would like to discuss another issue, the issue of administrative burden. As stated earlier, consolidated audits have been a requirement since the mid-1990s. This is a generally accepted accounting principle in accordance with the CICA handbook. As mentioned earlier, AFOA Canada was part of recommending to the CICA's Public Sector Accounting Board that the first nations adopt the common government reporting model.
There is, however, a second document produced by AANDC that further defines additional administrative financial reporting, entitled the Year-end Financial Reporting Handbook, as amended from time to time. The additional schedules are introduced through this document, and many times at the very last minute, to accommodate the different funding mechanisms used by the federal government. The last introduction of these schedules was released May 2012 and applied retroactively to the previous year. This caused confusion among our members on what was actually required.
AFOA Canada was not involved in providing input to these financial schedules. When I review the requirements of the schedule of salaries, honoraria, travel, and other remuneration for the first nation or by any entity it controls, I can see that this will add to administrative costs.
Further clarification is required on what “including their personal capacity” actually means within the proposed bill, or whether this is an audited schedule. The act does not specify that it should be an audited schedule, yet the AANDC's year-end reporting handbook requires that it receive an auditor's attestation.
These types of reporting lead to increased costs. Who pays for these additional costs?
To further complicate matters, these types of administrative burdens are being introduced at a time when the government is cutting tribal council advisory services in financial management. Who will provide advisory services to first nations if and when required?
We have also noted that there is much discussion on comparing first nations to other governments. mentioned first nations governments in his testimony here as a witness, yet the words “first nations governments” are not stated within this proposed bill. We ask, why are we comparing first nations to other governments when even this proposed bill does not acknowledge first nations as governments? Without this clarity, we are concerned that this proposed bill may be wrongly construed as requiring a group of Canadians to do more than what is asked of any other group of Canadians.
Is this act necessary? Without addressing the concerns that we have raised, AFOA Canada cannot support the current Bill as written. If it is to go forward, here are some recommendations.
AFOA Canada recommends that the committee undertake the following amendments: view this proposed act through the lens of accountability, to whom and for what; ensure that first nations are not required to do more than truly comparable entities; ensure that the requirements of this proposed legislation do not increase administrative burden without ensuring that funding of these costs is a factor; ensure that AFOA Canada is involved in any changes to the year-end reporting handbook that affect first nations financial statements and that it is resourced accordingly to undertake this work; and state within this proposed legislation the word “government” after the words “first nations”.
Thank you again for this opportunity to speak on a very important matter.
Thank you, too, to our witnesses.
Like many members of the committee, I think we are quite astounded that this is the first time you're getting to comment on this bill. You are the people who have exactly the expertise that would be required to get the bill right or to answer the question of whether this bill is necessary at all, which is I think where you were coming from, and again, who the accountability is to.
When the minister was before us, he did admit that he hadn't consulted between the private member's bill of Ms. Block and this other bill that seems to be much broader, with many unintended consequences around own-source revenue. Again, on the accountability, I think even Darcy Bear, in his testimony here, said that the accountability should be to the members of the band, particularly on own-source revenue, not to Canadians writ large.
I guess I'm just astounded that people like you and your organization weren't consulted before this was tabled. I hope you will be consulted on what it seems will be proposed government amendments, but have you looked at the proposed amendments that the Whitecap Dakota chief and council have put forward? Would those amendments deal with some of the concerns that you've highlighted today?
:
Yes, I've reviewed Chief Bear's amendments. This is where we're trying to say at AFOA Canada that those are very important issues and amendments that Chief Bear has outlined—definitely.
One thing you have to do with this legislation is step back and look at it through different lenses, one of those lenses being accountability, as you mentioned—accountability to whom and for what. The notion of consolidated audits gets very clear when you look at it through that end.
On the notion of comparability, as we've mentioned, comparability to like entities is what we're asking: not to do anything more, not to do anything else, but to like entities. If that comparability is to governments, then why aren't we putting in the bill the word “government”?
You can take a look at the Public Sector Accounting Handbook, as mentioned earlier by the Auditor General's office. He said that there are definitional issues, which is right. First nations aren't part of the common government reporting handbook, but the year-end reporting handbook states that for the purposes of accounting, first nations are government. It doesn't even say that in the CICA handbook, but it says it through this secondary document.
Keep in mind that at AFOA Canada we did recommend that. We recommended that, but it's still not a definition, because in this legislation first nations aren't considered governments.
I'd like to thank you, Mr. Goodtrack and Mr. Soonias, for attending here.
Actually, it's kind of ironic that Soonias is your last name, as it means “money” in the Cree language, and here we are talking about first nations transparency and governance, and about money, trying to be good government and trying to make first nations accountable in terms of how the money is being handled, for one.
Mr. Goodtrack, having a first nations background myself, coming from Muskeg Lake First Nation in Saskatchewan, and, too, having a background in the RCMP, I have seen the worst of the worst and I have seen the best of the best in terms of transparency and accountability. Some try but don't succeed. Others just blatantly reject all notions of being transparent and being accountable.
I find that very frustrating, with today's technology. For instance, in my first nation community of Muskeg Lake, they do their yearly report on their band website. They take added measures to have a meeting on their first nation community with their band membership. I live off reserve, and I don't have access. But they also try to make arrangements to meet with individuals in Saskatoon, Edmonton, and Prince Albert to tell them what is going on with the financial aspect of the day-to-day business on the first nation lands and the money spent.
I understand that the Aboriginal Financial Officers Association started back in 1999. You currently have 1,500 members, with 136 aboriginal certified financial managers. But there are 633 first nations out there. It's a tough void to fill and to get the proper training, for one.
I was reading an article from the Globe and Mail, going back to February 26, 2012, where it quotes you as saying that your members were fine with Bill C-27, the First Nations Financial Transparency Act. It quotes you further:
“We're all for that,” he said. “We believe in accountability.”
I agree with that sentiment, but you look at issues, and....
I've had to investigate first nations reserves. It's not fun, for one, trying to understand the practices and the.... I'm not an auditor. I'm not a profound...to say I'm good at it, but to look at financial audits....
But I look at an incident in the interior of British Columbia back in 2004, 2009, with the Anahim First Nation. Over five years, an amount of $284,000 in wages and bonuses and contract fees was spent by the chief; $111,000 was spent on wage reimbursements for travel, some without proper documentation; $28,000 was paid to relatives of the chief; $21,000 was used in band funds for the chief and council to purchase vehicles; and $10,000 in rental fees was paid back for the rental of the vehicles that the band purchased, back to the council.
This is where I'm coming from. You mentioned, and it was already mentioned by Mr. Seeback, that you have first nations individuals coming forward asking for the information that the chief and council have refused to release. They try; they go through the access to information and privacy acts. But under section 10 of the Indian Act, they have to release their identity.
They're afraid for their well-being, for their safety, because of reprisals—such as for homes—or repercussions through other measures—such as for potential jobs—or their family could be punished, or there could be physical challenges to their safety.
I look at this and I.... It's confusing. This is a very, very sensitive issue where, yes, your testimony here today could hopefully add some insight.
In what ways, if any, might Bill modify existing first nations accountability relationships?
Hopefully, I can get some clarification on that.
:
Thank you very much for your input.
I think it's fine for the other side to talk about accountability and transparency, but that's all they've been doing. Again, if there have been 200 complaints, there hasn't been any indication of whether this was from one person, two people, or three people. To say we're acting on all of these complaints without really being transparent as to how many people have made that complaint I think is not really going in the right direction. It's not providing the proper information for people to make a decision on a bill that's so important.
You answered one question that I had, which was whether Bill would result in reductions in reporting requirements. If I remember correctly from your initial report, you indicated it would actually add to the administrative burden.
Mr. Clarke mentioned all of these expenses that had been incurred, and some that may have been reimbursed. However, I think when you're looking from first nation to first nation—and it would depend from chief to chief, or council, as to whether they are actively involved in doing other things—you can't really say, “Oh my gosh, he spent $30,000 and this one only spent $10,000.” One chief may have been very active. I think we have to be careful as to how these expenses are done up.
There is a piece in here about the fact that they could be denied funding if they don't divulge this information and they don't have it on the website. For someone who has provided all the information to a department that they have actually used the money wisely, I wonder whether they should be denied that funding in order to continue the business of the day for their first nation. Have you seen this occur on a municipal basis, for example, where a municipality has not put down the breakdown of whatever on their website. Should they be denied funding? Do you think that is equal?
Based on the information you've provided, it's almost as if this is not equal to what is already happening out there, and it's kind of discriminatory.
Thank you to the witnesses.
First of all, these five- and seven-minute things don't give us enough of an opportunity to congratulate you on the important work you do. In a previous life, I served as legal counsel for a number of first nations communities and authorities. I'm very familiar with the important contributions you make with member communities, certainly in the areas of transparency and accountability around financial reporting.
I want to go back to a question I posed to a witness a couple of meetings ago. I think my colleague Mr. Wilks alluded to it earlier.
I get the sense, gentlemen, that part of the value of this exercise is that there are a number of first nations communities that are doing the very best they can to meet the reporting requirements to Aboriginal Affairs and Northern Development, and they are evolving for that kind of disclosure to their community members directly. I posed the question, isn't it true that probably in a number of cases, perhaps the majority, this is about the chief and council reporting certain things, particularly around remuneration and expenses? We've gone through an exercise of being more clear on that through some amendments from the Whitecap First Nation that we're strongly considering as a government. It's to put it out there for their communities to clear up any confusion or to clear up any issues that may be present but are not actually true.
In short, they're putting it out there for their protection, but I don't think that quite does it justice. They're actually dealing with their accountability as elected members by just putting it out there.
Does that resonate with you, Terry?