Attawapiskat chief slams audit leak as 'distraction'

A newly released audit of the federal funding spent by theAttawapiskat First Nation has found significant documentation lacking for the $104 milliontransferred to the bandbetween 2005 and 2011.

Attawapiskat Chief Theresa Spence responded Monday in a news release, which dismissed the timing of the leaked audit as a distraction from the "true issues" and claimed it was designed to discredit her.

"I remain steadfast on my journey and will not allow any distractions at this time to [waver from] the goal set forth," Spence said.

The chief is on the 28th day of a hunger strike amid national Idle No More protests.

The audit was requested by the federal government to ensure that the approximately$104 million it providedto Attawapiskat between April 2005 and November 2011 was spent as it should have been. The accounting firm Deloitte was engaged to perform the audit in December 2011.

Thefunding was intended for housing, infrastructure, education and other services.CBC News obtained a copy of the audit before it was made public.

In a letter dated Aug. 28, 2012,that waswritten by Deloitte to Chief Spence and copied to the Department of Aboriginal Affairs, the auditing firm saysthat of 505 transactions reviewed, more than 400 lacked proper documentation.

The letter says "an average of 81 per centof files did not have adequate supporting documents and over 60 per centhad no documentation of the reason for payment."

The letter to Spence also says there is "no evidence of due diligence on the part of Attawapiskat of funding provided by Aboriginal Affairs and Northern Development Canada for housing projects and Health Canada for health-related projects."

Funding conditions may not have been met

CBC News's National Affairs Editor Chris Hall says the audit shows "fairly significant findings" about theproblems on the reserve, "butwhat the audit could not doreally was to determine whether the money was spent the way it was intended to be."

Deloitte said it could not conclude that the payments made by the band council were in accordance with the terms and conditions of funding agreements with the federal government.

Overall,the report recommends:

• Stricter enforcement measures.
• More eligibility requirements.
• More reviewsof the First Nation's record-keeping.

The audit also noted "significant staff turnover" that had resulted in a "corporate memory loss" for transactions reported prior to 2010. Deloitte had difficulty tracing some of the earlier transactions because of changes in Attawapiskat's record-keeping systems.

Some of the details of specific transactions are blacked out in the copy obtained by CBC News, but in some cases, the report shows expenditures of five andsix figures without any supporting documentation found by the audit.

After Deloitte reported its findings to Spence in late August, it's not known what she or the band council did in response.

The Aboriginal Affairs Department says it discussed the audit with Attawapiskat's chief and council during a teleconference on Sept. 20. The department's deputy minister approved and signed off on the report in mid-October.

By midday on Monday, Aboriginal Affairs and NorthernDevelopment Canada had postedthe audit on its website. The federalgovernment was required tomake the report public on or before Jan. 16 90 days after the deputy minister of aboriginal affairs signed off on it.

State of emergency declared last winter

The Attawapiskat First Nation was placed under co-management more than a decade agoa measure taken by the federal government to attempt to improve financial administration.

The band's co-manager, Clayton Kennedy, acknowledged being in a romantic relationship with the band's chief, Spence. But he denied any conflict of interest.

Spence declared a state of emergency on the reserve in the fall of 2011, citing a critical need for housing.

• RELATED: The National's Adrienne Arsenault visited the community of Attawapiskat last winter

On Nov. 30, 2011, the federal government appointed athird-party managerto oversee the band's operations, citing urgent health and safety issues and a need for immediate action to remedy the problems.Spence and the band counciltried to block the move with acourt injunction.

Amid much media coverage, the government pledged to provide emergency housing.Abouttwo dozen modular homes were built and trucked to the communityover last winter's ice roads.

The third-party manager was removed April 19, 2012, based on progress that was made. The First Nation returned to co-management.

LastAugust, a Federal Court judge found that it was"unreasonable" for the federal government to appoint a third-party managerin response to Attawapiskat's housing crisis.

Ottawa lawyer Paul Champ, who'srepresenting the First Nations Child and Family Caring Society of Canada ina court case accusing the federal government of discrimination by funding First Nations child welfare, health and education at lower levels than non-aboriginal populations, questioned the "cynical timing" of the release of this audit.

He noted that the Federal Court found last summerthat the department had not raised any issues with the band council about its record-keeping beforenational media started coveringAttawapiskat's housing crisis.

"The prime minister should be working to address thereal funding inequities faced by reserves instead of looking to score cheap political points against vulnerable and disadvantaged Canadians," Champ wrote to CBC News.

Spence spokesman suggests audit is wrong

Spence has been on a hunger strike since Dec. 11, camped out in an aboriginal education centre on Victoria Island in the Ottawa River between downtown Ottawa and Gatineau, Que. She's demanding a meeting with Prime Minister Stephen Harper and Gov. Gen. David Johnston to discuss what she characterizes as "treaty issues" between First Nations and the Crown.

Spence's high-profile decision to forgosolid food until she gets her meeting is part of a nationwide series of protests, rallies and blockades under the banner of thegrassroots Idle No More movement.

Spence's team was keeping reporters away fromSpence on Monday morning, saying she was "focusing on her hunger strike" and accusing the media of not reporting their "honest information" back to Canadians.

Spence's spokesman, Danny Metatawabin, suggested that the audit was "absolutely," wrong butwouldn't comment further on its contents.

He also agreed with a suggestion that the audit was released to discredit Spence.

"The government's doing that," he said. "They're trying to undermine the process, the movement of the people."

"You have to understand what we're doing here. It's for all First Nations communities under the treaty, the nation to nation relationship," he said."We should be undermining the prime minister. We should be undermining the Department of Indian Affairs for creating that injustice."

Harperagreed to meet with chiefs from First Nations this Fridayand Spence has said she will attend, but is not giving up her hunger strike until she sees the outcome of the meeting.

On Friday, reporters asked Grand Chief Stan Louttit, who represents the northern Ontario region thatincludes Attawapiskat, about thestatus of the audit, which the band council agreed to when the First Nations problems first came under scrutiny.

"It is very, very difficult to do business in a remote community," Louttit said. "The average Canadian out there, they see millions and millions, and they just get concerned and said, 'Hey, there's something going on there.'

"But I challenge those people, come to the community and look at the books, and come and live there for a couple of weeks and you'll see,"he said.

"The audit speaks for itself," said Jan O'Driscoll, the press secretary for Aboriginal Affairs Minister John Duncan. "We accept its conclusions and recommendations."

Donations directed to Spence's partner

Spence's spokesman has been refusing to answer questions aboutthefinancial management in Attawapiskat, including one about a Facebook post asking for donations to support Spence's protest.

Macleans.careportedDec. 27 that Spence's team was offering bank account information on the official Facebook page of the hunger strike, for those who wanted to make donations. The account waslisted as belonging to Kennedy, Spence's live-in partner and the band's co-manager.

When someone commented on the post to say that the tribal council that runs the region around Attawapiskat was also taking donations,the Spence supporter who first posted the account information replied that Spence "does not want anybody but Clay to handle finances."

The Facebook post has since been removed.