Christie Blatchford provides sone background on the audit story which indicates the band had a less than stellar record of poor accounting procedures and that Chief Spence's boyfriend seems to be an accomplished spinmeister. The story, which is on the front page of today's National Post, is reproduced under the fair dealings provisions of the Copyright Act.
Attawapiskat audit reveals reserve finances in complete disarray
Christie Blatchford | Jan 8, 2013 6:39 PM ET | Last Updated: Jan 8, 2013 7:09 PM ET
Reading the newly released Attawapiskat audit, coupled with the affidavit sworn last year by Clayton Kennedy, Chief Theresa Spence’s boyfriend and co-manager of the beleaguered reserve, I am reminded of one of my favourite episodes of the old Seinfeld series.
Kramer is pitching a scam to Jerry, whereby he wants Jerry to claim his broken stereo, which Kramer has conveniently insured, was damaged in transit, and thus get the post office to pay for it.
Jerry objects, albeit feebly, and Kramer protests that “It’s a write-off for them.”
“How is it a write-off?” Jerry asks.
“They just write it off,” Kramer replies.
“Write off what?” Jerry says, then snorts, “You don’t even know what a write-off is, do you?”
“Do you?” Kramer asks.
“No, I don’t,” says Jerry.
“But they do,” Kramer explains slowly. “And they’re the ones writing it off.”
I was put to mind of this by a couple of the regularly occurring “account descriptions” in the Deloitte and Touche audit so much in the news — “write-offs,” to the tune of several hundred thousand dollars in some cases, and “writedowns” — all with the regularly occurring descriptors, vendor “unknown” and “incomplete documentation” or “No supporting documentation.”
In these instances, the auditors could find little or nothing to support the expenditures, apparently not even the name of the firm or person who was paid.
At bottom, the auditors found completely inadequate policies and practices in place and poor oversight of the $104-million in taxpayer funding that has flowed to Attawapiskat between April of 2005 and November of 2011.
And yet, in the affidavit he swore in December of 2011 — this in support of the band’s successful fight to overturn Ottawa’s moving it from co-management status to third-party management — Mr. Kennedy modestly sang his own praises as the steady financial hand.
He was in charge for the last two years the auditors examined, as was Chief Spence for most of the same time. She was elected Aug. 27, 2010, but for the previous three years, was deputy chief.
As Attawapiskat’s chief financial guy, Mr. Kennedy told the court, he’d brought in bank reconciliation procedures, reformed sketchy accounting practices and generally done a bang-up job.
He even referred to the band’s last regular audit, dated July 31, 2011, noting it was filed on time and complied with various policies, a claim that seems on a par with those hotels which brag of “high-speed elevators.”
It doesn’t appear, alas, that Mr. Kennedy mentioned the standard “management letter” the band’s Timmins-based accountants, Ross, Pope and Company, sent along with that audit, or the big fat red flag the local firm raised in the audit itself.
In the letter, the accountants identified “matters that may be of interest to management,” which is putting it kindly.
What they told Mr. Kennedy, who by then had been on the job for a year, was that the records were still in terrible shape — invoices weren’t being properly recorded; band assets such as the water plant and healing lodge had no insurance; rent arrears and welfare payments weren’t being respectively collected or documented; accounts payable records were out of whack and “many general journal entries had no supporting documents. When asked for explanations of the entries, often, none could be provided.”
Oh, and the Timmins auditors said, — the band had done no, ah, budget.
“We believe that the First Nation has an urgent need for a budget,” the letter said, with masterful understatement.
But apparently, in auditor-world, what was much more unusual and a much more important warning bell was what’s called the “going concern” note the Timmins firm included in its notes to the band’s consolidated financial statements.
This note pointed out that Attawapiskat’s objectives “are to continue as a going concern,” pointed out that at year end it had both a working capital deficiency of almost $4-million and a net debt of $11-million, and concluded that “the ability of the First Nation to continue as a going concern” was rather up in the air.
In other words, if the band wasn’t careful, it was going to be bankrupt — surely prima facie evidence of lousy financial management at the very least.
This, and of course the larger, multi-year audit done by Deloitte and Touche, surely cast a different light on Ottawa’s efforts last year — after the reserve’s desperate housing situation first came to light and Chief Spence declared an emergency and the story was all over the news — to put the band under independent third-party management, the most severe remedy available to the government.
Ottawa did that — managing to appoint as the third party a company that had earlier been fired by council — in November of 2011. The First Nation went to Federal Court and had the takeover ruled “unreasonable” in August of 2012, by which point Ottawa already had removed the designation.
Given what both the local auditors had found before the case was heard, and what Deloitte and Touche found afterwards, it is nothing short of astonishing that, as the Federal Court judge noted, the government didn’t produce “evidence of mismanagement or incorrect spending.”
It was as part of that court case that Mr. Kennedy and Chief Spence both swore affidavits, available online on the Attawapiskat website.
Mr. Kennedy thoughtfully included a copy of his latest contract between Attawapiskat and his company, Moo Shum Enterprises Inc., which pays him $850 a day plus expenses.
The document, dated July of 2011, begins with a preamble that incudes a statement of principles, one of which reads as follows: “Both parties [the band and Mr. Kennedy] are not aware of any past or present relationship between the First Nation and the Co-Manager that may be thought to be a conflict of interest.”
Gee: The Chief and Mr. Kennedy were already common-law partners, or life partners as they prefer, and presumably sleeping together. But no one was aware that could “be thought to be a conflict of interest”?
To borrow from Kramer, well, they know what it is, and they’re the ones agreeing it isn’t, or something.