Many First Nations in the past were plagued by governments interfering in their finances. Worst was the third-party management in which the government would appoint a “manager” to handle all the finances and who would often be paid anywhere from $160,000 to $420,000 per year. This money would come out of the band’s budget. Obviously, no manager had an incentive to really fix things and lose that fat salary.
A study in 2008 saw many third-party managers still working for the same band for 10 years or more. Even federal auditors noted that there were poor decisions, and that they needed more guidance on how to pay off or lessen the debts of the bands. They also said there was no indication that these positions were publicly tendered, which would have indicated levels of expertise.
The system outlined the styles of financial management for First Nations. For some, there is no outside management. Others face recipient management where the band operates under a government approved plan. Co-managed arrangements have the band in partnership with a financial manager to handle the money. Finally, under third-party management the appointed financial manager has all the authority, and the band had no control over its own finances.
The most damaging of the federal policies allowed officials to place a First Nation under trusteeship if they believed the band was not capable of responsibly managing funds. Of course, the arguments between southern-based government employees did not always reflect the needs of the First Nation community. Some First Nations complained that the reasons they had financial difficulties were due to chronic under-funding that didn’t reflect population growth in their communities. A First Nation in Manitoba said they only received $50,000 to maintain roads that would have cost $1 million to properly manage.
Statistics Canada figures show that both boil water advisories and problems with housing were higher on co-managed and third-party managed First Nations. Currently, Indigenous Services Canada has 93 First Nations under the infamous Default Prevention and Management Policy.
Possibly the numbers may decrease in the future. Changes that were not only recommended by First Nations but also by the Parliamentary Standing Committee on Indigenous and Northern Affairs.
Back in 2017 a committee report said, “The Committee is concerned that the Default Prevention and Management Policy has not prevented, nor addressed, financial defaults in First Nations communities in a meaningful way. In particular, it is concerned about the absence of enforcement or quality control measures in the policy to ensure that First Nations are receiving the capacity building opportunities required and to ensure that First Nations are moving out of default management as quickly as possible…. Third-party managers that do not support community development and do not actively work to help communities out of intervention ought to face repercussions.”
This led to amendments to the First Nations Fiscal Management Act. It promises more First Nations-led institutions and organizations involvement in the local First Nations financial management systems and economic growth for First Nations who opt into the Act. At this date, 348 out of 634 recognized First Nations in Canada have signed on to the optional First Nations Fiscal Management Act.
While it all looks good, anyone who has attended a residential school remembers the saying that the road to hell is paved with good intentions. We can only hope that these intentions arrive at a different destination.