The federal government is asking the Federation of Sovereign Indigenous Nations (FSIN) to repay more than $28.7 million following a forensic audit into its spending.

In a letter dated March 13 and addressed to the FSIN, Indigenous Services Canada outlines its response to the findings of the forensic audit conducted by KPMG that reviewed FSIN’s use of federal funding between April 2019 and March 2024. That audit flagged $34 million in questionable, ineligible or unsupported transactions.

The March 13 letter goes through how nearly $24 million in “unsupported” expenditures and about $4.8 million in “ineligible” spending was identified and says the funds “are repayable.”

“In addition to repaying these amounts, ISC expects that FSIN will implement appropriate corrective measures to address these concerns, strengthen internal controls, and ensure compliance with program requirements,” the letter states.

FSIN has until April 2 to respond with additional records or dispute the findings.

In a statement to CBC News, Indigenous Services Canada confirmed it sent a letter on March 13.

“We cannot disclose details of the correspondence as it relates to contractual obligations between Canada and the audit recipient,” a spokesperson from ISC said.

The department added it has processes in place — including forensic audits — to ensure public funds are used appropriately.

“Indigenous Peoples, and all people in Canada, deserve accountability for the use of public funds,” the statement said.

FSIN did not respond to CBC’s request for comment.

Audit flags documentation gaps, spending concerns

The letter raises concerns about how federal funds were managed.

The largest portion — over $23 million — relates to COVID-19 spending that auditors say lacked sufficient documentation to confirm eligibility. That includes shipping invoices, bills of lading, packing slips, customs declarations and proof of delivery. Another $12,500 was deemed ineligible because it was not COVID-19 related.

“While ISC recognizes that the urgency of pandemic response may have at times impacted recordkeeping, proof of PPE and food security shipments to FSIN’s distribution centre is required to support the invoices that were provided to auditors,” the letter states.

Other issues identified in the audit include:

• Use of administration fees for ineligible expenses, including almost $2 million toward the construction and economic development of a new FSIN building.
• Over $1.2 million in purchases of fleet vehicles that were deemed ineligible.
• Travel expenses where the reason for travel was not made clear. There were also inconsistencies and discrepancies around hotel transactions and mileage claims.
• Procurement practices with missing records or unclear deliverables.
• Payments of almost $247,000 to a former employee and just over $104,000 to the former employee’s consulting company, which include salary amounts and contract payments. In one case, the employee had resigned rather than being terminated without cause and was rehired within one week of receiving severance.
• Concerns about how costs tied to FSIN’s office building were charged to ISC-funded programs.

“The findings summarized above collectively demonstrate significant, systemic issues in FSIN’s financial management, recordkeeping practices, and adherence to the terms and conditions of ISC funding,” the letter states.

The letter was shared online by Rob Louie, president of the Band Members Alliance and Advocacy Association of Canada.

In an interview, Louie said his organization received the audit material from an anonymous source, who is a representative of one of FSIN’s constituent member bands in Saskatchewan.

“This money that flows to the FSIN comes from taxpayers in Canada,” Louie said. “The constituents have a right to know what’s going on.”