Indigenous and Northern Affairs Committee on Oct. 24th, 2012

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thank you, Mr. Chair.

I mentioned to Chief Twinn that I sure hope those hockey tickets were for the Vancouver Canucks; otherwise it would have been a disappointing game—not that I'm at all partial to any team.

Mr. Calla, in December of 2011 you referred to the Osoyoos Indian Band, who recently received certification from your organization. I believe this was a quote, that:

Osoyoos understood the need to demonstrate accountability and transparency in building the trust and confidence of the private sector, capital markets and their membership.

Certainly building the trust of a first nations membership is obviously important. Could you please tell us why it is necessary for first nations communities to build the trust and confidence of the private sector and capital markets?

[Harold Calla]

First nations communities are in need. If that need were going to be satisfied solely through the first nations relationship with Canada, it would have happened by now. First nations are finding themselves in a position where they need to engage with the private sector to meet the needs of their communities. In fact, you want them to engage; Canada needs first nations to engage.

I keep asking the question, when do you want us to be able to contribute to the gross national product, not just to the gross national expenditure figures?

I come from the Squamish Nation, in North Vancouver. What many of you may not realize is that the Squamish contribute, according to my son the economist, $1 billion a year to the north shore economy.

You need first nations to engage in the economic mainstream. First nations need access to private sector capital to do that. There isn't enough government money in this country. I don't care where you come from; 80% of the investment in this country comes from the private sector and not from government. So positioning first nations to access private capital is an essential element of moving forward in terms of responding to the needs of our communities. First nations, through acts like the First Nations Fiscal and Statistical Management Act and the First Nations Land Management Act, have developed means by which they can take control of their own destiny.

The Indian Act and the Department of Indian Affairs, or whatever they call themselves now, were never designed to take risks. You know yourselves that if you're going to function in the mainstream economy, it's all about managing risk.

Why do first nations need to do this? It's because they need to access capital, and their members, who are becoming more familiar with engagement in the economic mainstream and with reading financial statements, want to know what's going on.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Feeding off that, with regard to that first question, what kind of information related to first nations finances would help build this trust and confidence, in your view?

Does Bill C-27, by making the audited consolidated financial statements and the schedules of remuneration more accessible to the private sector and capital markets, help achieve this?

[Harold Calla]

I think having the financial statements available does.

I understand the need to have a schedule of remuneration. I sit on boards, and if you look at an annual statement, you'll see what I get paid as a director. I understand those things. But with respect, I don't think this bill addresses the issue of compensation the way it needs to be addressed.

If the issue you're trying to get at is the so-called nepotism that occurs from time to time, or that is alleged to occur from time to time, this doesn't encompass it all. If you look at the private sector, it's family, it's contracts. As I read this legislation, I could have a company and I could have a family member, but it's not captured. With great respect, that part is not as well defined as it is outside, in the private sector. I think that is not there.

When you're developing a business relationship, there are two things people want to understand. One is that you can fulfill your obligations as a partner. That becomes important to understand, and I think for those reasons, financial statements help give people an indication of that. Now, there is an issue of commercial sensitivity. I don't want to get into an accounting definition here, but we have to be very sensitive about what we're asking first nations to disclose. The issue I have with this legislation is that you're asking first nations to report by going down into the subs, which you do not ask anybody else to do.

I think it reaches too far in some respects and it doesn't reach far enough in others, because it doesn't define what it is.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thank you.

Leading from that, then, could the legislation relating to a first nations financial situation be validated by a neutral observer, and would this help attract private investment?

[Harold Calla]

I can tell you that the private sector has responded to Membertou, as an example of who has come forward. The banking syndicate is in place to provide them with 2.5% money.

Being certified and having this independent certification is invaluable. Even those communities that have a financial administration law and are looking at financial management system certification have made their commercial bankers aware of those kinds of things and have received financial terms that they previously couldn't get.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thank you very much, Mr. Chair.

I've finished my questions.

[The Chair, Conservative, Chris Warkentin]

Thank you, Mr. Wilks. Your time was nearly expired anyway.

We'll now turn to Mr. Simms for seven minutes.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Chief Twinn, this will be a bit of a lengthy introduction to a question, but I'm going to try to get through it as best I can.

Mr. Calla spoke earlier about being functional in the mainstream economy and how Bill C-27 addresses this.

There are two things. There's the Montana decision and your own decision regarding—I'll just go into it briefly:

...confidentiality of financial statements is protected because they are often consolidated statements that contain reports on private businesses owned by First Nations.

I think, Mr. Calla, you were referring to those just little while ago:

In that case, the Court held that audited financial statements, in particular statements dealing with band generated revenues, provided to the government under the Indian Act constituted confidential information within the meaning of paragraph of 20(1)(b) of the Access to Information Act and therefore need not be disclosed to the public.

I guess you know what I'm getting at. What kind of a situation does Bill C-27 put you in as far as the sensitivities outlined here vis-à-vis privacy?

[Chief Roland Twinn]

Although I'll try to be brief, it's not a simple answer.

It could give competitors an unfair advantage when it comes to some of our businesses. We have a company that does brushing and clearing. I'm sure some of the larger companies that are competitors would love to be able to see where we are financially so they could put their bids in place based on that.

As well, even if Bill C-27 does make these public, so what? There are no remedies in C-27 for any wrongdoing. It's information. Basically, somebody could complain about improper business or remuneration, but there are no remedies for that. There's where we also have a problem.

Some of the things that we do as first nations, especially now with the right for consultation within the traditional territories.... We enter into agreements with some of the pipeline companies, the resource development companies, and they require us to sign confidentiality agreements as to what we are getting through the agreement. This would make it public knowledge.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Sorry, I don't mean to interrupt. So these confidentiality agreements are exposed now, according to Bill C-27?

[Chief Roland Twinn]

The confidentiality agreement may not be exposed in its entirety, but any financial contributions would be, which could cause disruption when it comes to negotiations with the oil companies. They don't want Sawridge to know what kind of a deal they struck with Bigstone. But if we put it out in the public on a public website, they're going to know, and it could cause a disruption. For instance, if I am a better negotiator than the next first nation, I will get a little better deal. That's out in the public.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Mr. Calla mentioned—and I'd love to get your opinion in just a second—“functional in the mainstream economy”.

Would you say that this runs counter to being functional in the mainstream economy?

[Chief Roland Twinn]

Most definitely. It puts on an extra onus, and it kind of paints a picture, again, that first nations are unaccountable or untrustworthy. Our nation has been in business since 1972, and we've never had any problems. We are in the mainstream economy. That's why we went to the court in the first place, because that disclosure wanted to be put out there so that every hotel chain in the world could see where our hotels are.

This is not proper business, in my opinion, and I'm not a professional.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Thank you, Chief Twinn.

I didn't mean to exclude anyone else. My apologies.

Mr. Calla—perhaps anybody else—would you like to weigh in on this as well?

[Harold Calla]

One of the realities that I don't think anyone disputes is that you have an obligation to disclose your financial statements to your members. I don't think you are.

I would like to suggest that once you put it into your membership's hands, it is in the public domain. I can tell you that at home, as soon as some financial information gets out, it's in the local newspaper, if it's to their advantage and can sell copy. So let's be realistic and understand that the moment you respond to an obligation that I accept as delivering your financial statements to your membership, it's in the public domain. They are part of your public. And they will distribute it and use it however they see fit.

If we had enough time, I have about a 45-page memo on the PSAB, the Public Sector Accounting Board, talking about consolidation or modified equity approaches to accounting. I don't know how many of you read financial statements, but as an accountant I have to study them before I can even comment on them, they have become so complex.

I am concerned about the commercial sensitivity of those things. To the extent that your financial information shows a need, if I can characterize it as that, it can be capitalized on. But, with respect, that's no different than in the private sector. Public companies produce financial statements. Everybody knows. I don't see anybody running out to buy stock in some of these companies that have found themselves in a difficult time. It becomes part of the public domain.

I understand that. That's why I said we have to be careful about what we're asking. I do not support this notion of going down into subsidiaries or entities that are owned. These are band financial statements. I can understand that. And except for how they're recorded in the band's books, I don't think this legislation should touch anything beyond that.

[Scott Simms, Liberal, Bonavista—Gander—Grand Falls—Windsor, NL]

Okay.

Mr. Paul.

[John Paul]

I think it is quite sensitive, and we have tried to operate in a transparent way. We do things based on a cost model. When you go too deep into the details, as Harold says, you put yourself at risk. What's the sense of putting your community at risk financially because of information that your asking for? What are you going to use it for? What is the government going to use the information for? What are the benefits of having some of this information go to the government and made public? At the end of the day, these complicated things about PSAB, from our community's perspective, are about telling the story of what you're doing with the resources and tools you have, including the companies that the community owns.

You're managing these companies for the community, for their best advantage, to generate profit, to generate jobs in the community. That's why you have these things. You don't create them for tax purposes or other purposes; you create them to benefit the community. A lot of these things that are created are to benefit the community, and you have to understand that.

[The Chair, Conservative, Chris Warkentin]

Thank you very much, Mr. Paul.

We'll turn to Mr. Rickford now for seven minutes.

[Greg Rickford, Conservative, Kenora, ON]

Thank you, Mr. Chair, and welcome to all of the witnesses here today.

A special welcome to you, Clarence. I lived in Cross Lake and Norway House for extended periods of time. I'll let the committee know, for whatever it matters, that I love the Cross Lake Islanders. Best wishes to you guys. I coached them for a little while as an assistant coach. Best wishes to the North Stars in the KJHL, a great hockey team and a wonderful community.

There are two things, first of all, with respect to the previous line of questioning. I think it's worth noting for our witnesses today, and perhaps for the members, that some of, if not a lot of, these concerns on the business component side with respect to some of the clauses are under serious consideration for amendment. They have been dealt with by a previous witness here at least as a proposal to consider. As far as we know, they address many of the substantive concerns on the business side of things.

Second, Harold, you were just about to go down a path that I've been getting at with the witnesses with respect to that, and that is around obstacles, and not just the obvious ones. We've heard from community members who have been uncomfortable in a community forum, raising or challenging their chief and council to issue financial statements.

I believe part of this success goes to what you were starting to get at, and that is some of the other obstacles that might be there. Specifically, you're an accountant who can read certain financial statements, and some of us may have that sophistication, but not all.

So my question would be along these lines to you, Mr. Calla, and perhaps, Roland, you might want to chime in on this, and Clarence, certainly. What are some of the barriers you faced in terms of putting financial information out there and having it sufficiently understood by communities? This is a broad question, in some sense, because it deals with financial literacy, and it also deals with perhaps some of the process issues of actually having it accessible to community members.

Can you comment on those in the rest of my time, and if you gentlemen could share that, that would be great.

[Harold Calla]

Thank you for the question.

I don't have five copies or 50 copies, but I'm going to leave with you an annual report of the Squamish Nation. It contains the audit. It does not contain, in this edition, the version that will have salaries in it, but it is prepared and the membership does have it.

This is a much more meaningful document for a member and stakeholders to look at. It's proactive. It's not reactive to a historical record of transaction activity. It talks about what you want to do for the future, what investments you've made, and what successes you're enjoying. One of the things we don't talk about is performance.

The complaints you have heard from time to time, and we hear them all the time, are: What have you done for me lately? Are you making wise investment decisions? How are you managing your risk? Do you have too much debt? But, more importantly, where are we going and what are we doing?

I would like to ask the question, and I'm going to ask it here because this is really where it has to be asked. What is the end game for Canada on the aboriginal file? What do we want? We have to sit down as aboriginal people and figure out what we want, and it might not be different in all of the places.

I think this is a much more meaningful document that can get to the membership. Yes, you can look at this financial statement, but I always like to tell the story about my great aunt. When I said I was coming to Ottawa to talk about fiscal relations, she looked at me and said, “Which one of our relations is named fiscal?” That's the gap you're dealing with between two generations. So that reality has to be faced as well. I think this kind of thing is important.

What we'd like to see is not Bill C-27; we'd like to see every first nation in this country pass a financial administration law under our standards. Those standards were developed and they're COSO standards. They're consistent with the COSO framework, which is an international framework on control management of finances that was developed after all of the fiascos in the last 15 years.

[Greg Rickford, Conservative, Kenora, ON]

Thank you, Mr. Calla.

I want to hear from the other two gentlemen, if I may.

Go ahead, Roland and Clarence, for a minute or so each, I think.

[Chief Roland Twinn]

Through our process, we present the audit. Through our financial administration act, the members have the ability to bring their own financial people in and review the books of the first nation. If they have questions and they are not comfortable with the answers they are getting at the assembly, the audit—it's not just an audit, you have to produce a budget at the beginning of the fiscal year. Any time that members feel they do not understand or they have issues, they have the ability to stop the budget before it moves forward. They can bring in accountants and lawyers, and we will open the books up to them.

That was a demand of the membership. That's where our financial administration act is. If there is a conflict, we have conflict of interest rules. We have dispute resolution laws within our governance act. The mechanisms are there. We have yet to have anybody give a very strong opposition to anything. We have had some very pointed questions, asking for some explanation of the numbers. We have been able to do that.

Everybody seems to have been satisfied for the last two...we're coming up on our third budget, and it's our second audit to be presented to the assembly since we passed our administration act and governance act after 2009.

[Greg Rickford, Conservative, Kenora, ON]

Thank you. These are helpful things.

Clarence, go ahead.

[Clarence Paupanekis]

Thank you.

I can only speak from our Cree Nation's perspective in terms of being accountable and transparent to our first nations citizens. As I mentioned in my presentation, our practice is to have an annual general meeting and to explain as best we can to the membership what the financial statements entail. That itself can turn into a marathon session, because you have a greater mix of people who understand them well. You have former politicians sometimes who seem to be really astute and ask a lot of questions. There are those things. We do that.

The other day, I received a call from a band member asking for previous years' audits. I said, “I will get them to you as soon as I get back to the community next week.” We try to provide the documents when people request them. As I said, we have an audit scheduled for November 7 for the administration of our trust. We're preparing for that as well. There are going to be people coming and asking questions about our trust and how we administer that.