A federal forensic audit of the Federation of Sovereign Indigenous Nations (FSIN) has led to recommendations that the organization review its policies after $34 million in questionable transactions were found.
The audit, posted online Wednesday, was conducted by KPMG LLP on behalf of Indigenous Services Canada’s (ISC) Assessment and Investigation Services Branch (AISB) and looked at $47.1 million in transactions between April 1, 2019 and March 31, 2024.
The forensic audit was prompted after AISB received allegations about a lack of transparency over FSIN’s expenditures, including COVID-19 and travel payments made to a former employee and other claims.
In total, about $34.2 million of those transactions was flagged by KPMG, with $3.7 million deemed “ineligible,” $30.3 million as “questionable” and $155,595 as “unsupported.”
One of the main focuses of the audit was money spent on COVID-19 measures, with the federation having received $30,024,786 in related funding between April 2020 and March 2023.
The audit deemed $23.5 million in COVID-related expenditures as “questionable,” which is labelled when complete supporting documentation to determine eligibility was not received. About $60,335 was considered ineligible and $1,050 unsupported.
It was also determined that $2.6 million of the COVID-19 expenses did not appear to have appropriate approval obtained for the purchase.
It’s been recommended that FSIN, which represents 74 Saskatchewan First Nations, obtain budgets and planning information to ensure activities align with funding requirements, ensure reporting on funding use is received from recipients and consider tracking expenditures that are “associated with a particular funding letter” to be clear on how funding is being spent.
“FSIN could consider tracking the expenditures associated with a particular funding letter to clearly present how ISC funding has been spent,” the audit reads. “This will also allow for easier tracking of expenditure eligibility.”
COVID-19 was not the only expenditure analyzed in the audit, ranging from administration fees to travel and fleet vehicles purchased.
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Almost $8 million in administration fees were questioned, with $5.6 million deemed “questionable” and $2.3 million as “ineligible.”
Of that amount, more than $5.2 million is said to have “been directed towards the offices of chief and vice chiefs, which is not included as a covered cost in FSIN policy.”
About $2.3 million was also allocated to the purchase and development of capital items, specifically a new building and vehicle fleets, the former of which the audit notes, “office renovations are excluded according to FSIN policy.”
Recommendations were made by KPMG that the federation discuss and formally agree to a process with the government in which FSIN determines the “appropriate amount of administration fees to budget for a given funding agreement” and how it should be appropriately used. It also said eligible administration expenses should be allocated to a separate department for tracking.
Fleet vehicles purchased by FSIN were also flagged in the audit, with it noting 22 vehicles were bought for a total of about $1.4 million.
The audit found five new vehicles were purchased for the executive team in both March 2022 and October 2023.
FSIN argued these fleet vehicles “encounter extreme conditions and incur a significant number of kilometres each year resulting in an average life expectancy of less than two years.”
Despite this, KPMG said it was not provided with supporting documents relating to mileage records for the executive fleet, it says the $367,929 paid in October 2023 was a “questionable expenditure.”
It also determined nine vehicles were sold by FSIN to staff or executives, amounting to about $88,600 in income.
KPMG recommended FSIN consider a capital asset policy outlining accounting procedures for capitalization and disposal of fleet vehicles to ensure such expenses are recorded, but also suggested obtaining fair value assessment of vehicles before an auction sale.
“Where vehicles are sold at less than fair value, accounting records should reflect a loss to FSIN to the benefit of the purchaser,” the audit notes, adding it could trade the vehicles into the dealership when purchasing new vehicles instead of an auction.
Payments to a former employee were also questioned, with KPMG noting the employee received a severance payment that “appears to have been inappropriate” as they were re-employed within one week of payment, a move that it notes contravenes FSIN’s human resource management regulations. In addition, the former employee is noted to have resigned prior to being terminated without cause by FSIN, “leading to the payment.”
According to KPMG’s audit, the former employee received potential overpayments totalling $246,524.
As a result, FSIN is advised to have its treasury board review proposed severance packages prior to payment, and document rationale for termination as well as rehiring if they are rehired.
Global News reached out to FSIN for comment on the audit but did not hear back by publication.
Asked if the Saskatchewan government would step in at all given the audit, it said it is not a significant partner of FSIN but has provided funding to the organization in the past, including grants, goods and services.
“Ministries providing funding to any third-party organization has reporting mechanisms as part of those agreements, to ensure that government dollars are spent on agreed-upon initiatives,” a spokesperson with the government wrote.
The government says it’s reviewing the report.
Indigenous Services Canada said in a statement it would take action on the findings and recommendations.
“We are considering next steps, and will consult with any appropriate authorities as required,” a spokesperson for Indigenous Services Canada wrote.
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