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Aboriginal Affairs Minister Bernard Valcourt answers a question during Question Period in the House of Commons on Parliament Hill in Ottawa, Tuesday Nov.26, 2014 . Mr. Valcourt said only a handful of First Nations have clearly stated they will refuse to comply with the First Nations Financial Transparency Act, and he expressed hope that more reports would come in right at the deadline.Adrian Wyld/The Canadian Press

First Nations that fail to comply with this week's deadline for publishing their expenses will see immediate funding cuts, says Aboriginal Affairs Minister Bernard Valcourt.

Wednesday at midnight was the deadline for leaders to comply with the First Nations Financial Transparency Act. The controversial 2013 law took effect July 29, but when nearly two-thirds of First Nations did not meet the original deadline, Ottawa allowed a 120-day extension.

That extension was effective as 521 – or nearly 90 per cent – of the 582 First Nations subject to the new law had complied as of Wednesday evening.

In an interview, Mr. Valcourt said only a handful of First Nations have clearly stated they will refuse to comply, and he expressed hope that more reports would come in right at the deadline. But he also said the government will enforce the act starting Thursday. "Definitely [for] those that do not comply, we will start withholding funds immediately," he said.

The act faced strong opposition from First Nation organizations that say they were not properly consulted and that the law goes too far by forcing governments to disclose sensitive financial information related to on-reserve businesses. The Conservative government insists the move is about giving grassroots First Nations access to the same level of information that is provided by municipal, provincial and federal governments.

Chief Wallace Fox of Onion Lake Cree Nation, which includes territory in Alberta and Saskatchewan, held a news conference in Edmonton on Wednesday to announce that his community had launched a legal challenge against the act in Federal Court.

"We decided enough is enough," he said. "The mischaracterization of the monies owed to Indians as taxpayers' money has led to racism against my people. We did not want to go to court, but Canada made the unilateral decision to withhold our monies that are in our capital account …. If the government was a private person, they would be charged by the police. In this case, the minister thinks it's okay. Well, it's not okay."

While the vast majority of salaries disclosed over the past four months have not generated concern, there have been high-profile exceptions. Some members of B.C.'s 82-member Kwikwetlem First Nation were surprised to learn that Chief Ron Giesbrecht was paid $914,219 last year, including an $800,000 bonus.

And last month, members of B.C.'s Shuswap First Nation voted out long-time chief Paul Sam after it was revealed under the federal transparency law that he and Alice Sam, a then-councillor and his former wife, were both receiving salaries of $202,000.

The Aboriginal Affairs department plans to publish a list Thursday of all First Nations that have not yet complied. The minister said funding cuts are not intended to affect social services like education, but that he can't control how affected First Nations will manage the reduced transfers.

"We will not withhold funds for education or for social services," Mr. Valcourt said. "That is my intention, but I'm going to be candid with you. In certain circumstances where I have block funding agreements, they have the discretion at the band council level to swing the money one way or the other, so in those instances it can be difficult to withhold the funds only for governance issues."

The Assembly of First Nations has long opposed the act as unnecessary and heavy-handed, but is not advising First Nations as to whether or not they should comply with the deadline.

"That they are now threatening First Nations with further punishment if they do not comply with their own flawed legislation is consistent with this colonial approach," Cameron Alexis, AFN regional chief from Alberta, said in a statement.

Mr. Alexis said results to date show the vast majority of more than 3,000 First Nations elected officials, including chiefs and councillors, are getting "fair and adequate" compensation. The AFN argues the federal government should be more focused on such issues as First Nation children in care, overcrowded housing and missing and murdered indigenous women.

"One wonders why this [transparency] issue is the priority," Mr. Alexis said.