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The people of Barriere Lake in western Quebec, one of whom is shown in July of 2008, have a long-standing conflict with Ottawa over governance.Ashley Fraser

For every first nation under the thumb of a government-appointed third-party manager, there is a long and tortured back story.

In Attawapiskat, Ont., it's sewage backups, a bungled evacuation and perpetual poverty.

In Lake St. Martin, Man., it's flooding, snake pits and displacement of its people.

For the Algonquins of Barriere Lake in western Quebec, it's internal political divisions and long-standing conflict with Ottawa over governance.

Ottawa's last-ditch solution, after trying other approaches, has been to remove the first nations' authority to control their money and place their finances in the hands of an outside trustee.

The effect? In Lake St. Martin, the band's deficit climbed for years and has only recently been wrestled to the ground. There's still flooding and displacement. For Barriere Lake, there's no chief, and the school is having trouble paying its bills.

In Attawapiskat, third-party management has only just taken hold, but already it has provoked local discord, delays in decision-making and calls for lawsuits and civil disobedience.

Chief Theresa Spence and Aboriginal Affairs Minister John Duncan are meeting Thursday in Thunder Bay, Ont., in yet another attempt to find a lasting solution for the housing crisis on the James Bay reserve.

Mr. Duncan has announced a third-party manager, in addition to an audit and emergency aid. Ms. Spence welcomes the aid and will work with the auditors but is deeply opposed to the third-party management.

"Hopefully things can be clarified as to roles," an internal memo circulating among band members reads. "We want the forensic audit. We will work with the housing crisis. We simply do not want our current cash flow interrupted."

Third-party management is an approach that's been panned by all sides – the bands themselves, the Auditor-General, the government's internal evaluations, and tacitly, the government itself. The reports say it is not cost-efficient, fails to deal with underlying problems, and offers no obvious way out for troubled bands.

But it persists as the ultimate solution all the same, despite several attempts by the federal bureaucracy to reform the system.

The results are often absurd.

At the Barriere Lake school, principal Alec Wright had to cancel gym classes for three weeks just because the gym door lock was broken. It took that long to contact the third-party manager in Winnipeg, get permission to get a quote to repair the lock and secure payment for a locksmith – who then had to make two long-distance trips to the remote reserve because the band didn't have permission to pay for the quote and the repair at the same time.

"The arrangement is all right except for some very real impediments, which can wreak havoc," Mr. Wright says in an email. "Having a bureaucratic trustee, however well-intentioned, cripples reaction time and ability to deal with the unforeseen."

Barriere Lake's director of education, Jules Papatie, is trying to improve education standards on the reserve and is negotiating with the Western Quebec School Board for changes.

But the school board says the band owes $98,000 in fees left unpaid from years ago before the third-party manager was named. Mr. Papatie is well aware of the debt, but says the government is telling him he should not pay it because the charges were run up far too long ago.

He's stuck in the middle. "It sours the relationship that the band has with the Western Quebec School Board," Mr. Papatie said.

In Attawapiskat, band members heard in media reports that the federal government had bought and paid for 22 new houses. But the band members themselves were still putting details together for such a contract. They figured Ottawa was stretching the truth again – until a supplier contacted them and said the houses were a done deal.

"How do I contact the supplier when I don't know my role in relation to Third Party Management, how can I enter into a contract without funding approval from [Aboriginal Affairs] Normally we would do this as a matter of everyday business," the band council memo complained.

In Lake St. Martin, Chief Adrian Sinclair says the band council had to oust two third-party managers just recently before finding someone who would work with them on a plan to move towards financial independence.

"You need a third party that's going to work with a first nation, side by side. Leading them out of co-management, not leading them into further third party, to deficit," Mr. Sinclair said.

There are exceptions. Some bands do graduate from third-party management and go on to be independent.

The Pine Creek First Nation in Manitoba spent just a few months under third-party management after Derek Nepinak got himself elected chief, and then poured through bureaucratic manuals to aggressively plot a way out for his community.

"We were successful at breaking out of the third-party scenario," said Mr. Nepinak, now also the grand chief of the Assembly of Manitoba Chiefs.

But Mr. Nepinak says he was in a unique position. He was able to move quickly into a political void, and unite the community behind him before the third-party system dragged their spirits down.

"For a community that's been in third-party management for excess of two to three years, it doesn't take long for people to lose the capacity to fight for de-escalation," he said.

While Ottawa is experimenting with changes to the third-party system and has made an effort to work with troubled bands before they get in over their heads, for now, the third-party system is the key tool the government has to make sure federal funding is not misspent.

"The fundamental tension is that you have $6-billion going to first nations to administer, and you need some accountability," said University of Ottawa law professor Joseph Magnet.

"The government gets the feeling, rightly or wrongly, that these guys can't deal with it, and all the money is going down a hole."

The problem is that Ottawa is too quick to impose control and doesn't have the right systems in place to make sure a band's basic issues are resolved, Prof. Magnet said.

"The tools are very crude," he said. "The root causes of the problem are unlikely to be fixed."

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