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Housing conditions in Attawapiskat in November, 2011, that led to a state of emergency being declared.Charlie Angus

Accounting and auditing are diagnostic techniques. That is why Chief Theresa Spence of the Attawapiskat First Nation is gravely mistaken when she dismisses a very critical audit of the financial management of her reserve as "a distraction."

The money spent by the federal government at Attawapiskat is not outrageously high per person. The question is, rather, why the spending on basic needs is so ineffective. Everyone agrees that the community suffers from severe social and economic ills, especially in its defective housing. It is in the far north of Ontario, on James Bay, but the dwellings are not adequate for winter, and there is a lack of drinkable running water. No one has alleged misappropriation of funds, but the lack of basic bookkeeping has made it impossible to find out how the money has been allocated. It seems quite likely that nobody, literally nobody, knows.

In December, 2011, the federal government hired Deloitte and Touche LLP to audit its $104-million in transfers to Attawapiskat from 2005 to 2011. Deloitte's report made some favourable conclusions on the overall co-operation between the community and the Department of Aboriginal Affairs and Northern Development.

But the devil was in the details. Most payments were unexplained, unclassified; more than 60 per cent of a sample of transactions lacked any explanation of what they were for, and 81 per cent were not adequately accounted for.

Shortly before the audit was initiated, the government appointed a "third-party" manager, Jacques Marion, a partner at another large accounting firm, BDO Canada. Chief Spence and the council of Attawapiskat responded by suing in the Federal Court. In August, 2012, Mr. Justice Michael Phelan held that an assistant deputy minister had gone too far in appointing Mr. Marion, because the problem was an operational one, not a matter of "financial tools."

Unfortunately, the Deloitte audit was not yet complete at the time; Judge Phelan might have decided differently. Good financial practices are certainly not everything, but they can help pinpoint problems. Accounting is not a sufficient condition for well-being, at Attawapiskat or anywhere else, but it is a necessity – and far from a distraction.