Submission to the Standing Committee on Aboriginal Affairs on Bill C-27

Submission to the Standing Committee on Aboriginal Affairs on Bill C-27-Financial Accountability
Prepared by Judith Sayers,
Visiting National Aboriginal Economic Development Chair, University of Victoria
November 20, 2012

Bill C-27 is supposedly aimed at the Financial Accountability and Transparency of First Nations with an overall aim to reveal the remuneration of the Chief and Councillors in whatever capacity they hold in the First Nation or related entity the First Nation controls. The financial accountability and transparency that is envisioned in this legislation is not just for the members of the First Nation who have a vested interest in the moneys held for their benefit, but more for the general public.

The general public, which has really been the vocal voices of a few organizations, wants to know how money they say is public money is being spent. It is also an opportunity they want to show that First Nations are not being accountable for the moneys they receive and that Chief and Councils are being overpaid. It is more to satisfy these groups and the pressure they exert, than to address the fact that some members do not receive their financial statements as had been reiterated over and over again by the Minister of Aboriginal Affairs.

Money provided to First Nations by the government is done so in comprehensive agreements. Money is allocated for various things and the money must be spent on those things or the money goes back to the government. Auditors have to perform analysis and evaluations for First Nations beyond what any other organization they work for. Auditors often say they do ten times the work for a First Nation in their audits than anyone else and of course the First Nation has to pay for these services. If the Auditor does not provide this accounting to government, the First Nation will be paying back money or not receiving money in the future. How audits are conducted, under GAAP, etc. is carefully laid out in agreements First Nations sign with the federal government. Copies of these agreements should be studied by this committee to see how onerous the terms are for compliance of government requirements on moneys provided to the First Nation.

To ensure First Nations members get copies of financial statements, provisions to do that could be placed into these funding agreements between AANCD and the First Nation. There could also be a process put in place that if a First Nation did not provide their members with Financial Statements within 120 days of the year end, that the members could go to the auditor’s office and receive copies. The First Nation would be required to put this in the letter of engagement with the auditor and compensate the auditor for costs of making copies of the audit. Legislation is not required to do this when agreements have dictated First Nation/AANDC fiscal relationships and this can continue to be the tool that can accomplish this.

I believe that each First Nation should be providing financial statements of the First Nation to its members as well as providing financial statements of any entity that has been in place for the benefit of the First Nation. That being said, the question is how should it be done? In my opinion, the First Nation should have the responsibility to provide its members with these statements and not be legislated to do so. When I was Chief in my community for 14 years, the Financial Statements were mailed out to each member and at the September community meeting, the auditor was brought in to review the statements with the members so that an independent person could answer the questions of the members. That way it was not just the Chief and Council or our staff providing information. Providing the financial statements to the members was a practice put in place by the previous chief and this practice has been in place for well over 30 years in the Hupacasath First Nation. I know and understand that not every First Nation does this, but passing a law to make a First Nation provide their financial statements to their members is not a step toward self governing Nations nor does it make them accountable, it only makes them compliant. As First Nations have not been consulted fully on this proposed Bill, First Nations may have other solutions on how this issue could be handled. Full consultation on this bill needs to occur pursuant to the Supreme Court of Canada’s rulings.


Bill C-27 requires that all the money that is the First Nation’s must be placed in the financial statements that become information that is in the public domain. In the Indian Act, RSC 1985 c. I-5, s. 2(1) the definition of Indian Moneys is much narrower. The definition of Indian Moneys is defined as “all moneys collected, received or held by Her Majesty for the use and benefit of Indians or bands;” Breaking down Indian Moneys into categories, s. 62 states “All Indian moneys derived from the sale of surrendered lands or the sale of capital assets of a band shall be deemed to be capital moneys of the band and all Indian moneys other than capital moneys shall be deemed to be revenue moneys of the band.”

That is what is regulated in the Indian Act and with this Bill, the Minister seeks to broaden that authority to any money the First Nation receives, not just money from AANDC, but from the First Nation’s own source revenues, grants from organizations, provincial governments and any other entities. Those sources of revenue would not be considered “Indian Moneys” nor can it be considered money from the Federal government. The Federal Government does not have jurisdiction over moneys received from other sources and cannot compel the First Nation to be providing this information to the public. Such information may be confidential to a donor. Why should the general public know how much money the First Nation is making from selling cigarettes or leasing property they own off reserve, etc? It is no one’s business but the First Nation’s and raises privacy issues. This legislation is far too broad including money which the Federal Government has no jurisdiction over and could never be considered Indian Moneys or fall with the federal power of Indians and lands reserved for Indians.

Privacy of Chief and Council Personal Information

Bill C-27 s. 6(1) requires that a “schedule of remuneration” must be prepared which details remuneration paid by the First Nation or by any entity that it controls, to its Chief and councillors, acting in their capacity as such and in any other capacity, including their personal capacity. I have no issues with money paid to Chiefs and Councils for being Chief and council and that should be public knowledge to the members. I do have issues with other moneys paid to the Chief and Council. For example, if the Chief/council had a job with the First Nation before an election and continue to hold that job, such salary has never been a public disclosure and should not be now. Other positions held within companies over which the federal government has no jurisdiction should not be included. As Jennifer Stoddart, Canada’s Privacy Commission has addressed these issues in part, I will not repeat the concerns but raise them as a real issue.

Legislative Authority Regarding providing Financial Statements of Legal Entities to the Public

It is my submission that the federal government does not have authority to legislate with respect to any corporation, society or other legal body incorporated under provincial laws to provide financial statements to members of the First Nation and more problematically, to the public at large.

s. 91(24) of the Constitution Act, 1867 gives authority to the Federal government over “Indians and Lands Reserved for Indians.” Under this authority, the Federal Government has passed many laws including the Indian Act, First Nations Lands Management Act, and First Nations Fiscal and Statistical Management Act.

The proposed Bill C-27 claims authority over an “entity” which means a corporation or a partnership, a Joint Venture of any other unincorporated association or organization. Any “entity” that is incorporated under provincial laws whether it is a Corporations Act or Societies act or Cooperative becomes a legal entity, an entity that cannot be considered an “Indian” over which the federal government has no jurisdiction.

For example in BC, the Business Corporations Act [SBC 2002] c.57, s. 30 reads:

s. 30: A company has the capacity and the rights, powers and privileges of an individual of full capacity.

Or the Society Act of BC [RSBC 1966] s.433, s. 4(1)

From the date of the certificate of incorporation, the members of a society are members of a corporation...

(d) with the powers and capacity of a natural person of full capacity as may be required to pursue its purposes

You will note in both the Business Corporations Act and the Society Act that the word individual or person is used and does not refer to an Indian person. This is typical of corporate law across Canada, that a corporation becomes a legal entity with the powers of a natural person and has certain protections and liabilities.

A corporation is treated as a separate legal entity for GST purposes and for provincial commodity tax purposes. Courts will not “lift the corporate veil” for the purposes of the s. 87 exemption (Kinookimaw Beach Assn. v. Saskatchewan, [1979] S.J. No. 255(Sask. C.A.), leave refused (1979), 1 Sask.R. 179 (S.C.C.)). There are other cases that considered whether a corporation was an Indian person for the purposes of seizure and garnishment. Therefore, the federal government cannot legislate with respect to corporations or societies incorporated under provincial law to provide their financial statements to the members of a First Nation or to publicly publish audited financial statements on the webpage of the First Nations and on the website of AANDC.

The Constitution Act, 1867 s. 92(11) gives the provinces legislative power for the incorporation of companies with provincial objectives and s. 91(2) gives legislative power for the Regulation of Trade and Commerce to the federal government and they under this power have passed the Canada Corporation Act for profit and not for profit companies.

If First Nations are incorporating their businesses using provincial law as most do, the Federal government cannot then override the provisions of the provincial law.

Provincial Laws do not require that financial statements go to anyone other than the Directors and Shareholders of the corporation. In BC shareholders access to financial information is subject to the terms and conditions of what is set out in the articles of incorporation of the company. So in the instance where the members are shareholders, or have a trustee that holds the shares for them, the financial statements will be available to the members to see by virtue of provincial law. There is no need to have federal laws that do so. Indeed, the requirement in Bill C-27 would be an imposition or encroachment on provincial law. This would not be true for publicly traded companies as different laws apply to making financial statements available for the public. Additionally, the Societies Act of BC, s. 39, requires that every member be given the financial statements of the society. If a Society is controlled by a First Nation, its members will be members of the Society and will get the statements. If the Chief and Council, or a certain number of First Nation members are society members, there should be an agreement between the First Nation and the society how the financial statements are provided to the First Nation and the First Nation have a mechanism to share those financial statements whether it is through an annual meeting of the members, or it is in policy, or constitutions.

It would be my submission that the Federal Government cannot define consolidated financial statements of the First Nation as “those of any entity that it controls that are presented as those of a single economic entity” if those entities are a legally incorporated society/corporation/cooperative, partnership, joint venture under provincial law. If the First Nations has not incorporated or is ‘doing business as’, those business should be within the First Nation’s financial statements of the First Nation of which the members would have access to.


Assuming that the federal government may have jurisdiction over the financial statements of a legally incorporated entity, publishing financial information that is not normally public puts a First Nations legal entity at a competitive disadvantage by revealing its financials to its competitors. Business is a highly competitive arena and like businesses would love to have the financial information of a competing company to use to its advantage. What kind of revenue is the business generating, how much are they spending on marketing, on training, what kind of expenses do they have and money spent on copyright? Opening up First Nations companies to this kind of exposure is an incredibly bad business practice in an area where First Nations are competing for their share of the market for the services and/or products.

Other companies of the same nature do not have to publish their financial statements on their webpage, why is there discrimination/unfair practice against First Nations companies due to some federal government need for accountability and transparency over companies they have no authority over? This runs counter to all business principles and practices. Why would the Minister think this was necessary and what purpose does it serve when members can access this information as shareholders of a company? The bottom line is that this does not make good business sense.

First Nations are incorporating legal entities for many reasons including protection from liability, but mostly to create revenue and jobs for their members. If the Federal Government is requiring First Nations to reveal their corporate financial statements to their detriment, why would a First Nation provide such statements to the public on their webpage? If they did not do this, then they are subject to having moneys payable to them as a “grant” or “contribution” being taken away and going as far as terminating any agreement that provides such a grant or contribution. So a First Nation may be getting money for a community facility, for education initiatives, adding housing, or anything that would be critical to the physical well being of its members and the government could cut this off unless the First Nation publishes its confidential financial information of a company it controls on its website. A First Nation has to decide whether to reveal such information that could financially ruin their company where they are trying to create revenue for their members or risk losing grants/contributions for much needed services. Not a good choice and not a choice that should have to be made all in the name of “accountability and transparency.”

This is an Act to “enhance” the financial accountability and “transparency” of First Nations but the question is for whom? Why is the revenue created by a corporation of a First Nation of any business to the world? While it may be arguable that money a First Nation receives from the federal government for its administration is “public moneys” and should be public, the very opposite is true for a First Nations corporation. Any business person would object to such regulatory imposition.


S. 2(2) of Bill C-27 states that “the conclusion that an entity is controlled by a First Nation is based on an analysis of the nature of the relationship between the entity and the First Nation and the degree of influence exercised, HAVING REGARD TO THE FACTORS SET OUT IN THE PUBLIC SECTOR ACCOUNTING HANDBOOK OF THE CANADIAN INSTITUTE OF CHARTERED ACCOUNTANTS, as it is amended from time to time, respecting control by a government over an organization.”

The Handbook of the Chartered accountants is not publically available. You have to purchase it for a fair amount of money. And how would First Nations know when that manual is changed regarding the factors of control? How is a First Nations supposed to know what these factors are if they have to pay a lot of money for a handbook or ask their accountant/auditors for an understanding of what the factors are and have to pay them for their opinion? Legislation affecting First Nations should not be this difficult to understand and the factors of control should be laid out clearly in the legislation so First Nations can understand what they are.

It took me a lot of time asking several accountants for this material before I got a summary of the indicators of control. I understand they include

Persuasive Factors:

  • Unilaterally appoint a majority of Board (happens a lot with First Nations Chief and Councils)
  • Ongoing access to assets, direct use or responsibility for losses (common for First Nations to do)
  • Voting control (First Nations usually require a majority of board members)
  • Unilateral power to dissolve


Other Factors

  • Significant input into appointments
  • Appoint/Remove CEO (for cost savings First Nations use their own CEO for Ec Dev Corp.)
  • Establish or amend mission (First Nations economic development strategy dictates these-can change)
  • Approve business plans or budgets (Chief and council will have a role in this)
  • Restrict revenue generating capacity (Ec dev strategy may direct where profits go)
  • Establish or amend management policies. (Ec Dev Corp may adopt First Nation policies)


My thoughts around this are that now First Nations will be finding ways to get around these factors so they will not have to post their financial statements publicly in order for them to operate successfully.
This could be an unfortunate outcome of such legislation as it would take control away from the First Nation Chief and Council, make the corporations less accountable to the First Nation and be the exact result the Government is trying to prevent.


I respectfully submit to this committee that Bill C-27 is not needed and if it does proceed to law, must be fully overhauled to narrow it to areas where the federal government has jurisdiction. First Nations will be challenging this legislation in court regarding this issue and since AANDC spends more than any other federal department on legal fees, this does not seem like a desirable course of action.

Tools already in place such as the fiscal agreements between First Nations and AANDC can include provisions that ensure members receive audited financial statements if it is not the common practice of the First Nation.

Areas where the federal government does not have jurisdiction include requirements for provincial incorporated legal entities to provide financial statements publically on a website, moneys received by the First Nation from sources other than federal government sources, and moneys paid by a legally incorporated company to a Chief or council member.

First Nations should be supported in their efforts to be involved in economic development. Having the federal government put them at a competitive disadvantage by revealing its financial statements to its competitors/general public can only be considered a very bad business practice and must not be put in place if First Nations are to succeed economically.

I respectfully ask that Bill C-27 be withdrawn and other tools found that can achieve the same objectives. With all the many proposed laws in this legislature to allegedly make the lives of First Nations people better, they are only over regulating what is a complex legal regime that First Nations operate in every day.

Respectfully Submitted,

Judith Sayers
National Aboriginal Economic Development Chair
Assistant Professor Business and Law
University of Victoria,

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