Tighter rules pledged in First Nations health transfers

$2.6M allegedly diverted from First Nation

The federal government is promising to tighten qualifications and improve monitoring of companies managing the finances of struggling First Nations following allegations an Ontario company misappropriated millions of dollars in health-care funds.

Crupi Consulting is alleged to have diverted a total of $2.6 million in government transfers intended for the Kashechewan First Nation, an isolated reserve in Ontario’s far north. The company’s former treasurer, Joe Crupi, is facing eight fraud-related criminal charges concerning his handling of $1.2 million earmarked for an elementary school breakfast program, including an allegation he spent $700,000 for his own personal use.

Last week, the National Post reported Health Canada filed a lawsuit against Crupi and his brother Franco, alleging a further $1.4 million in health transfers was misspent through undocumented or ineligible transactions. Despite fraud concerns being flagged in 2011 and then referred to the RCMP, the lawsuit shows Health Canada renewed its funding contract with Crupi in 2012, 2013 and 2014.

In Parliament on Monday, NDP MP Charlie Angus hammered Health Canada officials for keeping Crupi in place “despite the warning bells from the attorney general and the RCMP,” and demanded Health Minister Ginette Petitpas Taylor fix the “operating culture” of the department.

“Now her lawyers are going after Crupi for the money, but that was money stolen from the mouths of children,” Angus said. “What steps will she take to make it right for the children of Kashechewan, and right for the people of Canada?”

The answer came from Don Rusnak, parliamentary secretary for the new Indigenous Services Ministry, which is expected to take over responsibility for health transfers to First Nations.

“It is completely unacceptable when public funds intended for Indigenous peoples are misappropriated,” he said. “Once the department was made aware of the RCMP investigation into the consulting group, it conducted an audit ... The department is taking corrective actions to make sure this does not happen again.”

Philpott’s office said a comprehensive review of how the government funds First Nations is already underway, and it intends to overhaul the regime governing what happens when a reserve goes into default.

“Our government has serious concerns with the current Default Management Prevention Policy,” a statement from her office said.

A Commons committee studied the policy in the spring and issued a report with eight recommendations accepted by the government. These included interim reforms to “improve the monitoring and assessment of third-party managers and co-managers” and to “strengthen the qualification requirements for third-party managers.”

During committee hearings in March, Paul Thoppil, chief financial officer with Indigenous and Northern Affairs Canada (INAC), acknowledged the government does not monitor the managers effectively enough.

“I don’t think that we do a very good job of assessment,” he said. “We try to do so as part of the reviews of why a First Nation (is) under thirdparty management as long as it is. If we feel that, in fact, the third-party manager is at fault, we will get rid of that third-party manager and bring in a new one. We do a review, but is it as robust as we’d like it to be? Probably not.”

Thoppil and other INAC officials said they want to avoid third-party management situations, where a company administers government funds until a First Nation is deemed able to do so again. The cost of hiring that company, which can reach $170,000 per year, is currently paid for out of the First Nation’s funding.

The overall goal of the government’s review, expected to be completed by the end of the year, is to build capacity for Indigenous groups to manage their own affairs. Thoppil cited a pilot project that gives the First Nations Financial Management Board, a not-for-profit First Nations group, funding to work with reserves to get them back on their feet, rather than appointing a third-party manager.

In the meantime, there are outstanding questions about why Crupi Consulting hadn’t been stopped more quickly after the fraud concerns came to light, and whether it had misappropriated funds from other First Nations in the region.

The company has helped manage the finances of at least six other First Nations in the region, including some situations where it was appointed the thirdparty manager by INAC. The government says it is still reviewing those cases. Messages left with those First Nations were not returned on Monday.