Ottawa is weighing whether to recoup more than $1.8-million from Attawapiskat First Nation for unsubstantiated housing spending uncovered in a 2014 audit of the reserve – a northern Ontario community today grappling with a suicide crisis that leaders say is linked, in part, to a housing shortage.

Attawapiskat's 2014 financial statement noted the "potentially repayable" $1,842,260 in housing-related transactions for the fiscal years 2006 through 2011, but said the band did not agree with the audit findings and was in discussions with Ottawa "with the expectation the amount will be reduced in whole or in part." The First Nation's 2015 financial statement does not mention the status of the discussions, but Indigenous and Northern Affairs Canada said the government has not recouped any of the money.

"The department considers many different factors when discussing potential recoveries from funding recipients, including potential hardship on the community," spokesman Shawn Jackson said in an e-mail. "Further discussion and analysis with the community is needed on these matters."

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Attawapiskat CEO Wayne Turner would not comment on the matter, other than to say discussions are continuing. In its formal response to the audit recommendations, the First Nation said the majority of the $1.8-million was related to two major contracts, "each of which was completed and the full funds dispersed."

The community, which has about 2,000 on-reserve band members, declared a state of emergency on April 9 after 11 people, most of them youth, attempted suicide. Until last week, Attawapiskat's only full-time, provincially funded mental-health position had been vacant since last year, in part because of the housing shortage. In a recent statement on the state of emergency, Chief Bruce Shisheesh said the community's problems "were not created overnight" and that adequate housing would help instill in residents a sense of stability and hope.

Inadequate and unsafe housing has long been a concern for Canada's indigenous communities, especially on northern and remote reserves where construction practices are often substandard, costs are inflated and the climate can be extreme. Several federal Auditor General reports have lamented the state of on-reserve housing, including a 2011 report that said roughly $1.5-billion in federal housing investments between 2004 and 2009 – which paid for 9,360 new units and major renovations to 13,000 units across the country – simply did not keep pace with demand.

Federal support for on-reserve housing comes from Indigenous and Northern Affairs Canada and from Canada Mortgage and Housing Corporation, including in the form of subsidies and loans. The Liberal government's recent budget allotted $554-million for First Nations housing over the next two years, with $417-million to be channelled to communities through INAC and $138-million bound for the CMHC to support renovations.

Identifying where housing money comes from and how it is spent is not as simple as examining a community's financial statements, which are prepared by the First Nation and reviewed by an external auditor before being posted online. In the case of Attawapiskat, the 2015 statement says the community received roughly $1.8-million in housing revenue from what was then Aboriginal Affairs and Northern Development Canada (now INAC).

The department, in the meantime, told The Globe and Mail that it provided the community with $5.4-million in housing funding that year. The department said the discrepancy was due to the fact that $3.6-million in housing-related funding – $1.2-million to convert school portables into 18 housing units, and $2.4-million to buy, transport and install 13 pre-fabricated homes – had been counted in the First Nation's statement as part of infrastructure revenue.

INAC has provided Attawapiskat with more than $15-million in housing funding since 2008. The CMHC has also provided the First Nation with subsidies for rental housing and forgivable loans to address major deficiencies, including electrical, heating and plumbing, a spokesman said in an e-mail.

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Mr. Turner said Attawapiskat has built, converted or installed 91 new units since 2007, nearly half of them in the past couple of years. Most of the homes on the reserve were built in the 1970s and are "showing the effects of a harsh climate," he said. He noted that building a new home on the James Bay reserve costs between $240,000 and $280,000, which is in line with the third-party quote the CMHC provided to The Globe. Mr. Turner said federal spending is not keeping up with natural growth in the community, where the population is increasing by 2.5 per cent annually, he said.

The housing situation was so dire in the fall of 2011 that former chief Theresa Spence declared a state of emergency. Attawapiskat, which was co-managed for more than a decade to improve the financial situation, came under federally imposed third-party management from December, 2011, until April, 2012.

In 2014, former co-manager Clayton Kennedy, who was also Ms. Spence's common-law spouse, was charged with fraud and theft over $5,000 that was alleged to have occurred in August, 2012. The matter was before the courts in Cochrane, Ont., on April 8 – one day before Attawapiskat declared the state of emergency amid the spate of suicide attempts. The case was adjourned to Aug. 31 for a plea.