The leaders of a troubled Ontario reserve are applying for a court injunction to block a government-appointed manager from "taking over" the community's finances, after a much-anticipated meeting with the minister of aboriginal affairs ended in an impasse.

Attawapiskat Chief Theresa Spence said that Ottawa's decision to take the community's finances out of the band council's hands "indicates discrimination against Attawapiskat leadership and the First Nations people generally."

The injunction, if granted by the courts, would prevent the government-appointed manager from "taking over and causing more harm than good" in the community, she said.

Spence made the comments after meeting with Aboriginal Affairs Minister John Duncan Thursday in Thunder Bay, Ont.

They have agreed to help ease the community's housing crisis by retrofitting a local healing lodge and assembling 22 modular homes for families currently living substandard buildings.

The federal government will also conduct a forensic audit of the band's finances, which Spence hopes will dispel any accusations that government funds have been mismanaged in the remote community.

Attawapiskat's published financial records indicate that last year there was a housing budget surplus of $2.27 million and an infrastructure budget surplus of more than $1 million.

When asked why that money was never spent, Spence said that "sometimes the audit is misinformed or the numbers are not right" and that the band had been spending all the money it received for housing.

Earlier threat

Spence had previously threatened legal action to fight the appointment of Jacques Marion, the third-party manager who the local band is being forced to pay $1,300 per day. Marion is currently working offsite after being asked to leave the reserve.

The Attawapiskat chief raised the alarm over living conditions on the reserve in the fall, saying a housing shortage had forced several families to live in tents and unheated trailers. Others have been living in overcrowded housing that's badly in need of repairs.

Aboriginal Affairs Minister John Duncan met with Chief Theresa Spence in Thunder Bay to discuss the urgent needs of people living in Attawapiskat. (Sean Kilpatrick/Canadian Press)

Duncan described Thursday's meeting as "respectful" and he pledged to visit Attawapiskat in due course. He also said that a new elementary school would be built in the Cree community in the spring, after years of lobbying from local residents.

However, he said the government would stand by the move to third-party management because it could help speed up the response to the crisis.

Duncan also emphasized that the third-party manager is only temporary, and that the forensic audit will examine his department's spending as well.

Thursday's meeting took place at the Thunder Bay regional office of Aboriginal Affairs and Northern Development Canada, where a crowd of students from the city's First Nation high school held a small protest to show their support for Attawapiskat.

Kevin Anderson held a placard with a message for Duncan: "It's not Fair."

Even though his own First Nation community is hundreds of kilometres away from Attawapiskat, Anderson said he can relate to their concerns.

"In Poplar Hill, it's just like survival every day," he said. "We have poor housing and we also don't really have running water ... so it's pretty much hard to live there."

Emergency response

The Red Cross and Emergency Management Ontario were due to deliver another shipment of supplies Friday to Attawapiskat families living in tents and shacks, according to a spokesperson for Duncan's office. A shipment delivered earlier this week included cots and other items, including additional foam insulation materials, wash basins and floor mats.

Chief Theresa Spence raised the alarm about the housing crisis in Attawapiskat in the fall. (Sean Kilpatrick/Canadian Press)

The community’s healing lodge is currently being assessed as a possible short-term shelter, and 22 modular homes are set to be delivered when ice roads open in the coming weeks.

NDP MP Charlie Angus, who represents the northern Ontario riding that includes Attawapiskat, has been deeply critical of the Conservative government's response to the crisis. On Thursday, he accused Ottawa of using "the politics of confrontation" rather than working with local leaders.

Duncan "had his chance to mend his broken relationship with the community and now they're going to court," Angus said in the House of Commons.

In response, Government House Leader Peter Van Loan described the meeting between Duncan and Spence as "a good step forward."