The economic crisis on many of Canada’s Indian reserves has become a meal ticket for the “Indian industry” — an army of consultants, lawyers and accountants who are sucking hundreds of millions of dollars out of First Nations and from federal government coffers.

One-quarter of the country’s 616 First Nations are in trouble, many of them crippled by “unmanageably high” debt. Ottawa has resorted to dispatching the Indian industry to partly or completely take over 83 of the 157 most indebted First Nations.

In some cases, the financial problems stem from mismanagement by the chiefs and councils charged with dispensing federal funds on their reserves. In others, it’s the result of chronic underfunding from Ottawa. Often it’s both factors combined with a lack of oversight from the more than 5,130 employees of Indian and Northern Affairs Canada.

Officially, the Canadian government doesn’t collect information on how much debt First Nations are actually in. Nor can it say how much money is being spent to try to fix the problem.

But a Star investigation has found the situation on many reserves is becoming increasingly dire.

This, even though the federal government gives about $7 billion a year to First Nations and has added 2,000 bureaucrats to Indian Affairs over the past 15 years.

Mismanagement and poverty have long been problems on many reserves. As has the reality that the daily efforts of the country’s fifth largest bureaucracy — Indian and Northern Affairs — have failed to better the lives of the 430,000 status Indians on those reserves, many of whom live in Canada’s most deprived communities.

And now, Indian Affairs statistics show the gap in quality of life between those living on reserves and the rest of Canada is getting worse.

This despite decades of criticism and recommendations from entities including the Auditor General of Canada, the Royal Commission on Aboriginal Peoples and the United Nations Human Rights Council, conditions on Canada’s reserves remain a blight on the country.

“It’s a national disgrace,” says Bob Watts, a Harvard-educated Mohawk from Caledonia, Ont., one-time bureaucrat with Indian Affairs and former CEO of the Assembly of First Nations, the mouthpiece for Canada’s Indian chiefs.

“We’re a country that holds ourselves out to the rest of the world as a great place to live. But in this country there are people that are living in the Third World. At what point are we going to actually look at these issues and demand real change?”

DISPARITY AND DESPAIR

By looking at government funding records and building a database of every contract and grant (valued at more than $10,000) that was awarded to the Indian Act bands, the Star has discovered massive disparities in funding among bands.

Example: the Toquaht First Nation on the west coast of Vancouver Island has received $18 million over the past three years to support an on-reserve community of just 16 status Indians. That works out to $1.1 million per band member living on reserve. Meanwhile, the Pessamit First Nation in Quebec has received $23 million for 2,877 status Indians living on its reserve on the north shore of the St. Lawrence River. That works out to roughly $8,000 per band member.

But the disparity among First Nations tells only part of the story. Relying on census data, Indian Affairs researchers have developed a “Community Well-Being Index” — a spreadsheet that gives every community, native and non-native alike, scores on education, employment, housing and income.

Among the bottom 100 communities on that list, 96 are First Nations.

Yet senior executives within Indian Affairs are loath to acknowledge what their own statisticians have discovered: that the gap between well-being on reserves and in the rest of Canada has been growing since 1996. Gina Wilson, a senior assistant deputy minister at Indian Affairs who is responsible for 1,800 bureaucrats working in the department’s regional offices, says: “There’s a lot of progress being made. I wouldn’t say that’s the case in every community, but to overall say the situation is getting worse, that’s probably a personal opinion.”

THE INDIAN INDUSTRY

The financial plight of Canada’s First Nations has given rise to a brigade of consultants, lawyers and accountants who, the Star has found, collectively secure more than 1,500 contracts from Indian Affairs, valued at roughly $125 million a year.

As the disparity between the First Nations and the rest of Canada grows, so does this Indian industry built to combat it.

Take, for example, the federal department of Indian Affairs which, despite having had its funding to First Nations capped at a two per cent increase per year since 1996, has seen its full-time staff balloon from 3,300 employees in 1995 to 5,137 today.

Outside of Ottawa, the Indian industry can best be spotted on the ground in 83 of the country’s most debt-laden First Nations, where consulting companies from across the country are being individually paid as much as $1 million a year — according to Marc Langlois, an Indian Affairs regional manager in Quebec — to either partially or completely take over the daily duties of the chiefs and councils.

Such firms include Lemieux Nolet of Quebec City, which — according to two former chiefs — gets about $600,000 a year to administer all government services for the 450 Algonquins living in Third World conditions on Barriere Lake reserve, 270 kilometres north of Ottawa.

Putting a band like Barriere Lake under third-party management is a controversial tactic which challenges the idea of self-governance on reserves, and which has placed more than 77,000 status Indians either completely or partially in the control of private consultants and accounting firms from across the country.

Cross-referencing data from the community well-being index with a list of bands currently struggling with debt issues, the Star found no evidence that the quality of life in communities governing themselves was worse than in those being controlled by consultants.

The process of putting a First Nation under third-party management has attracted the attention of Sheila Fraser, Auditor General of Canada. Fraser criticized the department’s intervention strategies in 2004, slamming Indian Affairs for not paying attention to the warning signs before several First Nations had spiralled deeper into “unmanageably high” debts.

Exactly how those communities managed to build up such debts while each filing an average of 160 reports to the government each year is hard to understand.

And for all the reports pouring into Indian Affairs’ 28-storey headquarters in Gatineau, Que., the department seems unable to answer some of the simplest questions about the Indian file.

Like how much debt are First Nations actually in?

The official answer: “The department does not collect the total accumulated deficit (debt) of all First Nations in Canada.”

It’s an interesting answer, considering that internal documents released to the Star accidentally by Indian Affairs’ staff in Winnipeg show the department does in fact collect the total “accumulated deficit” for individual First Nations in Canada.

It’s from those internal documents that the Star is able to report that some First Nations are operating at more than $20 million in debt.

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THE NEVER-ENDING STORY

To investigate the despair and disparity on Canada’s Indian reserves, a Star reporter ventured to eight reserves in three provinces to talk to six culturally distinct tribal groups.

Some represented the poorest of the poor. Like the 450 Algonquins of Quebec’s Barriere Lake. Or the Ojibwa, Cree and Sioux of Manitoba, who live in some of the most deprived and remote communities in North America.

Others are held out by Indian Affairs as success stories. Like the relatively well-to-do Mohawks of Tyendinaga who, despite living 30 kilometres from Belleville, can’t drink their tap water. Or the Chippewas of Rama, near Orillia, who benefit from the gambling habits of nearby Toronto residents.

Together they represent a collection of peoples who live within the confines of a broken Indian Act system.

Understanding the causes of the mismanagement and lack of oversight at the core of Canada’s First Nations policies requires an understanding of the Indian Act, a piece of colonial legislation passed by Parliament in October 1876.

Its goal: to protect, civilize and ultimately assimilate the Indian population.

Some 134 years later, the world has changed. But the act, still more or less intact, remains a barrier to real improvement in Indians’ standard of living.

Politicians, bureaucrats and native leaders agree that the system is broken and that the Indian Act needs to be either scrapped or replaced.

And yet it remains.

Why?

“Because no politician ever got his or her bread buttered by taking on the Indian issue,” says Harry Swain.

As deputy minister of Indian Affairs during the 1990 Oka Crisis, Swain made it his goal to kill the Indian Act, something he calls “a Victorian horror insufficiently updated and now in urgent need of replacement.”

He failed.

Now he and other former bureaucrats from Indian Affairs say the only way to kill the act and fix the system is to rally the Canadian public to care enough to do so.

But nearly everyone from Watts to Swain to the national chief of the Assembly of First Nations to the elders of some of the most troubled communities in the country say the greatest barrier to real change is that the average Canadian doesn’t care about the situation on reserves.

People see a headline on the front of a newspaper about the multi-billion-dollar mess that is this country’s Indian affairs and they turn the page, move on.

But visit a reserve and the residents will tell you exactly why you should care.

It’s your tax dollars, and it’s everyone’s mess.

Data analysis by the Star’s Andrew Bailey