The federal government has put Attawapiskat in northern Ontario under third-party management and ordered an audit to find out where federal funds were spent as the James Bay community struggles with a housing crisis.

Aboriginal Affairs Minister John Duncan, who announced the measure in question period Wednesday, told the House of Commons that "urgent health and safety issues" needed immediate action.

"The government of Canada has informed the chief that we are placing the community in third-party management to ensure community needs are addressed," Duncan said. 

"Part of the manager's role will be to administer my department's funding, which is normally managed by the First Nation directly."

Opening the books

The Attawapiskat First Nation is blaming the federal government for chronic underfunding, while Ottawa is questioning the band's accountability.  

Experts say the truth likely lies somewhere in between.  

CBC News asked Marilyn Abate, a forensic accountant with Rosen and Associates in Toronto, to look over the band's audited financial statements. She says the council hasn't produced a budget in years.  

"The fact that there is a lack of budgeting is very disturbing," Abate said.  

She says it's clear that the band is cash-strapped, but it's also a matter of how the money was spent.  

Abate says the audit raised some red flags, such as a $2.3-million surplus in the band's housing budget, though it's not clear if it's cash that can be spent, or if it's tied up in something.  

The band has maxed out its $2.5-million line of credit, and is paying 10 per cent interest on long-term loans, an amount well above normal.  

Abate says the band spends too much — at least 10 per cent of its revenues — on administration, money that could be going to programs. She says there are questions for the government as well about the $92 million it says it gave to the band over the past five years.  

"What was granted to them and was it earmarked, and did anyone follow up to ensure those funds actually went to those programs?" she asked.  

The reserve has been under co-management for a decade, indicating the government should have known it was in trouble long ago.

— With files from Karina Roman 

Duncan has also requested a comprehensive audit to identify how money has been spent in the community of about 1,800, and what oversight measures have been taken in the past five years.

Attawapiskat declared a housing emergency about a month ago, as many residents live in uninsulated shacks or construction trailers without heat or running water. On Tuesday, the Canadian Red Cross sent a shipment of aid, mainly heaters and winter sleeping bags.

Attawapiskat Chief Theresa Spence was shocked to hear the community has been put under third-party management.

"I guess, as First Nations, when we do ask for assistance and make a lot of noise, we get penalized for it," she told CBC News on Wednesday. "So, you know, to put us in third party while we're in crisis, that's very shameful and a disgrace from the government."

NDP MP Charlie Angus, whose riding includes the troubled reserve, slammed the government's handling of the crisis, saying its solution is to "blame the community."

"Why is it that when it's a First Nations community in distress, this government's response is contempt?" Angus asked the House of Commons.

The NDP asked for an emergency debate on Attawapiskat, but the request was rejected.

Harper said earlier this week that the government had spent some $90 million on Attawapiskat since he entered office in 2006.

"That's over $50,000 for every man, woman and child in the community. Obviously we're not very happy that the results do not seem to have been achieved for that, we're concerned about that, we have officials looking into it and taking action," he said Tuesday.

Numbers misleading: Rae

Interim Liberal Leader Bob Rae said the $90-million figure is misleading, as it includes funding for education, water, sewers and housing infrastructure.

"He's doing the same thing that he did yesterday, that is, the investments in health and education are included in the amount of $90 million that he is always referring to today," he said during question period Wednesday.

Attawapiskat

Rae called on the government to "take responsibility."

"There are dozens of Attawapiskats right across this country, and it's not the only community facing these conditions and these difficulties," he said Wednesday.

"The auditor general of Canada herself said, Mr. Speaker, in her last report that the aboriginal people of this country are living in intolerable conditions. It's the government that has to take responsibility for what's happened and not simply continue to blame the victim."

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The CBC's Adrienne Arsenault, reporting from Attawapiskat, said the about $90 million spread over six years was used for services normally covered by the municipalities or the provinces elsewhere in the country.

In Attawapiskat, these services are covered by the federal government under the Indian Act. The sum left for housing is about $1 million, which, in the North, can build about four houses, Arsenault said. 

Spence said the accusations of mismanagement of funds are untrue, but acknowledged the band has struggled with accounting.

"We're improving the way it is now, but we need qualified staff to meet the financial work," she told CBC News. 

Stella Wheesk, who lives in a cramped cubicle in Attawapiskat with her common-law husband and infant daughter, said she's not sure third-party management will solve her community's chronic housing problems, but she thinks it's worth a shot.

"I think it's better. I think it's better for them to take over so we can see more improvement," she told CBC news. 

Interim NDP Leader Nycole Turmel, who visited Attawapiskat on Tuesday, called on Harper to travel to the First Nations community to see the "unacceptable" conditions for himself.

"It's appalling and unimaginable, and worse than anything you could think of," she said during question period. "People are living in tents, in trailers. They have no heat and any little heat is a fire hazard. They're sleeping on mouldy mattresses."

Attawapiskat by the numbers 

Population: 1,800.

Houses: 300.

Tents: 5.

Sheds: 17.

Waiting list for housing: 314 applications.

People living in De Beers trailers: 90.

Cost of maintaining trailers: $100,000 a year.

Federal housing allocation for 2011-12: $581,407.

Cost of building a new house: $250,000.

Federal money for renovating five condemned houses: $500,000.

Cost of renovating one condemned house: $50,000-$100,000.

Federal stimulus money for housing in 2009-11: $450,000.

Benefit payments from De Beers mine since July 2008: $10.5 million (held in trust fund by community).

Amount in De Beers business contracts with Attawapiskat related to mine construction and operation: $325 million.

Amount needed to meet housing needs: $84 million.

The National Chief of the Assembly of First Nations, Shawn Atleo, hopes the Attawapiskat situation serves as a "tipping point" for First Nations communities.

"We now have social media and we never had it before, where people will be invited into the living rooms and the shacks and tents of a people living in great despair," he told CBC News.

He estimated there are about 100 or more First Nations communities, out of 634, where living conditions are similar to those in Attawapiskat.

"We have got to grasp the moment and say it is completely unacceptable," he said.

John Saunders, co-ordinator for the Red Cross, said his focus is the immediate needs of members of the community.

"It's –15, –20, with no heat and a wooden shack; those are pretty urgent needs," Saunders said.

"We distributed sleeping bags — these are winter-rated sleeping bags — to the first five families identified as the greatest need, and we are proceeding to the other remaining 19 families that are in the various shacks, getting heaters, sleeping bags, winter clothing to them and identifying what their other needs will be."

As of 8 a.m. Wednesday, the Red Cross had received $63,000 in donations for Attawapiskat, Saunders said.

Steve Linklater, his wife and four children have a television and a computer, but live in a one-room canvas shack.

"It gets really cold in the morning," he said, and the family huddles together at night to stay warm. The Red Cross gave them winter sleeping bags and a heater to ward off the cold, but what Linklater really wants is "a house, a warm house" — something his family has waited for for two years.

Saunders, who was encountering Attawapiskat for the first time, said he was impressed by the ingenuity of people adapting to the housing crisis. "MacGyver would be proud of these folks."

Arsenault said the community's health centre has a board with a list: "These are the people who are without homes; these are the people without plumbing; these are the people without heating; these are the people living in condemned homes."

The Red Cross is going through the list of needs, one by one.

Also, cellphone service finally arrived for Attawapiskat on Wednesday.

"That would make a huge difference to daily life here," said Arsenault.