The federal government has unveiled controversial changes to the Indian Act in a move that is already being criticized by aboriginal leaders.

Indian Affairs Minister Robert Nault introduced the First Nations Governance Act in the House of Commons Friday.

The bill sets new standards governing the way band councils are elected and run. It permits bands to observe traditional practices but says they have to observe certain rules such as having a set term for leaders and defined electoral practices.

On the financial side, it sets standards for transparency, disclosure and independent audits.

It would also repeal the clause that exempts the Indian Act from the Canadian Human Rights Act.

Nault says the legislation is the first step towards self-government.

"The governance initiative is not intended to replace existing treaties or self-government and treaty negotiations, but to provide First Nations communities with tools that would allow them to build self-sustaining communities," he said.

AFN denounces changes

The Assembly of First Nations immediately criticized the legislation, saying it merely tinkers with the Indian Act instead of offering real change.

"The starting point is the Indian Act," AFN National Chief Matthew Coon Come told CBC Newsworld. "The Indian Act is a racist document. Why should we build on a racist document?"

Coon Come said the legislation doesn't attack the root of the problem and will erode treaty rights. He said it gives the government more power over native affairs instead of moving towards self-government.

The AFN boycotted the consultations. Coon Come says less than three per cent of First Nations people participated.

Coon Come says the legislation will be challenged in court.

Six Nations Chief Roberta Jamieson said the act doesn't address the need for improved housing and education. "This act is little more than a new rule book... There are no funds with this bill."

Other groups support plan

The Congress of Aboriginal Peoples was one of the groups that did participate. It represents aboriginal people who live in urban environments.

Chief Dwight Dorey welcomes the new act. "I think this is the first step in focusing on some of the obsolete sections of the act."

It's the first major overhaul of the 126-year-old Indian Act, which spells out the way Ottawa deals with 600 First Nations bands across the country.

The bill will be sent to committeee for further consultations before its next reading.