The former federal Liberal government broke its own rules by doling out millions of tax dollars to a special police force in a small Mohawk community near Montreal, according to an audit obtained by CBC News.

The federal and Quebec governments had given $5.5 million to then Kanesatake Grand Chief James Gabriel for policing the small community in 2004-05. He started off the year by recruiting 67 officers to form a new police force.

Gabriel had warned that organized crime was taking control of his community and claimed the Kanesatake Mohawk police force had turned a blind eye. He said he needed to set up his own police force and clean out the existing Kanesatake police.

His goal was to take control of the police station, take control of the streets and start making the searches that he thought were necessary to fight the drug trade in Kanesatake.

He staged what turned out to be a disastrous raid on the Kanesatake police headquarters. His force was held hostage, his house burned down, and his officers ultimately run off the land.

In October, CBC News uncovered a secret preliminary audit, commissioned by the Harper government, of money spent policing the community. Among the findings was that money had been mismanaged in 2004 and 2005.

Among the problems: 

• $200,000 was paid to Kanesatake's former Mohawk police chief, Terry Isaac.
• Five other officers received between $100,000 and $200,000.
• One member of the force even claimed 32 hours of work during one 24-hour period.

Gabriel has denied any wrongdoing, insisting that all the spending was approved by the government.

Treasury Board rules not followed

The auditor's latest report reveals troubling details of how the money was approved in the first place.

Auditing firm Samson & Associates criticized the former Liberal government, stating the Department of Public Safety "did not comply" with Treasury Board rules.

The rules say money should not be handed out without a "reasonable expectation" of success. But Quebec authorities warned the government that the operation would fail, the audit says.

Federal officials would not grant any interviews.

"We are looking for the truth to be revealed, the whole truth," said Stephen Bonspille, grand chief of Kanesatake, "and those who were responsible for the mayhem that went on in this community, the abuse, the mismanagement of those funds to face justice."

The current minister of public safety, Stockwell Day, is studying the audit and will decide in January whether to refer the case to the RCMP for a criminal investigation.