Manitoba Hydro honours payments owing to First Nations impacted by Keeyask: report

Manitoba Hydro has properly reimbursed First Nations impacted by Keeyask dam project for $169 million in the past 15 years but needs to do a better job of tracking when money changes hands, the province's auditor general says.

Report recommends hydro require proof of expenses before reimbursing First Nations

The Keeyask generating station will generate another 695 megawatts from the Nelson River, which already produces almost 4,000 megawatts. (Keeyask Hydropower Limited Partnership.)

Manitoba Hydro has properly reimbursed First Nations impacted by the Keeyask dam project to the tune of $169 million over 15 years, but needs to do a better job of tracking when money changes hands, the province's auditor general says.

A report from Manitoba Auditor General Norm Ricard released Tuesday found that the utility is properly reimbursing First Nations impacted by the northern dam, but called for improvements to way funds are doled out.

The report starts out by noting Manitoba Hydro projects can have negative impacts on First Nations.

Of that $169 million, Hydro said $146 million in process costs and $17 million for adverse effects was paid to Fox Lake Cree Nation, York Factor First Nation, War Lake First Nation and Tataskweyak Cree Nation in northern Manitoba, according to the report.

Another $110 million is expected to be paid out over the life of the project.

Proof of payment

The auditor general found the reimbursement policy currently in place doesn't require First Nations certify that costs incurred related to the project were actually paid.

Hydro initiated independent audits of two First Nations involved in the project, in 2010 and 2014, after "financial irregularities" were noted.

The first audit found that one First Nation falsified invoices for reimbursement. The second audit confirmed another First Nation submitted travel claims that weren't in compliance with reimbursement rules, according to the report.

The auditor general recommends Hydro require proof of payment for significant expenses incurred by First Nations with respect to the dam.

The auditor general also recommends Hydro conduct more regular risk assessments of each First Nation, which would include obtaining copies of invoices and reviewing accounting records.

Adverse effects agreements

Adverse effects agreements are tailored to each of the First Nations to offset the impact of dam operations and dictate how to move forward when budgets need to be revised.

Hydro told the auditor general that when it notices financial discrepancies from a First Nation, it follows up with the community and updates cost projections accordingly.

The report states that Hydro followed key measures in these agreements, but it also found the policy itself to be too blurry.

Hydro paid Fox Lake Cree Nation, York Factor First Nation, War Lake First Nation and Tataskweyak Cree Nation about $146 million between 1999 and 2014, according to a report by the Manitoba auditor general. (Keeyask Hydropower Limited Partnership)

Hydro maintains that the ratification process is up to the First Nations to stay on top of, and also reportedly told the auditor general it has not received any complaints from First Nations about revised budgets.

But the auditor general said the Crown corporation needs to take greater steps to document and ensure First Nations have signed off on budget changes.

"Given the magnitude of these payments and the impact of Hydro developments on First Nation communities, it is critical that adverse effects agreements be fairly negotiated and appropriately ratified by each impacted First Nations community, and that strong processes be in place to ensure expenditures are properly supported and used for the purposes intended," the report states.

Manitoba Hydro stated that it supports the recommendations of the report and believes the review ultimately shows "the strength of the policies and procedures in place for managing funding arrangements with First Nations."

"There is always room for improvement and the audit has provided important recommendations for Manitoba Hydro to address [and] enhance its policies.... Certain actions are already underway."

The Pallister government released a statement Tuesday said it welcomes the report but is disappointed "common sense practices of compliance" in the report's recommendations weren't already in place.

"We have full confidence our new board of Manitoba Hydro will take a common sense approach to prudent fiscal management and governance going forward, while working in the best interests of the ratepayers and all Manitobans to ensure the corporation's claim verification process is strengthened," Crown Services Minister Ron Schuler said in a statement.

Keeyask is located 725 kilometres northeast of Winnipeg on the Nelson River, and 30 kilometres west of the town of Gillam.