Two plexiglass-clad motorboats that languish in a Whitehorse storage lot are all that Ta’an Kwach’an Council members have to show for investing $850,000 in Great River Journey, the failed adventure tourism outfit.
Auditors reckon the two boats, purchased for $600,000, are now worth just $175,000.
But what really puzzled the beancounters at Blair Mackay Mynett Valuations Inc. of Vancouver, which the Ta’an hired to conduct a financial investigation of the First Nation’s recent investments, is that the Ta’an board of directors approved the purchase in the first place.
“Any amount of proper due diligence would have suggested that in July 2009, further investment in Great River Journey Inc. would be ill-advised,” states the January report, obtained by the News. “This was not a sound investment decision.”
The Ta’an was one of four First Nations to initially invest $250,000 in the failed startup, along with the Kwanlin Dun, Tr’ondek Hwech’in and Selkirk First Nations. They all ended up soaked when the company declared bankruptcy in November.
The investment in Great River Journey was just one of many concerns raised by auditors.
As of March 2010, the First Nation had sunk $4.6 million into its development corporation as “loans and advances.” But, for now, “There is almost no possibility of repayment of these loans … without liquidation of its assets.”
What’s more, the corporation’s officials routinely refused to share information with their political masters. The First Nation’s board of directors and audit committee “have been frustrated by the lack of transparency and information flow resulting from what we consider to be very artificial and unnecessary barriers,” the report states.
Auditors also found “several significant breaches of internal financial controls,” including one case of a former chief cutting an unauthorized cheque. The good news is that all of this money was spent as it was supposed to, on the First Nation’s questionable investments.
If sloppy spending practices continue, the First Nation’s piggybank will be empty by 2018, auditors warn. A “significant reduction” in administrative expenses is needed to avoid further dipping into reserves, which still hold more than $20 million in savings.
The report does not reflect well on Ruth Massie, who was Ta’an’s chief until October of 2009 and is presently grand chief of the Council of Yukon First Nations. It alleges she authorized several financial transactions without the required board approval.
Massie, who is on leave following the death of her husband last week, did not respond to an interview request.
In one case, Massie cut a $90,000 cheque for a real-estate deal three days before the transaction was approved, the audit states.
In another case, the report states that Massie asked the finance director to divert more than half of the First Nation’s federal housing trust money – $904,000 – to cover operating shortfalls and cost-overruns for the development of a 43-hectare land block in Forestview, near Hidden Valley School. This was also done without the required board approval.
And it was done in two stages, over three months. Auditors gave the finance director the benefit of the doubt the first time, but during the second instance, “He should have been aware that a transfer from trust was a transaction that would require the board of directors’ consideration and approval.”
The Forestview development was supposed to be largely paid for with $927,000 chipped in by Ottawa and the Yukon government. But nearly half of those funds were diverted to “day-to-day operations” of the First Nation and to cover project shortfalls.
So, in a case of robbing Peter to pay Paul, the northern housing trust funds were put in their place. The housing trust funds were eventually replenished with money from yet another reserve.
Ta’an’s development corporation has a number of holdings, some profitable, some not. It has a stake in the Lynn and Bling buildings in downtown Whitehorse, which have both proven to be smart investments.
It also owns a piece of the waterfront condos being built by the Vuntut Gwitchin development corporation.
The Ta’an corporation owns a Black Street building in downtown Whitehorse that’s leased back to the First Nation. The auditors suggest that if the First Nation is the sole tenant, “it would make sense” for it to own the building outright, rather than pay its business arm $88,000 annually in rent.
And the corporation has sunk more than $822,000 into buying and maintaining the Bahai Centre in Deep Creek. According to the report, “The usefulness of this investment has been called into question, as it produces no significant return on investment.”
The Forestview land, to be turned into rural residential lots, should prove lucrative. The project is “virtually complete,” except the First Nation must first approve its draft Land Act. Auditors urge the First Nation to do this soon, “to start realizing a return on this significant investment.”
The report, which cost $40,000, concludes with a long list of sensible recommendations to make the First Nation’s operations leaner and more transparent.
It remains to be seen which of these recommendations will be acted on. Chief Brenda Sam declined to comment.
Contact John Thompson at