Former Indigenous procurement auditor calls pledge to examine the program ‘hypocritical’ after feds were warned of issues for years
The government’s Indigenous procurement program is vulnerable to corruption and fraud due to the lack of oversight and independent audits, according to an auditor who used to review company compliance with federal contracts.
Garry Hartle is a senior compliance auditor with Roundpoint Consulting, a company listed on the government’s Indigenous Business Directory that provides consulting services to Indigenous businesses. He testified before the House Government Operations and Estimates Committee on Dec. 10, a day after The Globe and Mail reported on Hartle’s allegations that Ottawa repeatedly ignored warnings from auditors that the program was being abused.
The committee has been examining issues in Indigenous procurement since early fall, hearing from ministers, government officials, Indigenous leaders, business associations, and contractors involved in the process.
Hartle, who previously worked as an external auditor contracted by the federal government to review companies’ compliance with the regulations, told MPs the program isn’t working.
“The absence of external audits will result in a lack of oversight to detect and deter public corruption,” Hartle said.
Hartle’s remarks follow Indigenous Services Minister Patty Hajdu’s (Thunder Bay–Superior North, Ont.) call for an external audit of Indigenous procurement practices. Hajdu told a separate House committee on Dec. 9 that her department is working on the details of such an audit, and will present her with a plan.
When asked by MPs for his opinion on Hajdu’s call for an audit, Hartle said: “That was being done … She fired the person doing it. It seems to be a rather hypocritical response to a problem they created themselves.”
Hartle told MPs that when the Procurement Strategy for Indigenous Business (PSIB) first started, the government had a branch that supplied external auditors to review contracts awarded under the program, but the government disbanded this unit in 2016, and had to contract out the work to independent auditors. Indigenous Services Canada (ISC) did not immediately respond to questions from The Hill Times about this branch and whether or why it was disbanded.
The PSIB is a federal initiative designed to boost Indigenous businesses’ participation in government contracts, aimed at promoting economic growth in Indigenous communities, and asks departments to meet a five-per-cent target in awarding contracts to Indigenous businesses.
Hartle joined Roundpoint Consulting in 2021. The Indigenous-owned company had a two-year contract with the federal government, but Hartle said it was terminated early by ISC in July 2023. He claimed the move left the government without the capability to conduct any audits.
“All of the mandated audits outlined in the guidelines were being circumvented because they had no external auditors,” he said.
According to Hartle, the business was denied any recovery costs after what he said was an arbitrary termination, but Roundpoint did not pursue legal action due to lack of resources.
Responding to questions from Liberal MP Jenica Atwin (Fredericton, N.B.), Hartle said he conducted about 100 audits on the PSIB per year, and noted that the non-compliance rate is “very low,” and “wouldn’t exceed 10 per cent, maybe even lower than that.”
The case of CHCA
Over the past year, successive media reports and testimony from Indigenous community leaders revealed loopholes that have allowed non-Indigenous firms to benefit from the PSIB by self-identifying as Indigenous, or by using so-called “rent-a-feather” schemes where an Indigenous person fronts a non-Indigenous company to secure contracts. In 2021, the government announced a new procurement process whereby departments were expected award at least five per cent of contracts to Indigenous businesses.
A 2016 audit by Hartle revealed that the Canadian Health Care Agency (CHCA)—a major contractor for nurses in remote and Indigenous communities—accessed federal funds set aside for Indigenous-owned businesses through a joint venture with a one-person foot-care company—Pedabun 35 Nursing Inc., owned by a First Nations nurse—despite CHCA not being Indigenous-owned itself.
As first reported by The Globe and Mail, the owner of the small Indigenous company in the joint venture was left with a $500,000 tax bill due to what an auditor described as “a serious misrepresentation” by CHCA.
Hartle called the case “particularly egregious,” and told MPs that his audit determined that CHCA “took advantage of the naivety of the owner” of the Indigenous company, making it work as “a shell.” Hartle told MPs that joint ventures in general are “problematic,” in the context of Indigenous procurement streams.
Hartle told MPs that he raised his findings through audits with officials at the time at then-Indigenous and Northern Affairs Canada and Public Services and Procurement Canada, but he said his allegations were dismissed.
Hajdu—who told MPs she first heard about Hartle’s allegations after they were reported in the news—described the issues outlined about CHCA as “very serious.”
“Even some misuse of the program puts the program at risk, so for me, an allegation like the one the auditor has made is very serious,” she said on Dec. 9. “We should act on it.”
Hartle explained to MPs the steps he took after the initial findings were revealed in 2016.
“I presented the evidence—which was substantial—to indicate there was fraud. My recommendation was that it be given to the RCMP to investigate, but they didn’t want any trouble, so they didn’t do it,” he said.
Hartle made serious allegations against CHCA, the non-Indigenous partner in the joint venture, which took the lead in the procurement process. He said it “invented” employees for the Indigenous company and included that information in the bid proposal to secure the contract. He noted that the number of employees in the Indigenous company contributed to the points required to win the contract.
“To me, that’s definitely fraud,” he said.
CHCA was reportedly removed from the government’s Indigenous Business Directory before 2019 following Hartle’s audit, but the company continues to secure federal contracts not designated for Indigenous businesses.
The Globe reported that CHCA was acquired by Premier Health of America in 2022, with its spokesperson saying that since then, the company has “focused on strengthening the agency’s governance and operational processes to ensure compliance with all ethical standards and regulatory requirements,” and that it has “no tolerance for fraudulent activity or misrepresentation.”
The external auditor told MPs that if the government adhered to established procedures, “there would be no gaps” that could facilitate fraudulent activity.
“There’s no governing act, but there is a cabinet-issued policy that was mandated to be followed, and they have published guidelines on that policy,” Hartle said.
ikoca@hilltimes.com
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