A team of professional auditors is now looking into claims made against the chief and council of the Big Island Lake Cree Nation in the northwestern part of the province.
No charges have been laid and none of the allegations has been proven in court.
But the federal government says it takes the allegations "very seriously" and Deloitte and Touche has been asked to conduct a forensic audit of the First Nation.
The audit work is ongoing, covering the period April 2009 to March 2012.
Documents obtained by The Canadian Press under the Access to Information Act offer a broad look at the allegations against the chief and council.
"The areas of analysis include the potential misuse of the social-assistance funds to pay personal expenses of the chief and council; and the allegation that band members who are listed as social-assistance recipients never filed an application and never received social-assistance funds," one document says.
The documents show Aboriginal Affairs and Northern Development got an anonymous, handwritten letter in April 2011 about the alleged misuse of federal funding.
The letter accuses band members, whose names are blanked out, of "taking money from social assistance and other accounts."
A second handwritten letter, sent in December 2011, makes more allegations specifically against the chief and councillors.
"Vehicles were bought, quads, horses and travel trailers, these were the things the chief David Sandfly bought and still spending on and we have no money for payroll or social assistance," the letter says.
The anonymous letter-writer also claims the First Nation is plagued by poor infrastructure and problems with alcohol and drug addiction.
As of November, the First Nation had a registered population of 1,132, most of whom live on the reserve.
Sandfly did not return several messages left on his cellphone and with a receptionist at the First Nation's band office.
Aboriginal Affairs and Northern Development declined to answer specific questions about the audit, which the documents indicate could cost as much as $150,000.
"The department takes allegations of misuse of public funds in First Nations communities very seriously and will investigate allegations once they have been sufficiently substantiated," spokeswoman Valerie Hache wrote in an email.
"The forensic audit work involving this First Nation is ongoing and as such it would be inappropriate to comment further at this time."
Deloitte is expected to present its findings to the department early next year. Those findings — and whether the matter is referred to police — may remain a secret.
"What will be released publicly will depend on privacy considerations," Hache wrote.
"Audit work that reveals criminal activity is handed over to the appropriate policing authorities and is not publicly disclosed."
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