Sandy Bay Chief Russell Beaulieu said a previous band council racked up at least $19 million of debt and the First Nation is working to repay creditors.
Beaulieu concedes insurance premiums, pension contributions and government deductions are being taken off each cheque, but added he doesn't know where that money has gone or where it is going now. He said the band can't afford a forensic audit, which might get to the bottom of it.
"We have hardly any money," he said. "We're finding out as much as we can."
Beaulieu said teachers continue to pay for health benefits that they aren't receiving because their insurance company is among the creditors.
"We let (the teachers) know what we inherited, what our payback schedules are and we're working on a remedy," Beaulieu said. "It's not going to happen overnight. There is no pile of money we can go and get."
The band's lawyer, Norm Boudreau, said the deductions are necessary to make payroll. He declined to say whether that was legal.
"You don't see any RCMP arresting chief and council at this time," Boudreau said. "It's a question of balancing the budget."
The Manitoba Teachers' Society is calling on the federal government to appoint a third-party manager to address chronic financial problems at the Sandy Bay reserve.
Teachers say their paycheques have bounced, retirees can't get access to their pensions and those who are ill can't get disability benefits despite paying for them with every paycheque.
Lawyers for the union have submitted a detailed package to Aboriginal Affairs and Northern Development Canada to support the request. The federal department declined an interview request and did not answer specific questions on the issue.
"This situation is completely unacceptable and we encourage the First Nation to resolve their financial difficulties as quickly as possible," Erica Meekes, spokeswoman for Aboriginal Affairs Minister Bernard Valcourt, said in an email.
The band just fired its co-manager, who was helping sort out the books, and a new one will start work next week, Beaulieu said. A third-party manager would just cause more hardship for the First Nation because everything would be cut with the exception of essential services, he said.
"The band office would be desolate — there wouldn't be anybody there," he said. "Our local teachers have spouses, siblings, children that work for the band. You think they would (rather) get a regular paycheque and then having their spouse be not working. They would be getting a regular paycheque but that doesn't make sense if your husband is off work."
The teachers' union said the 55 teachers on the reserve are owed at least $737,000. It also alleges conditions at the school are deplorable with broken fire alarms and bathrooms without toilet paper.
President Paul Olson said the union didn't take the decision to call on the federal government lightly. But Olson said the reserve is clearly struggling with larger financial problems that could benefit from an outside manager.
"If there are larger issues that Sandy Bay is grappling with around adequacy of funding, around predictability of funding, this would be the perfect time to use third-party management ... as an opportunity to make that case," he said.