12/09/2015 10:17 EST | Updated 12/09/2016 05:12 EST

$12M In Funding Still Being Withheld From First Nations

Forty-three First Nations are waiting on the Liberal government to release more than $12 million in funding which was held back by the previous government under a controversial law that requires bands to post financial statements online.

The Liberals "were very clear prior to the election," they would repeal and not enforce the First Nations Financial Transparency Act (FNFTA) says lawyer Bob Hladun, who represents Saskatchewan's Onion Lake Cree Nation.

He claims the First Nation has had $1.6 million held back over the last two years — money used to support over 800 employee salaries and access to housing.

"Each day that these funds are being withheld programs and services are being effected." said Hladun.

Law defied, millions withheld

Under the FNFTA, First Nations can have funding withheld if the they fail to post full financial audits on the Indigenous and Northern Affairs Canada website.

Aboriginal leaders have called the legislation prejudicial because it requires reporting of non-taxpayer supported streams of income. First Nations claim that information is already provided to government, and that publicizing it violates treaties as well as protections to privacy under the Charter of Rights and Freedoms.

CBC News has learned that shortly after the first deadline to comply passed a year ago, the Conservative government froze $4.3 million in funding.

"We've written, there has been no response, that is concerning at this point."

Documents obtained through Access to Information requests contain letters sent to 51 First Nations last year.

They include warnings of court action and a breakdown of which funds would be frozen. For some First Nations, it was as little as $399, for others as much as $277,516.95.

Around the same time the government also announced it was taking six First Nations to court, including Onion Lake, in an attempt to force them to comply.

Initially some of that money was paid out as some First Nations came into compliance with the act.

However in the year since the department says the amount of funds frozen has grown to approximately $12.1 million, while the court case has stalled.

Many still not complying

As the fall election saw the Liberals replace the Conservatives in power, the FNFTA took a beating in court.

Onion Lake won a stay of proceedings against the government, when a federal judge ruled the former aboriginal affairs minister Bernard Valcourt failed to consult First Nations on the legislation. 

That ruling effectively stalled the enforcement of the act in the courts, and the government is not pursuing legal action against any of the 43 First Nations which are currently not in compliance with it.

The law, however, remains on the books. It's not clear what will happen next.

Department officials have said the money is sitting, waiting to be released. 

carolyn bennett Indigenous Affairs Minister Carolyn Bennett says she disagrees with the First Nations Financial Transparency Act. (Photo: CP)

Hladun concedes the law can't be changed over night. But he says releasing the money would be a good start.

"We've written, there has been no response, that is concerning at this point," he said. 

In a statement, the new federal Indigenous Affairs Minister Carolyn Bennett said she disagrees with the act, and is willing to work with First Nations on a resolution.

Meanwhile Justice Minister Jody Wilson-Raybould told reporters in Ottawa that the act is part of a suite of First Nations legislation that is under review.

"We'll look at all pieces of legislation as they impact indigenous rights," she said.

So far there are no commitments to release the frozen funding.