What we heard about the Comprehensive Funding Agreement and what changes were made to the agreement as a result

Table of contents

Overview

The Comprehensive Funding Agreement is the new standard agreement model for transfer payments to Indigenous Communities which will be available in 2019-20 and subsequent years. It was designed to replace multiple agreement models under the former Indigenous and Northern Affairs Canada and Health Canada — First Nations and Inuit Health Branch, and to provide consistent agreement models for both Indigenous Services Canada (ISC) and Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC). The development of a new funding agreement model has also been driven by the work to establish a new fiscal relationship and the need to provide a template for the New Fiscal Relationship 10-Year Grant.

Approach

Engagement on the Comprehensive Funding Agreement spanned 3 months in the fall of 2018, beginning September 11 in Thunder Bay, Ontario and finishing November 30 in Vancouver, British Columbia. The engagement exercise included a series of 16 in-person and videoconference sessions with 1,006 First Nations participants, in addition to a series of emails, phone calls and individual meetings by request.

ISC regional offices also shared engagement materials via email to First Nations representatives, following up individually with phone calls and individual meetings by request.

The formal engagement process used:

Feedback ranged from overarching comments on Crown and Indigenous relations to technical details in the agreement clauses. Below is a summary of the major themes articulated by First Nations representatives, organized by worksheet topic.

Engagement themes

Preamble (opening clauses)

The opening section of the draft Comprehensive Funding Agreement presented a series of "whereas" clauses, some optional, that set the context for the legally binding terms and conditions that followed in the main body and the applicable schedules of the agreement. Participants were asked if the wording in the preamble clauses aligned with their understanding of the New Fiscal Relationship.

  • Some participants recommended moving the treaty reference to the beginning of the preamble to recognize the importance of the treaties to the relationship
    • They stressed that it is essential to signal to the general public that funding agreements are not handouts, but part of a commitment rooted in the treaties
    • There were requests to situate the relationship in a wider context by referencing other key documents, for example:
      • The United Nations Declaration on the Rights of Indigenous Peoples
      • The Truth and Reconciliation Commission recommendations
      • The Charlottetown Accord and its "new fiscal relationship" language from the 1980s and 90s
  • There were suggestions that new language for a new relationship should be positive, clear and active, and avoid redundancy
    • There were multiple calls for:
      • "First Nation" to precede references to "the Crown"
      • "First Nation" to replace "Indigenous"
      • Communities to be able to customize with optional clauses that speak to their specific circumstances
  • It was noted that First Nations find the use of the word "Recipient" to be offensive, as it has a negative connotation in First Nation communities. As a result, it was requested to replace the term "Recipient" with another word
  • For some participants, the language in the agreement is not the main issue; rather, their concerns are focused on funding sufficiency, funding formulas that meet actual needs and reflect population growth, inflation, and geography and remoteness factors
    • To achieve equity with other peoples of Canada, participants at the engagement session indicated that communities would benefit from escalators of at least 3% for all programs, not only health programs
  • It was suggested that a new relationship should start with a clean slate by including a clause on the forgiveness of debts and defaults
  • There was a statement that the evolution of the relationship should ultimately support First Nation self-government by moving towards direct funding transfers

Proposed mechanism to modify agreement terms and conditions

The Department is considering adding a new mechanism to the Comprehensive Funding Agreement that would simplify the process involved in changing the terms and conditions (i.e., activities) outlined in the agreement. The new mechanism would allow changes to be made outside of a formal amendment process, without a signature from funding recipients. Participants were asked to provide feedback on this proposed approach.

  • The new mechanism would be modeled on a similar mechanism already included in existing funding agreements, known as the Notice of Budget Adjustment (NOBA). To expedite the flow of funding, the NOBA allows budget adjustments to be made outside of the formal agreement amendment process, without a signature from Indigenous communities
  • While it was noted that the exploratory nature of the discussion did not offer any details on the new mechanism, some welcomed a means to expedite payments and simplify what can be an arduous amendment process
  • However, there was concern that a lack of countersignature could result in an insufficient paper trail and awareness of changes to terms and conditions, or reporting requirements. This could pose difficulties for community and program managers and create risks around financial tracking and unintended default
  • It was noted that the Department needs to clearly communicate with funding agreement signatories and their executives regarding the new mechanism in a consistent way
    • In the absence of countersignatures it was stated that notification letters will be needed to inform Chief and Council, as well as program and finance officers, about new funding and calculations, indicating how, where, and what the funding covers
    • In contrast, formal amendments are clear as to where the funding is going and for which program

Default prevention and management

The draft Comprehensive Funding Agreement also included exploratory clauses describing a new approach to default management which proposes to narrow the definition of default to focus on risks to health and safety of community members and/or the integrity of federal funds, and incorporates a self-assessment process. Participants were asked to comment on potential assessment criteria, as well as which third party organizations could assist councils to address defaults.

  • It was recommended that the terms health and safety need to be defined, as these are broad concepts
    • Similarly, it would be useful to identify what should trigger a self-assessment
    • It was noted that high staff turnover, and employees and vendors not being paid or reimbursed for expenses could lead to health and safety impacts, as could willingness to carry deficits or failure to meet certain financial ratios
  • In terms of shifting responsibility to Council for assessing risks to health and safety, there was a view that self-assessment can work well, but could be hampered by political dysfunction
    • Some participants felt that Council should also seek the perspectives of other staff and community members receiving services
    • If a First Nation has its own laws that cover the self-assessment and default remediation, it was recommended that these should replace the standard agreement default-related clauses
  • Some suggested that the section on default should be drafted in a more reciprocal manner so that the agreement includes clauses that also address situations where the Crown is in default of the agreement
  • In the absence of a draft of the new policy to replace the Default Prevention and Management Policy, there were many questions on the mechanics of a new approach, for example:
    • the function of a "default trustee" in relation to third party managers
    • the availability of funding for self-assessment and action plans to address a default, and if default is for a prescribed length of time
    • a general uncertainty over the federal role and involvement, including if fiduciary responsibility is maintained
  • There was a view that a wide range of options and qualified organizations, especially indigenous firms, should be available to First Nations for assistance in addressing defaults
    • It was suggested that accounting firms could assist to resolve pressing financial issues, but other organizations may be better placed to offer the training and ongoing support required for long-term capacity development
    • There was also concern that First Nations and Canada would need to maintain oversight of external organizations
  • It was noted that it may be more difficult to identify organizations that could assist First Nations to address immediate risks to health and safety of community members, such as a water system breakdown
    • Emergency plans could list these organizations
    • Professional associations were also identified as a resource, for example, to address staffing recruitment for nurses

Remedial measures to address default

The draft Comprehensive Funding Agreement stipulated remedial measures that the federal government may take to address default. These include circumstances under which the federal government may withhold funding as well as situations where a community is unwilling or unable to address a default. Participants were asked for their views on the distinction between unwilling and unable, on the withholding of non-essential funds, and other ways to address non-compliance with the terms and conditions of a funding agreement.

  • It was agreed that a distinction should be made between "unable" and "unwilling", to reflect the following:
    • If a community is unable to redress the situation, there is a possibility for capacity development
    • If a community is unwilling to do so due to a split Council or an unresolved issue with the Crown, this can lead to the need for a trustee
    • Unable also implies a lack of available funds
  • It was noted that withholding the non-essential funding can make the situation worse. Participants expressed the view that:
    • A progressive way is needed to work with the communities to identify issues, develop a plan to rectify problems and submit the plan for approval so funding is not withheld
    • Council must be aware before any funds are halted
    • More flexibility around reporting is needed as reporting expectations are too high, especially for small communities
  • There was concern that the default provisions do not consider a situation where the default is only related to a single program
    • In this scenario, it was suggested that withholding funds could be program-specific, and the default trustee potentially assigned to manage only that single program rather than all programs within the scope of the funding agreement
  • It was noted that strong governance is supported by engagement with citizens. Participants noted that:
    • Without a formal and transparent method of communication, the community may not know they are in default
    • Community members want to be aware of discussions and written communication between ISC and a First Nation describing the reason for default and how it will be addressed, including selecting a default trustee

Provision of information

The draft Comprehensive Funding Agreement included a clause specifying that the departments are to provide Indigenous communities with any publicly available information. Participants were asked about the current means for obtaining information from Canada related to a funding agreement, and how to improve access to publically available information relating to Funding Agreements.

  • There were calls for the scope of this clause to be extended such that departmental analysis of the data provided by First Nations, in addition to details on funding calculations could be easier to access
    • For example, participants reported that in the past, band support funding calculations were shared
    • Some cautioned that safeguards would be needed to protect individual privacy
  • Some participants noted a lack of awareness on where to find public information pertaining to funding for programs, terms and conditions, templates, and reporting
    • In addition it was suggested that there is a need for more printer-friendly PDF versions on websites, with suggestions to offer training for Council and upper management to facilitate access to this information

Accountability to members

The draft Comprehensive Funding Agreement includes a clause setting out requirements for transparency and accountability in the schedule for Contribution and Grant funding, which did not apply to the 10-Year Grant. Feedback was requested on streamlining or removing this clause in accordance with a First Nation's existing accountability mechanisms.

  • There was concurrence that transparency and accountability are important, but for First Nations with an approved financial administration law or comparable accountability framework, it would be reasonable to streamline this clause
  • Some participants expressed concern over the way Canada's role was described, using the term "support". There was a concern that the word "support" suggests that it is the responsibility of the First Nation to come up with money to fully deliver a program or service. There was a request to clarify that Canada should provide funding to deliver the program and services and not just support
  • Participants recommended replacing the word "Partnership" with "Cooperation" or "Treaties." Some expressed the view that the relationship is not actually a "Partnership" and suggested that this terminology is confusing and contradictory
  • There was a recommendation to include a reciprocal clause for Canada stating that Council "shall not represent itself (including in any agreement with a third party), as an agent, employee, legal partner of the Crown, or as acting on behalf of the Crown."

Engagement process

  • With regards to the engagement process, many participants noted that they would have preferred to have the materials ahead of the session to engage with their citizens, leadership, and legal and financial experts, so that representatives could have felt they had a mandate to confidently speak on behalf of their communities. Some said that more advanced notice may have boosted attendance and led to greater representation from community leadership
  • Participants also noted a lack of information on programs and reporting schedules for the 10-Year Grant and would have liked to see a draft policy of the new approach to default management and prevention. Additional materials could have also included a crosswalk between this agreement and previous agreements to determine major differences, and a cash-flow example showing how funds would be flowed

Other comments

First Nation choice

Participants stressed the importance of respecting First Nation choice, from preferences for multiple bank accounts and options for annual lump-sum grant payment, to agreement duration and the option to extend current agreements with the inclusion of some Comprehensive Funding Agreement clauses. Participants expressed concern about whether the model was really developed in partnership with First Nations. Rather than an agreement development process, led by the Crown, the question was posed: why not allow First Nations to propose an agreement model, allowing for full customization of agreements through bilateral negotiations?

Co-development partners

Concerns were expressed that ISC and CIRNAC are over-relying on the Assembly of First Nations (AFN) in co-developing the new fiscal relationship, and that the AFN does not adequately reflect the views of sovereign First Nations. Similarly, participants felt they were pushed to work with the First Nations Financial Management Board. Some felt the process over-relied on this institution and questioned whether it will be able to play the role being asked of it.

Legal review of agreement model

Some participants requested that Canada help First Nations with legal costs associated with the shift to the new agreement model.

Creation of a new department

There were some concerns expressed over the creation of a new department, from communities who felt they were being forced to combine separate program areas, such as health, education and social services into a single agreement. Alternatively, some expressed hope that administrative burdens may be reduced with one financial agreement management system. It was suggested that savings from transformation be reinvested back into communities.

Consistent messaging

It was stressed that ISC's Regional Operations and First Nations and Inuit Health sectors need to use the same language and same messages moving forward, as well as funding approach options, and should allow for carry-forward of unexpended funds.

Canada's long-term plan

Communities wanted to know the Government's plan after the 10 year duration of the New Fiscal Relationship Grant.

Audit documentation

First Nations have outlined that many First Nations, their accountants and even ISC now store documents electronically and therefore First Nations must be provided the opportunity to provide hard copies of original documents or electronic copies of documents.

Changes made to the Comprehensive Funding Agreement as a result of engagement

During this engagement process, concurrent discussions were underway with co-development partners. This co-development work along with engagement feedback, helped shape the development of subsequent drafts of the Comprehensive Funding Agreement, including schedules for the 10-Year Grant.

In response to engagement input, the departments made the following changes to the language of the agreement model:

Conclusions

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