PACC Committee Meeting

STANDING COMMITTEE ON PUBLIC ACCOUNTS

COMITÉ PERMANENT DES COMPTES PUBLICS

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, June 8, 1999

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[English]

The Chairman (Mr. John Williams (St. Albert, Ref.)): Good afternoon, ladies and gentlemen. I call this meeting to order pursuant to Standing Order 108(3)(e), consideration of chapter 10, “Indian and Northern Affairs - Funding Arrangements for First Nations: Follow-up”, of the April 1999 Report of the Auditor General of Canada.

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Our witnesses today are Mr. Denis Desautels, the Auditor General of Canada; Mr. Grant Wilson, principal, audit operations branch; and Mr. Ted Bonder, director, audit operations branch. From the Department of Indian Affairs and Northern Development, we have Mr. Dennis Wallace, associate deputy minister; and Mr. Brent DiBartolo, assistant deputy minister of corporate services.

Welcome all.

As we normally do, we will start with the opening statement by Mr. Denis Desautels, the Auditor General.

Mr. L. Denis Desautels (Auditor General of Canada): Thank you very much, Mr. Chairman, for the invitation to discuss with the committee our 1999 follow-up of the November 1996 chapter 33, regarding funding arrangements between Indian and Northern Affairs Canada and our first nations.

Chapter 33 was deliberated before this committee on December 10, 1996. At that time we discussed opportunities for improving how funding arrangements involving billions of dollars annually between the department and funding recipients were designed, implemented, and managed. Also, we raised questions about accountability.

Our recommendations related to several issues, including the need for the department to determine the suitability of funding arrangements to mitigate risks and to achieve desired results; to determine, together with first nations, how appropriate accountability can be achieved; and to ensure funding arrangements meet the government's and first nations' needs.

In its response to the 1996 audit, the department stated that the new financial transfer arrangement, or the FTA, then under development, represented a step in the right direction as, among other things, it would strengthen accountability.

In its testimony before this committee, the department defined accountability to include the expectation that first nations would conduct their affairs in accordance with the principles of transparency, disclosure, and redress. The department further indicated that it continually evaluates, with input from first nations, how it manages funding arrangements and is fully aware of the issues raised by the audit.

The 1999 follow-up reviewed the department's progress in implementing the 1996 audit recommendations. We focused on key areas, such as the implementation of the new FTA, the application of first nations self-assessments, and the handling of allegations reported to the department by first nations or their members as an element of accountability.

Our follow-up disclosed that the department had undertaken several improvement initiatives. But although initiatives are underway, I'm both puzzled and concerned about the length of time it is taking to resolve issues that have been known to the department and to first nations for many years.

At the same time, we appreciate that the issues are not easy to resolve. I stated in December 1996 before this committee that the challenges to the department are significant but not insurmountable. There are several factors that need to be taken into account, including the appropriateness of the department's approach and the desire and ability of funding recipients to parallel it as partners with similar objectives. The following examples will elaborate on and perhaps further clarify my concerns.

[Translation]

Some 13 years ago, the Department promoted and began to implement the Alternative Funding Arrangement or AFA, as a more flexible vehicle to address the varied capacity and desire of First Nations to assume control over government-provided funds and program delivery.

The funds are for the delivery by First Nations of several programs including social assistance, education, infrastructure and housing, in Aboriginal communities across Canada. The Department's primary role is to design and manage funding arrangements that appropriately support program delivery in a manner consistent with devolution and to help First Nations position themselves to assume greater self-government responsibility.

In 1996, the Financial Transfer Arrangement, or FTA, was promoted by the Department as an improvement over other funding arrangements. It was intended to result in better accountability, better value for money and better opportunity for First Nations to meet community needs. However, the Department has failed to come close to meeting its target for the widespread application of this funding arrangement. Less than 20% of funding recipients were using all FTAs as of January 1999.

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The FTA could be a very important tool to help First Nations effectively deliver programs over time, if tailored appropriately. Accordingly, we remain concerned that the intended improvements have been delayed.

The follow-up disclosed several challenges relating to FTA implementation. These include the reluctance of some First Nations to adopt it (for fear that it may result in reduced funding) and the lack of departmental strategies or plans to facilitate FTA implementation.

The Department indicated toward the end of the follow-up that it had slowed the conversion to FTAs so that related issues of First Nations desire and ability could be addressed. I remain concerned that more time will be needed to resolve issues that were identified at least 13 years ago.

We noted that in December 1998, the Department introduced yet another new model arrangement—the Canada-First Nations Funding Arrangement, or CFNFA—as a possible replacement for, and improvement of, the little-used FTA.

At the time of our follow-up, it was too early to conclude whether the CFNFA approach will be effective. We can only hope that the pattern of experiences with previous funding arrangements does not repeat itself.

[English]

We believe issues of first nations' desire and ability must be appropriately addressed as a prerequisite to the successful implementation of any funding arrangement. The need to tailor funding arrangements to the circumstances of individual first nations was, and continues to be, well recognized by the parties. For example, since 1986, AFA entry assessments for first nations were required to help determine their eligibility to enter into this arrangement.

In 1996, the department requested that all first nations prepare a self-assessment of their systems of management and accountability, and identify and act on areas needing improvement. The needed improvements would be included in a development plan as part of the funding arrangement. However, our 1996 audit disclosed that many of the assessments for first nations that had entered into AFAs were missing, and the 1999 follow-up revealed that more than one in three of the required self-assessments had not been completed. I believe, even considering known difficulties and sensitivities, it would be possible to do better in this important initiative.

Without the use of appropriate assessments, many funding arrangements will be either too restrictive or too flexible relative to the needs of the parties. This would not bode well for the cost-effective delivery of programs and the evolving relationship between first nations and the federal government. I further believe the department and first nations will need to re-examine their experience with self-assessments at appropriate intervals to determine their ongoing effectiveness and compatibility with their mutual needs.

With respect to redress and accountability, we observed in 1996 that the department had published certain principles of accountability, including redress. These principles are included in the terms and conditions of the newer funding arrangements. Effective redress includes providing an opportunity for first nations and their members to obtain an effective review and resolution of allegations. In our view, strong redress mechanisms will enhance accountability of all parties to a funding arrangement.

During the recent follow-up, the department reported that it had received over 300 allegations relating to 108 first nations during the prior two-year period. The allegations covered such matters as social assistance issues, mismanagement of funds, and other concerns.

A major and challenging decision applicable to every allegation is for the department to determine the extent of its responsibility for resolution and how this can be achieved.

Although the department had an important role in the disposition of allegations, we found that it provided little guidance on how to evaluate them. Consequently, there is a risk that allegations will not be dealt with appropriately, thus adversely affecting equity as well as accountability.

In addition, there was no national reporting system to help manage allegations. The allegation database was incomplete and unable to provide an accurate overall picture of the full extent of the problems, their causes, and their resolution. This in turn makes it more difficult to establish and implement effective prevention measures.

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In summary, Mr. Chairman, effective remedial action would require that the department and first nations resolve issues relating to the effective matching of funding arrangements, including the financial transfer arrangement, to the desires and abilities of first nations and the needs of the department. The approach used in addressing allegations and redress should be revisited. If these issues are not dealt with appropriately and expeditiously, they will become even more difficult to resolve in the future.

So the committee may wish, Mr. Chairman, to explore the department's intentions to take remedial action, including the disposition of allegations.

I thank you, Mr. Chairman. My colleagues and I would be pleased to answer your questions.

The Chairman: Thank you, Mr. Desautels.

Now we'll turn to Mr. Wallace for the opening statement on behalf of the department.

[Translation]

Mr. Dennis Wallace (Associate Deputy Minister, Department of Indian Affairs and Northern Development): Thank you, Mr. Chairman. I would also like to thank all of the members of the committee for this opportunity to appear before you today. I very much welcome this opportunity to discuss the Auditor General's Report.

As you know, one of the cornerstones of Gathering Strengths—the government's response to the Report of the Royal Commission on Aboriginal Peoples—is developing a new fiscal relationship with Aboriginal People, based on stronger accountability and new funding arrangements.

We know that support for our larger goals will be difficult to maintain unless we have strong First Nations with equally strong accountability practices.

Today, I would like to focus, very briefly, on three key areas: accountability, allegations of wrong-doing, and finally, funding arrangements.

[English]

First nations would acknowledge that becoming more financially accountable is not a matter of choice. It is not just something that should be done, it is something that must be done. First nations themselves are demanding it, progress on self-government requires it, and Canadians expect it.

We have been working hard with our first nation partners to strengthen accountability. There are a number of initiatives underway, but just let me mention three.

The Alberta Chiefs Steering Committee on Accountability was formed to develop an accountability framework for Alberta first nations. A twofold strategy was developed and implemented through a statement of undertakings on accountability approved by the Alberta chiefs themselves. This initiative was significant because it was driven from the grassroots and it was a clear demonstration of the importance attached to these issues by first nations themselves.

Second, the Assembly of First Nations and the Certified General Accountants Association signed a memorandum of understanding in 1998 aimed at, amongst other things, improving first nations capacity in the field of accounting. This initiative is being financed as part of Gathering Strength.

A new six-course certificate program has been successfully tested at the college level, and the first graduating class is being enrolled in Capilano College in British Columbia. Work is now proceeding on a university-level program at the University of Calgary.

Third, and closely related to the Assembly of First Nations' certified accountants project is the creation of the aboriginal financial officers associations. Two such associations have been formed, five more are in the works. These associations will support professional development of first nations officials, a professional civil service, and increase professional support to chiefs and councils. A national association is planned for 1999-2000 that will manage the projects from the Assembly of First Nations and Certified General Accountants Association.

All of these initiatives are aimed at building the capacity within first nations to effectively administer finances in accordance with recognized accounting and auditing principles. They bring new discipline and new priority to areas that first nations themselves recognize as key elements of effective self-government.

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[Translation]

In this regard, I might just mention that the percentage of First Nations which have completed management and accountability self-assessments now stands at more than 80%, up from the 63% at the time of the Auditor General's Report. The balance will be complete by the fall.

This is significant, because the management development plans which emerge from these assessments become part of the terms and conditions of any existing and future funding arrangements. In effect, they become a "road map" on how to strengthen governments.

[English]

There's a tie here to audit receipt, audit review, follow-up meetings with first nations, and development of plans to strengthen first nation governments, supported by resources from Gathering Strength to strengthen strong first nations government. The outcome of these initiatives could be bylaw development, improved operating policies, and training of new chiefs and councils, for example.

For our part, the Department of Indian Affairs and Northern Development is also working to strengthen our front-line operations. This is an initiative that was begun recently. That is, we are building the capacity of our own staff who work directly with first nations communities.

Let me turn now, Mr. Chairman, to allegations of wrongdoing. I want to acknowledge from the outset that we have more work to do in this area. As the Auditor General himself recognized, this is a far more complex issue than it might first appear. Having said that, however, we are taking steps and making progress. Since 1998 we have had a policy in place for reviewing allegations, and we are currently updating that policy.

One of the suggestions that has frequently been raised is the creation of a national registry for allegations, and certainly the feasibility of that will be part of our review. We are also working with first nations to develop their own internal redress systems so that these matters can be dealt with more expeditiously at the local level, which would in turn preclude many of the present types of allegations coming to the federal government. As the committee will know, if any of the allegations involve potential criminal activity, we refer the matter to the Royal Canadian Mounted Police, which conducts its own independent investigation.

Finally, Mr. Chairman, let me touch on funding arrangements. We are pleased to note that the Auditor General acknowledged the need to work on an individual basis with first nations communities in developing these arrangements and in assessing their capacity to implement them. We have developed a national model, a Canadian-first nation funding arrangement agreement, which permits a consolidation of federal funding to first nations, and we are about to launch consultations with first nations to receive their inputs and ideas.

Let me say very clearly, Mr. Chairman, that although we are moving ahead with a national model, that does not mean we are determined to apply it across the board without regard for the capacity of individual first nations and their willingness to assume the additional responsibilities.

As the minister said to the Standing Committee on Aboriginal Affairs and Northern Development in discussing the main estimates: “we want to look at the capacities and abilities of each First Nation... the idea that it's going to be blanketed across First Nations is not the approach we're taking.”

[Translation]

As I close, Mr. Chairman, let me say that I believe Canadians support the objective of strengthening First Nations communities, with a view to making them self-sufficient. And I believe that First Nations support the goal of enhancing their management and accountability of public funds.

We welcome the input of the Auditor General and all other interested parties as we pursue these goals together.

Thank you.

[English]

The Chairman: Thank you, Mr. Wallace.

Mr. Mayfield, eight minutes, please.

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Mr. Philip Mayfield (Cariboo—Chilcotin, Ref.): Thank you, Mr. Chairman.

I'd like to thank you gentlemen for coming to us from the Department of Indian Affairs. Also, to the Auditor General and his staff members, welcome.

I'd like to begin, Mr. Chairman, by asking a simple question of the Auditor General. I'd like to know, sir, in this context what is your definition of the word “redress”?

Mr. Denis Desautels: Mr. Chairman, I feel the word “redress” means first and foremost addressing complaints or problems discovered or identified by first nations members with normally their own administration. As we said in the chapter, there are a number of those received by the department itself. Some of those come to us, but there are many situations over a course of time where first nations members feel they're not happy with the management of their basic elected officials and they feel they have no other alternative but to turn to somebody outside their community, and normally to them that is the department.

I feel there's a need to deal with the problems that are raised by those first nations members in a fairly expeditious way. On occasion, of course, some of the allegations may not be supported, but a proper system of redress would identify that early on, and that in itself would be quite helpful.

Mr. Philip Mayfield: In the definition of where allegations have been found to be correct, is there any element of the word “restitution” included in this word “redress”?

Mr. Denis Desautels: Mr. Chairman, as far as I know, there's no official definition anywhere in the department's policies as to what redress really means. I think each case has to be taken on its own merit. It could be that on occasion there will be a need to rectify a situation, and I suppose that could mean some compensation to the person who was treated the wrong way. When it comes to cases of mismanagement of band funds, let's say, if that is the allegation, then depending on the nature of the allegation there are legal and other police alternatives to pursuing the issue.

If that's what you mean by restitution, I think justice, in a sense, would follow its course with that kind of situation.

Mr. Philip Mayfield: As I was reading... I understand this word is used a lot. I've read the 1996 minutes of the public accounts meeting, I've read your report, sir, and this is a word that's used quite frequently. I found my mind drifting from one definition to another, and I'm trying to nail this down a little bit. I thank you for your comments in helping me try to do that.

I'd like to turn to the departmental officials now and make a comment—a short comment, I hope. After reading, first of all, the Auditor General's follow-up report and then turning back to the meeting of the public accounts committee on December 10, 1996, I was surprised and I guess dismayed to see so much commonality between what was being discussed almost three years ago and what is in the Auditor General's report today.

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From my point of view as a person who represents a significant number of native Indian people who live on reserves in my constituency, I see in this report the roots of so many problems on reserves, where, because of funding arrangements, there are not good relationships among band members. There aren't good relationships between band and non-band members, and between communities. I find this dismaying.

Inasmuch as this is a follow-up audit, in the report it's obvious that the department is not monitoring the operation of funding arrangements. It's not gathering, keeping and analysing data. It's not getting sufficient input from the first nations on designing and implementing these arrangements. It's not keeping a complete record on the allegations that are made, or providing proper training for the people who are responsible for the administration of significant amounts of money. I want to ask the department, in light of all of these things, how do you explain all these gaps? So much has not happened. It's absolutely amazing to me. Does the department lack resources?

The Chairman: Mr. Wallace, what do you have to say about all this?

Mr. Philip Mayfield: It's time you cut me off. Thank you, sir.

Mr. Dennis Wallace: One might be able to make that observation, but I don't think it holds. I think a great deal of progress has been made. It's made every month as well as every year.

With respect to contribution arrangements, the means by which we fund first nations, we have—

Mr. Philip Mayfield: Sir, inasmuch as you have virtually agreed with the Auditor General's report about the improvements he's suggested, both in the 1996 report and in the current report, how can you say this is not accurate? There are obviously gaps. I would like to know why those gaps are there.

Mr. Dennis Wallace: There are some gaps, I think, sir. I would admit that.

Mr. Philip Mayfield: Not some gaps, enormous gaps.

Mr. Dennis Wallace: Let me see if I can fill some of them in for you.

Mr. Philip Mayfield: Please.

Mr. Dennis Wallace: Thank you.

We have a range of financial mechanisms to fund first nations. At the one end, we have contribution agreements that are very specific, where we require invoices and expenditure evidence for each cheque we issue. At the other end, we have self-government agreements that are very much a form of transfer payments, as you might see between levels of government. So we have a continuum.

Along that continuum, from contribution arrangements or comprehensive financial arrangements, are alternative funding agreements, which were an earlier model, the FTAs or financial transfer agreements, and the Canada first nation agreements we're currently developing with first nations. At the end of the spectrum are transfer payment models that are in place now with some first nations across the country. So I think we have made significant progress there.

You talk about audits and whether we follow up. We do very much. I'd like to speak very briefly about the fact that we now have in place a committee that will meet once monthly. Every month we will be looking at the number of audits that have been received as of June 30—and we expect to see them arriving—when the audit review committees will be meeting to review those reports; and when the department officials will be going out to meet with the first nations to discuss progress on those audits.

I mentioned in my remarks we'd have community assessments done with first nations by September, and we're at the 80% stage now. That gives us a road map from which we can work with first nations to develop a plan for improvement. Through Gathering Strength alone we have an additional $13 million to help first nations develop things such as bylaws, operating policies, and training programs for band staff and chiefs and councils.

Under the Indian Act, chiefs and councils remain in office for two years, so that means as often as not we're looking collectively to provide good training for a new government taking power. Also, with respect to allegations, we're able to tell you on a national basis exactly how many allegations are in place and how we're addressing them at a given time. Again, as I mentioned in my remarks, we're looking at putting in place a national system, but if you'd like to know how many there are at the present time we could tell you.

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The Chairman: Okay. Thank you, Mr. Wallace.

[Translation]

Mr. Perron, if you please, eight minutes.

Mr. Gilles-A. Perron (Rivière-des-Mille-Îles, BQ): You almost started answering my question. In your presentation, you mention criminal allegations you refer to the RCMP. How does the department deal with the other allegations? What is the number and what kind of allegations are directed to you?

[English]

Mr. Dennis Wallace: I believe we have at the present time 116. They range from complaints of access to chief and council to matters of financial propriety. They pertain to elections. To be specific, for example, in the Atlantic we have five allegations at the present time, with two pertaining to social assistance, one to housing, and two to financial accountability. In Alberta we have 24, with four pertaining to management, 15 to social assistance—I think you can draw from that whether a member of a first nation is adequately receiving service—four with respect to the environment, and one of another nature. We have 116 active allegations before the department at the present time across Canada.

[Translation]

Mr. Gilles Perron: Could you give me an idea of the situation in Quebec, please?

Mr. Dennis Wallace: At this point, we have three allegations in Quebec, but I have no details available.

Mr. Gilles Perron: Thank you, Mr. Chairman.

The Chairman: Thank you very much, Mr. Perron. You were very brief.

[English]

Okay, Mr. Harb.

Mr. Mac Harb (Ottawa Centre, Lib.): First I want to thank both the officials from the department and the Auditor General for their comments.

I'm a bit perplexed, to say the least, and at the same time confused. Throughout the Auditor General's report he talked about the importance of consultation with first nations and including them in the process. The department tried to consult with the first nations and bring them on board, but the Auditor General seemed to say they didn't do enough.

But how can they do more if they're not getting the kind of cooperation they want from first nations on some of those issues? Is it really fair to go after the department and say they're not doing their job, and at the same time tell them, look, we want you to consult and get these guys to buy in?

In today's report, in point 3, Mr. Desautels, you talk about the importance of ensuring that funding arrangements meet the government's and first nations' needs. In other words, you are saying that the needs of first nations are not being met. But when I read your report on page 10-14, point 10.69, there's a clear statement saying:

10.69 Of the 38 First Nations who responded, 25 believe that their current funding arrangements (FTA and others) meet their needs for flexibility in allocating funds and in implementation; 33 stated that the terms and conditions of their funding arrangements were clear and reasonable.

I want to ask the Auditor General to please explain to us this little contradiction between the report and what you have put in your statement.

As a final statement, I'm quite concerned, from the perspective of an elected official as well as a Canadian citizen, that we want to go out and try to brush everybody with the same brush and give the impression there is a disaster in the making out in the native community. As I can see from the report, there are isolated cases, and if those cases are of a criminal nature, they should be referred to the legal community and the law and an investigation should be carried out. If there is a problem, we should follow up on this. But if there are cases where we think there are problems, we shouldn't just brush everybody with the same brush. My impression so far has been that everybody is really being brushed together.

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The Chairman: Do you want to propose your three questions one at a time?

Mr. Mac Harb: No. I think the Auditor General knows what I'm trying to say. He was listening very attentively and taking notes. I also want a comment from the department on that.

Mr. Denis Desautels: Mr. Chairman, I will try to answer questions one and three for Mr. Harb, and my colleague Mr. Wilson will try to reconcile the responses in our chapter you referred to with the statements we made.

On question one, I think your concern was whether or not our criticism of the department was fair in terms of the amount of consultation they did or did not carry out with the first nations. On that one, Mr. Chairman, we have acknowledged very clearly, I think, that what the department has to do is quite difficult. I don't think the department gets the same level of cooperation from every first nation. Certain first nations are quite apprehensive about the changes being suggested by the department for a number of reasons, including the risk of moving to the newer arrangements. Certain of them—and I myself have heard it directly from many of them—are very concerned about the level of funding they're getting. They will tell you that they feel they are getting very inadequate funding for their growing population and the cases they have to deal with. There is a certain amount of what you could call mistrust or concern on the part of first nations, which slows down the process of consultation and the implementation of the new arrangements.

But as we've said throughout and I said again today, we recognize the difficulty of solving these issues. Recently I've been able to see them first-hand. I think the politics of our first nations are complicated. There's no doubt about that.

Question three was, are we painting everyone with the same brush? I am very concerned that we not be unfair to anybody. We have contact with first nations right across the country. We know of problem cases, but we also know of first nations that are well managed and have good strong leadership. In fact, we consult with those people. Some of our previous work has in fact reflected consultation with first nations that you might consider to be examples of good practice.

The intent here is not to give the impression that all first nations suffer from some of the problems that have been raised recently in the media and other places. If we raise the issue of redress, it's because we think it's an important issue on its own. The number of allegations and complaints is quite high. We've received some of those ourselves. I think they have to be dealt with, and I think we should be able to talk about those without the fear that we may be painting everyone with the same brush. That is certainly not our intent. We recognize that many of our first nations are quite well managed and are good examples of good management.

Mr. Wilson might try to clarify the second point.

Mr. Grant Wilson (Principal, Audit Operations Branch, Office of the Auditor General of Canada): Thank you, Mr. Chairman. The question is with regard to meeting the needs of both parties and the survey results that show an apparent inconsistency.

First of all, I would like to say that we surveyed first nations in 1996, and we felt it was important to also survey first nations this year to see if in fact things were changing and improving. Our survey essentially showed the same results as in 1996.

However, you raise a good point when you say that 25 believe their current funding arrangements, the FTA and others, are reasonable and the terms and conditions are reasonable.

We put a caution in here that you cannot make generalizations from the survey. The sample is too small. However, it is a pretty good indication.

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The issue here is that of those individuals who responded to the survey, a large number were FTA. As you know, 20% of the 600 first nations are under the FTA program. We have other indicators that show that in fact the needs of both parties are not being met. As we indicated in 1996 and 1999, one-third of first nations were at that time in financial difficulty. This means that some critical elements with regard to risk management are missing. Our comments, therefore, on the self-assessments are very important. Now, are these 25 first nations ones that are managing well? It's hard for us to tell. So I think you have to read that with a bit of caution.

The indicators are 300 allegations in two years, one-third of first nations in financial difficulty, lack of accountability, and 20% in 1996 with qualified financial statements. There are a lot of indicators of problems out there. So we raise these and say, why is that happening? Is it because of the lack of use of self-assessments or things like that? We really believe first nations should be able to give their views here. We would hope that in future more respondents would come forward.

The Chairman: Thank you, Mr. Wilson.

Now we'll turn to Mrs. Wayne for eight minutes, please.

Mrs. Elsie Wayne (Saint John, PC): Thank you.

In 1996 the Auditor General reported that almost one-third of the first nations and tribal councils were in financial difficulty. Is it the same situation today? Has it grown or decreased? Where are we?

Mr. Denis Desautels: Who is that addressed to?

Mrs. Elsie Wayne: I was addressing it to you, sir.

Mr. Denis Desautels: Do you want to try that?

Mr. Grant Wilson: Thank you, Mr. Chairman. Of course, the department would know these numbers better than we would.

Mrs. Elsie Wayne: Okay. I can address it to the department, if that's the case. This was in the 1996 Auditor General's report, and I thought that since then you may have assessed what the department is saying and whether or not things have improved.

Mr. Grant Wilson: Thank you, Mr. Chairman.

We did not determine this time how many were in financial difficulty. The issues were very broad, and it was an indicator that told us there was still a problem. We have anecdotal information that would suggest that in some regions the situation is worse today and in other regions it is better.

Mrs. Elsie Wayne: I see.

The Chairman: Let us ask Mr. Wallace. On Mrs. Wayne's question, is there an improvement there?

Mr. Dennis Wallace: I'll turn to my colleague Mr. DiBartolo. It's in his area that this question would lie.

Mr. Brent DiBartolo (Assistant Deputy Minister, Corporate Services, Department of Indian Affairs and Northern Development): We as a department use as an indicator of financial help for a first nation an 8% rule of thumb in terms of an operating deficit exceeding 8%. We work with the first nation to develop a remedial management plan. Current information shows that 25% of first nations require RMPs. I don't know if that's the same basis the Auditor General used in his 30% number in 1996.

Mr. Dennis Wallace: If I might, Mr. Chairman, I think there's a very important point to add, which I think Mr. Desautels covered ably, and that is that the annual increase to first nation budgets is averaging 2% growth. The population increase in first nations is running at about 3.7% to 3.8%. It's the most quickly growing population group in the country. So you can see quite clearly that some difficulties are a function of that.

The Chairman: Mrs. Wayne.

Mrs. Elsie Wayne: After the 1996 audit that was done by the Auditor General, the follow-up audit indicated that the department is not monitoring the operation of funding arrangements; not gathering, keeping, and analysing data; not getting sufficient input from the first nations on the design of funding arrangements; and not keeping complete data on allegations. Based on the information that came from the follow-up of the 1996 audit, have things changed within the department so that you are doing all of these things?

Mr. Dennis Wallace: Mr. Chairman, madam, I believe that in fact we are doing the kind of work you describe. We do receive audits from every first nation on an annual basis, and that includes tribal councils and other first nation entities. We do a review of those audits. We do look for a plan where there are problems. We do our level best to meet with those first nations or their groups to work out a development plan with them. The community assessment reports are an assessment of what kinds of strengths or weaknesses there are within the organization. So my sense is that we are doing that now.

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Your last question had to do with the allegations. We have an allegations coordinator in place in every region, and we do keep the statistics. We do follow up on the allegations that are made.

Mrs. Elsie Wayne: I'd like to hear from the Auditor General.

Mr. Denis Desautels: Mr. Chairman, if you look at our follow-up this year and try to measure the changes since the first audit in 1996, what we're trying to say here is that progress in implementing the new financial transfer arrangements has been quite slow, much slower than what the department had committed to back in 1996.

You also have to remember, as Mr. Wallace said in his opening statement, that these FTAs are the cornerstone in managing the relationship between the department and our first nations. So they're quite important. My concern is that it has taken quite a long time to put these new transfer arrangements in place, and at this rate the department is far behind its initial objective.

Now, I don't want to be just critical here. I understand that there are real practical concerns, and I understand that the department has voluntarily slowed down the rate of implementation in order to better match, if I understand correctly, the arrangements with the capabilities, which is okay. But, still, if those agreements are so important, it would be nice to know over what timeframe we will have in place satisfactory funding arrangements with essentially all of our first nations.

Mrs. Elsie Wayne: I just have one other question, Mr. Chair.

I visited one of the first nations in the province of New Brunswick, which is located just outside of Moncton. They took me through the drug rehabilitation facility they had to build there on the site. It really tugged at my heart to see so many of those young people who were trying to turn their lives around. In the Department of Indian Affairs and Northern Development, are you people involved in what is happening when it comes to the drug situation with our aboriginal people, or is there someone else who has to look at that?

Mr. Dennis Wallace: Mr. Chairman, Mrs. Wayne, we are involved, as is Health Canada through the medical services branch. For example, the New Brunswick first nations themselves met with our senior policy committee in Ottawa some months back and made a presentation that asked for a coordinator in each community to work with the families to try to improve their circumstances. We agreed to that and it's in place. That's an example, I think, of where we're trying to make progress. Through Health Canada there are also new programs in place to assist individuals and groups with regard to substance abuse and the like.

The one other observation I would make is that more often than not the underpinning of those problems has to do with the lack of an economic opportunity. The other part about New Brunswick that's quite special is that the Province of New Brunswick provided 5% of the annual timber allocation to New Brunswick first nations, which is a first step in helping to turn around a very difficult economic circumstance. So a number of people are engaged, and governments as well.

Mrs. Elsie Wayne: Thank you.

The Chairman: Thank you, Mrs. Wayne.

Mr. Konrad. Now we're on round two, so we're down to four minutes. If we have time, we can always come back for subsequent questions.

Mr. Derrek Konrad (Prince Albert, Ref.): Thank you, Mr. Chairman.

Some interesting things came out of the conference on accountability, which was held in Saskatchewan just recently. And, Mr. Wilson, we met there. One of the chiefs said that he didn't want to see any strings attached to their budget. They didn't want to do any line item budgeting, and things should be needs based. But that's not what I want to talk about. That's just the kind of thing that came out of it.

Judge Mary Ellen Turpel-Lafond characterized allegations coordinators as “make-work projects for bureaucrats”. I see in the audit here, points 10.56 and 10.57, that a lot of work is needed to be done on the issue of how to handle allegations. Is the department taking any action, or planning to take any action, on the points raised by the Auditor General?

• 1625

Mr. Dennis Wallace: If I may, Mr. Chairman, as I think I mentioned earlier, we are taking action with respect to the allegation coordinators—

Mr. Derrek Konrad: Would you be specific on what points you are taking action on?

Mr. Dennis Wallace: That was with respect to the idea of having a national system for collecting the information.

Mr. Derrek Konrad: But the Auditor General asks that something be done with it besides handling it.

Mr. Dennis Wallace: I think we do that. I should add, too, that the allegation coordinators more often than not are the directors of corporate services in each region. So this is not make-work, but it is adding to the existing work.

The point of the allegation coordinators—I don't think this has come up at this meeting to this point—is that this is also there to protect the individuals or groups who bring forward allegations so that their personal circumstances are protected in the event they don't want that information—the fact that they've come forward—to be released. The allegation coordinators, we think, perform a very important role in that respect, and it's a chain that runs right through the department on correspondence. It's all handled very specially in order to maintain that confidence.

But we are improving the allegation coordinator function. It tends to be the director of corporate services in each region. We do keep accurate information. We are now beginning to aggregate it nationally, and we do follow up.

Mr. Derrek Konrad: How many—

Mr. Brent DiBartolo: Could I add to that? One of the comments the Auditor General made was that field staff needed more detailed direction in terms of handling allegations, and clearer policies. I think it's important to recognize that the nature and variety of allegations make it very difficult to develop very specific policy procedures. Nonetheless, we are currently undertaking a review of our allegations handling process and we'll be working with the allegation coordinators in all regions to identify any shortcomings or weaknesses they perceive in the policy and we'll be addressing them.

Mr. Derrek Konrad: I have one more short question.

I presume you're developing some kind of statistics from the allegations. Can you tell me what's the most common allegation that's levelled?

Mr. Dennis Wallace: From a quick review of our current circumstance, it has as much to do with management of the first nations and the quality of service delivery, social assistance, for example, or social services. Very, very much in the minority are complaints about impropriety or illegality. It tends to be more management, openness and quality of service provision.

Mr. Derrek Konrad: Thank you very much.

The Chairman: Thank you, Mr. Konrad.

Mr. Myers.

Mr. Lynn Myers (Waterloo—Wellington, Lib.): Thank you very much, Mr. Chairman.

Mr. Wallace, I wanted to follow up on something Mr. Harb was talking about in terms of the survey and the terms and conditions of the funding agreements. It seems to me that in the Auditor General's report reference was made to the fact that 87% of those first nations who responded actually felt that they were clear and reasonable.

The Auditor General also indicated there was a need for better consultation with the first nations on these arrangements. In response to that, what can you offer us, as a committee, in terms of what exactly your department is doing to enhance those consultations and provide for a process that's meaningful and workable?

Mr. Dennis Wallace: Mr. Chairman, one of the key principles under Gathering Strength is partnership, that we both, first nations and ourselves, enter into a relationship as equals on the basis of openness. With that in mind, as part of the audit review and as part of negotiating arrangements and following up on arrangements in place, we now annually enter into a consultation process with first nations.

In fact, that also includes other federal departments, in order that all can table their concerns or take a look at some of the issues that are of interest to both sides. In fact, what we do is bring those concerns together so we're able to feed back on what it is we can do about them, and they're circulated for review by the month of December for follow-up in the spring.

• 1630

We're also looking at the idea of a focus group on the type of financial arrangement Mr. Desautels refers to, which are the Canada-first nations contribution agreements.

Staying on your question, sir, Mr. Desautels made an important point that because of concerns around the security of financing and the adequacy of it, many first nations don't want to move away from current relationships until they have the confidence that multi-year agreements will not put them at risk.

More particularly, we now have an Assembly of First Nations working group, with the Certified General Accountants Association, as an example of consultation. It's national. We have the Alberta chiefs accountability group. We're participating in that, and that's province-wide. We have the Saskatchewan fiscal relations table, which is looking at new financial models. In fact, I believe Mr. Desautels' staff have participated there from time to time. We're also in the midst of putting in place a national fiscal relations table with the Assembly of First Nations. So consultation, inclusion, and partnership development of new approaches is very much the basis of our working relationship with first nations.

Mr. Lynn Myers: Mr. Chairman, I want to comment that this is encouraging to hear, and I think it's something we need to hear, as a committee, to see that we're going along the right track. From what you say, it sounds as if we're moving in the right direction.

I wanted to ask the Auditor General this: I was looking back at the 1996 audit that you did of funding arrangements with the department. It seems to me that back then you indicated that the comments of the first nations should be considered in terms of addressing the needs of different types of funding arrangements. I think that was set out in that audit. Certainly it was reaffirmed in the 1999 follow-up, and I think the actual words were something along the lines of stressing the importance of first nations' willingness and capacity to enter into these financial transfer arrangements.

I want to be clear on this, because in a way it seems to suggest that you don't think the department is moving fast enough, and yet on the other hand you speak about the kinds of comments necessary from the first nations. I wondered if there wasn't a bit of a contradiction in that. Could you clarify that for my own mind, because in reading it at first blush, on the one hand you seem to point in one direction and yet on the other the department isn't moving fast enough. I guess I'm really trying to sort out which it is you're saying.

Mr. Denis Desautels: Mr. Chairman, I think we're saying both. I think when you analyse the whole situation, you cannot help but wish that we could move faster in terms of putting in place funding arrangements with each first nation that is satisfactory to everyone. So there is a certain sense of frustration at the slowness with which all of this is moving. I don't want to be unreasonable, but when you look at the rate of progress from 1996 to 1999 against the department's own commitments, you sense that it's taking much longer than anyone had anticipated back then. I think, therefore, there is a justification for wanting to move faster in that direction and get all first nations on a proper arrangement.

Having said that, we also were critical of the department for not sufficiently taking into account certain of the particularities of first nations in shaping and customizing the funding arrangements. For example, we talked about the self-assessments. We felt that the self-assessments were key to understanding the capacity of each first nation and reflecting that capacity in the design of the arrangement with that first nation. We identified the number of problems around that. Today we heard that much progress has been made in that area, that we now have self-assessments for over 80% of first nations. Well, that's good news.

Thus, I don't think there's a contradiction. I think there are two issues. There is the question of speed, and there is the question of also taking into account the varying capacities of first nations, with the information that we have or getting the information when we don't have it.

• 1635

Mr. Grant Wilson: I might add one other point. I too am encouraged by the increase in the number of self-assessments. But we also raised the point that when self-assessments were available the department in many cases did not use those and did not have management or plans to address the identified areas for the self-assessments, or take a look at the positive responses. So there was a need for a bit of rigour there that wasn't there.

Now, in two months, to go from 63% to 80% is quite impressive. I would hope there would be an assessment of those to the same extent. Of course, we haven't looked at that.

The Chairman: Mr. Myers, are you taking Mr. Finlay's spot?

Mr. Lynn Myers: Yes, I'm taking Mr. Finlay's, thanks.

What you underscore, of course, is the complexity of this whole area of first nations. I think that is patently clear in terms of this not being a simplistic issue. There's a number of complicators that always underlie all things of this kind. I think that's good for us to know, as a committee.

I wanted Mr. Wallace to respond, because we just heard Mr. Desautels speak in terms of the department not taking into account the customizing, the specific design that's necessary in this all-important area. Perhaps you have some thoughts in terms of what in fact you are doing in this regard.

Mr. Dennis Wallace: Thank you very much. I guess a good example, sir, would be that in British Columbia all of the community assessments—or self-assessments might be another description—are complete. The region there had a process that we're using across the country. It was done as part of those annual negotiations, or review of arrangements, with first nations. They are a treasure trove of information.

I will give you one example. It says that we do need to do work; 62% of the first nations in British Columbia don't have conflict of interest guidelines, for example. What that says is that we need to have tool kits to work with first nations to put in place a full set of bylaws, operating policies, and management regimes for good operations. In fact, we're moving toward that. That region at the moment is using the Gathering Strength money, the $13 million I had referenced earlier, along with the existing training funds we have to put in place development plans with the first nations. So we are in fact doing that, and we're doing it across the country. The pace is variable. But that monthly meeting I referred to, where we're mutually disciplining each other, I think, is going to get a uniform approach as we move into the fall.

Mr. Lynn Myers: One final small one, Mr. Desautels. In the follow-up report, I want to ask you a question on your indication that there were not adequate steps taken to ensure that complaints and disputes were adequately resolved. I think that came out in terms of the department.

I think you also said you do not investigate these allegations. I think that was made clear. Nor do you take a position with respect to the redress practice of the first nations. I'm paraphrasing, but I believe that's the thrust of what you said. The reasons you gave—and correct me if I'm wrong—were that these matters are for the department, other authorities and first nations. I believe I'm correct in that.

The question that came to my mind when I read that, Mr. Chairman, was how can you say there's not adequate resolution when you acknowledge that it's up to the first nations and authorities and the department to resolve? I'm a little confused about how you can say there is not adequate resolution to this when you're leaving it to them, as you pointed out.

Mr. Denis Desautels: I think I can clarify that fairly quickly, Mr. Chairman.

There is a shared responsibility for following up on redress and other complaints or allegations that come forward. That shared responsibility is between the department itself and the first nations. When I say we don't have a role, it's simply because we are not the auditors of first nations. Our role stops when the funds leave the department or the federal government and are transferred over to first nations.

However, we are responsible for auditing the management by the department of these transfer arrangements and everything that goes with that in terms of accountability and governance issues. So we have access to the department's records when it comes to redress or other governance issues, and we are able to compare what the department is doing in that area with what in fact they've actually advocated themselves. So what we're bringing to your attention is what we feel is a problem or an issue that needs to be addressed more closely by the department.

• 1640

We don't audit the first nations, but we audit the department, and since the department has a responsibility in that area, I think it's quite legitimate that we would look at that and report back to you what we found.

Mr. Lynn Myers: I'm sorry, Mr. Chairman, I just want to pursue the point.

Can you give me an example of where you said there was not adequate resolution, where in fact that happened, and tell me why it wasn't adequate and what, in your view, would have been the appropriate resolution? This is now on the issue of redress.

Mr. Grant Wilson: Thank you, Mr. Chairman.

We examined a sample of allegations as we indicated in the audit. We didn't evaluate the appropriateness. When we talk about ensuring that the departments have assurance that allegations are appropriately addressed, it was based on the fact that we would have expected departmental guidelines, as we've stated in paragraph 10.55, on how to evaluate the merit, how to decide additional information is needed, who should collect the additional information, and how to decide whether it should be resolved. There was no national data base at the time we did this audit, which we indicated would make it more difficult for the department to obtain the assurance it needs on the validity of self-assessments and the suitability of the arrangements, as well as the allegations.

Now, I cannot come up with a specific allegation. We have a large number of allegations that are sent to the Auditor General every month. Whether they are resolved or not is a matter that is up to the department. What we were trying to do here was raise the issue, to say that these are important, they're central to making funding arrangements work, and they're part of redress. Now, redress is not the responsibility solely of the first nation. Where first nations are not able to respond adequately to allegations, the department has a responsibility. That's what we were trying to raise in this case.

Mr. Lynn Myers: So you can say what's not adequate, but you cannot say what's appropriate. Is that what you're saying to me?

Mr. Grant Wilson: We believe we say what's appropriate when we indicate the department needs guidelines to clarify responsibilities respecting the merits of an allegation, the nature of the risks, the setting of priorities, and the identification of alternative actions. That's what's appropriate.

Mr. Lynn Myers: I think I get the picture.

The Chairman: Thank you, Mr. Myers. You've had Ms. Phinney's time as well, so you've done very well this afternoon.

Mr. Mayfield.

Mr. Philip Mayfield: Thank you very much, Mr. Chairman.

I was interested in Mr. Wallace's statement that they'll be receiving audit reports from all of the bands. A number of allegations come in my direction too, and I'd like to just relate a number of the allegations that I've heard, most of them from fellow band members themselves. The reason for telling you these is to ask how you would respond to them, as presumably they would become apparent in the reports you receive.

In one instance, a rather elaborate school was set up, and in a matter of time something over $100,000 seemed to disappear. Nobody ever really decided where it went, as far as I know. It's a great disappointment to all of the band people, because a large cultural element was included in this school program. The school went bust for lack of money. The teachers were laid off and the administrator was gone. And what caused great concern beyond the local situation was that the district school board then had to buy buses and get bus drivers and new teachers to include all of these children from the school on the reserve in the public school system.

I'd like to know what your response would be to a situation like this that comes to you.

Another instance regarding—

The Chairman: Let's just get the response there, Mr. Mayfield.

• 1645

Mr. Dennis Wallace: Mr. Chair, in fact that's a multifaceted challenge there. I'm presuming this is a first-nation-operated school, and that the Department of Indian Affairs is providing funding for it.

Mr. Philip Mayfield: It sure is, yes. Perhaps I could just conclude with one element that I neglected to mention. When I spoke to senior department officials about this, the response I got was, well, this is the new way of funding; they are responsible for the money, and if it doesn't work, that's their responsibility. I felt that was an inadequate response, because obviously there was a lack of ability to administer funds of that size.

Anyway, I would like to hear your response.

Mr. Dennis Wallace: I'm presuming that it is a first-nation-operated school.

Mr. Philip Mayfield: True.

Mr. Dennis Wallace: It receives contributions from the Department of Indian Affairs.

Mr. Philip Mayfield: True.

Mr. Dennis Wallace: And we provide an allocation based on a pupil-teacher ratio and other criteria that set out resources available. If the first nation has, for example, a financial transfer agreement, they've got some flexibility there.

They may have a plan for the operation of the school. They shared it with their membership, and perhaps there was a cultural program in there. Perhaps they had over-expenditures in education, or perhaps there were over-expenditures somewhere else in the first nation that used up some education funding.

So what we might have there before us is either certain operating costs were greater than the first nation had budgeted and they couldn't do certain elements of their program—that happens to the federal government from time to time, or the provincial government—or on the other hand, perhaps some of the funds were taken up by an economic development project that could have gone into deficit and chewed up the operating funds of the first nation.

Mr. Philip Mayfield: Sir, what I would like to hear from you is... These people are still there. They are very disappointed people.

Mr. Dennis Wallace: Right.

Mr. Philip Mayfield: But what action would the department take now? If we're going to go on, the money is gone... I don't know what redress means there. But what would be the department's response to requests for funding of that nature again?

Mr. Dennis Wallace: Well, what I was about to add in concluding the observations I was making is that if we receive that kind of observation, particularly a complaint from a member of the community, we would undertake to meet with the chief and council and quite possibly the education authority.

We'd determine what the circumstances are. Is it an operating problem because of management within the education group? Is it another part of the first nation's operations that is using up the operating capital of the first nation? Do they need specific help to try to help them turn it around? If there's a deficit within the first nation beyond the 8% level that Mr. DiBartolo referred to, that would be about a month's operations, and they'd have a cramp in their operation. Do we put in place a co-management plan with them?

If there's an allegation—

Mr. Philip Mayfield: I have about three observations I'd like to mention too, and—

The Chairman: Why don't we come back, Mr. Mayfield, and see if we can—

Mr. Philip Mayfield: Have I used my four minutes up?

Mr. Dennis Wallace: But on your last point, sir, if there's an allegation of something improper, we would pursue that.

The Chairman: We'll give you another opportunity, Mr. Mayfield.

Mr. Finlay, you have four minutes.

Mr. John Finlay (Oxford, Lib.): Thank you, Mr. Chairman.

I appreciate everything we've heard, and having served for a year and a bit on the aboriginal affairs and northern development committee, I've heard many of these problems, and it's very close to my heart. I want to thank the Auditor General and my colleague Mr. Myers for outlining, in one sense, what needs to be done and the range of problems that are involved.

I have some difficulty, however, Mr. Chairman. On page 10-7 of the Auditor General's report, under paragraph 10.9, he says:

As of 1996, six types of funding arrangements were being used in the Department, each reflecting different responsibilities and expectations between parties.

This sort of illustrates what he said about the need for flexibility and different levels. But since then, if I read your report today right, we've got another one, the Canada first nations funding arrangement. So we now have seven.

I wonder whether what the department has tended to do was create a new funding arrangement every time the old one got into trouble, leaving a number of first nations still dealing with the one they think they can handle. Consequently, we spend a lot of time creating new funding arrangements instead of fixing the ones we have by making sure the people involved know what you mean by transparency, etc.

• 1650

I want to go on, Mr. Chairman, just briefly. We've talked a lot about allegations here and having a national inventory and so on and so forth. It seems to me that if perhaps the department created two or three ombudsmen or travelling coordinators or some people who are skilled in conflict management but who understand roughly what a balance sheet is, we might get a little more done on this matter.

I really don't care that there are 108 as opposed to 110. It's nice to know we're getting better or worse, but that isn't what I'm reading here: “We've had a policy in place for reviewing them”; “We're currently updating the policy”; “the creation of a national registry for allegations... certainly the feasibility of that will be part of our review”. Let's get the allegation dealt with, and then we don't have to keep track of it at all. Just put it down that there was one there, and get on with life.

It seems to me the bureaucratic mind has somehow got in here to the extent—with all due respect and apologies, having been a bureaucrat myself—that the systems are not working.

The Chairman: Let's hear what Mr. Wallace has to say about ombudsmen, conflict resolution, and so on. Are we making progress?

Mr. Dennis Wallace: Oh, I think we are.

On the first point, with respect to the Canada and first nation funding agreement, really it builds on the financial transfer agreement. It draws in other federal departments so that a first nation, instead of having to negotiate with five or six or seven federal departments for health services or whatever the program would be, can do it in one. I don't see that it marks a significant change, other than providing better service. So it's an improvement on an existing model that we have. I think it would address your first point.

Mr. Brent DiBartolo: I also note that one of the specific recommendations of the Auditor General's 1996 report was that we work with other departments to find a better way to consolidate funding agreements with first nations.

Mr. Dennis Wallace: So we've done exactly that.

Mr. John Finlay: May I ask one little supplementary?

Does that mean DIAND brokers this with Northern Affairs, Health, etc., or does the first nation have to deal one on one with Fisheries, Agriculture, etc.?

Mr. Brent DiBartolo: The agreement that is currently being developed is being developed at this point primarily with Health Canada, because they're the other biggest service provider in terms of dealing with first nations. It would be likely that the first nations would continue to deal individually with the departments.

One of the advantages to this kind of system, the consolidated approach, is that it will ensure some consistency in approach among federal departments in dealings with first nations. It will ensure that we're not imposing different audit requirements, for example, which is a complaint I've heard in the past from first nations, that different government departments have different standards that have to be met. So it will allow a single window for dealing with first nations and consistency in approach in funding agreements while allowing the first nations to deal individually with the departmental service providers.

The Chairman: That you, Mr. Finlay.

[Translation]

Mr. Perron, please.

Mr. Gilles Perron: Deputy Minister, in your presentation you deal at length with the Memorandum of Understanding between the Assembly of First Nations and the Certified General Accountants' Association of Canada for training future accountants and, I dare hope, future managers. This is my concern. When are the first of these accountants going to be on the market to help you make all the systems more efficacious?

I have another concern. After these accountants have obtained their certificate, will they be recognized off- reserve or off- territory in the same way as all other Canadians?

[English]

Mr. Dennis Wallace: Mr. Chairman, Mr. Perron, the memorandum of understanding is between the Certified General Accountants Association and the Assembly of First Nations. It's partly to do with training, not necessarily to be designated a certified general accountant, but it's to deal with the adequacy of training for first nations band staff and to discuss the adequacy from a first nation perspective of the reporting requirements by the government. It's also addressing issues such as the types of consolidated audits we have or require. They're looking at some of the audit principles and what would be best from a first nations perspective.

• 1655

So it is multifaceted. Training is a part of it. I would hope that first nations employees who go into the certified general accountant program would take employment with first nations, but that's also why the associations of first nations financial officers are in place. I had mentioned Capilano College in British Columbia. There are training programs there as well.

The Assembly of First Nations is putting in place a national process with the CGAs and is also looking at initiatives along with it in each of the provinces, potentially with professional designation. Can they move between provinces? That would be a function, in large measure, of first nation willingness to employ, because not necessarily would a designation be a requirement for the job, but perhaps it's just the skills that would go with it.

The Chairman: Merci beaucoup.

Mr. Mayfield, please.

Mr. Philip Mayfield: Thank you, Mr. Chairman.

I would like to relate one other instance, and that is again with education. In this instance there's a contractual agreement between the band and the district school board in which funds are to be paid by the band for the education of children. In this instance the complaint is that everything is happening except the money is not being paid to the school board, and there is some concern about this.

In addition to your response about how you might deal with that, I'd also like to ask you... It seems to me there's a lack of preparedness, both by the department and the band in this particular instance. I'd like to ask you, in addition to what you might do to rectify that, would you be willing to stop creating new funding arrangements until the department is adequately prepared and until the band is adequately prepared to manage this money?

Mr. Dennis Wallace: In response to your first question, it does occur from time to time that payments become overdue on tuition agreements with area school boards. If the department discovers that the problem is acute—in other words, there's a complaint from the school board or the first nation indicates that it's not able to make the payment—we'll then enter into discussions around a management plan with the first nation or take steps appropriate to be sure that the accounts are current.

On the second point, I think there's a bit of a misunderstanding. A funding arrangement is simply a vehicle by which funds are provided to the first nation. I think your question really pertains to the management capacity of first nations. Building strong governments with strong capacities is one of the four principles of Gathering Strength. As you may recall, I had mentioned at the outset that the Government of Canada has an additional $13 million to build the kinds of skills that I think you're indicating are required in some instances to manage ably.

I don't know, Brent, if you would wish to add to that.

Mr. Philip Mayfield: Along that line, sir, in the notes I have been provided with and in the address you gave us, on page two, in the second paragraph, it says “...First Nations which have completed management and accountability self-assessments now stands at more than 80 percent, up from 63 percent...”. I'm wondering, in this completion, is there an accreditation involved with that, or does that mean they've sat in on the course and audited it? Is there some means of assessing the increasing ability after this process has been gone through?

Mr. Dennis Wallace: That's a very good question.

The community assessments are based on the International Standards Organization principles, ISO, but they're not carried out with the same level of detail. So it provides a very good sense of the capacities of a first nation. As I had mentioned in the case of British Columbia region, our team there, with first nations, are using that as the building block for the development programs jointly identified in partnership with the first nations for training and development. That's where we apply the Gathering Strength funds and other training funds we have available. It could be, as I've mentioned, bylaws, operating policies, or specific professional training of first nations staff or chiefs and council. We do use those contributing community assessments across the country, and we're going to be doing much more of that as we move into the fall.

• 1700

The Chairman: Thank you, Mr. Mayfield.

Ms. Phinney. I thank you for your patience.

Ms. Beth Phinney (Hamilton Mountain, Lib.): Thank you.

As the Auditor General stated, the work of the department is very difficult and complicated. I would like to commend the department and the first nations for what has been done and accomplished up until now.

That being said, I'd like to follow up on something Ms. Wayne and Mr. Finlay said about funding across federal departments. Some first nations surveyed by the Auditor General believe that improvement is needed with the coordination of that funding between the departments. I'd like to know if the department has any plans to address that. If so, will the first nations be involved in that process for improvement?

Mr. Brent DiBartolo: As I mentioned earlier, we've been working very closely with Health Canada in developing the Canada and first nations funding agreement. We've worked over the last two years, I guess, in drafting the outlines of an agreement. We did ask regions to consult with first nations over that two-year period. We're now at the point where we've got an agreement that we think is probably appropriate, but to ensure proper consultations with first nations we are about to go back out to the regions of both the Department of Indian Affairs and Health Canada this week, asking our funding service officers to make a concerted effort to ensure as broad a consultation process on that funding agreement as possible.

Ms. Beth Phinney: Is it only with Health Canada? Are there no other departments?

Mr. Brent DiBartolo: At this point it's only with Health Canada. We have consulted other departments. Solicitor General and Fisheries and Oceans have been involved in discussions, but at this point it's limited to the two departments.

Ms. Beth Phinney: And are they the only three departments that are doing funding to first nations?

Mr. Brent DiBartolo: No. The Department of Human Resources Development is another one we would involve.

Ms. Beth Phinney: But you haven't involved them yet?

Mr. Brent DiBartolo: No.

Ms. Beth Phinney: So there's no coordination between you and them?

Mr. Brent DiBartolo: Not formally. There have been preliminary discussions, but they haven't been formally involved in the development of this agreement.

Ms. Beth Phinney: They will be in the foreseeable future?

Mr. Brent DiBartolo: Yes.

The Chairman: Thank you, Mrs. Phinney.

Mr. Wallace, everything I hear this afternoon is “we will do this, we will do that, we're going to do something else”. The Auditor General was quite critical of your department in 1996 and again in 1999. I just wanted to make that observation. The second observation I want to make is that while in your opening speech you mentioned that you've gone from 63% of getting these self-assessments up to 80% in two months, I'm wondering why you've been so many years behind and all of a sudden you can move 20% in two months.

Mr. Dennis Wallace: Mr. Chairman, it's a good question.

The Chairman: We need an answer.

Mr. Dennis Wallace: We put a concentrated effort in completing those community assessments to have them completed. They are important. I've mentioned to you that we're meeting on a monthly basis. I also mentioned to you—

The Chairman: But why has it taken the Auditor General's report to light a fire under your department?

Mr. Dennis Wallace: I think, sir, that we have been moving, and we're drawing on the best practices of each of the regions across the country. This is new ground for us. If you were to look at the community assessment document—

The Chairman: What do you mean, it's new ground? Getting these self-assessments in is new ground?

Mr. Dennis Wallace: No. The community assessment is quite a lengthy document. It takes several hours to complete and it's very comprehensive. In fact it's much more advanced than the initial assessments that were used for alternate funding arrangements, which we were using in earlier years.

The Chairman: It seems to me it has required that the Auditor General light a fire under your department, which senior management should have been doing all the way along.

In 1996... I'm quoting from the Auditor General's opening statement, which says: “In its testimony”—that's Indian Affairs—“before this Committee”—Public Accounts—“the Department defined accountability to include the expectation that First Nations would conduct their affairs in accordance with the principles of transparency, disclosure and redress.” Do you agree with that?

Mr. Dennis Wallace: I do.

• 1705

The Chairman: When we come to transparency, why aren't the financial statements of the first nations made public?

Mr. Dennis Wallace: Sir, the financial statements are not eligible for disclosure publicly because of a court decision in 1988 that essentially protects the integrity of those financial statements, in part. More often than not, because they're consolidated financial statements, they may include the reports of the operations of first nations' businesses and other affairs.

The Chairman: Then where's the transparency?

Mr. Dennis Wallace: There are several forms of transparency, sir.

The Chairman: Let's be brief, but let's get them out.

Mr. Dennis Wallace: The first and primary transparency should be to the membership, and we are very concerned there that—

The Chairman: Do you check that the membership are informed?

Mr. Dennis Wallace: We do do that.

The Chairman: And are they being informed?

Mr. Dennis Wallace: We do do that as well, and that should be in the form of communications. Many first nations provide the financial statements door to door.

The Chairman: We now recognize that the first nations are government and we live in a democracy. Why isn't your department pushing to have these financial statements made public? It's taxpayers' money being used to help Canadians.

Mr. Dennis Wallace: We do provide information in public accounts of all of our contributions by first nations now.

The Chairman: If the court case says that your consolidated statements contain businesses, and I can agree with the fact that perhaps they can be private, why don't you insist in your FTA that government business is government business and it's open to the general public?

Mr. Dennis Wallace: In many instances, though, those first nations have businesses that are proprietorships of the first nation. They're not incorporated, therefore their operating statements are included.

The Chairman: Why don't you include in the FTA that you keep that separate, that you can keep that private, and government is government?

Mr. Dennis Wallace: It is an issue that could be pursued perhaps. I should turn to Mr. DiBartolo for a comment as he might have something more detailed.

Mr. Brent DiBartolo: No, I agree it's a distinction that we haven't made in the past. We would be guided by the court ruling, and it is certainly something we could consider.

The Chairman: Well, I think you should.

You mention in your opening statement, Mr. Wallace, that if there's criminal involvement or criminal activity, you refer it to the RCMP. How many charges or how many instances have you referred to the RCMP?

Mr. Dennis Wallace: I could provide that to you subsequent to this meeting.

The Chairman: Is it a small number, a large number?

Mr. Dennis Wallace: I wouldn't want to guess until I could provide you with an exact number.

The Chairman: Okay.

One of the MPs was talking about substance abuse. You mentioned in your opening statement that part of the problem is the lack of economic opportunity. That was one of the reasons.

Two things come to my mind. I have here an article from the Globe and Mail, Saturday, October 24, 1998, and it says:

On the Stoney Reserve near Calgary, chiefs and councillors collect tax-free salaries of up to $167,000 while others live in poverty.

And you're managing these departments. That particular reserve came to light when the judge ordered an investigation into the finances. Why didn't you folks know what was going on before the judge ordered the investigation?

Mr. Dennis Wallace: Sir, you have to understand that the Stoney first nation has its own sources of revenue in the form of interest on band funds capital, derived from oil and gas.

The Chairman: You are funding that particular reserve and they are paying $167,000 to the chiefs and councillors, yet their people live in abject and total destitution, to the point where the judge said that this required an investigation. Why weren't you on top of it? You have a responsibility to all the people on the reserves. Why do you tolerate this?

Mr. Dennis Wallace: I don't think “tolerate” would be the best word, sir, because in fact a first nation can presumably set its own standards for salaries and other forms of remuneration.

The Chairman: Do you agree with that, when others on the reserve are destitute?

Mr. Dennis Wallace: You're asking for a personal opinion and I don't know that it would be appropriate for me to respond on that basis.

The Chairman: No, I'm not asking for a personal opinion. I'm asking for an answer from you as the Assistant Deputy Minister of the Department of Indian Affairs and Northern Development. Do you agree that the reserves should be paying $167,000 to individual chiefs and councillors while others go destitute?

• 1710

Mr. Lynn Myers: Mr. Chairman, we're wandering and coming close here to getting into policy and personal opinions and such, and I'd prefer that we not go down this path.

The Chairman: Okay, I'll respect your request, Mr. Myers.

I note in the Auditor General's report, at paragraph 10.23, that:

We further noted that the Department does not have a plan and strategy to facilitate progress in adopting FTAs, where appropriate. We could find no plans in the four departmental regions we visited that would address this...

Why don't you have your own internal plan to achieve your objectives?

Mr. Dennis Wallace: As I mentioned in one of my first questions, Mr. Chairman, it would be fair to say the transfer of resources to first nations is along a continuum. It ranges from the comprehensive funding arrangements, which are arrangements whereby they're very tightly controlled, to financial transfer agreements that are much further along the continuum. The pace of uptake of those FTAs is based very much on the willingness of the first nations to consider them.

The Chairman: So your agenda has been driven by them. You don't have an agenda of your own?

Mr. Dennis Wallace: I would hope that the Government of Canada wouldn't oblige the first nations to undertake any form of agreement or enterprise that they find unacceptable to them. Rather, as I mentioned earlier, on the basis of partnership, we would both willingly move into a relationship or a funding agreement that best meets the needs of the first nation.

An FTA requires a capacity to manage and a capacity to administer that's reasonably sophisticated. We would want to be sure that capacity is there.

The Chairman: On that point alone, in paragraph 10.35 the Auditor General says:

We noted that none of the self-assessments that we reviewed were signed by the First Nations, nor was there evidence in the Department of Band Council Resolutions that could contest to the authority and commitment of the self-assessments provided.

So all you had was a piece of paper with the check marks and the ticks that wasn't assigned or adopted by the first nations. You took this as being the gospel from the first nations. Why would you be that incoherent?

Mr. Brent DiBartolo: As Mr. Wallace pointed out, we've established an operations committee to ensure that our practices across the country are consistent. He also pointed out that British Columbia, as an example, has worked with the first nations to ensure that the results of the assessment have been translated into capacity development plans. It's our intention to do that throughout the country.

The Chairman: I don't know which areas the Auditor General has looked at. It may not have been British Columbia, but I don't know. He says in paragraph 10.37 that:

...the regional office continued to rely on older assessments that were completed many years earlier and that related to a different type of funding arrangement.

When I read this report, I'm sorry to say I think the management in your department is grossly inept.

Mr. Brent DiBartolo: We have the reference to older funding agreements. There is a general community assessment unrelated to the funding agreement that looks at the capacity of the first nations to govern and to manage programs devolved to them. That is the assessment we are actively undertaking throughout the country.

The reference to the fact that we don't have a plan to move FTAs throughout the country is accurate. Two years ago, in 1996 when the Auditor General looked at FTAs, it was the department's stated objective to have every first nation under an FTA within a year. The Auditor General observed that we had to ensure that we consulted with first nations and we had to ensure that the funding agreements we entered into with them were flexible enough to meet their needs.

We recognize the wisdom of that advice and we acknowledge that we don't want an objective of rolling out a funding agreement to all first nations. We will work with them, as they develop, based on their capacity and willingness to move to more flexible funding agreements.

• 1715

The Chairman: That's obviously a complete change of policy. If they have a policy saying we'll do it within one year, the Auditor General says you have to do some consultation, and now, Mr. Wallace, you're saying your speed of conversion is totally dependent on the first nation. So you've completely flip-flopped from one position to another.

Mr. Dennis Wallace: I would expect that the Government of Canada would be moving forward with first nations on a basis of partnership, as I mentioned earlier. It's fair to say that the use of community assessments as a tool was only begun in the last couple of years. And as I mentioned to one other member, I do believe it's based on the principles of ISO. Therefore, it is a new tool that will help us be more effective in our working relationships with first nations. As any level of government, federal or provincial, the CHST or any other form of transfer mechanism is not something that is changed easily or quickly because—

The Chairman: You had a policy to do it within one year, and that was the point I was trying to make.

Mr. Steve Mahoney (Mississauga West, Lib.): Mr. Chairman, how long are your questions going on for?

The Chairman: About the same length of time as Mr. Myers'.

Mr. Lynn Myers: On that point, Mr. Chairman, you made the notation that they're inept, and certainly you're entitled to your opinion and I respect that. However, I too am entitled to mine. I would like, for the record, to indicate that I've seen substantial change since the 1996 audit, certainly in terms of the follow-up. We've heard testimony today as well that ongoing things are being done in a constructive and meaningful way. In fairness, this is a very complicated area and this is a very complicated process. It takes a lot of fine-tuning on any given day to make sure this works in a way that respects the rights of all Canadians, including the first nations.

Having said that, I just want it to go on record, and I do know that Mr. Mahoney wants to get a question, and I'm sure—

Mr. Steve Mahoney: The chair is hogging all the time. He let you jump in ahead of me.

The Chairman: We will let you have a comment, Mr. Myers.

Mr. Steve Mahoney: Between my colleague and you, I have a battle on my hands.

The Chairman: Anyway, basically, to wrap up, I'm very concerned, Mr. Wallace—

Mr. Philip Mayfield: I'd like to make a comment on one of the answers.

Mr. Steve Mahoney: Do I get a question?

Mr. Philip Mayfield: I'm not asking a question. In response to Mr. Wallace's comment that all of the band members have access to the records of the band, I have a variety of complaints to the contrary from band members who say they give it to some but they don't give it to all of us.

The Chairman: Thank you, Mr. Mayfield.

In summary, I'm very concerned about the gross disparity of the standard of living of the people on the reserves that is tolerated by your department.

I refer to the Globe and Mail article on the Hobbema reserve that you are no doubt familiar with, which is not too far from my riding. Again, the councillors and the chief are being paid hundreds of thousands of dollars and there are other members on the reserve who do not even have glass in the windows or doors on their houses.

Your responsibility is to help the people on the reserves to a standard of living that any Canadian would expect, and they don't have it. And they haven't had it for many years, and I don't know when you will be able to deliver that at the speed that you're going at. So I'm very concerned. Notwithstanding what Mr. Myers says, you're making some progress, but as the Auditor General points out, you're far too slow.

Mr. Mahoney.

Mr. Steve Mahoney: It seems to me that you have a rather unique department in the sense that the art of the possible would apply to your department more than any other in government in trying to negotiate settlements with various interest groups. What kind of process is in place for complaints either from members of Parliament or from members of bands who complain about some of the things we hear about. Quite often it has been my experience that there's very little evidence to back up some of those complaints, but I won't prejudge it. What kind of system do you have?

Mr. Dennis Wallace: Thank you, sir.

The allegation coordinator is the central locus of interest, but the concerns could be raised with the funding service officer, it could be raised with someone who is involved in economic development, with any employee of the department. If a concern has been raised by a first nation member, that is ultimately brought in to the allegation coordinator and picked up for further study. There may be requests made for further information if it's inadequate, or if it is adequate it is pursued from there.

• 1720

To go back to the other member's comment, if it should happen that an audit is refused to a first nation member by the council, for example, and we're able to verify that fact, the department will ultimately make a copy of that audit available to the first nation member. As I mentioned earlier, the nature of the complaints vary, so we would treat each one as it might be, whether it's quality of service or management treatment. We would meet with the first nation and discuss those directly and try to resolve them at that level.

With respect to impropriety, depending on their nature, we would still meet with the chief and council, so long as there wasn't a conflict there, and pursue it that way as well, and ultimately, if the problem was of a nature that we deemed to be criminal, we would broach that with the Royal Canadian Mounted Police.

If a concern were brought forward by a member of Parliament, we have a particular process, and it is unique and it's protected, as are the complaints brought forward by first nation members. Those go through a special process inside the department. We try to investigate them as quickly as possible and respond directly to the member of Parliament, and we protect the integrity of the information that has been provided, at least insofar as its source.

Mr. Steve Mahoney: What attempt would you make as a department to publicize within the first nation community themselves that there is a complaint system, be it an ombudsman or... I don't know what you would call it exactly; I think you said it at the beginning. How do people get to know about this if indeed they are living in substandard housing and if in fact there are accusations that a certain chief or an executive council is raking in the dough and these people are having trouble getting their fair share? How do you publicize it? Are they then in a position of being intimidated on the reserve itself? Maybe you could expand on that.

Mr. Dennis Wallace: On the issue of—I'll use your word “intimidation”, but it may vary—just not wanting to have one's individual complaint made public, the relationship between departmental employees and first nations, for the most part, is very close. Departmental employees tend to be very well known in communities. They tend to have long-term relationships. Because of that fact, my experience has been that first nations members are normally—in fact, I would hope, always—prepared to speak to a departmental employee if they have a concern. The departmental employee may choose to address that with the chief and council and deal with it in that fashion, protecting the confidentiality of the source of the information, or they may put it through the allegation process, if that's deemed to be appropriate.

We don't advertise as such, but I think it's fair to say again, because of that close relationship, I'm not sure we've experienced yet an individual who has found that they haven't a source or a way to address their concerns. That even includes cities, such as the city of Winnipeg, for example. We oftentimes find that first nations members will come into our regional office.

So I believe that capacity is there and it's known. As such, we don't have a shingle and we don't advertise, but I believe it's understood that it's available. Is that fair to say?

Mr. Brent DiBartolo: Yes. It's an internal process.

The Chairman: Thank you, Mr. Mahoney.

Mr. Steve Mahoney: You cut me off quickly. Are you back on the list?

The Chairman: No. We're going to have a quick word from Mr. Konrad, and then we'll wrap up with the Auditor General, who will have the last word.

Mr. Derrek Konrad: At a recent conference, one of the rank-and-file Indians said that if the chief loses the election, he's going to suffer culture shock. That just refers to what was said about the big salaries.

But I have another question, relating back to our chairman's question. What kind of government is it that is not open and accountable, that doesn't publish its financial reports? Is this a corporation, or is this a government? How is it seen?

• 1725

You said previously that when you enter into these agreements you're dealing with equals. Well, the Canadian government lets people know where the money is going, so I'd like an answer to that.

I asked this question in the House of Commons in regard to a grant that was given to a reserve in my riding. It was a grant that came with a condition—not to a government, not to a for-profit corporation. So I'd like to know what in the world this grant is to. Is an Indian government not a government? What is it? What is the status of the people who live under it, then?

Mr. Dennis Wallace: When transparency disclosure is being addressed, we look for that and expect it. On the financial statements, going back to an earlier comment, the salaries of chiefs and councils are now required to be published in the consolidated audits that are prepared. Our expectation is that they will be generally available to first nation members. Some are available in the first nation band office; some publish them in their newspapers or deliver them door to door.

We try to work those out. Some communities hold general band meetings, but each community has its own method. If we determine that the information isn't there, we will address it with chief and council and take appropriate steps.

As to your question on the grant, I'm sorry, I don't have sufficient information to respond to that adequately.

Mr. Derrek Konrad: Is it a corporation or is it a government?

Mr. Dennis Wallace: We view a first nation as a government and deal with them on that basis.

The Chairman: Thank you, Mr. Konrad.

Mr. Philip Mayfield: Mr. Chairman, there's one issue that hasn't come up, and I was wondering if you'd like to ask it. Do you think the department would see any difference in accountability as a result of the recent Supreme Court decision on elections in reserves?

Mr. Lynn Myers: Perhaps we could get a response in writing.

The Chairman: If you would like to pose that question, perhaps, Mr. Wallace, you can give the response to the committee in writing. Did you get the question?

Mr. Dennis Wallace: I did.

The Chairman: So you can respond to us on that and also on my question regarding the number of RCMP complaints that have been laid.

Mr. Dennis Wallace: Thank you.

The Chairman: We will now bring the meeting to a close with the wrap-up comments by Mr. Desautels.

Mr. Denis Desautels: Thank you, Mr. Chairman. I'd just like to make three quick points.

My first point deals with capacity building, which has been discussed at length today. I noted the comments by Mr. Wallace on the agreement with the Certified General Accountants Association of Canada. Some of the members referred to that in their comments. I also noted the creation of aboriginal financial officers associations.

So a number of things are going on in terms of building capacity. I would just like to add that I've had a recent meeting myself with the deputy chief of the AFN and offered our office, if there is any need, to support some these initiatives. I'd like to make that public commitment today.

Secondly, there was a fair bit of discussion on redress and conflict management. I also noted recently certain initiatives by groups of first nations, in Saskatchewan in particular, looking at ways of setting up mechanisms to resolve conflicts of certain types among themselves. I also support that kind of initiative, but obviously this cannot handle all of the cases. It will be necessary for the department to be ready to handle certain cases that these regional mechanisms cannot handle.

Finally, the most important point of this whole meeting, I guess, is the funding arrangements. I'd like to stress once more the importance of funding arrangements in the overall scheme of things. It's more than a simple bureaucratic requirement. As Mr. Wallace said, it's the cornerstone of managing the relationships between first nations and the Canadian government. I think it would be highly desirable, but I guess the ultimate objective is to have in place funding arrangements with each first nation that are suitable to the condition and capacity of that first nation.

• 1730

I believe it is possible to have a more detailed strategy and plan from the department, with timeframes for completion—I will leave it up to the department to define what complete means, because it's a constantly changing situation—of the funding arrangements with each first nation that is suitable to their condition or capacity.

I personally feel it's possible to do better than what has been achieved so far, even respecting the partnership model that is being pursued by the department. It will be interesting to see a more detailed plan on how we might reach, in due course, something close to the ultimate state.

Thank you, Mr. Chairman.

The Chairman: Thank you, Mr. Desautels.

We'll now call the meeting to a close. The meeting is adjourned.