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INAN Committee Report

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The Government of Canada gratefully acknowledges and welcomes the Report of the Standing Committee on Indigenous and Northern Affairs.  The Report accurately identifies many of the problems and challenges with the current Default Prevention and Management Policy (DPMP), and provides sound and sensible recommendations on how these can be addressed.

The Government has thoroughly reviewed the Report and accepts its findings and recommendations, and is committed to addressing these recommendations as outlined in this response.  The response is organized along four action themes, which constitute the axes along which the Committee’s recommendations will be addressed.

Theme One: Renewed Fiscal Relationship
As part of the New Fiscal Relationship, First Nations and urban Indigenous organizations will have access to adequate funding through long-term, stable, predictable and flexible funding arrangements rooted in a mutual accountability relationship (stemming from Committee recommendations 1 and 2.)

The Committee’s recommendations in this area come at an opportune time.  In July 2016 the Assembly of First Nations (AFN) and INAC signed a Memorandum of Understanding (MOU) to launch the co-development of a New Fiscal Relationship with First Nations which reflects a Nation-to-Nation relationship based on the recognition of rights, respect, co-operation and partnership. 

The July 2016 MOU created a Joint Committee on the new fiscal relationship and mandated it to “fully examine the current fiscal arrangement(s)…. and jointly produce proposals, options, and recommendations” toward sufficient, predictable and sustained funding and mutual accountability for First Nations communities.

Following the signing of the MOU, INAC has set in motion a collaborative process with the AFN, First Nations and Indigenous-led organizations such as the Aboriginal Financial Officers Organization and the First Nations Financial Management Board, and participation by other federal government departments and central agencies. The Joint Committee will leverage the work of a number of dedicated joint Technical Working Groups (TWGs) to advance its mandate.  These TWGs are developing draft joint proposals, options and recommendations to the Joint Committee for a New Fiscal Relationship.

As part of the collaborative co-development process in support of a New Fiscal Relationship, a joint TWG on Funding Sufficiency has been established to find solutions to ensure adequate and sufficient funding levels are available to First Nation communities. 

The work currently underway as part of this TWG involves research, engagement, consultation and collaboration and it will bring forward options and recommendations for establishing sufficient funding for First Nations communities (in the form of a report) to the Minister of INAC and the AFN National Chief. The response to this Report will set the way forward for a New Fiscal Relationship.

In parallel, INAC program areas are currently undertaking program reforms that target the development of new program delivery models and ways of better identifying funding levels required to meet the needs of each program and supporting the objectives of sufficiency and adequacy of funding provided to First Nations.

As part of the co-development process in support of a New Fiscal Relationship, a TWG on Funding Predictability has also been established to formulate options for funding arrangement approaches that ensure that First Nations have access to long-term, predictable and flexible funding to achieve their program and services delivery targets.  

Specifically, the joint TWG on Funding Predictability will propose funding vehicles to ensure effective, timely and predictable access to funding in a manner comparable to similar programs and services other Canadians enjoy.  This includes advancement of policies and innovations on how funding and related terms and conditions will flow in a new fiscal relationship.

Recognizing that more flexibility in funding arrangements is a particularly important concern for First Nation communities, Minister Bennett has recently announced to the AFN’s 38th Annual General Assembly that the opportunity for First Nation communities to carry forward and access unexpended funding will be expanded.  The department is now working to implement more extensive carry forward provisions.

As part of the co-development process in support of a New Fiscal Relationship, a TWG on Mutual Accountability has also been established.  This TWG is working to explore how the relationship between the Government of Canada and First Nations could be reframed as a more mutual, reciprocal model based on a Nation-to-Nation, Government-to-Government relationship.  Fundamental to any renewed fiscal relationship is the recognition that First Nations should be accountable first to their citizens.

The TWG on Mutual Accountability is making progress toward the development of a set of key indicators and measures common to all First Nations governments (e.g. education achievements) who would set their own priorities and targets within each outcome category, reflecting their unique circumstances, needs, pace and aspirations.

The role of planning is being explored as a key planning and accountability instrument in the new fiscal relationship.  As Minister Bennett has recently noted in her address to the AFN’s 38th Annual General Assembly, “Community-led planning is at the heart of what we are all trying to achieve – when elders and youth and women's circle, the school principal, the social workers, the nurse, the police chief come together with Chief and Council, good things happen. “

Developed by First Nation governments and their citizens, community plans would incorporate both common indicators and measures, as well as community-specific targets, priorities and indicators which would be tracked and made public by First Nations governments to their citizens in community plans and annual reports. The Government of Canada would also report to Parliament, at an aggregate level, on progress in achieving the objectives and targets of the New Fiscal Relationship.

Theme Two: DPMP and related policy changes
The DPMP and other related INAC policies and directives are reviewed and revised in line with the Committee’s findings and recommendations and the principles and objectives of the New Fiscal Relationship (in response to Committee recommendations 3 and 5.)

INAC is aware that there are significant areas of discontent among First Nations with various provisions of the DPMP and the procedures and mechanisms used.  The Minister is also on record expressing similar sentiments.  To its credit, the Committee’s findings in its Report do a commendable job of bringing these areas of discontent to the fore. 

INAC is committed to reviewing and revising the DPMP policy in collaboration with Health Canada (the other federal funder using the DPMP), its other federal partners and central agencies, and in close consultation with First Nations and Indigenous-led institutions and organizations that will play a role in the policy’s implementation. 

The following paragraphs outline some of the directions currently being considered, building on the Committee’s findings and recommendations, in the revision of the DPMP.

Revised default criteria

INAC plans to revise the DPMP default criteria currently focused on financial aspects to include broader elements such as governance, accountability, planning, financial and program management issues as well as wealth creation and economic development.

Primary focus of DPMP interventions on capacity development and default prevention

The revised policy should mark two significant shifts in how DPMP currently operates:

  • A shift from “disciplining” the community in default for perceived failures in managing funding agreement, to helping the community, through targeted capacity development assistance, overcome the challenges that have led to default circumstances; and,
  • A shift from a reactive approach to a proactive one, focusing on early engagement and intervention to prevent or avoid the occurrence of defaults.

Capacity development responses will need to focus more broadly on the entire range of challenges communities that end up in default typically face.

Redefinition of the role of the Third-Party Funding Arrangement Manager (TPFAM)

INAC will redefine the role of TPFAM around a more specific, shorter and more targeted emergency intervention focused primarily on restoring the delivery of critical services and rapid de-escalation once these services have been restored.  INAC will also develop new statements of qualifications, new contractual agreements and a related performance measurement framework to support TPFAM’s revised role.

Greater reliance on Indigenous-led institutions and organizations and on default intervention teams with a requisite variety of relevant skills and competencies

INAC will develop approach options, in consultation with various Indigenous-led institutions and organizations, on achieving greater reliance on these institutions and organizations in the activities associated with the DPMP.

Furthermore, the diversity of root causes for defaults and the attendant complexity in addressing them suggest that a team approach – deploying an intervention team with the requisite variety of skills and competencies – may be a more realistic alternative to appointing a single third-party manager or adviser.

Interim measures

Finally, INAC will examine what interim measures to advance the Committee’s recommendations that do not require a revised DPMP could be implemented in anticipation of policy changes.

Theme Three: Greater role and financial stability for Indigenous-led institutions
DPMP-related activities are transitioned to Indigenous-led institutions and adequate support is provided to arms-length Indigenous financial institutions working to increase financial literacy and financial management skills, competencies and capacity available to First Nation communities (addressing Committee recommendations 3, 6, 7 and 8.)

Recognizing their critical role in improving fiscal management in First Nation communities, the Government of Canada supports the First Nations fiscal institutions under the First Nations Fiscal Management Act (the First Nations Financial Management Board (FNFMB), the First Nations Tax Commission and the First Nations Finance Authority) through annual contributions for their operations, and provides annual project-based funding for various initiatives. 

The Government of Canada also supports the Aboriginal Financial Officers Association (AFOA) through annual funding, and other non-profit organizations such as the Canadian Executive Service Organization (CESO). 

In collaboration with its partners and working closely with Indigenous-led institutions and organizations, INAC will examine options and approaches available to transition as much of the process associated with the implementation of DPMP and related capacity development actions as practicable to Indigenous-led institutions and organizations.   Options may involve the use of existing Indigenous-led institutions and organizations, creation of new Indigenous-led institutions, or further development and support to those institutions and organizations already in existence.

INAC will also continue to support innovative pilot projects, building on a series of pilot projects designed to trial innovative approaches to improve outcomes in First Nation communities under default.  One of these pilot projects currently underway is a three-year project with the FNFMB to build capacity in five First Nation communities currently under Third Party Funding Arrangement Management so that these communities may de-escalate away from TPFAM, build internal capacity for sustainable operations and remove reliance on external third-party managers or co-managers at the earliest opportunity.

INAC will also continue to work with arms-length Indigenous financial organizations to establish capacity building programs to support financial management in First Nations communities.  Finally, INAC will continue to support arms-length Indigenous financial organizations that provide training and certification opportunities in financial management and financial literacy to local band councils and administration staff.

Theme Four: Progress Report
Report on progress on the Committee’s recommendations to be tabled by INAC in five years’ time (in response to Committee recommendation 4.)

INAC will report, within five years, on the progress made towards the implementation of the Report’s recommendations, its impact on the number of First Nations under default management and the evolution of capacity building actions and initiatives, including an update on the issues and challenges faced.