Backgrounder - Renewal of INAC's Intervention Policy

Why a New Policy

The budget for Indian and Northern Affairs Canada (INAC) for 2010-2011 is approximately $7.3 billion (Main Estimates). Most of these funds are transferred to First Nations and other recipients for the delivery of programs and services that would ordinarily be provided by various levels of government. These funds are transferred through funding agreements which are contracts signed by both parties and include specific terms and conditions which must be met. When these terms and conditions are not met, the Department can, and does, intervene through the INAC Intervention Policy. This policy outlines the actions that the Department and funding recipients must take to ensure any defaults of these terms and conditions are addressed, and delivery of programs and services under the funding agreements are protected.

Based on recent discussions with First Nations governments and financial experts as well as results of audit and evaluation studies, it has become clear that there were elements not addressed by the Intervention Policy. Chief among these is that the policy was not in keeping with the Department's broader objective of fostering community well-being and development. Many First Nation communities were in intervention status and, once in, tended to remain in that status for a long period. Furthermore, when a recipient was under intervention, it removed some or all of their authority and accountability to manage their agreements and expend funds.

Key Elements of a New Policy

To improve the outcomes resulting from implementation of the Intervention Policy, the Department is working on a new policy (tentatively named the Default Prevention and Management Policy). Key to this new policy will be a renewed focus on prevention, capacity development and ongoing sustainability.

The new policy is intended to build a closer relationship between the recipient and INAC in terms of ongoing oversight and support to reduce the risk of default. This new approach will shift the focus from intervention by the Department to effective management by the funding recipient in order to avoid a default situation.

In keeping with this approach, the introduction of new assessment tools to measure a recipient's capacity will be a key element to ensuring appropriate measures and management controls are in place for the delivery of programs and services in a community.

Some specific changes being considered under the new policy include:

• First Nations will have the lead role in setting a management action plan to deal with their financial problems;
• specialized resources in areas such as finance, risk management, mediation, governance, and other specialized areas will be created to benefit recipients;
• clear performance measures and more effective management action plans based on the actual situation will be developed;
• defaulting on an agreement may not always trigger intervention or the appointment of a third party funding agreement manager; and
• third party financial administrators will only be used in exceptional situations where there is no willingness or capacity to deliver programs and services.

In summary, this new approach is not just about protecting federal funds but also about ensuring the means are in place to foster and maintain community well being. As such, this new approach is about putting in place more holistic and longer term development plans that identify and fill capacity gaps in all areas that could threaten the financial health of the community.

Engagement, Collaboration and Implementation

To assist the Department in the development of this new policy, the Department has sought out - and continues to seek - the advice of experts in financial management including advice from the First Nations Financial Management Board, the Aboriginal Financial Officers Association and the Assembly of First Nations. To date, these organizations have shown support for this new approach and will continue to provide the Department with advice to ensure the policy and implementation tools are effective and appropriate. Departmental regional staff will be engaging with stakeholders over the summer with the goal of having a new policy in place for the beginning of fiscal year 2011-2012.

July 2010