Funding approaches

Learn about the different funding approaches Indigenous and Northern Affairs Canada (INAC) and Indigenous Services Canada (ISC) use for programs for Indigenous peoples.

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About funding approaches

The objective of the federal Policy and Directives on Transfer Payments is to ensure that transfer payment programs are:

Both INAC and ISC use various funding approaches to manage transfer payments related to their programs. There are five funding approaches that may be considered in the design and delivery of transfer payment programs: one approach for grant funding and four approaches for contribution funding. Related to contributions, funding approach options are made available to recipients based on discussion between departmental officers and the recipient and considering factors such as the nature of the program, the level of funding and recipient goals, priorities and capacity.

As per the statement made by the Minister of INAC and the National Chief of the Assembly of First Nations in July 2017, INAC and ISC are working with recipients to provide greater opportunity to carry forward unexpended funding, resulting in greater fiscal flexibility and autonomy for First Nations governments.

Grant approach

A grant is a transfer payment that is subject to pre-established eligibility and other entitlement criteria. Recipients are not required to account for the grant, but they may be required to report on results. The grant funding approach can be used for any duration of time necessary to achieve program results. Grants are not normally subject to departmental audits but require specific Cabinet policy and Treasury Board of Canada Secretariat program spending authorities.

The Government of Canada is working with First Nations financial institutions and the Assembly of First Nations on the creation of 10-year grants as part of establishing a new fiscal relationship.

Set contribution approach

A set contribution is a transfer payment that is subject to performance conditions outlined in a funding agreement. Set contributions must be accounted for and are subject to audit. Set funding does not include any provisions for carry forward of unexpended funding. All unexpended funding must be reimbursed to Canada by the end of each fiscal year. To support expanded access to carry forward, as of April 1, 2018, set funding will only be used in limited situations, such as when requested by the recipient or when the department identifies the need to use the approach as a risk management tool.

Fixed contribution approach

Fixed contribution funding is an option where annual funding amounts are established on a formula basis or where the total expenditure is based on a fixed-cost approach. Contribution funding is provided as fixed funding in instances where it is possible to determine a reliable annual estimate of the amount required to achieve the recipient's objectives. Fixed funding includes provisions for carry forward of unexpended funding; how ever, because an annual reliable estimate can be determined, the recipient is, in some situations, also responsible for cost overruns. The carry forward provisions are:

  • If results have not been fully achieved by March 31, unexpended funds may be eligible to be carried over so that work may continue in the following year.
  • When all delivery requirements have been met, unexpended funding may be retained and used by the recipient in accordance with an agreed upon plan for unexpended funding. The plan for unexpended funding is subject to certain limitations, such as the use of the unexpended funding during the fiscal year following the end of the agreement.

Flexible contribution approach

Flexible contribution funding is an option which allows funds to be moved within cost categories of a single program during the life of the project/agreement. Flexible funding is used in instances where the recipient may require flexibility to complete the work and achieve planned results, either in terms of additional time in the following fiscal year or by reallocating funding across cost categories. The flexible funding approach is used in instances where the recipient:

  1. has a longstanding relationship with the department
  2. has met a threshold level of capacity
  3. is willing to enter a minimum two year agreement

Flexible funding allows carry forward of unexpended funding at the end of the fiscal year, provided that the program is not in its last year and the overall funding agreement is also not about to expire. Use of unexpended funding is generally limited to furthering results as per the program objectives set out in the agreement.

Block contribution approach

Block contribution funding is an option which allows funds to be reallocated within the block of programs during the agreement, as long as progress towards program objectives is being achieved. It is possible under this approach to allow recipients to keep any unspent funding provided that program delivery standards have been met and the recipient agrees to use the unspent funding for purposes consistent with the block program objectives or any other purpose agreed to by the department. The block contribution approach can be used where the recipient has met certain readiness assessment criteria (General Assessment.)

Key elements of each funding approach

Attribute Funding approach
Set Fixed Flexible Block
1. Core requirements for all funding approaches Funding approach options are made available to recipients based on discussion between departmental officers and the recipient and considering factors such as the nature of the program, the level of funding and recipient goals, priorities and capacity. Each funding agreement includes certain terms and conditions as outlined in ISC's national funding agreement models and in INAC's national funding agreement models. These include requirements such as funding subject to an appropriation by Parliament, recovery of funds expended on ineligible expenditures, etc.
2. Recipient eligibility No eligibility requirement
  • Indigenous recipient
  • No capacity requirement
  • Indigenous recipient
  • Demonstrated capacity
  • Indigenous recipient
  • Demonstrated capacity
3. Funding level Amount required in fiscal year, determined in accordance with each program's agreed upon costing model/formula or other resource allocation approach.
During agreement term
4. Carry forward funds to next fiscal period No
  • If planned results not yet fully achieved: Yes, in some instances.
  • If planned objectives fully achieved: Yes, if use of unexpended funding is for purposes consistent with program objectives, no plan required.
  • If for any other purpose, a Plan For Unexpended Funding, approved by the department, is required.
Yes, but only to further achieve results towards program objectives and, in most instances, limited to the earlier of end of program or expiry of the agreement. Yes
5. Redirect funds Yes, but only on a risk managed basis and subject to any program-specific limitations Yes, among the cost categories established in the agreement and subject to any program-specific limitations Yes
At the end of the agreement
6. Retain unexpended funds No Yes, in accordance with latitude noted above in 4 and, in most instances, for use in the next fiscal period only. Yes, provided that the program is not in its last year and the overall funding agreement is also not about to expire. Yes during and at end of agreement/program/activity.
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