Frequently Asked Questions - Funding Approaches

What funding approaches are available?

There are five approaches that Indigenous and Northern Affairs Canada (INAC) may consider in the design and delivery of transfer payment programs:

  1. 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.
  2. 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 audits. This is the basic type of contribution commonly used in the past and where unspent funding is returned to the department annually.
  3. 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. Fixed funding is distributed on a program basis. It is possible under this approach to allow recipients to keep any unspent funding provided that program requirements set out in the funding agreement have been met and the recipient agrees to use the unspent funding for purposes consistent with the program objectives or any other purpose agreed to by the department. This approach is based on INAC's previous Flexible Transfer Payment (FTP).
  4. 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. However, unspent funds must be returned to the department at the end of the project, program or agreement. The flexible contribution approach is used when:
    • The recipient has met certain assessment criteria (including results from the General Assessment);
    • A program requires a two or more year relationship with a recipient to achieve objectives and can be funded under a multi-year funding agreement; and
    • The recipient can redirect funding among the various cost categories of that program as established in the agreement.
  5. 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 (including results from the General Assessment.) This approach is based on INAC's previous Alternative Funding Arrangement (AFA) authority and will be managed in a similar fashion.

The flexible and block funding approaches involve multi-year funding agreements that can last up to ten years. Agreements of this duration are considered on a case-by-case assessment basis and require recipients to meet certain capacity and eligibility criteria. These approaches support stable, ongoing relationships and provide flexibility for Indigenous recipients in regards to the use of funding. Multi-year funding agreements also benefit Indigenous recipients by enabling them to reduce their administrative burden.

INAC Funding Approaches Key Elements:
Funding Approach Treatment of Unspent Funds Redirection of Funding To Other Programs or Projects During Agreement Criteria for INAC's Recovery of Funding
Grant Can be retained by the recipient Grant is to be used for any expenditure related to the purpose, activity or initiative being funded. Recipient becomes ineligible
Set Contribution   Returned at end of each year Funds are to be expended as identified in the funding agreement. Cannot be redirected to other programs or projects. Funding is unspent or spent on ineligible items
Fixed Contribution Indigenous recipients only Returned annually unless used in the next year in the same program. Can also be kept and used in other areas if a plan outlining the activities to be undertaken with the unspent funds is approved by the department prior to use. Funds are to be expended as identified in the funding agreement. Cannot be redirected to other programs or projects. A plan is not provided/not approved where required, or Funding is not spent within timeline, or is spent on ineligible items
Flexible Contribution Indigenous recipients only Carried forward each fiscal year during the agreement or the project; and returned at end of agreement or project whichever comes first Funds are to be expended as identified in the funding agreement and cannot be redirected to other programs or projects. Funds may be redirected between cost categories in the project as defined in the funding agreement. Funding is unspent at the end of project or agreement or is spent on ineligible items
Block Contribution Indigenous recipients only Can be kept if used for activities in the block. Can also be kept for other activities outside the block if a plan outlining the activities to be undertaken with the unspent funds is approved by the department prior to use Redirection of funding is allowed among any and all programs included in the block during the life of the agreement, subject to delivery standards being met.   A plan is not provided/not approved where required, or Funding is not spent within timeline, or is spent on ineligible items

Did the new funding approaches affect recipients with annual or multi-year Comprehensive Funding Arrangements (CFA) that expired March 31, 2011?

Yes. New national funding agreement models have been developed to include the various funding approaches. As of April 1, 2011, INAC has been transferring funding to recipients using the new national funding agreement models and the new funding approaches, as appropriate. The funding approaches to be used depend on the nature and risk of the program and the nature and risk of the recipient. The duration of these agreements is based on the risk assessment as determined by a General Assessment undertaken by INAC.

What happened to multi-year agreements that did not expire March 31, 2011?

There have been no amendments to incorporate the new funding approaches into existing multi-year agreements that have expiry dates beyond March 31, 2011. Existing multi-year agreements will continue to include the previous funding types (Alternative Funding Arrangements, Contributions or Flexible Transfer Payments) until they expire. These funding types will continue to be managed in a manner similar to previous years. When the existing agreements expire, the new national funding agreement models will be used.

Were all First Nations and Tribal Councils that administer a Canada First Nations Funding Agreement (CFNFA) or a DIAND First Nations Funding Agreement (DFNFA) that expired on March 31, 2011 offered a new agreement with block contribution funding for 2011/12?

Yes, except in the following situations:

  • The First Nation or Tribal Council informed the department that it did not want to enter into a block contribution;
  • the assessment process was completed and the results indicated that the First Nation or Tribal Council did not meet the eligibility criteria; or
  • the region had information indicating that providing block contribution funding would have placed the delivery of programs and services at risk.

In cases where a new agreement with block contribution funding was not granted or was granted conditionally, the department may have offered a limited transitional agreement that may or may not include block funding. Each case was assessed on its own merits.

How will unspent funding for fixed and block contribution funding be managed?

Unspent funding for fixed and block contribution must be spent on activities acceptable to the department or it must be returned to INAC.

Unspent funds may be used for activities covered by existing program terms and conditions (fixed) or activities covered by any of the programs in the block (block funding only). These funds may only be retained if they are spent within the specified timeline and are accounted for as part of the regular program and financial reporting requirements.

Under fixed contribution and block contribution approaches, if unspent funding is to be used for another program or activity, a plan on the proposed use of the unspent funds must be submitted to INAC no later than 120 days after the end of the project, program or agreement, whichever comes first. In such cases, a separate report on the use of the unspent funding is required.

Unspent funding may only be spent after the plan on the proposed use of funding is accepted in writing by INAC. Therefore, it is especially important for recipients with block contribution funding to provide a plan as early as possible during the agreement. Otherwise, they may have to wait until after the expiry of the agreement to use the unspent funding as funds cannot be used outside of the block during the agreement without prior written acceptance.

Instructions for the plan and report on unspent funding are included in the Reporting Guide distributed with the funding agreement.

If a plan is required, what activities can unspent funding in fixed and block contributions be used for?

As noted, unspent funding can be used for any activities within the program (fixed contribution) or all block programs and services (block contribution). However, INAC will also consider any other activities proposed in a plan and which the department has the authority to fund. This includes any activities identified in a plan previously accepted by the department, such as a recipient Management Action Plan, a Community Development Plan or a recipient Fiscal Plan (block contribution requirement).

When can unspent funding be spent?

For block contributions, unspent funding can be spent within the fiscal year(s) covered by the agreement or within one fiscal year following the end of the agreement. For fixed contributions, unspent funding can be spent during the fiscal year following the fiscal year that generated the unspent funding.

Can other previously submitted plans be used as a proposed plan for unspent funding?

Yes, written notice to INAC that unspent funding will be used for activities described in a previously accepted plan, such as a Fiscal Plan or Management Action Plan, is acceptable. For administrative ease, these plans can be referenced and/or attached to the Plan template in the Reporting Guide. The department will confirm approval through a written notice. A report on the use of the unspent funding will still be required.

When does the need to submit a plan for unspent funding take effect?

The new funding approaches apply to agreements beginning April 1, 2011.

Alternative Funding Arrangements or block contribution funding were previously only available for First Nations or Tribal Councils. Will INAC be entering into agreements with Block contribution funding for new types of recipients?

Block contribution funding is an approach for providing transfer payments not only to First Nations or Tribal Councils but to all Indigenous recipients. The funding approach to be used depends on the nature and risk of the program and the recipient.

Date modified: