Modernizing Grants and Contributions
Management for Better Results
January 11, 2013
Modernizing grants and contributions management has advantages for Aboriginal Peoples by focusing on service to communities, and their members, achieving economies of scale, reducing the administrative burden on recipients, saving taxpayers’ dollars and ultimately ensuring more value for money.
AANDC applies an array of tools to ensure sound management of the funds appropriated to it by Parliament.
Last year, the department spent $7.9 billion, of which $6.4 billion (or 81.4%) was in the form of grants and contributions to 1,930 recipients. Of the 1,930 recipients, 594 were First Nation governments (including those governed by the Indian Act as well as self-governing First Nations). Other kinds of recipients include provincial and national Aboriginal Representative Organizations, Tribal Councils and agencies that provide social services such as child and family services.
The main tools include an internal control framework anchored in stringent internal audit; risk based audits of selected recipients; a default prevention and management policy; new tools to assess the risk associated with funding recipients; and ongoing efforts to streamline reporting by recipients to be consistent across the country, harmonized across federal departments and to focus on essential services.
While AANDC is committed to rigorous accountability to Parliament and Canadians it is also working to shift the underlying accountability of First Nations funding recipients away from reporting to the department and toward reporting transparently to their own members.
The path to improvement follows three inter-related tracks:
- Improving the way that grant and contribution programs work by pruning reporting, consolidating programs, creating a challenge function to curb the instinct to ask for more data and harmonizing processes across federal departments so the same data can serve many purposes;
- Differentiating among funding recipients so that those with stronger track records of financial and program management are rewarded with longer funding agreements and less reporting; and
- Shifting the accountability bargain away from reporting to government for the use of funds toward accounting to communities and program clientele for results.
1. Reducing the Administrative Burden
Since 2011-12, four federal departments have partnered to provide funding to the hamlet of Pangnirtung in Nunavut under a common multi-year Government of Canada agreement. This has resulted in an 82% reduction in the number of reports requested of Pangnirtung and the use of common administrative products (e.g. application forms) to satisfy the reporting requirements of the departments involved.
Since October 2011, another four federal departments have partnered to a common, multi-year Government of Canada funding agreement to the Montagnais du Lac St. Jean (Masteuiatsch), Quebec. This has resulted in a 56% reduction in the number of reports requested of the community to satisfy the reporting requirements of the departments.
Within AANDC, the process of rethinking and improving how the department uses the data provided by funding recipients has resulted in a sharp reduction in the number of ad-hoc reports the department requests of recipients. In fact, the department has seen a reduction from 4800 ad-hoc reports requested in 2011-12 to 800 in 2012-13.
The department will review all possible opportunities to streamline and improve the number of programs it manages which will in turn allow the department to clarify its resourcing needs and program results to Parliamentarians and create opportunities for less reporting requirements.
For 2013-14, AANDC is making a concerted effort to significantly reduce its requests of recipients for monthly, quarterly, semi-annual and annual reports as well as the breadth of data it requests. As a result, the next fiscal year will see a major reduction in the number of requested reports with ongoing efforts to have First Nations create their own annual reports to the community; consistent with the requirements of the proposed First Nations Financial Transparency Act (C-27).
Harmonizing the way federal departments do business
AANDC is actively working with other federal departments to ensure that joint recipient audits are coordinated starting at the planning stage. In 2011-2012, AANDC and Health Canada conducted four joint recipient audits. In the current year, six are underway.
AANDC and Health Canada are working to increase efficiencies and align common operations. Across both departments, the Manitoba, Ontario and Quebec regions are conducting joint General Assessments of their common recipients.
In addition, in 2013-14, Health Canada will be adopting AANDC’s Default Prevention and Management Policy (DPMP) and a common funding agreement model will be made available to interested funding recipients.
By April 2014, AANDC and Health Canada will be adopting each other’s financial system management solutions. AANDC will be adopting Health Canada’s financial management system and Health Canada will be adopting AANDC’s Grants and Contribution information management system.
2. Matching Solutions to the Needs of Funding Recipients
The General Assessment (GA) workbook tool measures the risk associated with each recipient funding agreement, based on the track record of the organization. The GA tool is now in its third cycle and is being adopted progressively by Health Canada.
Refining the Risk Assessment Tool
The GA has been in use for three years. As the GA is refined, AANDC is reviewing its approach to conducting the assessment, the frequency of assessments and additional uses of the results to conduct its business.
Risk-Based Funding Agreements
The end goal of a risk-based approach to funding agreements is fewer reporting requirements associated with the transfer of funds to First Nations with strong and proven track records of financial management and low risk. AANDC will in turn be able to focus more resources to assist those recipients in need of assistance of financial management capacity. Simpler language in the funding agreements, less reporting in relation to risk levels and longer-term funding agreements hold a lot of potential for willing partners.
Compliance, Monitoring and Audits
Risk-based compliance work, program reviews, internal monitoring and audits of program and policy implementation will continue to be the standard operating procedure for AANDC.
A risk-based departmental recipient audit plan is developed yearly by AANDC. The risk profile of recipients guides selection, using information from the General Assessment, Consolidated Audited Financial Statements, Default Prevention and Management data, recipient reporting track record and other assessment tools.
3. Shifting the Accountability Bargain
In June 2012, the Government announced the implementation of new financial reporting requirements for First Nations with funding agreements with AANDC.
As of June 2012, funding recipients are required to submit their annual consolidated financial statements in a consistent format. Model consolidated audited financial statements, which conform to generally-accepted accounting principles (GAAP), were made available to community members across Canada.
Use of the new, consistent format is contributing to increased accountability and will support First Nation governments' efforts to attract investments and stimulate economic development, while ensuring transparency to community members.
Consistent use of the new model will prepare First Nation funding recipients for the implementation of the proposed First Nations Financial Transparency Act (C-27) presently before Parliament, which will require that financial statements be publicly disclosed by First Nations.
This new approach is an important step toward Canada's commitment to greater accountability, reducing red tape and reducing the administrative (including reporting) burden for funding recipients and setting the stage for increased transparency
AANDC has developed service standards for its grants and contributions programs, which publicly state the level of performance that clients can reasonably expect to receive from AANDC under normal circumstances.
These service standards will be posted and performance against these standards will be monitored and reported on the AANDC website.
Bill C-27, the proposed First Nations Financial Transparency Act, will expand the scope of information publicly-disclosed to include the salaries and expenses of chiefs and councillors, as well as First Nations’ consolidated audited financial statements. Once passed, C-27 will require that this information be posted to the AANDC website as well as respective First Nations’ websites.
Disclosing General Assessment Results
AANDC is working through confidentiality and disclosure considerations with First Nation partners with the end goal of publicly disclosing information related to the results of the General Assessments.
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