Backgrounder – Aboriginal Affairs and Northern Development Canada's Financial Picture (2013–2014)

Aboriginal Affairs and Northern Development Canada (AANDC) is one of numerous federal departments and agencies that deliver programs and services to First Nations, Inuit, Métis and people living in Canada's North. These programs play an important role in building strong, viable communities and improving the quality of life for Aboriginal people and Northerners.

AANDC is responsible for the majority of federal programs and services that support Aboriginal people and Northerners. According to the 2013–2014 Main Estimates, tabled in Parliament on February 25, 2013, AANDC will spend approximately $8.0 billion (see chart below). Of this, approximately 80 per cent goes directly to recipients through transfer payments. Much of this funding ensures that Aboriginal people have access to basic services comparable to those provided to other Canadians through provincial, municipal and territorial governments. These services include education, housing, community infrastructure (water and sewage systems), social support services, and other benefits. In addition to expenditures for basic services, the department promotes economic development, negotiates and oversees the implementation of comprehensive and specific claim settlements, and implements practical forms of self-government.

The cost of basic services is driven by a young and growing population. In fact, in 2011, almost half (46%) of Aboriginal people were less than 25 years of age compared with almost one-third (29%) of non-Aboriginal people. This creates a growing demand for basic services with overall population/price increases of 3 to 4 per cent per year for the department.

Since 1997–1998, funding for essential programs and services provided by the department have been subject to a two per cent escalator. It should be noted that this does not apply to other AANDC program areas, such as the negotiation and settlement of claims, litigation or Northern Affairs.

Historical Expenditure Profile

Over the period from 2009–2010 to 2013–2014, AANDC's expenditures increased from $7.4 billion to $8.0 billion (in accordance with the 2013–2014 Main Estimates), which represents an average annual increase of about two per cent. This growth in expenditures reflects increased ongoing demand for essential programs and services. However, other factors have contributed to this increase as well. The department has been assigned additional duties in recent years, notably Residential Schools Resolution, which has increased the department's spending. The growth in spending can also be attributed to an increased focus on the settlement of claims as well as to significant investments made in priority areas through successive federal budgets since 2006.

While the department has taken on more responsibilities, its administrative overhead has remained relatively stable at about 2 to 3 per cent of its budget.

Capitalizing on Efficiencies

The department is taking steps to operate more efficiently and better execute its mandate. For example, AANDC is actively investing in tripartite agreements, particularly in the areas of education and child and family services. These agreements allow the department to draw on provincial government expertise, while building greater understanding of the unique needs and circumstances of a diverse Aboriginal population. The department is also reducing the reporting burden of First Nations communities by implementing the federal Policy on Transfer Payments. It has also introduced a new Default Prevention and Management Policy to provide a range of support and tools to communities. These tools and more are contributing to the reduction in the administrative burden on First Nations.

Aboriginal Affairs and Northern Development Canada, like every other department, is contributing to the effort to eliminate the deficit. As part of measures announced in Budget 2012, the department will achieve savings of $24.4 million in the first year, followed by $55.1 million in 2013–14 and will result in ongoing savings of $160.6 million by 2014–15. Much of the savings will be achieved through changes in the department's internal operations and streamlining program management and business processes, including the elimination of approximately 480 Full-Time Equivalents across the department by April 1, 2014. Savings will also be achieved over the next three years through other measures such as internal restructuring and reducing discretionary spending (e.g. travel, hospitality, temporary help). However, front line service delivery for essential services will not be affected as a result of savings measures.

Also, the department will achieve additional savings over the next three years by measures referenced in the September 4, 2012, announcements by the Minister on the new Results-Based Approach to Treaty and Self-Government Negotiations and changes to departmental funding for Aboriginal Representative Organizations and Tribal Councils.

Getting Results

As AANDC moves forward, it will continue to take a more targeted approach to improving programs and services for Aboriginal peoples and Northerners, by focusing on structural reforms and increasing the effectiveness of long-term investments. In trying to find practical solutions to real issues, work will continue with willing partners to renovate programs and develop innovative approaches in the areas of market-based housing, education partnerships and economic development. Maximizing the value of our investments in these areas will have a significant and positive impact on improving the quality of life for Aboriginal peoples, Northerners and all Canadians.

2013–14 Main Estimates – $7,975 million

Description of figure: 2013–14 Main Estimates – $7,975 million

This image is of a pie chart showing the breakdown of departmental expenditures for 2013–14. The breakdown is shown as follows: $6,401 million (80%) transfer payments; $70 million (1%) loans; $14 million (0%) capital; $807 million (10%) statutory/fiduciary obligations; $444 million (6%) program delivery; $53 million (1%) negotiation costs; $186 million (2%) administrative overhead. 

This image also contains two tables; the first demonstrates the breakdown of forecasted operating expenses – which total $1,491 million – as follows: $1,416  million for operating expenditures (Vote 1); and the following statutory expenses: $70 million for employee benefit plans; $3 million for resource royalties and $2 million for loan guarantees. The second table demonstrates the breakdown of transfer payments – which total $6,401 million – as follows: $6,317 million for grants and contributions (Vote 10); and the following statutory expenses: $74 million for land claims settlement acts, $9 million for the Labrador Inuit Claims Agreement and $1 million for Indian annuities.

The source for the information for the chart is page 177 of the 2013–14 Main Estimates.

Figures may not add due to rounding.

* The major item in the $807M is $696M for obligations stemming from the Indian Residential Schools Settlement Agreement. Furthermore, of the $807M, about $594M is for direct payments to recipients including obligations pursuant to the Indian Residential Schools Settlement Agreement, claims related obligations, Department of Justice costs, out-of-court settlements, etc.

** Program delivery costs directly benefit First Nation and northern communities and include costs associated with education, social development, capital/ infrastructure, economic development, Indian government support, environmental initiatives and northern programming. Of the $444M, about $169M is for direct payments to recipients, primarily related to the assessment, management and remediation of federal contaminated sites.

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