Backgrounder - Aboriginal Affairs and Northern Development Canada’s Financial Picture

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 2014-2015 Main Estimates, tabled in Parliament on February 27,2014, AANDC will spend approximately $8.1 billion (see chart below). Of this, approximately 84 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 2014-2015, AANDC's expenditures increased from $7.4 billion to $8.1 billion (in accordance with the 2014-2015 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 revised 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 achieved 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 are 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.

In an effort to bring greater clarity and understanding to its suite of programs, the Department has undertaken a consolidation of some of its transfer payment terms and conditions. This consolidation will contribute to increased flexibility and supports the reduction of reporting burden for recipients, as well as more appropriately managing the administration of transfer payments.

The department’s changes to the 2014-15 Program Alignment Architecture reflect significant efforts to simplify and clarify the program structure to more meaningfully depict programs in relation to their expected results for Aboriginal people, Northerners and Canadians. The term "Program Alignment Architecture" refers to a structured inventory of a department's programs, where programs are arranged in a hierarchical manner to depict the logical relationship between each program and the Strategic Outcome(s) to which they contribute.

The intended impact of the new Program Alignment Architecture is improved program clarity and simplicity and to allow the department to tell a transparent results story, not only at the Program level, but also at the Sub-Program level.

In summary, the department will report on 16 programs in its Program Alignment Architecture, three programs which have been restructured / reorganized from the previous Program Alignment Architecture; four programs with name changes and some realignment from the previous Program Alignment Architecture; and, and nine programs with relatively minor or no changes from the previous Program Alignment Architecture.

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 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.

 
Text description for Expenditures by Category

This image is of a pie chart showing the breakdown of departmental expenditures for 2014-15. The breakdown is shown as follows: $6,767 million (84%) transfer payments; $26 million (0%) loans; $6 million (0%) capital; $750 million (9%) statutory/fiduciary obligations; $307 million (4%) program delivery; $51 million (1%) negotiation costs; $173 million (2%) administrative overhead.

This image also contains two tables; the first demonstrates the breakdown of forecasted operating expenses – which total $1,281 million – as follows: $1,215 million for operating expenditures (Vote 1); and the following statutory expenses: $61 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 $6,767 million – as follows: $6,654 million for grants and contributions (Vote 10); and the following statutory expenses: $74 million for land claims settlement acts, $27 million for First Nations infrastructure, $9 million for the Labrador Inuit Claims Agreement and $1 million for Indian annuities.

The source for the information for the chart is page 163 of the 2014-15 Main Estimates. Figures may not add due to rounding.

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