Third-party funding agreement management explained
Changes to how ISC applies the Default Prevention and Management Policy
As of June 1, 2023, ISC no longer applies the first 2 levels of the Default Prevention and Management Policy (DPMP), Recipient-Managed and Recipient-Appointed Advisor, to recipients that enter default. This is an important step in the process to repeal the DPMP, which the Government of Canada committed to in 2017. ISC plans to work with First Nations partners to co-develop a new approach that provides capacity development support to communities experiencing significant governance capacity challenges. The third level of default management, known as Third-Party Funding Agreement Management, remains as a last resort, applied only in rare circumstances when all efforts to ensure the continued delivery of programs and services to community members have been exhausted.
The decision to place a First Nation into third-party funding agreement management means that Indigenous Services Canada (ISC) appoints a third-party funding agreement manager (TPFAM) to manage a recipient's funding agreement. The TPFAM works with the recipient to remedy the underlying issues that caused the need for third-party funding agreement management.
The appointment of a TPFAM is one of the actions available to the department under the current Default Prevention and Management Policy (DPMP). Third-party funding agreement management is a temporary measure to ensure the continued delivery of programs and services to community members, and is applied by ISC only as a last resort.
Canada is working with First Nations partners to repeal the DPMP and establish a new, proactive approach that better supports capacity development. This new approach will be based on pilot projects currently being conducted with the First Nations Financial Management Board to support First Nations in exiting default, and will also be informed by ongoing engagement with First Nations partners.
How a third-party funding agreement manager is chosen
To establish a list of qualified TPFAMs, ISC:
- uses a competitive bidding process advertised on Buyandsell.gc.ca. This selection process follows the government contracting policy requirements and established Public Works and Government Services Canada contracting practices.
- rates TPFAMs on mandatory criteria and qualifications.
Once on the list, whenever ISC needs the services of a TPFAM, the companies will be approached to bid on the work, or may be selected directly if circumstances support a non-competitive engagement (for example, if delay would be injurious to health, safety and welfare of community members).
What happens once a third-party funding agreement manager is appointed
Once a TPFAM is appointed, the administration of all funds allocated by the funding agreement between ISC and the First Nation is transferred to the them. The mandate of the TPFAM may also include acting as a facilitator between the First Nation and its creditors to negotiate debt repayment plans at the request of the First Nation. TPFAMs operate at arm's length from ISC and are not directly supervised by ISC, but they are expected to liaise closely with both the First Nation and the department.
It is important to note that under third-party funding agreement management, the First Nation's chief and council remain in place, as does the Band's financial management staff. The chief and council continue to manage resources and funding that do not arise from their funding agreement with ISC. The chief and council of a First Nation under third-party funding agreement management continue to be responsible for setting the strategic direction of the First Nation, and for exercising their governance powers, such as by-laws or governance resolutions.
Often First Nations remedy the situation which led to the default and are removed from from third-party funding agreement management. To exit third-party funding agreement management, a First Nation needs to establish a management action plan that addresses the defaults and shows sustained results (for example, deal with health and safety difficulties, continuity of service delivery to all members, and steps to develop capacity).