Contributions to support Indigenous governments and institutions, and to build strong governance: Terms and Conditions

Context

On July 15, 2019, the Department of Indian Affairs and Northern Development Act was repealed and replaced by the Department of Crown-Indigenous Relations and Northern Affairs Act and the Department of Indigenous Services Act. The departments created by the legislation – Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC) and Indigenous Services Canada (ISC) have a shared interest in strengthening governance in order to support fulfillment of their functions in terms of advancing reconciliation, self-determination, and transfer of responsibility for services to communities.

The involvement of CIRNAC and ISC in governance programming is a matter of social policy that includes the devolution of programs and services to First Nation and Inuit governments on a gradual basis. Strong governance and accountability of First Nations and Inuit governments and related institutions are fundamental to the prudent use of funds transferred from the federal government. These objectives are advanced by a series of measures: Employee pension and benefits plans to incent recruitment and retention of professional staff; the First Nations Fiscal Management Act institutions that provide fiscal services and products to First Nation communities; Tribal Councils that provide service and program delivery at an aggregated level to communities; and governance capacity development programs that provide training in sound governance.

The following terms and conditions provide the framework under which current and future CIRNAC and ISC contribution programming can be administered, in parallel with the grant for Band Support Funding, to facilitate capacity development in the Aboriginal public service; the First Nation elected leadership and entities that administer aggregate services and program delivery on behalf of or to First Nations governments and their communities.

Scope

The provision of core support to governance institutions and organizations is essential for sustaining this governance infrastructure now that it has been established. This includes 3 categories of contribution funding that were designed to complement the grant for Band Support Funding: (i) Employee Benefits which provides pension and benefit funding to Aboriginal employers delivering departmental programming, (ii) Tribal Council Funding which supports aggregate delivery of departmental programming, and (iii) ongoing support to the First Nations Fiscal Management Act Institutions

Targeted investments in governance capacity development provided through the fourth category, (iv) Governance Capacity Development, is also essential to support the development of stable, legitimate, and accountable First Nations and Inuit community level governments. This includes measures to strengthen public service management and institutional capacity as well as community governance decision-making mechanisms and frameworks.

General

This authority is listed under Governance and Community Development Services in the Indigenous Services Canada Departmental Results Framework and under First Nation Jurisdiction over Land and Fiscal Management in the Crown-Indigenous Relations and Northern Affairs Canada Departmental Results Framework.

(i) Employee Benefits

First Nation, Inuit, or Innu employers who are engaged in the delivery of services pursuant to a program previously delivered by the former Department of Indian Affairs and Northern Development (provided no funding for employee benefits is provided directly by the program, other than for the statutory benefits of Worker's Compensation, Employment Insurance and pay in lieu of vacation) are eligible.

These employer-sponsored pension plans must meet the requirements of Canada Revenue Agency (CRA) and either those of the federal Pension Benefits Standards Act, 1985 (PBSA, 1985), as determined by the Office of the Superintendent of Financial Institutions (OSFI), or be a provincially legislated pension plan that meets the requirements of the provincial regulations and the equivalent provincial legislation in order to be eligible to receive funding under Employee Benefits. Please refer to Appendix A: Additional Conditions Regarding Eligible Recipients for Employee Benefits funding.

These employers will also be eligible for funding for other non-statutory employee benefits only once an employer-sponsored pension plan has been approved for funding under this program.

(ii) Tribal Council Funding

Tribal councils are eligible for TCF funding when they have been clearly mandated by councils of member First Nations and agree to take on responsibility for the delivery of services designated by their member First Nations.

(iii) First Nations Fiscal Management Act (FNFMA) institutions

The First Nations Financial Management Board (FMB), and the First Nations Tax Commission (FNTC), the First Nations Finance Authority (FNFA), and the First Nations Infrastructure Institute (FNII) are eligible to receive funding under these terms and conditions.

(iv) Governance Capacity Development

The eligible recipients for Governance Capacity Development funding are as follows:

• agencies
• associations/organizations (profit or non-profit)/institutions
• bands/settlements
• beneficiaries of the James Bay, the Northern Quebec and the North-Eastern Quebec Agreements
• boards and commissions
• child welfare agencies
• cooperatives
• corporations, including Crown corporations
• cultural education centres
• district councils/chief councils
• education authorities
• employers
• First Nation, Inuit or Innu individuals
• municipalities and local authorities
• partnerships or groups (including special interest groups)
• provincial/territorial governments and agencies
• tribal councils
• universities and colleges

(i) Employee Benefits and (ii) Tribal Council Funding (TCF)

Recipients must complete an application form annually in the manner prescribed by ISC and must submit the form to the appropriate regional office. The application form contains the data used in the formula to establish the funding level and therefore must be reviewed for comparison with departmental records and approved by the regional office. The application form must be a document separate from the funding arrangement and must not be incorporated into the text of the arrangement.

In order to continue to receive funding under either Employee Benefits or Tribal Council Funding, the eligible recipient will provide the department with program specific annual reports which include the necessary information, as specified by the department, sufficient to verify adherence to program terms and conditions and demonstrate results; and any financial statements required by their funding agreement.

With respect to Employee Benefits, the eligible recipient must also provide all required reports to the Office of the Superintendent of Financial Institutions (OSFI) or their provincial regulator as applicable and CRA as determined by those institutions.

(iii) First Nations Fiscal Management Act (FNFMA) Institutions

The First Nations Fiscal Management Act requires that the First Nations Tax Commission, the First Nations Financial Management Board and the First Nations Infrastructure Institute to submit Corporate Plans and Budgets for the responsible Minister's approval. Specific requirements for the frequency and contents of these corporate plans and budgets are included in Part 6 (Financial Management and Control) of the First Nations Fiscal Management Act..

In order to seek funding for projects, the FNTC, FNFA, FMB and FNII must submit a proposal document to either CIRNAC or ISC, including as a minimum:

• a description of the project or project plan
• the objective(s) and expected outcome(s), of the project with linkage to the objective(s) and expected outcome(s) of the stream
  • outputs that will be generated
  • expected milestones along with criteria for measurement of success
  • expected outcomes along with criteria for measurement of success
  • a budget/cash flow for the project indicating anticipated overall revenues by source (other grant and contribution programs within CIRNAC and/or ISC; other federal government departments and organizations; other levels of government; the private sector; the applicant; and other sources)

Where applicable, the FNTC, FNFA, FMB and FNII must also submit a status report for continuing projects including a financial report for the project for the most recently completed fiscal year. The financial report may not be greater than 6 months old from the date of submitting the proposal. The purpose would be two-fold:

• To aid in determining the applicant's ability to successfully complete the project or non-core activities; and
• To review, where applicable, the degree to which, past funding by the recipient was spent in achieving its project objectives.

(iv) Governance capacity development

Eligible recipients will be required to provide the following information in order to be eligible to enter into a funding arrangement with CIRNAC or ISC.

• Establish how it is an eligible recipient
• Demonstrate it has the mandate and capacity to administer Community Capacity Development activities and membership programs
• Has, and can continue to maintain, sound financial management controls and practices
• Provide a description of the project objective(s), activities and expected outcome(s) of the project with linkages to the program objective(s) and expected outcome(s)
• Outputs that will be generated
• Anticipated outcomes along with criteria for measurement of success
• Provide a budget proposal outlining the program activities and costs
• If proposal-based, provide a cash flow projection based on the budget proposal
• In the case of third party delivery, provide a description of the arrangement which indicates their respective roles, responsibilities and accountabilities of each party to the arrangement undertake to provide CIRNAC or ISC with financial and/or program performance reports, information and data from the recipient no less frequently than once per year, or more often at the discretion of the funding stream
• Agree to provisions for appropriate program compliance review, program evaluation, and audit as applicable
• Undertake to permit auditors to have access to relevant program and financial documents, on the premises of the recipient or Managing Organization

The responsible departmental authority will communicate the above requirements at the earliest possible occasion in discussions with the proponent. Funding assistance is provided based on project proposals or plans prepared by eligible recipients. These plans and proposals will identify the full extent of activities and services to be undertaken by or on behalf of First Nation communities and the impact and opportunities created by funding such projects. Recipients must demonstrate a capacity to manage the project, including the ability to manage and deliver results and products within budget and on time. Recipients must provide details (including the costs) related to specific activities and deliverables relating to the proposals.

(i) Employee benefits

Departmental funding is for the provision of employee pension and benefit plans and the eligible employer is acting on its own behalf and not as an Agent of the Crown. The eligible employer is to be solely responsible for any and all payment and /or deductions required for the C/QPP and other employer-sponsored benefit programs. The eligible employer shall be responsible for making these payments directly. In the event that the employer fails to make the obligated payments the federal government assumes no responsibility to make these payments.

In the case of non-compliance with the terms and conditions of Employee Benefits, the department will work closely with the recipient and the appropriate pension regulator to resolve the difficulties. If the difficulties cannot be resolved, or in the unlikely event that OSFI or a provincial regulator de-registers a pension plan, the department will discontinue funding until the plan is again approved by the appropriate regulator.

A separate audited Schedule of Employee Benefits Funding or a Note to the Financial Statements is to be prepared in accordance with departmental reporting guidelines and provided as part of the Annual Audited Consolidated Financial Statements that the recipient is required to prepare and submit. A statement will be required that the Employee Benefits funds are locked-in, that payroll deductions are held in trust separate from operating funds, and payments have been remitted in accordance with the plan or are current.

(ii) First Nations Fiscal Management Act (FNFMA) Institutions

Pursuant to Part 6 (Financial Management and Control) and Part 4 (General) of the First Nations Fiscal Management Act, the FNTC, the FMB, FNFA, and FNII are required to submit Reports to the responsible Minister that include audited financial statements and, in the case of the FNTC, FMB and FNII, any quantitative information the responsible Minister may require to be included.

The FNTC, FMB, FNFA, and FNII must also report on projects and related funding based on the reporting requirements of their funding arrangements.

A. Context

Two defined benefit pension plans were established prior to the conception and implementation of DIAND's devolution plans, or the Employee Benefits – formerly the Band Employee Benefits (BEB) program. These 2 plans are located in Quebec: "Le Régime des bénéfices autochtones" and "Pension plan for employees of Mohawk Council of Kahnawake".

The benefits of these defined benefit pension plans are similar to those of the public service superannuation plan. These pension plans are in conformity with the requirements of the Pension Benefits Standards Act, 1985 (PBSA, 1985). They are very well managed as confirmed in 2002, by the Office of the Superintendent of Financial Institutions (OSFI). They meet the objectives of the government of Canada of ensuring that all Canadian workers have access to adequate pension plans.

Since these pension plans provide greater benefits than those usually provided by currently-funded defined contribution pension plans, their funding requirements are correspondingly higher. Consequently, their contribution levels exceed those authorized by the program terms and conditions.

There are 4 areas where the revised program terms and conditions impact directly upon the existing defined benefit pension plans. Specifically, these involve the maximum level of contribution by the department towards the eligible employer's share of contributions to these pension plans, the requirement that the employee's share of the cost be at least equal to the employer's share and the stipulation that the employer's share of the pension plan remittance be locked-in immediately and that the benefits be immediately vested.

Following a review of the impact of the revised program terms and conditions, it was determined that the implementation of the maximum level of contribution (currently 12.45%) by the department, instead of a level of contribution determined by the regular actuarial valuation, would result in an immediate shortfall in funding for the defined benefit pension plans (actuarial valuations set present employer contributions as high as 14% for 1 plan).

In these situations, the employer is legally liable to contribute in accordance with the requirements of the actuarial valuation. Consequently, the employer would have to make up the shortfall in funding beyond the department's maximum level of contribution as specified in the current program terms and conditions, or alternatively amend the pension plan to reduce those pension benefits accrued following plan amendment for their employees. Since this would have a negative effect on the existing defined benefit pension plans, various studies were undertaken by the employers involved.

The employers undertook actuarial studies of the impact of the program terms and conditions on their pension plans and the reduction of the pension benefits for their members. The study for Kanhawake pension plan was completed by Carole Morin, and actuary with the Standard Life Insurance Company, on February 22, 1989.

The study for "Le Régime des bénéfices autochtones" was completed by Guy Amiereault and Associates, Inc., on April 7, 1989. As a result of these studies, the employers officially requested that status quo be maintained with respect to their pension plans. Essentially, this implied that the department continue to provide funds in excess of the maximum contribution stipulated in the program terms and contributions in order to meet the requirement of the actuarial valuation as required by law. In such a case, the employer's contributions are determined by the actuarial valuation.

On June 27, 1989, the department completed a detailed examination and analysis of the various options available to reduce the potential negative effects of the program terms and conditions arising from the setting of a maximum level of contribution by the department. DIAND concluded that the best solution would be to consider these defined benefit plans as exceptions to the basic program terms and conditions and maintain the status quo for the funding of these plans by the department.

By maintaining the principle of the status quo for the funding of these plans, the department will not incur additional costs since the actual expenditures are currently built into the reference levels. However, if the new terms and conditions had been applied, DIAND's contribution would have been reduced by approximately $800,000 to the disadvantage of the employers contributing to the plans. Authority to maintain status quo for these plans was received in the revised program terms and conditions.

The existing defined benefit pension plans do not require that benefits be immediately vested or the employer's share of pension plan remittance be locked-in immediately, as is the case with the current terms and conditions. Since the existing plans provide higher levels of benefits than the defined contribution plans, it is simply intended to maintain them at their current level. If the provisions of the revised terms and conditions with respect to the vesting of benefits and locking-in of the employer's share were implemented, DIAND would have faced an additional contribution of up to $115,000 per year based on the assumed rate of termination of employment of 6.5% which has been used by the actuaries of the Standard Life Insurance Company in their study of February 22, 1989.

In this context, DIAND exempted these defined benefit pension plans from only those specific requirements of the program terms and conditions which impact directly on these plans. The exemption permits the retention of the status quo for these pension plans, in their current form, with respect to the level of contribution of the department toward the employer's share (i.e., based upon triennial actuarial valuations) and the timing of vesting of benefits and locking-in the employer's share.

All the other approved existing pension plans, currently funded by ISC are defined contribution pension plans because the employers had chosen that option when the plans were initiated. These pension plans conform to the current program terms and conditions.

B. Exceptions to Employee Benefits Program terms and conditions

The following stipulations pertain specifically to the existing currently funded defined benefit First Nation pension plans:

1. That ISC will continue to fund the existing defined benefit First Nation pension plans "Le Régime des bénéfices autochtones" and "Pension plan for employees of Mohawk Council of Kahnawake," in their current form, in accordance with Employee Benefits terms and conditions, with the following specific exemptions from these terms and conditions with respect to the level of funding and design features:
   1. the maximum level of contribution by the department toward the employer's share of pension plan contributions, as indicated in the Maximum Amounts Payable
   2. the requirement that the employee's share of the cost of pension plan contributions be at least equal to the employer's share contributed by ISC, as indicated in the Maximum Amounts Payable
   3. the requirement that the employer's share be locked-in immediately upon receipt by the administrator of the plan and that benefits be immediately vested, as indicated in Appendix A: Additional Conditions Regarding Eligible Recipients for Employee Benefits

C. Scope of Extended extended Coveragecoverage

The exceptions to the Employee Benefits terms and conditions will apply to present and future eligible employees of the "Pension Plan for employees of Mohawk Council of Kahnawake," as presently defined.

As "Le Régime des bénéfices autochtones" is a multi-employer plan, these exceptions will apply only to present and future eligible participants within the Region/Province of Quebec.