New Fiscal Relationship Grant

NFR grant escalator

To ensure NFR grant funding levels keep up with increasing costs over time, funding for core programs and services provided through the grant is escalated annually based on inflation and population growth.

The escalator is applied to all NFR grant eligible funding, except where ISC programs adopt their own ongoing escalation factors, as is the case for primary and secondary education, or to time-limited funding included beyond the core funding levels within the grant.

Differences between the NFR grant and block funding

There are some significant differences between the NFR grant and block funding agreements:

• block funding generally has a 5-year term
• block funding is a contribution, not a grant, and as such, it comes with more administrative and reporting requirements, as well as limitations on eligible expenditures
• block funding recipients have to complete unexpended funding plans at the end of the agreement
• block funding generally does not permit program redesign or provide the flexibility to set the standards and levels of service associated with these programs
• block funding recipients are subject to department-initiated recipient audits and compliance reviews

Accountability

The New Fiscal Relationship is based on the fundamental principle that First Nations and First Nations-led service delivery providers should be primarily accountable to their citizens and member First Nations.

As outlined in the NFR grant funding agreement and eligible recipients' financial administration laws or policies on financial administration, recipients maintain accountability to their members or member First Nations for the delivery of services by preparing and making available strategic plans that set out priorities, targets and proposed outcomes, as well as annual reports that report on outcomes from the strategic plans. As a result, the reporting burden of First Nations and First Nations-led service delivery providers to ISC is reduced by as much as 90%.

The NFR grant and Treaty Rights

ISC's Comprehensive Funding Agreement includes a non-derogation clause which indicates that "nothing in the agreement will be construed to diminish, abrogate from, or prejudice any treaty or Aboriginal rights." The NFR grant is a funding mechanism and does not modify existing treaties or affect treaty rights.

1. Financial administration

First Nations, Tribal Councils and First Nations-led service delivery entities interested in the NFR grant must have in place a financial administration law (First Nations) or a policy on financial administration (Tribal Councils and First Nations-led service delivery entities). A financial administration law or a policy on financial administration outline financial and governance practices that assist in making informed financial decisions.

First Nations meet this requirement by adopting:

• a financial administration law pursuant to section 9 of the First Nations Fiscal Management Act;
• a financial administration bylaw pursuant to section 83 of the Indian Act; or
• a financial administration law via Council resolution and provided to ISC.

Tribal Councils or First Nations-led service delivery entities meet this requirement by:

• adopting a policy on financial administration; or
• demonstrating that it has equivalent policies and/or by-laws in place.

The elements required for a financial administration law or a policy on financial administration to meet NFR grant eligibility are outlined in the standards set by the First Nations Financial Management Board. For more information, and to see a sample, please consult the First Nations Financial Management Board's NFR grant eligibility page.

2. Financial performance

First Nations, Tribal Councils and First Nations-led service delivery entities interested in the NFR grant must also meet certain financial performance ratios. These ratios are assessed through an examination of their audited financial statements for the preceding 5-year period. Specifically, recipients must demonstrate that their financial performance over the period has:

• an average "fiscal growth ratio" of no lower than minus 5%
• an average "operating margin ratio" of no lower than minus 5%
• an average "asset maintenance ratio" of no lower than 100% (this ratio does not apply to Tribal Councils or First Nations-led service delivery entities that have less than $500,000 in total capital assets)
• a weighted average "net debt ratio" of no more than 60% or a current year "net debt ratio" for the most recent year of no more than 60%; and
• an average "interest expense ratio" of no more than 5%

Funding included in the NFR grant

The NFR grant provides core funding through a single Comprehensive Funding Agreement for each recipient. The grant draws from existing ISC funding and reference levels for the following six service areas and 28 budget activities:

ISC is working to expand the list of programs eligible to be funded via the NFR grant.

While most programs that provide core funding are covered under the NFR grant, recipients operating under the grant are also able to apply for proposal-based funding outside of the grant. Recipients receiving the grant can still receive other contribution funding through set, fixed or flexible funding approaches.

Currently, ISC is the only department with funding eligible through the NFR grant. ISC is working with other departments to identify barriers and develop approaches to overcome them so that funding from other departments might be available through the grant in the future.

How to renew or leave the NFR grant

Recipients may request the renewal of an NFR grant funding agreement through a clause in the Comprehensive Funding Agreement.

A First Nation may opt-out of the NFR grant and move into another funding agreement model, such as a Self-Government Grant, when they are interested and meet the requirements. Recipients may also opt-out of the NFR grant and return to a contribution-based agreement. Recipients interested in other funding agreement models are encouraged to reach out to their ISC regional office to initiate discussions.

Supports available to help meet the eligibility requirements

Recipients interested in meeting the eligibility requirements for the NFR grant can work with the First Nations Financial Management Board at no cost. All recipients applying for the grant have access to the tools developed by the First Nations Financial Management Board, as well as advice and support in working towards meeting and maintaining eligibility criteria.

First Nations and Tribal Councils interested in developing their governance capacity can submit a project proposal through the Professional and Institutional Development Program. This program is administered by ISC at the regional office level and funds projects that will help to increase the governance capacity of communities in core functions of governance, such as leadership, law-making and financial management. All First Nations and Tribal Councils are eligible for project-based funding under this program, regardless of their interest in the NFR grant.