Grant to support the new fiscal relationship for First Nations Terms and conditions

1. Introduction

The Government of Canada and the Assembly of First Nations are working together to establish a new fiscal relationship that moves towards sufficient, predictable and sustained funding for First Nations communities.

A grant funding approach, supported by funding arrangements of up to 10 years and escalation to account for cost drivers such as inflation and population growth, provides recipients with greater predictability of funding to support innovation in service delivery and longer-term partnerships and enhanced flexibility in the design and delivery of services.

Under the new fiscal relationship, First Nations and Indigenous Services Canada co-develop new approaches:

• to support capacity-building and self-determination by First Nations and to empower recipients to plan and invest based on their own socio-economic and health priorities
• to work toward the elimination of socio-economic and health gaps between First Nation citizens and other Canadians
• that are founded on a mutual accountability relationship whereby Canada and First Nations are mutually accountable for the commitments they make to 1 another, while First Nations councils are primarily accountable to their citizens and tribal councils and First Nations-led service providers are primarily accountable to their member First Nations

Note: For the purposes of this document, the term citizens refers to members of First Nations bands as defined by the Indian Act or by self-governing First Nations' law-making authority.

2. Legal and policy authority

Department of Indigenous Services Act, S.C. 2019, c.29, s.336.

First Nations Fiscal Management Act, S.C., 2005, c. 9.

3. Purpose, program objectives and expected results

The purpose of this grant is to empower First Nations, Tribal Councils and First Nations-led service delivery entities to improve social, economic, educational and health outcomes by providing enhanced flexibility and predictability of funding, in a context of mutual accountability.

Funding is provided to recipients who qualify for the grant for a suite of services, designed and delivered by  recipients to better meet the needs of  First Nations citizens and member First Nations. The objective, in the long term, is improved socio-economic outcomes and the overall well-being of First Nations, leading ultimately to self-determination.

The desired result of this proposal is to fundamentally transform the way in which the Government of Canada funds First Nations, tribal councils and First Nations-led service delivery entities by having First Nation leaders primarily accountable to their citizens and Tribal Councils and First Nations led-service delivery entities primarily accountable to their member First Nations, with effective governance and financial systems in place, and by strengthening First Nations-led institutions and the co-development relationship.

New Fiscal Relationship: Capacity Building and Engagement is a sub-program of the Indigenous Governance and Capacity Support program in ISC's  Departmental Results Framework, which includes intended results and indicators related to the grant.

4. Eligibility

Potential recipients who express interest in receiving funding through this grant are assessed against applicable standards of the First Nations Financial Management Board. This assessment is provided to ISC who makes the determination on eligibility. The following are eligible to apply:

• First Nations under the Indian Act
• First Nation governments referred to in self-government or land claim agreements
• Tribal councils
• First Nations-led entities that provide services to First Nation government or to First Nation citizens of member First Nations

In order for a First Nation under the Indian Act or a self-governing First Nation government to be eligible, the following requirements must be met:

• a financial administration law passed under the First Nations Fiscal Management Act or, for those First Nations that are not scheduled to that act, a financial administration law or by-law passed by the First Nation that meets applicable standards of the First Nations Financial Management Board
• a set of provisions of the financial administration law or by-law, identified via co-development as supporting accountability to citizens, have been brought into force
• financial statements for the preceding 5-year period meet certain financial performance standards

In order for a tribal council or First Nations-led service delivery entity to be eligible, the following requirements are met:

• a policy on financial administration is in place that is based on the standard used by the First Nations Financial Management Board
• a set of provisions of the policy on financial administration, identified via co-development as supporting accountability to member First Nations, have been brought into force
• a statement is provided on the results of engagements with member First Nations on the decision to join the grant
• financial statements for the preceding 5-year period meet certain financial performance standards

A financial administration law, by-law or a policy on financial administration is a set of governance and financial practices that assist a First Nation, a tribal council or a First Nations-led service delivery entity in making informed financial decisions.

Financial performance standards are as follows:

• average fiscal growth ratio of no lower than minus 5%. Fiscal growth ratio equals total revenue in the current year less total revenue in the previous year or total revenue in the previous year
• average operating margin ratio of no lower than minus 5%. Operating margin ratio equals total revenue less total expenses or total revenue
• average asset maintenance ratio of no lower than 100%. Asset maintenance ratio equals total tangible capital asset expenditures or total amortization expense. This ratio does not apply to tribal councils and First Nations-led service delivery entities with less than $500,000 in tangible capital assets
• weighted average net debt ratio of no more than 60% or a net debt ratio for the most recent year of no more than 60% and net debt ratio equals total liabilities less total financial assets or total revenue
• average interest expense ratio of no more than 5%. Interest expense ratio equals total interest expense or total revenue

For a recipient to receive funding through this grant for the upcoming fiscal year, either a financial administration law, by-law or policy on financial administration that meets applicable First Nations Financial Management Board standards must be in place by April 1 with key provisions also brought into force at that time.

5. Type of activities and nature of eligible expenditures

Recipients shall undertake to provide services that support social, economic, educational and health outcomes and shall be accountable to their citizens or member First Nations for the design and delivery of services to support those outcomes. Targets and outcomes will be articulated in Strategic Plans.

The following are considered the type and nature of the eligible activities and expenditures in determining the amount of the grant:

Band support funding
Band support funding is provided to assist band councils to meet the costs of local government and administration of departmentally funded services. This support is intended to provide a stable funding base to facilitate effective community governance and the efficient delivery of services, which includes the formulation, implementation and enforcement of policies and regulations, selection of representatives and efficient delivery of services to members in a way that enhances social and economic well-being.

Employee benefits
Employee benefits funding supports First Nation employers in attracting and keeping the qualified staff needed to manage and deliver services taken over from the federal government and enables employers to establish competitive employee benefit packages comparable to other employers.

Capital facilities and maintenance

• Operations and maintenance
• Minor capital

Capital facilities and maintenance funding is provided to First Nations in order to plan, construct and acquire and operate and maintain community capital facilities and services, infrastructure, including schools and residential housing. Streams of funding include operations and maintenance funding provided for the maintenance and operation of existing assets and minor capital funding for housing and for construction, acquisition, renovation or significant repair projects with value below $1.5 million.

Income assistance
Income assistance provides funding as a last resort to assist individuals and families who are ordinarily resident on reserve with basic needs, such as food, clothing and rent and utilities allowance, special needs, such as essential household items, personal incidentals and doctor-recommended diets and pre-employment and employment supports to move individuals toward self-sufficiency, such as life skills and job training supporting improved quality of life through the reduction of poverty and hardship on reserve and improved participation in and attachment to the workforce.

Assisted living
Assisted living provides funding to assist individuals with in-home care, adult foster care and institutional care. The purpose of the funding is to help provide non-medical social support services to seniors, adults with chronic illness and children and adults with disabilities, mental and physical, so that they can maintain functional independence and achieve greater self-reliance.

Elementary and secondary education

• Core elementary and secondary education

Elementary and secondary education provides predictable and flexible funding, based on the respective provincial funding model with adaptations, for funded First Nation students to receive a quality, linguistically and culturally relevant education that support their needs. It also aims to support models for First Nations to have control of First Nations education through regional education models with an ultimate goal to improve educational outcomes for First Nations students.

Post-secondary education
Post-secondary education improves the employability of First Nations people by providing funding for students to access education and skills development opportunities at the post-secondary level. Streams of funding include post-secondary student support providing non-repayable financial support to First Nations students attending recognized colleges and universities in Canada and abroad and university and college entrance preparation provides financial support to First Nations students who are enrolled in university and college entrance preparation programs offered in Canadian post-secondary institutions to enable them to attain the academic level required for entrance into degree and diploma credit programs.

Primary health care

• Health promotion and disease prevention
• Public health protection
• Primary care

Primary health care includes funding for a suite of services provided primarily to First Nations individuals, families and communities living on reserve. It encompasses health promotion and disease prevention to improve health outcomes and reduce health risks, public health protection, including surveillance, to prevent or mitigate human health risks associated with communicable diseases and exposure to environmental hazards and primary care where individuals are provided diagnostic, curative, rehabilitative, supportive, palliative or end-of life care and referral services.

Health infrastructure support

• Health system capacity

Heath infrastructure support provides a foundation to support the delivery of services in First Nations communities and for individuals. More specifically, health system capacity funding enhances First Nations capacity to design, manage, deliver and evaluate quality health programs and services through planning, management and infrastructure.

Lands and economic development services

• Community Economic Development
• Lands and environment

Lands and economic development services funding provides to support to First Nations to assist with enhancing the economic development, land and environmental capacity of communities and to support the establishment of the conditions for economic development to occur, increasing their participation in the economy. Streams of funding include allocations to First Nation communities for economic development services and allocations to First Nations for land and environmental responsibilities.

Registration administration
Registration administration funding supports First Nations in facilitating the administration of the Indian Registration System and maintenance of band lists and increasing the adoption of the secure certificate of Indian Status at the community level. Funding provides for local provision of Indian registration administration that results in Indians gaining status and the attendant benefits as well as an updated Indian Register held by the federal government.

Tribal council funding
The Tribal Council Funding program provides core operational funding to eligible tribal councils to develop the capacity of their member First Nations, as well as provide aggregated program and service delivery, as mandated by their member First Nations.

6. Total Canadian government funding and stacking limits

Total government assistance for the same purpose shall not exceed 100%.

7. Method for determining the amount of funding

The initial base amount of funding for each recipient is established in year 1 of the funding agreement, based on current levels of funding for services. Recipients are neither advantaged nor disadvantaged in transitioning from contribution funding approaches to the grant funding approach.

Consistent with the commitment under the new fiscal relationship to work towards predictable and sustained funding, the grant funding approach provides for escalation of a recipient's initial base funding to account for national inflation and community-level population growth, with a guaranteed minimum annual escalation rate of 2%.

Inputs for calculating a recipient's annual escalation rate shall include:

• Inflation: Final domestic demand implicit price index, 3-year moving average
• Population growth: Indian Register on reserve and Crown lands population growth rate, 3-year moving average

Escalation under the grant funding approach is applied to the initial base amount annually starting with year 2 of the grant funding agreement.

Consistent with the commitment under the new fiscal relationship to strive for equitable funding approaches across funding mechanisms, the grant funding approach provides for adjustments to the composition of initial base funding to allow for alignment with programs that provide funding to the grant. The grant funding approach also provides for inclusion of funding in grant funding arrangements that is not eligible for escalation where this approach is required to ensure equitable access to time-limited funding without compromising reporting and other provisions of grant funding arrangements.

The method for determining the annual amount of funding for core Elementary and Secondary Education Program shall follow the procedures set out in the authority for the amended Grants and Contributions to Support First Nations Elementary and Secondary Educational Advancement. This funding level shall be set annually, separate from the initial base amount of funding, and shall be adjusted annually per the terms and conditions of that program.

8. Maximum amount payable

The maximum amount payable to any recipient will be $150,000,000 per year.

9. Basis on which payments will be made

To meet the objectives of the grant, to maximize flexibility and predictability, a single installment will be made available at the beginning of each fiscal year provided the eligibility requirements and terms and conditions of the funding agreement are met.

10. Application requirements and assessment criteria

First Nations, tribal councils and First Nations-led service delivery entities express interest in receiving funding through this grant by notifying officials at ISC. They are then assessed by the First Nations Financial Management Board against applicable standards for financial administration law, by-law or policy on financial administration and financial performance. Once complete, ISC determines eligibility based on the First Nations Financial Management Board's assessment. If approved, the recipient becomes eligible to receive funding through this stream on April 1 of the subsequent fiscal year. Ongoing assessment will take place to ensure that recipients continue to meet the eligibility criteria on an annual basis.

11. Due diligence and reporting

The department has in place systems, procedures and resources for ensuring due diligence in issuing transfer payments and for verifying ongoing eligibility and terms and conditions of the funding agreement including regular verification of financial performance and co-developed approaches for risk-based monitoring of implementation of financial administration law, by-law or policy on financial administration provisions that support accountability to citizens or member First Nations.

In addition to the monitoring of the eligibility criteria, the adherence to terms and conditions of the funding agreement will be verified, including provisions to Canada of the following:

• Multi-year financial plans
• Strategic Plans including the recipient's priorities, desired outcomes and their associated performance measures, set by and for the First Nation or member First Nations
• Annual audited financial statements and annual reports

The above documents will also be made available to their citizens or member First Nations.

Grant recipients will also provide data to the department for a minimum set of indicators consistent with the Departmental Results Framework and program reporting structures.

12. Official languages

Where activities may be delivered to members of either official language community, access to services from the recipient will be provided in both official languages where there is significant demand and part IV of the Official Languages Act is applicable. Federal employees in regional offices in designated bilingual regions have the opportunity to work in the official language of their choice as per part V of the Official Languages Act and are encouraged to do so with consideration to the language rights of recipients. Regional offices in designated bilingual regions as well as headquarters provide opportunity for recruitment, where appropriate, of both English and French speaking Canadians, taking into account the needs of recipients in these regions as per part VI of the Official Languages Act.

Part IV of the Official Languages Act does not apply when funding is further distributed.

13. Intellectual property

Where a grant is provided for the development of material in which copyright subsists, conditions for shared rights will be set out in the funding agreement.

14. Distributed payments

Where a tribal council delegates authority or further distributes grant funding to a First Nation, the tribal council shall remain liable to the department for the performance of its obligations under the funding agreement. Neither the objectives of the programs and services nor the expectations of transparent, fair and equitable services shall be compromised by any delegation or redistribution of grant funding.

Tribal councils have full independence in the selection of First Nations and will not be acting as an agent of the government in making further distributions.

15. Other terms and conditions

None