Evaluation of the New Fiscal Relationship (NFR) Grant

Background

Indigenous Services Canada's (ISC) New Fiscal Relationship (NFR) Grant, also known as the 10-Year Grant,^{Footnote 1} is a renewable funding mechanism that aims to provide eligible First Nations (and First Nations-led service delivery entities as of October 2024) with enhanced funding flexibility and predictability, including annual funding escalation. The primary objective of the NFR Grant is "to empower First Nations to improve outcomes for their First Nations and citizens/members by providing funding in a flexible and predictable manner, in a context of mutual accountability."^{Footnote 2} To this end, rather than Grant-eligible funds each being subject to program-specific Terms and Conditions and reporting requirements, these funds are flowed to participating First Nations under one set of minimalist Terms and Conditions and require greatly reduced results reporting. In addition to removing restrictions on the types of eligible expenditures and providing First Nations with full discretion to reallocate funds across program lines, grant funds can be disbursed in full on April 1st to enhance cash flow management and are subject to an escalator mechanism intended to preserve their purchasing power over time. As of March 2025, the NFR Grant included up to 28 ISC programs and 160 (26%) of First Nations were participating.^{Footnote 3}

Evaluation purpose and scope

The evaluation of the NFR Grant is required under section 42.1 of the Financial Administration Act. In accordance with the Treasury Board Policy on Results, the evaluation examined the relevance, effectiveness, and efficiency of the NFR Grant. This is the first evaluation of the NFR Grant, and it covered the period from the creation of the NFR Grant in April 2019 to March 2025. The evaluation also reviewed the NFR Grant through the lenses of ISC's cross-cutting themes: Service Transfer, Gender-Based Analysis Plus, Indigenous Children and Families, Impacts of COVID-19, and Climate Change.

The evaluation was guided by an Evaluation Advisory Group (EAG) consisting of participants from the NFR Technical Working Group, representatives from First Nations,^{Footnote 4} ISC Evaluation, and ISC NFR staff. An external contractor, Ference & Company Consulting Ltd., was engaged to assist ISC Evaluation to conduct the evaluation.

Methodology

The evaluation used a mixed-methods approach to engage and collect data from 51 First Nations and organizations (including 44 Grant First Nations and 7 non-Grant First Nations and organizations, such as Tribal Councils and Health Authorities). The methods included:

• surveys (n=39),
• interviews (n=10, including 6 group interviews with 2-3 representatives counted as 1),
• focus groups (n=3, groups included 8-12 individuals), and
• case studies^{Footnote 5} of Grant First Nations (n=8) in four regions (British Columbia, Alberta, Ontario, and Atlantic Region)
• 53 interviews with other groups (i.e., ISC NFR Secretariat and regional representatives, AFN, FMB, other federal government representatives, and other Indigenous organizations),
• a document and literature review, and
• an administrative file and data review.

Analysis cut across the core evaluation issues and cross-cutting themes to ensure a full coverage of relevance, effectiveness and efficiency. Triangulation was used to verify and validate the findings obtained through these methods and to arrive at the overall evaluation findings. The evaluation generated 9 major findings, 5 recommendations and 3 considerations.

Major findings^{Footnote 6}

The evaluation identified the following findings related to the NFR Grant over the evaluated period.

Alignment with Priorities: The NFR Grant supported federal and First Nations priorities, including reconciliation, self-determination, and socio-economic advancement. Its flexibility, predictability, and reduced reporting requirements were widely recognized as benefits, enabling more effective financial planning, more efficient resource allocation, and overall responsiveness to First Nation needs.

At the same time, the fact that the NFR Grant was not designed to address funding sufficiency – one of the core tenets of the original vision for the broader New Fiscal Relationship – was seen as a critical factor limiting the Grant's potential impact.

Adoption and Barriers: About one-quarter of First Nations were participating in the NFR Grant by the end of the evaluated period. While eligibility rules were viewed as fair by the participants in the evaluation, smaller and remote First Nations faced barriers due to limited financial and governance capacity, staff shortages, and turnover. Further, training and long-term capacity-building resources remained insufficient.

Predictability and Sustainability: The NFR Grant has increased funding predictability and sustainability, creating efficiencies in financial planning by reducing reliance on short-term agreements and one-off funding adjustments. However, satisfaction with the escalator was mixed based on concerns that it was insufficiently responsive to inflation (regional cost differences), and did not account for off-reserve population growth. Concerns were also raised about the escalator's comparability to other federal funding models, with potential inefficiencies stemming from confusion or disincentives; as well as the concern that First Nations who might not yet have the capacity to join the Grant might get left behind.

Accountability: The NFR Grant aims to shift accountability from federal compliance to First Nation-level responsibility. While over half of participating First Nations reported stronger accountability to members, the evaluators found that inconsistent reporting and limited First Nation awareness and understanding of the Grant restricted progress.

Relationships and Communication: Reporting reductions and collaborative approaches improved federal–First Nation relations in some areas. However, communication challenges persisted, particularly at the regional level, where unclear reporting requirements created inefficiencies in implementation and oversight.

Recommendations

To strengthen the NFR Grant's role in building a new fiscal relationship, and based on the findings that emerged from the evaluation of the NFR Grant, as well as direct suggestions from all interviewees, it is recommended that ISC:

1. In collaboration with other departmental governance capacity-building initiatives, develop options for funding to support First Nations, including with additional financial governance capacity, to adopt and implement the Grant.
2. Enhance First Nations' awareness and understanding of the NFR Grant and its processes.
   • 2.1 Work with First Nations, the AFN, FMB, and other Indigenous-led organizations to develop and deliver more training for First Nations in adopting and implementing a FAL and in fully leveraging the NFR Grant flexibility to design and deliver programs.
   • 2.2 Enhance training of regional ISC staff on the reporting requirements, processes and flexibility options with the NFR Grant, particularly among those with direct contact with First Nations and/or those whose programs or initiatives are or could be implicated in the Grant, to ensure accurate and consistent communication with First Nations partners.
   • 2.3 Improve coordination of the NFR with other self-determination initiatives, such as self-government, education transformation, and health transformation, to ensure Indigenous partners are aware of the options available, how these initiatives compare and work together.
3. Extend Grant benefits to more programs and recipients.
   • 3.1 Accelerate review of other programs within—and possibly beyond—ISC for potential inclusion in the NFR Grant.
   • 3.2 Develop recommendations for how beneficial features of the Grant (i.e., financial flexibility, April 1 disbursements, retained funding at year end, predictable escalators, renewal provisions, longer agreements of up to 10 years) could be extended to non-Grant recipients and programs to support the progress of all First Nations towards self-determination.
4. In collaboration with First Nation partners, review the escalator formula and update it as appropriate to better reflect cost drivers, and work across sectors and with CIRNACtowards better alignment of funding escalators.
5. Continue efforts to co-develop an approach to mutual accountability in the context of the NFR Grant, in order to clarify governance roles, strengthen First Nation-level transparency, and advance the Grant's core objective of supporting self-determination.

Overall Management Response

The New Fiscal Relationship Grant Directorate welcomes the evaluation of the New Fiscal Relationship Grant and values the opportunity it presents to further improve the Grant, which is a fundamental transformation of ISC's fiscal relationships with First Nations that advances their autonomy and self-determination.

The evaluation highlights the Grant's alignment with Government of Canada priorities including meeting demonstrable needs. We are pleased to observe that the flexibility of the Grant is empowering First Nations to meet their objectives by allocating funds to meet the unique needs of their communities, including expanding existing programs and creating new ones. The Grant's predictability is allowing First Nations to plan without the constraints of short-term funding cycles, as well as build credibility and foster partnerships with private industry. The design of the Grant has contributed to First Nations increasing their financial administration capacity, and simplified reporting has allowed staff to focus on program delivery and community engagement.

The NFR Grant Directorate recognizes that there are opportunities to improve access and reduce barriers to the benefits of the Grant, particularly for smaller and more remote communities that have less financial capacity and thereby experience challenges meeting and maintaining eligibility criteria, including preparing annual audited financial statements and reporting to community members on strategic plans and results. We acknowledge that ISC could do more to help First Nations understand the new requirements of the Grant, as well as improve the responsiveness of the escalator in various ways, including to increased costs due to broader population changes as regional variations in inflation.

The findings and recommendations of the evaluation provide lessons and recommendations for efficiencies and effectiveness. We note that the evaluation has raised several broader issues that reach beyond the scope of the Grant that ISC will need to address, such as the governance capacity challenges faced by all First Nations, the insufficiency of funding levels across ISC's programs, and the need to improve the flexibility and predictability of funding for all recipients.

The NFR Grant Directorate believes that the activities outlined in the plan below are appropriate and realistic, and will improve the ability of ISC to expand the scope of the benefits of the Grant in ways that continue the journey of reconciliation towards self-determination for First Nations. Some activities are already underway to address some of the evaluation's recommendations and it is anticipated that some will be completed by the end of the next fiscal year. As the Grant Directorate acquires more experience and a better understanding of challenges in the design and delivery model, the appropriate adjustments will be made in terms of responses to the Recommendations.

Assurance

The Action Plan presents appropriate and realistic measures to address the evaluation's recommendations, as well as timelines for initiating and completing the actions. Many action items involve engagement with partners and relevant stakeholders, with changes to be implemented following these discussions.

Action Plan Matrix

Evaluation Timeline

This document constitutes the report for the evaluation of Indigenous Services Canada's (ISC's) New Fiscal Relationship (NFR) Grant. The overall purpose of the evaluation was to examine the relevance, effectiveness, and efficiency of the NFR Grant. The evaluation covered the period from the NFR Grant establishment in April 2019 to March 2025. The evaluation was conducted in accordance with the Treasury Board Policy on Results and Section 42.1 of the Financial Administration Act as part of ISC's Five-Year Departmental Evaluation Plan 2024-25 to 2028-29.

Evaluation Context and Key Consideration

2.1 Overview

The NFR Grant, also known as the 10-Year Grant,^{Footnote 11} is a renewable funding mechanism designed to provide eligible First Nations with enhanced funding flexibility and predictability, including annual funding escalation connected to on-reserve population growth and inflation. Funding for a number of ISC program areas (e.g., health, income assistance, education, infrastructure and environment, economic development, and governance)^{Footnote 12} is flowed under a single set of Terms and Conditions that describe all of the eligible program areas and simply state that:

"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."

No restrictions are placed on either how the listed program areas should be designed or delivered, or how the funds should be distributed across programs. Provisions are included in the funding agreement to address any risks identified to health and safety resulting from program design and delivery, or funding distribution.

The NFR Grant aims to significantly reduce reporting requirements by First Nations to ISC based on the principle that, instead of a focus on compliance-based reporting to Canada, First Nations governments should report to their own members. Within the NFR Grant, First Nations are expected to report to their members by preparing strategic plans, multi-year financial plans, and annual reports.

2.2 Expected outcomes and performance

The NFR Grant logic model outlines connections between the activities undertaken and the immediate, intermediate, and ultimate results that are expected to arise from those activities:

In the immediate term the NFR Grant is expected to result in First Nations having the knowledge, governance and fiscal tools and resources to control the design and delivery of programs and services in their First Nations.

In the intermediate term, the NFR Grant is expected to facilitate Indigenous leadership in administering core functions of government and deliver programs and services in line with First Nation priorities.

The ultimate outcome for the NFR Grant is that Indigenous Peoples, First Nations and governments control the design, delivery and management of services.

NFR Grant performance data is measured in different ways and the approach continues to evolve. Some program areas funded through the NFR Grant are measured through 'Data Collection Instrument' (DCI) data, which consists of annual data on 5 of the programs funded through the Grant (about 3-4 indicators per program), as described below in section 2.4 Reporting Requirements.

The NFR Grant logic model and performance indicators are provided in Appendix F.

2.3 Eligibility Criteria and Process

Criteria: To be eligible for the NFR Grant, a First Nation or First Nations-led service entity needs to meet two key criteria: 1) have demonstrated five years of healthy financial performance shown through five qualifying financial ratios,^{Footnote 13} and 2) have strong financial management systems in place by passing a financial administration law (FAL)^{Footnote 14} (or equivalent) and have it come into force.

Process: The NFR Grant eligibility process involves many steps starting with First Nations submitting an Expression of Interest in writing to ISC, to developing a FAL, to undergoing an eligibility review with FMB, to ISC reviewing the FMB assessment and convening the Grant Eligibility Review Committee, to ISC sending an invitation letter to adopt the NFR Grant, signing a NFR Grant funding agreement, and FMB completing a status check of the FAL implementation (12-18 months after the beginning of the Grant agreement).

In order to assess the first of the two key criteria for initial and ongoing eligibility^{Footnote 15}, FMB conducts an analysis of the First Nation's financial performance over five years to ensure it meets the financial performance ratios as set out in the Grant terms and conditions.^{Footnote 16}

After the initial adoption, to determine ongoing eligibility, ISC uses the results of assessments of financial performance and planning and reporting requirements (updated each year) in an annual risk assessment (co-developed by ISC, FMB and the AFN) guided by a Risk-Based Monitoring Framework:

Text alternative for Risk-Based Monitoring Framework

Elements are presented as a formula in this order: A) Audited Financial Statement Risk Rating + B) Annual Planning and Reporting Requirements Risk Rating = C) Consolidated Risk Rating +/- D) Environmental Scan & Annual Meeting = E) Final Risk Rating.

In this framework, ISC looks at the FMB Financial Performance Report and its Risk Rating (A) and combines this information with a second Risk Rating based on the FAL implementation reports prepared by the First Nation and shared with ISC (i.e. strategic plan, multi-year financial plan, annual report) (B), to create a Consolidated Risk Rating (C). This is combined with an Environmental Scan^{Footnote 17} (D) (the scan considers many factors, and can include a review of the record of discussion from the most recent Annual Implementation meeting between ISC and the First Nation, any complaints or allegations received by the Audit and Evaluation Sector (CIRNAC and ISC), the capacity development plan, DCI reporting rates, and the overall relationship with recipient. The outcome of these considerations forms a Final Risk Rating (E), which corresponds to Final Risk Tier (from 1-3, with 3 meaning highest risk)^{Footnote 18}.

Before the NFR Grant Annual Implementation Meetings with First Nations, ISC reviews the Final Risk Tier calculated by the latest assessment results provided by the FMB. These results help identify any follow-up eligibility activities or areas where capacity-building support may be needed.

During the meetings, ISC regional staff (Funding Services Officers - FSOs) and Grant First Nations should review the past year's progress, discuss opportunities for improving First Nation outcomes, and assess whether the First Nation continues to meet the eligibility criteria set out in its Comprehensive Funding Agreement (CFA). This includes reviewing any changes to the Financial Administration Law (FAL), reporting requirements, implementation of strategic plans, and members' access to key governance documents, as well as findings from FMB's performance and audit reports.

If challenges arise that could affect the success or sustainability of the Grant, the First Nation and ISC Regional office can hold additional meetings to develop solutions. ISC's NFR Secretariat may also be brought in to support this process if needed.

The process described above is used to determine ongoing Grant eligibility, and may include a co-developed plan with activities designed to:

1. Prevent and detect risk exposures that could reduce the ability of a Grant First Nation to maintain eligibility:
   • Supporting First Nations to maintain financial performance ratios; and
   • Supporting First Nations to maintain ongoing implementation of, and compliance with, their FAL.
2. Assist First Nations in identifying opportunities for increased capacity support and providing information on available capacity supports. This includes:
   • Detecting warning signals that First Nation eligibility may be at risk; and
   • Utilizing information available to proactively inform potential needs for capacity assistance.
3. Support First Nations in increasing accountability to their citizens (including reporting on the status of delivery through Strategic Plans and Annual Reports), and,
4. Ensure annual risk assessment and ongoing eligibility activities are minimal and non-intrusive and make use of information that is to be provided through the terms of the NFR Grant agreement, where possible^{Footnote 19}.

While ISC actively monitors eligibility and works with First Nations to co-develop remediation strategies where appropriate, no First Nation was removed from the Grant as a result of failing to maintain eligibility criteria during the evaluation period^{Footnote 20}.

See Appendix D for full details of the initial eligibility criteria and process.

Separate from the ISC reporting requirements, the FMB does a one-time "status check" with every Grant First Nation about 12-18 months after they adopt the Grant^{Footnote 21}. At this time, they undergo "agreed-upon procedures" (AUPs) to determine the extent that the requirements of a First Nations's FAL provisions are being implemented. The AUPs were developed by FMB and then were formally agreed upon by ISC as part of the Grant's eligibility criteria. This step is intended to confirm that the First Nation has the ongoing financial administrative capacity to implement the Grant and includes checking for such things as having an approved governance policy, an approved finance policy, a multi-year financial plan, annual reports, an organizational chart, a strategic plan, and an established Finance and Audit Committee (FAC). The results of this review are critical as inputs to ISC that provide reasonable assurances whether First Nation recipients under the NFR Grant remain eligible. It also helps inform the risk assessment that determines the FAL monitoring.

2.4 Reporting Requirements

NFR Grant reporting requirements are defined in its terms and conditions,^{Footnote 22} and require that ISC monitor ongoing compliance with the eligibility criteria of the Grant,^{Footnote 23} as well as the provision to both the Government of Canada and First Nation members of:

• 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
• Annual reports from the First Nation to its citizens
• Annual audited financial statements.

ISC requests the first three reports from First Nations to confirm their completion but does not review their contents. ISC does review and approve the content of the annual audited financial statements. Grant recipients are also required to provide data to ISC through Data Collection Instruments^{Footnote 24} including the Grant Results Report, which itself includes a set of data fields related to 5 programs in the Grant: Home and First Nation Care, Clinical and Client Care, Income Assistance, Assisted Living, and First Nation Infrastructure and Housing, consistent with the Departmental Results Framework and program reporting structures^{Footnote 25}. Other data collection instruments may include reporting for Elementary and Secondary Education and Post-Secondary Education, as applicable. The shift towards First Nation-based reporting has been accompanied by a reduction of data collected by ISC. Through the Grant, the number of data elements was reduced from up to 3,203 to 248, a reduction of up to 92%, depending on the programs delivered by each recipient.

As mentioned above, the concept of the NFR Grant was one piece of a larger effort that began in 2016 to build a new fiscal relationship between the Government of Canada and First Nations, and the NFR reporting requirements should be understood in that context. From the outset, a core objective of this work was to shift the accountability relationship. This vision began to take shape in a joint report^{Footnote 26} that was released in 2017 by ISC and the Assembly of First Nations, followed by a 2019 report by a newly established Joint Advisory Committee on Fiscal Relations. This work continued to evolve, including continued consideration of early recommendations to develop a formal Mutual Accountability Framework and a national outcome-based framework (NOBF)^{Footnote 27} that would move away from compliance-based reporting and instead measure the progress being made on improving the well-being of First Nations peoples.^{Footnote 28} The NFR Secretariat indicated that subsequent engagements with First Nations concluded that a pan-First Nations NOBF is inappropriate^{Footnote 29}; however, the principle that "the primary accountability relationship is between First Nations citizens and their governments" remains core to the new fiscal relationship^{Footnote 30}: under their agreements, Grant First Nations governments are required to report to their citizens based on their FAL or equivalent law, and to have in place accessible and culturally appropriate citizen redress processes^{Footnote 31}. Work to further refine and implement a shared vision for mutual accountability continues to advance through the First Nations technical advisory tables that were struck to support the new fiscal relationship.

2.5 Management and participants

During the evaluation period, responsibility for management of the NFR Grant was divided between the ISC NFR Secretariat within the Strategic Policy and Partnerships Sector^{Footnote 32} and ISC's regional offices. The primary responsibility of the ISC NFR Secretariat was the development of policies, procedures, and communications tools related to the Grant and management of the approval process for First Nations adopting the Grant. The ISC regional offices were primarily responsible for managing the funding agreements and relationship with First Nations, such as answering questions about the Grant and holding Annual Implementation Meetings with First Nations related to the Grant. The NFR Grant Operational Guide outlines roles and responsibilities.

The AFN and the FMB are the key external partners in developing and implementing the NFR Grant. ISC worked with the AFN and the FMB to develop eligibility criteria for the Grant, which leverage the FMB's established suite of standards. FMB plays an ongoing role in assessing First Nations' and service entities' FALs or equivalents and financial performance, as well as providing capacity-building support for First Nations and service entities in implementing their FALs or equivalents upon request. Reporting and risk monitoring is a shared responsibility between ISC and FMB.^{Footnote 33}

Individual First Nations and First Nations-led service entities are also key partners in the NFR Grant, including not only First Nations currently participating in the Grant but also First Nations and service entities seeking to join the NFR Grant. First Nations-led service entities (such as Tribal Councils or Health Authorities) became eligible to apply for the NFR Grant as of October 2024.

2.6 Implementation and uptake

The NFR Grant officially launched in April 2019 with an initial target of 100 First Nations adopting the NFR Grant in the first year. Eighty-five ultimately accepted Grant offers for 2019-20 (Table 1). The NFR Grant escalator was announced in Budget 2019^{Footnote 34} but Treasury Board approvals were delayed due to federal elections and the onset of the COVID-19 pandemic in 2020. The escalator was ultimately introduced in 2021-22.^{Footnote 35} In 2022-23, a distinct unit was created within the NFR Secretariat to oversee the NFR Grant implementation and support outreach, communications with ISC regional offices, and the development of operational guidelines.

As of March 2025, out of a total of 619 First Nations in Canada, 26% (n=160) were in the NFR Grant and 58% (n=359) of First Nations have formally expressed interest (at least once) in entering the Grant. There have been only two instances where a First Nation who adopted the Grant chose to transition out of the Grant for an alternative funding mechanism, once in 2019-20 (to revert back to a contribution funding model) and once in 2023-24 (to transition to self-government). Starting in 2023-24 and continuing to the end of the evaluated period, ISC targeted an annual increase of 18 First Nations with Grant agreements. This target was met in 2024-25.

Interest in and adoption of the NFR Grant varied by region (Figure 1). The highest regional percentage of First Nations expressing interest in the Grant were located in the Atlantic region (91% of First Nations in the Atlantic region), followed by Saskatchewan (70%), British Columbia (65%), and Manitoba (60%). The lowest rate of interest in the Grant was in the Northern Region (16%), Ontario (47%), Alberta (48%), and Quebec (55%).

However, while interest was high in some regions, there were larger gaps adopting the Grant in some cases. For example, while 91% of Atlantic First Nations expressed interest, only 44% adopted the Grant. Similarly, 48% of Alberta First Nations expressed interest, with only 8% adopting the Grant. Analysis of regional differences and reasons why some First Nations have not adopted the NFR Grant are provided in Findings no. 2 and no. 6.

Text alternative for Figure 1: First Nations that Expressed Interest and Adopted NFR Grant, by region

In the Atlantic region (n=34) 91% previously expressed interest and 44% adopted the NFR Grant.

In Saskatchewan (n=70) 70% previously expressed interest and 24% adopted the NFR Grant.

In British Colombia (n=199) 65% previously expressed interest and 40% adopted the NFR Grant.

In Manitoba (n=63) 60% previously expressed interest and 17% adopted the NFR Grant.

In Quebec (n=40) 55% previously expressed interest and 28% adopted the NFR Grant.

In Ontario (n=127) 47% previously expressed interest and 18% adopted the NFR Grant.

In Alberta (n=48) 48% previously expressed interest and 8% adopted the NFR Grant.

In the Northern Region (n=48) 16% previously expressed interest and 0% adopted the NFR Grant.

Source: NFR Grant Tracking Document for Expression of Interest Eligibility and Adoption 2019-2024 (2025).

2.7 NFR Grant capacity support

During the evaluation period, First Nations had access to various capacity-building supports for NFR Grant adoption and implementation. If requested, the FMB provided support to help Grant First Nations become eligible for the Grant and implement their FAL. Additionally, as described above, ISC regional office representatives held Annual Implementation Meetings with Grant First Nations to review Grant progress, assess capacity support needs and co-develop plans to address these needs. These supports were advisory in nature and did not include additional funding or staff.

Beyond the NFR Grant, other ad hoc supports and funding were available to assist capacity building, including workshops by AFOA BC (e.g., budgeting) and Professional & Institutional Development (P&ID) funding from ISC. The P&ID funding, available through calls for proposals, supported First Nations in developing or implementing a FAL. Some regional offices, such as Ontario and Saskatchewan, also provided targeted P&ID funding for NFR Grant adoption. In a broader context, ISC is undertaking a modernization of core governance and governance capacity programs^{Footnote 37} that may lead to further capacity funding in the future.

2.8 Initial funding allocations and escalation

Funding for the NFR Grant draws from existing ISC allocations for service areas included in the Grant. Initial base funding levels for the Grant are defined by existing funding levels. A guiding principle for the NFR Grant is that no First Nation should experience a decrease in funding as a result of transitioning to the NFR Grant.

Total ISC funding allocated to the NFR Grant has grown over time, which is primarily a reflection of the increasing number of First Nations in the Grant. In 2023-24, ISC program funding delivered through the NFR Grant totalled over $1.3 billion (Table 2). Additionally, for the 2024-25 fiscal year, the total funding allocated to the Grant was $1.67 billion.

Changes in the base funding levels and any new investment or measures to support program sufficiency affect all eligible First Nations regardless of funding mechanism (including those who have adopted the NFR Grant). First Nations with the NFR Grant may request reviews of base funding for a particular program, in alignment with the ISC program's terms and conditions. Adjustments are coordinated with escalation payments to avoid duplication of funding growth.

Starting in the second year of the agreement, NFR Grant recipients are eligible to receive an annual escalation of funding to address inflation and population growth (minimum of 2% annual growth). Details regarding the NFR Grant escalator and its formula are provided in Appendix G.

It is important to note that Table 2 details the program funds that flow though the NFR Grant's Terms and Conditions, which are still considered departmental expenditures under their respective programs in ISC's accounting structure. There was also funding to support the NFR Grant directly, including the Operating funds such as salaries and benefits for the ISC NFR Secretariat ($1.3 million per year), as well as contribution funding provided to the FMB to support its role in the Grant ($1.3 million per year). In addition, ISC provides contributions ($3.7 million per year) to support two pilot projects that FMB is undertaking to support ISC's efforts to strengthen governance capacity: the Default Management and Prevention pilot project and the Financial Management System Support Services pilot project.

3.1 Scope

In line with the Treasury Board Policy on Results, the objective of this evaluation was to examine the relevance, effectiveness, and efficiency of the NFR Grant since its launch in April 2019 until March 2025. The evaluation also covered thematic areas and priority issues relevant to the program and partners, and to the broader department, including service transfer; the COVID-19 pandemic; climate change; children, youth, and families; and impacts through a gender-based analysis plus (GBA plus) lens.

Findings are intended to provide reliable evidence to inform NFR Grant design and delivery improvement based on identified best practices, opportunities, and lessons learned in First Nations contexts. All ISC regional offices with an NFR Grant agreement in place were included in the evaluation. A detailed overview of the evaluation issues and questions can be found in Appendix roman numeral 1I.

3.2 Evaluation Advisory Group

The evaluation team collaborated with an Evaluation Advisory Group (EAG) consisting of members from ISC Evaluation, NFR staff and some members of the NFR Technical Working Group, including representatives from the AFN, the FMB, and a few First Nations that had adopted the NFR Grant. The aim of the EAG was to provide an opportunity to collaborate with key partners and gather input at key stages of the evaluation, including planning and scoping, development of the methodology and data collection tools, preliminary findings, and final report.

3.3 Methodology

The evaluation was conducted by the ISC Evaluation Branch in collaboration with an external consultant. It utilized a mixed-methods approach that gathered data through First Nations engagement (surveys, interviews, focus groups), case studies, interviews with other groups (i.e., ISC regional representatives, ISC NFR Secretariat, partners including the AFN and FMB, other federal government representatives, and other Indigenous organizations), a document and literature review, and an administrative file and data review. Data collection took place between August 2024 and March 2025.

3.4 Limitations

The following limitations were identified, and corresponding mitigation strategies were implemented as part of the evaluation:

Risks of biased samples: Although the survey was distributed to all First Nations, the response rate was relatively low, suggesting a significant risk of self-selection bias. Interviews of Grant and non-Grant First Nations were based on a purposive sample, and were of course also voluntary, likewise creating the risk of bias. Additionally, only seven non-Grant First Nations were engaged, limiting the ability to compare perspectives. Time and budget constraints also restricted the number of First Nation visits and prevented travel to remote areas. Finally, the evaluation relied on band administrators and leadership perspectives. A few First Nation members did respond to the survey, but not enough to provide a representative view of how the broader membership perceives the effectiveness and impacts of the NFR Grant. To mitigate these limitations, the evaluation used multiple lines of evidence and diverse sources to triangulate findings and ensure a broader range of perspectives. Also, multiple feedback methods were offered to First Nations—including surveys, interviews, focus groups, and site visits—and the evaluation was promoted at First Nations gatherings to encourage broader participation. Findings were reviewed with the Evaluation Advisory Group (EAG), and transparency about limitations and potential biases was maintained throughout the process as an additional safeguard for interpretation and use of results.

In addition, the importance of regional analysis is recognized, given the distinct contexts of different regions and the varying levels of interest in and adoption of the NFR Grant. Efforts were made to ensure regional representation, and region-specific insights are provided where possible. However, regional breakdowns of the survey data are not discussed in this report, as results are unreliable with such small samples.

Limited data on socio-economic impacts: The ultimate outcome of "Indigenous Peoples, First Nations and governments control the design, delivery and management of services," uses the indicator^{Footnote 44} of the First Nation Well-Being (CWB) Index, which combines census data on income, education, housing, and labour force activities at the First Nation level^{Footnote 45}. The two specific indicators track the ratio of the average percentage increase in CWB scores from one Census to the next for First Nation receiving the NFR Grant, compared to non-participating First Nations and non-Indigenous communities, respectively. While the CWB is not the only or ideal measure of socio-economic impacts, the Census remains the only readily available source of First Nation-level data to compare Grant First Nations to non-Grant First Nations and non-Indigenous communities over time. Since the Grant began in 2019 and the latest CWB data is from 2021, it is too early to assess long-term impacts. As the census conducted only every five years, the next results will reflect 2026 data and likely become available around 2028.

Difficult to attribute impacts on First Nation well-being to NFR Grant: Although the NFR Grant uses the CWB as a key performance indicator, it remains difficult to attribute impacts directly to the NFR Grant. Assigning such long term and high-level metrics to a specific program or initiative is difficult in any context, and it is even more so for the NFR Grant, as it is a funding mechanism rather than a program, and the extent to which it has influenced the design and delivery of programs within individual First Nations is not known. Confounding external factors, such as inflation, variability in funding levels, revenue changes, and health and climate crises, significantly affect First Nation well-being independently of the Grant. Additionally, the reduced reporting requirements under the Grant framework, designed to lessen administrative burden, further complicate efforts to assess direct outcomes by providing less data for analysis than traditional funding agreements.

Grant implementation also involves select program results reporting through annual Data Collection Instruments (DCIs), although data collected during the evaluation period was limited and inconsistent, and the completion rate was too low to establish trends.^{Footnote 46}

To partially address these limitations, Grant recipients were asked to self-report interim impacts they attributed to adopting the NFR Grant in areas such as financial administration, Nation accountability, and program flexibility. Evaluators also reviewed qualitative trends reported by First Nations over time.

4.1 Finding no. 1: The NFR Grant objectives and design are largely aligned with federal government and First Nations priorities.

The primary objective of the NFR Grant is "to empower First Nations to improve outcomes for their Nations by providing funding in a flexible and predictable manner, in a context of mutual accountability."^{Footnote 47} Most Grant First Nations surveyed (77%) agreed that the NFR Grant objective is well aligned with their Nation priorities (Figure 2).

Text alternative for Figure 2: Grant First Nations' perceptions of NFR Grant alignment with Nation priorities

Question: To what extent is the objective of the NFR Grant well-aligned with your community priorities?

• Some extent: 12%
• Very little extent or not at all: 8%
• Not sure: 3%
• Good or great extent: 77%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document]

Some aspects of the NFR Grant's efficiency came through as Grant First Nations most frequently cited the following reasons why the NFR Grant supported their Nation priorities and/or why they adopted the NFR Grant:

• Flexibility – Many Grant First Nations identified that flexibility—and the enhanced autonomy to determine the use of funds it promises—was empowering and allowed the First Nation to meet the objectives outlined in their Nation strategic plan. It was explained that the flexibility in the Grant design supported allocations based on a First Nation's priorities, addressing unique needs, responding to unexpected challenges, and funding initiatives that reflected the First Nation's values and goals.

"[Our First Nation's] strategic plan emphasizes accelerating economic growth and community independence. The NFR Grant's flexibility allows [the First Nation] to allocate funds toward economic development projects, such as commercial ventures and tourism initiatives, thereby enhancing self-sufficiency."

• Predictability – Some Grant First Nations highlighted the NFR Grant's predictable funding as a key benefit. The stability of funding over a term of up to 10 years, along with the option to receive annual funds upfront each April 1, supported long-term planning, improved cash flow management, and allowed First Nations to earn interest by investing unused funds. The ability to retain surpluses at year-end further enhanced financial stability. Some case study participants also noted that the multi-year funding signaled trust from the Government of Canada, and it strengthened self-governance. Additionally, the predictability and accountability associated with the Grant were seen as helping to build credibility and foster partnerships with private industry.

"The NFR Grant offers long-term, predictable funding, enabling [us] to plan and implement programs that align with [our] strategic priorities without the constraints of short-term funding cycles."

• Reduced and simplified reporting. Some Grant First Nations also referred to the simplified reporting requirements as a key aspect of the Grant's design and delivery that was working well. It was explained that the consolidation of multiple program-specific reports into a single report had simplified administrative tasks and allowed staff to focus more on program delivery and First Nation engagement, rather than detailed compliance documentation. Notably, some First Nations found that reporting burden had not decreased overall, perhaps due to increased reporting by other ISC initiatives, or the more complex, consolidated reporting and internal reporting required by the NFR Grant and the FAL.

Similarly, most Government of Canada representatives interviewed (81%) agreed that the NFR Grant objective was aligned well with the federal government's efforts to renew its relationship with Indigenous Peoples and advance reconciliation and self-determination. Furthermore, more than half of respondents noted the importance and utility of the NFR Grant as a tool of transformation for First Nations since it allowed Nations to better respond to their unique needs.

"[The NFR Grant is] the most empowering approach to support First Nations' self-determination in the last 10 years."

The NFR Grant objective's focus on improved flexibility, predictability, and improved socio-economic outcomes of First Nations is aligned with priorities stated in various federal and co-developed reports and plans, with highlights elaborated below.

As detailed in Section 1.2, Evaluation Context and Key Considerations, the NFR Grant emerged from the collaborative development of a new fiscal relationship between the Government of Canada and First Nations, Inuit, and Métis that recognizes and is responsive to Indigenous Peoples' right to self-determination. The resulting report by ISC and AFN: A new approach: Co-development of a new fiscal relationship between Canada and First Nations (2017)^{Footnote 48} recommended the new fiscal relationship achieve this through ensuring sufficient funding and greater predictability, empowering First Nations to plan and invest based on their own priorities. A follow-up report, Honouring our ancestors by trailblazing a path to the future: Interim Report of the Joint Advisory Committee on Fiscal Relations (2019),^{Footnote 49} by the Joint Advisory Committee on Fiscal Relations (JACFR) further recommended principles to guide the new fiscal relationship: respect for Treaties, autonomy, sustainability, sufficiency, predictability, accountability, objectivity, and efficiency. Although the NFR Grant's focus on self-determination, compatibility with Treaty rights, sustainability, predictability and accountability demonstrates a good degree of alignment with these principles, the fact that the Grant was not designed to address funding sufficiency is an important point of departure that will be highlighted at various points in this evaluation.

More recently, the 2021 Minister of Indigenous Services Mandate Letter outlined a continued need to "work with [First Nations] communities and institutions to invest in capacity-building initiatives that support and advance self-determination, like the 10-year Grant."^{Footnote 50} Further, the NFR Grant aligns with the ISC 2024-25 Departmental Plan priority: "Indigenous communities have governance capacity and support for self-determination," since the Grant's flexibility enhances First Nations' ability to control the design, delivery and management of services.^{Footnote 51} In particular, the NFR Grant aligns with the Government of Canada's United Nations Declaration on the Rights of Indigenous Peoples Act (2021) Article 23:^{Footnote 52}

"Indigenous peoples have the right to determine and develop priorities and strategies for exercising their right to development. In particular, Indigenous peoples have the right to be actively involved in developing and determining health, housing and other economic and social programmes affecting them and, as far as possible, to administer such programmes through their own institutions."

It is also worth noting that many of the challenges associated with ISC's standard funding mechanisms—challenges the NFR Grant was specifically designed to address—have been raised repeatedly in evaluations of other ISC programs. These include excessive reporting burdens, funding delays, restrictions on carry-forward, lack of responsiveness to population growth and inflation, and issues related to predictability and flexibility. Annex E provides a summary of these recurring issues, based on 13 evaluations conducted between 2014 and 2025.

Program documentation indicates that an ultimate goal for the NFR Grant is to improve the socio-economic conditions of First Nations. This is not only core to ISC's departmental mandate (as referenced, for example, in its enabling legislation) but also First Nations priorities as captured, for example, in the Truth and Reconciliation Commission of Canada: Calls to Action 7 and 19, which call on the federal government to eliminate education, employment, and health gaps between Indigenous and non-Indigenous individuals.^{Footnote 53}

The evaluation found that, despite agreement from both First Nations and federal government representatives that the NFR Grant objectives and design are aligned with their respective priorities, the design's failure to address ongoing issues such as funding sufficiency and capacity gaps limited full alignment. Among surveyed Grant First Nations that thought the NFR Grant was not well aligned with their Nation priorities, the top reason provided was that the overall funding level still did not meet their Nation needs. Many Government of Canada, AFN, FMB, and other Indigenous organization representatives similarly acknowledged that the NFR Grant did not address funding sufficiency. As will be discussed further in Findings no. 5 and no. 8, funding limitations posed challenges for First Nations in effectively designing and delivering programs.

4.2 Finding no. 2: The NFR Grant eligibility criteria and process are appropriate but pose challenges for some First Nations.

The Grant eligibility criteria and process are efficient but have some limitations. Most Grant First Nations surveyed were satisfied with the NFR Grant eligibility criteria (75%) (Figure 3) and eligibility process (79%), finding them fair and appropriate and noting that the criteria were well-designed to ensure First Nations were prepared to manage the NFR Grant effectively^{Footnote 54}. Specifically, they reported that the financial criteria ensured First Nations were financially stable and capable of managing the flexibility of the funding responsibly. Some respondents also mentioned that having a FAL in place fostered strong governance and financial discipline, setting a framework for sound financial management, transparency, and accountability. Finally, some First Nations expressed appreciation for the objectivity and clarity of the eligibility metrics so First Nations clearly understood what was required.

Text alternative for Figure 3: Grant First Nations' satisfaction with NFR Grant eligibility criteria

Question: How satisfied are you with the NFR Grant eligibility criteria?

• Somewhat satisfied: 7%
• Not Very or not at all satisfied: 15%
• Prefer not to say: 3%
• Very satisfied or satisfied: 75%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

"We are fully compliant on these criteria and work for continual improvement. [Our First Nation] is FMB certified, and its financial ratios are very good."

Most other groups interviewed (including ISC NFR Secretariat, AFN, FMB, other government representatives, and ISC regional office representatives) agreed the eligibility criteria (73%) and process (71%) were appropriate.^{Footnote 55} Like Grant First Nations, these respondents highlighted the importance of the eligibility criteria and their rigor, noting that they provided a strong indication of a First Nation's readiness—particularly in terms of financial literacy—and served as a proxy for the governance and capacity needed to manage the grant, and to design and deliver programs effectively.

Regarding the eligibility process, some ISC and other governmental representatives highlighted that the extensive vetting and the process of developing a FAL set First Nations up for success. While some interviewees highlighted the involvement of the FMB as a strength because the organization provided both a third-party role and Indigenous perspective, others, including in case studies, echoed the regional office perspective that FMB involvement was problematic for some First Nations. The evaluation also heard that resistance to working with the FMB had lessened over time due to improved FMB efficiency for outreach and relationship-building in regions.

The evaluation also looked at why First Nations had not yet adopted the NFR Grant. At the time of writing, 74% of First Nations in Canada with ISC funding agreements had not adopted the NFR Grant. Adoption and interest in the NFR Grant varied by region (e.g., 40% of BC First Nations were in the NFR Grant, while 8% of Alberta First Nations were in the NFR Grant as of March 2025) (as discussed in Section 2.6 Implementation and Uptake). The case studies identified various reasons for non-adoption, including regional differences and governance preferences (see Finding no. 6). In some cases, First Nations had expressed interest but had challenges with meeting the eligibility criteria (i.e., the need for 5 years of audited financial statements^{Footnote 56}, meeting financial ratios and/or the requirement to adopt a FAL).

Ineligibility may be due to a variety of factors. For example, it was noted by some interviewees^{Footnote 57} that more support was required to build capacity for eligibility among non-Grant First Nations, particularly smaller and more remote First Nations, a suggestion that finds some support in the available quantitative data. First, NFR Grant First Nations had a slightly higher average CWB in 2021 than non-Grant First Nations: 66 versus 62^{Footnote 58}. To the extent that CWB scores can be considered reasonable proxies for First Nation capacity, this difference suggests they may have had a small pre-existing advantage that contributed to their ability to meet the eligibility criteria required to enter the Grant.

Second, NFR Grant First Nations are, on average, almost double the population size of non-Grant First Nations, suggesting that smaller First Nations may struggle to meet the eligibility criteria. This is explored further in Finding no. 4. This was echoed in the case studies, where First Nations perceived that the eligibility criteria were a significant barrier to Grant adoption, favouring larger, more resourced First Nations. In general, case studies revealed that larger First Nations with more resources reported a smoother, more efficient, process in meeting the Grant eligibility criteria, while Nations with smaller finance departments, fewer staff, and less financial capacity reported difficulty meeting and maintaining eligibility criteria, including the audited financial statements.

Some First Nations had also not yet joined the Grant due to competing priorities and crises. The evaluation heard in case studies that entry into the Grant initially required an increase in a First Nation's administrative burden as they completed the steps to become eligible (audited financial statements, development and implementation of FAL). As such, some First Nations explained they had not yet adopted the NFR Grant primarily due to competing and urgent priorities, such as responding to the COVID-19 pandemic, wildfires, and mental health and substance use issues, which had strained capacity allotment, constantly pulling the focus of First Nations away from the Grant to meet pressing needs. The COVID-19 pandemic also limited access to auditors in some regions (since many First Nations were on lockdown) and led to a backlog in annual financial statements required for gaining eligibility.

Beyond the initial capacity required to enter the Grant, it is also important to consider whether First Nations can sustain their eligibility over time, as this offers further insight into the reasonableness of the criteria. Two of the Grant's performance indicators are relevant to this question of sustained eligibility:

1. the percentage of First Nations that continue to meet the financial performance criteria set out by the FMB (i.e., the five aforementioned financial ratios), and
2. the percentage of First Nations in the Grant that publish reports codified in their financial administration laws/by-laws/policies.

The 95% target for the first indicator was consistently exceeded, with 95% of reviews being successful in 2019-20 and 2020-21, and 100% being successful in 2021-22 and 2022-23. Performance on the second indicator, however, was fell short of the 90% target, with only about 50% of First Nations demonstrating to ISC that they were publishing these reports.

These results suggest that the financial performance criteria appear reasonable and manageable for most First Nations. However, the low compliance with FAL reporting requirements warrants further examination. ISC will need to determine whether this reflects real risks needing mitigation (such as through capacity support) or whether it suggests that the reporting requirements are excessively demanding. Note that the question of reporting and accountability to First Nation members will be explored further in Finding no. 7, while the issue of First Nations needing greater capacity support to achieve eligibility and implement reporting and other elements of their FALs will be addressed in Finding no. 8.

The fact that no First Nations were removed from the NFR Grant during the evaluation period does suggest that the NFR Secretariat did not view the observed levels of non-compliance as a significant risk. Although ISC had the authority to remove non-compliant First Nations from the Grant, those who were technically not maintaining eligibility due to failure to demonstrate full implementation of their FALs were not being asked to leave. Instead, ISC worked collaboratively with the First Nation to try to resolve any outstanding issues through more frequent discussion and, where appropriate, providing support through the Professional and Institutional Development program.

It is important to note that there was an important change during the evaluated period regarding who was eligible to participate in the Grant. In 2024, the NFR Secretariat expanded the eligibility criteria to include First Nations-led service entities (such as Tribal Councils and Health Authorities). Expanding NFR Grant eligibility to include these organizations could allow more First Nations to benefit (however indirectly), especially those who face barriers to entering the Grant due to their size, remoteness, or capacity. However, it was cautioned by some representatives that opening the NFR Grant to other organizations could unintentionally impact the ability to support Grant First Nations because more organizations would be eligible for the escalator, creating funding pressures that could be challenging for the department to sustain.

4.3 Finding no. 3: Several limitations were identified in the NFR Grant escalator design.

The NFR Grant escalator is unique from other program funding adjustments as it has no cap on escalation (with a minimum of 2% funding escalation every year, starting in the second year of their NFR Grant agreement). While the NFR Grant escalator provided over $102.1M in additional program funding during the 2024-25 FY (see Table 6), First Nations did identify some limitations with the escalator design and efficiency.

During the evaluation period, the escalator was calculated based on inflation^{Footnote 59} and population growth^{Footnote 60}. The escalator also offered a 'best-of' commitment between the NFR Grant calculated percentage, a 2% minimum escalation, and ISC regional office block indexing rate for prior block agreement holders^{Footnote 61}, so Grant First Nations were never disadvantaged under the NFR Grant agreement. Due to its co-developed program funding model based on nominal roll data and Provincial and Territorial comparability models, K-12 funding is not included in the escalation calculation.

The average annual escalator rate has ranged from 2.8% in 2021-22 to a high of 5.1% in 2024-25. The average top-up per Grant First Nation in 2024-25 was $280,000. Based on an analysis of escalator data for 2024-25, of 142 Grant First Nations eligible for funding escalation, only 7 were escalated at the minimum of 2% and the highest escalation rate was about 12%. According to ISC NFR analysis, from 2019-20 to 2022-23, the 84 First Nations who started the NFR Grant in 2019-20 had an average annual increase of 5.7% in Grant eligible funding, compared to 3.4% for First Nations without the Grant.

Perspectives were mixed on the effectiveness, efficiency, and adequacy of the NFR Grant escalator in addressing inflation and First Nations population growth. Just under half of Grant First Nations surveyed (46%) were satisfied with the NFR Grant escalator (Figure 4). Similarly, just over half of ISC and other Indigenous organizations interviewed (52%) felt that the NFR Grant escalator design adequately responded to inflation and population growth.^{Footnote 62} Among Grant First Nations that were satisfied with the escalator design, respondents most frequently explained that the escalator amounts were fair or helpful. For some case study First Nations, the escalator was their primary reason for adopting the Grant, highlighting the importance of having a feature within the funding agreement that accounted for inflation and population factors. Other groups interviewed also pointed to the key features of the escalator such as the 2% minimum, and that it had resulted in overall higher average levels of escalation compared to First Nations not in the Grant.

Text alternative for Figure 4: Grant First Nations' satisfaction with NFR Grant escalator

Question: How satisfied are you with the design of the NFR Grant escalator?

• Somewhat satisfied: 26%
• Not Very or not at all satisfied: 20%
• Not sure: 8%
• Very satisfied or satisfied: 46%

N=39 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

The main criticisms of the escalator (across all groups) were as follows:

It did not make up for longstanding limitations in base funding levels.^{Footnote 63} Grant First Nations that were less satisfied with the escalator most commonly indicated that the escalator amounts were low and not sufficient to address actual First Nation needs, nor the elevated inflation experienced in recent years. Representatives from Grant First Nations in case studies as well as many other groups interviewed highlighted that, despite providing some benefit, the escalator remained insufficient to address the longstanding funding limitations faced by First Nations. Although the escalator was not designed to ensure funding sufficiency, First Nations' concerns about baseline insufficiency influenced their mixed levels of satisfaction with the escalator design. Many First Nations representatives mentioned that base-level funding reviews could take a lot of time and that results could be problematic as they relied on existing program methodologies and formulae, which varied by program area.

There were issues with the population growth indicator. First Nations across regions expressed concern that, because the population measure used for the escalator included the growth of on-reserve members only, it failed to support growth for members who were present on reserve temporarily or who were living off-reserve but still depended on services delivered on-reserve. The latter issue was particularly notable for First Nations that only recently acquired a land base yet serviced many members in neighbouring towns. It is also notable that the Indian Register, which is the source of population data for the escalator, is "subject to delays in reporting for events such as births, deaths, and change of residence"^{Footnote 64}, which can impact the accuracy of population counts. While alternative data sources, such as Canada's Census of Population, are available, they also present limitations in terms of completeness and timeliness.

There were issues with the inflation measure. Some groups interviewed noted a limitation of the escalator was that it did not account for all increased costs and differences in costs associated with rural and remote First Nations.

"The escalator makes sense but does not take into consideration natural events within a community (i.e., fire, floods, a mill shutting down, increasing unemployment, etc.). I would like to see the escalator calculation be in line with what municipalities are getting. Most communities have additional challenges that municipalities would not have (a big factor is remoteness and enticing people to make the drive to work in your community)."

Misalignment with other ISC/CIRNAC initiatives. In case studies and surveys, both Grant and non-Grant First Nation and organizational representatives expressed some confusion about precisely how the Grant's escalator is calculated. There was a noted misalignment between escalator approaches of the NFR Grant and other ISC/CIRNAC initiatives—such as self-government, education transformation, and health transformation. The lack of clarity and consistency in escalator formulas may create uncertainty for First Nations in financial planning and could influence major governance decisions, such as whether to pursue self-government agreements. For example, the NFR Grant escalator formula considers population growth in all eligible programs^{Footnote 65}, regardless of if the program is considered to be directly impacted by population changes, contrary to the population adjustments used in self-government agreements, which can apply to certain funding streams only.

Some government representatives also highlighted that the NFR Grant may not align with, and in some cases may even compete with, other initiatives intended to advance self-determination. For example, before health authorities became eligible for the Grant, some First Nations felt incentivized to leave those authorities in order to access potentially greater escalation independently through the NFR Grant. Additionally, some First Nations who went directly to the NFR Grant felt they missed out during the Health Transformation process where top-up funds provided for health entities.^{Footnote 66} Moreover, the existence of different escalation formulas—and the complexity involved in transferring accumulated escalation into a self-government agreement—may deter some First Nations from pursuing self-government. These inconsistencies can lead to confusion, coordination challenges, and other inefficiencies; as well as erosion of trust, particularly when the rationale behind funding differences across initiatives is unclear.

There is a risk that non-Grant First Nations may stagnate or fall behind as Grant First Nations advance their priorities. The intent of the Grant is to enable progress among First Nations that are ready and interested in making the transition; however, without complementary supports for non-Grant First Nations, the socio-economic gap between First Nations may widen over time. Government representatives expressed concerns that Grant First Nations benefit from annual escalations and greater funding flexibility, while some non-Grant First Nations—even if they have urgent needs (e.g., access to clean drinking water or adequate housing)—may receive comparatively lower funding.

Evaluators heard anecdotes that illustrated the impacts of this challenge, including perceptions of inequity and even cases where non-Grant First Nation members had applied to transfer into neighbouring Grant First Nations to access higher income assistance benefits, prompting one First Nation to temporarily freeze band transfers.

"[The NFR Grant] provides more money for First Nations with higher capacity… It disproportionately benefits communities with higher capacity… largely to do with the somewhat high bar to be eligible in financial performance and capacity to hire a financial director."

4.4 Finding no. 4: Many Grant First Nations have increased their financial administration capacity through their involvement in the NFR Grant

According to the NFR Grant Logic Model, one of the goals of the NFR Grant is for "First Nations to have the knowledge, governance, fiscal tools and resources to control the design and delivery of programs and services to their communities.^{Footnote 67}" For the purposes of this evaluation, Grant First Nations were asked in a survey to rate the extent to which the NFR Grant had helped their Nation to increase its financial administration capacity, and more than half (62%) felt that it had, to a good or great extent (Figure 5).

Text alternative for Figure 5: Extent Grant First Nations felt the Grant increased their financial administration capacity

Question: To what extent did NFR Grant help your community increase its financial administration?

• Some extent: 10%
• Very little extent or not at all: 25%
• Not sure: 3%
• Good or great extent: 62%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

The top 4 improvements to financial administration capacity reported by surveyed Grant First Nations as a result of adopting the Grant (chosen from a list of options^{Footnote 68}) included:

• The full and unconditional ability to retain funds into subsequent fiscal years. Most Grant First Nations agreed that the ability to retain funds at year end without having to give back or account for unspent dollars was a positive improvement in their Nation as a result of adopting the Grant.

"We signed up for the NFR Grant as we wanted more control over our funding with less reporting attached to it. It was difficult each year to review all funding to ensure all the funds were expensed and not being clawed back by ISC. So, the NFR Grant was a better fit for our nation as there are no clawbacks."

• Reduced reporting to ISC. Most Grant First Nations also noted that reduced reporting to ISC was a positive draw to adopting the Grant. When asked if reporting (to ISC and their First Nation) had reduced, stayed the same, or increased since entering the NFR Grant, many Grant First Nations surveyed (40%) found that reporting overall had reduced, improving efficiency by reducing staff costs and freeing up staff time to focus on program delivery. One quarter (25%) of respondents believed reporting had remained about the same, while a few (15%) respondents perceived that reporting had actually increased with the Grant. This was explained by the increased administrative burden related to FAL implementation and the review process.

"With not having to constantly report on every small funding opportunity, the Band has been able to smooth the funding amongst the various departments and allocate the funds more easily. This has provided [a] great opportunity for better financial health and management."

• Improved financial controls. Most Grant First Nations mentioned that adopting the Grant improved their financial controls through the procedures required by their FAL. As stated earlier, 160 First Nations across Canada adopted the NFR Grant as of March 2025. Although First Nations can certainly adopt a FAL without entering the NFR Grant, most First Nations (71%) who adopted the NFR Grant in 2019-20 adopted a FAL that same year, strongly suggesting that their desire to enter the Grant was their impetus for doing so. The criteria for the FAL (or equivalent law) established by the FMB require that First Nations implement rigorous financial administration procedures and reporting including having an approved governance policy, an approved finance policy, a multi-year financial plan, annual reports, an organizational chart, a strategic plan, and an established Finance and Audit Committee (FAC). Interestingly, many of the Grant First Nations in the case studies expressed that they had sound financial controls in place prior to the Grant and the FAL.
• Option to receive advance funds on April 1. Most Grant First Nations also shared that the ability to receive the year's funding on April 1 was a positive draw to adopting the Grant. Some First Nations mentioned the advance funding allowed them to better plan how their money was used (manage their cashflow, respond to unexpected expenses, and monetize their funding through short-term investments).^{Footnote 69} Government and Indigenous organization representatives agreed that advance and retained funds enhanced efficiency because they allowed First Nation to plan ahead, which supports stronger financial management.

Representatives interviewed from the Government of Canada and Indigenous-led organizations had a slightly different take on how the Grant had helped to increase financial administrative capacity. For example, overall, improvements were mostly attributed to the FAL and its associated financial controls. While more than half^{Footnote 70} felt that the Grant was helping to build and prioritize financial administration development (comments mentioned the process of developing and implementing a FAL, and, in some cases, hiring qualified financial administration staff), a smaller number (26%) of respondents who provided comments felt the Grant was not improving capacity. Those who felt the Grant only helped to "some" (33%) or to a "very little" (5%) extent noted that the time and capacity required to improve areas of financial administration were a challenge for many First Nations. Some also highlighted that the NFR Grant did not provide sufficient funding to support capacity development in this area, for example, one interviewee stated:

"It's very much structured what First Nations need to do [under the NFR Grant], but we haven't funded them to fully implement it."

"It takes time for financial capacity to develop – just being in the Grant doesn't improve financial administration capacity, but the process will [improve] over time."

4.5 Finding no. 5: Some Grant First Nations have used the flexibility of the NFR Grant to adapt, create, and expand programs and services to better meet the needs of their First Nations.

Some Grant First Nations surveyed reported that their Nations had adapted programs or services to better respond to the needs of their Nations (28%), such as new construction (e.g., a new health centre, new homes, and a new community hall), youth and Elder programs, interim supports for wildfires, and professional development training.

Despite the low rate of First Nations actually adapting or changing their programs, an analysis of Annual Implementation Meeting minutes found that 65% of First Nations said flexibility was a key benefit of the Grant^{Footnote 71}, suggesting that First Nations appreciate the potential that NFR Grant flexibility can offer, even if they are not currently fully exercising that flexibility. The reasons for this low uptake, which include challenges such as limited funding and staff capacity, and more urgent priorities, will be discussed in Finding no. 8.

Nevertheless, there is much to be learned by looking closely at the ways that those First Nations that did exercise the Grant's flexibility did so. The flexibility provided by the NFR Grant allowed some First Nations to redistribute their funding to areas of greater need. For example, one First Nation was able to divert surplus funding from the preschool education budget to health services and post-secondary education, which frequently operated with constrained resources in their Nation. Another First Nation shared how they were able to reallocate funding when their Nation experienced forest fires. One First Nation shared how they were able to use NFR Grant funding to run a food bank program in their Nation year-round, which had been previously operated entirely by donation.

"The autonomy that comes with the ten-year Grant is amazing. It provides the nation with assurance that we can utilize funds best for the unique needs of the Nation."

The evaluation identified many other examples of how programs or services had been adapted to meet First Nation needs:

Health Programming

• New health centre
• Expanded primary care
• Community gardens and food hampers

New Construction

• Community hall
• Youth centre
• New homes
• Purchase of a meat processing plant

Addressing urgent needs

• Support for natural disasters (wildfires)
• Mental health and addiction support
• Food insecurity
• Income assistance

Education

• Expansion of post-secondary student sponsorship program
• Creation of a kids' camp that focuses on cultural and traditional practices

The case studies found that the flexibility provided with the Grant allowed some First Nations to allocate funding more effectively and efficiently. First Nations frequently stated that transferring funds between programs and across years without conditions, paperwork, or limitations was also beneficial and allowed for longer term planning, which was considered a step towards self-determination.

The examples below provide more in-depth information about how the flexibility of the Grant has benefited specific First Nations.

4.6 Finding no. 6: ISC communication and relationships with Grant First Nations have seen both improvements and ongoing challenges under the NFR Grant.

Most Grant First Nations surveyed (67%) were satisfied with ISC communications related to the NFR Grant (Figure 6). Positive comments most frequently mentioned that ISC staff were supportive, helpful, and knowledgeable (e.g., taking time to meet with the First Nation to ensure they understood the process of adopting the NFR Grant).

Text alternative for Figure 6: Grant First Nations' satisfaction with ISC communication

Question: How satisfied are you with the communications between ISC and your First Nation related to the NFR Grant (content, frequency, language, tone, etc.)?

• Somewhat satisfied: 12%
• Not Very or not at all satisfied: 18%
• Not sure: 3%
• Very satisfied or satisfied: 67%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

More than half (55%) of surveyed First Nations reported a change in their relationship with ISC since joining the Grant, and of those that saw a change, all but 3 respondents felt that the relationship had improved. Positive comments included that there was more trust, respect and mutual collaboration and that there was more flexibility.

"[Our relationship with ISC is] less adversarial, more about working together to find solutions."

In interviews, some participants—including ISC regional office representatives and ISC NFR Secretariat—reported a positive change in the relationship between First Nations and ISC. Positive changes mentioned included that reduced reporting requirements and improved flexibility had allowed ISC regional offices to focus more on supporting First Nations rather than focusing on compliance.

Despite these improvements, a few issues were identified through both survey responses and case study interviews with Grant Fist Nations:

Communication gaps with ISC regional office FSOs.

Many Grant First Nations described gaps in communication with regional office FSOs, who were often overextended with large caseloads, faced high turnover, or lacked familiarity with the NFR Grant. This limited FSOs' ability to build deep knowledge of the Grant, or of First Nations, leading to inefficiencies, breakdowns in communication, and a lack of clarity on NFR Grant reporting requirements. Some First Nations reported limited or no recent contact with their FSO, resulting in low awareness of ISC supports. Others noted that submitted reports were re-requested, suggesting they were not processed. In one case, a First Nation had four FSOs in four years; in others, First Nations did not know or had never met their FSO.

Case studies and survey data also highlight ongoing issues with inconsistent communication, unclear reporting requirements, and insufficient training—both for ISC staff and First Nations. These findings reaffirm the need to strengthen FSO training, as FSOs are often the main link between ISC and First Nations. Without consistent support, even well-resourced First Nations may struggle to navigate Grant requirements, limiting the model's effectiveness.

In conversations with First Nations, evaluators also received requests—from Grant and non-Grant First Nations—for clearer, more detailed information on the Grant, especially regarding rules and benefits. They believed the ISC evaluators were NFR representatives and could clarify some of the finer points of the Grant. Evaluators noted that some Grant First Nations mistakenly thought they could not move funds outside of Grant programs or feared unused funds would need to be returned at the end of the 10-year agreement. Evaluators informed partners that these questions were more appropriately directed at FSOs, thus underscoring the FSO's role as critical points of contact.

The 2021–22 and 2022–23 ISC NFR Grant Risk Assessment Reports echoed these findings, identifying the need for regular FSO training to ensure accurate guidance and oversight. Encouragingly, targeted efforts in 2024, such as enhanced FSO training on NFR Grant reporting requirements, improved DCI submission rates from 72% to 81% (for outstanding 2019–20 data) (comparison based on November 2023 and November 2024 tracking results). Still, the need for continued and consistent FSO capacity building remains clear to improve efficiency in guidance, reporting, and oversight.

Reduced awareness among ISC program areas of First Nation needs. Another communication issue that emerged in the evaluation related to reduced reporting. For example, some Grant recipients noted that this had led to reduced ISC oversight of First Nations leaders who were not actively accountable to Nation members, and therefore, there was less frequent check-ins with program areas regarding funding sufficiency needs.

Initially, the reduced reporting requirements created some confusion. Some groups interviewed (including ISC regional office representatives, ISC NFR Secretariat and ISC program representatives) identified concerns that the NFR Grant, with its reduced reporting burden, had resulted in a decreased level of awareness among ISC program areas about First Nation needs.

ISC representatives observed that this concern had somewhat lessened over time as some programs increased their understanding of the new accountability relationship under the NFR Grant. Still, there was some uncertainty among both First Nations and ISC staff about how this reduced awareness could pose a potential risk in cases where First Nations face increased challenges and were requesting reviews of their base level of funding for programs, if there is less data and monitoring of these needs under the Grant.

"More independence [has been] given to First Nations [through the NFR Grant]. This is good and bad. I think that program areas have struggled more with knowing who to contact. Social development funding has been an area with lots of questions and it's unclear if current funding levels met the need and the spending. When deficits arise, it is concerning, and I do not always feel that support from ISC to check in on those levels annually."

While this finding has so far focused on current communications and relationships between ISC and NFR Grant First Nations, issues were also raised related to First Nations not yet in the Grant. The evaluation heard from several groups, including ISC regional office representatives, NFR staff, and both Grant and non-Grant First Nations, that the launch of the NFR Grant in 2019 was marred to some extent by confusion, misinformation, and skepticism about the purpose of the then-named "10-year Grant"^{Footnote 77}. It appears that much of this mistrust stemmed from longstanding funding constraints and issues with previous funding arrangements. This led to some reluctance in uptake as many First Nations took a cautious, wait-and-see approach.

Some current non-Grant First Nations that engaged in case studies remained skeptical of the NFR Grant and perceived it to be misaligned with reconciliation and the UNDRIP principle of "free, prior and informed consent" (Article 19)^{Footnote 78} due to the limited engagement with First Nations in its design. Some expressed concern about the lack of clarity around the process and long-term goals of the NFR Grant (i.e., what happens after 10 years, connection to self-government, whether a First Nation can leave freely, and implications if there is a federal government or policy change, etc.). Others expressed fears that it could be a way for the Government to absolve itself of its responsibility to First Nations. One First Nation suggested that settling for the NFR Grant would weaken their Nation's negotiating power for larger decisions around funding. Other First Nations were skeptical that reporting would be reduced as much as promised.

In some regions, ISC regional office representatives and non-Grant First Nations shared in case studies that longstanding cultural and historical preferences may have led to a slower uptake of the NFR Grant. These sentiments were particularly strong among some First Nations in the Alberta region where Treaty Rights are a high priority, and it was reported that some First Nations were looking for a funding approach that provided sufficiency, predictability, flexibility, and autonomy within the context of the Treaty relationship.^{Footnote 79} In other regions, such as Ontario, the evaluation heard from staff that some First Nations were reluctant to adopt the NFR Grant due to the initial requirement to adopt a FAL, which would require being scheduled into the First Nations Fiscal Management Act (FNFMA). Some First Nations in Ontario were reluctant to adopt a FAL because they did not want to include the ability for their Nation to enact a tax regime on their members since this is against their cultural principles.

During the evaluation period, work was done by the NFR Secretariat to address these concerns. For example, outreach was done to clarify that the NFR Grant does not impact Treaty Rights, and language was developed in the NFR Grant funding agreement to explicitly address this topic.^{Footnote 80} In response to concerns about the FAL, a 'third option' was developed by the NFR Secretariat, which allowed First Nations to adopt an equivalent First Nations traditional financial law that met the NFR Grant requirements but did not require them to be scheduled in the FNFMA. The ISC NFR Secretariat has taken systematic steps to dispel myths and misinformation related to the Grant, continuously adding and updating outreach materials such as FAQs, Grant 101 decks and in-person presentations. Some Grant First Nations have also contributed to awareness-raising about the Grant in their regions through sharing their experience and best practices at regional events, such as the AFOA BC Grant Forum.

4.7 Finding no. 7: It is unclear if Grant First Nations have increased their accountability to their members.

More than half of Grant First Nations surveyed (58%) saw themselves as more accountable to the members of their Nation since adopting the Grant. Thirty percent (30%) saw themselves as having about the same accountability to their Nation members, while ten percent (10%) believed there was much less or somewhat less First Nation accountability with the NFR Grant.

Text alternative for Figure 7: Change in perceived accountability to First Nation members since adopting the Grant

Question: How has the NFR Grant changed your First Nation's accountability to its members (e.g., First Nation consultations, strategic plans, annual reports, financial statements?

• About the same accountability: 30%
• Much less or somewhat less accountability: 10%
• Not sure: 2%
• Much more or somewhat more accountability: 58%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

Many reported that the improvement was because they more frequently shared plans and program results with First Nation members through reports and presentations, a requirement of the FAL.

"In order to stay in 'good standing' with the 10-year Grant, the First Nation has had to implement changes that also improve accountability to First Nation members. Having to run the Band operations in a proper business way, means that there are better spending practices and therefore information is more positive when reporting to membership. Having to meet with membership at least once a year has improved accountability to members."

Case study interviews indicated that some Grant First Nations felt their accountability to members had improved with adoption of the Grant, while most felt it was well established prior to the Grant and the FAL had not markedly changed that. In almost all Grant First Nations visited, the Grant had provided a consistent process to demonstrate accountability measures already in place, and for the First Nation members to recognize what transparency looked like.

Many Government of Canada and other Indigenous-led organizations also felt the NFR Grant had improved recipients' accountability to their members to a good or great extent. Some described the Grant as a significant shift away from accountability to ISC and towards self-governance. In contrast, some representatives shared that accountability to First Nation members had always been present among First Nations and that the NFR Grant had had a minimal impact on accountability.

While a small percentage (10%), it is worth noting that some survey respondents stated that with the NFR Grant, leadership did not share information, that no reports had been provided to members, and that they had little recourse to hold leaders accountable due to the reduced reporting requirements for receiving funding under the NFR Grant. This is significant when considered with the ISC reporting data (below). In case studies, some Grant First Nations explained that the NFR Grant had created divisions within their Nation due to the reduced accountability to ISC and lack of trust among First Nation members of their political leadership.

Given the NFR Grant aimed to shift away from compliance-based reporting to ISC, accountability under the Grant is meant to be primarily from First Nations governments to their own citizens. Still, ISC does monitor what reporting occurs, and to maintain eligibility for the Grant, First Nations must submit several documents, including FAL reports. Although ISC does not assess the content of these reports, it verifies their submission as part of its accountability framework.

Monitoring data from 2021–22 also reflect compliance gaps among the 117 Grant First Nations:

• 40% submitted an annual report
• 42% submitted a multi-year financial plan
• 50% submitted a strategic plan
• 56% held an annual implementation meeting with ISC
• 57% had financial statements reviewed by the FMB
• 62% submitted a Grant Results DCI.^{Footnote 81}

As well, in 2023–24, only 57% demonstrated to ISC that they had implemented most FAL requirements (based on FMB assessments). It is unclear if these reports were, in fact, being prepared by other First Nations but not being shared with ISC, or if they were not being completed at all.

Despite 71% of surveyed First Nations reporting familiarity with the reporting requirements and 62% expressing satisfaction, about half (48%) also identified barriers to meeting them. These included overlapping reporting demands, lack of clarity, insufficient staffing, data challenges, and delays in communication from ISC. Many First Nations—especially smaller or rural ones—reported that they lacked the financial administration capacity required to meet and maintain eligibility. Adopting a FAL did not guarantee improved capacity; many First Nations struggled to implement its provisions due to limited staff, training gaps, and difficulty accessing auditors. The capacity gaps that contribute to challenges with First Nation reporting are discussed in Finding #8, and this is an area that should be explored in future considerations of the Grant.

Additionally, most surveyed Grant First Nations (86%) and many case study First Nations stated that First Nations leadership and managers were aware of the Grant, but only 48% stated that First Nation members were aware of the Grant. Respondents explained that given the FAL required the participation of many staff members and Chief and Council in committees and procedures, all parties needed training on the Grant and FAL requirements. Many respondents indicated that information about the NFR Grant was shared during annual general meetings, First Nation engagements, audit presentations, publication of financial reports, and open houses, but some respondents believed that even though members were informed about the NFR Grant, they were not very aware of its implementation or had difficulty understanding it (particularly youth and Elders). Case study First Nations noted that there was less need for First Nation members to understand the funding mechanism as long as they were aware of and agreed with the use of the funding (i.e., programs and services that are being supported).

Although the evaluation could not clearly establish that accountability to First Nation members had improved as a result of joining the NFR Grant, some Grant First Nations surveyed identified that the NFR Grant had led to increased engagement of First Nation members in First Nation plans and priorities, creating higher expectations in some cases. Representatives from ISC NFR Secretariat also noted that they had observed increased participation and interest among First Nation members in Band politics, revitalizing First Nations' member engagement. Such heightened engagement can reasonably be expected where accountability to members is strengthened, reflecting the broader civic involvement and self-determination that the NFR Grant is intended to support.

Overall, it is worth noting that the evaluation largely relied on band administrators and leadership perspectives, and that general First Nation membership was not included in the interviews. It is possible that First Nation members would report a different impression of the changes in accountability since NFR Grant implementation. This issue will be explored in Finding no. 9.

4.8 Finding no. 8: Capacity shortfalls limit the adoption, implementation, and impact of the NFR Grant.

Strengths of Current Capacity-Building Supports

As mentioned, various capacity-building supports were available to First Nations with NFR Grant adoption and implementation, including FMB coaching on the FAL, FSO Annual Implementation Meetings with Grant First Nations, as well as various ad hoc supports from other sources, though these typically came in the form of advice as opposed to additional funding or staff.

The time, experience and knowledge base of the FSOs was key to much of this capacity support. While reporting requirements under the NFR Grant are reduced from separate program funding agreements, there is still a level of complexity and nuance to the documents required. Reporting requires high-level financial administrative capacity in First Nations. In many cases, Grant First Nations must rely on their regional office FSOs for guidance on reporting and form completion.

The evaluation discovered that most Grant First Nations found value in the capacity-building support offered through the NFR Grant but felt that more targeted support and funding were needed. Most Grant First Nations surveyed (75%) were satisfied with the quality of the capacity-building support offered to support NFR Grant adoption and implementation (Figure 8):

Text alternative for Figure 8: Grant First Nations' satisfaction with NFR Grant capacity-building support

Question: How satisfied are you with the capacity support available to help First Nations meet eligibility requirements (e.g., through FMB or other support)?

• Somewhat satisfied: 7%
• Not Very or not at all satisfied: 18%
• Very satisfied or satisfied: 75%

N=40 Grant First Nations

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

Among Grant First Nations that were satisfied with the capacity-building support, respondents most frequently explained that they had participated in training with FMB and found the training to be helpful (e.g., in creating a FAL). All Grant First Nations that engaged in case studies (which included representation across 4 ISC regions: BC, Alberta, Ontario, and Atlantic) had been offered FMB support in the development and implementation of their FAL, and nearly all accessed this support and appreciated it. A 2023 AFOA BC Grant Forum report similarly described FMB support as an invaluable service both for gaining and maintaining eligibility for the NFR Grant, as well as for building local capacity for successful implementation of the Grant.^{Footnote 82}

"[FMB] has been very supportive. We hope to have a session with FMB in the near future on updating our Risk Management Plan. We had a session about a year ago on budgeting and workplans."

4.9 Finding no. 9: While most Grant First Nations leaders and administrators view the NFR Grant positively, caution is warranted given ongoing challenges including unknown member perspectives, and ISC's evolving oversight role.

Findings in this report so far demonstrate that attitudes towards the Grant among First Nations leaders and administrators tended towards the positive, from their perceptions of its alignment with their priorities (Finding no. 1) to the appropriateness of the Grant eligibility process and criteria (Finding no. 2), to its role in strengthening their financial administrative capacity (Finding no. 4) and accountability to their members (Finding no. 7), to their satisfaction with ISC communications and relationships (Finding no. 6), the capacity-building support offered (Finding no. 8).

At the same time, enthusiasm was tempered by serious concerns, largely focused on funding and capacity limitations that curtailed the transformational potential of the NFR Grant, as detailed in Finding no. 8.

As illustrated in Figure 9 below, Grant First Nations' overall satisfaction with the NFR Grant reinforces this general pattern, with 60% indicating that the Grant was successful or very successful in meeting their initial expectations, hopes, and needs. Although this technically constitutes a majority, the relatively high percentage of ambivalent and even negative views of the NFR Grant warrant consideration.

Text alternative for Figure 9: Grant First Nations' overall satisfaction with the NFR Grant

Question: In your opinion, how successful has the NFR Grant been in meeting your initial expectations, hopes and needs? (N=40)

• Somewhat successful: 25%
• Not at all or not very successful: 11%
• Not sure: 4%
• Very successful or successful: 60%

Source: NFR Grant Evaluation. First Nations Survey Technical Report. [internal document].

Particular attention should be paid to the perspectives of band members. As noted above, the evaluation relied primarily on band administrators and leadership. General First Nation members were not directly engaged through interviews or site visits, and only a few participated in the survey. Although survey respondents on the whole felt that First Nation members' perceptions of the Grant were positive (39%) or neutral (36%)^{Footnote 88}, the views of the few First Nation members who did respond to the survey were markedly negative, citing concerns ranging from lack of qualifications among band staff and leadership to issues with transparency and questionable spending decisions. While it is not possible to generalize from so few responses, these perspectives underscore the need for deeper insight into how First Nation members perceive NFR implementation, as gaps in understanding these views could pose risks for First Nation trust and the long-term viability of the NFR Grant.

At the same time, as Canada continues to advance a renewed relationship based on the right to self-determination, it is important to consider the boundaries of federal oversight. While ISC has a legitimate interest in ensuring public funds are used appropriately, the NFR Grant's design explicitly shifts accountability from the Government of Canada to First Nations. This shift recognizes that First Nations governments are, first and foremost, accountable to their own citizens.

Striking the appropriate balance is further complicated by the absence of a clearly documented approach to mutual accountability.

Review the sufficiency of base-level funding more frequently for ISC programs.

While funding levels are the responsibility of individual programs (and not the NFR Grant), some Grant First Nations surveyed noted that there should be more regular reviews of base-level funding for ISC programs and that funding should account for urgent needs such as fires, floods, and other events impacting First Nations. Many case studies similarly emphasized that base funding was not sufficient and should be reviewed to ensure First Nations could effectively benefit from all the Grant features such as flexibility. Some other groups interviewed (including ISC regional office representatives and other government representatives) highlighted that calculations for funding should not have been based on existing programs as some program formulas were so outdated^{Footnote 90} that starting with insufficient funding and adding an escalator did not sufficiently help the First Nation. It should be noted that First Nations with the NFR Grant currently can request a review of their base funding levels (however this recalculation is based on ISC program formulas). Sufficiency of funding, on the other hand, can currently only be addressed by each individual program sector through Cabinet and budgetary processes.

Review the NFR Grant eligibility criteria and process.

Some representatives (including ISC NFR Secretariat, AFN, FMB, and other Indigenous organizations) highlighted changes that could be made to the Grant's eligibility criteria to better support First Nations to adopt the Grant including loosening requirements around providing the most recent five years of financial statements and eligibility ratios (e.g., if there was a known gap due to external factors such as fire, flood, or challenges accessing auditors), as well as increasing efforts to help First Nations adopt unique FALs that meet their needs as well as the financial management standards required for the NFR Grant.

In addition, widespread non-compliance with FAL reporting requirements—primarily due to capacity limitations—raises questions about whether these reporting obligations are justifiable or whether they create unnecessary barriers to entry for First Nations interested in the Grant. This suggests a need to revisit these requirements to determine whether adjustments are necessary to reduce barriers or whether further support should be provided to help First Nations comply.

Respondents also noted areas for improvement in the eligibility process, such as difficulties with the timeline, (e.g., most First Nations express interest in the Grant in September which makes meeting the November deadline to satisfy eligibility requirements challenging and contributes to delays with the Minister's review process).

Continue to support Indigenous-led data collection.

Some representatives (including other federal government representatives) shared that exploring ways to improve outcome data collection is important to better understand the impacts of the Grant and the relative success of ISC programs, and to demonstrate the progress in closing socio-economic gaps. It was suggested that the development of an Indigenous Data Strategy be accelerated and implemented to mitigate the risks associated with insufficient data for measuring outcomes. Such a strategy could also help address challenges associated with using the Indian Register and other existing data sources such as the Census of Population for funding allocation, as their fitness for this purpose is limited, but changes would require extensive multilateral engagement and consensus.

Appendix A: Programs Included in the NFR Grant

NFR Grant funding is based upon, and draws from, existing ISC funding for the following 6 service areas and their corresponding 11 program areas and 28 budget activities (Table 6). See Appendix B for a high-level summary of the programs not currently included in the Grant.

Appendix B: Programs Not Included in the NFR Grant

Table 7 below is a high-level summary list of budget activities that are not currently included in the NFR Grant. The description describes the some of the reasons these budget activities are not currently included in the NFR Grant. It is important to note that there are ongoing conversations at ISC about adding certain budget activities to the Grant.

Note: This is not the full list of funding lines that are not included in the Grant. The NFR Secretariat notes that one of the challenges of presenting a high-level table of what is, and what is not, included in the Grant is that there are over 900 functional areas, or funding lines, across the department and only about half are currently included in the Grant. The Departmental Results Framework is like a tree, and there are some branches that are not included in the Grant at all, but in other areas, some sub-branches are included but not others.

Appendix C: Financial Performance Ratios for NFR Grant Eligibility

The FMB examines five ratios during its financial performance review of a First Nation to determine NFR Grant eligibility. These ratios are calculated using information from the First Nation's audited financial statements for the past five years.

1. Fiscal Growth Ratio (FGR): The FGR measures a First Nation's ability to sustain and grow its revenues.

Thresholds - The First Nation demonstrates that its average FGR for the period under review is not lower than -5.0%.

2. Operating Margin Ratio (OMR): The OMR measures a First Nation's ability to balance its revenues and expenses to maintain operations.

Thresholds - The First Nation demonstrates that its OMR for the period under review is not lower than -5.0%.

3. Asset Maintenance Ratio (AMR): The AMR assesses if a First Nation is investing enough to maintain its existing capital assets and add new assets as they are required.

Thresholds - The First Nation demonstrates that its AMR for the period under review is not lower than 100.0%.

4. Net Debt Ratio (NDR): The NDR measures a First Nation's ability to manage its overall level of debt.

Thresholds - The First Nation demonstrates that its weighted average NDR for the period under review does not exceed 60.0% or that its NDR for the most recent year of the period under review does not exceed 60.0%.

5. Interest Expense Ratio (IER): The IER measures a First Nation's ability to manage the interest payments on its debt.

Thresholds - The First Nation demonstrates that its IER for the period under review does not exceed 5.0%.

Appendix D: NFR Grant Eligibility Criteria and Process

The eligibility of the Grant is set out in the comprehensive funding agreement and has been co-developed by ISC and AFN, with advice and support from the FMB. To be eligible, a First Nation or First Nations-led service delivery entity^{Footnote 91} must demonstrate:

1. Five years of successful financial performance, as established through five mathematical ratios (see Appendix C for details on these ratios), and
2. That it has passed a financial administration law and had that law enacted. For the purposes of NFR Grant eligibility, a financial administration law is defined as follows: "A Financial Administration Law is a set of governance and financial management practices that meets the Minimum Financial Administration Law Provisions set out in Schedule 6, either:
   1. Contained in a law prepared by a First Nation pursuant to Section 9 the First Nations Fiscal Management Act ('Financial Administration Law' or FAL);
   2. Contained in a by-law adopted by a First Nation pursuant to Section 83 of the Indian Act ('Financial Administration By-law' or FAB); or
   3. Contained in a document by a First Nation via Council resolution and provided to Canada by a First Nation (3rd path or 'inherent right' option).^{Footnote 92}

First Nations with a Grant agreement continue to be eligible for time-limited funding enhancements, e.g., COVID-19 related health supports. In these instances, time-limited funding is added to the Grant as a separate line item. This funding is not subject to escalation and does not have additional reporting requirements in relation to the NFR Grant.
The following paragraphs detail the broad steps for a First Nation to adopt the NFR Grant from the initial Expression of Interest to the eligibility review, invitation, and adoption:^{Footnote 93}

1. First Nation submits Expression of Interest (EOI) to ISC (or FMB) (by September of a given year). A First Nation submits a written Expression of Interest in the Grant. EOIs must include the following information: the official name of the First Nation, the title/role and name of the individual making the EOI, the date of the EOI and the proper contact information. Once an EOI is received, ISC will communicate with the First Nation regarding capacity development support requirements they may need to meet the eligibility criteria. If requested, FMB will work with a First Nation to provide capacity development support to assist them in enacting their financial administration law.
2. First Nation submits Draft Financial Administration Law (FAL), Financial Administration By-law (FAB), or traditional law (inherent right or 3rd path option) to the FMB for review (October). The FAL/FAB/law needs to meet co-developed standards and be assessed by the FMB. Some provisions of the FAL/FAB/law need to come into force immediately, while others are required within a 9-month entry into the NFR Grant. Implementation needs to be supported by policies and procedures. The target date for the final FAL/FAB/law to be signed by the First Nations Council is early-November.
3. First Nation makes annual audited financial statements available to FMB (early-November). Financial performance indicators or ratios are determined by a review of the previous five fiscal years' audited financial statements. Five financial performance indicator thresholds need to be maintained: Fiscal Growth; Operating Margin; Asset Maintenance; Net Debt; and Interest Expense Ratios (see Appendix C for details on these ratios).
4. FMB conducts a review of both the FAL (or FAB or traditional law) and the financial performance of the First Nation and then issues two separate compliance opinions to the First Nation and ISC (late-November). Following the FMB review, the NFR Secretariat reviews the information and calls a meeting of the Grant Eligibility Review Committee to discuss the recommendation. The Committee is comprised of representatives of the following ISC Branches: Strategic Policy and Partnerships; Chief Finance, Results and Delivery Office (CFRDO); Regional Operations; First Nations and Inuit Health Branch (FNIHB); and Audit and Evaluation Sector. The Committee then makes a recommendation to the Minister.
5. ISC sends an invitation to the First Nation to adopt NFR Grant for upcoming April 1 (January). The Minister sends an offer letter to eligible First Nations. ISC regional offices then work with First Nations to see if they wish to sign a Grant funding agreement and then put the agreement in place.
6. FMB completes a status check of the FAL implementation (12 to 18 months from signing the NFR Grant agreement, or as mutually agreed-upon with notice provided to First Nations). FMB will review the implementation of FAL provisions, based on a set of agreed-upon procedures. The results will inform ISC as to the extent to which a First Nation has implemented the minimum provisions of their FAL.
7. FMB and ISC conduct annual risk assessment and ongoing eligibility activities (annually). To continue receiving the NFR Grant, NFR Grant eligibility criteria need to be maintained. FMB and ISC conduct annual risk assessment and ongoing eligibility reviews of First Nations that have adopted the NFR Grant. Three risk Tiers have been established based on this review: Tier 1 (low risk); Tier 2 (medium risk); and Tier 3 (high risk). Different factors may be considered in this rating such as submission of audited financial statements, FAL status check, complaints and allegations (i.e., from First Nation members), among other factors. Risk Tiers determine how often ISC follows up with First Nation on remaining gaps.
8. ISC Regional offices and First Nations participate in NFR Grant Annual Implementation Meetings (September – November). These meetings, typically occurring in the fall, serve as a constructive dialogue between partners to support effective implementation of the NFR Grant agreement and overall functioning of the new fiscal relationship as it pertains to the NFR Grant. They are also an opportunity to discuss and develop plans to address any risks that have been identified during the risk assessment process.
9. Exiting the Grant. Though many mechanisms have been developed to ensure a First Nation maintains eligibility, the NFR Grant policies allow for instances where a First Nation may exit the Grant if they decide (e.g., if they choose to pursue self-governance or other reasons) or due to 'sustained inability to maintain ongoing eligibility.'^{Footnote 94}

Appendix E: Issues Associated with (non-NFR Grant) ISC Funding Mechanisms

A review of 14 recent (2018-2025) Indigenous Services Canada (ISC) evaluations of ISC programs, including Education Facilities (EF), On-Reserve Housing (ORH), On-Reserve Income Assistance (ORIA), Land Management Subprograms (LMS), Individual Affairs (IA), Post-Secondary Education (PSE), Clinical and Client Care (CCC), Health Infrastructure Support (HIS), Healthy Living (HL), Water and Wastewater On-Reserve (WWP), and Urban Programming for Indigenous Populations (UPIP) highlighted common constraints caused by traditional contribution based funding approaches. This scan included both programs that are currently eligible for inclusion in the NFR Grant as well as those not currently included (UPIP), as the Grant may expand to include additional programs in the future. These evaluations included findings about inflexible program requirements, burdensome reporting, delays in disbursement, restrictions on carry-over of funds across fiscal years, lack of predictability, and stagnant funding levels that failed to reflect inflation or growing populations.

Reporting Burden: Recent ISC evaluations frequently noted that heavy reporting requirements hampered service delivery. As the Cluster Evaluation of HIS stated, "The effort required to align community reporting to these standards was said to be burdensome to First Nations". The LMS evaluation similarly noted that "current reporting requirements for land use planning may be creating an additional burden on some First Nations" (p. 30). This issue was also raised in the ORIA evaluation, where "reporting requirements are still cumbersome for communities, especially smaller communities who lack sufficient capacity to meet requirements. Administrators explain that 'the program is micromanaged, which is the opposite of reconciliation' High reporting and compliance requirements burden the administrative staff with additional work and lead to cost recovery […] based largely on clerical errors, not ineligibility" (p. 28). The UPIP evaluation also noted that "reporting places excessive administrative burdens on already resource-strained Indigenous Service Provider Organizations, diverting attention and resources away from service provision" (p. 43).

Delays in funding: Several evaluations identified payment delays and unpredictable disbursements as serious constraints to service provision for First Nations. In the ORH evaluation, some First Nations noted that they receive their funding "in installments and often must pay for things upfront that will be later reimbursed; however, this creates a strain for communities that do not have own-source funding" (p. 69). Similarly in the EF evaluation, interviewees noted that "funding can be ill-timed in relation to their construction season causing delayed or postponed projects" (p. 28). The IA evaluation identified a key finding as "delays in approving and dispersing both band and individual moneys" (p.16).

Restrictions on funding carry-over: The problem of the potential for ISC's recoupment of unspent funds at year end was noted in several evaluations. For example, it was mentioned in the EF evaluation that "First Nation respondents noted that they are required to spend their funding within a given period, usually within the fiscal year in which funding is received. However, project delays could happen, and the fund cannot always be spent within the specified timelines. Communities must then request extensions to expand the timeline for spending the funds, which in turn can impact reporting timelines and can jeopardize future funding approvals if reporting is submitted late" (p.58). Similarly, the ORH evaluation stated, "First Nation respondents noted that they are […] required to spend their funding within a given period, usually within the fiscal year in which it is received… Although the Department is permitted to carry forward eligible lapsing funds to future years, the decision must be assessed on a case-by-case basis, which could limit First Nations ability to spend the funds in a timely manner. Communities must then request extensions to expand the timeline for spending the funds" (p. 55).

Lack of predictability: The predictability challenges associated with traditional ISC funding arrangements were a recurring theme across evaluations. A key finding in the UPIP evaluation stated, "The foremost challenge confronting urban Indigenous partners is inadequate, unstable, short-term and fragmented funding. This has hindered innovation and resulted in a shrinking network of service providers who are primarily focused on securing funding to sustain their operations and short-term survival, leaving little room for long-term planning." Similarly, the EF evaluation stated "First Nations do not really plan well beyond the first year because they don't have any indication that they will get funding the following year... That is the weakness of the FNIIP (First Nations Infrastructure Investment Plan)" (p.58). The LMS evaluation found that it "would benefit from predictable and multi-year funding arrangements so First Nations organizations can have consistent call-outs, make timely funding decisions, and support First Nations to implement their developed Land Use Plans" (p.14).

Lack of Flexibility: Some of the reviewed evaluations highlighted the lack of flexibility that came with some separate program funding agreements. Survey respondents in the EF evaluation said, "the funding approach needs to allow for greater flexibility and priority decision making on education infrastructure projects" (p.18). The UPIP evaluation heard similar observations, e.g. ""If there were authority to move funding across budget lines, we'd be able to do these things much more easily" (p.35).

Lack of responsiveness to population growth / inflation: The insufficiency of funding allocations that do not adjust annually for inflation or population growth were cited across reviews. For example, in the ORIA evaluation, it was noted that, "if a community grows in size or the Income Assistance recipient pool grows larger, it is unclear to what extent that community will receive more funds for service delivery commensurate with the growth" (p.30). Notably, in the HIS evaluation, it stated that "partners noted the lack of consideration made to changes in the economic state, particularly inflation, in funding allocations. Inflation results in a higher cost of living (COL) and a higher cost of materials, both of which impact the available resources to effectively address health needs (e.g., increase required salaries, price of equipment, etc.). […] funding levels for the Cluster programs have largely remained stagnant over the last six years" (p. 85). Likewise, the HL evaluation found that "[f]unding has been stagnant (i.e., not keeping up with inflationary pressures, and the increased needs of the Program) for many years, leading to unmet needs of the program and little to no increase in salaries at the community levels, contributing to high turnover rates, and vacant positions" (p.8).

These findings from previous ISC evaluations demonstrate how traditional contribution based funding approaches have constrained First Nations' ability to plan, adapt, and deliver essential services. The NFR Grant approach was designed to provide predictable, long-term funding, allowing the carryover of unspent resources, supporting reallocation across priorities, and responding to inflation and population growth.

Sources:

Indigenous Services Canada. 2024, Fall. Evaluation of the Urban Programming for Indigenous Peoples Program: Final Report. [unpublished at time of writing]

ISC. 2024, March. Evaluation of the Education Facilities Program.

ISC. 2024, March. Evaluation of the On-Reserve Housing Program.

ISC. 2024, March. Evaluation of the Healthy Child Development Program.

ISC. 2023, June. Cluster Evaluation of Health Infrastructure Support for First Nations and Inuit.

ISC. 2023, June. Evaluation of Land Management Subprograms.

ISC. 2022, February. Evaluation of First Nations Individual Affairs.

ISC. 2022, September. Evaluation of the Healthy Living Program.

ISC. 2021, March. Evaluation of Water and Wastewater On-Reserve Program.

ISC. 2020, October. Evaluation of the Elementary and Secondary Education Program.

ISC. 2020, October. Evaluation of the Post-Secondary Education Program.

ISC. 2019, July. Evaluation of the Assisted Living Program.

ISC. 2018, October. Evaluation of the On-Reserve Income Assistance Program.

ISC. 2018, August. Evaluation of the Clinical and Client Care Program: 2012-2013 to 2016-2017.

Appendix F: NFR Grant Logic Model and Performance Measurement

Text alternative for Figure 10: NFR Grant Logic Model

Ultimate Outcome (Departmental Outcome) : Indigenous Peoples, communities and governments to control the design, delivery and management of services

Intermediate Outcomes: Indigenous leadership to administer the core functions of government and deliver programs and services in line with community priorities

Immediate Outcomes: First Nations to have the knowledge, governance, fiscal tools and resources to control the design and delivery of programs and services to their communities

Activities / Outputs:

1. ISC side:
   • ISC requests expressions of interest in joining the Grant
   • ISC determines whether First Nations and First Nations-led service delivery entities are eligible for the Grant
   • ISC signs grant agreements with eligible First Nations and First Nations-led service delivery entities
2. First Nations side:
   • First Nations and First Nations-led service delivery entities adopt financial administration laws/bylaws
   • The Financial Management Board reviews First Nations' and First Nations-led service delivery entities' financial performance and financial administration laws/bylaws
   • The Financial Management Board reviews implementation of financial administration laws/bylaws and ongoing financial performance

ISC Enabling Outputs: First Nations and First Nations-led service delivery entities receive governance capacity supports

The following table provides the performance measurement indicators and targets for the NFR Grant.

Appendix G: NFR Grant Escalator

The NFR Grant Escalator funding is an annual increase to Grant eligible programs (except K-12). It provides assurances of predictable funding growth for the duration of a Grant funding agreement. Budget 2021 allocated $2.7B over 10 years for the Grant funding escalator, which is provided to ISC through a separate authority. Escalator payments begin in the 2nd year of the NFR Grant agreement and are calculated using the final Grant core funding amount eligible for escalation at the end of the previous fiscal year. The escalator has a guaranteed minimum annual increase of 2% and includes adjustments for:

• National inflation: Final domestic demand implicit price index (3-year moving average); and
• Population growth: On-reserve and crown land population growth rate (3-year moving average).

The escalation calculation incorporates a "best-of" commitment, where the NFR Secretariat completes a line-by-line comparisons of the 3 formulas (NFR Grant, minimum 2% or ISC Regional Office Block indexing rate) and uses the highest percentage as the escalator. Calculations are validated by regional offices and communicated to individual First Nations upon annual approval. The escalator formula and calculation methodology can be found below.

NFR Grant Escalator Formula Calculation Methodology

K-12 Funding: Beginning in 2019-20, funding for elementary and secondary education is calculated annually for First Nations, including those under the NFR Grant, using a new demand-driven regional funding formula based on nominal roll data and provincial funding models. As such, the NFR Grant escalator does not apply to K-12 funding.

Proposal-driven programs: First Nations in the NFR Grant continue to be eligible for proposal-driven programs, as well as other funding not currently eligible under the NFR Grant (such as Major Capital). This funding provided under the set, fixed and flex funding approaches are provided through the same funding agreement, but different schedule, as the NFR Grant.

Appendix H: Previous Audit (2022)

The audit contained recommendations related to improving the clarity of roles of the NFR Secretariat and ISC Regional Offices and increasing consistency in outreach materials to First Nations; ensuring capacity development resources for First Nations are identified and linked to eligibility criteria; developing a standard risk-based rationale for the areas assessed by the ISC Grant Eligibility Review Committee; developing a framework to track and monitor eligibility; assessing risks related to issues with the completion of ongoing assessments; and ensuring the Grant Eligibility Review Committee is involved in continued eligibility assessments.

The Management Action Plan (MAP) implementation included the NFR Secretariat delivering training to ISC Regional Offices, revising outreach materials, and further developing operational guides and tools; increasing capacity support and awareness of available support; clarifying and providing training on risk assessment processes and the link to eligibility; developing a process to refresh data related to reporting requirements and application of the eligibility risk management framework; implementing a risk management process and address the backlog in reporting (particularly related to the pandemic); and monitoring ongoing eligibility, identifying capacity development opportunities and elaborating on oversight procedures as informed by the Grant Eligibility Review Committee.

The table below details the recommendations and MAP implementation from the 2022 Audit of ISC's Processes to Support Participation in the 10-Year Grants.

Appendix I: Evaluation Issues and Questions

The evaluation focused on the following questions:

Appendix J: All Suggestions from First Nations and Other Groups

Table 10 presents suggestions to improve the NFR Grant by data source (i.e., First Nations surveys, case studies, interviews with other groups, and document and literature review). A summary of the suggestions is provided below.

The following were the most commonly identified suggestions for improvement arising from the evaluation: