Question Period Note: Progress Report on the Implementation of the Default Prevention and Management 2017: Report of the Standing Committee on Indigenous and Northern Affairs

• The Government of Canada is working with First Nations to establish a new fiscal relationship that moves towards sufficient and sustained funding for First Nation communities.
• Building a new fiscal relationship is instrumental in addressing the disparities and inequities in the socio-economic conditions between First Nations and other communities in Canada.
• As part of work on the new fiscal relationship, ISC has been engaging with Indigenous-led institutions and organizations with the goal to repeal the DPMP and establish a new system of capacity building supports provided by First Nations institutions.

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The DPMP has been in place since 2011. Before 2011, the Intervention Policy was applied. Since 2017, ISC has been working to repeal the DPMP and establish a new system of capacity building supported provided by First Nations institutions, as per the recommendations put forward in Default Prevention and Management 2017: Report of the Standing Committee on Indigenous and Northern Affairs. .

Key Standing Committee findings made clear that the DPMP:
• does not respect a Nation-to-Nation relationship;
• is punitive and “designed to address risk to the department rather than improve performance on the ground”;
• does not address root causes of defaults, and particularly the fact that lack of funding and other supports for building governance and financial management capacity are most frequently the root cause of defaults action under the current DPMP;
• does not adequately support capacity development and provides little preventive supports to avoid defaults;
• intervention approach involving the appointment of an external party (i.e., Recipient Appointed Adviser (RAA) and Third-Party Funding Agreement Manager (TPFAM)) is not effective in meeting its remedial and recovery objectives; and
• forces First Nations in default to cover the cost of the RAA or TPFAM themselves.

In the Government of Canada Response to The Standing Committee on Indigenous and Northern Affairs: Default Prevention and Management 2017, the federal government acknowledged the findings of the report and committed to implementing its recommendations through four main streams of action:

1. Renewed fiscal relationship - As part of the New Fiscal Relationship, First Nations and urban Indigenous organizations will have access to adequate funding through long-term, stable, predictable and flexible funding arrangements rooted in a mutual accountability relationship (addressing Committee recommendations 1 and 2).
2. DPMP and related policy changes - The DPMP and other related ISC policies and directives are reviewed and revised in line with the Committee’s findings and recommendations, and the principles and objectives of the New Fiscal Relationship (addressing Committee recommendations 3 and 5).
3. Greater role and financial stability for Indigenous-led institutions - DPMP-related activities are transitioned to Indigenous-led institutions and adequate support is provided to arms-length Indigenous financial institutions working to increase financial literacy and financial management skills, competencies and capacity available to First Nations communities (addressing Committee recommendations 3, 6, 7 and 8).
4. Progress report - Report on progress on the Committee’s recommendations to be tabled by ISC in five years’ time (addressing Committee recommendation 4).

If pressed on reimbursing the costs associated with Third Party and other external parties
• The Standing Committee raised concerns regarding the departmental practice that required First Nations to bear the cost of third party managers (currently 1 First Nation), and recipient appointed managers (currently 51 First Nations).

• Since 2018-19, the Department has been providing First Nations with funding to offset the cost of these external parties ($16-$18 million per year).

• Although this reimbursement is an interim measure until March 31, 2024, a longer term strategy is under discussion as part of the co-development work related to the Default Prevention and Management Policy.

If pressed on co-development and repealing the Default Prevention and Management Policy (DPMP)

• Co-development work on repealing and replacing the Default Prevention and Management Policy has been underway for several years.

• Co-development work has focused on defining a much more collaborative and capacity-focused approach to supporting and working with First Nations that respects the right of Indigenous peoples to self-determination and the autonomy of Indigenous governing bodies in advancing their self-determined priorities.

If pressed on pilot projects led by the First Nations Financial Management Board

• In response to the Committee’s recommendations on innovative pilots, the Department is working with the First Nation Financial Management Board on two important pilot projects.

• The Default Prevention Management Policy pilot was designed to trial an Indigenous-led approach to improving outcomes in First Nation communities under default. This pilot involving 25 communities has seen great success in moving First Nations out of default.

• The Shared Services pilot involves the development of a shared services platform to provide basic financial management services to First Nations.