Indigenous and Northern Affairs Committee on March 23rd, 2017

[Clayton Norris]

We've got some pretty interesting things to talk about.

We're honoured to be here and on the unceded territory of the Algonquin people.

My name is Clayton Norris. I'm the vice-president of aboriginal services with MNP. I'm joined by my colleagues, Robert Campbell and Kenny Ansems. Rob is our national director, and Kenny is our provincial director for British Columbia.

I'm of Cree-Dene descent from Alberta. MNP has over 70 indigenous employees who are part of our team across Canada. What we will reflect today is not only our firm's commitment and perspective from working in the communities but also us as aboriginal people. MNP is a national firm that provides accounting, advisory, and tax services. We've been in business for 60 years. Over the last 25 years, we've been developing a specific practice working with the needs of first nation, Métis, and Inuit communities.

In our journey, we've developed substantial and long-standing relationships that have tremendous value to us as a firm and to our practitioners personally. Our dedication and commitment to the indigenous community has culminated in MNP's being one of the largest providers of professional services in Canada. Two years ago, MNP made a business decision to transition out of providing third-party management services because we felt there was a better way to provide our services and expertise to aboriginal communities. We've looked at alternatives, and we feel there are new approaches that can accomplish more in a prescribed period, create hope, increase commitment levels, build a stronger team, develop capacity, and move communities ahead.

I'm going to ask Robert to continue. He's spent most of his professional career working with aboriginal communities.

[Robert Campbell, Director, Aboriginal Services, MNP LLP]

Thank you, Clayton.

Hi, Robert Campbell is my name. I'm from Kinosao Sipi and a proud member of the Cree nation. I am also proud to be a partner at MNP.

I'd like to start by saying that the purpose of the current policy has merit, as it is designed to ensure “continued, uninterrupted provision of programs and services for the health, safety and welfare of Aboriginal community members.” That said, we can all appreciate that well-intended efforts do not always result in a positive outcome.

We understand the root causes that have sent a host of aboriginal people and communities down a very difficult path, and we empathize with them. These conditions were not of their own making or design and are often a direct result of a host of actions taken post-colonization that have harmed, diminished, and marginalized the people. This also continues to speak to the need for reconciliation, and this very discussion is part of that journey.

The aspect of this policy that needs more focus is default prevention. There is limited evidence that early warning signs get noticed. Just sending out the audit review letter and commenting that ratios are declining, with limited follow-up, is not effective. The signs should be detected well in advance, and this unfortunate outcome would not be required if these indicators were properly evaluated. I expect most would agree that a prevention approach is much healthier, as opposed to the reactive nature that exists today.

MNP partnered with a tribal council to examine this more closely, and the path to and from intervention was very clear. There are no secrets, as the indicators are well known. Capacity, policy and procedures, reporting, budgeting, and commitment are all parts of the fundamental consideration.

We need to understand the root causes that have sent a host of aboriginal people and communities down a very difficult path, and we need to continue “supporting demand driven capacity development in Aboriginal communities in a sustainable manner”.

The true solution is a local, membership-driven, and community-supported one. Outside resources can only have a supporting role and need to evolve to simply providing the typical financial and management support required by any other Canadian community. Yet capacity-building also takes resources, and these are limited. The fact that the default prevention and management process is conducted out of the community's existing band support budget is absolutely punishing.

I believe we can all appreciate that these first nations are already suffering and that their finances are in a state of jeopardy, and yet we put them in a more precarious state by putting more financial pressure on them. This also creates resentment towards the provider and funder, who is simply doing a job within the parameters of the policy.

First nations are heavily reliant on the professional and institutional development fund, as it is one of the few mechanisms to support this type of work. It is not even close to sufficient in meeting the needs and demands of first nations across Canada. To make a real difference, there must be different options and more financial and management support.

This committee is exploring whether the current policy has been effective. The current policy speaks of creating “a flexible range of strategies that is as least intrusive as possible”, yet much of this effort has developed into something that is very intrusive and rigid.

We also know that the policy goal “to develop and maintain a co-operative relationship with recipients” can be difficult, given the genesis of the relationship. We see that in the policy, the use of management development plans is “strongly encouraged”, and yet many items in these plans cannot realistically be acted on, given current capacity levels and resources.

In our experience, there have been examples of communities successfully de-escalating from third-party management to self-sufficiency. The key success factor is having leadership and membership understanding and supporting measures to fix the situation. Transparency is important for nation members to understand the current financial situation and the challenges of managing and deciding on very limited resources. This includes understanding the budget process, having and enforcing sound financial policy and procedures, and required reporting for funders, investors, and most importantly nation members. These are the fundamentals that some communities have adopted, and they are now moving forward.

Not every community has the same experience. Because of influences such as geography, political and staff turnover, and lack of governance and financial capacity, a community can linger in a state of required intervention based on the existing policy.

The default management policy should be a temporary measure to ensure the delivery of essential services and programs; however, it can take many years to financially recover. Our intentions are to support and move to de-escalation as quickly as possible to help address their unique situation.

We believe that the financial management capacity of the community is one of the essential building blocks towards health and eventual prosperity. We constantly see that this is not improving in many communities. For support to be effective, it has to rely on the ability of the community as a whole to understand the reality and ramifications of the situation. This must be complemented by acceptance and a commitment to make the changes required to address the problem.

Lastly, it must be supported by a real effort to build capacity. The real measure of the effectiveness of any default prevention and management policy lies in the ability to build capacity. This is the crux of the current problem and what needs to change moving forward. You see, there is often a sentiment that service providers don't build capacity and don't have a desire to build capacity. I can't speak to other providers, I can only speak to our experience. We want to build capacity and we want communities to move forward. MNP would prefer to work with communities that are healthy and looking at more significant projects and programs. The intervention relationship is not healthy nor enjoyable for either party. We do not relish the situation. That is why it often ends negatively and can have lasting effects that reduce our ability to provide more meaningful services in the future.

With capacity-building come process and policy procedures as part of the formula for success. There are all kinds of documentation and best practices for internal controls, and best practices available through all types of groups, such as AFOA Canada and the First Nations Financial Management Board. This is just the first step.

These, of course, are only words on paper unless they are adopted and adhered to, and this is part of the challenge. There's a lot of paper out in the first nations, but none of it has purpose unless the community supports and implements this policy. When provided with up-to-date financial information, self-government rules, and policy that is supported and understood by members, this paper becomes a practical tool to manage and support first nations government programs and services.

In conclusion, the government needs to focus more on default prevention; develop a more realistic plan to assess and address capacity in these communities; and begin funding prevention services out of new money, and not the band support budget, which only further harms these communities. Finally, the government must also commit new money and resources to address capacity-building for aboriginal communities in need.

We want the best for the people. I want the best for my people. I pray that this discussion contributes to the improved health and condition of our communities.

Thank you very much. We'd be happy to answer any questions.

[The Chair, Liberal, MaryAnn Mihychuk]

Thank you.

The questioning now begins, and the first questioner is MP Michael McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Madam Chair, and thank you to the presenters today.

First of all, I want to note that it's very refreshing to see many aboriginal people involved at the professional level. The previous presenter who had the floor, Ernie Daniels, is from the Northwest Territories and was a colleague of mine for many years. I see Clayton here presenting and so many aboriginal people taking part in this discussion who are familiar with our history and the challenges we are up against.

As you know, we now have probably the largest number of indigenous MPs in our history. I think we all agree that we have to look at completing the circle. For too long we have been sitting on the outside. The country moved forward, and we sat on the sidelines.

I spent almost seven years as a band manager, so I've seen the challenges that are faced in a community. The band manager's job description does not exist. You do everything and anything that has come in your direction, from loose dogs to people dying in the community who need support. It's very challenging, given the resources.

I took notice of a number of things that were said, including about default prevention. I know for a fact that in the last 10 years we've seen many cuts at the band council and tribal council level, which have almost taken away any ability from decision-makers to deliver any types of programs or services to move forward, other than to keep the lights on. In many cases, somebody had to be laid off, either the chief or the band manager. Even though there's a lot of talk about how much chiefs make, there are still many chiefs who work for no pay at all, and we should recognize that.

If things are going to change, and we are going to complete the circle and talk about reconciliation, we also have to talk about economic reconciliation. That has to be a big part of where we go. I want, therefore, to ask you to talk about how to raise revenues.

We heard from the previous presenters about taxing people, our own membership, a discussion that often takes place in the land claims or self-governance negotiations. However, royalties have not been mentioned as much as I thought they would be, in terms of where we need to go. We have many resources on our lands. When we signed the peace treaties, we didn't expect to give them all away.

Maybe we could talk about that a little bit as a source of funding for our governance, because we need good governance, but we can't get it unless we have money.

[Clayton Norris]

That's a really good question. When it comes to default management prevention, we talked about the ability of a first nation to finance their long-term debt using the existing models that have been providing support. It not sufficient, most times, to pay for some of the back debt. We have been working with a completely different client on exactly that issue.

When it comes to resource-sharing, royalty-sharing, or tax—whatever you'd call it—what doesn't exist right now in Canada is a valuation of the indigenous title and right. If there's a linear project that's coming across a farmer's land or that impacts another community, there's a methodology that's typically used to provide a financial or other benefit to that landholder. Within first nations in Canada, there does not exist such a model for the sharing of these royalties.

Whether you call it a royalty, a tax, or a participation—and I think Mr. Calla spoke about it earlier—our first nations clients want equity. But these projects are also coming across the backyard through the traditional territories, which the Supreme Court has said is part of the title and right of those communities, whether it's treaty, unceded, or ceded land. There are various versions of it, but I think it's really important that we start to look at and reflect on the fact that indigenous title right has value, in order to get more communities to participate in the economy, to allow for infrastructure development, health, housing, and the social programs that are in such dire need.

[Michael McLeod, Liberal, Northwest Territories, NT]

I'll ask this question to both presenters.

Our communities' ability to build capacity in our communities doesn't seem to be working very well. I don't see many of those who are coming through to provide the management staying in the communities. These are not the most attractive places to live, in some cases. In my case, the communities are remote, housing is sometimes virtually non-existent, the pay is not that great, and so we have a high turnover.

In my experience, the communities that do the best usually have their own people in the management field. We're not, however, getting many people attending colleges and universities and coming back to the community. It's always somebody who has worked a long time as a bookkeeper or helping as an assistant.

How do we change that? Maybe we could go over that question.

[The Chair, Liberal, MaryAnn Mihychuk]

A quick response please, as we have only one minute left.

[Harry Lake]

In terms of increasing the capacity of that first nation, you might think about looking beyond geography. There's enough modern technology that might allow members of that first nation to do the first nation's work from a remote location using some of the more modern accounting systems, cloud accounting, and that sorts of thing. So it becomes a little bit geographically agnostic, if that makes any sense. If people get trained and they decide to leave, they still have the ability to contribute and work for that first nation, possibly remotely.

[The Chair, Liberal, MaryAnn Mihychuk]

If they have broadband.

MNP, you've got 30 seconds.

[Clayton Norris]

On the capacity development side, I think it's important to recognize that there are fewer than 60 CPAs from indigenous communities across Canada. We need to change that as a profession. We need to encourage youth to seek careers in the business and finance professions, by supporting the Martin Family Initiative to mentor and get those students to think that accounting is cool and business is fun and that there are many opportunities from that. We as a profession need to get better at encouraging the youth within those communities to seek that profession.

I think that organizations like AFOA with their CAFM program, which is a bridge to the CPA, have been doing a good job in moving that forward, but I think we can do more as a profession to encourage youth to get into what we do as accountants and business people.

[The Chair, Liberal, MaryAnn Mihychuk]

Good.

The questioning now goes to MP David Yurdiga.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Thank you, Madam Chair, and also I'd like to thank the witnesses for joining us this morning.

My first question will be for BDO Canada. When a first nation community is placed under a third-party management agreement, what is the new role for the chief and council, and what are the types of limitations imposed on council?

[Jacques Marion]

I think the role for chief and council really doesn't change much from the political perspective. It's mostly administration that changes. There's a lot of collaboration, and in providing the third-party services there's always a tie-in from the chief and council in the approval process of any of the expenditures or allocation of resources.

So there continues to be an involvement. The political involvement that a chief and council are responsible for with their membership continues. There's a diminished role when it comes to administration and financial allocation of resources based on the agreements put in place by the stakeholders.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

I'm just curious because the funds are obviously limited and some hard decisions have to be made. I'm looking at the housing crisis in most first nation communities, and there's also the issue of water treatment and the need to provide clean drinking water for the community. So do you play a role in helping the chief and council decide exactly what the priorities should be? This is very hard decision, when there are two equally important priorities. So would you give a business case, and can you describe the process?

[Jacques Marion]

Absolutely. The chief and council ultimately make the fundamental decisions that affect their members, based on the reasons they were elected by their members, to look after, steward, and decide the priorities that the particular communities deem necessary to implement.

Our role is to facilitate that within the structured funding agreements, which are very restrictive, by ensuring that the essential services are provided to the members, such as for water and housing. One of the restrictions in housing, though, is access to it. When first nations are in third-party management, they're not able to access CMHC-subsidized housing, which is a really important aspect for communities in need. It's one of the top three priorities we see across the nation.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Thank you for that.

There's another thing I'm curious about. With all these checks and balances, when you're part of a third-party management group, who is checking your progress? Does the federal government have a role to ensure that you are carrying out your duties as per the contract?

[Jacques Marion]

Absolutely. There are what are called “monitoring sessions”. I do notice a very large difference from region to region. After each engagement that we have, we ask regions to provide us with a ranking or rating of our services. It's different, again, and not standardized across the regions. The forms that we've seen are different from region to region, but there are ongoing quarterly or monthly monitoring sessions with the department. However, they fall short in not having repercussions for the practitioner. We find there should be far more punitive measures implemented on third-party managers who aren't delivering the services in keeping with the agreement's intent, and meeting the health and safety needs of the members.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

During the process when a first nation community is going into default management, how is a manager selected? Is there a tender process? Is it a flat fee? Are the organizations certified and then selected by first nations or is it INAC that picks the management group to look after that first nation community?

[Jacques Marion]

When it comes to the third party, INAC at the regional level picks the practitioner that is going to deliver the third-party services.

There's a framework for TPMs. A call-up is put out to pre-qualified firms that qualify through the MERX process for procurement for services. There's a long list of qualifications in terms of the documentation that's provided to Canada for them to put you on that pre-qualified list. From the pre-qualified list, the different regions, through a call-up process, award the contract.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Can the first nation community say it doesn't want the third-party management coming to look after the community? Does it have any role to play in the selection of the manager?

[Jacques Marion]

I think there's a certain amount of influence, and I think it varies from region to region, depending on how each region implements and interprets the framework. There is not necessarily anything visible from our standpoint that we could point to and say that a community really was involved in the selection of a TPM. It's done through the procurement process.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

What happens if a first nation doesn't comply with your direction? What happens if they say, “No, we're going to do this”, and it's contrary to your commitment to the federal government to ensure they manage their resources wisely?

[Jacques Marion]

We can't execute the request. We provide a response to the individuals who are requesting that we operate outside of the agreement. We have a discussion with the leaders, the administration, and whoever is involved in putting forth a request that doesn't comply. We have a lengthy discussion in trying to ensure that everybody understands the agreements in place and the reasons why we need to implement them in a compliant manner.

[The Chair, Liberal, MaryAnn Mihychuk]

You have five seconds.

[David Yurdiga, Conservative, Fort McMurray—Cold Lake, AB]

Five seconds?

Well, thank you for joining us this morning.