Indigenous and Northern Affairs Committee on April 19th, 2016

[The Chair, Liberal, Andy Fillmore]

We'll come to order. Thank you very much everyone for being with us today.

We'll start as always by acknowledging that we're meeting today on unceded Algonquin territory.

We have guests today from the Office of the Auditor General. I'm very pleased to welcome Michael Ferguson, the Auditor General of Canada; Jerome Berthelette, assistant auditor general; and Joe Martire and Glenn Wheeler, principals.

Thank you for joining us today.

We have 50 minutes to spend with you today. I'd like to offer you 10 minutes to present collectively, however you would like to distribute that among yourselves. Then we'll move into questioning and finish 50 minutes from now.

I'll be holding up a yellow card when there's a minute left in the 10 minutes, and a red when we're right out of time. When we get into questioning, I'll be extending the same courtesy to our questioners and guests when answering. That way we can try to be fair with the time and get everybody out of here on time.

Thank you very much, and perhaps you would like to take the floor.

[Michael Ferguson, Auditor General of Canada, Office of the Auditor General of Canada]

Mr. Chair, we're pleased to be here today to provide an overview of our role and mandate and to outline some key points from our past audit work that may be of interest to your committee.

Our office has a mandate to audit operations of the federal and territorial governments, and we provide Parliament and the legislative assemblies with independent information, assurance, and advice regarding the stewardship of public funds.

We conduct performance audits of federal departments and agencies, and we conduct annual attest audits of the financial statements of the government and of crown corporations. On a cyclical basis, we also conduct special examinations of the systems and practices of crown corporations.

For the three territories, my office reports performance audits directly to each legislative assembly. We also conduct annual audits of the financial statements of territorial governments and annual audits of territorial corporations.

In our performance audits, which we hope help the work of your committee, we examine whether government programs are being managed with due regard for economy, efficiency and environmental impact. We also look to see if there are means in place to measure the effectiveness of programs. Although we may comment on policy implementation, we do not comment on policy itself.

The Auditor General Act gives our office discretion to determine which areas of government to examine through performance audits. Our selection of audits is based on risks, significance and relevance to Parliament.

The performance audit process takes between 12 and 18 months to complete. The results of our audits are usually presented to Parliament twice a year, in the spring and fall.

In the past 15 years, the Office of the Auditor General has audited a broad range of federal programs and activities that affect First Nations and Inuit communities.

In 2011 we published a status report on the government's progress toward achieving the commitments it made to address recommendations from seven reports we issued between 2002 and 2008. Although we found that progress had been made in implementing some of our recommendations, we noted that many conditions and challenges faced by first nations communities had worsened.

For example, the education gap among first nations individuals and other Canadians had widened, the shortage of adequate housing on reserves had become more acute, and the presence of mould on reserves remained a serious problem.

Mr. Chair, that situation led us to consider some of the factors that inhibited progress.

In the preface to our 2011 audit report, we identified four structural impediments that we believed had negatively affected the delivery of programs and services to first nations individuals and communities.

The first impediment was a lack of clarity about service levels. The federal government supported services on reserves that were provided by provincial and municipal governments off reserves, such as education and drinking water. However, it was not always clear what the federal government was aiming to achieve because it had not clearly defined the type or level of service it committed to supporting.

The second impediment was the lack of a legislative base. Unlike similar provincial programs, the programs on reserves were not supported by legislation in such key areas as education, health and safe drinking water.

Instead, the federal government developed programs and services for First Nations on the basis of policy. As a result, the services delivered under these programs were not always well defined, and there was confusion about federal responsibility for funding them adequately.

The third impediment was the lack of an appropriate funding mechanism. The federal government used contribution agreements to fund the delivery of many programs on First Nations reserves. Often, the contribution agreements had to be renewed yearly, and it was not always certain whether funding levels provided to First Nations in one year would be available the following year. This situation created a level of uncertainty for First Nations and made long-term planning difficult.

The fourth and final impediment was the lack of organizations to support local service delivery. There were often no organizations in place—such as school boards, health services boards and social service organizations—to support local delivery of programs and services. In contrast, provinces had established such organizations. Indian and Northern Affairs Canada, now Indigenous and Northern Affairs Canada, had started to work with groups that represented more than one First Nation, but much remained to be done.

Mr. Chair, since 2011 we have audited several programs for first nations and Inuit communities, including the nutrition north program, policing programs, emergency management, access to health services for remote first nations communities, and the implementation of the Labrador Inuit Land Claims Agreement. We found that structural impediments continue to hinder effective service delivery. I should note, however, that we have not followed up on whether the recommendations made in these audits have been implemented. Currently we are conducting audits on first nation-specific claims and on the reintegration of aboriginal offenders.

For your convenience, we have attached to this statement a list of our most recent tabled federal and territorial audits, along with a brief summary for each. You will also note that in 2015 we tabled a report on the efforts of British Columbia first nations, Health Canada, and the Province of British Columbia to overcome the impediments in establishing the First Nations Health Authority in British Columbia. For example, the funding agreement between the federal government and the authority provides a level of funding certainty. It covers a 10-year period and includes an annual escalator to account for rising health care costs. In addition, the authority has increased support to local service delivery through training and expansion of access to electronic health services.

In addition, we identified two factors that contributed to the successful negotiation of the agreement. The first factor was a sustained commitment by leaders from first nations, as well as the federal and provincial governments, to the development of a new model for providing health services to first nations in British Columbia. The second factor was the decision by first nations to establish a single point of contact for negotiations with the federal and provincial governments.

Mr. Chair, if First Nations are to experience more meaningful outcomes from the federal funding of programs and services they receive, these structural impediments will have to be addressed.

Doing this requires the political leadership and will of all involved—the federal government, the First Nations leadership, and provincial and territorial governments.

This concludes my opening statement. We would be pleased to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Andy Fillmore]

Thank you very much, Mr. Ferguson, it's much appreciated.

We're going to go right into our first round of seven-minute questions, and the first question goes to Mike Bossio, please.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you, Mr. Chair, and thank you for being here, Mr. Ferguson, and all the rest of you as well. We really appreciate your coming to present to our committee today.

In the 2011 audit report, the Office of the Auditor General set out four structural impediments that limit the delivery of public services to first nations communities: the lack of clarity of service levels; a lack of legislative base; a lack of appropriate funding mechanisms; and a lack of organizations to support local service delivery.

What changes in practices and approaches should the federal government take to address these structural impediments?

[Michael Ferguson]

The first think I'd like to say on this is that In 2011 we were looking back, because we were noticing that even though departments were trying to put in place responses to the recommendations we had made in past audits, the results with first nations weren't changing. We were trying to figure out why. Why could there be things going on, but with no improvement in the results? We identified those four impediments. The first thing is that the government needs to be aware of those impediments and then try to deal with them.

When we did the study and audit looking at the British Columbia First Nations Health Authority, we looked at it because it was an organization that was able to get established, and we wanted to identify how they dealt with these four impediments. In fact, they were successful in overcoming them. So it is possible, with the will of everybody involved, to find ways around these impediments and come to an agreement and a better solution on some of these services.

Therefore, I really think the first thing is awareness. The second thing is making sure that the will is there on the part of everybody involved—the government, the provincial government if needed, and the first nations governments as well. Make sure the will is there on the part of everybody involved and the commitment is there, and then find ways around these four impediments that we've identified.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

You found that the use of contribution agreements to fund the delivery of services on first nations reserves could lead to delays in funding, uncertainty about the level of funding and lack of clarity about who is accountable for achieving improved outcomes. What changes in the funding mechanisms should occur?

[Michael Ferguson]

Mr. Chair, I'll start with the response and then I'll ask Mr. Martire to speak to what we found in our audit on policing services.

The issue here is making sure that there is certainty of funding. When you're trying to provide services to people and you have a responsibility to provide those types of services, you need certainty about what the funding is going to be. We found that sometimes these contribution agreements aren't put in until late in the year. So how can you know what types of services to provide?

I'll ask Mr. Martire to expand on that, because it was particularly something that we found in the audit on policing on remote first nations.

[Joe Martire, Principal, Office of the Auditor General of Canada]

As the Auditor General indicated, this is one of the issues that was problematic for the communities that were under the policing agreements. Most of them were one-year agreements, and it made it difficult for them to plan if they didn't know when the agreement was going to be renewed.

When we did the audit, we noted that at the end of March there were a number of communities affected by these policing programs that still hadn't received the funding and didn't know whether the agreement would be put in place. That caused a lot of problems for them going forward, in not knowing whether they had to lay people off and whatnot.

These contribution agreements range from one to five years, depending on the type of agreement. The vast majority of them are one-year contribution agreements, so it makes it difficult for people to plan and have some level of certainty about the level of funding they can expect to provide the services under those agreements.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

If we look at the funding mechanism today, a portion of the funding is grants and a portion is operational. Would you agree that if you were to eliminate the grant aspect of funding this contribution, and put it on more of an operational basis, saying this is the level of funding that you have, and you establish the priorities that are important to your communities....? I say this because we see that there is such a broad range of priorities across all reserves, across all nations. Would you agree that this would be a very good step towards solving some of these funding issues?

[Michael Ferguson]

As auditors, we don't try to prescribe the policy that should be put in place or exactly how the department should resolve the issues. We make recommendations.

I think that in terms of funding, we're not trying to prescribe a specific way of dealing with the funding issue. What we're trying to say is that there needs to be certainty with the funding. There needs to be a way that the different services can be planned for in the long term. Regardless of how that's done, it's more the end result—that there's certainty and an environment whereby that long-term planning can be done—that's important from our perspective.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Do I still have time?

[The Chair, Liberal, Andy Fillmore]

You have one minute left.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

How would changing the funding mechanism provide greater certainty about the level of funding and clarity about who is accountable for achieving improved outcomes?

[Michael Ferguson]

Well, in a funding agreement, if what you are dealing with is multiple-year funding.... Again, in the case of the British Columbia First Nations Health Authority, they put in place a 10-year agreement. In that agreement, they also had a number of years of an escalator, so the B.C. First Nations Health Authority knows how much money it's going to get over that 10 years and knows how that's going to escalate. That allows them to do that type of planning.

Then, within that agreement, if you know what the services are that are supposed to be delivered, you know what the time frame is, and you know how the funding is going to be delivered, you have all the bases you need in order to have the accountability.

[Mike Bossio, Liberal, Hastings—Lennox and Addington, ON]

Thank you very much, Mr. Ferguson.

[The Chair, Liberal, Andy Fillmore]

Thanks to both of you for that.

The next questioner is Cathy McLeod.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Thanks to you and your team for being with us here today, sir. I know that the work you do is much more comprehensive, but I just want to go back.... The audited financial statement is one of the gold standards of general reporting for any government. Would that be accurate?

[Michael Ferguson]

Again, in our work we do a lot of audits of financial statements, and yes, we express an opinion on those, and we expect to express a clean audit opinion without reservation. That's what we would like to see and what the organizations we audit would like to see.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

So you would probably also agree that when auditors do that reporting system, it should be widely and publicly available. It shouldn't be hidden away, I guess would be the accurate thing to say.

[Michael Ferguson]

Our office is all about promoting accountability and transparency. Whether that's accountability and transparency for financial information or performance of programs, those are the types of things that we are always looking for and promoting.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

I think it would be fair to say that first nations communities deserve that same kind of accountability and transparency from the structures, whether it be the Department of Indian Affairs or the audited statements of the money that's transferred through contribution agreements.

[Michael Ferguson]

Again, accountability I think is something that is very important. If you look at the study and the audit we did on the British Columbia First Nations Health Authority, you will see that one of the things we noted was that in setting up that organization, they had some issues around governance and some transparency issues. In order for that organization to be successful, we identified that it was very important for them to have those types of governance structures.

They were successful in overcoming the obstacles we identified in 2011 in order to establish that organization. The organization was put in place, but for that organization to be able to do what it needs to do in the long term, it needs to have appropriate governance structures in place, including the transparency. Again, we're not going to try to tell anybody how to do that, but we certainly are always promoting accountability and transparency.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

We know that the current government has appropriately committed significant dollars that are going to go into education. I guess there are a number of different ways to approach that.

Obviously, we approached it in trying to have, in partnership, a legislative framework, and that faltered—there's no question that it faltered. It was done in partnership, but it did not get to fruition. In terms of that overcoming of the structure, again, is the gold standard legislation with appropriate regulations? Would that be how you would like to see this move forward in terms of how the additional support for education gets structured?

[Michael Ferguson]

Again, I'm not going to try to sort of dictate any policy direction. I think in terms of the whole issue of accountability in reporting for first nations, a number of years ago we did an audit that looked at the reporting burden on first nations. I think we identified that there were something like over 160 reports that government departments at that time were requiring from first nations, some of them being very small. That was a report that we did in 2002. So it was quite a while ago, and things may have changed since then.

It is very much a matter of understanding the two-way street between the government as providing funders, and the first nations as governments that are part of that service-providing continuum, between the federal government providing services and the role of first nations in providing services.

It's very much a two-way street to try to identify the appropriate mechanism for accountability and transparency to exist within that framework.

[Cathy McLeod, Conservative, Kamloops—Thompson—Cariboo, BC]

Coming from British Columbia, of course, I am very proud of the First Nations Health Authority. Certainly there are going to be some growing pains along the way and your audit, appropriately, identified some of the challenges ahead. We talked about one being perhaps a legislative regulatory framework. This is in some ways a way to create some structure without legislation. Do you see this as something that potentially could get emulated, or is it really that every single community and every province is going to have to be very different?