Opening Statement to the Standing Committee on Aboriginal Affairs, Northern Development
and Natural Resources

Indian and Northern Affairs Canada—Transferring Federal Responsibilities to the North
(Chapter 8 - November 2003 Report of the Auditor General)

Economic Development of First Nations Communities: Institutional Arrangements
(Chapter 9 - November 2003 Report of the Auditor General)

Other Audit Observations—Indian and Northern Affairs Canada
(Chapter 10 - November 2003 Report of the Auditor General)

25 March 2004

Sheila Fraser, FCA
Auditor General of Canada

Mr. Chairman, thank you for inviting us to discuss three chapters of my November 2003 Report that deal with Aboriginal issues. With me are Jerome Berthelette and Jeff Greenberg, the Principals responsible for our work on Aboriginal and Northern issues.

Aboriginal issues are one of my five areas of focus for my term as Auditor General. This means that we will place an emphasis on this area and look for measurable change over time. That said, I recognize that the issues are many and complex. The areas in which we plan to contribute in a meaningful way are accountability, partnerships in program delivery—including partnerships across the federal government—and dispute resolution.

While I am not the auditor of First Nations, I believe that their perspective is vital to our work, and we engage them in several ways. I receive guidance from a Panel of Advisors on First Nations issues and from separate advisory committees established for each chapter. The majority of participants are representatives of the Aboriginal community with a wealth of experience.

The November Report chapters on Aboriginal issues share two common themes:

• the importance of establishing workable institutions that contribute to the management and growth of Aboriginal communities and their economies; and
• the need to manage for results.

Both Aboriginal peoples and the federal government recognize the importance of establishing institutions that contribute both culturally and economically to the long-term success of Aboriginal people.

Aboriginal leaders and the federal government need to define together the nature and types of institutions that will enable both to meet their goals and the results they want to achieve, not the least in the three areas you are examining today—that is, economic development, third-party intervention, and the management of land claims agreements.

In our study of institutional arrangements for economic development, we noted several positive examples of institutions that had helped First Nations to develop economically. These included development corporations that, in many cases, were supported by the federal government. However, we also heard about impediments to development, such as some of the structures around land management.

I was pleased that the federal government agreed with the three recommendations in the chapter, which were aimed at establishing a more consolidated, proactive, and results-based approach by government organizations. I was also pleased that the federal organizations involved were able to arrive at a joint response. As we observed in the study and in other work on First Nations issues, coordination and cooperation across the many federal organizations involved in Aboriginal programs is a major challenge.

The federal government has also committed to making important changes in its approach to third-party intervention, through a new Third Party Manager Policy. The audit observation in Chapter 10 recommends how Indian and Northern Affairs Canada could go further. Third-party management is an extreme intervention, intended to be temporary. However, unless it is more transparent and focuses more on capacity development, the intervention may not resolve the underlying problems.

Chapter 8, Transferring Federal Responsibilities to the North, discusses the need to manage for results and to do so in a way that shares the responsibility for that to happen among all the parties to the land claim agreements.

Our audit found that the Department does not know if it is fulfilling all of its responsibilities spelled out in two land claims agreements in the North—with the Gwich'in in the Northwest Territories and with the Inuit in Nunavut. We found that the Department is focussed on meeting the specific obligations under the land claims agreements, without considering their impact on the higher-level objectives agreed upon when the land claims were signed.

Let me give you an example. Article 23 of the Nunavut land claim has the objective of increasing Inuit participation in government employment to a level representative of the Nunavut population. To meet this objective, 85 percent of government employees in the Nunavut settlement area would have to be Inuit.

However, at the time of the negotiations, the parties did not set a target date for reaching this level, or a process for getting there, or milestones for assessing progress. Consequently, we could find nothing to indicate whether federal activities were helping to increase the number of Inuit employed in the government.

The lack of a results-based management approach has led to a dispute between the Inuit and the federal government. The five-year independent review called for in the land claim agreement noted the lack of co-operation between the federal government and Nunavut Tunngavik Incorporated to make article 23 work.

The institutional arrangements for resolving disputes as set out in both the Nunavut and the Gwich'in agreements are not working. In each case, an implementation committee oversees the agreement and attempts to resolve disputes. Because these committees operate by consensus, good will is essential for their effectiveness. However, when committee members cannot agree over such fundamental matters as the relationship between activities, obligations, and objectives, the processes break down.

In 2001, the Nunavut land claim participants created a working group to discuss the implementation of article 23, including the nature of the federal involvement. The working group was to report in a year. At the time of our audit, that report was still pending.

In its response to our audit, the Department indicated that it fundamentally disagreed with our view of how its success should be measured. The Department defines success as fulfilling the specific obligations set out in the agreements. We believe that success means more than meeting the minimum legal requirements—that results matter above all.

I am pleased to note Indian and Northern Affairs Canada has posted on its Web site a press release dated February 13, 2004, in which the Honourable Andy Mitchell, Minister of Indian and Northern Affairs Canada states that he agrees with the need to focus on the lasting benefits of land claims agreements.

One final point. I believe that the federal government is not providing adequate information to Parliament on its management of the land claims agreements. Put simply

• there is no reporting of results;
• there is nothing to indicate that disagreements exist; and
• there is nothing on the costs to the federal government of managing individual claims.

Parliament approved each land claim agreement through separate legislation. We believe that, at a minimum, it should get a report on how much money the federal government is spending to meet its commitments. The Department did not agree that these costs should be tracked and reported.

In conclusion, Mr. Chairman, in future hearings the Committee may wish to discuss with the Department how it will respond to the recommendations in our chapters. This includes

• what success means in land claims agreements and how it will amend its management framework to focus on responsibilities, not simply obligations;
• how it will report the costs of land claims agreements;
• implementation of the Third Party Manager Policy; and
• how it will implement the recommendations concerning institutional arrangements for economic development.

The recommendations in the three chapters are listed in an appendix to this statement.

Mr. Chair, that completes my opening statement. We would be pleased to answer questions.

Appendix

November 2003 Report

Chapter 8
Indian and Northern Affairs Canada
—Transferring Federal Responsibilities to the North

8.53 Recommendation. Indian and Northern Affairs Canada should work with the other signatories of the land claims agreements to overhaul the annual reports of the Gwich'in and Nunavut land claims agreements and make them more results-based.

8.63 Recommendation. Indian and Northern Affairs Canada should amend the land claim obligation system (LCOS) database to ensure that it focusses not only on obligations but also on results and that it provides measurable milestones and targets to gauge progress.

8.69 Recommendation. Indian and Northern Affairs Canada should track and report the costs of delivering the federal activities for each claim, including the overhead for itself and the other departments involved.

8.77 Recommendation. Indian and Northern Affairs Canada should strengthen its co-ordinating framework to ensure that the Government of Canada meets federal responsibilities under the land claims agreements.

8.86 Recommendation. Indian and Northern Affairs Canada should conduct a "lessons-learned" evaluation of its management of the Yukon devolution exercise.

8.87 Recommendation. Indian and Northern Affairs Canada should ensure that it has an adequate management framework for the implementation phase of the Northwest Territories devolution.

Chapter 9
Economic Development of First Nations Communities: Institutional Arrangements

9.74 Recommendation. Indian and Northern Affairs Canada, Industry Canada, and regional federal organizations should consolidate the administrative requirements and improve the adaptability of their business support programs for First Nations so that they can respond to large, complex, multi-purpose projects.

9.82 Recommendation. The federal government should support First Nations in identifying, planning, and implementing institutional arrangements that take advantage of economies of scale where possible, and that are appropriate to the First Nations' economic development circumstances and visions.

9.90 Recommendation. Under the leadership of Indian and Northern Affairs Canada, federal organizations should develop horizontal performance information for economic development programming that is outcome-focussed and relevant to the performance information needs of First Nations.

Chapter 10
Other Audit Observations
Indian and Northern Affairs Canada

10.46 Recommendation. Indian and Northern Affairs Canada should address the elements missing from its new Third Party Manager Policy, namely

• provision for First Nations input,
• chief and council capacity building, and
• dispute resolution.

10.47 Recommendation. Indian and Northern Affairs Canada should develop a strategy and action plan for implementing the new Third Party Manager Policy.

10.48 Recommendation. In consultation with First Nations, Indian and Northern Affairs Canada should conduct an evaluation of third-party manager intervention.