The Government of Canada transfers money to First Nations in Canada for the delivery of programs and services that would ordinarily be provided by various levels of government. Social assistance, education and infrastructure projects are generally the three largest categories of expenditures. Funding is transferred to First Nations through Funding Agreements, which are contracts signed by both the parties, and include specific terms and conditions which must be met.

The departmental authority for intervention is contained in the terms and conditions of Funding Agreements which set out instances of default where the Minister may intervene. The policy outlines the actions that are required by the Minister and First Nation governments to ensure the defaults are addressed and delivery of essential services under the Funding Agreements are protected. These default triggers include the following:

• the terms and conditions of the Funding Agreements between the Council and the Minister, are not being met by the Council;
  
  
• the Council's auditor gives a denial of opinion or adverse opinion with respect to the financial statements of the Council;
  
  
• the financial statements indicate that the Council has incurred a cumulative deficit equivalent to eight (8) % or more of the Council's total annual revenues; or
  
  
• the health, safety or welfare of FN members is being compromised.

There are three distinct levels of intervention which are determined by the level of First Nation capacity as well as the Council's willingness to address the situation. These are:

• low level: Recipient is willing and has the capacity to address/remedy the problem. This level allows for a recipient managed Remedial Management Plan.(RMP);
  
  
• moderate level: Recipient is willing but lacks the capacity to address/remedy the problem. This level requires the recipient to appoint a Co-Manager; and;
  
  
• high level: The Minister believes that a recipient is high risk and/or is unwilling to address/remedy the default and/or the difficulties which gave rise to the default. High level intervention results in the Minister appointing a Third Party Manager (TPM).

The Intervention Policy clearly sets out the intervention process and the steps that must be taken by the Minister when an event of default has been identified. Such activities as appropriate notification and communications, meetings/discussions with the First Nation, assessing the capacity and willingness to address and remedy the default, determining appropriate level of intervention, and ongoing, regularly scheduled progress monitoring are intended to ensure both consistency and clarity in the application of intervention activities.

In most instances, a willingness to address the problem exists and the First Nation would be required to develop and manage a self administered RMP or where there is a lack of management capacity, appoint a Co-Manager. As a last resort, and particularly where there is a lack of willingness to address the problem, the Minister will appoint a TPM to administer INAC programs on behalf of the First Nation Council. Other specific actions may be required by the Minister, including withholding of funds payable under the Funding Agreements or termination of the agreement.

Progress is monitored on a regular basis, and in consultation with the First Nation, the Minister's intervention can be reduced or phased-out altogether when circumstances have significantly improved. Decisions to intervene are not made lightly, and all intervention is directed towards the ultimate goal of First Nations managing their own affairs.

March 20, 2003

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