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

The Joint Framework

In July 2016 the Assembly of First Nations (AFN) and Indigenous and Northern Affairs Canada (INAC) signed a Memorandum of Understanding (PDF Version, 198.90KB, 1 page) (MoU) to launch the co-development of a New Fiscal Relationship with First Nations. Following the signing of the MoU, INAC set in motion a collaborative development process with the AFN, First Nations, and other Indigenous representative organizations, which resulted in a joint report published in December 2017. A new approach: Co-development of a new fiscal relationship between Canada and First Nations articulated a joint framework for a New Fiscal Relationship with First Nations currently operating under the Indian Act and presented a vision and recommendations for action.

The joint NFR vision

The framework for a New Fiscal Relationship embraced the following shared vision – that the New Fiscal Relationship:

• should constitute a regime that by design recognizes and is responsive to First Nations' right to self-determination – a recognition-of-rights approach;
• should strengthen First Nations' exercise of their right to self-determination by supporting First Nations-led capacity enhancement;
• should be a learning, evolving and empowering relationship – a conscious break from rigid colonial structures – with whole-of-Government approaches that address the realities of all First Nations;
• should be founded on a mutual accountability relationship whereby First Nations governments operating under the auspices of the Indian Act are primarily accountable to their own citizens, while the Government of Canada and First Nations governments hold one another mutually accountable for the commitments they make to one another and work together to achieve results for First Nations citizens;
• will ensure sufficient funding;
• will empower First Nations to plan and invest based on their own priorities, by ensuring greater predictability, flexibility, and autonomy of funding arrangements; and,
• will underpin progress toward the elimination of socio-economic gaps between First Nations citizens and other Canadians.

The Joint Implementation Process

An important roadmap: The joint December 2017 report recommended that the process to implement the New Fiscal Relationship (NFR) should leverage the work of an advisory committee (the Joint Advisory Committee on Fiscal Relations (JACFR)) and a joint governance structure that includes both strategic and technical tables. JACFR tabled its recommendations on continuing the joint work on the NFR in its June 2019 report, Honouring our Ancestors by Trailblazing a Path to the Future, which has served as an important roadmap for subsequent progress in the joint implementation process.

A joint governance structure: Supporting the joint implementation process is a governance structure designed for a collaborative approach. This structure has evolved – and will continue to evolve – over time, and currently includes: (1) at the strategic level, the Governance and Fiscal Table is a senior-level committee that sets the agenda on key joint-interest policy areas; (2) at the technical level, three technical tables have been established: (a) the NFR Table, with a focus on the key elements of the NFR such as the NFR Grant; (b) the Governance Modernization Table, with a focus on modernizing and expanding support for governance in First Nations; and (c) the Default Prevention and Management Policy (DPMP) Table, targeting the repealing of the existing DPMP and replacing it with a new approach rooted in prevention, collaboration, and capacity building.

Progress achieved in the joint implementation process: Progress has been achieved in the joint implementation process particularly as it relates to: (1) ensuring that First Nations have adequate funding and long-term, stable, predictable, and flexible funding arrangements; (2) establishing an outcomes-based framework for mutual accountability; and (3) developing a new approach and structure for replacing the existing DPMP.

Spending growth on grants and contributions

At Indigenous Services Canada (ISC), the combination of existing funding and significant new investments has resulted in spending growth on grants and contributions funding to communities of approximately 53% from 2016-17 to 2020-21. Budget 2021 alone provided more than $18 billion in new investments to further narrow gaps between Indigenous and non-Indigenous peoples, support healthy, safe, and prosperous Indigenous communities, and advance meaningful reconciliation with First Nations, Inuit, and the Métis Nation.

The New Fiscal Relationship (NFR) Grant

A long-term, predictable, and flexible funding agreement: The NFR Grant is a renewable, up to 10-year grant funding mechanism that supports reconciliation and self-determination by providing eligible First Nations with enhanced funding stability, predictability and flexibility as compared to more restrictive and inflexible contribution funding. Eligibility for the NFR Grant is determined using criteria co-developed with the Assembly of First Nations and the First Nations Financial Management Board (FMB).

Key NFR Grant Benefits: First Nations funded through an NFR Grant benefit from:

• Enhanced flexibility in the design and delivery of 11 core services to community members. First Nations will no longer be restricted by how Canada defines services through its programs' terms and conditions. With the NFR Grant, First Nations have full control over the design and delivery of programs and services funded through the NFR Grant;
• Greater fiscal flexibility to accommodate evolving local needs, funding pressures and priorities without the need for permissions from Canada, including an option for up-front annual installments;
• No reductions in funding when First Nations raise funds from other government sources;
• Unrestricted ability to retain unexpended funds at fiscal year-end for the duration of the agreement;
• Significantly reduced reporting, as the NFR Grant prioritizes accountability in First Nation governments reporting to citizens, which replaces 92% of reporting data elements previously provided to Canada for programs and services funded through the NFR Grant;
• No recipient audits initiated by Canada for programs included in the NFR Grant;
• Continuing to be eligible for proposal-driven programs as well as other funding not currently eligible under the NFR Grant (such as Major Capital);
• Greater predictability through a longer term (up to 10 years) and a guarantee that no First Nations should lose funding as a result of the transition to the NFR Grant;
• Better ongoing sufficiency through an annual NFR Grant escalator and other national funding program enhancements. The NFR escalator is designed to protect the NFR Grant base funding for inflation and population growth (i.e., by ensuring a minimum of two percent annual growth in base funding.) However, where individual program funding streams grow at a higher rate than a First Nation's NFR Grant escalator rate, the First Nation will see the same higher growth in those funding streams.

Progress achieved on accessing the NFR Grant: In all, 130 First Nations have now signed onto NFR Grant agreements between April 2019 and August 2022. The Expression of Interest process for April 2023 (deadline: September 30, 2022) has now been formally launched, and early indications are that the number of interested First Nations will be significant.

Comprehensive Funding Agreement Model

Designed with standardization, increased predictability and minimal administrative burden in mind, the Comprehensive Funding Agreement is on its way to becoming the single standard agreement model for transfer payments to Indigenous communities – including NFR Grants – made by Indigenous Services Canada (ISC) and Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC), replacing a variety of different pre-existing agreements.

Expanded carry forward and access to unexpended funding

At the Assembly of First Nations (AFN) General Assembly on July 25, 2017, the then Indigenous and Northern Affairs Canada (INAC) minister announced that the department is committed to ensuring that most funding agreements will allow First Nation communities to carry forward unexpended funding. This has resulted in greater fiscal and operating flexibility for First Nation communities, who must no longer rush into end-of-the-year spending sprees. Carry forwards for most funding agreements has also been incorporated as a principle in the NFR Grant. (NB: "set contributions," otherwise seldom used, still restrict carry forwards.)

Urban Programming for Indigenous Peoples (UPIP) programs and services

Created in 2017, the UPIP program provides core funding to allow Indigenous organizations to serve their clients, to deliver culturally appropriate programs and services to urban Indigenous peoples, and to invest in local urban stakeholder coalitions across Canada. Over the last 5 years (2017-2022) UPIP has invested a total that exceeds $267 million. This core funding provides a stable and flexible base that allows these organizations to plan their activities and dynamically allocate resources to support the evolving needs and priorities of their clients.

Covid-19 pandemic support to urban Indigenous organizations

Additional support to urban Indigenous organizations was provided during the Covid-19 pandemic through the Indigenous Community Support Fund. Through the Fund, the Government of Canada allocated a further: (1) $15 million in March 2020; (2) $75 million in May 2020; (3) $159.8 million in August 2020; (4) $75 million in November 2020; and (5) a further $150 million in Budget 2021. More recently, UPIP received of an off-cycle funding decision in the amount of $101.1 million over three years (2022/23-2024/25) to renew funding ($71.1 million), expand funding ($25 million), and support research and data collection ($5 million).

UPIP infrastructure

Announced in Budget 2019, UPIP will also provide $57.5 million over five years (2020-2021 to 2024-2025) to support investments in major and minor infrastructure projects for UPIP service providers.

Family Violence Prevention Program

The Family Violence Prevention Program's annual Call for Proposals supports violence prevention activities that focus on First Nations, Inuit, Métis, urban or 2SLGBTQQIA+ people facing gender-based violence. As of FY 2021-22, proposals can range from short term activities with a smaller budget (such as $50,000 for 1 year) to a multi-year project requiring a larger amount of funding due to the nature and scope of proposed activities.

Increasing transparency, strengthening mutual accountability

From January to June 2017, several engagements were undertaken on the themes of mutual transparency and accountability. Key messages from these engagements included the following:

• A mutual accountability framework needs to be in place that holds both First Nations and the Government of Canada to account;
• Such an accountability framework must recognize First Nations' primary accountability to their members, first and foremost;
• The mutual accountability framework must be developed collaboratively with First Nations and must be rooted in a set of national outcomes; and
• There is a need for funding to support First Nations capacity to meet accountability and transparency standards, and to develop and maintain the administrative supports, training, policies and procedures necessary to be accountable to their membership.

Developing a National Outcomes Based Framework (NOBF)

In its June 2019 report, the Joint Advisory Committee on Fiscal Relations (JACFR) recommended measuring the socio-economic gaps between First Nations and non-Indigenous Canada. ISC is working with partners to develop a National Outcomes Based Framework (NOBF) which is a key element of the mutual accountability relationship between First Nations and the Government of Canada. It will include a measurable set of outcomes that can be defined, compared, and acted upon in a coordinated way. Several in-person engagement sessions with First Nations were completed before the onset of the COVID-19 pandemic. These engagements are expected to conclude in Fall 2022, and a first draft of the National Outcomes Based Framework should be available by Spring 2023.

Problems which make the current DPMP unfit for a New Fiscal Relationship

Key Standing Committee findings made clear that the DPMP is unfit as a policy instrument in a renewed fiscal relationship. In particular, the Standing Committee rightly pointed out 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.

A collaborative and capacity development-led approach following the repeal of the DPMP

After the creation of the two departments (ISC and CIRNAC) from INAC (Fall 2017), the Chief Financial, Results and Delivery Operations (CFRDO) Sector at ISC assumed lead responsibility for developing a new approach and structure to managing defaults. The sector initiated engagements and began work to explore options with Indigenous-led organizations and institutions, including the Assembly of First Nations (AFN), the First Nations Financial Management Board (FMB) and AFOA Canada.

Guiding principles for a new approach to default management

Before substantive engagements and work began, a preliminary set of guiding principles were developed based on Standing Committee recommendations and the results of preliminary consultations. These principles included:

1. Funding relationships with First Nations will include a collaborative focus on identifying emerging risks and challenges related to governance, financial management and/or service delivery, so that preventive supports can be activated and deployed at the earliest.
2. No appointment of an external party is to be considered in response to challenges related to a First Nation's governance and/or financial management. This recognizes the reality that lack of funding and other supports for building governance and financial management capacity are too often the root cause of defaults. Such challenges are best addressed instead through ongoing collaboration, early remediation, and well-resourced capacity development supports.
3. The appointment of an external party is to be considered only in: (a) the exceedingly rare instances where there are unacceptable risks to service delivery (and/or unacceptable service disruption) and First Nation leadership are no longer collaborating and/or leading mitigation; and (b) the very limited situations where a First Nation government is: (i) legally unable to sign the funding agreement; or (ii) unable to obtain quorum and thus unable to fulfill its role related to the administration of the funding agreement and provision of the services funded.
4. When an external party is appointed: (a) the department initiating the appointment (ISC or CIRNAC) is responsible for the costs associated with the external party, not the First Nation government; (b) sourcing of qualified external parties mandated by the departments will give preference to qualified Indigenous institutions, organizations and individuals; and (c) the external party's mandate should: (i) be limited to the remediation and recovery of the service delivery area(s) affected; (ii be for a specified and sufficiently brief duration of time; and (iii) include enforceable performance objectives (including minimum qualifications for external parties) and an exit strategy at the earliest opportunity.
5. A joint ISC/CIRNAC and Indigenous steering committee will ensure that the new approach to default management is implemented as an effective solution to the problems identified with the old policy.

First Nation engagements were significantly affected by the COVID-19 pandemic

Initial First Nation engagements were conducted and subsequent drafts for a new approach in support of the repeal of the DPMP were developed between the winters of 2017 and 2019. Follow-up engagements were planned to begin in Spring 2020. Unfortunately, time, resources and agenda pressures emerging from the onset of the COVID-19 pandemic on the departments, First Nation governments, and Indigenous organizations, slowed down the pace of these engagements between early in 2020 and Winter 2021. These engagements have now resumed and are progressing according to expectations.

Interim measures to advance the Standing Committee's recommendations

In its September 2017 Response, the Government committed to implementing interim measures to advance the Standing Committee's recommendations pending the repeal of the DPMP. As such, ISC Regional Offices were directed to move towards a more collaborative, community-led and capacity focused approach to supporting First Nations approaching or facing default that is more consistent with the guiding principles listed above.

Current Status on DPMP repeal and replacement

Repeal and replacement work has been underway, but progress has been significantly delayed by the COVID-19 pandemic. Nevertheless, reports from the Regional Offices have consistently indicated a definite change in mindset and practices when dealing with defaults. Through such initiatives as Communities in Focus and the Community Development Wrap-Around Initiative, Regions have now significantly increased the attention paid to communities approaching or facing default, and have placed diagnosing root causes, more frequent face-to-face meetings, closer collaboration with internal and external partners, and capacity building, at the core of their work with these communities.

These efforts are being further supported by new funding of $104.8 million over 2 years, starting in 2021-22, to enhance the administrative capacity of First Nations governments and other Indigenous organizations that deliver critical programs and services, and by an additional $151.4 million over 5 years, starting in 2021-22, to provide wrap-around supports for First Nations with the greatest community development needs and challenges. This additional funding and actions taken to address the challenges faced by communities have had a significant cumulative impact on the First Nations still under some form of default management. As such, between 2017 and 2022, the number of First Nations under some form of default declined from 136 to 93, including a reduction in the number of First Nations under the highest form of intervention (TPFAM) from 10 to 1.

The interim measures are still in place; they will be replaced with regionally tailored community-centered approaches that bring together multiple stakeholders, are holistic, strength-based, community-led, and focus on understanding and supporting First Nation community and capacity development needs and priorities (Expected Completion: Spring 2023).

Modernization of Canada's Support for First Nations Governance

The Government of Canada's support for First Nations governance is a critical component of the New Fiscal Relationship. Since 2017, the Indigenous Governance and Capacity (IGC) program's funding components (Band Support Funding, Employee Benefits, Tribal Council Funding, and Professional & Institutional Development) have been supplemented by time-limited funding to support First Nation governance. In addition, the government's support for the First Nations Public Service Secretariat's (FNPSS) and First Nations institutions like the First Nations Financial Management Board (FNFMB) is helping to strengthen and enhance governance capacity in First Nation communities and organizations.

Furthermore, the government is implementing a Budget 2018 commitment to explore governance capacity needs in First Nation communities and undertake a comprehensive and collaborative review of federal government programs and funding that support First Nations governance. As such, ISC and the AFN have now been engaged for some time in joint work on the comprehensive review and modernization of the IGC program.

The Service Transfer Policy Initiative

Transfer of ISC responsibilities: Service Transfer is part of a multifaceted Government of Canada approach to advancing self-determination goals and priorities of Indigenous communities. In this context, ISC continues to work toward changing how the rights and needs of the Indigenous Peoples are addressed, and toward the gradual transfer of departmental responsibilities to Indigenous partners as their capacity to assume these responsibilities increases.

Advances in transferring responsibilities: Significant advances have already been made in transferring control of responsibility for program and services to First Nations in the areas of health, lands management and financial management. Devolution in the territories and self-government agreements have further transferred program decision-making to Indigenous communities. Other ISC and CIRNAC program areas are now pursuing specific service transfer opportunities with Indigenous partners, as are other Indigenous funding departments and agencies. These efforts are being complemented by renewed funding for the First Nations Health Transformation Agenda, funding for Indigenous groups who wish to design and deliver child and family services solutions that best suit their needs (supporting implementation of Bill C-92, an Act respecting First Nations, Inuit and Métis children, youth and families), and support for the advancement of First Nations student achievement in First Nations, independent, provincial and territorial schools through the Education Partnerships Program and particularly its Regional Education Agreement component.

Service Transfer Policy Framework: During FY 2021-22 ISC began developing a Service Transfer Policy Framework to provide greater clarity on the government's service transfer goals and objectives and increased transparency to partners. Work on the Framework is ongoing, and the department will consult and cooperate with a broad range of partners and stakeholders.

Renewing the ISC Policy on Operations and Maintenance (O&M)

A commitment to develop a new policy and funding framework: At the 2017 Assembly of First Nations (AFN) Annual General Assembly, the then INAC Minister committed to identifying options to move to a new policy and funding framework to remove the inequities of the current Operations and Maintenance (O&M) policy. Following consultations with First Nations and external experts, it was agreed that the O&M Policy should not be reformed in isolation, but as part of a broader and more holistic approach informed by the infrastructure best practice of Asset Management.

Asset Management engagements and pilot projects: As a first step, Asset Management engagements and pilot projects were conducted jointly with the AFN, and a draft Asset Management policy was developed. However, as Asset Management has proven significantly more complex than O&M, joint work is still on-going (Expected Completion: April 2023.)

Progress made in the move to a new policy and funding framework: In the interim, progress has been made in addressing O&M funding gaps and advancing the adoption of asset management best practices in First Nation communities. To that end:

• Budget 2019 and the 2020 Fall Economic Statement provided significant increases in O&M funding, including updated formula methodologies and $1.3 billion over five years and $299 million ongoing for water and wastewater assets;
• Budget 2021 provided $1.7 billion over five years with $388.9 million on-going in O&M funding for other Community Infrastructure, including Health and Solid Waste assets. Formulas were updated/ modernized to better support the costs associated with operating and maintaining infrastructure;
• As of December 31, 2021, 194 First Nation communities have participated in asset management capacity building activities and 52 have developed asset management plans. More information is available here about the ISC Asset Management Program;
• ISC piloted and in fiscal 2022-23 implemented a more comprehensive Extended Asset Condition Reporting System program, which makes available extended inspections that provide First Nations with a detailed assessment of current asset deficiencies, a forecast of future capital investment needs, advice for maintenance of assets, and an executive summary of the inspection's outcomes for consideration by the First Nation's leadership. The inspections are designed to better support communities in planning and budgeting for their infrastructures' lifecycle needs; and
• ISC allocated $140 million in one-time O&M top-ups to First Nations for fiscal year 2020-21 (2020 Fall Economic Statement increase to O&M funding) to bring funding levels up to 100% of formula funding for water and wastewater assets. To allocate funding in future years, beginning in 2021-22, ISC modernized the O&M funding methodology and updated funding formulas to better reflect real First Nations' O&M costs and to prepare the ground for an asset management policy approach replacement for the current O&M Policy.

Background

In April 2006, the First Nations Fiscal and Statistical Management Act (later renamed the First Nations Fiscal Management Act (FNFMA)), created three national First Nation institutions that were mandated to support First Nations in asserting their jurisdiction over their fiscal affairs: (1) the First Nations Financial Management Board (FMB), which assists First Nations in developing the capacity to meet their financial management requirements and in the development, implementation and improvement of financial relationships with financial institutions, business partners and other governments; (2) the First Nations Tax Commission (FNTC), which supports First Nations to institute property taxation regimes by approving First Nation property tax and expenditure laws and resolving disputes between First Nations and taxpayers; and (3) the First Nations Finance Authority (FNFA), which provides long term loans to First Nations through financing it obtains from the capital markets through the issuance of bonds.

Government funding and supports to arms-length national Indigenous-led institutions and organizations

Supporting all FNFMA institutions: The FNFMA institutions receive base funding annually from the federal government to deliver their core activities and can access additional proposal-based funding to support special projects and pilots. Base funding levels are reviewed periodically. Since Budget 2018, the annual funding for these institutions rose from $12.3 million to $23.4 million annually. Furthermore, the Government of Canada has committed an additional $54.3 million over five years to increase the support for the FMB and FNTC, starting in FY 2022-23. This funding will serve to stabilize core activities and expand the institutions' mandate.

Supporting the First Nations Financial Management Board (FMB): Due to its role in supporting First Nations to implement financial administration laws, processes, and mechanisms for sound financial governance, the FMB is uniquely placed to assist First Nations in implementing financial governance structures and systems to transition to greater fiscal autonomy. Additional funding is being provided to continue FMB's work on the New Fiscal Relationship (NFR) Grant. Legislative amendments are also being explored to permanently include the work on the NFR Grant and default prevention and management under FMB's core activities.

Supporting AFOA Canada: AFOA Canada is a national Indigenous institution that focuses on governance and financial capacity development (e.g., training and certification) of Indigenous professionals working in all areas of management, finance, band administration, and leadership. AFOA Canada is also a partner on joint working groups which center on issues related to capacity development of Indigenous public servants, communities, and organizations. ISC's average annual investment in AFOA Canada is $1.1 million. Investments in regional AFOA chapters vary across regions based on demand and available funds.

Supporting the First Nations Tax Commission's Tulo Centre of Indigenous Economics : The Government of Canada continues to support the expansion of the First Nations Tax Commission's Tulo Centre of Indigenous Economics building on its established expertise in research and training of First Nations administrators in the areas of taxation, land management and overall governance.

Supporting the strengthening of First Nations Public Services

In addition to the direct supports provided to Indigenous-led institutions and organizations noted above, ISC and CIRNAC are also exploring how to strategically invest capacity funding in strengthening First Nations Public Services and assisting Indigenous Public Service members to access training and certification opportunities in financial management.

Supporting the development of a Shared Financial Management Services capability

Background: ISC and CIRNAC are also exploring how aggregations of financial services could be leveraged to provide sustainable financial management support, particularly among smaller and more remote First Nations who face significant qualified staff recruitment challenges. In early 2021, building on lessons learned from the DMPPP Pilots, the FMB identified an opportunity to establish a national Shared Financial Management Services capability. This capability would enable First Nations as a group to access services and expertise that they may not be able to afford on an individual basis.

Objective: The Shared Services capability would be an optional resource available to First Nations governments needing additional – or alternative to in-house – capacity to support their financial management needs. The long-term objective would be the creation of a national Indigenous center of excellence with the knowledge and expertise that can be trusted to fully support First Nation governments' fiscal goals and objectives.

Shared-services pilot project : As a first step, the FMB proposed to conduct a pilot project over a two-year period to trial the provision of bookkeeping, accounts payable, accounts receivable, payroll and financial reporting services to ten First Nation governments through a shared services platform. To launch this pilot, Budget 2020 provided the FMB with $3.5 million over 2 years, which was renewed in 2022 for the continuation of the initiative in 2022-23 and 2023-24.

Default Management Prevention Pilot Project (DMPPP)

The DMPPP involved joint work with the First Nations Financial Management Board (FMB). The work began in 2016 and was divided into two phases. Phase Ⅰ started in October 2016, with five First Nation governments; Phase Ⅱ started in FY 2020-21, involving an additional 20 First Nation governments.

Default Management Prevention Pilot Project (DMPPP) Phase I

Five First Nations in default: In the first phase, the FMB worked with 5 First Nations (four in Manitoba and one in British Columbia) in Third-Party Funding Agreement Management (TPFAM) focusing on strengthening their financial management capacity and creating enabling conditions so they may exit TPFAM.

Key impacts on the First Nations involved: When the five First Nation governments entered the Phase Ⅰ pilot in FY 2016-17, all five were in the highest level of default (TPFAM). By the end of FY 2018-19, all five First Nation governments had been de-escalated to the second level of default, Recipient Appointed Adviser (RAA). At the start of the pilot, 4 First Nations had high General Assessment risk scores, and one had a medium score. As of today, only one of the pilot participants still has a high risk score, 2 have medium scores, and 2 have low risk scores. On a cumulative basis, the risk scores of the 5 First Nations involved in the Phase Ⅰ pilot have been reduced by 87.8%.

Lessons learned from Phase I: In its concluding Phase Ⅰ report to Indigenous Services Canada (ISC), the FMB provided important lessons learned from Phase I, including:

• To be effective, the approach to defaults must be capacity development-led and First Nation developed, delivered and directed;
• Focus on empowerment – accountability to citizens for delivering services and bettering the Nation's outcomes;
• Sustainability – based on proven internal control standards adapted by and for First Nations
• Independent, skilled and experienced practitioners within a First Nations institution providing hands-on training at no cost to the First Nation;
• There is a need for Shared Indigenous Support Services – a sustainable support capability in the form of a non-profit, nationally-available, shared Indigenous support service;
• Indigenous regulatory and legislative framework – A new Indigenous-led and managed policy framework will need to be put in place, including replacing the current Default Prevention and Management Policy (DPMP);
• When punitive measures are removed and First Nation governments are given the opportunity to regain control over their administration, real capacity development and empowerment begins;
• The basic needs of the community need to be addressed first to ensure First Nations have the adequate support and incentives to move away from intervention toward greater self-determination. More pressing emergencies such as fires and floods will delay progress – long-term stable commitments of all parties will be needed;
• Investments must be made in the development of sustainable capacity of the First Nation through an effective knowledge transfer to staff that are retained, and through the implementation of tools and systems, in order to see successful results longer term;
• Continuing capacity support funding following a de-escalation of intervention should be considered;
• Clear roles and responsibilities and effective ongoing communication and collaboration between ISC, the First Nations and Indigenous institutions, such as the First Nations Financial Management Board, are essential for continued success in reforming the approach to default prevention and management; and
• Government needs to make space for the development of a trust relationship between Indigenous institutions and First Nation participants.

Default Management Prevention Pilot Project (DMPPP) Phase II

Started, but progress delayed: Progress on this second phase has been significantly delayed due to the impacts of COVID-19. The First Nations Financial Management Board (FMB) continues to work as closely as possible with the 20 Phase Ⅱ participants focusing principally on: (1) policy development related to multi-year planning, risk management, strategic planning and conflict of interest; and (2) training in financial literacy, planning and budgeting, governance and Finance and Audit Committee roles and responsibilities.

Additional funding provided: Additional funding is being provided to continue FMB's work on the Default Management Prevention Pilot Project (DMPPP) phase II.

In First Nations

Significant progress has been achieved through the cumulative impact of a variety of capacity development programs and initiatives targeting First Nations communities. The Government of Canada remains committed to building governance and administrative capacity and strengthening Public Services within First Nations communities, recognizing that capacity building programs are foundational and, as such, essential in nature.

In Indigenous-led institutions

Significant progress has also been achieved through funding and supports for First Nations institutions. The Government of Canada is committed to supporting First Nations Financial Management Act institutions and helping to strengthen their relevance and capacity to deliver their services through enhancements to the institutions' mandates and core funding increases. In addition, options are being explored to establish a First Nations Infrastructure Institute. The Institute would offer infrastructure-specific capacity building, knowledge transfer, and support services to help communities improve infrastructure governance and outcomes.

In Indigenous-led organizations

Progress was also made in helping to enhance the impact of important Indigenous-led organizations. Beyond financial support provided to national Indigenous financial management organizations like AFOA Canada, the Government of Canada, through the Professional and Institutional Development Program, also supports regional and local Indigenous-led organizations.