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1986 Report of the Auditor General of Canada

Introduction

11.1 The Department of Indian Affairs and Northern Development Act, 1970, defines the responsibilities of the Department. The Department administers this and 40 other Acts of Parliament. According to its statement of responsibilities in Part III of the 1985-86 Estimates, the Department:

- fulfils the lawful obligations of the federal government arising from treaties and the Indian Act (for example, paying treaty benefits and administering Indian lands and trust moneys);

- provides for the delivery of basic services (such as education, social assistance, housing and development of community infrastructure) to status Indian and Inuit communities;

- assists Indians and Inuit to acquire employment skills and to develop viable businesses;

- negotiates the settlement of accepted claims relating to aboriginal title not extinguished by treaty or other means, or relating to past non-fulfilment of government obligations;

- makes transfer payments to the governments of the Yukon and the Northwest Territories to assist them in providing public services to territorial residents in accordance with the Yukon and Northwest Territories Acts and other agreements;

- provides for the balanced development of the North through management of natural resources (oil and gas, minerals, water, forests and lands); protection and management of the northern natural environment, including Arctic seas; fostering of economic and employment opportunities for northerners; and funding of social and cultural programs; and

- fosters political development of the two northern territories and co-ordinates federal policies and programming for the North.

Exhibits not available

1980 Comprehensive Audit

11.4 Mandate. The Department's mandate was not clear; thus its relationship to Indians and Inuit was not specified clearly enough to define what DIAND should be accountable for. Specifically, the Department was not sure whether it was accountable for producing social and economic gains for native people or was responsible simply for ensuring an equitable distribution of financial support as native groups pursued their own objectives. There is a great difference between these two orientations, and we were of the opinion that this had to be clarified before the Department could establish a structure for accountability. The measures of accountability would be quite different for the two orientations.

11.5 The Standing Committee on Public Accounts, in its Sixth Report to the House of Commons dated 23 June 1981, recommended that the Department take the necessary steps to clarify its mandate, especially in light of the absence of specific objectives, plans or goals against which its achievements could be measured.

11.6 The Department informed the Chairperson of the Standing Committee on Public Accounts in May 1985 that the Minister had commissioned a fundamental review of the Department's mandate, the processes by which it is carried out, and the relationship of the Department to the Indian people.

11.7 Contributions to Indian bands. In 1980 we reported to Parliament that the Department did not have assurance that contributions to Indian bands had been used for the purposes for which they were given, as required by Treasury Board. The Department responded that the control mechanisms necessary to meet Treasury Board requirements might have been beyond the current administrative capability of many bands. It has initiated negotiations with Treasury Board to develop an accountability process that is more appropriate for both the Indians and the government. At the time of writing this report, an "alternative funding arrangement" was being negotiated with Treasury Board. The objective of this arrangement is to put in place a new set of methods that would enable Indian communities to take responsibility and be accountable for funds received. In 1986-87, contributions to Indian bands will exceed $1 billion and the Department still has not established appropriate control for the contributions.

Scope of this Audit

11.9 We placed a certain amount of reliance on the work of the Departmental Audit Branch. Reliance was, of necessity, limited by the fact that the scope of the Branch's work was not as broad as our audit scope.

Reserves and Trusts

Introduction

11.11 The mandate of the Reserves and Trusts Branch, as well as the Department as a whole, is derived from the statutes the Department administers. The precise meaning of this mandate has been the subject of debate and confusion over the years. The confusion is caused by the imprecise nature of the legislation. While the Department may not be able to state its legal role unequivocally, its responsibilities for land management can be clearly stated to be the administration of lands reserved for the use and benefit of Indians and bands. In late 1984, a decision of the Supreme Court of Canada confirmed that the Department has a fiduciary duty to the Indian people with respect to surrenders of reserve land. (The Indian Act defines "surrendered lands" as a "reserve or part of a reserve or any interest therein, the legal title to which remains vested in Her Majesty, that has been released or surrendered by the band for whose use and benefit it was set apart".)

Audit Scope

11.13 We selected three areas within the Reserves and Trusts Branch for examination. These were the functions of land management, estate administration and band fund administration. First, we attempted to ascertain what the Department's legal mandate was by looking at statutes, recent case law and the Department's perception of its mandate. Second, we reviewed the Department's administrative process and compared its legal requirements and practices with those of private trust companies, which have a comparable fiduciary status. Finally, we looked at the human resources employed by the Department and made a general assessment of their appropriateness, again in light of the legal requirements and the practices laid down in law and observed by private trust companies.

Land Management

11.15 Until this decision, the Department had viewed the obligation created by its legislation as something of a "political" trust, but not a trust for which the beneficiaries could obtain relief from a court if it failed to discharge its responsibilities. As a result of the Guerin case, the Department is now aware that it has a fiduciary responsibility, at least with respect to surrenders, and that this responsibility is enforceable in a court of law. It is also aware that it must now examine and revise its procedures and policies in a number of areas to ensure it is living up to this responsibility.

11.16 The Lands Directorate of the Reserves and Trusts Branch administers Crown lands set aside for the use and benefit of Indian bands. It also provides policy advice to regional and district offices and to bands on management of Indian reserves, surrenders of reserve land, leases of surrendered lands and leases of reserve lands to band members and others. The Lands Directorate helps bands draw up surrenders so land may be leased; without them, bands generally cannot lease land to non-band members. Bands thus rely on the Directorate's expertise in carrying out surrenders quickly and efficiently when they have prospective lessees. They also rely on the Directorate to ensure that their wishes are taken into account in all transactions.

11.17 Inventory of lands and natural resources. One function of the Lands Directorate is to maintain an inventory of all reserve land. Despite this requirement, at the time of our audit there was no complete and accurate national inventory of reserve land and natural resources by individual band. We believe that such an inventory, including an indication of recommended land use, is necessary if the Department is to fulfil its fiduciary responsibilities in this connection. The potential liability for lost opportunities and failure to obtain the optimum return from reserve lands could be substantial if it does not have this information. The Department recognizes that this is a problem that needs attention but as yet has been unable to find a solution.

11.18 The Department of Indian Affairs and Northern Development should compile and maintain a complete, accurate, and up-to-date inventory of Indian lands and natural resources.

Department's response: The Department sees two aspects to this question - a registry of Indian lands and an indication of economic potential.

The Lands Directorate maintains an Indian Land Registry for the purpose of recording transactions on reserve and surrendered lands, as required by sections 21 and 55 of the Indian Act. However, the completeness and accuracy of Registry records vary greatly from one reserve to another. In many cases, jurisdiction over Indian land was transferred to the federal government - either at the time of Confederation or subsequently - with only a general description of its exact location, its size, and the restrictions or exclusions which applied. In 1978 it was estimated that 300 person-years would be required to carry out the detailed research needed to compile a complete and up-to-date land inventory. At present, due to limited resources, such research is undertaken on a case-by-case basis to deal with individual problems as they arise.

The second aspect of the question relates to the assessment of economic potential of Indian land and natural resources. The recent re-organization of the Department included the appointment of an Assistant Deputy Minister for Economic Development, and this will allow the Department to increase its efforts in this regard. Of particular interest is the significant increase in departmental resources assigned to carry out our oil and gas responsibilities, including the development and maintenance of an inventory of oil and gas resources on Indian lands. In addition, there are plans to complete the inventories of other mineral resources on reserves in British Columbia and the Maritime provinces. Mineral resource inventories will subsequently be completed for the remaining provinces.

11.19 Access to legal services. The Lands Directorate lacks adequate access to legal specialists. The access to Department of Justice lawyers in the regions and at headquarters is seen by employees as insufficient. Justice lawyers are not always available to work on Indian matters. The result is that legal opinions on leases and surrenders cannot be obtained as quickly as necessary. Because markets and land transactions often cannot wait, opportunities are lost. This also exposes the Department to potential liability for failing to provide adequate services to the Indian people.

11.20 In view of the potential liability for failure to provide an adequate service, the Department of Indian Affairs and Northern Development should, in conjunction with the Department of Justice, carry out an assessment of its requirements for legal services at the national and regional level and determine the most appropriate method of meeting this requirement.

Department's response: The two departments have been cognizant of this problem, and are working to resolve the difficulties.

11.21 Training and supervision of land management agents. One of the duties of a fiduciary, when choosing and supervising agents to act on its behalf, is to ensure that they have the required expertise to carry out the task for which they are hired. If this is not done, the fiduciary may be liable for acts of the agent that are in breach of the fiduciary relationship.

11.22 Employees dealing with land appraisals, legal surveys, contracts and leases require highly specialized training to discharge their fiduciary responsibilities properly. They need such knowledge not only to do work assigned to them but also to be able to identify problems when they arise.

11.23 In reviewing the practices of private trust companies, we found that they take care to ensure that they have well trained people to carry out such responsibilities. In the Reserves and Trusts Branch, however, certain employees handling leases and surrenders had neither the background nor the training needed to discharge such responsibilities with the trustee's high standard of care. The majority had come up through the ranks, basically from clerical levels. Very little training has been provided by the Department.

11.24 Since the Guerin decision, there has been an attempt in the British Columbia region to hire more specialized personnel and to increase training; however, regional management admits it is still far from resolving the problem. At present, untrained employees process leases, seeking Department of Justice advice only if they see "something out of the ordinary". Errors and oversights are made because employees lack the expertise to know when a legal opinion should be obtained. Inappropriate actions, such as those resulting in the Guerin case, occur under such circumstances.

11.25 The Department of Indian Affairs and Northern Development should ensure that personnel discharging fiduciary responsibilities are properly qualified and have the training needed to fulfil their responsibilities.

Department's response: The Department agrees with this recommendation.

11.26 Supervision of staff. Another aspect of a fiduciary's duty, after choosing qualified agents, is to supervise those agents to ensure that they exercise an adequate standard of care. In administering a trust, a trustee has a duty to exercise such care and skill as an ordinary prudent business person would exercise in the management of his or her own affairs. No ordinary prudent business person would allow an agent to act without supervision or without being satisfied that the agent knew his or her responsibilities and how to fulfil them. In practice, private trust companies have policy and procedures manuals to advise employees on how transactions are to be carried out. In addition, they have systems of checks and balances to ensure that things are done when and as they should be. Sales of property, encroachments on the capital of a trust, and investments are all reviewed by several levels in the company, with the final level of approval on some of these being the executive or senior management committee. No decision is made by any one person, and virtually everything an employee does is reviewed by someone at a higher level, and usually by a specialist. We found that the Department does not provide adequate supervision to its staff and does not have adequate review mechanisms to ensure the quality of the work being performed.

11.27 The Department recognizes that a number of the problems noted above exist and is studying and trying to resolve them. However, we believe that action must be taken quickly to enable the Department to fulfil its responsibilities and to minimize its exposure to future liability.

11.28 Qualified surveyors and appraisers. Legal advice is only one of the areas in which specialist help is needed for land management. Reserve land has to be surveyed and often appraised before it can be leased to non-band members. This has resulted in more requests for surveys and appraisals arriving at regional offices than these offices can handle. One region advised us that $40,000 is put aside annually for appraisals. As one appraisal can cost as much as $20,000, the backlog of requests is long. Similarly, legal surveys are costly but are often necessary, and the backlog of such requests is also long. This all points to a substandard service to Indian clients and possible liability on the part of the Department should leases or revenues be lost because of excessive delays. Private companies draw on outside experts such as surveyors and appraisers when this sort of situation arises, and we believe this would also be appropriate for the Department.

11.29 Contingent liabilities. The Guerin case has clarified the Crown's fiduciary duties with regard to "surrendered land" of the Indians. However the existence at 30 June 1985 of some 100 other lawsuits pending against the Crown illustrates the need to intensify attention to this matter. Approximately 75 per cent of these claims have no dollar value stated, but the 25 per cent that do represent a potential liability of $1.77 billion. Many of the claims have been in existence for some time; the Guerin decision may revive them and precipitate further claims. This potential liability was brought to the attention of Parliament in the form of an audit note in our 1985 Report.

Estate Administration

11.31 On notification of a death, the Department is required to prepare an itemized inventory of the estate, listing all real and personal property of the deceased and its value, all debts and claims against the estate, a statement as to whether the deceased left a will, and a list of all beneficiaries. It is also responsible for taking all steps necessary to safeguard the assets and collect money owing to the deceased. If the deceased has left a will and appointed an executor, the Department will be asked to approve the will and authorize the executor to act. If no will exists, the Department will appoint an administrator.

11.32 In practice, the Department prepares an inventory and safeguards the assets of an estate only in a minority of cases. This appears to be because officers of the Department do not have the time to go to reserves and take inventories themselves, particularly because many reserves are in remote locations. As a result, employees often rely on volunteers such as friends or relatives of the deceased. The problem created by this is that the Department is legally liable for the actions of volunteers. That is, it is liable for mistakes in inventories and damage or loss caused to estate assets because they were not properly safeguarded.

11.33 In the private sector, where trust companies act as executors or co-executors of their clients' estates, they take care to ensure that necessary procedures are carried out properly and promptly. Most companies have checklists of steps to be taken and a time frame that begins the moment they are advised of a death and ends when the last detail of the estate is settled. Detailed inventories are taken, appraisals are made of estate assets, assets are insured and every precaution is taken to safeguard them.

11.34 The Department's system and procedures for handling estates do not meet the standard exacted in the private sector. A report commissioned by the Department confirmed this and suggested that more resources be allotted to the estate program so that necessary safeguards can be initiated. At present, estate matters are given low priority, and resources have not been increased to meet the workload or improve the quality of administration.

11.35 Training for estate management. When administering Indian estates, the Crown is acting in the capacity of a fiduciary or trustee, and in this capacity must exercise a high standard of care, as discussed under Land Management. The duty to choose appropriate agents and to supervise their work is much the same as in land management. We found that, generally, personnel are not adequately trained, and expert opinions and assistance are not obtained frequently enough. There are excessive delays in processing estates. Furthermore, regulations, procedures and policies are outdated and not comprehensive enough, records are inadequate, and there is no formal system of estate administration. These problems have been pointed out in studies commissioned by the Department, but there is no evidence that the Department has taken steps to remedy them.

11.36 With respect to initial qualifications, estate officers rarely have experience in estate administration above the clerical level. Despite this lack of experience, they take on what is in effect full regional authority for estate administration as soon as they start work. They are expected to make decisions and give advice to districts with little or no access to expert advice or assistance. Their superiors have some knowledge of the larger problems of estate administration but are not familiar with day-to-day issues. Advice from headquarters and the Department of Justice in the regions is available, but many regional employees view it as not very accessible, timely or practical.

11.37 Once in their jobs, estate officers do not receive adequate training from the Department. The implications of inadequate qualifications and training are that estate officers can make serious errors that could result in legal liability for the Department without knowing they are doing so. For example, some districts officers do not have a good knowledge of the relevant provisions of the Indian Act or the Regulations. The errors committed are frequently errors of omission; estates are often left unattended because of insufficient staff or lack of knowledge of how to deal with them. In Manitoba, at present, many estates have had no action taken on them because the estate officer positions are vacant and only the clerical positions in the Estates Section are filled.

11.38 The Department of Indian Affairs and Northern Development should ensure that employees assigned to estate administration have the knowledge and skills necessary to handle all aspects of the work.

11.39 Estate backlogs. There is another serious problem in the quality of estate administration. Because of a lack of staff, delays in processing estates are excessive and backlogs become unmanageable. For example, in Ontario one person handles all estates for the regional office, assisted only by district superintendents who act as administrators. In Manitoba, two clerks are the only staff dealing with estates. In Ontario, the shortage has meant long delays in administering estates and an ever-growing backlog, which at the time of this audit amounted to 550 to 600 estates. Estates are not considered part of the backlog until they are over three years old. Some estates over 20 years old are still not settled. In Manitoba, the staff shortage has resulted in backlogs so serious that estates are often left untouched until a complaint arises. There are 300 new estates a year referred to the Manitoba regional office, which has the capacity to process only 150 estates annually when fully staffed.

11.40 In British Columbia, the situation is better as a result of a recent management review and reorganization. The region cleared its backlog and is now able to manage its workload. In addition, more qualified people are being hired in both the region and the districts, and workshops and seminars on estate matters have been developed. The region has not solved all the problems of estate administration, but it is attempting to provide a better service.

11.41 It has been suggested that the workload of estates officers could be substantially decreased if the preferential share of an estate, which goes automatically to the spouse, could be increased from the present $2,000 to the provincial limits, which range from $40,000 to $75,000. Officials of the Department see this as a possible way of streamlining administrative procedures.

11.42 The Department of Indian Affairs and Northern Development should study the question of whether estate administration procedures would be substantially improved by increasing the amount allowed for a spouse's preferential share of an estate. If the answer is positive, steps should be taken to seek the appropriate amendments to the legislation.

11.43 Records. We found that records kept on individual estates were inadequate. Checklists of steps to be taken did not seem to be used. The result is that it is often difficult to ascertain what steps have been taken. For example, in Ontario it was pointed out that there was no procedure for checking to ensure that cheques requisitioned for beneficiaries are made out in the proper amounts and actually sent out. Regional headquarters recognizes the problem but states that there is neither the time nor the personnel to correct it. Without proper record keeping, the defence of claims made against the Department or administrators will be difficult to prove with respect to whether and when proper steps were taken.

11.44 The Department of Indian Affairs and Northern Development should implement a checklist system for estate administration to ensure that documentary evidence exists to show that all necessary procedures are completed in a timely fashion.

Department's response: The Department agrees with the recommendations made on estate administration. However, with the planned reduction in the size of the Department, it will become even more difficult to provide effective administration of Indian estates. The overall approach to the management of this function is under review, both to improve existing procedures and to amend the legislation.

11.45 To date, Indian estates have been given a low priority by the Department largely because there have been few allegations of mismanagement in estate administration. However, as bands grow wealthier and their dealings with the Crown become more complex, this may no longer be the case. The Guerin case may encourage bands to hire lawyers and launch claims against the Crown. To avoid such claims, the Department needs to ensure that it is meeting its legal responsibility to the Indian people.

Management of Indian Moneys

11.47 Indian band funds are held in the Consolidated Revenue Fund and administered in accordance with the Indian Act. Each of these funds is divided into separate accounts for capital and revenue. The accounts were established to provide a continuing economic base for the Indians. When any part of the lands reserved for a band is surrendered and sold or leased, or when resources on reserve lands are sold, the proceeds are to be held in these accounts to finance present and future activities of the band. As prescribed in the Act, these accounts receive interest from the Government of Canada at a rate fixed by the Governor in Council. Until recently, the main source of funds in the capital accounts was the sale or lease of lands. In the past 10 years, as a result of oil and gas royalties flowing into the capital accounts of a few bands, the band fund balances have climbed dramatically.

11.48 In addition to administering the capital and revenue accounts for bands, the Department also maintains over 15,000 individual accounts for minors, unsettled estates, mentally incompetent persons and missing heirs. Most minors' trust funds originate from per capita distributions from the capital accounts of the bands.

11.49 As of 31 March 1986, there were 635 capital accounts with a total balance of over $765 million and about 592 revenue accounts with a total balance of over $47 million. These band funds constitute a liability of the Government of Canada. Exhibit 11.3 shows the number of accounts and amount of Indian moneys held by the Department at 31 March 1986.

Exhibit not available

11.50 Revenue accounts. The Act provides that "all Indian moneys other than capital moneys shall be deemed to be revenue moneys of the band". About 75 per cent of Indian bands have been given the authority to manage their own revenue accounts under section 69 of the Act.

11.51 This transfer of authority from the Department to bands could be seen to amount, after the decision in the Guerin case, to a delegation of responsibility for the management of the trust. In making such a delegation, the Department as trustee is obliged to exercise the same degree of care in the choice and supervision of its delegate as would a prudent business person. If this is not done, the Crown could later be liable for mismanagement by its delegate. To avoid such an occurrence, the Department needs a system and procedures for monitoring and obtaining reports on the management of revenue moneys by the bands.

11.52 The Department of Indian Affairs and Northern Development should seek clarification of the nature and extent of its responsibility following the transfer to Indian bands of the authority to manage their own revenue accounts.

11.53 If the transfer to bands of responsibility for managing their revenue accounts is held to be a delegation of responsibility, the Department of Indian Affairs and Northern Development should have procedures in place to ensure that a band reports on its performance in managing the revenue moneys, or should seek amendment to the Indian Act to permit the Minister to terminate its responsibility following the transfer.

Department's response: The Department is reviewing this question to ensure that Bands are enabled to administer their own revenue moneys without being accountable to the Department. As part of this review, the Department is seeking clarification of the nature and extent of its legal responsibilities.

11.54 Capital accounts. The Indian Act defines capital moneys as "all Indian moneys derived from the sale of surrendered lands or the sale of capital assets of a band". The Department has interpreted this to include money from the sale of land, timber and gravel and the exploitation of oil and gas.

11.55 Section 64 of the Act provides that the Minister may, where it is for the benefit of a band and with the consent of a band council, authorize expenditures from Indian capital moneys for specific purposes. Consent must come in the form of a band council resolution which requests the expenditure and initiates the expenditure process. The band council resolution forms the basis for assessment and approval of the request and the ultimate expenditure. In practice, the information provided to the Department is often inadequate. The reason for this is that there are no guidelines on what information is required, and the Department has not adequately communicated its expectations in this regard to the bands.

11.56 Furthermore, because of the time constraints set by the bands and the resource limitations of the Department, assessment of proposed expenditures is not carried out in a manner comparable to methods used by trustees in the private sector. For example, we found that the assessment process does not have standard procedures and guidelines to ensure that an expenditure is for a purpose allowed by the statute, that it is approved by an appropriate officer (as defined in procedures for delegation of authority) and that, once provided, funds are expended as authorized.

11.57 Capital moneys must be disbursed in accordance with section 64 of the Indian Act. In our 1984 Report, we stated that the Department had released funds from capital accounts on the basis of a broad and possibly inaccurate interpretation of section 64. To reduce the potential for liability to the Crown as a result of these deficiencies, we suggested that the Department follow the advice of the Public Accounts Committee and seek a judicial opinion from the courts regarding the correct interpretation of section 64. The Standing Committee on Public Accounts in its First Report dated 11 February 1985, recommended that:

- the Minister immediately seek a judicial opinion regarding the correct interpretation of subsection 64(k) of the Indian Act in order to ensure that the Crown is not exposed to any future legal liability; and

- the Department implement procedures to ensure that Indian capital moneys are professionally administered and disbursed in accordance with law.

Department's response: The Standing Committee recommendation concerns an observation by the Auditor General. It is our understanding that the statement in the Auditor General's 1984 Report (paragraph 3.58) dealing with a possible reference to the Federal Court of Canada, pursuant to section 17 of the Federal Court Act , on the scope and interpretation of paragraph 64(1)(k) is based on a letter from a former Associate Deputy Minister of Justice. This letter dealt in part with a possible administrative scheme in relation to paragraph 64(1)(k), which allows the Minister to approve expenditures of capital moneys which, in his opinion, are for the benefit of the band. it was suggested that if questions arose with respect to that scheme then this was one way to resolve them.

Section 17 has been utilized where the Crown is in dispute with another party over the effect of a statute on a particular fact situation - not just the simple interpretation of a statute.

It should also be pointed out that a decision of the Federal Court (even if possible) to a general question such as this does not bind the Court in future cases where other facts are in issue. Therefore, even if a question of this nature were referred to the Court, the value of a judicial interpretation, in relation to future proposals considered under paragraph 64(1)(k), would be limited.

As such, it is our Counsel's view that it would not be appropriate to refer the question relating to paragraph 64(1)(k) to the Federal Court. Therefore, in light of this and of other concerns, we are examining the need for amendments to the section to clarify its scope and intent.

Trust Accounts for Minors

11.60 Pursuant to the Indian Oil and Gas Act, all royalties from oil and gas obtained from Indian lands are held in trust by Her Majesty for the bands concerned. When the Minister, as trustee of these moneys, authorizes a per capita distribution, the payments constitute a discharge of the Minister's responsibility with respect to the royalties. For band members who are minors, however, the Minister must maintain trust accounts until they reach the age of majority. As of 31 March 1986, there were 14,331 trust accounts for minors, with a total value of $99 million.

11.61 Despite the requirement to hold a minor's share in trust until he or she reaches the age of majority, it has been the Department's practice to pay out a maximum of $3,000 a year to the minor's parents or guardian. This reflects the provision, under provincial trust laws, that the income of a trust may be paid out, on request, for the maintenance of a trust beneficiary. The program circular issued by the Department to clarify this practice states that the $3,000 payment is to be made on the written request of the parent or guardian. However, the $3,000 annual payment is made on behalf of all minors without the written request of the parent or guardian and regardless of need.

11.62 In addition to these distributions, per capita distributions are made of revenue moneys. In these cases, 100 per cent of the child's share is distributed to his or her parents or guardians.

11.63 Because of our concerns about these practices, we sought advice from an independent legal counsel, which confirmed our opinion that these funds were being released without adequate safeguards.

11.64 To comply with its fiduciary obligations, the Department should, as a minimum, make reasonable enquiries as to the need for the funds. This would involve a written request from the parent or guardian setting out the reasons why the moneys are required. Further, because court approval is necessary for such payments under provincial Trustee Acts, the Department should obtain court approval or pay the funds into court or to the Official Guardian or Public Trustee for the province.

11.65 An alternative would be to seek amendment of section 52 of the Indian Act to give express power to the Minister to advance funds for the maintenance and education of Indian minors out of the revenue or capital moneys to which they are entitled. These provisions could be similar to those in the Act dealing with mentally incompetent Indians.

11.66 The Department of Indian Affairs and Northern Development should revise its procedures governing the payment to parents or guardians of funds held in trust for minors, so that its procedures comply with provincial trust laws, or should seek amendment of section 52 of the Indian Act to give the Minister power to advance the funds for the maintenance and education of Indian minors.

Department's response: The Department recognizes the problem and is seeking legal advice as to the nature and extent of its responsibility.

Elementary and Secondary Education

11.68 The objective for the Elementary/Secondary Education activity, stated by the Department in the 1985-86 Estimates, was:

to ensure that all eligible Indians and Inuit have access to a quality and range of elementary/secondary education that is relevant to the social, economic and cultural needs and conditions of the individuals, bands and communities being served.

Exhibit not available

Background

11.71 The Department was aware of this problem and had initiated programs to facilitate community participation in enriching and modifying the curriculum. The National Indian Brotherhood, in the 1972 position paper it presented to the Standing Committee on Indian Affairs, "Indian Control of Indian Education", addressed this question. The Minister accepted the principles of the paper in 1973. However, because the Indian Act has not been amended, there is no legal basis for transferring control of education to Indian bands. Under the Act the Minister remains accountable for the quality of education delivered to Indian children.

11.72 Departmental guidance. The Department drafted a series of circulars on education in the mid-1970s to provide operational guidelines to its staff. The circulars were intended to explain policies, establish program standards, describe implementation procedures and set funding limits. They were also intended to be used by Indian bands that were assuming control of the process; however, they were not accepted by the bands because they had not participated in drafting them.

11.73 In 1978, the Department made another attempt to provide guidelines by publishing its educational policy and by outlining current standards and procedures to be used in the delivery of educational services. This publication was developed in consultation with Indian representatives. There was strong pressure against official acceptance of the policy from Indian political organizations and it was withdrawn. We saw no evidence of further direction on policy and procedures for the delivery of education. It has become evident that the Department's failure to establish guiding principles and program standards and to document implementation procedures has impeded the effective delivery of educational services to Indian children.

11.74 Delivery of educational services. Although the Department is responsible for delivering education that is "relevant to the social, economic and cultural needs and conditions of the individuals, bands and communities being served", it does this directly only for approximately 25 per cent of Indian children who go to federal schools. About 51 per cent of Indian children go to provincial schools; here, the Department's role is to provide funding and, to a limited extent, to see that their special needs are taken into account by the province and the local school board. The remaining 24 per cent of Indian children go to schools operated by bands on the reserves. The Department, in supporting Indian control of Indian education, still retains its responsibility for providing all eligible Indians with "access to a quality and range" of education relevant to their needs.

Audit Scope

11.76 Also, because the Department is accountable to Parliament for both the expenditure of public funds and the results achieved, we expected to find specific and measurable goals relating to the type and quality of education to be made accessible to Indian children, educational programs and procedures to achieve the stated goals, and a reliable information system that would allow management to monitor results and report on them.

11.77 We also examined the devolution process for transferring the management of Indian education to Indian organizations.

Lack of Direction

11.79 The provinces have primary responsibility for education and for determining standards within their jurisdictions. The Department, as a general rule, adopts the basic provincial core curricula to ensure that the principle of mobility is maintained. However, it must adapt certain areas of the program of studies and modify them to meet the special linguistic and cultural needs of Indian children. We found the adaptation of provincial programs by federal and band operated schools is largely uncoordinated. This is partly due to the fact that subjects of instruction other than core subjects are very much tailored to the specific needs of the community and, therefore, do not lend themselves to a standardized approach.

11.80 This practice leads to duplication of effort in developing curricula, and the quality of the programs that are developed outside the provincial systems is not consistently controlled. For provincial schools, the Department's role is to enter into tuition agreements with provinces or school boards to provide education to Indian children.

11.81 For the provincial programs, we found that the Department does not have the capacity to assess them in a systematic and co-ordinated way. There was little Indian involvement in the design, delivery, administration, control, review and evaluation of provincial education programs as they relate to Indian children.

11.82 Standards and operational guidelines. We found that although it is recognized departmental practice to apply provincial education standards for Indian schools, there was no formal statement to that effect. There were only limited written operational guidelines for managing schools, developing curricula or delivering the educational program. In some regions, standards and guidelines have been developed by regional management. In a number of program delivery areas, however, implementation and monitoring are the responsibility of regional offices that have no standards or operational procedures to assist them.

11.83 Lack of agreement, along with pressure from Indian political organizations, led the Department to abandon its attempts to provide formal management direction in the late 1970s. Thus, the Department has had to continue in its management role without program standards or implementation procedures. This has limited the Department's ability to assess its own performance. As a result, there is no assurance that it is meeting its objective of providing all eligible Indian children with the "quality and range" of education relevant to their needs.

11.84 The Department of Indian Affairs and Northern Development should develop operational standards, guidelines and procedures for its regional and district offices to follow. It should also introduce a monitoring system to provide feedback to various levels of management on the quality and level of educational services actually delivered by federal and band operated Indian schools and the educational achievements of Indian children.

Information Systems

11.86 The Nominal Roll includes general information for each child - residency, band registration, type of school attended and grade of registration - and educational information such as early school leaving or special education. To eliminate the possibility of duplicate recording of names, all students' names are cross-referenced against the band membership lists. This information system provides the basis for unit counts of students in the Education Data Base and for reports on system participation.

11.87 Given the diversity of management practices in the program, we found that there were no systematic procedures in place to collect data at the field level or to verify data input, resulting in inefficiency in data collection and use. There was also no assurance that collected data were accurate.

11.88 Program effectiveness information. For the Department to administer the educational program properly, to monitor its progress and to evaluate its effectiveness, it needs reliable information on a number of educational elements. Factors such as school retention, number of graduates, and participation rates provide some measure of the overall effectiveness of the schools. For program evaluation purposes, it also needs to have information on such things as the impact that has been produced by additional expenditures or how curriculum modifications have narrowed the gap in educational achievement between Indian and non-Indian children.

11.89 Since the generally accepted testing instruments used by most educational jurisdictions are based on urban populations, these are not considered to be educationally appropriate for Indian children living essentially in rural and isolated areas. As a result, schools have often restricted the use of testing.

11.90 We found that there were no uniform data or statistics on the academic achievement of Indian children in relation to specific educational program initiatives. Consequently, the Department could not evaluate the overall effectiveness of the education program or the effectiveness and performance of federal and band-operated schools. The lack of reliable information also prevented effective needs assessment and made it virtually impossible to measure progress in such areas as educational achievement of Indian students.

11.91 Financial information. The Education Data Base is a system that has been used by the Department for the past five years for financial planning and allocation of funds. The planning process is carried out twice a year - in June, to obtain additional funding where there have been changes in costs and volumes, and in November, to plan the level of funding required for the next fiscal year and make adjustments in costs and volumes for the current year.

11.92 The definitions of services are so broad that they allow different interpretations by district or regional offices, with the result that the services cannot be compared. As an illustration of this lack of consistency among provinces, some regions define instructional services as including the band's director of education, while other regions include guidance counsellors in the definition, although under departmental policy neither should formally be included in the category of instructional services. Because of these deficiencies it was not possible to develop a reliable data base. Regions and districts were not ensuring that the Education Data Base reflected the budget requirements of all schools, as provided by the schools themselves. Furthermore, it was not being used by the Department to allocate required resources to schools.

11.93 Work has been undertaken in the Department to improve the functioning of this data base. Individual managers in the regions are attempting to take corrective action, independently from headquarters. Headquarters is also studying means to improve the system or develop a new system. Without reliable financial information, the Department cannot determine whether funds appropriated for education programs are being used with due regard for economy, efficiency and effectiveness.

11.94 The Department of Indian Affairs and Northern Development should expand the information in its Nominal Roll to include information such as achievement levels relating to quality and range of education.

11.95 The Education Data Base should be improved by ensuring that a consistent definition of services is used and that budget requirements are developed at the school level and used for financial planning and a more equitable allocation of resources.

Devolution

11.97 The Department has not defined the steps leading to devolution. As a result, there appears to be a considerable gap between what the Indian organizations expect and how much the Department is prepared to devolve.

11.98 The Department has not established criteria or a checklist to ensure that an appropriate infrastructure, which would enable a band to administer and operate a school, is in place before it transfers control to an Indian organization. Because there were no clear policies, procedures or operational guidelines and since there was no mutual understanding of the mechanics of band takeover and operation, transfer arrangements have been a contentious issue.

11.99 The Department of Indian Affairs and Northern Development should define "Indian control" in order to make it clear whether the Indian organization assuming control is carrying out an administrative or a management role. The Department should develop clear policies and procedures for transferring control of education to Indian organizations.

Native Claims

Introduction

Exhibit not available

11.101 The Department provides financial assistance to native groups for researching and negotiating land claims. It has provided about $35 million in the past 13 years in the form of contributions for research into Indian and Inuit rights, treaties and claims. Another $99 million has been provided to native claimants in the form of recoverable loans.

Audit Scope

Comprehensive Claims

... the government requires that the negotiation process and settlement formula be thorough so that the claim cannot arise again in the future. In other words, any land claim settlement will be final.

The negotiations are designed to deal with non-political matters arising from the notion of aboriginal land rights such as lands, cash compensation, wildlife rights, and may include self-government on a local basis.

The thrust of this policy is to exchange undefined aboriginal land rights for concrete rights and benefits. The settlement legislation will guarantee these rights and benefits.

11.105 However, many important provisions relating to these specific obligations are not precise enough to commit Canada to specific levels of service or funding, or to achieve goals by a defined date. For example, the agreement states that for each Cree community, Quebec and Canada shall provide funding and technical assistance for a) the construction or provision of a community centre, b) essential sanitation services and c) fire protection facilities and equipment. However, this assistance is "subject to the extent of financial participation possible by Canada and Quebec", and neither government is committed to achieving these goals within a given time frame.

11.106 At the federal level, DIAND has overall responsibility for the agreement and is responsible for implementing specific sections. Several other departments are involved, including Environment, Secretary of State, Transport, Health and Welfare, Employment and Immigration, Regional Industrial Expansion and the Canada Mortgage and Housing Corporation. These departments and agencies participated in negotiating sections of the agreement relating to them, but their commitments to meet their obligations vary considerably.

11.107 It is essential that one department be responsible for co-ordinating implementation of agreements. Although this is DIAND's role, we found that the Department cannot exert enough influence over other federal departments and agencies to ensure that they will fulfil their obligations under the agreements.

11.108 The fact that government obligations were included in the agreement raised native expectations that they would be carried out within a reasonable time. However, the lack of specificity, the failure to dedicate resources to the obligations, and the fact that obligations were not always assigned to a specific department through an approved implementation plan have caused serious problems in implementing parts of the agreement. The Department has estimated that the cost in current dollars of implementing the outstanding obligations would be $190 million. As a result of a joint review of the implementation of the agreement by the Minister of Indian Affairs and the Minister of Justice in 1982, Cabinet approved increased funding of $61.4 million over the period 1982-83 to 1986-87 to satisfy some of the obligations in the agreement.

11.109 When negotiating future settlements of native claims, the Department of Indian Affairs and Northern Development should ensure that the formal agreement is supplemented by a detailed implementation plan. The plan should specify all obligations, assign responsibilities and make reasonable estimates of timing and costs. To ensure that Cabinet is aware of every provision in the agreement, what commitments are implied by these provisions, and the cost implications of those commitments, the Department should provide an implementation plan for its review before the final agreement is approved.

11.110 Reporting to Parliament. Section 10 of the James Bay and Northern Quebec Native Claims Settlement Act requires the Minister of Indian Affairs to submit to the House of Commons an annual report on the implementation of the provisions of the Act for the relevant period. The report is to be submitted within 60 days after the first day of January every year from 1978 until 1998 inclusive.

11.111 We expected to find eight annual reports, but found only one tabled 18 November 1980 and the 1982 implementation review, tabled on 8 July 1982.

11.112 We were informed that a draft report has been prepared by the James Bay and Northern Quebec Secretariat for the years 1982-85 inclusive; however, it has not been presented to Parliament.

11.113 The Department has failed to comply with the legislation; this has meant that the reporting mechanism, which would enable Parliament to monitor the implementation of claim settlements, has been missing.

11.114 The Department of Indian Affairs and Northern Development should comply with the requirements, as stated in paragraph 10 of the James Bay and Northern Quebec Native Claims Settlement Act, to table in Parliament an annual report on the implementation of the James Bay and Northern Quebec Agreement.

Financial Assistance for Claims

Northern Affairs Program

The Federal Role in the North

11.117 The federal government still retains ownership of the land in the North: it owns most of the land and resources north of the 60th parallel. Under the NAP, the Department, as the government's primary agent in designing and delivering social, cultural and economic development programs, acts much as a provincial government, and is unique in the federal system. Most of the activities it is involved in are governed by statute.

11.118 Transfer of responsibility. Although the Department bears the major responsibility for the North, several other departments, such as Environment, Fisheries and Oceans, Transport and National Health and Welfare, have significant roles. In addition, a significant amount of authority and responsibility is delegated to the territorial governments by the Minister of Indian Affairs and Northern Development to administer their respective territories. The Northern Affairs Program is constrained by uncertainty about the extent of its responsibilities within the federal system, particularly in relation to transferring them to the territorial governments. And, like a provincial government, it has to balance the competing and often incompatible demands of people, resources and the environment.

11.119 The NAP's resources totalled $127.7 million and 870 person-years in 1985-86. Of this, $9.4 million and 123 person-years were allocated to the Canada Oil and Gas Lands Administration (COGLA). The remaining $118.3 million and 747 person-years were spread across a variety of activities, many of which are connected with control of resources.

11.120 The Department also makes transfer payments to the territorial governments. In 1985-86, these totalled $440 million for the Northwest Territories (NWT) and $138 million for the Yukon.

Audit Scope

Economic Planning and Development

Exhibit not available

11.123 In consideration for this assistance, the government received shares representing an 18 per cent interest in the company. As of 31 March 1985, the company had retained earnings of over $57 million. An engineering study conducted for the Department in 1985 estimated that these retained earnings would amount to $70 million by the end of the mine's useful life, based on the company's current financial position and measured in terms of the discounted value of projected cash flows. On a strict percentage basis, the government's 18 per cent share is currently estimated at about $10 million based on certain assumptions about the future price of zinc.

11.124 In granting this assistance, the government's objectives were to promote northern development, generate employment opportunities and other benefits for northern residents, acquire expertise in operating resource projects in the Arctic, and advance Canada's role in Arctic shipping.

11.125 We examined the significant management systems, practices and controls associated with the project and found them to be satisfactory.

11.126 We noted, however, that the 18 per cent share of Nanisivik Mines Ltd. acquired by the government in exchange for its financial assistance was not reported in the 1984-85 Public Accounts. It may be difficult for the government to realize the value of this asset because its minority interest does not enable it to require that the funds be paid out. Nevertheless, it is an asset of Canada.

11.127 The Department of Indian Affairs and Northern Development should ensure that the government's interest in Nanisivik Mines Ltd. is included in the Statement of Assets and Liabilities of the Public Accounts of Canada.

11.128 Cyprus Anvil Mine. Before mid-1982, the Cyprus Anvil Mining Corporation's mine at Faro, Yukon, directly provided about 740 jobs annually and, both directly and indirectly generated, about 40 per cent of the Yukon's gross territorial product. In mid-1982, the mine encountered financial difficulties and ceased operation. These difficulties resulted from an excessive debt burden, high operating costs (the result of failing to remove enough rock overburden to allow for continuous mining of ore), and the decline in international lead and zinc prices in 1981. To keep the mine viable and operating, thereby supporting the Yukon economy, the government provided financial assistance. In 1983, the government agreed to provide up to $25 million of assistance to keep the mine operating and ensure continued employment. Of this, $19.6 million was an interest-free recoverable loan; the remaining $5.4 million was a contribution made through normal program funds. Government's assistance was to finance 50 per cent of the cost of removing 8.6 million cubic yards of additional overburden, thereby returning the mine to its viable long-term stripping ratio. It was to provide employment for 210 people for two years.

11.129 We examined the significant management systems, procedures and controls relating to this assistance, and found them to be satisfactory.

11.130 We found that the strip-mining program was successful. Rock overburden was moved in greater quantity, at a faster rate and at less cost than the Mine Re-opening Plan had called for. Only $17.3 m of the loan was used.

Renewable Resource Management and Environmental Protection Management

11.132 In 1984-85, this activity used $40.8 million and 359 person-years - 26 per cent of NAP expenditures, excluding grants and contributions, and 43 per cent of its person-years. We looked at the Department's compliance with the legislation and the EARP.

11.133 We did not find any major weaknesses in the regulatory and monitoring systems relating to the renewable resource responsibilities of the Northern Affairs Program. However, the systems have so far had only fairly routine situations to cope with. The one major project it has had responsibility for - the Norman Wells Pipeline - was relatively small on the scale of projects in the North.

11.134 A key to the continuing ability of the NAP to meet future expansion successfully will be to develop a mechanism for effects monitoring. In this context, effects monitoring means analysing the conditions imposed on operators through permits to determine whether they are having the intended result and, if not, determining how to modify the conditions to achieve the desired result. This activity is just getting under way, primarily because only in the last few years have there been sufficient data to permit such analysis.