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1993 Report of the Auditor General of Canada

Assistant Auditor General: Elwyn Dickson
Responsible Auditors: Larry Ting, Louis Lalonde, Raymond Foote

Main Points

11.1 The Canadian Aboriginal Economic Development Strategy (CAED Strategy) was initiated by the Government of Canada in 1989 to address the economic disparities between aboriginal peoples and other Canadians. The overall objective of the CAED Strategy is to help the aboriginal peoples achieve economic self-reliance. It replaces and seeks to improve on previous aboriginal economic development programs.

11.2 The departments of Indian Affairs and Northern Development, Employment and Immigration, and Industry, Science and Technology were given the responsibility to implement this initiative, at an estimated cost of approximately $1 billion for the first five years of its operation. Certain other federal departments have a role to play, although they are not directly accountable for the Strategy.

11.3 Visible leadership for implementing the Strategy as a whole needs to be better established. For example, leadership to manage the development of strategic partnerships across participating federal departments, and with private and aboriginal stakeholders, could be strengthened through the development and application of a comprehensive implementation plan.

11.4 The three departments responsible for implementing the CAED Strategy could not demonstrate that the variety of funding methods and amounts provided under the Strategy were appropriate in the circumstances. In addition, despite some positive examples of aboriginal economic development, they could not demonstrate that, after spending at least $900 million from the beginning of its implementation in 1989 to early 1993, they were meeting the Strategy's objectives.

11.5 The lack of appropriate performance and evaluation information impedes the necessary accountability within the aboriginal communities and between the government and Parliament.

11.6 Aboriginal community economic development organizations, local aboriginal management boards, and aboriginal capital corporations were established as intended opportunities to increase aboriginal participation toward economic self-reliance. In our view, they have a responsibility to co-operate with each other by sharing economic development information, such as potential business opportunities, and to co-ordinate their efforts in areas such as job training.

Background

11.7 Aboriginal Canadians are a diverse group with many cultures and languages. They inhabit all parts of Canada, from remote to urban areas. Their access to resources and their mobility, expectations and capabilities vary widely.

11.8 Aboriginal peoples include status and non-status Indians, Metis, Inuit and Innu. Responsibilities pertaining to status Indians living on reserves (approximately one third of the total aboriginal population of one million) and to the Inuit and the Innu generally belong to the Department of Indian Affairs and Northern Development (DIAND). Other federal departments and provincial and territorial governments provide a variety of services and assistance to all eligible aboriginal Canadians.

11.9 The Canadian Aboriginal Economic Development Strategy (CAED Strategy) was established by the federal government in 1989 to help develop and support the economic self-reliance of aboriginal people by providing them with the means to take advantage of economic development opportunities to achieve long-term employment and develop their own businesses. The CAED Strategy is implemented in partnership with aboriginal Canadians by three federal departments, each with its own primary area of responsibility ( see Exhibit 11.1 ).

11.10 The Department of Indian Affairs and Northern Development has responsibility for community economic and resource development; the Department of Employment and Immigration is responsible for skills development and urban employment; and the Department of Industry, Science and Technology is responsible for business development and the establishment of aboriginal capital corporations. The three departments share the responsibility for research and advocacy in the promotion of aboriginal economic self-reliance.

11.11 The CAED Strategy implementation focusses on:

  • greater aboriginal participation in the national economy;
  • increased opportunities for ownership and management of business enterprises and economic institutions;
  • access to continuing jobs;
  • aboriginal participation in the design and delivery of programs;
  • unrestricted access to federal economic development initiatives;
  • increased aboriginal involvement with Canadian business and investment interests; and
  • active participation and support from provincial and territorial governments.
11.12 The federal government expects the CAED Strategy to achieve, among other things:

  • greater employment and higher income levels for aboriginal people;
  • a broadened business base and improved aboriginal management and entrepreneurial skills;
  • a decrease in dependency on social welfare; and
  • an increase in the capacity of aboriginal communities to manage their affairs.

Financial Resources

11.13 To support more effective participation by aboriginal people in Canada's growing economy, the federal government dedicated funds, on a continuing basis, to the departments responsible for implementing the CAED Strategy. Funds were to be allocated yearly, and the initial five-year total was $873.7 million. These moneys enabled the departments of Indian Affairs and Northern Development and Industry, Science and Technology to put the Strategy into action. In addition, aboriginal participation and expenditures in programs offered by the Canada Employment and Immigration Commission were to continue to be targeted at no less than the 1988-89 level (approximately $120 million).

Responsibilities of the Department of Indian Affairs and Northern Development

11.14 DIAND has full responsibility for four programs under the CAED Strategy. Its main program is the Community Economic Development Program.

11.15 The purpose of this program is to assist status Indians and Inuit and Innu communities to establish and control community economic development organizations both on reserves and in the North.

11.16 The Department's main approach is to devolve delivery of program services to community-controlled economic development organizations. Under contribution arrangements with DIAND, these organizations use federal funding to provide direct services to their constituents. Based on criteria determined by the organizations, these services may include:

  • preparing community economic development strategies;
  • initiating business and resource development projects;
  • taking equity positions in private or community enterprises; and
  • supporting job-related training and employment programs.
11.17 Under the CAED Strategy, DIAND's financial assistance to the community economic development organizations has exceeded $50 million annually, which constitutes 70 percent of the Department's total CAED Strategy expenditures. According to DIAND, which retains responsibility for monitoring them, community economic development organizations are investing about 50 percent of their funding as equity or seed money in employment, business and resource development projects.

11.18 The other DIAND components under the CAED Strategy are the Commercial Development Program, the Resource Access Negotiations Program, the Regional Opportunities Program and, in conjunction with the departments of Employment and Immigration and Industry, Science and Technology, the research and advocacy component.

Responsibilities of the Department of Employment and Immigration

11.19 The Department of Employment and Immigration perceives its role in the CAED Strategy as one of administration and co-ordination with its federal partners. It uses Pathways to Success, a separate employment and training strategy for aboriginals, to meet its CAED Strategy responsibilities for skills development and urban employment. This allows the Department to commit to a number of related objectives: involving aboriginal people in local planning strategies; maintaining flexibility in programming; encouraging the development of aboriginal institutions to deliver employment programs and services; and complementing local and provincial programs and services.

11.20 Pathways to Success is a partnership between the Department and aboriginal groups, organizations and communities to invest in and develop a trained aboriginal labour force for participation in the unique aboriginal labour markets as well as in the broader Canadian labour market. The Pathways approach is based on decision making within the communities, which enables aboriginals at the local level to influence program changes at the national level.

11.21 Through Pathways, boards were created at the local, regional and national levels that represent all aboriginal communities in Canada, whether on or off reserves. The key element in this new partnership is the establishment of local aboriginal management boards. Eighty-six of the planned 110 boards were established. They are spread across the country and are responsible for defining training and employment priorities for their respective areas and for recommending project proposals. The boards and the Canada Employment Centres are jointly responsible for monitoring the effectiveness of local initiatives.

11.22 Canada Employment Centres are responsible for providing labour market information and preparing local planning strategies. In consultation with their community partners in the public and private sectors, the Centres determine local labour market needs and, where intervention is deemed appropriate, plan the most effective program and/or service responses. They also provide administrative and technical support to the local aboriginal management boards.

Responsibilities of the Department of Industry, Science and Technology

11.23 Industry, Science and Technology fulfils its CAED Strategy responsibilities through the Aboriginal Economic Program. The two main components are described below.

11.24 Aboriginal Business Development and Joint Ventures Program. This is the largest of the Department's CAED Strategy programs in terms of funding. It is designed to provide financial and developmental assistance to all eligible aboriginal individuals or groups for the establishment, expansion, modernization or acquisition of businesses. Industry, Science and Technology delivers this program through its offices located across Canada and makes contributions to aboriginals on and off reserves on the basis of applications it has received and approved. The Department has established external delivery organizations to build aboriginal business capacity and to deliver aboriginal programs in areas where access to its development offices is limited. These organizations are operated by aboriginal institutions such as the aboriginal capital corporations.

11.25 The aboriginal economic development boards form part of the management structure of Aboriginal Economic Program. One national and two regional aboriginal economic development boards have been set up to make recommendations to the Minister of Industry, Science and Technology on projects funded under the Department's programs. Board members are order-in-council appointees, and the majority of them are aboriginal. The boards assist Industry, Science and Technology in the implementation of its assigned CAED Strategy components and may advise the ministers of DIAND and Employment and Immigration, where appropriate, on co-ordinating their programs with the regulations respecting aboriginal economic development. These boards are also authorized to recommend to the Minister of Industry, Science and Technology the establishment of policies, procedures and guidelines necessary for the efficient operation and administration of the Department's programs.

11.26 Aboriginal Capital Corporations Program. Industry, Science and Technology provides contributions to aboriginal capital corporations, which in turn make commercial loans to businesses owned by aboriginal individuals or organizations. These aboriginal capital corporations are incorporated and are locally or regionally based. They tend to be owned by provincial aboriginal institutions, groups of tribal councils, a number of bands or sometimes entire aboriginal communities. The aim of aboriginal capital corporations is not to make a profit, but to help develop businesses, while maintaining their capital over time. The corporations are designed to break even on operations and be self-sustaining at the end of five years.

Achievements Demonstrate Potential for Success

11.27 We believe that the activities of the three departments can become a catalyst for establishing successful organizations in aboriginal communities.

11.28 We observed cases where aboriginal individuals and organizations have achieved positive results by participating in federally sponsored economic development programs. The example in Exhibit 11.2 describes a partnership between the federal government and the aboriginal people for making decisions in regard to training programs and community and business development. This case illustrates the co-operative approach that can contribute greatly to the achievement of aboriginal economic development.

11.29 The projects described in Exhibit 11.3 show that partnerships with the private sector can also contribute to aboriginal economic development.

11.30 Nevertheless, effectiveness evaluation is needed to determine to what extent these projects have been successful in increasing employment and expanding the aboriginal business base as intended.

Audit Objectives and Scope

11.31 Our audit objectives were to assess the adequacy of management practices for the implementation of and accountability for the CAED Strategy, disclosure of results, and compliance with authorities. We considered, among other things, the extent of participation of aboriginal peoples, provincial governments and the private sector.

11.32 Accordingly, we reviewed DIAND's involvement in community development, and Employment and Immigration's skills development and urban employment initiatives. We also audited a sample of Industry, Science and Technology's projects relating to business development and aboriginal capital corporations. We did not review the less significant CAED Strategy activities within these areas.

Management Practices for Success

11.33 In our review of CAED Strategy implementation, we expected to find, collectively for the three departments, certain management practices that would provide a reasonable chance for success ( see Exhibit 11.4 ).

Observations and Recommendations

Need for an Overall Implementation Plan - Leadership and Accountability

11.34 The CAED Strategy calls for comprehensive, integrated federal government action to enhance the economic self-reliance of aboriginal people. Three principal departments - Indian Affairs and Northern Development, Industry, Science and Technology, and Employment and Immigration - were mandated to provide joint direction for the design and delivery of program components under the Strategy.

11.35 The Strategy acknowledges that co-ordination of effort among federal departments is an important factor for success. We therefore expected to find, among other things, that the three principal departments were co-ordinating their efforts with a full and continual exchange of information on their priorities, activities, results, and issues to be resolved. In our view, this approach would help reduce any potential for duplicated activities and missed opportunities.

11.36 The published Strategy assigns responsibility for its implementation to a CAED Management Committee to ensure co-ordinated field delivery. This Committee comprises senior officials from all three federal partners and includes representation from the aboriginal community. The Committee established working groups in early 1990 to facilitate co-ordination and communication among the three departments.

11.37 We found that the CAED Management Committee and its successor committees met occasionally to help co-ordinate implementation of the Strategy. The selected approach was for each department to operate separately its respective programs under the CAED Strategy. In their opinion, this would prevent a duplication of effort while streamlining implementation.

11.38 We noted that DIAND and Industry, Science and Technology entered into an implementation agreement in July 1990, approximately one year after the Strategy was announced. The primary purpose of the agreement was to achieve full co-operation and co-ordination between the two departments in delivery of their respective mandates for aboriginal business financing. However, Employment and Immigration was not a party to the agreement, even though it is a principal partner in the Strategy.

11.39 We noted from departmental files that, some four years after the Strategy had been announced, certain basic and significant issues remained unresolved. These included the need to develop CAED Strategy agreements among federal, provincial and territorial governments and to establish an evaluation framework for the Strategy. The three principal federal departments agreed to a framework only in May 1993.

11.40 We further noted that there was no overall implementation plan. Such a plan could include goals leading toward aboriginal economic self-reliance against which their achievement and the related planned and actual expenditures would be monitored on an ongoing basis. In our view, notwithstanding the involvement of CAED committees, the absence of an appropriate plan means that leadership and accountability for the CAED Strategy as a whole need to be better established.

11.41 However, the departments recently indicated their belief that the aboriginal community should assume even greater responsibility for their own economic development than envisaged under the original Strategy. Given this approach, the federal government should reassess the appropriateness of the Strategy. If it continues to endorse the Strategy as currently set out, it will need to develop an implementation plan, as indicated below.

11.42 The federal CAED Strategy partners, in collaboration with aboriginal and other partners, should develop an appropriate CAED Strategy implementation plan. The plan should then be communicated, implemented and monitored with the co-operation of provincial/territorial governments and aboriginal organizations.

11.43 The plan should, as a minimum:

  • designate accountability for implementation of the Strategy;
  • provide for appropriate aboriginal representation in decision making;
  • address how effective interaction among all participant groups can be obtained to maximize the exploitation of opportunities and minimize unnecessary overlap; and
  • call for a monitoring regime to assess progress against goals so that remedial action can be taken where necessary.
DIAND's response: The Department can demonstrate that the Strategy has achieved one of its primary objectives, that of transferring real decision making and accountability to our clients. It would therefore be inappropriate to establish an implementation plan that could have the impact of centralizing decision making with the federal departments. The Department agrees that it is appropriate to review the current strategy of implementation in conjunction with aboriginal advisory boards and the other federal partners, through a regionally based process supported by Headquarters to redefine the Strategy based on our clients' priorities and to exchange the reporting of the results achieved.

EIC's response: An implementation plan, by centralizing the decision-making process within the federal departments, could adversely affect aboriginal institutions' and communities' control and direction over their own economic development. The Department agrees that its role in the CAED Strategy must be determined by the aboriginal management boards.

ISTC's response: Instead of providing a response to the specific observations and recommendations, ISTC has elected to provide an overall response concerning its role. It follows paragraph 11.88.

Inadequate Co-ordination Between Federal and Provincial/Territorial Governments

11.44 Natural resources are often under provincial and territorial jurisdiction. Thus, support and co-operation from those levels of government are needed when aboriginal communities wish to pursue economic development projects involving these resources.

11.45 Further, in both urban and rural settings, the co-operation of provincial and territorial governments is needed to help aboriginal people access business opportunities, training and jobs.

11.46 The ministers for Industry, Science and Technology and Indian Affairs and Northern Development were authorized to secure the active participation of provincial and territorial governments and to seek matching financial commitments for off-reserve aboriginals. Employment and Immigration was not required, under the CAED Strategy, to join its federal partners in this regard. However, it acknowledged the importance of federal/provincial and territorial participation and elected to rely on its existing (non-CAED Strategy) agreements with the provinces that cover training and related matters for the general population.

11.47 We could not find any documented national procedures that would require the CAED Strategy partners to identify those matters where provincial and territorial government support is needed and to pursue their active participation. According to DIAND, with the exception of specific agreements under the Resource Access Negotiations Program and some business projects, provincial and territorial participation under the CAED Strategy has not been obtained as intended.

11.48 The Minister for Industry, Science and Technology was required to report to Cabinet on the implementation of federal-provincial aboriginal economic development agreements by December 1990. This was not done.

11.49 The three federal CAED Strategy partners, in consultation with aboriginal representatives, should identify the areas where provincial and territorial support is needed and seek active participation from the governments concerned.

DIAND's response: The Department agrees that the provincial and territorial governments have an important role to play in expanding the economic base available to aboriginal people, and will continue to pursue opportunities in this regard under the direction of its respective aboriginal boards, advisory bodies and communities.

EIC's response: The Department agrees that provincial and territorial governments have an important role to play in expanding the economic base available to aboriginal people, and will continue to pursue opportunities in this regard through the aboriginal management boards.

11.50 The Department of Industry, Science and Technology should comply with Cabinet's directive to report on the implementation of federal-provincial aboriginal economic development agreements.

Concerns over Funding

11.51 Aboriginal communities are not homogeneous. They have different needs and opportunities, different governing structures and different access to natural and other resources. Some of them place more emphasis on environmentally and culturally sound economic development than others. In some communities, it could be more advantageous to upgrade the basic education of unemployed persons than to provide them with specific job skills.

11.52 Efficient and effective use of public funds requires that funding be appropriately planned and directed to activities that would be most beneficial to aboriginal communities as well as to aboriginal individuals living among the general population.

The basis for funding in the Department of Indian Affairs and Northern Development is questionable
11.53 Under the CAED Strategy, aboriginal communities are expected to identify their own needs, opportunities and priorities and to submit related strategic or operational plans. DIAND's policy is to release funds to the community upon receipt of these plans. However, the plans received are not used to determine the funding levels to be provided.

11.54 Instead, DIAND's contributions are provided primarily by the application of a formula based on population size. However, certain communities in remote areas have few employment or business opportunities. They are more concerned about their immediate needs, such as adequate housing and health care.

11.55 Conversely, some bands located near major urban centres or with access to developed natural resources have made progress toward achieving economic self-reliance. They may have a lesser need for economic development assistance. Yet, they continue to receive assistance for economic development primarily on the basis of population.

11.56 We further noted that DIAND continues to fund, on this basis, community economic development organizations that it has classified as being fully developed. According to the Department, in 1992, 73 fully developed organizations received $20 million from DIAND and 296 less-developed organizations received $33 million.

11.57 In addition, we could not find consistent evidence that DIAND had performed adequate reviews of the plans submitted by aboriginals. In our opinion, such reviews should be appropriately documented and they should be used in determining the level of funding provided, over time and within budgetary constraints.

Labour market information is insufficient for funding decisions by the Department of Employment and Immigration
11.58 The Department of Employment and Immigration shares with its aboriginal partners the responsibility for identifying training needs. These needs, which take into account labour market information, should influence how funds are allocated. The Pathways allocation process is done in consultation between the Department and its aboriginal partners. Several factors are used in allocating resources, including demographic data, unemployment levels, remoteness from urban centres and the historical level of expenditures.

11.59 Skills development for aboriginal people includes pre-vocational, vocational and management training. At the time of our audit, many local aboriginal management boards had not analyzed training needs for their areas to determine what training to provide, and to whom. Thus, funding for job and skill training through the Pathways strategy may not necessarily be targeted to identified aboriginal training needs.

11.60 The Department is responsible for providing appropriate labour market information to the local aboriginal management boards; based on that information, the boards could be expected to develop training needs analyses for their territories. However, Employment and Immigration does not always have sufficient information on the local labour market to enable the boards to determine the training opportunities that would eventually provide employment to aboriginals. For example, very little information is provided on occupations for which there is a shortage of skilled workers, or occupations where employment growth is projected.

11.61 Consequently, these boards are faced with the task of searching for other sources of labour market information and are not yet in a position to address the question of what training to provide.

11.62 The Internal Audit Bureau of Employment and Immigration recently completed an audit of the progress made by the Department in implementing its Labour Market Information Action Plan. This plan is intended to provide a general framework for promoting the systematic development and refinement of the labour market information function. According to the Internal Audit Bureau, the implementation of the action plan is progressing, but the process is very slow in several areas. The report, dated April 1993, states that ". . . the data bases developed locally do not always represent the total local labour market in a current and accurate manner." The report adds, "Presently, there is no formalized or commonly applied mechanism to clearly identify the needs of present and potential users."

11.63 The availability of reliable labour market information is essential to ensure that the training recommended by the local aboriginal management boards is appropriate. We recognize that aggregating labour market information at all levels is difficult as well as costly, and that the needs and expectations of users are constantly evolving. Since program funds are limited, we are concerned that the Department's funding allocation may not be targeted to areas with the most pressing needs and with the best job opportunities. We urge the Department to obtain and use complete and reliable data on the labour market.

Project funding by the Department of Industry, Science and Technology does not adequately consider the socio-economic circumstances of applicants
11.64 To apply for Aboriginal Business Development and Joint Ventures Program funding, potential applicants are required to demonstrate the commercial viability of their proposed projects using standard business criteria, such as return on investment, debt-equity ratios and gross profit. The terms and conditions of the program do not require consideration of the socio-economic circumstances of applicants as a criterion for assistance.

11.65 Approximately 76 percent of the aboriginal population have not completed high school. The letter of offer of assistance, which constitutes the principal document between the applicant and the Department, is too complex for the majority of applicants, as it is directed at individuals with schooling at the university graduate level.

11.66 In our examination of this program, we found projects that, in our view, would have been implemented even without financial assistance.

Funding decisions by the Department of Industry, Science and Technology do not depend on performance
11.67 The intent of the Aboriginal Capital Corporations Program is to provide contributions for the establishment of self-sustaining capital corporations owned and controlled by aboriginals. There are currently 33 such corporations with a total approved capital base of approximately $200 million. In the assessment of proposals for the creation of new aboriginal capital corporations or diversification of existing ones, the program terms and conditions require assessment of each corporation's potential to break even within five years. Our examination of Industry, Science and Technology's monitoring files for 11 corporations revealed that seven of them had 25 percent or more of their loans in arrears, and that two of the seven had eroded part of their capital base.

11.68 We found that the Department approved funding for four of the 11 aboriginal capital corporations without assurance that they were in compliance with the terms and conditions of the program. Three corporations had not demonstrated the required favourable record of operating performance and managerial capacity, and a fourth had not supplied a required third-party quality assessment of existing loan portfolios. We also noted that certain proposals were not adequately supported by a business plan, and that sensitivity analyses in support of the funding decisions were not maintained on file.

11.69 The three departments, in co-operation with other CAED Strategy partners, should adopt funding methods based on identified needs, priorities, constraints and opportunities.

DIAND's response: The Department considers that existing funding methods and mechanisms are designed to meet needs, constraints, priorities and opportunities of aboriginal individuals and communities who access CAED Strategy programs. These mechanisms recognize the importance of client control over program delivery and decision making.

EIC's response: The Department believes that funding methods are designed to meet needs, constraints, priorities and opportunities of aboriginal individuals and communities who access the CAED Strategy programs. These mechanisms recognize the importance of client control over program delivery and decision making.

11.70 The Department of Indian Affairs and Northern Development should document its review of the progress of community economic development organizations and the plans they submit and use this information as a basis for funding within budgetary constraints.

DIAND's response: The Department feels the funding was distributed in a fair and equitable way based upon the on-reserve population. The terms and conditions for each community economic development organization (CEDO) provided the maximum flexibility for them to develop their ability to deliver economic programs and advisory services and, at the same time, to respond quickly to local needs and economic opportunities.

DIAND agrees to undertake a review of the funding mechanism in conjunction with CEDOs and to explore the practicality of using the regional reviews of CEDO operating plans as a basis for future funding within budgetary constraints.

11.71 The Department of Employment and Immigration should provide, at all levels, labour market information that would enable aboriginal management boards to appropriately plan their training interventions.

EIC's response: Labour market information based on official census data are often not appropriate when disaggregated to the level useful for local boards and its credibility is questioned by the aboriginal partnership. With the recent release of the Aboriginal Peoples Survey data, and as the aboriginal management boards become operational and begin to input into the planning cycles, Human Resources and Labour Canada and Aboriginal people in partnership through the boards are determining the information needed and how it will best be obtained.

11.72 The Department of Industry, Science and Technology should:

  • develop and apply a criterion respecting the socio-economic circumstances of applicants when assessing eligibility for project funding through the Aboriginal Business Development and Joint Ventures Program; and
  • enforce the terms and conditions required by the Aboriginal Capital Corporations Program for funding the corporations.

Observations on the Monitoring Practices of the Department of Industry, Science and Technology

Monitoring practices are inadequate
11.73 In our examination of 84 projects, a representative sample from the Aboriginal Business Development and Joint Ventures Program, we found that 14 were no longer operating. Despite the fact that the program's short-term success rate is better than that achieved under previous programs, ongoing monitoring is essential in evaluating the program's ability to achieve its goals, particularly since the contributions are usually non-repayable.

11.74 We found documented evidence of monitoring for only 17 of the projects examined. Furthermore, in these cases, there was no evidence on file to indicate that the information submitted by applicants had been analyzed, for example, by comparing actual results to the business plan estimates. In addition, the first required monitoring is 13 to 16 months into the life of a project. In our opinion, progress reports and financial information gathered from monitoring a project would be more useful if they were more timely.

11.75 The Department of Industry, Science and Technology should strengthen its monitoring procedures to ensure that all projects in the Aboriginal Business Development and Joint Ventures Program are appropriately reviewed within a reasonable period of time, and that the results of such reviews are documented and considered when determining whether to provide ongoing support for a particular project.

External delivery organizations
11.76 We found, as in the case of the Aboriginal Business Development and Joint Ventures Program, that the Department of Industry, Science and Technology was not adequately monitoring the performance of external delivery organizations. In particular, the required reports to the Department from these organizations were not always provided, and when they were, they did not include performance data such as jobs created or other indicators of project success.

11.77 The Department of Industry, Science and Technology should take steps to ensure that external delivery organizations provide reports as required and that such reports include appropriate performance information.

Results Measurement Framework

11.78 When the CAED Strategy was initiated in 1989, the Government of Canada committed itself to obtaining measurable results over the next five years.

11.79 At the time of our audit, the three departments had made only limited efforts to assess how well the CAED Strategy was working. They did not have the information necessary to measure results. Although some quantitative data exist, such as the number of projects funded, data on results and quality of services provided are incomplete or non-existent.

11.80 In addition, although a draft framework for measurement was proposed by DIAND in December 1991, the departments (at the time of our audit in the spring of 1993) had yet to decide collectively on key evaluation matters, such as the type and accuracy of required data on results.

11.81 In our view, these matters should have been addressed when the CAED Strategy was designed, so that the implementation focus and accountability for results could have been determined right from the outset and then refined on a continuing basis.

11.82 We noted that, in May 1993, the CAED Strategy Management Committee approved a "CAEDS Results Measurement Framework" to be implemented at a later date.

11.83 In our opinion, the lack of appropriate performance and evaluation information impedes the necessary accountability within the aboriginal communities and between the government and Parliament. It makes effective implementation of the CAED Strategy more difficult.

11.84 The three federal departments involved in the CAED Strategy should obtain and use appropriate data to evaluate and report on the results of the Strategy.

DIAND's response: All CAED Strategy partners have determined an assessment framework that is employing various and appropriate sources of data and information to report on the results of the Strategy. In addition to significant performance monitoring to date, the Department is undertaking evaluation initiatives as outlined below, which will more fully address evaluation requirements.

The Department of Indian Affairs and Northern Development made a commitment to Treasury Board in 1990 to begin a series of evaluations and results gathering initiatives commencing in 1991:

  • A CAED Strategy assessment conducted by aboriginal people as recipient clients - to be completed this fiscal year;
  • Economic Development Strategic Review - to be completed this fiscal year;
  • Program evaluation of DIAND-CAEDS components - to be completed this fiscal year;
  • Statistics Canada post-census survey - aboriginal people - completed and data results are now being released;
  • CEDO operating plan results reporting data annexes - completed and reporting annually; and
  • Publication of status reports for the DIAND-CAEDS components - Community Economic Development, Research and Advocacy and Resource Access Negotiations - completed and published.
EIC's response: All CAED Strategy partners have determined an assessment framework that is employing various, appropriate sources of data and information to report on the results of the Strategy. In addition to significant performance monitoring to date, the partner departments are undertaking additional evaluation initiatives that will more fully address all evaluation requirements.

Questions That Need to Be Answered

11.85 The following questions, among others, need to be answered by both the government and non-government CAED Strategy partners in order to conclude on the success of the Strategy.

  • What actual benefits have resulted from CAED Strategy activities, and have these activities achieved value for money?
  • Did CAED Strategy expenditures take into account priorities of aboriginal people, or could the funds have been used differently to generate greater benefit?
  • Is there a more cost-effective way to achieve the same results?
  • What is meant by "economic self-reliance", and what criteria will be used to determine whether it has been achieved?

Inadequate Information to Parliament

11.86 Information on CAED Strategy costs and performance should, in our opinion, be reported to Parliament annually. Such information should be relevant, complete, and reliable. The only consolidated report on CAED Strategy activities that was provided to Parliament was a March 1991 joint status report. It describes the CAED Strategy components that are assigned to each of the participating partners and contains selected statistics such as costs and the number of projects approved, rejected or withdrawn. However, it does not provide performance information. In our view, the absence of this information impedes accountability.

11.87 The federal CAED Strategy partners should provide, in a comprehensive annual report to Parliament, information on costs and performance that is relevant, complete and reliable. This information should clearly indicate the total costs incurred and the progress made in relation to the stated objectives.

DIAND's response: The Department currently reports on DIAND components of the CAED Strategy through Part III of the Estimates. DIAND agrees with the need for results reporting. A CAED Strategy results measurement framework was agreed to and implemented by the Department and its partners in May 1993. It is expected that this new measurement framework will satisfy the informational needs outlined by the Auditor General's findings. These reports will be available as public documents on a periodic basis.

EIC's response: The Department agrees with the need to report to Parliament on an annual basis, but believes the appropriate reporting mechanisms on CAED and/or supporting programs are already in place through Part III of the Main Estimates.

11.88 ISTC, succeeded by Industry and Science Canada, has provided the following overall response regarding its role under the CAED Strategy. We are concerned that this response does not address the specific audit observations and recommendations.

ISTC's response: Industry and Science Canada believes that the audit of the CAED Strategy obscures the significant accomplishments of aboriginal Canadians and of the Department's Aboriginal Economic Program (AEP) business development initiatives. There is much to demonstrate that we are progressing well toward meeting the Strategy's objectives.

The Department is proud that since the autumn of 1989 to 31 March 1993, AEP has approved support for over 3100 proposals from clients. This financing totals $207 million and has resulted in investments, from all sources, of almost half a billion dollars in the aboriginal business sector. The effort toward increasing aboriginal participation in the national economy has clearly taken hold. Moreover, the direct involvement of aboriginal business leadership in the decision-making process through the Department's aboriginal economic development boards has made our investments responsive to the needs, constraints, priorities and opportunities of aboriginal individuals and communities.

Recently, the Department conducted a business performance review of the 337 aboriginal businesses with more than two years of operating experience that had received assistance early in the mandate of the Aboriginal Business Development Program. Ninety percent were still in operation, and sixty percent were operating with a profit or a small loss. This compares favourably with the Canadian average for new small businesses. A full review of all AEP activities, planned for 1994-95, will be based on an evaluation framework established by the Department in 1991. Meanwhile, the Department continues to report on specific achievements through studies, annual and progress reports, and by reporting both to Parliament and to aboriginal client groups.

The Department agrees with the importance of monitoring projects and of following up on the performance of its client businesses. It continues to make improvements in client monitoring and reporting practices.

Equally important, the Department has pioneered innovative approaches to the delivery of programs to aboriginal businesses through the establishment of aboriginal capital corporations, which provide loans to small businesses, and through external delivery organizations that substantially improve access to the program in rural and remote areas. These achievements have been critical to increasing the level of business management skills in communities across the country.

In summary, the Department's Aboriginal Economic Program effectively provides support to the growing aboriginal private sector - in collaboration with aboriginal people. Our programming is co-ordinated with other federal CAED Strategy partners by a common mission, and co-ordinated mandates and delivery mechanisms.

Additional Matters for Consideration

11.89 CAED Strategy funding to DIAND and Industry, Science and Technology was initially provided for five years ending in 1994. With respect to proposed funding renewals, we believe the federal CAED Strategy partners should take into account the following matters in addition to the observations and recommendations already discussed.

Employment Equity

11.90 As part of the federal government's 1990 Native Agenda, and in response to the recommendation of the Fourth Report of the Standing Committee on Aboriginal Affairs, DIAND and the Treasury Board sponsored the Aboriginal Workforce Participation Initiative in 1991. Its major goal is to increase aboriginal employment in the public service of the federal, provincial and territorial governments, as well as in the private sector.

11.91 This initiative gave federal departments and agencies specific duties, such as the development of aboriginal employment strategies, including the establishment of targets for recruitment, promotion and retention.

11.92 The Aboriginal Workforce Participation Initiative acknowledges that aboriginal people continue to be under-represented in the federal public service. Further, with respect to the private sector, a 1992 Employment and Immigration report on the application of the Employment Equity Act indicated that, although aboriginal representation in the work force had improved over a five-year period, aboriginal people remained substantially under-represented.

Basic Education

11.93 Studies conducted by DIAND and by an Indian community identified barriers to labour market participation, including low education levels and a lack of access to adult basic education programs.

11.94 A 1989 policy paper, "Success in the Works", published by Employment and Immigration, estimated that most new jobs will require more than five years of combined education and training beyond the completion of high school. Community entrepreneurs must compete in a changing business world, which demands frequent updating of sophisticated management and marketing skills. Even traditional occupations, such as resource development, are being influenced by technological change.

Investment Capital

11.95 The federal government has acknowledged that the Indian Act can impede economic development. For example, restrictions relating to on-reserve land use and other aboriginal assets make it more difficult for aboriginal peoples to obtain financing for development projects. Although these restrictions are not necessarily insurmountable, they do not facilitate exploitation of development opportunities.

The Role of Aboriginal Institutions

11.96 As a result of CAED and Pathways strategies, specific aboriginal institutions were established to assist the aboriginal people to obtain greater control over their economic destiny. The community economic development organizations, the local aboriginal management boards and the aboriginal capital corporations are examples of intended opportunities to increase aboriginal participation. At the same time, however, these institutions have a responsibility to co-operate with each other by sharing economic development information and co-ordinating their efforts to lead their constituents toward achieving their goals.