2002 December Report of the Auditor General of Canada
Chapter 1—Streamlining First Nations Reporting to Federal Organizations
1.1 First Nations reporting requirements established by federal government organizations are a significant burden, especially for communities with fewer than 500 residents. We estimated that at least 168 reports are required annually by the four federal organizations that provided the most funding for major federal programs.
1.2 We found overlap and duplication among the required reports. With the exception of some financial reports, limited use is being made of the reports by the federal organizations sampled, and we suggest that fundamental change is required. We found the following:
- Reporting requirements are dictated, not based on consultation.
- The information reported is generally not used to set funding levels.
- The reports contain information that does not reflect community priorities.
- We noted that new reports are being introduced with little or no review of the reporting requirements for existing programs, adding to the reporting burden.
- There is little feedback to the First Nations, except for an analysis of audited financial statements.
- Most required reports for Indian and Northern Affairs Canada (INAC) and Health Canada do not provide adequate information on performance or results.
- Little of the information being collected from the First Nations is being used by a number of the federal organizations in their reports to Parliament.
1.3 We are concerned about the burden associated with the federal reporting requirements. Resources used to meet these reporting requirements could be better used to provide direct support to the community. Steps need to be taken to streamline reporting requirements. The current program structure established by the federal organizations is an obstacle to reforming reporting requirements and needs to be reviewed.
Background and other observations
1.4 The reporting relationship between the First Nations and the federal organizations has evolved significantly over the last few decades. Today, communities deliver programs and services and administer annual budgets that can be in the millions of dollars. This has increased the reporting requirements within the communities and from the communities to federal organizations.
1.5 The study reported here focussed on the reporting requirements of funding agreements between the federal government and First Nations. Although the Auditor General is not the auditor of First Nations, we wanted to reflect their perspectives. The Federation of Saskatchewan Indian Nations assisted us and as a result, four First Nations and two tribal councils in Saskatchewan volunteered to participate in the study.
1.6 Our study was not intended to provide a complete view of national reporting. However, as the same reports are required in every region of the country, the study does shed light on issues that are relevant across Canada. It also suggests criteria for reporting.
The federal government has responded. The government's response is included at the end of the chapter. The government agrees with the recommendations in the study, and accepts the desire to reduce the reporting burden on First Nations.
Reporting requirements are of recent origin
1.7 First Nations have undergone a significant evolution in their reporting relationship with federal organizations over the last few decades. As recently as 1968, Indian agents played a key role in First Nations communities as the official spokespersons for Indian and Northern Affairs Canada (INAC). The chief and council were not responsible for program delivery, and First Nations did not report to federal organizations; those responsibilities were handled by the Indian agent.
1.8 The situation has changed significantly. Chiefs and councils have assumed increasing responsibility for program delivery. Today, communities deliver the programs and administer annual budgets that can be in the millions of dollars.
We were told by one member of a community how, as a child, in the mid-1960s her father took her by the hand, walked up to a cottage located in the community, and stood in a long line to receive the monthly family rations from the Indian agent. Today, that same community has investments and assets in excess of $100 million, revenues in excess of $42 million, and expenses of $30 million (31 March 2001).
Reporting requirements have evolved
1.9 For some communities, block funding arrangements on a multi-year basis have increased their autonomy and provided flexibility in the delivery of programs. Multi-year funding has consolidated reporting requirements for some programs, from a monthly to an annual basis.
1.10 In the last few years, the number of federal programs that provide support to First Nations has increased. Each new program has generated additional reporting. In addition, recent concerns about the adequacy of controls over public expenditures, particularly grants and contributions, have led federal organizations to take steps to increase controls. Taken together, these factors have resulted in increased reporting requirements.
Communities are diverse
1.11 It is important to note the circumstances in which federal programs are delivered in First Nations communities. Communities vary in size. The majority (61 percent) have fewer than 500 residents. Many of the communities (20.7 percent) are located in isolated and remote areas which affects the delivery of key services such as health care and education. In addition, each community is distinct in terms of its culture, degree of economic development, and the types and levels of services required.
Focus of the study
1.12 This is the first study undertaken as part of the Auditor General's priority on Aboriginal issues. It examines reporting requirements associated with funding agreements between federal organizations and First Nations, the purposes of reporting, and—recognizing the importance of good reporting for good management—ways to improve current practice. We started with the First Nations communities, looking at issues from their perspective, followed by a review of the systems and practices in the applicable federal organizations.
1.13 The objectives of the study were
- to assess reporting and audit requirements,
- to examine the use of reports and audits, and
- to develop criteria for an effective reporting system.
1.14 The Auditor General is not the auditor of First Nations. Our mandate is to audit federal departments, agencies, and the Crown corporations that, in turn provide support for First Nations. However, in this study, we needed the co-operation of a number of First Nations to learn about the reporting first-hand and to talk to those most directly affected.
1.15 The Federation of Saskatchewan Indian Nations (FSIN) offered to assist us, which led to four First Nations in Saskatchewan volunteering to participate in this study. Two are multi-community First Nations. Each of these First Nations has a significantly different relationship with the federal government. Two communities were managing their own affairs and two were managed by a third party with one federal department; this means that the programs delivered to them were under trusteeship and managed by a third party independent of the community. We also included two tribal councils in the study, because of their role in delivering health, education, and other services, through agreements with the federal government.
1.16 We examined the four federal organizations that provided the largest amount of funding to First Nations for program development and delivery. These organizations accounted for 95 percent of federal funding to First Nations in 2000-01. In order of size of spending, they were: Indian and Northern Affairs Canada (68 percent), Health Canada (18 percent), Human Resources Development Canada (5 percent), and Canada Mortgage and Housing Corporation (4 percent). We met with officials of these four organizations at their headquarters in the National Capital Region, and in local and regional offices in Saskatchewan. Exhibit 1.1 shows the program areas included in the study.
1.17 The study is not intended to provide a complete view of national reporting. However, given that the same reports are required in every region of the country, the study does shed light on issues that are relevant across Canada. In addition, we sought to identify good practices that would apply generally to communities in other regions of the country.
1.18 As we were completing the study, the Minister of Indian and Northern Affairs tabled an act "respecting leadership selection, administration and accountability of Indian bands, and to make related amendments to other Acts." This act could change the way First Nations are required to report; however, it did not form part of our discussions with First Nations and is not considered in this study. Also not considered in the study, but related to reporting, is a proposal to establish four public institutions, including a First Nations Statistical Institute that is intended to assist First Nations in meeting their information needs.
1.19 Further details on the study are found at the end of the chapter in About the Study.
Observations and Recommendations
The nature of the reporting system
Funding agreements set requirements
1.20 Both specific statutes, including the Indian Act and other federal legislation, and government policies incorporated into funding agreements with First Nations require First Nations to report to federal organizations.
1.21 The agreements are quite standard, based on templates and funding is distributed by formulas rather than negotiated individually. The agreements typically supply the funds for a specified time period and specific program purposes, and attach various conditions, including the minister's right to intervene and the reporting requirements.
1.22 The funding agreements generally take the form of contribution agreements—a type of transfer agreement subject to controls at the departmental and central agency levels. Treasury Board policy governs the way departments make these payments, and how they are accounted for and audited. External audits are not mandatory under the policy, but when financial audits are required under contribution agreements, they are to be conducted in accordance with generally accepted auditing standards. Essentially, under these agreements, First Nations are held accountable for spending the money to achieve the purposes intended. They may also be subject to departmental audit to verify those expenditures. Agreements with First Nations provide funds for program expenditures (for education, housing, and community health and social programs); for some programs, adjustments are made to reimburse First Nations for money spent for specific purposes (for example, social assistance, special education, Indian Child and Family Services).
1.23 In Saskatchewan the federal organizations have determined funding for some programs on a province-wide basis but may involve the Federation of Saskatchewan Indian Nations in the management of the programs, as in HRDC labour market programs. The Canada Mortgage and Housing Corporation also involves the Federation in the allocation of resources for housing.
Funding agreements have evolved
1.24 Funding agreements have evolved in recent years.
- INAC's stated intention has been to move toward agreements that provide greater flexibility for First Nations, for example by allowing multi-year funding and the application of a surplus in one program to be moved to cover expenditures in another program.
- During the 1990s, Health Canada was also moving to promote greater flexibility through five-year transfer agreements. Recently, however, it undertook a major revision of its agreements with First Nations. For example, the year-end due date for audited financial statements was extended from 90 to 120 days. In addition, consolidated transfer agreements have been changed to add additional control features.
1.25 In the four communities we visited, we found that one has a five-year transfer agreement with INAC (Financial Transfer Arrangement), and another has an annual agreement with INAC (Comprehensive Funding Arrangement). In the other two communities, the annual agreement for the delivery of their INAC programs was between the third-party manager and INAC. Three of the communities had multi-year agreements with Health Canada (Consolidated Contribution Agreement [Transfer/Targeted Programs]); the other community's tribal council had the same form of agreement. All of the communities had project-operating agreements with CMHC for subsidies and loans guaranteed by INAC, for the construction, purchase, or renovation of homes.
Several types of reports are required
1.26 The non-financial and financial reports required by federal organizations can be grouped as set out in Exhibit 1.2 which provides examples of each type of report (see Appendix A for additional information). We included reports that support funding proposals, whether the proposals are for one-time funding or in support of ongoing programs. We also included budgets and cash flow statements for new programs, because First Nations provide the data required for them. The federal organizations provide First Nations with funding to prepare the required reports.
A large number of reports are required
1.27 We estimated that 202 reports are required annually in a community for the selected programs of the four federal organizations in our study, including reports required under INAC annual agreements (comprehensive funding arrangements). The number falls to 168 by virtue of the reduced reporting requirements under INAC multi-year agreements (financial transfer arrangements). The results are summarized in Exhibit 1.3. These estimates are based on funding agreements in Saskatchewan and supporting documentation from federal organizations; the actual number of reports filed by individual First Nations may vary. The estimate is understated because we did not count reports for all programs of the four organizations, or those required by other federal organizations that also provided support to Aboriginal peoples.
First Nations perspectives
Communities develop reporting procedures
1.28 In the reporting system, the flow of information is from First Nations to federal organizations. The First Nations we talked to, found that the reporting requirements were not well suited to helping them to manage their own affairs, particularly where they had developed governance structures that include reporting procedures.
1.29 In the four First Nations we visited in Saskatchewan, the chief and council, as elected officials, delegate portfolio responsibilities in areas such as health and housing to committees chaired by a council member and composed of community members.
1.30 In one smaller community we noted five such committees. Anyone from the community is welcome to sit on these committees, which report back regularly to the council. Councillors who are responsible for a particular area or portfolio are directly involved with staff in administration and management of the programs. Another larger community established 12 portfolios; each portfolio is held by a councillor, and managed by a program director. In that community, administration is separate from the role of elected officials, and is governed by its financial management act.
Some communities have developed internal financial reporting
1.31 The two communities that are not managed by a third party have developed procedures for internal financial reporting. This financial reporting is tied to their budget process. They have appropriate accounting software and are organized to review and report on financial information. For example, in one community, general ledger reports are sent to the executive director for review before being forwarded to the chief and council. Over the course of the year, staff report on differences, or variances against budget. The chief and council monitor the overall budget and services provided, and approve financial transactions.
1.32 Both communities have a good working relationship with the external auditors. Part of the budget process is an annual meeting with the membership where the chief and council present the audited financial statements.
Communities carry on formal and informal non-financial reporting
1.33 Reporting to community members both formally and informally in areas of priority programs is ongoing in the four communities we visited. The portfolio councillor and program manager report to the chief and council, who in turn generally report to the community membership in regular meetings. For example, in one community, the education policy calls for the director of education to report regularly to the chief and council. In another community, each school has a monthly reporting process to determine which children need help, and who should attend special needs classes. Another community has its own radio station, through which community leaders communicate with the membership on a wide range of issues.
1.34 Community administrators told us that some non-financial reports required by federal organizations were used in their reporting processes. For example, monthly reporting on social assistance is used in one community by the portfolio councillor to provide oral reports to the chief and council, who find it helpful for program management. Similarly, in another community, monthly reports prepared by local boards under the Aboriginal Human Resources Development Agreement with Human Resources Development Canada are used to help manage employment programs. Some evaluation reports required by federal organizations have also proven useful to communities. For example, one community used a school evaluation to gauge how well the school was performing, as the basis for developing a school improvement plan.
Communities are strongly critical of the federal reporting system
1.35 The First Nations told us that the required information generally does not reflect their priorities, and is not always useful to them. The reporting requirements are dictated to them, not determined through consultations. If the reports are not filed, then the community is at risk of not receiving the funds for the next period. Community leaders told us that, as the reporting often has no importance or consequences for program delivery, it encourages the practice of filing reports for the sole purpose of ensuring continued funding, in other words, "data for dollars". In addition, First Nations face many obstacles in compiling the reports, including poorly explained requirements, data that are often hard to collect, and inconsistent funding for report preparation. One chief told us that no-one knows why most of the reporting is done. Paragraphs 1.36 to 1.44 provide examples of these problems.
1.36 In education, the nominal roll, an annual head count, is used to determine the funding level for the community's education program. However, adjustments to funding levels are not made until the next fiscal year. One community experienced a 10 percent increase in enrolment and did not receive the additional funding until the following April, straining the community's education budget. Further, INAC officials in Saskatchewan verify the nominal roll by checking that each student is attending classes on a regular basis up to and including 28 September of each school year. The communities stated that funding based on regular attendance up to 28 September, which is subject to the interpretations of the visiting departmental officials, does not help the communities work with those students who do not attend school on a regular basis. These are the students who are also at risk of dropping out completely. These comments from First Nations are consistent with the findings of our audit of elementary and secondary education, reported in April 2000, which recommended that the Department improve the way the nominal roll is used.
1.37 First Nations told us that a number of reports are required on housing, including annual updates on housing conditions, the community's plans for new housing, and the number of houses built or renovated. However, the way in which INAC allocates funds is not based on need as shown in the required reports but rather on a funding formula which has been capped since the mid-1980s, according to the communities. These reports were not meaningful to the communities we visited.
1.38 Tribal council inspectors work with the communities to compile the housing information and submit it to INAC. In one tribal council we visited, the reporting requirement was characterized as physically impossible, that is, there were insufficient resources allocated to inspect all houses and renovations. In practice, they do not inspect individual houses with the exception of newly constructed ones (to ensure compliance with building codes). As a result, tribal council staff compiles the reports for INAC based on discussion with housing co-ordinators in the community, and some inspection of major renovations.
1.39 The continued receipt of federal funds is dependent on timely filing of the required audited financial statements. For example, INAC has set a deadline of 120 days after the end of the fiscal year for the receipt of audited financial statements. In one community we were told that not all First Nation-owned businesses use 31 March as the year-end, and this delays the reporting of consolidated financial statements to INAC. If the Department does not receive the audited consolidated financial statements by the 31 July deadline, discretionary funds may be withheld.
1.40 The National Child Benefit Program has required communities to report annually since 1998-99. We were told that this program and its reporting requirements were not adequately explained to communities. Some information was given about what could not be funded, but little about what was eligible for funding. Communities had to guess as to what was appropriate programming and reporting. One community we visited, not knowing what was required of them, did report extensively on their accomplishments. However, the other communities' annual reports mostly listed activities and expenditures (see case study, "The National Child Benefit: A missed opportunity to report on results").
1.41 Communities told us that they were concerned about the number and frequency of the reports required by Health Canada. They told us that the reports required under the contribution programs were repetitive, and could be combined. Another concern about these reports was that communities received no feedback from Health Canada officials in the Saskatchewan Region. Two of the communities told us "the reports go down a black hole." The prime interaction between communities and local Health Canada officials was to deal with community members' complaints about health service delivery.
1.42 The four First Nations and two tribal councils we visited were very critical of the process used by Health Canada to bring in the new agreements. They said the process excluded them from any meaningful participation.
1.43 Staff members of an Indian Child and Family Services Program in one of the communities could not understand why their organization received funding for evaluations completed in years three and six of the program but not thereafter. They considered evaluations to be valuable management tools.
1.44 In one community, community leaders stated that it took them four years to develop their policy and procedures manual because they were so caught up in meeting their reporting obligations under their contribution agreements that they were unable to deal with the most strategic management issues.
1.45 Summarizing much of what we heard, one person said that the reporting requirements were a "crazy-quilt," patched together, with no one piece matching any other. A lack of federal co-ordination was cited as the main reason for this disconnect. For example, federal organizations required the communities to develop plans, in housing and community health programs, but the process was disjointed from the community viewpoint. Paragraphs 1.46 to 1.48 give examples of this lack of co-ordination.
1.46 The requirement for a five-year housing plan arose in connection with the 1996 change in the federal housing policy. Communities we visited put forward proposals to meet housing needs, and provide an annual update on housing conditions. Portfolio councillors for housing and health told us that they had undertaken surveys that demonstrated health risks from overcrowding in homes, including serious mould problems and inadequate sanitary facilities. They provided this information to INAC and Health Canada, but neither they nor the departments used it. In fact, we were told by local INAC officials that the housing plans were not used by them and they have no long-term impact on the communities' housing budgets.
1.47 The five-year housing plan and yearly updates that are provided to Indian and Northern Affairs Canada are not shared with the Canada Mortgage and Housing Corporation although the Corporation provides most of the government funding for the new houses built in the communities we visited. In addition, the Corporation relies on the Department for guidance on how to allocate the money by region. As the Corporation requires a ministerial loan guarantee, it does not allocate the funding until the Department is able to provide the guarantee. The Department is unable to provide this guarantee until 120 days after the end of the fiscal year, which allows departmental officials time to review the annual audited financial statements from the communities. As a result, the Corporation does not make its funding commitments until some time between August and October of each year. The communities advised us that this delay can result in winter construction which increases cost significantly, especially in remote communities.
1.48 Health boards and staff in communities told us that they expended considerable effort in developing the community health plans required by Health Canada. Under five-year transfer agreements, these health plans are required, and are updated when the agreements are renewed. Usually the health plans are based on surveys filled in by members of the community, and identify concerns that have the most priority. In one community, for example, the main priority is their youth. There are a number of federal organizations which do provide programs for youth. The staff and councillors responsible for youth were divided as to whether they should produce a community health plan or not. The reason was that the community could not implement the plan without federal co-ordination of various programs, which was not forthcoming.
Managing the reports is a challenge
1.49 An effective reporting system supports good management. We asked the sampled First Nations in Saskatchewan whether the federally required reports helped them to be successful. For the most part, they said no, for several reasons:
- the reports did not provide baseline data,
- there was no benchmarking of best practices that could be used by the First Nations when developing their programs and services, and
- there was little reporting on performance.
An exception with respect to reporting on performance is the Saskatchewan Indian Training Assessment Group Inc., which on behalf of the Federation of Saskatchewan Indian Nations holds the Aboriginal Human Resources Development Agreement (AHRDA) for Saskatchewan (see case study, "The Saskatchewan Indian Training Assessment Group Inc.: Meeting the management challenge").
Tribal councils are responding to the challenge
1.50 Because the system of federal reporting does not provide the performance information needed for good management, the two tribal councils we visited were developing performance measurement systems of their own. In one case, indicators will provide information on the performance of the education system. In the other, the tribal council has instituted a 20-year plan and is assessing progress through indicators and performance measurement.
1.51 The project to develop education indicators is in the initial stages. The planned indicators are intended to improve communication and support school system improvements by providing background information that can be used to interpret student results and demonstrate program quality. However, project funding has been secured from INAC only for the first two years, which are nearly completed. This has raised concerns about being able to secure a long-term commitment from INAC for this project.
1.52 The 20-year plan developed by the other tribal council is based on economic development goals, namely, to create jobs, and to achieve equality with the rest of Saskatchewan in education and income levels. The tribal council has established benchmarks from the beginning of the plan in the early 1990s and collected data to assess progress. The tribal council has demonstrated achievements, identified the areas most in need of attention, and focussed their efforts to move forward.
Federal organizations—Reporting process
1.53 We examined federal interactions with First Nations in setting requirements for reports, and processing, verifying, reviewing, and using the reports in our sample. We looked at ongoing non-financial and financial reporting within the annual cycle, as well as periodic reporting, such as needs assessments and evaluations. We posed some basic questions: Did federal organizations determine reporting requirements through discussions with First Nations? Was the reporting process as efficient as possible? What use did federal organizations make of the reports?
1.54 We also explored two major issues related to reporting, raised both by First Nations and federal officials. These issues were the need to improve performance information, and better co-ordinate federal organizations' reporting requirements.
Requirements need to be reviewed
1.55 We observed that programs have been added in recent years with little or no review of reporting requirements in existing programs. We noted a tendency toward "report creep", where the introduction of a new program invariably adds to reporting requirements. One example is the introduction of a new federal program that is closely related to an existing program. A case in point is Health Canada's Home and Community Care Program, introduced in 1999, and INAC's longstanding Adult Care Program. The overlap between the programs is acknowledged by both departments.
1.56 We noted that external accounting firms are required to report to the chief and council the results of their audits of the financial statements, including a stated audit opinion. In one community, we noted different reporting styles in the various year-end financial statements. In addition, some requirements for reporting exceed what auditors normally are called upon to do. For example, Health Canada's reporting and auditing requirements for the agreements to transfer health services require auditors to certify matters such as the reporting of communicable diseases to provincial authorities, and the registration of nurses with their professional association. Saskatchewan regional officials told us that these additional requirements were not being followed or enforced.
1.57 A good practice in this area is a recent initiative undertaken by Health Canada that recognizes the importance of reviewing reporting requirements for the health services delivered by the Northern Inter-Tribal Health Authority (see case study, "Streamlining reporting in the Northern Inter-Tribal Health Authority").
1.58 The extent of non-financial reporting required by federal organizations varies considerably. Most of the reports required by INAC and Health Canada are non-financial. In contrast, reports required by CMHC and HRDC are largely financial in nature. HRDC also requires some non-financial information in quarterly and annual activity reports.
1.59 In Saskatchewan, both INAC and Health Canada track non-financial reports. Some are verified, usually the ones that are used to calculate funding levels, such as the list of buildings that is used for operations and maintenance funding. However, many are not. For example, INAC does not verify the reports on the enrolment of post-secondary students. Regional INAC officials also told us that non-financial information in social development programs, including the National Child Benefit Program and the Family Violence Program are not verified. The only verification conducted on the Child Care Program has been on capital purchases.
1.60 Health Canada officials that we met in the Saskatchewan Region indicated that in many cases, they do not rely on non-financial reports, such as annual reports, when dealing with First Nations. Notable exceptions to that practice include some targeted programs, such as the Tuberculosis Elimination Strategy. It centralizes control and reviews reports to monitor progress and measure how effective the program is. The lack of attention to many of the non-financial reports calls into question the need to provide them.
1.61 Recommendation. The federal government should consult with First Nations to review reporting requirements on a regular basis and to determine reporting needs when new programs are set up. Unnecessary or duplicative reporting requirements should be dropped.
Required reports are tracked, but most are submitted on hard copy
1.62 Since federal organizations require First Nations to submit a large number of reports within a specified time frame, they have developed various procedures to record the receipt and status of the reports. Although INAC and CMHC use automated systems to track reports, all of their reports are received in hard copy form in Saskatchewan. INAC officials advised us that electronic reporting was more advanced in other regions, notably the Atlantic region. These organizations log in reports and enter data in automated systems as the reports are received. In the case of HRDC, reporting occurs through activity reports, submitted in hard copy, and electronically through data uploads, so the Department tracks reports both manually and electronically. Health Canada Saskatchewan Region, in contrast, receives all its reports in hard copy and tracks them manually. However, Headquarters officials advised us that Health Canada's implementation of the automated Management of Contracts and Contributions System was more advanced in other regions.
1.63 Electronic reporting is clearly more efficient than processing reports in hard copy form, both for the First Nations and federal organizations. We also noted that computers and computer literacy are widespread among the staff in the communities and tribal councils we visited. Although we did not examine the actual capacity in this area we do feel that that it is sufficient, with proper assistance, to support a fully computerized reporting system. In addition, we saw some technical innovations in the First Nations and tribal councils we visited in Saskatchewan (see case study, "An innovative, technology-based approach to health data collection").
1.64 Recommendation. The federal government should use the most efficient procedures to submit and process reports required from First Nations, and should work with First Nations communities to file reports electronically where it is practical to do so.
Financial reports are generally verified and reviewed
1.65 The federal organizations have adopted procedures to review and verify financial reports. These procedures differ for the review of audited financial statements as compared to other financial reports. INAC carries out "compliance and solvency reviews" in its local and regional offices, to analyze and identify issues in financial statements which are independently audited and sent in by the communities. The other federal organizations follow similar procedures. Other financial reports include reporting for expenditures that can be reimbursed, such as social assistance payments. These reports generally are checked for significant or unexplained variances. These procedures represented a reasonable effort on the part of federal organizations.
1.66 The balance of financial reporting generally receives less attention. For example, Health Canada regional officials in Saskatchewan told us that reports such as initial budgets and cash flow statements are often subject to limited review when received, to verify that services and staff are in place. This is also reasonable, given that budgets and cash flows simply reflect the funding that is available.
Communication with First Nations is inadequate
1.67 Federal organizations that receive information from the communities do not tell them how it is used, except for the review of audited financial statements. Nor do they communicate the results, if any, of their analysis of the information. INAC officials pointed out that the Department publishes reports and analysis based on the information collected from First Nations and makes most of it available on the Internet. However, this analysis is normally presented in aggregate form, combining information from many communities on a regional or national basis, which can be difficult to relate to the information needs of individual communities. Timely, considered feedback is a necessary element of an effective reporting system, and for the most part, it seems to be missing.
Performance information is insufficient
1.68 In its First Nations National Reporting Guide, INAC states that it uses the reports required from First Nations to assess and report on statutory requirements, accountability, resource allocation, operational or administrative requirements, program planning, and policy analysis. Good performance information is essential to all of these functions. However, we found a number of obstacles in the way of its collection.
1.69 For example, data are collected on the school graduation rate, which is one output of the education system. However, other measures are required to assess final outcomes in terms of the quality of the education that graduates have received. First Nations schools do not have access to most of the services provided by school boards. Provincial departments of education that normally assess the performance of the education system do not do this in First Nations schools. As a result, First Nations do not have the means to obtain the required data. That is why some tribal councils have made a commitment to provide these services, and in one case, a tribal council is developing education indicators. In a remark attributed to an INAC official, the situation was summed up as follows: "We made a mistake. We transferred schools when we should have transferred an education system."
1.70 Another example relates to the reporting on social assistance. These reports provide detailed information on recipients for control purposes: to ensure that those receiving assistance are eligible and that the correct amounts have been paid. This type of information cannot be easily used to measure the performance of a program. In addition, the dependency rate, which is the proportion of community residents receiving social assistance, is probably not accurate. Officials from INAC told us that they do not know the actual number of residents in the communities. The Indian Registry System, the only source of this information updated annually, was not designed to collect information about the number of residents.
1.71 Reporting for a number of other social development programs, including Indian Child and Family Services, National Child Benefit and Adult Care, was also weak in terms of generating performance information. INAC officials told us that the Department did not have the tools or human resources to be results-focused (see case study, "The National Child Benefit: A missed opportunity to report on results"). This is a recent program for which reporting requirements were instituted in 1998-99; it is a situation where the government has missed an opportunity to measure performance.
1.72 Despite its good intentions, INAC needs to overcome these obstacles to the collection of adequate performance information. In particular, we noted that First Nations do not have access to support from boards of education and, for the limited performance information it collects, the Department lacks the tools and human resources needed to use it effectively.
Health Canada is developing performance measures
1.73 Health Canada is developing a First Nations and Inuit Health Program Compendium that identifies outcomes and performance indicators for each program. The Department's new agreements that many signed early in the fiscal year 2002-03, require First Nations to report on goals, objectives, and measures of outcomes. Since reports under the new agreements were not yet available at the time this study was completed, it was not clear how outcomes will be shown.
1.74 Health Canada also requires five-year evaluations of community health services. We noted that extensive evaluation studies have been undertaken, particularly in the tribal councils we visited. In one community the evaluation was combined with the health services plan, and identified priorities based on a membership survey. However, departmental officials in Saskatchewan told us that apart from a quick assessment when received, these evaluations were often not adequately reviewed because their local offices lacked the human resources to do so. Similar concerns were raised in our October 2000 follow-up audit chapter, Health Canada—First Nations Health.
Information for Parliament about First Nations needs to be improved
1.75 Federal organizations have a duty to report to Parliament both the financial and the non-financial results they have achieved with the authority and public funds entrusted to them. We examined the reports on plans and priorities and the departmental performance reports for INAC, Health Canada, and HRDC over the last three years. We did not examine CMHC, which, as a Crown corporation, reports to Parliament on a different basis.
1.76 Much of the information that federal organizations collect from First Nations reflects resource inputs (what was spent), activities (what was done), and outputs (what was produced), rather than outcome-level results (the impacts and effects of programs). We found that little of the information collected from First Nations was being used in the Estimates documents. The impacts and effects of the multi-billion dollar programs for First Nations were not adequately reported to Parliament. We noted an exception with respect to HRDC's reporting of performance against annual targets for the Saskatchewan Aboriginal Human Resources Development Agreement. Our detailed findings are shown in Appendix B.
1.77 Federal organizations do not need to report to Parliament in detail on First Nations' program activities. Doing so would overwhelm Parliament with information. More detailed information of this nature can be made available through other means, such as the Internet. What is needed is less information on activities, and more on results.
There is a need for better co-ordination
1.78 We found examples of overlap and duplication in federal organizations' reporting requirements.
1.79 One example of overlap is the requirement for externally audited financial statements. Up to five separate financial statements can be required from each community:
- one consolidated and one supplemental schedule for INAC,
- one for Health Canada programs under transfer agreements,
- one for Indian Child and Family Services, and
- one for CMHC.
1.80 Another example is reporting for children's programs. We identified nine federal programs directed toward First Nations children; we examined reporting for three of them, the National Child Benefit, Aboriginal Head Start, and Education. The clients served by these programs differ in some respects; for example, the programs do not all target the same age group. However, all the programs require activity reports and many of those reports identify the same children and parents, in small communities. Overlapping program objectives also cause confusion about which activities should be funded under which program, which can lead to unclear reporting on activities and expenditures.
1.81 The same can be said for Health Canada's Home and Community Care program and INAC's Adult Care Program. These are overlapping programs and both require reports that can be related to the same persons in a small community.
A way forward
1.82 Federal officials and First Nations have referred to the program structure as "stovepiped." The programs are narrowly defined, overlap, and can duplicate each other. We found that the reporting requirements mirror this program structure.
1.83 Federal organizations need to review and better co-ordinate their reporting requirements. This review needs to be undertaken in consultation with First Nations in order to ensure that First Nations' reporting and information needs are also being met. The number of reports and in particular the number of audited financial statements required from First Nations needs to be reduced.
1.84 Based on the results of this study and previous work of the Office, we suggest that the following criteria be considered as a means to test the reporting structure. An effective reporting system should
- be based on a clear understanding between First Nations and federal organizations;
- produce fair and reliable financial and non-financial information that is verifiable;
- be appropriately open and transparent to First Nations membership, the public and stakeholders, respecting personal and commercial confidential information;
- make full and efficient use of available technology;
- be organized to achieve results, and to collect information on performance;
- be useful to First Nations communities to manage their affairs, including financial management and managing for results; and
- assist federal organizations to assess performance, effectiveness and financial control, so that they can report to Parliament on public expenditures.
1.85 Ultimately, as the program structure evolves, an ideal reporting system, as part of managing for results, would include performance measurement (both financial and non-financial); with reports on community outcomes feeding into reports on national outcomes. This approach would lead to
- adequate reporting on performance achieved,
- serious review of the information reported, and
- consequences from the reporting, in the sense of changes related to the review.
1.86 In our view, the program structure is a significant obstacle to the much-needed reform of First Nations reporting requirements. We were told that INAC, and Health Canada in the Saskatchewan Region, do not have the human resources needed to review and consider reports from First Nations effectively. INAC and Health Canada also told us that they are renewing their program authorities. This is an opportune time to streamline programs and better allocate program responsibilities.
1.87 Recommendation. The federal government should undertake a review of program authorities to streamline the programs and better allocate program responsibilities among departments and other federal organizations.
1.88 This study has assessed the reporting that selected First Nations in Saskatchewan are required to provide to the major federal organizations. We found that a large number of reports are required, yet few meet the needs of the First Nations or of the federal government.
1.89 The reporting system does not do enough to help First Nations or federal organizations meet management challenges, but it does provide employment to many community members. The resources devoted to the current reporting system could be put to better use, collecting adequate information on performance, and managing the programs.
1.90 While reporting requirements need to be streamlined, the underlying program structures are an obstacle to a more effective system. Instead of information on narrowly-defined program activities, reporting needs to provide meaningful information to First Nations and to the federal government. Fundamental change is required, and we suggest criteria to guide future assessment of the reporting system.
Government's response. The federal government is committed to improving the current reporting structure; in this regard, the criteria offered in this study will be useful. As noted in the report, this is not a complete review of national reporting and caution must be exercised in generalizing results based on only four First Nations and two tribal councils in one region; however, the desire to reduce the "reporting burden" on First Nations is accepted. Similarly there is a need to address this issue across departments and strive for a more results-based system in support of a government-to-government relationship. Such a system needs to be responsive to the requirements of First Nations and they clearly should be consulted. At the same time, the federal government remains committed to reporting to Canadians on the use of public funds and therefore there must be a balance achieved between the First Nations and the federal government's reporting requirements.
The federal government agrees that reporting should be transparent, administratively efficient, meaningful (performance based), rationalized across the federal government and related to sound program management. Consistent with these principles and in response to the specific recommendations of this study, the federal government is committed to reviewing reporting requirements both individually as departments and collectively, as a horizontal (across government) initiative, taking into consideration that CMHC is a Crown Corporation bound by separate policy and legislation that impacts on reporting requirements, and the nature, and financing of its programs. This work has already started through program authority reviews which are underway in a number of departments. Additionally, existing program areas are being examined to determine where "single window" reporting could serve the federal government at large. This interdepartmental initiative is being supported by an ADM level Steering Committee which has been established to direct horizontal work to foster a principle-based accountability framework for all federal Aboriginal programming, leading to improved program effectiveness through measurable results. Electronic data exchange continues to be pursued by the federal government, consistent with the Government on Line (GOL) initiative. For example, systems have already been implemented to facilitate electronic monitoring and management of reports in a number of departments. The federal government will build on these successes and promote electronic data exchange as a way of doing business with First Nations.
Reporting, both financial and non-financial, is an essential element of the accountability relationship between the federal government and First Nations. The federal government needs to attest to effective spending of funds appropriated by Parliament for the use of First Nations; First Nations leaders need to account to their membership for the manner in which they conduct their affairs on behalf of their communities. The ideal is to strive for a system of information exchange that serves the interests of both parties. In this regard, a First Nations led initiative to develop a First Nations Statistical Institute (FNSI) offers some potential to address the shortcomings of the current data quality and data development issues. The FNSI is designed to play an important role in the interpretation and analysis of data being collected on social, economic, and fiscal conditions of First Nations peoples and institutions, helping to address the information needs of First Nations. This work will also support First Nations in community planning, program evaluation and assist program service delivery.
About the Study
The objectives of the study were the following:
- to assess federal reporting and audit requirements for selected First Nations communities, including the nature of the requirements and how they are met;
- to examine how these reports and audits are used, both by the federal government and the First Nations communities; and
- to set out criteria for an effective reporting and external audit system.
Scope and approach
To carry out our study, we secured the participation of four First Nations communities and two tribal councils in Saskatchewan. We examined the reporting requirements set by the four federal organizations with the largest expenditures in support of Aboriginal peoples, and within these organizations selected several major programs as the focus of our study.
We developed a number of lines of inquiry for the study, including the following:
- the authority or source for the requirements, and the link with federal programs,
- the way reports and external audits are prepared, and related capacity issues,
- the communication of key information to First Nations communities,
- the review and administrative processing of reports and external audits by federal organizations,
- the use of reports and external audits within federal organizations and their reporting to Parliament,
- the communication of data/analysis from reports and external audits to First Nations communities,
- the use of reports and external audits by First Nations communities, and
- the extent to which the reports and external audits meet the needs of First Nations communities.
Assistant Auditor General: Maria Barrados
Principal: Jerome Berthelette
Director: Tom Wileman
For information, please contact Communications at (613) 995-3708 or
1-888-761-5953 (toll free).