Archived - Audit of AANDC Support to the Specific Claims Process

Background

Specific Claims, generally, are claims made by a First Nation (FN) against the federal government, which relate to the administration of land and other FN assets and to the fulfillment of Indian treaties. The nature of grievances qualifying as specific claims can vary widely, reflecting the diverse historical relationships between different FNs and the Government of Canada. Examples include the failure to provide enough reserve land, the improper management of FN funds or the unlawful surrender of reserve lands. Settling specific claims in a way that satisfies both the government and the FNs is an important priority, not only because doing so discharges outstanding legal obligations the federal government owes and provides FNs with the means and resources to promote social and economic development, but also because it helps build trust between the two parties by rectifying historical injustices.

Justice At Last: Specific Claims Action Plan set in motion a fundamental reform of the specific claims process, and was launched in 2007. These reforms were intended to bring increased fairness and transparency to the process.

Audit Objective and Scope

The objective of the audit was to assess the effectiveness and efficiency of the controls in place to support the Specific Claims Process throughout the claim life cycle.

The scope of the audit was limited to AANDC's responsibilities in support of the Specific Claims processes. As such, the scope did not include the responsibilities of the Specific Claims Tribunal itself, as it is an independent body.

The audit also reviewed the management of negotiation loans associated with Specific Claims, which is managed by the Funding Services for Aboriginal Governance and Negotiations Unit.

Statement of Conformance

This audit conforms with the Internal Auditing Standards for the Government of Canada, as supported by the results of the quality assurance and improvement program.

Conclusion

Overall the audit found that the AANDC has implemented key governance and operational processes to support the efficient and effective delivery of required services and support to the Specific Claims Process (SCP), although there are some areas where improvements could be made. A summary of observations, and recommendations for improvements, is below.

Observations

The audit observed a number of operational practices and processes in place to support the efficient and effective delivery of required services and support to the Specific Claims Process.

Specifically the audit noted:

• Treaties and Aboriginal Government (TAG) business plan includes planning highlights for the SCB, which include processing of claims in a timely manner; realignment of resources to facilitate negotiated settlements and to support Canada's involvement in the Specific Claims Tribunal, and collaborating with FN's as well as federal department and agencies.
• There is alignment between the operational objectives, the Specific Claims Policy, and the applicable provisions of the Specific Claims Tribunal Act, which align with government priorities and the roles and responsibilities of the federal government toward FNs.
• There are a number of performance indicators and statistics linked to objectives that are being monitored regularly by the Specific Claims Branch (SCB). The audit noted examples of weekly and monthly reports that include volume and performance metrics.
• The SCB contributes to weekly TAG Senior Management Committee and bilateral meetings.
• The SCB has implemented a monitoring and performance measurement approach that contributes to AANDC's capacity to monitor claims. The approach also supports the overall goal of providing information on claims to all stakeholders and the general public.
• The Specific Claims Process is clearly defined and formalized, understood by SCB staff, and communicated to stakeholders.
• Controls over claims processing (timelines, documentation and decisions approval) exist, and they are being executed effectively.
• The process to manage Negotiation Loans associated with Specific Claims is clearly defined and formalized, understood by TAG staff, and communicated to stakeholders. Controls over loans processing exist, and they are being executed effectively, and in compliance with policy and applicable legislation.

Recommendations

The audit identified a few areas where control practices and processes could be improved. The following is a summary of the report recommendations:

1. The Senior Assistant Deputy Minister of the Treaties and Aboriginal Government Sector should ensure that an appropriate Oversight Committee, with a defined governance framework and Terms of Reference (ToR) is implemented, and ensure that the Terms of Reference of the Claims Advisory Committee (CAC) is reviewed and updated. Specifically, CAC membership within the ToR should be reviewed to include a representative from the Litigation Management and Resolution Branch.
2. The Senior Assistant Deputy Minister of the Treaties and Aboriginal Government Sector should ensure that a comprehensive risk management framework related to specific claims (including strategic and operational level risks) and a risk management process, are established to appropriately identify, assess, mitigate and monitor the identified risks related to specific claims on a regular basis.
3. The Senior Assistant Deputy Minister of the Treaties and Aboriginal Government Sector should review current systems and assess system requirements/functionality against current available systems and evaluate the cost vs. benefit of centralizing the claim management systems and databases.
4. The Senior Assistant Deputy Minister of the Treaties and Aboriginal Government Sector should implement a centralized filing system, and/or documentation protocol, where an authoritative record (complete set of key documents) is identified, applied consistently, and easily accessible, to help ensure that key documentation is available and complete.

1.1 Introduction

This audit was included in the 2012-2013 to 2014-2015 Risk-based Audit Plan approved by the Departmental Audit Committee on February 23, 2012. The audit was identified as a departmental priority due to: the sensitive and visible nature of the program; recently implemented process changes; and the significance and materiality of potential contingent liabilities resulting from the settlement of specific claims.

The purpose of this audit is to provide independent, objective and supportable information that can be relied on to assess the execution of the Specific Claims Process. To achieve this purpose, the audit established a quality project management framework to help ensure the audit was carried out in accordance with recognized standards of professional practice Treasury Board Secretariat Policy on Internal Audit, and will follow the Institute of Internal Auditors' Standards for the Professional Practice of Internal Auditing.

1.2 Specific Claims History

Specific Claims, generally, are claims made by a FN against the federal government, which relate to the administration of land and other FN assets and to the fulfillment of Indian treaties. The nature of grievances qualifying as specific claims can vary widely, reflecting the diverse historical relationships between different FNs and the Government of Canada. Examples include the failure to provide enough reserve land, the improper management of FN funds or the unlawful surrender of reserve lands. Settling specific claims in a way that satisfies both the government and the FNs is an important priority, not only because doing so discharges outstanding legal obligations the federal government owes and provides FNs with the means and resources to promote social and economic development, but also because it helps build trust between the two parties by rectifying historical injustices.

The government first undertook to resolve native claims in 1972 and a comprehensive policy process for the negotiation of specific claims was first introduced in 1982. This alternative dispute resolution process provided FNs with an option to negotiate the settlement of specific claims based on the premise that negotiation was more timely, cost-effective, and co-operative than litigation. This process was criticized by FNs and other parties (notably the 2007 Standing Senate Committee on Aboriginal Peoples "Negotiation or Confrontation: It's Canada's Choice"). Criticisms focus on a failure to process and review claims in a timely manner, and a perceived conflict of interest arising from continuing federal government control over the process, and a lack of an independent body to make the process more fair and effective. Canada's response to the Senate Committee Report, announced on June 12, 2007, was Justice At Last: Specific Claims Action Plan.

Justice At Last: Specific Claims Action Plan set in motion a fundamental reform of the specific claims process which was intended to bring increased fairness and transparency to the process. The action plan is based on four pillars:

1. The establishment of an independent tribunal with the power to make binding decisions;
2. The designation of a fund in the amount of $250 million per year for 10 years for settlements;
3. Streamlining of internal government procedures to reduce or eliminate the backlog of unprocessed claims; and
4. Improved access to mediation services to support negotiations.

The Specific Claims Branch of AANDC is responsible for the implementation and administration of the Specific Claims Action Plan. Specific responsibilities include:

• Receiving specific claim submissions from FNs and assessing them against the Minimum Standard^{Footnote 1};
• Filing specific claims that meet the Minimum Standard with the Minister of Aboriginal Affairs and Northern Development;
• Making recommendations to the Minister as to whether a claim should be accepted for negotiation;
• Negotiating the settlement of specific claims with FNs;
• Monitoring and assessing negotiating tables and reporting results annually;
• Formulating financial mandates to settle specific claims;
• Paying settlements negotiated by AANDC and monetary awards issued by the Specific Claims Tribunal;
• For claims that are before the Tribunal, supporting Canada's participation in proceedings of the Tribunal by providing expertise on submitted claims, and ensuring policy objectives are respected and historical facts are correct;
• Administering the specific claims settlement fund; and
• Collecting performance data and reporting results.

The specific claims process includes four stages:

• Claim Submission and Early Review;
• Research and Assessment;
• Recommendation and Decision Making; and
• Negotiation and Settlement.

The Senior Assistant Deputy Minister (SADM) of the Treaties and Aboriginal Government (TAG) Sector is responsible for ensuring the specific claims process is operated and managed effectively, with appropriate use of human and financial resources. This accountability also extends to monitoring and assessment activities.

In addition to AANDC, a number of key stakeholders are involved in the settlement of Specific Claims. The following provides an overview of their responsibilities:

• Department of Justice: DOJ plays an integral role within the specific claims process. They provide advice as to whether a claim gives rise to an outstanding lawful obligation on the part of Canada. It also provides legal advice to AANDC during the negotiation process and in Claims Advisory Committee meetings. If the claim proceeds to the Specific Claims Tribunal, DOJ will represent the interests of Government in Tribunal proceedings.
• Specific Claims Tribunal: The Tribunal is an independent adjudicative body with the authority to make binding decisions in respect to the validity of specific claims and to award monetary compensation to a maximum value of $150 million per claim.
• Specific Claims Tribunal Registry: The Registry is the administrative arm of the independent Specific Claims Tribunal and is a federal government department pursuant to the Financial Administration Act.

In addition to the Specific Claims Branch, a number of key people/groups are involved in the Specific Claims Process within AANDC. The following provides an overview of their responsibilities:

• Claims Advisory Committee: Chaired by the Director General of the Specific Claims Branch, and comprised of other senior AANDC and senior DOJ officials, the committee issues recommendations to the Minister of Aboriginal Affairs and Northern Development on whether claims should be accepted for negotiation. The Committee also recommends financial mandates for approval to those with the appropriate delegated authority.
• Financial Management and Strategic Services Branch (Funding Unit): Administers loan funding for First Nations negotiating specific claims.
• Central Negotiations Branch (Assessment/Historical Research Directorate): This unit arranges independent mediation services during negotiation at the request of FNs and AANDC.
• Litigation Management and Resolution Branch (LMRB): This unit manages Canada's participation in proceedings of the Specific Claims Tribunal and also has an interface with SCB in the event a claim in negotiation is/or becomes the subject of active litigation.
• Regional Operations Sector: Regional offices participate in CAC meetings and at negotiation tables.
• Lands and Economic Development Sector: LED participates in CAC meetings and where appropriate, negotiating tables.

The key legislation, policies, and guidelines governing the Specific Claims Policies include:

• The Specific Claims Action Plan (2007)
• The Specific Claims Tribunal Act (2008); and
• The Specific Claims Policy and Process Guide (2009).

1.3. Specific Claims Statistics

Table 1 below outlines the volume and status of claims filed with the Minister between April 2009 and November 2012. The statistics for 2009-10 provides insight into the distribution between claims that are accepted for negotiations and those where no outstanding legal obligation was found.

Table 1

As described in Table 2 below, between April 2009 and November 2012 a total of 44 claims were settled through the negotiation process, for a total of over one billion dollars in settlements. The settlement of claims represents the end of the claim life cycle, and therefore these settled claims from this time period were initially filed with the Minister prior to 2009.

Table 2

Since the Specific Claims Tribunal Act came into effect in October 2008, 35 claims have been filed with the Specific Claims Tribunal. Of those 35 claims, 25 were not accepted for negotiation by AANDC, as it was determined that there was no outstanding legal obligation. The remaining 10 claims had been accepted for negotiations by the Department prior to their filing with the tribunal.

2.1 Audit Objective

The objective of the audit was to assess the effectiveness and efficiency of the controls in place to support the Specific Claims Process (SCP) throughout the claim life cycle. More specifically, the audit assessed whether:

1. The AANDC-SCB has effective governance controls in place to support the delivery of efficient and effective service under the Specific Claims Process;
2. The AANDC-SCB has effective controls in place to identify and manage the risks of achieving the service requirements of the Specific Claims Process;
3. Efficient and effective controls are in place throughout the four stages of the Specific Claims Process to help ensure that claims are processed in accordance with the Specific Claims Policy, and applicable provisions of the Specific Claims Tribunal Act; and
4. Effective program management controls are in place to support an efficient service delivery of the Specific Claims Process in the areas of Budgeting, Reporting, Claims Processing and IM/IT.

2.2 Audit Scope

The scope of the audit was limited to AANDC's responsibilities in support of the specific claims processes.  As such, the scope did not include the responsibilities of the Specific Claims Tribunal itself, as it is an independent body.

The scope of the audit included the responsibilities of the Specific Claims Branch in support of the Specific Claims Process. Within AANDC, the Specific Claim Branch is responsible for assessing claims submissions against the minimum standard and filing them with the Minister, researching and assessing the claims, negotiating settlements, and paying settled claims and also awards made by the Tribunal. The audit also reviewed the management of negotiation loans associated with Specific Claims, which is managed by the Funding Services for Aboriginal Governance and Negotiations Unit. Specifically, the scope of the audit covered:

• The program's management control framework in place to help ensure effective and efficient management of the four stages of the specific claims process;
• The Department's controls for monitoring and reporting on the progress of claims; and
• The Department's controls in place to ensure timely and accurate processing of the settlement payments, negotiation loans, and tribunal awards.

The scope included Management Accountability Framework and Core Management Control elements that help ensure effective governance, risk management, stewardship, and accountability related to support to the Specific Claims Process.

5.1. Governance

5.2. Risk Management

To support the efficient and effective delivery of the SCP, an effective risk management framework must be in place. The audit examined whether the SCB has a documented approach to risk management that includes risk identification, assessment, mitigation and monitoring.

The audit noted that SCB participated in a risk assessment as part of the Corporate Business Plan process, and provided input into the risks profiles developed at the departmental level, and also at the TAG sector level. The assessment concluded that the overall risk of the SCB not achieving its objective in regards to processing the backlog of claims and moving new claims quickly through the review and assessment process was low and that the proposed mitigating strategies in place were adequate to manage the identified risks.

In 2008, representatives of the SCB and DOJ participated in the completion of a risk assessment exercise as part of Canada's Action Plan. The assessment included identifying strategic, operational and project level risks which were assessed for likelihood and impact. The exercise also involved proposing mitigation strategies to manage each risk.

The following risks specific to the SCB were all rated as low:

• Risk that FNs decline to negotiate and turn to the Tribunal;
• Risk that the number of claims filed are greater than expected, creating another backlog;
• Risk that existing claims (as at October 2008) are not reviewed and assessed by March 31, 2011; and
• Risk that contribution and loan funds may not be used by the recipient for the intended purpose.

As part of the 2012-2015 Corporate Business Plan exercise, a risk assessment at the sector level was completed by TAG. The assessment identified risks in the areas of:

• Government and Aboriginal Partnership;
• External Partnership;
• Legal;
• Implementation; and
• Resource Alignment and Program Alignment.

The assessment does specify the need to pursue settlement of specific claims in a manner consistent with the time frames legislated in the Specific Claims Tribunal Act (2008), reducing the potential number of claims that could be referred to the Tribunal.

Although the current risk assessment, assessed the risks associated with the Sector, it did not represent a fulsome environmental scan of all of the strategic and operational risks that may impact the SCP and SCB, and didn't measure the risks for likelihood or impact. The SCB would benefit from completing such an exercise related solely to the specific claims to determine the areas which are most at risk to further assist the SCB in focusing their efforts to priority activities. In addition we noted that the risk management process to identify, assess, mitigate and monitor risk has not been formally defined.

5.3. Claims Processing Controls

The audit found that The Specific Claims Process is clearly defined and formalized, understood by SCB staff, and communicated to stakeholders. The SCB has implemented a number of controls to help ensure that claims are processed in accordance with the Specific Claims Policy and applicable provisions of the Specific Claims Tribunal Act. In addition, the audit found that controls are in place to help ensure that disbursements are in accordance with the Financial Administration Act. Audit testing found that these controls over claims processing (timelines, documentation and decisions approval) are being executed effectively.

5.4. Management Controls

Audit Criteria