Quarterly Financial Report: Quarter ended June 30, 2019

1. Introduction

This quarterly financial report should be read in conjunction with the Main Estimates for fiscal year 2019-20. It has been prepared by management as required by section 65.1 of the Financial Administration Act and in the form and manner prescribed by the Treasury Board Policy on Financial Management. For the purposes of both the Main and Supplementary Estimates, the Department is referred to as the Department of Indian Affairs and Northern Development.

This report has not been subject to an external audit or review.

2. Highlights of fiscal quarter and fiscal year-to-date results

This section highlights the significant items that contributed to the net increase or decrease in resources available for the year and actual expenditures as of the first quarter ended June 30, 2019.

As of the first quarter, CIRNAC has budgetary authorities of $6,936 million for 2019-20. In the first quarter, budgetary authorities were $3,852 million higher than last fiscal year. As per the Statement of Authorities tables (1a and 1b), the increase in total authorities is attributed to the increase of $2,698 million in Operating and Capital, and an increase of $1,153 million in Grants and Contributions. Statutory Authorities were higher by $62 thousand.

The year over year increase of $2,698 million in the Operating authority (Vote 1 – Operating Expenditures; Vote 5 – Capital Expenditures) is primarily due to the following changes:

• $2,028 million increase: Childhood Claims settlement;
• $750 million increase: Sixties Scoop settlement;
• $10 million increase: Negotiation, Settlement and Implementation of Specific, Comprehensive and Special Claims;
• $73.5 million decrease: Indian Residential Schools settlement;
• $21.6 million decrease: Contaminated Sites; and
• $9.3 million decrease: Iqaluit Community Daycare.

The year over year increase of $1,153 million in the Grants and Contributions authority (Vote 10 – Grants and Contributions) is primarily due to the following changes:

• $883 million increase: Advancing Reconciliation by Settling Special Claims;
• $139 million increase: Infrastructure Projects;
• $95 million increase: Fiscal Policy Reforms for Self-Governing Indigenous Governments;
• $45 million increase: Métis Nation Housing Strategy;
• $21 million increase: First Nations Land Management;
• $20 million increase: Nation Rebuilding Initiatives; and
• $52.3 million decrease: the Negotiation, Settlement and Implementation of Specific, Comprehensive and Special Claims.

Departmental budgetary expenditures were $160 million higher than the same quarter in 2018-19. As per the Departmental budgetary expenditures by Standard Object tables (2a and 2b), the increase for the quarter is mainly due to the changes listed in Figure 1.

3. Risks and Uncertainties

The risks to which CIRNAC is exposed in the 2019-20 timeframe are driven primarily by the complex changes that characterize its strategic agenda. The ambitious reconciliation agenda is taking place against the backdrop of increased expectations on the part of Indigenous Canadians and involves a range of inter-connected legislative, policy, structural and financial changes.

The development of these new directions – many of which are inter-connected and co-developed with Indigenous partners– brings considerable opportunity for Canada; yet due to the complexity of the endeavor, is also characterized by a number of strategic and operational risks. Capacity, new cultural approaches and alignment are all needed to effectively implement the government's agenda; yet these factors are themselves exposed to risk as a result of the political, strategic and operational environment facing CIRNAC over the coming year.

The following are the key identified risks for the Department:

• Alignment: The risk that the directions and actions of CIRNAC, other government departments, provinces/territories and Indigenous partners will not be sufficiently aligned to achieve the mandate;
• Meeting Expectations: The risk that CIRNAC will not be able to adequately meet the expectations of Indigenous communities as they relate to self-determination and reconciliation;
• Public Opinion: The risk that the directions being set by the government will not be supported by non-Indigenous Canadians, negatively affecting the sustainability of the government's agenda and funding;
• Sustainable Capacity: The risk that there will be insufficient capacity, capacity-building or institutional supports in place to enable self-determination;
• Change Management: The risk that CIRNAC will not be able to effectively design, operationalize and manage through the changes that are needed to transform the department and implement the government's agenda;
• Departmental Capacity: The Risk that CIRNAC will be unable to attract and retain the necessary internal resources with the appropriate cultural and technical competencies needed to discharge the department's mandate;
• Modern Treaties and Other Agreements: The risk that the lack of clear direction and capacity will hamper the successful negotiation, implementation and administration of modern treaties; and
• Environment: The risk that CIRNAC will be unable to manage environmental issues and liabilities in a timely and cost-effective manner.

The Department constantly monitors the level of risk exposure to these risks and develops risk responses strategies for each risk. Some of these risk mitigation activities include:

• Alignment: Usage of Justice Principles, adhering to the Departmental Mandate Letter, and weekly meetings between CIRNAC and Indigenous Services Canada (ISC) Deputy Ministers;
• Meeting Expectations: A permanent bilateral mechanism with Indigenous partners as well as other implementation committees and ongoing engagement with Indigenous communities and leaders to support reforms to programs which better align to community needs;
• Public Opinion: Monitoring of public opinion and understanding of Indigenous and northern issues and effectively communicating the results of investments;
• Sustainable Capacity: Increased funding for capacity building, ongoing work with the First Nation Financial Management Board and other Indigenous organizations under the New Fiscal Relationship initiative;
• Change Management: The implementation of a Change Management Work Plan developed by the Transformation Office following extensive consultations with departmental staff;
• Departmental Capacity: Implementation of a Mental Health Strategy, ongoing staff engagement sessions and the monitoring of human resource metrics of "at risk" business activities and programs attributed to people management issues;
• Modern Treaties and Other Agreements: The Department has implemented a number of measures to ensure clarity on direction within the Department and with other partners in the development and implementation of modern treaties and other agreements through, notably, active and ongoing Ministers and Deputy Ministers bilateral relationships with their Provincial and Territorial counterparts and weekly meetings between CIRNAC and ISC Deputy Ministers to ensure the departments are apprised of directions and issues relating to agreements; and
• Environment: Increased funding to improve waste management and to address contaminated sites, implementation of the Northern Adaptation Strategy and the Nunavut General Monitoring Plan.

In addition to the above strategic and operational risks, CIRNAC is exposed to specific fiscal risks. To minimize these risks, the Chief Finances, Results and Delivery Officer Sector works closely with all stakeholders to ensure that sufficient and effective controls are in place and that all fiscal authorities are being respected.

The Department is managing its budget by aligning resources to needs and through rigorous monitoring against both financial and human resource targets. Budget and expenditure trends are monitored regularly, including a review and challenge function, through the Quarterly Financial Report.

Departmental risks are also identified, assessed and mitigated at the region, sector, program and project level on a regular basis. In addition, funding recipients are assessed to determine their level of risk which determines the nature of their funding arrangement. Multiple regional approaches are used to confirm that recipients have met planned program results and that the funds were used for the intended purposes. Ongoing monitoring and recipient audit practices ensures that funding recipients have appropriate management, financial and administrative controls in place.

4. Significant changes in relation to Operations, Personnel and Programs

Significant changes in relation to Operations, Personnel and Programs during the first quarter of fiscal year 2019-20 include:

• Pursuant to Order-in-Council P.C. 2019-1109, Crown-Indigenous Relations and Northern Affairs Canada transferred the control and supervision of a portion of the federal public administration to Indigenous Services Canada effective on July 22, 2019. These changes will be reflected in subsequent financial reporting.
• Annie Boudreau assumed the position of Chief Finances, Results and Delivery Officer of CIRNAC, (effective June 12, 2019).

5. Approval by Senior Officials

Approved, as required by the Treasury Board Policy on Financial Management: