Quarterly Financial Report: Quarter ended September 30, 2019

1. Introduction

The Department of Crown-Indigenous Relations and Northern Affairs Canada (CIRNAC), which was a continuation of the previously established Department of Indian Affairs and Northern Development, was operating under the Department of Indian and Northern Affairs Act. As a result of the Budget Implementation Act 2019 No.1 C-97, the Department of Indian and Northern Affairs Act was repealed and CIRNAC ceased to exist as of July 14, 2019. The Budget Implementation Act also established a new department under the Crown-Indigenous Relations and Northern Affairs Act called the Department of Crown-Indigenous Relations and Northern Affairs (CIRNA). The restructuring of CIRNAC to CIRNA is the dissolution of one department and the creation of a new department. 

In addition to the Budget Implementation Act, on July 22, 2019, Order-in-Council P.C. 2019-1109 was passed and included transfers of certain programs and functions between the Department of Indigenous Services and CIRNA. 

This restructuring has an effect on financial reporting.  As such, for this Quarterly Financial Report for the quarter ended September 30, 2019, CIRNA has included CIRNAC's activity for the two week period between July 1 and July 14 (before CIRNAC ceased to exist) so that there is only one continuous Quarterly Financial Report for Q2 of 2019-20.  

Additionally, CIRNA is required to report on the deemed appropriations transferred i) to CIRNA from CIRNAC as a result of the Budget Implementation Act and ii) to and from the Department of Indigenous Services due to Order-in-Council P.C. 2019-1109. These additional reporting requirements will ensure full disclosure and facilitate oversight by Parliamentarians on the use of appropriations.

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.

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

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

Given that CIRNA is a new department established on July 14, 2019, no comparison is available this fiscal year.

3. Risks and Uncertainties

The risks to which CIRNA 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 CIRNA over the coming year.

The following are the key identified risks for the Department:

• Alignment: The risk that the directions and actions of CIRNA, other government departments, provinces/territories and Indigenous partners will not be sufficiently aligned to achieve the mandate;
• Meeting Expectations: The risk that CIRNA 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 CIRNA 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 CIRNA 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 CIRNA 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 response strategies for each risk. Some of these risk mitigation activities include:

• Alignment: Usage of Justice Principles respecting the Government of Canada's Relationship with Indigenous Peoples, adhering to the Departmental Mandate Letter, and regular meetings between CIRNA and the Department of Indigenous Services 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 regular meetings between CIRNA and the Department of Indigenous Services 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, during the transition, there is an increased need to ensure that there are proper controls in place and that there is coordination in the management of common funding agreements between CIRNA and the Department of Indigenous Services. To mitigate this risk, budget and expenditure trends, particularly for programs with common funding, are monitored closely on a regular basis, including formal quarterly reviews that are presented to senior management.

The creation of two new departments with shared activities has increased the number of transactions between CIRNA and the Department of Indigenous Services where the Department of Indigenous Services' regions are administrating CIRNA programs on their behalf. There is a risk that expenses are not recorded under the proper department. CIRNA is monitoring all accounts to ensure expenses are recorded properly and that any issues are addressed either by month-end or by year-end.

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

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

As mentioned previously, in addition to the July 14, 2019 Budget Implementation Act, on July 22, 2019, Order-in-Council P.C. 2019-1109 was passed and included transfers of certain programs and functions between the Department of Indigenous Services and CIRNA.

As a result, the Individual Affairs Branch, and the Lands and Economic Development Sector in CIRNA were transferred to the Department of Indigenous Services. Certain components of the aforementioned program and sector remained in CIRNA.  The Fiscal Policy and Investment Readiness Directorate and the new Lands Policy Unit was aligned with the Resolution and Individual Affairs Sector, while the Major Projects Management Office was aligned with the Implementation Sector.

With regards to internal services functions, as established by Order-in-Council P.C. 2019-1109, the Department of Indigenous Services and CIRNA have an internal service structure with a large number of shared services functions located in one or the other department. 

The following groups have been transferred from CIRNA to the Department of Indigenous Services and will provide services through service-level agreements:

• The Legislative, Parliamentary and Regulatory Affairs Directorate has been transferred to the Sectoral Policy and Partnerships Sector of the Department of Indigenous Services.
• Part of the Evaluation Performance Measurement and Review Directorate has been transferred to the Assistant Deputy Minister of the Strategic Policy and Partnerships Sector of the Department of Indigenous Services.
• The CIRNA Communications Branch has been transferred to the Department of Indigenous Services Communications Branch.
• The Security and Accommodations Directorate has been transferred to the Chief Finances, Results and Delivery Officer Sector of the Department of Indigenous Services.
• A portion of the Planning, Research and Statistics Branch, the Financial Officer Recruitment and Development program, the Information Management Branch, the Financial Planning Analysis and Estimates Directorate of the Planning and Resource Management Branch, and the Corporate Accounting and Materiel Management Branch have been transferred to the Chief Finances, Results and Delivery Officer Sector of the Department of Indigenous Services.  

In addition, the following units have been transferred from the Department of Indigenous Services to CIRNA where a service-level agreement will be established to provide services to the Department of Indigenous Services:

• Human Resources Planning, Performance Measurement and Systems unit has been transferred to the Human Resources and Workplace Services Branch of CIRNA.

To strengthen the relationship between litigation, program, and policies, Litigation, Management and Reporting Branch's litigation management function and capacity was transferred to the sectors in both the Department of Indigenous Services and CIRNA.

Personnel changes includes:

• Stephanie Barozzi assumed the position of Chief Audit and Evaluation Executive effective September 2019.
• Kate Ledgerwood assumed the position of Corporate Secretary effective September 2019.

5. Approval by Senior Officials

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

Pursuant to Budget Implementation Act 2019 No. 1 C-97, effective July 15, 2019, $6,166 is deemed to have been appropriated to Crown-Indigenous Relations and Northern Affairs (Vote 1 for $3,248M, Vote 5 for $10M and Vote 10 for $2,908M) from CIRNAC.

Pursuant to Order-in-Council P.C. 2019-1109 and Section 31.1 of the FAA, effective July 22, 2019, $366M is deemed to have been appropriated to the Department of Indigenous Services from the Department of Crown-Indigenous Relations and Northern Affairs (Vote 1 for 128M, Vote 5 for $4M and Vote 10 for $234M).