The Planning Cycle - Funding Agreements

Description:
A funding agreement is a document containing terms and conditions by which a transfer payment is made by the Crown to First Nations for delivery of programs and services. Funding agreements are negotiated with various government departments, often on a multi-year basis. Funding Agreements are legal documents through which a First Nation commits to deliver specific programs and services while meeting minimum program standards. Rules regarding the flexibility in the use of the funding, cash flow, and adjustment methodology are included.

Purpose:
Funding agreements are the legal instruments by which governments transfer funds to First Nation governments. It is important that Chief and Council understand the commitments contained in their funding agreements. Government departments are constantly revising the terms and conditions to meet their needs and often such amendments are agreed to without due consideration of the impact on the First Nation. It is important to remember that governments are under increasing pressure to account for the use of public funds transferred to First Nations.

A concluded funding agreement, represents guaranteed revenue to be allocated to programs, subject to the terms and conditions of the arrangement being met. These terms and conditions include some restrictions on the allocations of funds along with the minimum standards related to accountability. Thus the funding agreements are an important direct link between the Planning and Budgetary Cycles.

Considerations:
Recently, funding agreements have evolved to allow more Band control in allocating funding. Funding agreements come in several flavours depending on the funding agency, the specific programs, whether the program is ongoing or project based, the size, value and complexity of projects, and the Band's ability to manage the program and ensure that necessary services are provided.

It is of continuing frustration to First Nations that the terms and conditions and reporting requirements vary among departments and between programs. Making an effort to include several programs and departments under the same funding agreement is a step in the right direction, but does not appear to reduce restrictions or reporting requirements.

The types of funding agreements that INAC currently uses to fund First Nations include Contribution Arrangements, Comprehensive Funding Arrangements, Financial Transfer Agreements (see Sample FTA Table of Contents), and Canada-First Nations Transfer Arrangement.

Process:

  1. A complete listing of Funding Agreements that the First Nation is currently under should be summarized by the Band Manager. This summary should include the Name of the Agreement, the Parties, the Purpose, the Term of the Agreement, and the Funding Level.

  2. An action plan can be developed for each Funding Agreement. Actions taken depend upon whether or not the Funding Agreement is ongoing or if it must be renegotiated. Sample actions include:

    • Review of reporting requirements in Funding Agreement. In the event that all reporting requirements have not been met, they should be assigned with deadlines to the Financial Controller and appropriate Program Director.

    • If a new Funding Agreement will be required for the upcoming fiscal year, a summary of information and required data should be completed. Data gathering can be assigned to the appropriate Program Director.

    • The relevant government department or agency should be contacted and negotiations arranged. Prior to the negotiations, the Band should request a draft Agreement.

    • Once negotiations have concluded it is advisable to have legal counsel review all Funding Agreements prior to Band Council approval and signature. After all, these are legal documents which create legal obligations for the Chief and Council.

    • For any ongoing Funding Agreements, revised funding levels (based on the application of the funding escalators as defined in the agreement) should be confirmed with the funding government department or agency.

  3. Confirmed funding levels should be summarized and become part of the Revenue Forecast.

Timing:
The review of funding agreements should begin in December. Negotiations should conclude by early to mid-February in order to feed into the Budgetary Cycle on a timely basis. It is important to note the various reporting requirements under each type of funding agreement (see Report List).