Proceedings of the Standing Senate Committee on
Aboriginal Peoples
Issue 2 - Evidence - February 16, 2016
OTTAWA, Tuesday, February 16, 2016
The Standing Senate Committee on Aboriginal Peoples met this day at 9:34 a.m. to study the federal government's constitutional, treaty, political and legal responsibilities to First Nations, Inuit and Metis peoples (topic: Indian Moneys Program).
Senator Lillian Eva Dyck (Chair) in the chair.
[English]
The Chair: We welcome our viewing audience and those watching on CPAC these proceedings of the Standing Senate Committee on Aboriginal Peoples. Today, we are hearing witnesses from Indigenous and Northern Affairs Canada and the Department of Justice Canada.
As senators know, our general mandate is to study the federal government's constitutional, treaty, political and legal responsibilities to First Nations, Inuit and Metis peoples. That is our general order of reference. Today, we are initiating the first of our special-issues meetings by hearing from departmental officials on issues dealing with Indian monies and accessing them.
This morning we have before us from Indigenous and Northern Affairs Canada Sheilagh Murphy, Assistant Deputy Minister, Lands and Economic Development; Allan Clarke, Director General, Economic Research and Policy Development Branch, Lands and Economic Development; and Claudia Ferland, Director General, Individual Affairs Branch, Resolution and Individual Affairs. From the Department of Justice Canada, we have Douglas Fairbairn, Legal Counsel.
As I understand it, Ms. Murphy and Ms. Ferland will provide remarks, and the two gentlemen will be here to help answer any questions senators may have.
We will turn the floor over to our witnesses.
[Translation]
Sheilagh Murphy, Assistant Deputy Minister, Lands and Economic Development, Indigenous and Northern Affairs: I would like to thank the committee for providing this opportunity for us to speak to the administration of Indian moneys.
[English]
I am the Assistant Deputy Minister of Lands and Economic Development at Indigenous and Northern Affairs Canada. As already noted, I have with me Claudia Ferland, the Director General of Individual Affairs Branch, which includes the Indian Moneys Program; and Allan Clarke, Director General of Economic Research and Policy Development Branch, Lands and Economic Development, who has the Fiscal Management Act and those institutions under his purview. Mr. Fairbairn is from the Department of Justice Canada.
As a department, we recognize that First Nations need the ability to exercise control and jurisdiction over a broad range of areas. In particular, the current provisions of the Indian Act that deal with Indian monies are an example where an appropriate level of control is not currently being exercised by First Nations. While the department has made some effort to remedy this situation, which we will describe, we welcome the views and ideas of your committee as we seek ways to improve First Nations' access to their revenues.
Already, some options have be developed to enable First Nations to exercise control over Indian monies within the framework of the Indian Act, notably new section 64(1)(k), a policy that enables First Nations with capital Indian monies to manage and control their monies through a transfer to an independent trust. Claudia will speak to this policy shortly.
Outside of the Indian Act, several sectoral self-government regimes exist that enable or position First Nations to exercise greater control over revenues generated from their lands, such as the First Nations Land Management Act and the First Nations Fiscal Management Act.
In a recent letter to the Minister of Indigenous and Northern Affairs, which is posted on their website, the National Aboriginal Economic Development Board states that:
. . . a nation-to-nation relationship will only be possible where Indigenous governments are able to assert jurisdiction over matters that affect our lands, resources and other levers of economic development.
In this vein, it is important to First Nation economic development and community well-being that First Nations have access to and control over their sources of revenue.
There are various sources of revenues for bands under a band's control, such as settlement monies, band income from commercial activities on and off reserve, and other own-source revenues. Indian monies, under ministerial control, are only a small portion of First Nations' overall annual revenues of approximately $4.5 billion, with roughly $750 million of Indian monies currently being held in the Consolidated Revenue Fund on behalf of First Nations.
While options have been developed for First Nations to exercise control over Indian monies, we continue to seek additional options for First Nations, the National Aboriginal Economic Development Board and others. We welcome the committee's interest in the issue of Indian monies administration.
Ms. Ferland will now describe the administration of Indian monies and the current options available to First Nations for accessing their Indian monies.
[Translation]
We would then be pleased to answer any questions the committee members may have.
[English]
Claudia Ferland, Director General, Individual Affairs Branch, Resolution and Individual Affairs, Indigenous and Northern Affairs: I would like to thank the committee for this opportunity to speak to you on the complexity of Indian monies. As Ms. Murphy mentioned, I will first provide you with an overview of what Indian monies are and then discuss the current options available to First Nations for accessing their monies.
Indigenous and Northern Affairs Canada is involved both in the collection and distribution of Indian monies. Indian monies are collected, held and then distributed by the department on behalf of First Nations. First, I will begin by briefly describing what Indian monies are.
The Indian Act defines Indian monies as all monies collected, received and held by Her Majesty for the use and benefit of Indians and bands. Under section 62 of the act, these monies are referred to in two categories.
[Translation]
Capital moneys are derived from the sale of surrendered lands or the sale of the capital assets of a band. These moneys include royalties, bonus payments, and other proceeds from the sale of timber, oil, gas, gravel and other non- renewable resources.
Revenue moneys are defined as all Indian moneys other than capital moneys. They are derived from a variety of sources including, but not limited to, the interest earned on band capital and revenue moneys, fine moneys, and proceeds from the sale of renewable resources, leasing activities — i.e., cottages and agricultural land — and rights of way.
[English]
Indian monies are administered pursuant to sections 61 and 69 of the Indian Act, which outline the department's responsibilities for the collection, maintenance, expenditure and accounting of a band's capital and revenue money. Indian monies, both capital and revenue, are held by the Crown within the Consolidated Revenue Fund on behalf of First Nations and are not appropriated by Parliament.
The Consolidated Revenue Fund is the single fund used to receive all monies collected by the Crown. Capital and revenue monies are held in separate interest-bearing accounts under the name of the particular band concerned. Band capital and revenue monies earn an interest rate based on the Government of Canada bonds having a maturity of 10 years or over.
[Translation]
As was mentioned earlier, the moneys collected and expended in 2014-15 pursuant to the Indian Act were $205 million and $204 million respectively. As of January 31, 2016, the department was holding $757 million in capital and revenue Indian moneys.
[English]
Secondly, I would like to provide you with the various options for First Nations to access their Indian monies under the Indian Act and other optional legislation or self-government agreements. These options are very much dependent on the needs and the objectives of the First Nations and the category of monies being accessed, either capital or revenue.
[Translation]
Under the Indian Act, sections 64 and 66 provide a band access to their Indian moneys through expenditures with the consent of the band council.
[English]
Section 69 provides for a First Nation to assume management and control of its revenue monies. Through this method, a band must obtain consent from their membership, which is evidenced through a resolution of council. The band council resolution, or BCR, is then sent to the department for review and approval in accordance with the policy.
Recently, the department developed an optional policy that allows interested First Nations to transfer their current and future capital monies to an independent trust using subsection 64(1)(k) of the Indian Act. The policy outlines the criteria that will be considered in the exercise of ministerial discretion in regard to the transfer of all current and future capital monies from the Consolidated Revenue Fund to a trust created by a First Nation for its use and benefit.
The policy empowers First Nations by providing another option to gain greater responsibility and control over the management and expenditures of their current and future capital monies within the current legislative framework. Further, it enables First Nations to manage their capital monies with the flexibility required to respond to community needs and pursue economic development opportunities.
The policy was developed in consultation with internal and external experts as well as a number of interested First Nations. To date, two First Nations have used the framework of the policy to transfer all of their current and future capital monies to independent trusts. We recognize that transfers to independent trusts are not a viable option for all First Nations. However, we see this as an improvement under the Indian Act regime.
The First Nations Oil and Gas and Moneys Management Act came into force on April 1, 2006. Through this act, First Nations can choose to manage their trust monies without the involvement of the minister. First Nations do not have to be oil-producing to use the monies portion of this legislation. They only need to have trust monies held for them in the Consolidated Revenue Fund by Canada. Any First Nation that has trust monies held by Canada can consider the monies provisions of the First Nations Oil and Gas and Moneys Management Act as an option.
First Nations that wish to control their trust money under the First Nations Oil and Gas and Moneys Management Act must meet certain criteria. These criteria include developing a financial code that meets the requirements of the act. The community must also ratify both a First Nation's decision to opt into this legislation as well as the required financial code.
This legislation places direct and immediate decision-making authority over the management of capital and revenue trust monies in the hands of First Nations. Since the Indian Act will no longer apply to the administration of capital and revenue trust monies, First Nations will not have to obtain the minister's approval to expend their capital and revenue monies for community projects and expenses.
This alternative approach to the management of First Nations' trust monies provides more opportunities for First Nations and can help to unlock the potential for economic development opportunities.
The First Nations Oil and Gas and Moneys Management Act allows First Nations to be accountable to their members and provides them the flexibility required to respond more rapidly to community needs.
Currently, there is one First Nation operational under the First Nations Oil and Gas and Moneys Management Act. In 2015, six First Nations expressed interest to opt into the act.
Another option for managing Indian monies outside of the Indian Act regime is the First Nations Land Management Act, under which a First Nation can collect and manage its revenue monies.
[Translation]
Ms. Murphy will now make a few closing remarks.
Ms. Murphy: Thank you, Claudia.
[English]
This is an important matter that bears the committee's attention. Claudia has provided an overview of how the current process works and some alternatives that exist for First Nations to exercise greater control over their Indian monies, but we are aware that the issue of Indian monies management requires ongoing review.
We note that it would be relevant for the committee to hear from the National Aboriginal Economic Development Board, First Nations and other public and private stakeholders to consider potential options for First Nations' access, management and control of Indian monies, as well as implications of modifying the services that are currently provided by the department to First Nations.
The issue of enabling First Nations' control over Indian monies is part of a broader issue of putting in place mechanisms for First Nations to exercise jurisdiction and get out from under the Indian Act incrementally, if they wish. First Nations are using sectoral self-government legislation, such as the First Nations Land Management Act, the First Nations Fiscal Management Act and the First Nations Commercial and Industrial Development Act, to gain greater control over the tools of economic development and community self-determination and well-being.
We acknowledge that more options are needed to enable easier access to Indian monies beyond the section 64(1)(k) policy and the First Nations Oil and Gas and Moneys Management Act.
I would like to note that the Standing Senate Committee on Aboriginal Peoples' report entitled On-Reserve Housing and Infrastructure: Recommendations for Change released last year recommended that Indigenous and Northern Affairs Canada take immediate steps to convene a national round table with the National Aboriginal Economic Development Board and other First Nations organizations to explore ways to facilitate First Nations' access to Indian monies.
The board has previously indicated that monies management provisions of the Indian Act present a significant barrier to economic development for First Nations people and communities, and that more flexible and responsive institutional arrangements which facilitate First Nations' access to their monies must be developed.
The National Aboriginal Economic Development Board intends to hold a round table in 2016 on options to facilitate First Nations' access to Indian monies. The department is working with the board as it identifies speakers, options and issues that could be considered at the round table.
[Translation]
We look forward to the board's findings and are optimistic that they will provide helpful advice on this issue.
We would now be pleased to answer any questions you may have. Thank you.
[English]
The Chair: Thank you for your presentations this morning.
We are now open to questions from senators, and I will start with our deputy chair, Senator Patterson.
Senator Patterson: Thank you for appearing today.
It seems clear that Indian monies, capital and revenue, are only available to bands for whom those monies are collected and held, if I understand the presentation. I understand that two First Nations have used the optional policy under section 64(1)(k) to transfer current and future capital monies to independent trusts, and one First Nation is operational under the First Nations Oil and Gas and Moneys Management Act, with six expressing interest.
How many bands is the federal government holding monies for in Canada?
Ms. Ferland: Currently, 576 First Nations have accounts with Indian monies that are held in trust by Canada, for a total of $757 million. Of those, 68 bands have more than $1 million of Indian monies.
Senator Patterson: Thank you. With 3 out of 576, we're not doing very well in allowing those bands to get access to those funds. Is that a fair comment?
Ms. Ferland: Currently, the bands can access their funds under the trust using section 64 of the legislation, or section 69 for the revenue. However, in terms of the full transfer, you are correct; at this point, only two bands have transferred their money under the new provisions of section 64 and only one under the provisions of the First Nations Oil and Gas and Moneys Management Act.
Senator Patterson: So the optional policy, you suggested, makes things easier, but we've still only got two First Nations that have been able to take advantage of that; is that correct?
Ms. Ferland: That is correct, but one of the things I should note on the optional policy is that we've just completed the framework. It just received approval in December, while we have been working on it for about three years. We are launching it effective April 1, with several pieces of communication coming to the band. It is a new policy that we've been working on.
Senator Patterson: Our committee, you noted — and thanks for recognizing that — recommended that a roundtable be convened with the relevant stakeholders to improve this situation. On page 11 of your presentation, you suggested that the committee may wish to hear from stakeholders, but I see also that the National Aboriginal Economic Development Board has signaled that it intends to hold a round table and that the department is working with the board as it identifies speakers, options and issues.
Which is it? Are you recommending that our committee convene what we call a round table, or are you supporting the National Aboriginal Economic Development Board's initiative?
Ms. Murphy: I think what we're trying to say is that we're going to have the National Aboriginal Economic Development Board hold those round tables and collect input from stakeholders and from people who know and understand this world of Indian monies and make some recommendations. At the same time, we would encourage this committee to have them appear here as well, either before or after. It might be better after the round table. They have already done work in and around Indian monies; this is just taking it that next step.
It's a two-pronged approach. They will run their round table, and they will have information they can share with this committee if you are interested in hearing from them after the round table, or you could call them at your pleasure. They have already done some work in this area and have points of view that might be of interest.
Senator Patterson: Thank you.
The Chair: If I could follow up with a supplementary, you were talking about First Nations that have managed to access their Indian monies under the Indian Act versus those under the policy. If I understand it correctly, under the policy the money has to be transferred to a trust; and under the Indian Act, is it transferred into some other financial instrument whereby they might have greater control than in a trust? Is there a difference in the mechanism whereby they transfer the money from the department to a specific type of account?
Ms. Ferland: Under the First Nations Oil and Gas and Moneys Management Act, a band can transfer its revenue and capital money into either a bank or a trust; they have the option.
Whereas under the new enhanced policy under the Indian Act, subsection 64(1)(k), because they're taking that trust money, they can transfer it to a trust. So under the act, it's from trust to trust, and under the new policy, FNOGMMA, it's either/or.
The Chair: Thank you.
Senator Tannas: Thank you for coming today. I have just a couple of exploratory questions.
The top 10 First Nations on your list of 500-odd, how much of the fund would they represent?
Ms. Murphy: The top 5 First Nations control 54 per cent of those monies; the top 10, 63 per cent; and the top 20, 70 per cent.
Senator Tannas: That's interesting. So the 1 per cent exists within First Nations, too, apparently.
We wanted to get an understanding of this large block of money and how it might — initially, I think there was some thought that maybe it would help the greater good. It really is in the hands of a very small percentage of First Nations, which probably helps explain why many First Nations haven't gone through the rigmarole of independent trusts, because there just is not enough money to make it worthwhile. Is that fair? Would that be a reason why we would see that we only have a couple or, at best, a handful that seem interested in trying to find a different way to see this money looked after?
Ms. Murphy: I think that's a fair comment. If you look at our initial remarks, you'll note that there is a lot of money out there that First Nation bands are accessing that doesn't even come through the Indian Act provisions. We have something like $4.6 billion out there as revenues and opportunity. About $200 million enters the trust situation on an annual basis, for a total pool of $750 million.
You're right; a very small proportion of First Nations actually have significant amounts of money sitting in that Consolidated Revenue Fund. The majority have small amounts that we'd still like them to access, but perhaps the current provisions of how you do that, short of creating a trust, may be a bit of a barrier in terms of them taking those actions.
Senator Tannas: I notice that last year $205 million went in and $204 million went out, so that is healthy. Would that be the situation from the last number of years? Is that a number that you consciously "managed to'', or is that just a coincidence?
Ms. Ferland: It's not a number that we "managed to.'' There have been years where more monies have come out when we've transferred money out to some of the trusts, the two transfers. So that would have made a difference.
Just to build on the numbers, it should be noted that 22 bands have no money right now either in trust or revenue, and 339 bands have less than $100,000.
Senator Tannas: You're referring to some kind of a list. Is that list a matter of public record, or is it private?
Ms. Ferland: I'm referring not necessarily to the list in terms of the —
Senator Tannas: When I was asking about the top 5 or 10, you were doing some math or looking at something.
Ms. Ferland: We can provide that information.
Senator Tannas: That would be great. Thank you.
The Chair: Is that information available on the department website so the general public can access it as well?
Ms. Ferland: I would have to verify.
The Chair: Could you get back to us on that?
Ms. Ferland: Absolutely.
The Chair: Thank you.
Senator Lovelace Nicholas: Thank you for coming in today.
What would happen if the Indian Act were to be abolished? What would happen to the Indian monies?
Douglas Fairbairn, Legal Counsel, Department of Justice Canada: The Indian Act sets out a procedure for dealing with Indian monies, as we've heard.
One of the fundamental aspects of Indian monies relates to the fiduciary duty of the Crown to act in the best interests of the bands. A fiduciary duty — and I mention this because it's important to the explanation — exists where there is a unilateral power or discretion exercised by one party in respect to the other. That very concisely describes the situation of the Crown. It's acting on behalf of Indian bands to safeguard their monies, and that goes back before Confederation.
If the Indian Act were to be abolished, that could be done. There would be a question, though, about what the Crown's duties are to bands. Right now the bands collect monies in relation to Indian oil and gas leases, permits on reserve. All of those go into the Consolidated Revenue Fund, and the Crown acts like a trustee; it has a trust-like duty and a fiduciary duty. So eliminating or abolishing the Indian Act would leave open what the Crown should do in respect of Indian bands, whether it should simply hand over all control to bands. That may be something that bands would like, but in other cases perhaps there are bands that don't have the ability to deal with all of their Indian monies.
I think it comes down to essentially a political question and a question that is raised by the bands themselves, but it would leave a gap that would have to be addressed by negotiations between the Crown and bands.
Senator Lovelace Nicholas: Thank you. That leads to another question.
For indigenous people to get ahold of their Indian monies, it's complicated. If they went to the Supreme Court of Canada and the court made a decision, couldn't they then disburse the money to indigenous people so that they wouldn't have to live in such poor conditions?
Mr. Fairbairn: There was actually a case similar to what you've described, Ermineskin Indian Band and Nation v. Canada, where the court, in cooperation with the Crown and the bands involved, set out a process whereby monies could be transferred to the two bands in question — Samson and Ermineskin — using 64(1)(k). Prior to that there was no understanding that that provision could be used to distribute or expend monies and send them to a trust set up by the band.
That certainly is one method that may be used now. It has been used with Samson and Ermineskin, and most recently with Tsuu T'ina and Onion Lake.
Senator Lovelace Nicholas: It was mentioned "under the band's control,'' such as settlement monies. Would "settlement monies'' refer to resolving a land claim?
Mr. Fairbairn: Yes, it could involve that. A lot of it is up to the band as to how those monies are handled. In many settlements the monies are provided directly to a trust set up by the band, but there is always the option to send them to the Consolidated Revenue Fund, in which case they become Indian monies, and then they have to be dealt with through the Indian Act or the other types of legislation we spoke about. Increasingly, it seems that many bands are opting for funds to be sent to their trust directly to avoid the implication that they are Indian monies.
Senator Lovelace Nicholas: I think it should be clear that they should have easier access, because there are still land claims out there that have not been settled. It's a "take it or leave it'' attitude from the government. That's just a comment I want to make.
Senator Enverga: Thank you for the presentation. My question is related to what Senator Tannas requested you to answer.
Only the top five control 54 per cent of the money. Is there any option for them to share with other poor First Nations? If they say, "I want to give certain money to certain groups,'' can they do that?
Ms. Murphy: I'm not aware of that ever happening. Normally this is held in trust for that band and for the benefit of that community. We would have to check whether that had ever been requested. Not to our knowledge.
Senator Enverga: Would you let us know?
Ms. Murphy: Yes.
Senator Moore: Thank you, witnesses, for being here.
Ms. Murphy, when you say on page 3 that section 64(1)(k) enables the First Nations to transfer monies to an independent trust, who is on that trust?
Ms. Murphy: I think Claudia can answer that in terms of how the trust would work and what the requirements would be for the First Nation under 64(1)(k).
Ms. Ferland: Under 64(1)(k), through the policy, the band must establish sound trust management principles and include a trust deed and rules for trustee selection. So the cases where we've had two bands develop their own trust, they develop their own code for trustee selection and they must meet the trust criteria. All of the pieces that are put forward must be informed to the band, which then involves community consent and voting. So the trust deed and who is on the trust deed goes back as well and is informed to the band.
Senator Moore: In your answer, you talked about policy. Where does the involvement or participation of the department end? Does this trust have to keep reporting? Are you setting the rules for the selection? Where does it end? It says "independent trust.'' "Independent,'' to me, means it would be the band unto itself only and no more involvement with the department. Where does the department's role end?
Mr. Fairbairn: The independent trust is set up by the band with their lawyers and financial advisers. It is sent to the department. We look at that. But once the trust is set up —
Senator Moore: Stop there, please. Why do you look at it?
Mr. Fairbairn: The trust is looked at by the Department of Justice to essentially ensure that the minister can indicate that he is acting for the benefit of the band. Before monies are transferred, there is a requirement that he be satisfied that it's for the benefit of the band.
Once those monies are transferred to the trust, the Crown's obligation ends. It's now the obligation of the trustees to safeguard the money and to use it for the purposes set out in the trust deed.
Senator Moore: Once the funds have been transferred to the trust, that's the end of any involvement by the department?
Mr. Fairbairn: That's correct, senator.
Senator Moore: Have these monies been building since Confederation?
Mr. Fairbairn: Yes, senator, even before Confederation.
Senator Moore: Really?
Mr. Fairbairn: Yes.
Senator Moore: There is a comment here:
The Band Council Resolution is then sent to the department for review and approval in accordance with the policy.
What is "the policy?''
Ms. Ferland: In order to make it easier to access, the department has published the band manuals process. Therefore, a band can also review what it has to do in order to access their monies and see all the forms, the process and the procedures. It is exactly the same thing that our officers use.
Senator Moore: If a First Nation went through this policy process, how long does it take, in the normal flow of events, for the First Nation to access its money?
Ms. Ferland: That's actually a complex question. It can be as easy as two to three weeks to access the money, when all the documentation is prepared and when we have been working with the band. However, depending on the complexity of what is put forward, if a new trust is being set up, it can take several months.
Senator Moore: You mention on page 8 that, "Recently the Department developed an optional policy which allows interested . . . .'' When you said earlier that an optional policy was approved in December 2015 and will be effective this coming April, is that what you meant by "recently?''
Ms. Ferland: That is correct; that is the policy I was building on.
Senator Moore: How is it that since pre-Confederation and post-Confederation the department is just getting around to this now? Was this not thought of? In all the years, didn't anybody come forward and say, "We need access to that money. How do we go about this?'' You are telling me that nobody bothered to raise that before? How are we just coming to that now, in December 2015?
Ms. Murphy: You're right, it has taken time. We did focus originally on opt-out legislation. We worked on FNOGMMA and on other pieces of opt-out legislation first, while we worked on the monies provision.
The reality is that when you look at the big scheme of things, an awful lot of money managed by First Nations is not sitting within the Consolidated Revenue Fund; it is sitting elsewhere. We tried to work with them and give them advice and assistance on where they want to spend it across a broad range of programs and services.
We have not done well. We want to do better, and we are trying to look at other creative ways to access Indian monies, as we said in our introductory comments.
Senator Moore: On page 10 you say, regarding the First Nations Oil and Gas and Moneys Management Act, that in order for them to gain control, they "must meet certain criteria. These criteria include developing a financial code . . . .'' Who develops that?
Ms. Murphy: The First Nation themselves.
Senator Moore: Does your department have to approve that?
Ms. Murphy: Yes. We would have to look at it to ensure it meets the requirements of the act. It's the same way we do the other opt-in legislation; that is, to make sure it addresses all the requirements of the act. Once that happens, it gets ratified and then they operate under that code.
Senator Moore: If all the Indian monies that are in the Consolidated Revenue Fund today were distributed to the First Nations and there was nothing else in the fund, how many personnel of the department would no longer be necessary?
Ms. Murphy: We probably have to get back to you on that question, just to let you know what that implication would be. I would not want to give you an off-the-cuff answer in terms of what that would be.
Senator Beyak: Thank you very much for your presentation.
I'm reading this differently from my colleagues. It seems to me the option has always been available, under sections 64, 66 and 69, for the band councils, through a band council resolution, to obtain the money any time they want. This is a small fund compared to the general revenue. Could you elaborate?
Ms. Ferland: You're correct in terms of the bands being able to access their monies under sections 64, 66, 69. With the new opting-in policies we are saying, "Rather than coming into the department for a specific expenditure through a band council resolution, do you want to opt to take all your money out and manage that?''
Senator Beyak: Thank you very much.
The Chair: In the information that we have, you're talking about two sources of money that go into consolidated revenue from individual First Nations. One is the source that you call revenue monies, which are basically things from renewable sources; and the other is capital monies, which are non-renewable. It sounds like there are differences in being able to access these two pools of money. First Nations are able to access revenue money more easily than capital money. Why the distinction? Are they held separately?
Ms. Ferland: You're very correct in your distinction between the two sources of money: capital and revenue. That revenue is the renewable, and the capital is the non-renewable source.
Sections 66 and 69 allow for access to the revenue funds. Section 64 has all the various access in the ways that it was drafted for the trust. However, because of the composition of the trust, the legislation provides how the money will be distributed and accessed.
The Chair: So it has to do with a legislative barrier, then, or am I misunderstanding?
Mr. Fairbairn: Both provisions, revenue and capital, allow monies to be expended by the minister. Under 64(1)(k), which deals with capital monies, it is an easier process now to transfer all of a band's monies to a trust rather than having the band come back each time and request monies to be flowed out to it. That's the new turn of events in the last three years under section 64, namely, transferring all of a band's monies to their trust.
The Chair: Let's say that a First Nation has revenue coming in. If they have revenue coming in, does all of the revenue, for example from revenue money, have to go to the department, or is it a percentage?
Mr. Fairbairn: Typically, if it was money that was collected through a permit or through licensing on-reserve land, all the funds would come into the CRF and then the band could make a request to have whatever percentage it wanted flow back out to it.
The Chair: In the list of First Nations that you have, would you say that the bulk of the money comes from capital money or from revenue money?
Ms. Ferland: Currently, there is $581 million in capital and $175.6 million in revenue monies.
The Chair: And there are differences in access. In a given year, about how many First Nations would be contacting the department in order to access their money held in the Consolidated Revenue Fund?
Ms. Ferland: I can look up that number in terms of how many First Nations. Last year, there were 1,156 transactions in accessing Indian monies.
The Chair: Could you explain what "transactions'' means?
Ms. Ferland: Expenditures.
Senator Raine: I've been very interested in following this. Just so I have it clear in my mind, all the money in these funds is owned, if you like, by individual First Nations. We tend to look at it as $581 million in the capital fund, but that's not one fund. That's a whole bunch of funds. I think you mentioned that 576 First Nations own bits of that fund, and only a First Nation can decide what is done with its money. None of this money is collected and then disbursed on behalf of other First Nations. For instance, if I were a First Nation person, my band or my First Nation would pass a resolution to find out how much money is in the fund. They would know how much money they had in the fund. I'm sure there's an accounting going to them, and they would say, "Gee, we've got $2,695. We should have a little scholarship for one of our students and have everybody apply.'' The band would then decide that, yes, that's a good idea to do that with that little bit of money, and they could pass a resolution to do what they wanted. Am I correct?
Ms. Ferland: You are correct in terms of explaining how it works.
There are currently 1,189 accounts when you split them between the capital accounts, of which there are 584, and the revenue accounts, of which there are 603. But they are for the benefit of that specific band and can only be accessed for that specific band.
The Chair: Can the band use their money as collateral?
Mr. Fairbairn: If it's in the CRF, no, they wouldn't be able to. If the monies that have flowed out to them are in a trust or in their bank account, they could use that for collateral.
Once it's in the CRF, it's technically public money, even though it belongs to the band, so they couldn't use it for collateral.
Senator Tannas: Somewhere in our travels we got a sense that there was stranded money here and that it was difficult to access for good and valuable purposes. I'm not hearing or getting that sense from you folks. If there is an issue, an issue that you feel in your administration of this money, where there is stranded capital that can't be accessed for whatever reason, we'd love to hear about it. That, I guess, is the first thing I'd like an answer on.
The other is this: How many requests do you get — a percentage — that you find don't meet the requirements of the Indian Act and, therefore, you have to say no to?
Ms. Murphy: I think we'll answer that in two parts. I'll have Allan answer the part on the impressions around stranded capital because I think people have been saying that. It's probably because there is a delay. I'll let him answer that, and then I think Claudia or Doug will talk to the second part of the question.
Allan Clarke, Director General, Economic Research and Policy Development Branch, Lands and Economic Development, Indigenous and Northern Affairs: If you spoke to the National Aboriginal Economic Development Board or the First Nations Finance Authority, I think you'd get the impression that there is stranded capital.
I think that there is stranded capital for two reasons. One is the fact that regardless of the fact that money seems to be going from the CRF back to First Nations, time and cost are still associated with that process. Cost is associated from the point of view of financing itself. The amount of money in the CRF right now is earning 0.5 per cent with the current rate of return. At the same time, you have First Nations borrowing money through commercial lenders to run whatever they need to run. In our calculation, the cost of that is over $50 million a year to First Nations who have monies in the CRF but who have to still borrow money from a bank. That gap represents lost capital.
The second part — and this is where it goes to monetization or collateralization or securitization — is that First Nations can't borrow against this money. In the calculation we did with the First Nations Finance Authority, even if you're looking at about between $200 million and $300 million a year, if you securitize that using FNFA bonds, that could generate about $1.7 billion in lending for First Nations, which is quite significant when you think about the gaps that exist on reserves when it comes to infrastructure and other matters.
I think the perception is that although money does find its way back to First Nations, the time and the gap and the ability to use the money for certain things is still an impediment, and I think people argue that that represents a gap.
Senator Tannas: It hadn't occurred to me that that money, as it's doing the loop, can't be borrowed against and, therefore, as you say, can't be collateralized. If you look at today's interest rates, you could borrow a lot of money if you could declare, "This money is mine; it's a reliable revenue source, and I can assign the proceeds to make my payments on a bond.''
That is a very serious issue. We have a roomful of legislators. How do we solve it?
Ms. Murphy: Allan can tell you what we're up to now, particularly through the First Nations Fiscal Management Act and some of the institutions that we and First Nations are looking at to build financial acuity and the ability to use their monies in a different way than we would have traditionally done under the Indian Act.
Mr. Clarke: In our opening remarks we talked about jurisdiction and control over resources, people and money. In speaking to the senator's point about abolishing the Indian Act, I can't speculate on whether or not that is going to happen now or in the future. But I think what governments have been doing over the past 15 to 20 years is finding ways where First Nations can actually exercise jurisdiction in areas that mean something, which in our case is economic development. That's why we have things like the First Nations Land Management Act or the First Nations Fiscal Management Act and other legislation that provides a legal framework for First Nations to act in a way that they don't have under the Indian Act. The Indian Act does not provide any of the legal frameworks you would need to actually exercise jurisdiction, and it's completely anachronistic.
As to Indian monies, someone mentioned earlier that we have been collecting this money since before Confederation. That sounds somewhat anachronistic.
The idea is that you want to provide a legal framework for First Nations to actually exercise control over the things that are rightfully theirs, and that there are schemes or legal frameworks that you could create. I think the First Nations Fiscal Management Act, as an example, is something that you could possibly adapt to find a way to allow First Nations to assert jurisdiction in a full range of areas that touch on fiscal and financial management. That could include, at least theoretically, Indian monies.
Senator Tannas: Thank you.
I'll let you answer part 2.
Ms. Ferland: You were asking, just to confirm, about how many requests did not meet the threshold of the act.
Senator Tannas: That you turned down.
Ms. Ferland: To the best of my knowledge, we don't actually seek to turn down requests. At the regional level, we work with First Nations to see if they want to request their funds, be it through sections 64, 66 or 69: "How can we work with you to make it happen? What can we do to make it happen, and what are your options?'' It's much more about working relationships to make it unfold rather than saying, "We can't do this.''
The Chair: Do you have the capacity to actually answer those requests? Is it limited by having only one or two people that are on this file, or is that not part of the equation at all? Is there a blockage in terms of having the administrative capability to deal with the requests?
Ms. Ferland: We have capacity at the regional level to help on the ground with the First Nations, as they have a better understanding of their communities. As well, we have capacity at the national level to be able to support the regions. Between the regional and the national network, we're able to support the communities on their requests. We also have access to Department of Justice lawyers if we need them.
Senator Moore: Ms. Ferland, in response to the question from Senator Tannas, you said that in 2014-15 there were 1,156 transactions. That would, I guess, involve the $204 million that was distributed. Were those all the requests?
And of those 1,156 transactions, were they all approved and were monies issued? I think that's what Senator Tannas was trying to get to.
What was the total? Was that the total of all requests or are those the total number of transactions where monies were issued? If that is the answer, then how many were not?
Ms. Ferland: Just to confirm that I understand, you're asking me if 1,156 was the total number of requests that the department received in 2014-15.
Senator Moore: Yes.
Ms. Ferland: I would have to get back to you on the number of requests. I can confirm that is the number of transactions we did where we transferred money.
Senator Moore: I understand that, but I want to know how many there were.
You mentioned the region, but what is the process? Does the First Nation come to the regional office? How does it get started? What's the route? How does it ultimately get decided, an answer given and monies put out if it's a positive answer?
Ms. Ferland: With regard to the process, everything traditionally starts with a band council resolution. The bands approach the regional office to get assistance. They have access to the band manual in terms of the expenditures. It outlines the various steps to follow to access the monies and what forms must be filled out. This is done in partnership with the regional office or the department at the national level to be able to provide them with their funding.
Senator Moore: The band prepares a resolution and it goes to the regional office. The regional office fills out the forms, and then where does the application go? Ottawa? Where does it go after that?
Ms. Ferland: If the expenditure is under section 64 of the Indian Act, there are subsections to consider. It goes from subsection 64(1)(a) to 64(1)(k). Under some of the subsections, it is filled out and the money is transferred and approved at the regional level. Only subsections (k) and (d) come to the national headquarters to be filled out by us.
Senator Moore: Thank you.
Senator Lovelace Nicholas: In order for Aboriginal people to access this $750 million, subsection 64(1)(k) was amended. Could they have easier access to these monies for infrastructure, such as roads and better water? Would that happen?
Mr. Fairbairn: Subsection 64(1)(k) was essentially a court-created process. The Supreme Court decision set out how 64(1)(k) would be interpreted and the ways that monies should be transferred to bands. It sets out the requirement of a community vote, of a trust that must be developed by the bands themselves. It provides for the fact that the bands should seek independent legal and financial advice.
The department could seek to amend section 64(1)(k) and put in regulations to provide more detail as to how 64(1) (k) is to operate and to try to streamline the current procedures. At the moment, we're operating under the procedure set out in a court decision that aims to benefit bands while at the same time ensuring that the Crown fulfills its fiduciary obligations.
Senator Lovelace Nicholas: It just doesn't sound like it to me. How could a band have easier access if you don't change a section of the Indian Act? How could they have easier access so they won't have to live in such poor conditions?
Ms. Murphy: If they decide to participate under 64(1)(k), the reality is that they will opt into that, a trust will be created. Monies now and in future will flow to that trust, and they won't be under the Indian Act. They will be able to use and dispense those monies to the benefit of their communities in the way that you describe.
They have to go through the initial decision to create the trust. Once they've done that, it's theirs to manage, and the department steps back.
Senator Lovelace Nicholas: Thank you very much. You answered my question.
Senator Enverga: The First Nations Oil and Gas and Moneys Management Act was mentioned earlier. That is one way to get the money, but are there any other options to allow First Nations easier access to the money?
Ms. Murphy: If they sign on to the First Nations Land Management Act, they will opt out of 32 sections of the Indian Act and be able to manage their lands and resources under that regime, which is a way in which they don't have the monies coming through and into the Consolidated Revenue Fund. That's another piece of opt-in legislation.
We also find that First Nations collect revenues through other means. They're using creative ways such that you don't see it flowing into the Consolidated Revenue Fund. They use a variety of other means. A small portion of those monies are actually coming into the Consolidated Revenue Fund.
Senator Enverga: What is the easiest way to get those monies without the bureaucratic systems that may make it harder for them? What's the easiest way to do it?
Ms. Murphy: Do you mean the easiest way once they're in the Consolidated Revenue Fund?
Senator Enverga: That's right.
Ms. Murphy: The easiest way is for them to decide to opt in and create the trust, which moves it out permanently now and in the future so that it's theirs to manage. If they continue to leave it flowing into the CRF, they will come in each time and access it through the forms and approval processes. They would need to do that on whatever basis they choose to draw down those monies.
As Claudia said at the beginning, the large majority of First Nations are sitting with not that much money in the Consolidated Revenue Fund. A significantly small number have the majority of funds.
Senator Enverga: How many First Nations have opted for the easier way?
Ms. Murphy: Do you mean in terms of 64(1)(k)?
Senator Enverga: Yes, that's right.
Ms. Ferland: Currently two First Nations have opted into the new enhanced policy under 64(1)(k), but it is a very new policy that was approved in December. We hope that as we communicate it, more communities will take advantage of it.
I would add that 95 First Nations are under the regime of the First Nations Land Management Act, 54 of which are operational. The other 41 are developmental and moving to operational status. Once they become operational, they will manage outside the Indian Act as well.
The Chair: How many are under the First Nations Oil and Gas and Moneys Management Act?
Ms. Murphy: We have one under the act and five are interested.
It's a challenge for us to understand why First Nations are not availing themselves of that particular act. It might be in part because its title is "Oil and Gas and Moneys.'' You don't have a large number of First Nations with oil and gas opportunities on reserve.
I think we need to do more to understand what those impediments might be and where we could work with First Nations to have them work under that act. The act creates a lot of flexibility for them that they wouldn't necessarily have under 64(1)(k) because under that they get both capital and revenue monies.
The Chair: On page 12 of your presentation, you acknowledge that more options should be available. In the work that the department has undertaken over the years, have you considered other options that you can share with the committee?
Mr. Clarke: I think looking at things like the First Nations Fiscal Management Act, which allows First Nations jurisdiction in a number of areas including taxation and financial management, might form the basis of a legal framework where First Nations could have greater control over all their monies, including Indian monies. It's also a proposal that has been put forward by the First Nations Finance Authority. It will probably be considered by the NAEDB when they do their round table.
The Chair: Did you have a supplementary, Senator Raine?
Senator Raine: Just for clarification, Ms. Murphy, you just said, "First Nations Oil and Gas Moneys Act.'' Is it "Moneys'' or "and Moneys''?
Ms. Murphy: I misstated it.
Senator Raine: Because if it's generally out there that it's the "First Nations Oil and Gas Moneys Act,'' people would assume it's not for the monies side. It's for the monies side because of the First Nation monies that are there.
Ms. Murphy: You're correct. But I think because it says "Oil and Gas'' first, it is not well understood. It could be for monies management or oil and gas revenues management.
Senator Raine: Perhaps we could recommend a change to put the "and'' in capital letters, underlined.
Ms. Murphy: Excuse my mistake for not saying it.
Senator Raine: Most of us say "First Nations Oil and Gas Moneys Act.'' We need to emphasize the "and Moneys.''
Senator Moore: When you answered my last question, Ms. Ferland, you made me think of something else. You said there are 1,156 transactions in the past fiscal year. In response to my question about the process, you said some were approved by the regional office and some nationally. What's the breakdown of the approvals between regional and national? How many were approved in each jurisdiction?
Ms. Ferland: We will come back to the committee with the figures, if that's okay.
Senator Moore: Okay. I'd like to know that.
Senator Raine, I was struggling with the difference between the oil and gas and the other monies, so I think that has been answered.
I don't have anything else, chair.
The Chair: Thank you, senators, for your questions.
A number of questions have arisen from this discussion this morning, and we may wish to call you back so that you may respond to some of the issues raised by other witnesses. I hope you would be open to that. The information you provided this morning is very illuminating, yet I feel there could be a more fulsome discussion after another meeting.
In the information you provide to the committee, I'm wondering if you could put in a longer explanation of the process that individual First Nations have to go through and send material with regard to the approval process so that we could have a look at that in more detail.
Senator Raine, did you have a supplementary?
Senator Raine: If a person in a First Nation wanted to find out how much of their band's money was currently being held in the Consolidated Revenue Fund, is there an easy way they could do that?
The Chair: Are you talking about an individual person or a First Nation band?
Senator Raine: I would think the First Nation band knows what they have, but sometimes people are a little shy to go to the band and ask how much money they have versus neighbouring bands. It has to do with the economic activity that a band has had over the years.
The Chair: That's related to the question of whether that information is available on the department website.
Senator Raine: Exactly.
The Chair: I don't think they were clear as to whether it's available.
Ms. Murphy: I don't want us to "mis-answer,'' so we will get the answer for you as to what is available publicly or whether, if an individual enquired, they would get access to that information. We could provide that as a follow up.
The Chair: Any more last-minute questions?
Senator Moore: We visited various reserves last year. If a reserve has land and they rent it out to me and I run a food store on it and pay rent, is that rent payable to the Consolidated Revenue Fund? Or is it payable to the band and they have to give to the fund and then to apply to get it back?
Mr. Fairbairn: It would go to the Consolidated Revenue Fund if it was a lease.
Senator Moore: Under a lease from the band to me, the payment would be to the Consolidated Revenue Fund.
Mr. Fairbairn: That's right, if the lease was with the Crown.
Senator Moore: That's what I thought. Thank you.
Ms. Murphy: We can explain how leases work and the process. I think it would be helpful for your question.
The Chair: Please.
Mr. Clarke: I think it's important to understand why monies become Indian monies. It's because the Crown is negotiating something or is the signatory of a lease, a permit or a royalty activity. That's why a lot of the money is oil and gas money: Indian Oil and Gas Canada signs the royalties and leases for that type of activity.
The other things are land leases: That's the revenue money, but most bands already have access to that, so there is not a whole bunch of money there.
It's really things where the Crown is signing a paper on behalf of the First Nation that it becomes Indian money. That's why there's probably between $4 and $5 billion out there in the First Nations economy that is not being collected by Canada. They are doing things outside the scope of Indian Affairs or the Government of Canada, so Indian monies are relatively small in the greater scheme of what First Nations are earning and building and their other sources of revenue.
I think the point that people are making about Indian monies is that it begs a bit of justice in terms of First Nations asking the minister for their own money. The other part is about the reason we're not allowing people the full benefit and use of this money because we have it held up someplace.
Senator Moore: In my example, I lease land from the band. I sit down with the chief and council, negotiate the deal and pay rent to the band. Who signs the lease? Is it the band or is it Canada?
Mr. Clarke: It depends. There are different types of leases that could be part of a subset of a head lease, so therefore the band is negotiating those leases. Or it could be extra-legal, like a buckshee lease, so you sign it with a member of the band.
There is no standardized way of negotiating leases, but many of them are signed by Canada.
Senator Moore: What percentage?
Ms. Murphy: Where the lease is signed by Canada, the money comes to the Consolidated Revenue Fund.
Senator Moore: I understand that, but is Canada in on most of the deals?
Ms. Murphy: The ones that we talk about in terms of head leases and buckshee leases, no. The First Nations have developed those systems to manage the land, leases and permits themselves. When they enter into the First Nations Land Management Act, that gets codified into a land code, and they are operating within a legislative framework.
Senator Moore: Thank you.
The Chair: Thank you, witnesses from Indigenous and Northern Affairs and Department of Justice Canada for appearing before us today. We will likely be contacting you again. I wish to thank you for answering all the questions and providing us with this illuminating information.
(The committee adjourned.)