Regulations Amending and Repealing Certain Regulations Made Under the First Nations Fiscal Management Act: SOR/2024-255

Canada Gazette, Part II, Volume 158, Number 26

Registration
SOR/2024-255 December 9, 2024

FIRST NATIONS FISCAL MANAGEMENT ACT

P.C. 2024-1294 December 9, 2024

Whereas the Minister of Crown-Indigenous Relations has consulted with the First Nations Finance Authority with respect to sections 1 to 5 of the annexed Regulations;

And whereas that Minister has had regard to the representations made by the First Nations Financial Management Board with respect to sections 6 to 28 of the annexed Regulations;

Therefore, Her Excellency the Governor General in Council, on the recommendation of the Minister of Crown-Indigenous Relations, makes the annexed Regulations Amending and Repealing Certain Regulations Made Under the First Nations Fiscal Management Act under sections 56^{footnote a} and 89^{footnote b} of the First Nations Fiscal Management Act ^{footnote c}.

Regulations Amending and Repealing Certain Regulations Made Under the First Nations Fiscal Management Act

Debt Reserve Funds Replenishment Regulations

1 The title of the Debt Reserve Funds Replenishment Regulations ^{footnote 1} is replaced by the following:

Debt Reserve Fund Replenishment Regulations

2 The definition defaulting member in section 1 of the Regulations is replaced by the following:

defaulting member

means a borrowing member whose failure to make a payment payable under a borrowing agreement with the Authority has led to a reduction in the debt reserve fund. (membre en défaut)

3 The Regulations are amended by adding the following before section 2:

Debt reserve fund balance

1.1 For the purposes of paragraphs 84(5)(a) and (b) of the Act, the amount is equal to the balance of the debt reserve fund immediately before the first of the payments from that fund were made, not taking into account any payments that previously led the Authority to require replenishment of the fund under those paragraphs.

4 Subsection 2(1) of the Regulations is replaced by the following:

Notice

2 (1) At least 90 days before the day on which a payment is to be made to replenish the debt reserve fund, the Authority must send to the council of every borrowing member with an unpaid loan a notice setting out the amount of the shortfall in the debt reserve fund and the amount required to be paid by that borrowing member as determined under section 3.

5 Sections 3 to 4.1 of the Regulations are replaced by the following:

Amount to pay

3 The amount to be paid under subsection 2(1) is

• (a) in the case of a defaulting member, an amount that is determined by the Authority that must not exceed the amount of the shortfall attributable to that defaulting member; and
• (b) in the case of any other borrowing member with an unpaid loan, the amount determined by the formula

[A ÷ (B – C)] × (D – E)

where

A

is the aggregate amount of the borrowing member’s unpaid loans,

B

is the aggregate amount of all borrowing members’ unpaid loans,

C

is the aggregate amount of all defaulting members’ unpaid loans,

D

is the amount of the shortfall in the debt reserve fund, and

E

is the aggregate of the amounts payable by the defaulting members under paragraph (a).

Liability

4 For greater certainty, despite the payment of an amount under paragraph 3(a), a defaulting member remains liable for the payment to the Authority of all amounts required to be paid under a borrowing agreement with the Authority.

Revenue Management Implementation Regulations

6 (1) The definition local services capital infrastructure in subsection 1(1) of the Revenue Management Implementation Regulations ^{footnote 2} is repealed.

(2) The definitions financial institution and law-making delegate in subsection 1(1) of the Regulations are replaced by the following:

financial institution

means the First Nations Finance Authority or any person — including a bank, credit union or caisse populaire — or trustee with which local revenues or other revenues are deposited or by or through which local revenues or other revenues are invested. (institution financière)

law-making delegate

means a person or body to which the council of a First Nation has, under paragraph 5(1)(f), 8.1(1)(b) or 9(1)(b) of the Act, delegated any of the council’s powers to make laws. (délégataire)

(3) The portion of the definition third-party local services agreement in subsection 1(1) of the Regulations before paragraph (a) is replaced by the following:

third-party local services agreement

means an agreement, lease, instrument or act granting a right-of-way or easement or real servitude, permit or other instrument or act to which a First Nation or His Majesty in right of Canada is a party

(4) Subsection 1(1) of the Regulations is amended by adding the following in alphabetical order:

local services capital assets

means capital assets that are, or are intended to be, used wholly or in part for the delivery on reserve lands of programs and services that are paid for wholly or in part out of local revenues. (immobilisations destinées à la prestation de services locaux)

other revenues capital assets

means capital assets that are, or are intended to be,

• (a) used for generating other revenues; or
• (b) used wholly or in part for the delivery of programs and services that are paid for wholly or in part out of other revenues. (immobilisations des autres recettes)

7 Subsection 2(1) of the Regulations is replaced by the following:

Appointment

2 (1) Subject to subsection (2) and section 3, if the Board requires a First Nation to enter into a co-management arrangement or assumes third-party management and appoints a person who is not an employee of the Board to act as an agent or mandatary of the Board for the purposes of the co-management arrangement or third-party management, the scope of the authority of the person shall be set out in writing and a copy provided to the council of the First Nation without delay.

8 Paragraphs 3(a) to (c) of the Regulations are replaced by the following:

• (a) give an order under paragraph 52(2)(e) or 52.1(2)(e) of the Act;
• (b) act in the place of the council of the First Nation under paragraph 53(2)(a) or 53.1(2)(a) of the Act; or
• (c) assign interests or rights under paragraph 53(2)(c) of the Act.

9 (1) The portion of subsection 5(1) of the Regulations before paragraph (a) is replaced by the following:

Records and documents — local revenues

5 (1) At any time after receipt of a notice under subsection 52(1) or 53(1) of the Act and while a co-management arrangement in respect of the First Nation’s local revenues or third-party management of its local revenues is in effect, the First Nation shall, without delay, on receipt of an oral or written request, give the Board or a manager access to, and copies — or the opportunity to make copies — of, all records and documents respecting the First Nation’s local revenue laws and their administration, including records and documents relating to

(2) Paragraph 5(1)(e) of the Regulations is replaced by the following:

• (e) reserve lands, or interests or rights in reserve lands, that are subject to local revenue laws;

(3) Paragraph 5(1)(m) of the English version of the Regulations is replaced by the following:

• (m) programs and services that are paid for wholly or in part out of local revenues;

10 The Regulations are amended by adding the following after section 5:

Records and documents — other revenues

5.1 (1) At any time after receipt of a notice under subsection 52.1(1) or 53.1(1) of the Act and while a co-management arrangement in respect of the First Nation’s other revenues or third-party management of its other revenues is in effect, the First Nation shall, without delay, on receipt of an oral or written request, give the Board or a manager access to, and copies — or the opportunity to make copies — of, all records and documents respecting the laws of the First Nation made under section 8.1 of the Act and their administration, including records and documents relating to

• (a) communications between the First Nation and the First Nations Finance Authority or the Minister;
• (b) budgets for the expenditure of other revenues;
• (c) reserve lands, or interests or rights in reserve lands, that are subject to laws made under section 8.1 of the Act;
• (d) the First Nation’s other revenues and all expenditures of other revenues and, if applicable, the accounting information required under section 14.1 of the Act;
• (e) any deposit, loan or investment, or any other agreement with a financial institution, relating to other revenues or any secured revenues trust account;
• (f) the enforcement of the laws made under section 8.1 of the Act;
• (g) agreements and communications between the First Nation and the First Nations Finance Authority, including those related to the borrowing of money from the Authority;
• (h) agreements and communications between the First Nation and any law-making delegate relating to the delegation of law-making powers;
• (i) programs and services that are paid for wholly or in part out of other revenues;
• (j) other revenues capital assets;
• (k) any other agreements, obligations, commitments or other arrangements under which the First Nation is or may become obligated to expend other revenues or is or may become entitled to receive other revenues;
• (l) council meetings or membership meetings at which the laws made under section 8.1 of the Act are discussed;
• (m) employment contracts of persons involved in the making or administration of any law made under section 8.1 of the Act or the management of other revenues; and
• (n) drafts of records or documents referred to in any of paragraphs (a) to (m).

Copies

(2) A First Nation shall, without delay, on receipt of any records or documents referred to in subsection (1) that are produced or obtained while a co-management arrangement or third-party management is in effect, provide a copy of the records or documents to the Board or a manager.

11 (1) The portion of subsection 6(1) of the Regulations before paragraph (a) is replaced by the following:

Request for copies — local revenues

6 (1) At any time after the Board gives a notice under subsection 52(1) or 53(1) of the Act and while a co-management arrangement in respect of the First Nation’s local revenues or third-party management of its local revenues is in effect, the Board or a manager may, either orally or in writing, request copies of records or documents referred to in section 5 from any person who possesses or has control over them, including

(2) Subparagraphs 6(1)(h)(i) and (ii) of the Regulations are replaced by the following:

• (i) the Reserve Land Register, the Surrendered and Designated Lands Register, the First Nation Lands Register, as defined in subsection 2(2) of the Framework Agreement on First Nation Land Management Act, or any register maintained by or for the First Nation in which reserve lands, or interests or rights in reserve lands, are recorded, or
• (ii) any provincial land registry in which reserve lands, or interests or rights in reserve lands, are recorded.

(3) Subsection 6(2) of the Regulations is replaced by the following:

Assistance

(2) The First Nation shall, on the request of the Board or manager, provide the Board or manager with any assistance that is necessary to enable them to obtain copies of records or documents under subsection (1).

12 The Regulations are amended by adding the following after section 6:

Request for copies — other revenues

6.1 (1) At any time after the Board gives a notice under subsection 52.1(1) or 53.1(1) of the Act and while a co-management arrangement in respect of the First Nation’s other revenues or third-party management of its other revenues is in effect, the Board or a manager may, either orally or in writing, request copies of records or documents referred to in section 5.1 from any person who possesses or has control over them, including

• (a) the First Nations Finance Authority;
• (b) a financial institution;
• (c) a law-making delegate;
• (d) any person who manages or controls other revenues capital assets;
• (e) the First Nation’s auditor; and
• (f) the person in charge of
  • (i) the Reserve Land Register, the Surrendered and Designated Lands Register, the First Nation Lands Register, as defined in subsection 2(2) of the Framework Agreement on First Nation Land Management Act, or any register maintained by or for the First Nation in which reserve lands, or interests or rights in reserve lands, are recorded, or
  • (ii) any provincial land registry in which reserve lands, or interests or rights in reserve lands, are recorded.

Assistance

(2) The First Nation shall, on the request of the Board or manager, provide the Board or manager with any assistance that is necessary to enable them to obtain copies of records or documents under subsection (1).

13 (1) Subsection 7(1) of the Regulations is replaced by the following:

Explanations

7 (1) If a First Nation is required to provide records or documents under section 5 or 5.1, a councillor, employee, law-making delegate or representative of the First Nation shall, at the request of the Board or a manager, made orally or in writing, provide an explanation of the records or documents.

(2) Subsection 7(2) of the English version of the Regulations is replaced by the following:

Requirement to obtain information

(2) If a councillor, employee, law-making delegate or representative of the First Nation is not able to provide the requested explanation, they shall, without delay, make every effort to obtain any information, records or documents that are necessary to provide the explanation.

14 Subsection 10(1) of the Regulations is replaced by the following:

Copy of order

10 (1) If an order is made under paragraph 52(2)(e) or 52.1(2)(e) of the Act requiring that cheques be co-signed by a manager, the Board or the manager shall provide a copy of the order to each financial institution with which the First Nation has any ongoing financial arrangements.

15 Subsection 11(1) of the Regulations is replaced by the following:

Notice to financial institutions

11 (1) If the Board assumes third-party management, the Board or a manager shall provide, to each financial institution with which the First Nation has any ongoing financial arrangements, a copy of the notice of assumption of third-party management given by the Board to the council of the First Nation.

16 Section 12 of the Regulations is replaced by the following:

Application of Act and regulations to Board

12 For greater certainty, nothing in these Regulations exempts the Board, while acting in the place of the council of a First Nation under paragraph 53(2)(a) or (b) or 53.1(2)(a) or (b) of the Act, from complying with any of the requirements applicable to the council of the First Nation under the Act and any regulations made under it.

17 Paragraph 13(a) of the Regulations is replaced by the following:

• (a) approving a financial administration law in respect of the First Nation made by its council under subsection 9(1) of the Act or made by the Board acting in the place of the council under paragraph 53(2)(a) or 53.1(2)(a) of the Act; or

18 Section 15 of the Regulations is replaced by the following:

Cooperative management — local revenues

15 (1) If the Board has required a First Nation to enter into a co-management arrangement in respect of its local revenues or has assumed third-party management of its local revenues, the Board shall work cooperatively with the council of the First Nation, the tax administrator and any employee of the First Nation designated by the council to enable the First Nation to resume full responsibility for the management, control and administration of its local revenues.

Cooperative management — other revenues

(1.1) If the Board has required a First Nation to enter into a co-management arrangement in respect of its other revenues or has assumed third-party management of its other revenues, the Board shall work cooperatively with the council of the First Nation and any employee of the First Nation designated by the council to enable the First Nation to resume full responsibility for the management, control and administration of its other revenues.

Interpretation

(2) Subsections (1) and (1.1) do not limit or otherwise affect the powers and discretion of the Board in respect of the implementation of a co-management arrangement or of third-party management.

19 Subsection 16(1) of the Regulations is replaced by the following:

Remedial management plan — local revenues

16 (1) Within 60 days after requiring a First Nation to enter into a co-management arrangement in respect of the First Nation’s local revenues or assuming third-party management of its local revenues, the Board or a manager shall review the available information relating to the First Nation’s local revenues and to its local revenue laws and provide the council of the First Nation with a remedial management plan to address the matters that contributed to the assumption of co-management or third-party management.

Remedial management plan — other revenues

(1.1) Within 60 days after requiring a First Nation to enter into a co-management arrangement in respect of the First Nation’s other revenues or assuming third-party management of its other revenues, the Board or a manager shall review the available information relating to the First Nation’s other revenues and to its laws made under section 8.1 of the Act and provide the council of the First Nation with a remedial management plan to address the matters that contributed to the assumption of co-management or third-party management.

20 Section 17 of the Regulations is replaced by the following:

Report

17 The Board shall provide a written report of the results of each review required under subsection 53(5) or 53.1(7) of the Act.

21 Paragraphs 18(1)(b) to (d) of the Regulations are replaced by the following:

• (b) a summary or copy of all laws made by the Board acting in the place of the council of the First Nation under paragraph 53(2)(a) or 53.1(2)(a) of the Act;
• (c) a summary or copy of all agreements entered into or terminated by the Board in the course of implementing third-party management;
• (d) in the case of third-party management of the First Nation’s local revenues, a copy of the most recent audited financial report or the audited annual financial statements, as the case may be, that were made available to the Board under subsection 14(2) of the Act, and a statement of the revenues deposited to, and any expenditures from, the local revenue account, from the last day covered by the financial report or financial statements, as the case may be, to the most recent date possible;
• (d.1) in the case of third-party management of the First Nation’s other revenues, a copy of the most recent accounting information that was provided to the Board under section 14.1 of the Act, if applicable, and a statement of any deposits and expenditures of other revenues, from the last day covered by the accounting information to the most recent date possible; and

22 (1) Subsection 20(3) of the Regulations is replaced by the following:

Final invoice

(3) After termination of a co-management arrangement or third-party management, the Board shall send a final invoice to the First Nation within nine months after the date on which the notice of termination is given under subsection 52(3), 52.1(3), 53(6) or 53.1(8) of the Act, as the case may be.

(2) Subsection 20(5) of the Regulations is replaced by the following:

Debt

(5) The First Nation shall pay to the Board the amounts that have been invoiced under this section within 30 days after the day on which each invoice is received or within any longer period that is agreed to by the Board and the First Nation.

23 The Regulations are amended by adding the following after section 20:

Funding of required interventions

20.1 (1) If the following conditions are met, the Board shall give notice, in writing, to the First Nations Finance Authority, the First Nations Tax Commission and the Minister of the Board’s intention to send the Authority any invoices referred to in section 20 that have not been paid by the First Nation before or on the day on which they are due:

• (a) the Board incurred the fees and disbursements set out in the invoices in the course of implementing a co-management arrangement or third-party management that was required by a notice referred to in subsection 86(4) or (5) of the Act;
• (b) the Board is of the opinion that the First Nation does not have funds available to pay the invoices and that, if it were required to do so, it would go further into debt without any reasonable ability to discharge its debts; and
• (c) the Board does not have funds available to pay the invoices.

Invoices to Authority

(2) The Board may send the First Nations Finance Authority the invoices referred to in subsection (1) no earlier than 30 days after the day on which the notice is given to the Authority.

Payment of invoices

(3) Unless the First Nations Finance Authority receives a notice under subsection (4), it shall pay to the Board the amounts invoiced within 30 days after the day on which the invoices are received.

Change of circumstances

(4) If a condition set out in paragraph (1)(b) or (c) ceases to be met after the notice referred to in subsection (1) is given, the Board shall give notice of that fact in writing to the First Nations Finance Authority, the First Nations Tax Commission and the Minister.

24 (1) Paragraphs 21(1)(a) to (f) of the Regulations are replaced by the following:

• (a) a notice given to the council of a First Nation under subsection 52(1) or (3) or 52.1(1) or (3) of the Act;
• (b) an order made under paragraph 52(2)(e) or 52.1(2)(e) of the Act and any revocation of the order;
• (c) a notice given to the First Nations Finance Authority and the First Nations Tax Commission under subsection 52(5) or 52.1(5) of the Act;
• (d) a notice given to the council of a First Nation under subsection 53(1) or (6) or 53.1(1) or (8) of the Act;
• (e) a notice given to the Minister under subsection 53(1) or 53.1(1) of the Act; and
• (f) a notice given to the First Nations Finance Authority and the First Nations Tax Commission under subsection 53(8) or 53.1(10) of the Act.

(2) Subsection 21(2) of the Regulations is replaced by the following:

Copy to Authority and Commission

(1.1) The Board shall provide the First Nations Finance Authority and the First Nations Tax Commission with a copy of a notice given to the council of a First Nation under subsection 52(1) or (3), 52.1(1) or (3), 53(1) or (6) or 53.1(1) or (8) of the Act.

Copy to the Minister

(2) The Board shall provide the Minister with a copy of a notice given to the council of a First Nation under subsection 53(6) or 53.1(8) of the Act.

25 Section 22 of the Regulations is repealed.

26 (1) Subparagraph 23(2)(a)(i) of the Regulations is replaced by the following:

• (i) an employee of the Board or a member of the board of directors of the Board, at the office of the Board at 100 Park Royal South, Suite 300, West Vancouver, British Columbia, V7T 1A2,

(2) Subparagraphs 23(2)(a)(ii) and (iii) of the English version of the Regulations are replaced by the following:

• (ii) an employee of the Board in any other location, if the employee is acting in the course of their duties, or
• (iii) the manager, if the manager is acting in the course of their duties;

27 The Regulations are amended by replacing “local services capital infrastructure” with “local services capital assets” in the following provisions:

• (a) paragraph 5(1)(o); and
• (b) paragraph 6(1)(f).

28 The English version of the Regulations is amended by replacing “first”, “nation” and “nation’s” with “First”, “Nation” and “Nation’s”, respectively, in the following provisions:

• (a) the definition tax administrator in subsection 1(1);
• (b) section 4;
• (c) paragraphs 5(1)(a), (f), (j), (k) and (p) and subsection 5(2);
• (d) paragraph 6(1)(g);
• (e) the portion of section 8 before paragraph (b) and paragraph 8(c);
• (f) section 9;
• (g) the portion of section 13 before paragraph (a) and paragraph 13(b);
• (h) the portion of subsection 18(1) before paragraph (a) and the portion of subsection 18(2) before paragraph (a);
• (i) subsection 19(1);
• (j) subsections 20(2) and (4); and
• (k) paragraph 23(2)(b).

Repeal

29 The Financing Secured by Other Revenues Regulations ^{footnote 3} are repealed.

Coming into Force

30 These Regulations come into force on the day on which section 32 of An Act to amend the First Nations Fiscal Management Act, to make consequential amendments to other Acts, and to make a clarification relating to another Act, chapter 16 of the Statutes of Canada, 2023, comes into force, but if they are registered after that day, they come into force on the day on which they are registered.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

An Act to amend the First Nations Fiscal Management Act, to make consequential amendments to other Acts, and to make a clarification relating to another Act (former Bill C-45) received royal assent on June 20, 2023.

The First Nations Fiscal Management Act (FNFMA or the Act) was amended by former Bill C-45 in 2023 to help address economic gaps that many First Nations communities in Canada are experiencing. This was done by expanding and modernizing the mandates of the First Nations Tax Commission and the First Nations Financial Management Board to better reflect their current and future activities, and by establishing a First Nations Infrastructure Institute that would provide First Nations and other interested Indigenous groups with tools and support to implement and manage their infrastructure.

The amendments also aimed to improve the functioning of the Act, including by

• integrating the content of the Financing Secured by Other Revenues Regulations;
• combining into a single fund the debt reserve fund for financing secured by property tax revenues and the debt reserve fund for financing secured by other revenues, and
• simplifying the way certain Indigenous groups participate in pooled borrowing.

To support full implementation of the legislative changes, amendments to the Revenue Management Implementation Regulations and the Debt Reserve Funds Replenishment Regulations are needed, as well as the repeal of the Financing Secured by Other Revenues Regulations.

While many amendments under former Bill C-45 came into force upon royal assent, several provisions will come into force by Order in Council on January 6, 2025, to align with the coming into force of the regulatory amendments.

Additional amendments to the Revenue Management Implementation Regulations are also required to facilitate the intervention process under the Act, by updating certain terminology (that is, to encompass the broader and evolving range of local services and projects eligible for financing under the Act), and by clarifying who would bear the costs should an intervention be needed. Amendments to the Debt Reserve Funds Replenishment Regulations are also needed to clarify the determination of the amounts borrowing members are called upon for replenishment of the fund.

Finally, technical amendments to the Debt Reserve Funds Replenishment Regulations and the Revenue Management Implementation Regulations are required in order to ensure that the regulations function equivalently in both civil and common law jurisdictions. As well, minor technical amendments to the Revenue Management Implementation Regulations are also required to update references and to harmonize terms with those used in the enabling statute.

Background

The First Nations Fiscal Management Act received royal assent in 2005 and has since been amended on several occasions. It is an innovative, First Nations-led and -designed legislative and institutional framework that provides First Nations with support and tools to strengthen their communities and build their economies. The Act is an optional regime under which First Nation communities can choose whether to participate in the taxing, financial management, and borrowing options that have been created under the Act and its regulations. It allows First Nations to exercise jurisdiction over fiscal matters, including financial management, local revenue generation, and local services infrastructure. The Act also provides signatory First Nations with access to capital through the First Nations Finance Authority, which issues bonds on the open market in a manner similar to what is currently done by federal, provincial, and municipal governments.

There are currently more than 350 First Nations who have opted into the regime. Once a First Nation is scheduled to the Act by Ministerial Order, they can work with the institutions to ensure that their fiscal and financial governance, as well as their finances, are sufficient to participate in certain aspects of the Act, such as raising property taxes and participating in the pooled borrowing bond.

The Act has established four Indigenous-led institutions to administer the regime and provide support to First Nations: the First Nations Financial Management Board (FNFMB), the First Nations Tax Commission (FNTC), the First Nations Infrastructure Institute (FNII) and First Nations Finance Authority (FNFA). These institutions work together and in collaboration with the federal government and other First Nation partners to improve the ability of First Nation governments to address the social and economic well-being of their communities while providing the practical tools available to other governments for modern fiscal management.

The First Nations Fiscal Management Act and these Indigenous-led institutions have worked collaboratively for many years, and the regulations under the Act are the result of this collaboration, of shifting economic priorities and of community needs. The relationship between the institutions and the Government of Canada is founded upon mutual respect and collaboration. The institutions have long-standing, positive relationships with the Government of Canada, founded on shared governance practices and strong economic participation. Both the Government of Canada and the institutions are focused on improving the ability of First Nation governments to address the social and economic well-being of their communities, while providing the practical tools available to Indigenous governments for modern fiscal management.

In 2018, the First Nations Fiscal Management Act was amended to improve the functioning of the regime. As part of this suite of amendments, the term “capital assets” was changed to include “capital infrastructure” to better reflect the full breadth of projects eligible for financing through the FNFA, with the intent of updating the regulations over time to bring them into alignment with this change.

In June 2023, former Bill C-45 received royal assent, amending the FNFMA to further improve the functioning of the regime. Many of the amendments came into force immediately upon royal assent; however, others were postponed in order to align with amendments to several of the regulations under the Act. These recent amendments to the Act and associated regulatory changes will allow for new avenues of revenue management, borrowing and economic participation for First Nations communities under the FNFMA. These changes have not only been led by the Indigenous institutions but are also supported by the First Nations communities that operate within the Act.

Financing Secured by Other Revenues Regulations

When the Act was first put in place, it was intended to support pooled borrowing using property tax revenues only. To date, no First Nations have used their property tax revenues to participate in pooled borrowing, and therefore the Financing Secured by Other Revenues Regulations were developed to adapt the Act to allow First Nations to use other types of revenues (such as oil and gas royalties, revenues from leases or permits, transfers from other levels of government, and other revenues payable to the First Nation) to secure borrowing. The 2023 legislative amendments included provisions to move the contents of the Financing Secured by Other Revenues Regulations into the Act itself, with the intention of making everything easier to understand as all of the provisions would now be in one place and reading the pieces together would provide clarity.

Debt Reserve Funds Replenishment Regulations

The Act contains several measures that serve to mitigate some of the risks inherent in pooled borrowing. For instance, First Nations who wish to borrow money through the pooled borrowing provisions of the Act must have a certain percentage of their total loan amount held in a debt reserve fund (DRF) that can be used by the FNFA to satisfy unfulfilled obligations of borrowing members. While the FNFA may call upon its borrowing members to replenish the DRF anytime its balance is reduced by any amount, paragraph 84(5)(b) requires that the DRF must be replenished should payments reduce its balance by 50% or more. No First Nation has ever defaulted on their loans through the FNFA and thus the DRF has never had to be used and replenished in this way. The amendments made to the Act in 2023 combined the debt reserve fund for financing secured by property tax revenues and the debt reserve fund for financing secured by other revenues into a single debt reserve fund.

Revenue Management Implementation Regulations

In the unlikely event that a First Nation defaults on its loan through the FNFA, or is at risk of doing so, the FNFMB can enter into a co-management or third-party management arrangement, an “intervention,” whereby the FNFMB takes control of certain aspects of the First Nation’s financial governance in order to help the First Nation recover. The Revenue Management Implementation Regulations set out how the FNFMB is to conduct itself when called upon to enter into a co-management or third-party management arrangement with a First Nation. There has never been such an intervention triggered under the regulations. While the policy of the FNFMB is that the costs of an intervention are to be borne first by the First Nation and second by the FNFMB, currently neither the FNFMA nor the regulations specify who funds the intervention.

Objective

The objectives of these regulatory amendments are

• to ensure the function and operation of the regime become seamless and more consistent for those who use it;
• to allow the recent legislative amendments to be fully implemented, ensuring there are no gaps between the legislation and the amendments to the regulations;
• to clarify the manner by which the amount payable by borrowing First Nations to replenish the debt reserve fund is calculated and the manner by which they receive notice that the debt reserve fund must be replenished;
• to set out the manner by which a reduction in the balance of the debt reserve fund is determined, for the purposes of paragraphs 84(5)(a) and (b) of the Act, which describe when the First Nations Finance Authority can call upon its borrowing members to replenish the debt reserve fund;
• to provide an additional option for covering the costs of any interventions triggered under subsection 86(4) of the First Nations Fiscal Management Act;
• to provide the means for FNFMB to obtain the documents and information it needs to discharge its intervention obligations;
• to make minor technical amendments to update references and to harmonize certain terms with those in the enabling statute; and
• to ensure that the regulations function in an equivalent manner in all jurisdictions across Canada.

Description

Financing Secured by Other Revenues Regulations

The Financing Secured by Other Revenues Regulations are repealed, as the content of the regulations has been integrated into the First Nations Fiscal Management Act and the Revenue Management Implementation Regulations.

Revenue Management Implementation Regulations

To reflect changes made to the First Nations Fiscal Management Act in 2018, the defined term “local services capital infrastructure” is replaced with a new defined term “local services capital assets.”

To ensure that the regime continues to work properly, the amendments

• integrate sections 24 to 28 of the Financing Secured by Other Revenues Regulations into the Revenue Management Implementation Regulations, and
• add a new defined term “other revenues capital assets.”

To ensure that the FNFMB is adequately compensated when it is asked to intervene in a First Nation’s finances, the amendments clarify and specify that, in cases where neither the First Nation nor the FNFMB have adequate funds to fund such an intervention, the FNFA can be invoiced for the Board’s fees and disbursements.

To ensure that the regulations function in an equivalent manner in both common and civil law jurisdictions, technical amendments are made to reflect bijural drafting conventions. For instance, the definition of “third-party local services agreement” has been amended to include the term “easement or real servitude” in the English version instead of just “easement,” in order to better reflect the concept in both civil and common law. In French, the term has not changed as the concept of “servitude” in French is the appropriate term for both civil and common law.

Technical amendments are also being made to update references and to harmonize terms with those in the enabling statute, for instance, capitalizing “First Nation” in the English version and updating references to the location of the FNFMB.

Debt Reserve Funds Replenishment Regulations

The amendments to the Debt Reserve Funds Replenishment Regulations clarify the replenishment process of the debt reserve fund (DRF) such that

• For the purposes of paragraphs 84(5)(a) and (b) of the Act, which set out when the FNFA may call upon its borrowing members to replenish the DRF, the reduction in the balance of the DRF is based on the balance of the fund immediately before the first of the payments were made (not taking into account any payments for which the FNFA previously required replenishment of the fund).
• Only borrowing members who have an outstanding loan will receive a notice of the need to replenish the DRF. In addition, the notice will include the actual demand for payment.
• In the event that the DRF needs to be replenished, the share that each borrowing member has to pay to replenish it will be proportionate to the amount outstanding on the borrowing member’s loan.
• For greater certainty, the regulations state that despite any payment that is required to be paid to replenish the DRF, which could be all or a portion of the payments that had been defaulted on, defaulting members remain liable for the full amount of their debts as set out in their individual borrowing agreement with the FNFA.

Technical amendments are also made to reflect bijural drafting conventions.

Regulatory development

Consultation

The four Indigenous-led institutions (the First Nations Financial Management Board, the First Nations Tax Commission, the First Nations Finance Authority, and the Development Board of the First Nations Infrastructure Institute) under the First Nations Fiscal Management Act have proposed the amendments as part of their ongoing commitment to improving the operation of the regime and owing to their in-depth expertise in its functions and powers.

These Indigenous-led institutions have the most direct experience with the operation of the regime and share a common goal of ensuring that Indigenous communities have equal access to participation in the economy, fiscal management, governance, infrastructure, and capital. The institutions have a wealth of knowledge and experience, best practices, and strong relationships with First Nations communities that are part of the FNFMA regime. The institutions are in regular communication with the 350+ First Nations scheduled to the Act and have assisted Crown-Indigenous Relations and Northern Affairs Canada in reaching out to these First Nations on many occasions. These Indigenous-led institutions are well respected by communities and represent an array of voices from across Canada.

These regulatory amendments are required to support the implementation of the recent amendments to the First Nations Fiscal Management Act, which received royal assent in June 2023. Consultation on these amendments were completed during the engagement on the legislative amendments and fulfilled the expectations for adequate collaboration.

Given the ongoing communication led by the institutions and the consultation undertaken towards amendments to the Act, these regulatory amendments were not prepublished in the Canada Gazette, Part I.

Modern treaty obligations and Indigenous engagement and consultation

The First Nations Fiscal Management Act and its regulations are a regime designed to support Indigenous groups and communities as they take up powers in the areas of fiscal management, governance, infrastructure, and access to capital. Crown-Indigenous Relations and Northern Affairs Canada has a positive relationship with the FNFMA institutions and the communities that they support. The legislative amendments made in 2023, as well as these regulatory changes were brought forth by the Indigenous-led institutions in response to community needs and gaps in economic participation. Both the Government of Canada and the regime are focused on improving the ability of First Nation governments to address the social and economic well-being of their communities, while providing the practical tools available to Indigenous governments for modern fiscal management.

While these regulatory amendments will positively impact the communities operating within the FNFMA, an assessment was conducted on this initiative and it did not indicate any modern treaty implications, since First Nations, including modern treaty holders, must opt into the pooled borrowing regime under the First Nations Fiscal Management Act. As well, these regulatory amendments do not impact the self-governing and modern treaty First Nations’ existing fiscal powers established by their treaties.

This initiative aligns with Canada’s commitment to working with Indigenous communities on a nation-to-nation basis and to supporting the broader shared objectives of modern treaties, especially the promotion of social, economic, and cultural well-being of Indigenous peoples, and contributing to the development of prosperous and sustainable Indigenous communities in Canada.

Significant consultation was undertaken with First Nations during the development of the amendments to the Act. Overall, the feedback received was positive, with First Nations supporting the integration of the Financing Secured by Other Revenues Regulations into the Act, along with making the necessary consequential regulatory amendments. First Nations reported that they wished these amendments to come into force as soon as possible as hindered economic participation is a long-standing issue communities face and the legislative amendments, along with these regulatory amendments, will help address some of these issues.

Instrument choice

The federal government has committed to supporting stronger Indigenous communities, Indigenous institution-building and economic development through the First Nations Fiscal Management Act and its associated regulations.

The federal government and First Nations partners agree that a modern and efficient opt-in legislative and regulatory regime will support First Nations in exercising their jurisdiction in key areas of fiscal and financial governance. The regulatory amendments are necessary to support full implementation of the 2023 legislative amendments. Non-regulatory options were not considered.

Regulatory analysis

Benefits and costs

Benefits

Overall, the integration of the Financing Secured by Other Revenues Regulations into the Act will be a benefit to stakeholders, as having all the provisions in one place will make the regime easier to understand.

Similarly, amending the Revenue Management Implementation Regulations to specify that the FNFA may be asked to cover the costs of an intervention should the First Nations and the FNFMB be unable to pay is a benefit to stakeholders, as it supports an important feature of the regime, namely, the ability of the FNFMB to intervene and reduce the risk of a First Nation defaulting on a loan.

There are potential benefits associated with the changes to the Debt Reserve Funds Replenishment Regulations. First, by specifying that only First Nations with outstanding loans can be called upon to replenish the debt reserve fund, First Nations who have paid off their loans will benefit, as they could no longer be called upon to replenish the fund. However, it is very difficult to estimate the associated benefit, as the amount the First Nation would have to pay is calculated based on a formula set out in the regulation that includes variables that cannot be known in advance, such as the current shortfall in the fund and the amount owed by the defaulting members.

Second, First Nations with outstanding loans will also benefit, given the regulatory changes specify that the notice sent to the councils of borrowing members is to both indicate the amount of shortfall in the fund and require the borrowing members to replenish the fund. Previously, some First Nations could have theoretically paid off their loans in between receiving the notice of intention and the actual demand for payment, forcing a recalculation of the outstanding balance and required replenishment payments for the remaining borrowing members.

Costs

The institutions of the Act, in particular the FNFA and the FNTC, will incur additional costs in order to adapt their operations, standards and sample laws to reflect the changes to the regulations.

There could be a potential cost to First Nations associated with a change to the Debt Reserve Funds Replenishment Regulations. The regulation has been amended to specify that only First Nations with outstanding loans will be called upon to replenish the debt reserve fund. It is important to note that the debt reserve fund has never been used, as no First Nation has ever defaulted on a loan through the FNFA. There will be no extra costs to most stakeholders, as the operation of the regime will not change. There will be minor costs to the institutions as they update their law templates, outreach materials and internal documents to reflect the changes.

There are potential costs to the FNFA associated with changes to the Revenue Management Implementation Regulations. The amended regulations specify that, in certain cases of FNFMB intervention in a First Nation’s financial management under subsection 86(4) of the Act, the FNFA could be called on to cover the costs associated with the intervention should both the First Nation and the FNFMB be unable to pay.

The risk that First Nations may be unable to pay is extremely low. After nearly 20 years in operation, there is no single case where the FNFMB had to intervene, nor has any First Nation defaulted on its loan. There are also institutions such as the FNFMB in place to help anticipate and manage the risks. Consequently, the costs are expected to be minimal. Any costs incurred by the institutions or by First Nations are, individually and collectively, anticipated to be less than $1 million annually, and/or less than $10 million over 10 years. No additional costs to Canadians, government, or businesses are anticipated.

Small business lens

The small business lens does not apply, as there are no associated costs on small businesses.

One-for-one rule

The one-for-one rule applies since a regulatory title is repealed and is considered a title out. The regulatory provisions that have been moved into other regulatory and statutory instruments relate to First Nation financing and there are no incremental impacts on businesses or administrative burden costs associated.

Regulatory cooperation and alignment

Overall, the regulatory amendments will have no impact on international agreements or obligations.

The changes support the United Nations Declaration on the Rights of Indigenous Peoples, in particular the objectives of articles 20, 21 and 23, by ensuring the efficient operation of the First Nations Fiscal Management Act regime and its Indigenous-led institutions and by providing First Nations with the tools they need to take up jurisdiction in the areas of fiscal and financial governance and local revenues.

The Government of Canada has signalled its focus on building a new fiscal relationship with First Nations that reflects the principles of a nation-to-nation relationship, as well as its support of the United Nations Declaration on the Rights of Indigenous Peoples. Article 4 of the Declaration states that Indigenous peoples have the right to “ … ways and means for financing their autonomous functions.” A robust taxation regime can assist in financing the governance function of First Nations.

These amendments align with the Minister of Crown-Indigenous Relations’ mandate letter and the 2021 Speech from the Throne by advancing self-determination and by providing revenue sources and fiscal and financial tools that can help close socio-economic gaps. The amendments further allow for Indigenous participation in the larger economy.

Effects on the environment

In accordance with the Cabinet Directive on the Environmental Assessment of Policy, Plan and Program Proposals, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

As has been the case since the establishment of the First Nations Fiscal Management Act regime, performance and progress of the institutions established by the Act are monitored through regular communication between Crown-Indigenous Relations and Northern Affairs Canada and the Indigenous-led institutions, regular face-to-face meetings, and annual plans and reports submitted to the Minister. In addition, the program (including the funding provided to the institutions) is subject to the Department’s ongoing five-year evaluations and audits. The programs of the First Nations Fiscal Management Act are designed to effect change at a governmental level by supporting First Nations governments to establish modern, robust taxation regimes, establish good financial governance practices, and to access capital at preferred rates.

For the purposes of a gender-based analysis plus (GBA+) assessment, the information collected through these reports, plans, and meetings is provided at a community or institutional level, as is appropriate for a government-level program. To date, no data disaggregated by such factors as gender or age have been collected from the communities participating in the First Nations Fiscal Management Act. In order to complete the GBA+ assessment, high-level program statistics were reviewed, as well as academic and grey literature to determine the potential impact of the good fiscal governance practices fostered by the FNFMA institutions on diverse groups of people.

The following analysis will examine the potential impact on diverse groups of people through the changes to the various regulations under the First Nations Fiscal Management Act. A full GBA+ assessment of the regime itself is beyond the scope of this report. Specifically, the analysis focuses on the links between taxation, fiscal and governance capacity, and community infrastructure and services.

Fiscal and governance capacity

In the report First Nations Women and Governance: A Study of Custom and Innovation among Lake Babine Nation Women (Fiske, Newell, & George, 2001), the authors conducted interviews with women from the community on their experiences with governance and areas for recommendations. Among other issues, the respondents noted the need for fiscal accountability to community members and recommended that a “First Nation needs to establish fiscal regulations that clarify accountability of the council and administration to members and provide transparency of procedures.” The First Nations Fiscal Management Act regime’s legal framework, capacity-building institutions, and the standards, regulations, and laws were guided by these very principles of accountability and transparency.

Provision of community services and community infrastructure

It is well known that there is an infrastructure deficit on reserve. It has been estimated that the current infrastructure deficit on reserve will require anywhere between $30 billion (Indigenous Services Canada’s estimate in 2018) and $349.2 billion (Assembly of First Nations, 2023). The First Nations Fiscal Management Act provides First Nations governments with access to an efficient and effective taxation framework similar to those available to provincial and municipal governments.

Taxation systems established under the First Nations Fiscal Management Act must spend the tax revenues collected on the provision of local services and infrastructure. This can include water and sewer services, police and fire protection, garbage collection, road and lighting improvements, or parks, recreation and cultural facilities. Since 2008, First Nations taxing under the Act have raised over $645.9 million in tax revenues for local services and infrastructure.

Investing revenues in much-needed community infrastructure and services can support better socio-economic outcomes. Research showed that investments in transportation infrastructure can disproportionately benefit women, as they “spend more time and effort on transport (due to household chores such as fetching water and firewood), have less access to public services (including health), face greater safety and security risks while travelling, and have less control over resources…” (International Forum for Rural Transport and Development, n.d.). Improvements in infrastructure quality can also lead to great improvements in the quality of life of some of the most vulnerable populations, including seniors, youth, and people with disabilities (Wellesley Institute, 2012).

Overall, a GBA+ found that the regulations are likely to have an overall positive indirect impact on First Nations people in Canada. Primarily, the regulations will result in net benefits to First Nations communities by providing more options to First Nations wishing to establish an efficient, modern, taxation regime. The revenues raised through taxation and through the efficient collection of delinquent taxes will be spent on community services and infrastructure in First Nations communities.

Implementation, compliance and enforcement, and service standards

The Regulations will come into force at the same time as the remaining legislative amendments to An Act to amend the First Nations Fiscal Management Act, to make consequential amendments to other Acts, and to make a clarification relating to another Act on January 6, 2025.

The institutions of the FNFMA co-developed these regulatory amendments and are ready to implement them. The institutions will develop new templates and sample laws to support First Nations; existing borrowing laws will not need to be updated. Any new borrowing laws will reflect the new provisions. These activities are considered to be part of their core business and as such will require no additional funding. The institutions are aware that there could be some costs associated with these changes and support the changes even with the costs.

Crown-Indigenous Relations and Northern Affairs Canada enjoys a collaborative relationship with the institutions of the FNFMA and will continue to collaborate and engage with them to ensure the efficient and effective implementation of these regulatory changes.

Contact

Andrea Dykstra
Director
Fiscal Policy and Investment Readiness Directorate
Crown-Indigenous Relations and Northern Affairs Canada
10 Wellington Street
Gatineau, Quebec
K1A 0H4
Email: andrea.dykstra@rcaanc-cirnac.gc.ca