Making Your Money Work For You: A primer on changes to the First Nations Fiscal Management Act

By Kaitlin Ritchie

On December 13, 2018, Bill C-86 received Royal Assent, making amendments to two federal pieces of legislation affecting First Nations: the First Nations Fiscal Management Act, and the First Nations Land Management Act.

• The First Nations Fiscal Management Act (“FNFMA”) is legislation that enables those First Nations who choose to “opt-in” to the regime to implement taxation and fiscal management, and to access long term financing to meet their economic development and infrastructure needs. First Nations are now allowed to expand their real property taxing powers beyond what is permitted under section 83 of the Indian Act.
• The First Nations Land Management Act (“FNLMA”) is also “opt-in” legislation: for those First Nations that join, it takes them out of 34 sections of the Indian Act dealing with reserve management. Under the FNLMA, administration of reserve land is transferred to the First Nation, including (with a few exceptions) the authority to enact laws with respect to land, the environment and resources.

What’s been changed?

Changes were made to sections in the two Acts that dealt with the management of “Indian Moneys”. Indian Moneys are “all moneys collected, received or held by Her Majesty for the use and benefit of Indians or Bands”. They include:

• capital moneys, which come from the sale of the First Nation’s reserve lands or non-renewable resources (e.g. oil and gas royalties; proceeds from the sale of timber, gravel, etc.); and
• revenue moneys, which are all band moneys other than capital moneys (e.g. the sale of renewable resources; moneys from on-reserve leases, permits, licenses, fines etc.)

Although these moneys belong to First Nations, they are collected and held by INAC in trust for the First Nations and on their behalf. This is ultimately because title to reserve lands remains with the (federal) Crown. While there are ways that First Nations can collect and/or access their own moneys, these processes are far from being simple, and even when they are used, they don’t put these moneys directly in the hands of First Nations at the moment the money is earned.

While being held by the Crown, this money just sits, and the interest paid by the government of Canada on Indian moneys is well below what it costs First Nations to access financing from conventional sources. The legislative amendments to the two Acts effectively provide ways for First Nations to help their money work for them.

What’s new – highlights:

…in the FNLMA:

• The voting process that’s required to demonstrate community approval for a proposed land code is now less stringent and cumbersome, and more within a community’s control. The default under the Act is that a proposed land code is approved if a majority of eligible voters participating in the vote, vote in favour of the land code. A community also has the ability to fix the minimum percentage of eligible voters required to participate in a vote. This is a shift from the previous version of the FNLMA, which required that at least 25% of eligible voters of a First Nation vote to approve a land code.

This could increase the number of First Nation communities who develop and approve land codes, and thus increase the number of communities that gain control over management of their reserve lands—including the collection and expenditure of their revenue moneys.

• All revenue and capital moneys held, collected, or received by the Crown for First Nations under the FNLMA are no longer “Indian moneys”, and will be transferred to the First Nation. First Nations therefore now have the flexibility to invest this money (e.g. using the First Nation’s Finance Authority’s pooled borrowing mechanism under the FNFMA) to generate more capital, which can go toward pressing matters within their communities, such as the improvement or building of housing, infrastructure, schools and other public works on reserve.  The First Nations Finance Authority pools the borrowing power of member First Nations with real property taxation powers to obtain capital at interest rates lower than they could get on their own, borrows on their behalf, and issues bonds secured by their property tax or other revenues.
• If a First Nation has enacted laws or by-laws regarding the enforcement of laws or by-laws relating to taxation for local purposes on reserve lands, that First Nation can use those enforcement measures to enforce the payment of any amount payable to it under its laws or land code.

…in the FNFMA

• First Nations listed in the schedule to the Act (which includes many First Nations not under the FNLMA) that pass a financial administration law and have it approved by the First Nations Financial Management Board can also have Indian moneys transferred directly to them, after a successful vote by their communities approving that law. Sections 61-69 of the Indian Act – the sections of the Act that deal with the management of Indian moneys – will no longer apply to money paid to a First Nation in accordance with an approved financial administration law.
• First Nations can access certain services offered by the Financial Management Board without being “scheduled” to the First Nations Fiscal Management Act. This service is also available to other listed entities including tribal councils, and not-for-profit organizations providing public services like social welfare r educational services to Aboriginal groups or persons . This will allow the Board to review a “non-scheduled” First Nation’s or other listed entity’s financial management system, financial performance, or laws or by-laws relating to financial administration to determine if they are in compliance with the Board’s standards.  This enables more First Nations to benefit from the provisions of the Act in order to strengthen their financial management systems and give them access to long-term financing.