Canadian Northern Economic Development Agency (CanNor) - 2015-16 Departmental Performance Report

Raison d'être

Contributing to jobs and growth in Canada, the Canadian Northern Economic Development Agency (CanNor) works to develop a diversified, sustainable and dynamic economy across Canada's three territories. It does this by delivering funding programs to Northerners, including Indigenous people, as well as coordinating and facilitating federal departments involved in reviewing major projects across the North through the Northern Projects Management Office (NPMO). It also undertakes research to support the development of evidence-based policies, advocating for Northern economic prosperity and diversification, and collaborating with other federal departments, territorial governments, Indigenous organizations, and industry.

Responsibilities

As the federal government's regional economic development agency for the three northern territories, CanNor is responsible for administering a suite of contribution programs which support investments in economic development opportunities in the North. Investments from these programs, which include the Strategic Investments in Northern Economic Development (SINED) program, the Northern Aboriginal Economic Opportunities Program (NAEOP) and the Northern Adult Basic Education Program (NABEP), can be the impetus to get a business started or expanded. They can also help a community to benefit from upcoming economic opportunities. Investments can support a wide range of studies and projects, from new technologies and capacity building to preparing individuals to enter the workforce. Often, they are a catalyst for other funding efforts, including the territorial governments investing additional funds in support of CanNor funding – a reflection of the importance of partnerships and aligning efforts that is characteristic of working in the North.

CanNor's NPMO provides single-window path-finding and issues management for industry at all stages of resource development. Support is also provided to Indigenous organizations that play a key role in the consideration of these projects. This work often begins during the exploration phase and takes on even greater importance during environmental assessment and regulatory permitting. NPMO coordinates federal regulators to ensure the timeliness, transparency and predictability of regulatory efforts, while overseeing the Crown's Indigenous consultations. CanNor, through NPMO, also partners with communities to foster their readiness to maximize the positive impact of projects, while working collaboratively to minimize and mitigate risks.

The Agency's pan-northern perspective and knowledge of Canada's North are at the core of its efforts to champion the economic interests of the region within and outside the federal government. Complementing its contribution programs and the work of NPMO, the Agency uses its policy and research capacity to examine and assess economic issues and opportunities. Furthermore, with its headquarters in the North (Iqaluit), CanNor offers a unique operational understanding, insight and intelligence to contribute to advancing the Government of Canada's priorities in the territories. The Agency is well-positioned to inform the federal perspective on northern economic development including the challenges and opportunities in the North. For CanNor, success is a function of its knowledge, partnerships, collaboration and networks, all in the interest of positive outcomes for Northerners.

Strategic Outcomes and Program Alignment Architecture

1. Strategic Outcome: Developed and diversified territorial economies that support prosperity for all Northerners.

• 1.1 Program: Economic Development
  • 1.1.1 Sub-Program: Business Development
  • 1.1.2 Sub-Program: Community Development
• 1.2 Program: Policy and Alignment
  • 1.2.1 Sub-Program: Policy and Advocacy
  • 1.2.2 Sub-Program: Coordination and Alignment
• Internal Services

Operating Environment and Risk Analysis

Canada's three territories are home to approximately 119,000 people living across over 40% of Canada's landmass. While the North presents potential and opportunities for economic development, growth and innovation, the northern economy is challenged by a number of factors including its vast and remote geography, harsh climates, lack of infrastructure, connectivity challenges, the cost and access to energy, limited economic diversification, and shortage of skilled labour. This has the potential to constrain economic development opportunities. For example, in the North, the lack of infrastructure can increase capital costs by 15% for diamond mines and up to 2.5 times higher for base metal mines when compared to the rest of Canada.

The territorial economies remain significantly less diversified than other parts of Canada as three sectors alone – mining, quarrying, and oil and gas extraction, construction, and public administration (including health care and educational services) – account for more than 60% of the North's gross domestic product (GDP). The North's natural resource endowment will continue to be the foundation for economic growth. However, declining commodity prices in recent years as well as reduced investments have slowed down the northern mining industry in 2015, leading to a 0.8% decrease of the combined GDP. Over the medium- and long-term, it is expected that resource development will increase again, however building sustainable northern economies will require an increased focus on investments that contribute to economic diversification and ultimately, clean growth. Increased investments in clean technologies will present new economic development opportunities for the North to grow and diversify.

Access to skilled labour poses a significant challenge to supporting key economic sectors. Northern educational achievement rates remain low where on average, nearly a third of the northern population aged 25 to 64 does not possess a certificate, diploma or degree; twice the national average of 13% for Canada. This situation not only reflects an added challenge for businesses, it also prevents Northerners from fully benefiting from economic development opportunities.

These challenges shape CanNor activities and operations, and impact how it delivers on its mandate. Headquartered in Iqaluit, Nunavut, CanNor is a small and decentralized agency with offices in the three territorial capitals and a liaison office in Ottawa. As such, the Agency faces similar labour market and connectivity challenges in its operations.

In November 2015, CanNor was included in the new Innovation, Science and Economic Development (ISED) portfolio. Working collaboratively with the five other RDAs within the portfolio, CanNor aligned its activities with Government of Canada priorities and Ministers' mandate letters, including the development of the Inclusive Innovation Agenda with emphasis on investment in clean technology.

CanNor's key risks and response strategies are presented below.

Strengthening the northern economy by focussing on key economic sectors

Advancing major project development in the North

Excellence in people management

Continue to improve business processes, and program and service delivery

For more information on organizational priorities, see the Ministers' mandate letters.^{Endnote 6}

Financial Statements

The financial highlights presented within this DPR are intended to serve as a general overview of CanNor's financial position and operations and should be read in conjunction with the 2015-16 CanNor Financial Statements, which can be found on the Agency's website^{Endnote 9}.

Financial Statements Highlights

The financial results are shaped by the Agency's programs and internal services that aim to build a strong, diversified, sustainable and dynamic economy for Northerners and Indigenous people, communities and businesses across Canada's three territories, thus contributing to Canada's prosperity.

Total expenses for 2015-16 decreased by $5.6 million compared to 2014-15. Approximately $1 million of this was due to a decrease in operating costs, the majority of which relate to the one-time cost of $620 thousand for leasehold improvements which was incurred in 2014-15. The majority of this decrease is attributed to reduced contribution spending in 2015-16.

Total net liabilities were reduced by $7 million compared to 2014-15, due to an increased disbursement rate for contribution payments, and improved clearing of outstanding old-year liabilities. In 2015-16, approximately $4 million fewer contribution liabilities were established compared to 2014-15 – largely due to the Agency's success in working with recipients to accelerate the issuance of contribution payments. A further $3 million in previous year liabilities was reviewed and identified as no longer required.

Other changes are relatively minor and include changes to non-financial assets such as amortization of leasehold improvements and vehicles.

Description

This program supports economic development in Canada's three territories: Nunavut, Northwest Territories and Yukon. Ensuring that the North is able to participate actively in the economy is essential to Canada's economic growth. Each territory has unique opportunities and challenges that require individual strategies to foster sustainable, competitive and diverse economic development. Through funding support, CanNor strengthens and stimulates the northern economy by taking steps to advance private sector efforts, ranging from small and medium enterprises to large-scale industry. There is also a strong focus on creating the conditions to position individuals, including Indigenous and non-Indigenous Northerners, communities and business-related organizations for economic success.

Program Performance Analysis and Lessons Learned

While each territory and region is unique, economic development across the North is challenging due to a sparse and widely distributed population, harsh climates, cyclical economic patterns due to a dependence on natural resource development, an infrastructure deficit, and labour-market challenges.

In 2015, the territorial combined GDP decreased by 0.8% to $8.03 billion; largely a result of a decrease in the GDP contribution of mining, quarrying and oil and gas activities. Slight growth in the construction sector offset these losses as the percentage contribution of GDP from this sector grew by 0.99%. Public administration, resource development and construction continue to be key components of northern GDP.

CanNor also calculates a broader indicator of the state of northern economic development to guide its internal analyses and inform Agency priority setting exercises. This measure is referred to as the Northern Economic Index (NEI)^{Endnote 10} and is constructed on a 0 to 35-point scale. Movement along this scale reflects annual changes in seven indicators of the territorial economies that relate to: the labour market, financial well-being of Northerners, fiscal health/sufficiency of territorial governments, investments in the territories, as well as the status of business activity.

The NEI score of 4.5 reaffirms that in 2015 there was a contraction in economic activity in the North relative to the previous years in 2010 to 2015 period. The territories saw an increase in their unemployment rate, a decrease in own-source revenues generated by territorial governments, and a decrease in the rate of growth in average weekly earnings. Despite a slight increase in mineral exploration spending, the North observed a decline in resource development sector activity. Given the dependence on this sector, this decline contributed to reduced economic activity in other areas.

Based on these program performance results, CanNor continued its efforts to strengthen and diversify the northern economy through investments and collaboration with its partners. Some examples of these efforts include:

• supporting the construction of the Centre for Northern Innovation in Mining (CNIM), a partnership with Government of Yukon and Yukon College which has provided Northerners with better access to the education and training needed to take full advantage of the local jobs and prosperity generated in the mining and resource development sectors;
• working with Northwest Territories Tourism and the Government of the Northwest Territories to build Indigenous capacity to support enhanced northern tourism experiences;
• supporting a film workshop which involved the participation of 92 Northern residents in all facets of film production including directing, acting, stunt skills development and camera work. This resulted in the production of at least two other feature films to the territory, as the local capacity to work in this industry has now been established; and,
• working with 7 communities in support of community readiness planning – a foundational process piloted to identify sector economic diversification opportunities associated with resource development in order to maximize related community benefits.

CanNor learned through its SINED renewal analyses, review of performance measures and related results that the Agency needs to increase its direct work with businesses, provide for some investment in economic infrastructure, and enhance its service delivery. Increased efforts in these areas will respond to the needs of businesses and contribute to an enhanced foundation for economic diversification and growth across the North.

The difference between Planned Spending and Actual Spending is primarily due to lapsing of contribution funding for SINED ($781 thousand) and NAEOP – CROP ($2.2 million). A significant lapse in operating costs was also realized. With changes to CEDP programming, CanNor moved in the direction of supporting proposal-driven projects (as opposed to core operation funding) under NAEOP. This change, combined with changes to proponent spending plans towards the end of 2015-16, contributed to NAEOP being under-subscribed. CanNor also increased its efforts in 2015-16 to support the roll-out of the Canada 150 Infrastructure Program (CIP 150). In 2015-2016, the continuous intake process for the new CIP 150 program was launched, and 13 CIP 150 projects totaling $3,405,800 were approved. Funds will flow to projects in the 2016-2017 and 2017-2018 fiscal years. These projects will rehabilitate and improve existing community infrastructure in the North.

The lower than planned FTE number is due to the combined challenges of staff turnover in positions linked to sunsetting programs, as well as the difficulty of staffing in the North.

Description

This program supports research and analysis to guide programming and policy choices, the promotion of northern interests both inside and outside of the federal government, and the development of horizontal strategies, initiatives and projects to address economic development challenges and opportunities in the North.

Program Performance Analysis and Lessons Learned

The Policy and Alignment program includes both the Agency's strategic policy and planning unit, as well as the NPMO. CanNor uses its policy, research, and coordination capacity to examine economic issues and opportunities to inform the delivery of the Agency's contribution programs and NPMO operations. CanNor assesses the effectiveness of this program by how successful the Agency is in meeting its overall strategic objective of strengthening the northern economy. To determine this, CanNor measures annual changes across seven indicators of economic development^{Endnote 12}. CanNor aims to meet targets for at least five out of seven of these indicators to determine whether the composite measure's target was met.

In 2015-16, the Agency met five of the seven performance indicator thresholds it used to assess its economic development program and its related sub-programs through Policy and Alignment. Based on this performance analysis, this result indicates that CanNor's current policies and programs are aligned with strengthening the northern economy. 2015 results for the NEI and northern GDP, however, were not met during the reporting period.

CanNor Policy was active in 2015-16 both in terms of planning for and conducting evaluations. These efforts were instrumental in supporting program renewals announced in Budget 2016 and in ensuring programs are meeting the needs of Northerners. Some examples of these efforts include:

• collaborating with other RDAs to inform and launch CIP 150, which included northern-specific parameters to address the unique operating context, such as enabling a higher Government of Canada contribution ratio (75% in the territories as compared to 50% in the provinces), to accommodate the high cost of construction and limited availability of funds in the North;
• completing external engagements and a comprehensive analysis of the SINED program to identify challenges and opportunities, including what adjustments could be made to the program to increase CanNor's support to SMEs;
• concluding a formal NPMO evaluation, which informed its renewal;
• developing business cases for program renewals based on policy research, analyses and engagement; and,
• providing a northern perspective to national decision-making processes; for instance, the NPMO's continued work to ensure a northern perspective on engagement is integrated into environmental assessment Crown consultation processes.

CanNor also positioned itself through alignment and collaboration with the RDAs to deliver on emerging government commitments. The initial focus of these efforts in 2015-16 was on setting the stage for increased adoption of clean technologies.

CanNor learned through its performance analyses in 2015-16 that an integrated policy function, drawing upon all the Agency linkages, greatly informs decision-making processes. Through concentrating analytical capacity, communication across multiple business lines was greatly improved in the Agency, leading to more effective program delivery.

The NPMO funding profile for 2015-16 included $400 thousand which was identified as the cost of winding down the initiative in its originally expected sunset year (e.g., for staff relocation and related costs). NPMO funding was renewed in Budget 2016 and no sunset costs were incurred in 2015-16. A lapse of approximately $500 thousand is related to lower personnel and other operating costs due to a shortfall of four FTEs.

The lower than planned FTE count is due to the combined challenges of staff turnover in positions linked to sunsetting programs, as well as the difficulty of hiring in the North.

Description

Internal Services are groups of related activities and resources that are administered to support the needs of programs and other corporate obligations of an organization. These groups are Management and Oversight Services, Communications Services, Legal Services, Human Resources Management Services, Financial Management Services, Information Management Services, Information Technology Services, Real Property Services, Materiel Services, Acquisition Services, and Other Administrative Services. Internal Services include only those activities and resources that apply across an organization and not to those provided specifically to a program.

Program Performance Analysis and Lessons Learned

CanNor continued to provide learning opportunities, coaching and mentorship to employees, raising awareness of employment opportunities and innovative programs that attract and retain Inuit employees to the Agency.

Over the course of 2015-16, CanNor Communications made significant strides in preparing for migration to Canada.ca in 2016-17. All of CanNor's web content was analyzed for accuracy and relevance. Further, major portions were updated and re-written to reflect current priorities and to follow the new style guide for posting in the next fiscal year.

The Agency worked to prepare its information systems and employees for the implementation of two new government-wide HR systems, Phoenix and MyGCHR. Employees were provided with training and assistance to prepare for the future implementation of other information management and email transformation. CanNor also worked closely with other RDAs to identify common requirements and plan the development of a new shared system for the management of grants and contributions.

CanNor more actively managed relationships with the Agency's service partners to ensure CanNor has the tools and services in place to deliver in its unique operating environment. CanNor also anticipated changes to its operating environment, and used the transformation to enhance data integrity and management.

Actual spending was greater than planned by $1 million and total authorities available for use was increased by $560 thousand due to the allocation of funds available from the operating budget carry forward. The current difference is a result of several years of accumulated increases in Crown housing, salaries, and other northern operating costs, compared to related funding levels which have remained constant since 2009. The Agency is currently exploring options for rationalizing its Internal Services costs and ensuring a longer-term, more sustainable funding model.

Staffing in internal services has been stable over the year.