Wendy Harris testifies to Standing Committee

At the beginning of April, Wendy Harris (CEO and President) delivered a testimony to the Standing Committee for Indigenous and Northern Affairs Canada on the Study of Default Prevention and Management Policy. Read a copy of the written testimony below.

Thank you Madame Chair, and thank you also to the honourable members of the Standing Committee on Indigenous and Northern Affairs for inviting us here. We are delighted to participate in the review of the Default Prevention and Management Policy, and to provide our point of view with you today.

For 50 years, CESO (Canadian Executive Service Organization) has operated in many countries around the world, and in partnership with Indigenous communities across Canada. Because we work in both national and international settings where we leverage key learnings and best practices, we do hope to bring a unique perspective to the study on Default Prevention Management.

CESO is a not-for-profit, volunteer-sending, international economic development organization. We firmly believe that a strong economic infrastructure lies at the heart of sustainable change – both economic and social change, including the eradication of poverty. For CESO, “economic infrastructure” means two things. Firstly, supporting the development of the private sector, particularly micro- and small- and medium-sized enterprises (or SMEs) – the key drivers of any economy, whether it be developing, emerging, or mature economies. SMEs play a unique and important role in setting the rate of economic growth, and according to the UN, accounts for two out of every three net new jobs worldwide. We know Indigenous-owned SMEs are growing at a rate six times faster than those of non-Indigenous Canadians. Combined with a surging Indigenous youth demographic, these trends indicate a tremendous economic growth potential for Indigenous communities in the coming years, and also for the Canadian economy more broadly.

The second part of a strong economic infrastructure is about creating an inclusive environment to support private sector growth – this means strengthening the management and governance of institutions, whether Band or Tribal Councils, trade or industry associations, civil society organizations or co-operatives. From our experience, whether working here in Canada or around the world, quality governance is always a major indicator of whether economic development, and in fact social development, will be both successful and sustainable. By “quality” I mean its ability to effectively manage, plan and execute on the complex priorities of a given community and in a holistic manner that drives prosperity forward. When governance capabilities are strong and inclusive, there is an ability to invest and reinvest in both social and economic programming from multiple angles. This is, in our experience, how economic stability is achieved over time.

Regardless of where we are working, the main objective of our work is always capacity development. A non-negotiable aspect of our approach is that our work is locally driven. It is entirely focused on building the skills and experience of our clients and partners to support their goals and priorities. Our expert volunteers transfer their knowledge and skills to our clients, who then develop the tools they need to become not only the owners, but the creators of their own long-term stability and prosperity. This approach contributes to self-sufficiency and resiliency long after our work is done.

Essentially, the Default Prevention and Management policy is a tool used by the Canadian government to stop a financial situation from deteriorating further; it is intended to get a given community back on track in terms of financial reporting, so funds can continue to flow to the community. I will perhaps leave it to others to determine the success of the policy in achieving this objective. What I do want to speak about directly today with the Standing Committee is where I see a tremendous gap that can be filled – at the earliest level of warning and even before the policy is actioned. This gap is capacity development.

What the current policy fails to address is the capacity development of a community – whether proactively at that earliest warning previously mentioned, or once the community has moved into either co- or third-party management. This is simply because third-party managers aren’t tasked with building that skill and knowledge; they are tasked to go in and stop the bleeding. However, based on our lengthy experience in economic development both here in Canada and around the world, the only way to achieve sustainable change is by building local capacity. If the knowledge, the experience, the skills are not absorbed into the community and by the actual individuals charged with their responsibility, the cycle of crisis continues. Focus needs to be placed on unlocking the local potential and building capacity to ensure solutions are both achievable and sustainable. This approach ensures a bottom-up strategy that encourages autonomy over dependency, and never replaces – only empowers – local resources. Until this or another policy better addresses that gap, the intervention tool will be used more often, and for longer than anyone wants it to be.

What we recommend is that at the earliest signs of financial management risk or financial deterioration that the “intervention” comes instead in the form of capacity development through training and mentorship to proactively keep communities out of co- or third-party management.

Specifically, when the community’s governing body has developed strong financial management and governance capacity, it can start to plan, and to build long-term economic predictability and stability. The community can also begin engaging effectively with the mainstream economy. The stronger the governance capability, the greater the ability for an individual, community, or as in our work internationally, a country or even multi-national region to develop and strengthen critical social and economic initiatives. Internationally, for instance, our work strengthening local tax and audit capacity clearly shows the link between this and the ability to invest sustainably in economic and social growth or programming.

Taxation and sound auditing practices play a tremendously important role in furthering sustainable development not only from a reinvestment perspective, but also concerning regulatory accountability and transparency. However, our clients and partners often face multiple barriers and challenges in developing these type of skills and knowledge.

CESO’s roster of volunteers includes many experienced financial services experts who bring their knowledge and expertise – and by extension, the expertise of Canadian financial and regulatory institutions – to support the capacity development of clients. This development of capacity then ripples throughout the given community or country in various ways, leading to a more resilient and adaptable environment for communities and individuals to thrive.

The role CESO can play in the prevention of default management is firstly, to work in partnership with communities to build their readiness to engage in economic opportunities. We work closely with communities on building fundamentals, such as strong governance, leadership development, financial management and stewardship, human resource management, strategic planning, and many more – all elements critical to successfully developing long-term economic stability and resilience. But we also work with small business owners and entrepreneurs on the various areas of skill and capacity they need to build, stabilize and grow their businesses successfully – creating those all-important autonomous source revenue streams.

Secondly, CESO can play a complimentary role, working collaboratively or in parallel with Indigenous organizations such as the FNFMB, AFOA, and NACCA. It is important to underscore we are not an alternative to these organizations, but rather complement their objectives. We are the partner who can operationalize the capacity development required to move through certification, and ultimately to access capital markets – a truly transformational opportunity for communities.

In conclusion, it is our firm position that the current policy on Default Management Prevention does not address the lack of financial management and governance capacity within the communities – a fundamental cause of the need for intervention in the first place. We see these two areas of competency as critical building blocks of a strong economic infrastructure necessary for a community to further develop both economic and social initiatives to support its prosperity and stability. As such, our main recommendation is that a major focus be placed on investing community capacity development long before the policy is enacted. In doing so, we will proactively reduce the need for intervention policy itself; will set the stage for autonomous long-term social and economic growth; and finally, will help create the conditions for true reconciliation.

Thank you for inviting us to share our perspective today. I look forward to question period.