Disaster Financial Assistance Arrangements (DFAA)

Background

In the event of a large-scale natural disaster, the Government of Canada provides financial assistance to provincial and territorial governments (PTs) through the DFAA, administered by Public Safety Canada. When response and recovery costs place a significant burden on the PT’s economy and would exceed what individual PTs might reasonably be expected to bear on their own, the DFAA provides the federal government with a fair and equitable means of assisting PTs.

Through the DFAA, assistance is paid to the PT – not directly to affected individuals, small businesses or communities. In fact, PT governments design, develop and deliver disaster financial assistance, deciding the amounts and types of assistance that will be provided to those that have experienced losses. The DFAA place no restrictions on the PT in this regard.

Any request for financial assistance under the DFAA must be made by the PT within six months of the end of the disaster. Under the Emergency Management Act, an Order in Council is required to declare the event to be of concern to the Government of Canada and authorizes the provision of financial assistance under the DFAA. The Governor in Council authorizes the provision of financial assistance to the affected PT; the Minister of Public Safety and Emergency Preparedness is the final authority regarding eligibility of events and expenditures, and amounts of payments to be made through the DFAA.

Eligible expenses are defined in the program’s Terms and Conditions. These include, but are not limited to, rescue operations, restoring public works and infrastructure to their pre-disaster condition, as well as replacing or repairing basic, essential personal property of individuals, small businesses and farmsteads. Expenses related to mitigation activities undertaken to reduce the vulnerability of damaged infrastructure to future emergencies would also be eligible for cost-sharing under the DFAA (e.g. raising homes). Examples of expenses that would not be eligible for reimbursement include, but are not limited to: repairs to a non-primary dwelling (e.g. cottage), repairs to structures or items that are insurable, as well as costs that are covered in whole or in part by another federal program.

The percentage of eligible costs reimbursed under the DFAA is determined by a cost-sharing formula and is up to 90% of eligible expenditures.

Example:

For a disaster in a PT with a population of 1 million where the total eligible expenses for responding to and recovering from a disaster are $20 million, the table below shows how eligible expenditures would be cost-shared under the DFAA.

Under the DFAA, a PT has up to five years after the approval of the Order in Council to request the final payment. A request for reimbursement is processed following receipt of the required documentation of PT expenditures and review by federal auditors. Advance and/or interim payments up to 60% of the federal share can also be requested within the five-year timeframe.

Status

Since the inception of the DFAA in 1970, it has paid out $5.15 billion in post-disaster financial assistance. More than half (52%) was paid out between 2013 and 2018.         

A number of factors will contribute to the continued rise of program costs in the future: extreme weather conditions due to changing climate, demographic growth, the state and location of private dwellings and public infrastructure, the market availability and penetration of insurance against various disasters, and the parameters of disaster financial assistance programs, including the DFAA itself.

Considerations

Public Safety is appropriated $100M annually for the DFAA payments. Additional appropriations are sought as needed to supplement this amount. In recent years, $100M has been typically insufficient to cover requests for federal funding. Budget 2019 provided the Department with an additional $260M to cover obligations over two years ($155M for fiscal year (FY) 2019-20; and $105M  for FY 2020-21). Additional appropriations will be required to cover outstanding liabilities in future years.

The DFAA Terms and Conditions were recently extended to March 31, 2022. This extension provides a window for PS to complete an ongoing review of the DFAA with a view to ensure that it remains an effective and a sustainable instrument given the rise in frequency, impact and costs of natural disasters.

Next Steps

Moving forward on the results of the DFAA review will involve a number of decisions early in a new mandate that could help address natural disaster impacts and extreme weather events in the decades to come.

Date modified:

2020-03-18