How does Faculty of Graduate Studies work?
I can't comment on the specifics of the Canadian system, but in general the university wishes to ensure that standards and requirements for (say) a PhD in theoretical physics are equivalent to those for a PhD in German Literature. Thus, the faculty of graduate studies will be responsible for establishing the basic structure and standards to which the various graduate programs must conform. They then delegate the detailed implementation of any given program to the department concerned.

In practice, this may indeed generate all sorts of "interesting" internal politics, as the faculty of graduate studies attempts to justify its existence, and the departments try to assert their independence.