Presenting and Developing an Effective Remedial Management Plan. The best source of information and training onaboriginal finance and management

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1 Presenting and Developing an Effective Remedial Management Plan The best source of information and training onaboriginal finance and management A Practical Guide for Aboriginal Leadership

2 The Aboriginal Financial Officers Association of Canada (AFOA) is the centre for excellence and innovation in Aboriginal finance and management.we are the only organization in Canada that focuses on the capacity development and day to day needs of those Aboriginal professionals who are working in all areas of management, finance and administration - today's leaders and those of the future. AFOA was founded as a not-for-profit association in 1999 to enhance Aboriginal financial practices and management skills. Our members believe that the key to successful self-government, creating a better life for Canada's Aboriginals and a better future for the next generation lies in improving the finance and management skills of those responsible for the stewardship of Aboriginal resources. To do this, we conduct capacity development research aimed at enhancing competency in financial management, general management and program management.we develop capacity development programs, products and services.we provide professional development training.we certify Aboriginal financial managers and develop financial management standards. We promote best practices.we provide advice and counsel.we encourage Aboriginal youth to enter into financial and management professions. We provide a forum to share knowledge, experience and best practices. We support Aboriginal accountability and self-government efforts. AFOA helps Aboriginal communities and organizations maximize resources, strengthen decision-making and governance, enhance the delivery of programs and services and demonstrate accountability to community members and stakeholders.we help managers and leaders enhance their skills and knowledge and grow professionally. Published by: The Aboriginal Financial Officers Association of Canada 1066 Somerset St.West, Suite 301 Ottawa, Ontario K1Y 4T9 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without permission in writing from the publisher. Copyright 2008 Aboriginal Financial Officers Association of Canada Printed in Canada. 2 A Practical Guide for Aboriginal Leadership

3 Developing an Effective Remedial Management Plan Acknowledgements AFOA would like to thank those individuals who made this publication possible.the principal authors of this report were John McNeil, Partner, Grant Thornton, and Stephen Ashe, Senior Manager, Grant Thornton. Suzanne Werhar-Seebach, AFOA Director of Programs and Services, was responsible for concept integrity, project management, content review and editing. We would like to express our appreciation to the Listuguj Mi'gmaq Government, Quebec and the Long Plain First Nation, Manitoba for allowing us to learn from their experiences. Translation: Nicole Plamondon Design: Paul Edwards Design Printing: Printbridge Inc. We would also like to acknowledge the financial assistance of the Department of Indian and Northern Affairs Canada. On-line Course and Workshop This publication is also the basis of an on-line course offered by AFOA on "Developing an Effective Remedial Management Plan". A one or two day community workshop is also available. Go to for information on the on-line course and workshop. TA B L E O F C O N T E N T S Introduction I What is a Remedial Management Plan? An overview What different levels of intervention can occur in an RMP? 3 3 What areas of Band operations are included in an RMP?. 4 4 What are the key contents of an RMP? How is an RMP approved? II Understanding the Remedial Management Plan and its Impact Why and when is an RMP necessary? The impact of an RMP on the Community Understanding the types of funding agreements III Who,What and When in the RMP? The Band Council Creditors INAC Co-Manager IV How Do You Develop a Remedial Management Plan? Strategic planning Financial forecasts Decision making leading to an effective plan V Measuring and Assessing Performance of the RMP Financial results are not the only measurement Setting realistic, achievable measurable goals and action plans Continuous measurement is key About performance management VI Communicating Around the RMP Importance of Band communications Communications with other stakeholders VII Case Studies Learning from the Experiences of Other First Nations Case Study 1 Listuguj Mi gmaq Government Case Study 2 Long Plain First Nation Addendum A RMP Template

4 Introduction The Government of Canada transfers money to First Nations in Canada for the delivery of programs and services ordinarily provided by various levels of government. Social assistance, education and infrastructure projects are generally the three largest categories of expenditures. Funding is transferred to First Nations through Funding Agreements, which are contracts signed by both the parties. Each funding agreement is legally binding and stipulates the terms and conditions the First Nation Community must meet. Indian and Northern Affairs Canada (INAC) develops and maintains generic funding agreement models for those First Nation Communities not governed by their own self-government agreement. All of INAC s funding agreements outline specific accountability requirements, identified in the following table. Category General First Nation Specific Program Specific Specific Funding Agreement Requirement Regular audits Access to records Reporting and data quality Default and remedial management Project-specific (could relate to training or capacity development initiatives) Minimum program delivery and reporting INAC s authority for intervention is contained in the terms and conditions of Funding Agreements which set out instances of default where the Minister may intervene. The policy outlines the actions required by the Minister and First Nation governments to ensure the defaults are addressed and delivery of essential services under the Funding Agreements are protected. An essential condition stipulated by the principal funding agreements is the acceptable level of accumulated debt (or program deficits) relative to the First Nation Community s overall total annual revenues. Six common causes of debt accumulation in First Nation Communities are: Program overspending resulting from a lack of financial and budget reporting, over-staffing or no controls over incurring debt and disbursing funds; Program spending of contribution funding in non-qualifying areas, resulting in funding claw-backs by INAC; Spending on unfunded programs and initiatives (i.e. items not covered by funding agreements); Capital project overruns (often due to the absence of fixed contracts for material and labour); Capital spending prior to securing agreement/approval of funding and/or financing (which never materializes); and Unrecoverable loans and advances to Band members. When a First Nation is in default of a funding agreement clause relative to debt and deficits, the Minister of INAC may initiate an intervention. Sometimes, the First Nation Council will recognize the situation and volunteer to implement an intervention; alternatively, INAC may determine the need for participation of an outside party. The level of intervention will vary depending upon the situation, but in all cases, a Remedial Management Plan is required to rectify the situation. The Remedial Management Plan (RMP) provides the guidelines for intervention in the financial management of the First Nation Community. It is a process and document describing how the First Nation Community intends to correct its financial position, and address the factors that caused the accumulated debt (or program deficit) situation. This publication is intended to help First Nation Communities and Aboriginal Finance Officers develop the knowledge and techniques required to build an RMP that will help Communities achieve financial stability and accountability. 2 Introduction

5 Developing an Effective Remedial Management Plan I What is a Remedial Management Plan? 1 AN OV E RV I E W A Remedial Management Plan (RMP) is a comprehensive deficit recovery plan which encompasses all sources of Band funding/revenue and expenditures and includes an annual surplus target, which will be used to reduce accumulated Band debt. The RMP is approved by the Band Council and Indian and Northern Affairs Canada (INAC). As a result, it is imperative the Band Council (Council) be fully engaged in the development and implementation of the RMP. At its most fundamental level, the RMP should answer the question What has caused the accumulated deficit and how do we recover from it?, and as a result, will direct the action items for the Band to achieve the desired financial recovery. The Remedial Management Plan must be at least one year in duration and must include the following components: Purpose of the plan; Duration of the plan setting out start and completion dates; Problem identification, highlighting the causes of the intervention; Corrective action to be taken and the specific time frames to address each of the causes; Performance indicators to measure the effectiveness of the plan; Roles and responsibilities of the parties to the plan; Financial projections firm projections for the current year and estimates for subsequent years; Identification of other sources of funds used to address financial difficulties; Identification of capacity building and training activities; and Reporting timelines for monitoring purposes. 2 WH AT D I F F E R E N T L E V E L S O F I N T E RV E N T I O N C A N O C C U R I N A N RMP? The terms and conditions of the funding agreements between First Nations and INAC contain specific instances of default which may result in an intervention by the Minister. INAC s policy details the actions to be taken by the Minister of INAC and the First Nation governments to ensure defaults are addressed promptly and to protect the ongoing delivery of essential services, such as social assistance and education, specified under the Funding Agreement. The default triggers include the following four: The terms and conditions of the Funding Agreement between the Council and the Minister are not being met by the Council; The Council s auditor gives a denial of opinion or an adverse opinion on the financial statements of the Council; The financial statements indicate the Council has incurred a cumulative deficit equivalent to eight (8) % or more of the Council s total annual revenues; and Essential service delivery is failing, thereby compromising the health, safety or welfare of First Nation members through mismanagement or political instability. Following are the three distinct levels of intervention the Minister may choose, depending on the capacity and willingness of the First Nation to address the situation: Low Level:The Council is willing and has the capacity to address and remedy the problem. This level allows for a Councilmanaged Remedial Management Plan to be established. Moderate Level: The Council is willing to act but lacks the capacity to address and remedy the problem. This level requires the Council to appoint a Co-Manager to assist in the development and implementation of the RMP. The Co- Manager will be a professional accountant or company familiar with the financial management and business of a First Nation Community. The Co-Manager s role will be to work with the Council to develop and implement the RMP. The Co-Management situation will continue in effect until resolution of the financial problems and completion of the RMP. High Level:The Minister believes the Community is in a high risk situation and Council is not prepared to address and remedy the default or the difficulties which gave rise to the default.a high level intervention results in the Minister appointing a Third Party Manager who will, for all intents and purposes, act as Council for the purposes of reporting directly to the Minister to both remedy the default and ensure essential services continue to be delivered to Band members. What is a Remedial Management Plan? 3

6 INAC s intervention authority technically applies only to INAC funding. However, under any of the three levels (low, moderate or high), Council may opt to include all Band funding sources and programs under the intervention. For purposes of an effectively implemented RMP, this would be the preferred option. A Band s progress against its Remedial Management Plan is monitored on a regular basis. In consultation with the First Nation, the Minister s intervention can be reduced or phased-out altogether when circumstances have significantly improved. Decisions to intervene are never taken lightly and the intervention is always directed towards the ultimate goal of ensuring the First Nation community is in a position to manage its own affairs. 3 WH AT A R E A S O F B A N D O P E R AT I O N S A R E I N C L U D E D I N A N RMP? The RMP will include a review of Band revenues from all sources and all expenditures to build a complete picture of the Band s financial performance. Different funding arrangements may apply to sources of revenue other than INAC and, as a result, it is appropriate to take a consolidated view of specific program areas such as education, social services, health, or housing to ensure proper allocation of resources. More detail will be provided on the impact of different funding arrangements later in this document. In addition, certain operations may be managed by the Band with a target to enhancing services while breaking even, or be established with a goal of profit generation in mind. Such undertakings might include convenience stores, markets, gas bars, fishing, forestry, gaming facilities, and others. These enterprises need to be viewed on a consolidated basis of matching revenues and related expenditures, as well, to determine that they are first meeting the original objectives set when they were established, and to understand how their performance might be improved to benefit the overall Band financial standing. The principle objective of the RMP is to introduce financial stability and eliminate the Band s accumulated deficit which is often financed by debt. Therefore, a consolidated view of the Band s total deficit position and total debt load is required, once the individual programs and specific enterprises have been assessed. 4 WH AT A R E T H E K E Y C O N T E N T S O F A N RMP? A sample template for a Remedial Management Plan is attached as Addendum A to this document. The critical pieces of the plan involve the following: Clarity of understanding of the causes of the financial difficulties; Existence of, or the ability to develop, the competence, capacity, and willingness within the Band Council to correct the issues that led to the difficulties; and Development of a sound business plan, the results of which are clearly articulated in a detailed financial forecast. Therefore, a Community/Band profile should provide a brief overview of the Band (geography, demography and history including the issues that led to the intervention by the Minister) and a self assessment of the abilities of the Band to deliver on the commitments made within the RMP. Training, mentoring, or new hires required to develop community capacity as a component of the plan with lasting benefit for the Band in the future, should be highlighted. A comprehensive business plan should be developed to determine the action items necessary to improve the overall financial performance of the Band. This should include a strategic planning initiative described in more detail later in Section IV, Page 11 How Do You Develop a Remedial Management Plan? The business plan should demonstrate the Council: Understands the causes of the problems; Has developed a clear sense of its priorities; Has defined an action plan and has an understanding of the impacts of this plan; Is satisfied essential services will continue to be offered to community members; Has developed realistic, comprehensive financial forecasts indicating the impacts of the plan, including the debt retirement schedule; Has developed the financial and accounting systems to monitor performance closely against the plan; Has established reporting structures Co-Manager/Aboriginal Finance Officer to Council and Council to Minister for follow up; and Sees a realistic exit from the RMP within the time horizon of the plan. 4 What is a Remedial Management Plan?

7 Developing an Effective Remedial Management Plan 5 HOW I S A N RMP A P P ROV E D? A Remedial Management Plan is an amendment to a Funding Agreement signed by both the Band Council and INAC on behalf of the Minister. Therefore, the RMP must first be approved by the Council, since it will be held accountable for the plan s deliverables. This is a good point to briefly review the attributes of any accountability program. To be effective, an accountability program must be built on the following three elements: Transparency Decisions and the processes utilized in making those decisions must be open and transparent; Disclosure Information on administrative policies and standards must be readily available to all stakeholders; and Redress Procedures for review of decisions, including an appeals mechanism, must be in place. Since the Band Council represents all community members in the context of the business plan developed in support of the RMP, the accountability framework should entail the following steps: Transparency A mechanism needs to be in place to ensure the analysis of programs and the business plan developed are shared with community members; Disclosure Activity Reports on the performance of the Band against the specific targets established should be made available to community members so they see both successes and failures; and Redress Consultations with community members should be held at least annually to ensure action plans are meeting their expectations or action plans are modified if they are not having the desired impact. Open communication of the financial state of the Band as the RMP process begins will set the stage for this accountability process. It will ensure Band Members are aware of the implications of the decisions required and, as a result, they will be more likely to understand their impacts when they see the action plans executed. What is a Remedial Management Plan? 5

8 II Understanding the Remedial Management Plan and its Impact 1 WH Y A N D W H E N I S A N RMP N E C E S S A RY? As noted above in Section I(2), four events of default may arise, any one of which may result in an intervention by the Minister and trigger the necessity of development of a Remedial Management Plan. These events are: Default of funding arrangement program obligations; Denial of opinion/adverse opinion on annual audit; Cumulative deficit greater than 8% of total annual revenue; and Compromised health, safety or welfare of community members due to mismanagement or political instability. 2 TH E I M PAC T O F A N RMP O N T H E C O M M U N I T Y Imposition of an outside, usually non-native Co-Manager/Third Party Manager on a First Nation Community will understandably cause a variety of reactions and emotions from within the Council and Community. There may well be a period of grieving, accusation and internal conflict including under a moderate intervention when Council has the opportunity to participate in the selection of the Co-Manager. The Aboriginal Finance Officer and the Co-Manager should expect and be prepared for this. These concerns are natural but can and must be overcome by the development of an effective accountability framework. This will ensure engagement of community members interested in participating in the assessment of what has transpired and the development and understanding of the business plan needed to address the issues going forward. Appointment of a Co-Manager/ Third Party Manager is an opportunity for Band Council, management and staff to learn and improve capabilities through knowledge transfer. Initially there might be deterioration in the relationship between Band Council and the community as grievances are aired and members of the community ask difficult questions as to what has happened to bring the Band to this point. But as attention turns to the action and implementation plans for the future, the effort at the front end in engaging community members should pay dividends. Community members will be more knowledgeable of the process and, as a result, will be in a better position to be supporters rather than detractors. They will more likely feel a sense of ownership and responsibility if they are given the opportunity to participate in the plan development. The development of the business plan and the financial forecasts will result in a comprehensive review of how services are currently delivered. There may be opportunity to streamline activities and eliminate overlaps. On closer analysis, certain programs may not be Band priorities and can be suspended or discontinued. There may be efficiencies that can be introduced to save funds. These are decisions to be assessed and taken at the Band Council level in building an effective business plan. At the same time, these decisions may have implications on service levels and employment of Band members. Care will need to be taken to communicate the impacts of these decisions sensitively and with empathy for those affected. 3 UN D E R S TA N D I N G T H E T Y P E S O F F U N D I N G AG R E E M E N T S INAC uses a variety of terms when describing its funding arrangements. However, at a high level, two types of basic funding agreements exist: Comprehensive Funding Arrangement (CFA) and the Canada/First Nation Funding Agreement (C/FNFA). The CFA is a Targeted Program. Targeted Programs are time limited and allocated to specific undertakings.the CFA is a oneyear program in one of the following three forms: Contribution Funding conditional transfer payment for a specified purpose subject to being accounted for or audited to demonstrate adherence to terms and conditions of payment. Unexpended balances or unallowable expenditures are to be reimbursed to the Crown; Flexible Transfer Payment conditional transfer payment for a specified purpose for which unexpended balances may be retained by the Council, provided the program terms and conditions have been fulfilled by the Council. Any deficit is the responsibility of the Council; and Grant unconditional transfer payment. 6 Understanding the Remedial Management Plan and its Impact

9 Developing an Effective Remedial Management Plan The C/FNFA is the successor to earlier Block-Funded Arrangements. It is a five-year block-budgeted funding agreement INAC and other federal government departments enter into with First Nations and Tribal Councils. The C/FNFA contains a common set of federal government funding terms and conditions in the main body of the agreement, while attached schedules contain terms and conditions specific to each federal department. The C/FNFA defines minimum standards for a local accountability framework to transfer to First Nations increased authority over program design and delivery and the management of funds. First Nations may redesign programs to meet specific community needs, subject to maintaining minimum delivery standards, and may reallocate funds among program areas. C/FNFA Agreements may contain at least two streams of funding: core and targeted programs. Understanding the nature of the funding agreements is very important to the RMP as surpluses realized from the various funding arrangements are treated differently, as follows: Any surplus realized in a Contribution program must be returned by the Council to INAC; If there is more than one funding source for the program covered by the INAC Contribution Agreement, then a portion equal to INAC s share of the program shall be returned to INAC; and Conversely, any claims eligible for reimbursement under the terms and conditions of the Agreement shall be reimbursed by INAC to the Council. For each program or service identified as a Flexible Transfer Payment or Grant, any surplus shall be retained by the Council and any deficit shall be the responsibility of the Council. Where the Council has a surplus, it may use non-capital surplus amounts at its discretion and use capital surplus amounts for projects on the INAC Approved Capital Plan. Amounts for Contribution items are based on reimbursement of eligible expenditures. However, this does not exempt this type of funding from being capped. Depending on the terms and conditions of the Contribution funding, Council may be responsible to fund a deficit if it occurs. Block-funded agreements qualify for the INAC/First Nations Funding Agreement (D/FNFA) annual adjustment. Targeted flexible transfer payment program dollars do not qualify for the D/FNFA annual adjustment. Understanding the Remedial Management Plan and its Impact 7

10 III Who, What and When in the RMP? Please refer to the diagram at the end of this section for a high-level summary of the key participants in the Remedial Management Plan. 1 TH E B A N D C O U N C I L A The Buy-in The Band Council, representing all community members, is the owner of the Remedial Management Plan and must therefore be fully committed to its strategy, action items and implementation plan. The Band Council must be the decision maker in the process. It will require access to accurate and timely information on the basis of which it is able to establish the plan at the outset. The Band Council must be provided with regular reports so it can track the RMP progress and be assured the RMP is on track, or if further decisions have to be taken to get back on track. The Aboriginal Finance Officer will want to ensure the Band Council is comfortable with analyzing and understanding financial data. Since not all Band Council members have experience with financial information and practices, there may be a requirement for individual development, education and training. While this will require a personal commitment from all Band Council members, the investment is important and should not be minimized. The impact at the Band Council level will be less than satisfactory if the Council does not fully understand and take ownership of the plan and understand the consequences of the decisions it will be making. The Aboriginal Finance Officer, together with the Co-Manager/Third Party Manager (if one is engaged) will need to assess the quality of the financial controls in place. This will include an assessment of the accounting software system being used by the Band. Quite often, a reason for the financial deterioration is the inability to access timely and accurate information. If that is determined to have been the case, a decision will have to be made on acquiring an improved accounting software system and an investment made in training all appropriate band staff in the use of the system. B Strategic planning The financial performance of the Band should not be the only measure of success of a RMP. In developing the RMP, the Band Council should perform a full business plan (called a Strategic Plan) for the community. This will be discussed in more detail below (Section IV(1), Page 11). However in summary, the Council should ensure a detailed review of the Band s internal strengths and weaknesses and external threats and opportunities are analyzed and understood to place the plan in the context of the Band s current environment. If a co-manager is in place, he or she should be able to assist in this analytical work or recommend a member of the team to do so. If a co-manager is not engaged or is not a skilled facilitator, the Band may choose to utilize the expertise of a trained facilitator or professional consultant to assist in the process. Once the Band s context is understood, the Council should agree on a vision, mission and set of values to will guide its thinking. These tools will focus the Band s development of priorities and key strategic initiatives for the RMP. Further detail on the steps involved in this process is provided later at Page 11 of this document. These strategic priorities will then translate into the development of the financial forecasts and key strategic directions the Band s progress will be measured against during the life of the RMP. At each step of this business planning process, the Band Council will need to be engaged to make the appropriate decisions on the basis of solid input from Band members. A constant dialogue will ensure an understanding of the plan and a sense of ownership will exist in all stakeholders in the success of the plan. C Continuous Reporting Financial reporting is a required element of the RMP. The Council should expect to conduct monthly on site RMP follow up meetings attended by the INAC representative as well as the Co-Manager/Third Party Manager, as appropriate. In addition, Council will commit to sharing this information with all Band members. If progress is made as forecasted, the meetings with INAC may be cut back to quarterly after the first six months. However, it is recommended the Band Council continues to review results monthly and share this information with Band members so they can track the accomplishments against the plan to see the results of their decisions and the improvements to the situation. 8 A Practical Who,What Guide for and Aboriginal When inleadership the RMP?

11 Developing an Effective Remedial Management Plan D Selection of a Co-Manager If INAC requires a Co-Manager, the Band Council is responsible for selecting an appropriate Co-Manager. Compatibility between the Co-Manager and the Band is critical to the success of the plan. Since the financial outcomes of the plan are only one of the many measures of success of the RMP, the Council must ensure the Co-Manager selected has the same views and value sets as the Band. The following provides other attributes expected of the Co-Manager: Experience in the RMP process; Be an active listener, absorbing what the Band indicates are its priorities, goals and objectives and probing for clarification; The ability, desire and commitment to transfer skills to the Band throughout the term of the RMP process; Able to work cooperatively with the Band Council and Band management. This must be a team approach as opposed to confrontational; Provide a Co-Management Team to provide backup for the Co-Manager, including covering for absences from meetings; and Offer added value. The Co-Manager represents a substantial investment for the Band and there should be evidence of a good return on the investment made. 2 CR E D I TO R S Current and long term financial obligations of the Band must be considered in the development of the RMP. This will require direct contact with suppliers and financial institutions to clarify the exact balances outstanding. Any claims by former employees against the Band need to be included. Creditors can be grouped by different class, such as secured or unsecured, or those having priority over others. For example a financial institution may have registered security and have a specific charge against one of the Band s assets. Federal obligations such as withholding taxes, GST/HST and the like may have priority over other creditors. These should all be noted as a complete listing of creditors is developed. Through this process, opportunities to renegotiate terms of repayment, interest rates, interest charges on unpaid balances, or amounts outstanding may be identified. The experiences of some First Nation communities have shown Canada Revenue Agency and some provincial authorities are willing to negotiate outstanding balances. 3 INAC INAC will determine the level of intervention required at the outset Low, Medium or High. For high level interventions, INAC will appoint a Third Party Manager. INAC concurrence with the Council s selection of a Co- Manager will be required for medium level interventions. INAC will receive and approve the RMP once it has been developed. It will attend monthly on-site RMP Monitoring Meetings to review and assess progress against plan. These meetings may be reduced to quarterly at the discretion of INAC after the first six months of the plan implementation. INAC has the discretion to revise the terms of the intervention, either through an escalation to a higher level if the situation deteriorates further or de-escalation if it is improving markedly. Upon successful completion of the remediation plan, INAC has the discretion to terminate the RMP. 4 CO-MANAG E R A sample detailed listing of the Co-Manager responsibilities is itemized below. This should be read together with the template for a RMP attached as Addendum A: 1 Actively participate in the Monthly Monitoring meetings agreed to in the RMP; 2 In conjunction with the Aboriginal Financial Officer (AFO), prepare monthly variance reports comparing actual expenditures with budget; 3 In conjunction with Council, implement administrative policies and methods to ensure sound financial control and management practices; 4 In conjunction with Council, approve all expenditures and payments to ensure they fall within the applicable program criteria and that appropriate management controls are in place when and if it is determined modification of the authorized budget is warranted; this approval process will include signing of all cheques together with a Band official authorized to sign by Council. Who,What and When in the RMP? 9

12 5 In conjunction with the Council, use reasonable efforts to ensure Council operates within its approved budget and achieves its annual RMP deficit reduction targets; 6 Provide INAC and Council with monthly progress reports on the items identified in the RMP template as Council s Progress see Addendum A, Appendix 6 7 Make themselves familiar with the terms and conditions of this Co-Management Agreement and commit themselves to operate within Council s approved policies; 8 In conjunction with the Council, ensure (a) the RMP, (b) the control measures outlined in its Appendix 3 (Listing of Control Measures), (c) and the recommendations contained its Appendix 5 (Auditor s Management Letter) are followed; 9 Implement a policy and process for collecting accounts receivable and restricting advances; 10 On a date specified by the Council, and no less than once a month, deliver to Council a statement showing: a Itemized receipts, disbursements and commitments of the Council during the preceding month; b The standing of all accounts and the general ledger balances as of the last day of the preceding month; c Variance reports indicating any deviations from monthly budget projections and year-end forecasts; d Any other information that may be required by Council and funding agencies; and e A request for feedback from Council on the report provided by the FSO at the monthly RMP monitoring meetings; 11 Notify all financial institutions of changes in signing authorities, as they may occur; 12 In conjunction with the Council and the AFO, prepare a consolidated operating budget for the next fiscal year by March 8; 13 In conjunction with the AFO, maintain the Council s financial accounting system in an up-to-date manner in accordance with generally accepted accounting principles; 14 Work with the Council to ensure the ongoing implementation of the Council s Management and Capacity Plan, which is attached to the RMP; 15 Administer, in conjunction with Council, all of the INAC programs, services and related funding under control of the Council; depending on the mandate from Council, this would preferably be expanded to include all of the Band s funding sources and program deliveries and not be limited to INAC funded programs. 16 In conjunction with INAC and Council, complete a comprehensive review of Council s Management Assessment Report, and develop and implement a revised Management Development Plan; and 17 Throughout the term of the assignment, and in all duties and activities, build capacity and capability among Band management and staff to improve financial management and adherence to funding agreements. Primary Parties to a Remedial Management Plan FIRST NATION COUNCIL AND MEMBERS CO-MGR/3RD PARTY + INAC + MGR (IF APPOINTED) + CREDITORS Note: Other Federal government departments and Provincial/Territorial governments may be stakeholders with a vested interest in success for the RMP. 10 A Practical Who,What Guide for and Aboriginal When inleadership the RMP?

13 Developing an Effective Remedial Management Plan IV How Do You Develop a Remedial Management Plan? Please refer to the diagram at the end of this section for a high-level summary of the steps to develop a Remedial Management Plan. 1 ST R AT E G I C P L A N N I N G As noted earlier, the Remedial Management Plan is not just a financial budgeting exercise. It represents an opportunity to conduct a thorough examination of the fabric of the Community, what is working and what is not, and think of how, through a strategic planning process, a brighter future might be built that looks after the critical needs of the Community while building financial stability. For this reason, it is important to begin the process with an analysis of the Community, its relative position, strengths and opportunities that exist, the issues it faces and the steps necessary to overcome them. A Developing the context for the plan Strengths,Weaknesses, Opportunities,Threats (SWOT) The first step in the process is to put the plan in the context of the Community itself. The Band should first look inwards at the issues it can control or has impact on. Through a series of facilitated Community meetings where broad input from interested Community members is sought, the Band should examine what inherent strengths or weaknesses the Community possesses. Strengths may take the form of the demographic make up of the Community, individual community member s skills, geographic location, natural resources, physical assets, strong elders or leaders, etc. Examples of weaknesses may be the overextended financial position, departing community members, loss of cultural heritage, insufficient infrastructure, etc. It is helpful to prioritize strengths and weaknesses, listing the most important strengths and the most serious weaknesses. The plan ultimately should be built to take advantage of key strengths and try to overcome or compensate for critical weaknesses. Next, the Band should look externally to the environment around the Community. What is happening outside of its control that may impact positively (opportunities) or negatively (threats)? Examples of opportunities that may benefit the Community include new infrastructure such as highway construction, or technological advances. Examples of threats are declining economic activity in the region at large or changing tourism patterns. Once again the Band should prioritize the opportunities and threats and consider what opportunities the plan can take advantage of and what threats the plan must consider as having a negative impact. B Identify shared values Once the SWOT analysis is complete the Community should be engaged in the identification of a set of shared values. These values should be the inherent qualities that guide activities in the Community; how people treat each other and how they want to be treated. These are the key characteristics of the Community reflected in the day to day life of its members. The values of the Community will set the stage for the prioritization of issues surfaced later and guide the Community in how it will deal with those issues. An example of one First Nation Community s set of values that helped to guide its planning process was as follows: Responsibility for self, family, and community; Honesty, trust and integrity; Pride in our land and traditions; Reliability and efficiency; Respect, dignity, empathy; Loyalty and commitment; Elders and the future of our youth; Knowledge and communications; and Accountability. It is advisable to engage a trained facilitator or professional consultant to support the first time a SWOT analysis and articulation of a set of values are undertaken. If a Co-Manager has been engaged, and is an experienced facilitator, consider having the Co- Manager facilitate the SWOT analysis and values determination. As noted earlier, it is important to engage the broader Community in the dialogue. All of the material researched and developed during this stage will be taken into account in the development of the plan. How Do You Develop a Remedial Management Plan? 11

14 C Vision and mission statement Once the SWOT analysis is complete and a set of values has been agreed upon, the Band Council should develop a vision statement and a mission statement for the community. A shared vision of the future will be very important. The vision statement looks into the future and is intended to be a short, memorable, compelling statement of what the community will look like in 10 to 15 years. How will it be different? How will it be improved for the benefit of all? The vision statement should be a single sentence or key words outlining the Community s desired position. The mission statement provides direction to the Community and sets the groundwork for how every one will work together to achieve the vision. It represents the foundation for the development of the plan to move the Community forward towards its vision. In both cases short, simple, easy to remember statements are better than longer detailed forgotten messages. Here is an example of one First Nation Community s Vision and Mission Statements: Sample vision statement Our First Nation will, with the active participation of our members, strengthen our spirit of community and improve the quality of life and opportunities for our members. Sample mission statement D Our First Nation strives to provide its members with responsible and relevant quality government, administrative, health, education, recreation, cultural, economic development and municipal facilities and services to support members in their quest for a quality life style within a community that takes pride in its traditions and explores future opportunities. Strategic direction The SWOT analysis should result in the identification of the critical issues faced by the Band and the Council. These issues will be addressed with the formation of the RMP. In order to remedy these problems the Band and Council will need to develop a key strategic direction that will achieve the mission and vision. A strategy is the long-term plan or focus of an organization. It is the way in which they will accomplish their mission and realize their vision. Once a strategic direction is determined, the Band and Council can determine goals and priorities.these priorities and goals are not just financial goals but may involve the development of infrastructure or capacity that the Community needs to help to achieve its vision. These goals and priorities will be achieved by implementing strategic initiatives in the Community. A strategic initiative may be the improving of the operations of various community programs. A method for selecting strategic initiatives is to focus on the results of the SWOT analysis. Strengths can be matched against an opportunity so that the opportunity can be realized. At the same time strengths can be utilized to mitigate external threats. Perhaps a weakness can be addressed by pursuing an opportunity that will help correct the respective weakness. 2 FI N A N C I A L F O R E C A S T S A Development of a budget Now that key strategic initiatives have been established that will assist in setting priorities, attention needs to be turned to the development of the financial plan and targets. The financial plan will include a detailed budget and cash flow statement covering all Band programs. The forecasts will generally be required to cover a minimum five year period. In addition a deficit elimination plan with an annual reduction target and debt repayment plan will be required. The first step in the development of the financial forecasts is to group expenditures in the past fiscal year by specific program category. As an example all education program expenditures incurred should be grouped to develop a comprehensive record of the costs associated with that area. All other expenditures should be grouped by category such as social services, housing, band operations etc. This information is then compared to the nature of the funding mechanisms that the Band has received to understand if surpluses or deficits have existed in each of these program areas. As noted earlier this is important to understand since some funding arrangements require that surpluses be returned to INAC or that the Band underwrite deficits, while other funding arrangements permit surpluses to be utilized by the Band for other program initiatives. 12 How Do You Develop a Remedial Management Plan?

15 Developing an Effective Remedial Management Plan All revenues and expenditures of for-profit or self funded Community owned operations such as a gas bar, fish farm, or gaming facility should be grouped to confirm the profitability or otherwise of each undertaking. These operations can then be analyzed separately to look for improvements that will enhance performance and generate additional funds to benefit the community. Once a comprehensive view has been taken of the historical financial performance of the Band s programs, decisions will need to be made that will enable the Council to build and approve a budget for the coming year that will generate a surplus that can be applied to the Band s accumulated deficit. The decisions taken will be informed and reinforced by the Strategic Planning process that will have helped to clarify priorities and areas of strategic investment and also areas where the Band will have to cut back or cancel programs.the forecast should then be extended into the future. In many instances a factor for inflation may be all that is added to the ensuing years however as best as possible knowledge of upcoming events or Community needs should be factored in to build a realistic plan. B Cash flow analysis A cash flow analysis should be prepared to factor in timing differences between accounting methodology and when cash is actually expended, such as the impacts of capital spending versus depreciation, or deferred revenues or prepaid expenses. This cash flow forecast will also factor in the repayment programs that have been negotiated or agreed upon with each of the Band s creditors. From this forecast, certain bottle necks in cash requirements will be anticipated and allowed for. C Deficit elimination plan A deficit elimination plan will be developed that will allow the application of surpluses to the deficit. The RMP forecast will need to be extended for as many years as it will take to eliminate the deficit. Realistically this should be between five to ten years depending on the circumstances and complexities of the Community. 3 DE C I S I O N M A K I N G L E A D I N G TO A N E F F E C T I V E P L A N The most difficult component of the RMP development will of course be the decisions that need to be taken by Council on what programs or initiatives will be cut back or eliminated and which are essential to the Community and need to be further developed or enhanced. These are often emotional issues and there may be competing agendas. Individual community members, who may be friends and relatives, will be directly affected by the decisions taken. For this reason the investment made at the front end in an effective Strategic Planning process will pay dividends. The discussions that have taken place during the SWOT analysis, the establishment of a set of values, vision and mission statement and development of key strategic directions will assist in clarifying which decisions will need to be taken at the Council as the plan is being built. Ultimately since individual Band members will be affected by the decisions taken, the accountability framework that has been adopted will ensure that Band members are informed of the decisions and their impacts. They will have the opportunity to follow progress into the future to ensure that the decisions have the desired affect. Steps to Develop a Remedial Management Plan SWOT/ COMMUNITY INPUT VALUES VISION/MISSION STRATEGIC DIRECTION FINANCIAL BUDGETS How Do You Develop a Remedial Management Plan? 13

16 V Measuring and Assessing Performance of the RMP 1 FI N A N C I A L R E S U LT S A R E N OT T H E O N LY M E A S U R E M E N T As noted earlier, there are many ways to evaluate Community progress under an RMP. Obviously, the financial barometer measures the Band s success in meeting deficit reduction targets. While on the surface this seems nice and neat, experience indicates this is not the only or even the true measure of success. Band Councils understand the importance of financial stability that will come with deficit elimination and debt repayment. They understand the importance of working within budgets and cash flow forecasts so as to maintain essential services and programs into the future. However, Band Councils also believe strongly in the importance of job creation, capacity building and enhancing self esteem, in Community building and the preservation of cultural values and traditions. As a result, the Band Council will look to other measures to confirm progress is being made. One such measure may be an increase in quality housing for Band members. There will be concern the infrastructure of the Community will suffer as the financial well being of the Community improves. This may be perceived as adding to a housing crisis. In fact, the retirement of the accumulated deficit will no doubt be just one of the key strategic initiatives identified. It will be important to establish goals and measurement mechanisms for each of the key strategic initiatives just as the financial forecasts measure the success of the deficit elimination plan. 2 SE T T I N G R E A L I S T I C, AC H I E VA B L E M E A S U R A B L E G OA L S A N D AC T I O N P L A N S Once a key strategic initiative has been selected and the long term goal established, the goal should be broken down to achievable, measurable annual targets so performance can be tracked against results. Updating the RMP will therefore encompass more than just the financial performance imbedded in the RMP but also include reference to the impact the Band is making on other key areas that will ultimately benefit the Community and members as a whole. While it is effective to track performance on a strategic initiative by clearly articulating specific measurable, annual targets and then comparing results to those, it is also important to develop an implementation plan to ensure progress is made during the year and between planning cycles. To develop the implementation plan the action items should be documented that will need to be undertaken in the coming year to ensure success. This will include assigning specific accountabilities to ensure that everyone understands their role and commitment to moving issues forward. An effective way to keep these items front and centre in everyone s mind might be to assign overall management responsibility of each initiative to an appropriate member of Council who would provide the update on progress at the regular RMP meetings. By doing so, workload is shared, members become more engaged and there will be no surprises that might arise if a long period of time lapses between updates. Previously it was mentioned that the impact of the budgeting and financial management process is only as meaningful as the quality, timeliness and accuracy of the accounting system. In the same way, the impact of the monitoring process for the other key strategic initiatives will be mitigated by poor quality follow up or information. Care must therefore be taken to ensure that once goals are established and annual targets set, that systems and feedback loops exist to track and report on results. 3 CO N T I N U O U S M E A S U R E M E N T I S K E Y During the early stages of the RMP, follow-up monthly meetings will take place with INAC and the Band Council. Once comfort is established that satisfactory methodologies and follow-up is in place, these may be cut back to quarterly meetings. It is important through these reporting meetings to ensure accurate information is available. In the event that the Band finds itself off track, the reasons for this should be highlighted and a new action plan set in place to correct. Depending on the severity of the situation, or the deterioration in performance, it may be necessary to restate targets. If so, this should be highlighted at the earliest opportunity to retain credibility and keep a realistic view of the Community s potential in mind. Every effort should be made to avoid any surprises, which serve to damage the Band s and the Aboriginal Financial Officer s credibility. 14 Measuring and Assessing Performance of the RMP

17 Developing an Effective Remedial Management Plan 4 AB O U T P E R F O R M A N C E M A N AG E M E N T Performance management is a process that uses various activities to ensure the strategic and operational objectives of an Aboriginal organization are consistently being met in an effective and efficient manner. When applied to the RMP, it ensures the objectives of the RMP are being met. Performance management not only relates to the performance of employees but also to the whole organization, a department, a program, policy, property, and processes. For a further explanation on performance management, consult Key performance indicators are important measurement tools. They are measures that relate to the process of establishing and implementing strategic direction. They indicate results and identify opportunities for improvement. Performance indicators can be established for: Cost and stakeholder satisfaction (e.g. INAC and Band members); Community standards; and/or Legislative activity. For example, one of the most important indicators for an Aboriginal community is member satisfaction. Measurement of this indicator involves feedback from members based on proposed actions versus actions taken or performed, what you did and how it related to the members, and their impression of whether or not they are getting value based on expectations. The following AFOA publications and related courses can assist in establishing performance measures and reporting: Strategic Management & Accountability for First Nations Best Practices to Consider: This publication provides Aboriginal leaders with key information about strategic management and accountability and highlight some best practices, including performance management, to help enhance the quality of Aboriginal practices in planning and accountability. Performance Measurement & Reporting in First Nations:A Focus on Results: This publication will enable First Nations to use performance reporting as part of their strategy to enhance performance and strengthen their communities and organizations. The focus is on reporting on performance to community members. The publication and related course will identify core principles of performance reporting in First Nation environments and draw the link to financial reporting. Managing Employee Performance For Aboriginal Managers: This innovative resource introduces the Personal PerformanceWheel a tool to evaluate employee performance which brings together principles of human resources management, traditional aboriginal teachings on values and ethics and the teachings of the medicine wheel. Measuring and Assessing Performance of the RMP 15

18 VI Communicating Around the RMP 1 IM P O RTA N C E O F B A N D C O M M U N I C AT I O N S As stated above, the involvement and understanding of the whole Community in the RMP process will be critical to its acceptance and success. First and foremost, the Community Members will need to understand why the Band has to develop an RMP. The reason for the intervention, the role of the parties involved and the need for a Co-Manager/Third Party Manager will need to be communicated openly. This may take several open meetings for those interested in participating, and everyone will need to be given a chance to voice their concerns. The Strategic Planning process should begin to turn Band members attention to the future and what may result from the process, as opposed to the past and how the situation deteriorated or might have been avoided. During these meetings, the use of an accountability framework as described above (Section I(5) pg. 5) will give everyone an opportunity to contribute to the planning process if they so desire, or ultimately, ensure they are aware of the decisions taken, the reasons they were taken, and be able to track progress against goals. 2 CO M M U N I C AT I O N S W I T H OT H E R S TA K E H O L D E R S Effective communication with other key stakeholders is just as important. This will include INAC and the Co-Manager in addition to Band creditors. The frequency and nature of communications and interaction between INAC and Co-management are defined somewhat by the terms of the RMP, however Council should be supportive of an open and communicative relationship. The process will be successful if everyone operates from a position of openness and trust as opposed to an adversarial relationship. Band creditors should be aware of the nature of the intervention and the impact it will have on the repayment terms that presently exist. If repayment terms are modified through negotiation these should be documented in writing and in the event any delay takes place in the band s ability to satisfy these negotiated terms the situation should be communicated immediately to the creditor. Once again the desire is to build a relationship that is founded on credibility and delivery against commitments, or notification and discussion if this is not possible. S U M M A RY The intervention by INAC and requirement of establishment of an RMP will be a difficult, emotional and troubling event for Band Council and Band Members. There will be a sense of sorrow and anger that can overwhelm the Community. However, properly managed, the process can be constructive and instructive for Council and Community Members. This necessitates open communication from start to finish, empathy on the part of all, thoughtful analysis and planning, and careful implementation and follow-up. Many positive experiences exist indicating the benefits that might be derived from the RMP process. Following are two case studies which highlight the potential for strengthening a First Nation Community from the RMP experience. 16 Communicating Around the RMP

19 Developing an Effective Remedial Management Plan VII Case Studies Learning from the Experiences of Other First Nations C A S E S T U DY 1 L I S T U G U J M I GMAQ G OV E R N M E N T The community The Mi gmaq community of Listuguj is located in the south-east corner of the province of Quebec along the beautiful Restigouche River, and directly across from the Town of Campbellton, New Brunswick. Highway 132 cuts through the centre of the Reserve, north of the residential section of the community. This is an important highway in Quebec as it is the south-eastern link to the Gaspé Peninsula and is the main access route to Listuguj. The population of Listuguj consists of 2,300 on-reserve Members and 1,200 off-reserve Members. Listuguj is made up of a total land mass of 3, hectares. A gravel road network (5,890 meters), a paved road network (4,540 meters), and more than 600 houses are to be found within the territory. According to legend, the (Restigouche) river was named by a distraught Mi gmaq Chief whose son was killed while leading an expedition against the Mohawks who were poaching salmon. The Chief opposed the battle plan and when the entire Mi gmaq party was massacred on the banks of the river, he named it Listo Gotj he who disobeys his father. The government of Listuguj consists of twelve Councillors and a Chief. The term of office is two years under the current Section 11 Indian Act Regulations governing elections. The Listuguj Mi gmaq Government is a member of the Tribal Council called Mi gmawei Mawiomi Secretariat along with La Nation Micmac de Gespeg and the Micmacs of Gesgapegiag. The Listuguj Mi gmaq Government has a self-governance mandate. It offers programs in health services, assisted living (social services), education, protective services, public works, band administration, and economic development. Its main revenue generating activities are forestry (harvesting, chipper, and conservation) and fishing (snow crab, shrimp, and lobster). The Listuguj Community Health Services provide culturally appropriate health services and strives to ensure health care providers are sensitive and respectful to Mi gmaq health needs. It is focused on enhancing prevention, nutrition and health promotion. Listuguj Community Social Services Directorate assumed control for social services from the Provincial and Federal Governments in It delivers a variety of programs aimed at social development through healthy lifestyles and wellness. The Listuguj Education Directorate built and operates a school in Listuguj with approximately 300 students in Nursery to Grade 8. Students in Grade 9 and up attend the high school in Campbellton, New Brunswick. Also, the Education Directorate provides assistance to Band Members to gain access to post secondary education. Financial history Under the 1996 Marshall Agreement, opportunities for the generation of commercial income were enhanced, particularly in fishing and forestry. The Community s budget rose to over $40 million, but despite the growth in revenue, deficits also grew. It became very evident that strong leadership from the Chief and Band Council would be required to seize control of the situation. The Community experienced operating deficits over several years and in the late 1990 s operated under a low level intervention involving a self-managed RMP. Unfortunately, financial deficits continued. In 2003, when year end audited financial statements revealed the accumulated deficit had risen to over 10% of annual revenues, the Listuguj Mi gmaq Government voluntarily entered co-management. An independent professional firm was appointed to co-manage with the Government (Council) and develop and implement an RMP. Causes of the deficits were cited as: 1 Over expenditures in the capital program and on specific capital projects; 2 Insufficient funding for capital projects; 3 Ineligible expenditures under contribution style programs resulting in claw backs by the respective funding agencies; 4 Over expenditures in payroll in a Community forestry program; 5 Legal settlement on labour disputes; and 6 Over expenditures in a post secondary program. Coincident with the establishment of the co-managed RMP, an election was held. The elected Chief and Band Council had run on a platform of financial stability and independence. Once elected, they were able to act on the basis of this strong Community support. Case Study 1 Listuguj Mi gmaq Government 17

20 Experience with the RMP process The early focus of the Band Council centred on expenditure control. Unfortunately, this had little or no impact on improving the Band s financial position. Consequently, the Band Council revised its focus to understand, in detail, the sources of revenue, the nature of Government funding agreements (particularly the claw back features and inability to apply surpluses from one program to another), and the nature of the Band s variable income based on commercial activity. Listuguj Council learned that only 55% of its revenues came from government programs. The remaining 45% of revenues were generated from commercial enterprises. While under the Band s control, these commercial enterprises represented complexity of variability in financial results due to size of harvest or catch, commodity prices, and rising expenses related to the activities. Not all Council Members were familiar with financial information, so there was a steep learning curve for some. However, this helped the Council to dispel some myths that needed to be shattered, i.e. INAC will fund deficits, or Banks will fund deficits, or INAC and Banks create jobs. Through its revised focus and subsequent understanding of the sources and nature of its revenues, the Council established three high level goals as the desired outcome of the RMP: 1 Introduce a new financial model; 2 Maintain and improve financial controls; and 3 Build and strengthen the capacity of Band management. Also, the Band Council adopted four commitments to guide its activities in reaching financial stability: 1 Balance the annual budget; 2 Continue to operate under the RMP until a $1,000,000 surplus is achieved, or alternatively, adequate working capital is achieved; 3 Review the effectiveness and efficiency of all existing programs; and 4 Integrate long-term debt into operating program budgets. To deliver a balanced budget, each program director was required to adhere to a challenging budgeting process and live within the specific funding envelope. This resulted in the need to identify priorities, which led to many difficult decisions, cut backs in certain programs and deferrals of capital spending. The commercial enterprises were examined closely in an effort to improve their profitability or reduce losses where they were evident in the past. As the RMP was implemented, the Band obtained a much better understanding of the goals and objectives of the entire organization, leading to a different view of them. With the new financial model, all of the Band s approximately 180 programs were grouped into four main sectors: Core Programs (primarily Government funded), Employability, Commercial and Capital. Core Programs include programs in Health, Assisted Living (Social Services), Public Security, Education, Economic Development, Public Works and Band Support. The importance of working within budgets and achieving surplus targets was balanced with the need for job creation, capacity building, enhancing self-esteem, Community healing and cultural values and traditions. The employability component was extracted out of each of the three other sectors to allow the Band to better understand the true impact the employability goals and objectives were having on each of the Band s Core Programs. Creating a Commercial sector allowed the Band to determine the real picture in each Core Program prior to subsidization from Commercial profits and the amount of Commercial profits available to subsidize under funding in Government funded programs. During the implementation of the RMP, the Band realized its initial schedule for retirement of the cumulative deficit was too aggressive. Changing market prices in commercial fishing required an extension to the time period to eliminate the deficit. This realization, and a program to facilitate the extension, was possible due to the improved understanding of the financial position of the Band and the involvement of all parties in the implementation of the RMP. Lastly, the Council established a process of early identification of profitability of the commercial operations during the year through access to improved financial information. If profits were going to be realized, then 75% of the newfound profits would be treated as dividends and would be made available to the Council to invest in program delivery on a one time basis. These dividends could not support recurring expenses since the profitability of the variable components of the Band could not be counted on each year. The remaining 25% of profits was retained by the Council and applied against the elimination of the accumulated deficit. 18 Case Study 1 Listuguj Mi gmaq Government

21 Developing an Effective Remedial Management Plan A specific example of this practice in action arose for the Listuguj Community with its crab fishery. In 2004 crab prices were high and the Band experienced a very good year in landings. A large unplanned profit was realized by the Community owned fishery. With the discipline introduced to the budget process via the RMP, these profits were treated as bonus funds. A wish list was created from submissions from the various program directors and after careful review and consideration, Council applied 75% of the profits against these items on a priority basis. The remaining 25% profit was applied against the Band s accumulated deficit. The next year crab prices were much lower and the same level of profit was not realized, but the Band still met budget on an overall basis, because the superior profits of the year before were not treated as though they would be a recurring item. The Band involved the Community in the development of the RMP through informal, one-on-one discussions. Individuals expressed their concerns and opinions with the Chief and individual Band Councillors. This feedback grew as the Community learned more about the Band s business through the Community Newsletter (on both financial and non-financial matters). The feedback was used by the Chief and Council to tailor the priorities of the Community. This input, along with cooperation from the Community at large, the Chief, Band Councillors, Band management, Band staff, INAC, the banks and co-manager, was critical to setting goals, establishing the future direction for the Community and development of the RMP. Please refer to the appendix at the end of this case study for a flowchart of Listuguj s financial model developed as part of its RMP. In summary, the financial model introduced a high level of discipline in planning and improvements in access to accurate and timely financial information. As a result, the Band Council developed the ability to make informed decisions. However, it took commitment to enforce the discipline and ensure the Community was able to meet its budgets. The RMP had a very positive impact on Program service levels. Program Managers became much more involved in the financial and budgeting processes. They came to realize a sense of inclusion and appreciation as their involvement, opinions and feedback were incorporated into the processes. Similarly, the impact on Community goals and objectives was very positive. The informal consultative process used during development and implementation of the RMP provided a better understanding of Community expectations. This contributed directly to improvements in areas of concern to the Community. For example, financial improvements from the new financial model were applied to employability and commercial activities, two key concerns of the Community. Since implementation of the financial model, Listuguj has seen its accumulated deficit fall to less than 2% of total revenue. This was a remarkable turnaround in two years. As a result, the Band has been approved to move back to a low level intervention with a self-managed RMP. The Council adopted a six-month transition out of co-management. The plan included actions to deal with each main creditor and four key problem areas identified during the co-management period: 1 Management practices Over time, poor practices and the absence of other practices allowed over expenditures of funds and the minimization of revenue generated, resulting in the impairment of the resources available to Listuguj. A new financial model was identified and implemented during the transition period. 2 Policies There was a lack of policies providing guidelines to manage the affairs of the Band. Fourteen key policies were developed and implemented during the transition period. These policies deal with a variety of matters, including tendering, conflict of interest, social development, personnel, and transfer of commercial profits. 3 Resources Resource problems arose in the past from the inadequate allocation or availability of staffing and financial means needed to address the needs of the Band. Actions taken to address these problems included appointment of personnel to strategic roles and development of a five-year capital budget. 4 Timing Decisions were not always made in a timely manner, procedures were not executed in the expected timeframes, and communications were not always delivered when expected. Policy and procedural changes were introduced to address this, including schedules for financial reporting and the use of formal meeting procedures and tools. Currently, Listuguj is beginning the process of negotiating a new funding agreement with the Government of Canada. The Listuguj Mi gmaq Community now sees the opportunity to be free of debt and in a healthy position of growing financial independence in the near term. Case Study 1 Listuguj Mi gmaq Government 19

22 Lessons learned Get the commitment or buy-in of the Chief and Council to the RMP and ensure it is sustained throughout the implementation of the RMP. The best means to retire debt may not be a reduction in expenditures. Listuguj started the RMP process with this focus. However, it learned early that a more effective approach was to really understand the sources and nature of revenue. This provided the basis for what was available to spend and for tough decisions based upon Community priorities. Leverage the program knowledge and experience within the Band to get a good understanding of the program goals and objectives and sources and nature of revenue. An improved understanding of the Community and program goals and objectives (financial and otherwise) can have a profound impact on how the goals and objectives are viewed. This can lead to significant changes in the organization, structure and administration of programs. Listuguj s restructure of programs into sectors facilitated better understanding and management of Core Programs, how they were impacted by other programs, and how they were funded (Government and subsidization by Commercial profits). Similarly, this change can lead to a new balance between financial and non-financial goals and objectives and the definition of success. Listuguj now measures success beyond the bottom line of deficit/surplus. It introduced a number of nonfinancial outcomes vitally important to the Community, such as employment of Community members. Better understanding and information related to commercial activities provides a true picture of the funds available to support programs, facilitating avoidance of overspending. Listuguj was able to identify and commit commercial profits only as they occurred, rather than committing to spend a lump sum in advance (and thus risking a shortfall that had to be covered by debt). 20 Case Study 1 Listuguj Mi gmaq Government

23 Developing an Effective Remedial Management Plan Case Study 1 Listuguj Mi gmaq Government 21