2013/2014 Year-End Reporting Handbook

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Requirement Presentation to First Nations, Other

1 Aboriginal Affairs and Northern Development Canada British Columbia Region Financial Reporting Requirement Presentation to First Nations, Other Recipients and Auditors for 2013/2014 fiscal year reporting 1

2 2013/2014 Year-End Reporting Handbook AANDC and HC-FNIH have consolidated their financial year end reporting requirements into this Year End Reporting Handbook (YERH) AANDC and HC-FNIH Recipients must report using the YERH and submit their Audited Consolidated Financial Statements ACFS in the format available on AANDC s Internet Site. 2

3 The First Nations Financial Transparency Act, The Act The Act or FNFTA at ( lois.justice.gc.ca/eng/acts/f-11.66/page- 1html)creates 1.html ) the following new requirements for each First Nation that is a band as defined in subsection 2(1) of the Indian Act (unless it is party to a comprehensive self-government agreement given effect by an Act of Parliament): 3

4 First Nations Financial Transparency Act, The Act Cont d d. Each First Nation must publish on its Internet site, or cause to be published on an Internet site, both its Audited Consolidated Financial Statements (ACFS) and a Schedule of Remuneration and Expenses of Chief and each of its Councilors for the fiscal year, within 120 days after the end of the financial year (29 th of July) AANDC is required to do the same once it receives the ACFS and Schedules from FN. 4

5 First Nations Financial Transparency Act, The Act Cont d. The YERH requires: First Nations to whom the Act applies must provide AANDC its submission in two distinct packages: 1. Documents to be published on the internet Audited Consolidated Financial Statements (ACFS). Schedule of Remuneration and Expenses (Chief and Councilors) Annex B - An auditor s report or a review engagement report is required. 5

6 First Nations Financial Transparency Act, The Act Cont d. 2. Documents NOT to be published on the internet (as per Section 6.1.1) Program/Service/Activity Revenues and Expenses Schedules (Annex A). Schedule of Remuneration and Expenses (Unelected/Appointed Senior Officials) Annex C An auditor s report or a review engagement report is required. Statement of Moveable Assets Reserve (Annex D) An Auditor s report or review engagement report is required. 6

7 Financial Reporting Requirements Five different types of Financial Reporting under ARFA Agreement: - F-0080 Annual Audited Consolidated Financial Statement (All First Nations) - F-0081 Annual Unaudited d Schedule of Revenue and Expenditure (Not applicable to First Nations) 7

8 Financial Reporting Requirements - F-0190 Annual Audited Financial Statement - F-0191 Annual Audited Schedule of Revenue and Expenditure - F-0192 Annual Unaudited d Schedule of Revenue and Expenditure 8

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10 F ALL First Nations are required to send the financial statements in 2 distinct packages which must arrive at AANDC together. - 1st package contains documents to be published on the internet. - 2nd package contains documents NOT to be published on the internet. 10

11 F First Package Documents to be published on the internet: 1- Annual Audited Consolidated Financial Statements which includes the following: - Management Responsibility Letter - Auditor s Report, signed by auditor - Statement of Financial Position, Signed by Chief and Council - Statement of Operations (revenues by source, AANDC revenue must reconcile) - Statement of Changes in Net Debt (or Assets) - Statement of Cash Flow 11

12 F First Package, Cont d - Notes to Financial Statements - Comparative figures for previous year must be presented. - A budget column for all revenues and expenditures. - Schedule of Federal Government Funding (SFGF) is no longer mandatory, as the entire audit will be published online. 2- Schedule of Remuneration and Expenses (Chiefs and Councilors) Annex B 12

13 F-0080 Reconciliation of Revenue Reconciliation of AANDC Revenue on Statement of Operations to AANDC funding confirmation. Reconciliation is NOT based on Cash Flow. AANDC and/or HC must be able to reconcile funding provided to the Recipient. The following reconciliation is to be submitted as part of the Audited Financial Statement package: 13

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15 F Second Package NOT To Be Published Online 1. Program/Service/Activity / Revenue and Expenditure Schedules (Annex A) With signed approval by Chief and Council and/or senior management OR An accountants notice to reader. Formats are included in YERH. 15

16 F Second Package, Cont d 2- Schedule of Remuneration and Expenses (Unelected/Appointed Senior Officials) (Annex C) An auditor s report or a review engagement report is required. 3- Statement of Moveable Assets Reserve (Annex D) An auditor s report or a review engagement report is required, where applicable. 16

17 F-0080 Schedule of Programs/Services/Activities Revenues and Expenditures Each AANDC Revenue by activity/program code must be reported separately. Disclose ALL revenues/funding received by source for each AANDC-funded activity/program. AANDC will prorate its portion of revenues applied to expenditures to determine surpluses and deficits. Expenditures are detailed by line object on accrual basis. Each capital project (including housing) must be reported separately. SET, FLEX, FIXED, and BLOCK funding and matching expenditures must be presented separately Disclose Budget figures and Prior-year Unexpended Funds 17

18 F-0080 Schedules of Remuneration and Expenses Two separate Schedules of Remuneration and Expenses For Chief and Council (Annex B) For Unelected Senior Officials (Annex C) Auditor s attestation or review engagement report (Format must match YERH Annexes B & C) 18

19 F-0080 Schedules of Remuneration and Expenses, Cont. The FNFTA requires the public disclosure of a First Nation s audited consolidated financial statements and a schedule of remuneration and expenses paid to its chief and councillors. Remuneration is defined din the At Act as any salaries, wages, commissions, bonuses, fees, honoraria and dividends and any other monetary benefits other than the reimbursement of expenses and non-monetary benefits. 19

20 F-0080 Schedules of Remuneration and Expenses, Cont. Expenses are defined in the Act as including costs of travel, transportation, accommodation, meals, hospitality and incidental expenses. Clause 6 of the Act does not require the public disclosure of remuneration (salaries and expenses) paid to the chief and councilor by any entity other than the First Nation or its entities which h are consolidated d in its audited d financial i statements. (Pls see FNFTA and disclosure of Remuneration Guide provided). 20

21 F-0081 Package Not applicable for First Nations Unaudited Program/Service/Activity Revenues and Expenses Schedules (Annex A) Each AANDC Revenue by activity/program code must be reported on separate schedules. Expenditures are detailed by line object Each capital project (including housing) must be reported separately SET, FLEX, FIXED, and BLOCK funding and matching expenditures must be presented separately 21

22 F Package Recipients Other than First Nations, Tribal Councils and First Nation Political l Organizations (includes Non-For-Profit) using the General Reporting Model Annual Audited Consolidated Financial Statements Program/Service/Activity Revenues and Expenses Schedules (Annex A) 22

23 F Package Recipients e Other than First Nations, Tribal Councils and First Nation Political Organizations (includes Non-For-Profit) using the General Reporting Model Audited Program/Service/Activity Revenues and Expenses Shdl()( Schedule(s) (Annex A) - An auditor s report or a review engagement report is required. 23

24 F Package Unaudited Program/Service/Activity Revenues and Expenditures Schedules (Annex A) 24

25 Types of Funding Two types of funding provided in AANDC Funding agreements: 1- Grant 2- Contribution: - Set Contribution Funding - Fixed Contribution Funding - Flexible (Flex) Contribution Funding - Block Contribution o Funding Note: a) All contribution funding are subject to recovery of ineligible expenditures and/or unexpended funds under different terms and conditions. b) All deficits are the responsibility of the Recipient. 25

26 SET Funding Set funding is a contribution for which any ineligible expenditure and unexpended funding must be recovered by AANDC at the end of the fiscal year. Unexpended Set Funing is NOT deferrable to subsequent year(s). AANDC FSO s (BC Region) use the expenditures as reported in Annex A schedules to determine AUDIT recoveries and reimbursements. AANDC Program Officers may later adjust recoveries and reimbursements under a separate cover. All deficits are the non- reimbursable except: 26

27 Set Funding, Cont d Reimburseable Set deficits in Social Assistance can be: - Basic Needs (Transaction Activity Code 02305) - Child Out of Parental Home Allowance (TA Code 02307) - Maintenance Institutions (TA Code 02370) - Maintenance Foster Homes (TA Code 02371) - Maintenance Group Homes (TA Code 02372) - Maintenance Kinship Care (TA Code 02379) - Maintenance Post Adoption Subsidies (TA Code 02380) - Institutional Care Type II (TA Code 02397) - Adult Foster Care (TA Code 02398) 27

28 Set Funding 28

29 FIXED Funding Fixed Funding is a contribution for a program, service or activity for which any unexpended funding will be reimbursed to AANDC by the recipient. The recipient shall be released from the obligation to reimburse Unexpended Fixed Funding to AANDC, and may retain Unexpended Fixed Funding for one year following the end of the Fiscal Year in which funds were provided, if ALL following conditions have been met: 29

30 FIXED Funding, Cont d a) the Council has fulfilled ALL of the delivery requirements of fthis Agreement tfor that program, service or activity in the Fiscal Year for which the funding was provided; b) the Council expends the Unexpended Fixed Funding in the one-year period immediately following the Fiscal Year for which the funding was provided: 30

31 FIXED Funding, Cont d. (i) on a program, service or activity that is similar to and has the same purpose as the program, service or activity for which the funding was provided; or (ii) in accordance with a plan (See Supplementary Information provided) for expenditure of the Unexpended Fixed Funding that is submitted by the Council to AANDC within 120 days after the end of that Fiscal Year and that AANDC accepts by way of notice to the Council. 31

32 FIXED Funding, Cont d. c) the Council reports on its expenditure of the Unexpended Fixed Funding in accordance with the Year End Reporting Handbook. Any Unexpended Fixed Funding that the Council does not expend in accordance with this section must be reimbursed to AANDC under section 3.5 (Reimbursement of Unexpended FIXED Funding). All deficits are the responsibility of the Recipient. 32

33 FIXED Funding, Cont d. BC Region will use First-In / First-Out (FIFO) method in calculating unexpended FIXED Funding. Prior year unexpended FIXED funding is considered spent first before current year funding. BC Region will net out deficits with surpluses in unexpended Fixed Funds in the areas of Elementary/Secondary Education and O&M. Prior year Unexpended Fixed Funding must be reported in the schedules and ACFS. 33

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35 Flexible (Flex) Funding Flexible (Flex) Funding is a Contribution for which any unexpended funding may be retained and used by the recipient in a subsequent Fiscal Year, if conditions specified in the Agreement are met, until the earlier of the end of that program, service or activity and the expiry or termination ti of this Agreement, after which h any surpluses will be recovered by AANDC. Pi Prior year Unexpended dflex Funding must be reported in the schedules and ACFS. All deficits are the responsibility of the recipient. 35

36 BLOCK Funding Block Funding is a Contribution for a group of programs, services and/or activities for which funding is provided under the funding arrangement Any Aggregate Unexpended d funding may retained and used by the recipient if terms and conditions set out in the funding arrangement are met. Aggregate Unexpended Block Funding means the NET amount by which all amounts paid to the recipient identified as Block exceeds the total amount expended by the recipient. 36

37 BLOCK Funding, Cont d Flexibility to transfer between Block Funded Programs. Net transfers between Block funded programs must net out to zero and must be clearly traceable. Ineligible expenditures or transfers will be recovered in the same fiscal year. Aggregate surplus/deficit it is carried forward until the end of the agreement. 37

38 BLOCK Funding, Cont d Prior year Unexpended Block Funding must be reported in the schedules and ACFS. Surplus will be classified as Long Term Liability until the year before the end of the agreement, and then it will be classified as Deferred Revenue for the last year onwards. Aggregate surpluses may be retained in perpetuity p after the end of the agreement if: 38

39 BLOCK Funding, Cont d Surpluses will be used within block services, or The recipient sends a plan to AANDC to use the surplus in a different program outside block services, and AANDC must approve the plan by a written notice. A plan may be communicated to AANDC (Please see Supplemental Information sheet provided) 39

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41 NEW Block - Continued Block Funding Summary Sheet FY Sched # & Surplus (Deficit) AANDC Block Program Block Block Trf Sched # & Cumulative Net Name or Beginning of Block Other Block Total Block Expenditure Transfer Name or Surplus (Deficit) Page# Year Revenue Revenue Revenue s In/(Out) Page# End of Year 41

42 Types of Funding - GRANTS GRANT same as previous years, recipient may retain if they qualify for the grant 42

43 Financial Statement Review Cycle Call letter will be sent to recipient to identify who their auditor will be by mid- February. Recipients report to AANDC who their auditor is by March 15 (two weeks prior to end of each fiscal year). FN must provide their approval or disapproval for AANDC to contact the auditor directly. 43

44 Financial Statement Review Cycle, Cont d AANDC sends confirmation packages to auditors in May each fiscal year. Packages include: - Funding Confirmation - Checklist for AANDC audit acceptance - Trust fund balances - Guaranteed loan balances - Social Development statistical rollup - List of funded Capital projects - List of PAYE (Payables At Year End) 44

45 Financial Statement Review Cycle, Cont d AANDC receives audits July 29 Please see page 5 of the program guide for information i on how to send in reports. noperations(directorates)/fundingservices/ resourcesforeveryone/bc_region_program _Guide_2013_2014_e.PDF 45

46 Financial Statement Review Cycle, Cont d Initial Review: To ensure Completeness. - AANDC s target is to accept or reject ACFS within 10 days of its receipt. - Does the ACFS package meet the Year End Reporting Handbook (YERH) requirements? - Does AANDC have enough information to proceed with the review? - Initial acceptance/rejection letter of Financial Statements is sent out. 46

47 Financial Statement Review Cycle, Cont d Detailed Review: To ensure Correctness: - FSO has up to 60 to complete the review of the financial statements. - Within the 60 days, the FSO will request comments from dff different programs on their funding and eligibility of expenditures as presented in the ACFS and schedules. 47

48 Financial Statement Review Cycle, Cont d - FSO will no longer use the lesser of the AANDC reports vs. the amounts reported in the Shdl Schedules (Annex A). The expenses as per schedule (Annex A) will be used for the purpose of the audit review. - Program officers will comment on the eligibility of the expenditures as presented in the ACFS and schedule (Annex A). 48

49 Financial Statement Review Cycle, Cont d - Any ineligible expenditures will be recovered as part of the Audit Review. - Program officers may contact recipients regarding compliance review, missing reports or adjustments of recovery or reimbursements under separate cover from the ACFS review. - Program officers have 20 days to respond to FSO with their comments. 49

50 Financial Statement Review Cycle, Cont d FMC (Financial i Management Consultant) t) will do a technical review of the ACFS packages with the FSO. FSO will prepare a Financial Statement Review Letter and a Detailed Financial Report to present to Financial Statements Review Committee (FSRC) FSRC will approve the AFCS as well as the Financial Statement Review Letter and Detailed Report, or will recommend further adjustments. 50

51 AANDC Financial Statement Review Letter Financial Statement Review Letter addresses audit opinion, and the recipient s financial position Three financial ratios are used for recipients using the common government reporting model including all First Nations. - Liquidity - Sustainability - Working Capital 51

52 AANDC Financial Statement Review Letter, Cont d For other recipient using the non-profit presentation AANDC is using operating equity divided by total revenue. The letter summarizes surplus us recoveries, e es, reimbursements, and deferred revenues Detailed report and annexes show how the numbers in the letter were calculated 52

53 AANDC Financial Statement Review Letter, Cont d Annexes show analysis of all funded services and all capital projects except for grants Recoveries e es and reimbursements e : Will be netted in same fiscal year; possible recovery in one fiscal year; reimbursement in next 53

54 Standards for Default Management Funding Arrangement Article 9.0 Default - Default of funding provisions - Denial or adverse opinion by auditor - Negative Financial i Ratios - Health and safety of a member is at risk Governance Issues Program Delivery or the lack thereof. 54

55 Improvement in Default Policy Emphasis on prevention and voluntary management development plans (MDP), and recipient-management Action Plan (MAP), formerly called RMP. Default management can be on a program specific basis Default prevention, Management and Sustainability are emphasized, where previous policy emphasized default management 55

56 Types of Default Management Monitoring by FSO and recipient. 90-day plan possibly a Management Development Plan (MDP). Management Action Plan (MAP) recipient - managed. MAP recipient-managed with a Recipient- Appointed Advisor (formerly Co-Manager). Third Party Manager Agreement. 56

57 Default based on Ratios For recipients using the non-profit presentation model we still use the operating surplus/deficit divided by total revenue, intervention triggered at -8% For recipients using the common government or PSAB model (including all First Nations) we use 3 financial ratios: -Liquidity <0.90 is considered Unfavourable - Sustainability <-0.50 considered Unfavourable - Working Capital <-0.08 considered Unfavourable 57

58 Financial Ratios - Liquidity The liquidity ratio calculates whether the Recipient has assets sufficient to cover liabilities. It is a measure of short-term financial health Current Assets divided by Current Liabilities. 58

59 Financial Ratios - Sustainability The sustainability ratio calculates the Recipient's ability to service operational and capital obligations over the long term. It is a measure of longer term financial health. Financial a Assets s less GBE s and TF divided ded by Total Liabilities. 59

60 Financial Ratios Working Capital This ratio tests to see if current working capital deficiency can be covered with one month's revenues. Current Assets less Current Liabilities divided by Total Revenue. 60

61 Policy 200 Default Prevention and Management aandc.gc.ca/eng/ Directive 205 Default Prevention and Management aandc.gc.ca/eng/ Directive Third Party Funding Agreement Management aandc.gc.ca/eng/

62 Questions?? Ashraf Ghali Financial Management Consultant AANDC, BC Region Tel:

63 BC Audit Review Thanks for coming to the conference! 63

Year End Reporting Handbook*

Year End Reporting Handbook* Note: On March 20, 2013 the Technical Advisory Group (TAG) reviewed the 2013 AANDC Year End Handbook and produced a BC version of the document. Edits were for clarity and spelling corrections and have