Aboriginal Affairs and Northern Development Canada
British Columbia Region
Financial Reporting Processes
Presentation to First Nations, Other Recipients and
Auditors
for 2012/2013 fiscal year reporting
1
2012/2013 Year-End Reporting
Handbook
• AANDC and HC-FNIH have consolidated
their audit reporting requirements into the
this YERH and Audited Consolidated
Financial Statements (ACFS). Both
departments are referred throughout the
document as AANDC and/or HC.
2
• Financial statements are essential elements of
•
accountability. They depict a Recipient’s financial
health and provide information on how much
funding was spent and for what purposes.
Financial statements also assist in future
decision making.
Financial statements are prepared by the
Recipient and audited by an independent and
qualified auditor. The auditor’s function is to
determine the completeness and fairness of the
financial statements in all material respects.
3
2012 2013 BC Region Overview
• F-0080 Annual Audited Financial
Statement
• F-0081 Annual Unaudited Schedule of
Revenue and Expenditure
• F-0190 Annual Audited Financial
Statement
4
2012 2013 BC Region Overview
• F-0191 Annual Audited Schedule of
Revenue and Expenditure
• F-0192 Annual Unaudited Schedule of
Revenue and Expenditure
5
6
F-0080 – Annual Audited
Consolidated Financial Statements
• First Nations, Tribal Councils and First Nation
Political Organizations use the Canadian
Public Sector Accounting Standards (CPSAS)
• This is based on the recommendations of the
•
2008 Financial Reporting by First Nations
study from CICA
http://www.afoa.ca/acfme/pdf/Financial_Rep
orting_by_First_Nations_Report.pdf
7
F-0080
• Recipients other than First Nations, Tribal
Councils and First Nation Political
Organizations, should consult their auditor
as to which accounting rules apply
(Canadian Public Sector Accounting
Standards or non-profit)
8
F-0080
It is acceptable to send the financial
statements in 2 distinct packages which
must arrive at AANDC together.
9
F-0080 - First Package
• Annual Audited Financial Statements
includes:
- Auditor’s Report, signed by auditor
- Statement of Financial Position, signed by chief & Council.
- Statement of Operations (revenues by source, AANDC
revenue must reconcile)
- Statement of Changes in Net Debt (or Assets)
- Statement of Cash Flow
- Notes to Financial Statements
- Comparative figures for previous year must be presented.
- A budget column for all revenues and expenditures.
- Schedules of SFGF and Salaries & Honoraria with auditor’s
Attestation.
10
F-0080 - Reconciliation from
Statement of Operations to AANDC
funding confirmation
• 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:
11
12
F-0080 – SFGF Annex A (YERH)
• Schedule of Federal Government Funding
Format must match YERH
• Auditor’s attestation or review
engagement report is required
• or Band Council Resolution authorizing
release of entire audit on internet
• Reconciliation from Schedule of Federal
Government Funding to AANDC funding
confirmation
13
14
F-0080 - Second Package
• 1. Program/Service/Activity Revenue and
Expenditure Schedules
• With signed approval by Chief and Council
and/or senior management OR
• An accountants notice to reader.
• Formats are included in YERH.
15
F-0080
• AANDC Revenue by code must reconcile to
revenue on funding confirmation
• Expenditures listed by object
• Each capital project (including housing)
must be reported separately
• SET, FLEX, FIXED, and aggregated BLOCK
funding and matching expenditures must
be presented separately
• Transfers between Block Funding activities
must be clearly traceable per line item.
16
F-0080
• BC Region will net out deficits with
surpluses in unexpended Fixed Funds in
the areas of Elementary/Secondary
Education and O&M.
• Example, a surplus in Student
Transportation may be used to cover
deficit in Ancillary Support.
17
F-0080 - Auditor’s Management
Letter
• The CICA Handbook assurance
recommendation 5220.07 states that “The
auditor should communicate to the audit
committee or equivalent, significant
weaknesses in internal control which the
auditor identifies during the course of the
financial statement audit”.
18
• It is strongly recommended that the
“Auditor’s Management Letter” or
“Internal Control Letter” be provided to
AANDC and/or HC in all instances.
• However, this becomes a mandatory
reporting requirement in the
following cases:
• Where, a recipient is already under default
provisions of a funding agreement (a
continuation of a previously imposed
default; and
19
• When a Recipient is in default of its
funding agreement and AANDC and/or HC
has notified the Recipient that a default
management action is required, AANDC
and/or HC will request the “Auditor’s
Management Letter” or “Internal Control
Letter”.
20
F-0080
• Audited Statement of Receipt and
Expenditure of Indian Moneys (Trust
Funds - if any withdrawals) is no longer
required. However, it must be reflected in
Financial Statements and Notes.
21
F-0080 – Schedules of Salaries
and Honoraria
• Two separate Schedules of Salaries,
Honoraria, Travel, and Other
Remuneration for elected and unelected
officials.
• Auditor’s attestation or review
engagement report (Format must match
YERH Annexes B & C)
22
F-0081 – Package must include
• Schedule of Salaries, Honoraria, Travel
Expenses and Other Remuneration, for
Elected (Annex B) and Senior Unelected
(Annex C) Officials – AUDITOR’S
ATTESTATION
• Schedule (Annex E) of Federal Government
Funding – AUDITOR’S ATTESTATION
• Unaudited Program/Service/Activity
Revenues and Expenses Schedules (Annex
A)
23
F-0190
• Annual Audited Financial Statements
• Program/Service/Activity Revenues and
Expenditures Schedules
• Funding Reconciliation from FNITP
Funding Confirmation to Statement of
Operations
24
F-0191
• Audited Program/Service/Activity
Revenues and Expenditures Schedules.
• Auditor’s Report
25
F-0192
• Unaudited Program/Service/Activity
Revenues and Expenditures Schedules
(Annex A)
26
Types of Funding – SET
• Surpluses are recovered at the end of
each fiscal year
• BC Region uses the lower of the reported
expenditures or the audited schedules to
determine the recoveries and
reimbursements.
• Deficits on capital projects or reimbursable
deficits in Social Assistance may be
brought forward from prior year.
27
SET – Continued
• Reimburseable set deficits in social assistance can be:
• Basic Needs (Transaction Activity Code 02305)
• Child Out of Parental Home Allowance (Transaction Activity
•
•
•
•
•
•
•
Code 02307)
Maintenance – Institutions (Transaction Activity Code 02370)
Maintenance – Foster Homes (Transaction Activity Code
02371)
Maintenance – Group Homes (Transaction Activity Code
02372)
Maintenance – Kinship Care (Transaction Activity Code 02379)
Maintenance – Post Adoption Subsidies (Transaction Activity
Code 02380)
Institutional Care – Type II (Transaction Activity Code 02397)
Adult Foster Care (Transaction Activity Code 02398)
28
Set
Funding
29
SSet Funding
30
SET – Continued
• April expenditure recognized as deferred
revenue by AANC may appear in the
previous year column.
31
Types of Funding - FIXED
• Surpluses may be retained for one fiscal year if:
– surpluses are used in the same program in
the next fiscal year, or
– The recipient sends a plan to AANDC within
120 days after end of the fiscal year to use
the surplus in a different program, and
AANDC must approve the plan .
– A plan may be communicated to AANDC via
email addressed to Program manager and
FSO.
32
Fixed – Continued
• Unexpended Fixed Funds will be held as
deferred revenue in AANDC analysis.
• AANDC assumes that unexpended fixed
funds are used first before tapping into
new year funding.
• Deficits are not brought forward, except
for Capital projects.
33
Fixed
Funding
34
Fixed Funding
35
F-0080 – CFNFA OLD BLOCK
• The following recipients had CFNFA
funding arrangements with old funding
types (AFA, contribution, FTP)
• 676 Kitamaat
• 700 Boothroyd
• 713 Canim Lake
• 1071 Nuu-Chah-Nulth Tribal Council
36
Types of Funding: NEW BLOCK
• 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 is carried
forward until the end of the agreement.
37
NEW BLOCK - Continued
• Opening surpluses and deficits at
beginning of funding arrangements are
not brought forward
• Surplus will be classified as Long Term
Liability until the last year of the
agreement, and then it will be classified as
Deferred Revenue for the following year.
• Aggregate surpluses may be retained for
one fiscal year after the end of the
agreement if:
38
NEW BLOCK - Continued
– 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 .
– A plan may be communicated to AANDC via
email addressed to Program manager and
FSO.
39
NEW BLOCK - Continued
• In presentation of schedules, AANDC and
other revenues should be shown at the
top, followed by all expenses by object
with Transfers shown below the
surplus/deficit line.
• If a program has AANDC plus other
sources of revenue, AANDC will pro-rate
revenue against expenditures.
40
NEW BLOCK - Continued
• Block fund revenues should be divided
among all block funded activities within
each program – it is better not to show
revenues as a transfer.
• For example in education total revenue
$100,000 should be divided among all
schedules with eligible expenditures within
education ie. Tuition $25,000, ancillary
services $75,000 guidance and counselling
$25,000
41
42
Bl
Block
oc
Fund
k
43
Block Funding
44
NEW Block - Continued
Block Funding Summary Sheet FY 2012-2013
Surplus
Sched # &
(Deficit)
Name or Beginning of
Page#
Year
Block
AANDC
Program Block
Block
Other Block Total Block Expenditure Transfer
Revenue
Revenue
Revenue
s
In/(Out)
Block Trf
Sched # &
Name or
Page#
Cumulative Net
Surplus (Deficit)
End of Year
45
Types of Funding - GRANTS
• GRANT – same as previous years,
recipient may retain if they qualify for the
grant
46
Notification of Auditor
• Recipients report to AANDC who their
auditor is by March 15 each fiscal year.
• FN Approval for AANDC to contact the
auditor directly.
47
AANDC sends confirmations 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
48
AANDC receives audits July 29
Please see page 5 of the program guide for
information on how to send in reports.
http://www.aadncaandc.gc.ca/dci/RRG/20122013/E/UR/MG/Regional/K_1213E_BC_Pro
gram_Guide.pdf
49
AANDC checklist for incoming
audits
• AANDC’s target is to accept or reject
audits in 15 days (Initial Review)
• Is the audit consistent with the Year End
Reporting Handbook (YERH)?
• Does AANDC have enough information to
proceed with the review?
50
AANDC Audit Review Letter
Audit review letter addresses audit opinion,
and the recipient’s financial position
Financial Ratios implemented for recipients
using the government reporting model
including all First Nations.
For other recipient using the non-profit
presentation AANDC is using operating
equity divided by total revenue.
51
AANDC Audit Review Letter
• Letter summarizes surplus recoveries,
reimbursements, and deferred revenues
• Detailed report and annexes show how
the numbers in the letter were calculated
52
AANDC Audit Review Letter
• Annexes show analysis of all funded
services and all capital projects except for
grants
• AANDC reimburses for SET Basic Needs,
Child Out of Parental Home, Adult
Institutional Care, and Child & Family
Services Maintenance to the lower of the
approved report or the audit amount
53
AANDC Audit Review Letter
Capital Project Surplus Recovery and
Reimbursement Form:
• Recipients can request funding for
incomplete capital projects to replace
funds recovered as part of the audit
review process.
54
55
AANDC Audit Review Letter
• Recoveries and reimbursements :
• Will be netted in same fiscal year;
• possible recovery in one fiscal year;
reimbursement in next
56
Standards for Default Management
• Wording in the 2012-2013 Funding
Arrangement for Default Management
• Default of funding provisions
• Denial or adverse opinion by auditor
• Negative Financial Ratios
• Health and safety is at risk
• Governance Issues
• Program Delivery or the lack thereof.
57
Changes in Policies
• Emphasis on prevention and voluntary
management development plans
• Default management can be on a program
specific basis
• Default prevention, Default Management
and Sustainability are emphasized, where
previous policy emphasized default
management
58
Three Types of Default
Management
• Management Action Plan (MAP) Self
Managed
• MAP with Expert Resource Service
• Third Party Managed
59
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 government
presentation model (including all First
Nations) we use 3 financial ratios.
60
61
62
63
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
64
65
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.
66
67
Financial Ratios – Working
Capital
• This ratio tests to see if current working
capital deficiency can be covered with one
month's revenues.
68
69
Policy 200 Default Prevention and
Management
• http://www.aadnc-
aandc.gc.ca/eng/1322682173587
70
Directive 205 Default Prevention
and Management
• http://www.aadnc-
aandc.gc.ca/eng/1325176493347
71
Directive 210 - Third Party Funding
Agreement Management
• http://www.aadnc-
aandc.gc.ca/eng/1325173099700
• BC Region has no third party funding
agreements at this time
72
• 2012-2013 Year-End Reporting handbook:
http://www.afoabc.org/downloads/ncr4880916-year-end-handbook.pdf
• 2012-2013 Audited Consistent
Consolidated Financial Statements Model:
http://www.afoabc.org/downloads/2013model-financial-stmts.pdf
73
Questions??
Ashraf Ghali
Tel: 604-775-7140
ashraf.ghali@aandc.gc.ca
74
BC Audit Review
Thanks for coming to the
conference!
75