Report on Recipient Audit of Webequie First Nation

BACKGROUND

Aboriginal Affairs and Northern Development Canada (AANDC) selected the Webequie First Nation, Ontario, for a recipient audit in 2012-2013 based on their 2011-2012 risk assessment score and other risk factors.

The objective of the audit was to provide assurance that Webequie First Nation used funds provided by AANDC for their intended purposes, in compliance with the terms and conditions of the funding agreements.

Deloitte and Touche LLP, an independent audit firm, was commissioned to undertake the recipient audit. The audit took place in the winter of 2013.

FINDINGS

The audit found that all the expenditures claimed by Webequie First Nation were incurred, in all material respects, in accordance with the terms and conditions of the funding agreement between AANDC and Webequie First Nation.

ELIGIBILITY OF EXPENDITURES

Appropriate supporting documentation was provided for all transactions tested, and no misstatements were identified.

The design and implementation of key controls over the payroll, operating expenditures and business processes were tested. There was no evidence of review of expenditures prior to their approval; specifically, expense reports were not consistently initialed by the supervisor as evidence of review and approval. This increases the risk of incorrect expenditures being recorded, and ultimately paid to third parties.

The payroll reports are not reviewed prior to payment. This increases the risk of incorrect payroll expenditures.

GOVERNANCE

The Webequie First Nation was approved for Capacity Development funding from AANDC to complete a five-year governance strategic plan. AANDC's departmental Governance Capacity Planning Tool was used to guide the planning process. The Webequie First Nation Governance Strategic Plan was finalized and approved by Chief and Council in March 2012. The First Nation is in the process of implementing five of the ten governing functions.

Oversight over program activities occurs during Chief and Council meetings; however, meeting minutes are not taken. Instead, Chief and Council communicate decisions to individual Program Managers. Chief and Council help ensure transparency by making Band Council Resolutions available to all Band members.

At the time of the recipient audit, the Board of Education was the only Program that had developed roles and responsibilities for management and program staff. Terms of Reference have been developed, approved and implemented. They have demonstrated through meeting minutes that program initiatives are discussed and approved to achieve education funding objectives.

The audit found a draft Administration Code is being developed by Webequie First Nation which describes the roles and responsibilities for governance at a high level for members, Chief and Council, and management and administrative employees. The Administrative Code has not yet been approved.

BUDGETING PROCESS

The Contribution Agreement Remedial Management Plan states the recipient shall develop program and/or operating budgets. It is expected that the recipient have adequate financial and administrative internal controls.

The audit found that the budget planning process demonstrated that Program Managers are responsible for establishing budget priorities for each fiscal year. Budgets are prepared based on the needs identified through the program and the operational planning process, then reviewed and approved by the Chief and Council. At the time of audit, the Recipient's financial policy was still in draft format, and therefore this process had not been implemented.

It was noted that Webequie First Nation has only developed an operating budget for the board of Education; all other programs have not established a budget.

CENTRALIZED FINANCIAL SYSTEMS

The Webequie First Nation previously has different accounting software applications for each of the funded programs which made it difficult to audit and provide an assurance over the completeness of Webequie First Nation's financial statements. The Recipient Appointed Advisor has implemented the same accounting software application for each of the programs to provide ease of data management.

The audit noted that, while the same financial accounting application is now used for all funded programs, financial data is not shared between the versions of the application and each program has its separate general ledger, which can be inefficient for recording general administrative expenses.

It was also noted there was an intention to purchase a server to enable consolidation of applications for the funded programs. It was also mentioned the data maintained would be backed-up remotely in order to mitigate risks related to data storage. At the time of the audit, the Recipient had not yet purchased the server.

POLICIES

Some policies and codes were being developed to improve capacity, in consultation with Chief and Council and Program Managers. The following policies and codes have been drafted:

• Human Resources
• Financial Policy
• Financial Code
• Election Code, and
• Administration Code

At the time of the recipient audit, these policies and codes were still draft and had not yet been approved by Chief and Council. They were being reviewed by a legal firm to identify any possible legal concerns.

RECOMMENDATIONS

• It is recommended that the recipient document decisions by Chief & Council.
• It is recommended that all reports submitted by employees be reviewed by a supervisor within Webequie First Nation. The supervisor should initial the expense reports as evidence of review to demonstrate a review of the expense report has occurred.
• It is recommended that the payroll be reviewed and approved by the Finance Officer or the Chief prior to payment to ensure payroll expenses are accurate and valid. The Finance Officer or Chief should initial the payroll reports as evidence of review to demonstrate a review of the payroll report has occurred.
• It is recommended that the Webequie First Nation should continue the implementation of the governance functions identified in the Strategic Governance Plan.
• It is recommended that Webequie First Nation approve and implement its Administrative Code to clearly define roles and responsibilities of Chief and Council, as well as management and administrative employees.
• It is recommended that the Chief and Council develop and implement a budget for all programs that is aligned with the financial terms and conditions of the contribution agreements. On a periodic basis, Webequie First Nation should also conduct budget to actual variance analysis and ensure significant variances are substantiated by Program Managers.
• It is recommended that Webequie First Nation integrate all program general ledgers by using a single accounting application.
• It is recommended that Webequie First Nation back-up its financial information on a regular basis and store the information off-site.
• It is recommended that Webequie First Nation finalize, approve and implement financial and administrative policies and codes in order to strengthen its financial controls.

CURRENT STATUS

A copy of the final report has been sent to the recipient.