Report on Recipient Audit of Roseau River Anishinabe First Nation Government
Name: Roseau River Anishinabe First Nation Government
Location: Manitoba
Population: 1,125 on reserve; 2,524 total registered
Default status at time of audit: Third-Party Manager (2011-2012)
Current default status: Third-Party Manager (2012-13)
Current Chief: Chief Ken Henry Jr.
Time period covered by audit: April 1, 2010 to March 31, 2012
Amount of AANDC funding audited: $13,532,026
BACKGROUND
Aboriginal Affairs and Northern Development Canada (AANDC) selected the Roseau River Anishinabe First Nation Government in Manitoba for a recipient audit based on their 2011-2012 risk assessment score and other risk factors.
The objective of the recipient audit was to provide assurance that funding provided to the recipient was spent for its intended purposes and is in compliance with the terms and conditions of the 2010-2011 and 2011-2012 Funding Agreements with AANDC. The objective was achieved through:
- Examination of the effectiveness of the operations of the Financial Management Control Framework in place at the First Nation; and
- Conduct of a compliance review on the eligibility of the expenditures claimed under the terms and conditions of the Funding Agreements.
KPMG, an independent audit firm, was commissioned to undertake the recipient audit. The audit took place in the winter of 2013.
FINDINGS
The audit identified control weaknesses within governance, expenditure oversight and financial management that, if well designed and operating effectively, would help ensure funds were spent for the intended purpose and in compliance with funding agreements.
However, a sample of 5% of the funding identified compliance of 97% (based on the dollar amount of samples reviewed) with the intended purpose and terms and conditions of the applicable funding agreements with AANDC over the audit period. The auditors identified that expenditures in the amount of $18,093 were not in compliance with the funding agreement and are potentially recoverable.
Governance by Chief and Council
There are on-going disputes in regards to governance for the period under scope. These disputes have been noted in the Remedial Management Plan (2007 to 2013).
The audit found the following opportunities to improve the Chief and Council's governance and administration of band programs and support compliance with the Funding Agreement with AANDC:
- The completion of a custom election code and approval by the community would help resolve the governance issues that the recipient has experienced in the past. AANDC has noted that the resolution of governance issues is necessary in order to remove the Third-Party Manager.
- Although the Third-Party Manager forwards financial statements to the First Nation on a monthly basis, there was no evidence that the Chief and Council review financial information on a regular basis. The review and approval of a budget in advance of the fiscal period is a key role that the Chief and Council must complete each year and is a requirement under the funding agreement and the Remedial Management Plan.
- Minutes of Chief and Council meetings were not available for the period under scope.
Strategic and Operational Planning
The audit found that Chief and Council do not have a strategic plan or an operational plan for the First Nation's programs. The recipient has received funding from AANDC to complete a Community Plan, including a strategic plan. This plan was not completed at the date of the audit.
Band Management
Band Management functions are presently performed by a Third-Party Manager, which is responsible for the day-to-day administration and management of the First Nation programs, services and activities. The Third-Party Manager is accountable to the Chief and Council who are expected to provide guidance and oversight to the Third-Party Manager.
In addition to previous observations, the audit team provided the following observations of other areas where the financial administration and management of First Nation funds should be improved. These include:
- The recipient does not currently have personnel with the proper qualification and experience to perform the functions related to band management.
- The recipient does not currently have financial policies and procedures in place in regards to cash management, cash disbursements, accounting and record keeping and financial reporting.
- Although bank reconciliations for the social program account were completed by the Third-Party Manager on a timely basis, it was not evident if there was secondary review by the Third-Party Manager. Secondary review is important to help ensure that the bank reconciliation is complete and accurate and that outstanding items (cheques, deposits, bank charges etc) are recorded and dealt with in a timely manner.
Review of Program Expenditures
In addition to the review of control practices, the audit selected a risk-based, judgmental sample of 37 transactions to review. The auditors determined that of these transactions, 31 were approved by an authorized individual, and 35 had accurate and appropriate supporting documentation. 97% of the dollar amount sampled was in compliance with the funding agreement.
Examples of audit findings included:
- Six transactions were concluded to be not authorized due to lack of approval support on the cheque requisition, contract or invoice, or other evidence of approval from an authorized individual.
- Two transactions were concluded to be not accurate because no supporting documentation was provided such as a cheque requisition that did not have the original invoice, and another with no supporting documentation such as an invoice or contract.
- Two instances were not in compliance where no documentation was provided. In the first instance there was no documentation provided at all. In the second instance, only a cheque requisition was approved by the individual with authority to approve.
RECOMMENDATIONS
The Chief and Council require improvement to their governance and expenditure oversight practices relating to the funding provided by AANDC to support Members. In order to de-escalate from Third-Party Management, the recipient requires significant improvements to practices relating to the financial management of funding provided including: planning, budgeting, and monitoring of programs, services and activities.
- The audit recommends that Chief and Council improve the governance and oversight of the funding provided by AANDC through:
- Completion of the custom election code and approval by the community;
- Regular review of financial information (quarterly at a minimum, monthly is optimal) to assess actual program and administration expenditures compared to the budgeted amounts; and
- Documentation of minutes for all Chief and Council meetings and provision of minutes for review by Members, AANDC, auditors and other stakeholders as appropriate.
- The audit recommends that Chief and Council, in conjunction with the Third-Party Manager, prepare a strategic plan to communicate the strategic objectives of the Band over the next one to three years.
- The audit recommends that Chief and Council, with the assistance of the Third-Party Manager, prepare operational plans for the significant programs managed and administered. Based on the current programs, significant programs may include: education, social, facilities Operation & Maintenance and housing, and Band support.
- The audit recommends that the Chief and Council, in conjunction with the Third-Party Manager improve the financial administration and management of First Nation funding provided by AANDC in order to help Band Management be self-managed without the need for Third-Party Management through:
- Building capacity in the areas of financial management;
- Reviewing financial information on a regular basis that includes budget and actual results with explanations for significant variances over and under budget and prepare consolidated financial statements on an annual basis;
- Documenting financial policies including the requirements for cash receipts, cash disbursements, accounting and record keeping, and financial reporting. These policies should be communicated and implemented with appropriate training provided as needed;
- Secondary review of all bank reconciliations prepared by the Third-Party Manager for the social programs.
- The audit recommends that the Third-Party Manager ensures that all disbursements are properly supported by documentation. The key financial controls related to the disbursement of funds provided by AANDC should include, at a minimum, the following requirements: original invoices and contracts must be provided or available to support all cheque requisitions; receipt of goods or services must be approved by the proper delegated authority; cheque requisitions must be approved by authorized individuals only; and a list of individuals authorized to approve cheque requisitions, sign cheques, and issue bank transfers must be maintained.
CURRENT STATUS
A copy of the final report has been sent to the recipient.