Report on Recipient Audit of Black Lake Band

Governance

The audit found that the Black Lake Band has an Executive Act that sets out governance items such as the roles and authority of Chief and Council, the code of ethics, conflict of interest, and remuneration. However, the audit notes that there remains a need to improve governance and administration of band programs, and support compliance with the Executive Act and the AANDC Funding Arrangement.

Opportunities observed for improvement include:

• Minutes of Chief and Council meetings were not prepared over the audit scope period. As a result there is no documentation of Chief and Council decisions made.
• There was no evidence that the Chief and Council review financial information on a regular (for example monthly or quarterly) basis.
• The roles of Chief and Council and Band Management are not clear. The audit notes that Chief and Council involvement in the management of programs makes it difficult for Band Management to administer and manage programs, services, and activities in accordance with the AANDC Funding Agreement. The Executive Act may contribute to this uncertainty as it identifies Chief and Council roles in budget preparation and approval of financial transactions that are typically the responsibility of management. Since May 2012, the Prince Albert Grand Council has run two information/training sessions for the Black Lake Band Council to better understand the roles of management and Council.
• There is no evidence that the audited financial statements or the annual budgets were presented to the Members. Presentation of each is a requirement of the Funding Agreement.
• A comparison of the salary budget to actual for Chief and Council illustrates the need to present the annual budget and audited financial statements to the Members as well as the need to monitor budget to actual over the fiscal period. While the budget for 2011/12 was planned to decrease by 26% in an effort to reduce the First Nation's deficit, the deficit increased by 50%.

Strategic and Operational Planning

The audit found that Chief and Council and Band Management do not have a strategic plan that documents and communicates the strategic objectives for the programs and services provided to members. The First Nation also does not have operational plans that provide detail on how the programs and services provided to Members will be delivered.

Band Management

The audit found that during the audit scope period, there was inadequate evidence of the existence of key elements of an effective financial management control framework. The First Nation's audited financial statements for both fiscal years had previously been reviewed by external financial statement auditors, and received qualified opinions each time. In both cases, the external auditor also provided management letters identifying several deficiencies in financial administration and management of First Nation funds.

This current audit identified the following areas of financial administration and management of First Nation funds as requiring improvement:

• Weaknesses in financial controls were noted, such as payments made with little or no supporting documentation, and bank reconciliations that were not completed in a timely manner, or reviewed by the Band Manager.
• Weaknesses in the documented review and analysis of budget to actual variances were noted. There was no reporting of actual spending to budget amount variances to explain why amounts spent by program, service or activity are either greater or less than budgeted amounts.
• Preparation and presentation of financial information on a regular basis for Chief and Council was not completed.

Review of Program Expenditures

The audit selected a sample of 30 transactions to audit in detail. The auditors determined that of these transactions, 21 were approved by an authorized individual, and 10 had accurate and appropriate supporting documentation. 51% of the dollar amount sampled was in compliance with the funding agreement.

Examples of audit findings included:

• Nine transactions were concluded to be "not authorized" due to lack of approval of cheque requisition and contract or invoice; cheque requisition signed by the Chief only without the required second authorization signature by management or council; or a memo sent to accounting from the Band Manager without authorized approval by band management or council.
• 13 transactions were concluded to be not accurate and seven were deemed as may not be accurate due to lack of supporting documentation, such as a bank transfer requested by the Band Manager without any explanation; a payment for invoices in arrears without original invoices or cheque requisition prepared; a letter sent to the bank requesting the release of funds for National Child Benefit "cultural hunting trip" without additional supporting documentation; and payments with only a cheque requisition with limited information or no information.
• 49% of the AANDC funding sample reviewed was concluded to be not in compliance with the Funding Agreement, based on no or limited documentation to substantiate the nature and amount of the expenditure. In addition to previously noted items, examples noted include salary expenditures supported by only a cheque requisition and no salary grid provided to the auditors; a lack of documentation to substantiate expenditures for staff pension and group insurance benefits.

Examination of cheque signing authorities

Additional review of payment authorized on cancelled cheques for each fiscal year found that while all cancelled cheques had the signature of at least one signing authority, there were a number of cheques that had the second signature of an individual who was not authorized for the portfolio expenditure.