General Assessment (GA) Workbook - 2014

Step 1:

For each "Consideration" in column 2, determine the "Consideration Score" in column 3, by using the corresponding section of the workbook.

Compare the information you have about the organization to the "low", "medium", "high" benchmark in the workbook and select the best fit. Score "0" for low; "2" for medium; and "4" for high. Score "1" if the best fit is somewhere between "low" and "medium"; and Score "3" if it is somewhere between "medium" and "high".

Enter the score on Form A1. Enter the rationale for the score and recommendations for managing high risk situations on Form A3.

Step 2:

For each "Risk Factor" in column 1, determine the "Risk Factor Score" to be entered in column 4 by averaging the "Consideration Score" in column 3.

Step 3:

For each "Risk Factor" in column 1, determine the "Weighted Risk Factor Score" in column 6, by multiplying column 4 and column 5.

step 4:

Total column 6 and enter the amount in the "Total" row at the bottom of Form A1.

Step 5:

Determine the "Rating" at the bottom of Form A1, based upon the total calculated in step 4.

Ranges are: (Low 0 to 18.5); (Medium >18.5 to 37.5); and, (High >37.5 to 56) based upon a 1/3, 1/3, 1/3 distribution

Step 1:

Form A2 is completed on a program specific basis. For each "Consideration" in column 1, determine the "Score" for columns 2, 3, 4, etc. using the matching page in the workbook.

Compare the information you have about the organization to the "low", "medium", "high" descriptors and select the best fit. Use the same system for scoring as described for Form A1.

Enter the score on Form A2. Enter the rationale for the score and recommendations for managing high risk situations on Form 3.

Step 2:

For each "Consideration" in column 1, calculate the score.^{Footnote 1} Enter it in the corresponding areas on Form A1.

Step 3:

Calculate the "Average by Program" at the bottom of each of Columns 2, 3, 4, etc.

step 4:

Determine the "Program Management Overall Risk Factor Score" by averaging the "Consideration Scores" in the last column (round to one decimal place). Enter the Score on Form A1, column 4.

Form 1 (Organizational Level)

Form 2 (Program Specific Level)

Step 1

As you complete Forms A1 and A2, on Form A3 enter a brief rationale for the score, and recommendations for managing high risk situations. This is key information to be generated by the GA.

Consideration: 1.1 Capacity of recipient (i.e. governing authority) to Transact Business

Is the recipient (i.e. governing authority) able to transact business?

Relevance to Management of Funding Agreements:

As the funding agreement is a legal document, an organization must meet certain requirements to enter into a funding agreement; including:

• having a defined legal status (e.g. is a First Nation, Aboriginal Representative Organization non-profit corporation or other corporation);
• maintaining its legal status (e.g. corporations file an annual return with Corporations Canada or provincial/territorial equivalent);
• having a recipient (i.e. governing authority) which is willing and able to legally bind the organization (e.g. follows the legal process required).

A stable, well functioning recipient (i.e. governing authority) that supports a stable well functioning organization. It is able to respond in a timely manner to decisions required by the department/agency in order to initiate or manage funding agreements. As well, there is a seamless transition between recipients (i.e. governing authority) such that the capacity to make decisions and deliver services is not disrupted.

In the absence of a well functioning recipient (i.e. governing authority), the department/agency may be unable to conduct business with the organization, services may be disrupted and accountability compromised. Default assessment may be required.

Sources of Information / Evidence:

• The Default Prevention and Management Assessment process is the authoritative source of information regarding default situations (the GA process should reference – not duplicate – that process)
• Corporation Canada data base or provincial/territorial equivalent
• Elections schedule and history from the department/agency data base

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 1.2 Familiarity With Agreement

Does the recipient (i.e. governing authority) and management team have a sound understanding of the funding agreement?

Relevance to Management of Funding Agreements:

There is a need for the recipient (i.e. governing authority) and Management Team to understand its roles and responsibilities in managing the funding agreement and agreement requirements. In the absence of such an understanding, problems are likely to occur.

Best Practice:

The recipient (i.e. governing authority) and management team understand the terms and conditions of the funding agreement by meeting with the department/agency and securing advice from their own sources (e.g. legal, financial, tribal advisors). Where there is a significant change in recipient (i.e. governing authority) or management team during the life of the agreement, steps are taken to re-establish that understanding. The General Manager has two or more years of experience in managing federal funding agreements. The organization has a strong, ongoing general management function whose role includes supporting stability of the organization across changes in recipient (i.e. governing authority) or in senior program staff.

Sources of Information / Evidence:

• Observations during field visits
• Overall fulfillment of existing agreements
• By-laws, constitution, AGA Resolution

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 1.3 Management Framework for Program Management

Is there a separation between the recipient (i.e. governing authority) and the administrative sides of the organization?

Relevance to Management of Funding Agreements:

Separation of the governance and management functions supports independent oversight of the management of public services and expenditures. In larger organizations such checks and balances are best achieved by having:

• different individuals occupy position within each function; and
• a senior manager (e.g. Executive Director), plays a key role in coordinating all management functions and reporting to the recipient (i.e. governing authority).

Best Practice:

In both large and small organizations, integrity of service delivery may be supported by:

• an Audit Committee which assigns individuals to oversee functions they are not engaged in;
• delivery of services and the making of expenditures in accordance with well defined policies;
• a formal appeal process on matters of individuals entitlement;
• administrative policies to guide sensitive matters (staffing, contracting, travel expenditures);
• a formal process for the change of any policy within the recipient (i.e. governing authority)'s authority;
• experienced and knowledgeable staff supporting program and administrative functions;
• conflict of interest guidelines applicable to those in governance and administrative functions;
• an independent finance function (see risk factor 4.3);
• ongoing audit and compliance activities.

Sources of Information / Evidence:

• Observation during field visits
• Recent Readiness Assessment/ Default Prevention and Management Assessment Reports
• Other Planning documents

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 1.4 Accountability to Service Population

Has the recipient (i.e. governing authority) taken a proactive approach to demonstrating accountability?

Relevance to Management of Funding Agreements:

Funding agreements are premised upon the funded organization accounting to the public it serves and to the department/agency for the funds provided. This accounting is in terms of the results achieved and the means used to achieve them; compared to requirements within the funding agreement. It is only one aspect of the larger accountability relationship between the recipient (i.e. governing authority) and the community it serves.

Where such information is not readily accessible or the recipient (i.e. governing authority) does not hold itself to account, individuals may express concerns to the department/agency or the media. The intended accountability relationship may be eroded and the collective interest of the federal government, funded organization, and service population in maintaining public support for the program may be weakened.

Best Practice:

The recipient (i.e. governing authority) has practical ways to make information available to the public served by the funding agreement as to:

• the level of services available through the agreement, within available funds, and the policies which govern their delivery;
• the level of service provided (e.g. annual or program reports);
• the use of the funds (e.g. the audited statements ); and

The information on the three preceding bullets is available to the service population on the recipient’s (governing authority) website and/or upon request.

Sources of Information / Evidence:

Evidence as to a well functioning system may include:

• copies of annual reports or other accountability documents;
• media (positive and negative);
• organization websites (e.g. posting of accountability documents), protest websites;
• attendance at or documentation from funded organization meetings with service population (e.g. Annual General Assemblies or other meetings where audited financial statements are presented and explained to the membership).
• Health Plan

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 2.1 Strategic Plan

Does the organization have a strategic plan(s) in place that set multi-year direction in terms of outcomes, performance measures and accountability for Government of Canada (GoC) programs and services?

Relevance to Management of Funding Agreements:

While the organization's strategic or community plan will deal with issues beyond the funding agreement, the two should be mutually supportive in achieving results. In the absence of a strategic plan, day-to-day pressure may divert attention from long-term objectives, resulting in opportunities being missed and scarce resources being depleted.

Best Practice:

The recipient's (i.e. governing authority) strategic plan:

• Sets a multi-year direction based upon the mission / mandate, vision and values of the organization;
• Expresses this direction in terms of outcomes to be achieved, performance measurement and accountability (e.g. a "business plan");
• Sets context and priorities for shorter term plans (e.g. "operational plans") throughout the organization.

The "strategic plan" or plans may be part of a larger "Community Plan". "Community plans" go into depth as to how the strategic plan will be achieved.

Sources of Information / Evidence:

• Copy of plan shared with the department/agency
• Reference made to plan during field trips / site visits or by the funded organization during presentations to the department/agency
• Recent Readiness Assessment/ Default Prevention and Management Assessment Reports
• Plans posted on organization website

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 2.2 Operational Plan and Budget

Does the organization have an annual operational plan and budget in place?

Relevance to Management of Funding Agreements:

The operational plan and budget are the foundation for an effective annual budget management regime. They allow the organization to identify variances from planned project or service expenditures on a timely basis and take corrective action to manage within its budget, or to seek consent for adjustments as required by the funding agreement.

In the absence of an operational plan and budget, the organization is unable to manage in a methodical and integrated way to meet its obligations within the funding agreement and to advance its strategic plan. Accountability is eroded and there is a risk of disruption to funded projects and services due to financial difficulties experienced by the organization.

Best Practice:

Operational Plan and Budget sets out the services to be delivered by each organizational unit for the next 1 – 3 years, based upon the strategic plan, funding agreement obligations and available resources. It serves as a basis for measuring progress and accounting for results and expenditures. Based upon the operational plan, organizational units prepare more detailed work plans, to guide day-to-day work.

Sources of Information / Evidence:

• The organization should reference its operational plan and budget for purposes such as setting agreement cash flow
• Copy of plan shared with the department/agency
• Reference made to plan during field trips or by funded organization during presentations to the department/agency
• Recent Readiness Assessment / Default Prevention and Management Assessment Reports
• Operational plans posted on website

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 2.3 Business Continuity Plan

Does the organization have a business continuity plan in place to support continuity of the organization and its funded services where an extraordinary or foreseeable event may otherwise have an impact?

Relevance to Management of Funding Agreements:

The challenges faced by an organization change over time and may impact its ability to meet the requirements of its funding agreement. These changes may arise as a result of external events (foreseeable, or extraordinary) or decisions of the recipient (i.e. governing authority) to undertake a major initiative.

Best Practice:

The organization sees change as part of its normal operating environment; tries to foresee change and its potential impacts; and plans accordingly. The organization seeks to balance the demands on it with its capacity to avoid disruption to funded services. For example:

1. A business continuity plan or emergency management plan is in place to deal with foreseeable events (spring flooding; forest fires, organization building fire) or other foreseeable threats to health and safety; physical assets; or service delivery.
2. A plan is in place to deal with extraordinary events (e.g. opening or closure of a local industry which may impact service demands; the opening of an all-season road or the early closure of a winter road which may impact service costs; unforeseen loss of key staff etc.) that have or are occurring – to respond to urgent needs or to seek long-term benefits.

Sources of Information / Evidence:

• Existing documents detailing emergency management plans or other business continuity planning documents
• Field visits or presentations given by the funded organization
• Trends in emergency management requirements
• Comments / reports by Health or Public Safety Officials
• Media articles

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 3.1 Financial Position

Is the organization in a sound financial position?

Relevance to Management of Funding Agreements:

The strength of an organizations financial position indicates its ability to meet financial obligations. Where an organizations financial position is weak, it is an indicator that they will have difficulty meeting their delivery obligations for funded programs and services.

Three primary indicators are considered when assessing financial position:

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year);
• Sustainability (Net Debt) Ratio: (threshold: 0.50) – a measure of whether obligations can be met beyond 1 year; and
• Working Capital ratio (threshold : 0.80) – a measures of whether this month's bills for service delivery can be paid

Best Practice:

The organization maintains a balance between revenues and expenditures such that it is well positioned to meet its financial obligations in the short and long-term for purposes of delivering public services.

Sources of Information / Evidence:

• Annual audited financial statement or annual return(e.g. Interim and Final financial reports)
• Annual Audit Review process
• Financial Assessment Analysis
• Financial certification (FN FMB, ISO, etc.)

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 3.2 Financial Records and Reporting:

Do financial records and reporting meet generally accepted accounting principles (GAAP)?

Relevance to Management of Funding Agreements:

The organization's financial records and reporting system meets the need of its managers for purposes of managing their programs and the needs of the recipient (i.e. governing authority) for purposes of monitoring program delivery and the financial situation.

In the absence of sound financial records and reporting it is not clear that transfer payments have been used for the intended purpose, set forth in the terms and conditions of the funding agreement. The recipient (i.e. governing authority) and the management team lack key information and accountability towards all parties is eroded.

Best Practice:

The funded organization's financial records and reporting meet generally accepted accounting principles (GAAP), as evidenced by an unqualified audit opinion from an independent auditor. Where such an audit is not required due to a lower value agreement, the records meet the financial reporting obligations pursuant to the year-end reporting guide. Effective governance, management, transparency and stewardship of funds are supported.

Sources of Information / Evidence:

• Annual audited financial statements and/or other financial submissions (e.g. Interim and Final financial reports)
• Annual Audit Review Process

Benchmarks

Justification for Score

Mitigation Strategies

Consideration: 3.3 Finance Function:

Are the qualifications and quantity of the staff supporting the finance function appropriate to the value and complexity of the agreement?

Relevance to Management of Funding Agreements:

As organizations assume increased flexibility with respect to the management of programs and funds, local management requirements increase. The finance function plays an important advisory, support and internal control role for all organizations but particularly within those assuming increased authorities. Financial staff who are members of an accounting society benefit from continuing education, support, a code of ethics and mobility – which allows them to be effective in their role.

Best Practice:

The organization has the capacity to recruit, train and retain appropriate personnel to support the finance function. Personnel should have sufficient education and experience, commensurate with the size and complexity of the agreement. A preference is for a professional accounting designation, including the Certified Aboriginal Financial Manager certification*, for more complex situations.

The Assembly of First Nations (AFN) Chiefs-in-Assembly (Resolution 32, July 2008) supported the professional designation of the Certified Aboriginal Financial Manager (CAFM) as the preferred credential when First Nations are hiring personnel in financial and management positions.

Sources of Information / Evidence:

• Observations during field visits
• Recent Readiness Assessment or Default Prevention and Management Assessment Reports
• Financial staff titles, certifications and descriptions included in recipient work plans, cashflows, budget notes
• Financial certification (FN FMB, ISO, etc.)

Benchmarks

Justification for Score

Mitigation Strategies

GA for Project/Specific Service Agreements

Organization Name:

Step 1:

For Risk Factor 1 to 5 in column 1, determine the "Risk Factor Score" in column 4, by using the corresponding section of the workbook.

Compare the information you have about the organization to the "low", "medium", "high" benchmark in the workbook and select the best fit. Score "0" for low; "2" for medium; and "4" for high. Score "1" if the best fit is somewhere between "low" and "medium"; and Score "3" if it is somewhere between "medium" and "high".

Enter the score on Form B1. Enter the rationale for the score and recommendations for managing high risk situations on Form B2.

Step 2:

For Risk Factor 5, in column 1, determine if there are "Other Considerations" to be entered in column 2 based upon the specific needs of the program. Score each consideration in column 2, as in Step 1.

If there are no "Other Considerations" to be scored, enter a score of "0" in column 4. If there were "Other Consideration" to be scored, enter the average score from column 3 in column 4.

Step 3:

For each "Risk Factor" in column 1, determine the "Weighted Risk Factor Score" in column 6, by multiplying column 4 and column 5. These risk factors are considered equal in relative importance and are unweighted, except where:

• a program chooses to apply a weighting factor specific to their program;
• the risk factor "other considerations" is not in use and is assigned a weight of 0.

Step 4

Total column 6 and enter the amount in the "Total" row at the bottom of Form B1.

Step 5

Determine the "Rating" at the bottom of Form B1, based upon the "Total" calculated in step 2.

Ranges are based upon a 1/3, 1/3, 1/3 distribution.

Consideration:

Is there a strong oversight function to ensure agreement requirements are met

Relevance to Management of Funding Agreements:

The department/agency enters into agreements with many types of recipients, from large complex organizations with accountability relationships with the public or shareholders, to small, simple organizations. For example, from large hierarchal organizations with Boards/Councils, (which may be governmental, non-governmental or for-profit entities); to sole proprietorships with no employees (owner/operator).

Depending on the organizational form, who is responsible to ensure agreement requirements are met will vary. In large complex organizations the board/council (i.e. governing authority) signs the agreement and ensures that the organization meets its obligations – but does not engage in operations. In contrast, in a small simple organization, the owner/operator may assume all these roles.

Best Practice:

Success of a project/service delivery is highly contingent on the management of the organization. Features contributing to success may be:

• an experienced recipient (i.e. governing authority) (to oversee management of the agreement) and management team (to manage the project/services), or experienced owner/operator to perform all these functions;
• a solid track record with this type of agreement;
• the recipient (i.e. governing authority) or owner/operator having taken action to prevent any past deficiencies from recurring.

Sources of Information / Evidence:

Applicants/recipients:

• demonstration of capacity within application
• reference checks based upon application

Benchmarks

Benchmarks were developed for the following (please refer to the following links):

• ABDP – Project Specific Agreements
• ABDP – Aboriginal Financial Institutions and other business development organizations
• Inuit Recipients (Inuit Relations Secretariat)
• Strategic Policy Branch/Public Health Agency of Canada Benchmarking for Part B

Justification for Score

Mitigation Strategies

Consideration:

Is a stable organization in place with a proven track record in delivering this type of project/service?

Relevance to Management of Funding Agreements:

Organizations over time build the management structures, policies and procedures, business processes, etc. required to respond to client needs.

In a stable environment, the future success of an organization can be inferred from its past successes, or lack thereof. How success is defined varies between organizations, for example:

• a government/not-for-profit organization can be measured against its success in meeting funding agreement requirements.
• a for-profit organization can be measured against its return on investment, employment created, contribution to regional infrastructure, etc.

Sources of Information / Evidence:

Applicants/recipients:

• Demonstration of capacity within application
• Reference checks based upon application
• Annual reports

Benchmarks

Benchmarks were developed for the following (please refer to the following links):

• ABDP – Project Specific Agreements
• ABDP – Aboriginal Financial Institutions and other business development organizations
• Inuit Recipients (Inuit Relations Secretariat)
• Strategic Policy Branch/Public Health Agency of Canada Benchmarking for Part B

Justification for Score

Mitigation Strategies

Consideration:

Is the organization in a stable financial position?

Relevance to management of funding agreements:

The organization maintains a balance between revenues and expenditures such that it is well positioned to meet its financial obligations in the short and long terms.

Three primary indicators are considered when assessing financial position (reference the department/agency's draft Directive on Funding):

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year;
• Sustainability (Net Debt) Ratio: (0.60) – a measure of whether obligations can be met beyond 1 year;
• Working Capital Ratio (threshold: 0.80) – a measures of whether this months bills for service delivery can be paid.

Sources of Information / Evidence:

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year;
• Sustainability (Net Debt) Ratio: (0.60) – a measure of whether obligations can be met beyond 1 year;
• Working Capital Ratio (threshold: 0.80) – a measures of whether this months bills for service delivery can be paid.

Benchmarks

Benchmarks were developed for the following (please refer to the following links):

• ABDP – Project Specific Agreements
• ABDP – Aboriginal Financial Institutions and other business development organizations
• Inuit Recipients (Inuit Relations Secretariat)
• Strategic Policy Branch/Public Health Agency of Canada Benchmarking for Part B

Justification for Score

Mitigation Strategies

Consideration:

Is a credible and comprehensive project/service delivery plan in place – relative to the risk to be managed?

Relevance to management of funding agreements:

The department/agency enters into agreements to support projects of varying levels of complexity. These may be large, innovative ventures involving many unknowns or very simple transactions. The plan should be appropriate to the level of complexity to be managed – and the plan itself should be no more complex than needed to get the work done in order to meet the Terms and Conditions of the funding agreement.

A variety of formal planning processes may be applied in accordance with program authorities; for example:

• plans for major community initiatives;
• business plans for business ventures;
• proposals for academic research.

Where such plans are in place they inform the GA (i.e. there is no requirement to prepare additional planning documents)

Where the style of these plans is not prescribed, they should include:

• a credible project plan, scaled to complexity, with a well defined and thorough description of the processes and methodologies through which project / service delivery will be achieved (includes considerations for human resources, physical assets, conditional contracts, etc.);
• an exploratory risk analysis, detailing expected risks, risk tolerances and mitigation strategies;
• clear milestones supporting the timely identification of variations from plan so they can be corrected.

Best practice:

Risk mitigation measures are used to reduce the potential for events with material negative outcomes to occur, and thus allow project/service delivery to proceed within risk tolerances. One may consider, is the project/service:

• Simple vs. Complex
• Routine vs. Innovative
• Short Term vs. Long Term
• Single vs. Multiple Service Providers
• Low vs. High Time Sensitivity
• Well Defined / Certain vs. Continuously Changing as Project Progresses
• Low vs. High Publicly Sensitivity (health and safety, legal, political, environmental)
• Single Source Funded vs. Multiple Stakeholders
• Potential impact on other program / service obligations of importance to the department/agency or to the service population

Sources of Information / Evidence:

For applicants/recipients:

• Detailed project, business plan or work plan

Benchmarks

Benchmarks were developed for the following (please refer to the following links):

• ABDP – Project Specific Agreements
• ABDP – Aboriginal Financial Institutions and other business development organizations
• Inuit Recipients (Inuit Relations Secretariat)
• Strategic Policy Branch/Public Health Agency of Canada Benchmarking for Part B

Justification for Score

Mitigation Strategies

Consideration:

Other relevant considerations may be brought into the analysis provided they are documented (Note: These should be predefined and may be stored within GCIMS and pulled down as required).

Relevance to management of funding agreements:

Other relevant considerations may be brought into the analysis provided they are documented.

For example, for economic development projects:

• the cyclical nature of the economic sector upon which impacts the organization;
• the level of competition in the market within which the organization operates / competes.

Sources of Information / Evidence:

• Trade Associations Publications
• Statistics Canada

Benchmarks

Benchmarks were developed for the following (please refer to the following links):

• ABDP – Project Specific Agreements
• ABDP – Aboriginal Financial Institutions and other business development organizations
• Inuit Recipients (Inuit Relations Secretariat)

Justification for Score

Mitigation Strategies

Consideration:

Is there a strong oversight function to ensure agreement requirements are met?

Relevance to Management of Funding Agreements:

The department/agency enters into agreements with many types of recipients, from large complex organizations with accountability relationships with the public or private shareholders, to small, simple organizations. For example, from large hierarchal organizations with Boards/Councils, (which may be governmental, non-governmental or for-profit entities); to sole proprietorships with no employees (owner/operator).

Depending on the organizational form, who is responsible to ensure agreement requirements are met will vary. In large complex organizations the Board/Council signs the agreement and ensures that the organization meets its obligations – but does not engage in operations. In contrast, in a small simple organization, the owner/operator may assume all these roles.

Best Practice:

Success of a project/service delivery is highly contingent on the management of the organization. Features contributing to success may be:

• an experienced Board/Council (to oversee management of the agreement) and management team (to manage the project/services), or experienced owner/operator to perform all these functions; does recipient have the capacity to enter into and manage a federal government agreement
• a solid track record with this type of agreement
• the Board/Council or owner/operator having taken action to prevent any past deficiencies from recurring

Sources of Information / Evidence:

Benchmarks

Consideration:

Is a stable organization in place with a proven track record in delivering this type of project/service?

Relevance to Management of Funding Agreements:

Organizations over time build the management structures, policies and procedures, business processes, etc required to respond to client needs.

In a stable environment, the future success of an organization can be inferred from its past successes, or lack thereof. How success is defined varies between organizations, for example:

• a government/not-for-profit organization can be measured against its success in meeting funding agreement requirements.
• a for-profit organization can be measured against its return on investment, employment created, contribution to regional infrastructure, etc.
• does management have the experience and drive to ensure successful operation of the business

Sources of Information / Evidence:

Benchmarks

Consideration:

Is the organization in a stable financial position?

Relevance to Management of Funding Agreements:

The organization maintains a balance between revenues and expenditures such that it is well positioned to meet its financial obligations in the short and long terms.

AANDC considers three primary indicators when assessing financial position (reference AANDC draft Directive on Funding):

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year
• Sustainability (Net Debt) Ratio: (0.60) – a measure of whether obligations can be met beyond 1 year
• Working Capital Ratio (threshold : 0.80) – a measures of whether this months bills for service delivery can be paid

If a for profit entity,

• What is the recipient's credit rating?
• Is the recipient's (business) equity over leveraged compared to its sector average?
• Are the recipient's (business) current assets able to meet its current liabilities. Current ratio (including current portion of long term debt).
• Ratio analysis should reflect the planned activities of the business (projected financial statements).

Sources of Information / Evidence:

• Annual audited financial statement or other type of return as required by AANDC's Year-end Reporting Handbook
• Result of AANDC's annual audit review process
• Business Plan, Historical and Pro-forma Financial Statements

Benchmarks

Consideration:

Is a credible and comprehensive project/service delivery plan in place – relative to the risk to be managed?

Relevance to Management of Funding Agreements:

AANDC enters into agreements to support projects of varying levels of complexity. These may be large, innovative ventures involving many unknowns or very simple transactions, such as the purchase of a piece of equipment through a retail outlet. The plan should be appropriate to the level of complexity to be managed – and the plan itself should be no more complex than needed to get the work done.

A variety of formal planning processes may be applied in accordance with program authorities; For example:

• Plans for major community initiatives;
• Business plans for business ventures;
• Proposals for academic research;

Where such plans are in place they inform the GA (i.e. there is no requirement to prepare additional planning documents)

Where the style of these plans is not prescribed, they should include:

• a credible project plan, scaled to complexity, with a well defined and thorough description of the processes and methodologies through which project / service delivery will be achieved (includes considerations for human resources, physical assets, conditional contracts, etc.);
• an exploratory risk analysis, detailing expected risks, risk tolerances and mitigation strategies;
• clear milestones supporting the timely identification of variations from plan so they can be corrected;
• does the business manager/owner possess a business plan/proposal to effectively implement the project.

Best practice:

Risk mitigation measures are used to reduce the potential for events with material negative outcomes to occur, and thus allow project/service delivery to proceed within risk tolerances. One may consider, is the project/service:

• Simple vs. Complex
• Routine vs. Innovative
• Short Term vs. Long Term
• Single vs. Multiple Service Providers
• Low vs. High Time Sensitivity
• Well Defined / Certain vs. Continuously Changing as Project Progresses
• Low vs. High Publicly Sensitivity (health and safety, legal, political, environmental)
• Single Source Funded vs. Multiple Stakeholders
• Potential impact on other program / service obligations of importance to AANDC or to the service population

Sources of Information / Evidence:

For new applicants and existing recipients detailed project or business plan, pro-forma financial statements.

Benchmarks

Consideration:

Is the business or entity operating in a competitive market environment?

Relevance to Management of Funding Agreements:

Other relevant considerations may be brought into the analysis provided they are documented.

For example, for economic development projects:

• the cyclical nature of the economic sector upon which impacts the organization
• the level of competition in the market within which the organization operates / competes

Sources of Information / Evidence:

• Trade Associations Publications
• Statistics Canada
• Business plan, financial statements, recipient interviews, consultations with other stakeholders

Benchmarks

Rationale/Justification for Score

Consideration:

Is there a strong oversight function to ensure agreement requirements are met?

Relevance to Management of Funding Agreements:

AANDC enters into agreements with many types of recipients, from large complex organizations with accountability relationships with the public or shareholders, to small, simple organizations. For example, from large hierarchal organizations with Boards/Councils, (which may be governmental, non-governmental or for-profit entities); to sole proprietorships with no employees (owner/operator).

Depending on the organizational form, who is responsible to ensure agreement requirements are met, will vary. In large complex organizations the Board/Council signs the agreement and ensures that the organization meets its obligations – but does not engage in operations. In contrast, in a small simple organization, the owner/operator may assume all these roles.

Best Practice:

Success of a project/service delivery is highly contingent on the management of the organization. Features contributing to success may be:

• an experienced Board/Council (to oversee management of the agreement) and management team (to manage the project/services), or experienced owner/operator to perform all these functions;
• a solid track record with this type of agreement
• the Board/Council or owner/operator having taken action to prevent any past deficiencies from recurring
• The Board understands its role and responsibilities and exercises effective oversight over the management.

Aboriginal Financial Institutions and other Business Development Organizations:

In the context of Aboriginal Financial Institutions and other Business Development Organizations, the evaluation of this risk factor should be based on the following best practices.

1. Management framework: the board of directors exerts appropriate control over the organization.
2. Quality and experience of the Board: Board members have appropriate mix of experience and skill set required by the organization.
3. The board takes appropriate interest by contributing board activities: The board appropriately oversees management performance by monitoring the performance of the management team.
4. Political Interference: There is no inappropriate political influence at the board level overseeing the institution and conflict of interest policies are respected.
5. Quality/background of management team: Management possess appropriate experience, skill set, and has a clear vision for the organization. Management has had a positive impact on the operations and performance of the organization.
6. Quality of Administration: documented policies and procedures manuals/guidelines are being utilized and respected. In addition, management exercises proper due diligence and delegated authority for equity contribution, procurement, loan approvals and loan documentations are always respected.

Sources of Information / Evidence:

For New Applicants:

• demonstration of capacity within application
• reference checks based upon application

For Existing recipients for whom a current GA – Part A exists

• apply GA – Part A score

For Existing recipients where no current GA – Part A exists

• FNITP prior year's records or;
• advice from other federal or provincial departments; or
• the following specific source of information and consideration as identified by the program:
  • Management framework (Control Exerted by the Board):
    • Discussion with management and other stakeholders
    • Excessive costs relating to Director's meetings and administration
  • Quality and experience of the Board:
    • Reference to Board minutes to determine formality, quality and degree of information discussed at meetings.
    • Resumes & biographies
    • Policy & Procedures manual for the board outlining – appointments, conflict of interest, delegation of authority, skills & experiences, roles & responsibilities, etc.
  • Performance monitoring of management by the Board:
    • Reference to Board minutes
    • Organizational charts including reporting lines
    • Quality of strategic Planning, policy, and procedures development and Budgeting
    • Existence of a strategic plan and budgeting process
    • Is there a management performance plan and targets?
    • Quality of Policy and Procedures manual and evidence of timely updates
  • Political influence:
    • Discussion with management and staff
    • Review conflict of interest guidelines to determine if process followed
  • Quality/background of management team
    • Resume of GM
    • Track record of performance by reference to operational and financial data
    • Strategic and budget plans for the organization
    • Stability of Staff
  • Quality of administration :
    • Review of P&P manual and updates
    • Review of loan and project files to ensure proper procedures are followed
    • Review of external reports for evidence of any weaknesses

Benchmarks

Evaluation guide for AFI specific benchmarks

Justification for Score

Consideration:

Is a stable organization in place with a proven track record in delivering this type of project/service?

Relevance to Management of Funding Agreements:

Organizations over time build the management structures, policies and procedures, business processes, etc required to respond to client needs.

In a stable environment, the future success of an organization can be inferred from its past successes, or lack thereof. How success is defined varies between organizations, for example:

• a government/not-for-profit organization can be measured against its success in meeting funding agreement requirements.
• a for-profit organization can be measured against its return on investment, employment created, contribution to regional infrastructure, etc.

Aboriginal Financial Institutions and other Business Development Organizations:

Future success of the organization is heavily dependent on the quality of the management, staff and past performance history of the organization.

In the context of Aboriginal Financial Institutions and other Business Development Organizations, the evaluation of this risk factor should be based on the following best practices. Note that all factors may not apply.

1. Adequacy and skill Level of staff: The organization has adequate staff members that possess the necessary skills and training to perform their duties.
2. Familiarity with agreement (past contribution agreement with AANDC): There are no compliance issues or problems regarding the management of past funding agreements with the organization.
3. Compliance with policies and procedures: Organization (staff and management) respects and is in compliant in its own policies and procedures.
4. Historical performance: The organization has or exceeded established performance targets and annual reviews are undertaken and action plans implemented.
5. Cost per case (for Third-Party Delivery Performance – ASDs and XDO's only): Cost per case is reasonable. Average cost per case of $13,000 or less is considered to be good performance.

Sources of Information / Evidence:

For New Applicants:

• demonstration of capacity within application
• reference checks based upon application

For Existing recipients:

• annual reports
• the following specific source of information and consideration as identified by the program:
  • Adequacy and skill Level of staff
    • Stability of staff
    • Staff possesses the skills and experiences to complete their duties.
    • The volume of loan activity-equity contributions vs. size of staff
    • Are there any unnecessary positions?
  • Familiarity with agreement (past contribution agreement with AANDC):
    • Are there any outstanding issues of non-compliance within arrangements, compliance reviews, on-site monitoring visits, external third party reviews, etc?
    • Level of communication with the client
    • Is requested information provided in an open and timely fashion?
    • Overall fulfillment of existing and past agreements
  • Historical performance
    • Compare budgets to actual performance per audited financial statements
    • Quality of performance target and established system of performance review.
  • Compliance with policies and procedures
    • Is there an up to date policies and procedures manual?
    • Are loans and equity contributions made in compliance with P&P's manual?
    • Quality Assurance Review of loan and equity files.
    • Evidence of any self-dealings in loan files, financial statements incomplete, etc.
    • Board minutes would suggest non-compliance
  • Cost per case (for Third-Party Delivery Performance – ASDs and XDO's only)
    • Total Operating Costs/ [Total capital contracts + (0.5 x total stand-alone marketing contracts)]
    • Past AFI Evaluations and Cost-Effectiveness Reviews of Third Party Service Delivery.

Benchmarks

Evaluation guide for AFI specific benchmarks

Justification for Score

Mitigation Strategies

Consideration:

Is the organization in a stable financial position? Does the organization have adequate financial controls and systems?

Relevance to Management of Funding Agreements:

The organization maintains a balance between revenues and expenditures such that it is well positioned to meet its financial obligations in the short and long terms.

AANDC considers three primary indicators when assessing financial position (reference AANDC draft Directive on Funding):

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year
• Sustainability (Net Debt) Ratio: (0.60) – a measure of whether obligations can be met beyond 1 year
• Working Capital Ratio (threshold : 0.80) – a measures of whether this month's bills for service delivery can be paid

Aboriginal Financial Institutions and Other Business Development Organizations:

Future success of financial institutions is heavily dependent on the quality of accounting system, loan collection, and adequate revenue from loans and adequate loan loss allowances. Note all factors may not apply.

In the context of Aboriginal Financial Institutions and other Business Development Organizations, the evaluation of this risk factor should be based on the following best practices.

1. Adequacy of accounting & Management Information Systems: The organization possesses appropriate accounting and management systems, hardware and software and staff are familiar with the use of the systems.
2. Quality of loan collection process: The organization has a well defined loan collection process and no evidence of effort to mask delinquency problems.
3. Profitability/Break-even/Loss: Organization is profitable or near breakeven and losses for loan portfolio are reasonable.
4. Yield on loan portfolio: The yield on the loan portfolio is equal or higher than that of the AFI network and interest rate for loans is set at a reasonable rate for developmental lending and is comparable to other similar AFIs.
5. Adequacy of allowance for loan losses: Loan losses are adequately covered by allowances.

Sources of Information / Evidence:

• Annual audited financial statement or other type of return as required by AANDC's Year-end Reporting Handbook
• Result of AANDC's annual audit review process
• the following specific source of information and consideration as identified by the program:
  • Adequacy of accounting & Management Information Systems
    • Review management reports and other output from systems in place
    • Reconcile ledger amounts in financial statements
    • Is information current?
    • Can reports be produced on a timely basis?
    • Is the system adequate for the volume of business?
    • Operational and quarterly reports are received on time?
    • Are year-end audit costs excessive for the size of the organization?
  • Quality of loan collection process
    • Reviews of delinquent loans and the process for collection. Are they being pursued in an active and timely fashion?
  • Profitability/Break-even/Loss
    • Financial statement analysis
    • Look at 5 year averages as single year activity might represent exceptions
  • Yield on loan portfolio
    • Compare organizations yield with averages prepared by NACCA
    • Review interest rate policy and determine whether it is reasonable in the developmental lending environment
    • Is there evidence of concessionary rates being offered?
  • Adequacy of allowance for loan losses
    • Compare the level of delinquencies with the loan loss provision account
    • Check the Policy on write-offs and determine if it is being followed i.e. Are non-performing accounts being written off?
    • Are reviews conducted of delinquent accounts on a regular basis and action documented?

Benchmarks

Evaluation guide for AFI specific benchmarks

Justification for Score

Specific Mitigation Strategies

Consideration:

Is a credible and comprehensive project/service delivery plan in place – relative to the risk to be managed?

Relevance to Management of Funding Agreements:

AANDC enters into agreements to support projects of varying levels of complexity. These may be large, innovative ventures involving many unknowns or very simple transactions, such as the purchase of a piece of equipment through a retail outlet. The plan should be appropriate to the level of complexity to be managed – and the plan itself should be no more complex than needed to get the work done.

A variety of formal planning processes may be applied in accordance with program authorities; For example:

• Plans for major community initiatives;
• Business plans for business ventures;
• Proposals for academic research;

Where such plans are in place they inform the GA (i.e. there is no requirement to prepare additional planning documents)

Where the style of these plans is not prescribed, they should include:

• a credible project plan, scaled to complexity, with a well defined and thorough description of the processes and methodologies through which project / service delivery will be achieved (includes considerations for human resources, physical assets, conditional contracts, etc.);
• an exploratory risk analysis, detailing expected risks, risk tolerances and mitigation strategies;
• clear milestones supporting the timely identification of variations from plan so they can be corrected;

Best practice:

Risk mitigation measures are used to reduce the potential for events with material negative outcomes to occur, and thus allow project/service delivery to proceed within risk tolerances. One may consider, is the project/service:

• Simple vs. Complex
• Routine vs. Innovative
• Short Term vs. Long Term
• Single vs. Multiple Service Providers
• Low vs. High Time Sensitivity
• Well Defined / Certain vs. Continuously Changing as Project Progresses
• Low vs. High Publicly Sensitivity (health and safety, legal, political, environmental)
• Single Source Funded vs. Multiple Stakeholders
• Potential impact on other program / service obligations of importance to AANDC or to the service population

Sources of Information / Evidence:

For new applicants and existing recipients detailed project or business plan

Benchmarks

Justification for Score

Specific Mitigation Strategies

Consideration:

Under what market conditions is the institution operating and what marketing activities are undertaken?

Relevance to Management of Funding Agreements:

Other relevant considerations may be brought into the analysis provided they are documented.

For example, for economic development projects:

• the cyclical nature of the economic sector upon which impacts the organization
• the level of competition in the market within which the organization operates / competes

Aboriginal Financial Institutions and Other Business Development Organizations:

For Aboriginal Financial Institutions lack of demand for the institutions services including loans present risk to the success of the organization.

In the context of Aboriginal Financial Institutions and other Business development Organizations, the evaluation of this risk factor should be should be based on the following best practices. Note that all factors may not apply.

1. Promotional Activities: Institution undertakes adequate promotional activities to ensure steady demand for its services
2. Market demand for loans/equity services: There is adequate, continuous and on-going demand for loans and other services.
3. Coverage of Market Area: Institution actively solicits clients from all areas within its area/region of coverage.

Sources of Information / Evidence:

• Trade Associations Publications
• Statistics Canada
• the following specific source of information and consideration as identified by the program:
  • Promotional Activities
    • Is there documented evidence of promotional activity – in all forms?
  • Market demand for loans/equity services
    • Reference to historical levels of loan and equity activity for the last 5 year period? What is the expectation for the future?
    • Has a market analysis been done to ensure targets are achievable?
    • Are there any direct competitors that could affect future growth?
  • Coverage of Market Area
    • Review the regional distribution of the organizations loan portfolio and financial services
    • Are all areas and Aboriginal heritage groups being adequately serviced?
    • Are there limitations to areas that can be serviced e.g. Rural/urban vs. remote?

Benchmarks

Evaluation guide for specific benchmarks

Justification for Score

Specific Mitigation Strategies

Consideration:

Is there a strong oversight function to ensure agreement requirements are met?

Relevance to Management of Funding Agreements:

AANDC enters into agreements with many types of recipients, from large complex organizations with accountability relationships with the public or shareholders, to small, simple organizations. For example, from large hierarchal organizations with Boards/Councils, (which may be governmental, non-governmental or for-profit entities); to sole proprietorships with no employees (owner/operator).

Depending on the organizational form, who is responsible to ensure agreement requirements are met will vary. In large complex organizations the Board/Council signs the agreement and ensures that the organization meets its obligations – but does not engage in operations. In contrast, in a small simple organization, the owner/operator may assume all these roles.

Best Practice:

Success of a project/service delivery is highly contingent on the management of the organization. Features contributing to success may be:

• an experienced Board/Council (to oversee management of the agreement) and management team (to manage the project/services), or experienced owner/operator to perform all these functions;
• a solid track record with this type of agreement
• the Board/Council or owner/operator having taken action to prevent any past deficiencies from recurring

Inuit-specific considerations:

In the context of Inuit organizations, features contributing to success may be:

• a Board of Directors structure created or recognized by a land claim agreement;
• the Board of Directors represents its members: for example, members are elected from each area covered by the organization (such as each community of a region in Inuit Nunangat);
• there are few vacancies on the Board of Directors;
• there is transparency of Board of Directors decisions: for example, annual or audit report is available to members;
• public meetings are held regularly, such as AGM;
• it is possible to attend meetings by conference call or video, which is especially important for participants from remote areas;
• there are by-laws that govern the operations of the organization;

Benchmarks

Justification for Score

Mitigation Strategies

Consideration:

Is a stable organization in place with a proven track record in delivering this type of project/service?

Relevance to Management of Funding Agreements:

Organizations over time build the management structures, policies and procedures, business processes, etc required to respond to client needs.

In a stable environment, the future success of an organization can be inferred from its past successes, or lack thereof. How success is defined varies between organizations, for example:

• a government/not-for-profit organization can be measured against its success in meeting funding agreement requirements.
• a for-profit organization can be measured against its return on investment, employment created, contribution to regional infrastructure, etc.

Inuit-specific considerations:

In the context of Inuit organizations, features contributing to success may be:

• stability of the executive staff;
• a track record of financial reporting is found; for example, in corporation tax filings, when the recipient is a registered charitable organization;
• successful completion of similar projects in the past

Benchmarks

Justification for Score

Mitigation Strategies

Consideration:

Is there a strong oversight function to ensure agreement requirements are met?

Relevance to Management of Funding Agreements:

The organization maintains a balance between revenues and expenditures such that it is well positioned to meet its financial obligations in the short and long terms.

AANDC considers three primary indicators when assessing financial position (reference AANDC draft Directive on Funding):

• Liquidity Ratio (threshold: 0.90) – a measure of whether bills can be paid over the coming year
• Sustainability (Net Debt) Ratio: (0.60) – a measure of whether obligations can be met beyond 1 year
• Working Capital Ratio (threshold : 0.80) – a measures of whether this months bills for service delivery can be paid

Inuit-specific considerations:

In the context of Inuit organizations, additional factors may be considered. Features contributing to success may be:

• a line of credit is provided to the recipient by a bank (to be used if the recipient wishes to share this information);
• Canadian Generally Accepted Accounting Principles are observed in financial reporting;
• liquidity ratio is above .90; this ratio is more relevant than other ratios, when the recipient does not deliver essential services;
• there is a procurement process in place, or a framework or billing mechanism, for sub-contracting (when it is used);
• the most recent Annual Audited statements are unqualified, and there are no potential risk included in the notes (e.g. pending lawsuits, judgments).

Benchmarks

Justification for Score

Mitigation Strategies

Consideration:

Is a credible and comprehensive project/service delivery plan in place – relative to the risk to be managed?

Relevance to Management of Funding Agreements:

AANDC enters into agreements to support projects of varying levels of complexity. These may be large, innovative ventures involving many unknowns or very simple transactions, such as the purchase of a piece of equipment through a retail outlet. The plan should be appropriate to the level of complexity to be managed – and the plan itself should be no more complex than needed to get the work done.

A variety of formal planning processes may be applied in accordance with program authorities; For example:

• Plans for major community initiatives;
• Business plans for business ventures;
• Proposals for academic research;

Where such plans are in place they inform the GA (i.e. there is no requirement to prepare additional planning documents)

Where the style of these plans is not prescribed, they should include:

• a credible project plan, scaled to complexity, with a well defined and thorough description of the processes and methodologies through which project / service delivery will be achieved (includes considerations for human resources, physical assets, conditional contracts, etc.);
• an exploratory risk analysis, detailing expected risks, risk tolerances and mitigation strategies;
• clear milestones supporting the timely identification of variations from plan so they can be corrected;

Best practice:

Risk mitigation measures are used to reduce the potential for events with material negative outcomes to occur, and thus allow project/service delivery to proceed within risk tolerances. One may consider, is the project/service:

• Simple vs. Complex
• Routine vs. Innovative
• Short Term vs. Long Term
• Single vs. Multiple Service Providers
• Low vs. High Time Sensitivity
• Well Defined / Certain vs. Continuously Changing as Project Progresses
• Low vs. High Publicly Sensitivity (health and safety, legal, political, environmental)
• Single Source Funded vs. Multiple Stakeholders
• Potential impact on other program / service obligations of importance to AANDC or to the service population

Inuit-specific considerations:

In the context of Inuit organizations, features contributing to success may be:

• A project plan is available: it may be provided in a standalone document; a project plan may be included in an annual operational plan; or may be included in a 3-5 year strategic plan; or the recipient may use a planning tool or other document already available for another purpose (such as CanNor's guide in project planning);
• Clear milestones are identified in the project plan
• the size of the organization (staff) is sufficient to undertake the project; Staff have the capacity to work on the project; or
• the recipient maintains strong oversight, when sub-contracting is used to increase capacity for the project; for example, sub-contracting is only a portion of the project, when it is used (if terms of the contract are shared);
• There is a clear project lead, especially when sub-contracting is used, and when several funders are involved;
• the project lead (or a lead for another project with this recipient) communicated regularly with funding program officers in the past;
• Project costs include issues relevant to the North: administrative costs, geographic distribution (i.e. travel or remote access to meetings) are considered in the plan

Benchmarks

Justification for Score

Mitigation Strategies

Consideration:

Other relevant considerations may be brought into the analysis provided they are documented (Note: These should be predefined and may be stored within FNITP and pulled down as required)

Relevance to Management of Funding Agreements:

Other relevant considerations may be brought into the analysis provided they are documented.

For example, for economic development projects:

• the cyclical nature of the economic sector upon which impacts the organization
• the level of competition in the market within which the organization operates / competes

Inuit-specific considerations:

In the context of Inuit organizations, additional factors may be considered. During discussions with the Inuit Relations Secretariat, Inuit recipients often mentioned that the level of funding required for the project has a major impact on the risk associated with the funding agreement. A greater funding level implies a greater potential impact if problems arise with achievement of objectives and stewardship of funds. Furthermore, as the level of funding increases, the importance of other factors also increases. In this case, features contributing to success may be:

• materiality: risk involved in a $15K project is smaller than $150K, since the scope of a low-cost project is smaller.
• relative materiality: the project funds constitute a small portion of the recipient's overall income.

Benchmarks

Justification for Score

Mitigation Strategies