Report on Recipient Audit of Beaver First Nation
Name: Beaver First Nation
Population: 418 on reserve; 1,045 total registered
Location: Alberta
Default status at time of audit: Expert Resource Support, formerly known as Co-Managed (2011-2012)
Current default status: Recipient-Appointed Advisor, formerly known as Expert Resource Support (2014-2015)
Current Chief: Trevor Mercredi
Time period covered by audit: April 1, 2010 to March 31, 2012
Amount of AANDC funding audited: $7,008,976
BACKGROUND
Aboriginal Affairs and Northern Development Canada (AANDC) selected Beaver First Nation in Alberta for a recipient audit in 2012-2013 based on their 2011-2012 risk assessment score and other risk factors.
This recipient audit was undertaken to:
- Ensure compliance with the Terms and Conditions of the Agreements;
- Ensure compliance with Treasury Board's and AANDC'S policies and directives;
- Evaluate the efficiency and effectiveness of the Financial Management Framework in place to manage the Program, as well as the recipient's organizational capacity; and
- Assess the quality (adequacy) of the financial control measures and mechanisms in place to manage risks effectively.
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.
A sample of 12.4% of the in-scope funding identified compliance of 88.8% (based on the dollar amount of samples reviewed) with the intended purpose and terms and conditions of the applicable funding agreements signed with AANDC over the in-scope audit period. The audit identified that expenditures in the amount of $97,725 were not in compliance with the funding agreement and are potentially recoverable.
Governance
The audit found that the Beaver First Nation has a Procedural Policy that defines a number of governance items, some of which include Band Council duties; Band Council meetings, Members meetings and Conflict of Interest, however past Chief and Council may not have been fully aware of this policy document or followed it in practice.
Opportunities observed for improvement include:
- Minutes of Chief and Council meetings were not prepared over the audit scope period.
- There was no evidence that the Chief and Council reviewed financial information on a regular (for example monthly or quarterly) basis.
- The roles of Chief and Council and Band Management are not clear and distinct.
- 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.
- There is no evidence that band management and Chief and Council action items arising from audits are tracked against progress made to address these items.
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 details 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 unqualified opinions each time.
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.
- Band management did not prepare an annual budget for the two years in scope.
- Preparation and presentation of financial information on a regular basis for Chief and Council was not completed.
- Minutes were not prepared during the audit scope period.
Review of Program Expenditures
The audit selected a sample of 52 transactions to audit in detail. 88.8% of the dollar amount sampled was in compliance with the funding agreement.
11.2% of the AANDC funding sample reviewed was concluded to be not in compliance with the Funding Agreement, based on insufficient or no supporting documentation to substantiate the nature and amount of the expenditure.
Examination of cheque signing authorities
The audit reviewed all payments made to a specific supplier that was identified as a potential risk through interviews conducted during the site visit by the audit team. The concern expressed was for payments made to a company that may have been in a conflict of interest position with a member of Council. The audit reviewed all payments made to the specific supplier for authorization and accuracy as was completed for the sample of transactions. In addition the audit reviewed all cancelled cheques for authorized signatures.
RECOMMENDATIONS
- The audit recommends that Chief and Council improve the governance and oversight of the funding provided by AANDC through:
- Review, revision as needed, communication and adherence to the Beaver First Nation Council Procedural Policy;
- Documentation of minutes for all Chief and Council meetings and provision of minutes for review by Members, AANDC, auditors and other stakeholders as appropriate;
- Regular review of financial information (quarterly at a minimum) to assess actual program and administration expenditures compared to the budgeted amounts;
- Clarification of the roles of Chief and Council in the Beaver First Nation Council Procedural Policy to include responsibility to review and approve the annual budget; and
- Presentation of annual budgets and audited financial statements to Members on a timely basis following their completion.
- The audit recommends that Chief and Council prepare a plan to communicate the strategic objectives of the Band over the next one to three years.
- The audit recommends that Band Management prepare operational plans for the significant programs managed and administered.
- The audit recommends that Band Manager improve the financial administration and management of Band funding provided by AANDC through:
- Documenting financial policies for cash receipts, cash disbursements, accounting and record keeping, and financial reporting;
- Completing a second review of the bank reconciliations;
- Conducting a more thorough and documented review of monthly variance reporting; and
- Providing Chief and Council with financial information on a regular basis that includes budget and actual results with explanations for significant variances over and under budget.
- The audit recommends that the Band Management document the procurement to pay process and related financial controls.
- The audit recommends that Chief and Council annually review and approve salary and honoraria amounts to be paid.
- The audit recommends that Band Management include a conflict of interest policy as part of the financial policies.
CURRENT STATUS
A copy of the final report has been sent to the recipient.