Management Letter: Indian Business Corporation

Mr. Rob Rollingson
General Manager
Indian Business Corporation
#56, 2333 – 18th Avenue NE
Calgary AB  T2E 8T6

Ref: 2012-13 Recipient Audit Results and Follow-Up

Dear Mr. Rollingson:

Aboriginal Affairs and Northern Development Canada (AANDC) conducted a number of recipient audits in fiscal year 2012-13, including an audit of the Indian Business Corporation. Attached please find a copy of the full audit report and a summary of the report. The summary will be published on the department's website in the coming weeks, along with this letter. Should you wish to, you may provide a written response to the audit to me within 30 days. Your response will also be posted.

No recoverable amount was identified as a result of this recipient audit.

The audit report included the following recommendations:

1. It was recommended that for future loans to Aboriginal businesses related to Indian Business Corporation's direct or indirect equity interest, an independent external analysis be provided and accepted by the Minister prior to the loan being disbursed.
2. It was recommended that the Recipient recover from its Board members the amount of $145,992 that would reduce the Board of Directors' expenses to $100,000 each as per Article 5.1 c) in the Letter of Offer, and that the recipient ensures that it complies with this requirement for future fiscal years. However, if the Recipient fails to recover the funds from its Board of Directors it is recommended that AANDC exercises their right of default in accordance with Article 9.1 f) which states: "The following event constitutes a default: in the opinion of the Minister, the Recipient fails to meet any term, condition or undertaking in the this Arrangement is not complied with in any material respect and any such defect has not been cured by or remedied within thirty (30) days or written notice of such defect having been provided to or condition of this Arrangement" and recall the $2,000,000 capitalization loan."
3. Some members of the Board of Directors of Indian Business Corporation are also members of the Board of Directors of Indian Business Corporation Energy, which is a wholly-owned subsidiary company of the Indian Business Corporation whose main purpose is to generate opportunities for First Nations wishing to take greater control of their oil and gas resources. Therefore, the auditors recommend that Indian Business Corporation management review the Board of Directors' expenditures claimed under Indian Business Corporation Energy and ensure that the expenses claimed are reasonable and that the Duty to Loyalty principle was applied whereby the best interests of Indian Business Corporation and its beneficiaries (Treaty #6, #7 and #8 communities) are considered.
4. It was recommended that Indian Business Corporation include procedures in its Board of Directors Policy that include:
   1. The appropriate remuneration rate for the members of the Board. The policy should take into consideration remuneration of other similar Aboriginal Capital Corporation organizations.
   2. Terms of Reference outlining the roles of the Board members and President.
   3. Election process for Directors (including the advertisement of the Annual General Meeting to detailed election procedures).
   4. Terms of Reference for the Executive Committees.
   All items should take into consideration the duty to loyalty whereby the best interests of Indian Business Corporation and its beneficiaries (Treaty #6, #7 and #8 communities) are considered.
5. It was recommended that the General Manager of Indian Business Corporation inform the Board of Directors of the Government of Canada's "National Joint Council Travel Directive" rates, rules and regulations. In addition, a policy should be created whereby the General Manager could be in a position to refuse paying for travel expenses, without jeopardizing his position at Indian Business Corporation, when travel expenses were incurred by the Board of Directors that were not in the best interest of the Indian Business Corporation.
6. It was recommended that the Board of Directors enforce the Duty to Loyalty policy and require the President of Indian Business Corporation to reimburse his loan. In addition, the Board should initiate recovery of outstanding loans to Indian Business Corporation (i.e., loan to President's brother).

Your regional AANDC representative will be in touch with you shortly to help you develop an action plan to address the recommendations in the recipient audit report. This action plan will also be posted. Please discuss any questions or concerns you may have about this audit with your regional AANDC representative.

Sincerely,

Paul J. Thoppil, CPA, CA
Chief Financial Officer

c.c.: Jim Sisson
Lynda Clairmont
Anne Scotton
Allan Clarke