Financial Reporting Requirements

Table of contents

Important Notes

(These Notes are an integral part of this document)

As per the requirements of this document:

1.0 Context and Background

The departments of Aboriginal Affairs and Northern Development Canada (AANDC), and Health Canada (HC) (referred throughout the document as HC-FNIH – i.e. First Nations Inuit Health), receive and review financial information in conjunction with non-financial information and undertake compliance activities annually. These activities are undertaken to gather information on whether funds provided are expended for the purposes intended, the collected information depicts the Recipient's financial situation and allows AANDC and/or HC-FNIH to assess whether the funding Recipient's financial situation is sufficiently stable to assure continued delivery of funded programs/services.

Reporting on the use of public funds to community members and to Canadians remains an essential element of the management control framework for transfer payments. All governing bodies are ultimately accountable to their stakeholders. As such, AANDC and/or HC-FNIH must demonstrate to the Canadian public and Parliament, through their respective Ministers, that all funds, including those transferred to Aboriginal and other Recipients are spent in accordance with the terms of funding agreements.

This is a supporting document designed to help Recipients of AANDC and/or HC-FNIH to comply with the terms and conditions of funding agreements pertaining to financial accountability, transparency and reporting. This document must be read in conjunction with the Recipient's funding agreement.

Other stakeholders may be part of the management of the funding agreement, for example the Recipient's auditor, accountants or agencies receiving part of the funding provided to a Recipient. Where this is the case, it is strongly recommended that Recipients provide this document to all those involved in managing the funding agreement. All involved must understand the Recipient's annual financial reporting requirements and that of their funded Agencies.

2.0 Scope

This document applies to all AANDC and/or HC-FNIH Recipients who receive funding through a signed funding agreement with AANDC and/or HC-FNIH as defined in their funding agreement's terms and conditions, and who have the financial reporting requirements set-out in this document.

3.0 Accounting Standards

Financial statements are essential elements of accountability. They depict a Recipient's financial health and provide information on how much funding was spent and for what purposes. Financial statements also assist in future decision making.

Financial statements are prepared by the Recipient and audited by an independent and qualified auditor. The auditor's function is to determine the completeness and fairness of the financial statements in all material respects; this means an adequate review is done to provide a written professional opinion on the statements.

Financial statements provide important information to Recipients. The information is also important to federal government departments which fund transfer payment programs, and the financial institutions that do business with these entities.

In most cases, as described below, audited financial statements are required to be submitted in accordance with the Public Sector Accounting Board (PSAB) Standards which is a consistent standard used by all governments in Canada.

Additionally, some special purpose detailed reporting may be required.

3.1 First Nations

Produced by the Canadian Institute of Chartered Accountants (CICA), the Public Sector Accounting Handbook (PSA Handbook) applies to all forms of governments in Canada, and First Nations are considered governments from an accounting perspective.

3.2 Tribal Councils and First Nations Political Organizations

Tribal Councils and First Nations Political Organizations must adhere to the PSA Handbook accounting recommendations of the Common Government Reporting Model unless Canadian Accounting Standards definitions and recommendations deem them to be profit-oriented enterprises, or not-for-profit organizations, or government not-for-profit organizations (if applicable). It is the Recipient's responsibility, with the help of their auditor, to determine which of the CICA recommendations are relevant to their organization.

3.3 Recipients other than First Nations, Tribal Councils and First Nations Political Organizations

Recipients other than First Nations, Tribal Councils and First Nations Political Organizations must adhere to the PSA Handbook accounting standards unless Canadian Accounting Standards definitions and recommendations deem them to be profit-oriented enterprises, or not-for-profit organizations, or government not-for-profit organizations (if applicable). It is the Recipient's responsibility, with the help of their auditor, to determine which of the CICA recommendations are relevant to their organization.

3.4 Agencies

In some instances, AANDC and/or HC-FNIH may provide transfer payments to a Recipient that in turn delegates some or all of its obligations and/or transfers a portion or all of these transfer payments to an agency for the delivery of programs and services funded under the terms and conditions of a funding agreement. The funding Recipient who signed the funding agreement with AANDC and/or HC-FNIH remains accountable to AANDC and/or HC-FNIH for the performance of its obligations as set out in the funding agreement.

Therefore, where the Recipient has transferred funding to an agency, the Recipient must require that agency to provide the terms of the transfer as well as its financial statements to the Recipient in addition to the Recipient providing its own financial statements. Also, upon written request from AANDC and/or HC-FNIH to the Recipient, a copy of the agency's financial statements must be made available to AANDC and/or HC-FNIH.

4.0 References

5.0 Definitions

For the purposes of this document see Appendix A of the Treasury Board of Canada Secretariat – Directive on Transfer Payments.

6.0 Financial Reporting Requirements

This section details the components of the financial reports that Recipients must provide to AANDC and/or HC-FNIH, as identified in the Recipient's funding agreements.

AANDC and/or HC-FNIH Recipients must submit their financial reporting packages in the audited consolidated financial statements format available on AANDC's Internet Site. In the case of audited financial statements, the recipient shall engage an independent auditor who is a member in good standing of a corporation, institute or association of accountants incorporated under an Act of the legislature of the Province or Territory in which the recipient has its administrative offices. Where the independent auditor is a member of a corporation, institute or association of accountants incorporated under an Act of the legislature of the Province of Manitoba, that auditor must be recognized in Manitoba with the designation of Chartered Accountant, Certified General Accountant, Certified Management Accountant or Chartered Professional Accountant. These are the minimum standards to be met.

6.1 First Nations, Tribal Councils and First Nation Political Organizations (using the Common Government Reporting Model)Footnote 1

6.1.1 F-0080 – Annual Audited Consolidated Financial Statements package, comprised of:

a) Financial Statements
  • Annual Audited Consolidated Financial Statements (see Section 7.1)
b) Special Purpose Reporting
  • Program/Service/Activity Revenues and Expenses Schedules (Annex A).
  • Schedule of Remuneration and Expenses (Chiefs and Councilors) (Annex B) – An auditor's report or a review engagement report is required.
  • Schedule of Remuneration and Expenses (Unelected Senior Officials) (Annex C) – An auditor's report or a review engagement report is required.
  • Statement of Moveable Assets Reserve (Annex D) – An auditor's report or a review engagement report is required.

OR

6.1.2 F-0081 – Annual Unaudited Schedule of Revenue and Expense package, comprised of (does not apply to First Nations):

  • Program/Service/Activity Revenues and Expenses Schedules (Annex A)

6.2 Recipients Other than First Nations, Tribal Councils and First Nation Political Organizations (includes Non-For-Profit) (using the General Reporting Model)Footnote 1

6.2.1 F-0190 – Annual Audited Financial Statements package, comprised of:

a) Financial Statements
  • Annual Audited Consolidated Financial Statements (see Section 7.1)
b) Special Purpose Reporting
  • Program/Service/Activity Revenues and Expenses Schedules (Annex A)

OR

6.2.2 F-0191 – Annual Audited Schedule of Revenue and Expenses package, comprised of:

  • Program/Service/Activity Revenues and Expenses Schedule(s) (Annex A) – An auditor's report or a review engagement report is required.

OR

6.2.3 F-0192 – Annual Unaudited Schedule of Revenue and Expenses, comprised of:

  • Program/Service/Activity Revenues and Expenses Schedule(s) (Annex A)

7.0 Financial Reporting Description

7.1 Annual Audited Financial Statements

Important Note

Requests for restatements of recipient audited financial statements are only to be considered when an exceptional event has occurred. CICA Standards are to be consulted when a restatement is to be requested from a recipient.

a) First Nations, Tribal Councils and First Nation Political Organizations

The Recipient shall provide Consolidated Audited Financial Statements in accordance with Canadian Accounting Standards, using the Common Government Reporting Model (signed by Authorized Recipient Official).

The Annual Audited Financial Statements must at least include the following:

  • Management Letter;
  • Auditor's Report;
  • Consolidated Statement of Financial Position;
  • Consolidated Statement of Operations (including budget figures);
  • Consolidated Statement of Changes in Net Debt;
  • Consolidated Statement of Cash Flows; and
  • Notes to Financial Statements.

b) Recipients using the General Reporting Model (other than First Nations)

The Recipient shall provide Consolidated Audited Financial Statements in accordance with Canadian Accounting Standards and CICA Handbook.

The Audited Financial Statement must at least include the following:

  • Management Letter;
  • Auditor's Report;
  • Consolidated Balance Sheet;
  • Consolidated Income Statement (including budget figures);
  • Consolidated Statement of Retained Earnings;
  • Consolidated Statement of Cash Flow; and
  • Notes to Financial Statements.

7.2 Schedule of Revenue and Expenses of Funded Recipient – Program/Service/Activity (Annex A)

Important information: A separate Schedule of Revenue and Expenses must be provided for each Program/Service/Activity/Project for which funding is provided through a funding agreement. More specifically, the Program/Service/Activity/Project Revenues and Expenses Schedules must:

  • be presented on an accrual basis (Revenues/Funding received during the statement period less expenses incurred):
    • Revenues are accounted for in the year in which the transactions or events occur giving rise to the revenues for monetary transactions; and
    • Expenses are accounted for in the year in which the goods and services are acquired and a liability is incurred, or transfers are due for monetary transactions but do not include non-monetary transactions e.g. amortization expenses.
  • present each schedule's revenue and expense information for the Programs/Services/Activities/Projects separately and individually by Set, Fixed, Flexible or Block Contribution funding type as identified in the funding agreement;
  • disclose all revenues/funding received by source and expenses incurred by object for each Program/Service/Activity specified in the funding agreement;
  • include a revenue section that outlines funding/revenue from all sources including funds received from other government departments, private enterprises and other sources;
  • present unexpended funds (i.e. Prior year unexpended funding – where applicable);
  • detail opening and closing balances of deferred/unexpended funding;
  • disclose budget figures;
  • be approved by an authorized representative of the Recipient, indicated by a signature on the submitted package;
  • include any additional information to the schedules/financial statements, if relevant.

7.3 Schedules of Remuneration and Expenses (Annexes B and C)

7.3.1 Auditor's Attestation

The schedules described in this section must be accompanied separately by one of the following auditor's attestations: An auditor's report or a review engagement report.

7.3.2 Requirement for Schedules of Remuneration and Expenses

The schedules must include the information described in Annexes B and C.

  • Chiefs and Councillors (Annex B) – A "Schedule of Remuneration and Expenses"
  • Unelected Senior Officials (Annex C) – A "Schedule of Remuneration and Expenses"

7.4 Auditors Recommendations Letter to Management (Auditor's Letter)

The CICA Handbook recommends that the auditor must present to the audit committee or a similar governing body, any identified internal control shortcomings during the financial statement audit (Ref. 5220.07 – CICA Handbook).

This communication is either referred to as an "Auditor's Letter" or an "Internal Control Letter". These letters and the recommendations contained therein are valuable management tools to help build Recipient financial and administrative capacity.

The Handbook also requires that the auditor shall communicate in writing significant deficiencies in internal control identified during the audit to those charged with governance on a timely basis.

It is strongly recommended that the "Auditor's Letter" or "Internal Control Letter" be provided to AANDC and/or HC in all instances. However, its submission becomes a mandatory reporting requirement in the following cases:

  1. Where, a recipient is already in default, under default provisions of a funding agreement (a continuation of previously imposed requirements due to a default); and
  2. When a Recipient is in default of its funding agreement and AANDC and/or HC-FNIH has notified the Recipient that a default management action is required, AANDC and/or HC-FNIH will request the "Auditor's Letter" or "Internal Control" Letter.

Annex A – Schedule of Revenue and Expenses

Funded Recipient – Program/Service/Activity/Project Name
For the year ended March 31, 201X

  201X Budget 201X Unaudited 201X
(prior year)
(Unaudited)
Revenue (examples)
Aboriginal Affairs and Northern Development      
HC-FNIH (if required)      
Other revenue      
AANDC and/or HC Trust Fund interest revenue      
Prior year unexpended funding (where applicable)      
Total Revenue      
Expenses (examples)
Advertising      
Audit fees      
Bad debts      
Bank charges      
Emergency assistance      
Honoraria      
Insurance      
Interest on long-term debt      
Meeting      
Miscellaneous      
Office      
Professional fees      
Rent      
Repairs and maintenance      
Salaries and benefits      
Subcontracts      
Supplies      
Telephone      
Tradition and culture      
Travel      
Total Expenses      
Surplus (deficit) before transfers      
Transfers between programs      
Transfer to Education (example)      
Transfer from Casino (example)      
Surplus (deficit)      

Annex B – Schedule of Remuneration and Expenses – (Chiefs and Councillors)

Name of Funding Recipient
For the year ended March 31, 201X

Name of Individual Position Title Number of Months
[Note 1]
Remuneration
[Note 2]
Expenses
[Note 3]
         
         
         
         
         
         
         
         
Notes:
  1. The number of months during the fiscal year that the individual was a chief or councillor.
  2. As per the First Nations Financial Transparency Act:
    • "remuneration" means any salaries, wages, commissions, bonuses, fees, honoraria and dividends and any other monetary benefits – other than the reimbursement of expenses – and non-monetary benefits.
    • Examples are provided in the supporting document which accompanies this document on AANDC's Internet site entitled: "Supplementary Information".
  3. As per the First Nations Financial Transparency Act:
    • "expenses" includes the costs of transportation, accommodation, meals, hospitality and incidental expenses.

Annex C – Schedule of Remuneration and Expenses – (Unelected Senior Officials)

Name of Funding Recipient
For the year ended March 31, 201X

Name of Individual
(optional)
Position Title Number of Months
[Note 1]
Actual Salary or Approved Salary Range
From / To
Other Remuneration
[Note 2]
Expenses Reimbursed as part of Other Remuneration
[Note 2]
             
             
             
             
             
             
             
             
             
Notes:
  1. The number of months during the fiscal year that the individual was on staff.
  2. "Remuneration" means any salaries, wages, commissions, bonuses, fees, honoraria, dividends and reimbursement of expenses – including the costs of transportation, accommodation, meals, hospitality and incidental expenses – and any other monetary benefits and non-monetary benefits.

Annex D – Statement of Moveable Assets Reserve

Health Canada First Nations and Inuit Health Funding

Name of Funding Recipient
For the year ended March 31, 201X

Recipients of Transfer, Flexible and Flexible Transfer funding agreements dated prior to April 2012 and Block funding agreement shall also provide a Statement of Moveable Assets Reserve (MAR) for the Health Canada, First Nations and Inuit Health funding in accordance with the Health Canada, First Nations and Inuit Health Statement of Moveable Assets Reserve for Health Canada following this table.

  201W 201X
Balance at beginning of year $ xxx $ xxx
Amount provided in agreement for MAR $ xxx $ xxx
Total $ xxx $ xxx
Revenues generated $ xxx $ xxx
Expenses (acquisitions and replacements) $ xxx $ xxx
Balance at end of year $ xxx $ xxx
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