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.
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.
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.
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.