2018-2019 Financial Reporting Requirements

Table of contents

Important Notes

These Notes are an integral part of this document

A. Consolidation of Financial Reporting Requirements of the Department of Indigenous Services Canada (DISC) - excluding Health Canada – First Nations Inuit Health Branch (HC-FNIHB) / Indigenous and Northern Affairs Canada (INAC), hereafter known as the department(s).

B. The First Nations Financial Transparency Act (FNFTA)

The First Nations Financial Transparency Act (the Act) requires each First Nation that is a band as defined in subsection 2(1) of the Indian Act (that is not party to a comprehensive self-government agreement given effect by an Act of Parliament) to:

The Act applies for every financial year beginning after the day on which the Act came into force, which was March 27th, 2013 i.e. the Act applies for every financial year beginning with the 2013 - 2014 financial year.

The financial reporting documents that First Nations must prepare and provide to the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) under their funding agreements and this Reporting Guide include those that they must prepare and publish under the Act.

The Act also requires Department of Indigenous Services Canada / INAC  to publish on its internet site, the documents that a First Nation must prepare under the First Nations Financial Transparency Act, once the First Nation provides these documents to the department(s).

As some documents that First Nations must provide to the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) under this Reporting Guide are not covered by the Act, First Nations must separate documents covered by the Act from those not covered by the Act when providing them to the department(s), in two separate files as follows:

File 1: Documents required under the Act and that the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) will publish upon receipt:

  1. Annual Audited Consolidated Financial Statements including the auditor's written report
  2. Schedule of Remuneration and Expenses (Chiefs and Councillors) – Annex B accompanied by an auditor's report or a review engagement report.

Please note that the Schedule of Remuneration and Expenses of Chiefs and Councillors must not be part of the Audited Consolidated Financial Statements and must not include any information about individuals other than Chiefs and Councillors.

File 2: Documents not covered by the Act:

  1. Program/Service/Activity Revenues and Expenses Schedules (Annex A).
  2. Schedule of Remuneration and Expenses (Unelected Senior Officials) (Annex C), accompanied by an auditor's report or a review engagement report.

For details on the content of these documents, please see sections 6.0 and 7.0 below.

1.0 Context and Background

The Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC)  receive and review financial information in conjunction with non-financial information. Annual compliance activities undertaken by the department(s) to ascertain: whether funds provided are expended for the purposes intended, and whether a funding Recipient's financial situation continues to be sufficiently stable to ensure 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, the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) must demonstrate to the Canadian public and to Parliament, through their respective Ministers, that all funds, including those transferred to Indigenous and other Recipients are spent in accordance with the terms and conditions of funding agreements.

The Reporting Guide - Financial Reporting Requirements is a supporting document designed to assist recipients of  the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) funding to comply with the terms and conditions of their funding agreements which pertain 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. Examples may include, the Recipient's accountant, auditor or agencies receiving part of the funding provided to a Recipient. Where this is the case, it is strongly recommended that the Recipient provide this document to all those involved in managing the funding agreement as all such parties must also understand the annual financial reporting requirements of the Recipient and  its funded Agencies.

2.0 Scope

This document applies to all Recipients who receive funding from the Department of Indigenous Services Canada (DISC) – excluding Health Canada - First Nations Inuit Health Branch (HC-FNIHB) / Indigenous and Northern Affairs Canada (INAC), through a signed funding agreement with  the department(s) and as such have financial reporting requirements as outlined within the terms and conditions of their funding agreement.

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, qualified auditor who provides a written, professional opinion on whether the financial statements are complete and fair in all material aspects. Financial statements provide important information to all stakeholders including for example, federal government departments who fund transfer payment programs, and the financial institutions that do business with all such 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 Chartered Professional Accountants of Canada (CPA Canada), 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, under the definitions in the CPA Canada Handbook.

It is the Recipient's responsibility, with the help of their auditor, to determine which of the CPA Canada Standards 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 CPA Canada Standards recommendations are relevant to their organization.

3.4 Agencies

In some instances, the Department of Indigenous Services Canada / INAC may provide a transfer payment(s) to a Recipient who may in turn transfer a portion or all of this amount(s) and the related obligations i.e. delivery of programs and services, as outlined in its terms and conditions of the funding agreement, to an agency.  In such instances, the funding Recipient who signed the funding agreement with the department(s), remains accountable to the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) for the performance of its obligations as set out in the terms and conditions of the funding agreement.

Therefore, where the Recipient has transferred funding to an agency, the Recipient must require that agency to provide to the Recipient, the terms of the transfer as well as its financial statements. In addition, the Recipient must provide its own financial statements to the funding department (s). Also, upon written request from the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) to the Recipient, a copy of the agency's financial statements must be made available to the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC).

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 the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC), as identified in the Recipient's funding agreements.

The Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) funding Recipients must submit their financial reporting packages in the audited consolidated financial statements format available on the department(s)'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 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)

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), including the auditor's written report. In the case of a recipient who is a First Nation, these statements must be published or caused to be published on the Internet by the First Nation and will be published on the internet site of the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC).

b) Special Purpose Reporting

  • Program/Service/Activity Revenues and Expenses Schedules (Annex A).
  • Schedule of Remuneration and Expenses (Chiefs and Councilors) (Annex B) accompanied by an auditor's report or a review engagement report. In the case of a First Nation, these documents must be published or cause to be published by the First Nation and will be published on the internet site of the Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC).
  • Schedule of Remuneration and Expenses (Unelected Senior Officials) (Annex C) – accompanied by an auditor's report or a review engagement report.

Please note that neither of the Schedules of Remuneration and Expenses are to be part of the Audited Consolidated Financial Statements.

As information about identifiable individuals (personal information) will appear in the Schedule of Remuneration and Expenses (Chiefs and Councillors) and may appear in consolidated financial statements, the First Nation should provide advance notice to those individuals these documents will be published and may be disclosed to its members. Only personal information that is reasonably necessary to complete the consolidated financial statements should be included in that document.

Where information about identifiable individuals will appear in the Schedule of Remuneration and Expenses (Unelected Senior Officials), the First Nation should inform those individuals of any potential disclosure of that document.

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 Not-For-Profit) (using the General Reporting Model)

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 audited financial statements from a recipient are to be considered only if an event classified as exceptional occurs e.g. a material inaccuracy due to an accounting error, non-compliance with GAAP - Generally Accepted Accounting Principles, etc. CPA Canada Standards are to be consulted when a restatement of financial statements may to be requested from a recipient.

a) Recipients using the Common Government Reporting Model - First Nations, Tribal Councils and First Nation Political Organizations

Recipients reporting under the Common Government Reporting Model shall provide Audited Consolidated Financial Statements (ACFS) in accordance with the CPA Handbook

The Audited Financial Statements package must include, at a minimum, 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

The financial statements package is to be signed by an official authorized to represent the Recipient.

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

Recipients reporting under the General Reporting Model shall provide Audited Consolidated Financial Statements (ACFS) in accordance with the CPA Canada Handbook.

The Audited Financial Statements package must include, at a minimum, 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

The financial statements package is to be signed by an official authorized to represent the Recipient.

7.2 Schedule of Revenue and Expenses

NOTABLE

A separate Schedule of Revenue and Expenses must be provided for EACH  Program/Service/Activity/Project for which the Recipient has received funding through a funding agreement.

The following parameters are relevant to the Revenue and Expenses Schedules:

  • 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 through signature on the  financial statement package submitted
  • include any additional information to the schedules/financial statements, if relevant;
  • when there is more than one funding source for a Program/Service/Activity/Project, it would be beneficial for the recipient to provide additional detail on all funding sources as this information may be considered in the calculation of proportional reimbursements, where applicable.

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

7.3.1 Auditor's Attestation

The Audited Consolidated Financial Statements package must include, for each schedule described in this section, either an Auditor's Report or a Review Engagement Report, as prepared by the Recipient's auditor.

7.3.2 Requirement for Schedules of Remuneration and Expenses

First Nations must provide the following schedules and information:

  • Chief and Councillors - A "Schedule of Remuneration and Expenses - for Chiefs and Councillors" , that sets out individually, the remuneration paid and the expenses reimbursed to the Chief and each Councillor—acting in their capacity as such and in any other capacity, including their personal capacity—by the First Nation and by any entity that, in accordance with Generally Accepted Accounting Principles, is required to be consolidated with the First Nation. See Annex B for definitions of "Remuneration" and "Expenses." The Schedule must not include information about individuals other than the Chief and Councillors.
  • Unelected Senior Officials – A "Schedule of Remuneration and Expenses", that sets out the information described in Annex C. The schedule must not include information about individuals other than unelected senior officials.

Please note that Schedules of Remuneration and Expenses are not to be part of the Audited Consolidated Financial Statements.

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

The CPA Canada Handbook recommends that the auditor must present to the audit committee or a similar governing body, any shortcomings in internal controls identified as a result of the audit process (Ref. 5220.07 – CPA Canada Handbook). This communication is referred to as either an "Auditor's Letter" or an "Internal Control Letter". These letters and the recommendations contained therein, are valuable management tools with may assist the Recipient in  building  financial and administrative capacity.

The Handbook also requires that the auditor communicate, in writing and on a timely basis, significant deficiencies in internal controls identified during the audit, to those charged with governance. It is strongly recommended that the "Auditor's Letter" or "Internal Control Letter" be provided to  the Department of Indigenous Services Canada / INAC. However, its submission becomes a mandatory reporting requirement in the following cases:

  1. Where a recipient is already in default,  as defined under default provisions of a funding agreement, this reporting requirement will be in addition to previously imposed requirements; and
  2. When a Recipient is in default of the terms and conditions of its funding agreement and the Department of Indigenous Services Canada / INAC has notified the Recipient that a default management action is required.

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)
Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC)      
Other revenue      
Department of Indigenous Services Canada (DISC) / Indigenous and Northern Affairs Canada (INAC) - Trust      
INAC and/or HC Trust Fund interest revenue      
Fund interest revenue      
Prior year unexpended funding (where applicable)      
Total Revenues      
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)
         
         

Annex B 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 the internet site of the Department of Indigenous Services Canada  / INAC entitled: "Supplementary Information".
  3. As per the First Nations Financial Transparency Act:

    "expenses"  include 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 or
Approved Salary
Range
From / To
Other
Remuneration
(Note 2)
Expenses Reimbursed
as part of Other Remuneration
(Note 3)
           
           

Annex C 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.
  3. Expenses reimbursed as part of amount shown in Column  5

Annex D
Statement - The Management of Moveable Assets(MMA)

Department of Indigenous Services Canada (DISC) – Health Funding

Recipients of either Transfer, Flexible and Flexible Transfer funding through agreements dated prior to April 2012 and/or Block funding shall also provide a Statement – The Management of Moveable Assets (MMA). In addition, an auditor's report or a review engagement report is required.

A sample table, for reporting purposes, is provided below.

Name of Funding Recipient
For the year ended March 31, 201X
201W 201X
Balance at beginning of year $ xxx $ xxx
Amount provided in agreement for MMA $ xxx $ xxx
Total $ xxx $ xxx
Revenues generated $ xxx $ xxx
Expenses (acquisitions and replacements) $ xxx $ xxx
Balance at end of year $ xxx $ xxx
Date modified: