A First Nation Performance Management

Transcription

1 INSIDE VOLUME 6 / FEBRUARY 2009 How does your First Nation compare? Getting started with Performance Reporting Audit Preparation: Best Practices Employee Fraud Developing an Action Plan and more...

2 JAM The Journal of Aboriginal Management Subscription Information AFOA members receive free subscription to JAM: The Journal of Aboriginal Management. The Journal will be published twice a year once in the spring and once in the winter. The Journal will be mailed to members. Non-members can subscribe to JAM for $50.00 a year. To get a subscription, call AFOA toll free at or visit AFOA at Advertising Information JAM is distributed to all 1,300 AFOA members, over 800 National Conference delegates and made available to all First Nations and Inuit across the country. These are the people with the purchasing power who spend millions of dollars a year on products and services. Advertisers gain valuable exposure to key decision-makers in Aboriginal communities and organizations. Corporations who advertise in JAM also contribute to enhanced Aboriginal finance and management in this country and, ultimately, make a contribution to the enhancement of the quality of life among Aboriginal peoples. AFOA welcomes advertisers for JAM: The Journal of Aboriginal Management. All advertisements are in full colour. Corporate Members Other Full page,inside front or back cover $3,000 $4,000 Full page $2,000 $3,000 Half page $1,000 $1,500 ISBN Information JAM: The Journal of Aboriginal Management Published by: The Aboriginal Financial Officers Association of Canada 1066 Somerset St. West, Suite 301, Ottawa, Ontario K1Y 4T9 Editor: Suzanne Werhar-Seebach, Director, Products, Services & Communications (613) Extension 114, sseebach@afoa.ca For subscription and advertising information see inside. Library and Archives Canada Cataloguing in Publication The journal of aboriginal management: JAM Semiannual Issue 6 (February 2009) ISSN Native peoples Canada Finance Periodicals Native peoples Canada Politics and government Periodicals. Aboriginal Financial Officers Association of Canada. Title: JAM E78.C2J C All rights reserved. No part of this publication may be reproduced or transmitted in any form of by any means, electronic or mechanical, including photocopy, recording or any information storage and retrieval system, without permission in writing from the publisher. Graphic Design: Paul Edwards Design Copyright 2009 Aboriginal Financial Officers Association of Canada Printed in Canada Advertising disclaimer AFOA does not make any representation as to the accuracy or suitability of any of the information contained in the advertisements and does not accept responsibility or liability for those advertisements. They are not endorsed or recommended by the AFOA.

3 Aboriginal Financial Officers Association of Canada Table of Contents How does your First Nation compare? Getting Started with Performance Reporting Are you working on developing financial policies, procedures, by-laws or other financial control tools? Audit Preparation: Best Practices You could become a Certified Aboriginal Financial Manager (CAFM) Employee Fraud Developing an Action Plan Update from the First Nations Financial Management Board How-To Guides for the Aboriginal Manager and Elected Leadership Certified Aboriginal Financial Manager (CAFM) Diploma College of The Rockies Yellowquill College Strategic Readiness: Setting the Stage for Successful Strategic Planning in Aboriginal Communities and Organizations Capacity Development Workshops Now Available AFOA Instructors Will Come to You! Considerations for Today s Volatile Investment Markets.. 44 Certified Aboriginal Financial Management (CAFM) Program Online courses available through AFOA Introducing AFOA Aboriginal Management Certificate Courses

4 JAM The Journal of Aboriginal Management How does your First Nation compare? Getting Started with Performance Reporting By Keith Fonstad, MPAcc, CA All First Nation communities have accountabilities: to members for services provided; to funding agencies for use of funding; to lenders for repayment of loans; etc. In order to communicate the compliance with these accountabilities, most First Nations are currently only relying on financial reports. However, for many stakeholders, especially the members, the financial resources are only one component of the relationship that they want communicated. Other resources, such as people, culture, and infrastructure need to be communicated as well. To properly communicate the use of these resources, systems need to be put in place to measure and report on the use of the resources. This communication requirement is the basis for performance management. Performance Management Overview Performance management is a proven methodology for attaining results. In the private sector, companies of all sizes have been using various tools and formats to report and manage performance. The following are examples of various frameworks used: > Balanced Scorecard (Kaplan and Norton, 1993, 1996, 2001); > Performance Prism (Neely, 2002); > Cambridge Performance Measurement Process (Neely, 1996); > TPM Process (Jones and Schilling, 2000); > 7-step TPM Process (Zigon, 1999); and, > Total Measurement Development Method (TMDM) (Tarkenton Productivity Group, 2000). When done effectively, performance management assists organizations to achieve desired results. For example, the Balanced Scorecard theory states that for a business to be successful, it needs to ensure that all four elements of the business (customers, operations, 2

5 Aboriginal Financial Officers Association of Canada people, and finance) are working together to achieve the business goals. To accomplish this, a business needs to set a goal and then identify indicators of activities which drive the desired results. There should be some indicators from each of the four elements. Upon measurement of these indicators, achievement of the goal should be reachable. Public organizations have recognized the potential benefits of performance management and many have begun to implement it. However, there are many difficulties for public organizations when it comes to implementing an effective performance management system. A public organization typically has numerous and often conflicting potential priorities as compared to private organizations, which are generally singularly focused on maximizing profits. As a result of having more priorities and goals, the breadth of indicators required to monitor performance can become cumbersome. Another difficulty is the long-term nature of the priorities and goals of a public organization. Many of these goals may require development over many years before results can be identified. As a result, it can be difficult to maintain focus, especially when political terms are shorter. This can lead to goals and priorities changing rapidly, before they have had a chance to mature. Implementing performance management may be especially difficult for First Nation organizations due to the complex social and political components involved. However, the reasons for implementation being difficult are likely the very reasons why performance management is important and should be implemented. Effective management of the complex components will lead to improved benefits for the all stakeholders. The process to implement and use performance management is basically the same for all organizations, both public and private. The Aboriginal Financial Officers Association of Canada (AFOA) recently completed a study on performance reporting in a First Nation context. The study resulted in a publication Performance Measurement and Reporting in First Nations, A Focus on Results, as well as an online course and a community workshop. The AFOA study identified the key components of performance management in its framework, The Aboriginal Performance Wheel. Essentially, the study outlines the following process, which is consistent with those being used by private sector companies: > Community Strategic Plan attain input from the community to set a vision; > Operational Plans and Budgets align the expected actions of the managers with the objectives of the vision; > Analysis of Actual Results to Planned or Targeted Results compare the actual actions of the managers with the expected actions, ensuring the objectives of the vision are being met; and, > Communicating the Results reporting the plan, the results, and if any additional action is required. Keith Fonstad is a Chartered Accountant and Partner with Meyers Norris Penny 3

6 JAM The Journal of Aboriginal Management Performance Reporting In order to properly Communicate the Results, an organization needs to have effective performance reporting. Performance reports need to be relevant, reliable and readable, and facilitate appropriate accountabilities. A report is relevant when the indicators measured are: > Aligned with the goals of the organization; > Consistent; > Concise (typically limited in number); > Direct appropriate behaviour; and, > Presented in a timely manner. A reliable report is important for comparability, either between time periods or between organizations. If the information is to be used to make decisions, it is imperative that the information is accurate and can be verified. The report also needs to be suitable and easy to read and interpret for the users of the report. There are accountability relationships inherent in any organization. For First Nation communities, the most noticeable relationships exist between two main groupings: the management and Chief and Council; and the members and Chief and Council. The Chief and Council need to know that management is using the resources of the community to achieve the goals of the Chief and Council. The members want to know that the Chief and Council are ensuring the resources of the community are being used appropriately to meet the needs and objectives of the members. Performance reporting facilitates this accountability relationship by creating a forum from which the relevant information can be shared. There are no standard formats for performance reports. Each report will and should be different depending on factors such as the community s goals, indicators chosen, who will be reading the report, and how often the reports are prepared. An important factor to consider is the presentation of the reports and end use by the readers. For example, an annual performance report to the general membership at an annual assembly should be presented in a stimulating format, with lots of pictures and graphs, and should cover a variety of topics. Conversely, a monthly housing report for Council would likely be short and direct, presenting only a couple of key indicators. In order for performance reports to be effective, they not only have to be prepared in a suitable format, but also be a platform for subsequent discussions and actions taken from interpreting them. Therefore, it is important that the users of the reports be provided with a forum to meet and interpret the indicators and determine actions that may need to be taken to affect future reports. With regard to the timing of the presentation of the reports: reports for Chief and Council would be reviewed at regular Council meetings; reports for the community members would be presented and discussed at either regular community meetings, an Annual Assembly, or special community meetings, depending on the type and urgency of report being presented. 4

7 How does your First Nation compare? Performance Reporting An Example Meyers Norris Penny LLP (MNP) is a Canadian Chartered Accountant and Business Advisory firm that assists many First Nation communities with their year-end financial statement audit. Even though financial statements are important for reporting how resources are used, they can t report how well the resources are used. In order to fill this gap and assist First Nation communities to begin to focus on performance management and identify how the First Nation is performing in certain areas, MNP is preparing to provide a Community Financial Scorecard for the First Nation communities they work with. The Scorecard will be a performance report on some common indicators. These indicators are a combination of financial information found in the audited financial statement, such as education spending or own source revenue, and other non-financial information. Examples of non-financial information included would be: general items such as number of Members and number of Community Employees; education items such as number of Elementary and Secondary Students and number of Post-Secondary Students; and housing and assistance items such as number of Community Owned Houses and number of Members on Social Assistance. The non-financial information is divided into a financial item to create an indicator. For example, the number of Members might be combined with total government funding to provide a Government Funding per Member indicator. This indicator can than be compared to a prior year, a target, or a benchmark, such as the comparison with other similar communities. Below is an example of some non-financial information, followed by an example of some indicators. Non-financial information General Information Distance to Major Shopping Centre (city population of greater than 5, Total # of Members 1,485 Total # of Members on-reserve 1,154 Total # of Chief and Council 7 Total # of Band Employees 93 Education Total # of K-12 Students (on-reserve educated) 460 Total # of K-12 Students (on-reserve educated) with special needs 36 Total # of K-12 Students attending school in off-reserve school division 67 Total # of Post Secondary Students for the year 22 Total # of Post Secondary Graduates for the year 1 Housing Total # of Band owned houses (including CMHC) 171 Total # of CMHC houses 17 Total # of new houses constructed during the year Social Assistance Total # of Members on Social Assistance 660 5

8 JAM The Journal of Aboriginal Management Example Indicator Report Education Current Year Prior Year Benchmark INAC Funding received per student 10,000 9,500 12,000 Special Education Funding received per special needs student 20,000 20,250 25,000 Education Salaries per student 5,000 4,750 5,000 Percentage of students with special needs 9% 9% 8% Tuition per student Post-Secondary $ spent per Post-Secondary Student 20,000 19,000 22,000 Post-Secondary $ spent per Post Secondary Graduate 250, , ,000 The Chief and Council of a First Nation community can use the information in the Scorecard in a number of ways. First, they can use the Scorecard to help identify program areas of need.this will assist them in setting strategic goals and making these programs a priority. Second, the Scorecard may be used to assist in negotiating with funding agencies. Additional funding may be easier to obtain for those areas where needs have been identified, especially where funding is below relevant benchmarks. Third, the Scorecard may be presented to the members to assist with community discussions and community strategic planning that may be occurring. A clear and concise report will allow the community members to see which areas are in need and also allow them to see the progress that is being made by the Chief and Council. By working with and preparing a report for a large number of First Nation communities, MNP will be creating a database of reliable indicators from which benchmarks can be created. These benchmarks provide added value to the uses of the information in the Scorecard. Each indicator that a First Nation chooses to report on can be reported with a target, a current year, a prior year, and a benchmark amount. These comparisons allow Chief and Council and other users to better interpret and use the information to achieve the community s goals. The Scorecard is a new tool designed to help make the implementation of a full performance management process easier for First Nation communities. It will allow them to not only set new standards and goals, but assist in providing direction to achieve their goals. A Final Word Stewardship of financial resources is important for First Nations to create healthy, self-sustaining and self-governing communities; however it is not the only resource that needs to be managed. A self-governing First Nation needs to manage all the resources of the community, including the people, the culture, the infrastructure, and the finances. Performance management is the process required to effectively implement a method of measurement and reporting which will help a First Nation to achieve its community, health, and cultural goals. The focus on performance management will help the First Nation communities improve communication, hold their leadership accountable for the management of resources, and hopefully create a better life for each individual community member. JAM 6

9 Aboriginal Financial Officers Association of Canada Areyouworkingon developing financial policies, procedures, by-laws or other financial control tools? AFOA has a unique tool that can help. The AFOA s Distributed Knowledge System (DKS) is a unique effort reaching out to all First Nations communities that would like to develop practical and effective financial policies and procedures. DKS enables First Nations to develop their own financial policies with the benefit of models, samples and the experience of First Nations who are working on, or have completed their own policies. The key behind DKS is a software program that uses internet technology and web-based collaboration to support First Nations communities in their policy development process. DKS allows members of a community to work together with others, whether on or off-reserve, in the development of the community s financial codes. Examples of financial policies that have been developed in other communities available in the DKS resource library. To date there are models from over 30 communities across the country. DKS also features sample financial policies and procedures for a community to choose from whether they are looking to update all of their financial policies and procedures, or only sections that would add financial control measures to what they already have. For example, First Nations have access to sample policies and procedures related to signing authorities, operating budgets, policies to control and manage cell phone expenses, or contracting for professional services. Another DKS feature provides First Nations with mentor and peer support, even when some community members work in different locations. Whether on or off-reserve, DKS allows several users to work together on the development of the community s financial codes, at the same time! On-line support to the community is provided by a DKS Administrator who looks after the website ensures that community workspaces are setup and working properly. We encourage your community or Tribal Council to become involved in this First Nations initiative by sending us a copy of your financial codes, whether policies, by-laws, acts, or equivalent financial management tools to share with your colleagues nation-wide. (Any information used to create the samples will be credited to participating organizations with their permission. To make a submission, First Nations can use one of three options: 1 ing an electronic copy to the attention of fvicaire@afoa.ca; 2 Faxing a copy to (613) ; or, 3 Sending either a hard copy or electronic copy on diskette, by mail or courier to the attention of: Frederic Vicaire Aboriginal Financial Officers Association of Canada 1066 Somerset St.West, Suite 301 Ottawa, ON K1Y 4T3 7

10 JAM The Journal of Aboriginal Management Audit Preparation By Darlene Lafontaine, CAFM Proper audit preparation involves a process that is on-going and should not be left until just before your auditor shows up at your office door. This preparation should start at the beginning of the fiscal year and in order to prepare for an audit, one should understand what it actually is, what it produces and why it is required. Why are they required? Why are audits required for First Nations? Well, first and foremost, most funding agencies are now requiring that audited financial statements be produced as a condition for funding. In other cases, banks or insurance companies may request the audited financial statements prior to making decisions on loans or insurances. Audited financial statements also provide further credibility to your First Nation members as to the information presented and verified. What is an audit? An audit is an examination carried out by a Chartered Accountant firm that can determine if the information on the financial statements is prepared in accordance with GAAP (Generally Accepted Auditing Principles). The first few pages of the audited financial statements will contain at least three standard clauses: 1 It will describe the statements audited and the auditor s responsibility. For example, within the financial statements for our Tribal Council (completed by KPMG) the following is written We have audited the consolidated balance sheet of Wabun Tribal Council as at March 31 st, 2008 and the consolidated statements of operations, changes in net assets and cash flows for the year then ended.these statements are the responsibility of the Tribal Council management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2 The scope of the audit which explains how the audit was carried out. For example, once again, within the financial statements for our Tribal Council (completed by KPMG) the following is written, we conducted our audit in accordance with Canadian generally accepted auditing standards.those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. 8

11 Aboriginal Financial Officers Association of Canada An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. 3 Provides the opinion. This opinion is put forth as a result of the work completed on the audit. For example, once again, within the financial statements for our Tribal Council (completed by KPMG) the following is written, In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of Wabun Tribal Council as at March 31 st, 2008 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. The above clause represents an unqualified opinion which is what you seek for your own organization. Other types of opinions may include a Qualified Opinion, (may have questions on content), an Adverse Opinion, (missing information and cannot adequately give an unqualified opinion) or a Denial of Opinion (not comfortable with information presented and therefore denied) What Auditors Look for When an auditor comes to your organization they are looking for the following: 1 Assessment of your internal controls. Once the internal controls are reviewed, a testing will occur and if deemed adequate, the auditor may reduce the amount of testing needed.the review on internal controls may consist of the following: > Review and verification of program revenues and expenditures > Who is doing what duties and are they separated accordingly. > Bank reconciliations > Travel > Payroll costs and timesheets > Approval of Invoices and authorities for purchasing > Required amount of signatures on cheques as per policies. 2 Confirmations on bank balances, loans and funding received in fiscal year. 3 Required journal entries are inputted as per previous fiscal year (beginning balances equal their figures) 4 Assets purchased, written off 5 Verification of receivables and pre-paid expenses This list could go on and on and it s best to work with your own auditor and together come to an agreement as to what would be best prior to them arriving. Preparing for the audit There are many ways to prepare for the audit. These are areas that I find work for me. > Maintain your accounting records by preparing accurate monthly financial statements on a timely basis.this will alleviate additional workload at year end. Do not wait for the last minute to reconcile these statements. > Implement adequate accounting and spreadsheet software (or other software) that will allow you to access data accordingly. Darlene Lafontaine is a Certified Aboriginal Financial Manager (CAFM) and is the Financial Advisor for Wabun Tribal Council 9

12 JAM The Journal of Aboriginal Management > Internal controls must be implemented (and abided by) within the office. For example, there should be a clear understanding as to who does what when it comes to authorizing and processing expenses and thus, cheques for example. > Finance staff should have adequate training and expertise as it pertains to the full accounting cycle. If not, develop a training plan to achieve this. Stay updated on finance issues that affect your accounting system (i.e. changes in payroll, benefits, etc) > Implement a filing system that can provide documentation supporting the financial system on payroll, payables, receivables, capital assets, contracts, etc. > Develop a tendering process for the selection of your auditor and the frequency of tendering. > Ensure your auditors have a proper place to work upon arriving. > On April 1 st, start an audit file with the following: > Copy of current year contracts and indicate which department funds are allocated to (revenues and expenses) > Set up a calendar of reporting requirements and have reports available in individual contract files for auditor review. > Document any changes in internal policies and provide to auditor upon their arrival. Ex. Perhaps you made a change in the way items are approved for expenditures. Indicate this in the file you give them and explain why it is so. > Any new lending agreements and bank confirmations at year end. > Copies of budgets and indicate whether they have been summarized into the departments. Are they reflected on departmental income statements? > Any minutes from fiscal year being audited. > General Ledger and Sub-ledgers equal on a monthly basis (all the balance sheet reconciliations and sub-ledgers can be put into a monthly binder. (i.e. payables, receivables, employee loans, pre paid expenses) Year End Accounting Review Before you send your trial balance and general ledgers to your auditor, you should do a year end accounting review on all your general ledger accounts. Do not leave it up to the auditors to do this. They are not bookkeepers and you need to realize that additional work required by the auditor means additional costs.i realize that you may not be in the position to get everything done prior to their arrival.if that is the case, try to do as much of the work as possible. As the years go by, set goals for yourself and each year try to take on more of the functions yourself. Producing a checklist for yourself will assist you in becoming efficient. Remember, the more items on the checklist you can do, the less it will cost for your audit. Items to look for are as follows: > Have all administrative charges been recorded? > Are all Bank Reconciliations/Receivables, Payables, Capital Assets, pre paid expenses, service charges, interest earned and other sub-ledgers as required completed? > Have all allocations from other programs been identified and when are these entries put onto the books? (monthly/quarterly/annually). > Have all adjusting entries from the previous year been recorded and do the audited financial statements mirror the accounting system at that specific year end. 10

13 Thank you for reading JAM: The Journal of Aboriginal Management. The full PDF Version of this Edition is available to AFOA Canada Members AFOA Canada members receive a free subscription to JAM: The Journal of Aboriginal Management. The Journal is published semi-annually once in February and once in September. The Journal is mailed to all members, made available to all Aboriginal communities, organizations, educational institutes and professionals in Canada. If you would like to advertise or submit an article for JAM, please contact Jody Anderson at janderson@afoa.ca Non-members can subscribe to JAM for an annual fee of $50.00 per year. To obtain a subscription, please CLICK HERE to view the Subscription form. Forms can be submitted through the information below. If you would like to become a member or would like more information on AFOA Canada, please CLICK HERE to view the Membership Application Form. CONTACT: AFOA Canada 1066 Somerset St. West, Suite 301 Ottawa, ON K1Y 4T3 Tel: (613) Toll free: (866) Fax: (613) Web: pr@afoa.ca