NPO Policy on Financial Administration Implementation Testing
The New Fiscal Relationship ("NFR") 10-Year Grant Comprehensive Funding Agreement signed between an Indigenous Not-for-Profit Organization ("NPO") and Indigenous Services Canada, requires certain minimum provisions of an Indigenous NPO's Policy on Financial Administration to be brought to life. As part of the Memorandum of Understanding dated November 6, 2018 between the FMB, the Minister of Indigenous Services, and the Minister of Crown-Indigenous Relations, the FMB has agreed to perform testing of the implementation of these minimum provisions using an approach co-developed by Indigenous Services Canada, the FMB, and the Assembly of First Nations.
This implementation testing will be performed by the FMB, at the request of the NPO, 12-18 months after the effective date of the NFR 10-Year Grant agreement (or, exceptionally, as mutually agreed by Indigenous Services Canada, FMB and the Indigenous NPO). The approach involves the FMB conducting a set of standardized procedures that have been agreed upon with Indigenous Services Canada. FMB's report on the findings from the procedures will allow both the Indigenous NPO and Indigenous Services Canada to determine to what extent the required provisions on the NPO Policy on Financial Administration have been brought to life. The results are intended to inform and contribute to meaningful capacity development discussions between grant recipients, Indigenous Services Canada, and the FMB.
Implementation testing will be conducted remotely and will require the FMB to collect a variety of electronic records and interview key management personnel. This work will be scheduled at a time that is mutually agreeable and in a way that minimizes any disruption to the Indigenous NPO.
Exemption to Implementation Testing for Indigenous NPO with a NPO Standards Financial Management System Compliance Opinion from FMB
Grant recipients with a NPO Standards Financial Management System Compliance Opinion from the FMB will not be required to undergo the implementation testing. Indigenous NPOs who have a NPO Standards Financial Management System Compliance Opinion have already demonstrated implementation of their policies and procedures on financial administration and compliance with FMB's NPO Standards. This exemption demonstrates the value of the NPO Standards Financial Management System Compliance Opinion and avoids duplication of testing.
The exemption from implementation testing for Indigenous NPOs with a NPO Standards Financial Management System Compliance Opinion will be subject to receipt by Indigenous Services Canada of a report from the FMB confirming details about the NPO Standards Financial Management System Compliance Opinion, along with a signed letter from the Indigenous NPO (to be collected by FMB) confirming that the financial management systems related to the grant eligibility provisions remain in place.
Annual Grant Monitoring
As part of the Memorandum of Understanding dated November 6, 2018 between the FMB, the Minister of Indigenous Services, and the Minister of Crown-Indigenous Relations, the FMB has agreed to provide NFR 10-Year Grant monitoring services to Indigenous Services Canada. This monitoring approach has been co-developed by Indigenous Services Canada, the FMB and the Assembly of First Nations.
On an annual basis, the FMB will perform a limited scope review of a grant recipient's financial performance that will include:
- Review of the Indigenous NPO's annual financial statements and accompanying Independent Auditor's Report;
- Conduct a 'roll-forward' and recalculation of the five Financial Performance Ratios used for initial grant eligibility; and
- Calculate a preliminary risk rating to guide further discussions between Indigenous Services Canada and the Indigenous NPO.
By reviewing the annual financial statements and the corresponding Independent Auditor's Report, the FMB has developed a model that will identify the existence of potential risk factors. These risk factors will allow a multi-tiered approach to be used when the FMB is communicating monitoring results to Indigenous Services Canada. These tiered risk ratings are intended to inform and contribute to meaningful capacity development discussions between grant recipients, Indigenous Services Canada and the FMB.
The FMB's Monitoring Framework and Policies and Guidelines will be used to do this work.