Administrative Governance

Policies and Procedures

As part of a sound governance structure, Council will need to create a policy that describes how all policies and procedures of the First Nation will be created and put into practice.

Under the Financial Administration Law (FAL), only Council can approve financial administration policies and Council must keep a current list of these. Also, all financial administration policies of the First Nation must:

• be approved by Council,
• be in line with the FAL,
• support good accounting practices,
• include a list of and be made available to the people who have to follow the policies and procedures,
• be kept up to date, and
• be changed only when authorized by Council or by the senior manager.

Delegation of Responsibilities

An organization runs more smoothly if it is clear who has the authority to do what and when. To do this, the Council must create a policy for the delegation of responsibilities for people involved with the First Nation including an officer, employee, committee, contractor, or agent.

Council is still responsible for the First Nation’s administration even if some responsibilities are delegated to others.

Under the FAL, Council cannot delegate its responsibilities for approving:

• policies or procedures,
• budgets,
• borrowing money,
• financial reports, and
• the selection of the Finance and Audit Committee members, chairperson, and vice-chairperson.

A First Nation’s delegation of responsibilities policy must describe procedures that the First Nation will follow for:

• any approvals that will be needed for delegating responsibilities,
• keeping records of delegated responsibilities,
• setting the qualifications needed for a person to take on any delegated responsibilities,
• creating standards of work for those completing the delegated responsibilities,
• creating an agreement for the standards of work, to be signed by those completing the delegated responsibilities,
• monitoring the performance of a person who has been delegated to do certain responsibilities, and
• the regular review of delegated responsibilities.

Code of Conduct

A code of conduct is an important element of administrative governance because it acts as a guideline for ethical decision making. It also encourages positive working relationships and acts as a reference for solving ethical issues in the workplace.

The code of conduct applies to Council, officers, employees, committee members, contractors, and agents of the First Nation. It must be included in employee contracts, contracts for service, and when approving someone as an agent or to serve on the Finance and Audit Committee.

Council must create a policy stating that all persons to whom the code of conduct applies must sign a statement every year saying that they understand and agree to it.

This policy must require that all conflict of interest be reviewed once a year.

Under the FAL, the code of conduct must state that those persons making financial decisions for the First Nation have to:

• act honestly, in good faith, and in the best interest of the First Nation;
• use the necessary care, caution, and skill that would be used in similar situations;
• follow the standards set by the FAL, other laws of the First Nation and the First Nations Fiscal Management Act (FMA);
• follow all policies, procedures, and directions of Council; and
• avoid conflicts of interest. If a conflict of interest comes up, the policies and procedures set by Council must set out the steps to avoid and manage the conflict.

Council must also provide a code of conduct training program for all those that it applies to.

Managing Conflicts of Interest

Committees

A First Nation may choose to form a committee to perform a task more efficiently or with expertise in relation to a specific matter. Terms of reference allow for the smooth functioning of the committee and Council must create these for each committee.

The terms of reference for each committee must set out:

• the minimum number of members needed
• the conditions a committee member must meet, if any, in order to be on the committee
• the committee’s:
  • goals or desired end results
  • tasks and responsibilities, including any laid out by the FAL
  • voting rules
  • meeting and reporting responsibilities
• that agendas and minutes for all committee meetings must be kept for at least seven years.

Finance and Audit Committee

A Finance and Audit Committee (FAC) is a committee that oversees the financial reporting and audit functions of a First Nation. It provides forward-thinking oversight of the investments of a First Nation and supports Council in making good financial decisions.

The Finance and Audit Committee reinforces Council’s accountability and transparency to its citizens. It is important to understand that it is a recommending committee only and has no decision-making authority.

FAC Roles and Responsibilities

The Finance and Audit Committee reports to Council and has a financial and audit oversight role. These must be defined in the terms of reference for the Finance and Audit Committee that must include the financial and audit oversight responsibilities listed below.

The Finance and Audit Committee must review and recommend the following to Council:

• draft yearly budgets and multi-year financial plans for the First Nation
• the financial performance of the First Nation and compare any differences between the actual results and what was set out in the budget; Any large differences must be reported to Council
• the First Nation’s quarterly (once every three months) financial statements.

The Finance and Audit Committee is also responsible for the following:

• make recommendations to Council about the selection, work and performance of the auditor
• make sure that an auditor is independent
• make recommendations to Council about the planning, actions and results of audit activities
• review and make recommendations to Council about the First Nation’s audited yearly financial statements. This includes the audited yearly financial statements about local revenues and any special purpose reports
• make recommendations to Council about the policies, steps or directions on expenses that can be paid out. This includes the standards for expenses of Councillors and employees
• keep an eye on financial reporting risks and fraud risks. This includes making sure that the tools and guidelines currently in place for monitoring and reviewing risks are valid as well as considering the cost of creating and using these tools and guidelines
• review the FAL and recommend any changes to Council. This includes creating regular and on-topic reports for Council
• any other reporting needs as outlined in the FAL.

---

Finance and Audit Committee Members

The FAL requires that a policy is created and followed that includes procedures around Finance and Audit Committee member appointment, eligibility, removal, replacement and substitution. 

Member Appointment

The FAL requires that Council create a Finance and Audit Committee policy that has procedures on how Finance and Audit Committee members are appointed. These must include:

• the conditions to be a member on the Finance and Audit Committee that include that a member be independent (and what it means for a person to be considered independent);
• how potential members show that they meet the conditions for membership and are independent (this must be done in writing before a person becomes a member);
• how new members are selected and their terms of office;
• how a chairperson and a vice-chairperson will be selected for the Finance and Audit Committee (either the chairperson or the vice-chairperson will be selected for the Finance and Audit Committee and either the chairperson or the vice-chairperson must be a Councillor); and
• written approval for each member of the Finance and Audit Committee to show that he or she meets the conditions for membership. This has to be done every year.

Member Eligibility

The Finance and Audit Committee policy must also have conditions on member eligibility that include the following. 

• The Finance and Audit Committee must have the number of members stated in the First Nation’s FAL. The committee must not have less than three members.
• At least one Councillor must be a member of a Finance and Audit Committee with three or more members. At least two Councillors must be members of a Finance and Audit Committee with four or more members.
• All members of the committee must meet the conditions for membership and must be independent.
• Most of the members must have financial competency.

A person’s independence is decided by the Council. A person may not be considered independent if a financial relationship with the First Nation’s government may change a person’s thoughts or actions. If Council decides a person is not independent, he or she may not become a member of the Finance and Audit Committee.

Any person who helps in the management of money or property for the First Nation is not considered to be independent and is not eligible to be a member of the Finance and Audit Committee. This includes the planning, organizing, directing, or controlling of the First Nation’s money and property as well as budgeting, financial accounting, financial reporting, and gaining and using funds.

The Finance and Audit Committee policy also sets out steps to make sure that the length of time committee members are on the committee is:

• long enough to allow the members to gain knowledge of the First Nation’s financial management system, and
• varied so that not all members of the committee are new members. This allows for continued success of the committee and good planning for future members.

Member Removal

The Finance and Audit Committee policy also includes the steps for removing a member of the committee, including:

• the standards and conditions for removing a member from the Finance and Audit Committee that are set out in the FAL, and
• the standard that Council must document and confirm that all steps for removing a member have been followed and agreed to when a member is removed from the Finance and Audit Committee.

Member Replacement

The Finance and Audit Committee policy must also include steps for replacing a member of the committee who has been removed, leaves, or dies before their term of office expires. When a member leaves, for any reason, Council must assign a new Finance and Audit Committee member to take the position. This must be done as soon as possible.

Substitute Members

Council may assign a substitute member of the Finance and Audit Committee if the Nation has specified this in its FAL. The Finance and Audit Committee policy must also include the steps for the substitute member that specify that they:

• may attend Finance and Audit Committee meetings,
• may vote in place of a member who is unable to attend the meeting,
• may vote if there is a conflict of interest for a current member, and
• must also meet all rules and conditions for being a member of the Finance and Audit Committee.

---

FAC Meetings

The Finance and Audit Committee policy must also include the steps for committee meetings:

• The senior manager and the senior financial officer must be at all committee meetings, allowing for some exceptions. These officers attend the meetings to present information and answer any questions. They cannot vote and are not members of the Finance and Audit Committee.
• The committee must keep written records of who came to the meetings (committee members, the senior manager, and the senior financial officer).
• The number of committee members required at a meeting must be at least half (50%) of the total number of committee members, including at least one Councillor.
• Each member of the committee can have one vote on any question, so long as there are no conflicts of interest.
• Votes that end in a tie will be decided as it is outlined in the First Nation’s FAL.
• The committee must meet at least once every quarter (once every three months). The committee must meet as soon as possible after it gets the audited annual financial statements and report from the auditor.
• Notes must be kept for each meeting and these notes must include all important information discussed in the meeting.
• The committee must report to Council shortly after each meeting with what was discussed in the meeting.
• All outlines and information for each meeting are to be sent to the chairperson of the committee if the chairperson is not a Councillor.
• When the chairperson is not a Councillor, the chairperson is to be given any materials or information that is given to Council.

If the First Nation has specified in its FAL that the Finance and Audit Committee can make rules for its meetings, the Finance and Audit Committee policy must include steps that the committee must put these rules in writing and that these rules must not conflict with any other directions given by Council.

Appointment of the First Nation’s Officers

There are certain key tasks that need to be done in every First Nation. These involve managing the overall day-to-day operations of the First Nation, including specific tasks around finances and reporting.

The FAL requires that these be assigned to specific individuals to make sure that they get done.

Therefore, Council must create a policy outlining the duties and roles of the First Nation’s officers which include the senior manager, the senior financial officer, and the tax administrator (if the First Nation is collecting local revenues).

The FAL allows for the tasks of the senior manager to be done by more than one person, as long as each person reports directly to Council.

The FAL requires that the senior manager’s role includes the following duties and that these must be written in a policy.

• Report directly to Council
• Manage and delegate tasks for all officers and employees of the First Nation
• Be responsible for the contracts of the First Nation
• Identify, judge, track, and report on the risks and fraud risks of financial reporting
• Track and report the standards for controlling the risks above, including the cost of using those controls
• Perform other tasks as outlined in the First Nation’s FAL and other tasks as given by Council

The Council must also create a policy outlining the duties of the senior financial officer.

The FAL allows for the tasks of the senior financial officer to be done by more than one person as long as the senior financial officer remains responsible for making sure that these duties are carried out as required.

The FAL requires that the senior financial officer’s role includes the following duties and these must be written in a policy.

• Make sure all aspects of managing money and property are done to standard, including the financial accounting systems, policies and procedures, and internal controls
• Create and keep up-to-date the chart of accounts of the First Nation
• Prepare the First Nation’s plans for money and property management, including budgets, for several years (such as three-year, five-year, and 10-year plans)
• Prepare the financial statements of the First Nation
• Prepare parts of the reports to Council that have to do with money and property
• Prepare any information regarding the First Nation’s money and property that is needed by the Council or the Finance and Audit Committee
• Make sure that all agreements, including those involving money and property, follow the rules and standards of good financial practice
• Create and watch over the preparation and maintenance of financial records and the financial administration reporting systems
• Make sure all laws, policies, and procedures about the financial administration of the First Nation are being followed
• Review the financial administration systems of the First Nation and suggest ways to make them better
• Create and suggest steps to protect the First Nation’s money and property, including making sure that the proper procedures are followed
• Create and suggest ways to identify and control financial reporting risks and fraud risks, including making sure that the proper procedures are followed
• Report directly to the senior manager or to the Council
• Perform other tasks as outlined in the FAL and those given by Council so long as they do not clash with those in the First Nation’s FAL and the FMA.

External Audit

An external audit is the process of having someone independent of the organization review an organization’s financial statements and form a view as to whether or not they reflect the actual state of the money and property of the organization.

The independent reviewer (known as the auditor) must follow certain standards known as auditing standards. The external audit provides reassurance to the First Nation and other readers of the financial statements that what they are reading reflects reality.

Under the FAL, Council is responsible for overseeing the external audit through recommendation from the Finance and Audit Committee.

Council must create a policy about the yearly external audit of the First Nation’s financial statements and special reports.

This policy must include the steps for choosing and dismissing the auditor and must require that the auditor be:

• independent of the First Nation, and
• a public accounting firm or public accountant in good standing with the Chartered Professional Accountants of Canada (and the equivalent group for the province or territory where the public accounting firm or public accountant is located and practicing).

This policy must state that Council documents the choosing of an auditor in an engagement letter. This auditor must meet the standards set by the First Nation’s policy. The engagement letter states that once the audit has been completed, the auditor must confirm (in writing) that the financial statements and audit follow the rules, regulations, and standards of the FMB and all laws that may be relevant. If there are items where these rules, regulations, and standards were not followed, the auditor must also state these and the reasons for them.

This policy must also state that Council require the auditor to:

• give an audit opinion on the yearly financial statements of the First Nation within 120 days after the fiscal year end, 
• give an audit opinion or review comments on the special purpose reports, and
• complete their tasks as needed and follow the auditing standards set by the Chartered Professional Accountants of Canada.

This policy must also state that the auditor must be given the access and authority they need to carry out their responsibilities and tasks, including the following:

• access to all records, including books, accounts and vouchers, Council minutes and notes, Council resolutions, First Nation laws and agreements in which the First Nation is involved, and the ability to ask people about any of this information; 
• notices of all Finance and Audit Committee meetings, and the auditor may choose to attend and speak at these meetings;
• opportunity to speak with the Finance and Audit Committee about any matters that the committee may need to think about, with the auditor deciding if this is needed;
• attendance at Council meetings where the yearly audit, including yearly financial statements, will be considered and approved, with the auditor informed when this meeting is taking place (if the meeting is to discuss either keeping or dismissing the auditor, the auditor may not attend) and
• opportunity to speak at any Council and First Nation member meeting that the auditor has the right to go to or to which the auditor has been invited, including any meetings that may discuss issues that have to do with the auditor’s responsibilities and tasks.

Reporting of Remuneration and Expenses

Reporting to the First Nation on money paid to and money expensed by each Councillor is part of sound governance practices and reinforces Council’s accountability to its members. This report is to be completed yearly.

The FAL requires that Council create a policy on this that includes steps for:

• the creation of this report by the senior financial officer,
• including all payments and expenses for each Councillor (whether acting as a Councillor or as another role or position) in the report,
• keeping records for each Councillor’s payments and expenses, in a safe and private manner, and
• publishing this report in the First Nation’s annual report.