Finance

Integrated Planning

Integrated planning is a process for establishing the First Nation’s priorities and linking them to operations and spending.

A First Nation does integrated planning to make sure it has enough resources to deliver quality services to its members at a reasonable cost. This will support the First Nation in achieving its goals.

Under the FAL, Council must create a policy to outline its planning and budgeting process that explains:

• when and how often plans should be created and what these plans should include (these plans must include strategic plans, multi-year financial plans, capital project plans, life-cycle asset management plans, and annual budgets);
• what parts of these plans overlap or are related to one another;
• who is responsible for creating, organizing, approving, changing, updating, and speaking about each of the plans; and
• how the members of the First Nation will participate in or be told about the plans, the budget, budget deficits, and any significant non-budgeted spending, as is required under the FAL.

This policy must specify that the First Nation’s planning and reporting year (fiscal year) begins on April 1st and ends on March 31st of the next calendar year.

Strategic Planning

A strategic plan identifies the place that a First Nation is trying to get to – a shared vision for the future. It guides the work of Council and the administration by giving them direction on how to get to where the First Nation wants to be. It is the base for all other plans of the First Nation and is an important act of self-determination. 

The FAL requires that Council create a policy for the making and keeping up-to-date of the strategic plan of the First Nation and that Council go over the strategic plan regularly and make changes where it sees fit.

Risk Management

Risk is the possibility that a negative event will happen. Risk management is the process used to plan for these events.

Good risk management means thinking about the things that could go wrong in advance, and putting in place plans and controls that reduce the potential impact of any event before it happens.

The process of identifying risks and deciding if and which plans need to be put in place is best done around the same time as the First Nation’s strategic planning. 

There are different types of risks that a First Nation needs to consider and manage. This will support the First Nation in achieving its goals.

Under the FAL, First Nations must consider the following risks:

• For-profit activity
• Loans, Guarantees and Indemnities
• Investments
• Insurance
• Emergency Plan
• Financial Reporting Risks
• Fraud Risks

For-Profit Activity

Under the FAL, Council must create a policy to make sure all risks involved in carrying on for-profit activities in the First Nation are limited or managed.

This policy includes the steps for the following:

• identifying any risks with carrying out a presented for-profit activity,
• taking the steps needed to limit or manage the risks to the First Nation,
• making sure any for-profit activities are being done in support of the rules and standards of the FAL,
• getting the approvals needed to do the for-profit activity, and
• tracking any approved for-profit activity.

Loans, Guarantees, and Indemnities

Council must also create a policy on the lending of money and the giving of guarantees, indemnities, and securities so that risks will be limited or managed. This policy must include the steps to make sure all money loaned by the First Nation is properly managed and collected.

The policy must also include that:

• money collected and interest owed are provided for;
• rules be created for the writing off and waiving of debts;
• if the First Nation has a program of lending First Nation money to members, this program must allow everyone access, have published rules and regulations, and be clear to anyone reviewing it;
• make sure any money loaned by the First Nation follows any added requirements set by the FAL; and
• any money loaned by the First Nation must be reported yearly in a special report.

This policy must also include the steps for giving a guarantee on money borrowed, including:

• limits on the number of guarantees and the amount of money for which they can be given,
• the approvals needed to give a guarantee,
• making sure any guarantees given by the First Nation follows any added requirements set by the FAL, and
• any guarantees given by the First Nation must be reported yearly in a special report.

This policy must also include the steps for granting indemnities, including:

• limits on the number of indemnities,
• the approvals needed to give indemnities,
• making sure any indemnities given by the First Nation follow any added requirements set by the FAL, and
• any indemnities given by the First Nation must be reported yearly in a special report.

This policy must also include the steps for the following:

• giving securities,
• giving expense and payroll advances, and
• giving or making leases or lease-to-buy deals.

Investments

Council must also create a policy on the First Nation’s investments and investment strategy. This policy should take into account the short-term and long-term investment strategy of the First Nation and the allowed use of available money.

This policy must also include the requirement to:

• perform an estimation of the risk involved before investing,
• get the approvals needed before investing,
• keep and maintain the records of all investment decisions, and
• outline the steps to make sure that all investments made by the First Nation follow any added standards set by the FAL.

Insurance

Council must also create a policy to make sure that the First Nation has the insurance coverage that is needed.

This policy includes the steps for:

• identifying the risks of the First Nation and what insurance coverage would be best, including for risks of Councillors, officers, or employees of the First Nation;
• finding and getting the best insurance coverage for the situation;
• the approvals needed for insurance coverage;
• the actions that need to be taken to make sure that the First Nation always has appropriate insurance coverage; and
• making sure that if any insurance coverage is needed by the FAL, the First Nation has this coverage.

Emergency Plan

Council must create an emergency plan. This plan is used in any situation that could be considered an emergency and may change the cash flow of the First Nation.

This plan:

• includes rules for fires, floods, and other environmental risks such as landslides or toxic spills;
• is suitable for the size, risk, and impact of possible emergencies;
• needs regular emergency drills;
• must keep all contact lists up-to-date;
• must explain and send the plan to all people who may be involved or impacted; and
• must be reviewed once a year.

Financial Reporting Risks

Council must create a policy to review and go over the financial reporting risks as part of its review of other risks.

This policy must state that the First Nation must report and document any activities that may lead to the risk of the following:

• incorrectly reporting information in the First Nation’s financial statements (quarterly and annual), including any wrong information about financial reporting standards and timelines, getting information from sources and determining the meaning of this information, and the financial closing process at the end of each reporting period;
• not reaching the planned levels of financial performance for the First Nation; and
• not carrying out the duties of the First Nation that are needed.

This policy must state that the First Nation must create and document ways to watch for risks and keep them under control or manage them when they are seen.

Fraud Risks

Council must create a policy to review and go over the risk of fraud as part of its review of other risks. This policy must state that the First Nation must report and document any activities that may lead to the risk of the following:

• intentionally wrong reporting of money or property;
• intentionally wrong reporting of other items;
• putting resources, valuables, or money to a wrong use;
• intentionally wrong conduct by those in power; and
• illegal acts.

This policy must also state that the First Nation must create and document ways to watch for risks and keep them under control or manage them when they are seen, including the risk of fraud coming from the following:

• items or rewards that are given as part of completing a goal or task;
• being pushed or forced to complete a goal or task;
• poor design or use of activities to watch for risk;
• using First Nation resources, valuables, or money without the proper permission and approval;
• poor administration that leads to things being overlooked;
• ignoring the rules and steps that have been set up by policies or standards;
• technology or systems that are unable to complete tasks or perform tasks badly;
• ignoring laws that could directly or indirectly cause errors with financial reporting;
• incorrect actions being claimed as good based on attitude and explanations;
• management displaying favouritism;
• the level and type of guesses and judgements used in financial reporting;
• the location of the First Nation within the geographic region;
• the type of technology being used and the way in which management can change information using that technology;
• any strange or complicated deals or agreements that need management’s input and control; and
• how easy it is for management to change or ignore the rules and standards.

Multi-year Financial Planning

The multi-year financial plan sets out the money that a First Nation will need over the next five years to deliver the activities outlined in its strategic plan.

Under the FAL, a First Nation must have and keep up-to-date a multi-year financial plan that supports its strategic plan. The FAL also requires that Council create a policy for having a multi-year financial plan for the First Nation. This policy requires that the multi-year financial plan:

• include the current year and the next four years;
• use the expected values of the revenues, expenses, and transfers between accounts, separated by category;
• show any expected extra money or approved shortages of money;
• include the life-cycle asset management plan for the First Nation’s capital assets; and
• support the same goals as the strategic plan.

Budgets

A yearly budget outlines the planned spending for the First Nation over the next 12 months. It should flow from the First Nation’s strategic and multi-year financial plans.

Under the FAL, Council must create a policy for making a yearly budget for the next fiscal year. This policy must set out the yearly budgeting process, including:

• all tasks and activities that must be completed before the budget is approved,
• the person who is responsible for each task or activity, and
• how long it will take to complete and organize these tasks or activities.

This policy must also include the steps for getting the yearly budget approved, including the standards that:

• the Council must approve the yearly budget of the First Nation by March 31 of each year, for the budget of the following fiscal year; and
• the Council must approve any changes made to the yearly budget after it has already been approved.

This policy must also include the steps for handling budget deficits, including:

• the factors that may cause or increase a deficit, and
• that Council receives suggestions from the Finance and Audit Committee about how to balance the budget deficit.

Capital Assets

First Nations are responsible for building and keeping up their offices, schools, houses, roads and other capital assets. This is an important part of healthy and safe community living.

Having a policy and procedures on capital assets and projects will support the First Nation in making sure that it has the money to do this when it is needed. It will also make sure that it is done to quality and cost expectations.

Under the FAL, Council must create a policy for managing the First Nation’s capital assets. This policy must set out the rules and guidelines for life-cycle planning of these capital assets, including:

• creating and keeping all information on a capital asset up-to-date, including the location, owner, year the resource was received, dates of inspection, how long the asset is expected to be useful (from the time it was received), and (after inspection) the value and insurance coverage of the asset;
• the yearly inspection of all capital assets, including what the asset is currently used for, if the asset needs repair, if the asset is the right one for the task it is being used for, the remaining lifespan of the asset and how much it will cost to replace, a guess on the future dates and cost to replace or repair the asset, how much it has cost to use and repair the asset over the last five years, records of repair, and insurance coverage;
• the yearly plan for the regular maintenance and repair of capital assets;
• the yearly budget for repair and replacement of capital assets, including new construction; and
• estimated repair and asset replacement costs, including new construction and the short-, medium-, and long-term cost estimates.

This policy must also state that Council must create and put money into a savings fund for the purpose of construction, maintenance, replacement, and purchase of the First Nation’s capital assets.

Council must also create a policy for planning and carrying out capital projects. This policy includes the steps for:

• setting the maximum amounts that show when a capital project planning process should begin, to be set by the amount of money available, sources to receive money from, projects, or the expected impact on the community;
• when the maximum amounts are exceeded, Council must document a capital project plan (which may also be called a business plan or financing proposal); and
• the capital project plan must include all information that is needed to reach an informed decision, including the ability to continue the plan’s goals over a period of time, the tasks needed for the project to operate smoothly, and a risk assessment.

This policy must state that the plan for a capital project must include:

• the necessary project planning, design, engineering, safety, and environmental standards;
• the cost, budget, financing, and approval of the project;
• the standards for hiring or bidding for a contractor;
• tender, contract form, and contract acceptance;
• insurance for the varying steps of construction;
• the guarantees of project performance;
• project control, including contract management; and
• money withheld, approvals to work, and procedures for payments and audits.

This policy must also state that the First Nation’s members must be part of or told about capital projects and any borrowing of money that is done for the construction of new capital asset projects.

Life-cycle Planning For Capital Assets

Capital Projects

Council must also create a policy for planning and carrying out capital projects. This policy includes the steps for:

• setting the maximum amounts that show when a capital project planning process should begin, to be set by the amount of money available, sources to receive money from, projects, or the expected impact on the community;
• when the maximum amounts are exceeded, Council must document a capital project plan (which may also be called a business plan or financing proposal); and
• the capital project plan must include all information that is needed to reach an informed decision, including the ability to continue the plan’s goals over a period of time, the tasks needed for the project to operate smoothly, and a risk assessment.

This policy must state that the plan for a capital project must include:

• the necessary project planning, design, engineering, safety, and environmental standards;
• the cost, budget, financing, and approval of the project;
• the standards for hiring or bidding for a contractor;
• tender, contract form, and contract acceptance;
• insurance for the varying steps of construction;
• the guarantees of project performance;
• project control, including contract management; and
• money withheld, approvals to work, and procedures for payments and audits

This policy must also state that the First Nation’s members must be part of or told about capital projects and any borrowing of money that is done for the construction of new capital asset projects.

Managing Capital Projects

Procurement

First Nations are responsible for building and keeping up their offices, schools, houses, roads, and other capital assets.

Having clear rules and procedures around procurement – the supply of goods or services – makes sure that the services get delivered and meet the First Nation’s quality and cost expectations.

The FAL requires that Council create a policy on the formal offers or requests for proposals for the supply of goods or services. This includes situations where a process is required for a formal offer or request for proposal. The policy must include the steps to make sure all supplied goods and services include the need to:

• make sure all suppliers of goods and services to the First Nation are of a good quality and meet certain standards,
• provide support and make the process smooth for new suppliers to start to supply goods and services to the First Nation, and
• make sure supplied goods and services are looked over and reviewed to decide if they follow the standards and are right for contract or buying standards.

Borrowing Money

Borrowing money may support a First Nation in carrying out its projects and plans.

Under the FAL, Council must create a policy to show the steps needed for when the First Nation wants to borrow money. This includes the management and use of the borrowed money, as well as the steps for new borrowing, including:

• thinking carefully about any debt for the First Nation that may be created because of borrowing money;
• weighing the pros and cons of different ways to borrow money;
• accepting the rules and standards of debt responsibility;
• including members or letting members know certain information as outlined in the FAL; and
• keeping good records for money borrowed, including the first amount borrowed, the date(s) that all or any part of the first amount must be repaid, the date(s) when interest on the debt must be repaid, and the cost of borrowing (including interest payments and service or other charges).

This policy includes the steps to make sure that:

• all payments are made on time,
• the debt payments are tracked and recorded, and
• all debt responsibilities are reported as needed by the FAL and any other agreements attached to the borrowing of money.

Spending

Having rules and procedures in place for how spending can get approved and for what is an important part of a First Nation’s ability to operate smoothly. Under the FAL, Council must create a policy for the management of all the First Nation’s spending.

This policy must include that:

• all documents related to getting goods or services (e.g. requisitions, purchase order, requests for proposals, or tender calls) are clear about the details of the goods or services being requested;
• all cheques and other forms of payment must have two signatures or two approvals;
• limits for how much can be spent on goods or services are set up and clearly documented;
• the same person who approves the spending of money may not also approve a payment;
• the spending of money is only done if allowed by the budget of the First Nation (subject to any reasonable exceptions to deal with unexpected events that are mentioned in the FAL or in Council policy as laid out in the FAL); and
• controls are used to keep track of spending and show any spending overruns.

This policy must include the steps to follow for the repayment of expenses from those who are acting on behalf of the First Nation, including the following:

• the kinds of activities which are done on behalf of the First Nation;
• the kinds of expenses that are approved for repayment, including the categories and limits for these expenses;
• the receipts and other documents needed to support an expense claim; and
• the person who has the authority to approve repayment on expenses for different categories of claims.

Account and Cash Management

Control over access to, and the management of, an organization’s bank accounts (financial institution accounts) is an important part of good finances.

The FAL requires that a policy and certain procedures be put into place to make sure that a First Nation’s bank accounts and cash are managed to limit the chance of loss of money.

Under the FAL, Council must create a policy for the management of the First Nation’s financial institution accounts that includes that:

• all accounts are kept and used only for their intended use;
• all records of account happenings are kept up-to-date and are available at any time for review;
• all records about those in charge of the financial institution accounts must be kept up-to-date and any changes need to be reported to Council; and
• any changes made to the rules for writing a cheque need to be reported (in writing) as soon as possible to the financial institution. The rules for writing a cheque are outlined by Council, the Finance and Audit Committee, or the senior financial officer. A copy of these changes should be kept in the First Nation’s office, and in the First Nation’s records.

This policy must also include the steps for making deposits into the First Nation’s financial institution accounts, including that:

• all exchanges of cash should be done in a way that is clear and controlled so that fewer mistakes are made,
• a record must be kept of any deposits that will happen on a regular basis,
• it must be clear where each deposit is coming from and from what type of source, and
• all money in the deposit must be separated into different groups as needed.

This policy must also include the steps for financial institution account reconciliation, including:

• All financial institution accounts must be reviewed and reconciled by the senior financial officer. This must be done within 30 days from the end of each month, though exceptions may be made with good reason.
• Any errors or items seen as being out of the norm are documented and reported by the senior financial officer to the Finance and Audit Committee as soon as possible.

Financial and Operational Reporting

Financial and operational reporting promotes transparency and accountability, and communicates to members the First Nation’s progress towards achieving its goals.

The FAL requires reporting regularly to members on the money and property of the First Nation as well as on the activities that took place during a specific period of time.

Under the FAL, there are several reports that must be prepared, reviewed and, most often approved. These include:

• Monthly Financial Information (prepared and reviewed only)
• Quarterly Financial Statements
• Yearly Audited Financial Statements
• Special Purpose Reports
• Annual Report

Council must create a policy for reporting the First Nation’s financial results. This policy must state that the First Nation will keep an up-to-date list of financial reports that need to be prepared on a regular basis and that these reports must include:

• the name of the report,
• the person who is assigned to create the report,
• when the report will be available, and
• who will receive the final report.

Monthly Financial Information

Council must create a policy that states that Council and the Finance and Audit Committee will receive and review the financial information and activity of the First Nation each month.

Quarterly Financial Statements

Council must also state in a policy that quarterly (once every three months) financial statements will be prepared and require that:

• the senior financial officer prepares the quarterly financial statements, and
• Council must review and approve the quarterly financial statements, as recommended by the Finance and Audit Committee, no later than 45 days after the end of the quarter for which the statements were prepared.

The quarterly financial statements include:

• the amount of money and property earned and spent, compared to the yearly budget
• a balance sheet;
• a financial institution account reconciliation; and 
• any other information asked for by the Finance and Audit Committee or the Council.

Yearly Audited Financial Statements

Council must also create a policy that sets out the steps and information for the preparation and approval of the First Nation’s yearly financial statements. This includes the standards that:

• the senior financial officer must prepare the Yearly Financial Statements;
• the financial statement must be prepared in a way that follows generally accepted accounting principles;
• Council must review and approve the financial statements as recommended by the Finance and Audit Committee (this must be done by the earliest date of either 120 days after the end of the fiscal year or a time stated in the First Nation’s FAL); 
• the Chief or Council chairperson of the First Nation must sign the annual financial statements; and
• if the Chief or Council chairperson is not available, the following people can also sign the annual financial statements:
  • the Chair of the Finance and Audit Committee OR the senior financial officer.

Special Purpose Reports

The policy must state that the senior financial officer must prepare any special purpose reports that are needed by the First Nation’s FAL on a yearly basis. The reports may include, but are not limited to:

• the yearly report on remuneration and expenses of Councillors;
• a report clearly stating all payments made by the First Nation to fulfill guarantees and indemnities;
• a report clearly stating all debts and required tasks that have been waived by the First Nation during the fiscal year;
• a report clearly stating the money and property the First Nation has gained from First Nation lands (this report is only needed if the First Nation has a land code in force; some First Nations manage their land and have adopted land codes under provisions of the First Nations Land Management Act); and
• the money and property gained from First Nation lands must be presented in the report as separate from other money and property earned and shown in its own category. This report must also separate money and property gained from natural resources on the First Nation’s lands.

Members of the First Nation must have access to the yearly audited financial statements and the special purpose reports. These reports must be easy to access and available at all times. How to access these reports must be made clear to members of the First Nation.

Annual Report

Council must create a policy for the writing and publication of an operations and financial performance report of the First Nation. This report must be created once a year. This policy states that the report must include the following:

• a description of the services and operations of the First Nation,
• a progress report on any set financial goals and performance measures of the First Nation,
• the First Nation’s yearly financial statements for the previous fiscal year, and
• the special purpose reports.

This policy states that the annual report must be posted by the earliest date of either 180 days after the end of the fiscal year or by a time stated in the First Nation’s FAL. This policy must include instructions for:

• how First Nation members can access the annual report, and
• how to get this report to First Nation members who have asked for the report but have not yet received it.

If the First Nations Financial Management Board (FMB) or the First Nations Finance Authority (FNFA) ask for this report, a copy must be given to them.

System Improvement

Regularly reviewing and making improvements to the policies and procedures of a First Nation helps to make sure that they are meeting its needs.

In order to continuously improve and as required by the FAL, Council must create a policy for collecting, recording, and inspecting concerns and comments from people involved with or interested in the financial management system of the First Nation.

Council must also create a policy for planning, scheduling, and carrying out internal evaluations of the financial management system of the First Nation. This includes any resolved action of any concerns that are found in these evaluations. This policy must state that:

• internal evaluations must be done of all important activities and processes at least once each fiscal year,
• the person doing the evaluation must not be involved in the operations area or activity that is being evaluated, and
• records must be made and kept of the evaluation’s findings and the resulting actions of any concerns found.

This policy must also state that the people responsible for the management and operation of the First Nation’s financial management system must meet at least once a year. At this meeting, they must review the following items from the previous quarters and up to the date of the meeting:

• the financial management system’s processes and procedures;
• that all relevant laws are being followed;
• the results of the external and internal evaluations;
• the ways to improve processes that were brought up during the year, including their final results;
• all committees’ terms of reference; and 
• the organizational chart.

This policy must also state that the people who attend the meeting must prepare a report to be made available to Council, the Finance and Audit Committee, and the external and internal auditors. This report must include:

• a statement of whether or not the financial management system maintains the rules and standards of all relevant laws, policies, procedures, and directions; and
• recommendations for any changes to those laws, policies, procedures, and directions that would be good for the financial management system.

Review of the Financial Administration Law

Council must create a policy for reviewing the First Nation’s Financial Administration Law (FAL) at least once per year.

This policy must include the steps for:

• the ongoing review of the success of the FAL,
• finding and noting any changes to the FAL based on the results of the above review, and
• how members of Council will be told about or involved in the approval of any suggested changes to the FAL.

When a First Nation is ready to be tested for Financial Management System (FMS) Certification, it must ask the FMB to conduct a formal review of its financial management system. Steps include:

• The FMB will send a compliance approval for the First Nation’s FAL (under section 9 of the First Nations Fiscal Management Act (FMA), based on the FAL Standards).
• The compliance approval takes effect on the same date that the First Nation requests the review.
• All the rules and standards of the approved FAL are in force.

Resources to get you started

Sample Policy

• DOCX file: Finance Sample Policy and Procedures Download

Risk Management

• DOCX file: Risk Register and Management Plan Template Download
• PDF file: Emergency Planning Guide Opens in a new tab

Budgets

• DOCX file: Department Annual Work Plan Template Download
• XLSX file: Annual Budget Template Download
• XLSX file: Sample Consolidated Annual Budget Download

Procurement

• PDF file: Expenditures Overview Opens in a new tab
• PDF file: Procurement for First Nation Governments Opens in a new tab

Account and Cash Management

• DOCX file: Capital Asset Reserve Fund Policy Download
• PDF file: Reserve Account Guide Opens in a new tab
• PDF file: Investment Guide for First Nation Governments Opens in a new tab

System Improvement

• XLSX file: Internal Assessment Template Download

Financial and Operational Reporting

The diagram sets out the reporting and planning calendar of the First Nation under the FAL.