Local Revenues

How Local Revenue is Generated

First Nations who choose to take advantage of their property tax powers and collect property taxes (referred to as ) through a law under the First Nations Fiscal Management Act (FMA) must also follow certain best practices in managing their local revenues.

The FMB has created rules and guidelines to encourage the clear recording and accountability for collecting and spending of local revenues by First Nations that are described below:

  • Local Revenues Bank Account
  • and Tax Rates
  • Local Revenues Spending
  • Local Revenue Reporting
  • Investment of Local Revenues
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Tax Administrator

Under the Financial Administration Law (FAL), Council must create a policy outlining the duties and functions of the tax administrator. The tasks and responsibilities of the tax administrator may be done by more than one person as long as each person involved reports directly to the , , or the .

This policy must state that the tax administrator must carry out his or her duties as outlined in the FMA, the First Nation’s local revenues laws, and the FAL.

The duties must include:

  • reporting directly to the senior financial officer or the senior manager;
  • managing local revenues and the local revenues account on a day-to-day basis;
  • recommending the draft and amended local revenues component for the yearly budget to the senior financial officer;
  • recommending the local revenues component of the to the senior financial officer;
  • providing advice to the senior manager, senior financial manager, Finance and , and the Council on local revenues matters as requested; and
  • making sure all rules and of applicable laws are being followed in the administration of local revenues and the local revenues account.

Local Revenues Bank Account

Council must create a policy for the operation of the First Nation’s local revenues bank account.

This policy must state that:

  • a bank account is maintained and operated only for local revenues received by the First Nation,
  • this bank account does not contain any money other than local revenues,
  • this bank account is not used for any spending other than the spending outlined in the mentioned below, and
  • records of all bank account transactions (deposits and withdrawals) are kept and available for review at any time.

Property Assessment and Tax Rates

Council must create a policy for the First Nation’s property assessment process and .

This policy includes the steps for:

  • the creation, approval, and review of the record of taxable persons and property at any time as needed in the First Nation’s property assessment law,
  • the creation and submission of assessment notices to people named on the record of taxable persons and property at any time as needed in the First Nation’s property assessment law, and
  • keeping any records needed by the First Nation property assessment law.

This policy must also include property tax rate rules that:

  • the set rate of tax to be applied to the assessed value of each class of property is done at least once each year, and
  • the approval of the law is done by the First Nations Tax Commission (FNTC).

Council must also create a policy for the use of the First Nation’s taxation law.

This policy must state that the following activities must be completed within the time limit stated in the real property taxation law:

  • creation of a list of all property in the First Nation that can be taxed,
  • creation and delivery of tax notices to people who are named in the above list,
  • the application and collection of interest and penalties on money that is owed,
  • payment of any tax refunds,
  • making note of any tax payments on the list of property in the First Nation that can be taxed and sending out receipts for taxes paid, and
  • collection of taxes and taking the steps needed to make sure that unpaid taxes are paid.

Local Revenues Spending

Council must also create a policy for the First Nation’s local revenues spending (expenditure) law. This policy must include the standards that require:

  • a law by Council establishing a budget at least once a year for spending revenues raised under the First Nation’s property taxation law,
  • the approval of the law by the FNTC, and
  • the approval of any changes to the budget by the Council, which must be done within the required time frame (under section 10 of the FMA) and as soon as possible after the start of the .

The policy must also limit the spending of local revenues by stating that the money may only be used:

  • as approved in a budget that has been approved by the FNTC in one of the following situations:
    • if no law has already been made, the First Nation can make a spending law that approves the money that has been spent; and
    • if a law has already been made, the First Nation must decide that the money was spent because of an urgent need. The First Nation must make the necessary changes to the law as soon as possible after spending the money to approve the money that has been spent.

Local Revenue Reporting

Council must also create a policy for reporting of local revenues. This policy includes the steps for:

  • the creation, review, and approval of a yearly financial report on local revenues, including who is responsible for completing these activities and when these activities must be completed;
  • making sure that the report above is separate audited yearly for local revenues only (if a First Nation raises no more than $400,000 in local revenues each year, it can present its local revenues as a separate segment of activity in the audited yearly financial statements for the First Nation; and
  • the audited local revenues financial report or the audited annual financial statements must be available to the following:
    • the members of the First Nation;
    • any people who have an interest in, or the right to occupy, possess, or use the First Nation’s reserve lands;
    • the FNTC, the FMB, and the FNFA; and
    • the Minister of Indigenous and Northern Affairs Canada.

The policy and procedures above must keep the same standards and values as the FMB’s Local Revenue Financial Reporting Standards.

Council must create a policy to make sure that the senior financial officer or the tax administrator keeps and has available at all times a complete set of all records of the First Nation’s local revenues laws and their administration. This includes all records referred to in section 5 of the Revenue Management Implementation Regulations.

Council must also create a policy for any services that are paid for with local revenues. This policy must state that:

  • a list of all services paid for in whole or in part from local revenues must be kept and maintained, including details of previous service agreements and agreements that are not yet approved; and
  • the creation and documentation of the expected performance of the critical services above, including operating and service delivery performance.

Investment of Local Revenues

Council must also create a policy for the investment of local revenues. This policy includes the steps to limit the investment of local revenues to:

  • issued or guaranteed by Canada or a province;
  • securities of a local, municipal, or regional government in Canada;
  • guaranteed by a bank, trust company, or credit union;
  • deposits in a bank or trust company in Canada or non-equity or membership shares in a credit union; and
  • securities issued by the FNFA or a municipal finance authority established by a province.

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Local Revenues