Financial Statement Tools
Funding Agreements
Funding agreements are essential legal documents that establish the framework for government agencies to transfer funds to organizations. These agreements define specific terms, conditions, and accountability standards for allocated funds, supporting designated programs and services. While agreements may vary in duration and flexibility across different departments, they provide guaranteed revenue streams when conditions are met. Understanding and fulfilling these commitments is crucial for Chief and Council/Board members to ensure compliance and maintain stable funding relationships.
Process
- Agreement Summary: The CEO/CAO/Band Manager maintains a summary of all current funding agreements, including names, parties, terms, and funding levels.
- Action Planning: Each agreement requires an action plan, whether ongoing or needing renewal, to ensure reporting requirements are met.
- Negotiation: When a new agreement is needed, the organization coordinates with the relevant department(s) for draft reviews, ideally ensuring legal counsel reviews agreements before approval.
- Funding Confirmation: Revised funding levels for ongoing agreements should be confirmed annually and incorporated into the Revenue Forecast.
Timing
- December: Start reviewing funding agreements.
- February: Complete review, feeding into the Budgetary Cycle.
- Regular updates should ensure ongoing compliance and alignment with reporting requirements.
Audit
The audit delivers an independent, third-party assessment of organizational revenues and expenditures, conducted in accordance with generally accepted accounting principles. While focused strictly on financial accuracy and compliance rather than decision quality, this objective review provides reasonable assurance to community members and funding agencies that funds are properly accounted for and align with funding agreement requirements.
Audit Process
- Appointment of Auditor: Organizations typically use a tendering process to select an auditor, renewing the selection every three to four years. A formal letter of engagement establishes the auditor’s scope and responsibilities.
- Preparation: An interim meeting with the auditor clarifies year-end requirements, ensuring all necessary documentation is prepared. Missing records may lead to added costs if the auditor must reconstruct information.
- Execution: The audit involves verifying accounting records, cross-referencing to supporting documents, and assessing internal controls.
- Reporting: Auditors draft an opinion on the organization’s financial statements, presenting findings to the Chief and Council/Board. They also provide a “Management Letter” identifying areas for improvement.
Checklist for Audit Preparation
- Documentation Needed:
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- Receipts, payment journals, bank statements, canceled cheques
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- Payroll records, T4s, accounts payable/receivable lists
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- Financial agreements, Band Council/Board resolutions, meeting minutes book
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- General ledger, balance sheets, and financial statements
- Final Deliverables:
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- Balance sheets, revenue and expense statements, surplus/deficit schedules, and any special reports for funding agencies.
Timing
- September: Begin inviting tenders, if applicable
- November: Confirm auditor selection.
- April 30 – May 15: Draft Year-End Statements ready.
- July 15: Draft audit report for Chief & Council/Board review.
- July 25: Final audit completion, with documents made available to community members/stakeholders and submitted to agencies.
Conclusion
The Financial Statement Tools in Reporting & Budgeting include critical resources for managing, verifying, and reporting the organization’s finances. Through consistent adherence to funding agreements and regular audits, the organization can maintain financial transparency, fulfill reporting requirements, and promote sustainable financial practices. These tools ensure that Chief & Council/Board, and community members have accurate, reliable financial data to support informed decision-making.
