DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE FIRST NATIONS FINANCIAL MANAGEMENT BOARD Moving beyond the status quo, taking charge FMB Pre-Conference Workshop February 7, 2017 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Learning Objectives Gain an understanding Requirements for Financial of the Finance and Management Systems Audit Committee (“FAC”) Certification Roles and Benefits Structure Keys to Success Responsibilities 2 1
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE FINANCE AND AUDIT COMMITTEE 3 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Introduction • Raise your hand if your First Nation has a Finance and Audit Committee 4 2
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Outline STRUCTURE BENEFITS ACTIVITY 2: FINANCE AND AUDIT COMMITTEE SELECTION ROLES AND ACTIVITY 3: TERMS RESPONSIBILITIES OF REFERENCE QUIZ ? ACTIVITY 1: ROLES QUESTIONS AND RESPONSIBILITIES 5 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE BENEFITS https://www.youtube.com/watch?v=CGBVn-g_EW8&t=3s 6 3
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Benefits Provides forward- Creates a Supports Council Reinforces thinking oversight structured in making good Council’s financial of investments decision-making financial responsibility, approach for decisions accountability, Chief and Council transparency 7 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Takeaways – Finance & Audit Committee Independence and expertise to financial oversight Community success is possible with a well- Not a decision-making body, developed structure, makes recommendations to Council relevant expertise and teamwork Required to be in place for FMS Certification 8 4
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE ROLES AND RESPONSIBILITIES 9 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities Council Other Committees Senior Manager Finance and Audit Senior Financial Officer Committee Recommend Approve Prepare and Process External Auditor appt. External Auditor appt. RFP for Audit Services Financial Statements Financial Statements Records for Audit Manager External Auditor 10 5
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – Finance & Audit Committee Audit and Financial Audit Finance Oversight Responsibilities Responsibilities • External Auditor • Financial Planning • Audited Financials • Financial Performance • Risk Management • Financial Statements • Internal Controls 11 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – Finance & Audit Committee Policy Financial Planning and Reporting Financial Planning Recommend Financial Performance Monitor Financial Statements Review 12 6
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – Finance & Audit Committee Audit External Audit Selection, Engagement, Performance Recommend Planning, Conduct and Results of Audit Activities Monitor Audited Annual Financial Statements and Other Reports Review Reporting Risks and Mitigating Controls 13 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – Council Community Oversight Leaders Responsibility Approvers 14 7
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – Senior Manager, Senior Finance Officer Financial Strategy, Plan Internal Control Development Financial Operations and Report Development and Compliance Risk Management Planning 15 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Roles and Responsibilities – External Auditor Financial Compliance Performance Statement Audit Audit Audit 16 8
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Takeaways – Roles and Responsibilities Assess structure and framework Recommend Leverage expertise Monitor Exercise professional judgment Review Make recommendations 17 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE ACTIVITY 1 Case Study: Roles & Responsibilities 18 9
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE STRUCTURE 19 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Structure – Constitution • Report to Council Reporting • Chair and Vice-Chair are appointed by Council (one must be Councillor) • Minimum 3 members (at least 1 Councillor) Membership • For 4 or more members (at least 2 Councillors) • Majority of members must have financial competency Qualification Criteria • All members are independent 20 10
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Structure – Financial Competency • Financial literacy or related financial management expertise • Qualification requirements interpreted by Council • The ability to read and understand a set of financial statements; • An understanding of internal controls and procedures for financial reporting and risk management processes; Sample Financial Competency criteria • An understanding of the First Nation’s strategic objectives; • The ability to assess the general application of accounting policies and principles 21 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Structure – Independence • No direct or indirect relationship with the First Nation government • Council required to make policies or procedures for independence criteria Establishing independence eligibility criteria in compliance with FMB Standards ⎼ Senior Manager, Finance Manager, Finance department ineligible ⎼ Other employees may be eligible Requiring confirmation from candidate about independence Requiring annual conflict of interest disclosure statement 22 11
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Takeaways – Structure Unbiased Best Interest of Financial the Community Expertise 23 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE ACTIVITY 2 Finance and Audit Committee Selection 24 12
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE ACTIVITY 3 Terms of Reference Quiz 25 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Keys to Success – Finance and Audit Committee Capable Chair Assistance Technical Expertise Improve Community Well-Being Well-Defined Mandate Communication 26 13
DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE QUESTIONS ? 27 DEMYSTIFYING THE FINANCE AND AUDIT COMMITTEE Contact First Nations Financial Management Board Phone: 1-877-925-6665 Director of Capacity Development and Intervention: Suzanne Trottier, CFA, MBA suzanne_trottier@fnfmb.com Managers of Financial Management Systems Development: Hayley Hodgson, CPA, CMA • hayley_hodgson@fnfmb.com Melanie Lyons, CPA, CA • melanie_lyons@fnfmb.com Mindy Smith, CPA, CA, CIA, MBA • mindy_smith@fnfmb.com Ramona Tkachuk, CPA, CA, CAFM • ramona_tkachuk@fnfmb.com Ritesh Desai, CIA • ritesh_desai@fnfmb.com 28 14
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