The Accountability Cycle - Fiscal Plan & Final Program Budgets

Description:
The Fiscal Plan is a consolidated, program by program budget. The fiscal plan lays out the overall Band Council budget for the new fiscal year and is based upon approved Program Work Plans. Program budgets set out expected financial activities during the fiscal year. They are based on an analysis of revenues and expenditures and include both capital and operational expenditures.

Purpose:
The Fiscal Plan helps the Band Council determine the level of funding for each program during the current fiscal year. The plan is based upon the Mandate Objectives of the Band Council (see Planning Cycle). Financial information, including revenue, operational expenses, capital, and debt issues are usually summarized in spreadsheet format (see Sample Fiscal Plan).

The Fiscal Plan is the key mechanism for allocating funds. The Fiscal Plan provides the information necessary for the Appropriation phase of the budget. These program budgets are approved by Council prior to the appropriation process. Once approval is given, Council is able to appropriate monies as outlined in the plan. Program Directors are then accountable to the Band Council for the management the funds. If Program Directors require additional funding for whatever reason, then Band Council must approve this by amending the Fiscal Plan.

Process:
The Flexible Transfer Agreements allow Band Councils to choose how to allocate remaining funding after mandated programs are covered. The following section suggests a process for establishing and approving a Fiscal Plan for a First Nation under an FTA:

  1. Program Directors meet with staff to review program objectives, service delivery standards, program policies, and any other guidelines that will have a financial impact on their program for the upcoming fiscal year. The Revenue Forecast (see Budgetary Cycle) establishes the initial revenue stream for each program. While this forecast may not be a guaranteed amount because it is subject to reallocation by Band Council, it is a good place to start. At this stage in the process, program staff need to distinguish between the "must do" components of the program (those that must be provided by law) and the "should do" and the "nice to do" elements. In any case, in this preliminary stage, all program components should be costed and included in the initial program budget. Once completed, these Preliminary Program Budgets (see Planning Cycle) should be submitted to the Band Manager.

  2. The Band Manager and Financial Controller then meet with the Program Managers (either individually or as a group) to review Preliminary Program Budgets. This provides the Band Manager and the Controller with an opportunity to challenge and to understand program plans, and to prepare a comprehensive package for Band Council.

  3. Band Council and Program Directors then meet to go over preliminary program budgets. At this meeting, Directors are expected to make a short presentation on their submission and essentially "argue their case" for the submitted budgets. Band Council must consider the difference between funds requested by programs and total revenue available through the various income streams.

  4. Most often, the preliminary amounts requested by programs will be more than the total revenue available to the First Nation - often significantly more. In order to deal with this difference, decision-makers have three options:

    1. They may reduce funding to all non-essential services and activities;
    2. They can choose to reduce or eliminate specific services; and/or
    3. They can attempt to raise additional funds from internal or other sources to fund all those requested.

    In any case, the decisions at this stage will likely be difficult because, at the end of the day, expenditures must match revenues. The important things for decision-makers to keep in mind are the Band's Mandate Objectives and Priorities as determined earlier for the new fiscal year (see Planning Cycle). Finally, staff must ensure the Band Council understands and respects limitations in funding agreements related to the transfer of funds between activities and programs. While FTA's allow some flexibility, First Nations must adhere to the terms and conditions of the Funding Agreement. For projects that are desired but not ultimately funded by the Band, it may be appropriate to seek alternative funding. Federal agencies and philanthropic groups often release calls for proposals in areas that are directly relevant to First Nations. In fact, many calls identify Aboriginal issues specifically. An example would be the Aboriginal Healing Foundation. There is money available in these areas, but the difficulty is identifying the opportunities and making sure proposals are submitted by the deadlines.

  5. Once the decisions have been made and expenditures and revenues are balanced, the final program budgets must be approved by Council. The Fiscal Plan is the compilation of approved program budgets. To ensure the open and transparent process remains, the plan should be available to the community and funding agency upon request. The completed Fiscal Plan serves as the basis for establishing cash flow from funding agencies and to programs (see Cash Management).

Timing:
The Fiscal Plan and final program budgets should be approved by the end of March, prior to beginning of the new fiscal year when appropriations will take place.