The Planning Cycle - Fiscal Policy Review

Description:
A Fiscal Policy guides the financial operations of the First Nation. It outlines financial procedures and the roles and responsibilities of Band staff and, Chief and Council in relation to financial management of the Band, including the delegation of financial authority (see Fiscal Policy and Bylaw Samples).

Purpose:
The Fiscal Policy or Bylaw is the key control document that Band Council has to direct the financial operations of the First Nation. The Fiscal Policy outlines acceptable standards of operation that ensure fairness and accountability in the use and allocation of Band funds. The policy is the foundation against which all financial decisions should be made by the Band Council and senior staff. In addition, the Fiscal Policy sets out operational rules for the organization's finance department. This policy has a direct impact on implementation of the Funding Agreements, relates to the mandate of the Band Council, and helps to ensure accountability of the Band's financial management team.

The benefits of a sound fiscal policy or bylaw are many. It helps:

  • put resources to work to improve life in the community;
  • keep members informed and comfortable with what is happening;
  • protect officials by clarifying their roles and responsibilities; and
  • support effective relations with funding agencies, banks, suppliers, etc.

The consequences of weak fiscal policy are also many. It may result in:

  • opportunities lost to make improvements;
  • unneeded tension within the community; and
  • debt without any lasting benefit. Such debt may limit the community's ability to make improvements for many years.

A good fiscal management system takes years to build. It includes having appropriate policies and systems, a sound organizational structure and well trained staff. It is a tool that Chiefs and Council need in their role as leaders and decision-makers.

It is also a key part of the community's governance system. As such, it must be kept in place and grow as the community assumes new responsibilities and expands economic activity. Then, over the years, everyone will be served by the governance system and gain confidence in it.

While the basic policy should be kept intact, the policy should be reviewed on an annual basis in response to various factors. For example, changes in terms and conditions of funding arrangements, assumption of new programs, self-government, deficit, and co-management situations may warrant modifications to the fiscal policy. If changes are warranted, only Band Council can approve revisions to the Fiscal Policy.

Elements found in fiscal management system/codes of governments include:

  1. Statement of Principles on which the code or bylaw is founded

  2. Roles and responsibilities

  3. Budgetary Process

  4. Accounting and Appropriations Process

  5. Debt Management

  6. Loans Policy

  7. Internal Controls:
    • financial reporting
    • expenditure and budgetary control
    • asset management and reporting
    • contracting

  8. Audit

  9. First Nations owned enterprises

  10. Code of Ethics/Conflict of Interest Provisions

  11. Access to Information and Privacy

  12. Mechanism to Amend Code

Process:

  1. For a First Nation that does not have an up-to-date fiscal policy in place, the Band Manager and Financial Controller should prepare a draft for Band Council review (see Sample Fiscal Policy). It is important to work through all the elements and modify as appropriate with Band Council's input. The Fiscal Policy controls the financial operations of the Band by establishing the guidelines and rules that all staff must follow.

  2. It is critical that staff know, understand, and follow the approved Fiscal Policy. The policy should be reviewed in detail with all senior staff and all staff involved in the financial operations of the Band.

  3. As noted earlier, we recommend that the Fiscal Policy be reviewed annually. The Band Manager may wish to establish a working committee to conduct this review or simply request input from the Program Directors and the Financial Controller. Suggested amendments can then be summarized and cross-referenced with the existing policy to ensure no unintended cross-impacts.

  4. A revised draft will be presented to Chief and Council who must approve any changes to the Fiscal Policy. Any changes should be communicated to all staff along with a copy of the revised policy.

Timing:
Development of a Fiscal Policy can be done at any point during the fiscal year. It is recommended that a review be undertaken in the third quarter following the Annual General Meeting (see Community Accountability) and prior to the setting of new priorities for the upcoming fiscal year (see Priorization).