Glossary

Accountability is being answerable to the community at large and the funding agencies for the manner in which a government or organization has discharged its responsibilities. Accountability ensures transparency, disclosure, and offers a means of redress.

Accounting is a service activity designed to accumulate, measure, and communicate financial information about economic entities for decision-making purposes.

Accounting Cycle is the procedures for analyzing, recording, classifying, summarizing, and reporting the transactions of economic entities.

Accounts Receivable are a current asset representing money due for services performed or merchandise sold on credit.

Accounts Payable (or Trade Accounts Payable) are balances owed to others for goods, supplies, or services purchased on open account.

Adjusting Entries are entries required at the end of each accounting period to recognize, on an accrual basis, revenues and expenses for the period and to report proper amounts for asset, liability, and surplus (deficit) accounts.

Annual Report provides key information to the community and others. It includes a summary of revenues and expenditures, an overview of programs and services, a statement of achievements, priorities for next year, goals, objectives, vision, and mission.

Appropriation is the authorization given by Council to programs to expend funds to meet identified priorities and cover operating requirements. Appropriations can happen at one time or can be divided over the year to allow for unforeseen changes.

Assets are economic resources that are owned or controlled by a government or organization.

Audit is an independent review of the organization's financial accounts and statements. It verifies that generally accepted accounting principles (GAAP) are followed and correctly applied. An audit provides a means of showing Band members and funding agencies that fiscal resources were used and administered in a responsible manner and according to the terms of funding arrangements.

Audit Report is a report issued by an independent CA that expresses an opinion about whether the financial statements present fairly an entity's financial position, operating results, and cash flows in accordance with generally accepted accounting principles (GAAP).

Balance Sheet is a statement of financial position. The financial statement that shows the assets, liabilities, and surplus (deficit) equity of an entity at a particular date.

Bank Reconciliation is the process of systematically comparing the cash balance as reported by the bank with the cash balance on the entity's books and explaining any differences.

Budgets are formal statements of financial resources set aside for specific activities over a defined period of time. They are primarily devices to control an organization's activities. Budgets keep programs within Council's boundaries and help prevent deficits.

Capital is funding to identify, plan, design, construct, renovate or purchase assets for education, housing, or community infrastructure purposes, where such assets have a useful life of more than one year and are not held for resale.

Capital Assets are property, plant, and equipment that have useful lives over many years. They may require maintenance and include such things as equipment, buildings, land, roads, sewage collection, and water distribution systems.

Capital Expenditure Budget is a financial budget that plans future investments in major assets (like buildings, infrastructure, etc.).

Capital Plan identifies the Council's capital projects, scheduled by priority, with cost estimates that may be amended as data is refined. It should cover a five- year (5) period.

Capital Projects, Mandatory are projects within the Band's approved capital plan for which there is a specific ministerial obligation. These projects are identified in the funding arrangement.

Cash includes coins, currency, money orders, checks, and funds on deposit with financial institutions; the most liquid of assets.

Cash Budget is the amount of cash set aside each month to meet expected financial obligations of that month.

Cash Flow projections show how cash or funds will be used on various projects for each month of the year. Cash flow should be undertaken on a monthly basis to account for the seasonal nature of certain activities.

Cash Management is the monthly assessment of expenses and revenues in the organization.

Current Assets are cash and other assets that may reasonably be expected to be converted to cash for a year or during the normal operating cycle.

Decision-making describes the process through which a course of action is selected as the solution to a specific problem.

Disclosure is a component of accountability and refers to timely reporting of program and financial performance of the government, in accordance with approved plans.

Emergency Funds are cash amounts set aside to cover unforseen expenditures in a fiscal year.

Expenditure Report is a report prepared at the end of every quarter that shows, by department, the total year-to-date expenditures.

Expense Budget is the operating budget that outlines the anticipated expenses for each program/department and for the organization as a whole.

Expenses are the costs of goods and services used up in programming and service provision.

External Auditors are independent professional accountants recognized under provincial or territorial law who are retained by organizations to perform audits of financial statements.

External Audits are audits conducted by professional accountants recognized under provincial or territorial law who are independent of the client organization.

Financial Accounting is the area of accounting concerned with reporting financial information to interested external parties.

Financial Statements are reports such as the balance sheet, income statement, and the statement of cash flows, which summarize the financial status and results of operations of an organization.

First Nation Business Enterprise is an organization that is a separate legal entity with the power to contract in its own name and with the financial and operational authority to carry on a business which sells goods and services as its principal activity and can, in the normal course of operations, maintain its operations and meet its liabilities from sources outside the Band Council.

Fiscal Plan is a multi-year plan outlining the distribution of funds to support community objectives, programs, and services. Fiscal Policy is a clear statement of the responsibilities of staff in relation to the organization's finance department. It provides guidelines on procedures, identifies authority, and outlines issues regarding: travel claims; fiscal monitoring; payment processing; debt management; cheque writing; salary procedures; and administration of the finance office.

Fiscal Year is an organization's reporting year, covering a 12-month accounting period.

Funding Agreement, Indian and Northern Affairs Canada (INAC) is a formal agreement containing terms and conditions by which a transfer payment is made by the Crown for delivery of programs and services by the First Nation government or organization. The degree of federal control and involvement in the implementation of programs and services ranges from extensive to nil. Funding Agreements may contain one or more funding authorities. Types of funding agreements are:

  • Contribution/Comprehensive Funding Arrangements (CFA) are used for projects and/or services delivered by Band Councils. CFAs include a number of program activities. INAC has a higher degree of monitoring and control, while giving the Band Council flexibility to carry out its management responsibilities. The CFA is the only funding mechanism that can be used to fund capital projects in excess of $1.5 million. The Band Council is responsible to repay overpayments and other disallowed expenses to INAC.

  • Alternative Funding Arrangements (AFA) give Bands expanded authority for program policy, design management, and implementation of all transferrable programs in areas such as education, social services, community services, and capital facilities. Bands may modify and re-design federally funded programs to make them more appropriate to their community needs and priorities, as long as minimum program requirements are met. Funding is provided based on an overall plan which identifies major objectives, and lists a series of projects to be completed within the time frame of the agreement. Capital projects are limited to a maximum of $1.5 million and funds cannot be transferred to operations and maintenance.

  • Financial Transfer Agreements (FTA) enable First Nations to manage a moderated resource base over a multi-year period, while providing them with incentives to find the most cost-effective service delivery processes. Like AFAs, funds can be moved around to suit community priorities once minimum program requirements been fulfilled, with the exception of capital. FTAs promote local accountability and may combine funding from a number of federal departments.

Funding Authorities are rules, set by the Treasury Board of Canada, that federal departments must adhere to when funding a given program or service.

Generally Accepted Accounting Principles (GAAP) are authoritative guidelines that define accounting practice at a particular time.

Goals are end statements that identify what an organization would like things to be like in one, five or 10 years. Goals are set by the Chief and Council in consultation with the community. Goals are stated in specific, measurable terms. In this way, Band staff can see how their own work directly relates to achievement of the organization's goals.

Implementation is the course of assigning people and other resources to put a plan into action.

Income Statement (statement of earnings) is the financial statement that summarizes the revenues generated and the expenses incurred by an entity during a period of time.

Interest is the payment (cost) for the use of money.

Interest Rate is the cost of using money, expressed as an annual percentage.

Journal Entry is a recording of a transaction where debits equal credits; usually includes a date and an explanation of the transaction.

Lease is a contract that specifies the terms under which the owner of an asset (the lessor) agrees to transfer the right to use the asset to another party (the lessee).

Ledger is a book of accounts in which data from transactions recorded in journals are posted and thereby classified and summarized.

Liabilities are obligations measurable in monetary terms that represent amounts owed to creditors, governments, employees, and other parties. Long-term Liabilities are debts or other obligations that will not be paid within one year.

Matching Principle refers to the concept that all costs and expenses incurred in generating revenues must be recognized in the same reporting period as the related revenues.

Mortgage Amortization Schedule is a schedule that shows the breakdown between interest and principal for each payment over the life of a mortgage.

Mortgage Payable is a written promise to pay a stated amount of money at one or more specified future dates; a mortgage is secured by the pledging of certain assets, usually real estate, as collateral.

Note Payable is a debt owed to a creditor evidenced by an unconditional written promise to pay a certain sum of money on or before a specified future date.

Note Receivable is a claim against a debtor, evidenced by an unconditional written promise to pay a certain sum of money on or before a specified future date.

Notes to Financial Statements are explanatory information considered an integral part of the financial statements.

NSF (Non Sufficient Funds) Cheque is a cheque that is not honored by a bank because of insufficient cash in the customer's account.

Objectives are targets that must be reached in order to attain broader organization goals.

Operating Budget is the plan for the allocation of resources to each department for the budget period (e.g., one year).

Operations Fund is a master fund established for the purpose of accounting for all resources not accounted for in another fund.

Pension Plan is a contract between an entity and its employees whereby the entity agrees to pay benefits to employees after their retirement.

Performance Reports are regular evaluations of departments, programs, or people against their stated goals and objectives.

Planning is the starting point of the management process. To plan, goals and objectives are established and then strategies by which to achieve these goals are determined.

Posting is the process of transferring amounts from the journal to the ledger.

Prepaid Expenses are payments made in advance for items normally charged to expense.

Prior-period Adjustments are adjustments made directly to surplus (deficit) accounts in order to correct errors in the financial statements of prior periods.

Priorization is a decision-making process by senior officials to determine how limited funding will be distributed among programs and services. It is a ranking of objectives for the community.

PSAAB Rules are the standards prescribed by the Public Sector Accounting and Auditing Board (PSAAB) of the Canadian Institute of Chartered Accountants (CICA) for governments in Canada. The standards are published in the CICA's Public Sector Accounting and Auditing Handbook.

Recipient is the legal body receiving resources provided by INAC or other federal departments through a funding agreement (usually the Band Council).

Redress is a component of accountability and refers to providing the means for individuals to appeal decisions affecting them.

Remedial Management Plan (RMP) is a commitment by Council or a Board to take specific measures which are necessary to correct a financial problem. An RMP is developed by recipients and approved by the funding agency. Remedial Management Process is a series of steps defined within a funding agreement to confirm and correct problems which come to exist, in terms of a recipient meeting its obligations under the funding agreement.

Resources are the full range of assets a community or organization has available (e.g., people, time, funding, equipment, capital, knowledge, etc.).

Revenue Budget is the operating budget that identifies revenue (funding and income) required by the Band.

Segregation of Duties is a strategy to provide an internal check on performance through separation of custody of assets from accounting personnel, separation of authorization of transactions from custody of related assets, separation of operational responsibilities from record keeping responsibilities.

Strategies are the preferred programs and services mix to achieve community objectives.

Transparency is a component of accountability and refers to ensuring that the governance structures, operations, and decision-making processes are clear and open for observation and participation by the people.

Trial Balance is a listing of all account balances; provides a means of testing whether total debits equal total credits for all accounts.

Trust Monies are monies held by a person or organization on behalf of another person or organization. These funds are considered to be held "in trust" and the manager of those funds must act in the best interest of the beneficiary. First Nations often have two trust funds held by the Federal Crown: capital and revenue trusts. Capital Trust Monies are derived from non-renewable resource transactions on the sale of lands or other capital assets (e.g., natural resources). Revenue Trust Monies are generated primarily through land-leasing transactions or interest earned on deposits in the Consolidated Revenue Fund of the Government of Canada. Capital and revenue trust monies are expended on the authorization of the Minister, with the consent of the Band Council.

Unearned Revenues are amounts received before they have been earned.

Unrecorded Expenses are expenses incurred during a period that has not been recorded by the end of that period.

Unrecorded Revenues are revenues earned during a period that have not been recorded by the end of that period.

Variance Report compares an original budget to the actual expenditures, highlighting the difference or variance between the two. A variance report is produced along with quarterly expenditure reports on a year-to-date basis. The results of the variance report may necessitate amending the budget disbursements in the second appropriation in order to reflect the changed situation.

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