The Waskaganish band’s finances were in serious disarray last year, according to an auditor’s report (see News, page 7).

The band’s auditors, Pratte, Bélanger of Montreal, found numerous serious problems in the band’s accounting procedures.

They recommended many changes “to safeguard the Band’s assets more effectively.” Below we reprint excerpts of their report.

1. Budgets preparation, approval, control and follow-up
• The operation budget was approved late;
• Numerous projects of the Special Projects Fund and of the Capital Additions Fund were undertaken without detailed approved budgets;
• The budgeted amounts differ substantially from the actual revenues received and the expenses incurred by most programs and projects;
• Budget control and follow-up seem to be deficient at all levels.
We strongly recommend the implementation of the appropriate procedures for the preparation, approval, follow-up and control of the yearly operation budgets. … The Managers must be accountable for the budgets under their responsibility. …

2. Cash management and credit margins
• Throughout the year, the operating credit margins were always used at their maximum capacity which resulted in an unusually high interest cost; …
• The credit margins are intended to bridge finance the accounts receivable of the Band. However, due to the absence of funding of certain Special Projects and the cost overruns of certain Capital Projects, the credit margins are presently used to finance the accumulated deficits of these projects;
“Bank accounts were opened under personal names with signing authorities different than those of the Band.”
• The shortage of cashflow enticed some Managers to deposit the funds received for certain projects in individual bank accounts. In order to protect the funding of the project, the bank accounts were opened under personal names with signing authorities different than those of the Band. The funding received in the Band’s name was deposited in those accounts and at times the expenses were paid by the Band using the regular bank accounts;
• Due to the shortage of cashflow, the accumulated accounts payable to suppliers, at year-end, were considerably high. As a consequence, the amount of interest charged by the suppliers was also quite high.
We strongly recommend (that)… the credit margins must be used strictly as a
bridge financing of the Band’s accounts receivable and not to finance the deficits of certain under-funded projects. … We also recommend that the individual bank accounts be closed and the balances
of funds transferred to the regular bank accounts.

3. Accounts receivable
• The gross accounts receivable related to regular operations increased over the years… This is due to the absence of an adequate follow-up and collection procedures;
• The accumulation of the accounts receivable for long periods of time resulted in a considerable increase in the provision for doubtful accounts, due to the uncertainty surrounding the collectability of these accounts;
• An increase in the subsidies receivable, mainly in the Special Projects Fund, due to the failure to complete and submit
final activity reports as required in the funding agreements;
• Various old unsettled claims with the affiliated entities and other organizations;…
We strongly recommend… the elaboration and the implementation of a complete accounts receivable procedure. …

4. Accumulated deficits
… In the course of the past three financial years, the accumulated deficit of the Band has increased mainly because of the absence of adequate funding for certain Special Projects and the cost
overruns of certain Capital
Projects.
We strongly recommend that the present situation be thoroughly reviewed and analysed in order to prepare, approve and implement a recovery plan… This plan should be in place as soon as possible. … Adequate funding must be secured for all programs and projects prior to their start.

5. Housing construction and renovation cost
The total building cost of a housing unit increased from $150,000 in 1993-94 to $183,000 in 1997-98 The increase in cost was not accompanied by an increase in the funding.
On the other hand, for the past four years, the cost of housing renovations has greatly exceeded the available funding.
In both cases, the cost overruns were absorbed by the Band.
We strongly recommend a complete review and analysis of the housing construction and renovation cost. This should include a review of the methods employed for the purchase and transportation of material as well as the management of the construction or renovation sites.

6. Inter-funds transactions
… Due to the absence of adequate funding and the shortage of cashflow, mainly in the Special Projects Fund, the expenses of certain projects were paid using the cash available to other funds. … At year-end, the total amount due by the Special Projects Fund to the General Operating Fund and to the Capital Additions Fund is quite high, without a foreseeable method for reimbursement. This situation is indeed having a negative impact on the general cashflow of the Band.
We strongly recommend that the use of inter-funds transactions be strictly limited and that adequate funding must be secured before starting any project.

7. Cash control: rental housing fund
• Amounts of cash and cheques are received and deposited without any consideration for the actual dates of cash receipts, their purpose and their origins. As a result, it is very hard to determine the cash position or the balances of the accounts receivable at any given time;
• The amounts of cash and cheques received are not deposited on a regular basis. Abnormally high amounts of cash on hand are kept at the office. This situation may increase the risk for theft and losses of cash;
• In addition to the collection of regular rents, the Rental Housing Fund collects the residential users’ fees and the extra
rents for the additional basement rooms. … The absence of proper accounting records for these amounts makes it impossible to determine the total amounts paid and the balance owing by each individual;…

8. CSST provision
The Waskaganish Band does not have an accumulated fund in a specific bank account with respect to the CSST provision. Should a court decision be rendered against the Band, sufficient resources will not be available to settle the obligation.

9. Subsidiaries off-reserve
The investments in subsidiaries off-reserve are not recorded and disclosed in the Band’s annual financial report. The Band should obtain the audited financial reports of these subsidiaries in order to disclose the appropriate information.
In addition, the Band should collect the amounts due by the off-reserve subsidiaries and establish a mechanism to receive its fair share of the profits generated by these entities.

10. Policy for administrative charges
These is no written procedure nor a policy that governs the administrative charges charged by the Band for the administration of various projects. …

11. Rental policy: buildings & equipment
With the exception of the Rental Housing units, there is no policy nor a procedure governing the rental of the Band’s buildings and equipment.
The rental charges are presently decided on an ad hoc basis by various individuals according to their interpretation of the situation at hand. In most cases, this leads to confusion and misunderstanding without any assurance that the rental charges cover the Band’s real cost. …

12. Construction material and longterm assets inventory
The actual system used to account for the inventory of the construction material is deficient, time-consuming and not reliable. … It is very difficult to obtain an updated costed list of the Band’s assets [buildings, furniture, heavy equipment, vehicles, etc.] or to determine whether or not they are adequately insured. …