After the 1994 report “Special Review Re: Sto:lo Fisheries Authority”, significant changes were made to the operation of the Sto:lo Fisheries Authority, SFA, as it pertains to financial accountability. In the year following the review, all funds were provided to an independent administrator and only released in accordance with proper accounting procedures. Since then the financial control has been moved from the SFA to the financial arm of Sto:lo Nation. The fiscal accountability of Sto:lo Nation has been reviewed by DFO Finance, Pacific Region which is satisfied with the accounting processes in place.
In the last two years, DFO has been more involved in the financial aspects of the agreement. DFO staff have participated in the monetary aspects of the levy, referred to as the “Contribution Fishery” in the report, and excess salmon surplus to requirements, ESSR, fishery arrangements. Active management controls including the laying off of staff to avoid overexpenditures are now routine.
Specific Recommendations:
3.01 The quarterly Progress Reports submitted to DFO by the SFA are reportedly prepared internally by the SFA and are not reviewed by the external auditor prior to submission. Given the nature and extent of the issues raised through our review, there is an opportunity to increase the reliability and accuracy of the reports by having the auditor involved in the preparation and/or review of the progress reports.
The quarterly reports are now prepared by the Sto:lo Nation's director of finance and his staff, not by Sto:lo fisheries authority staff, as was the case prior to the report. Given that the processes used are accepted by the external auditor and DFO Finance, Pacific Region, the participation of the auditor in the preparation of the quarterly reviews is not required.
3.02 SFA apparently received two letters relating to accounting matters, dated February 7, 1994, and recommendations arising from audit, dated June 27, 1994, from Mr. Robert Nicklom of Goldfinch, Nicklom and Northcott, SFA's auditor for the fiscal year 1993-94. DFO reportedly did not receive copies of the auditor's management letters. As it appears that certain recommendations made by SFA's auditor have not been implemented, there is an opportunity for DFO to more proactively monitor SFA's management and operations by receiving such management letters.
Since the submission of the report, the subsequent implementation of the independent administrator for 1995 and procedures put in place since then, no management issues have been identified in the audit.
4.11 SFA should carry out a complete evaluation of the financial controls regarding the contribution fishery. Controls that were in place should be documented and analysed in conjunction with SFA's auditor to assess the effect on the audit opinion for fiscal 1994-95. In particular, a reconciliation of the fish caught per the landing slips issued to the revenue recorded should be performed. The numerical continuity of the landing slips should also be reviewed. In addition, the controls regarding future contribution fisheries should be reviewed to ensure appropriate improvements are made.
No contribution fisheries were conducted in 1995 or 1996. In 1997, DFO was highly involved in the design and implementation of the fishery. DFO's involvement included designing the bid package, opening the bids and selecting the highest bidder, and ensuring the funds were properly dealt with. The design of the fishery was such that numerical control of landing slips was not required.
4.12 A complete analysis of a particular individual's transaction should be performed. The analysis should address such questions as:
a. Why was a deposit of $125,000 received when the invitation to bid indicated that a deposit of $150,000 was required?
b. Does the bidding process, the amended bid, the outstanding receivable and the accounting controls regarding the related revenue raise concerns regarding the management of the contribution fishery?
c. Did the individual sell the fish to a third party and, if so, was he paid for them?
d. What is the likelihood that the receivable from the individual will be collected? Should the receivable, or a portion thereof, from the individual be provided for as a doubtful or uncollectable account?
e. What effect would the non-collection of the receivable from the individual have on the First Nations' and/or STC's performance under the agreement?
There has been discussion with Sto:lo Nation and Sto:lo fisheries on the involvement of the individual in this particular interaction. The total amount of the receivable monies from this transaction was deducted from the 1995 agreement amount DFO was to pay SFA. This left the Sto:lo Nation responsible for the outstanding amount, and this has had the effect of making the Sto:lo Nation more accountable for their practices. Further, the individual has not had any further involvement with projects of this nature.
4.23 SFA should assess their requirements to pay GST and, as recommended by their auditor, should review the accounting treatment of GST paid. After determining the extent of refund available, a GST return and/or refund claim should be filed in accordance with the Excise Tax Act.
4.24 The DFO should consider the position they will take with respect to amending past progress reports to properly account for GST that may have been included as allowable costs.
The GST was applied for and received in the 1994 agreement. Since then GST has been applied for on an annual basis.
4.28 SFA should review their policy with respect to accounting for capital assets particularly with respect to the treatment of disposals of capital assets. If necessary, progress reports should be revised for any accounting errors.
The accounting of capital assets including disposal is done in accordance with acceptable accounting procedures.
5.14 Insurance coverage should be reviewed to ensure that SFA is only insuring boats to which they have title. Excess insurance should be canceled and inquiries should be made as to the possibility of a refund. In addition, the existence and possible disposal of any excess boats should be reviewed.
Insurance coverage is now only on vessels operated by the SFA.
5.16 SFA should implement a system to monitor the personal use of cellular phones and vehicules. The level of use should be reviewed for any potential abuses. In addition, SFA should review the requirement, if any, to issue T4 slips for taxable benefits.
Managers within Sto:lo Fisheries are now provided a budget to work within. One of their responsibilities is to ensure that equipment is operated in accordance with acceptable procedures, including limiting the personal use of equipment. There have been instances where managers have limited the use of equipment due to abuses. The costs are deemed, by AFS staff who review the reports, to be within an acceptable range.
5.17 DFO should review their position with respect to SFA assets used for non-SFA business, such as travel to and from work.
DFO has reviewed the level of assets support including use for non-SFA business and has concluded this should be left to the discretion of the SFA managers who are accountable for their budgets.
5.18 DFO should request the travel expense claim forms for honoraria described in the general ledger as relating to CA-104.
A flat rate is now paid for honoraria—$75.00 per half day or conference call or $150.00 per day plus mileage at government approved rates. The authorization for this payment is the minutes of meetings. Minutes are provided by the independent chairman of the planning committee. Given the controls that are already in place, it is not necessary for DFO to view travel expense claims.
6.44 Generally the financial controls in place at SFA warrant improvement as various accounting errors appear to go undetected, notwithstanding the fact that SFA was apparently informed of the nature of many of the errors in February 1994.
6.45 We recommend taht a thorough review of financial controls take place with a view to detecting and preventing future errors from taking place. Controls currently in place such as inter-company and bank reconciliations do not appear to be performed on an accurate basis as evidence by the undetected errors.
6.46 The involvement of the external auditor in the preparation of the progress reports may result in the earlier detection of accounting errors and a greater assurance level regarding the reliability of the progress reports.
6.47 Additional training and education of in-house accounting personnel may also alleviate some of the problems that are currently being experienced.
Since the accounting regime and reporting relationships have been changed significantly, these recommendations have been addressed.
