5.0 GENERAL FINANCIAL REPORTING REQUIREMENTS

5.1 Financial Statements - Recipients

The Recipient shall provide INAC with consolidated financial statements in accordance with GAAP. They shall be audited in accordance with generally accepted auditing standards.

5.2 Financial Statements - Agencies

In certain instances INAC may provide Transfer Payments to a Recipient that in turn further distributes payments to an Agency for the delivery of programs and services funded under the terms and conditions of a Funding Agreement. Where the Recipient has transferred funding to an Agency, the Recipient remains accountable to INAC for the performance of its obligations as set out in the Funding Agreement. Therefore, where the Recipient has transferred funding to an Agency, the Agency shall provide to the Recipient its financial statements. Also, upon written request from INAC to the Recipient, a copy of the Agency's financial statements shall be made available to INAC.

For purposes of accounting for Transfer Payments, Agencies shall prepare their financial statements as follows:

• For Agencies that are either a First Nation, a Tribal Council or a First Nation Political Organization, the financial statements shall be prepared in accordance with the requirements set out in this handbook.
• For other types of Agencies, the financial statements shall be prepared in accordance with INAC's Financial Policies and Procedures Manual, Chapter 5.17 - Financial Reporting Requirements for Recipients other than First Nations, Tribal Councils and First Nation Political Organizations.

5.3 Generally Accepted Accounting Principles - First Nations

First Nations are, and should be, considered governments from an accounting perspective. Currently the CICA Public Sector Accounting Handbook (PSA Handbook) applies to all other forms of governments in Canada. GAAP for First Nations must be based on the application of the CICA recommendations for local governments as outlined in the PSA Handbook. There has been discussion and research on the appropriate GAAP for First Nations and until such time as these issues are resolved within the accounting standard setting community, it is INAC's view that the "best fit" for First Nation entities lies in the PSA Handbook local government accounting recommendations.

5.4 Generally Accepted Accounting Principles - Tribal Councils and First Nation Political Organizations

Tribal Councils and First Nation Political Organizations must adhere to the PSA Handbook accounting recommendations for local governments unless GAAP definitions and recommendations deem them to be more profit oriented enterprises or not-for-profit organizations. In those cases, the Recipient should follow the relevant recommendations found in the CICA Handbook.

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