First Nations Capital Project Management: Track Costs

First Nations capital project management covers design, tendering, construction, and handover. Finance has a narrower job that touches every stage: record what each project costs, compare it to the budget, show which funder paid for what, and carry the finished project into the Nation's asset records.

This post covers how Indigenous Services Canada (ISC) structures capital funding, how to give each project its own record, how to track a capital project budget against actual costs, how to keep costs separate by funding source, and how project costs become tangible capital assets in the audited statements. Which projects a Nation builds, and in what order, is the Nation's decision. The finance records only need to show what happened to the money.

What ISC Capital Funding Looks Like

ISC's Capital Facilities and Maintenance Program has three funding streams: operations and maintenance, minor capital for projects under $1.5 million, and major capital for projects over $1.5 million. ISC says the program's funding is managed through First Nation infrastructure investment plans, developed in partnership with First Nations and based on community-identified infrastructure needs.

The same page notes that adjustments to the plan may occur throughout the fiscal year as community, project, and financial circumstances change. A budget set once and left alone will drift from a plan that moves. The project budget needs to be easy to update and to compare with actual costs, which is the same idea we cover in our post on adaptive planning.

Capital money can also come from other funders, and each sets its own terms. Finance needs a way to see any one project by funding source as well as by total cost.

Give Every Project Its Own Record

Start by making the project something the ledger knows about. Sage Intacct's Basic Project Tracking, also called the Project dimension, lets you create project records and tag financial transactions with a project ID. Sage lists AP bills, purchasing transactions, AR invoices, Order Entry transactions, and journal entries. Once every bill for a project carries the same ID, one report shows what the project has cost.

Sage describes several levels of project tracking and says a business can grow into more capability over time. Project Costing adds time, expenses, and task tracking to the Project dimension, so costs can be recorded at the task level. Functionality varies by subscription level, and our First Nations solutions page lists Sage Intacct Basic Project Tracking as an add-on, so confirm which level fits before you commit.

Track Budget Against Actual by Project

A capital project budget answers one question: how much has been spent against what was approved? Record the approved budget for each project when it is approved, then compare actual costs with it on a fixed schedule, such as monthly.

When a cost estimate changes, record the change and the reason, and keep the original figure beside the revised one. Council and funders can then see both.

Review the report with the project lead as well as finance, so a variance is explained while the project is still under way.

Keep Costs Separate by Funding Source

When more than one funder pays for a project, each needs to see the costs charged to it, and the Nation needs the total. The way to get both is to tag each cost with its funding source when it is entered, in addition to its project.

In Sage Intacct, you can create user-defined dimensions, and on a transaction entry page you choose which dimensions to send to the general ledger. Sage says almost all reports support dimensions. A funding source dimension is one way a Nation could set this up.

The wider approach of recording each transaction once and tagging it by program, funder, and entity is covered in our post on First Nations financial reporting.

From Project Costs to Tangible Capital Assets

When a project ends, its cost becomes part of the Nation's tangible capital assets. ISC's model for audited consolidated financial statements says tangible capital assets are recorded at cost, which includes amounts directly related to the acquisition, design, construction, development, improvement, or betterment of the asset. The model's tangible capital asset schedule has a separate section for assets under construction, and its policy note says assets under construction are not amortized until the asset is available to be put into service.

ISC and Crown-Indigenous Relations and Northern Affairs Canada require the model for First Nations that provide audited consolidated financial statements under their funding arrangements. ISC's page is dated 2019, so confirm current requirements with your auditor.

This is where project records and asset records meet. In Sage Intacct Fixed Assets, a bill line that uses a construction in progress account can create a construction in progress asset, and each asset links back to the bill it came from. The project's costs and its asset record can then be traced to the same source documents. Our First Nations solutions page also lists Sage Intacct Fixed Assets as an add-on.

Where to Start

1. List every active and planned capital project, with its approved budget and each funder.
2. Agree on a project ID format and on which costs belong to a project.
3. Create a project record for each one, and a funding source tag wherever more than one funder pays.
4. Enter each bill with its project ID and funding source from the start, not afterward.
5. Compare budget with actual on a fixed schedule, and review it with the project lead.
6. At completion, confirm with your auditor how the finished project is recorded as an asset.

Next Step

A system tracks projects well only when the people using it know how. Our Ongoing Support and Training service helps new and experienced users run their Sage software more efficiently, and can help you introduce new features, such as project tracking, as your team is ready. To see what else we offer First Nations organizations, visit our First Nations solutions page, or read about Sage Intacct, which we implement and support.