This document contains the entire text of the policy as
revised on July 1, 2002. This policy replaces the version dated
October 31, 1995.
Receivables are an important asset of the government that need
prudent management. Across government these receivables involve
billions of dollars and a wide range of transactions that affect
Canadians daily. Given this extensive scope, the sound management
of receivables is significant to the government achieving its
overall objective of responsible fiscal management.
2.1 Responsibilities
This policy sets forth the management framework for the
effective administration of this asset. Integrated within the
policy are key roles and responsibilities, which are summarized
as follows:
Treasury Board – the Financial Administration
Act sets forth the statutory authority for Treasury Board to
act on matters relating to ‘receivables from any source
whatever’. The authorities are identified in Section 10 of
the policy. In support of the Treasury Board’s
responsibilities, the Secretariat is accountable for monitoring
the effectiveness of this policy. Section 9 of this policy
describes these responsibilities.
Ministers – overall, effective receivables
management is a key component of Ministerial accountability for
the sound financial management of their departments and agencies.
Specifically, with respect to the collection of receivables, the
Financial Administration Act provides an important role
for Ministers through their authority to consent to requests for
set-off for the purposes of recovery of debts due to the Crown.
Appendix B.2.4 fully describes these responsibilities.
Deputy Heads (and their delegated officials) – in
support of the ministerial accountability referred to above,
Section 6 of the policy describes the mandatory requirements that
are the responsibility of departments. Section 6.2 addresses
further requirements that must be addressed by departments and
agent Crown corporations. Deputy heads are expected to adhere to
the procedural requirements addressed in Section 7. If other
procedures are used, they must justify and document the reasons
for doing so.
For many programs, receivables are an inherent aspect of
program delivery. As long as government levies taxes, provides
products, services and programs of financial assistance, there
will be a receivables portfolio to manage.
The government’s strategy for managing receivables is to
pursue the horizontal management of knowledge and information in
order to achieve the best results. This strategy addresses
receivables management by treating the government as a single
entity, where departments must assume a corporate responsibility
for the global management of these assets in addition to their
specific responsibilities for receivables under their
control.
The adoption of the horizontal management approach provides
the opportunity for the effective use of information and
resources among departments and agencies. To this end, all
departments and agencies will be encouraged to share information
technology, collection facilities, practices and procedures with
a view to improving the management of the global receivables
portfolio, as well as the effectiveness and efficiency of their
respective collection operations.
To ensure that all government accounts receivable are managed
fairly, efficiently and effectively to recover such receivables
and minimize the risk of loss.
It is government policy:
- to avoid, wherever possible, the creation of
receivables;
- to grant credit only when it is an operational
requirement;
- to recognize receivables promptly and vigorously pursue their
collection;
- to treat debtors fairly;
- to charge interest on overdue accounts;
- to share information and resources between departments, where
permitted, in order to locate and collect debts owing to the
Crown; and
- to maximize recoveries through set-off against other forms of
government payments owing to a debtor.
This policy applies to all organizations considered to be
departments under section 2 of the Financial Administration
Act. For the purposes of sections 6.2 and 7.2 of this
document, this policy also applies to agent Crown
corporations.
6.1 Departments must:
- promote the avoidance of receivables in their program design
and delivery;
- identify in advance the types of goods, services, use of
facilities, rights, and privileges that they may provide on
credit;
- have a plan that includes receivables management practices
and a risk assessment of their receivables portfolio;
- classify, record and report accurately and promptly all
receivables transactions in accordance with government accounting
and financial reporting standards;
- sustain efficient and effective collection practices and
systems in accordance with this policy’s procedural
requirement on fair treatment of debtors;
- determine the classes of payments that they will make
available to other departments for set-off; and
- take action on a timely basis with respect to any write-off,
remission, forgiveness, or waiver of debts in accordance with
relevant regulations, Treasury Board policies and guidelines when
they are not settled in full.
6.2 Departments and agent Crown corporations must:
- upon request and in accordance with this policy’s
procedural requirements on information sharing, share debtor
information [as described in Section 7.2(a)] with other
departments and corporations to enhance government-wide accounts
receivable collection efforts.
7.1 Departments are to:
- require, to the extent possible, payment in advance, or at
the same time as goods and services are provided.
- establish, through a departmental credit policy, items such
as the following:
- the credit assessment process;
- the threshold for minimum value of credit sales;
- acceptable levels of credit risks;
- terms of credit;
- terms of payment;
- the information necessary to extend the credit; and
- the point at which, unless precluded by statute, the
department may not provide goods, services, use of facilities,
rights, and privileges because of unpaid debts to the Crown.
- seek security for debts due to the Crown when it is good
business practice to do so, in accordance with the Security
for Debts Due to her Majesty Regulations and
TB Circular 1989-2.
- prepare a receivables management plan that includes, but is
not limited to, the following:
- the evaluation of risks associated with each major component
in the portfolio;
- the materiality of the impact of any potential loss;
- strategy for managing the receivables portfolio;
- monitoring and control practices; and
- results-based management approaches.
- recognize in departmental receivables management systems the
types of debts described in Appendix A or any other amounts that
are debts due to the Crown.
- take appropriate, timely and cost-effective collection
actions that will normally be progressive and usually include the
steps outlined in Appendix B.
- incorporate into their business practices, the following
principles on fair treatment:
- debtors are informed of their obligations under applicable
Acts and Regulations and advised of any existing administrative
review or appeal processes that provide relief and/or
redress;
- applicable Acts, Regulations or policies are applied
consistently towards all debtors;
- any information provided to debtors is accurate and
understandable;
- the financial situation and any other special circumstances
regarding a debtor are considered when collecting a debt;
and
- service expectations are openly communicated to debtors.
7.2 Departments and agent Crown corporations must comply with
the following requirements on sharing information:
- Any public officer or agent of Her Majesty, including agent
Crown corporations, upon the request of a department or agent
Crown corporation, shall provide that department or corporation
with the following information concerning a person that has a
debt due to Her Majesty:
- the person’s last known address and telephone
number;
- the name and address of the person’s last known
employer; and
- any payment coming due to the person.
To limit unnecessary disclosure of the three information
elements identified above, only the information that is necessary
to comply with the purpose of the request is to be provided.
Therefore, for requests concerning attempts to locate a person,
only the first and second elements of information are to be
provided. When a request concerns use of set-off authority, all
three of the above elements of information may be necessary, and
to the extent possible, are to be provided to the requestor.
Federal institutions that are subject to the Privacy
Act or the Personal Information Protection and Electronic
Documents Act must also comply with their obligations under
these Acts. Please refer to Appendix B.7 for the procedural
requirements concerning the sharing of personal information.
- The information must only be required to locate the person in
order to collect the person’s debt or to set-off the debt
against any sum of money that may be due or payable by Her
Majesty in right of Canada.
- Any information provided in response to the request must be
obtained from any account, return, record, statement, document or
report pertaining to the person and not from any other person
such as a relative or a spouse and must not be used for any other
purpose.
- This requirement was established by Treasury Board pursuant
to paragraph 7(1)(c) and subsection 9(3) of the Financial
Administration Act. Advice should be sought from the
organizations legal counsel to confirm the application of this
policy in light of special program legislation providing for
confidentiality of certain information.
- Departments and agent Crown corporations are to require
assurance from the department requesting the information
specified in item 7.2(a) of this document that it will be
protected from disclosure in the manner consistent with
requirements of the program under which it was collected.
Departments are to:
- Establish a framework of internal controls for the
administration of accounts receivable. The principles for this
framework include, but are not limited to, the following:
- the appropriate division of duties related to credit
granting, collections, maintenance of accounting records, and
handling and reconciling of money;
- the provision of complete audit trails to track all claims
from the transaction that gave rise to the debt to its final
settlement;
- the establishment of monitoring and results measurement
mechanisms; and
- the preparation and distribution of periodic management
reports on the financial and non-financial activities of the
portfolio.
- Accept appropriate forms of payment, as supported by the
Receiver General, for the settlement of accounts receivable.
- Record all receipts of monies as outlined in the Policy on
Recording Receipts of Money.
- Maintain systems and controls for receivables management as
outlined in the Policy on Financial Systems and
Controls.
- Estimate the allowance for doubtful accounts in accordance
with the information outlined in the Policy on Allowances for
Valuation of Assets and Liabilities.
- Establish procedures to ensure that once an account owing has
been recorded in the departmental accounts, it is not removed
from these accounts until the department has received full
payment or has properly authorized a remission or other
forgiveness, a write-off, or a cancellation. When it becomes
known in the future – after an account has been
written-off, but not extinguished – that the debtor’s
financial position has improved and the debtor is capable of
paying the debt, the account should be reinstated and
collected.
- In accordance with the Policy on Internal Audit,
develop internal audit plans that include provision for the
review of internal management policies, practices and controls of
the accounts receivable program. Terms of reference for audits
should address whether the accounts receivable are managed in
accordance with this policy and the effectiveness of the
collection process.
- Comply with Appendix B of this policy for the collection of
delinquent loans and loan guarantees as outlined in the Policy
on Loans.
The Treasury Board of Canada Secretariat will monitor the
effectiveness of this policy by noting departmental internal
audit and program evaluation reports and conducting reviews where
warranted. The policy will be reviewed in five years time.
10.1 Authority
This policy is issued pursuant to sections 7(1)(c) and 9(3) of
the Financial Administration Act.
Note:
This reference section is an integral component of this
policy. In addition to the requirements addressed in this policy,
the references identify other Acts, Regulations, policies and
publications that shall be followed in the management of
receivables.
10.2 Relevant legislation
Financial Administration Act
http://laws.justice.gc.ca/en/F-11/index.html
Privacy Act
http://laws.justice.gc.ca/en/p-21/93445.html
Personal Information Protection and Electronic Documents
Act
http://laws.justice.gc.ca/en/p-8.6/91352.html
10.3 Relevant regulations
http://www.tbs-sct.gc.ca/fin/common/c_regs_e.asp
Receipt and Deposit of Public Money Regulations,
1997 – issued pursuant to section 17 of the
Financial Administration Act
Interest and Administrative Charges Regulations,
1996 – issued pursuant to section 155.1(6) of the
Financial Administration Act
Debt Write-off Regulations, 1994 – issued
pursuant to section 25(1) of the Financial Administration
Act
Security for Debts Due to Her Majesty Regulations,
1987 – issued pursuant to section 156 of the
Financial Administration Act
10.4 Treasury Board policies
http://www.tbs-sct.gc.ca/common/policies-politiques_e.asp
Interdepartmental Settlements Policy
Policy on Allowances for the Valuation of Assets and
Liabilities
Policy on Charging Interest on Overdue Accounts
Policy on Classification and Coding of Financial
Transactions
Policy on Deletion of Debts Due to the Crown (under
revision)
Policy on Deposits
Policy on Evaluation
Policy on Financial Systems and Controls
Policy on Internal Audit
Policy on Loans
Policy on Recording Receipts of Money
Policy on Recovery of Amounts Due to the Crown (from
employees)
Policy on Statutory Financial Reporting
Policy on Privacy and Data Protection (which includes the
Policy on the Use of the Social Insurance Number and the Policy
on Data Matching)
Government Security Policy
10.5 Treasury Board of Canada Secretariat publications
http://publiservice.tbs-sct.gc.ca/fin/common/c_main_e.asp
Chart of Accounts
Accounting Manual
TB Circular No. 1989-2, "Policy Related to the Regulations
Governing Security for Debts Due to Her Majesty"
TB Circular No. 1987-18, "Policy on Accepting Credit Cards
as Means of Payment for Goods and Services Provided by the
Government"
10.6 Other publications
Public Works and Government Services Canada Public Accounts
Instruction Manual
http://publiservice.pwgsc.gc.ca/rg/text/oldrg-e.html
Receiver General Directives and other Bulletins
http://publiservice.pwgsc.gc.ca/rg/text/recgen-e.html
Practitioner’s Guide to Management of Receivables in
the Federal Government
Please direct enquiries about this policy to your departmental
headquarters. For interpretation of this policy, departmental
headquarters should contact:
Financial Management Policy Division
Comptrollership Branch
Treasury Board of Canada Secretariat
Ottawa, Ontario
K1A 0R5
Telephone: (613) 957-7233
Facsimile: (613) 952-9613
Appendix A - Types of debts
and other claims to be included in the departmental receivables
management systems
This Appendix identifies types of debts managed by departments
that may need to be recognized and administered in the
department’s receivables management system. Not all of
these debts will appear in the government’s consolidated
financial statements, although they may be reported in
departmental reports. Examples of accounts that may not appear in
the government’s financial statements include debts between
federal government departments and some disbursements made under
repayable contribution agreements. For repayable contributions,
the disbursed amount may not result in a receivable if the
condition that triggers repayment is not met.
These debts include, but are not limited to, the
following:
- amounts due from taxation (including tax assessments), sales
of goods, provision of services, use of facilities, and statutory
or other obligations, including dividends and transfers of
profits and surpluses arising from the government’s
financial interest in outside organizations;
- overpayments or erroneous payments of salaries, allowances,
supplier accounts, grants, contributions, and benefits;
- disputed claims, at their estimated value;
- gross amounts assigned to third parties for collection;
- amounts due from repayable contributions when the conditions
that make the contribution repayable have been met;(1)
- amounts due from defaulted loans as a consequence of the
department honouring a loan guarantee;
- amounts due from penalties, fines and court awards;
- interest, penalties, or administrative charges on the amounts
and items specified above; and
- amounts due from other federal government departments.(2)
Appendix B - Procedural
requirements for collections
Departments will use whatever collection method is
appropriate and cost-effective in each circumstance. Collection
actions will usually be based on the methods and information
outlined below.
B.1 Common routine collection actions
- confirming the validity of the debt due to the Crown
- establishing the location of the debtor including obtaining
location information from other departments
- providing timely statements or notices
- communicating with the debtor to collect payment, to
establish a repayment schedule, or to renegotiate an existing
repayment schedule
B.2 More advanced collection actions
B.2.1 Voluntary deduction or assignment
Departments may act on a debtor’s voluntary
authorization to deduct the amount of a debt from payments the
Crown owes the debtor. For voluntary transactions, it is not
required to seek ministerial approvals that are required before
processing a set-off. Voluntary assignments to the Crown of
payments due to the debtor by a third party should be sent to
departmental legal advisors for review.
B.2.2 Present Value Payment
Departments may collect an account by accepting payment that
represents the present value of an established repayment schedule
or an amount due at a future date as payment-in-full. In
calculating the amount of a present-value payment, departments
must determine and apply an appropriate discount rate. This
discount rate should approximate the cost of borrowing to the
federal government and the risk factors associated with the
account. The Debt Write-off Regulations provide the
authority to write-off the balance that remains after payment has
been accepted as full settlement of the debt.
B.2.3 Security
The policy related to the Security for Debts Due to Her
Majesty Regulations is intended to encourage departments to
require security to protect the payment of amounts owing to the
Crown. Neither the Regulations nor the policy oblige a debtor to
provide security. Departments must decide on a program basis,
when requiring an amount to be paid to the Crown, whether
security could be required in order to facilitate the collection
of debt.
Departments should assess when it is appropriate in their
collection process to realize the securities provided to the
Crown.
B.2.4 Set-off
Section 155(1) of the Financial Administration Act
provides the general authority for the set-off of payments for
debt collection when specific program legislation does not
override this general authority.
Before initiating a set-off, every possible attempt should be
made to advise the debtor that set-off action is being
contemplated. If departments decide to pursue set-off against
debtors that have already made satisfactory repayment
arrangements, then debtors should be advised of this process when
establishing the repayment arrangements with the department.
Departments must obtain the consent of the paying
department’s Minister (or his or her delegate) to the
set-off except in cases of set-offs to recover overpayments of
salaries, wages, outstanding travel advances and
employment-related allowances of federal public service
employees. Both the department responsible for collecting the
debt and the department responsible for making the payment should
agree to the collection rate. Set-offs against contractual
payments are normally for the full amount.
Departments should make every effort to avoid creating undue
hardship when initiating set-offs against government
payments.
B.2.5 Private-sector collection agencies (PCAs)
The following are the procedural requirements for using
private-sector collection agencies and paying for their fees:
- Departments may use the services of private-sector collection
agencies (PCAs) to recover debts owed to the Crown when it is
effective and efficient to do so.
- Departments will utilize PCAs from the National Master
Standing Offer established by Public Works and Government
Services Canada.
- The following debts must not be transmitted to PCAs for
collection:
- debts owed by other government departments, government
agencies, and governmental organizations such as the United
Nations or foreign governments; and
- debts under appeal or in litigation.
- Departments shall cease active collection on accounts sent to
PCAs. Processing an account for set-off is not considered to be
an active collection measure.
- Only commissions payable for the successful collection of
debts due to the Crown covered by section 17.1 of the
Financial Administration Act can be charged to the
statutory authority.
- Expenses for services, not provided through the National
Master Standing Offer, such as those for tracing, credit
assessment, and cheque verification must be charged to
departmental operating votes and not to the statutory
authority.
- Departments must report their expenditures under this
statutory authority in the Public Accounts for each fiscal year
and in the final Supplementary Estimates of the applicable fiscal
year as required by the Treasury Board.
B.3 Compromise settlement
A compromise settlement involves accepting partial payment as
fully satisfying a debt and releasing the debtor from any
obligation to pay the balance. The authority to accept a
compromise settlement is held by the Minister of Justice, who
normally acts on the advice and recommendation of the appropriate
Minister.
Compromise settlements are normally considered in a process
that is incidental to litigation. The necessary condition for
accepting a compromise settlement is the determination that the
cost of litigation would be more than the expected recoveries or,
when the debtor is on the verge of bankruptcy, that the
settlement exceeds what the departments would receive if the
debtor went bankrupt. It may be determined that a compromise
settlement should be accepted either before or after the
commencement of legal proceedings.
For settlements based on compassionate grounds or public
interest considerations, a forgiveness or remission authority is
required. Departments must write off the difference between the
original debt and the amount of the compromise settlement in
accordance with the Debt Write-off Regulations and the
Policy on Deletion of Debts Due to the Crown.
B.4 Garnishment
There is a need to differentiate between administrative
garnishment initiated by departments under authority of their
program legislation and garnishment proceedings issued under
provincial law. In the former, the Department of Justice Canada
plays no role, except in circumstances when departments consider
it appropriate. In the latter, the departmental legal counsel
must be consulted.
B.5 Use of departmental legal counsel
Unless departmental legislation gives specific authority, all
cases involving legal proceedings must be referred to the
Department of Justice Canada.
Departmental legal services should be consulted to determine
any other assistance they may provide in the collection of debts
to the Crown.
B.6 Limitation period
Unless the limitation period for collections of debts is
specified in program legislation, the applicable provincial
statute may apply to federal debts. As the collection (including
set-off) of Crown debts is not always bound by provincial
legislation, advice should be sought from departmental legal
counsel to confirm the applicable limitation period.
B.7 Sharing of Information
The authorities for sharing of information to locate debtors
for the purposes of collecting amounts due to the Crown are as
follows:
- Section 7(1)(c) of the Financial Administration Act
provides Treasury Board with the power to make directions on
receivables applicable to departments.
- Section 9(3) of the Financial Administration Act
addresses the sharing of information for locating and set-off
purposes.
- Section 8(2)(b) of the Privacy Act addresses the
disclosing of personal information for any purpose in accordance
with any Act of Parliament or any regulation made thereunder that
authorizes its disclosure.
- Section 8(2)(l) of the Privacy Act addresses the
disclosing of personal information for the purpose of locating an
individual to collect a debt due to the Crown.
TB Policies regarding the administration of the Privacy Act,
including the Privacy and Data Protection Policy, which includes
the Policy on Data Matching and the Policy on the Use of the
Social Insurance Number (SIN) must be observed.
To ensure compliance with the provisions of the Privacy
Act, parties shall establish bilateral agreements governing
the exchange of personal information identified in section 6.2 of
this policy regarding policy requirements on sharing debtor
information. The purpose of the agreements is to set out the
parameters of the planned information exchange in accordance with
sections 4 through 8 of the Privacy Act, which refer to
the collection, use, disclosure, retention, disposal and
protection of personal information.
(1) The repayable amount of an
unconditionally repayable contribution will be recognized at the
time the agreement is signed. Payments due from a conditionally
repayable contribution will be recognized when the conditions
have been met. [Return]
(2) Payment of these accounts is in
accordance with the Interdepartmental Settlements Policy.
[Return]
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