6300 Goods and Services
Tax (GST)
The deputy head of the department has been delegated authority to add,
delete from or make any other amendments to the "Government of Canada Reporting
Entities Register" for the purposes of sub-section 239(1) of the Excise Tax
Act, as may be appropriate with respect to that portion of the Public Service for
which the deputy head is responsible. Consequently, a revolving fund unit may be
established as a separate GST reporting entity within the department.
For information on applying GST, consult the Policy on the Application of the Goods
and Services Tax and the Harmonized Sales Tax in the Departments and Agencies of the
Government of Canada.
The GST is assigned a source object but not a standard object in accordance with the
government's chart of accounts coding structure. Record the GST portion of each
transaction involving the purchase or the sale of a taxable good or service, respectively,
as an account payable or an account receivable. Record payment of GST on a separate line
of coding on each payment requisition. Do not include GST as part of the liability set up
under PAYE.
The management of a revolving fund will choose one of the following two methods to
record and report GST:
- record the GST expenditures and revenues to the department's accounts directly;
or
- maintain unit records and audit trails for GST expenditures and revenues and
journalize these GST expenditures and revenues to the department's accounts monthly.
6301 Record the GST expenditures and revenues to the
department's accounts directly
Expenditure
When an invoice for a taxable transaction is paid to a GST registrant, the GST
portion should be coded to the Refundable Advance Account (RAA) in the responsible
department's general ledger. The expense exclusive of the GST will be recorded to the
applicable expense account.
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Revolving fund
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Responsible department
|
Receiver General
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Description
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Statement of operations
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Balance sheet
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Central Accounts
|
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DR (CR)
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DR (CR)
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DR (CR)
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DR (CR)
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Expenses
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$100
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|
|
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Accounts payable
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($100)
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|
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To record an account payable for a taxable
good or service rendered to the revolving fund unit.
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Accounts payable
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$100
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|
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ANCAFA
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($100)
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|
|
|
|
|
|
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CRF
|
|
|
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($107)
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Revolving fund expenditure
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$100
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GST Refundable Advance Account
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$7
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To record the payment of the account payable.
The GST applicable to the purchase of a taxable good or service is recorded directly to
the department's account.
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Revenue
The Receiver General has assigned each department a central account, which is
used to record the GST revenue collected directly on taxable sales. The responsible
department reports all of its GST revenues, including those of the revolving fund, to
Revenue Canada each month. At the end of a fiscal year, the Receiver General offsets
centrally the GST Expenditure Accounts (Refundable Advance Account) to the Revenue Canada
GST Revenue Accounts.
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Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
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Balance sheet
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Central Accounts
|
|
DR (CR)
|
DR (CR)
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DR (CR)
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DR (CR)
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Accounts receivable
|
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$200
|
|
|
Revenues
|
($200)
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|
|
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To record an account receivable relating to
the sale of a taxable good or service rendered by the revolving fund unit.
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Accounts receivable
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($200)
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ANCAFA
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$200
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|
|
|
|
|
|
|
CRF
|
|
|
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$214
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Revolving fund expenditure
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($200)
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GST revenue
|
|
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($14)
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To record the collection of the account
receivable. The GST applicable to the sale of good or service is recorded directly in the
department's account.
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6302 Maintain records and audit trails for GST expenditures
and revenues and journalize GST expenditures and revenues to the department's
accounts monthly
Expenditure
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Revolving fund
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Responsible department
|
Receiver General
|
Description
|
Statement of operations
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Balance sheet
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Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
Expenses
|
$100
|
|
|
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Accounts receivable— GST expense
|
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$7
|
|
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Accounts payable
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($107)
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|
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To record an account payable and the GST
portion relating to the purchase of a taxable good or service rendered to the revolving
fund unit.
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Accounts payable
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$107
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|
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ANCAFA
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|
($107)
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|
|
|
|
|
|
|
CRF
|
|
|
|
($107)
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Revolving fund expenditure
|
|
|
$100
|
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GST Refundable Advance Account
|
|
|
$7
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|
To record the payment of the account payable.
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Accounts receivables— GST expenses
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($7)
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|
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ANCAFA Contributed capital Accumulated surplus
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$7
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|
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To record a journal voucher to transfer the
amount of GST charged to the authority of the revolving fund to the GST Refundable Advance
Account (asset account) of the responsible department.
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Revenue
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Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
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Balance sheet
|
Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
Accounts receivable
|
|
$214
|
|
|
GST payable
|
|
($14)
|
|
|
Revenues
|
($200)
|
|
|
|
To record an account receivable and the GST
portion relating to the sale of a taxable good or service rendered by the revolving fund
unit.
|
Accounts receivable
|
|
($214)
|
|
|
ANCAFA
|
|
$214
|
|
|
|
|
|
|
|
CRF
|
|
|
|
$214
|
Revolving fund expenditure
|
|
|
($200)
|
|
GST revenue
|
|
|
($14)
|
|
To record the collection of the account
receivable and of the GST revenue portion.
|
|
Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
|
Balance sheet
|
Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
ANCAFA
|
|
($14)
|
|
|
GST payable
|
|
$14
|
|
|
To record a journal voucher that will transfer
the GST remittance from the authority of the revolving fund to the GST revenue account of
the responsible department.
|
6320 Common service
costs
Common service costs may include direct costs (e.g. accommodation, materials and
supplies) or indirect costs (including overhead expenses) charged by either the host
department or other government department(s). These costs should be included as part of
the operating costs of the revolving fund. The governing principle is that revolving funds
will include in their costs of operations the same type of costs that similar operations
in the private sector incur.
Each year, fund managers should review any agreements or memoranda of understanding
relating to the allocation of common service costs. Closely analyze the overhead cost of
common services. Overhead costs should not include the costs of the structural overhead of
departments (such as the minister's office and deputy minister's office)
which serves a broad public purpose. Such costs should instead be paid out of the
departmental appropriation. To the extent that a revolving fund uses or shares the costs
of departmental overhead, it should only bear that portion of the costs directly
attributable to the goods or services being provided (e.g. accounting services,
materiel and contract services, personnel services).
As a revolving fund is normally expected to recover the full cost of operations, common
service costs must form part of the cost structure used to determine user fees for goods
and services.
6330 Subsidies
A subsidy is funding received or provided by a revolving fund that does not
require the recipient to do or provide anything in return. Fully disclose each subsidy
received in the financial statements and state its source of funding.
Examples of subsidies include the following:
- mandated services that are provided at less than full cost recovery, with non-users
of the service (usually the department) making up the difference; and
- payments made by the department to offset losses in revenues, such as municipal grant
equivalents.
Since subsidies affect the financial position and costing structures of a revolving
fund, appropriate disclosure is necessary to help interested parties evaluate the impact
of this assistance on the viability of the fund's operations. The disclosure should
contain the following information:
- the amount of the subsidy; and
- the relevant terms and conditions of the subsidy.
Record each subsidy in the books of the revolving fund and disclose particulars it in
the operating statements as revenue. Explain details of these subsidies in a note to the
financial statements.
6340 Refunds of revenues
collected in previous year
Situations may arise where revenue received in a previous year must be
refunded. Record such refunds as reductions of revenue in the current year.
However, if the information on revenue received in the current year becomes available
before the revolving fund's year-end financial statements are finalized, you would
make an accrual entry to record an account payable in the current year and reduce the
revenue reported for the year accordingly.
|
Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
|
Balance sheet
|
Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
Revenue (revenue source same as original)
|
$1,000
|
|
|
|
ANCAFA
|
|
($1,000)
|
|
|
|
|
|
|
|
Revolving fund expenditure
|
|
|
$1,000
|
|
CRF
|
|
|
|
($1,000)
|
To record the refunds of the revenues
collected in previous year(s) adjusted against the original revenue source.
|
6380 Accounting changes
and prior period adjustments
Situations occasionally arise where the financial statements include gains
or losses that pertain to the income or expenses of prior periods.
Prior period financial results should be adjusted only to reflect a change in an
accounting policy applied retroactively or to correct a fundamental error (CICA
Handbook, Chapter 1506 Accounting Changes).
To account for a change in an accounting policy, the adjustment is based on the date
that an item was first recognized or accepted in the financial statements, not the date
that the item was first discovered. For example, an item recognized in the current fiscal
year beginning April 1, 1996 or after would be treated as a current period item and
not as a prior period adjustment.
Gains or losses that qualify as prior period adjustments happen infrequently. For
comparative purposes, prior periods are to be restated as necessary to reflect the
retroactive application of a prior period adjustment.
The current period statements, should:
- exclude any prior period adjustments from the determination of net income for the
current period; and
- describe the prior period adjustment and the effect the correction has on the current
period as well as prior period statements, and a note that the financial statements of
prior periods have been restated.
Depending on the nature of the adjustment, it may be appropriate to disclose the effect
of this correction on significant items such as net income and working capital.
In the case of a historical summary of income for a number of periods, prior period
adjustments should be applied retroactively to correspond to the appropriate periods.
(See the Public Accounts Instructions Manual (PAIM) for more information on the
presentation of prior period adjustments.)
6390 Year-end
adjustments for refunds of prior year expenditures and Payable At Year End (PAYE)
6391 Refunds of prior year expenditures
In the government's policy, moneys received on April 1 and on or before
the cut-off date for period 13 must be credited to the old fiscal year if they
comprise receipts covering refunds of old-year budgetary expenditures. These cash refunds
are known as category "B" receipts in the Receiver General's year-end
directive. If it does not represent a recovery of a prior period expenditure than the
revolving fund must record cash received after April 1 as a new year transaction.
6392 PAYE
Revolving funds will account for financial transactions in accordance with
the current PAYE policy. Credit or debit any difference between a settled PAYE and the
PAYE amount accrued to the revolving fund's expenditure account.
In the revolving fund's March 31 financial statements, credit the refund to new
year expenses. The timing of the item will affect the reconciliation between the ANCAFA
and the revolving fund's expenditure vote.
6400 Bid deposits
Bid deposits are security deposits received from contractors following a
request for tender and are deposited as received. They may be represented by a certified
cheque or government-guaranteed bonds receipt of which must be accounted for as assets of
the department and the revolving fund.
Revolving funds may also tender and bid to obtain contracts. Bids made to obtain a
contract outside the government must be made in accordance with the Financial
Administration Act.
Responsible departments monitor these deposits in order to provide data for the Public
Accounts of Canada.
6401 Bid deposit received from tender
|
Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
|
Balance sheet
|
Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
CRF
|
|
|
|
$1,000
|
Bid deposit liability
|
|
|
($1,000)
|
|
|
|
|
|
|
ANCAFA
|
|
$1,000
|
|
|
Bid liabilities
|
|
($1,000)
|
|
|
To record the bid liability to company XYZ for
bid received on project "A."
|
Bid deposit liability
|
|
|
$1,000
|
|
CRF
|
|
|
|
($1,000)
|
|
|
|
|
|
Bid liabilities
|
|
$1,000
|
|
|
ANCAFA
|
|
($1,000)
|
|
|
To record the refund of bid to company XYZ.
|
6402 Bid made to a tender request
|
Revolving fund
|
Responsible department
|
Receiver General
|
Description
|
Statement of operations
|
Balance sheet
|
Central Accounts
|
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
DR (CR)
|
Bid deposit
|
|
|
1,000
|
|
CRF
|
|
|
|
($1,000)
|
|
|
|
|
|
Bid deposit asset
|
|
$1,000
|
|
|
ANCAFA
|
|
($1,000)
|
|
|
To record the bid made to company ABC for
tender request on project "Z."
|
CRF
|
|
|
|
$1,000
|
Bid deposit
|
|
|
($1,000)
|
|
|
|
|
|
|
ANCAFA
|
|
$1,000
|
|
|
Bid deposit asset
|
|
($1,000)
|
|
|
To record the refund of bid made to company
ABC on project "Z." (If the revolving fund was successful in the ABC tender bid,
the bid adjustment will be to the revolving fund's expenditure vote.)
|
7000 Specialized areas
There are topics that require consideration relating to the operating and reporting
practices for revolving funds and these are included in this section.
7010 Cost allocation
method
Normally costs are recorded on a direct basis (e.g. supplies, inventory
items, employee expenses), except for assets that are amortized. There are many unique
methods for arriving at costs (refer to the Treasury Board Guide to the Costing of
Outputs). Whichever method is used (e.g. activity-based costing, standard costs),
explain why the method was selected as a note to the financial statements. Overhead cost
allocation requires unique handling and is explained below.
"Direct costs" are costs that would only be incurred to produce or provide
the good or service in question and can be precisely attributable to that good or service.
Typical direct costs include the following:
- direct labour (salary and all benefits of those working directly to provide a service
or produce a good);
- direct material costs (material and supplies used to provide a service or produce a
good); and
- direct operating costs (e.g. accommodation, professional services, travel) used to
deliver the goods or services.
"Indirect costs" are the overhead costs incurred at least in part, to deliver
the goods or services in question. Indirect costs are allocated to the services they
support. However, the costs of central agencies are excluded from the calculation of
indirect costs. Indirect, or overhead, costs typically include the following:
- a portion of program support such as supervisory and management staff;
- a portion of corporate-wide functions such as personnel, finance, informatics, legal
services, audit and communications;
- a portion of departmental costs such as accommodations and utilities. (such costs may
have direct and indirect lines); and,
- a portion of departmental senior management costs.
When the revolving fund has its own corporate structure and does not receive services
from the responsible department, the responsible department will not recover a charge for
corporate services. When the revolving fund operates within the responsible department
infrastructure, the department will fully recover administrative, management and other
costs incurred on behalf of the revolving fund on a prorata basis. Examples of these
recoverable corporate overhead costs include the following:
- administration services costs (e.g. finance, personnel, materiel, real property); and
- management and support services costs (e.g. security, travel, corporate planning,
information management, audit and evaluation).
Representatives of the responsible department and the revolving fund need to establish
a corporate cost allocation model (CCAM) that best represents the overhead costs to be
charged to the revolving fund by the responsible department.
Corporate overhead costs should be paid to the responsible department at least
quarterly. The responsible department may choose to bill the revolving fund unit based on
budgeted expenditures during the year. Any difference between the amounts billed on a
budgetary basis and the actual charge will be adjusted when the actual charges are
determined.
7020 Accounting system
The revolving fund unit will require an accounting system that can offer
typical business entity functionality (e.g. inventory and capital asset management,
accounts receivable, full accrual accounting, cost accounting). The activities financed by
the revolving fund unit must be accounted for separately from the activities financed by
other appropriations.
Since the revolving fund unit must recover its full or almost full costs, the details
of its departmental overhead charges will be important. These costs represent expenses
under the fund. As well, they affect the revolving fund unit drawdown authority and,
potentially, the amount of interest payable. Include all overhead charges incurred by the
revolving fund (e.g. costs associated with inventory management activities,
contracting, personnel and accommodation) in the fund's accounting system.
As a minimum, the accounting system must provide for the following:
- the preparation of both periodic and year-end financial statements on a full accrual
and cost basis of accounting in accordance with GAAP; and,
- the preparation and submission of both periodic and year-end data to the Receiver
General on a modified accrual basis of accounting in accordance with Receiver General
directives to meet all accounting requirements for the revolving fund's budgetary
appropriation.
The accrual method of accounting records a number of non-cash transactions, such as
termination benefits and the amortization, gain or loss on the disposal of capital assets.
Revolving funds must also schedule their cash requirements out of the CRF. As a result,
the accrual records must be reconcilable to the records kept on a modified cash basis of
accounting for the purpose of the Main Estimates and the Public Accounts. The financial
systems of the revolving fund should be well coordinated with those of its responsible
department.
7030 Public accounts
The revolving fund unit must submit its financial statements to the Receiver
General (RG) of Canada annually, as required in the PAIM.
The PAIM describes the formats, contents and due dates of the reports that must be
prepared. As well, other financial information required by the PAIM will be submitted
through various departmental reporting channels.
The financial statements of revolving funds are published annually in Section 1 of
Volume II (Part II) of the Public Accounts of Canada.
7040 Audit
Revolving funds were subject to external audits until approximately 1984. At
that time, the Auditor General of Canada stated that he did not need to audit revolving
fund statements since he could do his review by applying statistical sampling techniques
against transactional activity at the central account level. In any event, his audit
engagement was with the Government of Canada and relative to its financial statements, not
the specific results and financial position of revolving funds.
Departments should however, schedule annual audits on the financial statements of their
revolving fund(s). This action provides the departmental management team with supporting
information on revolving fund operations to help them prepare the annual departmental
letter of representation sent to the Deputy Receiver General for Canada and the Auditor
General of Canada. The audit will provide support for the various representations that the
department must make on its financial and other activities. Eventually, this information
forms part of the Public Accounts of Canada. Accordingly, a number of departments have
opted to conduct internal or external audits regularly on their revolving funds.
In addition to an audit of the revolving fund's financial statements, financial
attest audits should be done to obtain observations on internal control weaknesses,
together with recommendations for improvement.
Some of the criteria used to decide whether to use internal or external auditors
include the following:
- availability of qualified internal audit resources;
- size and complexity of the revolving fund; and
- the need for arm's length verification
The costs of conducting an audit are part of the operating costs of the revolving fund.
If the financial statements of the revolving fund have been audited, then the
auditor's complete opinion statement must be included with submission material
forwarded to the Public accounts coordinating group.
Audits must review the revolving funds compliance to relevant Treasury Board policies
and Receiver General directives covering the financial accounting and reporting practices
of revolving funds, which govern disclosure and presentation in the Public Accounts of
Canada.
The following model outlines a standard set of terms of reference for an audit
engagement which was favourably reviewed by the Auditor General in a chapter of his
November 1995 annual report:
- audit title—indicates the name of the fund and the fiscal year;
- summary of requirements—includes instructions to complete the audit and
provide opinion; and
- background information—describes the operation and function of the fund
(this may be especially useful for external auditors).
7041 Audit objectives
- The auditor should conduct a financial audit and express an opinion on
whether the financial statements present fairly, in all material respects, the financial
position, results of operations and changes in financial position of the revolving fund in
accordance with the basis of accounting described in the note to the financial statements
and with the policies applicable to a revolving fund.
- Present a management letter containing observations made during the attest audit
describing any observances of weaknesses in internal control and system processes, along
with recommendations for improvements.
- Assess compliance with GAAP, specific Treasury Board policies and Receiver General
directives (specify selected policies and directives).
7042 Scope
Auditors are expected to do the following:
- review related central agency policies and internal instructions governing financial
statements and reporting by a revolving fund for inclusion in the Public Accounts;
- review and evaluate the financial systems and internal controls in order to be able
to express an audit opinion on the financial statements prepared in accordance with GAAP;
- verify the accuracy, completeness, valuation and presentation of assets, liabilities,
income and other financial figures in accordance with generally accepted auditing
standards;
- review the adequacy of financial statement disclosures including, such as, the
entity's complete or segmented financial position, in order to assess the revolving
funds continued viability; and
- review the established management control framework in relation to any policy or
directives for which compliance is to be assessed.
7043 Role of the Auditor General
The role of the Auditor General is outlined in the Auditor General Act.
The following is a brief summary of the verification and reporting activities that the
Auditor General's representatives may conduct on any revolving fund:
- verify the legislative authority and mandate of the revolving fund;
- review the structure, activities, and purposes and objectives of the revolving fund;
- ensure that an audit (internal or external) was conducted and review the findings;
- ensure that the revolving fund maintains essential and complete records;
- ensure that the revolving fund has spent money with due regard for economy and
efficiency;
- ensure that procedures are established to measure and report on the effectiveness of
the revolving fund;
- ensure that there are proper controls to safeguard and control public funds and that
these funds have been spent only where authorized; and
- conduct the review by statistically sampling any transactions deemed necessary.
7050 Winding up a
revolving fund
When the Treasury Board and the department responsible for a revolving
fund's operation decide to cease its operations, it is necessary to rescind the
authority of the revolving fund as of a specific date.
The Treasury Board will approve the decision to close a revolving fund. The decision
will identify a closing date in the fiscal year immediately following the fiscal year in
which the operations ceased.
When authority to operate a revolving fund has been obtained from Parliament pursuant
to the Revolving Funds Act, an Appropriation Act or other legislation,
authority to discontinue operations of the fund must be obtained through an Appropriation
Act or an amendment to other legislation.
The management of the revolving fund unit are required to provide the financial
statements as of the closing date of the revolving fund unit.
The responsible department will be the first source of funds for any costs associated
with winding up the revolving fund unit.
A submission to the Treasury Board seeking approval to discontinue revolving fund
operations should disclose the following:
- the alternatives available, with a recommendation to continue the services provided,
if appropriate; and
- information and recommendations necessary for the orderly closing out of the fund in
particular, for the disposition of the assets of the fund.
The required vote wording to terminate a revolving fund should reflect the following:
Vote No. — Name of the revolving fund — to terminate the operations
of the (name of the revolving fund) and to repeal (name of ministry) Vote no. X, Appropriation
Act No. X, 19XX-XX as at March 31, 19XX; or,
Vote No. — Name of Revolving Fund — In accordance with section 12
of the Revolving Funds Act, 1985 R.S. c. R-8, to repeal section x of the
said Act, as of March 31, 19XX.
7060 Merger of a revolving
fund
The government, as a "shareholder," of two (or more) revolving
fund entities, may decide to combine the resources, talents and risks of these under one
revolving fund entity.
The term "merger" may be used in the legal form to describe the combination
of two or more revolving fund entities into one single entity. For accounting purposes,
the result will consist of a pooling of interests. Under a pooling-of-interest accounting
concept, the combined revolving fund entity continues to be valued in accordance with
established book values, subject to whatever adjustments may be required to assure a
reasonably uniform application of GAAP.
The pooling-of-interests accounting treatment is supported by a reasoning that no new
basis of accountability is required, since the two (or more) entities are continuing
operations as one entity in a manner similar to the situation which existed in the past.
The presumption is that there has been no purchase or sale of assets, but merely a merging
of two (or more) formerly separate business entities.
Refer to the CICA Handbook, Chapter 1580, Business Combinations for a
complete description of the application of the pooling-of-interests method.
The merger of revolving fund units must be authorized through an Appropriation Act
or through some other legislative change approved by Parliament.
The combined revolving fund entity should reflect the assets and liabilities at the
total book values recorded by the combining revolving fund entities at the time of merger.
To ensure that the combined entities report on a reasonably uniform basis of accounting,
retroactive adjustments may be needed. As well, the financial statements of the combined
revolving fund entity will require a restatement for prior periods.
The ANCAFA of the combined revolving fund entity should of course, be equal to the
equities of the combining entities. As well, the accumulated surplus/deficit and the
contributed capital of the combined revolving fund entity must reflect the consolidation
total accumulated surplus/deficit and contributed capital of the combined entities.
The statement of operations for the period in which the combination occurs and for
prior periods should be reflected on a combined basis.
The method of accounting for the merger of two (or more) revolving fund entities should
be disclosed in the financial statements of the combined entity at the end of in the
accounting period in which the combination took place.
The results of operations are reflected only from the date of the merger. Consequently,
financial statements showing the results of operations as though the entities had combined
at the beginning of the fiscal period will help the reader understand and assess the
financial statements of the entities that are going to merge or have already merged.
The combined revolving fund entity will be responsible for disclosing the information
required by Chapter 1580, Business Combinations of the CICA Handbook.
7070 Control of the
statutory drawdown authority
A statutory appropriation authorizes the revolving fund to make expenditures
for specific purposes. This authority is a non-lapsing authority approved for such amount
and time as provided for in the specific statute.
The Treasury Board manages a small operating reserve which is primarily used as a line
of credit. The Treasury Board functions as a banker and gives the highest priority to
bridge-finance projects with significant productivity payback. The department responsible
for a revolving fund entity functions as a borrower who uses this line of credit (drawdown
on the authority). The management of the revolving fund unit is responsible for repaying
the advances made from this line of credit and with associated interest.
In rare circumstances, the Treasury Board may allocate funds from the operating reserve
to establish a capital asset base.
The deputy head of the revolving fund's host department is responsible for
controlling the statutory drawdown authority. Financial authorities will be delegated to
the management of the revolving fund unit who are responsible for fulfilling statutory
requirements.
Whenever the cash requirements of a revolving fund unit exceed the annual drawdown
authority agreed with the Treasury Board through the ARLU process, the deputy head of the
department responsible for the revolving fund unit will be accountable for providing a
report to the Estimates Division of the Treasury Board Secretariat. This report will be
provided thirty days after the period that shows a use of funds exceeding the estimated
annual drawdown authority and will include the reasons for this situation as well as an
action plan to correct it. The Treasury Board Secretariat may require that a material
shortage in the annual cash requirements be recovered from the departmental appropriation.
7080 Preparation of
Estimates
The Estimates will reflect the starting date for the operation of a
revolving fund following the approval by the Treasury Board. The revolving fund unit must
make estimates to determine a legislative authority limit for spending money out of the
CRF. To reiterate, the Treasury Board has to establish a drawdown authority value. The
full costs of services or individual products must be known and used as a basis for
budgeting and preparing the Main Estimates.
The Estimates Division of the Treasury Board Secretariat issues annual instructions on
how to present revolving funds in the Estimates. These instructions are included in the
Main Estimates call letter sent to the senior full-time financial officer of each
department.
A revolving fund unit may be used to finance programs, activities within programs or
sub-activities. If an entire program is funded through a revolving fund, supplement the
basic program by activities table with another table that shows the operating surplus or
loss of each activity of the program. A footnote to this table will reconcile the overall
surplus or loss to the Estimates' cash requirements and make an appropriate reference
to Part III of the Estimates for further information.
If an activity of a program is entirely financed through a revolving fund, that
activity will be shown on a cash basis (for information purpose) in the program by
activities table. This display will then be footnoted to relate the expected operating
loss or surplus to the Estimates' cash requirements and to make proper reference to
Part III for further information.
When part of an activity is funded through a revolving fund, a footnote to the table
will disclose the expected operating surplus or loss, relate that balance to the
Estimates' cash requirement or make suitable reference to Part III for further
information.
The revolving fund entity must provide adequate financial data annually to the
responsible department. Conversely, the responsible department must provide the revolving
fund unit with appropriate feedback concerning the department's expenses, controls
and other elements.
The Treasury Board Secretariat analyst will review the revolving fund plan and
determine whether there is a projected increase in the use of the drawdown authority (in
which case there would be a charge against the operating reserve) or whether there is a
positive bottom line (in which case there would be a credit to the operating reserve). Any
large in-year increases in the use of the drawdown authority would be included as an
information item in the Final Supplementary Estimates, with a corresponding charge against
the operating reserve. The Treasury Board is concerned about the implications of the
revolving fund business plan for operating reserves.
7090 Performance bonds
A "performance bond" guarantees the performance of work under a
contractual arrangement.
The particulars surrounding the use of performance bonds are covered in the Government
Contracts Regulations and Treasury Board's policies on contracting. The revolving
fund must comply with all appropriate contracting regulations and policies.
Performance bonds are normally required from contractors to ensure that there is money
to pay subcontractors and to complete the job in the event of a default. The Crown
self-insures, as defined in the statutory payment authority in the Crown Liability and
Proceedings Act, so no additional insurance or deposit is required. Therefore,
the Crown should not buy performance bonds.
7100 Year-end
reconciliation
The ANCAFA information presented in the financial statements using the
accrual basis of accounting has to be reconciled with the information based on the
accounting policies and practices of the Government of Canada.. In the Accounts of Canada,
transactions for revolving funds impacting the CRF are reported with departmental
expenditures.
Two reconciliation tables are published with the financial statements in the Public
Accounts. The first reconciliation is titled "Statement of authority provided
(used)" in the current year. The following items make up the main categories involved
in this reconciliation:
- net income (loss) for the year as reported in the statement of operations; and
- adjustments required to reconcile from the accrual basis to the modified accrual
basis of accounting used in the Accounts of Canada, including the following:
- items not requiring the use of funds (cash), such as amortization and provision of
termination benefits;
- net capital acquisitions that are accounted for as expenditures in the Accounts of
Canada;
- reversal of the working capital change; and,
- any other gross sources and uses of funds reported in the statement of change in
financial position (excluding those included above).
The reconciliation at this stage, has been converted to the Government of Canada
accounting basis that is, the net of the revolving fund central account (expenditure),
before year-end adjustments. The following transactions are processed in the Accounts of
Canada, but not in the ANCAFA account, due to different the cut off accounting principles
followed by revolving funds:
- the difference between current year's and previous years' net PAYE charges
against the appropriation account after March 31; and
- the net of amounts credited to the appropriation account after March 31.
A second reconciliation table is also published in the Public Accounts of Canada called
the "Reconciliation of unused authority." This table reconciles the balance in
the ANCAFA account according to the financial statements with the amount of unused
authority reported in the Public Accounts in each ministry summary. The ANCAFA account, as
per the balance sheet, records the net amount of the revolving fund's non-lapsing
authority that has been used. It does not reflect PAYE charges against and amounts
credited to the appropriation account after March 31; however, such charges are included
in the measurement of unused authority.
This reconciliation contains, where applicable, two types of transactions.
- PAYE charges against the appropriation account during the post-year-end period, in
accordance with the Receiver General Directive on PAYE. These include amounts discharged
after March 31 and recorded in the Accounts of Canada in the current reporting year.
- Amounts credited to the appropriation account after March 31, in accordance with
Receiver General directives on year-end procedures and PAYE. These include amounts
received and recorded in the Accounts of Canada by cash receipt, IS receipt,
source 0050 journal vouchers and PAYE source 0042 journal vouchers.
The reconciliation must also report the amounts of authority granted by legislation
(including any increase or decrease approved in subsequent Appropriation Acts) to
ascertain the amount of unused authority to be carried forward to the following year.
Each month, you must do a reconciliation between the revolving fund expenditure account
(central account in the responsible department's books) and the ANCAFA balance. At
year end, this reconciliation will be published in the Public Accounts.
8000 Appendices
8100 Appendix A —
Division of responsibilities and authority established by the Treasury Board
|
Parliament
|
Treasury Board
|
Responsible department
|
Create/dissolve/amend
|
Approve
|
Approve
|
Prepare
|
Organizational tasks – Allocate responsibility – Delegate authority – Devise spending control mechanism
|
|
Approve Approve Approve
|
Prepare Prepare Prepare
|
Directives – Basis of accounting – Disclosure
|
|
Approve Approve
|
Prepare Prepare
|
Appointments – Unit managers
|
|
|
Approve
|
Submissions/plans – Terms and conditions – Purpose – Benefits – Plans – Operating budgets ($) – Capital budgets ($) – Performance indicators – Estimate short- and long-term demand – Resources acquired and obligations assumed – Drawdown – Annual requirements
|
Receive (Parliament receives summary material
as part of the Estimates process.)
Approve
|
Approve Approve Approve Approve Approve Approve Approve Approve Approve Approve Approve
|
Prepare Prepare Prepare Prepare Prepare Prepare Prepare Prepare Prepare Prepare Prepare
|
Reports – Year-end financial statements – Periodic and interim reports
|
Receive
|
Receive Receive
|
Prepare Prepare
|
Audit and validation – Terms of reference – Selection – Act on report
|
|
Recommend
|
Approve Approve Approve
|
Ongoing approvals – Pricing – Service line change – Capital investment – Use of surplus – Write-offs of deficits – Amount of financial support
|
Approve
|
Approve Approve Approve Approve Approve Approve
|
Prepare Prepare Prepare Prepare Prepare Prepare
|
"Prepare" means to develop the submission or propose action for
approval.
"Approve" means, in the case of the Treasury Board, to approve with
the submission presented by the preparer (generally the responsible department) before the
fact. In the case of Parliament, it means to approve by a vote in the House.
"Receive" means to have knowledge by virtue of the matter being
tabled; for instance, Parliament receives the annual statements of each revolving
fund as part of the Public Accounts each year.
8200 Appendix B —
Abbreviations in this guide
|
AC
|
Accounts of Canada
|
|
ANCAFA
|
Accumulated Net Charge Against the Fund's Authority
|
|
AP
|
Accounts Payable
|
|
ARLU
|
Annual Reference Level Update
|
|
CAJV
|
Central Accounting Journal Voucher
|
|
CAS
|
Central Accounting System
|
|
CCAM
|
Corporate Cost Allocation Model
|
|
CEO
|
Chief Executive Officer
|
|
CICA
|
Canadian Institute of Chartered Accountants
|
|
COO
|
Chief Operating Officer
|
|
CP
|
Current Period
|
|
CPI
|
Consumer Price Index
|
|
CPP
|
Canada Pension Plan
|
|
CRF
|
Consolidated Revenue Fund
|
|
CY
|
Current Year
|
|
EBP
|
Employee Benefit Plans
|
|
EI
|
Employment Insurance
|
|
FAA
|
Financial Administration Act
|
|
FTE
|
Full-time Equivalent
|
|
GAAP
|
Generally Accepted Accounting Principles
|
|
GST
|
Goods and Services Tax
|
|
GST-RAA
|
Goods and Services Tax - Refundable Advance Account
|
|
IMAA
|
Increased Ministerial Authority Agreement
|
|
IS
|
Interdepartmental Settlement
|
|
MYOP
|
Multi Year Operational Plan
|
|
OGD
|
Other Government Departments
|
|
PAIM
|
Public Accounts Instructions Manual
|
|
PAYE
|
Payables at Year-End
|
|
PAYE-OGD
|
Payable at Year-End - Other Government Department
|
|
PODD
|
Payment On Due Dates
|
|
PSAA
|
Public Sector Accounting and Auditing Handbook
|
|
PSSA
|
Public Service Superannuation Act
|
|
PY
|
Prior Year
|
|
PY's
|
Previous Years
|
|
PWGSC
|
Public Works and Government Services Canada
|
|
QPP
|
Quebec Pension Plan
|
|
RAYE
|
Receivables at Year-End
|
|
RG
|
Receiver General for Canada
|
|
RF
|
Revolving Fund
|
|
SDBA
|
Supplemental Death Benefit Act
|
|
SO
|
Standard Object
|
|
SOA
|
Special Operating Agencies
|
|
TB
|
Treasury Board
|
|
TBS
|
Treasury Board Secretariat
|
8300 Appendix C —
References
Accounting for Secondment Agreements (discussion draft paper), 1994
Canadian Institute of Chartered Accountants. CICA Handbook.
Canadian Institute of Chartered Accountants. Financial Reporting in Canada
Canadian Institute of Chartered Accountants. Public Sector Accounting and
Auditing (PSAA) Handbook
Consulting and Audit Canada. Special Operating Agencies, Some Answers to Your
Questions, August 1993
Dingwall, John. Special Operating Agencies: Financial Issues. Canadian Centre
for Management Development, May 1995 (draft)Guide to the Costing of Outputs
Public Accounts Instructions Manual (PAIM)
Skinner, Ross M. Accounting Standards in Evolution, 1987.
Treasury Board. Chart of Accounts
Treasury Board. Debt Write-off Regulations (Justice department)
Treasury Board. Policy on Accounting for Capital Assets (draft)
Treasury Board. Policy on the Application of the Goods and Services Tax and the
Harmonized Sales Tax in the Departments and Agencies of the Government of Canada
Treasury Board. Policy on Cost Recovery and Charging Policy, April 1997
Treasury Board. Policy on Special Revenue Spending Authorities
Treasury Board. Submissions Guide
Treasury Board Secretariat. Alternative Delivery Mechanisms, 1992
Treasury Board Secretariat. Becoming a Special Operating Agency (SOA),
July 1991
Treasury Board comptrollership Manual
|