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DATE: January 25, 2000
TO: Senior Full-Time Financial Officers
SUBJECT: Payables at Year-End (PAYE) for FIS and non-FIS departments
Introduction
This letter clarifies the Policy on Payables at Year-End (PAYE), Chapter 5-5, Treasury
Board Manual, Comptrollership Volume, and the related Information Bulletin dated March 17,
1995.
Please ensure that this information is communicated to all sections of your
organisation which are involved with accounting and year-end processing.
These amendments are required to address recurring queries and to reflect the new
Financial Information Strategy (FIS) environment in which the government is now starting
to operate. Some of these changes apply to all departments, but the majority apply to
departments as they become FIS compliant. They are meant to ensure that year-end
departmental reporting to the center and the ensuing consolidation process will result in
all of the government's liabilities being reported accurately in the consolidated
financial statements presented in the Public Accounts of Canada.
Changes applicable to all departments
Salary and related accruals
Following changes made since 1 April 1999, the Regional Pay System no longer processes
compensation payments in period 13. As a result, accrual adjustments for salary,
retro-active pay adjustments, overtime, and other pay related transactions pertaining to
the old year are no longer calculated and recorded centrally. Consequently, all
departments (FIS and non-FIS) are now responsible for ensuring that all liabilities
related to these pay transactions are calculated and recorded in their own books as PAYE,
and as charges against their old year appropriation. It should be noted that the above is
only a decentralization in the process related to year-end payroll transactions, which
were already charged to appropriations. It does not apply to general allowances, which are
not charged to appropriations, and that are discussed later.
Materiality level
The materiality level applicable to the recording of a specific liability against an
appropriation is established in Appendix A to the Policy at the lesser of $5,000 or
one-half of one per cent of the appropriation authority. This limit is unchanged, except
for salaries and related pay accruals mentioned above. For these accruals, while the
liability will continue to be calculated on an individual basis, the above level of
materiality will be applied on a group basis, for each type of pay related transaction.
Changes applicable to FIS departments
General application
For FIS compliant departments, the PAYE policy continues to apply for the recording of
year-end payables against their appropriation. Other adjustments or clarifications that
may be required in their reporting and accounting process are discussed below.
The current PAYE policy deals with both the liabilities recorded at year-end through
central allowances and those recorded by departments against their appropriation. The
latter portion of the policy has always received more attention from departments, as these
are the only amounts charged against departmental appropriations. However, under FIS, with
the use of both the Financial Reporting Accounts (FRA) and the Authority Codes (AC) in the
government-wide Chart of Accounts, FIS departments may start recording liabilities against
their FRA for which they have no appropriation, and which will then be recorded against an
AC for non-appropriated amounts (F codes). Examples of these would include the recording
of general allowances for vacation pay and severance pay.
As the recording of such liabilities will be new to FIS departments, they should ensure
it is done correctly and follows clear departmental guidelines. They should also ensure
these new accounting policies are implemented in accordance with the timetable established
in their Accrual Accounting Transition Protocol.
For the first years of the FIS period, and until otherwise advised, departments will
also be required to inform the Treasury Board Secretariat (TBS) of the existence of such
liabilities being recorded in their year-end accounts. This will be done through each
department's annual reporting to the Financial Management and Accounting Policy
Division, TBS, in response to the call letter for Allowances for Valuation of Assets and
Liabilities sent annually for the purpose of Public Accounts preparation.
Settlement in excess of amounts recorded
Upon settlement of the final PAYE of a given year, if the net of all recorded PAYE
exceeds the net amount of all the settlements, the excess must continue to be recorded
against non-tax revenue for appropriation purposes. For FIS departments, any such excess
should be recorded against the same FRA expense where the amount was initially charged.
However, the AC coding should continue to be reported against current-year non-respendable
non-tax revenue for authority accounting purposes.
Interdepartmental amounts (PAYE-OGD)
Appendix A to the PAYE policy provides for the accrual of PAYE to other government
departments (PAYE OGD) against the appropriation of the debtor department and the
equivalent receivable at year-end (RAYE OGD) in the books of the creditor department when
the corresponding revenue is net-voted non-tax revenue. This approach is meant to ensure
that at year-end, on a consolidated basis, the total government-wide expenditures charged
against appropriations will be presented on the same basis as the total government-wide
revenues credited to appropriations. This year-end process continues to apply to FIS
departments. However, it is only a year-end process and should not be used during the year
to credit OGD receivables to a vote prior to the processing of the interdepartmental
settlement.
Given that FIS departments now record their receivables through sub-ledgers and to
ensure a better reconciliation of PAYE OGD and RAYE OGD, this year-end process now applies
to all PAYE OGD and the equivalent RAYE OGD, even when the corresponding revenue is
non-respendable revenues.
While departments may continue to record their PAYE OGD and/or RAYE OGD unilaterally,
both parties to the transaction shall make reasonable efforts to ensure that the
counterpart department is informed of the transaction and is recording an equivalent
amount. This should ensure that only small residual amounts need to be adjusted centrally.
Goods and Services Tax
The PAYE policy states that Goods and Services Tax (GST) must not be recorded as part
of the liability set up under PAYE. To recognize the change in their operating systems and
procedures, this no longer applies to FIS compliant departments. FIS departments now have
to set up the GST component of their PAYE, both when recording a liability through their
accounts payable sub-ledger (as they do during the year) and when estimating other PAYE
accruals.
Queries regarding this policy can be directed to Louise Breton, Financial Management
and Accounting Policy (FMAP), at 613-957-9675 or by Email at breton.louise@tbs-sct.gc.ca
Richard J. Neville
Deputy Comptroller General
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