Policy on Specified Purpose Accounts
(Publié aussi en français sous le titre Politique sur les comptes àa fins déterminées)
Table of Contents
Policy on Specified Purpose Accounts	1
1.	Effective date	1
2.	Preface	1
3.	Policy objective	1
4.	Policy statement	2
5.	Application	2
6.	Policy requirements	2
7.	Procedural requirements	3
8.	Monitoring	4
9.	References	4
10.	Enquiries	5
Appendix A - Guidelines	7
Appendix B - Classification of Accounts	14

Policy on Specified Purpose Accounts
1.	Effective date
The present document contains the entire text of the policy as revised April 1, 1995.  This policy supersedes T.B. Circular 1989-13 entitled "Specified Purpose Accounts".
2.	Preface
(a)	Departments and agencies receive, for various reasons, moneys which must be accounted for separately in the Accounts of Canada.  In some cases, the enabling legislation requires that revenues be earmarked, and that related payments and expenditures be charged against such revenues.  In other cases, money is received for a specified purpose and is recorded as a liability of the Government of Canada, as it constitutes a financial obligation of the government.
(b)	Given the special nature of these funds, accounts are opened in the general ledger to ensure that they are used only for the purposes for which they were received.  These accounts are called specified purpose accounts and allow managers to better control and manage these funds.
(c)	When no specific legislative authority is present, the authority of section 21 of the Financial Administration Act can be used to spend funds or contributions received within the context of partnerships, joint projects, cost-sharing projects, or similar arrangements with private sector organizations or other levels of government.  Specified purpose accounts can also be used to facilitate the management of money received as gifts, donations, bequests and endowment funds.
(d)	The policy on specified purpose accounts is designed to ensure that managers are well informed on the scope and operation of these accounts and on the related control and reporting requirements.  Specified purpose accounts are an important tool which can contribute effectively to the achievement of departmental objectives.
3.	Policy objective
To ensure that money received for a specified purpose is properly identified, classified, controlled and accounted for, reported on and, where applicable, that fiduciary duties and responsibilities are fully and adequately discharged.
4.	Policy statement
It is government policy that where money has been received for a specified purpose, it be applied for that purpose or returned in accordance with the Repayment of Receipts Regulations.
5.	Application
This policy applies to all organizations considered to be departments within the meaning of Section 2 of the Financial Administration Act, and to Crown corporations that are required to make deposits in the CRF in accordance with section 129 of the Financial Administration Act or any other legislation.
6.	Policy requirements
(a)	All money paid to or received or collected by Canada for a special purpose as defined in section 2 of the Financial Administration Act must be recorded in a non-budgetary or a consolidated budgetary specified purpose account (see Appendix B) in the Accounts of Canada.
(b)	All money paid into the Consolidated Revenue Fund for a special purpose must be paid out of the Consolidated Revenue Fund for that purpose in accordance with any statute applicable thereto and in accordance with this policy.
(c)	Departments must establish policies and procedures that will ensure adequate management, accounting and reporting of specified purpose accounts.
(d)	Whatever the source of special purpose monies, such monies are public funds.  Therefore, all regulations and policies relating to the control of receipts and expenditures apply to funds received and paid out for a specified purpose.
(e)	New trust accounts must be opened only pursuant to legislation.
(f)	Departments responsible for trust funds held in a specified purpose account must manage the funds on behalf of the beneficiary according to the powers and duties of a trustee and in accordance with the terms and conditions of a trust agreement or legislation establishing a fiduciary relationship.
(g)	The unused portion of an appropriation that would otherwise lapse must not be recorded in a specified purpose account.
(h)	Specified purpose accounts must not be used to record interdepartmental transactions or to reimburse departmental expenditures.  However, goods and services provided by federal departments or special operating agencies (SOAs) may be purchased with specified purpose funds when the department or the SOA providing the goods or services is not otherwise involved in the use of the money (i.e. is not part of the cost sharing or joint project agreement) and operates under a revolving fund or net-voting authority.
(i)	Specified purpose accounts must not be used to replace or avoid normal cost-recovery activities, (i.e., where fees for goods, services, or use of facilities would normally be charged).
(j)	Unless authorized by legislation, specified purpose accounts cannot be allowed to go into a debit balance and disbursements must not be made from the account if there are insufficient funds at the time the payment is to be made.
(k)	When security deposits are received and held by the Crown, only negotiable securities as defined in paragraphs a) and b) of the definition "security deposits" in the Government Contracts Regulations or in other acts or regulations may be recorded in the Accounts of Canada.
(l)	Any request to open a specified purpose account must be submitted to, and satisfy the requirements of, the Receiver General.
(m)	Unless specifically provided by statute, the payment of interest on funds held in a specified purpose account must be approved by the Minister of Finance.  The crediting of interest to the account, when applicable, must comply with legislative provisions and with instructions set by the Department of Finance.
(n)	Unless specifically provided by statute, interest is not paid on gifts, bequests and donations to the Crown; contributions received towards joint undertaking or cost sharing agreements; or, funds that have been "earmarked" for a specific purpose.
(o)	Administrative charges may be imposed on administered funds (for example, trust funds, endowments, joint project funds) when the legislation or other enabling authority allows it.
7.	Procedural requirements
(a)	Once the purpose for which the funds were received has been realized, the balance of the account must be returned in accordance with the Repayment of Receipt Regulations.  If, in accordance with the statute, trust, treaty, undertaking or contract, there is no obligation to return the funds or the security to the other party(ies), the balance of the account will be transferred to a miscellaneous non-tax revenue account.

(b)	Because of the special nature of insurance, pension and death benefits programs, the related specified purpose accounts will only be established pursuant to legislation.
(c)	When one specified purpose account is used to record funds relating to a number of projects, agreements, sources of funds, etc., subsidiary accounts must be kept by the department and reconciled monthly with the account in the Accounts of Canada.
8.	Monitoring
(a)	The Treasury Board Secretariat will monitor the effectiveness of this policy by reviewing departmental audit and performance monitoring reports.
(b)	Departments are responsible for the effective and efficient operation of specified purpose accounts.
(c)	Departments should undertake periodic reviews and audits of their use of specified purpose accounts to ensure that they are established and operated within the scope of departmental authorities and in accordance with this policy.  Special attention should be given to proper use of authorities and to legal aspects of contracts, agreements and any other types of arrangements whereby funds would be received for a specified purpose.  Other important aspects include the understanding by managers of appropriate authorities and their use; and the quality of documentation (for example legal agreements, accounting records, and manager training documents).
(d)	Performance indicators should relate to the efficiency of documentation and systems used to establish and operate specified purpose accounts.  On-going monitoring should oversee the utilization of moneys collected, held and spent in specified purpose accounts.
9.	References
9.1	Authority
This policy is issued under the authority of the Financial Administration Act.
9.2	Relevant legislation
Financial Administration Act (R.S.C., 1985, Chapter F-11) sections 2, 20, 21, 33, 34 and 63
Payment Requisitioning Regulations, SOR/85-999, as amended by SOR/86-68 and SOR/93-258
Repayment of Receipts Regulations, C.R.C. c. 729, as amended by SORs/81-920 and 93-258
Receiver General Directive on Specified Purpose Accounts
10.	Enquiries
Enquiries about this policy should be directed to the responsible officers in departmental headquarters who, in turn, may seek interpretation from:
On general policy issues
Financial and Contract Management Sector
Financial and Information Management Branch
Treasury Board Secretariat
Ottawa, Ontario
K1A 0R5
Telephone:	(613) 957-7233
Facsimile:	(613) 952-9613

On Receiver General requirements including the establishment of accounts
Chief
Accounts of Canada Analysis Section
Central and Public Accounts Directorate
Government Operational Service Branch
Public Works and Government Services Canada
Ottawa, Ontario
K1A 0S5
Telephone:	(819) 956-1880
Facsimile:	(819) 956-5407
On the approval of the payment of interest on a specified purpose account
Director
Financial Markets Division
Financial Sector Policy Branch
Department of Finance
140 O'Connor Street
Ottawa, Ontario
K1A 0G5

Telephone:	(613) 992-9032
Facsimile:	(613) 943-2039

On interest rates and recovery of interest
Chief
Public Debt Accounting
Informatics and Financial Services
Corporate Services Branch
Department of Finance
140 O'Connor Street
Ottawa, Ontario
K1A 0G5
Telephone:	(613) 995-5231
Facsimile:	(613) 995-1325

Appendix A - Guidelines
1.	General
(a)	Departmental policies and procedures should clearly state that the manager responsible for the funds held in a specified purpose account is accountable for the management of the funds and adherence to this policy.  A clear, precise accountability statement is particularly important in the case of cost-sharing or similar arrangements, gifts, donations, bequests, contributions and endowment funds.
(b)	Adequate internal controls, including monitoring and periodic reconciliation, must be in place.  A complete audit trail must permit the tracing of all transactions related to the specified purpose account.
(c)	As noted in the policy requirements, funds recorded in a specified purpose account may be transferred to miscellaneous non-tax revenue as long as there is a legislative basis for such a transfer.  This could occur when, for example, amounts received as guarantee deposits are forfeited to the government.
(d)	When authorized by the enabling authority (legislation, contract, agreement, etc.), administration costs may be charged to specified purpose funds.  Administration costs can be charged directly to the specified purpose account or the funds to pay such charges may be transferred to a revenue account.  The latter procedure would be efficient only if the department has net-voting or revolving fund authority which would authorize the re-spending of the money covering costs charged to the account.
(e)	When the legislation, or other establishing authority, does not authorize the cost of administration to be charged to the account, costs incurred by the department for the administration of the funds held in a specified purpose account must be charged to a departmental appropriation.
(f)	Unless specifically allowed by legislation, specified purpose accounts cannot go into a debit balance.  Therefore, disbursements must not be made from a specified purpose account if money is not available:  the expenditures should be delayed until funds are received.  Should a deficit result from error or oversight the balance must be restored promptly.  Any payment made with appropriated funds may not be reimbursed at a later date with specified purpose funds.
(g)	Specified purpose accounts may not be used to record interdepartmental transactions.  However, an exception occurs when specified purpose funds are used to purchase goods and services from another department with revolving fund or vote netting authority that is not otherwise involved with the specified purpose moneys (i.e. not part of the cost-sharing or joint project agreement).  This procedure is beneficial for the providing department only if vote netting or revolving fund authority is in place since without such authority, the department may not respend the amounts received and the money must be charged to miscellaneous non-tax revenue.
2.	Trust Accounts
(a)	Trust accounts are established to record the deposit of money in the Consolidated Revenue Fund, or the receipt of securities, when these funds must be administered by the Government of Canada according to specific terms and conditions of a trust agreement or legislation establishing a fiduciary relationship.  The funds remain the property of the beneficiary and consequently represent a financial obligation of the Government of Canada.
(b)	In order to establish a trust account, a true fiduciary relationship must exist between the government (trustee) and another party (donor):  that is, although the government does not own the funds, it holds the title of property (has control of the funds).  In the past many "trusts" have not met the requirement of a "true" trust; these should more properly be characterized as government obligations or administered funds.
(c)	Because of the special nature of true trust arrangements wherein powers are conferred on and duties imposed on the trustee, the establishment of a trust and the acceptance of such powers and duties is a very serious matter, especially since most trusts are established for a long period of time.
(d)	The establishment of a trust imposes on the trustee a number of duties, of which two have implications for the financial management of the specified purpose account:
–	The first duty is to account.  The trustee must ensure that proper accounts of all the transactions related to the trust funds are kept in good order along with the records of decisions.  Also, accounts must be rendered to the beneficiaries at appropriate intervals.
–	The second duty is to invest.  Since funds in trust must be managed for the benefit of the beneficiary, it is important that the funds earn a return for the beneficiary.  There are two options in this regard:  to invest the funds or to pay interest on the funds held in trust.  In both cases, appropriate legal authorities are required.  In addition, if the investment option is available (rarely the case), particular care and prudence should be exercised in the selection of good investments that are suitable in accordance with the terms of the trust.
(e)	Transactions recorded in a trust account are limited as follows:
–	The receipts and credits will consist of cash and securities received from outside parties or of benefits (and interest, if applicable) payable to beneficiaries directly by the government;
–	Charges and payments are limited to the balance in the account and may only be made to or on behalf of the beneficiary, in accordance with the terms and conditions of the trust agreement.  When authorized by the legislation or the trust agreement, administrative fees can be also charged to the account.
3.	Cost-sharing, Joint Project and Partnership Arrangements
(a)	Cost-sharing agreements are arrangements whereby the parties involved agree to share specified costs but not to participate directly in or assign staff to a common undertaking.
(b)	Joint project(s) agreements are arrangements whereby the parties involved agree to participate jointly in the actual carrying out of a project.  This would involve the sharing of resources, the purchase of goods or services, the hiring of personnel, and so on.
(c)	A joint venture is an arrangement where in addition to the sharing of the control and contribution of the resources, profits/surplus and especially the losses are also shared.  In such a case, all parties are liable for all obligations incurred in carrying out the joint venture.  A partnership is similar to a joint venture.
(d)	Although departments may enter into cost-sharing and other similar project arrangements, joint ventures and partnerships are to be avoided unless the department is specifically authorized by legislation to become involved in them.  Accordingly, the Department of Justice must be consulted prior to the signing of a joint project agreement in order to ensure that all the legal implications have been identified and evaluated.
(e)	A specified purpose account is required under a cost-sharing, joint project, joint venture or partnership agreement only when funds are received in advance from the external parties to the agreement.
(f)	As stated in the policy requirements, funds received from outside parties for the purposes of cost-sharing or joint project agreements must never be used to reimburse departmental expenditures; funds must be received in advance and expenditures shall be charged directly to the account.
(g)	If, in addition to the lead department, the agreement involves other federal departments or agencies, funds contributed by these departments and agencies must not be deposited in the specified purpose account.  These organizations must either pay their share directly out of their appropriations or put their funds in a suspense account and place the money at the disposal of the lead department.
(h)	Formal agreements concluded with external party(ies) should specify:  the scope of the project, the amount and timing of receipts, the types of expenditures to be made on behalf of the other party, the final disposition of the funds, the final disposition of assets if purchased using funds in the specified purpose account and any other provisions that may assist the financial management of the account (e.g., payment of interest on late payment of suppliers, unforeseen expenditures, dispute resolution mechanisms, etc.).
(i)	Unless specifically agreed to by the outside parties administrative costs may not be charged to the specified purpose account.  Administrative costs are normally part of the department's contribution to the collaborative arrangement.
(j)	Capital goods purchased under the agreement using funds provided by the external contributor(s) and which will remain the property of the Crown are subject to the same controls and approvals that apply to capital expenditures generally, i.e., expenditure approval, inventory control, etc.
(k)	When under a joint project agreement non-federal employees work in a federal facility under federal employee supervision, the agreement must clearly specify the nature of the work, the length of time, and any other provision which would help to prevent the creation of an employer/employee relationship.
(l)	Salaries of employees (indeterminate or term) may be paid from a specified purpose account if:
–	it is specifically provided for in the agreement with external parties; and
–	the remuneration (which may include the government's share of employee benefits plans if part of the agreement) is directly charged to the specified purpose account (no reimbursement of departmental appropriation).
(m)	Departments should ensure that they use proper cost recovery authorities when selling goods or services or renting facilities.  Special purpose accounts must not be used to by-pass or avoid using cost-recovery.
(n)	Where a contribution is received from a third party (either from the private sector or the non-federal public sector) towards a federal endeavour (e.g. an exploration or other research project, the electronic highway, etc.) and the third party doesn't receive goods or services of commensurate value in return (not counting publicity/goodwill), any money received for the purpose would be specified purpose account moneys.
(o)	Where the private sector makes a contribution towards a federal endeavour and does receive goods or services of commensurate value in return (for example, free testing of a product or process), the money received is not specified purpose account money, but cost-recovered non-tax revenue.
4.	Gifts, Bequests, Donations, Endowments
(a)	For the purpose of this policy, an endowment is constituted by funds acquired by donation or bequest subject to the following conditions:
–	a formal agreement is concluded between the donor and the department responsible for the administration of the endowment fund;
–	the agreement outlines the mechanisms governing the administration of the fund as well as the terms of payment of interest.  These terms must be approved by the Minister of Finance;
–	the agreement specifies that only the income, that is the interest paid to the account, will be spent for the purposes specified by the donor.  The capital must be maintained intact.
(b)	Scholarship programs must be administered in accordance with the terms of the endowment establishing the program.
(c)	Gifts, bequests and donations to the Crown may be made with or without conditions.  Any amounts received as gifts, bequests and donations for no specified purpose and without any condition or requirement as to the use of the funds are to be directed to Public Works and Government Services Canada to be credited to the Debt Servicing and Reduction Account, as per section 4 of the Debt Servicing and Reduction Account Act.
(d)	Any amounts received, for a specified purpose, as unconditional or general gifts, bequests and donations are to be used or spent in accordance with the mandate of the organization and with any relevant financial provisions that may be part of the legislation governing the organization.
(e)	Any amounts received as conditional contributions, gifts, bequests and donations, i.e., where the object of expenditure is clear and specific, are to be used or spent only for the purpose stated.  The Repayment of Receipts Regulations require that funds received that cannot be used for the purpose for which they were donated, or in accordance with the terms and conditions of the donation must be returned to the donor.
(f)	Since the acceptance of a contribution, bequest, donation, or endowment may impose costs and certain obligations on the part of the Crown (reflecting the purposes, terms and conditions on which the donation is made), it is advisable that clear guidelines on what the department will and will not accept be established at the outset.
(g)	Documents supporting any contribution, gift, bequest, donation or endowment are official records and are to be filed and placed in an archive.
(h)	When the department is involved in solicitation of donations, all fees, commissions and administrative expenses relating to the solicitation and management of donations would be an operating expense of the department, chargeable to the usual vote for operations, unless the donation agreement specifies otherwise.  No interest would accrue or be paid on the balance of the account.  Care must be taken to distinguish between true donations and revenues from concessions, licensing or other royalty arrangements which would more properly be treated as user fees.
5.	Federal-Provincial Arrangements
(a)	Where the federal government administers a program or a portion thereof on behalf of a province (for example, a provincial program that supplements federal assistance to a particular group or a particular segment of industry),
–	money received from the province to pay entitlements under the provincial program would be SPA moneys; while,
–	money received from the province for the cost of administration would not be SPA money at all, but cost-recovered, non-tax revenue.
(b)	Where a provincial government agrees to contribute towards—or share in the cost of—a federal program, any money received for the purpose would be special purpose money, regardless of whether it goes towards direct program expenditures or the costs of administration.
(c)	Where a provincial government shares a federal facility and contributes towards the cost of that facility, any money received is cost-recovered, non-tax revenue, and not SPA funds.
6.	Pre-payments
(a)	Where funds are received from the private sector or the non-federal public sector as pre-payment for future unspecified goods or services to be drawn upon when and as goods or services are requested, the money received could be recorded in a specified purpose account.
(b)	Charges for the goods or services will be transferred from the SPA to revenue as goods or services are provided, just as if payment had been made at the time.
(c)	Where funds are received as pre-payment for specified goods or services, the money received will not be recorded in a specified purpose account but as non-tax revenue.
7.	Court Awards
(a)	Where an award is made to the Crown and it has been stipulated by the court that the moneys are to be used for specific purposes, the funds are credited to a specified purpose account and paid out for the specified purposes.
(b)	No interest would be payable on this type of account and expenditures would be limited to contractual payments, other direct expenses, and grants and contributions.  Grants and contributions would be issued, in accordance with the normal grants and contributions rules, to provide financial assistance to projects undertaken by others that are consistent with the purposes for which the funds were awarded.

Appendix B - Classification of Accounts
1.	Budgetary (Consolidated) Accounts
1.1	Background
Until 1985-86 all specified purpose account transactions were classified as non-budgetary and the balances of the accounts were reported as liabilities.  In 1986, a change in accounting policy was introduced for those specified purpose accounts that are similar to departmental activities and that are not defined as financial obligations of the government.  Such accounts are budgetary and are consolidated with government revenues, expenditures and accumulated deficit.  The category of consolidated budgetary accounts includes all specified purpose accounts which are used to account for and control the funds received and disbursed in relation to the administration of the following.
1.2	Fees and levies
These are fees or other levies imposed by statute and earmarked for a special purpose by the statute.  Examples of such specified purpose accounts are the Unemployment Insurance Account and the Environmental Studies Research Funds account.
1.3	Budgetary insurance accounts
These are programs which are not for employees or former employees of the government.  This category includes accounts such as the Fishing Vessel Insurance Plan and the Land Assurance Fund.
1.4	Other budgetary specified purpose accounts
This is a broad category which includes:
–	contributions, gifts, donations, bequests, or endowment funds received for a specified purpose, whether conditional or not and even if designated for the benefit of specific classes of individuals.  Examples would be the Marconi Celebration Trust Fund, the Claudia de Hueck Bequest account and the Sioux Lookout Zone Hospital account.
–	qualifying contributions under cost-sharing and partnership arrangements, for example the Environmental Studies Research Funds.
–	court awards, other than a fine or penalty, that have been specifically earmarked by the court as compensation for—or mitigation of—damages, for example the Supplementary Fish Fines Account.
2.	Non-Budgetary Accounts
2.1	General
The accounting policies of the government of Canada define liabilities as the financial obligations of the government—that is, principally money that belongs to and is to be repaid to (or for the benefit of) identifiable outside organizations and individuals.  This includes all specified purpose accounts which are used to account for and control the funds received and disbursed in relation to the administration of the following.
2.2	Deposit accounts
(a)	These are accounts which are established to record the deposit of money belonging to third parties or the receipt of securities when guarantees are required from outside parties to ensure compliance of the depositor in accordance with a contract or an agreement.
(b)	Non-budgetary deposit accounts include money belonging to Crown corporations; bonds deposited as guarantees required by legislation; general security deposits from transportation companies; and contractors securities required to ensure satisfactory performance of work.  Examples are the Crown Corporations' Surplus Moneys; St. Lawrence Seaway account; the Candidates' Election Deposits account; and the Guarantee Deposits Account of Revenue Canada—Customs and Excise.
2.3	Trust accounts
(a)	Trust accounts are established to record the deposit of money in the Consolidated Revenue Fund, or the receipt of securities, when these funds must be administered by the Government of Canada according to specific terms and conditions of a trust agreement or legislation establishing a fiduciary relationship.
(b)	These true trust accounts include money belonging to natives, veterans or other individuals that is being held and administered on their behalf by the federal government due either to a statutory requirement or because the beneficiaries are not of legal age, or are infirm or incapacitated and incapable of managing their affairs.  The category also includes bequests to specific individuals.  Examples of these accounts are the Administered Trust Accounts established pursuant to the Pension Act, and the War Veterans Allowance Act; the Veterans Administration and Welfare Trust fund, the Indian Estate Accounts, and the Estates—Armed Services account.
2.4	Pension accounts
Pension accounts are used to record transactions relating to the operation of the Canada Pension Plan, various superannuation accounts and the Government Annuities Agents' Pension account.
2.5	Insurance and death benefits accounts
These accounts are used to record transactions relating to the operation of insurance programs for employees or former employees of the government.  Examples are the Veterans Insurance Fund and the Public Service Death Benefit Account.
2.6	Other specified purpose accounts
(a)	These accounts are used to record transactions relating to liabilities of the Government of Canada other than those identified above.  This is a broad category which includes money received from a province to pay entitlements under a provincial program; money belonging to inmates of a federal hospital, veteran's home or correctional facility; non-public money as defined in a statute; oil and gas royalties and revenues belonging to natives; and moneys held by the Crown under the Winding-up Act and Bankruptcy and Insolvency Act for distribution to creditors.
(b)	This category also includes unspecified pre-payment accounts which are established to record the deposit of money received as pre-payment of future unspecified goods or services to be drawn upon when and as goods or services are requested.  For example, money received from foreign governments for unspecified goods and services relating to international agreements; money received from non-federal organizations for the purchase of future (non-specified) goods or services (such as publications, patents, etc.).  There are numerous examples of such accounts, including the Provincial Tax Collection Agreements account; the Veterans Affairs Estates Fund account; the Financial Assistance to Canadians Abroad Account; the Unclaimed Dividends and Undistributed Assets account; and the Non-Government Agencies fund account of the Department of National Defence.