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".
(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.
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.
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.
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.
(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.
(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.
(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.
9.1 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
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
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.
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.
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