DATE:
January 20, 1998
À :
Senior Financial Officers and
Senior Full-Time Financial Officers
SUBJECT:
Report on Review of the Cost of
Various Methods of Payment
1. Introduction The Treasury Board
Secretariat has recently completed a review of the cost of various methods of payment used
in the federal government. A report was prepared documenting the costing analyses and
comparison among the following payment methods:
(a) petty cash;
(b) departmental bank accounts (DBA);
(c) travellers cheques;
(d) acquisition cards; and
(e) central cheque issue by the Public Works and Government Services Canada (PWGSC).
A copy of the report may be accessed on the Finance, Contracting and Asset Management
network the through the TBS Web site on the Government Enterprise Network (GENet), the
federal government's internal network, at the following address:
http://www.tbs-sct.gc.ca/fin/sigs/Information_Bulletins/rrcvmp_e.html
2. Scope of Costing The cost analysis primarily
focuses on the operating costs of processing transactions through the various payment
methods. The costs of procurement activities (i.e. purchases, contracting, etc.) are
outside the scope of this review, and are therefore not included.
3. Costing Methodology The costing is conducted
using the process costing methodology. Basically, the process flow of each payment method
is first of all analyzed into a series of activities. The estimated processing cost per
transaction is worked out on an average basis based on:
- costs accumulated on individual activities within a defined time period
- average time spent to process each transaction.
4. Costing Analyses and ComparisonAccording to the
findings as detailed in the report, the average costs for petty cash, DBAs and travellers
cheques are on the high side which is mainly due to the necessary accounting and control
procedures for operating these payment methods. Meanwhile, acquisition card has the lowest
cost as only one payment requisition is raised instead of multiple cheques for individual
transactions in the monthly credit card bill. The cost for central cheque issue hinges on
the way payment information is provided to PWGSC, and is relatively high for both manual
and urgent cheque issue which require special handling.
5. Evaluation of Payment Practices In the evaluation
of their payment strategy and practices, departments/agencies should endeavour to use the
most appropriate and cost-effective methods for making payments, and to identify areas
where improvement may be feasible.
Apart from other factors like the nature and urgency of the payment, the cost of the
payment methods should also be duly considered.
The report provides the costing analyses and comparison required in the evaluation
process.
6. Enquiries Should you have any enquiries on the
report and the costing analyses, please contact me or ask your staff to contact Gilles
Vézina at 957-9660 (Internet: Vézina.gilles@tbs-sct.gc.ca)
R.J. Neville
Assistant Secretary and Assistant Comptroller General
Financial, Contract and Asset Management Sector
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