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Directive on Payment Requisitioning and Cheque Control

1. Effective date

1.1  This directive takes effect on October 1, 2009.

1.2  It replaces the following:

  • Interdepartmental Settlements Policy (dated April 1, 1999);
  • Policy on Payment Requisitioning and Payment on Due Date (dated
    July 15, 1996);
  • Information Bulletin on Advance Payments (dated August 18, 1995);
  • Treasury Board Circular No. 1996-1, Changes to the Payment on Due Date Policy (dated February 6, 1996);
  • Policy on Control of Receiver General Cheques (dated October 1, 1994); and
  • Policy requirement 5.4 of the Policy on Recording Receipts of Money (dated
    June 1, 1996).

2. Application

2.1  This directive applies to departments as defined in section 2 of the Financial Administration Act.

2.2  Those portions of sections of this directive that provide for the Comptroller General to monitor compliance with this directive within departments and/or request departments take corrective action, do not apply with respect to the Office of the Auditor General, the Office of the privacy Commissioner, the Office of the Information Commissioner, the Office of the Chief Electoral Officer, the Office of the Commissioner of Lobbying, the Office of the Commissioner of Official Languages and the Office of the Public Sector Integrity Commissioner. The deputy heads of these organizations are solely responsible for monitoring and ensuring compliance with this directive within their organizations, as well as for responding to cases of non-compliance in accordance with any Treasury Board instruments that address the management of compliance.

3. Context

3.1  This directive supports the objectives of the Policy on Internal Control by outlining the duties and responsibilities of chief financial officers when administering all payments (including advance payments and refunds of revenues or receipts), interdepartmental settlements and other charges requisitioned against the Consolidated Revenue Fund. This directive provides requirements to ensure that all payments and other charges requisitioned against the Consolidated Revenue Fund are accurate, timely, properly authorized and legal.

3.2  The requisitioning of payments and the control over the issuance and delivery of cheques requires sound management based on clear accountabilities, strong financial and risk management, rigorous internal controls, the highest standards of ethical conduct and the application of cost-effective and efficient payment methods.

3.3  The Receiver General for Canada, as the principal provider of payment services for departments and agencies, issues payments in numerous currencies using electronic payments and paper-based Receiver General cheques. Electronic payment, which includes direct deposit, is the preferred and standard method for issuing Receiver General payments.

3.4  Departments use the Standard Payment System (SPS) to requisition payments and interdepartmental settlements. Public Works and Government Services Canada (PWGSC) uses the SPS to issue payments on behalf of departments and to process interdepartmental settlements between departments. Payments are requisitioned and processed on a regular or priority basis. Only PWGSC issues regular payments. Both departments and PWGSC may issue priority payments through the SPS.

3.5  If a department has a need to issue priority cheques, it may initiate a request through the PWGSC Banking and Cash Management Sector to set up a priority cheque print site in a departmental office or, when volume is low, have the priority cheques printed at a designated PWGSC site and arrange for pickup of the cheques.

3.6  This directive is issued pursuant to section 7 of the Financial Administration Act.

3.7  This directive is to be read in conjunction with the following:

4. Definitions

Definitions to be used in the interpretation of this directive are in the Appendix.

5. Directive statement

5.1 Objective

To ensure that all payments, interdepartmental settlements and all other charges requisitioned against the Consolidated Revenue Fund are processed in a timely and accurate manner and are properly authorized and legal.

5.2 Expected Results

  • Financial resources are used appropriately, based on the right authority, and losses due to waste, abuse, mismanagement, errors, frauds, omissions and other irregularities are minimized.
  • Payment requisitioning and processing of interdepartmental settlements by departments that are properly authorized, timely, accurate and legal.

6. Requirements

The chief financial officer (CFO) is responsible for establishing risk-based management practices and controls to ensure effective internal control over the financial management of payment requisitioning and cheque control as follows.

6.1 Payment and Settlement Requisitioning - General

6.1.1  Providing the Receiver General (RG) with the means to authenticate payments or settlements requiring authorization under section 33 of the Financial Administration Act;

6.1.2  When dealing with payments related to an assignment of Crown debt, ensuring that no further payments are requisitioned until further instruction from the Receiver General and that appropriate procedures are followed. Note that the Receiver General Directive 2009-3, Procedures Respecting the Assignment of Crown Debts and Their Subsequent Payment, section 68 of the Financial Administration Act and the Assignment of Crown Debt Regulations apply.

6.2 Advance payments

6.2.1  Ensuring that advance payment clauses are only made under exceptional circumstances when the payments are considered essential to achieving program objectives and when no other reasonable alternative exists;

6.2.2  Ensuring that any advance payment clauses adhere to the principles of Parliamentary control, section 33(3)(a) of the Financial Administration Act, and any other applicable instruments as follows:

  • Advance payments are lawful charges against the appropriation;
  • Advance payments in any given fiscal year relate to and do not exceed the value of work performed or goods or services reasonably expected to be undertaken or provided during that year;
  • Funds are spent in the fiscal year for which they are appropriated and are not carried forward by means of advance payments;
  • Advance payments for extraordinary start-up costs are related to, and are not to exceed, the actual start-up costs expected to be incurred by the contractor in the fiscal year in which the payment is made;
  • Multi-year maintenance contracts are to provide at least one annual payment for each year of the contract, and multi-year licensing agreements should, to the extent possible, do the same; and
  • Funds are not carried over from one fiscal year to the next by transferring them to revolving funds or specified purpose accounts, or by pre-paying for goods and services from revolving funds.

6.2.3  Ensuring that advance payments are only made when a procurement contract, or any other contract document for the advance payment exists. Note that section 34(1)(a)(ii) of the Financial Administration Act and Government Contracts Regulations apply;

6.2.4  For each procurement contract, or any other contract, ensuring that when the amount of the advance payment in any given fiscal year exceeds the value of the goods or services expected to be received during that fiscal year or the value of work performed by a recipient during that fiscal year, the excess is recovered immediately;

6.2.5  Ensuring that the amounts and the times of advance payments are approved by the Treasury Board when the approval of the Treasury Board is required for entry into a procurement contract or any other contract. Note that section 8(2) of the Government Contracts Regulations applies.

6.2.6  Ensuring advance payments, if any, for grants, contributions and other transfer payments are provided for in the funding agreement. Note that the Directive on Transfer Payments applies.

6.3 Payment on due date

6.3.1  Ensuring that suppliers of goods and services are paid on the due date. The standard 30-day payment term is used and starts as soon as an invoice is received or the goods or services are accepted, whichever is later. The 30-day term is not applicable when:

  • The terms of payment under a contract are different from the 30-day standard, with the approval of the Treasury Board;
  • Regulatory agencies approve fee schedules and payment terms such as utility bills that are paid by a specific day each month;
  • Payments are to employees (e.g. travel claim reimbursements) and are paid as soon as possible;
  • Rental payments for real property are paid pursuant to the terms of the lease or rental agreement;
  • The terms of payment allow for demonstrable benefit to the Crown if paid earlier than the standard 30-days;
  • It is more cost-effective to make a single payment for a number of invoices that are individually under $2,500 and that are due within the same week. The invoices are paid by a single payment on the earliest due date of the combined invoices.

6.3.2  Ensuring that suppliers are notified within 15 days of receipt when it is determined that there is a problem with the goods or services or the invoice. Any portion of the invoice not in dispute is paid within the original 30-day period;

6.3.3  Ensuring that interest is paid on payments made later than the due date as provided for by contract or statute or when awarded in legal proceedings against the Crown;

6.3.4  Scheduling payments and calculating interest when requisitioning payment. The interest rate applicable to Government of Canada overdue supplier accounts can be obtained from the Receiver General (RG) "Payment on Due Date (PODD) Interest Rate" web page. This RG rate is used in the absence of a rate specified by contract, statute, legal proceeding or charged by a regulated public utility;

6.3.5  Ensuring that payments in advance of the due date are only made when discounts are offered and it is more advantageous for the government, after considering the cost of money for the earlier payment and any additional costs incurred to process an early payment.

6.4 Interdepartmental settlements (IS)

6.4.1  Settling interdepartmental accounts promptly and accurately using the Standard Payment System (SPS) and adhering to the time limits for processing and questioning an IS. Note that the instructions issued in the Receiver General Manual (RGM) - Chapter 12 "Interdepartmental Settlement (IS) Processing" apply;

6.4.2  Ensuring that IS that are questioned, in dispute, or both, are resolved before the end of the next accounting period, if feasible, or at the earliest possible time before the end of the current fiscal year;

6.4.3  Accounting for the accrual of payables at year-end to other government departments (PAYE-OGD) and equivalent receivables (RAYE-OGD). Note that the Policy on Payables at Year-End (PAYE) and Appendix 6 of the RGM, Chapter 14 - Year End Timetable and Procedures apply;

6.5 Refund of revenues and receipts

6.5.1  Ensuring that all refunds of money previously credited to the Consolidated Revenue Fund are made pursuant to the Repayment of Receipts Regulations;

6.5.2  Ensuring that all refunds are verified and certified. Note that sections 34 and 33 of the Financial Administration Act apply;

6.5.3  Processing the refund of a credit card payment as a credit transaction receipt using the same credit card used for the original receipt, not by cash or cheque issue, and processing the refund of a debit card payment as a debit card refund. Section 8.5 of the Federal Government Card Acceptance Departmental User's Guide contains additional details on processing refunds;

6.5.4  Ensuring that a refund is recorded in the fiscal year in which the refund is made considering the following:

  • If the refund occurs in the same fiscal year as the receipt occurred, the refund is recorded against the account to which the original revenue or receipt was credited; and
  • If the refund occurs in a year subsequent to the year of receipt, it is normally recorded against the statutory expenditure account A122 "Refunds of previous year's revenue." However, if it is for revenue received by a program activity that has special revenue spending authority or a specified purpose account, the refund is charged to the account to which the original revenue was credited. Note that the Policy on Special Revenue Spending Authorities and the Directive on Specified Purpose Accounts apply.

6.6 Control of Receiver General Cheques

6.6.1  Ensuring that all Receiver General (RG) cheques (paper-based payments) are issued using the Standard Payment System (SPS);

Regular Payments

6.6.2  Ensuring that RG cheques issued as regular payments in SPS are mailed directly to payees;

6.6.3  Ensuring that payments for supplies and services, including consulting fees and personal service contracts or other similar arrangements, but excluding payments requiring contract release or where a replacement cheque is required, are issued as regular payments mailed directly to payees;

Priority Payments

6.6.4  Requesting priority payments, if required, from the RG. Note that the Receiver General Directive 1999-8R1, Printing Priority Receiver General Cheques at Departmental Sites applies;

6.6.5  Ensuring that RG cheques issued as priority payments in SPS are mailed directly by the RG to the payee unless a payment is required on an immediate basis or is printed at a departmental SPS priority cheque print site;

6.6.6  Establishing internal controls over departmental cheque print sites and RG cheques returned to the department for distribution as follows:

  • A cheque is not given to a person who has exercised either spending or payment authority for that payment or persons engaged in any part of the payment requisitioning process;
  • Cheques are not distributed to employees by officers engaged in any part of the staffing, classification, salary and wage assessment function or in the preparation and signing of reports of staffing transactions and pay input documents; and
  • For smaller departments and agencies where the preceding two internal controls over cheques are not practical, adequate segregation of duties and compensating controls are implemented to the extent possible.

6.6.7  Obtaining the prior approval of the minister responsible for the program for payments when, by exception, the cheque will be sent to a Member of Parliament for official presentation to the payee. Such approval is granted for an individual payment or for a category of payments such as transfer payments associated with a specific program. Cheques are sent to the chief financial officer who, in turn, is to send them directly to the Members of Parliament concerned. No cheques are delivered or sent to an officer who has requested the payment or who has participated in some manner in the payment approval process.

Replacement and Duplicate Cheques

6.6.8  Ensuring that replacement and duplicate cheques are issued in accordance with RG instructions and do not result in an additional charge to an appropriation. Note that Receiver General Directive 1999-6R1 applies.

6.7 Monitoring and reporting requirements

6.7.1  Chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive in their departments, bringing to the deputy head's attention any significant difficulties, gaps in performance or compliance issues and developing proposals to address them, and reporting significant performance or compliance issues to the Office of the Comptroller General.

6.7.2  The Comptroller General is responsible for monitoring departments' compliance with the requirements of this directive and conducting a review within five to eight years.

7. Consequences

7.1  In instances of non-compliance, deputy heads are responsible for taking corrective measures within their organization with those responsible for implementing the requirements of this directive.

7.2  In support of the responsibility of deputy heads to implement the Policy on Internal Control and related instruments, chief financial officers are to ensure corrective actions are taken to address instances of non-compliance with the requirements of this directive. Corrective actions can include requiring additional training, changes to procedures and systems, the suspension or removal of delegated authority, disciplinary action, and other measures as appropriate.

7.3  Individuals are reminded that sections 76 to 81 (Civil Liabilities and Offences) of the Financial Administration Act as well as sections 121 (Frauds against the Government), 122 (Breach of Trust), 322 (Theft) and 380 (Fraud) of the Criminal Code may apply.

8. Roles and responsibilities of government organizations

This section identifies other significant departments with respect to this directive. In and of itself, it does not confer an authority.

8.1  Public Works and Government Services Canada (PWGSC) is responsible for:

  • Design of forms
  • Issuance of payment and settlement instructions
  • Cheque controls including departmental bank accounts
  • Authentication of persons certifying requisitions
  • The security of electronic transmissions to financial institutions
  • Confidentiality, authenticity and integrity of data
  • The security, integrity and safekeeping of the media used to issue an electronic instruction for all payments and settlements, and
  • Maintenance of the Standard Payment System (SPS).

8.2  The Treasury Board Secretariat, Office of the Comptroller General is responsible for development, oversight and maintenance of this directive and for providing interpretation advice.

9. References

9.1 Relevant legislation and regulations

9.2 Related policy instruments and publications

10. Enquiries

Please direct enquiries about this directive to your departmental headquarters. For interpretation of this directive, departmental headquarters should contact:

Financial Management Policy Division
Financial Management and Analysis Sector
Office of the Comptroller General
Treasury Board Secretariat
Ottawa, ON K1A 0R5

Email: fin-www@tbs-sct.gc.ca
Telephone: 613-957-7233
Fax: 613-952-9613


Appendix-Definitions

Advance payment (paiement anticipé)
A payment made by or on behalf of Her Majesty under the terms of a contract before the completion of the work, delivery of the goods or rendering of the service.
Cheque print site (site d'impression des chèques)
- A facility in a department or at Public Works and Government Services Canada where the printing of priority Receiver General cheques is carried out.
Interdepartmental settlement (IS) (règlement interministériel [RI])
A transfer of funds between any two departments or agencies that operate within the Consolidated Revenue Fund. An IS is commonly used as settlement for the transfer of goods or services, funding of a department to operate a program on behalf of another department, the transfer of employee payroll deductions to the Canada Revenue Agency, or for employees transferred or loaned to another department.
Management practices and control (pratiques et contrôles de gestion)
- Policies, processes, procedures and systems that enable a department to operate its programs and activities, use its resources efficiently and effectively, exercise sound stewardship, fulfil its obligations and achieve its objectives.
Means to authenticate (moyens d'authentification)
In the context of this directive, the proof of authorization to a transaction, which contributes to the protection of data integrity and ensures that the authorizer can be identified. For manual or paper-based payments or settlements, the means to authenticate would be specimen signature cards whereas for a paperless environment, a combination of user identification codes, passwords, personal authorization numbers, special keys in personal access devices, verification of physical characteristics, etc., would replace signatures.
Priority cheque (chèque prioritaire)
A cheque processed on a priority basis and made available at a PWGSC or departmental cheque print site for priority delivery (e.g. next business day) to the payee or made available at a designated PWGSC or departmental cheque print site for immediate delivery (e.g. same business day) to the requesting department.
Priority payment (paiement prioritaire)
- A priority cheque or electronic payment processed on a priority basis.
Questioned IS (RI contesté)
- An IS which has already been successfully processed and reported to the Receiver General-General Ledger. The questioning of an IS request is, in effect, a cancellation, i.e., an exact reversal of the original IS request to which it is linked. Both departments are informed by SPS of the questioning via the receipt of the IS return/notification file.
Standard payment system (SPS) (système normalisé des paiements [SNP])
- The PWGSC system for processing Receiver General payments including payments issued by cheque and by electronic methodologies such as direct deposit.