Directive on Receivables Management
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1. Effective date
1.1 This directive takes effect on October 1, 2009.
1.2 It replaces the following:
- Policy on Receivables Management (dated July 1, 2002)
- Information Bulletin – Revised Policy on Receivables Management (dated July 4, 2002)
2.1 This directive applies to departments as defined in section 2 of the Financial Administration Act. It also applies to agent Crown corporations for subsection 6.1.11 related to the sharing of debtor information.
2.2 Those portions of sections of this directive that provide for the Comptroller General to monitor compliance with this policy 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 policy 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.
3.1 This directive supports the objectives of the Policy on Internal Control by outlining the responsibilities of the chief financial officer and any other senior official designated by the deputy head for the prudent management of departmental accounts receivable.
3.2 Receivables are an important asset of the government that require prudent management. Across government, receivables involve billions of dollars and a wide range of transactions. Given this extensive scope, the sound management of receivables is vital to the government's achieving its overall objective of responsible fiscal management.
3.3 Because the efficient and effective management of receivables is dependent upon cooperation among departments, the sharing of knowledge and information, collection facilities (e.g., call centres), information technology, and sharing of best practices and procedures is encouraged.
3.4 The types of debts managed by departments that may need to be recognized and administered in the department's receivables management system are identified in the Guideline on Collection of Receivables.
3.5 This directive is to be read in conjunction with the Receipt and Deposit of Public Money Regulations, the Security for Debts Due to Her Majesty Regulations, Debt Write-off Regulations, and the Interest and Administrative Charges Regulations which provide the regulatory framework for the directive's requirements. Departments are to read it in conjunction with the Policy on Internal Control.
3.6 This directive is issued pursuant to section 7 and subsection 9(3) of the Financial Administration Act.
Definitions to be used in the interpretation of this directive are in the Appendix.
5. Directive statement
That all government accounts receivables are managed fairly, efficiently and effectively, while minimizing the risk of loss.
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.
- Credit is only granted when it is an operational requirement;
- Receivables are recognized promptly and vigorously pursued for collection;
- Debtors are treated fairly;
- Interest is charged on overdue accounts;
- Information and resources are shared between departments, when permitted, in order to locate and collect debts owing to the Crown; and
- Recoveries are maximized through a set-off against other forms of government payments owing to a debtor.
The chief financial officer or senior official designated by the deputy head as the lead official for the management of accounts receivable is responsible for the following:
6.1.1 Minimizing receivables, to the extent possible, in program design and delivery by requiring payment in advance or at the time that goods and services are provided by the department.
6.1.2 Identifying in advance the types of goods and services, the uses of facilities, and the rights and privileges that may be provided on credit.
6.1.3 Establishing, through a departmental credit policy, items that include the following:
- the credit assessment process;
- a minimum threshold value for credit sales;
- acceptable levels of credit risks;
- terms of credit;
- terms of payment (recovery);
- the minimum information necessary to extend credit; and
- the point at which, unless precluded by statute, the department may not provide goods, services, use of facilities and rights and privileges on credit because of unpaid debts to the Crown.
6.1.4 Issuing, recording and reporting all receivable transactions accurately and promptly in the departmental accounts and the accounts of Canada.
6.1.5 Applying authorized interest and administrative charges. Note that the Interest and Administrative Charges Regulations apply.
6.1.6 Taking appropriate, timely and cost-effective collection actions, including the use of a set-off. Note that subsection 155(1) of the Financial Administration Act applies.
6.1.7 Establishing procedures for responsibility centre managers to ensure fair treatment of debtors:
- debtors are informed of their obligations under applicable acts and regulations and advised of any existing administrative review or appeal processes that provide relief, redress or both;
- applicable acts, regulations or policies are applied consistently toward all debtors;
- any information provided to debtors is accurate and understandable;
- the debtor's financial situation and any other special circumstances are considered when collecting a debt; and
- the department's service expectations to debtors are openly communicated to debtors.
6.1.8 Recommending to the minister and deputy head the classes of payments (e.g., tax refunds, GST rebates) that should be made available to other departments for set-off.
6.1.10 Seeking security for debts due to the Crown when it is good business practice to do so (refer to the Guideline on Security for Debts). Note that section 156 of the Financial Administration Act applies.
6.1.11 Ensuring that upon request of departments and agent Crown corporations, debtor information held by other departments or agent Crown corporations is shared with them (unless departmental or program legislation specifically provides otherwise). This requires that:
- Any public officer or agent of Her Majesty, including agent Crown corporations, upon the request of officials from a department or agent Crown corporation, will provide officials from that department or corporation with the following information concerning a person that has a debt due to Her Majesty:
- the person's last known address and telephone number;
- the name and address of the person's last known employer; and
- any payment coming due to the person.
- The unnecessary disclosure of these three information elements is limited. Only the information that is necessary to comply with the purpose of the request is provided. For requests concerning attempts to locate a person, only the first and second elements of information are provided. When a request concerns use of a set-off authority, all three elements of information may be necessary and, to the extent possible, are provided to the requestor.
- All information provided is fully compliant with the Privacy Act or the Personal Information Protection and Electronic Documents Act.
6.2 Internal control
The chief financial officer is responsible for ensuring the following:
6.2.1 Internal controls for the administration of accounts receivable are established, and are in place and include, at a minimum:
- the appropriate division of duties related to credit-granting, collections, maintenance of accounting records, the handling and reconciling of money, and write-offs;
- the provision of complete audit trails to track all claims from the transaction that gave rise to the receivable through to its final settlement;
- the establishment and monitoring of results-based measurement mechanisms; and
- the preparation and distribution to management of periodic reports on the financial and non-financial activities of the portfolio, including receivable ageing statements.
6.2.2 Appropriate forms of payment are accepted, as supported by the Receiver General, for the settlement of accounts receivable.
6.2.3 Estimates for the allowance for doubtful accounts are developed according to the Policy on Allowances for Valuation of Assets and Liabilities.
6.2.4 Procedures are established to ensure that once an account receivable has been recorded in the departmental accounts, it is not removed from these accounts until the department has received full payment or has properly authorized a remission or other forgiveness, a write-off or a cancellation. If it becomes known in the future – after an account has been written off but not legally extinguished – that the debtor's financial position has improved and the debtor is capable of paying the debt, the account is reinstated and collected.
6.3 Monitoring and reporting requirements
6.3.1 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.
6.3.2 The Comptroller General is responsible for monitoring departments' compliance with the requirements of this directive and conducting a review within five to eight years.
7.1 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.
The Treasury Board Secretariat, Office of the Comptroller General is responsible for development, oversight and maintenance of this directive and for providing interpretative advice.
9.1 Other relevant legislation and regulations
- Financial Administration Act , sections 7, 9(3), 155, 156
- Privacy Act
- Personal Information Protection and Electronic Documents Act
- Receipt and Deposit of Public Money Regulations
- Interest and Administrative Charges Regulations
- Debt Write-off Regulations
- Security for Debts Due to Her Majesty Regulations
9.2 Related policy instruments and publications
- Policy on Internal Control
- Directive on Losses of Money or Property
- Directive on Accountable Advances
- Directive on Receipt, Deposit and Recording of Money
- Directive on Loans and Loan Guarantees
- Directive on Travel Cards and Travellers Cheques
- Directive on Financial Management of Pay Administration
- Use and Disclosure of Personal Information
- Policy on Privacy Protection
- Directive on Social Insurance Number
- Policy on Government Security
- Directive on Terms and Conditions of Employment, Appendix – Terms and Conditions of Employment, Part 3 – Pay Administration, Section 15 – Recovery of amount due to the Crown
- Recovery of Amounts due to the Crown
- Guideline on Security for Debts
- Payment on Due Date (PODD)
- TB Circular 1996-03 "Interest and Administrative Charges Regulations"
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
Appendix — Definitions
- Cancellation of accounts (annulation des comptes)
Are the cancellations or adjustments of accounts that occur when debts are recorded in error or when the legitimacy of the debt cannot be substantiated. The cancellation and adjustment are deemed administrative actions that do not require specific legislative or regulatory authority.
- Forgiveness (renunciation)
Is the deletion of a debt that extinguishes the debt, waives the right of Her Majesty to reinstate the debt, and permits both the Crown and the debtor to remove the debt from their accounts. Also refer to section 24.1 of the Financial Administration Act and Debt Write-off Regulations.
- Periodic (périodique)
Is an interval of time determined to be reasonable by the chief financial officer based on risk and on the particular departmental circumstances e.g., volume of transactions, automation of systems, size and structure of organization.
- Remission (remise)
Is similar to forgiveness and involves the cancellation of or release from an otherwise enforceable debt, tax, fee or penalty. It differs from forgiveness in that remission relates to budgetary expenditures while forgiveness relates to non-budgetary expenditures. Also refer to section 23 of the Financial Administration Act and Debt Write-off Regulations.
- Set-off (compensation)
Is the reduction of a claim by deducting the amount of a valid countervailing claim. Set-off by the federal government may be enacted by a specific statute or regulation or under the authority of section 155 of the Financial Administration Act.
- Write-off (radiation)
Is an accounting action that applies primarily to uncollectible debts. It does not forgive the debt or release the debtor from the obligation to pay; nor does it affect the right of the Crown to enforce collection in the future. Also refer to the Debt Write-off Regulations.