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1. Effective date 2. Application 3. Context 4. Definitions 5. Directive statement 6. Requirements 7. Consequences 8. Roles and responsibilities of government organizations 9. References 10. Enquiries Appendix A - Definitions Appendix B - Specified Purpose Accounts

Directive on Specified Purposes Accounts

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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 Specified Purpose Accounts (dated April 1, 1995); and
Information Bulletin - "Financial considerations to be made when receiving funds through donations" (dated May 14, 1998).

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 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. Context

3.1 "Specified purpose accounts" is a broad classification of accounts established in the accounts of Canada and reported in the Public Accounts of Canada. SPAs, record transactions and expenditures for money payable out of the Consolidated Revenue Fund (CRF) under statutory authorities established for specified purposes.

3.2 This directive ensures that SPAs, which represent public money, are prudently managed and properly classified and reported in the Public Accounts of Canada.

3.3 To carry out various responsibilities in managing SPAs, it is essential that the chief financial officer and other persons designated by the deputy head fully understand the distinction between SPAs that record special purpose money and SPAs that do not record special purpose money.

3.4 SPAs used to record special purpose money - These are usually operationally established and record obligations and expenditures in respect of money received by the Crown for a special purpose as defined in sections 2(d) and 21 of the Financial Administration Act.

3.5 Most other SPAs - These are generally legislatively established and do not relate to special purpose money as defined in section 2(d) and 21 of the Financial Administration Act. These SPAs include both liability accounts and accounts that record revenues and expenditures authorized under statutory programs or for other statutorily specified purposes.

3.6 The distinction between the two types of accounts is further explained in Appendix B.

3.7 This directive supports the Policy on Internal Control and is to be read in conjunction with the Receiver General Directive 1997-6.

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

4. Definitions

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

5. Directive statement

5.1 Objective

To ensure that controls and processes are developed and maintained to correctly identify, classify, record and report specified purpose accounts; and that specified purpose accounts are effectively and prudently managed, including those accounts used to record special purpose money.

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.
Opening of SPAs that record special purpose money only when a direct link exists.
Proper classification and accounting of SPAs that record special purpose money and other SPAs.

6. Requirements

6.1 The chief financial officer is responsible for:

Control

6.1.1 Ensuring that effective management practices and controls are established, which specifically involves the following:

The proper classification and accounting of SPAs that record special purpose money and other SPAs, under the appropriate legislative or other authorities, are determined in consultation with the Office of the Comptroller General;
The uses of standing authorities for all SPAs in the accounts of Canada and Public Accounts are accurately maintained and reported;
A periodic review is undertaken of the continued relevance of the authorities used to open and maintain all SPAs, whether an act or other legal instrument (e.g., a trust agreement, treaty or contract) for SPAs that record special purpose money or specific legislation for any other SPAs;
A complete audit trail, which allows all transactions related to special purpose money and other SPAs to be tracked, is maintained and available for review;
Complete documentation is maintained (e.g., agreements, accounting notes and manager training documents); and
Records of amounts relating to various projects or agreements and sources of funds in subsidiary accounts of special purpose money or other SPAs are kept and reconciled monthly with the account in the accounts of Canada.

6.2 The chief financial officer or senior officials(s) designated by the deputy head to carry out the management of specified purpose accounts are responsible for ensuring the following:

General

6.2.1 Monies received for a special purpose and amounts collected or prescribed as credits under statutory benefit programs or for other statutorily specified purposes, are recorded in separate accounts in the accounts of Canada and reported separately in the Public Accounts of Canada.

6.2.2 All amounts credited to SPAs, whatever the source, are managed as public money. Accordingly, all regulations, policies and directives relating to the control of receipts and expenditures apply to funds received, credited and paid out for a special purpose or a specified purpose.

6.2.3 Any request to the Receiver General to open an SPA, including accounts recording special purpose money, is submitted according to Receiver General Directive, 1997-6, and clearly identifies the following:

The relevant authority to open the account:
- For accounts recording special purpose money, the authority will be the act, trust, treaty, undertaking or contract under which the money is to be received or collected; and
- For any other SPAs, the authority will be the specific legislation that either expressly creates the account or implies authority for its creation.
The standing authority (i.e., statutory appropriation) that will be used to make payments out of the CRF and charge them to the account:
- For accounts recording special purpose money, the authority will be subsection 21(1) of the Financial Administration Act in the absence of any other specific statutory appropriation; and
- For other SPAs, the authority will be a specific statutory appropriation.

6.2.4 Processes are set up to prevent insufficient balances from occurring, including the establishment of a hold period for cheques and money orders to avoid NSF and fraud.

6.2.5 In accordance with FAA section 21, disbursements are not made from the account if there are insufficient funds at the time the payment is to be made and accounts do not go into a debit balance, unless authorized by legislation.

6.2.6 Goods and services tax (GST) and harmonized sales tax (HST), payable on expenditures that are charged to SPAs that record cost-sharing agreements are charged to the SPAs instead of the GST/HST refundable advance accounts. (Refer to section on 9.1.4 "Cost-Sharing and Joint Project Agreements" in the Financial Information Strategy Accounting Manual.)

6.2.7 Precise accountability statements are developed and documented for each manager responsible for administering specific cost-shared agreements, other similar arrangements as well as gifts, donations, bequests, contributions and endowment funds.

Recording of special purpose money

6.2.8 An SPA is opened to record special purpose money only if all of the following conditions are met:

A direct link exists between the money received or collected from an outside party and the amount to be disbursed and the purpose for which the money will be disbursed is known at the time of receipt;
No additional amounts, other than interest, are to be paid by or charged to the federal government as part of the arrangement relating to special purpose money;
No payment of statutory benefits to outside parties is intended or anticipated (e.g., not a government program); and
A liability or an obligation exists to the outside party.

6.2.9 Interest on amounts credited to SPAs that record special purpose money is authorized by specific statute or, in the absence of such authority, allowed under subsection 21(2) of the Financial Administration Act at rates fixed by the Minister of Finance with Governor-in-Council approval.

6.2.10 Special purpose money received is not used to replace or avoid seeking the authorities required for cost-recovery activities (e.g., where fees for goods, services or the use of facilities would normally be charged). A department that has received special purpose money could, however, use the services of another department with special revenue spending authority to carry out or supply the special purpose activity.

6.2.11 Special purpose money is not used to reimburse departmental operating costs (e.g., salaries of government employees) incurred in a cost-shared (joint) project, joint venture, federal-provincial or other arrangement.

6.2.12 Special purpose money may only be accepted by a department when the special purpose activity is within the department's mandate.

6.2.13 Donations are:

Used for purposes consistent with the department's mandate and cannot be transferred to offset an expenditure from a voted authority or applied toward the cost of ongoing operations chargeable to an appropriation, such as, salaries, wages and public service employee benefits;
Used as appropriate to hire temporary staff, consultants or contract personnel, provided that payment for these services is made from the CRF and charged to the account in which the funds have been recorded as special purpose money; and
Not transferred from an SPA to a departmental appropriation

6.2.14 Once the objective for which special purpose money was received has been realized:

The balance of the account, if any, is to be returned in accordance with the Repayment of Receipts Regulations; or
The balance of the account will be transferred to a miscellaneous revenue account if, in accordance with the statute, trust, treaty, undertaking or contract under which the money was received, there is no obligation to return the funds or the security to the other party (ies).

Specified purpose accounts other than those recording special purpose money

6.2.15 Interest on amounts credited to SPAs that are not used to record special purpose money is authorized only by specific statute.

6.2.16 SPAs related to joint ventures, partnerships, and insurance and benefit programs are only established pursuant to legislation or by an Order-in-Council.

6.2.17 When legislation (or other establishing authority) does not authorize the cost of administration to be charged to the account, costs incurred for the administration of SPAs are charged to a departmental appropriation.

6.3 Monitoring and reporting requirements

6.3.1 Chief financial officers are responsible for supporting the 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. 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 departments with significant roles with respect to this directive. In and of itself, it does not confer an authority.

8.1 Public Works and Government Services Canada sets out the requirements for the establishment of and accounting for SPAs, including those recording special purpose money, within the accounts of Canada. SPAs of any type can only be opened with the approval of the Receiver General.

8.2 The Minister of Finance, with the approval of the Governor in Council, is responsible for determining the interest rate to be credited on special purpose money under subsection 21(2) of the Financial Administration Act, if the discretion to credit interest is exercised.

8.3 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. References

9.1 Other relevant legislation and regulations

Financial Administration Act , sections 2, 7, 17, 20, 21, 31, 32, 33, 34 and 63
Receipt and Deposit of Public Money Regulations
Payments and Settlements Requisitioning Regulations
Revenue Trust Account Regulations
Repayment of Receipts Regulations

9.2 Related policy instruments and publications

Directive on the Recording of Financial Transactions in the Accounts of Canada
Directive on Payment Requisitioning and Cheque Control
Directive on Receipt, Deposit and Recording of Money
Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements)
Financial Information Strategy Accounting Manual
Policy on Special Revenue Spending Authorities
Public Accounts of Canada
Receiver General (RG) Directive, 1997-6, "Requirements for the Establishment of and Accounting for Specified Purpose Accounts within the Accounts of Canada" (to be updated by the RG in 2009)

10. Enquiries

10.1 Please direct enquiries about this directive to your departmental headquarters. For interpretation of this directive, only 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

10.2 For enquiries related to the establishment of SPAs, departmental headquarters should contact:

Chief
Accounts of Canada Analysis Section
Accounts of Canada, Accounting, Manuals, and Quality Assurance Division
Central and Public Accounts Reporting Directorate
Accounting, Banking and Compensation Branch
Department of Public Works and Government Services
Gatineau, QC K1A 0S5

Telephone: 819-956-1796
Fax: 819-956-8400

10.3 For enquiries related to approval of the crediting of interest on an SPA, departmental headquarters should contact:

Director
Financial Markets Division
Financial Sector Policy Branch
Department of Finance
Ottawa ON K1A 0G5

Telephone: 613-992-9032
Fax: 613-943-2039

10.4 For enquiries related to interest rates, departmental headquarters should contact:

Manager, Departmental and Public Debt Reporting
Financial Management Directorate
Corporate Services Branch
Department of Finance
Ottawa ON K1A 0G5

Telephone: 613-996-9822
Fax: 613-995-1325

Appendix A - Definitions

Bequest (legs): Is a gift of personal property by will.
Cost-shared (Joint) project (projet à frais partagés [conjoint]): Is a common undertaking whereby the parties involved agree to participate in carrying out a project. This may involve the sharing of resources, the purchase of goods or services, and the hiring of personnel.
Contributions (contributions): Are offerings from external parties to the government without expectation of a return, similar to gifts, donations or bequests. Contributions are not, for the purposes of this directive, federal transfer payments.
Direct link (lien direct): Means that the money disbursed for a special purpose is directly related to the money received or collected from an outside party.
Endowment (dotation): Is money received by Canada as a gift or bequest which will be used for a special purpose.
Joint venture (enterprise en participation): Is an arrangement whereby participants share the profits or losses in addition to sharing the control and contribution of the resources,. In such cases, all parties are liable for all obligations incurred in carrying out the joint venture. A joint venture is similar to a legal partnership.
Management practices and controls (pratiques et contrôles de gestion): Are 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.
Obligation (obligation): Is, for the purposes of this directive, a promise or commitment tospend money to comply with provisions of an agreement, a will or other unilateral transaction.
Operationally established (établi au niveau opérationnel): Are accounts that are not established by specific legislation.
Periodic (périodique): Is the interval of time the chief financial officer determines to be reasonable based on risk and on the particular departmental circumstances, e.g., volume of transactions, automation of systems, size and structure of organization, etc.
Special purpose money (fonds reçus à des fins particulières): Applies to monies received or collected from outside parties and deposited in the CRF pursuant to section 21.(1) of the Financial Administration Act. The money may only be disbursed for the purpose specified in the instrument (i.e., act, trust, treaty, undertaking or contract) under which it is received. There has to be a direct link between monies received and monies disbursed, including any interest that may be authorized.
Standing authorities (autorisations permanentes): Are statutory authorities for payments out of the CRF (i.e., appropriations) that do not lapse at the end of the fiscal year but are for a longer or indefinite period.
Trust (fiducie): Is, for the purposes of this directive, established under an Act of Parliament unless exempted by Treasury Board or the Governor in Council. There are two definitions of trust, one under common law and the other under civil law (Quebec). Legal Services should be consulted for elaboration on legislated trusts.

Appendix B - Specified Purpose Accounts

I. General information about what specified purpose accounts are

"Specified purpose accounts" (SPA) is a broad classification of accounts established in the accounts of Canada and reported in the Public Accounts of Canada. SPAs record transactions and expenditures for money payable out of the Consolidated Revenue Fund (CRF) under statutory authorities established for specified purposes.
Monies deposited in the CRF can only be paid out as authorized by Parliament. Some SPAs are consolidated within the financial statements of the government when they are similar in nature to departmental activities, while others are presented with the liabilities of the government.
The appropriation authorities governing SPAs are standing authorities (as opposed to annual appropriations);
There are two types of SPAs: accounts that record special purpose money and other accounts that are legislatively established for purposes specified in the legislation. The distinction between the two accounts is discussed below.

II. Specified purpose accounts recording special purpose money

Special purpose money, within the meaning of paragraph (d) of the definition of "public money" in sections 2 and 21 of the Financial Administration Act, is money received or collected by the federal Crown for a special purpose, under or pursuant to an act, trust, treaty, undertaking or contract, and is to be spent for that purpose only.
The term "special purpose money" applies to monies received or collected from outside parties and deposited in the CRF, e.g., when the Crown acts as trustee or agent for a person or for another government. The money may only be disbursed for the purpose specified in the instrument (i.e., the act, trust, treaty, undertaking or contract) under which it is received. There is a direct link between the monies received and the monies disbursed, including any interest that may be authorized.
SPAs to which special purpose money is credited record the government's financial obligation to outside parties for money received and deposited in the CRF for a special purpose (e.g. deposit and trust accounts) or the government's obligation to spend funds received for a special purpose (e.g. donation and bequest accounts).
Court awards - when a court award is made to the Crown and it has been stipulated by the court that the monies are to be used for specific purposes, the funds are treated as a type of special purpose money credited to an SPA recording special purpose money and paid out in accordance with subsection 21(1) of the Financial Administration Act and the court's direction.
Trusts - Trust agreements are only entered into through legislation unless Treasury Board or Cabinet approves an exception. Funds held in trust are managed according to statutory and other legal requirements.
Payments out of the CRF of monies received for a special purpose are authorized either by specific legislation or by subsection 21(1) of the Financial Administration Act. Subsection 21(1) is a general statutory appropriation that applies when there is no specific legislative authority for the payment of special purpose money out of the CRF.
Departmental officials who wish to act as agents for private or public sector parties in disbursing special purpose money in a cost-shared or other similar arrangement are advised to contact their Legal Services before making any commitments.

III. Other specified purpose accounts

Other accounts that are classified as SPAs are generally established by legislation (e.g., "There is hereby established in the accounts of Canada an account to be known as . . .") to record transactions and expenditures authorized under specific statutory programs.
The establishing legislation prescribes the credits to the accounts (including interest credits, if any) and specifies the purpose for which the amounts are authorized to be paid out of the CRF and charged to the accounts. Some of these credits may relate to money received, but other debits or credits may result solely from accounting journal entries.
Examples of SPAs that are classified as liabilities of the government include the Canada Pension Plan Account and the Superannuation Accounts. These accounts are created by statute to track and record the transactions in legislated programs. Unlike SPAs recording special purpose money, there is generally no direct link between monies received and the balance of the liability, because payments charged to these accounts are based on legislated formulas. Furthermore in cases such as the Superannuation Accounts, the benefits are payable whether or not a sufficient balance exists in these liability accounts.
Examples of SPAs that are classified as consolidated specified purpose accounts and that record revenues and expenditures of the government include the Employment Insurance Account and the Seized Property Proceeds Account.
Subsection 21(2) of the Financial Administration Act provides discretionary authority for interest only on amounts credited to SPAs that record special purpose money; it does not provide general authority for interest on amounts credited to other SPAs. Interest is credited to accounts that do not record special purpose money only when authorized by specific legislation.

IV. Note on origins of specified purpose accounts

The term "specified purpose account" is strictly an accounting classification. Unlike the term "special purpose money", it does not derive from the Financial Administration Act or other statute. The classification first appeared in the 1980-81 Public Accounts and initially reflected a grouping together of liability accounts that recorded expenditures authorized by statutory (rather than annual) appropriations, which were described in the Public Accounts as being "for specified purposes." In 1985-86, a change in accounting policy initiated the consolidation of those SPAs that are similar in nature to departmental activities and the classification of "consolidated specified purpose accounts" was created. Consolidated specified purpose accounts are not liability accounts because their transactions do not reflect liabilities or estimates of liabilities to outside parties: in essence they constitute government revenues and expenditures.