Rescinded [2017-04-01] - Directive on Year-End Recording of Payables

This page has been archived on the Web

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact us to request a format other than those available.

1. Effective date

1.1 This directive takes effect on March 1, 2014.

1.2 It replaces the following:

  • Policy on Payables at Year-End (dated October 1, 1994);
  • Information Bulletin, Payables at Year-End (PAYE) for FIS and non-FIS departments (dated January 25, 2000); and,
  • Information Bulletin, Payable at Year-End (PAYE) (dated March 17, 1995).

2. Application

This directive applies to departments as defined in section 2 of the Financial Administration Act and to the activities of Crown corporations which are required to use the Consolidated Revenue Fund.

3. Context

3.1 The timing of when a transaction should be recorded for accrual accounting purposes (i.e. an expense) may not coincide with the charging of the transaction as an expenditure against the appropriation since the basis of accounting is different (i.e. accrual accounting vs. modified cash). For the purpose of this directive, the term “payable” is used to represent transactions that are to be charged against the appropriation at year-end. As a result, this directive focuses on whether transactions are payables that are to be charged against appropriations at fiscal year-end. It does not cover whether transactions should be recorded in accordance with the Government’s stated accounting policies which are based on Canadian Generally Accepted Accounting Principles (GAAP) for the public sector. Liabilities, including allowances, should be recorded in accordance with Treasury Board Accounting Standards and the public sector accounting standards which are issued by the Public Sector Accounting Board.

3.2 This directive supports the objectives of the Policy on Internal Control by outlining the responsibilities of the chief financial officer (CFO) to establish management practices and controls to appropriately record expenditures at fiscal year-end.

3.3 Accuracy of financial reporting is based on the assurance that financial transactions are properly recorded in the accounts of Canada.

3.4 Appropriations represent spending authority that is approved by Parliament. In order to accurately measure the use of this authority and to demonstrate accountability for departmental spending, the appropriate recording and reporting of all payables as at year-end is essential.

3.5 Where a department provides financing to a Crown corporation through a drawdown of funds from an appropriation, the department is responsible for recording amounts payable to the Crown corporation. However, when responsibility and signing authority have been delegated to the corporation, the department must require a designated officer of the corporation to be responsible for recording payables and charges against appropriations according to this directive.

3.6 Payables resulting in a charge against an appropriation are certified in accordance with section 33 of the Financial Administration Act, following certification pursuant to section 34 of the Financial Administration Act by individuals who are responsible for the performance of account verification and who have delegated financial signing authority.

3.7 This directive should be read in conjunction with the:

3.8 This directive is issued pursuant to sections 7 and 37.1 of the Financial Administration Act.

4. Definitions

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

5. Directive Statement

5.1 Objective

To ensure that payables existing at fiscal year-end for work performed, goods received, services rendered, and other items, including certain transfer payments, are charged against an appropriation in an accurate and timely manner and recorded in the accounts of Canada.

5.2 Expected Results

  • all payables are accurately recorded in a timely manner; and,
  • the recording of payables is supported by complete and accurate documentation.

6. Requirements

When a department or Crown corporation receives funds appropriated by Parliament, the chief financial officer (or an equivalent, in the case of a Crown corporation) is responsible for ensuring:

6.1 General

6.1.1 Effective management practices and controls are established so that all payables that meet the requirements set out in this directive are identified, quantified and recorded as expenditures and an audit trail is maintained.

6.2 Payables charged against appropriations

6.2.1 Payables can be determined and recorded on an individual basis or by group or class of recipients when practical and economical to do so.

6.2.2 When the exact value of the payable cannot be determined, an estimate is used to record the amount of the payable provided that a reasonably accurate value can be assigned. An audit trail allowing verification of the reasonableness of the estimate is to be kept.

6.2.3 Payables are to be charged to the appropriation if the following conditions are met at March 31:

  • in the case of debt incurred for work, the work has been satisfactorily performed whether or not the amount of the debt is due;
  • in the case of debt incurred for goods, the goods have been satisfactorily received and ownership is obtained whether or not the amount of the debt is due;
  • in the case of debt incurred for services, the services have been satisfactorily rendered whether or not the amount of the debt is due;
  • in the case of an amount payable between federal organizations, it is subject to conditions listed above as if it is a debt;
  • in the case of a debt resulting from a transfer payment, the amount is due; that is, the Government’s obligation to make a transfer payment and/or the entitlement of the recipient to receive a transfer payment has been established;
  • in all other cases, the amount of the debt is due and owed according to a contractual agreement or other legally binding agreement or memorandum of understanding; and,
  • in all cases, the amount of the debt should be substantiated (i.e. is auditable) and valued.

6.2.4 Pursuant to section 37.1 of the Financial Administration Act, payables are charged to appropriations even if this results in overspending the current year appropriation. The amount of overspending should be reported to Treasury Board Secretariat as soon as it is known. This will result in an equivalent reduction in the organization’s available spending authority in the following fiscal year.

Work-in-process

6.2.5 The value of work performed and services rendered is determined on the basis of performance up to year-end and on billings or estimates of the debt owing for the related performance. A payable is recorded for outstanding payments of work-in-process when the purchase contract establishes a debt for work-in process that has been completed up to and including March 31.

Acquisition of real property not already in the name of the Crown

6.2.6 A payable is recorded and charged to the appropriation when:

  • there is a binding purchase agreement at year-end;
  • all required approvals have been obtained; and,
  • title to the property has been obtained or, under exceptional circumstances, title has not been obtained but the Crown has effective use and control over the real property.

Salaries

6.2.7 Salaries and wages owed at year-end such as regular salaries, overtime, unused compensatory leave, extra duty, shift work, and performance management pay for work performed as at year-end, or unused vacation leave in excess of carry-over provisions stipulated in collective agreements are recorded as payables and charged to the relevant appropriation.

6.2.8 Payables owed to employees for severance pay or other separation entitlements are charged to the relevant appropriation when they become due and owing to the employee. The circumstances and related terms and conditions for each type of entitlement (e.g. severance pay, education allowance, transitional support measure, etc.) must be assessed individually in order to determine when the amount(s) become(s) due and owing to the employee.

6.2.9 Unpaid amounts for employees seconded or transferred are recorded as payables and charged to the appropriation.

6.2.10 Retroactive wage and salary settlements owed are recorded as payables and charged to the appropriation when salary contract agreements have been ratified and signed on or before March 31.

Advance payments

6.2.11 Payables for advance payments that are due on or before year-end are recorded and charged to the appropriation if they meet the requirements described in the Directive on Payment Requisitioning and Cheque Control.

Holdbacks

6.2.12 Payables for which there is a holdback of payment for work performed, service rendered or goods received are recorded and charged to the appropriation for both the net amount due and the holdback at year-end. Payables relating to holdbacks on transfer payments are recorded and charged to the appropriation only when the amounts of holdbacks are due and owing at year-end.

Issuing of Loans

6.2.13 Payables for loans are recorded and charged to the appropriation if, in accordance with the loan agreement, the conditions for payment are met by year-end.

Transfer payments

6.2.14 Payables for transfer payments should be charged against the appropriation as long as:

  • the transfer payment is authorized;
  • all eligibility criteria have been met by the recipient;
  • a funding agreement has been signed by both parties, when an agreement is required by the program; and,
  • the Government’s obligation to make the payment and/or the entitlement of the recipient to receive the payment has been established at year-end.

6.2.15 The Government’s obligation or recipient’s entitlement is established at year-end only when:

  • Grants:
    1. the grant payment is due and owing at year-end;
    2. a commitment to payment has been made and approved by a designated authorized person pursuant to section 34 of the Financial Administration Act.
  • Contributions:
    1. for a shared cost reimbursement arrangement, the amount represents eligible expenses incurred by the recipient up to year-end and is determined by reference to a payment claim or based on an estimate with supporting documentation submitted by the recipient;
    2. for a shared cost financing arrangement, all the conditions for payment are met and the amount is due and owing by year-end pursuant to the funding arrangement;
    3. for all other cases, a claim for payment has to be received by the department to establish entitlement by the recipient by year-end. If, in exceptional circumstances, an advance payment has to be made, such condition is to be included in the funding arrangement.

6.2.16 Payables are not recorded at year-end for entitlements of certain continuing benefit programs (e.g. Old Age Security and employment insurance benefits) since such payments remain valid only on a month-to-month basis. However, payables must be recorded for eligible retroactive payments that have been verified and quantified for the portion up to year-end or for the amounts already owed to eligible individuals but not yet paid at year-end.

6.2.17 In certain cases where an accrued allowance or liability has been recorded, such as for a series of payments in an upfront multi-year funding agreement, the previously accrued amount should be reduced by the amount payable recorded at March 31.

Departmental payables to Crown corporations

6.2.18 The following amounts are recorded as payables:

  • amounts payable to a Crown corporation as at year-end by the Government of Canada in accordance with the terms of a contribution arrangement;
  • amounts payable to a Crown corporation as at year-end by the Government of Canada under the provisions of a vote which specifically provides for the reimbursement of expenses or costs incurred by the corporation; and,
  • amounts owing to a Crown corporation as at year-end by the Government of Canada in respect of program, operating or capital expenses incurred by the corporation as at year-end.

Ex gratia

6.2.19 A payable is not charged against the appropriation for an ex gratia payment unless the deputy head or his delegate has formally approved such payment and the economic event, if applicable, occurred before year-end.

Claims against the Crown

6.2.20 Payables are only charged against an appropriation if all required authorizations as specified in the Directive on Claims and Ex Gratia Payments have been obtained before year-end.

Specified purpose accounts

6.2.21 Payables are charged against the specified purpose accounts when appropriate.

Sales tax

6.2.22 The amount of Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are to be recorded in the GST-HST Refundable Advance Account when payables are recorded against an appropriation. Similarly, the amount of Quebec Sales Tax (QST), if applicable, is to be recorded in the QST Refundable Advance Account when payables are recorded against an appropriation.

Materiality limit

6.2.23 Payables incurred up to and including March 31 that exceed the lesser of $5,000 or one-half of one percent of the appropriation authority are charged to existing voted or statutory appropriations and recorded in the appropriate payable account as described in the Government-wide Chart of Accounts for Canada.

6.2.24 A lower materiality limit, other than that referenced in paragraph 6.2.23 above, may be established as appropriate by departments and agencies.

6.3 Settlement of payables – voted appropriations

6.3.1 Settlements of payables are cleared against the payable account in which they were originally recorded as specified in the Government-wide Chart of Accounts for Canada.

6.3.2 Payables recorded during the fiscal year or at year-end are either cleared following settlement or revalued before the close of the subsequent accounting period.

6.3.3 When the amount paid to settle a payable is less than the amount of the recorded payable, the excess is applied, as needed, against another debt that was underestimated or for which no payable was recorded, provided that both debts were chargeable to the same appropriation. This means that:

  • for voted appropriations, the appropriation was given for the same fiscal year; and,
  • all other authorities, such as those related to grants, are respected.

6.3.4 When the total of all settlements is less than the recorded payable, any remaining balance is to be credited to current year non-tax, non-respendable revenue, rather than the current year appropriation.

6.3.5 When the total of all settlements exceeds the recorded payable, the excess is to be charged to the new fiscal year appropriation.

6.4 Settlement of payables – statutory appropriations

Settlement of payables, recorded during the year or at year-end, is treated in one of two methods:

  • payments may be cleared against the payable account in which the payable was originally recorded; or
  • the balance of recorded payables may be reversed against the new fiscal year’s appropriation and payments charged to the appropriation.

6.5 Carry-forward and removal of payables

6.5.1 Payables to outside organizations or individuals remain recorded until settled or for as long as the debts exist. Therefore, they are to be carried forward from fiscal year to fiscal year until they cease to exist.

6.5.2 Payables to other government departments and Crown corporations are reversed based on mutual agreement.

6.5.3 Recorded amounts that cease to be payables are cleared from the accounts before the end of the fiscal year in which they cease to be debts. If this circumstance arises and relates to a payable set up in the current year, it should be credited to the original appropriation. Should the payable stem from a previous fiscal year, it is to be credited:

  • to the other revenue authority code (Adjustments of Previous Years Accounts Payable (PAYE)) as specified in the Government-wide Chart of Accounts for Canada for amounts charged to lapsing or expired appropriations;
  • to a revolving fund if the amount was originally charged against a revolving fund authority; or
  • to the statutory authority against which the original debt was charged.

6.6 Receivables credited to appropriations

Only receivables resulting from recoveries and revenue transactions with other government departments are credited to an appropriation at year-end.

6.7 Reporting

Details of significant year-end transactions that involve uncertainty or unusual circumstances with respect to the interpretation of this directive are to be reported to the Office of the Comptroller General.

6.8 Monitoring

6.8.1 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.

6.8.2 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 apply.

8. Roles and responsibilities of government organizations

This section informs departments of other significant players in respect to this directive. In and of itself it does not confer an authority.

8.1 Public Works and Government Services Canada (PWGSC)

The Receiver General for Canada (RG) within Public Works and Government Services Canada is responsible for issuing year-end procedures and timetables so that the accounts of Canada and the reciprocal departmental accounts can be finalized.

8.2 Treasury Board Secretariat

The Office of the Comptroller General is responsible for development, oversight and maintenance of this directive and for providing interpretative advice.

9. References

10. Enquiries

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

Government Accounting Policy and Reporting Division
Financial Management Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
Ottawa ON K1A 0R5

10.2 For enquiries about appropriations and allotments and to report overspending of appropriations, departmental headquarters should contact their Estimates portfolio analyst:

Expenditure Operations and Estimates Division
Expenditure Management Sector
Treasury Board of Canada Secretariat
Ottawa ON K1A 0R5

10.3 Members of the public having questions on this directive are requested to contact TBS Public Enquiries for assistance.


Appendix A: Definitions

Appropriation (crédit)
Is any authority of Parliament to pay money out of the Consolidated Revenue Fund.
Audit trail (piste de vérification)
Are elements that allow tracking of a complete process. This includes delegation of authorities’ matrices, user profiles, data and files required to reconstruct the sequence of events and the transactions processed.
Expenditure (dépense)
Is the cost of goods or services acquired in the accounting period whether or not payment has been made or invoice received or transfer payment due where no value is received directly in return.
Expense (charge)
Is the cost of resources consumed in delivering government goods and services in the fiscal year.
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.
Ownership (propriété)
Is the title conferring the right to use and enjoy property in an absolute manner.
Payable at year-end (créditeur)
As the case may be,
  1. a debt incurred that results from work performed, goods received or services rendered before year-end;
  2. a debt due or owing on or before year-end under a contract or similar arrangement;
  3. an amount payable, on or before year-end as if it was a debt resulting from transactions and events, including events referred to in paragraph (a), with other government departments and Crown corporations. It also includes amounts payable as if they were debts under certain administrative arrangements, including memoranda of understanding with provincial, national or international entities and organizations. It also includes an amount payable under legislation in force at year-end.
Transfer payment (paiement de transfert)
Is a monetary payment, or a transfer of goods, services or assets made, on the basis of an appropriation, to a third party, including a Crown corporation, that does not result in the acquisition by the Government of Canada of any goods, services or assets. Transfer payments are categorized as grants, contributions and other transfer payments. Transfer payments do not include investments, loans or loan guarantees.