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(a) All departments must establish a chart of accounts that
will enable financial information to be analysed in accordance
with the object, authority, purpose, and responsibility
structures of the department; with the needs of operating and
financial managers for supplementary cost, asset, liability, or
other financial information; and with the requirements of the
central accounts or of central agencies. Other codes are also
required to meet the needs of those responsible for processing
accounting transactions. Public Works and Government Services
Canada can provide better services to departments if the
departments they service establish chart of accounts that follow
a consistent pattern.
(b) The chart of accounts is the means by which each specific
transaction is identified, with the accounting codes used to
accumulate aggregate data in the accounting system. It therefore
determines the information that can be obtained from the
accounting records.
(a) The code required for input to the Central Accounts System
include a portion that is set by Public Works and Government
Services Canada and a portion that is set by individual
departments.
(b) Certain standard codes are assigned on each accounting
transaction through the batch control procedures of Public Works
and Government Services Canada to ensure that cash and non-cash
transactions are separately identified and that accounting trails
are maintained on all transactions in the system. These codes
identify the department, the local services office, the batch,
and the source.
(c) Codes related to the chart of accounts are assigned by
departments, which have each developed their own chart of
accounts, with the numbering system and block format that they
consider most appropriate, subject to the following
restrictions:
- the central accounting system must be able to identify the
parliamentary appropriation, revenue, asset, or liability account
(central account number) to which a transaction is to be charged
or credited in the Accounts of Canada;
- the departmental line objects or resource codes, which are
the lowest level of analysis by object in each department, should
be compatible with the economic, source, or class objects, which
are the lowest level of analysis by object for the government as
a whole;
- the activity element shall be compatible with;
- the coding fields must be arranged in a prescribed
sequence;
- the total number of digits in any one field must not exceed
9; and
- the total number of digits in the coding block must not
exceed 25.
(d) Within these limits, each department has developed a chart
of accounts and a coding block that normally identify the
following (see Chapter 5-1 of the Comptrollership volume of the Treasury Board Manual):
- the parliamentary appropriation, Treasury Board allotment,
or revenue, asset, or liability account (the authority);
- the organizational unit to which the transaction should
properly be charged or credited (the responsibility centre or the
cost centre);
- the activity element or the lowest level of sub-activity to
which the transaction should properly be charged or credited (the
purpose);
- the nature of the goods or services acquired or transfer
payments made, the source of revenue received, or the cause of
increase or decrease to financial claims and obligations (the
object); and
- the cost element, cost account, operation, project, process,
element, task, item, job, committee, geographical region,
consumer or product group, individual, or any other particular
analysis that may be appropriate and that does not constitute an
activity, a responsibility or cost centre, or an object of
expenditure (optional codes).
(a) The use of collator numbers is a useful method of
simplifying the task of coding accounting documents, increasing
the flexibility of the coding system, and reducing the
possibility for error. Within any single responsibility centre,
most of the digits in the expenditure coding classification tend
to be the same for all transactions. For example, all
expenditures generally have the same codes for the program,
parliamentary vote, responsibility centre, activity, and first
level of sub-activity. Any one of these fields of information can
be up to 9 digits in length, but they collectively total 12
digits for most departments. If a collator code is used, one
collator number of 4 or 5 digits can be substituted for the 12
digits when coding transactions. Later, during electronic
processing, the collator code can be interpreted to impose the
full chart of accounts on each transaction exactly as if the
detailed coding were assigned on each input document.
(b) There are many advantages to using collator codes:
- The amount of manual coding required on each source document
is reduced and simplified; errors are less likely to occur in
departments when the codes are assigned to source documents, and
in computer centres when data are converted by encoding to
computer input.
- Certain inconsistencies that frequently arise through
undetected coding errors are eliminated, as for example, when
activity totals do not agree with responsibility totals within
the same responsibility centre.
- Collator codes can be established in a sequence that
facilitates use by clerical personnel and operating managers in a
responsibility centre and frees them from any need to acquire a
knowledge of the complete departmental chart of accounts.
- Collator codes facilitate the editing of input data during
computer processing because if a collator is valid, the imposed
coding will also be valid, and the majority of invalid items will
be rejected at the first stage in the processing rather than at
several stages as a transaction is processed through a variety of
computer routines.
- The departmental coding that may be input to Public Works
and Government Services Canada is restricted to a maximum of 25
digits. Where necessary, with the use of collators, this can be
increased during processing by at least 50 digits. This facility
permits a substantial amount of special financial or cost
analysis to be performed.
(c) If collators are used, each responsibility centre will
usually require one collator for each of the lowest levels of
sub-activity in which it participates and when required, one
collator for each revenue, asset, and liability account.
(a) All departments should fully document the chart of
accounts in a comprehensive coding manual that should be a part
of the departmental financial manual. The manual should explain
the use and significance of each field in the departmental coding
block; should explain any special action or unusual treatment
required with any contra, asset, or suspense account; and should
list all the valid codes for the department, with adequate
narrative descriptions of each code so that the manual may serve
as an authoritative reference for all financial and other
officers using the chart of accounts. At least one copy of this
manual should be available for reference in each office where
coding is performed.
(b) The manual should be supplemented with a chart of accounts
tailored to each responsibility centre to provide a simple and
ready reference of all codes likely to be required by each
responsibility centre manager and clerk performing a coding
function. All supplementary lists should refer to the manual for
advice on unusual transactions.
(c) Special procedures are required to ensure that the
departmental coding manual and the list of other codes are up to
date and that participants, including personnel and purchasing
units, are advised of all amendments. Each page of the coding
manual and the list should be given an effective date, and the
coding manual should be updated at least annually.
While there is no requirement that all departments use a
uniform coding block, departments should cooperate with Public
Works and Government Services Canada in eliminating unnecessary
variations. By using collator codes effectively, each department
should be able to fulfil its own requirements for a unique chart
of accounts, but within a standard coding structure.
(a) All systems that collect, record, and report financial or
related non-financial information must include controls to ensure
the integrity of the information in the system.
(b) Controls must be an integral part of a system to ensure
that all transactions are entered and processed accurately, and
that only properly authorized information will be accepted by the
system. The standards of accuracy and authority required for
financial transaction data apply equally to operational data.
(c) To determine the adequacy of the controls a thorough
assessment must be made of the contribution and significance of
each control operating within the complete system, and in
accordance with the significance of the information being
processed, the potential for error, the materiality of errors
that may ensue, and the cost of maintaining the required
control.
(d) There are a number of well-established techniques of
control that should be understood by all financial officers and
personnel involved in developing and operating financial systems,
for it is their responsibility to select the most suitable
combination of controls for each system. Where part of the
financial system is computerized, manual controls must be
designed to complement electronic controls to ensure that there
are no gaps, to avoid unnecessary duplication, and to maintain
control as economically as possible.
(e) Evidence of the performance of each control is the only
practical basis on which to ensure that controls are being
maintained. A signature is the most desirable form of evidence of
work performed, because it clearly designates who is assuming
responsibility for each control function and is suitable at all
levels of responsibility. A transaction should not be processed
through one point in the system unless evidence is available that
it has been processed through the previous stage. For example,
evidence may be required that a transaction has been recorded in
a subsidiary account, that the arithmetical accuracy has been
checked, that certain data have been matched to another source,
or that particular approvals have been obtained. Evidence should
also be provided to supervisors and managers that certain of the
non-processing controls are being maintained, or example, that
required reconciliations and balancing procedures are being
performed. Controls established electronically by a computer
should also be evidenced through a combination of special
print-outs to operators or users, and by periodic confirmation or
testing of the programs involved.
(f) Errors can occur at all stages in a financial system. The
types of errors that are likely to arise out of manual operations
include errors in transcription of information from one document
to another, errors in additions and calculations, errors in
assigning accounting or other reference codes, omission or loss
of transactions or of significant data on a transaction, and
duplications. The types of errors which are likely to arise in a
computer environment include mechanical errors, errors from
electrical malfunctions, errors in computer programming,
inaccuracies, duplication, or omissions of data in processing,
and loss or damage to files containing financial information.
(g) With the growth of responsibility accounting on a
decentralized basis and the maximum use of common services, it is
increasingly necessary to have controls to ensure that
transactions chargeable to one responsibility centre, to one
accounting office, or to one department cannot be charged to
another, either intentionally or in error.
(h) In any system, controls should be established as early as
is practicable in the system, and once established, should be
maintained through all stages of manual, mechanical, and
electronic processing. In most systems this will require
combinations of control techniques performed manually and
electronically.
(i) In simpler systems, it may be practical to establish a
verifiable value on data at the time of input, and to confirm
this value at the time of output. However, in most systems, an
integrated combination of manually or electronically performed
controls will be required. As a transaction is processed through
the system, an established control condition should not be
dropped before a complementary control condition has been
established, thereby ensuring that integrity is maintained at all
times.
(j) Techniques for control in a computer systems environment
are set out in Appendix C. Many of these techniques for control
are equally applicable to manual systems.
(a) Financial officers should be involved in the development
of systems to ensure that financial expertise is made available
to systems development projects and that proper financial
controls are included in systems being developed.
(b) The objectives of the system being developed will
determine the degree of financial officer responsibility in that
development. The level of involvement necessary in order to
exercise this responsibility will vary according to the financial
expertise of others involved in the project. In some
program-related systems development projects, it may be possible
for the financial officer to exercise this responsibility by
relying on the work of financial control specialists in the
program.
As a member of the department senior management team, the
senior financial officer will usually be involved in management's
review and approval of each phase of a systems development
project.
In the case of program-related financial systems of the
department, the financial officer's role is limited to that of
financial specialist. To exercise this limited responsibility,
the financial officer assumes a dual role: to be satisfied that
financial controls are adequately dealt with and will function as
financial management adviser to the project on such matters as
cost-benefit analysis and post-installation evaluation.
(a) In the case of financial administrative systems the
financial officer is both the financial specialist and the user
of the system, and must exercise comprehensive responsibility for
systems development. To this end, the financial officer must
approve (sign off) documentation of all phases of the project,
after ensuring compliance with the functional responsibilities of
the senior financial officer.
(b) Issues which should be addressed by a financial officer in
reviewing documentation of a financial system are described in
Appendix D.
Enquiries concerning this policy should be directed to your
departmental headquarters. For interpretation of this policy,
departmental headquarters should contact:
Financial and Contract Management Sector
Comptroller General Branch
Treasury Board Secretariat
L'Esplanade Laurier
300 Laurier Avenue West
Ottawa, Ontario
K1A 0R5
Telephone: (613) 957-7233
Facsimile: (613) 952-9613
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