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(a) Departmental financial systems shall be designed,
maintained, and operated so as to provide to Public Works and
Government Services on a timely and accurate basis, the
information required for the discharge of its Receiver General
responsibilities relating to the Consolidated Revenue Fund and
the accounts of Canada.
(b) Departments shall establish and maintain adequate controls
within their systems to ensure the completeness, accuracy, and
authority of all financial information and of all other
information that forms the basis for calculation of financial
information or is used for management control and
accountability.
(c) Departments shall ensure that suitably qualified financial
personnel are directly involved in all phases of development of
financial administrative systems and in the definition of
controls within program-related systems.
(d) Departments are required to reconcile on a monthly basis
the cash accounting information in its principal accounting
system with the Central Accounts kept by the Receiver General for
Canada.
(a) Properly authorized journal vouchers or requisitions for
payment by cheque, interdepartmental settlement advice, or other
payment instrument should be forwarded promptly and directly to
the appropriate office of Public Works and Government Services,
thereby expediting the processing of transactions.
(b) Where cost-effective, departmental systems should be
integrated with each other and interface with Receiver General
systems to avoid duplication of effort and to ensure the
completeness and consistency of all data reported.
(c) Departmental financial systems should be designed to
permit the periodic entry and reporting of information on
undischarged commitments so that officers exercising financial
signing authorities may know the amounts of undischarged
commitments and free balances for each appropriation and
allotment.
(d) Departmental financial systems should be designed to
provide timely, accurate, and meaningful information on the
activity elements involved in carrying out departmental programs.
Accrual information should be entered into financial systems
where necessary, in order to meet this objective.
(e) Departments should investigate the use of existing
financial systems of Public Works and Government Services, other
government departments, or commercial suppliers before
considering the development of new financial systems.
(f) Departments should ascertain, before any major revision to
a financial system is implemented or before any major new
financial application is made operational, that adequate security
features exist and that the internal controls have been examined
and found adequate by qualified auditors who are independent of
the suppliers and users of the system.
(g) When a separate service organization is responsible for a
departmental financial system, or an element of such a system,
the department being serviced should take whatever steps
necessary to ensure the adequacy of the system, its operating
environment, and its products.
(h) For all significant systems projects, departments should
apply the standards for management and control of EDP projects or
their equivalent.
(a) This chapter is devoted to the practical application of
accounting principles and standards for control in departments
and agencies and includes:
- a description of accounting systems in the Government of
Canada;
- practices for accounting for expenditures on a cash,
commitment, accrual, and cost basis;
- practices to be applied in establishing and maintaining a
chart of accounts; and
- the controls required to ensure the completeness, accuracy,
and authority of financial records.
(a) For the purposes of this chapter the following terms are
defined:
Financial systems (systèmes financiers) - are
systems through which financial information is used to account
for the operations of an organization, to control its assets and
liabilities, and to exercise management control and
accountability. These systems encompass both financial
administrative systems and program-related financial systems.
Financial administrative systems (systèmes
d'administration financière) - are those financial systems
which the financial element of an organization uses to meet its
responsibility for financial administration.
Program-related financial systems (systèmes
financiers à l'appui de programmes) - are those financial
systems which the program managers of an organization use to meet
their responsibilities as program managers.
Program-related systems (systèmes à l'appui de programmes) - are those systems which are required for the
operational or technical needs of a program and which are the
primary responsibility of the program managers of an
organization.
(b) Responsibility for accounting in the Government of Canada
is divided. Some responsibilities are allocated to the Receiver
General; others are allocated to individual departments and
agencies; and Treasury Board has authority to prescribe the
manner and form of the accounts of Canada and of departmental
accounts.
(c) Departments are responsible for establishing and
maintaining adequate systems to account for, control, and report
on financial, human, and physical resources within their purview.
These systems include not only the main departmental accounting
system and related subsidiary systems but all systems directly or
indirectly linked with the authorization and recording of
expenditures, the collection and recording of revenue, the
accounting for custody and use of physical assets and the
collection, recording, and reporting of financial or related
non-financial information used in evaluating the efficiency of
departmental projects and programs.
(d) The adequacy of these systems is a matter of judgement,
and therefore each situation should be assessed individually.
Departments are expected to ascertain the adequacy of security
and internal controls before any major new system is implemented
and to periodically re-evaluate these systems as to their
adequacy. Such appraisals should be performed by qualified
persons independent of the suppliers and users of the system. As
a minimum, a system must be maintained to satisfy the
requirements of the Financial Administration Act and all
other acts that may be applicable, the policies and regulations
of Treasury Board, and the requirements of the Receiver
General.
This section describes the Receiver General systems, the
central accounts, the departmental reporting services provided on
a service basis by Public Works and Government Services, and
departmental financial systems.
(a) Public Works and Government Services maintains a central
accounting system to discharge the Receiver General's
responsibilities relating to receipts into and expenditures out
of the Consolidated Revenue Fund and relating to the publication
of the Public Accounts of Canada, as well as to enable it
to provide accounting services to departments.
(b) In this central system, accounting data, both aggregate
and detailed, are assembled at one central location, where
information may be identified and extracted according to the
diverse needs of individual users in departments and central
agencies. Computers are used extensively to assist in assembling
and processing the accounting detail, and the central pool of
information, or data bank, is held on magnetic files. This system
is supported by several subsystems that either assemble
accounting data from various sources or process information
extracted from the data bank.
(c) The data bank approach may best be illustrated by
comparison with the alternative approach of consolidation
accounting. Consolidation accounting requires that each
department or operating unit maintain a completely independent
set of accounting records, and that reports on the government as
a whole be prepared by consolidating information generated and
reported by the individual accounting systems. Consolidation
accounting also requires that each independent set of records be
reconcilable to the Central System. A few departments have
developed accounting systems that are largely independent of the
central system. These impose special problems and cause some
duplication of effort because transactions must be separately
input to the central system and to the departmental system, and
departmental accounts must be reconciled with the central
accounts. To avoid these problems, departments are encouraged to
develop interfaces with the central system in order that data may
be exchanged in machine-readable form.
(a) Public Works and Government Services maintains a network
of services offices across Canada, each having the capacity and
authority to issue cheques for the Receiver General. All
departments must prepare, authorize, and submit payment
requisitions to services offices in accordance with the Policy
on Payment Requisitioning (Chapter 2-6) of the
Comptrollership Volume, Treasury Board Manual. Technical
specifications have been developed by Public Works and Government
Services to permit machine-readable input of accounting data
associated with payment requisitions.
(b) Services offices are located in the National Capital
region, in close proximity to the departments that they serve,
and in provincial capitals and other principal cities in Canada.
Each office is assigned a unique series of cheques, and cheque
requisitions are forwarded to a services office for processing
through computerized cheque issue and accounting routines.
However, cheques that are urgently required can be manually
issued. The related cheque issue and accounting information is
transmitted daily in machine-readable form by electronic means to
the central data bank in Ottawa.
(c) Services offices are responsible for:
- verifying the authority of cheque requisitions;
- controlling unused cheques;
- preparing, signing, and issuing cheques;
- recording cheques issued; and
- entering cheque issue information in the central accounting
system.
(d) There are minor deviations to these generalized procedures
for payroll cheques, payments in foreign currencies, cheque
cancellations, payments by money order, and interdepartmental
settlement advices.
(e) There are standard procedures for the redemption of all
cheques issued by Public Works and Government Services. Chartered
banks present all Receiver General cheques which they have
honoured each day to the Bank of Canada and its agencies, and on
the same day the bank reimburses the chartered banks. On the
following day, the Receiver General reimburses the Bank of Canada
and the paid cheques are delivered to Public Works and Government
Services, where all Receiver General bank accounts are
reconciled.
Non cheque-issue accounting transactions include receipts and
transactions recorded on journal vouchers and interdepartmental
settlement advices. The procedures for entering these
transactions in the central accounting system are similar to the
cheque issue procedures, except that they are input to the
accounting routines only and not to the cheque issue routines.
Each transaction must be properly authorized and submitted to a
services office in accordance with appropriate control procedures
for encoding and input to the main accounting system.
(a) The data bank is a collection of magnetic files that
includes all accounting transactions input to the central
accounting system. These files are available for access by the
central computers.
(b) Accounting information is received at the data bank by a
variety of means. Regional services offices transmit data
electronically; centralized cheque issue and pay systems provide
magnetic tapes; and some special types of information, received
directly from departments, may arrive on magnetic tapes, punched
cards, or even on source documents requiring encoding.
Transactions are assembled daily and merged weekly to produce
cash statements.
(c) Each individual accounting transaction is recorded in the
data bank and is identified by a series of code numbers that
include departmental accounting codes on the original source
document, code numbers assigned by accounting and local services
offices during the batching process, and any coding imposed by
computer routines. The coding structure is standard, but it can
be adapted to meet the specific requirements of each department.
Through a series of specially designed control files that
interpret the coding attached to transactions, a user of the
system, whether it is a department or a central agency, may
specify what data are to be selected from the data bank and the
format, sequence, amount of detail, and totals in which they are
to be reported.
(a) The central accounts are maintained by the Receiver
General in accordance with statutory responsibilities, one
account for each appropriation as voted by Parliament and one
account for each asset, liability, and reserve. The accounts are
prepared by extracting from the data bank all transactions with
source codes that identify cash receipts, expenditures, and
transfers between appropriations. They provide the information
that is reported in the monthly Statement of Financial
Operations and annually in the Public Accounts.
(b) Specialized accounting reports are prepared in the same
way to meet the needs of such organizations as the Department of
Finance, the Bank of Canada, and Statistics Canada for
information on the government as a whole.
(a) The departmental financial reporting services provided by
Public Works and Government Services are a by-product of its
cheque issue function and are based upon the data in the central
accounting system data bank of the Government of Canada.
(b) Primary responsibility for using the available services
rests with client departments. Public Works and Government
Services is willing to advise client departments on their service
needs and on accounting, reporting, and contracting
practices.
(c) The financial reports produced by the central accounting
system generally include only cash transactions. Many departments
have therefore developed supplementary accounting systems to
provide reports that include additional information, such as
accruals, commitments, detailed cost information, budgets, or
variance analysis. This information can then be submitted to
Public Works and Government Services to be included on management
reports designed for this purpose.
(d) Departmental financial officers must develop their own
accounting controls on the basis of a thorough understanding of
the services being provided to their departments by the
departmental reporting services of Public Works and Government
Services.
Where computerized departmental accounting systems exist,
every effort should be made to develop interfaces with the
central accounting system. This involves submitting data to
Public Works and Government Services on magnetic tape or some
other machine-readable medium in a form that can be accepted by
the central system. Conversely, data may be provided by Public
Works and Government Services in a form acceptable to
departmental systems.
(a) A control account is an account in one accounting system
whose balance at any point in time is equal to the total of the
balances of all the detailed accounts in a subsidiary system. In
well-designed computer, mechanical, and manual accounting systems
the accounting entries of a subsidiary system are simultaneously
posted directly, or accumulated for subsequent posting in total,
to the control account of the principal system. The use of the
control account device provides a means of ensuring that the two
systems are in agreement.
(b) The account maintained for each parliamentary
appropriation in the central accounts of the government may be
regarded as a control account that is supported by a number of
detailed accounts in the departmental accounting system.
(c) Where there are subsidiary accounting systems for such
items as accountable advances, inventories, accounts receivable,
loans, interest, grants and contributions, securities on deposit,
and imprest accounts, the principal accounting system should
contain control accounts. For example, one account showing the
value of inventories in stock that would be supported by detailed
inventory records can be maintained in the departmental accounts.
In some circumstances the subsidiary records may not be a normal
accounting record but an open file of source documents, such as
commitments or accounts receivable.
(a) All control account balances should be independently and
regularly agreed to the totals of balances in the subsidiary
accounting systems. Specifically, each department is required to
reconcile on a monthly basis the cash accounting information in
its principal accounting system with the central accounts kept by
the Receiver General for Canada. Generally, other control
accounts should be reconciled monthly, but daily, weekly,
quarterly, or even annual reconciliations may be appropriate in
some circumstances. When the control accounts do not agree with
the subsidiary system, the differences should be identified and
corrected. Because reconciliations become increasingly difficult
the longer they are postponed, they should all be regularly
reviewed and approved by supervisory financial officers.
(b) Where computerized departmental accounting systems are
used, each of the previously described machine-readable
interchange available should be investigated to see if cost
savings can be achieved through systems interface and
integration.
(a) When a departmental financial system, or some element of
such a system, is designed or operated by a separate service
organization, the department being serviced should take whatever
steps are necessary to ensure the adequacy of the design,
operating environment, and products of the system. This is not
intended to be restrictive, because the use of common service
organizations is frequently an efficient and economical
alternative that should be encouraged. However, the department
being serviced is ultimately responsible for the completeness,
accuracy, and authority of its accounting records and must
therefore assure itself that it has adequate means for assessing
the reliability of the system and for performing the appropriate
supplementary internal controls.
(b) When a department assigns elements of its accounting
responsibilities to a service organization, such a delegation
should be the subject of a written agreement, authorized by the
senior financial officer of the department and specifying
precisely what services are provided, at what cost, and what
responsibilities are assumed by the service organization for
accounting and internal control. Normally, the agreement should
also specify the rights of the department being serviced to
obtain information on:
- the design and operation of the systems operated on its
behalf by the servicing organization;
- any amendments made to these systems; and
- the results of independent audits of these systems.
(c) In some cases, it may be desirable for the department
being serviced to insist on the right to conduct its own audit of
systems operated by the servicing organization. For practical
reasons, such a provision could not be included in agreements in
which Public Works and Government Services is acting as the
servicing organization. It should also be recognized that it may
not be practical for Public Works and Government Services to
obtain prior approval of clients for all systems amendments;
nevertheless, client departments should be promptly informed of
amendments as they occur, and they should be consulted before
changes are made that may affect the content of the financial
information they receive. It is the responsibility of senior
financial officers in departments to take whatever steps are
necessary, and retain a record of these, to satisfy themselves
that agreements with servicing organizations are being adhered to
and are adequate in relation to departmental systems and to the
requirements of this volume.
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