CIRCULAR NO.: 1987-18
T.B. MINUTE: 804875
FILE NO.: 4110-05
DATE: April 15, 1987
TO: Deputy Heads of Departments, and Heads of Agencies and
Departmental Coporations
SUBJECT: Accepting Credit Cards as Means of Payment for
Goods and Services Provided by the Government
PURPOSE
1. This circular is to inform departments and agencies of amendments to the
policy and procedures covering the acceptance of credit cards as a means of
payment for government goods and services.
2. This circular sets out the consequent changes to Section 10.5 of the Guide
on Financial Administration "Claiming of Revenue and Receipts".
APPLICATION
3. This circular applies to "departments" as defined in Section 2
of the Financial Administration Act (FAA).
BACKGROUND
4. In 1980, the Treasury Board (TB) adopted a policy that introduced the
acceptance of credit cards issued by financial institutions as a means of
receiving immediate payment for government goods and services. Until recently,
the policy had been implemented by some departments on a limited scale under
individual agreements subject to various "merchant fee" rates.
However, many departments are now considering accepting credit cards as a way of
expediting increased revenues from cost recovery and revenue generation
activities. To this end, interim agreements that were approved by the Office of
the Comptroller General of Canada (OCG) are being replaced by standard,
government-wide Master Agreements, reflecting the principles below.
5. An assessment conducted by the OCG in May, 1985 revealed that broader
acceptance of credit cards would provide significant cash management benefits
including:
- earlier cash inflows to the Consolidated Revenue Fund and cost reductions
realized through:
- earlier receipt of payments,
- reduction of workload and expense of credit functions, and
- reduction of uncollectable accounts receivable;
- increased convenience and ease of payment for the public;
- immediate and exact settlement of foreign sales in Canadian currency; and
- opportunity for increased sales.
6. The following amendments to TB policy and procedures are intended to:
- permit centralized negotiations of Master Agreements in order to obtain
the best uniform service charge (i.e. "merchant fees"); and
- avoid duplication in setting up and implementing credit card acceptance
arrangements and procedures.
POLICY AND PROCEDURES
7. Because of the wide variety of activities that result in payments to the
government, each department to whom the policy applies will determine where
accepting credit cards is appropriate to its particular circumstances. Credit
card acceptance is not mandatory.
8. In deciding whether to accept credit cards, departments shall ensure that
potential applications are justified in light of the cash management gains,
administrative costs, and service charges involved.
9. In accordance with the Master Agreements, departments shall not
discriminate as to rates, services or other conditions with respect to any
transaction in which a charge card is used. Departments shall ensure, however,
that costs associated with accepting credit cards are built into the general
rate structure and allocated uniformly to all customers or clients.
10. Those credit card systems that satisfy applicable governmental cash
management objectives and TB policy may be used. Currently, only Visa and
Mastercard meet such criteria. To ensure maximum convenience to the public and
optimize revenue generation, cards of both of these systems will be accepted
where credit card acceptance is implemented.
11. The procurement of any equipment related to credit cards (including
manual imprinters as well as point-of-sale terminals), shall not be part of any
Master Agreement or any addenda thereto. Departments should assess the
cost-effectiveness of purchasing or renting such equipment, which shall be
acquired through normal procurement channels and meet the standards established
by the Receiver General. Where warranted by high volumes of sales and
transactions as well as other operational considerations (e.g. speed of
operations and productivity factors) departments should consider the use of
electronic point-of-sale terminals.
12. No fee, charge, refund or adjustment related to a credit card transaction
shall be paid out of public money to be deposited to the credit of the Receiver
General (e.g. credit card sales vouchers presented to a financial institution by
a department for such credit) or by any means other than in accordance with the Payment
Requisitioning Regulations, the Receipt and
Deposit of Public Money Regulations and the Cheque
Issue Regulations.
13. Credit Notes and Credit Slips, which are recognized by the TB as payment
instruments under section 28(1) of the FAA, shall be the normal means of
effecting refunds and adjustments on credit card transactions. Credit Notes and
Credit Slips shall be issued in accordance with the same principles as outlined
in the policy on "Non-Cash Credits and Adjustments" in section 10.5 of
the Guide on Financial Administration, and the Repayment
of Receipts Regulations. In addition, as payment instruments, they must
be authorized pursuant to section 26 of the FAA. Departments shall also remind
issuers of Credit Notes and Credit Slips of the importance of showing the
correct effective date to ensure that the Card-holder receives proper credit.
14. The above Master Agreements apply to all government applications for
credit card acceptance. Where required, terms and conditions unique to a
particular department and commensurate with TB policy will be introduced as
addenda to these agreements.
15. Subject to applicable TB policy and guidelines, the RG will conduct the
necessary negotiations and execute the ensuing agreements and addenda for credit
card acceptance arrangements. Departments shall deal exclusively through the RG,
who will assist them in implementing the necessary arrangements and who may
issue directives specifying operational procedures to be followed.
16. For the purpose of charging for their services, the financial
institutions have agreed to treat all departments to whom this policy applies as
one customer. Except for specific charges for special requirements that shall be
paid separately by the department, the service charge for all credit card
transactions will be calculated using the uniform rate as stated in the interim
or Master Agreement that applied at the time the transaction was effected. These
standard service charges will be billed to and, effective April 1, 1987, paid by
the RG monthly, and charged to the appropriation voted to the RG to compensate
financial institutions for banking services provided. The RG is also responsible
for the reconciliation, accounting and monitoring of the accuracy of these
charges, and for providing sufficient data to departments and agencies for
internal accounting, reconciliation and monitoring purposes.
EVALUATION
17. Because of the government-wide cost implications, the OCG (Cash
Management Directorate) will evaluate the effectiveness of this policy on a
continuing basis.
ENQUIRIES
18. Enquiries about the operational aspects of these arrangements should be
directed to the:
Director,
Banking and Cash Management Branch,
Accounting, Banking and Compensation Directorate,
Department of Supply and Services,
Place du Portage,
Phase III, Core 10A2,
Ottawa, Ontario.
K1A 0S5
Tel.: (819) 997-6830
19. Enquiries concerning this circular should be directed to the:
Cash Management Directorate,
Policy Development Branch,
Office of the Comptroller General,
L'Esplanade Laurier,
West Tower, 8th Floor,
300 Laurier Street,
Ottawa, Ontario.
K1A 1E4
Tel. (613) 957-9690
J.A. Macdonald,
Deputy Comptroller General,
Policy Development Branch.
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