Rescinded [2017-04-01] - Accounting Standard 3.2 - Treasury Board - Transfer Payments (Grants and Contributions)

1.1 This standard takes effect on April 1, 2012.

1.2 It replaces the version issued on January 2, 2001.

2.1 This standard applies to all departments as defined in section 2 of the Financial Administration Act, and that may be referred to using the term “across government” throughout this standard.

2.2 In this standard, any reference to all or part of the Canadian public sector accounting standards shall be construed as a reference to the Canadian public sector accounting standards valid at the time this standard comes into effect. Any subsequent changes to the referenced Canadian public sector accounting standards will be considered for future inclusion.

2.3 Section 6.2.2 relating to the role of the Treasury Board Secretariat in monitoring compliance does 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 standard within their organizations.

3.1 The consolidated financial statements of the Government of Canada are prepared using Government’s accounting policies, which are based on Canadian public sector accounting standards issued by the Public Sector Accounting Board.

3.2 Where the Canadian public sector accounting standards allow for a choice, the Government of Canada issues Treasury Board Accounting Standards to identify the government’s accounting policy of choice.

3.3 This standard sets out the accounting and reporting requirements for transfer payments in departmental financial statements and the Public Accounts of Canada, which include the consolidated financial statements of the Government of Canada. The standard is based on and is consistent with Canadian public sector accounting standards PS 3410, Government Transfers, and PS 3050, Loans Receivable.

3.4 Transfer payments made by the Government of Canada take a variety of forms – grants, contributions, transfers to other governments, forgivable loans, the significant concessionary terms of some loans, etc. Together they represent a large part of the Government of Canada’s spending. Consequently it is important that there are clear rules that ensure these payments are accounted for and are reported appropriately and consistently in departmental financial statements and the consolidated financial statements of the Government of Canada.

3.5 This standard is issued pursuant to section 7 and subsection 9(1) of the Financial Administration Act and supports Section 5.3 of the Policy on Financial Management Governance. 

3.6 This standard is to be read in conjunction with the Policy Framework for Financial Management, the Policy on Financial Management Governance, the Policy on Internal Control and the Policy on Financial Resource Management, Information and Reporting.

4.1 transfer payments (paiements de transfert)

In accordance with the Treasury Board Policy on Transfer Payments, transfer payments are transfers of money, 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 any goods, services or assets in return. Transfer payments do not include investments, loan guarantees or loans (except for certain loans described in 4.2).

4.2 For the purpose of this standard, transfer payments include the following:

grants (subventions)

Transfer payments to an individual or organization that are not subject to being accounted for by a recipient or are not normally audited by the department, but for which eligibility and entitlement may be verified or for which the recipient may need to meet preconditions. In certain circumstances, the recipient may be required to demonstrate continuous eligibility over the period of the grant. Grants are generally categorized as “other transfers” in Appendix B of PS 3410.

contributions (contributions)

Transfer payments to an individual or organization for a specified purpose pursuant to a funding agreement. The contribution is to be accounted for and is subject to audit. For some contributions, all or part of the contributions may be repayable if conditions specified in the funding agreement come into being. Contributions are generally categorized as “shared cost agreements: reimbursement versus financing arrangements” in Appendix B of PS 3410.

other transfer payments (autres paiements de transfert)

Transfer payments, other than grants and contributions, based on legislation or other arrangements that may be normally determined by a formula. However, once payments are made, the recipient may redistribute the funds among the several approved categories of expenditure in the arrangement. Examples of other transfer payments are transfers to other orders of government, such as equalization payments and the Canada Health and Social Transfer payments. Other transfer payments are generally categorized as “entitlements” in Appendix B of PS 3410.

certain loans (certains prêts)

Forgivable loans, loans to be repaid through future government appropriations and the concessionary terms of some loans. These loans are covered in PS 3050.

4.3 unconditionally repayable contributions (URCs) (contributions à remboursement non conditionnel (CRNC))

The government also uses transfer payment programs to provide URCs. These are contributions where the recipient is expected to repay all or part of the amount and/or where the government expects to receive a financial return. The terms may specify a date or dates for repayment, or may describe the particular time(s) or circumstance(s) that will determine repayment. As a result, URCs are, in substance, loans receivable and shall be classified and reported under “other loans, investments and advances.” They are not transfer payments for the purpose of this standard.

4.4 eligibility criteria (critères d’admissibilité)

Describe who a recipient must be, what a recipient must do, or what transfer terms must be met in order to be able to receive a transfer payment.

4.5 stipulations (stipulations)

Describe how a recipient must use transferred resources or indicate what actions the recipient must perform in order to keep a transfer payment.

4.6 stub period (période tampon)

Is the period between the last date (March 31) covered by the consolidated financial statements of the Government of Canada and the date the consolidated financial statements of the Government of Canada are completed.

5.1 Objective

The objective of this standard is consistent with accounting and reporting for transfer payments in the Public Accounts of Canada.

5.2 Expected Results

5.2.1 Transfer payments are accounted for on a consistent basis across government.

5.2.2 Transfer payments are reported on a consistent basis in the departmental financial statements.

The departmental Chief Financial Officer is responsible for establishing procedures to ensure that the following requirements are met:

6.1 Accounting for grants, contributions and other transfer payments

6.1.1 Transfer payments shall be recognized as an expense in the department’s Statement of Operations in the period that the events giving rise to the transfer payment occurred, as long as:

1. The transfer payment is authorized; and
2. All eligibility criteria have been met by the recipient.

6.1.2 A transfer payment is considered authorized when the authorization described in either Situation 1 or Situation 2 is in place:

• Situation 1
• At the financial statement date, the enabling authority (a legal authority to make payment and a voted or statutory authority) to provide a transfer payment is in place, and an exercise against that enabling authority has occurred that clearly demonstrates that the government has lost its discretion to avoid proceeding with the transfer payment; the exercise of authority shall be evidenced by a funding agreement signed by both parties.

• Situation 2
• At the financial statement date, the actions and communications of the government clearly demonstrate that it has lost its discretion to avoid proceeding with the transfer payment. The loss of discretion shall be evidenced by a funding agreement signed by both parties; the final approval of the enabling authority takes place in the stub period to confirm that the government was demonstrably committed to approving the enabling authority at the financial statement date.

6.1.3 The authority to pay is part of the authorization process. Until the authority to pay is in place, the government retains its discretion to avoid proceeding with a transfer payment. The absence of the authority to pay indicates that authorization is not complete.

6.1.4 Transfer stipulations do not affect the timing of the recognition of a transfer payment as an expense by a transferring government.

6.1.5  All transfers of tangible capital assets shall be recognized as an expense at the net book value of the tangible capital asset that has been transferred.

6.1.6 All transfers of goods that are not capital assets or services shall be recorded at the direct costs by the government in procuring the goods or services.

6.1.7 Given the non-exchange nature of transfer payments, the government neither acquires an asset (e.g., prepayment/advance) nor has a liability extinguished by providing a transfer payment.

6.1.8 If any repayment conditions specified in the funding agreement come into being and it is certain that full or partial repayment is required, departments will set up a receivable and reduce the transfer payment expense of the current period. Appropriate valuation allowances would be recorded.

6.1.9 Contingent recoveries are not accrued. Nevertheless, disclosure of the existence of a contingent recovery that is considered likely to be realized provides useful information and should be included in a note to the financial statements. The following information should be included:

1. The nature of the contingency; and
2. An estimate of the amount of the contingent recovery, or a statement that such an estimate cannot be made.

6.2 Accounting for loans with significant concessionary terms

6.2.1 In cases where a loan has significant concessionary terms (such as a low interest rate or none at all), the concessionary portion shall be accounted for as a transfer payment expense.

6.2.2  The Consolidated Revenue Fund lending rate that is in effect for a similar term on the date the funding agreement is concluded, will be used as the discount rate in determining the present value of the loan. The concessionary portion shall be the difference between the face value of the loan and its present value at the time the loan is made. Where the concessionary portion of the loan is greater than 25 per cent of the face value of the loan, it shall be considered to have significant concessionary terms.

6.2.3  Appropriate valuation allowances shall be recorded for loans receivable to reflect collectability and risk of loss.

6.2.4 The provision for the valuation allowance of a concessionary loan receivable shall be accounted for as a transfer payment expense, whereas the provision for the valuation allowance of any interest receivable shall be recorded as a bad debt (program expense).

6.2.5 Forgivable loans and loans to be repaid through future government appropriations shall be accounted for as transfer payment expenses, unless they meet the definition of a loan receivable where the government has a reasonable expectation of its recovery.

7.1 Deputy heads are responsible for:

• Monitoring adherence to this standard within their department, consistent with the provisions of the Treasury Board’s Policy on Financial Management Governance, Policy on Internal Control and Policy on Financial Resource Management, Information and Reporting.

• Ensuring appropriate and timely remedial action is taken to address any significant deficiencies related to the implementation of this standard within their department.

7.2 The Treasury Board of Canada Secretariat is responsible for:

• Monitoring compliance with all aspects of this standard and achievement of expected results in a variety of ways including, but not limited to, Management Accountability Framework assessments, departmental financial statements and the results of internal and external audits, in addition to working directly with departments.

7.3 The Office of the Comptroller General is responsible for:

• Reviewing this standard to reflect, as necessary, any subsequent changes to the Canadian public sector accounting standards.

8.1 The consequences of non-compliance with this standard are identified in Section 8 of the Policy on Financial Resource Management, Information and Reporting.

This section identifies other significant departments with respect to this standard. In and of itself, it does not confer an authority.

9.1 Treasury Board Secretariat

The Treasury Board of Canada Secretariat provides interpretive advice and guidance on this standard.

10.1 Relevant legislation

• Financial Administration Act

10.2 Related policy instruments and publications

• Directive on Transfer Payments
• Financial Information Strategy (FIS) Accounting Manual
• Policy on Financial Management Governance
• Policy on Financial Resource Management, Information and Reporting
• Policy Framework for Financial Management
• Policy on Internal Control
• Policy on Transfer Payments
• Treasury Board Accounting Standards

10.3 Related external standards and specifications

• Public Sector Accounting Handbook, Section PS 1201 – Financial Statement Presentation
• Public Sector Accounting Handbook, Section PS 3410 – Government Transfers
• Public Sector Accounting Handbook, Section PS 3050 – Loans Receivable

Please direct enquiries about this standard to your department’s headquarters. For interpretation of this standard, departmental headquarters should contact:

Financial Management Sector
Office of the Comptroller General
Treasury Board Secretariat
Ottawa ON  K1A 0R5

Email: Contact Financial Management Website by e-mailfin-www@tbs-sct.gc.ca
Telephone: 613-957-7233
Fax: 613-952-9613