Rescinded [2017-04-01] - Policy on Special Revenue Spending Authorities

The information required in a submission to Treasury Board seeking approval to establish and use net voting will vary according to the nature of the operation. Generally, the following information will be submitted:

• A summary of the proposal, including a brief description of the purpose and the nature of the operations to be financed, the dollar amounts of the authority requested (in terms of gross expenditures, revenues, net cash requirements, limit on revenues available for spending) and the proposed vote wording;
• A description of all operations to be performed, benefits to be obtained, major sources of revenue and major expenditures anticipated;
• Anticipated short and long-term demand for goods and services;
• Principles to be followed in rate setting and the proposed rate structure. In particular, the bases or processes for allocating indirect overhead costs shall be specified;
• Analysis of alternative sources of supply for services or goods to be provided by net voting and justification of a decision to "make" or "buy", if the services or goods could reasonably be subject to commercial competition;
• Plans and performance indicators;
• Any other information considered pertinent.

Treasury Board shall determine the extent to which revenue and expenses shall be equalized, i.e. the degree to which operations will be subsidized through appropriations. Treasury Board shall specify the maximum amount of revenue that may be spent.

Authority to operate net voting must be obtained from Parliament on an annual basis. This authority may be obtained by requesting Treasury Board approval to include additional wording within the appropriate vote of an Appropriation Act. The vote wording should reflect the following:

Rates should be set in accordance with TB policies on cost recovery and charging.

Treasury Board shall approve annually, as part of the annual reference level update, the rates or the basis for setting the rates to be charged in the next fiscal year.

General

The internal accounting system must be designed to meet the requirements and needs of managers, the Treasury Board, the Receiver General and Parliament.

Expenditure and revenue accounting for net voting must comply with Treasury Board policy on the classification of financial transactions including the annual amendment to the Chart of Accounts.

Amounts expended from the Consolidated Revenue Fund for operational expenditures shall be recorded as budgetary expenditures in the fiscal year in which they occur. Amounts received in respect of a net-voted service are credited to the appropriation in the year of receipt, to offset related expenditures for that year. The difference (net annual amount expended) shall be presented in the Public Accounts in a manner similar to expenditures of other lapsing appropriations. Year-end procedures in the Accounts of Canada shall be the same as for all other budgetary appropriations, except that accrued revenues are not credited to the vote until actually received.

The Expenditure Operations and Estimates Division of the Treasury Board Secretariat annually issues instructions as to how net voting shall be presented in the Estimates. Presentation in the Public Accounts shall comply with the directives issued by the Receiver General for Canada.

Authorizations to create or to use a new revolving fund, to amend the aims and limits of the fund's authority, to write-off accumulated deficits, or to terminate operations, may be obtained through an annual Appropriation Act. Authorizations may also be obtained under a special act or be incorporated in a departmental act. The authority to charge a fee to users is approved separately and should be approved prior to the request to establish a revolving fund.

The information required in a submission to Treasury Board seeking approval to establish and operate a revolving fund will vary according to the nature of the operation. In addition to the specific items set out in the policy requirements, the following general requirements are to be submitted:

• A summary of the proposal, including a brief description of the purpose and the nature of the operations to be financed, the dollar amount of the authority requested, the proposed vote wording and the proposed source of funding;
• A description of all operations to be performed, benefits to be obtained, major sources of revenue and major expenditures anticipated;
• A business plan which covers the financial and business line objectives for a three to five year period;
• A forecast of the utilization of the fund to determine the amount of continuing authority required. Pro Forma Balance Sheets and Statements of Operations on such periodic bases as suitably reflect the cyclical operations of the fund would normally disclose this information. A Statement of Changes in Financial Position disclosing resources acquired and obligations assumed by the fund, fluctuations in inventories, accounts receivable, and accounts payable; changes in capital; and expected surpluses or deficits should also be included. The number of years for which forecasts will be made will vary with the nature of the fund;
• Anticipated short and long-term demand for goods and services, sources of revenue and analysis of revenue by business line;
• Principles to be followed in rate setting and the proposed rate structure. In particular, the bases or processes for allocating indirect overhead costs shall be specified;
• Analysis of alternative sources of supply for services or goods to be provided by the fund and justification of a decision to "make" or "buy", if the services or goods could reasonably be subject to commercial competition;
• Plans and performance indicators;
• Description of any existing capital assets to be taken over and an estimate of their present value and remaining useful life;
• Identification of new capital facilities required, with estimates of their costs for the first and such subsequent years as may be directed by the Treasury Board;
• A proposed schedule of rates of depreciation, by category or class of capital assets, to be used to determine the charge to operations as depreciation expense and as a provision for depreciation;
• Resources (other than capital) to be acquired and/or obligations to be assumed by the revolving fund;
• Any other information considered pertinent.

Departments should be guided by the following criteria:

• Organization has a stable mandate which supports the established program objectives of the department;
• Department has the legal authority to charge fees;
• Goods and services are provided primarily for the benefit of specific individuals or groups who pay the full cost of the goods or services provided;
• Revenues and expenses of the organization are closely related;
• There are mechanisms in place for controlling costs, e.g. performance indicators, price and volume variance analysis;
• Revenues and resource requirements are large enough to warrant the administrative and accounting costs of such an operation.

Authority to establish and operate a Revolving Fund must be obtained from Parliament. This authority may be obtained through a special Act of Parliament or by including a specific vote within an Appropriation Act. When authority to establish a Revolving Fund is provided through a special Act of Parliament, that portion of the Act dealing with the Revolving Fund should contain a provision to allow amendments to the Revolving Fund authority to be included in an Appropriation Act. In the situation whereby an authority is obtained through an Appropriation Act the vote wording should include, as a minimum, the following:

Submissions to Treasury Board requesting changes in financial authority shall justify, by appropriate statements, the need for the changed funding requirement. Generally, a quarterly statement of operations and of the change in the financial situation for the past two years and a projection for the next three years will provide the required information. The vote wording should be consistent with the following:

Other changes to Revolving Fund authorities, such as changing the scope of operations or purposes of a Revolving Fund, may be accomplished in the same manner. The appropriate Program Sector of the Treasury Board Secretariat should be consulted concerning information on specific proposals in this area.

When the authority to operate a Revolving Fund has been obtained from Parliament pursuant to the Revolving Funds Act, an Appropriation Act or other legislation, authority to discontinue operations of the fund may be obtained through an Appropriation Act in the first two cases and a similar authority should be included in the separate legislation when the fund is established.

If a decision is made to discontinue operations, departments shall first seek the approval of the Treasury Board to do so. A submission to Treasury Board shall disclose:

• The alternatives available and a recommendation for the continuation of the services provided, if appropriate; and,
• Information and recommendations necessary for the orderly closing out of the fund and, in particular, for the disposition of the assets of the fund.

The required vote wording to terminate a revolving fund should reflect the following:

Rates for pricing purposes

Rates should be set in accordance with TB policies on cost recovery and charging.

Fees and rates submitted for approval to Treasury Board shall take into consideration the accumulated deficit or surplus at the beginning of the fiscal year as well as the estimated surplus or deficit for the entire fiscal year. In certain cases, the estimated surpluses or deficits for a longer period will be considered. In situations where the setting of specific fees and rates is not practical, the revolving fund will propose for Treasury Board approval, the method by which costs will be recovered.

If a revolving fund expects to incur deficits that might prevent it from continuing operations within the dollar amount of its non-lapsing authorization, then either an increase in the dollar amount of the non-lapsing authorization would be required, or the deletion of all or part of the fund's accumulated deficit would need to be sought through Main or Supplementary Estimates. Such an action would require the identification of a source of funds.

If authority is granted to delete all or part of the accumulated deficit of the revolving fund, there shall be a corresponding reduction in the Accumulated Net Charge Against the Fund's Authority (the offsetting entry to the deletion is a debit to this account). Any submission to delete a deficit in the accounts of the fund should include the amount to be deleted and the reason for the deletion. Any additional funding required as a result of write-off of a deficit would also require the identification of a source of funds.

Treasury Board may direct that any operating or contributed surpluses that are not expected to be offset by future deficits be deleted from the accounts of the fund. Such deletion of a surplus would increase the Accumulated Net Charge Against the Fund's Authority (the offsetting entry to the deletion is a credit to this account) and thereby reduce the extent to which the revolving fund would be able to make new expenditures.

Any major change in the forecast operating surplus or deficit during the fiscal year should be reported to the appropriate program Sector of the Treasury Board Secretariat, as early as possible.

As a minimum, the accounting system must provide for:

• the preparation and submission of both periodic and year-end data to the Receiver General in accordance with Receiver General directives to meet all requirements for keeping accounts as a budgetary appropriation; and
• the preparation of both periodic and year-end statements on an accrual basis of accounting in accordance with Treasury Board accounting policies based on Generally Accepted Accounting Principles as defined by the Canadian Institute of Chartered Accountants Public Sector Accounting Board (PSAB) Handbook. Subject to modifications or interpretations by the Treasury Board, the PSAB handbook will be the authoritative reference manual. In situations where a specific item is not covered in the PSAB Handbook, the Canadian Institute of Chartered Accountants Handbook will be used.

The display and disclosure of assets and liabilities in financial statements, as well as the methods used to calculate the depreciation, shall conform to Generally Accepted Accounting Principles as modified by Treasury Board Accounting Policies and shall be consistent from year to year.

Departments and agencies shall account for the fund's operations separately, determine the cost of each product or service and establish a system of accounting and management that provides the information required by Treasury Board and Parliament so that the statements of operations and the financial situation accurately reflect the use made of the approved authority.

The internal accounts of the revolving fund shall include any surplus or deficit arising from the operation of the fund. Accumulated deficits shall remain in the accounts of the fund until disposition is approved by Treasury Board and by Parliament through an Appropriation Act.

Amounts expended from the Consolidated Revenue Fund for working capital, capital expenditures and temporary financing of deficits shall be recorded in a manner prescribed by the Receiver General for Canada and Government of Canada Accounting Policy. Amounts received shall be recorded as recoveries of budgetary expenditures and credited to the continuing authorization in the fiscal year in which they are received. The difference (net annual amount expended or received) will be reported as net use of the non-lapsing authorization in the Accounts of Canada on an annual basis. Year-end procedures in the Accounts of Canada shall be the same as for all other budgetary appropriations.

The Expenditure Operations and Estimates Division of the Treasury Board Secretariat annually issues instructions as to how revolving funds shall be presented in the Estimates. Accounting for revolving funds, presentation and disclosure in the Public Accounts shall comply with the directives issued by the Receiver General for Canada. Funds shall comply with all requirements concerning the display of authorities, programs, activities, standard objects of expenditure, the disclosure of full time equivalents and of capital expenditures.

Within the accounts of a revolving fund, departments maintain an account entitled "Accumulated Net Charge Against the Fund's Authority". This is a control account used to record the amount of its non-lapsing authority that the fund has used. At no time may the balance in this account exceed the amount of the non-lapsing authorization by Parliament for the fund. The account is used to record:

• accumulated net expenditures charged to the Consolidated Revenue Fund by the operation of a revolving fund since its establishment;
• accumulated amounts representing the value of assets placed at the disposal of the fund less amounts of obligations assumed by the fund; and
• amounts of deficits or surpluses that have been authorized to be deleted from the fund.

A separate account is to be used to record accumulated operating deficits or surpluses to the extent that authorization has not been obtained to delete them. Accumulated operating deficits will be charged to the Accumulated Net Charge Against the Fund's Authority account only after Treasury Board approval and parliamentary authority have been obtained to delete them.

Accumulated operating surpluses are to be credited to the Accumulated Net Charge Against the Fund's Authority account only after Treasury Board approval to delete them has been obtained. (It is not necessary to obtain parliamentary authority to delete accumulated surpluses because no increase in spending authority is created by such deletions.)