Rescinded [2009-10-01] - Policy on Specified Purpose Accounts

1. Departmental policies and procedures should clearly state that the manager responsible for the funds held in a specified purpose account is accountable for the management of the funds and adherence to this policy. A clear, precise accountability statement is particularly important in the case of cost-sharing or similar arrangements, gifts, donations, bequests, contributions and endowment funds.
2. Adequate internal controls, including monitoring and periodic reconciliation, must be in place. A complete audit trail must permit the tracing of all transactions related to the specified purpose account.
3. As noted in the policy requirements, funds recorded in a specified purpose account may be transferred to miscellaneous non-tax revenue as long as there is a legislative basis for such a transfer. This could occur when, for example, amounts received as guarantee deposits are forfeited to the government.
4. When authorized by the enabling authority (legislation, contract, agreement, etc.), administration costs may be charged to specified purpose funds. Administration costs can be charged directly to the specified purpose account or the funds to pay such charges may be transferred to a revenue account. The latter procedure would be efficient only if the department has net-voting or revolving fund authority which would authorize the re-spending of the money covering costs charged to the account.
5. When the legislation, or other establishing authority, does not authorize the cost of administration to be charged to the account, costs incurred by the department for the administration of the funds held in a specified purpose account must be charged to a departmental appropriation.
6. Unless specifically allowed by legislation, specified purpose accounts cannot go into a debit balance. Therefore, disbursements must not be made from a specified purpose account if money is not available: the expenditures should be delayed until funds are received. Should a deficit result from error or oversight the balance must be restored promptly. Any payment made with appropriated funds may not be reimbursed at a later date with specified purpose funds.
7. Specified purpose accounts may not be used to record interdepartmental transactions. However, an exception occurs when specified purpose funds are used to purchase goods and services from another department with revolving fund or vote netting authority that is not otherwise involved with the specified purpose moneys (i.e. not part of the cost-sharing or joint project agreement). This procedure is beneficial for the providing department only if vote netting or revolving fund authority is in place since without such authority, the department may not respend the amounts received and the money must be charged to miscellaneous non-tax revenue.

1. Trust accounts are established to record the deposit of money in the Consolidated Revenue Fund, or the receipt of securities, when these funds must be administered by the Government of Canada according to specific terms and conditions of a trust agreement or legislation establishing a fiduciary relationship. The funds remain the property of the beneficiary and consequently represent a financial obligation of the Government of Canada.
2. In order to establish a trust account, a true fiduciary relationship must exist between the government (trustee) and another party (donor): that is, although the government does not own the funds, it holds the title of property (has control of the funds). In the past many "trusts" have not met the requirement of a "true" trust; these should more properly be characterized as government obligations or administered funds.
3. Because of the special nature of true trust arrangements wherein powers are conferred on and duties imposed on the trustee, the establishment of a trust and the acceptance of such powers and duties is a very serious matter, especially since most trusts are established for a long period of time.
4. The establishment of a trust imposes on the trustee a number of duties, of which two have implications for the financial management of the specified purpose account:
   • The first duty is to account. The trustee must ensure that proper accounts of all the transactions related to the trust funds are kept in good order along with the records of decisions. Also, accounts must be rendered to the beneficiaries at appropriate intervals.
   • The second duty is to invest. Since funds in trust must be managed for the benefit of the beneficiary, it is important that the funds earn a return for the beneficiary. There are two options in this regard: to invest the funds or to pay interest on the funds held in trust. In both cases, appropriate legal authorities are required. In addition, if the investment option is available (rarely the case), particular care and prudence should be exercised in the selection of good investments that are suitable in accordance with the terms of the trust.
5. Transactions recorded in a trust account are limited as follows:
   • The receipts and credits will consist of cash and securities received from outside parties or of benefits (and interest, if applicable) payable to beneficiaries directly by the government;
   • Charges and payments are limited to the balance in the account and may only be made to or on behalf of the beneficiary, in accordance with the terms and conditions of the trust agreement. When authorized by the legislation or the trust agreement, administrative fees can be also charged to the account.

1. Cost-sharing agreements are arrangements whereby the parties involved agree to share specified costs but not to participate directly in or assign staff to a common undertaking.
2. Joint project(s) agreements are arrangements whereby the parties involved agree to participate jointly in the actual carrying out of a project. This would involve the sharing of resources, the purchase of goods or services, the hiring of personnel, and so on.
3. A joint venture is an arrangement where in addition to the sharing of the control and contribution of the resources, profits/surplus and especially the losses are also shared. In such a case, all parties are liable for all obligations incurred in carrying out the joint venture. A partnership is similar to a joint venture.
4. Although departments may enter into cost-sharing and other similar project arrangements, joint ventures and partnerships are to be avoided unless the department is specifically authorized by legislation to become involved in them. Accordingly, the Department of Justice must be consulted prior to the signing of a joint project agreement in order to ensure that all the legal implications have been identified and evaluated.
5. A specified purpose account is required under a cost-sharing, joint project, joint venture or partnership agreement only when funds are received in advance from the external parties to the agreement.
6. As stated in the policy requirements, funds received from outside parties for the purposes of cost-sharing or joint project agreements must never be used to reimburse departmental expenditures; funds must be received in advance and expenditures shall be charged directly to the account.
7. If, in addition to the lead department, the agreement involves other federal departments or agencies, funds contributed by these departments and agencies must not be deposited in the specified purpose account. These organizations must either pay their share directly out of their appropriations or put their funds in a suspense account and place the money at the disposal of the lead department.
8. Formal agreements concluded with external party(ies) should specify: the scope of the project, the amount and timing of receipts, the types of expenditures to be made on behalf of the other party, the final disposition of the funds, the final disposition of assets if purchased using funds in the specified purpose account and any other provisions that may assist the financial management of the account (e.g., payment of interest on late payment of suppliers, unforeseen expenditures, dispute resolution mechanisms, etc.).
9. Unless specifically agreed to by the outside parties administrative costs may not be charged to the specified purpose account. Administrative costs are normally part of the department's contribution to the collaborative arrangement.
10. Capital goods purchased under the agreement using funds provided by the external contributor(s) and which will remain the property of the Crown are subject to the same controls and approvals that apply to capital expenditures generally, i.e., expenditure approval, inventory control, etc.
11. When under a joint project agreement non-federal employees work in a federal facility under federal employee supervision, the agreement must clearly specify the nature of the work, the length of time, and any other provision which would help to prevent the creation of an employer/employee relationship.
12. Salaries of employees (indeterminate or term) may be paid from a specified purpose account if:
    • it is specifically provided for in the agreement with external parties; and
    • the remuneration (which may include the government's share of employee benefits plans if part of the agreement) is directly charged to the specified purpose account (no reimbursement of departmental appropriation).
13. Departments should ensure that they use proper cost recovery authorities when selling goods or services or renting facilities. Special purpose accounts must not be used to by-pass or avoid using cost-recovery.
14. Where a contribution is received from a third party (either from the private sector or the non-federal public sector) towards a federal endeavour (e.g. an exploration or other research project, the electronic highway, etc.) and the third party doesn't receive goods or services of commensurate value in return (not counting publicity/goodwill), any money received for the purpose would be specified purpose account moneys.
15. Where the private sector makes a contribution towards a federal endeavour and does receive goods or services of commensurate value in return (for example, free testing of a product or process), the money received is not specified purpose account money, but cost-recovered non-tax revenue.

1. For the purpose of this policy, an endowment is constituted by funds acquired by donation or bequest subject to the following conditions:
   • a formal agreement is concluded between the donor and the department responsible for the administration of the endowment fund;
   • the agreement outlines the mechanisms governing the administration of the fund as well as the terms of payment of interest. These terms must be approved by the Minister of Finance;
   • the agreement specifies that only the income, that is the interest paid to the account, will be spent for the purposes specified by the donor. The capital must be maintained intact.
2. Scholarship programs must be administered in accordance with the terms of the endowment establishing the program.
3. Gifts, bequests and donations to the Crown may be made with or without conditions. Any amounts received as gifts, bequests and donations for no specified purpose and without any condition or requirement as to the use of the funds are to be directed to Public Works and Government Services Canada to be credited to the Debt Servicing and Reduction Account, as per section 4 of the Debt Servicing and Reduction Account Act.
4. Any amounts received, for a specified purpose, as unconditional or general gifts, bequests and donations are to be used or spent in accordance with the mandate of the organization and with any relevant financial provisions that may be part of the legislation governing the organization.
5. Any amounts received as conditional contributions, gifts, bequests and donations, i.e., where the object of expenditure is clear and specific, are to be used or spent only for the purpose stated. The Repayment of Receipts Regulations require that funds received that cannot be used for the purpose for which they were donated, or in accordance with the terms and conditions of the donation must be returned to the donor.
6. Since the acceptance of a contribution, bequest, donation, or endowment may impose costs and certain obligations on the part of the Crown (reflecting the purposes, terms and conditions on which the donation is made), it is advisable that clear guidelines on what the department will and will not accept be established at the outset.
7. Documents supporting any contribution, gift, bequest, donation or endowment are official records and are to be filed and placed in an archive.
8. When the department is involved in solicitation of donations, all fees, commissions and administrative expenses relating to the solicitation and management of donations would be an operating expense of the department, chargeable to the usual vote for operations, unless the donation agreement specifies otherwise. No interest would accrue or be paid on the balance of the account. Care must be taken to distinguish between true donations and revenues from concessions, licensing or other royalty arrangements which would more properly be treated as user fees.

1. Where the federal government administers a program or a portion thereof on behalf of a province (for example, a provincial program that supplements federal assistance to a particular group or a particular segment of industry),
   • money received from the province to pay entitlements under the provincial program would be SPA moneys; while,
   • money received from the province for the cost of administration would not be SPA money at all, but cost-recovered, non-tax revenue.
2. Where a provincial government agrees to contribute towards-or share in the cost of-a federal program, any money received for the purpose would be special purpose money, regardless of whether it goes towards direct program expenditures or the costs of administration.
3. Where a provincial government shares a federal facility and contributes towards the cost of that facility, any money received is cost-recovered, non-tax revenue, and not SPA funds.

1. Where funds are received from the private sector or the non-federal public sector as pre-payment for future unspecified goods or services to be drawn upon when and as goods or services are requested, the money received could be recorded in a specified purpose account.
2. Charges for the goods or services will be transferred from the SPA to revenue as goods or services are provided, just as if payment had been made at the time.
3. Where funds are received as pre-payment for specified goods or services, the money received will not be recorded in a specified purpose account but as non-tax revenue.

1. Where an award is made to the Crown and it has been stipulated by the court that the moneys are to be used for specific purposes, the funds are credited to a specified purpose account and paid out for the specified purposes.
2. No interest would be payable on this type of account and expenditures would be limited to contractual payments, other direct expenses, and grants and contributions. Grants and contributions would be issued, in accordance with the normal grants and contributions rules, to provide financial assistance to projects undertaken by others that are consistent with the purposes for which the funds were awarded.

1.1 Background

Until 1985-86 all specified purpose account transactions were classified as non-budgetary and the balances of the accounts were reported as liabilities. In 1986, a change in accounting policy was introduced for those specified purpose accounts that are similar to departmental activities and that are not defined as financial obligations of the government. Such accounts are budgetary and are consolidated with government revenues, expenditures and accumulated deficit. The category of consolidated budgetary accounts includes all specified purpose accounts which are used to account for and control the funds received and disbursed in relation to the administration of the following.

1.2 Fees and levies

These are fees or other levies imposed by statute and earmarked for a special purpose by the statute. Examples of such specified purpose accounts are the Unemployment Insurance Account and the Environmental Studies Research Funds account.

1.3 Budgetary insurance accounts

These are programs which are not for employees or former employees of the government. This category includes accounts such as the Fishing Vessel Insurance Plan and the Land Assurance Fund.

1.4 Other budgetary specified purpose accounts

This is a broad category which includes:

• contributions, gifts, donations, bequests, or endowment funds received for a specified purpose, whether conditional or not and even if designated for the benefit of specific classes of individuals. Examples would be the Marconi Celebration Trust Fund, the Claudia de Hueck Bequest account and the Sioux Lookout Zone Hospital account.
• qualifying contributions under cost-sharing and partnership arrangements, for example the Environmental Studies Research Funds.
• court awards, other than a fine or penalty, that have been specifically earmarked by the court as compensation for-or mitigation of-damages, for example the Supplementary Fish Fines Account.

2.1 General

The accounting policies of the government of Canada define liabilities as the financial obligations of the government-that is, principally money that belongs to and is to be repaid to (or for the benefit of) identifiable outside organizations and individuals. This includes all specified purpose accounts which are used to account for and control the funds received and disbursed in relation to the administration of the following.

2.2 Deposit accounts

1. These are accounts which are established to record the deposit of money belonging to third parties or the receipt of securities when guarantees are required from outside parties to ensure compliance of the depositor in accordance with a contract or an agreement.
2. Non-budgetary deposit accounts include money belonging to Crown corporations; bonds deposited as guarantees required by legislation; general security deposits from transportation companies; and contractors securities required to ensure satisfactory performance of work. Examples are the Crown Corporations' Surplus Moneys; St. Lawrence Seaway account; the Candidates' Election Deposits account; and the Guarantee Deposits Account of Revenue Canada-Customs and Excise.

2.3 Trust accounts

1. Trust accounts are established to record the deposit of money in the Consolidated Revenue Fund, or the receipt of securities, when these funds must be administered by the Government of Canada according to specific terms and conditions of a trust agreement or legislation establishing a fiduciary relationship.
2. These true trust accounts include money belonging to natives, veterans or other individuals that is being held and administered on their behalf by the federal government due either to a statutory requirement or because the beneficiaries are not of legal age, or are infirm or incapacitated and incapable of managing their affairs. The category also includes bequests to specific individuals. Examples of these accounts are the Administered Trust Accounts established pursuant to the Pension Act, and the War Veterans Allowance Act; the Veterans Administration and Welfare Trust fund, the Indian Estate Accounts, and the Estates-Armed Services account.

2.4 Pension accounts

Pension accounts are used to record transactions relating to the operation of the Canada Pension Plan, various superannuation accounts and the Government Annuities Agents' Pension account.

2.5 Insurance and death benefits accounts

These accounts are used to record transactions relating to the operation of insurance programs for employees or former employees of the government. Examples are the Veterans Insurance Fund and the Public Service Death Benefit Account.

2.6 Other specified purpose accounts

1. These accounts are used to record transactions relating to liabilities of the Government of Canada other than those identified above. This is a broad category which includes money received from a province to pay entitlements under a provincial program; money belonging to inmates of a federal hospital, veteran's home or correctional facility; non-public money as defined in a statute; oil and gas royalties and revenues belonging to natives; and moneys held by the Crown under the Winding-up Act and Bankruptcy and Insolvency Act for distribution to creditors.
2. This category also includes unspecified pre-payment accounts which are established to record the deposit of money received as pre-payment of future unspecified goods or services to be drawn upon when and as goods or services are requested. For example, money received from foreign governments for unspecified goods and services relating to international agreements; money received from non-federal organizations for the purchase of future (non-specified) goods or services (such as publications, patents, etc.). There are numerous examples of such accounts, including the Provincial Tax Collection Agreements account; the Veterans Affairs Estates Fund account; the Financial Assistance to Canadians Abroad Account; the Unclaimed Dividends and Undistributed Assets account; and the Non-Government Agencies fund account of the Department of National Defence.