Rescinded [2017-04-01] - Directive on the Use of the Consolidated Revenue Fund for Crown Corporations
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This directive is replaced by:
This directive replaces:
- Contingent Liabilities of the Government of Canada and Consequential Policies with Regard to the Reporting of the Financial Position of, and Insurance Schemes Operated by, Crown Corporations, Policy on the [2009-10-01]
- Drawdown Policy for Crown Corporation Funding [2009-10-01]
- Physical Asset Transfers to Crown and Other Wholly-owned Corporations, Policy on the Approval for, and Accounting of [2009-10-01]
- Financing of Crown Corporations - TB Circular 1980-46, Guidelines for the [2009-10-31]
1. Effective date
1.1 This directive takes effect on October 1, 2009.
1.2 It replaces the following:
- Treasury Board Circular 1980-46 – Guidelines for the Financing of Crown Corporations (as amended on June 7, 1996);
- Treasury Board Circular 1983-39 – Policy on the Approval for, and Accounting of, Physical Asset Transfers to Crown and Other Wholly-Owned Corporations (dated May 19, 1983);
- Treasury Board Circular 1984-63 – Policy on the Contingent Liabilities of the Government of Canada and Consequential Policies with Regard to the Reporting of the Financial Position of, and Insurance Schemes Operated by, Crown Corporations (as amended on July 29,1996);
- Treasury Board Circular 1986-11 – Drawdown Policy for Crown Corporation Funding (dated March 25, 1986).
2. Application
2.1 This directive applies to departments as defined in section 2 of the Financial Administration Act.
2.2 Those portions of sections of this directive that provide for the Comptroller General to monitor compliance with this directive within departments and/or request departments take corrective action, do 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 directive within their organizations, as well as for responding to cases of non-compliance in accordance with any Treasury Board instruments that address the management of compliance.
3. Context
3.1 This directive supports the objectives of the Policy on Internal Control by outlining the responsibilities of the chief financial officer of the department to establish and maintain management practices and controls where the Government of Canada provides financing to a crown corporation, through drawdown of funds from an appropriation .
3.2 It also outlines the responsibilities of a senior officer designated by the deputy head in the Department of Finance to establish and maintain management practices and controls where the Government of Canada provides financing to a Crown corporation through a loan, investment or advance.
3.3 For consolidated Crown corporations that rely on the Government as its principal source of revenue, the payments usually take the form of drawdowns of funds from an appropriation and are recorded as an expense and reported as such in the departmental financial statements.
3.4 Sound cash management practices require that appropriated funds for Crown corporations be drawn upon as the need arises, consistent with their immediate cash requirements, to carry out activities outlined in the annual corporate plan, thereby minimizing the impact that the drawdown of funds has on the use of government resources or borrowing levels.
3.5 For enterprise Crown corporations whose principal activity and source of revenues are the sale of goods and services to outside parties, the payments usually take the form of loans, advances or investments. These transactions represent financial claims held by the government and are reported as loans, investments and advances in the Government of Canada audited consolidated financial statements.
3.6 The status of a Crown corporation as an enterprise or appropriation-dependant institution is assessed by the Treasury Board Secretariat. The examination of the corporation's profits, projected cash flow and sources of cash flow, commitments, future earnings, market prospects, and business activities will determine whether or not it can finance its operations (including interest payments) and repayment of principal.
3.7 Departments are to read this directive in conjunction with the Policy on Internal Control.
3.8 This directive is issued pursuant to section 7 of the Financial Administration Act.
4. Definitions
Definitions to be used in the interpretation of this directive are in the Appendix.
5. Directive statement
5.1 Objective
To ensure that financial management controls are established and maintained to prevent the drawdown of funds from the CRF in advance or in excess of short-term need.
5.2 Expected Results
6. Requirements
6.1 Drawdown
When the Government of Canada provides financing to a Crown corporation through the drawdown of funds from an appropriation, the chief financial officer of the department making payments to the Crown corporation is responsible for ensuring the following:
6.1.1 A drawdown process is in place that limits the draw on appropriated funds to cover the short-term cash flow requirements of the Crown corporation and the drawdown is not made in advance of need. The individual draws will be for as short a period as operationally feasible (e.g., twice monthly or in some instances monthly).
6.1.2 A statement of cash flow prepared by the Crown corporation showing that its cash requirements are closely tied to the expected net disbursements for the period encompassed by the drawdown is documented.
6.1.3 The drawdown, at the end of the government's fiscal year (i.e., March 31), from a lapsing appropriation is not in excess of need for the purpose of preventing appropriated funds from lapsing.
6.1.4 Government contracts or agreements, between the department and Crown corporation that provide ongoing recurring payments that contribute significantly to the funding of a Crown corporation, include cash provisions consistent with this directive.
6.2 Loans, advances and investments
When the Government of Canada provides financing to a Crown corporation through a loan, investment or advance, a senior officer in the Department of Finance designated by the deputy head is responsible for ensuring that:
6.2.1 Loans, advances and investments by the Government of Canada to a Crown corporation are authorized by legislation, (i.e., through an Appropriation Act or other Act of Parliament).
6.2.2 Loans and advances to a Crown corporation are made only when the following criteria are met:
- A thorough analysis of the Crown corporation's financial position and prospects is carried out and indicates with reasonable certainty that the principal will be repaid; and
- An acceptable rate of interest for loans can be paid without recourse to parliamentary appropriations.
6.2.3 Where payments to a Crown corporation in respect of loans for capital expenditure are made before the relevant construction is completed, the repayment process may be deferred until the start of operations. However, interest at the acceptable rate is to be calculated from the date corresponding to the original repayment schedule.
6.2.4 Investments in a Crown corporation are made only if the following criteria are met:
- The Crown corporation is self-sustaining;
- A return equivalent to the Crown's cost of borrowing will be earned over time; and
- There is reasonable certainty that the investment will be recovered.
6.3 Monitoring and reporting
6.3.1 Chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive in their departments, bringing to the deputy head's attention any significant difficulties, gaps in performance or compliance issues and developing proposals to address them, and reporting significant performance or compliance issues to the Office of the Comptroller General.
6.3.2 The Comptroller General is responsible for monitoring departments' compliance with the requirements of this directive and in conjunction with its related policy, conducting a review within five to eight years.
7. Consequences
7.1 In instances of non-compliance, deputy heads are responsible for taking corrective measures within their organization with those responsible for implementing the requirements of this directive.
7.2 In support of the responsibility of deputy heads to implement the Policy on Internal Control and related instruments, chief financial officers are to ensure corrective actions are taken to address instances of non-compliance with the requirements of this directive. Corrective actions can include requiring additional training, changes to procedures and systems, the suspension or removal of delegated authority, disciplinary action, and other measures as appropriate.
7.3 Individuals are reminded that sections 76 to 81 (Civil Liabilities and Offences) of the Financial Administration Act as well as sections 121 (Frauds against the Government), 122 (Breach of Trust), 322 (Theft) and 380 (Fraud) of the Criminal Code may apply.
8. Roles and responsibilities of government organizations
This section identifies departments who have a significant role with respect to this directive. In and of itself, it does not confer an authority.
8.1 Department of Finance
- Approves, pursuant to section 127 of the Financial Administration Act, any loans, advances or investments related to Crown corporations that require funds out the Consolidated Revenue Fund.
- Establishes the rate of interest for Crown corporations to reflect the Crown's cost of borrowing monies for different maturities and for both amortized and unamortized repayment conditions;
8.2 Public Works and Government Services Canada (PWGSC)
PWGSC is responsible for issuing operational instructions and providing advice and interpretation on the Government-wide Chart of Accounts for Canada.
8.3 Treasury Board Secretariat
The Office of the Comptroller General is responsible for development, oversight and maintenance of this directive and for providing interpretative advice.
9. References
9.1 Treasury Board Secretariat
- Financial Administration Act, sections 63 and 65.
9.2 Related policy instruments and publications
10. Enquiries
10.1 Please direct enquiries about this directive to your departmental headquarters. For interpretation of this directive, departmental headquarters should contact:
Government Accounting Policy and Reporting Division
Financial Management and Analysis Sector
Office of the Comptroller General
Treasury Board of Canada Secretariat
Ottawa ON K1A 0R5
Email: fin-www@tbs.sct.gc.ca
Telephone: 613-957-7233
Fax: 613-952-9613
10.2 For information related to Receiver General instructions, departmental headquarters should contact:
Central and Public Accounts Reporting Directorate
Central Accounting and Reporting Sector
Public Works and Government Services Canada
Phase III Core 13A2,
Place du Portage
Ottawa ON K1A 0S5
Telephone: 819-956-0432
Fax : 819-956-8400
Appendix—Definitions
Acceptable rate of interest (taux d'intérêt acceptable) – Is the Crown corporation rate that is current on the date of making each payment under the loan agreement and is appropriate for the term and other conditions of the loan. It represents the Crown's cost of borrowing monies for different maturities and for both amortized and unamortized repayment conditions, as established by the Minister of Finance.
Advance (avance) – Is a financial claim acquired by making a payment to an outside party including a Crown corporation. An advance is normally repayable without interest and issued for a short-term (less than 18 months).
Appropriation-dependant Crown corporation (Sociétés d'État qui dépendent des crédits parlementaires) – See consolidated Crown corporation
Consolidated Crown corporation (Société d'État consolidée) – A Crown corporation that relies on Government funding as its principal source of revenue.
Crown corporation (société d'état) – Is a parent corporation or a wholly-owned subsidiary as defined in Section 83(1) of the Financial Administration Act.
Drawdown (prélèvement) – The process whereby funds, approved by Parliament through an appropriation, are paid from the CRF to a Crown corporation to cover its expenditures.
Enterprise Crown corporation (Société d'État entreprise) – Is a Crown corporation that is not dependent on parliamentary appropriations and whose principal activity and source of revenues are the sale of goods and services to outside parties.
Investment (dotation en capital) – Is the acquisition of owner's equity through the purchase of shares, the conversion of loans or advances to equity, or the contribution of capital.
Loan (prêt) – Is a financial claim acquired by making a payment to an outside party including a Crown corporation. A loan is repayable with interest according to a predetermined agreed repayment schedule and is usually for a long term.
Management practices and controls (pratiques et contrôles de gestion) – Are policies, processes, procedures and systems that enable a department to operate its programs and activities, use its resources efficiently and effectively, exercise sound stewardship, fulfil its obligations and achieve its objectives.
Payment authority (pouvoir de payer) – Is the authority to requisition payments under section 33 of the Financial Administration Act.
Self-sustaining corporation (société financièrement autonome) – A Crown corporation that is judged to be able to finance its operations and capital programs from internally generated funds and from funds that it could raise in the capital markets on its own credit.