Rescinded [2017-04-01] - Directive on Account Verification
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1. Effective date
1.1 This directive is amended effective June 1, 2014.
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 Policy on Internal Control by outlining the responsibilities of the chief financial officer, individuals delegated signing authority for section 34 of the Financial Administration Act, and financial officers regarding the verification process of payments and interdepartmental settlements.
3.2 The spending of public money requires that integrity, accountability and transparency are maintained to a high standard. This requires the establishment of responsible account verification processes that maintain sound stewardship of financial resources. As part of the account verification process, transactions are reviewed for accuracy such as ensuring that the payment or interdepartmental settlement is not a duplicate, that discounts have been deducted, that any charges not payable have been removed and that the amount has been calculated correctly.
3.3 Account verification provides a means to ensure that the work has been performed, the goods supplied or the services rendered, relevant contract or agreement terms and conditions have been met, the transaction is accurate, and all authorities have been complied with. As required by the Financial Administration Act, all payments and interdepartmental settlements are to be certified pursuant to sections 33 and 34. Financial signing authorities are to be exercised according to the requirements of the Financial Administration Act, the Directive on Delegation of Financial Authorities for Disbursements and departmental delegation documents.
3.4 This directive is to be read in conjunction with the following:
- Financial Administration Act;
- Directive on Delegation of Financial Authorities for Disbursements;
- Directive on Departmental Bank Accounts;
- Directive on Payment Requisitioning and Cheque Control; and
- Directive on Transfer Payments.
3.5 This directive is issued pursuant to sections 7 and 34 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 accounts for payment and interdepartmental settlement are verified in a cost-effective and efficient manner while maintaining the required level of control to ensure prudent management of financial resources.
5.2 Expected results
- Financial resources are used appropriately, based on the right authority, and losses due to waste, abuse, mismanagement, errors, frauds, omissions and other irregularities are minimized.
- Payments are properly authorized, timely (neither early nor late) and accurate and fulfil legitimate obligations.
6. Requirements
6.1 General
The chief financial officer is responsible for:
6.1.1 Establishing risk-based management practices and controls to ensure effective internal controls over account verification that specify the following:
- The extent of the verification required by individuals responsible for certifying payments and interdepartmental settlements. Note that section 34 of the Financial Administration Act applies;
- The extent of the verification required by financial officers responsible for certifying payments and interdepartmental settlements. Note that section 33 of the Financial Administration Act applies; and
- The responsibilities of financial officers for the quality assurance of the adequacy of the account verification process.
6.1.2 Documenting and communicating account verification management practices and controls to individuals and financial officers responsible for certifying payments and interdepartmental settlements.
6.1.3 Ensuring that persons exercising delegated authority for sections 33 and 34 of the Financial Administration Act do so in accordance with requirements on separation of duties found in the Directive on Delegation of Financial Authorities for Disbursement.
6.1.4 Determining that training has been provided as specified in the Policy on Learning, Training and Development and in the Directive on the Administration of Required Training for those departments to which the policy and directive apply. For departments not subject to this policy and directive, the chief financial officer or a person designated by the deputy head is required to establish departmental training requirements relevant to this directive.
6.1.5 Approving and reviewing on a regular basis sampling plans that have been selected by financial officers while conducting their quality assurance and verification responsibilities.
6.2 Account verification by individuals responsible for certification under section 34 of the Financial Administration Act
Individuals who have been delegated authority to confirm and certify entitlement for both payments and interdepartmental settlements are responsible for the following:
6.2.1 The performance of account verification on a timely basis and for the correctness of the payment requested.
6.2.1.1. They are to confirm and certify the following, as applicable. Note that section 34 of the Financial Administration Act applies.
- The work has been performed, the goods supplied, or the services rendered;
- The payee is entitled to or eligible for the payment;
- Contract or agreement terms and conditions have been met including price, quantity and quality. If, as a result of exceptional circumstances, the price is not specified in the contract or agreement, that it is reasonable;
- Advance payments meet appropriate requirements. Note that the Directive on Payment Requisitioning and Cheque Control applies.
6.2.1.2. In addition, they are to verify the following:
- Payee information is accurate and complete;
- The financial coding has been provided, is accurate and complete;
- All relevant statutes, regulations, orders in council, policies and directives and other legal obligations have been complied with;
- Accuracy of the transaction as follows:
- the payment is not a duplicate;
- discounts have been deducted;
- charges not payable have been removed;
- the invoice or claim total has been calculated correctly; and
- the supporting documentation is complete (i.e., it allows maintenance of an audit trail, demonstrates agreed price and other specifications, and demonstrates receipt of goods or services and authorization according to the delegation of financial signing authorities).
6.2.2 Ensuring that there is auditable evidence of verification; that is, ensuring that the process identifies individuals who performed the account verification or ensures there is an electronic audit trail.
6.3 Quality assurance and payment and interdepartmental settlement authority by financial officers
Financial officers are responsible for the following:
6.3.1 Ensuring that payments and interdepartmental settlements are verified according to the following requirements:
6.3.1.1. When exercising payment authority for payments pursuant to section 33 of the Financial Administration Act, ensuring that:
- there is auditable evidence demonstrating that account verification has taken place and has been certified by an individual with delegated financial signing authority pursuant to section 34 of the Financial Administration Act;
- no payment is made when the payment:
- is not a lawful charge against the appropriation;
- will result in an expenditure exceeding the appropriation; or
- will result in an insufficient balance in the appropriation to meet the commitments charged against it.
6.3.1.2. In addition, when exercising payment authority, ensure that:
- all high-risk transactions are subjected to a full review of the transaction;
- a sample of medium-risk and low-risk transactions are selected based on a sample selection methodology and are subjected to a review of the most important aspects of each selected transaction;.
6.3.1.3. When exercising payment authority for interdepartmental settlements pursuant to section 33 of the Financial Administration Act, ensuring that:
- All creditor-initiated interdepartmental settlements have a risk-based approach to monitoring and statistical sampling to ensure that payment authority has been performed in accordance with the requirements of paragraphs 6.3.1.1 and 6.3.1.2 above; and
- All debtor-initiated interdepartmental settlements are verified in accordance with the requirements of paragraphs 6.3.1.1 and 6.3.1.2 above.
6.3.2 Establishing sound sampling plans and practices, such as statistical and computer assisted sampling, based on the risk level of transactions, through an analysis of the cost-effectiveness of implementing such a practice. Criteria to evaluate the risk level include: impact, likelihood, the type of payment, the dollar value, the supplier or payee and the current error rate from particular organizations.
6.3.3 Ensuring that sampling practices and related techniques that are selected are sufficiently accurate and enable reporting on results to demonstrate the overall adequacy and reliability of the account verification process.
6.3.4 Although account verification is normally performed prior to payment or interdepartmental settlement, completing account verification after the payment or interdepartmental settlement has been made is permitted in certain situations (e.g. monthly acquisition card consolidated payments made at the departmental level):
6.3.4.1. Provided that the claim for payment is considered reasonable based on the following criteria:
- the invoice is from an established supplier or payee with a consistent record of performance and where an established and continuing relationship exists; and
- it is simple to obtain a refund from or to adjust a future payment to the supplier or payee; and
- the supplier or payee invoice or claim does not appear to contain major inaccuracies.
6.3.4.2 Provided that the debtor department for interdepartmental settlements has risk-based business processes in place to ensure that account verification and certification by the responsible delegated authority are performed on a timely basis.
6.3.5 Documenting post-payment verification procedures for the specific payments and interdepartmental settlement that are paid subject to the provisions of paragraph 6.3.4 of this directive.
6.3.6 Reporting for income tax purposes, according to the Canada Revenue Agency requirements when payments for service contracts and for mixed goods and services contracts are made.
6.3.7 Requesting corrective action when critical errors are identified during the quality assurance process for payment authority.
6.4 Monitoring and reporting requirements
6.4.1 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.
6.4.2 The Comptroller General is responsible for monitoring departments’ compliance with the requirements of this directive and 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 other significant departments with respect to this directive. In and of itself, it does not confer an authority.
The Treasury Board Secretariat, Office of the Comptroller General is responsible for development, oversight and maintenance of this directive and for providing interpretative advice.
9. References
9.1 Other relevant legislation and regulations
- Financial Administration Act sections 2, 7, 32, 33 and 34
- Payments and Settlements Requisitioning Regulations 1997
9.2 Related policy instruments and publications
- Policy on Internal Control
- Policy on Learning, Training and Development
- Directive on the Administration of Required Training
- Directive on Payment Requisitioning and Cheque Control
- Directive on Departmental Bank Accounts
- Directive on Delegation of Financial Authorities for Disbursements
- Directive on Transfer Payments
- Receiver General Manual Chapter 12: Interdepartmental Settlement Processing
10. Enquiries
For interpretations of this policy instrument, please contact your departmental financial policy group.
Financial policy directors or equivalent may contact Financial Management Enquiries for policy interpretations.
For public enquiries regarding this policy instrument, please contact TBS Public Enquiries.
Appendix—Definitions
- audit trail (piste de audit)
- –Are the elements that allow tracking of a complete process. These include delegation of authorities’ matrices, user profiles, data and files required to reconstruct the sequence of events and the transactions processed.
- 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.
- risk criteria (critères de risques)
-
- high (élevé)
- –Includes highly sensitive transactions, for example, when an error in payment is non–recoverable, or when payments that are largely judgmental, subject to interpretation, involve very large dollar amounts, or considered highly error prone.
- low(faible)
- –Includes transactions that are not sensitive in nature, have little or no potential financial loss associated with them, or have a low error rate with a low dollar-value impact of error, usually low to medium dollar value, and are recoverable.
- medium (moyen)
- –Includes transactions not considered either high risk or low risk.