Guideline on Common Financial Management Business Process 3.1 - Manage Procure to Payment

3.1.1 Scope

This guideline defines Manage Procure to Payment, which begins with the identification of procurement need and ends with a finalized payment issued by the Receiver General. This common financial business process focuses on expenditures that involve operational or capital procurement using a purchase order or other type of contract.

The scope of this guideline covers the following six subprocess groups:

• Manage Requirements;
• Control Commitments;
• Manage Contracts;
• Administer Contracts and Deliverables;
• Manage Payables; and
• Manage Payments.

Other operational expenditures, such as travel-related expenditures, are described in Manage Travel (Business Process 3.2). Expenditures or payments not involving formal procurement contracts, expenditures related to second and subsequent payments for multi-year contracts, non-pay employee-related transactions, and payments related to the relocation of employees are described in Manage Other Payments (Business Process 3.3). Payments to other government departments are described in Manage Interdepartmental Settlements (Business Process 2.2).

Some financial management activities described in the business process are also related to internal controls. The intent is neither to provide a complete listing of controls, nor to produce a control framework; however this model may enrich a department’s control framework.

3.1.2 Structure of the Guideline

The remainder of this guideline is structured as follows: Section 4 provides an overview of the organizational roles that carry out Manage Procure to Payment. Section 5 presents a detailed description of the Manage Procure to Payment business process, including subprocess groups, subprocesses, activities, and responsible organizational roles. Appendix A provides definitions of terminology used in this guideline, and relevant abbreviations are listed in Appendix B. Appendix C describes the methodology used in the guideline, and Appendix D elaborates on the roles and responsibilities outlined in Section 4. Purchases made with an acquisition card, which are considered a variation of the Manage Procure to Payment business process, are described in Appendix E.

The following references apply to this guideline.

3.2.1 Acts and Regulations

• Government Contracts Regulations
• Financial Administration Act (sections 7, 29, 32, 33, 34 and 41)
• Payments and Settlements Requisitioning Regulations,1997

3.2.2 Policy Instruments

• Account Verification, Directive on
• Accounting Standard 3.1 - Treasury Board - Capital Assets
• Acquisition Cards, Directive on
• Common Services Policy
• Contracting Policy
• Decision Making in Limiting Contractor Liability in Crown Procurement Contracts, Policy on
• Delegation of Financial Authorities for Disbursements, Directive on
• Departmental Bank Accounts, Directive on
• Expenditure Initiation and Commitment Control, Directive on
• Financial Management Governance, Policy on
• Fleet Management, Guide to, Chapter 1: “Light-Duty Vehicles”
• Fleet Management, Guide to, Chapter 2: “Executive Vehicles”
• Fleet Management: Executive Vehicles, Directive on
• Fleet Management: Light Duty Vehicles, Directive on
• Internal Control, Policy on
• Investment Planning – Assets and Acquired Services, Policy on
• Knowledge for Required Training, Standards on
• Learning, Training and Development, Policy on
• Management of Assets and Acquired Services, Policy Framework for the
• Management of Materiel, Policy on
• Management of Projects, Policy on the
• Management, Resources and Results Structure, Policy on
• Payment, Collection and Remittance of Provincial Taxes and Fees, Directive on the
• Payment Requisitioning and Cheque Control, Directive on
• Stewardship of Financial Management Systems, Directive on the
• Stewardship of Financial Management Systems, Policy on the

3.2.3 Other References

• Government of Canada Internal Services Definitions
• Management Accountability Framework
• Receiver General Control Framework
• Receiver General Manual
• Treasury Board Submissions, A Guide to Preparing

The following organizational roles act in support of legislation, such as the Financial Administration Act (FAA) and the Federal Accountability Act, and define policy and/or processes that are to be followed.

• Office of the Comptroller General – Financial Management Sector is the policy authority for financial management;
• Office of the Comptroller General – Acquired Services and Assets Sector is the policy authority for the management of real property and materiel, investment planning, project management, and procurement across the government;
• The deputy head is responsible for providing leadership by demonstrating financial responsibility, transparency, accountability, and ethical conduct in financial and resource management, including compliance with legislation, regulations, Treasury Board policies, and financial authorities;^[2]
• Department of Public Works and Government Services – Acquisitions Branch sets policy and procedures for acquisitions; and
• Receiver General – Accounting Banking and Compensation Branch provides directives and guidance to federal departments and agencies on government accounting, payment and deposit.

The following organizational roles act in response to financial management (i.e., Office of the Comptroller General – Financial Management Sector and deputy heads) policy and process requirements.

• The corporate finance role supports deputy heads and chief financial officers in meeting their financial management accountabilities by developing, communicating, and maintaining the departmental financial management framework, and providing leadership and oversight on the proper application and monitoring of financial management across the department;^[3]
• The strategic and corporate planning role coordinates input into the departmental strategic, integrated, and operational planning processes defined within the department and in support of central agency requirements;
• The financial services role carries out the day-to-day transactional financial management operations; and
• The responsibility centre manager – financial management role is responsible and accountable for exercising the following delegated authorities:
  • Initiating expenditures;
  • Controlling commitments pursuant to section 32 of the FAA;
  • Entering into contracts (transaction authority);
  • Performing account verification and certification pursuant to section 34 of the FAA.

When the organizational roles of responsibility centre manager – financial management and responsibility centre manager – acquisitions are performed by the same individual, due consideration should be given to adequate separation of duties in the Manage Procure to Payment process.^[4] Please note that within the context of this guideline, the responsibility centre manager is also referred to as “the manager.”

The following organizational roles act in response to policy and process requirements for the management of real property and materiel, investment planning, project management and procurement across the government. These roles are not financial in nature but are included in order to provide a comprehensive description.

• The corporate contracting and materiel role responds to the Policy Framework for the Management of Assets and Acquired Services and to the requirements of its associated policy instruments and processes for deputy heads and contracting authorities delegated to the department. This role also addresses department-wide requirements for procurement of goods and services;
• The asset/materiel management services role carries out the day-to-day transactional asset and acquired services operations; and
• The responsibility centre manager – acquisitions role defines requirements for goods and services, participates in the selection of vendors, and monitors contract performance. Where the responsibility centre manager – financial management and the responsibility centre manager – acquisition roles are performed by the same individual, due consideration should be given to adequate separation of duties in the Manage Procure to Payment process.^[5] Please note that within the context of this guideline, the responsibility centre manager is also referred to as “the manager.”

The following organizational roles provide a central service to other government departments.

• The Department of Public Works and Government Services – Acquisitions Branch is responsible for procuring goods and services for the Government of Canada unless the right to do so has been assigned by law or delegated to another department by the Minister.^[6] Acquisitions Branch provides a variety of services to departments, assists at each stage of the procurement cycle, and offers tools that simplify and accelerate the acquisition of goods and services; and
• The Receiver General – Banking and Cash Management Sector is responsible for managing the treasury functions of the government. These functions include issuing most payments on behalf of the government and controlling the government’s bank accounts.

As illustrated in Figure 3, the Manage Procure to Payment Level 2 business process comprises nine subprocesses (3.1.1 to 3.1.9) that are arranged in six subprocess groups: Manage Requirements, Control Commitments, Manage Contracts, Administer Contracts and Deliverables, Manage Payables, and Manage Payments.

Figure 3. Manage Procure to Payment – Level 2 Process Flow

Text version: Figure 3. Manage Procure to Payment – Level 2 Process Flow

Note A: The  symbol means that all three subprocesses should be completed before proceeding to the Manage Contracts subprocess group.

Note B: When the purchase is determined to be an asset, the cost of deliverables is an input to the following Materiel/Finance Interactions domain processes: Manage Other Capital Assets (Business Process 4.1), Manage Real Property (Business Process 4.2) and Manage Inventory (Business Process 4.3).

The subprocesses within each subprocess group and the roles and responsibilities relevant to each process are summarized below.

Manage Requirements

• Determine Requirements (Subprocess 3.1.1): Based on the approved budget and the approved plan, or an ad hoc requirement, the need for a good or service is identified, and requirements, such as type of goods, quantity, and estimated costs, are defined by the manager.
• Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2): The manager requesting the requirement should ensure that he or she has been delegated the appropriate expenditure initiation authority, and exercise or obtain that authority.^[7] Typically, this subprocess is performed concurrently with Verify Unencumbered Balance (Subprocess 3.1.3) and Manage Commitments (Subprocess 3.1.4), pursuant to section 32 of the Financial Administration Act (FAA).

Control Commitments

• Verify Unencumbered Balance (Subprocess 3.1.3): Before preparing the requisition, the manager needs to ensure that a sufficient unencumbered balance is available in an appropriation.^[8]
• Manage Commitments (Subprocess 3.1.4): After confirmation of a sufficient unencumbered balance is established, a commitment is recorded and updated according to department-specific policy^[9] by one of the following:
  • Asset/materiel management services;
  • Corporate contracting and materiel;
  • Financial services; or
  • The manager.

Manage Contracts

• Manage Contracts (Subprocess 3.1.5): Most activities are materiel management in nature rather than financial, but they provide important context and link the financial and contracting processes. Based on specifications from the approved requisition, a vendor is selected in accordance with materiel management business processes. The manager should ensure that he or she has been delegated the appropriate transaction authority, and exercise or obtain that authority.^[10] The contract is created as appropriate, and the final output is the approved contract.

Administer Contracts and Deliverables

• Administer Contracts and Deliverables (Subprocess 3.1.6): This subprocess involves monitoring the contract, receiving and accepting deliverables (part of account verification in support of section 34 of the FAA), and managing issues. The manager, supported by asset/materiel management services, is accountable for administering the contract. Receiving deliverables involves the physical receipt of goods or deliverables and the acceptance or rejection of goods or services based on damage, quantity, or other criteria, as defined by the terms and conditions of the contract.

Manage Payables

• Manage Payables (Subprocess 3.1.7): Following receipt of the invoice, account verification pursuant to section 34 of the FAA is performed. Certification authority is exercised by the manager,^[11] and a request for payment is prepared and sent to financial services.

Manage Payments

• Perform Payment Authority (Subprocess 3.1.8): Manage Payments starts with the receipt of a request for payment. During the payment process, quality assurance is performed by financial services as part of exercising payment authority pursuant to section 33 of the FAA.^[12]
• Issue Payment (Subprocess 3.1.9): The payment requisition is sent to the Receiver General for payment issuance. The payment requisition files are edited and validated, and payments are released by the Receiver General. The Receiver General produces a generic return file containing unique payment references for control purposes. The payment records are updated in the departmental financial and materiel management system^[13] by financial services, and Manage Procure to Payment (Business Process 3.1) ends. When quality assurance is not performed, the process proceeds to Manage Post-Payment Verification (Business Process 8.1). When quality assurance is performed, the process proceeds to Manage Financial Close (Business Process 8.2).

Although the use of an acquisition card is not mandatory, it is strongly encouraged when the purchase is within delegated transaction authority and it is efficient, economical and operationally feasible to do so.^[14] An alternative flow is provided in Appendix E to illustrate the process when an acquisition card is used.

Manage Requirements is the start of the Manage Procure to Payment business process, beginning with the approved budget and approved plan from Manage Planning and Budgeting (Business Process 1.1), or an ad hoc requirement. It involves defining requirements, determining the corresponding expenditure initiation authority, and preparing the requisition for a good or service.

A key aspect of this subprocess group is the coordination of the work of the responsibility centre manager – financial management, the responsibility centre manager – acquisitions, and asset/materiel management services. In some cases, the roles of responsibility centre manager – financial management and the responsibility centre manager – acquisitions are performed by the same individual. However, there may be situations when the individual does not have all the delegated authority for exercising financial and spending authorities or where the individual’s delegated authority is not sufficient for a particular requisition. In these cases, the roles of responsibility centre manager – financial management and the responsibility centre manager – acquisitions are performed by different individuals.

5.2.1 Determine Requirements (Subprocess 3.1.1)

Based on the approved budget and the approved plan, or an ad hoc requirement, the need for a good or service is identified; requirements, such as type of good or service, quantity, statement of work or tasks, dates required and estimated costs, are defined by the manager; and the appropriate procurement vehicle options are selected. Figure 4 depicts the Level 3 process flow for Determine Requirements.

Figure 4. Determine Requirements (Subprocess 3.1.1) – Level 3 Process Flow

Text version: Figure 4. Determine Requirements (Subprocess 3.1.1) – Level 3 Process Flow

5.2.1.1 Activities

The degree of complexity involved in defining requirements for goods and services will depend on the type of good or service required and/or the procurement vehicle selected. Based on the approved budget and expected outcomes as detailed in the approved plan, or an ad hoc requirement, the need to acquire resources is identified by the manager (Activity 3.1.1.1 – Identify Goods/Services Needed). Responsibility centre managers with delegated expenditure initiation authority are usually the initiators of the Manage Procure to Payment business process.

The detailed specifications for goods or services to be acquired are then identified (Activity 3.1.1.2 – Define Requirements). A requisition for procurement is drafted, detailing the type of good or service, the item description, the estimated cost, quantity and milestones.

It is important to examine the nature of the purchase to ensure that tangible assets that should be capitalized are identified early in the procurement process and that the financial coding is correct. Such assets may be acquired, constructed or developed and would also include leasehold improvements and betterments to existing assets. Accounting Standard 3.1 - Treasury Board - Capital Assets provides guidance on how to determine which tangible assets should be capitalized.

The financial coding against which the expenditure is to be charged is then identified, including the appropriate responsibility centre, authority, appropriations (operations and maintenance versus capital) and subactivity.

Based on the defined requirements, the appropriate procurement vehicle options are identified (Activity 3.1.1.3 – Examine and Select Procurement Vehicle Options). Typically, items of low-dollar value can be purchased with an acquisition card or a call-up against a standing offer; items of high-dollar value require a formal bidding process.

Discussions between the manager, functional specialists, asset/materiel management services, and the Department of Public Works and Government Services – Acquisitions Branch may be required to define the requirements more precisely and to clarify the contracting options and constraints, the nature of the goods/services, the duration of the contract and the date of delivery, the estimated cost, and the specific requirements (e.g., the level of security clearance and official languages). Functional specialists may also be consulted (e.g., Environment Canada when performing an environmental assessment, the Royal Canadian Mounted Police when procuring security-related goods or services, and IT specialists when purchasing or developing computer software or hardware).

The purchaser should also consult the Common Services Policy, which specifies that departments are to obtain goods and certain services through common service organizations unless a department has been delegated the procurement authority through other Treasury Board policies, by specific Treasury Board exemption, by specific departmental legislation, or in the provisions of the Common Services Policy.

5.2.1.2 Roles and Responsibilities

For this subprocess, there are typically two potential scenarios relating to accountability. In scenario one (S1), asset/materiel management services is accountable for the purchase of certain types of goods or services as described in department-specific policy. In scenario two (S2), the responsibility centre manager – acquisitions is accountable.

Table 1 provides an overview of roles and responsibilities, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

5.2.2  Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2)

The manager requesting the requirement determines the appropriate expenditure initiation authority, and exercises or obtains that authority. Figure 5 depicts the Level 3 process flow for Determine/Exercise Expenditure Initiation Authority.

Figure 5. Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2) – Level 3 Process Flow

Text version: Figure 5. Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2) – Level 3 Process Flow

Within the Manage Procure to Payment business process, there are two types of authority: spending and financial. Spending authority comprises expenditure initiation authority, commitment authority (Verify Unencumbered Balance (Subprocess 3.1.3) and Manage Commitments [Subprocess 3.1.4]) and transaction authority (Manage Contracts [Subprocess 3.1.5]).^[15] Financial authority comprises certification authority and payment authority, pursuant to sections 34 and 33 respectively of the FAA.^[16] The level of authority is based on the department’s delegation of authorities in accordance with the delegation documents approved by the minister and the deputy head, where expenditure initiation authority is defined as “the authority to incur an expenditure or to make an obligation to obtain goods or services that will result in the eventual expenditure of funds. This [authority] includes the decision to order supplies or services.”^[17]

5.2.2.1 Activities

When defining requirements, the manager should determine the appropriate expenditure initiation authority^[18] by consulting the delegation documents (Activity 3.1.2.1 – Determine Required Expenditure Initiation Authority). When the manager does not possess the required expenditure initiation authority, he or she should obtain the signatures of those with delegated authority (Activity 3.1.2.2 – Exercise or Obtain Authority). In some situations, the manager may not obtain the authority to initiate the expenditure, in which case the procurement requirement may be redefined or the expenditure initiation process ends.

Certain complex situations may arise for large projects, such as the acquisition of real property, the undertaking of new projects, or purchases related to a major Crown project, which may require project or expenditure initiation approval from outside the department. For example, new projects of high-dollar value or high risk will require the manager to ensure that the authority is adequately based on the asset and/or the service to be acquired and is consistent with the assessed level of complexity and risk.^[19] In these situations, additional approvals are required, and it may be necessary to prepare a Treasury Board submission. A Treasury Board submission is “an official document submitted by a sponsoring minister on behalf of a federal organization seeking approval or authority from the Treasury Board for an initiative that the organization would not otherwise be able to undertake or that is outside its delegated authorities.”^[20] A Guide to Preparing Treasury Board Submissions provides guidance on when a submission is necessary and step-by-step instructions on how to prepare and submit the necessary documentation for approval.

As the appropriate expenditure initiation authority is being exercised, a sufficient unencumbered balance has to be available in an appropriation^[21] (Verify Unencumbered Balance (Subprocess 3.1.3)). If a sufficient unencumbered balance is available, a commitment (Manage Commitments (Subprocess 3.1.4) ) is created in accordance with department-specific policy.

The Directive on Expenditure Initiation and Commitment Control does not specify what constitutes an appropriate level of documentation to support expenditure initiation and commitment control. However, the directive does state that the chief financial officer is responsible for supporting the deputy head in the implementation of the directive^[22] and for establishing department-specific policy and procedures with the expected result of managing the spending authority in a manner that maintains effective commitment control.^[23]

The Manage Requirements Subprocess Group ends when the following activities have been completed:

• The requirement is defined and approved by the appropriate expenditure initiation authority;
• The unencumbered balance is confirmed (Activity 3.1.3.1 – Determine Unencumbered Balance); and
• The commitment is appropriately recorded (Activity 3.1.4.1 – Record/Update Commitment).^[24]

Note: Both the Manage Requirements Subprocess Group and the Control Commitments Subprocess Group must be completed before an approved requisition (Activity 3.1.2.3 – Submit Requisition for Goods/Services) is submitted.

5.2.2.2 Roles and Responsibilities

For Activity 3.1.2.1 – Determine Required Expenditure Initiation Authority, there are typically two scenarios, depending on how the expenditure initiation authority has been delegated within the department. In the first scenario (S1), asset/materiel management services is responsible. In the second scenario (S2), the responsibility centre manager – acquisitions is responsible.

For Activity 3.1.2.2 – Exercise or Obtain Authority, the responsibility centre manager – financial management is accountable for obtaining the appropriate expenditure initiation authorization and may be assisted by asset/materiel management services in fulfilling this responsibility.

For Activity 3.1.2.3 – Submit Requisition for Goods/Services, the responsibility centre manager – acquisitions is accountable for submitting the approved requisition and may be assisted by asset/materiel management services.

Table 2 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

The Control Commitments subprocess group involves ensuring that sufficient unencumbered balances are available as well as creating and updating commitments prior to entering into or amending the contract. Control Commitments connects to three subprocess groups: Manage Requirements, to create the commitment; Manage Contracts, if there are amendments to the contract; and Manage Payables, to close the commitment on the payment of the last invoice for the contract.

5.3.1 Verify Unencumbered Balance (Subprocess 3.1.3)

Before submitting the requisition (Determine/Exercise Expenditure Initiation Authority – Subprocess 3.1.2), the manager needs to ensure that a sufficient unencumbered balance is available in an appropriation.^[25] Figure 6 depicts the Level 3 process flow for Verify Unencumbered Balance.

Figure 6. Verify Unencumbered Balance (Subprocess 3.1.3) – Level 3 Process Flow

Text version: Figure 6. Verify Unencumbered Balance (Subprocess 3.1.3) – Level 3 Process Flow

Note A: Once both Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2) and Manage Commitments (Subprocess 3.1.4) are completed, authorization is provided pursuant to section 32 of the FAA.

The deputy head or other person charged with the administration of a program is responsible for establishing procedures to ensure that commitments are controlled and accounted for and that records pertaining to them are maintained.^[26] In addition, departments should have the appropriate processes in place to verify the availability of unencumbered balances at the time of expenditure initiation and prior to entering into a contract.^[27] Commitment authority is delegated in writing to departmental officials by the deputy head (delegation of authority).^[28] The delegated official is then responsible for ensuring that there is a sufficient unencumbered balance available before entering into a contract or other arrangement.^[29] The creation and the maintenance of the delegation documents are addressed in Manage Delegation of Financial Authorities (Business Process 7.4). Commitment control, which includes accounting for those commitments, is an ongoing activity throughout the Manage Procure to Payment business process.

5.3.1.1 Activities

The manager requesting the good or service ensures that there is a sufficient unencumbered balance available to proceed with the procurement (Activity 3.1.3.1 – Determine Unencumbered Balance) by reviewing budget information, including a detailed analysis of outstanding or the previous year’s commitments as well as unpaid invoices. Ongoing, multi-year procurements require that continuing commitments are kept separate for the current fiscal year and for each future year within the most recently approved budget.^[30]

When the unencumbered balances are insufficient, it will be necessary to:

• Re-allocate budgets;
• Revise the approved budget and procurement requirements; or
• End the Manage Procure to Payment process.

If there are sufficient unencumbered balances, department-specific functions related to commitment authority are carried out. It is essential to ensure that there is appropriate evidence substantiating the authorization pursuant to section 32 of the FAA (Activity 3.1.3.2 – Provide Authorization), as stipulated by department-specific policy and procedures.^[31]

5.3.1.2 Roles and Responsibilities

The responsibility centre manager – financial management is accountable for his or her commitments.

Table 3 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

5.3.2 Manage Commitments (Subprocess 3.1.4)

While the unencumbered balance is being confirmed, commitments are recorded and updated by the manager, by asset/materiel management services, by corporate contracting and materiel or by financial services, in accordance with department-specific policy. Once the unencumbered balance has been confirmed and there has been appropriate commitment control, section 32 of the FAA has been exercised. Figure 7 depicts the Level 3 process flow for Manage Commitments.

Figure 7. Manage Commitments (Subprocess 3.1.4) – Level 3 Process Flow

Text version: Figure 7. Manage Commitments (Subprocess 3.1.4) – Level 3 Process Flow

5.3.2.1 Activities

The manager is accountable for ensuring that the commitment, including a continuing commitment that impacts future fiscal years, is recorded in accordance with department-specific policy. The manager may record or update the commitment, or the activity can be performed by asset/materiel management services, contract management or financial services. Throughout the Manage Procure to Payment process, the commitment is monitored and updated as needed (e.g., when the contract value changes) (Activity 3.1.4.1 – Record/Update Commitment).

Following receipt of the final invoice, the commitment is updated and closed out (Activity 3.1.4.2 – Close Out Commitment). The end objective of Determine/Exercise Expenditure Initiation Authority (Subprocess 3.1.2) and the Control Commitments subprocess group is to ensure that all commitments are managed and that managers do not exceed their allocated budgets or appropriations.^[32]

It may be impractical to formally record commitments individually, such as for transactions of low-dollar value. Departments can implement alternative accounting methods for these commitments, provided that their department-specific policy identifies when it is appropriate to do so and how these commitments are to be accounted for.^[33] Commitments are recorded based on the department’s approved budget and quantify the financial implications of the planned procurement requirements. For an ongoing, multi-year procurement, it is necessary to record the commitment annually.

5.3.2.2 Roles and Responsibilities

The responsibility centre manager – financial management is accountable for his or her commitments.

Table 4 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

This subprocess group involves creating and/or amending the contract as well as determining and exercising the appropriate transaction authority. Most activities are materiel management in nature rather than financial, but they provide important context and link the financial and contracting processes.

5.4.1 Manage Contracts (Subprocess 3.1.5)

Based on the approved requisition and in accordance with contracting policies, a vendor is selected. The manager must ensure that he or she has been delegated the appropriate transaction authority, and exercises the authority or obtains the approval of the individual with delegated transaction authority.^[34] The contract is created as appropriate, and the final output is the approved contract. Figure 8 depicts the Level 3 process flow for Manage Contracts.

Figure 8. Manage Contracts (Subprocess 3.1.5) – Level 3 Process Flow

Text version: Figure 8. Manage Contracts (Subprocess 3.1.5) – Level 3 Process Flow

5.4.1.1 Activities

The approved requisition (including authorization pursuant to section 32 of the FAA) initiates this subprocess group. The manager provides adequate information in the requisition for goods and services, such as evaluation criteria and sufficient detail, to support the procurement based on the procurement needs. The department is responsible for ensuring that the established vendor selection criteria are appropriate and in accordance with materiel management business processes. The vendor is selected through the appropriate procurement vehicle (Activity 3.1.5.1 – Select Vendor Through Appropriate Procurement Vehicle).

The Treasury Board Contracting Policy is a major element of the procurement framework, providing guidance on how to select vendors through the bidding process and on contracting. The Policy Framework for the Management of Assets and Acquired Services and the Treasury Board Contracting Policy identify policies, regulations and processes applicable to government procurement.

Depending on the nature of the good or service and the dollar value of the purchase, the contract creation, issuance and approval can be the responsibility of the manager, asset/materiel management services, or the Department of Public Works and Government Services – Acquisitions Branch. For a simple purchase of low-dollar value, the manager is typically delegated the appropriate transaction authority. Although the use of an acquisition card is not mandatory, it is strongly encouraged when the purchase is within delegated transaction authority and it is efficient, economical and operationally feasible to do so.^[35] An alternative flow is provided in Appendix E to illustrate the process when an acquisition card is used.

The finalization of the terms and conditions (Activity 3.1.5.2 – Finalize/Review Terms and Conditions) is sometimes an iterative process and may require revisions based on the agreement with the selected vendor. The terms and conditions of the contract must comply with the Policy on Decision Making in Limiting Contractor Liability in Crown Procurement Contracts. The process may also include consulting legal counsel, for example, to ensure that the terms and conditions are clear and indisputable in order to avoid any future misunderstanding or confusion.

If an amendment has been identified in Administer Contracts and Deliverables (Subprocess 3.1.6), the responsibility centre manager obtains the necessary details to review the terms and conditions and revises the contract. Once the amendment has been approved and signed by all parties to the contract, the Administer Contracts and Deliverables process flow can resume.

The data in the vendor master data file are validated and used in the contract. When a new vendor is selected or when the vendor information changes, a vendor master data file update should be requested or performed. The creation and maintenance of the vendor master data file is part of Manage Vendor Master Data File (Business Process 7.1).

When the value of the contract differs from the value listed in the original requisition, it will be necessary to revisit Verify Unencumbered Balance (Subprocess 3.1.3) in order to ensure that the commitment is still appropriate, prior to signing the contract. In the case of an increase in value, it should be determined:

• Whether sufficient unencumbered balances are still available;
• Whether the commitment authority is still appropriate; and
• That the commitment is recorded at the value expected to be incurred.^[36]

If unencumbered balances are available, the commitment is updated and the process continues. If no additional unencumbered balances are available, it will be necessary to obtain funding elsewhere or to amend the requirements.

The required transaction authority is then determined (Activity 3.1.5.3 – Determine Required Transaction Authority). Transaction authority is the authority to enter into contracts, including acquisition card purchases (Appendix E), or to sign off on legal entitlements.^[37]

Subsection 41(1) of the FAA provides for the establishment of financial limits above which Governor-in-Council or Treasury Board approval is required. The authority for departmental contracts can be found in the legislation constituting the department, which confers certain powers on the minister. Appendix C of the Contracting Policy prescribes the dollar levels above which Treasury Board authority is to be obtained. Transaction authority is limited by the Appropriation Acts passed by Parliament each year, which provide funds to carry out the departmental mandate.

As part of defining the requirement, the requesting responsibility centre manager should ensure that he or she has been delegated the appropriate transaction authority, as determined by the approved delegation documents of the department.^[38] When the manager does not possess the required transaction authority, the signatures of those with delegated authority must be obtained.^[39] In some situations, the transaction authority may not be granted and the Manage Contracts subprocess ends.

To ensure adequate separation of duties, the following functions are kept separate when responsibility is assigned to individuals involved in the expenditures process^[40]:

• Authority to enter into a contract (transaction authority) (Activity 3.1.5.4 – Exercise or Obtain Transaction Authority) ;
• Certification of the receipt of goods and the provision of services, pursuant to section 34 of the FAA (certification authority) (Activity 3.1.6.3 – Match Deliverables with Contract);
• Determination of entitlement, verification of accounts, and preparation of requisitions for payment or settlement, pursuant to section 34 of the FAA (certification authority) (Manage Payables (Subprocess 3.1.7));
• Certification of requisition for payment or settlement, pursuant to section 33 of the FAA (payment authority) (Activity 3.1.8.4 – Exercise FAA, Section 33 Certification, Including EAA Key); and
• If the process or other circumstances do not allow such separations of duties as identified above, alternate control measures are implemented and documented.

Furthermore, par. 6.2.2 of the Directive on Delegation of Financial Authorities for Disbursements requires that “persons with delegated authority do not exercise the following:

• Certification authority and payment authority on the same payment;
• Spending, certification or payment authority for an expenditure from which they can directly or indirectly benefit (e.g., when the payee is the individual with financial signing authority or when the expenditure is incurred for the benefit of that individual).”^[41]

As well as obtaining and exercising the transaction authority (Activity 3.1.5.4 – Exercise or Obtain Transaction Authority), the signed contract from the vendor is also obtained as required. When the responsibility centre manager exercising the transaction authority and the project authority are not the same individual, it is good practice for the project authority to provide concurrence with the statement of work. The contract, signed and approved by all parties, triggers the Administer Contracts and Deliverables subprocess group that involves the receipt of deliverables, which is an input to the account verification subprocess.

5.4.1.2 Roles and Responsibilities

The expenditure initiation authority and commitment are now in place, and the transaction authority has been obtained. The role accountable for the transaction authority will depend on whether the authority is delegated to the department or held by the Department of Public Works and Government Services – Acquisitions Branch. When the Department of Public Works and Government Services – Acquisitions Branch exercises transaction authority, the contract information and supporting evidence of financial options are kept in the departmental financial and materiel management system at the Department of Public Works and Government Services – Acquisitions Branch; this system would be the authoritative source. Although vendor selection and finalization of terms and conditions are materiel management in nature, they are included because of their financial implication (i.e., a signed contract).

Depending on the value of the contract and/or the delegated authority, there are several scenarios relating to accountability and responsibility for Manage Contract activities.

For Activity 3.1.5.1 – Select Vendor Through Appropriate Procurement Vehicle, there are two scenarios:

• In scenario one (S1), asset/materiel management services or the manager is responsible; and
• In scenario two (S2), the Department of Public Works and Government Services – Acquisitions Branch is responsible.

In both scenarios, the responsibility centre manager – acquisitions is accountable for this activity.

For Activity 3.1.5.2 – Finalize/Review Terms and Conditions, there are three scenarios, depending on the delegated authority.

• In scenario one (S1), asset/materiel management services is both responsible and accountable;
• In scenario two (S2), the Department of Public Works and Government Services – Acquisitions Branch is both responsible and accountable; and
• In scenario three (S3), the responsibility centre manager – acquisitions is both responsible and accountable.

For Activity 3.1.5.3 – Determine Required Transaction Authority, corporate contracting and materiel is accountable, and the manager or corporate contracting and materiel is responsible.

For Activity 3.1.5.4 – Exercise or Obtain Transaction Authority, there are three scenarios, depending on the delegated authority.

• In scenario two (S2), the Department of Public Works and Government Services – Acquisitions Branch is both responsible and accountable;
• In scenario four (S4), corporate contracting and materiel is both responsible and accountable; and
• In scenario five (S5), the responsibility centre manager – financial management is both responsible and accountable.

Table 5 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Administer Contracts and Deliverables is a point of integration with the business processes from the Materiel/Finance Interactions domain for the management of assets. This subprocess group involves monitoring the contract, receiving and accepting deliverables (part of account verification in support of section 34 of the FAA), monitoring financial performance, and resolving vendor issues. Most activities of this subprocess are materiel management in nature and are outside the financial management scope of this process, but they provide important context and link the financial and contracting processes. In some cases, it may be necessary to revisit Manage Contracts (Subprocess 3.1.5), for example, when the contract requires amendments.

5.5.1 Administer Contracts and Deliverables (Subprocess 3.1.6)

Subprocess 3.1.6 involves monitoring the contract, certifying the receipt and acceptance of deliverables (pursuant to section 34 of the FAA), reviewing financial performance, and managing vendor issues. The manager, supported by asset/materiel management services, is accountable for administering the contract. Receiving deliverables involves the physical receipt of deliverables and either accepting or rejecting deliverables based on damage, quantity, or other criteria, as defined by the contract. Figure 9 depicts the Level 3 process flow for Administer Contracts and Deliverables.

Figure 9. Administer Contracts and Deliverables (Subprocess 3.1.6) – Level 3 Process Flow

Text version: Figure 9. Administer Contracts and Deliverables (Subprocess 3.1.6) – Level 3 Process Flow

Note A: When the purchase is determined to be an asset, the cost of deliverables is an input to the following Materiel/Finance Interactions domain processes: Manage Other Capital Assets (Business Process 4.1), Manage Real Property (Business Process 4.2) and Manage Inventory (Business Process 4.3).

5.5.1.1 Activities

The contract should be regularly monitored (Activity 3.1.6.1 – Monitor Contract) to ensure that:

• Milestones are achieved;
• The vendor continues to be a going concern;
• The vendor meets the terms and conditions of the contract;
• The goods or services meet the requirements of the contract; and
• The total value of the contract is sufficient.

At any time during the contract period, events may trigger the need for action to be taken relating to the contract, the vendor information or the vendor.

The Administer Contracts and Deliverables subprocess also involves the physical receipt of goods and performing an inspection, or confirming receipt of services. In some cases, there may be multiple locations or designated receiving areas within the department where the goods are delivered. For goods, the physical receipt process results in a receiving document; and for services, in a documented acknowledgement of services received. Data such as quantity and item description are matched with the receiving document (Activity 3.1.6.2 – Match Deliverables With Receiving Document). Evidence of the receipt is part of the account verification, in support of section 34 of the FAA (Manage Payables (Subprocess 3.1.7)).^[42]

The deliverables are then compared to the terms and conditions of the contract (Activity 3.1.6.3 – Match Deliverables With Contract). Any discrepancies are noted and resolved with the vendor. If no discrepancies are noted or once they are resolved, the deliverables are officially accepted as part of the certification of the receipt of goods or the provision of services pursuant to section 34 of the FAA,^[43] supported by documentation such as a bill of lading, a deliverable, a time sheet, or a notice of acceptance.

To ensure adequate separation of duties, the following functions are kept separate when responsibility is assigned to individuals involved in the expenditures process^[44]:

• Authority to enter into a contract (transaction authority) (Activity 3.1.5.4 – Exercise or Obtain Transaction Authority) ;
• Certification of the receipt of goods and the provision of services, pursuant to section 34 of the FAA (certification authority) (Activity 3.1.6.3 – Match Deliverables with Contract);
• Determination of entitlement, verification of accounts, and preparation of requisitions for payment or settlement, pursuant to section 34 of the FAA (certification authority) (Manage Payables (Subprocess 3.1.7));
• Certification of requisition for payment or settlement, pursuant to section 33 of the FAA (payment authority) (Activity 3.1.8.4 – Exercise FAA, Section 33 Certification, Including EAA Key); and
• If the process or other circumstances do not allow such separations of duties as identified above, alternate control measures are implemented and documented.

Furthermore, par. 6.2.2 of the Directive on Delegation of Financial Authorities for Disbursements requires that “persons with delegated authority do not exercise the following:

• Certification authority and payment authority on the same payment;
• Spending, certification or payment authority for an expenditure from which they can directly or indirectly benefit (e.g., when the payee is the individual with financial signing authority or when the expenditure is incurred for the benefit of that individual).”^[45]

Goods and certain services may be recorded as an expense, an inventory item (Business Process 4.3 – Manage Inventory), or as a capital asset (Business Process 4.1 – Manage Other Capital Assets or Business Process 4.2 – Manage Real Property) along with the related liability. If not done previously, an analysis of the nature of the deliverables or goods may be required when it is not evident how the purchase should be recorded. This analysis is especially vital when the acquisition could be a component for an asset under construction, a betterment or a capital lease. An accrual entry may be recorded to reflect the receipt of the good or service, and the applicable updates are made to commitments.

In the event of the rejection of deliverables or a discrepancy in the receiving document, it is necessary to resolve these issues with the vendor (Activity 3.1.6.4 – Resolve Issues With Vendor). The vendor needs to be contacted to resolve the issue, which may result in returned goods, a modification to the deliverable, or a contract amendment.

Goods that are damaged or that are in excess of what was ordered are returned in accordance with the terms and conditions of the contract. The vendor is contacted and advised of the issue. Usually when goods are returned to the vendor, a Return Merchandise Authorization form is completed and sent with the returning merchandise. Goods to be returned can result in several outcomes:

• The goods can be replaced or exchanged for an alternative when the original goods are not available;
• The vendor can adjust or revise the invoice; or
• The vendor can issue a refund or credit memo for the portion of goods returned.

There may be instances when the issue can be resolved without returning the goods or rejecting the deliverables, that is, where they are accepted as received. This resolution may impact the value of the contract, for example, if the deliverables are accepted at a discount of the original price.

If the contract needs to be amended, it will be necessary to revisit Manage Contracts (Subprocess 3.1.5) and to proceed with the review and finalization of the terms and conditions of the contract (Activity 3.1.5.2 – Finalize/Review Terms and Conditions) following the appropriate flow of activities. There may be circumstances when additional entities may be consulted, most notably legal counsel, to ensure that issues are resolved. The contract and corresponding commitments should be adjusted to reflect the final resolution agreed upon by all parties.

The vendor master data file may require changes, such as a change in location or payment data, over the course of the contract. It is important to record changes when they become known. Certain vendor master data file changes may also trigger a contract amendment, for example, when a vendor undergoes a legal name change. Manage Vendor Master Data File (Business Process 7.1) provides details on how to make changes to the vendor master data file.

When deliverables are paid for by acquisition card, rather than proceeding to Manage Payables (Subprocess 3.1.7), the process would proceed to the performance of certification of the credit card statement, pursuant to section 34 of the FAA. The alternative process flow for acquisition cards is described in Appendix E.

5.5.1.2 Roles and Responsibilities

The key financial management activities of this subprocess are ensuring that the receiving documents accurately describe the deliverables received and that the deliverables match what was requested. Responsibility for administering the contract is shared among several roles, while the manager is ultimately accountable for the outcome. The remaining activities are materiel management in nature.

There are various scenarios relating to responsibility and accountability.

For Activity 3.1.6.1 – Monitor Contract, corporate contracting and materiel, the Department of Public Works and Government Services – Acquisitions Branch or the responsibility centre manager – acquisitions is responsible for this activity. When the manager is responsible, the Department of Public Works and Government Services – Acquisitions Branch could be consulted for their expertise and the manager – acquisitions would be informed of issues when he or she was not responsible for monitoring the contract. The manager – acquisitions is always accountable.

For Activity 3.1.6.2 – Match Deliverables With Receiving Document and Activity 3.1.6.3 – Match Deliverables With Contract, when the responsibility centre manager – financial management and the responsibility centre manager – acquisitions are not the same individual, the manager – financial management is informed of the results of activities 3.1.6.2 and 3.1.6.3, which are part of the account verification process in Manage Payables (Subprocess 3.1.7).

For Activity 3.1.6.3 – Match Deliverables With Contract, the type of deliverables will determine which role is responsible, typically based on the technical expertise required to confirm compliance to the specifications of the contract. In scenario one (S1), asset/materiel management services is responsible. In scenario two (S2), the manager – acquisitions is responsible. In both cases, however, the manager remains accountable.

For Activity 3.1.6.4 – Resolve Issues With Vendor, the role responsible will depend on how the transaction authority was exercised. In scenario two (S2), the manager – acquisitions is responsible. In scenario three (S3), corporate contracting and materiel is responsible. In scenario four (S4), the Department of Public Works and Government Services – Acquisitions Branch is responsible. In all cases, the manager is accountable for this activity.

Table 6 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

This subprocess group involves handling invoices, completing the account verification, and providing certification authority pursuant to section 34 of the FAA.

5.6.1 Manage Payables (Subprocess 3.1.7)

Upon receipt of the invoice, the following takes place:

• Account verification process is performed;
• Section 34 certification authority is exercised by the manager; and
• A request for payment is prepared and sent to financial services

Figure 10 depicts the Level 3 process flow for Manage Payables.

Figure 10: Manage Payables (Subprocess 3.1.7) – Level 3 Process Flow

Text version: Figure 10: Manage Payables (Subprocess 3.1.7) – Level 3 Process Flow

Manage Payables (Subprocess 3.1.7) involves receiving invoices, credit memos or other documents from vendors and verifying and validating invoice information. The approved contract and receiving document form part of the account verification.

Subprocess 3.1.7 begins when the vendor sends an invoice, which could be received by the program area, accounts payable or financial services, depending on the arrangements established in the contract. At this time, the date of receipt is recorded; the date of receipt is a key element in calculating interest, which is further described in Perform Payment Authority (Subprocess 3.1.8).

Account verification provides the necessary evidence to demonstrate that:

• The work has been performed;
• The goods were supplied or services were rendered;
• The relevant contract or agreement terms and conditions have been met;
• The transaction is accurate; and
• All authorities have been complied with.^[46]

Primary responsibility for verifying individual accounts rests with the responsibility centre manager – financial management, who has the authority to confirm and certify entitlement pursuant to section 34 of the FAA.^[47] These steps rely on the goods/services receipt process described in Administer Contracts and Deliverables (Subprocess 3.1.6), the approved contract (output from Subprocess 3.1.5 – Manage Contracts) and the vendor invoice. All payments and settlements are to be certified pursuant to section 34 of the FAA. Credit memos are reviewed following the same process as for invoices received.

To ensure adequate separation of duties, the following functions are kept separate when responsibility is assigned to individuals involved in the expenditures process^[48]:

• Authority to enter into a contract (transaction authority) (Activity 3.1.5.4 – Exercise or Obtain Transaction Authority);
• Certification of the receipt of goods and the provision of services pursuant to section 34 of the FAA (certification authority) (Activity 3.1.6.3 – Match Deliverables with Contract);
• Determination of entitlement, verification of accounts, and preparation of requisitions for payment or settlement, pursuant to section 34 of the FAA (certification authority) (Manage Payables [Subprocess 3.1.7]);
• If the process or other circumstances do not allow such separation of duties, alternative control measures are implemented and documented.
• Certification of requisition for payment or settlement, pursuant to section 33 of the FAA (payment authority) (Activity 3.1.8.4 – Exercise FAA, Section 33 Certification, Including EAA Key).

Furthermore, par. 6.2.2 of the Directive on Delegation of Financial Authorities for Disbursements requires that “persons with delegated authority do not exercise the following:

• Certification authority and payment authority on the same payment;
• Spending, certification or payment authority for an expenditure from which they can directly or indirectly benefit (e.g., when the payee is the individual with financial signing authority or when the expenditure is incurred for the benefit of that individual).”^[49]

Although account verification is normally performed prior to payment, completing account verification following payment is permitted in certain situations, such as acquisition card purchases, provided that the claim for payment is reasonable and meets the criteria outlined in the Directive on Account Verification.^[50]

5.6.1.1 Activities

The Manage Payables subprocess involves the following activities^[51] that support the verification and certification of invoices pursuant to section 34 of the FAA:

• Verifying that supporting documentation is complete (i.e., the documentation provides an audit trail and demonstrates agreed price and other specifications as well as receipt of goods or services and authorization according to the delegation of financial signing authorities) (Activity 3.1.7.1 – Verify That Supporting Documentation Is Complete);
• Confirming the following:
  • That contract or agreement terms and conditions have been met, including price, quantity and quality,
  • That work has been performed,
  • That the goods have been supplied or services have been rendered, and
  • If, as a result of exceptional circumstances, the price is not specified in the contract or agreement, confirmation that it is reasonable (Activity 3.1.7.2 – Confirm That Contract Terms Are Met);
• Confirming that the payee is entitled to, or eligible for, the payment. This confirmation would include ensuring that the payee is appropriate, particularly in the case of an assignment of the supplier’s debt (alternate payee) (Activity 3.1.7.3 – Confirm That Payee Is Entitled to Payment);
• Validating three-way matching (i.e., the information in the invoice, the approved contract and the receiving document is in agreement (Activity 3.1.7.4 – Validate That Three-Way Matching Occurred);
• Ensuring that the payee information is accurate and valid. The payee information should also be verified against the vendor master data file. If the payee information is not accurate and changes are required, the Manage Vendor Master Data File process (Business Process 7.1) explains how to make changes to the vendor master data file (Activity 3.1.7.5 – Ensure That Payee Information Is Accurate);
• Ensuring that the financial coding is accurate and complete (Activity 3.1.7.6 – Ensure That Financial Coding Is Correct);
• Verifying that all relevant statutes, regulations, Orders in Council, policies and directives, and other legal obligations have been complied with (Activity 3.1.7.7 – Verify That Relevant Regulations, Policies and Directives Were Followed);  and
• Confirming that the transaction is accurate, including that the payment is not a duplicate, that discounts, credits or contract holdbacks have been deducted, that charges not payable have been removed, and that the invoice or claim total has been calculated correctly (Activity 3.1.7.8 – Verify Accuracy of Transaction).

In addition to the policies previously identified in this guideline (subsection 3.2, “References”), other policy instruments specific to the transaction should be consulted, such as the Directive on the Payment, Collection and Remittance of Provincial Taxes and Fees.

It should be emphasized that departments are required to ensure that suppliers are paid on the due date. Departments that fail to pay by the due date^[52] must pay interest, without demand from the supplier, in accordance with the terms and conditions of the contract. The Directive on Payment Requisitioning and Cheque Control does not allow the department to elect a minimum threshold for payment of interest. For information on determining the due date, see the “Payment on due date” section of the Directive on Payment Requisitioning and Cheque Control. Typically, the payment term starts when the invoice is received at the invoicing address specified in the contract; this is the invoice receipt date for purposes of calculating the due date. The department has an obligation to record the invoice receipt date as follows:

• Paper invoices should date stamped; or
• Electronic invoices should have a date tag applied that cannot be changed electronically.

The “goods/services acceptance date” is the date of delivery to the department (Activity 3.1.6.2 – Match Deliverables With Receiving Document). The quality of the deliverables received is determined as part of the FAA section 34 certification process (Activity 3.1.6.3 – Match Deliverables With Contract).

Account verification also involves confirming that advance payments meet appropriate requirements^[53] and comply with the Treasury Board Contracting Policy. Recurring periodic payments for ongoing contracts, such as utilities and facilities, are described in Manage Other Payments (Business Process 3.3).

If, at any point during the account verification process, a discrepancy is noted or if the information is incomplete, the manager is required to resolve the discrepancy by tracing the issue to its source (Activity 3.1.7.9 – Resolve Discrepancies). Once the issue is resolved, the account verification may resume or start over.

Once the invoice has been verified and no discrepancies or issues have been noted, the account verification is complete and certified pursuant to section 34 of the FAA (Activity 3.1.7.10 – Exercise or Obtain Authority), which is usually provided through a signature block on the invoice or a completed account verification checklist. The invoice is recorded and the need to adjust the commitment is determined, such as in the case of a final invoice. If the invoice is not certified, follow-up with the vendor or others involved in the Manage Procure to Payment business process may be required. The final output of the Manage Payables subprocess group is an approved invoice in the form of a payment request for the purpose of payment processing.

Account verification pursuant to section 34 of the FAA also involves ensuring that there is auditable evidence of verification (i.e., ensuring that the process identifies the individuals who performed the account verification and ensuring that there is an audit trail).

5.6.1.2 Roles and Responsibilities

The responsibility centre manager – financial management is responsible and accountable for the completion of the account verification and the certification of invoices pursuant to section 34 of the FAA.

Table 7 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

Note A: The authoritative source for most policy instruments is outside of the DFMS.

The Manage Payments subprocess group completes the Manage Procure to Payment business process and involves the performance of quality assurance activities where applicable, exercising payment authorization pursuant to section 33 of the FAA, completing and submitting payment requisitions, and finalizing payments.

5.7.1 Perform Payment Authority (subprocess 3.1.8)

Perform Payment Authority starts with the receipt of a request for payment. Quality assurance is performed by financial services as part of payment authorization pursuant to section 33 of the FAA. Figure 11 depicts the Level 3 process flow for Perform Payment Authority.

Figure 11: Perform Payment Authority (Subprocess 3.1.8) – Level 3 Process Flow

Text version: Figure 11: Perform Payment Authority (Subprocess 3.1.8) – Level 3 Process Flow

5.7.1.1 Activities

The request for payment is received by financial services (Activity 3.1.8.1 – Receive Request for Payment) for payment issuance. The request for payment includes the invoice data, payment details (date invoice received, deliverables acceptance date, due date, and amount of invoice), vendor data, payment type (regular or priority payment), and financial coding block.

As part of this subprocess, the financial officer delegated section 33 of the FAA authority performs quality assurance (Activity 3.1.8.2 – Perform Quality Assurance). The financial officer exercises payment authority and is responsible for certifying and ensuring that^[54]:

• 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 FAA;
• 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;
• When exercising payment authority:
  • All high-risk transactions are subject to a full review; and
  • A sample of medium- and low-risk transactions is selected, based on a sample selection methodology, and the most important aspects of each transaction are reviewed; and
• Certification of payments pursuant to section 33 of the FAA is provided to the Receiver General (Standard Payment System).

If a discrepancy is found during this process, such as a duplicate payment, the payment requisition is returned to the responsibility centre manager – financial management for resolution.

The department is responsible for defining high, medium and low risks on the basis of its risk tolerance. Manage Post-Payment Verification (Business Process 8.1) describes the quality assurance requirements of section 33 of the FAA for sampling of medium- and low-risk transactions. Furthermore, the financial officer is responsible for requesting corrective action when a critical error is identified during the quality assurance process for payment authority.^[55]

The next activity is to determine whether interest is due on the invoice and to calculate interest as appropriate, in accordance with the Directive on Payment Requisitioning and Cheque Control, using the Bank of Canada interest rate in effect for the previous month plus 3 per cent^[56] (Activity 3.1.8.3 – Calculate Interest).

When calculating interest on late payment of an invoice, the date to be used is the latest of the following:

1. The original invoice receipt date;
2. The supplier’s invoice date (to be used as default if (a) is not captured);
3. The deliverables acceptance date; or
4. The shipment date (to be used as default if (c) is not captured).

Under the Directive on Payment Requisitioning and Cheque Control, if parts of an invoice are in dispute, the parts that are not in dispute are to be paid within the due date period. Departmental invoice business processes should have the capacity to split supplier invoices into disputed items and non-disputed items, and to have adequate duplicate payment controls that can identify true duplicate payments versus multiple payments on the same supplier invoice.^[57]

To ensure adequate separation of duties, the following functions are kept separate when responsibility is assigned to individuals involved in the expenditures process^[58]:

• Authority to enter into a contract (transaction authority) (Activity 3.1.5.4 – Exercise or Obtain Transaction Authority);
• Certification of the receipt of goods and the provision of services pursuant to section 34 of the FAA (certification authority) (Activity 3.1.6.3 – Match Deliverables with Contract);
• Determination of entitlement, verification of accounts, and preparation of requisitions for payment or settlement, pursuant to section 34 of the FAA (certification authority) (Manage Payables (Subprocess 3.1.7));
• Certification of requisition for payment or settlement, pursuant to section 33 of the FAA (payment authority) (Activity 3.1.8.4 – Exercise FAA, Section 33 Certification, Including EAA Key); and
• If the process or other circumstances do not allow such separation of duties, alternative control measures are implemented and documented.

Furthermore, par. 6.2.2 of the Directive on Delegation of Financial Authorities for Disbursements requires that “persons with delegated authority do not exercise the following:

• Certification authority and payment authority on the same payment;
• Spending, certification or payment authority for an expenditure from which they can directly or indirectly benefit (e.g., when the payee is the individual with financial signing authority or when the expenditure is incurred for the benefit of that individual).”^[59]

Once the financial officer is satisfied that all requirements have been met, the payment requisition is certified pursuant to section 33 of the FAA and electronic authorization and authentication is performed (Activity 3.1.8.4 – Exercise FAA, Section 33 Certification [Including EAA Key]).

The payment requisition is then prepared and submitted to the Receiver General (Activity 3.1.8.5 – Submit Payment Requisition to Receiver General) in accordance with the:

• Payments and Settlements Requisitioning Regulations,1997;
• Directive on Payment Requisitioning and Cheque Control; and
• Receiver General Manual, Chapter 4: “Standard Payment System and Departments.”

The requisitions within the payment file contain full payment details: name, date, amount, delivery address, financial institution routing information, stub detail (if required) and the type of payment. Departments assign a unique requisition number to each batch of payments.^[60]

The Receiver General Control Framework and the Receiver General Manual provide additional details and steps for ensuring that the payment requisition is properly submitted to the Receiver General. Authorized requisitions can be paid using several types of payment. When selecting the type of payment, there are many characteristics to consider.^[61] Table 8 provides the relevant references as well as key characteristics of the most common types of payment.

The following types of payment are not common, but may be used by departments in special situations:

Departmental bank accounts (DBAs): DBAs are limited to locations where normal facilities for the issuance of Receiver General cheques are not immediately available.^[63]

Electronic data interchange (EDI): The payee’s bank account should be EDI-compliant.^[64]

5.7.1.2 Roles and Responsibilities

Financial services are responsible and accountable for managing payment requisitions and certifying payments (section 33 of the FAA).

Table 9 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.

5.7.2 Issue Payment (Subprocess 3.1.9)

After payment authorization pursuant to section 33 of the FAA is exercised, the payment requisition is sent to the Receiver General for payment issuance. The payment requisition files are edited and validated, and payments are released by the Receiver General. The Receiver General produces a generic return file containing unique payment references for control purposes. At this time, the payment records should be updated^[65] in the departmental financial and materiel management system. Manage Procure to Payment (Business Process 3.1) ends, and Manage Post-Payment Verification (Business Process 8.1) or Manage Financial Close (Business Process 8.2) begins.

In the unlikely event that an overpayment or a duplicate payment is issued and cashed by the vendor, two options should be considered: obtaining a credit memo to be applied to future invoices within the current fiscal year (section 29.1 of the FAA^[66]) or receiving a refund from the vendor (Activity 3.1.6.4 – Resolve Issues with Vendor). The credit memo should be processed as described in Manage Payables (Subprocess 3.1.7). The refund should be processed as a receipt as described in Manage Revenue, Receivables and Receipts (Business Process 2.1).

Figure 12 depicts the Level 3 process flow for Issue Payment.

Figure 12: Issue Payment (Subprocess 3.1.9) – Level 3 Process Flow

Text version: Figure 12: Issue Payment (Subprocess 3.1.9) – Level 3 Process Flow

5.7.2.1 Activities

The Department of Public Works and Government Services uses the Standard Payment System (SPS) to issue Receiver General payments in Canadian and foreign currencies (Activity 3.1.9.1 – Issue Payment) and to process interdepartmental settlements (IS); the latter is addressed in Manage Interdepartmental Settlements (Business Process 2.2). All program, accounts payable and compensation payments are issued by the Receiver General on behalf of federal departments and are drawn from the Consolidated Revenue Fund. ^[67] The SPS is an integrated system, with various components and menus that incorporate the entire payment/document process.^[68]

The following summarizes the SPS payment processing steps.^[69]

Edit and Verification: On receipt of the requisition and payment details, the SPS confirms the authenticity of the electronic signature on the requisition and then edits the input to ensure that the requisition and payment details match and show no signs of tampering.

Assignment of Payment Reference Numbers: Each edited payment is assigned a 12-digit payment reference number (PRN) prior to loading into the SPS database. Each PRN is linked to the SPS requisition number assigned by the department.

Notification to Departments: Departments receive notification by return file that their payments have been edited and loaded into the SPS. Departments record the payment details (PRN, payment date, etc.) in their own departmental financial management system for control and future reference purposes.

Online Enquiry and Updates: Returned payments are recorded in the SPS. Departments are responsible for handling returned payments and may request the cancellation or the issuance of duplicate payments through the SPS. The SPS allows enquiries at all points of the payment life cycle.

Post-payment processing, including cheque replacement and exceptions, is part of Manage Financial Close (Business Process 8.2).

Departments receive notification by return file that their payments have been released by the SPS. Departments process the return payment file (Activity 3.1.9.2 – Process Return Payment File) and subsequently finalize and record the payment details (PRN, payment date, etc.) in their departmental financial management system (Activity 3.1.9.3 – Finalize Payment).

Departments are required to regularly reconcile the payment requisitions submitted to the SPS with the payment return/notification file sent by the SPS. Departments are also required to regularly reconcile the control account balances in the departmental financial and materiel management system with the control account totals received daily from the Receiver General – General Ledger (RG-GL) based on control data received from the SPS. Control account balance reconciliation is part of Manage Financial Close (Business Process 8.2).

5.7.2.2 Roles and Responsibilities

The Banking and Cash Management Sector is responsible for issuing payments, and financial services is responsible for recording completed payments.

Table 10 provides an overview of roles and responsibilities for this subprocess, using the Responsible, Accountable, Consulted, and Informed (RACI) approach. These roles and responsibilities are further described in Appendix D.