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					                  Part III - Commitment, Expense & Disbursements        FAM:          1802
                  Control Over Expenses                                 Date:    July 2010
                  Office of the Comptroller General                     Page:       1 of 12


                                                                 Approval Authorities




1.     INTRODUCTION

                               The Financial Administration Act (FAA) requires
                               that appropriate financial and operational manage-
                               ment controls are applied to the decision process in
                               spending public money and that they contribute to
                               the effectiveness of program delivery and to the ac-
                               countability of the authority process. The Govern-
                               ment Contract Regulations further specify who may
                               enter into a contract on behalf of the Government.
                               It is Government policy to entrust its ministers and
                               deputy heads with the responsibility to assign
                               financial and operational authority to managers in
                               order to enable them to administer programs under
                               their authority.
                               This Policy sets out the exercise of approval au-
                               thority for government expenditures, including -
                               Contract Authority, commitments, other general
                               ledger account entries, trust account transactions,
                               special purpose and revolving fund transactions, as
                               well as disbursements including single authority
                               disbursements.        The purpose is to highlight
                               responsibilities, cite legislated authority and provide
                               guidelines on use and documentation required to
                               support exercise of authority.
                               Generally accepted internal control practices, in ac-
                               cordance with Generally Accepted Accounting
                               Principles (GAAP), require that an Accounting Offi-
                               cer must have an internal reporting relationship that
                               provides appropriate organizational segregation of
                               responsibilities and authorities from the main busi-
                               ness units where Expenditure Officers report.
                               The directives in this Policy describe the responsi-
                               bilities of Expenditure, Accounting, and Revenue
                               Officers, as well as Contracting Authorities.




Rev. July 2010                               Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements      FAM:          1802
                        Control Over Expenses                               Date:    July 2010
                        Office of the Comptroller General                   Page:       2 of 12


                                                                      Approval Authorities



2.     DEFINITIONS

       “Accounting Officer”          means the public officer designated by the Minister
                                     under section 40 (1), and the Comptroller General
                                     under section 42 (1) of the FAA. Accounting Offi-
                                     cers are responsible for both expenditure and dis-
                                     bursement controls through sections 44, 48 and 49
                                     of the FAA. Duties include certifying all expenditure
                                     and disbursement matters including pre-encum-
                                     brances, commitments, charges and adjustments.

       “adjustment certification”    Certification, as appropriate, by either an expendi-
                                     ture, accounting or Revenue Officer that an adjust-
                                     ment to an expenditure, disbursement, revenue or
                                     balance sheet item is required and correct.

       “balance sheet accounts”      Perpetual accounts related to assets and liabilities
                                     and equities within the Government’s general
                                     ledger.

       “charge certification”        Attestation that all necessary verification have been
                                     performed so a charge can be made to an appropri-
                                     ation or a disbursement can be made. Expenditure
                                     Officers    exercise charge certification through
                                     acceptance or rejection of contract performance,
                                     goods or the amount of purchased goods or
                                     services. Accounting Officers must ensure that a
                                     particular charge has been accepted (authorized)
                                     by an Expenditure Officer; but also, that the charge
                                     is reasonable, appropriate and accurate before
                                     payment is made.

       “commitment certification”    Commitment certification represents confirmation of
                                     the intention to spend funds for a specific purpose.
                                     It typically occurs once funds have been pre-
                                     encumbered (reserved) following a requisition.
                                     (See also FAM 1701 “commitment”).

       “Contract Authority”          A public officer delegated the powers and duties
                                     of the Minister or Deputy Minister, in accordance
                                     with section 5 of the Government Contract
                                     Regulations, to enter into a contract on behalf of
                                     the Government.




Rev. July 2010                                     Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements     FAM:          1802
                        Control Over Expenses                              Date:    July 2010
                        Office of the Comptroller General                  Page:       3 of 12


                                                                     Approval Authorities


       “disbursement”                “A payment or transfer of money from the Con-
                                     solidated Revenue Fund or Special Purpose Fund”.
                                     (FAA s. 1(1))

       “documented approval”         An auditable format indicating approval by an
                                     authorized employee that has been exercised. This
                                     may be in a handwritten or electronic format.

       “expense”                     A cost of the Government incurred to provide for a
                                     known or estimated liability or loss”. (FAA s. 1(1))

       “Expenditure Officer”         The public officer designated by the Minister under
                                     section 40 (1) of the FAA. Expenditure Officers
                                     are responsible for expenditure controls pursuant to
                                     an appropriation or a special purpose fund through
                                     sections 44, 48 and 49 of the FAA. Duties include
                                     certifying all expenditure matters related to pre-
                                     encumbrance, commitment, charges and adjust-
                                     ments and if any expenditure is subject to certain
                                     statutory, policy or contractual conditions, those
                                     conditions are met.
       “pre-encumbrance
       certification”                Attestation by an expenditure and Accounting
                                     Officer that money is available to reserve
                                     funds from an allocated budget to an account
                                     for the current fiscal year (see also FAM 1701
                                     “pre-encumbrance”).

       “Revenue Officer”             The person designated to collect, receipt, deposit,
                                     record, adjust or manage public money.
       “single authority
       disbursement”                 A disbursement made under the authority and
                                     requirements of legislation other than the FAA and
                                     made without the requisition and certification of an
                                     Expenditure Officer otherwise required by the FAA,
                                     e.g., the requirement for social workers to issue
                                     emergency cheques.




Rev. July 2010                                    Financial Administration Manual (FAM)
                    Part III - Commitment, Expense & Disbursements      FAM:          1802
                    Control Over Expenses                               Date:    July 2010
                    Office of the Comptroller General                   Page:       4 of 12


                                                                  Approval Authorities



3.     POLICY

                                 Government financial approval authorities must be
                                 properly authorized and enabled pursuant to the
                                 FAA and Regulations. Subject to the following
                                 Directives, public officers with designated or
                                 delegated authority are responsible for prudently
                                 ensuring appropriate financial and operational
                                 management controls to their decision process in
                                 administering and accounting for public money
                                 (including expends, disbursements and revenue)
                                 and public property, while taking into consideration
                                 any applicable restrictions or conditions and
                                 ascertaining and considering varying degrees of
                                 risk for loss or damage.


4.     DIRECTIVES

       4.1                       Expenditure Officer

       4.1.1                     Section 38 of the FAA prohibits anyone other than
                                 a designated Expenditure Officer to incur an expen-
                                 diture.

       4.1.2                     Expenditure Officers are responsible for expendi-
                                 ture control matters consistent with section 44(1)(a)
                                 and 49(2)(a) of the FAA, including:
                                 (a) Ensuring that the amount for disbursement from
                                     an applicable budget complies with statutory,
                                     policy, and contractual terms and conditions; or,
                                     if there is no contract, it is appropriate in the
                                     circumstances. The authorization must be pro-
                                     vided in a written form [FAA s. 48];
                                 (b) Reviewing and verifying the supporting
                                     documentation and recommending the expendi-
                                     ture transaction (see Appendix D for checklist);
                                 (c) Ensuring compliance with all applicable legisla-
                                     tion, policies and directives; and,
                                 (d) Resolving any material discrepancies e.g., in
                                     goods or services received or amount invoiced,
                                     and recommending the expenditure transaction.



Rev. July 2010                                 Financial Administration Manual (FAM)
                 Part III - Commitment, Expense & Disbursements     FAM:          1802
                 Control Over Expenses                              Date:    July 2010
                 Office of the Comptroller General                  Page:       5 of 12


                                                              Approval Authorities


       4.1.3                  An Expenditure Officer’s approval includes the
                              following certifications: (see Definitions)
                              a)   pre-encumbrance;
                              b) commitment; and,
                              c) charge.

       4.1.4                  An Expenditure Officer must also certify any adjust-
                              ment made to an account that relates to an expen-
                              diture or an adjustment that impacts the balance
                              sheet.

       4.2                    Contract Authority Officer

       4.2.1                  Only Contracting Authorities may enter into con-
                              tracts on behalf of the Government. No contracting
                              authority shall proceed with a contract without
                              documented approval by the Expenditure Officer for
                              that budget. The Expenditure Officer may have
                              Contract Authority.

       4.2.2                  All material contracts must involve an experienced
                              Contract Authority (purchasing agent) to ensure the
                              most favourable outcome for the Government.

       4.3                    Accounting Officer

       4.3.1                  Accounting Officers must verify the authority of the
                              Expenditure Officer prior to certifying a disburse-
                              ment.

       4.3.2                  Accounting Officers are responsible for expenditure
                              and disbursement control matters consistent with
                              sections 44(1)(b), 48 and 49(2)(b) of the FAA,
                              including:
                              (a) Performing adequate sampling tests (see Ap-
                                  pendix B) to assess the quality of the review at
                                  the primary level of responsibility;
                              (b) Reviewing and verifying the voucher docu-
                                  mentation before any payment is made (see
                                  Appendix D for checklist);
                              (c) Ensuring compliance with all applicable legisla-
                                  tion, policies and directives;



Rev. July 2010                             Financial Administration Manual (FAM)
                 Part III - Commitment, Expense & Disbursements      FAM:          1802
                 Control Over Expenses                               Date:    July 2010
                 Office of the Comptroller General                   Page:       6 of 12


                                                               Approval Authorities


                              (d) Authorization is provided electronically in the
                                  System for Accountability and Management and
                                  in writing.

       4.3.3                  An Accounting Officer’s approval includes the
                              following certifications: (see Definitions)
                              a)   pre-encumbrance;
                              b) commitment; and,
                              c) charge.

       4.3.4                  An Accounting Officer must also certify any adjust-
                              ment made to an account that relates to a disburse-
                              ment, asset (other than revenue related, such
                              accounts receivable) or liability.

       4.3.5                  No person shall exercise any authority in relation to
                              a transaction, claim for payment or claim for
                              reimbursement from which that person or that
                              person’s relative can benefit. Similarly, due to
                              possible or perceived conflicts of interest, no
                              person shall exercise such authority where anyone
                              who resides in the same household can benefit.



       4.4                    Revenue Officer

       4.4.1                  Section 1 of the FAA prohibits anyone other than a
                              Revenue Officer to take into possession money or
                              valuable securities on behalf of the government.

       4.4.2                  A Revenue Officer must provide proper certification
                              before public money is taken into possession and
                              under control of the Government. The certification
                              includes:
                              a) account verification;
                              b) issuance of a receipt; and,
                              c) proper recording of the revenue.

       4.4.3                  A Revenue Officer must certify any allocation that is
                              made to a revenue account.




Rev. July 2010                              Financial Administration Manual (FAM)
                  Part III - Commitment, Expense & Disbursements      FAM:          1802
                  Control Over Expenses                               Date:    July 2010
                  Office of the Comptroller General                   Page:       7 of 12


                                                                Approval Authorities


       4.4.4                   A Revenue Officer must certify any adjustment
                               made that relates to a revenue account.

       4.5                     Dual Capacity
                               No person shall act as both an Expenditure Officer
                               and Accounting Officer in the same transaction
                               unless authorized as a single authority disburse-
                               ment. (FAA s. 41(3); FAM 1801 s. 4.5.5).

       4.6                     Conflict of Interest

                               No person shall exercise any authority in relation to
                               a transaction, claim for payment or claim for
                               reimbursement from which that person or that
                               person’s relative can benefit. Similarly, due to
                               possible or perceived conflicts of interest, no
                               person shall exercise such authority where anyone
                               who resides in the same household can benefit.




5.0    AUTHORITIES/REFERENCES

                               •   FAA sections 1,13, 38 to 44, 49
                               •   Government Contract Regulations
                               •   Delegation of Authority Regulations
                               •   FAM 1701, FAM 1801


6.0    CONSEQUENCES FROM FAILURE TO COMPLY

                               Failure to comply with policies and directives of the
                               Financial Administration Manual may result in actions
                               under Part X of the Financial Administration Act. The
                               Government of the Northwest Territories may seek
                               legal remedy in the Territorial Courts.




Rev. July 2010                               Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements        FAM:          1802
                        Control Over Expenses                                 Date:    July 2010
                        Office of the Comptroller General                     Page:       8 of 12


                                                                       Approval Authorities


                                      APPENDIX A: Quality Control

General

Departments should develop and publish specific internal policies and procedures for staff to
follow for the verification of accounts pursuant to sections 44 and 49 of the FAA; but subject to
FAM policies (See FAMs 1803, FAM 1701, and FAM 2101). These departmental policies should
take into consideration the departmental environment including factors such as the level of
decentralization.

Deputy Ministers should ensure that the responsibilities of each officer related to account
verification and quality assurance processes are clearly documented and understood.

Account Verification

As part of the account verification process, transactions should be reviewed for accuracy such as
ensuring that the payment 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.

Payments that may be made in advance of the completion of the verification process may, for
example, include the following:

   a. regular utility invoices such as telephone, heat and hydro where the invoice amount may
      vary from month to month;
   b. invoices covering numerous small value items, with regular suppliers where the individual
      transaction amounts are considered low risk such as taxis and,
   c. periodic invoices with established suppliers for services, such as maintenance or
      equipment rental, where the periodic invoice is normally the same amount each month.

Documentation that provides evidence of the extent of the commitments involved, the agreed
prices for the services and supplies, the precise specifications and requirements, and the agreed
payment terms should be maintained as required to support the verification process for each type
of payment and in order to ensure an adequate audit trail is maintained.

Quality assurance of the adequacy of account verification

The quality assurance review performed by Accounting Officers is in addition to the above
requirements, which can be achieved by using sound sampling techniques. Appendix B provides
additional information regarding the implementation of sampling.

If the errors discovered through the quality assurance review of the account verification are
frequent and serious, a complete review of the particular organization's account processing
practices should be carried out and the findings reported to the responsible centre’s manager for
corrective action.

When the account verification and certification pursuant to the FAA are continually inadequate or
otherwise unsatisfactory, withdrawing approval authority is preferable to duplicate checking.


Rev. Jan. 2010                                           Financial Administration Manual (FAM)
                         Part III - Commitment, Expense & Disbursements             FAM:          1802
                         Control Over Expenses                                      Date:    July 2010
                         Office of the Comptroller General                          Page:       9 of 12


                                                                             Approval Authorities


                           APPENDIX B: Implementation of Sampling


This policy supports the use of sound statistical sampling which determines the sample size
objectively according to the desired degree of confidence. Samples are selected in an unbiased
and representative fashion. Sampling which is intentionally biased toward certain sources of
transactions, those suspected of being error prone, for example, is judgmental sampling. Sound
statistical sampling is recommended over judgmental sampling because it ensures that the
conclusion to be drawn from the sample results will be reliable and statistically supportable.

The first step in implementing sampling is the completion of a feasibility study to determine the
current state of the account verification process. Once it has been determined that sampling is
feasible, the key to successful implementation of sampling within a department is the development
of a sampling plan. A sampling plan sets out departmental policy and procedure statements and
related data gathering and reporting requirements.

The sampling plan is approved by the Director of Finance, or equivalent, who will ensure the
sampling plan is documented in the departmental financial manual and understood by all staff
involved in its implementation. The plan should be updated and approved on a regular basis.

The sampling plan should include information such as the following: sampling populations and
transaction streams, sampling review period, point of testing (pre or post payment), the sampling
approach (statistical or other), the critical errors, the maximum tolerable error rate, and the
method of sample selection (manual or computerized), methodology assumptions to determine
sample sizes for transaction streams. The sampling plan should also identify the evaluation and
reporting that will follow the sample period as well as the approaches to corrective action.

Sampling techniques chosen should be sufficiently precise to allow conclusions to be drawn about
the overall adequacy and reliability of the account verification process.

Criteria to identify risk level of transactions should include consideration of the type of transaction,
the dollar value, and where appropriate, the current error rate from particular organizations. That
is, if the Accounting Officer is not confident about the adequacy of verification, transactions may
be classified at a higher level of risk for a period of time.




Rev. Jan. 2010                                               Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements          FAM:            1802
                        Control Over Expenses                                   Date:      July 2010
                        Office of the Comptroller General                       Page:       10 of 12


                                                                           Approval Authorities


                                APPENDIX C: Definitions of Risk

High Risk: Transactions with the following criteria would be considered high risk: highly sensitive
transactions, for example where an error in payment is non-recoverable, or payments which are
largely judgmental or subject to interpretation. This category could also include payments of very
large dollar amounts or payments that are considered highly error prone.

Low Risk: Transactions with the following characteristics would be considered low risk:
transactions that are not sensitive in nature, have little or no potential financial loss associated
with them, or a low error rate with a low dollar value impact of error or recoverable.

Medium Risk: Transactions not considered either high risk or low risk are of medium dollar value
and are not highly prone to error.

The following is AN EXAMPLE of the type of matrix that might be developed in order to identify
risk levels for transactions.

Type of Transaction                     Low Risk             Medium Risk                High Risk

General accounts payable                  < $$$                $$$ - $$$                 > $$$

Grants and contributions                  < $$$                $$$ - $$$                 > $$$

Social assistance payments                < $$$                $$$ - $$$                 > $$$

Travel expense claims                     < $$$                $$$ - $$$                 > $$$

Hospitality                               < $$$                $$$ - $$$                 > $$$

Conferences/training                      < $$$                $$$ - $$$                 > $$$

Relocation claims                         < $$$                $$$ - $$$                 > $$$




Rev. Jan. 2010                                             Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements          FAM:           1802
                        Control Over Expenses                                   Date:     July 2010
                        Office of the Comptroller General                       Page:      11 of 12


                                                                          Approval Authorities


                 APPENDIX D: Expenditure and Disbursement Control Checklist


All Payments

It is the responsibility of the department to ensure:
      • the payment meets all legal requirements (e.g., legislative authority exists, funds have
          been appropriated, the balance available in the appropriation is sufficient);
      • there is compliance with applicable Financial Management Board policy and related
          directives and procedures;
      • all calculations, extensions and totals are correct;
      • the payee’s name and address are correct;
      • all account classifications are accurate (i.e., chart of account distributions);
      • support documentation (e.g., written contract, agreement, approved payment directive,
          receipts) is in place and referenced as required ; and
      • all required certifications/approvals are in place (e.g., proof that goods and services are
          received) and
      • approvers are authorized (i.e., formal delegation exists as required).


Supplier Payments

It is the responsibility of the department to ensure:
• goods and quantity received are the goods that were ordered;
• the unit price given by the supplier matches the purchase order, release or Local Contract
      Authority (LCA) as required;
• for services, all contract terms are adhered to;
• GST are included or excluded, as appropriate;
• transportation/freight charges are appropriate;
• the proper purchase delegation has been quoted as required;
• the invoice has not previously been paid
• the purchase is reasonable for the type of operation performed;
• prepayment is only made where required and justified (e.g., subscriptions, registration fees);
• the invoice received date and goods and services received date have been accurately
      captured;
• where goods and services have not been received and payment is required (e.g., unused
      hotel rooms or airline tickets, cancelled courses), certification should reference “Payment in
      Accordance with Contract”;
• for contract payments, when required, supporting documentation includes Workers’
      Compensation Clearance, and Statutory Declaration of Contractor; and procurement
      requirements are adhered to for approvals and for distribution of purchasing documentation.




Rev. Jan. 2010                                             Financial Administration Manual (FAM)
                        Part III - Commitment, Expense & Disbursements         FAM:          1802
                        Control Over Expenses                                  Date:    July 2010
                        Office of the Comptroller General                      Page:     12 of 12


                                                                        Approval Authorities


Transfer Payments

   It is the responsibility of the department to ensure:
1. the transfer is in accordance with the provisions of relevant legislation, and related
   agreements, etc.;
2. a detailed calculation statement is provided when the amount of the transfer is determined
   using a formula as set out in legislation, regulations or in an agreement;
3. when an application form is used, it contains the signatures of the applicant and an authorized
   official of the department; and
4. where payments are made to suppliers to provide goods and/or services to individuals
   (e.g., payments to The NWT Power Corporation on behalf of TPSP recipients), these
   payments are subject to the criteria for suppliers outlined above in (2) above.




Rev. Jan. 2010                                            Financial Administration Manual (FAM)

				
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