DAOD 1016-0, Expenditure Management

Table of Contents

1. Introduction
2. Definitions
3. Policy Direction
4. Consequences
5. Authorities
6. References

1. Introduction

Date of Issue: 2001-04-01

Date of Last Modification: 2017-08-10

Application: This Defence Administrative Order and Directive (DAOD) is a directive that applies to employees of the Department of National Defence (DND employees) and an order that applies to officers and non-commissioned members of the Canadian Armed Forces (CAF members).

Supersession: A-FN-100-002/AG-001, Financial Administration Manual, Volume 1, Chapter 8, Accounting and Control of Expenditures

Approval Authority: Assistant Deputy Minister (Finance)/Chief Financial Officer (ADM(Fin)/CFO)

Enquiries: Director Financial Policy (DFP)

2. Definitions

certification authority (pouvoir d'attestation)

The authority, according to section 34 of the Financial Administration Act, to certify contract performance and price, entitlement or eligibility for the payment. (Directive on Delegation of Spending and Financial Authorities, Treasury Board)

commitment authority (pouvoir d'engager des fonds)

The authority to ensure that there is a sufficient free balance available to discharge a planned transaction before entering into a contract or other arrangement as required by section 32 of the Financial Administration Act. (Defence Terminology Bank record number 694580)

expenditure initiation authority (pouvoir d'engagement des dépenses)

The authority to incur an expenditure (to spend funds) or to make an obligation to obtain goods or services that will result in the eventual expenditure of funds. (Directive on Delegation of Spending and Financial Authorities, Treasury Board)

payment authority (pouvoir de payer)

The authority to requisition payments according to section 33 of the Financial Administration Act. (Directive on Delegation of Spending and Financial Authorities, Treasury Board)

transaction authority (pouvoir d'exécuter une opération)

The authority to enter into contracts, including acquisition card purchases, or to sign off on legal entitlements (e.g. employment insurance payments). (Directive on Delegation of Spending and Financial Authorities, Treasury Board)

3. Policy Direction

Context

3.1 Parliament and Canadians expect the DND and the CAF to be well managed and accountable for the prudent stewardship of public funds, the safeguarding of public assets and the effective, efficient and economical use of allocated public resources. All expenditures of public funds must be incurred for the purpose of achieving the mandates of the DND and the CAF and must be made in compliance with all applicable statutes and regulations, and Treasury Board, DND and CAF policies, directives, orders and instructions.

3.2 The delegation of spending authorities and financial authorities constitutes a key internal control mechanism that plays a critical role in ensuring a high standard of integrity, accountability and transparency in the expenditure management process. Only those DND employees and CAF members who are designated in accordance with A-FN-100-002/AG-006, Delegation of Authorities for Financial Administration for the Department of National Defence (DND) and the Canadian Armed Forces (CAF), may exercise spending authorities and financial authorities. The Financial Administration Manual (FAM), issued by the ADM(Fin)/CFO, interprets Government of Canada financial policies applicable to the DND and the CAF, and sets out financial administration policies.

Expenditure Management Process

3.3 The expenditure management process in respect of public funds consists of the following spending authorities and financial authorities:

1. spending authorities: expenditure initiation authority, commitment authority and transaction authority; and
2. financial authorities: certification authority and payment authority.

3.4 Expenditure initiation is the most critical step in the expenditure management process as it initiates a series of activities that ultimately leads to the disbursement of public funds.

3.5 Commitment control, required by section 32 of the Financial Administration Act (FAA), is integral in the expenditure management process for sound budget control, forecasting, allocation and reallocation of program resources.

Account Verification

3.6 Account verification provides a means to ensure that:

1. the work has been performed, the goods supplied or the services rendered;
2. the terms and conditions of relevant contracts or agreements have been met;
3. the transactions are accurate; and
4. there is compliance with all legal authorities.

3.7 In accordance with sections 33 and 34 of the FAA, all payments and interdepartmental settlements are to be certified as part of account verification.

DND Expenditures

3.8 Some DND expenditures include the disbursement of public funds for:

1. the salaries, pay and benefits of DND employees and CAF members;
2. operating and maintenance expenses;
3. capital acquisitions;
4. travel, hospitality, conferences and event expenditures; and
5. transfer payments.

Policy Statement

3.9 DND employees and CAF members are responsible for the effective and efficient management of the expenditure process, which includes ensuring that:

1. expenditures are a legitimate operational or business requirement of their organization and that a valid authority exists from Parliament that allows for the expenditure of public funds for the requirement;
2. public funds are not misused;
3. annual appropriations authorized by Parliament or allotments approved by the Treasury Board are not exceeded;
4. proper financial coding and appropriate accounting methods are used to record all transactions;
5. accounts are settled in a timely fashion; and
6. financial management processes and systems have proper internal controls.

Requirements

3.10 Expenditure management is subject to the relevant financial policies and directives set out in the References section. DND employees and CAF members responsible for the expenditure management process must act in accordance with these policies and directives. Managers and supervisors must ensure that DND employees and CAF members are aware of the relevant policies and directives, and their proper application.

3.11 DND employees and CAF members are encouraged to report to the DFP any instance of non-compliance with this DAOD or the relevant financial policies and directives set out in the References section. DND employees should be aware of the application of the Public Servants Disclosure Protection Act in any report of "wrongdoing", as this term is referred to in section 8 of that Act.

3.12 The following functions must be by kept separate when responsibility is assigned to DND employees and CAF members involved in the expenditure management process:

1. entering into a contract (transaction authority);
2. certification of the receipt of goods and the provision of services, according to section 34 of the FAA (certification authority);
3. determination of entitlement, verification of accounts and preparation of requisitions for payment or settlement, according to section 34 of the FAA (certification authority); and
4. certification of requisitions for payment or settlement, according to section 33 of the FAA (payment authority).

3.13 If circumstances do not allow such separations of functions as identified above, alternate control measures must be implemented and clearly documented. In such circumstances, responsibility centre (RC) managers must contact their level one advisor comptroller to receive approval of these alternate control measures.

3.14 No DND employee or CAF member may exercise either spending authority, certification authority or payment authority with respect to a transaction from which that person can personally benefit, either directly or indirectly, such as expenditures for travel, relocation or hospitality, reimbursement of tuition fees or membership dues, etc. Furthermore, for every transaction that results in a personal payment, the expenditure initiation portion of that transaction must be authorized by the person’s superior.

3.15 DND employees and CAF members who act in any office or employment connected with the expenditure management process, and have knowledge or information of the contravention of the FAA or its regulations by any person, or of fraud committed by any person against Her Majesty under the FAA or its regulations, are reminded that their failure to report, in writing, that knowledge or information to a superior officer, is an indictable offence under paragraph 80(1)(e) of the FAA. Also, any CAF officer who acts as an "accounting officer", as that term is defined in QR&O article 1.02, Definitions, is reminded of their obligations in respect of public funds under QR&O Chapter 202, Cash Accounts and Banking Arrangements.

4. Consequences

Consequences of Non-Compliance

4.1 Non-compliance with this DAOD may have consequences for both the DND and the CAF as institutions, and for DND employees and CAF members as individuals. Suspected non-compliance may be investigated. The nature and severity of the consequences resulting from actual non-compliance will be commensurate with the circumstances of the non-compliance. Consequences of non-compliance may include one or more of the following:

1. the ordering of the completion of appropriate learning, training or professional development;
2. the entering of observations in individual performance evaluations;
3. increased reporting and performance monitoring;
4. the withdrawal of any authority provided under this DAOD to a DND employee or CAF member;
5. the reporting of suspected offences to responsible law enforcement agencies;
6. the liability of Her Majesty in right of Canada;
7. the application of specific consequences set out in applicable laws, codes of conduct, and DND and CAF policies and directives; and
8. other administrative or disciplinary action, or both.

Note – In respect of the compliance of DND employees, see the Treasury Board Framework for the Management of Compliance for additional information.

5. Authorities

Authority Table

5.1 The following table identifies the authorities associated with this DAOD:

6. References

Acts, Regulations, Central Agency Policies and Policy DAOD

• Financial Administration Act
• Public Servants Disclosure Protection Act
• QR&O Chapter 1, Introduction and Definitions
• QR&O Chapter 202, Cash Accounts and Banking Arrangements
• Framework for the Management of Compliance, Treasury Board
• Policy on Financial Management, Treasury Board
• Directive on Delegation of Spending and Financial Authorities, Treasury Board
• Directive on Payments, Treasury Board
• Directive on Public Money and Receivables, Treasury Board

Other References

• FAM Chapter 1016-2, Expenditure Initiation and Commitment Control – FAA Section 32
• FAM Chapter 1016-3, Account Verification – FAA Section 34
• FAM Chapter 1016-4, Manage Payments – FAA Section 33
• A-FN-100-002/AG-006, Delegation of Authorities for Financial Administration for the Department of National Defence (DND) and the Canadian Armed Forces (CAF)
• Department of National Defence and the Canadian Forces Delegation of Authorities for Financial Administration Matrix