17-11 – Canadian Cadet Organizations Funds – Policy and Procedures for Accounting
Cadet Administrative and Training Orders (CATOs)
1. This order deals with all aspects of Cadet Cadet Organizations (CCO) funds, except the Lord Strathcona Trust Fund, and is issued to ensure that those funds are expended for the benefit of CSTC or School participants. This order is based on the National Defence Act and other publications issued by the Chief of Defence Staff (CDS).
2. Sections 17 and 38 to 41 of the National Defence Act (NDA), establish the powers, duties and functions of the Minister, the Chief of the Defence Staff and Base Commanders with regard to Non-Public Property (NPP), as well as the organization of the Canadian Forces (CF) by the Minister.
3. Section 46 of the NDA, authorizes the Minister to form cadet organizations, which are not comprised in the CF. As such, a fund is neither non-public funds nor subject to the reporting requirement of the CDS in his NPP capacity as set out in sections 38 to 41 of the NDA. The Cadet Instructor Cadre (CIC) are reserve members of the Canadian Forces and the CIC resale activities, including mess activities, are Non-Public Funds (NPF) activities.
4. For the purpose of this order, the following definitions apply:
“Mess” means an organization, whose membership is related to an identifiable and specified rank structure, formed for the purpose of building ‘esprit de corps’ and comradeship. Cadets are not allowed the use of these premises.
“Non-public property” (NPP) means as defined in section 2 of the National Defence Act:
- all money and property, other than issues of materiel, received for or administered by or through messes, institutes or canteens of the Canadian Forces (CF);
- all money and property contributed to or by officers, non-commissioned members, units or other elements of the CF for the collective benefit and welfare of those officers, non-commissioned members, units or other elements;
- by-products and refuse and the proceeds of the sale thereof to the extent prescribed under subsection 39(2) of the National Defence Act; and
- all money and property derived from, purchased out of the proceeds of the sale of, or received in exchange for, money and property described in paragraphs (a) to (c).
“Non-public funds” (NPF), the money component of NPP that comprises funds:
- generated by the resale activities;
- raised or contributed by DND personnel;
- received from admission charges to community, recreation facilities or events;
- received from the rental of NPP financed community, recreation facilities or equipment;
- received from the sale of NPP;
- received for the provision of programs or services for which the Public has full or partial responsibility;
- donated from fees, charges or bar profits of NPP organizations;
- earned through the investment of NPF;
- NPP buildings, equipment and material;
- personnel funded by NPP; and
- voluntary human resources employed in leadership and self-help capacities.
“Fund” means a CSTC or School fund and includes money and property received for, administered by or through CSTC messes and institutes and received for or contributed to or by, CSTC or School participants for their collective benefit and welfare.
“Institute” means an outlet, canteen or club that purchases merchandise except alcohol for resale.
5. The purpose of a Unit Fund is to provide a medium whereby the CO can administer all funds vested in the CO. The aim of the Fund is to promote the well being of all CSTC or School participants. In order to replenish this fund, the CO may impose a levy on gross sales from messes and institutes to a maximum of 7 per cent.
6. The CO RCSU is NOT authorized to levy a tax as a percentage of sales on messes and institutes in order to replenish the Regional Unit Fund. However, the CO RCSU may direct that each mess and institute remit, to a Regional Cadet Central Fund (RCCF), up to 1% of their gross sales. The purpose of the RCCF is to benefit all cadets in the Region. Guidelines for the RCCF must be set out in a formal constitution.
Training Centre or School Funds
7. The Commanding Officer (CO) of a CSTC or School may create a unit fund.
8. For an expense from a Unit Fund to be considered legitimate, it must be consistent with DND policies and it must benefit all participants of the Fund and not just a single individual or a restricted group of individuals. Examples of eligible expenses are:
- graduations/change of CO parades;
- operating expenses, such as bank fees, letterhead paper, accounting paper and fees, insurance premiums, etc;
- training awards for best candidates (including trophies and engraving); and
- receptions for the entire CSTC or School participants.
9. Gifts and donations received from civilian sources shall normally be treated the same as any other NPF/Cadet income, except where the grantor directs for a specific purpose. This type of gift/donation will be set up as a trust fund within the CSTC or School Fund and charged to the income statement as expenditures are incurred. If a person makes a donation to a CSTC or School Fund without mentioning a specific purpose for which the donation must be used, it shall become an integral part of the Fund and recorded as revenue upon receipt. It shall be used and accounted for in accordance with the same rules that govern the Unit Fund.
10. The funds of any mess or institute shall not be alienated by gifts to private or public institutions. A mess or institute may establish a separate gift fund by a simple majority vote of all participants. The gift fund may be authorized to give gifts and testimonials of a reasonable amount to participants on the occasion of departure or for any other legitimate cause as authorized by the constitution of the gift fund. The gift fund shall be funded from direct contributions from participants and shall not be replenished by a transfer of funds from other sources.
11. The accounting period is from 1 April to 31 March of each year.
12. Books of account and accounting records must be kept for a period of six years from the end of the accounting period to which they relate, with the exception of the synoptic ledger, which shall be retained indefinitely. Records must be kept and made available to Federal/Provincial agencies for audit purposes.
13. Consolidated financial reports for each Region shall be reviewed and maintained by the appropriate RCSU. They must include/show the following:
- operating statements for the accounting period;
- the closing balance for each Fund, mess and institute operating in the Region;
- list of furniture and equipment for each Fund, mess and institute, showing market or appraisal value;
- confirmation that audits have been completed; and
- any comments by the CO RCSU, such as that assets are covered by insurance and an explanation of any major profit or loss or any significant write-off.
14. Committees shall be formed in order to direct and administer the funds of each mess, institute. Participants shall elect mess and institute committees whereas the CO/Comdt may appoint the CSTC/School Fund and Regional Fund committee. Committees must be representative of the mess or institute, i.e. where cadets are participants of an institute, they must be adequately represented. All terms of reference for committees must be approved by the CO RCSU.
Bank Accounts and Investments
15. Each Fund, mess or institute can establish its own bank account with a local chartered bank, Credit Union or Trust company. However, a consolidated bank account can be established for each CSTC or School. For security purposes, it is recommended that distance to the CSTC or School be a criterion in choosing the financial institution.
16. Cheques shall bear two signatures, a signor and a co-signor. The CO shall appoint two signers as well as two co-signers. These individuals shall ensure that the payments are legitimate and that expenditures, other than normal inventory or operations are supported by the appropriate committee meeting minutes. Arrangements shall be made to allow the RCSU Staff to sign cheques after the closure of the summer activities.
17. The bank account(s) shall be reconciled at least once per month and at the end of the summer activities.
18. Banking arrangements shall maximize services and interest revenue. However, it is strongly recommended that funds be limited to short term deposits in a chartered bank or credit union.
Goods and Services Tax (GST) And Provincial Sales Tax (PST)
19. The requirement for federal government departments and agencies to charge, collect, and remit provincial sales tax (PST) was initiated by a Cabinet decision of September 7, 1961 (X-0325-61RD(01) which directs all departments and government agencies selling goods to register with provincial authorities in provinces which levy PST and to collect and remit this tax to the appropriate province.
20. All cadet units must register with Customs Revenue Agency (CRA) for goods and services tax (GST) if revenues are estimated to be greater than $30K annually. In order to simplify sales tax procedures for vendors and to reduce provincial collection costs, some provinces may harmonize their PST system with the federal GST system to create the harmonized sales tax (HST). Each unit will charge, collect, and remit GST/HST on revenues for sales of goods and services that are taxable at 7% or 15%.
Furniture and Equipment (F&E)
21. Given the short-term nature of the CSTCs which are similar to CF deployed ops, all NPF/Cadet capital expenditures, sports and physical fitness equipment and musical instruments shall be accounted for as a direct expense in the books of account.
22. Full particulars of F&E acquired and disposed of by a Fund, mess or institute shall be maintained in a F&E Property Record (F&E Record) and reviewed annually. F&E records will show, at a minimum, the purchase price, current market value and/or the appraised value, etc for insurance purposes, as well as the location and identification number of the item.
23. When items of F&E are reported to be beyond repair or of no further use to the Fund, mess or institute, the committee, with the approval of the CO, shall dispose of such F&E in a manner considered most beneficial to the entity and supported by an approved certificate of disposal as per sample at annex A.
Powers of Write-Off
24. Write-off is defined as the authority to adjust accounting records to reflect the deletion or changed monetary value of an asset or liability arising from an extraordinary occurrence(s) and not supported by a normal market transaction. Examples of situations in which write-off action is appropriate are fraud, arson, damage, destruction, theft, fire, disappearance and deletion of bad debts. All write-offs must be fully documented.
25. The CO of a CSTC or School is authorized to write-off NPF/Cadet assets to an amount not exceeding $500. The CO RCSU must approve all write-offs in excess of $500.
26. A kit shop may be established to offer specialized merchandise.
27. Accounting for a kit shop shall be maintained separately in the books of account as a trust account. Kit shop operations must adhere to provincial and federal sales tax regulations.
28. Public grants obtained for the summer activities must be accounted for in the books of account as trust accounts.
29. Arrangements shall be made with the supporting base to obtain the appropriate amount for the physical fitness grant.
30. All acquisitions must be accounted for as part of the F&E and expensed directly to the appropriate trust account(s).
31. CSTCs who are not covered by the Consolidated Insurance Program (NPF) shall obtain adequate coverage for fire and theft protection as well as third party liability. Under the CIP, CSTCs and Schools not operating messes or canteens do not require third party liability insurance if they do not have NPF activities.
Responsibilities of the CO RCSU
32. The CO RCSU shall be responsible for all NPF/Cadet activities for organizations under his/her command, including the following:
- the establishment of a Regional/CSTC/School Fund, mess or institute;
- ensuring that funds are used only for the benefit of participants of the CSTC or School;
- approving an expenditure of NPF/Cadet for a capital or non-recurring purchase in excess of $1,000;
- approving write-off in excess of $500;
- ensuring that provincial and federal laws regarding the collection and remittance of taxes on retail sales are followed;
- ensuring that provincial laws regarding the sale and consumption of alcoholic beverages are followed;
- publication of an accounting instructions;
- auditing of NPF/Cadet activities and books of account; and
- ensuring that the proper reports are reviewed and maintained by the RCSU.
Responsibilities of CSTC/School Commanding
33. The CO shall be responsible for all NPF/Cadet activities in the CSTC/School including the following:
- the supervision of all funds;
- approving an expenditure of NPF/Cadet funds for a capital or non-recurring purchase up to $1,000;
- approving write-off not exceeding $500;
- ensuring that the proper NPF/Cadet reports are forwarded to the CO RCSU;
- ensuring that assets are properly safeguarded. To this end, an insurance policy can be contracted locally. The premium may be divided proportionally among the Fund, messes and institutes;
- ensuring that stocktaking and cash counts are carried out as directed by the CO RCSU;
- maintaining F&E records; and
- ensuring that funds are expended for the benefit of the officers, NCMs, Civilian Instructors and the cadets of the CSTC/School, in the case of CSTC/School Fund and the benefit of its participants in the case of a mess or institute.
OPI: D Cdts 2
Date: Oct 06
Amendment: Ch 7/06
- Date modified: