Report on Review of the Cost of Various Methods of Payment
The Treasury Board Secretariat has recently completed a review of the cost of various methods of payment used in the federal government. A report was prepared documenting the costing analyses and comparison among the following payment methods:
(b) departmental bank accounts (DBA);
(c) travellers cheques;
(d) acquisition cards; and
(e) central cheque issue by the Public Works and Government Services Canada (PWGSC).
A copy of the report may be accessed on the Finance, Contracting and Asset Management network the through the TBS Web site on the Government Enterprise Network (GENet), the federal government's internal network, at the following address:
2. Scope of Costing
The cost analysis primarily focuses on the operating costs of processing transactions through the various payment methods. The costs of procurement activities (i.e. purchases, contracting, etc.) are outside the scope of this review, and are therefore not included.
3. Costing Methodology
The costing is conducted using the process costing methodology. Basically, the process flow of each payment method is first of all analyzed into a series of activities. The estimated processing cost per transaction is worked out on an average basis based on:
- costs accumulated on individual activities within a defined time period
- average time spent to process each transaction.
4. Costing Analyses and Comparison
According to the findings as detailed in the report, the average costs for petty cash, DBAs and travellers cheques are on the high side which is mainly due to the necessary accounting and control procedures for operating these payment methods. Meanwhile, acquisition card has the lowest cost as only one payment requisition is raised instead of multiple cheques for individual transactions in the monthly credit card bill. The cost for central cheque issue hinges on the way payment information is provided to PWGSC, and is relatively high for both manual and urgent cheque issue which require special handling.
5. Evaluation of Payment Practices
In the evaluation of their payment strategy and practices, departments/agencies should endeavour to use the most appropriate and cost-effective methods for making payments, and to identify areas where improvement may be feasible.
Apart from other factors like the nature and urgency of the payment, the cost of the payment methods should also be duly considered.
The report provides the costing analyses and comparison required in the evaluation process.
Should you have any enquiries on the report and the costing analyses, please contact me or ask your staff to contact Gilles Vézina at 957-9660 (Internet: Vezina.firstname.lastname@example.org)
Assistant Secretary and Assistant Comptroller General
Financial, Contract and Asset Management Sector
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