Financial Administration Manual Chapter 5 …

1 Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section 5. Table of Contents Amended: 04/2013 Chapter 5 accounting and Control of Expenditures INTRODUCTION accounting SYSTEMS Policy accounting Practices accounting METHODS accounting CONTROLS Overview accounting Control procedures Commitment Control SIGNING AUTHORITIES Policy Statement Definitions Policy Signing Authorities Limitations Interpretations Exceptions Signing Authorities Limitations Chart procedures General Spending Authority Payment Authority Rejection of Requisitions for Payment Delegation Process Signing Authorities Forms Interpretation Guidelines Equipment Lease Contracts EXPENDITURE INITIATION ACCOUNT VERIFICATION General Responsibility for Account Verification Account Verification procedures Preparation and

2 Verification of Journal Entries Application of Signing Authorities Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section 5. Table of Contents Amended: 03/2012 procedures Inter-departmental Journals PAYMENT TIMING GOVERNMENT TRANSFERS Policy Statement Definitions Policy Corrective Actions Responsibilities Guidelines PURCHASING OF GOODS AND SERVICES TRAVEL OPERATIONS AND MAINTENANCE AND CAPITAL EXPENDITURES PAYMENTS Payments Directive Interest on Overdue Payments CREDIT CARDS General Acquisition Card Policy ASSIGNED DEBTS General Definitions Debt Assignment Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section Introduction Issue Date.

3 12/92 INTRODUCTION This Chapter describes the policies , procedures , practices and guidelines within which departments receive authority to initiate and approve expenditure transactions for which they are responsible. It also sets out some of the responsibilities of service departments for controlling expenditure transactions, including their responsibilities for cheque preparation, control and delivery. There must be proper Financial authority and control for all government expenditures. Authority granted by statutes generally may be amplified by regulations, directives and guidelines issued by the Executive Council, the Deputy Minister of Finance or other specified authorities. Departments and agencies, in initiating and approving expenditures, are obliged to meet the requirements prescribed.

4 Managers having operational responsibility and budgetary spending authority may initiate expenditures to carry out their responsibilities, as outlined in this Manual and as prescribed by other government policies and procedures . Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section accounting Systems Issue Date: 12/92 accounting SYSTEMS Policy All accounting systems shall conform to the requirements prescribed in the Management Board Directives. The government maintains a centrally-administered accounting system known as the Financial Management Information System. Specialty accounting systems which may operate within departments require prior approval of the Department of Finance to ensure the systems are compatible with the central system and meet government accounting requirements.

5 accounting Practices Departments must utilize the Government accounting and reporting services in processing their Financial transactions. The Financial Management Information System has a database consisting of files recording all departmental accounting transactions. This database is the basis for all Government of the Yukon Financial statements. Departmental accounting transactions are recorded and identified by reference code numbers which consist of: a) supplier reference numbers b) pre-printed contract documents c) departmental accounting codes. While the accounting code structure utilized is standardized, there is built-in flexibility to allow departments to meet their unique needs. The main cheque issuing centre is within the Department of Finance. Cheque issuance is computerized, although Manual cheques are issued on an emergency basis.

6 The use of Manual cheques must be limited because they are costly to prepare. Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section accounting Methods Issue Date: 12/92 accounting METHODS Both the accrual and commitment accounting methods are used as the basis of government accounting . Under the accrual accounting method, accounting entries are made and total expenditures changed when goods or services are received. Under the commitment accounting method, accounting entries are made and the committed expenditure is changed when a contract it made for goods or services. The accrual accounting method is required to meet statutory requirements and, as such, is required by the Management Board Directives. The commitment accounting method is required to ensure departments do not exceed their budgetary appropriation by anticipating future expenditures.

7 The Financial Management Information System utilizes both of these methods. The accrual accounting system is the primary accounting tool for the Government of the Yukon. The commitment system is provided as a management tool to assist in planning and controlling departmental expenditures. Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section accounting Controls Issue Date: 12/92 accounting CONTROLS Overview accounting controls ensure the integrity of the accounting system. accounting control involves ensuring that only authorized data is entered and accepted into the system and that this information is entered, processed and reported properly. accounting control must be established during system development. These controls must be instituted and maintained throughout the system.

8 Control techniques include, but are not limited to: Proper system documentation Segregation of duties Adequate form design Job descriptions that accurately document responsibilities Documented procedures Pre-numbered forms Control totals Proper training accounting Control procedures The accounting system must have adequate controls to ensure the completeness, accuracy and authority for and of all information. The accounting control procedures used must satisfy both legislative and management needs in the control of public funds. A most important element of Financial control is that exercised on individual transactions as expenditures are contemplated, committed and authorized. Departmental management are primarily responsible for controlling individual expenditure transactions.

9 The basic elements of expenditure control are as follows: Departments must ensure that before an expenditure is initiated there is a sufficient unencumbered balance available in the relevant appropriation, allotment, or item included in the estimates to discharge the commitment. Departments must certify with respect to each payment that the relevant services have been performed or goods received at prices that are either in accordance with contract terms or are reasonable. Departments must not requisition a payment that would be an unlawful charge against an appropriation; would result in an Financial Administration Manual Chapter 5 accounting and Control of Expenditures Section accounting Controls Issue Date: 12/92 (Continued) expenditure in excess of the appropriation; or would reduce the balance in the appropriation so that it would not be sufficient to meet the commitments charged against it.

10 Where a payment is to be made before completion of the work, delivery of the goods or rendering of the service, as the case may be, departments must ensure that the payment is in accordance with the contract. Departments must utilize the centralized accounting and reporting services of the Department of Finance to obtain detailed accounting information. After payment authority has been exercised, payment requisitions should be immediately forwarded to the Department of Finance to expedite the processing of transactions. This ensures that payment will be prompt and that Financial reports are current. The accounting system must be designed to permit the periodic entry and reporting of information on undischarged commitments. This permits officers exercising signing authority or Financial control to be aware of free balances for each appropriation and allotment on a periodic basis.