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Chapter 2
Alienation of Non-Public Property
NPP Activity Committees - NPP Accounting Representation
FINANCIAL CONCEPTS
1. The Chief of Defence Staff (CDS) has directed that all unit activities must be administered within either the Public accountability framework or the Non Public Property (NPP) accountability framework.
2. The Base Fund Committee, as prescribed by CFAO 27-6, is the senior directing board of all NPP activities on the Base, except CANEX, Messes and Unit Funds.
3. The BComd may authorize the CO of a lodger, satellite, or integral unit to establish a unit fund where:
a. the unit is located in an area so remote from its support base that it is impractical to share base amenities; or
b. in other circumstances where the BComd considers it is practical and advantageous to do so.
4. A Unit Fund established under these provisions and/or the provisions outlined in CFAO 27-8 for national branch, regimental and group funds shall be accounted for as a separate entity, have there own separate entity, outlet, sub-outlet (EOS) structure and set of financial statements. Such funds include any resale activities (e.g. kitshops) they operate and all funds shall be deposited with CFCF.
5. With the exception of, unit fund operations independent of Base Fund, CANEX and messes, Base Fund shall account for all NPP activities which provide Canadian Forces members and their dependants with facilities and equipment for:
a. organized and recreational sports;
b. activities sponsored by married quarters organizations or community councils;
c. hobby and cultural clubs;
d. recreation and social activities other than those provided by messes;
e. news media;
f. arts and crafts;
g. branch and social funds;
h. entertainment; and
i. such other activities that are considered purposeful in the maintenance of a high standard of fitness and morale.
6. In addition, the Base Fund/Unit Fund shall account for revenues and expenditures of:
a. Chapel Funds;
b. grants from public funds; and
c. such other funds that are donated or collected for specific purposes and held in trust and over which the Base Fund exercises only custodial responsibility.
7. All non public revenues other than those applicable to messes, CANEX, subsidiaries and independent unit funds shall be credited to the Base Fund, and all non public property other than that belonging to the messes and CANEX, subsidiaries and independent unit funds shall be administered by the Base Fund.
8. All NPP funds shall be deposited within the CFCF, including Base Fund grants given to units or other elements for Morale and Welfare purposes. All requests to move or store NPP funds to/at a commercial banking facility shall be approved by the Chief of Defence Staff (CDS) or his delegated authority as per DAOD 9003-1.
9. Widespread activities such as but not limited to golf, curling, campground, newspaper, yacht club, rod and gun, lodging center, ski club, independent fitness, wood hobby, CF museums, auto club operations shall be operated as Base Fund subsidiaries with separate books of account. The Base Fund committee shall oversee operations of all subsidiary activities. Other NPP activities such as Fitness and Sports and Community Recreation, are provided with a separate EOS in the NPP financial structure (detailed in Chap 13 of this manual), and may be accounted for as subsidiaries dependent upon the size and scope of operations and national comparability requirements.
10. A subsidiary must have a complete set of financial statements as per Chapter 14 of this manual and the subsidiary’s capital position must be reported as an Investment on the Base Fund Balance Sheet.
11. As per CFAO 27-5, CF Museums are NPP activities and as such are subject to the NPP accountability framework. Military Regular and Reserve Force Unit Museums shall be accounted for as a Base Fund subsidiary activity with a separate EOS and accounting records.
12. Base Fund activities that are not established as subsidiaries shall be accounted for as a separate outlet under the Base Fund’s financial structure with a specific EOS reporting revenues and expenses, if any of the following conditions exist:
a. a manager is directly involved with the daily/ongoing activities ;
b. use sales and purchases accounts and maintains a merchandise inventory;
c. sells services to the community and/or membership;
d. has depreciable fixed assets;
e. charges membership dues;
f. receives revenue from two or more sources.
13. If the criterion to be reported as a separate outlet is not met, the activity shall be accounted for as a universal outlet under the Base Fund’s financial structure reported as a schedule to Base Fund statements.
14. To ensure consolidated financial reporting capabilities and standardization of the financial structure, all types of NPP activities (including clubs) that in essence, provide the same basic services and/or conduct the same activities, shall have the same financial structure. All minor hockey clubs for example shall be established with the same financial structure and if circumstances warrant changing the financial structure for one club, then all minor hockey club’s financial structures shall be amended to reflect the new structure.
15. Departure from the standardized financial structure must be approved by the Chief Financial Officer (CFO).
16. A NPP Entity Fund is a separate economic unit, segregated for the purposes of conducting specific activities or attaining objectives in accordance with special regulations, or limitations as outlined in the Entity Fund constitution. NPP Entity Funds are established to maintain legitimate non-Base Fund NPP funds within the NPP accountability framework.
17. Base branch and social funds shall be accounted for as an NPP Entity Fund as a liability in the Base Fund books of account. All revenues and expenses of such an activity shall be recorded in an NPP Entity Fund account on the Base Fund balance sheet.
18. As a NPP activity, these NPP Entity Fund operations are under the control of the BComd, through his delegated authority, and are subject to the same policy and procedures which apply to other NPP operations. Such activities are not to be incorporated as separate legal entities.
19. If required by the BComd or his delegated authority, the Base NPP Accounting Manager (NPPAM) may include transaction listings of NPP Entity Fund activities in schedules to the Base Fund financial statements. Expenditures in excess of the balance of an NPP Entity Fund account should not normally occur. Where such occasions arise, the matter shall be referred to the BComd or his delegated authority for investigation/action. The Entity Fund’s viability as an ongoing operation (going concern) needs to be evaluated - the ability to meet current and future financial commitments and to continue in operation for the foreseeable future. Short term assistance in the form of grant funds may be provided by the Base Fund if merited, however, if the Entity Fund does not appear to be viable over the long term it may be prudent to consider disbandment. Alternatively, if the Entity Fund does not appear to be self sufficient, but the benefits provided warrant ongoing Base Fund support, an initial Base Fund grant may be distributed to the Entity Fund in an amount sufficient to clear the deficit balance and from that point forward, grant funds may be distributed on a periodic or continuous basis in amounts sufficient to support the activity and prevent a future deficit balance.
20. NPP grants such as the PSP grant to senior appointments and special purpose funds authorized by CFO are accounted for as a liability in the Base Fund books of account. Specific administration and spending guidelines are promulgated separately as required. Contact the local NPPAM for administrative and spending guidelines.
21. An entity may, if the creation of a separate gift fund has been approved by a simple majority of all members, give gifts and testimonials of a reasonable amount to members on the occasion of their departure from the entity or for other legitimate purposes such as bereavement commemoration. Gift Funds shall be accounted for as a NPP Entity Fund. The entity's Constitution and By-laws must state the eligibility, amounts, purposes, etc. for gift fund expenditures as well as the appropriate monthly gift fund assessment from members. The gift fund shall be self-sufficient and shall not be created or replenished by transfers of funds from other accounts. However, in circumstances where surpluses have accumulated in entity gift funds, the surplus or a portion thereof may be transferred from the gift fund to another entity account such as mess subscription revenue, upon approval by a simple majority of members. (care must be taken to consider both current and future needs when determining transfer amounts).
22. Annually, the Mess Committee or Manager, with the assistance of the NPPAM, must review the gift fund to verify its self-sufficiency and ensure that any required changes to the By-laws are made.
23. All public grants shall be accounted for as trust accounts in accordance with (IAW) chap 10 of this manual.
24. An NPP organization is characterized by the fact that upon the closure of the activity, its funds accrue to the Base Fund, the CFCF or some other NPP organization and are used for NPP purposes. On the other hand, the funds of organizations such as Boy Scouts, Cadet Corps, Chapel Funds and Charity Fund Trusts do not accrue to Base Fund and therefore are not considered to be NPP activities and, if NPP Accounting Services are provided, are accounted for as trusts. In addition, CFCF has offered investment opportunities to specific organizations with close ties to NPP and these funds are accounted for as trusts. Details of trust investments are contained in Chapter 9.
25. The NPPAM should not normally provide accounting services to non-NPP activities as such action will reduce the NPP accounting resources available for NPP activities.
26. In some cases, NPPAMs may be directed to account for such non-NPP activities (e.g. Military Police Fund for Blind Children (see Annex A), Family Resource Centres (see Annex B)), if considered to be in the best interest of the CF. In these circumstances the BComd may request through CFO that the Regional Accounting Manager (RAM) and the NPPAM provide accounting services.
27. When the NPPAM provides accounting services to non-NPP activities, the following will apply unless directed otherwise by CFO:
a. the NPPAM must be provided with a copy of the constitution and/or by-laws of the activity showing, among other things, the executive positions and their responsibilities, the names of the executive members, the names of those who can authorize payments from the trust account and the destination of funds upon the closure of the activity;
b. as the activity is not an NPP activity under the control of the BComd, no minutes are required by the NPPAM;
c. the funds will be held as a trust on the Base Fund Balance Sheet;
d. the NPPAM will provide custodial services only (i.e. accept and record deposits and issue funds and record withdrawals);
e. the activity is not entitled to use the PST or GST numbers of the base:
f. the activity is responsible for recording and controlling any assets it owns; and
g. only the trust account balance (i.e. no transaction schedules) may be shown in the Base Fund financial statements.
28. Messes shall be considered to be independent financial entities exclusive of the Base Fund and shall be administered by an elected or appointed mess committee.
29. The BComd may issue specific directions on the operation of a mess including the contribution from a Mess to the Base Fund as prescribed in CFAO 27 6. Such contributions shall be shown as a mess general expense.
30. The accounting for a mess shall comprise the accounting records for the non public property used to provide the members with:
a. bar facilities and services;
b. social or entertainment activities; and
c. facilities and events for recreation and relaxation.
31. The funds of a mess shall be expended for the benefit of its members, which includes application towards the aims of:
a. other NPP institutions such as the CFCF and Base Funds; and
b. benevolent and welfare funds serving members of the CF.
32. CANEX resale operations include all NPP resale activities which, at the unit level, may include but are not limited to:
a. Retail stores: merchandising clothing, furniture, appliances, kitchenware, hardware, sporting goods, jewellery, watches, cameras and novelties;
b. Grocery stores: merchandising groceries, including health and beauty aids and miscellaneous household items;
c. Gas outlets: may include sale of gas, oil, parts, tires, batteries and accessories, and performance of service and repairs;
d. Other businesses: operations, including barber shops, beauty salons, newsstands, tailor shops, launderettes, laundry and dry cleaning taxi stands, photo shop, guest lodge, banks/credit unions and vending machines, operated either directly by CANEX or through a CANEX concession agreement; and
e. Food Service outlets: operated either directly by CANEX or through a CANEX concession agreement.
CANEX resale operations do not include:
a. deployed operations;
b. kitshops as authorized IAW CFAO 27-8;
c. licensed bar, snack bar, and dry canteen operations of a Mess or Service Club or Ship Exchange; or
d. licensed bar, snack bar, or pro shop type outlets, operated by and as part of a Special Interest Activity which is considered as part of that activity.
33. Other than these exceptions, CANEX has the right of first refusal for any new NPP resale activities contemplated at any unit.
ALIENATION OF NON-PUBLIC PROPERTY
34. In addition to the restrictions detailed at para 37 to 39 below, alienation of NPP occurs when funds are expended to the benefit of an individual or a restricted group of beneficiaries. For example, providing winning sports teams with sports clothing would be considered alienation. The opportunity to participate on a winning team is not open to everyone, not all military sports have championship events etc. The policy is to ensure that funds are expended in a context free of any alienation IAW the NDA. This policy applies to all NPP and is not restricted to cash and cash equivalents. As per CFAO 27-6, NPP funds can be expended with the express approval of the Chief of the Defence Staff (CDS), in the manner and to the extent approved by him.
35. Except for funds held in trust for specific purposes, funds of a Base Fund shall be expended primarily for the benefit of CF members and their dependants, civilian employees of the base and integral and lodger units which includes application towards the aims of:
a. other NPP institutions such as the CFCF; and
b. the benevolent and welfare funds serving members of the CF.
36. The funds of Base Fund, mess, or CANEX shall not be alienated by any disposition of NPP that may result in personal gain or advantage, gifts to private or public institutions, to relieve an officer, non commissioned member or civilian employee of his personal responsibility for loss or damage to public or NPP, for testimonials or gifts, for national appeals for financial assistance, or for the provision of anything connected with religious services.
37. A grant or transfer of base funds to a charitable or other organization that is not specifically part of base personnel support programs is prohibited. This does not preclude the establishment of a trust account to administer funds donated by individuals for a specific purpose or obtained from fund raising events or activities held for that purpose.
NPP ACTIVITY COMMITTEES – NPP ACCOUNTING REPRESENTATION
38. The RAM and the NPPAM shall each be ex-officio members of the Base Fund committee and shall provide financial information consistent with the responsibilities of their primary positions to assist the BComd or their delegated representative in the stewardship of NPP. At the request of the BComd, the RAM or NPPAM, or their delegated representative may also be required to provide the same level of service for mess or activity committees based on local circumstances/requirements.
39. The NPPAM shall be provided with a copy of the Minutes of all General and Committee meetings of the Base Fund, subsidiaries, messes and NPP Entity Funds and shall confirm that the necessary authority has been granted through those minutes prior to processing transactions through accounting records.
40. All accounting records of NPP organizations shall be maintained by the NPPAM. Source documents and registers (e.g. details of individual mess charges) maintained by other managers IAW specific paragraphs in this publication shall be made available to the RAM or his representatives as required.
41. Accounting records consist of the following:
a. Source Documents. These are invoices, Purchase Orders, Transfer Vouchers, Registers, Reports, Minutes, Memoranda, etc, used to advise the NPPAM of transactions, events, and approvals of expenditures;
b. Books of Original Entry. These are the media through which information on source documents is recorded for ultimate posting to the appropriate accounts. The Books of Original Entry utilized for NPP organizations are :
(1) Cash Receipts Journal (ABACIS SALREG). This is used to record all receipts and deposits, and some transfer vouchers affecting the Base Consolidated Bank Account (Base CBA) (see Chapter 18);
(2) Purchase Journal (ABACIS SUIGEN). This is used to record the procurement of goods and services through Accounts Payable records (see Chapter 19);
(3) Disbursements Journal (ABACIS DISGEN). This is used to record all cheques issued (see Chapter 19); and
(4) General Journal (ABACIS ADJREG). These are used to record other items (e.g. corrections, write-offs, etc);
c. General Ledger. The ledger is comprised of the accounts, as detailed in Chapter 13, to which the information recorded in the Books of Original Entry is posted monthly. This ledger serves as the source of information when preparing financial statements; and
d. Subsidiary Ledgers. Subsidiary ledger is a group of subsidiary accounts the sum of the balances of which is equal to the balance of the related control account in the general ledger. For manual records, subsidiary ledgers may be in the form of card files, ledger sheets, or locally produced pre-printed forms. Control accounts for which subsidiary ledgers must be maintained are identified in Chapter 13.
42. The retention periods for NPP records and documents are contained in the Defence Subject Classification and Disposal System (DSCDS). The Excise Tax Act and the Income Tax Act require that books and records, with their related accounts and vouchers, be retained for a minimum of six years from the end of the year to which they relate.
43. To facilitate audit and information retrieval, a minimum of six months of transaction detail is to be retained on the ABACIS system for all files (GL, SU, etc).
Alienation of Non-Public Property
NPP Activity Committees - NPP Accounting Representation