Chapter 2 Financial Concepts

CHAPTER 2 FINANCIAL CONCEPTS

GENERAL 1. The Base Fund Committee, as prescribed by CFAO 27-6, is the senior directing board of all NPF activities, except CANEX, on the Base. 2. The accounting entity for a Base Fund shall comprise the accounting records for all NPF activities (except CANEX and messes) which provide base officers, non- commissioned 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. entertainment; and h. such other activities that are considered purposeful in the maintenance of a high standard of fitness and morale. 3. In addition, the Base Fund shall account for revenues and expenditures of: a. Chapel Funds; b. grants from public funds; c. NPF Food Services accounts, where appropriate; and d. 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. 4. All non-public revenues other than those applicable to messes, CANEX, and subsidiaries shall be credited to the Base Fund, and all non-public property other than that belonging to the messes and CANEX shall be administered by the Base Fund.

BASE FUND ACTIVITIES 5. The NPF activities indicated in paragraph 2 above shall normally be accounted for either as an NPF Trust in the Base Fund books (see paragraph 11) or as a Base Fund general account operation. However, the BComd may authorize that larger activities, such as golf or curling clubs, be operated as Base Fund subsidiaries with separate books of account see paragraph 8). The BCompt shall determine the classification which best meets the needs of management without placing an undue workload on the NPF accounting staff. 6. In the case where Base Fund operates a resale outlet which would normally be run by CANEX (eg. a Combination Store at a small unit), the outlet should be accounted for on a Base Fund Income Statement. Unless stated otherwise, the accounting procedures will be the same as those for the similar CANEX outlet. 7. (Not allocated).

BASE FUND SUBSIDIARY 8. Where an activity is sufficiently large to warrant the establishment of separate books of account, the BComd may authorize the introduction of separate records and allow it to be accounted for as a subsidiary. Normally, the criteria for separation are that the activity: a. sells goods and/or services to the community and/or membership; b. charges membership dues of sufficient materiality to warrant the maintenance of accounts receivable subsidiary and accounts receivable control accounts; and c. receives revenue, of a material amount, from two or more sources. 9. A subsidiary must produce a complete set of financial statements as per Chapter 14 and pay its appropriate share of the NPF accounting charges as determined by the BCompt. 10. Base Fund records shall include accounts for the entity Share of Base CBA and the investment in that subsidiary. The investment account balance shall reflect the net equity of the subsidiary.

NPF TRUST 11. A BComd may also authorize certain Base Fund activities not sufficiently large to be a subsidiary, but requiring some autonomy, to be accounted for as an NPF Trust. All revenues and expenses of such an activity shall be recorded in an NPF Trust account on the Base Fund balance sheet. 12. A Unit Fund established under the provisions of CFAO 27-6, paragraph 27, shall be accounted for as an NPF Trust. 13. As a Base Fund activity, an NPF Trust operation is under the control of the BComd, through the B Admin O, and is subject to the same policy and procedures which apply to other NPF operations. Such activities are not to be incorporated as separate legal entities. 14. If required by the B Admin O, the NPFAO may provide transaction listings of NPF Trust activities in schedules to the Base Fund financial statements. 15. Expenditures in excess of the balance of an NPF Trust account should not normally occur. Where such occasions arise, the matter shall be referred to the B Admin O for resolution (eg. a Base Fund grant to the activity).

EXTERNAL TRUST 16. An NPF 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 NPF organization and are used for NPF purposes. On the other hand, the funds of organizations such as Boy Scouts, Cadet Corps and section party funds do not accrue to Base Fund and therefore are not considered to be NPF activities. 17. The NPFAO should not normally provide accounting services to non-NPF activities as such action will reduce the NPF accounting resources available for NPF activities. 18. In some cases, NPFAOs may be directed to account for such non-NPF activities (eg. Military Police Fund for Blind Children (see Annex A), Family Resource Centres (see Annex B), NDHQ Chapel Funds, public grants, etc) if considered to be in the best interest of the CF. In other cases, it may be considered that, due to the degree of isolation of the base or other socio-economic reasons, all structured activities are base oriented. In these circumstances the BComd may direct that the NPFAO provide accounting services. 19. When the NPFAO provides accounting services to non-NPF activities, the following will apply unless directed otherwise by DGPS: a. the NPFAO 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 NPF activity under the control of the BComd, no minutes are required by the NPFAO; c. the funds will be held as an External Trust on the Base Fund Balance Sheet; d. the NPFAO will provide custodial services only (ie. 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; g. only the trust account balance (ie. no transaction schedules) may be shown in the Base Fund financial statements; and h. the appropriate accounting costs are to be allocated in accordance with paragraph 32. 20. (Not allocated).

MESSES 21. 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. 22. 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. 23. The accounting entity 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; c. facilities and events for recreation and relaxation; and d. where appropriate, extra messing. 24. The funds of a mess shall be expended for the benefit of its members, which includes application towards the aims of: a. other NPF institutions such as the CFCF and Base Funds; and b. benevolent and welfare funds serving members of the CF.

CANEX 25. CANEX is a consumer-oriented resale system which includes all non-public resale activities including, but is not limited to Retail Stores, Grocery Stores, Combination Stores, Gas Bars, Food Services, Vending Machines, Warehouses and Special Services except: a. messes; b. recreation clubs; c. kit shops as authorized in accordance with CFAO 27-8; and d. other approved activities specifically excluded by DGPS. 26. Other than these exceptions, CANEX has the right of first refusal for any new non-public resale and consumer service activities contemplated at any base/station.

ALIENATION OF NON-PUBLIC FUNDS 27. Except for funds held in trust for specific purposes, funds of a Base Fund shall be expended primarily for the benefit of officers, non-commissioned member(s) and their dependants of the base, integral and lodger units which includes application towards the aims of: a. other NPF institutions such as the CFCF; and b. the benevolent and welfare funds serving members of the CF. 28. The funds of Base Fund, mess, or CANEX shall not be alienated by gifts to private or public institutions, to relieve an officer or member of his personal responsibility for loss or damage to public or non-public property, for testimonials or gifts, for national appeals for financial assistance, or for the provision of anything connected with religious services. 29. 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 separate trust account to administer funds donated by individuals for a specific purpose or obtained from fund raising events or activities held for that purpose.

GIFT FUNDS 30. 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 causes such as hospital comforts. 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. 31. Annually, the Mess Committee or Manager, with the assistance of the NPFAO, must review the gift fund to verify its self-sufficiency and ensure that any required changes to the By-laws are made.

ALLOCATION OF ACCOUNTING COSTS 32. Publicly-paid positions have been established to provide the basic NPF accounting services at units. The cost of additional NPF-paid personnel hired and other charges incurred in support of NPF accounting shall be shared by all NPF entities including Base Fund, its subsidiaries, NPF trust accounts and external trust accounts. 33. Annually, the NPFAO will determine the total accounting section workload, in hours, attributable to each NPF activity as a percentage of the total workload, in hours, of all military, public service and NPF personnel employed in the NPF accounting section. This analysis should cover a period of at least one month of normal transactions. 34. Based upon the applicable percentage of workload, each activity will be charged a share of the budgeted annual NPF accounting costs recorded in the Base Fund books. 35. The BComd may direct that accounting charges relating to Base Fund, subsidiaries, NPF trust accounts or messes be absorbed as a charge against the Base Fund. However, charges applicable to CANEX shall be charged to CANEX.

MESS AND ACTIVITY COMMITTEES - NPFAO 36. The NPFAO shall not serve as a regular/voting member of any base mess or activity committee. Where a member of the NPFAO's staff acts as the delegated representative, he shall not in any capacity serve as a regular voting member of that mess or activity committee. 37. The NPFAO, or his delegated representative, shall be an ex-officio member of each mess or activity committee and shall provide financial information consistent with the responsibilities of his primary position of NPFAO.

MINUTES OF MEETINGS 38. The NPFAO shall be provided with a copy of the Minutes of all General and Committee meetings of the Base Fund, subsidiaries, messes and NPF Trusts and shall confirm that the necessary authority has been granted through those minutes prior to processing transactions through accounting records.

ACCOUNTING RECORDS 39. All accounting records of NPF organizations shall be maintained by the NPFAO. Source documents and registers (eg, details of individual mess charges) maintained by other managers in accordance with specific paragraphs in this publication shall be made available to the BCompt or his representatives as required. 40. Accounting records consist of the following: a. Source Documents. These are invoices, Purchase Orders, Transfer Vouchers, Payroll Time Sheets, Registers, Reports, Minutes, Memoranda, etc, used to advise the NPFAO 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 NPF organizations are: (1) Cash Receipts Journal (ABACIS CASREG). 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 SUIREG). This is used to record the procurement of goods and services through Accounts Payable records (see Chapter 19), (3) Disbursements Journal (ABACIS DISREG). This is used to record all cheques issued (see Chapter 19), (4) Payroll Journal (ABACIS CLKREG). This is used to record all payroll transactions (see Chapter 20), and (5) General Journal (ABACIS ADJREG). These are used to record other items (eg. mess charges, write-offs, expiration of prepaid expenses, 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 ledgers shall be maintained to support specific control accounts in the general ledger. Such ledgers may be in the form of card files, ledger sheets, or locally produced preprinted forms. Control accounts for which subsidiary ledgers must be maintained are identified in Chapter 13. 41. The retention periods for NPF records and documents are contained in A-AD- D11-001 /AG-001, Records Scheduling and Disposal Manual. 42. 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, CU, etc).