Home > Corporate > Finance and Informatics > Chapter 9 - Consolidated Banking System (Revised 23 Jan. 04)
CHAPTER 9
CHAPTER 9
CONSOLIDATED BANKING SYSTEM
PURPOSE
This chapter outlines the Consolidated Banking System that has been established for NPF operations in Canada.
DEFINITIONS
In this chapter, unless the context otherwise requires:
Main bank account means the bank account held at the Bank of Montreal Ottawa Main Branch, where all deposits are made and cheques or other disbursements are withdrawn;
Concentration Bank Account (CBA Ottawa) means the asset account maintained in the CFCF books of accounts which contains the holdings of all NPF monetary resources of CFPSA;
Regional shares of the CBA are liability accounts held in the CFCF books of accounts in which all transactions including deposits, withdrawals and transfers between Base/Region and CFCF shall be entered;
Regional Concentration Bank Account (Regional CBA) means the account in the regional control accounts which reflects the amounts belonging to each base NPF operation within the applicable region. This amount must be in agreement with the regional share of the Central CBA Ottawa;
Local Bank Account means the bank account at a local bank where all deposits shall be made and transfers, initiated by the NPFAS or by the Bank of Montreal Main Branch, Ottawa, shall be made;
Central Office means the Finance and Informatics Division in Ottawa; and
CFO&VPI means the Chief Financial Officer and Vice President Informatics.
ACCOUNTING RECORDS
In the Central and Regional CBAs, the Base and Entities shares of the CBA will be reflected as a current liability account. Within their own books own of account, CANEX, Base Fund and their subsidiaries shall show their share of the Regional CBA as an asset account. If the CANEX, Base Fund, or Messes share is in a deficit position, then the balance at the end of the month will be reported as a liability account.
All cash deposits and cheque disbursements shall be charged to the Regional CBA and to the applicable Entity Shares of the Regional CBA. Detailed deposit and disbursement procedures are outlined in Chapters 18, 19, and 20.
PROCEDURES AT CENTRAL OFFICE
The CBA Ottawa will be accounted for through accounting records maintained at the Central Office.
An Accounts Payable shall be opened and maintained in the General Ledger of the CFCF accounting records to reflect the total amount payable to each region.
CFCF deposits and withdrawals will be actioned directly to the CBA Ottawa.
The Bank of Montreal, Ottawa Main Branch, will submit to the Central Office a statement of all transactions through the CBA Ottawa weekly, including withdrawals from the Drawcheque Service as defined at Annex B, Appendix 1.
The Central Office will update the Regional shares of the CBA to reflect transfers and disbursements affecting these accounts.
Monthly, as at the close of business on the last Friday in the month, after all transactions have been entered, the Ontario Regional Accounting Office (RAO) will report the following information to each RAM:
Balance of regional shares of the CBA;
the transfers received by the CBA Ottawa during the current month;
any CFCF loan issued during the month;
monthly contributions paid to the CFCF, Welfare Funds and CANEX HQ;
monthly allotments to the bases by the CFPAF; and
any other transfers initiated by Central or Regional accounting offices.
The Central Office will report the following to each RAM:
totals of MasterCard and American Express(in excel format), and Visa accounts processed during the month;
a listing of all Bank of Montreal Corporate Credit Card transactions for the previous month;
all CANEX pre-authorized debit transactions including returned items;
all manual payroll cheques; and
a listing of all cheques cashed for each region. The Central Office will send an electronic copy to close all cashed cheques (AUTOCLOS).
All discrepancies must be investigated and corrective action taken to ensure regional books are reconciled with the Central Office records.
CHANGE IN LOCAL BANK ACCOUNTS
In order to ensure internal transfers are not affected, the Central Office Treasury and Benefits Management Accountant (TBMA) shall be notified when a unit changes local bank accounts.
RESPONSIBILITIES
The following responsibilities regarding the operation of the Central, Regional and Base banking system are delegated to the appointments shown:
Central Office is responsible for:
updating policy and procedures for its operation;
keeping Central Office accounting records for all NPF activities;
providing monthly or other reports to regions as required for reconciliation purposes;
liaison with the Bank of Montreal, Ottawa Main Branch, on matters relating to banking operations including credit card machine requests and revisions; and
analyzing individual region/CBA records maintained at the Central Office.
The RAM is responsible for:
reviewing the NPF cash position of bases in the region;
assisting the base in resolving their situation where the NPF cash position is poor;
making such representation to the CFO&VPI as is considered appropriate to assist a base in a cash crisis;
completing the cash verifications and bank reconciliations as required by this chapter;
advising the PSP manager immediately when a base entity reaches an overdraft position, including the reasons for the overdraft and, recommending corrective action to resolve the problem;
controlling the appointment of and maintenance of current lists for cheque signing authorities for base and region levels; and
ensuring that cheques are not released any earlier than absolutely necessary to meet obligations, (e.g. maximum use of supplier credit and compliance with NPF pay dates).
The Base NPFAS is responsible for:
the monthly cash reconciliation of the NPF cashier;
daily bank runs to deposit NPF cashier receipts, as required, and to pick up night deposit bags and receipted deposit slips;
for non Bank of Montreal accounts, the weekly transfer of funds from the local bank to the CBA Ottawa;
liaison with the local bank manager, to ensure that procedures outlined in this chapter are followed; and
notifying the RAM and PSP Manager of potential entity cashflow problems so that overdraft situations may be avoided.
CHEQUES
Central Office will consolidate the cheque requirements and place the total order with the supplier. The cheques are retained in the supplier's warehouse until a unit requests, from Central Office, additional cheques. The Central Office will request the supplier to send the cheques directly to the unit. Upon receipt of the cheques, the unit will inform the Central Office of the range of cheques received.
The cost of all cheques issued to all NPF entities, will be borne by the CFCF.
BANK SERVICE CHARGES
No service charges are to be assessed to bases by local Bank of Montreal branches either for transfers of funds to the Bank of Montreal, Ottawa Main Branch or for normal day-to-day transactions. Units shall investigate and have such charges reversed. Other banks however, may levy such charges as part of the locally negotiated banking arrangement. All local units will be reimbursed for these charges on monthly Transfer Voucher Advice.
Any bank charges that are directly caused by the System, will be absorbed centrally by the CFCF as arranged between Central Office, the Manager of the Bank of Montreal, Ottawa Main Branch, and local bank managers. The CFCF will also reimburse bases for the rental or purchase of Bank or Credit Union night depository bags. These costs are to be charged to RAM GL UIEOS1181 - A/Rec CFCF - Bank Charges and reimbursed via a monthly TV initiated by the RAM. NSF cheque fees are to be paid by the base and recovered from the individual concerned.
INTERNAL TRANSFER
To facilitate the transfer of funds between bases and from bases to CFCF or vise versa, a procedure will be used whereby all such payments and transfers will be effected through internal transfers. Sample of locally produced Transfer Voucher is listed at Annex A.
Procedures for internal transfers will be as follows:
transfers by Transfer Voucher (TV) by the Central Office -
a base to be issued a CFCF loan, will be notified by e-mail confirming the transfer to the region. No covering TV will be forwarded, Regions will use the e-mail as authority to adjust the applicable Base share of the Region CBA;
loan repayments by bases will be deducted on the last day of each accounting month from their Region share of the CBA at the agreed repayment rate and a covering TV forwarded by the Central Office. TVs covering interest-bearing loans will show a breakdown of the payment as to principal deduction and interest charges. No change in the repayment rate will be made without prior agreement with the base concerned;
additional loan payments may be applied to a specific loan upon approval by Base Fund/Mess/Entity Committee. Central Office must be notified of intended action.
all other charges or credits which may be required will be effected by a TV except CFPAF allotments;
transfers by TV from base/ region level will be actioned by RAMs using a locally produced form;
monthly allocations to the Self Improvement Loan Program (SILP) to each base by Canadian Forces Personnel Assistance Fund (CFPAF) will be made by message to base authorities. A corresponding TV will be forwarded to the RAM's advising of base allocations and will be used as authority to adjust shares in the Region CBA. Any correspondence on amounts allocated should be directed to the CFPAF Manager in accordance with A-PS-007/AG-001.
In carrying out the requirements of completing locally produced TVs, RAMs will control TV numbers by the allocation of serial numbers and will attach the appropriate source document or contribution form to the TV.
After processing a TV, the RAM will enter the amount in the appropriate journal using the TV number allotted as the voucher number.
All contributions or remittances for a current month should be sent by e-mail to Ontario RAO as soon as possible but, no later than the 15th of the following month. On receipt of the form, Ontario RAO will adjust the Regional Share of the CBA by the amount of the transfer.
INVESTMENTS
Investments shall not be held by any base NPF operations without specific authority from CFO&VPI.
Where authority has been given to hold investments, a register must be maintained to support the entries for the investment purchase and redemption. The register will list all investments held and will include information such as description, (bond, GIC, etc), issuing organization (name of bank, trust company, etc) certificate number, purchase and maturity date, interest rate, interest payment dates etc. The interest is to be accrued monthly.
CFCF INTEREST RATE POLICY
In March 2002, the BoD approved a revision to the CFCF Interest Rate Policy. Previously, interest was paid quarterly based on the monthly closing Region CBA balances (excluding CANEX) at an annual rate of 3%.
Under the new policy, each entity (Base Fund and Messes) that deposits with the CFCF Concentration Bank Account (CBA) will decide annually how interest will be paid to them. Each entity must decide in December of each year what option will be utilized and this option will remain in place for the following calendar year. It should be noted that Base Fund will include all subsidiary entities, including Golf and Curling Clubs. For Messes, all Officers' Messes (OM) within a Base will be considered one entity (except in cases where there are two Commanding Officers). Similarly, all Warrant Officers' and Sergeant's Mess (WSM) will be considered one entity, Junior Ranks' Messes (JRM) one entity, as well as All Ranks' Messes.
Interest shall be calculated as follows:
interest shall be paid monthly, on Base Fund and Mess deposits with the CFCF CBA, at an annual rate of 3%, calculated monthly, for the portion of that deposit that is equal to or less than the entity's total CFCF liabilities; and
for amounts on deposit with the CFCF CBA that exceed the entity's CFCF liabilities, the Base Fund or Mess may elect to receive one of the following options:
interest at an annual rate of 3% calculated and paid monthly;
interest at a rate of Bank of Montreal prime rate plus 0.25%, calculated and paid monthly;
a return based on the overall CFCF Investment portfolio rate of return less 0.50% and calculated and paid annually (calendar year) based on the average monthly CBA balance; or
any combination of the above three options.
Annually, in December, each Regional Accounting Manager (RAM) is requested to solicit their Base/Wing entity Managers and consolidate their options to Central Office.
CFCF EXTERNAL TRUST INVESTMENTS
CFCF has extended the opportunity for Museums, Regimental Funds, and other such organizations, to invest with CFCF as External Trust Investment Accounts. For all potential investments of $10K or more, CFO&VPI will correspond directly with the organization, outlining the investment policy and options available for investment return.
The rate of return options available for External Trust Investments are as follows:
the trust account could share in the overall CFCF investment return. Whatever the CFCF investment portfolio made, as a rate of return in the particular calendar year, the same percentage return, less 0.5% ( the cost of managing the portfolio), would be credited to the trust account. While in the long run, this approach should yield a higher rate of return, there is no guarantee as the markets can go up and down;
the trust account could reduce market risk by CFCF paying the trust account interest calculated on the average daily closing balance at the Bank of Montreal prime rate plus 0.25%. Interest would be paid on a monthly basis and would compare favourably with the market rates for GICs; or
for total investments exceeding $25K, the trust account can choose a combination of a. and b. by designating a portion of the funds to be invested in each option.
For smaller trust account investments held in Region's books of account, the RAM will correspond with the contact person outlining interest rates available for investments as follows:
up to $5K - 3% per annum; and
$5,001 to $10,000 - prime rate less 2%.
Once the proprietor of the trust account has agreed in writing, of his intentions, to CFO&VPI and/or RAM, funds can be deposited at the Regional or unit level. Funds can be withdrawn (or deposited) at any time without penalty or other charges.
Regardless of which option is accepted, Central Office is to be advised of all CFCF External Trust Investment accounts held at unit level. There will be no management fees, service charges, or other costs to the trust account for managing the funds. Funds held in this account are for investment purposes only, if this account becomes an operating Base Fund entity, then the operating unit will share in the CBA investment revenue received quarterly and a service charge may apply.
For trust accounts that have chosen option 31 a), the RAO will be notified by the Central Office, in January of the following year, of the overall CFCF Investment return (less 0.5%). Interest revenue will then be deposited directly to the trust account and a transfer voucher will be raised by the Region to reimburse the CBA for interest payment.
For an external trust that has chosen either option 31 b) or 31 c), the RAO will be provided with the latest Bank of Montreal prime rate statistics to calculate interest on a monthly basis. Interest revenue will be deposited directly to the trust account and a transfer voucher will be raised by the Region to reimburse the interest payment. Transfer Vouchers can be raised on a monthly, quarterly, or annual basis.
DEPOSITS AND TRANSFERS
Deposits from all base entities shall be made to the local bank.
All funds belonging to base entities will be shown in Region CBA.
All funds held in the local bank account shall be transferred to the CBA Ottawa. For bases not banking with a local branch of the Bank of Montreal, a weekly transfer is mandatory on Tuesday morning of each week to completely clear the balance in the local bank account. Units are not to deviate from this transfer schedule unless specific authority is obtained from CFO&VPI. Detailed telephone transfer procedures are provided at Annex B. For local Bank of Montreal accounts, the Bank will initiate transfers twice a week and these procedures are not required.
Subsequent to the Tuesday transfer, if the balance in a base local bank account exceeds $100,000, an additional transfer is to be made on Friday morning. It should be noted that in addition to the mandatory weekly transfer on Tuesday morning, additional transfers by units may be carried out at any time and as frequently as desired. Cash flow to CBA Ottawa is the prime factor in maximizing interest earnings to CFCF on central deposits.
CHEQUE CORRECTIONS
If a cheque written against CBA Ottawa is cashed for an incorrect amount in excess of $10.00, the original cheque must be returned to Central Office for corrective action. Any errors less than this amount, will be charged as either a miscellaneous revenue or expense to the unit.
DISHONOURED PERSONAL CHEQUES / PAD PAYMENTS
When a cheque that was included in a deposit is dishonoured, the local bank will charge the value thereof against the local bank account through the use of a debit advice form and provide the NPFAS with a copy of the debit advice and the returned cheque. When a Pre-Authorized Debit (PAD) payment (e.g. for the CANEX Credit Plan) has been rejected by the bank, the Central Office will notify the applicable RAM who will notify the applicable NPFAS.
Upon receipt of dishonoured payment information, the NPFAS shall:
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enter the dishonoured payment in the Cash and Transfer Register as a credit to the Local Bank. The total of the cheque plus the admin charges will be debited to the Accounts Receivable - Members account. The administrative charge will be credited to Unearned Revenue until payment is received.
Dr Accts Rec - Members 120.00 Cr Unearned Rev - Adm Chg 20.00 Cr Local Bank 100.00 forward a copy of the local bank debit advice to the RAM for bank reconciliation purposes;
list the particulars of the returned cheque in a "Dishonoured Payment Register" maintained in alphabetical order;
notify the individual and arrange for immediate settlement of the account by cash or certified cheque. If payment is not received within a pre-determined period of time, for base public or NPF personnel, advise the individual's CO or Section Head of the situation and request assistance in collection of the outstanding debt; and
provide the PSP manager, or CANEX Outlet Mgr (for CANEX related cheques) with a copy of the "Cheque Interdict List" with the particulars of individuals who have negotiated more than one dishonoured cheque or failed to make restitution of first NSF items.
When a dishonoured payment has been negotiated by a visiting member, the NPFAS of the cashing unit shall take all reasonable steps to settle the account before the member's departure and if unable to do so, shall sell the account to the parent unit.
The NPFAS shall, upon payment of the account, issue a receipt (form CF 602), return the dishonoured cheque to the issuer and record the receipt through the Cash and Transfer Register as a credit to Accounts Receivable - (Member). At this time, the NSF fees may be modified/waived with the appropriate authorization.
In cases where individuals issue more than one dishonoured payment and/or fail to settle an account within 10 days, the NPFAS shall take action to place the individual's name on the "Cheque Interdict List" for an appropriate period of time as established by local administrative procedures.
If an individual on the "Restricted List" cashes a cheque or takes out a new CANEX credit plan, then the NPFAS will advise the individual's CO or Section Head and PSP Manager/CANEX Manager of the incident immediately to initiate follow-up action.
OVERDRAFTS
An entity's Share of the Region CBA must not be allowed to reach an overdraft position. Through cash flow projections, the RAM must anticipate cash shortfalls and immediately advise the PSP manager to implement appropriate financial stringencies.
LOANS INCLUDING LOANS BETWEENMESSES/BASE FUNDS
Loans between Messes/Base Fund should not generally be necessary; however, when a loan between these entities is considered appropriate and either of the entities is indebted to CFCF, the loan limits and authorities are deemed to be as specified for expenditures at DAOD 9003-1. When such a loan is authorized:
the amount and authority shall be indicated in the notes to the financial statements of both entities; and
the interest rate applied shall not exceed that applicable to CFCF loans.
Particulars regarding CFCF Loans are contained in Chapter 10 of this publication.
SIGNING AUTHORITIES
As all cheques issued are drawn against the Bank of Montreal, Ottawa Main Branch, Central Office must be advised of each region's cheque signing authorities, including base signing authorities for emergency cheques. The following procedures shall apply:
using Annex C to this chapter, the NPFAS shall submit changes in emergency cheque signing authorities and forward these to the RAM. The NPFAS shall retain a copy;
the RAM shall complete Annex C for regional cheques signing authorities;
the RAM shall submit the original of the forms to Central Office. A copy of the forms shall be retained for regional records. No accompanying letter or signature cards are required; and
as signing machines or signature plates are the principal means of signing cheques, special controls must be maintained to ensure the security of the equipment and hence, of the funds. These controls are listed at Annex D.
For emergency purposes, cheque signers shall be appointed in accordance with the following:
the RAM shall appoint the NPFAS as a primary signor;
Internal controls for disbursements must be in place as per chapter 19, para 22,23 & 24.
STOP PAYMENT ON CHEQUES
To stop payment of a cheque which has been forwarded to the payee, the RAM shall advise Central Office, by e-mail, of the following information:
cheque number;
date of issue;
amount;
payee; and
reason for stop payment.
To record the stop payment action, the RAM shall reverse the original entries in the appropriate entity accounts.
Cheques which have not been cashed within six months are "staledated" and should not normally be accepted by banks for payment. No stop payment action is required. Nevertheless, the NPFAS or RAM, as applicable, must contact the payee (recommended before the cheque becomes staledated), to determine why the cheque has not been negotiated and either issue a replacement cheque or write off the cheque to Miscellaneous Revenue of the entity concerned.
CASH AND BANK RECONCILIATIONS
The NPF cash receipts shall be reconciled monthly by the NPFAS or his designate and by the NPFAS at each handover of NPFAS or cashier duties. A copy of all cash reconciliations is to be sent to the RAM.
The Cash Receipts Reconciliation shall be recorded on Annex E and conducted as follows
freeze all transactions until the cash count is completed;
ensure that the cash holder remains in your presence until the cash count is completed and the cash is returned to his or her custody;
count the cash on hand and record the count in Part I;
record the cash on hand and the date of the previous reconciliation;
crecord inclusive receipt numbers issued since the last reconciliation and the total amount of those receipts;
verify that the deposits have been acknowledged by the bank (i.e., bank stamp) and record the total of all deposits since the last reconciliation);
enter the cash on hand as recorded in Part I; and
arithmetically determine the cash over/(short).
The RAM, or their designate, shall also perform a cash examination at least three times per year at each base in their region.
The RAM, or their designate, shall reconcile the base local bank accounts, including ABACIS cheques cancellation, and the Regional CBA monthly. Where it is necessary to present financial statements prior to the completion of the bank reconciliation, and the reconciliation has not been completed for two or more consecutive months, the Balance Sheet shall be qualified as follows:
"INCOMPLETE STATEMENT - BANK RECONCILIATION NOT COMPLETED"
This qualification shall be personally endorsed by the RAM. At year-end, the reconciliations must be completed as at the Balance Sheet date and prior to the preparation of the annual financial statement(s).
The RAM shall reconcile the Local Bank Account using Annex F as follows:
Line 1. Record the balance from the bank statement;
Line 2. Record the total value of deposits outstanding;
Line 3. Record the total value of transfers outstanding; and
Line 4. Record any other items that may affect the reconciliation.
Prior to reconciliation of the account, the RAM shall ensure that all transfers to the CBA Ottawa and dishonoured payment debit memoranda have been actioned to the books.
If additional bank accounts have been authorized by CFO&VPI, (e.g. for lottery corporation requirements), these local bank accounts must also be reconciled monthly.
All bank accounts shall be reconciled as at the balance sheet date.
Concurrent with the reconciliation of the Local Bank Account, the RAM shall reconcile the Regional CBA balance with the amount as reported at the end of each month by Central Office, using the format shown at Annex G. The procedure will be as follows:
Line 1. Record the balance stated by Central Office;
Line 2. Determine the total value of bank transfers outstanding and record that amount;
Line 3. Determine the total value of cheques outstanding (cheques not charged against Regional CBA by the Bank) as at the reconciliation date, and record that amount. A list indicating date, number and amount of cheque must be attached;
Line 4. Determine the net amount of region originated TVs not included in the Central Office statement and record that amount;
Line 5. Determine the amount of Central Office originated TVs not included in the books of account and record that amount; and
Arithmetically determine the results of paragraphs a. through e. to establish the true Regional CBA balance. This amount should equal the Regional CBA balance in the general ledger control account.
If a region is unable to reconcile the two balances, an e-mail shall be sent to Central Office stating the amount of the discrepancy and any other relevant information that will enable Central Office to reconcile the account.
Except at year-end, the completion of financial statements shall not be delayed pending receipt of the CBA statement from Ontario RAO. Any necessary adjustment can be made in the following month.
On hand over between NPFAS, the RAM shall ensure that the cash and bank reconciliations are completed as per the above procedures. Every effort should be made to complete the hand over on a date to coincide with receipt of the weekly bank statement from the Bank of Montreal and receipt of the Regional CBA statement, which will be requested from Central Office by the RAM.
Handing Over Certificates (Annex H) shall be prepared for each hand over and are to be distributed as follows:
the original to the outgoing NPFAS;
the duplicate to the RAM; and
the triplicate to the incoming NPFAS.
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