Effective Date: April 1, 2016
Applicable FAM Policies: 630 - Credit Granting and Control 
Applicability: GWNT Departments and Public Agencies

The Government grants credit in order to support program delivery. To minimize bad debt, Government departments and Public Agencies must control credit granting carefully, following good business practices. Credit must be granted selectively, based on the applicant’s creditworthiness, except where directed otherwise in legislation, regulation or by approval of the Comptroller General. The Government must notify credit applicants that it reserves the right to provide credit information to credit bureaus.

The credit granting process contemplated within this Policy applies to applicants such as those applying for credit for purposes such as a loan, fuel tax collection or other instances where credit will be extended. Contributions to individuals or businesses do not require a credit application. They are assessed on a combination of criteria including past performance with the GNWT (including related companies owned by the shareholders) capacity and eligibility.

The Accounting Services, Collections, Department of Finance, is available to advise and assist Government departments and public agencies in assessing the creditworthiness of credit applicants.

INTERPRETATION

Accountability

Credit approval terms may be set out in legislation, regulation, and directives; any other credit approval terms must be prescribed by the Comptroller General.

Departmental Directors of Finance and Program Managers are:

• Accountable for effective credit granting and control; and,
• Responsible for ensuring that credit approving officers in their departments and public agencies have the information and resources necessary to make good credit-granting decisions.

Issuing Credit

Before a government department or public agency issues goods, services, or money on credit, or issues goods on consignment, the approving officer shall:

• Assess the credit applicant in the aggregate of all related companies owned by the shareholders (Financial Reporting and Collections, Department of Finance can assist in identifying).
• Ensure that the credit applicant is not on the listing of write-offs and forgiveness maintained by Financial Reporting and Collections, Finance;
• Ensure that the credit applicant does not have their vendor account on hold;
• Ensure that the credit applicant is sufficiently creditworthy.

Credit Application

Every credit application must provide enough information on the applicant’s credit history, current financial position and current address to enable the approving officer to determine the applicant’s ability and likelihood to fulfill the repayment terms.

Every credit application from a business entity must provide the Legal and Operating name and address of the business entity and every individual who is a principal of that entity.

A credit applicant may be granted special consideration if refusing credit would:

1.  be counter to the public good such as if the applicant is the only fuel supplier for a small community;
2.  result in an undue hardship or undeserved disadvantage for the applicant such as when an outstanding bad debt or a previous bankruptcy would cause undue hardship or undeserved disadvantage for an individual applying for a student loan; or,
3.  act in conflict with the intended purpose of an established government program provided the following conditions are met:
   • total funding does not exceed $50,000
   • there is no existing "hold" on the applicant

Only the Comptroller General, or his/her delegate, may approve a credit applicant or class of applicants who would not normally meet the test of creditworthiness.

Bankruptcy

A person who has been personally bankrupt shall not be considered creditworthy until three years after the date of unconditional discharge from bankruptcy and the person has demonstrated his or her creditworthiness unless approved by the Comptroller General or his/her delegate.

Schedule of Principals

The Accounting Services, Collections, Department of Finance, shall maintain and make available on request to Government departments, and public agencies, a current and cross-referenced Schedule of Principals of Business Entities with Debts Written Off. The Schedule lists the name of every individual who is a principal in any business entity that owes a debt written off by the Government.

Related Parties

When credit is being granted by Departments or by the Comptroller General, related parties will be considered in the determination of creditworthiness. At the extreme, the provision is in place to ensure that principals of legal entities that are indebted to the GNWT do not incorporate another legal entity to access GNWT funds and avoid their legal obligation to the GNWT.

It also protects the GNWT where related companies may have effective control and influence over one another and should, therefore be treated as a single entity from a credit granting perspective. The debts or financial obligations of related and controlled companies must be considered when granting credit to an applicant.