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About This FAM

Responsible Agency: Office of the Comptroller General
Issued: Aug 2009
Last Updated: Aug 2009

Approval Announcements

1. Introduction

The Financial Administration Act (FAA) sections 18 (1) and (2) and 108, authorizes Ministers (and their delegates) to set fees for services rendered by departments or public agencies for which they are responsible.

However, the whole area of license fees is complicated by the constitutional conundrum involving direct versus indirect taxes. Under section 92 of the Constitution Act, 1867, a province (and its statutory creatures such as municipalities) can impose only direct taxes. As a very general statement, indirect taxes are taxes paid by one person in the expectation or subject to the general tendency that that person will recover the tax from another.

In 1998, the Supreme Court of Canada concluded that a particular levy or fee would be a tax it met the following four criteria:

  • Enforceable by law
  • Imposed under the authority of the legislature;
  • Levied by a public body; and,
  • Intended for a public purpose.

Based on the Courts conclusions about the relationship of fees to the related costs of providing services, departments will need to have adequate systems and procedures in place to determine what rates should be set for fees keeping in mind the Supreme Court’s criteria for accountability purposes. License fees, even though they are expected to be, or generally tend to be, passed on, are fees and not indirect taxes if they bear a reasonable relation to the cost of administering the licensing regime.

In the event the fees or other levies are imposed by statute and earmarked for specific purposes by the statute, they are special purpose funds by FAA definition.

Licenses and permits are controlled as accountable forms in accordance with Financial Administration Manual (FAM) 2907. Accounting is generally governed in accordance with PSAB 1200 and 1300 related to Revenue recognition.

 

2. Definitions

“accountable form” means any readily negotiable financial form (e.g. payroll cheques, travel or accommodation warrant) or non-financial form with pecuniary or other value after being completed and authorized (e.g. licenses, certificates, general receipt or invoice). Such a form needs to be carefully monitored and controlled due to inherent risk of loss of public money or property which may be caused [may be a result of] by an offence under Part X of the Financial Administration Act (e.g., fraud, bribery, theft, collusion, etc.). It is sequentially and uniquely prenumbered and either pre-printed or electronically produced.
“revenue agent” means a person acting as an agent of the Government contracted or appointed to act as a revenue officer on behalf of the Government for purposes other than tax collection.
 

3. Policy

Where economically and administratively feasible, departments and public agencies shall charge fees for licences and services rendered to the public, subject to the following Directives.
 

4. Directives

4.1

Departments and public agencies shall:

  1. charge fees at reasonable rates;
  2. ensure that fees are collected, safeguarded, and accounted for in accordance with FAM 2904, Receipt and Deposit of Public Money;
  3. collect outstanding fees in accordance with the 3102 series of directives in this manual; and;
  4. ensure that fees collected by contracted revenue agents are handled in accordance with FAM 3561.
4.2

A rationale for each fee charged must be kept available for audit purposes in the headquarters office of the responsible department or public agency and must include:

  1. pricing details;
  2. the price/rate basis, including direct, indirect, and accounting and system costs; and,
  3. the time period for cyclical fee reviews.
4.3

Department Heads and the chief executive officers of public agencies shall:

  1. where it is appropriate to charge a fee, review the fee periodically as determined by the rationale required in 4.2 above; and,
  2. propose new, discontinued, and changed fees for approval by the responsible Minister (or Minister’s delegate.)
4.4

Program Managers shall:

  1. be responsible for the accounting, control and collection of revenue derived through licences and fees; and,
  2. ensure that:
    1. fees charged are the most recently approved;
    2. revenue is collected, recorded, and deposited as required in this manual (see 4.1 above);
    3. licences are pre-numbered and controlled in accordance with the directive series 2905, Accountable Forms Control, in this manual; and,
    4. the rate set for the licence or fee is reviewed periodically to ensure sufficient revenues are generated in line with the basis for the rate.
4.5

Where the license or fee is collected by an external agency, the program manager must ensure that:

  1. a contract or agreement with an external agency is signed and the duties and responsibilities are clearly defined by the contracting department;
  2. the agent collects the proper rate;
  3. regular remittances in the required format are received from the agent;
  4. all licenses sold by agents are collected in certified legal tender;
  5. all licenses issued to an agent are accounted for; and
  6. all contract classes or any non-standard contract with agencies are approved by the Office of the Comptroller General and by the Legal Division of the Department of Justice. (Approval by Legal Division, Justice may not apply to special events in accordance with FAM 2812 and FAM 3561).
4.6 In observance of subsection 18(2) FAA, departments shall advise the Board of the introduction of a fee, a change to a fee, or the removal of a fee charged for any service within 60 days of the day on which the fee or a change to the fee is effective or the fee is removed.
 

5. Guidelines

5.1 Charges for a service to the public should recover the full cost of the service, including all direct and indirect costs to the responsible department or public agency and any other Government units.
5.2 In the case of a regulatory service, a fee or charge fixed on a total cost recovery basis may not be warranted. The fee for such a service may be collected from the ultimate user or from an intermediary who considers the expense a cost of doing business.
5.3 Program managers should levy no charge where the cost of collection would constitute an unduly large part of the revenue collected, unless the Government intends to restrict the associated licence or service. It may also be appropriate to set prices at levels that promote the achievement of social or economic goals.
 

6 . Authorities and References

  • FAA (1), 18 (1), 18(2), 13(2), 108, Part X.
  • FAM 2904, 2905, 2812, 3102, 3561
  • PSAB (PS 1200, PS 1300)
 

7 . Consequences from Failure to Comply

Failure to comply with policies and directives of the Financial Administration Manual may result in actions under Part X of the Financial Administration Act. The Government of the Northwest Territories may seek legal remedy in the Territorial Courts.