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The External Charging Policy replaces the Cost Recovery and Charging Policy (1997) and comes into effect August 12, 2003.
The federal government has engaged in external charging since Confederation, and today, like most other jurisdictions, applies external charges to a diverse range of activities. External charging differs from taxation in that the charge is linked to what an identifiable external party receives, over and above what the general taxpayer receives, or to the costs of regulating an activity or providing a service.
External charging is a sound management tool that can foster good governance. By making departments and stakeholders aware of the full costs of products and services, the value and associated costs of rights and privileges granted and the value of access to, and use of government resources, departments can promote more effective and responsive service delivery and encourage sound stewardship of resources.
This policy outlines:
This policy reflects the findings of a review of the 1997 policy, led by the Treasury Board Secretariat. It sets out the expectations of the Treasury Board with respect to the way departments manage external charging with the aim of strengthening accountability and fostering open and transparent communication.
The provisions of this policy are consistent with the commitment made in the 2003 federal Budget to set out the principles and enhanced implementation requirements for improved management practices relating to external charging.
The principles upon which the policy is based have not changed. The policy does, however, ensure that greater accountability and management rigour is applied to the establishment, amendment and on-going management of external charges. This is accomplished through increased emphasis on open, transparent and on-going stakeholder consultation, as well as through more comprehensive monitoring and reporting requirements.
The requirements of the policy are described in generic and principles-based terms in order to provide departments with the flexibility to tailor the implementation of the policy to specific external charges and to accommodate the diverse range of government activities and the environments in which they operate.
Benefit refers to the value of those products, services, rights or privileges or access to or use of government-owned and controlled resources, tangible or intangible, that is directly conferred upon identifiable external recipients.
"Departments" includes all departments as defined in section 2 of the Financial Administration Act.
External Charging (External Charges)
External charging refers to the process of establishing fees and collecting revenues for the direct provision or granting to identifiable external recipients (e.g. individuals, businesses, corporations and other non-federal institutions) of products, services, regulatory activities, use of a government facility (if not otherwise a real property transaction excluded by the policy), rights or privileges or access to or use of government-owned or controlled resources.
External charges refer to the actual fee established or the revenues collected.
External charges result in non-tax revenues, whether generated in Canada or abroad. They do not include other types of non-tax revenues (see the Application section of the Policy).
Identifiable External Recipients
All individuals, groups or entities not defined as departments are considered "external". This includes Crown corporations, associations, as well as municipal, provincial and foreign governments and international organizations.
"Identifiable recipients" are those who can be reasonably viewed as distinct from the general public and either derive a benefit or are those whose actions require the federal government to incur regulatory costs.
Stakeholders are all external parties with a self-expressed or perceived interest in a federal program. This includes paying users and their associations, as well as individuals and groups who have an interest in the core functions or activities of the program.
The Government’s purpose in promulgating the External Charging Policy is:
The objectives of the policy are to strengthen accountability, through consultation, monitoring and reporting, as it pertains to the establishment, amendment and ongoing management of external charges.
Through this policy, Treasury Board sets out the conditions under which external charging is appropriate; the requirements for establishing, amending and managing external charges, and the respective roles and responsibilities of Ministers, Deputy Heads, the Treasury Board Secretariat and departments.
The policy applies to all departments defined in section 2 of the Financial Administration Act, regardless of the authority used to establish or amend external charges.
This policy applies to fees departments charge external parties (e.g. individuals, businesses, corporations and other non-federal institutions) in return for granting or providing directly:
This policy also applies to charging for the use of government facilities (e.g. campgrounds), when this is done as part of the department’s core services to the public.
The policy does not apply to the following types of transaction:
At least one of the following conditions must be met before an external charge can be established:
In conjunction with the charging condition, departments should evaluate the charging decision within the context of whether:
Note: Where competitive situations exist, but there is a requirement for the government to continue to perform the activity, departments must refrain from competing unfairly (i.e. by setting prices that undercut the private sector as a result of understating costs, such as sunk capital costs).
Proposals to establish or amend an external charge must be supported by the best available, relevant information. This information must be communicated in an open and transparent manner to stakeholders, and stakeholders must be given a reasonable opportunity to provide their input, have it considered and receive feedback.
External charges will be based on either the cost of the underlying activity or the value of what is obtained by the identifiable external recipient, as consistent with the policy requirements for Establishing Charges (see below).
The revenues derived from external charging and associated information must be openly and clearly disclosed.
All external charge revenues collected are public monies governed by the Financial Administration Act. Authority to spend those revenues requires express legal authority or prior Treasury Board approval.
Departments that establish or amend charges by order or regulation must observe the requirements of The Government of Canada Regulatory Policy.
In circumstances where a department has several types of legal authorities available for establishing or amending charges (i.e. enabling or subordinate legislation, the Financial Administration Act, ministerial contracting authority), it should seek legal advice to ensure proper application.
This policy is to be read and applied in conjunction with other policies, notably those listed in the References section.
Ministers are responsible for the decision to establish or amend external charges within their areas of responsibility consistent with the legal authorities available to them and in accordance with the conditions and requirements of this policy.
Ministers (or Deputy Heads of agencies where appropriate) are responsible for ultimately ruling on disputes relating to their external charging activities (see Dispute Management below).
Deputy Heads must identify an Assistant Deputy Minister-equivalent or higher to oversee the implementation of the policy and to serve as the point-of-contact for the Treasury Board Secretariat. They must also develop and maintain information systems and management practices necessary (including documentation and analysis) to support external charging.
In order to demonstrate sound management of and accountability for external charging, departments shall:
1. Consult with stakeholders on all aspects of proposals to establish, amend and manage external charges, including specifically:
a) analysis in support of proposed external charging;
c) establishing the charge;
d) service delivery methods and standards; and
e) dispute management.
2. Monitor the implementation of the policy within the department.
3. Report information related to external charging.
These requirements are discussed in detail below.
Once an initial proposal is developed to establish or amend a charge, departments should identify affected and interested stakeholders, and should develop a consultation strategy and plan.
The purpose of the consultation process is two fold:
The scope and level of effort devoted to the consultation process should be proportionate to the significance of the proposed charge and to such other factors as the range and diversity of stakeholders and the nature and level of their interest. The consultation mechanisms used will depend on the nature of the activity in question, the environment in which it operates and the characteristics of stakeholders. The policy acknowledges that there may be circumstances where stakeholders are not readily accessible for consultation.
Departments should also contact other federal departments whose stakeholders may be affected by the proposed charge in order to seek opportunities for greater efficiency and consistency and to take into account the impact on other public policy objectives.
Consultations with stakeholders must cover the following:
Exceptional situations may arise which preclude prior consultation (e.g. Budget secrecy). In such cases, post-announcement consultations should be planned and the design of the announced program should be sufficiently flexible to allow for changes which may emerge as a result.
When proposing to introduce or amend external charges, regardless of the authority under which they are established, departments are expected to be aware of, and to understand the environment within which the charges apply, including the incidence and effects of the charges. Such analysis will form one element of stakeholder consultations and support the decision-making process.
Regardless of the authority under which charges are established, departments should undertake an environmental scan of the relevant factors. These factors should include:
Departments should also conduct a risk assessment of the relevant factors, with particular emphasis on those that may materially affect the successful establishment and management of the charge. The scope and level of effort devoted to such analysis should be commensurate with the level of risk determined by the department.
The environmental scan and risk assessment should be updated if the initial results lead to more in-depth analysis, or, if through the consultation process, additional information becomes available or more in-depth analysis is warranted in order to respond to the concerns of stakeholders.
After the implementation of new or amended charges, departments should periodically monitor the key factors identified in the environmental scan to the extent practical and reasonable and update their analysis as required. This is particularly important for sensitive or controversial factors and when the original analysis was inconclusive.
Where a department is the sole provider, it must be sensitive to the concerns of the users of these services about the effect of charges on their competitiveness or the financial performance of their operations. The environmental scan must address these concerns to the extent practical and reasonable, recognizing that such analysis: i) is complex and difficult to conduct because it is sensitive to the level of detail of the analysis, the methodologies used and the availability of reliable financial or other data from the users; and ii) often leads to inconclusive results.
When in-depth analysis that relies on sophisticated methodologies or consulting expertise is warranted, departments should seek the concurrence of stakeholders with the approach and methodologies to be used and their agreement to provide verifiable data at the appropriate level of detail.
Finally, analysis in support of external charging must give due consideration to the primacy of the program’s mandate and statutory basis.
Prior to establishing or amending an external charge, departments must estimate the full cost to government of the activity. A thorough assessment of costs will provide for open and informative consultations with stakeholders as well as contribute to sound management practices and informed decision-making.
The costing calculation must comply with the practices outlined in the Treasury Board Guide to the Costing of Outputs in the Government of Canada incorporating all direct and indirect costs as well as any relevant costs incurred by other departments in support of the activity.
Full cost estimates are required regardless of the approval authority or the basis on which external charges are applied.
Standard use of the Treasury Board Guide to the Costing of Outputs in the Government of Canada in conducting costing assessments will support other federal measures and policies advocating government-wide consistency in the treatment of costs and facilitate the comparison of cost information across activities.
Departments are responsible for establishing the amount to be charged. Establishing the amount to be charged must be done on one of the following bases, depending upon the type of activity in question:
Regardless of the basis of the charge there are valid conditions, described below, under which the level charged may be set lower than the full cost or market value. In all cases, when a department wishes to set a charge below full cost or market value, it must fully justify the reduction in accordance with one of the following conditions:
Departments considering the use of fee formulae in establishing the level to be charged must consult with legal advisors and refer to the appropriate fee-making authority (e.g. provision 19.2 of the Financial Administration Act), concerning legal expectations. Also, departments that utilize fee formulae must continue to ensure that their responsibilities under this policy (e.g. consultation) are being met.
Departments may establish differential external charges, varying relative to the level of service to be provided (e.g. a higher fee could be charged for quicker delivery).
Whether engaged in external charging or not, departments are expected to manage programs and deliver services in an efficient and responsive manner and to be open to innovative ways of delivering services. This includes periodically reviewing the service delivery performance of their programs.
Departments must also be receptive and respond to stakeholders’ suggestions on how to improve the efficiency or responsiveness of their services. Suggestions received must be carefully assessed to determine whether they are reasonable, feasible and consistent with public policy objectives.
When consulting with stakeholders on proposed or amended charges, departments must clearly describe the service to be delivered and explain why the service is being delivered in the manner in which it is. They must consult on the service standards to be achieved, respective responsibilities and accountabilities for their achievement and an exploration of feasible departmental options that could be adopted in the event they are not met. Feasible options could range from the consideration of alternative service delivery mechanisms to business re-engineering, fee reductions and rebates, etc.
Departments must establish and communicate appropriate service standards (qualitative or quantitative) in the context of the inherent nature of the activity and the interests of their stakeholders. Appropriate standards could include those performance commitments related to client-focused aspects of service delivery (such as a commitment to promptly notify clients of receipt of material, to inform clients on the progress made as an application moves through processing stages, or to expected processing times).
Departments could consider adopting relevant standards developed by other organizations, such as the International Standards Organization.
Stakeholders should be informed about those areas of service delivery where changes to underlying assumptions or conditions could impact the department’s ability to meet prescribed standards.
Service standard development and performance assessment are important elements of initial and ongoing stakeholder consultations. Realistic service expectations are fundamental to the establishment of workable service standards. Ultimately, departments need to examine service delivery issues within the context of available resources and with consideration to the primacy of legislated or regulated mandates and priorities.
Departments must, at a minimum, report annually to stakeholders on their overall performance with respect to service standards. Where service standards could not be met, departments must provide an explanation and implement corrective action as appropriate.
Once fees are in place, a departmental process must be available to stakeholders for raising disputes or issues related to external charging.
Departments must ensure that the process:
Monitoring based on the principles of risk management is a joint effort of TBS and departments, and promotes accountability and sound management.
Treasury Board Secretariat will monitor:
TBS will monitor implementation through the use of such tools as:
TBS may require, on a government-wide basis or with specific regard to issues within a single department, periodic reviews or studies to assess specific elements of external charging.
A review of this policy will be initiated by Treasury Board Secretariat within five years of its coming into force.
Departments will provide, upon request of TBS, pertinent information on external charging (including the findings of any departmental review) in support of TBS monitoring of the policy.
The disclosure of external charge information is essential to sustaining accountability to Parliament and the Canadian public. Reported information must be accessible, timely, regular, and available at differing levels of detail so as to meet the various needs of the general public, parliamentarians and paying stakeholders. Meeting this range of information requirements will require a combination of reporting vehicles including the Public Accounts of Canada, Reports on Plans and Priorities and Departmental Performance Reports as well as less formal mechanisms such as departmental websites, newsletters and documents distributed at consultation sessions.
To this end, revenues from external charges will be reported on departmental and a government-wide basis by major category within the Public Accounts of Canada and supplemented, where appropriate, with more detailed information by department and type.
Departments will disclose, in existing annual reports, including Reports on Plans and Priorities and Departmental Performance Reports, information related to charges planned, established or amended under this policy. Such information will be reported in accordance with a format and process to be prescribed by TBS.
Departments will disclose on departmental internet websites and through newsletters or other accessible means when appropriate, all information reported above, as well as further information such as details on fee descriptions, fee levels, service, and the authorities under which fees are established or amended.
Such information will be disclosed in accordance with a format and process to be prescribed by TBS. The provisions will contain the minimal requirements for the disclosure of information on web sites or through other distribution channels as well as the requirement to update such information annually. Departments will be encouraged to exceed established disclosure requirements wherever possible.
Enquiries related to the policy or to dispute management related to external charging should be directed to the departmental official designated as responsible for overseeing the implementation of external charging. When necessary, further questions or points of clarification can be directed to the appropriate Treasury Board Secretariat program analyst or the TBS financial management policy centre.
Access to Information Act
Federal Real Property and Federal Immovables Act and Federal Real Property Regulations
Financial Administration Act
Government Contracts Regulations
Interest and Administrative Charges Regulations
Official Languages Act
Receipt and Deposit of Public Money Regulations, 1997
Repayment of Receipts Regulations, 1997
Accepting Credit Cards as Means of Payment for Goods and Services Provided by the Government - TB Circular 1987-18
Common Services Policy
Financing of Conferences and Seminars [Information Notice]
Communications Policy of the Government of Canada
Government of Canada Regulatory Policy
Internal Audit Policy
Materiel Management Policy
Policy on Active Monitoring
Policy on Alternative Service Delivery
Policy on the Application of the Goods and Services Tax and the Harmonized Sales Tax in the Departments and Agencies of the Government of Canada - For FIS compliant Departments and Agencies
Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements)
Policy on Interdepartmental Charging and Transfers Between Appropriations
Policy on Receivable Management
Policy on Recording Receipts of Money
Policy on Special Revenue Spending Authorities
Policy on Specified Purpose Accounts
Treasury Board Contracting Policy
Guide on Financial Arrangements and Funding Options
Guide to the Costing of Outputs in the Government of Canada
Guide to the Regulatory Process
Integrated Risk Management Framework
Regulatory Impact Analysis Statement Writer’s Guide
Service Standards: A Guide to the Initiative
* The most current version of this material can be found on either the websites of the Treasury Board Secretariat of Canada (www.tbs-sct.gc.ca) or the Privy Council Office of Canada (www.pco-bcp.gc.ca).