ARCHIVED - TB Circular 1979-35: Pay Administration

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1. Purpose

The purpose of this circular is to reinforce the intent of Treasury Board Circular 1977-37 with respect to departmental responsibility for pay administration and to emphasize the importance to departments of adapting their organizations as necessary to incorporate the required controls including the appropriate separation of duties.

When adapting organizations with respect to pay administration, it may be necessary in some circumstances to implement an allocation of duties somewhat different from that recommended in T.B. Circular 1977-37. In all cases, however, departments are expected to establish adequate separation of duties to achieve internal control, and to respect the principles described herein.

2. Background

Employee compensation (pay) is an inherent part of personnel management. In recognition of this fact, the responsibility for coordination of government pay administration on behalf of Treasury Board rests with the Personnel Policy Branch of the Treasury Board Secretariat. Similarly, operation of the departmental pay administration process is the responsibility of the departmental personnel services organization.

Payroll accounting and financial control over the pay process are an inherent part of financial management. The responsibility for coordinating the establishment of appropriate internal controls and accounting for pay on behalf of Treasury Board rests with the Financial Administration Branch of the Office of the Comptroller General. Departmental financial controls within the pay process and the accounting for payroll expenditures are the responsibility of the departmental financial services organization.

3. Principles

Departmental organizations and procedures should incorporate the following principles:

• the establishment and enforcement of adequate financial controls within the departmental portion of the pay process is a financial function;
• the authority to initiate expenditures (expenditure initiation authority) must be exercised by responsibility centre managers;
• the establishment of pay entitlement and the preparation of pay input documents is a personnel function;
• the independent verification, batching and certification of pay input documents under Section 27 of the Financial Administration Act (FAA) is a personnel function to be carried out in accordance with procedures specified and monitored by the financial services organization;
• requisitioning and certification pursuant to Section 26 FAA is a financial function, and where persons other than financial officers are granted this authority because of special circumstances, they are subject to functional direction from the senior financial officer;
• the custody and distribution of pay cheques in departments must be performed by persons not otherwise involved in the pay process, these persons taking functional direction from the senior financial officer for this purpose;
• the verification of payroll registers or other output reports to ensure that input transactions are properly actioned, and the verification of changes initiated by the Department of Supply and Services, is a personnel function;
• the reconciliation of payroll register totals with departmental controls and central agency cash statements to ensure that reported pay expenditures are complete, accurate and properly recorded is a financial function;
• the review of responsibility centre pay distribution reports for accuracy, ensuring that such transactions as employee transfers, terminations and taken on strength have been actioned is the responsibility of line managers.

4. Elaboration

Items incorporated into pay input documents such as the applicable rate of pay, entitlement to allowances and other terms and conditions of employment are determined by personnel staff. The information necessary to verify the accuracy of pay input documents is available in personnel offices. Therefore the verification of pay input documents and certification under Section 27 FAA most logically rests with personnel offices.

Pay input documents normally do not contain the dollar effect on gross or net pay but only the components required for the Department of Supply and Services pay system to calculate these amounts. Therefore, persons delegated Section 27 or Section 26 authority must ensure that the pay transactions they have authorized are properly actioned by the

Department of Supply and Services by reconciling pay input documents to pay output reports and cheques, as outlined in Section 3 (above).

5. Implementation

Several departments have implemented the necessary processing procedures to comply with the intent of Circular 1977-37. Other departments are at various stages of developing their revised procedures but have not yet reached the implementation stage.

In preparation for accepting responsibility for the pay of their employees, departments who have not already done so should institute the necessary controls over their pay process consistent with the principles specified in Section 3 above.

Changes to the Regional Pay System to allow departments to assume progressively greater responsibility for the pay of their employees will be phased in over a period of time. During implementation of this phased approach, every effort will be made to ensure a smooth and controlled transition of responsibility from the Department of Supply and Services to departments.

Departments will be advised of the timing and impact of changes prior to implementation to allow for adequate planning and training of employees.

6. Evaluation

A central point of contact for pay administration has been created within the Personnel Policy Branch, Treasury Board Secretariat. The Pay Administration Coordination Section (PACS) has overall responsibility for the coordination of pay administration including pay policy interpretation. PACS has established a close working relationship with the Financial Administration Branch, Office of the Comptroller General for resolution of matters of a financial nature.

Prior to the transfer of pay processing functions currently exercised by the Department of Supply and Services, departmental readiness to assume these functions will be formally assessed. Departmental readiness will be reviewed by PACS, in cooperation with the Office of the Comptroller General, based upon an evaluation of departmental control procedures and accuracy of departmental pay input. PACS will monitor departmental performance using system-generated statistical reports provided by the Department of Supply and Services.

7. Area of Application

This circular is applicable in all respects to those departments and agencies listed in Schedule 1, Part 1 of the Public Service Staff Relations Act (PSSRA).

Policies and practices regarding financial control of pay expenditures are also applicable to all departments and corporations covered by Schedules A and B of the FAA and all

branches designated as departments by the Governor in Council in accordance with Section 2 of the FAA. Processing controls advocated herein apply to all pay systems operated within or on behalf of these populations.

Where a department is delegated responsibility under its enabling legislation for the payment of groups of its personnel by means of its own payrolls, the principles outlined in Section 3 above are to be applied.

8. Enquiries

For further information concerning this circular contact:

Pay Administration
Coordination Section
Personnel Policy Branch
Treasury Board Secretariat
Ottawa, Ontario
KIA OR5
(Telephone 995-1270)

Wm. McWhinney
Deputy Secretary
Personnel Policy Branch
Treasury Board Secretariat

S. Mensforth
Deputy Secretary
Financial Administration Branch
Office of the Comptroller General