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Credit Worthiness
Credit Granting and Control Directive No: 3101
1. INTRODUCTION The Government grants credit in order to support program delivery. In order to minimize bad debt losses, Government departments and public agencies must control credit granting carefully, following good business practices. Credit must be granted selectively, based on borrower creditworthiness, except where directed otherwise in legislation, regulation or by order of the Comptroller General. The Government notifies credit applicants that it reserves the right to provide credit information to credit bureaus. The Financial Reporting and Collections Section, Financial Management Board Secretariat (FMBS), is available to advise and assist Government departments and some public agencies in assessing the creditworthiness of potential borrowers. It gathers, analyzes, and provides credit information from varied sources inside and outside the Government, including credit bureaus. It may, if appropriate, assist departments and public agencies with collections
Credit Worthiness
2. DIRECTIVE Except as permitted in the following Provisions, credit may be granted only when there is a reasonable assurance of timely recovery from the potential debtor. 3. PROVISIONS 3.1 Credit Information 3.1.1 Before a Government department or public agency issues goods, services, or money on credit, makes a contract prepayment or accountable advance, or issues goods on consignment, the approving officer shall: a) ensure that the potential debtor is not on the listing of write-offs maintained by the Financial Reporting and Collections Section of the FMBS (see 3.13 and 3.14); b) ensure that the potential debtor or consignee is sufficiently creditworthy; and, c) be accountable for credit granting decisions.
Credit Worthiness
Directors of Finance and Program Managers are: d) accountable for effective credit granting and control; and, e) responsible to ensure that credit approving officers in their departments and public agencies have the information and resources necessary to make good credit-granting decisions. 3.2 Application for Credit 3.2.1 Every credit application must provide enough information on the applicants credit history, current financial position and current address to enable the approving officer to determine the applicants ability and likelihood to fulfil the repayment terms. 3.2.2 Every credit application from a business entity must provide the name and address of the business entity and every individual who is a principal of that entity. 3.2.3 Credit applicants shall be notified that, as a condition of granting credit, the Government reserves the right to provide to established credit bureaus the details of every credit application, the details of any credit granted, and the details of the debtors previous, current, and future repayment performance. Credit must not be granted without such notice.
Collection of outstanding receivables must be Actively and Vigorously Pursued, so that the credibility of programs, which generate revenues and recoveries, may be maintained and receivables may be realized in cash as quickly as possible.
4.1 Responsible Government departments and public agencies shall collect all receivables and overdue receivables promptly, efficiently, and in a thoroughly accountable manner. Unless directed otherwise within this 3103 series of directives, departments and regional offices of the FMBS shall transfer immediately to the Financial Reporting and Collections Section, FMBS, the collection of: a) any delinquent account receivable; and, b) any receivable, overdue receivable, or delinquent account receivable that is owed by a debtor who has begun bankruptcy or liquidation proceedings.
Setoff Action
Financial Administration Act Section 22(1) The Comptroller General may retain money by way of deduction or setoff of any money payable to a person by the Government out of the Consolidated Revenue Fund where:
a) That person owes money to the Government
Setoff Action
Directive Title: Setoffs Directive No: 3106 3. PROVISIONS 3.1 The Government may set off part or all of a debt, including a non-monetary obligation, which a person owes to the Government when: a) payment of the debt or fulfillment of the obligation is overdue and has not been forgiven; or, b) the person has commenced bankruptcy or liquidation procedures. An overdue repayment of an accountable advance is an overdue debt.
Setoff Action
3.2 The Comptroller General may set off overdue debt which a person owes to a public agency by deducting from or withholding payment of debt which the Government owes to that person. Public agency is defined in the Financial Administration Act.
3.3 The Government has a statutory right to set off an overdue debt which a public agency owes to the Government. (A public agency is a person by definition.)
3.4 The Government may set off a Government employees debt to the Government by deducting or withholding salary, wages or other earnings in accordance with the Collective Agreement provisions when: a) the employee has not paid a Government invoice or bill when due; b) the employee has resigned and owes a debt to the Government; c) the employee agrees to deduction from salary payment; d) the employee has not fulfilled an obligation due to the Government; or, e) the debt has been written off pursuant to Section 24 of the Financial Administration Act (write-off does not constitute remittance, satisfaction or forgiveness).
INTEREST
The new Financial System will be able to calculate
future, debtors will want the ability to forgo or negotiate interest charges or they may not remit the interest charges when payment is made.
FAM will require updating to deal with outstanding
QUESTIONS
References
Quick References for Collections
Financial Administration Act Sections 12 & 22 Financial Administration Manual Directives 2700, 2702, 2703, 2704, 2705 Directives 3100, 3101, 3102, 3103, 3104, 3105, 3106 Write-Off & Forgiveness Listing J:\FMBS\Prior Write-offs and Forgiveness List