6.4 Account administration

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6.4.1 Procurement of infrastructure

The CFI operates on the principle that its funds must be used effectively and economically. To maximize the purchasing power of its investment and to ensure a fair and transparent process, the CFI requires that all purchases follow the usual institutional tendering and purchasing policies and procedures. At a minimum, these must comply with the requirements set forth in the Canadian Free Trade Agreement .

A formal competitive bid process must be performed when required by institutional policies. To help reduce the administrative burden, this process should be performed only once, prior to the purchase of an item. The requirement for competitive bidding should be clearly communicated to all involved at the onset. Institutions should not make any purchase commitments to suppliers when soliciting pricing information at the proposal and award finalization stages, ensuring that a formal competitive bid process can be carried out prior to the actual purchase. For items involving in-kind contributions, institutions are also expected to follow its usual policies and procedures, which must follow the guidelines outlined in 6.5 Items involving in-kind contributions.

 

6.4.2 Acceptance of cash back or other benefits from a supplier

When providing pricing on CFI-funded infrastructure, suppliers may suggest that instead of a special discount (considered by the CFI as an in-kind contribution), the equivalent in cash or other benefits (including additional items) be given to the institution. The CFI does not endorse the procurement of infrastructure that would be linked to a promise of cash back or other benefits that would be advantageous to the institution but not related to a CFI-funded project. If this occurs, the cost of the infrastructure purchased from the supplier must be reported to the CFI net of the cash back or value of the benefit received from the supplier (i.e., fair market value less cash back or value of benefit). However, if the cash back or other benefits are advantageous to the CFI-funded project or portfolio of CFI-funded projects, the CFI will accept that the infrastructure purchased from the supplier be reported to the CFI at fair market value (as defined in 6.5.1 Definitions). Consult our cash back reporting scenarios and examples.

6.4.3 Maintaining financial records and tracking expenditures and contributions

The recipient institution and other eligible institutions participating in a multi-institutional project are responsible for the administration of CFI contributions and for tracking project expenditures and partner contributions. They must maintain adequate financial records and ensure that the expenditures and partner contributions comply with the CFI policies and guidelines outlined in this guide. This requirement is also specified in the institutional agreement and imposed as a condition of funding in the award agreement.

The institutions must also ensure that cash and in-kind contributions from partners have been received and expenditures have been incurred after the date of eligibility set for each fund, as outlined in the call for proposals for each fund or competition.

The account administrator is responsible for ensuring that the CFI is not charged more than the maximum allowable CFI funding share of eligible costs (typically 40 percent) or the maximum CFI amount, whichever is lower. Unless otherwise indicated in this guide, administration and accounting procedures for each project must conform to institutional standards, practices and policies.

Financial records

Institutions must maintain a verifiable audit trail for all transactions reported in a CFI-funded project, including in-kind contributions. It must also maintain separate project accounts for each CFI-funded project. The financial records must identify the various funding sources and the full actual cost of all eligible items (i.e., items presented in the proposal or updated budget and/or the final financial report) in a CFI-funded project, even if the cost of these items exceeds the estimated cost reported in the proposal or latest approved amendment.

Cash expenditures and contributions related to eligible items are normally expected to be tracked in separate accounts of the general ledger accounting system. Eligible in-kind contributions can be tracked either as part of this system or in other ways, such as in an Excel spreadsheet.

Institutions must not report to the CFI or provide financial records for items that do not constitute eligible items, even if they are related to the project. Costs must be assigned to appropriate project accounts on a regular basis, at a minimum prior to the filing of the financial report. Financial records must reconcile to the financial report submitted to the CFI.

Retention of supporting documentation

Institutions must keep all financial records and supporting documentation (see 6.4.5 Supporting documentation) for each transaction reported in a CFI-funded project. In line with Canada Revenue Agency requirements, documentation must be kept for at least six years. This six-year period starts at the end of the fiscal year to which the records relate. Institutions must keep on file all documentation for audit purposes and provide it upon request. The CFI may request that the documentation be maintained for a longer period for a given project if this is required for audit purposes.

Cost allocation of a single item shared between projects

If an institution determines after award approval that it is optimal and/or more cost-effective to consolidate the individual needs of two or more projects and to purchase one single item that will benefit these projects, the cost of the item purchased can be allocated and reported in each individual project using any method deemed reasonable by the institution, as long as the sum of the amounts reported does not exceed the actual purchase cost of the item. Institutions must indicate in the final financial report that the cost of the item has been allocated to more than one project and reference the other project(s).

Basket purchases

If the institution is unable to obtain from the vendor details of the purchase price and its allocation among infrastructure items, the cost of each item acquired as part of a basket purchase (i.e., a group of items acquired for a single amount) can be determined by allocating the price paid for the basket to each item on the basis of its relative fair market value at the time of acquisition. Details of the cost allocation should be documented and made available upon request. Unless otherwise required by institutional accounting practices, when the infrastructure items purchased are reported in the CFI budget as a functional group, the institution does not have to allocate the price paid to each item within the functional group.

6.4.4 CFI-funded construction or renovation that is part of a larger undertaking

Cost-allocation method

When the CFI funds a portion of a larger construction or renovation, the estimated costs for the CFI-funded space must reflect, as accurately as possible, the actual cost of this space. Costs for common elements and soft costs must be pro-rated to the CFI-funded portion of the undertaking. In such instances, it is the responsibility of the institution to develop an appropriate cost-allocation method.

Consult our framework for allocating construction and renovation costs and examples of detailed and simplified cost allocation methods. The CFI will allow an institution to use a simplified cost-allocation method only if the average cost of the CFI-funded space is representative of, or higher than, the average cost of the overall undertaking.

Financial reporting

Once the construction or renovation contract has been awarded, the institution is in a better position to calculate and report the expected cost of the CFI-funded space using an established cost-allocation method for the project. At this point, preliminary estimates can be replaced by firm estimates of costs to completion. In the interim financial reports, institutions are expected to report both the expected cost at completion and the actual cost at the reporting date.

  • Expected cost at completion: The CFI expects institutions to produce an updated analysis of the estimated construction or renovation cost every time there are significant changes. If there are only minor changes, the institution can wait until the end of the project to update the analysis.
  • Actual cost at reporting date: The actual construction or renovation costs reported in the interim financial report must be based on the percentage of completion of the entire undertaking at the reporting date, multiplied by the expected cost at completion. However, if an institution can demonstrate that the percentage of completion of the CFI-funded space is different from that of the entire undertaking, then the more representative percentage may be used. It is equally acceptable to apply the percentage of billing to date to the most recently estimated cost at completion for the entire undertaking.

Once the construction or renovation is complete, institutions must update the cost analysis using the final actual costs and report this amount in the final financial report.

6.4.5 Supporting documentation

Institutions must be prepared to provide supporting documentation for expenditures and contributions related to each eligible item reported in a CFI-funded project. Institutions must keep on file the original documentation for audit purposes and provide it upon request. The CFI will accept electronic images if all of the following conditions are met:

  • Senior management has authorized the use of electronic images as part of the institution’s normal course of business
  • The institution has established and documented systems and procedures for the imaging program, and these have been approved by senior management
  • The images are of good quality and are legible and readable when displayed on a computer screen and reproduced on paper
  • The institution has adequate electronic record-keeping policies, procedures and practices to ensure the reliability, integrity and authenticity of the electronic records and the records management system. Institutions should refer to the National Standards of Canada publication, Electronic records as documentary evidence  (CAN/CGSB-72.34-2017).

Institutions must keep on file the supporting documentation listed in the following pages.

Supporting documentation for expenditures

  • Purchase requisition
  • Request for bids
  • All bids received following a competitive bid process
  • Documentation justifying an exception if a competitive bid process was not undertaken (The exception must be permitted under the institution’s purchasing policy.)
  • Summary form documenting bids received and the evaluation and rationale for selection of the successful supplier or service provider
  • Purchase order or contract
  • Receiving document or statement of work performed
  • For travel costs, boarding passes (if available) or other evidence supporting that travel has taken place
  • Invoice
  • Proof of payment (e.g., cancelled cheque)

Personnel costs

  • For personnel costs, supporting documentation for time spent and nature of activities performed as indicated in Table 3 and for rate, fee or fixed percentage as indicated in Table 4.

Construction or renovation

  • For construction or renovation, scaled floor plans showing location of the area funded by the CFI and the size, description and nature of all such areas (e.g., wet lab, dry lab, office, greenhouse), including non-usable space or common elements (e.g., corridors, washrooms). The distinction between usable and non-usable space must be clear.
  • For construction or renovation for which the CFI component is part of a larger undertaking:

Table 3: Time spent and nature of activities

Practice

Supporting documentation

Actual salary plus benefits, multiplied by the actual time spent

or

Internal rate reflective of average salary plus benefits, multiplied by the actual time spent

or

Internal rate reflective of average salary plus benefits plus overhead component, multiplied by the actual time spent

Time records signed by the individual and approved by the supervisor supporting the amount of time and the activities performed (e.g., time sheets)

At a minimum, these should be obtained prior to filing a financial report (usually annually). A single time record covering the entire period since the last filing is acceptable, as are time records completed on a more frequent basis. The CFI also accepts a confirmation of this information from another person (e.g., project leader or department head) if that person is knowledgeable of the time spent and the activities performed.

Consult our sample template for personnel costs.

  

Fee for service

Description of services rendered or work performed

Fixed percentage of construction or renovation costs for architectural and/or engineering and/or project management costs

Description of services rendered or work performed

If the department issues an invoice for services rendered, the invoice may serve as acceptable documentation for both the time spent (if applicable) and the nature of the activities, as long as the details of those are included.

Table 4: Rate, fee or fixed percentage

Practice

Supporting documentation

Actual salary plus benefits, multiplied by the actual amount of time spent

Supporting evidence for the individual’s salary rate and benefits charged (e.g., letter of hire or change in salary rate, payroll records)

Internal rate reflective of average salary plus benefits, multiplied by the actual amount of time spent

Description of the method used by the institution to establish the rate

Evidence to support that the internal rate used is the same as the one charged to other internal clients (e.g., approved rate by central administration, internal rate made public to the internal community, evidence of same rate charged to other internal clients not related to a CFI-funded project)

Internal rate reflective of average salary plus benefits plus overhead component, multiplied by the actual amount of time spent

OR

Fee for service

OR

Fixed percentage of construction or renovation costs for architectural and/or engineering and/or project management costs

Description of the normal practice of the institution and confirmation that the practice used to report expenditures in the CFI-funded project is consistent with the normal practice of the institution for other internal clients not related to a CFI-funded project

Description of the method used by the institution to establish the rate, fee or fixed percentage

Evidence to support that the internal rate, fee or fixed percentage used is the same as the one charged to other internal clients (e.g., approved rate by central administration, internal rate made public to the internal community, evidence of same rate charged to other internal clients not related to a CFI-funded project)

Evidence to support that the rate, fee or fixed percentage used is less or equal to fair market value (e.g., industry benchmarks published by Hanscomb Ltd.  or RSMeans  for the appropriate region and time period, invoices for similar services paid by the institution to external providers in the same time period, etc.)

Supporting documentation for contributions

  • Agreement or letter confirming the amount contributed and the conditions of funding (if any)
  • Proof of receipt (i.e., deposit slip stamped by the bank)

Other supporting documentation

  • Supporting evidence for the portion of time the infrastructure is used for research, if other than 100 percent
  • Supporting evidence for the portion of space in a facility used for research, if other than 100 percent
  • Supporting evidence of key controls in place (e.g., evidence of approval of purchase requisition, purchase order, receipt of goods or services, payment, review of infrastructure changes and request for pre-approval, reconciliation of financial records and financial reports)

Additional requirements apply to the Infrastructure Operating Fund (see 6.10.5 Additional supporting documentation). For items involving in-kind contributions, see 6.5 Items involving in-kind contributions as additional documentation requirements may apply.

6.4.6 Foreign currency transactions

Foreign currency transactions must be reported in Canadian dollars in the financial reports in accordance with the usual institutional policies and procedures (e.g., using the market exchange rate in effect at the time the expenditure is recorded in the account, at the invoice date or at the payment date). Using the market exchange rate in effect at the time of the commitment (i.e., purchase order date) is not acceptable. If an institution enters into a foreign exchange contract for a specific transaction to protect itself against fluctuations in the foreign exchange rate and this is approved by the institution’s treasury department, the CFI will accept that the contract rate be used to report this transaction. However, there must be a direct relationship between the foreign exchange contract and the transaction (i.e., same amount, same date of settlement of the contract and expected payment to the supplier or service provider). Institutions must document this relationship at the onset of the contract.