Section 32 of the Financial Administration Act (control of commitments)

Section 32 of the Financial Administration Act (R.S.C., 1985, c. F-11) is the funding gate for federal contracts: no contract or other arrangement providing for a payment may be entered into unless there is a sufficient unencumbered balance available in an appropriation to cover the debts it will create in that fiscal year.

What the statute says

Under subsection 32(1), no contract or other arrangement providing for a payment can be entered into unless, to discharge any debt that will come due under it during the fiscal year in which it is entered into, there is a sufficient unencumbered balance available out of one of four sources: an appropriation by Parliament the payment will be charged to, an item included in the estimates then before the House of Commons, a commitment limit in an appropriation Act, or revenues received or estimated in the case of payments charged to a revenue-spending authority. Subsection 32(2) adds a record-keeping duty: deputy heads and program administrators must establish procedures and maintain records controlling the financial commitments charged to each appropriation, as the Treasury Board prescribes. As CanadaBuys summarizes it for buyers: no contract involving payment can be entered into without available funding to cover any incurred debts within the fiscal year the contract is entered into.

Where it fits with sections 33 and 34

Section 32 is the first of three FAA gates on federal spending. Section 33 (requisition) requires that no charge be made against an appropriation except on the requisition of the appropriate Minister or a person authorized in writing — and bars requisitions that would exceed the appropriation or leave the balance insufficient to meet commitments already charged, language that directly enforces section 32 discipline. Section 34 (payment) then requires certification that the work was performed or goods supplied and the price is according to the contract. In practice, this is why federal contract awards can slip across fiscal-year boundaries: if the money for the current year is committed, the award waits for the new appropriation.

What it means for vendors

Section 32 is rarely visible to suppliers, but its effects are. Multi-year contracts are funded year by year, so a contract may contain language making continuation subject to Parliament voting funds. Late-fiscal-year solicitations can be cancelled or delayed when the buyer cannot establish a sufficient unencumbered balance, and exercise of option years depends on the same gate. If a federal client hesitates to sign in March, it is usually a section 32 problem, not a problem with your bid.

Common questions

Does section 32 mean the government must have all contract funds up front?

No. It requires funding for the debts that will come due in the fiscal year the contract is entered into. Later fiscal years are funded from future appropriations, which is why contracts are often awarded "subject to funds being voted".

Can a department commit against estimates not yet passed?

Yes, within limits: subsection 32(1)(b) allows commitments against an item included in the estimates then before the House of Commons, which is how departments keep contracting during periods without a passed budget.

Related definitions

Section 34 of the Financial Administration Act · Government Contracts Regulations · Contracting authority · Late payment interest