FSD 10 - Posting loan
Introduction
This directive provides for a loan to employees, on an as-needed basis, normally so that they may purchase items needed at post or to otherwise facilitate the posting. Items may include clothing and foodstuffs and a private motor vehicle, for the employee's use at a post. The intent of FSD 10 is not to fund personal investments.
The employee will be required to identify the purpose of the loan.
Directive 10
Maximum Loan Amount
10.01 Subject to the discretion of the deputy head and the limitations and conditions of this directive, an employee may be granted an interest-bearing posting loan in an amount not exceeding the lesser of the following amounts:
(a) fifty per cent of the employee's gross annual salary; and
(b) $39,028, (or such amount as shall be established annually on April 1st in accordance with the methodology agreed to in the National Joint Council Committee on Foreign Service Directives). (revised April 1, 2011)
(April 1, 2010 amount: $38,334)
Eligibility
10.02 A posting loan may be granted to an employee:
(a) who is notified officially in writing of an impending assignment to a post; or
(b) who is on assignment at a post where a posting loan was not granted in anticipation of that assignment; and/or
(c) who has been granted a posting loan and is notified officially in writing of an impending assignment from one post to another post.
Instructions
1. A posting loan is normally granted in advance of posting or during the first twelve months of an assignment at a post.
2. A posting loan may be granted following completion of twelve months of duty at a post for reasons acceptable to the deputy head.
3. A posting loan may only be granted during the last twelve months of an assignment at a post in exceptional circumstances for reasons acceptable to the deputy head or where an employee is notified officially in writing of an impending assignment from one post to another post.
Timing
10.03 Where a loan is approved following notification of posting or cross-posting, the funds may be released to the employee up to 90 days prior to the official date of departure from Canada or from the employee's previous post.
Previous Loan
10.04 Where a loan is granted in accordance with Section 10.02(c), the maximum amount of the loan shall not exceed the amount available under Section 10.01 at the time of official notification of cross-posting, reduced by the outstanding principal of the previous loan, and repayment shall be in accordance with Section 10.08.
Renegotiation
10.05 Where a posting loan has been granted in accordance with Section 10.02, the employee may:
(a) negotiate a supplementary loan, on one occasion only, for an amount of $1,500 or over, up to the maximum amount that would have been available under Section 10.01 when the original loan was approved. The additional amount would be at the current interest rate for posting loans.
(b) renegotiate the term of the loan to a maximum of 4 years, with no change in interest rate.
(c) renegotiate the loan to reflect a higher loan payment with a corresponding decrease in the term of the loan, with no change in interest.
Instructions
1. The provisions of Section 10.05 are available at any time following approval of each loan, except that, during the last twelve months of an assignment at a post, the supplementary loan may only be granted in exceptional circumstances for reasons acceptable to the deputy head.
2. Where a posting loan has been granted to the maximum amount available under Section 10.01, the employee is not eligible for the provisions of Section 10.05(a).
3. The provisions of Section 10.05 are not available when a loan has been repaid in full.
Guideline
The total amount available as a combined posting loan and supplementary posting loan is the amount available under Section 10.01 when the initial loan was approved. For example:
1. Maximum amount available: $25,000. Employee is granted a posting loan of $10,000, repayable over two years.
After 10 months at post, employee finds it necessary to purchase a car. Although the outstanding principal has been reduced to $6,000, the loan could only be increased up to the original limit of $25,000, less the original amount issued ($10,000), i.e. a supplementary loan of up to $15,000 would be approved. The new interest rate would be a weighted average based on the outstanding principal at the original interest rate and the supplementary amount at the current rate. For example, if the original rate was 4% and the new rate is 5%, the weighted average would be ($6,000 x .04 + $15,000 x .05)/$21,000 = 4.71%.
2. Maximum amount available: $25,000. Employee is granted a posting loan of $25,000, repayable over four years.
After two years at post, employee has paid off $11,000 of the posting loan, and now applies for a $5,000 supplementary loan. This would not be permissible as employee has already been granted the maximum amount available, i.e., $25,000.
Interest Rate
10.06 Where a posting loan or supplementary loan has been approved in accordance with Section 10.02 and/or 10.05(a):
(a) the rate of interest on the initial loan shall be the prescribed rate in effect on the first day of the quarter (i.e., April 1st, July 1st, October 1st, January 1st) in which the loan is approved, such rate being established by the Department of Finance and published on the Department of Foreign Affairs and International Trade's website;
(b) the rate of interest on any supplementary loan shall be the prescribed rate in effect on the first day of the quarter in which the supplementary loan is approved, and where the new loan interest rate on the combined loan shall be a weighted average of the two rates.
(c) interest shall be calculated on the total outstanding balance of the loan, including any outstanding balance from a previous loan and any supplementary loan amount;
(d) the rate of interest shall remain fixed during the period of the loan, subject to the provisions of Section 10.05.
Guideline
On April 1, 2009, the prescribed rate was the average interest rate on 1-year treasury bills during the first month of the preceding quarter, i.e., January, 2009.
Maximum Period of Loan
10.07 Where a posting loan has been granted in accordance with Section 10.02, the repayment period shall not exceed a maximum of 48 months. Where a posting loan is renegotiated in accordance with Section 10.05(a), the repayment period shall not exceed a maximum of 48 months from the commencement of the repayment period on the original loan.
Repayment Terms
10.08 Where a posting loan has been granted in accordance with Section 10.02;
(a) interest shall be calculated and becomes payable two weeks following the day the loan is approved for deposit to the employee's bank account. These two weeks represents the average time from approval to deposit. Any interest owing between the issuance of the loan and the beginning of the repayment period will be added to the principal.
(b) the loan shall be repaid in equal bi-weekly instalments of blended principal and interest. Notwithstanding that interest becomes payable two weeks following the day the loan is approved, at the request of the employee, the repayment start date can be delayed up to the first day of the fourth month following the month in which the loan is approved, or to the first day of the month following the employee's arrival at post, whichever is the earlier.
Instruction
Where a loan is granted in accordance with Section 10.02(c), "principal" is the total amount of the loan which comprises the actual amount received by the employee plus any additional amount required to retire the outstanding principal of the previous loan.
10.09 Reserved
Early Repayment Options
10.10 An employee who has been granted a posting loan may partially repay the principal of the loan in a minimum amount of $500 on one occasion only, in which case the rate of interest shall remain unchanged and, upon request, the employee may:
(a) retain the original repayment period, in which case the total bi-weekly amount of blended principal and interest shall be reduced to reflect the reduced principal of the loan; or
(b) reduce the original repayment period, in which case the total bi-weekly amount of blended principal and interest shall be adjusted, as required, in accordance with the applicable repayment schedule, to an amount approximating as closely as possible the total bi-weekly amount prior to the partial repayment of the principal;
Loan Retirement
10.11 After confirming with the deputy head the outstanding balance of a loan, an employee shall have the right, during the term of the loan, to repay the whole of the outstanding principal and interest, with interest calculated to the end of the bi-weekly period in which the loan is retired. Where the employee utilizes this right, there is no further entitlement to any of the provisions of this directive for the duration of that assignment, including any extension of that assignment, until and unless the employee is notified officially in writing of an impending assignment from that post to another post. (See Section 10.03).
Extension of Repayment Period
10.12
(a) Notwithstanding Section 10.07, where an employee returns to Canada prior to the termination of the assignment, the deputy head may authorize the continued repayment of the loan and may also extend the repayment period to a maximum of 48 months from the commencement of the repayment period.
(b) Where the employer directs early termination of a posting and the employee's return to Canada and repayment of the loan would cause financial hardship, the deputy head may consider extending the repayment period beyond 48 months.
Cancellation of Posting
10.13 Notwithstanding Section 10.07, where an employee who has been granted a posting loan in anticipation of posting is subsequently notified officially that the assignment has been cancelled due to operational requirements as determined by the deputy head, the deputy head may authorize the repayment of the loan under the same terms and conditions as would have applied had the employee proceeded on posting, except that, in cases of financial hardship, the deputy head may consider extending the repayment period beyond 48 months.
Instruction
The terms and conditions referred to in this section are those terms and conditions of repayment which were in effect at the time the posting was cancelled and shall remain fixed until the loan is repaid.
10.14 Notwithstanding anything in this directive, where an employee:
(a) ceases to be employed before repayment is completed, the outstanding amount of the loan shall be subject to immediate recovery pursuant to the relevant provisions of the Financial Administration Act.
(b) has been granted leave without pay during the repayment period of the loan, the employee shall submit post-dated cheques to cover the bi-weekly payments during the leave without pay period. If no provision is made for settlement of the regular payments, the outstanding amount of the loan shall be subject to recovery pursuant to the relevant provisions of the Financial Administration Act.
10.15 Blank
General instructions
1. The employee shall be informed in writing of the terms and conditions of the loan, including the total cost of the loan and the rate of interest charged.
2. Provisions related to the financing of posting loans are contained in the Appendix to this directive.
Forms
Application for Loan - TBS 330-30 (Rev. June 2001) FSD 10
Appendix - Financing of loans and advances to employees posted abroad under the Foreign Service Directives
Introduction
1. To provide a convenient means of financing posting loans and certain advances to civilian employees posted abroad under the Foreign Service Directives, a working capital account has been established with the Department of Foreign Affairs and International Trade (hereinafter referred to as "Foreign Affairs").
Application
2. This Foreign Affairs' facility is available:
(a) for loans - to Foreign Affairs and all departments other than the Department of National Defence and the Royal Canadian Mounted Police to finance posting loans to employees being posted or who have been posted outside Canada under the Foreign Service Directives; and
(b) for advances - to Foreign Affairs and all departments to finance certain advances made at posts to employees outside Canada under the Foreign Service Directives;
where,
(c) The Department of National Defence and the Royal Canadian Mounted Police will continue to finance posting loans, whether made in Ottawa or at posts abroad, through accounts previously established for this purpose.
Implementation
3. Effective April 1, 1980, all posting loans, medical expense advances, accommodation security deposit advances and advances for public utilities made under the Foreign Service Directives are made from this working capital account.
Issue of loans and advances
4.
(a) Issue of loans
All duly authorized requests for issuance of Receiver General cheques for posting loans on behalf of other government departments except the Department of National Defence and the Royal Canadian Mounted Police must be submitted by the financial branch of the requesting department to the Department of Foreign Affairs and International Trade, Attention: Director, Strategic Policy, Planning and Monitoring Division (AEF).
(b) Issue of advances
The Head of Mission has been delegated authority to approve and issue to operational personnel of all government departments at posts, advances for medical expenses (FSD 42), accommodation security deposits (FSD 26), and advances for public utilities (FSD25), provided that the requests for such advances are duly recommended and/or approved by the senior program officer at the post of the department concerned.
Records of loans and advances
5. All loans and advances issued against the requisitions of a department are naturally the responsibility of that department, thus requiring it to maintain adequate accounts and records to permit the collection of repayment and any interest payable, as well as to meet the needs of the Fiscal Accounts for the accounting of the loans and advances and of any interest collected.
Repayment of posting loans
6. All posting loans will be repayable in accordance with the repayment charts for this purpose drawn up from time to time by Foreign Affairs in consultation with Finance Canada. Recovery in all instances will be through payroll deductions. Because of the fixed time restraints involved, the relative personnel pay input forms must be in the hands of the Pay Office of Government Services Canada at least three weeks prior to the pay period in which the first deduction will occur.
7. Foreign Affairs will make standing arrangements with each department concerned for the refund to the working capital account each month of all sums recovered during the month.
Repayment of advances
8. All advances made from the Foreign Affairs' working capital account will be recoverable in accordance with the requirements of the particular Foreign Service Directive involved. Each department concerned will establish procedures to ensure that repayments due from employees are in the hands of the appropriate Foreign Affairs' financial officer at the post or at Foreign Affairs' headquarters by the due date.
Repayment of loans and advances under special circumstances
9. Where an employee's tour of duty is terminated before the planned date, the department must make suitable alternative arrangements, where necessary, for the repayment of any loans or advances outstanding and advise Foreign Affairs of the arrangements made. Where loans and advances made at the post are involved, the arrangements should be made with the concurrence of Foreign Affairs.
10. If the service of an employee terminates while loans or advances are still outstanding, the normal practices will be followed to ensure that all amounts due to the Crown are recovered.
Enquiries
11. Enquiries regarding implementation details of the procedures referred to in this Appendix should be addressed to the Department of Foreign Affairs and International Trade, Attention: Director, Strategic Policy, Planning and Monitoring Division (AEF).