GENERAL RESPONSE
The Government welcomes the Committee's
recommendations
on foundations. The Government's Response below reflects that, since Budget 2003, the
Government has taken and, with recommendations from the Auditor
General and Parliament, continues to pursue active steps to strengthen
overall accountability and transparency relating to transfer payments to
foundations, and do so in a manner that respects the independence of these
organizations. Among the most important
steps taken are the following:
- The Government has set out clear principles it
will apply when using a foundation to deliver public policy;
- Funding agreements have been renegotiated, and in some cases legislation amended, to improve accountability;
- Reporting to ministers, Parliament, and the public has been strengthened;
- Default provisions have been introduced in funding agreements to enable corrections when things go wrong;
- The Government's Bill
C43 has been enacted to authorize the Auditor General to perform audits.
Further, the Government supports the Committee's recommendation that an evaluation should be conducted of
foundations as tools for the delivery of public policy. However, the Government
also believes that the accountability and oversight regime for foundations must
respect and preserve their independence if they are to remain effective
delivery tools.
RECOMMENDATION 1
Sponsoring ministers should table in Parliament the corporate plans or
summaries and the annual reports of foundations in a timely manner. In
consultation with the foundations, the sponsoring departments should encourage
them to include meaningful information on results in their plans and reports.
There are a number of reports that help to ensure transparency to Parliament and the
ability of committees to review foundation activities, and departments are working with foundations on an
ongoing basis to improve the information they provide.
In Budget 2003, the Government committed that summaries of foundations' corporate
plans will be made public by ministers and submitted to Parliament. In addition, departments responsible for
administering funding agreements are to incorporate significant expected
results to be achieved by foundations in their Departmental
Reports on Plans and Priorities, which are tabled in Parliament, and
situate these within overall departmental plans and priorities. For the duration of funding agreements,
these departments are also to report on significant results achieved by
foundations in their Departmental Performance Reports and situate these within
overall results achieved.
Annual reports of foundations are presented to ministers responsible for funding
agreements. All reports are made public and ministers are encouraged to table
them in Parliament. The annual reports of foundations established by
legislation, which represent about 80% of all transfers to foundations, are
tabled.
RECOMMENDATION 2
The federal government seek every
opportunity to persuade all existing foundations to incorporate into their
evaluation framework the standards set out in the Treasury
Board Evaluation Policy when commissioning independent evaluations.
The Government agrees that foundations should use recognized evaluation standards.
While the independent evaluators appointed by foundations likely use
appropriate evaluation standards, to provide further assurance, clauses to
address this have already been negotiated in a number of funding agreements
where funding was provided in the 2005 Budget.
Opportunities will be taken to negotiate similar clauses with other
foundations.
It is important to note that departments
are already obliged to follow the Treasury Board Evaluation Policy in the
conduct of their evaluations relating to foundations.
RECOMMENDATION 3
The federal government ensure that an adjustment mechanism is in place that allows sponsoring ministers to
intervene in cases where circumstances have changed considerably since the
creation of foundations for which they have responsibility.
The 2003 Budget clarified the circumstances in which foundations are used as a means of meeting the needs
of Canadians. In utilizing foundations, the Government makes very conscious and considered decisions that organizations
at arms-length from the Government are in the best position to deliver on the public interest. Transfers of funds to foundations are
fully and properly accounted for in the Estimates and
Public Accounts.
While the Government has taken significant steps to improve the accountability of foundations to
Ministers and Parliament, it is important to preserve the independence of
foundations from the Government and ensure that their directors are fully
responsible for foundation actions. The
funding agreements between foundations and the Government are contractual and
cannot be changed unilaterally. Funding to foundations is provided to meet
objectives with a mid to long-term horizon.
However, in the event that significant changes in circumstances were to
arise that led to misalignment between Government policy and the objectives of
a funding agreement, the Government would make every effort to renegotiate the
funding agreement with the foundation. To date, the Government has been
successful in negotiating adjustments to meet emerging requirements. For those
foundations established by specific legislation, it is also open to the
Government to seek amendments to the legislation, as the Government has done in
the past.
If a clause were to be inserted in a funding agreement that would
permit the Government to unilaterally redirect the use of a foundation's funds
that had been provided by the Government, this would be a strong, though not
conclusive, indicator that the Government controls the foundation within the
meaning of the Public
Sector Accounting Board standard on the Government Reporting Entity. It could also seriously impact the
foundations achievement of its objectives due to the consequent uncertainty.
RECOMMENDATION 4
The Office of the
Comptroller General of Canada and the Office
of the Auditor General of Canada pursue their discussions and prepare a
report detailing the progress achieved in clarifying the guidance of the Public Sector
Accounting Board concerning the accounting treatment of federal transfers
to foundations. This report should be tabled to Parliament.
The Government holds the view that its accounting treatment of transfers to
foundations has fully respected all objective accounting standards of the Canadian Institute
of Chartered Accountants.
The new Public Sector Accounting Board standard on the Government Reporting Entity,
which takes effect in fiscal year 2005-2006, defines the scope of the
Government reporting entity in terms of the organizations whose financial
affairs and resources would be included in a Government's financial statements.
The Government is examining foundations in the context of this standard to
reach a judgment on whether any foundations are controlled by the Government in
accordance with the terms of the standard. The Government will share and
discuss this analysis with the Office of the Auditor General. Should the Government determine that any
foundation is to be considered part of the Government reporting entity, the
Government's financial statements would require restatement if the financial
impact is material.
The Public Sector
Accounting Board is also revising its standard relating to government
transfers. This has not yet been finalized, but it may have implications for
accounting for funds advanced to foundations. The Government
will report back to the Committee on these matters by 31 March 2006.
RECOMMENDATION 5
The Treasury Board Secretariat reviews the use of exemptions to the transfer
payments policy that allow payments to be made to foundations in advance of
need. The findings of this review should be reported to Parliament.
Foundations are
important tools for implementing policy in areas such as innovation, research,
health and education, where stable, long-term funding is important. Up-front
funding is necessary to provide foundations the financial stability they need
to plan comprehensively for the medium and long-term, to allow them to make
multi-year commitments, and to attract funds from other sources.
Up-front
funding has meant that transfer payments have been made to foundations in
advance of their cash flow needs, but not in advance of their program need. The
Policy on Transfer Payments explicitly provides for Treasury Board approval of
exemptions when transfer payments are to be made in advance of cash flow need,
and this provision has been appropriately utilized to provide up-front funding
to foundations. The Policy on Transfer Payments, it should be noted, is
currently under review and the issue of exemptions will be considered.
Going forward, the Government is exploring
other options to guarantee stable funding for foundations that preserves their
ability to enter into longer-term commitments. The Government will report to
the Committee on the outcome of this review by 31 March 2006, in conjunction
with its review of accounting issues discussed above.
RECOMMENDATION 6
The Treasury Board
Secretariat develops an evaluation framework and undertakes a government-wide
evaluation of the use of foundations as instruments of public policy.
This evaluation should include the appropriateness of the use of foundations,
what they cost, and how effective they have been. The results of the
evaluation should be reported to Parliament.
The Government has already taken active steps to improve
accountability and transparency relating to transfer payments to foundations.
The Government will undertake an evaluation of the use of foundations as tools
for the delivery of public policy, particularly with respect to the use of
up-front conditional grant assistance. The Government undertakes to report the
results to the Committee no later than 31 March 2007. It should be noted that there is a robust framework in place for
the evaluation of foundation results. Funding agreements with foundations
generally provide that they are to carry out evaluations within specified
timeframes. These evaluations are being done. Evaluation results are reviewed
by departments, which incorporate significant findings in their Departmental
Performance Reports tabled in Parliament. Funding agreements also provide that
departments may undertake evaluations, and would generally do so in the context
of the department's broader program objectives.
RECOMMENDATION 7
The federal government seek parliamentary review of any
proposed funding agreement for new foundations or proposals for changes to
existing foundations.
Going forward, the Government is committed to seeking
parliamentary approval, through direct legislation, of purpose and funding for
foundations that are significant either from a policy or financial perspective.
In all cases, Parliament approves the funding for foundations.
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