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Creating a new transfer program is a very complex task that must take into
account several internal and external factors. Consultation and communication
with and between stakeholders is critical to develop a successful transfer
program. Consultation should include operational and functional staff and
management with experience managing and delivering similar transfer programs.
4.1.1 Types of transfer payments
The various forms of transfer payments include contributions, grants,
flexible transfer payments (FTPs), alternative funding arrangement (AFAs) and
other transfer payments (OTPs).
Key attributes of transfer payments:
- Contribution-a conditional transfer whereby specific terms and conditions
must be met or carried out by a recipient before costs are reimbursed.
- Grant-an unconditional transfer payment where eligibility criteria and
applications received in advance of payment sufficiently assure that the
payment objectives will be met.
- Other transfer payment (OTP)-a transfer payment based on legislation or an
arrangement that normally includes a formula or schedule as one element used
to determine the expenditure amount.
- Alternative funding arrangements (AFAs) and flexible transfer payments
(FTPs)- transfers specific to Indian and Northern Affairs Canada (INAC).
They possess characteristics similar to OTPs and contributions. AFAs and
FTPs are like contributions in that there is a written agreement setting out
both parties' obligations, including audit provisions. FTPs are conditional
transfer payments and may include provisions for the retention of unexpended
balances, provided program terms and conditions have been fulfilled.
4.1.2 Factors that influence the choice of transfer payment
The choice of funding instrument to achieve a department's policy objectives
is an important consideration in program design. The right choice of instrument
is a critical factor in meeting the objectives and expectations of program
managers, potential recipients and Parliament.
The following factors that impact upon the choice of instrument must be
considered:
- Legal-Legislation, regulations and policies
- Financial/Economic-risk management, cost effectiveness
- Social considerations-e.g., natural disaster
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See Sub section 4.6.2 for a more detailed discussion of factors that
influence choice of transfer payment.
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4.2.1 Linkage between transfer payment program objectives and national and
departmental objectives and priorities
When creating a new transfer payment program, its purpose and objective(s)
must support and advance the department's mandate and strategic objectives.
Although a department's mandate does evolve, its core mandate generally remains
constant over time. If the link between the program and departmental mandate
and/or business line is not obvious, then the program should be rethought.
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For example a department with a mandate to promote Canadians' health
could develop a program to encourage eating nutritional food. It is not
expected that the same department would have a mandate to encourage
Canadian farmers or businesses to produce and/or process those nutritional
foods. For this same department to use transfer payments to assist
businesses to process food would be questionable.
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4.2.2 Beneficiaries
Setting a program's objectives necessarily involves identifying the target
group or individuals that will benefit from the transfer program. Beneficiaries
may be named (e.g., specific individuals) or identified as a group or class.
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In the latter case for example beneficiaries may be identified narrowly
such as unmarried First Nations males in northern Saskatchewan or more
widely as First Nations people across Canada.
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4.2.3 Expected benefits and outcomes
Once the key stakeholders (e.g., program managers, sector representatives,
potential recipients, Parliament) agree on a program's purpose and objectives,
the groundwork is laid for the design of the program.
Most often, program objectives are general statements that provide a focus
and scope for stakeholders. However, in order to implement these objectives,
departments must proceed to restate them as expected results and outcomes
(expected benefits to Canadians). Identifying expected results will allow
stakeholders to determine, among other things, what should happen to
beneficiaries because of the funding provided and whether a project was
successful in contributing to the expected program results and objectives.
By identifying expected results and outcomes, officials can proceed with the
subsequent stages of program management. These include the choice of transfer
payment (e.g., grant or contribution), establishment of assessment criteria,
selection processes, transfer payment agreements, monitoring and payment
systems, and reports.
Section 5 is devoted to a full explanation of identifying, assessing,
measuring and evaluating a program's expected results.
Departments should consider an appropriate delivery mechanism for all new and
revised transfer payment programs.
4.3.1 Centralized versus decentralized program
The degree to which a program meets its objectives may be influenced by the
centralized or decentralized nature of its delivery. Programs can be managed
centrally, regionally, locally or in combination. Splitting specific management
functions between central and regional offices will best meet program
objectives. For instance, decision making could be centralized while other
functions such as monitoring and payments could be undertaken in a region.
Factors to consider include:
- the degree of control needed,
- the nature and dispersion of the potential beneficiaries,
- the dispersion of departmental human resources,
- cost effectiveness and
- critical or exceptional circumstances (e.g., urgent action needed).
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See sub section 4.6.2. for a more detailed discussion of factors on
centralization and decentralization.
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4.3.2 Direct delivery versus sub-agreement delivery
Departments may deliver a program through their own human resources or
through a sub-agreement. If this second option is considered, a department must
decide if a contract or transfer agreement is the most appropriate arrangement.
The factors that a department should consider when choosing direct or third
party delivery include:
- expertise within the department,
- program duration,
- cost,
- sensitivities, such as having a federal presence,
- target group needs and expectations and
- dispersion of target group.
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See sub-section 4.6.2. for a more detailed discussion of factors on
direct and third party delivery.
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4.4.1 Grants to class of recipients and for contributions
The Treasury Board submission seeking approval for a grants and contribution
program must include the terms and conditions in their entirety. They form the
basis for subsequent agreements with recipients. This sub-section describes each
required component of terms and conditions and explains why each is critical to
a program. Managers and advisors with a clear understanding of the reason for a
particular component are better positioned to manage within those terms and
conditions.
Although the requirements for terms and conditions are not explicit in the
policy for "Other Transfer Payments" and "Named Grants,"
there are a number of requirements that must be considered when approving these
transfer payments. See sub-section 4.4.3. for a more details
A prerequisite to renewing terms and conditions is identified in
paragraph 7.3.7 of the policy. It states that "Departments
must assess the current transfer payment program] through a formal
program evaluation or similar review, and report back on the effectiveness of
the transfer payments when requesting renewal of terms and conditions."
4.4.2 What is required
The Transfer Payment Policy is explicit about the minimum content of a
program's terms and conditions. Where a requirement does not apply for a given
program, an explanation is required for that item. For example, stacking does
not apply to transfer payments made to provinces and territories.
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Policy requirements
(section 8.1 of the TP policy)
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Comments
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Summary
- A short summary of the program or initiative.
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The terms and conditions will become a stand-alone document for use by
departmental staff. It will be helpful to them in negotiating with
potential recipients and in drafting agreements to place the program in
the proper context.
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Objectives and Results
- A clear statement of the transfer payment program's objectives;
- A clear statement of how the transfer payments further approved
program objectives, including identification of expected results and
outcomes.
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A manager must justify how a particular transfer agreement is linked to
and furthers the objectives set out in the transfer program's terms and
conditions.
This statement should relate to the results-based accountability
framework discussed in sub-section 5.1.
The program or legislative authority to develop or
renew a transfer payment program should also be identified in this section
to verify that it is in keeping with the departmental mandate.
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Eligible Recipients
- A clear identification of the recipient or definition of the class
of eligible recipients. If the intention is to include Crown
corporations as qualified recipients, include specific reference to
their eligibility.
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This component requires special consideration if a class or classes of
eligible recipients are being considered. A class may include individuals,
for-profit and non-profit organizations.
Transfer payments may not be made to other government
departments because it would circumvent Parliament and the Estimates
process.
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Stacking provisions
- The proposed stacking limits, i.e., specific limits to the total
government assistance (e.g., 50% of eligible project costs), and;
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The terms and conditions should demonstrate that due consideration has
been given to stacking. Managers should expect that other government
entities may be interested in participating in the funding of a particular
project.
The percentage of total government assistance (TGA) must be
stated explicitly in the terms and conditions. See definition of
TGA in the Transfer Payment Policy, Appendix A.
To ensure that a department is only providing the necessary amount to
undertake the project successfully, consider the funding amount the
recipient is receiving from:
- other federal government departments,
- other government sources (provincial, municipal) and
- the recipient is itself contributing to the project.
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- The method used for determining repayments by the recipient for
cases where such assistance exceeds the anticipated funding level.
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Refer to sub-section 4.6.4 for an explanation of stacking and an
example of wording for terms and conditions.
- Departments should briefly indicate that they have a monitoring
process in place to recover payments made beyond the stacking limit.
At a minimum, they should refer by name to their internal process or
system.
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Application Requirements
- A description of the supporting material required in an application
from a prospective recipient, including a requirement to disclose the
involvement of former public servants who are subject to the Conflict
of Interest and Post-employment Guidelines.
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These details are necessary for departmental officials to apply due
diligence: e.g. for determining eligibility, assessing the merit of the
project, reviewing the description of the work to be undertaken.
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Eligible Expenditures
- Identification of the type and nature of expenditures considered
eligible costs under the contribution program for reimbursements.
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The identification of eligible costs provides essential guidance to
managers and staff in developing and authorizing projects and agreements.
Sub-section 8.4.3. distinguishes between eligible and allowable
expenditures.
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Maximum Amount Payable
- The maximum amount payable to each recipient. Justify if not able to
identify the maximum.
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The maximum amount payable will limit the amount a department can
approve to a recipient under the program. Anything greater will require TB
approval by separate submission.
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Authority to approve, sign and amend
- The organizational positions, if any, that the minister will
delegate authority to approve, sign or amend contribution agreements
and the parameters within which this authority may be exercised.
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Departments can reference a delegation instrument that is or will be
used for the program. These delegation instruments do not need to be
submitted with the submission but must be in force at the time of the
submission.
Do not overlook the need to balance control with efficiency when
delegating authorities. Even a one-time only agreement signed by the
minister may need an amendment.
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Authority to approve payments
- Where not otherwise specified in the delegation of financial signing
authorities, the identification of the organizational positions to
which the minister will delegate authority to approve payment.
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Delegation of authority to make payments must be stated in the terms
and conditions in addition to the delegation for approvals and amendments
discussed above. Departments can reference a delegation instrument that is
or will be used for the program.
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Basis and Timing of Payment
- The basis and timing of payment (including such details as a
schedule of advance and progress payments and applicable holdback
provisions)
- Where advance payments deviate from the TP policy's requirements,
the justification and the associated cost to the government of imputed
interest (to calculate imputed interest, take into account the number
and amount of advances paid earlier than indicated in the guidelines,
the length of time the payment is advances and an interest rate equal
to the 90 day Treasury Bill rate).
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If advance payments are to be made, departments need to indicate that
they will be following the Cash Management Policy (see sub-section 7.6 and
Appendix B of the Transfer Payment Policy.) If this is the case, no
further discussion is needed.
The approval of TB ministers must be obtained, through a Treasury Board
submission, for any advance payments that fall outside the policy
provisions. Departments must indicate the proposed cash flow schedule,
calculate imputed interest and indicate if the department is also seeking
Treasury Board approval to retain the imputed interest in the allotted
program funds.
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Refer to sub-section 11.3 for further discussion
of the Cash Management Policy.
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Repayable Contributions
- In the case of a repayable contribution, the conditions or events
under which all or part of the contribution is repayable, a
description of the process to be used to monitor potential repayments
and collect amounts due and the application of interest charges on
overdue repayments.
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This section deals with contributions that are expected to be repaid,
and not for contribution overpayments. See sub-section 7.8 of the Transfer
Payment Policy for possible considerations.
A key element of this requirement is addressing the conditions or
events under which repayment would occur as well as briefly describing the
process to be used to monitor accounts
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Duration
- The number of years over which it is expected that the terms and
conditions will apply and payments will be made, as well as the nature
of any program review to be undertaken to assess the transfer payment
program's effectiveness prior to any proposed program renewal.
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Terms and Conditions do not extend beyond the program's life. They are
not required to cover the reporting/audit period that follows a project's
termination. For example, if the duration for funding projects ends on
March 31, 2003 but project audit reports are required for the
next five years, the duration of the terms and conditions is
March 31, 2003 and not March 31, 2008.
For more on the duration of terms and conditions and their correlation
to multi-year agreements and payments, see "Duration of Terms and
Conditions-Multi-Year Agreements and Payments" in the Best Practices
Annex.
The expected time frame for payments must be identified in the terms
and conditions. If claims for payment are to be accepted "x"
months after the program ends, (excluding Payables at Year End - PAYEs),
discuss this with the department's TBS program analyst. Normally, payments
outside of PAYE would be made within the time frame of the program terms
and conditions.
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Due Diligence in Managing and Administering the Transfer
Program
- Assurance that the departmental systems, procedures and resources
are in place for ensuring due diligence in approving transfer payments
and verifying eligibility and entitlement, and for managing and
administering the programs.
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Departments must exercise due diligence that will stand up to public
scrutiny.
A description of the essential elements to ensure due diligence in
managing and administering transfer programs is found in
sub-section 4.6.3. These elements are essential to apply the
risk-based audit framework discussed below, and to represent the main
elements that will be included in a typical audit.
In the case of a renewal, Treasury Board analysts may ask for previous
internal audit reports to demonstrate that the department has met its due
diligence requirements. If a department's prior audit reports point to
weaknesses, the TB program analyst may require evidence that remedial
action has been taken.
Refer to the policy's definitions section for a definition of due
diligence and to sub-section 5.2 of this Guide for a discussion on the
risk-based audit framework.
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Accountability Framework and Evaluation
- A results-based management and accountability framework (RMAF)
including: performance indicators, expected results and outcomes,
methods for reporting on performance, and evaluation criteria to
assess the transfer payments' effectiveness.
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Details on RMAF can be found in sub-section 5.1.
The department must demonstrate how it will measure the effectiveness
of the transfer payment program. All government spending is subject to
evaluation. However, the effectiveness of transfer payments, since they
usually do not involve receipt of specific goods or services, can be, or
can appear to be, more difficult to substantiate. Design the
accountability framework so that the program manager can fully access and
analyse the performance indicators, and measure the program's
effectiveness in meeting the result commitments.
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Audit Framework
- A risk-based framework for auditing contribution recipients, an
internal audit plan, and a plan to evaluate the transfer payment
program, including expected funds to be budgeted for costs related to
these requirements.
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Every program must be considered for audit, though that does not
necessarily mean each program will be audited. A risk-based audit
framework provides a coherent and disciplined approach to establish an
audit strategy that will be reflected in an audit plan.
Refer to Section 5 for guidance on a risk-based audit framework,
internal audit plan and program evaluation plan.
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Other Terms and Conditions
- The additional cost of managing and administering the program as
well as the source of such funds.
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A department must acknowledge that it has the capacity to deliver the
program under existing reference levels.
In addition to calculating the total value of the annual transfer
payments to be made under this program, ensure that the funds required to
manage and administer the transfer payment program are considered and
disclosed. Some programs require much more resources to manage than
others, e.g., high dollar value programs that require a high degree of
monitoring or programs that must receive and screen a large number of
proposals.
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- When legislation provides that terms and conditions be approved by
the Governor in Council, a draft of the appropriate Order in Council.
- An explanation of any proposed deviation, if any, from the
requirements of the transfer payment policy.
- Any other factors considered appropriate under the circumstances.
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Verify with legal counsel whether your department's legislation
requires an Order in Council (Special Committee of Council) for the type
of activities that may be carried out within the transfer payment program.
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Comment on an MP's Role Is not Required in the Terms and Conditions
(Ts & Cs)
- Any formal role a Member of Parliament will have delivering and
administering the transfer payment program.
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MPs should not have a role in delivering or administering a transfer
payment; therefore, no comment is required.
If this is not the case, the member's role is to be brought to the TBS
program analyst's attention.
The authority for a minister to sign agreements and approve payments is
understood and does not need to be addressed here. The delegation by a
minister for signing and amending agreements and authorizing payments is
captured in another section of the Ts & Cs.
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4.4.3 Other transfer payments (OTPs) and named grants
This table has been developed to provide guidance to TBS program analysts and
departmental officials who are seeking authority for OTPs and named grants in a
TB submission. Named grants are made to persons or other entities that are
specifically named in the Estimates as opposed to grants to a class of
recipients.
The Policy on Transfer Payments does not specifically mention terms and
conditions for other transfer payments (OTPs) or for named grants when seeking
approval for a TB submission. Nevertheless, there are requirements in the policy
that should be considered for these types of transfer payments.
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Policy Reference
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Policy Requirement
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OTP-
Inclusion
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Named Grants-
Inclusion
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7.1
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Preparation of a results-based management and accountability framework
that provides for appropriate measuring and reporting of results.
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The nature of a results-based management and accountability framework
(RMAF) will be determined on a case-by-case basis through consultation
with TBS -RMR division.
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Same as OTPs
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7.3.7
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Address the need to renew Ts & Cs: departments must assess through
a formal evaluation or similar review and report back the transfer
payments' effectiveness.
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An evaluation would be required if an RMAF had been developed. For
current programs or projects without an RMAF, departments should contact
TBS at least one year before potential renewal to determine requirements.
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Same as OTPs
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7.13
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Stacking limits
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Yes, but since OTPs are generally transfers to provinces and
territories, other funding sources are usually not applicable.
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Yes
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7.6.4
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Where instalment payments and advance payments are necessary to meet
program objectives, departments must follow the provisions of Appendix B.
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No - advances apply to contributions.
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Yes - Instalment payments apply.
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7.7
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Assistance to a recipient's capital project*
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Yes
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No - neither named grants nor grants to a class of recipients are to be
used for capital projects.
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7.11.1
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Written agreement
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Yes, to be approved in full or in principle by TB.
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Same as OTPs
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7.11.3 and 7.12
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- Recovery of overpayment clause; and
- an interest clause
in the agreement
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Yes
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No; however, amounts that are paid after expiry of eligibility or paid
based on fraudulent or inaccurate application or in error are subject to
recovery action.
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8.6
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Apply official languages policy
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No
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Yes, if a grant is provided to non-governmental organizations serving
members of both official languages
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*The OAG defines a capital project as a project intended to acquire or
improve a capital asset and the acquisition can be done through construction,
purchase or lease. Capital assets (under TB Accounting Standard 3.1 - Capital
Assets) are those initially costing $10,000 or more.
Note that while there are many other policy requirements that apply
to these types of transfer payments, they do not necessarily need to be
addressed in a TB submission unless an exemption is being requested.
Departments should refer to the document, A Guide to Preparing Treasury
Board Submissions, when preparing a TB submission.
The Guide provides a broad overview of the TB submission and examples of
different types of submissions, including those related to transfer payments. It
can be found on the TBS Publiservice site at http://publiservice.tbs-sct.gc.ca/Pubs_pol/opepubs/TBM_162/gptbs-gppct_e.html.
4.6.1 Factors that influence the choice of transfer payment
Legal - legislation, regulations and policy
- Authority-Departments must have the authority to undertake certain
activities. Legislation passed by Parliament determines the authority given
to departments to carry out their programs and activities. This may be
through departmental Acts or through specific legislation that permits the
establishment of a particular program to meet a specific need. In addition,
Cabinet often provides general direction for an initiative or program.
- Accountability-Grant recipients are not held accountable for the use of
funds received. However, they must establish continuing eligibility to keep
receiving scheduled instalments. Contributions, on the other hand, require
recipients to account for how they used the funds.
- Flexibility desired-Parliamentary control usually restricts grants more
than contributions. Grant programs cannot be increased or redirected without
the authority of Parliament. Treasury Board may authorize new contributions
and changes in the amount paid without obtaining further parliamentary
approval, within the purpose, dollar limits and restrictions prescribed by
Parliament.
- Policy requirements
- Departments must choose repayable contributions as the funding
instrument if transfers are made to a business to generate profits or to
increase its value. Exemptions may be sought where the benefits accrue
systemically.
- Where funding is intended to assist a recipients capital project,
departments must use contributions to assist a recipient's capital
project. Grants cannot be used.
Financial and economic
- Risk management-Choosing between a grant or a contribution depends upon
the identification of potential perils, factors and types of risks to which
departmental assets, program activities and interests are exposed. On a
continuum, as risk increases, the more likely a contribution will be
appropriate. Contributions allow departments to exert greater control over
the use of transfer payments.
- Risks other than financial risk must also be considered. Departments must
consider whether there may be an impact on the national interest. For
example, is there a realistic opportunity for the loss of reputation,
nationally or internationally, if the transfer payment objectives are not
met? Perhaps a transfer payment (non-repayable contribution under $100,000)
given to numerous companies in an industry to increase their competitive
advantage internationally could inadvertently attract countervailing action.
In such a case, a repayable contribution would be more appropriate to
achieve that objective.
- Cost effectiveness-To determine the most cost-effective means to achieve
program objectives, departments must consider the additional cost of
administering contributions over grants.
Social and other
- Social considerations may also play a part in the choice of instrument. In
a regional or national emergency such as the Red River flood, it may be
imperative to expedite the relief effort. In such situations, maximum
flexibility may be appropriate to meet the flood victims' needs.
Centralization versus decentralization
Factors to consider:
- Degree of control needed-If consistency of treatment is important to the
program, such as identifying eligible projects, then centralized
decision-making may be appropriate. For example, it may be important that
financial assistance is only provided to companies across Canada that are
not in a domestically competitive situation. It would be more difficult,
although certainly possible, to maintain consistency in a decentralized
structure.
- Nature of beneficiaries-It may be beneficial to differentiate among a
program's potential beneficiaries so that program management can be
centralized and/or decentralized. For example, consider transfer payments
targeted at both large and small and medium-sized enterprises (SMEs), where
larger firms are more likely to request larger contributions. To maximize
control and minimize risk, a centralized delivery scheme may be appropriate
for large companies that would generally request larger contributions and a
decentralized delivery scheme may be appropriate for SMEs.
- Dispersion-The expertise and resources available to manage a program and
the location of potential beneficiaries are important factors in assessing
if a centralized or decentralized delivery organization is needed. If the
resources and expertise are located regionally and the target group is also
located in the region, notwithstanding other issues, a decentralized
approach is an obvious choice. On the other hand, if technical expertise is
located centrally but program officers are located regionally, electronic
communication may allow for decentralization.
- Administrative costs-Costs associated with administrative activities, such
as travel, mail, office maintenance, must also be factored in.
- Critical circumstances-In some cases, such as a natural disaster, it will
be necessary to centralize operations because of an urgent need to act
quickly. Centralizing or decentralizing decision making and delivery may not
even be a question in such a case.
Direct delivery versus third party delivery
Factors to consider:
- Expertise-Does the department have personnel with the knowledge and skill
sets to deliver the program and apply due diligence in selecting applicants,
monitoring, collections and so on? In some cases, skills found within other
departments to undertake activities such as technical assessments or
financial analysis can be shared to bolster program management. In other
cases, it is more effective to seek third party expertise.
- Program duration-A department may not have the personnel to deliver a
program and there may not be time to hire and train people within a
reasonable time period. Implementation time and competitive contracting
requirements should be factored into the duration.
- Cost-This factor must be considered when there is a material difference
between direct or third party delivery.
- Sensitivities-There may be a number of situations that may be important to
the national interest or to potential beneficiaries that ought to be
considered.
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For example if it was important for a particular department or program
to have a federal presence to meet a program's objectives then direct
delivery may be preferable. For instance in promoting an important
initiative it may be important that federal presence be visible.
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- Target group needs and expectations-A program may be more effective if it
is delivered through a sub-agreement because of its nature. For example,
community-based programming across a region may depend on a close
relationship between the target group and the delivery agent. If personal
knowledge of potential beneficiaries is important to provide assistance,
then direct delivery may not be as effective as a local delivery through a
sub-agreement.
- Dispersion-If the target group is highly dispersed and the department does
not have personnel close by, then consider a sub-agreement delivery
arrangement.
4.6.3 Due diligence in managing and administering transfer programs
The transfer payment policy states that submissions for program approval of
terms and conditions, for grants to a class of recipients or for contributions,
should include "assurance that departmental systems, procedures and
resources for ensuring due diligence in approving transfer payments and
verifying eligibility and entitlement and for the management and administration
of the program are in place."
This paragraph stresses that due diligence in managing and administering
transfer programs is just as important as obtaining the expected results.
Due diligence in managing and administering a transfer program is supported
by having the proper systems, procedures, resources and controls in place. These
elements are often integrated into a management and control framework.
Whether in a framework or developed separately, transfer programs should have
in place the systems, procedures, resources and controls to ensure and promote:
- compliance to applicable legislation, policies and procedures;
- efficiency, effectiveness and economy in the use of resources; and
- financial integrity.
More specifically, the transfer program should include the following
components:
- A clear identification of legislation and policies that must be complied
with, of procedures that should be followed, of the level of quality,
operational efficiency and economy that is required in administering the
transfer program and the expected effectiveness in its delivery;
- A set of operational indicators covering the above;
- Internal controls to achieve administrative compliance and quality
objectives, operational efficiency and economy objectives and program
effectiveness objectives;
- A reporting process that provides program managers with timely, reliable
and complete information on the above.
Operational indicators
Compliance indicators show whether mandatory legislative and procedural
requirements are complied with. Quality indicators reflect the degree to which
operational and administrative quality standards are met.
Operational efficiency indicators measure the ratio between the cost of the
resources put into an operation and the value of its output. Economy indicators
indicate whether the most economical solution was chosen, when appropriate.
Effectiveness indicators tell whether or not a given process produces the
expected operational output.
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Examples of indicators
Compliance: Claims for reimbursement are approved by
an authorized officer.
Quality: Rationale for project approval is well
documented.
Performance (effectiveness): Significant agreement
problems are detected during monitoring visits.
Performance (efficiency): Unnecessary administrative
steps have all been removed.
Performance (economy): Conference calls are used by
program officers whenever possible to avoid costly travel.
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Several management and control frameworks exist and can be used directly or
adapted to meet the needs of departments or agencies that have not yet
adopted one.
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Best Practices Annex - Western Economique Diversification (WD) has
developed a comprehensive tool (Quality Assurance Review-G & C
Project File Management Tools) to assist with ensuring due diligence
in managing and administering grants and contributions.
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4.6.4 Stacking and stacking limit
A stacking limit is the cumulative total of all government assistance as a
percentage of eligible costs. Total government assistance (TGA) is the total of
federal, provincial and municipal assistance. Eligible costs are those described
in the program terms and conditions. The stacking limit can be expressed as:
Total Government Assistance is ___% of eligible program costs. Anything over the
TGA (stacking) limit will be subject to recovery.
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Appendix A of the TP policy describes various forms of
government assistance such as forgivable loans implicit subsidies and loan
guarantees.
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The stacking policy reflects that the federal government must determine the
appropriate level of total government support for specific projects or
initiatives. The guiding principle that departments must follow is
"...transfer payment assistance is provided for projects only at the
minimum level to further the attainment of the stated transfer payment program
objectives and expected results" (paragraph 7.5.1 (i) of the Transfer
Payment Policy). Providing assistance at the minimum level allows departments
with limited resources to fund a greater number of worthwhile projects.
What is the right financial assistance level that should be provided to a
recipient? Theoretically, it should only be large enough to interest a party to
undertake the project or initiative and to meet the program objectives. However,
total government assistance should never exceed 100%.
In attempting to arrive at a minimum level, departments should consider a
number of variables that may include:
- Status of project/initiative: Is this discretionary spending or a
statutory obligation?
- Available resources: What financial or non-financial assets can potential
recipients, such as individuals, profit and not-for-profit organizations,
call on to fund a portion of the project?
- Nature of activities and costs: Certain types of eligible costs may
warrant support at different levels depending on the benefits that may
accrue to recipients. For example, assets, if retained by a recipient, may
be supported at a lower level because it may have a useful life beyond the
project and may be used as collateral to help finance the project.
- Risk: What is the risk that the project may not succeed? Programs that
encourage recipients to take on greater risk (e.g., develop markets in a
third world country versus the U.S.) may justify a higher level of
government assistance.
Even though a department establishes a maximum stacking limit(s) in the
program terms and conditions, it may not necessarily wish to participate at that
level. For instance, where a potential recipient can finance equipment
acquisition at a higher level than a second potential recipient, program
managers may choose to provide a lower level of support in the former case.
Furthermore, a department may establish a "norm" below the stacking
limit. Recipients or beneficiaries may seek assistance from other departments or
other levels of governments to "top-up" the contribution. This allows
departments with limited resources to support a greater number of projects.
Nevertheless, departments should reserve the right to provide support beyond
the norm, up to the maximum stacking level determined for the program, for
situations where a project is worthy of funding but there are no other
government funds available, and the recipient or beneficiary cannot contribute
additional resources. Therefore, departments may wish to indicate in their
program terms and conditions that while they normally contribute at a particular
level, the maximum departmental assistance that can be provided will equal the
stacking limit.
A hypothetical example of norms and stacking limits
|
Activity
|
Departmental Norm
|
Other Government Assistance
|
Stacking Limit
|
|
Social program
(e.g., core funding)
|
90%
|
10%
|
100%
|
|
Social program
(e.g., training)
|
75%
|
15%
|
90%
|
|
Economic program
(e.g., R & D)
|
50%
|
25%
|
75%
|
For a class contribution program (e.g., economic program above), a department
might contribute 50% of eligible project costs. However, the department may want
to define that total government assistance (the stacking limit) does not exceed
75% of eligible costs, so as to:
- allow the recipient to get some additional assistance from other federal
departments or other levels of government and
- ensure that the recipient contributes at least 25% of the eligible costs.
The department must ensure that the recipient provides ongoing financial
information so as to determine if the stacking limit was exceeded. For any
assistance over the stacking limits, the department must define and collect the
overpayments.
Wording for stacking of government assistance for program terms and
conditions
"The maximum level (stacking limit) of Total Government Assistance
(federal, provincial and municipal assistance for the same eligible
expenditures) for this program will not exceed _____% of eligible expenditures.
*
This stacking limit(s) must be respected when assistance is provided.
In the event that actual Total Government Assistance to a recipient
exceeds the stacking limit, it will be necessary for the department to adjust
its level of assistance (and seek reimbursement, if necessary) so that the
stacking limit is not exceeded.
The Program will require all potential recipients to disclose all sources
of funding for a proposed project before the start and at the end of a project.
"
|
Including the following clause is optional and incremental to the
wording above: "The normal or targeted level of assistance by the
department for the program is ______% of eligible expenditures.*"
|
* NOTE: The first paragraph and the optional clause above will
require modification when departments have established separate stacking levels
for different costs and activities.
Refer to the example below for an illustration of stacking and adjustments to
program assistance when the stacking limit is exceeded.
Project stacking scenario
Example: Assume that a department has signed an agreement under a
TP program.
|
Sources of all funds (gov't and non-gov't): $1,000
|
(1)
Other Government Sources
|
(2)
Department's share
|
(3)
(1 + 2)
Stacking
|
(4)
Recipient's share
|
|
As approved in a written agreement
|
15%
($150)
|
75%
($750)
|
90%
($900)
|
10%
($100)
|
|
Actual, as determined during the project or after its completion
|
25%
($250)
|
75%
($750)
|
100 %
($1000)
|
0%
($0)
|
|
Remedy #1:
Adjust by reducing department's share
|
25%
($250)
|
65%
($650)
|
90%
($900)
|
10%
($100)
|
|
Remedy #2:
Adjust by pro-rating between the two government sources
|
23.3%
($233)
|
66.7%
($667)
|
90%
($900)
|
10%
($100)
|
Remedy #1: This scenario assumes that the unanticipated additional assistance
(Other Government Funding) of $100 is not returned or required to be returned,
in whole or in part, to the original funding department of those funds.
Remedy #2: Pro-ration of funds will vary with the number of organizations
providing assistance and the nature of the funds provided (e.g., entitlement in
some cases and subject to recovery in other cases). The example above assumes
one source of "other" government funds. (For example, one method of
calculation: Department - 75% ¸ 90% @ $100 = $83; then $750 - $83 = $667 or
66.7%; other gov't - 15% ¸ 90% @ $100 = $17; then $250 - $17 = $233 or 23.3%).
Other valid methods of pro-ration can be used.
4.6.5 Duration of terms and conditions-multi-year agreements and payments
For any active transfer payment program, there must always be a corresponding
set of terms and conditions (Ts & Cs) that are in force when the program's
respective business events take place. For multi-year contribution agreements
with end dates beyond the current Ts & Cs, the department should make every
effort to ensure that Treasury Board approves new Ts & Cs prior to
the end date of current Ts & Cs.
A minister may determine the duration of a multi-year contribution agreement
but must respect any specific direction provided either by Cabinet or Treasury
Board.
If a minister chooses to enter into multi-year contribution agreements, the
minister must have Cabinet agreement as to the program's ongoing nature and
expect that Treasury Board will extend the program and approve the respective
new Ts & Cs. In these situations, the department assumes an element
of risk. Risk relates to uncertainty that the program will be extended and that
there will be no change to the Ts & Cs. To mitigate this risk, any such
agreements must allow for termination without cause so as to
comply with subsequent Treasury Board decisions. The termination clause
must be distinctly separate from the "subject to parliamentary
appropriation" clause. In addition, a department must carefully
plan its Ts & Cs renewal.
Regarding payables at year end (PAYE), a contribution expense is recorded and
charged to an appropriation in the old year when, as at March 31, the payment is
due and owing pursuant to the contribution agreement. If a payment is due and
owing and a PAYE is set up during the Ts & Cs' duration,
the payment accordingly made in a future fiscal year is then authorized under
the Ts & Cs.
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