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Guide on Grants, Contributions and Other Transfer Payments


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11 Policy requirements - Annotations

This section deals with policy requirements or specific elements of a policy requirement that requires further elaboration or correction. This section does not discuss all policy requirements since the majority of them are straightforward and do not need annotation.

11.1 Eligibility of Crown corporations-paragraph 7.2.2 of the TP policy

In part, this paragraph reads "Where a department is considering a grant or a contribution to a Crown corporation listed in Section 85 and Part I of Schedule III to the Financial Administration Act, it must consult with the Treasury Board Secretariat to determine whether specific Treasury Board approval is required."

The conjunction "and" should read "or" as there are no corporations mentioned in section 85 of the FAA that are listed in Part 1 of Schedule III.

11.2 Approving terms and conditions-paragraph 7.3.7 of the TP policy

In part, this paragraph states that "departments must assess, 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."

This requirement, although not new, is mandatory and should be noted by departments. The onus falls on departments to show that lessons learned from sound program evaluation have been taken into consideration.

Where there are extenuating circumstances, departments may seek an exemption from TB to defer the requirement. However, because this obligation is fundamental to achieving expected results and outcomes and creating appropriate controls, any deferral runs counter to good program design.

11.3 Cash management policy-sub-section 7.6 of the TP policy

11.3.1 Advances on small contributions

Can an advance payment be made for a contribution's full amount when that value is small?

A contribution's key attribute is that normally, payment is in the form of a reimbursement of prescribed costs (i.e., only eligible expenditures agreed to are reimbursed). Since advances should be given on an exceptional basis, a holdback provision will:

  • minimize the risk associated with the recipient not using the money for the purpose contributed; and
      
  • act as an incentive for the recipient to fully account for all expenditures incurred, resulting in a reduction in departmental workload.

If officials managing transfer payment programs feel that an exemption to the hold-back provision is warranted, they must seek a special exemption within their transfer payment program terms and conditions at the time their approval or renewal is sought from Treasury Board.

11.3.2 Instalments of grants and advance payments of contributions-sub-section 7.6 of the TP policy

  • Clause 7.6.4 states that departments must be "guided" by the provisions of Appendix B regarding instalment and advance payments. The interpretation of "guided" is that departments must follow the schedule.
      
  • Clause 7.6.1 states that transfer payments "should" not be paid to recipients in advance of need. This clause should instead be read as "transfer payments must not be paid."
      
  • In clauses 7.6.1 and 7.6.3, reference is made to departments timing advance payments to a recipient's cash flow requirement. A cash flow forecast, whether obtained at the time of application for short projects or received monthly for longer-term projects, is required for issuing an advance.
      
  • Appendix B states that:
  • "advance payments...should...not exceed the following payment frequency." (This sentence refers to the schedule in the appendix). The term "not exceeds" may be interpreted by departments as being acceptable to advance payments less frequently; that is, instead of making monthly payments, a department could make quarterly payments. This is not a correct interpretation. Advances made quarterly cost the Crown more in interest charges than if monthly advances are made and accounted for. The phrase "not exceed the following payment frequency" should be interpreted as "not less frequently than the following payment frequency."
      
  • "for (contributions) agreements of less than 4 months, the schedule represents the maximum percentage that may be paid out initially." This phrase may cause confusion. The sentence should be read as "can or shall be paid out" and does not provide any discretion as to whether or not the schedule should be followed.

11.4 Intellectual property (IP)-sub-section 7.10 of the TP policy

The policy states that "where appropriate, the potential for sharing in intellectual property rights should be defined in the program terms and conditions."

Departments should be aware of the potential risk in acquiring IP through transfer payments. It may result in transforming a contribution agreement into a procurement contract or a licence agreement that is subject to the Government Contracts Regulations and trade agreements. For example, licensing issues can arise in situations where departments stipulate, in transfer agreements, that they can use the IP developed by the recipient for their own purposes.

To ensure that agreements remain transfer payment agreements, rather than becoming procurement contracts or licence agreements, departments should seek legal advice when IP is acquired or covered in transfer agreements.

11.5 Departmental representation on advisory committees and boards-paragraph 7.11.4 of the TP policy

Exercise caution when departmental or government officials participate on advisory committees or boards of directors.

Transfer payment recipients must remain independent of any control exercised by government officials. (For example, control may be exercised even in the absence of government participation on committees and boards. Departments should seek legal advice to ensure that a partnership relationships with recipients are not set up, implicitly or explicitly, in the agreements.) Involvement of departmental or government officials on advisory committees or boards of directors must not result in them exercising control, or be seen to be exercising control. Undue influence or control over advisory committees or boards of directors may result in financial or legal liabilities on the part of the Crown.

When participating on such advisory committees or boards of directors, departments should contact their legal personnel when potential control issues exist.

11.6 Official languages-Sub-section 8.6 of the TP policy

Departments should be aware of the contents of the official languages policy entitled "Grants and Contributions."



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