1. Introduction

The Ontario Government provides transfer payments to recipients external to government to fund activities that benefit the public and are designed to achieve public policy objectives.

Transfer payments are provided to individuals (e.g., recipients of disability support payments), external organizations (e.g., public hospitals, not-for-profit corporations), or to other governments (e.g., municipalities, First Nations). Ministries and provincial agencies are accountable for transfer payments that they administer and must exercise appropriate oversight of transfer payment activities.

The Transfer Payment Accountability Directive (Directive) sets out the administrative accountability framework for the oversight of transfer payment activities.

In addition to this Directive, transfer payment oversight and accountability is also supported by:

• Financial management policies – direction and requirements for accounting, business finance and control/assurance of transfer payments.
• Guidance – best practices recommended for effective administrative oversight.

The Secretary of Management Board of Cabinet (MBC) may also issue mandatory operational policies consistent with this Directive.

This Directive is issued under subsection 3 (3) of the Management Board of Cabinet Act.

2. Purpose

This Directive establishes the principles, requirements and responsibilities for ministries and provincial agencies when overseeing transfer payment activities.

3. Application and scope

This Directive applies to:

• ministries; and
• provincial agencies that have a mandate to provide transfer payments.

Unless otherwise stated, for the purpose of this Directive, the term “ministry” includes both ministries and provincial agencies.

Transfer payments are transfers of money from ministries to an individual, external organization or government for which the Ontario government does not:

• receive goods or services directly in return, as would occur in a purchase or sales transaction;
• expect to be repaid in the future, as would be expected in a loan; or
• expect a direct financial return, as would be expected in an investment.

Ministries are responsible for determining which activities will be funded through transfer payments and for obtaining the appropriate approvals to implement the activity. This Directive applies to the oversight of all activities funded through transfer payments after the ministry has obtained these approvals.

Ministries must comply with all relevant corporate directives and policies relating to the oversight of transfer payment activities. This includes practicing sound accounting, recording, financial management and reporting consistent with the OPS Financial Management Framework, policies and guidelines issued by Office of the Provincial Controller Division.

Ministries must follow good record-keeping practices throughout the transfer payment activity, including maintaining documentation for verification and audit purposes.

Out-of-Scope

This section provides clarity on certain transactions and situations that are not covered by the Transfer Payment Accountability Directive.

This Directive does not address:

• The transfer of funds between a ministry and a provincial agency. For clarity, when a ministry flows funding to a provincial agency, a transfer payment agreement is not needed or appropriate.

  The accountability and oversight relationship between a provincial agency and their responsible ministry regardless of how the operations of the provincial agency are funded. This relationship is set out in the Agencies and Appointments Directive.

• Requirements for expenditure approvals. Policies related to accounting, business finance and control/assurance are found in financial management policies.
• The transfer of tangible capital assets. Transfer payments are defined as transfers of money.
• The accountability and oversight relationship between a provincial agency and their responsible ministry regardless of how the operations of the provincial agency are funded. This relationship is set out in the Agencies and Appointments Directive.
• Requirements related to procurement. Transfer payments are separate and distinct from procurements.

4. Principles

The following principles support the requirements of this Directive and are intended to guide ministries in interpreting and applying the Directive.

1. Accountability – Ministries are accountable for protecting the public interest. Ministries hold recipients responsible for delivering the activities for which the funds were received.
2. Value for money – Ministries are efficient and effective in using public resources for transfer payments.
3. Risk-based approach – Transfer payment oversight is in proportion to any risks associated with the activity and the recipient.
4. Fairness, integrity and transparency – The decision to provide transfer payments and the oversight of transfer payment activities is fair, impartial and transparent and conforms to applicable legislation and corporate policy direction.
5. Focus on outcomes – Transfer payment activities are clearly defined and contribute to the achievement of public policy objectives.
6. Common processes – Ministries use common processes, tools and templates as appropriate to create administrative efficiencies and support consistency in the oversight of transfer payments.
7. Information sharing – Relevant and appropriate information and data are collected, managed and shared across the Ontario government.
8. Communication – There is respectful, open and ongoing communication between ministries and transfer payment recipients.

5. Administration

The Secretary of Management Board of Cabinet has the authority to issue mandatory operational policies consistent with this Directive.

A ministry must seek Treasury Board/Management Board of Cabinet (TB/MBC) approval if, in exceptional circumstances, the ministry requires an exemption from all or part of this Directive. The ministry must set out the rationale for the exemption in a business case.

6. Categories

There are three categories of transfer payment activities:

1. Time-limited payments
2. Ongoing payments
3. Support payments

A transfer payment activity can belong to only one category. Ministries must consider both the type of transfer payment activity and the potential recipient when making determinations about appropriate oversight of the transfer payment. Key characteristics of the categories of transfer payment activities are set out below.

Ministries must clearly identify and document:

• how the success of the activity will be evaluated; and
• how the outputs and/or outcomes of each transfer payment activity, if any, are to support the achievement of the associated public policy objective(s).

7. Risk-based approach

Ministries must use a risk-based approach for the oversight of transfer payment activities and recipients. This is consistent with  the Enterprise Risk Management Directive.

Ministries must periodically complete and document risk assessments and prepare risk management plans which address and manage any identified risks. The Transfer Payment Oversight Risk Management Guidance – Transfer Payment Accountability Directive (TPAD) document provides information on how to conduct and document risk assessments and management plans.

Risk assessments must be conducted for both the transfer payment activity and the recipient as follows:

Risk assessments

See Section 8.0, Part I, Additional Requirements for Time-limited and Ongoing Payments for more information on recipient risk assessments.

Activity risk assessment

At minimum, ministries must consider the following risk factors for all activity risk assessments:

• Nature of activity – including public profile/perception of the activity; type of clientele benefitting from the activity
• Funding amount – amount of funding the recipient receives for the activity

Proportionality

The results of the risk assessments will inform a proportional approach to the oversight of transfer payment activities and recipients. Ministry oversight approaches may affect the operating costs and operational efficiency of transfer payment recipients. Proportionality allows ministries to tailor their oversight approaches, including the level of monitoring and reporting reflected in the agreements, based on the risks assessed. Ministries must exercise greater oversight for activities and recipients deemed to be higher risk and implement reporting requirements that reduce administrative burden for activities and recipients deemed to be lower risk.

8. Requirements

The section on requirements is divided into three parts:

• Part I - Recipient assessment
• Part II - Agreements
• Part III - Oversight
• Part IV – Transfer Payment Ontario (TPON) use

Unless otherwise stated, the requirements are applicable to all categories of transfer payments.

Part I – Recipient assessment

Ministries must keep appropriate documentation to show:

• that potential recipients are individuals or entities that are legally capable of contracting (e.g., a corporation);
• that potential recipients meet established eligibility criteria; and
• the rationale for funding decisions (see funding rationale tip sheet).

Recipients must be eligible to receive funding, as established through legislation/regulation or through policy or program guidelines as appropriate.

Before funds are provided, ministries must make potential recipients aware of the requirements and expectations for the transfer payment activity including:

• desired output(s) and/or outcome(s) of the activity;
• eligibility criteria for receipt of funds and for continued provision of funds, including required documentation for proof of eligibility;
• general terms and conditions the recipient must meet after funds are received; and
• whether the recipient is required to register with TPON and, as part of the registration process, to provide a valid Canada Revenue Agency (CRA) business number ^{footnote 1[1]};

TPON provides ministries with access to information about registered TP recipients, eliminating the need for ministries to contact recipients for information that has already been provided through the system.

Additional requirements for time-limited and ongoing payments

Before funds are provided, ministries must make potential recipients aware of expectations for how recipients will demonstrate, through performance measurement, their progress toward achieving the outputs and/or outcomes of the activity. Such expectations must ultimately be reflected in the agreement.

Recipient risk assessment

At minimum, ministries must consider the following risk factors in their recipient assessments:

• Recipient capacity – governance structure (legislated, non-legislated), control structures (e.g., rules, guidelines, procedures, protocols, etc. that direct the work and processes of an organization), recent changes to governance or control structures.
• Recipient history – previous/current funding received from the Ontario government (including other ministries); known past performance on transfer payment activities (e.g., were the outputs/outcomes achieved); etc. Information on recipient history is available in the Transfer Payment Recipient Financial Insight Report and TPON.
• Public perception – how the potential recipient is viewed by the public and media.

The results of the recipient risk assessments will inform a proportional approach to the transfer payment oversight. See Section 7.0, Risk-Based Approach for more information on the concept of proportionality.

Additional requirements for support payments

Ministries must select recipients solely on whether they meet eligibility criteria and in cases of non-legislated support payments, the amount of funding available to provide.

Before funds are provided, ministries must make potential recipients aware of the requirements of the transfer payment activity including:

• eligibility criteria and associated documentation/proof of eligibility requirements;
• requirements after receipt of funds; and
• requirements for continuing to receive funds (as appropriate).

Part II – Agreements

Agreements are required for the management and oversight of all transfer payment activities. Ministries must have a signed agreement in place with a recipient before a transfer payment is provided.

Additional requirements for time-limited and ongoing payments

Transfer payment agreement templates are available for ministries to use as appropriate. Where appropriate, it is recommended that ministries use an agreement template in order to promote consistency across ministries and reduce administrative burden for ministries and transfer payment recipients. Where no appropriate agreement template exists, ministries must ensure agreements comply with the minimum requirements outlined in this section (see Transfer Payment Agreements Tip Sheet).

Agreements must identify the rights, responsibilities and obligations for both the recipient and the accountable ministry.

To ensure that agreements are developed and managed appropriately, ministries must:

• update agreements as appropriate;
• engage legal counsel when drafting agreements and when considering any updates or amendments; and
• follow a consistent, documented approvals process for finalizing, executing and amending agreements.

Agreements must include provisions that reflect the desired outputs and/or outcomes of the transfer payment activity and terms and conditions specific to the activity. These provisions will be informed by the results of risk assessments and must include at minimum:

• performance measures clearly related to the outputs and/or outcomes of the activity; and
• reporting requirements;
• term of the agreement; and
• right to audit and record keeping.

Reporting

Reporting by recipients is a critical tool used by ministries to assess progress toward meeting public policy objectives. Reporting requirements identified in the agreement must:

• be in proportion to the risks assessed by the ministry;
• be as clear and straightforward as possible, setting out the types of reports and reporting timelines;
• be streamlined so that only useful and relevant information is collected;
• require recipients to report, using performance measures, on progress towards achieving the intended output(s) and/or outcome(s) of the activity; and
• consider any other reporting obligations of the recipient (e.g., legislative).

Recipients can only report on how they performed with respect to the outputs and/or outcomes set out in the agreement. Ministries cannot require recipients to report on progress toward achieving public policy objectives.

Unless otherwise stated in the agreement, recipients may engage another organization(s) to contribute to the delivery of the activity. In such cases, the ministry is still accountable for the use of the funds and the recipient is still responsible for the funds received.

Term of the agreement

The term of the agreement establishes when the agreement will begin and end.

Ministries must include the term of the agreement within all new agreements.

New multi-year agreements can have terms of up to five years in length after which, they can be renewed if appropriate.

Ministries must also include termination rights in new agreements allowing them to be terminated if there is a change in government priorities.

Right to audit and record keeping

This section provides direction that requires that all transfer payment agreements contain terms and conditions that establish and support the Ontario government’s right to audit.

Ministries must ensure that each agreement includes terms and conditions that provide the Ontario government with the right to audit the recipient with respect to the transfer payment.

This requirement is satisfied in the following situations:

1. The ministry uses the standard Transfer Payment Agreement Template, which contains terms and conditions that establish a right to audit and record keeping requirements.
2. The ministry uses the right to audit clause and record keeping requirements from the standard Transfer Payment Agreement Template in a transfer payment agreement.
3. In consultation with legal counsel, the ministry develops an appropriate right to audit clause and record keeping requirements that provide the Ontario government with the right to audit the recipient with respect to the transfer payment.
4. If there is statutory authority that sets out the right to audit, a right to audit clause may be omitted from an agreement in consultation with legal counsel.

Additional requirements for support payments

Agreements for support payments can consist of various documents exchanged between the parties, such as an application form and/or a letter approving the funding.

Ministries must include, at minimum, the following components in the agreement:

• purpose and amount of the funds; and
• requirements associated with the receipt of funding, including any reporting requirements.

Agreements for support payments do not include performance measures.

Part III – Oversight

Ministries must monitor recipients throughout the term of the agreement to ensure they are meeting the obligations, responsibilities and terms and conditions associated with the activity, as set out in the agreement.

Monitoring is enhanced through respectful, open and ongoing communication with the recipient. Ministries are expected to maintain an effective working relationship with a recipient.

Additional requirements for time-limited and ongoing payments

The reports that ministries require recipients to submit are essential to effective ministry oversight of transfer payment activities. Ministries must review these reports to assess a recipient’s progress toward implementing performance measures and achieving the intended outputs and/or outcomes of the activity. Ministries must document the receipt and review of the reports submitted by recipients.

Situations may arise through the course of monitoring where corrective action is required. Corrective action refers to the steps taken to remedy non-compliance with a transfer payment agreement. Corrective action supports recipients in delivering on desired outputs and/or outcomes, and meeting the terms and conditions established by the agreement.

If a ministry initiates corrective action, it must be progressive in nature and in proportion to the risk associated with the degree of non-compliance. The degree of corrective action should only be increased if the recipient’s non-compliance continues. It is important that ministries document all actions, and provide timely and clear communication to recipients relating to potential corrective actions.

Before engaging in more severe corrective actions (e.g., revising or terminating an agreement, reclaiming funds from a recipient), ministries must consult with legal counsel.

Additional requirements for support payments

Ministries may set out information that recipients must submit to the ministry. However, recipients of support payments are not required to report on performance. Ministries must have appropriate control processes in place to address any non-compliance with the agreement, and/or in the case where a recipient becomes ineligible to receive funds.

To ensure open and timely communication, ministries must notify and provide direction to recipients on any corrective action that will be taken as a result of non-compliance, and timelines associated with such action. It is important that ministries document all actions.

Part IV – Transfer Payment Ontario (TPON) use

TPON system is the enterprise system for managing time-limited and ongoing transfer payments. TPON is an online case-management system that helps ministries manage the lifecycle of transfer payment programs. TPON is also integrated with the Integrated Financial Information System (IFIS).

TPON includes a central repository of recipient information. Ministries use this information to support their transfer payment management and oversight activities.

The Ministry of Public and Business Service Delivery manages the TPON system. For more information on TPON, refer to Transfer Payment Ontario on InsideOPS.

This section of the Directive applies to:

• ministries and provincial agencies as noted. For clarity, for this section, the term ‘ministry’ means ministry only
• time-limited and ongoing transfer payments only

Registration

Ministries must inform recipients that are applying for transfer payment funding, or that will be receiving transfer payment funding, that registering and validating their organizational information in TPON is mandatory.

Ministries must ensure a recipient’s registration has been completed in TPON before entering into an agreement, renewing, or amending an existing agreement.

Ministries must use the data from TPON as the authoritative source for recipient organizational information. This means that ministries must first check TPON to verify if the information is available and up-to-date before requesting it directly from the recipient.

Onboarding

Ministries must use TPON to administer all time-limited and ongoing transfer payments.

Ministries must commit to and provide details of their plan to use TPON when requesting approval for any new transfer payments or transfer payment funding from TB/MBC.

Module use

Ministries must use TPON’s contracting, report back, and payment modules. Use of modules means:

• Contracting module: option to either use the module end-to-end, attach an existing contract generated outside of the system, or use e-consent to secure approvals.
• Report back module: option to either use the module end-to-end (i.e. using a dynamic report back form to collect report back information in TPON), or to have an existing report generated outside of TPON attached to the module.
• Payment module: use the module end-to-end.

Data extracts

Having all transfer payment information reside in TPON supports appropriate oversight and decision-making.
Annual data extracts are required when:

• a provincial agency is administering a transfer payment.
• a ministry is not using the contracting, report back and payment modules end-to-end (see Module use above); and
• in exceptional circumstances, a ministry receives approval from TB/MBC to be exempt from the requirement to use TPON to administer a transfer payment;

9. Responsibilities

Employees overseeing transfer payment activities are responsible for:

• following the principles and requirements set out in this Directive; and
• managing information and data in an open and efficient manner that allows access and sharing across the Ontario government.

Managers are responsible for:

• carrying out any delegated authorities and assigned tasks in accordance with this Directive;
• making staff aware of and complying with the principles and requirements of this Directive and all other relevant directives and policies;
• ensuring that staff have sufficient training and skills required to properly oversee transfer payment activities;
• seeking timely direction when there are questions of application of this Directive; and
• taking timely appropriate action in the case of non-compliance.

Chief Administrative Officers are responsible for:

• carrying out any delegated authorities and assigned tasks in accordance with this Directive;
• working with Assistant Deputy Ministers to ensure compliance with this Directive, as well as all other relevant directives and policies, including financial direction;
• ensuring appropriate use of common processes, tools, and procedures to support administrative efficiency; and
• ensuring the application of risk based approaches.

Ministry of Public and Business Service Delivery is responsible for:

• requesting data related to the TPON, including required data extracts.

Deputy Ministers / Chief Executive Officers of a Provincial Agency are responsible for:

• delegating authority to appropriate levels within the ministry or provincial agency;
• ensuring that the principles and requirements contained in this Directive are implemented and adhered to within the ministry;
• recommending to TB/MBC changes to or termination of an existing ministry program that uses transfer payments as a means to achieve a public policy objective;
• ensuring that relevant and appropriate data and information are maintained and are available for sharing across the Ontario government; and
• ensuring that the ministry or provincial agency has the capacity to oversee transfer payment activities.

Secretary of Management Board of Cabinet is responsible for:

• issuing mandatory operational policies offering detailed direction on oversight of specific types of transfer payment activities and on common business practices; and
• issuing reporting requirements related to any topic within this Directive; and
• ensuring this Directive is reviewed regularly.

Treasury Board/Management Board of Cabinet (TB/MBC) is responsible for:

• granting exemptions from all or part of this Directive.

10. Definitions

For the purpose of this Directive, the identified terms have the following meanings:

Canada Revenue Agency (CRA) business number

The CRA business number is a nine-digit identifier for businesses to simplify their dealings with federal, provincial, and municipal governments in Canada. It aims to give each registered business its own unique number.

Objective

An achievable and realistic expression of a desired result.

Outcomes

The results of an activity or the impacts that it is having in the context of its stated activity objectives.

Outputs

What an activity produces in terms of specific goods, services or products.

Performance Measurement

The process of assessing results (i.e., the degree to which activity objectives are being achieved). Performance measurement involves the systematic collection of data – performance measures – that shows whether stated activity objectives are being met.

Performance Measures

Quantifiable information that provides a reliable basis for directly assessing achievement, change or performance over time. Can include both output measures and outcome measures.

Program

A group of related activities that respond to a specific public need in order to achieve public policy objectives.

Provincial agency

A provincial agency is an entity established under and subject to the Agencies and Appointments Directive. A provincial agency is part of government and accountable to its responsible Minister.

Risk

The effect of uncertainty on objectives. It can be characterized as either a potential negative or positive consequence or event that deviates from an expected output or outcome.

Risk assessment

The method used to determine risk management priorities by evaluating and comparing the level of risk against pre-determined standards, target risk levels or other criteria.

Risk management

A systematic approach to setting the best course of action under uncertainty by identifying, assessing, understanding, action on, monitoring, and communicating risk issues.

Transfer payment

Transfer payments are a mechanism used by the Ontario Government to fund activities that benefit the public and are designed to achieve public policy objectives. Transfer payments are transfers of money to individuals, external organizations or to other governments for which the Ontario government does not:

• receive goods or services directly in return, as would occur in a purchase or sales transaction;
• expect to be repaid in the future, as would be expected in a loan; or
• expect a direct financial return, as would be expected in an investment.

Transfer payment activity

An activity, funded via a transfer payment, that has a clear purpose, supports a ministry program, and is connected to the achievement of a public policy objective.

Transfer payment agreement

A signed document required for the management and oversights of all transfer payment activities, that clearly identifies the rights, responsibilities and obligations for both the recipient and the accountable ministry. Ministries must have a signed agreement in place with a recipient before a transfer payment is provided.

Transfer payment recipient

An individual or entity that is legally capable of contracting (e.g., a corporation) that has received a transfer payment from the Ontario Government.