Transfer Payment Operational Policy

1.0 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. The Transfer Payment Accountability Directive sets the administrative accountability framework for the oversight of these types of transfer payments.

Under the Transfer Payment Accountability Directive, transfer payments are provided to individuals, external organizations, or to other governments.

Transfer payment oversight and accountability is also supported by financial management policies, which provide the direction and requirements for accounting, finance and controllership or/assurance of transfer payments (see Appendix A for more information).

The Transfer Payment Operational Policy (Policy) is established under the authority of the Transfer Payment Accountability Directive, which authorizes the Secretary of Management Board of Cabinet (MBC) to issue operational policies consistent with the Directive.

Where appropriate, sections from the Transfer Payment Accountability Directive are restated in this Policy to provide context and clarity.

2.0 Effective date

This Policy is effective May 1, 2018 and was last revised, November 1, 2023.

3.0 Purpose

The purpose of this Policy is to:

• set out operational requirements and best practices that support effective and proportional oversight of transfer payment activities
• provide a consistent approach across and within ministries
• be sustainable and forward-thinking to support and enable strategic priorities
• support productive relationships with transfer payment recipients.

4.0 Application and scope

This Policy applies to:

• Ministries
• Provincial agencies that have a mandate to provide transfer payments.

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

As set out in the Transfer Payment Accountability Directive, organizations and individuals who receive transfer payments are referred to as “transfer payment recipients”.

For clarity, both the Transfer Payment Accountability Directive and this Policy apply only to the subset of transfer payments that fund activities for a specific purpose - to benefit the public, and to achieve public policy objectives. The Directive and this Policy do not apply to any other types of transfer payments (e.g., transfer payments provided to provincial agencies to support their internal operations).

The Directive sets out three types of payments. This Policy applies to two of these: time-limited payments and ongoing payments. It does not apply to support payments. In addition to the requirements outlined in this Policy, ministries must comply with all relevant corporate directives and policies relating to the oversight of transfer payment activities, including policies and guidelines issued by the Office of the Provincial Controller Division, which are available on the Ontario Public Service Financial Management Gateway.

Where a conflict or inconsistency occurs between any of the requirements outlined in this Policy and those specified in any legislation or regulation pertaining to the administration of a named transfer payment activity and/or its recipients, this Policy is subordinate to those requirements.

5.0 Principles

The Transfer Payment Accountability Directive establishes a set of principles to guide the application of the Directive. Those principles focus on: Accountability; Value for Money; Risk-based Approach; Fairness; Integrity and Transparency; Focus on Outcomes; Common Processes; Information Collection and Sharing; and Communication.

This Policy establishes an additional seven principles to further guide transfer payment relationships and the administration of transfer payment agreements.

Operational policy principles

Guiding principles for creating transfer payment relationships

1. Stewardship: Public resources produce best value where expected outcomes are clearly defined, and programs and organizations are focused on enabling and achieving those outcomes.
2. Reciprocal Respect: A transfer payment is the result of a partnership based on reciprocal respect.
3. Accountability: Parties to a transfer payment agreement must be accountable for addressing expected outcomes. Good administration supports accountability by providing transparency and capacity to deliver.

Guiding principles for administering transfer payments

4. Simple: Processes are streamlined and digitized, definitions and templates are standardized, and language is concise and clear to support clear communication and common understanding. Information is only requested when there is a plan to use it. Activities and programs are consolidated where appropriate.
5. Proportional: Application processes, reporting and other requirements are reasonable and proportional to the value of the funding and risk profile of the funding arrangement.
6. Flexible: Budget flexibility allows transfer payment recipients to adjust and innovate to deliver expected outcomes and meet community needs within appropriate and transparent financial guidelines.
7. Accessibility and Inclusion: Ministries integrate accessibility and inclusion into transfer payment program design, administration, and oversight to help ensure that no barriers are created for Ontarians.

6.0 Requirements and best practices

This Policy sets out requirements and best practices for agreements; proportional oversight; compliance with Statutes; and performance measurement.

Compliance with this Policy’s requirements is mandatory.

The inclusion of best practices in this Policy is intended to profile practices that have demonstrated success and to promote modernization efforts. While compliance with best practices is not mandatory, ministries are strongly encouraged to incorporate best practices into their transfer payment management and oversight activities, where appropriate.

6.1 Agreements

6.1.1 Electronic agreements and signatures

The use of electronic agreements and signatures can improve administrative efficiency and is environmentally sound. This section provides requirements for ministries proceeding with electronic administration of new, renewed, renegotiated or amended transfer payment agreements.

Requirements

1. Ministries must discuss the use of electronic formats for agreements and signatures with their transfer payment recipients. If a recipient agrees to the use of electronic administration for transfer payment agreements:
   • Ministries, must determine the standards, rules and other requirements necessary to manage the risks associated with the use of electronic agreements and signatures.
   • Ministries must provide the transfer payment agreement in an electronic format, and must accept signed transfer payment agreements from the recipient in an electronic format as an authoritative source.
2. When accepting signed transfer payment agreements in an electronic format, ministries must confirm that the content has not been modified in any way and the agreements have been signed by the appropriate signing authority. An example of an acceptable verification process is that the signed agreement must be sent from the signing authority’s email account, or another agreed upon email account.
3. In all cases, ministries must comply with the Accessibility for Ontarians with Disabilities Act, 2005 (AODA) requirements, and respond to requests for accessible agreement formats and communication formats in a timely manner at no extra cost to the recipient.

6.1.2 Amendments and updates to agreements

Agreements may need to be updated from time to time to respond to changing circumstances. This section provides direction on amending existing agreements.

Requirements

1. Ministries must consult with their legal counsel on proposed amendments to transfer payment agreements prior to making any changes.
2. Circumstances in which ministries must update or amend transfer payment agreements include, but are not limited to:
   • Any legislative or regulatory requirements imposed on the transfer payment activity or transfer payment recipient since the agreement was originally signed.
   • The risk of the recipient and/or the risk of the transfer payment activity changes as a result of a risk assessment.
   • Funding and/or service/activity levels change.
   • Change to ministry or government priorities that would affect an existing transfer payment agreement.
3. Ministries must provide the transfer payment recipient with information about any proposed amendments to the agreement. 

Best practice

1. Ministries should notify transfer payment recipients in advance of any proposed amendments to transfer payment agreements. A minimum of 30 days advance notification is recommended.

6.2 Proportional oversight

Oversight approaches, such as reporting requirements, must be proportional to the assessed risks. This means that if the recipient and activity risks are low, ministries must adjust the level of oversight of the activity and recipient accordingly. Similarly, if the outcome of the risk assessment is high for the recipient and activity, ministries must exercise greater oversight.

Direction on risk assessment for transfer payment recipients and activities is provided in three key instruments:

• OPS Risk Assessment Methodology;
• Transfer Payment Oversight Risk Management Guidance - Transfer Payment Accountability Directive; and
• Transfer Payments Financial Management Policy.

The Transfer Payments Financial Management Policy requires ministries to consult the Transfer Payment Recipient Report (formerly known as the Financial Insight Report or FIR) and consider the full funding relationship the Province has with a transfer payment recipient before providing transfer payment funding.

For more information on risk assessments, see Appendix A.

6.2.1. Proportional oversight matrix and general approach

The following matrix is a tool to support ministries in determining the level of oversight of the transfer payment recipient and activity based on risk. Leveraging the outcome of risk assessments, ministries must use the matrix to determine whether flexibility and streamlining approaches can be provided.

The three flexibility and streamlining approaches set out in this Policy are:

• budget flexibility
• streamlined reporting
• streamlined agreement renewal

While this Policy sets out these three approaches, there may be other approaches that ministries can also employ to effectively exercise proportional oversight where the risk is low.

Proportional Oversight Matrix

Excluded situations

Notwithstanding the requirements below, ministries may choose not to provide the three flexibility and streamlining approaches or any other approaches to support streamlining, in the following situations:

• Where legislative or regulatory requirements exist that conflict with or are inconsistent with this Policy (e.g., legislation that requires first quarter reports)
• Where program requirements conflict with or are inconsistent with this Policy.

Pre-requisite

1. Ministries must ensure that transfer payment recipient and activity risk assessment ratings are current.
2. Ministries that have decided to provide flexibility and streamlining must consult their legal counsel to ensure that the transfer payment agreement contains terms and conditions to support the specific flexibility and streamlining approaches that the ministry has decided to provide.

Requirements

1. Ministries must assess whether the flexibility and streamlining approaches are appropriate for all new, renewed and amended transfer payment agreements.
2. Where both the transfer payment recipient risk and activity risk is low (see matrix above), ministries must provide the flexibility and streamlining approaches, unless one of the excluded situations in section 6.2.1 apply.
3. Ministries must not provide the flexibility and streamlining approaches if the assessed risk is such that the approaches cannot be provided (see matrix above).
4. Ministries must review the application of the flexibility and streamlining approaches and make appropriate adjustments if either or both the recipient or activity risk levels change.
5. Ministries must carry out the flexibility and streamlining approaches in accordance with the terms of the applicable transfer payment agreement.
6. Ministries must document both the risk assessment process and the decision made for providing the flexibility and streamlining approaches to transfer payment recipients.

Best practice

1. Ministries should consider providing the flexibility and streamlining approaches to recipients when they are not amending or renewing existing transfer payment agreements, if appropriate.

6.2.2 Budget flexibility

Budget flexibility is the ability for a transfer payment recipient to reallocate certain funds between transfer payment activities and designated expenditure categories without the prior approval of the ministry.

Requirements

1. Ministries must provide budget flexibility where both the recipient risk and the activity risk is low (see matrix above), unless one of the excluded situations in section 6.2.1 apply.
2. Ministries must not provide budget flexibility if the assessed risk is such that the flexibility and streamlining approaches are not available (see matrix above).
3. Reallocation must be within the same transfer payment activity/agreement within one fiscal year, or within the agreement funding period. For multi-year agreements, reallocation must be within the authorized spending level in each fiscal year.
4. Ministries must verify that recipients apply budget flexibility within the following parameters:
   • Reallocation of funds must be within the same Executive Control, as defined in the Expenditure Management Directive, and in accordance with appropriation controls
   • Reallocation of funds must not be used for administrative costs or “other” costs, as per Ministry definition
5. Ministries must require transfer payment recipients to identify the reallocated funds, including the rationale for reallocation, in their next financial reporting process or more frequently if requested by the funding ministry.
6. Ministries must undertake a process of corrective action(s) in a timely manner in the event that transfer payment recipients have inappropriately reallocated funds.
7. Under exceptional circumstances, ministries may provide budget flexibility in excess of 10 per cent. In such cases, ministries must develop a business case and receive the appropriate approval prior to providing budget flexibility (see Appendix B for business case and approval criteria).

Best Practice

1. If a ministry determines as a result of its risk assessments that the risk status of either a transfer payment recipient or activity falls within the ministry’s discretion, the ministry should consider whether budget flexibility can be provided (see matrix above).

6.2.3 Streamlined reporting

Reporting is a necessary oversight mechanism. Appropriate reporting provides meaningful information and supports accountability. The reporting requirements imposed by a funding ministry should be in proportion to the assessed recipient and activity risk. By conducting risk assessments periodically, ministries can review reporting requirements and consider whether they are appropriate and where they can be streamlined. 

When determining reporting requirements, ministries should consider the following:

• Is there information being requested that is not used?
• Are there opportunities to consolidate requests with other funding ministries or to share information?

Requirements

1. Ministries must remove any requirements for a first quarter financial report (or first financial report), where both the recipient risk and the activity risk is low (see matrix above), unless one of the excluded situations in section 6.2.1 apply.
2. Ministries must ensure that reporting frequency is appropriate and necessary.
3. Within the same ministry, program areas funding the same recipient must investigate opportunities to streamline and consolidate reporting (such as the use of the Standard Multi-Project Agreement Template or consolidating year-end reconciliation for a multi-funded recipient). Where opportunities are identified, ministries must consolidate and streamline reporting.

Best Practices

1. If a ministry determines as a result of its risk assessments that a transfer payment recipient and activity falls within the ministry’s discretion, the ministry should consider whether streamlined reporting can be provided (see matrix above).
2. Program areas in the same or different ministries funding the same recipient for an activity should work together to identify opportunities to streamline and consolidate reporting. Such opportunities could include implementing common reporting requirements, setting out such requirements in a common agreement such as the Standard Multi Project Agreement Template, consolidating year-end reconciliation, or aligning the timing for recipient reporting.

6.2.4 Streamlined Agreement Renewal

A streamlined agreement renewal process is intended to eliminate negotiations at the time of agreement renewals where there is no value or benefit to the ministry or transfer payment recipient in undertaking such negotiations. It can be provided when there are no changes required from one agreement funding period to the next, including any changes to the funding amount and any transfer payment recipient obligations under the agreement.

Payments continue to be subject to the same financial rules (Cash Management Directive, Transfer Payments Financial Management Policy, etc.).

Requirements

1. Ministries must provide a streamlined agreement renewal process where both the recipient risk and the activity risk are low (see matrix above), unless one of the excluded situations in section 6.2.1 apply.

Best Practice

1. If a ministry determines as a result of its risk assessments that a transfer payment recipient and activity falls within the ministry’s discretion, the ministry should consider whether streamlined agreement renewal can be provided (see matrix above).

6.3 Compliance with Statutes

Ministries are accountable for protecting the public interest and ensuring efficient and effective use of public resources. This section sets out the requirement to confirm transfer payment recipients’ good standing with tax laws, and attestation of good standing with labour, and environmental laws (see Definitions for more information) before providing funding.

6.3.1 Attestation and Tax Compliance Verification

This section applies to:

• Ministries
• Time-limited and ongoing transfer payment activities where a ministry is not required to provide funding by legislation or otherwise by law, and:
  • The transfer payment recipient received cumulative transfer payment funding of $10M or more from the Government of Ontario in the previous government fiscal year (April to March); or the new or renewed agreement has a contract value of $10M or more each year.
• New transfer payment agreements. For the purposes of this section, new transfer payment agreement means:
  1. A net-new agreement
  2. An existing agreement that is being renewed
  3. An existing agreement that is being amended to include new funding

This section does not apply to:

• Provincial agencies
• Ministries providing funding to Indigenous transfer payment recipients (see Definitions for more information

Requirements

1. Ministries must require the following information from potential transfer payment recipients:
   • For good standing with tax laws - tax compliance verification completed on the Tax Compliance Verification Portal.
   • For good standing with labour and environment laws – an attestation.
     • An attestation form is available to be completed within the organizational profile on Transfer Payment Ontario (TPON)

1. Ministries must provide information about the compliance requirement to potential recipients prior to making funding decisions. Ministries must check to ensure the potential recipient has up-to-date compliance information on TPON and check the Tax Compliance Verification Portal to ensure that recipients are in tax compliance prior to entering into an agreement. Ministries must only enter into new agreements with recipients that are in good standing with tax laws (as confirmed through the Tax Compliance Verification Portal) and who attest to being in good standing with labour and environment laws.
   • Ministries must provide information on the requirement to be in good standing with tax, labour and environment laws as early as possible in the funding process through program guidelines, memos or other channels as appropriate. Recipients must submit the compliance information on their organizational profile on TPON.
     • Tax compliance verifications and attestations are valid for one year. Any potential recipient can voluntarily provide attestation and tax compliance verification if they wish to make the information available for future use, and can update the information to ensure it is current.
   • Before contacting the potential recipient for compliance information, ministries must check the recipient’s organizational profile on TPON. This information can be accessed by all ministries
2. Ministries must document and maintain the rationale for all funding decisions, including information requested by the funder and provided by the recipient.

6.4 Performance Measurement

Performance measurement is used to track and report on progress and to evaluate whether the funding provided to transfer payment recipients is effective.

This section provides direction to standardize outcomes and align performance measurement efforts across government.

6.4.1 Transfer Payment Performance Measurement Framework (TP PMF)

This section applies to:

• Ministries
• Time-limited and ongoing transfer payments where a ministry is not required to provide funding by legislation or otherwise by law

This section does not apply to:

• Provincial agencies

Requirements

1. For all transfer payments, ministries must use a dynamic form in TPON to collect performance information in accordance with the TP PMF.

This requirement applies as follows:

• For new transfer payments, ministries must use a dynamic form in TPON to collect performance information in accordance with the TP PMF.
• For existing transfer payments, ministries must use a dynamic form in TPON to collect performance information in accordance with the TP PMF or submit an annual implementation plan per direction from the Treasury Board Secretariat, Office of the Treasury Board until in compliance with the requirement above.

See the TP PMF Guidance Document for further information.

7.0 Definitions

• 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.

Authorized Spending Level

An authorized spending level is the maximum amount of expenditures that a transfer payment recipient can incur against a transfer payment activity for a given fiscal year.

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.

Environment Laws

All statutes and associated regulations administered by the Ontario Minister of the Environment, Conservation and Parks, and “good standing” with environment laws means that the organization has not been convicted by a court within the last year, and has no ongoing appeals.

Indigenous Transfer Payment Recipient

Any Indigenous individual or Indigenous entity that is legally capable of contracting that has received (or is under consideration for receiving) a transfer payment from the Ontario government. This may include, but is not limited to:

• First Nations, Métis, Inuit communities and entities (including band councils, Political-Territorial Organizations, Tribal Councils etc.)
• Indigenous organizations (non-governmental organizations, non-profits, etc.)
• Indigenous businesses

Labour Laws

All statutes and associated regulations administered by the Ontario Minister of Labour, Immigration, Training and Skills Development​, and “good standing” in respect of labour laws means that the entity has not been convicted of an offence under the Occupational Health & Safety Act, R.S.O. 1990, c. O.1, Workplace Safety and Insurance Act, 1997 and Employment Standards Act, S.O. 2000, c. 41 in a proceeding commenced under Part III of the Provincial Offences Act, R.S.O. 1990, c. P.33, during the preceding year.

Organizational Profile

All transfer payment recipient organization data and information on TPON collected via the Transfer Payment Common Registration including any file attachments related to a particular registration.

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 ministry.

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, acting on, monitoring, and communicating risk issues.

Tax Laws

Provincial and federal tax laws applicable to the organization. “Good standing” with tax laws means that none of the following circumstances apply, as confirmed by the Ministry of Finance through the Tax Compliance Verification process:

1. The organization is in default of filing a return under a tax statute administered and enforced by the Government of Ontario, or of paying any tax, penalty or interest assessed under any such statute for which payment arrangements have not been made.
2. If the organization has a business number with the Canada Revenue Agency, the organization is in default of filing a return under the Taxation Act, 2007, the Income Tax Act (Canada), Part IX of the Excise Tax Act (Canada) or an Act of another province or territory that imposes a tax on corporations and is administered and enforced by the Canada Revenue Agency.

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. 

Appendix A: Information on Risk Assessments

The OPS Risk Assessment Methodology helps ensure that risks are properly and consistently identified, assessed and mitigated. 

The Transfer Payment Oversight Risk Management Guidance - Transfer Payment Accountability Directive outlines how risk management concepts and practices can be applied to conduct a risk assessment and develop a risk management plan to support a proportional, risk-based approach to the oversight of transfer payments. 

The Transfer Payments Financial Management Policy sets out information and rules on the use of the Transfer Payment Recipient Report (formerly known as Financial Insight Report or FIR). The policy requires ministries to consult the Transfer Payment Recipient Report and contact previous funders prior to providing transfer payment funding to a recipient.

Appendix B: Business Case Criteria

The ministry must bring forward a business case setting out the rationale when seeking to provide:

• budget flexibility in excess of 10 per cent,
• flexibility and streamlining approaches to Indigenous transfer payment recipients with a high or very high risk status 

Approver

Ministries: Chief Administrative Officer (CAO)

Provincial Agencies: CAO equivalent (e.g. Chief Financial Officer)

The business case, or rationale, must include, at minimum, the following information:

1. The specific approval being sought
2. Rationale for exceeding the 10 per cent budget flexibility or for providing flexibility and streamlining approaches to Indigenous transfer payment recipients with a high or very high risk status, including information on the current risk assessment
3. Current ministry process/approach to flexibility and streamlining approaches, including addressing any issues with consistency for other transfer payment recipients that the ministry funds
4. Risk assessment of proceeding and of not proceeding, and any mitigation strategies
5. Any other options considered to support proportional oversight
6. Identification of any public/media interest related to the transfer payment recipient and the activity
7. Any amendments to the transfer payment agreement that might be necessary (note that consultation with legal counsel is required)
8. Any other information that maybe relevant for decision maker