Effective: April 1, 2018
Applicable FAM Policies: 775 - Disbursements
Applicability: GNWT Departments and Public Agencies

INTERPRETATION

The Government administers and/or delivers some programs and services using third party funding. The Legislative Assembly does not vote on third party funding. However, known agreements are provided as information within the Main Estimates document.

“Third party funding” means money transferred to the Government by another party for a specific purpose, under an agreement in which the Government fulfills that purpose on behalf of the other party. This type of funding does not include funds provided to purchase or construct a Tangible Capital Asset.

Disbursements from special purpose funds must have sufficient monies deposited on account before any disbursements can be made. In the event that funds are not advanced by the funder the department may advance funds if the agreement has been signed.

Departments are responsible to ensure quarterly reconciliation and invoicing occurs for any projects performed on behalf of others. The only exception permitted is when the agreement does allow for quarterly billing or permits more frequent billing.

Departments must follow up and invoice any receivables that are not received in a timely manner.

Departmental Directors of Finance shall ensure the timely compliance of required submissions for fund recovery and the corresponding creation of an invoice to facilitate monitoring of the recovery. The Comptroller General may levy a financing charge against the appropriation of the responsible department, on behalf of the Department of Finance, where it is determined that material costs have been incurred as a result of delayed recoveries. 

The following are not considered funded by a third party:

1. Cost-shared arrangements where funding through an agreement between the Government and a third party is provided in support of an approved program, project or service that is within the Government’s mandate and supported by approved appropriations; or,
2. Where funding through an agreement between the Government and a third party is provided towards the purchase or construction of a Tangible Capital Asset (TCA) and, the GNWT will retain ownership, including all ongoing operations and maintenance expenses.

The following criteria should normally be applied to classify projects considered as third party funded, which differ from projects that are funded through the Government Operations and Maintenance Capital appropriations.

Funding is for a specific project on behalf of a third party and supported by a written agreement;

• Funding does not require an appropriation to spend;
• Advances received from third parties may be held from year to year;
• A service is performed by the Government that would normally be provided by the third party;
• Funding is provided by a third party to enable the Government to provide services to an outside entity to assist in achieving specific goals.

Agreement Contents

All third party funding agreements must contain the following:

1. A clear explanation of the purpose of the agreement;
2. Details of the program, project, or service being performed on behalf of the third party, including but not limited to details of eligible disbursements under the agreement;
3. A schedule of estimated payments by the third party to the Government (including timing of those payments in a manner that minimizes any government funds expended in advance of receipts);
4. A schedule of estimated disbursements by the Government (including the timing of these disbursements);
5. Where applicable, details of TCAs to be acquired and the disposition of such assets at the termination of the agreement (excluding TCAs, which will be owned by the GNWT);
6. Public relations requirements;
7. Contacts for information exchange;
8. The names or positions of persons authorized to approve changes to the agreement;
9. Requirements for financial administration and reporting;
10. Requirements for program accountability;
11. Indemnification clauses in accordance with the Sections 125 to 129 of the FAA;
12. Identification of other stakeholders in the agreement;
13. Any administration fee to be charged by the Government;
14. Any responsibilities of the parties to the agreement in relation to any deficits incurred;
15. Where applicable, the right of the Government to retain surplus funds
16. Any GST/HST implications for administration fees or other charges.                 

Conditions

All third party funding agreements that:

1. Exceed $1 Million (including existing agreements of less than $1 Million which are increased to bring the total agreement to greater than $1 Million) must be submitted and approved by the Comptroller General, or delegate, before it is signed on behalf of the Government. The duration and/or monetary amount of an agreement may be increased without being resubmitted if its other terms and conditions remain unchanged.
2. Exceed $250,000 (i.e. the total agreement aggregate cost is $250,000 as opposed to an annual amount under a multi-year agreement) must receive a legal review by the Department of Justice.

Guidelines for CG review

Funding approved in support of the Government’s Mandate, where the Government will incur a portion of direct and indirect costs in support of the program (Cost Shared Arrangements) should give consideration to:

• The work requirements;
• The degree to which the Government and the third party will each benefit from the work; and,
• Whether the Government pays or foregoes interest as a result of the timing of its recovery from the third party.

Administration Fees and Financing Charges

If the third party agreement is primarily for the benefit of the funding organization, an administration fee must be charged to the organization in order to offset any direct and/or indirect costs incurred by the Government unless the Government agrees to waive the fee.

The administration fee to be charged is six and a half per cent (6.5%) of the total funding amount. The administration fee is to be recorded as general revenue in Fund 1.  The administration fee may be increased where appropriate.

When the Government is the primary beneficiary of a third party funding agreement, it may be appropriate for the Government to reduce or waive the administration fee. However, for any reduction or waiver of the administration fee, the responsible Minister must be prepared to provide documented substantiation to the Comptroller General, if requested.

Interdepartmental Arrangements

If 3rd party funding is held by a single department (originating) and where there are participating departments, all departments will record transactions in programs or projects as specified by the originating department. These programs or projects must be universal to all departments and all departments should be able to monitor the project or program.     

Where the originating department is to transfer funding from a third party the recipient department should record their expenses and offsetting revenue (under Fund 3) through a journal voucher to transfer the funds from the originating department.

Departments which have staff funded by a third party to work on a special project should record their expenses directly as disbursements funded by a third party (Fund 3).

Government departments entering into an interdepartmental arrangement to do work on a special project or ongoing project which are not fully funded are identified as co-shared agreements. Expenditures and revenue are recorded as Fund 1.