CPPM Policy Chapter 21: Government Transfers

This Core Policy and Procedures Manual chapter contains policy on government monetary or tangible capital asset transfers.

• 21.0 Government Transfers
  • 21.1 Objectives
  • 21.2 General
  • 21.3 Government Transfers Policy
    • 21.3.1 Approval Process
    • 21.3.2 Classification of Government Transfers
    • 21.3.3 Accounting for Government Transfers
    • 21.3.4 General Payment Standards for Government Transfers
    • 21.3.5 Documentation and Payment Management of Government Transfers
    • 21.3.6 Selecting a Service Provider of Shared Cost Arrangements
    • 21.3.7 Repayment of a Government Transfer Payment
  • 21.4 Information and Resources on Government Transfers

21.1 Objectives

• Ensure that government transfers are properly authorized and carried out in accordance with core policy, legislation and other authorities (e.g., regulations, directives, by-laws).
• Ensure that government transfer payments are managed in a manner that is fair, open, and transparent.
• Ensure that appropriate eligibility criteria and stipulations for government transfers address the intended outcomes.
• Maintain appropriate accountability for managing government transfers.
• Maintain accurate and timely information for decision-making and reporting purposes.

21.2 General

• Government transfers are transfers of monetary assets or tangible capital assets from the Province to an individual, a business, or other entities. They are non-exchange transactions where the Province is not the direct beneficiary of any goods or services, repayment, or investment.
• Government transfers are distinct and separate in this respect from other acquisitions by government (see CPPM 6) where it receives goods or services directly in exchange for payment.
• Government transfers also include transfers of monetary assets or tangible capital assets received by the Province from an individual, a business, or other entities.

21.3 Government Transfers Policy

21.3.1 Approval Process

1. A government transfer of monetary assets or tangible capital assets must be supported by approved legislative authority and other authorities, and approved by ministry service plans and objectives.
2. A government transfer must be supported by a government transfer request that is approved by a ministry officer who has been delegated expense authority for this purpose. The approved government transfer request must also be submitted to the ministry Chief Financial Officer for review and sign off for the purpose of attesting that due diligence has been performed on the government transfer request to address the following requirements and expectations:
   • The request clarifies the organization’s objectives, provides justification, and determines the minimum requirements to proceed with the government transfer initiative; and
   • The request provides the framework for meeting the organization’s accountability requirements in the planning, monitoring, and reporting of government transfers.

See the Government Transfer Request Guide (PDF) for requirements and expectations to consider in completing the government transfer request.

3. See the Guide for General Expectations in Managing Government Transfers (PDF) which describes the expectations for meeting ministry accountability requirements at various stages of a government transfer initiative and which can be incorporated in the government transfer request.

21.3.2 Classification of Government Transfers

1. Government transfers are classified in accordance with Public Sector Accounting Standards. Government’s Chart of Accounts includes the STOB descriptors and classification characteristics consistent with this policy. Professional judgment is required to achieve proper and consistent classification decisions using the three categories for government transfers:
   • Grants;
   • Entitlements; or
   • Shared Cost Arrangements
2. A government transfer is a non-exchange transaction where government is not the direct beneficiary of goods or services and the transaction is not considered a loan or an investment. There may be situations where a ministry takes temporary delivery of goods as an administrative conduit in distributing the goods to a recipient. This circumstance does not constitute a direct receipt of goods, and therefore, would qualify as a government transfer payment.
3. Grants

Government transfers include grants provided at the discretion of government to individuals, businesses, or other entities for specified purposes. They are non-exchange transactions where government is not the direct beneficiary of goods or services, and government does not control or participate in the ongoing activities of the transfer recipients. Stipulations should be attached to recipient spending to promote sound financial management and to ensure the recipient is using the funds as intended.

Grants have the following characteristics:

• Payment is solely at government's discretion.
• In most cases, recipients have to apply for or meet some eligibility criteria for a grant. Note that meeting eligibility criteria does not guarantee a recipient will receive a grant.
• Government decides how much, to whom, and when a payment is to be made.
• Legislative authority and a written agreement (see CPPM 21.3.5.2) are required for authorizing the grant.
• Eligibility and stipulations are set by government in the agreement.

Usually, there is a ceiling on the total that may be transferred under a particular grant program. Government grant recipients should be subject to accountability requirements (e.g., performance measures, reports) as set out in the stipulations.

Examples of grants include: research & development transfers, cultural transfers and scholarships.

4. Entitlements

Government transfers include entitlements that government must make if the recipient meets eligibility criteria. The eligible recipient and the amount of the entitlement are prescribed in legislation and other authorities.

There are two types of entitlements:

1. Characteristics of entitlements for individuals:
   • All eligible persons meeting the eligibility criteria must be paid.
   • A written agreement is required (see CPPM 21.3.5.2).
   • A statute or a regulation sets the eligibility criteria and the amount to be transferred.
   • The amount transferred can vary depending on the circumstances of the recipient.
   • Once eligibility criteria have been met, the recipient is entitled to receive an entitlement.

An example of entitlements for individual recipients is social assistance.

2. Characteristics of entitlements for businesses or other entities:
   • A statute or a regulation sets the basis for determining the amount to be transferred.
   • A formula, per-capita or other unit basis method of entitlement calculation may be used to determine the amount to be transferred.
   • A written agreement is required (see CPPM 21.3.5.2).

Examples of entitlements for other entities include: formula-based transfers such as federal/provincial equalization payments and per capita transfers to local governments.

5. Shared Cost Arrangements

Government transfers include shared cost arrangements that are reimbursement and financing arrangements under contract or formal written agreement to individuals, businesses, or other entities for purposes specified within the agreement. They are non-exchange transactions (i.e., government is not the direct beneficiary of goods or services) and the transferring government has significant control over how the funds are to be spent. Stipulations should be attached to recipient spending.

Shared cost arrangements have the following characteristics:

• The transferring government may agree to pay for all (the transferring government may be the sole contributor of a project), or share a portion of, the funding for a project.
• Shared cost arrangements may involve different levels of government that are jointly sharing financial responsibility for specific types of costs related to a project.
• The funding of expenditures for a project may be shared by the government transfer recipient with other individuals, businesses or other entities.

1. Characteristics of Reimbursement Arrangements:
   • Reimbursement is made by the transferring government to the recipient for eligible expenditures already incurred (i.e., expenditures incurred before the government transfer is provided).
   • Government can reimburse the recipient over time on the basis of eligible expenditures incurred. This gives government a greater degree of influence over the types of expenditures reimbursed and accountability measures.
   • There is a formal written agreement, legislation and other authorities setting out the terms and stipulations. Payment is tied to specific deliverables.
   • There may be a ceiling on the total amount that will be reimbursed by the transferring government.
2. Characteristics of Financing Arrangements:
   • It will involve a government transferring resources up front to provide the recipient with advance financing to be able to incur eligible expenditures. Note that the eligible expenditures do not have to be incurred in advance in order to qualify for the government transfer.
   • There is a formal written agreement, legislation and other authorities setting out the terms and stipulations.
   • The requirements to incur eligible expenditures are stipulations to be met by the recipient after the government transfer has been provided.

Examples include: assets built under a shared cost arrangement.

21.3.3 Accounting for Government Transfers

1. Government transfers must be recorded and reported accurately, completely and on a timely basis to comply with government's accounting policy. Financial Reporting and Advisory Services, Office of the Comptroller General should be consulted on policy interpretation.
2. Government transfers should be recognized in the Government's financial statements:
   1. as an expense when the Province is the transferring government (see CPPM 21.3.3.5); or
   2. as revenue when the Province is receiving a government transfer (see CPPM 21.3.3.6).

Government transfers should be recognized in the period that the events, giving rise to the government transfer, occurred, if the following conditions have been met:

• The government transfer is authorized (see CPPM 21.3.3.3) and is supported by a government transfer request approved by a ministry expense authority. The approved government request must also be submitted to the ministry Chief Financial Officer for review and sign off (see CPPM 21.3.1);
• A written communication (a written agreement) is provided to the recipient; and
• All eligibility criteria have been met by the recipient.

3. Authorization
   1. A government transfer is authorized when both of the following have occurred by the financial statement date (i.e., fiscal year end):
      1. i.Approved legislation or other authorities to provide a government transfer is in place; and
      2. ii.A decision has been made by the transferring government under approved legislation and other authorities that clearly demonstrate that it has lost its discretion to avoid proceeding with the government transfer. The loss of discretion may be demonstrated through written communication to the recipient.
   2. A government transfer can also be authorized if both of the following have occurred:
      1. i.The actions and communications of the transferring government by the financial statement date clearly demonstrate that it has lost its discretion to avoid proceeding with the government transfer. Thus, the government is demonstrably committed to approving the enabling legislation and other authorities for the government transfer and proceeding with the transfer; and
      2. ii.Final approval in the stub period (the period between the financial statement date and the date the financial statements are completed) of the enabling legislation and other authorities to provide the government transfer confirms that the transferring government was demonstrably committed to approving and proceeding with the government transfer at the financial statement date.
4. The Province as the transferring government has the ability to impose the following terms on government transfers:
   1. Eligibility Criteria
      • Specifies who qualifies to receive a government transfer and/or the actions necessary to qualify for the transfer.
      • The nature and substance of the eligibility criteria that must be met before a government transfer is provided.
      • Specifies pre-conditions that must be satisfied in advance for a recipient to qualify for a government transfer.
      • May include the following characteristics:
        • Eligible recipients may have to apply and provide evidence that they have met the requirements to receive a government transfer. Some transfer programs may require recipients to apply and meet eligibility criteria only once while other transfer programs may require periodic application as well as ongoing eligibility (i.e., continually meeting eligibility criteria) over periods funded.
        • Eligibility may be dependent on the completion of specific actions of the recipient before they can qualify for a government transfer or for arrangements that require ongoing eligibility. The recipient may have to demonstrate that they meet the eligibility criteria on an ongoing basis (e.g., recipient required to raise a specific amount of resources from third parties; or require recipients to match the transferring government’s offer of resources).
        • The recognition of an expense is permitted on an ongoing basis if the eligibility criteria are met on an ongoing basis.
   2. Stipulations
      • Stipulations should be used in grants and shared cost arrangements as they can be a tool used by the transferring government to promote sound financial management and to ensure the recipient is using the funds as intended.
      • Stipulations must be met after a government transfer is provided and recipients must meet the stipulations of the government transfer in order to keep the transfer.
      • Stipulations must include the requirement for funds to be repaid if they are not used to achieve the purpose of the government transfer payment as specified in the government transfer agreement.
      • May include the following characteristics:
        • Stipulations that specify the purpose for which transferred resources are used to carry out a particular activity, or to acquire or develop a tangible capital asset for delivery of services, where government is not the direct beneficiary.
        • Time stipulations where transferred resources must be used in a particular or specified period of time.
5. Recognition and Recording Criteria – The Province as the Transferring Government
   1. Grants
      • A grant should be recognized as an expense by the Province as the transferring government when the transfer is authorized and all eligibility criteria have been met.
      • A grant can result in a liability to the transferring government once all eligibility criteria have been met. Unpaid authorized government transfers evidenced by a written agreement at the year-end for which the recipients have met the eligibility criteria are liabilities and must be recognized and recorded.
      • For grants that involve a government transfer of a tangible capital asset, the expense should be recognized at the net book value of the tangible capital asset transferred.
      • Determination of whether a transferring government has a liability at the financial statement date is evaluated in terms of authorization requirements, eligibility criteria, and meeting the definition of a liability.
   2. Entitlements
      • An obligation to provide an entitlement occurs when the recipient meets the eligibility requirements, which may be demonstrated through an application process.
      • Entitlements that require the transferring government to make a series of payments over some future time are not recognized as liabilities. No obligation similar to that created by a contract or written agreement exists until the recipients meet the eligibility criteria or the program is delivered.
      • Where recipients must continually meet the eligibility criteria to be eligible for the entitlement, the transferring government may have liabilities for amounts already owed to eligible recipients but not yet paid.
      • Entitlements due to individuals are liabilities and must be recognized completely at fiscal year-end for all amounts due to eligible individuals. If a reasonable estimate of the unpaid entitlements to individuals meeting the eligibility criteria at the financial statement date can be made, the estimate is recorded as a liability. Estimates can be based on the following:
        • Past experience or a reliable forecast, taking into account those who are eligible but have not yet applied by the financial statement date.
        • In cases where it is difficult to estimate the amount due to those eligible but have not yet applied by the financial statement date, use only the applications received by the financial statement date as the most reasonable basis for estimating the amount of the liability.
      • Entitlements due to businesses or other entities that have met all eligibility criteria and remain unpaid at the end of the accounting period are liabilities and must be recognized completely at fiscal year-end. Estimates must be made for unpaid portions of entitlements due to other entities in accordance with the governing legislation and other authorities. Any entitlement amounts determined to be overpaid must be recognized and recorded as accounts receivable.
   3. Shared Cost Arrangements
      ​A shared cost arrangement should be recognized as an expense by the Province as the transferring government when the transfer is authorized and all eligibility criteria have been met.
      • For reimbursement arrangements, an authorized government transfer is recognized as an expense by the transferring government as the recipient incurs eligible expenditures for reimbursement.
      • For financing arrangements, an authorized government transfer is recognized by the transferring government as an expense when it is authorized and money has been transferred.
      • Unpaid portions of incurred eligible expenses arising from a shared cost arrangement are liabilities and must be recognized and recorded at fiscal year-end.
   4. When a government transfer payment made by a transferring government is paid and subsequently refunded in the same fiscal year, the refunded amount must be credited to the applicable expenditure account. If the amount is not refunded in the same fiscal year, it must be credited to miscellaneous revenues.
   5. Where certain stipulations have not been met by the recipient and repayment of a government transfer payment is being sought by the transferring government, the amount of the government transfer payment must be recorded as a debit to an accounts receivable and a credit to revenue.
   6. Government transfer amounts that are recorded based on an estimate must be adjusted to recognize the proper expenses if there is a change to the estimate before the financial statements are completed.
   7. In order to provide accurate and complete summary reporting, and effective management control, the amount recognized for any particular government transfer should be:
      • applied correctly;
      • accounted for; and
      • consistently classified and recorded from year to year.

Accounting for government transfers should recognize the substance of the underlying events rather than the form of funding patterns.

See decision tree for the Province as the Transferring Government (PDF) 

6. Recognition and Recording Criteria – The Province as the Recipient Government
   1. A government transfer should be recognized as revenue by the Province as a recipient when the transfer is authorized and all eligibility criteria and stipulations, if present, have been met.
   2. Authorized government transfers to the Province that are supported by a letter or signed agreement, for which eligibility criteria have been met, must be recorded as an accounts receivable until the transfer is received.
   3. A government transfer with eligibility criteria and with stipulations should be recognized by a recipient as revenue in the period the transfer is authorized and all eligibility criteria have been met. An exception can be made to the extent that the transfer gives rise to an obligation that meets the definition of a liability for the recipient. Considerations for determination of a liability are:
      1. The stipulations of the government transfer alone; or
      2. If the stipulations are too broad, the stipulations of the government transfer should be taken together with the actions and communications of the recipient government before the financial statement date to determine the substance and intent of the transfer stipulations and
      3. Whether either consideration would create an obligation that meets the definition of a liability. Stipulations for a recipient government may affect the timing of recognition of revenue. If an obligation becomes a liability, the recipient government would initially recognize the government transfer as a liability. Revenue would, subsequently be recognized as the liability is settled.
   4. Government transfers received by the Province before revenue recognition criteria have been met must be recorded as a liability.
   5. Entitlements that the Province is eligible to receive in accordance with legislation and other authorities should be recognized as a receivable if the amount can be estimated and has not been received at the end of the accounting period.
   6. Any unpaid entitlements due to the Province must be recognized and recorded as accounts receivable.
   7. Unpaid portions of eligible expenses incurred by a ministry that are due to it under a shared cost arrangement must be recorded as accounts receivable.
   8. Government transfer amounts that are recorded based on an estimate must be adjusted to recognize any changes in revenue estimate before the financial statements are completed.

See decision tree for the Province as the Recipient Government (PDF)

7. Recognition and Recording Criteria – Government Transfer of Tangible Capital Assets

Government transfers between CRF entities and Crown Corporations or external bodies where there is a non-exchange transaction (i.e., the Province is not the direct beneficiary of the transfer of tangible capital asset) should be recorded at the net book value. Please contact Financial Reporting and Advisory Services, Office of the Comptroller General for guidance.

21.3.4 General Payment Standards for Government Transfers

1. A government transfer payment will only be made:
   • when authorized under legislation and other authorities; and
   • for specified purposes in accordance with established eligibility criteria and when the eligibility criteria are met; and
   • when there is a written agreement in place; or in accordance with a Shared Cost Arrangement for the purposes specified in an agreement.

21.3.5 Documentation and Payment Management of Government Transfers

1. A government transfer payment must be supported by a government transfer request that is approved by a ministry officer who has been delegated expense authority for this purpose. The approved government transfer request must also be submitted to the ministry Chief Financial Officer for review and sign off (see CPPM 21.3.1).
2. A written government transfer agreement between the Province and the recipient is required to support a government transfer payment. For grants and entitlements, the use of an application form or correspondence with the recipient may be sufficient as a form of written agreement provided that it demonstrates the recipient’s acknowledgment of the terms and stipulations of the agreement.
3. A shared cost arrangement is a formal written agreement that must clearly identify the terms and stipulations of the arrangement (see Governance and Management Guidelines for Government Transfers (PDF)).
4. Ministries should seek advice from legal counsel to assist in developing a written government transfer agreement.
5. Government transfer payments must be managed in a manner that:
   1. is fair, open and transparent; 
   2. provides for government independence and objectivity; and
   3. provides accountability by:
      1. clearly identifying roles and responsibilities;
      2. aligning with ministry service plans and program objectives;
      3. providing adequate administration and documentation on planning, and monitoring;
      4. reporting on use of public funds; and
      5. taking into consideration economy, efficiency and effectiveness.
6. The ministry is responsible for documenting, in a government transfer file, the rationale, or the circumstances, that support the use of one or more of the considerations for selecting recipients of shared cost arrangements. This documentation must be appended to a government transfer file and be available when requested (see CPPM 21.3.6).
7. The responsible ministry must undertake measures to conduct appropriate due diligence on a prospective government transfer payment recipient, including, where applicable, credit and background checks on key signatories, verification of business references and other certifications, and assurance that the recipient has sufficient capacity to manage the planned program related to the government transfer payment.
8. Records of government transfer payments, and an appropriate management information system and monitoring strategy must be maintained by the responsible ministry to ensure the terms and stipulations for the government transfer payments are met.
9. The performance review of a recipient must be carried out with independence and objectivity. An employee must not take part in a performance review if they are exposed to an actual, perceived or potential conflict of interest in relation to a performance review.

21.3.6 Selecting a Service Provider of Shared Cost Arrangements

The engagement of a shared cost arrangement must demonstrate fairness and openness, transparency, value for money, competition, and accountability.

The selection of a service provider without a competition can only occur where:

1. The shared cost arrangement is with another government organization;
2. Only one service provider may be qualified or is available to provide the good, service or construction and no reasonable substitution is possible;
3. An unforeseeable emergency exists, and the goods, services or construction could not be obtained in time by means of a competitive process;
4. A competitive process would interfere with a ministry's ability to maintain security or order or to protect human, animal or plant life or health;
5. The acquisition is of a confidential or privileged nature and disclosure through an open bidding process could reasonably be expected to compromise government confidentiality, cause economic disruption or be contrary to the public interest;
6. Financial assistance is being provided to a specified target group or population; or
7. A competitive selection process is not appropriate.

The ministry is responsible for documenting why a competitive process was not undertaken. This documentation must be appended to a government transfer file and be available when requested.

21.3.7 Repayment of a Government Transfer Payment

1. A repayment of a government transfer is required if a transfer payment is paid and any of the following issues arise:
   • the recipient’s eligibility for receiving the government transfer payment had expired;
   • fraudulent or inaccurate information was provided;
   • payment was made in error; or
   • the recipient has not complied with the terms and stipulations for the payment.

The ministry Executive Financial Officer or other designated ministry official will determine the extent of repayment based on the nature and severity of the situation, and record the amounts owing as a debt receivable to the government.

2. Recovery of an overpayment is required immediately or reasonable arrangements must be made to ensure repayment in due course.

21.4 Information and Resources on Government Transfers

• Government Transfer Request Guide (PDF)
• Decision Tree for the Province as the Transferring Government (PDF)
• Decision Tree for the Province as the Recipient Government (PDF)
• Governance and Management Guidelines for Government Transfers (PDF)
• Guide for General Expectations in Managing Government Transfers (PDF)

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