Appendix M Template CBO Transfer Agreement
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CBO Draft Agreement - Government Transfers
Instructions have been included throughout this template agreement in blue bold font. These instructions should be removed when drafting your agreements.
Government transfers is an accounting term used to describe the transfer of assets by a government to another party where the government does not receive anything directly in return. Government transfers can be in the form ofgrants, shared cost arrangements or entitlements. Government transfers are to be expensed when they are authorized by the transferring government and any eligibility criteria have been met by the Agency.
The term ‘financial assistance’ has been used throughout this template agreement in place of, or as a reference to, government transfers. The term ‘financial assistance’ should not be confused with the cash payments of that assistance. In some cases, a transfer expense may need to be recorded before the cash payment is made. It is important to differentiate transfers expense (accounting perspective) from cash payments throughout this agreement.
The template agreement acknowledges that a Ministry may intend to give up its discretion and fully authorizethe transfer in the first year of an agreement (whether the agreement spans one year or multiple years), or a Ministry may choose to retain its discretion and incorporate further authorization steps over the term of a multiyear agreement. This template identifies a possible further authorization step to be the Legislative Assembly’s approval of an Appropriation Act in each future year.
Eligibility criteria could also result in recording transfers expense over the term of a multi-year agreement, as transfers are not recorded as an expense until they are authorized and eligibility criteria are met.
In all cases, a transfers expense must be recorded when the transfer has been authorized and any eligibility criteria have been met, regardless of whether there is sufficient appropriation. However, an appropriation must be charged when a transfers expense is recorded. Therefore, sufficient appropriation must be obtained through special warrant, virements or other means available. As per The Financial Administration Act, 1993, if sufficient appropriation is not obtained, any amounts expensed in excess of the appropriation for the fiscal year is a first charge against a suitable appropriation in the following fiscal year.
THIS AGREEMENT MADE this______day of ______, 201x.
BETWEEN:
HER MAJESTY THE QUEEN in right of the Province of Saskatchewan, as represented by the Minister of ***** (hereinafter referred to as the "Minister”)
OF THE FIRST PART
-and-
********
(hereinafter referred to as the "Agency")
Insert proper full legal name of the Agency and address
(if a corporation - confirm status and name with Corporation’s Branch 787-2962)
OF THE SECOND PART
INTRODUCTION
Authorization under accounting rules requires two actions by the transferring government: the legislative authority (noted in this section) must be in place; and the transferring government must exercise the authority, whichindicates the government has made a decision to provide financial assistance and leaves the government with no discretion to avoid it.Often that evidence would be an agreement like this – as long as the agreement does not leave room for the government to avoid providing the financial assistance.
It is not required but it is a good idea to set out the authority for entering into the agreement here.
Whereas the Minister desires the delivery of certain services for the purposes of ************* for the period specified herein;
And Whereas the Agency is capable of and prepared to deliver those services;
And Whereas the Minister is authorized to enter into an Agreement to provide financial assistance to the Agency for this purpose under the authority granted by sections *** of (insert legislation that authorizes the Agreement);
Therefore the Parties agree as follows:
1.0DEFINITIONS AND SCHEDULES:
If there are terms used in this Agreement consistently, then think about defining those terms so that they mean the same throughout.
Definitions can be added or removed as appropriate.
Make certain all terms defined in this section are used in the Agreement.
Make certain any section numbers referenced in the definitions are correct.
Those likely to be required are included.
1)In this Agreement:
(a)“Agency Budget” means the itemized budget allocations of the Agency for delivery of the Services set forth in Schedule “C”
(b)“Agreement” means this Agreement and includes all Schedules attached to this Agreement;
(c)“Client Records” means file recordings, documents and information kept by the Agency which relate to the provision of Services by the Agency to its clients;
(d)“fiscal year” means April 1st of one year up to and including March 31st of the next year.
(e)“Records” means Client Records and Services Records
(f)“Services” means those Services set out in Schedule “A”, and unless otherwise indicated includes all labour, equipment and materials which the Agency may require to provide the Services;
(g)“Services Records, means all documents, books, accounts and other information of the Agency relating to the provision of Services under this Agreement other than Client Records
(h)“surplus funds” means the money remaining at the end of a fiscal year from the payments the Agency has received from the Minister under this Agreement, after payment of all expenses related to the delivery of Services which are set out in the Agency Budget;
(i)“Term” means the period this Agreement is to be in effect, as specified in section 2.1
Optional
(xx)“quarter” or “quarterly” means the three month period in each fiscal year from April 1st to June 30th; July 1st to September 30th; October 1st to December 31st; and January 1st to March 31st.
(xx)“operational plan” means the Agency’s plans for the fiscal year including program, capital, financial and human resources plans.
1.2The following Schedules are included and form part of this Agreement:
(a) Schedule “A” -Services
(b) Schedule “B” - Payment Schedule
(c)Schedule “C” -Agency Budget
(d)Schedule “D” -Reporting Requirements
(e)Schedule “E” -Criminal Record Checks
(f)Schedule “F” -Record Retention Schedule
2.0TERM (This contract may be for multiple fiscal years)
2.1This Agreement will commence April 1, 20xx and will expire March 31, 20xx.
An issue with multi-year agreements is whether the full amount of the financial assistance (transfer) should be recorded as an expense in the first year of the agreement or whether an annual amount should be recorded as an expense in each year of the agreement.
- When a multi-year transfer is fully authorized by the transferring Government upon signing an agreement that spans more than one year, the Government has lost its discretion to avoid proceeding with the transfer and a transfer expense for the full amount of the agreement would be required in the first year, if eligibility criteria have been met.
- Alternatively, when the agreement contains a clause that indicates the government still has discretion because authorization has yet to occur in each of the future years, a transfer expense would be recorded in those future years when authorization has been granted, if eligibility criteria have been met.
Note that the eligibility criteria outlined in section 4.0 could also result in recording transfers expense over the term of a multi-year agreement, as transfers are not recorded as an expense until they are authorized and eligibility criteria are met.
Choose one of the following section 3.0’s:
3.0BINDING AND ENFORCEABLE OBLIGATION (applicable for one-year or multi-year agreements)
The following wording can be used for one-year agreements or where the full amount of a multi-year transfer is to be expensed in the first year, as long as eligibility criteria, if any, are met.
3.1The parties acknowledge that this Agreement creates binding and enforceable obligations including the obligation to provide financial assistance unless the obligation is suspended in accordance with this Agreement or this Agreement is terminated in accordance with its terms.
OR
3.0FUTURE YEARS’ AUTHORIZATION(applicable for multi-year agreements only)
The following wording allows the government to retain its discretion until some point in future years when the Legislative Assembly appropriates the transfer funds. The transfer is expensed in future fiscal years, rather than expensing the full amount of the transfer in the first year.
3.1The parties acknowledge that this Agreement does not create a binding and enforceable obligation to provide financial assistance until:
a) the Legislative Assembly of Saskatchewan has appropriated funds out of which the financial assistance may be paid in the fiscal year in which the payment is to be made pursuant to this Agreement; and
b) theAgency has met the eligibility criteria with respect to the financial assistance as set out in section 4.0.
4.0 ELIGIBILITY CRITERIA
Eligibility criteria are what the Agency must do to qualify for the financial assistance (transfer).Government transfers are not expensed until the eligibility criteria are met, except as noted in * below.
Eligibility criteria should be specific enough so that the terms can be assessed or measured for purposes of determining when transfer expenses should be recorded.
Examples of eligibility criteria include incurring eligible costs, providing certain services (e.g. hire X number of individuals), delivering a program, purchasing or constructing an asset or providing a report that evidences the Agency has done something.
Sample wording (the examples provided below are not a complete list as there could be a number of other examples):
Example A - eligible after providing the services
4.1In order to be eligible for financial assistance, the Agency must have first provided the Servicesset forth in “Schedule A”.
OR Example B - eligible after providing a report
4.1In order to be eligible for financial assistance, the Agency must have first provided a report that provides evidence of the Agency providing the Servicesset forth in “Schedule A”.
OR Example C - shared cost arrangements
Shared cost arrangements are between two parties that jointly share the financial responsibility for specific costs related to a project. Typically, authorization occurs at the point that the agreement is signed. In these arrangements, the eligibility criteria include the incurring of eligible costs by the Agency. The transferring Government is required to record the expense at the point that costs are incurred by the Agency.
4.1In order to be eligible for financial assistance, the Agency must have first incurred eligible expenditures for the provision of theServicesset forth in “Schedule A”.
4.2For the purposes of paragraph 4.1, eligible expenditures include:
a) (list all eligible expenditures - e.g. funding to applicants, direct costs, indirect administration costs, capital asset purchases, etc.)
* Note that in the event a payment is made prior to the Agency meeting the eligibility criteria in any of the examples above, the payment would be expensed on the basis that the transferring Government has made a decision to change the terms of the financial assistance (transfer). That is, eligibility criteria become stipulations that are expected to be met after receiving the financial assistance.
If you consider certain conditions to be eligibility criteria, but regularly provide transfer payments in advance of the recipient meeting those conditions, the conditions are then more in the nature of stipulations and what the Agency is expected to do to keep the transfer payments.
5.0STIPULATIONS (SERVICES)
The Agreement must have provisions which set out the Services to be provided and these must be clearly delineated. I have set this out to be generic – with a Schedule to be modified by each ministry setting out the Services. Care should be taken preparing Schedule A.
Stipulations are what the Agency is expected to do under the Agreement after being eligible for the financial assistance (transfer). Where a transferring Government has paid in advance of the Agency meeting eligibility criteria, those eligibility criteria become stipulations that are expected to be met after receiving the financial assistance.
Conditions that are included as eligibility criteria in section 4.0, should not also be included as stipulations in this section. It should be clear whether a condition is an eligibility criteria or a stipulation.
Examples of stipulations that may be used (not intended to be a complete list):
5.1The Agency will provide the Services set forth in Schedule “A”in accordance with the terms of this Agreement. This paragraph would be removed if ‘providing the Services’ is included as eligibility criteria in section 4.0.
5.2To deliver the Services the Agency will:
(a) engage and utilize only suitable and qualified personnel;
(b) obtain all licenses, approvals or permits which may be required; and
(c)comply with all applicable laws, regulations, bylaws or codes which may apply to the Services
5.3Any amendments to the Services shall be agreed upon between the Minister and the Agency. All amendments must be in writing and signed by the Agency and the Minister.
5.4The Agency will keep records and submit reports as set forth in section 7.0.
5.5The Agency shall immediately notify the Minister if the requirements of this Agreement cannot be met by it or if the Agency is unable to maintain adequate staff to provide the Services.
6.0PAYMENT SCHEDULE
I suggest moving the specific payment elements to a Schedule where they can be customized to meet the particular needs of the ministry and Agency. I have kept in this section provisions which I am assuming to be relatively standard and used in one form or another in all agreements. There are options to consider on withholding payments and Surplus payments.
Government policy requires that the payment schedule be based on the cash flow needs of the Agency. The timing of recording a transfer expense does not necessarily coincide with the timing of cash payments. A transfer expense arises for the transferring Government once a transfer is authorized and eligibility criteria have been met by the Agency.
6.1The Minister will pay the Agency for those Services in Schedule “A”in the amountset forth in Schedule “B”.
6.2All payments made pursuant to this Agreement shall be used only for the purpose of providing the Services for which the payment was made and the Agency shall promptly:
(a)notify the Minister of the amount of any payments not used for the purpose of providing such Services; and
(b)unless otherwise directed by the Minister, refund such amounts in accordance with the Minister’s directions.
6.3The Agency is responsible for the payment of all expenses incurred by it in providing the Services and the Minister will not pay any additional amount to reimburse expenses.
Optional clauses (not all clauses go together)
Reallocating Funding
6.4The Agency agreesthat all expenditures made by the Agency for Services shall be made in accordance with the allocations set out in the Agency Budget. Where necessary, the Agency may reallocate funds within salary codes and within non-salary codes in the Agency Budget. However, the Agency may not reallocate funds from salary codes to non-salary codes or non-salary codes to salary codes in the Agency Budget, without prior written approval of the Minister.
OR
6.4The Agency may reallocate funds between categories of budget expenditures set out in the Agency Budget, provided that the reallocation of funds does not increase or decrease an expenditure item by more than twenty percent (20%). The Agency must obtain the written approval of the Minister for any other reallocation of funds within the Agency Budget. References to the Agency Budget will mean the Agency Budget as amended resulting from any reallocation of funds done in accordance with this provision.
Withholding payments
6.5In addition to any other rights the Minister may have pursuant to this Agreement, where the Minister on reasonable grounds believes that the Agency has failed to:
a)maintain staffing levels for Services as described in the budget allocations in the Agency Budget ; or
b)provide all Services;
payments made pursuant to this Agreement for those Services may be reduced in an amount deemed appropriate by the Minister and the Agency shall promptly refund to the Minister the amount of any payments received for those Services in excess of such reduced amount.
OR
6.5Where, in the opinion of the Minister, the Agency fails to comply with the provisions of this Agreement, the Minister may withhold any payment due to the Agency until such time as the Agency complies with this Agreement to the satisfaction of the Minister.
OR
6.5If the Agency should neglect to provide the Services in a timely fashion, or fail to perform any provision of this Agreement, the Minister may, after providing not less than ______Notice to the Agency, and without prejudice to any other right or remedy he may have, perform or arrange for the performance of such Service. The Minister may deduct all reasonable costs incurred from any payment due to the Agency.
Board expenditures
6.6Unless otherwise specifically provided in the Agency Budget, payments made under this Agreement may not be used to pay board members of the Agency except as specified below;
(a) funding may be used to reimburse board members for reasonable travel, meal and accommodation expenses, provided:
(i) they are required to travel on Agency business; and
(ii) the rates do not exceed those which are applicable to employees of the Public Service of Saskatchewan;
(b)funding may be used to provide a gifts to a retiring board member, provided the expenditure does not exceed $5 per year of service to a maximum of $50.00.
7.0RECORDS, REPORTING and ADMINISTRATION
Include details on the requirements to provide accountability reports not already identified elsewhere within the agreement. Any requirements to provide reports included in section 4.0 as eligibility criteria should not also be included in this section.
7.1The Agency will keep complete and detailed Client Records as may be required for the Services that it has provided pursuant to this Agreement. The Agency agrees that the Client Records will:
(a)contain the details specified in Schedule “F” ; and
(b)be maintained and retained in accordance with the criteria listed in Schedule “F”.
7.2The Agency is responsible for and will maintain such Services records as the Minister may require, including complete accounts and records of all revenues and expenditures pertaining to payments received and Services provided pursuant to this Agreement which meet generally accepted accounting principles and practices, , including all invoices, receipts and vouchers relating thereto. The Agency will maintain and retain the Services Records in accordance with the criteria listed in Schedule “F”.