(Disponible en français : Subventions et contributions — Mise en œuvre des politiques fédérales par le transfert de fonds)
The Government of Canada offers some services directly to Canadians, such as the provision of passports (for a fee) for international travel. However, for the most part, it transfers funds to other orders of government, individuals or third parties. This paper provides information about the federal government’s transfer payments, particularly its grant and contribution programs.
The government does not acquire any goods, services or assets through transfer payments. Instead, the government transfers funds as a means of achieving its policy objectives. For example, the transfer may offer income support to veterans, or provide funds to a third party to deliver services, such as labour training programs.
In 2018–2019, the Government of Canada spent $224 billion on transfer payments, which represented 70% of the government’s total program expenses. Major transfers to individuals include Employment Insurance, children’s benefits and old age security benefits. Major transfers to other orders of government include the Canada Health Transfer and Equalization Program payments.
Figure 1 outlines total federal spending over the past 10 years on transfer payments, and presents the spending as a percentage of total program expenses.
Figure 1 – Total Federal Transfer Payments, 2009–2010 to 2018–2019 ($ billions and % of total federal program expenses)
Source: Figure prepared by the authors using data from the Public Accounts of Canada.
Grants and Contributions Overview
The government has created numerous grant and contribution transfer payment programs. Examples of the programs include: apprenticeship grants, grants to support Canada’s tobacco strategy, contributions to support First Nations elementary and secondary educational advancement, and contributions under the Strategic Innovation Fund.
The accountability and reporting requirements for grants and contributions differ. According to the Treasury Board’s Policy on Transfer Payments:
- “A grant is a transfer payment subject to pre-established eligibility and other entitlement criteria. A grant is not subject to being accounted for by a recipient nor normally subject to audit by the department. The recipient may be required to report on results achieved.”
- “A contribution is a transfer payment subject to performance conditions specified in a funding agreement. A contribution is to be accounted for and is subject to audit.”
There are various forms of contributions, including non-repayable, conditionally or unconditionally repayable, or a combination thereof. For example, the Strategic Innovation Fund allows for all three, depending on the stream of funding sought.
Some contribution agreements require repayments based on agreed-upon annual amounts. In other cases, repayments are conditional, based on recipients’ revenue; i.e., recipients are expected to repay the contribution only when certain income or profitability criteria have been met.
Administration of Transfer Programs by Federal Departments and Agencies
Funding for a transfer payment program is usually announced in the Minister of Finance’s budget and approved by Parliament in the estimates process or in legislation outlining a program’s parameters.
Under the Policy on Transfer Payments, the Treasury Board is responsible for approving a new transfer payment program and departments are responsible for administering the funds. To request funds for a new program, a department prepares a Treasury Board Submission, which includes a proposed program’s key elements, including its policy goals, expected results, types of transfer payments and repayments, terms and conditions, risks, official languages implications, and gender-based analysis plus (GBA+) considerations.
Once a transfer payment program has been approved and receives funding, departments solicit applications to allocate the funds. Departments assess applications against established criteria to ensure the eligibility of applicants, the relevance and viability of proposals, timelines, and in some cases, GBA+ considerations.
Departments then decide how to allocate funding to recipients consistent with programs’ terms and conditions. Some programs provide full funding up front, while others require recipients to submit expense claims that must be approved before they are reimbursed. Additionally, some programs may use funding agreements with recipients that outline how the funding is to be used.
As noted earlier, grant recipients usually have minimal accountability and reporting requirements. In contrast, departments may audit the recipients of contributions to ensure that a program’s terms and conditions have been met, and the monies have been put to proper use.
Departments are responsible for monitoring and reporting program results, as well as undertaking evaluations every five years of the relevance and effectiveness of grant and contribution programs. The evaluations should also asses the impact of programs on diverse groups.
Departments set out their proposed spending for grant and contribution programs in main and supplementary estimates documents, and proactively disclose the recipients. They then report on the actual amounts spent in the Public Accounts of Canada. In addition to amounts for each program, the public accounts list recipients of grants and contributions of $100,000 or more. Finally, they outline the results of their programs in their departmental results reports and on GC Infobase.
In a 2006 audit of the government’s grant and contribution programs, the Office of the Auditor General of Canada found that recipients were experiencing heavy financial and administrative burdens when applying for funding and meeting program requirements.
Later that year, the President of the Treasury Board commissioned the Independent Blue Ribbon Panel on Grant and Contribution Programs. In its December 2006 report entitled From Red Tape to Clear Results, the Panel recommended that the government should simplify the reporting and accountability regime, and encourage innovation through sensible risk management. It noted that Indigenous and non-profit organizations, which often represent vulnerable groups, depend heavily on grant and contribution programs, but have been adversely affected by the administrative burdens.
In response, in 2008 the government released its Action Plan to Reform the Administration of Grant and Contribution Programs, and assessed the plan’s impact in its 2013 Results Report and its 2017 Results Report. The government indicates that the administrative burden on recipients has been reduced, service standards for program delivery are in place, and there is greater consistency in funding practices across departments.
Authors: Alex Smith and Dillan Theckedath, Library of Parliament
Categories: Economics and Finance