WDP Terms and Conditions - June 2010

Corresponding document: WDP Performance Measurement and Reporting

1. Legal Policies

In accordance with section 6(3) of the Western Economic Diversification Act, the Minister may, in accordance with the Terms and Conditions approved by the Treasury Board, make grants and contributions, in support of programs and projects undertaken by the Minister.  An Order in Council will be sought for any proposed Agreements with Provincial governments pursuant to paragraph 6(1)(f) of the Western Economic Diversification Act.

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2. Purpose and Objectives of the Program

The Western Diversification Program (the Program) will contribute to the achievement of the Department’s mandate to promote economic development and diversification in western Canada; and advance the interests of western Canada in national policy, program and project development and implementation.

Funding under this Program is anticipated to result in a Western economy that is developed and diversified as demonstrated through: 

1. Knowledge translated into new products and services and into new ways of designing, producing or marketing existing products or services for public and private markets, through innovation.
2. Enhanced business productivity and competitiveness, trade and investment attraction and penetration of western Canadian technologies, services and value-added products into international markets, access to risk capital and business services for SMEs.
3. Economic development and diversification in communities to sustain their economies and adjust to changing and challenging economic circumstances.
4. Undertaking research and analysis required to inform policy and program decisions.

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3. Expected Results and Performance Measurement

A performance measurement strategy (PMS) has been developed for the department which includes performance indicators, expected results, methods for reporting on performance and evaluation plans to be used for determining the effectiveness of the program activities. 
Indicators for each project are identified in alignment with the activity undertaken and are detailed in the contribution agreement. Recipients are required to report progress and final results against these indicators.

The WDP focuses on developing and diversifying the western economy through innovation, business development, community economic development, and research with measurable results demonstrated under each activity through indicators as detailed in the Department’s PMS.  A complete and current list of indicators is maintained in the PMS, but examples of indicators for performance measurement under each activity include:

1. Innovation: Patents filed or issued, prototypes developed, technologies adopted or brought to market, spin off companies, etc.;
   
2. Business Development: Jobs created or maintained, businesses created or maintained, the value of trade financing, partnerships and strategic alliances, etc.;
   
3. Community Economic Development: Community involvement, community stability, people trained, public-private partnerships, businesses, created, maintained or expanded, etc.; and
   
4. Policy, Advocacy and Co-ordination: Program or policy decisions influenced by research, etc.

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4. Eligible Criteria

Funding may be in the form of a contribution or a grant.  Grants may be used where the assessment demonstrates a low risk project where monitoring is not required through the life of the project, due to the strength of the recipient, and the confidence in the use and value of the required funding.  Projects requiring ongoing monitoring of progress and use of funds will be funded as contributions.

Contributions and grants may be made to: 

1. Non-profit organizations;
2. Post-secondary institutions;
3. Hospitals and regional health care centers;
4. Individuals;
5. Co-operatives;
6. Small and medium sized commercial, legally incorporated, for-profit enterprises;
7. Indian Bands, as represented by their Chief and Council;
8. Federal Crown Corporations (Treasury Board Secretariat will be consulted prior to any funding decisions for Federal Crown Corporations);
9. Provincial Government Departments, agencies and Crown Corporations;
10. Municipal Governments and organizations created by them;

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5. Eligible Activities

Grants and Contributions under the Program will be made towards projects that support the development and diversification of the western Canadian economy, and activities where economic and/or employment benefits accrue primarily within Western Canada.

Activities funded under this program will be in the areas of:

1. Innovation:  including activities leading to technology adoption and commercialization, technology linkages, applied research and development, community innovation, skills development and knowledge infrastructure.
2. Business Development: including activities contributing to improved business productivity, enhanced market and trade development, industry collaboration, foreign direct investment and access to capital.
3. Community Economic Development: including activities contributing to planning and strategies, development and viability, and economic adjustment.
4. Policy Advocacy and Co-ordination: including activities related to research and analysis involving economic overviews.

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6. Eligible Expenditures:

Grants and Contributions will be made towards eligible costs, including operating and capital costs, that are incurred by the recipient and which, in the opinion of the Department, are reasonable and are required to achieve the results to which they relate.  Examples of eligible costs are:

• operations, maintenance;
• personnel: salary and benefits;
• equipment purchase and lease;
• information management and information technology acquisitions;
• legal, administrative, accounting, licensing, permits, consulting fees;
• rents, leases, leasehold improvements
• acquisitions of proprietary processes;
• interest charges, insurance, fees, taxes;
• supplies, transportation;
• capital improvements related to projects; and
• other costs that are reasonable, incremental and directly attributable to activities necessary to achieve desired results, as specified by the agreement.

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7. Government Assistance

Total Government Assistance (stacking level) under the Program will be up to and including 50% of eligible capital costs for commercial projects including the establishment, modernization or expansion of physical plants; up to 75% of other eligible costs for commercial projects; and up to 100% of eligible costs for non-commercial projects, projects implemented by not-for-profit organizations or projects carried out in accordance with formal agreements entered into with other levels of government.

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8. Amount of Funding

Funding for Grants and Contributions under the Program will be determined based on the minimum level required to ensure that the projects further the attainment of Program objectives and expected results and that the projects proceed in the timing, scope and location proposed. The assessment of the required level will take into consideration all other sources of funding available to the recipient.

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9. Maximum Amounts and Special Conditions

1. The maximum contribution per project per recipient under these Terms and Conditions shall not exceed $10 million without the approval of Treasury Board. A decision by Cabinet is required for any contribution over $20 million. 
   
2. Where the department provides funding for more than one project for a recipient under these Terms and Conditions the maximum cumulative amount of contribution funding approved shall not exceed $38 Million in a 5 consecutive year period without the approval of Treasury Board.  This 5 year revolving cycle will commence April 1, 2009. 
   
3. The maximum grant per project per recipient under these Terms and Conditions shall not exceed $1 million without the approval of Treasury Board.  A decision by Cabinet is required for any grant over $20 million.

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10. Payments:

Payments for contributions will be made either:

• On the basis of documented claims for eligible costs incurred and paid and/or the fulfillment of conditions specified in the contribution agreement being met; or
• Achievement of pre-determined performance expectations or milestones as detailed in the agreement. Standard performance expectations will be as defined in the Department’s Program Activity Architecture; or
• A costing formula, when a “per unit” cost of outputs can be clearly predetermined.

Payments for grants will be made:

• In accordance with the details set out in the grant agreement and may be either in instalments or as a lump sum, depending on the size and nature of the project being funded and the cash requirements of the recipient.

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11. Requests for Funding and assessment Criteria

Every prospective recipient provides any pertinent information needed to assess the project such as:

• Description of the project including:
  • Activities;
  • Timelines;
  • Costs;
  • Key partners and other sources of funding;
  • Expected results and a performance measurement strategy, and 
  • Project Risks and mitigation strategies
    
• Description of the Recipient
  • Legal status;
  • Financial position;
  • Disclosure of lobbyists involvement; and
  • Involvement of former public servants or public office holders.
    
• Any other information that the Department requires to assess the eligibility of the prospective recipient and the project.

The criteria to assess projects are defined in the Department’s systems and guidelines and examine the following aspects of the project:

• Eligibility;
• Viability;
• Incrementality;
• Resources;
• Results;
• Risks and mitigation measures;

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12. Monitoring

1. Contributions: The level of detail in reporting that is required from recipients of contributions will be aligned with the risk of the project and may include schedules, plans and reports in sufficient detail to enable the Department to:
   • assess the progress of the project;
   • assess the financial status of the project/recipient;
   • carry out the post-completion monitoring called for in the agreement;
   • administer the repayment of the contributions where applicable; and
   • evaluate the achievement of milestones and performance expectations.
     
2. Grants:  Recipients will be required to report on the results of the project to support the performance measurement strategy of the Department and to determine continuing eligibility where a grant is paid by installments.

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13. Official Languages Act:

In support of building a society which is respectful of Canada's linguistic duality, in cases where WDP funding supports activities that benefit members of both official language communities:

1. Its design and delivery will respect the obligations of the Government of Canada as set out in Part VII of the Official Languages Act through consultation with the Official Language Minority Community, and
   
2. Where appropriate, equitable services and benefits will be made available in both official languages either directly through the funded activities or through an alternative arrangement, in compliance with the Official Languages Act.

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14. Contributions to be further Distributed

Funding to recipients for further distribution to one or more persons or entities will only be provided through a contribution.  Special conditions in the contribution agreements for this purpose will clearly define the relationship between the department and the recipient to ensure that the recipient maintains independence and will not be seen to be acting as an agent of the government.

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15. Repayable and Conditionally Repayable Contributions:

Contributions may be repayable, conditionally repayable or non repayable depending on the nature of the project.  The recipient’s contribution agreement will detail the terms of repayment and the following sections set the provisions for establishing repayment requirements:

1. Contributions to not- for- profit entities will be non-repayable except where a project results in what would normally be considered a commercial activity.  Commercial activity means cases where forecasted revenue generation is clearly beyond cost recovery, and is material and profit driven.  In such cases the amount will be conditionally repayable and will commensurate with benefits which accrue to the recipient from the project.  Revenue factors that determine the amount due (in whole or in part) and that trigger repayment are based on the achievement of revenue generation.
   
2. Contributions to for-profit businesses are to be repayable, either conditionally or unconditionally, depending on the nature of the project being funded.
   1. Conditionally repayable contributions are used to fund the types of projects where a shared risk approach is deemed appropriate in order to stimulate activity.  The risk assessment is focused on the nature of the activity to be undertaken, and this type of assistance is used in projects where technical and/or market penetration risks are inherently elevated.  These may include R&D projects, commercialization of new products, new market development, and supplier development to bid and acquire procurement contracts, etc.  Repayment is provisional upon specific conditions occurring or being met.  The amount to be repaid is commensurate with benefits which accrue to the recipient from the project. Success factors which determine the amount due (in whole or in part) and trigger repayment include the achievement of  R&D objectives, achievement of sales of the resulting products, achievement of sales in a new market, achievement of productivity gains, or an awarded procurement contract.  The determination of the amount due will be directly linked to the project’s success factors.  For example for some types of projects, the achievement of the success factor will result in the entire contribution becoming fully repayable; in most types of projects the amount becoming due will be based on a percentage of annual gross sales achieved from a specific product or market.  The establishment of the amount due will be guided by formulas and parameters established depending on the nature of the project being funded.  These parameters are to take into account the ability to pay, assessment of forecasted results, and reasonable expectations for repayment within a given time period (e.g. within 10 years).
   2. Unconditionally repayable contributions are to be repaid regardless of the benefits realized in the project.  Projects with for profit entities, other than those described in Section 15(b)i will generally be unconditionally repayable.
      
3. The establishment of the repayment period will be based on such factors as the useful life of the funded asset, the duration of the project the period during which the recipient will realize the benefits of the project, the expected return on investment, and the recipient’s financial position and ability to repay.
   
4. The terms of repayment are to be based on a fixed time schedule with due consideration to any seasonal nature of a recipient’s operation (monthly, quarterly, semi-annual or annual installments), or linked to revenues based on a percentage of gross sales or sales of the resulting products with provisions for full repayment by a specified due date.
   
5. Non-repayable contributions to for-profit businesses and not- for- profit organizations engaged in commercial activities may be permitted where:
   • The contribution is less than $100,000 and the administrative burden of repayable contributions is not justified.
   • The benefits from the contributions accrue broadly rather than to the recipient.
     
6. The Department will use its corporate systems to assist in the verification of invoice dates, appropriate follow-up on overdue or defaulted accounts, viability reviews, rescheduling decisions and collections. 
   
7. Each project will be rated according to risk so that appropriate monitoring measures can be carried out as per Section 12 of these Terms and Conditions and in accordance with the Treasury Board Policy on Receivables Management.

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16. Rights to Intellectual Property

Under the funding agreement, the Recipient is required to retain ownership of intellectual property developed in the project. Ministerial approval is required for any exceptions.