effective transfer payment management presenter: indira ramdhan office of the provincial controller...
TRANSCRIPT
Effective Transfer Payment Management
Presenter: Indira Ramdhan
Office of the Provincial ControllerTreasury Board [email protected]
February 15, 2012
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Today’s Discussion
Provide an overview of the current transfer payment (TP) environment.
Examine how to use a risk-based approach to effectively manage TPs.
Outline considerations when assessing a TP recipient’s governance capacity.
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Key Messages
“Accountability is the cornerstone of effective transfer payment program management.”
“A risk-based approach is integral to the proper management of TP accountability and must be built into each step of the TP Accountability Cycle.”
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The World of Transfer Payments
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What are Transfer Payments?
Transfer payments are government transfers of money to an individual, an organization or another government for which the government does not:
Receive goods or services directly in return, as would occur in a purchase or sales transaction;
Expect to be repaid in the future, as would be expected in a loan; or Expect a financial return, as would be expected in an investment.
Types of TPs: Entitlements Shared-cost Agreements Grants
CapitalOperationalOne-time funding
Pilot projects
Research
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Why are Transfer Payments so Important?
Major part of government spending
Spending taxpayers’ money
Increasingly, the primary means of delivering public services
Provides the means to support “grassroots” innovation
Growing importance of not-for-profit sector as an agent of socio-economic change
Other Expenses
10%*Transfer Payments
90%*
$12.7 Billion
$108.9 Billion
TPs as Share of Total Government Expenditures ($121.6B) 2010-11*
* On appropriated basis. Excludes consolidation adjustments and $8.8B Treasury Program (interest on debt).
Source: Government of Ontario Public Accounts, 2010-11
7Clients
Citizen
Capacity / Program Effectiveness
Acc
ou
nta
bil
ity
Balancing Accountability and Capacity / Effectiveness
Client Group
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Revised TP Accountability Directive
Establishes the principles and mandatory requirements for stronger oversight of transfer payments.
Applies to ministries and classified agencies that administer TPs.
Transfer payments not meeting the requirements of the TPAD must have Treasury Board/Management Board of Cabinet (TB/MBC) approval.
Key principles: risk, good governance and value-for-money.
Transfer Payment AccountabilityDirective
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Key Changes to the Directive
Requires a risk-based approach to TP management
Also applies to classified agencies that provide TPs
Only legal entities or individuals (entitlement programs) can receive transfer payments according to approved criteria, in amounts not exceeding requirements, and in accordance with ministry RbPs
Ministries and agencies must consider TPR’s capacity for effective governance and controls
Must balance public service accountability and the TPR’s responsibility and capacity to deliver
Ministries must have oversight capacity to ensure TPRs are providing services for which funds are received
Corrective action is to be in proportion to the risk associated with the degree of non-compliance and be progressive in nature
TB / MBC approval is required for exemptions / exceptions
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Transfer Payment Accountability Cycle
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Using Your Professional Judgment Use of your professional judgment and discretion is required
throughout the TP cycle
When defining expectations: Determine what is realistic for both parties
Before agreements are signed and money is flowed: Ensure the TPR has met all of the requirements
Ongoing monitoring and reporting requirements: Determine if the TPR is meeting your requirements Are there are any impacts if the TPR is not meeting the
requirements set out in the agreement?
When a TPR is not meeting its objectives: Determine what the appropriate corrective action should be
based on the degree of non-compliance
Whenever you interact with TPR staff: Be mindful and professional in your day-to-day
communications and behaviour
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A Risk-based Approach
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Risk Management
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What is Risk / Risk Management?
Risk: the chance of something happening that will affect the achievement of objectives.
Risk can represent an opportunity or a threat to the achievement of objectives.
Risk Management: active process of systematically identifying risks, assessing exposures, and developing appropriate action plans so that risks are managed in a way that will enable a recipient to meet its business objectives.
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Why use a Risk-based Approach?
It is mandatory!
Risk Management is central to effective TP management
One size does not fit all
Improves understanding of challenges and threats and opportunities
Helps meet strategic and operational objectives
Risk Management formalizes this process, brings more rigour to it and requires documenting and reporting conclusions, plans, actions to be taken and results.
Risk Management aids the program staff by helping to prioritize and decide where best to focus your efforts.
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Risk Management Process
State
Objectives
State
ObjectivesIdentify
Risks
Identify
RisksAssess
Risks
Assess
Risks
Plan &
Take
Action
Plan &
Take
Action
Monitor
Risks
Monitor
Risks
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Step 1: State Objectives
Ask: Why does this program exist?
The ministry/classified agency should have already defined objectives, functions, eligibility criteria and TPR obligations for all TP Programs.
Key objectives, performance measures and targets of the program should be stated simply, clearly and accurately.
TPRs should be perfectly clear about why the initiative is being undertaken and what is expected of them.
State
ObjectivesIdentify
Risks
Assess
Risks
Plan & Take
Action
Monitor
Risks
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Step 2: Identify Risks
Ask: What are the threats to meeting the program objectives?
Use a structured approach to ensure that all risks threatening the objectives are identified and documented prior to the risk assessment
Ask: What is being done about the possible threats?
Ensure all activities to manage the risks are identified and documented prior to the risk assessment
Increase awareness among staff of the various risks and strategies to manage them
State
Objectives
Identify
RisksAssess
Risks
Plan & Take
Action
Monitor
Risks
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Risks
Public Perception
Public Perception
Stakeholder Satisfaction
Stakeholder Satisfaction
Workforce / HR
Workforce / HR
Information / Technology
Information / Technology
Service / Operational
Service / Operational
Governance/ Accountability
Governance/ Accountability
OtherOther
Legal / Compliance
Legal / Compliance
Financial / Fiscal
Financial / Fiscal
Strategic / Policy
Strategic / Policy
RisksRisks
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Step 3: Assess the Risks
Ask: How likely are the threats to occur?
Prioritize and assess risks and strategies
For each risk identified in Step 2 – assess it based on likelihood of occurrence & potential impact (consider existing and operational controls)
Ask: If the threat materializes – what kind of an impact would it have on the objective?
Prioritize risks based on the assessment
Identify potential control gaps / residual risk (i.e. typically, risks that may not be adequately managed)
State
Objectives
Identify
Risks
Assess
RisksPlan & Take
Action
Monitor
Risks
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Step 4: Plan and Take Action
Ask: Which risks do you need to act on? How?
Identify risk exposures (residual risks) and determine whether they are acceptable
For risks deemed acceptable, the rationale should be documented by the person responsible for it
For risks deemed unacceptable, develop, document and implement action plans to manage them
Determine corrective actions that need to be taken (by whom & by when) to adequately manage each risk exposure
State
Objectives
Identify
Risks
Assess
Risks
Plan &
Take ActionMonitor
Risks
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Sample Risk Impact-Likelihood Matrix
Likelihood
Impact
LowMedium –
LowMedium
Medium – High
High
High
(Almost certain)
Assign oversight / management
responsibilities
Needs senior management
attention
Needs senior management
attention
Detailed management planning and attention is
required
To be managed by senior
management with a detailed plan
Medium-High
(Likely)
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Needs senior management
attention
Needs senior management
attention
Detailed management planning and attention is
required
Medium
(Possible)Manage by routine
procedures
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Needs senior management
attention
Detailed management planning and attention is
required
Medium-Low
(Unlikely)
Manage by routine procedures
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Low
(Rare)Manage by routine
proceduresManage by routine
procedures
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
Assign oversight / management
responsibilities
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Step 5: Monitor the Risks
Periodically monitor the risk profile and effectiveness of action plans, revising as necessary, e.g., conduct mandatory risk-based reviews
Was action taken under the Plan and Take Action step?
Share relevant risk-related information on a timely basis in regular reporting as per the TP agreement, and as TB/MBC or Minister of Finance may request
Learn from experience and foster a pro-active risk-responsive approach to decision making
State
Objectives
Identify
Risks
Assess
Risks
Plan & Take
Action
Monitor
Risks
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Risk-based Approach to TP Management
Integrated throughout the TPA Cycle (see TPA Cycle diagram)
One size does not fit all
Balance public service accountability with the TPR’s responsibilities and capacity to deliver
Document, Document, Document!!!
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Remember . . .
Risk is both opportunity and threat!
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Transfer Payment
Recipient Governance
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What is Governance?
Governance refers to the processes and structures through which power and authority are exercised, including the decision-making processes.
Good governance is about both achieving desired results and achieving them in the right way.
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TP Recipient Governance
The TPAD requires ministries and classified agencies to consider the TPRs’ capacity regarding:
Expertise and experience necessary to discharge responsibilities in compliance with ministry requirements;
Required and appropriate governance
and control structures; and
Reliable, accurate and timely
reporting.
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What is the Organizational Structure?
Ministry/TP ProgramMinistry/TP Program
Board of DirectorsBoard of Directors
Chief Executive Officer/
Executive Director
Chief Executive Officer/
Executive Director
Operations Operations Human
Resources
Human
ResourcesFinanceFinance
Legislation
Media
Other Funders
• executes board’s strategies• not normally a board
member but can be an ex-officio member
• accountable for operations
Sub-committeesSub-committees
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Appoint the leaders (e.g., CEO, senior managers, committee members,
project manager)
Appoint the leaders (e.g., CEO, senior managers, committee members,
project manager)
Determine or approve the mission & objectives (i.e. what is valued)
Determine or approve the mission & objectives (i.e. what is valued)
Provide financial, legal & ethical oversight
Provide financial, legal & ethical oversight
Monitor performance & respond as required
Monitor performance & respond as required
Allocate resources effectively
Allocate resources effectively
Advocate externallyAdvocate externallyEvaluate activity plans
and budgets
Evaluate activity plans and budgets
Some Common Roles of Boards of Directors
Set strategic direction
Set strategic direction
Can delegate responsibilities to sub-
committees
Can delegate responsibilities to sub-
committees
Directors’
Key Roles
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Signs of Weak Governance
Poor service and communications amongst clients and/or partners, TPRs and ministry
Excessive turnover of executive directors/CEOs and/or board members
Difficulties in recruiting board members
Lack of (or weak/poor) relationship between ministry / classified agency and TPR
Chronic, persistent deficits
Low attendance at board meetings
Failure to address conflicts of interest
Unclear roles and responsibilities
Irregular reporting practices
Partisan or conflicted boards
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TP Organizations: Governance Challenges
Volunteer boards may not have the range of expertise needed to fulfill fiduciary responsibilities.
Board membership may not be representative of the population served (changing demographic or cultural profiles of clients).
Boards may assume an operational, rather than an oversight role.
Overdependence on key (or long tenured) administrators.
Small organizations can have underdeveloped processes and procedures but deliver tangible “grassroots” results.
Capacity limitations can result in roles and responsibilities being blurred.
Performance management (financial and non-financial) may not strongly link to decisions.
Established organizations can be wedded to an single or dated method of delivery.
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Assessing Board Effectiveness
Meet the Board
Meet the Board
Meet StaffMeet StaffConfirm TPR
is legally
established
Confirm TPR is legally
established
Ask for the Business / Risk
Management Plan
Ask for the Business / Risk
Management Plan
Review manuals/other
documents
Review manuals/other
documents
Look at client-satisfaction
surveys
Look at client-satisfaction
surveys
Interview select
stakeholders
Interview select
stakeholders
Look at TPR’s by-
laws
Look at TPR’s by-
laws
Review annual reports
Review annual reports
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Importance of Good Governance
Ensures accountability and value-for-money for the public
Provides stability and transparency Ensures efficient use and management
of public resources Clearly defines roles and responsibilities Provides a yardstick to measure
performance against agreed expectations
Fulfills legal obligations and mandates Enables and monitors desired client
outcomes
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Pensions
Funding: Government
(Fed / Prov.) investment
Established governance
Professional skills
Assets (land, buildings)
/ Liabilities
Separation of role /
duties
Funding
Incorporated /
financially complex
Hire staff
Private donations
Volunteer
(Non) Corporate
Flat organization
Organization Maturity Model
Size ($ / # FTEs / OPs)
Org
aniz
atio
n M
atu
rity
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Other Tools
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Relationship Management An effective and ongoing relationship
between a program manager and a TP recipient organization is a critical ingredient for success.
These relationships hinge on the interplay between three dynamics:
Legal: TPR and the Ministry / classified agency
Formal: Ministry / classified agency staff and TPR staff
Personal: between individuals
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Financial Management
Financial management is the process by which the financial aspects of public sector business are directed and controlled to support the delivery of the organization’s goals.
Importance of TP financial oversight
TPRs are spending public money
Concise, timely, accurate reports and records are excellent indicators of management effectiveness
Financial information supports key decisions
Financial information facilitates identification and management of risk
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What is Performance Measurement?
Performance measurement (PM) is the process of assessing results – to improve them if possible
PM tracks how well program objectives are being achieved
Performance measures (PMs) can provide you with accurate information for risk management and decision-making The better informed your risk management and decision-
making, the better the TP results and value for money
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Resources
offers 2 day course – Transfer Payments:
Effectively Managing Transfer Payment Programs
Transfer Payment Accountability Forum chaired by MGS’ Corporate Policy Branch Examines issues and shares best practices
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Questions or Comments