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Foundations (Conditional Grants)

In 2006-07, NRCan contributed to the following foundations (conditional grants). Further information can be found at http://www.tbs-sct.gc.ca/est-pre/estime.asp.

1. Sustainable Development Technology Canada
2. Green Municipal Fund

1) Name of Recipient: Sustainable Development Technology Canada (SDTC)

2) Start Date: April 2002

5) Description: To stimulate the development and demonstration of Canadian technologies aimed at climate change, clean air, clean water and clean soil.

6) Strategic Outcome: Canadians derive sustainable social and economic benefits from the assessment, development and use of energy, forest and mineral resources, and have the knowledge to mitigate environmental impacts and respond effectively to natural and man-made hazards.

7) Achieved results or progress made: (within departmental overall plans)
Over the life of its operations, SDTC will expend $280 million primarily on climate change projects, $70 million on air quality projects and $200 million on the development and demonstration of new technologies for clean water and clean soil. Out of the climate change/air quality allocation, SDTC will provide at least $50 million towards projects related to the development and demonstration of technologies for the hydrogen economy and at least $50 million for projects related to clean fossil fuels.

NRCan is not responsible for reporting specifically on SDTC progress and results. However, as the designated minister under the SDTC Act, the Minister of NRCan tables the SDTC annual report in Parliament. This report is available at the SDTC website at http://www.sdtc.ca/en/index.htm. The following is a summary of SDTC accomplishments as reported in the 2006 annual report.

In 2006, SDTC announced 35 projects for funding, with SDTC providing $76M (30%), private sector participants providing $157M (62%) and other government programs providing $22M (8%), for a total project value of $255M. Since its inception, SDTC has committed $238M (28%) in technology development and demonstration funding for 107 projects, while the private sector contributed $499M (59%) and $109M (13%) came from other public sources, for a total project value of $846M. These 107 projects are reported by SDTC to have the potential for 12.6 Mt of CO2 emission reductions annually by 2012.

A total of 10 projects has been completed to date. Seven were completed in 2005 and three in 2006.

In 2006, SDTC operational expenses were $7.4M, compared with $5.9M in 2005. The approved operating budget for 2007 is $8.7M. 2006 project disbursements were $32.1M, compared to $13.3M in 2005, with the 2007 figure forecast at $70M. Total project disbursements as of December 31, 2006, stood at $57M. SDTC's investment portfolio had an overall market value of $525.5M on August 31, 2006. Accordingly, SDTC's earnings on the investment of the $550M received from the government have largely offset the combined operating costs and project disbursements to date.

77% of the 107 projects funded to date (82 projects) was classified as principally having a climate change impact, 17% (18 projects) was classified as having a clean air impact, and 84% (90 projects) had both climate change and clean air impacts. These figures are close to the targets of 80% climate change and 20% clean air.

(in millions of $)	8) Actual Spending 2004-05	9) Actual Spending 2005-06	10) Planned Spending 2006-07	11) Total Authorities 2006-07	12) Actual Spending 2006-07	13) Variances
14) Program Activity (PA): Energy*	100.0	0.0	0.0	0.0	0.0

15) Comments on Variances: In total $275 million expended by NRCan ($50M was incurred in 2001-02)

16) Significant audit and evaluation findings and URL to last audit and/or evaluation:

First Interim Evaluation (June 2006) (http://www.sdtc.ca/en/news/Interim_Evaluation_Report.pdf)
As required by Funding Agreement Three, SDTC carried out an interim evaluation of its operations in 2006. The evaluation was conducted by an independent consultant, who made a number of recommendations to SDTC. Although key informants praised the high quality of SDTC's operations, the evaluation report found that many expressed concerns over the slow pace of the funding process as well as the level of details required for Statements of Interest (SOI) and proposals. In particular, the informants identified significant concerns with the lengthy contracting process, while recognizing that external factors beyond SDTC's control can have a significant contributing role. The evaluation found that fewer than half of all approved projects (at the end of 2005) had signed contracts (32 of 76). As a result, on December 31, 2005 (with 4 of its 9 funding years completed), SDTC had committed $169M to clean energy technology projects, but only $25M disbursed. Hence, NRCan and Environment Canada concluded that SDTC would need to increase its funding commitments and disbursements substantially. The two departments will assess SDTC's response, once released, and discuss with the Foundation the implementation of the report's recommendations. In particular, shortening of the contracting process will need to be addressed. A second interim evaluation will be due in 2009 or after two-thirds of the funds have been committed (whichever comes first).

CESD Climate Change Audit - Chapter 1 (September 2006) (http://www.oag-bvg.gc.ca/domino/reports.nsf/html/c20060901ce.html/$file/c20060901ce.pdf)
In December 2005, the Office of the Auditor General's Commissioner of the Environment and Sustainable Development (CESD) initiated an audit of SDTC. This audit encompassed all aspects of SDTC's operations and was part of the CESD audit of climate change programs in the federal government. The audit objective was to assess how well SDTC was fulfilling its mandate to support and fund the development and demonstration of climate change technologies and act as a catalyst in building a sustainable development technology infrastructure in Canada. The audit was also to determine whether the federal government had ensured that SDTC activities were effectively aligned with other federal climate change activities and whether the government's oversight of SDTC was appropriate and provided Parliament with suitable information in a timely manner. The full audit report was tabled by the Auditor General in September 2006. Chapter 1 (the report on SDTC) was positive in its assessment of the two sponsoring departments (NRCan and Environment Canada) and indicated that the departments had taken reasonable steps to ensure the alignment of SDTC's climate change activities with federal efforts and to oversee the Foundation. The report recommended that SDTC adopt alternative approaches to reporting projected reductions in greenhouse gas (GHG) emissions, using a conservative approach. This recommendation was a reflection of SDTC's claim that the projects approved to date could lead to a 12.5 Mt reduction in GHG emissions. The report recommended that SDTC re-examines the appropriateness of the rate it uses to discount project applicants' GHG claims and that it also takes into account the effect of project delays.

AG November 2006 Report - Chapter 12 (October 2006) (http://www.oag-bvg.gc.ca/domino/reports.nsf/html/20061112ce.html/$file/20061112ce.pdf)
In Chapter 12 of the Auditor General's November 2006 Report, entitled "The Role of Federal Appointees on the Board of Directors of Sustainable Development Technologies Canada (SDTC)", the Auditor General reported on an investigation into the question whether the government's position on the role of federal appointees on SDTC's Board of Directors supports effective board governance. This investigation was in part triggered by the insertion of Clause 15.20 in the third funding agreement with SDTC, which limits the participation of government appointees in board meetings. At various occasions, the Foundation had raised concerns about how the clause would affect the board governance.

In its report, the AG concluded that the government's decision to restrict the role of federally-appointed directors affected the SDTC Board's governance, impeded SDTC's operations and contradicted the government's own position on the matter. The OAG recommended that NRCan and Environment Canada consult with TBS and the Privy Council Office to clarify the role of federal appointees on the board of directors of SDTC. Following the release of this report, the suggested consultations have taken place and TBS has advised the sponsoring departments that Clause 15.20 can be removed.

Evaluation of Foundations (March 2007) (http://www.tbs-sct.gc.ca/report/orp/2007/ef-fe/ef-fe_e.asp)
This report presents the findings of an evaluation of the use of foundations as instruments of public policy. The evaluation study was conducted by KPMG LLP (KPMG) on behalf of the Government of Canada between September 2006, and January 2007. The study addresses the government's commitments to the Standing Senate Committee on National Finance and Standing Committee on Public Accounts to undertake an evaluation of the use of foundations as tools for the delivery of public policy, particularly with respect to the use of up-front conditional grant assistance. The evaluation examined the following: (i) the overall appropriateness of the use of the foundation model as an instrument of public policy; (ii) effectiveness of foundations; and (iii) operating and administration (O&A) costs of foundations as compared to existing department-run programs for delivering policy.

The study found that the 16 foundations evaluated differ in mandate, scales of operation, business models and range of activities, and that they differ from departmental programs. The study's short time frame prevented a reliable comparison of operating and administrative costs between foundations and departmental programs. Analysis was based on the cost structures and trends of foundations compared to operating and administrative costs of similar government organizations.

The study's overall findings were positive and concluded that foundations, such as the SDTC, are cost-effective, successful in achieving results, fulfilling their mandates and complementing related government programs; however, the study noted also that proposal assessments for new foundations should be strengthened to ensure the most appropriate, effective and efficient method of delivering public policy. TBS is now studying the evaluation results and recommendations, and is considering the need for further research into the future use of the foundation model for delivering public policy. Potential future requests from the standing committees will determine if the Government will need to provide additional input.

17) URL to recipient's site: http://www.sdtc.ca/en/index.htm.

18) URL to recipient's annual report: http://www.sdtc.ca/en/news/annual_reports.htm.

* NRCan share only

1) Name of Recipient: Federation of Canadian Municipalities' (FCM) Green Municipal Fund (GMF)

2) Start Date: Budget 2000

5) Description: The intent of the GMF is to encourage investment in environmental municipal infrastructure. Specifically, the priorities of the fund is to have a positive impact on the health and the quality of life of Canadians by reducing greenhouse gas (GHG) emissions, improving local air, water and soil quality and promoting renewable energy by supporting environmental studies and projects within the municipal sector.

The GMF is equally co-funded by NRCan and Environment Canada (EC) who have provided endowments to the FCM which manages the funds at arms' length, creating a strong partnership between the FCM and the Government of Canada. The FCM Board of Directors, formally designated as the decision making body for the funds, is advised by a 15 member council with five federal appointees. The Council plays a key role, supported by the FCM secretariat and the GMF Peer Review Committee.

The FCM, a not-for-profit non-governmental organization, operates the GMF through an arms-length-agreement with EC and NRCan. Created in 2000 with two arms-length funding agreements totaling $125 million, the GMFs were doubled in 2002 with an additional $125 million. The latest funding agreement (2005) added another $300 million to the funds and merged the two funds into one fund, the GMF.

This fund supports grants, loans and loan guarantees and is consistent with the purpose and intent of the original agreements. $150 million dollars of this fund is to be used exclusively to provide loans for the remediation and redevelopment of municipal contaminated sites (Brownfields). The new agreement contains some significant revisions which are expected to substantially increase the environmental, social, and economic benefits of the GMF by increasing their size, flexibility, and clarity.

For more information on the GMF, including GMF Annual Report 2005-2006 and an overview of GMF projects, consult the foundation's website at http://www.sustainablecommunities.fcm.ca/GMF/.

6) Strategic Outcome: Canadians derive sustainable social and economic benefits from the assessment, development and use of energy, forest and mineral resources, and have the knowledge to mitigate environmental impacts and respond effectively to natural and man-made hazards.

7) Results achieved: Within departmental overall plans, encouraging local environmental action in key sectors including:

• energy;
• water;
• waste;
• sustainable transportation;
• brownfield remediation; and
• planning.

Performance results reported here are those reported by the FCM in material distributed to the responsible departments (NRCan and EC) in their 2005-2006 annual report.

Since 2000, the GMF has approved and funded 522 studies, field tests and capital projects, for committed funding of $304M, leveraging more than $1.8B of economic activities across Canada.

FCM estimates the potential environmental impacts from these investments include the reduction of: 641 tonnes NOx; 65 tonnes SOx; 512 tonnes PM10; 1.2 megatonnes CO2; or an equivalent of taking 201,000 cars off the road annually.

In 2005-2006, the GMF approved over $9M in grants and almost $55M in loans to 31 capital projects. This includes the Request for Proposal (RFP) for brownfields which financed loans totalling over $15M for 12 projects, leveraging over $39M in economic activity. These projects will remove or remediate approximately 650 thousand cubic metres of polluted soil from over 1 million square meters of property.

In 2005-2006, over $10M in grants supported 84 feasibility studies, field tests and sustainable community plans, a figure similar to the previous year.

The GMF set a 2005-2006 goal of regional balance. This was achieved with the exception of Quebec, where the numbers are expected to climb with increased outreach to that province and the adaption of the RFP process to facilitate GMF applications from Quebec.

In 2005-2006, GMF agreed to sell the Emission Reduction Rights from the Nanaimo landfill gas capture project to an Alberta-based energy utility, possibly recovering the value of the original grant. If successful, this mechanism may be replicated in future funding agreements.

When it becomes available, the 2006-2007 GMF annual report will be posted on the foundation's web site.

(in millions of $)	8) Actual Spending 2004-05	9) Actual Spending 2005-06	10) Planned Spending 2006-07	11) Total Authorities 2006-07	12) Actual Spending 2006-07	13) Variances
14) Program Activity:	0.0	150.0	0.0	0.0	0.0	0.0

15) Comments on Variances:

16) Significant audit and evaluation findings and URL to last audit and/or evaluation:

17) URL to recipient's site: http://www.sustainablecommunities.fcm.ca/GMF/.

18) URL to recipient's Annual Report: http://www.sustainablecommunities.fcm.ca/GMF/Annual_Report/.

*NRCan's share is 275M.

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