Guide to Requesting Capacity-Based Real Property Transaction Approval Limits

The purpose of this guide is to outline the information and analysis that will be evaluated to support requests for capacity-based approval limits and conditions for real property transactions. Such limits and conditions should be based on operational needs and departmental capacity to manage transactional risks, complexities and sensitivities. Requests for such limits should present an analysis of operational need; an understanding of the risks, complexities and sensitivities associated with typical transactions undertaken by the department; See footnote ¹ and demonstrate internal capacity to manage the identified risks, complexities and sensitivities. This guide will assist departments in presenting the information necessary to support being granted these approval limits.

A real property transaction can be an acquisition or disposition of real property by purchase, lease, licence, exchange, gift, easement, expropriation, transfer or acceptance of administration, or transfer or acceptance of administration and control.

Ministers have the authority to acquire or dispose of real property under the Federal Real Property and Federal Immovables Act, the Federal Real Property Regulations or other acts. Generally, real property is acquired or disposed using the Regulations' authority unless there is a more specific legislative authority. The approvals required for real property transactions are dependent on the legislative authority used to undertake the transaction.

The Federal Real Property and Federal Immovables Act provides authority to the Treasury Board to "establish financial or other limits, restrictions or requirements respecting any transaction or class of transactions authorized under regulations made pursuant to subsection (2)." Treasury Board first established transaction approval limits in 1992. Real property transaction approval limits and conditions can be financial thresholds for specific types of transactions or conditions such as specific processes that must be followed or a combination of both.

These limits are important because when acquiring or disposing of real property using the authority of the Regulations, a minister must seek Treasury Board approval when the value of the transaction is greater than the transaction approval limits for his or her department. If the value of the transaction is less than the department's transaction approval limits, he or she can undertake the transaction without seeking Treasury Board approval. If a minister acquires or disposes of real property under the Federal Real Property and Federal Immovables Act, Governor-in-Council approval is required, regardless of the value of the transaction. If a minister acquires or disposes of real property under any other act, the specific requirements or restrictions detailed in the authorizing legislation must be followed. Therefore, even those transactions that are within the limits established by Treasury Board may require Treasury Board or Governor-in-Council approval.

In 2006, the Policy on Management of Real Property was renewed, and limits and conditions that were approved before that date were embedded in Appendix B of the policy. Limits were categorized as either special or general. Special limits were department-specific, and general limits applied to all other departments. The real property transaction approval limits were then reviewed in 2010. As a result of this analysis, it was determined that the existing limits needed to be renewed in order to be coherent and consistent with departmental capacity. Therefore, the Treasury Board of Canada Secretariat proposed, in consultation with custodial departments, that the existing limits be rescinded and that departments be asked to seek Treasury Board approval of revised limits, based on a consistent analysis of need and capacity.

On November 17, 2011, all existing limits and conditions were removed from policy and placed in a Web-based repository. Most special limits that were established before November 17, 2011, will expire on November 17, 2014, and departments that do not seek revised special limits before November 17, 2014, will revert to general limits. If departments or agencies want to undertake real property transactions above the general limits without needing to seek Treasury Board approval, they are encouraged to seek capacity-based limits. This guide has been developed to assist departments with such requests.

Special and general real property transaction approval limits and conditions that have been approved by the Treasury Board are posted in the Web-based repository.

Requests and recommendations for capacity-based transaction approval limits and conditions will be evaluated to align with several overarching objectives. First and foremost, transaction approval limits should be based on departmental capacity to manage identified risks, complexities and sensitivities and meet operational needs. Furthermore, the tools and processes for seeking, retaining and publishing transaction approval limits are designed to reduce the "web of rules," reinforce deputy head accountability, reduce departmental reporting burden, and promote principles-based policies.

Capacity-based transaction approval limits and conditions should support the operational needs of the department; requests for such limits should therefore be supported by an analysis of departmental need. In order to determine the needs of the department, the submission should include an analysis of past transactions and estimate the nature, volume and value of transactions anticipated over the next three years. The analysis of past transactions is also used as an indication of the typical transactions undertaken by the department. If future transactions are expected to be markedly different from those in the past, the risks, sensitivities and complexities of anticipated future transactions should also be identified and analyzed.

Many real property transactions contain inherent risks, sensitivities and complexities. Requests for capacity-based transaction approval limits should include an analysis of such risks that are inherent in past transactions undertaken by the department. The objective of this analysis is for departments to demonstrate that they are able to identify and assess the unique risks, complexities and sensitivities inherent to their typical transactions.

There are any number of circumstances that may carry inherent issues. Acquisitions that could be considered sensitive include long-term leases, the acquisition of heritage properties, the acquisition of contaminated sites or other transactions that introduce Crown liability, acquisitions that are not at market value, sole source acquisitions, land assemblies and others. Disposals that could be considered sensitive are the disposal of heritage properties, properties that have competing interests, contaminated sites, properties that have redevelopment potential, properties wanted by other departments or levels of government, directed disposals, strategic disposals, and disposals at less than market value. Other conditions that may contribute to a transaction that is complex or sensitive include those that touch on inter-jurisdictional relations, those that have a high degree of public or media interest, those that may infringe on established or asserted Aboriginal rights, and those that are part of a public-private partnership.

Another means of assessing sensitivity and complexity of past transactions is to analyze transactions based on policy requirements. The Policy on Management of Real Property, the Directive on the Sale or Transfer of Surplus Real Property, the Accessibility Standard for Real Property, and Appraisals and Estimates Standard for Real Property impose requirements that govern real property transactions. Transactions should be assessed against these requirements. Departments are required to comply with Treasury Board real property policy principles, including open and fair transactions, paying and charging based on market value, and achieving best value to the Crown.

It is critical to note that just because a department may typically undertake transactions that have identified risks, sensitivities and complexities, it does not mean that these particular transactions will require Treasury Board approval. The intent of the review is to ensure that the department has the ability to identify the real property transaction risks, sensitivities and complexities, and establish mechanisms to manage the risks, sensitivities and complexities that the department is likely to face in its operations.

Departments will need to demonstrate they have the tools in place to manage the risks, sensitivities and complexities of their typical transactions. These tools include appropriate governance structures such as approval processes and delegation of authority, documented rules and guidance, and monitoring mechanisms to verify that governance structures and internal policies are followed.

The Policy on Management of Real Property requires departments to have a comprehensive real property management framework. The management framework should govern management practices and real property transactions and should be tailored based on the needs of the department. Table 1 outlines the elements of a real property management framework.

1.6.1  Governance

Planning for real property transactions should be linked to departmental and federal goals, and the planning process should reveal that decisions for real property transactions are based on an analysis of program need and real property performance. It is recommended that when departments request capacity-based transaction approval limits, the submission should highlight internal planning processes for managing real property transactions. For example, this may include business cases, options analysis, communications plans and stakeholder analysis.

Using the real property management framework as a guide, departments should indicate that authorities to undertake transactions are documented and that decision-making structures are in place. Practitioners should have a clear understanding of their authority and the approvals that are needed to proceed. The roles of Justice Canada and Public Works and Government Services Canada (PWGSC), among others, should be clear so that practitioners know how and when these departments are engaged. It should be noted that if the authority to undertake transactions is delegated broadly, and there should be detailed guidance, approval protocols and monitoring mechanisms. The department should outline how risks, complexities and sensitivities inherent in real property transactions are identified, mitigated and managed as part of the planning and approval process. The approval process should indicate that risky, complex or sensitive transactions are elevated for senior management oversight and approval.

1.6.2  Rules and Guidance

Rules, policies, checklists and other documents that guide transaction decisions should be in place. Guidance could include a policy on open and fair transactions that articulates when it is or is not necessary to have a public solicitation. There should also be written guidance that details how to complete options and financial analyses of real property transactions and that directs how to establish and confirm the amount given or received for the acquisition or disposition of real property.

There should also be internal guidance that details how to identify and manage sensitive transactions. For example, this could include a guide to conduct stakeholder analyses and how and when to inform interested parties of the Crown's intention to acquire or dispose of real property. Of importance is that departmental policies and guidance provide sufficient information to practitioners so they can apply judgment consistently.

1.6.3  Monitoring

The last element of capacity that should be demonstrated is monitoring. Departments should have mechanisms in place to monitor transactions to confirm that decisions and approvals align with departmental and Treasury Board policies, respect authority limits, and meet internal approval requirements.

Requests for capacity-based transaction approval limits and conditions can be either financial or descriptive in nature, or a combination of both. It is recognized that the dollar value of a transaction is not always the most appropriate or accurate measure of the risk, complexity or sensitivity associated with a transaction. It is also recognized that the majority of transactions undertaken in some departments can be categorized or classified accurately, based on the nature of the transaction, method of solicitation, or the party with whom the Crown transacts. For this reason, the request for capacity-based limits and conditions can be either financial or descriptive, or a combination of both, based on the needs and capacity of the department seeking capacity-based limits.

1.7.1  Treasury Board Submission

Section 16(4) of the Federal Real Property and Federal Immovables Act provides authority to the Treasury Board to "establish financial or other limits, restrictions or requirements respecting any transaction or class of transactions authorized under regulations made pursuant to subsection (2)." Therefore, all requests for capacity-based transaction approval limits must be established through a Treasury Board submission. This can be in the form of a stand-alone submission or as part of the submission seeking approval of the department's investment plan and project management capacity. If the request for capacity-based transaction approval limits and conditions is included as part of the submission seeking approval of the department's investment plan, the information and analysis in support of revised limits should be included in a supporting appendix to the submission.

Tools and resources are in place to assist departments in developing Treasury Board submissions. A Guide to Preparing Treasury Board Submissions provides general guidance. Section II of this guide further outlines how to prepare a Treasury Board submission seeking capacity-based real property transaction approval limits.

Reporting requirements for real property transactions will be managed through the Directory of Federal Real Property (DFRP), and there will be minor modifications made to the system and the guide to require that the date of all transactions be entered into the DFRP. By having the dates of real property transactions, the Treasury Board of Canada Secretariat will be able to monitor policy compliance and have a more accurate account of the real property transactions completed.

The newly obtained capacity-based limits and conditions will not expire. However, because capacity is not static, departments that have capacity-based limits will be required to regularly reaffirm that their capacity continues. It is expected that departments will reaffirm capacity to manage real property transactions using a capacity attestation that will be submitted by the deputy head to the Secretariat within three years of receiving approval of capacity-based limits.

Consultations will be held with custodial departments shortly on the form, content and workings of the attestation.

If a department fails to attest to ongoing capacity, or if the Secretariat does not agree with the attestation, the Secretariat may recommend to the Treasury Board that the capacity-based limits be reduced or rescinded.

A department can prepare a submission to request revised capacity-based limits at any time, should its operational needs and capacity change. The capacity attestation will be used only to monitor the limits previously approved by the Treasury Board; any amendments to limits, other than adjustments to account for inflation, must be approved by the Treasury Board, based on an analysis presented in a Treasury Board submission.

The subject of the Treasury Board submission should be "Request for capacity-based real property transaction approval limits and conditions."

The authority cited in the submission should be the Federal Real Property and Federal Immovables Act, section 16(4).

The proposal should begin with the following: "The Minister of [insert] is seeking Treasury Board approval for capacity-based real property transaction approval limits as follows."

The wording should be as clear as possible because when the submission is approved, the approved proposal will be published in the Treasury Board repository of Real Property Transaction Approval Limits and Conditions. For financial limits, the revised limits should clearly indicate the type of transaction corresponding to the financial limits. Types of transactions include acquisition by purchase, lease, acceptance of administration, or acceptance of administration and control or disposition by sale, gift, lease out, transfer of administration, or transfer of administration and control and others. Conditions could include specific processes that will be followed or specific parties with which the minister will transact, such as other government departments.

Note whether there are any new resources required to implement this initiative; however, this should be nil.

The purpose of this section is to provide a sense of the conclusions of previous audits and evaluations relevant to the proposal, as well as a brief description of future plans in these areas. If there are no previous or future audits or evaluations at play, the organization should simply state, "Not applicable."

2.6.1  Real Property Context

The objective of this section is to outline information necessary to situate the departmental request for capacity-based transaction approval limits and conditions. This section should be brief and include only the information necessary to situate the request. Some of the information that should be presented in the real property context is captured in the Directory of Federal Real Property. The context could include the following:

• A summary of the department's real property portfolio;
• The number of buildings or properties owned and leased;
• The primary use of real property holdings and the typical number of acquisitions and dispositions;
• The business drivers for real property transactions; and
• Challenges facing the department when it needs to acquire or dispose of real property.

2.6.2  Operational Need

This section should present both a description and an analysis of real property transactions typically undertaken by the department. This section serves to provide a background of departmental transactions, helps demonstrate future departmental requirements, and helps identify that the department has the capacity to identify and analyze the risks, sensitivities and complexities of its typical transactions.

2.6.2.1  Past Transactions

This section should include a description and analysis of past transactions within the past three years. It should also present the total number of transactions, the number and type of acquisitions and dispositions, and generally the total consideration paid or received.

The analysis should present the number of transactions that were undertaken using departmental approval limits, those undertaken by PWGSC on behalf of the department, and those that required Treasury Board approval. This section should also present an analysis of the method of acquisition and disposition and the associated processes.

It is critical to note that departments are not expected to provide an exhaustive inventory and description of all transactions undertaken. Information provided in this section should be more analytical in nature.

2.6.2.2  Risks, Complexities and Sensitivities

As outlined in section 1.5, many real property transactions contain inherent risks, sensitivities and complexities. Departments should provide an analysis of such characteristics of the typical transactions they undertake. The purpose of this analysis is to show that the department is able to identify and assess these characteristics in its own transactions. Transactions should also be assessed against policy requirements.

Although this analysis of typical transactions should generally focus on transactions undertaken in the past, if future transactions are expected to be markedly different from those in the past, the risks, sensitivities and complexities of projected future transactions should also be identified and analyzed.

2.6.2.3  Future Transactions

In order to assess future departmental needs, departments are advised to describe transactions that are expected to be completed in the next three years. It is recognized that it is not possible to forecast the total number and type of transactions in detail; however, departments should identify the number of known transactions, leases that will expire, surplus sites, and the estimated number and nature of expected transactions based on operational needs. The aim of this analysis is to determine the transaction approval limits needed to support anticipated transactions over the next several years. This section should also estimate the number of transactions that will be undertaken using capacity-based departmental approval limits and those that will still require Treasury Board approval.

2.6.3  Capacity Assessment

The objective of this section is to identify the tools that the department has in place to manage real property transactions and support requests for capacity-based transaction approval limits. Specific tools for managing real property transactions include governance, rules and guidance, and monitoring. Section 1.6 provides additional context and clarification that relate to these tools. The submission should address each of the tools identified in the following.

Requests for capacity-based limits should be based on operational need and the capacity to manage risks, complexities and sensitivities associated with departmental real property transactions. If a department identifies real property transactional capacity gaps, these should be outlined and analyzed and include a plan to address the gaps noted.

2.6.3.1  Governance

This should include a description of the analysis completed for planning transactions, such as business cases and options analysis, and how planned transactions are captured in departmental planning documents such as the Investment Plan. Departments should indicate the approval bodies and delegation of authority instruments used in the management and approval of real property transactions and how organizational structures mitigate transactional risks and sensitivities. The department should also note whether it has completed transactions in excess of limits without the prior consent of the Treasury Board and under what circumstances.

2.6.3.2  Rules and Guidance

Departments should present internal guidance governing real property transactions, such as internal policies, guidelines and checklists, and indicate how they are disseminated and whether they are regularly updated to account for changes in practices. Transactional risk, complexities and sensitivities identified in the transaction analysis section should have corresponding guidance that is available, widely distributed and used by practitioners.

2.6.3.3  Monitoring

This section should present how real property transactions are monitored so that senior management is satisfied that practices align with written guidance and approval requirements.

2.6.4  Request

The objective of this section is to indicate the transaction approval limits that the department is seeking to support operational need. The wording should be as clear and specific as possible and should align with the wording in the proposal.

Appendices to a Treasury Board submission should present supporting information referenced in the body of the submission that is pertinent to the request.