Building on An Accord
Between the
Government of Canada
and the
Voluntary Sector
A Code of Good Practice on
October 2002
Voluntary Sector
Voluntary Sector Initiative
Funding

National Library of Canada cataloguing in publication data
Voluntary Sector Initiative (Canada)
A Code of Good Practice on Funding : Building on An Accord Between the
Government of Canada and the Voluntary Sector
Text in English and French on inverted pages.
Title on added t.p. : Code de bonnes pratiques de financement.
Issued also on the Internet, in braille and in large print.
ISBN 0-662-32841-8
Cat. No. CP22-66/2002E-IN
1. Voluntarism – Canada – Finance.
2. Nonprofit organizations – Canada – Finance.
3. Charities – Canada – Finance.
4. Voluntarism – Government policy – Canada.
5. Nonprofit organizations – Government policy – Canada.
6. Charities – Government policy – Canada.
I. Canada. Privy Council Office.
II. Title.
III. Title : Building on An Accord Between the Government of Canada
and the Voluntary Sector.
HV105.V66 2002 361.3’7’0971 C2002-980239-3E

A Code of Good Practice on
Voluntary Sector Initiative
Funding
Building on An Accord
Between the
Government of Canada
and the
Voluntary Sector
October 2002

Developed by the Joint Accord Table
of the Voluntary Sector Initiative
For more information please visit the Voluntary Sector Initiative Web site:
www.vsi-isbc.ca
Une version française de ce document est aussi disponible
Additional copies of this document can be obtained by calling:
Toll-free Number: 1 800 O-Canada
(1 800 622-6232)
TTY/TDD: 1 800 465-7735
or by downloading them in a variety of formats from
the above-noted web site.

A Code of Good Practice on Funding
Table of Contents
1. Why a Code? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Link to the Accord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Purpose of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Scope and Application of the Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. Principles Underpinning the Code . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Voluntary Sector Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Government of Canada Support of the Voluntary Sector . . . 8
4.1 Purposes/Activities for Which Direct Funding is Provided . . . . . . . . . . . . . 8
4.2 Direct Funding Mechanisms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Other Government of Canada Support of the Voluntary Sector . . . . . . . . . 9
5. Good Funding Practices: The Code in Action . . . . . . . . . . . . . . 11
5.1 Voluntary Sector Responsibilities for Funding Practices . . . . . . . . . . . . . . 11
5.2 Government of Canada Responsibilities for Funding Practices . . . . . . . . 13
5.3 Joint Responsibilities for Funding Practices . . . . . . . . . . . . . . . . . . . . . . . 16
6. Moving the Code Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Appendices
Appendix 1: Description of the Voluntary Sector . . . . . . . . . . . . . . . . . . . . . . 18
Appendix 2: Contributions of the Voluntary Sector . . . . . . . . . . . . . . . . . . . . . 19
Appendix 3: Contributions of the Government of Canada . . . . . . . . . . . . . . . 20
Appendix 4: Voluntary Sector Purposes/Activities Funded by
the Government of Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Appendix 5: Types of Direct Funding Mechanisms . . . . . . . . . . . . . . . . . . . . 23
Appendix 6: Strategic Investment Approach . . . . . . . . . . . . . . . . . . . . . . . . . 24

A Code of Good Practice on Funding 2
1. Why a Code?
Signed in December 2001, An Accord Between
the Government of Canada and the Voluntary
Sectordescribes the key elements of a strength-
ened relationship between the two sectors. It
sets out common values, principles and com-
mitments that will shape the sectors’ future
practices as they work together for the benefit
of all Canadians.
This Code of Good Practice on Funding fulfils
the Accord’s commitment to take measures to
put its provisions into action. As such, the
Code is a tool for identifying practices related
to the funding aspect of the sectors’ relation-
ship. By using these good practices, both
sectors are committed to building that relation-
ship, thereby strengthening their ability to
better serve Canadians.
1.1 Link to the Accord
This Code of Good Practice on Funding has been
developed in accordance with the provision in
the Accord stipulating that the Government of
Canada and the voluntary sector will develop,
in a timely fashion: codes or standards of good
practice to help guide interactions between
government departments and voluntary sector
organizations on aspects of the relationship
such as policy dialogue, funding, and other
issues as identified.
As summarized below, the Accord also contains
specific references to the issue of funding:
•Recognize and consider the implications
of its legislation, regulations, policies and
programs on voluntary sector organizations
including the importance of funding policies
and practices for the further development ofthe relationship and the strengthening of the
voluntary sector’s capacity;(Government of
Canada Commitments) and
•Advocacy is inherent to debate and change
in a democratic society and … should not
affect any funding relationship that might
exist.(Principles: Independence)
In addition, the Code builds on the values of
democracy, active citizenship, equality, diver-
sity, inclusion and social justice, and the
principles of independence, interdependence,
dialogue, co-operation and collaboration, and
accounting to Canadians, which are the basis
for the Accord.
1.2 Purpose of the Code
The purpose of this Code is to guide interactions
between the Government of Canada and the vol-
untary sector on funding policies and practices.
The Code is grounded in each sector’s recogni-
tion of its responsibility to be accountable to
Canadians and the importance of sustainable
capacity to enable voluntary organizations to
serve Canadians.
Voluntary sector organizations have a mandate
to identify and respond to community needs
by providing programs, services and support to
improve people’s lives. They provide collective
voices and involvement in issues of common
concern. As diverse as the Canadian population
itself, the voluntary sector includes an estimated
180,000 incorporated non-profit organizations,
of which 80,000 are registered charities. These
organizations differ enormously in their causes
and constituencies, in size and resources, and in
the extent to which they are run by volunteers
and paid professional staff. They range from

small community-based groups to large national
and international organizations. Working
independently, voluntary sector organizations
determine their own priorities and manage
their own affairs.
Voluntary sector organizations carry out impor-
tant work in many areas, including sports and
recreation, arts and culture, health, religion and
environmental protection. Through their staff
and volunteers, these organizations work daily
in communities across Canada, identifying needs
and providing effective services to improve
people’s lives and support the well-being of
communities. In addition to its support role,
the voluntary sector contributes significantly to
the Canadian economy. (See Appendix 1 for a
description of the voluntary sector and Appendix
2 for an overview of the sector’s contributions.)
The Government of Canada has a mandate to
use public funds for programs and services that
improve the quality of life of all Canadians
(see Appendix 3 for a summary of the federal
government’s contributions). Almost every
aspect of Canadian life is affected in some way
by the Government of Canada and, each day,
millions of Canadians rely on the essential
services it provides. The federal government
also plays an important role in developing
Canadian and global economies, and in sustain-
ing relations with other countries and multilateral
organizations. Moreover, the federal government
makes laws and regulations that affect many
aspects of Canadians’ daily lives.This Code examines the current funding policies
and practices between the Government of Canada
and the voluntary sector, and identifies ways
to strengthen these arrangements over time.
Expanding on prior work by the Treasury Board
Secretariat to identify how the Government of
Canada’s funding policies and practices could be
improved to strengthen its relationship with the
voluntary sector
1, the Code is also informed by
the input of the voluntary sector’s Working
Group on Financing. The contributions of these
bodies provide a strong foundation for the Code.
The Code is a guide to good practice and a
practical tool for implementing the principles
set out in the Accord. It takes into account
the environment in which both the voluntary
sector and the Government of Canada work, as
well as the values and other important consid-
erations that affect the funding aspect of their
relationship. In the longer term, improved
funding policies and practices should achieve
the following positive outcomes:
•enhanced ability for each sector to carry
out its mandate;
•greater transparency, consistency and
understanding between both sectors;
•clear and balanced accountability in the
funding process;
•good funding policies and practices that
are applied widely; and
•strengthened sustainable capacity of
voluntary sector organizations.
3
Why a Code?
1As part of the Voluntary Sector Initiative, the Voluntary Sector Project Office (VSPO) in the Treasury Board Secretariat was mandated to
identify and propose solutions to impediments in federal funding practices and policies in relation to the voluntary sector, to provide
greater consistency across departments and to improve the government’s ability to strengthen sector capacity. This work involved extensive
consultations with the voluntary sector and across government, and resulted in the Federal Strategy on Funding Practices and Policies, a
federal funding framework to improve administrative practices and help federal departments build the capacity of sector partners. A key
element of the Strategy is a Guide to Improving Funding Practices Between the Federal Government and the Voluntary Sector, which has
now been fully integrated into this jointly developed Code and is superseded by it.

Ultimately, the Code’s power to influence and
change behaviour will come from its endorse-
ment by both sectors, as well as through
continuing discussion between the federal
government and the voluntary sector.
1.3 Scope and
Application
of the Code
This Code, which builds on current funding
policies and practices, includes specific recom-
mendations to improve directfunding practices.
Consistent with the financial management
framework
2of the Government of Canada, it
applies to existing and future funding arrange-
ments between federal government departments
and agencies (including their regional organi-
zations) and the voluntary sector organizations
they work with at both the national and
local levels. Both sectors are committed to the full applica-
tion of the Code over time, recognizing that
there will be variations in the pace at which
this is achieved. Many departments, agencies
and voluntary sector organizations are already
using many of the practices specified in the
Code. Others are at different stages. All share
a commitment to be guided by these good
practices.
The Code is expected to evolve based on
experience with its use. Moreover, it will be
subject to regular review at meetings between
Ministers and sector representatives, as set
out in the Accord.
In addition to direct funding, the federal
government also supports the voluntary sector
indirectlyby providing tax relief to individual
Canadians and corporations for donations made
to registered charities. However, tax treatment
of donations as well as levels of funding, and
partnership with other sectors and other levels
of government fall outside the scope of this
Code (see Appendix 3 for more information).
A Code of Good Practice on Funding 4
2Includes Financial Administration Act, and policies on transfer payments, contracting, procurement, evaluation, expenditure management
and risk management as well as international trade agreements.

Principles Underpinning the Code5
2. Principles
Underpinning
the Code
Building on the Accord, this Code is based on
the following shared principles:
The Voluntary Sector’s Value
A healthy and active voluntary sector plays an
important role in helping the federal govern-
ment achieve its public policy objectives. By
its very nature and particularly because of its
connection to communities, the voluntary sector
brings a special perspective and considerable
value to its activities, including those it under-
takes with the Government of Canada.
Strengthened Sustainable Capacity
Sustainable capacity consists of resources,
expertise and infrastructure that allow organi-
zations to manage themselves and carry out
their mandate over time. Maintaining this
capacity is critical for organizations to continue
serving their clients, including undertaking
work in partnership with federal government
departments and agencies.
The Government of Canada and the voluntary
sector recognize the importance of sustainable
capacity for organizations and how funding
policies and practices can affect that capacity.
This capacity requires resources and support
from a variety of sources, including the federal
government.
Co-operation and Collaboration
A close working relationship between the
voluntary sector and the Government of
Canada will foster the co-operation and collaboration needed to maximize their comple-
mentary skills, expertise and experience.
Innovation
The voluntary sector and the Government of
Canada encourage and support innovation in
communities across the country. The sectors
will collaborate to leverage their strengths and
expertise, enabling them to explore new and
creative ways of responding to community
needs. Through its strong connection to com-
munity, the voluntary sector is well placed to
identify emerging priorities and offer innovative
proposals for change. For its part, the federal
government can play a role by developing
funding practices that encourage innovative
policies and programs.
Diversity and Equitable Access
The voluntary sector derives much of its strength
from the diversity of its people, organizations
and sources of support. Reflecting the face of
Canada, the people who work and volunteer
in the sector are drawn from a range of back-
grounds and offer a wealth of unique abilities
and experiences. The Government of Canada and
the voluntary sector will work together to ensure
that funding policies and practices take account
of the specific needs, interests and diversity of
the sector, including, for example, groups repre-
senting women, visible minorities, persons
with disabilities, Aboriginal people, linguistic
minorities, sexual orientation, remote, rural and
northern communities, and other sectors, so that

such groups do not face even greater challenges
in accessing federal government funding and/or
programs and services.
As well, policies and practices must respect the
provisions of existing legislation, including the
Canadian Charter of Rights and Freedoms, the
Canadian Human Rights Act, the Employment
Equity Act, the Official Languages Act, the
Multiculturalism Act, the United Nations
Universal Declaration of Human Rightsand
other international conventions to which
Canada is a signatory. Policies must also
respect all amendments, extensions or replace-
ments to these laws and policies.
Accountability
Accountability is the requirement to explain
and accept responsibility for carrying out an
assigned mandate in light of agreed-upon
expectations. The two sectors will fulfil their
respective accountabilities as described below:
•Voluntary sector organizations, through their
boards of directors, are accountable to multiple
constituencies, including funders, donors,
clients, members, volunteers, staff, government
and the general public. When they accept
public funds, as with any other funds, they
are accountable for how these funds are used.
Accountability requirements differ depending
on the type, purpose, duration and amount of
funding and should be linked to realistic and
measurable outcomes. •The Government of Canada is accountable to
Parliament and the Canadian people for the
use of public funds. It is guided by Results
for Canadians(a management framework for
the federal government) and the financial
management framework of the Government
of Canada. The Office of the Auditor General
of Canada also plays an important role in
monitoring accountability for the expendi-
ture of public funds.
Transparency and Consistency
More consistent application of funding policies
and practices across the Government of Canada
and the voluntary sector as a whole will lead,
over time, to more harmonized and streamlined
processes that will benefit both sectors. Both
sectors require clear and timely information on
all aspects of funding processes in an open and
transparent manner.
Efficiency and Effectiveness
The Government of Canada and the voluntary
sector recognize the importance of efficient
and effective allocation of funds. Application,
reporting and monitoring requirements must
also be manageable and realistic.
A Code of Good Practice on Funding 6

Voluntary Sector Financing7
3. Voluntary Sector
Financing
The voluntary sector is a significant economic
force in Canada
3:
•The sector employs 1.3 million people, about
9 percent of the workforce.
•The contribution of this workforce is
increased by the 6.5 million volunteers who
dedicate more than 1 billion hours each year
through the voluntary sector organizations
in their communities – the equivalent of
580,000 full-time jobs.
•The voluntary sector generates about
$90 billion in annual revenues and has
$109 billion in assets.
A strong, resilient voluntary sector draws its
support from a variety of sources, including:
•22 million Canadians who make financial
and/or in-kind donations totalling almost
$5 billion to help organizations achieve
their missions;
•millions of individuals who volunteer their
expertise and labour;
•governments, foundations, charitable funding
organizations (e.g., United Ways-Centraides)
and corporations that provide financial and
in-kind resources; and
•funds raised by voluntary sector organiza-
tions through service fees, product sales,
investment income and other charitable
fund-raising activities.
In response to changing government priorities
and available funding over the past decade
or so, voluntary sector organizations haveexplored opportunities to further diversify
their funding sources.
•The private sector:Corporations were
encouraged to increase their donations and
they did so. Although the private sector plays
an important role in voluntary sector funding,
it has not been able to offset reduced
government funding, which remains the
sector’s largest source of revenue. Moreover,
the private sector provides primarily one-time
or short-term funding; this is problematic
as voluntary sector organizations require
ongoing funding.
•Individual donors:Individual donations can
be a consistent and significant source of
revenue, but most smaller voluntary sector
organizations do not have the broad public
profile needed to raise significant funds from
individuals. In recent years, the government
has increased tax assistance for charitable
donations (mainly in 1996, 1997 and 2001)
resulting in an increase in average donations
reported by individuals on tax returns.
•Foundations, community funds and chari-
table funding organizations: Voluntary
sector organizations regard these flexible
and innovative funding sources as essential
elements of their long-term sustainability.
•Governments:Federal, provincial, territorial
and local governments together provide more
than half of the voluntary sector’s total annual
revenues, with the large majority of funding
(more than 85 percent) coming from the
provincial and territorial levels of government.
3See Appendix 2 for more information on the contributions of the voluntary sector.

A Code of Good Practice on Funding 8
4. Government of
Canada Support
of the Voluntary
Sector
Although direct federal funding is not the largest
source of public funds to the voluntary sector
(provincial, territorial and local government
funding are considerably larger), it is nonetheless
significant. As discussed in Section 1.3, the
Government of Canada’s provision of tax
relief also has a significant impact on the
voluntary sector.
4
The Government of Canada has a clear interest
in ensuring a healthy and active voluntary sector
in communities across the country so that
they can work together for the well-being of
Canadians. Funding policies and practices must
encourage this by removing any barriers to an
effective working relationship.
4.1 Purposes/Activities
for Which Direct
Funding is Provided
Federal government departments and agencies
make different types of direct funding available
to voluntary sector organizations for a range of
purposes and activities
5to ensure that govern-
ment policy objectives are met in a flexible and
appropriate manner. However, not all types offunding are provided by every department and
agency. Each federal department and agency
determines the type(s) of funding best suited
to fulfil its mandate and policy objectives.
Departments and agencies are guided by their
individual policy and program priorities as well
as by the terms and conditions of the specific
funding programs they provide. Although most
federal government funding is allocated for a
one-year period, some departments and agen-
cies also provide funding on a multi-year basis.
All funding agreements are subject to the
annual appropriation of funds by Parliament.
In considering their mandate, federal depart-
ments and agencies may make funding available
for various purposes and activities, including:
•program and service delivery;
•strengthened sustainable capacity;
•strategic investment;
•alliances and partnerships;
•policy dialogue;
•advocacy;
•research;
•innovation; and
•capital expenditures.
4See Appendix 3 for more information on the contributions of the Government of Canada.5Descriptions of each of these funded purposes/activities can be found in Appendix 4.

4.2 Direct Funding
Mechanisms
The federal government provides the vast
majority of its direct funding to the voluntary
sector through four main types of funding
mechanisms
6, in accordance with the Treasury
Board of Canada’s Policy on Transfer Payments
and Contracting Policy:
•contributions;
•grants;
•contracts; and
•other transfer payments.
Of these, most funding is provided through the
first two mechanisms (i.e., contributions and
grants). Some funding is also provided through
contracts for specific professional services.
The last mechanism is restricted to special and
specifically defined arrangements, for example,
transfer payments to other levels of government.
Funding arrangements, including their dura-
tion, should reflect the nature and scale of
the issue to be addressed. For example, chronic
or systemic social issues are not likely to be
solved through short-term project funding.
Project funding has a place in the overall fund-
ing mix for problems that are expected to be
solved in the short-term or for time-limited
activities. However, many issues (e.g., racism,
climate change, HIV/AIDS) are longer term
in nature and may require long-term funding
commitments, as well as collaboration and
partnership activities, to make real progress.
4.3 Other Government
of Canada Support
of the Voluntary
Sector
In addition to providing voluntary sector
organizations with direct funding as mentioned
above, federal departments and agencies can
provide access to other support and resources.
Such non-monetary contributions are made at
the discretion of individual departments and
agencies and may need to be charged against
a department’s appropriations.
Although awareness of them varies, the types
of non-monetary contributions listed below
can be found in some federal departments and
agencies. As specific circumstances will determine
the details of any funding arrangement, depart-
ments and agencies may adapt and/or build on
these examples. Key determining factors are the
availability of resources, and congruence with
federal government priorities and the depart-
ment’s or agency’s specific strategic aims and
policy priorities. Departments and agencies whose
current terms and conditions do not permit them
to provide these types of support should be aware
that they can seek approval to amend those terms
and conditions to permit the following activities:
•In-kind contributions, such as:
– access to/use of hard and soft assets
(e.g., libraries, meeting space, video tele-
conferencing equipment and facilities);
9
Government of Canada Support of the Voluntary Sector
6The four funding mechanisms are described more fully in Appendix 5.

– recyclable equipment (e.g., office furniture,
computer hardware);
– access to training opportunities (e.g., profes-
sional development);
–training for voluntary sector organizations
on Government of Canada funding practices,
mechanisms, processes and outcomes; and
– federal government/voluntary sector
personnel interchanges.
•Differential pricing:
–consideration/recognition of many voluntary
sector organizations’ reduced capacity to pay
for participation in conferences or training
programs (note: support of this kind can
also be provided through direct funding in
the budget of an eligible initiative); and
–access to Government of Canada bulk pricing
rates, in the case where a supplier has agreed
to extend preferential rates to a voluntary
sector organization.
A Code of Good Practice on Funding 10

Good Funding Practices: The Code in Action11
5. Good Funding
Practices:
The Code in Action
Building on the principles presented in Section 2
of this Code, the funding practices outlined
below identify specific measures to improve the
flexibility, responsiveness and consistency of
funding arrangements, taking into account
the realities of the two sectors. Many of these
practices are already in place in some federal
departments and agencies and in the voluntary
sector. Where appropriate, these practices could
be applied more broadly in both sectors. A
living document, the Code will evolve as new
practices are identified and improved upon.
Progress will be achieved when this process
of continuous improvement, based on shared
principles and supported by ongoing dialogue,
becomes common practice.
5.1 Voluntary Sector
Responsibilities for
Funding Practices
Building on the Code’s shared principles, the
following good practices by the voluntary
sector will help guide interactions between the
voluntary sector and the federal government.
The voluntary sector commits to:
5.1.1 The Voluntary Sector’s Value
•demonstrate and communicate value in the
delivery of programs and services;
•inform federal government departments and
agencies of areas in which the voluntary
sector possesses particular expertise and
knowledge; and•stay informed about federal government
policy and program areas that are relevant
to their areas of operation.
5.1.2 Strengthened Sustainable Capacity
•invest in organizational and human resource
development management;
•develop its funding sources and diversify
them to the extent possible;
•demonstrate through the application of
equitable and efficient operating policies
and practices its readiness to work with
government;
•explore with government funders the
possibility of using multi-year funding
agreements and identify the potential impact
of such agreements on organizations’ stability
and long-term planning processes; and
•identify and include infrastructure-type
costs, such as information management
and information technology, memberships,
facilities, human resources and financial
management obligations (e.g., audits), when
developing budget estimates.
5.1.3 Co-operation and Collaboration
•acknowledge funding sources, including
the Government of Canada, in promotional
material;
•use its extensive networks to communicate
information and co-ordinate among organi-
zations as appropriate to avoid duplication;

•take steps to stay current with existing
government planning tools such as program
expenditure priorities and plans, contribute
to these as required, and work to improve
the effectiveness of the sector’s related
planning tools and practices; and
•work with government funders to identify
ways to make programs more responsive to
local needs.
5.1.4 Innovation
•identify innovative funding practices to
improve existing program delivery;
•engage with federal departments and agen-
cies in dialogue about innovative funding
approaches to address emerging community
issues and needs; and
•where appropriate, examine opportunities
to share innovative approaches with other
voluntary sector organizations and govern-
ment funders.
5.1.5 Diversity and Equitable Access
•implement policies to ensure equality of
opportunity, both in employment practices
and service provision; and
•publicize government or other funding
policies broadly and share that information
across the diverse sector.
5.1.6 Accountability
•ensure sound financial management,
including accounting procedures that are
in accordance with generally accepted
accounting principles;
•provide effective board governance; •adhere to ethical fund-raising practices;
•ensure that sufficient monitoring, internal
management and client and funder account-
ability systems are in place; and
•ensure that organizations have the level of
financial expertise needed to fulfil all their
financial management, recording and report-
ing obligations.
5.1.7 Transparency and Consistency
•ensure openness and transparency of
activities and financial records, including
management and overhead costs, and
volunteer involvement;
•provide essential financial information
and notify the federal government of any
changes, delays or irregularities related to
funding, in a timely manner; and
•co-operate with any external reviews of
funding that may be required, including
monitoring, evaluation and/or audit.
5.1.8 Efficiency and Effectiveness
•ensure that systems are in place to monitor
and evaluate activities against agreed-upon
objectives;
•ensure the timeliness of its responses to
accountability requirements;
•plan program investments strategically;
•periodically evaluate (in consultation with
users) its use of public funds to ensure it
meets “value for money” criteria; and
•work with government funders, where appro-
priate, to develop user-friendly forms and
reporting requirements.
A Code of Good Practice on Funding 12

5.2 Government
of Canada
Responsibilities for
Funding Practices
Building on the Code’s shared principles, these
good practices by the Government of Canada
will help guide interactions between govern-
ment departments and agencies and voluntary
sector organizations. The Government of
Canada commits to:
5.2.1 The Voluntary Sector’s Value
•communicate with voluntary sector organiza-
tions that may be well qualified to compete
for research funding alongside the private
sector and universities;
•include as one criterion the “particular
value” that voluntary sector organizations
bring to specific activities they undertake
with the Government of Canada (e.g., access
to networks, knowledge of specific issues,
expertise in service delivery, ability to
promote equality and social inclusion)
when considering a funding proposal;
•include a legitimate proportion of the cost
of providing this particular value as part of
the budget for a funded activity when it is
integral to the project’s successful implemen-
tation; and
•establish opportunities for voluntary sector
organizations to access federal contracts
through means such as:
– the creation of standing offer lists of
voluntary sector organizations that have
been “pre-qualified”; and
– the development of service registries
(i.e., listings of voluntary sector organiza-
tions with a particular expertise).
5.2.2 Strengthened Sustainable Capacity
•use multi-year funding agreements and
develop and implement mechanisms to facili-
tate their use, in appropriate circumstances,
in order to enhance organizations’ stability
and capacity for longer-term planning;
•allow a reasonable and flexible transition
period when major changes are made to a
funded activity already underway;
•use flexible arrangements available to
departments and agencies in accordance
with the Treasury Board of Canada’s Policy
on Transfer Payments (e.g., making advance
or installment payments to meet program
objectives, including the carry-forward of
nominal unused advances over year-end,
not exceeding expected expenditures for
the month of April);
•make payments according to an agreed-upon
timetable and consider both the size and
nature of the proposed funding and the
applicant organization;
•in proposed budgets for programs or projects
to be delivered by voluntary sector organiza-
tions, include among allowable expenditures
infrastructure-type costs (e.g., information
management and information technology,
memberships, facilities, human resources
and financial management obligations
(e.g., audits)) that are integral to successfully
implementing eligible initiatives;
•manage funds effectively to eliminate
problems caused by the distribution of
a concentrated amount of funding to
organizations at the end of the fiscal
year; and
13
Good Funding Practices: The Code in Action

•use the Strategic Investment Approach to
strengthen the capacity of voluntary sector
organizations to collaborate over the longer
term with government on key policy and
program goals of mutual interest (see
Appendix 6).
5.2.3 Co-operation and Collaboration
•solicit and consider voluntary sector views
on better ways to meet new or existing needs
through funding programs;
•provide voluntary sector organizations with
access to useful planning tools and routinely
share information on departmental, agency
and government-wide priorities and plans
(for policies, programs and research), to
facilitate long-term planning in voluntary
sector organizations; and
•be flexible in implementing new programs
that address broad federal priorities and,
where appropriate, tailor these programs to
meet local needs.
5.2.4 Innovation
•identify and bring forward emerging issues
with respect to funding policies and prac-
tices, and use new funding approaches to
address community needs;
•recognize the potential of voluntary sector
organizations as a source for innovations
that could be used to advance departmental
or agency or program priorities; and
•recognize the benefit of targeting a portion
of new program funding for innovation at
the design stage, incorporating appropriate
risk assessment, risk management and
accountability measures.
5.2.5 Diversity and Equitable Access
•recognize the potential of diverse community
organizations (e.g., faith, cultural) to con-
tribute to program development and delivery
of services, and demonstrate sensitivity to
cultural differences; and
•make an effort to provide equitable access to
funded programs for organizations that may
face greater challenges in accessing federal
funding (e.g., groups representing women,
visible minorities, persons with disabilities,
Aboriginal people, linguistic minorities,
sexual orientation, and remote, rural and
northern communities) by:
– making information available on existing
and new funding programs, including
application procedures, in a variety of
easily accessible formats (e.g., through
outreach activities, the press, umbrella
and intermediary organizations, voluntary
sector networks, directories, newsletters
and the Internet, and in formats accessible
to persons with disabilities);
– writing application forms in plain language
to increase clarity and reduce complexity;
and
– ensuring that eligibility criteria and fund-
ing practices do not create unintended
barriers for smaller organizations with
limited resources or without a federal
“track record”.
A Code of Good Practice on Funding 14

5.2.6 Accountability
•make application and accountability stan-
dards and procedures flexible enough to
accommodate a variety of approaches and
the limited capacity of smaller organizations,
while still ensuring effective protection of,
and proper accountability for, public money;
•take into account monitoring procedures
already agreed to by a voluntary sector orga-
nization’s other funders, as well as any quality
assurance system introduced by the organiza-
tion, when discussing the content, quality and
format of federal information needs;
•agree on well-defined, measurable results
and clear roles and responsibilities; and
•ensure mutual respect for diversity and
recognize that different community groups
can manage their resources in different
ways and still meet the federal government’s
accountability requirements.
5.2.7 Transparency and Consistency
•develop a harmonized process across the
Government of Canada to facilitate the joint
funding of projects when several departments
or agencies are working collaboratively
on the same or several initiatives with a
common client;
•ensure a clear understanding and consistent
application of the Treasury Board of
Canada’s funding policies across the federal
government (e.g., transfer payments, con-
tracting, risk management) and make them
known to the voluntary sector organizations
they work with;•clearly state the objectives of funding
programs and their eligibility criteria, and
ensure that application forms are under-
standable and concise;
•use common elements in application
and reporting forms across the federal
government;
•ensure that all applicants receive precise
information concerning the application
process and the stages and timing of
decision-making;
•establish realistic planning timeframes,
service standards for funding, and perform-
ance commitments of departments and
agencies for providing full information in
a timely manner; and
•identify a point of contact for each
funding program and include it in the
application guide.
5.2.8 Efficiency and Effectiveness
•ensure minimum duplication and maximum
ease in application and reporting require-
ments by requiring only essential information
and encouraging the development and use
across the Government of Canada of generic,
user-friendly forms and software, electronic
application and reporting procedures, and
one-time-only basic “boiler plate” data, to
be updated as required;
•develop less complex and shorter agreements
for lower-cost, lower-risk projects that will
facilitate the application process;
15
Good Funding Practices: The Code in Action

•use a “risk-based” approach – based on
modern financial management principles –
to assess and monitor initiatives, ensuring
that it is appropriate to the organization’s
level of funding, size and nature; and
•recognize the cost to voluntary sector
organizations of monitoring and evaluation
by including support towards such costs
when they are identified in the budget
submitted for an eligible initiative.
5.3 Joint
Responsibilities for
Funding Practices
Together, the two sectors can give effect to
the Code’s shared principles by adopting good
practices that will improve their funding
relationship. Specifically, they commit to:
•ensure that impact assessments of funding
policies and practices on projects and
programs take into account the varying
circumstances in different regions of
the country;
•ensure that accurate and sufficient informa-
tion is uniformly available to support quality
decision-making and reporting on results;•develop evaluation tools (including third-
party evaluations) for measuring longer-term
outcomes of funding at the departmental
and agency program level (as opposed to
the project level);
•establish collaborative processes with clearly
delineated roles and responsibilities, and
reach decisions about the funding process
through collaborative processes;
•exchange information and build awareness
to improve mutual understanding;
•outline agreed-upon results/outcomes for
financial programs/activities; and
•communicate shared results and successes
jointly, wherever possible.
A Code of Good Practice on Funding 16

Moving the Code Forward17
6. Moving the
Code Forward
The Government of Canada and the voluntary
sector are committed to implementing the Code
through a two-phase plan. The first phase will
involve broad dissemination and communica-
tion of the Code as a guide for both sectors
on ways to improve the application of direct
funding policies and practices. This includes
strengthening the sustainable capacity of
voluntary sector organizations to better serve
Canadians.
In the second phase of the implementation
plan, the sectors will work together to apply
the Code, for example, through briefings, work-
shops, seminars, pilot projects and case studies.
This phase will also focus on initiatives to
monitor and assess the impact of the Code and
to increase understanding of how it can be
used to improve the funding relationship
between the sectors.
The Government of Canada and the voluntary
sector are committed to using the Code, to
learning and improving the way they work
together, and to making positive and lasting
behavioural changes. As the Code’s guidelines are
incorporated into daily use across government
departments and agencies, and throughout
the voluntary sector, representatives of both
sectors will:
•discuss the Code and learn from one
another;
•work to adapt their funding policies and
practices; and
•propose reforms to make the Code more
effective. Results will flow from the increased use of
the array of good practices already in place,
including those proposed in this Code, as
well as from those that will evolve with time
and experience. Understanding in both the
Government of Canada and the voluntary
sector of their mutual commitment to achieve
progress together is key.
In An Accord Between the Government of
Canada and the Voluntary Sector, both sectors
agreed on the need to report to Canadians on the
status of their relationship and the results that
have been achieved under the Accord. Assessing
the Code’s use and effectiveness as a tool in
meeting the Accord’s goals will require periodic
review, discussion, analysis, evaluation and
reporting. This may result in modifications to the
Code and the establishment of new priorities.

A Code of Good Practice on Funding 18
Description of the Voluntary Sector
An Accord Between the Government of Canada and the Voluntary Sector describes the voluntary
sector as follows:
This sector consists of organizations that exist to serve a public benefit,
are self-governing, do not distribute any profits to members, and depend
to a meaningful degree on volunteers. Membership or involvement in these
organizations is not compulsory, and they are independent of, and institu-
tionally distinct from the formal structures of government and the private
sector. Although many voluntary sector organizations rely on paid staff
to carry out their work, all depend on volunteers, at least on their boards
of directors.
The voluntary sector is large, consisting of an estimated 180,000 non-
profit organizations (of which 80,000 are registered as charities) and
hundreds of thousands more volunteer groups that are not incorporated.
In 2000, 6.5 million people volunteered their time to a voluntary sector
organization and the sector employed a further 1.3 million people. This
diverse multitude of organizations ranges from small community-based
groups to large, national umbrella organizations and includes such organi-
zations as neighbourhood associations, service clubs, advocacy coalitions,
food banks, shelters, transition houses, symphonies and local sports clubs.
Appendix 1

Appendix 2: Contributions of the Voluntary Sector19
Contributions of the Voluntary Sector
Voluntary sector organizations do important work in a wide variety of areas, including sports and
recreation, arts and culture, health, religion and environmental protection. Through their staff and
volunteers, these organizations work in communities across Canada every day, identifying needs
and providing effective service and support to improve people’s lives. Instrumental in developing
and supporting social, cultural, economic and political values in Canadian communities, voluntary
sector organizations make a valuable contribution by:
•delivering services;
•advocating on behalf of community causes;
•encouraging self-help;
•facilitating community and economic development in Canada and developing countries;
•promoting awareness and action on environmental issues;
•advancing religious faith and practice; and
•raising funds and providing financial support to other organizations.
The voluntary sector’s breadth and diversity are among its principal strengths. Voluntary sector
organizations provide channels through which Canadians can make themselves heard on impor-
tant issues. Many organizations work with the most marginalized members of society, advocating
for the needs of those whose voices are too seldom heard. A fundamental part of a democratic,
pluralistic and inclusive society, voluntary sector activities reinforce citizenship by encouraging
Canadians to participate in and express their views on a diverse range of individual and civic
concerns and interests within their communities, whether defined geographically or as communi-
ties of common interest.
Through its ability to galvanize Canadians on important issues and act as an early warning
system on a broad range of issues (e.g., land mines, racism, family violence, climate change,
media concentration, heritage preservation and HIV/AIDS), the voluntary sector can inform and
enrich policy debates, identify emerging priorities and offer innovative proposals for change.
The voluntary sector’s ability to build bridges between communities and cultures helps to promote
understanding, awareness, diversity, inclusion and social justice – connecting people locally,
regionally, nationally and around the world.
Appendix 2

A Code of Good Practice on Funding 20
Contributions of the Government of Canada
Almost every aspect of Canadian life is in some way affected by the Government of Canada.
Every day, millions of Canadians rely on essential services provided by the federal government,
including, for example:
•national security;
•peacekeeping;
•protection of rights and freedoms;
•environmental protection;
•protection of the health of Canadians;
•maintenance of national parks and treasures;
•communication and technology development; and
•transportation guidelines and services.
The Government of Canada also plays an important role in the development of Canadian and
global economies, and sustains relations with other countries and multilateral organizations.
As well, the federal government makes laws and regulations that affect many aspects of
Canadians’ daily lives.
In 1997-98, the federal government made an estimated $2.2 billion in annual directpayments to
support programs and services delivered by voluntary sector organizations.
The federal government recognizes its role to encourage and stimulate increased giving by Canadian
individuals, corporations and foundations (both public and private) through tax relief. In 1997-98,
the federal government provided $1.3 billion in indirectsupport to the voluntary sector through
personal and corporate tax credits for charitable donations. In addition, tax assistance is provided
through the sales tax rebates to charities and the benefits associated with their tax-exempt status.
7
Appendix 3
7The source for these statistics on the federal government’s direct and indirect support is: Final Results of Statistical Research into Funding
of the Voluntary Sector, an analysis of the Public Accounts of Canada carried out in 2001 by the Voluntary Sector Project Office of the
Treasury Board Secretariat.

Appendix 4: Voluntary Sector Purposes/Activities Funded by the Government of Canada21
Voluntary Sector Purposes/Activities Funded by
the Government of Canada
Program and Service Delivery: Funding may be provided to service delivery organizations
that contribute directly to federal departmental and agency objectives. This funding is made
available through project and organizational funding.
Strengthened Sustainable Capacity: Longer-term funding may be provided to help strengthen
the capacity of voluntary sector organizations to collaborate more effectively with federal departments
and agencies on key policy goals.
Departments and agencies also recognize the need to develop capacity over a longer period of time
and may provide longer-term funding (i.e., three to five years) if organizations demonstrate specific
performance outcomes. In addition to ensuring capacity is available to the federal government, this
type of funding:
•enables funded organizations to develop and maintain a body of expertise;
•allows for longer-term planning and increases stability within the voluntary sector;
•takes account of an organization’s objectives as well as its need to operate efficiently and
effectively; and
•covers a wide range of infrastructure costs such as leadership, financial management,
marketing management, organizational and human resource development, information
technology and management information systems, research and development, and client
and funder accountability systems required for quality service delivery.
Strategic Investment Approach: This is an innovative approach that uses existing funding
mechanisms to strengthen the capacity of organizations in order to enhance their ability to work
collaboratively with federal government departments and agencies on agreed-upon goals over a
specified period of time. This approach was developed under the leadership of the Treasury Board
Secretariat in consultation with the voluntary sector (see Appendix 6 for a detailed description of
the Approach).
Alliances and Partnerships: Funding may be provided for:
•networking;
•capacity-building at the multi-organization level;
•coalitions;
•associations with other organizations; and
•joint action.
Appendix 4

A Code of Good Practice on Funding 22Policy Dialogue:
Funding may be provided for:
•identifying emerging policy issues;
•supporting dialogue, discussion, debate and input on policy issues;
•supporting research, consultation and input into policy development and implementation;
•providing resources and support to the wider voluntary sector; and
•contributing to specific policy objectives.
Advocacy: Funding may be provided to promote representative voices on emerging issues
that are important to the delivery of departmental and agency mandates, and for advocating
for changes in public policy. Advocacy is defined as “the act of speaking or of disseminating
information intended to influence individual behaviour or opinion, corporate conduct, or public
policy and law.”
8
Research: Funding may be provided for research and development.
Innovation: Funding may be provided for innovative or pilot projects whose outcomes may
benefit the sector as a whole or be transferable to other voluntary sector organizations.
Capital Expenditures: Funding may be provided to purchase tangible assets such as equipment.
In some exceptional cases, funding may also be provided to purchase land or buildings. Such
assets help voluntary sector organizations provide continuous service and have a lifetime beyond
the reporting period in which they are acquired.
8Working Together: A Government of Canada/Voluntary Sector Joint Initiative: Report of the Joint Tables, Voluntary Sector Task Force,
Privy Council Office, Government of Canada, August 1999.

Appendix 5: Types of Direct Funding Mechanisms23
Types of Direct Funding Mechanisms
The four types of direct funding mechanisms are:
•
Contributions: Conditional transfer payments to an individual or organization for a specified
purpose as set out in a contribution agreement. These funds must be accounted for and are
audited.
•
Grants: Transfer payments made to an individual or organization that do not need to be
accounted for and are not subject to auditing, but for which eligibility and entitlement can
be verified or for which the recipient may need to meet pre-conditions.
•
Contracts: Agreements between contracting authorities and suppliers to provide goods,
perform services and/or carry out work for the federal government for appropriate financial
and/or non-financial consideration. Payments go to individuals, firms or organizations that
fulfil the terms of the contract.
•
Other Transfer Payments: Payments based on legislation or an arrangement that normally
includes a formula or schedule as one element used to determine the expenditure amount.
Once payments are made, however, the recipient may redistribute the funds among the several
approved categories of expenditure in the arrangement. Examples are transfers to other levels
of government such as equalization payments, and health and social transfer payments.
Appendix 5

A Code of Good Practice on Funding 24
Strategic Investment Approach
Context
•As a key element in its Funding Strategy, the Government of Canada is looking to strengthen
capacity in the voluntary sector in order to support the sector’s ability to collaborate
with the federal government over the longer term on key policy and program goals of
mutual interest.
Purpose
•The Strategic Investment Approach (SIA) aims to strengthen the capacity of voluntary sector
organizations working with departments and agencies on key policy goals to collaborate
more effectively, by contributing to building their organizational capacity in selected areas
of need.
Approach
•The SIA addresses gaps in specific areas of capacity. Purposes could relate to capacity gaps
in governance, community outreach, policy and program development, technical capacity,
or financial and program management capability.
•Capacity gaps, timeframes and resources required must be agreed upon between
departments/agencies and collaborating voluntary sector organizations.
•The investment must be supported by a strong business case demonstrating why strategic
investment is needed, and how it will improve collaboration with government on a major
policy or program goal which is key to both the sector and the government. Consequently,
the SIA would not be suitable for all funding relationships between the Government of
Canada and the voluntary sector.
The SIA is results-oriented and time specific, i.e., delivering on specific goals in a limited
number of areas over a finite time period.
Appendix 6

Appendix 6: Strategic Investment Approach25 Benefits
•Strategic investment in the capacity of key voluntary sector partners would improve their
ability to provide expert advice and deliver programs over the longer term related to
government priorities. This would lead to policies and programs and enhanced delivery
of services better aligned with the needs and expectations of Canadians.
•SIA would enhance the ability of sector organizations to function effectively and efficiently by:
– strengthening the structural capacity essential for long-term planning;
– supporting the ability to expand and consolidate networks across a wide range of sectors;
– stimulating the creation of a stronger, deeper knowledge base on issues; and
– promoting opportunities for collaboration and engagement with the government which
build on existing strengths.
Departments and agencies and voluntary sector organizations working on common issues would
assess the extent to which the capacity of collaborating organizations could be strengthened
through investment. Departments and agencies working with their sector partners would develop
a business case that establishes:
•
The purpose for which funding is required. Specific purposes could be related to
governance, community outreach, policy and program development, technical capacity or
financial and program management capability;
•
The duration of funding. SIA may be multi-year, depending on the capacity gap identified
and the investment needed to address it. The business case should clearly identify the
funding timeframe required;
•
The expected results and its evaluation process. Progress towards achieving expected
results must be identified, and an evaluation plan developed to assess actual results against
expected outcomes. This reflects the fact that SIA is meant to achieve tangible results within
specific timeframes and is not an open-ended commitment to ongoing funding.

A Code of Good Practice on Funding 26Considerations
•Results-oriented multi-year funding arrangements:
Strategic investments would be targeted to meet clearly identified goals, over several years.
Progress towards achievement would be identifiable, demonstrating the effective use of the
financial resources provided.
•The Need for a Business Case:
A strategy to achieve results is a requirement of the Strategic Investment Approach, to
ensure that resulting changes or improvements can be evaluated. The investment must be
supported by a strong business case demonstrating why strategic investment is needed,
and how it will improve collaboration with government on an issue which is key to both
the sector and the government. The business case would have the following elements:
– a clear statement of the scope and objectives of the investment;
– a strategy for achieving the objectives;
– a detailed description of planned requirements;
– a clear plan for management and monitoring over the life of the investment; and
– a well-defined evaluation process to assess the investment outcome.
In addition to the strategies departments and agencies may use to implement the Strategic
Investment Approach, the Voluntary Sector Project Office, Financial Management Policy Division
at Treasury Board Secretariat, is providing implementation support to departments and agencies.

Notes