Ontario Lottery Corporation - Advance Funding Program

The Strategic Policies and Priorities Committee recommends the adoption of the following report (September 23, 1998) from the City Clerk, Commissioner of Corporate Services and Commissioner of Community and Neighbourhood Services:

Purpose:

The purpose of this report is to update Council on negotiations with the Ontario Lottery Corporation regarding the City's administration of the Ontario Lottery Corporation Advance Funding Program and to recommend next steps.

Funding Sources, Financial Implications and Impact Statement:

The City is currently not resourced to administer this program. Provincial officials advise that direct cost recovery from the province is not possible and that municipalities must recover the cost of administering the program directly from charitable organizations.

Recommendations:

Given the province's position that the City may not recover the costs of administering the Advance Funding program from the Ontario Lottery Corporation, and recognizing the critical need to distribute these funds to local charities in the most economical and efficient manner possible, it is recommended that:

(1)City of Toronto's Advance Funding Allocation be distributed using Option 1: a streamlined allocation process. The Council approved roster shall include: (1) the priority group of eligible organizations who previously ran roving charity casino events; and (2) the United Way and the Toronto Community Foundation who will undertake to allocate funds to the community

(2)That a fee of $100.00 per application be charged by the City of Toronto to cover the costs of administering this process, similar to the application fee currently charged for lottery licensing.

(3)That the appropriate City officials be authorized and directed to take the necessary steps to give effect thereto.

Background:

At its meeting held on July 29, 30 and 31, Council considered a staff report on the Ontario Lottery Corporation's Advance Funding program. The program was initially set up to loan funds to charities affected by the provincial cancellation of roving charity casino events. The intent was to have these groups repay the funds from proceeds from future permanent charity casinos. With the cancellation of the permanent charity casino initiative, the province was forced to revisit the criteria for the Advance Funding program. It is now essentially a grant program which provides funds to charitable organizations who previously conducted roving charity casino events and to other charitable organizations who meet provincial AGCO (Alcohol and Gaming Commission) lottery licensing criteria. With no provincial mechanism in place to administer the fund, the Ontario Lottery Corporation delegated the responsibility of determining charity eligibility and allocations to municipalities. The provincial Advance Fund allocation for the City of Toronto is $8.8 million and the City's recommended roster of charities must be submitted to the Ontario Lottery Corporation by March 31, 1999.

When this matter was first considered, Council adopted the position that the City's participation in the program would be contingent on recovering the full costs for administration of the Advance Fund on a fee for service basis directly from the Ontario Lottery Corporation. Staff were directed to negotiate the direct cost recovery with appropriate provincial officials and report back to Council regarding the City's participation in this program.

Discussion:

City officials met with staff from the Ontario Lottery Corporation and the Gaming Secretariat to seek clarification on a number of issues related to the administration of the Advance Fund and to negotiate direct cost recovery for administering this program on behalf of the province. Provincial officials confirmed that priority for funding must be given to groups who previously held roving charity casino events, that municipalities have the authority to apply any additional criteria to assist in determining the eligibility of applicants and that municipalities may set their own internal deadlines for approval.

The province was very firm in stating that any administrative costs incurred by the municipality must be recovered directly from the charities and not from the province. With potentially thousands of applications to review, the City will require a minimum level of dedicated staffing and resources to administer the fund and meet the required deadlines. These costs are above the current budget allocations and cannot be absorbed without reduction of regular service to constituents. Given the province's firmly stated position on direct cost recovery from the Ontario Lottery Corporation, the following options are available to Council:

Option 1 - Streamlined Allocation Process:

As an alternative to a labour-intensive grants allocation process, and to significantly reduce internal administrative costs, the City could design a process around two major groups: (1) the priority group of organizations who previously ran roving charity casino events; and (2) the United Way and the Toronto Community Foundation who are experienced in the distribution of funds for the benefit of the community.

The amounts for organizations who previously held roving charity casino events would be calculated strictly on the basis of providing replacement dollars for lost charity casino proceeds. Approximately 250 groups would be eligible. Groups would be required to submit detailed financial information and lottery licensing staff would conduct an analysis and review to determine appropriate replacement amounts. Grants to these groups would account for approximately $3.3 million of the $8.8 million allocation from the Ontario Lottery Corporation. Under this process, a basic administrative fee of $100.00 per group would be applied to cover the cost of conducting the detailed review necessary to ensure compliance with provincial lottery licensing criteria. This is consistent with the current practice of charging an administrative fee for processing lottery licensing applications.

The remainder of the $8.8 million allocation could be distributed to the United Way of Greater Toronto and the Toronto Community Foundation who would assume the responsibility for further distribution to local charities. Both organizations are fund allocators with a city wide mandate. Staff will negotiate specific agreements with each of the organizations regarding the recommended allocation from the Advance Fund and the priority areas for funding. The United Way of Greater Toronto will be asked to direct funding to Winter Relief programs for homeless people, the 0-6 funding program aimed at young children, settlement services, services for assaulted women, member agencies and other human service agencies. The Toronto Community Foundation will be asked to fund environmental, arts and culture, and heritage initiatives.

Option 2 - Non-Participation:

The City could take the position that it will not administer the Advance Fund on behalf of the province. The Province would be required to find another agency to administer the program on its behalf. This would further delay the processing of funding requests and distribution of funds to the local community, and put the availability of the funding at risk.

Option 3 - Comprehensive Allocation Process:

A comprehensive process for administering the City's $8.8 million allocation from the Ontario Lottery Corporation would require a dedicated staff team for a period of 6 months and a budget of approximately $400,000.00. It is estimated that up to 4600 charities would be eligible to apply under this comprehensive process. The budget would cover the costs of an extensive mailout to applicant organizations, advertisements in three major dailies and other local dailies, an information brochure and dedicated telephone lines, and staff time. A dedicated lottery licensing team would conduct an analysis and review of financial statements submitted from the charity casino groups to recommend appropriate replacement grant amounts and would review these applications for compliance with AGCO lottery licensing criteria. The dedicated Community Grants Team would conduct a full agency review based upon municipal criteria as set out in the proposed City of Toronto grants policy. A report and proposed roster of eligible organizations would be forwarded to Council for approval before submission to the Ontario Lottery Corporation.

Given the province's position that the City cannot invoice the province directly, the City would be left with two alternatives for administering a comprehensive allocation process: (1) the City would have to absorb the $400,000.00 administrative cost; or (2) the City would have to set a fee schedule that would recover the $400,000.00 directly from the charities. If Council were to choose this option, we would also have serious concerns about the City's ability to meet the province's March 31, 1999 deadline for submission of the recommended charity roster.

Based on the options outlined above, and giving consideration to the need to administer an efficient process that will benefit local organizations, staff recommend that Council adopt Option 1 - the streamlined allocation process.

Conclusions:

This report updates Council on the outcome of negotiations with the Ontario Lottery Corporation regarding the administration of the Advance Funding Program and outlines the City's options for the administration of the program. The province's position is that the City cannot recover the costs for the administration of the Advance Fund on a fee for service basis directly from the Ontario Lottery Corporation. Given this position, the City must look at other delivery options to ensure that funds are distributed for the benefit of the local community with minimal administrative costs. Accordingly, a streamlined allocation process is recommended.

The Chief Administrative Officer has been consulted in the development of this report.

Contact Name:

Barbara McEwan, Director, Legislative Services, 392-4373.