Frequently asked questions about the Forest Investment Account

Here are a collection of the most frequently asked questions about the B.C. forest investment account compiled by Pricewaterhouse Coopers

Frequently asked questions regarding Forest Investment Account

About the FIA Program:

What is the FIA?

The Forest Investment Account (FIA) is a new provincial government mechanism for promoting sustainable forest management in British Columbia.

How will the program work?

For a detailed description of the program please refer to the document section of this website (This section is currently under construction)

Will the program be fully operational in the first year or will there be changes from year to year?

It is expected that the program will be fully operational in the first year, apart from the development of Sustainable Forest Management (SFM) plans. However, changes to the program could occur at the request of the FIC or Ministry of Forests.

Will this be similar to the former FRBC arrangements?

No. The FIA is set up with new rules and regulations.

How will licensee’s FRBC multi-year plans and agreements be addressed?

Until such time as Sustainable Forest Management Plans are in place or substantially completed, FIA funding recipients should include in their investment schedules consideration of incomplete projects initiated last year which were funded by Forest Renewal BC. Priority will be given first to those projects with legal obligations (backlog reforestation, wildlife collars, hydrometric station maintenance and demobilization, Water Act authorization, etc.), secondly to projects which, due to their current state, pose a moderate to high risk to the en vironment and thirdly, to projects for which planned returns from past investments will not be realized until the project is completed.

Can licensees count on the 5-7 year funding that was originally promised?

Funding is approved on an annual basis only. There is no certainty as to the level of funding that will be provided in the future.

When will licensees/management units get funding?

Funding will be distributed as soon as PwC’s forest investment managers approve the submitted investment schedules and a recipient contract is signed.

What about funding for the work in the field that is already in process or planned?

It should be included within your investment schedule in the normal way.

Can the program run out of money?

Funds are committed annually. We know how much money we have this year and we intend to spend that amount – only.

Will licensees be forced to use our own resources to finish projects that are underway?

Yes, if the project costs exceed the amount of FIA funds that have been allocated to you or if the PwC forest investment manager does not approve the costs in your investment schedule.

Will licensees have to fund the planting of trees that are in the nursery and ready to be planted even though FIA funding has not been approved?

Yes, until such time as an investment schedule is completed.

Do all projects need to be applied for up front, or can new projects be added through the year?

New projects can be added throughout the year.

Can changes be made to approved projects in light of unforeseen circumstances, without excessive red tape?

Amendments to approved projects will be submitted to PwC forest investment managers using the investment schedule. Minor changes such as the timing or season in which the project is completed can be approved very quickly, however changes to projects that may effect the cost structure or return on investment will require a higher level of review by the PwC forest investment manager.

Who is responsible for quality control on projects – company, government or PwC?

We all are. Licensees should ensure that projects meet their internal quality controls. PwC, with our monitoring procedures and audit procedures will ensure that licensees have carried out appropriate measures to ensure the delivery of a quality project. Where they haven’t done so, our procedures will be more heavy-handed, and responsibility will begin to shift more to PwC, and ultimately, if there is a series of events that indicate problem actions, to the government. If licensees don’t address and build-in appropriate quality measures, they should expect a reduction in allocated funding in future years which will be driven by the government. When the project is completed the Licensee will be required to have a Qualified Professional sign that all regulations and standards agreements were met. This is the ”completion certificate” that will be required as part of the completion summary.

How will the concept of licensee consortium work?

Consortiums will work through the principles of SFM plans. The Ministry of Forests is currently developing these details.

Will PwC help licensees set this up?

Licensees will be able to consult with their forest investment managers however, we expect licensees to establish consortiums, societies or associations on their own.

What happens if licensees can’t reach a consensus on what is best in our area?

The Ministry of Forests is developing the details but early discussions indicate that PwC forest managers will not be able to accept investment schedules from licensees that have not signed onto a completed SFM plan for their management unit.

Who will arbitrate?

The costs required to produce SFM plans are eligible for FIA funding. Licensees in management units that expect consensus will be tough to achieve may want to budget some of their funds for an arbitrator.

Will funding be set up by timber supply areas? By zones?

The apportionment of LBIP funding to each management unit is according to its proportion of the volume of Crown timber harvested in all 37 timber supply areas and 34 tree farm licence areas during the previous three calendar years. For this purpose, only volume harvested under the following forms of agreement has been included in the calculation:

* tree farm licences, * forest licences, whether replaceable or non-replaceable, * timber sale licences, whether replaceable or non-replaceable, * timber licences, and * pulpwood agreements.

Volume harvested under woodlot licenses and community forest agreements is not included in the apportionment calculation because those tenures are the focus of the separate Small Tenures Program.

Are there any penalties if licensees don’t deliver?

Yes, there will be penalties which are yet to be determined.

Tendering Contracts:

Do all or a portion of contracts need to be tendered and do tender rules apply by project or to overall annual budget, and do they need to tender if they can direct award a reasonable (market) rates (reduces overhead admin. costs)? Where a licensee has elected to sub-contract work, the licensee is required to adhere to the following tendering requirements:

* If a proponent’s allocation is $50,000 or lower no tendering is required * Greater than $50,000 a minimum of 50% of the gross value of all work sub-contracted for the year including delivery allowance must be tendered; * Any project over $100,000 must be advertized locally * Projects less than $100,000 can be select invitation tendered. * The ministry of forests will define “local” for purposes of tendering projects

Keep in mind that a licensee must also clearly demonstrate a valid rationale for awarding subcontracted work to a group other than the lowest bidder. Direct award work costs must meet the test of being reasonable and economic.

Government’s Role in the Program:

How much government red tape is there with the standards agreements- reference document, government sign-off, local agency monitoring role, etc.?

If the project will meet the standards agreements exactly as they exist on the Ministry of Forests FIA website, there will be no government involvement. However, if the Licensee wants to utilize an altered or an entirely different standards agreement, the Licensee will have to negotiate with the appropriate government agency and the amount of red tape will likely depend on the complexity of the project for which a new or altered standards agreement is desired.

As the Administrator of the FIA, will PwC act independently from the Ministry of Forests (Ministry of Forests)?

Yes. We are responsible for all aspects of program administration, funding and auditing. Government’s role in the FIA is to determine the allocation of funds to participants, establish eligible investment activities and work standards and perform its regulatory function. Does the Ministry of Forests have the authority to determine priority projects?

Government will have no direct role in setting activity priorities, approving LBIP projects, verifying fieldwork or certifying project completion.

Will ministry and government officials still be involved in decision-making?

PwC is responsible for all aspects of program administration, allocation and disbursement of funds, and auditing. Government’s role in the FIA is to determine the allocation of funds to participants, establish eligible investment activities and work standards and perform its regulatory function.

Will the Ministry of Forests see licensees’ plans?

The ministry will receive reports from PwC on a regular basis on details of the program as a whole. It is not expected that individual licensee plans will be provided to Ministry of Forests.

Will the investment plans be part of the government’s new vision of sustainable management plans?

Yes. This is outlined in materials that have been distributed to licensees.

About PwC:

How was PwC selected as Administrator of the program?

PwC was selected as Administrator of the FIA land-base Investment Account through a competitive tendering process.

Because PwC audit so many forest companies, don’t you think that you might have a conflict of interest? What is to prevent you from giving your existing client preferential treatment?

It is of paramount importance to us that we maintain our integrity, objectivity and independence in our capacity as FIA Administrator and Auditor. PwC has very clear conflict policies that must be agreed to in writing annually by every member of our staff. These policies make it very clear to all that we are independent of our audit clients and we do not perform management functions for clients. However, given the serious attention that is accorded to potential conflicts of interest today, we believe as Administrators for the FIA that it is imperative we add further measures to our existing conflict policies, including:

* We will mandate an annual review by an independent third party, to be mutually agreed upon in consultation with the Minister, of our investment screening, audit and other activities undertaken with clients of the firm to ensure objectivity.

* The Audit Director and all full-time Forest Investment Managers assigned to FIA administrative duties will be required to be independent of the licensees and will be precluded from performing any other services for licensees other than FIA services;

* A minimum of 25% of performance audits will be competitively outsourced to third parties and some of these audits will include audits on those licensees that are clients of our firm, so as to confirm the objectivity of our firm’s decisions made by FIA Forest Investment Managers;

* The FIA administrative organization will function as a separate unit of PwC, both physically and operationally. This separation will limit full-time FIA staff exposure to other work being performed by PwC for clients, and will facilitate the separation of meetings and communications with licensees and other parties from other activities of PwC.

Web Link: www.fialicensees.com

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