Arctic Yearbook 2014 - Page 211

  211   1. Establishing a clear fund objective; 2. Clarify fund deposit and withdrawal rules, including the need to legislate the existing informal agreement for 25 percent allocation of resource revenues to the Heritage Fund; 3. Establish robust transparency and oversight mechanisms, including appointing a Supervisory Council to manage the Fund; and 4. Strengthen citizen engagement. The rules pertaining to how a fund is managed are critical to its long-term success. Research into best practices20 indicates that there are three key factors in developing a successful Heritage Fund, ensuring strong internal controls from the beginning. First, establish clear fund objectives; second, define clear operational rules for the fund in line with these objectives; and third, develop a clear and robust governance and oversight structure. A defining principle of a successful Sovereign Wealth Fund is a sound governance framework containing a clear division of roles and responsibilities (International Working Group of Sovereign Wealth Funds 2008). Through establishing a strong governance structure that has independent oversight of the Heritage Fund and a clear division of responsibilities, a robust system of checks and balances can be ensured. Authority should be provided to governing bodies to exercise objective, independent, and effective judgment, in order to prevent the use of the Heritage Fund for political goals that are not aligned with public interest. The Government, the fund owner, should provide oversight to determine fund objectives, such as broad policy purposes and the investment mandate. However, operational and political separation should be maintained in order to limit political interference into investment decisions of the Fund. Issue 1: Establishing a Clear Fund Objective Though the Ministry of Finance indicated that the Heritage Fund has been established purely for savings, our work with the public and Legislative Committee indicated that there is not yet consensus within the NWT about the objective of the Heritage Fund. Views reported to our research team ranged from savings for saving’s sake, to creating a fund for investment in specific infrastructure projects (such as telecommunications), and generating a culture of savings, autonomy and long-term vision in the NWT. Economic stabilization, however, is also an important consideration, for which a separate fund for the singular purpose of economic stabilization could be established in the future. Daitch, Schwann, Bauer, Dias & Fan Li