Telefilm Canada, the country's principal source of production subsidy, has been advised to pull out of television and concentrate on film in two separate reports, by the Canadian Television Fund (CTF) and consultancy KPMG.

The reports suggest that the federal agency should no longer administer the $200m CTF, citing bureaucratic inefficiency and duplication that arose when Telefilm was given responsibility for directing funds provided by Canadian cable companies through the CTF.

The CTF report recommends the government accede to a long-standing film industry request for a separate $50m feature film fund. It also suggests that the CTF needs to tighten its rules concerning conflict of interest, suggesting that fund directors, many of them major players in the Canadian entertainment industry, needed to remain at arm's length from funding decisions to dispel an existing "mistrust" in the process.

The second report, commissioned by the federal Heritage Ministry from KPMG, also pointed to inefficiencies.

Neither report mentioned Montreal production company Cinar, which is embroiled in allegations of fraud involving the use of Canadian "fronts" for foreign talent on productions claiming Canadian content status. However, the implication is clear: both the federal agency and the CTF need to improve transparency and efficiency and address conflict of interest. One former Telefilm executive, who while at Telefilm was approached to investigate alleged impropriety by Cinar, is currently employed by Cinar. The fall-out from the Cinar debacle is sure to delay any governmental policy changes.

On a brighter note, both reports support continued public subsidy of film and television, suggesting that removing such support would limit the variety and indigenous content of Canadian production.