Project Approval Paralysis and Canada’s Declining Aid Spending

Canada’s media, opposition parties, and development community have all grappled with the questions of how much and why Canadian foreign aid funds were lapsed in the government’s 2012-2013 fiscal year.  Initial reports projected upwards of $800 million underspent.  Later figures suggest that the total amount lapsed was closer to $290 million.  With the end of FY2013-2014 just recently passed, we have yet to see whether another significant lapse of Canadian ODA has occurred. And still, we know very little about why Canada’s aid money went unspent last year.

This question of why Canada lapsed funds has continued relevance today. The OECD released its annual aid data this week showing that aid is at an all-time high and yet Canada’s aid contributions declined sharply in comparison to other leading donors (-11% from 2012 to 2013).  Reasons for this decline, linked certainly to the lapsed funds of 2012-2013, have been in short supply from the Government. The DAC report claims Canada justified its sharp drop in aid spending between 2012 and 2013 on extraordinary payments made in 2012 – simply the illusion of a cut.

In a November 2013 meeting of the Standing Committee on Foreign Affairs and International Development, Nadir Patel, Chief Financial Officer of DFATD suggested the lapse was due to lower than expected assessments from international organizations, but then admitted that it was money that could have been spent by the Agency. In the same meeting, opposition MP Paul Dewar asked Minister Baird why so few new project approvals of more than $25,000 were being authorized by DFATD in the beginning of 2013-2014, and the Minister responded: “We’re doing smaller ones.” This question of approvals – of how many, what size, and what type of projects were being approved in 2012-2013 by the former CIDA and its Ministers, has received insufficient attention when trying to better understand the lapsed funds and last year’s sharp drop in Canadian aid levels.

To examine this in more depth, the North-South Institute (NSI) and Engineers Without Borders (EWB) began analysis using the government’s own open data files on aid spending, as well as data compiled from DFATD’s Disclosure of Grants and Contributions over $25,000 to try and reveal a clearer picture of the 2012-2013 lapse and its link to project approvals and the annual cycle of government spending.  Aniket Bhushan (NSI) and James Haga (EWB) convened a workshop in Ottawa at the end of March to preview the results (see: here and here) of their analysis, a detailed report of which is presumably soon to be available from the North-South Institute.

After attending the NSI/EWB workshop in March, I was inspired to look into a series of related questions using the most recent DFATD open data files from January 31, 2014.  This data – part of recent government efforts to participate in international aid transparency initiatives – reflects all active approved aid  projects for DFATD and, more importantly, their date of approval and total amount of funds committed to the new project. In particular, I was interested in how project approvals differed in 2012-2013. How many projects were approved in contrast to the preceding fiscal years and how did they compare in size?

First, I looked at how many new projects were approved by CIDA in each fiscal year.  Figure 1 shows that FY2012-2013 was notable for a sharply reduced number of new project approvals.  According to DFATD’s open data, only 280 new projects were approved in 2012-2013, a sharp drop from the 461 approved the prior year.  This nearly 40% decline in the number of new project approvals is a telling figure when considering the lapsed funds that year.  Without a sufficient number of new programs coming online to replace those that are ending, any donor agency is going to have difficulty moving its allotted budget of aid funds.

Figure 1. New CIDA Project Approvals by Fiscal Year, 2008-2013

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Figure 2. New CIDA Project Starts by Month, Fiscal Years 2009-2013

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With far fewer projects approved than had been typical at CIDA, I looked next at the question of when during the fiscal year projects were being approved.  Anyone familiar with the spending cycle of the Government of Canada knows that a significant amount of funds are frequently spent in the waning days of the fiscal year.  At CIDA this was ever the case. It is not surprising that complex and challenging programs aimed at reducing poverty and supporting international development might run into hurdles when it comes to spending their estimated budget in a given year.  For this reason, an annual ritual of ‘March Madness’ at CIDA was always the reallocating of undisbursed funds to those programs and projects which were able to spend before the end of March. It was not surprising then that the DFATD open data files revealed a similar pattern.

In each of the past four fiscal years (and presumably for time immemorial), there have been large spikes in the approval of new projects in the final month of the fiscal year.  Figure 2 reveals this trend, but also shows how strikingly different 2012-2013 (and indeed 2011-2012) was from previous years.  In contrast to the nearly 200 new project approvals in March 2011, in March 2013, the Minister of International Cooperation only approved 104 new projects.  More telling is that throughout that rest of the fiscal year, then Ministers Oda and Fantino approved more than 20 projects in a month only once (April 2012).

Fewer projects were approved in total, as well as in the key ‘March Madness’ period at the end of fiscal year in 2012-2013.  This, in and of itself, is not sufficient to explain the lapse in funds, because had new projects being approved been of larger scope and budget than in past, approving fewer of them would not automatically reduce CIDA spending.  To examine this question of project size I analyzed data on the dollar amount of new project commitments in the DFATD data. Not only are fewer projects being approved, the funds committed by these projects is in sum and on average less than in prior fiscal years.  Though the total committed in March 2013 was still significant (nearly $900 million), the total committed throughout the year was far less than in prior years.  On average, a new project commitment at CIDA in 2012-2013 was approximately $6 million, while in 2010-2011 it was closer to $8 million.  Figures 3 and 4 show these differences both in monthly total commitments from new project approvals and monthly average commitments.  The message is clear: not only were fewer projects being approved, but on average they were smaller projects making use of less of Canada’s allocated aid budget.

Figure 3. Total New CIDA Project Funds Commitments by Month, Fiscal Years 2009-2013

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Figure 4. Mean New CIDA Project Funds Commitments by Month, Fiscal Years 2009-2013

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To put it simply, if the Minister does not approve new projects, and the projects that are approved are much smaller than has been typical of Canada’s aid program in recent years, then CIDA/DFATD will have great difficulty in spending its allocated budget.  The 2012-2013 lapses in aid spending seem to have mostly been due to a sharp drop in new project approvals at CIDA.  Why would such a reduction occur?  Some have argued that this was simply a means of cutting through inaction or stealth and freeing up Canadian aid funds to be returned to the Government coffers in aid of nothing more than deficit reduction.  No evidence points to a deliberate government effort to spend less than planned at CIDA for this express purpose.

The bigger question is more straightforward:  Why were the Ministers of International Cooperation in this period not approving new projects at the same rate?  Were there simply fewer projects for them to approve?  Rumored piles of approval memos sitting on the desks of Ministers Oda, Fantino, and now Paradis are legend within the Canadian aid community and at DFATD and suggest that it is not a matter of no new projects being offered for approval.

The rumored addition under the Harper Government (and continuation through today) of a “No Objection” approval step for CIDA’s Minister may be partially to blame for the lower levels of project approvals. Where previously Deputy Ministers and Assistant Deputy Ministers might have been permitted to approve projects and contributions up to a certain threshold, now DFATD aid officials cannot reportedly approve anything before receiving the “No objection” nod from the Minister’s office.  Could this extra “No Objection” requirement from the Minister be responsible for the paralysis of project approvals seen in 2012-2013?  Unfortunately the DFATD data cannot provide the answer to that question.

As taxpayers, some might applaud this savings or “frugality” as Minister Baird put it to the Standing Committee on Foreign Affairs and International Development on April 9, 2014, but many others will be left wondering why the government squandered the opportunity to use Canadians’ tax dollars to support development and fight poverty abroad, as they had been mandated to do.  Many of us would feel cheated if we donated to a charity for a specific cause only to learn later that the charity did not spend the money, returning it instead to its parent-organization’s general coffers because its executive director had been unwilling or unable to approve new programs.  Should Canadians feel any different about the exact same behavior within our national foreign aid agency?

This post originally appeared on the Ottawa Citizen Aid & Development Blog on 2014/04/12.

 

Does a New Minister Again Bring New Aid Priorities?

It was a time-honoured tradition at the Canadian International Development Agency (CIDA).  Every time a new minister was appointed, officials within the Agency would wait several months for the new Minister to announce a new set of priorities for Canadian aid.  With each new Minister trying to put their own stamp on the Canadian aid program, the effect was one of layering priority over priority in an often chaotic or contradictory manner.

Since the year 2000 at CIDA, and now within the development arm of the newly minted Department of Foreign Affairs Trade and Development (DFATD), we have witnessed a revolving door of Ministers each trying to tweak or shift the directions of Canadian foreign aid.  In that time, Canada has had six different Ministers at the helm of its aid program. In each case, the Minister has attempted to imprint a new set of priorities on how Canada funds development.

Maria Minna, under the Liberals, ushered in the “Social Development Priorities” agenda, honing CIDA’s focus in on health, education, child protection, and HIV/AIDS.  Her successor, Susan Whelan, layered an additional priority on top of Minna’s social development agenda by instituting a renewed focus on agriculture and rural development. The next Liberal Minister, Aileen Carroll, added governance and private sector development alongside health and education as her four areas of focus for CIDA.  In the period from 2000-2006 that made for at least seven different priority areas for Canada’s aid program.

Things did not change much in the wake of the Liberals demise as governing party.  Under both the Conservative minority and subsequent majority governments the same trend continued.  During Josée Verner’s short tenure, CIDA commenced on a renewed effort to promote gender equality and empower women, as well as a focus on entrepreneurship.  Bev Oda, the longest-serving Minister in this era, prioritized ‘aid effectiveness’ for Canada, but not in the sense that effectiveness is understood by the international aid community.  Instead, she ‘focused’ CIDA on three thematic priorities: food security, children and youth, and sustainable economic growth.  Leaving her cabinet post and resigning her parliamentary seat nearly a year ago after several years of controversies like the infamous “not” inserted in a memo or her alleged predilection for limousines and pricey orange juice, Oda gave way to the last Minister to helm CIDA as an organization: Julian Fantino. Not to be outdone, under Fantino’s watch, we saw the Minister declare a new refocusing on private sector development and a new love affair with extractive sector at CIDA that may well carry over into the newly formed DFATD.

If your head is not spinning by now with all the various layers upon layers of priorities and focuses imposed by this parade of Ministers, we have today witnessed yet another cabinet shuffle with a new Minister for International Development: Christian Paradis.  Will we witness, yet again, a new set of priorities for Canadian aid once Minister Paradis has settled in to his new portfolio?  Given that Paradis is taking over Canada’s aid program direct from stints at Natural Resources and Industry, perhaps not.

The problem with a constant and shifting set of priorities for Canada’s aid program is that it leads to a lack of sustainability and predictability about Canadian partnerships and investments in the Global South.  If the only constant in our aid program is the inevitability of changing priorities ever couple of years, it makes it very difficult for long term investments in development to pay off with effective results. To commit to true aid effectiveness, Canada should try to develop a strategic policy framework for engagement with development that supersedes Ministerial whims to put their own fingerprints on the aid program.

With this morning’s cabinet shuffle, Canadians are yet again saddled with a Minister for International Development who appears on the surface to have little or no international development background. Regardless of his development credibility, if  Minister Paradis really wants to make his mark as Canada’s second ever Minister of International Development, he will not tinker adding another layer of aid priorities and instead attempt to steer the development arm of DFATD into a long term commitment to its newly legislated mandate.  The parade of ever-changing priorities must stop.

This post originally appeared on the Ottawa Citizen Aid & Development Blog on 2013/07/15.