Opening Statement to the Standing Committee on Public Accounts

Canadian International Development Agency - Managing Contracts and Contribution Agreements
(Chapter 14 - October 2000 Report of the Auditor General)

Mr. Chairman, thank you for this opportunity to present the results of our audit of CIDA's management of its contracts and contribution agreements. Joining me at the table are John Hitchinson, Principal and Paul Morse, Director responsible for the CIDA audit.

CIDA is responsible for managing about $1.8 billion of Canada's international assistance. Approximately $700 million of that amount goes to Geographic Branches for programs aimed at countries in Asia, Africa and the Americas. Most of this amount is spent through contracts and contribution agreements with third parties, referred to as Canadian executing agencies, to deliver development assistance projects.

Another $260 million is spent by the Canadian Partnership Branch for grants and contributions to support partner organizations that are responsible for the planning and implementation of their own programs and projects.

Competitive Contracts

We found that, with some exceptions, where CIDA used a competitive process in its Geographic programs for selecting executing agencies, the process was properly conducted. However, we also observed instances where contracts did not comply with the Treasury Board Contracting Policy or the Government Contracts Regulations. These involved inappropriate sole-sourcing, contract splitting, and non-compliance with the contracting policy for former public servants in receipt of a pension.

Authority Framework for Contribution Agreements

We also found that an authority framework, similar to that for the contracting process, is not in place for CIDA's contribution agreements. This is important because in 1999-2000, 45 percent of CIDA's Geographic Branches' expenditures were through contribution agreements, compared with 43 percent through contracts.

The terms and conditions for grants and contributions related to the Geographic programs are very general and provide no direction on how and when to use contribution agreements. They include a provision that contributions are to be approved in accordance with regular departmental procedures and authorities; however, exceptions can be dealt with internally by CIDA. Consequently, CIDA's use of contribution agreements to select executing agencies often varied from its stated internal policies or practices. CIDA can select executing agencies by means of contribution agreements, which are, in effect, the same as sole-source contracts, which would not be permitted under Government Contracts Regulations. This was the case in about half of the contribution agreements we examined.

Support for Results-Based Management

In 1998, we conducted an audit of CIDA's implementation of results-based management in its Geographic programs. CIDA had adopted the concept of results-based management to change the Agency into a more results-oriented and learning organization. We found that progress was evident, but uneven.

In this audit, we examined CIDA's contracts and contribution agreements to see how well they support results-based management and meet CIDA's operational needs. We found that many of the issues we raised in 1998 concerning results-based management re-surfaced. In many instances, contracts and contribution agreements do not yet provide sufficient support to results-based management. They contain unclear or unrealistic expected results, or do not provide for monitoring of and action on changes to assumptions that are critical to project success.

To get a large project planned and approved, tendered, contracted, and operationally planned can take anywhere from one to five years. It involves considerable expense and effort on the part of both CIDA and the host country partner. Given this large investment in resources and the short-term costs associated with cancellation, it is difficult for CIDA to decide to cancel the agreement when results are not forthcoming. CIDA does not build into its management of project agreements any formal requirement or mechanism for "off ramps" - that is, a decision to proceed or withdraw.

On a positive note, we observed that CIDA project officers attach considerable importance to monitoring the agreements under their responsibility. They commonly use monitors under contract to review and report on progress, and they insist on receiving reports from Canadian executing agencies as required.

Canadian Partnership Branch Agreements

Our examination of agreements in the Canadian Partnership Branch found that CIDA obtains reasonable information on the financial health of its Canada-based partners for its Voluntary Sector program. However, limited information is received on projects that were funded, on the amounts spent on them, and on results obtained. CIDA bases its funding primarily on historical levels rather than on partners' performance.

We also observed that more meaningful and accurate information on the Canadian Partnership Branch is needed in CIDA's Performance Report to Parliament.

Conclusion

Our chapter contains a number of recommendations aimed at tightening up the management of CIDA's contracts and contribution agreements. CIDA has responded positively to our observations and recommendations. The Committee may wish to discuss with CIDA the specific steps it is taking to deal with the issues raised.

Mr. Chairman, that concludes my opening statement and we would be pleased to answer your Committee's questions.