Proceedings of the Standing Senate Committee on
National Finance
Issue No. 83 - Evidence - December 5, 2018
OTTAWA, Wednesday, December 5, 2018
The Standing Senate Committee on National Finance, to which was referred Bill C-86, A second Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures, met this day at 2:01 p.m. to study this bill (topic: Part 4, Division 17 — Official Development Assistance).
Senator André Pratte (Deputy Chair) in the chair.
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The Deputy Chair: Good afternoon, everyone. I’m Senator André Pratte, the deputy chair of the committee.
As a reminder to those watching, the committee hearings are open to the public and are available online at sencanada.ca.
I would now like to introduce the clerk of the committee, Joëlle Nadeau, and our two analysts, Alex Smith and Shaowei Pu, who team up to support the work of the National Finance Committee.
Today, we’re beginning our consideration of Bill C-86, which was referred to us yesterday, on December 4, by the Senate. Up until now, our hearings have been on the subject matter of the bill, and not on the bill itself.
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Today, we want to focus on one measure of Bill C-86, Division 17, Part 4 about international financial assistance.
We welcome from the Canadian Council for International Co-operation, Fraser Reilly-King, Research and Policy Manager. From the Canadian International Development Platform, we have Aniket Bhushan, Lead Analyst and Principal Investigator. Finally, from Grand Challenges Canada, Jocelyn Mackie, Co-Chief Executive Officer.
Welcome to all of you and thank you for being here today. I believe Mr. Reilly-King will begin with a short presentation and then Mr. Bhushan and Ms. Mackie.
Fraser Reilly-King, Research and Policy Manager, Canadian Council for International Co-operation: Thank you very much.
Thank you, Mr. Chair and members of the committee for the invitation to appear. My name is Fraser Reilly-King. I’m with the Canadian Council for International Co-operation. We’re a national coalition of civil society organizations working to end global poverty and promote social justice and human dignity for all.
Our 80-plus members include many of Canada’s leading international development and humanitarian assistance organizations. More broadly, we represent a sector that includes over 2,000 organizations, employs 14,000 people, and spends $5 billion every year .
Bill C-86 will have important impacts on the work that we and our members do to build a fairer, more sustainable and safer world. I’ll focus my remarks on how Bill C-86, from our perspective, changes the delivery and tracking of Canada’s international assistance.
For the past 10 years since June 2008, Canada’s official development assistance, or ODA, has been governed by the Official Development Assistance Accountability Act. This act ensures that Canada’s international development and humanitarian assistance focuses on poverty reduction, considers the perspectives of the poor, and upholds human rights. It also ensures a level of accountability to Parliament and the public.
Bill C-86 amends the ODA Accountability Act in two important ways. First, it repeals the current definition of ODA under the act and makes the definition subject to regulation by cabinet.
The current definition is based on that of the Organisation for Economic Co-operation and Development, or OECD, the institution responsible for defining and monitoring ODA globally. The 2008 Canadian definition in the act was in line with the OECD definition current at that time.
Members of the OECD’s Development Assistance Committee, or DAC, regularly review aspects of this definition. This review has been more pronounced over the past four years as the DAC undertakes the modernization of ODA which may affect the definition but more often affects the interpretation of this definition under the rules established by the DAC for all donors.
When Bill C-86 was studied by the House of Commons, CCIC, the Canadian Council for International Co-Operation, warned that making the Canadian definition of ODA subject to cabinet discretion would prejudge the outcomes of this multilateral review and could put Canada out of line with its global peers. We are therefore very pleased that the bill was amended at second reading to ensure that Canada’s definition remains aligned with the OECD standard now and in the future.
Our second concern relates to the importance of the act for improved transparency and accountability for Canadian ODA. Bill C-86 would delay the release of a report required under the ODA Act. Currently, this report to Parliament provides preliminary whole-of-government information six months after the end of a given fiscal year and six months ahead of the final annual statistical report. By delaying the release of this report by a further six months, there would be no official data on Canadian ODA until a year after the fact. Timing it with the release of the more comprehensive statistical report also makes these act numbers redundant.
We realize there are ways to make this data available without a report to Parliament, and the government has indicated a willingness to do so. However, the best way to ensure that this vital information for accountability and transparency remains accessible, irrespective of the particular government, is through legislation and through maintaining the release of the report in the fall. We therefore recommend that the current reporting schedule under the ODA Accountability Act is maintained.
Bill C-86 also introduces the international financial assistance act, allowing the Minister of Foreign Affairs or International Development to offer sovereign loans. This is an area in which the OECD recently made an important change in the way the ODA is assessed. Previously, sovereign loans that were concessional and had a minimum grant element of 25 per cent and which aimed to reduce poverty and support economic development, were counted as ODA in their entirety.
Now sovereign loans are assessed on a grant equivalency basis. Only the grant portion of a sovereign loan is counted as ODA. The grant portion is calculated according to a scale, so loans to least developed countries receive preference. This means that a loan to Chad is treated differently than a loan to China.
The changes to the proposed definition of ODA under the ODA Act mean that Canada’s definition will keep pace with these changes. Any sovereign loans that Canada issues will be partly counted as ODA based on this OECD framework.
We therefore recommend that this also be clarified in the international financial assistance act by amending the act to state that sovereign loans that are concessional, which aim to reduce poverty and support economic development and which otherwise meet the principles and conditions of the ODA Act, will be counted as ODA according to the new definition of ODA in the ODA Accountability Act.
This cross-reference will clearly frame the relationship between sovereign loans issued by Global Affairs Canada and the rest of Canada’s international assistance. As the Government of Canada introduces new and diverse forms of international financial assistance, it is important to ensure consistency in the way this assistance is assessed.
With that, I’ll close. Thank you for your attention. I look forward to any questions.
Aniket Bhushan, Lead Analyst and Principal Investigator, Canadian International Development Platform: Good afternoon. Thank you for this opportunity. Thank you, chair.
My remarks will complement and build on my colleague’s. As such, some of the areas that he’s already covered I will try to be brief about or skip over. I should also mention that we have submitted as a brief sort of a wider analysis which pertains to some of the content here.
In summary, I’ll point at two things. First, our reading of the specific measures here in Bill C-86, Part 4, Division 17, which are really three: the change in the reporting timeline, which we welcomed but with qualifications; the repeal of the definition of ODA, which again we welcome but with some qualifications; and more importantly — and I’ll spend most of my time on this — the three new authorities contained in the IFAA, which is again welcomed but with a specific request for greater detail, possibly further study and consultation, and some supportive recommendations that we’ve outlined in the brief that I’m happy to speak to in my remarks as well as in the Q&A further.
On the change in reporting timeline, I defer to my colleague and I am largely in agreement. Our point, in terms of the qualifier, is simply that attention also needs to be paid to not just the reporting timeline, the framework and the structure, but also, more importantly, the quality of the information and the quality of the underlying data.
Our challenges and issues have been with more of the quality of the underlying data and information as it relates to the ODA Act and so we hope that whatever change is made will work towards bettering that.
On the question of the definition of ODA, as my colleague has already mentioned, ODA is not a static concept. It has been through significant revisions, a couple of key ones being around debt sustainability and the valuation of loans, as well as on the issue of in-donor refugee costs. When there are major global issues it tends to have an impact on what we want to count and report as ODA. Largely, the trend and tendency has been towards expansion. We want and tend to count more things as official development assistance.
That said, the main change proposed here is to make the definition of ODA subject to regulation, which we welcome. I will point to two processes that we go to some length in the brief to describe. They’ve also been touched on before.
Essentially, the first is the modernization of ODA agenda where the valuation of not only loans but overall reporting of ODA is moving from what’s called a cash accounting, the cash flow based system what we currently have, to a grant equivalent system, the goal of which is to make it more specific to attribution. When you are doing more for those who need ODA more, it should count more. That’s essentially the general principle. We’ve outlined the details of that in the brief.
The second process, which is related and complementary and, it’s important to recognize, does not replace ODA, is a measure that the OECD is working on now called TOSSD which is the Total Official Support for Sustainable Development. This measure is different. It recognizes that there are many other evolutions that are taking place and the importance of the need to crowd in private capital, crowd in public and private finance complementarity, and TOSSD aims at that measure.
We welcome this change to move the Canadian definition from ODA to be more regulation based so that it can better keep up with these two main multilateral processes: again, the modernization of ODA agenda, as well as the new TOSSD measure, which I can speak to in questions and answers further.
I will make four points very quickly on what should be kept in mind as we’re going through and moving to a regulation-based approach to defining Canadian ODA. First, obviously, is ensuring that ODA remains targeted and focused on poverty alleviation. Second is ensuring consistency and respect for Canadian values such as equality, inclusiveness, human rights and cultural sensitivity. Third is ensuring there is symmetry between the tools and solutions we apply, especially since we are diversifying these and talking more about the private sector and crowding in private capital, to the context and problems to which they are really applicable. Last, fourth is ensuring that the perspectives of the poor and our development partners across the spectrum are well represented and reflected in both the process of policy development and also prioritization as far as ODA is concerned.
Finally, I’ll give our perspective on the new authorities contained in IFAA, the new measure that’s in the bill, and these cover three new programs: the sovereign loans program, the International Assistance Innovation Program, and the climate change repayable contribution program.
Our conclusion here is that we welcome these forward-looking and necessary measures to ensure Canada’s development policy and financial tool kit keep up with these global changes and helps position Canada for new opportunities, but we must recognize that these are new, especially for Global Affairs Canada. There is a new ground, a new terrain, here. These have been resourced, furthermore, in Budget 2018, backed with $1.5 billion over five years which doubles the level of Canada’s international assistance provided by innovative tools. This is welcomed as proponents, but we also mention that the changes outlined in the ODA modernization agenda has a significant impact on the sovereign loans and soft loans program. For example, the only recent experience that Canada has in this space is two sovereign loans made to Ukraine recently. Those would not be counted the way we had counted them until recently. That gives you an idea of what these changes really imply for Canadian ODA.
Our key takeaways are these. While the sovereign loans program and authority are welcomed, far greater transparency is needed on things like loan terms and tenders, the policy objectives, and there needs to be consistency with the new grant-equivalent approach to the valuation of ODA within these loans.
On the points about the innovation program and the repayable contributions, our challenge is that while we welcome these measures, we raise a specific caution on account of the limited visibility regarding the content and the objective of these new programs. Global Affairs has already provided some insight into this and conducted a consultation, but the outcomes of the consultation have not been very clear. As far as the new strategy is concerned, as to what IFA and these authorities are going to end up doing, that remains a bit unclear.
I’ll close with three points, the overarching banner of which is that Canada really needs an overarching development finance policy and strategy. To that end, we think that is a greater clarification of the role and ownership of IFA authorities between the two ministers that could be asked for. Given the difference that ministers have to IAE, International Assistance Envelope management, and because these authorities are funded out of the International Assistance Envelope, the addition of these authorities deserves a specific form of review. We argue that there should be consideration made to a five to seven-year periodic review.
The Chair: Would you please conclude.
Mr. Bhushan: The last two points are what I already mentioned in terms of the need for greater transparency on the objectives of the program and the need to improve internal capacity globally at Global Affairs, as well as in the wider Canadian development finance ecosystem. Thank you for your patience.
Jocelyn Mackie, Co-Chief Executive Officer, Grand Challenges Canada: Thank you very much for having me here. My name is Jocelyn Mackie. I am co-CEO of Grand Challenges Canada. I’m going to make three points in my opening remarks. First, I’m just going to spend a little time describing what GCC is because it’s very relevant for my comments.
My comments are going to be confined solely to the international assistance innovation program that is proposed within this bill.
My second point is that government and Global Affairs Canada should be given greater flexibility for financing arrangements and partnerships for international assistance. Third, it’s not a panacea. The approach to these really needs to be forgivable with appropriate flexibility and really tailored to each circumstance.
Grand Challenges Canada is an innovation platform that seeds and transitions to scale scientific, social and business innovation to drive sustainable impact at scale.
We are primarily funded by the Government of Canada, so we are a policy delivery vehicle for Global Affairs Canada. We have supported over a thousand innovations in over 90 countries around the world. These innovations are actually having a real impact on the ground. They are saving and improving lives — 13,000 lives saved and 1.5 million lives improved — and because the results of innovations are in the future, they will save and improve even more lives by 2030, as we have modelled out.
We have over five years experience in deploying various financing approaches to support development innovation. These tools are very important and they can drive impact and sustainability.
In the bill, there is language in the budget that talked about financing arrangements, flexible financing arrangements and partnerships. What do we mean by that, at least from our perspective?
Financing structures need to be tailored to the stage, the sector and the market of the innovation that we are trying to reach, particularly when we’re trying to reach the base of the pyramid. For example, for social innovations this often means a grant with all the supports around that to get the impact that you’re looking for.
For social enterprises and businesses, this is often a loan — it should be a loan — but with concessional terms and a lot of patience, or convertible debt or direct equity. We really need to let the innovation or the program drive that decision and it needs to be tailored to each circumstance.
The right financial tools can also help drive partnerships that we’re trying to achieve. For example, we’re often trying to crowd in the private sector. We need to use tools like convertible debt or equity that resonate with the private sector when we’re trying to crowd them in, whether it be angel investors or other forms of financing.
There are two lessons that we have learned at Grand Challenges Canada which I think are very relevant for this program. First, innovation is incredibly risky. Innovation that is targeting the bottom of the pyramid in low- and middle-income countries is even riskier. It doesn’t mean that we shouldn’t do it, but the structure of the funds we’re intending to deploy needs to recognize that. Debt needs to be forgivable and convertible into equity.
We have FinDev, for example, that does fully repayable and market-rate investments looking for commercial returns. I believe this fund should be active in what we call the “valley of death,” getting innovations through to where they can be picked up by the market, by the private sector or by local country governments.
The second lesson is that funding for innovations needs to be flexible. Innovators and entrepreneurship shift over time depending on the context and these modalities need to recognize that.
In conclusion, the international assistance innovation program is critical and it’s where we should be going. It will be very transformational if it supports innovations, which basically means new ways of doing things, to the point where they can scale sustainably and get over the valley of death. The funds need to be deployed flexibly and tailored to each innovation or initiative and, if done in this way, they can and will drive sustainable impact at scale and Canada can save and improve more lives in low- and middle-income countries.
The Deputy Chair: Thank you very much.
Senator Marshall: My questions are primarily on the reporting but, Ms. Mackie, your flexible financing arrangements were very noticed by me. Who provides oversight on these flexible financing arrangements that you’re talking about?
Ms. Mackie: For Grand Challenges Canada, we deploy funds from Global Affairs Canada. We have a board of directors that is accountable for the use of those funds and then we report into Global Affairs Canada on how they are deployed and whether there are any returns that come back from them. That’s the way that it works for us.
Senator Marshall: Are performance indicators outlined up front? What is the magnitude of the financing that you receive from the Government of Canada?
Ms. Mackie: We’ve been funded most recently through a contribution agreement for $160 million over the last two to three years. Before that, we were previously funded through the Development Innovation Fund in health. Collectively we’ve deployed about $40 million of that in non-grant finance in debts, convertible debt and those different forms of capital. Some have started to come back that can be repurposed for doing other good work. Some have had to be forgiven because the innovation didn’t scale in the way that was intended.
The most important thing it has done is to put a real focus on sustainability and in crowding in the private sector. It has enabled our innovators to stop thinking like they’re always going to be on grants, forced them to think about how they can be more appealing to the private sector, and gotten them ready for more traditional forms of capital.
Senator Marshall: Is the private sector participating? What is the uptake?
Ms. Mackie: Definitely. The private sector participates mostly on an innovation level. They are not coming in to support the platform. They’re interested in each innovation itself and then they fund the innovations alongside us with real money.
Senator Marshall: So what’s the extent of financing by the private sector compared to the amount of government funding?
Ms. Mackie: For every dollar we deploy, we have leveraged $2, but that is not just from the private sector. That includes other governments, CSOs and private foundations. The private sector would be maybe around 20 per cent of that. It’s by and large because our innovations are in low- and middle-income countries, a lot of them will scale through public channels. These are health interventions, social innovations. Only a subset of our innovations are really going to scale through the private sector and those are the ones that have crowded in private sector dollars. Johnson & Johnson and Philips are examples of multinationals that have come in.
Then we also support actual social enterprises who have money from sales from their actual business.
Senator Marshall: Thank you. Mr. Chair, I have some questions on the report. Can I be put down for second round, please?
Senator Boehm: Thank you very much for joining us today and for all the good work you do as advocates for international development. I have a few questions and some of them go back to my earlier experience.
We have a lot of different moving parts. As Fraser Reilly-King mentioned, there is the coordination of the OECD and the development assistance committee between donor countries as we’re looking at new and innovative ways to generate funds for ODA. You’re looking at asymmetry of approaches and we also have, of course, a development financing institution that has been set up as well. So there are a lot of moving parts in a short period of time and it is compounded by a policy review, as you know.
How are you interacting with Global Affairs Canada and indeed with other potential partners — and I know Grand Challenges Canada has a good record of working with other governments and other entities as well — to ensure that the consultation, first of all, is evergreen? There was mention of capacity building issues within Global Affairs. I noticed that a little bit when I was there, because all of this is relatively new, but the goals and objectives are all the same.
Do you see yourselves working more closely, having more frequent consultations? What do you think really needs to be improved in terms of the approach?
Mr. Bhushan: I can start. In the brief, we lay out two specific recommendations, one of which speaks squarely to this. We understand that these current deliberations around the Budget implementation act are largely technical and, as I put in the brief, they are largely technical and on the margin. As you’ve rightly pointed to, there has been quite a bit of change not only globally but within Canada with the launch of FinDev Canada. But it is not just that. We have a blended finance platform and several other elements. We have a thriving and growing impact investing in the blended finance community.
Our recommendation here is simply that the IFAA as construed should provide an opportunity for further and specific discussion and possibly even study of the broader issue of Canada’s ODA and development finance structure overall, which isn’t in the purview of discussion of the BIA. The reason for that is quite simple. We outline in the annex that when you look at different donors’ positions on things like the modernization of ODA agenda, new measures, loan evaluations and crowding in the private sector, their positions are very well thought through.
I’m thinking of the U.K., which has a target of spending 0.7 per cent of ODA GNI. The U.K. has been pushing very aggressively on the inclusion of certain elements as ODA which currently are not ODA.
In Canada, we haven’t really had this updated conversation and discussion. Especially in light of these new elements in the architecture, I think there’s an opportunity to use this as a forum to essentially refresh what the framework and what the set-up of Canadian development finance looks like.
Very specifically on the point about the new authorities, the target and the objectives of those are still, even at a high level, quite unclear. I would say our discussions are very fruitful in that regard because we are bringing up these issues, but they are fairly limited because the forum and the fora don’t really exist adequately in my humble opinion.
Senator Boehm: Do you see some of this capacity-building extending to missions in the field, given that the new policy is going to put a greater emphasis on doing things on the ground and lowering overhead costs in that sense?
Mr. Bhushan: Sure. I think you know better than I —
Senator Boehm: I used to, maybe.
Mr. Bhushan: — well, I hope so, given your prior role.
The consultations that took place that led to the Feminist International Assistance Policy have been broad ranging, wide-ranging and very healthy as an update. However, I would argue that someone should do the math to look at the spread of how many of those took place in Ottawa, D.C. and New York as opposed to Ouagadougou or Nairobi even.
The point is that we also made a specific comment about Canada having commitments internationally and not only that we want to do things on overheads but on localization and prioritization, which we cannot meet with the way our reporting and information flow structure currently is set up. I think much more needs to be done, especially on the localization agenda.
The traceability of ODA remains very weak and remains a big problem for us as analysts, because we get asked these questions and this is frustration with what I mentioned earlier about the quality of reporting, not just the fact that there is a report and a data set, but the quality of the data that is contained within it.
Senator Boehm: Do the SDGs guide your approaches as well?
Mr. Bhushan: They do for me and for our work at a broad level, but the concurrence between how ODA is set up as sectors and the way the SDGs are set up, as you know, has been a bit of a mismatch. Now, there’s a process to harmonize that a bit further, but at least in the Canadian context — and Fraser can correct me if I’m wrong — there’s much more room to do more. We have an SDG commission or panel that Statistics Canada is running, but that’s more domestic.
Mr. Reilly-King: To respond to your question, as you know, since 2016, the focus has shifted a little bit beyond official development assistance. There’s a lot of talk of Canada’s approach to international assistance. We see that in the feminist international assistance policy and the statistical report on international assistance. We’re trying to get a broader handle on all our spending overseas.
This is echoed to some extent in the international context — and Aniket has referred to it — where the OECD is talking about total official support for sustainable development.
The difference between what I feel is that approach at the OECD level and Canada’s approach here is that the OECD is talking about any money that goes to any country outside of industrialized countries and assuming that’s in support of sustainable development. I don’t think that’s always the case. Foreign direct investment — twice the amount of flows come out of developing countries as go in, and they’re not necessarily always for sustainable development.
I think where Canada has shifted that conversation, it’s done a much better job in terms of aligning a lot of our international assistance, be it through FinDev, through new institutions, through new loans, through the ODA Accountability Act, et cetera, around gender equality and around the Sustainable Development Goals. We’re trying to ensure that, with our international assistance, we are advancing the SDG agenda.
One of the challenges — and this also speaks to Aniket’s point about us going in that direction and trying to ensure coherence in our approach — is that I don’t think there’s necessarily been an intentional plan to develop a coherent strategy of what all of the new tools we’re introducing to our toolkit can do and how we ensure that what we’re doing — with our new loans, new sovereign loans, risk insurance and maybe even through export Development Canada — is all moving toward one end. We don’t necessarily have a coherent strategy. I think we’ve managed to align a lot of things around the SDGs, gender equality, et cetera, but I think it would be useful to take a step back.
On your point around capacity building, this is a recent experience where the government has established a funding window for small- and medium-sized organizations, but the assumption is, in a way, that providing this funding for small- and medium-sized organizations will generate high-quality proposals and suddenly you’ll have a whole range of organizations that can generate high-quality programs on the ground. However, we’re finding that a lot of these organizations haven’t had access to the funding in such a long time that we need to increase their capacity, technical skills and training to apply to proposals, to develop quality programming on the ground and to ensure that it’s meeting the highest gender-based analysis; et cetera.
As we introduce these new funding tools, we also have to build the capacity of the Canadian government and partners to deliver on that assistance as well.
Ms. Mackie: Specifically about the capacity building, compared to the time when I started at Grand Challenges Canada six and a half years ago, it is markedly different in terms of the interaction that we have with Global Affairs Canada, both on the bureaucratic side and the minister’s side. I’d say the capacity is rising.
You can continue to give them more capacity in these new tools. We keep bumping up against the kinds of constraints of government to be as nimble as required to play with the private sector or crowd them in. There are countless times when I’ve had frank conversations with the private sector. They say, “I’ve tried and it just doesn’t work for us,” and we’ve been able to partner with them.
There’s lots of potential there, but it’s more the structure that will be a challenge. It’s not necessarily the capacity; that could be achieved. There are some things there that will make it tricky.
They will have to think about how to deliver this with partners, with the appropriate accountability and oversight, but also to allow for that nimbleness and flexibility. Otherwise, it’s going to defeat its purpose.
Senator Andreychuk: If I understand the presentations, you’re putting a lot of emphasis on new tools that are going to be quicker and, you say, therefore, more efficient; at least that’s the hope.
The problem with overseas assistance is that there are many expectations and many ways to deliver, and Canada continues to change. It’s very hard to track where the money is, and its acceptability in the countries that we’re trying to reach. I was pleased someone said that not enough is done in Ouagadougou. I agree with them.
The other thing is that we’re trying to match up with OECD all the time, but official assistance now is a totally different situation than it was 20 years ago. You’re competing with China, Brazil and all of these countries that have entered the field — Russia, in many ways — that aren’t living by the standards we are. Yet, we’re spending resources and time trying to match up with traditional aid givers.
These programs may or may not succeed. Now we’re doing a feminist agenda. We did a poverty agenda. We did a maternal health agenda. We did a sustainable development agenda. It seems to flow, with every government putting its stamp on it, but trying to track the money is very difficult.
My overall rant is that it’s been that way for 25 years, and we’re always trying to balance efficiency and accountability.
There seems to be a movement for more discretion to the government — meaning the minister — to utilize the money. We’re here as a parliamentary committee on oversight. The trend in the NGOs that I used to deal with is that they wanted transparency, and they wanted to be part of the process of Canada.
You’ve identified two things. One is that we don’t have an overall strategy for all ODA money. The second is how to track the money and whether it’s actually doing what it should.
Therefore, how do we get at a better system if we’re going to give the governments in regulations and ministerial capacity the ability to do what they think is right, while we sit here representing communities that reach out and say they want to be part of that process? Where’s the accountability for us when it is discretionary in the hands of ministers? How do you follow the money?
Ms. Mackie: We had to learn that lesson a very hard way. I think it was a meeting with Peter, who said, “What are the results that I’m getting for every dollar that we’re putting in?” I’m going to thank you for pushing us in this direction, to force us to be able to articulate that for every dollar that went out, what is the lives saved or improved that we have actually had for that dollar?
I appreciate we are a very small subset of this, but it took us a long time to do that. In innovation, it’s even harder to do that. But forcing that kind of discipline — don’t get me wrong; we have other kinds of results like policies, influence, patents and papers published that are all important — that focus on lives saved and improved that you can track down and measure; they can be audited. We can look at what we expect to happen, with lots of discounting for failure, so we can see, just like you do with a business, what you expect on your results for the money you put in — what do we expect to get? What do we expect our revenues to be? If we’re off, then let’s learn from that.
At least in our experience, for the kind of tracking and expectation that for these dollars you’re going to get this many lives saved or improved, you need to define that, because it’s different in every case. Having that accountability has been a very important focusing mechanism for us. We can speak to it now because of the focus, but we couldn’t in the early days and that’s a lesson that perhaps could be applicable across.
Mr. Reilly-King: I would say that my observation is that the money isn’t all that discretionary. There’s a lot of accountability within the government on funding. In fact, what we’ve observed in the last eight years is that there’s been a distinct shift for maybe more discretionary programming, which I think actually had its benefits, and I can talk to that separately, toward contract and accountability, where you have a lot of interaction between programs and between partners, et cetera, in the design of projects to ensure they’re impactful, to a very strong shift toward contracting, reporting and accountability for every dollar spent. I think there is actually quite a lot of reporting and accountability.
You’re right that some of the challenge is that you have a new government. It wants to put its stamp on development and on issues, so it designs things.
It’s been a continuum between the Conservative government and the Liberal government, where the Liberal government picked up the focus on maternal newborn and child health, has continued it and has branched out towards gender equality.
One of the challenges though — and take this in a measure — is that we don’t want to focus too much on results and return on investment. Ultimately what we want to see is not that there were 15 kids in schools this year, 45 next year and 60 the year after. That’s important, but we also want to know impact. Were these kids actually getting a quality education? Are they moving on to further education? Did they feel safe in the streets where they live? Are they getting support at home? Are they being fed? Part of that comes from the fact that we’re not telling a good story to Canadians about these investments, about the impact it’s having. So you get these headline stories where maybe some funding has been mismanaged, but we’re not getting that overall positive narrative on the investments that have been made and on the impact that we’re having overseas with this.
Finally, one thing to keep in mind and to bring back as well is, as we move forward both with official development assistance but also broader development assistance, we know what works from the past 20 or 30 years of doing this. There’s a set of principles around aid effectiveness and development effectiveness that should guide our funding. Governments tend to ignore those. We haven’t seen a new aid effectiveness strategy or plan since 2012. Aid effectiveness and development effectiveness, we’re following some of those principles, but it’s fallen a little bit by the wayside of late.
The Deputy Chair: Mr. Bhushan, I would ask you to answer briefly.
Mr. Bhushan: I’m going to agree and break with my colleagues somehow, and agree in a sense more with your point driven by the fact that I think we can do better. There’s a fundamental role for you folks and other committees like this to play more of.
On the emerging economies part, it’s not entirely true because many of these emerging donors actually do want to play in the DAC. I’m looking at statistics for ODA loans. The UAE needed $2 billion in ODA loans. That’s comparable to Canadian budgets, in that sense.
On this point about transparency, traceability and so forth, I think that more needs to be done to really mandate a greater level of accountability for taxpayer-funded resources. We’ve just done a project, and I have some copies of the report, where we had the opportunity to look at this issue of traceability in the context of the government implementing a new strategy and plan, this feminist international assistance policy. In the most recent iteration of the reporting to Parliament, the department mentions that it has made 95 per cent of Canada’s humanitarian assistance gender integrated. We were surprised by this because it’s actually very difficult to do. It’s a big leap up. How did they do it so fast? What did it cost?
To our surprise there’s no validated information that can back up that claim. That is the role of oversights such as this: to mandate, number one, not just the data that is put out in public, but what is the validated information that backs that up. That’s one thing you could do.
The other thing is the funding that goes through Canadian official channels, Global Affairs principally but also IDRC and others, to Canadian civil society and non-governmental organizations. We don’t even have traceability beyond what happens to that funding when it goes from Ottawa to Ottawa. At the very minimum, committees like this and others can mandate a minimal form of reporting that is consistent across Canadian civil society organizations that are receiving Canadian taxpayer dollars and resource organizations and industry groups, like CCIC that Fraser is representing and others, to build their capacity to implement the same, which is frankly not happening.
[Translation]
Senator Forest: I have a quick question. Why isn’t this happening? With regard to the whole explanation of the need for criteria or performance indicators to properly track our investments, we were told that this currently isn’t happening. Why?
Your colleague just made a very good point. He said that, in order to ensure a more logical tracking system, we should establish performance indicators and define indicators. However, he then concluded by telling us that this currently isn’t being done. Why isn’t this happening?
[English]
Mr. Reilly-King: It’s my understanding that is happening now. I do more the policy side, so I don’t know the programming side. But every civil society organization that gets funding from the government has a performance measurement framework or management framework. It has to report on results. The government has those indicators.
I think maybe what Aniket is speaking more to is a better way to track. It may be at an aggregate level where the investments are going, what the results are, and what the outcome is.
Ms. Mackie: We have a ton of reporting. We have a monitor in our office for two days a week. We’re being evaluated. We report every quarter on the results that have come in, where every dollar has been spent. We’ve been audited several times.
Again, we are just one example, but I can tell you where every dollar was spent, what result it came to. There were some fast failures. I can speak to that, too. That’s innovation. They have performance measurement frameworks with metrics that these are feeding up to.
I think the challenge that I’ve observed is collating that in a way — because it’s so complex — that is digestible to somebody who is not in the depths of it is where the challenge is. Then, there is doing it across all these organizations that are looking and pointing at different SDGs. We’re only touching two of the SDGs. There are many that are across. How do you have a similar indicator for somebody who is on SDG 3 versus SDG 7 is where I’ve observed the challenge to be.
There’s a ton of reporting. It’s collating it up in a way that’s comprehensible is where I would say the challenge is.
Mr. Bhushan: I feel like I should clarify. I completely agree that there’s a ton of reporting. The question is: Where does it go and where does it end? It goes and it ends at Global Affairs, and it speaks to your question about oversight and the role of oversight, flexibility and discretion.
You tell me if you’re giving me a loan and the entire relationship of that is between you and me and I have to go to some third party, wouldn’t the third party want to know what happened with that loan? Am I still credit-worthy for the second? If everything stays in a closed loop where I give you money, I give you performance indicators and I rate you great on your performance indicators and then give you another one of the same thing, that seems to be a little bit not really the meaning of transparency and accountability. That’s definitely accountable in some ways, but the problem is it ends at a level where we can’t actually do more with it, even if we want to do something productive like learn from what’s working and do more of what’s working and stop doing the stuff we know is not working.
Senator M. Deacon: Thank you for quickly acknowledging the fast failures. I heard it there. I was going to bring that forward. Thank you for that.
Looking at that area of balancing accountability and efficiency, I am curious, it started in an earlier conversation on how the timing of tabling international assistance report one year after the end of the fiscal year affects your ability and ability to be accountable to the government’s activities in this area at the same time. You started to highlight that timeline change when you first spoke this afternoon. I’d like to hear more about that.
Mr. Reilly-King: Our interest at CCIC, one of the things we do is monitor the activities of the government and the aid file. From our perspective it’s useful to have information throughout the year that can add to our understanding of where Canadian aid spending is.
We get that now, for the first time in five years, in the budget. They’ve announced the international assistance envelope, which is the main chunk of money that we spend for development co-operation. They’ve announced that in the budget. We then, six months later, get official development assistance numbers for the most recently past fiscal year, which is useful to know where Canadian aid spending is at, what it’s been on and where the priorities are. Then we get more definitive numbers later.
It’s useful just to be able to track where Canadian aid is going and hold the government to account for spending, and to also be able to signal to our members and to the broader development community where Canadian aid is going and being spent.
Mr. Bhushan: I can elaborate on the reporting issue. There are these reports, which are reports to Parliament and more official reports that are generated by the department, but there is data flow which has a higher frequency and, including in the reports to Parliament, we tend to do a good job of patting ourselves on the back about how good we’re doing on transparency based on those measures. The key measure is the International Aid Transparency Initiative which has a monthly publication frequency and there’s Canadian feed that goes into that called the project browser. The data is being updated all the time.
I’m a data analyst. I pull that data. I know how it’s being input and how frequently it’s being updated and all that. That’s great, but do you realize that at a point in time how much of the entire picture you’re actually seeing? The reporting is much more frequent, but if at any given point in time I’m only seeing 50 or 60 per cent of the picture at best, then what good has that done to give me a full overview? What good has it done for me to inform partners who are actually trying to use these feeds to drive predictability, for instance, or coordination of where Canada is and where Canada might be going? In essence, these tools are really not quite at a level to be able to do that.
Serious donors — I’m not saying Canada is not one — who talk about these types of measures, like the U.K. Department for International Development, have gone much further. They have end-to-end transparency not only in terms of when things are approved. A larger percentage of what is approved and by when it is approved is covered in their portals, but also where it’s gone to. Those who receive that funding then have to accord by the same standard and also report information in the same place. You get a fuller picture. Even when there are points of disruption in the flow, you can at least see that and anticipate that better and you certainly have a better sense of predictability of what DFID may be doing, I would argue, more so than in the Canadian context.
Senator Klyne: Good afternoon and thanks for your presentations.
This is a question for Ms. Mackie. I heard you say you get $160 million over two to three years and I didn’t quite catch the split. Was it 40:60? What is the split?
Ms. Mackie: That was including all of our funding that we received from the Government of Canada since day one, $40 million has gone into repayable forms. That was the $230 million under the development innovation fund. Then we’re about $40 million through the $160 million. We haven’t placed all of that into new innovations yet. Of the amount that we have spent, $40 million of it has gone into non-grant tools. The rest has gone into grants. That’s what I meant by that.
Senator Klyne: So, non-grant. Is that also repayable?
Ms. Mackie: Yes. That’s all repayable. The language that Global Affairs uses is repaybles.
Senator Klyne: We have Peter to thank for that?
Ms. Mackie: Examples of repaybles would be loans, convertible loans, equity and that kind of stuff.
Senator Klyne: If I can ask about the repaybles, does your office have a limit — I’ll call it a credit limit, if you will — before you have to go to, say, an advisory board which will recommend to the minister?
Ms. Mackie: In our contribution agreement that we have right now, there is a $20-million cap that can be used for repayables. At $10 million —
Senator Klyne: I mean per —
Ms. Mackie: Per entity? We can only fund entities right now up to $1 million per entity.
Senator Klyne: Just your office?
Ms. Mackie: Just us, then we crowd in others.
Senator Klyne: If you want to exceed that, do you have an advisory board that recommends to the minister?
Ms. Mackie: We have to go back to Global Affairs Canada. I believe it stays on the department side. I don’t believe it goes to the minister. If we want to go above a million. We’re really early stage, so we’re giving $100,000 up to $1 million. Sometimes we go over that with special approval. We’re seed and transition to scale. We’re not in the $10 million or any market stage. We’re early stages, smaller amounts.
Senator Klyne: So smaller to medium-sized.
Ms. Mackie: Exactly.
Senator Klyne: Did I hear you say you syndicate in some cases with others?
Ms. Mackie: Definitely. That’s our whole mandate, to crowd in other funders in a particular innovation for a particular investment. We try to bring along others on our terms, or sometimes we’ll follow along their terms. It’s tricky when we’re using Government of Canada funds, but that’s the model and that’s what we’ve done.
Senator Klyne: That’s the new crowd funding. I think it used to be called syndication.
Ms. Mackie: Yes. Syndication, that works.
Senator Klyne: For every dollar you put in you lever two?
Ms. Mackie: Yes.
Senator Klyne: What does the entity which has to repay put in? Is it the moneys that led up to that point, or is there something tangible?
Ms. Mackie: The entity we’re supporting is focused on getting the impact at the end of the day. Some are getting actual returns which are helping to service their loans, whether it’s ours or others. That’s the vision, at least, that we hope for. These are start-ups mostly, very early stage, in terms of the companies. We also support not-for-profits and social enterprises and others that are structured differently. We have a wide range because of the nature of the innovations we’re looking to have.
Senator Klyne: The dollar you put in to lever up to others, to your crowd, what amounts are valued from the recipients’ end? Anything? Are they putting in 50 cents for your dollar, or 10 cents?
Ms. Mackie: Usually these entities aren’t there yet. They have all the modelling and how they’re going to get there, but they’re so early stage. We’re often coming in with friends and family to help.
Senator Klyne: Generally, something has happened on the bench in the garage before. I assume they make some investments. It’s not just that they woke up one morning, contemplating the future, and said, “I have an idea I’m going to see.”
Ms. Mackie: No. We’ve seeded these innovations. They have evidence behind them. This is a long process before we’re getting into putting in these kinds of funds.
Senator Klyne: One final question. You said some doesn’t come back. What’s the percentage?
Ms. Mackie: They haven’t matured yet. We won’t know.
Senator Klyne: How do you know some won’t come back? You just know there is? What are you planning will come back?
Ms. Mackie: Some have already folded. That’s how I know they are not coming back. The entities themselves —
Senator Klyne: What’s your loan writeoff? An estimate.
Ms. Mackie: So far we’re projecting out of the $40 million that we have out there, we’re actively watching about $25 million that we think will return and could have some upside. The other ones we’re really unsure about and it’s too hard and early to say what will happen.
Senator Klyne: So about 35 per cent is a writeoff?
Ms. Mackie: That’s about right. Very early stage, risky.
The Deputy Chair: We have two minutes left. Second round, Senator Marshall.
Senator Marshall: Could you explain the reporting? It seems you’re moving from a six-month time frame to a one-year time frame, which doesn’t really strengthen accountability. Could you explain that?
Mr. Reilly-King: I think the intent of the amendments to the act is to have everything align on an annual basis. Right now, there’s a statistical report that comes out one year after the previous fiscal year that reports on that previous fiscal year. The value of getting something on an interim basis, six months later, is that we get a sense of the numbers six months after the end of the fiscal year.
Senator Marshall: A year seems like a long time.
Mr. Reilly-King: It is.
Senator Marshall: It would be preferred if the statistical could be moved back six months and blend them in that way.
Mr. Reilly-King: That would be even better.
Senator Marshall: Right. The way I understand it, I’m not supportive of extending it to one year. That seems like a long time.
The individuals or whoever that uses the report that’s released at the six-month intervals, have you spoken with them? If I was expecting a report within six months and find out, no, I’m not getting it anymore, it’s going to be amalgamated with something and I won’t get it until a year down the road, I would not be happy about it. The people who use the six-month report, what has been their reaction to this?
Mr. Reilly-King: Many of those people are sitting at this table. I use it, our members use it, others who analyze policy use it. We’re expressing our dismay.
Senator Marshall: Yes. It’s a year old. Some of you, when you were speaking, talked about wanting to get out a more positive narrative on the investments and more needs to be done on accountability. Extending the reporting from a six-month time frame to a one-year time frame, that just seems almost incredible.
Mr. Reilly-King: Exactly.
The Deputy Chair: Thank you very much. Are you all right, Senator Marshall?
Senator Marshall: Well, he seems to agree with me, so I’m wondering who is pushing it.
The Deputy Chair: Thank you very much.
Ms. Mackie: I wanted to make sure I was accurate in my answer to the last question. We have deployed $40 million in loans on things that are meant to come back, and we’re projecting that $24.6 million will come back. I wanted to be accurate.
The Deputy Chair: I want to thank the witnesses for being with us today and remind the honourable senators that we have another meeting beginning at 5 p.m., not here but in the Victoria Building in the usual room, to hear the minister.
Thank you very much.
(The committee adjourned.)