Government Operations Committee on April 19th, 2010

[The Chair, Liberal, Yasmin Ratansi]

We'll commence meeting 10 studying the freeze on departmental budget envelopes and government operations.

We have before us, from the Canadian International Development Agency, Mr. David Moloney, the executive vice-president; Mr. Jim Quinn, the chief financial officer, and Ms. Christine Hogan, the vice-president, strategic policy and performance branch.

I understand, Mr. Moloney, you have opening remarks. The floor is yours.

[David Moloney, Executive Vice-President, Canadian International Development Agency]

Thank you, Madam Chair and the committee, for this opportunity to address the Standing Committee on Government Operations and Estimates.

As the chair has said, I'm joined today by colleagues from CIDA.

I thought it might be useful for committee members if I took a few minutes at the outset to provide an overview of CIDA's budget--what we're doing with these funds and how we are working to use them more effectively and efficiently.

As committee members know well, CIDA works to achieve our strategic outcome as set out in our main estimates and detailed in our report on plans and priorities; namely, the reduction in poverty for those living in countries where the Canadian International Development Agency engages in international development.

To do so we have approximately 1,950 employees, with roughly 170 of them posted in 49 countries, working with local governments and several hundred Canadian and local partners, as well as international organizations. These people deliver total programming, as proposed to Parliament this year, of $2.9 billion.

To support our operations both at home and in the field, we count on an operating budget of about $230 million. The total budget of $3.2 billion is drawn from the government's international assistance envelope, which Budget 2010 announced would be capped at its 2010-11 level going forward. CIDA currently draws about two-thirds of that envelope.

Looking specifically at our operating budget, 70% of the expenses is for salaries, while 30% is for other costs, including travel, training, and professional services. Like all other government departments, CIDA is reviewing its expenditures in order to do its part to implement the government's three-point plan to return to a balanced budget by 2014-15, as announced in Budget 2010.

In light of the directive to freeze departmental operating budgets at the 2010-11 levels until 2012-13, CIDA will absorb any wage and salary increases established by collective bargaining agreements applying to that full 2010-2013 period.

CIDA employees will receive the planned increase in wages for 2010-2011, which the Expenditure Restraint Act and collective bargaining agreements have set at 1.5%. To cover these salary increases, CIDA will find additional efficiencies within the existing operating budget.

In particular, in order to effectively absorb the wage and salary increases, which we estimate for 2010-2011 at $2.2 million—against total salary commitments of $153 million—CIDA will continue to scrutinize and tighten all operating expenditures, which include both salary and non-salary spending.

Reducing operating funds obviously means that we at CIDA will have to be more strategic in how we go about all of our business, ensuring that we are getting the most out of every dollar spent. We believe that we are well-positioned to do so because this is an exercise in which CIDA has already been engaged for quite some time. In fact, we recently launched an ambitious business modernization initiative to transform the agency's operating model as one key element of a more effective, efficient and accountable delivery of Canada's international development program.

Within the context of this initiative, we are decentralizing program responsibilities to the field, which ensures CIDA's operations and associated roles, experts, authorities and accountabilities are located where they will most effectively and efficiently contribute to the agency's mission and mandate.

Other components of our business modernization initiative include the reengineering of our business processes to sharply cut the time we take to develop new programs and projects and to respond to funding proposals. This means gains for our programming partners and recipient countries. It also means higher levels of productivity and value-added from CIDA employees.

We have already achieved very significant improvements in key lines of business and are pressing ahead.

As I noted, Madam Chair, this initiative is just one part of the government's aid effectiveness agenda to strengthen the focus and effectiveness, efficiency, and accountability of Canada's aid dollars.

Regarding focus, Minister Oda announced in February of last year that 80% of CIDA's bilateral aid would go towards 20 countries, meaning that the bulk of our bilateral programming is now going to areas where it can make the most difference. This is our largest line of business and represents just over one-half of our program dollars. Another third of our funding goes through multilateral organizations, and here too CIDA has refocused funding on institutions that are effective and aligned with the Government of Canada's priorities.

In terms of thematic focus, Madam Chair, last May the minister outlined CIDA's priorities for international development. These are to increase food security, to secure the future of children and youth, and to stimulate sustainable economic growth.

Given the nature of CIDA's business, we must be able to adapt to global circumstances such as natural disasters, economic instability, or geopolitical crises. Our approach in Haiti, for example, had to change fundamentally after this January's earthquake, to move from primarily development objectives to ones of humanitarian assistance, recovery, and reconstruction.

There are also good-news stories of countries that progress to the point of generating their own tax dollars to finance their development and no longer need ours. Development institutions are all in the business of shifting program and operating budget dollars to the areas that require immediate support in light of changing global circumstances. The same logic applies in today's climate of fiscal restraint and specifically with respect to the directives laid out in Budget 2010.

The measures I've outlined here today demonstrate CIDA's commitment to managing its spending well while still realizing successes in the delivery of the Government of Canada's mandate as it relates to international development. CIDA will live within its means.

We're happy to answer any questions the committee may have.

Thank you.

[The Chair, Liberal, Yasmin Ratansi]

Thank you very much.

We will go to the first round of questions.

Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

Thank you, Chair, for this opportunity. Thank you, witnesses, for coming.

Mr. Moloney, you said that CIDA would do its part. It seems to me that CIDA is being asked to bear more than its share. I was just looking at page 164 of the budget and it says there are savings measures of about $17.5 billion, of which $4.5 billion will come out of international assistance. Based upon your budget of about $4 billion, give or take, that's a pretty serious amount of money to lose over the next number of years and not be able to spend on international assistance. It seems disproportionate to any other contribution by any other department or agency. National Defence is contributing $2.5 billion on a budget of roughly $100 billion over the same period of time. Containing administrative costs is $6.8 billion, and I don't even know what that would be. That would probably be well over hundreds of millions of dollars.

Mr. Moloney, this is an enormous amount of money that you are walking away from, of which you, CIDA, are contributing about two-thirds. My first question to you is, can you tell me how that will be portioned between your agency, CIDA, and the other departments? Who else will be asked to share in this “burden” of reducing the $4.5 billion?

[David Moloney]

Certainly I can confirm that CIDA does account for about two-thirds of the international assistance envelope. By way of comparison, the Department of Finance and the Department of Foreign Affairs and International Trade each account for 8% to 10% of that envelope. IDRC, the government's International Development Research Centre, accounts for about 3%, and then a variety of other government departments account for the balance. It would be speculation to say what might have been done should the international assistance envelope have continued to grow beyond the current fiscal year, so I can't comment on the split. Those are the facts as of today.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I'm not asking you to comment on it. In my recollection, the Department of Finance's budget was something in the order of about $80 billion. DFAIT's budget--I don't remember what that is, and yet their proportion of contribution, particularly with respect to Finance is, relatively speaking, minuscule compared to what CIDA is being asked to contribute to these projected savings. Is that a fair comment?

[David Moloney]

I can't offer any comment on the government's decision regarding the program dollars. I can confirm that on the operating side the approach with CIDA is the same as all other departments.

[John McKay, Liberal, Scarborough—Guildwood, ON]

But it is an accurate observation, would you say?

[David Moloney]

I'm not going to comment on the program dollars element.

[John McKay, Liberal, Scarborough—Guildwood, ON]

You also indicate that you will be doing some internal savings as well. It looks like your actual spending in the fiscal year 2008-09 was $414 million, and you're dropping that to $229 million, roughly $230 million. That's a very significant drop in your operating budget.

Meanwhile, you're refocusing from, basically, the desperately poor countries in Africa to the slightly less poor countries in South America and Central America. So who gets dropped out of all of this?

[David Moloney]

The figures that I believe the member is referring to are not in respect of any of our programming dollars, but rather in CIDA's operating vote. Comparing our operating vote from 2008-09 to the operating vote that's currently in front of Parliament, through the main estimates, for 2010-11, there is a significant decrease from two years ago to this year, which is overwhelmingly due to a one-time technical revaluation of liabilities related to exchange rate adjustments. That amount was in excess of $163 million.

[John McKay, Liberal, Scarborough—Guildwood, ON]

So when you talked about other subsidies and payments, that's what you were referring to?

[David Moloney]

That's right. There were payments owing on the operating side. There is in fact a modest reduction, much more modest--in the range of 5% or so--that has to do with the fact that the government has, for a number of years, in several of the last budgets, been pointing to the need for administrative efficiencies, which, as I alluded to, are part of the aid effectiveness agenda. CIDA has been working hard to be more efficient and to work smarter, but these are much more modest than the amount you were talking about.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In effect, if I add that $163 million back into 2010 and 2011, it's roughly a status quo situation. Is that fair?

[David Moloney]

It's very close.

[John McKay, Liberal, Scarborough—Guildwood, ON]

In reality, therefore, there is no actual reduction in CIDA's operating budget. In reality, therefore, the transfers in the international assistance envelope are being significantly reduced?

[David Moloney]

They will not grow against a status quo projection of some considerable increases of the order you mentioned.

[John McKay, Liberal, Scarborough—Guildwood, ON]

That was in the order of about 8% on an annual basis, was it not?

[David Moloney]

They have grown 8% for the last 10 years, including this year.

[John McKay, Liberal, Scarborough—Guildwood, ON]

How much further behind our 0.7% does this put us?

[David Moloney]

The OECD came out last week and updated Canada's official development assistance relative to gross national income at 0.33%, which is a status--

[The Chair, Liberal, Yasmin Ratansi]

This is the last question for you, Mr. McKay.

[John McKay, Liberal, Scarborough—Guildwood, ON]

I believe this might be the sixth, seventh, or whatever number set of priorities that ministers over the last number of years have had. Yours are food security and children and youth, etc. With respect to the minister's ever-changing set of priorities here, what does this have to do with the only legislative mandate you have, namely the better aid bill, which was passed in 2008? How in heaven's name does this have anything to do with poverty reduction, with taking into account perspectives of the poor, and with our commitment to international human rights?

[The Chair, Liberal, Yasmin Ratansi]

Could we have a brief response, please?

[David Moloney]

Very briefly, I'd point to the report that Minister Oda tabled before Parliament prior to September 30 of last year--