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2013 The Society of Management Accountants of Canada. All rights
reserved./ Registered Trade-Marks/Trade-Marks are owned by The
Society of Management Accountants of Canada.
No part of this document may be reproduced in any form without
the permission of the copyright holder.
Module 2 Assignment 3
Practice Case Examination
Backgrounder
The background information relating to the Case Examination
(Backgrounder) isprovided to candidates in advance of the
examination date. The Backgrounder containsinformation about both
the company and the industry involved in the case. Candidatesare
expected to familiarize themselves with this information in
preparation for theanalysis that will be required during the Case
Examination.
Candidates should note that they will not be allowed to bring
any written material,
including the advance copy of this Backgrounder, into the
examination centre. Anew copy of this Backgrounder, together with
additional information about thecompany and a supplement of
formulae and tables, will be provided at the writingcentre for the
Case Examination.Only the following models of calculators
areauthorized for use during the Case Examination:
1. Texas Instruments TI BA II Plus (including the professional
model)2. Hewlett Packard HP 10bII+ (or HP 10bll)3. Sharp EL-738C
(or EL-738)
Candidates are reminded that no outside research on the industry
related to this case isrequired. Examination responses will be
evaluated on the basis of the industryinformation provided in the
Backgrounder and the question paper (AdditionalInformation).
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Foreign Aid Canada (FAC)Backgrounder
Overview (1991 to 2012)
Foreign Aid Canada (FAC) is a Canadian third-world aid
organization that was foundedin 1991 by Dr. Barry Green with the
help of a few friends and two wealthy benefactors.FAC grew rapidly,
obtaining some key CIDA contracts and participating in a number
ofhistoric emergency relief projects, including the 2004 tsunami in
Asia. Funded by thefederal government, corporations, charitable
foundations and individual donors, FAChas a good reputation as an
effective provider of emergency relief and developmentassistance,
mainly in Africa and Asia.
In areas struck by famine and other disasters, FAC delivers food
items, builds modularhomes and provides other types of emergency
relief. In developing countries, FACprovides assistance through
various development activities, such as drilling wells,improving
irrigation systems and helping farmers in various ways.
FAC was incorporated as a tax-exempt, not-for-profit
organization without share capitalunder Part II of the Canada
Corporations Act and is a registered charitable organizationwith
the Canada Revenue Agency (CRA). This permits FAC to issue tax
receipts fordonations. Annual charity information returns must be
submitted to the CRA.
A significant portion of FACs funding is received from the
Canadian InternationalDevelopment Agency (CIDA), which is
administered by the federal government.Consequently, project costs
must be audited by an independent accounting firm andFACs annual
financial statements submitted to CIDA.
Human Resources
Dr. Barry Green, a tireless advocate of assistance to the
impoverished nations of Africa,has been the executive director of
FAC since its inception. By the end of December2012, the
organization had average annual revenues of more than $24 million
and astaff of 116. Currently, the management team includes five
functional directors whoreport to Dr. Green (see the organizational
chart presented in Appendix 1).
With respect to staff recruitment, except for local hiring in
Africa and Asia, new positionsare first posted internally. If no
qualified candidates are available, the positions are
publicized through the Internet on two major employment
websites.
For positions in Africa and Asia, local hires are preferred.
This helps make the peoplepart of the process and reduces
relocation, travel and family-related costs. Generally,because
there are few good forums for advertising (such as widely used
websites), localmanagers are permitted to use a word-of-mouth
search in the hiring process.
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In general, FAC follows Canadian employment standards throughout
the organization.For example, if an employee in Africa is to be
terminated, FAC pays severance whetheror not it is required under
local law.
Most staff members are very dedicated to the cause. Employee
turnover is lower at the
head office than in the Canadian not-for-profit sector; however,
turnover is high amongthe field workers, mainly due to travel
requirements, family issues and workingconditions. There are
dangers associated with providing aid in developing countries.Some
workers choose to disregard these dangers whereas others refuse to
work inareas that are highly dangerous. No FAC worker has ever died
in the field.
For Canadian employees, FAC pays market-level salaries. For
locally hired employeesin Africa and Asia, FAC pays salaries above
the local market rates. The organizationsmid-range benefit plan
offers coverage for accidental death and dismemberment, healthand
dental needs, life insurance (1.25 times salary) and long-term
disability. Totalbenefits are approximately 17% of base salaries,
including employer contributions to theCanada Pension Plan and
Employment Insurance.
Revenue Sources
Each year, FAC competes with tens of thousands of worthy
organizationsreligious,medical, educational, humanitarian, relief
and developmentfor donations fromcorporations, charitable
foundations and the Canadian public. In 2011 and 2012, therewas
intense competition among assistance organizations for the limited
amount ofdonations available.
Most FAC donors have a special interest in the various countries
in Africa and Asia andare influenced by the organizations
involvement in these countries. Historically, crisis
relief attracts far more donations than ongoing development
activities. For example, in2002, donations were higher because of a
severe famine in Northern Africa, whichreceived heavy media
coverage. In early 2005, Canadian donations increasedsignificantly
to fund crisis relief in Southeastern Asia as a result of the
devastatingtsunami of December 2004, but then returned to normal
pre-tsunami levels by August2005.
Since its inception, FAC has maintained a mailing list of
individuals, charitablefoundations and corporations that have
either made a donation or requestedorganizational information. Each
addressee is sent a quarterly newsletter containinginformation on
FACs current activities, together with a donation request.
Various media are used to promote FACs cause, such as ads in
national newspapersand magazines, information booths at various
events and fundraising dinners. FAC hasa toll-free telephone number
through which donations can be made via credit card. Forthose
donors who wish to contribute on a regular basis, arrangements can
be made forautomatic monthly bank account withdrawals or credit
card charges. Gifts of stock, lifeinsurance, annuities and
endowments are encouraged.
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Occasionally, FAC receives a bequest, a type of revenue that is
difficult to forecast.Some donors neglect to inform the
organization that it has been named as a beneficiaryin their wills.
Also, a bequest is frequently a residual sum, to be determined
afterpayment of fixed amounts to family members or other
parties.
Some donations are restricted, which means that the funds may be
used only inaccordance with the wishes of the contributor. Before
FAC accepts a restricteddonation, its board of directors must
approve the contributors stipulations regarding theuse of these
resources. The donation is then tracked using restricted fund
accounting(see Financial Information section). Approximately 20% of
donations and bequestsreceived in fiscal 2012 were restricted.
Board-approved uses for restricted donationsinclude general
emergency relief, general development, specific emergency
relief,specific development and capital investments.
An additional source of revenue for FAC is the sale of
memberships in the organization.Typically, members are wealthy
individuals over the age of 60 who join because of theorganizations
involvement in Africa and Asia. The cost of an FAC membership
is$10,000 plus a commitment to donate at least $1,000 per year.
This commitment is notenforceable. However, on average, members
have donated $1,250 each per year overthe last five years. Members
have no voting rights but receive a copy of the annualreport in
addition to the quarterly newsletter.
Historically, under the direction of Dr. Green, FAC has avoided
following politicalagendas, both domestic and foreign, but has
actively sought Canadian governmentfunding when it was available to
further the organizations objectives. In Canada,government agendas
regarding foreign assistance tend to change when a
differentgoverning party is elected, or public pressure forces the
government to address aspecific area of concern. Government agendas
in developing countries also tend to
change in response to internal and external conditions.
All Canadian government funding obtained by FAC is specific to
particular projects,mainly development projects. Not all FACs
requests for government funding can befulfilled. In order to
compete successfully against numerous other
not-for-profitorganizations for the available funds, FAC must
identify excellent projects that arerelated to government
objectives, economical, and effective in reaching clearly
statedgoals. The ratio of support services expenses (e.g.
administration, fundraising, donorrelations) to project activity
expenses is an important factor in determining how muchfunding (if
any) the Canadian government and CIDA, as well as other supporters,
willprovide. Local stakeholders must be brought on side (i.e. local
governments, residents,
etc.) and persuasive presentations must be made to CIDA, in both
written and verbalform. Ultimately, approval depends on other
factors as well, including political and publicpressures. For
example, a significant amount of the available funding usually goes
tosupport projects that address issues that have been made very
visible to the publicthrough the spotlight of the media.
In the year 2005, a wealthy African-Canadian businessman set up
an endowment fundof $4,000,000 to be invested in fixed income
securities by FAC. All income generated
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from the fund, in perpetuity, is to be used for the operations
of FAC. The monies areheld in a special investment account with
FACs bank and are invested by a fundmanager.
Public Relations
The FAC logo has been used since 1991 and has become very
familiar to people whowork in the foreign assistance sector. FAC
has an attractive, fully bilingual website thattells the story of
FAC and provides one dozen continuously updated vignettes oncurrent
project activities. According to FACs Internet service provider,
website trafficamounts to approximately 8,400 unique visits per
month. From time to time, FAC issuespress releases concerning its
projects. For example, Foreign Aid Canada announcesfarm irrigation
project in Eastern Africa was released on April 22, 2011.
Facilities
FACs head office is located in a large Canadian city and houses
all of the Canadian-based staff. The original mortgage on the
office building was refinanced in 2005 andhas been paid down
significantly.
The organization has four regional offices in four key African
and Asian countries.These regional offices primarily support
development activities; consequently, the fouroffice managers
report to Peter Lewis (Director, Agriculture and Water Projects).
Tosome extent, the relief activities are also supported by the
regional offices. Mobile, localproject offices are set up where
necessary for both relief and development projects.
Emergency Relief Projects
Most of the time, the emergency relief provided by FAC is in
response to famine. Inthese cases, large quantities of grains and
basic foodstuffs are brought into the affectedarea for distribution
in villages and refugee camps. Food is purchased whenever
andwherever it is most efficient to do so, but some items are
donated by Canadian farmgroups. In cases of severe drought, water
is shipped in and distributed by FAC.
Where disasters have destroyed homes, FAC provides various types
of emergencyshelter, from tarpaulins to inexpensive, lightweight
modular huts made by a Canadianmanufacturer. These huts are built
in sections and trucked or flown into the affectedarea. They can be
assembled with minimal tools and expertise.
The transportation of supplies is usually contracted out, since
FAC owns few vehiclesand these are used mostly by the regional
office managers for local travel.Transportation costs for emergency
relief can be very high. This is due to the quantity ofgoods moved,
the remote locations served and the tight timelines. Sometimes,
third-party helicopters or aircraft are engaged to rush supplies to
affected areas. Trucks andother vehicles are also used.
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Development Projects
Water and Irrigation Projects
In order to improve living conditions for the poor in Africa and
Asia, reliable sources of
clean water are essential. The lack of clean water means death
for thousands throughdisease. Inconsistent rainfall means
ineffective farming and irrigation. FACsdevelopment projects in
this area generally consist of drilling wells and
improvingirrigation.
Agricultural Assistance
Agricultural development projects include the provision of
seeds, tools, agriculturaltraining (often via picture books for
illiterate farmers) and on-site milling. FAC also helpsstruggling
farmers deal with local pests and crop failures, enrich and
conserve their soil,increase harvests and diversify into more
profitable crops. For example, agriculturalspecialists employed by
FAC are introducing farmers to new techniques, including
terracing and planting moisture-retaining grasses.
A Typical Development Project
The Runtan irrigation project would be considered typical of FAC
developmentassistance.
A traveling field officer in Africa noted that the Runtan area
of Africa suffered fromreduced agricultural output because it
lacked a way to move water from a river to anearby dry valley. She
submitted a summary project proposal to FACs head office inCanada
for a fairly simple irrigation system, and the project was
approved.
Detailed cost estimates and a project plan were then prepared. A
call for tenders wasissued, bids were received and a local
contractor was engaged. The field officer liaisedwith the local
government and the local residents to get their support.
FACsgovernment relations staff secured CIDA funding for most of the
project. As part of thearrangement, FAC agreed to maintain the
irrigation system for one year before turningthat responsibility
over to the local government. The balance of the required
fundingwas covered by donations from the general operating
fund.
FAC personnel and the local contractor carried out the project
using a mechanicaltrench digger. The work was completed on schedule
and on budget.
Project Management
All of FACs emergency relief and development activities are
organized into projects,chosen in consultation with communities,
local governments and other organizations. Insome cases, FAC staff
members identify a need and propose a project. In others, theyare
approached by the local community, the government or another
stakeholder.
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Projects can be as small as a $2,000 handout of grain to a
village stricken with a localflood or as large as an agricultural
project involving an entire province of a country andcosting up to
half a million dollars. The duration of most projects is less than
one year.
Government funding for development projects is requested by
submitting a proposal to
CIDA. The project must have a development impact and meet other
CIDA criteria,including a $5 million ceiling per project. After
approval, CIDA and FAC sign acontribution agreement covering all
aspects of the project. All costs are subject to CIDAaudit. FAC has
never had a problem in this area.
At FAC, projects costing under $100,000 can be approved by the
executive director.Those over $100,000 must be approved by the
board of directors. Presentation of suchproposals to the board must
include the project objectives, an outline of resourcesneeded and
an estimated budget.
Each project has a single project manager who reports to the
relevant functional director(i.e. Alison Boutang or Peter Lewis).
At any point in time, there can be as many as
twenty active projects. Some project managers oversee several
small projects at thesame time.
Normally, two bidders are obtained for each activity that must
be subcontracted.Usually, selection of the best bid is based on
price.
Poor, underemployed local workers are hired whenever possible,
especially for the workrequiring minimal skills. Most technical
positions have to be filled from Canada.
After salaries, materials and contractor fees, the majority of
the remaining direct projectcosts are those related to travel.
Estimated travel costs are approved by the project
manager prior to each trip. Trip expense claims including
receipts are sent to headoffice by courier or submitted upon the
travellers return to Canada and paid. Employeeswho work in remote
foreign locations over long periods of time cannot easily
submitexpense reports with receipts. Usually, for these employees,
an advance on the travelexpenses is issued, with the approval of a
director, and expenses are later claimedagainst the advance.
Financial Information
Accounting System
FAC uses the Fund Fast accounting system specifically designed
for use by not-for-profit organizations. The system has been in use
for five years, and Linda Roberts(Director, Finance and Technology)
is pleased with it. Transactions at remote relief anddevelopment
sites are relayed to the head office, usually by courier, where
they areentered, albeit with a substantial time delay, in the Fund
Fast system. The systemprovides project accounting reports,
financial statements and actual versus budgetreports. No general
overhead is charged to projects.
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Accounting Policies
FAC follows the deferral method of accounting for contributions
and uses the restrictedfund method of accounting for reporting.
Funds are created to correspond to thedifferent kinds of spending
restrictions placed by donors on their contributions. All
inter-
fund transfers require the approval of the board of
directors.For financial reporting purposes, if a specific type of
restricted expenditure has not yetbeen made, the corresponding
restricted contributions are recognized in the operatingfund using
the deferral method, and later recognized as revenue when the
expenditurefor which the contribution is to be used has
occurred.
In the statement of operations, restricted contributions and
expenditures related tospecific relief and development projects are
reported in the operating fund. Unrestrictedcontributions are
recognized as revenue when they are received.
Funds can be restricted internally by the board of directors.
For example, in 2007, the
board designated $100,000 as a base financial reserve.
Contributions for the purchase of amortizable capital assets are
recognized as revenueon the same basis as the amortization expense
related to the acquired capital assets.Until then, they are shown
as a liability (deferred contributions) on the statement
offinancial position.
Inter-fund transfers are reported as non-operating items in the
statement of changes infund balances. Investment income on the
endowment fund is shown as investmentincome in the operating
fund.
Donated services are recorded at fair value. Services for which
the value is not easilydeterminable, such as volunteer labour,
assistance from employees of foreigngovernments and donated media
coverage, are not recorded.
Accounts receivable represent amounts billed to CIDA under its
contributionagreements with FAC. CIDAs policy is to make payments
for approved capital assetprojects only after the assets have been
acquired or built, and after receivingdocumentation to support the
costs of the assets. For project operating expenses, CIDAwill make
payments to FAC on a quarterly basis. CIDAs accountants must first
audit theprojects statement of expenses (submitted each quarter)
before any payment is made.For projects with durations of three
months or less, CIDA will make payments after theproject is
complete and the expenses are audited.
The organization records and reports its activities as
follows:
Operating fund This fund is used to account for all revenue and
expendituresrelated to general operations.
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Capital fund This fund reports the assets, liabilities (e.g.
mortgage, deferredcontributions), revenues and expenses (e.g.
mortgage interest, amortization) relatedto the organizations
capital assets. Purchased capital assets are recorded at costand
are amortized over their useful lives. Donated assets are recorded
at estimatedfair value.
Endowment fund This fund is used to account for all
contributions that require theoriginal principal to remain intact.
Contributions are treated as increases in the fundsbalance. The
funds investments are recorded at cost, which approximates
marketvalue.
Auditors
Upon incorporation, the board of directors decided that an
annual audit of the financialstatements should be obtained in order
to maintain the highest standards oftransparency and
accountability. Since that time, the boards audit committee
hasapproved Clark & John, a national accounting firm, to
conduct the annual audit. Each
year, the auditors have provided a clean audit report on FAC
financial statements (seeAppendix 2 for the 2011 and 2012 financial
statements).
Planning and Budgeting
Each fall, the following years operating budget is prepared by
the accounting staff andapproved by the board of directors.
Budgeting has proved to be a difficult undertakingfor FAC. Both the
level of individual and corporate donations and the following
yearsemergency relief needs are difficult to forecast. Throughout
the year, internal monthlyoperating reports are prepared, showing
the variances between budgeted and actualrevenues and expenses.
Prior to developing the budget, the board of directors reviews
the strategic plan andprovides preliminary direction for the
accounting staff to use in preparing the budget. InOctober 2011,
the board of directors prepared an environmental scan and
reviewedFACs mandate (see Appendix 3). Considering the economic
uncertainty, the boardpredicted that donations would decrease and
directed staff to reflect this in the 2012budget. As a result, FAC
was able to avoid incurring a significant deficit.
Banking and Cash Management
Since incorporation, FAC has been serviced by a large, chartered
bank. FAC has bothCanadian and U.S. chequing accounts and
frequently sends U.S. dollars to Africa and
Asia by wire transfer. The bank provides a credit facility with
an operating line based on75% of collectible CIDA receivables. The
current interest rate on the operating line is6%.
To manage worldwide operations effectively, FAC uses a fairly
complex cashmanagement system. The U.S. dollar is the preferred
currency in Asia and Africa;therefore, most foreign costs are paid
in U.S. dollars. However, each regional office hasa bank account
where some of the U.S. funds are converted to the local currency.
From
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time to time, funds in U.S. dollars are wired from Canadian
headquarters to the regionaloffices to replenish the accounts.
Non-Governmental Organizations (NGOs) in Canada
Although assistance organizations do not view each other as
competitors but rather co-labourers in a global battle against
poverty and other evils, they effectively do competefor fixed
government funding and limited individual and corporate donations.
In Canada,there are hundreds of Canadian non-governmental
organizations (NGOs) that areinvolved in emergency relief and
development around the world, including FAC, WorldRelief, the
Salvation Army, Compassion Canada and others. Among the hundreds
ofCanadian non-governmental aid organizations are some
well-established not-for-profitsthat started out as fundraising
branches for the Canadian government.1An example ofsuch a
not-for-profit is Oxfam Canada, which has since become a
government-independent organization.2
These NGOs vary in size from very small to very large (FAC would
be considered amid-sized organization). Some focus primarily on
relief (e.g. World Relief Canada).Others are involved in many types
of activities, including development, both in Canadaand around the
world. Some have a specialized focus (e.g. medical, education,
humanrights). New organizations enter this sector every year.
A typical FAC competitor is Canada Helps Inc. (CHI), whose
stated mission is to serveindividuals and families in the poorest
countries of the world. CHI has annual revenuesof approximately $32
million and, in 2011, approximately 60% of its project
activitiesexpenditures pertained to 100 relief projects that
assisted more than 250,000individuals, and 40%, to 50 development
projects that are expected to improve the livesof 35,000
individuals. CHIs administrative costs usually amount to between
19% and
21% of total project activity expenses.
Another competitor of FAC is Catastrophe Aid Canada Inc. (CACI),
a thinly-staffedorganization that raises funds through large
newspaper advertisements when disastersstrike worldwide. The money
raised (approximately $20 million annually) is thenchannelled
through other organizations and governments. CACI does not deliver
anyservices itself. Its administration, fundraising and donor
relations costs generally amountto 20% of total money raised.
1 Cranford Pratt, Canadian International Development Assistance
Policies: an Appraisal(Montreal:
McGill Queens University Press, 1994), 88.2 Oxfam Canada, Oxfam
Canada gets top marks from partners, accessed October 31, 2012,
http://www.oxfam.ca/who-we-are/oxfam-canada-gets-top-marks-from-partners.
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Official Canadian Foreign Aid
In 1968, the Canadian International Development Agency (CIDA)
was formed as afederal government agency to oversee Canadas aid
efforts with the main objective ofpromoting the economic
development and welfare of developing countries.3Today, its
mandate is to manage Canadas support and resources effectively
and accountably toachieve meaningful, sustainable results and
engage in policy development in Canadaand internationally, enabling
Canadas effort to realize its development objectives.4
CIDA provides a significant amount of funding to various
organizations, such asInternational Development NGOs, educational
institutions, faith-based organizationsand community groups.
According to a 2012 survey conducted by the Canadian Councilfor
International Co-operation (CCIC) and the Inter-Council Network
ofProvincial/Regional Councils for International Cooperation
(ICN):
Almost half (45.6%) of the 158 organizations surveyed received
more than 25%of their income from CIDA, with a quarter receiving
more than 50%. Among the107 organizations that receive money from
CIDA, 72 organizations (67.3%) weremore than 25% dependent on CIDA
funding. There are few discernible patternsamong these 72
organizations. Among these organizations, a large proportion(around
54%) were relatively small from an income perspective (less than
$1million), but there was less of a correlation with staff size
(only 15% have lessthan three staff). A quarter of the
organizations that participated in the surveyreceive no CIDA
funding.5
Canada provides foreign aid (called official development
assistance or ODA) todeveloping countries in various waysthrough
bilateral projects, multilateral aid,partnerships with NGOs and
special programs. Programs funded by ODA focus on such
areas as education, health and nutrition, HIV/AIDS, child
protection, gender equality,agricultural and rural development,
governance, private sector development andemergency relief.6CCIC
estimates that Canadian ODA was $5.5 billion in
2010/11,7andaccording to more recent publications CCIC estimates
that ODA will decline to $5.2billion between 2012 and
2014.8Therefore, Canadas aid performance as measured
3 CIDA, Mission and Mandate, accessed October 31, 2012,
http://www.acdi-cida.gc.ca/acdi-cida/acdi-cida.nsf/eng/NIC-5493749-HZK#mission.
4 Ibid.
5 Brian Tomlinson and Rose Yewchuk, Putting Partnership back at
the Heart of Development: Canadian
Civil Society Experience with CIDAs Call-for-Proposal Mechanism,
Partnerships with CanadiansBranch(CCIC, 2012), 4.
6 CIDA, Canadas ODA Policy (May 9, 2012), accessed October 31,
2012,
http://www.acdi-cida.gc.ca/acdi-cida/acdi-cida.nsf/eng/STE-42484626-GZ3.
7 CCIC, The Report to Parliament on the ODA (October 2011),
accessed October 31,
2012,http://www.ccic.ca/_files/en/what_we_do/2011_CCIC_Briefing_Note_3rd_Report_to_Parl_ODA
_Act.pdf.8 CCIC, Federal Budget 2012: Facts and figures on
Canadian Aid Performance past, present and
future (March 29, 2012), accessed October 31, 2012,
http://www.makepovertyhistory.ca/story/federal-budget-2012-facts-and-figures-on-canadian-aid-performance-past-present-and-future.
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against Canadas Gross National Income (GNI) will decline from an
estimated 0.34% in2010 to 0.29% in 2012, and 0.27% in 2014.9
Canadian non-governmental organizations (NGOs) make up an
important group ofpartners that provide foreign aid. Supporters of
NGOs claim that they possess several
advantages over official aid channels: speed, flexibility, low
cost, innovativeness and,above all, an ability to reach the poorest
effectively.
Each year, CIDAs priorities are set after cross-country public
consultations that allowthe Canadian people to play a key role in
the cooperation program. Canada has areputation as a mid-sized
power and as an honest broker, and both the Canadiangovernment and
Canadian aid agencies are viewed internationally as
generallytrustworthy. As such, Canada has been able to play a
constructive role in the areas ofhuman rights, governance and
post-conflict relief and reconstruction programs.
African and Asian Settings
In 2011, 60 per cent of the worlds population lived in Asia and
15 per cent, in Africa.Africas population has been growing 2.3 per
cent per year, a rate more than double thatof Asias population (1
per cent per year).10
Based on a 2011 report published by the Asian Development Bank,
Asia and the Pacificregion remained home to the largest number of
the worlds poor. The next largest regionwith the worlds poor is
Sub-Saharan Africa.11The report stated that:
Based on broad estimates, 63% of the worlds extreme poor lived
in Asia and thePacific region in 2008. This is much larger than
Sub-Saharan Africa (33%).Relative to 2005, Asia and the Pacific
regions share dropped by a little over 4%,
while Sub-Saharan Africa gained by almost 4%.12
Although farming is the most important subsistence activity in
many Asian and Africancountries, large portions of these continents
have a chronic problem with food scarcity. 13There are a variety of
reasons for this problem. The most notable are large-scalenatural
disasters (e.g. 2004 tsunami, 2005 earthquake), a high rate of
populationgrowth, the loss of farm labour due to widespread
movement of workers from ruralareas to urban areas, the economic
priority given to the production of export crops, anda general lack
of adequate investment in modern agricultural technology. Soil
erosionand desertification (the process in which soil dries out
until almost no vegetation growson it) have become major problems
affecting agriculture in many areas. When droughts
9 Ibid.10 Barbara Crossette, The State of World Population
2011(UNFPA, 2011), 5.11 Guanghua Wan and Iva Sebastian, Poverty in
Asia and the Pacific: An Update(Asian Development
Bank, 2011).12
Ibid., 21.13 Stephanie Dunn, Food Scarcity Trends, Challenges,
Solutions(Zurich: Dexia Asset Management,
May 19, 2010).
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or floods occur, the people often starve or suffer the effects
of severe malnutrition. Cropfailures cause rising unemployment for
agricultural workers while food prices increase.
Progress in many Asian and African countries has been hampered
by economicproblems and political and social instability. Wars,
revolutions, terrorism and ethnic and
religious conflicts have been commonplace. For example, civil
war in Burundi andRwanda between the two main ethnic groups, the
Tutsi and the Hutu, caused more thana million deaths in the
1990s.
A recent study of the global AIDS epidemic14reported that 22.5
million people areinfected with HIV in Africa. The majority (60%)
of them are women and girls.15The studyalso concluded that, of the
16.6 million children globally who had lost one or bothparents to
an AIDS-related illness, 14.9 million of them were in Africa.16
The study also reported that:
The Asia Pacific region has made significant progress in
controlling HIVs spread.
The number of people living with HIV has remained stable for the
past five yearsand estimated new infections are 20% lower than in
2001.17
Therefore, the UNAIDS study shows that the AIDS epidemic
continues to remain aproblem in Africa, but there is progress in
Asia and the Pacific region.
14 UNAIDS, AIDS at 30: Nations at the crossroads (June 8, 2011),
accessed October 31,
2012,http://www.unaids.org/unaids_resources/aidsat30/aids-at-30.pdf.
15 Ibid.
16 Ibid.17 Ibid., 82.
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Appendix 1Foreign Aid Canada (FAC)
Organizational ChartAs at December 31, 2012
6 Staff(2 government relations,
2 fundraising,2 newsletters)
Director, EmergencyRelief
Alison Boutang
Board of Directors
Executive Director
Dr. Barry Green
2 ExecutiveAssistants
27 EmergencyRelief Staff
Director, Agriculturaland Water Projects
Peter Lewis
39 Agriculturaland Water Staff
Director, GovernmentRelations and Fundraising
Florence Taylor
Director, Human ResourcesTravel and Facilities
Betty McLeod
Director, Financeand Technology
Linda Roberts
9 Staff(4 human resources staff,2 travel/relocation staff,
3 head office facilitymanagement and cleaning
personnel)
4 RegionalOffice Managers
Controller
Pat Innes
9 Accounting and
Payroll Staff 12 IT Staff
Assistant Director,Technology
Keith Dong
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Appendix 2Foreign Aid Canada (FAC)
Statement of Financial Position (Audited)As at December 31
(000s)
OperatingFund
EndowmentFund
CapitalAsset Fund
2012Total
2011Total
Assets
Current assets:Cash $ 241 $ $ $ 241 $ 202Investments 211 4,000
4,211 4,102
Accounts receivable 2,789 2,789 2,601
3,241 4,000 7,241 6,905
Capital assets (net) 1,239 1,239 1,265
Total assets $3,241 $4,000 $1,239 $8,480 $8,170
Liabilities and Fund Balances
Current liabilities:Accounts payable and accruedliabilities
$2,043 $ $ $2,043 $1,871Mortgages payable current 27 27 25
2,043 27 2,070 1,896
Mortgages payable long-term 187 187 214
Deferred contributions 440 440 346Fund balances:
Unrestricted 610 610 548Invested in capital assets 1,025 1,025
1,026Internally restricted 100 100 100Externally restricted 48
4,000 4,048 4,040
758 4,000 1,025 5,783 5,714
Total liabilities and fund balances $3,241 $4,000 $1,239 $8,480
$8,170
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Appendix 2 (contd)Foreign Aid Canada (FAC)
Statement of Operations and Changes in Fund Balances
(Audited)For the Year Ended December 31 (000s)
OperatingFund
EndowmentFund
CapitalAsset Fund
2012Total
2011Total
Revenues:Unrestricted donations (Note 1) $11,200 $ $ $11,200
$12,331Restricted donations (Note 1) 2,748 2,748 3,741CIDA
contributions (restricted) 9,410 9,410 8,844Member contributions
496 496 528Investment income 337 337 324
Total revenues 24,191 24,191 25,768Expenses (Note 2):
Project activities (Note 3):Salaries 5,195 5,195 4,915Materials
and supplies 10,250 10,250 11,699Contractors 3,123 3,123
3,200Travel and other 1,265 1,265 1,648
19,833 19,833 21,462
Amortization expense 75 75 68Support services:Administration
3,455 14 3,469 3,387Fundraising, publicand donor relations 746 746
765
4,201 14 4,215 4,152Total expenses 24,033 89 24,122 25,682
Excess (deficiency) of revenueover expenses $ 158 $ (89) $ 69 $
86
Fund balance, beginning of year $688 $4,000 $1,026 $5,714
$5,628Excess (deficiency) of revenueover expenses 158 (89) 69
86Inter-fund transfers (Note 4) (88) 88
Fund balance, end of year $ 758 $4,000 $1,025 $5,783 $5,714
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Note 1: Types of Donations for the Year Ended December 31, 2012
(000s):
Unrestricted Restricted Total
Relief Development Total
Donations
individuals andfoundations $ 9,651 $1,465 $100 $1,565
$11,216Donations corporations 1,549 155 50 205 1,754Bequests 578
400 978 978
Total donations $11,200 $2,198 $550 $2,748 $13,948
Note 2: Project Expenses for the Year Ended December 31, 2012
(000s):
Relief Development TotalSalaries $1,900 $ 3,295 $ 5,195Materials
and supplies 4,613 5,637 10,250Contractors 937 2,186 3,123Travel
and other 633 632 1,265
$8,083 $11,750 $19,833
Note 3: Summary of Project Activities for the Year Ended
December 31, 2012:
Relief Development Total
Number of projects 79 58 137Number of lives improved 151,000
38,000 189,000
Note 4: Inter-fund Transfers (000s):
2012 2011
Mortgage principal payments $27 $13Mortgage interest payments 14
25Purchase of equipment 47
Transferred to capital fund 88 38Transferred from operating fund
(88) (38)
Net $ 0 $ 0
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Appendix 3Foreign Aid Canada (FAC)
Environmental Scan October 2011
Strengths Weaknesses
1. Good reputation as an effective providerof emergency relief
and developmentassistance in Africa and Asia.
2. Skilled staff who are dedicated to thecause low head office
staff turnover.
3. Good HR practices.4. Good support from members solid
membership base each membercontributes an average of $1,250
peryear.
5. Strategically located regional field offices.
6. Good relationship with CIDA.7. Neutral stance taken political
agendas
avoided.8. Efficient use of various promotional
media.
1. Membership subscriptions are decreasing(few new members;
long-term memberspassing away).
2. Slow communication of transactions andtravel expense claims
from foreignlocations to head office causes delaysin preparing
quarterly statements ofexpenses for projects funded by CIDA.
3. Slow payments from CIDA.4. High turnover of field workers.5.
High cost of transportation.
Opportunities Threats
1. Canadian aid agencies are regarded ashonest brokers efficient
in ensuringdelivery of aid to those in need.
2. Emergencies caused by natural disasters
and global warming have been increasingin all parts of the
world.3. AIDS and HIV continue to be a significant
problem in Africa.4. CIDAs budget for Asian and African aid
is
expected to increase in 2012 focus willbe on fighting AIDS,
education anddevelopment projects.
1. Tens of thousands of competitors fordonations from
corporations, charitablefoundations and the Canadian public.
2. Hundreds of NGOs competing for
government funding.3. The amount of Canadian public donationsis
limited; the competition amongassistance organizations is
intense.
4. Political and social instability and dangerin Africa and
Asia.
5. Changes in political agendas regardingforeign aid resulting
from elections inCanada and foreign countries.
6. ODA is expected to decline in 2012 to2014.
Foreign Aid Canada Mandate:
Foreign Aid Canada provides development assistance, through
agricultural,water and irrigation projects, and humanitarian
emergency relief to African and
Asian countries in need.
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