10.1 Introduction

Project approval is required before CIDA can invest funds in a specific initiative. Approval authorities vary depending on the value of the project. This chapter provides an overview of the documentation required for project approval and indicates the various project approval authorities.

Notes:
§ Project Approval, Executing Agency/Implementing Organization selection, and contract/contribution agreement signature authorities are different and distinct.
§ If the Project Manager (PM) is seeking a directed sourcing selection, a project can not be approved without the prior selection approval of the proposed Executing Agency (EA) or Implementing Organization (see the Contracting Guide for Managers in CIDA).
§ Projects can not be submitted for approval until an environmental assessment, if legally required, is conducted under the Canadian Environmental Assessment Act (CEAA) and a decision is taken regarding significant adverse environmental effects (see the CEAA and the Roadmap).

Helpful Hints:
Other steps in the project cycle may be undertaken in parallel with the preparation of the Project Approval Document (PAD). These include: consultation with Legal Services regarding project agreements (Chapter 11); and, preparations for consultant selection (see the Contracting Guide for Managers in CIDA). Undertaking these preparatory activities in parallel will help to save time in operationalizing the project.

The Project Approval Document (PAD), prepared by the PM in consultation with the project team, is the document which defines the project, including the expected results, performance indicators, critical assumptions, budget, schedule, risks, implementation methodology, etc. and seeks approval for funding.

The approval of a project is the official authority to encumber funds against the project.

The Project Approval Document defines the scope of the project and the parameters for project implementation. The PAD must demonstrate that the project meets the project appraisal criteria and must demonstrate links with the Country/Regional Programming Framework (C/RPF) (see Chapter 6) or the overall CIDA policy framework (see Chapter 2) and/or branch programming framework, if no programming framework exists.

There are two formats for project approval documentation:

• the standard bilateral approach to the PAD, including supporting annexes, is retained for projects over $500,000 as described in section 10.2 below; and
• a simpler format for projects up to $500,000 is described in section 10.3 below.

Approval for Special Program and Project Expenses (SPPEs) and Canada Fund for Local Initiatives Projects is briefly discussed in section 10.4 below.

10.2 Project Approval Documentation for Projects Over $500,000

Note:
The PAD must provide sufficient information and detail to allow the approving authority to make an informed decision regarding the investment of Canadian funds.

Project Approval Documentation¹ for projects over $500,000 consists of:

Decision Memorandum* (2 pages maximum).
This memorandum is addressed to the Minister or Vice-President depending upon the value of the project. The headings within the Memorandum are: Subject; Decision Requested; Background; Consultation within Canada; Communications; and Recommendation.

The Decision Memorandum should clearly indicate how the decision requested is consistent with the C/RPF and the foreign policy statement, both in relation to the specific commitments set out for development assistance and to the broader foreign policy objectives (advancing prosperity, security and culture and values). The section on consultations should highlight discussions with other Canadian stakeholders and other federal departments. If no consultation has taken place, that should be indicated.

Notes:
Content requirements may change. Information on the specific content of the Decision Memorandum and the required attachments (below) is available from your Strategic Management Division or Vice-President's office. LOB 8: Bilateral Responsive Mechanism. There is a general limit of $5M for projects submitted for approval under this mechanism (see section 4.4.8).

A. PAD Cover Sheet
(generated by the AIS; also see section 10.5 below)

B. Annex A* - Project Summary
(4 pages maximum) shall include the following:

1. development context and links between the project and the C/RPF or the overall CIDA policy framework and/or branch programming framework, if no programming framework exists;
2. expected results (Outcomes and Outputs);
3. project description: scope, timeframe, cost, an indication as to whether the proposal was developed by CIDA or submitted as an unsolicited proposal (under the Bilateral Responsive Mechanism - LOB 8), involvement of recipient country partners and stakeholders, and confirmation that the appropriate CIDA Project Management Strategy and Contracting Plan have been prepared;
4. lessons learned (from earlier phases, similar projects or other initiatives in the same country or with the same partner by CIDA or other donors);
5. expected benefits to Canada and the recipient country;
6. anticipated risks based on information gathered during the various project analyses. This short section includes any questions or issues on recipient country ownership and project sustainability. The risk findings from all analyses are also compiled and analyzed in a Summary of Risks which is part of Item E (Annex C) below. Potential risks are also listed in the LFA (see Chapter 5);
7. program financial context.

C. Annex B* - Selection
(not required if selection competition will be through the open bidding system).

D. Annex C - Project Analysis Summary:
This one or two page annex provides an overall summary of the analyses conducted. Attached to the overall summary is a 1 or 2 page summary of each analysis conducted and a Summary of Risks (see section 8.5 and section 10.7.1 below).

E. Annex D - Logical Framework Analysis
which emphasizes expected results and anticipated risks (see Chapter 5).

F. Annex E - Project Budget
by result, if possible, or by input detailing annual cash flow with inflation adjustment, contingency and a risk allowance (see section 10.7 and section 12.7), if requested.

G. Financial Check List Form - CIDA 1082 or 1083

H. Gender Equality Form - CIDA 96

I. (Environmental) Preliminary Assessment Form
(see Chapter 8 and the CEAA and the Roadmap) - CIDA 1519-1² and, if required:

1. (Environmental Assessment) Screening Report Form - CIDA 1519-2;
2. Environmental Assessment - Review of Screening Report and CIDA Course of Action Form - CIDA 1519-3;
3. Environmental Assessment - CIDA Course of Action Following a Panel Review or a Mediation Form - CIDA 1519-6.

J. Indicative Planning Figures (IPF) Summary

The following documents are also prepared, as appropriate. Although they are not submitted to the Vice-President as part of the Project Approval Document package, their existence is confirmed in Section c) of Annex A of the PAD dealing with the project description:

• CIDA Project Management Strategy (see section 9.7).
• Contracting Plan including terms of reference for contracted resources (Executing Agency, Monitor, etc.) (see section 9.9).

10.3 Project Approval Document for Projects Up to $500,000

This section indicates the requirements for project approvals up to $500,000 which are generally approved by the Director General (DG) or Program Director (PD).

For project approvals up to $500,000, the LFA (see Chapter 5) is relied upon to provide key information required for approval. Information provided in the LFA is not duplicated in the Decision Memorandum.

Note:
The PAD must provide sufficient information and detail to allow the approving authority to make an informed decision regarding the investment of Canadian funds.

For projects up to $500,000, Project Approval Documentation consists of:

A. PAD Cover Sheet (generated by the AIS)

B. A Decision Memorandum (2 pages maximum). This memorandum is normally addressed to the Director General or Program Director. The headings within the Memorandum are:

• Subject;
• Decision Requested;
• Project Background and Description (including the timeframe, overall cost, Line of Business and confirmation that the appropriate abbreviated CIDA Project Management Strategy and a Contracting Plan [if necessary] have been prepared);
• Lessons Learned (from earlier phases, similar projects or other initiatives in the same country or with the same partner by CIDA or other donors);
• Project Analyses (confirming that the project team has reviewed the appropriate analysis information requirements outlined in section 8.3 and believes that sufficient information exists about the types of issues raised to proceed with approval. Specific analyses are not mandatory, although the DG, PD or Project Manager [PM] can so decide at the project selection stage (see section 6.8);
• Expected Benefits to Canada and the Recipient Country (not a mandatory section, but would be included when considered significant);
• Partnership and Consultation (highlight discussions with Recipient Country stakeholders, other Canadian government departments, other Canadian stakeholders, etc. as appropriate. If no consultation has taken place, that should be indicated); and,
• Recommendation.

C. Annex A - Logical Framework Analysis (which emphasizes results sought, resources to be consumed and risks anticipated (see Chapter 5). As indicated above, the LFA is a key approval document for projects up to $500,000 and information provided in the LFA is not duplicated in the Decision Memorandum.)

D. Annex B - Project Budget by result, if possible, or by input (including annual cash flow with inflation adjustment, contingency and a Risk Allowance, if requested. The project budget is placed immediately after the LFA to make a direct link between the expected results and the resources and activities required.)

E. Financial Check List Form - CIDA 1082 or 1083

F. Selection Annex - if required

G.Gender Equality Form - CIDA 966

I. Environmental Screening Forms as required (CIDA 1519-1 and others)

The following documents are also prepared, as appropriate. Although they are not submitted to the Director General or Program Director as part of the Project Approval Document package, their existence is confirmed in Section c) of the Decision Memorandum dealing with the project description:

• Abbreviated CIDA Project Management Strategy (see section 9.7.3).
• Contracting Plan, if required, including terms of reference for contracted resources (Executing Agency, Monitor, etc.) (see section 9.9).

 
Note:
Content requirements may change. Information on the specific content of the Decision Memorandum and the required attachments is available from your Strategic Management Division.

10.4 Approval of SPPEs and Canada Fund for Local Initiatives Projects

The approval process for SPPEs and Canada Fund for Local Initiatives Projects are as simple as possible due to the nature of the proposed activity.

10.4.1 Approval of SPPEs³

SPPEs are described in section 4.3.4. Approval of an SPPE is in accordance with the delegated project approval authorities in section 10.6 and obtained through the simplified process described below, except when the request for funding is part of a Concept Paper, in which case the Vice-President will approve the SPPE (see section 7.4).

For other requests for the approval of SPPEs, the PM prepares a short Decision Memorandum to the appropriate Director General or Program Director which indicates:

• the Decision Requested;
• Background to, and Reason for, the Request;
• Expected Outputs/Outcome of the SPPE;
• Summary Budget;
• Proposed Selection and Contracting Approach;
• Expected Duration of Activity; and
• any other information considered important.

The Decision Memorandum must be accompanied by a coversheet (generated by the AIS) and an (Environmental) Preliminary Assessment Form (CIDA 1519-1) (see Chapter 8 and The CEAA and the Roadmap).

The Director General or Program Director approves the SPPE by so indicating on the Decision Memorandum. (Contact your Strategic Management Division for more details.)

10.4.2 Canada Fund for Local Initiatives Projects (Canada Funds)

Canada Funds are described in the Guidelines for the Canada Fund for Local Initiatives which indicate the objectives, policy, procedures, eligible recipients, etc. for Canada Fund activities.

CIDA has the authority to allocate funds for, and to audit and evaluate projects of, Canada Funds. However, responsibility and accountability for Canada Fund sub-projects is delegated to the appropriate Canadian Post accredited to the recipient country. The Head of Mission is directly accountable to the President of CIDA for all matters relating to the Canada Fund. Although Canada Funds are financed out of bilateral program funds, they are not considered normal bilateral projects and do not require agreement with the recipient country.

In view of the unique nature of the Canada Funds (including the requirement for yearly funding approvals), the Vice-President, in consultation with the Head of Mission, decides on the amount to be allocated for the recipient country before the beginning of each fiscal year.

The allocation decision is often accomplished through one decision document for all Canada Fund programs within the Branch and the decision is communicated to staff, Finance Division, the Department of Foreign Affairs and International Trade (DFAIT) and each Canadian Mission concerned by memo or email.

10.5 Coding of Projects

The Agency has a single corporate coding framework based, where possible, on international coding standards. The coding of project information allows CIDA to develop consistent and reliable corporate reports as well as meet its reporting obligations to external stakeholders such as Parliament and the Development Assistance Committee (DAC). The coding framework consists of a number of coding tables corresponding to the Agency Information System (AIS) modules. The tables which are used to classify project details are identified below by the nature of the information.

Why we are undertaking the project: Priority, Theme, Result

Who is involved in or impacted by the project: Vendor, Vendor Type, Beneficiaries

How we are delivering the assistance: Investment Type

Where the project is being delivered: Country

What the project is providing: Sector, Financial

When the project will be delivered: Milestone, Status

In order to ensure that reports accurately reflect a country program's activities, project information should be entered into the AIS as early as possible. As a general rule, projects should be entered at the tentative stage in the AIS when the country program begins expending time and effort on the initiative and serious discussions are being held with projectpartners. Some specific principles are:

1. if the project is being discussed as part of the country program's workplanning exercise and briefings with the Vice President, it should be entered in the AIS;
2. if a formal request has been received from a recipient country and the country program is considering the proposal, it should be entered in the AIS;
3. no project should be included in the country program's pipeline posted on CIDA's website, unless it has been entered in the AIS; and,
4. if serious consideration is being given to a proposal received under the bilateral responsive mechanism, it should be entered in the AIS.

PMs are responsible and accountable for the validity of the information entered in the AIS for their respective projects. The information should be updated on a regular basis to ensure that the AIS reflects the current situation.

10.5.1 Basic Coding Instructions

The following guidelines should be followed when coding information in the AIS.
 

1. Coding should be based on the project's results statements.
2. Each coding table should be treated as an independent and distinct coding decision.
3. Project coding must be entered for all level 2's of the AIS Work Breakdown Structure
4. Coding may be on a proportionate or marker basis. Where proportionate coding is called for and when more than one proportionate code (priority, sector, country) is selected depending on the information being coded for a particular project, the allocation should be based on the funding allocation and must total 100%. Where a "marker" approach is used, multiple items may be selected and there is no apportionment of project value against individual markers.
5. Coding decisions should be documented for future reference.

 
Detailed definitions for categories used in the coding tables can be found in the document entitled ODA Priorities: CIDA Operational Definitions. When coding projects please refer to the updated Coding Tables available on Entre Nous.

10.6 Project Approval Authorities

Different project approval processes apply to projects of different values. All project approval amounts include the risk allowance, if applicable (see section 10.7), but exclude the Goods and Services Tax or Harmonized Tax. CIDA's delegated program/project approval authorities are found in the Delegation of Selection Authorities and Contractual and Financial Signing Authorities.

For clarification on the authorities for project/program approvals, consult your Financial Management Advisor (FMA).

10.6.1 Ministerial or Treasury Board Approval

Ministerial approval for projects is sought through a Decision Memorandum and Annexes as indicated in section 10.2 above.

If Treasury Board approval is required, a Treasury Board submission must be prepared. This submission is sent to Treasury Board through the Minister responsible for CIDA, who recommends the project to the Treasury Board.

Note:
As content requirements may change, information on the specific contents of the Treasury Board Submission and the required attachments is available from your Strategic Management Division or Vice-President's office.

10.7 Risk and the Risk Allowance

10.7.1 Risk Identification

All development assistance projects are subject to external factors (risks) which are not within the control of project personnel, but which may affect the achievement of results.

Risks could range from macro economic issues (such as the rate of exchange between the Canadian dollar and the local currency) to national political issues (such as labour stoppages, political disturbances or the passage of important new legislation) to very specific project related matters (such as the acceptance of a new technical methodology, creation of a particular institution by the government or the availability of appropriate candidates for training). However, risk factors MUST NOT be so broad as to constitute an unconditional project reserve.

Risk assessment is a part of all project analyses conducted during project appraisal (see section 8.3). Each analysis should identify not only the possible risk, but also its probability and its potential impact on the project. The compilation of risk information from all the analyses will be important in the project feasibility document (see section 9.2), the LFA (see Chapter 5), the Risk section of Annex A of the PAD and the Summary of Risks attached to Annex C of the PAD (see section 10.2 above).

If significant project risks are identified, the PM should request a risk allowance in the PAD as part of the total project budget.

Note:
It is important to note that some "risks" initially identified during project screening or project analyses cease to be called or treated as "risks" when the project team (and recipient partners) decide that the project should specifically address the matter(s) with project resources, i.e., bring the matter(s) into the manageable interests of the project. In such cases, these initial "risks" are no longer considered "risks" as they are no longer external factors, but rather another aspect of project operations. If there is still concern about managing the particular matter(s), the project team should consider increasing the project contingency since the project's risk allowance would not be available for such internal, operational matters.

However, it is not usually possible to bring significant external factors into the project's manageable interests either due to limited project resources or to the very nature of the external factor. Therefore, the project should include a risk allowance and the PM, project team and other project stakeholders must monitor (not manage) risks using risk indicators as described in section 5.3 of  The Logical Framework: Making it Results-Oriented.

10.7.2 Risk Allowance

Risks which have been identified as having financial implications should be costed. Such costing is generally speculative and is based on the experience of project team members, expert opinion, or experience of other similar project activities of CIDA or other donors. The risk allowance budget should be based on an estimate of the additional inputs required to compensate for the occurrence of the specific event(s). The total cost assigned to the identified risks may be discounted to take into account the probability (or lack thereof) of all of the risks occurring during the life of the project.⁴

The risk allowance is a special budgetary authority granted to CIDA by the Treasury Board. It is intended to provide a specific budgetary allocation in the event that a specific external risk which had been identified in the PAD occurs.

Note:
These risks are not operating problems which should be managed or mitigated through good project management practices, on-going adjustment of project activities, and the use of contingency funds.

The risk allowance is a discrete budgetary component included in the initial project approval to compensate for the occurrence of specific, named events outside the control of CIDA or the Executing Agency and which, if they occur, will have an impact on the resources required to achieve the expected project results. The external risks MUST be identified and costed at the time of initial project approval.

The funds for risk allowance MUST be included in the total project budget for the purpose of determining the appropriate approval level.

10.7.3 Use of the Risk Allowance

Release of risk allowance funds is subject to approval by the Geographic Vice-President should the event(s) identified in the PAD as an external risk factor(s) actually occur. This approval can be requested by means of a simple memorandum to the Geographic Vice-President through the PD. 

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¹Items marked with an asterisk (*) are sent to the Minister. Others are retained in the VPs Office or held on file.

²These forms are available from Forms Management.

³SPPEs do not require a Concept Paper since they are not considered bilateral projects and can not exceed $500,000.

⁴For further information, consult your Branch Senior Economist.