Guidance to partners on new approach to holdbacks

Issues

Due to COVID-19, many partners have experienced acute financial challenges.

The previous holdback approach (5% across contribution agreements) may have contributed to these challenges. This could particularly affect organizations with multiple large projects.

Global Affairs Canada’s Response

In spring 2020, Global Affairs Canada (GAC) took a temporary, 2-pronged approach in response to these challenges due to the impact of COVID-19. As a result, programs were able to release or reduce the holdbacks in contribution agreements for projects ending during the fiscal year 2020 to 2021 and reduce the holdback for international development assistance (IDA) projects ending in 2021 to 2022 based on a tiered approach. We made decisions on a project-by-project basis, not on an organizational or portfolio basis.

As of April 1, 2021, based on partner organizations’ financial analysis and to continue to assist partners with cash flow management, GAC will permanently adopt the tiered approach to all IDA contribution agreements—both active and new. 

Application of the new holdback approach by programs

All new IDA contribution agreements will have the new holdback approach reflected in the agreement template.

All active IDA contribution agreements are automatically eligible for the new holdback approach. The project officer will open a discussion with the organization as required. He or she will start the email exchange to modify the agreement.

Description of the tiered holdback approach:

New holdback approach
GAC's Contribution	Holdback
Up to $3M	5%
Over $3M to $5M	$150,000
Over $5M to $10M	$250,000
Over $10M	$500,000

Operationalization

For active projects, there won’t be a formal amendment. Emails between GAC and the organization will document the approach for the reduction of the holdback.