Briefing binder created for the Deputy Minister of Finance on the occasion of his appearance before the Standing Committee on Public Accounts on December 9, 2024 on the Auditor General of Canada's report 8, entitled “Canada Emergency Business Account” - part 10

OAG Audit – CEBA Program Overview and Recommendations

Issue

Overall, the audit found that EDC did not manage the CEBA program with due regard for value for money, and that Finance Canada and Global Affairs Canada did not provide effective governance and oversight of the program.

Key points

• Finance Canada agrees with most of the OAG's recommendations, though believes that the report is missing key context on the situation in which the program was stood up, the need to rapidly distribute funds, and the effectiveness of the program in preventing small business insolvencies.
• Finance Canada disagrees with the OAG's recommendation that it should ensure oversight gaps for CEBA are addressed, in particular related to gaps in the administrative expenditures that are paid through the Canada Account. Finance Canada has no legislative authority to provide oversight of EDC administrative expenditures.

Anticipated Questions and Answers

1. Is there disagreement on any of the findings of fact or how the information is presented in the report? 

The government disagrees with the overall tone of the report and believes that some critical context is missing. For example, there is no consideration given to the economic effectiveness of the program – Statistics Canada data suggest that corporate insolvencies, particularly for small businesses, were dramatically reduced during the first two years of the pandemic. This is attributable to CEBA and other support programs put in place at the start of the pandemic, as well as the speed at which these programs were stood up.

Similarly, while the OAG has taken issue with the oversight of administrative expenditures, it did not evaluate how reasonable those expenditures were. When compared with other government loan programs, the administrative costs of the CEBA program were significantly lower than others offered by EDC, Business Development Canada, and Farm Credit Canada.

It is also clear that Finance Canada is not responsible for overseeing the administrative expenditures of EDC relating to CEBA. EDC, as an arms-length Crown corporation, is responsible for program administration and administrative expenditures. Finance Canada has no authority to oversee, evaluate or direct EDC's administrative expenditures.

The OAG has made changes to the report to reflect feedback from Finance Canada and other implicated parties. However, the OAG did not make sufficient changes to reflect the lack of context as stated by the Department.

Background

Key Audit Recommendations

Four audit recommendations concern the Department of Finance Canada:

• EDC should work with Finance Canada to consider appropriate actions, including legal implications and options to recoup loan forgiveness from ineligible small businesses. EDC should then identify the full population of ineligible recipients in the non-deferrable expense stream.
• Finance Canada should provide analysis to support the development of a complete plan, including spending limits, for all actions required to collect on defaulted loans through to the end of the CEBA program.
• Finance Canada and GAC should clarify who has the lead for key program activities such as risk mitigation and overall program outcomes.    
• In its role as policy lead, the Department of Finance Canada should address the accountability and oversight gaps for the CEBA program, including oversight of administrative expenditures on the CEBA program that are paid through the Canada Account. 

Other recommendations targeting EDC and/or CRA include:

• EDC should strengthen contract management processes and monitoring.
• EDC should develop a detailed plan to transition data management to the government.
• EDC and the CRA should reassess their individual collection plans and include missing elements, such as performance metrics. CRA should coordinate with EDC to obtain the information needed to set its own performance metrics. 
• EDC should enforce the existing terms and conditions of its agreements with financial institutions to ensure data collection is timely and can inform CRA planning.

Departmental Response to Recommendations

FIN agrees with all but one of the recommendations of the audit report.