:
Welcome to meeting number 14 of the House of Commons Standing Committee on Public Accounts.
Pursuant to Standing Order 108, the committee is meeting today on report 14, “Regional Relief and Recovery Fund”, of the 2021 reports of the Auditor General of Canada.
Today’s meeting is taking place in a hybrid format, pursuant to the House order of November 25, 2021. Members are attending in person in the room and remotely using the Zoom application. Regarding the guidelines from the Board of Internal Economy of March 10, 2022, everyone participating in person must wear a mask, except for members of Parliament when they are seated at their place during the proceedings.
To ensure an orderly meeting, I would like to outline a few rules to follow. Before speaking, please wait until I recognize you by name. If you are on the video conference, please click on the microphone icon to unmute yourself. Please keep your microphone muted when you are not speaking. For interpretation, for those on Zoom, you have the choice at the bottom of your screen of floor, English or French audio. For those in the room, you can use the earpiece and select the desired channel.
I remind you that all comments should be addressed through the chair. For members in the room, please raise your hand if you wish to speak. For members participating via Zoom, please use the “raise hand” function. The committee clerk and I will do the best we can to maintain a consolidated order of speaking for all members, and we thank you for your co-operation.
In accordance with our routine motion, I am informing the committee that all witnesses have completed the required connection tests in advance of the meeting.
I would now like to welcome our witnesses.
Welcome, everyone. It's lovely to see you again. It's the second time this week for the Auditor General.
From the Office of the Auditor General, we have Karen Hogan, Auditor General of Canada; Philippe Le Goff, principal; and Lucie Després, director. From the Federal Economic Development Agency for Northern Ontario, we have Manon Brassard, interim president, and Lucie Perreault, director of programs. From the Federal Economic Development Agency for Southern Ontario, we have Chris Padfield, acting deputy minister, and Linda Cousineau, vice-president, business innovation and community development. From Prairies Economic Development Canada, we have Dylan Jones, interim deputy minister of PrairiesCan and president of PacifiCan; Hicham Aitelmaalem, director general; and Sundeep Cheema, chief financial officer.
Witnesses will have five minutes to make their opening statements.
Ms. Hogan, you have the floor.
:
Thank you, Madam Chair.
Thank you for this opportunity to discuss our report on the regional relief and recovery fund, which was tabled in the House of Commons on December 9, 2021.
I would like to start by acknowledging that this meeting is taking place on the traditional unceded territory of the Algonquin Anishinabe people.
Joining me today are Philippe Le Goff, who was the principal responsible for the audit, and Lucie Després, who led the audit team.
As part of the response to the COVID‑19 pandemic, the federal government announced the regional relief and recovery fund in April 2020. The fund was managed by the federal government’s regional development agencies across Canada. It was meant to help businesses and organizations that could not access other federal pandemic support programs and emergency funding or that required additional assistance. In total, the government allocated more than $2 billion to the fund.
This audit focused on whether Western Economic Diversification Canada, the Federal Economic Development Agency for Southern Ontario, and the Federal Economic Development Initiative for Northern Ontario designed, delivered, and managed the fund effectively and efficiently, and whether they reported on results.
Overall, the regional relief and recovery fund was successful at providing last-resort assistance to thousands of businesses and organizations affected by the COVID‑19 pandemic. Also, according to data provided by the regional development agencies, the program will likely succeed in reaching the objective of providing at least 25% of its funds to the tourism sector.
[English]
However, the management of the program was weakened by a lack of efficiency, consistency, fairness and transparency, which may have resulted from the efforts to administer the program quickly. Applicants from different regions of the country faced different requirements because of the various approaches taken by regional development agencies and the agencies' different interpretations of the eligibility criteria.
We found that, as a result of these differences across regions, funding was awarded in some cases to applicants who did not meet all of the eligibility criteria set out under the national fund, and ineligible expenses were funded.
In addition, in some regions, not-for-profit organizations were directly invited to apply for funding, without an open call to all potential eligible organizations.
We also found that the system put in place to report on the fund's performance relied on inaccurate information for key indicators. For example, the number of jobs maintained was based mainly on information provided by applicants, without further verification. In our view, the number of jobs saved was often overstated.
The three regional development agencies that were covered by our audit expected that between 25% and 42% of the total amount of repayable contributions granted would not be repaid. This is due to the fact that the regional relief and recovery fund was designed as a last-resort funding program and therefore carried increased risks.
We made three recommendations to the regional development agencies, including one recommendation that we also addressed to Innovation, Science and Economic Development Canada. The regional development agencies only partially agreed with our recommendations.
Madam Chair, this concludes my opening remarks. We would be pleased to answer any questions the committee may have.
Thank you.
:
Good morning, Honourable Chair and members. Happy spring, everyone.
My name is Dylan Jones. I'm joining you from Edmonton, which is Treaty 6 territory within the Métis homelands.
I am the president of PacifiCan and the interim president of PrairiesCan. These are the successors to WD, Western Economic Diversification Canada, which delivered the RRRF in the four western provinces.
The RRRF was, as the Auditor General has noted, an urgent relief program that targeted businesses and organizations that did not qualify for other pandemic support programs. It was a backstop program. It launched with almost $1 billion for regions across the country and was recapitalized twice, to a total value of over $2 billion, to deal with unprecedented need.
This was emergency funding to help eligible businesses to pay their bills and pay their employees at a time when their revenues were significantly reduced. The program created certainty for thousands of families and hope for the future. From conception to delivery, the RRRF took less than seven weeks to stand up.
In western Canada, the pandemic arrived just as key sectors of the economy were reeling from depressed energy prices and international trade shocks to our exporters. It wasn't just oil and gas. We had problems in global sales across a broad range of commodities. Businesses were very vulnerable in western Canada at the outset of this. That's why demand for the RRRF in the west exceeded all other regions of the country combined.
WD took swift action to provide more than $700 million to 10,000 businesses and organizations. To give you some examples, we supported individual businesses like Rocky Mountain Flatbread, a family pizza and pasta restaurant with locations in Alberta and B.C. They used RRRF funds to develop a home pizza kit and started growing their own salad sprouts, which they now sell to other restaurants.
As you know, a portion of the funds was set aside for tourism businesses. We were able to help the Tunnels of Moose Jaw to retain staff, renovate and prepare for when the attraction could reopen. The reduced risk of permanent closure kept key employees of this year-round tourist attraction working, but also hopeful. I have to say, I really felt like we were in the hope business throughout this crisis.
I would like to note that in western Canada, many under-represented groups were funded at a rate that was significantly higher than their representation in the western market. Rural RRRF approvals accounted for more than double the percentage of rural small and medium-sized enterprises. Women-owned businesses were approved for RRRF funding at a rate that was one and a half times the percentage of women-owned businesses in the population. On the indigenous front, it was a similar story, with twice the baseline percentage.
Altogether, the RRRF in the west supported over 2,700 women-owned businesses, 349 indigenous-owned businesses, at least 97 official language minority community businesses and at least 74 LGBTQ+ owned businesses.
That's a snapshot of how the program was implemented in the west. The picture looks different in other regions of the country and for good reason. Canada is a big country, and it's not the same everywhere. RDAs designed their rollouts of RRRFs to maximize speed and local accessibility. Given the urgent need to quickly deliver this funding, it made sense to use existing application processes that were already available and with which customers and clients were already familiar.
The Auditor General has made some recommendations that we will act on, such as improving the consistency of measurement reporting. Lessons learned will inform the design of performance measurement strategies for future initiatives of this urgent nature. We appreciate the work of the Auditor General. We're always happy to learn and improve.
I will close by noting that the Auditor General found that the regional relief and recovery fund was successful at providing last-resort assistance to thousands of businesses and organizations affected by COVID. Indeed, the RRRF largely did the job it was designed to do, and it did so under pressing circumstances and quickly. Businesses continued operating, and Canadians kept their jobs in a volatile time.
The people of PacifiCan and PrairiesCan, the public servants who delivered this program, were incredibly thankful and humbled by the opportunity to help others.
Thank you.
Thank you.
:
Good morning. It is my privilege to appear before this committee today.
I will start by saying that I am joining you from Gatineau, which is located on the unceded territory of the Algonquin and Anishinabe peoples.
I'm here in my capacity as FedNor's interim president. As noted in the Auditor General's report, FedNor was previously an initiative under the Department of Industry. FedNor was established as a stand-alone regional development agency on August 12, 2021, and I joined FedNor on that date.
I am pleased to talk to you about FedNor's experience in delivering the regional relief and recovery fund—the RRRF—in northern Ontario, and the agency's response to the Auditor General's audit. The audit has provided input that will help us better serve Canadians when implementing national programming.
FedNor was able to deliver the RRRF quickly and effectively, thanks to the proven and established processes and mechanisms built into its system and the dedication of its employees.
[Translation]
In northern Ontario, the COVID‑19 pandemic has had wide-ranging impacts on local economies, affecting businesses and communities that, in many cases, depend on single industries.
The RRRF has been vital for one of the hardest-hit sectors in northern Ontario, the tourism industry. The region's tourism products are primarily geared towards the American market and tend to attract tourists who are seeking to experience the great outdoors. With the extended closure of the United States border, the industry found itself in a precarious situation and its very survival was at stake.
[English]
While the tourism industry was perhaps the most hard-hit sector, it was not the only one. As a result, there was significant demand for support through the RRRF from the manufacturing sector and businesses engaged in agriculture, forestry, hunting and fishing, all of which were significantly impacted.
Funding offered through the region's community futures organizations supported rural, main street businesses and small and micro enterprises located in communities across northern Ontario, including in indigenous, rural and remote communities.
FedNor took swift action and, with the 24 community futures organizations, delivered more than $100 million across the region, effectively providing support to key sectors like tourism, agri-food and manufacturing, and contributing to the economic stability and well-being of the region.
In total, more than 1,200 businesses and organizations benefited from RRRF in the region. More than 30% of our total funding went to support tourism. Approval for businesses led or majority owned by women has almost doubled the percentage of women-led or majority-owned SMEs in the business population. Approvals for indigenous-owned or indigenous-majority-owned applicants were over one and a half times the percentage of approvals for indigenous-owned or indigenous-majority-owned SMEs in the general business population.
The audit process, which took place as FedNor and its partner RDAs were still delivering the RRRF, enabled FedNor to work with other audited RDAs to quickly respond to concerns. It also provided valuable recommendations to help us better serve Canadians.
[Translation]
The agency immediately sought to improve its practices and has already taken action to address the recommendations of the audit report. In fact, lessons learned from the delivery of the program and the audit process have been applied to budget 2021 programs.
[English]
As we work together to better serve Canadians, FedNor and the audited RDAs will continue to move forward on our action plan.
I'd be pleased to answer any questions you may have. Thank you.
:
Thank you very much, Madam Chair.
Good morning, committee members, and Ms. Hogan, Mr. Jones and Madam Brassard.
Thank you to the committee for the invitation.
Before I begin, I'd like to acknowledge that I'm participating today from Ottawa, the traditional territory of the Anishinabe and Algonquin nations.
I am pleased to be here on behalf of Ms. Nancy Gardiner, as the acting president of the Federal Economic Development Agency for Southern Ontario—or FEDAV Ontario, as it's known—to participate in your study on report 14, “Regional Relief and Recovery Fund”.
I'm joined today by my colleague, Linda Cousineau, vice-president, business innovation and community development.
[Translation]
FedDev Ontario is the regional development agency responsible for managing the RRRF in southern Ontario.
At the outset of the pandemic, when it became clear how badly Canadian businesses and communities would be impacted by restrictions to keep Canadians safe, Canada’s regional development agencies, or RDAs, quickly pivoted to design and deliver the RRRF.
[English]
This fund was a critical federal tool to help businesses and organizations mitigate pandemic-related financial pressures. It also provided an important backstop to other federal business supports, such as the wage and rent subsidies and the Canada emergency business account.
We thank the Auditor General for her work and the work of her team. We are pleased to see the recognition that the RRRF's design aligned with the government's objectives for helping businesses and organizations deal with the impact of the pandemic and addressed gaps not covered by other COVID-related programs.
The report also acknowledged that leveraging existing experience and systems, as well as the direction to accept greater risks, allowed the RDAs to design and deploy the program within weeks of the onset of the pandemic.
Southern Ontario is a key driver of Canada's economic growth, representing more than 39% of the country's GDP and employment. However, the region was hard hit by the pandemic. More than a million jobs were lost in southern Ontario by April 2020. To provide critical support to small businesses and their employees when it was needed most, FedDev Ontario was allocated more than $500 million to deliver the RRRF in southern Ontario.
[Translation]
FedDev Ontario’s direct delivery of RRRF provided relief to more than 1,300 businesses across the region.
We also worked with Community Futures Development Corporations, or CFDCs, to provide targeted relief to more than 1,950 rural small businesses.
In addition, to maximize the program’s reach and impact, we worked with regional partners to provide targeted support that reached more than 39,000 small businesses, including sectors hardest hit by the pandemic, as well as under-represented groups that were disproportionately affected.
[English]
Overall results for the RRRF in southern Ontario show that funding was provided to businesses that needed it most, with almost $160 million supporting southern Ontario's tourism businesses, surpassing the commitment to provide at least 25% of RRRF funds to the hardest-hit tourism sector; more than $150 million supporting women-owned or women-operated businesses; $10 million supporting indigenous businesses; and more than $140 million supporting rural areas.
The Auditor General's report noted that overall, the RRRF was successful at providing last-resort assistance to thousands of businesses and organizations affected by the COVID-19 pandemic.
Work is under way to address each of the recommendations, and the audited RDAs have developed a detailed response and action plan.
We have taken steps to continue to look for ways to better support under-represented groups. For example, based on a GBA+ analysis, dedicated funding was set aside for indigenous businesses under the tourism relief fund. Activities that foster inclusive recovery are also being prioritized in the delivery of the jobs and growth fund.
We agree that it would be helpful to examine practical ways to improve transparency in the future and, when appropriate, leverage common regional development agency approaches to program delivery, assessment and approval.
[Translation]
RDAs were established to be place-based and reflective of the regions they serve. Delivery of national programs by RDAs should of course be coordinated, but also delivered in a way that reflects each regions’ unique needs and circumstances.
Harmonizing processes to accurately report on program outcomes is an area for further improvement. Lessons learned from the RRRF will inform the design of performance measurement strategies for future initiatives.
Since spring 2021, all new initiatives delivered by multiple RDAs have been developed to foster harmonization of program indicators and the collection of data.
[English]
Under the leadership of , FedDev Ontario will work with its RDA colleagues to take the lessons from the delivery of the RRRF during this unprecedented time to refine and improve its approaches to supporting businesses and organizations in the regions.
In closing, Madam Chair, I'd like to acknowledge the efforts of the public servants within our organization to quickly design and deliver this program while themselves navigating a once-in-a-generation pandemic. During an extraordinary and uncertain period, they successfully worked together to provide timely support that helped to make sure that businesses could keep operating and employing Canadians.
Thank you.
Thank you to the witnesses for appearing today and for your work throughout the pandemic. All your efforts are much appreciated.
Thank you to the chair for filling in today for Mr. Williamson. It's much appreciated.
I just want to start out with a brief statement, and then I'll get into my question.
I believe that a robust economic development department is absolutely critical to a prosperous economy, because it spurs innovation in both the public and private sectors. Throughout the world we've seen numerous examples—in Europe, in Asia and even in some of the states in America—of how they've worked through impressive public-private collaboration and an unrelenting commitment to results, and economies have been materially lifted by competent, agile economic development departments.
Unfortunately for Canada, I fear we're not there yet. We appear to be a laggard in both innovation and economic development. As a starting point for reform and improvement, having accurate information will be required as the foundation for critical decisions that will need to be made in the coming years to reform Canada's economic development investments.
Therefore, I'm deeply troubled by the inaccurate information that was revealed in the Auditor General's report. One of the key metrics in determining the success of taxpayers' investments is jobs maintained or created.
Could the Auditor General please enlighten this committee with her thoughts and maybe expand on her earlier comments with respect to how accurate the reporting of jobs maintained and created by the CFDCs was?
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I'm sorry, but my time is short here.
My challenge, Mr. Padfield, is that I want to use these numbers going forward. I can only think that you all can have a huge role in the economy going forward and in being extremely beneficial, but it is very hard to make those decisions when numbers aren't solid.
You'd have to agree that even if they're one-offs—and the auditor didn't review every transaction—regardless of where they are used, when the ministers and the government are looking at this and they're trying to make decisions and they see these claims about jobs that clearly can't be true—for example, with the agency that indicated that over 200 jobs would be maintained for a recipient receiving less than $60,000, or when an agency simply reported the number of jobs as the total number of employees, meaning that they said, “Okay, because you got the money, you would have gone bankrupt without it, and therefore we're going to report all your jobs”—this is troubling. As I said, I want the government to have accurate information so that it can make the best decisions possible, so to just say that these are one-offs is troubling and challenging.
Would you also please table the formulas for the calculation of jobs? Would you be good to do that for us?
:
Thanks very much, Chair. It's great to be with colleagues again and to hear the presentations this morning.
My first question will go to FedDev. It could go to any of the respective agencies, but FedDev is the one that has supported my region through this particular fund and in other ways over the years.
I look at a press release that came out around the time the regional relief and recovery fund was really being implemented. I'll point to two businesses. One is in London and one is down the road, in Ingersoll, Ontario.
This is for URSA Manufacturing. The release reads, “The RRRF”—the regional relief and recovery fund—“has helped URSA cover its short-term fixed operating costs and diversify into non-auto markets—keeping the company in business.”
The other business, in Ingersoll, is Chocolatea, and is described as an artisan chocolate and premium tea retail shop. Here, the funding was delivered in partnership with Community Futures Oxford. It “provided working capital to help the company with its cash flow needs”.
We've heard the phrase “last-resort assistance” mentioned a few times here today.
This is for Mr. Padfield. If this fund did not exist, is it reasonable to assume that these businesses simply would not have been able to survive? Let me just be that blunt about it.
This is probably the final question, if I'm looking at the chair and mindful of time. It will go to all three of you, Mr. Jones, Mr. Padfield and Ms. Brassard.
In terms of lessons learned, can we expect regional economic development agencies to better coordinate going forward? I'm not just talking about during the pandemic, which we're still in, but on a go-forward basis to ensure consistency of outcome? Are there lessons learned here in terms of the need for the agencies to coordinate as far as having consistent eligibility criteria and driving for consistent outcomes overall?
One thing that comes out in the report, as we heard in the presentation this morning from the Auditor General, is that there does not appear to have been much coordination among agencies. I realize that probably has a lot, if not everything, to do with the fact that this program was introduced at lightning speed to deal with something that had been completely unseen before. That's understandable from one perspective, but I would hope that there would be a lesson learned as far as coordination among agencies and bureaucracy.
We'll start with Mr. Padfield and go to the others, too.
:
Thank you, Madam Chair.
I would like to thank all committee members for welcoming me as I replace my colleague today.
It's truly an honour for me to be here, especially for this study, because we can look back at the circumstances surrounding the beginning of the pandemic. As the member for Abitibi-Témiscamingue, a region that in some ways may be similar to the FedNor area, I've learned a great deal about the major needs of our businesses, particularly the very small ones. The federal programs put in place have overlooked partnerships and business owners who pay themselves in dividends, as well as many farmers.
I addressed , at the time, on that subject to tell her that something had to be done, specifically that funding should be quickly provided, along with support programs. In my view, the CFDC network was perfectly positioned, in Abitibi-Témiscamingue, to receive this money and make it available right away to prevent bankruptcies. In fact, bankruptcies are still a possibility in 2022, according to a study by the Canadian Federation of Independent Business, because we are not yet fully out of the situation caused by the pandemic. Not all businesses are back on track and doing well.
I want to take a moment to congratulate our CFDCs, and especially executive directors Thérèse Grenier, Jocelyn Lévesque, Éric Laliberté and Nadia Bellehumeur, for their excellent work in Abitibi‑Témiscamingue. It was possible for us to access decentralized funding to save our businesses in the region. That's why I think that kind of program is a great strength.
I would like to ask you a question, Ms. Hogan.
In your report, you say the following:
14.47 We found that each regional development agency developed its own application form and used different criteria to assess funding applications to the Regional Relief and Recovery Fund.
I will digress and talk about this for a moment. The “FARR” acronym, which is the French equivalent of the RRRF, is already used in Quebec to refer to the “Fonds d'appui au rayonnement des régions”. Having the same acronym refer to two different regional programs creates some confusion in the regions.
In your report, you state that the criteria used were different, but also that the “applications considered to be eligible varied from one regional development agency to another”. Well, I think that having programs adapted to each region, according to needs, is a strength. Federal programs are far too often designed with major corporations in mind. That's what Canada's economy is based on. In contrast, the Quebec economy and the rural economies are much more geared towards small and medium-sized businesses. That is why I find that having programs that are adapted to each region is a strength.
I would like to hear your comments on that.
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Indeed, flexibility is important. In our implementation, the stated objective is that this is a national policy. Overall, the criteria were actually still met, in my view. I do agree that it is important to harmonize the definitions.
You may already know that I am also the president of Canada Economic Development for Quebec Regions. I think that, there too, we have programs for secondary and tertiary processing, but I won't elaborate on that. The important thing is to be able to adapt the way the program is applied, within the limits of what is permissible.
In northern Ontario, where I'm also currently working, we have placed significant emphasis on projects carried out in partnership with indigenous peoples and projects involving industrial development and tourism. That meets a need in northern Ontario, so that's what we have focused on.
We have also worked with the CFDCs, since there is a whole network there too. We were therefore able to divide up the work between us. FedNor took on the small and medium-sized businesses in certain sectors and divided up the work so as to be able to coordinate with the CFDCs. That was the second pillar of this program. There was money for the agencies and there was money for the CFDCs. We worked together, while avoiding interfering in each other's work, to make it easier for them, for us, and especially for the client base, who needed quick access to programs, in light of the situation.
:
Thank you very much, Madam Chair.
Thanks to all colleagues for their good questions so far. I understand, however, this was a difficult period for every single one of the regional development agencies.
To the Auditor General, you've had a difficult job collecting data, in some instances, where data was missing. I want to recognize that.
I have a few questions to clarify some of the data gaps that I noticed in some of the review—they're very similar to Mr. Lawrence's—and my concern with how this program impacted particular regions.
I'm from Edmonton, Alberta. It's good to know that Mr. Jones is present. I never had the opportunity to meet Mr. Jones. I worked in the indigenous sector for six years in Alberta. It's the first time I've ever met you. There's going to be a target in these particular questions for you, to make sure we get some clarification on your statements and the glaring discrepancy between them and the report.
I listened to your statements early on. They sounded very promising, but I think there was some interesting positioning and interesting language you used to avoid some of the particular instances and glaring facts related to this report.
I'd like to turn the attention of the Auditor General and Mr. Jones to exhibit 14.4, “Businesses led by members of under-represented groups made up various proportions of approved applicants”. In that section, you'll see that there is a comparison graph of three different agencies: northern Ontario, southern Ontario and western economic diversification.
Within that, you'll see that western economic diversification failed to report youth as one of the categories for this study. I also want to point out that the percentage granted to indigenous people was 2% under the first stream.
Could the Auditor General, followed by Mr. Jones, explain why this graph and the information presented here are so different from the statements made by Mr. Jones?
Go ahead, Auditor General.
Mr. Padfield, I'll direct some of my questions, as a member from eastern Ontario, to the experience as an MP in southern Ontario here. I've had some members comment that a local community futures program was ready to accept funding, but was very slow to receive it from FedDev. When it did, it received only a small amount. Despite the RRRF being awarded a large sum of money overall—I believe initially it was $962 million, which increased to $2 billion—the money that was given to frontline agencies to administer the program was smaller than they anticipated.
One of the other interesting things that was noted in the report was that there was obviously a large subscription into these programs, and they couldn't accommodate all of it, yet at the end of the year there was still money left over.
I'm just wondering if you could talk about the process. If the staff and infrastructure at community futures programs have been around for the last 30 years, what was the delay in getting funds to them, particularly surplus funds that were still left on the table at the end of the year?
:
One challenge—and I think it's been raised before—was some of the unclear eligibility criteria. The Auditor General's report, on page 3, indicates that the eligibility criteria were often unclear where funding was awarded to recipients who were ineligible. Going more specifically, there were some cases involving, again, the community futures program.
They were unaware of some of the nuances of the eligibility program; specifically, recipients who applied for both the RRRF program and CEBA, for example, could claim $20,000 forgivable for only one program, not both. Many of these businesses were unaware of these details and were not provided them by the department, so, by the time the contracts were already lined up and money was awarded, businesses found out that, although they thought they would be forgiven $40,000, in fact, it was only $20,000, obviously a major financial consideration, strain or challenge for them. This was devastating for many businesses, and they had to repay much more than they initially thought and budgeted for.
Mr. Padfield, can you explain how some of that miscommunication or clarification happened and how many businesses this impacted? Did you hear that as a complaint or a challenge in the process?
:
If it was a complaint or a challenge, it would have been very early on. I think things got smoothed out quite a bit.
To Mr. Jones's point, while we talk about the RRRF—and you talk about it running from May 2020 and moving to closing up in June 2021—there were, in effect, four trunks to the program. We adjusted the program—again, we were at the bottom of the rung, along with our CFDC partners—between changes that would happen to CEBA, to their wage subsidy and to the rent subsidy, so our program had to change to adapt to all those changes as they went along.
As you know, CEBA was worth $40,000 at the beginning. As the pandemic lingered and needs increased, it moved to $60,000. We likewise had to move our programming to reflect that when we were copying the CEBA-type loans, and we worked with the CFDCs to do similarly.
Throughout that period, from May 2020 to June 2021, that program evolved at four different periods, so we worked closely with our CFDC colleagues. As the overall package and portfolio of federal supports changed, being the lender of last resort in that regard, being the safety net, we had to adjust to all that. We worked closely with our CFDC partners to make sure we were able to do that and that they were given the information they needed to make sure that what they were providing was in line with where the rest of the federal supports were going.
:
Thank you, Madam Chair.
As part of this discussion, I would like to put forward an idea that I like and is quite important to me. It is something I did a study on in my riding. It is also included in the Bloc Québécois's demands, in our budget expectations. I'm crossing my fingers and hoping to hear something along these lines this afternoon. We would like to see the government create regional funds to support local innovation. The important point here is that these would be projects carried out by and for the regions. We're talking about economic development and diversification geared towards the innovative secondary processing of Quebec's natural resources, particularly in the areas of electric vehicle batteries, aluminum, forestry, and agriculture and agri-food. We could even have a tax credit for people living in rural areas.
In its platform, the Bloc Québécois also talks about land development. The Bloc Québécois proposes to regionalize regional development programs by decentralizing Canada Economic Development and entrusting the money to regional funds that will enable the regions to manage their priorities independently. Decisions on the future of our regions must no longer be made from Ottawa, but in the regions. The purpose of a regional agency is to meet a regional need; it is more attuned to the realities of the areas it represents.
My question is for Ms. Brassard, from FedNor.
Would you agree that the decentralization of program funding could be more effective in meeting regional needs? Managing their own funds would enable the regions to make decisions together with the community, which would improve consistency and efficiency. We could do more than what is being done now.
:
Thank you very much, Madam Chair.
Again, thank you to my colleagues. We've had good questions thus far.
I want to return to the issue of some of the reporting and the recommendations made by the Auditor General. I'll point your attention to section 14.32 in the report, under recommendations, which mentions that for future programs, the federal economic development agencies for northern Ontario, southern Ontario, the Prairies and the Pacific, and the other regional development agencies “should establish targeted levels of support for under-represented groups and ensure that information is collected” and used to inform decision-making.
I want to note that the agency said it “partially agreed”. This is concerning in some ways, because we want to make sure that we have real progress on the GBA+ analysis of some of this work, and data is critical to that.
I want to really remind officials, particularly Mr. Jones, of the fact that not reporting and/or not even collecting this information is a critical error in our ability to make good decisions, and it brings a judgment on our institutions when we don't do this effectively, particularly in light of the fact that other economic diversification agencies have collected it. It's a glaring fact that we're lagging behind, in the western diversification branch in particular, in relation to the other two agencies.
Why has the agency only partly agreed to this recommendation?
Honourable Chair and committee members, I accept the criticism on data collection. Bluntly, if we were going to do this all over again, we would have collected more data at the front end and less at the end, right? We would have collected more up front.
Our approach was about just being quick and easy for people. That was our approach, but it led to the situation we're in now, and I accept that criticism. On that part, we would do it differently in a similar situation.
Just to explain the “partly agreed”, it relates to setting targets for this kind of program, so please understand that my comment is not about setting targets in general. There are often programs.... We talked earlier about the importance of getting the number of indigenous-owned businesses up in general. There are places where targets make sense, but for an emergency backstop program, if we had tried up front to ration the program, we would have had to get it right, because if you ration the program, it means that money is not available for people who don't meet however you've rationed it.
I don't know if that made sense, but the point is—
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I appreciate that. There are a few things I want to get on the record, so I appreciate your doing that in the interests of time.
To the economic development agencies, in the interests of time, as opposed to asking all of you for a yes or no, I will put it the other way. Would anybody object to tabling with the committee the following: the number of cases you identified later, in any reviews or perhaps through the Auditor General, of any businesses that were ineligible or had ineligible expenses? Would you be willing to table with the committee the number of cases or recipients identified as not using the money appropriately or as ineligible?
Regarding the status of the remedy of that, are you looking to recoup that money, or are you just deeming that not an option at this time? What is your plan to do that?
If our committee were to ask for this in our report, would anybody object to regular intervals for those updates, so that perhaps every quarter or a couple of times a year you'd update those numbers on the number of cases and what those repayment statuses are? I'm not talking specific names per se, but the number of cases and what actions your agencies are taking to rectify that.
Would anybody have an issue with doing so? I don't see any objections. I appreciate that.
I will ask the same thing, perhaps, as well—
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I don't think it's a discrepancy. I think it's the nature of the different economies.
It's really hard to make comparisons between each of the regions. As Mr. Jones pointed out, the west was in much more dire straits just before the pandemic, and when you're making a comparison to southern Ontario.... Even within southern Ontario, we have very different impacts from the pandemic.
There were a number of regions that were locked down for extended periods. Our demand fluctuated significantly as lockdowns rotated around in various regions within the jurisdiction.
Our refusal rate was assessments of eligible costs and what have you. It went back to the point at which you had to have gone through all the various other programs to be able to show that you were ineligible or you were not able to meet your financing needs through some of the other mechanisms before you could come to us.
If our default rate was high, it was because either they received funding from one of the other support mechanisms, or they didn't have any other costs that weren't covered that would have been eligible. It's a reflection of our good due diligence on the projects that came forward and our risk assessments of the investments that we were making as they came to us, which we did regularly and throughout the program.
:
Thank you, Madam Chair.
First of all, thank you, witnesses, for appearing today.
In my previous work in economic development with the City of Kitchener, I was quite familiar with the digital main street program and working with Communitech. I can vouch that many small businesses, retailers in particular, were saved through this program. It allowed them to quickly transition to online shopping, which they would never have been able to do before, so it was very effective in that way.
Mr. Padfield, I was wondering. This program was launched in a period of seven weeks. Can you explain how that compares with the usual program launch for new programs? How were you able to accomplish that so quickly in this time? I know there was urgency, but I wondered if you could elaborate.
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I can start, if you'd like.
The not-for-profits were supported in two ways. Partway through the program, they became eligible for support through the program itself, to ensure that they had liquidity to continue. There was a circumstance where we provided about $5 million to keep 28 different not-for-profits functioning and to support businesses within the region.
We also leveraged 14 other not-for-profit organizations to help us deliver recovery activities that included the digital mainstream and working with the Toronto Region Board of Trade to help the digitalization of other companies that were small manufacturers, or the second- and third-floor main street companies.
Through that work, we were able to support 39,000 different SMEs across the region with that host of activities that we were able to diverge. We also leveraged some organizations to help us deliver support to under-represented groups, including women and official languages communities within the region.
We have a deep, strong ecosystem in southern Ontario, and we were happy to be able to leverage some of those partners to help us advance this initiative.
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Far be it from us to tell a region what they need or don't need, but we do that regular analysis. That's part of our core business.
I want to delineate between the emergency relief program we're talking about here versus our ongoing efforts to develop economic opportunities for the future. Prior to the pandemic, we did 20 different round tables across the region and had deep communications. Linda and I were across the region with hundreds of different stakeholders, talking about what those regional needs were.
I don't know if you realize, but while we were a temporary agency created in 2009, in 2019 the current government made us a permanent agency. We were just launching ourselves off as a new permanent agency and not an ongoing running program. Those 20 round tables were meant to help us do exactly what you're talking about—build up that deep regional knowledge and understand what particular regions need going forward.
I think it's really important, and you're completely right about that kind of analysis. That's quite different, though, from an emergency relief project, which is what the RRRF was. It was based on needs from different organizations. We weren't being prescriptive about who we thought had needs and who didn't.
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Maybe I'll take a stab and hope the connection works on this one.
There is one thing I want to flag for the committee, which is that we often think about procurement as a comparison for what fairness looks like. The thing with a standard procurement process is that businesses, when they're doing competitive bidding, lose money on the bids that fail, but they recoup it by charging more for bids that succeed.
When you're working with non-profits, that doesn't apply. If they're in a competitive process and they spend $20,000 on a bid, if you will, or on an application and it fails, they're out-of-pocket. We don't actually get the same kind of demand from non-profits for competitive processes.
I'm not making an argument against fairness or transparency. I'm just saying that it's actually not the way it works. It's not really what people want, necessarily. They want to know what's going on. They want to be able to knock on our door and say, “Hey, I've got an idea.”
On this one, we talked to basically everyone who might be able to help. We sort of know who they are, the people who work in these spaces. We reached out to them—and remember, we were in a massive rush—and said, “Do you have something that you have to offer?” The word was out quite broadly on the non-profit side.
I take the point that's been raised here, but it wasn't that we decided who we weren't going to talk to. We basically reached out to everyone we thought might possibly be able to help. People like that process, because they know they're not wasting their time trying to put in a bid and then having to eat the cost if it's unsuccessful.
:
Thank you very much, Madam Chair.
I want to again thank all of the witnesses. I know this has been a difficult study. It was a difficult time that we as a country had to endure, so I thank you all for your service.
It's incumbent upon our committee and us as elected officials to make sure that the taxpayer and regular Canadians understand how this process works and where this money is going.
I want to address paragraphs 14.49 and 14.50, which I believe contain probably the most problematic and largest issues facing this program. I'll read one out: “In our samples, we found the following examples where funding was provided, but the applications should have been rejected because they did not satisfy the program’s eligibility criteria....”
I want to thank Ms. Hogan for very clearly outlining the problem here. There were clear criteria and there was a failure by the organizations to apply those criteria. We expect the regional development organizations to follow through with understanding the impact of this.
When we look at the findings under 14.50, there is “repayment of shareholder loans”. That's what this money was used for. Taxpayer dollars went to shareholder loans. There is also “financial support to family members” and “purchase of a new vehicle”. These are ineligible expenses, but they're massive expenses. This is a glaring failure of the program, which I hope we can remedy.
In some instances, businesses had no employees but were still allowed in this program. There were also cases of applicants that had not previously applied to other organizations, and “cases of applicants that were not in operation before March 2020”. That is extreme.
I really want to make sure we understand Ms. Hogan's report on this and how important it is to truly satisfy the application of fair criteria, so it doesn't end up that taxpayer dollars are going to the repayment of shareholder loans. We can understand how that's a difficult thing for Canadians to understand.
Will the regional development organizations remedy this issue, or are we simply going to allow the shareholders to have their money?