Canada fumbled oversight of CEBA loans: auditor general

Article content

The Canadian government rolled out $49 billion in loans to businesses during the COVID-19 pandemic without “due regard for value for money,” the country’s auditor general said.

Article content

Article content

About $3.5 billion was paid out to more than 77,000 ineligible businesses that applied to the Canada Emergency Business Account (CEBA), Karen Hogan concluded in a report on Monday. That’s nine per cent of the nearly 900,000 Canadian businesses that received loans through the program, which was introduced by Prime Minister Justin Trudeau’s government in 2020.

Article content

The interest-free loans of up to $60,000 were quickly doled out to help small- and medium-sized Canadian firms with payroll, rent and insurance as businesses were shuttered to control the spread of the coronavirus. Up to $20,000 was forgivable if firms repaid by a certain date.

But while the government moved swiftly to support struggling businesses, the initiative was plagued by “poor program management and oversight failure,” Hogan’s office said in a news release.

“Unlike other COVID-19 programs, CEBA is a loan program with repayments that will be ongoing for several years while action on defaulted loans is just beginning,” she said in the release. “Value for money will be further compromised without better monitoring and improved plans to recover defaulted loans.”

The report is also critical of Export Development Canada’s procurement processes, which the auditor general said “did not follow principles of fairness and transparency” as it chose a vendor for its loan accounting system.

The government corporation “prioritized quick implementation of program changes by relying on sole-source contracts with a single vendor without strong checks and balances in place,” the auditor said. It relied on Accenture to administer the program and used “a series of non-competitive contracts,” which ultimately resulted in the company awarding a major contract to one of its own subsidiaries.

Article content

Article content

“EDC gave too much control to the vendor over key aspects of contracts, such as the scope of work and pricing, and failed to exercise basic controls in contract management, such as monitoring that amounts paid aligned with the work performed,” the report said.

Accenture did not immediately respond to a request for comment.

The auditor general also slammed the Department of Finance and Global Affairs Canada for failing to “effectively” oversee CEBA, saying “neither department took accountability for the program, leaving many basic program elements, such as life cycle planning, either delayed or incomplete.”

Combined, the report’s findings offer further evidence of the consequences of the speedy rollout of the pandemic-era loan and compensation programs. Combined with other direct transfers to individuals, it’s increasingly clear that some spending went to business owners and workers who shouldn’t have received the funds in the first place.

The government pushed back the deadline to repay CEBA loans multiple times, ultimately requiring firms to return the funds by Jan. 18 of this year to receive the forgivable portion, or by March 28 if they had sought refinancing from a financial institution. After that, the debts converted to term loans at a five per cent rate, with full repayment due by the end of 2026.

Article content

As of the end of March, there were some $8.5 billion in CEBA loans still to be repaid, Hogan said in the report.

In 2022, the auditor general released a report showing some $4.6 billion in overpayments to ineligible recipients of the Canada Emergency Response Benefit, a program meant to support individual workers during COVID-19, as well as some some $27.4 billion in expenditures that “should be investigated further.” The spending increased the federal government’s debt levels by about two-thirds, pushing the country’s debt to GDP ratio above 40 per cent.

Business insolvencies spiked at the beginning of 2024, coinciding with the repayment deadline for the CEBA loans. Some economists have suggested the bankruptcies are evidence of so-called “zombie” firms that were propped up by the loans during the pandemic but closed after repayment.

—With assistance from Jay Zhao-Murray.

Bloomberg.com

Article content