Canada’s auditor general has revealed that the federal government’s pandemic-era small business lending program faced a number of contractual problems due to lack of oversight.
The Canada Emergency Business Account (CEBA) was introduced at the height of the pandemic to support small and medium-sized businesses that were forced to close or limit operations due to public health measures. This program provided interest-free loans backed by the federal government. A portion of the loan can be forgiven if it is repaid by a certain deadline.
The program was able to quickly provide loans to distressed businesses, with the majority of the funds going to eligible businesses, according to a report released Monday by the Auditor General of Canada. But the audit found “significant weaknesses” in the program’s contract management.
Export Development Canada (EDC), the Crown corporation responsible for administering the financing program, relied heavily on a single contract with a single contractor to deliver the program.
More than 90% of the $230 million in management fees was paid to Accenture, a professional services and IT company, under an exclusive sourcing agreement, the report said.
EDC warned early in the process that it did not have the capacity to manage the program on its own and would need to seek outside assistance, the report said. However, the Crown corporation “outsourced many important aspects of the management of the CEBA program without putting strong checks and balances in place,” the report said.
Specifically, EDC has enabled Accenture to dictate the scope and price of contracts with little resistance.
The company selected its subsidiary for the contract
The audit found that Accenture was tasked with conducting an informal selection process to identify a vendor to run an accounting system to track and monitor loans and collections. Even though other vendors met the technical requirements for this aspect of the program, Accenture ultimately recommended one of its subsidiaries for the $36 million contract. According to the report, Accenture’s recommendations were accepted by the EDC.
“In our view, this was a conflict of interest that EDC had no control over. We also note that Accenture was paid to carry out the process that ultimately won the contract.” ‘s practices are not consistent with EDC’s procurement principles of fairness and fairness,’ the report states.
As EDC began to consider how to begin collecting on defaulted loans, it identified issues regarding its potential continued reliance on Accenture to manage the program. EDC has begun developing a competitive process to govern this aspect of the CEBA program.
However, due to “continued delays in planning this phase by the Treasury Department of Canada and a lack of clarity on roles and responsibilities in the recovery of non-performing loans,” the EDC abandoned the competitive process and ultimately decided against this aspect of the program. It became dependent on Accenture. said the report.
The audit found that 91 percent of CEBA recipients were eligible for loans. However, approximately $3.5 billion in loans are still being disbursed to ineligible applicants.
The Auditor General found that the eligibility verification based on the initial requirement, known as the payroll stream, was largely successful and accurate. However, the report identified issues with eligibility under an expanded set of requirements introduced later in the program.
EDC found 30 ineligible recipients under the expanded system, which is based on non-deferrable expenses such as rent, rather than a company’s payroll. However, the Board of Auditors estimates that there may be up to 26,000 applicants who do not meet these requirements.
Based on Accenture’s recommendation, the EDC granted a loan based on non-deferrable expenses “despite the documentation clearly showing ineligibility and missing basic information,” the report said. The department is said to have been approved.
Some of the accepted documents did not include business names or included expenses outside the eligibility period.
