Federal auditor says pandemic loan program lacked control over contract spending

The federal government’s pandemic-era loan program for small businesses, known as the Canada Emergency Business Account (CEBA), was introduced to provide financial assistance to struggling businesses during the height of the pandemic. The program offered interest-free loans backed by the government, with a portion of the loan forgiven if repaid by a certain deadline.

However, a recent report from Canada’s auditor general highlighted significant weaknesses in the program’s management of contracts, leading to issues with oversight and accountability. The audit found that Export Development Canada (EDC), the Crown corporation responsible for administering the program, heavily relied on sole-source contracts with Accenture, a professional services and IT company, for the majority of the program’s administrative expenses.

The report raised concerns about EDC’s lack of oversight in allowing Accenture to determine contract scope and prices without adequate checks and balances in place. Auditor General Karen Hogan expressed disappointment in the lack of departmental oversight and questioned the decision to outsource key aspects of the program to a single vendor.

One of the key issues identified in the audit was the lack of proper monitoring of costs related to the program. For example, a call center set up by Accenture saw costs balloon from $3 million to over $23 million, with the cost per call increasing significantly. EDC failed to verify or analyze the costs in invoices, leading to inefficient use of resources.

Additionally, the audit found that Accenture recommended one of its own subsidiaries for a $36-million contract to run an accounting system for the program, raising concerns about conflicts of interest and transparency in the procurement process. Despite initial plans for a competitive process for collecting defaulted loans, EDC ultimately relied on Accenture due to delays and lack of clarity in roles and responsibilities.

While the CEBA program successfully provided loans to eligible businesses, the audit also discovered that billions of dollars went to ineligible applicants. EDC approved loans based on recommendations from Accenture, even when documentation clearly indicated ineligibility or missing information. The report estimated that as many as 26,000 applicants may not have qualified under the expanded eligibility requirements.

Going forward, the auditor general made several recommendations for EDC to improve its contracting process and eligibility checks. EDC agreed to implement these recommendations but only partly agreed to further eligibility checks for businesses under the non-deferrable expense requirements. Hogan expressed concern about the government’s reluctance to recover funds from ineligible applicants and emphasized the need for transparency in the process.

The audit report underscores the importance of strong oversight and accountability in government programs, particularly during times of crisis. Moving forward, it will be essential for EDC and other government agencies to prioritize transparency, accountability, and effective contract management to ensure that taxpayer funds are used efficiently and effectively.