Public Accounts Committee on April 7th, 2022

[Manon Brassard]

I agree with what Chris Padfield said. We are consulting a lot more.

[Dylan Jones]

I would just add that there are things, on a practical level.... A good example here is the definition of tourism. It seems obvious that we should be defining “tourism” in the same way, but it's actually stunningly difficult. Is a restaurant on the border of a tourist area a tourism business or not?

Depending on what definition you use, how would you assess it? The next question then is, are you [Technical difficulty—Editor]? What proof are you using and what burdens are you creating? This stuff [Technical difficulty—Editor].

[The Vice-Chair, Liberal, Jean Yip]

Mr. Jones, I believe you may have some technical issues on your end.

Thank you very much.

We now will move on to Monsieur Lemire for six minutes.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

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 Minister Joly, 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.

[Karen Hogan]

I agree with you. The regional development agencies were created precisely because we recognized that the regions had different realities and priorities.

Here, however, we're not talking about a program that existed before the pandemic and had to be adapted to take that situation into account. This is a program that was created during the pandemic precisely to respond to those specific circumstances. It's a national program with very clear national criteria. Accordingly, the expectation was that the eligibility criteria would be applied consistently across the country and then the program would be adapted to take into account the priorities and particular characteristics of each region. What is at issue here is the eligibility to a national program that should have been consistent all across Canada. That was actually the objective when the program was designed.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you very much.

I would also like to hear what Ms. Brassard has to say about this.

Northern Ontario is more or less Abitibi-Témiscamingue's neighbour, so our regional media often report news about FedNor and its involvement in the region. The autonomy you now have makes it possible for you to take leadership and make your mark in your region.

I feel that one of the challenges in Abitibi‑Témiscamingue is that there doesn't seem to be any money allocated to programs for businesses that, for instance, want to go into secondary or tertiary processing in our area, which is a region heavy in natural resources. I have the impression that you have a bit more flexibility at FedNor to invest in those programs.

What is your view on the flexibility of regional funds? How can that become a lever for a given area?

[Manon Brassard]

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.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Ms. Brassard. I think I will get back to you soon, if you wouldn't mind.

[The Vice-Chair, Liberal, Jean Yip]

Thank you, Mr. Lemire.

We'll now move on to Mr. Desjarlais for six minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

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.

[Karen Hogan]

I'm not sure that I can explain why Mr. Jones made different statements. What I can do is explain to you what we found in our audit.

In our audit here, we were able to highlight for you, with this graph, the type of information that was gathered, typically through self-identification application forms. We looked at this information as we were auditing how the regional development agencies applied a GBA+ lens to the program. What we found was that while they gathered this information, it was rarely used to inform decision-making. All I can provide you with is the data that we had.

In some instances, western economic diversification did not gather that data, so we could not include it in the chart.

I think the rest of your questions should be directed to Mr. Jones.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

If you can, Auditor General, while I have you on this portion, did Western Economic Diversification report to the Auditor General any information related to youth in terms of their participation?

[Karen Hogan]

As I mentioned, we gathered the data that came off of the self-identification in the application forms. We did not see any information about youth, which is why it's not included in the chart.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much.

Mr. Jones, could you please tell me and my honourable colleagues why Western Diversification failed to report youth? Then I'll follow up with my second question.

[Dylan Jones]

I hope the sound is working now. Is it? Okay. Perfect.

First, I should just clarify that the final reports from proponents will be coming in this month. Everything will be in house, I think, by the end of April, so there will be better data. This audit was conducted in the life of the program, so—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

To be very clear, Mr. Jones, there are other agencies here that were able to satisfy the request of the Auditor General. I'm trying to state that there has to be consistency across the board on some of this reporting. It's not appropriate to see Western Diversification take such a lack of reporting when...we've seen the very same from northern Ontario and southern Ontario.

I can't accept that response, that you're not collecting on time. There are other agencies that are doing this work. I need to know why the agency for western diversification did not report this.

[Dylan Jones]

There will be better data as we move forward. In addition, we were facing or expecting a much higher level of volume, and indeed we had that. We had 10,000 projects, whereas other agencies were dealing with much smaller volumes.

We took an approach—I think we wouldn't do it the same way again—of having a very streamlined application process. That was not just to reduce the administrative burden on us—because we were expecting a wave, which we got—but also to reduce the burden on applicants. We went very narrow at the beginning of this program in terms of what we collected. We went too narrow; even we would say too narrow.

The other thing was that no one expected this to go on for two years. It's easy in hindsight, but we were all thinking that this was a three-month program. We needed to get it out quickly. We were going to get a wave of applications. We would have time to gather more data afterwards.

Our whole philosophy, when we funded this, was to be very lean and to help absolutely everyone. Our basic philosophy was that we were not going to ration the program. Anyone who—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

In response to that—I have limited time here—in regard to the indigenous portion, there was a reporting for 2% of indigenous funding here. Why wasn't it larger, considering there was such a demand?

[Dylan Jones]

The real issue here is that we have a ton of work to do to grow the number of indigenous-owned businesses in western Canada. Our project approval for indigenous was 2.8%. That's nowhere near the population of indigenous people in western Canada, so in a way that's disappointing, but it's also twice the rate of indigenous-owned businesses at large. Indigenous-owned businesses are about half that, proportionally, in the SME population.

The point is that we did well if you compare us against the status quo of indigenous businesses—

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

That's what I'm saying. That kind of logic is inaccurate.

[The Vice-Chair, Liberal, Jean Yip]

Thank you very much, Mr. Desjarlais. You can carry that over to the next round.

We will now move on to the second round.

Mr. Duncan, you have the floor for five minutes.

[Eric Duncan, Conservative, Stormont—Dundas—South Glengarry, ON]

Thank you, Madam Chair.

Ms. Hogan, on some of the funding distribution, there was a general amount announced for the RRRF program. Did you get any information, or do you have the information, on the formula that was used to distribute the money to the respective agencies, and then, further to that, how it was split, maybe to sub-partners or local partners? Do you have that information, or were you asked that at all?

[Karen Hogan]

During our audit, we looked at how the funding was allocated through the regional development agencies. We actually have a chart, exhibit 14.2, that gives you that layout. We noted that they looked at demographic information, but often economic factors were factored into how the allocation was done.

We saw no concerns with how the allocation was done, and hence didn't dig too much further into it.

[Eric Duncan, Conservative, Stormont—Dundas—South Glengarry, ON]

Thank you.

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?

[Chris Padfield]

The CFDCs were a really important partner for us. We gave them, in fact, $83 million out of the $500 million that came into FedDev. They moved very quickly on the ground to support 1,950 different SMEs across the region. They were a critical partner for our organization.

I think we moved very quickly across the board to get this program set up and in operation. I know everybody was eager to get things rolling, but I think we were up and rolling in a very few weeks, and the CFDCs were quickly onside to help and support. They were a critical partner across the board on this.