Public Accounts Committee on Dec. 4th, 2024

[The Chair, Conservative, John Williamson]

This meeting is called to order.

Hello, everyone.

Welcome to meeting number 156 of the House of Commons Standing Committee on Public Accounts.

Today’s meeting is taking place in a hybrid format, pursuant to the Standing Orders. Members are attending in person in the room and remotely using the Zoom application.

Before we begin, I would ask all in-person participants to read the guidelines written on the updated cards on the table. These measures are in place to help prevent audio and feedback incidents and protect the health and safety of all participants, including, and especially, the interpreters. I kindly remind all those in person and online that, for the safety of our interpreters, it is very important that your microphone is muted when you are not speaking.

Thank you all for your cooperation.

Pursuant to Standing Order 108(3), the committee is resuming consideration of the Auditor General of Canada's Report 8, entitled “Canada Emergency Business Account“, from Reports 8 to 12, referred to the committee on Monday, December 2, 2024.

I would like to welcome our witnesses, some of whom are with us in person and some of whom are joining us remotely.

From the Office of the Auditor General, we have Karen Hogan, Auditor General of Canada.

It's nice to see you and members of your team again.

We have Andrew Hayes, deputy auditor general; and Mélanie Cabana, principal.

Thank you all for coming in.

From Export Development Canada, joining us remotely, we have Mairead Lavery, president and chief executive officer.

To you and all of your team members, thank you for making yourselves available today.

We have Mr. Scott Moore, executive vice-president, finance, and chief financial officer; and Todd Winterhalt, senior vice-president, international markets, and head of communications and public affairs.

We'll begin with opening remarks from our two groups of witnesses.

Ms. Hogan, you have the floor, please.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Thank you, Mr. Chair.

I am pleased to be here today to discuss my report on the Canada Emergency Business Account program, or CEBA, which was tabled in the House of Commons on Monday.

I would like to begin by acknowledging that we are on the traditional unceded territory of the Algonquin Anishinabe people.

I am accompanied today by Andrew Hayes, Deputy Auditor General, and Mélanie Cabana, the principal who was responsible for this audit.

The Canada Emergency Business Account program was put in place during the COVID‑19 pandemic to help small Canadian businesses cover expenses they could not defer.

We found that Export Development Canada, EDC, acted quickly to provide $49.1 billion in loans to help almost 900,000 small businesses across Canada. However, the program was not managed with due regard for value for money.

We found significant weaknesses in EDC’s contract management. It relied on a single vendor, Accenture, to deliver the program. The non-competitive contracts awarded to Accenture represented 92% of the total value of $342 million in contracts related to the CEBA program.

EDC gave too much control to Accenture over key aspects of contracts, such as the scope of work and pricing. EDC failed to exercise basic controls in contract management, such as monitoring whether amounts paid aligned with the work performed. Since ongoing program delivery uses Accenture’s proprietary IT systems, EDC will have to rely on these non‑competitive contracts until at least 2028.

We also found that neither the Department of Finance nor Global Affairs Canada provided effective oversight of value for money. There was an accountability void that resulted in basic program elements, including measuring outcomes, being delayed or not completed. Finance Canada did not challenge EDC's administrative spending, or provide an overall spending limit. As of March 31, 2024, that spending totalled $853 million.

While 91% of loans were issued to eligible businesses, we estimated that about $3.5 billion went to ineligible recipients. I am concerned that EDC only partially agreed with our recommendation that it should carry out additional work to identify all ineligible recipients and recover the amounts involved.

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. Value for money will be further compromised without better monitoring and improved plans to recover defaulted loans.

This concludes my opening statement.

We would be pleased to answer any questions the committee may have.

[The Chair, Conservative, John Williamson]

Thanks to you as well.

Next, from Export Development Canada, we have Ms. Lavery. I assume it's you. If so, you have the floor for five minutes, or you're welcome to designate anyone on your team.

Thank you.

[Mairead Lavery, President and Chief Executive Officer, Export Development Canada]

Thank you, Mr. Chair and members of the committee, for inviting me here today.

Thank you for the opportunity to contribute to the committee's study of the Auditor General's Report regarding the performance of the Canada emergency business account program. I would like to begin by highlighting a few important notes.

EDC worked collaboratively with the Office of the Auditor General. We accept the recommendations of the audit. We are focused on improving our controls and reporting and have established a clear process to collect on all loans, including amounts owing from ineligible recipients. This process is under way.

For those who may be less familiar, EDC is a Crown corporation that operates under a mandate to support and grow Canada's export trade. We help mitigate risks for thousands of Canadian exporters and investors, as well as for international buyers, through our suite of financing solutions, insurance products, knowledge products and connection services. As the committee may know, EDC has been consistently profitable throughout its 80-year history.

Before we begin discussing the Government of Canada's emergency business account, I would first like to say EDC understands the importance of taking stock of what worked well and what could have been better. Let's recall that when this program was announced, Canadians were boarding repatriation flights, our borders were closed to non-essential travel, and provinces were declaring states of emergency. Schools, offices and businesses were forced to shutter, and Canada's unemployment rate was on its way to a record high.

On March 27, the Government of Canada announced the creation of the Canada emergency business account program, directing EDC to administer it under the Canada Account. It expanded EDC's mandate so we could work directly with domestic businesses. Through this program, eligible small businesses and not-for-profits were provided up to $60,000 in partially forgivable loans. For many business owners, those loans helped them keep their lights on, pivot to new ways of doing business or, in some cases, avoid bankruptcy.

Acting as the program administrator for the emergency business account, we had to essentially build a bank within EDC, developing complex infrastructure that did not exist. We created systems capable of funding, tracking and collecting 900,000 loans. We created processes that allowed us to share information with nearly every bank and credit union in the country.

The program began accepting applications on April 9, less than two weeks after the government's announcement. When the federal government announced the program, EDC was already at capacity, supporting customers and delivering other relief programs specifically for Canadian exporters. Undertaking this program required us to mobilize both internal and external resources quickly, so that we could pivot to supporting non-exporting small Canadian businesses and not-for-profits.

These businesses employ 9.7 million people in Canada. We know they form the backbone of the economy, and we know they are often the most vulnerable in times of crisis. We understood that this program was mission-critical, but we would not have been able to deliver on what the government asked of us without specialized, third party support. In the end, over 21 months, we partnered with more than 230 financial institutions to deliver almost 900,000 loans, totalling $49.1 billion in emergency support, to more than 75% of all Canadian small businesses from coast to coast.

For context, in a typical year, EDC extends about 300 loans. While processing applications and delivering these emergency loans to businesses, we were also adapting and finding solutions to the government's decisions to expand eligibility, increase loan amounts and extend deadlines. With each change, we worked to deliver pandemic relief as quickly and efficiently as possible, and we succeeded at a reasonable cost of approximately $300 per loan.

Still, there is always an opportunity to improve our practices, especially with a “first of kind” program launched in an unprecedented time, and this audit offers important recommendations for how we can do so. We are working to implement all of the Auditor General's recommendations.

EDC has already identified some similar areas for improvement and is implementing an action plan. We anticipate that a number of improvements will be in place before the end of this year.

Thank you again for inviting us to contribute to your study.

I look forward to the discussion and the opportunity to offer more information on EDC's role.

Thank you.

[The Chair, Conservative, John Williamson]

We thank you as well.

We'll begin our first round, which will consist of four members for six minutes each.

Mr. Vis, I understand you'll be leading us off. You have the floor, please.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair.

Thank you to our witnesses today.

Ms. Lavery, you stated at the end of your testimony that you are currently looking at areas for improvement.

There was $3.5 billion of taxpayer money improperly distributed to ineligible businesses. Who should be fired for making such a big mistake?

[Mairead Lavery]

This program was built in an unprecedented time of the pandemic, and the deliverable was to deliver at speed and to introduce liquidity into the economy for the benefit of small business. Over 900,000 businesses were supported at a time when they were struggling, when they were facing bankruptcy and when they were challenged—in fact, very challenged—not only to support their employees and meet their costs, but also to support their families, given that many of these organizations are entrepreneurs.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you.

The Auditor General is here today in person, I might add, and at our meeting this week, the Auditor General confirmed that the pandemic is not an excuse for improper program delivery or operationalization, so again I'll ask who should be fired for wasting $3.5 billion of taxpayer money. Is it you or is it someone else at EDC who should be held responsible for wasting this much money?

[Mairead Lavery]

This was a complex program that provided support to over 900,000 small businesses across Canada. It was provided in an unprecedented time, and it was a very complex program that necessitated a number of changes. The application criteria were changed five times. The eligibility criteria were changed five times. In fact, the actual loan amount was adjusted as well, as was the repayment deadline. This meant that this program was incredibly important.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Ms. Lavery, I believe that 91% or 92% of all contracts went to a single third party, Accenture. In other words, the majority of this complex work that was given to EDC to conduct on behalf of Canadians was given to a third party to do.

The Auditor General outlined that you had multiple opportunities to undertake a competitive bidding process to ensure accountability of taxpayer money and that there was value for money, yet on numerous occasions you did not exercise that authority as a CEO to let other companies bid competitively on the work being undertaken on behalf of Canadians. Why not?

[Mairead Lavery]

That's correct. We did go with a sole source to Accenture on this program.

The reason for that was, again, to ensure that this program was delivered at speed to provide $49 billion to small businesses across Canada. That necessitated our moving with a vendor that could provide that support in a very fast time frame and work with more than 233 financial institutions across Canada. We did look at RFPing it and would have desired to RFP that. The number of program changes and the asks of us did not allow that to happen.

Since then, we have changed our processes.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Ms. Lavery, there are a lot of Canadians who are struggling right now. The fact that you came to this committee.... You've read the Auditor General's report, and you cannot point out one single person—maybe it's you, or maybe it's someone at Accenture—who should be held accountable for making these decisions.

What's even more distressing is that you are in contract with Accenture until 2028, and Accenture is effectively auditing its own work and conducting further business on behalf of Canadians. Is that appropriate, and is that even in line with the conflict of interest guidelines that EDC is subject to?

[Mairead Lavery]

We are in line with our own guidelines with respect to procurement, and I will ask Mr. Moore, our chief financial officer, to describe the contracting process at EDC.

[Scott Moore, Executive Vice-President, Finance and Chief Financial Officer, Export Development Canada]

We have a preference for competitive procurement at EDC. In this case, as Ms. Lavery explained, the timing of the original sole-sourcing with Accenture was such that we did not have time, and given all of the different changes in the program over almost a two-year period, we were continuing to work under that arrangement.

As we got into 2021 and looked at the collections phase, which is a very important phase—

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Mr. Moore, is it not problematic that EDC did not do a better job of ensuring value for money for taxpayer dollars by going through a competitive bidding process?

Are Canadians asking too much when they want value for their money?

Why can't you guys give me a straight answer?

[Scott Moore]

It's important to look at what Accenture delivered as part of this program.

As our vendor, they were critical to developing the technology in the process to receive applications from 233 financial institutions. They helped us deliver on an eligibility program. They helped us deliver technology to receive two million documents. They helped us build a loan accounting system to manage over 100,000 loans. We developed a call centre that received 450,000 calls over the life of the program, and we did it for $300 per loan.

[The Chair, Conservative, John Williamson]

Thank you.

That is the time. We're moving now to Mr. Drouin, who is joining us virtually.

Mr. Drouin, you have the floor for six minutes.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Thank you, Mr. Chair.

My first question will be for EDC.

Now, of course, we know that it was a sole-sourced contract. My question is, who initiated the conversation? Was it an unsolicited proposal by Accenture? Did similar companies submit unsolicited proposals to offer similar services, as Accenture was doing?

It's just so I understand the relationship between EDC and Accenture. Was Accenture already a service provider with EDC, and is that why you chose Accenture right away?

[Mairead Lavery]

Accenture was an existing service provider for which EDC had run an RFP process back in 2017. They were very familiar with the processes and systems at EDC. Given the speed and efficiency with which this program was established and needed to be available to distribute the funds to the small businesses that were facing bankruptcy and an inability to pay their bills, we went with someone who, we felt, could deliver that in a timely manner.

As well, they had significant financial service experience in working with Canadian financial institutions. This program ultimately resulted in agreements with 233 financial institutions right across Canada, and that experience was invaluable.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

Yes, I'm not going to be the MP who's going to give you heat because you chose to sole-source. I've had 10 years' experience in the private sector, working with IT firms, and the saying in Ottawa was always, “There's no such thing as a three-month government sale.”

I know that you guys were in a hurry, and we were all getting pressure back home, once the announcement was made, to get this going. However, where I do have some issues, and I think the Auditor General is right, is with billing practices. Are there any plans for EDC to recoup some of those costs that were.... For instance, we're looking at call centres that were billing for hours that were over the actual opening hours of those said call centres. Now that EDC knows the Auditor General has done a report, are you guys looking at this?

Regardless of what the contract said, I'm assuming that EDC would want to recoup some of those costs, if a centre, for whatever reason, overbilled. Are there any plans within EDC to recoup some of those costs?

[Mairead Lavery]

I will pass this to Mr. Moore to explain the contracting process, as well as the controls we have to ensure that we paid only for services received.

[Scott Moore]

Thank you.

The Auditor General did identify opportunities for us to improve our controls in and around billing and contracting, and we have agreed to implement those recommendations. I wanted to focus on the controls that EDC did have in place, so again we'll go back to the time we were at during the pandemic.

We were very focused on outcomes as opposed to the individual activities: How do we make sure that we get $49 billion into the hands of 900,000 small businesses in Canada as soon as possible? In terms of what we were doing, we were focused on making sure those outcomes were being delivered by our vendor. That was through the form of daily huddles. It was through meetings that were happening every single day to ensure they were actually delivering what we needed. At the disbursement phase, it was to get money out the door and to do eligibility, and then later in the program it was building the collections ecosystem.

We did review the invoices that were received. We certainly have an opportunity around documentation and around the more detailed tracking. We have made improvements in that area over time. In 2023, we added all of the time sheets into our accounts payable system that all of our approvers, me included, have access to. We've more recently added attestations around the work performed. We've more recently added all of the metrics in and around the call centre.

Specifically to your question on the call centre, it wasn't actually an overbilling issue. It was a documentation or tracking issue. A number of those resources were working on collections processes and not on the call centre, so it wasn't a question of actually billing for more hours than they worked. It was the type of work that they were doing while they were ensuring we had coverage for a call centre that needed to be available to handle questions that we continued to receive and that we do continue to receive from loanholders.

[Francis Drouin, Liberal, Glengarry—Prescott—Russell, ON]

I'm sure that all of you have read the Auditor General's report. I'm going to focus on recommendation 8.24, which is that EDC, along with Finance, should “consider appropriate actions, including legal implications and options to recoup loan forgiveness from ineligible small businesses.” Again, on the recommendation, EDC said, “Partially agreed.” Finance said, “We fully agree.”

What's the rationale for EDC's response in terms of “partially agreed”? Do you not see that from a legal perspective, if you have to recoup some of...? If they default, are you not in a legal position to do so? Or is it because you just don't believe that you have a strong legal case, given the fact that you had approved? You had deemed those eligible small businesses, even though they were ineligible based on the criteria...but you accepted it at that time.

[Mairead Lavery]

Yes, just to be clear, we are working to collect all loans in this category of “ineligible”. That is actually under way at the minute.

We agree with the Auditor General on working with Finance Canada to consider next steps. That is a very important point. This is a program that we were directed by Finance Canada to perform, and, as such, we will need policy direction as to how they want to deal with the loan forgiveness. That is what's related to our comment on partially agreed. It was really waiting on direction from the Department of Finance.

[The Chair, Conservative, John Williamson]

Thank you, Ms. Lavery.

Ms. Sinclair-Desgagné, you have the floor for six minutes.