Thank you, Mr. Chair.
I'm here with my colleague Julien Brazeau. We thank the committee for the invitation to speak today on the audit of the Canada Emergency Business Account.
I would like to thank the Auditor General and her team for her work on this file. They worked closely with our team as they put the audit together.
Before discussing the specific recommendations, I would first like to note that the context in which this unprecedented program was delivered, and the impact it had on the Canadian economy are not detailed in the Auditor General's report. The program made an important contribution to ensuring the resilience of the Canadian economy during the pandemic and its aftermath.
In the spring of 2020, the government quickly set up this program, the objective of which was to ensure that Canadian small and medium-sized businesses could survive the pandemic.
No government department was in a position to deliver a program of this size and scale. Export Development Canada was selected given its expertise in loan delivery and administration, as well as the possibility of using the Canada Account to fund CEBA transactions.
At launch, the economic situation was highly uncertain. As more became known and in response to the evolving pandemic and needs of businesses during this time, the program was quickly expanded and refined during 2020.
For instance, after stakeholders such as indigenous groups flagged that not all businesses use business accounts, the requirement for a business account was removed. After agriculture groups, among others, flagged that some businesses did not have significant payroll expenses but did have other non-deferrable expenses, the non-deferrable expense stream was created. After groups like the Canadian Federation of Independent Business highlighted the need for additional support, the amount of CEBA loans available expanded from $40,000 to $60.000.
An important point is the timeliness of the support delivered under the CEBA program. Business insolvencies, particularly for small businesses, were dramatically reduced during the pandemic, a reduction of nearly 25% in 2020 and a further 11% in 2021. Over 55% of CEBA loan-holders reported that the amount received from the CEBA was necessary to maintain their operations during the pandemic.
It is also positive that over 80% of loan-holders fully repaid their loan by March 2024 and received partial loan forgiveness. Repayments have continued, and the current outstanding balance has dropped from $8.5 billion at the end of March to just over $8 billion at the end of November, even though we still have another two years until the final repayment deadline.
In its report, the Office of the Auditor General provided Finance Canada with four recommendations. Three of them deal with improving collection efforts from both eligible and ineligible recipients, and I would note that we strongly support those recommendations on increasing our efforts or ensuring that we make good efforts to collect on owed funds, including from ineligible loan-holders.
We did, however, disagree with one of the recommendations, which was that the Department of Finance Canada address the accountability and oversight gaps for the CEBA program, including the oversight of administrative expenses. I would note that we had multiple exchanges with the Auditor General and her office over the course of the audit on this very point, as we wished to support the work. I think we came to some agreement on some of the root causes, but we couldn't find agreement on the recommendation itself.
The Auditor General's report did raise important questions about the current oversight and accountability mechanisms around the Canada account and whether they are well suited for the management of a large government program like the CEBA program. We also do agree that there are likely opportunities to improve the oversight of programs like the CEBA program.
That being said, we had to disagree with the recommendation that we “should address the accountability and oversight gaps for the [CEBA] program, including oversight of administrative expenditures that are paid”. We note that EDC, as the program administrator, was responsible for decisions regarding administrative expenditures. The Department of Finance Canada doesn't have the legislative authority to evaluate or provide direction on these expenditures and, therefore, can't agree to the recommendation.
Again, I want to reiterate that the program was delivered in unusual circumstances. We think it did a great job in supporting small and medium-sized businesses throughout the pandemic.
We're happy to take any questions from the committee on the audit or on the program.