Public Accounts Committee on Dec. 9th, 2024

[The Chair, Conservative, John Williamson]

Good morning, everyone.

I call the meeting to order.

I'm going to begin by speaking about some housekeeping issues. I know my idea of having some quick committee meetings on Dec 18 went over like a lead balloon, both on the government side as well as with opposition members. To relieve everyone, Santa's coming early. We're not going to do that. I expect we are going to recess Parliament on Tuesday, so there won't be a Wednesday meeting as I had just floated and mused.

There is already a link that's gone out for Wednesday regarding line by line. The clerk and I have been unable to secure the witnesses that the subcommittee had prioritized, largely because of unavailability. That's every last one. As the subcommittee recommended, we going to use the time we have for line by line.

You'll note that, on Wednesday, we'll tackle report 7. On Monday, it is my intention—and this notice hasn't gone out yet—to pick up “Report 8: The Benefits Delivery Modernization Programme”, which is tied to it. I would like to tackle that while it's still fresh in our minds. For any other time remaining, we'll continue to go through our list. That's it for the update.

Wednesday's notice went out just before this meeting. We will get Monday's out in the next day or two, but so you know, it is my intention to have another round of line by line.

Welcome to meeting number 157 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'd like to ask all in-person participants to read the guidelines written on the updated cards on the table. This is with respect to the audio system with which you're all familiar. As a kind reminder to all those in person and online, for the safety of our interpreters, it is very important that your microphone be muted when you're not speaking.

Thank you all for your co‑operation.

Pursuant to Standing Order 108(3)(g), 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 all our witnesses from the Office of the Auditor General. We have Karen Hogan, Auditor General of Canada; Andrew Hayes, deputy auditor general; and Mélanie Cabana, principal.

It's nice to have you all back again so soon.

From the Department of Finance, we have Chris Forbes, deputy minister; and Julien Brazeau, associate assistant deputy minister, financial sector policy branch.

Thanks for coming in.

Ms. Hogan, you have the floor for any opening comments you might or might not have. I know we just had you in, of course.

The floor is yours for up to five minutes if you would like.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

I have a point of order, Chair.

I believe that my colleague, Mr. Erskine-Smith, is unable to get into the meeting. I want to make sure that he has access.

[The Chair, Conservative, John Williamson]

The clerk is working on that. Thank you.

It is a member's privilege to join us either in person or remotely. Mr. Nater, you are aware of that.

Ms. Khalid, I appreciate that. If it is going to be an issue we can't resolve, I would ask the Liberal whip to make preparations to replace Mr. Erskine-Smith.

Ms. Hogan, you have the floor for up to five minutes if you'd like.

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

Mr. Chair, I am pleased to be here today to talk about our report on the Canada emergency business account program, which was tabled in the House of Commons on December 2.

As you've mentioned, I'm accompanied by Andrew Hayes, deputy auditor general, and Mélanie Cabana, who's the senior principal responsible for the audit.

Since I gave an overview of my report when I appeared before this committee last week, I will not be making a statement today, but I will be happy to answer any questions committee members may have.

Thank you very much.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Forbes, you have five minutes to comment.

[Chris Forbes, Deputy Minister, Department of Finance]

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.

[The Chair, Conservative, John Williamson]

Thank you very much.

I'll begin our first round now. Our first round consists of four members with six minutes each.

Mr. McCauley, you have the floor, please.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thanks, Chair.

Witnesses, thanks for being with us today.

Welcome back, AG Hogan, Mr. Hayes and Ms. Cabana.

I have a quick question for you, AG Hogan. I'm looking at a press release by Deputy Prime Minister Chrystia Freeland, who of course is also the Minister of Finance, and by the Minister of Small Business, Minister Valdez, which says that your report “[doesn't] properly acknowledge that CEBA was designed and delivered during a global pandemic.”

I recall a previous report about COVID benefits and the lacklustre oversight on them. Do you think a pandemic is an excuse not to provide proper oversight or proper guardrails around the spending of taxpayers' dollars as the government is insisting here?

[Karen Hogan]

I've been asked this question a few times since we released the report. I very much stand by the fact that I believe our report is quite balanced. It does definitely talk about the pandemic. It recognizes the situation in which the program was rolled out. It acknowledges the rigorous analysis that the Department of Finance did to develop the policy and to make recommendations around the report.

I have said it about other programs, and I'll say it again. Even if there was a pandemic, there was an expected level of due diligence and monitoring of expenses, which I think everyone would expect.

I acknowledged that at the beginning. By going non-competitive and by doing things quickly, the objective was to quickly get funds out and that was achieved. However, as the program kept moving on, there was the need to change that. I've held that view for every single COVID program that we have looked at.

[Kelly McCauley, Conservative, Edmonton West, AB]

Thank you.

Mr. Forbes, you intimated the same argument that the finance minister stated, that it was COVID and that it had to be pushed out the door quickly. What is the acceptable level of fraud to be committed against a taxpayer by the government if we're stating that a lot of dollars went out the door because it was COVID and it had to be done fast, but look how many businesses it saved. There seems to be this attitude that theft is okay and that fraud is okay because it was an emergency, and look how much money we got out the door anyway.

[Chris Forbes]

Thank you for the question.

I don't think that we think any level of fraud or theft is acceptable. I think the point we're making—

[Kelly McCauley, Conservative, Edmonton West, AB]

That's right, and I would agree. Why, then, do we have your department putting out a press release saying that the AG didn't appreciate, at the time, the difficulties?

[Chris Forbes]

I think our—

[Kelly McCauley, Conservative, Edmonton West, AB]

All the push-back we get from the government is that those were unprecedented times, and it had to put the money out the door as soon as possible, and look how successful.... You, yourself, stated how successful the program was. However, we have all of this money stolen from taxpayers and have money being sole-sourced, possibly in a fraudulent way, through Accenture, but it just seems to be that it's acceptable because it was an emergency.

[Chris Forbes]

Thank you for the question.

I disagree with the idea that we'd treat fraud or not collecting amounts owed as things that we can just wave away. Indeed, as I said, the Auditor General made a number of recommendations around improving efforts to collect from ineligible or other accounts that were outstanding. We agree that we have to do.... These are taxpayer dollars, as you said, and these are amounts that we intend to go after.

[Kelly McCauley, Conservative, Edmonton West, AB]

Did you read the December 2 statement?

[Chris Forbes]

I've read it. I don't have it in front of me right now.

[Kelly McCauley, Conservative, Edmonton West, AB]

There are eight paragraphs. There's not one word about protecting taxpayers' money, about preventing fraud or even about claiming it back. I just find it very concerning that the government has time to attack the AG, has time to throw its arm out, patting itself on the back, but there's not a single comment about the stolen money—the money fraudulently taken from taxpayers.

I'm going to get a different line of thinking or questioning. Who decided that EDC would be the department or the Crown corporation that was going to manage this program? We heard from EDC that it wasn't prepared for it, that it didn't have the capacity and that it pushed back against Finance with this information. Who decided that, yes, it would be given to it anyway?

[Chris Forbes]

The government took the decision to use EDC as a delivery vehicle.

[Kelly McCauley, Conservative, Edmonton West, AB]

Was that at Minister of Finance's level? Who? Someone would have had to because, as much as the government is a blob, someone has to.

[Chris Forbes]

It's a cabinet decision as to the delivery agent.

[Kelly McCauley, Conservative, Edmonton West, AB]

Would it come out of cabinet?

[Chris Forbes]

It's a cabinet decision as to who delivers.

[Kelly McCauley, Conservative, Edmonton West, AB]

In previous testimony on the CERB issue, we heard from CRA that CRA pushed back against some of the proposed ways that the money was going to flow out for fear of fraud and oversight issues.

Did Finance push back against this decision to give it to EDC, which was clearly not capable of rolling out this program?

[Chris Forbes]

The challenge that we faced, given the scope and the scale of this program and the timing, was that there weren't a lot of options as to how to deliver this, and we knew we had to get the support out. EDC, it was determined, was the best option. I'm not saying it was easy for EDC where they were—