Federal auditor says pandemic loan program lacked control of contract spending | CBC News

The federal government’s pandemic-era loan program for small businesses faced a number of contracting issues due to a lack of oversight, Canada’s auditor general has found.

The Canada Emergency Business Account (CEBA) was introduced at the height of the pandemic to help out small businesses forced to close or limit their operations due to public health measures. The program offered interest-free loans backed by the federal government. A portion of the loan would be forgiven if it was repaid by a certain deadline.

A report from Canada’s auditor general released Monday says the program was able to quickly provide loans to struggling businesses and that a vast majority of the funds went to eligible businesses. But the audit found “significant weakness” in the contract management of the program.

Export Development Canada (EDC), the Crown corporation responsible for administering the loan program, heavily relied on sole-source contracts with one contractor to deliver the program.

More than 90 per cent of the $230 million in administrative expenses was paid to Accenture, a professional services and IT company, based on sole-source contracts, the report said.

EDC flagged early on in the process that it didn’t have the capacity to administer the program on its own and would need to seek outside help, the report noted. But the Crown corporation “outsourced many key aspects of the management of the CEBA program without strong checks and balances in place,” the report said.

Specifically, EDC allowed Accenture to determine the scope and prices in its contracts with little pushback.

Company picked its own subsidiary for contract

The audit found that Accenture was tasked with running an informal selection process to identify a vendor that would run an accounting system to track and monitor loans and collections. Accenture ultimately recommended one of its own subsidiaries for the $36-million contract, despite other vendors meeting the technical requirements for this aspect of the program. Accenture’s recommendation was accepted by EDC, the report said.

“In our view, this was a conflict of interest that EDC did not manage. In addition, we note that Accenture was compensated to run a process in which it ultimately won the contract. These practices do not align with EDC’s procurement principles of fairness and transparency,” the report said.

Issues with potentially continuing to rely on Accenture for administration of the program were identified as EDC began to consider how to start collecting defaulted loans. EDC began to formulate a competitive process for the administration of this aspect of the CEBA program.

But “persistent delays in planning for this phase by the Department of Finance Canada and lack of clarity about roles and responsibilities for the collection of defaulted loans” resulted in EDC abandoning its competitive process and ultimately relied on Accenture for this aspect of the program, the report said.

The audit found that 91 per cent of CEBA recipients were eligible for the loans they received. But roughly $3.5 billion in loans still went to ineligible applicants.

The auditor general found that eligibility verification under the initial requirements — known as the payroll stream — was largely successful and accurate. But the report identified issues with eligibility under an expanded set of requirements that were introduced later in the program.

EDC found 30 ineligible recipients under this expanded stream, which was based on non-deferrable expenses such as rent, as opposed to a businesses payroll. But the auditor general estimates that there could be as many as 26,000 applicants that didn’t qualify under these requirements.

The report said EDC approved some of the loans under the non-deferrable expense stream based on recommendations from Accenture, “even though documentation clearly indicated ineligibility or basic information was missing.”

Some of the documents that were accepted lacked a business name or included expenses that fell outside of the eligibility period.