Auditor General Report Exposes Mismanagement of Billions in Pandemic Loans

A scathing report by Canada’s Auditor General has unveiled significant management failures in the federal government’s $49.1 billion Canada Emergency Business Account (CEBA) program, which was created to provide critical financial relief to small businesses during the COVID-19 pandemic. The report found that while loans were distributed swiftly, the program’s lack of oversight and poor contract management have placed billions of taxpayer dollars at risk.

Auditor General Karen Hogan highlighted extensive reliance on sole-source contracts, inadequate controls, and weak departmental oversight, leading to what she described as compromised “value for money.”

“I would expect a basic level of due diligence and monitoring of expenditures regardless of whether a pandemic exists,” Hogan told MPs Monday, emphasizing that departments failed to oversee the program properly.

The program, administered by Export Development Canada (EDC), delivered loans to 898,000 businesses across Canada, aiming to help them cover rent, payroll, and other essential expenses during lockdowns. Of the total funds disbursed, $3.5 billion went to ineligible applicants, according to the report, and nearly $8.5 billion remains outstanding.

Contracting Without Oversight

A core issue identified in the audit was EDC’s reliance on the professional services firm Accenture to deliver the program. Accenture received 92 percent of the $342 million allocated for administration through non-competitive contracts. The report detailed how Accenture was given control over contract scope and pricing with little pushback from EDC.

In one instance, Accenture oversaw a vendor selection process for an accounting system, ultimately awarding the $36 million contract to one of its own subsidiaries. Hogan criticized the process as a conflict of interest that was not managed.

Additionally, an EDC-commissioned call centre ballooned in cost from an initial $3 million to over $23 million by 2024, with the average cost per call skyrocketing from $31 in 2020 to $589 in 2023. Hogan’s report revealed EDC paid invoices for the centre without verifying time sheets or questioning discrepancies.

Lack of Departmental Oversight

Hogan also criticized the Department of Finance Canada and Global Affairs Canada for their failure to oversee EDC’s administration of the program. Both departments, she noted, failed to define their roles or provide oversight for EDC’s contracting and expenditures.

“I would have expected better oversight by the Department of Finance and Global Affairs Canada,” said Hogan.

While the government touted the program’s rapid roll-out as a lifeline for small businesses, it admitted to gaps in planning and oversight. Finance Minister Chrystia Freeland and Small Business Minister Rechie Valdez defended the program, citing the circumstances of the pandemic.

“CEBA saved businesses from bankruptcy,” the ministers said in a joint statement.

“While the Auditor General offers useful recommendations, this report fails to acknowledge the historic scale and speed at which this emergency support was delivered.”

Ineligible Applicants

The audit found that the program’s payroll stream was mostly successful in verifying eligibility, but problems emerged in the expanded non-deferrable expenses stream. EDC approved loans for applicants whose documentation clearly indicated ineligibility or lacked basic information. As of March 2024, over $1 billion in loans to ineligible recipients remained unpaid.

Hogan urged EDC to strengthen eligibility checks and pursue recovery where possible, but EDC has pushed back, citing potential costs and legal complexities.

“Implementing this would be challenging and may also come at significant cost,” EDC told CBC.

Looking Ahead

The federal government will remain reliant on Accenture for program administration until at least 2028, raising concerns about the long-term cost and accountability of the program. Hogan warned that unless oversight improves, the ongoing repayment and collection process—set to last until 2032—could result in further waste of public funds.

“Value for money will be further compromised without better monitoring and improved plans to recover defaulted loans,” Hogan concluded.