Statement from EDC on the Auditor General's report on the CEBA program

Statement from Todd Winterhalt, EDC's Senior Vice-President, International Markets and Head of Communications and Public Affairs

OTTAWA, ON, Dec. 2, 2024 /CNW/ - In response to the onset of the COVID-19 pandemic, on March 27, 2020, the Government of Canada announced the creation of the Canada Emergency Business Account (CEBA) program and directed EDC to administer it on its behalf. EDC was asked to design, develop and launch the program within two weeks to respond to the urgent needs faced by Canadian small businesses—and we achieved that target, with CEBA support becoming available on April 9, 2020.

Given the scale and complexity of the program, and the urgency with which it had to be developed, it's important to take stock of what worked well and what could have been done better. The audit by the Office of the Auditor General (OAG) and its recommendations are an important element of how we strive to continuously improve. The OAG audit listed five findings pertaining to EDC, four of which we have agreed to and one to which we have partially agreed.

EDC is very proud of what we were able to accomplish on behalf of the Government of Canada for Canadian small businesses. This was a net-new program with no precedent or instruction manual to follow. The CEBA program supported more than 75% of Canada's small businesses, providing a critical lifeline during the rolling closures and difficult economic conditions. EDC, in partnership with more than 230 financial institutions, administered over $49 billion in partially forgivable loans to almost 900,000 small businesses to help keep their lights on and pivot to new ways of doing business. Now in the loan collection phase, 83% of CEBA funds have been repaid or forgiven in accordance with the program's terms (as of September 30, 2024).

The OAG recognized that EDC acted quickly to disburse the CEBA loans. On the first day that loans became available, more than $5 billion in small business loans were disbursed. This was achieved with the hard work and dedication of a team of EDC employees and specialized third-party support to develop and operate a large-scale, complex program on an urgent basis. Indeed, every decision EDC took was viewed through the lens of getting emergency relief in the hands of small businesses as quickly and efficiently as possible, and to ensure they had access to the resources and tools they needed throughout all phases of the program.

The OAG's report noted that the total spending to administer the CEBA program was $853 million as of March 31, 2024, including $575 million in fees to the 233 participating financial institutions and $248 million in EDC's administrative expenses. For context, the Government of Canada directed EDC to work in partnership with banks and credit unions across Canada to make it easier for small businesses to access the emergency loans through their regular means of banking, and each financial institution receives payment in the form of fees for their work in the program. Of the $248 million in EDC administrative expenses, $230 million was spent on third-party procurement. This third-party support was necessary to develop and operate net-new systems to evaluate applications, to fund, track and collect loans, to share information with the financial institutions, and to establish and maintain dedicated CEBA resources for applicants and loan holders such as the call centre and website.

It is important to note that while we were building and administering the CEBA program, EDC was also urgently working to support our own existing customers, Canadian exporters, whose businesses were also profoundly impacted by the pandemic. In fact, we rolled out four new pandemic support programs across our main lines of business—financing, loan guarantees, insurance and equity support—to help Canadian exporters navigate the significant economic and supply chain challenges.

Since inception, the CEBA program has undergone a significant amount of change at the direction of the Government of Canada. In response to the changing COVID-19 landscape, the Government of Canada extended the application deadline five times, expanded the eligibility criteria on five occasions to deliver support for more businesses, increased the amount of financial support available, and moved out the repayment deadline twice. As these changes were made and new needs were identified, they added to the scope and costs of administering the program.

The OAG's report found that 91% of all CEBA loans went to eligible recipients. The 9% the OAG estimates went to ineligible recipients is comprised of about 6% that EDC previously identified as ineligible and already disqualified from partial loan forgiveness, and about 3% that the OAG estimates were incorrectly assessed as eligible based on its sample. The OAG's recommendation to explore options to recoup partial loan forgiveness relates to this 3% of loans. We have partially agreed to this recommendation. In practical terms, implementing it would be challenging and may also come at significant cost as it requires assessing the full population of loans in the non-deferrable expense stream. EDC will work with Finance Canada to consider legal and cost implications, and will explore potential options to recoup the partial loan forgiveness amounts. This will inform whether EDC can—or should—move forward with the recommendation.

EDC welcomes the opportunity to continuously improve our practices, which is why we have accepted the OAG's recommendations, many of which we have already taken steps to address:

• We are strengthening our vendor performance and contract management practices for existing and future CEBA contracts. By the end of 2024, we will have put in place process enhancements that address all of the OAG's findings. By the end of March 2025, these process enhancements will also be added to a new vendor performance tool.
• Regarding the CEBA program data, we are working with our third-party provider to ensure EDC will continue to maintain its data ownership and access rights upon completion of the program.
• We are working closely with the participating financial institutions to monitor and support their timely fulfillment of data and reporting obligations for CEBA.
• We're making sure we're sharing our most recent data with the Canada Revenue Agency (CRA) in a timely fashion, and will work with both CRA and Finance Canada to implement meaningful key performance measures for defaulted loans.

Please see our specific responses to the OAG's recommendations contained in the report for more information.

About EDC 

Export Development Canada (EDC) is a financial Crown corporation dedicated to helping Canadian businesses make an impact at home and abroad. EDC has the financial products and knowledge Canadian companies need to confidently enter new markets, reduce financial risk and grow their business as they go from local to global. Together, EDC and Canadian companies are building a more prosperous, stronger and sustainable economy for all Canadians. For more information and to learn how we can help your company, call us at 1-800-229-0575 or visit www.edc.ca. 

SOURCE Export Development Canada