Office of the Auditor General (OAG) Report #14 on Regional Relief and Recovery Fund (RRAF)

A/Deputy Minister PACP Committee Appearance
Federal Economic Development Agency for Southern Ontario

Table of Contents

Opening Remarks

A/Deputy Minister Chris Padfield
Federal Economic Development Agency for Southern Ontario
Standing Committee on Public Accounts
Ottawa, Ontario
April 7th, 2022

Thank you very much, Mr. Chair. / Merci beaucoup, Monsieur le Président,

Good morning Committee Members, Ms. Hogan, Mr. Jones and Ms. Brassard.

Thank you to the Committee for the invitation. Before I begin, I'd like to acknowledge that I am participating today from Ottawa, the traditional Territory of the Anishinaabe Algonquin Nation.

I'm pleased to be here on behalf of Ms. Nancy Gardiner, as the A/President/Deputy of the Federal Economic Development Agency for Southern Ontario – or FedDev Ontario – to participate in your study of Report 14, Regional Relief and Recovery Fund (RRRF for short). I am joined today by my colleague Linda Cousineau, Vice President, Business Innovation and Community Development at FedDev Ontario.

FedDev Ontario is the regional development agency (RDA) responsible for managing the RRRF in southern Ontario.

At the outset of the pandemic, when it became clear how badly Canadian businesses and communities would be impacted by restrictions to keep Canadians safe, Canada's RDAs quickly pivoted to design and deliver the RRRF.

This fund was a critical federal tool to help businesses and organizations mitigate pandemic-related financial pressures. It also provided an important back stop to other federal business supports, such as the wage and rent subsidies, and the Canada Emergency Business Account.

We thank the Auditor General for her work and the work of her team. We are pleased to see recognition that the RRRF's design aligned with the government's objectives of helping businesses and organizations deal with the impact of the pandemic and addressed gaps not covered by other COVID-19 relief programs.

The report also acknowledged that leveraging existing experience, and systems, as well as the direction to accept greater risks, allowed RDAs to design and deploy the program within weeks of the onset of the pandemic.

Southern Ontario is a key driver of Canada's economic growth, representing more than 39 per cent of the country's GDP and employment.

The region, however, was hit hard by the pandemic. More than 1 million jobs were lost in southern Ontario by April 2020.

To provide critical support to small businesses and their employees when they needed it most, FedDev Ontario was allocated more than $500 million to deliver the RRRF in southern Ontario.

FedDev Ontario's direct delivery of RRRF provided relief to more than 1,300 businesses across the region.

We also worked with Community Futures Development Corporations (CFDCs) to provide targeted relief to more than 1,950 rural small businesses.

In addition, to maximize the program's reach and impact, we worked with regional partners to provide targeted support that reached more than 39,000 small businesses, including sectors hardest hit by the pandemic, as well as underrepresented groups that were disproportionately affected.

Overall results for the RRRF in southern Ontario show that funding was provided to businesses that needed it the most:

  • almost $160 million supporting southern Ontario's tourism businesses – surpassing the commitment to provide at least 25 per cent of RRRF funds to the hard-hit tourism sector;
  • more than $150 million supporting women owned or operated businesses;
  • $10 million supporting Indigenous businesses; and
  • more than $140 million supporting rural areas.

The Auditor General's report notes that, overall, the RRRF was successful at providing last-resort assistance to thousands of businesses and organizations affected by the COVID-19 pandemic.

Work is already underway to address each of the recommendations, and the audited RDAs developed a detailed response and action plan.

We've taken steps and continue to look for ways to better support underrepresented groups. For example, based on GBA Plus analysis, dedicated funding was set aside for Indigenous businesses under the Tourism Relief Fund. Activities that foster inclusive recovery are also being prioritized in delivery of the Jobs and Growth Fund.

We agree that it would be helpful to examine practical ways to improve transparency in the future, and when appropriate, leverage common RDA approaches to program delivery, assessment and approval.

RDAs were established to be place-based and reflective of the regions they serve. Delivery of national programs by RDAs should of course be coordinated, but also delivered in a way that is reflective of each region's unique needs and circumstances.

Harmonizing processes to accurately report on program outcomes is an area for further improvement. Lessons learned from the RRRF will inform the design of performance measurement strategies for future initiatives.

Since the spring of 2021, all new initiatives delivered by multiple RDAs have been developed to foster harmonization of program indicators and the collection of data.

Under the leadership of Minister Jaczek, FedDev Ontario will work with our RDA colleagues to take the lessons from the delivery of the RRRF during this unprecedented time to refine and improve our approaches to supporting businesses and organizations in our respective regions.

Mr. Chair, in closing, I would like to acknowledge the efforts of public servants to quickly design and deliver this program, while themselves navigating a once-in-a-generation pandemic. During an extraordinary and uncertain period, they successfully worked together to provide timely support that helped make sure that businesses could keep operating and employing Canadians.

Thank you et merci.

Summary of OAG Audit

Audit Purpose and Time Period

  • The Regional Relief and Recovery Fund (RRRF) audit examined how regional development agencies (RDAs) designed, delivered, and managed the RRRF program.
  • It was conducted as part of a suite of audits examining government spending in response to COVID-19. It covers the time period of March 15, 2020 to June 30, 2021.
  • The findings and recommendations are without attribution to specific RDAs and apply to all RDAs.

Positive Findings

  • The audit report includes positive findings from the RRRF programs, including:
    • The RRRF was successful at providing last-resort assistance to thousands of businesses and organizations affected by the COVID-19 pandemic.
    • RDAs worked together to launch the program much faster than what is usually seen in normal policy development and program implementation.
    • The program processed applications quickly.
    • RDAs were able to leverage the expertise and knowledge of the Community Futures organizations to quickly direct assistance to rural communities.
    • The program was aligned with the federal government's objective of rapidly responding to the impact of COVID-19 in order to ensure that businesses remained viable and were positioned for recovery.

Critical Findings

  • The audit report contains certain findings that could draw concern with the delivery of the program, such as:
    • Program management had weaknesses in terms of efficiency and fairness due to non-harmonized program delivery by RDAs.
    • Reported results contained inaccurate information pertaining to jobs maintained as RDAs relied on recipient attestations.
    • Uncertainty regarding contribution repayments and post payment activities.
    • A high failure rate expected for collection of amounts due to be repaid.
    • A failure to establish targeted levels of support for underrepresented groups (GBA Plus).

Recommendations

Recommendations RDA Responses
Recommendation 1: For future programs, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, Pacific Economic Development Agency of Canada, and the other regional development agencies should establish targeted levels of support for underrepresented groups and ensure that information collected is used to inform decision making.

Partially Agreed. The regional development agencies audited agree that Gender-Based Analysis Plus (GBA+) and other data needs to be collected to inform decision making on the needs of underrepresented groups for future programs.

RDAs recognize that underrepresented groups were disproportionately impacted by the pandemic. The RRRF was designed to provide funds to all small businesses unable to access adequate funding elsewhere. We agree that for every program considered, efforts are needed to help ensure that the distribution of our supports are inclusive and reflective of the populations in the context of the program objectives. In the case of the RRRF, targets for underrepresented groups could have limited the ability of the RDAs to adjust and provide support to those that needed it the most. Results for this program show that funding was provided to the businesses that needed it the most, with significant support provided to underrepresented groups.

Recommendation 2: To foster greater compliance with transfer payment policies and ensure efficiency, fairness and transparency in delivering future programs, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, Pacific Economic Development Agency of Canada, along with the other regional development agencies should:
  • Ensure a common delivery approach, assessment and approval of funding requests.
  • Ensure an open and transparent application process for all funding.

Partially Agreed. The regional development agencies audited agree that transparency was not perfectly served due to the emergency nature of the program. This was in line with guidance from the Secretary of the Treasury Board to all deputy heads to put a priority focus on achieving the intended results of the Government's response measures, and to use their sound judgment for maximum flexibility in applying Treasury Board policies and exercising authorities. We agree that it would be helpful to examine practical ways to improve transparency in the future.

The regional development agencies audited do not agree that common delivery of funding programs is appropriate in all instances. Regional development agencies were expressly established to be place-based and reflective of the region they operate in, and deliver national programs such as the RRRF in a nationally coordinated, regionally tailored fashion. Complementarity with provincial and other levels of government programs is typically more important to our clients than consistency with programs being delivered in a different context in other parts of the country.

Recommendation 3: For future funding programs, Innovation, Science and Economic Development Canada, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, Pacific Economic Development Agency of Canada, as well as other regional development agencies should review and harmonize their processes to accurately report on program outcomes. Agreed. The regional development agencies audited agree that the consistency of measurement reporting could be improved. We agree that this is an area for further work. We agree with the importance of continuous improvement. Lessons learned from previous programming will inform the design of performance measurement strategies for future initiatives.

Recommendation 1: Targeted levels of support for underrepresented groups

Advice/Recommendation to the Deputy Minister
April 7, 2022

Issue:

How do you respond to the recommendation for future programs to "establish targeted levels of support for underrepresented groups and ensure information is collected in decision making"?

Recommended response:

  • The Auditor General's report notes that, overall, the RRRF was successful at providing last-resort assistance to thousands of businesses and organizations affected by the COVID-19 pandemic.
  • Unfortunately, collecting data and targeting support was much more difficult to achieve in an emergency situation.
  • Nonetheless, across the RDAs audited, we managed to support thousands of businesses that were led by underrepresented groups or that significantly employ underrepresented groups.
  • For example, recognizing the disproportionate impact on women-led businesses, FedDev Ontario invested $4 million from the RRRF to partner with the Northumberland Community Futures Development Corporation (CFDC) and Invest Windsor-Essex to provide non-repayable assistance that helped more than 750 women-led businesses cover re-opening expenses.
  • Based on GBA Plus analysis, dedicated funding was set aside for Indigenous businesses under the Tourism Relief Fund. Activities that foster inclusive recovery are also being prioritized in delivery of the Jobs and Growth Fund.

Background

Recommendation:

For future programs, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, Pacific Economic Development Canada, and the other regional development agencies should establish targeted levels of support for underrepresented groups and ensure that information collected is used to inform decision making.

Audited RDAs Response:

Partially agreed. The regional development agencies audited agree that gender-based analysis plus and other data needs to be collected to inform decision making on the needs of underrepresented groups for future programs. Regional development agencies recognize that underrepresented groups were disproportionately impacted by the pandemic.

The Regional Relief and Recovery Fund was designed to provide funds to all small businesses unable to access adequate funding elsewhere. The agencies agree that for every program considered, efforts are needed to help ensure that the distribution of supports are inclusive and reflective of the populations in the context of the program objectives. In the case of the Regional Relief and Recovery Fund, targets for underrepresented groups could have limited the ability of the regional development agencies to adjust and provide support to those that needed it the most. Results for this program show that funding was provided to the businesses that needed it the most, with significant support provided to underrepresented groups

FedDev Ontario Background:

To provide critical support to small businesses and their employees when they needed it most, FedDev Ontario was allocated more than $525 million to deliver the RRRF in southern Ontario.

FedDev Ontario's direct delivery of RRRF provided relief to more than 1,300 businesses across the region.

The Agency also worked with the 36 Community Futures Development Corporations (CFDCs) in southern Ontario to provide targeted relief to more than 1,950 rural small businesses.

In addition, to maximize the program's reach and impact, the Agency worked with regional partners to provide targeted support that reached more than 39,000 small businesses, including sectors hardest hit by the pandemic, as well as underrepresented groups that were disproportionately affected, including:

  • almost $160 million supporting southern Ontario's tourism businesses – surpassing the commitment to provide at least 25 per cent of RRRF funds to the hard-hit tourism sector;
  • more than $150 million supporting women owned or operated businesses;
  • $10 million supporting Indigenous businesses; and
  • more than $140 million supporting rural areas.

The report (p. 10, exhibit 14.4) indicates that for FedDev Ontario, 42% of approved applicants were women, 2% Indigenous peoples, and 14% youth.

These figures only partially represent the efforts taken by FedDev Ontario, as investments were also provided through not-for-profit organizations to support underrepresented groups.

Through RDAs, the Government of Canada is also making significant investments in diverse entrepreneurs and business owners, such as through the Black Entrepreneurship Program and the Women Entrepreneurship Strategy.

Recommendation 2 (a) (b): Common approach to program delivery/open and transparent process

Advice/Recommendation to the Deputy Minister
April 7, 2022

Issue:

How do you respond to the recommendation that "RDAs should ensure a common approach to program delivery and to assessment and approval of funding requests, and an open and transparent application process for all funding"?

Recommended response:

  • RDAs agree that it would be helpful to examine practical ways to improve transparency in the future, and when appropriate, leverage common RDA approaches to program delivery, assessment and approval.
  • In order to deliver the RRRF to help businesses quickly, and provide financial support when they needed it most, RDAs used their existing application forms and assessment processes. These differ across RDAs.
  • RDAs were established to be place-based and reflective of the regions they serve. Delivery of national programs by RDAs should of course be coordinated, but also delivered in a way that is reflective of each regions' unique needs and circumstances.
  • This approach was taken when RDAs were called on to deliver nationally coordinated, regionally-tailored recovery programming in Budget 2021.
  • RDAs increased coordination and developed harmonized program implementation plans, adopted identical public-facing websites with common guidelines and application form requirements, and standardized reporting requirements across RDAs.

Background

Recommendation:

To foster greater compliance with transfer payment policies and ensure efficiency, fairness and transparency in delivering future programs, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, and Pacific Economic Development Canada, along with the other regional development agencies should ensure:

  • a common approach to program delivery and to assessment and approval of funding requests; and
  • an open and transparent application process for all funding.

Audited RDAs Response:

Partially agreed. RDAs audited agree that transparency was not perfectly served because of the emergency nature of the program. This was in line with guidance from the Secretary of the Treasury Board to all deputy heads to put a priority focus on achieving the intended results of the government's response measures and to use their sound judgment for maximum flexibility in applying Treasury Board policies and exercising authorities. The agencies agree that it would be helpful to examine practical ways to improve transparency in the future.

The RDAs audited do not agree that common delivery of funding programs is appropriate in all instances. RDAs were established to be place-based and reflective of the regions they operate in and deliver national programs such as the Regional Relief and Recovery Fund in a nationally coordinated, regionally tailored fashion. Complementarity with provincial and other levels of government programs is typically more important to the agencies' clients than consistency with programs being delivered in a different context in other parts of the country.

Recommendation 3: Reporting on outcomes

Advice/Recommendation to the Deputy Minister
April 7, 2022

Issue:

How do you respond to the recommendation that RDAs "should review and harmonize their processes to accurately report on program outcomes:?

Recommended response:

  • Harmonizing processes to accurately report on program outcomes was an area identified for further improvement.
  • The RDAs that were audited agree that the consistency of measurement reporting could be improved. We agree that this is an area for further work, in the spirit of continuous improvement.
  • Lessons learned from the RRRF informed the design of performance measurement strategies for future initiatives.
  • Since the Spring of 2021, all new initiatives delivered by multiple RDAs have been developed to foster harmonization of program indicators and the collection of data.

Background

Recommendation:

For future funding programs, Innovation, Science and Economic Development Canada, the Federal Economic Development Agency for Northern Ontario, the Federal Economic Development Agency for Southern Ontario, Prairies Economic Development Canada, and Pacific Economic Development Canada, as well as other regional development agencies, should review and harmonize their processes to accurately report on program outcomes.

Audited RDAs Response:

Agreed. Innovation, Science and Economic Development Canada and the regional development agencies audited agree that the consistency of measurement reporting could be improved. The department and the agencies agree that this is an area for further work. The department and the agencies agree with the importance of continuous improvement. Lessons learned from previous programming will inform the design of performance measurement strategies for future initiatives.


RDAs will take additional steps to enhance the accuracy of performance indicators and data gathered including regular collaboration to improve methodologies for indicators, development of tools for staff, and continued enhancements to data collection.

Regional Relief and Recovery Fund Backgrounder

Advice/Recommendation to the Deputy Minister
April 7, 2022

Recommended response:

  • From the beginning of the pandemic, the Government of Canada's priority has been to keep Canadians safe, and to keep our economy strong.
  • The Government of Canada provided unprecedented support to small businesses including through the wage and rent subsidies, the Canada Emergency Business Account (CEBA) loan and the Regional Relief and Recovery Fund (RRRF).
  • The RRRF was a critical federal tool to help businesses and organizations mitigate pandemic-related financial pressures, and provided an important back stop to other federal business supports.
  • The Federal Economic Development Agency for Southern Ontario (FedDev Ontario) and its partners delivered over $500 million in RRRF support across southern Ontario.
  • This funding helped over 40,000 small- and medium-sized businesses and organizations in the region, and is expected to have helped maintain over 70,000 jobs.

Background

  • At the outset of the pandemic, when it became clear the significant negative impact restrictions to keep Canadians safe would have on businesses and communities, Canada's regional development agencies (RDAs) quickly pivoted to design and deliver the $2 billion Regional Relief and Recovery Fund (RRRF).
  • The RRRF was a critical federal tool to help businesses and organizations mitigate pandemic-induced financial pressures and allow them to continue their operations by providing no-interest, repayable contributions to small- and medium-sized enterprises (SMEs) for liquidity support.
  • The RRRF was also an important backstop to other COVID measures (i.e., it mirrored the Canada Emergency Business Account (CEBA), offering a portion of loan forgiveness for loans under <$60K). It also supported projects by businesses, organizations and communities to prepare for a successful recovery.
  • Over $500 million of RRRF funding was delivered by FedDev Ontario, directly and in partnership with local Community Futures Development Corporations (CFDCs) and other partners in southern Ontario. This support helped southern Ontario businesses and organizations weather the economic impacts of COVID-19, sustain employers for recovery and keep more people employed.
  • FedDev Ontario's direct delivery of the RRRF provided critical relief to more than 1,300 businesses and organizations across the region, and is projected to maintain more than 27,000 jobs.
  • The Agency also worked with CFDCs to provide targeted relief to more than 1,950 rural small businesses that helped maintain more than 6,250 jobs in rural areas.
  • In addition, to maximize the program's reach and impact, the Agency worked with regional partners to provide targeted support that reached more than 39,000 small businesses. These investments are expected to indirectly maintain nearly 43,000 jobs, including in sectors that were hit hardest by the pandemic, such as tourism, retail and main street businesses, as well as underrepresented groups that were disproportionately affected.
  • Overall, results for the RRRF in southern Ontario included:
    • almost $160 million in over 800 projects supporting southern Ontario's tourism businesses – surpassing the commitment to provide at least 25 per cent of RRRF funds to the hard-hit tourism sector;
    • more than $150 million in over 1,400 projects supporting women owned or operated businesses;
    • $10 million in over 130 projects supporting Indigenous businesses; and
    • more than $140 million in over 2,000 projects supporting rural areas.
  • Throughout delivery of RRRF, all measures were taken for the adequate use of funds and with due diligence to ensure good stewardship of public funds in accordance with federal directives.
RRRF Funding
Total RRRF Funding by RDA Amount allocated ($ millions)
May-20 Oct-20 Dec-20 Totals Received
ACOA $110.10 $60.20 $83.40 $253.70
CEDQ $211.40 $69.80 $46.10 $327.30
CanNor $34.30 $0 $4.00 $38.30
FedDev Ontario $252.40 $184.00 $100.00 $536.40
FedNor $49.50 $22.30 $40.00 $111.80
WD $304.20 $263.70 $309.70 $877.60
Total Amount $961.90 $600.00 $583.20 $2,145.10
Amounts allocated from agencies
to community futures development
corporations (included in total)
$287.00 $177.70 $177.00 $641.70
G&C Allocation
G&C Allocation by
RDA and Stream
Stream 1 (RDA Delivered):
G&C Portion of RRRF Allocation
Stream 2 (Community Futures Organizations):
G&C Portion of RRRF Allocation
ACOA $151,892,500 $99,600,000
CEDQ $204,647,500 $120,000,000
CanNor $26,500,000 $11,800,000
FedDev Ontario $443,759,000 $83,350,999
FedNor $55,760,000 $55,400,000
WD $593,160,000 $271,500,000
Total $1,475,719,000 $641,650,999