Opening Statement to the Standing Committee on Public Accounts

Atlantic Canada Opportunities Agency—Economic Development
(Chapter 6 - December 2001 Report of the Auditor General)

Mr. Chairman, thank you for this opportunity to discuss the key findings in Chapter 6 of my December 2001 Report. Joining me today are John O'Brien, Principal, and Marilyn Rushton, Director, from our Halifax regional office.

The Atlantic Canada Opportunities Agency is one of several organizations that are responsible for grant and contribution programs on which we reported in December. Next week we are scheduled to discuss with your Committee chapters 4 and 5, dealing with the management of grants and contributions government-wide.

The Agency provides assistance to businesses for commercial projects, such as

• business expansion,
• support for marketing activities, and
• purchase of capital equipment.

In 2000-01, ACOA approved assistance totaling $93 million to support commercial projects, usually in the form of repayable contributions.

Not-for-profit organizations usually receive non-repayable contributions from ACOA to support non-commercial projects such as

• carrying out trade and research studies,
• planning community-based economic development,
• holding conferences, workshops, and training, and
• developing local infrastructure.

The Agency authorized assistance of about $126 million for these types of projects in 2000-01.

We found that the management of contributions for commercial projects had improved significantly since our last audit in 1995. However, we are still concerned about the management of contributions for non-commercial projects. Our audit did find weaknesses in the Agency's assistance to both types of projects.

Overall, we found that the Agency has an appropriate framework for controlling grants and contributions. However, 17 of the 108 projects we examined did not describe the results expected from the Agency's contribution.

Twenty-six of the projects in our sample required an environmental assessment under the Canadian Environmental Assessment Act. For 7 of these projects, the Agency carried out the assessment late in the approval process. In 12 projects the letter of offer did not require the proponent to carry out all of the measures identified by the assessment to mitigate environmental damage. Our findings in this area are particularly troubling, because the Commissioner of the Environment and Sustainable Development criticized the Agency in 1998 also for conducting environmental assessments late in the approval process.

Turning to ACOA's support for commercial projects, all of the projects we examined met the required terms and conditions for eligibility. In addition, applications were appropriately assessed before ACOA approved them. We attribute at least some of the improvement in managing these types of contributions to the greater discipline imposed when repayment is expected.

Our only significant concern about commercial projects was that the Agency had not publicly disclosed the size and performance of its $400 million portfolio of loans and repayable contributions.

We found that in managing contributions for non-commercial projects, the Agency used broad eligibility criteria that most projects would fit or could be made to fit.

I draw your attention to an example of how questionable means were used to make a project appear to fit the eligibility criteria. ACOA is not permitted to fund government services through its Business Development Program. However, on page 11 of Chapter 6, we note a case where the Agency did just that, through a not-for-profit organization it was instrumental in creating. The organization received a contribution from ACOA's Business Development Program to develop exhibits for an interpretation centre for the PEI National Park. Agency officials were the managers of the not-for-profit organization while also acting as project officers for ACOA. We do not question the value of this project, but we are concerned that the Agency circumvented the intent of the Business Development Program's terms and conditions by establishing and managing an organization to support services provided by another government department, Parks Canada.

ACOA is using partnerships more often. It partners with other federal departments, provincial governments, community development groups, educational institutions, and other organizations. We found that the results expected from these partnerships are often vague. In addition, the Agency has collected little or no ongoing performance information on most federal-provincial agreements, which were important partnerships for many years.

Mr. Chairman, I would like to briefly discuss ACOA's measuring and reporting of performance. The Agency generally makes good links between expectations set out in its report on plans and priorities and what it reports in its performance report. Most of the key results are supported by reasonable evidence. One of the indicators the Agency uses to report on its performance is its impact on employment. We remain concerned about the way the Agency measures and reports the impact of assistance to non-commercial projects. It reports that it creates one full-time job lasting five years for each $25,000 it spends to support non-commercial projects. We have a lot of trouble accepting that the Agency automatically achieves better results the more it spends. We have encouraged the Agency to find a more direct means to clearly and realistically report the impact of its contributions to non-commercial projects.

In conclusion, we found that the Agency has made a great deal of progress in managing its assistance to commercial projects. While conditions such as repayability that have led to this improvement may not exist in all programs, the record indicates that management practices can be improved. It is now time for the Agency to focus its attention on improving its management of assistance to the non-commercial sector.

We have reviewed the Agency's action plan in response to our report. The Agency appears committed to dealing with our concerns. It indicates that it intends to complete studies and evaluations by March 2003 to address our recommendations. We encourage the Committee to ask the Agency for a progress report at that time.

Mr. Chairman, that concludes my opening statement. We would be happy to answer any questions.