CEBA's rushed rollout left billions unpaid, with loan defaults and bankruptcies rising in its wake
The Canadian government distributed $49bn in loans to businesses during the Covid-19 pandemic, but the program lacked “due regard for value for money,” according to Auditor General Karen Hogan.
Hogan's report, released Monday, revealed that $3.5bn was allocated to over 77,000 ineligible businesses through the Canada Emergency Business Account (CEBA).
This represented 9 percent of the nearly 900,000 businesses that received loans under the initiative launched in 2020 by Prime Minister Justin Trudeau's government, according to BNN Bloomberg.
CEBA provided interest-free loans of up to $60,000 to support small and medium-sized businesses with payroll, rent, and insurance costs during pandemic-related closures. Up to $20,000 of each loan was forgivable if repaid by a specific deadline.
While the program aimed to assist struggling businesses quickly, Hogan criticized its “poor program management and oversight failure.”
In a news release, she noted, “Unlike other Covid-19 programs, CEBA is a loan program with repayments that will be ongoing for several years while action on defaulted loans is just beginning. Value for money will be further compromised without better monitoring and improved plans to recover defaulted loans.”
The report also scrutinized Export Development Canada (EDC), which administered the program, for its procurement practices.
Hogan highlighted that EDC used sole-source contracts without sufficient oversight, relying on Accenture to manage the program.
Accenture, in turn, awarded a significant contract to one of its subsidiaries.
EDC responded by emphasizing the unprecedented nature of the program and stated that most ineligible recipients had already been identified and disqualified from partial loan forgiveness.
“This was a net-new program with no precedent or instruction manual to follow,” EDC spokesperson Todd Winterhalt said, adding that EDC has begun addressing the auditor’s recommendations.
Global Affairs Canada and the Department of Finance were also criticized for their oversight failures.
Hogan reported that neither department took full accountability for CEBA, resulting in delays and incomplete planning for critical program elements.
In a joint statement, Finance Minister Chrystia Freeland and Small Business Minister Rechie Valdez acknowledged the report’s recommendations but defended the program's rapid implementation.
They noted, “Within less than two weeks, the federal government stood up new, emergency support for 898,000 small businesses across the country. This was a historic, national effort, at a time of crisis, to support our small business owners and their employees.”
The report further highlights the broader consequences of pandemic-era financial programs. In addition to CEBA, earlier audits identified overpayments and questionable expenditures in other programs. For example, the Canada Emergency Response Benefit recorded $4.6bn in overpayments.
An additional $27.4bn in expenditures requires further investigation.
These programs, while providing essential relief, contributed to a sharp rise in federal debt, pushing Canada’s debt-to-GDP ratio above 40 percent.
As of March 2024, approximately $8.5bn in CEBA loans remained outstanding. Businesses faced repayment deadlines earlier this year, with the forgivable portion requiring payment by January 18 and full repayment by the end of 2026.
Some economists linked a spike in business insolvencies at the start of 2024 to these repayment deadlines, suggesting that many firms sustained by CEBA during the pandemic—so-called ‘zombie’ firms—were unable to continue operations once repayment began.
The CEBA program’s rushed implementation has drawn attention to gaps in oversight and planning, leaving significant questions about accountability and the long-term economic impact of pandemic relief efforts.
