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2000 October Report of the Auditor General of Canada

October 2000 Report—Chapter 11

Exhibit 11.9—Project Approvals Not Based on Established Procedures

New Brunswick Department of Natural Resources and Energy - $6,000,000 to supplement provincial funding of silviculture activities by private woodlot owners

The Minister made a commitment to the Government of New Brunswick to fund the project before HRDC officials had received and reviewed the proposal to ensure that it met the eligibility criteria.

New Brunswick's Minister of Natural Resources and Energy submitted a request for funding to the Minister of Human Resources Development in May 1996, after TJF was announced but before it was implemented on 1 July 1996. In a 17 July 1996 letter to New Brunswick's Minister of Natural Resources and Energy, the Minister indicated he was prepared to provide TJF funding of $2 million per year for 1996, 1997 and 1998.

The regional office was informed that the Minister had made a commitment to New Brunswick for $6 million over three years. The regional office worked with provincial officials to develop the details of the proposal and then prepared a recommendation for approval. The Minister approved the project on 15 August 1996.

In our view, the project did not meet TJF criteria, as no new sustainable jobs were being created. We note that similar projects were subsequently approved in Newfoundland ($11.5 million) and Quebec ($5.7 million).

Auberge des Gouverneurs (9047-4412 Québec Inc.) - $600,000 for construction of a hotel complex

The Minister announced that the federal government would contribute $600,000 to this project, which was to create 60 jobs. After assessing the project, Human Resource Centre of Canada (HRCC) officials decided to fund it under TJF to create 40 jobs. However, the funding remained unchanged, resulting in a higher cost per job. The project was announced before it was approved.

On 10 February 1997, the local HRCC received a fax from the Prime Minister's constituency office concerning the project, suggesting that the HRCC contact an official in the office of the Minister of Human Resources Development for more details.

On 13 March 1997, the Minister issued a press release to announce funding of up to $600,000 and the creation of 60 jobs under the Targeted Wage Subsidies program.

Discussions between the local HRCC and the sponsor identified TJF as a more appropriate program to fund this project. After receiving a proposal and business plan on 4 April 1997, the local office confirmed that the project met TJF criteria. The HRDC regional office agreed with the assessment but established that only 40 of the 60 jobs were eligible for funding under TJF. However, the recommended amount of funding was not reduced accordingly, even though the cost per job exceeded regional guidelines ($10,000 per job).

On 4 July 1997, the Minister's office announced a contribution of $600,000 for the creation of 40 jobs under TJF. The project was formally approved on 9 July 1997.

In the Department's view, there was no requirement in the program to maintain a $10,000 ceiling per job.

In our view, the project met the TJF criteria.

Chelson's Distribution Ltd. - New Brunswick - $84,000 for construction and furnishing of cottages

The amount of the contribution recommended by HRDC officials was increased at the approval stage without explanation.

The proponent applied in October 1998 for a TJF contribution. During a site visit in November 1998, the project officer indicated to the proponent that funding up to $82,000 could be possible. In December 1998, the project officer informed the proponent that the project would be recommended but for $50,000, a lesser amount than the proponent had expected. The proponent called the project officer and expressed frustration.

In June 1999, the project officer recommended a CJF contribution of $60,000. The HRDC regional office reviewed the assessment of the project officer and concurred with it.

This CJF project was approved by the Minister with funding of $84,000 - $24,000 more than officials had recommended.

In our view, this project did not meet CJF criteria as there was no evidence of funding of last resort. In addition, the project activities had been largely completed before ministerial approval was obtained.

Cochran Entertainment Inc - Nova Scotia - $2,500,000 for production of a television series

Before HRDC officials had completed their assessment of the project and recommended its approval, the Minister informed the proponent that HRDC would participate in funding the project.

As early as February 1998, HRDC officials were in contact with the sponsor and other partners concerning a proposal for the project. A 25 March 1998 e-mail from the Minister's office to the HRDC regional office asked if HRDC could help in financing and noted that a decision was required before 7 April 1998.

On 3 April regional officers advised the Minister's office that they had met with the proponent and that there were still information gaps and questions about the sustainability of jobs.

A 9 April 1998 letter to the proponent from the Minister confirmed funding not exceeding $2.5 million under TJF, subject to the execution of a contribution agreement. An e-mail dated 14 April 1998 from the regional office to a project officer in the local office indicated that there were difficulties with the proposal, as it included short-term jobs.

On 21 April 1998, the regional office recommended approval, and the Minister approved the project on 30 April 1998.

In the view of the Department, there is evidence on file that supports that established procedures for the assessment and recommendation of TJF projects were followed, and that the project would have created 100 sustainable jobs had CBC cutbacks and cancellation of the series not occurred.

In our view, this project did not meet TJF criteria, as it created short-term rather than sustainable jobs.