OTTAWA (Staff) – The federal auditor general’s office last week questioned the accuracy of government claims of significant success in promoting western economic diversification during the past decade.
Since 1987, the federal western diversification department has spent close to $1 billion to foster economic growth. Most of that is supposed to be repaid.
The government claims that money helped create 42,000 jobs.
But in a report tabled in Parliament Nov. 21, auditor general Denis Desautels said the department has not proven its claims, that its job creation numbers are inflated and no credible method exists to assess the real impact of the department’s loans and grants to companies promising diversification projects.
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“In our view, a program running for eight years before the current changes, that has committed about $1 billion of taxpayers’ cash, deserved better evaluation,” said the report prepared after an audit of the western diversification department.
Based on promise of jobs
The auditor general noted that while the department claims to have helped create or maintain 42,000 jobs, the claims are unverified and based on promises made when projects were announced.
In fact, the selective audit found that 3,800 of those jobs were with companies out of business or owing bad debts to the government and 8,200 of those jobs were with companies helped by programs set up before the western diversification department was created.
“Unqualified statistics on jobs created or maintained, irrespective of how they are used, can only lead to a false sense of achievement if they are not balanced by realistic qualifiers,” said the report.
Western diversification officials have responded by promising improvements.
Part of the problem identified in the department is that many spending commitments lack a clear objective. The department has not even developed a clear definition of what constitutes a job.
The auditor general noted the irony that while western diversification is supposed to be a responsible guardian of public money, it also is supposed to help new businesses that probably could not receive financing from regular commercial lenders.
At the end of March, the department was owed $346 million and it had assumed as much as 22 percent would not be recovered.
“This illustrates the dilemma facing the department,” said Desautels. “If it recovers all its money, it risks criticism that it is not funding the niche projects it has targeted and is competing unfairly with the capital markets. If it loses large amounts, it faces criticism for making bad investment decisions and wasting money.”
