OTTAWA (Staff) – When the Liberals took office in late 1993, they found abuse in the prairie cash advance program was so widespread that the program’s future was being questioned inside government, a senior government official said last week.
“The new government launched a program review and it was startling,” said the senior bureaucrat familiar with the review, who spoke on the condition he not be identified.
“Treasury board and finance (departments) came back and said simply that the program costs were way out of control. That program would not have been saved if it had not been changed. That was the clear message.”
Read Also
Land crash warning rejected
A technical analyst believes that Saskatchewan land values could be due for a correction, but land owners and FCC say supply/demand fundamentals drive land prices – not mathematical models
In 1993-94, the value of defaults in the program was $64 million. It cost less than $40 million to operate.
“Defaults were actually far greater than the cost of running it,” he said. “It was unbelievable.”
In addition to some criminal fraud which found its way into court, the auditors found farmers rolling over advances without repaying, even though rollovers were not supposed to happen.
Since the loans were on the basis of Canadian Wheat Board permit books, the auditors found:
- Farmers with several books applying for several advances.
- Farmers changing permit books and reneging on advances charged against former books.
- Farmers managing to get children and grandchildren registered for permit books and therefore eligible for interest-free advances.
- Against the rules, farmers repaying the advance with cash, rather than with returns after the crop is sold. In effect, they were using the program as a source of cheap money, rather than as a backstop for cash-flow problems because of unsold grain.
There were minimal penalties for farmers who defaulted. The cumulative cost of defaults picked up by taxpayers has exceeded $100 million.
The high rate of prairie defaults became an issue for producers of non-wheat board crops who were eligible for advances through the better-run program operated under the advance payments for crops act. They became uneasy that the entire scheme was being tarnished in government eyes.
