Briefing binder created for the Deputy Minister of Finance on the occasion of his appearance before the Standing Committee on Public Accounts on December 9, 2024 on the Auditor General of Canada's report 8, entitled “Canada Emergency Business Account” - part 6

Canada Account

Issue

Why the Government used the Canada Account to administer the CEBA program.

Key points

• The Canada Account is an Export Development Canada (EDC) mechanism used by the government to support certain export transactions and can be used to rapidly respond to financial crises or extraordinary circumstances.
• While the Canada Account is typically used to support Canadian exporters, as part of the Government's economic response to the COVID-19 pandemic, the Government temporarily expanded EDC's mandate to include domestic support for Canadian businesses.
• The Ministers of Finance and International Trade authorized EDC, under the Export Development Act, to administer the CEBA program using the Canada Account as the best mechanism for managing large-scale disbursements quickly.
• There are several reasons for this:
• Emergency Funding Needs: The Canada Account's flexibility allowed for the swift transfer and disbursement of funds to support businesses.
• Risk Management: The loans under the CEBA program were provided through the Consolidated Revenue Fund so that the government bore the risk and could report on the loans through the Canada Annual Report and the Public Accounts.
• Strong relationship with Canadian FIs: By using the Canada Account and working with EDC to administer the program, the government could leverage EDC's expertise and strong relationships with the Canadian banking sector to disburse loans efficiently and ensure they were in line with emergency support efforts.

Anticipated Questions and Answers

1. What is the Canada Account?

The Canada Account supports transactions in line with EDC's mandate that exceed the financial or risk capacity of EDC's corporate account but are deemed to be in the national interest. EDC administers Canada Account transactions on behalf of the Government with funding provided from the Consolidated Revenue Fund. Transactions are authorized by the Minister for International Trade, with the concurrence of the Minister of Finance, as per section 23 of the Export Development Act.

2. Why was the Canada Account used to administer the CEBA program?

The Canada Account was chosen because it was a mechanism that could provide the government with the flexibility needed to quickly stand up a large-scale loan program and EDC had existing and strong relations with the Canadian banking sector that would be needed to achieve speed of deployment and national coverage.

3. What governance measures are in place for Canada Account transactions?

Under section 23 of the Export Development Act, the Minister of Finance and the Minister for International Trade must authorize EDC to undertake transactions using the Canada Account. Ministerial authorizations outline the parameters for each transaction and outline how EDC is to be reimbursed for expenses to administer the transaction. In accordance with section 23, EDC maintains decision-making power for all decisions, including expenses, that are consistent within the ministerial authorization. In the case of CEBA, a ministerial authorization provided authority to EDC to provide a line of credit to eligible financial institutions based on parameters set by the Government and, due to the notable size and rapid implementation of the program, a subsequent ministerial authorization was provided updating the manner in which EDC can recover costs to ensure the Crown corporation would be appropriately compensated for their administrative costs. 

Recognizing the extraordinary nature of the CEBA program, the government established additional governance committees specifically for the CEBA program that included representatives from EDC, Finance Canada, Global Affairs Canada, the Canada Revenue Agency, and Innovation, Science and Economic Development Canada. The Deputy Minister committee and Assistant Deputy Minister committee provided a space for implementation plans, financial updates, program changes, roles and responsibilities, stakeholder issues, etc. to be discussed and the Assistant Deputy Minister committee is still ongoing.

Background

The Canada Account was established in 1969 through the Export Development Act. It allows Canada to support exporters with loans, guarantees, equity investments or insurance policies that exceed the risk tolerance or capacity of EDC, but are deemed to be in the "national interest". While Canada Account transactions are administered by EDC, the government assumes all associated financial risks and costs by providing all monies required from the Consolidated Revenue Fund (CRF). Transactions are provided on commercially oriented terms and are authorized by the Minister International Trade, with the concurrence of the Minister of Finance. 

Statutory Elements

• Sections 23 and 24 of the Export Development Act include several provisions outlining the legal parameters for Canada Account use. Most notably:
• Section 23(5) enables the Minister of Finance to authorize EDC to retain their administrative costs from repayments and recoveries of transactions to the CRF.
• Section 24(1) sets the limit for the total amount of liabilities and obligations that can be entered into under the Canada Account. The current statutory limit is $100 billion.