Archived - Management Response and Action Plan

In their evaluation report, KPMG/ITnet find that, although the mandate and policies of the Retail Debt Program are consistent with federal government roles, responsibilities, and priorities, there is no valid economic rationale for the Retail Debt Program in its current form on the basis that:

The evaluation report states that it is doubtful that the Retail Debt Program could return to cost effectiveness given the low interest rate environment combined with high and increasing administration cost per unit (i.e., due to retail debt stock declining faster than its administration costs).

The report describes the Retail Debt Program business practices and service delivery methods as satisfactory, including service levels, marketing and communications activities, management and operational procedures, and sale and redemption practices.

Lastly, the overall governance framework for the Retail Debt Program is deemed to be aligned with leading practices.

KPMG/Itnet’s primary recommendation is that the Retail Debt Program be wound down in an orderly fashion. Their fall-back recommendation is to streamline distribution so that sales are made exclusively through the cash sales channel (i.e., banks, dealers and direct).

The table below contains the recommendations from the KPMG/ITnet evaluation, along with corresponding management responses and planned actions.

Management Response and Action Plan

Recommendation Management Response Planned Action Lead Target Date
1. The Department of Finance should consider the following strategic options for the Retail Debt Program:
  • Wind down the Retail Debt Program in an orderly fashion on the basis that there is currently no valid economic rationale for the Program, it is not cost effective and it is doubtful that it could return to cost effectiveness.
  • As a fall-back recommendation, eliminate the Payroll sales channel. In this version the only channel maintained would be the cash sales channel.
The Department of Finance notes KPMG’s recommendations, while recognizing that:
  • Approximately 2.5 million Canadians continue to hold over $6 billion of Government of Canada Retail Debt products, demonstrating Canadians’ continuing support for the Program.
  • The Payroll Savings Program remains the preferred channel for Canadians to purchase Retail Debt products, accounting for over 90% of sales annually.
  • KPMG’s conclusion that the Program is not cost-effective is largely based on the historically low interest rates at which the Government of Canada can currently borrow on the wholesale market.
  • Although interest rates are currently at historic lows, as overall interest rates rise the ability to borrow in the retail market at favourable rates will help support low borrowing costs for the Government.
The Department of Finance and the Bank of Canada will continue to seek efficiencies to reduce program costs while maintaining an appropriate level of service. Department of Finance and Bank of Canada Ongoing

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