Ontario business support programs lack targets, follow-up, transparency: AG report

The Ontario government has no comprehensive plan or outcome targets for nearly $2.4 billion in business-support funding in the province, much of which goes to large companies, according to the 2015 Annual Report of the Office of the Auditor General of Ontario (AGO). The audit also found that 80% of funds were disbursed "through non-publicly advertised processes in which only selected businesses were invited to apply" and that the ministry "does not publicly report overall or individual results at the expiry of projects".

"Even though expert reports stress that economic development support funding should be focused on increasing exports, developing innovations or increasing productivity, no contracts with recipients formally require improvements in any of these areas," states the AGO report. "A comprehensive and effective strategy for economic development and employment supports would help address Ontario's lagging competitiveness compared to other Canadian and U.S. jurisdictions."

Most of the funds include innovation and R&D components. The Ministry of Finance also provided $368 million in R&D tax credits in FY14-15.

Only in January of this year did the Ministry of Economic Development, Employment and Infrastructure (MEDEI) announce a comprehensive Strategic Investment Framework (SIF) that included such metrics as productivity growth, greater innovation or increased exports. MEDEI has seven distinct funds (see chart) and also administers funds on behalf of other ministries such as Ministry of Research and Innovation.

The new framework was accompanied by a consolidation of several of the funds examined by the AGO into a new $2.5-billion, 10-year Jobs and Prosperity Fund (R$, February 10/15).

Cluster/sector priorities under the new framework give MEDEI responsibility for aerospace, automotive, information and communications technology, clean tech, financial services and chemistry, with MRI responsible for life sciences. While MEDEI responded to the report by stating that its new Jobs and Prosperity Fund and SIF will address the recommendation, the AGO counters that there are still no strategies in place for sector/cluster priorities.

The AGO is particularly concerned that the MEDEI framework does not focus on clusters, strategic partnerships or small- and medium-sized businesses (SMEs), despite the findings of several expert reports over the past five years. In its deliberations, the AGO examined nine economic-focus studies for the province, including a 2014 Report of the Expert Panel Examining Ontario's Business Support Programs, which has still not been released a year after its completion.

That report concluded that the province's business support programs favour "the largest and oldest companies, the companies least likely to be in need of support".

SMEs were eligible to apply to only two of the seven funds and received just 4% of total awarded funding.

Despite the shortcomings highlighted by th AGO, the report says provincial funds have had a significant leverage affect (see chart).

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