Western Economic Diversification Canada
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Executive Summary

Introduction

The Community Futures Program (CFP) supports Community Economic Development (CED) and builds the self-reliance and capacity of communities to realize their full sustainable potential. The objectives of the CFP in support of this mandate include fostering economic stability, growth and job creation; helping to create diversified and competitive local rural economies; and helping to build economically sustainable communities. The CFP is delivered through four Regional Development Agencies in their respective regions. The CFP is designed to operate in rural communities and provides financial support to Community Future Organizations (CFs) for their activities. There are 90 non-profit CFs, 4 provincial CF Associations and one Community Futures Pan West Group in Western Canada.

CF activities include (1) fostering strategic community planning and socio-economic development; (2) providing business services by delivering a range of business, counselling and information services to small and medium-sized enterprises (SMEs) and Social Enterprises; (3) providing access to capital to assist new and existing SMEs and social enterprises; and (4) supporting community-based projects and special initiatives.

This study evaluates the relevance and performance of the CFP from 2008–09 and to 2012–13. In order to minimise duplication of effort, the evaluation draws upon findings in the CFP revitalization exercise to support some of the issues in the evaluation framework. The evaluation serves as a complement to the broader revitalization initiative.

The methodology for the evaluation included document and literature review, performance data analysis, Statistics Canada business number review, 2011 Statistics Canada census data of CF service areas, key informant interviews, surveys and case studies.

Relevance of the Program

  • The overall conclusion is that there is a relevant ongoing need for the CFP in Western Canada. Evidence from the literature review indicates that SMEs face barriers to financing. Financing requests from SMEs have gone up significantly since the recession. The literature review showed that overall business lending conditions continue to ease in 2012, however, certain sub-categories continue facing greater difficulties in accessing financing such as business start-ups and exporters.
     
  • Policies and programs such as the CFP implemented by governments support SMEs to overcome barriers to financing. Programs such as the CFP are needed in stable economic conditions and in economic downturns.
     
  • Evidence from the key informant interviews suggests an ongoing need for the CFP, especially in the area of access to capital and business development services. The most common driver for this was related to clients unable to source funding from traditional sources because they are viewed as high risk.
     
  • The client survey revealed that the majority of clients who applied to the CF for funding were denied funding from other sources.
     
  • A lower number of key informants and survey respondents indicated a need for community strategic planning and community economic development in their regions. This is indicative of the fact that respondents were not very familiar with community economic development of the CF involvement in this activity. Case study respondents expressed the need for clarity in activities that constitute community economic development.
     
  • Given the broad nature of community economic development, the evaluation advisory committee members indicated that reporting on indicators is very subjective. It will be beneficial for the department to further clarify the CFP activities in community strategic planning and community economic development in order to better reflect performance reporting in these activities.
     
  • An assessment of other programs that provide business services indicates that such programs have specific conditions which limit their reach to specific groups of entrepreneurs. The CFs have identified mechanisms such as collaborations, partnerships and referrals to minimize overlap and duplication with other programs and funding sources.
     
  • The 2014–15 Report on Plans and Priorities for the department aligns the CFP with the Government of Canada outcome of “Strong Economic Growth.” The objectives of the CFP align with departmental priorities in Business Productivity and Competitiveness as stated in the department’s corporate business plans from 2008 to 2012. The objectives of the CFP also aligned with the roles and responsibilities of the department as a federal government economic development agency.

Performance: Achievement of Expected Outcomes

  • Using data from Statistics Canada business number review, the department was able to assess the long-term outcomes of CF-assisted firms to a comparable group of non-assisted firms. Analysis of the data demonstrated that CFs lending activity is making a difference and that CFs continued to lend to a diversified clientele base.
     
  • The Statistics Canada business number review showed that CF-assisted firms outperformed a comparable group of non-assisted firms in terms of employment growth, survival rate and revenue growth. CF-assisted firms had an average employment growth rate of 9.5 percent compared to 4.2 percent for non-assisted firms from 2005 to 2010. CF-assisted firms had a survival rate of 76 percent five years after the start of their businesses compared to 60 percent for non-assisted firms. CF-assisted firms had a revenue growth rate of 13.8 percent compared to 6.1 percent for non-assisted firms.
     
  • Key informants and survey respondents agreed that the absence of the CFs in their community would have a highly negative impact on business start-up, survival and growth, as well as community strategic planning and development in their service area.
     
  • The performance data on outputs, immediate and intermediate outcomes demonstrated the effectiveness of the CFP in achieving its objectives particularly related to access to capital and business development services.
     
  • The average number of loans per CF per year increased from 15.8 in 2002–07 to 16.8 within the period of the evaluation (2008–13).The number of loans and number of clients served by the CFs were higher in 2008 to 2010. This may have been as a result of the global economic recession within that period.
     
  • The evaluation encountered challenges during the data collection exercise particularly on retrieving data from the software used by the CFs. Collection of client data was a burden on the CFs. Information collected from the CF into a database could not be easily imported into common software programs used by the department.

Performance: Efficiency and Economy

  • Operating costs for the CFP were not available from the department’s financial systems for the calculation of efficiency measures within the evaluation period since costs to administer the CFP were mixed with other program costs. However, the department implemented a revised Program Alignment Architecture in 2013–14 with the CFP as a separate sub-program within the program activity of community economic growth. This change will enable the department to track operating expenditures in relationship to the delivery of the CFP, allowing the department to report on the efficiency of delivery of the CFP and compare the cost of delivery to that of other Regional Development Agencies in the future.
     
  • Overall, CF loan clients leveraged $1.2 for every dollar in loans disbursed by the CFs. Using the total for all leveraged amounts for all CF activities, the CFP leveraged $4.6 for every dollar spent by the department.
     
  • The efficient and effective use of resources by the CFs was analyzed through the ability of the CFs to meet their objectives for the program. Analysis of the Statistics Canada business numbers review indicated that CF-assisted firms perform better than the comparable group in terms of employment growth and revenue growth in addition to having a better business survival rate after five years of entry into business. This is supported qualitatively through the interviews and surveys.
     
  • There are concerns on the management of the investment funds especially with respect to the excess amount of cash on hand. Individual CFs hold over $80 million in funds that are not invested in active business loans representing 28 percent of the value of the investment funds as at 2013. Strategies to address this are part of the CFP revitalization exercise.
     
  • CF clients expressed satisfaction with the services they received from their CFs. The most common reason cited for client satisfaction was the one-on-one business counselling services that clients receive from CF staff. CF Managers and Chairs however provided a lower level of satisfaction for WD, in particular in relation to funding levels.

Recommendations

Based on the findings and conclusions drawn from the evaluation, the following recommendations are made to be addressed by the department.

Recommendation 1: The department should clarify CF activities that count as community economic development.

Recommendation 2: The department should examine the effectiveness of the CF reporting system to report on outcomes and ensure better integration with departmental systems.

Recommendation 3: The department should continue to work with other Regional Development Agencies on enhancing analysis of long-term outcomes using Statistics Canada data runs. The department may want to explore using this method of assessing long-term outcomes for other departmental programs.