Western Economic Diversification Canada
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Performance: Efficiency and Economy

The following section summarizes the findings related to the efficiency, the use of resources and management of investment funds of the CFP. Client satisfaction is also assessed.

Efficiency and Economy of the CFP

Efficiency Measure

WD’s operating costs to deliver the CFP were not available from the department’s financial systems within the evaluation period since they were combined with other program delivery costs. However, starting in 2014–15, the Treasury Board Secretariat requires departments and agencies to adopt efficiency measures as a component of their Performance Measurement Framework. The targets and actual performance for the efficiency measures are to be reported publicly in Departmental Performance Reports starting 2015–16. 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. The department’s efficiency measure for the CFP is stated as “operating costs per $1,000 in Grants and Contributions (Gs&Cs) expended.”

Leveraged Amount

The CFP activities in access to capital, business development services and community economic development activities resulted in leveraged amounts as reported in the CF database and indicated in the table below.

Leveraged Amounts through Various CFP Activities ($ millions)
Fiscal Year Amount Leveraged Through Lending Activities Amount Leveraged from Community Economic Development Projects Amount Leveraged from Business Development Clients Total Leveraged Amount
2008–09 88.2 10.8 36.8 135.8
2009–10 84.2 25.8 40.5 150.5
2010–11 79.0 37.0 37.8 153.8
2011–12 81.9 15.1 27.9 124.9
2012–13 117.4 11.5 28.8 157.7
Total 450.7 100.2 171.8 722.7

A total of $375.1 million in loans were issued by the CFs over the period of the evaluation. Using the $450.7 million leveraged through lending activities, CF loan clients leveraged $1.2 for every dollar in loans disbursed. This compares to the 2008 Evaluation which reported a leverage amount of $1.3 for every dollar disbursed as loans.

A total of $156.0 million was spent by the department over the period of the evaluation on the CFP. Using the total for all leveraged amounts for all CF activities ($722.7 million), the CFP leveraged $4.6 for every dollar spent by the department.

Efficiency of Resources

CF staff resources have been decreasing over the years (see table below).

CF Staff Resources
Fiscal Year Number of Full Time Equivalents Average staff per CF
2008–09 608.5 6.8
2009–10 597.0 6.6
2010–11 548.0 6.1
2011–12 528.0 5.9
2012–13 493.5 5.5

Key informants indicated that CFs have experienced resource constraints due to fixed operating allocation levels for several years but are operating in a fairly efficient manner as evidenced by the results achieved. WD key informants suggested that the current revitalization exercise would further improve the cost-effectiveness of CFs through establishment of tiered performance targets for lending, business services and community economic development (CED) and community strategic planning activities, in addition to improvements to governance (including succession planning) and further training for CF staff and board members.

The efficient and effective use of resources by the CFs was also analyzed through the ability of the CFs to meet their program objectives. As indicated in the previous section, analysis of the Statistics Canada business numbers indicated that CF lending and business development services make a difference as CF-assisted firms performed better than the comparable group in terms of employment growth, revenue growth and business survival rate. This is supported qualitatively through the interviews and surveys with respondents indicating that the CFP achieved its immediate, intermediate and long term outcomes.

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Management of Investment Funds

The 2008 Evaluation concluded that investment funds are well managed by the CFs, however there was the need to examine the growing proportion of investment funds kept as cash on hand and clarity around loan loss rates.

As part of the CF Revitalization exercise being undertaken by the department, an analysis was undertaken to determine the amount of cash on hand by the CFs. The analysis revealed that individual CFs hold over $80 million in funds that were not invested in active business loans (as at 2013). This represents 28 percent of the value of the investment funds for the CFs.

Many CFs have invested almost all their available funds in active business loans and have been able to demonstrate that demand exists in their region for additional funds. Other CFs have considerably less than 75 percent of funds invested in active business loans (some under 50 percent) and have not increased their lending activity levels or made the extra funds available to other CFs either directly or through provincial investment fund pools.

This is a concern for the department and the ongoing revitalization exercise includes components that will enable the CFP to identify mitigating strategies for the management of investment funds, especially cash on hand. CFs in some regions have already implemented provincial loan pools to make surplus cash on hand available for other CFs to borrow.

The loan loss rates analysis were also analyzed to assess the management of CF investment. The calculation of the loan loss rate was done by dividing the bad debt expense by the value of loans issued as in the table below.

Loan Loss Rate ($ millions)
Fiscal Year Value of Loans Bad Debt Expense Loan Loss Rate
2008–09 77.9 4.0 5.0%
2009–10 79.4 6.1 8.0%
2010–11 71.4 6.4 9.0%
2011–12 67.7 6.0 9.0%
2012–13 78.7 6.9 9.0%
Total 375.1 29.5 Average/year 8.0%

The 2008 Evaluation estimated the overall average loan loss rate to be 3.5 percent. The estimated loan loss rate is now 8 percent. This indicates a rise in loan write-offs for the CFs. The increase may be explained by the downturn in the economy, resulting in higher default rates. The department may want to monitor this ratio over time to determine the trend and whether corrective measures are needed.

Key informants and survey respondents were mixed in their views with respect to the management of investment funds. The most common concern was that some CFs were too risk averse, which does not align well with the CFP role as a developmental lender.

Client satisfaction

The overall consensus among survey respondents is that clients and partners were satisfied with CF services, supports and partnerships. The majority of CF partners indicated that they were very satisfied with their partnership with the CF (83 percent). A large majority of CF client survey respondents indicated that they were satisfied with the services and assistance they received from the CF. The majority of both loan and non-loan clients were satisfied with the services they received from their CFs. The most commonly cited reason for client satisfaction was related to the personal business counselling services they received from CF staff. Case study respondents indicated that CF one-on-one business counselling services were helpful to develop their business management skills. The figure below indicates the proportion of clients who were satisfied to a great extent with CFP business services.

Text Description, Figure 10: Proportion of clients who were satisfied to a great extent with CF business services

In this figure, CF clients surveyed indicated their opinion on satisfaction with business services received from their CFs.

CF Managers and Chairs were asked about their satisfaction with the department. High levels of satisfaction expressed related to timeliness of responses and interaction with WD Officers (69 percent), availability of WD Officers to respond to concerns (66 percent) and nature of responses (59 percent). However, a lower level of satisfaction was reported for funding levels received from WD (39 percent) and overall satisfaction with WD (44 percent). Case study respondents indicated that they would appreciate the presence of WD Officers at some of their events such as annual general meetings.