Auditor General says Eco-Investment Fund underfunded, in need of a rescue

Tucked into an audit of e-bill payment issues at Ontario businesses is an accounting error that has cost taxpayers almost $200 million in a bailout program known as Sustainable Development Technology Canada.

As in 2016, auditors from Auditor General Bonnie Lysyk say the government broke federal laws when it gave money to businesses that couldn’t prove they were following some of the rules governing eco-venture funding programs.

“The lack of verification is a problem that has had serious financial impacts on EDC and Ontario businesses,” Lysyk said in a statement.

Ontario’s Eco-Investment Fund, rolled out in 2014, had $1.8 billion in venture capital committed but by 2016 auditors found almost $210 million in potential fraud, including a $40 million company that had more than $90 million committed for projects that it hadn’t done.

The GIS is a predecessor to “green industry” funding called Sustainable Development Technology Canada, or SDTC, which has earned tens of millions in subsidies. In October, the Ontario government announced an agreement with the federal government to get rid of the SDTC program, bringing with it the eco-investment fund and the cancelled GIS.

In recent audits Lysyk and other auditors have found that millions in eco-fund handouts may not have been fairly distributed in the first place.

Businesses participating in the GIS aren’t allowed to collect money until they make their first investment, but at least six businesses have raised $19 million since the fund launched, auditors said.

The report says Canada Revenue Agency rules governing these investments are more rigorous than those governing other venture capital programs, but also isn’t as tough as enforcement.

Even when a business did declare it was acting in good faith, auditors say the government didn’t “quite know what it was getting into.”

Consistent with past audits, auditors noted a lot of businesses didn’t give proper information to auditors, such as how much money the projects were actually being invested in, where the investor would place that money or the trading terms of the venture.

Related: Ontario’s $1.8 billion green fund a laggard as claimed by business leaders, feds

The bank account from which companies received sustainable development technology funding is supposed to close on December 1. Despite the audit and plans to fund two projects for a year, the program will operate just in time for the filing deadline.

The auditor general says it’s still up in the air what will happen with the SDTC, but that people who are authorized to receive funds under eco-investment should now stop fundraising and return the funds they’ve already collected.

Ontario’s cabinet is expected to consider the issues raised in the audit and what to do about the SDTC program in the coming days.

Following the Auditor General’s announcement, Innovation Minister Marie-France Lalonde said government officials have “no plans to write off $208 million of the $868 million under the green investment fund or refund anything to EcoInvest business.”

“Where money did not originate from the green fund and where proof of funding exists, a loan has been made that will be repaid,” Lalonde said.

Leave a Comment