Quebec’s Auditor-General says the Legault government provided emergency financial aid under its two main COVID-19 support programs to several businesses that did not strictly meet the test to receive help, including some that were already on shaky financial ground before the health crisis.
Of the 22 loan transactions her team scrutinized, 10 loans worth $68-million combined were given to borrowers that failed to meet the publicly available criteria of the government’s main pandemic support program, Auditor-General Guylaine Leclerc said in her annual report published Wednesday. They include two companies that have never been profitable, six others in financial difficulty well before the pandemic started, and one that received backing to fuel its expansion plans and not to weather the pandemic.
Quebec Economy Minister Pierre Fitzgibbon, acting on the analysis and recommendations of department staff, authorized help for several companies on the basis that they were deemed to be “strategic for the Quebec economy,” according to the Auditor-General’s findings. None of the companies are named in the report.
“To judge whether it was a ‘strategic’ company, I would have wanted to see the criteria for that,” Ms. Leclerc told reporters at a news conference in Quebec City. “Without any criteria, it becomes difficult to judge whether it is or it isn’t.”
The audit’s findings speak to some of the shortcomings in the way Premier François Legault’s government has handled support to business during the pandemic, an issue with which many other governments have struggled over the past two years. But they also raise questions once again about the extent to which the government’s financial decision-making is done in a discretionary way without full transparency.
“This opens the door” to favouring certain companies, Parti Québécois opposition member Méganne Perry Mélançon said. “And that’s why we have to shed light on all the loans that have been given.”
Mr. Fitzgibbon defended his government’s actions, telling reporters he personally intervened in about 25 pandemic business assistance cases and that all of the 10 loans singled out by the Auditor-General were recommended for approval by Investment Quebec staff. He said it’s impossible to completely standardize the lending process for all borrowers.
“A government has to be flexible,” Mr. Fitzgibbon said, adding companies can always approach the government if they believe they need help.
Quebec has provided financial backing to roughly 10,000 businesses hit by the fallout from COVID-19 through two main corporate assistance programs, known as PACTE and PAUPME, which together had a funding envelope of $3-billion as of March. Of the companies that received support, fewer than 0.5 per cent have declared bankruptcy, which shows the government’s goal of helping businesses push past the crisis has worked, according to the Economy Ministry’s formal response to the Auditor-General’s report.
Among the companies that have been publicly identified as receiving emergency backing from Quebec are hotel operators Groupe Germain and Groupe Tidan, as well as auto products distributor Uni-Select. Anjou, Que.-based Telecon, a planner of telecommunications network infrastructure, was the top recipient of assistance as of November, 2020, according to a list published by newspaper La Presse.
Quebec was able to grant the 10 loans identified by the Auditor-General under a clause in the PACTE program’s internal management guide that allows Quebec’s economy minister to exercise discretion on a case-by-case basis and authorize financial assistance even when the criteria are not met, Ms. Leclerc said.
Because the existence of this special clause was not communicated publicly, some companies might not have been aware they could benefit from aid, she said. She said this lack of transparency means the government did not provide a level playing field for all companies weighing whether to ask for help.
The Auditor-General said there were other problems with the way the government has managed taxpayer funds through the crisis. With respect to the PAUPME program, which is an emergency assistance program for small and medium-sized businesses run at the regional county municipality level, Ms. Leclerc’s team found no explanations justifying specific loan amounts and terms granted on several files.
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