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Last month, Ontario Finance Minister Rod Phillips, seen here in Toronto on March 18, 2020, said all federal funds handed to Ontario had been allocated.Frank Gunn/The Canadian Press

Ontario had $12-billion in unspent contingency funds when the second wave of COVID-19 hit this fall, even as schools resumed with larger-than-recommended class sizes and virus testing centres were overwhelmed, according to a report from the province’s independent fiscal watchdog.

In its review of the province’s spending in the second quarter, which ended Sept. 30, Ontario’s Financial Accountability Office (FAO) says the money was held as of that date in three funds: one earmarked for COVID-19 health spending; another for pandemic support for employers or individuals; and a general budget contingency fund.

The tally of unused funds was $2.7-billion more than the $9.3-billion the FAO said had been left unspent as of Aug. 24 in a previous report. Opposition politicians said the government should have spent more, and more quickly, on hospitals, long-term care homes, schools, testing labs and support for small businesses, to better prepare Ontario for COVID-19′s second wave, which has forced restaurants and retailers to close in virus hot zones and put some hospitals over capacity.

Responding to the report, Ontario Treasury Board president Peter Bethlenfalvy said the government has added $14.5-billion in spending on COVID-19 over all since March. And he said the government has since spent or allocated 80 per cent of the money in the contingency funds singled out by the FAO, putting it toward COVID-19 testing, contact tracing and extra hospital beds, among other things.

The FAO report in Ontario – the only province with a financial watchdog similar to the federal Parliamentary Budget Office – was released just before a first ministers’ meeting Thursday with Prime Minister Justin Trudeau focused on health care funding. Provinces say the federal share is only 22 per cent of their costs, and dropping. They want it raised to 35 per cent. The leaders are also expected to discuss the vaccine rollout.

When the $12-billion in contingency funds identified by the FAO was sitting idle in September, the province’s swamped testing system forced the government to stop tests for most people without symptoms. In August, it had vetoed Toronto District School Board plans for smaller class sizes. And it only announced plans to hire 3,700 more front-line health care workers in late September.

Mr. Bethlenfalvy did not directly respond to questions about why the government’s cash on hand was so large as of Sept. 30, when critics say it was clear Ontario was struggling to cope with the second wave and should have spent more cash to prepare for the fall.

“At the end of the day, the actual funds flow, and when you pay your bills, you may have committed the spending but you have not flowed the money,” Mr. Bethlenfalvy said. “So you may have bought something, but you don’t have to pay for it right away.”

He said the government was sparing no expense in fighting COVID-19: “It’s being committed to, it’s being allocated, and it will show up in the numbers. Rest assured ... that money is flowing. Don’t worry about the technical, back-office flow of funds.”

On Tuesday, the Ontario NDP cited the $12-billion contingency funds as it accused the province’s Progressive Conservative government of accepting billions in COVID-19 aid from Ottawa but then failing to use it. The Ontario government denies this is the case.

Last month, Ontario Finance Minister Rod Phillips said all federal funds handed to Ontario had been allocated. Emily Hogeveen, a spokeswoman for Mr. Phillips, said under the $19-billion Safe Restart Agreement signed by the provinces and territories and Ottawa in the summer, Ontario is entitled to about $5.1-billion in federal cash. It has so far received $4.8-billion, she said, with $1.17-billion earmarked for contact tracing.

Peter Weltman, Ontario’s Financial Accountability Officer, said he could not say how much of the $12-billion was federal money, but that his office is preparing another report to analyze Ontario’s accounting of the COVID-19 money it has received from Ottawa.

Similar concerns about how federal COVID-19 money for the provinces is being used have emerged elsewhere. Under the Safe Restart deal, provinces and territories signed agreements with the federal government on how the money would be spent. But there is little transparency about how the funds have been used.

In September, Alberta Premier Jason Kenney committed to spend $1.3-billion in Safe Restart funds to increase COVID-19 testing, enhance health care capacity, funnel money to municipal transit systems, and buy more personal protective equipment. However, the Alberta Federation of Labour says the Kenney government has spent only a tiny fraction of the money available to it through a federal cost-shared program to support essential workers during the pandemic.

Ottawa included $2-billion for municipalities, but that money has been slow to trickle down in some cases. Vancouver Mayor Kennedy Stewart says his city was “shafted” because British Columbia did not opt to parcel out those funds on a per capita basis, instead increasing the share available to rural communities.

He predicts the federal government will look for ways to transfer money directly to municipal governments next time around: “The federal government is taking a hard look at how they are rolling money out. The traditional way has been to send it to the province. But a lot of the time, the federal intention doesn’t hit the ground.”

British Columbia has secured $3.2-billion under the Safe Restart plan, but it has not provided an accounting of how much of that money it has spent. Those details will be released at the end of the fiscal year in March.

A spokeswoman for federal Intergovernmental Affairs Minister Dominic LeBlanc said the government expects all provinces are doing their best to spend the money to curb COVID-19.

“We expect and are convinced all provinces, including Ontario, are hard at work to support Canadians through these exceptional circumstances,” spokeswoman Corinne Havard said.

In its budget last month, Ontario said it would run a record $38.5-billion deficit in 2020-21 as it fought COVID-19. It also said all but $5.1-billion of its contingency funds was already allocated to be spent by the end of its fiscal year next March, leaving extra money if things got worse. Any leftover cash is to be used to reduce Ontario’s deficit and debt at year’s end.

Late Tuesday, the Ontario government suddenly ended its legislative session two days ahead of schedule. In a statement, Ontario NDP Leader Andrea Horwath accused Mr. Ford of “calling it quits” at the height of the pandemic: “Giving up, going home and waiting for a vaccine is not a good second-wave plan.”

With a report from Marieke Walsh in Ottawa

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