A federal briefing note says more than a quarter of Atlantic businesses that get federal subsidies fail within five years.
“The business survival rate for Agency-assisted startups is 73 percent,” said the federal briefing note “Atlantic Canada Opportunities Agency” (ACOA).
However, it goes on to say the survival rate for businesses that did not get taxpayers’ help is a lot lower, at 33 percent, “for unassisted firms after the crucial fifth year following startup.”
The note adds that in 2021–2022, the agency disbursed $364 million in grants and subsidies, while its long-term average is about $276 million per year.
Subsidies averaged just over $230,000 in grants and loans per successful applicant, said the November 2022 note. “On average each year the Agency assisted 971 businesses.”
It adds that 82 percent of the agency’s clients have less than 50 employees, and 55 percent have annual revenues of $2 million or less.
It also notes sales by ACOA-assisted firms grew by an average of 4.2 percent per year.
The briefing note also points to challenges in the Maritimes’ economy.
Job vacancies are at an all-time high, it said, with more than 54,000 vacant jobs in the second quarter of 2022.
Housing prices are up more than 50 percent since the beginning of the pandemic, it adds, while the inflation rate in several Atlantic provinces has been higher than the national average.
“Agency funding agreements were standardized and not considerate of risk,” said the audit by the Office of the Comptroller General.
It found other problems too, such as the agency “does not include recipient reporting requirements” to prove taxpayers get value for money. Contracts were also “missing the start date and duration of the agreements and note the identification of project activity details and costs as ‘optional’,” said the report “Regional Development Agencies Internal Audit of Recipient Selection Phase II.”
Agency subsidies for insolvent firms included a $444,154 loan and $50,000 grant to a Prince Edward Island ethanol plant that closed in 2019.
The agency also awarded $638,360 in subsidies to a Cape Breton call centre that went bankrupt in 2018.
Parliament created the agency in 1987 to “promote the economic development of Atlantic provinces and enhance the region’s competitiveness,” according to its mandate under the Atlantic Canada Opportunities Agency Act.
