Final Evaluation of the Community Futures Program in Ontario
3.0 Evaluation Findings
This section of the report presents a summary of the evaluation findings, which are organized into the issue areas of relevance, design and delivery, success, and cost-effectiveness and alternatives. Under relevance, findings are discussed for: need for the program; complimentarity and duplication; linkages between CFDC, CF and Industry Canada objectives; and the role of the federal government in delivery the CF program. Design and delivery discusses findings regarding: the effectiveness of the CFDC networks; issues impacting the success of the program; CFDC involvement in strategic planning; management of investment funds; and performance measurement. Program success presents findings about: the appropriateness of information, referrals and counselling to clients; the impact on business knowledge and skills of clients; the impact on new and existing businesses; the needs of official languages minority communities; intermediate and finally long-term impacts of the CF program. Cost-effectiveness and alternatives explores findings on those two topics, while findings regarding other lessons learned and progress on previous recommendations are discussed subsequently.
Finding: SMEs are important to the development of local economies and the CF Program is supporting businesses that would otherwise not have been able to start, survive, or expand. Based upon independent research and other findings in this evaluation there is a continuing need for the CF Program as there are limited sources of funding for small businesses. Information from Statistics Canada also shows that areas served by CFDCs have consistently lower economic performance than the Ontario averages, although the gap varies by region, suggesting that the level of need for the Program may also vary by region.
Findings in this section are based on: interviews, research documents related to financing for SMEs, the client survey (i.e., loan clients), case studies, and Statistics Canada labour market data.
Contribution of SMEs to Rural Economies
As of December 2007, there were more than 2.3 million business establishments in Canada, with
37.6 percent of those businesses being located in OntarioFootnote 14. SMEsFootnote 15 in Ontario are small, typically with four or fewer employees and a recent report on small business statistics showed that over 50 percent of SMEs in Ontario employ one to four individualsFootnote 16.
According to the September 2007 report, Small and Medium Sized Enterprises in Ontario, SMEs account for 97 percent of all businesses in Ontario and are "important drivers of job creation and economic growth."Footnote 17 This same study shows that in 2004, the SMEs in Ontario accounted for 40 percent of the total GDP of the province. Similarly, a recent small business quarterly report by IC indicated that ‘rural-based entrepreneurship plays a significant role in the development and support of local economies.'Footnote 18 The report Small and Medium Sized Enterprises in Ontario also suggests that ‘access to financing is critical if SMEs are to develop and expand.'Footnote 19 Information from the evaluation shows that SMEs face challenges in accessing financing from traditional sources.
Availability of Financing for SMEs
All interviewees (39 of 39) agreed that there is a need for the CF Program, primarily because businesses cannot access other sources of funding in their regions. This notion was supported by the client survey, as almost all clients viewed access to capital as the CFDC service most needed by SMEs (94.4 percent). In fact 77.0 percent of clients surveyed were refused funding by a financial institution; with start-ups having a slightly higher refusal rate than existing businesses
(81.5 percent versus 72.1 percent). This rate of refusal is much higher than the 12.3 percent rate of refusal of rural Canadian businesses and 23.5 percent for all Ontario businesses, reported in the Survey on Financing of Small and Medium Enterprises.Footnote 20 This suggests that CFDC clients are less likely to receive bank financing than other rural or Ontario businesses. This could be an indication of the need for the program among CFDC clients. Note that 43.1 percent of clients suggested that they did not apply to a financial institution before approaching a CFDC, which is surprising given that CFDCs are targeting those who are not able to access traditional financing. Although, only two-thirds of loan clients interviewed for the case studies had first approached a bank, the other third had not done so primarily because they knew they would be turned down.
There is some existing research to support the notion that there are challenges for SMEs in accessing financing from financial institutions. The June 2008 Senate Report, Beyond Freefall: Halting Rural Poverty noted that "the challenges of accessing credit in rural Canada have long been recognized at the federal level." The report goes on to state that "arguably the most successful program to help address this concern has been the Community Futures program."Footnote 21 Also, in a November 2007 survey by the Canadian Federation of Independent Businesses, 61 percent of SMEs surveyed identified "securing term financing or loan from a bank" as the biggest financial barrier to establishing a business.Footnote 22
A 2007 Government study suggested that small firms are less able to obtain financing than large firms and that small firms are more likely to turn to informal sources of capital, including personal finances.Footnote 23 Also, according to the Survey of Suppliers of Business Financing, in 2001 only 12 percent of overall lending by chartered banks was for small authorizations (i.e., less than $1 million).Footnote 24 This is also supported by data from the SME financing data initiative, which found that there was a link between loan refusal rates and firm size with smallest firms having the highest refusal rates of all firms.Footnote 25 Therefore it appears that small SMEs are more likely to require non-traditional sources of financing than large and medium-sized SMEs. Information from the case studies is consistent with this, particularly with those loan clients interviewed in Belleville and Brantford. In these two communities, the CFDCs were supporting very small business with few employees (i.e., less than 5).
Need for Services Provided
Clients surveyed noted a great need for all the services provided by CFDCs, with access to capital seen as the greatest need (94.4 percent). The majority of clients also noted a need for business information (93.3 percent), business counselling (92 percent), referral services (90.3 percent), and training (90.1 percent). CFDCs surveyed felt very strongly that all services provided by CFDCs were needed and, in fact, for all activities CFDCs survey respondents indicated that there was either some need or a great need for the services, with the exception of one respondent who believed that there was little need for referral services. As for community economic development (CED) work, almost all clients believed there was either some or a great need for assistance with projects and almost all (99.4 percent) felt there was either some need or a great need for assistance with strategic community planning and socio-economic development. CFDCs were equally supportive of this with 92.7 percent of CFDC survey respondents saying there was either some need or a great need for assistance with strategic community planning and socio-economic development.
A recent study by Dr. Robert G. Roseheart also cites a need for a program similar to the CF Program, indicating that "overall, rural and regional economies are somewhat challenged to attract attention because of the current academic fascination with urban clusters, and the concentration of Research and Development (R&D) spending in cities."Footnote 26 He notes that in the northwest "much of the job creation is expected to come from small start-ups or expansion of small-and medium-sized companies ... There is a need to provide a business-friendly climate in the region to encourage business to start, expand and grow, and to encourage the creation of new business by new entrepreneurs."Footnote 27 While this is in reference to northwest Ontario, it likely has relevance throughout the province.
The CF Program is also needed because it has provided assistance to SMEs that would have had difficulties starting, expanding or maintaining their businesses. Clients surveyed generally agreed that had they not received CFDC support, they would not have been able to start/maintain/expand their business. However, of the survey respondents who were refused a loan, 45.0 percent indicated that they have been able to start/maintain/expand without the assistance. Information from case studies suggests that while some businesses would still exist in the absence of CFDC support, their owners suspect that the businesses would be smaller and their plans would have taken longer to complete. The case studies also highlighted the role CFDCs play in Northern Ontario towns whose economies are largely tied to commodities. As the demand for these commodities, such as steel, gold and lumber, rise and fall the main employers in the small towns can be seriously affected. CFDC loans help maintain significant players during downturns and help others grow rapidly as demand shifts.
Information from Statistics Canada shows that the regions served by CFDCs generally have lower economic performance than Ontario overall. The size of the labour force for the regions served by CFDCs grew 12.6 percent between 1996 and 2006.Footnote 28 Despite this, the labour force participation rate of the CFDC served areas has remained relatively constant at 63.6 percent over the same time period. This is between 2.7 percent and 3.8 percent below the provincial average (see Table 13). There is some variation in these numbers by region and by size of population served. In 1996 and 2006, two regions (South Central and West) had participation rates slightly above the overall Ontario rate. The CFDCs which serve populations of less than 49,999 had participation rates that were much below the provincial rate, while the larger communities approached, but did not equal, Ontario's rate.
|CFDC regions (average)||63.6||63.5||63.7|
|10,000 – 49,999||61.1||60.5||59.7|
|50,000 – 100,000||65.1||65.5||65.7|
The CFDC served regions, on average, also have consistently higher unemployment rates than Ontario overall (Table 14).Footnote 29 There is, however, some variation by region and by size of population served. The Northwest and Northeast regions have unemployment rates much higher than the overall provincial rates, while the East and South Central regions have unemployment rates lower than the overall Ontario rate. CFDCs which serve smaller populations also have much higher unemployment rates than the Ontario rate.
|CFDC regions (average)||10.7||8.1||7.1|
|10,000 – 49,999||12.4||10.2||8.7|
|50,000 – 100,000||8.8||5.6||5.5|
The average earnings in the CFDC served areas were also below the overall Ontario average (Table 14). None of the regions had average earning rates as high as the provincial value. The smallest communities had the lowest average incomes and the largest communities had the highest.
|CFDC regions average||24,059||29,011||32,954|
|10,000 – 49,999||23,221||28,087||31,033|
|50,000 – 100,000||24,171||29,348||33,632|
The labour market information and the research presented above suggest that small businesses in small communities (i.e., less than 50,000) have a higher level of need for the CF Program than medium and larger businesses in larger communities (i.e., more than 50,000). There may also be a larger need for the Program in certain geographic areas, such as the Northeast and Northwest, which have had consistently higher unemployment rates than Ontario. The Northeast region is also well behind Ontario in average employment earnings.
Finding: Information from the evaluation found that the CF Program, with the provision of access to capital, business services, and CED activities, is a unique program that is not wholly duplicated by any other program. There are other federal, provincial, and municipal programs that provide services similar in nature to certain components of the CF Program, including two FedNor programs, which are often complimentary, rather than duplicative.
Findings in this section are based on: interviews, review of CF, EODP and NODP program documents, the client survey, and the CFDC survey.
Many interviewees (29 of 39) were aware of other programs that compliment/duplicate the CF Program, although many believe that these other programs are complimentary (17 of 29). Note that CFDC board chairs were least aware of other programs. Clients and CFDCs surveyed were also aware of other programs that offer similar services to the CF Program (Figure 2).
It is interesting to note that clients were more aware of other programs or organizations that offer financing than the CFDCs. It is also interesting to note that CFDCs were much more aware of other organizations or programs that offered business information and referral services. This may be a result of the CFDC having better access or being better connected to the other types of programs and organizations that offer these types of services.
With respect to strategic community planning and socio-economic development, less than half of CFDCs surveyed (44.8 percent) felt that there were other programs or organizations that offered this service. This was very similar to partners surveyed, with 43.6 percent indicating they were aware of other programs or organizations that offer strategic community planning and socioeconomic development.
Programs External to FedNor
Information gathered from the evaluation showed that the other sources of financing for SMEs include banks and the Business Development Bank of Canada (BDC) and the Canada Small Business Financing Program (CSBFP). With respect to other programs or organizations offering counselling, stakeholders identified the Enterprise Centres, the Ontario Small Business Centres, and the Self-Employment Benefits (SEB) program, which are all operated by the Provincial Government. CED partners surveyed indicated that some municipalities also undertake strategic community planning and socio-economic development and that there are a few other organizations offering this service.
CFDCs and FedNor staff believe there is good cooperation between programs and organizations offering complimentary services (24 of 28). For example, the CFDCs and the BDC have a referral agreement in place, whereby the CFDCs will provide loans to SMEs that are less than $150,000 and the BDC will provide loans to SMEs that are more than $150,000. Some organizations are also co-located, such as with Trenval BDC. Trenval is co-located with the Ontario Ministry of Agriculture Food and Rural Affairs (OMAFRA), Enterprise Quinte, and the Quinte Economic Development Commission. This allows for good cooperation and sharing of information between the organizations and offers clients one-window to business information and services, which minimizes the duplication of services. Information from the case studies also showed that the SEB and CF programs are often used by clients in conjunction with one another. Case study clients interviewed who obtained a loan from the CFDC also often took advantage of the SEB program, which offers participants a small salary for their first year of operation. Clients believe that the combination of the two programs made it possible to take the risk to start a business.
Programs Internal to FedNor
FedNor offers two other economic development programs in addition to the CF Program: the NODP and the EODP. NODP was first established in 1987 when FedNor was created. Its focus is on promoting economic growth in Northern Ontario in five areas: community economic development; trade and tourism; innovation, information and communications technology; business financing support; and human capital. NODP is delivered by FedNor program officers, who work with clients to complete the application process.
EODP was established in 2004 to promote regional economic development in rural Eastern Ontario by investing in projects in five priority areas: business development, skills development, access to capital, retention and attraction of youth, and technological enhancements. The program is delivered through the 15 CFDCs serving the Eastern Ontario region.
A single CFDC does not have access to both EODP and NODP. CFDCs in the West, Southwest and South Central regions have access to neither program.
EODP, NODP, and the CF Program are similar in that they have common objectives and desired outcomes and in some cases, offer similar services (Table 16). All three programs are generally focused on promoting growth and economic stability; diversification; and sustainable, self-reliant communities. While these programs are focused on similar objectives, each takes a different approach in fulfilling these objectives. The CF Program offers repayable financing to SMEs in local communities and provides support to communities for economic development activities (i.e., through technical or financial support). EODP offers contributions to projects that support program objectives and the CFDC can access the funding for its own activities or provide the funds to a third-party through a contribution agreement. The NODP offers repayable and non-repayable contributions and repayable loans for projects that support its program objectives.
The three programs also overlap in the geographic areas served. The CF Program targets all of rural Ontario, EODP targets rural Eastern Ontario and NODP targets Northern Ontario.
The CF Program focuses on local CFDCs; regional, provincial and national CF associations; incorporated, non-profit organizations working to establish a new CFDC; and incorporated, non-profit organizations establishing or administering an Investment Fund Pool. EODP has both primary and secondary recipients. The primary recipients of the Program are the CFDCs of Eastern Ontario and the Eastern Ontario CFDC Network Inc. The secondary recipients include: non-profit organizations, including municipalities and municipal organizations, community development organizations, and associations; legal commercial entities including individuals, corporations, partnerships, cooperatives and trusts; and Aboriginal organizations. NODP focuses on: capital providers; SMEs (less than 500 employees), including corporations, partnerships, cooperatives, proprietorships; and non-profit organizations, including Aboriginal organizations, community development organizations including CFDCs, post-secondary institutions, and municipalities and municipal organizations.
|Community Futures||Eastern Ontario Development Program||Northern Ontario Development Program|
|Program Objectives||Fostering economic stability, growth and job creation; helping to create diversified and competitive local rural economies; and helping to build sustainable communities.||Promote socio-economic development; create a competitive and diversified regional economy; contribute to the successful development of business and job opportunities; and sustainable self-reliant communities.||Promote growth, economic diversification, job creation, and sustainable, self-reliant communities.|
|Delivery Structure||Delivered by 61 CFDCs||Delivered by 15 CFDCs in Eastern Ontario||Delivered by FedNor|
|Geographic Coverage||Rural Ontario||Rural Eastern Ontario||Northern Ontario|
15 CFDCs in Eastern Ontario are the primary recipients. CFDCs may enter into agreements with third parties, including:
|Funding Structure||CFDCs may receive non-repayable contributions. CFDC investment funds and investment fund pools are provided in the form of repayable loans, loan guarantees, or equity investment to SMEs, including Social Enterprises.||Contributions will normally be non-repayable, unless revenue streams are generated to allow for repayment||Both repayable and non-repayable contributions|
FedNor and CFDC interviewees believe that EODP and NODP are complimentary to the CF Program because it allows the CFDCs to access funding to undertake activities to support their CF objectives that may not have otherwise been possible. Between April 2002 and March 2008, CFDCs accessed a total of $75.7 million in EODP and NODP funding (Table 17). These funds were used for capitalization of investment funds, operating costs, bilingual services and CED projects.Footnote 30 A total of $14.5 million was accessed by CFDCs through NODP for capitalization of investment funds. CFDCs accessed a much larger proportion of funds for operating expenses through EODP ($1.2 million) than through NODP ($127K). Ten different CFDCs accessed NODP funds to assist with providing bilingual services. CFDCs accessed both NODP and EODP funds for CED projects, totalling $59.3 million over the past six years.
|Capitalization of investment funds||$ 14,502,754||$ 0||$ 14,502,754|
|Operating expenses||$ 127,458||$ 1,203,356||$ 1,330,814|
|Bilingual services||$ 590,477||$ 0||$ 590,477|
|CED projects||$ 24,778,935||$ 34,480,183||$ 59,259,118|
|Total||$ 39,999,624||$ 35,683,539||$ 75,683,163|
The evaluation identified some potential duplication between EODP, NODP, and the CF Program. The first area of potential duplication is in the services provided. All three programs support CED and have an access to capital component. With respect to access to capital, according to information on these programs, it appears that the recipients are intended to be different types of businesses and/or organizations and therefore there is likely little duplication in this service. However, with respect to CED, it appears possible that similar organizations are being funded through EODP, NODP, and the CF Program to undertake similar kinds of activities.
Information from the annual reports also raises questions as to whether there is some duplicate reporting between EODP, NODP and the CF Program. In the annual reports for the CF Program, CFDCs are required to report CED activity. The CFDCs in the four regions that have access to EODP and NODP funds reported contributions to CED projects in excess of $17 million dollars over a two-year reporting period, while the CFDCs that do not have access to EODP and NODP reported contributions to CED projects of just under $500,000. It is unlikely that the CFDCs in the Northwest, Northeast, Southeast and East regions have contributed such a large amount of funding through their own operating funds for the CF Program and therefore are likely reporting activities done through EODP and NODP under the CF Program. This has been identified as an issue because this means that there is duplicate reporting occurring between NODP and the CF Program and EODP and the CF Program.
Finding: CFDC objectives are in line with the objectives of the CF program as they both focus on economic growth, diversification and the sustainability of communities. The CF Program objectives are in line with Industry Canada objectives primarily through the priority related to building competitive and stable communities.
Findings in this section are based on: interviews with stakeholders, review of program documents, the CFDC survey, and case studies.
Consistency of CFDC Objectives with National CF Program Objectives
According to foundation documents for the CF Program, the objectives of the program are:
- economic stability, growth and job creation;
- diversified and competitive local rural economies; and
- sustainable communities.
CFDC survey respondents believe that the objectives of the CFDCs are much in alignment with the overall objectives of the CF Program (93 percent). CFDCs indicated that their objectives are to foster economic growth and stability, foster creation and maintenance of jobs, help create diversified and competitive local economies, and help build sustainable communities. All FedNor and CFDC interviewees that were able to respond to this question (31 of 31) agreed that the objectives of the CFDCs are well aligned with the CF Program objectives. Note that two CFDC board chairs were unfamiliar with CF Program objectives.
Consistency with the Industry Canada objectives
According to its Report on Plans and Priorities (RPP), IC has three strategic objectives, which are:
- a fair, efficient and competitive marketplace;
- an innovative economy; and
- competitive industry and sustainable communities.Footnote 31
The priorities under the final objective are to support industrial sectors which are important to the Canadian economy and help Canadians so that they may take advantage of economic opportunities, support business development, provide long-term growth and promote sustainable development.Footnote 32 These priorities are closely aligned with the objectives of the CF Program of economic stability, growth and job creation; diversified and competitive local rural economies; and sustainable communities. Information from FedNor interviewees confirmed this, saying there is a high level of consistency between CF Program objectives and those of Industry Canada (12 of 13). The areas of consistency included sustainable communities (cited by 5 of 12 interviewees); diversification (5 of 12); and improved access to capital (3 of 12).
Finding: The federal government has a legitimate role to play in the delivery of the CF Program and while the province does have a rural plan, there is a perception that the provincial government's involvement in rural economic development has been limited.
Findings in this section are based on: interviews with program stakeholders and document review.
In 2004, the province of Ontario developed its first rural plan for Ontario. This plan outlined the government's commitment to addressing the issues that face rural communities and set three priorities: strong people and strong economy; better health; and success for students. The plan was updated on an annual basis and progress relative to the plans goals and objectives is also reported annually.Footnote 33 In support of this plan, the province offers a number of programs that are available to individuals, businesses, community organizations, and municipalities in rural communities. For example, the Rural Economic Development (RED) Program offers funding for projects that will assist with overcoming barriers to economic development growth. The province also has programs that offer support for infrastructure (e.g., Ontario Biogas System Financial Assistance Program, the Canada–Ontario Municipal Rural Infrastructure Fund, and rural connections). The province also supports the Business Retention and Expansion (BR+E) Program. This program ‘promotes job growth by helping communities learn about issues and concerns of, as well as opportunities for, local businesses and set priorities for projects to address these needs. Ultimately, communities will have greater success in attracting new business if existing businesses are content with local economic conditions and community support.'Footnote 34
All FedNor senior managers and external stakeholders interviewed (9 of 9) believe that there is a legitimate role for the Federal Government to play in the delivery of the CF Program. The main reason cited for this is a perceived lack of provincial investment in rural development (6 of 9). Similarly, the 2008 Senate report Beyond Freefall: Halting rural Poverty stated that the Community Futures program is "one of the few unequivocal success stories in federal rural policy and…one of the few visible signs of the federal government in rural Canada."Footnote 35 Furthermore, the 2007 Speech from the Throne noted the role of the federal government in "ensuring economic security for all Canadians."Footnote 36 Interviewees also believe that national consistency in the delivery of the Program is more attainable when it is delivered federally (5 of 9) and that it is important to have a federal presence in rural communities (4 of 9). It is interesting then that, while the province has a rural strategy in place, there is a perception that its involvement in rural economic development has been limited.top of page
Finding: The provincial and regional networks are seen as effective because they are relevant to local conditions. The national network is seen as less effective because of a lack of communication and lower participation due to the cost involved in maintaining the network.
Findings in this section are based on program documentation, stakeholder interviews, and the CFDC survey.
There are three networks in place for the CF Program. A pan-Canadian network was established in 2000 to provide a framework for regular collaboration and sharing of best practices throughout the country. This network works through provincial networks established in each of the provinces and territories, including the Ontario Association of Community Futures Development Corporations (OACFDC) in Ontario. The OACFDC was established in 1994 and works to provide a range of services to its member CFDCs (e.g., professional training and development, sharing of best practices, group benefits, government liaison). In Ontario, seven regional networks have been established (i.e., in each of the seven CFDC regions) with a representative of each of these regional networks liaising with the OACFDC.
Both interviewees and CFDC survey respondents believe that the provincial and regional networks are effective. The majority of FedNor and CFDC interviewees (21 of 25) and almost all CFDC survey respondents (95.7 percent) felt that the provincial network is effective and adds value to the CF Program. Similarly, FedNor and CFDC interviewees (20 of 26) and the CFDC survey respondents (84.8 percent) felt that the regional networks were effective particularly for sharing information and best practices.
There were mixed views on the effectiveness of the pan-Canadian network, with 11 of 21 FedNor and CFDC interviewees suggesting that it was ineffective and did not add much value to the overall program and only 9 of 21 suggesting that it was effective. It is interesting to note that FedNor interviewees rated the pan-Canadian network as less effective than CFDC interviewees. These results are similar to the CFDC survey, as 55.8 percent of respondents rated the national network as effective, while the remainder felt it was ineffective. Reasons for rating the network as ineffective include the cost involved in participating in conferences and a lack of communication. Overall it would appear that FedNor and CFDCs view the provincial and regional networks as more effective because they offer more opportunities for sharing information and are more relevant to local situations.
Finding: The evaluation did not identify any issues that are impacting on the success of the program, and found that the program appears to be working well. However, the lack of performance data may hinder the program's ability to measure its success.
Findings in this section are based on interviews, the CFDC survey, and observations made by GCS during the analysis of available program data (i.e., Quarterly Reports and annual reports).
Due to concerns with respect to the reliability of Quarterly Report data, especially with regards to reporting of business services provided, findings on program success are primarily based on soft data. In examining the data gathered for the evaluation, no issues were identified as having a negative impact on the success of the program, which is likely related to the fact that the CF Program has been in place for a number of years and, over time, modifications have been made to address any previous issues that may have existed. FedNor and CFDC interviewees did, however, believe that funding is an issue impacting the program. Nineteen of 21 interviewees suggested that at a national level, there are issues related to funding, some of which include: restricted funding limits (i.e., maximum loan value of $150,000), insufficient funding available (e.g., for operations, for investment fund), and uncertainty surrounding program renewal. Similarly, when asked about program issues at the provincial level, many FedNor and CFDC interviewees (24 of 28) cited funding issues, particularly related to shortages in operating funds and unequal access to funds for CED projects.Footnote 37 Note that at both the national and provincial level, funding was equally cited as an issue by FedNor and CFDC interviewees. At the community level, both FedNor and CFDC interviewees (11 of 13) expressed some concern about issues related to the management of the CFDCs such as maintaining capacity of staff and recruitment challenges, access to technology and training resources, and board governance.
Forty-six (of 54) CFDC managers and 32 (of 42) CFDC board chairs cited program challenges in the CFDC survey. Funding was the biggest program challenge, cited by 40 CFDC managers and 22 CFDC board chairs. More specifically, there was an identified need for more operational and investment funds. Some respondents (16 of 46 managers and 6 of 32 board chairs) also suggested that administration requirements (e.g., reporting) were a challenge.
Only 21.6 percent of client survey respondents identified challenges in working with the CFDCs. Financial and non-financial clients identified more challenges than CED partners (41 percent or 84 of 203; and 45 percent or 92 of 203, respectively). Only 13 percent of CED partners (27 of 162) cited challenges, the most common of which was general challenges with the governance and/or management of the program (cited by 8 CED partners).
The most frequent challenges cited by financial clients related to limited funding and/or caps on funding levels (20 of 84 respondents). Other challenges which were listed by financial clients included:
- structure of borrowing and loan conditions (15 of 84 respondents);
- cumbersome and long application process (9 of 84 respondents); and
- general challenges with the governance and/or management of the program (6 of 84 respondents).
Surprisingly, some non-financial clients cited limited funding and/or caps on funding levels as the biggest challenge (14 of 92). The survey information did not yield an explanation for this. Non-financial clients also felt that getting information (i.e., correct information, information on services) was a challenge (11 of 92).
While funding challenges were cited by many interviewees and some survey respondents, the evaluation did not provide any evidence to suggest that a lack of funding may be preventing the program from achieving its objectives. There is evidence however, that there are issues related to performance measurement (e.g., completeness and reliability of data) which may be impacting the program's ability to measure its success. This issue is discussed further in section 3.2.5 (Performance Measurement).
Finding: CFDCs are involved in strategic community planning and socio-economic development, primarily as participants and not leads, and are aligning their activities with those plans. Where CFDCs are leading strategic planning, they are bringing together community groups in the development of the plans.
Findings in this section are based on the client survey, and interviews. Due to the limitations with respect to the client survey, particularly due to the limited number of partners surveyed that have partnered with a CFDC for strategic planning, GCS's confidence in the reliability of these findings is low.
The majority of partners surveyed indicated that their community has a strategic plan in place (99 of 153) and many of these partners (59 of 92) suggested that the CFDC was a participant in the process, not the lead. This is consistent with the CFDC survey, which showed that CFDCs have been involved in developing 688 community strategic plans, but they were the lead only 32.5 percent of the time (224 times). Information gathered from the case studies suggests that, in some communities, it is the municipality that retains the lead role in community strategic planning. In these communities, CFDCs would be invited as a community partner to participate in the process. CFDCs are more likely to initiate a strategic planning exercise in a community where municipal resources and/or capacity may not exist to do so.
Where CFDCs are taking the lead in strategic planning, interviewees indicated that community consultation, normally led by a third-party consultant, was the primary process used. This is consistent with information gathered from partners, as the majority (10 of 14) said they attended a consultation session.Footnote 38 Interviewees suggested that when CFDCs are leading strategic planning, they have brought together members of the community, with the majority indicating that normally more than 10 organizations and community groups are represented in the consultations. Information from the CFDC survey suggested an even higher level community involvement. The survey showed that the majority of CFDC respondents (43 of 96) consulted 20 or more organizations.
Partners surveyed agreed (17 of 19) that the level of community involvement in strategic planning was appropriate. CFDC interviewees and CFDC survey respondents were in slightly less agreement about community involvement. While many CFDC interviewees (22 of 32) believe that there is a good level of community involvement, 5 (of 32) suggested that it varies from CFDC to CFDC, and 3 (of 32) believe that community representation could be better. Similarly, while most CFDC survey respondents (64 of 93) believe that the level of community involvement has been appropriate, many (21 of 93) were uncertain, citing challenges such as: remoteness and lack of resources, difficulties in engaging the community, and the fact that the CFDCs may not have input if the municipality is leading the process.
Most interviewees (17 of 21), most partners surveyed (76 of 85), and almost all CFDC survey participants (89 of 92) agree that CFDC activities are linked to community strategic plans. Information from the case studies showed that CFDCs generally look for a link between an application / project and a community strategic plan, although they do not necessarily refuse a loan or a project if it does not fit.
Finding: Generally, investment funds appear to be well-managed as shown by the level of loan activity and growth in investment funds. However, there are some large variations among regions, particularly with respect to the percentage of investment funds in active loans and loan loss rates.
Findings in this section are based on: interviews, document review, Quarterly Report data, and financial information from GCRS.
In examining the management of investment funds, the evaluation aimed to assess whether the number and level of loans was meeting client needs. In TEA, CFDCs tracked the number of applications received from businesses from 2004 on. Information is limited however, because businesses that approach the CFDC about financing, but for various reasons, do not proceed to the application stage, are not captured in this system. Therefore, it is difficult to know the volume of loans provided to businesses relative to the demand for that service.
With respect to the number of loans provided to clients, since April 2002 the number of loans provided by CFDCs each year has been decreasing slightly, from a total of 1,151 loans in 2002-2003 to 974 loans in 2007-2008. However, as the volume of loans has decreased, the average dollar value of loans has been increasing slightly almost every year, rising from $45,362 in 2002-2003 to $52,551 in 2007-2008. It is interesting to note that generally a decrease in loan numbers is matched with an increase in the dollar value of loans. This would suggest that the level of loan activity has been fairly constant over that time period and there has been a trend towards providing fewer loans of higher value. Not surprisingly new CFDCs (i.e., those created since 2001) have lower levels of loan activity than established CFDCs, providing a lower number of loans that are of lower average dollar values. CFDCs that serve regions with a population of less than 10,000 have provided many more loans of smaller dollar values than areas with larger populations. The CFDCs in Southern Ontario, which tend to serve larger populations, have the opposite trend, providing SMEs with fewer loans, but of larger dollar value. This is likely related to the fact that SMEs in smaller communities would tend to be very small SMEs, thus with lower investment requirements.
To further assess the management of loan portfolios, the evaluation examined the proportion of the CFDC loan portfolio that was invested in active loans. Information from the Quarterly Reports shows that while there is a slight decreasing trend in the amount of funds that CFDCs have invested in active loans, there has been little variation over the years (average of 71.8 percent in 2004-2005 and 69.3 percent in 2007-2008). Therefore, CFDCs have maintained between 28.2 percent and 30.7 percent of their portfolio in financial reserves (between April 2004 and March 2008, the dates for which there is data). On a regional basis there is some variation in this figure, with the Northwest region having maintained the lowest amount of financial reserves (24.3 percent) and the East having maintained the highest amount of financial reserves (40.3 percent) (Figure 3). Based on the volume of loans and the financial reserves on hand, it would appear that the East region has the lowest level of loan activity of all other regions. While there are a number of factors that could explain this, such as changes in demand for services, it is more likely related to the fact that the CFDCs in the East are much more active in CED than most other regions. For more on this, see section 3.3.5 (Intermediate Impact of the Program).
An investment study commissioned by FedNor in 2003 inferred that CFDCs should maintain approximately 30 percent of their lending activity in cash reserve. However they also noted that due to the seasonal nature of loan transactions and capitalization provided by FedNor, the required amount of financial reserves that should be maintained by a CFDC is in the order of 50 percent of the total investment portfolio.Footnote 39 Most regions are within this 30 to 50 percent range. FedNor has not endorsed the recommendations made in this study and has not adopted an official policy with respect to CFDC cash reserve balances within the investment fund.
The management of the investment funds was also analysed through examination of the level of growth of the CFDC's investment portfolio. The general trend with the investments funds has been one of positive growth. The total dollar value of investments funds for all CFDCs grew from $217.2 million in 2004-2005, when data is first available, to $255.5 million in 2007-2008. This represents an overall growth rate of 17.7 percent. While the value of these funds has been growing since 2004-2005, the rate of growth has been smaller each year (Table 18). This is also the case on a regional basis with the majority of regions experiencing slower growth in their investment funds in the past three years, with modest growth in the last year of operation. In fact the Southwest region saw a slight negative growth in the value of its fund, with four of the seven CFDCs in that region recording negative growth. While loan loss rates may provide some insight into the slowed rate of growth, information on loan loss rates is not available for consecutive years. This does not allow for an analysis in the trend in loss rates compared to the trend in investment fund growth. The evaluation did not yield any further explanations for this trend.
Variations in this indicator and others related to investment funds may be attributable to many factors including the need within the community, local economic situation, competing priorities and Board interests.
|Dollar value of investment fund ( millions)||$217.2||$234.3||$250.4||$255.5||-|
|Percent growth (with capitalization)||-||7.9%||6.9%||2.1%||17.7%|
Some CFDCs have received capital injections from either the CF Program or through NODP. Between April 2002 and March 2008, 22 CFDCs received $20.6 million for capitalization through the CF Program, with the CFDCs in the West, Southeast and South Central regions receiving the largest proportion of this funding (26.9 percent, 23.7 percent and 21.2 percent respectively). Since 2001, there have been nine new CFDCs created, including three in the Southeast, two in the West, two in South Central, and one each in the East and the Northwest. The two new CFDCs in South Central received 88.4 percent of capitalization dollars that went to the region, while those in the West received 53.0 percent. In the case of the Southeast, only 20.7 percent ($1 million) of the total capitalization for that region can be attributed to the creation of one new CFDC in 2003.
During that same time period, 16 CFDCs received $14.5 million for capitalization through the NODP program. These injections have influenced the rate of growth of the Northern CFDC investment funds. Although the growth rate is still positive once those injections are removed from the fund, the rate of growth is affected, diminishing from 12.2 percent to 5.8 percent. With only one exception, injections from the CF Program were directed to CFDCs outside of the regions that can access NODP funds (i.e., Northwest and Northeast).
The investment funds in the South Central, West, and Northeast regions benefited proportionally more from capitalization dollars. When these dollars are removed from calculations of investment fund growth their funds grew much more slowly (Figure 4). In South Central and the West this can be most likely attributed to the new CFDCs. New CFDCs have investment funds which are about a third the size of an average CFDC fund when capitalization is not included. These added dollars represent a large proportion of their fund. The three regions which have access to neither EODP nor NODP (i.e., South Central, Southwest and West) all have below average loan portfolio values. These regions are not able to accrue as much investment income as a result, making them more reliant on capitalization to grow their funds.
There is limited information available on loan loss rates. While CFDCs provide information that could be useful for loan loss rates, this information is not compiled and therefore is not available for analysis. A survey administered by FedNor in April 2006 provided information on loss rates for fiscal year 2005-2006. This survey was not been replicated in subsequent years. According to this survey, the average loan loss rate for all CFDCs was 10.8 percent (Table 19). However, there are very large ranges in loss rates across regions and CFDCs, with three CFDCs reporting a zero percent loss rate and others reporting loss rates of 20 percent and higher (5 CFDCs). In comparison with traditional financial institutions, the loss rates on CFDC loans are significantly higher, although not surprisingly given that CFDCs are mandated to provide loans to higher risk clients, whereas financial institutions generally lend on a lower risk basis.
|Organization||Average Loan Loss Rate|
|CFDC (average for 2005-2006)||10.80 %|
|Financial InstitutionsFootnote 40 (average 2001-2006)||0.2 %|
|Business Development Bank of Canada (2006)||1.00 %|
FedNor has not established a target range for loss rates and stakeholders had quite varied opinions. Some FedNor and CFDC interviewees suggesting loss rate levels are appropriate and some CFDC survey respondents suggesting that loss rates are too high. It is therefore difficult to determine whether or not these rates should pose a concern.
Recommendation #1: FedNor should work with CFDCs to establish general target ranges related to desirable levels of funds in active investment and loan loss rates based upon local realities. This would allow FedNor to assess a CFDC's loan portfolio performance and assist with improvements where necessary.
Overall, the CFDCs with the largest populations (i.e., 100,000 and up) had the smallest loan portfolios and investment funds, and the highest percentage of cash on hand. Based upon observations during the case study in Brantford, this may be as a result of increased availability of capital for small business generally in larger communities. Thus the CFDCs in these regions are serving smaller, less bankable, clients who are approved for smaller, shorter loans. These smaller, riskier loans may also be associated with higher loan loss rates. Unfortunately data on loss rates was not available for each CFDC, so cross-tabulation is not possible.
Interestingly the CFDCs with the smallest populations (10,000 or less) had the reverse, with large loan portfolios, large investment funds and low percentage of cash on hand. They also had above average number of closed deals annually, and above average value of new loans. Despite this, these CFDCs have well below average investment fund growth. Of the ten CFDCs with small populations, seven are found in the two northern regions, both of which have long standing investment pools. When a loan of up to $500,000 is made from one of these pools, the host CFDC has the associated loan and job statistics attributed to it. Thus, a sparsely populated CFDC may have a large loan portfolio on the strength of only one or two loans. On average though, these less populated CFDCs would have many small, loans, which would likely suffer from similar loan loss rates as the larger CFDCs.
Finding: While tools are in place for data collection and FedNor staff feel that performance data is sufficient, some CFDCs are not fulfilling reporting requirements, data provided is not reliable, and TEA is being under utilized. FedNor management of the program is not optimized.
Findings in this section are based on interviews, document review, and observations made throughout the data collection and analysis process.
Data Collection and Performance Reporting Requirements
FedNor has established data collection and reporting requirements for the CF Program (summarized in Table 20). This process begins with the development of a CFDC business plan, which outlines a CFDC's future goals, objectives, and planned activities and is essentially a proposal for funding for the operation of the CFDC. These plans have been required annually since program inception, although since April 1, 2002, some CFDCs operate under three-year operating agreements.Footnote 41 These plans are intended to form the basis against which CFDC performance will be assessed.
Beginning in April 1996, CFDCs requesting capitalization of their investment funds were required to submit an investment fund report. These reports provide historical and current information regarding a CFDC's investment fund status and activities, including growth of the fund. Around the same time, FedNor first purchased TEA, which is the information system in place to record administrative data concerning the program, including program outcomes.
Beginning April 1, 2002 CFDCs were required to provide annual reports to FedNor in a more standardized format. Previously, there was no consistent format for reporting performance. These reports provide an overview of the activities of the CFDCs and are mostly narrative with some quantitative statistics (e.g., number of loans, dollar value of loans, CED projects supported) included.
FedNor has also recently developed and distributed a business planning handbook (Spring 2008) to CFDCs which provides them with information on reporting requirements, including what data is required and timelines for reporting. The document has been distributed to CFDCs, but the extent to which it has been reviewed by CFDCs is not known.
|Requirement||Effect Date||Summary of Purpose||Frequency|
|CFDC Business Plan||Since program inception||The business plans provide an overview of the CFDC region, economy, challenges, etc., and present goals, objectives and activities for the CFDC for the coming agreement period.||Every year or every 3 years depending on the CFDC|
|CFDC Annual Report||April 1, 2002||Provide an overview of the activities of the CFDC each year. Mostly narrative, with some quantitative statistics (e.g., number of loans, dollar value of loans, CED projects supported). Annual reports are intended as a way to measure performance against indicators in the business plan.||Annually|
|Investment Fund Report||April 1, 1996||Provides historical and current information regarding a CFDC's investment fund status and activities. This is a requirement for CFDCs requesting capitalization of their investment fund.||Each year, as an attachment to the annual report|
|TEA Quarterly Reports||First purchased for use in 1996/1997 (not mandatory)||Provides information on the performance of each CFDC (mainly output-related, but some outcome indicators are reported).||Quarterly|
CFDC Compliance with Reporting Requirements
Information from the evaluation showed that some CFDCs are not complying with established reporting requirements. This is less of an issue with business plans because these plans provide the basis for funding arrangements between CFDCs and FedNor. According to a FedNor representative, CFDCs would not receive a funding agreement without that plan. The issue with respect to reporting compliance lies with the annual reports and TEA Quarterly Reports.
The first annual reports, using the new standard format, were submitted for the period starting April 2005 and generally include CFDC reporting periods between April 2005 and December 2006. FedNor currently keeps a log of the CFDCs that have provided an annual report. As discussed in the limitations of the methodologies, CFDCs submitted 43 and 34 annual reports in year 1 and year 2 respectively (of 61 CFDCs). Of the reports submitted, some were not in the standard format and not all reports contained information on CED activity. There have not been any consequences imposed on CFDCs that have not provided annual reports, thus there is no incentive for CFDCs to complete these reports.
With respect to TEA, the system is not mandatory and currently there are at least three CFDCs that do not use the system. A FedNor representative indicated that FedNor program officers in the field enter the information on behalf of those CFDCs.
Availability of Data
A review of TEA data showed that the system does not capture or generate all indicators required for performance measurement as per the CF RMAF. For example, it is not possible to determine the number of jobs created by sector, which is an indicator established to measure the impact of the Program on economic diversification. In addition TEA is limited to providing information related to program outcomes for loan clients (e.g., jobs created, businesses started) and does not track the longer-term impacts on businesses (e.g., impact on revenue, survival rate of businesses). There is also no system in place to capture the impact of CED work.
The system is also limited in providing information that would be useful to manage the program. While CFDCs are able to enter large amounts of information related to their loan portfolio, business services, and CED activity, it is limited in its ability to extract the information, being able to provide only the information that is in the pre-programmed quarterly reports. Note that the projects module (i.e., for CED) is not currently in use by the CFDCs. Also, through gathering information for the case studies, it was discovered that it is not possible to generate community-specific data. In one case, the CFDCs had been keeping separate records so were able to provide community-specific data; a second generated the data manually; and the third provided an estimate of the proportion of work in the community versus the region and the figures were extrapolated using that proportion.
Based on these findings, it appears that TEA has the capability to provide a complete data collection and reporting system for all CFDCs activities; however it is currently being under-utilized. TEA needs additional fields to capture data identified in the RMAF.
Use of Data
A few FedNor interviewees indicated that performance data is used primarily to measure program performance (3 of 13) and to make decisions about the program (3 of 13). According to a FedNor program representative, program officers in the field have access to all of the various data collected through the tools in place and use the information to ensure that CFDCs are on track with commitments set in their business plan and operating agreements.
Generally FedNor interviewees believe that they have enough information available to make decisions about the program. However, in reviewing the performance measurement data, the evaluation found that much of the information is not actually compiled in any way. FedNor has not yet been able to compile information gathered from the investment fund reports and it has only recently begun to scan in annual reports received and compile the information in a Microsoft Access database. This raises questions as to whether information being collected is used in any way to make decisions or to manage the program.
Most FedNor interviewees (10 of 13) feel that performance information is reliable. However, observations made during data collection suggest that there are issues with respect to data reliability. In reviewing the TEA data, numerous outliers were found and were removed from the data set for analysis purposes. For example, in 2003, three CFDCs reported average loan values in excess of $800,000, which far exceeds the maximum allowable loan value. Those CFDCs confirmed that it must be an error, but were unable to identify the source of the error. Note that a senior FedNor representative indicated that verification of the data is conducted in the field; however this was not confirmed in the course of the evaluation.
With respect to the outcome information entered in TEA (e.g., jobs created), this information is estimated at the time of application and no verification is done to determine whether that was in fact the actual job impact. It is expected therefore, that the recorded impact information may be higher than the actual impact.
The lack of performance information and the unreliability of the information that is collected raises questions as to whether FedNor is able to effectively manage its program.
Recommendation #2: FedNor should complete a review of the performance data collected for the CF Program to ensure reliable and meaningful reporting and establish additional indicators to provide information for assessing the longer-term impacts of the program, particularly for CED activities. In addition:
- FedNor needs to ensure that c is capable of capturing and reporting on all required performance information. It is possible that FedNor could reduce reporting requirements for CFDCs by maximizing its use of TEA and thereby improving its ability to manage the Program as well as make it more useful for CFDCs.
- FedNor should ensure that all CFDCs are fulfilling all reporting requirements and should establish consequences for those CFDCs that do not comply with the requirements.
- FedNor should ensure that CFDCs are not reporting activities undertaken and outcomes achieved through the use of EODP and NODP funds in CF Program reports (i.e., in the annual reports).
- To ensure data reliability, FedNor should implement a system whereby TEA data captured and submitted in the Quarterly reports would be reviewed on a regular basis; FedNor needs to work with the CFDCs to ensure data is corrected should issues be identified.
Finding: The provision of loans, business information, and counselling by CFDCs has been fairly consistent over the four-year period between 2004 and 2008. Clients believe there is a great need for these services and clients are very satisfied with the services provided.
Findings for this section are based on the Quarterly Report data and the client survey. Due to concerns with respect to the reliability of Quarterly Report data, especially with regards to reporting of business services provided, findings on program success are primarily based on soft data and hence the level of confidence in these findings is low.
As discussed in section 3.2.4 (Management of Investment Funds), the number of loans provided by CFDCs has decreased slightly, as the average dollar value of loans has increased. This suggests that the level of loan activity has been fairly constant over that time period. For the past four years, CFDCs have been tracking business activity (i.e., general inquiries and in-depth counselling) in TEA. According to this system, the number of general inquiries received by CFDCs has remained fairly consistent over that time period. As with the volume of loans, the newer CFDCs have had fewer general inquiries than established CFDCs, which suggests that newly established CFDCs may take a few years to fully establish their business services and loan portfolio.
Between April 2004, when data was first recorded, and March 2008, the CFDCs received a total of 202,961 general inquiries, and provided a total of 32,759 in-depth counselling interviews to clients. There are great differences between the numbers of general inquiries being reported, with some CFDCs reporting in excess of 6,000 annually, while others report fewer than 30 for all four years. Similarly, in-depth counselling ranges from three sessions per year to 896. These substantial differences call into question the validity of the data as some CFDCs may have different reporting practices for these services. However, demand for these services also likely plays a role.
The numbers of these services provided vary greatly by region, with the West providing the highest numbers for both of these services, with an average of 1,190 general inquiries and 254 in-depth counselling interviews per year (Figure 5). The Northeast and South Central regions also receive high numbers of general inquiries (average of 1,119 and 984 respectively), while the Northwest has received the fewest numbers of inquiries each year (average of 239). The West and Southeast regions have provided the highest number of in-depth counselling interviews (254 and 183 per year on average, respectively), with the Southwest and Northeast regions providing the lowest numbers of in-depth counselling (65 and 34 per year on average, respectively). There are few explanations for these variations other than that there are likely different levels of demand for these services depending on the region.
The CFDCs which have awarded the fewest loans had well below average general inquiries and above average in-depth counselling. This would suggest that there is less interest in the services provided by the CFDCs, but for the loans that they provide, they take a more active role in supporting the business. The CFDCs which awarded the most loans had well above average level of in-depth counselling, which implies they are working with each of their loan clients thoroughly. However, they had below average general inquiries. No reasonable explanation for this can be found, except to assume that it is related to demand.
The CFDCs serving the smallest populations (less than 10,000) each averaged double the number of general inquiries than their larger compatriots (1,468 versus 707) annually. As mentioned in 3.2.4, they also provide more loans than more populous CFDCs. Like other frequent lenders, they have much lower in-depth counselling figures. As the population in the region increases, more in-depth counselling is recorded. Larger communities may have more services in the community, so the CFDC can direct more small businesses to these alternative services. Larger communities also have more start-ups as clients, who would generally require more counselling, which would account for the increased number of counselling sessions.
As discussed in section 3.1.1 (Need for the Program), the results of the client survey showed that there is a high level of need for services offered by CFDCs, with access to capital services being rated as the services most needed within the community. Overall clients are very satisfied with all services provided by CFDCs, including access to capital and training seminars. Not surprisingly, access to capital services received the highest satisfaction rating, with 76.5 percent being very satisfied and 18.8 percent being somewhat satisfied (Figure 7). Overall, clients were least satisfied with the counselling services provided, although that service still received a very positive rating overall (73.0 very satisfied, and 19.2 somewhat satisfied). The general level of satisfaction was consistent across regions; with the West being least satisfied of all regions with the referral and counselling services and the Southwest being the least satisfied of all regions with access to capital services.
Finding: CFDCs have improved clients' business skills and knowledge and clients are using these skills for financial management, marketing and applying for funding, although to a limited extent.
Findings in this section are based on the CFDC and client surveys. All CFDC survey respondents (managers and chairs) felt they had been successful in improving the business skills and knowledge of clients (67.4 percent said very successful, 32.6 percent said somewhat successful). This is consistent with what was reported by clients, who indicated that CFDCs had been very successful (49.3 percent) and somewhat successful (42.3 percent) in improving their business skills and knowledge, although CFDCs were slightly more positive in this respect than clients. Only a small proportion of clients did not agree that the CFDC had improved their business skills and knowledge (5.8 percent indicated not very successful and 2.6 percent indicated not at all successful). In examining the different client groups, CED partners believed that CFDCs were slightly more successful in improving their business skills and knowledge than financial and non-financial clients (Figure 8). Note that these responses were consistent between regions, with no noteworthy differences.
Financial and non-financial clients were asked to indicate to what extent they were using the information obtained from the CFDC. While most clients indicated they are using the information obtained, it appears to be to a limited extent. Few financial or non-financial clients are using information for human resource management, completing a funding application, or for project management (Figure 9).
CFDC services appear to be most useful for clients in assisting with the financial management of their business (28.9 percent said great extent, 24.0 percent said some extent). Clients are also using information to develop a business plan (17.0 percent said great extent, 22.0 percent said some extent), to market their business (12.6 percent said great extent, 25.6 percent said some extent), and to access other funding sources (10.5 percent said great extent, 24.1 percent said some extent). Not surprisingly, non-financial clients are using CFDC services to develop a business plan more than financial clients. This would likely be related to the fact that financial clients are more likely to have already completed a business plan (i.e., because they have already received a loan) than non-financial clients. Again, these responses were fairly consistent at a regional level, with no noteworthy differences.
Finding: CFDCs have created new business start-ups and have helped to maintain and strengthen existing businesses.
Findings in this section are based on interviews, the CFDC survey, the client survey, and the Quarterly Report data. The Quarterly Report data related to the number of loans and their value is considered reliable given that this data is pulled directly from CFDC financial systems. Other data within the Quarterly Reports presents concerns with respect to reliability.
Almost all interviewees (35 of 39) believe that the CF Program has been successful in creating new business start-ups. CFDCs and clients surveyed have similar views, both suggesting that the Program has been successful in creating new businesses. CFDCs (managers and chairs) were slightly more confident with all respondents saying very successful (69.8 percent) or somewhat successful (27.1 percent). A few clients expressed some doubt that the CF Program had been successful in creating new business start-ups, with 7.1 percent suggesting it had not been very successful and a further 3.9 percent suggesting that it had not been successful at all (Figure 9).
Data obtained from the Quarterly Reports confirms what clients and CFDCs suggested. CFDCs provide loans to both new and existing businesses. As discussed in section 3.2.4 (Management of Investment Funds), over the six years 6,963 loans were awarded, with the trend being slightly negative in recent years. However, the average value of those loans has increased slightly over the years. Therefore, it can be said that the CFDCs are making fewer loans, but the value of those loans is increasing, resulting in a fairly constant level of lending over the six years. The only exception to this are the new CFDCs which have fewer loans and lower average loan value, suggesting it takes time to develop a clientele and build an investment fund.
Overall the number of businesses started as a result of both investment funding and business services is rising. Over the six years of study 2,888 new businesses were started as a result of loans provided by the CFDCs. Over the six years the trend has been fairly consistent in business start-up due to investment funding. The Southeast and the Southwest regions were very successful in starting new businesses, being at or above average every year with 13.8 and 11.0 businesses started per year. The East, West and Northwest were consistently below average with 4.6, 6.3 and 6.0 businesses started annually per CFDC, respectively. The number of businesses started seems directly linked to the loan activity. The least populated CFDCs helped start on average 11.8 businesses per year, which is above average. This seems reasonable given that they also provide more loans than average. Similarly, the CFDCs which provided on average 30 or more loans per year were well above the average for the number of start-ups businesses annually (average of 14.5). Those who averaged 10 or less loans per year helped start fewer businesses (3.8 on average).
If a business that had yet to have any sales revenue came to the CFDC for in-depth counselling, the efforts by the CFDC would be counted towards a business start-ups as a result of business services. Some of these business services clients might also be investment fund clients and would be counted twice in the overall trend in new businesses. Nonetheless, the trend in the number of businesses started as a result of business services is positive. In total 5,340 new businesses began as a result of business services. Three CFDCs, Huron and Sarnia–Lambton in the West region and Nottawasaga in South Central, reported being far more active in using business services to start businesses as they alone represent 49.1 percent of total new businesses. When all businesses impacted are counted these three represent 44.4 percent of the 11,542 businesses impacted through business services.
Information from the client survey also shows that the Program has had an impact on the creation of new businesses, as the majority of loan clients surveyed who received a loan for a start-ups (71.2 percent), suggested that they would not likely have been able to start their business without the loan from the CFDC. (Figure 10).
Over the six year study period, 10,010 existing businesses were assisted through both investment and business service activities, with a gradual increasing trend. CFDCs in the West and South Central regions provided more assistance to existing businesses than the provincial average, as would be expected by the presence of Huron, Sarnia–Lambton and Nottawasaga in these regions. The investment funds alone have assisted 3,808 existing businesses over the six years. CFDCs in the Southeast and Northeast impacted the most existing business (14.9 and 13.3 per year respectively). The CFDCs in the South (i.e., South Central, Southwest and West) awarded below average numbers of loans and assisted fewer existing businesses.
As the population served by a CFDC decreases, the more existing businesses, and businesses overall, it assists. This is a similar trend to the number of loans provided (i.e., as the population decreases, more loans are provided). This is most likely reflective of the demand for the loans and the lack of other sources of investment in the area. In other words, CFDCs in smaller communities have more clients.
Again, information from the client survey also shows that the Program has had an impact on existing businesses, as the majority of loan clients surveyed who had received a loan for an existing business, suggested that they would not likely have been able to maintain or expand their business without the loan from the CFDC (70.0 percent).
Overall, roughly 45.1 percent of businesses impacted by CFDC activity are new businesses and the remainder are existing ones. This percentage has not changed much over the six years. In the two northern regions the focus appears to be on maintenance of businesses, as the percentage of new businesses impacted drops to 39.3 percent. The case study in Kirkland Lake revealed that northern CFDCs may be more focused on helping to stabilize their communities in the face of fluctuating commodity markets. Assisting with starting new businesses is of secondary concern. In contrast, the CFDCs with the greatest populations (i.e., 100,000 or more) are more focused on start-ups, with 53.1 percent of their business impact being felt in that group. These CFDCs are found predominantly in the South of the province and tend to have more diversified economies. They also have more options for credit in these regions, so an existing firm with a credit history would not have to rely as greatly on CFDCs for assistance.
The impact on businesses can also be measured by examining the ability of businesses to leverage other funds and whether they have experienced an enhanced ability to access capital from traditional sources. According to the Quarterly Report data, clients have reportedly leveraged funds in the amount of $497.5 million. This translated into a ratio of 1:1.63, meaning that for every dollar loaned by the CF Program, clients are obtaining $1.63 from other sources. The CFDCs with the fewest closed deals and below average value of new loans also had below average leveraging. However, the southern CFDCs (South Central, Southwest and West) had below average numbers of closed deals, yet they were above average in leveraging. While the evaluation did not yield any explanations for this, it could be related to a greater availability of other funding sources.
Information from the client survey shows that a small proportion of clients leveraged funds (16.0 percent of financial clients). Note that because clients were not initially asked whether they needed to leverage other funds, this is not necessarily an indication that clients are not successful in leveraging funds. Clients that leveraged funds indicated that the primary source of those funds was a financial institution (56 percent). Clients also leveraged funds through other federal programs (16. 0 percent) and from the BDC (8.0 percent). Of those clients that leveraged funds, 36.8 percent were able to leverage more than $150,000. Another 45 percent of clients leveraged between $10,000 and $74,999.
Both clients and CFDCs reported that the CF Program has enhanced client ability to access capital from traditional sources (Figure 11). Again, not surprisingly, CFDCs were more confident in their level of success in this respect, with only two CFDC respondents somewhat disagreeing. Clients cited the CF Program as being very successful (46.5 percent) or somewhat successful (33.4 percent) in enhancing their ability to access capital from traditional sources, with only a small percentage disagreeing (8 percent somewhat disagreed, 5.6 percent disagreed). Note that a fairly high number of respondents could not answer this question (29 percent). It is possible that these respondents had not yet tried to seek funding from traditional sources since obtaining the CFDC loan. Note that there was concern expressed during the case studies that the high collateral requirements from CFDCs made it difficult to obtain financing from other sources. However, collateral requirements are set by each CFDC and this may not be a concern across the province or the program.
Finding: CFDCs are serving the needs of Official Languages Minority Communities (OLMCs) by providing advice, support and services in both official languages where required, though there are some remaining challenges related to maintaining skilled, bilingual staff and costs associated with providing bilingual information materials.
Findings in this section are based on interviews, the client survey and the Quarterly Report data. Eighteen of the 61 CFDCs provide services to regions in which OLMCs are located. The majority of those CFDCs are located in the Northeast region (10 of 18), with none located in the Southeast region.
During the four years since the number of businesses assisted was tabulated in TEA (April 2004 to March 2008), 1,574 francophone businesses were assisted, which represents 7.7 percent of the total businesses assisted by all CFDCs in those years. During that same time period 5.9 percent of the new loans went to francophone businesses, which represented 6.6 percent of the loan value for Ontario. In looking just at the 18 bilingual CFDCs, there were 1,090 francophone businesses assisted which represents 19.5 percent of the total volume of business assisted by those CFDCs. In addition, francophone clients constituted 15.5 percent of the new loans provided by these CFDCs, representing 16.2 percent of the total dollar value of loans provided by bilingual CFDCs. Only two bilingual CFDCs had less than 5 percent of their loans going to francophone businesses. It is interesting to note that two CFDCs, which do not serve OLMCs, provided services to francophone businesses more than 5 percent of the time. One CFDC serving OLMCs did not record any services directed at francophone businesses. It is unclear whether it is not providing any bilingual services or whether that CFDC simply did not report those figures in TEA.
FedNor and CFDC interviewees generally agreed that CFDCs were able to provide bilingual services where required. Of the senior managers interviewed, all (4 of 4) suggested that the CFDCs are providing bilingual services. Of the FedNor program officers interviewed, seven of eight work with CFDCs that serve OLMCs. All but one indicated that there are no issues with CFDCs providing bilingual services, with the other officer suggesting that improvements are needed in this area. Similar responses were received from the CFDC interviewees that serve OLMCs (9 of 21). The majority indicated that they are providing bilingual services, with one suggesting that it is not fully capable (i.e., some materials are not available in French). This is consistent with information from the client survey, which showed that virtually all financial and non-financial clients received service in the language of their choice (99.5 percent). The remaining clients indicated that they were just served in English or that materials were not available in French.
Therefore, CFDCs appear to be successful in providing bilingual services where required, however there are on-going challenges. Interviewees agreed that there are challenges associated with maintaining bilingual staff (12 of 19); the cost involved in providing bilingual material (12 of 19); and the fact that in some regions, there is little demand for the services (12 of 19).
Finding: The CF Program has supported community economic development, although it appears to be by varying degrees between CFDCs. The Program has also assisted communities to develop and diversify their economies, and has strengthened community capacity, although the extent to which the program has contributed to these outcomes is difficult to quantify.
The findings in this section related to CED are based on information from the annual reports, case studies, the CFDC survey, and the client survey. Due to the limitations with the annual reports (i.e., they are incomplete), this information is considered unreliable. The findings with respect to economic diversification and community capacity are based only on the CFDC and client surveys and therefore GCS is limited in drawing conclusions in this respect.
Community Economic Development
Foundation documents for the CF Program state that CFDCs receive funding to, among other activities, support community-based projects and special initiatives by collaborating with other partners in the public sector and civil society to implement strategic community projects or deliver special initiatives targeted to communities. With restricted budgets for CED activities through the CF Program, CFDCs attempt to undertake this work through mobilizing partners and resources.
CED activities are reported in the CFDC annual reports. As discussed in section 3.2.5 (Performance Measurement), not all CFDCs have submitted annual reports and of those provided, some are incomplete and do not contain CED information. Nonetheless, the information from the annual reports received and information from the CFDC and client surveys showed that CFDCs are involved in CED and provide both financial and technical support to organizations and/or projects. Of the CFDCs that have reported CED information, it appears that CFDCs that have access to NODP and EODP funds are more involved in CED than other CFDCs.
Volume of CED Projects
According to the information compiled from the annual reports, CFDCs either led or participated in 815 CED projects in year 1 and 908 projects in year 2.Footnote 42 The information shows that the CFDCs in regions that have access to EODP and NODP funds (i.e., East, Northeast, Northwest, and Southeast) have been more involved in projects than the other CFDCs, with those regions accounting for 74.5 percent of the total CED projects in year 1 and 87.6 percent of the total CED projects in year 2 (Table 21). The CFDCs in South Central, Southwest and West regions have been the least involved in CED projects, although these regions do not have access to EODP and NODP. It is important to note that because not all CFDCs provided annual reports or reported CED information, these CED numbers do not necessarily represent the true number of projects supported and while it does appear that the regions with access to EODP and NODP are more involved in CED, that may not necessarily be the case.
|Year 1||Year 2|
|# of CFDCs Reporting CED||# of projects||3Percent of Total Projects||# of CFDCs Reporting CED||# of projects||Percent of Total Projects|
|CFDCs that have access to EODP||9 of 15||374||45.9||11 of 15||416||45.8|
|CFDCs that have access to NODP||11 of 24||233||28.6||10 of 24||379||41.7|
|CFDCs that have access to neither EODP nor NODP||11 of 22||208||25.5||7 of 22||113||12.4|
|Total||31 of 61||815||100.0||28 of 61||908||100.0|
According to the CFDC managers surveyed, CFDCs have varying degrees of involvement in CED projects, with 11.5 percent involved in less than five projects a year; 11.5 percent involved in five to nine projects a year; 17.3 percent involved in 10 to 14 projects a year; and 53.8 percent are involved in anywhere from 15 to 50 per year. Note that a small number of CFDCs (3) suggested that they are involved in at least 100 CED projects.
Dollars Contributed to Projects
CFDCs reported contributions of $11.1 million to CED projects in year 1 and $7.2 million to CED projects in year 2. Again, according to this information CFDCs that have access to EODP and NODP funding have provided the most funding for CED projects, with those regions contributing 97.6 percent of the total funding provided to all CED projects reported in year 1 and 96.8 percent of the total funding provided in year 2 (Table 22).
On average, CFDCs have contributed less than $10,000 per CED project supported (average of $10,000 per project in year 1 and $6,488 per project in year 2). The average contributions per project reported in the annual reports are consistent with the information provided by partners. The majority of partners surveyed (58.5 percent) received less than $10,000 in financial support for their project. This was also similar to information collected from partners during the case studies, many of whom received less than $10,000.
|Year 1||Year 2|
|# of CFDCs Reporting CED||Dollars Contributed to Projects||Percent of Total Dollars Contri-
buted by CFDCs
|# of CFDCs Reporting CED||Dollars Contributed to Projects||Percent of Total Dollars Contri-
buted by CFDCs
|CFDCs that have access to either EODP or NODP||20 of 39||$10,855,346||97.6||21 of 39||$6,985,403||96.8|
|CFDCs that have access to neitherEODP nor NODP||11 of 22||$ 266,468||2.4||7 of 22||$233,121||3.2|
|Total||31 of 61||$11,121,814||100.0||28 of 61||$7,218,524||100.0|
Information in the annual reports showed that CFDCs are one of many possible partners contributing to a CED project and CFDCs are providing only a small portion of the total funding. In year 1, the contributions made by the CFDCs constituted only 31.7 percent of the total funding for the projects. In year 2, this proportion was even smaller, with CFDC project funding constituting only 17.4 percent of the total project funding. While CFDCs may not be contributing a large amount of funds to projects, partners interviewed during the case studies said that the CFDC contribution was important, leveraged other partner funding and that the project may not have proceeded without it. Similarly, the majority of partners surveyed (64.7 percent) indicated that they would not likely have been able to undertake the project without the support of the CFDC.
Information from the annual reports, case studies, and partner survey showed that in addition to providing financial support, CFDCs are providing a large amount of technical support to projects. Fifty-nine percent of partners surveyed said that they received technical support from the CFDC for their CED project (34 percent of those also received financial support), mainly in the form of business advice/planning/strategy and information support (55.4 percent) and human resource support/volunteer time (32.6 percent). This is consistent with case study information, as partners interviewed suggested that both board members and staff spend much time providing technical support to projects such as sitting on committees, advising on issues such as project and financial management, offering expertise for or carrying out studies and research, and actually working on-site for a certain number of hours per week.
CFDCs surveyed indicated that they are spending anywhere from a few hours per project to more than 250 hours. This is consistent with the information in the annual reports. CFDCs reported a total of 87,280 volunteer hours for CED projects in year 2 and 123,858 hours in year 2, with the number of volunteer hours spent per project ranging from 6 to 250. Unlike the number of CED projects and dollar values contributed, access to EODP and NODP does not seem to influence the amount of volunteer time contributed to projects as some regions without access to those programs recorded higher levels of volunteer time than those regions with access to those programs. This seems reasonable considering EODP and NODP are funding programs. Note that there does not seem to be a correlation between the numbers of projects supported, dollar value of projects, and volunteer time contributed. One might expect that if a CFDC is providing large financial support, it may not provide as much technical support and vice-versa; however this does not appear to be the case.
The CED information currently gathered in CFDC annual reports provides output-level information on CED (e.g., number of projects, dollar value of contributions), however, does not provide information on the impact of the work on the community. Therefore, this information was asked of partners surveyed. According to partners surveyed, the biggest impacts of CED work have been that it mobilized businesses or community groups and improved or developed business knowledge. Partners also agreed, to a slightly lesser extent, that CED work helped to revitalize a particular sector and created or maintained jobs (Figure 12). It is important to note that while regions with access to either EODP or NODP appear to be more involved in CED, there is no information to show whether they have a greater impact on their communities than the other regions.
FedNor representatives, CFDCs and external stakeholder believe that the CF Program has helped communities diversify their economies (20 of 24). This is consistent with information gathered from the client and CFDC surveys. Not surprisingly, CFDCs were much more in agreement than clients and in fact no CFDCs surveyed suggested that the Program had not been successful in helping communities diversify their economies. Most clients were in agreement (74.2 percent); however some clients did not agree that the program had helped communities diversify their economies (11.3 percent), with non-financial clients being in slightly less agreement than the other two client groups (Figure 13). A small proportion of clients were neutral with respect to their opinions (14.4 percent) and it appeared more difficult for financial and non-financial clients to judge this than CED partners, as 19.7 percent of financial clients and 14.3 percent of non-financial clients were neutral, versus 11.8 percent of CED partners.
TEA does not generate the number of jobs created or maintained by sector. While this information was collected through the client survey, the small numbers of respondents and the distribution of those responses by region and by sector, do not allow for analysis on the extent to which projects being supported are in a wide variety of sectors.
Strengthened Community Capacity
IC/FedNor defines capacity building as a ‘broad and complex set of activities that will, if successful, enable people of diverse backgrounds in communities to take a more active role in shaping their economies and determining their collective futures. It enables communities to set their priorities, identify and develop their own capabilities and resources and make the best investments.Footnote 43 Capacity building involves increasing the intellectual (e.g., organizational infrastructure and capacity, planning capability) and human capacity (e.g., leadership, skills development, partnerships) within a community through strategic economic development planning and providing support for businesses and organizations to implement those plans.
The CFDCs are structured such that they are providing services to businesses and organizations that are supportive of capacity building as defined above. They are mandated to lead or participate in strategic planning, support community economic development projects (both technical and financial support) and offer financing and business services to small businesses.
Information from the evaluation shows that CFDCs are improving the business skills and knowledge of clients and community organizations, mobilizing partners to undertake community economic development projects, and providing funding and business services to clients. Though the level of involvement in these activities varies by CFDC, information provided by interviewees and survey respondents suggests that overall CFDCs are having an impact on community capacity. Twenty-six of the 30 interviewees who responded to the question, indicated that CFDCs have strengthened community capacity, primarily through the merging of resources/partnerships (10 of 30) and by increasing skill sets and business knowledge of clients (9 of 30). Note that few external stakeholders and FedNor senior managers responded to this question.
Only one CFDC survey respondent felt that the CFDCs had not impacted community capacity, while the remaining respondents indicated that the CFDCs had been somewhat or very successful in doing so. Similarly, clients believe that the CFDCs have improved community capacity (48.3 percent very successful, 40.9 percent somewhat successful), with a few indicating this was not the case, and with non-financial clients agreeing slightly less than the other two client groups (Figure 14).
Finding: The CFDCs have made investments in SMEs and are active in community economic development activities. There is limited information to assess the contribution of the activities to long-term impacts of the Program, although stakeholders agree that the CF Program is contributing to economic growth and stability, diversification and sustainability of communities, and survival of businesses.
Findings in this section are based on Statistics Canada labour market data, the CFDC survey, and the client survey.
Information gathered from the evaluation shows that the objectives of the CFDCs are in-line with CF Program objectives and that they are undertaking activities in support of these objectives. During the six-year study period, CFDCs have invested $294.1 million through 6,963 loans to SMEs. CFDCs reported assisting 6,696 businesses and creating or maintaining a total 48,533 jobs. CFDCs have also made both financial and technical contributions to CED activities, with each CFDC being involved in anywhere between 5 and 30 projects each year and each region contributing between $40,000 and $8.0 million to CED projects each year.
The long-term impact of the CF Program relative to all of the other community influences (e.g., other investments made, economic conditions) is difficult to assess. An analysis of Statistics Canada labour market reveals that on key economic indicators (i.e., labour participation rates, unemployment rates, and average family/household income), there has not been an increasing disparity between CFDC served regions and the overall province of Ontario.
There has been virtually no change in the labour force participation rate of CFDC served regions, with only a 0.2 percent increase between 1996 and 2006 (from 63.6 percent to 63.7 percent).
This is fairly consistent with the provincial figures, as in that same time period there was an increase in the labour force participation rate of 0.8 percent (from 66.3 percent to 67.1 percent). There have been more significant changes in the rates of unemployment, as discussed in 3.1.1 (Need for the CF Program). Overall, unemployment has dropped Ontario-wide and throughout CFDC served regions (Figure 15). These drops were largest between 1996 and 2001, and smaller between 2001 and 2006. Overall regions served by CFDCs saw a smaller decrease in unemployment rates (30.0 percent) compared to the province of Ontario (33.3 percent), although four of the seven regions actually saw larger decreases in unemployment rates than Ontario (East, Southeast, South Central and Southwest).
Median household earning have been increasing both in CFDC served regions and in the province of Ontario (Figure 16). The rate of increase for CFDC regions was much faster than Ontario between 2000 and 2005, averaging 10.0 percent growth versus 1.4 percent for Ontario. Thus, the CFDC regions are beginning to approach the provincial medians.
Figure 16. Median Household Earnings, CFDC Regions Compared to OntarioFootnote 44
Analysis of the Statistics Canada data with respect to the impact of the CFDC activity and the CF Program as a whole is challenging. Any changes to these economic indicators cannot be directly attributed to the CF Program. What the labour market data can reveal is whether in general rural communities are remaining economically viable, improving or declining. A sharp decline or increase in disparity between rural and provincial averages would suggest that the suite of programs being offered is not effective or having the desired impacts. The labour market data does not indicate that there are any noteworthy differences between rural and provincial averages. It is therefore implied that the suite of programs active in rural communities is having the desired impact.
Both clients and CFDCs agree that the CF Program is contributing to its long-term objectives, although again, not surprisingly, CFDCs are more confident in this regard and in fact no CFDCs disagreed. Clients were slightly less confident that the CF Program is contributing to its long-term objectives, although for all four objectives, more than 70 percent of clients either agreed or strongly agreed (Figure 17). A much greater proportion of clients responded neutral to this question than CFDCs. This is likely due to the fact that that certain groups were better able than others to judge the long-term impact of the CF Program. If the responses are examined across the three survey groups, non-financial clients more than any other survey group, were least able to provide an opinion on the long-term impact of the CF Program. CED partners were most able to provide their opinion in this respect (i.e., they had the lowest proportion of neutral responses). This is not surprising, given that this survey group is likely more involved in economic development activities within the community than the financial and non-financial clients and thus likely in a better position to judge the impact of the Program.top of page
Finding: It was not possible to determine whether FedNor is cost-effective in administering the CF program, as program costs are not available. CFDCs are cost-effective in administering the CF program, although the level of effectiveness appears to vary between CFDCs.
Findings in this section are based on document review and the Quarterly Report data. Due to the limitations with respect to the Quarterly Report data, the level of confidence in the reliability of this data is low.
To assess the cost-effectiveness of a program, generally the costs for program operationsFootnote 45 are compared to program outcomes to calculate a cost per unit outcome. For the CF Program in Ontario, it was not possible to assess the extent to which FedNor is cost-effective in administering the program (i.e., costs for operation versus outcomes). This is due to the fact that FedNor does not separate the costs for the operation of the CF Program from the other programs it delivers (i.e., EODP and NODP). Significant attempts were made to extract the operating costs for the CF Program; however, it was not possible.
Recommendation #3: FedNor should undertake a costing exercise to identify the costs for the operation of NODP, EODP, and the CF Program. This would be particularly useful because different delivery models are used to deliver these programs and it would allow FedNor to assess the extent to which the different delivery models are effective in achieving program outcomes.
In the absence of FedNor operating costs for the CF Program, the evaluation examined the cost-effectiveness of the Program based upon the operating dollars provided to the CFDCs and reviewed the activities of the CFDCs in relation to their outputs and outcomes.
Variations Between CFDCs
Information from the Quarterly Reports shows that there is much variation between the CFDCs with respect to level of activity (e.g., loan volumes, general inquiries), investment fund performance, and cost per outcome. Many outliers and blank fields in the Quarterly Reports raise concerns as to the reliability of the Quarterly Report data and therefore the level of confidence is low for findings where Quarterly Report data has been used as a methodology.
Loan and Business Activity
The average number of loans provided to SMEs over the six-year study period was 19.0, with one CFDC averaging 2.3 loans per year and another averaging 62.3 loans per year. Similarly, there is a very large variation in the average dollar value of loans, with one CFDC averaging $18,722 and another averaging $97,882.Footnote 46 As discussed previously, there is a correlation between the number and dollar value of loans and therefore, CFDCs with few loans offer higher dollar valued loans. These CFDCs tend to be those serving smaller communities in the North, with the reason for the higher dollar valued loans likely being the presence of loan pools between the region's CFDCs.
As with loan activity, the number of business services provided varies greatly between CFDCs (Table 24). Some CFDCs have had very low volumes of general inquiries, with one CFDC receiving an average of only 6.5 inquiries per year. Some CFDCs, on the other hand, have had extremely large volumes of inquiries (e.g., 6,567). Similarly, some CFDCs have conducted a limited number of in-depth counselling interviews (i.e., 2.5), while some CFDC have conducted hundreds of counselling interviews.
|Service||Average Per Year, Per CFDC||Minimum||Maximum|
|Number of loans||19.0||2.3||62.3|
|Average dollar value of loan||$ 42,240||$ 18,722||$ 97,882|
|Number of general inquiries||832||6.5||6,657|
|Number of in-depth counselling interviews||134.3||2.5||896|
The evaluation yielded few explanations for these variations; the level of demand for each of these services would vary according to region and community and would be influenced by geographic, demographic, and economic conditions. For example, if a community is experiencing an economic downturn, it may be difficult to attract new clients that would want to start a new business. Conversely, if a community is experiencing a boom, there may be many options for credit, so "less bankable" clients will be those applying to the CFDCs. Overall there appears to be increased demand for CFDC services as economic conditions in a community increase up to the point where sources of credit and business information external to CFDCs start to become more readily available. At this juncture, the demand for the services starts to decrease, something which is more common in the larger communities. However, as more sources of credit become available, more leveraging options arise, allowing each loan dollar and business service offered to go further. Nonetheless in the smallest communities the jobs which are impacted represent a greater percentage of the employment in the region, so the demand relative to the community size is greater than in larger populations. As well, since these jobs represent a larger percentage of total jobs in the community, these CFDCs may be impacting their communities more profoundly. It is also important to note, that with the data reliability issues with respect to the Quarterly Report data, the wide ranges in these numbers may also be due to data issues. Hence, throughout this evaluation little confidence has been given to the Quarterly Report data.
Investment Fund Activity
Overall, the investment funds for the CFDCs have been increasing and have seen a growth of 12.3 percent since 2004 when they were first tracked, although there is much variation by region.Footnote 47 Sixteen of the 61 CFDCs have experienced negative growth with one CFDC having a negative growth of 48.6 percent. Note that four of the five CFDCs which first received funding in 2003-2004 have seen negative growth rates, which is not surprising given that those CFDCs have not yet had the opportunity to build their fund (i.e., they have not generated much income through loans yet).
There does not appear to be a correlation between investment fund growth and the percentage of the fund in active investment, as there are CFDCs with negative growth and a high percentage of funds in active investment and vice-versa. This is more likely explained by the loss rates on loans. There is limited information available on loss rates, as there is no Quarterly Report data available. However, the 2005-2006 FedNor investment fund survey showed that the CFDCs had an average loss of 9.9 percent, although there is much variation in losses between CFDCs, with some (3) reporting a zero percent loss rate, while others reported loss rates as high as 29 percent (Table 25). Note that CFDCs with smaller growth in investment funds tend to have higher loss rates.
|Service||Average Per Year||Minimum||Maximum|
|Investment fund growth (with injections removed)||12.3 %||-48.6 %||68.9 %|
|Percent in active investment||67.8 %||41.7 %||92.0 %|
|Cash on hand||32.2%||8.0%||58.3%|
|Loss rates (April 2005-March 2006)||9.9%||0.0%||29.0%|
Cost Per Outcome
CFDCs reported a wide range of jobs created and businesses started, with some CFDCs reporting zero jobs created per year and very few businesses started per year (i.e., 2.5). The number of jobs created and businesses started is influenced by the level of CFDC activity, the type of businesses being supported (e.g., size), and the nature of the loans (e.g., for start-ups, maintenance, expansion).
Because the CFDCs receive relatively similar funds for operations, it is the numbers related to jobs created and businesses started that influence the cost per outcome for the CFDCs. For example, CFDCs with fewer jobs created or fewer businesses started have higher costs per job created or businesses started/maintained. Some CFDCs have very low costs in this respect and are well below the average, with one CFDC creating a job for only $279. Conversely, there are some CFDCs that are well above the average with one CFDC creating a job for $15,637 (Table 26).
|Service||Average Per Year||Minimum||Maximum|
|Cost per business started/maintained||$ 4,997||$ 720||$ 27,167|
|Cost per job created||$ 1,954||$ 271||$ 13,514|
|Investment cost per job created||$8,623||$ 4,179||$ 53,672|
All of the comparison information presented in this section raises questions as to whether some CFDCs have been more effective in delivering the CF Program than others. While their effectiveness may be influenced by factors such as geographic location, demographic composition of the community, the economy of the community and the level of demand for services, it could also be related to the performance of the CFDCs. FedNor in concert with the CFDCs would be in the best position to determine whether certain CFDCs could be more effective in delivering the program given the many variables which influence effectiveness.
Recommendation #4: FedNor should work with CFDCs to establish target ranges for the level of activity for CFDCs (e.g., number of loans, investment fund growth). These ranges should be developed in consideration of factors that may influence the activities of CFDC (e.g., geographic location, demand for services). This would provide a guide for program offices and assist them in understanding whether CFDCs could be more effective in delivering the program or achieving program results.
Finding: The current service delivery model in place for the CF Program integrates a number of components that are important to successful community economic development. Several studies and reviews have strongly supported the CF Program delivery model.
Findings in this section are based on interviews and document review. Almost all of those interviewed (36 of 39) believe that the current delivery model used for the CF Program is the most appropriate one to achieve program objectives. Some interviewees (21 of 39) provided reasons why the model is the most effective; the main reason being that it allows for local decision-making (13 of 21). Interviewees also believe that the fact that the Program is run by local volunteers (5 of 21), and that it is arms length to government (3 of 21) make the model effective. There were no suggestions for alternative delivery models.
A few recent studies support the notion that the current delivery structure for the CF Program is most effective. A study conducted by the University of Guelph in 2005 stated that:
- "the Canadian Community Futures Program.....reflects the conscious crafting of a centrally supported program for endogenous development. It effectively joins state-to-community with a strong yet flexible governance model and is a good example of place-based policy"Footnote 48.
The 2008 Senate report entitled Beyond Freefall: Halting Rural PovertyFootnote 49 found that:
- "The challenges of accessing credit in rural Canada have long been recognized at the federal level. Arguably the most successful program to help address this concern has been the Community Futures program, a federally funded but community-based and community-led initiative…"
- "The Community Futures program success is due in no small part to the fact that it is locally run and suited to local conditions…"
Finding: The evaluation revealed a few key lessons which were mainly related to the current delivery approach for the CF Program and the key success factors with respect to this approach.
Interviewees (FedNor and external stakeholders) were strongly supportive of the current delivery approach being used for the CF Program and indicated there are components of this approach that are key to effective community economic development. Many (13 of 27) felt that a grassroots approach, where decisions are made at a local level is the most critical success factor for community economic development. Interviewees also noted that volunteerism is an important component (6 of 27) and that partnerships and good cooperation by community organizations are essential (3 of 27).
Finding: FedNor has made progress on implementing recommendations made in the previous evaluation of the Community Futures Program (2002-2003).
A total of 13 recommendations were made as a result of the evaluation of the CF Program, completed in 2002-2003. Because that evaluation was formative in nature, many of the recommendations were related to design and delivery issues including: better identification of target groups for CFDCs, better recognition for volunteer contribution, a more well-defined reporting structure for CFDCs (i.e., performance information), continued support for training and development opportunities for CFDCs, negotiating multi-year agreements, and the development of more useful indicators for community economic development.
FedNor senior manager interviewees are satisfied with the progress made on these previous recommendations, noting that data collection has been improved; that more efforts have been put into promotional efforts; a revised RMAF and performance measures were developed; that more efforts have been made to target certain groups, particularly youth; and that FedNor is doing more to recognize volunteers. This is consistent with information obtained by a FedNor senior manager who provided a summary of progress against the previous evaluation recommendations (see Appendix K for this summary). Observations from the evaluation indicate that there are outstanding issues related to recommendation #9, concerning the availability, quality and reliability of data.
- 14 back to footnote reference 14 Industry Canada. Key Small Business Statistics. July 2008.
- 15 back to footnote reference 15 IC defines an SME as having less than 500 employees, but for FedNor's purpose, SMEs tend to be those with less than 10 employees.
- 16 back to footnote reference 16 Industry Canada. Key Small Business Statistics. July 2008.
- 17 back to footnote reference 17 Government of Canada. Small Business Financing Profiles. Small and Medium Sized Enterprises in Ontario. September 2007, page 1.
- 18 back to footnote reference 18 Industry Canada. Small Business Quarterly. Volume 9, Number 3, November 2007. Page 1.
- 19 back to footnote reference 19 Government of Canada. Small Business Financing Profiles. Small and Medium Sized Enterprises in Ontario. September 2007, page 1.
- 20 back to footnote reference 20 Statistics Canada. Small Business and Special Surveys Division. Survey on Financing of Small and Medium Enterprises, 2004. March 2006.
- 21 back to footnote reference 21 Senate Canada. Beyond Freefall: Halting Rural Poverty, Final Report of the Standing Senate Committee on Agriculture and Forestry. June 2008.
- 22 back to footnote reference 22 Canadian Federation of Independent Businesses. Banking Matters: Survey of Small Business Owners on Banking Issues. November 2007, page 2.
- 23 back to footnote reference 23 Government of Canada. Small Business Financing Profiles. Small and Medium Sized Enterprises in Ontario. September 2007.
- 24 back to footnote reference 24 Industry Canada. Key Small Business Financing Statistics. August 2005, page 11.
- 25 back to footnote reference 25 Industry Canada. Financing Small and Medium-Sized Enterprises: Satisfaction, Access, Knowledge and Needs. February 2002.
- 26 back to footnote reference 26 Roseheart, Dr. Robert G. Northwestern Ontario: Preparing for Change. February 2008, page.11.
- 27 back to footnote reference 27 Ibid. p.53.
- 28 back to footnote reference 28 All statistics from Statistics Canada 1996, 2001 and 2006 Censuses
- 29 back to footnote reference 29 Unemployment rates are being used because Statistics Canada did not report employment rates in 1996.
- 30 back to footnote reference 30 Capitalization means adding funds to the investment fund (i.e., a top-up of funds).
- 31 back to footnote reference 31 Industry Canada 2007-2008 Estimates: Report on plans and priorities. February 2007. p.10.
- 32 back to footnote reference 32 Industry Canada 2007-2008 Estimates: Report on plans and priorities. February 2007. p. 15.
- 33 back to footnote reference 33 http://www.omafra.gov.on.ca/english/rural/indruralplan.htm
- 34 back to footnote reference 34 http://www.reddi.gov.on.ca/pdf/3609787_bre_resource_manual.pdf
- 35 back to footnote reference 35 Final Report of the Standing Committee on Agriculture and Forestry. Beyond Freefall: Halting Rural Poverty. June 2008. p. 301
- 36 back to footnote reference 36 Government of Canada. Speech from the Throne: Strong Leadership. A better Canada. October 16, 2007
- 37 back to footnote reference 37 CFDCs in the Northern and Eastern regions of Ontario may access EODP and NODP funds to undertake community economic development projects. No such funding is available for CFDCs in Southern Ontario.
- 38 back to footnote reference 38 The respondents include only those partners that indicated the CFDC in their region took a lead role in the community strategic plan developed for their community and were consulted in the development of that plan.
- 39 back to footnote reference 39 KPMG. Community Futures Development Corporations Investment Fund Analysis: Summary Of Findings. June 2003
- 40 back to footnote reference 40 Based on the average loss provisions over a six year period for six large financial institutions.
- 41 back to footnote reference 41 Currently, 37 out of 61 CFDCs in Ontario are operating under three-year agreements.
- 42 back to footnote reference 42 28 of 61 CFDCs reported CED information in year 2.
- 43 back to footnote reference 43 For the purposes of this evaluation, FedNor developed this definition of community capacity from existing material.
- 44 back to footnote reference 44 For comparison purposes, all figures have been converted to 2005 dollars. For the 1996 Census, Statistics Canada did not provide median household earnings.
- 45 back to footnote reference 45 Program costs are defined as the cost to FedNor to administer the program, not including funds provided to the CFDCs (i.e. FedNor salaries and O&M)
- 46 back to footnote reference 46 Average loan values for three CFDCs were removed from the range, as they exceeded the maximum allowable loan contribution (i.e., >$150,000).
- 47 back to footnote reference 47 This is without capital injections from NODP or the CF Program.
- 48 back to footnote reference 48 University of Guelph. Community Futures Program in Canada, Good Governance in Successful Rural Development Programming, 2005.
- 49 back to footnote reference 49 Final Report of the Standing Committee on Agriculture and Forestry. Beyond Freefall: Halting Rural Poverty, June 2008, page 297.
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