Summative Evaluation of the Northern Ontario Economic Development Fund (NODF)

3.0 Findings – Relevance

3.1 What evidence exists to show that projects are relevant (e.g., adapted to local economic development needs)?

Document Review

Needs and challenges for economic development in Northern Ontario continue to persist. In 2002, some of the main needs identified related to a dependence on natural resources such as forest products and minerals, lack of appropriate community economic diversification strategies, an aging and declining population, youth out-migration and high unemployment rates. More recently, FedNor has concluded that while much progress has been made, Northern Ontario's economy continues to struggle with similar and persistent socio-economic and geographical challenges including:

• an unemployment rate of 7.8% (2004), far above the 6.8% rate for Ontario and 7.2% rate for Canada;
• a 2% reduction in population (1999–2004) compared to a 9.4% growth in Ontario and 6.9% growth in Canada;
• significant labour losses over the last twenty years (1981–2001) in primary industries (48.5%), manufacturing (33.8%) due largely to the increased use of technology;
• an 11% share of employment in the manufacturing sector compared to 16.3% in Ontario (2001);
• inadequate telecommunications and transportation infrastructure;
• youth out-migration and a regional youth unemployment rate 51% higher than the national average (2001);
• geographic isolation from large urban markets to the south; and,
• distinctive barriers in Aboriginal communities such as social dependency, access to capital and at-risk youth.

A comprehensive analysis of the economic characteristics of Northern Ontario was conducted by Lakehead University in 2004.⁵ The research included population profile, trends in industrial structure and manufacturing sector, specialization patterns and trends in Northern Ontario's economic base sectors, and Northern Ontario's contribution to the provincial and national economies. An economic well-being index was developed indicating a decline by 32% during 1996–2001 due to the high effective unemployment rate that has resulted in significant out-migration from Northern Ontario.⁶ The report recommends that FedNor emphasize the following criteria for program areas within its mandate:

• help resource-based industries develop new value-added products and services, commercialize research and develop new markets;
• provide funding (repayable and non-repayable based on performance) to small and medium-sized value added business start-ups in sectors such as forestry, mining, machinery and biotechnology;
• support community projects that are in line with the overall industrialization objectives of promoting these sectors;
• develop low cost energy production to reduce electricity costs to value-added firms; and,
• encourage relocation of existing government agencies to Northern Ontario.⁷

Data Review

The database review revealed that the NODF is reaching a wide range of recipients and funding a wide range of projects. The profile of projects, based on the information in the database is as per Table 7.

Table 7: Profile of Funded Projects

Characteristic	# of Projects	%
Studies or Implementation
Studies	261	24 %
Implementation	814	76 %
Total	1 075	100 %
Region
North Eastern	520	48 %
North Central	263	25 %
North Western	291	27 %
Total	1 074	100 %
Strategic Investments
Business Financing Support	32	3 %
Telecommunications and ICTs	84	8 %
Innovation and Technology	62	6 %
Trade and Tourism	134	12 %
Community Economic Development	416	39 %
Human Capital	347	32 %
Total	1 075	100 %
Target Group
Youth	385	36 %
Women	14	1 %
Aboriginal	207	19 %
Francophone	63	6 %
Total Project Cost	$
Minimum	4 030 $
Maximum	48 867 137 $
Mean	371 224,14 $
Sum	399 065 953 $
FedNor Authorized Assistance	$
Minimum	700 $
Maximum	4 500 000 $
Mean	113 574 $
Sum	122 091 955 $
Proportion of FedNor Funding	%
Minimum	1,2 %
Maximum	100 %
Mean	64,8 %

Table 7 shows that FedNor is providing assistance for a wide range of project types, across the regions of Northern Ontario, with a good range of objectives, covering FedNor's target groups (albeit minimally for women and francophones). Additionally, the projects are of varying sizes financially, from as little as 4,030 to as much as close to $50 million.

As for the organizations funded, Table 8 shows that FedNor is providing assistance to a wide range of types of organizations in a wide variety of industry sectors.

Table 8: Profile of Funded Organizations

Characteristic	# of Projects	%
Type of Organization
Incorporated Company – Private (SME)	54	5%
Educational Institution	78	7,3%
Other Non-Profit Organization	563	52,4%
Municipality / Municipal Development Corporation	178	16,5%
Indian Band Council / Aboriginal Community	201	18,7%
Federal Government / Federal Crown Corporation	1	0,1%
Total	1 075	100%
Industry Sector
Agriculture, Forestry, Fishing and Hunting	4	0,4%
Construction	1	0,1%
Retail Trade	1	0,1%
Transportation and Warehousing	3	0,3%
Information and Cultural Industries	1	0,1%
Finance and Insurance	1	0,1%
Professional, Scientific and Technical Services	68	6,3%
Administrative and Support, Waste Management and Remediation Services	2	0,2%
Educational Services	81	7,5%
Health Care and Social Assistance	41	3,8%
Arts, Entertainment and Recreation	64	6%
Other Services (except Public Administration)	198	18,4%
Public Administration	610	56,7%
Total	1 075	100%

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Service Improvement Initiative

In the 2002 Service Improvement Initiative survey, 87% of surveyed recipients indicated that they agreed (strongly agree and agree) that FedNor / Industry Canada was responsive to their needs. In the 2005 survey, 94% of those answering this question indicated that they agreed with the statement. While the increase is not statistically significant, the results show that recipients strongly believe that FedNor is responsive to needs, and thus relevant.

Interviews

All FedNor management and staff interviewees agreed that NODF programming is relevant to the economic needs of communities in Northern Ontario. The relevance of projects is seen to be enhanced by the fact that program officers are out in the community and therefore understand local needs. Interviewees commented that projects are generally targeted to communities and not-for-profit organizations (some of which represent various industrial sectors – health care, mining, agriculture, forestry and tourism). Interviewees commented in the programs ability to not only respond to specific community needs but to bring a broader, more regional perspective to the table. Flexibility of program criteria is seen as a key feature and efforts are made by program officers to ensure supported projects are a good fit with program criteria, indicating that some initiatives are community-oriented while others may have a focus on specific sectors whether it be from a regional or pan-northern perspective. Partnerships are encouraged in order to ensure communities do not work in isolation or at cross-purposes. Staff described their role as being a catalyst for economic development in Northern Ontario. There was also strong agreement amongst management and staff that the new NODF priorities or strategic objectives are appropriate. There was consensus that the change in strategic objectives from the previous ones was appropriate and added greater clarity and definition with respect to FedNor priorities and were a better reflection of work being done through FedNor.

There was also agreement amongst CFDCs and other stakeholders that NODF programming is relevant and that priorities and strategic objectives are appropriate. However, a few individuals felt that FedNor programs were more relevant to larger urban areas and felt that there should be a stronger presence of FedNor officers in their communities.

Recipient Survey

The survey of recipients shows that the NODF priorities are all perceived to be very important to recipients, regardless of their specific project needs. Additionally, when recipients approach FedNor for NODF funding, they indicate that their needs were well met. Table 9 summarizes the average importance ratings of each FedNor priority, the proportion of surveyed recipients who indicated that this priority pertained to their needs in their dealings with FedNor and the average ability of FedNor to address their needs in this area.

Table 9: Importance, Need for, and FedNor's Ability to Address Need for Strategic Priorities

Strategic Priority	Mean Importance (out of 10)	% Needing	Mean Ability to Address Needs (out of 10)
Telecommunications and ICT	91	57%	8
Innovation and Technology	86	52%	81
Trade and Tourism	81	54%	79
Human Capital	92	82%	84
Business Financing Support	84	3%	78
Community Economic Development	91	75%	82

When asked in what way the FedNor program was not able to address their needs, 44% of the surveyed recipients indicated that their needs were all met; another 2% said they did not know. The key responses were:

• it does not fund enough; we did not get enough money; it does not cover enough eligible expenses; other money-related issues (22%); and,
• it is too restrictive; the scope of what they fund is too limited; there are too many rules to eligibility (21%).

All other responses were given by less than 10% of the surveyed recipients.

Case Studies

The case studies for the nine projects selected provide specific examples of how NODF projects are linked to local economic development needs. One indicator of the alignment of the projects with local needs is the co-funding that local municipal and other public, not-for-profit and private sector organizations are providing for these projects. Table 10 identifies the types of needs being addressed through each of the nine projects examined in the case studies. The table also lists the local co-funding partners to give examples of the types of local organizations supporting these projects. In most cases, the support is from local municipalities, either directly or indirectly through not-for-profit economic development corporations created by the municipalities.

It should be noted that some NODF projects support broader socio-economic objectives. For example, the funding for the provision of tele-medicine equipment for seven remote First Nations in North Western Ontario, is directly linked to improving the health of the local community. In doing so, the project is building telecommunications and tele-health infrastructure, and supporting the training of technical and health care delivery personnel. These benefits are directly linked to social and health benefits and indirectly to economic benefits by reducing the need to go south for medical diagnosis and treatment. More broadly, access to quality health care is an important precondition to economic development.

Table 10: Needs Being Addressed and Co-funding Partners

Case Study	Local Needs Being Addressed	Local Organizations Providing Funding
GIS Strategic Plan for West Simcoe	Municipal and regional strategic planning Improved delivery of municipal services (planning, zoning, fire, police, use of natural resources)	Seven local municipal governments
Sault Ste. Marie Innovation Centre youth internship	Development and retention of human capital in North Development and delivery of GIS applications and services to the region	Innovation Centre (not-for-profit responsible for improving competitiveness)
Private Sector firm youth internship	Development and retention of human capital in the North Development of technical skills Support for start-up firm	Private sector firm
Construct museum complex for Gore Bay Heritage Centre	Tourism development Improved access to cultural events Business opportunities for local crafts	Town of Gore Bay
Sault Ste. Marie 2003–2004 Winter Tourism Initiative	Winter tourism development Restoration of tourism business following SARS Support for local businesses linked to tourism	Sault Ste. Marie Economic Development Corporation Local ski and other winter tourist businesses
Technology and content development for TV services Chilly Beach in Sudbury	Development of high technology business job creation Development, retention and repatriation of young people	City of Sudbury
Development of ultra-sensitive diagnostics for detection of cancer	Development of high technology biotechnology business Creation of jobs Development and retention of young people	Pre-project funding from: Lakehead University Thunder Bay Ventures (local CFDC) Private citizens
Development of Marketing Plan and Content for Timmins region	Attraction of new businesses Expansion of existing businesses Creation of jobs Retention of youth	City of Timmins Local businesses
Provision of telemedicine equipment for seven remote First Nations in North Western Ontario	Development of telecommunications infrastructure Training of technical and health care delivery personnel Improved access to healthcare Improved delivery of health care services	No other funders Delivery agent is not-for-profit tribal council serving seven remote First Nations

3.2 What is the degree of match between program selection criteria and actual projects?

Interviews

Management and staff interviewees indicated that they had no difficulty in determining how the projects met the program selection criteria. Several program officers described how they work with clients in the early stages of project development to ensure that the project would be a good fit with the NODF program. Sector specialists also play a key role in ensuring a good match between program selection criteria and actual projects. Some officers also described a process whereby project proposals are discussed at internal team meetings, thereby providing the opportunity to assess their appropriateness in the context of other projects that have been approved or being considered.

Case Studies

All projects examined in the case studies are in general aligned with one of five NODF program elements (Community Economic Development, Trade and Tourism, Innovation and Technology, Telecommunications and ICT, and Human Capital⁸).

In addition, many of the FedNor project summaries identify specifically the FedNor objective under which the project is being funded. For example, the project involving the development of multimedia technology and content for the television service Chilly Beach in Sudbury under the Innovation and Technology element, was funded under criterion 7.1.2, whereby FedNor can make "contributions to start-ups and pre-commercial product development which would be unlikely to attract commercial debt due to the risk involved". In the case of the Sault Ste. Marie Innovation Centre Youth Internship, it was noted that the project meets the requirements of FedNor's Program Framework, by "promoting entrepreneurship and enhancing business management skills as well as providing a post-secondary graduate with valuable work experience in business and economic development, with the objective of leading to longer term employment". The construction of the Gore Bay museum complex is an example of a tourism related initiative. In this case, the project summary cited Section 7.1.2 c of FedNor's terms and conditions, which provide for "contributions for costs of activities such as the development of economic infrastructure and the strengthening of Northern Ontario's tourism industry through the development of destination tourist facilities".

The case study files also show that the percentage of total project funding for each project follows FedNor criteria. For example, funding for youth internship projects consists of non-repayable contributions that are limited to 50% of eligible costs for private sector firms, but provide up to 90% funding for public and not-for-profit organizations. For contributions to projects led by private sector firms, contributions are limited to 50% of total eligible costs and are repayable and depending on project success, may exceed the amount of the contribution. For one of the projects involving private sector firms examined, repayment is based on 1% of annual gross sales arising from commercialization of the product, to a maximum of 125% of the contribution. For the other project, repayment is set at a fixed amount per year, to a maximum of 120% of the contribution.

The case studies also show that there is flexibility in administering the guidelines and criteria. In one of the projects involving a private sector firm, the recommended contribution is 57% of eligible costs, exceeding the normal 50% limit. This was justified on the basis of the "strategic importance of this project to Northern Ontario" and "the difficulty such innovative companies have in raising capital in Northern Ontario".

3.3 Conclusions – Relevance

1. The economy of Northern Ontario continues to struggle with economic development issues. NODF strategic priorities are relevant and adapted to these economic development issues. Additionally, the projects are relevant in their objectives and meet the criteria established by FedNor.

The key aspects of NODF which make the program particularly relevant are:

• its flexibility;
• its broad criteria and broad range of priorities;
• the range of project size it funds;
• its broad reach;
• the fact that it is customized to needs;
• its partnership approach;
• its geographic delivery; and,
• its ever evolving strategic outlook.

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⁵ Dr. B. Moazzami, Department of Economics, Lakehead University, Northern Ontario in the 21^st Century: New Challenges and Opportunities.(Return to reference 5)

⁶ Ibid (p. 102–106) (Return to reference 6)

⁷ Ibid (p. 154–155) (Return to reference 7)

⁸ Excludes Business Financing Support which was not included in the case studies.(Return to reference 8)