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Ottawa didn’t track a third of its $1.7-billion annual innovation funding programs

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The federal government did not measure the impact of one-third of the 96 business innovation programs giving out about $1.7 billion annually, according to an internal review.

A copy of that review—classified as secret—states that the allocation of funding from 2012-2017 led to confusion for companies applying for money, favoured large businesses over startups trying to scale and particularly disadvantaged female and Indigenous entrepreneurs.

The December 2017 review—which The Logic obtained via an access-to-information request—has not previously been made public. While it has already prompted some internal changes—including consolidation resulting in two-thirds of funding programs being eliminated in the March 2018 budget—many of the issues outlined in the report remain.

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Talking Point

Thirty-two per cent of innovation and clean technology funding programs—given out by the government as part of its $1.7-billion annual spend—included no way of measuring their impact, according to an internal review. The review also stated that funding programs favoured large businesses over startups, and particularly disadvantaged women and Indigenous-led entrepreneurs trying to get funding.

Part of the problem is a lack of data. The report states that 32 per cent of innovation programs “did not identify performance indicators that measured the impact of their programs against their objectives.” Although 23 per cent of programs had strong performance measures, when data is collected, it is “underutilized in measuring impacts on firms,” according to the report.

Innovation Minister Navdeep Bains did not answer questions regarding why the government is giving out money without tracking its effectiveness and what, if anything, has been done to improve things since this report was circulated in December. His spokesperson, Nilani Logeswaran, said the March 2018 budget included “the establishment of new performance measures for evaluating innovation programs.”

The internal review raises questions about how many jobs are being created through innovation funding, or indeed whether the government is monitoring the programs closely enough to know how many are being created.

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One-third of government innovation funding studied in the report was distributed via third-party services such as incubators, networks and hubs. Data collection on activity and outcomes for those services “varies widely, due to fragmented coordination and leadership,” resulting in “limited understanding of outcomes for one third of funding,” according to the report.

The report states that 70 per cent of programs had some degree of mandate overlap, causing confusion for firms trying to decide where to apply. The government sought to address the overlap by reducing the number of programs by two-thirds.  

The report also flags several concerns that Canadian governments have long tried to address, including scaling startups and small- and medium-sized enterprises (SMEs), and the challenge of commercializing—and generating revenue from—innovations.

“Less than half of funding is directed to firms that are in a growth stage,” reads the report, adding that despite the government’s focus on creating high-growth firms, “stable and mature firms typically receive the largest funding awards.”

Less than 30 per cent of funding programs have practices to help companies sell outside the country. Canadian SMEs lag behind international peers in exporting, according to the report.

Funding was particularly lacking for startups that have a great idea, but don’t yet have revenue: “Funding of high potential pre-commercial technology advancement is fragmented,” reads the report.

The report also identifies a number of high-level concerns about Canada’s ability to innovate, which the government typically doesn’t discuss publicly, including “subpar performance” in business spending on R&D, industry productivity and progress towards meeting greenhouse gas reduction targets.

The review found that just two of 45 cleantech programs (representing 12 per cent of funding) actually track and report on “clean outcomes.”

“Low capacity for monitoring and reporting clean outcomes suggests less impact on the Clean Growth and Climate Change Agenda,” reads the report, adding, “What gets measured gets done.”

Since the report came out, the government has launched a website called the “Clean Growth Hub.”

It is working to streamline client services, improve federal program coordination, enable tracking and reporting of clean technology results across government, and connect stakeholders to international markets,” said Logeswaran.

The report indicates that only 12 out of the 96 programs consider inclusivity, particularly for women, Canadians with disabilities, Indigenous people and the elderly.

“Program performance and benchmarking in this area is challenged by the lack of data, metrics, and targets,” reads the report.

It also states that 33 per cent of programs are of a limited duration, creating planning issues for companies that don’t know if they can rely on the money after the first few cheques arrive. There was a significant spike in approvals and funding payouts in March, which creates uncertainty for firms, according to the report. The fiscal cycle of government determines when it can disburse funding, but it doesn’t necessarily align with the way companies spend or fundraise normally.

Just two out of the 96 programs use procurement to support innovation. The government relies disproportionately on foreign-based firms for large procurement projects. IBM, which helped launch the scandal-plagued Phoenix payment system for government employees, received $2 billion in federal contracts since that launch.

The government can help encourage innovation by acting as a first buyer through its procurement channels, according to the report. Government purchases provide revenue and legitimacy for companies, which may help them attract other clients.

The government appears to have already begun addressing this concern prior to the report being issued. The March 2017 budget set aside $100 million for a new program, Innovative Solutions Canada, which aims to help domestic firms scale by “having the federal government act as a first customer.”

Logeswaran said the government implemented a strategy in the March 2018 budget to simplify the delivery of innovation business review programs with “an increased focus on enhancing support for high-growth potential firms.” She also said the government has created a website that serves as a central hub for those seeking innovation funding.

(Cover photo by THE CANADIAN PRESS/Justin Tang)