And that's not how government funding works: It's mostly based on product delivery and jobs created, basically, what is the net effect on the economy as a whole. If the layoffs are true, then I would think both Federal and Provincial would be banging on their doors demanding answers (if not already nulled by whatever agreement they had).
Since everyone is all pissy about funding and such (and I'd assume most are within Canada here), I'm going to be the shit disturber and make you think a bit:
This game was funding by Canadian Tax Dollars.
http://www.thetelegram.com/Arts---Life/Technologies/2009-04-25/article-1436362/Puffin-play/1
Specifically, if you read the fine line, the funding was given not with a publishing deal, rather helping them complete development. It would have been entirely possible that games under funding don't ever find publisher. So what if it didn't? Would you all be crying fowl that money was spent and no product (or mediocre product) was shipped?