Evidence of meeting #42 for Finance in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was students.

A video is available from Parliament.

On the agenda

MPs speaking

Also speaking

Ian Shugart  Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office
Daniel Lapointe  President, Focus OSBL Consulting Service, As an Individual
Joshua Mandryk  Labour and Class Actions Lawyer, Goldblatt Partners LLP, As an Individual
Chris Aylward  National President, Public Service Alliance of Canada

11:45 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Thank you.

If the meeting took place by Zoom, can you check if there is a recording of that meeting and commit to releasing that recording to our committee as well?

11:45 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

If there is such a thing, we can provide all of that. My intention, Chair, is to be as expansive as possible in the information we provide to the committee.

11:45 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Thank you very much.

The next question I have goes back to this issue of due diligence. You confirmed that the public service does perform due diligence when it awards large-scale contribution agreements. This was a billion-dollar contribution agreement, but you indicate that somehow or another, your officials missed the fact that WE, the recipient of the contribution, had breached a bank covenant, that its entire board had resigned and, presumably, they missed the fact that the organization and its affiliates had somehow accumulated $40 million in real estate, even though it is not a real estate business.

Who in the public service ought to have performed and reported on this due diligence?

11:45 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

That “ought” assumes that there was a failure of duty, and I'm not prepared to accept that assertion. I do not know what information was available to whom on the broader dealings of the organization, which I understand is a complex organization.

I can only repeat for the committee, Chair, that the due diligence of the public service related to the ability of WE Charity to deliver this program.

11:50 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Right, and doing that due diligence would have required reading the financial statements. Is that correct?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

If that were relevant to their ability to deliver this program, that may be the case.

11:50 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

You would have to read the financial statements to know if the organization had the financial capacity to administer a program of this scale.

Did anyone in the public service read the financial statements of WE before allegedly recommending that it be given delivery of this program?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

I think the answer to that question is encompassed within my earlier answer. I don't have any further information.

11:50 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

Right, because if they had read the financial statements, they would have found that WE was in breach of its bank covenants, which would have been right there staring the official in the face. It seems hard to believe that no one would have alerted the government to these facts about the WE organization.

Finally, did the Prime Minister indicate to you when you discussed this matter with him, this WE contribution agreement, whether or not he had spoken to any member of WE or its affiliates or its representatives before the proposal went to cabinet?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

There is absolutely no evidence, no suggestion, in anything that I have reviewed that would suggest that the Prime Minister had any interaction with the WE Charity in relation to this program—none whatsoever.

11:50 a.m.

Liberal

The Chair Liberal Wayne Easter

Thank you, both.

11:50 a.m.

Conservative

Pierre Poilievre Conservative Carleton, ON

What about his staff members?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

The same issue, as far as I know.

11:50 a.m.

Liberal

The Chair Liberal Wayne Easter

We will now turn to Ms. Koutrakis, and then we'll have time for one question from Ms. Gaudreau, and maybe one from Mr. Julian.

July 21st, 2020 / 11:50 a.m.

Liberal

Annie Koutrakis Liberal Vimy, QC

Thank you, Mr. Chair.

Thank you, Mr. Shugart, for being here with us today.

Last week we heard from Ms. Wernick, and in her testimony she said that the public service agreed that the WE Charity was the only organization to deliver the student service grant. With this in mind, it makes sense, then, that the cabinet would try to deliver the program as quickly as possible given the exceptional circumstances that we are all currently facing.

Was a contribution agreement the most effective way, in your opinion, to quickly deliver the CSSG, and is there anything unethical about delivering a program through a contribution agreement?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

Absolutely not. Contribution agreements are a vehicle that governments, going back as far as I can remember, have used to achieve public policy purposes in a transparent way that is subject to audit, which this agreement was and is. They are a standard vehicle.

There are standard provisions in contribution agreements. They will vary from case to case, depending on the nature of the program being delivered. They are absolutely a proven vehicle, and there is nothing unethical about using a partnership agreement with a third party to achieve public policy and public administration objectives—none whatsoever.

11:50 a.m.

Liberal

Annie Koutrakis Liberal Vimy, QC

Can you expand, please, on what steps are taken to get a program through the cabinet process?

11:50 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

It all depends on the program and the nature of it, but, in brief, a minister proposes something, sponsors the proposal, so to speak, which would have been developed by public servants with input, again depending on the case, from stakeholders.

Again, going back decades, governments of all stripes have engaged with stakeholders through their own political offices and, through public servants, have received proposals and have asked for proposals. It is a very dynamic process. That will result in a proposal that public servants will sign off on. It will typically go to a committee of cabinet for scrutiny, and then, if the recommendation is positive or even if it is disputed but still has life, it will go to full cabinet for ratification. Different governments will vary the process somewhat according to the procedures that the head of the government puts in place, but, generally speaking, that is the process that is followed.

During the COVID pandemic there have been amendments to the process. There has not always been the luxury of time. Cabinet, of course, was meeting less frequently than it normally would. The COVID committee, which is an ad hoc committee chaired by the deputy prime minister, was meeting far more regularly than any committee normally would.

So there were variances related to the nature of the crisis, but, in general, that would be the process.

11:55 a.m.

Liberal

Annie Koutrakis Liberal Vimy, QC

In general, is it common for the civil service to consider multiple organizations but only recommend one organization to cabinet?

11:55 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

It would depend on the facts of the case. If there were—and let's use our imaginations here—a wide variety of organizations, and if there were time to do it, there might very well be a formal competitive process. There could be a call for proposals in a formal competitive process. There's been a wide variety.

By the way, the WE charity was not the only third party the government turned to during the pandemic crisis to support these public objectives. It turned to the Canadian Red Cross, the United Way Centraide and other organizations to provide the expertise and the reach that the public service does not itself have. Let's bear in mind that our system may have the public service as central at the federal, provincial and municipal levels in providing public services, but it's part of a complex system of civil society organizations supporting these objectives. The public service may be admirable, but it's not everything. This is a normal part of doing business.

That is not to say, Chair, that the nature of the committee's inquiry is trivial or should not be followed up, but this is a standard means of doing business. In this case, the public service professionally concluded that this organization was best placed, and indeed uniquely placed for reasons I mentioned earlier in our meeting, to deliver these objectives, and all of the decisions associated with it were consistent with that conclusion.

11:55 a.m.

Liberal

The Chair Liberal Wayne Easter

I'm sorry, but we're out of time there.

I do want to just follow up on the steps in the cabinet process, having been in cabinet myself. Usually there are three options that come to cabinet, in my time, anyway. Now with COVID, no doubt there's more streamlining out of necessity.

Would other options beyond WE have been there? You did mention United Way; you did mention the Red Cross. Would there be a preferred option, other options considered, and why didn't they see fit to go with them?

11:55 a.m.

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

Well, Chair, you're revealing our techniques—that we often provide ministers with an unacceptable option, another unacceptable option and the right option. I'm making light of it of course, and I want to be clear to the Canadian public about that.

Again the facts will determine the situation.

I do not believe that options were provided in this case, because the lines of the program, broadly speaking, had already been announced by the Prime Minister as being the government's objectives to deal with this issue. What was recommended to cabinet followed those lines. It represented the further elaboration of those program features. Similarly, in the absence of other options, in the public service's best judgment about the delivery vehicle, the WE Charity was the only recommendation made, but with the rationale that they were uniquely placed, in our opinion, to deliver many of the features of the program.

Now, as I said, in the cabinet discussion, ministers did raise issues of due diligence. That part of the process was followed, as it would be in any other case, Chair.

Noon

Liberal

The Chair Liberal Wayne Easter

Okay, thank you.

I did promise Ms. Gaudreau and Mr. Julian one more question each. We'll go a little bit over.

Ms. Gaudreau.

Noon

Bloc

Marie-Hélène Gaudreau Bloc Laurentides—Labelle, QC

Thank you, Mr. Chair.

We've learned a number of things so far at this meeting, so I thank you, Mr. Shugart. You told us that due diligence was exercised.

My question is straightforward. You mentioned that, recognizing your duty, you felt it important to choose an organization capable of meeting the conditions of the contribution agreement. We raised the possibility of a creditworthy organization.

Since due diligence was exercised, would it be possible to provide the committee with that so-called diligence, the actual report?

Noon

Clerk of the Privy Council and Secretary to the Cabinet, Privy Council Office

Ian Shugart

If there are relevant documents in that regard, Chair, I would be happy to have them provided to the committee.

I think it would be appropriate for the committee to see the contribution agreement with WE Charity. I would have no objection to the contribution agreement being made available and I cannot imagine that WE Charity would have any objection either.