Public Accounts Committee on Oct. 28th, 2009

[Sheila Fraser]

Thank you, Chair.

As we mention in the report, the department did consider other options but did not implement them.

I think it's important, and we try to make the point here, that CEEA-T did not meet the conditions under the contribution agreement, which said that they were to request payment only after they had paid their subcontractors. We also indicate that obviously government was trying to do the right thing and ensure that the subcontractors were paid for the work that was done, but we believe that $3.2 million was put at risk because payments were made to an insolvent company and there was, as far as we could determine, no guarantee that the payment would actually go to the subcontractors.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Precisely. Could the agreement at that point not have been amended with legal assistance?

[Sheila Fraser]

Yes. That was one of the options that were considered.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

Then Mr. Fadden, was that an option that was considered at the time?

[Richard Fadden]

It was, Mr. Chairman. I would only note that it takes two to amend a contract; it cannot be amended unilaterally. At this point, our relationship with these entities was such that they weren't going to do anything we asked them to do.

[Bonnie Crombie, Liberal, Mississauga—Streetsville, ON]

When did we learn that CEEA-T was insolvent?

[Cassie Doyle]

I wonder if I could, Mr. Chair, ask our director general from the office of energy efficiency to join us at the table.

[The Chair, Liberal, Shawn Murphy]

Coming to the table, colleagues, is Carol Buckley, the director general of the office of energy efficiency.

Welcome, Ms. Buckley.

[Carol Buckley, Director General, Office of Energy Efficiency, Department of Natural Resources]

Picking up on the question of the decision whether to pay the subcontractors directly, as Deputy Minister Fadden said, the entity with whom we had a legal agreement would not have been likely to want to stand back from that agreement; they wanted to continue to be the entity delivering the work under the contribution agreement.

In addition, there were some 40 or more subcontractors, so the administrative difficulty of moving a contract of many millions of dollars to tens and tens of subcontractors would have been very difficult, particularly since the entity that had signed the agreement would not have been happy to do it.

So we had advice that there were options we could undertake, and we felt confident in the option we chose. As long as we did a very rigorous value for money assessment of all the business plan items, we would ensure that money was only provided for work that was completed. Then the legal relationship was between CEEA-T and the subcontractors, and the money needed to flow from CEEA-T to the subcontractors, not from the crown to the subcontractors.

[The Chair, Liberal, Shawn Murphy]

Thank you, Ms. Crombie.

Mr. Shipley, you have five minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chair.

I have to tell you, this is likely one of the most disturbing events I've witnessed in my short tenure on this committee.

First of all, I'm a little disappointed, Ms. Doyle, that actually in your opening presentation you tried to protect so much the events that happened between 2003 and 2005. Rather, I think, as you did at the end, you should have focused as much on what has changed, what has happened, and those good things.

What happened in the first part of this event—some of my colleagues are trying to underestimate it, I'm afraid—is that we have $110,000 that was paid by the department to a consultant. That same consultant signed a contributory agreement with NRCan as president of the recipient. CEEA Transport entered into a contract for professional services—this is from the Auditor General's report—and the contract included provisions to pay up to another $712,000 in professional services.

Rightly so, the Auditor General says they are very concerned about knowing all the circumstances. One is that NRCan, in an internal audit, for some reason at that time did nothing about the conflict of interest, which raises a large concern, knowing that we're talking about close to a million dollars in services and consulting fees that went out.

On top of that, to follow up what my colleague was raising, which is a valid point, the Auditor General says: “We found that NRCan made about $3.2 million in payments to CEEA Transport” knowing the fact “that it was likely insolvent”. So they did not pay their subcontractors. In my riding, I know subcontractors who get raked over because somebody has skimmed off the money at the top and has decided that it is their prerogative not to pay the subcontractors.

Now, we're talking about $3.2 million, so I have a question that follows from a comment here. You said that “no money was lost and there were no overpayments”; you have to be assured that no money was lost and no overpayments made.

Where did the money go?

[Cassie Doyle]

Thank you for your question.

It's fairly complex, because there are a number of reports, all focused on the same situation.

The reference I made to money not being lost or overpayments not made reflects the fact that in April 2006 the payments under CEEA-T were suspended to allow for a much more rigorous review of all of the deliverables under the specific contribution agreement. As I mentioned, there was a very detailed review; it took a dedicated team to go through these 760 program deliverables to ensure that section 34 of the Financial Administration Act had been fully complied with. It was after that rigorous review that there was a sort of truing up in terms of what the crown was responsible or obligated to pay for work that at that time had been completed.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I understand the point: the crown does not pay the contractors; the crown pays the company. An internal review was not done concerning the conflict of interest, which appears to be maybe even more than that now.

What you said—or I think it was Mr. Fadden who said it—was interesting: that the RCMP declined to investigate.

Can you expand on any reason the RCMP would have to decline to investigate something, when close to a million dollars had been spent--any reason, knowing that there was an internal conflict, knowing that there was a conflict of interest, knowing that there had not been an internal audit that would review it, that the RCMP would come along in whatever year and say, we don't think we want to investigate?

[Cassie Doyle]

I'd certainly be pleased to elaborate on the role of the RCMP.

Natural Resources Canada invited the RCMP to review the facts on two occasions, in May 2006 and then upon conclusion of the internal audit in July 2006. All of the findings of the internal audit were provided to the RCMP. After its review, the RCMP noted that there was no evidence of wrongdoing warranting either further review or initiation of a criminal investigation.

So there were two formal referrals to the RCMP, and the formal response was provided in July 2006, after the full audit material was provided.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Shipley.

Mr. Paillé, you have cinq minutes.

[Pascal-Pierre Paillé, Bloc, Louis-Hébert, QC]

Thank you.

in your statement, at page 3, you state that “... Natural Resources Canada has a robust system of financial controls in place to ensure that tax dollars are well used and are spent for their intended purpose”. In addition to knowing what amounts would be paid, you have to know whom they will paid to. The problem is not only that money was paid in excess, it is also how that money was paid under the contract.

I would like to ask a simple question. Today, are you still doing business with CEEA Transport? Do they have other contracts with you?

[Cassie Doyle]

No, we have not had any further contracts, Mr. Chair.

[Pascal-Pierre Paillé, Bloc, Louis-Hébert, QC]

From the information I have here, Mr. Middleton is still working for Bronson Consulting Group. Are you still dealing with that company?

[Cassie Doyle]

No, we do not.

[Pascal-Pierre Paillé, Bloc, Louis-Hébert, QC]

All right. Thank you.

[Cassie Doyle]

Oh, I'm sorry; pardon me. Perhaps I could ask my director general.

It's the individual, not the company, that we are no longer dealing with.

[Carol Buckley]

Peter Middleton, to my knowledge, worked for Bronson Consulting quite a few years ago. Then he formed his own consulting company, and that is the consulting company that was hired through the CEEA-T contribution agreement.

We continue to work with Bronson Consulting. We have no knowledge of any association of Peter Middleton with Bronson Consulting today, and we certainly have no contribution agreements or any business with Peter Middleton today.

[Pascal-Pierre Paillé, Bloc, Louis-Hébert, QC]

You said to my colleague that you have identified another potential situation of conflict of interest. You also said that in the case referred to by the Auditor General, the officer who dealt with the file has been dismissed. Does the fact that you believe there might be a new conflict of interest even though new rules have been put in place mean that another officer might be involved?

[Cassie Doyle]

Thank you for your question.

To be specific, the department is currently aware of one potential conflict of interest situation. As the review or investigation of that situation is under way right now, it's not possible for me to disclose the individual's name, and it would also not be appropriate under the Privacy Act, but we are aware of one other potential conflict of interest situation within our department.

[Pascal-Pierre Paillé, Bloc, Louis-Hébert, QC]

From the information we have received, it was quite obvious that it would be a conflict of interest. Why did management of Natural Resources Canada ask for an internal audit? Why was there an internal audit?