Evidence of meeting #127 for Public Accounts in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was foundation.
A video is available from Parliament.
Andrew Hayes Deputy Auditor General, Office of the Auditor General
I think it's important to mention that there is also a recommendation that ISED, the department, should also be monitoring and ensuring that it assesses conflict of interest challenges at the foundation. There is an oversight role that ISED should be playing.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you very much.
Could you also go over your recommendations regarding project eligibility, including what went wrong with this? What are the implications for your recommendations?
Auditor General of Canada, Office of the Auditor General
You're asking me to remember a lot of specifics. I'm going to see if Mathieu wants to join in here.
I would say, overall, that it's about making sure, when the awarding of public funds is done, that it follows the structure, the governance structure, that was agreed to between the federal government and the foundation. It's clearly set out in the contribution agreements between the government and the foundation, and the board really failed to comply with those requirements. They created a stream that, we believe, doesn't even meet the mandate of the foundation, which were some of the contracts that we believe received funds in an ineligible way.
It's about going back to basics and following that contribution agreement.
Mathieu, do you want to add something?
Mathieu Lequain Principal, Office of the Auditor General
Yes. As we said in the report, the material for the discussion around the eligibility of projects are minutes: the records of decisions, board minutes and the project committee review. They're very concise and they're very high level, so it's very difficult, as an auditor, to understand the level of engagement, the level of discussion, for a specific project.
Liberal
Patrick Weiler Liberal West Vancouver—Sunshine Coast—Sea to Sky Country, BC
Thank you.
With my last question here, based on your general experience in audits, what are some of the challenges with arm's-length organizations such as SDTC in regard to accountability and process?
Auditor General of Canada, Office of the Auditor General
In the federal government, a foundation is a unique one because you have the departments and agencies, and then at arm's length you have the Crown corporations. At further arm's length, you can have a foundation like Sustainable Development Technology Canada.
That foundation has its own board and its own governance structure. It's asking the federal government for funds to disburse. It's meeting a policy objective, but it needs to remember that it's actually disbursing public funds.
This is where I think Innovation, Science and Economic Development Canada comes in and plays an important role. It has an oversight role to ensure compliance with that contribution agreement and also ensure the prudent use of public funds. While it did some monitoring, it did not do enough. It should have been asking about conflicts of interest to make sure they were properly managed. Public servants are held to a higher standard and this foundation should have been held to that same standard so that conflicts of interest were dealt with properly.
I can tell you that the department, throughout the audit, reacted quickly and already started to make changes to how it interacts with this foundation and others.
Conservative
The Chair Conservative John Williamson
Thank you very much.
Ms. Sinclair‑Desgagné, the floor is yours for two and a half minutes.
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
Thank you, Mr. Chair.
Ms. Hogan, can you confirm that you will be able to provide the committee with a list of the 90 cases where Sustainable Development Technology Canada did not comply with conflict-of-interest policies, as well as a list of the 10 projects that received funding, even though they were ineligible?
Auditor General of Canada, Office of the Auditor General
I'm not in a position to give you this information in person, but we will send these lists to the committee.
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
Mr. Chair, can you assure us that this information will be made public?
Conservative
The Chair Conservative John Williamson
As has been said, once the information is provided to the committee, it can do what it wants with it. For example, it can put it on its website, I think. If the information is sent to you, it's up to you to decide what you want to do with it.
Okay?
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
Mr. Chair, I think it's important that committee members be notified.
Conservative
The Chair Conservative John Williamson
They will be.
You have the floor for one minute and 50 seconds.
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
Thank you very much, Mr. Chair.
I would like to come back to the issue of non-competitive contracts and the breakdown in terms of the types of contracts.
One of the government's arguments is that standing offers are supposedly more competitive. They are factored into non-competitive contracts, but they are of a more competitive nature. It's an option between a competitively awarded contract and a non-competitively awarded contract. I think that's a misperception. In fact, as you say in your report, in the case of McKinsey, the standing offer agreement was determined on a non-competitive basis.
Is that correct?
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
So 71% of the contracts awarded to McKinsey were actually awarded non-competitively. For McKinsey, that accounts for about $118 million.
Auditor General of Canada, Office of the Auditor General
Yes, but I would like to clarify something.
About 20 of the contracts used the standing offer. For the others, departments or agencies and Crown corporations used a non-competitive process.
Bloc
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
I understand.
That said, when it comes to 71% of contracts, that includes standing offers.
Is that correct?
Auditor General of Canada, Office of the Auditor General
That's correct.
I didn't want you to get the impression that the standing offer was used for 71% of the contracts.
Nathalie Sinclair-Desgagné Bloc Terrebonne, QC
That is very clear to me and, I hope, to the people listening to us.
It is quite worrisome.
Do you think that is also the case for all the other companies the government does business with? Knowing that McKinsey represents 0.27% of the professional service providers the government uses, do you think this kind of non-competitive contracting practice is now commonplace in the federal government?
Auditor General of Canada, Office of the Auditor General
It's hard to say.
What I see is that the lack of justification for using a non-competitive process is probably a common problem.
In terms of the number of contracts that were sole-sourced, I don't have that information at hand. I can only comment on McKinsey.
Conservative
The Chair Conservative John Williamson
Thank you very much.
Mr. Desjarlais, you have the floor for two and a half minutes.
NDP
Blake Desjarlais NDP Edmonton Griesbach, AB
Thank you very much, Mr. Chair.
Auditor General, you mentioned that 0.27% of contracts were given or awarded to McKinsey & Company since 2011. Is that correct?