Thanks for the invitation to appear before the committee today, Mr. Chair, and for allowing me to provide some opening remarks with regard to the audit of SDTC.
I have three points that I would like to present to the members of the committee.
First, I would like to strongly underline my department's commitment to sound management of public funding. We aim to ensure effective stewardship in all of our activities and, where weaknesses are found, to take swift action to correct those weaknesses.
The record shows that Innovation, Science and Economic Development Canada moved swiftly as soon as we were made aware of the allegations of mismanagement at SDTC. We were informed by the whistle-blower of the allegations in mid-February 2023. Very shortly thereafter, we issued a contract for a leading audit firm, Raymond Chabot Grant Thornton, to conduct a fact-finding exercise. The firm had full access to the evidence provided by the whistle-blower.
RCGT's report was presented to the department in late September 2023. It revealed inconsistencies and opportunities for improvement in the organization's governance and conflict of interest practices, in its compliance with its contribution agreement and in its HR practices. Within a few short days, the minister was briefed, and he ordered SDTC to implement a detailed corrective action plan in order to pause on new project funding.
In response to concerns regarding the SDTC's human resources practices, the department decided to do a second review, and that required the contribution of SDTC and the Attorney General of Canada.
Within the space of a few short weeks, the government engaged a leading national law firm, McCarthy Tétrault, to look deeply into the allegations around HR practices. That review was thorough, interviewing more than 60 current and former SDTC staff, executives and board members, and there was an associated document review. ISED also provided to the law firm the package we received from the whistle-blower. This review found that neither current nor former executives engaged in harassment, that severance packages and NDAs were aligned with normal business practices and that HR complaints were unequivocally addressed.
Finally, of course, the Auditor General conducted her own audit. We've been very pleased to work closely with Ms. Hogan and her office, and we welcome the findings of her audit. We are in full agreement with her findings, including the recommendations directed to ISED. Indeed, we're already quite advanced in implementing improvements.
My second point is to underline the unique nature of SDTC. Its legal structure played a role both in how we got here today and in the government's plans for restoring funding to the clean-tech sector. More than 20 years ago, Parliament set up this organization as a private foundation. This means that it's an organization in the private sector and is not owned by the government. The statute makes clear that SDTC is not an agent of the Crown. In this regard, it is totally unlike a branch of my department, a Crown corporation or even a third party that might act as our agent to deliver a program on our behalf.
Through a contribution agreement, ISED allocated funds to SDTC for a specific purpose. However, much of the day-to-day decision-making on how the organization should operate and exactly how its programming should work is, by design, in the hands of the SDTC board and management team.
Under the legislation, the government's ability to oversee this organization's activities is limited to the terms of the contribution agreement. Any human resources issue at Sustainable Development Technology Canada therefore falls outside government oversight by law. The employees are not public servants and none of the usual legal structures that apply to public servants are in play. That is why the former board of directors had to waive its rights before McCarthy Tétrault could begin its review of human resources practices.
As the Auditor General noted, ISED did conduct monitoring activities under the contribution agreement, but as the Auditor General said, these were not sufficient to pick up the problems inside SDTC. We agree and are already well advanced in putting in place structural changes in how we oversee clean-tech funding.
My final point, briefly, is with regard to the action plan to restore confidence in clean-tech funding. We are confident that the transition of both rank-and-file staff and SDTC programming to the NRC will directly address the concerns that have arisen from the various reviews.
The NRC and IRAP have a 100-year history of excellence in delivering programming to Canadian business. Moreover, they have expertise in clean tech. They are well suited to take on the new responsibilities. Moreover, unlike SDTC, the NRC is a Crown agency. It is fully subject to important statutes such as the Financial Administration Act. Its employees are public servants directly accountable to the Crown. Its governing council, in its entirety, is named by the government. The president of the NRC is a GIC appointee subject to regular performance reviews by the government.
The challenges identified at SDTC revolved almost entirely around its arms'-length independent governance model, which clearly, as the minister has said, was not sufficient to meet modern expectations of public sector governance. By placing its programming inside the public service, the ability to scrutinize and ensure adherence to key government policies, whether in finance, administration, conflict of interest or HR, will be much higher.
Thank you for giving me the opportunity to present my comments. I am now prepared to answer questions from members of the committee.
