Public Accounts Committee on June 13th, 2024

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Could he answer that, Chair? Is he going to get the money back?

[The Chair, Conservative, John Williamson]

You will have another round, Mr. Desjarlais.

Mr. Perkins, you have the floor for five minutes, please.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you, Mr. Chair.

I guess, to Mr. Desjarlais' question, I will give you a brief second: Are we going to get the money back?

[Simon Kennedy]

With regard to the question of recoveries, that is an area that we think is a priority. We think there needs to be action taken to offset those funds to SDTC, which should be taking action to recover those monies.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Right. It wasn't a priority in the past, though.

I would like to come back to this relationship with the assistant deputy minister who has been in the meetings.

Auditor General, from page 23 of your report, I take it that you must have spoken with a number of the directors about the relationship. At the top of page 23, you essentially say that when these votes of conflict were going on, either declared or not declared, since the assistant deputy minister did not raise any concerns, board members assumed that the department was okay.

Essentially, if that's a fair summary, there was an implicit agreement to the ambiguity or the silence of the department, which was in every meeting.

[Karen Hogan]

We definitely spoke with many past and current board members, and even the assistant deputy minister, and there was confusion around what the role was. That was very clear.

Yes, some of the board members voiced to us that it was an implicit agreement, in their mind, that nothing had been raised by—

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Well, I don't think he was there just to eat the chicken fingers. I presume he was there to actually be a two-way conduit for both what departmental policy is to make sure they are following the contribution agreements and to report back anything that the assistant deputy minister....

I have served on a number of boards, including one Crown board. I would expect that the department, the deputy and the minister would be informed. In fact, I know that in the case of the Crown board that I served on, the minister was very much aware of what went on at every board meeting.

[Karen Hogan]

I think this is exactly why we made a recommendation that this needs to be clarified and strengthened. I personally spoke with Mr. Kennedy about this situation as we were closing off the audit.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It's pretty clear in the Conflict of Interest Act with regard to public office holders. It says, “No public office holder shall make a decision or participate in making a decision related to the exercise of an official power”. When almost half the money going out the door is conflicted amounts in terms of the government-appointed board members, that is not one person leaving the room and there's an exception. It's actually the rule. They're all working and getting conflicts, and it's the culture that causes a problem.

Mr. Kennedy, were you aware that the previous person who was on there, ADM Noseworthy, had asked a previous serving chair, while he was serving as an observer on the board, for a job?

[Simon Kennedy]

Mr. Chair, I'm not aware of these allegations. I'm sorry. I'm not in a position to comment on it.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

If your ADM was asking a chair for a job while supposedly observing any wrongdoing, do you think that it would compromise their ability or willingness to report wrongdoing in the board?

[Simon Kennedy]

Mr. Chair, I would just say that this is the first I'm hearing this allegation. I don't feel comfortable responding to hypotheticals, especially not about a former employee.

I am not aware of this allegation. It's the first time I'm hearing of it.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Okay, but it is not appropriate for a government official serving on a Crown corporation board as an observer to ask that board chair for a job.

[Simon Kennedy]

Well, Mr. Chair, I would say there are very clear rules that apply to designated public office holders about how they are to comport themselves with regard to future offers of employment. Members would be well aware of those rules. They're a matter of public knowledge, so I would just point to those.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I have one last question for the Auditor General.

[The Chair, Conservative, John Williamson]

You have one minute, Mr. Perkins.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Thank you.

I'm very confused here. From a governance perspective, your report seems to imply that if you declare a conflict, because they followed their rules, then somehow that's not an issue, when it's clearly an issue with regard to the SDTC act, which says that “no director shall profit or gain any income or acquire any property from the Foundation or its activities.”

When you have almost half the transactions, almost half the money, going to board members in companies they have a financial interest in, it doesn't really matter what the conflict of interest policy of the board is, does it? What matters is the act, and breaking the act of Parliament.

[Karen Hogan]

I think there's a lot going on here, because there is also the Canada Foundation for Sustainable Development Technology Act, which requires that some of the board members have experience and be involved in the sector.

I think that inherently, as Mr. Kennedy pointed out before, it will create conflicts of interest, which is why a really rigorous process is needed. I would expect that it's more than declaring a conflict of interest; it's declaring and recusing yourself from any votes and decisions.

However, I agree with the member, Mr. Chair, that the act also clearly states that no member should have personally benefited. It is a concern, which is why in our report we flagged failures of the board in respecting its enabling legislation.

[The Chair, Conservative, John Williamson]

Thank you very much.

Up next is Ms. Bradford. You have the floor for five minutes, please.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you, Mr. Chair, and thank you to the witnesses today.

This is directed to you, Ms. Hogan.

In paragraph 6.24, you write that estimates of environmental benefits of projects “were unreasonably high.” Can you explain what you meant by this, and what made them “unreasonably high”?

[Karen Hogan]

I might ask Mathieu if he wants to join in here.

I think we were raising a few things. There was no target set in what should be a reasonable target when it comes to determining the environmental benefits. We found that most of the applications quantified them, but they were very high. Part of our conclusion was based on the fact that we looked at completed projects, and in 12 out of the 18 completed projects, the received benefits were actually 50% lower than what had been estimated.

While I know that an estimate is difficult in this area, that was a lot of projects to have not achieved their benefits.

There's nothing else to add from Mathieu.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you.

In paragraph 6.44, you note that the same law firm that the foundation's external general counsel worked for was “hand-selected” to produce a report on financial mismanagement in human resource practices at the foundation. You note that “This could create the appearance that the investigation was not independent.” However, this also appears like a selection based on previous work and trustworthiness.

In your view, how can foundations and arm's-length corporations better prepare for perceived conflicts of interest? How can board members get a better understanding of what “a perceived conflict of interest” may actually be?

[Karen Hogan]

That entire paragraph in our report actually highlights some conflicts of interest that might be real or perceived that were really not addressed by the conflict of interest policies in the foundation.

There are so many best practices out there that boards can use to help establish what their conflict of interest policies look like. There are the federal values and ethics. There is the Conflict of Interest Act. The OECD has guidelines in the public service when it comes to conflicts of interest. There are other countries. My counterpart, the ANAO, actually has a guide on conflict of interest.

I think there are lots of areas where best practices can be sought. This is about ensuring that from a public perception, individuals never appear to have put themselves in a position where they may benefit from public funds. When you're involved with public funds or in the public service, you need to be held to a higher set of standards.

I'm going to turn to Andrew, because I know this is an area that he's really passionate about. I'm sure that he probably has something he might like to add.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

There's just one thing to add to your question: The individual we're talking about there, the general counsel, is also one of the two members remaining on the member council.

[Valerie Bradford, Liberal, Kitchener South—Hespeler, ON]

Thank you.

Mr. Kennedy, getting back to the constitution and how the board of directors was arrived at, eight people on the board of directors were appointed by the Governor in Council. Can you explain the process and the backgrounds of those who were appointed in this way?