Public Accounts Committee on June 13th, 2024

[Michael Cooper, Conservative, St. Albert—Edmonton, AB]

I sounds like you're washing your hands clean of any accountability. Canadian taxpayers deserve so much better.

[The Chair, Conservative, John Williamson]

We will move on now.

Mrs. Shanahan, you have the floor for five minutes, please.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much, Chair.

Actually, I'd like to address the design of this organization, because obviously there's reasoning behind that.

We're in the tech sector. It's not normally an expertise of public servants to be choosing what we call winners and losers when it comes to identifying technology that's going to be the technology of the future, so I'm just trying to understand, Mr. Kennedy.

Is it common practice to have this kind of organizational structure?

I guess ISED would be a place where we would see government working with the private sector.

[Simon Kennedy]

Mr. Chair, this is very unusual in the stable of organizations that we support. We would either be working directly with a Crown agency, such as the Space Agency or Statistics Canada—there are a number of these in our portfolio—or we would be engaging with a third party that would be an agent to deliver against a very specific set of criteria in terms of what we're asking them to do.

This is a very different circumstance. This is an independent organization. They are flowed money through our contribution agreement, but many of the choices and decisions about how they structure their programming, about how they govern themselves and their various processes, are with the board and the management team. That doesn't remove the obligation on ISED to be carefully monitoring and overseeing the contribution agreement, but the design is such that a lot of the day-to-day aspects of how the business is done is entirely the responsibility of the board.

The lesson here is that even with a board of private sector experts brought in to provide oversight, the kinds of activities we undertook to ensure the contribution agreement was being followed—reviewing minutes, doing regular evaluations, even sitting in on meetings—wasn't sufficient to identify these problems and correct them.

I would make the following analogy. If you're a large bank, a private sector organization, you have a board. The board is composed of people who are experts and are well regarded. They actually have the responsibility for the oversight of the bank. However, when it comes to things like finances or certain kinds of issues, like cybersecurity, they have a third party, like an accounting firm, that comes in and audits the books and independently verifies that the bank is doing what it's supposed to do.

We did not have the kinds of control frameworks that might have actually caught these kinds of issues. There was too much reliance on what I might call more informal processes, like reviewing the minutes. The Auditor General has noted that the minutes occasionally didn't include the kind of information you would need. Even if you were reviewing the minutes, if the minutes aren't complete, you're not going to catch the issues.

What I can assure the committee, in terms of the fallout from this episode, is that under the action plan, we're replacing these measures with much more formal control processes, requiring sign-off by a senior official, requiring regular auditing, requiring third-party validation. The checking of the homework of the board is going to be much more diligent and much more rigorous.

The observation I would make is that if there's a lesson here, it's that even for an organization with a well-regarded board, there needs to be additional infrastructure to closely verify whether a board is following its own rules.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you for that testimony.

I think part of the work of this committee, and the good work of the Auditor General's office, is addressing deficiencies and gaps, identifying them and going forward.

I see by your letter that you have an action plan. Is there anything in your action plan that you would prioritize going forward?

[Simon Kennedy]

Mr. Chair, we believe all of the measures in the action plan are important.

The action plan touches on issues of eligibility. The Auditor General has noted that as an issue. Conflict of interest is a very serious issue.

The various dimensions of the audit findings are captured by the action plan, and we have been diligently pursuing all of them. At this point, all of those elements of the action plan are fully implemented.

[Brenda Shanahan, Liberal, Châteauguay—Lacolle, QC]

Thank you very much.

I want to ask the same question to the Auditor General.

What would you consider a priority out of the recommendations? I know there are a number of recommendations, quite detailed, but what is the overall priority?

[Karen Hogan]

I'm assuming that it's not a good answer to say that it's all of the recommendations.

I think addressing immediately the conflicts of interest—and that's why I was happy to see that greater accountability would take place as this moves under the umbrella of the public service—for sure is an important one.

I do think it's important that the government do the extra work needed to identify if there are other projects that were ineligible, and then either take measures to recover those funds, or at least be transparent with organizations about whether they will or won't.

I've always been on record that if a corporation receives funding from the public service or the government that they shouldn't receive, it should be recovered, or the government should be clear with them what they're going to do.

[The Chair, Conservative, John Williamson]

Thank you very much.

Ms. Sinclair‑Desgagné, the floor is yours for two and a half minutes.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Thank you, Mr. Chair.

Mr. Kennedy, I would like to pick back up on the Auditor General's remarks. Can you provide the committee with the measures taken concerning the recommendations the Auditor General has made? Can you give us a general overview of all the projects, including their eligibility? When you have the results, could you send them to the committee?

[Simon Kennedy]

Yes, I will send that information to the committee.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Excellent. Please also send the other information that the Auditor General referred to earlier as being necessary, given that this is taxpayers' money.

So the National Research Council of Canada will have all the funds it needs while awaiting the creation of the Crown corporation. Have all the employees been reassigned?

[Simon Kennedy]

Employment with the National Research Council of Canada is part of the offer made to the Sustainable Development Technology Canada employees.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

How many are there?

[Simon Kennedy]

There are between 60 and 70. I don't have the exact number.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Okay. So they are going to be reassigned to the National Research Council of Canada.

Can you also provide the committee, when that is done, with confirmation that the recommendations made in the Auditor General's report—not just the ones she referred to earlier, but all the recommendations in the report—have in fact been implemented by the National Research Council of Canada, given that Sustainable Development Technology Canada no longer exists?

[Simon Kennedy]

We can work with our colleagues at the National Research Council of Canada to coordinate our reply to the committee.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

Perfect, thank you.

Regarding how the hierarchy is organized, have you identified the person or persons who will be doing the necessary follow-up in relation to project eligibility and conflicts of interest at the National Research Council of Canada? Have you identified who will be doing that work in your department?

[Simon Kennedy]

I would like to point out that responsibility for managing the department lies with me and I am therefore prepared to answer questions. For the National Research Council of Canada, the president is Mitch Davies. Ultimately, we are both responsible, along with our team.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

So is it Mr. Davies himself who will be making sure that the projects being funded now are in fact eligible?

[Simon Kennedy]

Discussions about these matters are already under way. I don't know whether ultimately, in a year or eight months, we will still be at the same point with it. We shall see. It is certainly important that we study these projects from the perspective of the Auditor General's recommendations, to decide the next step.

[Nathalie Sinclair-Desgagné, Bloc, Terrebonne, QC]

In the case of the projects that should not have been funded, are you also going to send us confirmation that the money has been repaid, when that is done?

[Simon Kennedy]

I don't know whether the committee members are aware, but I have already sent the committee a letter promising to provide it with our action plan and to be transparent with the committee about the actions we take.

[The Chair, Conservative, John Williamson]

Thank you.

Up next is Mr. Desjarlais.

You have the floor for two and a half minutes.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair.

I want to return now to the serious issue of the recovery of taxpayer money. You mentioned several times, Mr. Kennedy, that, as a matter of fact, there would be a process undertaken to actually deliver some of this money back into the hands of taxpayers.

In order to do that, is there a plan in place, or has a plan been developed, to actually see to it that this money will be recovered in a timely fashion?