Public Accounts Committee on Sept. 3rd, 2024

[The Chair, Conservative, John Williamson]

Good morning, everyone.

I call this meeting to order.

Welcome to meeting number 136 of the House of Commons Standing Committee on Public Accounts.

Today's meeting is taking place in a hybrid format. Pursuant to the Standing Orders, members are attending in person in the room and remotely by using the Zoom application. I'd like to ask all members and other in-person participants to consult the card on the table for guidelines to prevent audio feedback incidents.

Please keep in mind the preventive measures in place to protect the health and safety of all participants, including interpreters.

Use only an approved black earpiece. Keep your earpiece away from the microphone at all times. When you're not using your earpiece, place it face down on the sticker to your right or your left. Just as a reminder, all comments should be addressed through the chair.

Pursuant to Standing Order 108(3)(g), the committee is resuming consideration of the Auditor General of Canada's Report 6, entitled “Sustainable Development Technology Canada”, part of the 2024 Reports 5 to 7, which was referred to the committee on Tuesday, June 4, 2024.

I'd like to welcome our two witnesses.

From the National Research Council Canada, we have Mitch Davies, president. It's nice to see you. Thank you for coming in.

We also have David Lisk, vice-president of the industrial research assistance program. It's nice to see you as well.

You will have collectively a maximum of five minutes for your remarks, after which we'll proceed to rounds of questions from the members.

It's over to you for a five-minute opening, please.

[Mitch Davies, President, National Research Council of Canada]

Thank you, Mr. Chair, for the invitation to speak with you today about the National Research Council of Canada as part of this committee's study of the Auditor General's report on SDTC.

I'd like to begin by acknowledging that the NRC's activities take place across the country from the unceded, shared, current and traditional territories of first nations, Inuit and Métis people.

We recognize our privilege to be able to conduct research and drive innovation on these lands, and we pay respect to the peoples who were here before us.

I'm here today with David Lisk, the vice-president of NRC IRAP.

As Canada's largest federal research organization, the NRC advances scientific knowledge, supports business innovation and provides science-based policy solutions. With nationwide facilities and collaborations, the NRC unites scientists, industry, academia and global partners.

With over 4,300 employees located across the country, the National Research Council’s vision is to bring about a better Canada and a better world through excellence in research and innovation.

In addition to conducting research for more than 75 years, NRC has provided key support to innovative Canadian small and medium-sized businesses through the NRC industrial research assistance program, or NRC IRAP, to develop innovations that drive the growth of these businesses and Canada's economy. The NRC IRAP has been instrumental in ensuring that SMEs have the support they need to grow, innovate and contribute to Canada's economic growth, to job creation and to professional opportunities for students and recent graduates.

In the fiscal year 2023–2024, the NRC's Industrial Research Assistance Program, IRAP, supported over 9,000 clients and provided funding to around 3,000 firms, contributing to the creation of approximately 12,000 jobs. Client firms experienced a 35% increase in revenue and a 21% growth in employee numbers.

This support is provided through a nationwide network of more than 273 industrial technology advisers in communities across Canada, who are working closely with companies by providing technical and business advice as well as research and development funding and referrals for an evolving portfolio of SME clients. With a long-standing record of successfully supporting SME growth, NRC IRAP has become a cornerstone of Canada's innovation ecosystem and one of the flagship Government of Canada programs that have given an important role in helping Canadian businesses grow and thrive.

On June 4, 2024, following the tabling of the Auditor General's audit report on Sustainable Development Technology Canada, the Government of Canada announced that it will transition SDTC to the NRC to enhance accountability, transparency and integrity and to restore public confidence in the program.

This transition will ensure continued support for clean technology innovations, which are critical for meeting Canada's climate targets, while providing stability for current projects and SDTC employees.

Due to its extensive experience and track record supporting innovative tech-focused SMEs, NRC IRAP was selected to take on SDTC's existing programming to ensure that the economic and environmental goals previously set by SDTC continue to be met, working under NRC's IRAP governance and due diligence processes and practices. All NRC employees, including SDTC staff who would join NRC IRAP, must adhere to the NRC conflict of interest policy and the public sector values and ethics code. Under our policy, NRC IRAP employees are required to provide annual declarations of outside activities.

Today, the NRC is working closely with the SDTC leadership team to support a smooth transition for SDTC stakeholders, clients and employees, and ensure that the organization's programming continues to operate smoothly. We anticipate this transition will be completed within one year. We are ready to move as quickly as possible, recognizing the need to stabilize the situation for SDTC stakeholders and the affected employees.

Mr. Chair, thank you once again for the invitation to appear today. My colleague and I look forward to answering your questions.

[The Chair, Conservative, John Williamson]

Thank you very much.

We'll begin our first round, which will be four members for six minutes each.

Mr. Perkins, please lead us off for six minutes.

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

Thank you, Mr. Chair.

Thank you, witnesses.

I'll just say, on a personal note, that last night at 10:30 was the 26th anniversary of the tragedy of the downing of the Swissair flight, a crash in my riding near Peggy's Cove, in which over 200 individuals died. It's still a trauma for many people in the riding. I'd just like to acknowledge that and all the people in my riding who are still suffering from that and the families who lost loved ones.

In your opening you mentioned that the announcement on the SDTC tech fund, known by our side as the “green slush fund”, was made on June 4, basically within hours of the release of the Auditor General's report on the green slush fund's conflicts of interest and misuse of taxpayer money. Was the Minister of Industry or the minister's office and/or the deputy minister in touch with NRC before that announcement regarding this transfer?

[Mitch Davies]

Mr. Chair, the NRC would have been involved at a working level in terms of options that, I assume, the department was considering for SDTC sometime in the spring of that year, so yes, we had interaction with the departmental officials on the announcement. Obviously we had to think about it from a planning point of view and prepare ourselves to get on with the planned transition from the day it was announced.

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

Before the Auditor General's results were out, the minister was talking to you about the transition. Did the minister or his staff meet with your department during that preparation?

[Mitch Davies]

Mr. Chair, the advice from or interaction with the minister on the file didn't involve me or any of the staff at the NRC. We would work with the department on any material they were looking for from us regarding that, including options that may well have been considered or advice that may have been given.

We didn't have any visibility of that directly. It's not our role to advise. Obviously we're there to support the portfolio of the minister. If they assign us a job and want to assess it, then we can help them undertake that work.

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

Were there any meetings with the Prime Minister's Office or the Privy Council Office as part of that preparation?

[Mitch Davies]

I was not involved in any meetings and I'm not aware of any meetings with any staff in the Prime Minister's Office in regard to the transition.

I can assume, because these matters were related to the way government is organized, that there could have been working-level contacts on what we would call “machinery business”, looking at options that could be considered. Again, that's something that I wasn't involved in directly.

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

My understanding, from your presentation and the releases, is that this is being wrapped into the IRAP structure, the governance structure within NRC, at least for the next year, with an acting board of three, I believe, former public servants.

Do they all report to you, Mr. Lisk? You have a governance structure for IRAP that reports to you. Am I correct?

[David Lisk, Vice-President, Industrial Research Assistance Program, National Research Council of Canada]

Currently SDTC has its own structure and it has the board members you're talking about.

We have our own operating structure as IRAP, which lives inside of the NRC. When the transition happens, the SDTC structure will be collapsed, eventually, and IRAP will take over operations of the program, as well as the staff who will come to implement those operations.

To answer your question, we do not have a relationship with SDTC in the way you're describing. The board does not—

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

However, it's still operating independently under those three acting board members.

[David Lisk]

That is correct.

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

You're working with management, I presume, and the acting CEO, on the transfer.

[Mitch Davies]

Mr. Chair, I appreciate the question that's being asked.

Just to be absolutely clear, the interim board does not report to the NRC in any manner. We work with the interim board representing the foundation. We work with the staff at SDTC on the transition planning, but the interim board will, again, wind up its activities when the foundation's wound up. Then, once we've taken over the program, there's no ongoing relationship between us and the interim board, and they don't report to us. They're not going to become part of our reporting structure. The foundation won't exist as far as the ongoing programming is concerned.

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

Then the governance of all of that will exist sort of the way IRAP is done now.

[Mitch Davies]

Yes.

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

When I look at the IRAP governance structure, I see very little accountability to Parliament. In fact, I see none. That IRAP board is not Governor in Council-appointed; it's appointed by the members of the NRC.

I presume.... When I read it, it's under Mr. Lisk. He has the responsibility for appointing the board members, and there is no publicly available information that I can see in disclosures of where that money goes in those individual donations. When I go to the SDTC site, I can see everything it's done since its inception. Is it therefore the intent that this will evolve into the IRAP governance structure, where nothing is transparent to the public or accountable to Parliament?

[Mitch Davies]

Mr. Chair, in delivering the program through the NRC IRAP, all of the transparency and disclosure requirements that apply to any federal organization will apply, which means that funding will be proactively disclosed, as it is. The Financial Administration Act will apply. Decisions will be made by the employees of the organization—in this case, as they've been made in the NRC IRAP since its inception. They're made by professionals. They're made by public servants—

[The Chair, Conservative, John Williamson]

Thank you. That's your time, Mr. Perkins. Thank you, Mr. Davies.

I'll turn now to our next member, Mr. Weiler. You have the floor for six minutes, please.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, Mr. Chair.

I do want to thank Mr. Davies and Mr. Lisk for joining our committee today as we continue our study on SDTC.

I want to pick up on where Mr. Perkins was going with his questioning, and this will be very helpful for us.

In June, the minister announced that SDTC programming was going to be transitioned to the NRC. I think it would be really helpful for us to learn about what's going to be different and what to expect.

Would SDTC still be classified as an arm's-length organization, or does this transition to the NRC, which is a Government of Canada organization, change that?

[Mitch Davies]

Mr. Chair, subsequent to the transition, there will no longer be an arm's-length organization that's in charge of the funding. That's going to be transferred to us, and then we'll be delivering for sustainable development technology development purposes and helping entrepreneurs. The accountability and the structure that will exist will be the same as that which applies to a departmental corporation, as we have it now with the NRC IRAP. All the financial administration, all the sort of public administration frameworks that are in application for departments that are common in our system and to audit committees—public disclosure, the financial administration of funds in the public service—will apply, and there'll be no arm's-length body involved.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

Would you say that SDTC's mission aligns with that of the NRC? In short, would you say that this transition would then make sense to you?

[Mitch Davies]

Mr. Chair, supporting innovators and entrepreneurs is most certainly within our mandate and mission. The NRC IRAP has been doing that directly with small and medium-sized businesses for over 75 years, and quite successfully, based on testimonials and things that Canadians have observed about the program and its strengths.

Also, climate and sustainability are a goal, a priority, for the National Research Council in the next five years for our new strategic plan, so we see it as being aligned with our goals, our capabilities, and the interest we have to support Canada with science and technology that's there for our future to help our growth and also to respond to the challenges that Canada faces.

[Patrick Weiler, Liberal, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you, and I can definitely confirm that I've heard some of the same things and seen some of the companies that it's helped in my riding that are really on a leading edge of clean technology.

Moving on, could you tell us specifically what the transition means for funding to SDTC and the funding that SDTC, in turn, disburses to its projects? Does that now fall under the NRC's processes and protocol?