Public Accounts Committee on Sept. 3rd, 2024

[Mitch Davies]

There are two worlds to take into account. Right now, there's a question of the restart and the evaluation of all the files that SDTC has in order to determine their eligibility.

Obviously, there are the observations that have been made by the Auditor General and what to do to follow up on those. I think that's been the subject of testimony given here previously. Once that work has been done and the files have been transferred, that is the point in time when NRC IRAP will take care of working with those files and those clients, as well as running the program on an ongoing basis.

At the moment, all of the files are with SDTC, and they're undertaking work that they've talked about here. When that's completed, it will start the process of transferring the files to us, and we'll run it from that point forward.

Obviously, we'll establish the terms and conditions to the Treasury Board, which will provide the authority for this programming to continue. Preparing that work is under way now.

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

Thank you.

What kind of oversight will be exercised over the financial channels at SDTC going forward?

[Mitch Davies]

Mr. Chair, as far as NRC IRAP is concerned, we won't be involved in the oversight of anything at SDTC. Perhaps that's what the member's question is related to.

The decision-making processes will follow the way things have been done in the history of NRC IRAP. We have professionals—people with business experience—who work with clients. They develop an understanding of their business and what they're trying to do. They then work with them on projects and take them through our process for decision-making.

Decisions are made by public servants with the authority to take those decisions. There could be advice and expertise brought to bear, some external views, in particular for larger investments. Those are not to make decisions, but to advise us, because the most important thing here is that we make decisions that are sensitive to the market and technology realities. Obviously, we want to have the maximum amount of skill and expertise brought to bear in making those decisions.

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

Certainly.

Moving forward, are you able to speak to any strategies that you have in place to prevent the type of conflict of interest issues that arose with SDTC, particularly in the context of how funding decisions are going to be made as it rolls into NRC?

[Mitch Davies]

Mr. Chair, an important understanding on how NRC IRAP conducts its business is that we have people who join the organization from the private sector. When they join, they have to disclose and make us aware of any interests they have, and they have to bring themselves into line with our conflict of interest policies. Those are applied to our staff, because the most important thing is the perception of what they're doing—and the reality, but perception is equally important.

We have a process undertaken with our staff to ensure that they disclose what they need to under our policy, and then they can conduct their business with their clients without someone questioning whether things are being done in a fair way. That's what's important. That's built into the system we have that relates to our employees, and it will apply in the case of employees who join us from SDTC or have any involvement in the SDTC programming in the future.

[The Chair, Conservative, John Williamson]

Thank you very much.

Ms. Sinclair-Desgagné, you have the floor for six minutes.

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

Thank you, Mr. Chair.

Thank you to the witnesses for being here.

“Sustainable Development Technology Canada”, or, “How to screw up a good idea and mismanage perfectly useful funds”. That's chapter 1 of the Liberal Party of Canada playbook.

How can we make sure that we're not throwing the baby out with the bathwater, when there are so many worthwhile projects and businesses that depend on this type of funding?

One good example is Calogy Solutions, which is waiting for its second $100,000 payment, due last March. That money hasn't turned up yet. The company has had to lay off four people, and clients aren't sure what's going to happen. The company has lost trust and its ability to compete. Calogy Solutions is suffering because, among other things, some members of the steering committee are greedy.

How will the National Research Council of Canada ensure that these companies receive their funding as quickly as possible?

We know that all projects are at the assessment stage, but can we get a clear timeline?

People need predictability. When they're expecting government funding, they expect that to be reliable, more reliable than what they might expect from some private sector parties. In this case, what they're expecting is public sector funding.

How can we ensure that businesses get the right message, that they'll be able to give their clients and their teams good information and be able to count on something more predictable?

Do you have a clear timeline for when these companies will get the money that's coming to them?

[Mitch Davies]

Mr. Chair, I think the question is important. I mentioned in our opening comments that for the stakeholders, the companies that work with SDTC, stability and predictability are very important. Obviously, we want to see the transition concluded within a year. We are hoping to do it earlier than that.

The question of the funding that a given company might well be waiting for now is obviously important. It's with the SDTC organization and the interim board. They have to examine it. As I have spoken about here, they're reviewing the files, given that questions and observations have been raised in terms of eligibility in some cases and so on. They have to complete that work. The restart work is not undertaken at the NRC at this time. Once that is done, we will take on the files that are valid and that conform to the contribution agreement. Those are the files that will be transferred to us.

I think it's important that the member's question is very well understood in terms of the need to get this going and, for the companies that are waiting, the real need for them from a business point of view. The restart is not something that the NRC is directly involved in. It's with the SDTC and its board and staff.

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

Obviously, there's a conflict of interest issue, and I suppose you'll tell me that you have your own guidance for this and you're being careful. That said, once Sustainable Development Technology Canada has been incorporated into the National Research Council of Canada, how will you make sure this never happens again? How can you make sure this won't happen with the Industrial Research Assistance Program?

Earlier, Mr. Lisk, who is here, briefly talked about the fact that, as soon as there is money available, people want to take advantage of it. That's human nature. How can you make sure this won't happen at the National Research Council of Canada and that it won't happen again with funds like the Sustainable Development Technology Canada funds, which are meant to serve a worthy cause?

[Mitch Davies]

Mr. Chair, given the objectives that the government has provided to us to run this program and restore public confidence, it obviously weighs on us that we have to do this very well and do a solid job. I think what was observed in the previous testimony was the nature of the foundation itself and its governance and having, obviously, people from the sector, a small sector in Canada, particularly at its outset, involved in decision-making and so on. That situation does not have a parallel in the NRC and the way we operate. Our decision-making rests on people who are employees of the organization and professionals who work under values and ethics with regard to conflicts of interest, and who really work on behalf of the public interest as part of a public organization.

Obviously, we take very seriously the need to run this program to the highest standards going forward.

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

Thank you, Mr. Davies.

When the conflict of interest issue came up a few months ago, Treasury Board asked all departments to identify which employees were in conflict of interest. Has the National Research Council of Canada done that?

[Mitch Davies]

Conflict of interest is actually something that is always addressed at the National Research Council. Every time someone is hired, people have to also look at their activities and disclose them where there's a need to do so. It's actually a living area of continuous improvement—

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

Did you find that some people had second jobs or some involvement with a particular company, for example?

[Mitch Davies]

In general, there would be circumstances in the disclosure of conflict of interest when we would have to work through our ethics office on mitigation or on matters to address those circumstances, including, of course, sometimes having people withdraw or change their involvements or investments or that type of thing.

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

Has that happened recently? We've seen some particularly shameful examples in recent months, including at the Department of National Defence. Has the National Research Council of Canada gone back and interviewed the employees again? Even the Office of the Auditor General of Canada has done that.

Can you confirm that you've done that?

[Mitch Davies]

Mr. Chair, there are just two things I would mention. Earlier in the summer, I actually asked all the management level at the National Research Council to look at their disclosures and bring them completely up to date. I'll be able to get a report on that in the weeks ahead to know that everyone has done so.

The second is that we have regular training undertaken by thousands of employees across the National Research Council on what their obligations are so that they are absolutely clear on what they have to do and how to conduct themselves. I think we take it very seriously. We're working, as every large public organization does, to emphasize that. I've done that personally with all the people who are in the management ranks. I've asked them to do that to also show their employees what we're expecting and to model the right kind of conduct in the workplace.

[The Chair, Conservative, John Williamson]

Thank you very much.

Next up is Mr. Desjarlais.

He is joining us virtually. You have the floor for six minutes, please, sir.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair, and I want to thank the witnesses and my colleagues for their very good questions today.

I want to return to the subject of restoring public confidence and the AG's report.

Mr. Davies, you're aware that the AG's report made several recommendations prior to the establishment of the process that's currently under way, which would transfer much of SDTC's former role to the National Research Council and the IRAP program, as we've talked about a bit today.

In your work towards restoring public confidence, I think it's important to take into account the victims of this and, as one of my colleagues mentioned earlier, to recognize a really good policy while balancing it against a really strong and very well-evidenced situation of misconduct, particularly conflict of interest, organizational mismanagement and even employee and serious HR concerns that were brought forward at the ethics committee last year.

When it comes to the work of restoring public confidence, taxpayers, who are among the victims in this case, need to know that funds are being properly administered in order to have confidence that the work you're undertaking is going to be of good value. Second to that, of course, we have the employees. I mentioned the whistle-blowers, who eventually had to come forward to a House of Commons committee to reveal their very serious HR complaints and their concerns with what they had witnessed. We also heard that at that time HR managers were being fired left, right and centre. There were such huge HR issues that some employees ultimately had to leave.

Finally, it is the environment that will see, I think, a very large impact from the lack of, or at least the disabling of, this program. I think many young Canadians in particular are hoping to see you work to rebuild confidence in this kind of work.

With regard to the work of restoring public confidence, can you speak to what processes you've undertaken in response to the Auditor General's report, and particularly her recommendations throughout section 6? There are very many recommendations. In your work to restore public confidence, have you taken into account the Auditor General's recommendations?

[Mitch Davies]

Mr. Chair, I think it's really important that people take into account the observations that have been made, as well as the reports of the Ethics Commissioner on the question. Those things were distributed at the council, and certainly we'll be discussing them further in the days ahead.

NRC IRAP can continue to do what it's done for 75 years only if it does that well, and to a high standard. We take that seriously, because these programs are important. They're important for our economy in supporting small and medium-sized businesses that are taking on very risky things to advance their technology and to do innovative things. Obviously it's really important that everyone at the council take that into account in the way we run things that we're entrusted to do, and also that we live that every day.

I think it's regrettable. Obviously there are circumstances here that are definitely a challenge, but we'll take full measure of all the observations and take those into account in the way we do business and fulfill what the government has asked us to do, which is to restore trust in this area of programming and to get it up and running as quickly as we possibly can.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

I'd like to back up a bit in terms of how the issue with SDTC came to light and some of the concerns that were brought forward at that time to members of the ethics committee.

Prior to that, of course, these employees had tried to raise alarms about the very serious allegations and concerns related to the situation at SDTC. At any point in time did anyone, particularly members of SDTC—including the former chair, board members or staff members—come to NRC to report such allegations?

[Mitch Davies]

Mr. Chair, I am not aware of that. I have no information on that.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

During the transfer of this program, what measures are you undertaking to make sure that whistle-blowers and employees—those who work at SDTC—are well protected and well encouraged to continue their good work while feeling safe in the workplace?

[Mitch Davies]

Mr. Chair, I'll open by explaining that in our workplace, we have mechanisms inside the workplace that allow people to disclose issues when they have questions about the way we're proceeding or the way work's being done. Whether it's questions of health and safety or whether it's the way we're administering things, we have a process to disclose those issues internally. Also, public servants can avail themselves of the act for that, which has been established in a parliamentary office, if they so choose. I think those are strong guardrails and strong processes in the public service that apply and are there for all employees and their protection.

We've taken the time to meet. I met with all of the SDTC employees in a town hall to welcome them and to explain to them how we work at the National Research Council and the way things will proceed in the days ahead, and to open up strong lines of communication. It's very important that this group of employees be taken into account fully. Obviously, we will be giving them offers of employment. We want their expertise as well so that we can run this program in a solid fashion in line with its objectives in supporting sustainable development.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Davies. I think that is my time.

[The Chair, Conservative, John Williamson]

Thank you. Yes, that is your time, Mr. Desjarlais.

This being the second round, we will go to Mr. Brock now for five minutes. You have the floor, please.