Public Accounts Committee on Sept. 5th, 2024

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

Thank you.

Is there anything else you'd like to add to what you view as the Privy Council's role in this matter?

[Donnalyn McClymont]

I would just underscore that there is a very clear line between what we do at the Privy Council Office in terms of public service advice and the nature of appointments. Obviously, it is the prerogative of the minister and the Prime Minister to take decisions on the appointment of ultimately the best suitable candidate for a role, in their view, so there will be a line that we have no line of sight into, I would say.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

So it's advice and in a non-partisan fashion...?

[Donnalyn McClymont]

Yes, Mr. Chair. That's correct.

[Jean Yip, Liberal, Scarborough—Agincourt, ON]

I'd like to speak about SDTC's transition into the NRC from both a timeline and a process perspective.

The NRC leadership stated that the transition is under way and should be done by the end of this year. What are the usual timelines and process for the transition of one government agency into another?

[Donnalyn McClymont]

I'll do my best to respond. I would just underscore that we're the appointments people, but I'll take a stab at it and try to be helpful in this.

This would be more of a machinery-of-government question. However, I would say that this is pretty fast, to be honest with you, and I think it's the minister and the department. I would give them credit for moving very quickly in trying to address the issues and integrate the programming into the NRC and then ultimately into the Canada Innovation Corporation, as the minister announced earlier this June.

Obviously, it takes time to integrate new programming into an organization, but I understand that Mitch Davies, the head of the NRC, was here earlier this week and explained that they're working closely with the SDTC chair and members to effect that transition. He was talking about March of this coming year, as I understand it.

[The Chair, Conservative, John Williamson]

Thank you very much.

Now over to Ms. Sinclair‑Desgagné, who is joining us using the Zoom application.

Ms. Sinclair‑Desgagné, you have six minutes.

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

Thank you, Mr. Chair.

Good morning to the witnesses.

There is something else going on here. In past decisions as well as future ones, there are questions about fund-related governance, as there were with Sustainable Development Technology Canada and will be with the Canada Innovation Corporation, or CIC.

Many of us think that Crown corporations have far too much flexibility, some of them more than others. Sustainable Development Technology Canada, or SDTC, was publicly funded and had enormous flexibility, which it used to allocate funds, have conflicts of interest and make potentially problematic appointments. I have a problem with that. Now, what we're hearing and what we're seeing is that the government's plan is to set up the CIC, which will ultimately be just another crown corporation, or SDTC 2.0.

Will the CIC take a precautionary approach to managing public funds? We have no guarantee of that. At no time was there a desire expressed for transparency and due diligence with respect to public funds. All we heard was that the money and the teams were going to be transferred. Is there going to be a change in governance?

I'll turn to the representatives of the Privy Council Office, because that is the office that submits lists of appointments, as we heard earlier. We will probably be able to do the same thing for the CIC. It was decided that the CIC would be the new vehicle for this type of fund.

Why not manage those funds according to the same transparency and governance criteria as the departments are subject to?

[Donnalyn McClymont]

Mr. Chair, I would just note from the outset, in responding to the honourable member's question, that when the Auditor General appeared before the committee.... I thought her comments were quite insightful. She explained that the nature of the structure of the organization created an inherent conflict.

To the honourable member's question, it's true. Having been at PCO for a long time, as I mentioned, I would say this is quite a novel structure. You have seven directors appointed by the GIC, and then those directors appoint eight other directors, and that whole board then appoints foundation members. They are “good behaviour” appointments, which means they can only be removed for cause, which is a very high bar for removing appointees. An example is if the government loses confidence or trust in the directors.

It was designed that way and approved by Parliament back in 2001. My understanding, from what I've read in the media, is that the intention at that time was to have a very arm's-length organization that would work in the clean-tech sector to support start-up companies, if you will. The committee is well aware of that.

From an appointments perspective, it is a novel structure, to the member's question.

Going forward, as the member has noted, the intention is to have it under the Canada Innovation Corporation. That legislation, again, was just recently passed by the House. The intention is to have a more typical corporation structure, if you will, whereby you have a chair and directors appointed by the Governor in Council, who serve at pleasure. Perhaps that will give the kind of structure that the committee is looking for in terms of accountability and transparency.

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

Thank you. I have limited time.

We agree that the governance structure of SDTC was a problem. You said so, and the Auditor General also noted it. Here is a quote:

The CIC will operate as a partner to the private sector with the flexibility to deliver funding quickly and adapt programming to meet evolving business needs. The CIC will also recruit private sector experts…

It's very similar to what happened at SDTC.

If there is such close proximity with the private sector and it is stated at the outset that the CIC will have significant flexibility, we are creating a similar governance system, not only in terms of the steering committee, but also in the way in which funding is granted.

Shouldn't we be even stricter? Shouldn't these funds be managed as they would be by a department? A parliamentarian or a citizen, for example, could see, line by line, what is funded by the departments. However, that cannot be done in the case of Crown corporations, which is very problematic. The public has a right to know what's going on.

Those funds should be managed by a department.

[Donnalyn McClymont]

Mr. Chair, I would note that a decision has been taken by the minister, and an announcement has been made about the structure going forward.

For my part, I would note that from the appointments perspective, we will obviously ensure that there's an open, fair and transparent process to find directors for the Canada Innovation Corporation who have the requisite skills to ensure the oversight required going forward for the organization.

[The Chair, Conservative, John Williamson]

Do you have another question, Ms. Sinclair‑Desgagné?

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

Yes. Why are these funds still managed by a Crown corporation? Why are they not simply managed by a department? Why was it determined that CIC was the best vehicle to manage these funds?

[Donnalyn McClymont]

I wouldn't be in a position to give a perspective on why that was chosen as the ultimate vehicle. I would say, however, that they will be part of the portfolio underneath the responsible minister. They will have the necessary accountability structure.

I would just reiterate that for our part, as the folks here to talk about appointments, we will make sure that we find the people best suited to ensure that the organization is well structured and has the accountability mechanisms in place to ensure the right level of probity on these funds going forward.

[The Chair, Conservative, John Williamson]

Thank you very much.

Up next is Mr. Desjarlais. You have the floor for six minutes, please.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you very much, Mr. Chair, and I want to thank Ms. McClymont for being present with us today to answer these important questions.

As you are aware, the concerns related to SDTC are largely twofold in the minds of Canadians. One thing is the fact that, of course, there was severe conflict of interest leading to severe levels of institutional mistrust. That's one barrier we're attempting to overcome here in this committee's report. We're trying to understand how conflicts of interest can take place and trying to reduce the likelihood of those conflicts happening. We heard from the Ethics Commissioner earlier this summer in relation to other files, on which we know room can be made to ensure that officers, whether they're appointed or not, doing the work we do in Parliament or on behalf of departments are actually followed through on correctly.

Part of the issue with SDTC, as noted by the Auditor General, was with the appointment process of the actual persons who sat there or at least with the oversight of those persons who would sit there. I understand that may not be the function of your office today, but it may be something worthy of consideration.

In order for me to best understand this, could you please describe again—I know you did at the beginning of your comments—the clarity that your office has or the Privy Council Office has in the appointment process for SDTC? How many members were they to recommend and what was the process for filling the remaining vacancies?

[Donnalyn McClymont]

Mr. Chair, I would note that on the SDTC front, three selection processes took place over the course of the past, I would say, 10 years. Starting in 2017 there would have been a process launched to appoint directors. In 2018 there was a process launched to appoint the chair, and in 2021 there was a third process launched that was to appoint the further directors to fill further vacancies on the board, the seven positions that are filled through Governor in Council appointments.

PCO at that time would have been responsible for leading the selection process for those three processes. There would have been three other members on the selection committee. It would have had a representative from the department, a representative from the minister's office and a representative from the Prime Minister's Office. In both sets of circumstances, we would have had over 100 applications for the various roles, and we, as a selection committee, would have reviewed those to ensure that they met the criteria, particularly given the legislation itself.

I would say, again, that it was quite a novel piece of legislation in that it had very strict requirements to ensure there were directors who were engaged in the development and deployment of sustainable development technologies, who came from all regions of the country, who were men or women, who came from the business and not-for-profit sectors, and also that the board itself in its entirety represented and had a good understanding of sustainable development technologies. As you can imagine, that would have narrowed down the field of eligible candidates with that knowledge and those skills. The last composition of the board had a fair representation of members from across the country. People from B.C., Ontario and, I believe, the Atlantic provinces and Quebec would have been board members.

On that basis, we would have undertaken interviews. We would have screened people to make sure they fit the criteria. We would have conducted interviews.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Maybe we can get to that point next. I apologize for having to interrupt.

I'd like to just back up on something that I think was important for our study. You mentioned two things that I think are important to clarify. One, who was present in the room at the time of the appointment reviews? You said a member of the Prime Minister's Office, and I believe you also said a member of the minister's office. Can you clarify which minister?

[Donnalyn McClymont]

Yes, Mr. Chair. There would have been representatives. All of this information is on our website with respect to the standard approach for a selection process. This is very standard. There would have been a chair from the Privy Council Office, a representative from the department and a representative from the minister's office. In this case, at that point in time, the organization would have been under the portfolio of Innovation, Science and Economic Development, and one of our colleagues from the appointments group in the Prime Minister's Office would have been a representative in the selection process.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

As part of that, as I think you described for a previous member, these persons were evaluated largely on merit. Is that correct?

[Donnalyn McClymont]

As I described, the legislation had very specific requirements regarding the composition of the board, so they would have looked at that. They would also have looked at an individual's ability to manage as a board member and their experience on other boards.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

What about ethics in the instance of conflict of interest? Is there any review process in the appointment process that could demonstrate or at least reduce the risk of conflict of interest? As you know, in SDTC this is an extremely serious situation. There were many instances of conflict of interest. It seems imperative to me, if we're going to be appointing officers to these kinds of boards, that there at least be some kind of competency demonstrated that they have an ethical understanding of the conflict of interest.

Are there any questions within the review or interview process that clarify or create a process to determine how much risk a particular appointment could potentially create for an organization in the instance of conflict of interest? What anti-conflict of interest processes are there in the appointment process?

[Donnalyn McClymont]

I would say we have a very robust...and it's continued to evolve and strengthen over the past several years, in terms of making sure that candidates are very well aware that they have to adhere to the Conflict of Interest Act. It starts in the notice of opportunity. A very detailed paragraph sends candidates to the website of the commissioner. It goes through the obligations for candidates, if they wish to apply, of how they have to adhere to the act.

In the interview process, we ask the candidates point-blank if they have any real or perceived conflicts in relation to serving in the role. Throughout the selection process, we continue to ensure that we raise these issues. We do one last check again, of course, before the appointments process. The standard right now is about five touch-bases over the course of the selection appointment process. Individuals are advised and are asked to ensure that they will comply with the Conflict of Interest Act throughout their tenure.

[The Chair, Conservative, John Williamson]

Thank you very much. That is your time.

We will now begin our second round.

Mr. Cooper, you have the floor for five minutes.

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

Thank you, Mr. Chair.

Madam McClymont, you spoke about an open, transparent and merit-based approach with respect to Governor in Council appointments. With respect to the process that ultimately led to the appointment of Annette Verschuren to serve as chair of SDTC, how did the search begin? Was there a public posting for the position of chair?