Public Accounts Committee on Nov. 4th, 2024

[The Chair, Conservative, John Williamson]

Good morning, everyone.

I call this meeting to order.

Welcome to meeting number 149 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 using the Zoom application.

Before we begin, I'd like to ask all in-person participants to read the guidelines written on the updated cards on the tables. These measures are in place to help prevent audio and feedback incidents and to protect the health and safety of all participants, with special emphasis on our hard-working interpreters.

As a reminder to all those in person and online, for the safety of our interpreters, it is very important that your microphone is muted when you are not speaking. I know that can be a bit of a challenge when you're part of a debate, or, I should say, when there is questioning back and forth. We don't debate here; we question witnesses and hear their answers. Just remain aware of that, please.

Thank you all for your co-operation.

I'll remind you again that all comments should be addressed through the chair.

Pursuant to Standing Order 108(3)(g), the committee is resuming consideration of report 6, Sustainable Development Technology Canada, of the 2024 reports 5 to 7 of the Auditor General of Canada.

I would now like to welcome all our witnesses.

From the Office of the Auditor General, we have Karen Hogan, Auditor General of Canada.

It's nice to have you back. It's been a while since you and your team have been in.

We also have Andrew Hayes, deputy auditor general, and Mathieu Lequain, principal.

Thank you all for coming in again.

Joining us virtually, from Sustainable Development Technology Canada, we have Ziyad Rahme, chief operating officer.

Before we begin, I just want to note that while this is a two-hour panel, we'll be taking a health break at approximately the one-hour mark for 15 minutes. We'll suspend at that time.

Ms. Hogan, because you've appeared here previously for this study, I'm going to begin with Mr. Rahme.

Sir, you have the floor for up to five minutes, please.

It's over to you.

[Ziyad Rahme, Chief Operating Officer, Sustainable Development Technology Canada]

Thank you, Mr. Chair.

Good morning to all.

My name is Ziyad Rahme. I'm here as the chief operating officer of Sustainable Development Technology Canada.

I'm speaking to you today from the traditional lands of the Anishinabe Algonquin nation.

Firstly, thank you, Mr. Chair, and all committee members, for your accommodation and flexibility in scheduling this appearance. I underwent a planned surgery in August. Recovery continues, so I may need to walk around or stand periodically at some points during our time together. Thank you in advance for your understanding.

I joined SDTC eight years ago. I primarily served as the vice-president of investments, reporting to the CEO.

I am an engineer by background and a former entrepreneur, and spent most of my career working for a clean tech start-up.

As VP of investments, I worked with SDTC experts who reviewed and recommended projects to the board and its committees for funding. We gave advice. Following a defined process, the board made decisions and we monitored progress.

I also served as the acting chief executive officer for SDTC from November 2023 to June 2024. In this capacity, I was responsible for finalizing and implementing the detailed management action and response plan submitted to the Department of Industry in December 2023.

As the committee knows, on June 4, 2024, a new board of directors was appointed. At that time, I transitioned to the role of chief operating officer to support the new board in its mandate to implement the recommendations of the Auditor General, restart funding for Canadian clean technology companies, both those previously approved for funding and new applicants, and transition SDTC programming and staff to the National Research Council.

The new board's work is informed by the extensive and comprehensive reviews completed over the past year, including the Auditor General's report, the McCarthy Tétrault report and the Conflict of Interest and Ethics Commissioner's reports.

In my role as chief operating officer, I am responsible for implementing the direction of the new board of directors, supporting the transition to the NRC and providing leadership support and continuity for the employees to help retain their critical expertise and skills. I am focused on supporting the new board's decisions, guiding our employees through the present situation and preparing them for the future.

I am here today to support this committee in its study of the Auditor General's report into Sustainable Development Technology Canada. I understand and respect Parliament's role and your work. I'm also keenly aware of my obligations as a public sector leader.

I want to take this opportunity to respond to a specific finding that was highlighted in the Auditor General's report related to a conflict of interest I had disclosed to the former CEO. As I told the Auditor General and her team, I declared to the former CEO a perceived conflict related to the firm at which my spouse is employed, as required by our policy, and recused myself from any and all involvement in procurement processes related to said HR and associated recruitment.

I want to reconfirm that my spouse had no role in the search for former board directors, nor have I had any role in the awarding of any contract at the firm at which she is employed.

I also want to confirm that I have had no involvement in the recruitment of any board directors.

I am pleased to support the new board in reviewing and implementing the recommendations of the Auditor General and others. These reviews will make our support of Canada's innovative clean-tech sector even stronger.

Since its inception, SDTC has supported hundreds of companies. Through this programming, these companies have created over 26,000 jobs, leveraged seven dollars for every dollar of SDTC support, and delivered strong environmental benefits in Canada and around the world. As we transition employees from SDTC to the NRC and evolve our approach to supporting clean-tech innovation, the conclusions of the Auditor General, McCarthy Tétrault, and the Conflict of Interest Commissioner provide clear guidance on the road ahead. The new board is focused on that. My colleagues and I are supporting them in implementing their decisions, and we are committed to delivering results for clean-tech companies and all Canadians.

With that, I'm happy to answer the committee's questions.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you very much for your time.

Mr. Rahme, should you need to take a brief pause, just let me know. It's probably best that you don't, just given some of the questions. There's a flow to them often, so if you do need to take a break before I suspend for 15 minutes, just let me know. We'll certainly accommodate you.

Thank you.

Now turning to Ms. Hogan, you have the floor, please.

[Karen Hogan, Auditor General of Canada, Office of the Auditor General]

Mr. Chair, thank you for this opportunity to once again discuss our report on Sustainable Development Technology Canada.

I want to begin by acknowledging that we are gathered on the traditional unceded territory of the Algonquin Anishinabe people.

Since I appeared before this committee last June, I have no opening remarks today. However, my previous statement has been redistributed to members of the committee.

I'll return the time to you for your study. We will be very pleased to answer any questions the committee may have.

Thank you.

[The Chair, Conservative, John Williamson]

Thank you again, Ms. Hogan.

We'll begin our first round for members. It's six minutes each.

Mr. Perkins, I understand you're kicking things off. You have the floor.

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

Thank you, Mr. Chair, and thank you, witnesses.

Auditor General, I like that opening statement.

My opening round will be questions for Mr. Rahme.

Your previous capacity primarily as VP of investments is the context of my questions in this round.

The Verschuren Centre, which is a centre that Annette Verschuren set up at Cape Breton University, applied while Annette Verschuren was chair for, I believe, almost a total of $6.8 million through various SDTC funds. That consideration went to the investment committee, I believe, which you oversaw. Is that correct?

[Ziyad Rahme]

Mr. Chair, this project was never approved or even considered by the project review committee. The company had applied and routine due diligence was conducted, but upon being made aware that SDTC staff had conducted due diligence on this application, the PRC removed the project from any further consideration.

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

On July 30, 2021, you wrote in an email to your team, to someone named Jen, that you were fast-tracking the approval of that.

What did that email mean?

[Ziyad Rahme]

Mr. Chair—

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

I think she was the applications lead.

[Ziyad Rahme]

That's correct. This project applied via the standard application process. The fast tracking you are referring to occurs when we have sufficient information regarding any application to move to the second or third step in our comprehensive, six-step due diligence process. In this particular case, while I don't recall the exact details, if it was approved for the fast track, that means it would have met those criteria.

In general, in our process, probably about 10% of the projects that apply receive this fast-track consideration.

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

I appreciate that. Thank you.

Did Ms. Verschuren call and inquire at any point in time about the status of that application?

[Ziyad Rahme]

Mr. Chair, Ms. Verschuren never called to inquire about that application.

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

On January 18, 2022, you wrote that while the application would not proceed, SDTC would make its best efforts to find the Verschuren Centre money elsewhere in the government. Is that correct?

[Ziyad Rahme]

Mr. Chair, while I don't recall the exact nature of that email or recall that email, what I can say is it is common practice at SDTC.... If there is not a fit for funding within SDTC programming, we have a variety of federal and provincial partnerships. Given the work we would have done, for example, on an application and all of the diligence, we try to pass that on to other agencies where there might be a better fit.

We don't try to influence those decisions. It's really more a question of conveying what we have learned and passing it on to others for potential consideration.

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

In essence, you act as a business development arm to find other government money for projects, including one named after the family of the chair of the board.

On June 9, 2022, a few months after that letter, the Verschuren Centre got $2 million from the industry department. It then got another $2.2 million from ACOA, I believe, and then another million dollars from ACOA. It goes on and on over the next couple of months—there was $1.4 million from DFO—for a total of almost $10 million.

Did your team help secure the ISED or ACOA money in terms of directing them to the Verschuren Centre when it couldn't get the money from SDTC?

[Ziyad Rahme]

Mr. Chair, it would have been after the initial round of introductions. I don't recall or remember our participating in any due diligence by these other agencies, but I'd have to look into it to confirm that.

That is my recollection.

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

However, you committed, as you said was your standard practice, to helping them, and then suddenly, over the next couple of months, they shockingly got money from the ISED department—SDTC reported to that minister—and got money from ACOA, which also falls under the industry department.

In my view, it actually was a pretty good bailout to get free business development and government grant money for an entity that was set up by the chair, which then went and got more money than it was seeking from SDTC in the next few months from other departments.

Did SDTC charge the Verschuren Centre for any of those services?

[Ziyad Rahme]

Mr. Chair, as I just said, as a standard practice, we try to engage in referrals to other agencies. It goes both ways. We also work actively, for example, with the clean growth hub, and we receive many referrals from other funding programs. We offer this as a service for applicants to try to help them as much as we can with those particular referrals.

[The Chair, Conservative, John Williamson]

Thank you.

That concludes your round, Mr. Perkins.

I'll turn now to Ms. Bradford for six minutes. You have the floor.

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

Thank you, Mr. Chair

Thank you to our witnesses.

Ms. Hogan and staff, welcome back. Is this your third or fourth appearance on this particular topic? It's one or the other.

[Karen Hogan]

I believe it's my second appearance on this report.

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

Is it your second? I think it's been at least two. Okay. Anyway, welcome back.

I'd like to discuss with you the House motion that was passed on June 10, 2024. You've raised serious alarm bells regarding its extent and scope and how it risks compromising your office's independence.

Could you please speak to your concerns?

[Karen Hogan]

Absolutely.

I will start by saying that I am not questioning the privilege of the House of Commons to order the production of documents, and my office, as I stated in my letter, will produce the documents. We have already started to produce some of those.

Fundamentally, the documents being sought belong to the departments or to the foundation. They belong to a third party. They need to decide whether they will produce those documents before I can produce them. It's kind of like being the caboose on a train. Because they are the owners of the information, I need to see what they will do with that information.

There is an ongoing dispute between the government and Parliament over documents, and I should not become a mechanism by which Parliament receives government information. I believe my independence would be compromised if I become that vehicle. There is also the unintended consequence that this could have a chilling effect on departments and agencies sharing free and unfettered information with my office. I have very broad access to information, and I need to preserve that broad access.

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

I'll clarify for those who might be watching at home: In the course of doing your AG reports, you reach out to departments, and they provide the information. Now, when we're asking for documents—as you stated—they belong to departments, so you have to go back to those departments.

Do the departments feed them through the caboose—through you—and then you send them to the clerk of the House, or do they go directly from the departments to the clerk?