Public Accounts Committee on Nov. 2nd, 2023

[The Chair, Conservative, John Williamson]

I call this meeting to order.

Welcome to meeting number 82 of the House of Commons Standing Committee on Public Accounts.

Pursuant to Standing Order 108(3)(g), the Committee is meeting today for its study on Sustainable Development Technology Canada.

I'd like to welcome our witness, from the Office of the Auditor General of Canada, deputy auditor general Mr. Andrew Hayes.

It's good to have you back, sir.

Mr. Hayes, I understand you have a brief statement. You have the floor.

[Andrew Hayes, Deputy Auditor General, Office of the Auditor General]

Mr. Chair, thank you for inviting me to appear before the committee as part of its study on Sustainable Development Technology Canada.

I would like to acknowledge that this hearing is taking place on the traditional unceded territory of the Algonquin Anishinaabe people.

As the committee is aware, our office has decided to conduct an audit on how Sustainable Development Technology Canada is financing sustainable development technologies within the portfolio of Innovation, Science and Economic Development Canada. This decision comes in response to recent discussions with the department and information received by our office.

I am happy to answer the committee’s questions where possible. However, as we have just begun the audit, we have yet to finalize its scope. We are hoping to present our report to Parliament in 2024 before the summer recess. We look forward to appearing before the Committee again at that time.

Mr. Chair, this concludes my opening remarks.

Thank you.

I'm prepared to answer questions.

[The Chair, Conservative, John Williamson]

Thank you, Mr. Hayes. Again, on behalf of committee members, I appreciate having your office update Parliament on its activity.

I turn now to Mr. Barrett.

You have the floor for six minutes, please.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Thanks very much, Chair.

Thank you, Mr. Hayes, for being here this morning on behalf of the Office of the Auditor General.

This issue has obviously captured a lot of media interest and public interest in recent days, and I understand that your office has been engaged on it for some time.

Can you tell us on what date your office first communicated with the whistle-blowers?

[Andrew Hayes]

I believe that our first encounter with the whistle-blowers was in November 2022. There were a number of meetings with the whistle-blowers between November and January. A presentation was made to our office. Information was shared in November, December and January. Would you like me to continue with what happened after that?

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

I'd like to find out what your advice to them was, and then, maybe, if we need to look back at any of that previous timeline, we can.

[Andrew Hayes]

When we receive information from any party, that information is taken into consideration as we determine what our audit priorities are going to be.

In this case, with the information we received, given the nature of the organization of SDTC and particularly with Governor in Council appointees, we reached out to the Privy Council Office, to senior officials there, at the end of January, early February. The Privy Council Office turned the matter over to ISED.

I guess I should say that when we engaged with the Privy Council Office it was to make the connection between the whistle-blowers and the Privy Council Office.

The Privy Council Office turned the material over to ISED, and then ISED had carriage of the file after that.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Why wasn't an audit initiated when this was first brought to your attention? It's since been evident that gross mismanagement has occurred at Sustainable Development Technology Canada. Why didn't you initiate an audit at first?

[Andrew Hayes]

The allegations that we have received.... We have to recognize that SDTC, the foundation, is more arm's length than the normal department that we audit. We have a mandate to follow funding agreements, and that's what SDTC has with the federal government. In our view, at the time, it was preferable to see what management's response was going to be to the allegations, and then for us to keep an eye on it and determine when or if an audit would be appropriate.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Okay.

Have you seen the fact-finding report that was precipitated by this referral to PCO and, later, ISED—the report by RCGT?

[Andrew Hayes]

We received a copy on October 3. I've reviewed the redacted version. I know that our team has the unredacted version.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Okay. You have not seen the unredacted version.

[Andrew Hayes]

That's more because I haven't asked for it from our team. I've reviewed the redacted version.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

That report evidences that the chair and the CEO are both in conflicts of interest and that tens of millions of dollars have been given to ineligible companies, and we still have Sustainable Development Technology Canada saying they are good stewards of taxpayer dollars. How can both of those things be true at the same time?

[Andrew Hayes]

One of the main reasons we're going in to audit is that the report from RCGT is equivocal. It leaves room for interpretation. I'll point to particular statements.

On the conflict of interest side, it says, “Conflict of interest policy appears to not have been consistently followed”. SDTC “did not appear to follow the recovery requirement”. A recipient of COVID-19 relief payments “appeared to be ineligible”. There are a bunch of statements like this, and we want to get our audit work done to identify what is, in fact, happening there.

We don't have a view yet. We will do our audit work and determine a view. This report from RCGT left lots of unanswered questions.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

I think that's well said, if not a bit understated.

I want to offer you some quotes we've heard from a senior official with ISED—the CFO, Mr. McConnachie. He said, “Based on the preliminary findings of the fact-finding exercise...there is smoke around the vast majority of the allegations.” That was in May. In July he said, “It was free money,” and, “That is almost a sponsorship-scandal level kind of giveaway.” In August, he said there was “a lot of sloppiness and laziness” and “outright incompetence”. He also said, “The minister is going to flip out when he hears the stuff.” Then in September he said, “The report implicates the board in terrible ways...by not following process, by not following the [conflict of interest] regime, by not being prudent fiduciaries.”

Have you heard these recordings? Were they furnished to you by the whistle-blowers?

[Andrew Hayes]

I don't know whether the whistle-blowers have given it to our audit team. Our team hasn't told me that they've received that.

Over the last week the department informed me, in fact, that there would likely be a report about recordings of their staff. I haven't heard those recordings at this point in time. That actually didn't factor into our decision to launch the audit.

[Michael Barrett, Conservative, Leeds—Grenville—Thousand Islands and Rideau Lakes, ON]

Prior to your launching the audit, I did write a letter to your office requesting an audit, having heard some of the very troubling allegations. There are bulk approvals, bulk payments to companies that didn't ask for it and didn't need it, in some cases, in conflicts of interest from board executive members who were involved. The external reviewers said the funds should not be paid, but millions of payments were paid out right at year end and were just enough to meet targets so the CEO and her friends could get bonuses. Isn't that highly suspicious?

[Andrew Hayes]

As I said, the decision to launch this audit was made on the basis of our review of the RCGT report.

We did receive your letter on October 30. We informed ISED and SDTC on the 26th that we were launching an audit. You'll be receiving a response back.

[The Chair, Conservative, John Williamson]

Thank you.

Ms. Shanahan, you have the floor for six minutes now, please.

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

Thank you very much, Chair.

Again, it's always interesting and educational for us to receive a representative from the Auditor General's office. Thank you very much, Mr. Hayes, for being here to walk us through some of the process.

Indeed, I think this is an example of where initiatives were taken, and rightfully so, in the objective manner that they should be. A situation was brought to the attention of the Auditor General's office. If I understand correctly, it was referred. I'd like to have your comments on that again, as to why it was referred to the Privy Council Office, or how that works. Now this decision has come forward, independent of any request that was made by Parliament for the Auditor General's office to do an audit.

Can you explain a bit again about that initial process for Canadians to understand, to reassure Canadians about the independent process that we have here—the institutions that work on behalf of Canadians to ensure that funds are properly deployed—and the process that makes your office conduct an audit of this kind?

[Andrew Hayes]

I contacted—and it was I who contacted them—the Privy Council Office representatives in late January of this year, after our audit team had been receiving information from the complainants.

From my perspective, the PCO officials acted quickly. The reason we contacted the Privy Council Office was that there were a number of Governor in Council appointees on the board of directors and also appointed as members of the foundation. With that in mind, we reached out to the Privy Council Office. After that, given that this is a foundation under the umbrella of the minister for ISED, I know the matter was transferred over there.

We decided to do this audit after careful consideration. We looked at the RCGT report that was released on October 3. We looked at the statement that was issued by the foundation around that time; I think it was October 3, or it might have been the 4th. We looked at management's action plan and determined that while many of the actions were forward-looking, we wanted to make sure the eligible recipients who were receiving payments were getting the right amount, and if there were ineligible payments, those were being recovered. As for the processes, if there were any conflicts of interest or other process problems, those would be identified so that things could be improved in the future, and money that shouldn't have been paid could be recovered.

This was a matter we had been following. We have mobilized our office to be able to do that work without compromising other audits, but as everybody here knows, we don't have auditors sitting around doing nothing, so we've had to be creative with that. We recognize this is something that needs to be addressed in our audit work very quickly.

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

Thank you for that.

Indeed, we recently had the meeting with the Auditor General and the team concerning the regular roster of audit reports. We know from previous testimony that the Auditor General's office has been tested insofar as being able to have the resources to conduct audits to that extent. That had to do with a number of factors, the pandemic being a key one, but there was also staffing, and so on.

Can you explain what happens to the usual audits? Does this take priority? What is the usual course of action?

[Andrew Hayes]

As we've said to this committee before, and typically when we're talking about our audit planning and our departmental plan, the independence of the office is important. The ability we have to choose the places we're going to go to is a hallmark of our independence. In this case, this was an audit we decided to do.

We're planning so that it doesn't derail any of our audits that are already started or that are on the books. At this point in time, we don't expect anything will have to be delayed or cancelled. We're going to do this one in addition to the other work we had planned.

To be perfectly honest, we are grabbing our qualified auditors from across the office, including in our services, to be able to help us. We have very skilled people in our services, who moved from the audit practices into there, and they are going to help us out on this.

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

It is good to hear that you have the resources and the people with the skill set to conduct this kind of audit.

Are there other bodies, agencies, that you consult with? I'm thinking of the Ethics Commissioner, for example. You're talking about conflict of interest.

What is your engagement with the Department of Innovation, Science, and Economic Development?