Public Accounts Committee on Nov. 2nd, 2023

[Andrew Hayes]

We hope to table the report by summer.

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

Very well, thank you.

[The Chair, Conservative, John Williamson]

Thank you very much.

Mr. Desjarlais, good day. You are joining us online, and you have the floor for six minutes. Go ahead, please.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you, Mr. Chair.

I want to thank Mr. Hayes for being present here.

I think it's a critical issue that we're seeing and not just, I think, in this instance. We've seen a troubling pattern in Canadian governments, with both this government and the previous government, of these issues of conflicts of interest arising, particularly when they're dealing with public and private partnerships.

One issue with those public and private partnerships is in fact governance. I think this is a perfect case of issues with such things as mismanagement and HR that have been present in the media and that are, of course, I'm more than certain, within your scope currently.

However, one issue that I think is not often discussed is the actual practice of the board members and how that good governance—or, in this case, bad governance—can translate into things like breaches of the conflict of interest policies, which is probably the most severe and one of the largest ethical breaches that can be made when governments are entrusted with public funds.

My questions will be in relation to those three things. I know you've already answered questions directly in relation to scope, but could you share with us how large that scope is in terms of timing and framing of SDTC? It's my understanding that SDTC was founded in 2001. In 2013 it received a partnership agreement of $325 million over the course of eight years, which brought us to 2020 from 2013. Then, of course, there was a newer agreement of $1 billion over five years.

Would your scope take into consideration the multitude of these agreements, not just the one we're currently faced with but also previous ones? I think what we're dealing with here is structural rot. I don't think these things happen overnight. I don't think they happen in a vacuum. I don't think they happen in isolation. I think they happen because as time goes on they are not held accountable—continuously, over and over. We see that with Indigenous Services Canada when it comes to clean water, with multiple governments continuing to fail there.

Therefore, it's imperative that we actually look at the root causes of non-adherence to conflict of interest policies and what I perceive as huge and gross misconduct and a lack of appropriate governance.

My first question is on scope. Would you take into account considerations that look at prior funding arrangements particular to SDTC's founding in 2001?

[Andrew Hayes]

We did do an audit in 2017 through the commissioner of the environment and sustainable development, so we know there was a line drawn in the sand at that point in time. We always reserve the right to look behind the scope that we set if we see that things warrant a deeper dive. However, I would suspect that our audit scope would start at some point after 2017.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Thank you for that, Mr. Hayes.

My second question is on the topics of the scope. Would human resources concerns also be brought up in this scope of work by your audit team?

[Andrew Hayes]

We are aware that the human resources allegations that have been made by maybe current and former employees—I'm not entirely sure—are a major concern for many people. Given that this is a foundation that is at arm's length from the government and, in fact, at even greater arm's length than a Crown corporation would be in terms of our audit mandate, we're not sure how far we're going to be able to go into the HR considerations. However, we are looking at those. We very well might ask every question we want and see what happens. However, we have to respect our mandate. That's clear.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

Is part of that mandate looking at, for example, ISED and the ministry in relation to the actual contribution agreements that put in particular detail the government's commitments to a variety of equity, human rights and human resource priorities? Do you think those would be taken into consideration in your scope in relation to human resources, or would you take that as an avenue to better investigate issues of human resources?

[Andrew Hayes]

The funding agreement becomes the centrepiece of our mandate. With a foundation that receives money like this from the government, it's structured in a very different way from, say, a department or a Crown corporation.

Our audit mandate will actually focus us into what's happening under the funding agreement.

I know this is probably not a popular thing to say, but these funding agreements are basically going to set the limits around our mandate. What the foundation does with its business that's not related to the funding agreement becomes more difficult for us to audit.

I don't know at this point in time how much of a hook we have into the human resources area.

[Blake Desjarlais, NDP, Edmonton Griesbach, AB]

In some ways, Mr. Hayes, you can see my concern with that, in the sense that the government could, not just in this instance but in other instances, partner with groups—Crown corporations or even lesser than in this instance—that could, in fact, have bad practices in their human resources and still have a contribution from the government. Is that correct?

[Andrew Hayes]

I'm not sure that I am in a position to comment on that.

The way these foundations are set up, there is a policy reason. It's the government that decides that. Parliament has set up this organization in legislation. We are going to do our audit work in the best way we can.

Obviously we'll set out in the audit report what the lines of accountability are, and they might be very different from what we're used to seeing with Crown corporations and the like. The department might not have the same degree of influence over this organization as they would otherwise have.

[The Chair, Conservative, John Williamson]

Thank you. That is the time.

We now turn to Mr. Cooper.

You have the floor for five minutes, please.

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

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

Mr. Hayes, in answer to a previous question you noted that the Auditor General had conducted an audit of SDTC—a report that was issued in 2017 and covered the period between 2006 and 2017. I would note that in that report the Auditor General found that at the time SDTC had “rigorous and objective processes in place to assess, approve, and monitor projects” and “had measures in place to mitigate potential conflict of interest” and had an “extensive due diligence process” that was followed.

Do you have any reason to think that the Auditor General was given inaccurate or incomplete information to draw those conclusions?

[Andrew Hayes]

No, I don't.

Could I just make two comments about that?

If we ever have concerns about access to information or the sufficiency of information, it's our duty to bring it to Parliament. I know that in this case—at the time I was head of our legal services—there wasn't an issue around that.

If I might just add one thing, I'll put it this way: Positive conclusions in our audit report are even more concerning to me, frankly, because when we find positive things we want to make sure there are no negatives that might be hiding. When we report a positive to Parliament, it's because it's positive.

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

Okay. Thank you for that.

Since that audit, Liberal industry minister Navdeep Bains, as he was then, appointed a personal friend of Justin Trudeau's as chair of SDTC. Since the appointment of that individual, a cloud of gross mismanagement, fraud and corruption has descended upon SDTC. I would submit that is supported by the RCGT independent report.

You said, sir, in answer to a question posed by Mr. Barrett, that findings in that report are equivocal. However, I would respectfully challenge you on that submission in that, for example, at 2.3.1 of the RCGT report, it is stated, “When brought to the Board of Directors for approval, the Covid-19 relief payments to active companies were found not [to] have followed the Corporation's conflict of interest procedures.” It also stated that board members did not recuse themselves.

That involved some $38 million of taxpayers' money that went out the door in which board members were in conflict of interest, did not recuse themselves and approved the money. That is not an equivocal finding. That is an unequivocal finding that there were breaches of the conflict of interest procedures.

[Andrew Hayes]

I would say that we will do our audit work to determine, in our opinion, what is and is not present there.

I make the statement that the findings are equivocal in the very same section, but in the summary of key observations, the way that is presented is that conflict of interest policy may not have been followed for COVID relief payment initiatives.

I understand entirely what you're saying. I think that when I use the word “equivocal”, I mean that it leaves it open to different interpretations, and that's exactly what's here.

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

There's certainly language in the report that is very unequivocal. Would you agree that, at the very least, the RCGT report raises serious questions about mismanagement, conflicts of interest and potential wrongdoing at SDTC? Would you agree with that?

[Andrew Hayes]

Reading the RCGT report, the statements in there and unanswered questions were one of the main factors in our decision to launch our audit.

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

Thank you for that.

Through you, Mr. Chair, Mr. Hayes, you stated that discussions have started with the team at SDTC. Who is your office in contact with at SDTC? Who is on that team?

[Andrew Hayes]

I think, when I mentioned the team, I mean that our audit team has started discussions with SDTC. I would expect that it's their management at this point, but I don't have specifics on who exactly that is.

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

Can you confirm, because I note that in the 2017 audit—

[The Chair, Conservative, John Williamson]

Be very brief, Mr. Cooper.

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

Can you commit that the audit team will interview executives and the chair at SDTC, ISED officials, including the—

[The Chair, Conservative, John Williamson]

I'm going to cut you off there, but I will allow Mr. Hayes just a brief answer on that, please.

[Andrew Hayes]

I can assure this committee and Parliament that we will always do rigorous work. We will talk to everybody we need to talk to.