Public Accounts Committee on June 20th, 2024

[Karen Hogan]

It's difficult for me to comment on how the transition has been set up and the appointment of the board members, since I don't know any of the details around those things.

When I think about where it will ultimately end up, which is in a federal department, I believe that will increase accountability and transparency around the use of funds, and it will help eliminate some of the potential conflicts of interest that currently exist, given that board members need to be experts in the field.

I guess one of the concerns I will have then will be with how the National Research Council will ensure that they have the expertise to do what was happening at the board. How will they make sure that the projects are really innovative and have new technology? How will they make sure that the projects will actually contribute to better water, cleaner air and a reduction in climate change?

I think that, while it will help in some respects, there's another risk that's present, and I hope the National Research Council will make sure they have that expertise as they evaluate, based on merit, what every project should receive.

[Iqra Khalid, Liberal, Mississauga—Erin Mills, ON]

I really appreciate your talking about the ethics of it all, because I do think that's really important. Can you perhaps explain the nature of potential ethics violations or conflicts of interest that could arise in an organization like this? I know we saw through the pandemic how companies were paid out. How does that translate into the reality and the perception of accountability and transparency in government institutions like this?

[Karen Hogan]

I think you should start with a foundational sort of element that a person should not be seen to benefit from public funds. There's a requirement in the Sustainable Development Technology Act that says that no one should personally benefit from government money. However, when the act also then requires that board members have expertise in the field, that requirement, by its very nature, invites conflict of interest. The clean-tech industry is a small one, so if you want some expertise, it's likely that the people with that expertise are also trying to develop and innovate.

That's why there's a need for a really rigorous process to say that if you've declared a conflict of interest, you should do the right thing and recuse yourself from the votes and the discussions.

[The Chair, Conservative, John Williamson]

Thank you very much.

That is the time.

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

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

Thank you, Mr. Chair.

I have a direct question for you, Auditor General.

How did you determine the audit period? I believe it starts on April 1, 2017. Why that date in particular?

[Karen Hogan]

We chose the audit period based on the previous audit. The commissioner of the environment and sustainable development performed an audit in 2017. We focused on what had happened since that time. I just want to make sure that—

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

Okay.

In his audit, did the commissioner examine conflicts of interest? I don't believe that was part of his audit.

[Karen Hogan]

No. In 2017, he had to determine whether the projects would actually—

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

He wanted to know whether the environment was being protected, and so on.

[Karen Hogan]

Yes. A lot has happened since 2017.

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

Indeed it has.

If we go back before 2017, it seems that there were some fairly flagrant conflicts of interest, including with the Enerkem project. Ms. Méthot sat on both the Enerkem board of directors and the Sustainable Development Technology Canada review committee. Enerkem was the company that received the most funding from SDTC. I think it got $56 million for its project. That's the figure I have. Obviously, the project does not appear in your report, because it was completed on March 31, 2017. Unfortunately, it wasn't examined in your audit, but I think it's a case worth noting.

Actually, the SDTC's contribution was $63.6 million, while Ms. Méthot sat on both Enerkem's board of directors and SDTC's review committee.

I have a question for you, Ms. Urie.

You told my fellow member that you were going to reassess the projects to determine whether the funds should be recovered. Will you reassess every project? That's a question we asked Mr. Kennedy repeatedly last week.

I would like to know whether you, as the vice-president of finance at SDTC, or the team that will be transferred to the National Research Council, will reassess every project, first to determine whether they were eligible. We know that the Auditor General was unable to do that.

Will you hire a firm? How will you proceed?

[Sheryl Urie]

As it stands right now, consistent with the recommendations in the Auditor General's report, we've committed to reassess the eligibility of the portfolio of projects that we have. That would be done prior to any transition to the National Research Council. There will be a third party that would be engaged to conduct this work. The criteria for eligibility will be laid out very clearly. There will be commentary on how each project approved by the SDTC board would have met the eligibility criteria. If the eligibility criteria have not been met, recovery would be considered.

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

You say “each project”, but are you talking about current projects or so-called completed ones?

[Sheryl Urie]

Currently we're starting with all projects that are under way, the active portfolio of projects. It's a significant number of projects, so in order to manage the workload, those are the projects that we're starting with. There are over 100 projects.

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

Are you also going to reassess the so-called completed projects? Once again, I'm thinking of the Enerkem project, which ended up receiving only public funds from the City of Edmonton and SDTC, but provided absolutely no service. That is the type of project that harms the reputation of SDTC and any other government funding, since it didn't meet a single objective. It was a public money pit.

On behalf of Quebeckers and Canadians, I would like your assurance that you will reassess the funding that went to so-called completed projects, to see whether you can recover the money.

[Sheryl Urie]

Unfortunately, I can't speak about a specific project without having more details.

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

I'm talking about past projects.

[Sheryl Urie]

For past projects, those projects are still under consideration as well. We don't have a full road map to the end of the transition at this point in time. As we said, Dr. Boothe has just joined the organization.

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

Okay.

Mr. Kennedy told us last week that funding for current projects would resume during the transition. In my opinion, there is one major factor. If these projects are being reviewed to determine whether they are truly eligible and whether they meet the criteria, how can Mr. Kennedy tell us that funding will resume shortly? Are you going to withhold the funds until the project is proven to be eligible, or are you going to start the process over and fund existing projects as they come up? How are you going to proceed?

[Sheryl Urie]

Again, as it relates to eligibility, we need to go through the process of reassessing eligibility for the active projects prior to disbursing funds. I think we're fortunate that we have a little step-up. From the Auditor General's report, they would have sampled a pool of projects, and they've already considered them eligible, but going forward, there remains the rest of the portfolio.

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

When do you think you'll be able to resume funding projects that are deemed eligible? Are you going to do it as you go along, or are you waiting until the whole thing is done?

I'm asking on behalf of eligible businesses that need this working capital to stay afloat. Some of them are great companies, but unfortunately, they are hurting right now because of the scandal surrounding SDTC. They deserve to receive their funding.

[Sheryl Urie]

I appreciate the comment. We feel that every day in dealing with our portfolio companies and trying to ensure that they're getting the funding they need to continue operating. We are moving as quickly as we can to reassess the projects, but that needs to be done in advance of disbursing funds.

[The Chair, Conservative, John Williamson]

Thank you.

Mr. Green, you have the floor for six minutes, please.

[Matthew Green, NDP, Hamilton Centre, ON]

Thank you very much.

I want to begin with an overall framing.

Ms. Hogan, I believe I heard you state that benefiting from public dollars is a conflict of interest. Is that correct?

[Karen Hogan]

I think it's a fundamental rule that if you're involved in a public organization, you should not be seen to be personally benefiting from public funds.