The AG found that one out of six projects funded by the government’s green tech fund were ineligible
OTTAWA – Innovation Minister François-Philippe Champagne announced he is shutting down Sustainable Development Technology Canada — a scandal-plagued cleantech fund derogatively referred to as the “green slush fund” by Conservative MPs — in response to a scathing auditor general report on Tuesday.
The government plans to transfer STDC’s funding responsibilities to the National Research Council (NRC) over the next year.
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Auditor General Karen Hogan found that one out of six projects funded by STDC that she audited to the tune of millions were ineligible. It also found the organization had serious governance issues.
“The various reviews conducted ― including the Auditor General’s report ― have revealed serious weaknesses in SDTC’s governance, prompting a new delivery approach to government support for the cleantech sector,” Champagne said in a statement.
The auditor also found that the federal public service consistently disregarded its own contracting rules when it awarded $209 million worth of contracts to consulting firm McKinsey, which she described as a symptom of larger issues with the government’s overall procurement practices.
“As a Government of Canada organization, the NRC is subject to rigorous and stringent oversight of its personnel and finances. This structure will help rebuild public trust while increasing accountability, transparency and integrity,” he added.
Hogan published two scathing reports Tuesday on how the government manages taxpayer funds either though professional services contracts or funding granted by STDC.
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A first audit of nearly 100 contracts awarded since 2011 to controversial consulting firm McKinsey & Company found “frequent disregard for procurement policies and guidance” and infrequent proof of value for money. She noted that 71 per cent of those contracts, worth $118 million, were awarded on a non-competitive basis.
It also took a swipe at the government’s central purchasing agency, Public Services and Procurement Canada (PSPC), for failing to challenge other federal organizations when they issued contracts that appeared to overlap.
“Federal contracting and procurement policies exist to ensure fairness, transparency, and value for Canadians — but they only work if they are followed,” Hogan wrote.
Hogan audited 33 of the 97 contracts granted to McKinsey since 2011 and found that critical information was missing in over half (19) of them, such as why the contract was needed, what were the expected deliverables and if they were all provided, and whether the “ultimate intent” of the contract was met.
“All of the above meant that value for money could not be demonstrated for these contracts,” she wrote.
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Hogan found that the total value of contracts awarded to McKinsey increased beginning in 2017-2018, though overall spending to the company since 2011 only represented 0.27 per cent of all consulting areas they worked in for the federal government.
Procurement Minister Jean-Yves Duclos said in a statement that Hogan’s findings are in line with several other internal and external reviews and welcomes her recommendation to strengthen guardrails against potential conflicts of interest in government procurement.
In her report on STDC, Hogan says she found “significant lapses” in the foundation’s governance and how it managed public funds.
Between 2017 and 2023, STDC’s board approved $836 million worth of funding aimed at helping green technology projects start up, scale up, support their seed funding round, or develop partnerships and networks.
But the AG found that the foundation gave out dozens of funding awards — totalling nearly $60 million — to projects that didn’t meet its eligibility criteria, failed to follow its conflict-of-interest policies in nearly 100 cases, and that its board didn’t even have the minimum number of members required by law.
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“We found that the foundation awarded funding to projects that were ineligible, that conflicts of interest existed in some instances, and that certain requirements in the Canada Foundation for Sustainable Development Technology Act were not met,” reads the report.
“It’s not always clear that funding decisions made on behalf of Canadian taxpayers were appropriate and justified,” Hogan added in a statement.
“We found 90 cases where their records showed that members of the board who had declared a conflict of interest were involved in discussions and then voted on awarding funding to a project, and that should not happen,” she told the Commons public accounts committee Tuesday morning.
She told the committee she found 90 cases where the foundation’s own records show a board member participated and voted in a discussion about a contract despite being in a conflict of interest.
“It represents about $76 million. Now, it doesn’t mean that the award wouldn’t have happened, but you just don’t know what would have happened if individuals had properly recused themselves,” she said.
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Her report makes 10 recommendations for STDC, including that the foundation clarify its guidance regarding project eligibility, improve its challenge function when assessing a funding request and reassess all the projects it approved since March 2017.
Since STDC is being shut down and its mandate and funding will be transferred to the NRC, it is unclear if any of the recommendations will be enacted.
STDC has been in turmoil since the media reported on internal whistleblower reports flagging significant governance and conflict of issues within the organization beginning in February 2023.
There are at least five ongoing or completed investigations into the STDC’s governance, labour practices and funding decisions, including by the AG and the federal ethics commissioner.
The president of the board of directors, Annette Verschuren, resigned last year after being the subject of an investigation by the ethics commissioner. She admitted to having approved more than $200,000 in subsidies to the company NRStor, which she runs.
The president and CEO of SDTC, Leah Lawrence, also resigned. In a letter to the board of directors, she cited a “sustained and malicious campaign to undermine” her leadership.
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With additional reporting by Catherine Lévesque.
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