A report commissioned by the federal government revealed that Sustainable Development Technology Canada (SDTC) has been violating its contribution agreement with the federal government, distributing tens of millions of taxpayers dollars inappropriately. 

Furthermore, SDTC board members and executives were incentivised with big bonuses to erroneously distribute these taxpayer dollars with little oversight, the report found. 

The Raymond Chabot Grant Thornton report, commissioned by Innovation, Science, and Economic Development Canada (ISED), found that SDTC’s seed fund, which distributes $50,000 to $100,000 grants to clean tech companies, violates the crown corporation’s contribution agreement with the federal government. 

Specifically, the ISED mandates that SDTC review the projects its funding to ensure its grants don’t surpass 50% of the total project costs.

However, the Raymond Chabot report found that SDTC had not been following this procedure before approving projects for funding, noting that there was a significant chance SDTC were overpaying firms.

From 2019 to 2022, 180 seed fund projects were funded, totaling $17,551,275. 

Raymond Chabot sampled 19 companies that received multi-million dollar grants from SDTC and found that three of them did not meet the partnership requirements stipulated in SDTC’s contribution agreement with ISED. 

While the names of these three companies were redacted in the report, a whistleblower told True North the three companies are Semios, Miovision Technologies, and GHGSat. 

The report says that funding these companies violated SDTC’s mandate, as they have “elements of commercialization,” which is inconsistent with SDTC’s mandate and violates the contribution agreement with ISED. 

SDTC had approved GHGSat for $20,000,000 on September 15, 2021, $17,000,000 for Semios on January 20, 2022, and $16,580,000 for Miovision, totalling $53,580,000.

SDTC is actively funding 141 companies as of August 31, 2023 with contributions ranging from $500,000-$20,000,000.

The report also notes that another funding stream was potentially non-compliant with SDTC’s goals to fund sustainable development technologies to help reduce Canada’s carbon emissions, though the details of the non-compliance were redacted. 

“However, it appears that the [REDACTED] stream is potentially non-compliant with section 2.02 of the Contribution Agreement,” reads the report.

The report also revealed that SDTC’s board had approved and distributed $38.4 million worth of COVID-19 relief payments to each active company within their portfolio while bypassing SDTC’s conflict-of-interest policies. 

Raymond Chabot reviewed 21 of the hundreds of companies that received Covid relief payments and found that unnamed board members had conflict-of-interest declarations associated with six of these companies, or 29% of them. 

No one on the board recused themselves from voting on the Covid relief payment scheme, and the report says that board members acknowledged that the lack of consideration of conflicts of interest was “inappropriate.”

Extrapolated to the 118 companies that received relief payments in 2020 and the 102 companies that received relief payments in 2021, SDTC potentially sent out 68 relief payments with conflicts of interests, or about $11.14 million worth of payments. 

Furthermore, the SDTC executive and board members were incentivised to distribute the Covid relief funds with year-end performance bonuses. 

As part of SDTC’s corporate goals for the fiscal year 2019-2020, SDTC was tasked with distributing $120.7 million, a 31% increase from fiscal year the year prior. 

On March 23, 2020, a week before the end of the fiscal year, SDTC’s board approved $20 million for Covid relief payments, distributing $17.9 million before the end of the fiscal year. 

SDTC’s 2019-2020 annual report notes that the clean tech fund had distributed $122 million. Had the board not approved the Covid relief fund, SDTC would have come up approximately $16 million short of its goal. 

For the 2019-2020 fiscal year, the CEO was incentivised with a performance bonus up to $95,250 while vice presidents were incentivised with bonuses of up to $48,000. Other board members received up to $10,920.

In 2020-2021, SDTC was tasked with disbursing $162 million and ended up disbursing $146 million.

However, on March 9, 2021, SDTC had approved $25 million in funding for COVID-19 relief payments and ended up disbursing $20.5 million in relief payments. Had the board not made this approval, SDTC would have only distributed $101.5 million that fiscal year. 

The CEO, vice presidents, and board members were incentivised with performance bonuses up to $96,000, $48,000, and $11,000 respectively. 

In response to the Raymond Chabot report, Innovation Minister François-Philippe Champagne announced the temporary suspension of funding for all new SDTC projects until corrective measures were put in place.

The day after minister Champagne announced the government would be pausing SDTC funding, SDTC released a statement defending itself, saying there is no evidence of wrongdoing and that it will not be conducting an investigation.

“We note the report found no clear evidence of wrongdoing or misconduct at SDTC and indicated that no further investigation is merited,” read a statement from the crown corporation.

In a statement to True North, SDTC said that its board is reviewing the report carefully and will work to “ensure further compliance.”

“The SDTC Board of Directors and leadership team are carefully reviewing the RCGT report and are taking action to implement the government’s recommendations as quickly as possible to minimize disruption to Canada’s sustainable innovation ecosystem,” reads the statement.

“We are redeploying internal resources to this effort and are bringing on external expertise to ensure that we can further strengthen compliance with the contribution agreement while maintaining the same high level of efficiency and speed of business processes that Canadian entrepreneurs have come to expect.”