In its 2024 report entitled Sustainable Development Technology Canada, Canada’s Auditor General found rampant and long-term conflicts at a federally funded non-profit foundation. As the report detailed, Sustainable Development Technology Canada (SDTC) was established by the federal government in 2001 to fund Canadian environmental technology projects. Over two decades later, the report found that the SDTC failed to establish proper conflict screening procedures for funding decisions. In fact, the report found 90 separately instances, involving $76 million in awarded funding, where “the foundation’s conflict of interest policies were not followed”.
The Auditor General also found weak record-keeping practices, noting that SDTC “did not have an effective system to maintain records over disclosures of conflicts of interest and related mitigating actions.” In fact, according to the audit, the foundation only established its conflicts register in 2022. In the review period between March 2017 and December 2023, the Auditor General found 25 cases in which SDTC’s directors participated in discussions and voted to approve funding even though they had previously declared conflicts of interest. While SDTC claimed that many of those instances were improperly recorded since directors had in fact recused themselves from the decisions or were found not to be in conflict after their initiation declarations, the foundation’s records were never updated to correct these alleged recordkeeping errors. It therefore remained unclear whether conflicts had in fact tainted the funding award decisions.
The report also found that “the foundation’s conflict-of-interest policies lacked specific guidance to address situations that could involve perceived conflicts of interest” and “did not establish how to maintain records of decisions about those situations and any potential mitigation strategies.” For example, the Auditor General found five cases where “directors had business or personal relationships that we considered gave the appearance that their private interests conflicted with their role of acting in the best interest of the foundation,” as well as instances in which potential conflicts were not properly reported to the board or to the federal government as required by existing conflict procedures.
Further, once allegations of financial mismanagement were raised, the report found that SDTC struck a special committee to investigate the concerns but that committee “hand-selected the same law firm to which the foundation’s external general counsel belonged to investigate” which, as the Auditor General stated, “could create the appearance that the investigation was not independent.”
The report made a series of recommendations to address these chronic conflict concerns, stating that SDTC “should implement an effective system to receive, manage, store, and report annually disclosures of conflicts of interest and put measures in place to ensure its conflict-of-interest policies are followed.” As this case study illustrates, the failure to adopt and follow proper conflict screening procedures can adversely impact the integrity of spending decisions involving public funds.
