TPC compliance audit finds 11 companies in breach of conditions; more audits expected

A compliance audit of the sunsetting Technology Partnerships Canada (TPC) program has found 11 recipient companies in apparent breach of their contribution agreements, paying nearly $2.4 in prohibited contingency payments. At least one firm — Bioniche Life Sciences Inc — has repaid the contingency fee it paid to then-lobbyist David Dingwall, while three others were “found to be in breach of the terms of their agreements” and have been given 30 days to respond to notices of default sent out on September 22.

(Dingwall, a former Cabinet minister, was also cited for failing to register as a lobbyist while working for Lorus Therapeutics).

The audit of 47 firms by Raymond Chabot Grant Thornton (RCGT) was ordered by Industry Canada to determine whether companies that received funds from TPC had abided by their signed contributions agreements. The contracts stipulate that companies do not pay a commission or contingency fee to individuals or firms they hire to help secure a TPC loan. Furthermore, individuals or firms hired by firms applying to TPC must be registered as lobbyist.

The first indications of problems with at least five recipient firms appeared during an internal audit of TPC in 2003 by Ernst and Young for Industry Canada’s Audit and Evaluation (AEB) branch. AEB conducted an initial internal review of the five companies and then engaged Kroll Lindquist Avey in March 2004 to conduct a forensic audit.

That audit determined that four of the five companies had “breached their obligations” and TPC payments were withheld, according to an Industry Canada status report released late last month. By August 2004, all four firms had reached agreements with the department “on the rectification of their breaches” by paying to Industry Canada the amounts paid or payable to the consultants they had engaged. At that point, TPC introduced tighter measures for compliance, training staff on the Lobbyists Registration Act and stepping up monitoring of individual companies. Industry Canada also decided to conduct a broader audit which led to the latest revelations.

The RCGT audit covered 19 companies randomly selected by RCGT and 28 other companies identified by Industry Canada.’s AEB. Of those 47 firms, 21 were deemed to be in compliance, 11 were apparently in breach and 11 require more work before a determination can be made. Another four companies are currently undergoing fieldwork and quality review. The 11 who appear to be in breach will be subject to a forensic audit and Industry minister Dr David Emerson has stated publicly that the audits will continue until he is satisfied that all breaches are uncovered.

Since its inception until June 30/05, TPC invested $2.75 billion in 275 projects, leveraging an additional $11 billion in R&D investment. Smaller firms account for 89% of TPC projects, receiving 37% of overall funding. Last month, Emerson announced that TPC would be cancelled as of March 31/06), to be replaced by the Transformative Technologies Program and a to-be-announced aerospace and defence fund (R$, September 20/05).

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