Terms of Reference

Background

1. The "program and project announcements" to be reviewed were the official announcements made by either Communications New Brunswick (CNB) or the client Company (Company).
2. The "proper process" is that process as prescribed under Act, Regulations or Agreement as applicable. As we were dealing with two separate jurisdictions we make the following comments about those processes;

The authority for the Minister to provide financial assistance under regular programs is vested in the Economic Development Act (EDA) and the associated Regulations.

The key sections of the EDA and its Regulations are:
EDA 3(1) states
"The Minister, with the approval of the Lieutenant-Governor in Council or in accordance with the regulations, may provide financial assistance to aid and encourage the establishment or development of industry in the Province and such financial assistance shall be in accordance with the terms and conditions specified by the Minister or specified in the approval of the Lieutenant-Government in Council".

Regulation 3.3(1) states "Subject to subsection (2), the Minister may, where the New Brunswick Industrial Development Board...recommends such action, provide financial assistance to an industry under subsection 3(1) of the Act without the approval of the Lieutenant-Governor in Council".

Regulation 3.3(2) goes on to state "Subsection (1) does not apply if the sum of (a) the financial assistance sought...exceeds the amount of $100,000".

EDA (1) states
In this Act... "financial assistance" includes

(a) "making a direct loan to a person,
(a.1) providing a grant to a person,
(b) guaranteeing the repayment of a loan made to a person,
(c) guaranteeing a bond or debenture issued by a person, or
(d) acquiring of shares in a corporation or company;"

"industry" means any commercial enterprise

Regulation 3 states "the following are prescribed as industrial, commercial and business activities to which the Minister shall not grant financial assistance under subsection 3(1) of the Act:
(a) logging;
(b) primary agriculture;
(c) primary mining;
(d) quarrying;
(e) broadcasting;
(f) transportation;
(g) communications;
(h) publishing of news periodicals;
(i) generation of electricity;
(j) retail trade;
(k) food catering;
(l) warehousing;
(m) provision of personal services; and
(n) Repealed"

EDA 7(1) states
"Subject to subsection (1.1), the Minister shall not take any action under subsection 3(1) unless:
(a) the Minister has received an application for financial assistance under subsection (2) and has referred the application to the Board (NBIDB), and
(b) the Board, after duly considering the application, has transmitted its recommendation to the Minister".

EDA 7(6) goes on to say
"The Minister is not bound by a recommendation of the Board made under this section".

Regulation 9 states
"An application for financial assistance shall be in writing and set forth not less than
(a) the financial assistance requested,
(b) the purpose for which the financial assistance is requested, and
(c) the financial situation of the applicant".

We obtained information pertaining to the background and operations of RDC from Mr. Gilman, Vice President of Finance and Administration and Mr. Paulin, Manager and Corporate Secretary.

RDC operates under the provisions of the Regional Development Corporation Act which sets out a number of broad objects and purposes related to providing financial assistance to regional economic development programs and initiatives.

We focused our review effort, for RDC funded projects, on two programs - The Canada / New Brunswick Regional Economic Development Agreement (REDA) and the Province of New Brunswick Economic Development Fund (EDF). An outline of the processes for the review and approval of project proposals under each program follows.

REDA

Paragraph 4.1(a) of the RDC Act states that one of the purposes of the organization is "to administer and manage development agreements between the Government of the Province and the Government of Canada as assigned by the Lieutenant-Governor in Council". Provincial administration of the REDA program falls under this provision.

Project funding applications made to REDA are subject to the general provisions regarding project approval and administration under an agreement dated July 31, 1996 between the Government of Canada, as represented by the Minister for the Atlantic Canada Opportunities Agency (the ACOA Minister) and the Government of the Province of New Brunswick, as represented by the Minister responsible for the Regional Development Corporation. Typically, funding applications are received from other provincial government departments.

The REDA Agreement provides for the establishment of a management committee consisting of two voting chairpersons. One is appointed by the Federal Minister and the other by the Provincial Minister. The management committee, among other things, is charged with the responsibility to approve projects. To this end, a set of procedures has been established to control the review and approval of proposals (requests for financial assistance) in a uniform and consistent manner. These procedures are as follows:

1. Proposals must be prepared under established guidelines
2. Proposals are subjected to analysis by both RDC and federal officers in standardized format
3. Officers in step 2 provide recommendations to management committee
4. Presentation of the proposals by representatives of the originating provincial department to management committee
5. Management committee's decision is documented on a Project Authorization Form
6. After both co-chairs have signed the Project Authorization Form, a letter of offer is sent to the Deputy Minister of the originating department. If accepted, the Deputy Minister signs and returns the form to RDC.

EDF

EDF is a provincial fund established under an Order in Council for a four year period ending March 31, 2000. Its purpose falls under the general mandate of RDC as established in the Act described above.

As with REDA proposals, a standard set of procedures has been developed to deal with the review and approval of project proposals (requests for financial assistance). An outline of these are:

1. Each year, typically in early fall, the president of RDC sends a memo to Deputy Ministers of provincial departments requesting they submit proposals
2. Proposals are submitted under established guidelines
3. Proposals are subjected to review by RDC officers in standard format on a Proposal Summary and Review Sheet
4. Informal consultation by the President of RDC with the affected Deputy
5. Proposals from Step 3 are submitted to the RDC board of directors for review
6. RDC presents to the Board of Management a recommendation for funding consideration. Board of Management makes the final decision on the allocation of funds.
7. After Board of Management approval, originating departments are advised of the funding.

It should be noted that all proposals for a given year are submitted as a group to the Board of Management and all are approved at the same time. This approval was granted in October 1998 for the fiscal year ending March 31, 2000.

Scope of Review Procedures

To proceed with our detailed review we:

1. Determined those files to be included. We met with Mr. Scott, Director of Communications and Promotions for EDTC. We requested he provide us with a listing of companies for which there had been announcements made by either Communications New Brunswick or the Company during the period January 1, 1999 to June 7, 1999. We suggested we were interested in looking at larger assistance files, and as a result, did not request Small Entrepreneur Capital Assistance Program (SECAP) files. Mr. Scott indicated there were not often public announcements on SECAP files in any event. The listing was provided to us. Subsequent to receiving the listing and to help ensure we had received all files with announcements from Mr. Scott's office, we provided him with a listing of 33 additional funding projects and requested he review each for announcements. This effort produced two additional companies with announcements. Finally we reviewed the CNB website news release archives. Having followed the above steps we felt comfortable we had the complete population of files to be reviewed.
2. Determined those key steps critical for "proper process". The review procedures performed on each identified file were:

(a) Per Regulation 9 - Review files for evidence of application for financial assistance
(b) Review files for existence of Project Executive Evaluation
(c) Per EDA 7(1)(a) & (b) - Review signed minutes of the New Brunswick Industrial Development Board (NBIDB)
(d) Review the Records of Decision of
   (i) Board of Management
   (ii) Executive Council
(e) Review the signed Order-In-Council
(f) Review the communications file for the announcement date and relevant materials

To proceed with our detailed review we:

1. Determined those files to be included. We met with RDC representative Mr. Paulin. From his input it was determined that the most significant funding activity took place under REDA and EDF. Accordingly, it was decided to focus on project announcements from these two programs for the time period January 1, 1999 to June 7, 1999.

   REDA

   Upon request, Mr. Paulin provided us with a list of project announcements for REDA funded projects during the time period. To help ensure we had received all projects with announcements we reviewed Communications New Brunswick news release archives. From the combined listing we reviewed a sample of the files on the listing with an emphasis on those later in the period.

   EDF

   All EDF funding assistance is authorized once a year. Because of this, the population of files to be reviewed was considered as those files approved in October, 1998. We determined we would review a sample of these files.

2. Determined those key steps critical for "proper process". For both REDA and EDF files we reviewed those procedures as outlined earlier for their respective programs.

Analysis and Conclusions

Generally we found the files to have been subjected to "proper process". EDTC staff were knowledgeable, thorough and helpful. Of the twenty-three files reviewed, exceptions to "proper process" were:

1. Evidence of a Request for Financial Assistance was not located in six files. It should be noted that in discussion with EDTC staff, these omissions were in "development files" only. These are files prepared for companies being approached by EDTC to move into or expand in the Province of New Brunswick. Given the high probability EDTC personnel have initiated contact with the Company (rather than the Company first approaching EDTC) in an effort to attract that Company to the Province, a Request for Financial Assistance is more difficult to obtain. We feel consideration should be given to eliminating the requirement for a Request for Financial Assistance for all "development files".

2. Company 1 - In this file we found a signed Memorandum of Understanding that had been issued without a proper caveat indicating the contents of the Memorandum were subject to approval by the appropriate levels of government including the Lieutenant-Governor in Council. In discussion with EDTC staff and given an announcement date of February 4, 1999 for a file with an August 19, 1998 OIC, it appears this was simply an inadvertent administrative error.

3. Company 2 - In this file the NBIDB minutes were dated after the Records of Decision of Board of Management and Executive Council and the OIC. This is clearly in violation of EDA 7(1) which states "the Minister shall not take any action under 3(1) unless...(b) the Board, after duly considering the application has transmitted its recommendation to the Minister". In discussion with EDTC staff it was acknowledged that this was a file where proper process had not been followed.

In general, we found that proposals received by RDC were subject to "proper process" and that program announcements did not occur until this process was completed. The process is well documented in the files that we reviewed and RDC staff were knowledgeable and helpful.

There were, however, six instances in our review where funding announcements were made prior to the completion of the review and approval process. These are as follows:

1. Chaleur Waterfront Master Plan - CNB news release dated May 6, 1999.
   At the news release date, RDC had not received a request to fund this project.

2. Lameque - Miscou Master Plan - CNB news release dated April 28, 1999.
   A funding request dated January 14, 1999 is on file at RDC, however, the review and approval process had not been completed at the date of the news release.

3. Cultural Tourism Marketing - CNB news release dated April 27, 1999.
   At the news release date, RDC had not received a request to fund this project.

4. Sugarloaf Park - CNB news release dated May 3, 1999. A funding request dated November 17, 1998 is on file at RDC, however, the review and approval process had not been completed at the date of the news release.

5. Plage de l'Aboiteau Upgrade - CNB news release dated May 4, 1999.
   A funding proposal dated May 5, 1999 is on file at RDC. Final REDA Management Committee approval had not been given by that time.

6. Parlee Beach Master Plan - CNB news release dated May 4, 1999.
   At the news release date, RDC had not received a request to fund this project.