Ottawa paid WE Charity $30-million to run student program

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The contract Ottawa signed with WE Charity allowed the group to receive all of the money to administer the Canada Student Service Grant upfront, with the organization getting $30-million out of a potential $43.5-million before the contract was cancelled.

The contract shows that WE’s arrangement to run the program to pay student volunteers took effect weeks before cabinet approved the program on May 22. The deal, which the government called a contribution agreement, was released through the House of Commons finance committee on Monday.

The government first announced the contract on June 25, but it was cancelled on July 3 amid conflict-of-interest accusations against Prime Minister Justin Trudeau. The deal called for all the money to be paid to WE by July 2. The charity said Monday it received $30-million on June 30, but will refund all the money. “The details of repayment are presently being worked out with the government,” WE said in a statement.

Prime Minister Trudeau and WE Charity: The story so far

WE said Monday the money paid to the charity reflects startup costs for the program and could only be spent on eligible expenses, as defined in the contract.

Both Mr. Trudeau and Finance Minister Bill Morneau have apologized for failing to recuse themselves from the cabinet decision to award WE the contract. The Conflict of Interest and Ethics Commissioner is investigating whether they broke federal ethics laws.

The House finance committee is studying the controversy around the government’s decision to award the contract to the charity despite multiple financial ties that the families of Mr. Trudeau and Mr. Morneau have with WE. On Monday, the finance committee confirmed that Mr. Trudeau and his chief of staff, Katie Telford, will testify on Thursday afternoon. WE co-founders Craig and Marc Kielburger will speak to the committee on Tuesday.

The contract was signed on June 23, but came into effect on May 5, 2020. WE says the May 5 date reflects when it began working on the project and incurring eligible expenditures to design, build and prepare to deliver the program. “Because of the speed with which the program needed to be launched and delivered, WE acted in good faith to undertake these actions before this agreement had been finalized and signed.”

Mr. Morneau said last week the cabinet’s special committee on COVID-19 met on May 5 to discuss the program, but cabinet’s final decision was made more than two weeks later.

In a statement, Diversity, Youth and Inclusion Minister Bardish Chagger’s spokesperson, Danielle Keenan, said the negotiations with WE started after that meeting.

Kevin Page, a former parliamentary budget officer who is now the founding president and chief executive of the Institute of Fiscal Studies and Democracy at the University of Ottawa, reviewed the contract at the request of The Globe and described it as “incredibly front-end loaded.”

“I think the size and speed of the contract stand out – It is a large disbursement of money over a short period of time,” he said. “I do not think this is common, but assume the government and recipient would argue the significant time and size pressures would create large up front costs on the recipient.”

The arrangement also plans for much less total spending than the government publicly announced for the program when it was first mentioned by Mr. Trudeau on April 22 and which is published on the federal government’s website.

According to Ottawa’s published figures, the government planned to spend up to $912-million on the program. But the agreement with WE only details plans to spend $543.5-million.

In a statement from Employment and Social Development Canada, the government said $912-million was still allocated for the program. The $543.5-million “was commensurate with program activities and tied to the expected uptake of the program,” acting director Michael O’Shaughnessy said.

“If demand exceeded the number of grants funded in [the original contribution agreement], additional funding would have still been available for the program.”

Michael Barrett, the ethics critic for the Conservative Party, said “concerning new details” were emerging every day. “We were told that WE Charity would get $19-million to administer the Trudeau government’s $912-million student grant program. Now we learn that Trudeau’s friends were getting $43.5-million for a $500-million program. The numbers just don’t add up. Where is the other $368.5-million? This entire scandal reeks of corruption at the highest levels of government.”

The contract says the $43.5-million payment was based on the organization registering up to 100,000 participants. WE noted Monday that the agreement called for $8,375,000 of the money to go to partner non-profits. “No WE entities were to receive any funding from that amount.”

The government broke the project into two “cohorts” of 20,000 participants each, plus a “supplementary cohort” of 60,000 participants. The government planned to spend $100-million per 20,000 participants, or $500-million.

WE was to receive up to $19.5-million, including $1.15-million in administration costs, for the first 20,000, up to $13.5-million, including $1.15-million in administration costs, for the second 20,000, and $10.5-million for the final 60,000.

The government was to pay WE the $19.5-million for the first group of participants, as well as the $10.5-million for the supplemental cohort, as soon as it signed the agreement. Ottawa owed WE the $13.5-million payment for the second group on July 2. However, WE says it did not collect the $13.5-million.

“These are program costs, and they are defined specifically in the agreement as expenditures related directly to the delivery of the program, or necessary to enable WE to manage the delivery of the program,” WE said Monday in a statement. “These are not ‘fees.’ Any funds not used in eligible expenditures were required to be returned to the government.”

WE noted Monday that it was “subject to audit by the government to verify the use of government funds on eligible expenditures, both during the life of the project and for six years after the end of the project.”

The federal government has said it will continue with the program but has not yet said how it will work now that WE Charity won’t administer it.

Questions about the connections between the charity and senior Liberals prompted revelations that Mr. Trudeau’s wife, mother and brother have been paid for their participation in WE events. The Prime Minister’s mother, Margaret Trudeau, was paid the most. The charity confirmed on July 9 that since 2016, Ms. Trudeau has been paid about $312,000 in speaking fees, which includes a commission to the speaking agency that represents her.

It was then revealed that Mr. Morneau’s daughter works for the organization. And last week Mr. Morneau also revealed that he reimbursed the WE Charity $41,366 on Wednesday for expenses related to his family’s 2017 travel with the organization.

At the same time the controversy has prompted questions about WE’s governance and the relationship between the charity and its for-profit affiliate called ME to WE. In July the WE organization announced a review of its organizational structure and governance and a plan to refocus its efforts on international work. On Monday, The Globe and Mail reported that the charity’s former chair, Michelle Douglas, resigned due to “concerning developments” and that she “did not resign in the ordinary course of matters.”

Ms. Douglas resigned from the charity on March 27 and will also testify at the finance committee.

The Globe has a sponsorship partnership with WE Charity. The agreement expires on Aug. 31 and will not be renewed.

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