Startups And Not-For-Profits Face Disaster As Dozens Of CyberNB Grants Remain Unpaid

Reading Time: 5 minutes

FREDERICTON—CyberNB’s sudden and seemingly messy collapse late last month shocked New Brunswick’s business community.

The cybersecurity organization announced February 28 it was shutting down after Opportunities New Brunswick (ONB) held back hundreds of thousands of dollars of funding.

In the weeks since, an apparent abdication of responsibility by CyberNB, its partners, and its funders has left participants in an employment program on the hook for what is likely more than $700,000 in unpaid grants.

That unexpected debt has startups scrambling to make payroll and community not-for-profits on the verge of closing. Many say they’re shocked by the abject failure of the government agencies involved to address the problem.

Grant Recipients Desperate For Answers

Digital Skills For Youth (DS4Y) is a federal program designed to help recent graduates find work with small businesses and not-for-profits. Through the program, firms hire graduates for short work terms and are later reimbursed for the cost of their salaries.

The program is funded through Innovation, Science, and Economic Development Canada (ISED) but is administered in each province by local partners. In New Brunswick, CyberNB was that partner.

When CyberNB shut down, dozens of organizations that had hired (and paid) people through CyberNB’s DS4Y grants were still waiting for reimbursement.

For weeks, they’ve been desperately seeking answers about when, how, or even if they’ll get the money they were promised. No one involved, from CyberNB to ONB to ISED, seems willing to give them answers.

Former Employees The Only Point Of Contact

In the hours and days following CyberNB’s abrupt shutdown, newly fired employees, who were no longer getting paid, frantically reached out to DS4Y participants to let them know what was happening.

Nealy everyone Huddle spoke to for this story said they learned about CyberNB’s Collapse from news reports. They say the former employees’ unofficial communications have been their only meaningful contact about the DS4Y program.

Daniel Lirette is the founder and CEO of GrowDoc. The company recently hired six people through DS4Y and Lirette says he’s still waiting for most of the promised reimbursement, close to $80,000.

Like everyone Huddle spoke to for this story, Lirette says he’s been stuck in an endless loop of blame-shifting and evasion by the organizations involved.

“It’s kind of a just a back-and-forth game between CyberNB and ONB and they’re all pointing the finger at each other,” he says.

All that uncertainty, Lirette says, is wreaking havoc on his business.

Before CyberNB shut down, he was planning to keep his DS4Y hires on the payroll. He says keeping them would have been “absolutely fantastic and potentially game-changing” for his business.

But, because he has no idea when or if he’ll be reimbursed, he had to let them go. That means the growth-oriented projects they were working on for GrowDoc are mostly shelved.

Founder Facing Personal Bankruptcy

Pascal McCarthy is the founder and CEO of Parados. He says he’s even more worried about his company’s financials. He has a pile of his own capital invested in the business and is worried carrying the cost of unfulfilled DS4Y grants could pull Parados under.

“I basically put my student loans, got a personal loan, and life savings into it,” he says.

Parados received grants for three employees through DS4Y. The company has already paid those employees but has heard nothing about its promised reimbursement. Without that money coming, McCarthy worries how he’ll keep paying his team.

“It’s been a struggle, every payroll’s been a struggle, like, where am I getting the funds to make payroll this time?” he says.

Recent investments from other organizations mean Parados is good for the time being but McCarthy isn’t sure how long he can carry the extra financial burden.

Like Lirette, he’s spent hours trying to reach people at ONB, ISED, and anyone he thinks might be able to help him. Over and over again,  he’s been passed along or told there’s no information.

“And I’m like, that doesn’t really help me. I kind of need to know whether to let these people go or not because it’s both personal and company bankruptcy that I’m looking at if I’m not getting reimbursed,” he says.

Worse Than Credit Card Fraud

The wall of silence around DS4Y has been particularly damaging for many of the not-for-profits who took part in the program.

Reginald Tower is the president of the Greater Dorchester Moving Forward Co-operative. Moving Forward used a DS4Y grant to hire a program director for a youth-lead experiential learning program in the community.

Tower says that, despite his best efforts to make contact, he’s heard absolutley nothing about a reimbursement that’s already long overdue.

“They were supposed to pay within 60 days, right? And 60 days went by and nothing happened. We sent emails and follow-ups: No messages back,” he says. “Not one bit. Not even an ounce. No single email in response back.”

Moving Forward has so far been left on the hook for about $15,000 “that we don’t have and never would have spent if we thought we were dealing with a moral… entity,” Tower says.

He says he’s not sure if Moving Forward can keep paying for its building. There’s also a real possibility its volunteer board members will choose not to continue and the organization will completely fold.

Tower recently fell victim to a credit card scam, which was a terrible experience but one where he felt like he had some control. He says his experience with the DS4Y program after CyberNB shut down has been worse.

“I feel way more… attacked by my own government. It feels worse to me… that this nonprofit has been taken advantage of in this way than [when] my own personal credit card was attacked,” he says.

Lirette says he can’t help but feel “deceived” by a provincial government that promised grants to people while he belives it knew CyberNB could fold.

“It’s a hard one because it’s kind of like we were deceived by not knowing that this was going to happen when people did know,” he says.

No Confirmation Payment Is Coming

Although CyberNB was technically run by an independent board, the organization was deeply connected to, and funded by, Opportunities New Brunswick.

The former Liberal government set up CyberNB in 2016 under ONB’s umbrella. In 2019, the PC government opted to make CyberNB independent. At the time, the government set aside millions of dollars to help fund the organization as it transitioned from a government body into a not-for-profit.

CyberNB folded after ONB decided to withhold the final $200,000 of that transitional funding. Since then, ONB has tried to distance itself from CyberNB.

Huddle reached out to Opportunities New Brunswick, ISED, the former chair of CyberNB’s board of directors, and its former CEO asking about the DS4Y program.

None were willing or able to provide any answers.

David MaGee, who was the interim chair of CyberNB’s board, said only that there are “on-going conversations happening on how to best resolve this situation.”

Jeremy Depow, who was CyberNB’s acting CEO, said he’s “no longer with the organization” and can’t give any information.

ONB said it “empathize[d] with the employers’ frustrations and understand[s] that information has seemed sparse” but tried to distance itself from both CyberNB and the DS4Y program.

It pointed out that CyberNB was run by an independent board of directors and said the DS4Y program is ISED’s responsibility.

Even ISED wouldn’t give straight answers. The organization replied to Huddle’s interview requests with a generic statement that it is “actively working towards a solution for continued program delivery.”

Rumours are circulating that DS4Y employers will eventually get their reimbursements through ISED, but the organization would not confirm that to Huddle.

‘It’s Unbelievable’ Government Would Sanction This

McCarthy says the whole experience with the DS4Y program has him seriously considering relocating from New Brunswick to a region that better supports startups.

“I’m debating relocating because I don’t know if I believe in coincidences so this might just be a sign to move elsewhere where there’s good support, especially for startups,” he says. “I’ve heard really good things elsewhere, like in Nova Scotia and Halifax.”

Lirette says he will think twice in the future before he accepts government grants.

“Who would expect that a government agency or a government organization would go bankrupt? Like that’s unheard of. Like, that shouldn’t exist, really,” he says.

Tower is also flabbergasted that the province allowed any of this to happen.

“It’s just kind of unbelievable that the government can set up an entity to distribute money… and then cut the contract midway through—and the people that suffer are the actual people they intended to help in the first place,” he says. “It’s unbelievable that our own government would sanction that.”

Trevor Nichols is the associate editor of Huddle, based in Halifax. Send him your feedback and story ideas: [email protected].

RELATED: CyberNB Grant Recipients Will Get Their Money, But What Happened To Their Paperwork?