July 30, 1991

PUBLIC ACCOUNTS COMMITTEE (UNEDITED)

The Committee met at 10:00 a.m. at the Colonial

Building.

MR. CHAIRMAN (Hearn): Order, please!

We are ready to go, we have a quorum but we have

more people coming. First of all, let me welcome anyone who has not been here

before, and I say that because some of our people around the table are here on a

regular basis every time we meet.

Today we will be discussing funding as it relates

to the Denominational Education Councils. I would like to take the time to

welcome the representatives of the Integrated and Pentecostal. We have a little

set procedure, before we get into the regular hearings and discussions. Anyone

who has not been before us yet - and when I say before us, since this Committee

started this past year and a half or whatever - has to be sworn in. Any

witnesses will have to be sworn in.

We then ask the Auditor General or his

representative to give an opening statement basically outlining the concerns

raised about any Department or Agency with which we are meeting, and then we

throw it open to the Department or Agency to give any response or make any

general comments about the topics the Auditor General discusses.

Following that, we ask the Members of the Committee

to raise any questions, and we basically throw it open for a to and fro

discussion. We try to be very informal about it, however we would ask you to go

through the Chair, not because I am that sticky but because we are recording.

Everything is recorded by Hansard, so you do have a record later on, whether

that is good or bad.

The microphones in front of you are strictly for

recording purposes not for amplification. So when you speak, would you move

fairly close to the microphone and perhaps mention your name each time, because

as the conversations are typed up the secretaries would probably not recognize

too many of the new voices. So if you would just mention your name before you

get into the discussion, then we will make sure the record is clear. I would not

want to be blamed for something Tom Pope said and vice versa.

I am not sure whether Dr. Pope and Pastor Batstone

would want to sit at the table. If you wish, there is absolutely no reason why

you should not and if you want to take part - Hubert, you know might be carrying

the conversation but you might want to interject, so it is entirely up to

yourselves. If you feel you want to be part of the general discussion you may

sit at the table and we will have you sworn in and you can take

part in anything

at all. If you want Dr. Norman to carry the whole works, well that is entirely

up to yourselves, but you are more than welcome to sit in at the table, but in

the event you want to participate then you will have to be sworn in.

With that, I will introduce the - yes, Mr. Walsh?

MR. WALSH: (Inaudible).

MR. CHAIRMAN: Yes, I was going to introduce the

people at the table. To my immediate left is Elizabeth Murphy, who is, among a

number of things, the Assistant Clerk of the House of Assembly. She is basically

our research person right now while Dick Porter is off sick. She is the person

who contacts everybody. Whatever else has to be done, Elizabeth is doing it, as

she has been doing for many years and doing it well. To my left is Art Reid, the

Member for Carbonear. On my immediate right are: Aubrey Gover, the Deputy

Chairman of the Public Accounts Committee; Alvin Hewlett, the Member for Green

Bay; and Jim Walsh, the Member for Mount Scio - Bell Island.

I will ask Mr. Drover if he would introduce the

people from the Auditor General's Office. Bill Drover is representing the

Auditor General this morning.

MR. DROVER: Thank you, Mr. Chairman. I am Bill

Drover, the Audit Principal responsible for the annual report. With me is George

White, Audit Manager.

MR. CHAIRMAN: And Hubert Norman from the

Denominational Education Councils. And, Hubert, with you are Dr. Tom Pope and

Pastor Earl Batstone.

DR. NORMAN: Yes, Mr. Chairman. Just

procedurally, we understood that the Integrated Education Council would be on

for a half hour and then I think followed by the Pentecostal Education Council.

So, if that is the correct procedure, then we can follow that pattern.

MR. CHAIRMAN: Certainly.

DR. NORMAN: If you wanted both to be together I

am sure Pastor Batstone would have no objection to coming up and being sworn in

at the same time.

MR. CHAIRMAN: Basically we are talking, I

think, generalities. I see no problem at all with Pastor Batstone sitting in

with yourself and Tom, you know it is a general type questioning. Now some of

the members might want to talk specifically about the Integrated group or the

Pentecostal and then either one or the other can pick it up. But I think most of

what we will be discussing, unless I miss my guess entirely, will be strictly

generalities about funding mechanisms and what have you, you know something that

either one or all of you can get involved in. So maybe it would be better to be

there altogether.

AN HON. MEMBER: I think I am just going to sit

here today and (inaudible).

MR. CHAIRMAN: Thank you.

I should mention, just before we do the swearing

in, a few years ago when people were summoned before the Public Accounts

Committees, you know, it was something like going up before the Spanish

Inquisition, 'What did we do wrong?' We are trying to get away from that. When

you are summoned, usually it means that the Auditor General has raised some

concerns about, not the way necessarily that you - and when I say you I am

talking about the department or agency or whatever that is handling public

funding, but probably he has identified some weaknesses in the system or the way

he thinks or his office thinks things could be done a bit better or what have

you.

Sometimes we bring groups and agencies before us

for general discussions on funding, how they handle their funding, how

accountable they are and other related problems. We have found it to be a

worthwhile experience not only for the Members of the Public Accounts

Committees, but also for the groups and agencies, because it gives them a chance

sometimes to discuss publicly some of the problems they see in trying to handle

the whole situation. I think a lot of the agencies that came before us thinking

that they were in for some kind of trouble or whatever, left feeling that it was

a very worthwhile exercise. They got a chance to let others know some of the

frustrations in trying to collect public money and spend that money and be

accountable, in doing so, in light of all the other factors that surround us.

We are open to the public on meetings. The public

can attend any meeting at all. The press is, I will not say always here, but

mainly here and they may want to talk to you, and you might want to talk to them

afterwards. That is entirely between you and them. As regards the questions back

and forth, as I said, feel free to interject whenever you wish. We try to keep

it as orderly as possible, but our meetings, I must say this past couple of

years, have been very fruitful and worthwhile for everyone concerned.

Our only job, as the Public Accounts Committee, is

to try to see that the money collected by Government is done according to

legislation, is done as well as possible and as efficiently as possible, and

spent the same way. And where there are deviations we try to zero in to see what

the problems are. We then in our own report later on in the year, recommend

perhaps better ways of handling the whole situation.

So, Elizabeth, before we proceed you will have to

swear - Mr. White have you been sworn in?

MR. WHITE: Yes, I have been here before.

MR. CHAIRMAN: He has been here before.

Swearing of Witnesses

Dr. Thomas Pope

Dr. H. Norman

Pastor Earl Batstone

MR. CHAIRMAN: Thank you, Elizabeth.

With that I will turn it over to Mr. Drover. The

Auditor General has, in his

section on transfer payments, raised some concerns,

I suppose, about the accountability of Government funding as it flows through

the different groups and agencies and what real control Government has over it.

With that he listed a number of groups and agencies, a couple of them, of

course, being the school boards and the Denominational Education Councils. This

morning we are dealing only with the Denominational Education Council area. I

should mention that only two of the three are present, the Integrated Education

Council and the Pentecostal Education Council. The representatives from the

Roman Catholic Education Council were not available. We have been aware of that

for some time but they will be joining us at a later date. Mr. Walsh, that was

your question.

There are three Councils, for those who are not

familiar with the setup. The Integrated Education Council represents a number of

religions, and was set up a number of years ago. We have the Pentecostal

Education Council and the Roman Catholic. Altogether they receive whatever

Government funding goes through the different councils and in turn disperses

that to school boards and so on, mainly for school construction and not for

operating. As we meet with the school boards, or when we meet with them later

on, we will be talking about operating funding and so on. The dollars talked

about here, for which the Denominational Education Councils are responsible,

strictly relate to general construction and major maintenance, I suppose, heavy

funding. The amount each year is roughly between $25 or $30 million, I believe.

They receive that based upon the percentage of the population which each group

represents. Unless there have been some changes I think we are talking about the

Integrated Council receiving about 37 per cent of that total funding.

AN HON. MEMBER: The Integrated Council is 56.5 per

cent.

MR. CHAIRMAN: I am sorry, the Roman Catholic is 37

per cent, and the Pentecostal is around 7 to 8, in that area. So we have about

57 per cent, 37 per cent, and 6 per cent roughly, in that range. With that I

will ask Mr. Drover to make his opening comments.

MR. DROVER: Thank you, Mr. Chairman.

We did not prepare a formal opening statement for this

report item. It is 3.5 of the 1989 annual report. Our opening statement was

given under the health care sector back when we first looked at it last year,

but I will now, for the information of the committee and the information of the

witnesses, attempt to give some background on where the office is coming from

and where the office is leading to relating to transfer payments.

Actually, in excess of 50 per cent of the Province's

Budget is paid out in what we term transfer payments. These are payments to

school boards, hospitals, municipalities, and others. During the past two or

three years the Auditor General has concentrated on this area in addition to

others. One of the fields we have gotten into is accountability, financial

management and control, and reporting by Government. The Auditor General, under

the present Financial Administration Act, is charged with the responsibility to

determine whether there is adequate control over the expenditure of public

money. Public monies, by definition, are the funds that originate from the

public purse approved by the Legislature. So that, in turn, requires that the

Auditor General at least satisfy himself that in excess of 50 per cent of the

Province's expenditure is adequately controlled and reported upon. As part of

this 3.5 report item in the 1989 annual report - and that was our first year of

going into transfer payments. I might point out for the information of the

committee and others, that our second round is in the current year. We are now

into a number of school boards, we are into a number of hospitals, and we will

be reporting in the 1991 report on the results of these audits in the current

year. We are doing specific audits of certain school boards. There has been one

audit done of a large integrated school board and there has been one audit

completed of a large Roman Catholic school board to date. There has been one

audit completed of a large hospital and another - without giving away the

details - outside of St. John's. I point that out for information purposes.

In looking at transfer payments, Mr. Chairman, we

visited the Department of Education and we gave a number of recommendations and

comments dealing with the control that the Department of Education had over its

payments. We were somewhat concerned. We commented on the controls at the

departmental level in dealing with school boards, and coming right up to where

we are today, we commented on the denominational education councils. We pointed

out, on page sixty-seven of the annual report for 1989, that the Province has

established a denominational educational system through the legislation. Within

this system the denominational education systems' councils have sole

responsibility for the planning and approval of capital projects. There appears

to be no overall plan developed in conjunction with the Department of Education.

Those were our findings at the time, Mr. Chairman, developed in conjunction with

the Department of Education, that would ensure capital projects are undertaken

in an equitable manner, are not duplicated unnecessarily and are in harmony with

the Government's expectations.

The executive secretary of each council is responsible

for approving plans, location, design, and size of capital projects. The

Department of Education is not directly involved in project approval, but may

provide input into design, size and location of the capital project. Payments

for capital projects underway are made by the school boards for capital projects

from the capital grants which are provided by the Government and distributed to

them by the councils. There is no monitoring of these capital projects by the

Department of Education, either from the perspective of adherence to plans or

for monitoring of costs. An external audit is not required by legislation,

although each council does submit to the Department of Education audited

financial statements. The auditor's reports that are attached to these

statements are in the standard format which does not give assurance that the

grants from the Province were spent in compliance with governing legislation.

That, just as a side issue, Mr. Chairman, is an area that we have concentrated

on, not only in the educational sector, but also in the area of health and other

areas, in that the standard which is referred to as the attest audit report, the

auditor's report that most of us are familiar with which is attached to the

financial statements of an organization, to us does not give sufficient comfort

to the reader, particularly to the legislator, that the expenditures are in

compliance with legislation. It does give comfort regarding the financial

transactions, yes, there is no doubt about it, but it does not, in our view,

give what we refer to as legislative compliance comfort. So this is why we have

been encouraging the Department of Health and Education to expand auditor's

reports or to have a separate report issued in the form of an expanded one.

Management letters resulting from the external audit

process are not received by the Department of Education, therefore government

officials are not made aware of any weaknesses in management and financial

controls that might exist within the denominational councils. Operating grants

are based on budgets submitted by the councils, but no comparison is made by the

department between the budget and the actual expenditures of the councils.

In summarizing our comments, Mr. Chairman, on the

whole of the Department of Education, we concluded that the Department of

Education is responsible for funding the school boards and denominational

councils in the amount of approximately $450 million each year. Our review

indicates that the department does not have adequate procedures in place to

ensure that this money is spent for the purposes intended by government or that

it is spend in accordance with government's objectives and policies. In

addition, formal reporting relationships have either not been established or

have not been enforced, so that the department and the recipients of transfer

payments may report on the discharge of their responsibilities.

That study was completed within the Department of

Education. As I pointed out earlier, we have expanded that in the current year

and we have gone out to a number of the school boards, we will report in the

next Auditor General's report on the results of those audits.

I think, Mr. Chairman, that concludes the background

information and certainly to some of the members of the committee who have heard

myself or Mr. Hart speak on transfer payments and the accountability process in

the past, I extend my apologies, because it may be considered somewhat boring to

have heard it a dozen or more times, but it is done for the purpose of putting

on the table the topic that we are about to discuss here today. Thank you, Mr.

Chairman.

MR. CHAIRMAN: Thank you very much, Mr. Drover. As

you have mentioned, it has been a topic over the years before Public Accounts

Committees, the discussion on transfer payments and accountability within a

department, where everything is there sort of sight specific and all kinds of

controls are involved. Once you get into transfer payments with the groups and

agencies quite often reporting mechanisms and follow up mechanisms are perhaps

not in place and you basically have to leave it up to the integrity, I guess, of

the groups and agencies with which we deal to make sure that the procedure is

followed.

Would somebody like to comment, Hubert, on that, or do

you have an opening statement that you would like to make or feel free to follow

whatever way you would like to operate.

MR. NORMAN: Mr. Chairman, in response to the

statement, I think probably we could elaborate on seven or eight different areas

of reporting to Government, not just reporting but involvement of the councils

and Department of Education officials with regard to policies and procedures

concerning capital construction.

We as councils receive currently an annual capital

grant of $27 million. In addition to that there is approximately a $1 million

grant for salaries and rent and operating expenses and so on. These two things

are quite separate in that, of course, the capital account deals with school

construction and all that money is funnelled through the various councils out to

the school boards across the Province.

One area that I would like to comment on is our

audited financial statement. As was mentioned in the opening statement, councils

do indeed present to the Department of Education annually, an audited statement.

In the case of the Integrated Education Council our auditors are Peat, Marwick,

Thorne. This document presents an accurate and up-to-date accounting of the

actual monies we receive from Government and how they are expended through the

Councils to the various school boards. That particular document would not

provide all the information that one would like to have, in terms of specific

details, on the hundreds and hundreds of projects that are carried out by the

councils. But that is one of the documents.

Also, each council presents to Government, to the

Department of Education, a report of its activities. Now this is done on an

annual basis so that this would supplement the actual audited statement, in that

all the activities of the Council that have been carried out through the year

would be highlighted in this particular annual report.

I think, Mr. Chairman, in terms of a detailed

accounting by way of projects and making some determination as to whether or not

the funds expended by the council would be in accordance with Government

policies and the wishes of the Department of Education, there is another forum

which would be the primary one for that kind of focus. That forum is known as

the Joint Capital Construction Committee. In that particular forum - I have

before me here the documentation that would be provided by the Integrated

Education Council. This is a fairly thick document. It would provide an

assessment of all of the capital needs of the sixteen integrated school boards.

The procedure we follow there is that we ask each school board to submit to us a

five-year plan and we have renewed this every year, we have the most up-to-date

figures on their needs. We provide all of these details to the Department of

Education identifying board by board each application that we have before us.

Furthermore, we also divide these applications by categories so that we know how

many school boards want funding under fire safety upgrading and so on. So, we

break it down not only by school boards but also by categories of construction.

Furthermore, we identify what the school boards have

established as their top priority projects, so that we clearly outline what

would be the immediate needs of the various school boards, and we provide some

documentation for each of these needs, outlining why this particular school

needs to be replaced or why this particular extension needs to be constructed

and so on. We do that for our fire safety upgrading as well as for our needed

capital needs.

In addition to that, we would make a presentation in

this

section on what we call 'trends', because there are various trends in

education that would impact upon the capital needs, and some of these may be

programme changes that the Department of Education would have implemented,

Changes that are resulting in the Province, for

argument sake, because of declining enrolments, joint service schools requiring

additional funding so that we can provide co-operation within the school system

in order to better be able to respond to the educational needs of the students

and so on.

And then the final section, which is very important I

think in terms of the statement made by the Auditor General's Department, is a

summary of the capital votes, and in that particular

summary, and I am using of

course, because I am more familiar with it, the Integrated Education Council

Proposal and Documentation.

This

summary of votes would identify the total amount

of funding spent over a five year period on various categories like

provide a project by project breakdown, which of course is not provided in the

audited statement, because in your audited statement you primarily have the

projects, because of course the $27 million to which I referred, is broken down

into four major categories.

There is $1 million of that earmarked for

upgrading; there is $2.5 million earmarked for capital debt retirement funding

and the remaining $22 million would be for general construction projects. So in

amount voted.

We do the same thing for extensions and heating. What

we spent on new schools, portables, roofs et cetera are listed project by

project and dollar by dollar, so that this provides a further accounting to the

Department of Education, in terms of how we have actually spent the money by

vote and by project.

A fourth area, Mr. Chairman, is in connection with the

Denominational Policy Commission and I would like to link the two; the two are

the previous one I just mentioned, the Joint Capital Construction Committee and

the Denominational Policy Commission, because both of these - each one is a

forum whereby the Department of Education can share and interact with the

councils in terms of policy decisions governing the expenditures of these funds.

The Denominational Policy Commission is chaired by the

Minister, and either the councils or the Department of Education can bring to

the agenda of that commission, any particular item that it so desires, and

indeed, in this past year, resulting from the most recent Budget Speech, of

course that Denominational Policy Commission has moved forward to establish a

long term capital planning committee, which is very important in terms of

synchronizing the duties and responsibilities of the councils in capital

construction, and the intentions and desires of Government to see funding

established and allocated in a certain way.

When both of these bodies were established, the

Denominational Policy Commission and the Joint Capital Construction Committee,

it was primarily with a view to providing a forum whereby the councils and the

Department of Education could act in partnership in discharging their

responsibilities, and it has worked very well in that regard.

I just want to refer to some correspondence that

established the Joint School Construction Committee, and clearly the Department

of Education identified then that in so establishing such a committee that it

would like to have input in determining building priorities, in deciding where

new buildings will be located and the extent of the accommodation required, so

very directly related to ensuring that the funds voted by the Legislature were

spent in accordance with the intention of Government in so doing.

There are several other areas that I could refer to,

Mr. Chairman, that might be helpful to further elaborate on, not just our

accountability, in sense of the dollars actually spent, but in terms of the

inter-relationship between Government and the councils in school construction

and in establishment of policy.

The legislation is quite clear in that The Schools Act

requires the approval of the Department of Education of all school sites and it

also requires the approval of the Department of Education for all building

plans. So before we as councils can permit a school board to proceed to tender,

we have to have a letter from the Department of Education saying that these

plans have been inspected by the appropriate people within the Department, as a

matter of fact the school construction engineer I think is a cross appointment

between public works and the Department of Education. And when we receive that

letter we are then in a position to permit the school board to proceed to

tender. But without that approval letter from the Department of Education we

would not be in a position to allow a school board to call tenders on a major

project.

In addition to that, of course, we have a document

known as The School Planning Manual, which is a document that has been agreed

upon by the councils and the school boards and the Department of Education,

which establishes guidelines for the construction of school facilities, with

regard to appropriate sizes and so on and so forth. And so the plans that would

be devised by a school board's consultants would in actual fact be in accordance

with The School Planning Manual as modified and amended from time to time.

And in concluding, Mr. Chairman, I would refer to two

other areas whereby there is co-operation between the councils and the

Department of Education and indeed other departments in connection with the

establishment of priorities and of guidelines for construction. A committee has

been established recently on the community use of schools, and this is an

inter-departmental committee in that there are representatives from other

Government departments because, of course, the community use of schools is

important not only to the Department of Education, but to other departments

involved in recreation and municipal affairs and so on.

I think finally a primary committee that has been

established since this year's Budget Speech is the Long Term Capital Plan.

Approximately one-half million dollars of this year's capital funding is going

towards funding the work of the Long Term Capital Plan Committee. This committee

is looking to identify all of the needs, it is really a needs assessment

project, all the needs of the school boards across the Province, not only in

terms of their immediate needs but also their long term needs and looking to

establish schedules of maintenance and upkeep of buildings so that the whole

life cycle of the school can be projected for a number of years and we can see

down the road where certain amounts of money are needed to be expended by way of

upkeep of buildings and of replacement of various aspects of a facility. And

that particular committee is jointly chaired by the councils and the Department

of Education and would have representatives on it from across the school system.

So, Mr. Chairman, I have outlined eight areas whereby

we share with the Department, both from the point of view of pre-project by way

of the establishment of needs, whereby we share with the Department in the

establishing of guidelines and policies and procedures, and whereby we account

to the Department for the funds that have been expended. That may be sufficient

for at least an immediate response to the opening statement.

MR. CHAIRMAN: Thank you, very much, Mr. Norman.

Certainly, I think, it is a very in-depth detailing of

how you spend your money.

PASTOR BATSTONE: May I just add that the policies

and procedures are the same for all councils, and in conjunction with the

establishment of the Capital Construction Committee, just to mention the

representatives from the Department in Government, the Assistant Deputy Minister

of Finance and Administration with the Department of Education is a member of

that committee. The Director of School Services, Department of Education, and a

member of Treasury Board at the time of its establishment, the Director of the

Budget Division of Treasury Board was a member of that committee. Now that this

new committee is set in place in the current year, I am not sure that the

functioning of this old capital construction committee will have the same

function as it did in previous times.

MR. CHAIRMAN: I am just wondering, Pastor

Batstone, as Dr. Norman went through the various committees and the

responsibilities of the IEC, from your own perspective on the Pentecostal

Assemblies do you basically track the same type of system or do you have perhaps

different ways of doing things?

PASTOR BATSTONE: Mr. Chairman, we track the same

system fairly. Of course we are a much smaller district and we do have one board

which cares for the whole Province so there is some different relationships

between the board and us, and then their boards, but we track the same process.

MR. CHAIRMAN: And I presume the same would be true

certainly of the CEC also?

Okay. Any questions?

Mr. Gover.

MR. GOVER: Thank you, Mr. Chairman.

I suppose we always have a little difficulty with this

committee and the Auditor General's Report in the sense that the Auditor General

reports at a certain point in time that deficiencies in their opinion exist, and

then when we actually have the hearings the deficiencies may or may not be

corrected. Of course, as I indicated, the deficiencies as identified in the

Auditor General's Report are deficiencies that are deficiencies in the opinion

of the Auditor General, but to be taken seriously and to be discussed by the

committee at hearings such as this. I just wonder, from the Auditor General's

point of view, having heard the system now in place, or that was in place, and

the additions to that system as outlined by Dr. Norman, I wonder what the

Auditor General's response is to that in light of the comment there that there

is no overall plan developed in conjunction with the Department of Education to

ensure that the projects are undertaken in an equitable manner and there is not

unnecessary duplication? It seem to me, from hearing what Dr. Norman had to say,

that there seems to be extensive consultation with the Department of Education

and there appears to be now a long-term planning committee which is going to set

out the priority needs of the Province over the long-term. I just wonder, based

upon Dr. Norman's comments, is the Auditor General's office satisfied now that

these are sufficient measures, or in the Auditor General's opinion are there

additional steps that should be taken?

MR. DROVER: I think, Mr. Chairman, what we would

have to say is that the Auditor General certainly welcomes the system as

outlined by the former witness. I think, however, what he would have to do is -

as I pointed out earlier, our review of 3.5 on transfer payments are (inaudible)

with the Department of Education at the time. This was the system in place in

the Department for the control of financial resources that were assigned to

school boards and to the Denominational Education Councils. The onus at the

departmental level is, and this may sound theory but it is really not, it is for

the officers of the Department to challenge, if you will, any amounts thereto in

order to protect public money, to ensure that it is adequately controlled by

those to whom it is granted. I think in this case here there are a number of

committees in place and I think that certainly the Legislation Committee would

welcome the consultation effort that is ongoing. However, I think before the

Auditor General would formulate a final opinion on whether the controls are

adequate in place we would have to go back into, and we have been back in in the

current year, the Department of Education and completely assess the system of

control that is in place at that level.

One thing that exists that we would recommend, we have

recommended it before and we possibly might recommend it even in the current

report, would be a system similar to an internal audit function within the

Department of Education which basically has the sole responsibility to - in

addition to all of these committees that exist, to see that adequate systems and

procedures are in place in the financial side.

There is consultation there, yes, on some of the

policy and construction and capital areas. But I think that we would like to

see, I guess in the Department of Education, that type of a process where there

are a number of, if you want to call them inspectors, if you want to call them

auditors, it does not really make a difference what you call them, that type of

function exists in a financial nature. I do not think that type of function

exists at the present time which requires a challenge in the financial area in

the area of compliance with direction. I know that they do receive the audited

financial statements and those are welcomed.

But I think one of the functions that must also take

place is that someone independent, whether it be an independent internal auditor

or whether it be an external auditor, should be charged with the responsibility

of saying that look: the committees may know that we have gone to public tender

- I might just take a simple case here - but an auditor should have to go in

afterwards and say: all of the contracts were let in accordance with The Public

Tender Act and they are in compliance with The Public Tender Act and they are in

compliance with the other pieces of legislation of the Province. Those may sound

very simple or oversimplifying the financial part of it, but that to us is a

strong accountability process.

Don't get me wrong, there is an accountability process

here right now. I am not saying that does not exist. But what we were talking

about at the time, and what we are talking about right now is strengthening that

process. So I am not saying that it is completely out the window and out to

lunch. I think that there is a process in place and we are talking about

strengthening that. Our emphasis back in 1989, when we issued the report item,

was to try to improve the process in the Department of Education. Our emphasis

in the current year will be to report back to this Committee, back to the

Legislature on our review of both. We have been back into the Department of

Education in the current year and we have been out to the school boards. I do

not know if that answers your question, Mr. Vice-Chairman?

MR. GOVER: Well it seems that what you are

suggesting is that the Department of Education have internal auditors that would

go out and check the accounts, in this case of the DECs, to ensure that there

was compliance. I note like in Item 2, that while the audited financial

statements certainly present an accurate financial picture, they give no

assurance that the governing legislation has been complied with. In your

investigation back in 1988 or 1989 when it was done, did you find any instances

where funds were expended not in compliance with the legislation?

MR. DROVER: I think the answer is no, Mr.

Chairman. You know we would not have gone into it in that considerable detail.

We would ask that whether the system is in place to give assurances to the

department, and the system is not in place, in order to follow through each and

every transaction it would take us all of the time that we would have allocated

to this process here. We feel that the Department should have either independent

audit assurance from that, either by the external auditors of the school board

or the Denominational Education Council, or else that the Department have its

own inspectors or auditors in place to do that process.

I might give an example, Mr. Chairman, in that I was

giving a presentation one time to a group of senior people in a department and I

said that certain cheques, you know, a number of cheques, this is back a number

of years ago, were being pre-signed. I was asked: did you find any pre-signed

cheques because we have never seen any? And the answer to the question is that

you will not see pre-signed cheques, because by the time they come back to you

they have cleared the bank, and it is obvious that if someone had taken the

trouble to pre-sign it, then the second person signed, then both signatures are

there so you will not see it unless you go out into the field and see it. There

has to be a detailed process in place and that challenge must be up front. In

other words, the system must be in place, and I guess it is not the number of

errors that an auditor finds in modern auditing, but the auditor must look at

and see if there is a system in place to check those errors, or procedures. I am

not hinting at all, by the way, that there are any, we are talking about a major

system in place.

MR. GOVER: Let us just try to bring it down to a

concrete example, so that I can understand it. Would it be correct to say that

when the funds flow from the Government through the DECs through the school

boards and a project is tendered, that the school boards and the DECs have to

comply with the Public Tenders Act?

MR. Drover: Yes.

MR. GOVER: They must comply with the Public

Tenders Act?

MR. DROVER: Yes.

MR. GOVER: So what you are saying is that there is

no system in place to ensure that the Public Tender Act is complied with?

MR. DROVER: There may have been at the time one in

the Denominational Education Council's offices. What we are saying in this

report item is that, at the Department of Education level, there was no

assurance given to the senior people at the Department of Education, they did

not have. I think the criticism here, from our mind is to the Department of

Education.

We are saying that the Department did not have in

place adequate systems and procedures to ensure that these tenders were called.

Now granted, if we had gone into the Denominational Education Councils offices,

quite possibly and more than likely, 99 per cent assurance probably, we would

have found these tenders and there was adequate procedure in place.

MR. GOVER: So the thing is that you are not saying

that councils are not complying -

MR. DROVER: No.

MR. GOVER: - what you are saying is the Department

has no mechanism to ensure that the compliance is taking place.

MR. DROVER: Exactly, that was the gist of the

paragraph in 1989, yes.

MR. GOVER: Okay, and would it be satisfactory, as

an alternative to the department doing the check internally, for the auditors of

the DECs, to carry out that function and then report compliance with the Public

Tenders Act or the appropriate legislation; not only to certify that the

statements comply with generally accepted accounting principles, but to certify

as well that the governing legislation is complied with, would that be

satisfactory?

MR. DROVER: You are into, right now, Mr.

Vice-Chairman, a very good example and a very good issue that we have been

discussing for the past year and a half with the Department of Health. The

Department of Health has taken strong measures in working with Treasury Board

and with the Comptroller General's office to put in place that type of procedure

in certain hospitals.

They have tried it in two or three hospitals in the

current year and we are very supportive of it, so, to answer your question, that

road has been, if you want to call it, paved or developed at the Department of

Health level, to get some information back from the auditors and a short answer

is 'yes', we would be very supportive of that and it would certainly be

completely adequate, if they obtained from the auditor of these Denominational

Councils or of the school board itself, a second report.

Now, if one looks at an example of that, right now the

auditors of the municipalities issue a short form opinion on the financial

statements of the municipality and by the way, the School Tax Authorities are

similar.

In addition to that at the same time, there is a

Section 383 report, if I recall correctly under the Municipalities Act, which

basically tells the Minister, it is addressed to the Minister from the Auditor,

and it says that: they have complied with their Budget and points out if they

exceeded their Budget; they have proper controls in place over bonding, staff

have been bonded and other matters which have come to my attention, they have

complied with the Public Tender Act.

As far as I know, right now, that system does not

exist in the school boards or in the councils; it is starting to exist at the

Department of Health level, and I do give credit by the way, to the questions

which have come up at this committee here for helping that start, and I think it

would be excellent if that process were to start at the Department of Education

level, because the auditors of the school boards and the councils are certainly

quite capable of performing that function while they do the attest audit, yes.

MR. GOVER: Okay, so what it boils down to on that

particular issue, is that the accounts of the DECs or the school boards have to

be checked either by their own auditors or by auditors from the Department of

Education, to ensure compliance with legislation such as the Public Tenders Act.

MR. DROVER: Exactly.

MR. GOVER: Okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: Is there anything that you would

like to add for clarification purposes?

DR. NORMAN: Just the same, Mr. Chairman, I think

you have identified another component of this and that is that the school boards

in the case of the Integrated Education Council are the actual owners of the

property, and while we dispense the funds to the school boards that in turn

would, of course, be audited by the school board's auditors and they are

responsible for that. The Department of Education also receives a copy of each

school boards audited statement, but there is that component whereby the school

board is the actual owner of the property and actually is the body which goes to

public tender.

The mechanism by which we can ensure that they have

actually gone to public tender is that before they can proceed with the project

our policies require they have to have permission from us to award the public

tender, and there are quite a number of steps in our capital procedures whereby

the approval of the council is required along the way. We have to approve the

initial application, the educational specifications, the preliminary plans and

then we give them approval to proceed with their final plans and finally the

Integrated Education Council also has to authorize the awarding of the tender,

and that has to be done in writing. So, we are in a position as well to ensure

by way I suppose of almost another check, that all the funds that are expended

by capital grants from Government are done through the Public Tendering process

and, of course, the Local Preference Act would also come to bear on this as

well. So, we ensure that that in actual fact is done and we have to give that

written approval before the contract can be awarded via the public tender

process.

MR. CHAIRMAN: Pastor Batstone.

PASTOR BATSTONE: Yes, Mr. Chairman, also the

councils exercise a monitoring and control function on these projects undertaken

by the school board. In the case of the Pentecostal Council payments are made as

progress payments and they have to be substantiated and signed by the business

manager and superintendent of the board, by the financial administrator of the

council, and by myself, so that there is an ongoing monitoring of all payments

made to the board relative to capital expenditures on any project undertaken by

the board.

MR. GOVER: May I ask just one question.

MR. CHAIRMAN: Mr. Gover.

MR. GOVER: With respect to the standard auditor's

report that the financial statements are done in accordance with generally

accepted accounting principles and accurately reflect the financial situation of

the body, can an auditor give that statement if the body has not complied with

The Public Tenders Act?

MR. DROVER: Mr. Chairman, I think the short answer

would be yes, because he is asked to audit the financial transactions of the

body and, I guess, theoretically he takes the amount that is received from the

Province and, I guess, assesses the expenditure that goes out. He is not

employed as a legislative auditor and he is not employed to ensure that there is

compliance with legislation and he is also not employed as what they refer to as

a broad-scope auditor into the area to provide comments for economy, efficiency,

or effectiveness. He will however, if it comes to his attention that there is a

breach of The Public Tender Act, he will probably report it in a management

letter. But if part of the terms of reference in terms of his engagement are

that he just express an opinion on the financial transactions and the financial

position of the body then that is basically what he sets out to do.

I might give you an example, if the corporation, the

school board or the hospital or whatever has $100,000 in cash and a building

worth $5 million then really the balance sheet, whether it is in compliance with

The Public Tender Act or otherwise would not be affected. I think he would have

to use his professional judgement in reviewing that area, but certainly I think

he would be challenged to comment to his client if it comes to notice.

Now I will point out also, to be fair to the auditing

profession as such, they start their process as generally accepted auditing

standards, and generally accepted auditing standards do not require that the

auditor be completely familiar with every piece of legislation that exists in

the Province. There could be many, many Acts in addition to our own provincial

Acts, and there could be many federal Acts, and I think that if he is examining

just expressing a short form opinion on the financial transactions, that is what

he does. If you want him to do further work they certainly have a sufficient

background to expand that, but if you want that, that is an additional cost, if

you will, additional direction to them, and I think auditors across the country,

certainly the Auditor General, are encouraging the various departments and

agencies to have that done if it means by your external auditor or by your

department. But to come back to your short form answer again is that the short

form report covers the financial transactions and the financial position of the

body, it does not deal at all with legislative issues. That is all I can say on

that one, Mr. Chairman.

MR. CHAIRMAN: This perhaps, sort of summarizes

what we quite often say to the witnesses who come, is that comment is sometimes

made by the Auditor General's office and made strictly from an auditors point of

view, and we respect that. The practicality of conforming with that sometimes or

the mechanism used by other groups or agencies may be proper and right in their

own way, it is just that according to the Auditor General, it is not exactly the

way he would see it from the way he would operate. Sometimes it can be done for

better protection for everyone. Sometimes it is just not practical or possible

maybe, not because the Auditor General's office sometimes raises a concern does

everyone sort of jump to say yes, that is right and proper, we will correct it.

Sometimes that is not possible or practical at the time. Sometimes the

mechanisms put in place might be more efficient than those raised by the

auditor. But from his point of view, and proper auditing principles, here is how

he sees it should be done. I am not saying that to try to downgrade the Auditor

General's office, but we have had disagreements, and in some cases, I guess, the

witnesses and the Auditor General's office have agreed to disagree. But in most

cases I think you will find that there is a lot of common ground there and

hopefully our discussions improve the general system.

I think we should take five or ten minutes to have a

cup of coffee. It is getting a bit stuffy. We will get back at it again.

Recess

MR. CHAIRMAN: Order, please!

Let's get down to business. Mr. Reid, did you want to

ask any questions?

MR. REID: Yes, just briefly. The Auditor General

made a couple of comments in his report and I would like to have clarification.

Expenditures are not in the legislative compliance, what exactly were you

referring to on that particular one, the comment on expenditures? Were you

talking about capital expenditures?

MR. DROVER: Do you have a reference there, Mr.

Reid?

MR. REID: You were reading from your report here

earlier and you made the comment something along the lines of legislative or

legislator compliance?

MR. DROVER: Legislative compliance. Okay, that is

part of

section two of the

summary on the denominational education councils. It

is on page sixty-eight of the annual report, number two. The item referred to

says an external audit is not required by legislation, although each council

does submit to the Department of Education audited financial statements, and

then we went on to say the item that Mr. Reid is referring to. The auditor's

reports that are attached to these statements are in standard format which does

not give assurance - I think the key word there is assurance - that the grants

from the Province were spent in compliance with governing legislation. Prior to

break, Mr. Chairman, I think the question came over from the Vice-Chairman

asking if it would be acceptable if the external auditors were to give that

assurance. I think that basically addresses the whole issue there, that if the

external auditors of the Denominational Education Councils and the school boards

were required to give some form of assurance to the Minister or to the

Department that there has been compliance with legislation, I think that that

would certainly be acceptable.

I do not know, Mr. Chairman, if that answers Mr.

Reid's question.

MR. REID: Are you satisfied, then, with what Mr.

Norman put forward with regard to the monitoring of the actual construction? I

probably was not listening to you, but did you say that the process they go

through in regard to monitoring in regard to permits and applications and so on,

is this something that you did not know as an auditor?

MR. DROVER: I think, Mr. Chairman, we would have

to say that the process is a good one. However, I think what we are saying is

that, from the Department of Education's standpoint, there must be some formal

assurance or formal guarantee by the Department, whether it is done by its own

staff or whether it is done by external auditors, that the process is carried

out, first of all, with two evaluations. Number one, that this process as

described, is operating as described, and secondly, any items that come to light

which are either in breach of legislation or otherwise, are brought to the

attention of either the Minister or the Department.

So, to answer the question, the process as described

is certainly an adequate one, but I think the process as described must be, I

guess, given some form of evaluation either by an external auditor, by our

office or by someone from the Department, to determine whether the process is

operating satisfactorily. That is what an auditor would always tell you, that,

yes, as described it sounds good but we have to do a detailed audit of it.

MR. REID: I get the distinct impression, Mr.

Drover, and I have for some time, I suppose, since I have been on the Committee,

that it would be the ultimate for the Auditor General's office, it would be

utopia, for want of a better word, if you could get a value for dollar audit

done on the education or health expenditures, a comprehensive audit, I suppose,

if you want to call it that. With it all said, how strong are you or your

department as it relates to the actual expenditures of over $400 million a year?

What exactly are you looking for? Are you looking for more access to the boards

or to the education system? You are not necessarily pleased with what has been

presented up to now, and for a number of years you have made those comments.

What do you see as the alternative for you, as an auditor or as an Auditor

General's office, as it relates to spending in education?

MR. DROVER: That is a big question, Mr. Chairman.

It also addresses the proposals that are there in the form of the new

legislation. One of my personal views is that there is not a complete

understanding of the terms, value for money or comprehensive auditing, and a lot

of people throw everything into it.

The Auditor General of the Province is directed, as I

said at the outset, under the Financial Administration Act, to ensure that there

is adequate control over the expenditure of public money. Public money is

defined under the present Financial Administration Act to include all

expenditures of the Province and agencies that are tied to it. So, the Auditor

General can take any expenditure that originates with central government and

follow it to its end conclusion. That would obviously include any expenditures

that go out to the school boards, hospitals, or other facilities in the

Province. Prior to this point in time, prior to the last couple of years, the

Auditor General of this Province was also the auditor of probably in excess of

90 per cent of the Province's Crown corporations, and if you go back another

five or six years, probably the auditor of many of its municipalities and school

tax authorities. With all of that bulk of work the Auditor General really did

not have the resources at the office to get out to the hospitals. While my

personal belief is that the Auditor General has had for some time the authority

to go out there, most of his work centred around what I referred to as 'the

Confederation Building', Central Government, examining the payments out relying

on the auditors. It is only in recent years that we started to examine in more

detail the financial statements of the various school boards and hospitals and

that is where we come into this big expenditure that we are talking about today.

I think that the Auditor General, to come closer to

Mr. Reid's question, would be extremely pleased and satisfied if there was an

adequate system in place whereby you Members of the Legislature grant, for

instance, let us say $600 million to the Minister of Education and $700 million

to the Minister of Health, and that these Ministers then bring back, you know,

annual reports to you saying here is what I did with it, and I comply with the

legislation. Here is what I did with what you gave me. That is the ultimate.

That is referred to again here.

Now part of that process, Mr. Chairman, and I am not

trying to bore you with the details, but part of that process would be that the

Minister himself in carrying that information into the House would then be

required to place reliance either on external auditors or his own officials,

that the money that he has spent has been spent properly. If he is going to give

his assurance, his name to that report, to the Legislature, he wants to be sure

that the system in place over that $600 million has been adequate. What the

Auditor General is saying is that the Minister should have in place safeguards

to ensure that if he pays the Roman Catholic School Board or the Pentecostal

School Board, if he pays them X numbers of dollars he gets back in detail the

results of what happened to that and he assures himself that was adequately

spent. And we came back a few minutes ago to the issue of the attest audits,

that tells him basically that the funds were received by that school board or

that hospital, it tells him the present financial position. That gives him

certain assurances on the financial position.

But one thing that is not there that must be

emphasized right now, and the Auditor General is emphasizing this throughout the

report both at the Department of Health, the Department of Education, and also a

couple of years back we emphasized it in Municipal Affairs, is that the Minister

must also have assurance that the Acts that the Minister is required to comply

with have been complied with those subordinate to him. So what the Auditor

General is saying is okay, either the external auditors do it or there is a

system in place in the Department of Health and Education and Municipal Affairs

to do it, whereby officials do it, give the Minister that assurance or else that

the Auditor General may have to do it. The preference of the Auditor General

would be to have the external auditors or the officials do it and that in

subsequent years the Auditor General then does a test to ensure that there has

been compliance with that procedure. Auditors General across the country do not

want to be the people to do it because it would take up massive resources right

across the country. The Auditors General welcome, you know, every now and then a

visit to a hospital or a school board and we are quite capable of doing it. But

if we had to visit every hospital, school board and municipality in this

Province to ensure compliance with legislation well, we certainly would not have

the resources, the manpower or the person power to do it at the present time.

So, I guess, as far as value for money is concerned

the Auditor General of Newfoundland does not have the mandate. I guess Mr. Hart

and I, when we annually edit this document, we take pains to ensure that we do

not stray into that area. But the Auditor General of Newfoundland in carrying

out modern audit techniques, performs many audit functions in compliance. Like

for instance, a lot of things that people, I guess, in our profession do not

completely understand is that part of value for money auditing also includes

attest audits. Well we are required to do attest audits. We are directed by

legislation. Part of value for money also includes compliance. You know, there

are certain procedures there. So if you take a list of twelve items dealing with

value for money the only thing that the Auditor General of Newfoundland really

cannot do and he does not do, he does not express his opinion on economy and

efficiency, and we have no intention of doing it right now, and he does not

express his opinion on the effectiveness of the process.

He does express his views on systems and procedures in

place to guarantee and protect public money. I don't know if that comes close to

answering your question.

MR. REID: Mr. Norman, react to that.

DR. NORMAN: Mr. Chairman, I think what we are

saying is that at the present time this information and this data is made

available to the Department of Education in the form of our annual report. If I

can use one example: suppose the Legislature says that $1.5 million of the

capital grant is to be spent on fire safety standards upgrading. In our

documentation to the Department of Education we would identify the proportion of

the capital grant that has been spent on fire safety upgrading and this would be

contained in our annual report. Furthermore in the meeting of the joint capital

construction committee we would present documentation to the Department

identifying project by project how much money was spent on fire safety standards

upgrading. So through the reporting that we have and the current mechanisms in

place we certainly demonstrate that the funds have been expended in accordance

with the wishes of the Legislature, however I recognize that in terms of our

audited report that that particular report would not contain the same details

because it would simply have global amounts of funding and it would account for

the expenditure, but may certainly not in detail be able to identify all of the

various categories and breakdowns. We do provide that information and we would

also wish to go on record as saying that we would certainly not have any

objection to some other form of audit being performed, if it were some kind of

an internal audit procedure, an officer of the Department of Education, or

whatever is required. We currently provide the information as best we can, and

certainly to demonstrate that we are performing in accordance with the wishes of

the Legislature, we would have no objection if that were to be required in some

other form or through some other audit mechanism. We would wholeheartedly concur

with that and be very willing to comply with the wishes with regard to that.

MR. REID: (inaudible) straight number of more

direct issues, I suppose, later on today or tomorrow but it seems to me that if

the Auditor General's office had unlimited funds, then Mr. Hart and Mr. Drover

could go out and employ another 300 or 400 auditors, it would be simple then for

Government to say to the DECs, the hospitals, and all things related, I suppose,

directly and indirectly to Government, it would be easy for the Government to

say to the Auditor General's office: you go out and do these comprehensive

audits that you are asking for, but we are not in that situation. I do not think

you will find any jurisdiction in Canada in a situation where they can provide

finances, I suppose, to the Auditor General's office, not even a federal one, to

be able to do all that the Auditor General wants to do or suggests to do. I want

to hear what is wrong. I want to hear it in layman's terms. I want to hear it so

I can understand it, and I want to hear it so the people of Newfoundland can

understand it. I want to know what is wrong. Why is there a discrepancy between

the Auditor General's office as it relates to the financing of the various

denominations?

Then I hear you say that you feel that things are okay

but maybe we could make some changes. There is a difference of opinion here and

the way to, I suppose, get around the question is, what do we do about the

difference of opinion? Do we try to satisfy the Auditor General or do we forget

about what the Auditor General is reporting each year? Or, do we go back to

Government and make recommendations with regards to how you are actually doing

your audits? I do not know. You suggested that maybe something could be done in

regards to tightening up or making your audit more comprehensive. I do not know.

Mr. Drover, in layman's terms what is wrong with the system in Newfoundland as

it stands right now as it relates to educational funding?

MR. DROVER: I think, to use one word, a

formalization of the process. I do not think that one can deny that there is a

lot of cross communication and a lot of committee structures, and I think that

they do good work. I think it is just an evaluation process.

If I might go back to - you mentioned earlier value

for money and comprehensive auditing. I raised at a comprehensive auditing

seminar in Toronto one time that one of the first people in this country to ever

even come out with the words economy efficiency and effectiveness, believe it or

not - and we can table it if necessary - was the Auditor General of Newfoundland

in 1898, Mr. Berteau. He commented that the role of the auditor not only goes to

expressing an opinion on the financial statements, but also to assessing the

expenditures of government, whether they have been complied with economy and the

efficiency of government expenditures. That was the first time that anyone can

find that type of reference and that was nearly 100 years ago, Mr. Chairman.

So coming back the process has not changed in 100

years. There is a process of the auditors expressing on the financial statements

of the entity their opinion, and that is a good one, we accept that. But there

also must be a challenge in place, whether it is in the form of a form that

someone must sign, whether it is in the form of a type of report that someone

must comply with, and this must be attested to by an independent officer whether

that independent officer is one of the Department of Education or the external

auditor of the school board or the denominational education council.

I think we are coming close to a consensus on this

process because I think we possibly, around the table here, may have agreement

that that formal process would certainly go a long way to establishing control,

as the Auditor General would say it. That would mean that the Department of

Education would have in place files whereby they get copies of the management

letters of all these bodies, they study them and see what is in play. They are

the guys who are paying the piper, you know, they should have access to that.

They also have in place a process where they get a formal report from the

independent auditors that says to the Minister: look everything is fine, in

which case the Auditor General would have to assess that system and say as far

he is concerned he would have to report back to you and say that is

satisfactory. He could not report back to you, Mr. Chairman, he could only

report to the legislature that the system was satisfactory if there were many

committees in place, and they were doing good work, fine work, but that there

was no challenge processed by an independent side. He could not report back

because the committee within itself cannot be its own control. A committee, all

of us, must have someone who looks back on our expenditures, you know,

independently. It is the independent control that must be in place, and it is

the formalization of that process that we are talking about here.

So I think we are close to that today. I think that as

the representatives from the Denominational Education Councils have pointed out,

there is a system in place for various committees, they have an evaluation

process in place at the school board level where they assess the capital

payments to the school boards, and they assess it for public tender purposes. I

think if one were to sit down with the Department of Education and say: okay

that process must now extend to you, you must satisfy yourself in addition to

the Denominational Education Councils satisfying themselves. Then once that is

in place I think the Auditor General would have to be satisfied with the system.

It is a formal process in place, and there must be

assurance given from somewhere. I will use an example: say you have given me

$100 million to build a new building, I built it, I did a good job on it, and I

go back to you and say here is the building and I have complied with everything.

I think that in addition to my comments you would rather have some assurance

from somebody else who went out there and looked and saw that the building was

in place and that the structure was sound and that other legislation which was

in place, was complied with. That is the role of the auditor, to ensure that

that challenge is there, and that is what we are talking about today, Mr.

Chairman.

MR. CHAIRMAN: Based on some of the comments, we

talk about value for dollar auditing. How practical do you think it would be in

the field of education, Mr. Drover?

MR. DROVER: That is a good one, Mr. Chairman.

MR. CHAIRMAN: Okay, mainly I just threw it out

without expecting any real answer on it -

MR. DROVER: I can attempt to deal with the issue

if you will. First of all, the Auditor General in the Province does not have a

mandate to perform value for money functions - while he does have the knowledge,

it is part of our whole training process - he does not have the mandate to do

it.

Now, having addressed your issue, no Auditor General

is going to go into the area of policy. In other words, if the Legislature and

if the Government of the day determines that Denominational Education is a

policy, then the Auditor General is not going to go on record as specifically

criticizing the process there.

What the Auditor General would really have to do

however, in the case of value for money auditing, and one of the things that in

recent years some of the Provinces have looked at let us say, is busing; if one

were to say that you picked up let us say sixty children in a certain

neighbourhood, thirty of them are Catholic, thirty are Integrated School Board

and you send in two buses, then an auditor general in doing value for money

might turn around and say: maybe it is more beneficial that the two school

boards co-operate and send one bus in to pick up the sixty children and deposit

them wherever the need is there, that would be a value for money process. Then

an auditor general would be into the education sector, but with regard to

specifically criticizing the dollar value, once a policy becomes in place, then

the Legislators, being yourselves, take the decision that we accept.

It may be more costly, it may be more beneficial, it

may be less costly, I do not know. I think there is a Royal Commission in place

right now studying that issue and I think no auditor general is going to go in

and criticize in detail that kind of policy process; what he may criticize are

specific expenditures of it. If I might use another example: if there are two

schools in a small community, he might bring it to your attention that look,

this is costing you X number of millions of dollars because of a lack of

co-operation and he might suggest co-operation. By the way, I do think, from

what I read, I think that is probably taking place at the present time, but that

is the only process for value for money that an auditor general would get in

under all this area of value for money auditing, unless of course he was engaged

and directed by a committee such as this, or Cabinet, or by the House itself to

come back with a more detailed critique or comment on that process.

MR. CHAIRMAN: The only reason I asked that is when

we talked about it and it was a big issue for a number of years; Ken Dye was

certainly very strong on it, value for dollar, and it has sort of slowed down a

bit now, but in the field, even if you were given free rein in the field of

education, really looking at education and looking at the far end or the bottom

line which is the education of individuals, particularly young children, you can

go out and look at school construction and you can say to one of the gentlemen

here that, the school you built, you know you spent a half a million dollars on

it, we feel you did not get value. The contractor did not do a good job or

whatever, it is only worth $300,000; you could look at school board operations,

that the money you are spending with Ginn & Co., you could have had a better

deal at Breakwater here in Newfoundland, you know.

Bus transportation; you used an example, yourself. You

are using two buses in this community, if you reroute you can use one. But tell

me, it is hypothetical I suppose and I do not expect an answer, but how would

you judge the value you are getting for 80 per cent of the total educational

dollar that goes to teachers salaries, you know, if you are going to do a value

for dollar audit, how can you place a value on what you are getting from an

individual teacher?

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: I mean 80 per cent, I think a lot of

people fail to look upon that and I sort of use that as an example to point out

that 80 per cent almost of the money that is spent is for teachers salaries. We

talk about transfer payments; and there is another example here when we get into

school trustees where only a very small percentage of the amount of money spent

by school boards is raised locally. When you really get down to it a lot of

money spent by school boards is raised locally in relation to the actual dollars

that they have control over that they spend, because factored into the amount of

money that flows through school boards would be teacher's salaries. Teacher's

salaries make up in excess of 70 per cent of the total budget, which is

extremely significant. So, if you want to talk about value for dollar, forget

schools, buses, forget everything, the key component in any educational system

is the teacher. We have seen many years ago in the remotest of communities very

solid education systems because of the individual in the classroom. Today we see

magnificent buildings and we see all kinds of equipment and children being bused

to schools and computers galore and everything else, and we have problems in our

educational system. A lot of these problems stem right back to the individuals

involved and you cannot get away from that. I think it is an area where a value

for a dollar auditing would cause a tremendous amount of problems.

MR. DROVER: Mr. Chairman, a lot of the people in

the country believe that in 1975-1976 value-for-money auditing was invented in

Canada, but really if one were to trace the history of it, in 1942 the Auditor

General of the United States, he is referred to as the Comptroller General of

the United States, that office there which is a huge office, was required to do

some assessments, and that is when the American Government was getting ready for

the Second World War and getting into the whole area of metal and bullets and

that type of thing and value for what they were getting there. That office gets

into what we call specialists, and I am going to relate this to your comments

there. In other words, they have a number of psychiatrists and psychologists and

what they do is get into an area where they challenge people in their own field.

Coming back to your point there, in Canada most of the Provinces would expect,

with the exception of the Federal Government, the value-for-money field is

commenting on the systems and procedures in place to ensure adequate value for

money. In which case I guess I do not need a medical doctor or otherwise with me

if I am just going to ask the question, do you have a system in place, and then

evaluate the system. But if I am going to go in to assess whether a doctor is

using the most economic way to cure a patient or whatever and I am going to do

the assessment, then I must be at least as adequately trained as the person I am

assessing.

Certainly, the office in Newfoundland and certainly

the great majority of the offices in Canada do not have people of that calibre

and it may be not value for money to engage those people because they may be

should be doing what their expertise requires them to do.

So, as far as Newfoundland and most of the provinces

are concerned we would go to an area such as the Department of Education and ask

them: what kind of system procedures have you set in place to ensure that you

are getting adequate expenditure or adequate control over what is happening in

that 80 per cent of the funds, the teachers salaries and that. I think the

Department of Education should have that in place. If it does not, then the

Minister should, in our humble opinion, have people that can at least perform

that assessment. If that is not in place then the Auditor General of the day can

report that in his view that system is not in place to ensure that challenge.

That comes back to what I was saying earlier, if you are going to spend the

public money there should be an adequate secondary control or challenge in place

to ensure that it is being properly spent.

If you take the specialty area of dealing with

handicapped children, a very specialized area here, I certainly know absolutely

nothing about those cases and there has been some excellent work done there. I

cannot assess that from an educational point of view because I do not carry a

doctorate in education but I think that maybe people in the Department of

Education should be in a position to be able to assess whether that program is

working properly. If you take the case of French immersion and other programs

that are into the educational sector; if you take the case of putting a building

in some place, there are people in place who can tell you first of all from an

educational point of view that this is what happens here. There are also

contractors or engineers in place who can turn around and tell you that if you

put that building there well first of all you are going to have to bus some

children from 100 miles away and others, those are number crunching. I guess

people in our field can help with the number crunching. But in the deep

educational side, there is no one in our field who would be able to challenge

someone who is trained and has a doctorate in education if he believes it and if

the Department of Education has him on staff and that is his job to control and

assess that, he then becomes part of the audit process. Maybe some doctors of

education at the Department of Education level would not like me to say that but

really realistically they then become auditors. They audit the policy that has

been put in place.

I do not know if that helps you, Mr. Chairman.

MR. CHAIRMAN: I agree wholeheartedly with what you

are saying. Without belabouring the point, I think perhaps the systems are in

place, but whether or not the functions are carried out is something else.

MR. DROVER: Yes, I concur.

MR. CHAIRMAN: (Inaudible) out this objective

outside watchdog or whatever. Perhaps I could sum it up by asking one question.

How many teachers out of the 10,000 teachers who operate annually in the

Province get fired? That probably answers the question of checks and balances

and what have you.

Mr. Hewlett.

MR. HEWLETT: My colleague here is chomping at the

bit, so I will let him go first.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: Jim Walsh, Mount Scio - Bell Island. I

am not so much chomping at the bit, but we are into noon hour, Mr. Chairman, and

I am not sure if we are in full flight again this afternoon.

MR. CHAIRMAN: Yes, we are. We will be back at 2:00

p.m. I think we all have a lot of things left on our -

MR. REID: I want to deal with - although the

Auditor General's Office is not as concerned in terms of value for money - I

want to talk about economy, efficiency and facility sharing.

MR. CHAIRMAN: Well maybe, as that is such an

extensive one - I thought you might have just a short snapper - it is twelve and

some people might have made arrangements for meetings or phone calls or whatever

(inaudible).

So I think we should break, and we will pick up with

you this afternoon. I think that is a very good topic too, and I am sure the

gentlemen here would like to get into discussing sharing and so on, because I

think there are a lot of misconceptions, perhaps, about the cost of the system

and the amount of co-operation and sharing that goes on. I think it would be an

area where all would benefit from some questions.

We will pick up at 2:00 p.m.

MR. DROVER: Mr. Chairman.

MR. CHAIRMAN: Yes, Mr. Drover.

MR. DROVER: Mr. Chairman, before we go, I think

the member's question is going to be a very good one. I would like to point out,

from the Office's perspective so nobody misunderstands it, the Auditor General

of Newfoundland does not have the mandate for economy and efficiency. I think

one of the members of the Legislature, a former Minister of Finance, Mr.

Windsor, summarized it by saying that the role of value for money and

comprehensive auditing is left with the members of the Legislature. They would

be concerned about that. I think he said that in the House one time and I think

it is a very good comment on that process.

MR. CHAIRMAN: That is why, I guess, these people

are asking the questions.

MR. REID: That is the reason I said I wanted to

lift it from you and deal with it at this level.

MR. DROVER: Okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: So, we will meet at 2:00 p.m.

The meeting stands recessed until 2:00 p.m.

Recess

The Committee reconvened at 2:00 p.m.

MR. CHAIRMAN: Order, please!

Okay, we will pick up where we left off this morning.

I think I had promised Mr. Walsh that he could have the lead question.

MR. WALSH: Thank you, Mr. Chairman. My main

interest here today, I think, is a little different than most. I fully accept

the difference in accounting procedures that may take place and I fully

understand what it is that the Auditor General's office must be going through in

terms of reaching out to so many different groups throughout the Province. I

guess the one that concerns me the most is that I am, I suppose, a firm believer

that for every cent we spend we should get a full penny's worth of either

services and/or goods, whether that be in teachers salaries or anything else

that we do.

With that in mind, over the past year in particular we

have had a number of controversies that have come to the forefront with respect

to facilities themselves and the construction of school facilities, and I am

wondering where are the various school boards at this point in time in, one, I

suppose, trying to meet their own denominational requirements with respect, I

suppose, to the constitution and everything else, but at the same time trying to

meet those requirements in what I would think would be fewer facilities, and

probably larger facilities.

We had an incident, I think, in St. George's last

year, and a potential in other areas. I am gravely concerned about economy and

efficiency, and value for the dollar, and I am wondering where are we today in

terms of the school boards themselves coming together in terms of construction

of new facilities and sharing the facilities? The main reason for my question

this morning is that the third segment of the puzzle is not here. Maybe the two

thirds of the answer might help in setting a direction and a tone, but I am

really concerned about that because I have for my own reasons and from my own

homework, and I may be proved to be wrong, that we could be getting better

facilities in terms of better equipped facilities on a sharing basis, and I am

just wondering where are we with that today, and is progress being made? Maybe

that is the best place to start from.

MR. CHAIRMAN: Maybe I should just elaborate

briefly on the third segment. I think either segment can speak for all the

others in relation to co-operation, because from my experience I find that the

three groups work very, very closely together in the sense of knowing what the

other is doing. So I think, you know, anyone speaking could give an answer to

your question from all three perspectives. Dr. Norman.

DR. NORMAN: Mr. Chairman, perhaps it would be

important to say at the outset that the legislation, the Schools Act in

particular, gives each school board the responsibility for organizing education

within its geographic boundary. So that particular responsibility legally rests

with the school board, however, it would also be important to say that the

councils play a significant role together with the Department of Education

working in co-operation with the school boards. In the final analysis there is a

lot of co-operation and sharing within the different groups.

In terms of trying to come to grips with that

particular issue the three Denominational Councils, and we can certainly include

the Catholic Education Council as well in this, set up a joint committee a

couple of years ago to establish a policy on interdenominational co-operation,

and the three councils worked very closely on that and established some

guidelines that we were able to submit to our various school boards.

Since that time, and in particular as it relates to

capital, I can certainly speak for the Integrated Education Council in this

regard, our policy is that we will not approve any new capital funding unless we

explore all the possibilities that exist for joint service arrangements with the

other denominational systems, to make sure that we review that potential and try

to see what possibilities exist before we actually vote capital expenditures for

new schools. Furthermore we have dialogued with all of our school boards and

shared this policy on interdenominational co-operation with them. More recently,

during this past school year, the three Denominational Educational Councils have

established a joint co-ordination committee on regional co-operation and at that

committee level there are representatives of the Catholic Education Council, the

Pentecostal Education Council, and the Integrated Education Council. We have

been reviewing all geographic areas of the Province with a view to looking at

how we can best deliver educational services to the students right across the

Province. In particular we have established almost a full time job description

for Dr. Pope who works on staff with the Integrated Education Council but whose

main responsibility is in the area of joint services and co-operation. He has

done a tremendous amount of work in that area and we can point to numerous

examples where not only have we brought school boards together by way of

consolidation but we have been able to bring about a significant number of joint

service arrangements across the Province. I think this morning we made reference

to bodies like the Denominational Policy Commission and the Joint Capital

Construction Committee. We have shared with the Department of Education in

looking at areas of the Province which would have potential for joint service

schools.

Mr. Chairman, since Dr. Pope works significantly in

that area I think it might be helpful if we asked him to elaborate on some of

the projects that are ongoing and some of the tasks we see ahead of us in that

area.

MR. CHAIRMAN: Certainly.

Mr. Pope.

MR. POPE: Mr. Chairman, it is important lady and

gentlemen to put this in context, I guess, because much has happened during the

past two to three decades in particular. Reference was made this morning to the

present Royal Commission on Education and of course many of us around this table

will recall the Warren Commission back in the mid 60s. In 1964-65 Dr. Warren and

his commission reported that there were 1266 schools in this Province. Well,

September last year there were 525. More than 700 schools have closed. In fact

one of our districts have closed as many as sixty-seven schools. Schools exist

in 307 of the communities of this Province, both from the largest to the

smallest, and it is important to realize that in 84 per cent of these

communities there is a single school system. There may be more than one school

but there is a single school system in 84 per cent of the communities of this

Province that have schools. I would perhaps share this with you more fully but

it is a little bit outdated even in the past few weeks actually. This year, Mr.

Chairman, about forty-two or so communities in this Province have more than one

school system. Now in these forty-two you will find a number of schools, in fact

you would have last year found nine, but now you would find more that have what

we call a joint school system. For example, Glenwood would be shown up there as

having two school systems but Glenwood has a joint school system. There is a

single school building and it is operated jointly by the Roman Catholic and

Integrated Boards in Gander, but for reporting purposes that school would show

up as having two denominations. Indeed it does have two denominations in the one

school system. Last year in June, for example, we signed five new joint service

agreements. When I look at that sheet I recognize readily how things are

changing again in the last several months. I notice some communities here, for

example, like Buchans, which come this September, will also have a joint school

system, in terms of the Roman Catholic and the Integrated systems there. I

notice Woodstock and Pacquet out in Green Bay which involves a joint system with

the Pentecostal and the Green Bay Integrated School Board. Come September we

will also have a joint school system at the high school level in a small

community on the Labrador Coast, namely Port Hope Simpson.

I could go on, Mr. Chairman, but suffice it to say

that the landscape is changing quickly and changing, you know, in that kind of a

direction. I said to you that there were 525 schools. That number will change

again come this September because we would be aware of a board that, say, closed

out three small schools or two small schools or whatever, in the spring. We

would anticipate that the number of schools will work its way down to around

450. We would also anticipate a greater sharing in more and more areas where it

is considered desirable that sharing ought to occur.

Now having said that, we all recognize the three

systems, in making their representations to the Royal Commission clearly stated

their positions with respect to where numbers warrant and where numbers are

good. Obviously, the systems prefer their own schools in terms of the other two

systems. But clearly we have demonstrated to all three councils, that in areas

where it is in the best interests to co-operate that that is clearly what ought

to happen and, indeed, is happening.

At the school board level, again going back to the

Warren days, they would have talked about 309 school boards. In other places

they refer to 270 school boards, depending on how you look at them. They were

small and scattered and almost every little parish and every community had its

own board. Well, four years ago we would have had thirty-five boards and now, as

of July 1 of this year, we have, I guess it is, twenty-seven boards. Now, that

is the kind of way, Mr. Chairman, the system is changing and that is the kind of

way we see the system evolving in terms of these kinds of changes. We think it

is illustrative of the co-operative kinds of efforts that are occurring across

the system.

Now, I have not mentioned many, many instances where

we would be offering each other, for example, religious educational programmes.

You know, Catholic schools offering Integrated programmes and the Integrated

schools offering Catholic programmes and so on. Also, what is now, we think, a

very positive development is that where two schools do exist and they are

somewhat close and one is offering programmes that the other school does not

offer, particularly at the high school level, the students are transported to

the school to take a course or two that is not offered in their school. That is

clearly also happening more and more now.

In brief, Mr. Chairman, the system is clearly not what

it was, you know 1266 schools where you had almost every little community with

two or three different little schools. In brief, 84 per cent of the communities

have one school system.

MR. CHAIRMAN: Just before you get off that, Dr.

Pope, if you would, how many of the other 16 per cent would have more than one

system. How many of those would have more than one because, once again, numbers

warrant? For instance, St. John's, whether you have all one religion or five

religions you have population enough to maintain x number of schools. Does it

make a difference and how many communities would be in the 16 per cent range but

numbers would certainly justify two, three or four schools?

DR. POPE: Approximately ten, Sir, you know larger

communities. I mean, it is not going to change here very much in St. John's,

Mount Pearl, Gander, Grand Falls and Corner Brook, you know these larger centers

because we have adopted a certain approach to schooling as you know. In our

Province, for example, we look at 500 and 600 students as large schools. Now, we

would not have to go very far, even as near as Nova Scotia and certainly New

Brunswick where we will find a different perception in terms of school size.

They would see school size certainly differently that we would in terms of what

is large. But, if you examine our perception of what is a satisfactory size, 500

students or 600 students let us say or thereabouts, there is probably ten or so

communities where you would still have several schools because the numbers would

warrant it, like the ones that I have mentioned.

MR. CHAIRMAN: I guess the pertinent question then

is, how many communities do we have presently that have too many schools?

DR. POPE: If you define it, Sir, in terms of shall

I say having two small schools -

MR. CHAIRMAN: Yes. We are talking about numbers

and economics and not about the philosophy of education.

DR. POPE: No, no. If you are talking about two

schools of 100 students, 150 students or 200 students you are probably in the

thirty or so range where communities would have a couple of small schools like

that, if you are looking at the forty-two that I am saying there.

Now you have to remember, Mr. Chairman, as you and I

are saying this, I am talking about particular communities here, there could be

another community that is just two miles away that you could certainly justify

bringing these two communities together. But, that is the kind of figures and

numbers that you would be looking at.

MR. CHAIRMAN: The press have funny ways of

reporting things and some of these questions I am asking are just to bring out

some points. When you mention communities a couple of miles away, that does not

necessarily mean either that you have an integrated school in community A, a

Pentecostal school in community B two miles away and they should be together. In

a lot of areas you have all one religious group two or three miles away.

DR. POPE: Oh, very much so.

MR. CHAIRMAN: A couple of quick areas, the

Southern Shore and Conception Bay Centre just come to mind where you have

communities within a stone's throw almost with their own schools.

DR. POPE: Mr. Chairman, that is clearly a very

good point to make because we would certainly observe that the community

rivalry, perhaps we would use that in the best sense of its term, is a very

strong factor these days in bringing these kinds of things together. We struggle

as much with shall we say two integrated communities as we would with two

different denominational communities.

MR. CHAIRMAN: I am sorry I am talking away Mr.

Walsh's question time but he will have lots of time later.

I always used to say our history and geography have

dictated our school or educational patterns more so than anything else. I think

if we look at the changes that have occurred in recent years, these changes have

coincided with advancements in communications and transportation maybe more so

than anything else. If we go back to the reasons why schools were established in

the beginning the history of settlement patterns and the geographical patterns

of the Province and the isolation and so on, I think people have to look at that

to understand the development of our system and the changes that have occurred.

DR. POPE: Mr. Chairman, I think it is important to

observe too that we see these changes not so much from a standpoint of trying to

get larger as from trying to become smaller because of enrolment declines and

this sort of thing. Clearly, we will continue to be a Province of small schools,

Sir, when all of this is completed. There are approximately fifty-five

communities in the Province that are either so isolated by distance or geography

that they would remain unaffected by all of these comings together. Even those

that have come together, if we might use that term, we are still talking about

continuing to be a province of small schools, we just have to be.

MR. CHAIRMAN: There is nothing necessarily wrong

with that, is there.

DR. POPE: No, but I make that point, Sir, because

often times people place the emphasis on what is getting larger. We often try to

say a lot of this is in response to try and not to get smaller.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: I thank my colleague the Chairman for

the history lesson and for the need to explain things in a simplified manner for

the media.

AN HON. MEMBER: (Inaudible).

MR. WALSH: But thank you just the same.

I want to say from the outset that I have absolutely

no problem with a denominational school system that allows people to have

children of their faith exposed to their religion. I have no problem with that,

it is just that my definition of a school is somewhat different than what I

believe we have evolved to in this Province.

I do not believe that the school itself is a physical

structure. I believe it is the education that takes place within a building and

the physical walls, and if there are multiple denominations within a four wall

structure, that is fine, as long as we are getting the best possible education

for those children and that the best possible facilities are being offered to

them. That for me is the goal.

Now if the east wing of the building is dedicated to a

particular religion I am not overly concerned about that aspect of it because

that is inherent in our history and I realize that. My concern is the fact that

are we in the situation where we are spending $2 million for a ten or fifteen

room school here, and a mile away we have another denomination wishing to

construct another ten room school for another $2 million

whereas if both of them

came together we could generate a far better education for our children for

maybe $3 million. And I believe that our accountability as legislators have to

be also to the people that we are putting additional burdens on every day of the

week for the dollar that is diminishing faster and faster as every day goes by,

and that is what I am concerned about.

What I am also wondering is, Dr. Pope maybe you could

answer this, where are we in terms of new construction and upgrading of schools

that exist out there? Are we now in every case looking at where a new school is

needed, are we addressing schools that are either underutilized in those same

areas and are we capitalizing on those before we start spending money of the $27

million that is being spent annually? Can we take an existing structure, for

example, that has all of the requirements of the school in terms of the labs and

the computer rooms and saying: let's put five rooms on this school as opposed to

building a new facility? Are we doing that?

DR. POPE: We clearly are, Sir, in many, many

instances, and I could certainly cite examples for you to illustrate that. For

example, I mentioned that a joint services will occur now in Buchans this fall.

And the integrated board, which in joint services is usually an operating board,

meaning a physically operating board who tends to the windows and doors and that

sort of thing, and our board will be operating the Roman Catholic school in

Buchans because that is a better facility than ours. Our school would have

needed substantial work done to it to bring it along

whereas the joint service

agreement provides for the integrated board to be providing the schooling in the

Roman Catholic school. It is a joint school, mind you. But like I said, the

operating board in Buchans will be the integrated board.

Also, Mr. Norman made reference to the fact of the

council having policy that does not permit it to proceed with these things until

we have explored all of the options in that regard in our case, and that is the

kind of way that we are trying to. You mentioned the school last year that we

were struggling with in that regard in terms of effecting a joint service, and

clearly what we were doing there was making certain how best to spend the money

that we had. I think the numbers themselves changing and going down would convey

to you that clearly a lot of that kind of thing must be happening, that we are

not rushing off to build a little school here or a little school there anymore.

MR. WALSH: I seem to have been favouring Dr. Pope,

Mr. Chairman, of the integrated committee in terms of where we are coming from,

but I think only because Mr. Norman answered first. I suppose it is only fair

that I stay quiet for a little while and allow Pastor Batstone to get involved

as well in the discussion.

PASTOR BATSTONE: Thank you. Mr. Chairman, we

certainly would say that we recognize that there are components in the delivery

of education which are not distinctly denominational in character, and therefore

not unique to the purpose and the principles of any particular system. There is

certainly in those areas a great deal of co-operative efforts and willingness to

share, and the Pentecostal Education Council has also developed a policy on

interdenominational co-operation. I say that from the perspective that any

co-operation entered into by the Pentecostal school board will be

interdenominational since it is the only Pentecostal board in the Province.

There is no other Pentecostal board in the Province with which to co-operate. So

any co-operative efforts by the Pentecostal Board will be interdenominational.

We are a very small school system in comparison to the other two major systems.

But Sop's Arm, for instance, is a co-operative venture. Pacquet is a

co-operative venture. We are entering into a co-operative venture in Port Hope

Simpson.

Also in the administration at the school board office

level busing, for instance, we are a part of co-operative busing. I think of

(inaudible) in the Grand Falls area in the provision of specialists like

educational psychologists and speech pathologists and in the providing of

in-service, there are also co-operative efforts between our board and other

boards. We as well, being a small constituency, have found that when the

enrolment level of our smaller schools drop significantly, it is probably more

convenient for us to close out a particular school and to be absorbed into the

other school system which may operate in that community. I can name, for

instance, Point Leamington in recent years, Seal Cove, White Bay, Joe Batts Arm,

and Carmanville will close, I think, in September. Possibly the indication that

6,000 of our enrolment, our total Pentecostal constituency student enrolment, is

now housed in Integrated and Catholic schools in the Province, and 6,000

approximately in our own system. So certainly it is not the policy of the

Pentecostal Education Council to establish one-room schools or small schools

hither and dither across this Province, as indeed that witnesses to.

I would also bring another perspective here, I think

we need to recognize the tremendous contribution that parents make to their

denominational schools above and beyond the contribution through their tax

dollars and through school taxes. For instance, in Springdale in a ten year

period the Pentecostal people of Springdale contributed $1.5 million to the

capital expenditure of their school in Springdale above and beyond their share

of the capital grant. The Port de Grave Pentecostal constituency constructed

their school outright from their own funds and I could mention other schools.

In Deer Lake, for instance, the capital construction

cost of Phase One was $1.1 million, $700,000 was provided by the local

Pentecostal people. So there is just a tremendous amount of money being

contributed by the Pentecostal constituency in the provision of Pentecostal

education for their students, and I would want to go on public record and

recognize that kind of involvement and contribution by the Pentecostal people.

But certainly we are a part of and involved with

co-operative ventures and as the enrolment declines in the foreseeable future, I

am sure there will be other instances and places where we will be extending that

co-operative venture together.

MR. CHAIRMAN: It is very important that you bring

out the part about contributions because a lot of people feel that there is no

contribution - you know, Government funds education and Government should call

the shots. As you mentioned, I think in the auditor's report there is a mention

made that 90-odd per cent of the funding whatever for school board operations is

provided by Government. That is factual when you count teachers salaries. But if

you eliminate teachers salaries, and talk about the actual construction and

maintaining of schools, then the percentage becomes much higher from the local

side through school taxes, but above and beyond school taxes from local

contributions. I often question whether or not these contributions would be

forthcoming if you had a public school system?

One other thing that you mentioned I think that we

should elaborate on, you mentioned bus transportation. When people talk about

the denominational system of education, they say, oh, yes, it is time that we

got rid of the Catholic bus going up one side half filled and the Protestant bus

going up the other side half filled. You know, what is the story today in

relation to busing? How much duplication do we have within the $25 million we

spend on school busing from your experience?

PASTOR EARL BATSTONE: Mr. Chairman, I do not know

that we can respond to that directly. I understand that the Department of

Education has conducted a study in busing in the Province and I think possibly

there is one ongoing at present. But as you are aware there are two systems of

busing in the Province, thats the school board owned buses, and they tend to be

co-operative ventures, and then there is the individual contracting situation.

We are involved in both areas from the Pentecostal Board's perspective. Where

possible we are involved in board owned co-operative busing with other school

systems and we also have the individual contract.

I personally am not aware of those kinds of glaring

examples that we hear about in the media, and I suppose my tongue in cheek

response would be: do you count at the beginning of the pick up or at the end of

the pick up, to determine how many students would be on a given bus at a given

time. But I believe all boards are certainly willing and very anxious to look

into the possibility of streamlining their buses for the sake of economy and

convenience.

MR. CHAIRMAN: Dr. Pope, from your experience -

DR. POPE: Well I can only add sir, that obviously

things are changing a great deal too in that area; for example, Pastor mentioned

there are nine, what is commonly called board owned systems in the Province, and

it is my understanding that they operate about 450 of the 1,000 or so school

buses that operate in the Province; and it is also my understanding that they

transport about 36 per cent to 40 per cent of the students who are transported.

Now theoretically sir, these buses should have the

utmost in terms of efficiency and effectiveness in terms of the kinds of example

that you mentioned, these things should only occur to a minimum in that kind of

arrangement, therefore, if they are transporting 35 per cent to 40 per cent of

the students, it would seem that there are significant improvements being made

in that kind of thing if indeed, and I would think it is reasonable to expect

that these things do occur, whether or not they occur on the scale that is

sometimes represented I suppose is hard to determine, but I think you can see

what is happening there too, by these few figures that we are sharing with you.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: I am pleased to hear that we are seeing

that co-operation and I am glad to see it. I want to go back to the Auditor

General's office during this particular portion and then Mr. Drover might be

able to answer.

Has the Auditor General's office been involved much in

terms of the funds that have been allocated for construction and in terms of

recommendations? For example, in some cases when funds are announced for water

and sewer, there is an allocation by the engineers that the project may cost X

number of dollars.

One finds that a tender comes in at a little less and

the money stays in the system, sometimes instead of going the quarter mile you

had planned, the Department will say, well let us go to a half mile because of

the cost that comes in.

In terms of school construction, when someone says

that a school is going to cost $1 million for example, and the actual tenders

come in less, what procedures kick in automatically, do those funds then go back

into the general fund, the differences that were allocated or are they chewed up

in other areas?

MR. DROVER: To answer the first part of your

question, we have not performed in recent years a detailed review of that

section, that would be a follow-up to this year's procedure of reviewing

transfer payments coming out of Education and I would anticipate that that type

of review would probably be in the next year or so.

What procedures would kick in? My understanding, and I

have the system documentation there on the Department of Education, would be

that, if the Department allocates X number of million dollars to the

Denominational Education System and there is a saving there, I would anticipate

that the system may be able to utilize the saving, because it has been allocated

in block by the Department, similar to the methods used in allocating funds to a

hospital, in that, hospital funds are voted in block by the Department of

Health, however, if there is an overall saving in Government, in the Department

of Public Works, Services and Transportation, if there is a saving there on the

construction of a building on what was voted in the department -

It is a very good question and I am having trouble

with it, because over the years all of it just went into the system and was all

utilized in other areas; the savings have been utilized to other resources. I do

not say it is an inappropriate method, it is just that it gives the opportunity

to the decision makers whether they are in the school boards, the denominational

system or the departments to utilize funding, but most funding, just so that you

understand it, the Legislature, when it votes on the Act, it votes on the

various Heads, it will not vote on the fact that a $3 million allocation related

to the school down in Hants Harbour or Greenspond, it will vote on X number of

dollars to the Department of Education.

The split over into the Department of Education works

within the system, so as long as the Department of Education does not exceed

what is referred to as its head, you know, it does not exceed its $600 million

allocation overall, then it utilizes the funds, so they -

MR. GOVER: Just one second now. Thank you, Mr.

Drover. I think Mr. Norman would like to perhaps respond to that question, which

is, if the Government votes $27 million and all the tenders come in and only $25

million worth of tenders are out there, what happens to the other $2 million, do

the DECs give that back to the Government or do they keep it?

MR. NORMAN: By way of illustration to that, as it

has been mentioned by Mr. Drover, the capital funding that comes to the councils

is really as a block of funds, so during this current year we would have a $27

million block of money to be spent in accordance with the directions of the

budget speech and so on, and as invoked by the Legislature. Last year we had

tenders that actually came in in total $1 million under our projected budget,

and I think it was probably just a result of the marketplace at the time. We had

anticipated that there would be some extra construction under way and things

might have been a little higher, but in actual fact the market was very, very

hungry and we were getting up to twelve to fourteen bids on a project. So with

that kind of competition, in total we were able to save significant dollars.

That simply then made that money available for projects that were in the wings.

We have extensive capital needs that can be projected for some years into the

future, as a matter of fact, so we then immediately were able to proceed to

attend to and to respond positively to some further construction needs, so that

money went right back into additional capital projects that were ready to go.

MR. WALSH: The tenor of where my question is

coming from: up to the time a school or facility is about to be built, the

Minister himself, if my understanding is correct, and I may be corrected on it,

but my understanding is that funds tend to be project specific and then the

Minister will sign the letter saying go ahead and build that school in Hant's

Harbour or wherever based on the funds that have been expended. My concern is

that when a $1 million is left over does the Minister or the Department then

have control over in terms of last year where that additional $1 million would

go? Is that decided on a priority list that has been submitted, or can you then

take that million dollars and go into that proposed list and do with it what you

wish? I am looking for accountability in terms of the differences, and I will go

to Mr. Drover, and maybe back to Mr. Norman through the Chair.

MR. DROVER: Mr. Chairman, I just do not know, to

be honest with you. I think this is part of the whole process of working with

the Denominational Education Systems and the Department themselves, but whether

the Minister exercises control over a certain amount is something that would be

extremely difficult to audit. I know that over in some departments, for

instance, in the health care sector, the department does allocate the great

majority of the funding out, but because of certain health needs and the overall

operations of the health care sector in the province there is a certain amount

of funding that is left with the department for those purposes. It is not a

major amount, but there are some debts left with the guys at the Department of

Health and we do not have a problem with that. I know that similar to what you

are talking about there, there are certain procedures in place which are

consistent in relating to construction, public works and road paving. You know,

that is similar to what you are chatting about there, but regarding the

Denominational Education System and getting into the deep part of that, in the

1989 report we did not assess that specific point, and therefore the answer to

your question, as far as our office is concerned unless we did further

investigation to verify it, I do not know if I can address that specific issue

with the Minister holding those funds. The denominational education people would

certainly know.

MR. WALSH: The reason I asked -

MR. CHAIRMAN: Mr. Norman could clarify it for you.

MR. NORMAN: Mr. Chairman, the submission that we

would make to the department would invariably include projects that would go

beyond the funding limitations of any particular year because we submit a five

year plan to the department. If, for arguments sake, the tenders come in this

year and there is $1 million left over then we would go through exactly the same

procedures as we would ordinarily. The legislation dictates that we cannot spent

that money on anything other than the construction of new schools and so on and

so forth, that is outlined in the legislation, so we are limited to capital

spending of that money. We would then simply dialogue with the Department and

the next priority capital project would be then financed and the Minister would

have, through his officials, approve the site, they would have to approve the

plans, they would have to authorize the awarding of the tender and so on. So,

that particular project would not be treated any differently than all of the

others for that year and the involvement of the Minister through his officials

would still be as per the policies and procedures that have been laid down.

MR. CHAIRMAN: Just for clarification, unlike

departments and road money and so on where you have an estimate type of thing

and you announce projects and you call tenders and that is it. The

Denominational Education Councils are given a blanket sum every year and then

you can use that money as you so wish according to your priority of projects

until it is all gone.

DR. NORMAN: That is right. On the basis of need

and we take the most outstanding needs in the Province and go down through them

one by one.

MR. CHAIRMAN: No, go ahead, Mr. Walsh.

MR. WALSH: The reason I am asking is that in the

briefing notes that I received it appears that somewhere along the way the

Auditor General was concerned about funds that have been allocated for capital

expenditures and have been moved to current account to help offset deficits.

Although it says here in our briefing notes, for the purpose of eliminating a

potential deficit does have merit, I am concerned as to whether or not that was

the intent and has the Auditor General looked at it? I am only going from the

notes. If there is, be it $100,000 or $50,000 should it be guaranteed that it

goes towards physical structures as was allocated or is the policy of having

funds in some cases being transferred from capital accounts into current

accounts? Should that be allowed to continue?

I may be reading the notes wrong, but from what I am

looking at and it says page 66 of DEC P68, whatever that means.

MR. CHAIRMAN: We are talking about school boards

here, I think, Mr. Drover.

MR. WALSH: Maybe I am interpreting it wrong.

MR. DROVER: Which paragraph, Mr. Walsh.

MR. WALSH: Page 66. Requiring school boards to

curtail expenditures on capital account and the transfer of funds to current

account. Now even though the DEC - now I may be interpreting it wrong and by all

means correct me if I am - would require that the school be built and the school

board would then take the responsibility for the building of the school. Like I

said, I may be interpreting what I am reading to be somewhat out of whack, but

these were some notes that were prepared for me.

MR. DROVER: You are referring to this document the

compendium which is also tabled in the House of Assembly with the Auditor

General's Report, page 66. It is the Department of Education's response to the

issue. The second one there, you are saying: with regard to the finding that

school board budgets are not submitted to the Department, the Department will

take this matter under advisement. It will be recognized however that funding

for school boards is based on prescri