July 31, 1991

PUBLIC ACCOUNTS COMMITTEE (UNEDITED)

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

Building.

MR. CHAIRMAN (Hearn): Order, please!

We are a little shorthanded this morning, however a

couple of the Members will be joining us very soon so we can get through all the

preliminaries anyway.

First of all let me welcome Mr. Breen and Mr. Hearn

from the School Trustees Association. It is their first time here so they are

fairly unfamiliar with our procedures, therefore, I will quickly outline what we

do.

The only reason we have you here is not because of

any great offences you have committed or anything, the reason we bring most

people in front of us is because of comments made by the Auditor General in his

reporting. In our scrutinizing of the Auditor General's Report each year we try

to highlight matters of concern and interest. Number one: areas where we think

that by having some open and frank hearings before the Public Accounts Committee

we can approve the overall accountability in relation to the collection and

expenditure of the public dollar, which is our main job; the other reason

sometimes is so that comments made or suggestions made by the auditor or perhaps

by the Department or Agency need to be further explained or clarified and quite

often our hearings help to do that. We always say to the witnesses that because

you are mentioned in the Auditor General's Report does not necessarily mean

there is anything wrong with the accounting in your Department or Agency. Quite

often the auditor has an idea of how the thing should be done perfectly,

according to him or his Department. Of course that is why he is there, to be the

watchdog on the government dollar, and departments and agencies sometimes have

their own systems which are quite adequate, proper and correct but may not be

exactly what the Auditor General wants. In our discussions quite often we find a

common agreement or sometimes the right to disagree and that is fair ball.

How we operate: We usually ask the Auditor

General's Office to make the opening statement just highlighting the concerns

raised in his report and then we will give the witnesses a chance to make any

comments they want in relation to that or general opening statements. Then the

Members of the Committee usually start the ball rolling by questions to either

one group or the other. I think yesterday the Auditor General's Office had more

questions thrown at them than the other people. But we had a very, very

enlightening discussion, I think, yesterday on the field of education and the

financing of it. I am sure today will be just as rewarding.

We will have to swear in the witnesses as neither

one of you have appeared before us before. Elizabeth Murphy on my left, the

Clerk of our Committee and the Clerk Assistant at the House of Assembly, and

filling many roles these days, will do the swearing in. Also, we have with us

this morning Bill Drover from the Auditor General's Office, Bill is the Audit

Principal; and George White also from the Auditor General's Office and George's

title is Audit Manager. We have Kevin Breen who is the President now of the

School Trustees Association and the former Past President, Jim Hearn, no

relation for the record. I always say that, but it depends upon his performance,

I might acknowledge some relationship if he is good.

The Members of the Committee who are here this

morning: Alvin Hewlett on my far right, the Member for Green Bay; the Deputy

Chairman, Aubrey Gover, Member for Bonavista South; joining us we will have Jim

Walsh, the Member for Mount Scio and hopefully Art Reid who is the Member for

Carbonear. Two other members who are not in town and who could not make it to

this set of hearings are Glenn Tobin from Burin - Placentia West and Bill Ramsay

from LaPoile.

The microphones in front of you are not for

amplification, they are just for the record. All our conversation, as is

everything that goes on in the House of Assembly, is recorded by Hansard. In our

Committee of the House everything you say is recorded and if there is any

dispute later on you will have access to your words.

We also welcome the lone reporter from The Evening

Telegram. It is good to see the press covering these hearings because, as I said

yesterday, I think any news agency which wasn't here yesterday missed some very

worthwhile information in the exchanges. Sometimes it is unfortunate when stuff

like this does come out in a very open general forum and in a detailed manner,

that some of the reporting agencies are not here to report it. Some of them seem

to be here only if there is something extremely controversial. So maybe we

should have done a news release yesterday saying that we had found some missing

money or something at the School Trustees Association. I am sure we would have

her blocked over there this morning. Anyway, it is good to see The Telegram

covering the hearings in detail.

With that, I will ask Elizabeth to swear in our

witnesses and then we will get into the opening statement. It is going to be

extremely warm in this place as it is not air conditioned, so don't hesitate to

take off your jackets as I am doing.

Swearing of Witnesses

Mr. Kevin Breen.

Mr. James Hearn.

MR. CHAIRMAN: Thank you, Elizabeth.

As usual, we will ask the Auditor General's Department

if they would make the opening statement.

MR. DROVER: Thank you, Mr. Chairman.

As I explained yesterday - I apologize to the Members

of the Committee who have been here through so many meetings on transfer

payments, I think they have probably heard the

summary a number of times in the

past - transfer payments are a unique form of expenditure of Government funds.

In the Province of Newfoundland the total transfer payments to school boards,

hospitals, municipalities, and other agencies exceed 50 per cent of the

Province's annual budget. It is a form that presents a unique situation dealing

with auditors in that you do not see invoices coming in for services rendered

and it is a form that most governments across the country use by utilizing

transfer payments to pay for services in hospitals, school boards, universities

or colleges. In Newfoundland it approximates around $1.5 billion per year.

The first time we reported on transfer payments was in

the 1989 Annual Report of the Auditor General. At that time our audit centered

on two major departments, Education and Health. We had reported in the previous

year on the Department of Municipal Affairs.

In the Department of Health we have already addressed

those issues before the service committee. We have had a number of hospitals in

to discuss it. We are now dealing today with what centered out of the Department

of Education. I think it is important that the Committee appreciate that our

visits were to the Department of Education, not to the school boards at that

time and not to the Denominational Education Councils. So we did not assess any

system within those bodies.

As I pointed out yesterday, in the current year we

have visited a number of school boards and we have visited a number of these

bodies and we have also gone back to the Department of Education. And in the

1991 Annual Report of the Auditor General we will be commenting in considerable

detail, as a follow up to this report item.

Relating to the Department of Education, we commented

on the problems in dealing with what we call accountability control over the

reporting aspect of what comes in from the school boards. All Auditors General

feel that if the public money is spent there should be complete and full

accountability of it. I think our findings of that year included - and I might

read from those - the audited financial statements reported on by external

auditors submitted by the school boards to the Minister each year. We reviewed

these financial statements for the year ending the 30th of June 1988 and our

review disclosed that the legislation permits certain funding to be withheld

from the school board that fails to submit its audited financial statements to

the Minister by the first of September. Since the date of receipt of the

financial statements by the department was not readily determinable, we used the

dates of the auditor's reports to gauge their receipt.

Of the thirty-five auditors reports examined, sixteen

were dated subsequent to the first of September while one was undated. Of

thirty-five school boards, nineteen had not signed their financial statements.

This means that the members of the board, the Chairman and one other member of

the board, had not signed. That is the traditional method used by them, which is

contrary to the normal practice indicating formal acceptance of the financial

statements.

The legislation requires that the auditors of the

school board inspect and report on the sufficiency of the bonds. Three auditors

reports noted that certain employees were bonded but none commented on the

sufficiency of the bond coverage. Departmental officials could not provide us

with any other correspondence showing separate reporting on the sufficiency of

the bond coverage by the external auditors. We could not find any evidence that

the department had taken any action to ensure that school boards complied with

the legislation. In addition unsigned financial statements were not returned to

the school boards for proper approval. The reports issued by the external

auditors on the financial statements of the school boards use, without

exception, the standard wording of an auditor's report. That is referred to in

our field as the attest audit report or a short form report. Such wording

assures the reader that the financial information contained in the financial

statements reported upon is presented fairly in accordance with the stated

accounting principles on a basis consistent with that of the previous year. Such

reports add credibility to financial information supplied by the school board,

without question, it does add credibility. However there is another point that I

think a committee of this nature should be aware of. This financial information

shows that the money was spent but does not give adequate assurance to the

Department of Education that the money was spent for the purposes intended by

government, nor that it was spent with due regard to economy, efficiency or

effectiveness, and also it does not give assurance that all the legislation such

as the Public Tender Act and others were complied with. I think this committee

addressed that issue yesterday and addressed the issue of how you get that, and

I think we suggested you could get the external auditors to do another expanded

report, or whatever.

Management letters issued by external auditors to the

school boards as a result of the audit process, are not forwarded to the

department, hence the department is not made aware of any weaknesses in

management and internal control which exists within the school boards.

The Department of Education, under the authority of

the Minister of Education, issued a reporting manual for school boards which

established the uniform accounting and reporting system for all school boards.

All but four of the school boards have submitted financial statements in the

prescribed format for 1987-88. We could not find any evidence that the

department had used these financial statements for the intended purpose of cost

analysis and comparison. Budgets of school boards are not required to be

submitted to the Department of Education, although the majority of the grants

paid to the school boards are based on student enrolment, budgets are a tool

that could be used by the departments to establish the financial objectives of a

school board and to measure its performance. The internal financial statements

would also be useful for monitoring costs and for determining funding

requirements.

Our review of the financial statements of the school

boards show that eighteen of the thirty-five school boards had accumulated

deficits at June 30, 1988. We think that is a concern that should be noted. If

there are deficits being accumulated out there, they are eventually going to

have to be addressed.

Grants paid to school boards are based primarily on

student enrolment, the details of which are supplied by the school boards to the

Department of Education. The department does not have an adequate system in

place to check the accuracy of this information which is used to pay

approximately $400 million. Without going too far, the system that is in place

at the present time is one dealing with the population structure without getting

into the details of the statistical data within the Department. Our enquiries

within the Department concerning the reporting process showed that few formal

reports were made by the school boards to the Department concerning their

responsibilities for performance in the provision of education within the

Province. In addition there was no formal reporting by the Department to the

Minister for presentation to the House of Assembly on how it had discharged it's

responsibility for the approximately $450 million spent on education. We talked

yesterday about the field of reporting in the Legislature, and I think we

addressed it in each one of the last three reports, we are suggesting it and I

think it is happening across the country, where the Minister would rise in the

House and table an annual departmental document report in a prescribed format

that would then show how the Minister is accountable and eventually going on

down the line to how he holds the others accountable. It would be a document

that is prepared specifically for the Members of the Legislature so that they

could understand - in other words you approved $600 million for the Education

sector and the Minister comes back to the House and says this what I did with

the $600 million. That document is one we have been suggesting for a number of

years and I think you are going to find in the near future that it is going to

become a generally accepted practice. It is becoming practice in some provinces

now. I understand, for instance, that New Brunswick recently gave that type of

direction, that this is what would be in reports, and I think if one were to

refer to our last year's annual report one would get the type of format we are

talking about here.

Mr. Chairman, that addresses our comments in the 1989

report. One must appreciate that report is now a year and a half or so old. We

must also appreciate that that audit concentrated under the Department of

Education, the comments and complaints if you want to call them complaints, but

our summarization there relates to the system in place at the Department of

Education level. It is only in the current year that we have gotten out to some

of the school boards. I cannot comment on the current review.

MR. CHAIRMAN: Mr. Drover, as you mentioned

yesterday, the Auditor General's Department is presently doing some audits at

the school board level and I understand you have completed two. I believe that

is what you mentioned. Was it two?

MR. DROVER: We have completed one on either coast.

We have gone over some short questionnaires with them. We have completed one

in-depth audit on the west coast and one on the east coast.

MR. CHAIRMAN: So next year we will have specific

reference to individual school boards and then you will see what is happening at

the school board level. From general observations, as you say, it is from the

Department audit that the educational funding, just to put it in perspective,

most of the $500 or $600 million that is given out each year is not spent

directly by the Department. Unlike most Departments it is farmed out to

denominational education school boards and the Denominational Education

Councils, as they mentioned yesterday, they receive about $27 million of that

for capital construction and the rest goes to school boards. That is a little

bit out of whack in reality because you are looking at $400 million or so, a

fair amount of money, but most of that, something like 77 per cent, or more than

that, probably 80 per cent of it is taken up in teacher's salaries alone, which

really, even though they go to school boards sort of come directly from the

Department so it is really a figure which is perhaps, when you talk about school

boards having that kind of money to spend, is really not correct. They employ

teachers but the money is sort of followed right through from the Department as

such. The money is sort of cut out beforehand. The boards pay salaries based on

qualifications and whatever and they have no room to move or manipulate that

salary vote. They themselves only have direct control in expenditure over the

operational funds plus whatever money they collect. As they report back, they do

have their own reporting systems, their own audits or whatever, as the

Denominational Education Councils had. They not only had their audit but they

also had their annual report which gave a breakdown of every nail that went into

every school type of thing and the boards undoubtedly had the same thing. I

think the point the Auditor General raised, and I say this for the witness's

sake, was that there was no independent outside backup on the total expenditure

of that money. So, I am interested in hearing what the members of the School

Trustees - or how they see this problem, if it is a problem, from your

perspective, in the reporting back of the money spent. The idea of the Public

Accounts Committee I suppose is to see that every dollar is followed to the end

and then someone is accountable for it. If there is a gap somewhere in this

reporting back these are the gaps, I guess, that the Auditor General would like

to see filled, you know tightened up.

MR. BREEN: Yes, Mr. Chairman, when you mentioned

$450 million or whatever, I think you could probably isolate that down to about

$65 million if you extract teacher's salaries; you extract the capital grant

which is funnelled through the DECs; if you look at school transportation which

is contract based and paid by Government - it has to be approved by Government -

or the school board busing where the school board owns its own busing and has to

be approved by Government otherwise it is a 90-10 split, 10 per cent by the

school board and 90 per cent by Government. You are talking roughly about $66

million I would think in calculation of monies that boards have some

flexibility, and I say some because out of that you have support staff salaries

- and you are constrained by collective agreements in that area - so when you

look at monies really that are discretionary monies you are looking at what is

in the instructional budget, which is very little.

School tax monies represent about another $30 million

which boards have discretion to use between operating and capital depending upon

the situation with a particular board.

So, I think $450 million is kind of overstating the

magnitude of the monies that are available to be directed.

Certainly, as a school board, I have always felt very

comfortable with the fact that we had a chartered accountant for them and say

for my own board, Ernst & Young would come in at the end of each year and would

do an exhaustive audit. In my view it was an exhaustive audit, they would spend

close to a month up there pretty well, and the Board would be given a statement

and they would come in at the meeting of the board and go through it. Sometimes

we would have a management letter, other times we would not, but certainly we

felt some comfort in the fact that we had been given a fiscal clean bill of

health at the end of the day.

In terms of the Department's role, I presume spot

audits or in the old days I guess there were inspectors, if that were to be done

I cannot see anybody having a problem with that, there is no one wanting to hide

anything. I guess the biggest problem we have is that we do not have enough to

go around. In terms of preparing a budget and submitting it to government so

they could better plan their own fiscal deployment of money, if that would get

us more money to do the things that we have to do, well so be it. But, my own

experience has been over the last twenty years that we seem to be in a catch-up

position all the time and that programmes are planned, initiatives are taken and

we are asked to do these things without even knowing where the money is coming

from to do them or what the resources are.

So, if this process of consultation or inspection or

whatever would fine-tune the system a little bit better and would allow probably

for better planning, long range fiscal planning, I do not think any school board

in the Province would have an objection to it. But I think to a school board you

would say right now that we submit an annual financial statement to the

department. Presumably the department, if they are not happy with that

statement, have resources within Government that they could consult and find out

if there is something wrong with this particular school board. If it means a

team of auditors going in and having a look at it from top to bottom I presume

that is within the mandate of the department to do, since they are paying the

shot. I cannot see anyone in our organization having a problem with that.

MR. CHAIRMAN: I do not think, as we have gone

through the different hearings with all groups and agencies, I have not seen

anyone yet who has argued against proper reporting and so on, and in some cases

because of the system set up, it is not perfect, it is not what the Auditor

General's office probably would like to see; there is always room for

improvements and quite often it is one of our own recommendations as we make our

own report, that some fine tuning had to be done in the reporting system.

Mr. Drover.

MR. DROVER: I may add for information purposes,

one of the issues we mentioned was that a number of the boards were running

deficits and I think both you and Kevin have pointed out the limited budget that

is provided, particularly in the operating area in the school board. That, I

guess, emphasizes the situation in permitting a school board to run a deficit

and that if it does run a deficit or accumulate it, there is obviously the

possibility of large interest payments required, in which case there is a

possibility that maybe the amount that is required to be paid on interest could

be coming from funds that were intended by other sources, either to the

Department of Education level or by the Legislators themselves to be utilized in

the education sector and that is a possibility that they might have to concern

themselves with.

The other thing is, to address the issue to which

Kevin referred to on the financial statements. Certainly, no Auditor General

gets into a position of criticizing his peers. I mean Ernst and Young - I take

considerable pride in the fact that I trained with Ernst and Young, but, that is

not the intent.

The public sector auditors perform an attest audit

which is the two paragraph standard format that goes on the financial statements

of the Province. I think one must appreciate that in this field, in the public

sector, where you are using provincial money or which is referred to as public

money, there is a second part of that, in that, in addition to getting a report

on the financial transactions of the body, one must also get a report from an

independent, whether it is Ernst and Young, Peat, Marwick, whatever firm, or

whether it be in fact maybe the Auditor General, but that you get an independent

assessment that: OK in addition to its financial transactions, you took the

money that you gave it, it paid this out and it had a lot of strong controls

over its financial transactions, there may be other legislation that is in

place, such as the Public Tender Act, such as Local Preference Policies, which

really one must comply with, and the public sector auditors I think, would have

to admit themselves that they are not engaged at the present time to do that.

We have had, and I pointed out to the committee, and I

apologize for stating it again today, but I am stating it under another topic;

we have had a lot of discussion over the last couple of years with the

Department of Health, in working with an in-house committee, with Mr. Lemon and

with members of the Treasury Board Secretariat, whereby the Department of Health

will now request certain hospitals to have their auditors do an expanded review.

In addition to getting their financial statements,

attest audit financial statements themselves, they will then have a list of

about seven or eight points which the auditor adds his opinion to; in other

words, did they comply with the Public Tender Act? The auditor answers 'yes or

no' and then the auditor issues an opinion back to the Department of Health.

That really would go a long way to strengthen

accountability in an independent format, that is basically what we are talking

about; we are not talking about criticizing in any way, shape or form, any

financial statements that come in from the school boards, we would address that

behind the scenes afterwards, but that is not the criticism. The criticism is

that there is another part of this process. Now the other thing I might add, and

I am not sure if it came out clearly yesterday, is that the Auditor General's

office has the capabilities to do that, but if you put the Auditor General to

doing that, then he really becomes part of the system, because really, that

should be part of the system in the Department of Education and the Auditor

General should then be in a position to just review that.

That should be done by someone entirely, and I am

saying to you that while the office may have the capability of doing it, it

should not, in our opinion, be the one who should do it; it should be part of a

control system within the Department of Education itself, they should be

controlling their own money.

I do not know if you follow what I mean, Mr. Chairman,

but that just addresses the two points that came as a result of your opening

discussion on deficits and on financial statements.

MR. CHAIRMAN: Mr. Breen.

MR. BREEN: From my own experience before we are

given permission to do any capital works we have to have the approval of both

the Department and the DECs, the appropriate education council. And there is a

number of tests that go into that particular discretion, one of which is

adherence to the Public Tendering Act. My own school board had a school

construction in the Goulds in 1987, and because one of the sub-trades was not

adhering to some little nuance within the Public Tendering Act, that project was

put on hold for something like two months until the Department of Development -

is it the Department of Development that had the Public Tendering Act?

AN HON. MEMBER: Works, Services and

Transportation.

MR. BREEN: Works, Services and Transportation,

okay. Until they were satisfied that a particular need was addressed there, we

were dead in the water. We did not have the permit from the DEC nor from the

Department to go ahead, and the DECs would only pay us on what they call an

invoice basis. In other words we have to satisfy them that all of these checks

and balances are in place and are being adhered to before any money is

dispersed.

Now the second point: what I am hearing this morning

is that whatever is set up with the Department to kind of tighten this whole

process then I am sure if it were communicated to school boards as part of -

here is a new regime that you have to adhere to and you have to fit into and

report back to, then fine, but from what I am hearing from the Auditor General's

Department is that the reporting is being looked at, but school boards are

reporting what they have to report.

MR. CHAIRMAN: According to legislation.

MR. BREEN: According to the legislation. Well now

if there is something wrong with that then let's change it and we will report in

a different way.

MR. CHAIRMAN: I think this is the whole idea. Mr.

Gover, on a point you made you wanted to make a short reference because Mr. Reid

is waiting for a line of questioning.

MR. GOVER: On that point just to try to put it in

perspective. Yesterday we had the same issue with the DECs on the Public Tender

Act, and no one disputes, or at least there is no basis to dispute the fact that

the school board system may be perfect, that the DEC system may be perfect to

ensure compliance with the Act. But what the Auditor General is saying is that

there is no one within the Department of Education who was sent out to

independently inspect the contracts and records of the DECs and the school

boards to satisfy the Department itself that the Act is being complied with. You

say the Act is being complied with, the DEC's say the Act is being complied

with, you have an internal system to make sure the Act is complied with, but

when it comes right down to it, the only way the Department of Education knows

the Act is being complied with is that they have to believe you. And what the

Auditor General is saying is that in order to ensure that there is compliance,

independently the Department of Education is going to have to send someone in to

check that or your external auditor is going to have to say not only that your

statements are done in accordance with generally accepted accounting principles,

but that you have also complied with the applicable legislation. No one is

saying that you are not complying. The only thing from the Department's point of

view is they have not sent anyone to check it independently, they have to take

your word for it.

MR. BREEN: Mr. Gover, what is the role of the

engineer at the Department of Education who looks at the submission which is

sent to the DECs, DECs send it to the Department, there are certain tests that

are done before the approval. Every piece of school construction in this

Province has to be approved by the Department of Education. You cannot do it

without it. What determinations are they making before they give you that go

ahead?

MR. GOVER: All I can say is in the Auditor

General's opinion they are not making those determinations which are required

for the Department to - what we are saying here is not that the school boards or

the DECs do not have their act in order, what we are saying is the department

does not have its act in order because it has no independent verification that

the funds it is allocating for school construction are actually (

a) being spent

for school construction, and (

b) are being spent in compliance with the Public

Tenders Act.

MR. BREEN: That is a revelation to me.

MR. GOVER: Mr. Drover is that correct?

MR. DROVER: Yes. I think, Mr. Chairman, one thing

to add to that in addition to the consultation on the heavy capital issue, I

will try not to get into it in too much detail because it comes dangerously

close to what we are into our findings in the current year.

The Public Tender Act also applies to items that are

of a lesser amount, such as maintenance, such as the purchase of a carpet, such

as the purchase of a contract for oil or anything of that nature, and I think

these issues must be considered. In other words what we are saying is that there

must be a regime, a system in place within each one of these boards to say that

everything in excess of $5000, as each department of Government is required to

do, everything in excess of $5000 must be referred to, to ensure that the Public

Tendering Act has been complied with, there have been either calls for

submissions independently or else it has gone right straight to tender. That is

the law in the Province and there is no option on that. By having someone at the

Department of Works, Services and Transportation look at the document, that does

not serve the purpose, that does not complete it. Now, on a capital

construction, yes, quite honestly there probably are public tenders called on

that. I would say, yes, the visible ones, maybe. But if one were to get into the

other areas, I think that Kevin is probably right, maybe someone in the

Department of Education has not sat down with all the school boards and educated

them to the fact that these are the procedures we have to follow in the

Department of Education and these are also the procedures you have to follow on

the Public Tender Act issue. That is just one act of many.

MR. GOVER: Let us just move off because that is

just one thing and we can get into that, but just to illustrate the point about

the independent check. Item 7 in the Auditor General's Report basically states

that grants are paid to school boards primarily based on student enrolment, the

details of which are supplied by the school boards to the Department of

Education, so that if a school board does its enrolment and supplies it to the

Department the Department of Education then does a calculation and pays out the

grant based upon the information you have supplied. They are taking your word

for it as to what the enrolment is. What the Auditor General is saying is that

no one goes out and checks to make sure that the enrolment figures you sent in

are accurate. Am I correct on that?

MR. DROVER: That is correct, and I can confirm

right now that that is still the system. They do some checks relating to

population trends and that sort of thing but with regard to checking the exact

number: the Department of Education does not go out, inspectors, auditors, or

whatever, do not go out to independently confirm that number. That is going to

be a problem in the current report as well.

MR. CHAIRMAN: Where you are talking 125,000

students in our schools, the only way to verify it, I suppose, is for somebody

to do a head count and hope everyone is in school, and then you hope they are

just not sitting there. You have superintendents who are sort of the middle men

between the local board and the Department. It is the superintendent, the

executive director, the chief executive officer at the board level who collects

all the information and who then sends it on to the Department on behalf of the

board. He in turn of course gets it from the schools as registration is

completed in September when schools open. How would the Department verify the

fact that Tom Jones, the Superintendent of Exploits Board, says that we have

1374 kids registered? Would somebody have to go out and go from school to school

and count heads? I know what you are saying, verification, we are paying a grant

based upon the number of people who are in the school, and that is right, but if

some guy sits down and rips off a list saying we have 42,000 students where he

only has 22,000, then the people in the Department accept his word unless they

are astute enough to know the difference, which they would on any great

discrepancy, but if you had fifteen or twenty students I am sure it would not be

picked up. How do you verify without going out and doing the actual count? How

do you verify it then, even if you do do an actual count?

MR. DROVER: I can try to address your point

because I think it is a good point to compare with, and I just feel the

independent auditor can certainly get involved in the school board. First of all

each one of these little heads out there, and by the way I have four, myself and

Sharon have four of those little heads out there somewhere in the system, and

each one of these is, I think, $275 per, so you can tie it into dollars. In

other words that is $275 per. If the Department of Education were to say to each

one of the school boards we want a certificate, or whatever you want to

call it from your auditor indicating that you have a

system in place - and by the way I would go out on a limb and say that I think

there probably is, because they do have an attendance system in place, that is

in place right now and it is a long standing one - I do not think it is a major

difficulty to do it because the system exists right now that is coming up to the

board level. I think all it would be is for the auditor to turn around, assess

the system and see that the information coming up is accurate, and then once a

year or whatever the case might be turn around and write the Department of

Education and say okay, this school board has 10,000 students. We have tested

five schools or whatever the case may be and we have satisfied ourselves that

the board does have 10,000 students in attendance there. The department then has

something that is independent that it can rely on.

Now, the only other way to do it would be to turn

around and have inspectors at the Department level who would have to go out and

do it, it would be a more onerous task for them because the auditors are already

out there getting this information. So, that is very similar to what we are

talking about over in the Department of Health. In other words, there are

certain expansions that you can do to the auditor's role but it does give some

assurance to the Minister of Education and to the Deputy Minister that I now

have independent assurance, if you will, that there are in fact - I do not know

how many students there are in the Province but let us say 100,000-odd -

AN HON. MEMBER: One hundred and thirty.

MR. DROVER: - 130,000 students in the Province. I

have thirty-five auditor's reports here and I add them all up and when the

Minister goes to the House looking for 130,000 times $275 for that grant then he

has some assurance himself independent of the others.

MR. CHAIRMAN: Mr. Breen.

MR. BREEN: Mr. Chairman, if you listen to this you

could say that the superintendent writes a letter, independent of everyone else,

saying that he has 20,000 kids in his district, when really what it is, there is

a certification from the classroom teacher, signed by the principal, signed by

the assistant superintendent for personnel, gone through the superintendent's

office and eventually signed by the board chairman to the department. So, I

mean, there is a scrutiny within that particular system. Again, I come back to

cost, where is the money going to come from for all of this?

MR. CHAIRMAN: That is a very good question. What

is coming out are two things that are very, very clear. We have had this

argument on a number of occasions and that is, to do the thing perfectly - I can

understand what the auditor is saying, it is his responsibility to make sure

that for every dollar spent someone is perfectly accountable. The question is,

in the practicality of it how do you be perfectly accountable ?.... the only way

I suppose, if you want to carry it far enough, is to go out there and as I say

have somebody count heads and then you would have to verify that fellow is

really from that community - you know how far do you want to go if you want to

get down to the finest point. But from an educator's point of view, coming

through the system, what Mr. Breen says is correct. You have your registration

in the classroom and it goes from the classroom teacher to the principal to the

superintendent's office and through maybe a couple of other people to the board

and on in through the Department structures and what have you. Of course, from

year to year you have your movements and transfers in and transfers out and

everything is balanced and checked and what have you. Certainly the Department

has accepted that and it has been a long standing principle.

From the Auditor General's Office I guess what he is

saying is that an independent observation on this check would be more objective.

I can appreciate that and somewhere maybe there is a mechanism that will give

greater protection to Government for this information that is coming up through

without having to get into the detailed hassle of the examples that we gave to

carry it so far, I can see both your points. But I think as far as the dollars

that go out to school boards, based entirely upon the number of teachers and the

number of students, that is it. You get your money based upon your teacher

population and your student population, except the bus transportation which is

based on public tender.

So, consequently all of these can be verified unless

somebody wants to manipulate figures at the classroom level and get away from

all the checks up through which is practically impossible, consequently, I can

see where everybody would be satisfied, except perhaps, the auditor - yes, Mr.

Drover.

MR. DROVER: Mr. Chairman, I think that legislative

auditors right across the country: this is as fundamental as the audited

financial statements, it is that fundamental to it; in other words, one might

expand this discussion and say, well, the financial statements came in from the

school board and we are going to get the superintendent to sign them and say

that everything is great; we are going to get the business manager to sign them

and say that he is satisfied with them, so we do not need an audit done on the

financial statements of the school board, and just using that as an example,

that certainly would not be acceptable to any Minister of Education or

otherwise.

I think that there are laws and procedures in place

when you are dealing with public money and I think that the way any Auditor

General would have to speak on it would be, if the Legislature declares them to

be applied to the various hospital, school boards and other agencies in the

Province, then there must be some form of check.

Now, yes, an Auditor General can go out and do a test

check once every four or five years, but really, there should be a system in

place that ensures that that check is in place, and I can emphasize that knowing

what is happening with many of the school boards, particularly the larger ones,

I do not think that is a large job.

I think that, yes, what Kevin points out, that many of

these procedures are being carried out; yes, the superintendent does confirm the

number of students who exist in the school board and yes, it is passed on

independently there.

I do not think that the independent auditor would have

a major task to perform in adding some form of an independent certificate or

otherwise to that document, I really do not, I do not think that is a major

task.

MR. CHAIRMAN: Really, to see that these checks are

in place rather than carry it to, as the example I gave, to the counting of

heads -

MR. DROVER: He will give you the independent

assurance that, look, these procedures are in place, that is all, and all it

does is, as a matter of fact, it adds a lot of credence and support to the

superintendent's signature.

MR. CHAIRMAN: That is entirely a sort of a

different perspective; really, what we are talking about - and we exaggerated it

to point out if you want to get too technical about it - basically, what you are

saying is, the independent audit would just verify the checks and balances that

are already in place-

MR. DROVER: In place.

MR. CHAIRMAN: -and are now being carried out

properly in the report which gives protection to the system.

MR. DROVER: That is all, and I think firms such as

Ernst and Young and Peat Marwick are quite capable of expanding that. We are, as

I said, working with health on it now and I do not think we have encountered any

problem whatsoever and I think that may set the tone for future use of that.

MR. CHAIRMAN: But that will be a department's job

really, rather than an individual school board's job.

MR. DROVER: Exactly. This complaint is not related

to the school boards, we are not saying that there is anything wrong; we are

saying that the system does not exist within the Department of Education.

MR. BREEN: But Mr. Chairman, you know, every

recommendation for the department to do something will impinge on school boards.

Because you know, I have been around long enough to know now, that the money

coming out is getting less and less each year, and it is all coming from the one

pie, so the more you build up these internal controls, you have a cost related

factor, and it will translate into less money going out into the primary purpose

that a school board exists and that is the education of the children.

MR. CHAIRMAN: Unless the checks and balances and

the financial advice enables you to save money enough to offset it and have more

money for the real things, that is the idea I guess behind it all. The

practicality of it.

Mr. Reid, you have been waiting long enough I think.

MR. REID: Yes, I have so, sir.

At that point and just to follow up on what my

Chairman is saying then we would have to assume that if there are going to be

savings, we will have to assume that some of the things you are doing with

regards to checks and balances right now are not correct, and I do not think

that we can assume that as a committee.

I also do not believe that the question of checks and

balances is one of the schools' trustees or one of school boards; I believe you,

Mr. Breen, and what you said, that if Government wishes to introduce these

checks and balances, you then, as school boards have no choice but to follow

them and I guess Government then has no choice, but provide you the necessary

funding in order to carry them out.

MR. BREEN: I wish that were the case, Mr. Reid,

but Government in the past has done a lot of innovative things and have created

many programmes, but there has never been the funding to go along with them, and

I think you can go back to the re-organized high school programme of the 1970s,

where the whole thing was taken and turned upside down, but the money was not

there to do the job; so I mean, I take no comfort in the fact that if changes

are made we are going to get the dollars to do it. That has not been the track

record.

MR. REID: That is an argument, I guess, that the

Auditor General will have to address with the Department and the Minister

himself. Possibly that is where the Department will come in.

I have a couple of questions, Mr. Chairman. I am going

to run until break time and then I may need to come after, but I want a couple

of minutes. I want to get into something here that I do not know if our two

guests can give us some figures on, but I am interested in the accumulated

deficits of the boards in the Province. I am assuming that you two gentlemen are

speaking on behalf of all the boards.

MR. BREEN: Except the Seven Day Adventist.

MR. REID: Except the Seven Day Adventist. One

major problem that I have personally, I suppose, is that for the past number of

years we have heard of school boards in Newfoundland having some serious

problems and having to approach governments for bailouts, and the media has a

tendency to get hold of that for some reason or another and blow it out of

proportion more so than what it should be. But can you tell us, Mr. Breen: it

says here that in 1988 it showed that eighteen of the thirty-five boards were

running accumulative deficits. I have a couple of quick questions for you before

I come to my major question. How many boards in 1990 were running deficits?

MR. BREEN: I could not give you that answer

because I really do not know.

MR. REID: You do not know. What organization then

would be able to tell me that, other than your department?

MR. BREEN: The DECs. There are two things if you

run a deficit, you obviously have to get into borrowing, and borrowing has to be

approved by the appropriate council. So in order to do that you would have to

have the authority of the respective DEC. So the DECs could give you that

figure.

MR. REID: Would you make a guess at possibly the

board, the one board in Newfoundland that is probably at the present running the

highest deficit and what that deficit would be, approximately?

MR. BREEN: I would be guessing. I know my own

board has a deficit. In terms of real dollars it is fairly substantial, but

probably in terms of the size of other boards it is not that great. I do not

think we are really comparing apples to - if you look at our tax base and our

ability to generate other sources of revenue, you have to consider all that. I

can certainly get the information for you, but I would not have it at the -

MR. REID: So you would not be able to say that

approximately boards in the Province are $45 million in the hole or something

along that line?

MR. BREEN: No.

MR. REID: You do not want to answer questions for

your own board do you?

MR. BREEN: Well, I did not bring the up to date

financial information. All I know is that we have had deficits over the years,

but we have been able to carry it on our cash flow.

MR. REID: What is your board?

MR. BREEN: St. John's Roman Catholic.

MR. REID: The Roman Catholic is the second largest

in the Province is it?

MR. BREEN: It is the largest.

MR. REID: It is the largest in the Province. When

you do run a deficit, Mr. Breen, how do you handle the deficit? How do you make

your payments?

MR. BREEN: We borrow.

MR. REID: You borrow. How do you make your

payments back then? Where does the money come from.

MR. BREEN: Basically, if it wasn't for the school

tax authority, we would be bankrupt.

MR. REID: So it comes out of the school tax

authority.

MR. BREEN: Yes, that is the only money we have

that is not pegged.

MR. REID: And your interest and everything comes

from the school tax authority. What do you get from the school tax authority

here in St. John's?

MR. BREEN: I guess we probably pick up close to

$10 million.

MR. REID: What per cent would go to alleviate the

deficit, do you have any idea?

MR. BREEN: No, but we break it down into capital

and operating, depending on the situation, because we do not get enough money

from Government through the DECs to do the capital works that we need to have

done, so traditionally our board has used its own resources. When the 90/10

formula was in we built certain schools at 60/40.

MR. REID: But out of the total debt, or the total

(Inaudible) repayment on your debt what percentage of that $10 million,

approximately, I am not looking for exact figures, what percentage of that $10

million goes towards that reduction per year?

MR. BREEN: The debt reduction is a very small

portion because we are not retiring our debt as quickly as we should. We have to

service it first and then if there are monies set aside we reduce it.

MR. REID: Do you have any idea how much?

MR. BREEN: I do not want to go on the record

because I did not bring the financial records of my own board with me. I am not

chairing the Finance Committee so I am not really -

MR. REID: The point I am trying to make is it

seems like every year school boards are going further and further in debt, it

seems that way, and I do not think school tax authorities were set up in the

beginning to alleviate debt reduction, or debts in the school. I think they were

put together, or at least I feel they were put together, to enhance the quality

of education. I think that maybe we should as a committee possibly get some

information and look at that and just see how some of the boards in the Province

are stacking up.

The other question I have, Mr. Chairman - it is eleven

o'clock and I am going to stop there - I didn't get very far on that line of

thinking with Mr. Breen, I appreciate the fact that he does not have his facts

and figures with him. The Auditor General made a comment on Number 8 in his

report, the last one: in addition there is no formal reporting to the Department

for presentation to the House of Assembly. Now, you are suggesting that the

Minister of Education can stand in the House of Assembly with an outline of what

has happened to $450 million in the past fiscal year. You must have something in

your mind on this or you must be planning to make a suggestion to the Minister

or to the Government on it. What exactly would be in that report? Would it be so

detailed that we would be able to see how much money was spent in a particular

school as related to, say, janitorial services?

MR. DROVER: Probably one might say the smaller the

better. I think in our 1990 annual report, 3.6 on Page 66, we went into a review

of annual reports of departments and I think some of the information we had

anticipated would be to - and I will just go over the four or five points,

describe the departments, their agencies, mission, provide a profile on the

groups that were there and the areas served, describe the department, their

agencies, goals, describe the major activities undertaken by each program, the

financial and other resources utilized, in the client groups. This is something

that is probably not much bigger than this type of document. Describe the major

activities undertaken for each program, describe the effects of the department's

or agencies' programmes, forecast the expected future state of the client groups

and areas, and describe the significant methods used by the department or agency

to ensure compliance with the economy, efficiency and effectiveness and control

of its programs, compliance with the legislation and its successes. That just

did not originate in our office in Newfoundland. Those are standards that were

reached from British Columbia to Newfoundland and are presently being put into a

number of provinces and the federal area. So that is just a departmental annual

report that, without getting into too much details, for the reader such as the

Members of the House of Assembly, if they want more detailed information then

they can certainly go back to the House in Question Period and ask for the

details.

MR. REID: What purpose does that serve? When you

look at it that shows up in the House like all the other reports that show up in

the House of Assembly, 90 per cent of them are thrown under your desk somewhere

and eventually cleaned out, but a report like that, what benefit does it have

other than, I suppose, protect the Minister?

MR. DROVER: I think right now, Mr. Chairman, the

House of Assembly gets two documents; after a Minister's speech, the Budget

Speech, he gets this document which is the Estimates and I think what that is

doing - then at the end of one year he gets this document which is the Public

Accounts of the Province, what that is doing then is taking an accountability

document. You have given the Minister of Health over here $700 million and the

Minister of Education $600 million, you report here on the straight numbers,

that is all, these are just number (inaudible). What this type of document would

turn around and prove is that the Minister is telling you this is the money you

gave me and these are the programmes we offered, these are our successes or

failures. The regime supporting that would be this independent group that comes

in, you know the thirty-five school boards, I have summarized all of that for

you, but I have summarized it to the point where a Member of the House of

Assembly can sit down and probably, almost while he is watching the Minister

present the document, read it fairly quickly and get an understanding of the

$600 million we gave you for education in the Province. You are satisfied, Sir,

that this was properly accounted for within the laws of this Legislature. In

addition to that - if I have any questions as a result - but it is his

accountability document, the whole scheme of accountability rests with that one

document there.

MR. REID: You would not be talking about a report

on a major amount of money because as Mr. Breen said, if you take out the

teacher's salary and you take out what the school tax provides, you are not

talking about, I suppose, capital -

MR. BREEN: You are talking $65 million.

MR. REID: You are talking $65 million and I am

sure if I wanted to right now - and Mr. Breen you can answer this one - I am

sure if I wanted to today, I could go to the Department of Education and find

documentation on that $65 million. Could I not?

MR. BREEN: I think you could.

MR. DROVER: The accountability document relates to

the whole. You have given the Minister a cheque for $600 million and he must

then say to you: we spent $450 million or $400 million relating to teacher's

salaries and here is the accountability over teacher's salaries. Here are some

of the controls that are in place, there are so many teachers in the Province,

he points that out. It would be a document that basically has five, six or a

dozen headings depending upon what headings he is using here, but it would not

only just include - the $65 million would be a part of it yes - but he would

also have to be accountable for the payment of - the Minister of Education would

have to be accountable for the $100 million that goes to the university, the X

number of millions that go to the Colleges at the present time. So, he would

tell the Members of the House of Assembly here are the procedures that I have

put in place to guarantee you that there is an accountability over this money.

It is a

summary, but it is a

summary of probably - I would go out on a limb and

say fifty, sixty, or seventy reports that he has in his office. He has one from

each one of the school boards, thirty-five, one from the university, and one

from each of the eight or ten colleges, and I am up to fifty already, and he

summarizes, or someone in his office would summarize that and give you a rather

small document which basically shows you and demonstrates that he has

accountability for the $600 million that he has received. I do not know if that

is satisfactory.

MR. REID: Mr. Chairman, it is almost ten after,

let's take a break and get a coffee if you do not mind.

MR. CHAIRMAN: We will take a break for ten minutes

or so.

Recess

MR. CHAIRMAN: Before we get down to our

formalities, I am glad to hear you coming up with some new ideas.

MR. REID: May I make my final comments, Mr.

Chairman?

MR. CHAIRMAN: Mr. Reid.

MR. REID: Yes. I will direct my comment to the

Auditor General. I do not think that any of the school boards, or I suppose the

complete education system in the Province outside the Minister's office, has any

problems dealing with rules or regulations as it relates to reporting

financially to the Department and I guess to the Auditor General.

I do not mean to be nasty here, but I believe that

sometimes the Auditor General, in the office he holds, has no other choice but

to make comments relating to a better method, or better methods of reporting,

and I guess as long as there are auditor generals and new ideas coming forth

each year, like every profession I suppose, the Auditor General will continue to

insist that things be done in a certain way.

But with that said, I think we as a committee also

have to appreciate the fact that in order to satisfy the Auditor General to the

extent that he will, in future years be writing good things about Education and

Health and other departments, there needs to be a sizable amount of monies found

somewhere for departments to carry out the necessary recommendations that the

Auditor General's office suggests, and I guess that is true also of providing

the Auditor General's office with substantial amounts of money so he can go out

and actually do the job that he thinks should be done in a lot of cases; so the

bottom line is yes, I agree.

Sitting on this committee now for the past two and a

half years, there have been a number of cases where the Auditor General has been

critical of reporting, but the bottom line I think boils down to the fact that

we are living in Newfoundland and Labrador and we just do not have the

Government or nobody else has the finances in order to make the system perfect,

so we have to rely on superintendents and school board trustees and people out

in the system, whom, I suppose, are honest with us and provide us with a fair

and accurate account of what is going on.

I do not necessarily agree that every single dollar

that a school board has must be accounted for under the principles of fairness

and tendering processes and so on, because I know in my situation in Conception

Bay North, there are times when better deals can be arrived at without going to

the public tendering process sometimes, because you are closer to the people,

you know the type of work that can be done and so on.

I appreciate what the Auditor General is saying and

some of the recommendations, but I think it is necessary for us as a committee

in Government too, to realize that without the necessary funding in place it is

pretty hard to accomplish.

I would be interested, Mr. Chairman, in seeing, and I

would like to ask now officially, if there is some way that we could have tabled

the deficits of those eighteen school boards in 1988? Maybe there are more now,

but I would like to see what the deficits are on some of these boards and maybe

if we could get some sort of a spread sheet or something for the past ten years

which would indicate how much the deficit has been increasing, and with that

maybe we can convince our colleagues in education to probably help in some way

down the road if we are lucky enough to get a few extra dollars some year to try

to eliminate some of these deficits. Thank you.

MR. CHAIRMAN: Mr. Reid, just to follow up on what

you were saying, the Department of Education would have available and can make

available, the list of school boards, the deficits and what have you. In fact,

if you go back to yesterday when we met with the Denominational Education

Councils and we talked about the breakdown of $27 million, $2.5 million of that

each year goes towards deficit reduction. Many of the boards are running

deficits because of past, not necessarily present, borrowing needs not related

to current account necessarily, but most boards, I would suggest, if not all,

who have deficits have them because of past borrowing on capital where they had

to put in ten per cent of the funding up until a few years ago when some

enlightened Minister changed the rules. The boards had to put in ten per cent

and government only funded ninety per cent of school construction.

In a lot of cases, as Mr. Breen mentioned, the ninety

per cent did not provide for what the board really wanted, and the board had to

put in a lot more than ten per cent. In fact, some of the larger boards, like

the St. John's boards, under capital needs went well above and beyond what was

approved for them and had the wherewithal to do it themselves. Other boards

outside did not, so a million dollar school, which is only a small school these

days, was approved for a small rural area, that board automatically had to come

up with $100,000. Now if that happened to be a $4 million school, which is not

huge, all you are talking about here is a school for 400 - 500 students, that

was $500,000 the school board had to borrow.

Back six or seven years ago interest rates were at

twenty-two and twenty-three per cent. You can picture the amount of money a

little school board had to come up with, and that was just on one project. A

board in the run of a year might be trying to handle, one, two or three

projects. Some boards went very heavily into debt to the point where they could

just not fund it. How do you pay your interest, not to say principal, out of

your current money or your operating money each year? Where does that come from?

Well government allocates funds to boards, and this is where we talk about the

fairness being so unfair based upon the number of students. If you have ten

students you get ten times $275, whatever the amount is now, and if you have

twenty you get twice that, but you get the same amount per student. But to

provide for the educational needs of the student in area A compared to area B,

the cost is entirely different.

We talked during the break about a rural area where

every phone call you must make is a long distance call. If your co-ordinator is

going to visit schools he might have to travel over 300 miles of the roughest

kind of road, he might have to get a helicopter to fly to the island. In an area

like St. John's you can almost walk from school to school and visit all your

schools. So it makes an awful lot of difference in the cost of servicing your

children, not to say servicing anything else, then when you look at the tax base

above and beyond this little bit of government money that you get which though

given so equally based on per pupil is entirely unequal because of the amount it

costs to service each child. And that is why we introduced a grant called the

Tax Equalization Grant which gave more money to areas that could not raise their

own. The only thing that keeps many boards afloat is the money they collect from

the school tax authorities, or through the school tax authorities, ten million

dollars perhaps for the St. John's Boards alone and lesser amounts outside, but

what even adds then to the inequity of that is the fact that in St. John's you

have all your big malls, companies, businesses and all kinds of commercial tax

base and most people work in a high employment area. A lot of money is brought

into the system which in turn is given directly to the schools within this

authority and that is what, I think, a lot of people do not understand about the

school tax authority. The money is collected by them, all these dollars are put

right back into the classrooms within this area of collection and the board can

call the shots on how they spend it.

But in rural areas where the tax base is so small you

might have a fish plant that is not working and that is about it; and with a lot

of the high unemployment rate, in some areas extremely high, the tax returns

through the school tax authority once again is extremely small.

MR. WALSH: Mr. Chairman, I appreciate the history

lesson and I want to ask, where are we going?

MR. CHAIRMAN: Okay, let me get there.

We were talking about the deficits -

MR. REID: Don't interrupt the Chairman, I was

finding that quite interesting and I was going to ask the Chairman a question

after he was finished. I feel you were rudely interrupted and I think you should

continue.

MR. CHAIRMAN: I appreciate your comments and also

Mr. Walsh's, there is a limit to it. But what I was zeroing in on was the

deficits of boards -

MR. WALSH: (Inaudible) but I would like to deal

with it with the people who are here.

MR. GOVER: Exactly. I would like to hear from Mr.

Breen.

MR. CHAIRMAN: - the deficits of boards, because of

this, and that is one of the reasons why a lot of them are in trouble.

Consequently, it is going to be a while. This $2.5 million that was brought up

yesterday is helping them to get out -

MR. REID: I understand that but the problem that I

have with that is as we continue to spend more and more money on capital to

build new schools, more and more of the school tax money that is actually going

into the revenues of boards, is going towards debt reduction on capital.

MR. CHAIRMAN: No, no.

MR. REID: That is not right?

MR. CHAIRMAN: Not necessarily because number one,

right now as of a few years ago, school construction is funded 100 per cent. So

boards do not have to borrow. Really most boards are in trouble because of past

borrowing.

MR. REID: Okay.

MR. CHAIRMAN: However -

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Yes, therefore they are past

deficits.

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Current money, yes, to pay for past

borrowing unless the board -

MR. WALSH: Mr. Chairman, again with all due

respect to my colleagues at the table, I really appreciate the conversation that

we are having, but I think as a Committee we can have this any time we want. I

now find that we have witnesses here whose time is as valuable as our own and I

now find that we are feeding the answers to the witnesses so they can either

agree or contradict with us. Mr. Breen wants to answer some of these but we will

not let him.

MR. CHAIRMAN: Okay, Mr. Walsh, I appreciate your

comment and Mr. Breen in fact was going to comment on the deficits that boards

have at present and the effect of using the school tax money.

So, maybe Mr. Breen if you would, we can discuss this

at any time as was mentioned.

MR. BREEN: Mr. Chairman, I will be very brief with

this. First of all, when you talk about this grant for debt reduction, and this

was not universally accepted because there were certain boards in the Province

that felt this rewarded poor stewardship; discriminated against boards that had

kept their borrowings in line and who did not do what they considered to be the

imprudent things. That is one way of looking at it. But the underpinning for all

of this, in my view, and I am sure Mr. Hearn would share it, is that the whole

question of educational finance has to be addressed. This whole tagging the

dollars to per pupil is off-the-wall. There is no greater form of inequality

than the equal treatment of unequals. That is what we are doing here when we peg

everything to a per pupil grant, we take into no account the disparities of

demographics, of employment, of the commercial tax base, and even the whole

matter of cost of goods and services within an area. Contrary to what many

people feel, St. John's has a great tax base. It has a lot of employment but the

cost of doing business here is a lot higher than in other areas too, but none of

this has been weighed. Until we address the whole foundation, or how we ground

this, then discussions on school tax authorities and whether we should have an

equalization grant for the coast, or whatever, I think really is not getting us

anywhere. We really have to look at a different way of funding the schools. We

have to look at possibly what they call a budget approach, a block funding

approach, where you go in and negotiate your budget, whether you negotiate that

with the Department, with Treasury Board, with the DECs, or with whoever, and

the determination is made that this board, based on the demographics, based on

the number of pupils, or whatever, needs X number of dollars to determine a

foundation program and that foundation program should be a program that

addresses a basic educational program for every child in the Province, that no

matter where he or she lives they should have that type of level of educational

opportunity. We have never done that. I see we are kind of spinning our wheels

in terms of debating the kind of extraneous things we have here today, but until

we really get down and look at the root cause of why we have deficits, why

school boards are in trouble, and I do not know too many that are not, then we

are just going to exacerbate that problem in the future. If anything were to

come out of this today, and I would just like to take this opportunity to you

people who are legislators, to really think about the fact that we have to

rethink the way we have done things in the past and try to get on with something

a little bit more equitable in the future.

MR. CHAIRMAN: Mr. Breen, did not the task force on

educational finance address these tactics?

MR. BREEN: Yes, but it is gathering dust

somewhere. Here is the report here.

MR. CHAIRMAN: What is the title of the report?

MR. BREEN: Financing Greater Equality and

Excellence in the Newfoundland School Systems, June 1989. It was chaired by Cec

Roebothan and the committee Members were W. Dixon who resigned in March 1989 and

Dr. Warren who resigned in March 1989.

MR. CHAIRMAN: Actually it was chaired by Dr.

Warren and submitted by Cec Roebothan because Dr. Warren had resigned at the

time.

MR. BREEN: A lot of the work has been done. You do

not have to re-invent the wheel with this. The research has been done and the

statistics are there. I think it takes probably a little bit of a political will

to make some changes that people are a little bit fearful of.

MR. CHAIRMAN: And probably a few political

dollars.

MR. BREEN: I do not know if that determination has

really been made, of how much it is going to cost, but it is going to radically

change the way we have done things in the past. It might cause a lot of

uneasiness in that there is change, but one thing we know is the way we are

doing it now is not working.

MR. CHAIRMAN: Mr. Drover.

MR. REID: You have just got yourself a piece on

the news.

MR. WALSH: Whether or not it is a piece on the

news I would like to say it is probably the most forthright statement I have

heard towards education and our approach in the two days we have been here and I

compliment you for making the stand and making a very valid case. The 60s are

maybe here again and it is time, to not just rethink, but to act on good work

that has already been done . The way you related to the report it sounds

as though there is a lot of very good foundation in that report in your opinion.

Am I correct in assuming that?

MR. BREEN: Yes, and that is really built on other

investigations that have been done. For example the school trustees authored a

report in 1982, which was a multi-disciplinary committee, people from the

departments, superintendency, trustees and university got together and really

looked at things and this kind of built on that again, but really, it is still

hanging.

MR. WALSH: In your opinion, is it time for action?

MR. BREEN: I think it is long overdue, long

overdue.

MR. CHAIRMAN: Mr. Drover had indicated he wants to

say something.

MR. DROVER: Thank you, Mr. Chairman. I apologise

as it is not related to this specific topic, but it relates to Mr. Reid's

comments and I think they are very valid.

I will point out that our office goes through a whole

process in developing issues for the annual report, and each comment that is in

here must meet four criteria and must be relevant to the issue at hand; it must

be reasonable, cost-efficient and effective and it must be material in relating

to what happens here, so each one here is not a theoretical comment, this is a

practical comment in dealing with the situation at hand.

I might point out, as I referred to yesterday and

today as well, during the year we get involved in a number of departments, but

for the last two years we have been involved heavily in suggestions with the

Department of Health. This does not often come out, but from the executive level

of the Department of Health, we have had excellent co-operation in trying to

implement, and I think I have said that here in the past, Mr. Lemon and Dr.

Williams have been very co-operative with the office in expanding some of these

methods to the various hospitals in acquiring accountability there.

While our audit of health may be a year ahead of our

audit of education, I am not saying that we are not having co-operation at

Education at all, I am saying that our work in health is probably about a year

ahead, but by bringing it to your attention today, I hope to demonstrate that

the practicality of these recommendations, the Department of Health is taking

some of these recommendations and attempting to implement many of them in their

own accountability of the various hospitals.

That does not say that there are not any problems and

that there is nothing that we have to report, it is just saying that they have

taken it and started a system whereby they are getting the external auditors of

a number of hospitals to report back to them, and I would also say that we have

visited in the current year quite a number of hospitals and we have had

excellent co-operation; we visited, and the only way to say it is, I guess, we

have just recently completed an audit of the largest hospital in the Province

and I guess everybody probably knows which one that is, but we have had, without

doubt, excellent co-operation, but that does not say we do not have anything to

report, that just says we did have excellent co-operation there.

So the topic we are talking about today and our

recommendations here, I think are without doubt in our mind, if the willpower

rests in the department to implement them, then the only reason we make them is

for accountability purposes; that is our role as Mr. Reid quite adequately

pointed out, but they do not come off, they are not theoretical, they are

practical solutions to it, accountability.

MR. CHAIRMAN: Thank you, Mr. Drover. Mr. Reid.

MR. REID: But with that said, then it is the role

of the Auditor General through the Minister's office, to accomplish that; it is

not the role of the Auditor General, through the back door, up through the

superintendents and the boards, it should come in reverse, and the gentleman

said earlier this morning in one of his first comments; he said they have no

problem in dealing with any rules and regulations that the department should set

down, as it I suppose relates to accounting -

Thank you, Mr. Breen.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: One final question, Mr. Drover.

The School Tax Authorities themselves: does your

office or has your office in the past done spot checks or audits on these

groups? I ask that because they are called School Tax Authorities and

an Act of

the House of Assembly allows them to do what they do, and the disbursement of

funds we are quite satisfied that those funds are disbursed and so on, but has

your office done a thorough analysis of the system, for all or any of the school

tax authorities?

MR. DROVER: Prior to December 31st, last year, we

were the auditor of all the school tax authorities in the Province, all of them.

We issued the financial statements similar to the attest audit financial

statement for each school board.

As of December 31st, the School Tax Authorities, are

not really part of our primary mandate, so we vacated the area and I think all

of them, we are not doing a school tax authority right now; that does not say

that prohibits us in the future from going into one. Our last audit would have

been for December 31, 1990. I think it is 1990 that we would have done the last

audit for the school tax authorities. Everyone in the province we would have

audited up to approximately that date.

MR. WALSH: So your role from January 1, 1991

forward will be as is with any other agency, would be now to go in and do spot

checks either at your own request or on the request of some committee.

MR. DROVER: We would have to take the position

that the answer is yes. I owe it to you to point it out that there is some

debate by some that sums that are raised, and I think Mr. Gover did a good job

in raising this debate when we - and I am just trying to explain it to you. When

this Committee had one of the hospitals in, okay, we got into a discussion on

the private funds.

MR. WALSH: Yes.

MR. DROVER: All right, there was some debate by

their solicitors that private funds do not come under The Financial

Administration Act, and therefore they are not accountable to the House of

Assembly for their private funds. There is some debate in the minds of some

people, but we do not accept it, that the School Tax Authority funds are, in

fact, money that is raised by the School Tax Authority, and it does not come

under the definition of public money. We would have to address that issue. We

have never had a problem with it, but I am just trying to be fair to you to

point out the whole gambit of what is there.

Mr. Gover did a good, and I should not speak for him,

but he did a good job in summarizing similar to what you just said that if the

agency is created by

an act of the Legislature then all monies -

MR. WALSH: We have had that discussion and we

concur in that sense.

MR. DROVER: Yes, okay. So I think that is just the

debate. I wanted to bring it to your attention the debate that might rest in the

minds of some people, because I was not present when you were discussing that.

MR. BREEN: Mr. Chairman, I am astounded that that

comment could be made, that the school tax monies are not public monies. I find

that flabbergasting.

MR. CHAIRMAN: You report to the Minister on how

you spend your school tax dollars?

MR. BREEN: Budgets have to be approved by the

Minister. The tax levy is approved by the Minister.

MR. WALSH: That is one of the major flaws in the

system, Mr. Breen.

MR. DROVER: The clear, concise definition of

public money as defined under The Financial Administration Act is money that is

held by the Province, okay?

MR. CHAIRMAN: Specially given to you by the

Province. You do not get that directly from the Province?

MR. DROVER: Really the School Tax Authority, while

it is not a clear, concise Crown corporation as such, it might be defined that

way. But I mean we do not accept that. I am just pointing out how some may

conceive it.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: Mr. Chairman, the point I am leading up

to, Mr. Drover, is that I have heard those comments as well and I have a great

concern with them. And probably tomorrow's newspaper and tonight's news will

elaborate on my thoughts about it, because of that kind of an attitude and that

kind of an approach, and that is one of the reasons that this morning I called

for the abolition of the School Tax Authorities. If they were created by our

Government they should be by the Government, they can be abolished by the

Government and then we will in turn be responsible for the funds collected,

schools boards and everybody else. I argued yesterday: why did nineteen school

boards out of thirty-five not sign their audited statements to your department?

To which you corrected and said, look, you know, it did take place, just at that

point in time it had not. And I was satisfied with that. But here we are talking

in terms of $30 million to $40 million a year and somebody out there believes

that they may not be accountable to either the Government, the Auditor General

or the people of the Province. My only comment is they are dreaming in

technicolour, that is not the way the real world works.

MR. CHAIRMAN: Mr. Drover.

MR. DROVER: That is correct, Mr. Chairman, just to

jump in again. We raised the issue of private funding for hospitals, that came

before this Committee. The School Tax Authority money is another one, these

parallel each other. The other one which is probably the largest one of the lot

might be the funds that are raised by Workers' Compensation. The Workers'

Compensation Commission does not raise its funding through Government. The

Government does not write a cheque for it. But it does raise it by contributions

from employers.

Those are the three primary agencies there. Now in our

office

interpretation we would expect that is really public money and we would

treat it as such. But all I am pointing out to Mr. Walsh is that there is in the

mind of some individuals, and one must listen to it, you know, as all legal

debate.

MR. CHAIRMAN: Actually I think if we go back to

when we had the hospital boards, members of the hospital boards or executive

directors or, you know, paid personnel, basically told us they felt that the

money they collected through their fund raising drives and so on, on behalf of

the board, was not public money and they were not accountable to anybody for

that.

MR. WALSH: More importantly, Mr. Chairman, it was

not just that the employees told us, their legal counsel attempted to tell us,

and I can appreciate if someone in a position of employment has an

interpretation of what might be because in that case it can be corrected, but

when the legal counsel is sitting their challenging, I see that as completely

different than an employee with an

interpretation.

MR. CHAIRMAN: It is much the same with the school

tax authorities. I am sure if they wanted to use the same thing they are saying

look Government is not giving us this money so why should we bother telling

government how we spend it. Basically, I think, that was the reaction of some

hospital boards. That is basically where it came from, not to us from school tax

authorities, maybe there were some people in the school tax authority who may

feel that and might say it.

Mr. Hearn.

MR. HEARN: Mr. Chairman, I find it difficult to

equate private monies with school tax authority money because the school tax is

set up by

an act of the Legislation, and it is public money. But if you go out

say, from a hospital, and get private funds from private individuals then I

feel: how can you equate private monies with school tax monies, it is public

money. Up until December 1990, I am part of a school tax authority too, we were

audited by the Auditor General, we are now audited by an audit firm that has to

be approved by the Minister of Education so we are still accountable to the

Department of Education for the money we get from the school tax.

MR. CHAIRMAN: And rightly so.

MR. HEARN: Rightly so, I agree with that. We are

not talking about private funds here, we are talking about public monies that

are collected through the school tax.

MR. GOVER: I think part of the problem too with

the hospital's money, it is a discretionary pool of money and to some extent I

suppose when the school tax dollars flow to the school board that is a

discretionary source of money. The school board decides on what projects the

money is going to be spent.

AN HON. MEMBER: So, it is still accountable to the

Department of Education for that money.

MR. GOVER: Yes. But what the hospitals were doing,

I do not know if the school boards could do the same thing, but let us say that

a school board wanted a particular superintendent, they would go out with these

discretionary funds, money raised by the school tax, and say we will give you a

salary supplement over and above what the average superintend makes; we will

give you a car; we will give you a golf club membership; we will give you an

entertainment allowance; we will give you administrative overtime; we will give

you all these perks, in order to recruit a particular superintendent. The

argument is that these dollars are not being put back into education but they

are being put into perks for senior management.

So, I suppose, if a school board wanted to recruit a

particular superintendent or programme coordinator or assistant superintendent,

I mean, would a school board consider expending its funds in that particular

way, or has it expended funds in that particular way?

MR. CHAIRMAN: Mr. Breen.

MR. BREEN: Sure they have. There is what they call

an augmentation. Again, it goes back to the point that I made. It is not worth

the while for some people to aspire to the office of superintendency with the

inherent responsibilities for the spread between say a supervisor or a programme

coordinator and the salary for a superintendent. Boards have been forced to

augment the salary of the superintendent to attract a qualified person. Not that

they are trying to - I know nothing of golf club memberships and lavish

entertainment accounts but certainly there is a travel allowance and what they

call a bonus that they pay over and above what is allocated by the Department.

MR. CHAIRMAN: A signing bonus.

MR. BREEN: Yes, a multi-year contract.

MR. GOVER: I see. Then there is the controversy as

to like the hospital boards take their discretionary funds and the board members

go off on various conferences and these conferences may very well be beneficial,

I do not dispute that, but there are some people who think that maybe that is

not an appropriate use of funds.

So what about the school tax money, would that be used

to send board members away to conferences?

MR. BREEN: It is hard to know which dollar is

spent to do what, whether it pays the light bill or to send someone to a

conference but certainly there is a vote in a lot of school board budgets for

professional development for both teachers and for trustees. Obviously, it has

to be paid for.

MR. GOVER: So, what you are saying is that out and

about the Province in order to recruit certain superintendents there is a salary

bonus over and above the allocation provided by the Department of Education.

MR. BREEN: Certain boards may have to augment the

salary of a superintendent to attract a qualified and suitable candidate.

MR. GOVER: I see.

AN HON. MEMBER: Only superintendents.

MR. CHAIRMAN: A good question.

MR. BREEN: To my knowledge.

AN HON. MEMBER: What about specialists people?

MR. BREEN: There is a specialists bonus from the

Department to cover that.

MR. CHAIRMAN: Could boards augment the salary of a

teacher if they wanted a particular music teacher?

MR. BREEN: No, because that would be contrary to

the collective agreement. You cannot make an individual deal with a teacher.

MR. CHAIRMAN: It is only when dealing with people

outside the collective agreement.

MR. BREEN: A superintendent is not constrained by

a collective agreement.

MR. CHAIRMAN: Mr. Breen, yesterday when we had the

DECs here we got into a discussion on the cost of delivering educational

programmes throughout the Province. We, of course, got involved in the cost of

Denominational Education, and they talked about co-operation, especially

co-operation which is being fostered these days as compared to, maybe, the past

or what have you. Do you find that in St. John's where you operate right next to

and cross the boundaries of another major board, do you find that you co-operate

in any way with specialists. Well, the transportation problem you do not have

because Government does not pay for transportation in St. John's, but whatever.

MR. BREEN: Yes, we do. For example, on Bell Island

we have a co-operative programme with the Integrated Board and certain

specialists are crossing board boundaries to give certain expertise.

MR. CHAIRMAN: Could you see any great saving if,

instead of having two major boards in St. John's you only had one?

MR. BREEN: No, personally I cannot and it is

really not my mandate to address that. However, you are looking at the Roman

Catholic Board serving 20,000 kids and the Integrated Board serving probably

12,000 to 13,000 kids and there probably would be pockets. Now, I am not

speaking for the St. John's Board but, for example, the inner city is a problem

right now for both school boards and there could probably be an area to be

addressed there in terms of housing. We have a fleeting population for both

boards. Everyone is moving to the suburbs, and they are expecting the school

boards to chase them out there with buildings when we basically empty the

enclave. So there may have to be a rethinking of that whole thing and that could

possibly mean a co-operative venture with the other board.

There are certain things being talked about now. For

example, we need to house some children in the Portugal Cove - St. Phillip's

area that the Integrated Board is involved in and, conversely, they have a

problem in the Pouch Cove - Flatrock area where we may be doing some

construction. So, these things are being talked about.

MR. CHAIRMAN: That follows along the line, I

think, of basically what the DECs talked about yesterday.

Mr. Reid.

MR. REID: I should have asked this question

yesterday, I guess, but I am going to ask you because you are a superintendent,

are you not?

MR. BREEN: No, I am not a superintendent, I am a

trustee.

MR. REID: Oh, I am sorry. I do not know if anyone

asked this before or not. I am afraid maybe Loyola has asked it. A former member

of the Committee approached me this morning and asked this question of me. I

want to ask it, but I do not know if the answer has been given or not yet. What

is the rationale - maybe you have gone through this already and I have not heard

it - of spending, let us say hypothetically, $3.5 million on a school in, well,

you just said Pouch Cove, so we will use Pouch cove, for let us say 400

students, and let us go out somewhere in Placentia Bay with 400 students and you

only spend, say, $2.5 million? That happens. Do you know what I am getting at?

MR. BREEN: What, the varying cost based on - I

really do not know. I mean, I presume the cost of material and the cost of

labour would vary in different parts of the Province.

MR. HEWLETT: You do not provide a richer

educational environment for one crowd versus another?

MR. BREEN: Well, each school board is autonomous.

I mean, they can pretty well add on to the curriculum as they see fit, with the

approval of the Department. I presume you are talking about cost per square foot

to construct, are you?

MR. REID: Well, not necessarily. I will just give

you another example, one that I am closer to. The school that I taught in, the

CIC in Carbonear, cost, I think, $3.8 million and it is a pretty modern school

with labs and a whole host of the modern things of teaching, work shops and all

kinds of thing. A year after they built a high school in Harbour Grace, which

was next door, and I am talking about the integrated system, and the high school

in Harbour Grace, I know they are serving less kids, but there is nothing in the

school. There are no labs in comparison to what is in the high school in

Carbonear, the gymnasium is not half as good as the one that is in Carbonear. A

lot of kids right now in Harbour Grace are leaving that school and coming down

to the other school because the one in Carbonear is offering a better programme,

and the reason that they are offering a better programme is because they have

better labs and the facilities to offer. What rationale is used in a case like

that where one group of kids would be deprived of a level of education that

someone two miles away would be able to obtain?

MR. BREEN: I am not trying to duck the question,

but it is too bad you did not ask it yesterday when the IEC were here.

MR. REID: It was actually asked and answered.

MR. CHAIRMAN: Mr. Breen is the Chairman of a

school board so he has to fight for funding to build whatever schools he is

going to build, and undoubtably he will fight to get as much as he can. Now the

DECs make that determination, how much they will give you, and I think the

question Mr. Reid asked and why it was asked was because I made the statement

yesterday. I thought that the boards in St. John's, because they are big and

powerful and have good lobbyists and experienced personnel sometimes, you get a

much better deal from the DECs than some smaller boards out there, and when we

are talking about equal population, you know, if you are asking to build a

school in the inner city to service 600 people you will get x number of dollars,

if a small rural board comes in to look to build a school for 600 they seem to

get a lot less, and the school that is put out there to serve the same number of

students is in no way comparable to the one in the inner city. Is it because of

the power of the board?

MR. BREEN: But you are talking about two rural

schools here.

MR. CHAIRMAN: But here we are talking about two

within the one board. That really throws me off.

MR. REID: I wanted to get a personal opinion from

you on it because I really -

MR. BREEN: I do not know, really. If I knew I

would offer an opinion, but I do not know.

MR. REID: But that is happening, and you know it

is happening all over the Province, especially in rural Newfoundland.

MR. BREEN: Well I did not know of the particular

incident you just reported, but I do not disbelieve you. But as to why, I really

do not know.

MR. HEWLETT: Is that justified in your opinion,

Mr. Hearn?

MR. J. HEARN: I would like to ask Mr. Reid a

question. What time was the school build, just recently?

MR. REID: Yes, well it was in a matter of two

years, the one in - well I will use that as an example. I am going to pick on my

colleague now from -

MR. J. HEARN: Can I finish speaking please?

MR. REID: Okay, I am sorry.

MR. J. HEARN: A few years ago, not too many years

ago, only a couple of years ago, the school boards had to come up with ten per

cent of the funding, and if that was so in Harbour Grace, Carbonear maybe the

school board could not afford that ten per cent to go to the $3 million that the

good school with all the labs and everything went on in Carbonear. So I just -

MR. CHAIRMAN: What school was built first?

MR. REID: CIC and then St. Paul's was built a year

and a half after.

MR. CHAIRMAN: It should be the other way around.

MR. BREEN: The good one was built first though.

MR. CHAIRMAN: The good one was built first, but

(inaudible) -

MR. BREEN: Maybe they did not have enough money to

build the second one. I would be just guessing. I really do not know.

MR. HEARN: I think now that most of the schools

that are funded through the boards are funded on an equity basis because that

ten per cent is not involved and if the school board requests $2 million to

build a school then they get that $2 million approved by the DECs. So the ten

per cent is not a factor, but I just wondered if that ten per cent was a factor

with the two schools you are talking about, but apparently it (inaudible) -

MR. REID: Well I think it was in 1984 I moved into

CIC and then it must of been around 1987 -

MR. BREEN: In both cases then the ten per cent -

MR. REID: - when the other one was started. And I

do not believe, by the way, Mr. Breen, that there is no influence. I am sure

there is. And I do not care who sits here and tells me that there is not, but

there is a certain amount of influence because certain places get better

facilities than others.

MR. BREEN: I did not say there wasn't any

influence.

MR. REID: No, someone up here said there was not.

I do not believe that there isn't. I remember going to Springdale some years ago

when the previous Premier opened a new

section on Grant Collegiate down there

and I walked through it, after teaching for fifteen years in the outdoor toilet

in which I was teaching in Carbonear, it almost made me sick to see the

facilities that were in Springdale, compared to what we had and what other

places in the Province had.

Do not tell me, and I hope that there is nobody at the

table, be it previous Ministers of Education or not, that the Premier of

Newfoundland or politicians did not and do not have influence when it comes to

buildings, school buildings in this Province, because they do.

Let me finish, I am not finished, I want to get this

across to this character, my friend over here; and then two or three years ago,

build another monstrosity. I should not call it a monstrosity, I should call it

a piece of art, the new Pentecostal High School, which I am sure if you searched

this Province, you would not find a better facility, and I do not know but

Eastern Canada than what they have down there, so with all that said, there is

definitely something going on that some of us so-called new people at this dirty

political game which we are at, do not know about and one of these days I am

going to get my foot in the door and find out and maybe I might get a new school

for Northern Bay in the lower part of my district.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: Mr. Chairman, if what Mr. Reid is

saying is correct, I have to do everything I can to get my school in Paradise

finished off, Father out there has been driving me absolutely berserk because it

is not finished and I may take these gentlemen to lunch afterwards, if influence

can be used, I would like to have that school finished as well.

MR. CHAIRMAN: I suggest, Mr. Walsh you would be

wasting your money.

SOME HON. MEMBERS: Hear, hear!

MR. CHAIRMAN: You should have taken them to lunch

yesterday.

I must say I disagree with Mr. Reid, because from many

experiences I have had and I think any politician regardless of stripe will tell

you, despite the fact that the politician might write a letter to the DECs,

Government, through the Department of Education, gives right now, about $22

million for school construction to the DECs.

They determine, independently, now once again,

independently, question mark, how that money is spent-

MR. HEWLETT: (Inaudible).

MR. CHAIRMAN: - it is supposed to be spent on

priorities and the money is allocated according to needs. I think, if you look

at how money is distributed over X number of years, you will find that it is

shared fairly equally anyway, which is fair ball to a point as long as

priorities are addressed.

Let me ask you a question on this, when you are going

after a new school, who determines how much money you get; do you make the

request: we need a school and here is the cost, it is going to be $5 million or

does the CEC come in and determine how much the school is going (inaudible)?

MR. BREEN: No, you submit to the CEC your request

and then they come back and say: sure, but knock 10 feet off the gym and you do

not need this lab up here and you do not need this grade of whatever and we are

going to give you $4.2, and then you are back into a kind -

MR. CHAIRMAN: Lobbying with them.

MR. BREEN: -of a negotiation with them.

MR. CHAIRMAN: But the more you lobby and the

better your lobbyists are, the better chance you have of getting what you want.

MR. BREEN: Well you certainly have meetings with

them and you know you try to get your point across.

MR. CHAIRMAN: Because as an example, and one of

the reasons I think the one that you were asked about this morning, is one that

happened up my way where three schools were being built; two by the St. John's

Roman Catholic Board, your own board, and one by an outside rural board, for the

same I think, roughly 600 students, each one, give or take a half a dozen, not

enough to be significant in any size.

The two in the St. John's Board, the offer was between

$4 million and $5 million and the one for outside was $2 million, that is very

significant; it ended up to be $4 million after a lot of lobbying, yes and

interventions.

You do not tell the CECs basically, I do not think

there is anybody who would go in there and say, you better allocate - I do not

think that happens, I think they -

MR. BREEN: I have never experienced that.

MR. CHAIRMAN: No, but lobbying helps. The one on

the Pentecostal school, just remarking on Springdale, yesterday Pastor Batstone,

when he was here said: they pay 31 per cent of capital construction they are

contributing directly, which is significant in any school construction.

MR. HEWLETT: And it is kindergarten to Grade XII

and a church, all under one roof, cradle to the grave.

MR. CHAIRMAN: Any further questions or comments?

I think once again we have had some open and frank

discussions, and getting to the point directly, I think we both see what the

other is saying. The Auditor would say there should be a more independent

general verification of finances when it involves so much money and the board is

saying we are doing what we are required to do but if somebody wants to do it

better go ahead and do it and pay for it. That is fair ball. I think the other

thing coming out of it all is we are talking about a lot of money and perhaps if

it were re-arranged a bit better we would get a better bang for the dollars that

are involved. I think your message is loud and clear, Mr. Breen, and hopefully

we will get it across, especially since the directions are all set there and it

is only a matter of carrying them out.

MR. BREEN: Mr. Chairman, there is one source of

funding that has not even been identified here today. I think we are doing more

than we should be doing almost if you looked at the amount of money that is

raised locally by PTAs.

MR. CHAIRMAN: Or even by kids.

MR. BREEN: Well, through kids with candy bar

sales, sweeps, bake sales, card parties, it is astronomical, and they guard that

turf rather jealously because you cannot really get a handle on the amount of

money that is being raised but I know it is significant.

MR. CHAIRMAN: There are many little pieces of

equipment and aids in our schools today that would not be there except for that,

many of the trips and so on, the educational jaunts that our kids take. I agree

with that 100 per cent.

MR. REID: But the general public are getting to a

point where it is almost saturated now, I think. The general public are getting

to a point where sooner or later people are going to start saying, no. I do not

know what it is like in St. John's but I know there are a lot of areas in the

Province where it is just unbelievable, every second day there is somebody

knocking on your door looking for something for a school, especially if you are

in a fair size place where you have the Pentecostal, you have the United Church,

the Integrated system, and the Roman Catholic system. You have three of them

coming at you the one time. That is a good point and it would be interesting if

there was some way somebody could get a handle on that in the whole Province and

see how many millions of dollars, because you are definitely talking millions -

MR. BREEN: Oh, you are talking millions. There is

no question about that.

MR. REID: - how much is going into the system like

that.

MR. CHAIRMAN: Could we operate alone on Government

money if we withdrew that? Where would you be today if you did not have school

tax authorities and the PTA funding?

MR. BREEN: Bankrupt.

MR. CHAIRMAN: All boards I would say, or just

about.

MR. BREEN: The rich St. John's boards would be

bankrupt.

MR HEARN: Mr. Chairman, I think one thing that

should be noted, too, is the volunteer work that goes into the school boards

from the school trustees. The amount of time that has been put in it has never

been accountable to the Auditor General or anybody.

We figured out one afternoon at a school board that if

we were paid

for the number of hours and days we put in it would

come to twelve and a half cents an hour for the year, the amount of time we put

in school boards.

AN HON. MEMBER: Mr. Hearn, welcome to the

political world.

MR. HEARN: You do not get paid either?

MR. CHAIRMAN: We get paid more than that.

MR. HEARN: That is what we figured out, Mr.

Chairman. We get twelve and a half cents an hour with all the meetings, the

committee meetings, you know.

MR. CHAIRMAN: But you are not suppose to be

getting paid

whereas we are and, of course, we are suppose to be getting highly

paid. This is factual. The second year I was elected, when we had all kinds of

problems in the district and a lot of meetings, my district is a rural one and

covers 250 miles of the roughest kind of roads, an actual breakdown over a four

or five month period of the hours that I spent and the pay I was getting, I was

getting $2.39 an hour for the actual time that I spent on the job.

AN HON. MEMBER: Some of us are worth more and some

of us are worth less you see.

MR. HEARN: I am not complaining about that because

we go in as a school trustee and we know there is no pay for it, it is like most

of municipal councils here, there is just no pay. You go in and you spend your

time.

MR. CHAIRMAN: But if you had to pay and if you did

not have the volunteers that we have what would it cost to service (inaudible)?

MR. BREEN: Then you know, Mr. Gover's point that

you send a trustee or two to a workshop or two, it is a very small price in

terms of the overall expenditure that you are making.

MR. CHAIRMAN: That is right.

AN HON. MEMBER: Motion to adjourn, Sir.

MR. CHAIRMAN: Well, we have not given them a

chance for concluding remarks so Mr. Drover if you would like to give your

summation.

MR. DROVER: Thank you, Mr. Chairman.

We have summarized earlier today the comments on the

transfer payments particularly relating to school boards in the Province. We

noted that our comments related to our audit of the Department of Education and

that in the current year we have had a number of visits to a number of school

boards and they will be reported on in the 1991 Annual Report of the Auditor

General.

We also commented today, as a result of some

discussion, on the role of the Auditor General and the recommendations that he

makes and the criteria that we must go through in developing these

recommendations.

We also commented on the fact, that as supported in

our annual report, the reports of the various departments and the type of

accountability document that they should hold in place.

From our office point of view one highlight that I see

from this morning was the discussion on public money. We take some direction

from the Committee and having heard the views of the Committee I can certainly

assure you that while we have not been into the school tax authorities in the

current year, we share your comments. I would anticipate that maybe in the next

year we would follow up on some of that. I certainly took a fair bit of clear

direction on that from you.

To summarize, most of the comments in the Auditor

General's Report page 65, 66, and 67 still stand. By the way what we are saying

is not isolated here and it is not off-the-wall. I only have one copy with me,

but this is a recent pamphlet put out by the Comptroller General of Canada to

all of the agencies of the Federal Government and it deals exactly with the

issues - and I read from it yesterday - that we have here and it gives the

direction there of how to hold accountability. I will just read one sentence

here from it, it says: Deputy heads - being the heads of the Department of

Education - should expect their senior managers to provide them with assurance

that five conditions for accountability are met, to allow the deputies and their

managers to report confidentially on their stewardship - I have given you the

topic on the Minister's report - to organizations outside the department or

agencies that would be similar to school boards and that, they could require

these assurances to be supported by evidence, in which case the staff go out and

do it, or by independent review. We have had a lot of discussion on that today

and yesterday and I think that is a highlight of the last two days, Mr.

Chairman, the independent review aspect or by the Department.

So, I guess to come back to it, we feel that the

Department of Education should strengthen its independent review, whether it

goes similar to the Department of Health in obtaining that information from

independent auditors or whether it goes and increases internal audit or whatever

within their own function. That recommendation will be certainly addressed in

considerable detail in the

1991 Annual Report as a result of the current year's

audits. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, very much.

Mr. Breen.

MR. BREEN: That is all, Mr. Chairman.

MR. CHAIRMAN: Well, I would like to thank you for

coming in. As the Auditor General's Office has mentioned, they are doing audits

now on boards which will give us a chance next year to look at any weaknesses in

the system. At that time, whoever is here, because, as my colleague, the Member

for Green Bay has indicated, both of us, along with Mr. Tobin, I guess, were

nominated for the Committee even though it is a House Committee and we are

supposed to be here until the end of the term according to precedent and general

rules and regulations. We are nominated to the Committee for appointment by our

leader who is now, himself, resigning. So consequently the logical thing for all

of us to do, before he officially leaves, is to submit our own resignations so

that the new leader will have the right to make such appointments to committees.

I will be, as Mr. Hewlett has already done, I believe, I think he has indicated

publicly, submitting my resignation to Mr. Rideout and the new leader, whoever

he will be, will be nominating somebody to Chair -

AN HON. MEMBER: Whoever he will be?

MR. CHAIRMAN: Or she, I am sorry about that. -

whoever he or she will be to be the Chair of the Public Accounts.

I would suggest to the members who will still be

around that when we get into dealing with boards it might be a very good time

for an open, frank hearing on some of the problems that school boards are

having. Because one of the biggest problems facing us today, not only in

education but generally, because our future depends on it, is in relation to

financing education. So hopefully we have started the ball rolling with the

Demoninational Education Committees and the Trustees. I think if people

understand the problems inherent in education and financing it, it will be more

widely accepted and supported, as school tax authorities are today by some

people after the work they did last year to make people aware of their real

function and how they operate. It is still not liked but perhaps more readily

supported. So hopefully our involvement and your contribution has at least

created a greater awareness and, if properly reported, there are some very good

facts and figures that will come out. But this is just the tip of the iceberg

like the many tips we have up the Southern Shore. Hopefully it will follow on

from here.

So, thank you very much. It is probably our last

session. I do not think we will be meeting again the Summer. It does not look

like it. By the time the next hearings are held you probably will have some new

faces.

With that, I thank my colleagues for their support,

and it has been an interesting couple of years. Thank you.

The Committee now stands adjourned.