Public Accounts Committee — Department of Finance — 29 January 2025

2025-01-29

Newfoundland and Labrador — Committees

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January 29, 2025 PUBLIC ACCOUNTS COMMITTEE

The Committee met at 9 a.m. in

Conference Room A, West Block.

CHAIR (Forsey):

Good morning.

We'll call the meeting to order.

Welcome to the Public Accounts Committee public hearing respecting the Public

Accounts Consolidated

Summary Financial Statements for the year ended March 31,

2023, and the Auditor General Report on the Province's 2023 Financial

Statement Audits .

The Committee wishes to thank the

various witnesses from the concerned entities who will appear before the

Committee throughout the day. We also acknowledge the Deputy Auditor General

and the officials from that office who are attending today as well.

I remind Members and officials to

turn the mic on when you wish to speak and turn it off each time when you are

finished. There is a button there at the bottom that you can use.

My name is Pleaman Forsey, MHA for

Exploits and Chair of the Public Accounts Committee. Before we proceed, I will

provide the Committee Members the opportunity to introduce themselves, starting

with the Member to my right.

L. STOYLES: Lucy Stoyles,

MHA, Mount Pearl North.

GAMBIN-WALSH: Sherry Gambin-Walsh, MHA, Placentia - St. Mary's.

J. BROWN: Jordan Brown,

MHA, Labrador West.

P. TRIMPER: Perry Trimper,

MHA, Lake Melville.

J. WALL: Joedy Wall,

MHA, Cape St. Francis.

CHAIR: Thank you.

The Standing Committee on Public

Accounts is dedicated to improving public administration in partnership with

the Auditor General. The Committee examines the administration of government

policy, not on the merits of it, and strives to achieve consensus in its

decisions whenever possible. Members take a non-partisan approach to their work

on this Committee.

The Committee will hear from several

entities today, in the following order: for the morning portion of the hearing

are the witnesses from the Office of the Comptroller General, Treasury Board

Secretariat and the Department of Finance; next, for the first portion of the

afternoon, we will have witnesses from the Department of Health and Community

Services and Newfoundland and Labrador Health Services; and finally, this

afternoon, we will have the Department of Children, Seniors and Social

Development.

Before we start with matters under

consideration first today, I wish to welcome from the Office of the Auditor

General: Deputy Auditor General Sandra Russell; Assistant Auditor General,

Financial, Brian O'Neill; Manager of Communications, Office of the Auditor

General, Chrysta Collins.

We will now turn our attention to

the first entities we will be hearing from today, the Office of the Comptroller

General, Treasury Board Secretariat and the Department of Finance. I would like

to thank the witnesses for their appearance and welcome the following

officials: Brendan Hanlon, Comptroller General; Lisa Warren, Director of

Government Accounting; Elizabeth Lane, Secretary to Treasury Board; Michelle

Jewer, Deputy Minister of Finance.

I will start with a few reminders

for the witnesses and an outline of how the hearing will proceed, before I call

on the clerk to swear and affirm the witnesses.

Witnesses are reminded that this is

a public meeting, and your testimony here today will be part of the public

record. Witnesses appearing before the Standing Committee of the House of

Assembly are entitled to the same privileges granted to Members respecting

parliamentary privilege. Witnesses may speak freely and what you say in this

parliamentary proceeding may not be used against you in civil proceedings.

Live audio will be streamed on the

available following the hearing. Hansard will also be available once

finalized.

When called upon to speak, please

activate your microphone, identify yourself by saying your name first and

please remember to turn your mic off once you've finished speaking.

First, I'll invite the Comptroller

General, Secretary to Treasury Board and Deputy Minister of Finance to make

opening remarks. Then the Committee Members will pose questions in turns of

10-minute periods. These rounds will continue until the Committee have

exhausted their questions on the matters.

I now ask the Clerk to administer

the oaths and to affirm witnesses.

Swearing of Witnesses

Ms. Michelle

Jewer

Ms. Elizabeth Lane

Mr. Brendan Hanlon

Ms. Lisa Warren

CHAIR: Thank you.

I now call upon the Comptroller

General to bring opening remarks.

B. HANLON: Thank you, MHA

Forsey.

First of all , I'd like to

thank the Public Accounts Committee for asking us here today. I would like to introduce myself and the

staff I have with me today.

My name is Brendan Hanlon,

Comptroller General of Finance with the Treasury Board Secretariat, and I have

with me Lisa Warren, director of Government Accounting. I'm just going to make

a short opening statement to let everybody know what we do at the Office of the

Comptroller General and then the deputy ministers will introduce themselves.

The Office of the Comptroller

General is a branch of the Treasury Board Secretariat. Along with the

Department of Finance, we administer the Financial Administration Act to

ensure adequate control over all government revenues, expenditures, assets and

liabilities.

We develop government-wide financial

and accounting policies and procedures; provide transaction processing services

for payments made to government and received by government; we provide internal

audit services to government departments, entities and support the work of

government's Audit Committee; and oversee government's fraud management

program.

We're responsible for the

administration, processing and compliance of payroll, leave and time attendance

transactions for over 30,000 government employees, teachers and pensioners. To

facilitate these activities, we're also responsible for several of the

government's largest financial and payroll systems.

The Office of the Comptroller

General also supports government's Audit Committee in its work related to

internal audit, Public Accounts, fraud management, advocacy and ethics

responsibility. We are a professional accounting organization. We are committed

to ensuring we meet our account standards, which allows for clean, unqualified

audit opinion on the financial statements of the province.

Finally, the Office of the

Comptroller General is a supporter of the role and mandate of the Auditor

General in their work on the Public Accounts, performance audits, and other

work. We look forward to continuing this relationship.

Thank you, that's our opening

remarks.

CHAIR: Thank you.

I now call upon the Secretary to

Treasury Board to bring opening remarks.

E. LANE: As the Comptroller General has

stated, part of my responsibility is oversight of Treasury Board Secretariat.

Treasury Board Secretariat has approximately 270 employees across four branches

of government: Treasury Board Operations, Human Resources, Evaluation and

Accountability, and Office of the Comptroller General.

I'm very happy to be here and happy

to take questions from the Committee.

Thank you.

CHAIR: Thank you.

I now call upon the deputy minister

of Finance to bring opening remarks.

M. JEWER: Good morning,

everyone.

Thanks for having me here today as

part of this group to answer questions on Public Accounts.

I'm the deputy minister of the

Department of Finance, so we work very closely with both Treasury Board

Secretariat and Office of the Comptroller General throughout the year, and

during Public Accounts as well. But we do have a little bit of a different

mandate than Treasury Board Secretariat.

With the Department of Finance,

we're responsible for fiscal, financial, statistical and economic policy. We

provide advice to Cabinet, obviously, and other government departments and

agencies. We are responsible for the provincial budget, the administration of

provincial tax statutes, management of provincial borrowing and debt, project

analysis, economic and fiscal forecasting, negotiation of federal transfers,

and representing the province on national, fiscal and statistical matters.

Thanks for having me here today, and

I'm looking forward to your questions.

CHAIR: Okay, thank

you.

With that, I guess I'll now

recognize the Member for Mount Pearl North to proceed with the questions.

L. STOYLES: Thank you very

much, and thank you all for coming, and of course the Auditor General's office

and their staff for coming today, and of course my colleagues for being here

today.

In the Auditor General Report, she

noticed that the books remain open for one month after the yearly fiscal

invoice process, and I'm just wondering, have you looked at any changes in

that? Because apparently, we're the only province in Canada that does that.

We're just wondering what the practice is going to be moving forward.

B. HANLON: Every province

treats the chargeback period differently. The chargeback period is 30 days

after the end of March. We're legislatively required to have that chargeback

period of 30 days, so it allows for expenses that come in late related to

prior, previous year, be charged to the correct fiscal year.

Of course, that does result in

additional time required to complete the Public Accounts audit, because we need

30 days for the books to close. Right now, we're not looking at any changes to

that requirement, but as I said, different provinces do it differently all across the country. And it may be something we'll look

at in the future, but right now we're not looking at that particular

process .

L. STOYLES: Okay.

How frequently does the Office of

the Comptroller General review allowances to identify any accounts for which

there was no reasonable recovery?

B. HANLON: Annually,

departments are required to submit Accounts Receivable and Allowance for

Doubtful Accounts updates. So we're continually reviewing those accounts. Of

course, the larger Accounts Receivable are Income Support and outstanding

fines. We're continually working with departments to sort of identify whether

accounts should be written off or submitted for writeoff and we will provide

advice and guidance on the write-off process.

We want to have correct accounting

for all our assets and liabilities, which would include Accounts Receivable and

any allowances that are set up. So we're continually working with departments

to ensure those balances are correct and up to date.

L. STOYLES: Since the

Auditor General's report was released, and of course your department has

received a copy, what changes has the department made for compliance?

B. HANLON: With respect

to accounts receivable?

L. STOYLES: Yes.

B. HANLON: Okay, so as

part of the 2024 Public Accounts, we communicated clearly with all departmental

executive and controllers to raise awareness of the issue of having up-to-date

accounts receivable and allowance for doubtful accounts. We have reiterated the

requirements for departments to review accounts receivable, in

particular the non-trade receivables and allowances such as Income

Support and fines receivable. We have asked them to consider writeoffs in all

instances where it's appropriate, which is usually statute-barred accounts,

bankruptcies or deceased. So Income Support are making a special effort to

update their balances and writeoffs, as appropriate.

And just a note, the representative

from Income Support will be here later this afternoon discussing Income Support

accounts further.

L. STOYLES: Yes, thank you.

I'm assuming that after seven years

and they're on the books and they're not receiving anything, are they

automatically taken off the books then or how is that process working? Is that

still the same as it has been in the past?

B. HANLON: So

statute-barred accounts are generally six years with no activity on the

account. There are exceptions to those circumstances, but once the six years

are up , generally speaking, the department would be

required to submit a writeoff to Treasury Board. Anything under $1,000 the

deputy minister can write it off, and then our Internal Audit would follow up

on those writeoffs. Anything over $1,000 would have to come to Treasury Board.

So that's a process that's been in place for quite a while.

L. STOYLES: The accounts

that you're collecting on a regular basis, if somebody is still

remaining on income support, you're only allowed to take a percentage of

their income support. Can you explain that process to us?

B. HANLON: Yes. If you're

an active income support client, generally, it's 5 per cent of your income

support payment is taken towards your overpayment. So overpayments can be for a

variety of reasons. If someone gets a damage deposit for an apartment, for

instance, that could be set up as an overpayment.

Overpayments are set up for a number of different reasons. So 5 per cent is taken off

their income support cheque. Once they are inactive from income support, then

that collection activity goes over to DGSNL who has a collections

section that

then takes over collection of that account.

L. STOYLES: After the six

years is up and you can do an automatic within a $1,000 – it's automatically

dated then after the six years is what you're saying. If somebody was to win

the lottery and they still owed $20,000 for income support, is there any way of

recovering that?

B. HANLON: My

understanding of statute barred is that once the six years are up, there is no,

sort of, legal ability to collect that money once the six years is up and it is

statute barred, which is why it would then, normally, get routed directly for a

writeoff at that point.

L. STOYLES: Yes, but if

they're paying their 5 per cent and they're still in the books and they're

paying, if they took 10 years or 15 years, are you allowed, even after the six

years is up, will you continue taking that 5 per cent or is their account

considered dead?

B. HANLON: My

understanding is that if you're an active income support client and the 5 per

cent is coming off, that counts as acknowledgement of the debt. So therefore

statute barred wouldn't be in effect on that debt. It would be continual to be

paid and oftentimes, depending on the size of the debt, at 5 per cent, it may

take a while to collect but it would not become statute barred during an active

collection, we'll say. That's my understanding.

L. STOYLES: So if someone

is not on income support and they've gone to work, you can deduct their wages

and take the amounts off their wages and that's not the 5 per cent, right?.

B. HANLON: Correct. So

there are a number of tools that DGSNL would use.

Federal set-off is one. They could put someone in federal set-off. If they get

an income tax return, that would be applied against their income support

overpayment. They can set up repayment arrangements with people. They could do

wage attachments on people. So they use a number of

different tools to collect once you become inactive from income support.

L. STOYLES: Is there any avenue for an appeal once they're deemed to owe the money?

I'm dealing with a case now, so I'm asking this, and they've said right from

the get-go that they didn't owe the money. Is there any way for a further

appeal for them to come back and say to the Auditor General and to you guys

that they can come back and have a second look at their account?

B. HANLON: I'm just going to put a caveat on this. You can confirm with CSSD this

afternoon, but my understanding is that there's an income support appeal board

that would hear those types of issues, not the Comptroller General. It's

handled by the income support appeal board. That's my understanding. It can be

clarified with CSSD.

L. STOYLES: Okay, thank you.

I'm going

to move on.

Thank you.

CHAIR: All right,

thank you.

The Member

for Placentia - St. Mary's.

S. GAMBIN-WALSH: Good morning.

I'm just

going to focus on the straight piece, public-private partnerships right now. So

the AG notes a continuing issue regarding the review of inflation rates using

calculated and contractual obligations relating to P3s. When does the Office of

the Comptroller General intend to conduct a sensitivity analysis to explain any

potential impacts of the change in inflation rates on the total value of P3s

contractual obligations?

B. HANLON: So I'm happy to report that we have worked with the Department of Health

and Community Services and updated contractual obligation disclosures to

reflect inflation rates built into P3 agreements for operating payments. So we

have taken that step. We have taken the advice of the Auditor General and

implemented that step.

S. GAMBIN-WALSH: Okay.

B. HANLON: On the second part, the sensitivity analysis, we're reviewing options to

provide sensitivity analysis if it's materially warranted in future Public

Accounts. So we're just looking at the impact if rates go up or down, is it

material to the Public Accounts? So once we've done some analysis and

determined if it should or should not be included in the Public Accounts, if we

determine that should be included, then it will be included.

So we're

considering that alternative, but we have already implemented the impact of

interest rates on P3s.

S. GAMBIN-WALSH: Okay.

What

exactly are you doing to review the inflation rate used when calculating the

contractual obligations? What exactly is done? What's the process?

B. HANLON: So we would look at incremental increases or decreases in the rates and

the amount – I guess the amount of money that that would impact on the Public

Accounts themselves. If the amount is relatively small, I mean, if it's

immaterial, should it be included or not, that's a question for our office. But

that's what we do, we look at if the rate goes down by a certain percentage,

what is the impact and if the rate goes up by a certain percentage what is the

impact.

It's all

sort of predicated on the fact that nobody really knows which way the rates are

going to go. Therefore, what sort of level of changes should we be looking at.

Those are the things we're looking at.

S. GAMBIN-WALSH: Okay, thank

you.

Specifically about loans: How

frequently does the Office of the Comptroller General review allowances to

identify any accounts for which there is no reasonable – like how often do you actually do that – probability of recovery?

B. HANLON: We did a

specific project this year, our Internal Audit completed a review of loans

receivable and requested writeoffs for 11 of those 35 accounts.

There were over 35 loans, Internal

Audit did an initial first look and they decided that 11 of those loans should

be submitted for writeoff. Then departments were requested to review the

remaining 24 loans and complete writeoffs where necessary and financial

statements were updated for 2024. Altogether, 19 accounts of the 35 were

written off. One is currently in process which would make it 20 – if it's

approved, of course, by Treasury Board – and of the 14 loans remaining, one has

since been repaid and one is a conditionally repayable loan.

Really, there are 12 of the 35

accounts remaining. We did a concerted effort this year to look at all 35

accounts and take action where necessary.

S. GAMBIN-WALSH: Okay, thank

you.

My colleague was referring to

accounts receivable, the doubtful accounts, and we had quite a discussion about

this yesterday. I'm just wondering, and I know this is probably for CSSD also,

but there was a probability of somebody winning the lottery and you got your

six years or whatever – I actually know a case where

someone did win the lottery and paid back what they owed – but it seems like

there is a significant amount of money owed on the books. I understand there

are the potential of estates, but you use the six or seven years there so is it

beyond your control? Does it then go to Treasury Board and Treasury Board

totally decides if that is written off or not?

B. HANLON: Sorry, do you

mean if it's beyond six years or just within?

S. GAMBIN-WALSH: Beyond.

B. HANLON: I'll just add,

and again CSSD may have additional to add to this this afternoon, there are

things they can do like certificates of judgment and whatnot to expand the

collection period beyond six years. There are tools they can take if they fell,

you know, it might depend on the size; if someone owes a large amount, they

could seek a certificate of judgment which would, I think, extends it an

additional 10 years.

Those steps are worth taking if the

amount of the overpayment indicates that they should take additional steps.

GAMBIN-WALSH: Okay.

B. HANLON: Then, usually,

the department would make the decision that this is now beyond the six years so

we cannot submit it for writeoff, and if they did submit it for writeoff, it

would be sort of not legal, because there's no longer the ability to collect

that money. The law says that that is no longer recoverable.

GAMBIN-WALSH: Okay. Thank you very much.

I'm just going to Inventory

Management. The AG notes in the report that Inventory Management is a large

area of risk for the government. How is the government working to ensure that

inventory count guidelines are followed and that documented policies are in

place?

B. HANLON: We're taking a

different approach this year and we have implemented an inventory guideline for

departments. We have formalized an inventory guideline to tell them steps they

should be taking every year. We have sat down with departmental comptrollers, we have quarterly meetings with departmental

comptrollers to outline steps they should be taking on inventory control.

This year we will be implementing

spot checks; our internal audit division will be doing spot checks on

inventory, so that's sort of a new thing we're going to be doing, just to sort

of add additional validity to the reports that are coming in for departmental

inventory, and we have communicated to departmental executive the need to get

inventory updates in on time, and ensure they are accurate and timely.

So those are the steps we've taken,

new guidelines and we're going to be doing spot checks on inventory, and

communication to comptrollers and executive.

GAMBIN-WALSH: Okay, thank you very much.

So Bank Reconciliations, we know

that they're not being completed at year-end. Can you just comment on that?

B. HANLON: Yes, I can.

Last year there were three instances of bank recs going beyond – 60 days is

sort of policy in place for having bank recs completed. My understanding is

there were a couple of year-end bank reconciliations that went beyond 60 days;

I think they may have been 70 days. Part of it had to do with the write-back

period, so you know, year-end needs a bit of additional time for bank

reconciliations, but for this year we are going to ensure that all bank

reconciliations are done within the 60-day time frame.

GAMBIN-WALSH: Just an additional question to that. Have you found

that you may have four or five months that are not completed? Are we looking

back at October, November, December and you're into March? Is that happening?

B. HANLON: Right now,

that is not happening. All bank recs are being done within a 60-day time frame

right now.

GAMBIN-WALSH: Okay. Thank you.

The unfunded pension liability: Has

government reviewed this pension plan to determine if an action is needed to

ensure its continued sustainability?

E. LANE: Government is

responsible for a number of different pension plans.

In terms of direct responsibility, there's the Pooled Pension Fund, they

include the Uniformed Services Pension Plan as well as the MHA Pension Plan, as

well as the Provincial Court Judges' Pension Plan and there are various levels

of funding status for each of these plans. I'm just, I guess, wondering which

specific plan that you're referencing?

GAMBIN-WALSH: Uniformed, specifically.

E. LANE: Currently the

Uniformed Services Pension Plan has a funded status of between 25 per cent and

26 per cent. Government is aware of the nature of the funding status of that

plan and is currently reviewing options to address that issue.

GAMBIN-WALSH: Okay, thank you.

That's all my questions right now.

CHAIR: Thank you.

We'll ask the Member for Lab. West

to ask questions.

J. BROWN: Thank you so

much, Chair.

My first question, I guess, is on

the $660-million line of credit held by different entities of the Newfoundland

and Labrador Health Services. The Auditor General made a note of the

sustainability and that. I just want to know what is this a sustainable debt

that is possibly within there or are there any issues within the department on

the $660-million line of credit with the Newfoundland and Labrador Health

Services?

M. JEWER: Certainly, a

large line of credit for NL Health Services, we are continuing to work with the

department and NL Health Services on how to manage that line of credit. In Budget

2024, there were additional funds allocated to NLHS

to help address that issue and we're continuing to work with them on bringing

that down.

J. BROWN: Thank you.

I guess, a follow up on that is the

sustainability. I guess, from your answer is that yes, it is possible, it is

sustainable or is there some concern for sustainability going into the future

with that?

M. JEWER: I'm not sure I

can answer that particular question around

sustainability, we're continuing to work with them to find options to address

the line of credit. Currently, their line of credit, the interest they pay on

the line of credit, for example, is higher than our cost of borrowing for

government. We're looking at options on what's the best way to fund that

shortfall.

J. BROWN: Thank you so

much.

I guess moving on to Asset

Retirement Obligations, the Auditor General noted that a lot of buildings and

other assets that will require this is currently not an operating policy right

now. Where is the department, the Treasury Board or the Office of the Comptroller

General with the asset retirement obligations, given a lot of buildings and

stuff are seeing their end date coming up soon or you see there are some new

buildings that are replacing older buildings, aging infrastructure – where are

we to with that in the policy?

B. HANLON: We have a policy in place now where all departments have

to report changes to their asset retirement obligations to my office on

a monthly basis. We have developed a formal business process for reassessing

and updating asset retirement obligations regularly. The process ensures

accuracy and completeness of the information used to calculate asset retirement

obligations.

requested the Department of Transportation and Infrastructure to complete a

review of 5 per cent of their total assets in ARO, which was about 40

buildings. So they completed that the past year. We're going to do a rolling, I

guess, update from departments on asset retirement obligations.

So the

process we developed will be reviewed by the Office of the Auditor General to

ensure that they agree with the process and position we're taking on asset

retirement obligations.

J. BROWN: Thank you, Comptroller General.

With the

asset retirement obligations and you are having, like you said, monthly reports

and everything like that, are we going to see a more robust plan for retirement

of assets, or is there any concern there that because we're only doing this now

and it's only aging buildings that are coming up faster, a lot of

infrastructure is now severely aged in this province – is there any concern

there?

B. HANLON: MHA Brown, do you mean sort of future infrastructure investments or –?

J. BROWN: Current infrastructure investment.

B. HANLON: I guess I'll pass it off to Michelle, but my office wouldn't necessarily

comment on future infrastructure investments. I mean, we would record asset

retirement obligations and make sure government is aware of the condition of

the assets. But with respect to future investments, of course, my office

wouldn't comment on that.

M. JEWER: I'll ask you to repeat the question, I'm sorry.

J. BROWN: Like I said, we weren't tracking retirement obligations with current

assets now that we have a significant amount of aged and aging building and

some infrastructure that's going to soon be replaced, are we in a good place

with asset retirement obligations? Are we going to be able to meet those needs?

Because we weren't tracking it before.

M. JEWER: Certainly that's something that we look at when we're looking at current

infrastructure as well as new, like, for example, the sustaining capital piece

of keeping that infrastructure in good condition. So that is something that we

look at when we're looking at a budget for a particular project.

Does that answer your question?

J. BROWN: Thank you so

much.

Moving on to Inventory Management, I

know that my previous colleague talked about it, but in the report they singled

out TI with some of the issues with the inventory management. My question would

be, given that some of this has not been followed up on and there has been

issues with inventory management, going back, what is the plan to reconcile or

to get there? Because if there is a significant issue now and the Comptroller

mentioned about some new procedure and that, what is the plan for reconciling some

of the issues that are probably going to arise from where missing inventory or

inventory that was not properly logged – is there a plan in place to deal with

that?

B. HANLON: I guess I

wouldn't presuppose that there was going to be issues coming up in inventory

but, like I said, out internal audit

section will be doing spot checks on

inventory to ensure validity. We communicated with executives the, sort of, necessity to tighten up all inventory controls

and inventory management.

Of course, if issues would happen to

arise with any of the inventory, then we'll work with the departments to remedy

those issues. We couldn't presuppose that there will be any at this point.

J. BROWN: Okay. I just

wanted to make sure that if there is going to be an issue with reconciliation

on inventory, I just wanted to know if there's a plan in place or if there's

anything that the department is looking at or anything like that to make sure

that we have a process for us, given that we've had issues in the past in

keeping track of inventory in this province.

B. HANLON: The Office of

the Comptroller General has zero tolerance for any fraud whatsoever. So if

anything comes up in our review of inventory, then we will work with the

department to remedy that situation.

J. BROWN: Thank you.

Finally, with the pension

liabilities, especially with the uniformed pension, I know that my colleague

asked about it and we mentioned that there is work identifying anything like

that. Can we get some timeline or anything on this work or the work it is going

to be to reconcile that deficit in that pension? I think that the uniformed one

is the one that was singled out in the report as being one of the most

underfunded ones. Is there any work or timelines or anything like that that we

can see on addressing those issues?

E. LANE : I can verify that, as I stated

previously, government is aware of the funding status of that plan and the

issues with the funding status. Work is ongoing in terms of an analysis of

options to address the funding status of the plan. I don't, today, have a

timeline or an expected time as to how long that will take but I can confirm

that the analysis is ongoing.

Thank you.

J. BROWN: I know

previously when it comes to underfunding pensions and that there has to be certain permissions and stuff given. Is the

government allowed the underfunding – I know when dealing with the Wabush mines

workers and that, the company went to government and asked them for permission

to underfund the plan. Did government give itself permission or is there any

promissory note or anything like that attached to this plan for the allowance

of its underfunding?

E. LANE: With respect to the Uniformed

Services Pension Plan and a couple of other pension plans as well, the Pension

Benefits Act Regulations exempt the USPP from the

requirements to fund financial deficiencies, which has been a long-standing

exemption. So there is legislation that backs the deficiency in the Uniformed

Services Pension Plan.

J. BROWN: Thank you,

that's my final question.

CHAIR: Thank you.

We'll now call upon the Member for

Lake Melville.

Thank you.

P. TRIMPER: Thank you, Chair.

First of all , I just wanted

to check – Brendan, when you were talking about decision-making around

writeoffs, there's another threshold above $5,000. Is that when Cabinet gets

involved? I mean Treasury Board is there and those representatives but is there

a point at which the entire Cabinet – I've served in Cabinet; I'm just trying

to recall, but I put it out there.

B. HANLON: Settlement

limits are $5,000. So if government wants to settle an outstanding debt with

somebody and the, sort of, variance between the amount

they want to settle at and the amount of the original debt is greater than

$5,000, then that's when that particular incident would kick in.

P. TRIMPER: That's what I'm

asking.

B. HANLON: Okay.

P. TRIMPER: All right,

thanks.

I'd like to follow up on my

colleague from Lab West's line of questioning around assets. I'm going to go a

little bit off topic here. I'm going to stay on the topic, but I want to look

at it from a couple of different angles. Because, as an MHA, I'm aware of

several assets that are sitting on the books not available for use by

government, not available for use by the private sector, and they just seem to

be stalled year after year. I'm trying to think of a way to overcome that. I've

got buildings in my District of Lake Melville that I've had inquiries.

I'm just looking to see if there's

some more transparency that could be provided. I remember years ago, around

2016, we did a review of our footprint and looked at our space and we radically

pulled back, so much lease space, underutilized and so on. Is there any

mechanism and/or have we ever engaged something similar to

look at assets that, really, we don't seem to have any use for, yet are still

sitting there, languishing away, with a building up of liability?

B. HANLON: MHA Trimper,

good question.

The Department of Transportation and

Infrastructure are responsible for listing all space within the government

envelope. I would suggest that if you wanted to reach out to Transportation and

Infrastructure, they should be able to provide that information for you. Of

course, the Office of the Comptroller General would not have that information,

but Transportation and Infrastructure are responsible for all space

requirements, is my understanding, within government.

P. TRIMPER: Understand and

I'm doing that and it's working. It's a little slow. I just wondered if there

was any direction or – would you guys ever consider providing that direction to

all departments who may have assets? Again, I always like to look across the

country too at other Ps and Ts and see if there's some lessons learned there or

some direction that could be used. I don't know if you have any comment on

that.

B. HANLON: I guess my

comment would be, we have professional accountants that could sort of assist

with that as well. I mean, TI are sort of the holders of the space but, of

course, we could get involved in an analysis, that sort of thing. We haven't in

the past but it's not to say that we couldn't.

P. TRIMPER: And then

rolling it in and having had a background in environmental consulting

previously, the environmental liabilities, the public safety liabilities that

are loading up on that and I'm thinking from a public safety perspective and

some issues, children playing around a facility that's not safe and some of

that, building escalating costs is more than incentive to actually

dispose of some of these assets. I'm thinking that there's need for some

exercises there where at some point you say we have to

fish or cut bait, as they say.

B. HANLON: Thank you, MHA

Trimper.

We'll certainly take that under

advisement. You're making very good points on the use of government space.

P. TRIMPER: Okay.

I'm going to pause there and pass it

on to my colleague, from the beautiful District of Cape St. Francis.

CHAIR: Thank you.

We'll now call upon the Member for

Cape St. Francis.

J. WALL: Thank you,

Chair.

I wasn't expecting that from my

colleague from Lake Melville, you don't normally pause.

P. TRIMPER: But I

recognized your –

J. WALL: You certainly

did, and I appreciate that.

Thank you all for coming here today.

I have a couple of follow-up questions from my colleague for Placentia - St.

Mary's before I get into other questions, because questions are stimulated by

conversation.

First of all , on the loans,

it was noted 11 of 35 accounts were submitted for write off. If I have the

numbers correct from my taking notes. I looked at the other 24: you have 19 of

35 written off, one in process and we're down to 12. I believe you said that,

right.

So those 12 accounts, what about

those? Will those be recoverable or are you looking for those to be written off

as well.

B. HANLON: MHA Wall, good

question.

Our review, we looked at all of the loans and the chances of collectability on those

loans. I guess to summarize, the 12 loans that are remaining, in our opinion

they are collectable so that's why they are remaining on the books. The ones

that could have been written off or should have been written off, have been or

are in the process of being written off.

J. WALL: Okay, thank you for that.

With respect to Inventory

Management, I do know that the AG has made some recommendations, and you did

say about the spot checks that you wanted to implement for the departmental

inventory.

I'm just wondering how those spot

checks are going to be implemented, and do you have dedicated staff or

officials to do that to ensure that is done in a timely matter throughout the

year?

B. HANLON: We have

dedicated Internal Audit staff that are directed by an internal audit plan.

We will work the spot checks into

our internal audit plan, and we do have dedicated, professional, knowledgeable

staff that can carry out the inventory spot checks. We'll do it across the

province at different locations and different types of inventory to make sure

we have, you know, a good scope and scale of all the inventory and make sure

there are samples from all different areas.

That's our plan.

J. WALL: Okay. Thank you for that.

With respect to the AG, she noted

the inadequacies of the inventory management. On top of spot checks, any other

new guidelines or anything else being implemented other than the spot checks to

address her recommendation.

B. HANLON: Yeah, so I

mean, ultimately departments are responsible and required to have documented

inventory management policies and practices in place. Of course, our job is to

ensure they have those practices and policies in place. As well, at our

comptroller meetings – I have quarterly meetings with all departmental

comptrollers – we have stressed the importance of inventory and asset

management over and over again .

Those are the sort of steps we have

taken. In conjunction with the spot checks, we think it will provide for a very

robust inventory management protocol throughout the coming year.

J. WALL: Thank you for that.

I am happy to hear of the quarterly

meetings to keep on top of that on a regular basis. It makes it much easier

going forward, no doubt.

With respect to the unfunded

pension, and specifically with the Uniformed Services Pension Plan, I've had

several people reach out to me over the last number of years who are in that

pension plan. Without breaching any confidentiality, one, a retired RNC

sergeant whose pension is $9,800 a year. That's his pension from RNC after 26

years of service.

So again, from my notes, 25 to 26

per cent is unfunded status; is that correct? Twenty-five to 26 per cent? You

said that you couldn't provide a timeline, but you do have analysis ongoing

with respect to that. So what options are being considered to look at that, or

to correct that unfunded liability?

E. LANE: That's the funded status of the

plan –

J. WALL: Sorry, yes,

thank you.

E. LANE: Yes. So we have for this plan as

well – it's part of our Pooled Pension Fund, there are three pension plans in

that. We have a pension investment committee, and the role of the committee is

to advise the trustee on the operation and the investment of the Pooled Pension

Fund. So there is certainly oversight with respect to the funding statuses of

all the plans involved in the Pooled Pension Fund. It would be part of their

role to look at and assess any options moving forward with respect to the

funding nature of the plan or any changes.

Obviously as well, when we look

historically, there are two other plans back in 2015, the Public Service

Pension Plan as well as the Teachers' Pension Plan, that underwent significant

reform, landing on a joint trusteeship arrangement with our unions. In terms of

the analysis that is being done, it would be certainly premature of me to talk

about where that may or may not land, as it is a government decision.

However, there is some history in

terms of different options that we can look to, including whether

or not it would be – for example what's been done with the previous

plans in the past. So that would be included in the options.

J. WALL: Thank you, Ms. Lane, I do

appreciate that.

I have had several conversations

with the Minister of Finance regarding this, and I'm happy to hear that there

is ongoing work on that, so thank you for that.

I do have another question with

respect to the offshore royalties and carryback of

decommissioning costs. Government has yet to determine the impact of carryback of decommissioning costs will have on offshore

royalties, and of course these liabilities could be material and appropriate

accounting for them would be within the Canadian Public Sector Accounting

Standards.

My question would be: What progress

has government made on the work with the Department of IET ,

to determine whether an estimate for decommissioning costs can actually be reached?

B. HANLON: I'll just give

an overview of what's happened in the last couple of years with respect to

decommissioning costs.

The Office of the Comptroller

General discloses Offshore Royalty Decommissioning Carryback .

Right now it's contingent liability, that's how we report it. So in 2022, an

accounting assessment provided to the Office of the Auditor General support

this treatment due to the uncertainty regarding the decommissioning carryback impact on the royalty calculation, liability and

status. So due to this sort of uncertainty around the amounts and what the

impact would be in the future, our assessment was that we would disclose it as

contingent liability.

We completed a review with the

Department of IET in 2022, to confirm that existing

accounting treatment. So we're continuing to work with IET

now to review royalty regulations for its projects to see if any new royalty

regulations may impact disclosure requirements. That will help us determine if

an estimate can be or should be established. We're going to ascertain how these

costs will factor into the royalty calculations and identify any carryback amounts.

We're going to continually ensure

that the appropriate accounting treatment is applied according to Canadian

Public Sector Accounting Standards. That's the sort of approach we've taken and

that's the plan for right now with respect to that.

J. WALL: Thank you, Mr.

Hanlon, I appreciate that.

Thank you, Chair, that's all for

now.

CHAIR: Thank you,

Member for Cape St. Francis.

Just going through some of the

questions here that already have been asked with regard to

inventories and that kind of stuff. How accurate is the information you

received from the entities regarding – are they incomplete or inaccurate? How

accurate is the information that you receive?

B. HANLON: You mean in

general?

CHAIR: In general,

yes.

B. HANLON: Okay, I'll just

sort of explain how it all works and then we can just sort of go from there.

The year-end, March 31, there's a one month write back so then we get

submissions in from all departments and all government entities, say in May

period. What we do is we do sort of a very robust analysis. We have Lisa and

her very smart people that work in government accounting, take all those

submissions, they do analysis, comparisons to previous years. They do trend

analysis. They sort of go back with literally hundreds of questions to

departments and entities to add validity to the submissions. I mean, department

submissions are accurate but, of course, like everything, we go through all of our process to ensure that the end product that comes

out at the end of the day, government's financial statements are as accurate as

they can possibly be.

There's a lot of back and forth.

Lisa's crowd are literally doing hundreds of entries over the summer, working

through all that sort of thing. So a combination of professional accountants in

departments working with professional accountants in our office ensure that at

the end of the day those financial statements that we produce, are as accurate

as they can possibly be – and with the help of the Auditor General, of course.

CHAIR: Okay. Thank

you.

Receivables of loans – do you have a

percentage of the receivables for the recovery of loans with regards to loans

and receivables that you get back? Do you have a percentage of what you're

getting back with regard to the recovery?

B. HANLON: So I guess to

say, so our receivable is a really big number, like $3 billion point something.

So 80 per cent of that comes from the federal government so we're going to get

100 per cent of that, most likely. When you look at our accounts receivable

that could have any sort of allowance set up at all, it's about $300 million,

primarily income support and fines receivable. Sort of, as I discussed earlier,

there is analysis done on income support and on the fines receivable to set up

an appropriate allowance for doubtful accounts.

So that would be such-and-such per

cent. So that is, sort of, our estimation of what wouldn't be collected in the

future but of our overall receivable, a large chunk of that is not quite 100

per cent guaranteed but as close as you are going to get to 100 per cent

guaranteed and allowances set up for the part that, you know, may not be

collected in the future.

CHAIR: Thank you.

Do you have a cost estimate of the

assets to be retired? Do you have a cost estimate of what can be retired there

or anything like that?

B. HANLON : MHA Forsey,

unless Lisa has a better answer, I will certainly get that information for you.

I don't have it at my fingertips, what we have set up, as that's a retirement

obligation right now, but we have it. We can get it.

CHAIR: Okay. Thank

you.

Just following up with a couple of

more questions. What initiatives are being taken to ensure internal controls

and accounting practices?

B. HANLON: I'll just go

back to some of the things we do during the year. We meet with departmental

comptrollers on a quarterly basis to stress the importance of following all

internal controls and appropriate accounting practices. We especially meet with

them around Public Accounts submission time to make sure all

of their submissions are accurate and up to date. We send detailed

guidelines out to all entities and all departments on Public Accounts

submission. If there are any issues that come up at all, we deal with the

departmental executive to ensure that those issues are remedied effectively and

quickly. We're continually working with departments on any issues that come up

during the year. But Lisa's staff provide very clear documentation and instructions

to all entities and departments with respect to all those submissions, in

conjunction with all the analysis they do, of course.

CHAIR: Thank you.

The asset retirement obligation of

2023, $518 million. The stability of the province and the fiscal situation

remains a significant concern. What actions are being put in place to control

the stability?

M. JEWER: I guess I'll

point to Budget 2024 , and there is a five-year fiscal forecast that is

released as part of Budget. In that budget you'll see return to balance, return

to surplus in '25-'26 of $58 million and then there are small surpluses

throughout the period up to '28-'29.

Of course, part of budget '25, we're

currently in the process of starting to develop budget 2025, so we'll have a

new five-year forecast when that is released. Certainly that is, from a fiscal

stability perspective, you can see getting return to surplus is something that

certainly the bond-rating agencies look to us for, and this is very important.

Also, I'll mention on the debt

management side there's a number of things that we've

done to deal with the substantial amount of debt that the province has on the

books. We did re-establish sinking funds for new debt issuances. So when

there's a new debt issuance, there is a sinking fund of no less than 1.5 per

cent that has to go against that or has to be put in

the sinking fund and invested to repay that debt when the debt becomes due.

Usually our debt could be five, 10,

30 years. The majority of our debt would be 30-year

time frame, so that gives us enough time to invest that sinking fund money to

be able to repay that debt when it becomes due. We did make changes to the Financial

Administration Act to optimize sinking fund performance as well, so we do

have the ability to invest in a broader range of securities. That allowed us to

do municipal and highly rated corporate bonds, for example, and highly rated

equity investments that are publicly listed on S&P 500 or the TSX 60.

We also established a Future Fund.

This Future Fund was established in '22-'23, where a portion of the province's

non-renewable resource revenues and net proceeds from any sale of capital

assets is invested in the Future Fund. We do have, currently to date, about

$390 million in that future fund. So that's another step that government has

taken to help stabilize the financial position.

From an investor perspective, we

have launched a European borrowing program. So our provincial bonds can now be

traded in the European markets. And that's the intention to attract additional

investors to purchase our bonds and then, by generating that demand, would

hopefully reduce the cost of our debt. So that's another step that's been

taken.

CHAIR: Okay, thank

you.

As of March 31, 2023, the province's

Accounts Receivable line item amounts to $3.3 billion,

with an Allowance for Doubtful Accounts totalling $122.2 million. Of this, a

significant portion has been outstanding for several years, with only $1.5

million written off.

Does the Office of the Comptroller

General intend to review the Accounts Receivable, including Doubtful Accounts,

to identify outstanding balances and when they can be written off?

B. HANLON: I'll just sort

of provide a bit of context around the big receivable number; it is a big

number, $3.4 billion. So $2.8 billion of that is due from the Government of

Canada. We would never write that off for something that is an allowance;

that's practically guaranteed money. That's 80 per cent of the receivable.

Taxes Receivable and Offshore

Royalties make up about another 10 per cent. So the remaining 10 per cent is

mainly Income Support and Accounts Receivable. We have been working with

departments to sort of ensure that the allowances set up are the correct amounts.

We have been stressing the importance of submitting writeoffs from departments,

as required, and we'll be continuing to do so.

You can check the CSSD this

afternoon, but I do believe they're also taking a review of their process

around setting up their allowance for Doubtful Account amounts to make sure

it's up to date and in tune with the current balance that's in their Accounts

Receivable portfolio.

So those are the steps we're taken.

I'll also add with our quarterly meetings with controllers, we are stressing

the importance of focusing on writing off accounts that are no longer

collectable, because it's not appropriate to have them on the books any longer.

CHAIR: Thank you.

One quick question –

decommissioning: Have any decommissioning costs been established?

B. HANLON: So Lisa can

kick me if I'm wrong, but my understanding is that no, there have been none to

date. Lisa is nodding; there have been none to date.

CHAIR: All right,

seeing my time is up, I'll continue with the Member for Mount Pearl North.

L. STOYLES: Thank you,

Chair, a couple of more questions.

Groups like the egg farmers who have

not provided any financial information, I'm just wondering what measures your

office have taken to try and obtain that financial information.

B. HANLON: I'm pleased to

report, after some compelling, they have submitted their financial statements

as requested for 2024. So those were sort of the last outstanding set and they

have now submitted them to our office.

L. STOYLES: So has

everybody else been in compliance as well, besides the

egg marketing board? Has everybody else complied? And the other question is:

Can your department put any policies in place to force them to give you the

information?

B. HANLON: As of right

now, everyone is compliant with submitting their financial statements to our

office as required.

With respect to legal requirements,

of course, we're working with entities all the time. We work with departments

who sort of oversee entities. So we take whatever steps we need to to work with departments and to work with entities to

ensure they have submitted the required financial information to our office.

L. STOYLES: So the C- NLOPB consolidation, has that partnership been put in place

and what have your department done to make that happen?

B. HANLON: I guess there

has been a long outstanding question of whether the C- NLOPB

should be included in the government reporting entity or not. Analysis done by

our office in the past, the issue comes around shared control over the C- NLOPB .

So I'll just explain how it works.

The province has three members on the board, the federal government has three

members on the board and quorum is four members. There could be an instance

where the federal government has three members at a meeting and the province

has one member at a meeting, therefore that wouldn't really be shared control.

All that being

said, we are taking another look at this just to make sure

we're consistent across all of our entities and consistent across other

provinces to see how they deal with the C- NLOPB . So

it's not a closed case. We are currently reviewing whether they should be in or

not, but that's sort of the circumstances around why a decision was made at

this time for them not be included.

L. STOYLES: Looking at the

whole report, is there anything coming out at you that wasn't looked at in the

Auditor General's report that your department should take a high priority on?

B. HANLON: Tricky

question.

What I will say is that in general,

our Internal Audit have their audit plan that they work on all year long. That

may be different issues than the Auditor General brings up in their Auditor

General's report, and that's sort of the point: For all of us to be looking at

different areas to have good coverage in our respective audit plans.

Our Internal Audit group could look

at a different issue that hadn't come up, and that's sort of how we operate

during the year. So it's possible we could look at things that the Auditor

General hasn't looked at, for instance. So I hope that answers your question.

L. STOYLES: It does, thank

you.

I was going to ask that question

then, if you looked at it, your department would make changes and you basically

said you could look at making changes without the Auditor General coming

forward and suggesting that something is not up to par or up to speed.

B. HANLON: Just to comment.

Yeah, we

are proactive in working with departments and identifying areas where

improvements can be made. We all want to see improvement wherever it can be

made. So, yes, our office works with departments continually, through our

quarterly meetings and otherwise, to make improvements wherever they can be

made.

L. STOYLES: Thank you, Chair.

CHAIR: Thank you.

We'll ask

the Member for Placentia - St. Mary's.

S. GAMBIN-WALSH: Thank you, Chair.

I do have

some questions, just some clarity required.

Timing of

the Consolidated

Summary Financial Statements, am I hearing that the Office of

the Comptroller General is not considering or has no consideration to probably

implement any other business process that would reduce or change the time of

the tabling of the Public Accounts?

B. HANLON: We have made a number of steps to improve on

the timeliness of the Public Accounts. I'm just having a quick look here now.

Right now, there are no legislative changes planned. But, of course, our office

is always looking for operational improvements to shorten the Public Accounts

timeline.

additional resources were added the past year: an additional Public Accounts

analyst, accounting research specialist and an accountant in the Public

Accounts group. We provided detailed training to staff to improve efficiency in

business processes; review and documentation has been updated. We added more

milestones to our internal

schedule to assess, monitor and make progress

towards goals and take corrective action as required.

implemented additional quality assurance procedures to ensure the accuracy of

the information and working papers provided for audit and to verify the

accuracy and completeness. Because, of course, if more accurate and complete

information comes in, the less time will be required on the back end. We feel

like we've enhanced our communication with the Office of the Auditor General to

address audit issues and audit information requests on a timely basis.

So those

are steps we have taken, and, of course, we are always looking to improve the

timelines on our Public Accounts. I would just like to add that we are meeting

our legislative required timeline, which is November 1 every year.

S. GAMBIN-WALSH: Okay, thank you very much for that.

So that somewhat answers another

question that I had that I just wanted some clarity on. I was going to ask how

does the Office of Comptroller General plan to work with the departments to

improve the quality of the Public Accounts submissions, because after reading

the report, it highlights or it lends to or suggests – I'm not sure of the word

to use here – that there appears to be probably not enough capacity in the

departments, that information may be entered wrong or it's incomplete when it's

received. I mean you did allude to the fact that you analyze it and go back

with additional questions, but when reading the report these things do come

out, without any information. Can you comment on that?

B. HANLON: We're dealing

with a large number of departments, so submission

quality is going to range across departments for sure. So that's why we're

providing additional training. The templates we try to provide as accurate and

is really good instructions as we can, clear

instructions to departments so that the templates are filled out correctly.

Again, we re-emphasize through our quarterly departmental controller meetings

the importance of having accurate information. We have professional accountants

that can work with the department's finance divisions to assist them in

compiling their information if required as well.

GAMBIN-WALSH: Okay, thank you very much.

One last question, I'm just

wondering, how is government continuing to – just first I want to say that I

have noticed that the zero-tolerance culture for fraud is greatly improved over

the last four or five years. It's really good . I'm

just wondering how are you going to continue to promote this zero-tolerance

culture for fraud?

E. LANE: You're right,

government has a zero-tolerance policy for fraud. It's a fairly

robust fraud management program that government has, which includes the

policy prevention and detection measures, awareness and education and robust

reporting measures outlined for investigations as well as a fraud risk

assessment. Government has, in addition to the policy, government has a

mandatory fraud prevention and detection training as well. That is mandatory

throughout core government. Fraud risk surveys are a tool as well that is

completed annually through the Office of the Comptroller General with all

departments to identify areas for the OCG to focus on

to mitigate the risk of fraud.

There are also – my colleagues can

comment more specifically on this – but there are also dedicated professional

development days on financial issues, including fraud, so that occurs. Also,

the Office of the Comptroller General as well as the Office of the Auditor

General are notified of reported cases – all reported cases – of fraud as well.

I'll leave it there for now, unless

you have further questions.

GAMBIN-WALSH: No, that's it. Thank you very much and that is it for

me, Chair.

CHAIR: Okay, thank

you.

We'll move to the Member for Lab

West.

J. BROWN: Thank you,

Chair.

I just have a question here on when

it comes to recovery of funds from delinquent accounts, or anything like that,

are you keeping track of how much is spent on trying to recover this money, and

does it exceed the amount that you're trying to recover?

B. HANLON: DGSNL can

provide further clarification. The collection unit in government resides with

DGSNL, so they could tell you the exact amount of money they spend on,

basically, their collection officers. The cost to collect is basically the cost

of the collection officers.

But if they put somebody, say for

instance in federal set-off, there is no cost. Anything that's recovered from

the income tax payment, is 100 per cent returned to government. There's no fee,

there's no anything like that. So really the cost to government for

collections, are the collection officers.

I was the departmental comptroller

with HR (inaudible) years ago, and I can assure you the benefit from collection

officers greatly outweighs the cost of the collection officer. Like, many, many

times, I would suggest.

J. BROWN: Thank you so

much for the background on that.

Also, when it comes to information

management, I know that in the report the Auditor General talked about

gathering information data and accuracy. I was wondering if there were any

improvements since the time of this report have been put through to your office

to improve the information management and gathering. I know that the Auditor

General did have some concerns in the past about that.

B. HANLON: MHA Brown, do

you mean IT control type of thing?

J. BROWN: Yes, IT

control.

B. HANLON: The OCIO right

now as I understand it – we got an update from OCIO – so they are actively

reviewing all policies, are in the process of creating a new policy framework

which will include a formal review process. So that work has begun and will

continue into 2025 with an OCIO resource dedicated to lead this initiative.

They have taken that recommendation

very seriously and have dedicated resources and would be working on developing

a whole new policy framework around all the recommended options this year.

J. BROWN: I guess one

final question on there.

The programming and the systems that

are being used by your department for financial tracking, and everything like

that – when was the last time all those systems have been reviewed or been

updated, especially with security features and things like that? When was the

last time that was done?

B. HANLON: MHA Brown,

we're continually updating our security processes and internal control

processes with our financial systems. We have a very, very robust financial

system with many, many safeguards in place.

I guess you could just look at the

history of upgrades done with our old system and it is sort of evident from how

it operates that there are not many issues that come up because of the security

that's in place and all the procedures that are currently in place for our

financial system. It's very robust.

J. BROWN: Thank you.

No further questions, Chair.

CHAIR: Thank you.

We'll move to the Member for Lake

Melville.

P. TRIMPER: Thank you,

Chair.

This may be a question later this

afternoon for the CEO, Pat Parfrey , but I just

wondered what your thoughts on the $600-million line of credit that has been

created by our regional health authorities and whether or not

you see a hope for optimism now that we've got all four combined in terms of

control.

It has been interesting sitting on

this Committee and as we've done other investigations, the tremendous

difference between each of the four regional health authorities over the last

several years. I'm a big fan of what is happening, and I just wondered if you

shared that level of optimism?

M. JEWER: Certainly, to

your point, Dr. Parfrey probably can speak to this

this afternoon. As I mentioned before, the Department of Finance and Treasury

Board Secretariat work with the department and NLHS

around that line of credit. It is concerning, it is a high number, and we did

put money in the budget last year to help address that.

Do you want to repeat part of your

question again?

P. TRIMPER: I'm just

wondering now that we are combining all four regional health authorities into

one, that alone should help addressing unanticipated overruns and the need to

borrow, that kind of thing.

M. JEWER: Yeah, for

sure.

I think they're currently in the

process of amalgamating to one system. I think that will certainly provide

efficiencies. They're not yet there but that's the plan, to bring them all

under the one system, right.

P. TRIMPER: Have you been

aware of when that financial aspect, the combination, would be completed by?

M. JEWER: I don't have

time frames, but again, us and Treasury Board Secretariat are working with them

on that solution.

P. TRIMPER: Thank you.

My next thought, and it's just a

thought, I was just doing a little, dare I say, some Google searching there but

I'm just looking at well decommissioning and it frustrates me to see us giving

up royalties to go back and deal with abandoned wells.

Alberta doesn't really have it any

better, but it is a substantial issue in Alberta as well. It's a levy that is

applied to the industry. I was just wondering if you have any advice for

looking at future offshore deals and, you know, what we might do?

I'm looking around the country to

see if there's a better way; I'm not sure I see one right now.

B. HANLON: We work with IET on the accounting side of things to see if a liability

should be set up for decommissioning and whatnot. I would suggest that IET may be in the best position to outline how that may or

may not impact royalty agreements in the future. Because we're involved on the

accounting side, we set up contingent liabilities for the future but, other

than that, of course, our expertise is not in that sort of realm.

P. TRIMPER: My last

question – this is back to the timing of financial reporting and the steps

you've taken that all sounds positive. I wonder if you could talk a little bit

about – this is a kind of set-up question and I don't mean to do that to you,

but it's really like, how do we move ourselves up the line in terms of being

compared across the country? Are there big structural changes? And/or my

thought is – and back to one of my colleague's questions on the quality of the

information that's coming in – maybe some of these other provinces and

territories are getting their information in sooner but perhaps it's not to the

same quality. I don't know, but it was just something that the AG noted to us.

B. HANLON: The structural

change that would have to happen, that other provinces do, that's different in

Newfoundland and Labrador is that our accounting systems and our budgets are

done on a modified cash basis as opposed to an accrual basis. So, as a result,

when the year ends, we need to do literally – Lisa and her staff – hundreds of

accrual entries to bring the books from a cash basis to an accrual basis. That

process takes a long while. We have to get all the

information in from departments and entities.

What other jurisdictions do is they

may have accrual financials, accrual system set up and accrual budget set up

which would cut down on the amount of time required. But right now, as the Financial

Administration Act is structured, it sort of leads us to this modified cash

basis.

The thing that would have to happen,

and may or may not happen in the future, would be amendments basically to the Financial

Administration Act and large changes to our financial systems which, of

course, would be costly and time consuming, but it's a project that could be

considered in the future. That is the main reason why we're pushing up into

September, October and others may get it done a bit sooner.

P. TRIMPER: How do we

compare? Are other jurisdictions following this same modified cash basis or are

we unique in the federation?

B. HANLON: Lisa could say

if we're unique or not, but a large number do accrual accounting, have an

accounting system set up. We're on the tail end of when Public Accounts get

submitted, but they're always within the legislative timeline, which is sort of

the most important thing for us, to make sure we meet legislative timelines.

This year, we're going to implement

the things I've talked about to reduce our timeline as much as possible.

P. TRIMPER: Thank you very

much.

Thank you, Chair.

CHAIR: Thank you.

We'll move to the Member for Cape

St. Francis.

J. WALL: Thank you,

Chair.

Thanks to my colleague from Lab

West, I'm down to one question. Good questions and good answers, thank you.

I don't think this one has been

asked. I went back through my notes and I don't think it was but forgive me if

it has been. The AG noted some deficiencies in the reporting of the asset

retirement obligations, investments, loans receivable and disclosures related

to accounts receivable, long-term debt and contractual obligations need to be

further assessed, from the AG's office.

So my last question is: How is the

Office of the Comptroller General reviewing its disclosure requirements?

B. HANLON: Gee, I made it all this way and I just forgot the button once. Well, I

got too comfortable.

So the

Office of the Comptroller General has completed a detailed review of each of

the disclosure areas noted. Assessments were completed to determine if

additional disclosure in the Public Accounts were required by the Canadian

Public Sector Accounting Standards.

Disclosure

of the 2024 Public Accounts were updated accordingly, as required. So these

disclosures included asset retirement obligations, investments, loans

receivable and accounts receivable. So those have been updated in the 2024

Public Accounts.

J. WALL: Thank you, Mr. Hanlon.

appreciate that. That's my last question, Chair, and I appreciate the panel's

time and answers for today.

Thank you.

CHAIR: Okay,

thank you.

I do have

a couple of more questions, actually . When we asked if

there have been any decommissioning costs established, you just said no. Why

hasn't any decommissioning costs been done?

B. HANLON: Ultimately, I'll just go back to the things we have done. We do disclose

decommission carryback as a contingent liability.

That's sort of accounting treatment and stance the Office of the Comptroller

General has taken on the topic. After discussion with the IET ,

we feel that it is the appropriate accounting treatment to make.

There is a

difference of opinion with the Office of the Auditor General. I mean, we feel

the disclosures are a contingent liability and currently the appropriate

accounting treatment, and we have an accounting discussion paper provided to

the OAG that was provided for feedback in 2022.

continue to review and monitor with IET for any

changes or new information that may change our disclosure position . But as I

said, it is a difference of opinion with the Office of the Auditor General at

this time.

CHAIR: Okay, thank

you.

What is being done to ensure

spending is controlled and debt load is reduced?

M. JEWER: I'll refer

again to Budget 2024 and the fiscal forecast. So you'll note again return

to surplus in '25-'26 is part of Budget 2024 . From a spend perspective, you can

see that coming out of the deficit would be inherent in controlling some of

that spend. Some of that, of course, is additional revenue as well coming into

the forecast.

With respect to – you had asked

about managing the debt, correct?

CHAIR: Yes.

M. JEWER: I'll mention

again the things we've done around managing debt, putting sinking funds against

any new issuance of debt. There is a period of time

where there were no sinking funds attached to new debt. So I think it's

probably in the range of $16 billion or so that has no sinking funds attached

to it.

We did re-establish that. So now

that we do issue a debt, then 1.5 per cent of that gets put into a sinking

fund. Then that gets invested. Then, by the time the debt becomes due, there

should be sinking funds there to pay off that debt. From a fiscal

sustainability perspective, that is an important measure that was put in place.

Also with the sinking funds,

traditionally the Financial Administration Act was pretty

strict on what could be invested. So we did make some changes, as I

mentioned, to be able to invest in broader things to allow for a greater

return.

For our sinking funds, for example,

for '23-'24 the approximate return was 5.6 per cent on those funds. Our cost of

borrowing is approximately, current year, about 4.5 per cent. So you can see

there we are investing more than what the cost of the debt would be.

Then the establishment of the Future

Fund, I mentioned as well. So a certain portion of non-renewable resources goes

into the Future Fund and then gets invested. For '23-'24, the return on the

Future Fund was about 6.7 per cent, just to give you some indications there.

CHAIR: Okay, thank

you.

What is being done to address the

rising debt servicing costs? We're looking at over $1 billion per year.

M. JEWER: Again, I

mentioned the expansion into the European borrowing programs in

order to increase demand for our bonds would hopefully then lower that

cost of debt. Certainly, from the bond-rating agencies, as I mentioned, they're

looking forward to return to surplus as an important aspect to how they rate

our bonds. So that is a credit positive, we'll call it, when they look at how

they rate the province with respect to bond rating.

So those two things, for sure,

return to surplus, managing the cost, increasing revenue, obviously, reducing

that reliance on having to borrow is important. That would, obviously, reduce

the cost of the debt as well.

CHAIR: Okay, thank

you.

What is the sustainability of

reliance on oil revenues and federal transfers?

M. JEWER: So, for Budget

2024 , I believe the percentage of oil royalties to revenue was 15 per cent.

Back in 2011-12, it was 32 per cent. So then that's the natural decline of the

reliance on oil in the forecast.

From the federal transfers

perspective – I'm just going to get the number here. For '23-'24, 20.3 per cent

of our revenue was federal revenue. The majority of

the revenue is, what we call, own-source revenue. So coming from, as I said,

income taxes, corporate taxes, sales tax, oil royalties, those sorts of things.

CHAIR: Okay, thank

you.

What is being done to reduce that

reliance on the oil revenues?

M. JEWER: Again, if you

see, as I mentioned, it was 32 per cent and down to 15 per cent as part of Budget

2024 . So there is that reduction. It's about, I think, diversification of

the revenue streams coming in. To have different revenue sources coming in

would then reduce that reliance on oil.

For example, I'll just mention the

wind hydrogen as an example of a new source of revenue that would be coming

into the province.

CHAIR: Okay, thank you.

Just a couple of more questions, I

guess.

While auditing the Consolidated

Summary Financial Statements, the Auditor General noted numerous instances of

information that required correction from the Office of the Comptroller

General. How is the Office of the Comptroller General working to reduce errors

associated with the modified cash basis of accounting?

B. HANLON: So we've taken

a number of steps, taking the recommendations into

account. I mean, we're committed to reducing errors and promoting improvements

in financial reporting throughout government – our office is.

Departments are provided detailed

instructions for Public Accounts templates and a deadline that allows our

office to review the submissions and ensure proper completion. Consolidated

entities receive detailed completion instructions and a sufficient deadline for

the Office of the Comptroller General review.

The Department of Finance and the

Office of the Comptroller General have partnered to provide professional

development days. So we've done professional development days where Public

Accounts reporting and internal audit are discussed with financial professionals

throughout government.

We meet regularly with departmental

controllers, with Public Accounts as a standing agenda item and issues are

noted and raised with the group. We do our analysis and reasonableness review

on all submissions to try and avoid correction errors in the future.

We like to have accurate, timely

submissions in from all departments and we're making extra effort and will

continue to make extra effort to make sure that those submissions are as

accurate as they can in the future.

CHAIR: Thank you.

Does the OCG

intend to move to accrual accounting?

B. HANLON: Ultimately, the

financial statements of the province are provided on an accrual accounting

basis but the Financial Administration Act , as it currently exists, of

course, requires modified cash basis of accounting. So that will require

legislative changes. There are no legislative changes planned at this time, I

can say.

CHAIR: All right.

My time is just about close there. I

do have a couple of more questions, but I will move on down the line just in

case there are any extra questions. I'll follow up with a couple of questions

after that.

I'll ask the Member for Mount Pearl

North; do you have any more questions?

L. STOYLES: No, I don't.

Thank you again for coming this

morning.

CHAIR: The hon. the

Member for Placentia - St. Mary's.

GAMBIN-WALSH: No more questions for me.

Thank you very much for your

contribution.

CHAIR: The hon. the

Member for Labrador West.

J. BROWN: Thank you,

Chair.

I have no more questions, but I

thank our guests for providing the information today.

CHAIR: Thank you.

The hon. the Member for Lake

Melville.

P. TRIMPER: Thank you,

Chair.

It's not a question; it's a comment

and it may be a compliment then back to the deputy minister. I was just doing

some rough calculations in your investment strategy on the sinking fund. That

would represent somewhere between – am I getting this right – $8 million to $10

million per billion dollars? Is that what we're actually

gaining there through your investment strategy? Did I get that right? I

was looking at the percentages and you said 5.8 per cent and then 4.6 per cent.

That's about $10 million per billion. Is that what we're –?

M. JEWER: I'd have to do

the calculations; I'd have to get back to you to confirm. For sinking funds,

for example, the balance is about – so $1.5 billion is what we have in sinking

funds currently, and we have about 5.6 per cent return on that for the year,

for '23-'24.

P. TRIMPER: Okay.

M. JEWER: The Future

Fund, there's $390 million in that.

P. TRIMPER: Yes, it's back

– but the difference, the way you're investing is actually

generating many millions of dollars. I'm thinking it's $8 million to $10

million per billion. I'm not sure if I've got that right or not. How do we

enter that into the budget? How is that showing up? As a revenue, and how is it

labelled?

M. JEWER: It would be

investment income on the income statement that would show up. The sinking funds

actually come off of our borrowings, in our

liabilities.

P. TRIMPER: On your

borrowing costs.

No, I just wanted to say that's

good.

Thank you and thanks for the

opportunity.

CHAIR: Thank you.

The hon. the Member for Cape St.

Francis.

J. WALL: Thank you,

Chair.

I have no further questions. Thank

you to all of you for coming up today and providing your answers to us. It's

appreciated.

Thank you.

CHAIR: Okay, thank

you.

I'll follow up with a couple more

questions.

The Auditor General noted

deficiencies in the reporting of asset retirement obligations, investments and

loans receivables. How is the Office of the Comptroller General reviewing

disclosure requirements?

B. HANLON: So we

completed a detailed review of all disclosure areas that were noted by the

Auditor General. Disclosures in the 2024 Public Accounts were updated

accordingly, as required. So we did update asset requirement obligations,

investments, loans receivable and accounts receivable for the 2024 Public

Accounts. We took the recommendation under advisement and updated our

disclosure requirements accordingly.

CHAIR: Okay, thank

you.

During the audit, the Auditor

General notes four instances in which it took 60 or more days for the Office of

the Comptroller General to complete bank reconciliations. How is the Office of

the Comptroller General improving its turnaround time for the preparation of

bank reconciliations?

B. HANLON: We have a very

clear review of all bank reconciliations now. They're all up to date – up to

date meaning within 60 days is the requirement of the Auditor General. As you

said, there were four instances noted. We've reviewed those four instances and

we put processes in place to ensure that going forward, all bank

reconciliations are completed in a timely manner.

CHAIR: Thank you. I do

have one more question, that's it.

The Auditor General Report notes

three risks included in government's financial statement discussions and

analysis that potentially can have significant effect on the province's

economic and fiscal position. How is government using the risk highlighted in

financial statement discussion analysis to inform decision making and spending

priorities?

B. HANLON: Just to be

clear, are you talking about rate mitigation and demographic issues?

CHAIR: Yes.

B. HANLON: Okay.

First,

just on rate mitigation, the finalization of the rate mitigation plan with

Newfoundland Hydro was announced in May 2024, effective July 2024, whereby

domestic residential power rate increases associated with Muskrat Falls cost

recovery are capped at 2.25 per cent per annum. So that's sort of something

that has been done with respect to rate mitigation.

With

respect to aging demographics, you know, government makes investments in the

province to make it a beneficial place to live and raise your family, and we

are working on our immigrations policies and IPGS

does a very good job of dealing with enhancing immigration within the province.

So those are steps that have been taken demographically.

M. JEWER: If you look at Budget 2024 from a demographic perspective and

look at population indicators, we do see population growth in the economic

forecast. That's the first time we've seen growth in many, many years. But just

to give you an example, from 2023 to 2024, the 2023 population was 539,000. We

had about 9,800 net migration from immigration international and

interprovincial. Then we had a natural change of deaths over births of about

3,500, so a net of 545,300 in a population perspective.

Seeing population

growth in the forecast, as Bren has mentioned, there is certainly the

demographic of 75-plus does grow in the forecast as well, but that is taken

into consideration when you look at the general population and population

growth.

CHAIR: Okay.

I think, that probably may end the

questioning. I'm just taking one quick look around; I have no questions.

I'll ask the entities if there are

any closing remarks on their matter.

E. LANE: On behalf, I'm

sure, of Treasury Board Secretariat, which includes the Office of the

Comptroller General and I'm sure the Department of Finance as well, we are very

happy to appear and provide the information as requested by the Committee and

we thank you for the questions and the opportunity.

Thank you.

B. HANLON: Just briefly,

I'd like to thank Lisa and her staff for all the work they do on Public

Accounts, excellent job they do every year on Public Accounts, so I just want

to thank her and her staff. And I'd like to thank you guys for inviting us here

to answer your questions.

CHAIR: Okay, thank

you.

I'll ask the Deputy Auditor General

if there's any closing remarks on her part.

S. RUSSELL: I just wanted

to thank the Public Accounts Committee for having this hearing that addresses

the Public Accounts. There are several jurisdictions that don't get this

opportunity. I just think it's such an important part of our work and it's just

such a great experience to have these issues addressed in this public forum.

I'm very pleased to see some of the

responses on some of the recommendations that we've made and see things that

are being addressed and very much looking forward to working with the Office of

the Comptroller General in doing whatever we can to make a more

timely tabling of the Public Accounts in future.

Just thank you, it's been a great

hearing.

CHAIR: Okay, thank

you.

On behalf of the Public Accounts,

I'd certainly like to thank all the entities for appearing before us this

morning and answering the questions that we had. It's nice to hear the comments

from the Deputy Auditor General that through the Public Accounts she's got some

more conclusions to what she's been looking for so that's good to see that.

Other than that, again, thank you

for coming. With that we'll take a recess now and we'll return at 1 p.m. to

proceed with the hearings.

Thank you.

Recess

CHAIR: Thank you,

everyone. Good afternoon.

In this portion of the public

hearing, the Committee will hear from the Department of Health and Community

Services and Newfoundland and Labrador Health Services. I would like to thank

the witnesses for their appearance and welcome the following officials: Patrick

Morrissey, Assistant Deputy Minister, Corporate Services; Dr. Pat Parfrey , Chief Executive Officer, Newfoundland and Labrador

Health Services; Scott Bishop, Chief Financial Officer, Newfoundland and

Labrador Health Services.

I will start with a few reminders

for the witnesses and outline how this portion of the hearing will proceed

before I call the Clerk to swear in and affirm the witnesses.

Witnesses are reminded that this is

a public meeting and your testimony here today will be part of the public

record. Witnesses appearing here before the Standing Committee of the House of

Assembly are entitled to the same rights granted to Members respecting

parliamentary privileges. Witnesses may speak freely and what you say in this

parliamentary proceeding may not used against you in civil proceedings.

Live audio will be streamed on the

will be available following the hearing. Hansard will also be available

once finalized.

When called upon, please just

activate your microphone, identify yourself by saying your name first, and

please remember to turn off your mic when you're finished speaking.

First, I'll invite the chief

executive officer and deputy minister to make opening remarks. Then the

Committee Members will pose questions in 10-minute periods. These rounds will

continue until Members have exhausted their questions.

I now as the Clerk to administer the

oaths to the witnesses.

Swearing of Witnesses

Mr. Patrick Morrissey

Dr. Patrick Parfrey

Mr. Scott Bishop

CHAIR: Thank you.

I now call upon the CEO of

Newfoundland and Labrador Health Services to bring opening remarks.

P. PARFREY : As you know,

I've only been the CEO of NL Health Services since last Friday, but I have had

discussions about the Auditor General's report with Karen Stone, who was the

interim CEO, and with Scott Bishop, who will be our spokesperson in responding

to the components of the Auditor General's report.

I think that's probably enough from

me at the moment .

CHAIR: Okay, thank

you.

I now call upon the deputy minister

of Health and Community Services to bring opening remarks.

P. MORRISSEY: John McGrath

sends his regrets, of course.

First of all , I just want

to thank the Chair and the Committee for giving us the opportunity today to be

here and answer any questions you have and just thank you for all the valuable

work that you do.

I also want to thank the Auditor

General's office, the OCG and staff at NLHS in their efforts in completing this report. I also

want to congratulate Dr. Pat Parfrey on his

appointment for new CEO.

I won't take up too much time. I

just wanted to highlight a couple of the more significant things that are

ongoing that touch on some of the recommendations.

Just a couple of things, including

the Fixed Asset Register that was noted and Electronic Fund Transfers are

primarily due to the limitations of the NLHS's

existing finance and information system, Meditech. The department and NLHS are now working closely with the Office of the Chief

Information Officer and the Department of Finance on implementing a new

enterprise resource planning system, which will effectively modernize finance,

human resources and procurement and supply chain technology.

When it comes to the inventory we

can get into more details, and Scott can for sure, but in the fall of 2024, a

new warehouse management system was approved by government which will modernize

inventory control and eliminate that risk of expiry and waste of the product.

It was also noted in the report that

there is a lack of an internal audit function. We're happy to say that since

that time, the NLHS board of trustees in partnership

with HCS approved the establishment of an internal audit office within the

health authority. That is ongoing, the recruitment efforts for that team.

There are a few other

recommendations, some internal control issues that NLHS

has addressed with compensating controls and other areas. So I just wanted to

highlight some of the major initiatives that are ongoing.

We are happy to take your questions.

CHAIR: Okay, thank you.

With that, we'll start the

questioning and I now recognize the Member for Mount Pearl North to proceed

with the questions.

L. STOYLES: Thank you,

Chair, and thank you for coming.

I am the MHA for Mount Pearl North.

I'm assuming you know everybody at the table. Thank you for coming and thank

you to the Auditor General for doing all the work in her department, and the

department for doing all the work that they do for us and for the government.

I have a couple of questions. The

health care foundations, there's a bunch of them: the Janeway Foundation, the

Bliss centre, the Trinity Conception Placentia Health Foundation, the Burin and

the Grenfell Foundation. The government don't have any control over getting

financial statements from them. We're just wondering if your department is

going to ensure that they do provide those accounts.

I know most of them are

self-sufficient and everything and they raise funds and most of the funds they

raise, a lot of them are going back to the health care foundation and to the

hospitals, but we are just wondering what the protocol is and if you're looking

to putting any policies in place in that regard.

S. BISHOP: Great

question.

I guess to settle the question that

has been posed, Ms. Stoyles, it comes down to an element of, as you mentioned,

control. The current health authority and legacy health authorities do not

actually affect the control of the foundations. Although we partner with them

for their fundraising efforts and we certainly appreciate the major component

of our work they contribute to, there isn't an element of control within the

health authority, therefore they aren't consolidated to our financial

statements as deemed appropriate by the Auditor General's Office.

However, our current board bylaws,

as passed by our current board of NLHS , does include

an element whereby the foundations are required to provide our board with

audited financial statements on an annual basis, and that's expected from all

foundations. So that is an element of our board bylaws in which the financial

statements that are audited by their own auditors are presented to our board in

completeness, nine months after its completion and audit for review by our

board.

We also have great partnerships with

all our foundations in terms of our leadership in NLHS ,

but also our board itself and their involvement with our individual foundation

boards. So there are lots of partnership synergies and governance in terms of

the relationship with the boards, but ultimately it comes down to an element of

control in which NLHS does not control the boards,

therefore, they are not consolidated. But there is an element of our board

bylaws that require the foundations to present audited financial statements to

our board on an annual basis.

P. PARFREY : I just want to

confirm that the chair of the board, of the NLHS

Board, has created a subcommittee that includes all the CEOs of all the

foundations and they're about to meet.

L. STOYLES: Okay, so would

the Auditor General be able to get a copy of that because I don't think they

were able to get a copy. That was my understanding anyway. I'm just wondering

if it could be provided. Have you asked for it and is the Auditor General's

Office entitled or able to get a copy of that, and if so, when can they get it?

S. BISHOP: As NLHS , we certainly have copies of those latest financial

statements that are audited and we can certainly work with the foundations and

the AG's Office to understand what requirements might be there. But we can work

through that and get back to the Committee, if that's the case.

L. STOYLES: The other

question, because we've been talking, of course, in our Committee meetings

about health and different aspects of the AG's Report. One of the questions I

had, I don't know if it's actually related , is social

workers. This is what I'm told and I deal with a lot of social workers, people

calling looking for help in the district. Not only my district; I'd say every

MHA is doing what I'm doing, if they get a call for seniors or anybody looking

for help and if they need a social worker and that.

What I've been told by a lot of

people, especially the past four or five years that social workers – I don't

know if the job hasn't changed, but now people don't have an individual social

worker. Whoever is available when – if I need a social worker and I call the

department, somebody would be assigned to me on that specific case. Everybody

doesn't have – I understood back in the day that everybody had their own social

worker. I'm just wondering if that has changed.

P. PARFREY : I'm not able

to answer that question right now, but I can find an answer for it and get back

to you about it.

L. STOYLES: Okay. I know

it's very concerning to me, and it's not really in the Auditor General's

report, but I brought it up because it's been a concern to me as an MHA dealing

with supervisors. I know one elderly lady had five different. And people trying

to get into nursing homes, they've got two or three different social workers

before they get in. And then children and that. I'd just like to know if things

have changed.

That's it for me for questions right

now.

CHAIR: Okay, thank

you.

The hon. the Member for Placentia -

St. Mary's.

GAMBIN-WALSH: Good afternoon.

You've kind of answered some of my

questions in your introduction. Thank you very much for that, but that gave me

more questions, specifically around the Meditech system. You indicated that the

fall 2024 new system was approved, and we're about to implement a new system

for the five entities. Do you have any idea about the timeline for the

implementation? Where you are with that as it pertains to moving from Meditech

separately to one as a whole?

P. MORRISSEY: I just wanted

to clarify, so the Meditech, there was nothing approved on that yet. We're

working towards implementing a new system for Meditech. I think what I was

referring to is the warehouse management system, which is the inventory system

within NLHS that was approved. As for timelines,

Scott can you maybe detail that a little bit better?

S. BISHOP: Thank you for

the question.

In terms of timelines, as Patrick

identified, the Meditech solution is – we're in active conversations with

Health and Community Services, Department of Finance and OCIO in terms of

replacement of Meditech in what I'd refer to as the back

office functions of that system, which are quite dated and fragmented.

Patrick alluded to the fact that we have a new inventory, a warehouse inventory

solution that was approved last fall.

It's through a vendor, Tecsys , which we will be implementing in two of our major

distribution centres; one here in St. John's – you've probably noticed the new

warehouse on East White Hills – is our St. John's distribution centre, and one

in Corner Brook that opened last year. We'll be modernizing those two

distribution centres to be the main hubs of distribution of medical supplies to

all our facilities across the province.

In terms of timelines, we foresee

both distribution centres being fully operational by this spring, one likely

before the other, the St. John's site actually includes

the vaccine depot for the province so there are some complicating factors in

establishing that as it relates to the new software but by June we anticipate

both distribution centres to be fully equipped with a modernized warehouse

management system at that time. June time frame would be the latest; earliest

could be as early as April.

GAMBIN-WALSH: What infrastructure are you using right now?

S. BISHOP: At the moment our warehouses

are based on the Meditech platform that Patrick alluded to. It is quite dated.

We actually have four instances of Meditech across NLHS from the legacy RHAs that's

still in place. As you can appreciate those systems are not consolidated. They

don't speak to each other – quote, unquote – and there's a lot of fragmentation

and lots of exposure related to that, but it is a Meditech platform that's

currently used.

Aside from that there's general

manual controls that are in place from an inventory perspective, so this really

does modernize our warehouse consumable inventory and put controls in place

that Patrick alluded to around proper inventory rotation, expiry and wastage

that have been a major concern with an antiquated system that we're currently

leveraging through Meditech. It's going to put us quite ahead in terms of

modernizing that space for the PHA.

GAMBIN-WALSH: Okay. Just so that I can be clear, so the warehouse

management system was approved in the fall and you have two systems or two

areas and that's what you're moving to, okay, all right.

Auditing, you did also speak about

the internal auditing but just can you just rehash: How are you auditing

internally today?

S. BISHOP: Today, we don't

have a formal internal audit function. We do have standard internal controls

that are implemented in terms of best practice, when it comes to internal audit

in general terms. We also have our audited financial statements performed on an

annual basis by the Office of the Auditor General in terms of our financial

statement audit.

There are also policies enacted that

are in line with Treasury Board and provincial government in terms of things

such as travel, hospitality, delegation of signing authority. Those policies

also provide a level of internal control. I think the biggest thing for us, as

Patrick alluded to, is the implementation and the establishment of a formal

internal audit office. An enterprise and an organization of government the size

of NLHS certainly needs that function and we foresee

that function after being approved by government officials in terms of

implementation.

We're, right now, in the state of

recruitment of a chief internal audit officer. This is an arm's-length office

from the organization, so it's a function that reports, functionally, to the

board of trustees directly and not to the organization per se or it's

leadership and administratively to the CEO.

So from day-to-day things such as

payroll and other administrative functions, it does have a relationship to the

CEO but it does have a functional responsibility to the board of trustees. So

it is objective in that sense of the word.

That's in the recruitment phases in

terms of the chief audit officer and, from there, that individual will form his

or her office at that point.

S. GAMBIN-WALSH: Okay.

So I'm guessing like the risk

assessments –

P. MORRISSEY: I just have

one thing.

So, similarly, with the Office of

the Comptroller General for the departments, they do offer various internal

audits for NLHS as well as the department. So just to

add, that's who we use internally now is the Office of the Comptroller General.

S. GAMBIN-WALSH : So just based

on the internal auditing and the inventory controls and what have you, I'm just

trying to wrap my head around the risk assessment component and the quality

assurance component. How do you make decisions now to determine what area

within a hospital, within health care would need funding? For example, is it

cardiac or oncology? We know everyone's pulling for money; every area is

looking for investment. How do you make those primary decisions of where the

investment needs to go, say, in 2025?

S. BISHOP: It's a great

question and one that is a constant struggle in terms of understanding where

priority areas are but through the implementation of a risk register that we

have as an organization, we understand where the primary risks are for the

organization in terms of where funding is required. That's both on the

operating funding side but also just as important as on a capital operating

side or a capital funding side.

We do have

active governance structures internally in terms of understanding what

priorities need to be met and that comes from active conversations with our

clinical partners, our front line in terms of where we see issues in terms of

access that might need to be addressed through additional funding or the like.

Dr. Parfrey can speak to this more eloquently likely, is the

guide that we have in the Health Accord in terms of guiding our way forward in

terms of where we need to prioritize to make that a successful implementation.

That does provide us with a good blueprint, if you will, in terms of where our

priorities are in the health system and where we should be prioritizing not

only our operating funding allotment, but also turning the page to our capital

side.

P. PARFREY : I will make a comment about that.

I think that

the Health Accord has gone through a massive public engagement, involving 128

different groups of people and 10 committees, and has been accepted by

government as policy for health care delivery and for action on the social

determinants of health and has made fairly substantial

investments in both those arenas.

The reality is that the priorities

that I have, as the CEO, and what the organization will have is

written in the Health Accord so people will know what they are. On top of that,

there is a blueprint for the Health Accord that discusses the implementation

issues and how you could go forward with implementing each of those actions

that were given priority.

It's the role, I suppose, of the NLHS executive to be able to determine what are the best

ways to implement each of these actions, and that's ongoing.

I would like to say that of those 57

Calls to Action in the Health Accord, all of them have been acted upon either

at a policy level or at an implementation level. But making policy is the easy

part. The hard

part is implementing it and dealing with the change management.

That's really what NL Health Services engage in at the

present moment.

GAMBIN-WALSH: Thank you very much. That's all for me.

CHAIR: Okay, thank

you.

The Member for Labrador West.

J. BROWN: Thank you,

Chair.

In the report there the Auditor

General had concern about the line of credit that was taken out by, at the

time, the individual health authorities and now it's consolidated into the NLHS . With the $660 million line of credit, what is the plan right now deal with that amount of additional

debt that was taken on by the authority?

S. BISHOP: Thank you for

the question, MHA Brown.

I think first and foremost NLHS , in partnership with the Department of Health and

Community Services and the Department of Finance, acknowledges that that level

of borrowing is not fiscally sustainable. And there have been active

conversations in the past two years in partnership around a vision or a way

forward in terms of what we do to reduce that borrowing capacity in that light.

I think there are a

number of things that has led to that borrowing limit, and it's occurred

over a number of years and it'll likely take multiple years to get it back to

something that is fiscally sustainable. But there are a

number of pointed strategies that have been enacted in the past couple

of years as NLHS formed as a new provincial health

authority to sort of addressing that.

One, I think in partnership with the

Department of Health and Community Services, is addressing the structural

deficit that was in legacy RHAs that had played a

prominent role in where the line of credit has become. That's been addressed in

fiscal '24-'25 with partnership from Patrick, the deputy, and others within the

Department of Health.

I think just as important, though,

is what part NLHS plays in that sustainable vision

going forward around borrowing. One element that we have been seized with as an

executive and a board over the past couple of years has been, as the RHA or PHA

forms and evolves, where are the efficiencies that can be harvested to help

with that borrowing and being able to reduce the reliance on that borrowing

capacity.

So we have established a multi-year

sustainability plan that we monitor quite regularly with the department and

with our board of trustees to enable efficiencies to be harvested and used in a

way in which we can leverage and reduce our reliance on that borrowing

capacity.

The other piece of that is the

reduction of agency resources that has been a big play in recent years and

requirement for us to be successful in the delivery of service in the health

sector. But a plan to reduce that agency reliance is also enacted and we're

monitoring and reporting that quite regularly in terms of another big area in

terms of efficiency finding and being cognizant of our responsibility around

that.

So I think, in partnership, there

are a number of levers that are being enacted to be

able to reduce that line of credit over the coming years, to be successful in

that in partnership with folks within the department and the Department of

Finance.

P. MORRISSEY: Thanks, Scott.

I think as well, I just wanted to

add as part of the previous budget, you mentioned the $616-million line of

credit. We obviously want to get that down to, frankly, a pre-pandemic level.

In budget, there was $550 million approved over two years to pay down the line

of credit to get us to a line of credit that is just used for operational

emergency purposes.

So just to add to Scott's comments

there. And I think in partnership with health transformation and NLHS , you know, it worked pretty closely

on making sure there is accountability and value for money in every spend, so

that's a big part of us going forward and working towards that.

J. BROWN: Thank you both

for that – oh, sorry, Pat.

P. PARFREY : I would like

to make a comment.

The idea that we have a line of

credit and borrowing facility would imply that we might have profligate

spending. I don't actually think that's the case. I

think that the structure deficit is really important

and the addition of having to pay for agency nurses, actions that are requested

to take place that are unfunded and wage increases on top of that, are the

things that are driving this, not profligate spending.

That necessity to have the borrowing

capacity to keep the organization going is really important .

But I think that the idea that you have one line of credit that you look after

for the five zones is pretty important as well. But

that requires a degree of planning that's challenging.

J. BROWN: Thank you so

much for that.

What is the interest rate paid on

the current line of credit right now?

S. BISHOP: As the

evolution of the PHA, as NLHS continues, we still

have legacy bank authorities within previously existing bank institutions. So

we actually have three institutions that we work with

across the legacy RHAs as NLHS .

So we do have a borrowing capacity amongst three institutions, all of which

have a similar interest rate on our borrowing. Two of which is prime minus 0.5

basis points, and one is which is prime minus 0.8 basis points. So all in

relative space.

Nonetheless, as Dr. Parfrey alluded to, the ultimate game in terms of our

standardization and evolution as a PHA is to standardize not only our systems,

but our things like our banking institutions. That's part of our work plan over

multiple years that will get us there. But, at this point in

time , we're dealing with three particular banking institutions with

varying rates of interest, but relatively in similar terms.

J. BROWN: Thank you so

much.

Also with this right now, I guess

the ultimate goal is to consolidate everything into

this. What is the time frame right now for consolidating the finances of the

legacy RHAs and NLCHI all

into one? What is the current timeline for seeing that progression done?

S. BISHOP: We have actually consolidated . While the systems remain

unconsolidated and very fragmented, which is a problem in another sense of the

word when it comes to reporting, but for all intents and purposes, for

presentation to government and its official financial statements, presentation

to government officials in terms of the Comptroller General and for audit

purposes with the Auditor General, our statements are consolidated at this

point and this will be the second year for our consolidated efforts in terms of

consolidating our financial reporting.

It's the systems behind that that's

the segmented and fragmented part. But for consolidated reporting purposes, we

are consolidated for all intents and purposes, for reporting purposes, whether

it be for the Auditor General for audit or for other reporting mechanisms up

through the Department of Health for accountability reporting and general

conversations.

J. BROWN: Okay, thank

you.

For the consolidating of the

systems, I guess, is the bigger picture here, too, as well as what needs to be

done. When is the time frame for your consolidation of the systems? I know you

mentioned a few things there with Meditech and that. What is the time frame

you're working with now to try to get that all in-house?

S. BISHOP: Another great

question and another piece of work that's evolving over time. We spoke earlier

about our warehouse systems, which is a major step forward for us. I guess the

second piece of that would be the consolidation and modernization, better yet,

of our antiquated Meditech system, which is what we're using at

the moment .

There hasn't been a defined timeline

for that system integration and consolidation. We are in active conversations

with department officials, OCIO, as Patrick talked about earlier, and the

Department of Finance to leverage capacity around what a consolidation system

could look like and what system that might be.

But again, we're in the very early

stages of that work plan, but I'm sure that will come to light sooner than

later and will be a major benefit for us all.

J. BROWN: Thank you so

much.

I guess with the consolidation and

everything like that, we've had these discussions with the Comptroller General

and stuff like that, but just for the record and for public knowledge of this,

are you guys operating on accrual-based accounting system?

S. BISHOP: Yes, we are.

J. BROWN: All right,

thank you. That's my final question.

CHAIR: Okay, we'll move to the Member for Lake Melville.

P. TRIMPER: Thank you, Chair.

colleagues have grabbed a lot of my thunder. And it wasn't thunderous.

I'd like

to explore a little bit more on the same line of thinking as Jordan was just

doing now, around the collapse of the RHAs . I think

you've got most of the elements, but I wonder if you could just summarize the

disparity.

You know,

it's been interesting serving on this Committee, watching, and as we've looked

at different topics in the Public Accounts Committee and different aspects,

it's been enlightening, I guess is one word, to see the differences in the four

RHAs . I've become such a fan of this guy and Sister

Elizabeth and the Health Accord, and I've just been welcoming it. Back home in

Labrador everybody is saying you need to be getting our Labrador system back,

and I have so many arguments to push back on them.

I wonder

if you could summarize maybe some of our questions, your thoughts, just on

where we are now in terms of getting a good handle on spending, attacking that

debt that we have that we need to work on, and just a bit more on timelines. I

think you've got most of it, but I just wonder if you had a general comment on

that.

P. PARFREY : Maybe I'll start.

So the

intent of the reorganization, I suppose, you'd have is that the provincial

health authority had responsibility for evolving plans on a province-wide

level, such that there was equity for every resident of this province with

access to services. But the innovative part of it was that the regions needed

to have input into how care was delivered in their regions.

So the challenge was to ensure that

the collaboration between the provincial approach and the regional roll out of

services, consistent with what the people wanted within their regions, was

going to happen and that requires a kind of a matrix approach of organization

and requires a collaboration between the various people there to make it

effective.

I would say that's a challenge and I

think it's evolving, and I think that the capacity of the provincial approach

to influencing what happens in regions is going to get better. So that's a

challenge for me, kind of coming into the job as a new person. I think the

consolidation of the finances is really going to be dependent on that system

that Scott was talking about, to ensure that the services that are present in

each of those regions are done to the best of our capacity, and that involves a

certain number of ways of doing so.

There are a set of services that

need to be availed of for the region itself around the areas that they believe

to be the most important: family care, internal medicine, surgery and

obstetrics and the pieces that go with it and their capacity to recruit to be

able to provide those services, which is a challenge. That's kind of that basic

suite of services that are necessary for a particular region and a particular

district.

Then there's the issue of, for

regions, that they're able to get access to tertiary level services. The idea

there is that we need to be able to get tertiary-level consultants to be able

to travel to the people and to be able to treat the people in their own

environment. That's actually happening . In Happy

Valley-Goose Bay, cardiology has visited there twice in the past few months.

General surgeons have gone there several times to do endoscopy.

So the idea of bringing the care to

the people is getting traction. Then virtual care is improving. It is a

priority, I think, but it's feasible to balance the virtual care with the

in-person care that's necessary to be able to provide good care to a patient.

An example I'd give would be if

you're living in Happy Valley-Goose Bay and a woman had a breast lump, she

currently might go St. John's for imaging and then go back for the surgery and

go back for the follow-up visit and go back for the next follow-up visit.

Whereas the initial visit that's necessary could take place virtually and the

last two visits could take place virtually and the last two visits could take

place virtually and the provision of the imaging that's necessary could be

provided in the region.

What I'm saying there is that

balanced approach to virtual care, as against in-person care can evolve in such

a way that the patient who's living far away can get good service, as good as

you get in St. John's. So that's the idea of bringing the care to the people.

Then the second idea is bringing the

people to the care that's specialized. Examples of that would be somebody who's

in Happy Valley-Goose Bay with a myocardial infarction and needs a cardiac

cath. Previously, there were delays in that transfer happening but now with

Heart Force One that transfer is happening much faster and what the data

demonstrates is that for every 100 patients that are transferred using Heart

Force One for their cardiac cath , 25 per cent stay in

the hospital in St. John's and the rest of them go home; they don't go back to

their facility. So that's an example of bringing the people to the care.

Clearly we need to be as efficient

as we possibly can. I think the other element of that is around the air and

ground ambulance system; that the ground has been integrated and the paramedics

are now publicly paid workers and the air is imminently being integrated and

the planning around getting helicopters to be able to be part of our system and

the planning around getting emergency care presented by professionals who are

full time in the job so they look after the patient who's in the isolated area,

initially, all the way through to coming to the place that they're meant to

come to. That's evolving as well and that integrated air and ground ambulance

system will occur this year. So that's a good example of bringing the patient

to the care.

I think that the benefit of the

provincial health authority is thinking in a holistic sense about how every

person in this province can get optimal care, despite their isolation or

despite the lack o

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Citation	2025-01-29
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