Public Accounts Committee — Department of Advanced Education and Skills — 8 September 2015

2015-09-08

Newfoundland and Labrador — Committees

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September 8, 2015

PUBLIC

ACCOUNTS COMMITTEE

The

Committee met at 9:00 a.m. in the House of Assembly Chamber.

CHAIR (Bennett):

Good morning, everyone.

This is a meeting, or more appropriately put, a hearing of the Public

Accounts Committee of the Province of Newfoundland and Labrador.

Today, we are going to have questions and pursue information that came up

in the Auditor General's report related to Memorial University.

The individuals who are here are actually from the Department of Advanced

Education and Skills and I will go into an explanation of why they are here

instead of somebody from Memorial University.

I am

the Chair; my name is Jim Bennett.

I am the MHA for St. Barbe district.

I am going to introduce my colleagues, both from government side and the

Opposition side, and then the Vice-Chair, Mr. Hunter, will have a word.

Then we will invite the other witnesses to introduce themselves so that

when they are speaking, anybody who may be watching will know who is speaking,

and the people from Hansard will know who speaking so when they record what is

said, we will know who said it.

With us

today is my Vice-Chair, the Member for Grand Falls Springdale

MR. HUNTER:

Grand Falls-Windsor

Green Bay South.

CHAIR: The

districts are getting somewhat confusing, but that is okay.

Then we have the Member for Cape St. Francis, the Member

for Bellevue, the Member for Bonavista North, the Member for St. John's South ,

and the Member for St. John's East.

We have the Auditor General, his staff, the other two witnesses, and my Clerk,

Ms Murphy.

Each

member, when they pose their initial questions, they may want to introduce

themselves because at that time the camera will be on.

Mr.

Hunter, you wanted to have a few words.

MR. HUNTER:

Thank you, Mr. Chair.

First

of all, I would like to just welcome our members from AES, the AG's office, the

AG, and my colleagues from the House of Assembly to the Public Accounts

Committee. This is my first time, I

think, in these types of hearings.

I have been on Public Accounts years ago, but it is the first time we held these

kinds of hearings. It is a learning

curve for me not that I want to learn too much, after deciding to leave

politics in a couple of months.

I would

just like to say that I did review the reports, the AG's report, and the

documentation that was before us. I

have to say a lot of this is over my head.

My colleagues and our Chair will try to ask questions the best that we

can, realizing that there is no representation here from Memorial University, I

take it.

Just

brief enough to make it in the record that as Vice-Chair, I am pleased to be

here and question the public's concern in how we spend public money, whether it

be government departments or Crown agencies.

It is incumbent on us as politicians, particularly the Public Accounts,

that we look into matters involving public money.

I just welcome you here today and my colleagues.

Hopefully it turns out to be very meaningful and very productive.

Thank

you very much.

CHAIR:

Thank you, Mr. Hunter.

The

witnesses who are here today are here voluntarily.

The Public Accounts Committee could subpoena people, but that would be a

process through the House of Assembly.

The witnesses who are here are here voluntarily; however, their evidence

is sworn evidence.

When

witnesses appear before us repeatedly, they are sworn and they stay sworn

throughout the session. So some of

our witnesses are already sworn and some have not been sworn.

I am going to ask Ms Murphy to administer the oath for the individuals

who have not yet been sworn or previously sworn.

Then I am going to ask Mr. Paddon, the Auditor General, if he would like

to say a few comments before we start.

Swearing of Witnesses

Tracy Pelley

Mr.

David Pike

Mr. Bob

Gardiner

CHAIR:

Thank you, Ms. Murphy.

For

anybody who may be watching or may read the transcript heaven knows why

someone would want to read the transcript from Hansard, but people do from time

to time. So that the individuals

are in context, I will ask Mr. Paddon if he would like to just give us some

background and/or if members of his audit staff would like to have some

commentary on the audit and that sort of thing because it allows a context for

the information. Instead of just

jumping into the nuts and bolts of how much did this cost and what did you spend

on that, it is useful for people to know.

MR. PADDON:

Thank you, Mr. Chair.

Good

morning, everybody, members of the Committee.

We started our audit at Memorial University a couple of years ago.

The scope of our audit was the period April 1, 2011 until March 31, 2014,

so it covered a three-year period.

really had four objectives that we were looking at when we commenced our audit:

the first was to determine whether the university was adequately monitoring its

financial position and operations; the second was to determine whether

recruitment and compensation practices were in accordance with university

policy; thirdly, to determine whether leave and overtime were properly approved

and monitored; and the final objective of our review was to determine whether

travel and relocation expenditures were approved and paid in accordance with

policy established by the university.

From a

scope perspective relatively limited, so we did not venture outside of those

areas we are precluded from commenting on or reviewing issues that would be

sort of academic in nature, if you want to call it that.

So we really stuck to the operational side of the university versus the

academic side.

terms of conclusions on our objectives, obviously we would set up a number of

criteria, we would review those criteria with the university, then we would

conduct our audit and look at the objectives with a view to seeing whether the

criteria that we have established were met, and then conclude on our overall

objectives.

terms of the first objective, we did find that the university had adequate

processes in place to monitor its financial position and operations and

really, that was not a huge surprise, given the size of the university and the

administrative structure that they have in place.

You would actually be surprised if they did not have processes in place

to monitor their financial position and their operations.

There were a number of findings that we had associated with that, but our

overall conclusion was that the processes were adequate.

terms of recruitment and compensation practices, again we found that, based on

our samples, the recruitment and compensation practices were in accordance with

the university policy; however, we did find some exceptions along the way and we

have reported those as findings.

The

third objective was around leave and overtime and our conclusion was, based on

the review and the samples we looked at, that leave and overtime were not being

properly approved or monitored in accordance with policy of the university,

procedures, and collective agreements.

So we found a number of instances where things that were supposed to be

done according to policy were not being done.

A lot of it revolved around documentation and processes in place to

monitor leave and overtime.

The

fourth objective was around the travel and relocation policies, and we did find

that the travel and relocation were approved and paid in accordance with the

university policy.

Generally speaking, of the four objectives, we found that three were fine and

one required some improvement in our view.

We did find quite a number of findings, which I guess a finding would be

something that in our view members of the Committee or members of the public or

members of the Legislature would find interesting and it sort of highlights some

particular issues within the operations of the university that there could be

some issues where they could make some improvements along the way.

So we highlight those for the benefit of the Legislature and of the

Committee in particular.

We had

thirty-nine findings in our report overall, and then in terms of

recommendations, one of the outcomes of our report is to provide recommendations

to the university or to the sponsoring department, as the case may be all

aimed at improving financial accountability, financial reporting, and financial

controls, and we have thirteen recommendations that we have provided to the

university. As the Committee is

aware, after a couple of years we will follow up with the university and inquire

as to how they are making out with the implementation of our recommendations and

we will report that to the Legislature at that time.

I think

that is all I will say by way of background.

CHAIR:

Thank you, Mr. Paddon.

Today

there is nobody here from Memorial University.

Memorial University is relying on a

section of the Memorial University

Act not to appear. That may seem

unusual. I have reviewed the act.

This section, which is

section 38.2, was passed in 1993, so it is

twenty-two years old. Memorial

University also relied on this

section of the act to not respond directly to the

Public Accounts Committee.

When

the Auditor General does his review and then makes his report, the report

becomes public. The Committee sits

with the AG and his staff to review his findings so we can understand exactly

what his findings are, more or less in ordinary terms, in lay talk instead of

necessarily in accounting terms or in technical terms.

Afterwards, we then analyze the report; we send a letter to whoever is the

agency or department. So we send

the letter asking for various types of explanations on this point here and that

point there. Some things may be

clarified; some things may not be clarified.

We did this in late March, and approximately a month later Memorial

University communicated with the minister and pointed out to the minister that

the Public Accounts Committee has written us asking a variety of questions and

here are the answers. They elected

not to respond to our questions and instead responded to the minister so the

minister could pass the questions on to the Public Accounts Committee.

That is

the state of the legislation today.

The university claims academic autonomy.

The Public Accounts Committee looks into expenditures of public funds

generally as identified by the Auditor General.

Why I say this is that the questions today of the individuals who are

here, they may not be able to answer them with the degree of detail that might

be useful if it were somebody actually from Memorial University.

Maybe they can. Maybe they

will have been fully briefed by Memorial University on all the background of all

of the details.

The

Auditor General may be able to provide some insight, so I suspect, though I

cannot really predict, we will be going to the Auditor from time to time where

the representatives from the department do not have the information because we

do not have somebody here from Memorial University.

When we

do the questioning, the examining, the procedure that we have followed and

continue to follow is that we go in rotation, ten minutes per member at a time,

and we go Opposition, government, Opposition, government, back and forth.

If somebody is at or near or just past ten minutes, if they are pursuing

a particular line of questions, then it makes more sense to let them run on for

another few minutes or whatever it requires to finish up those questions.

So they could be a little bit longer, but generally that is just to make

sure all members have an opportunity to ask questions on an ongoing basis.

We have

booked the day. There is no way to

forecast necessarily how long we will be here; however, the report is long, it

is extensive and it is detailed, and there is a book full of appendices of

forecasts and so on. That is

because some of the questions it may look like the witnesses are not

answering. That is just sort of a

caution to anybody who might think the witnesses are not answering for some

reason.

The

manner that we follow and we elected to follow in Public Accounts, when we

began, we created our own practices and procedures manual where none existed.

Whereas in court settings sometimes people see an adversarial

examination, cross examination, we do not do that.

We are more of an inquiry nature, so we are more I think inquisitorial.

We ask the questions and get the answers that we hope to get.

Also

whereas courts seek to find someone

who did something wrong, something bad and punish them, we are more remedial.

We like to find out what went wrong and how it can be fixed and then it

is condensed into the report that we will provide to the House.

Unless

anybody has any questions or observations, I am going to go to the first

Committee member, Mr. Osborne, and ask if he would like to ask some questions.

MR. K. PARSONS:

(Inaudible) opening

statement.

CHAIR:

Yes.

Mr. Parsons, who is the former Vice-Chair and has been on the Committee

the whole session and Committees before, has pointed out to me that it is

customary for us to invite any witnesses or organizations that show if they

would like to make an opening statement for the beginning.

Sometimes they are able to say what work they have already done and it

saves some questions, and it certainly allows a context.

I will do that first.

You

need to identify yourself or the people from Hansard will be saying we do not

know who is giving the information.

MR. PIKE:

Good morning, members.

I would

just like to articulate the Chair's observations from earlier.

Myself and my colleague, Bob Gardiner, are appearing here today at the

request of Memorial University. As

we confirmed with the Clerk's Office at the time the invitation to appear was

extended,

section 38 of the Memorial University Act addresses the autonomy of

the university, and in particular,

section 38.2(3) does not compel the

university officials to attend Committee meetings.

As I

indicated, my colleague and I, at Memorial's request, will address any questions

that the members have; and, if required, we will follow up with Memorial

University to ensure a written response to support the Committee's report.

Written

responses to questions posed by the Chair and Vice-Chair on Memorial were

provided to the Committee. In

addition, from an accountability and transparency perspective, Memorial has

posted a link on their website, or a URL address, to the Auditor General's

report, and has provided detailed responses to each of the Auditor General's

thirty-nine findings for the university Committee.

appreciate the analysis completed by the Auditor General and the recommendations

on how to improve Memorial University.

We accept the recommendations made by the Auditor General pertaining to

both the Department of Advanced Education and Skills and Memorial University,

and both of our entities take accountability very seriously.

Our department will work with Memorial to address the outstanding issues.

We hold regular meetings, and we will continue to discuss and address the

Auditor General's recommendations.

Just

one comment on the agenda: I am referenced there as Deputy Minister; it is

Assistant Deputy Minister for the Department of Advanced Education and Skills.

CHAIR:

Thank you.

Mr.

Osborne.

MR. OSBORNE:

Thank you, Mr. Chair.

I will

start off by saying that I find it very disappointing and, in fact,

disrespectful that Memorial University did not appear before the Public Accounts

Committee. I understand and

appreciate the academic autonomy of the university, but that does not give them

a get out of jail free card. It

does not give them the autonomy fiscally where, I believe, they do have a

responsibility, still when they are spending taxpayers' dollars, they have a

fiscal responsibility to answer questions and to certainly appear before the

Public Accounts Committee, as opposed to playing this cat-and-mouse game of us

having to ask officials from the department questions and the officials going

back to the university to ask them questions and get answers.

This is a more direct way of asking questions, and it is very

disappointing that they did not appear.

I just wanted to state my thoughts on that before I start my questioning

this morning.

I noted

in the letter from the office of the president and vice-chancellor that he

pointed out the customary autonomy of the university and the express provisions

section 38.2 of the Memorial University Act not to respond directly to the

Public Accounts Committee. He went

on to say: Moreover, I note that the Public Accounts Committee has not held

public hearings in relation to previous reports of the Auditor General

pertaining to the university.

That is

unfortunate that did not happen, but maybe it should happen more often.

Maybe there should be a greater focus on Memorial University if that is,

in fact, an observation of the university as to why they should not have to

answer questions or do not feel the obligation to answer questions of the Public

Accounts Committee.

first question and I will go to Memorial University's response to the Public

Accounts Committee's questions. The

Auditor General reported that the university had failed to recover $151,340

relating to two employees from shared-services agreements.

The Public Accounts Committee had asked the university: What are these

shared services agreements and what is the status of the recovery of these

funds? Is the failure to recover

these amounts the result of a conscious policy decision?

Memorial University responded by saying, These agreements are managed with due

diligence, with the appropriate financial arrangements incorporated within the

University operations. They go on

to say that these two instances were related to two unique personnel situations.

I would like to ask how they were unique.

MR. GARDINER:

In discussions with Memorial

on Friday, they indicated that these two particular cases were human resource

related whereby there was a sharing agreement between, in one case, the

Department of Health and Community Services and Memorial, and the other case was

with Eastern Health and Memorial.

In both these cases, the employment relationship between Health and Community

Services and Memorial and Eastern Health and Memorial were changed.

It was a case whereby Memorial then had to invoice Health and Community

Services in one case and Eastern Health in the other case to recover the funds.

So the

funds, I think, as Memorial indicated, have been recovered from Health and

Community Services, and Eastern Health has been invoiced for the other instance.

MR. OSBORNE:

Okay.

I am

going to go back to the first paragraph of Memorial's response: These

arrangements are managed with due diligence, with the appropriate financial

arrangements incorporated within the University operations.

In the second paragraph of the university's response: These amounts owed

were not recovered due to an oversight in the process.

They seem like two sentences, one following the other, in two connected

paragraphs, but they are two contracting statements.

How do you level out those two contracting statements?

MR. GARDINER:

I cannot speak for Memorial,

but it is our understanding that Memorial indicates that, generally speaking,

there is due diligence; but, in some cases, which would be the anomalies,

sometimes things will not be followed in the proper manner.

Then, in retrospect, they will follow up and do the due diligence after

the fact.

MR. OSBORNE:

Okay.

appreciate the fact that you cannot speak for Memorial University.

That is why I am disappointed they did not have the respect for the

Public Accounts Committee to show here today.

The

amount of the second situation involving an employee who was jointly appointed

by Memorial University and Eastern Health but was terminated by Eastern Health,

the university maintained the employee on its payroll for an additional period

of time, which Eastern Health has agreed to partially fund.

First of all, why was the employee maintained on payroll for an

additional period of time?

Secondly, what is the status of the recovery of that overpayment?

MR. GARDINER:

The employee would have been

kept on Memorial's payroll because, again, it would have been a joint

relationship, so they would have continued their employ with Memorial.

Memorial has indicated that it has invoiced Eastern Health for the

outstanding balance.

MR. OSBORNE:

Okay, so the employee was

terminated from Eastern Health but maintained on Memorial's payroll.

Why would Eastern Health be on the hook for some of that overpayment if

the employee was terminated by Eastern Health?

MR. GARDINER:

I cannot answer that

question other than, like I said, it would have been an agreement between

Memorial and Eastern Health as to why that would happen.

I am not sure why the employee was terminated; those details we would not

have.

MR. OSBORNE:

You will ask Memorial for

the answer to that question?

MR. GARDINER:

Certainly.

MR. OSBORNE:

I am going to go to Question

5 where the Public Accounts Committee asked Memorial University: Could you

provide the Committee with an update on its practice regarding the documentation

and approval of academic employee leave and overtime which the Auditor General

reported were not being properly approved or monitored in accordance with

university policy and procedures and collective agreements?

The

response from Memorial was: The nature of faculty employment, including the

absence of prescribed hours or days of work, require very different

considerations for leave than for non-academic employees.

Can you explain this?

MR. GARDINER:

When it comes to academic

employees, meaning professors and so on, Memorial will attest to the fact that

it is certainly different for academic versus non-academic.

The academic employees, obviously, do not punch a clock in terms of a

nine-to-five. They work different

hours with respect to teaching and research.

Memorial would say that their policies with respect to academic employees

and attendance and such would be consistent with all universities across the

country, and certainly within North America.

MR. OSBORNE:

Okay.

The university's response also indicates that the AG's concern was with

the lack of documentation and monitoring.

Can you explain why according to the Auditor General's findings there

was a lack of documentation and monitoring of the academic employees?

MR. GARDINER:

Memorial has indicated that

they are reviewing their policies, notwithstanding the fact that, of course, the

academic faculty or academic employees would be handled differently than the

non-academic. Currently, the

monitoring of attendance, et cetera, is done at the faculty level as opposed to

a centralized approach. Memorial

has indicated that they are reviewing that process to ensure that the proper

checks and balances are in place.

MR. OSBORNE:

Do you find that it being

approved at the academic level do you feel that is acceptable?

MR. GARDINER:

That would be consistent

with other universities in the country.

MR. OSBORNE:

Even within our own

university, between different faculties, there is a great inconsistency when it

comes to how academic leave, sick leave, or annual leave is carried out.

Would you agree with that?

MR. GARDINER:

Again, Memorial is reviewing

that process.

MR. OSBORNE:

Okay, so I will go back to

your previous answer where you stated that it is consistent with other

institutions: Even within our own university, there is great inconsistency.

Is that acceptable?

MR. GARDINER:

What I am saying is the

process that Memorial has in place is consistent with other universities,

recognizing that there may be some inconsistencies within different faculties,

and that is what Memorial are currently reviewing to ensure that there is more

consistency within faculties.

MR. OSBORNE:

So other academic

institutions across the country have a lack of documentation and a lack of

supporting evidence as to when annual or sick leave was taken?

MR. GARDINER:

I cannot comment for other

universities; I am just saying that the process that is in place in terms of

monitoring attendance and such with respect to academic faculties is consistent

with other universities. Again,

Memorial is reviewing that process within their own institution to ensure that

there is more consistency within faculties.

MR. OSBORNE:

Okay.

Here is

my concern with that. In the

university's response to our question: Annual leave and sick leave are not

tracked centrally but are tracked informally and I have a huge concern with

they are tracked informally by deans and department heads within academic

units. Is that acceptable, that

they are tracked informally?

MR. GARDINER:

Memorial would indicate

that, again, it would be consistent with other universities and the nature of

the academic setting whereby professors are scheduled for teaching particular

classes and are held accountable with respect to research, et cetera, that it

would be very difficult to track attendance, et cetera, for faculty members on a

time-clock perspective. Memorial

does have a policy whereby there is no payout of carried over leave when a

professor retires, so there is no financial liability from that perspective.

CHAIR:

Mr. Osborne, we should go to

a government member now.

MR. OSBORNE:

Okay, I have one other

question on this particular item.

CHAIR:

Okay, go ahead.

MR. OSBORNE:

Academic staff members are

responsible for informing administrative heads of absences that impact upon

their ability to perform their duties and responsibilities.

So the staff members themselves are responsible for informing

administrative heads. Now, we know,

through the Auditor General's research, that did not always happen; they did not

always inform. Basically, we are

putting the fox in charge of the henhouse here.

Who

determines whether the leave had an impact on their ability to perform their

duties and responsibilities? Who

makes that determination? Is that

the staff member as well?

MR. GARDINER:

I can only assume that would be the dean responsible for the particular faculty

in terms of the impact of a professor's absence with respect to particularly

their teaching accountabilities.

MR. OSBORNE:

Okay, but again, the

university, in their response to our questions: Academic staff members are

responsible for informing administrative heads of absences that impact upon

their ability to perform their duties and responsibilities.

So if

the staff member is responsible for informing the dean or the departmental head

when the absence should impact upon their ability to perform their duties and

responsibilities, who makes the determination, and where is the consistency in

determining whether the leave is going to impact on their abilities and their

duties?

MR. GARDINER:

That would be the individual professor, him or herself, in consultation with the

dean indicating what the teaching responsibilities are in particular, and with

respect to the research that the particular individual would have.

That would be a discussion that I am assuming would happen between the

professor and the dean to determine

MR. OSBORNE:

We now know that the

academic employee did not always inform the departmental head of their leave

even is that correct?

MR. GARDINER:

I would not be able to say.

MR. OSBORNE:

The university, if they were

here, would be able to.

Okay,

thank you.

CHAIR:

We will go to Mr. Hunter.

MR. HUNTER:

Thank you, Mr. Chair.

I think

a lot of the questions we have in mind are probably common amongst my colleagues

here, because we are wondering about the same questions.

I just have a question right off that was bothering me about the

financial position and operations.

Item 1,

the university reported unrestricted net deficiency of $106 million, an increase

of 58 per cent over nine years. Is

there any mechanism where government and the university would review that on a

periodic basis of deficiencies within Memorial, particularly when it comes to

the number of employees and the number of students are they being monitored?

On item

7, since 2004, the university has grown 23 per cent, but the rate of the

students only grew 5 per cent. So

is there a mechanism that is looked at periodically to see if the spending is

consistent with the growth of the university, the courses, number of students,

and all that? Do we monitor that

somehow, if it is through the university or through government?

MR. GARDINER:

That is monitored annually.

Memorial is required, under legislation, to submit an annual report to

government. We have regular

meetings with both the President and the Chair of the Board of Regents.

With

respect to the deficit piece, that is the same as any entity, like government

itself, in terms of that would be employee benefits that would be paid out

such as severance upon retirement or termination.

So that is an ongoing thing, the same as with government, in terms of

what they are on the hook for with severance, leave entitlement, and so on.

MR. HUNTER:

So post-employment benefits

still would be reviewed, monitored, and recorded?

Would that also be reviewed on an annual basis, the benefits of

post-employment?

MR. GARDINER:

That would be part of

Memorial's annual report including their audited financial statement, yes.

MR. HUNTER:

That is all recorded and

discussed in an annual review.

MR. GARDINER:

Correct.

MR. HUNTER:

There are other questions,

but can we come back?

CHAIR:

Absolutely.

MR. HUNTER:

Okay.

CHAIR:

Mr. Hunter was not very

long.

Mr.

Parsons, in parity with the government and Opposition members, maybe Mr. Parsons

would (inaudible).

MR. K. PARSONS:

Yes.

No problem at all.

I have

to say and now it is not too often I will agree with the Member for St. John's

South, but I am pretty disappointed today that there is nobody here from

Memorial University. We do not

agree all the time, but I do agree with this one.

As a

part of Public Accounts and I have been on Public Accounts for the last seven

years. I think we have a great

Committee. There are a lot of

results that come from this Committee, answers to questions, clarifications, and

stuff like that. It is pretty

disappointing to know that the university Mr. Chair, you suggested in those

twenty-two years, I think, since it came in, that maybe it is something we

should, on our final report, put in and make a suggestion that we go to

legislation and make some changes so that this cannot happen.

We are

talking about public money and we are talking about what the public spends, so I

think it is something that they should be accountable.

We are not that bad here.

The hearings are usually pretty good.

I really think the questions can be answered and maybe there are good

answers to the questions that we will have.

It is disappointing that they are not here this morning.

first question is going to go to the Auditor General.

Looking at the responses and I have been reading the Auditor General's

reports for a good few years now. I

am disappointed with the responses actually that came because they are a little

bit vague and we do not need to answer this.

I would

like to know your overall thought on the recommendations, where they are

followed, and the responses you received from the university.

MR. PADDON:

I guess my initial reaction

just to provide a context and to reiterate what I said earlier, we will be

doing a formal follow-up within a couple of years to specifically look at the

status of the implementation of our recommendations.

So notwithstanding where they may indicate or what their responses are

today or as part of this process, we will follow up and look at it.

When I

look at the responses the university provided through the Minister of Advanced

Education and Skills to the Committee, I think it is probably fair to say that

there is vagueness to them. I would

tend to agree with you there. At

the end of the day, all our recommendations are designed to strengthen control.

The

university is spending almost a half-billion dollars of taxpayers' money every

year, so our sole purpose in doing the review and making the recommendations is

to strengthen the financial accountability around the spending of that money.

We would expect that the recommendations, particularly when they surround

the financial controls, would be taken very seriously and given due and

appropriate consideration.

When we

look at issues around, say, leave, leave in an organization the size of the

university can be very significant.

The non-academic leave liability is $15 million.

That is a significant liability, and while there is no liability to pay

out academic leave at the end of a person's career, during the course of their

career, thirty or thirty-five years or so, they are still taking leave.

So there needs to be a process in place to ensure that each individual is

getting no more, no less than what they are entitled to during the course of

their career. I think it is

important that processes are in place, and consistency of process is a fairly

significant issue from our perspective as well.

That is one of the things we did see, a sort of inconsistency throughout

departments.

It is

kind of premature for me to say where I think it is going to be because I will

let the process play out and give the university the benefit of the doubt that,

yes, they will take the recommendations seriously and do their best to implement

them. There may be certain areas

where we will agree to disagree.

That is fair enough, but I would still feel strongly about my recommendations.

On the

same point, some of our recommendations were directed towards the Department of

Advanced Education and Skills. I

would hope that they would take those recommendations and give them serious

consideration as well.

MR. K. PARSONS:

Thank you very much.

I just

have some questions. As my

colleague just mentioned a little while ago, it is 85 per cent of the expenses

of the university for the last nine years.

It has increased by 85 per cent.

What are the major costs that we have accumulated there?

MR. PIKE:

Some of the (inaudible)

growth of expenditure for the university has been initiatives and strategic

investments that the Province has put into Memorial.

For example, over the past nine years government has invested money into

the Faculty of Medicine, $11 million; the Faculty of Nursing, $1.4 million; and

the Faculty of Engineering, $2.9 million.

Of course there are salary increases in accordance with the government

template that have occurred over the years as well.

MR. K. PARSONS:

I want to just look at

tuition and the freeze on tuition.

While I think the university has maintained growth, when it comes to students

you have been pretty consistent. I

think it is pretty good that there has been no decline in student enrolment and

stuff like that.

seems like enrolment for students from outside the Province has increased by a

lot. It is good to see that all

services and everything can and we are maintaining that.

Just explain to me a little bit about the tuition freeze and the impact

it has on the enrolment and to keeping the university where it is today.

MR. GARDINER:

Memorial's enrolment, as you

have indicated, has remained pretty constant.

Obviously, they need that critical mass to keep programs viable.

The representation from Newfoundland and Labrador students, while it is

less as a percentage of the whole university population, it is certainly

consistent with the decline in the high school population.

I think

over the past from 2005, the number of individuals from Newfoundland and

Labrador attending Memorial has declined about 13 per cent.

That is pretty consistent with the decline in the high school enrolment

as well. Memorial is still

capturing approximately the same percentage of Newfoundland and Labrador high

school graduates as they have in the past.

Obviously the low tuition, as well as the quality of education in

Memorial University, makes it attractive to certainly Maritime students, as well

as students from across Canada and international students, which account now for

about 10 per cent of their population.

It is

interesting to note that a significant portion of those who come from away to

attend Memorial do stick around after graduation.

I do not have the exact percentages now, but I think it was around 70 per

cent for international students two years after graduation, and I think 40 per

cent to 45 per cent for other Canadian students.

MR. K. PARSONS:

Okay, that is good.

What

effect does it have on what is offered at the university?

As we look, the university has increased the Medical School and students

for nursing and stuff like that.

The effect of keeping the international students and students from across Canada

must also affect the amount of courses we can offer and the quality of our

education.

MR. GARDINER:

Well, absolutely. Without the

sustainable numbers, programs would certainly have to change at Memorial.

Increasing the presence of Canadian and international students allows for

Memorial to keep the robust programs that it currently does have.

cannot remember what the second part was.

MR. K. PARSONS:

No, that is okay.

MR. GARDINER:

Okay.

MR. K. PARSONS:

That is basically what I

wanted.

I want

to go to the infrastructure needs over at the university, and as the Auditor

General noted, most of the buildings over there are forty years old.

There were some audits done, but I think there was a lack of audits on

nine different buildings in his report that were not looked at.

What

are we doing? What procedures are

in place for our infrastructure spending and our overall maintenance?

I know it has increased over the last number of years, but where are we

when it comes to the needs of the infrastructure spending?

I know there is a big demand over there.

Where has it prioritized to and what are we looking at?

Is there a process in place?

MR. GARDINER:

The nine buildings that did not have the FCI done I think it is called there

was only one building, I think the Earth Sciences Building, which was

accountable for about $13 million.

That has since been done, I think.

The other eight buildings are very small buildings and Memorial has indicated

that it really does not make sense to take on that process.

It would not be cost effective.

terms of their prioritization for infrastructure, they do have a multi-year

infrastructure plan that is posted on their website, and they have committed to

updating that annually. Obviously,

with unforeseen things happening, the priorities obviously change.

One of their main priorities right now, as you probably know, is the

Science Building. The Science

Building is one of their top priorities to replace, and of course they have

embarked on a new core science facility, which is due to open in 2019-2020.

MR. K. PARSONS:

Okay.

Now I

want to go to a little bit about the leave.

It kind of surprises me, the sick leave policy that is in place for the

university. Can you explain that to

me? Can you explain, because it

does not seem like there is any limit to how much sick leave you can take.

You can go up to sixty days and there are no limits.

What is the policy? Is that

some policy that is in all of Canada like you said earlier?

What is it?

MR. PIKE:

The university has a

long-term disability program in place for their employees.

After a certain number of days, I think it is sixty days, which is

different than government employees, the long-term disability program will kick

in and the benefits are then paid through the insurance company.

MR. K. PARSONS:

There is no limit to how

many sick days you can take?

MR. PIKE:

I understand there is a

review ongoing now of the whole attendance management process in accordance with

the collective agreements that they have in place.

MR. K. PARSONS:

Okay.

So you can take up to as long as you take fifty-five sick days a year,

then you can go back and in a couple of months' time you can go on sick leave

again for the same period of time before having to do any long-term disability.

Is that the way the policy works?

MR. PIKE:

I am not exactly sure of the

policy or the collective agreement requirements, but we can certainly follow up

with Memorial if you like.

MR. K. PARSONS:

That is what it seems like.

There does not seem like there is any limit whatsoever.

I do

not know if the Auditor General wants to comment on that.

Is there a limit to the sick leave that they can take?

MR. PADDON:

The only limit we saw was

the sixty days, which were consecutive days, before you access the long-term

disability. Other than that, if you

took a day here or a day there it did not appear to us that there was an overall

limit.

MR. K. PARSONS:

Was there any tracking

mechanism in place to see who is tracking it?

If you have a prof who is gone for sixty days, obviously there is

somebody who has to teach those courses.

MR. PADDON:

I think that was one of the

issues, that it was sort of a lack of documentation and monitoring.

That was one of the problems we found.

CHAIR:

We will go to Mr. Murphy.

Thank

you, Mr. Parsons.

MR. MURPHY:

Thank you very much, Mr.

Chair.

Welcome

to our guests. Thank you for

appearing before the Committee.

I do

have to start off by saying, as well as my fellow members who have sat here in

Public Accounts today, Mr. Chair, that I am quite upset over the fact that

Memorial University has chosen to hide behind the act and not appear before the

Committee. I know they have

supplied answers, and I agree with the other members that some of these answers

are vague and begs the question of whether I should be asking personnel from AES

about these or asking a representative of Memorial University.

I would

rather ask a question or two of a representative of Memorial University, but

they are not here. That says a lot

about accountability, I believe, when it comes to the handling of taxpayers'

funds. I am rather upset about

that. As well, I think the people

of Newfoundland and Labrador should be upset about the simple fact that they are

not here to express the needs of the university, as well as the future asks that

the university is going to be coming to the public for.

The act

simply needs to change, I would agree with my fellow members on that, the

section 38.2. The act obviously is

going to have to be reviewed and new legislation is going to have to be coming

out because accountability, openness, and transparency are quite important to

the people of the Province.

Considering the monies that we do put into Memorial University and the monies

that the general public puts into tuition and that sort of thing, I think there

has to be a degree of accountability in all aspects of this.

first question, I guess, on that aspect has to do I have to ask the Auditor

General about the degree of co-operation you did have from Memorial University.

Did you find, number one, you had issues there that you wanted to tackle

but simply could not because of the university not agreeing to you looking at

them?

MR. PADDON:

No, Mr. Murphy, I think it

would be fair to say that we had the complete co-operation of the university

during our review. When we first

informed the university that we were planning a review, they did point out that

a

section of their act would limit my ability to look at, sort of, the academic

side of things. That was fine.

I was aware of that limitation to start with.

Our

focus, when we started, was around the four areas that I outlined in our

objectives. There was no attempt by

the university to deviate us from that.

So we did have co-operation of the university.

MR. MURPHY:

Okay.

That is good to hear on that aspect of it, but I am still kind of upset

over some of the questions that I would love to have asked around Memorial

University.

Thank

you for that.

wanted to ask also I think the question has already been answered around the

termination of the employees. It

says in Memorial's response that there was a $30,000 recovery of some of the

monies that were initially paid out.

What is

being done to recover the rest of the money that was paid out?

Or is there any more money that has to be paid back on that particular

question?

MR. PIKE:

The amount in the recovery

in the second employee to Eastern Health has been invoiced and there has been

follow up with Eastern Health regarding the overpayment.

MR. MURPHY:

So Eastern Health will be

paying that bill?

MR. PIKE:

I cannot comment on

MR. MURPHY:

Or no response from them yet

as regards to that matter?

MR. PIKE:

I am not sure of the

discussions around that, but I know there have been discussions with Eastern

Health and Memorial.

MR. MURPHY:

Okay.

Thanks for that.

I would

also like to ask you see, again, with no real representative here from

Memorial University I do not know how much in tune the government is to these

questions, but I wanted to ask some of the questions about the financial

positions and operations of Memorial University.

It says

here, number 2 on page 6 of the report, The liability for post-employment

benefits has increased 67% over the past four years from $119.0 million in 2010

to $198.6 million in 2014.

What

were the chief reasons that these liabilities increased?

MR. PIKE:

The amount represents the liability, as the report indicated, for

post-employment benefits, and it has increased.

There has been natural growth in salary increases, salaries and wages,

and it does represent accumulated severance for employees' health, dental, and

life insurance for retirees and their surviving spouses, as well as to voluntary

early retirement income plan and a supplementary retirement income plan.

MR. MURPHY:

I guess a supplementary to

that. Is there a plan in place to

have people contribute, for example, a little bit more to their plan so that you

can overcome these liabilities, or what is the process here?

MR. PIKE:

Well, these amounts are recorded in their financial statements as a future

liability. These future benefits

are unfunded at the year end, but as the amounts are paid out, they are expensed

in the university's budget.

MR. MURPHY:

Okay.

So somebody is going to have to try to recoup these in the future.

Number

3, The University reported a pension deficit of $222.8 million at March 31,

2014. What are they doing to

overcome this, or are they doing anything to overcome the pension shortfall?

MR. PIKE:

In today's pension environment, it is not uncommon for pension plans such as

Memorial to have funding deficiencies.

Memorial, in particular, the existing deficit is a consequence of the

global financial crisis that occurred in 2008-2009, wage increases over the

number of years. So in accordance

with the Pension Benefits Act, this going concern deficit has to be amortized

over a period of time, not more than fifteen years.

MR. MURPHY:

Okay.

MR. PIKE:

As of March 31, 2015, that amount of $222 million has reduced to $202 million.

MR. MURPHY:

Okay, all right.

MR. PIKE:

In the pension plan.

MR. MURPHY:

So it has backed down by

about $20 million over that time?

MR. PIKE:

It is reducing, yes.

MR. MURPHY:

Yes, okay.

So it is being addressed here.

You

mentioned that it would probably be about fifteen years before it basically

comes back to zero if they stay on track?

MR. PIKE:

Well, there is a schedule. Each

year it is looked at in accordance with the Pension Benefits Act and depending

on what the gain or loss is in any particular year, that amount is amortized

over a period of time.

MR. MURPHY:

Okay, all right.

Great, thanks.

Under

section 15, Nine University buildings, with Facility Condition Index costs

totalling $54.2 million, did not have a detailed audit (inspection) completed by

engineering consultants. While

these audits were being completed, the University did not have accurate

information to make informed decisions on capital planning and funding

purposes.

I am

just wondering if they have a problem as regards to building maintenance and the

need for inspections, ongoing replacement of buildings that are older forty

years old, we have heard the age of some of these buildings.

I am questioning why the university would have taken on more building

liabilities. For example, when it

comes to the Battery purchase, it was probably a pretty good purchase in the

context of things but they still chose to sink money outside rather than looking

after the assets they already had.

Was

there any reasoning on the part of Memorial University as to why they needed the

Battery in the first place rather than looking at the assets and the asset

replacements that they had to undergo?

MR. GARDINER:

The rationale for the

purchase of the Battery is two-fold.

One was they did need some additional graduate residence spaces; as well

as the plan is to move a number of arms of Memorial, such as the Gardiner

Centre, to the Battery so that it would offset leasing costs.

MR. MURPHY:

Okay.

They obviously did a study then of the outside leasing costs, for

example, when it came to that and they figured they would be in a better

position buying this building?

MR. GARDINER:

That analysis would have

been done three or four years ago before the purchase, absolutely.

MR. MURPHY:

Okay.

Is there any chance we can get a hold of the analysis to have a look at

it, just out of curiosity?

MR. GARDINER:

We can certainly check with

Memorial to see what they have.

MR. MURPHY:

To see if they will make

that available, okay.

The

other questions that are here this is what concerns me about the simple fact

of Memorial University not being here.

I really do not feel like I can ask questions of AES, for example, when

it comes to leave and overtime and the documenting process and the effect of

monitoring, et cetera, through AES without somebody from Memorial University

being here.

So at

this particular time, Mr. Chair, again, I will state the fact that with nobody

here from Memorial University I do not see the sense sometimes in asking some of

these other questions. For the

record, I do not know if there is a possibility here whoever is going to be in

government next time or if we are going to be sitting before but government

needs to change this legislation so that we can have a proper hearing around

some of these questions.

CHAIR:

Mr. Murphy, to ensure that

we get whatever information is available I would recommend asking the

representatives from AES, and if you are not satisfied with the answer, maybe

follow up with the Auditor General to see if he has any information.

We should exhaust the possibilities that there is an answer here.

there is not, we may want to go back to Memorial University and ask them.

We probably should not assume that they have not been briefed on a

particular item because we may miss something.

MR. MURPHY:

You may be right on that.

Okay.

Well,

then I will continue.

CHAIR:

It is an unhandy way to ask

questions just the same.

MR. MURPHY:

Yes.

At the same time, I would rather hear it from Memorial University and

hear government's take on it too I suppose.

I just find it remarkable they are not here to well, in all essence,

defend themselves too, if there is something there that needs to be asked.

wanted to come over

CHAIR:

Before moving on

MR. MURPHY:

Go ahead.

CHAIR:

maybe we should go to Mr.

Peach.

MR. MURPHY:

Sure.

CHAIR:

When you say to defend

themselves, we find that agencies come here and they like to come forward and

say all the things they have done in response to the Auditor General's report.

So sometimes they come here and they have done a really good job,

satisfied most of the answers, and put to rest most of the questions that would

have come up.

MR. MURPHY:

I would agree with you on

that aspect. There are still

questions around their maintenance programming, I think, that are out there,

particularly in the general public when they hear about issues; for example, the

replacement of the Science Building and that sort of thing.

I will leave it at that.

CHAIR:

Mr. Peach.

MR. PEACH:

Thank you very much, Mr.

Chair.

I too

have to echo the concerns of our other Public Accounts Committee members.

I was very disappointed to hear that the university did not have anybody

here. I read through the report

pretty much in its fullness. There

were a lot of questions around the report that I had.

I saw

the response back. I too thought it

was vaguely answered in some ways.

No disrespect to the two gentlemen across the way.

I am sure you are quite qualified to answer some of the questions, but

not all of them. You will get

answers for us.

Some

questions have already been asked, but probably in a different form than I had

here that I want some clarification on.

With respect to the two employees the $151,340 related to two employees

not recovered, the monies not recovered are these employees still employed

with the university now? If they

are, how are we getting the money back?

If they are not employed, are we still trying to get that money?

MR. GARDINER:

To our knowledge, the

employees are not employed. The

outstanding funds, again, one was from Health and Community Services and one was

from Eastern Health. So it was not

the employees who had to pay this money back but the organizations: the

department and Eastern Health. The

funds have been recovered from Health and Community Services and, as stated

earlier, Eastern Health has been invoiced for the outstanding amount and MUN

fully expects to get reimbursed for that.

MR. PEACH:

Okay.

With

respect to the leave, I just have a question around that.

There are so many deficiencies here within the whole report.

I am just wondering how you would monitor the way that it was done so

that people would not actually get more pay than they are actually supposed to

have. Was anybody ever in that

situation where they got paid more than the actual leave that they were supposed

to be granted?

MR. GARDINER:

There would not have been

any employee who got paid more than what they were supposed to actually get.

With respect to the leave, again Memorial would have to speak to it in

terms of the processes that are in place; but, with respect to academic staff,

they would certainly have responsibility for their teaching duties as well as

research. That kind of provides

somewhat of a check and balance in terms of whether they are in attendance or

not. There certainly would not be

any employee getting overpaid because of the leave management system.

MR. PEACH:

With respect to the

Auditor's report and the recommendations that the Auditor made, I am assuming

that a lot of this stuff was done manually before.

Is it done electronically now so that one can see if there are any

changes or anybody is overpaid and you can pick it up fairly easy, rather than

be on a manual basis?

MR. PIKE:

The university has

undertaken a review of their attendance management practices and processes and

have a committee in place to make recommendations for changes to that whole

attendance management process. I

would assume that process would have identified shortcomings in the current

system and what the problems were.

MR. PEACH:

With respect to the nine

university buildings, the index costs of $54.2 million, and not having the

detail audit done, I am just wondering how we know that we got what we paid for

in that respect. If we never had an

engineering inspection done, then do we know that the buildings were up to a

standard code that we were looking for?

At the end of the day, did we get what really we are paying for?

MR. PIKE:

The university does have a

comprehensive plan that is in place for tracking capital renewal requirements

and they do go through a rigorous process, and they have a published

infrastructure plan as well that look at the needs of the university.

I am

not sure if I answered everything in your question there.

MR. PEACH:

Not really, no more

clarification, if you can.

MR. GARDINER:

The FCI Facilities Condition Index basically, to my understanding, it is an

indication as to the work that would be required to bring a building up to a

particular standard. The nine

buildings in question, the biggest one was the Earth Sciences Building, which I

understand has the Facilities Condition Index currently underway or has been

completed. The other eight

buildings are very small buildings whereby Memorial would say it does not really

make sense to do that piece of work because they are so small and insignificant

in terms of what would be required that it would not be cost-effective.

MR. PEACH:

Okay.

I am

just wondering about the two contractual positions when I was reading through it

and I saw that there was no competition conducted.

Normal practice within government is that there would be a competition

conducted, and in this case here it was not.

Can you give us any reason why that happened that way?

MR. GARDINER:

Memorial has indicated that the general practice is that a competition would be

conducted. There are occasions in

these two indications whereby they needed a particular piece of work done and it

would not have been prudent to do a competition.

It was a defined piece of work that need to be done quickly, and to go

through a competition, you would not have gotten a person in place for a couple

or three months. So these were

contracts that were offered to individuals who were capable of doing the work,

but the normal practice certainly is to go through a competition.

MR. PEACH:

Just a suspicious mind, I

guess it is not the same two people that were overpaid the $151,000, is it?

MR. GARDINER:

No.

MR. PEACH:

Okay, thanks.

I do

not have any other questions right now, Mr. Chair.

CHAIR:

I will return to Mr.

Osborne.

MR. OSBORNE:

Thank you, kindly.

I would

like to thank Mr. Pike and Mr. Gardiner before I start again.

You are doing the best you can to answer questions.

I think the frustration of the Committee is at the university, not at you

guys; but it is very disappointing, I will say again, that they are not here.

Obviously you cannot answer all the questions.

I am

going to go back to leave for a moment I did have another question on that

Memorial University's response: The primary mechanism used by academic units

for tracking annual leave and sick leave are Absence from Campus forms which are

completed by academic staff members on a voluntary basis.

I know that the Auditor General had pointed out that this is not always

complied with.

We go

to the next question that they provided an answer on which was: How many

non-academic employees are employed by the University?

What are the cumulative leave and overtime entitlements of these

employees? To which, in part,

Memorial University replied, Memorial requires that overtime be pre-approved

and authorized by a supervisor or manager to ensure that there are controls over

the amount granted.

I am

just wondering how can there be two so starkly different policies in place,

where for non-academic employees there has to be a pre-approval of a benefit to

ensure that there are controls over the amount granted, yet for academic

employees, it is a voluntary form to be filled out.

I will go back again to the fact that the policies between departments at

Memorial University are significantly different.

It is not always a uniform policy followed.

I know it is under review; but how can we in 2015, where there is such a

large amount of public money being spent, give such autonomy to the academic

staff in this particular case?

MR. GARDINER:

To my knowledge there is no

overtime, necessarily, for academic staff.

The overtime would be for non-academic staff.

As the university has indicated, there would be a pre-approval process.

With respect to the academic leave for faculty members, Memorial are

reviewing that process currently and will be making some changes based on that

review.

MR. OSBORNE:

No, I understand that we are

talking two different sorts of leave.

The non-academic staff, for example, obviously has checks and balances in

place, where the academic staff in many instances do not.

That is our concern. I think

that is the concern of the Public Accounts Committee and certainly of myself in

this particular case. Without the

checks and balances and forms being filled out on a voluntary basis, and it

being the responsibility of the employee to voluntarily inform a department head

that they are taking leave, either sick leave or annual leave, and that it is

not tracked centrally, that is obviously a concern.

So, I am just reiterating that I think that is something that obviously

Memorial University needs to fix.

They are not here to hear it directly, but I am sure they will read the

transcripts, or at least hear it from departmental staff but that is something

that has to be corrected.

Question 8 from the Public Accounts Committee: How many management employees

did the university approve for overtime compensation in addition to vacation in

lieu of overtime? How much money

did this decision entail? The

response from Memorial University was: Any payments approved for overtime in

circumstances such as these were related to extraordinary events .

I would

like to know such as what are these extraordinary events?

MR. PIKE:

We did ask that question of Memorial on what the extraordinary events might be

and one of the examples that they provided was when we had DarkNL, the students

were relocated from the various residences to the Field House and they required

management staff and other staff to oversee the operations during that time.

MR. OSBORNE:

Okay

For the

year ended March 31, 2012, for example, there was approximately 573 management

and professional employees who were eligible for an additional five days of

vacation in lieu of being paid overtime.

Of these, forty-three management employees were paid an additional

$123,478 in overtime. Did these

forty-three individuals receive the five days as well as the additional pay?

MR. PIKE:

That is a question that we would have to ask Memorial, but we can certainly

follow up, or the Auditor General might be able to determine for us if that

happened.

MR. OSBORNE:

Okay, I do not know

Auditor General, do you have the answer to that particular question?

MR. PADDON:

While I would not be definitive, my understanding is that the overtime was paid

in addition to the five additional days leave.

MR. OSBORNE:

Okay, thank you.

I will

go to Question 9: Has the University reviewed its policy with respect to senior

management travel and if so what steps have been taken to ensure compliance with

travel policies? I know we touched

on this a little bit, but I would like some further clarification.

Their

response: Prior to travel, all unit heads and vice-presidents are required to

report in writing to their vice-president or the president, respectively, all

absences due to travel prior to the travel occurring.

What exactly is the approval that is required and in what form is that

approval required?

MR. GARDINER:

Essentially, the way the

approval for leave at Memorial works is if a vice-president, for example, is

going to be away on leave, for travel purposes, they would notify their

counterparts, the other vice-presidents, as well as the president.

The president obviously then if he or she in this case, he has a

problem with it, would notify the respective vice-president that he or she is

not approved for this particular leave.

They

notify their colleagues, as well as their superior, as to when they are going,

why they are going, and who the contact person would be.

If their superior has an issue with the particular travel arrangement,

then they would let that person know and then obviously travel would not happen.

MR. OSBORNE:

Okay.

I know

the travel policy is supposed to be reviewed in accordance with Memorial

University's policy framework. What

are the proposed changes?

MR. GARDINER: I

would not be aware if, in fact, there are any proposed changes or the status of

that particular review. I know

Memorial has an ongoing review of policies every number of years.

I think it is five years they review each policy.

I am not aware of the status of their travel policy review right now, but

we can certainly follow up with Memorial and find out when it is scheduled.

MR. OSBORNE:

Okay.

WITNESS:

(Inaudible).

MR. GARDINER:

My colleague tells me that it is scheduled to be reviewed in 2016.

MR. OSBORNE:

Question 10: Has the university, since the Auditor General's review, deviated

from its relocation policies and is it committed to applying current policy

until the review in 2016? Based on

Memorial University's response, it is always dangerous to assume, but you could

assume that the answer to that was no.

If that is in fact the case, can you explain?

MR. GARDINER:

Memorial would indicate that they have not deviated from their travel and

relocation policy. Within the

policy, there is room for an exemption.

For example, recently they relocated an

individual from Ontario who

was a critical person to move Memorial forward with respect to infrastructure.

The example they gave us is and I do not know the exact number.

So, for

example, in their policy there is a limit in terms of the weight that they would

reimburse someone for moving. This

particular individual was a well-established individual in the field, a long

history, an older person who certainly had more belongings than the 10,000-pound

limit, if that is what it was.

In this

case, they would say for the sake of reimbursing this individual for an extra

couple of thousand pounds, because this person is the ideal candidate, then

there is provision within the policy, with the proper approvals, that they can

make an exception. They do follow

their relocation policy with the provision that there are some exceptions, with

the proper approvals.

MR. OSBORNE:

Okay.

Finding

37 of the Auditor General's review and this is why I am surprised that they

did not deviate from their policies.

We were correct in the assumption that they did not deviate from policy.

Executive and senior management employees were not required to complete

and attach documentation that indicated the approval to travel or the estimated

travel costs, to the travel claim.

As a result, travel expenses could be incurred for travel that did not receive

prior approval from the University.

Would

that, in itself, not be reason enough to deviate from Memorial University's

current policy?

MR. GARDINER:

I am not sure what the

question the question I just answered was with respect to their relocation

policy. Finding 37 deals with their

travel policy and as I indicated earlier, the onus is on the individual, whether

it be a vice-president or senior manager, to inform their superior when and why

they need to travel. If the

superior has an issue with that, then they would indicate it to the person and

obviously the travel would not happen.

Other than that, then it would be approved.

MR. OSBORNE:

Okay.

Item 38

directly relates to relocation: eleven out of thirteen employees were approved

by the respective vice-president or their designate at amounts which exceeded

that permitted by policy. Given the

level of exemptions approved, is it possible that the university policy should

be revised?

MR. GARDINER:

Again, as indicated in their

response, the policy will be reviewed as part of Memorial's regular review of

policies; but, as indicated in Memorial's response, while it appears that it was

over and above the normal policy, again there is a stipulation in the policy

whereby in extenuating circumstances the approval can be sought to deviate from

the policy. While it is a deviation

from the policy, the policy allows that deviation in extenuating circumstances.

MR. OSBORNE:

Okay.

Again,

item 39 of the Auditor General's findings: All relocation expenditures were not

recorded on a Staff Settlement Claim form which is signed by an employee to

verify the expenditures. As a

result, there is a risk the University may not recover 50% of total expenses

paid, if an employee leaves within two years.

Can you

elaborate further on this and tell us what, if any, measures are put in place to

protect not only the university but taxpayers of the Province in this particular

case?

MR. PIKE:

The university has indicated

that it has developed a new Staff Settlement Claim form which now captures the

information that is incurred by a third party as well as the individual, and

those are now kept in a file together so that they are followed up and monies

are accounted for.

CHAIR:

Let's go to Mr. Cross.

MR. CROSS:

Thank you, Mr. Chair.

I guess

at this point, with seven members on this Committee, maybe the strongest

statement is we all reiterate the same things that there is a fair degree of

disappointment that Memorial University and if I can quote a couple of my

colleagues are hiding behind the legislation, behind the act.

I think the Member for Bellevue spoke about suspicious minds to the point

that maybe everything is okay and everything is fine, but without people being

directly in front of us to ask questions then the appearance versus the reality

is always a doubt. Where there is

doubt, there are suspicious minds as to how things are being conducted, I guess.

This

week that we are conducting these hearings is actually orientation week at

post-secondary. Students are being

oriented and getting fresh starts, and it would be sort of unifying if Memorial

University officials were here giving us the fresh start that we could ask the

questions to them directly.

With

that in mind, I just want to reiterate, to give unanimity to it from the whole

Committee, that we are disappointed and the disappointment is not minor.

It is a major for everybody on this Public Accounts Committee.

With

regard to this portion of the Auditor General's investigations within the last

year, the Memorial University investigations they were doing, I guess when the

Auditor General undertook to do so, he had certain objectives in mind and

certain things you are going to look for.

What he brings back to us to review, I guess, there are thirty-nine

findings that come out of his report, with thirteen recommendations.

maybe the remainder of my ten minutes I will give the hon. gentleman opposite a

little bit of a break and I am going to concentrate my questions on updates to

the three recommendations that were to the department and not to the university.

When I get back for my second round, I may throw in some extra questions

for the university at that time.

Recommendation 1 I mean, all three of these recommendations were written and

gone to print, and right now time has elapsed since that time, so if we look at

the three recommendations that were directly referring to AES or to the Province

to respond to, we need to get an update on these as well.

For the record this morning, if members opposite could update

Recommendation 1: The Province should review the Provincial funding model to

determine if it is efficient and effective and includes such factors as the

capacity of the University to deliver programs, program costs per student,

enrolment and output results.

there is a seven-line answer here in this.

Although brief, it says a lot, but do we have an update for what has

happened there and if this is continuing?

MR. GARDINER:

The department is reviewing the process by which it funds Memorial, but in

particular it is important to note that Memorial is undergoing an efficiency

review. So that will inform future

budget decisions with respect to Memorial and how it is funded.

Typically what would happen is Memorial would come forth in the budget process

and identify strategic initiatives that it would want government to support.

So, for example, as Mr. Pike indicated earlier, expansion of the medical

school, expansion of the engineering building, Marine Institute programs and so

on. We would look at the review of

MUN's funding as part of their efficiency review, which is ongoing.

They

have identified, I think, last I saw and this is on their website twenty-two

initiatives which identified $5.2 million in savings.

So that would be an ongoing conversation with Memorial in terms of how

they are funded and what efficiencies they can realize.

MR. CROSS:

Okay.

The

second recommendation here, The Province should review the tuition freeze

education for students from Newfoundland and Labrador.

In looking through the findings there were some statistics about other

Canadian students and foreign students as well, and statistics for enrolment and

how it was met. The tuition freeze

policy, is there any update to the comments that are in page 56 of this report?

MR. GARDINER:

Ultimately, the tuition is

set by the Board of Regents at Memorial University.

Over the past number of years, in conversation with government, there has

been a mutual agreement that government would offset any increase in tuition by

increasing Memorial's grant in lieu of tuition.

As was stated earlier, currently Newfoundland and Labrador students make

up about 70 per cent of the enrolment in university, about 20 per cent come from

other Canadian provinces, and 10 per cent are international.

Memorial continues to capture the same proportion of Newfoundland and Labrador

high school students as it had in the past, since 2005.

Memorial's Newfoundland and Labrador enrolment has decreased by about 13

per cent. That is consistent with

the decrease in the number of high school graduates.

The

other Canadian and international students are attracted to Memorial for the low

tuition, as well as their robust programs.

It is important to note that many of those who come here for a university

education remain a couple of years after they have finished.

So we would anticipate that they would become residents of the Province

which certainly is part of a larger Population Growth Strategy that the Province

has just recently announced.

MR. CROSS:

Okay.

So the number of Newfoundland and Labrador students, although shrinking,

the shrinking is in the same amount, you are saying, as the enrolment figures

and graduation figures from our secondary schools.

MR. GARDINER:

Correct.

MR. CROSS:

Okay.

Recommendation 4 says, The Province should consider a long term plan to address

the University's ageing infrastructure and maintenance needs.

Now there are quite a few comments.

Some comments already have come through with regard to the infrastructure

and the age of the buildings at Memorial University.

If you

look at the graphs we were presented with, you can see that, obviously.

The little pictorials of the bar graphs shows that we can read rather

quickly that the number of buildings constructed in the last few years are

very minor compared to what was constructed between forty and fifty-five years

ago. Is there a major update in how

the response that was given here has come about in the last little while?

MR. GARDINER:

The only update would be the

fact that Memorial does have an infrastructure plan it is posted on their

website whereby they prioritize their infrastructure needs and are in constant

conversation with government to facilitate the critical needs.

Memorial has certainly stated publicly that they have identified some of

their critical needs and have put some monies aside to address those.

They

have identified their number one priority outside of and I guess this could be

considered critical as well it got to happen right now needs.

The replacement of their Science Building is certainly their number one

priority from an infrastructure process.

Work has started on the replacement of the Science Building with a new

core science facility which, again, is scheduled to open in September 2019.

MR. CROSS:

Do you feel that Finding 16,

critical maintenance items that were not being actioned are now actioned in a

more a timely manner or that the practice put in place is actually improving

that aspect?

MR. GARDINER:

I would certainly consider

that the university has their house in order with respect to addressing critical

needs and are on record as doing so.

MR. CROSS:

Okay, Mr. Chair.

CHAIR:

Ordinarily I would go to Mr.

Murphy, but I think it may be time to take our morning break and resume with Mr.

Murphy. If we could commit to be

back here around 10:50 by one of these clocks.

They are not always the same.

Thank

you.

Recess

CHAIR:

Okay, we are ready to resume

and we are going to go back to Mr. Murphy.

MR. MURPHY:

Thank you, Mr. Chair.

I am

quite pleased in this particular instance most of my fellow Committee members

have been asking questions that I would have had a little bit earlier, so I only

have a few questions left, really.

It mainly centres around infrastructure and maintenance needs.

I have basically only two or three questions.

number 4 of the recommendations from the Auditor General on page 51 of the

report he states, The Province should consider a long term plan to address the

University's ageing infrastructure and maintenance needs.

I wonder if any of you gentlemen from AES might be able to comment on

what is being doing in that regard about addressing the needs of Memorial

University.

MR. GARDINER:

Memorial University has put

together an infrastructure plan, a long-term plan, which it has tabled with the

department as well as published on their website.

The department is in constant communication with the university in terms

of prioritizing that plan and obviously funding that plan.

Memorial will be funding some of the infrastructure needs through their

efficiencies, as they see fit. That

is a plan that will be updated on an annual basis.

So Memorial has done the piece of work to put together an infrastructure

plan, and is in constant dialogue with the department in terms of what the

priorities are and how best to move forward with that plan.

MR. MURPHY:

Did they have a plan

previously for building maintenance?

The question might even go to the Auditor General on this.

Did you find evidence before of a previous maintenance plan that was in

place by Memorial University to address the aging needs?

MR. PADDON:

I do not think it is a

question of a previous maintenance plan.

MR. MURPHY:

Yes.

MR. PADDON:

I think it is fair to say

that the university has a process in place to identify their maintenance needs.

I do not think the issue is necessarily with the university identifying

the needs. I think it is a question

of how much funding is available to address those needs.

MR. MURPHY:

Right.

MR. PADDON:

If you are only addressing

30 per cent to 33 per cent of your needs a year and your infrastructure is

aging, it is going to continue to worsen over time.

I think it is a funding issue as opposed to a process issue.

MR. MURPHY:

Okay.

This

kind of brings me up, I guess, to the next question that I would have for the

gentlemen from AES, Mr. Gardiner and Mr. Pike.

One of the moves that Memorial University is making to address some of

the strategic infrastructure needs they have a list of efficiencies and I have

gone through the efficiencies here; I am wondering about the efficiencies that

they are undertaking.

there something put in place to make sure that some of these efficiencies are

not going to affect educational needs, for example?

I go through the Animal Care one.

It says operational changes in Animal Care Services, for example.

They will have an annualized savings of $144,000 which is supposed to be

going towards the infrastructure plan.

I am

wondering if these savings of $144,000, for example, that they would and like

I said, just by example, is there a possibility there that it could affect the

educational needs of the students involved, number one; and number two, is there

somebody who is actually going to be monitoring these processes that they have

undertaken to make sure that it is not going to affect education?

MR. GARDINER:

The university, with respect

to their efficiencies, have undertaken a strategic consultation process with

their faculties to ensure that the education itself of students is not impacted.

The review is led by the President of the university and they have

identified two individuals within the university who are spearheading the

review. One person has an academic

background to ensure that the integrity of the programs is maintained, and the

other person has an administrative background whereby they would review their

administrative processes.

Again,

they undergo significant consultations with the various faculties.

There is a subcommittee, a Senate, that is involved in those

consultations as well. All the

findings and efficiencies, as you have pointed out, are published on their

website to ensure that there is a transparent and accountable process that is in

place and it will not have a negative impact on the education perspective from

the university.

MR. MURPHY:

Okay, thanks for that.

Just as

a follow-up to that, when it comes to the report that they have, are they

inviting more public consultation or public input as regards to the processes

that they are going to be following in the future?

MR. GARDINER:

I am not aware of any formal

public consultations, per se. The

consultations that they would be involved with would be within the university

community itself with respect to the Board of Regents, the Senate, and the

various faculties. I am not aware

of any public consultations, per se.

MR. MURPHY:

Okay, thanks for that.

The

only other question that I would have would have to be Recommendation 5 on the

part of the Auditor General. It

says here, The University should ensure audits and inspections of

infrastructure are completed to identify maintenance requirements, and that

critical maintenance work is actioned in a timely manner.

Well, that is obviously pretty much the important part of any kind of a

maintenance plan.

I guess

the question again to the Auditor General probably is a little bit of

clarification to your first answer about the maintenance plan.

What you were saying, if I interpreted right, was that there was

obviously some sort of a maintenance need there, the maintenance plan.

People, I assume, were notified that these issues were ongoing and,

obviously, it built up to probably more major issues as a result of not being

addressed.

If I

can frame this right, there is no sense of having a plan if you do not have the

money to follow through with the plan is what you are saying, right?

MR. PADDON:

Yes, that would be probably

a fair

summary.

MR. MURPHY:

Okay.

So, it

is critical that government would have a role in this too, obviously, to address

those needs and make sure that what they are asking for is what indeed they are

asking for.

MR. PADDON:

The university gets money

from two broad places: one is a government grant, and two is tuition.

So it has to come from one of those two places.

MR. MURPHY:

It has to come from

somewhere, so obviously well then, just to sum up.

The importance of a maintenance plan is inherently obvious right now.

That if you do not maintain something, there is a good chance that

tuition will increase as a result.

So they are better off following through with a plan and sticking by it and

directing money towards the fulfillment of what is required, rather than having

to put up fees to pay for a building after, if need be the case.

MR. PADDON:

My experience over the years is that the longer you leave maintenance undealt

with, your problems essentially compound.

MR. MURPHY:

Right.

Okay, thank you for that.

Mr.

Chair, I have no further questions at this time, nothing comes to mind.

Everybody else has been asking the other questions that I would have

asked. Unfortunately, a little bit

more follow-up from Memorial University it would have been nice to have them

here to answer these questions and to engage with them.

It is unfortunate, but it is what it is.

CHAIR:

Okay.

I will go back to a government member.

Mr.

Hunter, do you have questions?

MR. HUNTER:

Yes, just a couple of

comments, actually. I am still hung

up on the sick leave pertaining to the academic employees, the non-academic and

the executive employees. I know the

AG recommendations are probably the answer to a lot of our concerns and

questions. There are key words in

all thirteen recommendations, and the AG alludes to efficiencies, effectiveness,

results, delivering long-term plans, timely manner, adequate documentation,

review, documented track monitor, properly submitted, recorded and approved.

These are all areas and every recommendation that can alleviate all of

these problems we are seeing.

My hang

up with the sick leave is if it is not documented in a proper way than how can

the university run smoothly? We are

educating people in there to do all kinds of programs related to business and

finances and all that, and then we have a university, such a large institution,

that cannot run their own affairs.

It does not make a whole lot of sense.

I would

like to thank the AG and staff for such a great job in doing the AG's report on

Memorial, and the recommendations, which I think is probably the most important

part of our exercise of Public Accounts, the most important part of the exercise

of the AG's Office. Hopefully, I

will see these recommendations come to some type of involvement by government to

make sure that the university addresses all these problems because if we do not,

then every dollar we spend inefficiently is an issue that will not go away.

It is not going away until we find the money to fix it.

A dollar saved is a dollar earned to put towards these efficiencies,

particularly with the infrastructure.

I do

not have a direct question. I would

just like to thank Elizabeth for putting together all the stuff for us as a

Committee and for such a great job, and you guys for showing up and trying to

answer the questions as best you can.

The important part of this exercise today would have been to have someone

from Memorial here where we could take this document and go through it question

by question and recommendation by recommendation.

I still

think it was a worthwhile exercise.

I think we did pretty good with the questions and answers.

We at least got a ball rolling so that we can move forward.

So thank you again on behalf of our side of the Committee.

I will pass it to you, Mr. Chair.

Thank

you very much.

CHAIR:

I am going to stay with

government members until they have used up ten or fifteen minutes and then go

back to Mr. Osborne.

MR. K. PARSONS:

I have a couple of general

questions, basically. We discussed

a little earlier about the tuition freeze and the importance of the tuition

freeze, which I understand. It is

great to see that. As you look at

the chart that is on page 23, we are the lowest in all of Canada when it comes

to tuitions right across the country, as far as students.

It is great that our young people have the opportunity to go to

university with a cost so low.

I was

recently at a seminar at the university and we were there with med students.

A question came up and I asked a question.

I wanted to know the difference between the tuition fees for med students

here in Newfoundland versus there was a lady there from British Columbia and

another gentleman from Ontario. I

believe ours were around $6,300 a year, somewhere in that area.

The lady from BC told me that BC's was around $18,000 and Ontario's was

somewhere in the $20,000 range for tuition fees.

While

you stated earlier that it is good that these students are coming here to

Newfoundland, is there any policy in place or is there anything we are trying to

do when you are talking that much of a difference for a person's education, I

know you said 40 per cent stay and work for the first two years.

Perhaps there is something the university and the government can do to

ensure that we keep a lot of these students here.

They

are getting a great education obviously at MUN or they would not be here.

The quality of education is great.

The cost is the main reason they are coming here.

We as taxpayers of Newfoundland and Labrador are paying for it.

I was

wondering what policies are in place to ensure that we get the students?

What are we doing to attract students and trying to keep them here in the

future?

MR. GARDINER:

The short answer to that can

be found in the Population Growth Strategy whereby part of the strategy is to

make this place more attractive for people to not only come here, but to stay

here. So there are certainly a

number of initiatives within the Population Growth Strategy.

terms of focusing on university students who come from other Canadian provinces

and territories and internationally, I guess there is no formal policy per se to

keep them here, except, obviously, to make the Province more attractive.

To keep people here and to attract people here, that would be undertaken

in the Population Growth Strategy.

MR. K. PARSONS:

I am just wondering if there

was some kind of policy in place not to scare anybody off now or anything.

I know in the School of Medicine there are some things that are offered

to doctors to come out to rural Newfoundland in the first couple of years they

are doctoring, to stay in rural Newfoundland and stuff like that.

I am not sure if it is some policy that we should be looking at also to

keep young doctors, engineers, and everyone who is coming from abroad to stay

here in Newfoundland. Perhaps there

is a policy we can have a look at.

It is just a suggestion.

I have

another question now for you. It is

the last question I am going to ask.

I was interested in looking at we are after hiring provincial

pensioners. Obviously, sometimes

provincial pensioners are more than qualified for positions over at the

university and anywhere else. Where

we are in an area where young people are trying to get their feet in the door

and everything else, what policies are in place I know the Auditor General

mentioned that the university does not restrict any hiring for provincial

government pensioners. What is the

reason for that? Are they more

qualified? I think it is something

they should be looking at.

MR. GARDINER:

From Memorial University's

perspective, again they are not bound by the policy in terms of hiring

government pensioners. Memorial

being autonomous, they have their own processes in terms of payroll et cetera.

They would say that they would not be able to discriminate against

someone who is getting a government pension as opposed to a university pension.

So if a

person were to apply for a position at Memorial and he or she was a government

pensioner, Memorial would have no way of knowing that particular person was a

government pensioner. They would

not be obliged to let Memorial know that they are a government pensioner.

If Memorial requested that information from the Government of

Newfoundland and Labrador from the Pensions Division, they would not be able to

give that information from a privacy perspective.

Memorial has no way to distinguish between a government pensioner or not.

Consequently, they do not discriminate between if a person is a

government pensioner or not. They

do have rules and policies in place with respect to hiring people who are on

pension from the university but they do not have the mechanism even to

distinguish between government pensioners.

MR. K. PARSONS:

Okay.

So the university pensioners who are rehired, there is a minimum number

of hours per week they can work?

MR. GARDINER:

Correct.

MR. K. PARSONS:

Okay, so it is twenty hours

a week.

Just in

conclusion, I am still tied up a little bit on the sick leave bit.

I really think there should be some kind of a policy put in place.

Sick leave is something when I came to private industry I worked with a

company for twenty-seven years and we were allowed six sick days a year

basically. That is just the norm

out in any government place or any private industry.

It just

seems to me that there is an unlimited number.

I really believe it is something that AES should be discussing with the

university and saying listen, we need a policy put in place here; this is not

acceptable. It may be acceptable in

all other universities, but I really believe that it is just opening the door to

abuse.

I think

it is something that we should be looking at as a government and forcing the

policy here a little bit. I do not

know what your thoughts are on that.

MR. GARDINER:

We certainly will engage

Memorial in a conversation on that.

It is important to note though, I think that and again I cannot speak for

Memorial in terms of its policies on sick leave, but it is something that we

will have a conversation with them about.

Memorial does not have replacement costs for their academic or for any of their

faculty or staff in terms of backfilling positions, unless it is long term and

they are on long-term disability and obviously they will have to be replaced.

They would not be paying a salary if someone is on long-term disability.

It is an issue that we will certainly explore with Memorial further.

MR. K. PARSONS:

Just in closing now, it is

going to be interesting to see what the response will be to your recommendations

over the next little while. I guess

in two years you will go back and do an overview of what they have done.

It will be great to see what happens there.

I would

like to thank the two gentlemen this morning.

I appreciate your answers.

You gave great answers here this morning.

Thank you very much for what you have done here this morning under the

circumstances.

Thank

you.

CHAIR:

Mr. Osborne.

MR. OSBORNE:

Thank you, Mr. Chair.

In the

Auditor General's report, page 6 actually, and it is item 5, The Province funds

the University using a base-budget approach which uses the previous year's

funding levels as a base amount which is amended for programming changes.

This approach has inherent risks as annual funding is not directly linked

to the University's capacity to deliver programs, registration/enrolment levels,

or outputs.

I would

just like to ask the Auditor General if you can expand on that and provide some

more detail prior to asking questions of the staff from AES.

MR. PADDON:

Yes, thank you.

When a

budget request comes in from the university to AES on an annual basis the

starting point, if you want to call it that, would be the prior year's amount,

so the base budget. Then any new

initiatives that they would like to undertake, any increased salary, or any

increased staff complement, all those sorts of things then would be added on.

From

our perspective, at some point you should probably step back and say, in the

base-budget amount, what in a sense are you funding and are you still funding

things that make sense from a taxpayer perspective.

Ultimately, all the money that is going to the university is taxpayer

funded.

In our

view, there should also be some kind of link to outputs.

What, at the end of the day, do you want to achieve?

Can you achieve it with the amount of money that is being provided or do

you need to have changes? Those are

the sorts of things that by just sort of starting out with a base budget and

not really probing or digging at what is included in the core amount, then you

might be missing an opportunity to rejig or re-level the existing budget and

provide some capacity, perhaps, to fund new initiatives.

There

is a risk, which I certainly understand, around academic freedom and all that

sort of thing, which is the purview of the university; but at the end of the

day, there is still money coming from the pockets of the taxpayers.

So in our view, there should be at least some look at whether it is

every year, every second year, or every five years, it really does not matter

but some look at the underpinnings of the budget.

MR. OSBORNE:

Okay.

I appreciate that. Thank

you.

I think

that finding was probably as much a suggestion or direction for government as it

is for the university. Based on

that and the discussion just with the Auditor General, what mechanisms does the

university have in place to really go below the surface and look at whether or

not some of your funding line items are properly being spent, or whether or not

there are savings there?

I know

there are fiscal challenges for the university.

We have aging infrastructure at the university.

We do not hear stories in the media like we do about some other

universities across Canada or universities in the States for example, but we

know that other universities that are older than Memorial have major

infrastructure problems. Memorial

University is at a crossroads where you are starting to see an infrastructure

deficit.

So, how

deep does Memorial University go to ensure that their budget line items are

being properly spent, and whether or not there can be savings without affecting

the delivery of services? How does

Memorial University plan to deal with the infrastructure deficit?

MR. GARDINER:

In terms of the base budget model, while it sounds like we start from the

previous year's budget line an element of truth to that however, it is not

simply accepted at face value.

Memorial has to table an annual report every year, along with an audited

financial statement, which obviously is reviewed by the department to ensure

that Memorial is meeting its obligations.

For

example, just this past budget year, Memorial University saw a reduction in its

base budget for operations, and obviously needed to realize efficiencies to

address that. Again, Memorial, over

the past year-and-a-half, a couple of years, are undergoing an efficiency

review, which they report to the department on a regular basis and make the

findings and savings available on their website.

So,

while it is base budget model, it is not simply an accepted fact that that money

will be there year over year.

Again, I just referenced this last budget year where Memorial's operations

budget was reduced by a certain amount.

MR. OSBORNE:

Are there efficiencies

within Memorial University that can be found to further decrease the areas where

there may be wastage?

MR. GARDINER:

Absolutely, and they are looking at those efficiencies on an ongoing basis, and

again, they post regular updates on their website in terms of the efficiencies

that are found and the amount of money that is realized through those

efficiencies.

MR. OSBORNE:

Okay.

Are you

able to share where some of those efficiencies can be found?

MR. GARDINER:

Not off the top of my head. I do

know the last time I looked on the website I think they identified twenty-three

efficiencies for a net savings, I think, of $5.2 million.

Now that is probably a little dated now.

They have probably realized more efficiencies than that since, but they

certainly regularly report the efficiencies that they found.

They have had to do a bit of a deeper dive this year because of their

reduction in their operational budget for 2015-2016.

MR. OSBORNE:

Okay.

Thank you.

Part of

the reason for going down that avenue, item 6, the very next item, University

expenses have increased 85% over the past nine years.

Cumulative expense growth for the Province over the corresponding period

was 58%. It certainly seems on the

surface, other than last year where there was $52 million in savings, the

university bottom line has grown at a much faster pace than the Province's

bottom line. Can you explain how

that has happened or what the justification is for that, and whether or not all

of that increase has been necessary?

MR. GARDINER:

I would suggest that the

difference between the growth of the funding for the university versus the

expenditures by government would be the introduction or the expansion of certain

areas within the university. For

example, the med school expansion increased by $12 million.

There is an increase in the Engineering and Applied Science Faculty, as

well as an increase at programming at the Marine Institute.

Those

will be targeted initiatives that would be over and above a normal increase in

expenditure such as inflationary costs, salary increases and so on.

It would be targeted initiatives that Memorial would have come into

government and identified as a priority area such as the expansion of the

Faculty of Medicine and so on, whereby the budget would have been allocated

additional funds to address those particular initiatives.

MR. OSBORNE:

Government's overall budget

has doubled over the past twelve years.

For Memorial to have an 85 per cent increase and the Province to have a

58 per cent increase over the past nine years sounds staggering.

Is all of that 85 per cent increase justified?

MR. GARDINER:

I would suggest that it

would be justified on a year-to-year basis when Memorial makes its budget

submission to the department and identifies strategic initiatives that they

would like to focus on. If in fact,

through the budget process, government identifies that it is a priority for

government and the Province, then they would fund those particular initiatives.

It is

not simply providing additional funds to Memorial that are not targeted.

Besides regular inflationary increases and salary increases, any

additional funds over and above would be for targeted initiatives that Memorial

has put forward and government has agreed to fund.

MR. OSBORNE:

Provincially, and it would

appear, I guess with the university as well, that we have experienced the

wealthiest decade the Province has ever experienced, and taking out the

chequebook was a little bit easier to do over the past decade.

Times are probably changing, and fiscal responsibility and looking for

ways you can trim in areas where there is wastage.

With

that 85 per cent, was there some level of, it is easy to take out the chequebook

with that 85 per cent, or can all of that 85 per cent it is one thing to say

we were able to justify it year after year.

I would suggest the Province was able to justify it.

If you looked at any line item and said, well, what would you cut?

It is a lot more difficult to cut than it is to add to the bottom line.

So,

just looking at the increase of 85 per cent over a nine-year period, can we say

without saying we justified it year after year, as the Province did was all

of that necessary?

MR. GARDINER:

I would suggest that all of it was necessary to fund the specific initiatives

that Memorial came forward with, such as the expansion of the med school,

engineering, and the Marine Institute and so on.

Those funds were targeted.

If government did not provide that funding then the med school would not have

expanded, the Faculty of Engineering would not have expanded.

Memorial made a good case in all those instances for the expansion.

Again,

with normal inflationary pressures, as well as salary increases, that is a

natural evolution of the budget process. The

other funds would have been required for the targeted initiatives.

That said, Memorial's budget was reduced for the fiscal year 2015-2016.

They are undergoing a review, obviously, to identify savings to make up

for that funding reduction.

MR. OSBORNE:

Okay.

Item 7,

Since 2004, the number of employees at the University has grown by 23%

not unlike the provincial government I would suggest, but the rate of growth in

the student enrolment has only been 5 per cent.

How do you justify the huge increase in staff while the student enrolment

was only 5 per cent?

MR. PIKE:

The 23.4 per cent increase

in the years noted; Memorial has identified that there were two areas that

contributed to 15.5 per cent of that overall increase.

One of those areas was 456 individuals who were part of the medicine

Standardized Patient. They were

call-ins.

Basically, for the Faculty of Medicine, individuals would come in with their

cases and be diagnosed by individuals in the faculty.

That amounted to about 10.8 per cent of that.

They were called in as required; one, two days, five days per year, which

added to the count. As well, as

they indicated, there was medicine non-stipendiary clinical faculty who were

placed in positions without compensation because of an agreement that was with

the Faculty of Medicine as well as the Department of Health.

The

other areas where the increases were, as Bob had mentioned, the targeted

initiatives for expanding different areas.

So 15.5 per cent of that 23 per cent is in the area of the standardized

medicine practices as well as the clinical faculty.

MR. OSBORNE:

Okay.

CHAIR:

Mr. Osborne, I am going to

move to Mr. Peach now.

MR. OSBORNE:

Okay.

Thank

you.

MR. PEACH:

Thank you, Mr. Chair.

I have

a couple of questions, maybe for clarification more than anything else.

I am still stuck on the overpayments.

Going through the report there were a couple of other areas as well.

On page

27, there was an overpayment there for employees of $8,154.

Then on page 28, there was another overpayment there of $45,268 over and

above the $151,000 for the other two employees.

I am just wondering, throughout the Auditor's report he identified

several areas where there are overpayments.

seems like to me, in my mind I am thinking the money must have been handled

pretty loosely to have all these overpayments.

I am just wondering are those overpayments being recovered as well, or

have they been recovered do you know?

MR. GARDINER:

We have been advised by

Memorial that some of the overpayments have been received and the other ones

they are in the process of recovering.

MR. PEACH:

Okay.

Thanks.

Unamortized Losses to the Auditor maybe; it is just a question that is in my

mind here I am looking at 2010-2011 there was none.

In 2012, we are looking at $26,000; in 2013, $32,000-and-somewhat; and

2014, $26,700-and-whatever. I am

just wondering about these losses.

At one

point there I think you identified that the losses have increased by 67 per cent

over four years. I am just

wondering, who funds those losses?

I guess it is probably a foolish question.

Is that then back to the government or are these losses just something

that is picked up somewhere else?

Can you identify that for me, clarify it?

MR. PADDON:

As a general rule, if the

university's revenue does not meet its expenses that results in a loss for the

year. Some of those expenses are

expenses that you do not have to pay for today, but you will have to pay for

down the road such as severance costs, or accumulated sick leave that are paid

out when people retire.

Sooner

or later, while you may not pay cash today, you recognize the expense today, but

the cash has to come somewhere down the road.

That cash, ultimately as I had indicated before, will have to come from

one of two places, either from a grant from the government or through tuition

fees.

To a

certain extent it is a question of timing of when you have to pay for it.

Ultimately, if you have accumulated a loss over a period of time, sooner

or later that has to be paid for.

MR. PEACH:

So it does get paid for?

MR. PADDON:

It may be twenty years from

now, it may be ten years from now, but sooner or later, yes, you pay the piper.

MR. PEACH:

It is not something that is

just written off and forgiven.

MR. PADDON:

No.

MR. PEACH:

Okay.

The

other question I have is on the graph on page 20, Figure 2.

I look at the increase in students, 5 per cent, and then I look at the

note that you had made there of the university employees has grown by 23 per

cent.

I am

just wondering why the big increase of staff.

If the students did not grow that much, then why did the staff have to

grow 23 per cent? Can anybody

answer why that would be?

MR. PIKE:

In my earlier response I

indicated that part of that growth that was identified of 23.4 per cent had to

do with some standardized patients who were used in the Faculty of Medicine.

The other ones were clinical staff who were on the payroll system and had

a title for academic purposes. So

they represented 15.5 per cent of that overall growth of 23 per cent.

The other ones, other areas, primarily dealt with the strategic

investments that the Province and Memorial have placed into different faculties.

MR. PEACH:

Was that a change in what

happened from 2004, we will say, to 2007?

I am just looking at the graph there yes, and then it started to climb

up then after that. So something

changed there for that to happen?

MR. PIKE:

It is my understanding that

the standardized patients and the clinical faculty were not included in the 2004

numbers.

MR. PEACH:

Okay.

Then on

page 14, Table 2, I am looking at other revenues there, $61,489.

Maybe the Auditor General could probably clarify that one.

I am just wondering where that money would be identified as coming from?

MR. PADDON:

I am not sure.

I do not have that information, Mr. Peach.

MR. PEACH:

Okay.

I was just looking at the table there, Table 2.

I was just looking down through it there and I saw government grants,

then student fees, and then other revenue.

MR. PADDON:

That other revenue could

come from a variety of sources. It

could come from grant revenue or revenue that they get for grants for specific

purposes. It could come from sales

of although sales are different.

It could come from the federal government.

There are a variety of other sources where money may come from.

MR. PEACH:

So it just cannot be

identified as to

MR. PADDON:

Pardon me?

MR. PEACH:

It could not be identified

other than other revenues, could it?

MR. PADDON:

Well we just took this

information straight from the financial statements of the university.

So this was how they would have categorized it on their financial

statements.

MR. PEACH:

Okay.

Mr.

Chair, I am just wondering if I am in order by asking a question on student

loans.

CHAIR:

Sure.

MR. PEACH:

It is just something that

recently came up on student loans.

Would you gentlemen be able to answer something on student loans?

WITNESS:

(Inaudible).

MR. PEACH:

Okay.

I had a couple of students who went to university last year.

Their parents moved away within the last sixteen months to Alberta

somewhere to go to work, but the students did not move.

They were living in St. John's, boarding in St. John's, renting in St.

John's. In the summer, they went

and lived with their grandparents for the summer in Newfoundland.

When

they came back to go to school, to re-enrol again this year, they got turned

down on their student loans in the Province.

They had to apply outside the Province.

So they had to go immediately and apply in Alberta.

Most of them did not know before the last week or the last two weeks

because they had thought that the same procedure would be in place for them

again this year, where they had been enrolled last year and going to school last

year. So they had thought that

everything would be in order. When

they came back about two or three weeks before the school opened and applied for

their student loans, they got turned down.

So I am

just wondering what the policy now, I am told the policy is that if your

parents are living outside the Province, well then your home of residence,

because you are not at the age of twenty-four, is with your parents.

Those people are twenty, twenty-one years old.

They are out there on their own renting here in St. John's, going to

school in St. John's. I am just

wondering why that policy would be that strict to students at that age.

Can you answer anything on that for me?

MR. PIKE:

I cannot talk to the specifics of the case.

We can certainly follow up with you on that, but it sounds like it is the

residency requirements that are entrenched in the legislation for student

financial assistance, but we can certainly follow up on that for you.

MR. PEACH:

It certainly puts them in a

bad situation. Last year they went

to school, they have one year in, and now they are finding that they cannot

afford to go. If they do not get a

loan through Alberta, then they cannot go to school, so they have to step out

now they have a year gone, and now they have to get out.

It does not seem to be fair to them.

I am just wondering if that policy could be looked at, because it

certainly puts them in a poor situation.

might not be somebody who is living with their parents, but their parents have

moved away and, for some reason, they could be living with their grandparents.

Because they are living with their grandparents for a year or whatever,

then they have to abide by that policy.

So they have in a bad situation.

Either they have to make a decision now not to go to school and step out,

or if Alberta does not given them the money, well they are not getting money

from the parents because the parents are away and they are living here in

Newfoundland. The parents cannot

afford it.

MR. PIKE:

Each one of the provincial jurisdictions that administer student financial

assistance have a common set of residency rules that is entrenched in the

legislation, but we will certainly follow up on that.

MR. PEACH:

All right, thanks very much.

Thank

you, Mr. Chair.

I just

want to make a comment. Again, I

still have to express my disappointment that the university was not here, but

due to the questions that were asked and the expertise of the two gentlemen on

the other side, you did a fantastic job this morning and I want to thank you for

answering the questions the way that you did to the best of your ability.

Also,

to the Auditor General and their staff for the co-operation that we got over the

last while with regard to the meetings that we have had with the university and

other things that apply to the Public Accounts Committee, and to Elizabeth for

the fantastic job that she has done over the last while in getting out all the

correspondence and setting up the meetings and everything else.

Thanks

very much.

CHAIR:

We will move to Mr. Murphy,

I think, next.

MR. MURPHY:

I have nothing else, Sir.

CHAIR:

Mr. Osborne.

MR. OSBORNE:

Yes, thank you.

Just a

couple of final questions and then I can clue up as well.

Item 11, on page 7 of Auditor General's report, In excess of $112

million of the Provincial 2013-14 operating grant to the University effectively

subsidizes students from outside the Province an increase of $80 million since

the start of the tuition freeze. I

am just asking the department officials if you can elaborate on why that is.

What makes up that $80 million of the $112 million in operating grant?

MR. GARDINER:

I can only assume that

number came from a proportion of the university's funding.

That obviously would be per pupil or per student funding.

As well, obviously this university or this Province, the same as any

other province in Canada, does not discriminate against students coming in from

other provinces or territories with the exception of Quebec.

Quebec does have a tuition fee for Quebec residents that are

significantly less than for students from out of Province.

Obviously, any student coming here from other Canadian provinces, territories,

or international students does benefit from the lower tuition, which could be

considered a subsidy from government.

That said, from an international student perspective, the tuition fees

are higher than they are for Canadian residents.

MR. OSBORNE:

Okay.

Over the past decade, what has the increase in local Newfoundland and

Labrador students been versus Canadian students, versus international students?

What percentages have we been, say, a decade ago and what percentages are

there today?

MR. GARDINER:

I would suggest that ten

years ago the student enrolment at Memorial University would have been comprised

of approximately 90 per cent of Newfoundland and Labrador students.

Currently, it is comprised of 70 per cent, approximately, of Newfoundland

and Labrador students, 20 per cent from other provinces and territories in

Canada, and 10 per cent international.

I would

suggest that is not a result of a decline in the participation rate of

Newfoundland and Labrador students.

Over the past ten years our high school population has declined approximately

equal to the decline in the number of Newfoundland and Labrador students

attending university. I would

suggest that seventy, twenty, ten as opposed to ninety ten, ten years ago, was a

result of an increase in the number of other Canadian students and international

students attending Memorial as opposed to a decrease, proportionately, of the

number of Newfoundland and Labrador students attending Memorial.

MR. OSBORNE:

Okay.

I just

want to go back to the infrastructure deficit at the university again for a

moment. The university themselves

identified that approximately $145 million was needed to address urgent deferred

maintenance over the next five years.

Where does the university plan to come up with that funding?

MR. GARDINER:

Currently, this year, I

think the university has identified $7 million worth of what they would consider

urgent infrastructure needs. The

infrastructure needs typically would be met by Memorial from savings from their

efficiency review, as well as any funds that government would provide in their

infrastructure budget. Again, as

noted, Memorial's budget was reduced for 2015-2016 fiscal but they have

identified, I think it is $7 million that will take care of the urgent needs

with respect to infrastructure.

MR. OSBORNE:

There were two contractual

positions that did not have competitions conducted, as found by the Auditor

General. As a result, there was no

documentation to support that the most qualified individual was hired for the

position. How can the university

justify that these two individuals were the most qualified?

MR. GARDINER:

The university adheres to a

policy whereby they do go through a competitive process for positions.

In a number of cases, in the two cases here, they identified two

instances where competition was not suitable simply because they needed these

individuals in a timely manner.

They identified people who were qualified for the position and, again, not

having time to go through the competitive process.

They acknowledged these two individuals as being qualified for the

positions and they offered them the contracts.

MR. OSBORNE:

Does that adhere to the

hiring practices of Memorial University?

MR. GARDINER:

That I cannot answer, other

than the fact that I would suggest there is probably room within their policy to

make exceptions when warranted; similar to government polic

Document details

Collection	Newfoundland and Labrador — Committees
Citation	2015-09-08
Type	committee
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Language	en
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Identifier	3061f409fba38a7ce57031afe9dde7e8e9f8fa01

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