SEPTEMBER 28, 1999

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 9:30 a.m. in Room 5083.

CHAIR (Mr. J. Byrne): Order, please!

Before I get into the introductions, I would like to

mention to the media that if you would like to take pictures or anything, do it

now before we get into anything.

These mikes are new mikes, so any time you want to

speak you have to press the button here on the front of your machine, and

apparently I can cut you off at any time. Hopefully, I will not have to do that.

I like precise, short answers because our questions are usually that way.

I would like the Committee to introduce themselves. As

I said, I'm the Chairman of the Public Accounts Committee and the Member for

Cape St. Francis. To my right is Tom Lush, the Member for Terra Nova. He is

Vice-Chairman. We will start on the far end and come around if we could.

MR. MERCER: Bob Mercer (inaudible).

CHAIR: You need this for recording purposes, too.

MR. MERCER: I shall do it again, then. Bob Mercer,

MHA for the District of Humber East.

MR. MANNING: Fabian Manning, MHA for the District

of Placentia & St. Mary's.

MR. FRENCH: Bob French, MHA for the District of

Conception Bay South.

MR. NOSEWORTHY: Mark Noseworthy, House Of

Assembly.

MR. ANDERSEN: Wally Andersen, MHA for the District

of Torngat Mountains.

MS HODDER: Mary Hodder, MHA for the District of

Burin-Placentia West.

CHAIR: We have Elizabeth Murphy, Clerk of the

Committee. Also, to our left here we have the Auditor General's office and her

staff. If you would introduce yourselves, please.

MS MARSHALL: My name is Elizabeth Marshall. I am

the Auditor General. To my right is John Noseworthy. John is Deputy Auditor

General. To my left is Claude Janes. Claude is Auditor Manager of Accounts.

CHAIR: Now I'd ask the witnesses to introduce

themselves.

MR. WHITE: My name is Brendan White, Chairman of

Avalon West School District.

DR. RIDEOUT: Good morning. My name is David

Rideout, of the Avalon West School District, and I'm Director of Education.

CHAIR: Thank you. In the back of the room I

believe we have Mr. David Lewis,

Assistant Deputy Minister of Support Services; and Mr.

Jack Thompson, Director of Financial Services for the Department of Education, I

would imagine.

Anyway, let's keep her going here. We have to swear in

the witnesses now and the Clerk will do that. Also, the Auditor General's people

have to be sworn in because it is a new Committee.

Swearing in of Witnesses

Brendan White

Elizabeth Marshall

John Noseworthy

CHAIR: Thank you.

We do have another person here in the room, a person

from VOCM. Welcome.

Basically, this hearing was called -

WITNESS: Mr. Chairman, we have two other gentleman

who are expected. I think they are having a problem with parking space. Our

Assistant Director of Finance, Mr. Eric Snow, and our Comptroller, Mr. Jim

Doody, will be joining us if they find a place to park and they haven't gotten

lost.

CHAIR: Yes.

When we speak we should identify ourselves for

recording purposes, of course, and Hansard.

What we can do now is have opening statements, if the

witnesses would like to make any opening statements. We will then go on to the

Auditor General's Office, if they want to make any opening statements, and then

we can get into the questioning. Hopefully, your counterparts will be here by

that time. Would you like to have any opening statements?

Basically the Public Accounts Committee is here to

hear from the Avalon West School Board with respect to the Auditor General's

report that was produced March 31, 1999, which covered 1998. In that report

there were a number of concerns.

We will just have these people introduce themselves

now.

WITNESS: Sorry for the delay, Mr. Chairman.

CHAIR: No problem. When you speak, could you just

press on your mike there? We just had our introductions, so if you could

introduce yourselves we would appreciate it. We have two more witnesses.

MR. SNOW: Eric Snow, Assistant Director of Avalon

West School Board.

MR. DOODY: James Doody, Comptroller.

CHAIR: Thank you.

Swearing in of Witnesses

Eric Snow

James Doody

CHAIR: Thank you.

I will make just another point before I get into the

hearing itself. The representatives from the department are here as observers,

basically, but there may be some questions that we might want to ask for

clarification purposes. At that time we do ask that you come forward, sit at the

table and be sworn in and answer the questions.

Back to what we had started. Would the witnesses want

to make any opening statements before we get into the hearings? Because I

believe you received the same information that we received before the hearings

today. Is anyone going to make any opening comments?

MR. DOODY: Not really, Mr. Chair, other than to

say that we are pleased to be here this morning to appear before you to give

evidence on the matters that you have addressed in your letter to us. I don't

know if Dr. Rideout has anything to add.

DR. RIDEOUT: I have just a very brief comment. We

have reviewed the information that was provided. It has been helpful to us in

terms of our operational establishment as a new district. We think that as we

proceed during the day you will find that there are certain things that we have

been able to do in light of the recommendations that were made. Hopefully, today

will be an opportunity to have that kind of clarification for you folks and some

further comment on it.

CHAIR: Thank you.

The Auditor General's Office.

MS MARSHALL: Mr. Chairman, I would like to just

give an overview of the work we have done in the last two years on school

boards.

The first review we have done since amalgamation was

in 1997, and at that time one of the areas we looked at was executive salaries.

That was reported in my 1997 report. There is information in that report that I

would like to have handed out to the Committee members - I thought it would be

informative - on Executive Compensation.

The second review I carried out was in 1998.

Primarily, what I was trying to do was to make sure all of the assets and

liabilities of the twenty-seven old school boards actually ended up in the ten

new school boards and that there was nothing missing.

There were three problems areas that we identified,

and I will just run down through those briefly. The first is what we call

ancillary funds, and that would be things like canteen sales, fundraising

events, and things like that. Primarily, the problem is that nobody really has a

handle on how much money is out there in those funds. We have seen some funds

that have hundreds of thousands of dollars in them. There is really no control

over the funds, no processes, and of course we do not have any idea how much is

out there.

The second problem area we identified was fixed assets

in school boards. I was not so much concerned with the buildings because they

are fixed, but furniture, equipment, electronic equipment, computers, those are

moveable assets and none of the school boards are doing a good job of

controlling those assets. There are no ledgers; so when the assets are moving

from one school to another, or from one school board to another, nobody can

really track them. We really could not tell whether all fixed assets of the

twenty-seven school boards actually got into the ten new school boards.

The third area we looked at was compensation benefits.

The biggest problem we identified there was that there were benefits that were

paid within the school boards that were not in accordance either with cabinet

direction, ministerial direction, government policy or departmental policy. As a

result, some boards are paying compensation in excess of what has been

authorized. What essentially has happened in the school boards is that you have

a lot of inconsistencies now in the school boards. Some are complying with the

policies and are paying certain rates while other school boards were not

complying with the policy and are paying different rates.

That is basically an overview of the work that we did

last year.

CHAIR: Thank you.

One point I want to make also, it came to my attention

late yesterday afternoon that there was a report that had been done by the

Department of Education entitled, Review of Retiring and Executive Compensation.

It was done by Kirby and Company, Certified General Accountants.

It was late yesterday afternoon, about 5:00 p.m., when

I managed to get a copy of this. The board members did not even receive a copy.

I had copies done up for the board members this morning. I went through this

last night, as late as 10:30 p.m. or 11:00 p.m. and there are some questions and

concerns in this that may need to be addressed. I don't think it would be fair

to pass them out and expect people at this hearing now to be able to ask

questions on that. What I think we will do is continue on with the information

that was sent out, that we all have received, ask any questions we want on that,

and maybe reconvene at a later date, a couple of weeks down the road when we

have proper time, have the board members review this report and do a proper

assessment on it, and they may want to come back and ask further questions. If

they do not, so be it; but there is a good chance that we will be reconvening at

a later date.

Having said that - and I discussed that with the

vice-Chair yesterday evening - I think that is fair. We may have some further

discussions on that after we have the hearing completed today or whatever, or

after we adjourn today.

I think what we will do from this point is go on, and

go right into questioning. Basically, it has been suggested that maybe we go

with the newest member of the Committee. I think the newest member is Mary

Hodder. Isn't that correct? So I do not know if you would like to have any

questions?

MS HODDER: (Inaudible) question. The Auditor

General identified amounts of $81,262 in a trust fund and $256,855 in canteen

funds that were recorded on the previous board financial statement, but only the

$81,262 is recorded in the current board's financial statement. Can the board

comment on this particular amount?

DR. RIDEOUT: Yes. In the response to Mr.

Noseworthy of August 31, I alluded to some of the convolutions that occurred

during the most intense period in educational history, as we have known it,

during the restructuring of 1996-1997. At that time we had pretty well all of

the Western Avalon Roman Catholic School Board collapsed into our district. We

had all of the former Avalon North Integrated School Board collapsed into our

district. We had a portion of the Seventh-Day Adventist School Board collapsed

into our district, and we had a portion of the Pentecostal Assemblies Board of

Education collapsed into our district.

When that occurred January 1, mid-year, there were

various practices being held in each of those boards and we did not have a

mechanism, as a new board, that allowed for an appropriate mechanism for

reporting consistently amongst the schools of the four jurisdictions.

Consequently, when the time came to do our reports - and in fairness to

ourselves, you have to appreciate, I am sure, that December 31 we did not exist.

January 1 we were responsible for everything. On top of that was an intense

period of reorganization which led to twelve school closures in that June, and a

number of other events that were preponderant, I guess, would be a very mild way

to describe them.

At that time, how to report financial statements was

not uppermost in our minds. It just was not something that was in the forefront

until the time came for the year-end when we started to try to collect this

data. At that time we realized that because of the practices that had been

followed from September to December 31, and because we had not really

established any new practices or procedures to replace that amongst all of the

sixty schools that we were now responsible for, it would really not be possible

to give an accurate picture of that.

The trust fund was a more precise figure that was

provided by an independent source so we had that readily available and it could

be reported. The other funds were not easily reported in that fashion. To be

honest with you, at that time of the year we really did not know how to go about

getting the information. Subsequently, when the Auditor General raised it in her

report we recognized, as well, that it was a legitimate issue, that there are

literally hundreds of thousands of dollars floating around in the system, and

that there are no mechanisms for control on them. We all, who have had children

go to school, know about the picture money, the textbook money, the sports money

and all of it, which could easily be in excess of $100,000 per school sometimes.

That led to a concern for us, as administrative staff

representing the board's interests and being able to speak to those kinds of

questions, of course, and we began to conduct a review of the system to try to

see what we could bring together, as a new board, that would unite all of the

fragments that really were now a part of our new entity which was Avalon West

School Board. That took a little bit of time because one of the things that

happened in the restructuring that occurred, administratively we were reduced

something like 60 per cent in staff - roughly about a 60 per cent reduction in

administrative staff - and yet we had taken over a district that was

significantly larger than we had before. However, our people did work together

with our principals at the local level and we were very pleased to have a final

policy approved and passed by the board last school year, the 1998-1999 school

year, which was implemented and which we are now following.

That policy is intended to address the concern that

you have raised. I do apologize that it has taken a year-and-a-half roughly to

work through it but you have to realize that we are talking about school systems

and principals and administrators that do not have a strong accounting, auditing

background and we have had to try to train them and prepare them, and train

secretarial support staff. We have had to try and introduce new computer

technologies and accounting software package at each school we use. We are

trying to streamline banking into one bank right now so that all of the schools

really are with the one banking institution, and we are hoping that will allow

us to call for proposals which will lead to lower service charges and things of

that nature. So I am very pleased to report that one is being actioned rather

aggressively by our board.

CHAIR: Can I just interrupt? One question popped

into my mind: The policy that you say you put into place, is that available

here? Is that there in the books?

WITNESS: (Inaudible).

CHAIR: Okay.

MS M. HODDER: Mr. Chairman, I will pass to the

next questioner.

CHAIR: Thank you.

The next questioner - I would ask Fabian Manning if he

would like to ask a question or two.

MR. MANNING: Thank you, Mr. Chairman.

I have a question concerning monies owed by staff. As

of March 31, 1998, a senior employee of District 9 owed a total of $40,587 to

the school board and the Department of Education. This amounts consisted of

$8,973 owning to the board for cash advances; $31,000 owing to the board for

redundancy pay repayment; $9,814 owing to the Department of Education for

redundancy pay repayment.

I would like to refer back to the cash advances, if

you could elaborate on why someone would receive a cash advance. Who authorizes

this advance, and have they been paid back?

MR. WHITE: The reason for the advance?

MR. MANNING: Yes.

MR. WHITE: The $40,000 owed by the senior member

of staff represents a combination of salary advances and redundancy repayment

and severance pay.

The salary advance - when the employee was hired there

was some dispute as to where his salary would be. He had not received any salary

from government, I understand, from the time of hiring until January; so, out of

common decency and common sense, the board paid him in advance, knowing that the

money would be recovered - not in advance, but gave him salary advances before

it was settled. He did not receive any salary until January but this account has

now been paid in full.

The redundancy pay of approximately $19,000 - that was

to be repaid once the employee concerned was rehired and terminated by the

former school board that he had worked for. This too has been repaid, and it was

through an agreement between the employee and the department where an

agreed-upon amount would be deducted from his pay per pay period and included

interest at government's cost of borrowing.

CHAIR: Can I interject a question here on this?

MR. WHITE: Yes.

CHAIR: I noticed there - is that the one where it

was agreed to pay back $250 per pay period?

MR. WHITE: Yes.

CHAIR: Was there anything involved here with

respect to this individual being able to pay that back with respect to working

overtime, or anything of that nature, or was it just a straight $250 deduction

out of his pay?

MR. WHITE: To that, I will go the assistant

director or the director.

DR. RIDEOUT: I am trying to recall. My

understanding is that that was that $250 per pay period. The agreement with the

Assistant Deputy Minister at the time, who approved that arrangement, included

interest at government's cost of borrowing. I received confirmation in August

that that indeed had been repaid and at interest.

CHAIR: Auditor General?

MS MARSHALL: Yes, could I just make one comment on

the interest? When we looked at this a year ago there was no indication that

interest was included. We had had discussions with departmental officials and at

that point in time they indicated to us that no interest was included and that

the receivable system at the department was not set up to charge interest on the

accounts. Since the departmental officials are here, perhaps they could probably

confirm or indicate what has transpired since then.

CHAIR: Yes, that is fine. It is a good idea.

Sorry, go on.

DR. RIDEOUT: Just to offer a comment before they

do that. The letter from the Assistant Deputy Minister, in that regard, I

believe was dated January 1997. It indicated that it would be at interest. The

confirmation that we received was from Linda Dooling in August that it had been

repaid. Vaguely, I know the interest rates were low at the time. Somewhere

around 6 per cent was the amount that they had calculated for that period.

MS MARSHALL: We have a copy of the same letter. It

is just that when we did the audit work there was no indication. We worked

through the calculations and we did have discussions with departmental officials

and they indicated: no, that interest was not in there. We had checked the

calculation and confirmed that it was not in there. So something transpired in

the interim.

CHAIR: Afterwards.

MS MARSHALL: Yes.

CHAIR: The letter that you are referring to, it

was from the Deputy Minister you said?

MS MARSHALL: (Inaudible).

CHAIR: Sometime after the Auditor General did her

report?

MS MARSHALL: No.

WITNESS: No.

MS MARSHALL: We had a copy of the letter, we were

aware that it was in existence and that it referred to that fact that there was

going to be interest charged, but when we checked the calculations and discussed

it -

CHAIR: It wasn't.

MS MARSHALL: - with departmental officials they

said the system would not accommodate it, so something must have happened in the

interim. They did something with it.

CHAIR: Could the department officials probably

clarify that for us?

You will have to be sworn in first.

Swearing in of Witnesses

David Lewis

CHAIR: Thank you.

You have heard the conversation. Can you add something

to it for us?

MR. LEWIS: Yes, I can confirm that subsequently

the department did calculate interest at the government borrowing rate and the

interest was paid.

CHAIR: Fine. Thank you.

Back to you, Fabian.

MR. MANNING: (Inaudible) for now.

CHAIR: Okay, maybe we could go to my right. Mr.

Lush, do you have any questions at this time?

MR. LUSH: I just want to congratulate the board

for the fine job you are doing. As indicated by the superintendent or the

director, it is a very challenging time in education, the greatest reform ever

to take place in this Province, and we anticipate some growing pains. The

benefit of all of this is that as a result of the Auditor General's examination

we are all able to learn from it and do what is required to do. We can

appreciate that at the time of integration some of these problems were not high

on the agenda, that you had other things to get moving on. We appreciate that.

However, we are involved in the spending of public

dollars so all of us have to take this very seriously. Again, as I said, we

appreciate the complexity of the job that you are doing, and can certainly

appreciate the difficulties when you had to bring together all of these boards,

each with its own way of accounting or non-accounting, whatever the case might

have been, and to try and bring order to what was, no doubt, a system that in

terms of financial audit, particularly, was not very adequate.

So my general question to you, I guess, is in terms of

the Auditor General's criticism of monies not being adequately handled or spent,

and fixed assets not being properly documented - all of this kind of thing. What

is your reaction now? Do you think that, as a result of these criticisms, you

are getting the financial house in order and that you are administering the

affairs of your board in ways that are acceptable to business?

MR. WHITE: I would answer that by referring you to

two pages in the report, pages 12 and 14. Page 12, the financial position: we

are quite pleased that the overall financial position of the current board was

favorable compared to the combined former board's financial position in 1996.

Not only have we reduced the expenditures more significantly in the current

board's instructional and administrative budgets but also - the Auditor General

has indicated at least, and we concur with that - the current board has a good

working capital position and little long-term debt and we are poised to move

forward in a positive way. I might add that I think this year it looks as if we

are in a position to come forward with a balanced budget for the third straight

year.

We are pleased that the Auditor General has identified

certain things that need to be addressed and we are doing policy on those

things, as Dr. Rideout indicated earlier.

MR. LUSH: Just for the interest of the Committee,

I think maybe there may have been some surprises to certain people, probably to

the business community in particular and to accountants and to people that

generally have systems set up for administering monies, expenditures and

revenues,

whereas in education we had a history of not documenting everything. I

suppose one of the reasons might have been, in schools in particular, we did not

handle a lot of money and everybody took care of their own little thing.

Fundraising was carried on and the money was spent for whatever reason that

particular fundraiser was for; so the Auditor General mentions that in

particular - fundraising - and canteen funds which again had a history, I would

think, of not being very well documented and administered in the way that

business would like to see it done.

What has the board done in view of these criticisms,

particularly about fundraising and canteen funds?

MR. WHITE: Again just in a general way, as Dr.

Rideout indicated, as a result of our own concern and the concerns raised by the

Auditor General, we have now a comprehensive policy on fundraising, the canteen

sales, et cetera, and the reporting of it. As he also indicated, our secretaries

and our principals have been in-service trained to address those concerns as

raised by the Auditor General. It is included in the package that the Auditor

General has. I guess, Dr. Rideout, if you want to make some comment on it by way

of detail...

DR. RIDEOUT: I think the point is well-made and

well-taken with regard to the capital assets of a $60 million organization;

however, I am not sure the picture is as bleak as it may be portrayed. What you

have to realize is that when we took over there were sixty schools - buildings -

fifty-eight buildings, sixty schools, two joint-service ones. I assure you,

every principal in every school knew the capital equipment in that school by and

large. Now they might not have known whether there were 236 shares versus 227,

not that precisely, but generally, in terms of the major items, those items

still remained in that school building at the time. There was no disbursement of

the vast majority of the capital assets.

Now it is true that there was no inventory as such

centrally located that we could point any one to. There is still no such

inventory as such. I'm informed that we could produce such an inventory but it

would probably cost us about $60,000 to do it in terms of person hours that

would be required. From our perspective, as a board that is struggling to

balance its budget every year, unless there is evidence that there is abuse in

the system we are very reluctant to use $60,000 for that purpose. Now if at any

point in time there is a provincial measure taken to try to address this

throughout the Province, to have an inventory, then we would be very pleased to

participate but in all honesty, $60,000 for us to do something of that nature is

not something that we really have the flexibility for in our budget right now

without cutting certain priorities.

The other thing I would just add to it is this. I

guess the basic movement occurred from the closure of one of the previous school

board offices. That was the Western Avalon Roman Catholic School Board office.

They had a little office in Avondale. The biggest movement that occurred was

with the capital equipment from their office into our office, which was the

former Avalon North School Board office. So all of the equipment, when we took

over, was already in the building of Avalon North, so we knew what was there by

and large.

For Western Avalon, there was not an inventory that

would satisfy an auditor I don't think of any kind, whether it was the Auditor

General or just our own auditors. However, basically what happened at

consolidation is that the people from that office moved into our office and they

brought their equipment with them. James Doody came in as Comptroller. He

brought the desk with him from his office, he brought the computer with him, so

we did not purchase new capital items for those people who were coming in. We

were able, as part of our plan, to retain all of our employees and not issue any

layoffs as a result of that downsizing and the reduction which did occur. There

was a computer inventory, I am told, that was a fuller, documented inventory

that would be appropriate for any records of any school board, but the rest of

the items were really a few desks, a few chairs, a couple of fax machines and

filing cabinets, and those items were moved by our staff. It was our staff who

went in and brought them to the new building. So I think there would be very

little concern over anything that happened in that transition and move itself.

MR. LUSH: I expect as well that this had to be

done with a great degree of care and sensitivity in terms of the board moving

things from schools. Now a school that was closed, I expect that that was

probably not too bad, but I'm thinking, in terms of your integration, that there

were communities that felt they had a fair amount of autonomy over their school.

The school board moving in to take out fixed assets to place in another school

probably presented a bit of a difficulty. I am just wondering whether it did or

not, and whether the board had to move rather gingerly and diplomatically in

terms of redistributing furniture, fixed assets or whatever.

DR. RIDEOUT: Absolutely, and that still exists.

Any time you are talking about a streamlining of the organization, any time you

are talking about closing a school, for example, there is great sensitivity -

that the piano was donated by the parish, and what do we do with it? - and all

of those kinds of nuances come into play when you are dealing with something of

that nature.

With regard to your other comment about the procedures

which are in place, we met with our principals, and in no uncertain terms we

laid out the expectations of the new policy that you have referenced in this

document. We had resistance, and some of our administrators could appreciate the

points that were being made and what we were trying to do as a system. We were

really trying to create almost a new culture, and we are talking about a culture

of accountability and responsibility which is really part of today's educational

and public environment. It is a natural process.

Many of the principals were glad and welcomed that

kind of direction because they were concerned that they were trying to, let's

say, run a tight ship, if I may use a clich,

whereas a principal down the road

might be a little bit looser in how he was handling his canteen operation. So we

would have had a goodly portion of our administrators very supportive of this

policy. We were very clear with them: This is not an optional activity for you.

This is a requirement of the board which has responded to a concern which was

identified, which it deemed to be legitimate, and as employees of the board you

now have the obligation to ensure that these concerns are addressed adequately

at your local school level so that we, as a district, can be sure that they are

addressed from our perspective, too.

MR. LUSH: That's fine for now, Mr. Chairman.

CHAIR: Thank you. I think the Auditor General

would like to comment on this. Before we get into that, it was mentioned earlier

that you may have a balanced budget for the third year in a row. There has been

really no audit of your assets, and that includes all the schools that would be

in your jurisdiction, I would imagine. I'm no accountant by any stretch of the

imagination, but to do a proper audit at the end of the year, and a balanced

budget, wouldn't you need to have a good handle on the fixed assets within your

jurisdiction?

My problem was, if you do not know what is in the

schools - you say the principal may have a fair handle to a certain extent - but

the board does not really know, so how can you come up with a balanced budget

not knowing these figures?

DR. RIDEOUT: The comment by the chair of the board

was with regard to operational funds.

CHAIR: Okay.

DR. RIDEOUT: The capital assets - and I will have

to rely on my people for this as to how it is reported - really refer to the

items that are fixed within the districts that were there in the previous

districts. Like, you have a school building. We know that building is there. We

know it is valued at a certain amount, we know it has roughly 400 desks in it

and things of that nature. So it would be from that background that we would

reflect that in our statements. That is my understanding.

CHAIR: Okay, it is just the fixed assets. Then get

back into the material within the schools such as televisions, computers,

projectors, desks. I mean, you have all these assets, I would say, and would

they not be included in putting your budget together?

MR. SNOW: Mr. Chair, basically in terms of our

operating budget for the upcoming or current, in this case, fiscal year, in our

budget and in our actual financial statements for last year, we would be

recording historical figures that have been recorded in previous years and any

additional expenditures of a capital nature that would have occurred throughout

the past year. It would involve an historical figure; it would not involve an

accounting and balancing of the actual assets to that figure.

CHAIR: Further to the point you were making, it

would cost you $60,000 to put this together. You really don't know, then, that

if you spent that $60,000 that you could be in more money or assets than you

think you have now today. So in actual fact that could be money well spent.

MR. SNOW: Mr. Chair, the $60,000 is a very rough

estimate on our part to do a reconciling, if you will, of the actual fixed

assets presently held by the board to the book values that we are carrying. In

addition to an amount to do that initial reconciliation there is also the

ongoing cost of maintaining a balancing, if you will, of the actual physical

assets. The long-term cost of that, when you assess it, has a far greater figure

than just the $60,000.

CHAIR: Thank you.

Just one more thing before I go to the Auditor General

on this issue, and it is in conjunction with this I suppose to a certain extent.

On page 5 of the information that was sent out - and we are talking about

inadequate control over capital assets, which is what we are on to - below that

in Figure 4, under Expenditure, they have Administration. For the six month

period from July 1, 1996 to December 31, 1996 and for the next six month period

we have, January 1, 1997 to June 30, 1997, is that $1 million difference there

in administration costs? Would that be an increase? Could I assume from that

that there could possibly be a $2 million increase in administration costs for

the Avalon West Board compared to previous? No? Okay.

MR. SNOW: I am wondering, Mr. Chair, if you could

repeat that because I am having difficulty finding the figure.

CHAIR: Under Expenditure in Figure 4,

Administration, there is the second column, Former Boards, July 1, 1996 to

December 31, 1996, for Administration, there is $7,400,000. In the first column,

from January 1, 1997 to June 30, 1997, which is six months also, there is

$8,392,000. There is $1 million difference. Why would there be an increase of $1

million in Administration in a six month period?

MR. SNOW: Mr. Chair, the former board was $7.4

million for six months. The new board was $8.4 million for six months, totaling

roughly $16 million.

CHAIR: That is right.

MR. SNOW: The reason was the grants were cut. My

reference to it being cut by about 60 per cent from previous years? The

administration component of the grant was reduced somewhere in the vicinity of

60 per cent.

CHAIR: I'm missing something. That to me is an

increase of $1 million for administration costs. Am I reading that wrong?

Auditor General?

MS MARSHALL: I will try. In the first column you

have for six months of 1997 and in the next column you have the six months

before 1997.

CHAIR: That is right, yes.

MS MARSHALL: Those two added together will give

you a full year. So if you are comparing $8.3 million with $7.4 million, you

have to add the two together so you will get a full year of operations. You do

not need to look at the difference, you look at the total, and the total is in

the third column there, $15.792 million.

What I was trying to do in that figure - just to

elaborate a bit further - was just give you an idea of how much it was costing

to operate the former boards compared with the new boards, because we are

tracking the costs. We are trying to see if the new boards are going to cost

more than the old boards.

CHAIR: Are they?

MS MARSHALL: It is too early to tell, we are still

working the numbers. As you can see from this

schedule here, some of the numbers

are starting to go down, as Dr. Rideout was saying.

CHAIR: Yes. Thank you.

DR. RIDEOUT: Actually, what I think you need to

look at is the former boards over in column four, $18.7 million for 1995-1996.

When we came on for half of the year and the other boards were on for half, it

was down to $15.7 million and now we are down to roughly around $9 million. I am

not sure of the figure now.

CHAIR: Okay, that is fine, I understand.

I want to get the Auditor General to comment on the

discussion so far.

MS MARSHALL: The only comment I wanted to make

with regard to capital assets is that you feel like everything is there and you

are accounting for everything but if you do not have the inventory records, you

do not know.

We did have one public sector entity last year where

they had a similar problem with capital assets, they were not keeping a record,

so we selected I think it was sixteen new pieces of computers that came into the

entity in the past year and then we tried to find them. I think we could only

find about half of them. Sometimes you feel like you have a good handle but if

you do not have the records then you really don't know for sure.

The second point I wanted to make is that, with

millions of dollars in assets, I think it is worthwhile to have somebody there

to keep track of it, especially the moveable stuff. I am thinking like the

computers, VCRs, electronic equipment and that sort of thing.

The last point I wanted to make is that some of the

auditors are not issuing clean opinions now. If there is not good control over

the fixed assets or you do not have your fixed assets record you will not get a

clean opinion on your financial statement. I think I have seen some indication

of that already. I think you are still getting a clean opinion but it is

possible that your auditors might not be so willing to give you a clean opinion

in the future.

CHAIR: Thank you.

DR. RIDEOUT: Mr. Chairman, we would love to have

an inventory clerk. We would really appreciate having one. Our difficulty is, we

do not have the wherewithal in our budget to have such a person. The computer

one is an excellent example for us. We commenced this summer with hiring seven

or eight students over the summer, trying to get a computer inventory done. We

wanted them to go in and open up the computer, copy down the serial numbers of

the various components in the computers that you would need to have recorded -

the processor type, the speed and so on - so that if there were any tampering

with that equipment we would know what should be there. We had probably about

one-quarter of our schools done with the technology and we just ran out of time.

Hiring the students was a relatively cheap way for us to try to do it but it was

still at a fair cost to us overall.

We would concur that an inventory clerk, or someone of

that nature, would be a valuable asset to our board, and I am sure to each of

the boards, but the present funding mechanism is not sufficient to allow us to

hire such a person if we are going to have a balanced budget for a fourth year.

CHAIR: Thank you.

Mr. Mercer, would you like to ask a question at this

time?

MR. MERCER: Thank you, Mr. Chairman.

I just want to go back to the ancillary funds. The

Auditor General states that, at least in the records of one of the collapsed

boards, one of the former boards, they did do and did maintain on their

statements canteen funds for some quarter of a million dollars. There was

another block of funding in there dealing with scholarship funds. For some

reason, however, the new board chose only to recognize the scholarship funds and

disregarded inclusion of that on their financial statements of the canteen

funds. What was the process by which you made that decision?

DR. RIDEOUT : I will refer back to my earlier

comment in responding and just indicate that was part of the rationale. The

other factor, I guess, is that we felt that even what one of the former boards

had been doing was really insufficient because canteen sales are only a very

small part of the funds the Auditor General was referring to. You have the

textbook money, the picture money, the cold plate sale, the graduation fund, the

sports fund, and all those kinds of activities, so we felt that even what that

former board had been doing really was not sufficient in itself if we just had

all of the schools reporting the canteen funds. That is why the current policy

that we have implemented is attempting to report all of them, and that would

account for more than just canteen funds; so it would be much more comprehensive

than even what one of the former boards had in place.

MR. MERCER: I understand what you are saying, but

I am still wrestling with the question that if you knew, at least in general

terms, if it was $250,000 held by one of the boards in the form of canteen

funds, and that there were primarily two boards that collapsed into one, why was

there not some effort to find out what the other board might have had and then

make some rational board decision as to how you were going to handle that,

inadequate as it might have been. Something is sometimes better than nothing.

DR. RIDEOUT: I think, in retrospect, we could

easily have sent out a form to principals and said: Please tell us what your

canteen sales were. We could have reflected that in the statement in a very

inadequate fashion, just as the canteen sales were reported previously. It may

have been that would have been a good idea, if we had thought of it at the time.

MR. MERCER: In your initial response you indicated

there were many other funds held by the schools; there were the picture funds,

the textbook funds, and there was obviously a scholarship fund. Were there any

other major blocks of money that you might have been aware of in your former

life in working with the other boards that may not have been reported to the new

board? Because I am assuming that pretty well everyone who now works with the

board at some point in their lives worked with the former boards.

DR. RIDEOUT: The comment on the ancillary funding

is not new to 1996-1997. That has been a concern amongst boards for as long as I

have been around, which is about eighteen or nineteen years, that there is a lot

of money changing hands in schools for which really there is no proper mechanism

for accounting in the fashion that an auditor or an accountant might expect to

see. I guess all that I could say is that it is almost endless, the number of

funds that you can... In fact, the system that we have set up now has how many

accounts to charge off those funds to? Roughly fifty or sixty activities for

incoming funds where they can be recorded in different categories, and they

would range anywhere from a basketball team trying to buy uniforms, to the prom.

It is almost endless the kinds of things that schools are trying to raise money

for to support their programs, generally extracurricular programs.

MR. MERCER: I guess the thrust of my question

comes from the statement you just made, that there is a lot of money changing

hands. When there is a lot of money changing hands, one would assume or one

would think that there are some kind of internal record-keeping systems, whether

they be formal, informal, auditable or not auditable.

What was the situation prior to the new board coming

into place, and prior to your new policies which are now in there? All of these

monies that were changing hands, how were they accounted for and so forth?

DR. RIDEOUT: Those policies would have varied from

school to school, and the practices would have varied as well. I guess that is

part of the difficulty that was identified in that there really was no

consistent treatment even within the boards that we are talking about. That is

why the policy that we have referenced here addresses that. I wish we had that

policy when the Auditor General visited in 1997. I think it would have been in

the public interest for us to have had it. Unfortunately, we did not then.

MR. MERCER: Just to move on a little bit further.

Were there any funds within the District #9 and the two successor boards,

predecessor boards, that were of a bequest nature, monies that were given to the

boards, for argument's sake, for general educational purposes?

DR. RIDEOUT: That is the $81,262 that is

referenced there. Those are scholarship funds given in trust for specific

purposes, and the donor is very specific in saying this money is used for a

scholarship for this purpose at that school.

MR. MERCER: Okay, that is the scholarship fund,

but I am referring to the funds that may have been bequeathed to the school for

a general educational purpose. Were there any funds like that? How would former

boards and the present board have handled those kinds of funds?

DR. RIDEOUT: I wish there had been but there was

not.

MR. SNOW: This is just to clarify a point, I

suppose. The so-called canteen funds of $256,855 that was reported by the

Auditor General and the $81,262 are two distinctly different types of funds.

Obviously, the scholarship funds were bequests from former patrons of various

schools et cetera who wanted to leave a perpetual memorial fund to provide

scholarships for certain of their interests. The $81,262, those balances are

easy to test by any auditor. It is a very simple procedure.

Not so with the canteen funds. The canteen funds of

$256,855 represent a myriad, as Dr. Rideout as said, of different sources of

revenue generated by schools from fund raising to pictures to textbooks to sales

from the canteen et cetera.

I think this is the underlying question we are all

trying to get at here: why were they dropped from the first set of financial

statements of Avalon West when they appeared in a former board's statements?

When we looked at it, and we looked at the discrepancies, and the fact that the

other three boards - parts of them came together at least into Avalon West -

were not reporting it, we really started to assess the meaning of reporting

$250,000, probably even $500,000 if we had gone out, in the financial statements

and what those figures represented to the readers of those statements.

When we looked at the audit procedures that would be

necessary in sixty schools to verify where those amounts came from, how we

arrived at $256,000 or $556,000, or whatever the case might be, we said: We just

cannot afford to get into those kinds of costs right now in terms of paying an

auditor to verify those underlying amounts. As a result we said we need some

procedures that an auditor can rely on to reduce the costs of verifying these

material amounts in a set of financial statements, and we decided that we cannot

report this. It is a figure that is going to cost us a bundle of money to be

able to verify if an auditor says: Look, you want an unqualified opinion in your

statements, this is what I have to do. Quite simply, that is why it got dropped

from the statements.

Our procedures right now, our fiscal policies that we

have just implemented in the past school year, together with the in-service and

the proposed monitoring that the board has approved - which also provides, I

might add, for an internal audit function whether we engage external auditors to

do that or whether we try to do it from in-house staff - I believe will go a

long way to addressing the concerns raised by the Auditor General in her report.

CHAIR: I would like the Auditor General to

comment. Do you think the policies and procedures put in place will go a long

way to address your concerns?

MS MARSHALL: I have not looked at those policies

and procedures in detail so I would not be able to express an opinion. The only

thing I was curious about when I read it was: Will those funds now show up on

the audited financial statements of the school board, or will they not? I think

that goes back to a comment you just made, which has made me curious. I was

assuming that they would all show up on the balance sheet but - is that so?

MR. SNOW: They will. We are not sure exactly how

an external auditor will view those funds on the balance sheet, obviously; but

yes, the intent is that we will be reporting those funds in our balance sheet.

CHAIR: Bob.

MR. MERCER: Yes, just to finish off on the issue

of the scholarships versus bequests that would be for general educational

purposes.

Has the board given any consideration as to how it

would handle that? How would it handle that in its audited statement? Would it

handle it on its own financial statement? Would it set up a separate group to

handle it? How would you do that? Even though you have no money at the moment,

you say you live in hopes and die in despair. How would you handle that were it

to come your way? How would the board deal with that?

DR. RIDEOUT: Actually, I may have misled you

slightly. We do have a little bit of money through an education foundation that

we established about a year-and-a-half ago. We have been endeavoring to raise

funds to support student scholarships and we probably have around $20,000 or so

collected in that fund right now. That is a charitable organization, registered

with Revenue Canada, where we keep the books for that purpose. If we were to

have a major donor come forward and want to contribute funds for the kinds of

things that you have referenced, I would expect that the education foundation is

where we would find the place to park it.

MR. MERCER: How would that show up in your

financial statements?

DR. RIDEOUT: I will defer to my financial people

to respond to that.

MR. SNOW: Mr. Chairman, we have consistently

reported the $81,262 as trust funds and appropriated funds in our financial

statements right in the balance sheet. Additional funds raised for that matter

that are held in trust would be recorded and reported in the same manner.

MR. MERCER: So, it would be on the balance sheet

and financial statements of School District # 9?

DR. RIDEOUT: And we are actively looking for

donors.

WITNESS: Looking in the wrong direction.

CHAIR: I think, before we go to next person to ask

questions, we will have a ten-minute break for a cup of coffee.

Recess

CHAIR: Order, please!

We reconvene the hearing and we will get right into

more questions. I think Mr. Andersen, to my left, is anxious to ask a few

questions.

MR. ANDERSEN: Mr. Chairman, I do believe

(inaudible) more patient.

CHAIR: Bob will pass for now and let you go.

WITNESS: (Inaudible).

CHAIR: Maybe it is up to me.

MR. MERCER: Go ahead, Wally.

MR. ANDERSEN: I won't hog, like the Member for

Humber East.

It was noted that personal expenditures in the amount

of over $1,000 - $1,367 to be exact - was charged to the corporate credit card.

What has the board done to cut down on corporate credit cards being used for

personal use?

WITNESS: What page, Wally?

MR. ANDERSEN: Page 8.

CHAIR: Page 8 and page 20,

section 15.

DR. RIDEOUT: The $1,367 referred to - from time to

time we would generally have trustees who would attend meetings of the Canadian

School Boards Association or the Atlantic School Boards Association, their

annual conference. Occasionally, the trustee - or if it were an employee - may

have a spouse going with them and at the time the travel arrangements are made

it is common for my executive assistant to make bookings for the trustee and

spouse, or employee and spouse if they would be attending, and then that money

has to be paid by the trustee or employee for their spouse to attend. My

executive assistant just does the booking and leg work for the individuals

concerned; then that is charged to the individual trustee or employee and they

have to pay that amount to the school board. This is, I guess, a long-standing

practice by the boards, and my understanding is that the $274 that is referenced

there was repaid. It had not been repaid at the time of the visit.

The trustee or employee attending a conference,

obviously their travel costs would be paid by the board. It would just be that I

guess the executive assistant, my executive assistant, as a courtesy to the

trustee at the time they are making the reservation for the trustee, would make

one for they spouse so they could travel together - same seat, same airline,

that kind of a thing - and there has never been any problem with collecting

payment of that type.

MR. ANDERSEN: Thank you.

The Auditor General noted that the current board paid

a car allowance to one of the board's executive staff at the rate of $450 per

month. Is that to believe that the board is now complying with the government

policy? Has there been anything recovered on these amounts that have been paid

out?

DR. RIDEOUT: The background to that, I guess, when

the employee referenced was hired by the Avalon West School Board, the chair

indicated that there would be a car allowance provided as part of the

compensation package, and that comment was based on the fact that the previous

superintendents of the two main boards that had consolidated had been provided

with such car allowances. One, I believe, was reported by the Auditor General as

$400 a month; the other was about $300 a month, if I recall.

The executive of Avalon West School Board agreed that

they would provide a car allowance of $450 as part of a compensation package,

feeling that it was the practice of the previous boards, and the amount being

slightly higher than $400 reflected the larger size of the district.

Subsequently, that was communicated to the Minister of

Education somewhere around late December or early January and the minister

responded that that would not be permitted under the new guidelines of the

Department of Education. Upon that directive from the minister, the car

allowance was stopped; it was not continued. However, the position that was

adopted was that this was a commitment that was made and it was honored for that

two month period until the minister's directive overruled. The short answer is,

no, it was not recovered.

MR. ANDERSEN: Thank you, Mr. Chairman. I will pass

for now.

CHAIR: Thank you.

With respect to that $400 for the car allowance, that

was outside the guidelines and regulations at the time for the board, and it was

only afterwards when the minister was involved that it was corrected?

DR. RIDEOUT: The problem we had during that period

of time was that the board was not aware of exactly what was contained in the

compensation package, and this was a matter for all boards in the Province. It

was being addressed through the Newfoundland and Labrador School Boards

Association and I guess it went on for a period of in excess of a year or so

where there was ambiguity as to exactly what was in this executive compensation

package that everyone was alluding to.

At the time that that decision was made by Avalon West

School Board there was nothing, to their knowledge, that would preclude them, as

an autonomous board, having the authority to make such a decision as part of the

compensation package, especially in light of the fact that the verbal commitment

had been given by the chair that such a benefit would be part of the

compensation.

CHAIR: Would the Auditor General like to comment

on that?

MS MARSHALL: Yes, I can make a comment on that.

There was a conscious decision made by government, I believe it was in 1994,

that indicated that all public sector boards and departments had to comply with

standard rates for compensation within government.

CHAIR: Which were?

MS MARSHALL: Pardon?

CHAIR: Do you know what they were, the standard

rates?

MS MARSHALL: I think it was $85 a month for a car.

I think that is what it was, yes.

CHAIR: I thought that. I saw that, yes.

Eighty-five dollars?

MS MARSHALL: Yes, $85 a month is the rate, I

think, per month.

CHAIR: Per month?

MS MARSHALL: Yes.

CHAIR: Not very much.

DR. RIDEOUT: The thing I would remind the members

of the Committee of, of course, is that this was an appointed interim board that

took office in August 1996. They would not have been familiar with any of those

details that transpired prior to August 1996. In the absence of such a

comprehensive compensation package being made known to them - in fact, I know

amongst the directors of education who were hired it was a fairly significant

concern, because they were being offered contracts and they did not know what

the salary was going to be.

CHAIR: Thank you.

Mr. French.

MR. FRENCH: Thank you, Mr. Chairman.

I have some questions today which I would like to ask

the board and ,of course, they have all come out of the Auditor General's

report. On page 6, number 5, it says: "Executive Salaries Not in Accordance with

Cabinet Direction." It goes down through and says District #1, District #6,

District #9, and District #10 paid out $162,504 which were not in accordance

with government guidelines and which were not in accordance with Cabinet

guidelines.

I want to know what measures have been taken to

correct that. As I read it from the Kirby report, there are, I will call them,

four senior officers for the Avalon West School Board. I would also like to

know: Are these four officers now being paid over and above what the minister

stipulated in the guidelines that were sent out to all the boards? If so, why,

and is there documentation from the minister to give the school boards in this

Province - not only West - but every school board in the Province the right to

do this?

MR. WHITE: The question, as Dr. Rideout alluded

to, as to the appropriate salary scale for the senior staff was never clearly

settled when the senior administrators were hired. The Department of Education's

position, and the former minister's position, was that the salaries could not be

above step 25. It was our feeling, and on the advice of legal counsel, that we

felt there was an order in council, 96-828, that would allow for salaries up to

step 33 to be paid.

In several discussions that I had with the former

minister, and on the advice of legal counsel, I requested that the former

minister refer the issue to an independent court for a ruling. Our senior staff

agreed to abide by the decision of the judge on that ruling. However, the

dispute or the difference of opinion as to whether or not the salary scales

could be kept was settled on February 19 of this year when the current Minister

of Education, Minister Foote, approved the salary placements at step

thirty-three of the approved salary scale. So -

MR. FRENCH: Could I just interrupt you here for a

minute? Because I know there are some people here from the department. I firmly

believe that the minister - entirely on their own, either he or she - does not

have the authority to write such a letter. I don't think there is any minister

of the Crown that, without Cabinet approval, has to write a letter saying that

it is okay for A,B or C to break the law. What I want to ask somebody from the

department is: Did the Minister of Education, at the time, have Cabinet

approval? Because I have also seen the letter. Did the Minister of Education at

the time have Cabinet approval to write such a letter? If so, could somebody

show me the documentation where this happened, where this information came from?

Because really and truly, as a member of the Public Accounts Committee and as a

citizen of this Province, I want to see it. I'm not going to be pussy-footed

around anymore where somebody says: I will get you the information. I want to

see that particular piece of information, Mr. Chairman.

CHAIR: Thank you.

MR. FRENCH: I am not finished with my questions

yet (inaudible).

CHAIR: I don't doubt it. Would Mr. Lewis want to

respond to that, or Mr. Thompson? He has already been sworn in.

MR. LEWIS: In terms of the minister's letter of

February 19, 1999, that letter predated my actual tenure with the department. I

came on at the end of April. My understanding is that the letter was drafted on

the basis of a legal review that was done by the Department of Justice on the

issue of the salaries that would be paid to directors and assistant directors in

school boards, and that the minister drafted a letter which recognized that the

contracts that boards had entered into had been entered into in good faith and

had agreed to stand by those contracts, on the understanding that all future

contracts would be under the department's original

interpretation of the OC and

the legislation.

MR. FRENCH: Mr. Chairman, I may need some guidance

here. Because it is my understanding that there is no department or lawyer that

can give the minister this approval. My understanding of the law is that the

approval for a minister to do that must be from Cabinet. So the question I'm

asking is: Did the minister write the letter with the approval of Cabinet?

MR. LEWIS: To my knowledge there was not a Cabinet

decision to draft the letter. I could stand to be corrected, but it is my

understanding that there was not. The legal advice from the Department of

Justice indicated that in fact the department was not out any money, that the

board had been providing the difference between the department's original

interpretation of the OC and the legislation, and that it would be the board

which would have to take recourse against the staff if there was any action to

be taken.

MR. FRENCH: I've seen the correspondence from the

minister, and the minister grants the approval for the board to do this. I stand

to be corrected by the Chair or by anybody else in this room, but again, my

understanding is that it must be a Cabinet decision, and regardless of what the

Department of Justice says it still must me a Cabinet decision. If it is a

Cabinet decision, then I want to know why it didn't go to Cabinet? Why didn't

the Minister of Works, Services and Transportation or the Minister of Municipal

and Provincial Affairs, or whatever, have the right to have input into this?

Because maybe some of them would not agree with it.

CHAIR: Bob, just to interrupt you. I don't think

this man can answer the question why it didn't go to Cabinet. That would have to

be from the ministers, I think.

MR. FRENCH: Well then, can I ask you, as a senior

official of the department, to go back and put that question to the minister for

me? I would certainly appreciate getting an answer.

CHAIR: I think if you want to ask that, ask it in

the House yourself. That is what my approach would be on that (inaudible).

MR. FRENCH: I am asking it here because I've sat

here over the last couple of years and I've asked questions, and I have received

information in writing from various deputy ministers and assistant deputy

ministers on particular points that I have raised. Some of them have been kind

enough to write me back and not only supply me, but other members in the room,

the information. So if I might, sir, I would like to ask you if you would go and

see if you could prepare - and even if you can't, I would like a letter just

saying that the answer is not available.

CHAIR: I think that really is a question for one

of the ministers, from yourself directly. I mean, a letter to the minister.

MR. FRENCH: Unfortunately, the minister is not

here, Mr. Chairman.

CHAIR: No, but I mean you could write a letter.

That can be brought up at other times, I think. I do not think it is not fair to

ask-

MR. FRENCH: I know where the letters go.

CHAIR: I don't really think it is fair to ask this

man that question, why it didn't go to Cabinet. He is not in the position to

answer that.

MR. FRENCH: To go back to the school board then,

you people are relying on an answer that was given you, in this case, by

Minister Foote?

CHAIR: Yes.

MR. WHITE: Not really. We were always of the

opinion, and supported by our advice from legal counsel, that by giving them

step 33 we were in compliance with the Order in Council you are referring to

anyway. The minister's letter of February 19 merely approved what we were doing,

what even the interim board had been doing. When we came on as an elected board,

I was the first chair of the elected board, and at that time, the contracts had

been entered into. As Mr. Lewis said, the contracts were negotiated and entered

into in good faith during the tenure of the interim board. When the elected

board came in to tamper with or to change the terms of the contracts in any way,

we were advised again by legal counsel that this could be interpreted as a

violation of the agreement and would be grounds for possible successful legal

action against the board if we did that. I didn't feel, nor did the elected

board feel, that we had any right to go back and tamper.

CHAIR: I have just a point of clarification for

understanding on my part, just before I get into that, and this may help you.

With respect to the pay scales when these individuals were being hired, it is my

understanding that the directive from the former minister, which would have been

Roger Grimes, was that a person could be hired on, on his pay scale up to step

25. If an individual was at a pay scale which was higher than step 25, which was

step 33 we are talking about - I think some boards may have gone over that step

33 - then they could be possibly hired on at that level. However, they could not

go beyond step 25 if they were hired below step 25. Some of the boards did hire

people on at the step 25 and then bumped them up to step 33.

In my estimation, if you look at other boards, we have

a couple of boards getting paid at step 33, some of the different positions, and

we have other boards at step 25 and below. My question is: How fair is that to

the other boards?

MR. FRENCH: Mr. Chairman, in the information that

I have which came from the Auditor General's office, and I say to the Chairman

of the Board, it says under 5:

"However, in a letter dated 15 November 1996 to the

executive director of the Newfoundland and Labrador School Boards' Association,

the Minister provided flexibility to the boards in placing executive staff at a

step on the approved scale not in excess of step 25..."

So it does not matter what the board thinks or what

Bob French thinks. The minister is saying to every board in this Province that

we can pay a salary up to a step 25 and not beyond. Then my understanding for

anything over and above that is it would require a Cabinet decision because it

is clearly outlined by the Auditor General here.

The other question I have is this. Your four senior

officers, are they now paid according to scale, or have there been separate

negotiations outside of step 25? Are your four senior officers all paid over and

above step 25?

MR. WHITE: All our senior staff are paid at step

MR. FRENCH: They are all paid at 33.

MR. WHITE: As approved by the minister.

CHAIR: Again, what I have a difficulty with, with

respect to this, is the previous minister was so vocal on this in the House of

Assembly and in the media with respect to what he felt was the correct

procedures not being followed with respect to directors and senior staff being

paid at that scale. Then we have a new minister appointed and within a very

short period of time it is okay. I think that is the point you are making.

MR. FRENCH: Again, I say to the ADM that I really

would like an answer in writing to my question. Did it ever go to Cabinet or did

it not?

CHAIR: Bob, with respect to that again, maybe in

our discussions afterwards when we are discussing the recommendations of the

report we can either make a recommendation and/or write the minister and ask

directly.

The Auditor General would like to comment.

MS MARSHALL: Yes. I'm speaking now from my 1997

report because that is when I initially looked at the salaries. Back in 1996 how

they established the initial salaries was Cabinet said that people were to be

put on that scale at the amount that was closest to their current salary,

wherever they fell. It was after that point in time I think the minister said

you could have some flexibility to move up to step twenty-five, but those funds

could not come from your grant funding, they had to come from other sources of

funds. I do not recall any direction that gave you flexibility to go to step 33

unless you were already there when you started out in 1996.

CHAIR: Any comment from the board?

WITNESS: Do you want to comment on that?

DR. RIDEOUT: Just to say for the record that from

our perspective we have been left in a very awkward and embarrassing situation

whereby for two-and-a half years our compensation package and salary has been

under dispute, through no fault of ours.

MR. FRENCH: I agree.

DR. RIDEOUT: We were hired under certain terms and

people sold houses and relocated and all those kinds of things with certain

understandings. We have never tried to be difficult on the matter. That is why

when the chair of the board made the suggestion to the minister that we refer it

to the court for a friendly judgment, we felt we would abide by, regardless of

what had been signed in a contract, whatever the judge said was the correct

interpretation. We would voluntarily abide by it because we felt what the board

had done was consistent with the Order in Council of up to step 33. At no time

did we even ask to go beyond step 33 because we felt that was not consistent

with the Order in Council. I guess this is just to say that it has been awkward

for us as senior staff to have our salary disputed for two-and-a half years.

(Inaudible).

CHAIR: Yes, I can understand the embarrassment of

being in the media so much.

A question I have to ask, and it just popped in my

mind when you were speaking, was this. The salaries that are being paid to the

senior staff, who makes the decision of the salary itself? Is it the board? If

there were decisions made that the senior staff would get paid at step 33, are

there any minutes of a board meeting of that nature where this was approved?

DR. RIDEOUT: My understanding is that the scale

itself is created by the Department of Education and approved by Treasury Board,

the original scale, and that varies from board to board depending on the size of

the district.

Our points are based on various factors such as

student enrolment and all of that. So the basic scale with 1 to 33 is provided

to the board by the Department of Education. In terms of the decision on the

placement, that was done by motion of the board.

CHAIR: It was done by a motion of the board. Would

that be available to us? I think when I was going through some of my material

that was there somewhere and I think it was mentioned. Now maybe it was not a

motion of the board to pay these salary scales.

MS MARSHALL: I think that might have been in the

Kirby report.

CHAIR: Okay. That may be in the Kirby report, that

there was not-

DR. RIDEOUT: Mr. Chairman, I should say it was a

decision of the board. Whether it was a motion or not, I would have to refer to

the minutes to know for sure.

CHAIR: Or the minutes or a motion of where that

was discussed and approved. I don't think that the people who were certainly

looking at the time came up with it, but in the meantime that is something that

we are going to have to get into at a later date I believe when we reconvene.

DR. RIDEOUT: I would add that at the time when the

board reviewed its decision it actually had legal counsel to come out and meet

with the full board and go through the details. There was a decision made then

by the board - and I would assume it was by motion - that was unanimously

supported to maintain the step 33 placement based on legal advice.

CHAIR: It is too bad that it has been in the media

and that the people themselves will have to be defending this when it is really

something for the board, or the board itself I would imagine.

Mr. French.

MR. FRENCH: As well, Mr. Chairman, as I come on

down through 5 I say to the Chairman of the Board that it goes on to say:

"District #1 and District #10 provided salaries to their executives above step

33. Effectively the salaries of these executives are off the salary scale. In

District #10, the top-ups provided to executive staff were a combination of

several compensation items as follows..." It goes on to list them.

What it says to me, whether rightly or wrongly, is

that we probably paid $52,822 in salaries to somebody that we probably did not

have the right to pay. Am I correct in assuming that or am I not?

WITNESS: Since we are District #9 I wouldn't

comment on District #1 or District #10. I would hope that -

MR. FRENCH: Let's not split hairs here. Were they

not all rolled into one?

WITNESS: No.

MR. FRENCH: No. Maybe they should have been.

WITNESS: District #10 is Avalon East.

CHAIR: That is right.

MR. FRENCH: Okay, well I will save that one for

tomorrow because I do not intend to give up on this. I want an answer. I will

say this quite honestly, because I won't talk behind anybody's back, I'm not

happy. I'm not happy that a minister writes a letter. I don't know if there is

Cabinet approval or if there is not. One minister says one thing and another

minister says something else, and that does not sit well with this particular

member. I want the questions answered. I have heard stories this morning of step

33. I heard that there are people probably in excess of $30,000 over and above

where they should be.

WITNESS: Not Avalon West-

MR. FRENCH: No, no, but there are boards that are

paying in excess and to me that is wrong.

Anyway, I will go on. I will go down to 7. It says

"Compensation to Boards Not in" - and you can tell me if this covers you people

or not.

WITNESS: No, we are District #9. It is District

#1.

MR. FRENCH: All right, I will leave that one.

In District #9 there was redundancy pay that again was

not paid within government policy. I think there was some $12,000 in District #9

that was paid in redundancy. Again, according to the Auditor General, these

expenditures exceed termination benefits and contracts. I just wonder if that

money is recoverable, and if it is recoverable, has there been any steps taken

to recover it?

CHAIR: I think that has been addressed, has it

not? Earlier?

MR. FRENCH: Not to me. I have not heard of it.

CHAIR: That $19,000 -

MS MARSHALL: That is the $12,000. It was a payment

of $10,000 and $2,000 and I believe it was by a former board. Based on the

information we have, no, it has not been recovered, and at the time of the audit

it had not been included in the people's T4s either. It seemed to be just a

retirement benefit.

MR. FRENCH: Should that not have been T4ed to the

employee?

MS MARSHALL: It shouldn't have been paid actually

but it was and then it should have been T4ed but it was not.

CHAIR: Would the board like to comment on that?

MR. WHITE: Mr. Chairman, the money was not paid by

Avalon West. We are talking about transactions that took place under the

predecessor board.

CHAIR: I think, basically, Bob -

MR. WHITE: We have no control, no authorization,

or at least I do not believe we have, to go back and (inaudible).

CHAIR: The point that could be made here, I think,

is that there would be policies and procedures put in place so that this will

not happen with the present board. I think that is what -

WITNESS: It is the Avalon board.

CHAIR: Can I clarify something on that? Because on

page 20, and in your response, from Dr. Rideout to Mark Noseworthy,

section (

c) says:

"The remaining balance for severance repayment is

still a matter of dispute since the employee claims that the severance pay was

an earned benefit to which he was entitled once his former employment was

`severed.' It is his position that precedent was already established when

several other individuals were provided this arrangement in the past. If the

employee's position is accepted, then that amount would simply be deducted from

the normal severance..."

The question I have to you now is: What about sick

leave and seniority? If an individual was with the previous board, is hired on

with the current board, and he or she received severance pay - of course to me,

if you receive severance pay you are basically cutting your ties and you are

starting out anew - would this individual be hired on with his seniority, sick

leave built up, and the like? Can anybody address that? They have this at a few

boards. We have this situation at a few boards.

DR. RIDEOUT: Yes. My understanding in that

instance is simply as part of the teacher compensation package when you retire

you are eligible for a severance payout that is, I guess, part of the

compensation for all teachers in the Province, and senior administration of the

districts - except for the AD of Finance - are governed by that particular

package. If that, for example, were to amount to $25,000, just to use a figure,

and if in a previous payout you were paid $10,000, then when you finally retire

you are eligible for $25,000 minus the previous $10,000 which is $15,000. That

is what I understand to be the position referenced there, that the severance was

a right that was earned once the severance occurred and then that is deducted

from any future rights under the severance once you are rehired. Am I clear?

MR. FRENCH: If I came from one school board, say,

into the Avalon West School Board, and I had worked for ten years with a

previous board, do I have the right to carry my benefits from one board to the

other?

WITNESS: (Inaudible) similar to that one.

MR. WHITE: That is if you were transferring. In

the case of this employee, this employee was severed; he had received his

severance, and at a later date was hired by Avalon West, because Avalon West was

an entirely new entity.

MR. FRENCH: So he or she would have no benefits to

carry forward.

DR. RIDEOUT: Exactly.

CHAIR: That is the question I asked.

MR. WHITE: That is -

DR. RIDEOUT: Not in terms of the severance.

CHAIR: Oh. The Auditor General brought this up in

a report. Would you like to comment on that to get this straightened out?

MS MARSHALL: Sure. Are we talking about the

severance pay that is owed?

CHAIR: Yes.

MS MARSHALL: That is what it seems (inaudible).

In government, when you are severed or your employment

terminates with a public sector organization you are given severance pay and you

usually go on. If you are rehired within a certain period of time then you have

to repay a certain portion of that severance pay when you come back on. In this

case, when that employee came back on they had to repay a certain portion of

their severance pay in accordance with some kind of defined formula or

calculation or whatever. That is a standard government policy.

CHAIR: That was done, it was repaid?

MS MARSHALL: It was supposed to be repaid. At the

time we did our audit it had not all been repaid, and I understand there was

some sort of dispute with the Department of Education or with the school board

as to whether that person was going to repay that severance pay.

In accordance with normal government policy,

everywhere else in government when people come back and get a new job after

receiving severance pay they do pay back a certain portion of the severance pay

because they come back on.

CHAIR: Could you comment on that?

DR. RIDEOUT: I guess what is clouding it a little

bit is the overlap of redundancy versus severance as two different issues. My

understanding is that the redundancy is indeed an amount to be repaid. Severance

is viewed as a different matter. While it may become a practice for it to be

returned, it is my understanding that there have been previous instances where

the severance was simply taken off the total sum owed at the end of one's

employment. So, that if you had $25,000 owed you and $10,000 had been provided

through another severance, then you only get $15,000 at the end of that period.

CHAIR: So if that individual was hired by the

board, had his or her severance, was hired back in by the board, their sick

leave and seniority and whatever else goes with it, would that still apply or

are they starting out anew with the board?

DR. RIDEOUT: My understanding is that the

seniority does not really apply. It is senior administration. Because it not

like a collective agreement where you are governed by seniority in any sense.

You are at the pleasure of the board. Seniority carries very little tangible

benefit to you. The sick leave entitlement would have transferred.

CHAIR: It would have transferred.

DR. RIDEOUT: Yes.

CHAIR: I am still not clear if it was paid back or

not, if the proportion -

MS MARSHALL: I understood from the Department of

Education that at the time we did our audit it had not all been repaid, and part

of the reason was that there was a certain amount in dispute. Some of it was

being repaid but some of it was in dispute.

Whether it has all been repaid or not, I do not know.

The Department of Education were keeping a tally on what was being repaid so

they might be able to give some insight into whether it was all repaid or

whether the amount in dispute was resolved or whatever. At the time of our audit

there was an amount outstanding and I know some of it was in dispute, but I

considered it to be a bona fide receivable of the government, it was split

between the school board and the Department of Education and that the amount

should have been collected.

CHAIR: Who is best equipped to answer that

question? Someone from the department?

MS MARSHALL: The Department of Education should be

able to tell you if the department collected their portion and the school board,

the finance person, should be able to tell you if the school board collected

their portion.

CHAIR: Okay.

DR. RIDEOUT: Mr. Chairman, in recognizing Mr.

Lewis as being new to the position, I can answer it. There is about $14,000, I'm

told, that is still in dispute as part of that severance package.

CHAIR: How much?

DR. RIDEOUT: About $14,000.

CHAIR: Still in dispute. How long a time frame are

we talking here now?

DR. RIDEOUT: Since 1997, 1996.

CHAIR: Two years.

DR. RIDEOUT: The dispute is simply that the

$14,000 would come from the person's entitlement at the end of their employment

when whatever they should get in severance would be reduced by that $14,000.

CHAIR: I understand.

I think Mr. Lush had some questions.

MR. FRENCH: I am not finished yet, Mr. Chairman.

CHAIR: I'm sorry.

MR. LEWIS: Mr. Chairman.

CHAIR: I thought he was going to answer. Okay.

Mr. Lewis.

MR. LEWIS: I can just clarify that. From the

department's perspective, this receivable has been addressed in that funds that

were payable to the board on behalf of the individual were intercepted to cover

the receivable. So from our perspective it is an issue now between the board and

the employee.

CHAIR: Thank you.

Bob.

MR. FRENCH: It says on page 7 - and on page 18,

page 19 and page 89 - that the Auditor General indicated that the former

"District #9 boards made payments totaling $62,711" to employees for unused

vacation time who were not declared redundant and who still worked with the

board. Can the board respond to this?

MR. WHITE: Again, this is a former board, not

Avalon West.

MR. FRENCH: You told me earlier that board number

nine was rolled over into Avalon West. Do I understand you correctly?

MR. WHITE: No, board number nine is Avalon West.

CHAIR: It is Avalon West.

MR. FRENCH: Okay. Then would the former board not

know what transpired with the other one?

MR. WHITE: The former boards, Avalon -

MR. FRENCH: Would your board not know what

transpired with a former board? Would there not have been any correspondence

between the board that you took over and your board?

MR. WHITE: No, because it no longer existed.

MR. FRENCH: So, we just take $62,711 and we say:

That is gone and nobody is left responsible. Do I understand you correctly?

CHAIR: Just to interject here, the boards in the

District #9 area did make the $62,711 before this board was incorporated, type

of thing.

MR. FRENCH: Yes, I have no problem with that. Who

is responsible now? Nobody.

MR. LUSH: It is one of the things we alluded to

earlier, Mr. French.

MR. FRENCH: Yes, but I am not happy with that, Mr.

Lush. There is $62,711 of our money gone somewhere and I would like to get to

the bottom of it. I am not putting blame on anybody here, but I would like to

know for my own piece of mind where it went, and it does not seem like anybody

can give me an answer.

MR. WHITE: Mr. Chair, I can give you an answer.

CHAIR: Yes, it is Mr. (inaudible).

MR. WHITE: Those amounts are the annual leave

payouts that were in accordance with the existing NAPE collective agreements and

the approved benefits package for non-bargaining unit employees that existed

with those two boards at the time that the payouts were made. It is as simple as

that.

MR. FRENCH: So, these people's benefits - if I

understand you correctly - when they went - because it says here: To employees

for unused vacation time who were not declared redundant. So these people were

not declared redundant; they were hired by Avalon West board. Am I correct?

MR. WHITE: At a later date

MR. FRENCH: Okay, so they would have been paid

then?

MR. WHITE: Yes. It was paid out by the former

boards. We had no control over what former boards did. I hadn't even been

involved in trusteeship until the interim board came in and the former boards

were long gone.

CHAIR: The Auditor General.

MS MARSHALL: Most of those employees went over

with the new school board. In my opinion, their benefits, like their sick leave,

went over with them. Their vacation time should have also gone over with them.

There should not have been payouts except for payouts that were expressly

provided for by the Department of Education, and for most of those there was no

express authority from the department for it.

CHAIR: Yes, but the situation now that we find

ourselves in, from my understanding, is that the present board took over from

the group or the numbers of the boards that did this. With their vacation pay

being paid to them, these people were hired on with the new board rolled over

into it. Your problem was that the vacation pay should not really have been

paid. It was up to fifty days, wasn't it? Is that this issue?

MS MARSHALL: The superintendents and assistant

superintendents - that is at the senior level -

CHAIR: Yes.

MS MARSHALL: - they were entitled to be paid for

up to fifty days. Anything in excess of fifty days was supposed to lapse and be

lost to them. What we found was that in some cases people got paid for more than

fifty days. I don't know if we gave the detail but you can see in the details,

some got in excess of fifty days. Some people got paid for their fifty days -

CHAIR: Plus thirty-three -

MS MARSHALL: - then they took the leftover days

with them and started to use those days. Those days should have been lost. They

should not have been able to use them. So there were benefits paid out that

should not have been paid, but almost all of those people went over to the new

board.

CHAIR: The point I am trying to get at here now

with respect to the executive, with the fifty days plus, this board will have to

really account for that I suppose.

MS MARSHALL: No, it would depend upon which board

made the payment.

CHAIR: Okay, so the only thing we can do now is to

ask this board questions that apply to them.

MS MARSHALL: That's right.

CHAIR: The previous boards that were there - we

cannot, as a Public Accounts Committee, call hearings on the previous boards

now. I can understand Bob's dilemma here because he is saying some people out

there now are not being accountable and cannot be accountable because of the

system.

MR. FRENCH: Because they are still working for the

new board, just rolled over.

MS MARSHALL: That's right.

CHAIR: Bob Mercer wants to make a point.

MR. MERCER: I am getting a little bit confused. It

seems that no one has responsibility for anything. We have schools; we went

through reform; we went through the former boards to an interim board, to the

present board. Was there not and is there not something in legislation that

provides for continuity and responsibilities? Can someone explain that to me,

either you or somebody in the department?

CHAIR: Auditor General.

MS MARSHALL: You are talking about the new boards

being accountable for the actions of the old boards. There is nothing that I am

aware of whereby the new boards would be accountable for the actions -

MR. MERCER: So are we saying then that the former

boards, the two in the Conception Bay area or Avalon West in the RC School

Boards, whatever they did is done and we cannot hold them accountable? There was

an interim board in place and whatever they have done, they cannot be

accountable; the only board we can deal with is the board which is now in place?

MS MARSHALL: That is a legal issue that I would

not be able to answer.

MR. MERCER: Can we get an answer on that, Mr.

Chairman?

CHAIR: That is a question that we would have to

put to the Department of Justice, I would imagine.

MR. MERCER: Because it seems to me that there is a

continuity but it is not with the boards. There is a continuity obviously with

the staff. There has to be some continuity in the whole process.

CHAIR: You would think so.

MR. MERCER: If it not with the boards it has to be

with the staff.

MR. FRENCH: Mr. Chairman, on a point of order.

I don't know if we should really go any further until

we do have, as Bob has said, some kind of a legal opinion of exactly who is

responsible here. It is a waste of my time and everybody's time; it is a waste

of the board's time. If I am going to propose questions to this board and they

are not responsible, or they should not be responding, then why I am wasting the

board's time and my own in asking the questions? If they do not have to answer

me, then why ask the questions?

CHAIR: I suppose Bob, they have to answer if they

can answer.

Fabian.

MR. MANNING: Just to follow up on Bob's point of

order, the present board that is in place now, if I understand it properly,

cannot be responsible for what some other board did in the past. So all we can

deal with here are the actions, the finances, of this present board. To be

asking questions here of what a previous RC board did. or what Avalon North

Integrated did, is really spinning wheels; because these people are not at

liberty, really, in my estimation, to answer those questions. Until we get a

clear and concise ruling from somebody as to who we can ask the questions to,

again I go along with Mr. French; we are spinning our wheels.

CHAIR: Okay, I want to make a comment on this. I

think, because of the makeup of the previous boards, the present board and the

whole educational reform, and the combining of the schools, there has to be some

overlap here, and we are seeing that here now in the questions. The previous

boards did do things that appear to be outside their mandate with respect to

certain issues here. I think that we, as a Public Accounts Committee, can be

asking questions to this board to make sure that these types of situations are

not happening today with the present board and they have policies and procedures

put in place so that it won't happen.

I think we are going to reconvene anyway at a later

date, especially when you read the Kirby Report, I say to the members of the

Committee here. You are going to want to come back and ask questions, and Bob,

you will be probably a little bit more upset when you read that.

I think we can still go on with questioning here with

respect to what is in the Auditor General's report which applies to the Avalon

West School Board.

Tom wanted to make a comment.

MR. LUSH: Yes. I think it is a matter of trying to

understand what has gone on here. I am not sure that everybody here doesn't

understand, I am not making that accusation, but it is difficult. For example,

in the question that Mr. French frames here under 5. What we are looking at here

in the bold print is: Executive Salaries Not In Accordance With Cabinet

Direction. We look at the coming together here of ten boards and it makes it

complicated. The only questions this board can answer are those that are

directed to District #9.

CHAIR: Exactly.

MR. LUSH: Their total overpayment was $24,502.

That is all there was with them. We look at a total of $162,504, but that

involved boards one, six, nine and ten. I think the board obviously can shed

light on what happened. I do not think it is an exercise in futility. The

problem comes - and I do not understand this, and Committee members have an onus

and responsibility to try and understand it - that if, for example, there was a

severance package or a vacation pay entered into with a previous board, with a

board that integrated under this board, I can't see what responsibility this

board has in trying to recover that.

You know, you cannot do that. That goes on all the

time. The board is disintegrated. We have to understand that. Whose

responsibility is it? It becomes, obviously, the Department of Education's. It

is the Department of Education's responsibility to collect any overpayments, not

this board. This board would never get on with its work if it had to get on with

that kind of detail, going back and seeing what payments went to this teacher or

that person. That is not their responsibility. Their responsibility is to get on

with education in the most efficient and effective manner they can. So I think

we have to understand here what we can question them about. You cannot get into

questioning them about severance packages that were done by other boards. They

came with them and their responsibility is to look into how it now applies to

them.

So the question, Mr. French, or others who have that

question, I think, as to are we collecting severance packages and whatever

overpayments there were, can be directed to the appropriate people in the House

or through whichever way you want to do it. I think we have to understand that

this board can only answer what they have to deal with now. As the Chair put it,

I think the lesson in this for everybody is to make sure we have the appropriate

mechanisms in place so that this does not happen in the future.

Obviously, we are not going to have an integration in

the future that is going to cause this kind of problem that we have had. We hope

not, but all of the other things, the fiscal matters, putting in place with

respect to fixed assets and various other items that we have talked about -

canteen funds, other raising of funds - that we can have procedures in place.

The ones on vacation pay and severance pay, these were quite unique under the

circumstances and, as I said, not something that this board can address in

totality.

CHAIR: Thank you.

MR. FRENCH: Mr. Chairman, on a point of order.

Again, I don't agree with Mr. Lush at all. If you do

not want me to ask questions on this stuff here, don't give it to me. Don't sent

a report up to my office, and then send this up to my office, have me sit down

and read it and go through it, only to have me come in here and tell me: No Bob,

you don't have the right to ask questions on that. Why did you give it to me in

the first place? This to me is very upsetting. I received this stuff in good

faith. I read it in good faith. I highlighted what I wanted to ask questions on,

what were concerns to me as a member of this Committee.

If I am not to ask questions on the information that

is here, then do not give me the information and, very simply, I will not ask

them.

CHAIR: Bob, with respect to that statement, I

think that you have to realize that when this information was being put together

the Auditor General had to look at -

MR. FRENCH: I have no problem with that, Jack.

CHAIR: Okay, let me finish.

MR. FRENCH: I have another report here now that

somebody else wants me to read. Tomorrow or the next day, Mr. Lush might say:

Well, you cannot ask any questions out of that because there is no one here

responsible for this. We have hundreds of thousands of dollars gone but nobody

is responsible. What a crock of garbage, to me.

CHAIR: Bob, as I was saying, the Auditor General

did a report and it was presented in the House of Assembly. For us to come in

here and ask questions, we needed to know the background of what happened with

respect to the twenty-seven boards that came down to ten. Most of the

information is here. It is our responsibility to read it and to know what is

going on within the report itself and then to ask the questions.

MR. FRENCH: (Inaudible).

CHAIR: I happen to agree with Mr. Lush on this

issue. The only thing I do say is that I think it should be going further with

respect to the board itself, with respect to rules and regulations and

legislation that is in place. The board should know that if there are hiring

practices within government, if there are people being hired and they have been

paid certain vacation pay, and they are closed off one day and hired the next

day, with respect to severance, redundancy, vacation pay, all of this should

apply. That is what should be applied here. What we are saying now, one of the

questions we have been asking: Is it being applied properly? I think all of that

is here within the Auditor General's Report.

With respect to this report, that was the one that was

done by the Department of Education that we did not receive until late yesterday

afternoon, I think, when you go through that, again, it is going to be similar

to this here. You are going to have to read it and basically assimilate in your

own mind what is applicable to the Avalon West board and ask the applicable

questions, and I think we are doing that.

DR. RIDEOUT: Mr. Chairman?

CHAIR: Yes.

DR. RIDEOUT: I think what the Committee is

struggling with is what we struggled with -

CHAIR: Exactly.

DR. RIDEOUT: - with the overlap that occurred.

Where the transition occurred January 1, in the middle of the school year, you

had certain responsibilities that overlapped.

If you refer to page 19 of the document Mr. Noseworthy

prepared for you, what you will see there is what I attempted to dig out of the

records as a courtesy to the Committee, from the previous boards, and cite for

you there what I understood to be the basis on which these boards made these

payouts, and whether it is a part of the NAPE collective agreement that was

referenced there, or the benefits package for non-bargaining unit employees.

This is what I am given to understand forms the basis of the decision of the

previous boards, so you may find that of relevance. We cannot speak to the whys

and wherefores of the decision and the action, but this is provided hopefully as

background that would at least assist you in understanding where those boards

were coming from, from the records that we could garner.

CHAIR: I understand that.

Mr. Mercer.

MR. MERCER: Thank you.

A question for the Auditor General, just to begin

with, and I ask this -

CHAIR: Before you get into that, with respect to

Bob's point of order -

MR. MERCER: Oh, I am sorry.

CHAIR: I don't think it is necessary - and the

Committee can vote on it if they want, and we will probably be adjourning

shortly anyway - I think we can continue on with the hearing this morning as we

had set out to do at the beginning when I made the statement with respect to the

extra report and reconvening at a later date. I think there are questions that

can be asked of this Committee, they are here and we should ask them. If anybody

has any objections to that, so be it.

MR. FRENCH: Mr. Chairman, I do and I will be

asking no more questions.

CHAIR: Okay, fine.

Mr. Mercer.

MR. MERCER: Yes, I think that is a question for

Mr. French to take up with the Speaker.

In my background as a public servant - I spent some

twenty-five or twenty-seven years there so I do know the rules of government

reasonably well, and I was always in a managerial position - there were rules:

Treasury Board regulations dealing with sick leave, annual leave, vehicle usage,

so on and so forth. Am I of the opinion that the school boards are governed by

those rules?

MS MARSHALL: Yes, that is correct. In 1994,

Cabinet issued a directive which required all public sector bodies to comply

with those types of rules. My recollection is that it was incorporated into the

new Schools Act also.

MR. MERCER: So those being the rules - and I spent

some twenty-five, twenty-seven years there, and I assure you, they were applied

to the public service for many years prior to 1994 - but since 1994 onwards

these rules apply to all of the corporate bodies, the school boards and so on.

MS MARSHALL: Yes that's correct, by direction of

Cabinet.

MR. MERCER: I would presume then that was

communicated to the appropriate corporate boards. Do we have any information to

indicate that that was?

MS MARSHALL: I did do a review of that several

years ago and it became obvious that many of the boards were not advised of that

requirement.

MR. MERCER: Which may in fact answer my next

question. Because my next question was this. That being the case, and that being

the directive of Cabinet and Treasury Board, why would the boards - whether it

is this one, the interim or the previous boards - feel they could do something

that was outside of the rules? Why could you, for argument's sake, issue more

than $85 a month for vehicle allowances? Why would you feel that you could go to

step 33 when the minister clearly said step 25? I am just trying to get a feel

of this. If the current board chair can't answer that, I'm sure the staff who

were around at the time might be able to lend some insight into that.

DR. RIDEOUT: All that I can say and offer, I

guess, is that the directive that came out in 1994, I understand, which I've not

seen myself, but let's assume that that did go out to some authorities, between

1994 and 1996 obviously that was not being followed by the boards that

amalgamated into Avalon West. I could not speak to why they were not following

it, whether they were aware of it or not, because as the Auditor General has

pointed out, those boards were paying those kinds of things as part of their

compensation package. That is what was communicated to me as being a part of the

package that I would receive at the time until the minister stated in January

1997 that it did not apply.

If you look at, just by reference, page 15 of your

package, the very last sentence, the last three lines, the Auditor General says,

"...we note that the current Board" - Avalon West - "is now complying with

Government's policy..."

MR. MERCER: So in your former association with the

former boards, you were not made aware, or you had no reason to become aware, of

the policy of government in 1994 dealing with the remunerations and so on and so

forth?

DR. RIDEOUT: I had not personally, no.

MR. MERCER: Is there someone from the Department

of Education who perhaps could shed some light on that for us?

CHAIR: Please.

MR. LEWIS: I'm sorry, could you just repeat that

again?

MR. MERCER: I guess the issue that has come up is

that in 1994 the government of the day made a ruling that Treasury Board rules

and regulations dealing with senior staff and management would apply to all

agencies and corporate groups under the auspices of government and government

departments and so on and so forth. The Auditor General is indicating that that

may not have been communicated.

MR. LEWIS: In terms of the directive back in 1994,

I would not be able to speak to that. I would have to get that information and

get back to the Committee on it.

In terms of the new boards, when the boards were

established the department did do an in-service with all board members. It went

out and met with boards and reviewed the rules and the operating guidelines they

have to operate under. It is our understanding now that the boards are complying

with Treasury Board guidelines and so on. As boards contact us and ask specific

questions - for example, is a salary increase applicable, when is it applicable,

and those sorts of questions - the department provides direction to the boards

on the basis of Treasury Board rules.

The boards have contacted us and asked for a copy of

the personnel and procedures manuals of Treasury Board, and we have been

following up on that. It is our understanding that Treasury Board is in the

process of finalizing a personnel and policy procedures manual now which should

be available some time during this fiscal year. Once that is available we intend

to distribute that to all the boards and to provide an in-service on that as

well.

MR. MERCER: Mr. Chairman, if I could ask Mr.

Lewis: if you could, when you go back to the department, make a determination

and provide the Chair with some information as to when the department became

aware of the ruling from government, Cabinet, Treasury Board, whichever, and

when that information may have been made aware or known to the various boards

throughout the Province. Could we get some information on that?

MR. LEWIS: Yes, I am back here again tomorrow for

the Avalon East board so I will endeavor this afternoon to have the files

reviewed and to identify when we received the directive, and if and when the

other boards were notified.

MR. MERCER: Thank you.

Just one last question before lunch, Mr. Chairman. I

find it disturbing - perhaps there are reasons why I shouldn't, but I do find it

disturbing - when the AG tells us that the polices and the procedures as

prescribed by government were not followed by the previous boards, the Avalon

West RC and the Avalon North Integrated,. I find that disturbing.

I also find it disturbing that ministerial directives

respecting pay scales and so on are not accepted and that boards - whether it be

this one or the previous boards - would then feel it is within the ambit of

their authority to do something other than what is in those rules and

procedures, and in those ministerial directives. I have some problems with that

and perhaps the board Chair could share with me why, in his capacity as Chair,

he would feel that the board would have authority over and above that which has

clearly been delegated to it by government or through ministerial directives. Is

there anything I am missing here in this loop?

MR. WHITE: Mr. Chair, I do not think that we were

in violation. I think we were complying with the Order in Council, and we had

legal advice from the Newfoundland and Labrador School Boards Association legal

counsel that we were indeed complying with the Order in Council by putting them

on step 33.

On February 19, the minister herself approved the

salaries at that scale. So, I do not follow your argument.

MR. MERCER: I just wanted to follow up on that

point. The Auditor General's information is clear, that the ministerial letter

stated that you were not to go beyond step 25, and I believe step 33 is the top

anyway.

Whether you agree with the minister or not is not my

point. The point I am making is, if the minister, who I presume has some

authority with respect to education in the Province in these matters, makes a

statement, why would the board go against that decision even though it might

feel it had information to support its case? Why would it not go along and do as

the minister had instructed and then follow the procedures respecting

arbitration and legal opinions, and if found to be correct in its original

opinion the board would then allocate the additional funds as necessary? Why

would you forthrightly go against the minister and say: You are wrong, we are

right, we are going to do this; and then afterwards refer it to a panel to give

a final decision.

MR. WHITE: We asked the former minister, who is

the one we had the dispute with, to refer it to an independent judge or an

independent court. Would you like for me to tell you the flowery language that

the minister answered with?

MR. MERCER: I am sure the minister could be very

flowery.

MR. WHITE: Anyway, the answer was no; but, based

on the advice of our legal counsel, we felt that we were right and we had been

given nothing other than the flowery language. Well, it is not fair to say that

but we had been given nothing that convinced us that we should go back and

renegotiate the contract or tear up the initial contracts that had been signed

and to tamper with them. I don't think -

MR. MERCER: Your answer really is that it was

already a done deal, the interim board had approved it and you were just simply

following through on that.

MR. WHITE: It was our understanding, even at the

interim board level, that the CEOs of the ten new boards would be compensated at

a level - certainly they would not lose pay and that - but you have to realize

too that they were coming from various positions. Like in our case, our CEO was

hired to become the director of the second largest board in the Province. He had

been coming from an assistant directorship with the one of the smaller boards.

Now, if we had applied the formula that you are talking about now and put him on

the next step he would be the lowest paid of all of the senior administrators in

the Province, even lower than assistant director of the smallest board, and we

didn't feel that that was fair. It was convoluted.

CHAIR: Can I interject here? Because we are

getting into an area where we are asking questions to the board that basically,

if the Committee members had the an opportunity to read the Kirby report, would

give you probably a better understanding as to the questions you are asking, and

maybe even rewording the questions that you might be interested in getting the

answers to.

I think that, as we said earlier, probably the best

thing for us to do now is break and reconvene at a later date, maybe a couple of

weeks down the road, depending on a notification from Mark Noseworthy to the

individuals. We would have, I think, a better understanding of exactly what the

Auditor General was getting at with respect to this issue and others that are in

that report. I think the Committee by then may have a copy of the report, or may

or may not have one, and they would have an understanding of where we will be

coming from, I would imagine, with the next set of questioning at the next

hearing we have.

Unless we have people who want to continue on now, I

suggest that we probably adjourn for a while until we reconvene at the call of

Chair. People will be notified as to the time and place. It will be here more

than likely. Does anybody have any objections to that?

Mr. Manning.

MR. MANNING: Mr. Chairman, just as a follow-up to

an earlier conversation, when I look through the information we have, and mainly

the questions that I'm sure not only myself have but other Members of the

Committee may have, again I get back to the point that these people who are here

today are not in a position to answer a lot of those questions.

I'm thinking over the next couple of weeks that the

Chair, in consultation with the department, may have set up a meeting where we

have somebody here who can answer those questions. Because when you look at the

amounts of dollars that we are talking about here it is immense, and it isn't

fair to have those people here, to be plugging away at those questions, for the

simple reason that they are not in a position to answer them. Maybe in the next

couple of weeks we can address that issue, because I don't want to be back here

next week saying that we cannot ask questions again.

CHAIR: With respect to that I may make a point

here now. The information that we have, the members of the Committee themselves

should make sure they understand what is in this report. Because it is pretty

direct. Prepare the questions that are applicable to the board. There are many

questions that can be asked and I am sure they are prepared to answer. We can

look at that at that point in time.

Before we adjourn, I do not know if anybody wanted to

have any closing comments because it is not really closing comments, but in the

interim, would the board want to have anything to say at this time?

MR. WHITE: No, other than we appreciate the

opportunity to appear. It has been a worthwhile exercise for us. If you are not

satisfied, certainly we will be more than anxious to appear again and provide

you with the answers that you are looking for if we can provide them. Thank you.

CHAIR: Thank you.

The Auditor General.

MS MARSHALL: Just one comment, Mr. Chairman.

We were of the understanding that there were two

reports from Kirby and Company. I have one which the department gave me last

December but I have not seen a second report.

CHAIR: Thank you for that.

I would ask Mark Noseworthy to follow-up on that with

the department. If there is another report, the Public Accounts Committee would

like to receive it and have it in advance of the next meeting so we can have a

chance to review it.

Dr. Rideout.

DR. RIDEOUT: Mr. Chairman, if you are expecting us

to answer questions on two Kirby reports it might be advisable for us to have a

copy of them too.

CHAIR: Yes. I mentioned that earlier. I'm not sure

if we are at liberty to make these public yet. I would suggest that the board

contact the Department of Education and request that they give you that report

or those reports because you can tell them that you will be questioned on them

at the next PAC meeting, which will be in the next few weeks. We have a person

here from the department so I don't know if you can see that they could get a

copy of the report. I don't know if we should give it out yet. If it was

discussed at the meeting, I would. I would not have a hesitation.

Yes, Dr. Rideout?

DR. RIDEOUT: Mr. Chairman, just a comment. If

there are specific items that you would like, such as a reference to whether

there is a motion of the board about the salary placement and all of that, if

Mr. Noseworthy could let me know, we can provide any and all of that

information. We have files yay thick on this but we do not know what you want

specifically. If it is anything like that he can free feel to contact my office

and we will make sure you have it.

CHAIR: With that specific issue, I brought that up

earlier, with respect to that motion with respect to the salaries: when it was

approved, by whom and what have you. I think it would be appreciated if you get

that to us before the next meeting but there is no way I can tell you what we

want because it would come up at the meetings themselves, at the hearings, you

know.

Having said that, I would like to thank the members of

the board for coming here today, the representatives of the Department of

Education, the Committee itself of course, their staff, and the lone member from

the media down there, VOCM. Thank you for being here and we will get back to you

on the time of the next hearings. Thank you.

By the way, before we go, could the Committee please

stay because I want to have a quick discussion before we adjourn for the day?

The Committee met in camera, and adjourned later.