October 16,

2012 PUBLIC ACCOUNTS

COMMITTEE

The Committee met at 2:00 p.m. in the House of Assembly Chamber.

CHAIR (Bennett): Order, please!

I call this meeting to order. This is a meeting and we are undecided

whether it is a meeting or a hearing, it is one or the other, of the Public

Accounts Committee. Clearly, it is a meeting.

My name is Jim Bennett; I am the Chair of the Public Accounts Committee.

Other members and our witnesses will introduce themselves.

The Public Accounts Committee inquires into matters that deal with public

expenditures in the Province. Today, we are dealing with a matter that was

raised in the Auditor General's report. The Committee is not restricted to the

Auditor General's report; however, it tends to be our preference to go there

first and in conjunction with the Auditor General, to do reviews of any matters

that have come up.

Witnesses who appear before the Committee are immune from any form of

prosecution based on any evidence that they provide. The evidence is provided

under oath, either solemn oath or affirmation. An oath will be administered to

the witnesses who have not previously sworn such an oath.

I am going to begin with Mr. Brazil on my left and ask him and the other

members of the Committee to introduce themselves.

MR. BRAZIL: David Brazil, Vice-Chair of the Committee, representing the

District of Conception Bay East Bell Island.

MR. S. COLLINS: Sandy Collins, MHA, Terra Nova District.

MR. K. PARSONS: Kevin Parsons, MHA, Cape St. Francis.

MR. CROSS: Eli Cross, MHA, Bonavista North.

MR. MITCHELMORE: Christopher Mitchelmore, MHA, The Straits White Bay

North.

MR. JOYCE: Eddie Joyce, MHA, Bay of Islands.

MR. PADDON: Terry Paddon, Auditor General of Newfoundland and Labrador.

MS KEATS: Trena Keats, Audit Manager, Office of the Auditor General.

MS RUSSELL: Sandra Russell, Deputy Auditor General.

MR. McCARTHY: Julian McCarthy, Assistant Deputy Minister, Consumer and

Commercial Affairs, Service NL.

MR. BURKE: Jerry Burke, Director of Consumer Affairs with Service NL.

CHAIR: Ms Murphy will administer the oath or solemn affirmation as is the

choice of the witness.

Swearing of Witnesses

Ms Keats

Mr. McCarthy

Mr. Burke

CHAIR: Our Page today is Shelby Marshall. Thank you for joining us.

The procedure we follow, for the benefit of the new witnesses, is that the

questioning goes in ten-minute increments, nominally ten minutes. We start with

a member from the Official Opposition, and then we move to a government member,

back to a member of the Third Party, and back to the government. We alternate

back and forth.

Questioning will start with Mr. Joyce from Bay of Islands.

MR. JOYCE: Thank you, Mr. Chair.

I will go on to page 265 of the Auditor General's report. On top of page 265,

"Of the 55 licences reviewed, three lotteries operated during the year ended 31

March 2011 without a licence - one bingo lottery and two bingo/breakopen

lotteries. These instances of operating without a licence are offences under

Canada's Criminal Code . However, rather than treating them as such, the

Division, instead, issued back-dated licences to each of the organizations to

cover the periods of unlicensed activity."

Can you explain? What is that situation, please?

MR. McCARTHY: Yes, sir.

These were situations where we were aware that an application was in process.

There were some issues with the application in that we did not see that this was

an issue of criminal intent or someone trying to break the law. It was an issue

of trying to comply with the law.

You have to realize, we are dealing with charities and non-profit

organizations. Sometimes they are not totally familiar with how to complete all

of this. If we feel there is no criminal intent here and that this is someone

just trying to comply, the department will assist them to make sure that the

compliance is there.

It is not a situation where we felt these people should be prosecuted. We

felt they were being open and upfront trying to comply, and we worked with them

to get that done.

MR. JOYCE: Was that the first time they ever had a licence, these three

groups?

MR. BURKE: I do not think so. What happens is where it is all run through

charities, their executives and volunteers change over time. So there may be new

people involved with the organization who are not familiar with the new rules.

MR. JOYCE: Can I ask the Auditor General his comments on that, backdating

licences?

MR. PADDON: Backdating of anything is not something that you would

typically condone or approve of. Typically, you would issue a licence from the

point where you were satisfied that all the criteria would be met.

MR. JOYCE: Can you tell me how far back it was backdated? Was it a month,

two months, three months, a year?

CHAIR: If I might, first of all, interject.

When each witness provides an answer, when we change from one witness to

another, could you identify yourself? We will have a transcript, and it will be

difficult for the person who is transcribing to know which person is which. So

if you would just say your name when you provide an answer.

MR. McCARTHY: No, I do not have that information with me. I am not sure

if the Auditor General has the specific details.

WITNESS: I do have some of the details there. One of them had been

operating without a licence for a year. I believe it had been backdated to the

original date.

MR. JOYCE: I will ask you this question I guess: Was the application on

file, in file, or it is just expired and they just kept operating?

MS KEATS: As I understood, was that the application was in progress;

however, there were circumstances where they were asked to cease operations

until the licence had been issued.

MR. JOYCE: They did not cease; they kept operating?

MS KEATS: I understand, yes, they had continued to operate without a

licence.

CHAIR: Those answers were provided by Trena Keats.

MR. JOYCE: Is that the way the process unfolded? Someone applied, the

licence is ceased, there is correspondence asking them not to proceed yet, but

they did. Even after they did, then the department backdated their licences to

conform with the regulations, even after asking them to stop processing and stop

using them as a lotto licence. Is that correct?

MR. McCARTHY: I am not sure of the complete details, but, in the

situation, we felt comfortable backdating the thing. I mean, you have to realize

this will be a rare exception. We process over 3,000 licences a year. Sometimes

issues come up when you are dealing with charitable gaming organizations and

non-profit organizations. They are all volunteers; it is all quite different.

The department felt comfortable to complete the process after all the

information was received.

MR. JOYCE: The Auditor General just stated that the department asked them

to stop, to cease. Obviously if the department asked them to cease operations,

everything was not in order. If it was, it would have been but you are asking

them to cease operations in several occasions and then you continue to keep

operating and after you continue to keep operating, at a certain point you say

okay, you kept going, that is all right, we will just backdate the application.

You cannot have it saying we are following through and ask them to stop doing

your work, yet backdate it saying everything was fine. Obviously everything was

not fine or you would not have sent the stop order out to them.

MR. BURKE: I am not familiar with the particulars of this one, but the

alternative here is for us to turn the matter over to the RNC or RCMP for

criminal charges. What we do is work with the organization. I think in most

cases when we tell them to cease and desist, once we have realized they are

operating without a licence, they do.

Like I said, this may be the odd case where somebody just continued to

operate. Again, there was no criminal intent that we determined.

MR. JOYCE: Actually there were three cases, not just one, that the

Auditor General mentioned. I do not know if it is common knowledge. Are we

allowed to ask for the names of these companies or organizations? I do not know

if that is

MR. BURKE: I do not know the names.

MR. JOYCE: I do not know if the Auditor General has the names or if they

can release the names, or

MR. PADDON: That, I cannot answer the question; I am not quite sure. I

suspect we would have the names in our file. In terms of releasing them,

typically we would not include the names in our report unless there was some

rational or logical reason to put it in the report. Whether there are privacy

issues around it, I really do not know. I just cannot answer your question.

CHAIR: Mr. Joyce, I would say, with respect to the names, so we not get

delayed, afterwards we can either do an access to information or we can ask for

advice from counsel from the House of Assembly as to how we should proceed on

that point.

MR. JOYCE: Yes.

CHAIR: That might be helpful.

MR. JOYCE: The reason why I asked that, I know some small organization or

some group sends in an application and I know there is a lot goes in but

then they are almost put through the ringer. Then we find out through the

Auditor General's report there are three that are operating a bingo licence and

pull-tab for an extended period of time, told to stop, and not doing it. So,

obviously there is

That brings me to the next part: performance measuring or monitoring. No

performance measures or reporting requirements. The department had not

established performance measures or reporting requirements for lottery

licensing, and for the division in general. There were no performance reports

for the division in 2010-11. The annual report of the department for 2010-11,

tabled in the in House of Assembly, did not include any information on lottery

licensing activity of the division. There was also no operating plan in place

for the division to enable the division to focus its activity towards achieving

strategic goals and objectives.

Is that common in the department, in the lotto licensing division?

MR. McCARTHY: There is no requirement under the legislation to report to

the House, and if you look at the number of areas and the number of programs

that we have in the department, most of them are not required to specifically

report to the House. There is mention in the annual report from a general

perspective, but there is no requirement for us to report to the House

specifically on this.

MR. JOYCE: So there is actually no requirement?

MR. McCARTHY: No.

MR. JOYCE: Okay.

If you go on page 264, at the bottom of the page: No audited statements

required of the licensees. The division did not have established guidelines as

to what circumstances a licensee would be required to provide audited

statements. Can you give us a brief outline on the policy of the department for

auditing of licensees?

MR. McCARTHY: That is on page, sorry?

MR. JOYCE: On page 264.

MR. McCARTHY: With regard to the audited financial statements, am I

correct, Jerry, in saying that it is at the discretion of the director to

determine when audited financial statements are required?

MR. BURKE: Yes.

MR. McCARTHY: It is a judgement call. We look at the nature of the type

of lottery, what controls and that they would have in place, the size of the

lottery and that type of thing.

You have to realize a lot of those lotteries range from very small to very

large. The department makes a determination when audited financial statements

are required. That is basically determined based on the size of the lottery,

what is involved in it, what controls are in place, what protections are with

regard to the prizes and those things, if there are outside things and that

being done and controls in place. So, it is strictly a judgement call.

MR. JOYCE: Okay.

There are no formal procedures in place, just a judgement call?

MR. McCARTHY: No, there is no formal standard to say that you have to

have it in this case or not; no, there is not.

MR. JOYCE: Okay.

On the same page: Licensing auditor position vacant. In the report it says

here that the position has been vacant for more than years. Has that position

been filled since?

MR. McCARTHY: No, that position has not been filled. As a department we

do not have funding for that position. That is funded through the Opening Doors

program. We have been working with the Opening Doors program to try to identify

qualified individuals for that position. Unfortunately, we have not been able to

do so. We continue to work with the program to try to find a suitable candidate

to fill that position.

MR. JOYCE: Until that position is filled, and it says here in the report,

"The Licensing Auditor position is responsible for reviewing submitted financial

reports of licensees, as well as performing financial audits on licensees. In

the absence of a Licensing Auditor, the Division has been significantly behind

in its review of financial reports and has periodically used the help of a

work-term student".

So, that work is not being done as we speak?

MR. McCARTHY: No, it is not that it is not being done. Obviously, if we

had the position filled, it would be done much more efficiently and on time.

Yes, there are delays in completing that work, but we do have other staff, when

time permits, doing that. Obviously, yes, if the position was filled, we could

do that in a much more efficient manner.

MR. JOYCE: It says here at the bottom, right at the same thing, "there

were no financial audits performed pertaining to the year we reviewed."

MR. BURKE: No, there was not for that year.

MR. JOYCE: There was not?

MR. BURKE: No.

MR. JOYCE: You are saying they are a bit behind, yet the Auditor General

is saying there is none for that year. So there is none for that year.

Obviously, this position is very important because if there is none done for a

full year, it is not that they are falling behind; it is just that none are

being done.

MR. McCARTHY: What you have to recognize with regard to that yes, it

would be good to get some of those financial audits done. We receive very few

complaints with regard to lotteries, anyone complaining about it not being run

properly or anything like that. We are fairly confident that for the most part

these lotteries are run properly and there are no issues with them, especially

based on the number of complaints. We are certainly not being inundated with

complaints saying they have problems with how those lotteries are being run.

MR. JOYCE: Okay.

CHAIR: Mr. Joyce, I will go to a government member.

MR. BRAZIL: Thank you, Mr. Chair.

I want to welcome our two witnesses today.

I am trying to get my head around it, as somebody who has been involved with

not for profits for years and years, and obviously some of the lottery licensing

processes, particularly on some umbrella groups.

Mr. McCarthy, just take me through the process so we are all aware if there

is intent here or if there is an acceptance of an understanding that it is not

as simple as it is in the bureaucracy to be able to get reports in on time. You

are dealing with a lot of not for profits. Just take me through the process of

somebody applying for and putting in a lottery license application, and the

process then for when they have their ticket draw or an ongoing function to the

day that they must do their annual reports. So we can give an understanding to

the members here of how this works, please.

MR. McCARTHY: You have to recognize, for the most part these are not

professionals or businesses. These are non-profit organizations. They are

charities and volunteers doing this. They are out raising money for good causes

in the Province.

There is a process that has to be followed. We try to work with these people.

We recognize they are not all professionals and they are not at this everyday.

There are changeovers in boards and changeover in the people involved in that.

When it is done, if a financial report is not filed on time if we have no

concerns, we have had no complaints, and we know that organization is going to

be coming back for future licenses, we have to look at: What is the harm being

done? What is the consequence of it? Is there criminal intent here? These

volunteers have jobs and have other things to do. Sometimes it is just not

possible to get the reports in, in the time frames. We make that determination

of whether that is an issue in regulating the lotteries.

MR. BRAZIL: Fair enough.

Obviously, in not for profits you have turnover from executive to executive,

who is around and who leaves. Yes, that is understandable.

While it is a bit alarming, and I can understand the Auditor General's point

about it, three in different areas out of 3,000, it is not that dramatic. One of

my concerns is, though, we still do not have and maybe you do enough staff

there to be able to either assist organizations like this or urge them along, or

in some way, shape, or form improve the process so that a lot of these

bureaucratic issues can be dealt with so that compliance is still put in place,

and the optics there that everything is accounted for is actually done.

Is there any thought to how you would do that? Is there is a need for new

human resources or a different approach to deal with not for profits, or if

there is a way we reduce the amount of paperwork that they may need to address

some of these issues?

MR. McCARTHY: Not a whole lot of comment. The issue is how far do you go

with regard to the regulation of that? How many controls and processes do you

want to put in place with regard to a cost-effective I do not see bringing in

a huge amount of human resources at thousands or hundreds of thousands of

dollars in order to potentially curtail some minor problems with charities. You

have to look at a cost-benefit analysis.

Certainly, if we had the positions through Opening Doors filled, that would

give us one extra resource to perform some of those functions and maybe free up

staff in order to help a little bit. Again, that is a decision of government,

how much resources they want to put into it.

MR. BRAZIL: Fair enough.

Just give me a better idea of what you are talking about. Obviously, there is

a plan there for an enforcement officer what that person's responsibilities

would be when it comes to the not for profits and the lottery licensing process.

MR. BURKE: That person will be responsible for doing on-site inspections

of events in progress to ensure that they are operating under the rules as set

out for each different type of lottery. They will also be required to monitor

the financial reports that are submitted and do a financial audit where

required.

MR. BRAZIL: Okay, perfect.

My colleague there alluded to it, some of the measures in reporting

requirements as part of that. Are you looking at a new process for the reporting

process, or are you quite comfortable with what is there, keeping in mind the

minimal number of non-compliance issues with some of the agencies that applied

for lottery licenses? Are you looking at a new process? Is there a better use of

technology or the modern use of some of the programs and services we already

have in place?

MR. McCARTHY: We are always reviewing our policies and procedures and

processes in place. That is part of the ongoing process of running the division

and running the department.

With regard to the reporting process we have in place now, we are provided

with information on a regular basis. I know that information does not go to the

House. I am certainly confident with the staff we have there, that they are

qualified. For the most part they are doing a good job, and that policies and

procedures in place are adequate to carry out the requirements of the division

and the program.

MR. BRAZIL: Okay, thank you.

Mr. Chair, like I said, the questions that we asked have been sent from the

clerks, and the responses we got clarify that. There are a number of issues

here, but I would think some of my colleagues will address those also. So I am

good for right now.

Thank you.

CHAIR:

Thank you.

Mr. Mitchelmore.

MR. MITCHELMORE: Thank you.

It is pretty clear that under Service NL, the provincial lottery licensing

primarily deals with non-profits when it considers these charitable licences

that are being administered. It is has been noted in the responses that a number

of the volunteers may not be the best administrators when it comes to having all

the skill set and the criteria to adhere to the policies.

It is certainly clear that Service NL needs to tighten up its regulations,

based on its current mandate, to make sure that it is able to deal with the

clientele in the division. What is very important is the lottery licensing being

able to be available to do the important work that non-profits do in the

community to raise money. Are there some current barriers there? Does your

division not have the adequate staff to be able to support these needs?

MR. McCARTHY: Just to clarify with regard to who can receive a licence.

It is registered charities, registered with the Canada Revenue Agency, and

non-profit organizations registered with our commercial registrations division.

That is the criteria in order to obtain a license, who is eligible to do these

activities.

With regard to you would have to go back to that we receive very few

complaints. We are not getting charities and non-profit organizations coming in

to complain to us that they are not happy with the process, that they are not

happy with the way they are being treated, they are not happy with the timelines

to get the applications done, or that they are not happy with the information

that is being provided by staff. So, I would go back to that, to say we use that

as a guide to feel that it is adequate what we are doing.

MR. MITCHELMORE: My point is that if the process goes under intense

scrutiny and review, that it makes the process more difficult for non-profits

and charities to be able to access licensing. That it could have detrimental

impact to the community. My concern is about finding a balance here so we are

making sure we are providing the best service to these charities and non-profit

groups that are doing great work in the community when it comes to fundraising.

Is there is a solution around this based on the findings of the Auditor

General's report as to what the department is going to do to move forward, to

change some of its policies, to make them a little bit more efficient, and

improved? Are you going to look at hiring additional staff to meet the needs of

these people?

MR. McCARTHY: With regard to the staff issue, as was indicated, we have

two positions that are not filled and obviously the filling of two positions

would give us more resources in order to carry out the mandate.

Again, I just reiterate: We are not seeing where organizations are coming to

us to say they are not happy with the process, the timelines, the efficiency in

which we get it done, or that they are not being provided with good service.

Obviously, no matter what organization you are in there are going to be errors

and that type of thing. Someone is going to make a mistake from now and then.

These were very minor in nature for the most part. Staff have been reminded

to ensure that policies and procedures are followed. We do not see it as a big

concern.

MR. MITCHELMORE: In the three cases Mr. Joyce had highlighted previously,

were those a result of complaints?

MR. BURKE: Those were the result of the Auditor General's review.

MR. MITCHELMORE: No, in the fact that they were not issued licences and

they were operating without licensing. Did they have their licences expired or

not approved, the ones who had their applications in the system, because of a

complaint made by an individual or a group?

MR. BURKE: No, I do not think so.

MR. MITCHELMORE: Okay.

On page 262 of the Auditor General's report, it says: "Furthermore,

performance measurement and reporting was inadequate, policies and procedures

were not well defined, and improvements were required in the use of the

Division's database system and the administration of the Division's lottery

files."

I am curious as to what type of data management system is being used and what

improvements are being made to rectify inadequacies because there was in the

Auditor General's report where applications were being put on file that were

withdrawn, given the same reference number, and things like that.

MR. BURKE: All of our applications are tracked in what is called an

AMANDA System. It is a licensing and report system. Whenever an application is

received, it is entered into the system. Once you get a permanent record, you

have an identifier number, so we know at any given time who is licensed and who

is not licensed, whose licences are expiring, and we will get in touch with

people before their licences expire to say your licence is expiring, you need to

get another one in.

Like I say, it is the odd one that slips through that system, and then that

is when we work with the organization to get the information in place and get

them back on to the systems. In the most part, our organizations are

organizations that we have had since licensing came in 1982, and it is just

renewal year over year of the same licence.

MR. MITCHELMORE: The Opening Doors position that is funded for the

licensing auditor that has been vacant for more than four years I guess close

to five, now you mentioned that it is not funded through the department. Is

there the option of looking at, where this is a very difficult position to fill

for Opening Doors, some discussion of maybe making another position available

through that funding, and use your departmental funding to hire a licensing

auditor, since you do have vacancies in your department as well? Is that an

option?

MR. McCARTHY: It is not something that we have looked at right now. We

did not really anticipate that it would take this long or that it would be that

much difficulty, and we are still hoping to work with the Opening Doors to get

someone to fill that position.

MR. MITCHELMORE: So, when work-term students are hired to do this work,

who is giving the direction and the supervision to do the auditing work that

needs to be done on these files?

MR. McCARTHY: Those work-term students are not doing the full scope of

all the duties that would be required with that. They are under the supervision

of the manager for the division.

MR. MITCHELMORE: Okay.

I am curious to note Mr. Joyce had noted about the licences that were being

backdated is that a practice that the department is going to continue?

MR. McCARTHY: No. You have to realize that we are looking at 3,000

applications a year. We are looking at volunteer organizations, non-profit

organizations. In rare instances, situations are going to come up. If we feel

that there is no criminal intent and there is no harm or no foul with regard to

working with these people to resolve the issue, then we will see it. It is not

our intent or our policy to backdate applications, no.

MR. MITCHELMORE: Is there an option to look at extending an application

for beyond a one-year period or beyond the time, to reduce administration and

costs associated with dealing with these applications is that something that

can be explored? As well, I have viewed the Web site for the application

process; it is all paper based. Is the department moving forward with looking at

doing on-line-based applications as an option?

MR. McCARTHY: The maximum period is one year right now. We have never

looked at any longer period than one year.

With regard to it being all paper based right now, certainly as funds become

available and technology becomes available and we look at whether it is cost

effective to do that, you have to look at some of those organizations whether

they would have the means to do it from an electronic basis, too. It is

something we look at from time to time, and when we do have the resources in the

budget it is maybe something that would be done in the future.

MR. MITCHELMORE: Is there a way to auto-renew licences that are regular,

that have been a bingo hall for ten or fifteen years, that keep reapplying, and

that could have a licence expired? Is there an option where government could

continue to just reissue the licence? Is the one-year maximum set in the

regulations or is that just something government is choosing as a one-year

policy right now?

MR. BURKE: We have never looked at licensing beyond one year for the

reason that organizations such as these change hands and the information could

get lost. We do need to get an annual financial report so we can record the

activity for statistics.

There is currently no way to auto-renew on-line, but as Mr. McCarthy said it

is something the department looks at overall. There are areas of the department

where you can renew on-line.

MR. MITCHELMORE: I think moving towards on-line option for some of these

basic entries would be a good process to look at.

CHAIR: Mr. Mitchelmore, I will go to a government member.

MR. MITCHELMORE: Sure.

CHAIR: Mr. Collins.

MR. S. COLLINS: Thank you.

Going back to something we spent quite a bit of time on already, I can

appreciate the rationale of why there was not any recourse pursued against the

three groups or individuals, of course, knowing they are charity groups. All of

us over on this side certainly deal with those each and every day and we

understand it is not an ideal situation a lot of times for the individuals who

are at the helm.

Just so that it is on public record, though, on a go-forward basis starting

today or starting last week, whatever the case is, what processes have been put

in place to ensure this does not happen or to minimize that? We have talked

around this quite a bit, but have there been any specific changes done that we

could minimize seeing these things happen again?

MR. McCARTHY: It is probably impossible to eliminate that. You have to

recognize that the contact has to come from them with regard to if they want to

put off a gaming event and they want a licence for it. We do not initiate that,

they initiate that.

The charities that have been doing this for years know the processes and all

that. Even then, sometimes if you get new people involved in that organization,

someone goes on holidays or whatever. If this happens, we will make sure to tell

the organization that this is not acceptable and this should not happen again.

We work with them to ensure that, but to totally eliminate it, that would be

impossible.

MR. S. COLLINS: Fair enough.

I am just wondering, on page 273 it makes mention there of, "During our

review, we found that three of 55 applications reviewed contained intended uses

of proceeds that matched the unapproved use of proceeds in the guidelines."

While we can talk about that a bit, I am just wondering on the other side of

it: How much follow-up is done? For example, if I apply as a charitable group,

say the funds are going to be used for this or for that, or whatever the case

may be: What sort of follow-up is done by the department or your officials to

make certain that is actually where the funds went, where they were intended to

go?

MR. BURKE: On their application form they have to tell us what they are

using the funds for, and if it is an acceptable use we will approve it. If it is

not, we will not approve. We will have them amend their application or make a

new application.

Once the event is over, they have to do a financial report within thirty days

outlining the total money they took in, less prizes and expenses, and then net

proceeds that were left for the intended use that was approved in the

application. We take them at their word that is where that has gone to. Again,

unless we get a complaint that it is not, we have no way of knowing.

MR. S. COLLINS: Up to this point, from your experience, the compliance

has been pretty good if that is the case.

MR. BURKE: It has been pretty good.

MR. S. COLLINS: Yes, okay.

Back again, the thing is when you are asking questions after a number of

individuals, of course, there is going to be a little bit of repetition. I just

wanted to go back to the issue with the job that was left unfilled for four

years and how it is going through Opening Doors, and that is fair enough.

I am just wondering, and I think Mr. Mitchelmore had mentioned it, during the

interim while Opening Doors is working through their process, is there some sort

of way to fill in that gap at the department, knowing that it is a vital

position and something obviously that could add a lot of value? Is there any way

of putting someone in there on a short-term basis just to cover off the gap? Is

there some way you could work with Opening Doors to accomplish that?

MR. BURKE: We have reassigned some staff since the Auditor General's

report to ensure that all the financial reports when they are received are

processed on time and put into the system. The only part now of the Opening

Doors position is the on-site inspections and the financial audits which are not

done. Since the report, we have managed to keep everything up to date.

If people get a bit of free time, there has been a couple of more staff who

have been shown how to do this process. It has worked well for us, except we do

not have anybody currently qualified on staff to do the on-site inspections or

the financial audits.

MR. S. COLLINS: Okay.

I am assuming the department works actively with Opening Doors, or is this

entirely Opening Doors and you are just waiting for that applicant to come

forward? How does that work? I am not familiar with the process.

MR. McCARTHY: No, we are working with Opening Doors and looking for

people from the Opening Doors program that we feel meet the minimal

qualifications and they would be reviewed to see if they are suitable for the

position. Unfortunately, like you say, we did not think it was going to take

that long but we are hopeful we will be successful in completing this process.

MR. S. COLLINS: Okay.

That is everything for now, Mr. Chair.

Thank you.

CHAIR: Mr. Joyce.

MR. JOYCE: Thank you, Mr. Chair.

I will just put it on the record that we understand a lot of small volunteer

groups do apply for licences and we understand the complications to it sometimes

that you go through. Mr. Collins just mentioned that all of us deal with that

some time throughout the year about applications. We understand that, but I

think a lot of it is what we are doing here, trying to instil confidence because

there is over $54 million in proceeds taken in through lotto licences. So, it is

fairly big.

We are given the impression that it is just some church group who are doing

some turkey dinner or something, but $54 million is a fair amount of money to be

taking in, in lotto licences. Our role here is to make recommendations to the

House so that we can give the confidence to the people that it is being run

properly and this here is part of the process, sitting down, getting educated

ourselves and getting it explained.

It is not that we are totally saying that everything that is going on is

wrong. I hope that is not the impression we are giving. I do not think any of us

are trying to give that impression, but we are trying to get the guidelines in

place so we can ensure the public that it is being operated properly.

I will just go through some things, and it may be done. On page 262, "There

were nine employees who review and approve licence applications; however, these

employees were not designated by the Minister to approve licences. Such

designation is required under the Regulations."

I know that is just a procedural thing. Has that been taken care of now?

MR. McCARTHY: The authority is there for the minister to designate the

other positions. We are reviewing now to make sure that all the people who are

involved in the process will be so designated by the minister. We do not see any

need to change the process.

MR. JOYCE: Okay, but according to the Auditor General that is just a

procedural thing is it?

MR. McCARTHY: Yes, the minister has the authority to designate the

director or any other staff in order to actually approve the licence. We are in

the process of reviewing that to make sure all the people who are actually

approving the licence will be so designated.

MR. JOYCE: Okay.

Up on page 263, it says here, "Two of three applicants who were required

under the Regulations to submit business plans with their applications, did not

provide the required business plans." I guess it is more of an education: What

type of licence would that be if we have to put in a business plan?

MR. BURKE: When the prizes are very large we usually look for a business

plan. The best example I can give you, are all these new home lotteries. We will

require them to send us business plans. We look at them to see if we think that

they will work. Sometimes we say we do not think this is going to work, just

based on the number of other houses that may be on tickets at the same time. If

they insist on going ahead, well we require them to get a prize guarantee to

ensure that the public is protected.

MR. JOYCE: Okay.

On the same page, down at the bottom, it mentioned financial reports. I know

it was brought up earlier about some of the people, volunteers and changeover,

and some people not thinking it is a big part of their process about the number

of people who do not submit their financial reports on time. Is there a

follow-up to remind them that it should be done, that it is part of the process?

They should maybe be turned down the next time?

MR. BURKE: There is a constant follow-up with these organizations until

we get the required information or financial report. We usually are successful.

Again, it is for a variety of reasons, people are on holidays, people have left

the organization. People have died actually, and they cannot find records.

Again, with the nature of the organization, we do our best to get the

information in as soon as we can.

MR. JOYCE: Even in this report where it says 24 per cent, most of the

time a follow-up will continue until it is received somehow?

MR. BURKE: Yes.

MR. JOYCE: Okay.

Have you ever had many cases where you never received it and you had to

cancel a licence or not renew one for somebody?

MR. BURKE: That would be after the fact. I have been there almost twenty

years now and I can probably count on one hand the incidents where we had to not

issue another licence.

MR. JOYCE: Okay.

It is the same thing in the next paragraph about non-compliance of the

financial reports. Do you usually get them on time also? Do you usually

follow-up? It is on the same page as with the financial reports from the gaming

event.

MR. McCARTHY: Yes, like you say a lot of times the reports may be

overdue, but we do continue to follow up until the reports are actually

received. In a very rare occasion at the end of the day we do get the reports,

it just may not be within the timelines that are required.

MR. JOYCE: Okay.

Are there any times when you have and this is just from my own information

to proceed to court or proceed to withdraw an application, or tell people no,

we cannot renew it because you did not follow with the compliance of the

regulations?

MR. BURKE: There have been several occasions over the years where we did

not issue a licence.

MR. JOYCE: Is it usually the bigger ones?

MR. BURKE: No, it is usually the smaller organizations that do a one-time

event type of thing or then they want to get another one. Then they just do not

bother because they do not want to do the financial report.

MR. JOYCE: Okay.

I noticed in the report that there are six or seven locations around Service

Newfoundland and Labrador that accepts the applications. Are they all processed

in one area in St. John's, once they are received?

MR. BURKE: The applications are received in St. John's, Gander, Corner

Brook, Labrador City, Happy Valley-Goose Bay, and Clarenville and they are

processed by staff in those offices. Unless it is a new organization or a

first-time applicant, that has to be brought to the attention of the manager or

myself.

MR. JOYCE: Do any of those Service Newfoundland and Labrador do any

follow-up, or is it mainly in St. John's, like if you had to run out do they

ever do any on-site visits to any of the places that do have a lotto licence

just to see if everything is in place?

MR. BURKE: For the staff who are in those other centres, they do not do

any on-site inspections. They will do follow-up work if there is something

missing from the application or outstanding on their file.

MR. JOYCE: Would it be some and this is just me thinking like out

Corner Brook way, would it be advisable if some of those staff had that

authority or were brought in on that so they can

MR. McCARTHY: That is the intent of the positions, if we can get them

filled, that we can do some of the on-site inspections and reviews.

MR. JOYCE: With the positions?

MR. McCARTHY: Yes, with the positions through the Opening Doors and if we

can get the enforcement officer position in place. When we get that in place,

that is the intent that they will do some on-site inspections.

MR. JOYCE: Yes, but I am talking about if there are six satellite

stations that receive the applications

MR. McCARTHY: Yes.

MR. JOYCE: The Opening Doors person is not going to go to Corner Brook,

Gander, and all the other places. If there is staff in Corner Brook, and like

the Auditor General mentioned some random selections, you just go out and visit

the sites and do a report so there is always a follow-up. If you do one or two a

year, or three or four a year, just so every year they cover each one. That is

just a suggestion. I do not know if you even thought about that because it would

add more confidence into the process.

MR. McCARTHY: I understand what you are saying. The position, yes, could

travel across the Province to do random checks and that type of thing, right

across Newfoundland and Labrador. Obviously with over 3,000 applications, it

would be very random what we would do, but the ability would be there to do

that.

MR. JOYCE: Okay.

So it was not considered, the satellite offices doing that, and it is not

going to be considered?

MR. McCARTHY: The issue is you have to have people qualified to go out

and do that. We cannot just send anyone out. We have to have people who are

qualified in order to carry out that function.

MR. BURKE: These staff in these satellite offices that is just one duty

amongst many others that they have. They are, for the most part, clerks. They

would not be qualified to go out and do an on-site inspection without some

training. Then again, we would be changing their job description.

MR. JOYCE: Okay.

On page 266, just a note from the Auditor General on Other Findings, policies

and procedures not well defined, "The Department does not have any written

policies and procedures to help ensure compliance with the Regulations."

Is that still the case or is there a discrepancy with the Auditor General and

the department?

MR. McCARTHY: If you want to say a formal policy and procedure manual,

then no we do not have that. Most of the requirements with regard to lottery

licensing and with regard to the application process, all of that is detailed in

the requirements, in the rules, and also in the contracts we are doing and the

guidelines. Most of that is posted on our Web site.

It is an extra step, we could put that all together, but we feel sufficient.

All of the information is there, the policies and the procedures, some of them

are accepted practice, but the policies and procedures are there, what is

required to complete those applications and make sure they are done properly.

All the information is there.

MR. JOYCE: I just ask the Auditor General: Do you feel that that policies

and procedures should be better defined?

MR. PADDON: The focus of our comment was more around policies and

procedures directed toward internal staff versus applicants. It was our view

that there was probably sufficient information available to applicants to be

able to know what they had to provide and the procedures that they follow. Our

concern was there was nothing internal available to suggest to staff what they

should be doing on a day-to-day basis to ensure compliance, monitoring, and

those sorts of things. I have not seen anything or have not heard anything that

would suggest that there has been any change there.

MR. JOYCE: Would you like to comment on that?

MR. McCARTHY: My comment is that with regard to the processes, all the

information is laid out, what is required, so staff know what information is

required to do that compliance to make sure the application is completed

properly, all the requirements are there, so

MR. JOYCE: So we have a difference here

MR. McCARTHY: Yes.

MR. PADDON: We clearly do have a difference. I would suggest, based on

sort of the issues that we raised in our report around sort of follow-up and

monitoring and those sorts of things, would suggest that staff are not familiar

with the procedures, and that is probably some of the reason why there was not

follow-up.

MR. JOYCE: Again, I know I am beating a dead horse, but is there any

appetite to go back and review the policies and procedures, or do you think it

is in place, and this kind of stuff is going to continue, or

MR. McCARTHY: As I indicated before, we are constantly reviewing policies

and procedures. Things change in the divisions and in the department on an

ongoing basis, and we are constantly reviewing policies and procedures.

The intent of my answer was not to say that we are not doing anything, but

there are a number of processes in place we feel are adequate. We are constantly

reviewing this to make sure yes, that is part of our mandate, to ensure that

we have appropriate controls in place.

CHAIR: (Inaudible).

MR. JOYCE: Yes, I will come back.

CHAIR: Mr. Parsons.

MR. K. PARSONS: Good afternoon.

I just want you to lead me through the whole process now if I am a non-profit

organization and I am looking for a lottery licence. As you know, we all said

earlier we all deal with different groups and individuals in our area that have

to go through the procedure whether to get a lottery licence. So, can you just

guide me through what the steps are for someone to get a licence?

MR. McCARTHY: Yes, I will let Jerry answer that, as the director.

MR. BURKE: The first step is to make an application to us with all the

information that is on the application form, which includes the organization,

their address and the type of organization they are, like whether they are

registered with Revenue Canada or incorporated as a non-profit organization, or

a certified sports or recreation association. That is our first test that, yes,

you qualify.

Then the next thing we look at is, okay, what are they looking for here.

There is a different application for all the different types of lotteries that

we issue. There is bingo, there are the break-open tickets, the ticket raffles,

Monte Carlo nights and sports bets. So they will fill out the application for

the type of lottery that they are having, then they will have to give us the

information as to where the event is going to take place, who is going to

supervise the event, what the prize payouts are, what their anticipated proceeds

are going to be, and what the use of those proceeds are for. They sign that they

have a separate lotteries trust account set up in a registered financial

institution.

Once we are comfortable that everything is in place for that organization, we

will issue the licence. Most licences are issued within two days after we

receive them because most organizations are up to date and in compliance with

the legislation.

MR. K. PARSONS: Do you do a follow-up for a new organization that comes

in?

Obviously, what we are hearing today, a lot of the questions are that a lot

of stuff is not being recorded. Individuals, because they are volunteers and

stuff like this, are getting leeway with compliance to a lot of the rules that

are here.

Is there anything in place that will show an organization that comes in:

Listen here, these are the guidelines, once you fill out your application and

once you get your lottery licence, here is what you have to do to complete your

whole lottery licensing format?

MR. BURKE: Yes, all of the rules for every lottery are available. There

are guidelines for the eligible use of proceeds, what we deem is eligible. Then

there is a financial report which they will have to fill out showing what monies

they took in, what prizes and expenses they paid out, what the net proceeds

were, and did it go to what they intended in their application. If they have

trouble with that, we will work with them to help them fill out the financial

report.

MR. K. PARSONS: Being involved in a lot of volunteer organizations

myself, along with most people there are more volunteers in Newfoundland, I

think, than any other place in the country. Most of these people who do

volunteer want to make sure they do things right. It is important we give them

the proper guidelines to make sure that at the end of the day they have that

feeling in their gut that: Listen here, we did it right. We have all our

applications done and everything filled out.

It is important to me to make sure we have the proper processes in place so

people know exactly what they are doing. Like you say, they are volunteers and

most times they are the same volunteers who do everything in your community.

My question basically is I know you say the business plan part of it is for

major lotteries and stuff like that, even reviewing the small garden parties

that are being held and stuff like this procedures that are in place, they are

all standard for everybody? Is there a dollar figure on what profit is made? How

does it work there?

MR. BURKE: No, they design their own lotteries. There are restrictions on

prize payouts for bingo. On the others, they have had them as much as with these

small 50-50 draws at a school event for $25 up to like at a Caps game for

$20,000, or for a new home, or two new homes on one ticket. So, it is a wide

range.

MR. K. PARSONS: Okay.

My next question is to the Auditor General. Just in overall, the responses

that you received, what kind of satisfaction I know you are going to review it

again in two year's time and everything else, but what kind of responses do you

feel is there anything that really hits you that you would like to see a

better response from?

MR. PADDON: Yes. There are just a couple of things I would like to

comment on, and I will get specifically to your question in a second.

One of the things that we do when we do an audit, we will test a sample of

items. So, while there might be about 3,200 applicants in the run of a year, we

only looked at fifty-five. When you say that perhaps there was minor or only a

few infractions, really what you are talking about is say two or three out of

fifty-five, versus two or three out of 3,200.

You really need to project what we found on our sample over the full

population. Infractions of three out of fifty-five would translate to somewhere

around 170 to 180 over the full population. So I think you need to keep a little

perspective there as well.

Just in terms of my sense, maybe I can answer your question this way. I would

suspect that if we went in and did another audit today we would probably have

similar findings that we had a year ago.

MR. K. PARSONS: That is it for me for questions.

CHAIR: Mr. Mitchelmore.

MR. MITCHELMORE: I wanted to go back to licences approved with unapproved

intended uses of proceeds, on page 263. They are listed there, for operational

expenses, and maintenance of the service club as being applications that were

approved, that these were not really eligible expenses.

I am wondering, for clarification for the future, would it be simpler to list

maybe some of these instances where applications are becoming frequently

rejected, or well, these got approved because on your application it clearly

lists proposed use of proceeds, and it just says (inaudible) details?

MR. McCARTHY: Yes, with regard to those instances, that is not

acceptable. The staff have been reminded that they must ensure that the

application is complete. Reviews will be put in place to ensure that they are

complete, and they are only approving applications with approved proceeds.

MR. MITCHELMORE: Okay.

What is limiting a lottery licence or revenues from lottery or games of

chance from helping a non-profit or a registered charity with their operational

expense or maintenance? What is the reasoning behind that?

MR. BURKE: With a charity we do not question anything. If they are a

registered charity they can use their money for however they see fit.

For a non-profit organization, they get the licence to raise money for

charity and we do not think the operation of their facility is a charitable

object. Now there are instances where they can take 20 per cent of the proceeds

from a ticket lottery as a commission. They can use that towards their upkeep

and maintenance.

MR. MITCHELMORE: Okay.

Maybe should there be separate applications then for a charity versus a

non-profit, somebody who is registered with the CRA?

MR. BURKE: I do not think so.

MR. MITCHELMORE: Okay.

I went online and looked at all the applications and they are one page. They

seem like they are very simplistic. I am just wondering, in these situations

should they have a little bit more detail, a little more description? Because

when I looked at the rules and the schedules and everything it seemed quite

difficult to understand all of the information that is there. It is very

technical in terms, it is very legal. For myself or for other volunteers, they

may find it difficult to understand the rules. It is not written in everyday

language, is kind of what I am saying.

MR. McCARTHY: Again, we go back to, we do not get a whole lot of

complaints with regard to the process.

MR. MITCHELMORE: Okay.

I want to ask you then about the collection of fees associated with

lotteries, which is listed on page 263. There was a delay in submitting reports

but when it comes to collection of fees, what are the fees? Do you have a number

of licensees who are in arrears that are not submitting their fees?

MR. BURKE: From time to time there are organizations that are in arrears

but we work with them to get the fees in. The fee is based for different

lotteries, like bingo is 1 per cent of the prize payout. For games of chance it

is $10 per wheel or table. There are a lot of them with just a $5 charge. For

anything with prizes under $500 there is no fee.

Again, that comes back to their fee is due with their report. If their report

is late, the fee is going to be late. So we eventually track both of it down

together.

MR. MITCHELMORE: Right.

Are the non-profit groups or the registered charities aware of the fees and

the reporting process when they are given a licence? How is that made from the

staff to these organizations, especially the ones that are new? What is the

process?

MR. BURKE: They are all given copies of all the rules and regulations.

For the most part, all of these organizations have been operating for years and

they understand what the fee structure is.

MR. MITCHELMORE: Okay.

There would be new bingo halls or new lottery ones as well, I am just

wondering if they may be confused sometimes.

MR. BURKE: I was going to say, any new organizations we work with them to

make sure they understand all the rules before they get their first licence.

MR. MITCHELMORE: Right, okay.

The incident here, it says that a financial report was thirteen months

overdue, yet the division issued ten new licences to this person. It is kind of

like they are in arrears because they are not following policy, but it is

allowing them to continue, issuing licence after licence. This seems very

interesting that they were given ten different licences. It is different some

licences are issued for a year, some are issued for a month or one specific

case.

MR. BURKE: Some of these charities and non-profits are quite large with

subgroups.

MR. MITCHELMORE: Okay.

MR. BURKE: Each committee in the group is going to be doing one type of

lottery; like one could be running a bingo, one could have a sports lottery, and

one could be doing a Monte Carlo night. They have various licences at any given

time.

It is signed off by signing officers. We might have licences out there, like

when one group within the group is late, so that we penalize the other group,

especially considering some of the causes that are out there.

MR. MITCHELMORE: Right.

MR. BURKE: Again, that comes down to working with the organization. For

the most part most of them are great, but there is the odd one where you are

going to have trouble.

MR. MITCHELMORE: Right, I think it is good that you have explained it

that way with the organizations having subgroups and things like that. When you

look at an organization, if it is just one and one specific case and you are

reissuing licences, the way that this is written could reflect and raise

eyebrows based on that.

Let us see, I want to ask you about the errors around the statistics that

were on the Web site for the 2008-2009 year. Has that been rectified?

MR. BURKE: Yes, it has.

MR. MITCHELMORE: I am curious because I went on the Web site today and

looked at the statistics and it has not been updated for 2010, anything past

2009, why is that?

MR. BURKE: We have to get the statistics from everybody for the fiscal

year. We do not want to put up statistics if there are outstanding financial

reports. Like you say, sometimes it might take us up to a year to get all of the

information in before we are comfortable in putting those statistics up there.

There is usually about a two-year lag. Then some of the organizations have

different fiscal years than what we have. It is a timing thing, but I think we

are about ready now to go up with the next set of statistics.

MR. MITCHELMORE: Okay.

In terms of the errors it says: Expenses and prize payouts, the

understatement of the actual expenses and what they were in the Auditor

General's findings there on page 266. What accounts for these errors? Is it just

human error in terms of what was being tabulated?

MR. BURKE: Yes, that would be. That was human error.

MR. MITCHELMORE: Okay.

Do you see situations where you talked about the position and talked about

the budget, but I wanted to go back to looking at on-site compliance. It would

be to my understanding that not every type of lottery would have an on-site, a

physical location, so it would be very difficult to monitor, to actually go

on-site if somebody is doing a ticket sale or whatnot. How would you look at

enforcing those types of compliance?

MR. BURKE: The on-site ones, they are quite easy. If bingo is running,

you go in and do an inspection. Say, for a ticket lottery, that would be the one

where we would get them to submit their records and we would do a financial

audit on them. There is no other way of doing an inspection.

MR. MITCHELMORE: Right.

That would be more specific to a larger lottery, I guess.

MR. BURKE: Right.

MR. MITCHELMORE: I guess, are there exceptions to these types of rules to

specific groups when it comes to looking at raffles and fundraising? We are

specifically talking here about incorporated non-profits and charities

registered with the CRA. Are there exceptions to requiring a lottery licence for

certain groups and organizations in the Province?

MR. BURKE: Our definition includes amateur sport, youth activities and

recreation. For amateur sport, they would have to be certified by Tourism,

Culture and Recreation and the sport governing body to qualify for a licence.

The same with the recreation associations, they would have to be certified by

Tourism, Culture and Recreation and the municipality.

Again, we encourage them to get incorporated for their own protection. For

the most part, most groups we have, they are incorporated. There would be very

few exceptions.

MR. MITCHELMORE: What happens, though, to a group that is unincorporated

that has a legitimate cause and they have something that is coming up?

Incorporating takes time; it costs money, if it is a new group what are

options? How do they get off the ground, I guess, to raise the necessary money

to do the good work in the communities? There must be exceptions to the rules.

MR. BURKE: We require they submit their application thirty days prior to

their intended event. If they are not incorporated, there is time for us to work

with them to get them incorporated through another division in our branch. The

fee is only $75 so it should not be cost prohibitive. Normally when we have been

faced with that situation we have been able to get people up and operating when

they wanted to.

MR. MITCHELMORE: Okay.

CHAIR: I will go to a government member.

Mr. Cross, I believe.

MR. CROSS: Mr. Mitchelmore took all of my questions in the last session.

There are one or two comments here on page 273, related to incomplete and

outdated information on applications. Does that mean that if the application is

incomplete, someone has actually received a licence even though there were

blanks?

MR. BURKE: Yes.

MR. CROSS: Okay.

I can understand in one of the paragraphs it said, for instance, where if you

saw on a ticket you knew what the date was and you just transferred the date

over. I can understand that.

For other things, how would you follow-up after would you have just left it

open?

MR. BURKE: If we are aware of it, we will follow it up.

MR. CROSS: Okay.

The other question now, and I have not seen any reference to it in any of

these provincial lottery licences, and I do not know if we are aware that some

of these games have been going on, like Texas Hold'em for charity: Is there

actually a licence you can apply for?

MR. BURKE: Yes, under our ticket lottery application there is a

section

where you can have Texas Hold'em tournaments, but they are restricted to $500

payout per event and they cannot be held in a commercial liquor establishment.

MR. CROSS: Your summer festivals and things like that could actually use

MR. BURKE: Yes, sometimes a Lions Club or a Kinsmen Club will have a

small tournament for their members or whatever.

MR. CROSS: So they are legal in that way?

MR. BURKE: If they have a licence they are legal.

MR. CROSS: Okay.

Is it commonly aware that it can be done? I have asked a couple of places, if

they have been as part of a summer festival or whatever, and I asked them about

the prize payouts and what is there. I used to be involved with the recreation

commissions and Lions Clubs, and almost every single application you probably

have on your file you could probably go back and find my name applied for

something in a former life. That was one that I was not aware of and I was just

wondering in that sense.

There has been a lot of comment in the communities about Texas Hold'em and

things like that. It is on the verge of being a little different than just

regularly selling tickets and things like that.

MR. McCARTHY: Again, unless the organizations or the individuals involved

contact us, we have no way of knowing unless there is a complaint made.

MR. CROSS: Unless there is a complaint. Yes, I understand.

CHAIR: Mr. Joyce.

MR. JOYCE: I have a few more questions. On page 274, it says here,

"Business plans not received.

Section 3 of

Schedule D of the Regulations states

that For a ticket lottery with a potential prize payout of $100,000 or more a

detailed business plan shall be submitted with the application...' Our review

included three ticket licence applications with potential prize payouts noted of

$100,000 or more. Two of the three applications did not include a business

plan." Can I ask why?

MR. BURKE: When that was identified we determined it was the same staff

member who did it in both instances and it has since been corrected. It should

not have happened.

MR. JOYCE: It should not have happened, okay.

I can go through a few of them, the recommendations, because obviously I am

hearing on one side is that everything is fine because we are not receiving any

complaints. Yet, we have the Auditor General making these recommendations and a

lot of concerns that he had.

Are any of these recommendations going to be followed? What we are hearing is

that we are not hearing any complaints, everybody is happy so nothing is going

to change. Yet, we have these recommendations.

I will go through, just under that, "only those staff designated by the

Minister approve licences, as required by the Regulations". Is that being

implemented?

MR. McCARTHY: Yes, it is. Since the Auditor General's report, we have

reviewed the report. We have taken it seriously and we have taken steps to

address the issues that have been pointed out where we felt it was appropriate.

MR. JOYCE: Okay.

What I am hearing is that everything is fine, we are not hearing any

complaints, so no need to change things; yet, we have a number of Auditor

General's recommendations that, I am not sure. Well that one, as you say, is

going to be followed.

"information included in applications is complete and up to date before

applications are considered for approval". Is that going to be implemented?

MR. BURKE: That is something we strive to do on a daily basis with every

application. Given the number of applications, there are going to be things

missed. If it comes to our attention we will fix it, but we will communicate to

staff from time to time the importance of having everything included on the

application before a licence is issued.

MR. JOYCE: The $100,000 payout one, so that has been taken care of. That

should not happen again.

MR. BURKE: That will not happen again.

MR. JOYCE: Perfect, good job.

I will go on to page 279, some of the recommendations there. This was lottos

operating without a licence. "As a result, the Criminal Code and the Regulations

were not being followed with regards to licensing of lottery operations and the

treatment of punishable offences."

Here are some of the recommendations. "The Department should: ensure that

required financial reports are received from licensees within the established

deadlines". Is the department striving to ensure that this is being completed?

MR. McCARTHY: With regard to the recommendations, instances where the

Auditor General has reported. We have taken steps to ensure that, with regard to

staff, to make sure that these types of things do not happen where possible.

With regard to the criminal code one; again, the department has to make a

decision with regard to if someone is behind or late or whatever, are we going

to treat that as a criminal code offence or as an issue where the person you

have to look at criminal intent in some of those cases.

If we do not feel there is a criminal intent to steal money or to

misappropriate funds and that type of thing, it is a timing issue, the length of

time it takes to get compliance. That is a judgement call of the department that

we have to look at. We are not going to refer things for criminal action where

we do not think there is any criminal intent on behalf of the parties involved.

MR. JOYCE: Okay.

What does the Auditor General say about that? I am just curious. I understand

that because someone is a bit behind there is no criminal intent. It is hard to

say: okay, we are going to

MR. PADDON: You are essentially asking me to provide some, I guess, legal

assessment.

MR. JOYCE: No, no. I am asking you on the report that was done, where it

mentioned that it was a criminal offence and

MR. PADDON: Well, I think it would be fair to say that if we come across

an infraction of

an act or regulation that would be, in our view, contrary to

the criminal code, it would be hard-pressed not to put a recommendation in our

report around that.

MR. JOYCE: Okay.

MR. PADDON: At the end of the day, the department has to operate on a

daily basis, and it is their judgement and it is their operational decision how

they want to address that on a daily basis, but from our perspective it would be

difficult to ignore.

MR. JOYCE: Ignore it, but then I understand where you are coming from is

that you have to weigh it out. Okay.

The second one of those recommendations, "develop a licensee reporting

process that addresses all relevant legislation". Has that been completed in the

department?

MR. BURKE: Our licensing reporting process did address all relevant

legislation. We review it from time to time and if we deem change is necessary,

we will make it.

Jerry Burke, sorry.

MR. JOYCE: Again, I am not trying to keep the point going, but the

Auditor General is saying it is not and your department is saying it is. Is

there no way to come to a mutual agreement?

MR. PADDON: Well, we have not had a chance to sit down and come to any

mutual agreement on it. I do not think that is the nature of this process.

Essentially, our view is that there are a number of requirements that

applicants are required to meet. The current reporting requirements do not

require applicants to report on those particular regulatory items. It would be

difficult for the department to know if they are complying because they are not

required to report on it.

MR. JOYCE: Okay.

The other one that I mentioned earlier, "consider conducting on-site

inspections as provided for in the Regulations". We already know if there is one

person who is not in the position to do it. Is there any other way to ensure

that this is going to be complied with? We can go on here to eternity and say:

well, the position is not filled; therefore, we are not going to do it.

MR. McCARTHY: No. We are looking at that everyday and we are hoping to

have that process. If that is not completed soon, if we do not get someone

through the Opening Doors process, then yes, we will be looking at other

alternatives. What that can be, obviously I cannot say here today.

MR. JOYCE: How long has this position been vacant?

MR. McCARTHY: Over four years right now.

MR. JOYCE: I am not trying to be hard to get along with, but don't you

think it is time to say that we are not following the regulations, because there

no on-site inspections and the position is not being filled? There has to be a

determination made by the department somewhere.

MR. McCARTHY: With regard to the on-site inspections, yes, that is

obviously another tool that could be used to ensure enforcement and ensure

compliance. That is a little bit different than to say that people are not

complying. That is a different issue.

MR. JOYCE: It says in the regulations, according to the Auditor General,

provided in the regulations to "consider conducting on-site inspections as

provided for in the Regulations".

MR. McCARTHY: It is not mandatory, is that correct?

MR. BURKE: It is not mandatory under the regulations. When we did have

this position a number of years ago and it was filled for about fifteen years

before it went vacant, it just so happened that the current manager was the

person in that position but we were finding very little in regard to

violations of anything in the regulations with our on-site inspections. They

might not have the rules for bingo posted, or just some minor things, but we

found the organizations, for the most part, were compliant. We would like to

take a look at them again at some time.

MR. PADDON: Just to be clear, I do not think we are saying that the

regulations require on-site inspections, what we are saying is that the only way

you could determine compliance with some of the regulations is if you do an

on-site inspection.

MR. JOYCE: Yes. Obviously, the department did feel the same way, because

the position is still left open.

Page 280, right of the bottom of the recommendations, it is under the

sub-headline: No performance measures or reporting requirements. Down at the

bottom, "develop and implement an operating plan for the Division." Can you

explain that, Terry?

MR. PADDON: I will do my best. I guess our view is when we looked at the

published documents for the department itself there was nothing specific in

there related to this division that related to goals, objectives, those sorts of

things. I do not know if, when we inquired, whether there was anything provided

in terms of specific goals or targets or objectives for the division.

MR. JOYCE: Would you like to comment on that, Mr. McCarthy?

MR. McCARTHY: Yes. A divisional plan as spelled out separately from the

departmental plan and the strategic goals and objectives, no, but it is all part

of the departmental plan that we have. There is no divisional operating plan,

per se, in writing, but that is not to say that we are not operating the

division and have a plan as to how that is being operated. It is maybe not

spelled out clearly, separately from the departmental plan.

MR. JOYCE: Okay, that is it for me right now, Mr. Chair.

Thank you.

CHAIR: A government member; Mr. Collins, maybe.

Any other government member?

MR. K. PARSONS: No, I would just like to follow up a little bit. I think

a lot of the questions today are about procedures that are in place and whatnot.

Since the Auditor General's report came out, have you made many changes, is

there a lot of change, can you discuss some of the changes that you have made to

address some of the procedures that have been in place?

MR. BURKE: We have not made a lot of change, because a lot of the

recommendations are based on current staff who had oversights and there were

late reports. It is going to be an ongoing thing with this type of industry that

we are just going to have to keep after people. We are going to have to keep

reminding staff of what their responsibilities are. I do not know there is any

more we can put in place other than those on-site inspections and financial

audits for determining compliance.

MR. K. PARSONS: Okay.

I understand, and I think we all understand, your intent to make it as easy

as you can for the people who are applying. It is a very important part of all

our communities with the fundraising they do and whatnot for different

organizations.

As was stated earlier, it is not minor when you are talking about $54 million

in totalled monies that are in place. It is very important because you can put

it in place, 90 per cent could be perfect, and then you have 10 per cent where

there is some compliance. It is important we have rules and regulations there

and that we make sure everything is done properly.

I do not know what procedures we are looking for here today. It seems like

you guys are pretty happy with what is going because there are not a lot of

complaints, but sometimes you do not hear any complaints and there still could

be things that are wrong also. I do not know if you want to comment on that.

MR. McCARTHY: To speak to that, certainly the things in the Auditor

General's report, the deficiencies identified with regard to if there was

oversights in the process from our end and that type of thing, we are taking

that very seriously, and we are ensuring to the extent possible that does not

happen again. Staff have been reminded. There is a process put in place. We are

reviewing that to ensure to the extent possible we cannot guarantee there are

going to be no errors or omissions, but we certainly have the processes in place

to ensure they are minimized to the extent possible.

MR. K. PARSONS: Thank you very much.

CHAIR: Mr. Mitchelmore.

MR. MITCHELMORE: Thank you.

I have never filled out an application for this but I did go on-line looking

at your applications, looking at the reporting procedures and things like that,

and there is certainly a lot of paper and a lot of different applications. I am

wondering if you would be considering working with the non-profit and volunteer

secretariat along with your Consumer Affairs Division to look at maybe doing

focus groups or something like that to engage the non-profit sector, the

clientele you service here, to see if there is a way to streamline the process

and make it easier for them.

Is that something you would be willing as a division of a department to look

at doing to simplify some of these processes?

MR. BURKE: A number of years ago we met with a lot of these organizations

to streamline and all of these separate applications and financial reports are

as a result of the input from those organizations. Because prior to that, it was

a four-page application and a four-page financial report where everything was

thrown in together, so we did streamline it.

If we had requests from anybody, we could certainly sit down and have focus

sessions. I do not think that would be a problem.

MR. MITCHELMORE: Right.

I just think that there may be a tool or a resource that could help people to

find what qualifies in certain expenses, gross and net profits, to almost like

how you fill out your taxes on-line. You fill out and they say a tip here, did

you calculate this correctly and whatnot.

Having some sort of interactive tool, whether it at the Service NL site where

the person would have filled out the application, or on-line readily available

to somebody who does have access to the broadband Internet a number of other

government departments are utilizing technology in innovative ways to reach the

clientele. I am just wondering if that is something that your department would

look at pursuing.

MR. McCARTHY: Definitely, anything that is available and that is cost

efficient for us to perform our duties better or to make it more efficient and

to ensure enforcement in that.

As Jerry said, with regard to any non-profit organization that wants to come

to us, wants to work with us, wants us to come out and give presentations, we

certainly are willing to do that. We do that when we get requests. Also, we have

staff working with people with regard to those organizations.

There are many things with regard to the non-profit sector now. With

government, there is a whole division with regard to non-profit sector. In our

insurance division, we work with them from an insurance perspective, in that we

have a person dedicated.

There are a lot of things being done to help all of those charitable

organizations, where possible, to deal with government and the requirements, and

to assess risk and liability.

MR. MITCHELMORE: How much revenue is generated on an annual basis from

these lotteries to your department or to provincial coffers?

MR. BURKE: We receive, in licensing fees, about $350,000.

MR. MITCHELMORE: Okay.

Is that reinvested back into your department to pay for costs or does it just

go into general revenue?

MR. BURKE: General revenue.

MR. MITCHELMORE: Okay.

I am wondering then: Out of what you collect, what percentage is

uncollectible, or you do not generally collect? Is it a high percentage?

MR. BURKE: It is a very low percentage that would be uncollectible

because we have that hook that if you do not pay your fees, you are not going to

get another licence. So it is very seldom that a group does not pay up.

Sometimes they have to because they find themselves in trouble set up a

payment plan with us where they will pay so much per month, but we do not have a

problem with it.

MR. MITCHELMORE: Okay.

How would people know, or how would your department know if you do not do any

on-site visits, if somebody is operating without a licence without submitting

your report, and you are not issuing them a licence, and they continue

operations?

MR. BURKE: We have no way of knowing unless there is a complaint made.

MR. MITCHELMORE: Okay. It is generally the public police basically, for

the most part.

Since looking at these here, there are a high number that go beyond the

months outstanding in terms of applications, from what I am looking at. If you

look at from 3-6, 7-12, 12+ and Not Received as at, represents over 56.2 per

cent where the reports are being delayed. We have talked about reasons why.

I am wondering if your department is looking at any ways to maybe provide an

incentive for people to submit their reports in a timelier manner. Could they

maybe get a reduced fee, or could they get something back in return for making

sure they are on time as a means to encourage somebody who would be late, to get

in there a little bit quicker?

MR. McCARTHY: No, we have not looked at that.

MR. MITCHELMORE: Okay.

I go back to reviewing the regulations and the reporting requirements because

it seems somewhat of concern looking at

section 13,

section 31,

section 28, on

page 276. I guess this was talked about a little bit, "licensees shall open and

maintain a separate designated lotteries trust account in a financial

institution" That is somewhat being accounted for on the application where they

are looking for the trustees and the signatures.

Is there anything being done to ensure that these accounts are set up and

that they are being followed? Is there a search or anything done? There is no

way. It is just the word of the applicant, right?

MR. BURKE: Correct.

MR. MITCHELMORE: Okay.

Has the licence reporting process changed to include the non-financial

compliance at all, or are there plans to do so?

MR. McCARTHY: I do not really understand the context of your question.

MR. MITCHELMORE: Okay. Well, basically the current licence reporting

requirements include information that is just of the financial nature. The

Auditor General pointed this out earlier, that in order to be complying with

regulations you would have no way of knowing that there are two witnesses at a

media bingo, at that event.

What are you doing to change your forms to comply with the regulations to

ensure that you are meeting your regulations, or are you looking at changing the

regulations that are currently in place? Because one or the other would

ultimately have to change, either follow the regulations or you change the

regulations.

MR. McCARTHY: If I understand your context, what the Auditor General is

saying is these are recommendations that could ensure that the regulations are

being followed. He is not making a statement that they are not being followed in

that particular context. "We would expect a more complete licensee reporting

process to be in place to allow the Division to ensure that Regulations such as

those noted above were being followed by licensees."

MR. MITCHELMORE: Right.

MR. McCARTHY: So, it is not a question that they are not being followed.

It is these are some recommendations they put in place, or that potentially

could help. Again, you have to look at a cost-benefit analysis of how much it

would cost to put these in for what would result at the end of the day. What are

you saving? That is a judgement that has to be made.

MR. MITCHELMORE: The point is that these are specifically in the

regulations. There is no way of the department knowing that the regulations are

being followed. Therefore, if the department is not going to be changing its

applications or its compliance policies, then would it be looking at changing

the regulations to eliminate some of these rules

section 28, for example

from the policy, or is that going to be something that is going to be enforced

in the future?

That is where there are some concerns. We have regulations. Regulations are

supposed to be followed, and we are seeing right here where there is no way of

knowing if they are being followed or not.

MR. McCARTHY: No, I did not intend to change the regulations with regard

to that, or lessen the standards. As indicated, some on-site inspections, if we

had the position, could verify whether that is being complied with. Again, I

reiterate, we are not getting complaints that there is a problem out there, but

certainly it would be nice to have someone to go out and do some random on-site

inspections to confirm that.

MR. MITCHELMORE: Right, but something like

section 28 in your financial

report, if there was a media bingo you could have a

section of the financial

form to say that these two people were present and they would sign the form

there to confirm that. Then you would be able to know that that regulation, that

requirement is being met.

Is there some review by your department, based on the Auditor General's

finding, to ensure that the regulations are being followed, is what I am asking?

Because right now it does not seem like there is a change, from the response

that I am getting.

MR. BURKE: We give these organizations say for that media bingo one,

for example a sheet, like a checklist that they should follow. They do sign

off as to who the two witnesses were. If we do on-site inspections, or financial

audits, that is the kind of stuff that should be available for us to look at in

order for us to determine that they had complied.

MR. MITCHELMORE: Okay.

There has not been a financial audit done in quite some time, not in a full

scope of any shape. I think you need to look at filling the position, whether it

is through the Opening Doors or through other operations that you have, vacant

positions, reclassification. You are missing out on vital opportunities there.

However, that is my opinion.

CHAIR: Mr. Mitchelmore, I will go to a government member.

MR. MITCHELMORE: Sure.

CHAIR: If one has a question. If not, I will go to Mr. Joyce.

MR. JOYCE: No, I am fine for now.

CHAIR: Mr. Mitchelmore, you may continue.

MR. MITCHELMORE: I am curious, and I guess Mr. Joyce had asked the

Auditor General and yourself, but I am surprised there is no operating plan for

your department. How can the division achieve strategic goals and objectives

without an actual operating plan to get there and measure? This is something

that is not being worked on, obviously.

There is no plan to put an operating plan in place, even though there are

unwritten rules and policies. There is no way of tracking what is actually being

done and followed on a yearly basis to see if you are meeting your strategic

goals and your mandate.

MR. McCARTHY: Just to reiterate, the fact that some of that is not in

writing does not mean we are not part of the departmental strategic plan with

goals and objectives, a part of that. It does not mean there is reporting not

done to the director and not done to myself as part of that, and having reviews

and processes in place. Whether there is a formal operational plan, that is one

aspect of it, but that is not to say we are not monitoring the division and

reviewing the division, and making sure that the division is carrying out its

mandate.

MR. MITCHELMORE: Okay.

On page 285, in your response to licence monitoring, you said, "The

Charitable Gaming industry is, for the most part, run by volunteers through

charitable and not-for-profit organizations. The division does its best to

ensure that all Financial Reports are received on a timely basis. However, given

the nature of the industry, there will be instances of late reports but rarely

is a report not received."

Can you be more specific and define rarely? How many actual instances have

you had where a report is never received?

MR. BURKE: In the twenty years I have been there, like you say, you could

probably count them on both hands where we did not receive the report. That is

usually for organizations that they come together, they hold an event and then

they disband, and they let their charitable status lapse or they let their

incorporation lapse and we have no one to go after.

MR. McCARTHY: To reiterate, they are not situations where we have gotten

a complaint with regard to the activity that was carried out. They just never

followed all of the processes with regard to reporting after.

MR. MITCHELMORE: Do you have any idea or a statistic of how many

unlicensed lottery, bingos, and things like that, that are happening in

Newfoundland and Labrador? Is that something that is kind of tracked through

your department?

MR. BURKE: I cannot see anybody tracking illegal activity. If they did,

it would be reported to the police, but we certainly do not track it. If we

become aware of an unlicensed lottery that is not being run by a charitable

religious organization, we refer it to the police for prosecution.

MR. MITCHELMORE: Okay.

MR. BURKE: I would say it is impossible to collect statistics on

unlicensed gaming activity.

MR. MITCHELMORE: Right.

I guess if you found out that an organization is operating without a licence,

would you be working with them first before something would go to the police, as

in what has already been found in the Auditor General's report where things like

backdated licences were issued?

MR. McCARTHY: With regard to that question, again, we would have to look

at if this is a proper charity that is available and is permitted to get a

licence, just have not followed the process; it is strictly a judgement call. If

it is clear that someone has criminal intent or has no intention of complying

with the legislation, is trying to break the legislation, we will refer that

matter for legal action to the appropriate legal authorities.

MR. MITCHELMORE: Right.

MR. McCARTHY: You would have to make a decision. What is the reason for

the non-compliance?

MR. MITCHELMORE: What outreach is being done through your division of the

department to inform new incorporations in the Province? When a non-profit is

incorporated, do you send them a package? If they are going to be doing

fundraising through lottery and things like that, do you send that out to them

to let them know? The same thing with the CRA, when they become registered

charities, do they get a package, or do they get a call from your office, or

some way to educate them about this process of provincial lottery licensing?

MR. BURKE: Unless we are asked for a package, we do not send it out.

There are thousands and thousands and thousands of incorporated non-profits and

registered charities. A lot of them do not fundraise through lottery, so how do

we know who to send it to?

MR. MITCHELMORE: Right.

MR. BURKE: That would be an awful overkill to give something to

everybody.

MR. MITCHELMORE: Service Newfoundland and Labrador also deals with

registration of companies, so they would be dealing with the non-profits. When a

letter goes out to them, maybe a paragraph or a

section to note that if they are

doing fundraising, that a link would be provided to direct them to that aspect

of the Web site or a telephone call to the Service Newfoundland and Labrador

office to help ensure greater compliance. I would imagine there are

organizations out there that would be complying with legislation but may not be

aware of the process and how to go about doing it. It is just a suggestion.

I do not have any further questions. I certainly thank you for being more

than upfront and frank with your responses, and to keep doing the work you are

doing.

Thank you.

CHAIR: Do other members have any questions before I have a few questions?

MR. JOYCE: I would just like to make a statement and this is from me

personally in some of the work. I understand the amount of applications that go

through your offices for processing. I understand sometimes the smaller

applications may need a bit of help to get filled out and everything.

The intent of the Public Accounts is to try to help strengthen I do not

think it is more for the smaller church groups. It is the bigger ones when

someone looks at the $54 million that was paid out last year. It is our role to

try to strengthen that. I know when some come through and they are not

completely filled, it is hard to track someone down in some area of Newfoundland

and Labrador to complete a form. I understand that and I think most of us

understand that, too.

I just want to thank you for enlightening us sometimes and being forthright

on the questions. I thank the Auditor General's staff also for helping us out

here. It is an issue I know everyone on this side over here has faced to help

out and try to work through the system also. We understand the frustrations.

Sometimes you hear us knocking on your door trying to help out with the

applications also.

Thank you for that.

CHAIR: Gentlemen, early on in the questioning and I am referring to

page 263 if it is helpful there were a number of questions about three

applicants who had unapproved uses of proceeds noted. Maybe there were not

questions on that. "The unapproved uses were: operational expenses of the

applicant in two instances, and maintenance of the applicant's service club in

the third instance." What, if any action, did you take based on that finding?

MR. BURKE: We went to all staff and reminded them of what does qualify

and what does not qualify. We have that listed and it is also available to the

public on our Web site.

CHAIR: I was referring to the applicants who misused basically

misappropriated gambling money is what they did. Money was raised in a lottery;

they used it for something that was not an approved use. I am asking: What steps

did you take regarding those three applicants?

MR. BURKE: All we can do in those instances is to advise them that these

are not approved uses of proceeds; we did not approve them on your application.

If it happens again, we are going to have to take a more serious look. We just

look for voluntary compliance.

There have been occasions where they have taken the money and put it back

where it was used inappropriately. Knowing what each one of them done

individually, it is hard to know. That is usually isolated incidents where we

have worked with the organization in each case.

CHAIR: Do I understand you to say that if they had asked to do it, you

would have told them no, and since they did it improperly, they were forgiven.

MR. BURKE: Not that they were forgiven but

CHAIR: They got forgiveness instead of compliance?

MR. McCARTHY: You would have to look at that from the nature of how much

was involved

CHAIR: I understand that.

MR. McCARTHY: with materiality of that. If it was something really

material, we would not let that go lightly.

CHAIR: You agree that they actually converted the funds to a different

use than they were approved for?

MR. BURKE: Yes, that has happened. It is the organization's

interpretation usually of what we provide as approved uses of funds. Sometimes

they may stretch that.

CHAIR: A conversion is a Criminal Code offence. Repeatedly, the Auditor

General has raised the words Criminal Code throughout this report.

MR. PADDON: I think it is important to note that in those three

applications, when the applicant, when they made their application, the

application had the unapproved uses on the application. The organizations had

their licence approved based on the information that they sent in, which was the

unapproved uses.

CHAIR: Okay, I understand.

MR. PADDON: I guess what the department is saying is you really cannot

fault the organization if they had given a licence based on the information they

send in.

CHAIR: Now I understand the organizations requested an unapproved use, so

they actually acted in good faith and were permitted to do so. Now the division

or the department has taken the remedial step of reminding staff that this is an

inappropriate procedure.

MR. McCARTHY: That is correct. That was oversights on behalf of staff in

approving the thing. It should not have happened. We have reminded staff and we

have ensured, to the extent possible, that this does not happen again.

CHAIR: On page 265, this was the issue I intended to refer to before I

pursued the other one. Of fifty-five licences reviewed, three operated during

the year without a licence and then they were backdated. There were a number of

questions, and I never was satisfied. Was the backdating to the date of the

licence application or was it to a different date?

MR. BURKE: It was dated for the date of the event.

CHAIR: But not the date of the application?

MR. BURKE: No, because the application date may not be the same day as

the event.

CHAIR: Are you able to go back to your records and provide at this

point I will not ask you for the names because we need to get an opinion on

whether the names can be disclosed, but are you able to provide a written

confirmation to the committee of the chronology of the dating of the licence,

the dating of the application, and the dating of the event?

I could not really figure it out from the questions that were asked by at

least two of the members. I still could not understand. I understand a little

better now whether this was something that happened over a relatively quick

period of time or backdated over a longer period of time. Are you able to go

back and provide this committee with that chronology?

MR. McCARTHY: We are not sure what level of detail can be provided with

regard to identifying organizations. That is something we would have to seek

advice on.

CHAIR: Okay.

The Auditor General presumably will have these files, the ones that are

referred to?

MR. PADDON: I am not sure whether we would have the files themselves. We

would certainly have the information. We would have seen the files. We do not

physically have possession of the files, no.

CHAIR: Okay.

Do I understand that those files can actually be identified?

MR. PADDON: We know who they were, yes.

CHAIR: If that is of any assistance that the Auditor General can identify

those files, are you able to provide the committee with the dates, the

chronology of when different events happened? At this point, I think it is safe

to say we are fairly in the dark. We do not know when this happened.

MR. PADDON: That would all be in the organizations file, all of the

information you are looking for there. If we are able to provide you with the

file, we would be able to identify that information.

CHAIR: You can say licensee A, B and C, because there are three of them.

That way we will be able to assess it ourselves and see, because we need to file

a report to the House of Assembly on this. This definitely is a gap in the

information, simply because you do not know at this point and we do not know at

this point. It would be important for us to know.

Also, at the bottom of page 265, the report says, "Gross proceeds:

understatement of $16.2 million" What does that mean? I do not think it means

someone ran off with $16 million, or maybe it does.

MR. BURKE: That was a calculation error by our staff. That has since been

corrected.

CHAIR: Okay.

The next page says, "Expenses and prize payouts: understatement of $34.5

million" Is that the same thing?

MR. BURKE: It is the same thing, yes.

CHAIR: Then, "Net proceeds: understatement of $2.8 million" That is net

proceeds to whom, to the people who

MR. BURKE: Net proceeds to charitable and religious organizations.

CHAIR: Are you able to provide us with the actuals, the restated correct

numbers?

MR. BURKE: Yes, we can provide those.

CHAIR: Or, are the numbers that I referred to actually the correct

numbers as revised?

MS KEATS: (Inaudible) to the Web site at the time, but I believe we were

given the correct information for that particular year that had been

recalculated by the department.

CHAIR: Okay.

MR. PADDON: As I understand it, the numbers that are reflected here in

that recommendation are the correct numbers.

CHAIR: Okay. Thank you.

In that case we have those numbers.

On page 284 begins the department's response. At the bottom of 284 there is

Application Approval and Processing. "Issue: Approval of license applications by

those not designated".

The response by the department is, "The department is currently seeking

advice from the Department of Justice on the issue of authority to approve

licenses and will implement direction as deemed appropriate." Did that response

come back from the Department of Justice?

MR. McCARTHY: Yes, the response from the Department of Justice was that

the minister had the authority to designate these individuals. It is just that

the division had not designated the individuals, and we are in the process of

correcting that issue.

CHAIR: Okay. How does it stand now?

MR. McCARTHY: Pardon?

CHAIR: How does it stand now?

MR. McCARTHY: We are in the process now of correcting that, but it is not

completely corrected yet. We had to determine the designated individuals who

would do that and get the minister to give the proper designation as permitted

under the rules.

CHAIR: The report is dated January and the response is included in the

report. So the response must have been longer ago than January, 2012.

The departmental response is included in the AG report. The AG report was

published in January, 2012. So, the response was sent before January, 2012? For

approximately ten months this matter is not yet resolved, or is it resolved?

MR. McCARTHY: We had to seek legal advice. We got the legal advice and

there was an issue with regard to the stamp being used by the director and

whether that would suffice.

The legal advice we received is that the simplest way to correct this is to

have the minister designate these individuals who were actually approving and

that would resolve the issue. That is what we are in the process of doing.

CHAIR: Okay, but that has not been completed yet?

MR. McCARTHY: No. It has not been completed, no.

CHAIR: On the bottom of 285, the issue that was dealt was, "Licensee

reporting requirements do not fully address legislation". The response says,

"The department is anticipating finalization of classification and recruitment

of an Enforcement Officer" Is this the same position? It is not the same

position as open?

MR. McCARTHY: I am sorry, I am after

CHAIR: At the bottom of 285.

MR. McCARTHY: Page 285, do you have that there, Jerry? What did I do with

that one? Maybe it is here. I am sorry about that.

CHAIR: The issue that came up was: Licensee reporting requirements do not

fully address legislation. The department's response was, "The department is

anticipating finalization of classification and recruitment of an Enforcement

Officer for the Consumer Affairs Division."

MR. McCARTHY: Yes.

CHAIR: " It is expected that monitoring, reporting and compliance within

the Lottery Licensing Program will be enhanced once this position is filled." Is

the position filled?

MR. McCARTHY: No, the position is not filled, and actually we are still

working with the Public Service Secretariat in order to properly classify and

get that position properly classified.

CHAIR: Do you have any idea of when the position might be filled?

MR. McCARTHY: I really cannot say at this time, no.

CHAIR: On page 286, the issue of no audited statements required of

licensees. The response was, "Audited statements were not a requirement of the

legislation." If audited statements were a requirement of the legislation for

larger licensees, what would the outcome be? Is that manageable?

MR. McCARTHY: I really would not be able to comment on that, because I

would have to look at the scope of the thing I really could not comment at

this time.

CHAIR: I can understand if it is a very small lottery in the hundreds or

few thousands, but if it is quite large, maybe they should be required to have

audited financial statements. Do you have an opinion on that?

MR. McCARTHY: Not at this time, no.

CHAIR: So you do not have an opinion as to whether you think they should

be audited or not?

MR. McCARTHY: Whether audited statements would be required or not?

CHAIR: Yes.

MR. McCARTHY: We do require audited statements in some cases.

CHAIR: Okay, then the response that you gave on 286 says that audited

statements are not a requirement of the legislation.

MR. McCARTHY: That is right, it is not a requirement of the legislation,

but that does not mean that we cannot, as a matter of policy we could require,

if we deemed it necessary.

CHAIR: Have you required audited statements?

MR. BURKE: Some of the larger organizations that operate year-round, they

provide us with audited financial statements on an annual basis.

CHAIR: Of the fifty-five of the sample group, how many were audited?

WITNESS: (Inaudible).

CHAIR: None of the fifty-five statements that were the sample group were

audited?

Then I am going to ask if you could refer to the year that this covers and

advise the Committee of how many whatever the number was: 3,000-and-some

actually provided audited financial statements. We do not need to see it, just

how many of them

MR. McCARTHY: That is noted.

CHAIR: Thank you.

I have no more questions, but maybe some of the Committee members might want

to go back to something.

Mr. Mitchelmore.

MR. MITCHELMORE: I have a question.

I was on your Web site looking at the charitable gaming statistics, which I

asked about earlier and you said you have updated them on the Web site. I think

there is an error in the stats that are there. You have gross proceeds listed at

$36,371,680, expenses and prize payout at $5.9 million, yet net proceeds are

only at $9.3 million.

Somewhere there is missing a lot of millions of dollars in terms of expenses.

I think there is maybe a technical error of a twenty being omitted from the

expenses and prize payouts. Then that would fall in line with the other expenses

and what net proceeds would be. It just does not make any sense, what is listed

on your Web site. It might be something you would want to look into.

MR. BURKE: Yes, we will look into it. I cannot comment on it today,

obviously, but will look into it when I get back to the office.

MR. MITCHELMORE: Or else there would certainly have to be an explanation

as to why, if there was $36 million in gross proceeds by charity, only $6

million in expenses and payouts, yet the net proceeds were only $9 million. That

only adds up to $15 million. What happened to the other $21 million, basically?

I still think there is an error involved somewhere there.

CHAIR: Mr. Mitchelmore, did you want one of the gentlemen, if there is an

error, to advise us accordingly?

MR. MITCHELMORE: Yes, I would like some clarification back to the

Committee on this, at least a letter or correspondence saying this was looked

into and this is the reasoning why this is $6 million versus maybe $26 million.

There should be some explanation because the statistics, it was said, were

updated and that they were accurate. I do not think that is the case. There

needs to be an explanation to the Committee on that.

MR. McCARTHY: Not a problem.

MR. MITCHELMORE: Thanks.

CHAIR: You can provide the explanation?

MR. McCARTHY: Yes.

CHAIR: Mr. Paddon, did you have any questions or anything we should

cover?

MR. PADDON: No, I am just doing a check of our findings. It would appear

that the Committee members have covered all of the findings we have had.

CHAIR: Thank you for coming.

We will entertain a motion to adjourn.

MR. S. COLLINS: So moved.

CHAIR: We are adjourned.

Thank you very much.

On motion, the Committee adjourned.