November 18, 1998

PUBLIC ACCOUNTS

COMMITTEE

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

CHAIR (J. Byrne): Order, please!

For those of you who do not know me, my name is

Jack Byrne. I am the MHA for Cape St. Francis, and Chairman of the Public

Accounts Committee. To my right is Tom Lush, the MHA for Terra Nova, who is the

Vice-Chair. What we will do is go around the table in a few minutes.

This hearing is called by the Public Accounts

Committee to get some information with respect to the privatization of

Newfoundland and Labrador Computer Services.

I understand from the department of the Auditor

General we have: Ms Elizabeth Marshall, the Auditor General; Mr. John Noseworthy,

Deputy Auditor General; Mr. Dave Ralph, Audit Manager; and there is one more,

Mr. Keith Butt. From the Treasury Board Secretariat we have: Mr. Peter Kennedy;

Mr. Ron Williams; and Mr. Harry Hutchings, Director of Information Technology.

From the Department of Industry, Trade and Technology we have Mr. Keith Healey,

the Assistant Deputy Minister, and you have one more individual with you.

MR. HEALEY: Linda Spurrell.

CHAIR: We know each other now, I think, but we

will go around the table anyway.

MS MURPHY: Elizabeth Murphy, Clerk.

MR. J. NOSEWORTHY: John Noseworthy, Deputy

Auditor General.

MR. BUTT: Keith Butt, Auditor General's Office.

MS MARSHALL: Elizabeth Marshall, Auditor

General.

MR. RALPH: Dave Ralph, Audit Manager.

MS SPURRELL: Linda Spurrell, the Department of

Industry, Trade and Technology.

MR. HEALEY: Keith Healey, Department of

Industry, Trade and Technology.

MR. KENNEDY: Peter Kennedy, Secretary to the

Treasury Board.

MR. HUTCHINGS: Harry Hutchings, Director of IT

management, Treasury Board.

MR. WILLIAMS: Ron Williams, Comptroller

General, Treasury Board.

MS THISTLE: Anna Thistle, MHA for Grand

Falls-Buchans.

MS S. OSBORNE: Sheila Osborne, MHA for St.

John's West.

MR. M. NOSEWORTHY: Mark Noseworthy, Executive

Officer, Public Accounts Committee.

CHAIR: Thank you.

The Public Accounts Committee decided after

reviewing the Auditor General's Report for March 31, 1997 that we had a number

of issues we wanted to look at, and one of them happened to be the privatization

of Newfoundland and Labrador Computer Services, based on the comments and

concerns of the Auditor General.

We had a document passed out to each individual. I

would think, Mark, that was done. There is one slight addition to that. In the

agreement in the document that you received there were a number of pages that

were not included. Were they passed out?

MR. M. NOSEWORTHY: They are all there.

CHAIR: They are all there now.

Before we get on with this, the people from the

Auditor General's office have been sworn in, but we have to swear in the

witnesses. Elizabeth, could you do that?

MS MURPHY: Two have not been.

CHAIR: Two have not been, okay.

Swearing of Witnesses

Mr. Keith Butt

Mr. David Ralph

Mr. Keith Healey

Ms Linda Spurrell

Mr. Harry Hutchings

Mr. Peter Kennedy

Mr. Ron Williams

CHAIR: Thank you, Ms Murphy. Before we get into

the questions, I want to make one point. On page 1 of the document there is a

statement there with respect to the divestiture of Newfoundland & Labrador

Computer Services Limited. The second paragraph says: "Information in these

documents is considered confidential as it contains proprietary information with

respect to the operations and commitments made by NewTel and its consortium

partners." I think that came from Treasury Board. Would you like to comment on

that before we get going?

MR. KENNEDY: I would like to say, Mr. Chairman,

there are obviously some issues here - I do not know what issues exactly - but

some that might be considered to be commercially sensitive, and there might be

some information here that relates to the competitive position of a private

company which is engaged in a competitive process. I think it was just to make

the Committee aware of that. Our intention was to give you the information and

to allow it to be used to whatever extent is useful for the Committee in its

deliberations, but just to point out that there was a sensitivity in relation to

that.

CHAIR: The Public Accounts Committee by its very

nature is a Public Accounts Committee. In my mind, if an agreement is being made

and being negotiated at any point in time, of course that would be confidential

until the agreement is done. I think what we will be basically concentrating on

is the report of the Auditor General, but we will keep in mind the point that

you make. Again, I have to say that the agreement, once it is done, is done in

my mind.

Would the Treasury Board or the department have any

opening statements they would like to make before we get into the questions?

MR. KENNEDY: Just a general statement perhaps, Mr.

Chairman, before we look at details of some of the issues raised by the Auditor

General, just to outline the fact that there was a privatization that was

undertaken with an economic development objective in mind. Because the situation

that existed up until 1994 with respect to the provision of computer services

was one where government had its own internal computer services bureau. It was

no different than our having a Department of Works, Service and Transportation,

the Public Service Commission or anything of that nature.

Because this company, which was the largest IT company

in the Province, did not have any private sector focus, because it did not

sub-contract for the most part any work to the private sector, this was felt to

be an impediment to the growth and to the development of the information

technology sector in the Province. With that in mind it was determined that it

should be placed in the hands of the private sector, subject to terms and

conditions that would be satisfactory to government, and for the overall purpose

of attaining mainly a series of (inaudible) relevant objectives.

To this point in time we feel, despite the existence

of some problems in the arrangement, that this has been a success. A number of

(inaudible) jobs, for example, were created and were (inaudible) for the last

three or four years to be an internal IT utility for government purposes. I am

convinced personally that there will be no more jobs there today than there were

four or five years ago, but in fact there are 126 new positions based on the

most recent numbers (inaudible).

Over $12 million in work has been subcontracted, to

this point in time, to the local industry. Previously very little, if any, was

in fact subcontracted. Forty-four companies locally have benefited from

subcontracting on that work. There are some positive signs, I suppose, that the

industry in the Province is now on a better footing for growth.

There are some problems, which you mentioned, with

respect to the ability of certain other consortium partners to deliver on

commitments that were made. We are engaged at this point in time, in the late

stages of negotiations, with the partners to find a package of measures that we

would consider will keep us whole.

There are some financial penalties that could apply if

we are unsuccessful in doing that, but our strong preference would be to

negotiate a package of benefits that would put us substantially, as a Province,

in the same position, more or less the same position we would have been in had

these problems not arisen.

One of the consistent themes the Auditor General

raised was with respect to the need to have a full audit carried out in order to

have 100 per cent satisfaction, and the knowledge and comfort, that the benefits

that were outlined are accruing to us and so on. We have initiated that and

(inaudible) under way at the present time.

Apart from that I don't think I have anything of a

general nature to say.

CHAIR: Thank you. Your opening remarks sounded to

me like they were a pre-emptive strike with respect to the questions.

MR. KENNEDY: If the Auditor General looks at this

and (inaudible) what the Auditor General's job is. I just wanted the Committee

to understand the background to the decision. It was a policy decision that gave

rise to this transaction, which in turn puts us all here today, I suppose,

talking about various elements of it; but I thought the overall policy objective

should be clearly understood.

CHAIR: Thank you. Would the Auditor General's

office, or anybody there, like to make any comments before I get into questions?

MS MARSHALL: Well, primarily my concerns were in a

couple of areas. One is that some of the benefits that were supposed to have

accrued up to 31 March 1997 had not been realized. My question was: What were

government's plans with regard to those shortcomings?

The other area was, as Mr. Kennedy mentioned, that the

information that government was receiving came directly from the company. I felt

that some of the information should have been verified through an audit or other

process. Those were my two primary concerns.

CHAIR: When I reviewed the information, those were

a couple of things I picked up on. There are a few questions with respect to the

agreement itself that I highlighted and which I may ask if someone else doesn't

ask them in the meantime, but that's fine. What we can do now is probably get

right into the questions, if anybody would like to start.

MS S. OSBORNE: Yes, Mr. Chairman.

CHAIR: Sheila Osborne.

MS S. OSBORNE: My first question is around the

very issue that the Auditor General just brought up. Why aren't the reports

verified - the reports that come from NIS?

MR. KENNEDY: Mr. Chairman, I will respond to that

if you wish. I think we feel that they are, in fact, verified. I suppose the

question is: What kind of means does one rely on to obtain that verification,

and what degree of comfort does one have with it?

We have an ongoing relationship with this company.

They are still the main provider with Information Technology services to

government, and they have provided us with a very detailed report. We had

firsthand knowledge of what they are up to and what kind of projects they are

engaged in. We have the reports and, based on our knowledge of an operation

which substantially was our own internal operation four or five years ago, I

guess we had really no reason to suspect that anything we were being told was

incorrect or inaccurate in any manner. In fact, we had a fair degree of comfort

that it was generally correct.

The business of the audit is a valid point because, of

course, unless you actually go and do a full-fledged audit then you don't have

certainty. We understand that. I don't think the point with respect to a need

for an audit, the fact that an audit had not been done - I don't think we are

here, as a group of officials, in the absence of any such audit, having no

knowledge of where we are and having no sensible way to make an opinion on the

validity of what we are being told. That would be my answer.

CHAIR: Anything else?

MS S. OSBORNE: Yes.

CHAIR: Oh, I am sorry.

MS S. OSBORNE: What is government currently doing

to resolve the issue? It is up here on page 6, "Andersen has not provided any of

its $3 million commitment to establish a Research and Development Centre within

NIS by 13 October 1997...". Is government doing anything to resolve this issue?

MR. KENNEDY: We are engaged in negotiations, and

have been for some time. These problems, as you know, have existed for some

time. We are very close to a conclusion in that set of negotiations. The people

who were responsible for putting those agreements together obviously recognize

the possibility that problems might exist with the ability of various partners

here, or factors beyond their control, to deliver on certain of these

commitments. For that reason, put in place in the agreement are various

provisions that would state what the penalty would be for non-compliance,

(inaudible) in the position. We have that right under the agreement, to go out

and call for the penalties to be paid if we wish.

I suppose we have more interest in securing benefits

of the type that would have accrued had these commitments actually been there.

In fact, we have been negotiating around the key areas within the original

contract, things like the amount of work subcontracted to the local industry,

and things of that nature, to see if we can arrive at some additional measures,

some additional commitments with respect to industrial development benefits that

would replace and be equivalent to the ones that have fallen off the table. We

have been actively doing that. It is a complex negotiation. There are three or

four parties involved in it. The issues are substantial. As I say, we have made

some progress and I think we will be in a position to (inaudible) something to

government in the near future.

CHAIR: Just to add to that train of thought, you

say you have made some progress. Could you be a bit more specific with respect

to that? Because that was one of the things I highlighted in the agreement when

I was going through it. The actual statement is - I think with Sygma or with

Andersen there is a 10 per cent penalty with respect to what should have been

done, and 15 per cent with another group.

WITNESS: Fifteen per cent with Andersen.

CHAIR: Yes.

MR. KENNEDY: The penalties are clear. In the case

of Andersen it is a cash payment to the Province of 15 per cent of the value of

the work which is not delivered, which would be a cash payment of several

hundred thousand dollars.

In the case of the Bell Sygma commitment, also a cash

payment but not a cash payment to the Province; a cash payment by them to the

local company who would then have the right to use that money to incur

expenditures to allow them to try to procure other work to replace what was not

brought to the table.

Those are what the penalties consist of. The type of

thing we are trying to negotiate relates to replacement work, if you want, to

keep us whole, but I could not be specific in that there is no decision.

CHAIR: Basically, the government or the department

is using their discretion pretty widely in not enforcing those penalties.

MR. KENNEDY: I think we are in a position where

they can be enforced, but clearly in our view it is more advantageous for the

government and for the Province to secure a package of replacement benefits than

to seek these cash payments to be made. That is a process that will take some

time. Our intention would be to take as much time as we need to fully explore

that and in the end make the best decision overall. We think that is the

direction we are headed in.

CHAIR: Anna, do you have any questions at this

time?

MS THISTLE: I will pass for the moment.

CHAIR: On page 5 of the Auditor General's Report,

I note that the Province was required to make payments totalling $6.5 million

relating to the unfunded pension liability. Has this been done? That is on the

first part of Share Purchase Agreement.

MR. KENNEDY: Page 5, under Share Purchase

Agreement, Mr. Chairman?

CHAIR: Yes, that is right, the first paragraph

there. The Province is required to make payments totalling $6.5 million relating

to unfunded pension liability of the former NLCS employees. The shares were sold

for $9 million.

MR. KENNEDY: That has been done, Mr. Chairman. I

do not know what the exact nature of the arrangement was. Some sort of

undertaking was entered into by the Province with the pension fund to see that

commitment... I believe it has been done over a period of years. I do not have

the details of that with me but the short answer to your question is: Yes, that

has been done.

CHAIR: When I was reading through this, some of

the comments in the Auditor General's Report, it seems that the Province has not

lived up basically to all of their commitments either. Can you elaborate on that

and tell us what commitments they may not have lived up to? And is that part of

the problem in not enforcing these penalties that you mentioned earlier?

MR. KENNEDY: The only one - I suppose my

colleagues will correct me if I am wrong - one of the commitments we made, of

course, in agreeing to secure our work, our Information Technology work from

this consortium, was to spend a guaranteed minimum amount of money each year.

That was a substantial part of the value.

CHAIR: $17.5 million or something?

MR. KENNEDY: $17.5 million. Essentially it was in

consideration of that, that we received these various benefits pursuant to the

agreement. There was one year where we fell short on that particular commitment

in the area of about $500,000, as I recall - one year only - which then left the

consortium in a position where they had certain rights which they did not

exercise either. It is fair to say, if there are some things that they have not

delivered on that they had - this one here as well we have not delivered on.

CHAIR: Page 5, in the second paragraph under Share

Purchase Agreement, it says: Our review also indicated that, although the Share

Purchase Agreement entitles government to have a representative on the Board of

Directors of NIS, government has not had a representative appointed to the Board

since the fall of 1996.

Has that been addressed? Why haven't you had a person

on that board?

MR. KENNEDY: That was very carefully considered at

the time and the agreements did not require us to have a director on the board.

It gave us the option, if we so chose, to have someone appointed. That was

considered and discussed with our minister at the time, and it was deemed that

the most appropriate course of action would be to not follow through and appoint

someone to the board.

This is a company that is our major supplier, and a

company on whom we are depending to meet very significant commitments to the

local industry in terms of sub-contracting out work and so on. There are some

issues of conflict that would be associated with being on the board, and I

suppose being seen to be too close to - not at arm's length enough perhaps from

the operation, that sort of thing, given those sensitivities, we decided not to

pursue that.

CHAIR: I would assume that when the agreement was

being put together between the various groups involved - government, NLCS,

Sygma, Andersen, and what have you - that would have been discussed. If it was

agreed upon, to put a representative of government on the board, why change

after... I do not see the logic of putting them there in the first place and not

having them there afterwards.

MR. KENNEDY: I do not think we were required, Mr.

Chairman, to have it. The agreements provided for this.

CHAIR: I think so.

MR. KENNEDY: Maybe we could ask Mr. Hutchings to

comment. He was closer to it (inaudible).

MR. HUTCHINGS: If I could just comment on that, I

think the key reason why the member of the board was put forward in the

beginning was to, I guess - from a transition perspective, we were divesting of

a public corporation. I guess we wanted to make sure that from a transition

point of view that would be covered or followed through reasonably. At a point

in time when it was thought that transition was completed, the organization was

established.

It was seen that in relation to proper

customer/supplier relationships it probably would not be appropriate to keep a

member on the board.

CHAIR: Also on page 5, the second column, the

major paragraph there, the last sentence, goes back to what Ms Osborne had

brought up and you addressed earlier - just some more clarification - "However,

Government has not verified the Annual Reports provided by NIS and, therefore,

has not determined whether it is receiving the benefits negotiated in 1994."

Now it is all well and good, I would think, to accept

any reports that are given to you by NIS, but to my mind - how am I going to put

this diplomatically? In my mind, government receives reports from numerous

different groups - and audits - and we have the Auditor General's office in

place with twenty or thirty accountants over there, I suppose, doing the work of

following up on different agencies and what have you. To me, I think that would

be a very important part to have these numbers verified by either an independent

group or the Auditor General's office or someone. Can you comment further on

that?

MR. KENNEDY: Mr. Chairman, I think we agreed with

that. We did not think this was a matter of urgency. We did not think it was an

urgent requirement to do this because, as I indicated earlier, there are other

(inaudible) available to us that leave us essentially in a position where we

could make reasonable judgements on the value of the benefits that were being

delivered.

We agreed that we needed to have this audit done and

commenced the audit. I might add that I do not think we found - to the extent

that we found things in that audit and were substantially moving towards a

conclusion - I do not think we found any surprises or any different

understanding or anything that conflicts with the knowledge we have been working

(inaudible). We certainly agree with the need to do the audit, which is why we

(inaudible).

CHAIR: Ms Marshall, would you like to comment on

that any further?

MS MARSHALL: No. I am not surprised that they have

not found anything significant. The concern that I had was that the reports were

prepared by the company that initially purchased NLCS, and that the information

coming in should be subject to some type of verification by government.

CHAIR: Do any of you have questions?

MS THISTLE: Yes, Mr. Chairman.

CHAIR: Ms Thistle.

MS THISTLE: This is our second series of

privatization hearings, and I was actually quite interested in hearing from the

Committee about the status of Operation ONLINE, how that is (inaudible) the

Province. I would like to hear about that.

MR. HEALEY: I would just like to make a quick

comment on that. The Operation ONLINE group established a base for the criteria

(inaudible) in 1994, which defined the sector at that point in time as it stood.

They are in the process right now of completing a survey of where those forty

criteria stand as of today, which will then be used as a measure of the benefit

to the economy, to the IT community specifically in the Province, and we are

currently awaiting that report. Certainly, as soon as it comes forward, we will

make that known.

Early indications are that the sector itself is

growing - some of the figures that I have seen and heard - 23 per cent just over

the past year. An interesting statistic from that is that in fact in rural areas

in Newfoundland and Labrador that growth has been closer to 70 per cent. As soon

as that survey and results are complete, (inaudible) exactly how the IT sector

has grown as a result of this initiative.

MS THISTLE: Actually, this is one of the bright

spots of our economy right now, the IT sector. I am just wondering, particularly

with rural Newfoundland, how soon can we expect to be online in every community?

MR. HEALEY: I think there was an announcement

probably a week or a week-and-a-half ago where the Premier and Mr. Manley made

an announcement in terms of community access. I cannot quote the statistics in

terms of the time frame on that, but certainly we can dig that information up

and provide it to you.

Very clearly, in terms of our school access, we are

the first Province to have each and every school connected to the Internet

through our community access program, which would be our community access or

business service centres, our library board, and each and every library around

the Province. Others will be able to go into those centres and utilize the

service free of charge, to access the Internet. Again, I don't remember the

exact number of those centres (inaudible).

MS THISTLE: Yes, I know the announcement was made.

In fact, the biggest problem I think most of us are finding since the

inexpensive rates have been brought in is that circuits are completely tied up

after 6:00 p.m. It is a big concern all over the Province. I know this

particular Province leads the country in being online and hooked up more so in

schools than any other part of the country, and it has made a big difference I

know in my district. The IT sector is really starting to grow. I know the

announcement was made, but I'm wondering when can you expect schools in rural

Newfoundland to actually be able to dial out free of charge? Are you looking at

a time frame of twelve months or less?

MR. HEALEY: All schools in the Province are

currently hooked to the Internet and have access to it.

MS THISTLE: Okay, the schools are, but they are

still not dialling out free of charge, are they?

MR. HEALEY: I would have to check on that for you,

to be quite honest. I could not give you a definitive answer. I think the access

in each of the schools is there and provided for. The students can go in and use

that without the students themselves having to pay any fee.

MS THISTLE: No, the students do not have to pay. I

am just wondering if it is a toll-free number from all rural Newfoundland for

schools.

MR. HEALEY: I would have to check on that for you.

I could not give you a definitive answer to that.

MS THISTLE: You say you are now in the process of

compiling a report to see how Operation ONLINE has benefited the IT sector in

this Province?

MR. HEALEY: No. Operation ONLINE is compiling a

report to see how this initiative has impacted, as well as others and their own

work, on the growth of the IT sector in the Province, using the 1994 statistics

that it was based on, to see what that growth has been over that period of time.

MS THISTLE: When do you expect to have that report

ready?

MR. HEALEY: Did we get a date, Linda?

MS SPURRELL: No. The report I think is well on its

way to being completed. I don't see it taking that much longer (inaudible).

MS THISTLE: Was that an initiative on your own, or

was it a requirement as part of the privatization?

MR. HEALEY: It was part of the privatization that

we measure that (inaudible) we looked at that. ONLINE is conducting that for

government.

MS THISTLE: That should be an interesting report.

Thank you.

CHAIR: Do you have a question, Sheila?

MS S. OSBORNE: Yes. On page 4, the third bullet,

it says: "The reports do not provide any information to indicate whether

Andersen and Sygma are using NIS as their exclusive representative in the

Province and preferred representative in Atlantic Canada as required by the

Industrial Benefits Agreement." Can anybody comment on that?

MR. HEALEY: Indeed, that had not been reported on

in the initial report that we had received from NIS. We have gone back to NIS

and requested that that be reported separately to us, but we have not yet

received that report.

MS S. OSBORNE: Did they indicate when you could

expect to receive it?

MR. HEALEY: No.

MS S. OSBORNE: Okay.

CHAIR: Further to that - I do not have the page

here -, but in reading from this document there is a referral to, like,

semi-annual reports for the department. Have you been -

WITNESS: (Inaudible).

CHAIR: Pardon?

MR. HEALEY: Annual reports.

CHAIR: Annual?

MR. HEALEY: Yes.

CHAIR: I saw semi-annual somewhere. Anyway,

annual. That is one of the points I had picked up on with respect to if they are

the exclusive representative in the Atlantic Provinces. This agreement was

signed back in 1994 and we are now in 1998, and we have not had a report on

that?

MR. HEALEY: No. I think what Ms Osborne was

asking, or as I interpreted it, Mr. Chair, was this: Was that piece of the

reporting included in the annual reports? No, it wasn't, and it was missed by

us. We have now gone back to NIS and asked them for a separate report on that.

CHAIR: Yes, that's what I am saying. So in four

years you have not had a report, any time in that four years, with respect to

that specific point?

MR. HEALEY: Not a formal report in terms of that,

no.

CHAIR: Do you have more?

MS S. OSBORNE: Not on that point.

CHAIR: On anything, whatever.

I will continue on again. On page 6, in the first few

bullets there, the first section, it refers to the agreement, and what had been

agreed upon to be met by Andersen, Sygma and what have you. You have already

addressed that somewhat with respect to all the conditions not having been met.

On the third one down it says: "Although NIS has reported that NewTel has met

its commitment to bring $5.0 million of new business into the Province by 31

March 1997, government has not yet verified this information."

Was it just $5 million, or was it $6 million, was it

$15 million, and where was it? Can anybody address that?

MR. HUTCHINGS: I can speak to that. That was the

$5 million as part of a $15 million commitment NewTel had made. My view of that

would be that it is in relation to $5 million to that point in time. The

verification issue there would be the same as (inaudible) Industrial Benefits

Agreement (inaudible) now being carried out (inaudible).

CHAIR: Are you saying that it was just the $5

million? Because up to the year -

MR. HUTCHINGS: It was $5 million to the date of

the commitment (inaudible) a total of $15 million over the seven and one-half

years.

CHAIR: By March 1997?

MR. HUTCHINGS: That is right, 1997. The $5 million

here is a commitment to a number of (inaudible) to date (inaudible) total

commitment of $15 million.

CHAIR: Fifteen million dollars.

MR. HUTCHINGS: It is related to verification

issues related to the other issues that have been raised regarding the

verification of the Industrial Benefits Agreement.

CHAIR: Mr. Kennedy, you addressed in your opening

remarks the next point that I want to make, and that is with respect to the job

creation. The agreement requires that NIS would create twenty new jobs and I

think something like twenty-seven person years of employment. On page 6, in

section (c), Job Creation, the Auditor General says "the 27 years of employment

has not materialized." Could you give us some idea of the actual number of jobs

that have been created from this by NIS?

MR. KENNEDY: The agreements which are provided to

the (inaudible) as well which outlined what (inaudible) they have made, they

give us specific information on that. My information is that to this point in

time, for the purposes of those agreements, the company itself has 126 new jobs.

CHAIR: One hundred and twenty-six jobs?

MR. KENNEDY: One hundred and twenty-six jobs. Some

numbers as well - when I mentioned earlier that a significant amount of work had

been contracted out to the local industry, in excess of $12 million, there is a

number of person years of employment associated with that which is not counted

for the purposes of this commitment, but nevertheless that has accrued 159

person years of employment. (Inaudible) 159 person years of employment in the

local information technology sector by virtue of this work being contracted out

to smaller companies.

CHAIR: That is the point, that it is not jobs with

NIS but with the smaller firms throughout the Province.

MR. KENNEDY: That later number of 159 is what

relates to that, but the 126 are employees at NIS.

CHAIR: New employees.

MR. KENNEDY: Yes.

CHAIR: It sounds pretty good.

With respect to subcontracting on page 6 also, the

report reads: "The Agreement also requires NIS to subcontract $3.4 million of

Government and $2.8 million of non-Government work to the local IT industry by

31 March 1997. Under the terms of the Agreement, there are limits placed upon

the amount of business that may be subcontracted to Paragon..." I understand

Paragon was a subsidiary of NewTel, I would think. Is Paragon still a subsidiary

of NewTel or has it gone independent? Do you know that?

MR. HUTCHINGS: I can probably speak to that. It is

our understanding right now that Paragon will be merged in with NewTel effective

January 1, 1999. It is not there yet today but there is work ongoing.

CHAIR: What impact would that have with respect to

Paragon and this contract and this agreement?

MR. HUTCHINGS: That is something we are going to

have to negotiate with the players about with regards to that particular

arrangement. It has been recognized. There is an issue there, and it has been

discussed. It is very preliminary at this stage of the game because this is

fairly recent news. We have to deal with that particular matter (inaudible).

CHAIR: Because I would think if Paragon is going

to merge with NewTel, they could probably end up getting a larger percentage of

the work than had originally been agreed upon in this contract.

MR. HUTCHINGS: We will have to be deal with

particular mechanisms there. We are certainly sensitive to the issue. How we are

actually going to do it we do not know it at this point in time.

CHAIR: I have a question with respect to the

contracting out of work, $3.4 million of government and $2.8 million of

non-government work to the local IT industry which works out to be about $6.2

million. That, according to what is here, has been met, I think. Is that the

total amount of money? Can you comment on that? Was it $6.2 million? Has it gone

to $8 million? Because if there is more work being brought into the Province -

it is all based on percentages, I would imagine -, so has there been more than

$6.2 million contracted out to the local information technology industry?

WITNESS: (Inaudible) numbers (inaudible).

MS SPURRELL: Actually, we have some of the 1998

figures as well. Up to this point in time they are supposed to have $9.2 million

subcontracted, and as the fiscal year ends, 1998, they are up to $10.4 million.

That is purely subcontracting that qualifies under the IBA. Any sole source

contracts or any business that they want to undertake with a local company is

not counted under the IBA, and it is in addition to the (inaudible) $10.4

million.

CHAIR: The last couple of sentences that you just

said, could you say those again for me?

MS SPURRELL: I am with the IBA. Work has to be of

a specific kind to qualify under the agreement, and it has to go on a

competitive basis. If NIS develops a preferred supplier relationship with a

local company and they do not go through a tender process, it is not counted

under the IBA (inaudible).

CHAIR: Is that right? That is interesting. You

would not have a handle on that, then, would you?

I do not want to be hogging this. If anybody has

questions, please go ahead. Sheila?

MS S. OSBORNE: What remedies are in place for

government to take if NIS fails to meet its obligation through the contractual

obligations?

CHAIR: I think that has been addressed somewhat

earlier on, because that is one of the points I was making with respect to the

contract.

MS S. OSBORNE: Okay.

MR. KENNEDY: I think the main areas there - the

main commitments we would be concerned about are the industrial development

benefits which were the main reason behind the government privatizing the

operation. The problems that exist there are (inaudible). The cash payments I

referred to are substantially the remedy which is available to us unless we

enter into some replacement agreement on a different package, (inaudible) a

different package of benefits that keeps us whole, which is how we hope this

will be resolved.

CHAIR: Further to that again, if government is

renegotiating with whomever with respect to that issue, I have a concern that if

we have an agreement put in place and one, two, three or whatever of the groups

are not going to meet the conditions, and it is going to be renegotiated after

the fact, we, as a committee, and the public in general, really do not know what

is happening until after the fact again.

I can understand where you are coming from on it. You

could go out and penalize a group for not meeting the conditions and you could

actually take from what could be developed down the road in the industry, but I

think you need to address that point. If they do not meet the conditions and you

are going to renegotiate the conditions, and then they do not meet those

conditions, are you going to go back and renegotiate the conditions again? How

far do we go? This, I suppose, is the question I am getting to.

MR. KENNEDY: First of all, the reason these

commitments have not been met relates really to factors; it does not relate to

bad faith on the part of (inaudible).

CHAIR: I am not saying that.

MR. KENNEDY: It relates to factors beyond people's

ability to control corporate reorganization and divestiture of their own company

to somebody else, that sort of thing. I suppose, as long as this is outstanding,

it is a valid criticism. When the Auditor General does her report for next year,

no doubt the Auditor General will examine this again and will either state the

same thing again or there will be a replacement package of work or benefits in

place which the Auditor General in turn will, I am sure, examine; and that

department will pass their own opinion.

(Inaudible). When this is done, in any event, no doubt

it will require a public announcement. I think it will all be public in the

fullness of time, and until such time these questions will be asked and we will

have to deal with those.

CHAIR: I do not want to appear too negative with

respect to this situation because I have been involved with computers for

twenty-five years and I can understand the potential of them; but I think if the

conditions are not being met and you renegotiate, does it come to a point in

time where government says: Well, it is time to end this. We cannot continue on

this route with that group.

I used to work over in the Howley Building and they

used to contract work to NLCS. I know MUN used to contract work to NLCS. I have

gone through this and I understand, from the information given to me, they are

not paying more to NIS per hour, or whatever way they charge for service, but

yet there are people within these areas who have told me that they are paying

more. Could you comment on that?

MR. KENNEDY: My colleagues can elaborate, but the

agreements provided some protection for government in terms of rate increases

that the company could impose through the life of this contract, over seven

years, so there were some limits that were placed on those. They have a limited

ability to increase rates, and they have done so on a couple of occasions, but

within the bounds of what the agreements provided for.

CHAIR: I do not want to belabour the point. Do you

have any more questions?

MS S. OSBORNE: Has NIS been maintaining software

in accordance with the agreement?

WITNESS: There is a software trust agreement which

was put in place for a relatively small number of (inaudible). We have checked

that since it was raised in the Auditor General's report, and that is being

maintained by (inaudible).

MS S. OSBORNE: Thank you.

CHAIR: Anna, any questions? Okay, I will continue.

I remember reading something about semi-annual. Here

it is on page 6,

section (e), Supplier Development, the first bullet there. It

says, "NIS has reported the following activities: provided semi-annual

information sessions for the local IT industry."

I remember reading `semi-annual'. Could someone

elaborate on that, because that seems to me to be a pretty important point in

the whole Information Technology; that group would be a leader and meet with

different companies or whomever, communities, to get this industry off the mark

type of thing.

WITNESS: Mr. Chair, that is being done on a

regular basis, probably more often than semi-annual. NIS has a very good

relationship with the local community and the local IT association which

represents most if not all of the IT companies in the Province. Certainly all of

the reports that we get back through that association, through members of the

association, indicate they are more than pleased with the efforts that NIS are

carrying out to accomplish that.

CHAIR: Can you give me some example of what would

actually happen at one of these sessions? Say if there was a small company out

there starting up, or whatever the case maybe, which contacted NIS and said,

could you come in (inaudible), would it be an information session or would it be

a training session? Would it be an hour long or would it be two days long, that

type of thing, and do they charge for it?

MS SPURRELL: It is a public information session

they have on a regular basis, advertised through the industry association,

The Telegram , the provincial papers and whatnot. Basically, it is a

meet-and-greet. NIS has a presentation on the industrial benefits agreement, how

to obtain government work through NIS. They quote some of the recent numbers and

some of the recent projects they had, and where they have people in the States

and what have you. Then afterwards it is more of an informal session where they

have most of their marketing staff there to meet companies who are interested in

establishing a relationship with NIS, and it goes from there.

In addition to that, as Mr. Healey said, they do have

a good relationship with (inaudible) and they met on a regular basis with the

industry association and with the small companies who are interested in

establishing that type of relationship with NIS.

CHAIR: Thank you.

There was a security audit report done for March of

1998, with respect to NIS. Could we have some information on that, or have some

reporting on that?

MR. WILLIAMS: Yes, we did engage a firm to do a

Request for Proposals to (inaudible) security audit. That was carried out and we

did get a (inaudible). A copy of that report was provided to the Auditor

General.

CHAIR: Okay. Do you have anything, Ms Marshall, on

that?

MS MARSHALL: No. This is an issue we raised, I

think, on several occasions. Basically what the audit report does is express an

opinion as to the adequacy of control down at NISL because a lot of government

records are being processed down at NISL and we wanted to make sure there was

adequate security and controls over it. That was the intention of the audit

report.

CHAIR: Thank you.

This is something that I have brought up many times in

the committee hearings of the House of Assembly with respect to the various

departments when we are looking at the Budget, the amount of money that is being

spent on computers and the like in various departments. It seems to me that

there is no end to it.

I know you have to update. When you buy a computer

today it is probably out of date next month, but if we buy computers today they

should be able to handle the workings of the various departments for at least

two or three years, I would think. Government is not growing that fast. If

anything, it is decreasing in size.

I know we are talking about efficiency and whatever

the case may be, but what interaction is there between your division and various

departments - and follow-up, communication, training, in government departments?

MR. KENNEDY: Mr. Chairman, there is a fairly

strong interest in the centre in Treasury Board in this matter. Because we did,

prior to the contract being entered into, had our own department, if you want,

had our own corporation available to us. Obviously there was a need to have a

strong coordinating role in Treasury Board as it relates now to individual

departments, keeping on growing with this new company.

We maintain a strong interest in the subject. The

issue of the amount of money which is spent on information technology is a good

one. That budget is done centrally in Treasury Board. The budgets are being put

together from departments. The IT budget is pulled together, everybody's numbers

go on the table, and government makes an overall global decision.

If you look back at the amount of money we have been

spending in recent years I do not think you will find any significant changes. I

do not think the expenditures are excessive, in my view, given the size and

scope of government operations, the number of systems and so on that we have. I

think you could quite easily rationalize spending more money.

We do engage a consultant service which is called the

Gartner Group, I believe, which provides information to the industry generally

on costs to one (inaudible) organization to the next and so on. It will produce

data which (inaudible) somewhat meaningful that says organizations of this size,

with this size of a budget, generally spend this much money, for argument's

sake, on information technology needs. We get those kinds of notional

indications that come to us. They show us as being a bit below the norm for an

organization of our size compared to other organizations in North America.

CHAIR: Why I bring this up is for this reason.

When I go through the budget each year, and the departments I am responsible

for, it seems to me - you have said the words: You can rationalize the spending

of this money. Yes, you can probably rationalize anything, but can you justify

it sometimes, in my mind? I am thinking millions of dollars each year. If your

department has put $500,000 into it this year, do you really have to put

$500,000 into it next year? Because where I am going to is that often times in

the last month you will see in various departments the big expenditure going up

so they have their budget spent, so they will not lose it the following year. I

am just curious if that would be happening.

MR. KENNEDY: That may happen to some degree.

Perhaps it is in human nature that that happens. I've put forward the other

argument myself, on occasion, that those people who do not, when the budget

becomes available, run out and spend the discretionary money right away can

often be more prudent -

CHAIR: There is no doubt.

MR. KENNEDY: - managers in your system because

they will say: Look, (inaudible). When push comes to shove we can live without

that computer or that vehicle. The money is needed for something else and can be

applied to more fundamental needs. I think there is another side of that. I do

not doubt what you are saying.

CHAIR: Yes.

MR. KENNEDY: It goes on. Perhaps in all cases is

not justified, but the budget is fairly closely coordinated. If you are looking

at individual numbers bouncing around it may relate to the development of a new

systems component of the budget. Most of the money is spent simply on

maintenance of running all the existing system, producing cheques, meeting

payrolls and all this sort of thing, but there is money spent on development of

new systems and major upgrades of the systems from time to time. Those numbers

can bounce around a bit. You can see big variations in a particular department

from one year to the next if a particular system in a certain department or a

particular system is a number one or number two priority. It may be what gets

funded this time around. When you look at the numbers you will see those

variations.

CHAIR: I think we are probably going to break for

a coffee. One more question before we break for a coffee for ten or fifteen

minutes. I remember having a hearing here, and I do not remember which one it

was with. Social services. They started out with like $50,000, $100,000, it went

up to millions of dollars, way above. There is nobody who could imagine what

actually happened and why it happened. At that time, what I thought happened was

that we had people, and they got consultants in, I think, to tell them what they

needed. I do not think anybody knew what they wanted, needed or required,

whatever the case may be. They went out and just spent dollars after dollars.

Then the system they got installed, I do not think it actually worked for them.

MS MARSHALL: No, the system was never implemented.

I understand that they have gone back - I do not know if to square one - and

they have started to look at a new system again.

CHAIR: What kind of bucks are we talking about?

What was spent on that?

MS MARSHALL: I think it was about $10 million

spent. I cannot remember where the estimate started out, but it ended up that

the estimate approached $50 million after.

WITNESS: Forty-seven point nine million dollars.

MS MARSHALL: Yes, it went up to $47.9 million. It

was estimated to cost approximately $3.7 million when they started out but the

initial cost did not include everything. It was only some of the cost. I think

as the project got on track people started bringing in all these other costs and

it sort of started to bloom. It went from $3.7 million up to I think it was

around $47 million.

CHAIR: What time frame was that, what years? Can

you remember?

WITNESS: It was approved in 1989.

CHAIR: In 1989.

MS MARSHALL: They expected that by the time it

went in, in 1999, it was going to cost around $47 million.

CHAIR: Are you saying now that they have gone back

to square one after spending $47 million?

MS MARSHALL: I think what happened - and Treasury

Board officials may be able to provide additional information.

MR. LUSH: They didn't spend $47 million.

CHAIR: Didn't they?

MR. LUSH: No. (Inaudible) cost.

MS MARSHALL: My recollection is that they spent

about $10 million and then I think the project was halted. I think they

regrouped to decide what they were going to do. The intent was to replace an old

system that had been in place at the department since, I think, the late 1970s.

It was really an antiquated system and it really did need to be replaced.

CHAIR: I want to be clear here now, because Mr.

Lush just said they did not spend $47 million. They had estimated that but they

spent $10 million.

MS MARSHALL: They spent $10 million but they

estimated that -

CHAIR: It could go to that?

MS MARSHALL: Right.

CHAIR: Does anybody know anything about that?

Would you be able to comment on it?

MR. KENNEDY: I have a recollection of it. I hadn't

reviewed any of that in preparing to come here today but I do have a

recollection substantially along the lines that has been explained by the

Auditor General.

It was a project that on two or three occasions had an

increase in cost estimates attached to it which eventually got to a point where

government said: It is not affordable any longer and we have to go back to

basics. At that point the project was shut down, as I recall, and spending on it

was stopped. There has been no substantial launch or re-launch of the project

since then. There is still a significant need which exists. In the meantime,

necessary maintenance on the existing systems has been done. The department most

recently is examining ways that it might be able to reactive this project given

some organizational changes that have taken place in the intervening years. I

understand they are discussing with the federal government as well matters in

which they could work together. Perhaps we could use their system. We could

jointly develop something affordable and -

CHAIR: With the new company you mean? Did I just

understand you, that you tried to work something out with NIS?

MR. KENNEDY: No. Conceptually I suppose, they are

trying to sort out how it is they will address the need of its major systems

upgrade, but there has been a project underway at this time.

CHAIR: Alright, thanks. Let's break for a coffee

and come back at 10:45 a.m. or so.

Recess

CHAIR: I will get the hearing back underway. I do

not know how much longer we will be but it should not be too much longer. Before

we get underway I need to do something with the minutes of the hearing we had

yesterday. Could we have a motion to adopt those minutes?

On motion, minutes adopted as circulated.

CHAIR: I will continue on. On page 13 of the

document presented, it says Legal Services and the Accounting and Information

Technology Services total $623,509.27. At our hearing yesterday with respect to

the privatization of Newfoundland Hardwoods there was almost $1 million in these

types of fees.

Is there anyway we can get a control on that? It seems

there are awfully high amounts of money being spent on privatization for

accounting and legal fees, or consultant fees I suppose. Do you have any comment

on that? Three hundred and sixteen thousand dollars for Halley Hunt. That's a

lot of money.

MR. KENNEDY: Mr. Chairman, as a general comment,

yes it is a lot of money. I know we say that these are very complex

transactions. These are issues here of great important to the Province, a very

time-consuming due diligence process that went with all this through the

negotiations in ensuring that the various agreements that were entered into

captured what was intended to be captured and fully protected our interest. So

any of the transactions of this nature that I have been involved in have had

costs of this order of magnitude or beyond, perhaps. You know, these are

commercial arrangements and you cannot do them without lawyers working full time

or financial advisors and so on. So it is expensive but it is a necessary part

of the process.

CHAIR: What sort of an hourly rate would be

charged on these? It would have to be fairly high, I would think.

MR. KENNEDY: I don't know. That would be a

function for whatever lawyer or financial advisor was provided, and (inaudible)

of experience and that sort of thing. I do not have that information available

at this time.

CHAIR: Thank you.

Does anyone have any questions?

WITNESS: No.

CHAIR: No? Alright.

On page 29,

section 4.2.6, it says, "During the Term,

unless otherwise agreed by Government and NLCS, not more than $2,850,000 of the

total of Government Work and Other NLCS Business identified in the

Article 4.2.1

Table may be awarded to Paragon and to be eligible for such work, Paragon must

obtain such work on a competitive basis."

It goes on to say, "The restriction on awarding

Government Work or Other NLCS Business as aforesaid shall continue only while

Paragon is or may be affiliated with NewTel, NLCS, Andersen or SYGMA within the

meaning of "affiliated corporations" as contained in

section 7 of the Act, or

controlled thereby either de facto or within the meaning contained in

section 8

of the Act."

We touched on that earlier and I had it highlighted in

the agreement. You are telling us now that there are negotiations with Paragon

to become - well, they are subsidiary now so they are going to be merged into

NewTel, I would think; that is what they are talking about. From what I can see

there, Paragon will end up getting a larger percentage than what they are now

permitted to get. That would be one of the reasons why, I would think, they

would merge. Would that be fair to say?

MR. KENNEDY: I do not think so, Mr. Chairman.

Almost the opposite might prevail. At least at the present time the argument can

be made: Paragon is one of the smaller local companies, albeit it is one which

is owned by this corporate group and it no longer has that identity; it is

merged with the overall company. I would make the argument that it would be more

difficult then for a rationale to be put forward that you are almost then

subcontracting to yourself. You might be under a greater burden to subcontract

to others.

CHAIR: If NewTel can do so much of the work now,

and they are required to subcontract at a certain percentage of that work to

other Information Technology groups, I would imagine NewTel does the larger

portion of the work. If that becomes a part of NewTel -

MR. KENNEDY: The amount of work that has to be

subcontracted to the local companies is a fixed -

CHAIR: Exactly.

MR. KENNEDY: - is a finite amount of work which is

laid out and agreed upon. They have to meet certain commitments in that

particular respect. Now they will have to meet them in a go-forward case here if

this company gets merged and it will be more difficult, I suppose, for them to

make the argument that somehow what they are now doing with Paragon as part of

the overall corporate group somehow qualifies. So I think it would be more

difficult for them to meet the commitment, rather than easier.

CHAIR: In the next clause, 4.2.7, it says, "If in

any Fiscal Year of the Term, Government Work is projected to exceed $19,000,000

NLCS agrees to sub-contract additional Government Work to Local IT Businesses in

that Fiscal Year in an amount equal to the amount by which the value of the IT

Professional Services acquired by the Government under the Service Level

Agreement in such Fiscal Year exceeds $10,700,000 to a maximum of 15 per

cent...". So if it goes above, to me, I think it is being set up that they can

get more work, if you look at that paragraph there, unless I am reading it

wrong.

MR. KENNEDY: We made certain commitments to give

them a certain amount of business, which is where the $17.5 million comes from.

There is another eventuality which has not occurred, which has not actually

happened in practice, which says - by the way, if government in fact spends in

excess of this other threshold, they in turn have an additional commitment they

have to meet with respect to subcontracting out. So if government ended up

spending this amount of money - which it did not - they would have a further

commitment to meet and they would have to increase subcontracting out. That is

what 4.2.7 says.

CHAIR: It does, but if you relate it back to the

other one, unless I am missing something -

MR. HUTCHINGS: If our expenditures at NIS exceed

$19 million, there are indications here then, I guess, we will increase the

amount of subcontracting to the local IT businesses. That is not specific to

Paragon; that is a general (inaudible).

CHAIR: That is right, yes.

MR. HUTCHINGS: So at this point in time our

expenditures have not exceeded $19 million. It would not be specific to Paragon;

there would just be a general increase in subcontracting to the local

communities.

CHAIR: Yes.

With respect to this renegotiations - this just popped

in my mind - with respect to the conditions of the contract not being met, I

think it was for seven years. Am I correct, seven years? Is the term of this

agreement being renegotiated, or has it been renegotiated? Has it been extended?

MR. HUTCHINGS: No, the original term has not been

extended or altered in any way.

CHAIR: Is it being looked at in the renegotiations

with respect to the -

MR. HUTCHINGS: I am reluctant, Mr. Chairman, to -

it certainly would not be something that we would have a primary or fundamental

interest in but I would be reluctant to get into a discussion with what is or is

not - in fairness - in a negotiation that is under way in respect to which no

decisions have been taken by the Cabinet or Treasury Board.

CHAIR: On page 30,

section 4.3.3: At the same time

as the activities referred to -

WITNESS: 4.3.3.?

CHAIR: Page 30.

WITNESS: I don't have page 30.

CHAIR: That page is missing. It refers to Memorial

University. It says: "...NLCS will consult with and receive agreement from

Memorial under the Memorial Service Level Agreement as to which portions of that

IT work can be sub-contracted in accordance with

Article 4.2 as part of the

Government Work."

Has Memorial University contracted work to NIS over

and above what they had normally been contracting to NLCS? Some people would

have you believe that government may be paying more to MUN to meet the

requirements of their level of funding for the agreement. Is that something that

is so far off base?

MR. KENNEDY: I will ask Mr. Hutchings to provide

some background as to the role of the University in this contract.

MR. HUTCHINGS: The expenditures the University

have made in NIS in recent years have been declining (inaudible). Their

expenditures in NIS have actually - I think three years ago they were somewhere

around $3.9 million. This year we are expecting it to be somewhere around $2.5

million. So they are declining relative to where they were a couple of years

ago, I think.

CHAIR: Thank you. That can't be very accurate.

On page 34, in the New Jobs Commitment, subsections

6.4.2 and 6.4.3, with respect to the forty additional jobs and eighty-five new

jobs, they talk about Best Efforts. What you have told me previously is that

that has been met certainly over and above.

MR. KENNEDY: Yes, they are beyond. Their

commitments go beyond what the minimum requirements are in these agreements.

CHAIR: Very good. I am going through now the

points I had highlighted in the agreement.

Turn to page 39. We touched on this again earlier too,

section 7.10.3, with respect to the liquidated damages if the amount of jobs

have not been created. That is not a fact, and it is not even worth considering

because you are saying it has been met.

Does anybody else have any questions further?

MS MARSHALL: Can I ask something? This is just in

relation to something that was mentioned this morning. The stimulation of the IT

industry, the report that is being worked on by the ONLINE secretariat, will

that break out the stimulation as it relates to NIS and as it relates to other

IT companies? I am wondering has all the stimulation in the IT industry been at

NIS as opposed to throughout the industry in the Province?

MR. HEALEY: I would hazard a guess at that. It may

be very difficult to attribute the growth to NIS, for example, and say that this

is (inaudible) outside of the direct jobs that are created within NIS. Clearly,

that is related to NIS, but other growth in the industry generally may not be

attributable (inaudible) measured (inaudible) NIS versus ONLINE versus ITT. I

would suggest that we should wait for the report to see if in fact they were

able to do that.

MS MARSHALL: The concern I had was that the

stimulation might all be at NIS. Have all the smaller companies sort of been

pushed out of the IT industry? I was wondering if you can see the growth in the

non-NIS companies.

MR. HEALEY: I am sorry, I misinterpreted what you

were asking in that. No, I would suggest that the report would clearly show that

number of companies, the number of jobs, and where those jobs are. We should be

able to (inaudible) -

MS MARSHALL: As you breakout between NIS and

non-NIS companies.

CHAIR: Basically, the whole intent of this

endeavour by government was to create an information technology industry

Province-wide in Newfoundland and Labrador, and not to be concentrated on one

company. Not for it to be a monopoly but just the reverse of that. Is that

right?

MR. HEALEY: In addition to that, Mr. Chairman, I

would suggest that the intent was to grow the sector in the Province but to grow

that sector such that it is export-oriented, bringing new jobs into the

Province, and then work into the Province as well.

CHAIR: Exactly. Hopefully that is what will be the

end result. I have no other questions. Mr. Smith just joined us. Basically if no

one else has any questions I would just like to thank everyone for coming here

this morning. I do not think the questions were too difficult. I think it was

something that you probably would have been expecting. I think we got some good

information this morning. We will be reporting to the House of Assembly on this

hearing probably early in the new year. I am sure you will be interested to see

what we have to say and any recommendations we may or may not make.

Again, I would like to thank the Auditor General's

office and her people for coming here today, yourselves, the witnesses, for

coming, and the Committee itself and the staff.

The Committee adjourned.