SEPTEMBER 29, 1999

PUBLIC ACCOUNTS COMMITTEE

The Committee met at 10:00 a.m. in Room 5083.

CHAIR (J. Byrne): Order, please!

First of all, before we begin, please remember when

you are speaking that the mikes have a button on the front that you can press so

you can be heard and taped. Also, I can cut you off if I feel the answers or the

questions are too long. We only have a certain amount of time.

I call the hearing to order.

MR. LUSH: It is always the answers; the questions

are never too long.

CHAIR: I don't know, some questions are pretty

long sometimes.

This hearing of the Avalon East Board before the

Public Accounts Committee was called as a result of the Auditor General's Report

presented this spring, March 31, 1998. My name is Jack Byrne, and I am Chairman

of the Public Accounts Committee. I think most people here know me now. To my

right is Tom Lush, the Member for Terra Nova, who is the Vice-Chair.

What we will do is go around the table and introduce

ourselves. Then there are a few other little things we have to do beforehand.

Witnesses have to be sworn in and what have you.

I am who I said, Tom is there, and Mark Noseworthy is

to the right. What is your job?

MR. NOSEWORTHY: Mark Noseworthy, Executive

Officer, Public Accounts Committee.

MR. FRENCH: Bob French, MHA for Conception Bay

South, member of the Public Accounts Committee.

MR. MANNING: Fabian Manning, MHA for Placentia and

St. Mary's.

MR. MERCER: Bob Mercer, MHA for Humber East.

MR. LESTER: Roger Lester, Assistant Director of

the Avalon East School Board.

MS LEGROW: Kathy Legrow, Chair of the Avalon East

School Board.

MR. SHORTALL: Brian Shortall, Director of

Education, Avalon East School Board.

MS MARSHALL: Elizabeth Marshall, Auditor General

(inaudible).

MR. JANES: Claude Janes, Audit Manager, Office of

the Auditor General.

MR. NOSEWORTHY: John Noseworthy, Deputy Auditor

General.

MS M. HODDER: Mary Hodder, MHA for Burin-Placentia

West.

MR. ANDERSEN: Wally Andersen, MHA for Torngat

Mountains.

MS MURPHY: Elizabeth Murphy, Clerk.

CHAIR: Thank you.

Elizabeth, could we have the witnesses sworn in?

Swearing of Witnesses

Brian Shortall

Kathy Legrow

Roger Lester

CHAIR: Thank you.

After we speak, could we turn the mikes off? I will be

leaving mine on because we can operate six at a time, but I have been asked to

make sure they have been turned off.

Basically, the Public Accounts Committee is a Standing

Committee of the House of Assembly. We are here to be watchdogs of the tax

dollars of the people of the Province of Newfoundland and Labrador. As I have

said, we decided to have this hearing because of the comments in the Auditor

General's Report this past year, and you are here just to answer questions that

may be forthcoming from the Committee.

We will, at the end of the hearing, be making

recommendations or a report to the House of Assembly some time in the near

future. Basically what we will do from here is ask the Auditor General if she

has any opening comments. Then the witnesses can have opening comments, if they

so desire, and then we will just go on into the questioning.

Auditor General.

MS MARSHALL: I will not go into the same length

that I went into yesterday morning but, for the benefit of the witnesses who are

appearing just today, this review resulted from an audit of the reorganization

of the twenty-seven school boards into the ten, whereby we made sure that the

assets and liabilities of the old school boards actually ended up with the new

school boards.

Again, similar to the Avalon West School Board, the

three areas we identified were the ancillary funds, control of fixed assets, and

compensation benefits.

CHAIR: Thank you.

Would anybody from the board like to make a comment?

MS LEGROW: Thank you, Mr. Chairman.

Just to comment that we are certainly here to

cooperate in any way we can. We have attempted, at our board, to make every

decision as transparent as we can and we would certainly commit to continue to

do that. We would be pleased to answer any questions that you might ask us, or

find the information should it be unavailable at this moment.

As you are aware, I am the Chair of the board, which

is our governing body which determines policy, and we have a professional

secretariat which is charged with the day-to-day administration and management

of the organization.

We were pleased to cooperate with the Auditor General

last fall with her report, and met with her, and also provided our response to

her comments in December and responded as well to this Committee in August of

this year at the request of your CEO; so we are ready, willing and able.

CHAIR: What we will do is just go right into

questions. Yesterday we started off with Mary Hodder, so today we will start

with Fabian Manning.

MR. MANNING: Thank you, Mr. Chairman.

With respect to the $573,000 in trust funds that were

transferred to private trustees prior to the new board coming into effect, does

the current board feel that this was in contravention of the schools act and

that all assets of the dissolved boards were not transferred to the new board?

MS LEGROW: Thank you, Mr. Manning.

This board, upon realizing - because at the time we

did not have access to that information when the boards came together; in fact,

the records were quite sketchy at the time - we engaged the services of Benson

Myles - Mr. Wayne Myles, in particular, is our legal solicitor - to investigate

whether or not we should rightfully own these assets. His relationship with the

board continues. There has been ongoing dialogue with the trustees and with

their solicitor, and as yet we have been unable to reach a successful conclusion

to the matter.

MR. MANNING: I have just one more for now. The

current board paid $30,529 that was charged to two corporate credit cards. Of

this amount, only $4,491 was supported by receipts. These amounts cover the

period from January 1997 to June 1998. Of this $30,529, an amount of $5,124 was

for meeting expenses which covered seventy-six restaurant charges. Would the

board like to comment on this and the credit card usage overall?

MS LEGROW: Can you just itemize what you questions

are exactly? You are asking me about the restaurant charges for board meetings

and what else?

MR. MANNING: Basically, the -

WITNESS: Page 8.

MR. MANNING: The current board paid $30,529 that

was charged to two corporate credit cards. Of this amount, only $4,491 was

supported by receipts. Could you care to comment on that and the credit card

usage overall?

MS LEGROW: I can certainly comment on the

restaurant charges. As to the details I would have to refer to my staff since

we, as board members, are not intimately acquainted with the specific amounts.

We did review it as a board and we were satisfied with the explanations of our

staff. We have since changed our policy and receipts are required now for all

corporate expenses, but I would defer to Mr. Shortall on that.

CHAIR: (Inaudible) maybe the Auditor General would

like to comment (inaudible) the details and then Mr. Shortall (inaudible).

MS MARSHALL: The primary concern that I had with

the $30,000 was there was a lack of supporting documentation. Of the $30,000,

there was about $4,000 that there were adequate receipts for. In review of other

public sector entities, for example, Western Memorial Hospital, that was a

problem out there. If people are submitting claims for reimbursement for that

type of expenditure there should be the supporting invoice and there should be

information, for example, on who is being entertained and the purpose of the

entertainment. That would be in accordance with general government policy.

CHAIR: Mr. Shortall.

MR. SHORTALL: Yes. I should point out that even

though the supporting documentation had not been attached to the expense claims,

the expense claims had been submitted to the finance office of the school board

and were itemized with respect to what the bills on the various AMEX charges or

VISA cards were in terms of the monthly statements. You have a list of billings.

Each one was noted for the accounting staff as to the reason for it.

Unfortunately, the attached documentation, as Ms Marshall points out, was not

attached.

We have since revised our internal financial

procedures and effective July 1, 1998, for this current year, all expense claims

and so forth carry with them the appropriate documentation and the information

that Ms Marshall mentioned with respect to the purpose of the expense, the

identification, the number of parties involved and so forth.

So we have incorporated into our procedures the

concerns which were pointed out in her report. All I can say to you, further to

what Ms LeGrow mentioned, is that there are two corporate credit cards, one held

in my name and the other in Mr. Lester's name. These were used for the ongoing

expenses of board meetings, committees, board travel, et cetera and there were

many kinds of expenses there in addition to travel or hotel accommodations and

so on. As a result, it wouldn't be unusual to find a high degree of meal

charges, because with volunteer trustees there are a lot of meetings which are

held during the evening at supper time, at lunch time, breakfast or traveling on

the road and so on. This is why there were would a lot of those kinds of

charges.

All I can say to you, Mr. Chairman, is that since it

was brought to our attention by the Auditor General we have put into effect

revised and improved and more stringent procedures. It was merely for expediency

that the receipts were not attached and they will be in future, and we accept

her observations.

CHAIR: I don't say you would have it with you, but

the policies and procedures that you have put in place, maybe we should get a

copy of that forwarded to the board sometime after the hearings.

MR. SHORTALL: Yes. I will ask Mr. Lester if he

will do that and I am sure he will.

CHAIR: Okay. Fabian, do you have any more?

MR. MANNING: No, that is it.

CHAIR: Okay. Anybody on this side want to ask a

question?

Mr. Andersen.

MR. ANDERSEN: The question I am going to ask

refers to pages 6 and 27.

What procedure or authority did the board use in

providing salary top ups here in the amount of $52,000 for senior staff?

CHAIR: Is your mike on?

MR. ANDERSEN: According to the Auditor General

this was - I'm sorry. Do you want me start all over again, sir?

WITNESS: No, I got most of it (inaudible).

MR. ANDERSEN: The question is this. What procedure

or authority did the board use in providing salary top ups of over $50,000 for

senior staff? According to the Auditor General, this was higher than the formula

approved by Cabinet. Could you respond to this?

MS LEGROW: Thank you, Mr. Andersen.

I am just going to refer you, as we did with the

Auditor General, to a letter that we received on October 25, 1996 from the then

Minister of Education, Roger Grimes. At that time we were in the process of

hiring our new staff and were therefore looking for direction from the

department as to how to proceed. It says:

Attached for your information is the approved salary

scales. Those scales would take you to step 33 for directors and assistant

directors in your school board. Successful applicants for these positions should

be placed on the approved scale at the step next highest to their current salary

but in no case above step 33. I recognize that in many cases previous school

boards provided employees with salaries which were in excess of the approved

salary scale. Therefore, in placing former school board employees on scale,

boards should consider the actual salary paid to the employee and not the

approved salary.

We felt that we were legally authorized to pay our

staff at a rate up to step 33. We also considered at that time that because of

the units of work, and some of us were somewhat familiar with the Hay scale,

that our board staff, being the largest in the Province, having the most units

of work in terms of the number of students, the number of schools, the number of

staff, relatively speaking we wanted to make sure that they were paid at a rate

that was relevant to the other board staff that worked in the Province. The

personnel committee of the day began the process of negotiating contracts with

these people with the commitment at the time relative to this letter that they

would be paid at about step 33. Subsequent to that, Mr. Grimes wrote us and

discussed other steps on the salary scale, but at that time we had already made

a commitment to our staff and we did not feel that we could step back from that

commitment.

Early this year we received a letter from the Minister

of Education permitting us to continue at this step for these staff only and

that for any new staff that were hired they would have to be commensurate with

the directives of the department.

MR. MERCER: Do we have a copy of that letter?

CHAIR: There is a copy of the letter from the

minister in your report here, from Judy Foote the minister.

MS LEGROW: No, I guess he is referring to the one

of October 25, 1996.

CHAIR: Do we have that? I do not.

With respect to that, I think there are a lot of

people who want to ask questions on this. From my understanding of what had

happened in reading the documentation - and also the Kirby Report that was done

for the Department of Education, which confirmed or backed up what the Auditor

General had said with respect to salaries - and with respect to the pay level,

for example, there were different levels here. I will not get into names, but

steps 19, 18, 16 and 26 would have been the pay scales. My understanding was

that if previous employees of previous boards were to be hired they could be

fitted into the scale anywhere up to step 25 and not beyond.

MS LEGROW: If you refer to this letter, which was

the documentation we had at the time when we hired our employees, and if you

recall that during September 1996 to December 1996 was when the old boards were

beginning to dissolve and the new boards were being formed and we were hiring

our staff - at that point I think we had hired Mr. Shortall - this was the

document that we had to go by of the day. Then with the subsequent communication

from the department, even though we had made a contract basically with our

staff, the expectation was that we would have had to breach that contract

because the rules of the game had been changed by someone else. We did not feel

comfortable in breaching our original contract with our employees. Not only

that, but there were other staff throughout the Province. Because of the

anomalies of the day some people who were hired were coming in from Labrador to

other parts of the Province because they had a Labrador allowance. It fixed

their salary at a rate that might have even exceeded what Mr. Shortall might

have been making at some point in time. Again, relevant to what was going on in

the Province at the time, we did not feel that that was fair to our staff.

CHAIR: I have a lot of questions on this issue as

we get into it. I am going to defer. Are you finished, Wally?

MR. ANDERSEN: Yes, I will pass.

CHAIR: Mr. Mercer wanted to ask a question.

MR. MERCER: I would like to see a copy of that

letter. The information which is available to me is that the direction from the

minister was that the board was authorized to go up to step 25 and that if the

board wished to go beyond 25 it could do so using other funds. I presume other

than government funds.

It is also my recollection, and I stand to be

corrected by the AG, that salaries were paid at step 25 and that sometime after

September 1997 salaries were moved to 33, which would seem to place that letter

at variance with the facts that I know.

MS LEGROW: I can only -

MR. MERCER: Could the AG clarify that what I just

said is...

MS MARSHALL: Yes, I can shed some light. We did a

review in 1997, and when I reported in December of 1997 - I handed out the chart

yesterday to you - the executive of the St. John's East School Board were being

paid at what I consider the correct salary; but sometime between the time we did

that review and when we went back last year the salaries had been increased.

MR. MERCER: Yes, that is my understanding of the

information.

MS MARSHALL: Yes, initially they were paid the

correct amount.

MR. MERCER: Which is somewhat at variance with

what I just heard.

MS LEGROW: I am going to make a comment and then I

am going to defer to the staff. My understanding is that the contract was signed

with our staff. Even though we had a handshake contract in October of 1996, the

physical contract was not signed, I don't believe, until September or October of

1997. At that point then the actual salary increases would have been

implemented, but I will ask Mr. Shortall if he would just give the detail of

that.

MR. SHORTALL: That is correct, Sir. In the fall of

1996 when the hirings were complete for the senior executive team there was an

understanding reached and a handshake, as Ms Legrow pointed out, that the

contract and the level of benefits would be at the Step 33 level. However, given

the challenges of bringing the five school boards together, proceeding with the

registration and the organization of the school district before - you might

recall, in those days we were looking at registering every pupil for a

denominational or non-denominational school - that massive piece of work, as

well as the logistics of bringing an organization together for the first time in

mid-year with existing staff, essentially diverted the energy and the attention

of the school board from the completion of the senior executive contracts. As a

result, they were not completed until the fall of 1997. At that time the

arrangements which had been in place, negotiated - for example, in my particular

case and Mr. Lester's particular case we continued to be paid at the level of

benefit which had been negotiated by us with our former employer, the Roman

Catholic School Board for St. John's, and in the fall of 1997 these arrangements

were removed and the arrangements with the Avalon East board took their place.

That accounts for the change in the salary level that Ms Marshall has

identified.

Back in the days of the former boards, the schools

legislation at the time empowered the boards to set the level of remuneration

for their staff, senior staff particularly, and that in the case of the Roman

Catholic board and many other boards involved a top-up over and above the level

of salary identified by the Department of Education policy and regulations of

those days.

This, I would remind the Committee with respect, was

under a previous schools act which did give the school boards more autonomy with

respect to the level of remuneration than the current act does.

CHAIR: Can I just interject? That letter that you

just referred to, could I ask Mark to take that and get a copy for us?

MR. SHORTALL: Absolutely.

MR. MERCER: Just a couple of questions

(inaudible). Would it be possible for the board to provide us with copies of the

contracts in question, and the minutes of the board including those copies?

WITNESS: Yes, Sir.

MR. MERCER: Thank you.

CHAIR: Bob, you wanted a supplementary on this

one?

MR. MERCER: (Inaudible).

MR. SHORTALL: The minutes of the board approving

the current contracts?

MR. MERCER: The contracts on which (inaudible).

MR. SHORTALL: Yes indeed, absolutely. I believe we

provided those but we certainly will get them for you.

CHAIR: I am sorry, I thought you were finished.

MR. MERCER: The information which I have is that

the salary levels being paid presently are considerably in excess of the

departmental approved - or the departmental scale.

CHAIR: Do you have your mike on?

MR. MERCER: Oh, I am sorry.

The information which I have indicates that the

salaries currently being paid are somewhat high relative to that which was

approved. I don't know, Mr. Chairman, if the members of the board have seen the

Kirby report.

MS LEGROW: No, we have received no copy of the

Kirby report.

MR. MERCER: Then it would not be fair for me to

make reference to too much of the detail in that. I know the letter which you

have there seems to be at variance to that, but it seems to me that the

information which I have and which the AG has provided to us, was very clear in

the statement that individual staff salary was to be rounded up to the next

highest step on your Hay scale level, to a maximum of step 25. Any top-ups were

to be done by the board with its own funds. What funds does the board have or

would the board have to provide those top-ups over and above step 25, other than

what I would call normal government allocation?

MR. SHORTALL: The Avalon East School Board would

have no source of revenue beyond its grants which it receives from government.

Obviously if salaries were to be enhanced from school board monies the monies

would have to come from monies provided to the board in its annual regime of

granting from government through the Department of Education.

MR. MERCER: Do we have that letter from the

minister, the specific letter with -

MS MARSHALL: I don't have the letter here with me

but the specific letter that I saw was the one dated October 25, 1996, in which

he indicated that boards did not have the authority to top-up the approved

salaries that were set by that formula approved by Cabinet. Then the next month,

15 November, he did provide the boards with some flexibility. He permitted them

to appoint the new directors and assistant directors at any step on the approved

scale not in excess of step 25, as long as the boards were prepared to fund the

difference in salary from other funds.

MR. MERCER: So it seems to me that that letter,

which comes after the letter of October 25, stipulates two things: one, salaries

not to be in excess of step 25, and two, if you go beyond that you must use

other funds.

MS MARSHALL: Correct.

MR. MERCER: So I am going to ask the question:

What is your understanding of other funds? I've made an assumption, I may be

completely wrong, but what would you assume that to mean?

MS. MARSHALL: I have not been able to identify

anywhere anything that I would consider other funds because the schools boards

receive all of their money from the provincial government, and anything that

comes in by way of donation or whatever is usually specified as to what it is

going to be used for.

The only thing that I have seen was in Labrador. They

receive some funding from one of the mining companies and they consider that to

be a source of other funds. That's the only -

MR. MERCER: Again, I appreciate your answer, that

you are not aware of any other funds. I am aware of the dispute and the

discussion going on between your board and the trustees of the trust fund.

MS LEGROW: But the funds did not come from there.

MR. MERCER: Okay. So they came from general

government revenues?

MS LEGROW: Yes.

MR. MERCER: Thank you.

CHAIR: Bob French wanted a supplementary on this.

MR. FRENCH: Yes, just on the salaries here and in

line with what Wally said. Again, in the information that we have from the

Auditor General, I find it very strange that we seem to be getting into a lot of

letters here. I don't know if I ran into trouble yesterday with another board or

if I didn't. I have some difficulty with this because of what the Auditor

General has placed in front of us as a committee. I'd read this to the

chairperson of the board. Page 6 says:

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

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

the Minister provided flexibility to the boards" - in other words, Avalon East,

Avalon West, whatever - "in placing executive staff at a step on the approved

scale not in excess of step 25 as long as the boards had other funds to pay

these salaries."

Now if there are other funds I would certainly like to

know where they are. I would certainly hope that when kids are knocking on doors

selling chocolate bars or you are giving a kid fifty cents to buy a bar or a bag

of chips in a canteen, I would trust that that money would not be used to pay

somebody's salary.

I would just like to know where the board felt, or

where the board thought they had the authority, to go over a directive which was

issued by the minister. I said this yesterday, I will say it again today, again

for the record, my understanding is that the minister of any department does not

have the right to grant that approval without authority of Cabinet. Yet the

board felt, in its wisdom, that they could pretty well do what they like. I have

difficulty with that. I do not think that the board or I or anybody else - it

would be like us as MHAs in this room walking into the House of Assembly and

saying: We should all get $2,000 a month car allowance and we should all be paid

twenty-eight cents a kilometer. It does not make sense.

That is why when I read this information it does not

make sense to me either. As well, as part of that supplementary, I would like to

know the salaries. I do not like reading names but if you want me to I will.

There are four senior executives on the staff of the Avalon East School Board. I

would like to know: are the four of those today being paid at step 33 or are the

four of these over and above step 33?

MS LEGROW: To my knowledge they are being paid at

step 33. One of those staff is no longer with us, she is retired, and there has

been a new person hired who will be hired at a rate commencing -

WITNESS: He is not at step 33.

MS LEGROW: He is not at step 33. He is hired at

the government rate, our new director of program. I would ask Brian then to deal

in more detail.

MR. SHORTALL: Mr. French, the other three

directors are paid at step 33 and not above that. The rationale for that - if

you would just forgive me - is that in the fall of 1996 - I would ask you to be

mindful of the realities of that particular time. At that time we had brand new

school boards appointed to take office and to begin to organize the new

districts, September, October, November and December. The former boards were

still in existence. The legislation governing the former boards gave those

boards the autonomy to determine the level of remuneration for their senior

staff. There was a lot of confusion as to what the powers of the new boards

would or would not be. Most people assumed that the powers of the old boards

would essentially be the powers of the new boards. There was new legislation and

there was quite a trail of letters - as Mr. Mercer has pointed out - going back

and forth between officials and ministers of the education department, the

school boards' association, and so forth.

It was in that particular framework that the school

boards made agreements with their staff as to placements on the scale.

Subsequently, the letters that came, later in 1996 and through early 1997,

clarified more distinctly the position of the Department of Education. At that

particular time arrangements and understandings had already been reached. The

legal advice which the school board was receiving was that it was within its

justification to do what it had agreed to do. In February 1999 the present

minister of education communicated to the Chair of the board that she was

prepared to recognize the payments up to step 33 as long as new employees would

be placed on the scale according to departmental policy.

Since that time, as Ms Legrow pointed out, one of the

four people who were initially hired in the fall has retired. Her replacement

has come to work and he has been placed at the appropriate level. I believe it

is step 28 or step 29 of the scale. That was determined by officials at the

Department of Education as to the placement he would be provided at the Hay

scale. That was based upon his current salary in Labrador and where he would be

placed as he changed scales there.

As you know, there are three payment scales depending

on the size of the school boards. The scale he was on was for Labrador and the

exact same step he was on that scale he was placed on on the scale that applies

to Avalon East. So he is in line with the official policy.

MR. FRENCH: I have more questions but not on that

particular issue.

CHAIR: I think Mr. Lush wanted to have a question

on this.

MR. LUSH: Just a rather elementary question,

really. I do not know whether all Committee members understand this step

progression. Just what are step 25 and step 33?

MR. SHORTALL: In terms of dollars?

MR. LUSH: No, no. What are they?

MR. SHORTALL: It might be that Ms Marshall can

probably give you a more thorough answer than I can on that particular one, but

essentially the Department of Education, to my understanding, adopted a

modification of the Hay scale to determine the classification and salary

placement for employees. There were three scales identified to govern the

payment of directors and assistant directors for the new boards.

MR. LUSH: So they were only for senior staff?

MR. SHORTALL: That is correct. Well, and also they

would -

MR. LUSH: Teachers have their own pay scale.

MR. SHORTALL: The teachers have their own, and the

support staff, governed by CUPE contracts, or student assistants by NAPE

contracts, will be determined by those particular collective agreements.

MR. LUSH: So for people at the board office

(inaudible)?

MR. SHORTALL: Non-unionized people at the board

office would also be subject to a placement on this particular scale and I

understand that Mr. Lester is in the process of achieving that at this

particular time, and in communication with the department of classifications and

pay.

MS MARSHALL: I am just going to go back a step. I

just want to clarify something of what Mr. Mercer was talking about regarding

salaries.

There was

an act that went through to amend the

Schools Act in the Education Act and it was assented to July 26, 1996. In

section 103(1) that legislation says: "The minister shall... arrange for the

payment of the salaries of directors, assistant directors... and all the

salaries shall be paid in accordance with scales approved by the

Lieutenant-Governor in Council." Those were the scales that were approved by a

Minute of Council in 1996.

So it was back as far as 1996 that the government was

setting the salary scales for the senior officials of the school boards.

MR. MERCER: You were going to answer the question

of what the salary is at step 33. Could I have that answer? You can do it minus

the 2 per cent. That is what I'm interested in.

MR. SHORTALL: I will ask Mr. Lester if he will

give you that information. (Inaudible).

MR. MERCER: Where you were going to answer it I

just thought you would have it at your fingertips.

MR. LESTER: No. Those scales have changed since

they were put in place. On page 27 of your package there the scales are

identified. At step 33 for the Director is $99,780; Assistant Director -

Programs is $85,350; the same for the Assistant Director - Personnel; and the

Assistant Director - Finance is $81,634.

They are the current scales.

MR. MERCER: Mr. Chair, can I have follow with one

supplementary?

CHAIR: One more, because there are other people

that want to ask questions.

MR. MERCER: These numbers which you have just read

are at variance with the numbers I have in a report here from the Department of

Education based upon salaries actually paid, based upon T4s, and they are on the

low end. The T4 salaries are much in excess of that.

MS MARSHALL: I do not know the definitive answer

but I would like to say that after the senior people were put up on step 33, the

Department of Education were not aware they were at step 33 and gave them a step

increase. It might have been probably about $1,000 or $2,000 each. Now whether

that is what it is, I do not know.

MR. MERCER: Could we get some clarification on

that message here? Because the number which I read here for - I will just give

them for step 33 - is $99,780. The numbers which I read here for salaries based

upon T4s is $123,000, less some overpayments which brought it back down to

$108,000.

CHAIR: I do not know if that had to do with

severance from the old board, redundancy, vacation or anything of that nature

coming into the new board. Could the Director respond to that?

MR. SHORTALL: I suspect that the explanation is in

that particular area. There were some unused vacation days that were attributed

to that particular time and I would think that probably would have made the

difference. Perhaps Mr. Lester can be a little bit more specific in that answer

to you, Mr. Mercer.

MR. LESTER: To my recollection it was unused

annual leave that was paid. That would have made a difference between the

approved scale as for step 33 in the booklet and the T4 amount.

MR. MERCER: Having deducted the two amounts, the

annual leave and the car allowance, the salary is still some $10,000 greater

than the step 33.

CHAIR: I think, as we get into questions - because

I picked up on that also and I will have a lot of questions as we go through -

that will be highlighted or cleared up in due course when we get into -

questions that I have anyway - and hopefully they will be able to get the

answers.

MR. MERCER: Just lay it there for now?

CHAIR: Sure.

Mr. Lush had a point to make but before we leave this

- and I am sure we will be coming back to it - I want to refer to the letter

that Ms LeGrow referred to, dated 96-10-25. In the first paragraph it says:

Successful applicants for these positions should be placed on the approved scale

at the step next highest to the current salary but in no case above Step 33. I

recognize that in many cases previous school boards provided employees with

salaries which were in excess of the approved salary scale.

What I would like to know is: the staff there now, the

executive staff with the board today - and apparently it was not done until

September of 1997, I believe you said, and there was a handshake before that

when the people were hired on; and apparently, according to Mr. Shortall, the

previous legislation gave the previous boards the authority to set the pay

scales - in the time leading up to the takeover by the new board, was there an

increase given to staff members who are still existing with the board today

which would allow them to fit into a higher scale with the new board? Do you

understand my question? What I am basically saying is - I don't know if I am

being too devious here - were certain board members setting themselves up for

the new board, at a higher pay scale?

MR. SHORTALL: My understanding is that the school

board, upon hiring, was very cognizant of the level of salary which the

individuals received from their former employees. This salary, as I mentioned to

you, was comprised of three components. One was the level of salary determined

for superintendents and assistant superintendents under the former regime of

legislation, as you are aware, and there was a placement on the teacher salary

scale, wherever you would fit in on that, that was supplemented by a

superintendent or assistant superintendent's bonus which was essentially

determined by the size of the enrolment of the district and so on. That was one.

There was also, in the case of many of the employees -

the four individuals in question - the former employees provided some additional

compensation for automobile expenses. In the third case, there was also

additional compensation provided by the former employer to compensate for the

size of the districts and the complexity of the districts that these individuals

were attempting to administer.

Those three components did provide a salary that

represented what we would refer to - and I think the last letter of the first

paragraph on the 96-10-25 letter to the Chair of the Avalon East board talks

about the actual salary paid to the employee, and that actual salary was

comprised of that.

The board was very mindful that people coming into

these new positions would not receive a cut in pay, so they actually paid them

the actual salary, which in many cases was at or above Step 25. I believe as

well that the understanding was that when a person received an advancement, or

went to another position, there was a step promotion level, I believe, Mr.

Lester, that was calculated into that. So this was the background to the

determination of the level of salary which would be provided the employees under

the Avalon East board. The board wanted to ensure that their actual salary, from

the three areas that I mentioned, was not cut.

Also, given the fact that the degree of responsibility

had increased by, in some cases - in my particular case I was responsible for

18,500 students in September when I was hired by the Avalon East board, and took

over on January 1, 1997. Actually, we worked for two employees through the fall

of 1996 without any additional compensation. In January of 1997 we were

responsible for 36,000 or 35,000 children. It was quite an increase in

responsibility, so the board felt that it was appropriate to advance one step to

compensate that on the scale as well. To my recollection, Mr. Byrne, that was

the rationale the board used.

CHAIR: Auditor General.

MS MARSHALL: I just wanted to add some insight

because we reported on this in 1997, and that was the chart that I gave to you

yesterday.

Based on everything that we saw, this looked like it

was quite accurate and was based on accuracy and that there was no inflation of

the salary figures between that time and the time it ended up in the 1997

report.

My recollection, just to summarize, and Mr. Shortall

can correct me if I am wrong, is that when we did the 1997 report the salaries

at the Avalon East School Board were accurate and in accordance with the

formula. There were some school boards that were significantly higher and I

think that may have had an influence on what some school boards did between that

time we did the first report and the time we did the second report.

CHAIR: I think what I am trying to get at, and Mr.

Mercer referred to it, is the difference from the previous boards to the

existing boards salaries - executive staff - the difference from point A, the

executive staff now with the present Avalon East School Board. What is the total

difference? From some of the figures I have seen there, it could be upwards to

as much as $35,000 to $40,000 in any given year, if you look at all of it.

MS MARSHALL: That might be the difference between

what they were paid by the old board and what they are now.

CHAIR: Exactly. Yes, that is what I am saying.

MS MARSHALL: Okay, but it was not initially.

Initially it was only the matter of a couple of hundred dollars.

CHAIR: What I am saying is that between the fall

of 1996 and September of 1997 when the contract was signed, and Ms LeGrow

referred to this, there was somewhat of an increase that could be as much as 40

per cent or 50 per cent in salaries. Is that correct?

Mr. Shortall.

MR. SHORTALL: Mr. Byrne, I would love to say the

answer to that was yes and I would be delighted if I had that kind of an

increase. I asked for it at the time but I certainly did not get it, I assure

you.

As I said to you, I want to point out the fact that I

used to determine the actual salary these individuals received. The board was

cognizant of that. There was no increase given by the former school boards that

employed me, at an rate, and Mr. Lester I am sure, and also the person who has

retired from the board, to beef up the salaries so that the Avalon East board

would have a bigger base to compensate employees on. That was not the case. The

actual salary was the dollars we received plus the car allowance plus the

enhancement which the former employer received. That was calculated into a lump

sum and then there was an additional step added on the scale to compensate for

the increase in responsibility.

CHAIR: So what was that lump sum?

MR. SHORTALL: That lump sum came out, Roger, to be

the amount of money that you reported on page 27, I am assuming?

MR. LESTER: That is correct.

CHAIR: Oh yes, that is there, I am sorry.

MR. FRENCH: Mr. Chairman, do we have a list of

what the four senior executives are being paid? Can we get it?

CHAIR: It is there, listed.

Not to cut you off, but I want to get this one

straightened out. Mr. Mercer, you referred to the T4s there.

MR. MERCER: Yes.

CHAIR: What was the total there?

MR. MERCER: When you total the T4s, it is

$123,684. There were some overpayments which were recovered, which reduced that

to $108,220; which is why I said it is about $10,000 higher than the top of the

HL 33 scale.

MS LEGROW: I would just like to say that it is

very difficult for us to respond to something that we do not have in front of

us, and we have not had an opportunity to do our own research and investigation

so I do not know that we can even give you the kind of answers that you want

unless we really know what you are talking about. We do not have it; we have

never received that report.

CHAIR: The Kirby report.

MS LEGROW: Yes.

CHAIR: But you do have - Mr. Lester referred to

this - what did you say, one hundred and what total?

WITNESS: One hundred and twenty-three thousand six

hundred and eighty-four.

CHAIR: The original salary was $85,000, I think,

with the previous board. Is that correct, 85,000?

WITNESS: Yes.

CHAIR: So now it is up somewhere around $110,000?

WITNESS: Yes.

CHAIR: Fifteen and ten, that is $25,000; so,

$25,000 compared to $85,000 is certainly 30 per cent.

MR. LESTER: Mr. Byrne, can I ask what year those

T4s are? Is that noted in the report?

WITNESS: Ninety-seven.

MR. MERCER: Again, as I said at the outset, Mr.

Chairman, I find it hard to use these numbers because, as Ms LeGrow has

indicated, she does not have them; but at the same time I feel that I need to

raise the issue.

MR. LESTER: That difference would have been Mr.

Shortall's annual leave that was added in there, fifty days that he would have

been paid by the department during 1997. That would have made the difference.

The salaries I gave you were the 1999 salaries which included the increase. If

you go back to step 33 on a grid, in 1997 it would have been fifty days' pay at

that rate there. In 1997, $82,400 was step 33 at that time. So it would have

been -

MR. MERCER: That's why I asked minus the 2 per

cent. That is the question (inaudible).

MR. LESTER: Fifty days on that should bring you up

to the $108,000 or close to it.

CHAIR: I'm okay for now on that issue. I'm sure we

will come back to it, though.

I think Mr. Lush had a question or comment.

MR. LUSH: I have forgotten where it was now. On

the pay scale again, what are the scales? We hear of two, 25 and 33. Are these

the two areas of payment for senior staff, just 25 and 33? Are there other step

progressions in between?

MR. LESTER: What it is is this. You have a grid

like this that has thirty-three steps. Step 25 was the one we were talking

about, and then step 33. I'm not sure of the percentage, but there are

increments like a 1 per cent increase between each of those steps as you

progress through. The formula is that if you are below step 25 you get annual

increments of steps per year. Once you hit step 25 you are frozen at that step,

or above step 25. You do not move any more on the scale. It is an actual grid

that has a placement somewhere between step 1 and step 33.

MR. LUSH: I understand the progression but what I

wanted to establish here is that this is only for senior staff, not people

included on the NTA or on the principal's (inaudible). This is just for people

at the board.

MR. LESTER: This particular grid here is developed

solely on a point range and it is our directors' grid and nobody else's. There

is a grid here for other assistant directors as well.

MR. LUSH: So who decides where you go on that

grid?

MR. SHORTALL: My understanding is that when an

employee is recruited the current salary that he receives is identified and then

he is placed on the next higher step. Is that correct? Or there is a 10 per cent

increase, something of that nature.

MR. LESTER: Yes, there is an implementation

formula bay dependent upon where you come from, if you come from outside the

public service or within the public service. So there are a bunch of factors

that determine your actual placement on the scale.

If you were previously on the scale and, say, coming

from a government department to a school board you will be placed on the same

step you are currently on, on the existing scale, on the appropriate school

board scale. There is criteria I guess that apply to it, depending upon where

you are coming from.

MR. LUSH: Mr. Shortall mentioned that the new

board, in determining their salary, looked at what the person received from an

old board, which is sensible and logical. I think you mentioned three

components. First of all, there was a superintendent's scale established by the

Province. Then individual boards could pay above and beyond that scale. It makes

some sense too. Where do these funds come from? You mentioned the three

components, I think, that went into establishing the salary. The Roman Catholic

school board used that in particular. Where do the funds come from to pay, let's

say, your salary that was in addition to the superintendent?

MR. SHORTALL: My understanding, Mr. Lush, is that

they would have come from the operating expenses of the school board. Speaking

of the former Roman Catholic school board, there were no additional trust funds

or anything of that nature. Monies would have been decided by the school board.

They would have come out of the administrative grants provided the board to

operate by the department.

MR. LUSH: Which came from the government?

MR. SHORTALL: Yes, which had to have come from the

government.

MR. LUSH: Just a final question: Could you

describe to the Committee how school boards were paid? How, for example, is the

Avalon East School Board funded now? Your cheque does not come from the

Department of Education, right? It would come from the Avalon East School Board,

I expect. All cheques of people at the board, do they come from the Department

of Education or do they come from the board?

MR. LESTER: It again depends on where you work. If

you are a director or an assistant director, other than a finance person, they

come from the Department of Education. In my case, as the finance person, it

comes directly from the board. All of our support staff come from the board.

Student assistants and teachers come from the Department of Education. So it is

dependent upon what area you work in, I guess, your collective agreement, which

one you fall under.

In the predecessor board - go back to the old RC

board, superintendents were paid their teacher salary scale, basically, and

their superintendents bonus by the Department of Education. Any augmentation

over that would have been paid out of operating funds that the board had itself.

CHAIR: Mr. French has a question.

MR. FRENCH: Mr. Chairman, before I get into the

question I wanted to ask, I have some difficulty with this salary business. I

want to ask either the chairperson or the Director of Finance, as one member of

this Committee: Could you supply me a list of where your top four executives, or

what your top four executives are being paid? As well, would you also supply to

me a copy of Step 33 on the pay scale, in writing?

MS LEGROW: We can certainly provide that but I

think that information is on page 27 of -

MR. FRENCH: Well, when I add up what is on page

27, Madam Chairman, and what is in a report which unfortunately you do not have

and which I am not really happy about, because - we went through the same thing

yesterday with the Avalon West board. We are talking about a report that they

did not see, and we have you people here today and we are talking about a report

that you people did not see. To me, that is not fair to you people. I take

exception to that because to me it is like somebody coming in blind and I am

asking you questions because I was under the impression that we all had this,

although I did not get it until yesterday morning, and you people have never

seen it. It is not really fair. When I look at names and salaries here, and I

look at page 27, there is a difference.

MS LEGROW: Yes.

MR. FRENCH: There still is a difference. I do not

know if Mr. Shortall should be getting a raise because the way I look at it, he

is owed almost $2,000 from page 27 and what somebody tells me he is being paid.

I would like to ask Mr. Lester for a copy of what your four top executives are

being paid and where they should be paid on Step 33, if I could have that in

writing, because there is confusion between this report and what is on page 27.

You do not see what I see, but there is.

CHAIR: Okay, Bob, can I interject something here?

Because I find it more than passing strange that the Department of Education

paid for a report that was done by Kirby and Company, which concerns the Avalon

East board, the Avalon West board and a few other boards with respect to pay

scales, redundancies, vacation pay, credit card and whatever.

I found out about this report the day before

yesterday, about 3 p.m. I managed to get Mark to track it down and go over to

the Department of Education and actually get it. We had it copied for the board

members for the Committee yesterday morning. I cannot understand why the Avalon

East board would not have a copy of that, why you did not receive a copy, or why

you did not go looking for a copy, unless you did not know it was being done. I

cannot see you not knowing it being done because -

MS LEGROW: No, Mr. Chairman, we knew it was being

done because we opened our books for them and they were certainly in.

CHAIR: Exactly.

MS LEGROW: We were audited, I think, at that

particular time by three different groups of people - I think our own auditors,

the Auditor General, as well and Kirby and Company - so our books were wide open

to anybody who wanted to come through and have a look at them. We were wearing

our underwear in public on a regular basis.

I guess because so many audits were done, we were

responding to so many audits and we had so many other things on the go, we did

not know but the department might be using it for a different purpose.

CHAIR: With respect to that, we have the Auditor

General's Report and that is what we called this hearing on, based on what was

in this report. To me, the Kirby and Company report pretty well backs up and

confirms most of the findings of the Auditor General with respect to pay scales,

vacation pay, top ups and augmentation, whatever the case may be. I think what

we will have to do is go ahead with this and I would suggest that you people

request a copy of this from the Department of Education. Maybe we have

representatives from the Department of Education here today.

We have it here. I am not sure if we should, as the

Public Accounts Committee, give it to you but I think you should be able to get

your hands on. I would expect the Department of Education, if they have it, that

they should be able to get it before you leave here this morning.

MS LEGROW: I have no doubt that there is

absolutely no skullduggery going on here. It would only give us an opportunity

to defend ourselves appropriately if we had the actual facts and figures in

front of us. Because of all of the auditing that has been going on there is no

way, even if we wanted to, to engage in illicit top ups and that kind of thing.

Even though we have had a disagreement with the Auditor General and with the

department, we have certainly been forthcoming about our information and been

honest about it and then at some points to agree to disagree, but in my opinion

and to my knowledge there is absolutely nothing else going on here.

CHAIR: We would not be suggesting that. From my

perspective, the fact is that - and I have a major problem with this - you spoke

about difference of opinions. The previous Minister of Education, Mr. Grimes,

was clear in saying that the step progression or the salary paid was not within

the guidelines, it was not within Cabinet approval, it was not within his

directive, and the Auditor General is saying that, and Kirby and Company are

pretty well saying that.

The board has a different opinion. We have a new

minister appointed and shortly after she is appointed she sends out a letter

which is here in our documents - it was a very vague letter in my mind -

basically smoothing the waters and saying everything is fine now, hunky-dory.

You have two ministers in the same Cabinet who have a major difference of

opinion. Who is right? That is what we are here to try to find out and get to

the bottom of it.

MS LEGROW: Maybe another piece of information is

that in our discussions with the department around the salary issue, because of

the confusion in the letters that had come from the department, the confusion

around what would be approved salaries given the various salary components that

Mr. Shortall discussed earlier, we were prepared and indicated this to the

department to go to court on the issue of the salaries. We mentioned that, I

think it was last fall. Our solicitor felt we had grounds on which to do that.

We felt as strongly about this as that. That was basically our last communique

to the department on this particular issue prior to the minister's letter in

February.

CHAIR: Again I want to stress that the previous

minister was so strong on this, and I remember him being so strong in the media.

The Auditor General went on what was the correspondence from that minister and

what have you with respect to Cabinet directives and the minister's statements,

and that is why we are here today. Yet we have another minister saying now that

it is okay. We have you, the board, having their opinion, saying their legal

opinion is correct. We are here now, as I said earlier, to find out what is

really going on and who is right and who is wrong. We will be making -

MS LEGROW: I think you have to look at the timing

though. Because when we informed the department of our intention of going to

court if we had to, that was in late November or early December, whereupon Mr.

Grimes was reappointed to another minister's position and Minister Foote took

over. Basically, she inherited this situation.

CHAIR: There is no doubt. She inherited it, but

that is the point. She inherited this situation which was certainly caused by

the difference of opinion between the Avalon East School Board and the previous

minister, and the audit done by the Auditor General, and the Kirby and Company

report that was done for the Department of Education which was not made public,

which we have our hands on now. The board really should have a copy of that.

Again, I see I think the Deputy Minister in the back,

and hopefully he can make a call and get you a copy of this. If not, we should

have some discussion as to if we should give it to you because we will not

complete this hearing today from my perspective.

Mr. Shortall wanted to say something and then Fabian

Manning wanted to ask.

MR. FRENCH: Just a second, Mr. Chairman. My

question has not been answered.

CHAIR: I'm sorry.

MR. FRENCH: Could I get those copies in writing,

please?

CHAIR: Yes, sure.

MR. FRENCH: Thank you.

CHAIR: Mr. Shortall.

MR. SHORTALL: Mr. French, we will have those

delivered to you.

Mr. Chairman, one of my responsibilities under the

schools act is to provide advice to the school board and to ensure that the

board has proper advice when it is making its deliberations. From October, or

from the fall of 1996, the Avalon East School Board was operating under the

legal advice of its counsel. Its counsel was aware of all decisions which the

school board was making at that time.

As Ms LeGrow indicated, our counsel felt that in a

review of all the information and documentation from October 1996 on up until

the fall that the board was on very sound legal ground in terms of the decisions

that were made. We did indicate to the department that we were quite prepared to

seek a resolution to the problem through the courts, if necessary. Several

months, subsequent to that, we received the information from the current

minister that you have just referred to.

CHAIR: With respect to that, just a comment, then

I think Fabian wanted to say something. If we had two lawyers come in here

today, sit in the back of that room, and I asked them what color was the wall

down there, one would say green and the other would say blue and they would go

to court and make a fortune. To my mind, again, we have, from a logical,

sensible point of view and from the documentation that has been put before us,

to make some decisions and recommendations as time goes forward after the

hearings are completed. We need to be as thorough as we can be and I think that

you are going to need a copy of that report.

Mr. Manning.

MR. MERCER: A point of order, Mr. Chairman.

CHAIR: Sure.

MR. MERCER: Mr. French has requested copies of

certain documents for his personal use. I presume that will be sent -

CHAIR: For the Committee.

MR. MERCER: - to the Committee, to the Committees'

Chair.

CHAIR: Sure.

MR. MERCER: Thank you.

CHAIR: Mr. Manning.

MR. MANNING Mr. Chairman, yesterday a discussion

similar to the one we are having today was ongoing, and there was a comment made

that there is a possibility of a second report that was carried out. I'm not

sure if it was by Kirby and Company, but there was another report. I'm just

wondering has that been confirmed, and if so, can we have a copy of that one

also? Because we seem to be operating in a lot of gray area here.

CHAIR: Afterwards, yesterday, I spoke to Mark

Noseworthy on this to request that report, if indeed there was a report.

Apparently, there is one and they would be providing us with that report. We

don't have it yet, so I will ask the Assistant Deputy Minister: when can we get

our hands on that?

MR. LEWIS: (Inaudible).

CHAIR: You have already been sworn in.

MR. LEWIS: In terms of the first report, it is my

understanding there was a report which covered the other districts, or some of

the other districts, other than District #9 and District #10 which is the report

which you referred to, which the Public Accounts Committee has been provided by

the Auditor General.

I have not been able yet to get a copy of that report

and to circulate it but I understand it exists, because we have referenced in

our comments to the Auditor General that there was more than one report. I have

checked around the department and to date we have not put our hands on it, but I

was asked for it just the evening before last. I have people reviewing the files

and I am sure we will identify that report. Because I was not at the department

at the time I do not recognize it from sight. What I have been looking for is a

report that looks like the report we circulated previously. We haven't found

that one.

In terms of the release of this particular report to

the school boards, I had a brief discussion with our solicitor with the

Department of Justice on that yesterday. There are some concern in terms of

releasing the report in its entirety because it refers to more than one district

and it names specific names of individuals. In a release of the report to

District #10, for example, the Committee may wish to provide only those sections

of the report that relate to District #10 as opposed to providing them with a

copy of the report that relates to other districts as well. I would just raise

that caution.

CHAIR: Sure, that isn't a problem. What you are

saying is, in the first issue the other report does not cover areas -

MR. LEWIS: District #9 and District #10.

CHAIR: So that is not an issue.

MR. LEWIS: Our standing is that this second

report, based on a first report which was more broad-brushed of the various

districts, identified specific issues with districts 9 and 10 and that resulted

in the commissioning of this more detailed report on districts 9 and 10.

MR. FRENCH: When will the board receive this

report? Because I believe we are doing exactly today what we did yesterday. It

is like throwing water in the wind; it is blowing back at you. We are here

asking people questions. We got this information in front of us and, in fairness

to the board, they do not.

I think before we come to these hearings all our ducks

should be in a row and the board should certainly have had this. Our Chairman

should have had it long before he did. I believe that the board should certainly

have had this report before they came here to get questions from me, from Mr.

Lush, Mr. Byrne, Ms Hodder, or whoever. The board should have had it.

CHAIR: What we will do now, as far as I can see

from the deputy minister, is that we can ask Mark to go out and copy the parts

of the report that are applicable to the Avalon East Board and we can give it to

them here today. When we adjourn today we will have to reconvene at a later

date, again.

MR. FRENCH: I don't want to split hairs here but I

don't know if legally the information that Mark would copy is what the board - I

would much sooner see the information come from the department, where it should

come from, not from here. The information that goes to the Avalon East School

Board should come from the Department of Education, not from the Public Accounts

Committee.

CHAIR: That's a good point. Would you see to that?

MR. LEWIS: I will take your direction back to the

department and we will -

CHAIR: When can we expect the board to receive

that?

MR. LEWIS: As soon as possible would be the best I

can say.

CHAIR: Today? Tomorrow?

WITNESS: That would depend, I guess, upon what he

takes from the department when he goes back.

MR. MANNING: Mr. Chairman, if I could, it was not

a directive that you pass out this information yet. That has not been decided.

Is that my understanding from what you just said? A few moments ago when you

said that you had discussed it, you have not been told yet to pass this

information to Avalon East?

MR. LEWIS: No, I have not.

MR. MANNING: No, so he has not been given that

directive yet.

MR. LEWIS: We commissioned this report on the

basis of the Auditor General's Report, confirming essentially the findings that

she had found, and we provided the reports to the Auditor General. That is what

the department has done to this point with that report. We have also submitted

to the Department of Justice and had a legal review of it in terms of recourse.

MR. LUSH: I just have a comment. I think we are

building this Kirby thing up to be - making a mountain out of a mole hill,

really. This Kirby (inaudible) says nothing any more than what the Auditor

General's Report says. It simply supports her, so I don't know why we are

holding that up to be such a secret thing. It simply says -

MR. MANNING: A point of order, Mr. Chairman.

MR. LUSH: It simply says it supports the Auditor

General on her statements that the pay scale was in contravention of the Schools

Act. That is what it says, and I -

CHAIR: Fabian.

MR. MANNING: A point of order, Mr. Chairman.

I agree with what Tom is saying, but at the same time

we were here yesterday asking questions referring to this report and our

witnesses did not have it in front of them, number one. We would refer to a

certain page and the witness would say: Well, I don't have that here. It is the

same situation we have here this morning.

Whether it is the same or not, chalk of one and cheese

of the other, the thing is that the paperwork, or the paper where we are

deriving our questions from, these people are not privy to have this in front of

them. Now they may have it in the Auditor General's Report but it may not be

down to the scale that it is here. Therefore, they cannot (inaudible) when we

ask a question. If we cannot get an answer to the question, what are we here

for?

CHAIR: This is going to be an official request to

the Department of Education, through you, that the Kirby and Company report, the

sections applicable to the Avalon West board be given to them as soon as

possible, and the sections with respect to the Avalon East board be given to

them as soon as possible so we can continue on with our hearings. Hopefully we

will get an answer back from you within twenty-four hours. Is that reasonable?

WITNESS: Yes, Sir.

CHAIR: Fine, that's all you can do.

MR. FRENCH: Mr. Chairman, if I might, I would just

like to say that when we talk about the Kirby report and we talk about the

Auditor General's Report, I looked at the salaries and on page 27 there is a

difference in what Kirby is telling me that the executives are being paid. As a

matter of fact, if what Kirby and them are saying is correct, on page 27 some of

the chief officers at the Avalon East School Board are being underpaid.

MR. LUSH: I'm not one bit interested in what Kirby

says. I believe these people. These are the people that are under oath, these

are the people who are (inaudible).

MR. FRENCH: I also believe the Auditor General and

what is in here, so (inaudible) -

MR. MANNING: Well, what do we have this for? Throw

it in the garbage then.

MR. FRENCH: What do we have the Auditor General's

report for if that is how you feel about it?

MR. LUSH: These are the people who are here to

tell the (inaudible).

MR. MANNING: (Inaudible) garbage.

CHAIR: Order, please!

What we can do here now is continue on. I have reams

of questions I can ask here based on the Auditor General's report, and I am sure

other people around this table can ask questions. We can go until at least noon

or so, adjourn, and reconvene at a later date when these people have the Kirby

report and we can do a final questioning of the board. I think that is

reasonable to expect.

MR. FRENCH: Mr. Chairman, I would like to move a

ten minute adjournment at this time (inaudible) cool off a bit.

CHAIR: Yes, I was just about to do that,

(inaudible) break. No problem. We will have a ten minute break.

Recess

CHAIR: Order, please!

We will get this hearing going again. When we took a

break Mr. Manning was asking a few questions, so we will move on now to Mary

Hodder.

MS HODDER: Thank you, Mr. Chairman.

The Auditor General noted that the current board paid

$269,224 in severance to two former employees of a former board. This was

$110,599 in excess of what government's policy was. The current board approved

this contingent upon the minister's approval which was not forthcoming for these

enhanced severance packages. The board paid these amounts anyway. Can the board

provide the Committee the authority with which they did this?

MS LEGROW: Thank you, Ms Hodder.

The board did not actually pay the amounts. The

amounts were approved by a previous school board, the board from which these

employees were employed, and the monies for that amount were held in escrow.

CHAIR: Excuse me, your mike is not on.

MS LEGROW: I'm sorry, I thought it was on.

The monies were held in escrow and I guess what our

board did was facilitate the transfer of those monies with proper T4s and that

kind of thing for the former board.

MS HODDER: It is stated that the enhanced

severance packages were paid with monies from the Pitts Trust Fund. According to

an order of the Supreme Count of Newfoundland all monies in this fund were to be

used for general education purposes. Does the board feel that enhanced severance

packages fall under this description?

MS LEGROW: It would be quite fair to say, and both

my colleagues here with me this morning will remember, that we were extremely

concerned about this activity and it really precipitated our contact with Wayne

Myles, our solicitor, on this particular issue. Mr. Myles indicated to us that

he had great concerns about those monies being used for that purpose. Again I

will reiterate that it was not our decision, it was the decision of the former

board. He did say at the time that it would require an extensive legal audit in

order to determine whether or not that was within the parameters of that

particular trust. We did not have the monies at the time to conduct that kind of

legal audit.

We reported the findings of our solicitor to the

department and essentially that is where it is now. We just cannot afford to do

the kind of auditing and to do the research to see whether or not that

particular trust fund would permit that kind of expenditure.

CHAIR: Can I just interject? Are you finished?

MS LEGROW: Go ahead.

CHAIR: Okay.

I think the Auditor General may want to make a comment

on this. On page 15 of the document you have in front of you, it says at the

bottom of the diagram, "The Schools Act, 1996, states a board shall not make a

payment to an employee as a result of the termination of his or her employment

or the abolition of his or her position except as approved by the Minister'.

Since the Minister of Education did not approve these enhanced severance

packages, the payments were made not only in breach of the applicable

legislation, but also without approval of the current Board."

Would the Auditor General like to make a comment on

that?

MS MARSHALL: Yes, I will probably make two

comments. First, I would like to clarify: the gross amount of the severance

packages were, in fact, paid out by the new school board. It was the trust funds

then reimbursed.

MS LEGROW: As I said, the money was held in

escrow.

MS MARSHALL: Yes, until the gross amount was paid

out.

The concern that I had was that the severance packages

were supposed to have been approved by the minister and he, in fact, refused to

give his approval for the enhanced severance packages but they were paid out

anyway.

The other issue that I had a concern about was that

when the new school board approved those severance packages, the enhanced ones,

they said they would approve them contingent upon the approval of the minister.

Well, the minister wrote back and said no, I am not giving my approval, but it

got paid out anyway. We could never find a board minute which said we are going

to go ahead and proceed with this even though we did not get the approval of the

minister. I think that was something I had requested several times, but I never

did get that minute and I do not think any such minute exists.

MS LEGROW: To my knowledge, that minute does not

exist. My understanding of the discussions of the day was that the motion was

passed in December, prior to the new board taking over, and it was with the

intent of having government monies pay out the redundancies or basically the

payout of the salary contracts of the two staff.

The legal advice of the day to that particular board -

my understanding is, and again this is only hearsay because I was not involved

in it - was that if these two employees were to take their contracts to court,

they would probably win in a court debate, in a court decision, the right to

have their salaries paid out.

The motion of the board, the minute that existed for

December, was on the assumption that public monies would be used to settle the

contracts of these two employees. So in January or February when pressure was

applied to the Avalon East School Board to do this, it was not with the view of

using public monies. It was on the understanding that it was monies from the

previous board that had already been held in escrow, that it was not public

money that was to be used, and the cheque was written knowing that it was in

escrow. There was a great deal of discomfort at the time, which is why we went

to the Department of Education and alerted them to what had happened up front.

I just want to make sure now whether Brian or Roger

want to add to that.

MR. SHORTALL: Yes, your recollection is accurate.

The understanding clearly was given to the Avalon East School Board by

representatives of the former Avalon Consolidated School Board in December of

1996 that these monies should be paid to these two former employees of that

board; and should the minister or government not approve the full financial

package, the trust fund would convey the balance of money to the Avalon East

School Board so the board would not be out any money.

Indeed, as Ms LeGrow pointed out, there was an amount

which represented the difference between the department-calculated severance

benefit as well as the additional monies which the trust fund people put in an

escrow account which was used to reimburse the board for the monies that were

provided to those two particular employees.

The board did not feel it was actually spending public

monies as much as it was merely providing a payment with the understanding that

it was going to be reimbursed for the difference, which it was.

CHAIR: Just a quick question on that: What was the

difference? The trust fund paid the difference for the severance package, which

was an enhanced package that was not approved by the minister. To me, I don't

know if that is a proper use of the trust fund money, for a starter. I am sure

if people put money in trust, or made donations for the education of the

children of the Province, that trust fund should be used to pay severance to

people from the former boards. Would you agree or disagree with that?

MS LEGROW: I would just like to say I think your

discussion should be with the people who made that decision. That had nothing to

do with the Avalon East School Board. It was a decision made by that former

board prior to the boards coming together. It was a decision that basically held

through. The decision had already been made to expend trust fund monies prior to

the Avalon East School Board being in operation, in effect. We really had no

control over the decisions of that former board.

CHAIR: My next question: When was it paid out and

under what directive, what minute? Am I getting things confused? There was no

minute for that? Who, initially -

WITNESS: Who wrote the cheque?

CHAIR: Yes, but if someone wrote the check they

had to be given the authority from somebody to write it. It is not the person

who wrote the cheque.

MR. SHORTALL: As I indicated to you, in December

1996, assurances were provided to the Avalon East board that, should government

not approve the enhanced severance package for these two particular former

employees of one of the former boards, the trust fund monies would be used to

compensate the Avalon East board for any difference. That assurance was clearly

provided and is recorded in a motion that was provided at some date in December

of 1996. Subsquent to that - and at that time as well, the Avalon East board had

very little information about the trust fund as to what it was, the extent of

it, the terms of reference, and all these other things that you have alluded to,

Mr. Byrne, as to whether such a payment would be appropriate. We were not in a

position to judge that.

As the weeks unfolded in January past, and we got

ourselves into February, there were more and more questions along the lines that

you have identified starting to come across the minds of the trustees. At that

time - as Ms LeGrow has indicated - the firm of Benson Myles was retained to

provide advice to the board with respect to these particular matters. However,

almost parallel to that, based upon the fact that monies were placed in escrow

to cover any difference between the approved payout from the Department of

Education and the agreed upon settlement for these two particular employees, the

cheques were provided by the Avalon East board for these two individuals and in

a very timely fashion the trust fund provided the difference in monies; and the

Department of Education, of course, provided the rest of the money in terms of

the board's account as well, so there was no dollar difference at the end of the

day.

I would ask Mr. Lester if he wishes to comment further

on that from his perspective.

MR. LESTER: I will just add that there are some

indemnities from the people who were the trustees of the trust fund of the day,

indemnifying the board for the cost in the event that the minister did not

approve the severance package - which we know he did not. It was on that, I

guess, authority and understanding that the cheques were written and then

consequently bills sent to the trustees of the trust fund to be reimbursed to

the board.

CHAIR: Mr. Mercer.

MR. MERCER: I am hearing, in my mind at least,

conflicting information and I just want clarification to begin with. The issue

of the trust fund is another line of questioning which I would like to get into

at a later date, Mr. Chairman.

The information which I have indicates that the Avalon

Consolidated School Board, which is a predecessor board, did approve the

enhanced severance packages. I believe the date that I have is - do I have a

date? It was back in December. No, it is maybe a little earlier than that.

WITNESS: November 5.

MR. MERCER: November 5, that is the one I was

looking for. That is fine. The board that was in place on December 6, which the

AG referred to as the current board, approved and substantiated the decision of

the Avalon Consolidated Board to pay these enhanced packages, but only on the

condition that they be approved by the minister as per the Schools Act. Now that

is the information which I have.

As I understand, the current board, on or about

January 30, 1997 - those payments were made despite the fact that the minister

had refused, in writing, to give his consent. So I am a little bit confused.

Because if this board had approved the enhanced severance, subject to the

minister approving it - I did not hear the board say that they were subject to

getting it from some other accounts or whatever, but on the condition of the

minister approving - and he did not approve, and it was subsequently paid, then

where is the authority? Because it seems to me that if the board passed the

motion saying: We do this on condition that, and the condition was not approved,

then the motion is invalid. Where was the authority to pay?

CHAIR: The Auditor General might want to comment

on that first. Do you?

MR. MERCER: Have I got my facts half right?

MS MARSHALL: No, you have your facts completely

correct. We could not find the authority to pay. We could not find a board

minute authorizing that cheque to be cut. The cheque was cut but there was no

board minute and we requested on several occasions for a copy of the board

minute and we were not provided.

CHAIR: Mr. Shortall.

MR. SHORTALL: I would respond. Ms Marshall is of

course quite correct in her statement. There is not a specific exact board

minute that directed that particular cheque to be cut, and you are correct Mr.

Mercer in your observation. However, in the December 1996 school board meeting

of the Avalon East School Board there were clear assurances recorded at that

particular meeting that should government not authorize the enhanced severance -

I should not say enhanced - the severance package for these two former employees

of one of the previous boards that the trust fund monies would be used to make

up the difference. With that type of an assurance, and with the indemnities

which Mr. Lester mentioned - and the fact that these monies had already been

identified and had been held and were being held in escrow - the cheque was cut

toward the end of January for these particular people and the monies were

reimbursed to the school board. There was no difference at the end of the day

with respect to the school board's accounts.

I should point out, I think, that there was an

analogy. I realize the amount of money now is quite different in the example

that I am going to give you, but it is not unusual for school boards to create

an account receivable to assist a school council, parent association or school

to make a purchase, following which the balance would be made up by fundraising

or by contributions from other sources.

For example, a school may wish to buy a number of

computers. It is not unusual for the school board to place an order to that

effect and bill the school and then receive monies from the school over the next

two to four months based upon the proceeds of fundraising campaigns to pay off

that particular educational investment. In that particular context it was the

same type of thinking that we used in this regard. This would be an account

receivable. We had an indemnification from members of the trust fund that the

monies would be provided. The monies were held in escrow. We realized that. We

knew the additional monies would come back and we felt that it would be an

appropriate way to handle the requests from these two former employees of a

previous board. Mr. Lester, I think that is a fairly accurate

summary of what

came to pass. We were satisfied that the Avalon East School Board would be out

no dollars as a result of this particular transaction and the board was not out

any money.

MR. MERCER: So are we saying that in the December

meetings of the board a block of money, in excess of what the approved severance

was, some $110,000, was physically earmarked and put into an escrow account

specifically for severance to be paid to these people? Because that is my idea

of an escrow account.

MR. SHORTALL: The Avalon East School Board, Mr.

Mercer, did not do that but we were of the assurance that one of the former

school boards, and the trust fund itself, had identified that particular amount

of money and had done that with it. Also, we received statements of indemnity

from representatives of the trust fund that this particular money would be

forthcoming should this payment be made.

MR. MERCER: So you are saying that it was the

Avalon Consolidated School Board, in December, who specifically earmarked that

amount and put it in escrow.

MR. SHORTALL: I cannot speak for that particular

former board, but it was either that board or it was the trust fund itself which

made that particular determination. That is my understanding, Mr. Lester. I

think that is -

MR. LESTER: (Inaudible).

MR. SHORTALL: (Inaudible) yours..

CHAIR: Just before Bob, I have a question.

Basically, the decision to write that check was done at the executive level and

not at the board level?

MR. SHORTALL: Our rationale for making it, Mr.

Byrne, was at the December meeting, given the assurances that been provided

around the table before the motion that Ms Marshall and Mr. Mercer referred to

was carried - and we do have minutes and we can provide statements from the

secretaries of that particular meeting that the assurances were provided to the

board, that should the minister not approve the agreed upon severance package

the trust fund monies would top up the difference. Further to that we understood

that, as well, monies would be placed in escrow. Subsequently we received

statements of indemnity from representatives of the trust fund before we

considered releasing any monies which we did toward the end of January.

CHAIR: The Auditor General, then Bob French.

MS MARSHALL: Just to bring you right through to

the end now. The new board paid the severance packages on January 30, 1997,

without the minute. Then the trust fund reimbursed the board May 2, 1997. So,

three or four months after they did get the money.

CHAIR: Bob.

MR. FRENCH: Somebody is out $110,000. Somebody

spent $110,000 without approval. The Avalon East Board, as we know it today, had

a word from what was the Avalon Consolidated School Board ,or the trustees: We

will take this $110,000 out of ABC account and we will transfer it to you. I see

two things wrong here. Number one, the minister did not approve it. Number two,

some trust fund is out $110,000. Can you explain that to me? What trust fund is

now out $110,000? Because somebody got $110,000 that, according to the Minister

of Education in this Province, they should not have. That is how I see it.

MR. SHORTALL: Mr. French, I really cannot speak on

behalf of the Pitts Fund. I do not have the knowledge and the understanding of

it. There was a considerable degree of frustration on the part of the Avalon

East School Board very early in its regime when it became knowledgeable of these

particular trust funds and the extent of monies in those particular funds. The

exact terms of the trust and so forth were not made available to us. That is why

we, in February, contracted the services of Benson Myles to investigate this

matter and provide advice to the board. That particular process is ongoing and

the firm of Benson Myles has been meeting, only earlier this month, with the

legal representatives of the trust fund to determine the future relationship, if

you wish, between the trust monies and the Avalon East Board as a successor of

the Avalon Consolidated Board, should there be any relationship, and we are

waiting to see that play its way through.

MR. FRENCH: This particular fund, is this now in

the hands of the Avalon East Board?

MR. SHORTALL: No, it is not sir. It is in the

hands of a group of trustees and they are acting according to the various trust

documents that -

MR. FRENCH: Would you have any idea of why the

trust was set up? Was it for furthering education?

MR. MANNING: We do. General education purposes.

MR. FRENCH: Okay, it was for general education

purposes. Somebody is out here $110,000. I realize that it is not your board but

as I said yesterday, and I say again today, somebody has to take responsibility

for this $110,000. Somebody is out $110,000. It was not done according to what

the trustees - whether they had that authority or whether they did not have that

authority, I do not know. I find it very strange that we would give $110,000

over and above what the government scale allows, and that is the part that

bothers me. There is $110,000 gone which could have been used to help some child

in Newfoundland to further their education and that fund is now short $110,000.

That really bothers me, that this money would go to pay somebody over and above

the severance package as laid out by the Government of Newfoundland and

Labrador.

Some day in another area I will get the right to

address it, but I think that somebody should really investigate this. I believe

that we should have, through maybe the Department of Justice, some kind of a

judicial inquiry to find out why somebody has the right to give that authority.

I may be wrong but I don't think they do. I don't think the two people should be

paid. I know that there were some funds paid back but I understand that this

money that was paid was not part of the money that was recovered. Am I correct?

MR. SHORTALL: I'm not quite sure I understand your

question.

MR. FRENCH: There were some funds that were paid

out, I think, which were collected or somebody had to go back and recollect

them. Am I correct in that?

CHAIR: I think I might be able to clarify that.

What had happened was that the board paid out the money, the enhanced package,

and they recovered it from the trust fund some time after because they had

committed the money to them.

MR. FRENCH: My argument, Mr. Chairman, is that now

the fund is out. Somebody is still out $110,000.

MR. SHORTALL: If I could, Mr. Chairman, and I

hesitate to make any comment about the trust funds because we have no other

relationship to them, but I would point out that in the responses of one of the

former school boards to the Auditor General's report there are comments made by

that particular board to the very point that you raised, and whether or not that

board felt it had the authority, or the funds had the leeway, to provide monies

for those kinds of purposes. I would refer you to those comments of that

particular board. I'm not able to speak on it, on its behalf.

MR. FRENCH: I will close on this point, Mr.

Chairman. I would just like to say to Mr. Lush that maybe you don't feel it is

our concern. I feel it is our concern. I feel that we are out $110,000 here to

the education process -

MR. LUSH: No, we are not (inaudible).

MR. FRENCH: Yes we are. There is $110,000 gone

without ministerial approval. It may not bother you but it bothers me.

MR. LUSH: The minister has nothing to do with the

trust fund.

CHAIR: The point here -

MR. FRENCH: But he is supposed to give authority.

MR. LUSH: You have to understand, he has nothing

to do (inaudible). Only give authority to pay (inaudible) but he has nothing to

do with the trust fund.

MR. FRENCH: He did not give authority to pay.

MR. LUSH: No, that is right.

MR. FRENCH: Yet it was done. That's the part that

bothers me.

MR. LUSH: (Inaudible).

MR. FRENCH: It may not bother you but it bothers

me.

CHAIR: Order, please!

The point to me here is this. The question has arisen

if the previous board had the authority to do what they did with respect to that

trust fund. There is a line of questioning there. I think again there is some

overlap between the previous boards and this board. The point that Mr. French is

making, I think, is the accountability. Who is to be held accountable for that?

That remains to be seen. Mr. French referred to a judicial inquiry. That may

very well be a recommendation of this Committee after the hearing is completed.

Who knows? It depends on what evidence we find here and that is what we are here

to do, to ask the questions, to get the answers and then to come up with some

recommendations.

MR. MERCER: Mr. Chairman?

CHAIR: Not to cut you off, but there are some

people to my left who might be wanting to ask a few questions. Because you have

had a fair shake at it.

Mr. Andersen.

MR. ANDERSEN: This is not really a question but a

concern that I have, somewhere along the lines but maybe not as strongly as Mr.

French, to know that a board could go ahead and approve over $100,000 in

severance, knowing that they did not have the approval of the minister. If I

read down further, it says: According to an order of the Supreme Court of

Newfoundland that all monies in this fund were to be used for general

educational purposes. When I read the part of general educational purposes, I

think one would have to agree that severance packages definitely would not

qualify to be paid out.

This is just a comment. That is a concern that I have,

that a board could go ahead without the minister's approval; and if they are

well aware of an order of the Supreme Court of Newfoundland, to go out and do

it. That

part concerns me.

MR. FRENCH: It concerns me too.

CHAIR: That is the question, yes.

MR. FRENCH: That was the question.

MR. LUSH: Not the trust fund.

MR. FRENCH: Yes, it was the trust fund. Where did

the money come from?

MR. LUSH: (Inaudible).

CHAIR: Order, please!

Mr. Mercer.

MR. MERCER: Just to follow through, it is clear to

me that the board is not aware of the workings of the, quote, trust funds,

unquote.

MS LEGROW: No.

WITNESS: That is correct.

MR MERCER: Therefore, Mr. Chairman, given the

extensive commentary which we have here from the trustees of that fund, I think

it might be appropriate that we, at some appropriate time when we reconvene,

have a representative of that trust fund here so that we could ask some

questions. Because the allegation, which I understand, that has been made with

respect to the trust funds is that they represent private money to the directed

as per the trustees who are in charge of that versus - and we have another group

of monies called public monies. I think we need to explore that a little bit -

CHAIR: In my mind, Bob, with respect to that, it

comes down to jurisdiction. If the PAC will have the authority to go out to a

private trust, the question is: Did the previous board have the authority to put

that money out to four private trustees? That is the question.

MR. MERCER: Mr. Chairman, I tend to agree with you

on that point, were it not for the fact that the trustees were also members of

the boards.

CHAIR: Previous boards.

MR. MERCER: Past and present.

MS LEGROW: No, there are no trustees - well, there

might be one actually sitting on our board at the moment. I'm very uncomfortable

with this because we have nothing to do with it, but there are people, both from

the former board and from the trustees, who can certainly respond to your

concerns.

MR. MERCER: The reason I just want to belabour

this point, Mr. Chairman, is that the Auditor General did report that the

$573,000, or whatever the number was , was on the financial statements of the

previous board. They are not on the financial statements of the current board.

CHAIR: Because?

WITNESS: That is correct.

MR. MERCER: That is the `because' we have to get

our mind around.

CHAIR: It is because the previous board decided to

put that money in that trust to a private trustee so the present board would not

have any control over it.

MR. MERCER: I'm not going to make that assumption

but the previous board did in fact change the trustees.

CHAIR: Definitely.

Mr. Lush.

MR. LUSH: I think, again, the question that has to

be addressed is: Where did the board get its authority to pay the compensation?

That is the key. I think the trust fund is beyond our jurisdiction too. Number

one, they were not permitted to pay the compensation, as far as we know. That is

what the law looks like. The fact that they had a private trust fund, I think

that is out of our jurisdiction. The boards had those funds. They were set up

for certain educational purposes and the board of the day thought they had the

authority to do with them what they could.

It might be a different form to deal with it but I do

not think it is our jurisdiction to deal with that trust fund. As they said,

they were there set up for a long time and boards thought they had a use for

them. The people who set them up set them up for educational purposes. We might

argue that was not general educational purposes, to pay somebody severance. That

might be another area, but our question has to be: Who gave the board authority

to pay the compensation when it looks like it was in direct contravention of

certainly a ministerial directive? That is the question that has to be

addressed.

MS LEGROW: I would just like to say with respect

that having sat at the table when that motion was passed early in December of

1996, the board of the day felt uncomfortable with providing authority to pay

these packages without ministerial approval, which was why the motion was stated

the way that it was.

The piece that came with the monies coming from the

trust fund - I do not even think it was exactly articulated that way, other than

monies were held in escrow and there were monies available - that was a

different thing. In terms of public monies, the board of the day, I think it is

fair to say, actually made that as part of the motion, that it would not be

without the thinking then that we were talking about public funds.

CHAIR: With respect to that, though, that begs the

next question, to me. It is why the minister refused to give his permission or

authority to cut that cheque. Obviously, he must have felt that the board did

not have the right to use those funds in that matter. I am only surmising what

the minister was thinking, but it seems logical to me.

MR. MERCER: What I understood Ms LeGrow to say was

that it was her understanding - please, I don't want to put words in your mouth

- when the motion was approved that the monies were to be coming from the

government funds and that is why you put in the condition subject to. Is that

what I heard you say?

CHAIR: Mr. Shortall.

MR. SHORTALL: If I can just respond, I recall the

meeting of December quite well because we have gone over it many, many times as

a result of the events that have come to pass since.

The rationale in providing the payment at the end of

January to those two former employees was based upon an understanding that had

been communicated to the Avalon East board by one of its predecessor boards that

this amount had been agreed; and the assurances had been provided the Avalon

East board that, if the minister did not approve, we should pay the money out on

the understanding, the assurance, and the indemnification of individuals, that

the monies would be provided to the board. It was on that basis that the cheque

was cut. We were quite confident that while a cheque was issued there was a high

degree of confidence amongst my staff as well as amongst the school board

members who were aware of that, that this money - while a cheque was cut from

the Avalon East School Board - the monies would be compensated in a very timely

fashion, which they were.

MR. MERCER: That being the case, Mr. Shortall, I

am just surprised that the motion approved by the board didn't reflect that.

CHAIR: Thank you.

Mr. French.

MR. FRENCH: I will move on to something else. One

of these days we will get some answers.

Mr. Chairman, I would like to go to page 7. Down at

the bottom of page 7: 14. District#10. The Auditor General writes, "Our review

of District #10 identified several expenditure items which were of particular

concern."

One of the issues she raises, she says, "In May 1996,

an executive of a former board received a payment of $42,555 as compensation for

2/3 of unused accumulated education leave. This employee is still employed with

the Board. There is no policy which permits a payment of this nature."

Again, if there was no policy, where does the board

get the right to pay this money? Was that money out of general revenue which the

board received from the government?

MR. SHORTALL: If I may, Mr. French, I can respond

to that. In May of 1996, the former board in question was the Roman Catholic

School Board for St. John's. The legislation which pertained to it at that time

provided that board with the autonomy to determine the levels of remuneration

for its senior staff. An employment contract had been entered into with this

particular employee some years before that and it provided the board with the

discretion to make such a payment in terms of the employment contract of the

individual at that time. In May of 1996 the school board made a conscious

decision to provide that particular degree of compensation. Again, it was done

under legal advice at the time and it was certainly in keeping with the terms of

the personal service contact of the individual involved.

MR. FRENCH: Was the money T4-ed to the individual

concerned? As well, was the cheque written by the now Avalon East School Board?

MR. SHORTALL: No, Sir, the cheque was written by

the Roman Catholic School Board for St. John's and it did appear on the T4 slip

of the individual concerned.

MR. FRENCH: As well, if I go over to page 8 and

carry on with 14. District #10, the Auditor General says, "In May 1996, a second

executive of a former board received a payment of $16,252 as compensation for

2/3 of unused annual leave over 50 days. This employee is still employed with

the Board. There is no policy which permits a payment of this nature.

Now, does that mean that somebody had annual leave of

thirty days so they got paid twenty plus they got paid the fifty days from the

board? Again, where does the authority come from to do this when the Auditor

General says there is no such authority to permit such a payment?

MR. SHORTALL: At the risk of repeating myself, Mr.

French, in May of 1996, the legislation that the former Roman Catholic School

Board for St. John's operated under provided it - at least in that board's

opinion - with the flexibility to make a decision of that nature. That decision

was taken by the board, it was taken with legal advice, and the board felt that

it had the authority to do that at that time, given the legislation which

pertained to it. The specific question as to whether it involves the - you asked

a question with respect to the actual composition of the days. Can you just

clarify that for me?

MR. FRENCH: Well, okay. It says the $16,252 is

compensation for two-thirds of unused annual leave over the fifty days.

MR. SHORTALL: Yes, over the fifty days. That is

correct.

MR. FRENCH: Does that mean that the Department of

Education would allow a board - any board - the right to pay up to fifty days,

and after that there was no agreement where the board could allow a payment such

as this to be made? Am I correct?

MR. SHORTALL: I believe you are correct, Sir. The

understanding is that you can claim up to fifty days unused annual leave as you

terminate your employment with the organization, and this particular monies

represented two-thirds of the unused annual leave that existed over and above

that fifty day level.

I would ask Mr. Lester if he wanted to elaborate on

that because he is probably able to give you better figures than I can.

MR. FRENCH: Before you do, Mr. Lester - and I

think I am clear on this - again, this is money that was paid out by the Roman

Catholic School Board and not by the now Avalon East School Board?

MR. SHORTALL: That is correct, Sir. It would have

been paid by the Roman Catholic School Board for St. John's and obviously was

paid out from their operating revenues which were, as we pointed out earlier,

provided by government, but it was paid by that particular board at that

particular time and would have come up on the T4 slip of the employee in

question at the end of the year.

MR. LESTER: I don't think I have anything further

to add unless your analysis of how it came up is correct. It was the days over

and above fifty days that the individual had, and the board agreed to pay

two-thirds of them. They were leave days that could not be used for various

reasons over the previous years.

MR. FRENCH: I do not know if it is fair to ask

this question, Mr. Chairman, and I would ask you for guidance. Maybe it is not a

fair question to this board, so I have to be very careful. Where did somebody

get the authority - if there is no approval in legislation, as the Auditor

General says - where did somebody get the approval to pay out almost $60,000?

CHAIR: I don't know if I should answer that, but

to me it seems that the board is saying - or the previous board felt they had

the authority under the legislation to do that. The question is, if there were

no policies in place, my perspective, from what I am seeing - and I have to be

careful how I word this - is that possibly the legislation was used in a manner,

or interpreted in such a manner, to give them the authority to do that.

MR. FRENCH: If the Auditor General says there was

no authority, I would like to just hear from -

MS MARSHALL: (Inaudible) no authority. I have

never seen those types of payments before, only in that school board.

With regard to the annual leave, I can say there was a

policy. We have a copy of a policy from the department back in 1989, which says

that: Upon retirement or resignation, a superintendent or assistant

superintendent shall be entitled to a payment of up to fifty days.

That was upon retirement or resignation; but when the

school boards collapsed and went from twenty-seven into the ten, there was a

directive issued by the assistant deputy minister. Again, this one is dated

January 8, 1997, but I think there were ongoing discussions about this annual

leave policy. It says: Directors and assistant directors who held the position

of superintendent or assistant superintendent immediately before being appointed

to their current position were entitled to receive payment from government for

up to fifty days unused annual leave, or to bring forward up to fifty days

unused annual leave.

It would be only up to fifty days, and people who had

more than that just lost them to the system. So, in this case, somebody got paid

for so much of their annual leave in excess of fifty days while other people in

the system just lost them. There was no authority and there are inconsistencies

in the system.

CHAIR: I think it would be fair to ask that the

legislation, or the

section or clauses of the legislation which the board felt

they could utilize to make this decision, it would be fair to ask the director

to provide us with that?

MR. SHORTALL: Absolutely, and it will be from the

Schools Act which was operating in May 1996.

CHAIR: Exactly.

MR. FRENCH So there is, if I -

CHAIR: That is what the board is saying and the

Auditor General is saying something different. That is the problem. We have to

get that.

MS MARSHALL: I have not seen any authority for

payment of that nature.

MR. FRENCH: Under the old system or the new?

MS MARSHALL: Under the old system or the new.

MR. FRENCH: Okay.

MS MARSHALL: In addition to that, I have never

seen payments like that made by any school board since I have been auditing them

since1992.

CHAIR: Thank you.

MR. FRENCH: I will ask this of the new school

board. Is there now a procedure in place, Madam Chairman, that would govern

somebody who would, some day down the road, end up with the fifty days or more?

If somebody is there for the next two years, all of a sudden can Bob French or

Tom Lush walk in and say: I would like to have some education leave and so I am

entitled to whatever there is. What is the procedure now? Or is there one?

MS LEGROW: I would have to defer to the staff to

respond to that.

CHAIR: Policy.

MR. SHORTALL: Ask Mr. Lester if he would respond

to your question, Bob. I think he can do it.

MR. LESTER: Yes, Mr. French. Right now we are all

governed underneath, what would you call it?, the public servants compensation

plan. Well, it is the executive compensation plan, but it is the paid leave plan

of government. So there is no cap on the number of days of annual leave that you

can accrue but you do not accrue any other types of leave, i.e., compassionate

leave or sick leave. We get x number of days a year, depending on your years of

service, and it can grow to any number provided you take a minimum of ten per

year. There is provision in that plan to pay the outstanding balance at the end

of your career, or you can request payment for it, my understanding is, during

that time frame.

CHAIR: Mr. Lush had a question (inaudible).

MR. LUSH: I just wanted to finish up on this. I

think probably the two major concerns that the Auditor General had with respect

to her review of the school boards were the retirement compensation packages

paid to retiring superintendents and assistant superintendents as well as the

salary calculations of the directors, assistant directors and so on.

Based on that, I just wanted a final question. From

the Kirby report - because my feeling is that you do not need to know what the

figures are to address what the Kirby report is saying. I said earlier that

basically they had supported the Auditor General's position in terms of the

salaries paid to the people I just mentioned.

I just wanted to ask a question and ask for comment on

it. First, with respect to the salaries, after looking at the salaries - and, as

I said, the figures are irrelevant. People know what their salaries are. I

expect they do. I know what mine is. I look at the pay stub every time I get it

to make sure there is no change; or, if there is a change, that it is upwards

and not downwards. So I expect everybody knows what they are being paid. They

know what their salary is, regardless of what the Auditor General says.

CHAIR: With the tax relief coming it will be

upwards.

MR. LUSH: After looking at those salaries, the

Kirby report says: It is our opinion that the aforementioned salaries are in

contravention of

section 12 of the Schools Act as approved by the

Lieutenant-Governor in Council.

It goes on further. This is another one. He says: It

is our opinion that all senior management personnel at Avalon East School Board

are being paid in contravention of the Schools Act. All are being paid at Step

33 of the scale.

What is your reaction to that? Is the Auditor General

wrong? Is the Kirby report wrong? On what basis does the Avalon - what is their

authority for paying these salaries at that level if indeed they contravene the

act?

MR. SHORTALL: Mr. Lush, as we indicated earlier,

there was a considerable difference of viewpoint, I suppose, between the

interpretation of the various pieces of correspondence which were coming out

from the department over a number of months, in late 1996 and early 1997, on

this particular topic. The advice the school board had been receiving from its

council supported its view with respect to the decisions it made, and obviously

there is another viewpoint which has been articulated here today and we were

certainly aware of at the time.

We feel that the resolution to the matter was received

in the letter from the current Minister of Education in January of this past

year with respect to her recognition of the placement at Step 33, on the

understanding that all future hirings would be strictly in accord with the

departmental policy and practices. Since that particular time we have had an

additional hiring at the senior executive level and that hiring was exactly in

accord with the department practices and policies. In fact, the actual salary

was determined in a conversation between myself and one of the Assistant Deputy

Ministers at the department to determine the salary level for that particular

purpose. The board is strictly following the directives of the minister from

January 1999. We feel that her letter puts aside the difference of opinion which

existed from the fall of 1996 and throughout 1997, up until that letter was

received.

MR. LUSH: So you think you're right?

CHAIR: Obviously.

MR. SHORTALL: Yes.

MR. LUSH: Okay. The other one, the final one, is

on the retirement package. Again, with a compensation package, the retirement

package that Mr. French and others just concluded, the Kirby report says: As we

were not permitted access to the relevant personal contracts for these

individuals we are unable to express an opinion on these payments, other than to

say that they are well in excess of what were permitted to be paid other

retiring superintendents, et cetera.

MR. SHORTALL: All I can say, Mr. Lush, is to my

knowledge I certainly was not asked by the representatives of Kirby and Company

for information concerning the personal employment contracts of any of the

senior executives of the Avalon East Board. I would ask Mr. Lester if he was

given that kind of a request. As Ms LeGrow pointed out earlier, it was not our

position to withhold information from people who were doing audits. This is the

first time I realize we were asked for that information. Mr. Lester?

MR. LESTER: Yes, I know of being asked for the

information. It was not available in files that existed in our office or at the

old Avalon Consolidated office. My understanding was that Kirby and Company were

going to make contact with the individuals themselves and ask if they could have

copies of the contracts. They were not withheld by us. We just did not have

copies of them to provide.

MR. LUSH: The second part, that they were well in

excess, what is your view, and were you right?

WITNESS: (Inaudible).

MR. LUSH: No, they know.

MR. SHORTALL: Just let me clarify it, Mr. Lush.

The first of my comments were that I was not aware that we had been asked. I was

assuming it was information on the contracts of the existing executives. If we

are talking about the two employees of one of the former boards that Mr. Lester

has just alluded to there, I cannot comment on whether -

MR. LUSH: We are talking about three who were paid

the compensation packages that amounted to - I have just forgotten now what, but

it was a huge sum of money for three of the former Avalon Consolidated School

Board.

MR. SHORTALL: I cannot comment. I am just assuming

that the former school boards felt that they were correct in their particular

decision at the time. There were three particular employees. Two in particular

received additional monies. One, I understand, did not receive any additional

monies over and above what he had already received from that particular board.

So I can only assume the boards felt they were right. I hesitate to speak on

their behalf.

CHAIR: Thank you, Mr. Lush.

Those questions from Mr. Lush basically originated

from the Kirby report. He did hit on something that I had highlighted last night

when I was going through this. I'm just sorry to say that you guys never had the

Kirby and Company report which you will have in the very near future, I hope.

I think what we will do is pretty well adjourn for the

day and say that we will be reconvening, I would say, within the next few weeks

when you have a copy of the report and you can directly respond to the concerns

that are in the report which basically are in conjunction with, or very similar

to, the Auditor General's Report.

I would like to, at this point, thank witnesses for

coming today and giving the answers to the best of your ability and the

information that you have, Mr. Shortall, Ms LeGrow and Mr. Lester. I would like

to thank the representatives from the department, down in the back, who answered

a few questions today when need be, the Auditor General and her staff, Committee

members, our staff, and the media.

We will be notifying you in the very near future of

the time, more than likely it will be at this location, and adjourn for now.

Committee adjourned.