October 14, 1993

PUBLIC ACCOUNTS

COMMITTEE

The meeting convened at 10:20 a.m.

MR. CHAIRMAN (Windsor): Order, please!

I apologize to those who have been waiting outside

while the committee held private meetings.

First of all, I would like to introduce the members

of the committee: to my immediate right, Mr. Danny Dumaresque, the Vice-Chair,

the Member for Eagle River; to my left, Mr. John Crane, the Member for Harbour

Grace; Mr. Melvin Penney, the Member for Lewisporte. To my right, Mr. Alvin

Hewlett, the Member for Green Bay; Mr. Glenn Tobin, the Member for Burin -

Placentia West. Mr. Oliver Langdon, the Member for Fortune - Hermitage, is not

here but is expected. He is lost in action. Hopefully he will show up shortly.

I would like to welcome the witnesses who are here

and ask the Auditor General, first, if she would introduce the people she has

with her this morning.

MS. ELIZABETH MARSHALL: Thank you, Mr.

Chairman. To my right is Mr. Ed Sweeney, Audit Principal with our office, and to

my immediate left is Mr. George Murphy, the Audit Manager responsible for this

audit.

MR. CHAIRMAN: Thank you very much,. We have Mr.

Manuel, I think, from the Advisory Council on the Economy. Mr. Manuel, we

welcome you here this morning. Would you like to introduce the people who are

with you?

MR. JOHN MANUEL: Thank you. With me is

Christine Hollett, the Executive Director of the Advisory Council.

MR. CHAIRMAN: Thank you very much. We have

Minutes of the meeting of October 12. Is there any business arising from this?

If not, I have one matter.

Item number 5 deals with a matter which was

actually held in a private session of the committee subsequent to the public

hearings on Tuesday. It resulted from a request from the Minister of Works,

Services and Transportation to defer the hearings as scheduled for Wednesday. We

subsequently dealt with that and the committee agreed to defer for yesterday the

hearings subject to further investigation of the concerns of the Minister of

Works, Services and Transportation.

I have to report that on behalf of the committee I

have consulted with authorities, the Clerk of the House, and have recommended to

the committee that we should proceed with the hearings; however, the majority of

the members of the committee have decided against that. I have advised the

committee that I will be reporting to the House of Assembly that I feel it is an

infringement of the rules of the House, the conventions of the House, and the

rights of the members. I will be doing that at the appropriate time when the

House of Assembly next meets by way of the special report of the Chairman of the

Public Accounts Committee or a minority report of the Chairman of the Public

Accounts Committee.

On motion, Minutes adopted as circulated.

MR. CHAIRMAN: Perhaps we should swear in the

witnesses. I ask the Clerk to do that before we proceed any further.

SWEARING OF WITNESSES

Edward Sweeney

George Murphy

Christine Hollett

John Manuel

MR. CHAIRMAN: Thank you very much. I say for the

benefit of the witnesses, you may have noticed the Auditor General wasn't sworn.

She has previously sworn and is considered to be so sworn for the life of this

House of Assembly, actually. After the last election we found out we had to

swear witnesses who hadn't been sworn before. Apparently, once you've sworn

before the sitting of the House then you've sworn for four years, or as long as

the members are sworn, I guess.

We do take evidence under oath. I should advise the

witnesses that this basically is an extension of the House of Assembly. The

Public Accounts Committee is a Standing Committee of the House. It has the same

authorities and responsibilities as the House of Assembly, and therefore, we do

take evidence under oath. This is not a trial. We are here to gather information

and we report back to the House of Assembly with such information as we may see

as appropriate to bring back to the House.

We welcome your advice today on the matters that are

before us. If there happens to be a detailed question that you don't have with

you, by all means, you are free to provide detailed information later on, if we

should get into that. So don't think that you are on a hot seat or anything of

that nature. We are not here for that. We are here to gather information and to

examine the matters that have been referred to us, in this particular case,

through the report of the Auditor General.

The committee has a mandate from the House of Assembly

to examine: (

a) any matters referred by the Auditor General to the House; (

b) matters referred by the House, itself, to the committee; (

c) matters that the

committee may, on its own, feel are items of interest, worthy of its time and

examination, or (

d) matters referred to us from time to time by the members of

the House. Sometimes we get letters from individuals and groups asking us to

examine a matter. We may or may not do that. We are not bound by the Auditor

General's Report but we certainly use it as a guide. The majority of the matters

that we consider stem from the various reports of the Auditor General.

In this particular case, we are dealing with the audit

of the Advisory Council on the Economy and certain matters referred in there by

the Auditor General. In that light, before I go any further - this being an

extension of the House, you see microphones in front of you. All of the

proceedings are recorded and transcribed in Hansard exactly the same as in the

House of Assembly, so I ask you to speak clearly into the microphones. I will

try to identify each witness as you speak, but if I fail to do so, please

identify yourself for the benefit of the people who are sitting in the dark room

at the back of the House of Assembly trying to transcribe from these tapes, and

don't have the benefit of seeing who is speaking. So, if I fail to do that each

time, please help me with identification.

To introduce the topic, perhaps now I shall ask the

Auditor General if she would like to make a brief opening statement.

MS. MARSHALL: Thank you, Mr. Chairman.

The Advisory Council on the Economy was established by

the Economic Advisory Council Act effective May 10 1991. Our first audit of the

Council was for the period May 10 1991 to March 31 1992. During this audit, we

also reviewed employees' salaries for compliance with the Public Sector

Restraint Act.

Section 2(

e) of the Public Sector Restraint Act defines the

restraint period to be the period April 1 1991 to March 31 1992.

Section 5(1) of

the act states that: no increase shall be applied to the pay scales of public

sector employees during the restraint period.

As a result of our audit we reported that: first, the

Council contravened

Section 5(1) of the Public Sector Restraint Act by paying

salary increases to certain staff during the restraint period, and; second, the

Council paid retroactive salary increases for dates prior to May 10 1991, a

period during which the staff were employed with the former Economic Council of

Newfoundland and Labrador.

It was our recommendation that the Council comply with

the Public Sector Restraint Act.

MR. CHAIRMAN: Thank you very much. Mr. Manuel,

would you like to make a brief opening statement?

MR. MANUEL: Not right now, Mr. Chairman, thank

you.

MR. CHAIRMAN: Very well. It is entirely your

right, Sir. Perhaps, then, we will begin with questioning. I will give Mr.

Langdon an opportunity to catch his breath. Mr. Penney, would you like to open

questioning this morning?

MR. PENNEY: Thank you, Mr. Chairman.

Mr. Manuel, very briefly - I understand, what is

happening here is that there is a suggestion that pay increases were given to

your staff at a time when we were under restraint, and the legislation was there

to cover this particular period of restraint.

The position you have taken, and the position that was

also taken by the firm of Stewart McKelvey Stirling Scales, was that - and I

quote from a letter, on page 29, of September 16, sent to the Advisory Council

on the Economy, and signed by Bruce Grant:

" ... the job descriptions and terms of employment of

employees of the Advisory Council are substantially different from those which

may have been in effect in their previous employment.

"Therefore, we would suggest that any contracts of

employment entered into by the Advisory Council and its employees are entirely

new contracts. Employees are not receiving an increase in salary but are having

new salaries for their new positions established for the first time."

Is that basically the position of the Advisory

Council?

MR. MANUEL: That is part of the position. It is a

little bit complicated. I can try to explain it to you.

Towards the end of 1989 and early 1990 I was a member

of the Economic Council. We felt that there were going to be some major changes

made and that maybe the Economic Council wouldn't exist. All our employees are

on short-term contracts - two-year contracts. We had a couple of contracts that

came up for renewal, one in January 1991 and another in March and, at that time

- and this was the old economic council and I was vice-chairman - we decided we

weren't going to renew them and we weren't going to give any increases to

anybody, because we didn't know if we were going to exist a month or two down

the road. So, when the legislation went into effect to create the Advisory

Council and I was asked to go on it, which I did, I told the chairman, at the

time, Mr. Lundrigan, that we had frozen salaries, that we had not paid any

increases even though we felt they were due, because we didn't know if the

people were going to be working there or not.

Once we got ourselves established, the staff were

told, `We don't have time to worry or do anything about your salaries' - if you

recall, we got thrown into a public consultation thing on this Strategic

Economic Plan - `and when we get around to it, we will do something about it,

but whatever we do, we will make it retroactive, some of you to the date the

council was formed and some of you who came over from the old Economic Council

to the date of your last increase.' We made that commitment, and that is the

reason, by the time we got around to looking at the salaries in, I think, it was

September 1991, we looked at them, signed the contracts that had been left in

abeyance since early in the year, and at that time we honoured what we told them

we would do. That is basically what happened.

MR. PENNEY: So you are telling us then, that had

the Economic Council continued to exist, those employees would have gotten the

increase anyway?

MR. MANUEL: Yes. The way we gave compensation was

that on an anniversary date of the contract we would sit down with the

employees, review their work, and give them an increase. So, if the Economic

Council had been existing, they would have been given an increase in January and

March 1991.

MR. PENNEY: I want to be sure I understand; this

new employee of the Advisory Council on the Economy, with your new group - had

that employee not come with you but stayed with the Economic Council, had the

Economic Council continued to exist, would have been given these increases we

are talking about?

MR. MANUEL: Yes.

MS. HOLLETT: If I may - before wage restraint

legislation would have come into place, so they would have been done in January

and March.

MR. PENNEY: So it has nothing to do with new job

descriptions - `job descriptions and terms of employment and employees of the

Advisory Council are substantially different.' So it really has nothing to do

with the fact that the job was different?

MR. MANUEL: Well, that is part of it, but the

other

part I was trying to explain to you is that under normal conditions, if

the Economic Council had continued to run, we would have sat down in January

1991 with Paul Bugden and in March 1991 with Christine, before restraint, and we

would have given them the salary increases that were due to them in line with

the salary increases that had taken place in 1990 in the public service.

MR. PENNEY: But was the job description different

and were the work requirements of those employees different or greater after

they became employees with this new advisory group?

MR. MANUEL: There was no doubt about it that it

was greater as there was a lot more activity.

MR. PENNEY: But they were not paid more as a

result of this new terms of reference and new job description?

MR. MANUEL: No. Now, do you really want to get me

complicated?

Anyway, when we put that to bed we then decided that

we were not sure where these people fit into the pay scale, where they should

be, whether we had them in the right scale or not, so maybe we had better go to

Treasury Board and ask them to do an evaluation and put them on the pay scale

they should be on, and that was done after the fact.

MS HOLLETT: And that would be in line with the new

job description that arose as a result of the new mandate of the Advisory

Council, so the classification that was undertaken now has pay scales associated

with the Advisory Council and not with the Economic Council.

MR. PENNEY: In this briefing manual we have, it

says it the other way around, so I just assume that it happened that the

reclassification came first and the retroactive pay increase came second, but

that is not the case?

MR. MANUEL: No, the reclassification came much,

much later. The retroactive pay increase was basically because Tony Brait,

then-Chairman of the Economic Council and I, as Vice-Chairman, made a decision

to freeze salaries and not to renew contracts, because we didn't know if within

a month or two maybe it would be just as bad. So we made a conscious decision,

and when the Advisory Council was formed and the staff went over from the

Economic Council, I informed the Chairman of the Advisory Council, Mr.

Lundrigan, that we had done that and we had neglected - or we had frozen their

salaries and not re-signed contracts.

MR. CHAIRMAN: Mr. Penney.

MR. PENNEY: One last question, Mr. Chairman.

On pages 32 and 33 of this manual that we have here,

it shows an increase for Gerald Crane from $24,000 - that is on page 33 - from

$24,000 to $25,560.88; and it shows Doug Trask increased from $43,500 to

$45,844. There is no point in quoting the others.

Does this increase reflect both of these scenarios

that you have explained - the reclassification plus the retroactive pay

increase?

MR. CHAIRMAN: Ms. Hollett.

MS. HOLLETT: No, what that reflects is what had

happened to the general classifications within the civil service within the

previous 1990-1991 fiscal year. During that time there were adjustments to the

pay scales within the civil service. The increases that were awarded to those

two individuals merely reflected what had happened in the 1990-1991 period,

before wage restraints.

MR. MANUEL: Before restraints. I think that is

where the problem came in: we were not paying our staff the way the civil

service was paying them, and during the period of April 1990 up until April

1991, the civil service got a 3 per cent increase at one time and then another 3

per cent -

MS. HOLLETT: Two per cent.

MR. MANUEL: It all added up to 8.8. We did not

give our staff any increase because our practice was to give it to them on the

anniversary date of their contract.

MR. PENNEY: Okay, let's stick with one, just so I

can follow this.

MR. MANUEL: Okay.

MR. PENNEY: I am not so sure I follow what you are

saying. Let's just stick with Gerald Crane.

MR. MANUEL: Could we take Doug Trask, because I

understand him. Gerald Crane doesn't work with us anymore and I have forgotten

about him.

MR. PENNEY: Okay, no problem, we will take Doug

Trask. He was being paid $43,500. That is his annual salary before

reclassification on April 6. Then, between April 1 and March 31, he got $45,844.

You are saying that this is just to bring him up to par with what all the other

public sector employees were getting?

MS. HOLLETT: Yes.

MR. PENNEY: Are you telling me then, that when

your new Advisory Council did reclassification, that was increased again?

MR. MANUEL: He was reclassified to a higher job, I

think.

MS. HOLLETT: Yes, when the classification came

out, we took the salary that he had at that point, which was $45,844. and put

him on the closest step to his classification, so he was not given a salary

increase when the classification came into effect. It was just moved on the

right scale, that is all. So, in answer to your question, no, he did not get

another increase when he was reclassified.

MR. PENNEY: Because he was reclassified to a spot

that was conveniently close to this figure.

MS. HOLLETT: Yes, as close as we possibly could on

that scale.

MR. MANUEL: If I could go through that for a

minute, I will try to explain it. It is complicated. It took me a long time to

try to understand it and I am not sure I still do.

MR. PENNEY: Yes, so you will understand why we are

having a little bit of a problem following it as well.

MR. MANUEL: Oh, yes.

MR. PENNEY: Or at least I am.

MR. MANUEL: From May 1, 1990 to May 1, 1991, Doug

Trask - although there was no classification on that, we had him classified in

our own minds as a GS-40 on the civil service scale, okay? Now, during that

period of time, before restraint came in, there were various wage increases that

the GS-40 got during that period of time, okay? And he didn't get any of those

because we didn't pay that way. Now, when his anniversary date came up on May 8,

the wage restraint was already in, but we felt that if we had paid the way the

civil service had paid, he would have gotten these increases, so we felt it was

only fair that we follow the same thing that GS-40 got during that period of

time. That is how he got the increase. As I said, it is a matter of time, it is

the way we pay rather than anything else. For example, in October, the civil

service got an increase, we did not give anybody any increase. In April, the

civil service got an increase, we did not give anybody on our staff an increase.

We used to hold the increases until the anniversary date of their employment on

the contract.

MR. CHAIRMAN: Are you finished Mr. Penney?

MR. PENNEY: Yes, I will take some time to digest

those figures to see if I can square that in my own thought process.

MR. CHAIRMAN: Mr. Tobin.

MR. TOBIN: Mr. Chairman, if I understand what Mr.

Manuel is saying, is it that your group was basically tied to the same salary

structure as civil servants?

MR. MANUEL: Loosely tied. Before we asked Treasury

Board to do job classifications, they were loosely tied, and I guess we picked

grades that we felt they fit into.

MR. TOBIN: When the public servants of this

Province received a pay increase that they negotiated - by the way, are any of

your people members of the collective agreement or anything such as that?

MS. HOLLETT: The position for Doug Trask -

although they were not classified at this particular time, we assumed it was a

union position at a GS-40. His was unionized, as was the position for Mabel

Leaman and for Gerald Crane.

MR. TOBIN: So they were members of a collective

bargaining unit?

MS. HOLLETT: Well, we considered them so although

they never paid union dues. They were not a member of the union.

MR. TOBIN: They were not members of collective

bargaining then, if they were not represented by a union.

MR. MANUEL: No, but we gave them classification as

such.

MS. HOLLETT: We classified them as that.

MR. TOBIN: You gave them classification the same

as that, okay. When the people who were classified similar to them within the

public service received a pay increase as a result of the collective bargaining

process, having an effective date, did your people receive that at that time?

MS. HOLLETT: No.

MR. TOBIN: They did not?

MR. MANUEL: No.

MR. TOBIN: So, what you did here was retroactive

to bring those people on the same level as the people within the public service?

MS. HOLLETT: Yes.

MR. MANUEL: Exactly.

MR. TOBIN: It was at a later date.

MR. MANUEL: It was at a later date.

MR. TOBIN: But it was bringing the classification

of those people into line with the classification of people in the public

service?

MR. MANUEL: Exactly.

MS. HOLLETT: Yes.

MR. TOBIN: Okay, I think I got that straight. To

whom do you report?

MR. CHAIRMAN: Mr. Manuel. I have to get you to

identify yourselves better because the poor girls up in Hansard are going to go

in the horrors.

MR. MANUEL: I report to the Premier.

MR. TOBIN: So your report is directly to the

Premier?

MR. MANUEL: Yes.

MR. TOBIN: That would account for why the Premier

would have been carbon copied on the Auditor General's letters?

MR. MANUEL: Yes.

MR. TOBIN: What is the - I know it is there - but

basically, what is the total budget that you people would expend in terms of the

work that you do?

MR. CHAIRMAN: Ms. Hollett.

MS. HOLLETT: Our annual budget runs to about

$400,000.

MR. TOBIN: About $400,000?

MS. HOLLETT: Yes.

MR. TOBIN: What do you achieve for that $400,000?

MS. HOLLETT: What do we do?

MR. TOBIN: What do you do?

MS. HOLLETT: We have done in the past - we do a

lot of consultation on behalf of the government. Our major project, in the

particular year that we are addressing, was the consultation process on the

Strategic Economic Plan. We undertake research initiatives. We also, during that

time frame, took an in-depth look at the provincial economy to assess its

strengths and weaknesses and where we felt, as an independent advisory board, we

should suggest to the government areas in which they should move.

So our two main areas of focus are, we do one or two

major research projects per year. We undertake several consultation sessions -

we did last year and we still do it periodically now to meet with various

community groups and business organizations to obtain feedback on government

activities or suggestions for the government to encourage economic development

and those types of things.

MR. TOBIN: So, basically, your role is that of

advisor to the government, but certainly within the areas of consultation,

assistance and things such as that. You don't have any responsibility like the

Economic Recovery Commission would have to -

MR. MANUEL: No, it is purely an advisory role.

MR. TOBIN: We can't fault you for the unemployment

rate for the past five years - that is increasing by 6 per cent expense to this

Province.

MS. HOLLETT: No.

MR. TOBIN: Mr. Chairman.

MR. CHAIRMAN: Mr. Tobin.

We have to get away from these conversations back and

forth and try to structure this a little bit so the people in Hansard have half

a chance.

MR. TOBIN: Yes, I say to Mr. Manuel, I have gone

through it. I now understand why the retroactive pay was put in place and what

it all meant. There are some comments there that - in terms of the role and the

- for example, when someone retired, I understand you took him out to dinner?

MR. MANUEL: Yes.

MR. TOBIN: When you compare, Sir, your report to

the report on government awarding the tenders for health care facilities, you

fade in comparison. You don't have a lot to be ashamed of.

MR. CHAIRMAN: Thank you, Mr. Tobin.

Mr. Crane, would you like to carry on?

MR. CRANE: Yes. There is only one comment I would

like to make. For a group of business people, the only criticism the Auditor

General could make is on your bookkeeping, and your books of account weren't

very well kept. I thought that would come from any group other than you people.

How can you explain that your books of account weren't up to date? What really

surprised me was that on a couple of occasions you paid invoices twice. I am

sure in your own private business you would never do that. How do you account

for your book work being so sloppy?

MR. CHAIRMAN: Mr. Manuel.

MR. MANUEL: I think the way I can explain that is,

if you remember back when the Advisory Council was formed, immediately, the day

it was formed, the Premier told us to go out and across the Province, upside and

downside, and start a public consultation process; they wanted answers back on

this Strategic Economic Plan. So, before we got ourselves organized, we were out

actually hitting the road and a lot of stuff fell through the cracks. The salary

thing - I mean, we should have done something about the salary thing right away

when we were formed but we just didn't have time. That is the main reason why we

- I won't say we were sloppy, we were certainly rushed for time.

MS. HOLLETT: The volume, I think, if I may add, of

work at that time, was incredible. Because we were trying to organize all these

sessions and all the bills were coming in. We have since improved that so that

it doesn't happen again. The only thing to say is just the volume of work

resulted in some invoices that may have been paid twice and the lack of keeping

the books up-to-date. It was just the volume of work.

MR. CRANE: But you say everything is up to date as

of now.

MS. HOLLETT : Yes, we do.

MR. CRANE: I don't see too many other criticisms

in the report.

MR. CHAIRMAN: Mr. Crane, thank you.

Mr. Hewlett.

MR. HEWLETT: Thank you, Mr. Chairman. I suppose,

what I have to say is more of a comment than anything. It is regarding the

matter raised by the Auditor General. Having spent some, I suppose, fifteen

years as an employee of the Crown, I went through restraint periods previously.

One thing that I noticed, both in my own personal situation and with regard to

various collective bargaining units in the public service, was if you were lucky

enough to have had a raise scheduled before the restraint axe fell, you got it.

If you were unlucky enough to have your date of an increase occur after the

restraint axe fell, then you had to take nothing, and that was tough luck.

Timing was based on the severe economic situation the Province was in and, as I

said, if you were scheduled to have a rate increase sometime after the axe fell,

you didn't get it, and there was no opportunity to have fairness and balance

instituted retroactively.

I can see where the Auditor General is coming from,

that in a restraint period, the law says: no increases, period. What we had was

the application of - I don't disagree that it might be just, but nonetheless,

against the law. Because the law says: no increases, period, during this

particular time, even if there are valid moral, financial, reasons for granting

them retroactively. I have been through circumstances where one union was lucky

enough to get a big raise for his folks, two weeks later, the axe comes down.

The next union that was due up to get a raise was faced with zero. That's the

luck of the draw, and tough luck.

So I can see where the Auditor General is coming from.

The Council took it upon itself to be fair, just, morally right, but in a time

when it was illegal to do it. What do you say to that, Sir?

MR. CHAIRMAN: Mr. Manuel, would you like to

respond to that?

MR. MANUEL: Well, I can't quarrel with what you

are saying. We did make a conscious decision. We felt that because of the way we

paid the salaries, and that if we had followed the civil service way of paying

salaries, and if we had given these increases during the year, they would have

been up to date. And, yes, we made the decision that we felt was a fair

decision.

MR. HEWLETT: Thank you, Mr. Chairman. That is all

for me.

MR. CHAIRMAN: Thank you, Mr. Hewlett.

Mr. Langdon.

MR. LANGDON: I have a couple of points. On pages

32 and 33 again, looking at the annual salaries, there is the Executive

Director, Christine Hollett, as at January 1991 - $52,720; then, on November 7

1992 there is an approximate $5,000 increase, no doubt I guess you're putting

upwards on the step that this particular person should have. I look at another

person, Sharon McLennon, $36,892, on page 33. But then, on April 1 1992 she

received $6,000 less. What would be the reason for the two big - one positive

upward and the other negative down? Was Sharon McLennon being overpaid for her

qualifications?

AN HON. MEMBER: (Inaudible).

MR. LANGDON: Oh, I'm sorry, I didn't see that.

MR. CHAIRMAN: The pay periods are different.

MR. LANGDON: Well, then, let's go to the other one

on page 33. Everybody else seems to get an increase of $1,000 to $1,500, or

whatever, but for Christine Hollett there is a difference of $5,000. Why would

there be such a difference there?

MS. HOLLETT: The reason for that was the

appointment. On November 2 1992 I was appointed Acting Executive Director, and

according to the public administration procedures, if you are appointed to an

acting position for a period longer than one month you are to be granted a

maximum 10 per cent increase, or to the same step of the appropriate scale of

the new position that you are filling. That is where that 10 per cent came into

play, because we did not have a scale at that time. The 10 per cent would have

brought it up to that new salary level. That's the explanation for that.

MR. CHAIRMAN: Mr. Langdon.

MR. LANGDON: On the purchase of flowers, we are

talking about $2,779 paid at one such dinner. Was that an accumulation of, say,

different dinners and was all paid at that one time, or was it one particular

dinner amounting to $2,779? That's on page 8. One dinner? Would you consider

that to be excessive?

MS. HOLLETT: That was for a retirement dinner back

in - it could have been 1989. No, I don't think it was in 1989, it could have

been 1988.

MR. LANGDON: Before you came into being.

MS. HOLLETT: Yes.

MR. MANUEL: The old Economic Council, now the

Advisory Council, has had a policy, I guess, that once a year, when there was a

turn-over of people - new people appointed to the board and old staff people

retired, we would have a dinner to honour the people who retired, to thank them

for the time and effort they put in. Because people like myself don't get

honorariums for this. I am supposed to be paid a dollar a year but I haven't

even seen that yet. So we felt it was only fair, once a year, to have that

dinner.

MR. LANGDON: That was my point. So the fact is,

there was no salary involved and this was just gratitude, really.

MR. MANUEL: That's right, appreciation.

MS. HOLLETT: A thank-you.

MR. LANGDON: Appreciation.

MR. MANUEL: Appreciation and thanks.

MR. LANGDON: Okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Langdon.

Mr. Dumaresque.

MR. DUMARESQUE: I don't have many questions, Mr.

Chairman. As far as I can gather, the technical aspect of the legislation may

have been breached but the spirit of the legislation was certainly kept intact.

This would be my feeling towards what you did as far as the salary increases are

concerned. Certainly, I don't think that many people would reasonably do

differently in the same situation. So, I have no major problems with the way you

have done things. I would like to know if you still continue those dinners and

if these expenditures would by any means get to that level. I can appreciate

that you have - how many members now on your team?

MR. MANUEL: There are thirteen members on the

Advisory Council board and three employees. One of things we have done is cut

down. We felt, or certainly, I felt, with everybody going through the period of

restraint, that if we are going to be economic advisors to the government, we

should show the same thing. We have cut our staff. Our staff is three right now,

down from a high of five three or four years ago.

MR. DUMARESQUE: These dinners, then, would be for

the people serving on the board as volunteers.

MR. MANUEL: On the board, yes.

MR. DUMARESQUE: And people in the office, as you

say.

MS. HOLLETT: No, not for -

MR. MANUEL: No, not for the people in the office.

MR. DUMARESQUE: Not for the people in the office.

MR. MANUEL: Just for the volunteers, really.

MR. DUMARESQUE: Without remuneration, that

certainly would be an appropriate gesture, but as you note and appreciate,

everybody is going through restraint, and to show yourselves in the same light

certainly, I think, is an appropriate gesture.

I don't want to belabour anything, Mr. Chairman. I

think it is obvious they have done the best they could with the resources they

have had, and hopefully, the good work will continue.

MR. CHAIRMAN: Thank you, Mr. Dumaresque. There are

just a few points that I would like to make to the Council.

On Page 10 of the document provided to us, is a letter

to the Auditor General from the former Chairman, Mr. Lundrigan, where he makes

the case that you have put forward, that employees of the council received no

increases in their first year of employment, and increases in their second year

were based on what took place in the public service in the previous year.

In the first paragraph, to summarize the events, the

third line down says: Any increases that are given to employees in year two are

influenced by changes in compensation to other people. So that is for year two.

Yet, at the end of that paragraph, you are saying your employees are always

lagging behind public servants by one year in their compensation,

whereas they

get their increases in year two. Then you say these were not increases for

1991-92; they merely reflected what happened the previous year.

That is a contradiction of terms. In one sentence you

are saying: We don't give them increases in year one; they only get increases in

year two based on what others got in year one. Then you are telling me that

these increases they got weren't increases for year two; they reflected what

took place in year one. You don't get increases in year one. You told me that in

your first sentence. Now, you are telling me - you can't have your cake and eat

it too. Either they were increases in year two or they were not. Clearly, they

were increases in year two.

MR. CHAIRMAN: Mr. Manuel.

MR. MANUEL: I think, Mr. Chairman, what we have

decided to do - and we had a meeting with people in Treasury Board a couple of

weeks ago, and I finally threw up my hands and said: Look, this is too

complicated. Why don't we just put the whole thing on the same scale as the

public service, and do exactly as the public service does, because trying to do

it the way we did - you are right, we were just compounding and confusing and

everything else, and I think very few of us knew what the devil we were doing,

and then trying to keep it up.

You can go through it and it logically comes out, but

it is a really complicated thing to do. You know, I was involved in it, and it

took me three or four days of trying to figure out what we did. What we did was

right, but it is very complicated. So what we are going to do in future is put

them on the same scales as the public service.

MR. CHAIRMAN: So you are on the pay scales now.

MR. MANUEL: We have these scales established now

and we are going to put the same compensation as the public service. If the

public service gets an increase they will get it, rather than have it drag

behind.

MR. CHAIRMAN: Thank you, Mr. Manuel. I think that

is wise. I just wanted to point out the contradiction, though, in your letter.

MR. MANUEL: Yes.

MR. CHAIRMAN: The issue of retroactivity has been

dealt with at some length and clearly, the board did not have the authority to

issue those increases retroactively. The board cannot issue compensation for

something, although you are honouring commitments that perhaps were made by

others and you did take over the whole thing. So in the strict legal

interpretation, I guess, you are wrong, but we appreciate, I guess, the work

that you did.

Could you tell me a little bit about the board, or the

council? How do you function now? You report to the Premier now?

MR. MANUEL: Why don't we -

MR. CHAIRMAN: What is the difference between this

council and the Economic Council - the former council?

MR. MANUEL: Very little difference, except that we

were given the assignment, when we were formed, to take this White Paper - I

don't even know if it was a White Paper then, at the time of this draft of a

Strategic Economic Plan that the government came up with - out to the public and

get public reaction, which we did. We held meetings all over the Province and

got public reaction, public input into the thing. Of course, then the plan was

put out, announced, in June of 1992, and one of our major jobs now is to act as

a monitor to make sure that the thing happens - the 143 points.

Other areas of work that we have to do is just to give

advice to the Premier and the Cabinet, really, on what we feel should be done in

the Province to encourage business establishment, and we have given advice on

what we feel should be done with taxes, for example, and any help that should be

given to somebody to get a business started, and stuff like that. It is general

economic advice.

MR. CHAIRMAN: Ms. Hollett.

MS. HOLLETT: There are a couple of differences, I

think, between the Economic Council and the Advisory Council. With the Economic

Council, the reporting relationship at that time was through the Minister of

Development; with the Advisory Council, the relationship changed - more

reporting through the Premier.

The mandate of the Advisory Council was more elaborate

than the mandate of the Economic Council. There was a threefold mandate there

basically just to undertake independent research and to stimulate debate.

With the Advisory Council, the consultation role has

become more elaborate. The stimulation of informed public debate has been

increased and there are two new areas that were really added with the Advisory

Council, that is, this whole evaluation and monitoring realm that John has just

referenced here, and that is to evaluate and monitor, at the request of

government or on our own initiative, any policies, programs, or services

provided by the government. That is one area which, as the Economic Council, we

never got into. The second area was this whole integration of social and

economic policy. That is really being played upon, to try to get the two areas

of policy merged and both practically working in the same direction; so those

are three areas, in effect, responsibilities, that have been added to the

Advisory Council that the Economic Council did not have.

MR. CHAIRMAN: Thank you, Ms. Hollett. There seems

to be a pretty fine line there and I don't think there is anything that

precluded the Economic Council from doing exactly all those things.

MS. HOLLETT: No, there was always a catch-all

phrase that said any initiative that the Economic Council wanted to undertake,

it could.

MR. CHAIRMAN: You mentioned a reporting

relationship there, that you report to the Premier. Can you make any comment as

to why that was changed from reporting through the Minister of Development and

Cabinet to now reporting directly to the Premier?

MR. MANUEL: I can't answer that, Mr. Chairman.

When the legislation came before the House, that was the reporting function that

was put forth in the legislation.

MR. CHAIRMAN: I appreciate what you just said

about the differences in the councils, the very fine lines marking the

differences in the two councils. Have the responsibilities of staff changed

dramatically?

MS. HOLLETT: Just the variety in terms of the

types of work we do now. While research is research, the variety of topics in

the different areas has expanded.

MR. CHAIRMAN: Did these changes require additional

training for any staff?

MS. HOLLETT: No.

MR. CHAIRMAN: We are not talking any additional

training so we are just talking broader responsibilities, and it was on the

basis of that that a reclassification - or a classification was done which

upgraded the status of most of your staff?

MS. HOLLETT: Yes.

MR. MANUEL: As you appreciate, we never did have a

classification before so we decided it was time to do it.

MR. CHAIRMAN: Mr. Penney, do you have any

additional questions?

MR. PENNEY: No, Mr. Chairman.

MR. CHAIRMAN: Mr. Crane.

MR. CRANE: No.

MR. CHAIRMAN: Mr. Langdon.

MR. LANGDON: No.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: No, Mr. Chairman.

MR. CHAIRMAN: Do you have any final comments you

would like to make, Mr. Manuel?

MR. MANUEL: Not really, Mr. Chairman, except that

I have never been before a committee of the House before and it has been an

interesting experience. I will not say I enjoyed it but you learn something new

all the time.

MR. CHAIRMAN: Let me tell you, Mr. Manuel, you

have had a far more pleasant morning than many people who have come before this

committee in the past. The committee has spent its energy already this morning

on another topic and is reserving, I guess, what is left for later discussion.

Having said that, the items that you brought before us are fairly clear, I think

- somewhat confusing, yet fairly clear, to put it in fixed terms, and I don't

think they require a lot of debate. I think we understand where things were done

incorrectly but the motives were not, and I think that has been clarified.

MR. MANUEL: We certainly took to heart the Auditor

General's Report and just made a commitment, and that is why we decided to

change it and do it the way the government does it from now on in order to avoid

that in the future.

MR. CHAIRMAN: Thank you.

Does the Auditor General care to make any final

remarks?

MS. MARSHALL: Yes, just one point, that regardless

of the anticipated timing for any increase, the Public Sector Restraint Act was

very clear and covered a specific period of time in that employees were supposed

to be frozen at their salary levels.

MR. CHAIRMAN: I don't think there is any question

from the discussions here today that the increases that were provided were done

contrary to the act and that there was no authority for retroactivity. In spite

of all the arguments that were made, which are valid arguments, nevertheless, in

strict

interpretation of the law and the Financial Administration Act, there

clearly was a breach here of the restraint act and there was no authority for

retroactivity.

MR. MANUEL: In hindsight, I agree with you. In May

1991 when we made the commitment, we did not realize at that time that we were

contravening the act because the restraint had just come down and I guess we

didn't know that much about it, and we made that commitment all the way back in

1991. But you are right, in hindsight.

MR. CHAIRMAN: Thank you very much.

I thank the witnesses for appearing before us, the

Auditor General and her staff for their usual co-operation, the staff of the

House who were here to do the recording and to give us advice, the members of

the committee for their diligence and their research, the members of the press

for being present and reporting on it.

The meeting stands adjourned to the call of the Chair.