The Committee met at 10:00 a.m. at the Colonial Building.

MR. CHAIRMAN (Hearn): Order, please!

We are ready to go, we have a quorum but we have more people coming. First of all, let me welcome anyone who has not been here before, and I say that because some of our people around the table are here on a regular basis every time we meet.

Today we will be discussing funding as it relates to the Denominational Education Councils. I would like to take the time to welcome the representatives of the Integrated and Pentecostal. We have a little set procedure, before we get into the regular hearings and discussions. Anyone who has not been before us yet - and when I say before us, since this Committee started this past year and a half or whatever - has to be sworn in. Any witnesses will have to be sworn in.

We then ask the Auditor General or his representative to give an opening statement basically outlining the concerns raised about any Department or Agency with which we are meeting, and then we throw it open to the Department or Agency to give any response or make any general comments about the topics the Auditor General discusses.

Following that, we ask the Members of the Committee to raise any questions, and we basically throw it open for a to and fro discussion. We try to be very informal about it, however we would ask you to go through the Chair, not because I am that sticky but because we are recording. Everything is recorded by Hansard, so you do have a record later on, whether that is good or bad.

The microphones in front of you are strictly for recording purposes not for amplification. So when you speak, would you move fairly close to the microphone and perhaps mention your name each time, because as the conversations are typed up the secretaries would probably not recognize too many of the new voices. So if you would just mention your name before you get into the discussion, then we will make sure the record is clear. I would not want to be blamed for something Tom Pope said and vice versa.

I am not sure whether Dr. Pope and Pastor Batstone would want to sit at the table. If you wish, there is absolutely no reason why you should not and if you want to take part - Hubert, you know might be carrying the conversation but you might want to interject, so it is entirely up to yourselves. If you feel you want to be part of the general discussion you may sit at the table and we will have you sworn in and you can take part in anything at all. If you want Dr. Norman to carry the whole works, well that is entirely up to yourselves, but you are more than welcome to sit in at the table, but in the event you want to participate then you will have to be sworn in.

With that, I will introduce the - yes, Mr. Walsh?

MR. WALSH: (Inaudible).

MR. CHAIRMAN: Yes, I was going to introduce the people at the table. To my immediate left is Elizabeth Murphy, who is, among a number of things, the Assistant Clerk of the House of Assembly. She is basically our research person right now while Dick Porter is off sick. She is the person who contacts everybody. Whatever else has to be done, Elizabeth is doing it, as she has been doing for many years and doing it well. To my left is Art Reid, the Member for Carbonear. On my immediate right are: Aubrey Gover, the Deputy Chairman of the Public Accounts Committee; Alvin Hewlett, the Member for Green Bay; and Jim Walsh, the Member for Mount Scio - Bell Island.

I will ask Mr. Drover if he would introduce the people from the Auditor General's Office. Bill Drover is representing the Auditor General this morning.

MR. DROVER: Thank you, Mr. Chairman. I am Bill Drover, the Audit Principal responsible for the annual report. With me is George White, Audit Manager.

MR. CHAIRMAN: And Hubert Norman from the Denominational Education Councils. And, Hubert, with you are Dr. Tom Pope and Pastor Earl Batstone.

DR. NORMAN: Yes, Mr. Chairman. Just procedurally, we understood that the Integrated Education Council would be on for a half hour and then I think followed by the Pentecostal Education Council. So, if that is the correct procedure, then we can follow that pattern.

MR. CHAIRMAN: Certainly.

DR. NORMAN: If you wanted both to be together I am sure Pastor Batstone would have no objection to coming up and being sworn in at the same time.

MR. CHAIRMAN: Basically we are talking, I think, generalities. I see no problem at all with Pastor Batstone sitting in with yourself and Tom, you know it is a general type questioning. Now some of the members might want to talk specifically about the Integrated group or the Pentecostal and then either one or the other can pick it up. But I think most of what we will be discussing, unless I miss my guess entirely, will be strictly generalities about funding mechanisms and what have you, you know something that either one or all of you can get involved in. So maybe it would be better to be there altogether.

AN HON. MEMBER: I think I am just going to sit here today and (inaudible).

MR. CHAIRMAN: Thank you.

I should mention, just before we do the swearing in, a few years ago when people were summoned before the Public Accounts Committees, you know, it was something like going up before the Spanish Inquisition, 'What did we do wrong?' We are trying to get away from that. When you are summoned, usually it means that the Auditor General has raised some concerns about, not the way necessarily that you - and when I say you I am talking about the department or agency or whatever that is handling public funding, but probably he has identified some weaknesses in the system or the way he thinks or his office thinks things could be done a bit better or what have you.

Sometimes we bring groups and agencies before us for general discussions on funding, how they handle their funding, how accountable they are and other related problems. We have found it to be a worthwhile experience not only for the Members of the Public Accounts Committees, but also for the groups and agencies, because it gives them a chance sometimes to discuss publicly some of the problems they see in trying to handle the whole situation. I think a lot of the agencies that came before us thinking that they were in for some kind of trouble or whatever, left feeling that it was a very worthwhile exercise. They got a chance to let others know some of the frustrations in trying to collect public money and spend that money and be accountable, in doing so, in light of all the other factors that surround us.

We are open to the public on meetings. The public can attend any meeting at all. The press is, I will not say always here, but mainly here and they may want to talk to you, and you might want to talk to them afterwards. That is entirely between you and them. As regards the questions back and forth, as I said, feel free to interject whenever you wish. We try to keep it as orderly as possible, but our meetings, I must say this past couple of years, have been very fruitful and worthwhile for everyone concerned.

Our only job, as the Public Accounts Committee, is to try to see that the money collected by Government is done according to legislation, is done as well as possible and as efficiently as possible, and spent the same way. And where there are deviations we try to zero in to see what the problems are. We then in our own report later on in the year, recommend perhaps better ways of handling the whole situation.

So, Elizabeth, before we proceed you will have to swear - Mr. White have you been sworn in?

MR. WHITE: Yes, I have been here before.

MR. CHAIRMAN: He has been here before.

Swearing of Witnesses

Dr. Thomas Pope

Dr. H. Norman

Pastor Earl Batstone

MR. CHAIRMAN: Thank you, Elizabeth.

With that I will turn it over to Mr. Drover. The Auditor General has, in his section on transfer payments, raised some concerns, I suppose, about the accountability of Government funding as it flows through the different groups and agencies and what real control Government has over it. With that he listed a number of groups and agencies, a couple of them, of course, being the school boards and the Denominational Education Councils. This morning we are dealing only with the Denominational Education Council area. I should mention that only two of the three are present, the Integrated Education Council and the Pentecostal Education Council. The representatives from the Roman Catholic Education Council were not available. We have been aware of that for some time but they will be joining us at a later date. Mr. Walsh, that was your question.

There are three Councils, for those who are not familiar with the setup. The Integrated Education Council represents a number of religions, and was set up a number of years ago. We have the Pentecostal Education Council and the Roman Catholic. Altogether they receive whatever Government funding goes through the different councils and in turn disperses that to school boards and so on, mainly for school construction and not for operating. As we meet with the school boards, or when we meet with them later on, we will be talking about operating funding and so on. The dollars talked about here, for which the Denominational Education Councils are responsible, strictly relate to general construction and major maintenance, I suppose, heavy funding. The amount each year is roughly between $25 or $30 million, I believe. They receive that based upon the percentage of the population which each group represents. Unless there have been some changes I think we are talking about the Integrated Council receiving about 37 per cent of that total funding.

AN HON. MEMBER: The Integrated Council is 56.5 per cent.

MR. CHAIRMAN: I am sorry, the Roman Catholic is 37 per cent, and the Pentecostal is around 7 to 8, in that area. So we have about 57 per cent, 37 per cent, and 6 per cent roughly, in that range. With that I will ask Mr. Drover to make his opening comments.

MR. DROVER: Thank you, Mr. Chairman.

We did not prepare a formal opening statement for this report item. It is 3.5 of the 1989 annual report. Our opening statement was given under the health care sector back when we first looked at it last year, but I will now, for the information of the committee and the information of the witnesses, attempt to give some background on where the office is coming from and where the office is leading to relating to transfer payments.

Actually, in excess of 50 per cent of the Province's Budget is paid out in what we term transfer payments. These are payments to school boards, hospitals, municipalities, and others. During the past two or three years the Auditor General has concentrated on this area in addition to others. One of the fields we have gotten into is accountability, financial management and control, and reporting by Government. The Auditor General, under the present Financial Administration Act, is charged with the responsibility to determine whether there is adequate control over the expenditure of public money. Public monies, by definition, are the funds that originate from the public purse approved by the Legislature. So that, in turn, requires that the Auditor General at least satisfy himself that in excess of 50 per cent of the Province's expenditure is adequately controlled and reported upon. As part of this 3.5 report item in the 1989 annual report - and that was our first year of going into transfer payments. I might point out for the information of the committee and others, that our second round is in the current year. We are now into a number of school boards, we are into a number of hospitals, and we will be reporting in the 1991 report on the results of these audits in the current year. We are doing specific audits of certain school boards. There has been one audit done of a large integrated school board and there has been one audit completed of a large Roman Catholic school board to date. There has been one audit completed of a large hospital and another - without giving away the details - outside of St. John's. I point that out for information purposes.

In looking at transfer payments, Mr. Chairman, we visited the Department of Education and we gave a number of recommendations and comments dealing with the control that the Department of Education had over its payments. We were somewhat concerned. We commented on the controls at the departmental level in dealing with school boards, and coming right up to where we are today, we commented on the denominational education councils. We pointed out, on page sixty-seven of the annual report for 1989, that the Province has established a denominational educational system through the legislation. Within this system the denominational education systems' councils have sole responsibility for the planning and approval of capital projects. There appears to be no overall plan developed in conjunction with the Department of Education. Those were our findings at the time, Mr. Chairman, developed in conjunction with the Department of Education, that would ensure capital projects are undertaken in an equitable manner, are not duplicated unnecessarily and are in harmony with the Government's expectations.

The executive secretary of each council is responsible for approving plans, location, design, and size of capital projects. The Department of Education is not directly involved in project approval, but may provide input into design, size and location of the capital project. Payments for capital projects underway are made by the school boards for capital projects from the capital grants which are provided by the Government and distributed to them by the councils. There is no monitoring of these capital projects by the Department of Education, either from the perspective of adherence to plans or for monitoring of costs. An external audit is not required by legislation, although each council does submit to the Department of Education audited financial statements. The auditor's reports that are attached to these statements are in the standard format which does not give assurance that the grants from the Province were spent in compliance with governing legislation. That, just as a side issue, Mr. Chairman, is an area that we have concentrated on, not only in the educational sector, but also in the area of health and other areas, in that the standard which is referred to as the attest audit report, the auditor's report that most of us are familiar with which is attached to the financial statements of an organization, to us does not give sufficient comfort to the reader, particularly to the legislator, that the expenditures are in compliance with legislation. It does give comfort regarding the financial transactions, yes, there is no doubt about it, but it does not, in our view, give what we refer to as legislative compliance comfort. So this is why we have been encouraging the Department of Health and Education to expand auditor's reports or to have a separate report issued in the form of an expanded one.

Management letters resulting from the external audit process are not received by the Department of Education, therefore government officials are not made aware of any weaknesses in management and financial controls that might exist within the denominational councils. Operating grants are based on budgets submitted by the councils, but no comparison is made by the department between the budget and the actual expenditures of the councils.

In summarizing our comments, Mr. Chairman, on the whole of the Department of Education, we concluded that the Department of Education is responsible for funding the school boards and denominational councils in the amount of approximately $450 million each year. Our review indicates that the department does not have adequate procedures in place to ensure that this money is spent for the purposes intended by government or that it is spend in accordance with government's objectives and policies. In addition, formal reporting relationships have either not been established or have not been enforced, so that the department and the recipients of transfer payments may report on the discharge of their responsibilities.

That study was completed within the Department of Education. As I pointed out earlier, we have expanded that in the current year and we have gone out to a number of the school boards, we will report in the next Auditor General's report on the results of those audits.

I think, Mr. Chairman, that concludes the background information and certainly to some of the members of the committee who have heard myself or Mr. Hart speak on transfer payments and the accountability process in the past, I extend my apologies, because it may be considered somewhat boring to have heard it a dozen or more times, but it is done for the purpose of putting on the table the topic that we are about to discuss here today. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you very much, Mr. Drover. As you have mentioned, it has been a topic over the years before Public Accounts Committees, the discussion on transfer payments and accountability within a department, where everything is there sort of sight specific and all kinds of controls are involved. Once you get into transfer payments with the groups and agencies quite often reporting mechanisms and follow up mechanisms are perhaps not in place and you basically have to leave it up to the integrity, I guess, of the groups and agencies with which we deal to make sure that the procedure is followed.

Would somebody like to comment, Hubert, on that, or do you have an opening statement that you would like to make or feel free to follow whatever way you would like to operate.

MR. NORMAN: Mr. Chairman, in response to the statement, I think probably we could elaborate on seven or eight different areas of reporting to Government, not just reporting but involvement of the councils and Department of Education officials with regard to policies and procedures concerning capital construction.

We as councils receive currently an annual capital grant of $27 million. In addition to that there is approximately a $1 million grant for salaries and rent and operating expenses and so on. These two things are quite separate in that, of course, the capital account deals with school construction and all that money is funnelled through the various councils out to the school boards across the Province.

One area that I would like to comment on is our audited financial statement. As was mentioned in the opening statement, councils do indeed present to the Department of Education annually, an audited statement. In the case of the Integrated Education Council our auditors are Peat, Marwick, Thorne. This document presents an accurate and up-to-date accounting of the actual monies we receive from Government and how they are expended through the Councils to the various school boards. That particular document would not provide all the information that one would like to have, in terms of specific details, on the hundreds and hundreds of projects that are carried out by the councils. But that is one of the documents.

Also, each council presents to Government, to the Department of Education, a report of its activities. Now this is done on an annual basis so that this would supplement the actual audited statement, in that all the activities of the Council that have been carried out through the year would be highlighted in this particular annual report.

I think, Mr. Chairman, in terms of a detailed accounting by way of projects and making some determination as to whether or not the funds expended by the council would be in accordance with Government policies and the wishes of the Department of Education, there is another forum which would be the primary one for that kind of focus. That forum is known as the Joint Capital Construction Committee. In that particular forum - I have before me here the documentation that would be provided by the Integrated Education Council. This is a fairly thick document. It would provide an assessment of all of the capital needs of the sixteen integrated school boards. The procedure we follow there is that we ask each school board to submit to us a five-year plan and we have renewed this every year, we have the most up-to-date figures on their needs. We provide all of these details to the Department of Education identifying board by board each application that we have before us. Furthermore, we also divide these applications by categories so that we know how many school boards want funding under accessibility grants. We also know how many school boards want funding under fire safety upgrading and so on. So, we break it down not only by school boards but also by categories of construction.

Furthermore, we identify what the school boards have established as their top priority projects, so that we clearly outline what would be the immediate needs of the various school boards, and we provide some documentation for each of these needs, outlining why this particular school needs to be replaced or why this particular extension needs to be constructed and so on. We do that for our fire safety upgrading as well as for our needed capital needs.

In addition to that, we would make a presentation in this section on what we call 'trends', because there are various trends in education that would impact upon the capital needs, and some of these may be programme changes that the Department of Education would have implemented, building codes, changes like accessibility for handicapped and so on.

Changes that are resulting in the Province, for argument sake, because of declining enrolments, joint service schools requiring additional funding so that we can provide co-operation within the school system in order to better be able to respond to the educational needs of the students and so on.

And then the final section, which is very important I think in terms of the statement made by the Auditor General's Department, is a summary of the capital votes, and in that particular summary, and I am using of course, because I am more familiar with it, the Integrated Education Council Proposal and Documentation.

This summary of votes would identify the total amount of funding spent over a five year period on various categories like accessibility, portables, roofs and so on, but in addition to that, it would provide a project by project breakdown, which of course is not provided in the audited statement, because in your audited statement you primarily have the summaries of the expenditures; but this would identify all of the accessibility projects, because of course the $27 million to which I referred, is broken down into four major categories.

There is $1 million of that earmarked for accessibility projects; there is $1.5 million earmarked for fire safety upgrading; there is $2.5 million earmarked for capital debt retirement funding and the remaining $22 million would be for general construction projects. So in order to demonstrate that we have spent that portion on accessibility, we have identified all of the votes and listed our accessibility projects and the total amount voted.

We do the same thing for extensions and heating. What we spent on new schools, portables, roofs et cetera are listed project by project and dollar by dollar, so that this provides a further accounting to the Department of Education, in terms of how we have actually spent the money by vote and by project.

A fourth area, Mr. Chairman, is in connection with the Denominational Policy Commission and I would like to link the two; the two are the previous one I just mentioned, the Joint Capital Construction Committee and the Denominational Policy Commission, because both of these - each one is a forum whereby the Department of Education can share and interact with the councils in terms of policy decisions governing the expenditures of these funds.

The Denominational Policy Commission is chaired by the Minister, and either the councils or the Department of Education can bring to the agenda of that commission, any particular item that it so desires, and indeed, in this past year, resulting from the most recent Budget Speech, of course that Denominational Policy Commission has moved forward to establish a long term capital planning committee, which is very important in terms of synchronizing the duties and responsibilities of the councils in capital construction, and the intentions and desires of Government to see funding established and allocated in a certain way.

When both of these bodies were established, the Denominational Policy Commission and the Joint Capital Construction Committee, it was primarily with a view to providing a forum whereby the councils and the Department of Education could act in partnership in discharging their responsibilities, and it has worked very well in that regard.

I just want to refer to some correspondence that established the Joint School Construction Committee, and clearly the Department of Education identified then that in so establishing such a committee that it would like to have input in determining building priorities, in deciding where new buildings will be located and the extent of the accommodation required, so very directly related to ensuring that the funds voted by the Legislature were spent in accordance with the intention of Government in so doing.

There are several other areas that I could refer to, Mr. Chairman, that might be helpful to further elaborate on, not just our accountability, in sense of the dollars actually spent, but in terms of the inter-relationship between Government and the councils in school construction and in establishment of policy.

The legislation is quite clear in that The Schools Act requires the approval of the Department of Education of all school sites and it also requires the approval of the Department of Education for all building plans. So before we as councils can permit a school board to proceed to tender, we have to have a letter from the Department of Education saying that these plans have been inspected by the appropriate people within the Department, as a matter of fact the school construction engineer I think is a cross appointment between public works and the Department of Education. And when we receive that letter we are then in a position to permit the school board to proceed to tender. But without that approval letter from the Department of Education we would not be in a position to allow a school board to call tenders on a major project.

In addition to that, of course, we have a document known as The School Planning Manual, which is a document that has been agreed upon by the councils and the school boards and the Department of Education, which establishes guidelines for the construction of school facilities, with regard to appropriate sizes and so on and so forth. And so the plans that would be devised by a school board's consultants would in actual fact be in accordance with The School Planning Manual as modified and amended from time to time.

And in concluding, Mr. Chairman, I would refer to two other areas whereby there is co-operation between the councils and the Department of Education and indeed other departments in connection with the establishment of priorities and of guidelines for construction. A committee has been established recently on the community use of schools, and this is an inter-departmental committee in that there are representatives from other Government departments because, of course, the community use of schools is important not only to the Department of Education, but to other departments involved in recreation and municipal affairs and so on.

I think finally a primary committee that has been established since this year's Budget Speech is the Long Term Capital Plan. Approximately one-half million dollars of this year's capital funding is going towards funding the work of the Long Term Capital Plan Committee. This committee is looking to identify all of the needs, it is really a needs assessment project, all the needs of the school boards across the Province, not only in terms of their immediate needs but also their long term needs and looking to establish schedules of maintenance and upkeep of buildings so that the whole life cycle of the school can be projected for a number of years and we can see down the road where certain amounts of money are needed to be expended by way of upkeep of buildings and of replacement of various aspects of a facility. And that particular committee is jointly chaired by the councils and the Department of Education and would have representatives on it from across the school system.

So, Mr. Chairman, I have outlined eight areas whereby we share with the Department, both from the point of view of pre-project by way of the establishment of needs, whereby we share with the Department in the establishing of guidelines and policies and procedures, and whereby we account to the Department for the funds that have been expended. That may be sufficient for at least an immediate response to the opening statement.

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

Certainly, I think, it is a very in-depth detailing of how you spend your money.

PASTOR BATSTONE: May I just add that the policies and procedures are the same for all councils, and in conjunction with the establishment of the Capital Construction Committee, just to mention the representatives from the Department in Government, the Assistant Deputy Minister of Finance and Administration with the Department of Education is a member of that committee. The Director of School Services, Department of Education, and a member of Treasury Board at the time of its establishment, the Director of the Budget Division of Treasury Board was a member of that committee. Now that this new committee is set in place in the current year, I am not sure that the functioning of this old capital construction committee will have the same function as it did in previous times.

MR. CHAIRMAN: I am just wondering, Pastor Batstone, as Dr. Norman went through the various committees and the responsibilities of the IEC, from your own perspective on the Pentecostal Assemblies do you basically track the same type of system or do you have perhaps different ways of doing things?

PASTOR BATSTONE: Mr. Chairman, we track the same system fairly. Of course we are a much smaller district and we do have one board which cares for the whole Province so there is some different relationships between the board and us, and then their boards, but we track the same process.

MR. CHAIRMAN: And I presume the same would be true certainly of the CEC also?

Okay. Any questions?

Mr. Gover.

MR. GOVER: Thank you, Mr. Chairman.

I suppose we always have a little difficulty with this committee and the Auditor General's Report in the sense that the Auditor General reports at a certain point in time that deficiencies in their opinion exist, and then when we actually have the hearings the deficiencies may or may not be corrected. Of course, as I indicated, the deficiencies as identified in the Auditor General's Report are deficiencies that are deficiencies in the opinion of the Auditor General, but to be taken seriously and to be discussed by the committee at hearings such as this. I just wonder, from the Auditor General's point of view, having heard the system now in place, or that was in place, and the additions to that system as outlined by Dr. Norman, I wonder what the Auditor General's response is to that in light of the comment there that there is no overall plan developed in conjunction with the Department of Education to ensure that the projects are undertaken in an equitable manner and there is not unnecessary duplication? It seem to me, from hearing what Dr. Norman had to say, that there seems to be extensive consultation with the Department of Education and there appears to be now a long-term planning committee which is going to set out the priority needs of the Province over the long-term. I just wonder, based upon Dr. Norman's comments, is the Auditor General's office satisfied now that these are sufficient measures, or in the Auditor General's opinion are there additional steps that should be taken?

MR. DROVER: I think, Mr. Chairman, what we would have to say is that the Auditor General certainly welcomes the system as outlined by the former witness. I think, however, what he would have to do is - as I pointed out earlier, our review of 3.5 on transfer payments are (inaudible) with the Department of Education at the time. This was the system in place in the Department for the control of financial resources that were assigned to school boards and to the Denominational Education Councils. The onus at the departmental level is, and this may sound theory but it is really not, it is for the officers of the Department to challenge, if you will, any amounts thereto in order to protect public money, to ensure that it is adequately controlled by those to whom it is granted. I think in this case here there are a number of committees in place and I think that certainly the Legislation Committee would welcome the consultation effort that is ongoing. However, I think before the Auditor General would formulate a final opinion on whether the controls are adequate in place we would have to go back into, and we have been back in in the current year, the Department of Education and completely assess the system of control that is in place at that level.

One thing that exists that we would recommend, we have recommended it before and we possibly might recommend it even in the current report, would be a system similar to an internal audit function within the Department of Education which basically has the sole responsibility to - in addition to all of these committees that exist, to see that adequate systems and procedures are in place in the financial side.

There is consultation there, yes, on some of the policy and construction and capital areas. But I think that we would like to see, I guess in the Department of Education, that type of a process where there are a number of, if you want to call them inspectors, if you want to call them auditors, it does not really make a difference what you call them, that type of function exists in a financial nature. I do not think that type of function exists at the present time which requires a challenge in the financial area in the area of compliance with direction. I know that they do receive the audited financial statements and those are welcomed.

But I think one of the functions that must also take place is that someone independent, whether it be an independent internal auditor or whether it be an external auditor, should be charged with the responsibility of saying that look: the committees may know that we have gone to public tender - I might just take a simple case here - but an auditor should have to go in afterwards and say: all of the contracts were let in accordance with The Public Tender Act and they are in compliance with The Public Tender Act and they are in compliance with the other pieces of legislation of the Province. Those may sound very simple or oversimplifying the financial part of it, but that to us is a strong accountability process.

Don't get me wrong, there is an accountability process here right now. I am not saying that does not exist. But what we were talking about at the time, and what we are talking about right now is strengthening that process. So I am not saying that it is completely out the window and out to lunch. I think that there is a process in place and we are talking about strengthening that. Our emphasis back in 1989, when we issued the report item, was to try to improve the process in the Department of Education. Our emphasis in the current year will be to report back to this Committee, back to the Legislature on our review of both. We have been back into the Department of Education in the current year and we have been out to the school boards. I do not know if that answers your question, Mr. Vice-Chairman?

MR. GOVER: Well it seems that what you are suggesting is that the Department of Education have internal auditors that would go out and check the accounts, in this case of the DECs, to ensure that there was compliance. I note like in Item 2, that while the audited financial statements certainly present an accurate financial picture, they give no assurance that the governing legislation has been complied with. In your investigation back in 1988 or 1989 when it was done, did you find any instances where funds were expended not in compliance with the legislation?

MR. DROVER: I think the answer is no, Mr. Chairman. You know we would not have gone into it in that considerable detail. We would ask that whether the system is in place to give assurances to the department, and the system is not in place, in order to follow through each and every transaction it would take us all of the time that we would have allocated to this process here. We feel that the Department should have either independent audit assurance from that, either by the external auditors of the school board or the Denominational Education Council, or else that the Department have its own inspectors or auditors in place to do that process.

I might give an example, Mr. Chairman, in that I was giving a presentation one time to a group of senior people in a department and I said that certain cheques, you know, a number of cheques, this is back a number of years ago, were being pre-signed. I was asked: did you find any pre-signed cheques because we have never seen any? And the answer to the question is that you will not see pre-signed cheques, because by the time they come back to you they have cleared the bank, and it is obvious that if someone had taken the trouble to pre-sign it, then the second person signed, then both signatures are there so you will not see it unless you go out into the field and see it. There has to be a detailed process in place and that challenge must be up front. In other words, the system must be in place, and I guess it is not the number of errors that an auditor finds in modern auditing, but the auditor must look at and see if there is a system in place to check those errors, or procedures. I am not hinting at all, by the way, that there are any, we are talking about a major system in place.

MR. GOVER: Let us just try to bring it down to a concrete example, so that I can understand it. Would it be correct to say that when the funds flow from the Government through the DECs through the school boards and a project is tendered, that the school boards and the DECs have to comply with the Public Tenders Act?

MR. Drover: Yes.

MR. GOVER: They must comply with the Public Tenders Act?

MR. DROVER: Yes.

MR. GOVER: So what you are saying is that there is no system in place to ensure that the Public Tender Act is complied with?

MR. DROVER: There may have been at the time one in the Denominational Education Council's offices. What we are saying in this report item is that, at the Department of Education level, there was no assurance given to the senior people at the Department of Education, they did not have. I think the criticism here, from our mind is to the Department of Education.

We are saying that the Department did not have in place adequate systems and procedures to ensure that these tenders were called. Now granted, if we had gone into the Denominational Education Councils offices, quite possibly and more than likely, 99 per cent assurance probably, we would have found these tenders and there was adequate procedure in place.

MR. GOVER: So the thing is that you are not saying that councils are not complying -

MR. DROVER: No.

MR. GOVER: - what you are saying is the Department has no mechanism to ensure that the compliance is taking place.

MR. DROVER: Exactly, that was the gist of the paragraph in 1989, yes.

MR. GOVER: Okay, and would it be satisfactory, as an alternative to the department doing the check internally, for the auditors of the DECs, to carry out that function and then report compliance with the Public Tenders Act or the appropriate legislation; not only to certify that the statements comply with generally accepted accounting principles, but to certify as well that the governing legislation is complied with, would that be satisfactory?

MR. DROVER: You are into, right now, Mr. Vice-Chairman, a very good example and a very good issue that we have been discussing for the past year and a half with the Department of Health. The Department of Health has taken strong measures in working with Treasury Board and with the Comptroller General's office to put in place that type of procedure in certain hospitals.

They have tried it in two or three hospitals in the current year and we are very supportive of it, so, to answer your question, that road has been, if you want to call it, paved or developed at the Department of Health level, to get some information back from the auditors and a short answer is 'yes', we would be very supportive of that and it would certainly be completely adequate, if they obtained from the auditor of these Denominational Councils or of the school board itself, a second report.

Now, if one looks at an example of that, right now the auditors of the municipalities issue a short form opinion on the financial statements of the municipality and by the way, the School Tax Authorities are similar.

In addition to that at the same time, there is a Section 383 report, if I recall correctly under the Municipalities Act, which basically tells the Minister, it is addressed to the Minister from the Auditor, and it says that: they have complied with their Budget and points out if they exceeded their Budget; they have proper controls in place over bonding, staff have been bonded and other matters which have come to my attention, they have complied with the Public Tender Act.

As far as I know, right now, that system does not exist in the school boards or in the councils; it is starting to exist at the Department of Health level, and I do give credit by the way, to the questions which have come up at this committee here for helping that start, and I think it would be excellent if that process were to start at the Department of Education level, because the auditors of the school boards and the councils are certainly quite capable of performing that function while they do the attest audit, yes.

MR. GOVER: Okay, so what it boils down to on that particular issue, is that the accounts of the DECs or the school boards have to be checked either by their own auditors or by auditors from the Department of Education, to ensure compliance with legislation such as the Public Tenders Act.

MR. DROVER: Exactly.

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

MR. CHAIRMAN: Is there anything that you would like to add for clarification purposes?

DR. NORMAN: Just the same, Mr. Chairman, I think you have identified another component of this and that is that the school boards in the case of the Integrated Education Council are the actual owners of the property, and while we dispense the funds to the school boards that in turn would, of course, be audited by the school board's auditors and they are responsible for that. The Department of Education also receives a copy of each school boards audited statement, but there is that component whereby the school board is the actual owner of the property and actually is the body which goes to public tender.

The mechanism by which we can ensure that they have actually gone to public tender is that before they can proceed with the project our policies require they have to have permission from us to award the public tender, and there are quite a number of steps in our capital procedures whereby the approval of the council is required along the way. We have to approve the initial application, the educational specifications, the preliminary plans and then we give them approval to proceed with their final plans and finally the Integrated Education Council also has to authorize the awarding of the tender, and that has to be done in writing. So, we are in a position as well to ensure by way I suppose of almost another check, that all the funds that are expended by capital grants from Government are done through the Public Tendering process and, of course, the Local Preference Act would also come to bear on this as well. So, we ensure that that in actual fact is done and we have to give that written approval before the contract can be awarded via the public tender process.

MR. CHAIRMAN: Pastor Batstone.

PASTOR BATSTONE: Yes, Mr. Chairman, also the councils exercise a monitoring and control function on these projects undertaken by the school board. In the case of the Pentecostal Council payments are made as progress payments and they have to be substantiated and signed by the business manager and superintendent of the board, by the financial administrator of the council, and by myself, so that there is an ongoing monitoring of all payments made to the board relative to capital expenditures on any project undertaken by the board.

MR. GOVER: May I ask just one question.

MR. CHAIRMAN: Mr. Gover.

MR. GOVER: With respect to the standard auditor's report that the financial statements are done in accordance with generally accepted accounting principles and accurately reflect the financial situation of the body, can an auditor give that statement if the body has not complied with The Public Tenders Act?

MR. DROVER: Mr. Chairman, I think the short answer would be yes, because he is asked to audit the financial transactions of the body and, I guess, theoretically he takes the amount that is received from the Province and, I guess, assesses the expenditure that goes out. He is not employed as a legislative auditor and he is not employed to ensure that there is compliance with legislation and he is also not employed as what they refer to as a broad-scope auditor into the area to provide comments for economy, efficiency, or effectiveness. He will however, if it comes to his attention that there is a breach of The Public Tender Act, he will probably report it in a management letter. But if part of the terms of reference in terms of his engagement are that he just express an opinion on the financial transactions and the financial position of the body then that is basically what he sets out to do.

I might give you an example, if the corporation, the school board or the hospital or whatever has $100,000 in cash and a building worth $5 million then really the balance sheet, whether it is in compliance with The Public Tender Act or otherwise would not be affected. I think he would have to use his professional judgement in reviewing that area, but certainly I think he would be challenged to comment to his client if it comes to notice.

Now I will point out also, to be fair to the auditing profession as such, they start their process as generally accepted auditing standards, and generally accepted auditing standards do not require that the auditor be completely familiar with every piece of legislation that exists in the Province. There could be many, many Acts in addition to our own provincial Acts, and there could be many federal Acts, and I think that if he is examining just expressing a short form opinion on the financial transactions, that is what he does. If you want him to do further work they certainly have a sufficient background to expand that, but if you want that, that is an additional cost, if you will, additional direction to them, and I think auditors across the country, certainly the Auditor General, are encouraging the various departments and agencies to have that done if it means by your external auditor or by your department. But to come back to your short form answer again is that the short form report covers the financial transactions and the financial position of the body, it does not deal at all with legislative issues. That is all I can say on that one, Mr. Chairman.

MR. CHAIRMAN: This perhaps, sort of summarizes what we quite often say to the witnesses who come, is that comment is sometimes made by the Auditor General's office and made strictly from an auditors point of view, and we respect that. The practicality of conforming with that sometimes or the mechanism used by other groups or agencies may be proper and right in their own way, it is just that according to the Auditor General, it is not exactly the way he would see it from the way he would operate. Sometimes it can be done for better protection for everyone. Sometimes it is just not practical or possible maybe, not because the Auditor General's office sometimes raises a concern does everyone sort of jump to say yes, that is right and proper, we will correct it. Sometimes that is not possible or practical at the time. Sometimes the mechanisms put in place might be more efficient than those raised by the auditor. But from his point of view, and proper auditing principles, here is how he sees it should be done. I am not saying that to try to downgrade the Auditor General's office, but we have had disagreements, and in some cases, I guess, the witnesses and the Auditor General's office have agreed to disagree. But in most cases I think you will find that there is a lot of common ground there and hopefully our discussions improve the general system.

I think we should take five or ten minutes to have a cup of coffee. It is getting a bit stuffy. We will get back at it again.

MR. CHAIRMAN: Order, please!

Let's get down to business. Mr. Reid, did you want to ask any questions?

MR. REID: Yes, just briefly. The Auditor General made a couple of comments in his report and I would like to have clarification. Expenditures are not in the legislative compliance, what exactly were you referring to on that particular one, the comment on expenditures? Were you talking about capital expenditures?

MR. DROVER: Do you have a reference there, Mr. Reid?

MR. REID: You were reading from your report here earlier and you made the comment something along the lines of legislative or legislator compliance?

MR. DROVER: Legislative compliance. Okay, that is part of section two of the summary on the denominational education councils. It is on page sixty-eight of the annual report, number two. The item referred to says an external audit is not required by legislation, although each council does submit to the Department of Education audited financial statements, and then we went on to say the item that Mr. Reid is referring to. The auditor's reports that are attached to these statements are in standard format which does not give assurance - I think the key word there is assurance - that the grants from the Province were spent in compliance with governing legislation. Prior to break, Mr. Chairman, I think the question came over from the Vice-Chairman asking if it would be acceptable if the external auditors were to give that assurance. I think that basically addresses the whole issue there, that if the external auditors of the Denominational Education Councils and the school boards were required to give some form of assurance to the Minister or to the Department that there has been compliance with legislation, I think that that would certainly be acceptable.

I do not know, Mr. Chairman, if that answers Mr. Reid's question.

MR. REID: Are you satisfied, then, with what Mr. Norman put forward with regard to the monitoring of the actual construction? I probably was not listening to you, but did you say that the process they go through in regard to monitoring in regard to permits and applications and so on, is this something that you did not know as an auditor?

MR. DROVER: I think, Mr. Chairman, we would have to say that the process is a good one. However, I think what we are saying is that, from the Department of Education's standpoint, there must be some formal assurance or formal guarantee by the Department, whether it is done by its own staff or whether it is done by external auditors, that the process is carried out, first of all, with two evaluations. Number one, that this process as described, is operating as described, and secondly, any items that come to light which are either in breach of legislation or otherwise, are brought to the attention of either the Minister or the Department.

So, to answer the question, the process as described is certainly an adequate one, but I think the process as described must be, I guess, given some form of evaluation either by an external auditor, by our office or by someone from the Department, to determine whether the process is operating satisfactorily. That is what an auditor would always tell you, that, yes, as described it sounds good but we have to do a detailed audit of it.

MR. REID: I get the distinct impression, Mr. Drover, and I have for some time, I suppose, since I have been on the Committee, that it would be the ultimate for the Auditor General's office, it would be utopia, for want of a better word, if you could get a value for dollar audit done on the education or health expenditures, a comprehensive audit, I suppose, if you want to call it that. With it all said, how strong are you or your department as it relates to the actual expenditures of over $400 million a year? What exactly are you looking for? Are you looking for more access to the boards or to the education system? You are not necessarily pleased with what has been presented up to now, and for a number of years you have made those comments. What do you see as the alternative for you, as an auditor or as an Auditor General's office, as it relates to spending in education?

MR. DROVER: That is a big question, Mr. Chairman. It also addresses the proposals that are there in the form of the new legislation. One of my personal views is that there is not a complete understanding of the terms, value for money or comprehensive auditing, and a lot of people throw everything into it.

The Auditor General of the Province is directed, as I said at the outset, under the Financial Administration Act, to ensure that there is adequate control over the expenditure of public money. Public money is defined under the present Financial Administration Act to include all expenditures of the Province and agencies that are tied to it. So, the Auditor General can take any expenditure that originates with central government and follow it to its end conclusion. That would obviously include any expenditures that go out to the school boards, hospitals, or other facilities in the Province. Prior to this point in time, prior to the last couple of years, the Auditor General of this Province was also the auditor of probably in excess of 90 per cent of the Province's Crown corporations, and if you go back another five or six years, probably the auditor of many of its municipalities and school tax authorities. With all of that bulk of work the Auditor General really did not have the resources at the office to get out to the hospitals. While my personal belief is that the Auditor General has had for some time the authority to go out there, most of his work centred around what I referred to as 'the Confederation Building', Central Government, examining the payments out relying on the auditors. It is only in recent years that we started to examine in more detail the financial statements of the various school boards and hospitals and that is where we come into this big expenditure that we are talking about today.

I think that the Auditor General, to come closer to Mr. Reid's question, would be extremely pleased and satisfied if there was an adequate system in place whereby you Members of the Legislature grant, for instance, let us say $600 million to the Minister of Education and $700 million to the Minister of Health, and that these Ministers then bring back, you know, annual reports to you saying here is what I did with it, and I comply with the legislation. Here is what I did with what you gave me. That is the ultimate. That is referred to again here.

Now part of that process, Mr. Chairman, and I am not trying to bore you with the details, but part of that process would be that the Minister himself in carrying that information into the House would then be required to place reliance either on external auditors or his own officials, that the money that he has spent has been spent properly. If he is going to give his assurance, his name to that report, to the Legislature, he wants to be sure that the system in place over that $600 million has been adequate. What the Auditor General is saying is that the Minister should have in place safeguards to ensure that if he pays the Roman Catholic School Board or the Pentecostal School Board, if he pays them X numbers of dollars he gets back in detail the results of what happened to that and he assures himself that was adequately spent. And we came back a few minutes ago to the issue of the attest audits, that tells him basically that the funds were received by that school board or that hospital, it tells him the present financial position. That gives him certain assurances on the financial position.

But one thing that is not there that must be emphasized right now, and the Auditor General is emphasizing this throughout the report both at the Department of Health, the Department of Education, and also a couple of years back we emphasized it in Municipal Affairs, is that the Minister must also have assurance that the Acts that the Minister is required to comply with have been complied with those subordinate to him. So what the Auditor General is saying is okay, either the external auditors do it or there is a system in place in the Department of Health and Education and Municipal Affairs to do it, whereby officials do it, give the Minister that assurance or else that the Auditor General may have to do it. The preference of the Auditor General would be to have the external auditors or the officials do it and that in subsequent years the Auditor General then does a test to ensure that there has been compliance with that procedure. Auditors General across the country do not want to be the people to do it because it would take up massive resources right across the country. The Auditors General welcome, you know, every now and then a visit to a hospital or a school board and we are quite capable of doing it. But if we had to visit every hospital, school board and municipality in this Province to ensure compliance with legislation well, we certainly would not have the resources, the manpower or the person power to do it at the present time.

So, I guess, as far as value for money is concerned the Auditor General of Newfoundland does not have the mandate. I guess Mr. Hart and I, when we annually edit this document, we take pains to ensure that we do not stray into that area. But the Auditor General of Newfoundland in carrying out modern audit techniques, performs many audit functions in compliance. Like for instance, a lot of things that people, I guess, in our profession do not completely understand is that part of value for money auditing also includes attest audits. Well we are required to do attest audits. We are directed by legislation. Part of value for money also includes compliance. You know, there are certain procedures there. So if you take a list of twelve items dealing with value for money the only thing that the Auditor General of Newfoundland really cannot do and he does not do, he does not express his opinion on economy and efficiency, and we have no intention of doing it right now, and he does not express his opinion on the effectiveness of the process.

He does express his views on systems and procedures in place to guarantee and protect public money. I don't know if that comes close to answering your question.

MR. REID: Mr. Norman, react to that.

DR. NORMAN: Mr. Chairman, I think what we are saying is that at the present time this information and this data is made available to the Department of Education in the form of our annual report. If I can use one example: suppose the Legislature says that $1.5 million of the capital grant is to be spent on fire safety standards upgrading. In our documentation to the Department of Education we would identify the proportion of the capital grant that has been spent on fire safety upgrading and this would be contained in our annual report. Furthermore in the meeting of the joint capital construction committee we would present documentation to the Department identifying project by project how much money was spent on fire safety standards upgrading. So through the reporting that we have and the current mechanisms in place we certainly demonstrate that the funds have been expended in accordance with the wishes of the Legislature, however I recognize that in terms of our audited report that that particular report would not contain the same details because it would simply have global amounts of funding and it would account for the expenditure, but may certainly not in detail be able to identify all of the various categories and breakdowns. We do provide that information and we would also wish to go on record as saying that we would certainly not have any objection to some other form of audit being performed, if it were some kind of an internal audit procedure, an officer of the Department of Education, or whatever is required. We currently provide the information as best we can, and certainly to demonstrate that we are performing in accordance with the wishes of the Legislature, we would have no objection if that were to be required in some other form or through some other audit mechanism. We would wholeheartedly concur with that and be very willing to comply with the wishes with regard to that.

MR. REID: (inaudible) straight number of more direct issues, I suppose, later on today or tomorrow but it seems to me that if the Auditor General's office had unlimited funds, then Mr. Hart and Mr. Drover could go out and employ another 300 or 400 auditors, it would be simple then for Government to say to the DECs, the hospitals, and all things related, I suppose, directly and indirectly to Government, it would be easy for the Government to say to the Auditor General's office: you go out and do these comprehensive audits that you are asking for, but we are not in that situation. I do not think you will find any jurisdiction in Canada in a situation where they can provide finances, I suppose, to the Auditor General's office, not even a federal one, to be able to do all that the Auditor General wants to do or suggests to do. I want to hear what is wrong. I want to hear it in layman's terms. I want to hear it so I can understand it, and I want to hear it so the people of Newfoundland can understand it. I want to know what is wrong. Why is there a discrepancy between the Auditor General's office as it relates to the financing of the various denominations?

Then I hear you say that you feel that things are okay but maybe we could make some changes. There is a difference of opinion here and the way to, I suppose, get around the question is, what do we do about the difference of opinion? Do we try to satisfy the Auditor General or do we forget about what the Auditor General is reporting each year? Or, do we go back to Government and make recommendations with regards to how you are actually doing your audits? I do not know. You suggested that maybe something could be done in regards to tightening up or making your audit more comprehensive. I do not know. Mr. Drover, in layman's terms what is wrong with the system in Newfoundland as it stands right now as it relates to educational funding?

MR. DROVER: I think, to use one word, a formalization of the process. I do not think that one can deny that there is a lot of cross communication and a lot of committee structures, and I think that they do good work. I think it is just an evaluation process.

If I might go back to - you mentioned earlier value for money and comprehensive auditing. I raised at a comprehensive auditing seminar in Toronto one time that one of the first people in this country to ever even come out with the words economy efficiency and effectiveness, believe it or not - and we can table it if necessary - was the Auditor General of Newfoundland in 1898, Mr. Berteau. He commented that the role of the auditor not only goes to expressing an opinion on the financial statements, but also to assessing the expenditures of government, whether they have been complied with economy and the efficiency of government expenditures. That was the first time that anyone can find that type of reference and that was nearly 100 years ago, Mr. Chairman.

So coming back the process has not changed in 100 years. There is a process of the auditors expressing on the financial statements of the entity their opinion, and that is a good one, we accept that. But there also must be a challenge in place, whether it is in the form of a form that someone must sign, whether it is in the form of a type of report that someone must comply with, and this must be attested to by an independent officer whether that independent officer is one of the Department of Education or the external auditor of the school board or the denominational education council.

I think we are coming close to a consensus on this process because I think we possibly, around the table here, may have agreement that that formal process would certainly go a long way to establishing control, as the Auditor General would say it. That would mean that the Department of Education would have in place files whereby they get copies of the management letters of all these bodies, they study them and see what is in play. They are the guys who are paying the piper, you know, they should have access to that. They also have in place a process where they get a formal report from the independent auditors that says to the Minister: look everything is fine, in which case the Auditor General would have to assess that system and say as far he is concerned he would have to report back to you and say that is satisfactory. He could not report back to you, Mr. Chairman, he could only report to the legislature that the system was satisfactory if there were many committees in place, and they were doing good work, fine work, but that there was no challenge processed by an independent side. He could not report back because the committee within itself cannot be its own control. A committee, all of us, must have someone who looks back on our expenditures, you know, independently. It is the independent control that must be in place, and it is the formalization of that process that we are talking about here.

So I think we are close to that today. I think that as the representatives from the Denominational Education Councils have pointed out, there is a system in place for various committees, they have an evaluation process in place at the school board level where they assess the capital payments to the school boards, and they assess it for public tender purposes. I think if one were to sit down with the Department of Education and say: okay that process must now extend to you, you must satisfy yourself in addition to the Denominational Education Councils satisfying themselves. Then once that is in place I think the Auditor General would have to be satisfied with the system.

It is a formal process in place, and there must be assurance given from somewhere. I will use an example: say you have given me $100 million to build a new building, I built it, I did a good job on it, and I go back to you and say here is the building and I have complied with everything. I think that in addition to my comments you would rather have some assurance from somebody else who went out there and looked and saw that the building was in place and that the structure was sound and that other legislation which was in place, was complied with. That is the role of the auditor, to ensure that that challenge is there, and that is what we are talking about today, Mr. Chairman.

MR. CHAIRMAN: Based on some of the comments, we talk about value for dollar auditing. How practical do you think it would be in the field of education, Mr. Drover?

MR. DROVER: That is a good one, Mr. Chairman.

MR. CHAIRMAN: Okay, mainly I just threw it out without expecting any real answer on it -

MR. DROVER: I can attempt to deal with the issue if you will. First of all, the Auditor General in the Province does not have a mandate to perform value for money functions - while he does have the knowledge, it is part of our whole training process - he does not have the mandate to do it.

Now, having addressed your issue, no Auditor General is going to go into the area of policy. In other words, if the Legislature and if the Government of the day determines that Denominational Education is a policy, then the Auditor General is not going to go on record as specifically criticizing the process there.

What the Auditor General would really have to do however, in the case of value for money auditing, and one of the things that in recent years some of the Provinces have looked at let us say, is busing; if one were to say that you picked up let us say sixty children in a certain neighbourhood, thirty of them are Catholic, thirty are Integrated School Board and you send in two buses, then an auditor general in doing value for money might turn around and say: maybe it is more beneficial that the two school boards co-operate and send one bus in to pick up the sixty children and deposit them wherever the need is there, that would be a value for money process. Then an auditor general would be into the education sector, but with regard to specifically criticizing the dollar value, once a policy becomes in place, then the Legislators, being yourselves, take the decision that we accept.

It may be more costly, it may be more beneficial, it may be less costly, I do not know. I think there is a Royal Commission in place right now studying that issue and I think no auditor general is going to go in and criticize in detail that kind of policy process; what he may criticize are specific expenditures of it. If I might use another example: if there are two schools in a small community, he might bring it to your attention that look, this is costing you X number of millions of dollars because of a lack of co-operation and he might suggest co-operation. By the way, I do think, from what I read, I think that is probably taking place at the present time, but that is the only process for value for money that an auditor general would get in under all this area of value for money auditing, unless of course he was engaged and directed by a committee such as this, or Cabinet, or by the House itself to come back with a more detailed critique or comment on that process.

MR. CHAIRMAN: The only reason I asked that is when we talked about it and it was a big issue for a number of years; Ken Dye was certainly very strong on it, value for dollar, and it has sort of slowed down a bit now, but in the field, even if you were given free rein in the field of education, really looking at education and looking at the far end or the bottom line which is the education of individuals, particularly young children, you can go out and look at school construction and you can say to one of the gentlemen here that, the school you built, you know you spent a half a million dollars on it, we feel you did not get value. The contractor did not do a good job or whatever, it is only worth $300,000; you could look at school board operations, that the money you are spending with Ginn & Co., you could have had a better deal at Breakwater here in Newfoundland, you know.

Bus transportation; you used an example, yourself. You are using two buses in this community, if you reroute you can use one. But tell me, it is hypothetical I suppose and I do not expect an answer, but how would you judge the value you are getting for 80 per cent of the total educational dollar that goes to teachers salaries, you know, if you are going to do a value for dollar audit, how can you place a value on what you are getting from an individual teacher?

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: I mean 80 per cent, I think a lot of people fail to look upon that and I sort of use that as an example to point out that 80 per cent almost of the money that is spent is for teachers salaries. We talk about transfer payments; and there is another example here when we get into school trustees where only a very small percentage of the amount of money spent by school boards is raised locally. When you really get down to it a lot of money spent by school boards is raised locally in relation to the actual dollars that they have control over that they spend, because factored into the amount of money that flows through school boards would be teacher's salaries. Teacher's salaries make up in excess of 70 per cent of the total budget, which is extremely significant. So, if you want to talk about value for dollar, forget schools, buses, forget everything, the key component in any educational system is the teacher. We have seen many years ago in the remotest of communities very solid education systems because of the individual in the classroom. Today we see magnificent buildings and we see all kinds of equipment and children being bused to schools and computers galore and everything else, and we have problems in our educational system. A lot of these problems stem right back to the individuals involved and you cannot get away from that. I think it is an area where a value for a dollar auditing would cause a tremendous amount of problems.

MR. DROVER: Mr. Chairman, a lot of the people in the country believe that in 1975-1976 value-for-money auditing was invented in Canada, but really if one were to trace the history of it, in 1942 the Auditor General of the United States, he is referred to as the Comptroller General of the United States, that office there which is a huge office, was required to do some assessments, and that is when the American Government was getting ready for the Second World War and getting into the whole area of metal and bullets and that type of thing and value for what they were getting there. That office gets into what we call specialists, and I am going to relate this to your comments there. In other words, they have a number of psychiatrists and psychologists and what they do is get into an area where they challenge people in their own field. Coming back to your point there, in Canada most of the Provinces would expect, with the exception of the Federal Government, the value-for-money field is commenting on the systems and procedures in place to ensure adequate value for money. In which case I guess I do not need a medical doctor or otherwise with me if I am just going to ask the question, do you have a system in place, and then evaluate the system. But if I am going to go in to assess whether a doctor is using the most economic way to cure a patient or whatever and I am going to do the assessment, then I must be at least as adequately trained as the person I am assessing.

Certainly, the office in Newfoundland and certainly the great majority of the offices in Canada do not have people of that calibre and it may be not value for money to engage those people because they may be should be doing what their expertise requires them to do.

So, as far as Newfoundland and most of the provinces are concerned we would go to an area such as the Department of Education and ask them: what kind of system procedures have you set in place to ensure that you are getting adequate expenditure or adequate control over what is happening in that 80 per cent of the funds, the teachers salaries and that. I think the Department of Education should have that in place. If it does not, then the Minister should, in our humble opinion, have people that can at least perform that assessment. If that is not in place then the Auditor General of the day can report that in his view that system is not in place to ensure that challenge. That comes back to what I was saying earlier, if you are going to spend the public money there should be an adequate secondary control or challenge in place to ensure that it is being properly spent.

If you take the specialty area of dealing with handicapped children, a very specialized area here, I certainly know absolutely nothing about those cases and there has been some excellent work done there. I cannot assess that from an educational point of view because I do not carry a doctorate in education but I think that maybe people in the Department of Education should be in a position to be able to assess whether that program is working properly. If you take the case of French immersion and other programs that are into the educational sector; if you take the case of putting a building in some place, there are people in place who can tell you first of all from an educational point of view that this is what happens here. There are also contractors or engineers in place who can turn around and tell you that if you put that building there well first of all you are going to have to bus some children from 100 miles away and others, those are number crunching. I guess people in our field can help with the number crunching. But in the deep educational side, there is no one in our field who would be able to challenge someone who is trained and has a doctorate in education if he believes it and if the Department of Education has him on staff and that is his job to control and assess that, he then becomes part of the audit process. Maybe some doctors of education at the Department of Education level would not like me to say that but really realistically they then become auditors. They audit the policy that has been put in place.

I do not know if that helps you, Mr. Chairman.

MR. CHAIRMAN: I agree wholeheartedly with what you are saying. Without belabouring the point, I think perhaps the systems are in place, but whether or not the functions are carried out is something else.

MR. DROVER: Yes, I concur.

MR. CHAIRMAN: (Inaudible) out this objective outside watchdog or whatever. Perhaps I could sum it up by asking one question. How many teachers out of the 10,000 teachers who operate annually in the Province get fired? That probably answers the question of checks and balances and what have you.

Mr. Hewlett.

MR. HEWLETT: My colleague here is chomping at the bit, so I will let him go first.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: Jim Walsh, Mount Scio - Bell Island. I am not so much chomping at the bit, but we are into noon hour, Mr. Chairman, and I am not sure if we are in full flight again this afternoon.

MR. CHAIRMAN: Yes, we are. We will be back at 2:00 p.m. I think we all have a lot of things left on our -

MR. REID: I want to deal with - although the Auditor General's Office is not as concerned in terms of value for money - I want to talk about economy, efficiency and facility sharing.

MR. CHAIRMAN: Well maybe, as that is such an extensive one - I thought you might have just a short snapper - it is twelve and some people might have made arrangements for meetings or phone calls or whatever (inaudible).

So I think we should break, and we will pick up with you this afternoon. I think that is a very good topic too, and I am sure the gentlemen here would like to get into discussing sharing and so on, because I think there are a lot of misconceptions, perhaps, about the cost of the system and the amount of co-operation and sharing that goes on. I think it would be an area where all would benefit from some questions.

We will pick up at 2:00 p.m.

MR. DROVER: Mr. Chairman.

MR. CHAIRMAN: Yes, Mr. Drover.

MR. DROVER: Mr. Chairman, before we go, I think the member's question is going to be a very good one. I would like to point out, from the Office's perspective so nobody misunderstands it, the Auditor General of Newfoundland does not have the mandate for economy and efficiency. I think one of the members of the Legislature, a former Minister of Finance, Mr. Windsor, summarized it by saying that the role of value for money and comprehensive auditing is left with the members of the Legislature. They would be concerned about that. I think he said that in the House one time and I think it is a very good comment on that process.

MR. CHAIRMAN: That is why, I guess, these people are asking the questions.

MR. REID: That is the reason I said I wanted to lift it from you and deal with it at this level.

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

MR. CHAIRMAN: So, we will meet at 2:00 p.m.

The meeting stands recessed until 2:00 p.m.

The Committee reconvened at 2:00 p.m.

MR. CHAIRMAN: Order, please!

Okay, we will pick up where we left off this morning. I think I had promised Mr. Walsh that he could have the lead question.

MR. WALSH: Thank you, Mr. Chairman. My main interest here today, I think, is a little different than most. I fully accept the difference in accounting procedures that may take place and I fully understand what it is that the Auditor General's office must be going through in terms of reaching out to so many different groups throughout the Province. I guess the one that concerns me the most is that I am, I suppose, a firm believer that for every cent we spend we should get a full penny's worth of either services and/or goods, whether that be in teachers salaries or anything else that we do.

With that in mind, over the past year in particular we have had a number of controversies that have come to the forefront with respect to facilities themselves and the construction of school facilities, and I am wondering where are the various school boards at this point in time in, one, I suppose, trying to meet their own denominational requirements with respect, I suppose, to the constitution and everything else, but at the same time trying to meet those requirements in what I would think would be fewer facilities, and probably larger facilities.

We had an incident, I think, in St. George's last year, and a potential in other areas. I am gravely concerned about economy and efficiency, and value for the dollar, and I am wondering where are we today in terms of the school boards themselves coming together in terms of construction of new facilities and sharing the facilities? The main reason for my question this morning is that the third segment of the puzzle is not here. Maybe the two thirds of the answer might help in setting a direction and a tone, but I am really concerned about that because I have for my own reasons and from my own homework, and I may be proved to be wrong, that we could be getting better facilities in terms of better equipped facilities on a sharing basis, and I am just wondering where are we with that today, and is progress being made? Maybe that is the best place to start from.

MR. CHAIRMAN: Maybe I should just elaborate briefly on the third segment. I think either segment can speak for all the others in relation to co-operation, because from my experience I find that the three groups work very, very closely together in the sense of knowing what the other is doing. So I think, you know, anyone speaking could give an answer to your question from all three perspectives. Dr. Norman.

DR. NORMAN: Mr. Chairman, perhaps it would be important to say at the outset that the legislation, the Schools Act in particular, gives each school board the responsibility for organizing education within its geographic boundary. So that particular responsibility legally rests with the school board, however, it would also be important to say that the councils play a significant role together with the Department of Education working in co-operation with the school boards. In the final analysis there is a lot of co-operation and sharing within the different groups.

In terms of trying to come to grips with that particular issue the three Denominational Councils, and we can certainly include the Catholic Education Council as well in this, set up a joint committee a couple of years ago to establish a policy on interdenominational co-operation, and the three councils worked very closely on that and established some guidelines that we were able to submit to our various school boards.

Since that time, and in particular as it relates to capital, I can certainly speak for the Integrated Education Council in this regard, our policy is that we will not approve any new capital funding unless we explore all the possibilities that exist for joint service arrangements with the other denominational systems, to make sure that we review that potential and try to see what possibilities exist before we actually vote capital expenditures for new schools. Furthermore we have dialogued with all of our school boards and shared this policy on interdenominational co-operation with them. More recently, during this past school year, the three Denominational Educational Councils have established a joint co-ordination committee on regional co-operation and at that committee level there are representatives of the Catholic Education Council, the Pentecostal Education Council, and the Integrated Education Council. We have been reviewing all geographic areas of the Province with a view to looking at how we can best deliver educational services to the students right across the Province. In particular we have established almost a full time job description for Dr. Pope who works on staff with the Integrated Education Council but whose main responsibility is in the area of joint services and co-operation. He has done a tremendous amount of work in that area and we can point to numerous examples where not only have we brought school boards together by way of consolidation but we have been able to bring about a significant number of joint service arrangements across the Province. I think this morning we made reference to bodies like the Denominational Policy Commission and the Joint Capital Construction Committee. We have shared with the Department of Education in looking at areas of the Province which would have potential for joint service schools.

Mr. Chairman, since Dr. Pope works significantly in that area I think it might be helpful if we asked him to elaborate on some of the projects that are ongoing and some of the tasks we see ahead of us in that area.

MR. CHAIRMAN: Certainly.

Mr. Pope.

MR. POPE: Mr. Chairman, it is important lady and gentlemen to put this in context, I guess, because much has happened during the past two to three decades in particular. Reference was made this morning to the present Royal Commission on Education and of course many of us around this table will recall the Warren Commission back in the mid 60s. In 1964-65 Dr. Warren and his commission reported that there were 1266 schools in this Province. Well, September last year there were 525. More than 700 schools have closed. In fact one of our districts have closed as many as sixty-seven schools. Schools exist in 307 of the communities of this Province, both from the largest to the smallest, and it is important to realize that in 84 per cent of these communities there is a single school system. There may be more than one school but there is a single school system in 84 per cent of the communities of this Province that have schools. I would perhaps share this with you more fully but it is a little bit outdated even in the past few weeks actually. This year, Mr. Chairman, about forty-two or so communities in this Province have more than one school system. Now in these forty-two you will find a number of schools, in fact you would have last year found nine, but now you would find more that have what we call a joint school system. For example, Glenwood would be shown up there as having two school systems but Glenwood has a joint school system. There is a single school building and it is operated jointly by the Roman Catholic and Integrated Boards in Gander, but for reporting purposes that school would show up as having two denominations. Indeed it does have two denominations in the one school system. Last year in June, for example, we signed five new joint service agreements. When I look at that sheet I recognize readily how things are changing again in the last several months. I notice some communities here, for example, like Buchans, which come this September, will also have a joint school system, in terms of the Roman Catholic and the Integrated systems there. I notice Woodstock and Pacquet out in Green Bay which involves a joint system with the Pentecostal and the Green Bay Integrated School Board. Come September we will also have a joint school system at the high school level in a small community on the Labrador Coast, namely Port Hope Simpson.

I could go on, Mr. Chairman, but suffice it to say that the landscape is changing quickly and changing, you know, in that kind of a direction. I said to you that there were 525 schools. That number will change again come this September because we would be aware of a board that, say, closed out three small schools or two small schools or whatever, in the spring. We would anticipate that the number of schools will work its way down to around 450. We would also anticipate a greater sharing in more and more areas where it is considered desirable that sharing ought to occur.

Now having said that, we all recognize the three systems, in making their representations to the Royal Commission clearly stated their positions with respect to where numbers warrant and where numbers are good. Obviously, the systems prefer their own schools in terms of the other two systems. But clearly we have demonstrated to all three councils, that in areas where it is in the best interests to co-operate that that is clearly what ought to happen and, indeed, is happening.

At the school board level, again going back to the Warren days, they would have talked about 309 school boards. In other places they refer to 270 school boards, depending on how you look at them. They were small and scattered and almost every little parish and every community had its own board. Well, four years ago we would have had thirty-five boards and now, as of July 1 of this year, we have, I guess it is, twenty-seven boards. Now, that is the kind of way, Mr. Chairman, the system is changing and that is the kind of way we see the system evolving in terms of these kinds of changes. We think it is illustrative of the co-operative kinds of efforts that are occurring across the system.

Now, I have not mentioned many, many instances where we would be offering each other, for example, religious educational programmes. You know, Catholic schools offering Integrated programmes and the Integrated schools offering Catholic programmes and so on. Also, what is now, we think, a very positive development is that where two schools do exist and they are somewhat close and one is offering programmes that the other school does not offer, particularly at the high school level, the students are transported to the school to take a course or two that is not offered in their school. That is clearly also happening more and more now.

In brief, Mr. Chairman, the system is clearly not what it was, you know 1266 schools where you had almost every little community with two or three different little schools. In brief, 84 per cent of the communities have one school system.

MR. CHAIRMAN: Just before you get off that, Dr. Pope, if you would, how many of the other 16 per cent would have more than one system. How many of those would have more than one because, once again, numbers warrant? For instance, St. John's, whether you have all one religion or five religions you have population enough to maintain x number of schools. Does it make a difference and how many communities would be in the 16 per cent range but numbers would certainly justify two, three or four schools?

DR. POPE: Approximately ten, Sir, you know larger communities. I mean, it is not going to change here very much in St. John's, Mount Pearl, Gander, Grand Falls and Corner Brook, you know these larger centers because we have adopted a certain approach to schooling as you know. In our Province, for example, we look at 500 and 600 students as large schools. Now, we would not have to go very far, even as near as Nova Scotia and certainly New Brunswick where we will find a different perception in terms of school size. They would see school size certainly differently that we would in terms of what is large. But, if you examine our perception of what is a satisfactory size, 500 students or 600 students let us say or thereabouts, there is probably ten or so communities where you would still have several schools because the numbers would warrant it, like the ones that I have mentioned.

MR. CHAIRMAN: I guess the pertinent question then is, how many communities do we have presently that have too many schools?

DR. POPE: If you define it, Sir, in terms of shall I say having two small schools -

MR. CHAIRMAN: Yes. We are talking about numbers and economics and not about the philosophy of education.

DR. POPE: No, no. If you are talking about two schools of 100 students, 150 students or 200 students you are probably in the thirty or so range where communities would have a couple of small schools like that, if you are looking at the forty-two that I am saying there.

Now you have to remember, Mr. Chairman, as you and I are saying this, I am talking about particular communities here, there could be another community that is just two miles away that you could certainly justify bringing these two communities together. But, that is the kind of figures and numbers that you would be looking at.

MR. CHAIRMAN: The press have funny ways of reporting things and some of these questions I am asking are just to bring out some points. When you mention communities a couple of miles away, that does not necessarily mean either that you have an integrated school in community A, a Pentecostal school in community B two miles away and they should be together. In a lot of areas you have all one religious group two or three miles away.

DR. POPE: Oh, very much so.

MR. CHAIRMAN: A couple of quick areas, the Southern Shore and Conception Bay Centre just come to mind where you have communities within a stone's throw almost with their own schools.

DR. POPE: Mr. Chairman, that is clearly a very good point to make because we would certainly observe that the community rivalry, perhaps we would use that in the best sense of its term, is a very strong factor these days in bringing these kinds of things together. We struggle as much with shall we say two integrated communities as we would with two different denominational communities.

MR. CHAIRMAN: I am sorry I am talking away Mr. Walsh's question time but he will have lots of time later.

I always used to say our history and geography have dictated our school or educational patterns more so than anything else. I think if we look at the changes that have occurred in recent years, these changes have coincided with advancements in communications and transportation maybe more so than anything else. If we go back to the reasons why schools were established in the beginning the history of settlement patterns and the geographical patterns of the Province and the isolation and so on, I think people have to look at that to understand the development of our system and the changes that have occurred.

DR. POPE: Mr. Chairman, I think it is important to observe too that we see these changes not so much from a standpoint of trying to get larger as from trying to become smaller because of enrolment declines and this sort of thing. Clearly, we will continue to be a Province of small schools, Sir, when all of this is completed. There are approximately fifty-five communities in the Province that are either so isolated by distance or geography that they would remain unaffected by all of these comings together. Even those that have come together, if we might use that term, we are still talking about continuing to be a province of small schools, we just have to be.

MR. CHAIRMAN: There is nothing necessarily wrong with that, is there.

DR. POPE: No, but I make that point, Sir, because often times people place the emphasis on what is getting larger. We often try to say a lot of this is in response to try and not to get smaller.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: I thank my colleague the Chairman for the history lesson and for the need to explain things in a simplified manner for the media.

AN HON. MEMBER: (Inaudible).

MR. WALSH: But thank you just the same.

I want to say from the outset that I have absolutely no problem with a denominational school system that allows people to have children of their faith exposed to their religion. I have no problem with that, it is just that my definition of a school is somewhat different than what I believe we have evolved to in this Province.

I do not believe that the school itself is a physical structure. I believe it is the education that takes place within a building and the physical walls, and if there are multiple denominations within a four wall structure, that is fine, as long as we are getting the best possible education for those children and that the best possible facilities are being offered to them. That for me is the goal.

Now if the east wing of the building is dedicated to a particular religion I am not overly concerned about that aspect of it because that is inherent in our history and I realize that. My concern is the fact that are we in the situation where we are spending $2 million for a ten or fifteen room school here, and a mile away we have another denomination wishing to construct another ten room school for another $2 million whereas if both of them came together we could generate a far better education for our children for maybe $3 million. And I believe that our accountability as legislators have to be also to the people that we are putting additional burdens on every day of the week for the dollar that is diminishing faster and faster as every day goes by, and that is what I am concerned about.

What I am also wondering is, Dr. Pope maybe you could answer this, where are we in terms of new construction and upgrading of schools that exist out there? Are we now in every case looking at where a new school is needed, are we addressing schools that are either underutilized in those same areas and are we capitalizing on those before we start spending money of the $27 million that is being spent annually? Can we take an existing structure, for example, that has all of the requirements of the school in terms of the labs and the computer rooms and saying: let's put five rooms on this school as opposed to building a new facility? Are we doing that?

DR. POPE: We clearly are, Sir, in many, many instances, and I could certainly cite examples for you to illustrate that. For example, I mentioned that a joint services will occur now in Buchans this fall. And the integrated board, which in joint services is usually an operating board, meaning a physically operating board who tends to the windows and doors and that sort of thing, and our board will be operating the Roman Catholic school in Buchans because that is a better facility than ours. Our school would have needed substantial work done to it to bring it along whereas the joint service agreement provides for the integrated board to be providing the schooling in the Roman Catholic school. It is a joint school, mind you. But like I said, the operating board in Buchans will be the integrated board.

Also, Mr. Norman made reference to the fact of the council having policy that does not permit it to proceed with these things until we have explored all of the options in that regard in our case, and that is the kind of way that we are trying to. You mentioned the school last year that we were struggling with in that regard in terms of effecting a joint service, and clearly what we were doing there was making certain how best to spend the money that we had. I think the numbers themselves changing and going down would convey to you that clearly a lot of that kind of thing must be happening, that we are not rushing off to build a little school here or a little school there anymore.

MR. WALSH: I seem to have been favouring Dr. Pope, Mr. Chairman, of the integrated committee in terms of where we are coming from, but I think only because Mr. Norman answered first. I suppose it is only fair that I stay quiet for a little while and allow Pastor Batstone to get involved as well in the discussion.

PASTOR BATSTONE: Thank you. Mr. Chairman, we certainly would say that we recognize that there are components in the delivery of education which are not distinctly denominational in character, and therefore not unique to the purpose and the principles of any particular system. There is certainly in those areas a great deal of co-operative efforts and willingness to share, and the Pentecostal Education Council has also developed a policy on interdenominational co-operation. I say that from the perspective that any co-operation entered into by the Pentecostal school board will be interdenominational since it is the only Pentecostal board in the Province. There is no other Pentecostal board in the Province with which to co-operate. So any co-operative efforts by the Pentecostal Board will be interdenominational. We are a very small school system in comparison to the other two major systems. But Sop's Arm, for instance, is a co-operative venture. Pacquet is a co-operative venture. We are entering into a co-operative venture in Port Hope Simpson.

Also in the administration at the school board office level busing, for instance, we are a part of co-operative busing. I think of (inaudible) in the Grand Falls area in the provision of specialists like educational psychologists and speech pathologists and in the providing of in-service, there are also co-operative efforts between our board and other boards. We as well, being a small constituency, have found that when the enrolment level of our smaller schools drop significantly, it is probably more convenient for us to close out a particular school and to be absorbed into the other school system which may operate in that community. I can name, for instance, Point Leamington in recent years, Seal Cove, White Bay, Joe Batts Arm, and Carmanville will close, I think, in September. Possibly the indication that 6,000 of our enrolment, our total Pentecostal constituency student enrolment, is now housed in Integrated and Catholic schools in the Province, and 6,000 approximately in our own system. So certainly it is not the policy of the Pentecostal Education Council to establish one-room schools or small schools hither and dither across this Province, as indeed that witnesses to.

I would also bring another perspective here, I think we need to recognize the tremendous contribution that parents make to their denominational schools above and beyond the contribution through their tax dollars and through school taxes. For instance, in Springdale in a ten year period the Pentecostal people of Springdale contributed $1.5 million to the capital expenditure of their school in Springdale above and beyond their share of the capital grant. The Port de Grave Pentecostal constituency constructed their school outright from their own funds and I could mention other schools.

In Deer Lake, for instance, the capital construction cost of Phase One was $1.1 million, $700,000 was provided by the local Pentecostal people. So there is just a tremendous amount of money being contributed by the Pentecostal constituency in the provision of Pentecostal education for their students, and I would want to go on public record and recognize that kind of involvement and contribution by the Pentecostal people.

But certainly we are a part of and involved with co-operative ventures and as the enrolment declines in the foreseeable future, I am sure there will be other instances and places where we will be extending that co-operative venture together.

MR. CHAIRMAN: It is very important that you bring out the part about contributions because a lot of people feel that there is no contribution - you know, Government funds education and Government should call the shots. As you mentioned, I think in the auditor's report there is a mention made that 90-odd per cent of the funding whatever for school board operations is provided by Government. That is factual when you count teachers salaries. But if you eliminate teachers salaries, and talk about the actual construction and maintaining of schools, then the percentage becomes much higher from the local side through school taxes, but above and beyond school taxes from local contributions. I often question whether or not these contributions would be forthcoming if you had a public school system?

One other thing that you mentioned I think that we should elaborate on, you mentioned bus transportation. When people talk about the denominational system of education, they say, oh, yes, it is time that we got rid of the Catholic bus going up one side half filled and the Protestant bus going up the other side half filled. You know, what is the story today in relation to busing? How much duplication do we have within the $25 million we spend on school busing from your experience?

PASTOR EARL BATSTONE: Mr. Chairman, I do not know that we can respond to that directly. I understand that the Department of Education has conducted a study in busing in the Province and I think possibly there is one ongoing at present. But as you are aware there are two systems of busing in the Province, thats the school board owned buses, and they tend to be co-operative ventures, and then there is the individual contracting situation. We are involved in both areas from the Pentecostal Board's perspective. Where possible we are involved in board owned co-operative busing with other school systems and we also have the individual contract.

I personally am not aware of those kinds of glaring examples that we hear about in the media, and I suppose my tongue in cheek response would be: do you count at the beginning of the pick up or at the end of the pick up, to determine how many students would be on a given bus at a given time. But I believe all boards are certainly willing and very anxious to look into the possibility of streamlining their buses for the sake of economy and convenience.

MR. CHAIRMAN: Dr. Pope, from your experience -

DR. POPE: Well I can only add sir, that obviously things are changing a great deal too in that area; for example, Pastor mentioned there are nine, what is commonly called board owned systems in the Province, and it is my understanding that they operate about 450 of the 1,000 or so school buses that operate in the Province; and it is also my understanding that they transport about 36 per cent to 40 per cent of the students who are transported.

Now theoretically sir, these buses should have the utmost in terms of efficiency and effectiveness in terms of the kinds of example that you mentioned, these things should only occur to a minimum in that kind of arrangement, therefore, if they are transporting 35 per cent to 40 per cent of the students, it would seem that there are significant improvements being made in that kind of thing if indeed, and I would think it is reasonable to expect that these things do occur, whether or not they occur on the scale that is sometimes represented I suppose is hard to determine, but I think you can see what is happening there too, by these few figures that we are sharing with you.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: I am pleased to hear that we are seeing that co-operation and I am glad to see it. I want to go back to the Auditor General's office during this particular portion and then Mr. Drover might be able to answer.

Has the Auditor General's office been involved much in terms of the funds that have been allocated for construction and in terms of recommendations? For example, in some cases when funds are announced for water and sewer, there is an allocation by the engineers that the project may cost X number of dollars.

One finds that a tender comes in at a little less and the money stays in the system, sometimes instead of going the quarter mile you had planned, the Department will say, well let us go to a half mile because of the cost that comes in.

In terms of school construction, when someone says that a school is going to cost $1 million for example, and the actual tenders come in less, what procedures kick in automatically, do those funds then go back into the general fund, the differences that were allocated or are they chewed up in other areas?

MR. DROVER: To answer the first part of your question, we have not performed in recent years a detailed review of that section, that would be a follow-up to this year's procedure of reviewing transfer payments coming out of Education and I would anticipate that that type of review would probably be in the next year or so.

What procedures would kick in? My understanding, and I have the system documentation there on the Department of Education, would be that, if the Department allocates X number of million dollars to the Denominational Education System and there is a saving there, I would anticipate that the system may be able to utilize the saving, because it has been allocated in block by the Department, similar to the methods used in allocating funds to a hospital, in that, hospital funds are voted in block by the Department of Health, however, if there is an overall saving in Government, in the Department of Public Works, Services and Transportation, if there is a saving there on the construction of a building on what was voted in the department -

It is a very good question and I am having trouble with it, because over the years all of it just went into the system and was all utilized in other areas; the savings have been utilized to other resources. I do not say it is an inappropriate method, it is just that it gives the opportunity to the decision makers whether they are in the school boards, the denominational system or the departments to utilize funding, but most funding, just so that you understand it, the Legislature, when it votes on the Act, it votes on the various Heads, it will not vote on the fact that a $3 million allocation related to the school down in Hants Harbour or Greenspond, it will vote on X number of dollars to the Department of Education.

The split over into the Department of Education works within the system, so as long as the Department of Education does not exceed what is referred to as its head, you know, it does not exceed its $600 million allocation overall, then it utilizes the funds, so they -

MR. GOVER: Just one second now. Thank you, Mr. Drover. I think Mr. Norman would like to perhaps respond to that question, which is, if the Government votes $27 million and all the tenders come in and only $25 million worth of tenders are out there, what happens to the other $2 million, do the DECs give that back to the Government or do they keep it?

MR. NORMAN: By way of illustration to that, as it has been mentioned by Mr. Drover, the capital funding that comes to the councils is really as a block of funds, so during this current year we would have a $27 million block of money to be spent in accordance with the directions of the budget speech and so on, and as invoked by the Legislature. Last year we had tenders that actually came in in total $1 million under our projected budget, and I think it was probably just a result of the marketplace at the time. We had anticipated that there would be some extra construction under way and things might have been a little higher, but in actual fact the market was very, very hungry and we were getting up to twelve to fourteen bids on a project. So with that kind of competition, in total we were able to save significant dollars. That simply then made that money available for projects that were in the wings. We have extensive capital needs that can be projected for some years into the future, as a matter of fact, so we then immediately were able to proceed to attend to and to respond positively to some further construction needs, so that money went right back into additional capital projects that were ready to go.

MR. WALSH: The tenor of where my question is coming from: up to the time a school or facility is about to be built, the Minister himself, if my understanding is correct, and I may be corrected on it, but my understanding is that funds tend to be project specific and then the Minister will sign the letter saying go ahead and build that school in Hant's Harbour or wherever based on the funds that have been expended. My concern is that when a $1 million is left over does the Minister or the Department then have control over in terms of last year where that additional $1 million would go? Is that decided on a priority list that has been submitted, or can you then take that million dollars and go into that proposed list and do with it what you wish? I am looking for accountability in terms of the differences, and I will go to Mr. Drover, and maybe back to Mr. Norman through the Chair.

MR. DROVER: Mr. Chairman, I just do not know, to be honest with you. I think this is part of the whole process of working with the Denominational Education Systems and the Department themselves, but whether the Minister exercises control over a certain amount is something that would be extremely difficult to audit. I know that over in some departments, for instance, in the health care sector, the department does allocate the great majority of the funding out, but because of certain health needs and the overall operations of the health care sector in the province there is a certain amount of funding that is left with the department for those purposes. It is not a major amount, but there are some debts left with the guys at the Department of Health and we do not have a problem with that. I know that similar to what you are talking about there, there are certain procedures in place which are consistent in relating to construction, public works and road paving. You know, that is similar to what you are chatting about there, but regarding the Denominational Education System and getting into the deep part of that, in the 1989 report we did not assess that specific point, and therefore the answer to your question, as far as our office is concerned unless we did further investigation to verify it, I do not know if I can address that specific issue with the Minister holding those funds. The denominational education people would certainly know.

MR. WALSH: The reason I asked -

MR. CHAIRMAN: Mr. Norman could clarify it for you.

MR. NORMAN: Mr. Chairman, the submission that we would make to the department would invariably include projects that would go beyond the funding limitations of any particular year because we submit a five year plan to the department. If, for arguments sake, the tenders come in this year and there is $1 million left over then we would go through exactly the same procedures as we would ordinarily. The legislation dictates that we cannot spent that money on anything other than the construction of new schools and so on and so forth, that is outlined in the legislation, so we are limited to capital spending of that money. We would then simply dialogue with the Department and the next priority capital project would be then financed and the Minister would have, through his officials, approve the site, they would have to approve the plans, they would have to authorize the awarding of the tender and so on. So, that particular project would not be treated any differently than all of the others for that year and the involvement of the Minister through his officials would still be as per the policies and procedures that have been laid down.

MR. CHAIRMAN: Just for clarification, unlike departments and road money and so on where you have an estimate type of thing and you announce projects and you call tenders and that is it. The Denominational Education Councils are given a blanket sum every year and then you can use that money as you so wish according to your priority of projects until it is all gone.

DR. NORMAN: That is right. On the basis of need and we take the most outstanding needs in the Province and go down through them one by one.

MR. CHAIRMAN: No, go ahead, Mr. Walsh.

MR. WALSH: The reason I am asking is that in the briefing notes that I received it appears that somewhere along the way the Auditor General was concerned about funds that have been allocated for capital expenditures and have been moved to current account to help offset deficits. Although it says here in our briefing notes, for the purpose of eliminating a potential deficit does have merit, I am concerned as to whether or not that was the intent and has the Auditor General looked at it? I am only going from the notes. If there is, be it $100,000 or $50,000 should it be guaranteed that it goes towards physical structures as was allocated or is the policy of having funds in some cases being transferred from capital accounts into current accounts? Should that be allowed to continue?

I may be reading the notes wrong, but from what I am looking at and it says page 66 of DEC P68, whatever that means.

MR. CHAIRMAN: We are talking about school boards here, I think, Mr. Drover.

MR. WALSH: Maybe I am interpreting it wrong.

MR. DROVER: Which paragraph, Mr. Walsh.

MR. WALSH: Page 66. Requiring school boards to curtail expenditures on capital account and the transfer of funds to current account. Now even though the DEC - now I may be interpreting it wrong and by all means correct me if I am - would require that the school be built and the school board would then take the responsibility for the building of the school. Like I said, I may be interpreting what I am reading to be somewhat out of whack, but these were some notes that were prepared for me.

MR. DROVER: You are referring to this document the compendium which is also tabled in the House of Assembly with the Auditor General's Report, page 66. It is the Department of Education's response to the issue. The second one there, you are saying: with regard to the finding that school board budgets are not submitted to the Department, the Department will take this matter under advisement. It will be recognized however that funding for school boards is based on prescribed formula - is that the one? - and the Department would also point out that considerable data on school board operating costs has been completed by the Department in conjunction. With regard to the finding that transfers to or from current funded account is not appropriate the Department will take this matter under advisement and consider changes are in order. The Department notes, however, that the policy of requiring school boards to curtail expenditures on capital and transfer funds to current account for the purpose of eliminating a potential deficit does have merit.

That is the Department of Education's response to our comment. We felt that to transfer money from capital into current to support a current operating deficit really was not in keeping with the method used to vote the funds. If $27 million was voted capital it should be utilized for capital, that is what we were saying. What the Department's response to that was we had reported in the annual report and the Department of Education now responds in this document here, with the comment you have there today, that the Department notes however that a policy of requiring school boards to curtail expenditures on capital account and transfer funds to current account for the purpose of eliminating a potential deficit does have merit.

MR. CHAIRMAN: I am not sure whether or not we are in the same ballpark when we talk about capital/current and so on because I certainly do not think the capital funding provided for school construction by the DECs ends up offsetting the current account budget at school board level. We might be talking about some school board owned money, capital/current but certainly we are not talking the dollars we are talking here. Mr. Norman, you might just want to clarify that.

DR. NORMAN: Mr. Chairman, if we vote $500,000 for a particular project that money is not automatically transferred over to the school board. That money is only paid to the school board upon receipt of appropriate documentation. I think Pastor illustrated this morning the kind of signatures that are required and so on in order for us to substantiate us paying that particular invoice, so we really pay to the school boards upon the submission of invoice. However, if a school board is budgeting $1 million, say from the school tax authorities, the school board might say from that $1 million source of revenue we are going to spend $500 on operating and $500 on capital because school boards do undertake on their own initiative through that other source of funding capital initiatives that are not funded through the legislative vote at all. I think my best understanding of that statement would be that it would only apply to monies that are directly obtained by the school board from some local source of funding.

MR. WALSH: Mr. Chairman, one final question, then I will pass to someone else.

MR. DROVER: Excuse me, Mr. Chairman.

MR. CHAIRMAN: Go ahead.

MR. DROVER: That problem will be expanded in considerable detail in the 1991 report. There is one school board, at least, that we have reviewed where we have that concern, of borrowing funding for a capital nature and utilizing it in the transfer form. We will explain that in considerable detail. I cannot get into it in very much detail right now but I know Mr. Walsh has a very good point there and we are still seriously concerned about the utilization within school boards of capital money over the current.

MR. CHAIRMAN: What we are talking about here really is monies controlled by school boards themselves, that are raised through school tax authorities or borrowed by the board. Some boards are in a position where they can borrow above and beyond what they get from you. They can go off on their own, St. John's being the prime example. Some of that money borrowed for capital might be used for current account or whatever but that is strictly an internal board thing and it does not involve capital funding from (Inaudible). We know now what we are talking about.

MR. DROVER: It causes some concern later on, too. We are going to have to wrestle ourselves with commenting on this but as you borrow money you have to pay interest and whether the interest costs are taking away from your other - in other words if you as a Member of the Legislature vote $27 million then a certain portion of it goes towards the payment of interest costs. Is that what your intention is and that type of thing? These are the type of things we are wrestling with right now as we complete the audit of at least a couple of school boards but it is very current.

MR. CHAIRMAN: Mr. Walsh.

MR. WALSH: One final question for Mr. Drover, and then I will relinquish to my other colleagues. Based on your report ended March 31, 1989, page 65, it says `of the thirty-five schools boards nineteen had not signed their financial statements, which is contrary to the normal practice for indicating formal acceptance.' What has the Auditor General's Office and/or the Department of Education done to correct, what to me is, a blatant inequity? I mean you either agree that your financial statements are okay and you sign them and submit them or they are not okay so you do not submit them or is that just something they whipped in quickly to comply with the September 1 deadline? I am not sure, but how do you end up with nineteen out of thirty-five not signing their financial statements?

MR. DROVER: Okay that there is saying that the financial statements were not signed by the chairman of the board and one other member of the board. That does not say that they did not receive the financial statements with signed audited certificate on it. In the current year we have performed another review of that and that would be considered in the 1991 report, yes. It is something that causes us some concern, the whole monitoring of the financial statements of the school boards, and one of the things we are saying to the Department of Education, and it comes out here in this report as well, we really think that the Department when it gets the financial statements, study the financial statements, study the results of it, compare it to what went on in the budget and have a whole process in mind. And I think the Department of Education is attempting to strengthen that process. We have worked with them now for a couple of years on that.

But, yes, we will be reporting, and I hate to reiterate it again, in the 1991 report on a major review of this, both at the Department of Education level and then out to a number of the school boards.

MR. WALSH: Thank you, Mr. Chairman.

MR. CHAIRMAN: Anybody else?

MR. HEWLETT: Earlier on in our morning session the Auditor General's Department mentioned that a lot of the co-operative mechanisms, the committees and what not between the DECs and the Department of Education are commendable, but they are not formal, in the sense that the Auditor General refers to. So I presume that what you are referring to is formal in an accounting sense, rather than an exchange of knowledge or an exchange of ideas and that sort of thing?

MR. DROVER: I think what we are talking about is an accountability process which must be formalized, that must be at arm's length. The Department of Education, if you, I guess, compare it to a supplier, they provide a certain amount of funds to the various Denominational Educational Councils and the school boards, and they must be separate and at arm's with that, while they work together and they come to one mind or come to a consensus on a number of areas such as where councils can locate schools etc. etc. That working together must also be subject to some sort of an assurance afterwards. And I just might comment here, because I have a document that we recently received in on accountability, and this adds to what I said this morning or what I tried to say, I am just quoting from it 'deputy heads should expect that their senior managers provide them with assurance that the five conditions mentioned above are met, to allow deputy heads and their managers to report confidently on their stewardship to organizations outside of the department or agency. They could require these assurances to be supported by evidence or independent review.

That basically is what I was saying this morning: by some form of formalized evidence or by independent review. The independent review is provided by the external auditor and/or the other one would be the source of evidence which could be a questionnaire type thing that is done by a group of inspectors or whatever from within, either way.

MR. HEWLETT: You are essentially talking about, for want of a better phrase, auditing the process itself, including all the committees and corporations.

MR. DROVER: Basically you get to a stage where your well trained officials in the Department, your experts in the Department of Education become, for the want of a better word, auditors, and that they are checking these processes that are in place, yes.

MR. HEWLETT: One other question, Mr. Chairman, to the DECs. Given the numbers that we heard here today and given the nature of the human being in looking for a quick fix, or a quick solution to many of our ills, would the DECs agree perhaps with the notion that denominational education has led to a tremendous waste of taxpayers' money? Is this notion becoming more and more a myth in our society and becoming a ready scapegoat for those of us who do not want to face the reality of, you know, too few dollars facing too many children?

MR. CHAIRMAN: Dr. Norman.

DR. NORMAN: Mr. Chairman, I think that we certainly cannot find the evidence in the educational system to substantiate some of the charges that have been levelled against it by way of so-called duplication and expenditures of funding that would be unnecessary.

What we see, rather, is that we have a system that is significantly shrinking in that we peaked with out enrolments in 1972 at 162,000; I expect that when the enrolment comes in this September, we will probably be in the vicinity of 125,000. So we do in actual fact experience a significant decline in student enrolment and that presents the education system with a terrific challenge in how to deliver quality education to students who are becoming fewer in number, schools are becoming smaller and at a time when the programme has been mushrooming really and expanding significantly.

So the challenge is really one of how best to deliver quality education and what we have found is that, one of the ways in which the system has responded and very positively, is through the concept of the joint service school; and even though we tend to think of smaller Newfoundland communities like the example that was very high profile in the media last year of the McKay/St.Fintan's area, where we now have the kindergarten to Grade VI students all accommodated in a Roman Catholic school, but which is operated as a joint service school, and all of the high school students accommodated in the former integrated school which is now operated as a joint service school.

We find that these kinds of responses are enabling us to offer much better programming, better quality of service, better delivery to the students and that is just one example of dozens that we could illustrate but our sense is that the challenge is not one of simply removing duplication but how best to deliver quality programmes to students spread over such a wide geographic area, when the enrolments are declining so seriously.

MR. CHAIRMAN: Thank you, Dr. Norman. Pastor Batstone.

PASTOR BATSTONE: Mr. Chairman, we might add to that, that consolidation or joint services do not necessarily mean savings of dollars, in fact consolidation may cost you more, particularly initially, and as Dr. Norman has pointed out, it is an educational rationale rather than economic rationale.

MR. CHAIRMAN: A loaded question. How much is it costing us extra to have the system of education we have today? If the system of education as we have it today, our denominational educational system were abolished by legislation when the House opens, and we went into a public school system, how much money is the Government saving, provided now you say, we are not going to use the extra money for education, just how many extra dollars are going to be there - you know the hundred million we talk about a year, and all of this stuff; is it there?

Dr. Pope.

DR. POPE: Mr. Chairman, I cannot answer you precisely, sir, but also in terms of Mr. Hewlett's question, I would ask you to put it in this focus, that 96 per cent of Government's budget for Education goes to four headings, that is: Education and Primary, Elementary and Secondary.

It goes to teachers' salaries, which I believe is in this Province 77 per cent; also it goes to Transportation; it goes to Maintenance and Operation and it goes to School construction. Now, 96 per cent, and you know, if you reflect on that just briefly, go to these four headings, teachers salaries which are paid on the basis of certain number of children per teacher, the regular pupil/teacher ratio at present is one per twenty-three students.

School bus transportation is approved on a needs basis and we already talked a little bit about that where, that is clearly being rationalized. The maintenance and operating grants are paid on the basis of so much per student sir, and it does not matter

what the student is or who the student is, it is paid so much per child.

MR. HEWLETT: It does not matter how many buildings you have.

DR. POPE: It does not matter how many or how few building you have. Of course, the school construction grants are allocated to the councils and we distribute these on the basis of need.

These four take up 96 per cent of the total. Now I ask you where in the world or more precisely where in the Budget of $500 million or $600 million would you find the $100 million or the $122 million or the $77 million that people have used, Mr. Chairman, as the amount the system is costing extra.

MR. CHAIRMAN: That leaves $20 million roughly speaking if my calculations are correct, 4 per cent of roughly a $500 million budget you are looking at $20 million, $21 million or $22 million maybe, out of that you operate the Department of Education itself, all the internal and external offices and what have you, and the field operations.

DR. POPE: In our Province, Sir, that latter 4 per cent is spread over seventeen headings.

MR. CHAIRMAN: But out of that you would have to save the $100 million.

DR. POPE: I do not know the answer to your question, Mr. Chairman, but it is as a philosopher says 'always living with that question', but I think when you look at the 96 per cent falling under these four headings which are, I believe, largely extraneous to the system that we have; teacher's salaries, 77 per cent of our total budget goes in salaries in the budget.

MR. CHAIRMAN: It has nothing to do with religion or a breakdown, and that teachers are allocated on numbers.

DR. POPE: It is all allocated on numbers. The transportation is being more and more rationalized in terms of that being to in terms of need and numbers. The operation and maintenance I believe works out to be so many hundred dollars per student regardless if you have a denomination or do not have one. And the school construction grant is clearly given out on the basis of need.

So, Sir, that is how I try to get my thinking around it in terms of looking at it that way and say where in the Budget would you find all of these many, many, tens of millions of dollars.

MR. CHAIRMAN: Personally, I have used the same arguments as yourself, in being put on the spot with that question, and it is one that perturbs me when I hear people who are heavily involved in education sometimes talking about the cost of our system. Regardless of whether you support the system or not, be for it or against it based on facts, and when your only argument is that we have to get rid of the system because of its cost, when you break it down to the actual dollar, manipulate it to the best, even if you could close all of those little schools tomorrow and combine them - I mean that is going to be an extra cost anyway - if it happens gradually whether you have three groups sharing or one group it is going to happen anyway to a great degree.

AN HON. MEMBER: (Inaudible) transportation costs.

MR. CHAIRMAN: The same way with transportation.

But above and beyond that, if you threw out the system that is there with it undoubtedly goes the direct contribution that comes because of the system. How many parcels of land out there and how many schools right now are partially owned by the systems, if these dollars were withdrawn and had to be replaced by direct government funding? Pastor Batstone gave an example this morning of the contribution of some of the Pentecostal schools and the same is true of the others. How many schools are built on church ? property and so on, and so on? Now, if these contributions are withdrawn I would think certainly you would offset any savings. So, if we are talking about the system in terms of cost, dollars, I think we are barking up the wrong tree. If the quality of education is affected for some other reason, I always use again history and geography, two very important components. But our educational standards in this Province are as good as any province anywhere else when we compare apples and apples. In fact, in many ways we are a long ways ahead of many of the others. But we always seem to complain about ourselves for some reason.

Dr. Pope.

DR. POPE: Mr. Chairman, I am anxious to say you know, despite my earlier remarks, that I would certainly recognize that the denominational system obviously costs us something, but the same would be said of course about Alberta and Saskatchewan, Ontario and Quebec and New Brunswick, that has a francophone and anglophone system, you know New Brunswick has forty-two boards and twenty-seven anglophone and fifteen francophone, so I mean we recognize it costs something.

Just in the little examples we said to you earlier, we are still struggling to bring small schools and small communities together, but my answer was in the context of trying to get a reasonable focus on this as opposed to grabbing at some kind of a figure that you wonder where you could ever find it.

MR. GOVER: Mr. Chairman, may I just (inaudible).

MR. CHAIRMAN: Yes, Mr. Gover.

MR. GOVER: Is there any estimation as to the value of these contributions on a yearly basis? Like there are contributions that have gone in the past, schools are built on properties that have been contributed in the past, but on an ongoing basis, is there any value to these contributions or any estimated value; have the DECs sat down and tried to estimate what the value is of having denominational education, what the value of these contributions from the constituencies are? Would it be $12 million a year, or $1 million a year, $10 million a year?

MR. CHAIRMAN: Pastor Batstone.

PASTOR BATSTONE: I could speak for our council; again I would indicate we have one board, so maybe it is simpler for us to do this. Yes, we do keep an accurate account of both capital and operating contributions to our school board by the local people.

Again, in that one year there was over $500,000 donated for operational that is apart from the capital, so that is possible for our district.

MR. CHAIRMAN: Do you have any idea of percentage, forgetting teachers salaries which is a big bulk, everybody sort of gets the same thing, but in relation to the operation of your schools, what percentage (inaudible).

PASTOR BATSTONE: Mr. Chairman, for capital, right now our people are contributing 31 per cent; in other words, for every provincial dollar we spend in capital, there is thirty-one cents above and beyond contributed by the people, by Pentecostal people.

The operational is more difficult to identify and we do that on a yearly basis because if someone buys a piano for this school or a copier for another school and so forth, so it is not systematic, but we are systematically contributing 31 per cent of our capital expenditure.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Pastor Batstone, would it be safe to say that if there is a price for denominational education, specifically say, as it applies to your particular board, would it be safe to say that your constituency to a great extent and not the taxpayer in general, are the people who are both willing to and are, paying that price.

PASTOR BATSTONE: Well certainly, Mr. Chairman, I would concur with that; also though, the great benefit to that is there are people who are personally involved in education. Once they contribute personally beyond their tax dollars, which is a more hidden cost to them, when they contribute personally to education they are very much involved personally, and so they are committed to their school system, and I speak for the Pentecostal constituency in this Province.

MR. GOVER: The Chairman made a good point that it is difficult to put your finger on how much the system may cost, but once you get down around a figure I suppose, from zero to ten million, I mean, the contributions that are made from the various constituencies more than offset this additional cost that may be there, and as the Chairman indicated, just because there is additional cost, does not necessarily mean that your denominational educational system should be abolished.

Society has to make a judgement, well this is a constitutionally entrenched right, but there has to be a value judgement made. Are we willing to spend extra dollars for a denominational education system which may promote values over and above the values which may be promoted by a public school system? But the point is, when you get down to strictly economics, even if the system costs more, you have to look at what the system puts in as well by being structured the way it is, so it is not as clear cut as to say that the system is costing or is it?

MR. CHAIRMAN: I think those are facts that very seldom come out even though you try to bring them out, it is always the negative value, you know the fellow with the big figure or something who grabs the headlines.

Very few people take time to do research and look into the facts behind the scenes, (inaudible) but also, you mentioned something there, if people above and beyond the values of a denominational education; you know people looking at dollars and cents, if there is no extra cost type of thing, people may sort of accept it but I think a lot of people, when you do polls, you know polls show x number of Newfoundlanders are against the denominational system of education. The question should be asked why, or x number are for it why, type of thing. I would say that many who would be against it, even though there might be all kinds of reasons why they might be against it, maybe all kinds of good legitimate reasons, but a lot of them, I would think, would answer, 'it is too costly.' In fact I remember one poll that was done right after the Newfoundland Teachers Association, of all groups, came out and said it cost $77 million or something. When they were asked where they got the figures, they said, 'well it is a guess.'

AN HON. MEMBER: A guess!

MR. CHAIRMAN: That is factual. But the other thing is it is a different system of education and perhaps there is a price you have to pay for it. Now how great a price you can afford to pay for it is one thing, but I remember using the phrase before, we teach people how to make a living in our schools, young people, but we also have to teach them or educate them in the way of life and teach them how to live, and the value to society there in relation to an all around education. I do not know whether you can measure that in dollars and cents, and I think that is extremely important. I am not trying to take your place, Pastor Batstone, at all. I am just talking about - I am not talking about specific religion per se, I am talking about general living in society and character building and getting along with your fellow man, and sharing. You know, many of the problems we face today - we talk about costs: when we look at our budgets and we look at health, if you could look at the health cost as it relates to problems in society, you know, drinking, drugs and all of this kind of stuff, and insurance costs because of accidents and disruptions and municipal costs because of the inability to get along, and the problems that are out there because we are not educated, perhaps, properly in getting along and sharing and all this kind of stuff. I think there is a price you pay for that, and these are the things that people overlook entirely. Education is not just reading, writing and arithmetic, there is a lot more to it. Again, I do not mean to get into a moral discussion, but it is a personal opinion, and I think most people share that opinion if they take the time to look at it.

But anyway, a couple of more pertinent questions. You mentioned this morning $2.5 million debt retirement. In you $27 million that you have for capital construction as such, $22 million will go to capital construction and so much has to be spent on accessibility and so much for improving fire safety and all of that. But $2.5 million for debt retirement, and I am quite familiar with it as you know, but for the sake of just getting it on record, the reason that is used for capital debts, I believe that certain boards over the years have run up heavy debt loads because they needed schools and had to borrow money to build the schools. There was a time when the Government did not finance 100 per cent of school construction and boards had to put in ten per cent on their own. Many of them borrowed money and had no way of replacing that money and built up a capital debt to the point where their current account is being used up to service that debt. This money, I understand, is used sort of, the harder you are hit type of thing, the more you get. Am I correct there Mr. Norman?

MR. NORMAN: Yes, Mr. Chairman, again just as we allocate the capital expenditure on the basis of need, when Government identified in the Budget subhead, $2.5 million for capital debt retirement, that as well was allocated on the basis of need. And some school boards had devised a system whereby you could identify the percentage of their budget that was going to service the debt, and you could also identify the percentage of their total debt as in comparison to their income. And so you could work out all of the various percentages and we saw that several of our boards were very, very dangerously high in terms of the percentage of their income that was going to service the debt and the total percentage of their debt in relationship to the income that they had. So we identified in co-operation with the Department of Education the various statistics related to the financial statements, and again this particular funding was earmarked on the basis of need.

MR. CHAIRMAN: One other thing you mentioned this morning, you talked some new committees, Government is having input into locations on schools. Now, over the years Government basically has had sort of a hands off in relation to school construction, that is direct involvement. Because of the new committees or whatever, are you saying that Government is more directly involved in telling you where to build schools or whatever, because that was looked upon as always being very dangerous?

DR. NORMAN: Mr. Chairman, there is no evidence to suggest that there is a more direct hands-on approach as it were, but the councils have always worked co-operatively with the Department of Education. I made particular reference this morning to the committee that is looking at the long-term capital plan. We are involved with, not only the Department of Education, but several other Government departments because it is also our firm belief, and I think part of the policy of each council, that there should be extensive community use of schools and also that the schools should have access to the various facilities that may be available in the community, whether it is a ball park or a swimming pool, or what have you. The intention there is to better utilize the school facilities for community use and also vice versa. At the present time the intention of this particular committee is to devise an elaborate needs assessment of the entire Province that would not only show the current needs but also what our needs might be five years, ten years, or fifteen years down the road. That of course should not in any way jeopardize the legislative rights of the Denominational Education Councils to ultimately determine where the capital funds will be allocated.

MR. CHAIRMAN: I think that is extremely important because we have always said that the denominational education systems decide, based upon priority basis, where monies go for school construction. It is important because if governments, and I said this within Government as well, if governments decided where schools will be built undoubtedly come election year it will always be the tendency to build it in Bonavista South somewhere. It is factual and it is dangerous when it comes to something like education. I am glad to see the system we have and I one hundred per cent agree with the involvement of the school in the community use of the school. How often have we seen the Lions Club building a playground in the middle of the harbour, the Kinsmen Club building a swimming pool on the south side, the Rotary Group building a soccer pitch on the north side, and the school down at the far end with nothing around it? Once the school closes at three o'clock the doors are locked and somebody is trying to build a gym somewhere else in the harbour. We cannot afford it, especially in the smaller rural communities. The school boards have to be knocked over the knuckles here because too many of them have the attitude that everybody is a hoodlum, the door is closed and nobody is allowed in. I saw schools, in fact I operated one, where we had it open seven days and seven nights a week if somebody wanted it. That is what it is there for. People are responsible if they are given a chance to be responsible. You have a beautiful gym in a community and it is closed all Summer and closed on weekends and closed in the nighttime and the kids are out looking for something to do. It does not make sense. Then you have a big multi-million dollar, or thousand dollar, well, I will not say multi-million, well in some cases, softball field four miles away from the school and when the kids get out of school they have no place to play ball whereas if it had been built adjacent to the school everybody could use it. These things have to be brought together. Leadership is so important here and I think perhaps the school being the centre of the community that is where leadership should come from, from the educational people, and that has not happened at all in most cases out around. I am certainly glad to hear that move is underway formally. The final question or comment I have I think that perturbs me a little bit is sometimes in the allocation, and I will deal more directly with this when we have the missing link here, the allocating of funds for schools I sometimes think it depends upon the board. If you are a big powerful board with good (Inaudible) with lots of good lobbyists you seem always to do a bit better than the poor little board out around, you know the amount of funding provided, the size of your lab, the size of your gym, there never seems to be a real argument, whereas the poor fellow out around does not seem to fair so well. Is that considered by the DEC? Maybe the difference was made up because the larger boards have their own borrowing power and can make up the difference. Where do we stand here? I can give you examples where there are severe differences in the amounts of money allocated. I am talking about the same number of students now, we are not talking about one hundred here and a thousand there, I am talking about 600 and 600 type of thing. Yet, the amounts offered the structure itself, the structures are different, why?

DR. NORMAN: Mr. Chairman, I can obviously only speak for the Integrated Education Council but we are in the process now of building a significantly sized high school for the Bonavista - Catalina area and that particular school will probably cost somewhere between $6 million and $7 million which is on a par, scale wise, taking inflation into consideration with the cost of the regional high school we built in Mount Pearl a few years ago, and Conception Bay South a couple of years after that, we would have to say that we really do not find any significant difference whatsoever between the schools and the various geographic areas of the Province. They are built according to the school planning manual. They are always costed on the basis of the locale which they are in. As a matter of fact, you generally find that if you are building something in a more isolated area that you may have to allow for additional funding because of the transportation costs.

MR. CHAIRMAN: Nain for instance.

DR. NORMAN: We will all remember Nain.

I would also like to say, Mr. Chairman, in response to that, since the small school study report came in one of the recommendations in that particular report was that special resources should be applied to small rural areas where the small schools were absolutely essential, and that no longer should we build a few classrooms and an administrative office but rather that particular school should have some recreational facilities, some practical arts, a distance education room, a computer room and basically I am starting to describe the school that we just opened down in Francois on the South Coast. We opened one last June like that up in St. Lewis on the Labrador Coast, we are now going to tenders for a similar facility in Red Bay on the Labrador Coast. We have plans for a facility in Makkovik.

So, I would say contrary to the fact that there may be some impression that urban areas get some special treatment, we tend to try and meet the needs of students all across the Province. It seems to me that in the small rural areas we have to go the extra step sometimes to be able to ensure that the school can still offer the programme offerings that these students should have access to. It is not always possible to have the same size physical education facility because you have to tailor certain aspects of the school to the enrolments and you are not going to put the same size gym in a student population of 100 that you would for 300 or 600. So, obviously there are differences based on size because there is some scale to that kind of facility. But it is our objective to ensure that all students across the Province have access to the basic educational programming and able to avail of many of the specialists services and programmes that are now in the curriculum.

MR. CHAIRMAN: But you said you are speaking for the Integrated group.

DR. NORMAN: Certainly, in that capacity because I am involved and for the benefit of some people, we have on staff an architectural coordinator who works directly with all of the school boards in approving these plans.

The reason why I cannot speak for another council is because we are not involved in approving any of the facilities for either the Catholic Council or the Pentecostal Council. So, I could only speak directly to the ones for which we have jurisdiction.

PASTOR BATSTONE: Mr. Chairman, I can speak for the Pentecostal Council but, as you know, we have the most consolidated system in the Province. We may qualify for three boards on the basis of the present regulations and enrolment. We have one board, so there is no competition amongst boards for funds. All of our capital funding is directed through our board and the priorities of the school board basically become the priorities of the council.

MR. CHAIRMAN: We will have to take this one up at a later date.

Mr. Gover.

MR. GOVER: You say that basically every board submits a five-year plan and there is a long-term capital planning committee that I believe you mentioned. What, in the councils' opinion, is the amount required over the next five years for school construction, in the councils' opinion now? Or to put it another way, what, in the councils' opinion, is the amount of money required to bring every school in the Province up to an acceptable standard? Would you have any idea what those figures would be?

DR. NORMAN: Mr. Chairman, if we were to put that particular figure, I guess, in the ballpark, as it were, our estimate would be in the vicinity of about $150 million. Last January when we received our plans from the Integrated School Boards, the Integrated School Boards alone were in the vicinity of about $100 million. When we compare notes with our other colleagues we find that in total we are thinking about $150 million would be the ballpark figure.

Of course, that does not at all go to meet the ongoing needs that we are going to see by way of maintenance and the upkeep of facilities to ensure that there is no deterioration.

MR. GOVER: But the $150 million is just new school construction?

AN HON. MEMBER: No!

MR. GOVER: What does the $150 million look after?

DR. NORMAN: It would be new school construction, that would be part of it, by way of brand new facilities. In some instances it would be extensions for programmes. There is a fairly extensive list of needs. We still haven't met all of the reorganized high school programming needs by way of, say, schools that would need a music room put on, industrial arts and that kind of thing. It would also involve what we call modernizing school facilities. There are some buildings out there that even though they may be only fifteen years old, because of the significant programme changes over the last decade and a half, they now need to be modernized in order to be able to accommodate the new programmes and resource based teaching and so on. So, modernization of the older facilities would also be part of that.

Then you get other factors like meeting the changes in the building codes that have occurred since these schools were constructed, accessibility codes, fire safety codes, and we are getting now some labour standards coming to bear on it, like recycling of air and so on. So the building codes are changing so continuously that that is another factor.

MR. GOVER: But at the present moment, if the Government was to vote the DECs $150 million then that would bring all the schools in the Province up to an acceptable standard in the council's opinion?

DR. NORMAN: Yes.

MR. GOVER: But you would need the $150 million in one year?

DR. NORMAN: Yes.

MR. GOVER: Well spread out is that $30 million over five years or is that the same bang as $150 million in one year?

MR. CHAIRMAN: If I could give an example there, back about seven or eight years ago, if I remember correctly, a rough estimate to do exactly the same thing, to bring us into utopia, you know where all the schools will be built and repairs done, at that time it was estimated it would cost roughly $120 million. That is about eight years ago. Since that time there has been approximately $200 million which has gone into the system and now we are $150 million behind, which shows that if you spread it over even five years, five years from now the changes and so on would throw a whole new -accessibility alone has cost a mint and the reorganized high school a double mint in relation to the provision of something beyond the little box classroom. Fire safety is something else and then you are getting into the expanding programmes.

Of course, people a few years ago were quite satisfied as long as the windows did not leak and there was a potbellied stove down there and lots of wood, they were comfortable. Now, if the school is getting dusty you almost have to have a new school. So standards are changing so fast and requirements are changing so fast, it is going to be rough to keep up.

Pastor.

PASTOR BATSTONE: Mr. Chairman, also legislation indicates that a capital grant is for the building erection and also the equipping of schools, and when we consider that we are really moving into the computer age and we must think about this as education, etcetera; industrial arts moving more towards a technical aspect, we have to equip our schools with computers and that kind of hardware, and there is going to be another cost that will increase the monies needed to bring our schools up to today's standards.

MR. CHAIRMAN: One question following up on that from the three people who are heavily involved and experienced in education; when we talk about all this advancement and moving into the computer age and the industrial arts and the music rooms and the broad classroom, are we changing our system to a point where we are getting away from the essentials in education, you know the solid basis upon which you can build later on?

There are many arguments now that the students coming out have a smattering of everything and very little of anything, and that they are very weak in the fundamentals; do you see that as perhaps becoming a problem?

DR. POPE: Well there is no doubt in terms of your latter point. Some people in literature today, would even use the word abuse in terms of what is expected of the schools, schools are asked to do so many, many, many things, but those of us in education, sir, would still keep that essential function before us in terms of what the overall mission of the school is, namely that of student achievement, and particular as that achievement applies in the academic area, we would clearly see these kinds of things, the various technologies and resources, especially now with the resource base approach, as a means to helping to achieve these goals and we would be certainly abusing things ourselves if these things became in themselves ends, but they must still fit in what the overall mission of the school is, which clearly is in the area of helping children with academics.

Now we know academics mean more than the traditional three Rs these days, but nevertheless, the traditional three Rs are still of what is most important and that is how we would see it, these would be assisting. If you go into classrooms today, Mr. Chairman, we often smile and say, the least thing you find in there is children because there is so much resources around, local resources that teachers have brought in that assist, and the room is crowded with things that the teachers use you see.

We mentioned earlier, Dr. Norman for example, in this report here we listed terms of (inaudible) from the 122 at one time, we listed ten trends and these are clearly impacting; I mean the small school at Francois, I guess was about $850,000, Dr. Norman, was it not, for forty odd children? Now that would have been unheard of, of course a few years ago, but so would the school in Francois, I mean it would have been unthought of, it there is such a word, for Francois and in the same way St. Lewis, in the same way Red Bay, Dr. Norman.

The trends go from day care to accessibility to now we teach the Junior High School Programme to now the business of Health and Safety; one of our boards for example had to put $100,000 into one of its schools because of the health factors associated where the air was not circulating.

Now there was a time you associated that with industry, but now of course as the testing mechanisms get more and more sophisticated, we believe that, that will indeed be found to be the case, that you know circulations of air in these buildings is not what it ought to be, so all that is helping what was 122 and the figure does not seem to go down, sir; the figure does not seem to go down at all.

PASTOR BATSTONE: With respect to your comment on technology in education, I see one of the great challenges facing us in this Province is to make small schools effective. We are a Province of small schools now; we will always be a Province of small schools and we cannot make these schools effective by making them larger, it is impossible, so I believe we should be on the cutting edge really of small school effectiveness and I believe that technology is one of the tools that can be used in bringing programmes to small rural Newfoundland without the disruption of taking them from their community to another community or excessive busing, etcetera. We need really to be on the cutting edge of small school effectiveness in this Province, and I believe technology is, indeed, one of the tools that we can use in that regard. Other jurisdictions in America and across the world have small schools. Some are as small as two to four students in the school, but they have used computer technology distance education and computer software, educational software to great advantage to enhance the educational experience in those small schools. And I believe we should be on the cutting edge of making small schools effective.

MR. CHAIRMAN: You are preaching to the converted from the small school study to our distance education programmes and so on (inaudible) I still maintain that the key component in education, the one, I think, that probably concerns me more today than ever before is the teacher in the classroom. I think sometimes we get carried away so much talking about technology and advancements and enhancements and everything else, I think we should use these as an incentive to improve, not as a substitution for our basics, you know, an enhancement rather than a substitution. But the person who really manipulates that, the hands on person, we are dealing with children mainly, and regardless of how efficient that machine is behind us and what it can do when you push a button, the most effective bond with what that child learns is going to be caused by the individual who is involved. Really I think maybe that area is an area which we are sort of taking for granted, and that might be (inaudible).

I do not know what this has to do with the Auditor General, but it has certainly been a worthwhile discussion, maybe the type that should be held more often because I am sure that there are things that came out here today that perhaps some people did not realize perhaps before. The auditor has expressed, and I think has gotten across the point that even though funding is given, and we are aware from reporting and from experience and everything else that the dollars are well spent, the weakness is always there unless there are some outside checks and balances, and that is something that can be looked at as a mechanism. Perhaps it is already in place. It is a matter of making sure the checks and balances are followed through. But, you know, you can check and balance dollars and books, it is the value, I guess, of the education that we get and how it is delivered that it is going to be very hard to get a handle on. Perhaps, you know, our discussions will help.

Mr. Drover, do you have any final comments?

MR. DROVER: Mr. Chairman, just to conclude the four items that were mentioned in the report and to point out to the committee, as I pointed out earlier this morning, that there is presently a review under way involving a number of school boards. We will be reporting on each one of these items in the 1991 annual report which we will anticipate around and about December or January if the House is in session at that time.

If I might just repeat, the Province has established a denominational education system. Within the system the denominational education councils have the sole responsibility for planning and approval of capital projects. There appears to be no overall plan developed by the Department of Education, now we are saying that that will be a formally documented plan, and the executive secretary of each council is responsible for approving the plan so, however, the department is not directly involved. We are looking for documentation as to that involvement. We recognize as a result of the testimony given this morning that the various committees that exist, and the exchange of information and advice throughout the process, well this would be a formalization of that.

An important one to our mind, and it relates not only to school boards, denominational education councils and to the hospitals and municipalities, I think it is one for this group to keep in mind, an external audit is not required by legislation. We feel that one should be required by legislation. It is required under the Schools Act for each school board. Although each council, we do say, does submit to the Department of Education audited financial statements. So while it is not required, it is being provided. The auditor's reports that are attached to these, as I pointed out this morning, are under the standard format which does not give assurance, this is important to us, that the grants from the Province were spent in compliance with all the legislation. What is being developed within the Province of Newfoundland and within Government right now is a process, and we are to a certain extent involved in making recommendations particularly relating to the health care sector, dealing with trying to get the external auditors or whatever to at least provide some sort of assurance similar to that which is provided dealing with municipalities and with school tax authorities. There is a separate report to the Minister, and certainly those that have been involved in municipalities would recognize the report that goes to the Minister in that area.

Management letters - this is another one that is important to us - resulting from external audit processes are not received by the Department of Education. Therefore the Government officials in the Department are not aware of any weaknesses in management financial controls. We feel that if the Province is providing the funding then the Province should receive the detailed management letter comments. Whether it be from the Denominational Educational Councils or whether it be from the school boards, whether it be from a university or whatever, they should become aware of the auditors' concerns. And finally the operating grants are based on budgets submitted by the councils but no comparison is made by the Department. That is a criticism of the action taken by the Department between the budget and actual expenses of the councils. That is telling the Department that they should expand their role in reviewing the work of the councils.

That summarizes our view today and I guess it all goes back to, you know, accountability, financial management and control and reporting, which we have explained many times before the Committee. And, Mr. Chairman, certainly I have as yourself learned a fair bit in listening to the gentlemen today. Thank you.

MR. CHAIRMAN: Okay, Mr. Drover.

Dr. Norman.

DR. NORMAN: Just to raise one point to the auditor. Section 15 of The Department of Education Act, 1989, subsection 9 of Section 15, provides that each education council shall not later than the 30th day of September in each year prepare and submit to the Minister a financial statement on a form prescribed by the Minister setting forth the assets and liabilities of the education council, receipts and expenditures. So we are required by legislation to submit an annual report.

MR. CHAIRMAN: Mr. Drover.

MR. DROVER: Yes, Mr. Chairman, that is quite right. They are required to submit a financial statement, but that does not - there is another section that generally follows in most legislation that says this financial statement as referred to above shall be audited by a firm of independent accountants or a public accounting firm who shall render to the Minister the opinion (inaudible).

MR. CHAIRMAN: It is something like a budget. The Minister need not necessarily accept it, right?

Mr. Norman, do you want to conclude?

DR. NORMAN: Mr. Chairman, I just want to say that we are pleased to have the opportunity to share with you today and to share with your colleges. We feel that even though some of the processes and procedures and reporting that we are involved in with the Department of Education may not formalize some of the concerns of the Auditor General, certainly all of the information that is at our disposal is also at the disposal of the Department of Education, and we are certainly willing to co-operate fully with the Department in that regard and if there are some particular mechanisms that need to be put in place then we would pledge our co-operation to ensure that is indeed done. So we want to thank you for the opportunity to share with you and I appreciate that chance.

MR. CHAIRMAN: Thank you very much. And for those of you who are available we invite you to join us at 10:00 o'clock tomorrow morning when we will be talking to the School Trustees. And this will be basically the receivers of the goodies that you pass along, and are responsible at the local level, and as was pointed out this morning really boards decide which schools and where and which ones to close and all of these things. So it should be an interesting informative morning.

Perhaps both sets of meetings are really a prelude to next year after the auditor does specific audits on school boards specifically, where you can get into the different problems that exist and question the procedures that are used. So basically we are getting a general look at how the agencies operate so that we can get into the specifics then a little later on, because you are looking at a budget that is the second largest in the Province, one that is usually questioned, and I think it is only right that we make sure that we get the best value for every dollar spent.

Thank you very much and I will see most of your tomorrow.

This meeting now stands adjourned.