[The following meeting of the Public Accounts Committee was not recorded by Hansard. Due to the poor quality of the recorded tapes, transcribers and editors met with much difficulty in deciphering portions of the meeting.]

The Committee met at 10:35 a.m.

MR. CHAIRMAN: Order, please!

If the press wants to take pictures, silent pictures, that is fine. We follow basically the same rules here as in the House of Assembly.

I want to welcome everybody here, as well the members of the Committee and the newly appointed Vice-Chairman, Mr. Tom Murphy, MHA for St. John's South; Mr. Garfield Warren, of course is no stranger, the MHA for Torngat Mountains; Mr. Dumaresque, who is on the way from coastal Labrador and will be here before lunch I understand. Other members of the committee for various reasons, unfortunately, were not able to attend.

I would like to welcome the Auditor General, Elizabeth Marshall and to make mention of the fact that this is her first time appearing before the Public Accounts Committee in her new role as the newly appointed Auditor General. On behalf of the Committee I would like to extend our congratulations to you on your appointment, to welcome you to the Committee and to say particularly for the benefit of the people who are here from outside, that the Auditor General and the Public Accounts Committee work very closely together. We have had tremendous support from the Auditor General's Department. The department of course provides a lot of expertise and advice to us who are generally laymen when it comes to heavy financial matters, particularly auditing and accounting methods and so forth, so we rely quite heavily on the advice of the Auditor General's Department as well as of course, the officials from various government departments who come before us. So I would like to welcome Ms. Marshall and Mr. Drover, who has been with this department for a long time and is no stranger to Public Account Committee meetings.

For the benefit of the witnesses here, I would like to say that this is not a trial; this is a hearing to gather information to hear your opinions on issues that may be of concern to the Committee and to get your suggestions as to how things could be improved, so we are here basically to gather information. If there is information that you do not have in your head or at your fingertips, you are certainly at liberty to say so and we will accept written information for every documentation that may be required later on.

Perhaps I could ask Mr. Condon, who is the chief financial director responsible for the Labrador Stores and whom I know well, to introduce his staff, the people who are with him and to speak slowly so that we get a complete record of this. May I also say, before I go any further that we have a sound system here - the microphones are on at all times so be careful of talking to one another or anything. Nearer the microphone; try to keep rattling of papers and glass and things on your desks to a minimum because all the microphones are on and everything is being recorded and will be transcribed by the Hansard staff later on, and they do not have the advantage they have in the House of Assembly where only the mike of the person who is speaking is live.

Also, for the benefit of the Hansard staff in St. John's who will be transcribing, it is going to be important that we identify the speakers, so, either you identify yourselves before you speak or I will try to remember to identify you so that the people in St. John's know who is speaking when you start to speak. With that Brian, perhaps you would like to introduce your staff.

MR. CONDON: Okay, I will introduce them all now; my people will stand as I introduce them. First we have Ben Ludlow, who is our manager or supervisor of operations for the coast. Ben operates out of Goose Bay and co-ordinates all operations in relation to our branches. Next to him is Antone Nochasak, manager of our Nain store; Ray Darby, manager of our Hopedale store; Guy Prichard, manager of the Postville store; Wally Anderson, who is one of our buyers and operates out of Goose Bay. Wally does all the buying in the local area and co-ordinates shipments. Victor Lyall, manages the Davis Inlet store and Snowden Parsons is the manager of the Makkovik store.

MR. CHAIRMAN: We have to officially swear in the witnesses, you are giving information under oath. Mr. Dick Porter, who is acting clerk today will undertake that.

Elizabeth Marshall

Wally Anderson

Guy Prichard

Ray Darby

Antone Nockasak

Ben Ludlow

Brian Condon

MR. CHAIRMAN: Thank you very much.

Having dispensed with that, perhaps we can move on to invite the Auditor General, if she would like, to make some opening remarks in introducing the topic at hand.

MS. ELIZABETH MARSHALL: Thank you, Mr. Chairman.

We received the documents from the research staff of our Public Accounts Committee; basically the internal audit report and documentation (inaudible).

I would like to indicate though, for the benefit of the Public Accounts Committee, that the last audit of the retail stores was carried out by the office of the Auditor General in March of 1984, and I would just like to summarize what the recommendations were in that review, because basically the recommendations contained in that review are very similar to the recommendations made by both internal audit and (inaudible), and I am just summarizing now.

For the year ended the 31 of March 1984 there were major weaknesses in the system of financial management and accounting control within these stores, and basically the recommendations of the Auditor General at that time were: The first one was that management reporting and financial control systems should be implemented to provide management with essential information necessary for decision making and financial control.

The second recommendation was that a senior financial official should be appointed to implement the management reporting and financial control system and other recommendations.

The third recommendation was that an operations manual should be developed to help provide an adequate system of financial control.

The fourth recommendation was that the store managers should be trained in the retail environment to provide them with the management tools and techniques necessary to operate.

Number five was that retail merchandise should be purchased on a timely and economic basis.

I think, Mr. Chairman, that many of those recommendations still prevail (inaudible). I believe some of the recommendations were implemented and we look forward to the discussion of how the stores (inaudible).

MR. CHAIRMAN: Thank you very much.

I should say to the witnesses, our purpose in being here is because of some of the items addressed by the Auditor General, and some of the concerns about financial controls in stores, particularly from a taxpayer's point of view and from the House of Assembly's point of view, the cost to taxpayers of operating the stores. But the Committee and the House is fully aware of the situations, and that they are very unique in coastal Labrador. We are not talking downtown St. John's; we are talking coastal Labrador. The conditions are very different.

Speaking for myself - and I know Mr. Warren of course is very familiar with the stores - we had hoped, in fact, to get out and visit some of the stores, but time and expense precluded that. So we are looking for you to give us, in your words, the problems with which you are faced and how you may see that some of the concerns and recommendations made in the various reports could be implemented - how soon the controls can be improved and how we, as a Committee perhaps, can move forward on that.

Mr. Condon, would you like to make any opening remarks on behalf of the department?

MR. BRIAN CONDON: Yes, Mr. Chairman.

I guess last year we had the internal audit group go in and look at the operations at Makkovik to give us some idea of where we could improve the efficiency of the operation; and Makkovik's store being similar to all the other stores, that we could use the results of that report to implement suggested changes for the other operations.

While the Auditor General mentioned that some of the recommendations in their 1984 report are similar to the recommendations in the internal audit report - and I am sure they are, in a lot of cases - we did put in an operations manual, and the internal audit people said: Look, the operations manual is fine but there are a lot of sections which are not appropriate for a retail operation. I think the operations manual in itself was adopted from some manual used by the northern co-ops or the northern stores - some of those groups. I guess if we went in again next year I'm sure there'd be other improvements we could make to the system to operate the system more efficiently.

Over the past two or three years we've taken a hard look at our operating expenses, especially our controllable expenses. Expenses that we can do something about - hydro charges and salaries, expenses. We've looked in particular at our inventory levels. In past years we've been carrying high inventories which resulted in write-offs of a substantial amount, especially of frozen foods at year-end, because of freezer burn, everything else. Over the past year or so we've reduced our inventory levels quite substantially. That has been I guess assisted to a certain extent by a subsidy that's been recently put in place through Canada Post and the Department of Indian and Northern Affairs, which makes it more economical now in some cases to fly goods in and out of Goose Bay as opposed to bringing it in during the summer and stockpiling it until it's used during the year.

In tobacco products in particular, in previous years we've built up inventories of half a million dollars starting in November. Now we can send in tobacco products on an as needed basis, so we don't tie up that much in tobacco products any more. The same way with meat products, even though we have them in heavy vacuum-sealed packs, if these are in the freezer for five or six months, they will deteriorate. So now hopefully this year we're going to look at flying more and more of our meat products in on a regular basis and just try to cut down our inventory levels where we can.

Also, with respect to the inventory and certainly controls, it's common knowledge that all retail operations have a problem with shrinkage or pilferage or whatever you want to call it. We approached Treasury Board recently to implement a point of sale computerized system, which will certainly help us pinpoint where our losses will be. That was one of the recommendations that came out in the internal audit report also. We're hoping that this year we'll put in a pilot project in one of these stores to see how it works in getting the bugs out of the system. Those systems now are quite cheap. We could pay for this system in all the stores in a couple of years by reducing spoilage and reducing losses in our inventories and keeping them at minimum levels.

MR. CHAIRMAN: Excuse me, can you speak up a little louder? The acoustics in this room are not great.

MR. CONDON: Maybe I'm not close enough.

MR. CHAIRMAN: I was just going to say the same thing. My ears are not as keen as they used to be.

MR. CONDON: I was talking about the inventory control system and the point of sale system. This is computerized and you will see a similar system in department stores where they have scanners, and in that system itself you can put in a minimum reorder plan. If you want your inventory system to be twigged when you get down to twenty-five sacks of flour, or something like that, that system will tell you: look, you've got to order now. I think if we can get that on stream, get the bugs out of it and get that pilot project under way, it should certainly reduce our inventory levels and provide for a better and more efficient operation.

These are just some of the measures. Also, along those lines, it costs us now - each store - around $2,000 a month in hydro charges. We can take a couple of freezers out of use, lock them, and that'll reduce our operating costs also. On the other levels, in the salaries area, in some cases we may be overstaffed. We're looking at where people retire or leave, we're seriously looking at whether we need to replace people in those cases. We're looking at some of our temporary staff, because most conventional retail stores have a lot of temporary people. With our operation they're all permanent. That's one of the things with government.

With the ordering system over the past number of years, I guess the government purchasing agency has been more flexible than usual. If we have an opportunity to buy items at a discount price they'll say: you let us know and go ahead and buy it. That's not a problem. The ordering system takes a fair bit of time.

In summary, we're working at it and we've shown some results over the past year or so, and we've been able to reduce our expenditures by $300,000 or $400,000 by cutting down on the inventory levels and having a closer look at our controllable costs. We're proceeding in that direction. Hopefully over the next year or two we can demonstrate that the stores at least can break even, and that's about all we want, just to ensure that the prices are comparable with the Goose Bay operations and that the taxpayers do not have to subsidize the operations. I think the stores, in most cases, can operate as viable entities.

MR. CHAIRMAN: Thank you, Mr. Condon, perhaps now we will move on to the Committee members to direct questions at the witnesses. Mr. Murphy would you like to begin?

MR. MURPHY: Yes thank you, Mr. Chairman.

Some of the remarks that Mr. Condon made about some of the old systems associated with reordering and control are very interesting, I had a chance to peruse the internal audit document and I would imagine, from talking to the store managers, that you must find yourselves in the winter months with inventories down on some necessary goods and services that you would provide to a community. Of course, the buyers in St. John's would have the ability to know and understand what the coast needs. I would have thought there would be a better liaison to ensure that non-perishable items would be able to get to the coast of Labrador in the fall of the year or at this time of the year, would be in inventory and you would not have to fly them in.

I see all kinds of little things but I would suggest that, picking up on what Mr. Condon had to say, there is obviously a necessity for these stores to be alive and well if they are going to supply the people. The other question of course, comes to mind in reading the Touche Report as to how to do it and how to do it more effectively and efficiently so the costs are reduced to protect the taxpayers. I noticed a statement from Newfoundland and Labrador Hydro showing an outstanding balance of $18,636.97 which is over 365 days overdue. If you look at those figures, you might ask the question: why should we pay this bill if they have not paid theirs? We are going to get into that later I am sure in more detail.

The only thing I would like to do is to ask one of the store managers, perhaps Mr. Lyall from Davis Inlet, just for my sake and I am sure the Committee's sake and everybody present, to talk from your perspective as to what the difficulties are, the day to day difficulties in operating the store, and where problems come to light with you. We would get better knowledge from you because you are living and working there. Perhaps in a short statement you could tell us what the difficulties are and what your thoughts are on solving them.

MR. LYALL: I do not know what to say.

MR. CHAIRMAN: Perhaps there are more specific questions you could ask him.

MR. MURPHY: I noticed that the internal audit brings out security problems and different situations with cash flow which need to be addressed, monies going through the mails et cetera. Do you have any suggestions as to how you would improve the security in your store? Do you have much pilferage, do you know?

MR. LYALL: (Inaudible).

MR. MURPHY: Are you satisfied yourself that the locking procedure of the store and the system within the store is adequate?

MR. LYALL: (Inaudible).

MR. MURPHY: Yes, so at any given time you would have sometimes I suppose twenty-five to thirty people in the store?

MR. LYALL: Oh yes.

MR. MURPHY: That could happen and you would have a staff on the floor of probably two or three?

MR. LYALL: Yes, sometimes one.

MR. MURPHY: Sometime one, so it would be almost impossible to watch people if they were inclined to take something and it would be very difficult for you to secure your goods.

MR. LYALL: (Inaudible).

MR. CHAIRMAN: Mr. Lyall would you come a little closer to your microphone, your voice is not being picked up?

MR. MURPHY: I notice in the internal audit the system that was put in place is down. I think it is down in most of the stores but they suggested that this operation be put back in. Do you think you could tighten it up, that you could tighten up the security and tighten up what goes on in the store without a great deal of expense?

MR. LYALL: I think so. (Inaudible).

MR. MURPHY: That would make your task obviously more difficult if you have people off sick and so on. So you do not have any part-time capability under the structure that is there now? Perhaps one of the other store managers might like to comment from the standpoint of security or some other area? It seems to be highlighted that the security situation is not what it should be. At the end of the year when you do inventory control and you look at the amount of goods that have been paid for and the amount of goods that have actually been sold I guess it gives you some idea as to what kind of loss you have due to people removing products without paying for them. Mr. Condon overall is that a large amount?

MR. CONDON: I am just trying to recall the way the stores are set up. I think there is a turnstile at the entrance to most of the stores. Is that correct?

AN HON. MEMBER: There was one.

MR. CONDON: There was one. I do not see any large amount of goods going out because there is only probably the manager and the assistant manager who may have a key to the store. There is only one entrance used and people go through the turnstile, if they are in operation. I do not see a lot of pilferage going on but certainly as Vic indicated if you have people off and there is only one person on the floor you could have a problem. On Friday afternoon you have a concentration of people and I guess there is certainly an opportunity for people to pilfer. It is probably not a major problem but I am sure as with most retail operations it is done and there is obviously things that we can do to correct it. If we can pinpoint what is being done then we can implement some measures to control that.

For example if you have cigarettes out in the open where people can gain access to them it is quite easy to put a package in your pocket. Cigarettes are very expensive so in most cases we try to keep the cigarettes inside the counter where the clerk is.

When they mentioned security in the report they talked about putting chain locks on the doors. Now all these heavy aluminium doors have keys fitted into them but in most cases they never worked very well so in a lot of cases we had to change them around anyway. For example in the Nain store I think you could put the bolt across but you could shake it and the bolt would fall open. In a lot of cases we had to revert to putting chains on the doors for additional security. There has been a kind of security system in the stores that monitors any movement and is supposed to set off an alarm, but in some of the stores those are not operating efficiently so we have some of the technical people from Goose Bay looking into that now. A gentleman by the name of Sheppard is going up to the area to have a look at the stores' security systems. There are safes in all stores and no cash or anything is left around in the tills or anything like that but we do carry a substantial amount of cash in the safe. This is certainly a major concern, because people could get in and get those things open and take $50,000 or $100,000.

MR. MURPHY: Have you ever had an instance of that happening?

MR. CONDON: No, other than cases where people have gotten into a store and beat up on a safe for an hour or so and then tried to break into the cash registers but there was no cash in them anyway so they didn't get anything. But there have been cases where they got in and just stole some cigarettes. In the case of cash I don't think you can ever have enough control over it. People can get in and access that money but I guess the remoteness of the location may be to our benefit, because in most cases you can't just jump a car or plane and get away.

MR. CHAIRMAN: Perhaps, Mr. Murphy, I could just ask a question on this. Mr. Condon, can you give us an idea of what percentage you might be losing each year? Does your inventory control give you any idea what percentage of loss there may be through various causes?

MR. CONDON: Well you talk about pilferage and shrinkage and deterioration, each year we have to probably write off maybe, I don't know, a couple of per cent, for example in meats that get freezer burn or some of the old stock that's -

MR. CHAIRMAN: I'm talking more about loss through theft or weak controls. Can you give us a handle on that?

MR. CONDON: I would have no idea, to be honest with you. I could say less than 1 per cent -

MR. MURPHY: It's difficult -

MR. CONDON: It's difficult to know. I'm sure there's no wholesale theft going on. There's nothing going out the back doors because the back doors are not open. So if there are people pilfering anything, it's going to obviously have to go out through the front door and they have to pass by the cashiers.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Yes, thank you, Mr. Chairman. Let me move from something negative to something more positive. I noticed in the internal audit that a lot of the safes that are in the stores now, the combinations have been the same for six or seven years and you've turned over a fair number of staff who would know that combination. Perhaps it might be just worthy of note that if you have somebody down there who knows what they're doing they could change them and update them, and what have you. It might avoid trouble.

Leaving that alone, I noticed the Cardex system. I just envisage in my own mind the problems that must cause the store managers. Because if it's not constantly looked after and updated then obviously your inventory is going to suffer and you're going to find yourself in trouble. What kind of a move have you made in that regard?

You made mention, Mr. Condon, of some kind of an updating system, some kind of a computerized system where at the end of the day the cash register would record a coded name or whatever the case may be which would give all the store managers and the buyers a clearer indication as to what has left your warehouse and what you might be getting short on. I think that in 1992 we need to move away from Cardex and get into some kind of a more sophisticated method to ensure that folks have a better opportunity to pick up what they need. Perhaps you might want to address that.

MR. CONDON: This is probably going back a couple of years but we went to Treasury Board at the time with a fairly elaborate plan where we were going to spend $250,000 - that was a lot of money at the time - to put this point of sales systems in all the stores. I guess Treasury Board said: look, maybe that's a bit too rich at this point in time. So it's been deferred. Right now those type of systems are fairly cheap. We could install a system in, say, Hopedale, for example, for $15,000, and that includes all the software, the scanner, and the guy coming up and installing the system and training our people for a couple of weeks.

This is the way we would like to go. You may not be able to determine how much pilferage or anything is going on, but at least with this system you'll determine that if there was supposed to be ten cartons of cigarettes left and you go to your inventory and you count and there's only nine, then you know that there's a problem in that particular area, otherwise you don't. Like I mentioned before, it's hard to gauge how much is going out the back door and how much you're losing in other ways.

It takes a full time employee almost all day to maintain the Cardex system. That's all they do. They take this report and they write down the amount received and the amount going out to the stores from the warehouse. There's supposed to be a balance there. On a monthly basis, the manager would take a number of those cards and go back into the stockroom and say: okay, we're showing 500 bags of sugar on the Cardex system, where are they? Now that's supposed to be spot-checked on a monthly basis. But if the person who's doing the recording misses a few entries here and there, the whole system is thrown out of whack. I think that is probably one of the problems, the system probably could be maintained a little bit better, or maybe monitored a bit better than in the past.

MR. MURPHY: So what I hear you say is, not only would an updated system do well for inventory control and would put a better handle on shortages, but it would also be very beneficial in security.

MR. CONDON: Yes.

MR. MURPHY: Okay. Mr. Chairman, I will have a few more specific questions later on.

MR. CHAIRMAN: Thank you, Mr. Murphy. Mr. Warren, if you would like to ask some questions.

MR. WARREN: Thank you very much, Mr. Chairman. I guess almost everybody knows me since I spent some time working with the stores during the past years.

I would like to ask the managers a couple of questions - probably beginning about April and up to now. Perhaps I will start with Mr. Parsons. I would like to ask each manager a simple question: How often has your cash been checked by somebody outside the depot, before April of this year? And, how many times since you have been a manager has your cash been checked by head office staff or Goose Bay staff?

MR. SNOWDEN PARSONS: In the two-year period that I was manager in Davis Inlet, I would say, Mr. Glen Ludlow, my supervisor, performed a cash check at least six times. However, when I was transferred to Makkovik from March 1991 up until the period in question, as you say, in April, I did not have any cash checks at all - no cash count performed. But in Davis Inlet I had quite a few.

MR. WARREN: Victor?

MR. LYALL: Up 'til when - April?

MR. WARREN: Before April, going back the last three years.

MR. LYALL: In the seventeen months I was there we had it done twice.

MR. WARREN: Twice in seventeen months. Guy?

MR. GUY PRICHARD: I think about twice, yes.

MR. WARREN: Ray?

MR. RAY DARBY: Same.

MR. WARREN: Antone?

AN HON. MEMBER: (Inaudible).

MR. WARREN: Thank you very much. Mr. Chairman, I notice in the internal report that was done here, it shows that there is some lack of control from either head office or from the Goose Bay office. I would ask, probably, Mr. Condon, financial adviser: each store probably has $100,000 cash floating around. Why aren't there more periodic checks done with the cash? I am noticing, too, that the safes are open during most of the day in most of the stores, because if you have to use the combination every five minutes for changing cheques, it is going to be difficult - especially for the manager to be there all the time. So is there some reason why there are not more checks being carried out?

MR. CONDON: Well, I guess, the physical counter: there are cash counts, I guess, whatever you want to call them - that is just one measure of internal control we use over the cash. We have a number of systems in place through which, I guess, we are reasonably sure that there are no problems with our cash. It is counted on a daily basis with the manager and assistant manager, I think, probably signing forms. Am I correct in that, Guy? - on a daily basis. There are weekly reports submitted to our financial officer in St. John's which reconciles the cash to what is supposed to be on hand.

The surprise cash counts - and I guess Mr, Warren is quite aware of it - there are not too many times you can get into any of the communities on a surprise basis. It is very rarely that Ben can go up and nobody knows he is coming. From time to time when he does go up he will do a cash count. I guess, in other cases, if we suspected there may be some problems or we had a request from one of the managers to do a cash count, then we would do them more often. I guess that is essentially what it comes down to.

MR. WARREN: Earlier, in your answer to Mr. Murphy's question, in talking about security at the stores, you indicated that the doors are not that secure. Is this the blame of the managers, or is it the blame of the Goose Bay office, or the blame of the St. John's office?

I understand that one particular store has been waiting for some repairs for seven or eight months. If this is the case, how far can the manager go when making requests for something to be done to improve security? What is there to say this security is being carried out? I guess dollars is probably one of the factors, but when we are talking about a $3,000,000.00 business, $10,000 or $12,000 should be more important to look after than that $3,000,000.00 in seven or eight months. I noticed it has taken that long to get some things done.

MR. CHAIRMAN: Mr. Condon.

MR. CONDON: I can honestly say I am not aware of particular cases. For example, in the Hopedale store, which is a new store that was built only a couple of years ago, we had glass doors put in and I guess it was in the contract to put them in. A few days later the glass was broken out, and I don't know if the door locked properly at that time. We had to end up welding a piece of metal over that particular door and secure it by some other means.

I don't know if Ben has anything else to add to that. I know most of the doors are fancy doors, but they don't function that well. Maybe it is the climate or something. I am not sure. They are all sealed doors or aluminium type doors with bolt locks. In most cases the key doesn't work or the bolt doesn't hold and we end up putting big chains and big padlocks on it. There are outside doors and there are inside doors. I mean most stores do have that. The outside door is probably the one we have the chain on, and the inside door may have a lock.

MR. CHAIRMAN: Mr. Ludlow, do you want to add something to this?

MR. LUDLOW: Yes. We had a security check done, which we do fairly often by the RCMP. The locks that were on the doors, the original locks, were not in their term 'secure locks'. So as we replaced them we replaced them with chains and padlocks which in their opinion were a more secure lock for these doors. They could open these other doors with a knife or credit card, I suppose, or whatever.

MR. CHAIRMAN: These locks and these doors were designed by a consultant?

MR. LUDLOW: Yes.

MR. CHAIRMAN: Were they approved by the Department of Public Works?

MR. LUDLOW: Yes, we obtained whatever approval needed.

MR. CHAIRMAN: Who supervised the construction? Were they a qualified construction company?

MR. LUDLOW: Yes, an engineering firm.

MR. CHAIRMAN: Some of the doors installed -

MR. LUDLOW: Were not supervised. We had to change over the system in the Nain store. We had a problem with that store shortly after it was built.

MR. CHAIRMAN: Did they not meet the specifications with respect to this issue?

MR. LUDLOW: We couldn't go back to the contractor and say you have to upgrade this.

MR. CHAIRMAN: You could have done that with the consultant. I realize this is natural role which (inaudible).

MR. LUDLOW: I did. I contacted the consultant, and we ended up doing the job ourselves.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Mr. Ludlow, it would seem to me we put a great deal of emphasis on doors. When we are talking about security, are the windows just standard windows? If you throw a rock through the window can you enter the store?

MR. LUDLOW: Most of the windows have been eliminated. We have very few glass windows left in any of the stores now.

MR. MURPHY: Okay, so rather than the glass windows you put in place some other more secure material because of the problems you were having. But originally, as the Chair said, everything was up to a standard, and what is obviously taking place is that you had to change a lot of it.

MR. LUDLOW: I had to replace -

MR. MURPHY: And the RCMP tell you that this is as secure as anything else that they know of.

MR. LUDLOW: Well, yes.

MR. MURPHY: So where there was glass what have you put there now? If a window was this type of window originally when the store was built and the glass was broken, would you nail up plywood?

MR. LUDLOW: No, it is being replaced by metal -

MR. MURPHY: So it would be very hard to access the building through old windows and what have you?

MR. LUDLOW: Somebody can usually find a way in.

MR. MURPHY: Yes.

MR. LUDLOW: In Nain just recently there was a cooling system that had a small outlet for the air in the basement, cut through the concrete basement. A couple of days ago we had to take the unit out and put cement in the hole. You would never dream that anyone could get in through it.

These are the things that happen from time to time. We correct them as they are found.

MR. MURPHY: Sure.

MR. CHAIRMAN: Perhaps before we get back to Mr. Warren, because we interrupted his line of questioning, we will just ask maybe any and all of the managers: Do we have any problems now with stores being broken into? Are these measures that you have taken now working? Have you resolved the problem?

MR. LUDLOW: Yes, somewhat. There have been quite a few years when we did not have any break-ins at all, or very seldom - attempts probably, but people not getting in; but this last few months there has been a rash of attempts and actual break-ins - mostly in the Nain facility.

MR. CHAIRMAN: Thank you, Mr. Warren.

I am sorry to have interrupted you.

MR. WARREN: No problem, Mr. Chairman.

I was just wondering if the managers have a copy of this report. There are several questions I would like to ask the various managers, but if they do not have the report it is very difficult for them to respond.

Mr. Condon, maybe after lunch if you could get a copy of this report for the managers, there are several questions that I wish to ask them. It is very difficult for them to respond if they do not have a copy of this.

MR. CHAIRMAN: If I could just interrupt for a second. I should have mentioned earlier, we have a list of outstanding accounts, and I know the members of the committee have some questions. In asking those questions can we omit the names, in order to protect the individuals? Some of these may be in dispute, so we just will not have individuals names used publicly. Refer to the list and ask the question hopefully without using the names.

Mr. Warren.

MR. WARREN: Last year, the end of 1991, all the stores combined lost $553,000. That was the combined loss among all the stores. In Makkovik, the lost was $131,000.

Snowden, can you see any reason why we lost $131,000 in Makkovik? Can you see some ways of reducing that deficit in the coming year? What is going wrong where we have a store in Makkovik that is serving 350 people and we are losing $130,000?

What recommendations can you give to the Public Accounts Committee and the Legislature to see this deficit being reduced?

MR. CHAIRMAN: Mr. Parsons.

MR. PARSONS: There are several reasons for the loss showing on the books for Makkovik last year. Number one was the economic downturn there. We had from March, up until some time in November, people with very little income in the village of Makkovik. That fall the government introduced, as you know, the works program for Makkovik, and people made a few dollars on that then had to wait until sometime in January or February before they even saw UIC. They had no money to spend. We still had our operating costs. Mr. Condon just alluded to the fact that we have six employees in Makkovik, and sales dropped down as low as $40,000 a month, everybody should understand we do not need six employees but with the system the way it is, we had to keep six employees; so that was one reason why we showed a loss there of such magnitude - the operating costs were severe in comparison to the income.

Another reason for the loss in Makkovik was that, when I went to Makkovik, my supervisor, Ben Ludlow, asked me if I could clear up the warehouse on the dock, the old warehouse, this kind of thing - which I did. I also took the responsibility upon myself, without too much authority from my supervisor, to check all inventory in Makkovik. I found in that store, inventory in the food line as much as thirteen years old, so I took it upon my shoulders to get rid of it at a very cheap price or even to take it to the dump to be destroyed.

I think my depreciation and markdowns last year came to a total of somewhere around $50,000 or $60,000. It had to be done. Maybe my head will be put on the block someday for doing something like that but I felt it had to be done, and I think that since I have done this, things have changed in the cost versus income in Makkovik. With the upswing now in the fishery there, God bless, we have some turbot coming in, we have a lot of salmon this year and people are working, I think when you see the report from 1992 to 1993, you will see a vast difference in the loss, if any, in Makkovik. Right now in the Makkovik store, besides fishing gear or hardware which does not go bad, I doubt if you could find a $1,000 worth of old product. I do not have to reduce prices anymore on the product to get rid of it and I do not have to take it and throw it away. We have new product there, people are happy with the new product and they are not asking for reduction in prices, so within this fiscal year you will see a major change in the net income or loss or whatever - a net result in the Makkovik store.

MR. CHAIRMAN: Thank you, Mr. Parsons. Mr. Warren.

MR. WARREN: Victor, do you want to look at Davis Inlet, you lost $108,000. Why?

MR. LYALL: I do not know. I guess an increase in the operating costs (inaudible).

MR. WARREN: Can you see any way of improving it?

MR. LYALL: Not really, no.

MR. WARREN: So you have obviously been operating at a deficit?

MR. LYALL: Yes, until (inaudible).

MR. WARREN: Until what?

MR. LYALL: There are not too many people working now.

MR. WARREN: But if any business is operating at a loss of $100,000 every year they are not going to stay in business very long, so why do you think the taxpayers should keep Davis Inlet going?

AN HON. MEMBER: (Inaudible).

MR. WARREN: Guy Prichard. No, I am sorry. You are Postville. Sorry about that. One hundred and nineteen thousand. You are talking about a population of 220 people and the store losing $119,000 of taxpayers' money.

MR. PRICHARD: Well there wasn't much money around the community.

MR. CHAIRMAN: Could you come closer to the microphone?

MR. WARREN: What I am trying to show, Mr. Chairman, is these are the managers in the stores, these are the guys who are operating those businesses and these are the people who are supposed to have the responsibility of delivering a good service to communities. Therefore, if we are showing a deficit in each community - I am not saying there is anything wrong with the managers but there is something wrong with the system, and I think we as a public accounts committee should try to find out what is wrong with the system. This is why we like for you people to tell us which ways to improve it. Do we have to get rid of the stores, turn them over to some private enterprise, or do taxpayers in the Province of Newfoundland and Labrador have to continue spending a half million dollars a year to keep those stores afloat? This is why I am asking the question.

MR. CHAIRMAN: Mr. Prichard.

MR. PRICHARD: Yes, well we can cut down on our operating costs by not bringing in meat like Mr. Condon explained, we can have so much brought in. Then shut down one of our walk-in freezers. That is one part. Use part-time staff two or three days a week.

MR. WARREN: How many employees do you have?

MR. PRICHARD: I have four.

MR. WARREN: You have four employees in a small store for 200 people. Can you do it with less?

MR. PRICHARD: Two or three days a week we can do it with probably three. Three staff, probably even two.

MR. CHAIRMAN: Obviously you can't go with part-time staff. Most small grocery stores or general stores operate with the majority of part-time staff called in as needed. They have seven in the store on Friday and two on Monday and Tuesday, because you are tied into government hiring practices and procedures and unions I guess. I assume some of these people are members of a union, therefore they don't have that flexibility.

This is obviously one of the problems that has been identified in the various studies. You are not talking apples and apples here, you can't compare the operation of these stores with an operation in downtown St. John's or even in Goose Bay where it is in a commercial competitive sort of position and where business is in control, management is in control of the staff and this sort of thing. We recognize this.

Mr. Condon, you wanted to make a comment.

MR. CONDON: Yes, just one point. Our stores operate from 9:00 to 5:00 Monday to Friday, and most retail stores are open Friday night, Saturday night or whatever.

MR. CHAIRMAN: In a report that came out of meetings in the communities, that was one of the problems identified by the people of the community, that the hours of service were not necessarily appropriate. Is it possible to change that within the restraints of the public -

MR. CONDON: Well we have in some cases, I think, accommodated people. I think Thursday nights now the (inaudible) stores are open. Last year, I think, in Davis Inlet we spoke to the Band Council Chief. He suggested that maybe we should open stores on a Saturday. We gave it some thought and found it wasn't feasible under the circumstances to open the store. But where possible if the Community comes to the stores or comes to the manager and says: We would like to see the store open Friday night. We will do whatever we can to accommodate them.

In some cases if fresh goods come in Friday night we open the store on Saturdays.

MR. CHAIRMAN: You know maybe this is one of the problems. Let me just interrupt for a moment. In reading the report it identifies the fact that in certain communities, not all of them, there is some competition from private enterprise. If they are open on Friday nights and Saturday, maybe it is time for these stores to be operated more on a competitive basis. Maybe we should be closed Wednesdays, Thursdays or whatever day depending on the nature of the community.

MR. CONDON: There is something else I might add too. Over the years, going back probably a few years, the stores were looked on as performing a social good. If someone in the community said: government don't carry cigarettes any more because I am going to open a little store now and I think I could make a few dollars in cigarettes. Well the government would say: that is fine. We won't carry cigarettes any more. Now we don't carry any pop, we don't carry any chips and we don't carry any bars because we are in competition with people in the community. It has gone that way over the years. If someone else came to the manager or to the government and said: Yes, you take a little portion of it. I guess that hurts us over here. We have seen in Makkovik in particular, a private sector eating away at our business. In Makkovik we have maybe 400 or 500 people. There is probably not enough room for three stores. Somebody has to obviously suffer. At one point in time I guess we probably had the monopoly there. Government had the only store, but now we see private enterprise spring up and there is a bit of competition and their prices are as good as ours.

MR. CHAIRMAN: That is a policy matter and not strictly an issue for public accounts other than looking at the efficiency of the stores. Maybe though the department needs to re-examine their policy, why do we not compete? We are trying to be efficient, we are trying to break even at least and not necessarily make a profit. I do not think that is government's mandate. Obviously if we start making a profit then private enterprise should be in there and we should help. We recognize the social role that these stores play in these communities. However there are policy changes that can allow you to be more competitive.

MR. WARREN: Mr. Darby, I think you are celebrating your 25th year as manager of a store.

MR. DARBY: It will be 25 in October.

MR. CHAIRMAN: As manager of a store?

MR. WARREN: Yes.

I think he has been at Davis Inlet twenty-five years. He is an old hand at it and I guess he has seen many changes during all those years and he is probably the better person to ask. The stores have gone from the 60s, to the 70s, to the 80s, to the 90s, have you seen any improvement for customers, or have you seen more frustration for the managers? What is your synopsis of the operations during the last twenty-five years? Do you have more autonomy? Do you control the store or is the store controlled by outside forces?

MR. DARBY: A bit of both Garfield. I think our stores are still back in the 60s. I just do not think we went ahead with the times because of government regulations.

MR. WARREN: Where can you improve your deficit position?

MR. DARBY: Well, there is one thing, we deal with the GPA. A private company can buy the stuff and get five or ten cases free but that is not available to us. There is a lot of stuff like that that we could bring in. Like Mr. Condon said there are various things that are money making items that we do not deal with, pop, candies and stuff like that. We do not touch anything like that. If we had it there I am sure people would shop in the stores more often because right now they have to go to all the private stores around to pick up this stuff.

MR. WARREN: And you still have the same operating costs?

MR. DARBY: Yes.

MR. WARREN: At the bigger store in fact you only lost $60,000 last year. Is it that you did a good job or are there more people shopping at the store in Nain? Or is it that the competition is not so strong? What do you think?

AN HON. MEMBER: (Inaudible).

MR. WARREN: That answers my question. There have been a lot of concerns expressed and maybe my colleague might like to ask more questions.

MR. CHAIRMAN: Thank you, Mr. Warren. Perhaps I'll just ask a couple of questions, from a general point of view, on the operation of the stores, since we've been talking specifically about the stores up until now and want to get into the purchasing and shipping procedures and all that sort of thing perhaps a bit later. Perhaps we'll just stick with the stores for a moment.

Can you tell us, whoever wishes to address this, Mr. Ludlow or any of the managers, what can we do to improve inventory control? We talked about the inefficiencies in the Cardex system, it doesn't seem to be working well. Surely the computerized system Mr. Condon talked about would be an advantage, at least you would know what's going out. Computers only give information depending on what you put into them. There's nothing magical about computers, they simply organize the information, the data, that you give them. Unless we have a system on a regular basis filling the data into a computer you still don't know where you are. What sort of controls can be put in place in addition to just computerized cash registers?

MR. CONDON: Maybe just a quick comment on that. Going back a number of years, suppliers I guess maybe took advantage of the operations, the remoteness of them. At the end of the year they'd ship us up stock that was outdated, expired. Things we never even ordered would end up coming to the stores. I guess the buyers, knowing that this was the last boat of the year, were stuck with it. We've gotten after the suppliers and said: if you ship up anything that we haven't ordered, or ship any dated merchandise, it's going back at your expense.

So we've addressed that end of it. Suppliers right now are treating government as a customer. It's no longer a case of: we can throw the old stuff to the government. Now they view us as a customer and they like our business. We've gotten after some of them and said: look, if you don't follow those lines we'll advise GPA to take you off the tender list altogether, and GPA has cooperated. So the suppliers have kind of fallen in line. We have a number of good suppliers we get most of our stuff from, but we've had problems with some of the others over the years.

So we've talked to the suppliers. We've tried to get them to ship all of their stock in one shipment rather than a case here and a case there, because every piece of stuff that goes on costs us twenty-six dollars. So if you send nine cases it will cost us twenty-six dollars and if you send us one case it will still cost us twenty-six dollars. So we've got them to try to get all their shipments together and send them up at one time. When it gets to the store we have asked the guys who handle the freight to keep their eyes open for any damaged merchandise so we can make a claim against Marine Atlantic or CN Marine. That part of it seems to be working quite well.

We're trying to refine our ordering so we don't run out of the staple items - the flour, the sugar, and things that are heavy. The other stuff, as I mentioned earlier, the meats and the fruits and things like that, we can ship in now to Goose Bay, as we do, by air freight on a weekly basis. These are just a few of the measures we're looking at to improve our level of inventory control. These are outside the Cardex system and the computerized system.

The consultants' report mentioned a number of little things we could do, like putting the things that move regularly closer to the door in the warehouse, and rotating your stock. In the case of milk we've asked our managers to turn the milk over a couple of times a year, because apparently if you leave milk for seven or eight months it all settles down at the bottom and comes out in a little blob.

So little things like that don't cost us a great amount of money, but we can impress on the suppliers and the managers that they can save money in the long run if they do this. These are just some of the measures we're looking at to improve our control over the inventory.

MR. CHAIRMAN: Some of the things Mr. Parsons told us with regard to the Makkovik store and the things he has done since he was transferred there were somewhat refreshing in a sense. Mr. Parsons, what efforts are to be made in other stores to do that sort of thing? Do we have old inventory there, do we know how many tins of beans are going to sell this year? Does that influence your purchasing decisions, or is it on an ad hoc basis as the reports seem to indicate? There does not seem to be a professional approach to knowing how much of a commodity is expected to be sold, obviously there are always some variances but maybe we can estimate them within reason. But if you have had something there for thirteen or fourteen years, somebody has not been looking after the inventory and has not been managing well, I guess that is the only way you can put it. How about the other stores, Mr. Parsons, do you want to comment?

MR. PARSONS: I found that by getting rid of this old product and going back to the stock cards that were there for five or six years, that I was able last year in my summer order and fall order to reduce the requirements for the store as per cards by $175,000. That is a lot of money by which to decrease your order. Now naturally some of that was through consultation with my supervisor regarding meats, we did not bring in as much, we flew meats in from Goose Bay as needed. I also found that in Makkovik, and everybody who has been up there will bear with me on this and understand what I am saying, people tend to make a lot of their own foods and they do not want soups brought in, they do not want beans brought in. I found there was a large supply of beans there that people were not buying. People were not buying canned soups, people were not buying packs of Sloppy Joe mix, people were not buying tons of Shake and Bake, so these things were all taken off my order. As I said, I reduced my order by $175,000, and this year we still had a good supply of food in Makkovik when the boat came.

MR. CHAIRMAN: For the benefit of the committee, Mr. Ludlow or Mr. Anderson may be able to tell us, do the managers order the goods that they need or is there control from the Goose Bay office, the main purchasing office? I understand there is one in Goose Bay and one in St. John's. Is there any body which looks at how many cans of beans were sold in the last five years in each one of the stores and how many are being ordered this year and whether or not they need that many cans of beans? With today's computer technology, Mr. Condon, it would take you about fifteen minutes with a Lotus program to get yourself a graph which would show you very clearly whether you are within reason or not. Is there that kind of an approach?

MR. LUDLOW: Yes, this is being done from both the St. John's office and from the Goose Bay office. Not as much from here because the orders do not come through here, but if the buyers are looking at something in there and they question something, they send it back through here. I contact the managers in some cases and in some cases it is done directly by the buyers, but in some cases it does come through this office and we monitor these. Let us go back to these cards. They use this card system to do their purchasing.

MR. CHAIRMAN: How did we get goods that are fourteen years old in the store then and I assume they are still ordering more?

MR. LUDLOW: No sir -

MR. CHAIRMAN: No, but prior to your changes there.

MR. PARSONS: Before I went there I cannot say what was ordered because the orders are sent to St. John's and there are no copies here so I cannot say if some of those old products were re-ordered each year or not but I know once I got rid of them I did not re-order them.

MR. CHAIRMAN: Do you have records in your stores of how much of each commodity you used each year for the last five years? Is that available to you?

MR. PARSONS: Yes, that is available.

MR. CHAIRMAN: You do have that at your fingertips?

MR. PARSONS: Yes.

MR. CHAIRMAN: So you know how much you have used. So obviously you look at that and head office looks at that as well. I am curious as to how we have such inventory built up. Is there any mechanism to cross reference the inventory that is in the stores with those numbers, with the projected sales? I mean you must have some idea how much you are going to sell.

MR. LUDLOW: That is all on this card system, the amount that comes in, the amount that is sold - all this is recorded on the card system.

I fail to see where there was inventory in Makkovik fourteen years old. I have to be honest with this because every item, every food item in Makkovik, was destroyed about four or five years ago. There was nothing moved from the warehouse into the new store.

MR. PARSONS: In answer to Mr. Ludlow's question on the bulk food, Mr. Ludlow is right in saying that the food was destroyed in Makkovik. But there was food transferred in from other depots at that time, and I clearly saw marked on the cases: summer of this year; fall of this year, or whatever. I have listings of foods - I did not bring with me now; I have it here in Goose Bay with me - I have listings of foods that are from five to thirteen years old. I have a list of it all, but it was not Makkovik's food. It was transferred in from other depots. Mr. Ludlow is right in that.

MR. CHAIRMAN: Mr. Murphy, you wanted to ask something along this line?

MR. MURPHY: Yes, I certainly do.

While we are talking about depreciation of merchandise, if you look in most stores you can see great variances. Obviously the operating expenses have a great deal to do with the profit. If you look in Nain, for instance, depreciation of merchandise was $7,771 in 1991; $12,920 now, but if you look over in Hopedale you will see that depreciation of merchandise was $10,000 in 1991, but $36,770 now. This would indicate to me that the Cardex system obviously is not working very well, when you see that tremendous amount; and you can move on into the other stores and, as the Chair brought out, the $36,000 in 1990, impacting on $161,000 of net loss, would certainly be - I am not saying that you can save it all, but it would seem to me that $37,000 for depreciation of merchandise is a tremendous amount of money when you look at a system that should be looking after rotation and/or depreciation of merchandise.

If you go over into Davis Inlet you will see the figure is much, much lower. In Makkovik it seems to be consistent in 1991 at $7,000, perhaps that makes a little more sense. If you look at the operating expense total in Nain, in 1991 it was $359,000 and in 1990, $278,000. If you look at the different columns you will find that salaries went up $24,000. There is a tremendous amount of difference. Fuel and light has gone from $36,000 to $76,000. Repairs and maintenance went from $13,000 in 1990 to $33,000.

The other one that shakes me a little bit is janitorial services. In 1990 costs were $468.00; in 1991 it went to $5,200. Did we buy new vacuum cleaners, did we put in a new system or what?

If you look at these columns you will see, of course, depreciation of merchandise went down in 1991 to $12,920; but if you look at all the stores and total up depreciation, it would indicate to me that there is a tremendous amount of money there.

As Mr. Warren said, when you look at the total of $556,000 - which is half a million dollar loss - stock rotation and depreciation of old stock, and putting it on sale, even at a loss, rather than having to take it to the dump and destroy it, would seem to me to be much more logical.

So obviously the Cardex system, Mr. Ludlow, is really not working very well when you look at what is taking place in depreciation of merchandise.

MR. LUDLOW: Yes, I fully agree that this Cardex system is not working. I do not think there is any logical way to make it work. Until we get into a point of sale system where everything is recorded in and out through the cash registers I do not see where or how we can improve this Cardex system. It is definitely not working.

MR. MURPHY: What happened to the fuel and light, Mr. Condon? It looks like somebody gouged you.

MR. CONDON: Sometimes it is with government accounting again and with the payment of bills. The deviations are probably not that great. I know that sometimes we get bills from Hydro at a certain time of the month and if they do not get paid for that month, then it falls into the next fiscal year so -

MR. MURPHY: But look at Davis Inlet in 1990- 1991, fuel and lights. You have $17,000, so even if you carried thirteen months in 1991 and only eleven months in 1990, how would you go from $17,700 to $43,000?

MR. CONDON: I would say there are probably a couple of months of 1990 in 1991 because of the timing. There obviously were a couple of increases in Hydro charges; increases in usage in the stores but certainly not enough to bridge that gap. I would say there were a couple of months in 1991 that should have been paid -

MR. MURPHY: Well if you look at 1989, the $34,000, you saved $17,000, then all of a sudden you were $26,000 in variance, it does seem like quite a bit of money. If you look at the rest of them, there is also quite a deviation in fuel and light; now I do not know but I guess that is your cost, I mean you only pay what you are billed.

MR. CONDON: Exactly, and as I have said, if at certain times of the month we do not get the invoices over to finance or finance is late, it may be the following month so you might (inaudible) fiscal year when a couple of the bills are paid, but certainly there should not be that much of a deviation.

MR. CHAIRMAN: Before we continue this morning there is coffee in the back of the room. I am not proposing to take a coffee break. I would say that we would probably stop for lunch around 12:30 and come back again, so anybody who wants coffee, please feel free to wander out and help yourself. Mr. Warren.

MR. WARREN: Well I could probably see some deviation in the fuel and lights because of the fiscal year but surely goodness this would not happen with janitorial and maintenance? I mean you have gone up from $29,000 to $44,000 and we have the same five stores, the same space to clean, and you have an increase of about 40 per cent in salaries paid to the janitors. Have we hired on more janitors or are we making sure our floors are cleaner or using more detergent because that is an awful amount of increase in cleaning the stores from one year to the other year.

MR. CONDON: I can only speculate that there may be some changes in where we apportion the costs. Sometimes, if we were using detergent from the stores or things like that, janitorial expenses might have been charged to repairs and maintenance or sundries, for example, and we may now have put it back into janitorial expenses. That might be one of the reasons. I do not know why we have that big a deviation from one year to the next. I think we contract out most of our janitorial services, if I am correct.

MR. WARREN: In all the stores, or in all the depots with the exception of Nain, the manager's house and the store - those are the two buildings we maintain with heat, light and fuel. In Nain I think we have an extra house.

MR. CONDON: Yes, and in Davis Inlet also.

MR. WARREN: So this would be the reason for the increase in the Nain fuel and light over the other depots?

MR. CONDON: That could be part of it, but that would be consistent. We have had the manager's house in Nain, and the assistant manager's, for years, the same as in Davis Inlet, so there should not be that much of a difference.

MR. WARREN: In Davis Inlet there are two residences, right?

MR. CONDON: Yes.

MR. WARREN: Then comparing Nain's fuel and light and comparing Davis Inlet's fuel and light, they are way off course, right?

MR. CONDON: Yes, but then Davis Inlet sales are probably $700,000 while Nain's are probably close to $2 million, so you have a much bigger capacity of freezer space and things like that. There would be higher usage in Nain, certainly, with larger freezers, more freezer space, and bigger inventories of frozen foods.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Thank you, Mr. Chairman.

Perhaps, Mr. Condon, if you look in the column of salaries in the last three fiscal years, you might want to give us a little comment on them. In 1989, permanent salaries went from $477,000 to $637,000 in 1991, an increase of $150,000. Overtime seems fairly consistent. Perhaps you would want to comment on why in 1989 other earnings and what they are were $62,000 and they closed out in 1991 at $102,000 which is $50,000 more.

I see that temporary employees salaries actually have gone down; but perhaps you would want to comment on the overall salaries increasing $150,000, and why would other earnings would go up.

MR. CONDON: The salaries, I guess, are dictated by the union contracts. I do not think the increases were certainly as large as that, but again it could be a timing thing, a year end thing, where I guess the last payday is sometime in March, but if it gets into the new year -

Other earnings - that relates to Labrador allowances? Am I correct in that? Again that is set by the union contract. The substantial jump in it from 1990 versus 1991, I have no explanation for that - why it has almost doubled.

MR. MURPHY: Is that consistent even for people on the coast who work in the stores? Do they get the same situation? Is the same salary situation offered to local people as opposed to people you might bring in from outside?

MR. CONDON: I do not follow you, Mr. Murphy.

MR. MURPHY: What I am saying is: If you are saying to me that this is a northern allowance of $102,000 that has gone up nearly $40,000 - that $40,000 in a year, when you look at it, is almost 40-odd per cent of an increase. Are you saying to me that all of a sudden there is a great amount of northern allowance that has come to light?

MR. CONDON: I think the Labrador allowance or northern allowance is paid a couple times a year?

MR. PARSONS: We get our northern allowance with each cheque, however we do get a travel allowance that would account for some of the increase there and that comes I think in March or April, somewhere around there.

MR. MURPHY: But would that be in other earnings?

MR. PARSONS: On our pay cheques it is considered as other earnings.

MR. MURPHY: But this is your own travel, it is not travel on behalf of the stores?

MR. PARSONS: No, no. This is an allowance we get and on the stub it states other earnings.

MR. CONDON: Mr. Porter was good enough to provide me with a bit of information here and it says on this, and I guess this came from one of our financial people: For your information the Labrador travel allowance is at the rate of $275 for each employee and each member of the employee's family. It is usually paid to the employee the first pay period of April of each year, so you could imagine if there is a timing difference between March and April, we would have that showing twice in the same fiscal year, for example. Do you follow?

MR. MURPHY: Yes. I think I understand, or if somebody was married and there were a lot of babies or something in that year. But it does seem to be a substantial jump.

MR. CONDON: Yes, it is quite an extensive jump.

MR. MURPHY: I mean overtime is basically consistent in business when you look at the columns, but that column stands out.

MR. CONDON: I can follow up on that just to get an explanation as to why there is a substantial increase over -

MR. MURPHY: Somebody in NAPE might want to ask why, from 1989 to 1990, there is an $150,000 increase in wages? Someone might want to ask: why an increase up here and no increase somewhere else?

Okay, thank you Mr. Chairman.

MR. CHAIRMAN: Mr. Warren, do you still want to question?

MR. WARREN: I still have a lot of questions, Mr. Chairman. Again, it is very difficult when the manager does not have this book. However, I understand, reading here, Mr. Condon, that the financial statements which are compiled by head office, I gather that the managers do not receive copies of them?

MR. CONDON: They do receive them now, Mr. Warren, and I guess for your information, managers have received a copy of that sometime ago when it came out first from internal audit, so I do not know how good your memory of that document is, but they have all seen it and I guess gone through it.

MR. WARREN: Well they do not have part of this because this was only compiled the last two weeks -

MR. CONDON: Yes, that is the appendix -

MR. WARREN: Well this is what I am referring to -

MR. CONDON: Sorry about that.

MR. WARREN: So that is why this afternoon I would like to at least see the waybills and things like that because -

MR. CONDON: Actually we have had the secretary over at the office running off copies but time prevented us from picking them up -

MR. WARREN: So the managers now receive financial statements -

MR. CONDON: - on a monthly basis -

MR. WARREN: - on a monthly basis. For the record, what do the financial statements contain? In earlier discussions it seems a lot of things were not done. So what do the financial statements contain when some things are not completed?

MR. CONDON: Well, I guess it is the normal financial information. In addition to that, and as recommended in the internal audit report, we are going to include a variance report. As you know, we have a budgeted amount for each expenditure. For fuel and light we have a budgeted amount and we have our actual amount, so the managers could see: look, this is what we budgeted for fuel and light, this is what we actually spent, and it will show how much of a variance. These are things that at least they can address. The normal financial statement is a combined statement for all the stores and then individual statements which break down in our accounting system, the operation, the sales, the discounts, the markdowns and the operating costs including the salaries, freight, transportation. And it breaks down sales by each commodity like fruit and hardware and fishing supplies and so on.

MR. WARREN: Do you have a copy of the last statement that you could supply to the committee?

MR. CONDON: I do not have a copy with me but certainly I can supply a copy - Dick do you have a copy?

AN HON. MEMBER: (Inaudible).

MR. CONDON: Okay, I can get that when I go back to the office. Len has a statement run off for June.

MR. WARREN: Do you have a copy also of the last cashed cheques by -

MR. CONDON: The last cashed -

MR. WARREN: Yes. Can you supply us with the last couple of cash accounts?

MR. CONDON: We can supply those too, yes.

MR. WARREN: I notice that on page eight of your report you took Makkovik as an example of a store you wanted to do a trial basis audit on. Who performed those duties? Was it yourself or some auditor?

MR. CONDON: No, we had asked the internal audit division over in the Department of Finance to do that. So they had their own people come in. They got some information from Ben in Goose Bay and they got some information from our accounting people. They looked at it all before they came in. They spent two or three days in Makkovik, went away and did that report and sent it over to us. These are suggestions or recommendations that they make so you can improve you operations.

MR. WARREN: Thank you, Mr. Chairman. I have a question for the Auditor General. The last audit was done in 1984, we are talking about eight years ago. What would be the logical reason why, with a $3 million business year by year, the Auditor General has not deemed it necessary to review those stores on a more periodic basis?

MS. MARSHALL: (Inaudible)

MR. CHAIRMAN: Excuse me. Could you pull your mike in and try to speak a little louder?

MS. MARSHALL: We try to schedule the audits on a regular basis. There are a lot of Crown corporations also responsible for auditing so it is done (inaudible).

(TECHNICAL DIFFICULTIES WITH RECORDING).

MR. CHAIRMAN: Perhaps we should move that microphone up in front there. Mr. Drover.

MR. DROVER: The last review as I recall was done at the request of the former Deputy Minister of Rural Agriculture and Northern Development. I think it was Cyril Goodyear at the time and it was an unusual review for us to do. We sent five auditors into each one of the stores. One person went to each one of the stores and we sent our Corner Brook audit manager into Happy Valley - Goose Bay to co-ordinate the effort and the report was then written up in St. John's.

From the standpoint of salaries and that sort of thing we will cover that from our review of the general service payroll expenditures through the department, our review of the central. I guess to get to the coast again would probably require evidence of the planning process. The Auditor General herself would establish the priority, whether it be at the request of this committee or whether it be at the request of the deputy minister. Most of our work, as I said, is centralized in the public accounts of the Province, which is about $3.5 Billion worth of expenditures. Right now I think we are required to look at some 100 to 128 agencies within the Province, so all of the school boards, all of these come into play there. I would say normal getting around into the departments would be about a five year process. This one has not come back because I think there has been some discussion ongoing. Although we were not privy to it we knew that this review here was on the go and we did not think it would serve any purpose for us to get into the coast when the internal audit people had been in there. Certainly if a request comes from this group or the deputy minister then I think the Auditor General would have to at least considerate it at that point in time. In our normal course of work it would probably take - if these had not taken place, these two reviews, one of internal audit and one of Deloitte & Touche we would probably be back in the current time frame, probably this year or next year. These two reports have taken place and I am not sure that our people can tell you anything different than these two studies did and both of them are fairly recent.

I do not know, Mr. Chairman, if that answers the question but I am speaking again from memory which is about seven or eight years ago.

MR. CONDON: Mr. Chairman, if I could just add something?

MR. CHAIRMAN: Mr. Condon.

MR. CONDON: I just want to add something to Mr. Drover's statement. All the expenditures for the stores are audited, too, as part of the public accounts expenditures. All of these invoices where we pay suppliers for goods or pay somebody to fix our furnaces, that is all part of the public expenditure. The Auditor General has access to those and I guess in his reviewing of the expenditures sometimes those expenditures are selected I would assume, in a random sampling there would be some of those in there, so if we spent $3.5 million some of that has already been audited as part of an ongoing process.

MR. CHAIRMAN: Mr. Drover.

MR. DROVER: Mr. Chairman, in order to express an opinion on the financial statements of the Province we use a big computer program. We dump the whole $3.5 billion worth of expenditure into one big program and we go in without any - we tell them the direction as far as materiality; we tell the program what confidence we have; then we turn around and whatever comes out we audit. So Brian is quite right. Over the last eight or ten years, anytime that anything came up regarding the Department of Development we would have to follow that to an extent in order for the Auditor General to express an opinion on the financial statements of the Province. That is what is called generally accepted auditing standards. That is the same as any firm would do to express the opinion of that.

We also, in addition to that, go in and evaluate the programs of the various departments on an ongoing two, three, five year basis. We try to make it a three year basis, but because of the additional work that has been added to the role of the office in recent years, that is now getting up to about a four year basis. The standard across the country is about five. You come back to the program every four or five years. I will give you an example.

Three or four years ago we did a major review of the Department of Justice, and a major review of the Department of Social Services. We would not be back in the current year. We would probably be back in the next year or the year after. That is the way the big program works. So they are audited twice; first to express what is called the short funding opinion on the financial statements of the Province. They are subject to audit. They go into the big pool - the $3.5 million pool.

Secondly, in order, on a three to five year basis, to get some information on the programs, we would evaluate a specific program. If we are evaluating the program of the Labrador Services, if we can obtain sufficient information in St. John's that would be acceptable to us, it is not necessary that we send the auditors in and do a special report, because a special report is very similar, as I pointed out earlier, to what Deloitte & Touche did, or the internal audit people. I think that would have to come as a request from either the deputy minister or a resolution of this committee to the Auditor General to send us into those.

Again, Mr. Chairman, I hope that enlightens you on some generally accepted auditing standards.

MR. CHAIRMAN: Thank you, Mr. Drover. I appreciate that.

I just have a question. Perhaps, Mr. Condon, from a policy point of view, as the report points out, the stores have not been accepting coupons that are promotional coupons. Very few households go to the supermarket today without a purse full of coupons and stand in line dishing them out. Has that policy been changed? Are you now accepting them? If not, why not? And what would be the administrative problems, Mr. Condon?

MR. CONDON: I am glad to announce that we are accepting coupons. I do not know if any of the managers have received any, though. I stand to be corrected, but we did put that in place, that if any of the customers came in with coupons we would gladly accept them. I do not know if any of the managers can enlighten me. Has anybody actually shown up at the stores with some coupons for redemption?

MR. CHAIRMAN: Perhaps I can ask some of the managers: Has this been a problem? Have there been requests from the community? Have there been a number of coupons show up since the policy has been changed? Are the people aware that the policy has been changed?

Mr. Parsons, do you want to comment?

MR. PARSONS: The coupons that I have received to date for redemption are Pampers coupons. Those are the only ones I have received. I have contacted the redemption firm, I think in New Brunswick somewhere - I am not sure; I cannot remember now. I have had the forms come and I have returned the coupons to this company and they have redeemed them; but to date it has only been Pampers coupons.

MR. CHAIRMAN: For my own general information, perhaps the people of these areas do not get the same junk mail that we do in their mailboxes every day? Some of this is worth money.

MR. PARSONS: There is some junk mail coming in - the stuffed envelopes - but I think on the coast people are more educated in junk mail than we are from the Island portion. They take them and throw them in the garbage where they belong.

AN HON. MEMBER: Very quickly.

MR. CHAIRMAN: Mr. Murphy?

MR. MURPHY: Thank you, Mr. Chairman.

Some of the questions that have been asked this morning in relation to reducing some of the losses would indicate to me that maybe purchasing and/or the buying of goods for the stores would provide some answers. Some of the information that has been provided would indicate in the dry goods area that the store managers don't requisition and the field doesn't requisition, but St. John's picks up everything and decides. Now is that not true?

MR. PARSONS: Not now. That has changed.

MR. MURPHY: It has changed. Okay, so what you are telling me now is that the store managers actually fill out the requisition for dry goods and what have you.

MR. PARSONS: I do anyway. I think all the rest do.

MR. NOCHASAK: No.

MR. MURPHY: No. The store manager from Nain says no.

MR. NOCHASAK: (Inaudible).

MR. MURPHY: Do you sell dry goods in Nain?

MR. NOCHASAK: We have some.

MR. MURPHY: You have some there. So you open a box and get a surprise. Is that what you are telling me? It could be whatever. It seems to me there is a tremendous inventory of gloves on the coast.

MR. NOCHASAK: Gloves and socks.

MR. MURPHY: Gloves and socks, yes. But let me ask a further question about purchasing. When you do purchase, is there any deviation from store manager to store manager? If you write a requisition for so much flour and things that are important on the coast in the winter, is there a deviation in those kind of requisitions? Does somebody shoot down the quantity or increase the quantity? Off the top of your head is that a problem for you as store managers?

MR. PARSONS: For the staple items that is not a problem. I get everything I ask for in the staple items. I did this year have to contact Mr. Ludlow with regards to some minor things that were changed. I will give you one item. I decided to bring in some shepherds's pie, it is just a little snack thing, and I ordered twenty-five cases. When my order came back it recommended ten. I called the person who recommended ten and asked him why, and he said he didn't think we could sell twenty-five cases. I asked if shepherds's pie had been sold in Labrador before and he said he couldn't remember. So I contacted Mr. Ludlow and that was corrected. So I got my twenty-five cases of shepherds's pie and next week I won't have one left.

AN HON. MEMBER: (Inaudible).

MR. PARSONS: So that was corrected, and for a few other items.

MR. MURPHY: When we talk about depreciation of merchandise and dumping of merchandise it would seem unlikely to me that a manager who knows his store and knows what the consumers are looking for would bring in $37,000 worth of goods that over time would depreciate and either have to be dumped or written off. So the first question that would come to my mind is: are most of these items being sent by a buyer in St. John's who doesn't know the circumstance or is it just the store manager taking a chance? It would seem to me that the store manager should know exactly - well not exactly, but certainly should come close - as to why they are writing off all these goods as time goes on. I mean is it purchasing at either Goose Bay or St. John's that is causing the problem, or are the store managers buying things and hoping to sell them? Perhaps you might want to address that, Mr. Condon.

AN HON. MEMBER: A difficult question.

MR. CONDON: It is, yes.

AN HON. MEMBER: Everybody is pointing fingers.

MR. CONDON: Admittedly a few years ago the department did get into buying a fair amount of dry goods, let's say, and I don't think there was a lot of input from the managers at the time. So they did get dry goods and probably said: How are we going to sell this kind of stuff? So I guess maybe we have backed away from that now altogether. Right now the system is that we get information in from different buyers, and we send it along to the managers and say: Is there anything in this booklet that is of interest to you?

I think that is the way it should be. I mean we have to let the managers manage the stores. I can't determine what is going to sell in Makkovik or Nain. I have no idea.

MR. MURPHY: No.

MR. CONDON: With some of the old inventory, I think a lot of the write-offs were related to maybe old meats and stuff. I think that it is just human nature. For example, if we have a lot of meat on hand going into June and July and a new shipment comes in, people in the store push the old stuff in further and start selling off the new stuff. People know there is a new supply of meat in so they do not want to buy the old stuff. I guess after a couple of years you get meat there that is only fit for the dump. So I think in Mr. Parson's case he found instances where some of the meats had been there a couple of years and had deteriorated to the point where they were only good for dog food or whatever and certainly they were not fresh, they were freezer-burned and I think maybe that is one of the reasons why we wrote off a lot years ago.

MR. MURPHY: But, Mr. Condon, you know it would indicate to me that if the store manager or the staff were aware that in June there was a new supply of fresh meat coming in, that April or May would be a good time to probably put on a sale of the meats that were still there, rather than have those meats pushed inside by people to get at the new meats? So I mean that comes down to, I would think, inefficiency in managing the store or the staff not doing what needs to be done. So honestly I look at it another way. You know you hear of rotation of stock, and I suppose that is a buzzword in your business, all of your businesses. Rotating stock, codes and serial numbers so you know when it was made, when it was purchased and everything else that the customer may not know. So that is why I asked the question: is purchasing sometimes getting in the way of the efficiency of the stores? That is what I am asking.

MR. CONDON: Maybe I am getting a bit off the point, but I guess over the years maybe we have not allowed the managers to manage the stores, maybe we have made too many decisions for them. With respect to meats, some years there is a lot of caribou around so if we bring in a large inventory of meat and there is plenty of caribou, then we are stuck with a lot of meats. Right now we let the managers do pretty well all the ordering and as I said, sometimes we do second guess things, especially as Snowden mentioned, things that are not staple items and that is our prerogative I agree. Every order comes in and I will have a look at it and some of our buyers will have a look at it and we do not have a problem with going back to the manager and saying: Do you need this, do you think you can sell it?

MR. MURPHY: Thank you, Mr. Condon; thank you, Mr. Chairman.

MR. WARREN: I would like to ask Ray a question. Ray, you put in your requisition as the other managers did this year, probably two or three months ago; so far probably two or three or four ships have gone into Hopedale, can you name some items that you have not received as of -

MR. DARBY: I could not tell you that, Garfield. I have been out of Hopedale for the last month.

MR. WARREN: How long does it take you to receive a commodity that goes through the regular process; one month, two months, three months, four months?

MR. CHAIRMAN: Mr. Prichard.

MR. PRICHARD: Well it is a bit better this year because we are getting the products early. We usually send our requisitions in March and the DUKE OF TOPSAIL was in this weekend. I was not there so I do not know what freight we received but I would say that I will have about 80 per cent of my order in by the time summer is over.

MR. WARREN: Well, Mr. Condon, from the time you receive that requisition in St. John's, how long does it take GPA to go to a tender call? I think this is the problem on the coast, the customers are not being served because of GPA's problems and government bureaucracy, so can you explain the process?

MR. CONDON: Yes, yes. There is a certain time delay. We ask the managers to try to have their orders in by the end of March for example, so that our guys would have a chance to look through the orders, to combine all orders on one large sheet or whatever and send it down to GPA. Now that might take a couple of weeks. When GPA gets them, they have to put them on tender I think for three weeks, so they get the tenders back and there may be 3,000 items for example and they go through every item. I think this year there were twenty different suppliers who made offers and it may take GPA another two or three weeks to sort out who got what and then they apply this provincial preference number or whatever so they have to do that and then they notify the suppliers but nothing happens anyway unless the Marine Atlantic vessels are going down. This year in particular we are all ready, the suppliers are all ready. I think this happens most years, we have everything ready to go pending the Marine Atlantic sailing and I guess the ice conditions and everything dictates that. There is a couple of months time lag for sure from the time the managers send in their orders to the time the suppliers are ready to ship the stuff.

MR. WARREN: And this all ties into Mr. Murphy's question earlier about why the manager has not ordered stock because by the time you get it two or three months of the year are gone, so this is a case of one problem mushrooming into another problem.

MR. CONDON: That is right. And the managers do have to do up their orders in March. They have another three or four months while the store operates which could deplete some of the stock so before their first order comes by the end of July or August they might run short of something else, so there is that delay. If you were just an ordinary store you could phone up Lewisporte Wholesalers and say, I want so much of this and they would send it in and you would have it, I suppose now, in two or three days, but with our system we have to go through the public tender process and it does take time.

MR. MURPHY: Mr. Chairman, it must be much more difficult for all the managers to play guessing games. As you say if there is somebody in St. John's, Lewisporte, or Corner Brook, they know what they will probably sell that week and if they do not they will move to the next week and they do not have to over-order, whereas in your case once it is in it is very difficult to get out. You do not have the same ability to rotate stock or material. That is very understandable. Just off the top of your head, Mr. Condon, I noticed a column in 1991, just so I know what it is, if you look at other income, there is $27,000 there, did somebody pay up some old bills or something or did you chase somebody?

MR. CONDON: Some of that probably relates to rented space up in Nain for Canada Post, they use a part of the store for a post office. Also I guess the rental rates for houses for the managers was increased over the previous year. I guess that accounts for a fair bit of it.

MR. MURPHY: Maybe we should get the post office involved everywhere. However, it is just a new figure there.

MR. CHAIRMAN: Thank you.

Okay. There are a number of other issues that we need to discuss. No doubt we want to get into some of the outstanding amounts and what efforts are being taken to try to collect some of these.

This appears to be an excellent opportunity to take lunch. Does the committee agree?

You need some time to look through the documents with your managers over lunch.

MR. MURPHY: And we need to get copies of them.

MR. CHAIRMAN: We will give you an hour and a half. Will that be sufficient time for you to get a flummy dum and a cup of tea, to look at your documents and come back again?

AN HON. MEMBER: Yes, that gives us plenty of time.

MR. CHAIRMAN: So, we will meet at two o'clock.

I might say though before we adjourn that there are only three members of the committee and we do not have a quorum, we can receive evidence but we do not have a quorum to vote. We are hoping Mr. Dumaresque will arrive and be here after lunch.

Thank you. We will adjourn now for lunch at 2 o'clock.

MR. CHAIRMAN: If everyone is here, I would like to call the meeting back to order.

I would like to welcome Mr. Danny Dumaresque, the Member for Eagle River, who has arrived from the coast of Labrador finally. He has joined us for the balance of the meeting. Danny, I have just a couple of details. The mikes are live all the time, so the less noise you make the better because it will all be recorded. You have to speak very closely to the microphone for the recording equipment to pick it up. Also either identify yourself or I will identify you for the record for Hansard's purposes so that they can properly transcribe later since we don't have that kind of recording taking place.

I welcome everybody back after a brief lunch. Who would like to begin questioning this afternoon? Danny, if you are not ready yet I will go on to someone else since you just arrive.

Mr. Dumaresque.

MR. DUMARESQUE: Thank you, Mr. Chairman. If you wouldn't mind, I am not sure what has already been asked. I have done a fair amount of reading on this, so I will be asking some questions later.

MR. CHAIRMAN: Okay, we want to get into some of the outstanding balances. You don't have those yet do you?

AN HON. MEMBER: I have a copy of them here.

MR. CHAIRMAN: Perhaps we can get on with that area. Does somebody wish to begin, or will I -

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Thank you very much. I suppose just a few comments and maybe a few questions. I certainly don't have any intention of asking anybody why or relating any names to this. The one that I see here that baffles me is in Makkovik where I see an outstanding balance. I guess it is over 365 days. It would need an explanation, its Newfoundland and Labrador Hydro. It looks like their initial amount owing was $19,124.00 and they got a credit of $487.00 leaving an outstanding balance of $18,637.00. How would Newfoundland Hydro, number one, get into the store in Makkovik and why would they leave that balance outstanding for so long?

MR. CHAIRMAN: Mr. Ludlow.

MR. LUDLOW: I think I probably better explain that one. When Newfoundland and Labrador Hydro took over the operation of the power plants up there they assumed that they took over all the equipment and the supplies that were in the store. But these were inventory items that were in the store that Newfoundland and Labrador Hydro did take from the building and were using, but some of it was never ever used. Some of it would still be around there yet. They assumed that they had taken over all of these items. That has been an ongoing controversy ever since they took over the plants and there has been attempts made to collect that, but they say no it was their property.

MR. MURPHY: How long was this outstanding, Mr. Ludlow?

MR. LUDLOW: I don't quite remember the number of years. It was much longer than 365 days.

MR. MURPHY: Still and all on the balance sheet you folks are still carrying this.

MR. LUDLOW: We are still carrying this. There has been requests made to have it written off, but that has not happened either.

MR. MURPHY: Then you must ask yourselves would they write off a power bill to you fellows, you know. With some of the others I was wondering -

MR. CHAIRMAN: Are you saying therefore that it is in dispute and that you have now decided that there is no way to collect that? Has there been any attempt to resolve this with Hydro?

MR. LUDLOW: It is not my decision to decide whether or not -

MR. CHAIRMAN: Mr. Condon, maybe you could tell us. What action was taken with Hydro to determine whether this is a valid charge or not?

MR. CONDON: The department operated power plants on the coast for a number of years, and I suppose ten years ago or even maybe more than that - I am just thinking from memory some of the stuff I have read in the files - Hydro took over whatever we had. The amount here is for miscellaneous inventory items that were related to the power plant. I guess they were nuts, bolts, couplings, and all of that stuff. We said: Look, Hydro, take it all over. The $18,000 was shown on our books as an inventory item, and hydro, I guess, accepted the stuff and said: You know, at $18,000 - that is junk. That is old stuff that has been there for years. It is no good to the plant; it is no good to us; and I guess the dispute has been ongoing - probably there is not much happening on it recently, but I understand, going back several years, there has been quite a bit of correspondence going on with hydro.

We went to Treasury Board a couple of years ago to have a lot of the amounts written off, and that one in particular they asked us to have another look at before they - we are trying to dig through some of our old documentation on these items right now to see if we can reconstruct anything. Maybe in a few months time we might be able to resolve this, or we might be able to probably say to the hydro people: We will not pay your Hydro bills.

MR. CHAIRMAN: Mr. Murphy:

MR. MURPHY: Thank you, Mr. Chairman.

The other thing then, obviously, that I see here that might need some answering, or would require some explanation - are associations and construction companies such as - now without naming those; some of them I guess are probably no longer functioning, but I see quite a few, like the Department of Mines and Energy, and the Department of Fisheries, and large construction companies that, to my knowledge, are still operating, and recreation committees. Even our friends, the RCMP, owe you $1.57.

For the life of me, I cannot understand why these people do not pay. Are they invoiced every month? Do you add interest to them? Is there a logical reason why they are still on the books?

MR. PARSONS: I have checked into some of those departmental ones, and the reason they are giving me as to why they have not been paid is because they were not invoiced properly in the beginning.

If you notice - I am sure you know - on mostly all departmental purchase orders it says: Two copies of your invoice must accompany this purchase order. They also require an itemized list. A lot of those accounts here were invoiced with a single invoice and just marked to goods. This is why they refuse to pay, because there is no indication of what goods were received or why they were given.

MR. MURPHY: That brings up another question.

Is this somebody from the department who walked in and ordered something because they needed it from the store in Makkovik, or is it a purchase order actually from the government?

MR. PARSONS: Some of these are from employees of the departments concerned, with a purchase order, but still the department has refused to pay.

MR. MURPHY: And you would reference the PO number on the invoice?

MR. PARSONS: Yes.

MR. MURPHY: And they still refused to pay?

MR. PARSONS: Yes.

MR. CHAIRMAN: They refused to pay because of improper documentation is what you are telling us?

MR. PARSONS: Exactly.

I have checked with number forty-six, and that is not an amount outstanding. It is incorrect debits and credits in the account.

I have gone back through the accounts and dug out some invoices and whatnot. Here again, signatures on the invoices are not recognizable by the company, so therefore they are refusing to pay.

They are refusing to pay this amount, saying: Look, we do not owe this money, and I do not think they do owe that money.

MR. CHAIRMAN: Were there purchase orders issued for those?

MR. PARSONS: No, there were no purchase orders. What happened was that the company placed money on the account, and it was charged against the money on account. However there are some invoices that are not legible - the signature - and there are mistakes in addition and subtraction of debits and credits in the ledger accounts.

Some time ago I did a complete reconciliation of all those accounts and for some reason, when one of the monthly statements was submitted, the corrections in debits and credits was not passed on to our accountant, Mr. Rowe. Mr. Rowe came back to the assistant manager, who then re-reported those accounts without my corrections of debits and credits - it is all mixed up again, but this account that you see here in front of you for March 30, is not as high as it is here; there are mistakes that have been corrected, that I have corrected, however -

MR. MURPHY: So what you are saying, in reality a lot of this has been corrected and -

MR. PARSONS: There have been some corrections made; yes. The large ones, yes, that stands as it is.

MR. MURPHY: Fifty-six, I would suggest that credits (inaudible) -

MR. PARSONS: Fifty-six, yes, that -

MR. MURPHY: (Inaudible).

MR. PARSONS: - back and forth, right?

MR. MURPHY: Right. And what would that $862 - the indicator is that it is over 365, the $862 left in that Department of Social Services, so does that mean that that is a discrepancy also?

MR. PARSONS: No. That would not necessarily mean a discrepancy however, I did find some irregularities with the account. Mr. Ludlow had them checked out and they were verified as being okay, but what this would be here is, where maybe a cheque has been issued to a recipient and our reimbursement from that department has not been received yet, that is no problem, that happens all the time but that account does not show any bad debts.

MR. MURPHY: No.

MR. WARREN: Mr. Chairman, page 27 of the report talking about social services, it says that there is a transaction taking place but there is no documentation.

MR. PARSONS: Are you referring to the internal audit?

MR. WARREN: Yes.

MR. PARSONS: That, Mr. Warren was when I started to go through this account and tried to reconcile it. There were some entries messy, this is what I just referred to where I went to Mr. Ludlow who went back through the Department of Social Services and these figures have been verified and they are okay.

MR. MURPHY: If I may, Mr. Chairman, another broader question in a sense. I see that there are some cheques, some NSF cheques outstanding; is there a store policy, Mr. Ludlow or Mr. Condon, that addresses cheques in large amounts? I know it is difficult to get them certified for one reason or another but even after they come back, what is the procedure in place to try and collect these monies?

MR. CHAIRMAN: Mr. Parsons.

MR. PARSONS: The procedure that I am following with NSF cheques is that if I receive one, I go to that person and give them a chance to pay for it either by another cheque or by cash. If the next cheque is returned NSF, I take no more cheques from them. The only cheque that I take right now from anybody, a personal cheque, is for payment of goods that they receive; I do not cash any more personal cheques for cash only. Even if a girl goes out and baby-sits for somebody and she is paid by a personal cheque, I will refuse to take that cheque for cash. If you look up the NSF ledger in Makkovik right now you will find that the NSF outstanding I think is somewhere around $200 to $300.

MR. MURPHY: The amounts that are outstanding, would they be cheques or would they be charges?

MR. PASONS: This here?

MR. MURPHY: Yes.

MR. PARSONS: For Makkovik here, they are charges. I think the only time that we are asked to submit an NSF cheque statement is at the end of the year, that is the only time that I have ever done one. During the year I keep a check on it myself and watch it, if one comes in I make sure it is paid and as I said, Makkovik is well - off NSF wise. I looked through some of the other accounts in Davis Inlet and I have noticed one or two there that I know are NSF cheques and it's put in as an account receivable right now, but the only time we are asked to report is at the end of the year.

MR. MURPHY: Is there any policy as such, either by the department in Goose Bay, to you managers on cheques and NSF cheques? Is there anything in a policy manual or procedural manual?

MR. PARSONS: We have a memo stating that we are not allowed to take personal cheques for cash. We are only to take personal cheques for payment of groceries.

Also, it states in our - I guess it is government policy - that managers can be held responsible for any cheque that goes NSF, and it can be deducted from our pay cheque. So there is a system of checks and balances.

MR. MURPHY: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Warren?

MR. WARREN: Thank you very much, Mr. Chairman.

I want to follow up with Mr. Parsons' answer to your last question. Probably I will ask Mr. Condon: The managers have a memo saying that they cannot take a personal cheque from somebody for $50 or $100, but they can take a personal cheque for the amount of the goods. You could lose both ways. You could also lose the goods plus the cheque by taking it for the goods. If you just take the cheque for the guy who is in Makkovik and needs $100, you will not take the chance on giving him the $100 but you will take a chance on taking his cheque for $300, which could bounce and also he would have the goods too.

MR. CONDON: I guess the stores perform a little bit of a banking service in a lot of the communities. We will cash payroll cheques, UIC cheques, or any government cheques for people. As Mr. Parsons mentioned, we do not accept personal cheques for cash, but since we are in the business of providing a service, if anybody - and a lot of people do business by cheque up in communities, so we will accept a cheque as payment for the groceries.

For the most part we have very little problem with accepting cheques in this regard. Most of our problems would come from construction companies - companies that are in doing some work there, and there might be five or six people from the community hired. They will give them their payroll cheque and we will cash the cheques for them. Then, all of a sudden the construction company is gone out and a month later we get these cheques back NSF; so we have to track down some of these construction companies.

As far as the general public is concerned - I do not know if the managers might have anything to add - we have very little problems with accepting cheques for the purchase of groceries. I would say there are a fair number of people who use cheques for the purchase of groceries. I think that if we did not we would have a lot of hue and cry from the residents.

MR. CHAIRMAN: You are not getting a high percentage of NSF cheques then?

MR. CONDON: No.

MR. CHAIRMAN: Is that accurate for pretty well all stores?

MR. CONDON: For Makkovik especially, yes; there are very, very few.

MR. LUDLOW: Some of these NSF cheques, or most of them - mostly all of them, I guess - are not written intentionally to be NSF, but the length of time that it takes for our cheques to get in and get through the bank, this person is probably already to the bank when he writes the cheque. By the time this cheque gets in there, which would be a month to a month and a half afterwards, then that account has probably dwindled away and next month is back up again; so if they write another cheque it is probably alright. There is not a problem with collecting, but this is one of the reasons why we do get NSF cheques.

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: Thank you, Mr. Chairman. On page 29 and 30 of the report it says that a majority of those accounts - and it mentioned Makkovik in particular - but I would think that the other five depots would be in the same boat, and they go back pre 1986. Earlier Mr. Parsons mentioned what he has done in the past year or so to identify the thirty-odd accounts in Makkovik. Now looking at Nain, for example, or Hopedale or Davis Inlet, we have similar problems. I would like to stay away from particular names as much as I can. We see a person here in Nain who is employed, and we have over $3,400 outstanding. I guess probably Antone could advise us as to how far back this $3,400 goes? How much correspondence has taken place between you as the manager and your field supervisor? How much correspondence has taken place between the field supervisor and the St. John's head office, to make a collection from a person who is fully employed? Has anything been done? When was the last time number six was given the notice that he owes $3,400 to the government of taxpayers' money? When did you advise him of that? When do you advise your field supervisor? When did the head office advise him? Does this guy still know he owes $3,400 or does he care?

MR. NOCHASAK: I can't understand.

MR. CHAIRMAN: I guess what Mr. Warren is trying to get at is what methods are used to try to collect these amounts that have been outstanding now for some time. I understand - I will just clarify it first of all before we answer that part - in general that the policy has changed since 1986, that you are not now issuing goods on credit anymore to individuals. So many of these items that are outstanding are prior 1986. What are we doing to try to collect these amounts?

MR. NOCHASAK: We send out a statement at the end of every month.

MR. CHAIRMAN: The end of each month?

MR. NOCHASAK: The end of every month, like this, to every person and company. Now I just wonder what it was before it got to me.

MR. WARREN: Yes, I know because it was a number of years ago. Every month now this particular person here gets a statement from you.

MR. NOCHASAK: They get a statement every month.

MR. WARREN: Of just $3,400. Nothing else.

MR. NOCHASAK: Just the amount owing.

MR. WARREN: It doesn't say what it is?

MR. NOCHASAK: (Inaudible).

MR. WARREN: Mr. Condon, have any of you attempted maybe to attach income?

MR. CONDON: No. Actually we requested Treasury Board to write off a lot of this stuff, and they have indeed, but they came back with the balance of what is left here now. I think these are probably the more current of the list. They said go back through your records and see if you can get some backup statements on this. We were thinking about turning them over to a collection agency and before you can do any of that you need backup documentation. That is what we have asked the managers to do, to try to dig through their old files and see where these charges originated. I guess sending statements out month after month without people acknowledging them, maybe those people haven't come back, they are becoming old, or maybe they are arguing that they don't owe it. I don't really know. We are hoping that over the next few months we will be able to look at each one of those and determine whether it is collectable or not.

Maybe at some point in time we would have to turn them over to the Department of Justice for some type of legal action.

MR. CHAIRMAN: Can you tell us generally how an individual would be allowed to accrue $3,400 in credit for groceries in a store? That is probably the best part of a year's supply of groceries.

MR. LUDLOW: Yes -

MR. CHAIRMAN: That is only one example; I am not interested in any one individual.

MR. LUDLOW: What happened here I expect, is that these accounts, most of them, or all of them I dare say, go way back to years ago when we had given out credit to fishermen. With a bad summer fishing, they accumulated a lot of debt there and could not pay it back and I guess we could not collect it in other years either, because of social policy too, the next year we would supply the fishermen with supplies again so these things kept building up and building up. After a few bad years you end up with a lot of balances.

MR. CHAIRMAN: Is there any interest charged on them?

MR. LUDLOW: No. A lot of these balances go back to people in Nain. I do not think you will find any documentation on them because it was destroyed in the fire in 1972, and most of them are back before then.

MR. CHAIRMAN: Mr. Condon, do you want to -

MR. CONDON: Yes, just one point, Mr. Chairman. I think at one point in time the department financed engines and boats; managers probably could remember some of those days when I guess pretty well anything that went on up there, the department would finance.

MR. WARREN: I would think that $3,400 could be a skidoo or a boat.

MR. CONDON: Yes.

MR. PARSONS: Excuse me, Mr. Warren. If you look at Makkovik you will see in number two and number three, it clearly states, a stove and motor; number five, a washer and motor, so some of these things are for household appliances.

MR. WARREN: I notice in the Nain one too, the Nain Fishermans Committee. (Inaudible) set up in the various communities all over Newfoundland and Labrador, but when you see a balance of $4,400, was this for some kind of work project?

AN HON. MEMBER: Maybe some of the managers might be familiar with that one.

MR. LYALL: That was a program we had in Nain (inaudible), and we cashed the paycheques. Those are all bounced cheques (inaudible).

MR. WARREN: All bounced cheques from?

MR. LYALL: From the project, they overspent (inaudible).

MR. WARREN: So what attempt was made to collect?

MR. LYALL: (Inaudible).

MR. CHAIRMAN: The Nain Fishermans Committee issued cheques in excess of what they had available and they are responsible for it and should be held responsible for it.

MR. MURPHY: I think, Mr. Chairman, Canada Works Project, on the next page, Mr. Warren, shows the same thing in Nain for a $1,045.52; that probably would fall in the same category or, I do not know, maybe it was I have no idea, it could be picks and shovels or whatever the case might be, but there is still an outstanding bill of $1,045.52, so you are asking the taxpayers of the Province to subsidize this Canada Works Project. I mean, the bottom line is that, that is the bottom line, and I do not know how old that is, there is no date on it but when you see something it is like a neon light that goes on and off and the same thing that committee member Warren talks about. I mean if you look through it you will see different groups and what have you. Anyway, I do not know what that Canada Works Project is, but one would I suppose, assume that these people overspent also and left a bill on the ledger in Nain that is uncollectible.

MR. WARREN: It is roughly $200,000 in the supply depots and practically all of it is more than 365 days old. Eighty per cent of it probably is more than seven years old.

MR. CONDON: I would say it was, yes.

MR. WARREN: I would like to go back again to my original question. Do you believe there has been enough effort put into trying to collect some of this? Where is the breakdown on this, is it with Treasury Board in St. John's or is it with your department in St. John's? Other than sending out a little slip to Mr. so and so saying he owes us $35.00 what else is done to Mr. so and so?

MR. CONDON: Probably not much else. Treasury Board's only input into this is that we went to Treasury with a number of these and said: look, these have been outstanding for five years, can you write them off for us? They said: well, we will write off some of them for you but there are a lot more there that you might collect on. So they have thrown them back in our lap. What we are trying to do now is dig through our files and piece together the information and if indeed there are legitimate charges and people do not pay up then we will go to the Department of Justice. On anything current we have taken a pretty hard line with people who have given us NSF cheques. We have written letters to them, mentioned the Department of Justice and we have been quite successful, but on these I can only speculate. If we do find out the information on them we will then pursue it but until then we have very little to go on. Like Antone said we will send another statement.

MR. WARREN: In a number of cases here they are employees of government, both federally and provincially, and there are avenues open where collection can be made, at least in those instances. I am surprised to see employees of departments owing bills going back over the years.

MR. CONDON: I can assure you that when we get the information back we are going to pursue it. Even some of our own employees, if they are on that list, we will take the necessary action to recover the amounts if indeed it is deemed they are legitimate.

MR. CHAIRMAN: Are your saying, Mr. Condon, that we have this list before us that is five or six years old and we do not know if they are legitimate claims or not? Have we not made any attempt to determine that?

MR. CONDON: Not that I am aware of, Mr. Chairman. We have these statements come in every month and it is only over the past couple of years that we send them over to Treasury Board to get rid of a lot of them - we are back eight to ten years - that we have made a determined effort to sort our whether they are legitimate or not and what type of action we can take to recover them. They have been there with just a statement sent out from time to time. I do not think there was any concerted effort. Now maybe Ben can elaborate on that but I am not aware of any concerted effort to collect them other than the normal monthly statement type of thing. I have not seen anything in our files where we got the Department of Justice writing letters or anything else.

MR. CHAIRMAN: Mr. Ludlow.

MR. LUDLOW: The only effort that has been made has been through the managers and ourselves and not through any legal channels. It has never been pushed through any legal channels - they have been threatened at times.

MR. WINDSOR: I guess the obvious question is, why not? There is a couple of hundred thousand dollars of the taxpayer's money outstanding, plus whatever has been written off already by Treasury Board for various reasons. Obviously, Treasury Board, perhaps wisely has said: why write this off? Why have we not asked the Department of Justice to pursue it and why have we not asked permission to put it to a collection agency, or any other remedies available to us?

MR. LUDLOW: I do not have an answer.

MR. CONDON: Mr. Chairman, I can only speculate that some of these cases, the Nain fisherman's Committee and some of those other ones, for various social reasons or whatever, government deemed it not prudent to pursue them.

MR. CHAIRMAN: In that case government should have said: We do not want to pursue them. They should have, in that same order, given you permission to write them off.

In the absence of such permission on file, we have to question: Why are we not pursuing it?

MR. DUMARESQUE: Mr. Chairman, just a quick run through the statements there. I find there are some thirty accounts that are either federal or provincial departments. Surely there is no need for government to not say to somebody, in a federal or provincial department, pay up. You cannot be concerned about social costs to somebody who has a government account there.

Earlier we said that there was some discrepancy or dispute over the actual balances - the ones in Makkovik in particular - but am I to assume that all of these thirty accounts, federal and provincial departments or organizations, are all disputed accounts? If so, can this still happen now?

MR. CONDON: I do not know if Antone might want to add to this. I know we had a situation this year that, I think, in Nain the Department of Social Services owed us some money. Some money, I guess from their office, came to the store with a purchase order, and I guess Antone said: Well, boys, we are not giving you anything. Pay us up or that is it.

Is that correct Antone? It was only after there was intervention at higher levels, and they came across with their money and squared off the account.

So we are, I guess, addressing those receivables and the outstanding charges, especially with our own provincial departments and agencies.

MR. PARSONS: I started procedures in Davis Inlet to collect some NSF cheques through the small claims court. I was told by the previous director of our department to stop.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: As I asked, can this happen again now? The first part of my questioning was: Can I assume that the thirty or so accounts that we have here with federal and provincial departments are disputed accounts - that the invoices cannot show that they are legitimate claims? Is that a reasonable assumption?

MR. CONDON: I guess there are some of them probably in dispute, but we do business on a regular basis with some of the departments, so there may be outstanding balances for a couple of months.

MR. DUMARESQUE: The vast majority of these are over 365 days.

MR. CONDON: I would imagine those would be in dispute, or certainly not sufficient documentation.

At one point in time I think everybody up on the coast had a DPO book. I think maybe that is where it all comes from. There were people running into the store with a DPO book, and proper authorizations were not there. I guess maybe that is where a lot of those accounts originated, and a lot of personnel changed. People with social services - you might have a person there for a couple of months who is writing DPO's, and the next month there is somebody else with a DPO book. Those are maybe just some of the reasons for that.

I do not know if the managers can elaborate further on that. I am sure they were aware of this, all those things arose earlier.Ray, you have been up there for the longest time. You must be quite familiar with how some of those accounts came to be.

MR. DARBY: In my Hopedale accounts here we have one - Department of Wildlife. Myself and Mr. Ludlow have been trying to collect this since I have been there - the last two years - and came to discover that we sent in our invoices to St. John's but the wildlife officer in Hopedale did not. I did the same thing as Antone; I cut him off. As Ben said, higher authority came down and said: Start issuing it again.

MR. WARREN: By higher authority, what do you mean?

MR. DARBY: Well, someone over me.

MR. WARREN: Like somebody (inaudible).

MR. DARBY: I would think so, yes.

MR. WARREN: What higher authority would you need permission from before you would start proceedings?

MR. LUDLOW: That usually goes to the minister's assistant deputy or the deputy minister. If we refuse to give another department credit then usually they will bypass us and go to the minister's office for approval. I am not saying they get it or don't get it. There are lots of times there are decisions made like that at that level, I suppose, from one deputy minister to another and from one ADM to another.

MR. CHAIRMAN: Are there any specific examples of some of these issues here, some of the ones that you have listed here that you have not been able to collect because you have been told to cease your efforts to collect them?

MR. LUDLOW: No. I have never been told to cease.

MR. CHAIRMAN: You have been told to continue to issue goods though, on credit.

MR. LUDLOW: There have been some cases.

MR. CHAIRMAN: Can you give us some specifics of those?

MR. WARREN: (Inaudible).

MR. DARBY: Pardon me?

MR. WARREN: Which department (inaudible).

MR. DARBY: The Department of Wildlife. We started re-issuing in the beginning of July or sometime around the middle of July.

MR. WARREN: This year?

MR. DARBY: Yes.

MR. WARREN: (Inaudible).

MR. DARBY: Two years now.

MR. CHAIRMAN: Mr. Warren, would you get closer to the microphone?

MR. WARREN: I would like to go back to Mr. Condon. Again it goes right back to the management, they have no authority in the community to run those stores. The manager is saying: No, I'm not giving him credit. Somebody in St. John's is saying: Yes, you give him credit. So where do you as the financial advisor fit in.

MR. CONDON: In my limited experience I think there was one case which involved the Department of Social Services. I think in that case the people were told they would pay the bill. When somebody up there on Social Services wants something right away for a client or whatever, we go ahead and issue it with the understanding that our bills will be paid. I guess that is all legitimate.

MR. CHAIRMAN: You accomplish what you set out to do.

MR. CONDON: Since I've been involved there has been very little of that. As far as that happening today I can't see it. You know, we deal on a regular basis with social services people and health care people, and I think most of the guys who come into the stores know them well enough to say: Look, you have an invoice outstanding for a couple of months. Pay up or we are going to have to cut you off. I think in the case of the social services one we were probably paid, but like I said, maybe two months later, by the time the voucher goes through the system. But I guess it brings the matter to the attention of higher officials, and it tells them: Look, somebody has to account for this. Pay the bill and keep everything running smoothly.

MR. LUDLOW: There hasn't been too much of that these late years, but I think you can relate some of these accounts back then when this used to happen.

MR. MURPHY: Back then is when.

MR. LUDLOW: I think Mr. Warren can verify that too. We had the same thing when we were managers over there. We didn't have authority. We could refuse something, but the next day somebody else would come down and say: You have to do this. It is not so much true today.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Let's pursue this because I think this is important and tells us something. A manager who is saying no more credit to a department of government because of an outstanding bill, is a good business manager. What you are saying is that somebody upstairs either in St. John's at the ADM level or whatever is picking up the phone and saying authorize this and cut out this foolishness. I mean that is the indication I am getting from this conversation. Now, if the bill is eventually paid, you know, I can understand it but there are outstanding bills here that I am hearing are four and five years old.

AN HON. MEMBER: Yes.

MR. MURPHY: Obviously you're referring to somebody picking up a phone and saying: Mr. Ludlow: give it to him, I'll take the responsibility for it.

MR. LUDLOW: This happened years ago, yes. But like I say, not so today. I think Mr. Condon said there was an agreement to pay before anybody said to go ahead and give the manager the go-ahead even.

MR. MURPHY: But there was no transaction of paper to take the manager off the hook, and that's why we're looking at some of this outstanding stuff here in front of us today. Is that what you're saying to me?

MR. LUDLOW: I didn't see any. I don't know whether the managers received anything in writing or not.

MR. MURPHY: Well, I'm glad to hear that it doesn't happen now, that that exercise is over. I think what we're seeing here, as Mr. Warren has already indicated, is $200,000 of bad debt that somebody probably said: don't worry about, I'll take the responsibility for it. Here it is in August of 1992, and nobody has taken responsibility for it. It's still on the books. It belongs to every Newfoundlander, no matter where he lives, if he lives in Nain or he lives in Parson's Pond, he's picked up a proportionate share of the tab for this.

If I might, Mr. Chairman. Antone, down here, right from the bottom of page 2 up in Nain, I see a weather service. Is that DOT or MOT or is that a private...?

AN HON. MEMBER: (Inaudible).

MR. MURPHY: These people with accounts outstanding from ninety to 365 days, with $2,000 on the books, federal agencies....

MR. NOCKASAK: Yes. That's federal you're looking at, (Inaudible) Nain, that's all bounced cheques.

MR. MURPHY: All bounced cheques?

MR. NOCKASAK: All bounced cheques, yes. He bounced cheques in the store in Nain.

MR. WARREN: That's three or four years ago?

MR. MURPHY: I see. So he was providing the weather service and he changed cheques at your store. When you said weather service system, the first thing is a little bell goes off, and you think federal people, you know. But you're telling me that's a private individual?

MR. NOCKASAK: I don't even know where's he's to now.

MR. MURPHY: So if I might, Mr, Chairman, just one more question.

MR. CHAIRMAN: Go ahead.

MR. MURPHY: Mr. Ludlow, I think I understand what I'm hearing. There is a system in place now where a manager of a store can refuse credit to a government department, or anybody who's outstanding on the books. It would seem to me to make good business sense that somebody would shortcut this without paper on a phone and say: look after this, et cetera. Is there no policy in place now that would stop this? I mean, I can understand emergencies, I can understand certain circumstances. But is there still no policy to stop that at the minister's level or the deputy minister's level, or the ADM's level?

MR. LUDLOW: Not that I'm aware of, no. But these things don't happen now. Not to my knowledge, anyway.

MR. MURPHY: So what you're saying is that most of this was a few years back. There was a lot of this: go ahead and do it and I will take the responsibility?

MR. LUDLOW: Yes.

MR. MURPHY: The responsibility is now in front of this Committee and falls on the shoulders of these people who have been short-circuited by somebody in senior positions. Is that what I'm hearing?

MR. LUDLOW: Years ago.

MR. MURPHY: Yes.

MR. LUDLOW: Yes. Not today.

SOME HON. MEMBERS: (Inaudible).

MR. LUDLOW: In MakkovikI I refused credit to that company last year, last fall, because I had not completed my review on the account at the time. They did try to go through the system up above, but the system would not overturn my decision. I got called right from the top, almost, asking me what the problem was, and I told them, and they said: okay, fine, that's it.

MR. MURPHY: (Inaudible).

MR. CHAIRMAN: Thank you, Mr. Murphy. Mr. Prichard, can I just ask you, as it relates to Postville, I see several outstanding amounts here for 90 days to a year. Many of them are government departments, to whom I understand you still issue credit, there are some individuals as well. Can you tell us why these individuals were given credit, particularly looking at the 6th, 7th, 8th, 9th, 10th names down, plus NSF cheques at the bottom of the page in one of the same names? These all seem to be brothers or of the same family, could you tell us why credit was being issued to those people?

MR. PRICHARD: There is no credit being issued. Those are payments on their accounts. Those figures over there are when the last action was taken, within the last zero to ninety days, ninety to 365 or over 365, and they have made payments on their accounts in those days.

MR. CHAIRMAN: So there has been no increases credit?

MR. PRICHARD: No increase in credit, no.

MR. CHAIRMAN: So some effort obviously is being made in these cases to collect. That debt is an older debt, I assume?

MR. PRICHARD: It is an older debt and they have been paying ten dollars or twenty dollars or whatever.

MR. CHAIRMAN: That is as a result of efforts from you -

MR. PRICHARD: We send statements at the end of every month.

MR. CHAIRMAN: Do the statements go out from the individual stores, is it your responsibility as a manager to issue those statements or do they come from (inaudible)?

MR. PRICHARD: Well my assistant manager prepares them when he is finished the month-end statements and everything, he prepares the statements and sends them in.

MR. CHAIRMAN: So he does that at the local level and then it is your responsibility to try to collect.

MR. PRICHARD: Yes.

MR. CHAIRMAN: Okay -

MR. DUMARESQUE: Mr. Chairman,

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: I noticed eight or ten accounts from individuals who are now deceased, what is the policy there? I am wondering also, Mr. Condon, why Treasury Board would not authorize forgiveness there, and certainly if they would not, why wouldn't there be some action against their estates, if there are such things?

MR. CONDON: I think what Treasury Board did - and the list was quite extensive - they took everything, they wrote off everything pre-1985; maybe those individuals were not deceased at the time. I think in most cases if the person were deceased we would not have a problem getting approval for write off.

MR. CHAIRMAN: Would you have a problem in trying to get a claim against the estate perhaps, if there were any assets? Have you taken that kind of action?

MR. WARREN: Knowing the deceased, and I know most of them, there is no estate.

MR. CHAIRMAN: That is why I asked the question. Have there been any attempts or is it just a waste of time? If so, why don't you just tell Treasury Board: this is a waste of time, the gentleman is deceased, he has no assets, he has no estate, let us write it off. In my experience I think Treasury Board would write it off quite readily.

MR. CONDON:I am not aware of any, now the managers might be. There might have been cases where estates would pay off any outstanding balances but I am certainly not aware of any.

MR. CHAIRMAN: Do any of the managers have any recollection of any periods of times when estates have paid balances due, before?

MR. CONDON: No.

MR. CHAIRMAN: Has anybody ever tried to get it from an estate, let me ask that question?

MR. CONDON: I do not think there are any estates, as Mr. Warren stated.

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: Yes, Mr. Chairman. I would like to go back to Postville and this is before (inaudible) opened an account there, the third to the last account. Now, I understand the last time this company was in Postville was a number of years ago. What is the reason for this $1,500 - is there a dispute with the invoices, is there a dispute as to whether the goods were delivered, what is the problem?

AN HON. MEMBER: I do not know. I do not know about that account. We do send statements but they all come back.

MR. WARREN: You mean they have been returned -

AN HON. MEMBER: To that last address -

MR. WARREN: - so that is as much as -

AN HON. MEMBER: That is as far as I have gone, yes.

MR. CONDON: Mr. Chairman, I think that company may have gone out of business a number of years ago. I do recollect some other difficulties with them.

MR. CHAIRMAN: Some difficulties here I know.

MR. WARREN: I notice in the Hopedale statements it's almost like one family had a monopoly on things owing $5,000 altogether. In fact even a man and his wife have an account. Is this for their groceries, boats, motors? I guess it must be quite old. Other than your statement going out there is nothing else being done to collect that?

MR. DARBY: Mr. Warren, most of these accounts that I can attach to here go back over ten, twelve and fifteen years. At that time the stores dealt in everything: engines, fishing supplies. As Mr. Ludlow stated, if they had a bad year we just carried the debt.

MR. CHAIRMAN: Mr. Warren, are you finished?

MR. WARREN: Yes.

MR. CHAIRMAN: Do you have any questions, Mr. Dumaresque?

MR. DUMARESQUE: I have no questions right now.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Thank you, Mr. Chairman. I think I heard Mr. Condon say that in 1985 Treasury Board wrote off most of the debt or all of the debt, and this debt would seem to be incurred from 1985 onward. Is that what I am hearing?

MR. CONDON: Yes, well that was my understanding, that they took a lot of the ones that they could relate to 1985 or prior to that. But some of the larger amounts - and I refer again to the Hydro one, and there is one there for Postville Ship Building and a few of those - they didn't write off. They looked at the dollar amount to. There was a number of them for $1.50 or $10 and they basically took those all out, but they left a number of the large ones in there that may be going back long before 1985.

MR. MURPHY: Mr. Ludlow, I walked away from it before, but I can't walk away from it in reality, Sir, and I don't want to put anybody in an awkward position. I say to you, from your response, it seems that people in higher positions short-circuited your decisions or managers decisions over time. Do you know some of those people who might have done that?

MR. LUDLOW: No. I can't remember now. It has been sixteen or seventeen years since I was a manager up here.

MR. MURPHY: Oh, so you are going way back?

MR. LUDLOW: Yes.

MR. MURPHY: Because this is here inside of me, and I certainly don't want to resurrect anything, but I think in all fairness we are dealing with public funds here, and if we are going to function as a public accounts committee we have to ask the questions. I mean obviously you understand that. That is why I asked. I am just glad your response was what it was. At least I got it out of the way.

MR. LUDLOW: I could never remember back that far -

MR. MURPHY: No.

MR. LUDLOW: - or even remember what happened.

MR. MURPHY: And it has (inaudible).

MR. LUDLOW: I know that it did happen to me when I was up here years ago. Some of these decisions were probably not decisions made by the managers, they could have been made by somebody from outside the actual store operation itself other than the manager.

AN HON. MEMBER: Are you talking about politicians or assistant deputy ministers?

MR. LUDLOW: It could have been politicians, I suppose, in some cases.

Back when these stores were operating it was quite a bit different than it is right now. We were working for every other department other than the one we were actually working for. We operated the fish plants, we operated the power plants, we issued any assistance requested by social services, police work, and everything else at that time. So we were dealing with a whole lot of social issues and I guess politicians were involved to a certain extent, it was more of a social thing than it is right now. It's basically now a store, a retail store operation, but then it was more of a social program I suppose. The store operation itself was only a small part of what we were doing.

MR. MURPHY: So the format has changed, is what you're saying.

MR. CONDON: The format has changed quite a bit.

MR. MURPHY: Rather than the stores wasting $800 or $900 a year on postage to send invoices to these accounts - quite a few of them would seem, Mr. Condon, not to be collectable. Just let me ask you in a general sense here, if you had the opportunity tomorrow to recommend - and you can walk away from this if you want - what would you do with most of this?

MR. CONDON: I'd recommend to Treasury Board to write them off.

MR. MURPHY: Yes. That seems to be -

MR. CONDON: Now, I guess probably you could go through that and pick out thirty or forty, and say: alright, these ones are collectible. The rest of them? Clean it off our books, save us time and money.

MR. MURPHY: Have you recommended that? That you sit down with somebody from Treasury Board and say: look, I think these are collectible? I notice the managers and you get together once a year for a financial meeting. I don't know when that meeting is - but if you ask the managers: look, what do we have here that's collectible? Take that package into Treasury Board and say: the managers in their wisdom feel that this is collectible and the rest of it is gone. Have you thought of that?

MR. CONDON: Yes, that's what we're hoping to do, maybe later on in the fall, after the managers have had time to look at all of these. Get together and say: look, give us your list of ones that are collectible, and the rest we'll just tell Treasury Board that is as far as we can go, we can't find the records on them, there's no basis for the charges, and write them off. I think we've whittled that down to thirty or forty at the most.

MR. MURPHY: You know, I hear from a manager that he sends out a statement every month and forty-two cents and three weeks later it's returned marked address unknown. We go through this regularly. This gentleman here is doing the same thing. I would think that a lot of it is the same. Your answer is obvious, I guess.

Thanks, Mr. Chairman.

MR. CHAIRMAN: We have had a lot of questions on this issue, perhaps we should move on. We spent a lot of time on this particular issue, important as it is, but we want to get into another line of questioning. If there are other questions on this, ask them by all means, but, perhaps we could move on.

MR. WARREN: I guess one of the comments is that most of these go back pre-1986. I think Mr. Condon said two or three years ago or five years ago Treasury Board reviewed those accounts. Are you telling us the department has not gone to Treasury Board in the last number of years to review those again? One person there is deceased, I know that person died seven years now and there is no way to get anything from that estate. Surely goodness Treasury Board should have been notified over the last seven years about this person being deceased.

MR. CONDON: We sent them over to Treasury Board maybe a couple of years ago, or six or eight months ago, it may be longer than that. We did get approval from Treasury Board to write off a lot of them, then they came back with another little note saying: look, pursue the rest of these, then come back to us again, this type of thing.

MR. WARREN: So when they come back and say pursue, what do you do?

MR. CONDON: If the managers say these are legitimate charges, we will then advise the Department of Justice to commence collection efforts.

MR. WARREN: So, has that been done?

MR. CONDON: No. The managers have not finished going through all of these and you might appreciate that this is going to be an extensive digging exercise in some cases, so -

MR. WARREN: But a Treasury Board notice was sent two or three years ago saying to pursue them.

MR. CONDON: Yes.

MR. WARREN: After being told two or three years to pursue them, this is some enforcement.

MR. CONDON: No. It was not two or three years ago, it was only maybe several months ago. We did get a TBA writing off so many of them and requesting us to pursue the balance of them, and that I think our financial manager has written the store managers I guess earlier this spring. I cannot recall when the letter came out but I think (inaudible) asked you to pursue those, especially the outstanding ones?

MR. DARBY: At the end of March, yes.

MR. WARREN: So (inaudible).

MR. DARBY: We were supposed to do another check list on it and fax it in to Mr. Rowe, which we did -

MR. CHAIRMAN: Is every store equipped with a fax machine now?

AN HON. MEMBER: Yes.

MR. CHAIRMAN: Are you finished with that line of questioning, Mr. Warren? I just want to get into the purchasing again, a little bit. This procedure with purchasing, do the store managers make up a list and sent it to Goose Bay? Is it reviewed in Goose Bay, is the ordering done in Goose Bay or is it done in St. John's?

MR. CONDON: Partly in St. John's and partly here. The immediate requirements are done here at Goose Bay. There are two orders placed with the St. John's office during the year. One is placed during March for the summer supplies and another one is done in July for the winter supplies. Everything in between is purchased through Goose Bay.

MR. CHAIRMAN: How are those lists generated, do the managers all send in the list of things that you will want to Goose Bay for the spring and winter? Let us deal with those two first. In the Goose Bay office you then put that together as one large order and send it into government purchasing or, what do you do?

MR. CONDON: No, those orders are placed through the St. John's office.

MR. CHAIRMAN: St. John's office.

MR. CONDON: It does come from this office (inaudible).

MR. CHAIRMAN: Do they go directly to St. John's or through the Goose Bay office?

MR. CONDON: No, through St. John's with these two orders.

MR. CHAIRMAN: So the managers send their request directly to St. John's?

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Emergency supplies then, you order through Goose Bay.

AN HON. MEMBER: Emergency supplies, fresh fruits, vegetables and weekly orders are placed through here. I would say the dollar value must be equal to what's sent to St. John's.

MR. CHAIRMAN: Are these done by direct purchase orders issued from the Goose Bay office?

AN HON. MEMBER: Standing offers and direct purchasing.

MR. CHAIRMAN: Is the standing offer called each year or every couple of years?

AN HON. MEMBER: Each year, I think. I do not think they would give you a price for less than twelve months anyway.

AN HON. MEMBER: No; in fact it is hard to get one for (inaudible).

MR. CHAIRMAN: So you have the standing offer and you then get the requests that come in from each manager and then your office in Goose Bay issues the request.

MR. LUDLOW: What we do then is go out on tender with them.

MR. CHAIRMAN: But you have a standing offer, you told me. You have me confused.

MR. LUDLOW: In some cases. If it is something like office supplies, but with the fresh fruits and vegetables this is done through a tender system, the same as -

MR. CHAIRMAN: Tender or invitation. How many suppliers would there be, for example, for fruits and vegetables?

MR. LUDLOW: (Inaudible).

MR. CHAIRMAN: How many suppliers would there be in Goose Bay for these types of commodities?

MR. LUDLOW: Two.

MR. CHAIRMAN: Two? So your tendering amounts to phoning two of these or do you actually have to publish a paper?

MR. LUDLOW: No, we do it by paper.

MR. CHAIRMAN: You have to do it by paper?

MR. LUDLOW: Yes. It is faxed to them; they come back with the figures; we decide which is the lowest; and then we fax that off to GPA and GPA would issue us a number.

MR. CHAIRMAN: So you do not actually publish a tender in the newspaper?

MR. LUDLOW: No.

MR. CHAIRMAN: You fax each of those two suppliers a copy?

MR. LUDLOW: It is directed to these two suppliers.

Then there are cases where we issue direct purchase orders, where we have to go probably to the co-op and to northern stores for things.

MR. CHAIRMAN: So there are certain limitations on what you can do by direct purchase orders?

MR. LUDLOW: Yes.

MR. CHAIRMAN: So that is all handled here in Goose Bay?

MR. LUDLOW: That is all handled through Goose Bay.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: In your day-to-day system of purchasing now, and having been involved so long, do you see that there is a better way to do it?

It would seem to me, I suppose, if St. John's works it works, or whatever the case might be. Do you think the system could be streamlined? Is there a way to save a dollar in purchasing?

MR. LUDLOW: Within the system that we work in, no, I do not see where we could. Everything is tendered, we look for the better prices. In fact the buyer here will probably, lots of times, instead of doing telephone calls, go from store to store to find out where he can get the better price.

MR. MURPHY: Let me, if I might, ask some of the managers: Do you find the purchasing system restrictive now? Would anybody like to comment on that? Do you find it restrictive in the sense that you cannot get what you need as fast as you would like?

Is there bureaucratic red tape that is costing you time and money? Do you feel the system is satisfactory as it is? You gentlemen, of course, are on the front line.

MR. DARBY: The only thing is that it takes so much time; it is so time consuming. By the time we place an order it could be two or three months or whatever to get this thing. If I need it right away, I do not get it right away in a lot of instances.

MR. MURPHY: But what I am trying to address, Mr. Darby, is that if that happens to you in December month when things start to freeze up, it could end up costing the system a lot more money if it has to be flown in, if somebody did not take your advice in July when you placed your winter order and had it forwarded while the coastal system was still open. Does that ever take place?

MR. DARBY: Pardon me?

MR. MURPHY: Does that ever take place? If you order, let us say, as I kind of talked about this morning, 100 sacks of flour - I am sure you order much more than that - and somebody reduced it to twenty-five and you found yourself looking for flour in January, are those kind of things happening now?

MR. DARBY: No, Sir, they are not.

MR. MURPHY: Not on a continuing basis.

MR. DARBY: No.

Like Mr. Parsons said this morning, your basic stuff - they do not touch that order; and I have not had any problems with the rest of my orders.

MR. MURPHY: So that flows pretty well?

MR. DARBY: Yes, Sir.

MR. MURPHY: Okay, thank you.

MR. CHAIRMAN: Any questions down on the other end here, gentlemen?

MR. WARREN: Yes, I have some questions.

MR. CHAIRMAN: Mr. Warren, go ahead.

MR. WARREN: Now I notice that the managers have a copy of this book.

AN HON. MEMBER: All we have here, Mr. Warren, are the invoices (Inaudible).

SOME HON. MEMBERS: (Inaudible).

MR. CHAIRMAN: That's it. Page 49 is the first page of the invoice. There's no number written on that one.

AN HON. MEMBER: D-10, I think, is the....

AN HON. MEMBER: D-10?

MR. CHAIRMAN: D-10? On top? Yes.

MR. WARREN: I notice there a person by the name of Mr. Hudson signed for thirty-three pieces of goods from Newfoundland Multi-Foods. You have forty-seven pages. I notice the weight is 610 pounds, and 256 pounds, and that's up 866 pounds. However, I see an invoice from Mr. Hudson for 1,198 pounds. Is this checked very carefully when it's taken from point A to point B? The total weight in those three shipments adds up to 866 pounds. So there's roughly 300 pounds of freight that you're charged for that I don't see if you received or not. Ray, since it is in Hopedale, can you explain why the difference? Or was it put in different crates after Mr. Hudson picked it up?

MR. DARBY: Mr. Warren, with this freight from Hudson, as you know, he has a smaller plane. I would say it came in on two shipments. We do check when we can at the airport. But if it's in the dead of winter my main concern is to get it over to my building before it freezes. But we do try to make a check of it coming off. But these invoices from Multi-Foods are usually faxed in, so we have an idea of what's coming in. Most times the winter our invoices checked out with our freight.

MR. WARREN: There are no discrepancies at all?

MR. DARBY: Very rarely.

MR. WARREN: How about you, Mr. Parsons?

MR. CHAIRMAN: Mr. Anderson, you wanted to contribute something here.

MR. ANDERSON: Yes. I wanted to say something with regard to what Mr. Warren said about the difference in the pounds. At the same time, Mr. Warren, we checked out a bill that Mr. Hudson brought to us to sign and send to St. John's for payment. We checked out the bills that he gave us and they were accurate. We check every one of them. When we get freight from five or six different companies - furnace parts, whatever - and each day that he holds that I mark them down. Because normally I go with him to get the freight and (Inaudible) to his pick up, and to his aircraft, and we do verify all the goods that he does carry for us.

MR. WARREN: Yes, but where's the other invoice, if that's the case?

MR. ANDERSON: The other invoice? Like I said, it's probably where I purchased two cases of Miracle Whip or two (Inaudible). Here are two cases of Miracle Whip at forty-nine pounds each, here's (Inaudible) -

MR. WARREN: Yes, but where's the invoice?

MR. ANDERSON: I pass the invoice into the boys, to each store, as the stuff goes in.

MR. WARREN: Yes, but what I'm getting at, it's not here.

MR. ANDERSON: (Inaudible).

MR. WARREN: Yes. I have no problem with what you're saying. But we're given this by the Department. You're telling us that we're not given all the information.

MR. ANDERSON: That's true, sir, I see your point.

MR. CHAIRMAN: We can't reconcile here the number of cases shipped, the number of cases received, the weight received, and in many cases it's very difficult to know what even was being sent. To be a devil's advocate, I don't know but it's the manager's having a skidoo shipped up for himself at the same time as part of a government shipment. I'm not suggesting that for a moment. But you see the concern, there is no documentation to show this.

MR. ANDERSON: I can guarantee you that we're not being overcharged by Mr. Hudson. (Inaudible) this is what we sent on that plane at the time.

MR. CHAIRMAN: The store manager is equally satisfied that what they're being charged for shipment actually is received at your stores? Do you feel that there are adequate safeguards in place that you know what was being shipped to you, that you know what's being charged to your store? Because this charge will come in from outside and be charged against your store. Are you satisfied that you are actually receiving everything that's being charged to you? Mr. Parsons.

MR. PARSONS: You call Clarence Bruce at Multi-Foods and he'll tell you I'm the biggest thorn in his side he ever knew. Because I weigh everything that comes into my depot. If I'm short by one pound he's notified. So, yes, we do check. I double check every item.

The thing is, we don't see this waybill from Hudson's, so we can't - this is the first time I've seen those waybills. But those there, Wally faxes them in or the company faxes them in to us, so we know what's coming, and I do verify what's on here with what I get. However, I don't know see those waybills here from Hudson.

MR. CHAIRMAN: Who signs those?

MR. PARSONS: Those waybills? I don't know, because I've never seen them.

MR. CHAIRMAN: The customer signature here on this one, on the....

MR. WARREN: (Inaudible).

MR. CHAIRMAN: On the one that I'm looking at.

MR. PARSONS: Maybe Mr. Jim Anderson, Makkovik, who brings freight from the airstrip to us, maybe he signs those. But I've never seen them. I've never seen them even when I was in Davis Inlet. I didn't see them there either. That's the first time I've ever seen one.

MR. CHAIRMAN: I'm looking at number 201-2, which is on page 51, for example. There is a signature at the bottom there, signed customer signature.

AN HON. MEMBER: Yes, okay.

MR. CHAIRMAN: Pilot signs it, and customer signature. Who is the customer? Is that the person shipping it? Or is that the person receiving it in wherever this one happened to go to?

MR. WARREN: That's the stock handler.

MR. DARBY: That's the stock handler. One of our workers will sign.

MR. CHAIRMAN: Okay. So one of your employees verifies at the dock that this actually did arrive.

MR. DARBY: This is the stock shipped by air. But one of us will be at the plane when it comes in.

MR. CHAIRMAN: He checks to make sure the number of pieces were received.

MR. DARBY: Yes.

MR. CHAIRMAN: When you get to your store you check weights and things like that?

MR. WARREN: Excuse me, Mr. Chairman.

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: So you know the number of pieces but you don't know the weight. Is that what you're saying?

MR. PARSONS: No. What I'm saying, Mr. Chairman, is that when Wally Anderson goes to Newfoundland Multi-Foods to check the product before it comes out - which he does very often, I must say - this one is either faxed to me by Wally from our office or from the Newfoundland Multi-Foods office. You'll see under pounds there, the weights are always marked in, what the pounds are that are being shipped to us. Also, the quantity ordered and quantity shipped.

What I do, when I receive my shipment, by Mr. Hudson or by Lab Air, or whoever, I then take those invoices and I check what's coming through my warehouse door piece by piece. Of course, I don't weigh a case of grapes, because I know the weight of it. I don't weigh a case of bananas, because I know the weight of it. But if I'm receiving pork chops or hamburger meat or chicken legs, anything at all like that, I go and weigh it all and record the exact weights. If I'm short by a kilo I'll note it on my receiving report and Mr. Clarence Bruce at Newfoundland Multi-Foods is notified. I guess corrections are made.

But like I said, this is the first time I've seen this waybill from Mr. Hudson. So I can't say what he has charged the depot where I've worked. But I do know that everything is checked coming in. If there are any shortages, they're notified, both Newfoundland Multi-Foods and our department here in Goose Bay.

MR. CHAIRMAN: Mr. Condon.

MR. CONDON: That is the point, Mr. Chairman. We get invoices from Multi-Foods for the shipment of the produce, which is signed and all this stuff, and there is a receiving report attached. In addition to that maybe a month later we will get an invoice from Hudson or Northern Light, whatever company, which will say: I am charging you for so many pounds of produce at forty-two cents a pound, whatever he charges for delivery to Makkovik, and he will refer to invoice such and such, three or four different invoices which are probably Multi-Foods invoices which have the weights on them, so he will refer to those invoices and the weights I guess will jive with what he is charging us, then I think, you or Wally would check the weights that Northern Lights charges us with the amounts that are shown on the invoices from Multi-Foods, the amount they shipped. We only get invoices from Multi Foods and from any other companies, but months later we will get maybe a batch of them from George Hudson or Labrador Airways that say: this is the amount of freight we have flown for you, these are the invoices to which we have referred, the weights are on them so you owe us a certain amount of money and that is all.

All signed by Ben and Wally and cross checked to previous copies of the invoices. That is my understanding and Ben can elaborate a bit more on that.

MR. LUDLOW: Every thing is cross referenced and checked out but as Wally is saying, there are certain invoices there but there are other invoices pertaining to that same shipment. Everything that went up on that flight did not necessarily come from one supplier.

MR. CHAIRMAN: That indicates that the firms need some sort of a shipping waybill of its own that says: we are shipping these goods to such and such a store, this much from Multi-Foods, this much from the Dairies, so that the store manager knows what is being shipped by Mr. Anderson to him. We have to know what we are being billed for by the transport company.

MR. LUDLOW: Yes. In fact, I am already in the process of doing up some forms whereby it can be received at the other end by someone in the store, someone to receive it up there and not only that, but for the transport company to sign these bills on this end, sort of a waybill type of thing.

MR. CHAIRMAN: (Inaudible).

MR. ANDERSON: (inaudible) faxed immediately to each depot. The purchase order cannot be sent on to St. John's unless we have a copy of the receiving report. If the committee, Mr. Warren, are thinking it would be more appropriate, then certainly if we do get extra items through for shipping by Mr. Hudson, then if need be we can certainly include a copy of whatever we buy and put it on that invoice for verification.

MR. CHAIRMAN: Could I just ask this general question? The airlines you are using, is that the only service available, is that a regular service or is that a charter (inaudible).

AN HON. MEMBER: No. There are several companies which are flying freight up the coast. Hudson has flown a fair amount to Postville, Makkovik and Hopedale this past season because his rates were lower than that mail subsidy rate, not much but it was a cent a pound so we had to go with that rate.

MR. CHAIRMAN: (Inaudible).

AN HON. MEMBER: Yes, we do.

MR. CHAIRMAN: Mr. Anderson.

MR. ANDERSON: While we are on the topic of fresh fruits and vegetables, I would like to bring up a couple of things that make my job very frustrating. We send our tenders to the local wholesalers here and of course we have to accept the lowest bid. Sometimes the difference in the tender is less than $200. One company can guarantee us our fresh fruit and vegetables ready for shipment at 10:00 on Tuesday morning. The other company cannot guarantee us the product until late afternoon on Thursday. When we are talking about a loss or a depreciation, if the weather is bad on Tuesday and Wednesday and we get our product to the coast on Thursday, we have Thursday and Friday to sell it. If the other company gets the contract because they are the lowest bidder, our stuff is not ready to go until mid Thursday. If the weather is bad our stuff sits there. We get up the coast around 5:00 or 6:00 on Friday and our stores are closed on Friday and Saturday, and that is really frustrating, for the sake of a couple hundred dollars the difference between a good product or a bad product.

The other one is the airlines. One airline company is a cent a pound cheaper than the other one, and again we have to go with the cheapest airline at one cent a pound. One individual carries 1,000 pounds, so if the weather is bad and we apply after hours, when we go into Hopedale with three loads Mr. Darby will tell this guy: We have a plane coming in Saturday morning at 9:00. According to the (inaudible) if I go down and he unloads the plane in less than three hours, the plane goes again at 3:00 and he gets another three hours and if the plane goes in at 6:30 that night he gets another three hours. While in fact for less than one cent a pound we have aircraft that could take 3,000 pounds and get all the freight there in one shot. The guy would spend just three hours overtime instead of sending the aircraft three times with 1,000 pounds and the guy getting nine hours.

MR. CHAIRMAN: May I just interrupt? Why would you not invite your tenders to specify an aircraft that is capable of carrying a certain amount?

MR. ANDERSON: According to regulations to my knowledge.

MR. CHAIRMAN: That is all you can do.

MR. ANDERSON: Yes.

MR. CHAIRMAN: Specify the size and type of aircraft. And the same is true with the supplier who can't supply until Thursday, your tender should state goods to be supplied on Tuesday. That is his problem then to get it here on Tuesday if you choose to pick. That is the way it goes.

So often I have seen the government's main problem the specifications for a tender call. You are not being specific in what you want and what you need for your specific conditions.

MR. WARREN: Mr. Chairman -

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: For the sake of $200 or $300 dollars. I think when we are looking at the income statement that we were discussing this morning, this $553,000 could be much more reduced if we listen to what this man has been saying because you are talking nine hours overtime which is tied into this income statement. We are talking about a plane coming in three times, you talk about depreciation of goods, because it is Saturday, Sunday and Monday before you can sell it. So I think it is just probably the way that the operations are running. It is a government operation and it is not working.

MR. CHAIRMAN: The point I was making also, Mr. Warren, was that if he had the flexibility and freedom that private enterprise would have to make those types of management positions, yes, but he doesn't. We all have to work within the constraints of public tendering and government policies and procedures and all the rest of it. I am simply suggesting ways and means that you can use the system as it is. You have to learn how to use the system - that is what I am saying to you, I guess - so that the system doesn't hold up progress, that you are given that flexibility.

MR. ANDERSON: The other part that I would like to just touch on is, sometimes you get a call saying: you know, you sent bad food into the coast. Well, I doubt if the people on the Committee understand the situation that we are in in northern Labrador, here in Goose Bay.

MR. CHAIRMAN: Let me say, Mr. Anderson, just to interrupt you for half a second, we are learning a great deal today and getting a much better feel for it. That's precisely why we're here today. I'm sure I speak for all the Committee when I say we are enjoying this kind of an interchange with the managers of the stores.

MR. ANDERSON: Sir, what I want to say is, if we do have a tender, and we order, let's say, 800 pounds of fresh fruit and vegetables for our stores. So it goes on tender. So Multi-Foods is awarded the tender. We say: okay, we want you to bring in from Montreal $8,000 worth of freight for us on Tuesday. So if the freight gets here on Tuesday and the weather is bad Wednesday, Thursday and Friday, and we can't fly, we're stuck with that $8,000 worth of freight. I can't go back and say: here's your freight, I don't want it.

So it happens once in a while our product is marginal and is almost half-bad. Like, all the other stores here in Goose Bay, they go through the same companies. The aircraft picks and chooses, and go and pick their's up. Well here we are, we're stuck with $8,000 worth of fresh fruit and vegetables, and two or three days later we can't just go back and say: listen, that $8,000 worth of goods, we don't want it. Because next week, if you want to bring in more product, if you go back a second time you say: listen, buddy, look, you just stuck me with $8,000 worth of goods, I don't want your business.

It is a very difficult situation at the moment that we're dealing with. At times, there's a lot of controversy by the people. I suppose where we have to bring in extra freight, you can't really blame them (inaudible). It hurts me some times to see the way government operates, as mentioned on the tendering system, the chance of getting goods out there in a hurry is the difference between a good product and a bad product. But I think we should have some firm guidelines because if I go back there now, or like when we start flying, and if I give the contract to someone who can have the stuff in on Tuesday, the other guy is going to go back and he's going to call up St. John's, the minister, and say: look, what's your guy in Goose Bay doing? He's breaking every rule in the tendering act.

So, all these things have to be taken into consideration. They're touchy. But, honest, if you want to give the people on the coast a real good service, then someone up above is going to have to write the rules and regulations, so when the time comes for me to make a decision on whether I get a good or bad product, it's there in black and white. Then, next day, I will not have a call from the minister saying: you're breaking the tendering act.

MR. CHAIRMAN: Mr. Condon. Would you like to address that? We're all in St. John's isolated in our ivory towers.

MR. CONDON: I guess as a government operation we have to be sensitive to the public tender requirements. We've had a lot of discussion, both Ben and I, about airline companies coming in with one cent below the other one, and saying: well should we go with them? They have smaller planes, they don't provide a service, but according to the strict interpretation of the tendering act they're cheaper. I can appreciate that company's predicament too. If he doesn't get the tender he's saying: look, what's government doing, there's discrimination, I'm providing a cheaper service? It goes on and on.

I realize maybe there is something we can do. Maybe our specifications to address some of those concerns, the same as Wally mentioned about the shipment of fruit. We've talked about that a number of times, about getting it in on Tuesday where you have the whole week versus getting it in on Thursday. Sure, Tuesday gives us lots of flexibility. But then you have another company there. We would like to see a bit of competition too. We wouldn't want to throw all our business one way, because after a while then that company gets a bit complacent. Those suggestions you made about wording our tender documents differently is certainly something we'll take under consideration and may discuss with GPA. I know GPA has of late been quite flexible in dealing with, and they can I guess appreciate some of the unique problems we have in shipping goods up the coast.

MR. CHAIRMAN: Would it not be possible, Brian, to give a standing order for so many hundred pounds of grapes, say, to a company? So that when Mr. Anderson needs ten cases to go out this Friday he can go pick them up, he already has a standing price on standing orders. Even if he did this on a three-month basis. Even if it is renewed and recalled every three months.

MR. CONDON: We discussed the standing offer issue on a number of occasions. I think a lot of the suppliers are a bit leery with standing offers. They say: we can't hold our prices, especially with fresh fruit where it goes up and down. You know if you have a frost down in California or if you have something else, the prices vary quite substantially. It would certainly make life a lot easier for us if we could be assured that we don't have to bother about tendering. We know on a Tuesday that there's so much fresh fruit and vegetables and all this stuff is going right to Lab Air. It's being handled by Canada Post. Wally and the others don't have to bother at all. It's going right on to the coast.

MR. CHAIRMAN: Let me ask this. Are there any trends in that? How much variance is there in the amount of fresh fruit that you would order each week? I mean, are we not able to say that for the next ten weeks we're going to need ten cases of grapes a week, so that the supplier knows that he is going to have to supply them? Can we not then call a tender for a hundred cases of grapes to be delivered ten cases at a time, that sort of thing? I think the suppliers would sort of learn to live with that. You may pay a little bit more some days but a little bit less others.

MR. ANDERSON: It's very difficult because if you're going to need ten cases say for this week, okay, say for today, or this week, and the weather is down, so the boys get the ten cases of grapes Friday evening, and you know, then you have ten more cases coming on Tuesday. You're going to be caught with twenty cases. We have to monitor almost from day to day.

Also, another point I forgot to mention too, is that during the winter months you might have the best kind of day, nice and sunny, but when the temperature goes far below, you got to make a decision. Do you send your product up the coast? When it gets to say Nain, or Makkovik, you got your fresh fruit and vegetables now, it's -60 below, or with the wind chill factor it would be -85, you have four miles to cart your fresh vegetables by skidoo from there down to the airstrip. So do you send it today? You have all these factors. I've gone through St. John's and done the big tenders and, I mean, there's a lot of work involved. I'll tell you, it's nothing compared to trying to get the orders in from Goose Bay under these conditions.

We've taken our stock out to the aircraft and thrown sleeping bags over it until we get it on board the aircraft and then put the big (Inaudible), and you call the boys and say you have this big box for you, but always (Inaudible). The worse part is you don't know from one day to the next what's going to happen.

One guy has an aircraft, knows that he can fly 1,000 pounds, we have 8,000 pounds for the coast. It'll take him two days to fly our freight, with eight trips to the coast, whereas Lab Air for a cent more per pound, with the two Twin Otters, can have the whole 8,000 pounds gone and delivered within four and a half hours.

These are some of the obstacles that we run into here. Believe you me, sir, it's frustrating at times, to say the least.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: A question, Mr. Chairman, that obviously comes to mind is, appreciating the tendering system as it applies, and giving everybody an opportunity on a fair playing field, there are situations that exist in Labrador that are unique, I suppose. Mr. Anderson, makes a good point. At the end of the day, on a cent a pound from an airline that travels in on Thursday, you have to ask yourself; number one, the quality of food when it gets there, if it doesn't get to the shelf till Monday, and in some cases probably not till Tuesday, and how much spoilage you have in it - you managers know that. Is there 20 per cent or 30 per cent ending up feeding the dogs? If you got it in on Tuesday, is it only 5 per cent?

The other one that comes to mind, Mr. Condon - I might address this to you - picking up on what the Chair said, indicating the issue of how to tender, by adding a face letter to it, and explaining the situation as such, is have you ever approached government tendering and said: we are unique, and the guidelines and rules that are laid down for everybody else are certainly not applicable to us from a common sense point of view? Has that ever been done?

MR. CONDON: Not in those particular instances, we haven't approached GPA. But certainly it's something we can consider. We talk about using the larger Twin Otters versus the smaller ones. I guess maybe George Hudson may complain and ask: why can't you use a plane that can carry 1,000 pounds?

MR. CHAIRMAN: For all the reasons that were just given.

MR. CONDON: Again, if we were allowed to do that without any questions from GPA we would certainly go that route. Absolutely.

MR. MURPHY: That's why I ask if you ever approached tendering and said: from a logical and logistical point of view it's better for us to use a carrier that has a much greater capacity, and a cent a pound is - now maybe the other gentleman can get in on it, where you're talking dry products such as hard bread and other products that are not perishable as such. He might be able to pick up on that end of it.

MR. CONDON: It's certainly a consideration. I guess the issue with the two airlines has only come into play recently since the subsidy came into place. Certainly Ben, Wally and I will discuss it and maybe have a talk with GPA and see if we can do that with our tender documents. I guess our goal is to provide the best service possible to the residents.

MR. MURPHY: At the end of the day you may very well save money. Again, the Chair brings up a good point when he says: if you write the specs properly, then sometimes you end up with the best results. If you just leave it open, then obviously somebody in St. John's is going to say: it's a cent a pound cheaper. That's why the public tendering situation is like it is. In the long run you may end up losing more, and even more importantly, you're not getting the quality product out to the people out there.

MR. DUMARESQUE: Mr. Chairman, I would just like to say that it's not as cut-and-dried as it might appear. I know of a situation on my part of the coast where we have a mail contract, and one would argue, or have the arguments put to me, that if I had a smaller plane, maybe better situated, somebody who would be doing that even as their only business, they're able to give a better service than a company like Lab Air can.

So I've had the other side of the coin being presented to me. There are times when some planes or some pilots can get to places and do things, if they're doing it as their only business, that others can't. Including timing, including those types of scheduling problems that you have, that sometimes they can get around them where others can't.

So it is not just a simple black and white situation, and I would be cautious about making an absolute conclusion without taking into consideration some of the other aspects of life in Labrador.

MR. CHAIRMAN: Mr. Parsons.

MR. PARSONS: Mr. Chairman, I am going to lose my banana breads. We do have a lot of bad fruit coming in, especially bananas and grapes.

I agree with Mr. Dumaresque that smaller planes could give us good service. I have seen the planes that we are referring to come into Makkovik and Davis Inlet, when I was there, on the same days that I am expecting Mr. Wally Anderson to get my freight down to that man and bring in to him, on a charter trip for some government department and leave my bananas and grapes that are going mouldy and soft, here in Goose Bay.

This is the same man who says: My price is cheaper and you must go with me. I agree; go with his price if it is cheaper, but not to the extent where he is going to do a charter for somebody else and leave our goods here.

MR. CHAIRMAN: I will be the devil's advocate again. I suppose if we specify a 3,000 pound aircraft then we are going to have to have a full load every time. All of those things have to be considered.

Obviously Mr. Dumaresque's points are valid. I think what it comes down to - I might just make an observation - that again some more freedom at the local level is necessary to deal with local conditions - both at the management level in the stores and the management level in Goose Bay. Somehow we need to find a way around that, yet keeping in place necessary controls obviously.

We still have a problem of some inefficiencies built in there, and certainly great losses that the taxpayers should be concerned about.

MR. DUMARESQUE: Are we into something different now, or can we ...?

MR. CHAIRMAN: I think we have covered that fairly well.

MR. DUMARESQUE: I was just reading through some of the financial data there, in particular looking at - I am not sure what page - page number C1, which is the consolidated financial data.

AN HON. MEMBER: Page C1?

MR. DUMARESQUE: I guess that is the first page of Appendix C in the final report; Appendix C - key financial data.

One of the things that struck me was the bad debt allowance. For 1987 there was zero bad debt allowance. Then in 1988 it went to $358,000; in 1989 $393,000; and now $410,000. What is the explanation for that? Why zero in 1987 and ... ?

MR. CONDON: Again I can only speculate that probably prior to that we were not recognizing any of those accounts as being bad debts, and I guess probably the Auditor General's people got after us and said: Look, those accounts are all doubtful; you had better start showing them up as bad debts, so we took them up on it.

MR. DUMARESQUE: So you did not show bad debts before that?

MR. CONDON: I am only speculating now what the possibilities were - I know with a lot of government departments around that time we showed most of our accounts as being collectible. There were very few provisions, and maybe Mr. Drover can acknowledge that too. Years ago there were very few provisions for uncollectible accounts in some departments. It was only after some work by the Auditor General.

MR. CHAIRMAN: Did we actually write off $400,000 a year each of these three years, or is that - ?

MR. CONDON: No, that is just a provision, and I think that was probably everything that is on that list.

MR. CHAIRMAN: It has not changed very much?

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: I am not that familiar with the retail business, but 10 per cent - is that a normal bad debt allowance, or is that high?

MR. CHAIRMAN: I think I can answer that is an extremely high one, but it is because of all the old bad debt that is still there that has not been cleaned up. That is the total outstanding bad debt. That is not bad debt for that year. That is not $400,000 in one year. That is the accumulated debt. I think that is right?

MR. CONDON: If I were to estimate our bad debt allowance I guess now it would be zero because we do not have any. We do not issue credit as such, but we have some NSF cheques which are negligible.

MR. DUMARESQUE: Okay. Thank you.

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: Mr. Chairman, I would like to go back to this particular issue that my colleague has mentioned, $410,717. If we look at the report that's given by the Department for the same year, on page 1A, it shows $1,114,000. There's $600,000 bad debt there somewhere that's not shown.

MR. CHAIRMAN: Good point.

MR. CONDON: Probably it was around that time that we got approval from Treasury Board, I think we wrote off, I believe -

MR. WARREN: Six hundred thousand dollars.

MR. CONDON: No, $293,000. Our total receivables are somewhere around $450,000. We went to Treasury Board with them and they agreed to write off $290,000.

MR. CHAIRMAN: In 1990 you show $1.1 million, in 1990 over here you show $400,000. I think that's what Mr. Warren's concerned about.

MR. WARREN: Okay, I think Dick has corrected this one for me. Maybe the lines are going across wrong. I think our graph is wrong.

MR. CHAIRMAN: The lines are not drawn right?

MR. WARREN: Yes.

MR. DUMARESQUE: Total expenses, that's total expenses.

MR. WARREN: Yes, I think our lines are drawn wrong. Okay.

AN HON. MEMBER: Mr. Chairman, (Inaudible) line there by Promotions and picked it up on the Depreciated Debt Merchandise.

MR. CHAIRMAN: Okay. So that's the total expenses on the bottom, right?

AN HON. MEMBER: That's the total expenses (Inaudible).

AN HON. MEMBER: Bad debt of zero, actually.

MR. CHAIRMAN: Okay.

MR. WARREN: There are no bad debts.

AN HON. MEMBER: No.

MR. CHAIRMAN: See how easy we found $600,000. (Inaudible).

MR. WARREN: I'd like to ask the managers a question. The fiscal year ends March 31. Guy, what's your budget for the year?

MR. PRICHARD: Don't recall.

MR. WARREN: Ray, what's yours? Antone, what's yours? You're managers of the stores and don't have a budget.

MR. PARSONS: I do, sir.

MR. WARREN: You do. Okay. But those three, you've operated businesses and look here, you're talking about an $800,000, $900,000 business. Have you been told by your supervisor what your budget is for the year?

How can you operate without a budget?

AN HON. MEMBER: I'm not aware of it, Garfield.

MR. PARSONS: I've got an expenditure transaction report that I get every month. At the beginning of the fiscal year it tells me my budget and the breakdown of expenditures. All I do is add that up by number of budgets per year.

MR. WARREN: So where do you get this (Inaudible) -

MR. CHAIRMAN: Is that what you spent for the previous year or what you're proposing to spend?

MR. PARSONS: No. You get an update. April month we get our expenditure budget for the year. Then, every month we get an update as to what we spent or what the balances are. That comes from Len Rowe's office, our accountant. I have a file on that at all times that you file and you update. Updates with the expenditures too.

MR. WARREN: Do you have -

MR. PARSONS: In actual fact I have prepared a financial statement on my own for our depot. Mr. Ludlow was supposed to get one final figure for me and that was the inventory on hand as of March 31, 1991, with that information I would have my own financial statement here to present. I keep a record of all expenditures in my depot, completely, before it goes to St. John's and is sent back to me in the expenditure report. I have it all recorded. So at any given time I can present my own financial statement.

MR. MURPHY: So is that budget broken down for you? Subheadings?

MR. PARSONS: Yes, it is.

MR. MURPHY: So you have it all. Your salary account, your maintenance account, everything.

AN HON. MEMBER: (Inaudible).

MR. MURPHY: Right on target.

MR. WARREN: So Guy, you have no budget as to how much that you're going to spend this year, do you?

MR. PRICHARD: I don't know what it is. I do get the expenditure transaction report, but offhand I can't....

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: One of the other points there on that same consolidated income statement Mr. Warren referred to is the transportation cost. I see it's gone from $57,000 in 1989 to $277,000 in 1991. That's a large increase. What would you attribute that to?

MR. LUDLOW: That transportation cost was the cost of providing supplies to the coast last spring when we had that ice problem.

MR. DUMARESQUE: Yes, okay.

MR. LUDLOW: That extra cost was the cost of flying in goods before the Marine Atlantic boats got up.

MR. DUMARESQUE: So that's up to March 31, 1990, and then the first month or two of 1991, I guess, more than that actually, it was I suppose four or five months right up to August, wasn't it?

MR. LUDLOW: Yes, well, mid-August actually.

MR. DUMARESQUE: Mid-August, yes. Okay. So that's certainly a tremendous cost, isn't it? So right now are we down to somewhere around the 1989 level?

MR. LUDLOW: We're down to normal this year. We have had to fly a few things, but nothing compared to last year. We were more prepared. All the basic supplies and everything took us through. This year too we had that mail subsidy thing, freight subsidy through the mail, the post office.

MR. DUMARESQUE: Right.

MR. LUDLOW: That has reduced the cost tremendously this year.

MR. DUMARESQUE: Okay. So that's encouraging, I suppose. What we saw there was an anomaly in that it did impact on the bottom line. So presumably we'll see our losses down a fair bit, if everything else operates as normal. Thank you.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Yes, thank you, Mr. Chairman. I'd like to go back, Mr. Condon, to one of the security things that we talked about this morning, one I forgot to mention. That is, the transfer of large amounts of funds from St. John's to the stores. Somehow or another, having a little bit of experience - nearly getting taken out one time - do you feel yourself that that transfer is as secure as it could be? Is there any other way? You're looking at in excess of $100,000 in cash.

MR. CONDON: The system we use now where our accountant advises the bank, the bank makes up a deposit of fifty, a hundred, whatever, in cash, Brink's delivers it to the airport and Canada Post takes it from there - that's the best system we have. I don't think we could afford to have Brink's -

MR. MURPHY: I mean, couldn't the bank transact that cash difference from Goose Bay in, rather than St. John's up?

MR. CONDON: We looked at that possibility, actually, when there was a possibility of a postal strike this year. Ben made arrangements through the Royal Bank. They have the same problem. We have to let them know about a month in advance that we want so much cash.

MR. MURPHY: I would say it's better for the bank to pay for Brink's than you to pay for Brink's, because I remember a mailbag on the tarmac a few years ago that sat there in St. John's for four or five hours until finally somebody realized that it contained half a million dollars.

MR. LUDLOW: In conversation with a couple of the bank managers here, they tell me they bring their money in here the same way that we do, through Nain just through the postal system. It's not delivered through any security company, it's just through the post office in an ordinary moneybag.

MR. MURPHY: I guess Canada Post offers some insurance for that?

MR. CONDON: A very limited insurance, I think. Ten thousand dollars?

MR. LUDLOW: Yes. Very limited.

MR. MURPHY: So if you lost the bag you'd lose $90,000.

MR. CONDON: I guess our cash would be, what, in the $50,000 to $60,000 range?

Both Ben and I went over to the post office and saw this little bag, you could see the money inside of it. I was amazed. That's the way they used to handle it. A little white bag, and you could see the dollar bills inside of it.

MR. LUDLOW: Clear plastic.

MR. CONDON: Clear plastic.

MR. MURPHY: So what you're saying to me is that from St. John's to the destination, if Canada Post should lose it - their security is good but it's certainly not that good - the government could stand to lose somewhere between 80 per cent to 90 per cent of that total amount?

MR. CONDON: That's quite possible. In the meantime, since we had the internal audit people in there, we've had a meeting with the bank, and I think our postal people in St. John's had a look at it. Apparently the bank wasn't using the right size bags or the right, I guess, thickness of bags. You're not supposed to be able to see the money. So we've been after the bank now to change the bag sizes, or the bag texture, whatever, so that people looking at them can't visibly see dollars. It's amazing. Just this big bag of money. That's how it's handled.

MR. WARREN: How much was lost in the last ten years up to now?

MR. CONDON: None.

MR. WARREN: Through an aircraft going down?

MR. LUDLOW: I can't ever recall any being lost anywhere. Cheque remittance was lost once coming out from the coast -

MR. MURPHY: I'll offer the suggestion: how many times do you have to lose it?

MR. LUDLOW: So far -

MR. MURPHY: So far, so good.

SOME HON. MEMBERS: (Inaudible).

MR. MURPHY: An ounce of prevention is worth a pound of cure, that is why I ask the question. Because it'll happen one of these days and Canada Post will have no problem coming up with the $10,000. We'll sit around and discuss the system after we've lost $50,000 or $60,000. So I just raise that for the Committee. Thank you, Mr. Chairman.

MR. CHAIRMAN: Any other questions from the Committee?

Mr. Warren.

MR. WARREN: Yes I have a couple of questions concerning the cash flow in the communities. I understand there's some arrangement now that you can get cash from other businesses when necessary. One of the complaints I get as a politician for the area, is that the store is quite often out of cash. So do you have to wait very long for cash to arrive? I would probably be correct in saying that in the last few months those complaints have diminished tremendously. Is it working better now by circulating cash in the community than it was previously? I ask any manager.

MR. DARBY: Mr. Warren, I think so. It's got a lot better, where we can access the cash locally. I think this winter it was probably twice, in the past we had to wait for cash to come in from St. John's, and with no planes flying, you know what happened. There was probably no cash at the depot for a week or so. But now we can purchase locally and we buy from three places in the community. So it's better at Hopedale.

MR. WARREN: You just give them a cheque in place of cash?

MR. DARBY: Yes.

MR. WARREN: Mr. Chairman, I want to ask a couple of questions on employees' credit.

MR. CHAIRMAN: (Inaudible).

MR. WARREN: I guess it's not much different now than it was for years and years. As an employee of government your cheque goes to various banks outside the coast and you have a limited amount of money and you have to use credit, going back to my day and Ben's day and your day, and you go back I guess when government took over the stores in 1951. As a manager of a particular store - and I just don't list any manager - is the system that's presently operated by government ineffective? What are the disadvantages and advantages to the system? What are the flaws or the safeguards? Or are there any safeguards, or any flaws?

MR. PARSONS: I would like the Committee to understand that I am a young manager. Not young in age, but in management. These are all seniors to me. Since I came to the coast there has been a change in what has been happening with regards to employees receiving a limited amount of credit during the period before pay days. However - and I say this very openly - we talked about this morning, or it was mentioned, alluded to this morning, of pilfering or shoplifting. We can also include in that, I think, staff or employee theft. Because it damn well happens.

Right now as managers we have no control over our staff if they want to steal. There's no way that we can find out if they are stealing groceries and taking them home. The only system we have in place to safeguard anything with employee theft is that one employee will check on another employee. That doesn't mean a pinch of you-know-what. There must be a system put in place in order to safeguard against that.

Mr. Ludlow and I have talked, over a cup of coffee about it. There's been no firm decision made or any hard lines written down as to what should be done. But I think if you go to work tomorrow at the Metropolitan stores or Woolco, I don't think any employee can walk out of that building with a parcel at five o'clock without somebody knowing what's inside it, or if it was really paid for or not.

MR. CHAIRMAN: You can't walk out with a parcel at all without someone knowing?

MR. PARSONS: You can't.

MR. CHAIRMAN: No. Not when you're working.

MR. PARSONS: That's right. So why are the staff on the coast of Labrador allowed to shop at their pleasure and to take their groceries out without being checked by somebody? So I do believe that we must have some system in place whereby it's understood, and clearly understood, by every staff member that this should be done. Right now, if I try to check on something with employees I'm looked upon as a big bad B, and not a bear either. So somewhere along the way somebody has to take that step to get a system introduced. Because right now it's wide open. There's no way of checking or controlling what might happen with the staff on the coast of Labrador.

MR. CHAIRMAN: I might just add to that, I'm aware - because my daughter worked at Zellers part-time last winter - that not only is she not allowed to purchase, she's not allowed to serve me, as a member of her immediate family.

MR. PARSONS: We do -

MR. CHAIRMAN: It's very easy to poke stuff through and pretend that you're checking it out but not be checking it out. That happens a lot more than people walking out. I suspect your bigger problem is things being put into a bag for others.

MR. PARSONS: We try to curb that, and it's working fairly well, that a cashier doesn't serve her own father and mother, or uncle and aunt. Now of course sometimes, if there's only the one cashier working, she has no other choice but to serve her relative -

MR. CHAIRMAN: (Inaudible) situation.

MR. PARSONS: But if it can be at all avoided, the cashier does not serve relatives. Not where I am, anyway.

MR. CHAIRMAN: Similarly that employee cannot go down the street and buy their groceries somewhere else either. It is your main store, so they do not have much choice; and if they are working all week they have to buy while they are working because when they are not working the stores are not open. We have to recognize those problems. I think that certainly is an area of concern. I think clearly that some policy should be put in place here - some procedures to deal with that strictly adhered to by all managers and enforced by all managers.

Mr. Murphy.

MR. MURPHY: If I might, Mr. Chairman, having had some experience, it is even more difficult and I do not know how you could control it in small, rural communities.

I think everybody understands that if Mary is checking on her mom or dad, probably eyes are upon her so to speak and what have you; but how do you check when their friends and their neighbours across the street come in - there is a grave difficulty in that area too, if there is $65 worth of stuff gone out and the tape shows $23.

I know one situation where I happened to observe this. The tape was $9.95 and in the bag were two cartons of cigarettes and all kinds of other goodies that totalled somewhere in excess of $215. The tape was $9.95.

When the explanation was given, it was a 50/50 (inaudible). That is the area that I would be more inclined to think that this goes on, the phantom, and I do not know how you can handle or control it.

MR. CHAIRMAN: If it is a computerized cash register you can control it.

MR. MURPHY: Exactly, because every item then, the bar code (inaudible).

MR. CHAIRMAN: If it does not beep then you can hear.

MR. MURPHY: That is right.

AN HON. MEMBER: I guess if employees are intent on stealing, it is extremely difficult. I would be interested in hearing if the other managers have any similar type of concerns as Mr. Parsons.

MR. PARSONS: It is not the fact of employees actually stealing; it is beating the system - getting something for nothing.

The employees I had in Makkovik are basically honest, good, people; but it is a system that can be used. So it is easy to put in a dozen oranges and pay for two, probably. I am not saying they are doing it, but it is all open for them to do it. There is nothing to stop them from doing it.

MR. PRICHARD: I find it difficult. Our clerk is probably related to - there are only 200 people in Postville - and he is probably related to (inaudible). So I cannot control who she is checking through the cash register. I cannot go out for every customer that is done. I have my work to do; and the other two staff members I have are related to about 180 people in Postville.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: How much staff turnover have we had, in your recollection - probably the senior man or store manager - for similar such reasons?

MR. PRICHARD: None.

MR. MURPHY: None?

MR. PRICHARD: Or one or two.

MR. MURPHY: One or two?

I guess everybody could probably say the same thing?

MR. CHAIRMAN: Those stats are very stable.

MR. PRICHARD: Yes.

MR. CHAIRMAN: Mr. Warren.

MR. WARREN: Maybe, Mr. Chairman, the question to the managers would be: We have identified some concerns, like Ray in Hopedale, how could that problem be solved?

MR. DARBY: Again, I probably agree with Snowden. There has to be guidelines put in place, as was stated before. Hopedale is no different than Davis or anywhere else. All my staff members are related to one another. The only difference in Hopedale is they tend to tell on one another.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: Is there any explanation why there can't be the policy in the stores the same way as it is in Zellers? That you have to have to have somebody else check in your groceries for instance? That particular aspect of the problem that was raised?

MR. CONDON: I guess, as some of the managers mentioned, where a lot of the people who work in the stores and the clerks are related to a number of people in the community -

MR. DUMARESQUE: No, not that. The employees themselves, I'm talking about. I'm a bit surprised, but I suppose I shouldn't be, that there's an opportunity available to any employee, that they can go and collect their groceries at the end of the day and walk out, and not have the manager know exactly what they purchased. I'm surprised at that and can't understand why it can't be done otherwise.

MR. CONDON: I'm going to defer that question to Mr. Ludlow who indicated to me that there is a type of policy that's been in place (Inaudible).

MR. LUDLOW: In that policy manual, or so-called policy manual, there is a policy in there whereby employees cannot serve themselves. They have to be served by another employee in the store.

MR. DUMARESQUE: Okay. So the point then that you're making, Mr. Parsons, is that the manager doesn't know. Because obviously some other employee in this case must know what the other employee, if they can't serve themselves, some other employee must know what exactly has gone out through the door with that other employee. You're saying that reporting mechanism is not being used?

MR. PARSONS: I have five staff members in Makkovik, and myself. Any given time during the day, an employee, if it's slow, there's nothing happening there, an employee could go and pick up groceries and, if it was a cashier, take it to the other cashier to get it checked out. I have not yet been asked to verify any purchases by employees by another member of the staff. They have never yet come and told me: I'd like for you to come out with me, I'm checking in somebody else's groceries, because this is the normal procedure, it's what we should be doing. As a matter of fact, if I did do it the staff would be offended and they would accuse me of not trusting them.

AN HON. MEMBER: That's right.

MR. PARSONS: This is something that I find retards greatly our abilities to manage, this book says on page 48 that we're not competent. But it causes some problems for us that we are looked upon as Spiderman coming down to grab somebody. If I ask for these things to be done I am looked upon as someone who doesn't trust the staff. Previous managers haven't asked that this be done, why are you asking for it? So if there's a directive that comes from the main office it's okay, it's fine. But if I threaten to enforce it, or somebody else threatens to enforce it: previous managers haven't done this, why do you want it done?

MR. DUMARESQUE: But I mean, it would appear to me that obviously the governing authority would say that times change, and they're doing it in Zellers now probably for some reason that they didn't do it twenty-five years ago. So why wouldn't it be normal or effective?

MR. PARSONS: Then what we need -

MR. DUMARESQUE: I can understand your problem at a local level. You've got to live with your people and obviously trust is a very important element in your working relationship. But I'm just wondering why you would have to be put in that position and not have a directive come from somewhere else along those lines. Is there just absolute confidence that this is not happening and we don't need to do anything?

MR. LUDLOW: I guess what we're in the process of doing now is a new policy manual that will cover a whole lot of these issues that I think managers find themselves stuck with now. Like I said, they are right there on the spot. They're dealing with the customers every day. We realize that they need a policy whereby they can refer back to it and say: this is what it is. We do have a policy manual, but there are some things that need to be covered. This manual is in the process of being revamped right now. Hopefully it will cover a lot of these areas.

MR. DUMARESQUE: When do you expect to have that manual in place now?

MR. CONDON: We have a first draft of it. We're hoping to get it out to the managers, a revised draft, to get their input into it before we formalize it. We're hoping that will happen over the next month or so. Mr. Parsons mentioned the managers checking out the other employees. I'm wondering if the managers have the time to do that. I guess maybe it's fine when you have a slow traffic period, but I wonder how the rest of them feel about checking out the groceries of their co-workers. I know it's never been a significant issue, not since I've been involved. Certainly it's something that we can look into. I'm just curious how the other managers may feel about doing it, since they're all union people. I guess there's a certain element of trust we have to have in all of our staff members.

MR. WARREN: What do you mean?

MR. CONDON: What type of relationship that would form.

MR. CHAIRMAN: It's not a matter of trust, it's a matter of eliminating opportunities, removing temptation, I think.

Mr. Warren.

MR. WARREN: Yes, Mr. Chairman. A short question to Brian now. You said the policy manual is in the draft stages. Has there been any consultation with the managers?

MR. CONDON: We're putting together the draft mostly on a lot of the financial, some of the technical parts of that draft will be circulated to the managers to get their input into it. Certainly some of that stuff that we're talking about now - employees checking out groceries - will certainly come up in that discussion.

We've used some of the old manual stuff, some of the stuff that's still appropriate. But the forms have changed over the years, and there are new forms. New directives have gone out and probably just haven't gone into the manual itself. So it needs a fair bit of update.

MR. WARREN: So what time was the last update of the manual? What year was that?

MR. CONDON: The manual that I think is in use now is probably... three or four years old?

MR. LUDLOW: About four years old. Most of that manual is adapted from a co-operative policy manual. It conflicts with the government policies in a lot of the cases.

MR. WARREN: Yes. I notice on page 48 of the Deloitte & Touche report, second paragraph. If I was a manager, running those operations in various communities, I think I would be a bit concerned with the statement in the second paragraph, in particular where it says: "In discussions with Department of Development staff in St. John's" - talking about the St. John's staff, they've indicated to this consulting company that: we have managers who can't do their job.

I'd like to know from you, Brian, as the guy from head office, from St. John's, if you never told them that, somebody in St. John's must have told them that. So what rationale do you arrive for them to come to this conclusion?

MR. CONDON: I have no idea where they came to that conclusion. It certainly did not come from me. I have the utmost confidence and respect for our managers. I can appreciate the environment and the conditions under which they work, and the difficulties. I think they do a fine job. The report itself was done by an independent group. I know they might have referenced some abusive people in our department. I can assure you that it didn't come from myself or from Mr. Ludlow either.

MR. WARREN: The paragraph continues on. It does say there are some concerns in the community that the managers are not in tune with community needs. Would part of the reason be because they are really not managers, but because they are controlled by St. John's forces because of the PGA and because of other things? Are these some of the reasons why the managers are not performing to their potential?

MR. CONDON: I think that for a lot of years we didn't allow the managers to manage. We dictated everything to them and we didn't give them an opportunity to manage, but there are still the regulations with respect to the collective agreement and government purchasing and things like that, you know, those are things that we still have to abide by. Right now we are trying to give the managers more authority, more autonomy and allow them to make decisions on what they order.

MR. WARREN: If Ray Darby was told by you to take the Hopedale store and run that store in the manner which he thinks it should be run, are you going to give him enough rope to hang himself or are you going to continuously - this is probably a bit of an unfair question - but are you going to say: Ray, you take the store and operate the store the way you feel it should be operated. How long would you let Ray Darby run that store, two days, two months or three weeks? Or will you have Mr. Ludlow going into Hopedale every week to see that Ray is running it right? Where do you go from there?

MR. LUDLOW: Maybe he could run it as long as I didn't get into any trouble with the administration. No, I guess maybe the managers could speak to this more than I could, but I think over the years we have tried to manage the stores from St. John's which wasn't right at all. We didn't give enough authority to our people in the field then and the store managers. We made all the decisions, and a lot of the times the decisions were not right decisions.

MR. WARREN: And then a few years ago we changed it and decided to manage the stores half from Goose Bay and half from St. John's. Now the managers have it coming both ways.

MR. CHAIRMAN: Further questions, anyone?

MR. MURPHY: One final question, Mr. Chairman.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Is there any fear you sense in the managers, who are out on the front line, that people are concerned with the internal audit? And I might also refer to my colleague here, did our friends from Touche come up and do an audit up here and talk to all you gentlemen and what have you, or did they just sit in St. John's and put this document together?

MR. CONDON: No, Deloitte and Touche, I believe, made a couple of trips to the coast and I guess met with all the managers.

MR. DARBY: No, sir.

MR. CONDON: They didn't meet with you?

MR. DARBY: They did not meet with me.

AN HON. MEMBER: (Inaudible).

MR. CONDON: But they did hold public meetings in the communities.

AN HON. MEMBER: Yes.

MR. CONDON: They didn't do any audit. They looked at, I guess, the existing operations and how government could operate these stores in a more efficient and effective manner. I think that was maybe their mandate if you want to call it that. They made a number of suggestions.

MR. MURPHY: I see. Okay, I just wanted to clear that up. How they put this document together was by and large to go into the community, ask questions within the community, ask questions of yourself and other senior officials within the department and primarily St. John's. Mr. Ludlow, did they talk to you at all?

MR. LUDLOW: Very briefly.

MR. MURPHY: Yes.

MR. LUDLOW: (Inaudible).

MR. MURPHY: Now, the internal audit. Is there a fear on the coast that there is going to be a drastic change in the stores or is there a possibility of a movement in another direction? Is that real? I mean can every manager kind of say that there is some fear that is existing?

MR. PARSONS: There is a fear within the staff that our jobs will be gone within a couple of years. There's a fear within the community, especially the older part of the community, that knew the Rural Development per se, when Ben, Garfield and Ray were managers years ago. Because that was their link with St. John's. That was their lifeline - Rural Development. Those people out there don't want to see Rural Development go. They want it to stay. I think they realize that the government operation has been and will be one of the best they could ever hope for.

They probably heard tell of co-operatives, or partnerships, or private enterprise, but I don't think they really understand what it is. I think the only thing they really understand is that the government store is there for them. So there is a big fear out there... every time a memo comes out or something is on the radio about the stores being moved from government ownership, you can see a change in the staff, and their attitude changes. Because their jobs are going to be gone.

When I look at this book and I see that report there, if the stores are going to be co-operative or anything else, I know I won't have a job, because if any person would hire me after reading that, they would have to be stupid.

MR. MURPHY: Is that a consensus? Is that a fear? Does somebody disagree with that opinion?

So silence is agreement, I guess.

SOME HON. MEMBERS: (Inaudible).

MR. MURPHY: No. Okay. The reason I ask that is because I suppose sometimes that kind of an attitude, a negative attitude, or a change, would have an adverse impact on folks and what have you. If they see it or think that it's going to disrupt, then you can be sure they'll help it along. They won't intentionally help it along, but they'll help it along because they lose confidence. Once you lose confidence, of course, they change it.

Thank you, Mr. Chairman. I want to thank the store managers, and Mr. Ludlow and Mr. Condon, for making themselves available. Thank you.

MR. WARREN: Mr. Chairman, I find it interesting that I called one particular store - I think it was Friday past - I call quite often to different areas of my district. But two weeks ago I called and the staff member answering the telephone said: Rural Development, good afternoon. What way do you answer your phone today?

AN HON. MEMBER: Industry, Trade and Technology. I do.

MR. WARREN: Thank you.

MR. CHAIRMAN: Industry, Trade and... ?

AN HON. MEMBER: Technology.

MR. CHAIRMAN: Is that the correct name of the Department now?

MR. WARREN: It's interesting when you talk about a retail operation that you, in trying to improve it, that you would come up with -

AN HON. MEMBER: And people hang up and they call back and say: oh.

AN HON. MEMBER: I think it will always be Northern Development.

MR. WARREN: Yes. But I understand there's a memo gone out and they must answer the phone in this way only.

AN HON. MEMBER: Yes.

MR. WARREN: Don't you think this is a little bit much?

MR. CHAIRMAN: Can I perhaps this one time ask Ms. Marshall or Mr. Drover if they have anything to add here, any questions that they would like to ask, or any comments to make?

MS. ELIZABETH MARSHALL: I don't have any questions. The only comment I have is that I found the two studies very interesting, but not quite as interesting as the testimony of the officials, it's been a very informative day.

MR. CHAIRMAN: Thank you. I think you've spoken for all the members of the Committee as well. Mr. Drover, did you want to add anything? Any members of the Committee have any further questioning? We seem to be getting to the end.

If there are no further questions, let me thank the witnesses for coming forward and being so frank and open with us. I hope that we've not taken too much out of your lives today or put too much pressure on you. That was not our objective. Our objective was to do what I believe we've done, which was to search out some information and get a better feel for it. I think with your candidness you've given us a great feel for the difficulties that you're faced with. I think that as one committee of the House of Assembly now we're in a much better position to judge performance, based on the realities of what you're faced with in the individual locations that you serve.

So I thank you all for coming. Let me thank our recording artist behind me here, who has been diligently taking the tapes; Mr. Porter, who is the research assistant to the Committee; the Auditor General and Mr. Drover as well, for coming from St. John's and giving us the benefit of their time here today.

There being no further business, the meeting stands adjourned.

The Committee adjourned.