The Committee met at 2:00 p.m. at Colonial Building.

MR. CHAIRMAN (Windsor): Order, please!

Ladies and gentlemen, first of all I'd like to welcome the witnesses who are here, particularly those who are here for the first time. Just by way of preamble these meetings are meetings of the Public Accounts Committee of the House of Assembly so in fact it's an arm of the House of Assembly. Information will be given under oath, of course, but we're here simply to take evidence, not to act as judge and jury. We're here to hear your views and your side of the story as it relates to, in this particular case, several items referred to us through the Auditor General's report.

News media are present, and others may be present, are entitled to take the sound footage but not film during proceedings. If there were any cameras here we'd let them go through now for some silent film. Basically the same rules as the House of Assembly.

For the benefit of witnesses I'd ask you to speak clearly into the microphones. The Hansard people are trying to transcribe this, the same as they would the House of Assembly proceedings. I will identify each of you before you speak again for their benefit, but if I fail to do so I'd appreciate it if you would identify yourself before you speak. Speak clearly into the microphones, and fairly loudly so that we can hear you, because the acoustics in this ancient building are not great.

First of all I should introduce the Committee members. To my immediate right is Mr. Tom Murphy, the Vice-Chair, MHA for St. John's South; Mr. Alvin Hewlett, MHA for Green Bay; Mr. Art Reid, MHA for Carbonear; Mr. Bill Ramsay, MHA for LaPoile. There are two other members. Mr. Dumaresque, MHA for Eagle River, was here with us this morning but is tending to his mother, who's just coming out of hospital. So you'll appreciate the importance of those things I'm sure. Mr. Garfield Warren, MHA for Torngat Mountains, is in Labrador I believe today, and he'll be back with us tomorrow.

The Auditor General is absent so Mr. Drover then is chief spokesman this afternoon. Perhaps, Mr. Drover, you'd introduce the people who you have with you this afternoon.

MR. WILLIAM DROVER: Thank you, Mr. Chairman. I'd like to note that the Auditor General is leaving the Province just about now to go to a meeting with the other Auditors General in Charlottetown, so she sends her apologies.

On my immediate left is George White, an Audit Manager with the office. Seated next to him is Don Boyles, an Audit Senior, and next to him is Debbie North, also an Audit Senior.

MR. CHAIRMAN: Thank you very much. Again I welcome Mr. Wells who I assume is spokesperson for the hospital board. Perhaps you, sir, would like to introduce the people who are with you today.

MR. WILLIAM WELLS: Thank you, Mr. Chairman. My name is Bill Wells, I'm the chairman of the board of trustees of the General Hospital Corporation. With me to my left is Mr. Donald Keats, who's the executive director and CEO of the General Hospital Corporation; to my right is the Medical Director, Dr. Eric Parsons; and Mr. Albert Croke, at the end of the table, who's the Chief Financial Officer. We have other members of staff in the background. Our Director of Purchasing, Mr. Norman Pardy, and Mr. Brian Gorman, who's the Manager of Stores. So between us all we hope to be able to provide a very positive response to any of the questions that might arise.

MR. CHAIRMAN: Thank you very much. I also recognize the presence of the Assistant Deputy Minister and other officials of the Department of Health who are here to observe, I guess, and also in the event that we may need to call on them for their advice as well. The first thing we have to do is ask the Clerk to swear in the witnesses. Perhaps Miss Murphy would like to proceed with that now.

Donald Boyles

Debbie North

Albert Croke

Bruce Gorman

Donald Keats

Norman Pardy

Eric Parsons

William Wells

MR. CHAIRMAN: Thank you very much. Our Clerk being very efficient has presented me with minutes of the meetings of yesterday at 10:00 a.m., yesterday at 2:00 p.m., and this morning at 10:00 a.m.

On motion, minutes adopted as circulated.

MR. CHAIRMAN: Well the purpose of the hearing this afternoon is to look into particular items referred to us through the Auditor General's report dealing with the financial management of the Health Sciences Complex, matters relating to fixed assets, purchasing procedures and so forth.

I will first of all ask Mr. Drover, to make an opening statement on behalf of the Auditor General's Department.

MR. DROVER: Thank you, Mr. Chairman.

The Health Sciences Centre together with the Leonard A. Miller Centre, is operated by the General Hospital Corporation. During 1991, the office of the Auditor General carried out an audit of the Health Sciences Centre. At that time the hospital had 341 acute care beds and provided a comprehensive range of in-patient and out-patient services.

Our audit was designed to review the areas of financial management, fixed assets, inventory and purchasing at the Health Sciences Centre. This review was designed to assess whether the policies and procedures were adequate to ensure proper control over fixed assets and inventory; the financial management system was adequate to provide information to management and to the board for decision making and control over the boards revenues and expenditures and to ensure compliance with the General Hospital Management Act and related regulations; and the purchasing system was adequate to ensure monitoring and control of the purchase function and compliance with the statutory requirements.

As a result of our review, we report the following: In general we found most aspects of financial management at the hospital were adequate; under fixed assets, we found that adequate physical and accounting controls over fixed assets do not exist. In relating to inventory, we found that the accurate records of inventories are not maintained for management control purposes and finally, under purchasing system, we found that the policies and procedures are in place to ensure control over the acquisition of materials, however, several instances were noted of non-compliance with the Public Tender Act.

MR. CHAIRMAN: Thank you very much, Mr. Drover. Mr. Wells, would you like to respond by way of an opening statement to those comments?

MR. WELLS: Thank you, Mr. Chairman.

Well on behalf of the board and the General Hospital Corporation, I would like to say that we welcome the report of the Auditor General and the recommendations contained therein. I think that they serve to improve or assist in the making of improvements to the overall system, and the corporation has approached these recommendations and the report in a very positive manner. I should also say that we have addressed the recommendations outlined in the report, that systems are in place or being put into place with respect specifically - I can think of, inventory, which was just mentioned and there are many new checks and balances and overall improvements and we welcome the review once again, of the financial accounting systems within the hospital corporation.

I should say, Mr. Chairman, to you and the members of the Committee, in terms of accountability and with respect to the corporations operations generally, if you look at it, in 1991 we have external auditors to the corporation who report to the board, we also had a supplementary audit of the board which we agreed to at the request of the Department of Health, we also had the Auditor General's report in addition, so there were three functions of independence from the management and the board with respect to auditing the affairs of the corporation.

In addition to that, we have our own internal audit function. We have initiated review of inventories, stores, pharmacy, dietetics all of which is an internal; we have an audit committee of the board in place chaired by a board member, and two of the board members on that audit committee have professional accounting designations and I should like to make it clear to the committee, that the General Hospital Corporation over its existence, has never refused to provide any information requested by the Department of Health and the Department of Health has complete access to the operations of the hospital.

We provide significant information on a routine basis, it is just part of the doing of the business of the corporation and everything is available to the Department of Health when officials visit the corporation, so that in terms of making sure that the accounts of the corporation and the manners and processes involved in expenditures, we really profess that this is an open book, that we are open to the suggestions of either the Department of Health, or in cases when the Auditor General's department does review the systems, and as well as with our own external auditors to ensure that a fairly significant budget, some $112 million this year, that the expenditures are in accordance with the requirements of statute from the Province. Now in anything of this nature and of this extent there are areas where there always can be improvement, and there are systems that can be improved upon. These things, as an ongoing process, as a board and as a management, we will endeavour to cooperate with each and every entity that can assist us in that regard.

With respect to specific questions I think it best that they be directed to Mr. Keats and then he will field them amongst the staff. Thank you.

MR. CHAIRMAN: Thank you very much, Mr. Wells. I appreciate your comments and your cooperation with the Department of Health. As you've said, you are responsible for spending a significant chunk of taxpayers dollars, and the taxpayers of course have an interest in how that is spent. The process that we're involved in now, this is a final accountability process in the auditing, accounting and answering to the department officials and so forth. We're not here as much to find fault as to help improve and see what has taken place in the past, and what could be done perhaps more effectively and efficiently in the future.

We welcome this opportunity to discuss these issues with you. Perhaps as a result of this there may be some suggestions we can make as to how to improve and perhaps, as we've found with many - particularly Crown corporations and agencies that are somewhat at arm's length from government - quite often as it relates, particularly to the Public Tender Act, there is not a complete awareness of the importance of the act and how strictly it has to be applied, and some of the ramifications of not complying with the act.

These are the sorts of things that the Committee members I'm sure will want to discuss with you as we proceed on. Perhaps we can start this afternoon - Mr. Ramsay, would you like to get it started?

MR. RAMSAY: Yes, I would.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Thank you, Mr. Chairman. I welcome the people here from the General Hospital Corporation. The main thing I'd like to focus on initially is with regard to the Public Tender Act and compliance with the Public Tender Act.

I note reference to a letter from a supplier that in the audit was noted in the files specifically referring to the setting of specifications or the description of specifications for an argon laser piece of equipment used, I suppose, in the ophthalmology department. I've also noted in here as well a response from the General Hospital Corporation to that situation, stating that it was probably... any allegations concerning that were improper as there was no benefit to be gained by any person at the hospital from such a direct purchase or tender, because it's so specific.

I just wanted to get some comment on that. I note if that was what the intent was, I suppose, as far as getting a specific piece of equipment, I don't think anyone on the Committee has any problem with that. Albeit as long as it's a level playing field for other companies to bid. Now there were no other companies bidding, but the information that came through the audit would lead one to believe that it was... you know: make sure that we got this one specific piece of equipment, because there was a preference or otherwise for it. I suppose for it to be stated specifically as such in internal documentation that: we have a preference for this piece of equipment, we would invite quotes from other companies. If they come up with a similar or equally as good a piece for this similar amount of money then that would be sufficient to do so.

In the way that it was done - according to the information we're provided with anyway - it would lead someone to put up a red flag and say: there's something wrong here, and therefore I think an auditor would question it. I just want to get a comment on that, and then I have some other things about that to Mr. Wells or the Executive Director.

MR. CHAIRMAN: Mr. Keats, do you wish to respond to that?

MR. DONALD KEATS: Yes sir. As a general comment, we have a fairly detailed policy and procedure manual for public tendering within the Corporation. I think we have a fairly good understanding of the public tendering legislation within the organization. On a given year we invite public tenders around 500 times a year. We go to public tender 500 times and we invite 500 different tenders so that is about 1000 tenders. That is in addition to the tendering work that is done through the Newfoundland Hospital and Nursing Home Association for some 3000 different items, the central purchasing agency as well as the government purchasing agency, so we tender through a variety of mechanisms. As you would appreciate in the health care environment developing specifications for sophisticated equipment requires the assistance and advice of a lot of technical people.

I suppose there are a number of things that I could comment on with respect to the argon laser. I guess one of the comments I would make upfront is that this laser was purchased out of private funds given to the organization by an outside organization specifically to purchase an argon laser for the area where it was intended to go. Be that as it may we said we will follow the public tendering procedure. We asked for some specifications. We put the thing out to tender and we included some of the information that was included in the letter that was received through the Department of Ophthalmology. All of the ophthalmologists within the organization use this particular piece of equipment so it is not just one individual using it and having a preference for it. This laser which cost around $38,000 is not something that comes off the shelf. It is a custom made laser so any of the other companies that supply lasers could have had access to the materials to provide this laser. It is a custom made thing. Only one company bid on it but that does not mean to say that other companies did not pick up the specifications. There were other companies who picked up the specifications. One company bid on the thing but we received no complaints or comments from any of the other companies that said: look, this is too specific, you are gearing this too close to one of the other companies. There were no complaints of those natures. The other thing I guess I should mention generally is that we use three different types of lasers at the hospital and between the time the specification was developed for this particular laser and the time it actually went to tender, which was an eighteen month time frame, we developed tenders for other types of lasers and bought lasers from other companies, but not this particular type. Our lasers, depending on whether they are in the OR or in the ambulatory care area, would probably be different types. They might be a (inaudible) laser or they might be a fixed laser, or whatever, so they would require different specifications.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: I note also there was a comment with respect to the documentation surrounding the opening of tenders and the evaluation forms. I have not come across as to whether that has been improved or not. Has that aspect of your evaluation of public tenders been improved?

MR. KEATS: Yes, we have improved the amount of documentation that now goes into a file on the evaluation of tenders. Before what was done was the comments were made directly on a specification sheet and if we received a bid from a supplier, that essentially did not meet the specifications, that was just noted on that specification sheet and kept in the file. We now have a separate form which is kept in the file that says: these are the bases on which we made the evaluation and it repeats some of the things on the specification sheet so there is a new form there.

MR. RAMSAY: And a cross evaluation of other -

MR. KEATS: Yes.

MR. RAMSAY: I note that on Page 164 of the Committee document here there is a copy of the advertisement used for the argon laser and others. I refer this to you by virtue of our examination this morning of a school board here. Your ad does state that sealed tenders clearly marked will be received up till 4:00 p.m. on the date stated above and will be publicly opened in the director of purchasing's office immediately following the closing.... has it always been your policy to advertise this as being available to the public to attend these openings or is it generally just to provide the opportunity for those that are bidding to attend?

MR. KEATS: I will get clarification on that.

MR. RAMSAY: Can the public attend any opening bid or just the companies?

MR. KEATS: Any member of the public can attend.

MR. RAMSAY: I just wanted to be clear on that. It does say publicly but I just wondered as to that. Do you often have other than the individuals who are involved in the bidding attend, or is it very rare for other people to attend?

MR. KEATS: Mostly the bidders.

MR. RAMSAY: Alright. That's all I have for right now, Mr. Chairman. I'll let someone else start a line of questioning.

MR. CHAIRMAN: Mr. Ramsay. Mr. Reid, would you like to carry on from there?

MR. REID: All of you do have this Auditor's report. Pages 195-196: I want to go to the bottom of page 195. Would you explain to the Committee what, in the breakdown that's there - other income. Just explain to us what Health Care Supply is. I don't know what that is, "C C". Is that "C C" there or is there something missing from that?

MR. KEATS: Health Care Supply Centre.

AN HON. MEMBER: (Inaudible).

MR. REID: Pardon me?

MR. KEATS: Oh, that's another item. Workers' Compensation.

MR. CHAIRMAN: WCC.

MR. KEATS: WCC.

MR. REID: Would you want to go through that Health Care Supply? What exactly is that?

MR. KEATS: I'll let Mr. Croke, our Chief Financial Officer, respond to that.

MR. ALBERT CROKE: The Health Care Supply Centre is a distribution centre where we procure and distribute medical, surgical or drug supplies used by other hospitals that they normally don't get through the hospital association purchasing contract. We provide special programs on behalf of the Department of Health. We supply to homes that are administered by the department or funded by the department.

MR. REID: That's payment for these programs?

MR. CROKE: Pardon?

MR. REID: Is that payment for these programs?

MR. CROKE: No, this is a billing system. We issue the supplies and we bill either the user of the supplies or Department of Health. Whoever is responsible for paying.

MR. REID: To the tune of $358,576.

MR. CROKE: Yes.

MR. REID: School of Nursing tuition. You get to keep that, do you? The School of Nursing tuition, I'm assuming that "TUTI" is tuition, is it?

MR. CROKE: Yes it is.

MR. REID: Is that $61,400?

MR. CROKE: It is.

MR. REID: Sale of Equipment - what's Miscellaneous Income?

MR. CROKE: It's a combination of smaller amounts of income that come in from the various departments of the hospital.

MR. REID: Up here, page 196, Salaried Medical - M. What does that mean?

MR. CROKE: In 1990-1991 the MCP, Medicare Commission, took over the funding of hospitals for salaried physicians. This was a payment on behalf of that. We bill MCP for a salaried physician.

MR. REID: What do you rent that can realise a $366,901 revenue for the hospital?

MR. CROKE: Located at the Leonard Miller Centre is Southcott Hall. It's made up of twelve floors, I think, some of which is rented out, either to students. There's a hostel down there. Workers' Compensation clients stay at the hostel and we charge that accordingly.

MR. REID: Your $4,481,402 is basically the total of monies that you make over and above, I suppose, outside your regular budget. I'm not sure how to express myself here. I'm trying to find out if those funds are your board funds.

MR. CROKE: No they're not.

MR. REID: They're not your board funds. Where can I find in your budget your board funds?

MR. CROKE: The hospital is a corporation that is funded partially by the Department of Health and partially by offset revenue generated by the hospital from these other sources as you see here. The board funds are not included here.

MR. REID: You are not compelled to include your board funds into your financial statement, is that what you said? You did not say that?

MR. CROKE: No, not in this particular statement, no.

MR. REID: May I have a statement on your board funds?

MR. CROKE: We do not have a statement here, but certainly I have no problems with getting you a statement of our board funds.

MR. CHAIRMAN: Can you just clarify this for me, Mr.Reid, (inaudible) -

MR. REID: I am sorry, Mr. Chairman, but this goes back to some years ago and I apologize to you because you are not familiar, but I think the rest - no, maybe Mr. Murphy is not either.

MR. CHAIRMAN: For those who are not would you tell us what we are getting into here. It is an interesting area but (inaudible).

MR. REID: I think my friends across the table know what I am getting into. I just wanted to know because I have gone through a number of audits with some other health care institutions in the Province, and there are other funds that are not recorded in government audits. There is nothing wrong here, this is not a derogatory comment, I would just like to know what the board funds of the General Hospital Corporation are. That is basically all and I did not want to go any further than that.

MR. CHAIRMAN: Mr. Keats, would you like to tell us the distinction between board funds and hospital funds?

MR. KEATS: Yes. As the Chairman indicated earlier this year our budget is about $112 million. About 85 per cent of that is an operating grant from the government in terms of what they provide in our budget, another 15 per cent or 16 per cent is income that is generated that is noted on this page that you have been talking about that we get from D.V.A. or from Workers' Comp or from other sources and all that goes in as an offset revenue against our budget. The health department gives us our money in advance. We take that money and we invest it, and the money that comes out of that investment goes into our board funds, as well as, donations that we may get from people, will go into board funds. We then use those board funds primarily to supplement the equipment purchases for the organization.

MR. CHAIRMAN: So where is the accounting for the board funds and why would that not be included in the general statements here of the hospital?

MR. CROKE: Well first of all, we produce a number of statements, alright. There is the hospital itself, which is an accounting of the operations of the hospital, which, if you turn back to 194, is a summary of where the revenues come from and as you can see, most of the revenue, $91,710,370, is provided by the provincial Department of Health. The remainder of the revenue is generated by agencies, paying agencies like Workers' Compensation Commission, other provinces, non-resident and so on as identified on pages 195 and 196.

There is a separate accounting of board funds. Board funds are specific funds as Mr. Keats just said, that are not required to offset the operating expenditures of the hospital.

MR. CHAIRMAN: I am not clear on the distinction between them though. You are saying that you are operating two sets of books, one of which you are saying is basically government money and that you think that you are accountable for, but then board fundings that you feel no obligation to account for, is that what you are saying?

AN HON. MEMBER: No. All of the funds at the hospital are duly audited and provided to the department. I guess we operate on what we call 'fund accounting', I mean, we have a central laundry that we do the accounting for and public health lab, again, they are all audited and submitted.

MR. CHAIRMAN: Is there any public money in the board accounts?

AN HON. MEMBER: No.

AN HON. MEMBER: Interest, I guess.

MR. CROKE: Interest. It is not considered public money.

MR. REID: Mr. Chairman, every hospital, and I will not go as far as to say every home, a number of them, operate on a strict I suppose operating budget and account for every dollar that government provides to them, but because of a number of factors hospitals and boards have funds that they call their own. Those funds are generated through wills, deaths and burials, and this sort of thing, through people donating money through burial funds and different things, you know what I'm talking about. Instead of flowers you send your money to the hospital foundation. There are all kinds of other things. And through generated interest on money that government and other people, I suppose, or other groups, provide the hospital.

There's nothing wrong with this. This has been going on for years. We brought it up some years ago when we were doing another hospital. We found out to our surprise that there were large sums of money - I'm talking in the hundreds of thousand of dollars - in smaller hospitals then the one that's represented here today. These monies are taken at the discretion of the board and spent on, in some cases, equipment and seminars, travelling at some times, various other things. They are controlled solely by the board chairman and maybe the financial administration officer.

I just wanted to know - and maybe I shouldn't have asked it because the media is here - but I was just interested, gentlemen, in finding out how much money that the General Hospital Foundation - being the largest one in Newfoundland - would have in board funds. Now if you don't wish to answer me that's quite alright, maybe you can tell me later on, but that's up to yourselves.

MR. CHAIRMAN: Mr. Wells.

MR. WELLS: I think, Mr. Chairman, as has been stated, that all hospitals operating within Newfoundland and where there are boards appointed by government, have board funds which are not within the statements of the general operation and expenditures of the hospital in providing medical services and other things, where you generate revenue aside from grants and from government for operations.

In that sense the money is distinct from the regular operation of the hospital. In the case of the General Hospital Corporation - this is not the Health Foundation - these board funds are audited each year and the Department of Health would know exactly what would be in the board funds, as it varies. My brief experience with the hospital - I haven't been there a full year yet - but that account would vary, it could be upwards of a half a million dollars or $700,000, and then down. These funds will be expended mainly for the purchase of equipment or to facilitate the installation of equipment, these types of things.

They are totally - they're in the control of the board, but not this chairman. It would be the board at a meeting of the board which would vote on the expenditure of these funds. That's the only way they could be disposed of. They're really not part of the general operating accounts of the hospital. They would appear in a separate set of financial statements that are audited. Correct me if I'm wrong. I'm sure that the Department of Health is privy to it. Now I'm not sure. I don't think the Auditor General would think these board funds would be in the purview of the public accounts of the Province. Probably. That's why it's not mentioned.

MR. CHAIRMAN: Mr. Drover, do you want to comment on that?

MR. DROVER: I think I attended the same meetings Mr. Reid is referring to, and I think it was on the Clarenville Hospital. First of all, we haven't tested the area of foundation funds, foundations are a recognized charity and we haven't deliberately, and it may involve some legal opinions at a later date. Foundation funds to one extent may not fit the definition directly of public money as such.

I can't speak for the former Public Accounts Committee at the time, but I think the view that the Committee took at the time was rather strong, now these are board funds, okay?... aside from the collections and raising by going out to the public and getting that, okay, take that one to one side. If for instance there is a fair bit of funds raised as a result of interest payments - in other words like, for instance, the Department of Health gives them, in the case of this one here, somewhere in the neighbourhood of $9 million or $10 million in advance per month, and you deposit it - then I think that the former Public Accounts Committee took a view, and Mr. Reid was on it, that that was in fact public money, because it was generated from public money. It started with the public money.

The other ones dealing with the incentive program there, those types of funds, I think the former Committee took the view that was public money. I think they left on the table, at least in my mind and in the mind of our office right now, the issue of dealing with another area which is a benefit to all society right now, the foundation funds. I do not think we have received any direction as to looking at those and really to tell you the truth in the four or five hospitals that we have looked at we have not directly gone at the foundation funds right now.

Mr. Reid may wish to comment, Mr. Chairman. I think that gives a brief update as to what the gist of the meeting was at that time.

MR. CHAIRMAN: Mr. Reid.

MR. REID: The only reason I raised it, Mr. Chairman, was because at that time with Clarenville I was sort of disturbed over the fact that there were public documents in the hands of the Department of Health that were not being made available when we were doing a presentation on a particular board, and here was the Department of Health sitting on information that should have been included in our report. I am not blaming it on the Auditor General's office and I am not blaming it on the hospitals in question. I am blaming it on the Department of Health because this audited report and financial statement is not complete. That is the reason I brought it forward and that is the only question I have right now.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: I have only one comment I would make. In my time with the government this was a contentious issue all the time. Government would say: do we want hospitals to provide this information and should they be allowed to keep the interest they generate on our funds and so on, so it a thing that is back and forth. It does not apply only to Newfoundland. It is in every province in the country where hospitals get government funding. We use the board funds, as the chairman said, primarily for equipment. The other major reason we use these board funds, since government does not fund any deficits we might incur in a year - they say: you run a deficit, you find the money. If we have money in a board fund and we have a deficit we take that money and we apply it to the operating grant to fund the deficit.

MR. WINDSOR: So it becomes a grant from the foundation to the hospital.

MR. KEATS: Not the foundation. The foundation money is solely for equipment, capital, and so on.

MR. WINDSOR: So that is another one again.

MR. WELLS: That, Mr. Chairman, is a distinct board of directors of the General Hospital, in our case, health foundation, which is a complete entity onto itself raising money to supply equipment that is required in the hospital. In our case we have been very fortunate. We have certainly helped the hospital in the amount of monies that are raised. These issues of grants to hospitals specifically, and I know going back into the early 70s when I was on the Waterford Hospital Corporation, the then St. John's Hospital Council which was funded partly by government, it has always been the practice, whether right or wrong, that if you made some money on interest of monies advanced for your operating budget, that gave some flexibility to the entity to deal with things, as Mr. Keats expressed, but it would not be shown up in the statements here. It is a fairly common practice across Canada. I have been familiar with it for about twenty-odd years, involved in various boards, hospital boards or hospital councils, the general hospital, but there is a full accounting of those monies, but you will have to look for another set of financial statements.

MR. REID: The reason why I brought it up, Mr. Wells, was that we did find one particular institution in Newfoundland that was spending the board funds on - I am afraid to say the word but I will say it anyway, 'perks' for salaried employees, and that is what disturbed the Committee at the time because these funds were, number one, generated through interest on government money and, number two, it was monies that had been collected in good faith from people, memorial funds and different other things. These funds were in this particular case being spent on vacations in Florida. Do I have to go any further? There are cases and there have been. I hope there is not now. I think some of your colleagues will know who I am talking about here and what I am talking about. That is why we questioned it because we are suppose to be the Public Accounts Committee and I think most of us feel if it is public accounts then it includes all the public accounts and not just a portion of the public accounts.

MR. CHAIRMAN: Thank you, Mr. Reid. Mr. Hewlett.

MR. HEWLETT: Thank you, Mr. Chairman.

When I was going through the documentation here, the letter from the laser company and what-not - I am just looking at it out of the blue or as someone who has a paranoid mindset, lets say, it looks god-awful and so on and so forth. I read some of the explanation included in the documentation as well. I would ask anyone from the Hospital Corporation, if I were an ophthalmologist and I trained in such-and-such a school and I learned to use the Smith laser and so on, for the want of a better phrase, and then I go work in a hospital and they obtained some block funding to obtain a laser, is it fair to say that the department concerned would be inclined to get a Smith laser, especially if the people employed by the department had all trained on a Smith laser might not be able to use a Jones laser? But given that predisposition that would sort of put you in trouble vis-à-vis The Public Tendering Act. Is that a fair comment?

MR. KEATS: No, prior to The Public Tender Act you would probably have had a lot of personal preferences that people may have brought to an organization, and you can understand that, as you say. If you are in the OR and you work an anaesthetic machine that is a Greiger(?) anaesthetic machine which has controls and certain systems and so on, and is the one you feel comfortable with, you are not going to be too anxious to bring in a German machine that has controls in totally different locations.

But what happens with public tendering, if our director of purchasing is going to tender for a fairly sophisticated piece of equipment then obviously there is a number of people in the organization involved in that, the technical services people from the university have some input, our maintenance people will have input for electrical considerations and so on. The physician group involved would also have some involvement. But by the fact that you develop the specifications and go to tender and then you accept the company that meets the specifications with the lowest price, then sometimes you might say it is a fine line that you cut out all the other companies. But generally what happens, if we went for a tender that was so detailed that only one company could meet that, all the other suppliers would be the check and balance on that and they would come in and say: look, we cannot meet the specifications, and they would put a complaint in. So we would go back to retendering.

MR. HEWLETT: So presumably if the good doctors put out these specs and expected bids from only the Smith Company and, presumably the Jones Company thought that it could manufacture such a device at a cheaper price if it met the general specifications, then I presume the good doctors would have to go to school again or adjust and accommodate to the new laser. Presumably there is no danger in the human health or whatever is involved.

MR. KEATS: Unless there is a significant reason why we could not go with that. And in some cases you might go to tender as an example for surgical gloves, and surgical gloves are a pretty common thing but I know of a surgeon who has allergies to most surgical gloves. There is a certain kind that individual needs, so you make an allowance in that exceptional case. But unless there is some really significant public safety consideration as to why you shouldn't accept that piece of equipment then you don't do it.

MR. HEWLETT: I also note in the documentation there, to my amazement, because I have never run a hospital - thank God for that - in the Dietetics Department there was a tremendous amount of documentation on control. I guess when you are in an organization as large as the General Hospital you get into feeding hundreds and hundreds of people. There is a matter of wastage. You know, you do not cook 5,000 potatoes if you only need 3,000 and so on, and it went into a rather elaborate scheme and description of computerizing and so on the meals and freezing them beforehand and having them on hand. Is that as indicated in the documentation well underway to be mechanized or computerized, the dietetic stuff, because it seems to allow itself for tremendous error factors if not very closely controlled, when you get into volumes involved?

MR. KEATS: The inventory control generally has been a priority in the organization for a couple of years. In dietetics, for example, we have a fairly good idea of what load you would produce on a daily basis, and you could eliminate your wastage. We know on an average day that we are going to produce 2,000 meals. There is a cyclical menu that is produced so the people know what kinds of foods they need to produce this menu, and you know that 40 per cent, 50 per cent or 60 per cent of your patients who are coming in are going to require special diets. So you can get a pretty good feel to know that.... Just as I couldn't tell you which people might get pregnant next year, but I can tell you that there might be 2,500 people who have deliveries at the General Hospital. So we do the same thing with the dietetics.

MR. HEWLETT: There was another section in there on the inventory of physical assets. I had occasion to be at the Health Sciences in the last couple of days, and just out of curiosity I looked at a couple of long tables like this one here. I noted on the corners there appeared to be something like an engraving gun or something or another, and there were all kinds of numbers written on the corner of each table. I'm wondering, having seen the documentation I saw here with regard to inventory of physical assets and getting a thorough inventory and keeping it updated, is this empirical evidence that I found of your organization attempting to meet the deficiencies pointed out by the Auditor General's department?

MR. KEATS: Yes. In the past the General had a process of keeping track of fixed assets. Up to 1989 there were some lapses in that. We've now gone back and we've started to implement the process in accordance with the recommendations of the Auditor General of tagging all of our fixed assets, of keeping control of those, and then marrying it up through purchasing with the actual count of fixed assets and where they are.

MR. HEWLETT: Has that reached completion yet?

MR. KEATS: No, it hasn't reached completion. We set a date of - we said March 1993 would be the date that we would finalize this process. We still are aiming to finalize this process in March of 1993. On occasion we have changes in staff or staff problems that delay certain things, so we would like to have that full recommendation in place by March of 1993.

With one possible exception. We don't know if it's feasible or practical to do a full physical count of all assets on a yearly basis. We're looking at the value of doing that versus doing partial random audits of physical assets, spot checks, on a periodic basis.

MR. HEWLETT: That's it for me right now, Mr. Chairman, thank you.

MR. CHAIRMAN: Thank you. Mr. Murphy, would you like to continue?

MR. MURPHY: Yes, thank you, Mr. Chairman. I have a few comments and a few general questions that I'd like to start with. I notice in the Auditor General's report that when they talked about financial management the word "adequate" is used. I don't have Webster here and I'm not sure what "adequate" means. I suppose if we look at it from the standpoint of a layman's terminology, "adequate" probably means acceptable but certainly not polished. Again picking up on what my colleague had to say about fixed assets, and I was glad to hear your response, Mr. Keats, that things are going... not gung ho, but certainly in place, to the best of your ability to try and do things to control them. From my past experience I know how difficult it must be.

However, I also think that it has to be done, and I'm sure a lot of other people here do. We deal with different corporations and school boards and what have you, and there's a tremendous amount of public money spent on all kinds of fixed assets. If we don't have some control on those then obviously we're not guarding the taxpayers' dollars.

I also notice on page 186 that the revenue under Provincial plan for 1992 is in excess of $91 million, which is a little better than 10 per cent I think of the total budget for health care in the Province. I think our health care is probably somewhere close to $900 million. When you mentioned earlier in some of your remarks that you receive these monies up front are you saying that you receive it once a month, or quarterly, or semi-annually, or annually? How do you receive the Provincial plan of revenue?

MR. KEATS: Basically it's on a monthly advance.

MR. MURPHY: So what you're saying to me is that probably at the first of every month that you're receiving somewhere in the vicinity of $8 million from government.

MR. KEATS: Yes.

MR. MURPHY: Back to my colleague's question. Is it the interest from those particular monies that you would transfer into your board account as such?

MR. KEATS: Yes.

MR. MURPHY: Just as a point of clarification. If I could just go back to some of the remarks made by the Auditor General and some of the responses just to find where we are today. I notice that on Page 29 of the report that was given to you and that the Committee has: in non-compliance with the General Hospital Management Act, that is an act of legislation, they talk about an annual report and they talk about the non-submission, I think, of three reports. I notice again in your response, that you talked about annual reports.

MR. KEATS: Yes, that is the annual report responses on Page 29.

MR. MURPHY: Okay, fine. That is your response.

MR. KEATS: Yes, Sir.

MR. MURPHY: I left the Auditor General to go and talk about the $91 million. It is on Page 18 actually where the Auditor General discusses, in their findings, non-compliance and actually quotes Section 14 (1) of that Act. Perhaps you might want to comment on what you mean when you say in Paragraph 2 on Page 29, this is your response: while a public relations type annual report has not been prepared since 1987. What does that mean?

MR. KEATS: Generally hospitals in the past have produced a glossy report that they have distributed around the Province to various people which says: this is our audited financial statement and this is some statistical information, numbers of admissions, number of patient days and so on, and that type of report the General Hospital has had for financial reasons. The benefit of that to us is minuscule and we are not going to produce it anymore.

MR. MURPHY: But if you removed yourself from the glossy type of report you are talking about, and I am sure we have all seen them not only from private industry who are trying to make an impact or what have you on their shareholders, we also see it from Crown corporations, but surely heavens a report that contains information - I do not care if it is on recycled foolscap, I find that to be a remark that is certainly not acceptable to me when you consider the amount of monies that we just discussed. I notice in the last paragraph you said it should also be noted that as of July 1, 1991 the General Hospital falls under the provisions of the Provincial Hospital Act rather than the General Hospital Management Act but that still does not relieve you.

MR. KEATS: No, that point was only there primarily for clarification, primarily for the Auditor General, to let him know that we are now back under the Provincial Hospitals Act and not under a separate act but we do not produce an annual report. A lot of people do not produce an annual report but that does not mean to say we do not provide a lot of information. We produce an annual report of hospitals, Part 1 and Part 2 of which provides far more information than an annual report. It includes our audited financial statements. We also produce a lot of other information that is available. We also produce four to six times a year a newsletter called the General Happenings Newsletter.

MR. MURPHY: Is that a glossy newsletter?

MR. KEATS: It is an internal thing, it is not really a glossy thing and it has more generic information as opposed to saying this is our financial statement today and our financial statement last week or so. That would contain general interest information.

MR. MURPHY: I certainly accept that explanation because if you look on Page 21 you will see the Auditor General's concern on inventory and her remarks. I see here that the report is done monthly almost. Concerning the deficiencies from the actual physical count to the adjusted amounts, perhaps you might want to talk about that because to me it looks like somebody is playing catch-up and there is a fair amount of monies here.

MR. KEATS: The inventory control as I indicated earlier is an area that has been a priority for the organization and in 1990 the organization asked the internal auditors to do some reviews on its inventory procedures and controls as an internal process and determine where we could make some changes and some corrections, so those reports were initiated in these three areas with a number of recommendations being introduced.

Our management engineering department this year has taken on inventory control and changes to inventory as a top priority, and basically what this says is: look, when you have reconciled your physical count with your general ledger, there has been some adjustments, and if you take a look at some of those, stores for example, the adjustments, and these adjustments take place for a variety of reasons, I mean, there might be data entry errors, there might be costing errors, there might be some double counting or there might be people making offsetting adjustments, so there is a variety of reasons and they are primarily systems problems and in some cases, for example, stores in January, 1991 had an adjustment of $70,000 negative but in March when it was done it was a $72,000 positive, so they kind of cancelled out one another over a period of a year.

Now, what we have done in the last period of time, our own twenty-one recommendations that were listed for the stores area by our internal auditor, we have implemented nineteen of those and we are working on the other two. In our pharmacy area, where we had a unit dose system and we had a six digit number for all of our pharmacy stock items, we have now implemented a computerized system, we have made significant improvements in our pharmacy inventory and our turn overs in pharmacy. The last variance we had in our pharmacy for example, was $1,400 and when you are looking at -

MR. MURPHY: Correct me if i'm wrong, but is that a discrepancy of $135,000 in pharmacy?

MR.CROKE: That was the difference between what we had in the general ledger in the accounting department and what was in the physical count when pharmacy did its actual count at that time, and as Mr. Keats has just said, there is a variety of reasons why this happens -

MR. MURPHY: Yes, I understand, but if you are looking at a half-a-million dollars, even for the reasons that Mr. Keats gave, you know, when you did the count and then the adjustment there was a $135,000 discrepancy, it would seem quite a bit on just human error. You know I realize the human factor comes into play, mistakes and errors, then again, it would seem that because of that you got involved the 31st of January, 1991, which was only six months after, you reduced your amount of deficiency down to $70,000 which is less than half of what you did before, and then if you look at the 31st of March, which is only three months later, why am I not seeing parentheses around the $77,000? Are you telling me that that is an upward adjustment?

MR. CROKE: Yes, in the opposite direction, yes.

MR. MURPHY: So what you are telling me is that this discrepancy that was identified by the Auditor General, and brought to your attention, and that you have become involved in, in essence, in less than nine months it went from $135,000 negative to a $77,000 positive, which is in excess of $200,000?

MR. CROKE: Well, first of all, I think it should be noted that the hospital began its own look through its internal auditor at our inventory because we knew it had some weaknesses and we wanted to make changes and improvements to the system, because we were getting some adjustments when we did physical counts. It was not the result of the Auditor General picking it up. I mean, he is quoting the internal auditor at the hospital where we did initiate all of these improvements that were necessary.

MR. MURPHY: Yes, but then that begs the question of if we back this up far enough what would we see, because what I see here is a tremendous improvement in a nine-month period and we are only dealing with 30th of September, 1990?

So what this tells me is that it was because of either the Auditor General or your own initiative, and I'll take it that it was your own initiative, although this is in the inventory appraisal of the Auditor General. I notice that Mr. Keats' response is basically talking about that type of thing which is contained on page 30. So I just wanted to get some clarification for my own benefit. I remember when somebody hit me with a hockey stick, and I'm sure the Chairman remembers equally as well -

MR. CHAIRMAN: I remember you hit me.

MR. MURPHY: Yes, I hit him one time and he never forgot it. As a matter of fact, I may have even tapped the Director of Purchasing occasionally. However, you'd go in there and there'd be another Elastoplast bandage that somewhere down the road you knew you were going to need for your knee so you found a place probably to put an extra one in and said: I'll use this down the road and I won't have to come back to the hospital. I understand all of those things, and I understand the difficulty in a hospital of trying to maintain a control. But when I look at these kinds of figures it is rather startling, and perhaps I'm not getting the explanation I'm looking for. When I see a deficiency in nine months, an adjustment, from September 1990, to March 31 1991, in excess of $200,000, that is mind boggling. Perhaps the chairman would like to respond.

MR. CHAIRMAN: Mr. Wells?

MR. WELLS: I'm probably the least qualified. But don't assume - these are not losses or profits. This is just a system at a particular point in time, and that'll vary in periods. What you don't want is your discrepancy path to be too wide in terms of the adjustments. We're neither making nor losing here.

MR. MURPHY: It's still uncontrolled, Mr. Wells, isn't it?

MR. WELLS: Yes. But we're not making or losing money on this proposition.

MR. MURPHY: No, I'm not disputing that. It's still uncontrolled in the system.

MR. KEATS: Yes. There is no doubt that there is some control that needed to go in in pharmacy. From September 1990 to March 1991 when those adjustments were made it wasn't because there was a new system put in place at that particular time. The new system was put in place after this. So we're using the same system. They are adjustments between your general ledger and the physical count, not profit or losses.

MR. HEWLETT: Do these variations occur now?

MR. CHAIRMAN: Let me just interrupt for a second here. Mr. Keats, maybe I'm reading this incorrectly. Am I to presume from this that on September 30 you did a physical count and you found that you had $135,000 less inventory in the pharmacy than you thought you had, so you made an adjustment at that point in time? January of 1991 you did another physical count and found you had another $70,000 less than you should have. In other words, I would assume somewhere you lost that $70,000 worth of inventory during that time. Three months later you did an account and found you had $70,000 more. Am I reading it incorrectly? That these are really cumulative. I'm at page 21.

MR. CROKE: This is not saying that we lost inventory. If you look at the actual inventory balances on these dates, the balance on hand is the same on January 31 and on September 9. Okay? We had the same amount of inventory - generally inventory should stay the same.

MR. CHAIRMAN: Yes, because you're ordering some and you're using some.

MR. CROKE: Yes.

MR. CHAIRMAN: But you can't account for $70,000 worth, this tells me.

MR. CROKE: Well, no. What this is saying is that the transactions that took place from September 30 on didn't all get either entered properly or didn't get entered at all through the pharmacy system, and didn't make its way into the general ledger accounting system. That's basically what it's saying. It's not cash, it's the value of the inventory at one time compared to what was in the general ledger at the same time.

MR. HEWLETT: So these aren't things gone missing, for want of a better phrase? That's what we're getting at.

SOME HON. MEMBERS: No.

MR. MURPHY: I'm not suggesting that.

MR. CHAIRMAN: That's what I was asking about.

MR. MURPHY: Yes. If you move over into stores, the figure again is deceiving here, it looks like all of a sudden it was gone and now it's found, and that's why I ask the question.

MR. KEATS: As I said, there may be a variety of systems problems. Somebody may have entered the wrong costing information on a particular product, somebody may have reversed the digit on a particular product. They were systems problems, and that's what we concentrated on at that point in time.

MR. CHAIRMAN: If I could just ask a quick question, Mr. Murphy?

MR. MURPHY: Sure.

MR. CHAIRMAN: Could you give us an idea here? When you did your physical counts did you find any difference in what you thought would be in the inventory and what you actually had? In other words, is there any evidence of any product disappearing and what percentage would you be losing, because you are seeing adjustments here of anywhere from 20 per cent to 35 per cent, and you are telling me now that this does not mean that the product is not there, it is just in your accounting and your financing, it is paper work?

MR. CROKE: Actually, it is mostly paper work, it is not recorded in the right place at the right time and you know, while you see $105,000 there on $826,000 worth of inventory, that probably came as a result of six months worth of transactions that went through the hospital.

MR. CHAIRMAN: Not in the second one, within three months you have a variance of $69,000.

MR. CROKE: Yes, okay, on $910,000 worth of inventory at the time, okay, so we have four months worth of transactions and we do $13 million worth of transactions throughout the stores department in a year which is over $1 million a month, so we have an adjustment of $70,000, not on $910,000 worth of inventory, but on $4 million worth of transactions at the time.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: It is a record keeping process, not a loss of inventory or gain of inventory or somebody walking away with things in the organization.

MR. CHAIRMAN: The question I asked a moment ago was: Do you have a feel for how much you may be losing, how much is walking out of the hospital unescorted?

MR. KEATS: It is very difficult to say. We know there is no system that is foolproof and I would not be able to say to you that some things do not leave the hospital that we do not want to leave the hospital, and we picked up a number of people leaving the hospital through security with things they should not have had, but by and large, in the stores, the stores items, pharmacy and so on, I would think the theft or the pilferage is minuscule, given the nature of the organization.

MR. MURPHY: Are you telling me Mr. Keats, now, that there is a policy or procedure to do these counts and make these adjustments; have you satisfied yourself with that or are they just done periodically?

MR. CROKE: One of the controls that we have for inventory is the periodical count of the inventory -

MR. MURPHY: (Inaudible).

MR. CROKE: Oh yes. - right now we are doing it generally four times a year, every three months but we certainly do it every four months.

MR. MURPHY: Okay, that is why I am asking you the question because it is not clear on the books. Just let me ask one other question, Mr. Chairman, before I move on and that is, on the appointment of consultants. I think our friends at the Auditor General's department indicated that there were no guidelines and policies in place for hiring consultants, as a result the hospital has selected the same auditor after a three-year appointment had expired without a call for proposals of tenders.

I suppose this might be said also of banks and other consultants who may fall under the jurisdiction or the need that the board may feel appropriate. I see that the recommendation is to develop and implement guidelines, and I refer you to your response on page 29. Again you said: you do not agree that this is a financial management issue, but your recommendation is well taken and guidelines will be considered. Have you an update on that or are you still considering?

MR. KEATS: We do have guidelines for the hiring of consultants for a variety of things that may take place in the organization, and traditionally, hospitals and other organizations have not gone the public tender route for professional services. The Public Tender Act does not require you to go to tender for professional services. At the General we have tendered for banking services, we tendered our insurance services; we have gone to tender for our audit services, this year we have gone to tender for a fixed three-year audit program, we have done that and within the very near future you will see a proposal in the paper for legal services, so pretty well all of our professional services now are being tendered.

MR. MURPHY: Are you telling me, Mr. Keats, that you have an unwritten guideline and policy system?

MR. KEATS: No. We have as a matter of a board policy right now, or board practice, that for professional services - although there's nothing that says you must go to tender or you must do that - but as a matter of routine, for professional services such as banks, insurances and legal services we will go to public tender.

MR. MURPHY: Let me ask you this question then, which would probably confirm where the auditor may be coming from. In your course of doing that have you found a marginal difference from banks and auditors, et cetera, in tendering? Have you seen some good dollar savings?

MR. KEATS: Yes sir, in some areas there's been some good dollar savings. There's no doubt about that.

MR. MURPHY: Thank you. Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Murphy. It's probably a -

MR. KEATS: That may not be totally because we went to tender. That may be a total reflection of where we are in the economy. So I have no way of saying to you, for example -

MR. MURPHY: Especially with the banks.

MR. KEATS: - that, no, not with the banks. I have no way of saying to you that our legal services, which are extremely difficult to tender and to select - and I'm not sure how that's going to come out yet - that we might be getting a better rate because we went to a proposal versus what might be going on (Inaudible).

MR. MURPHY: If I might make a suggestion, it might be prudent to sign a five-year contract with somebody at the same price that they'll give you in 1991, 1992.

MR. CHAIRMAN: They'll get you one way or the other anyway, Mr. Keats. We'll take a five minute break for a coffee now, I think.

MR. CHAIRMAN: Order, please!

Not to dwell on this laser piece of technology, but just to clarify the procedures here, and the timing on it. We have evidence on page 25 of the report that on March 14 a letter was received from the company that supplied it, Carl Zeiss. Basically stating that: (Inaudible) specifications that we've suggested to you. "The specifications that only Zeiss can fulfil are as follows...."

Strictly to clarify that for me, because this was March 14, the tender didn't close till July 29. So clearly that company had a large input into suggesting to you -

MR. REID: Different year, Mr. Chairman.

MR. CHAIRMAN: - the specifications -

MR. REID: Different year, don't forget, now. March 14, 1989.

MR. CHAIRMAN: I realize that. That's right. There's a year in advance.

MR. REID: Yes.

MR. CHAIRMAN: Yes. So the company had input - which is not abnormal. You will go to a supplier and say: would you help us right a set of specifications? Let me qualify that by saying you normally write a set of specifications that can be filled by any number of suppliers. You might ask two or three suppliers: what are your specifics? Or you might look at literature that's made available by them.

In this particular letter it says: "The specifications that only Zeiss can fulfil are as follows...," and they list down four particular specs that they can only fulfil. My first question would be: would other suppliers have been able to meet those specs? This suggests they couldn't. Are these specs so specific that other suppliers couldn't meet them? For example, the 50 micron fiber cable. By specifying the 50 micron are they the only ones that produced one? Or somebody else have a 60 that they could have supplied, or a 40 that might have done anyway. I'm being hypothetical but I think you understand my line of questioning.

It also concerned me that on page 180 we have evidence that the equipment was actually installed for evaluation well in advance of the tender. So you had an idea of what the equipment was. Dr. Val Conway was using the equipment, satisfied himself that this was an adequate piece of equipment, that it was a piece of equipment that did what he wanted it to do, and it was perhaps the best available. The doctor may well have been satisfied: this is the piece of equipment I want. The concern here is that this letter from March 14 indicates that the specs were specific to this piece of equipment that nobody else could meet with, even though you've told us that it's custom built. Yet Zeiss themselves are saying: these four items only we can fulfil. Could you clarify that for us?

MR. REID: Can I add something before they have a chance to -

MR. CHAIRMAN: Mr. Reid, yes.

MR. REID: Because that was one of the ones I questioned - and also, while there was a tender in the paper calling for that piece of equipment, that piece of equipment was at the Health Sciences Complex.

MR. CHAIRMAN: Yes.

MR. REID: It was already installed at the Health Sciences.

MR. CHAIRMAN: It was installed for evaluation, that's right.

MR. KEATS: Only for evaluation.

MR. CHAIRMAN: The question that would automatically follow is: why didn't we install three for evaluation and see which one is the best? Obviously that's not practical. I'll give you an opportunity to explain.

MR. KEATS: There may have been another piece of equipment, another laser piece of equipment, somewhere else in the hospital for evaluation. So it's not uncommon to have a variety of pieces of equipment in that organization for evaluation before you purchase that equipment.

MR. CHAIRMAN: I accept that. Can you explain to me, though, why Zeiss would say, almost a year in advance of the tender call - more than a year in advance of the tender call - that these are the specs that only we can fulfil. Why therefore would you write a set of specs, assuming you did, that included these particular items, knowing that only Zeiss could fulfil it? Was it not possible to write a set of specs on which others could have competed?

MR. KEATS: I cannot explain to you the differences in this and why Zeiss would say these are the only specs that we can fulfil.

MR. CHAIRMAN: No, they said: These are specs that only Zeiss can fulfil.

MR. KEATS: Yes.

MR. CHAIRMAN: In other words, nobody else can do this.

MR. KEATS: Fifty micron fiber cable, you can go out and purchase that. These other pieces of equipment, you can go out and get those. The telephone company can go out and buy them. So if you are in the business of putting together a laser, as I understand it, you can get the stuff to custom make a laser, because none of these lasers are put together and left on a shelf waiting for someone to order them.

MR. CHAIRMAN: Except that you specified a 30 SL\L slit lamp made especially for the Zeiss Argon Laser. Obviously if you are going to have a Zeiss Argon Laser you have to have that slit lamp. I do not have a problem with that so much, if that is what you are buying, but did we actually specify that particular lamp? Are there other lamps that are comparable or equivalent, produced by other persons? I realize we are getting pretty technical here, but what I am trying to establish is, did we make this so specific that nobody else could bid on it?

I could specify I want to buy a car, and I can call tenders for a 1992 Chevrolet Caprice. Now Ford is going to have trouble bidding on that.

MR. KEATS: Sure.

MR. CHAIRMAN: But if I specify a 6 cylinder automatic, minimum 4.0 litre engine, with automatic transmission and the rest of it, then I am going to get five or six bids on it; but I can make it most specific.

I know when we called tenders for government cars we could only specify two or three things - automatic transmission, floor mats, and the colour of the vehicle. I remember saying: I do not care what colour it is as long as it is blue - and I got a blue car.

AN HON. MEMBER: And do you know something? They still have not changed the colour.

MR. CHAIRMAN: Anyway, I do not mean to make light of it. I think you understand my question and the purpose of my question. Doctor Parsons, are you going to answer that for us?

DR. PARSONS: Yes. When we set out to purchase any equipment that is, let us say a little bit higher technology than us normal people can understand, and do not really know how to tender it out - once the equipment has been accepted as a prioritized need within the institution - we will normally go to one of the specialists who will use the equipment, and ask them: What do you suggest the specs for, in this instance, a laser should be that would suit your department?

In this instance I really cannot explain the letter being on our file, but I would suggest that the physician has contacted a laser supplier - one or two laser suppliers, whichever - and asked them for specifications for a laser that suits a particular purpose. We would then use these specs that are given to us to send out a tender for a particular laser, using the general specifications that it needs to be functional; it needs to be 110 volts; it needs to be et cetera, et cetera, plus there are other more technical specifications that we would need. This tender would then be issued to the public. It is a public tender and would be picked up by multiple other suppliers.

If there were, within this tender, a specification that the only piece of equipment had to be three by ten, and they were the only ones that made something that was three by ten, the other company, if it was three by eleven, would complain that the specifications are too specific and therefore you are directing your tender to a specific item.

That is one of the safety gates that we have to assure us - us being The General Hospital - that we do not have individuals who work within the institution who have a certain degree of power in order to direct purchases to a particular area.

With this particular tender, for a laser that was dated in March of 1989, there was a laser purchased subsequent to this but was not of this brand. We actually purchased a laser that was made by a competitive company for Zeiss on another tender. The following tender was issued, Zeiss - or the type of laser that's mentioned in this document, was purchased, but it was purchased because it suited the need of the area where it was going. I.e., to our Outpatients Department, where we have a room where the machine is isolated and is not mobile. As you'll notice there's a reference within this letter to a machine that being mobile tends to be damaged, et cetera. This machine would be appropriate to go in a fixed area. The one we bought previously needed to go into the operating room where it would be pulled from one room to the other. This machine was not able to do that.

We try to avoid, in all instances, to send out tenders as specific as possible for the needs we require them for. Indeed, on some occasions there are needs of which only one supplier can supply. However, in all tenders we try to be as specific as possible but not to design the tender to suit a particular supplier.

As far as the other item, of having instruments installed for evaluation, I don't know where the reference is within the report that the instrument was already in.

MR. REID: The reference is on page 180.

MR. CHAIRMAN: Which is actually the tender document.

AN HON. MEMBER: Laser already installed for evaluation.

MR. REID: That's the tender from Medco, which was withdrawn by the looks of things. Was that withdrawn, by the way? Because there's "No Bid" written across on it here and I'm just assuming "No Bid" would be a withdrawn bid, would it? On page 177. Then in their tender, page 180, III J, it says: "Laser already installed for evaluation." Then Part IV, A, says: "Do you provide a unit for in-house demonstration...? If yes, specify and state any terms: already on site."

DR. PARSONS: We do from time to time request, before we submit tenders, because tenders have to be specific, we may bring equipment in for trial evaluation. It may in fact be that this one was in on trial evaluation before the tender went out. Before we do that we invariably, through our purchasing department, require a purchase order to be signed for: a) a limited basis, and b) that this equipment is not to be kept within the institution, and at the end of the evaluation period has to be taken out of the institution or another purchase order is made, again to avoid the ability of individuals to bring things into the institution on so-called evaluation, and then find three months later that we can't live without it. Then we're forced to purchase it.

So we do bring things in sometimes for evaluation but it's for a short period of time and it is not unusual. We do it for anaesthetic machines and so on.

MR. REID: Can I pick up on that, Mr. Chairman -

MR. CHAIRMAN: Mr. Reid.

MR. REID: - to follow your line of thought?

MR. CHAIRMAN: On this same topic?

MR. REID: Yes. I don't have any problems with a doctor recommending to the board or to the administration that: this is the best piece of machinery, and this is the piece of machinery that I want as a doctor. I don't have any problems with that. You don't have any problems with it either. If that is the case then, why not go back to the minister and ask for permission to purchase, without going to tender, that particular piece of equipment?

Quite often the minister will allow you to do that, if it's a case where there's a possibility that there's only going to be one person bid, if you did go to tender; and that maybe there is something within that piece of equipment that can't be supplied by someone else. There's nothing wrong with doing that. I really don't think there's anything wrong. The only thing that's wrong here is the principle is wrong, you see? That's what irritates I guess us as members of the Public Accounts.

MR. CHAIRMAN: I'm not sure that the minister would agree to that. If there were other suppliers that could (Inaudible) -

MR. REID: If there were. But because there were no other bids on the piece of equipment then I'm assuming that there couldn't have been anybody else fulfil the necessary requirements. So I'm accepting the fact that the doctor who was mentioned there, Dr. Conway, picked that piece of equipment out and said: look boys, this is the best piece of equipment that we can possibly purchase. I don't have any problems with that.

MR. HEWLETT: Could anybody else have bid?

MR. KEATS: Just let me clarify that for a moment. If you were to look in The Evening Telegram on Saturday you would find twelve, fifteen, twenty things going to public tender for the General Hospital Corporation. Traditionally what people will do as a matter of practice on Monday morning, if you're in the city, you will go to our purchasing department and you will say: let me take a look at the specifications for this piece of equipment. There may be ten companies that appear to take a look at the specifications for the equipment. Two of those companies may follow through with a bid. The other eight may say: no, we're not even interested, we can't do it, it's not worth our while, or we're doing something else. For whatever reason they may not.

So because only one company or two companies may bid on something that doesn't mean to say that it's not available for a wide variety of companies to make a bid on. There could have been three or four companies that looked at the specifications and for whatever reason may have said: we're not interested. In this particular case the companies that did take a look at the specification, one of them said: yes, we're going to make a bid on it, The other says: we're not going to make a bid on it, we can't supply it, or for whatever reason. That's the thing we generally use. If those companies think the specifications are such that they're locked out we will get a complaint about that. That's when we follow back and do the investigation.

MR. REID: Yes, but you know. That's true of anything. With reference to the cars and trucks, you know, Dr. Conway knows, and that company that he dealt with knows if there's another company out there which can compete with this one for that piece of equipment.

MR. KEATS: Yes.

MR. REID: He knew that. Dr. Conway knew that it was only that company that could probably supply that. You follow what I'm saying?

MR. KEATS: Yes, I'm following what you're saying -

MR. REID: So you should know it as the administrator. If you're looking for a Ford motor you're not going to buy a GMC.

MR. KEATS: Right. But if -

MR. REID: You follow what I'm saying.

MR. KEATS: - I put out a specification for a car, for example, if you follow through on that, and there was only one bid that came in on that car, then you don't assume that the specification was so detailed that only one company could bid on that. Because all the other companies besides Ford may have said: we've either missed the tender, we missed the bid, we looked at the specifications, and we're not interested in providing the product. That was my sole point. One bid doesn't mean to say there was only one company available. One bid -

MR. CHAIRMAN: Unless you specify a 4.3 litre engine and everybody else builds a 4.0.

MR. REID: That's right.

MR. KEATS: Exactly. But if you did that, then you went out to a car company -

MR. CHAIRMAN: That's what we're trying to get at here, to ascertain whether -

MR. KEATS: If you did that, then went out and said: okay, I want a 4.3 litre engine, there's a good chance the other car companies will put in a complaint and say -

MR. CHAIRMAN: There is a good chance, unless that guy is bidding for ten more down the hall and doesn't want to (Inaudible), so: let him have that one, I want to get those ten.

MR. KEATS: Sure.

MR. CHAIRMAN: What we're looking at here is the potential for any abuse, that's all.

MR. KEATS: As a matter of principle, the General Hospital Corporation is interested, and by and large follows the Public Tender Act of the Province. We're not interested in finding ways to get around that Public Tender Act. We don't want to do that.

MR. MURPHY: In the real world, Mr. Keats, I can see, with all kinds of justifications, especially today with the technology that you alluded to doctors associated with medicine, it's not beyond anybody's scope - I pick up on what my colleague said - that doctors share information. I can hear a doctor saying to another doctor: look, for heaven's sake, don't buy Product X, it doesn't do what needs to be done. The other unit is a much more efficient unit, it does what needs to be done, we don't have the same kind of breakdowns. I talked to our friends in Halifax and Montreal, they had a similar unit. If you buy that you're buying this, that and the other thing.

But that Product X that all that exchange is associated with may very well meet the specs. This is why I think that my colleague makes a good point. With that kind of experience and that kind of documentation or somebody saying the problems that they had with that particular product, and I know Mr. Pardy can give me a dozen cases of things he bought. I know it myself in Scott air packs that I can relate to Mr. Wells, and different other air packs that were on the go at the time. They were cheaper but in the end, for what we wanted them for, they were a bad buy.

That's why I think what Mr. Reid is saying is correct. It makes sense to me for physicians to go to the Department of Health and say: we need Unit B. Because in the long run it's going to be a much more effective and better unit. Surely to heavens that takes place. What happens is that you write a set of specs now, you want Unit B, you don't want Unit A, and you write a set of specs to keep Unit A out of the picture. We all know that goes on.

AN HON. MEMBER: (Inaudible).

MR. MURPHY: We all know it goes on. I think a much more honest and appropriate way to do it would be to first approach those people who are providing the funding, in this case the government, and say: here's a letter of explanation. Because in many cases you have senior physicians who will go to Montreal at the invitation of a supplier to look at an installed MRI or CAT scanner, whatever the case may be, and show the working functions of that particular unit. The same situation would exist I guess with a laser. I'm not so sure on this one that it would be worth the company's while.

I find no fault with that. The only thing I do find fault with is drawing a set of specs to eliminate the rest of the competition. I've seen that. I'm not suggesting that this is what applies here. However, it was on site before purchase, and it looks like everybody was geared up and it was used and so forth and so on. It leaves us with some skepticism, I'm sure. I hope you understand that.

MR. CHAIRMAN: If there's no response to that, just before we leave this particular item, you made a statement earlier, and I was wondering if you could clarify it for me, you said it was purchased with funds from outside sources.

MR. KEATS: Yes.

MR. CHAIRMAN: Are you suggesting therefore that because it was private funding, donation, fund-raiser or whatever, that the Public Tender Act should not be followed to the same degree? I'm just asking, what were you suggesting by that comment?

MR. KEATS: It's a moot point. Somebody might argue that if I'm a private individual who goes to the General Hospital or the Janeway and says: I'm going to give you $30,000 provided you buy a piece of equipment, A, and no other piece of equipment, does that organization turn around and say: no, we're not going to accept the money until we go to public tender. What we did was said: we're going to go through the public tendering process with this piece of equipment.

MR. CHAIRMAN: I think that's the correct procedure. I would say that if the person wanted to donate a particular piece of equipment he could bring in that piece of equipment. Wouldn't have to go to tender.

Mr. Ramsay, did you want to...?

MR. RAMSAY: Yes, I have a few questions. I note in the documents there are references to inventory and the reference gets into the specifics of the amount of inventory on hand at any given time. In industry, I suppose the health care industry, we should look at it that way. Possibly similar to any other area, noted in the automotive industry and many others, they have adopted a policy of 'just in time' inventory now, versus the stockpiling of inventory, which was the common practice in the past. There are references in here in a document that was prepared for you, I guess, a review of the inventory practices - I'm not sure if it was at the Miller Centre or at your own - as to what the pharmacy would have on hand at any given time, and a way for you to effect savings in that area by virtue of cutting back on the volume of inventory on hand.

I just wanted to ask you if that kind of thing has been considered, as to whether you will implement that sort of cost-saving measure in the future. Not only for that, I suppose, but also for other items, nonpharmaceutical items, the supplies and other consumables that are used in the institution.

MR. KEATS: Yes, Mr. Ramsay, that is part and parcel of our inventory control system. If I can just follow up on the example of pharmacy: based on a review that was done on September 3 1992, at the Miller Centre there was a $120,000 reduction in the inventory on hand and an improvement in the inventory turnover. Not as much as we want to improve it. The Miller Centre Pharmacy will be integrated with the Health Sciences Centre pharmacy on the new computer system, so that will be another change, another control process.

For the Health Science Centre itself there has been a significant reduction in the inventory on hand, and the associated turnover rate is now thirteen times per year which incidentally is twice the industry norm. So we are turning over the inventory significantly more and reducing the cost of doing that.

MR. RAMSAY: Okay. I am going to take you to a variety of different places here. These are just some questions that I noted as other questions came up. I was speaking to the Sir Thomas Roddick Hospital people at our last meeting, and I am pleased to comment that they will be receiving a new institution since our last visit with them which is badly needed and just to put that on the record.

MR. CHAIRMAN: The engineering of it.

MR. RAMSAY: Yes. Well apparently they got a process established as to how it is going to proceed. I wanted to get into the area of patient stay.

AN HON. MEMBER: It must be a Liberal district, is it?

MR. RAMSAY: This is something which we discussed with them and they spoke of the length of patient stay as being a key factor in lowering the costs associated with operating the institution that they have there. And they pointed out that they were moving towards the new norm of ambulatory care and home care programs for in-patients to get them out of the institution as quickly as possible, to cut down on the cost. At your institution, even though it is at a different level, of course, being the key central hospital I suppose for a lot of the procedures that are performed here in the Province, but is this an area which you are striving for as well?

MR. KEATS: Yes, Sir, I think over a period of years there have been a lot of changes made in in-patient versus out-patient services. We run a significant out-patient service in volume. I doubt if there are very many teaching hospitals in the country that has a better or a more comprehensive ambulatory care program than the General Hospital Corporation.

The terms of your average length of stay, I mean there are a variety of factors that will impact on the average length of stay. Two-thirds of our out-patients come from outside of the eastern Avalon. Sometimes we have a length of stay for patients because we cannot get them back to their homes or back to other hospitals once they have been in to the Health Sciences Centre and got the things done that needed to be done. As well, well over 50 per cent of our patients are called outliers when you look at norms, like average lengths of stay and so on. So they are not the normal patients you would look at. And I can argue with you that the quicker we get the patients out the more expensive the system becomes. You know, if I wanted to say to you our cost per patient day is the lowest in the country, there are two ways we can do that. We can bring in people who do not need to be in the hospital, bring in unnecessary admissions; and we can keep people there for long periods of time. One of those two things or both of those things would substantially decrease our cost per patient day.

So to say we are going to get patients out in eight days instead of nine day may actually increase the cost because the patients you are bringing in to replace the person who was in the bed on the ninth day is getting significant. So you do not necessarily move to ambulatory care as a way of saving your operating dollars. You move to ambulatory care because that is the preferred way and the technology is now there to provide those services. We have done significant work in that area.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: All right. I have a few more. One concerning the area of salaried physicians versus fee for service physicians and their effect on the cost associated with the institution. How many salaried physicians would you have on a percentage basis who utilize the facility versus fee for service physicians? What would be the ratio?

DR. PARSONS: We have very few. We have approximately 250 medical staff of which four or five are salaried. An insignificant number as far as the General Hospital is concerned.

MR. KEATS: If I can add to that.

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: Bearing in mind as the primary teaching hospital our physicians have a significant role in teaching as well as patient care.

MR. RAMSAY: Okay.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: There is I suppose a commentary now to the effect that salaried versus the fee for service often will cut the cost associated with medical care. Albeit in a speciality hospital like your own where you are getting into surgeries and, I guess, salaried physicians would be very difficult to keep If they were unable to earn an amount of income related to the fee for service versus the salaried amount. Would that be one of the situations or because most of these physicians use the facility on a fee for service basis?

MR. CHAIRMAN: Dr. Parsons.

DR. PARSONS: Most of the physicians in the General Hospital are fee for service physicians and they work within the institution and charge MCP on the unit of service. The argument or the thought that salaried physicians will save the health care system money is - there are two sides of that and I do not think there have been any genuine studies done to prove one or the other. The individual who is pro fee for service will say: if you went salaried you would need twice as many physicians to get the same volume of work done and would not save any money, so we have not dealt or looked at the cost-savings and certainly it is something that possibly lies in a higher arena than just one institution.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Thank you. The Canadian Association of Public Accounts Committees and the Auditors General throughout the country participate in a group - I am trying to think of the group that deals with effectiveness reporting -

MR. CHAIRMAN: Mr. Drover.

MR. DROVER: Canadian Comprehensive Auditing Foundation.

MR. RAMSAY: Yes, the Comprehensive Auditing Foundation; they have dealt with a matter called effectiveness reporting quite substantially over the last number of years. They have developed a process whereby the effectiveness of given methods of operation, management systems et cetera have been utilized and it is being developed I suppose as a discipline, a management discipline and an accounting discipline. I just wonder, because I know you have done very many internal reviews et cetera here, and a good analysis has been done on a lot of different areas of your institution.

I am just wondering, the idea of effectiveness reporting and dealing with things that you implement, is this a standard practise that you would follow? Now I know I might have gone off on a bit of a tangent there in speaking about the Comprehensive Auditing Foundation, but it seems like you are dealing with the intent of what is being suggested by them in health care institutions and others. I know the Queen Elizabeth Hospital in Toronto was singled out in the last one as a case in point, and they had done an effectiveness reporting exercise on their operations and the balance of how their operations dealt with the variety of patients they had coming in from a long-term care basis versus an acute care basis et cetera. I am just wondering, is it a standard practice at the institution to dig into the effectiveness of given programs and that are sometimes things left and after they are tried, are they not evaluated, I just wonder if it is a point that the management of the hospital keep very firm track of?

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: I suppose over a number of years, given the fiscal capacity of the Province, hospitals in the Province have been looking at what programs they are providing and whether or not they should be providing those programs, and every year we take a look in detail at what we are doing and what we should be doing and why we are doing it and if indeed we should be doing it and if not we should be doing it, so that goes on.

If you are saying, do we fully evaluate the efficacy of some of the things we do, I mean that is not done to the extent that it should be done anywhere in the country, and that is not something that is in the sole purview of the General Hospital. I mean that is a societal, ethical question: do you provide renal dialysis to somebody who is ninety years old or to somebody who is going to die with cancer next year anyway? You know, some of those things take place across the country -

MR. RAMSAY: Then you are getting into the rationing of medical services.

MR. KEATS: - and that is a different question. In terms of how detailed a program evaluation program do we have, I can tell you that we do not have a significant program evaluation program, nor does any other hospital in the country have a detailed program evaluation because it is very difficult to determine in some areas like cardiovascular surgery. If we did 350 cardiovascular surgery cases last year on people who needed surgery and ten of them died, did we have a poor program and all those sorts of things? I mean, it is very difficult to do a program evaluation but those are the areas we are getting into. Eric, I do not know if you have any other comments you would like to make on this?

DR. PARSONS: Not really. I mean we do look closely at utilization issues, making sure that we utilize our beds appropriately; we look at antibiotic usage which is an area of utilization and sort of I guess falls within the question. As Mr. Keats, said, program evaluation is something that we have started to look at in most hospitals and have been unsuccessful in really developing a scheme in which we -

MR. RAMSAY: Methodology seems to be now being developed to a point for the sake of auditors and others to bring back to government. Just one final point I want to make, Mr. Chairman. It is a question I asked our other guests whom we had at the hearing with Sir Thomas Roddick, and I would ask it individually to the four of you, and it was along the lines of just basically, what one thing do you feel could possibly be done differently in the area of health care that would effect the most gain in the provision of services to the people of the Province? You know, if you could come down to one possible area, would it be increased funding, would it be more effective use of the dollars that are available, et cetera, et cetera?

If each of the four of you, as witnesses, would have one thing that you can think of - and this is you know, almost like the man on the street type of thing, but as elected officials, I think we would like to know, people on the inside looking out, what their feelings are on what would be one specific area that you think could really give a really good improvement in the overall efficiency and effectiveness of health care in the Province.

MR. CHAIRMAN: It sounds like a blank cheque to me, who wants to try and respond to that? Mr. Keats.

MR. KEATS: You would get a wide variety of opinions as you say about who you would ask. When I was with the provincial royal commission as we went around the Province this was a question we asked people. If you had $1 million and three programs that were $1 million each and were very good how would you select amongst those programs? Surprisingly out of the eighty-eight people we asked this question to eighty-eight per cent of them said, that is a government decision and we are glad we do not have to make it. I don't think you would get the same response today as we got in 1983-84.

MR. CHAIRMAN: That is a bureaucratic answer.

MR. KEATS: I agree with a lot of people who have written that the most significant thing we can do for health care generally are the things that we do to ourselves or against ourselves. We have an extremely booming cardiology practice at the Health Science Centre. We are running 120, 130, or 140 per cent occupancy consistently and if you said to our cardiologist, what can we do to prevent this, they would say if people stopped smoking, if people monitored their diets a little better and kept their blood pressures down, probably half the people who come to us we would not need to see at all, so I think it is your lifestyle considerations. It is not more technology, not more physicians, not more of this, it is your lifestyle considerations.

MR. MURPHY: Wellness programs and preventive medicine.

MR. KEATS: In the long-term it has the most significant impact on health care.

MR. CHAIRMAN: Mr. Reid, are there any final questions? I assume, Mr. Ramsay, you are finished.

MR. KEATS: Does anyone else have a question?

MR. MURPHY: Just a quick question. It is important to me after discussing health care on the west coast of the Province, at Roddickton, and at some of the other hospitals, I think we have heard a lot about the health care throughout the Province, in your opinion, and I know this has nothing to do with the documents in front of us, but for the money that is available today do you feel the health care at the General Hospital right now is as good as it has been or is it deteriorating?

MR. CHAIRMAN: Mr. Keats.

MR. KEATS: You will get a different answer again depending on who you ask. I do not think there has been any deterioration in the quality of care at the General Hospital. I would counter that though with saying the General Hospital because of the nature of the organization has not received the tightness that some of the other organizations may have had around the Province. Most of our programs are 'one off' programs for the Province. We run the only cardiovascular surgery program, we have the neurosciences, we have the oncology programs, the infectious diseases programs. You cannot get them anywhere else so we probably have not been as squeezed as an institution as much as some of the other ones. I would venture there has been no deterioration in the quality of care. I would also be careful to say though that because of changes in technology and because of changes in society we cannot continue with - I mean, if you look at other teaching hospitals across the country they have been going up at this rate and we have been going up at that rate and the gap is getting further, and further, and further every year, and we are not going to be able to continue with that. I think Newfoundland makes better use of its health care dollar than any other province in the country.

MR. MURPHY: I am just glad to hear that you are consistent with what I have heard throughout the Province. That was why I asked the question.

Thank you, Mr. Chairman.

MR. WINDSOR: Let us get back to the Public Accounts, if we could, as important as that question was. Mr. Reid do you have any final questions?

MR. REID: No, other than just to make a request of you, Sir. Would you ask the Department of Health to provide you with the audited statements for the board account for this General Hospital so that we can review them?

MR. WINDSOR: The Deputy Minister is present and will take that as notice.

MR. REID: Thank you. They are not for public viewing but just for our own personal viewing.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Mr. Chairman, I have just one quick question. We spent a lot of time on this laser business and it was said it was paid for out of other funds. Now, the Hospital Corporation per se comes under the tendering act. I suppose the Auditor General is the best one to ask. Are public funds and various other funds, apart from the regular operating budget of the hospital, are they by law subject to the tendering act, or is it by convention or niceness that it is done?

AN HON. MEMBER: I look around for the Auditor General who is quite an expert in the Public Tender Act.

MR. DROVER: That is a difficult one because I do not know if it has been tested. Someone mentioned earlier about if you want to get a specific piece of equipment out of a will and then turn it over. Really what it says is that anything purchased by a government funded body must go through the Public Tender Act so I think we would take the position that the items must go through the Public Tender Act. Now later maybe someone might come down with a group of lawyers afterwards and give different interpretations. The interpretation that we would give, that if something is purchased for use in the hospital that the Public Tender Act applies.

MR. HEWLETT: Regardless of the source of funds.

MR. DROVER: We would use that, yes. I think that would be our view.

MR. HEWLETT: Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Murphy, any final questions?

MR. MURPHY: No thank you, Mr. Chairman.

MR. CHAIRMAN: There are probably a few more areas that we could get into but we're just about out of time, and I really don't think there's enough time to get into any detail. I don't think there's enough left untouched here that - and I ask the direction of the Committee - I think we can dispense with the hearing tomorrow. I think we can reasonably assume that we've covered enough here that we won't come back tomorrow. Is that agreed?

MR. RAMSAY: No further questions, Mr. Chairman.

MR. CHAIRMAN: So rather than try to get into something that we can't finish, because we do have to be out of here very shortly, let me conclude on behalf of the Committee -

AN HON. MEMBER: (Inaudible).

MR. CHAIRMAN: Yes, the Vice-Chairman advised me that we can always recall people, if we decide we want to have further hearings we can do it at another time. I don't think at this point in time it appears to be necessary.

On behalf of the Committee let me thank the witnesses for coming forward today and giving us the benefit of their advice and their evidence, and their candid responses. We appreciate the manner in which you responded to our questions today. Did you want to make a final statement, Mr. Wells, of any kind before we conclude?

MR. WELLS: Just very briefly. I think that some of the things that were noted in the Auditor General's report we would expect to be noted. That's the proper thing. The argon laser had a lot of significance. The letters, when you read it on the face of it, it's a bit startling. I think it's a sales pitch. The thing was so open that I think the interest of the hospital and the public money in terms of the purchase of that piece of equipment - in the end everybody was well served. One would expect to pick up and question some of the language there. It was done so openly that in the process - you'll see another letter there from the same company on another issue of equipment saying: we can't tender at this time because we don't have -

We would expect these things, and I think that reasonable. I suppose the only thing I can say, because Mr. Murphy did bring it up, he said that the preface to the Auditor General's report about the statement of our accounts, that they were adequate. You know how drab and dull these types who are in the accounting profession are, and they very seldom use superlatives. Because I read that and I said: my goodness, what have I gotten myself into? Then I realised of course that that's exactly what the profession uses when it describes these types of things.

MR. CHAIRMAN: You're lucky to get that. The two letters "I-N" in front of that would have made a different picture.

MR. MURPHY: Actually, it turns out to A+.

MR. CHAIRMAN: Just to respond to that, Mr. Wells. We think that just about the best interests were served. In spending taxpayers' dollars or in politics it's not enough to be right, you must also appear to be right. We often get unfortunately tarnished with that not appearing to be right, even though what we've done has been quite correct. In the expenditure of public funds the same can happen. We again thank you for your information today.

Mr. Drover, do you -

MR. WELLS: If I might, Mr. Chairman, I'd just -

MR. CHAIRMAN: Sorry, Mr. Wells, I didn't mean to cut you off.

MR. WELLS: Because when the discussion was on the variances in the inventory, which is just a question of when the paper trail catches up with the fact, so it should be neither too positive nor too negative, the differences in the figure, but I was looking at the budget summary. I take no credit for this - within that hospital, on over $31 million worth of medical-surgical drugs and other supplies, and I look at their 1991-1992 budget, and the actual expenditure, the differential in the end was so negligible on that kind of spending that the controls must be pretty good.

You follow this from year to year, and the projections and the actual expenditures are so tight that there can be very little tomfoolery in the piece, when you look at that. It sort of re-fortifies your opinion that while - and as the hospital has acknowledged, certain procedures should be in place and certain things followed - you can always tighten up. I'm not too worried about it. I still feel, on behalf of the board, that if the board has any function to serve in these hospitals that they are accountable for the activities of management in the corporation. The report from the Auditor General is not taken lightly by the board. We're into it ourselves to find the answer as to what went on long before we get in front of the Public Accounts Committee.

MR. CHAIRMAN: I think the Committee appreciates that, Mr. Wells. We recognise that in a corporation as large as the General Hospital Corporation, particularly as it relates to inventories, with the broad range of inventories that are available, particularly as my colleague, the Vice-Chair, pointed out, in emergency rooms that must be available, can't be under lock and key. They must be available for those who need them instantly, sort of thing. Very difficult to control every item within the hospital.

I guess the Committee's role is to determine on the advice of the board that measures are in place and to be satisfied on behalf of the House of Assembly and the taxpayers that indeed proper measures are being taken, and with the advice of the Auditor General and the people who do audits to ensure that every step is being taken to safeguard the public purse.

MR. RAMSAY: I move, Mr. Chairman, that we adjourn.

MR. CHAIRMAN: Before we do that, I'd like to give Mr. Drover one opportunity to just respond -

MR. RAMSAY: Oh, okay, my apologies.

MR. CHAIRMAN: - and then have a final word if he'd wish to do so.

MR. DROVER: Thank you, Mr. Chairman. On behalf of the profession at large, in some of the other provinces they have a value for money area. I think some of those Auditors General might say too you that if the system was more than adequate you would be wasting money, because you were making it stronger than it should be. I think that explains the adequacy. So I think it's the strongest word we can use, that it is adequate.

Seriously though, I'd like to thank the officials, on behalf of Ms. Marshall, at the Health Sciences and the General Hospital. Mr. Keats and his predecessor Mrs. Dobbin, in particular, and the two board chairmen and their staff, and Albert Croke, the Chief Financial Officer.

What we've done now is, we've brought the Committee down through four large institutions - the two hospitals, and the two school boards. When the House of Assembly passed the Act October 31 of last year, the Auditor General's Act, it gave access to I think it's 120, 125, entities in the Province. So you'll probably over the next five to ten years start to see an awful lot more of these entities coming to you.

I'd like to thank you, Mr. Chairman, on behalf of the staff. We're always available to answer any questions. Thanks again.

MR. CHAIRMAN: Thank you very much. We also want to thank the witnesses from the General Hospital. I thank the Auditor General and staff for your assistance in this. You do point out quite rightly that many of these areas are new ground for the Public Accounts Committee. It's only with the introduction of the legislation really that we've had a full mandate to deal with it. Perhaps in future we'll have further legislation which will give the Public Accounts Committee more teeth. It's an area that we're looking at. There's no legislation in Canada that gives full legislative authority to the Public Accounts Committee. It's an area that we'd like to look at. Nevertheless, we do have of course the authority of the House of Assembly.

I thank my colleagues, the members of the Committee, for their diligence in these hearings, and to the staff as well. I think this pretty well rounds off this round of hearings for us. The House of Assembly will open on Monday. Mr. Drover, I assume we can expect the new Auditor General's report fairly soon? Am I correct in that?

MR. DROVER: The Auditor General's report is - Ms. Marshall may shoot me - but the Auditor General's report is being edited and being worked on now, the final view of it. I guess by legislation we have to table it by January 31.

MR. CHAIRMAN: I was under the impression that she would like to table it during this sitting of the House but prior to Christmas so that we would have new, fresh, more current information to get our teeth into after Christmas.

I think I might say to the Committee that it has been a satisfying round of hearings we have had. I think we have accomplished the purposes of the Committee in protecting the public purse and the taxpayers as best we can. This final process of accountability, we believe, is important and we will be no doubt reporting to the House in due course.

Thank you all once again.

On motion, Committee adjourned.