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

MR. CHAIRMAN (WINDSOR): I call the meeting to order. I welcome all the witnesses back, and we'll start off right away with the Vice-Chair. Mr. Murphy, would you like to begin this morning.

MR. MURPHY: Thank you, Mr. Chairman. As we concluded yesterday I think primarily we were discussing the issue associated with computer software and what have you. I suppose eight or ten hours gives a person time to think. I remember as a civil servant, and a public servant for a period of twelve or thirteen years, that sometimes I needed a piece of equipment, and I had a preference for it, because it was the best piece of equipment on the market. It was going to do the total job. I sympathize with people who sometimes may be captured in the public tendering system. Now the Chairman, when we were in Corner Brook, I think, spoke to this and I think he spoke to it rather correctly when he said that if you sit down and want to purchase something that is going to fulfil the total need that is required by your board, I see absolutely nothing wrong with drawing up those specs because at the end of the day it very well may be very dollar saving, initial capital may be higher than other systems that are on the market, but at the end of the day whether it be two or three or four or five or ten years you are going to end up with a system that is better for you and in the long run may save you money, it may save the board money. So I just wanted to put that to bed and say that, because I think in this particular situation the board and those who work with that system felt that system was what you needed.

At your board meeting you took that particular one, made a presentation, so forth and so on. The only thing I might say is that when you write that purchase order, or when you draft up your specs, I do not think you should try to put up some kind of a cloud. I think you should say this is the unit we want and this is why we want it. And I think, if you can make your case and make it well, you will end up with that piece of equipment. So that is what I gathered yesterday from the questions asked and I just wanted to emphasize that.

In cluing up my questions, I just want to make reference to a letter to Mr. Hart, signed by Mr. Paul Stapleton who was then the chairperson. I don't know why I would forget your name, Mr. Shortall, I have been connected with Shortalls all my life. He says on page 20: our board is keenly aware of our responsibility to spend the taxpayers' dollars wisely. Then, of course, we have his response to the draft report of the Auditor General. Perhaps I would ask you as the Manager/Superintendent of the Board to respond to the Auditor General's audit, and maybe capsulize the whole thing, and then perhaps the Auditor General might want to respond or one of her people might want to respond, because I think that is necessary.

MR. SHORTALL: Mr. Murphy, we have made, I think, a concerted effort to take the recommendations of the Auditor General at their value and address each one of them in particular and we have taken steps on the vast majority at this time. The one that we have not taken demonstrable action on at this point in time has to do with the recommendation concerning the fixed assets. But that is because we were dealing with the other ones initially, and we were trying to find a process and looking at ways and means and making enquiries with comparable organizations in other provinces as to how they go about this particular thing. So we are doing some research, if you like, on that in initial stages, and we see ourselves moving into it.

With respect to the other recommendations, especially the matters of compliance with The Public Tender Act, we have had a lesson to be learned, and we certainly feel that our financial procedures will enable us to adhere more properly to the specific requirements of that legislation. So I think we have made some progress on it. There are some specific recommendations that we have enacted, such as the signing of the minutes, the locked tender box, and things of that nature. Obviously they are one shot things that we have done and we have looked after and we have incorporated them. I think it is fair to say that the education sector, while The Public Tender Act 1984 certainly had application to it, probably takes a number of years before all institutions have become fully aware and cognizant of their responsibilities in terms of a lot of legislation.

One of our frustrations is that there is a tendency in education these days to downsize the administrative structure. The basic rationale for that is to apportion scarce resources to the classroom level or to other priorities within education. I suppose that is understandable. The rub with that kind of logic is that it makes it more challenging to ensure matters such as compliance with your regulations and proper planning and proper tendering and proper financial controls are adhered to because these require person hours and we are having a bit of a challenge at the moment finding the human resources to do what we would want to do in this.

But we have expanded our financial staff. Since we received the report of the Auditor General, we have recruited an accountant, an assistant deputy business manager, an assistant business manager to work on staff. His presence has increased our ability to stay on top of these matters of responsibility. We have also recruited an additional accounts payable clerk, I think, Mr. Lester, to assist us in this regard, and these are two new people that we did not have on staff. So we have increased our ability to do the kinds of things that we have been asked to do as well, and I am hopeful that when the Auditor General's people visit our office in years to come, which I expect they will, that they will give us a better bill of health.

MR. MURPHY: Maybe next year.

MR. SHORTALL: Whenever.

MR. MURPHY: Perhaps at the end of the day when other Committee members are finished I would like to hear probably a viewpoint from the Auditor General or if she so decides, maybe she would want to make one now.

MS MARSHALL: Mr. Chairman, thank you. As I indicated in the opening statement yesterday we looked at three specific areas of the school board. We did not go in and do a thorough audit of the entire school board. We just went in and looked at three select areas. We found problems in each of the three areas, and I think it is fair to say that our most notable concern was with regard to non-compliance with The Public Tender Act. At this point in time I am quite happy to hear that the school board has taken action to correct the problems that have been identified. Usually as part of the audit process we will be going back to the school board at some future period to make sure that our recommendations have been implemented, and perhaps to look at other areas. I would like to say that we realize the school board has to be given adequate time to implement the recommendations. I was pleased to hear that they have commenced implementation.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Thank you, Ms Marshall. Thank you, Mr. Chairman, I will pass.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: Thank you, Mr. Chairman. I would like to ask the Auditor General, because I do not have the information myself, what are the penalties for non-compliance? And what are the options that anybody could consider?

MS MARSHALL: There are no prescribed penalties that I am aware of. I think that is more a legal issue. When we conduct our audits and we look at compliance with legislation we see that as being a very important part of the audit in that this legislation has been passed by the House of Assembly and there are certain requirements that have to be met. In this case the House of Assembly is anticipating that any exceptions to The Public Tender Act will come back before the House of Assembly, so that they are advised and so they may ask whatever questions they have on the matter. In this particular case there were many cases which should have been reported to the House of Assembly which were not, therefore members of the House of Assembly did not have the opportunity to question why certain things did not go to public tender or why, for example, the lowest tender was not accepted. So, you know, that is where our major concern focuses on. But with regard to prescribed penalties, I cannot answer that question. There is none that I know of.

MR. DUMARESQUE: That is what I thought. But I think that has to be an issue that the Committee is going to have to deal with. Hearing after hearing we're coming into issues of non-compliance, and one or two, maybe, with a particular board, is not something that we should be overly concerned about. But I mean, every hearing that we have we have several areas of latent non-compliance. To know that we haven't any penalties there, what is going to keep people from not complying in the future?

This seems to be an open-ended thing and we just can't come back here every day and say to them: yes, we're sorry you don't understand the public tendering act, we're sorry that you had a new employee and maybe he didn't go through a proper training process. The public out there is not going to put up with us continually coming back here saying: we're sorry that things didn't go that way. I think that we're going to have to take a serious look at this issue.

I understood earlier from Mr. Shortall that you were looking at some kind of disciplinary action or something, some disciplinary action had been taken in this particular case. I don't mean to select you or your school board any more then I will on other occasions, with the General Hospital this evening or any other, but what particular obligation do you feel and what particular steps have you taken in terms of seeing that this does not happen again by way of penalties or disciplinary action?

MR. SHORTALL: Mr. Dumaresque, in terms of specific discipline it has gone essentially the route of making it well known within our staff that instances of non-compliance with our internal financial policies would be met with firm discipline, which could involve dismissal. Also, employees have been made aware that should they place orders with suppliers without proceeding through the financial channels we will not be paying for those orders and the payment of those orders would become their responsibility. We have also circularised and will remind our suppliers on a regular basis not to respond to any orders which may be placed with them that have not gone through our particular procedures.

So in that sense I suppose the disciplinary action has really been one of a warning as opposed to any further measure. We view the thing quite seriously and the fact that the matters were rather blatant as we indicated yesterday we realised that we had a serious problem. There's also one of education of our employees as well which we are acting on also. I can assure you, sir, that we'll be living up to our responsibilities in this regard. If any of our financial management procedures are violated it's not something that we would overlook and leave with a slight tap on the knuckles, once we've given an individual warning and once we're satisfied that we've (Inaudible) education program to people, and that's what we're about now.

MR. DUMARESQUE: So you've received this copy now, what? The initial report of the Auditor General. Over a year ago?

MR. SHORTALL: Essentially yes, sir.

MR. DUMARESQUE: Have there been any instances where you know that the act has been violated since then, and if so, has there been any kind of disciplinary action taken?

SOME HON. MEMBERS: (Inaudible).

MR. SHORTALL: Mr. Lester reminds me that we have resorted to living up to our responsibility with respect to reporting matters that have not been tendered or otherwise on the appropriate forms. Recently there were some damages incurred as a result of wind damage in the windstorm which necessitated some emergency repairs to our buildings in St. John's. These particular matters of course are in the process of being reported on the forms required. There was a matter earlier involving the ordering of a number of report cards which initially appeared to exceed the amount of $5,000 which had not been tendered. However, as we investigated it more closely we understood that it was less than that particular amount, and we had some consultations with the officials in the department and came to the conclusion that it wasn't necessary to report that, but on balance there has been, I do not believe, Mr. Lester, a serious violation, to my knowledge anyway.

MR. LESTER: None that I am aware.

MR. SHORTALL: As I say, we certainly will be fulfilling our reporting obligations which, as we pointed out yesterday, again was something we had not been doing.

MR. DUMARESQUE: I would like to commend you on that, because from where I sit, as one member of the Committee, I do not think it is fair for the public to chastise us over one or two mistakes. But once you get any of the forty-six Crown corporations or agencies or boards of the government coming before the Committee, and we find a half a dozen of these situations in every one them, you know, you can understand that the public will not be very tolerant of that type of thing, if, in fact, there are examples of where a public service is being denied, and we can clearly show that if the proper process was followed maybe there would be cost savings and maybe greater public service would be provided. So this is where I am coming from not anywhere else.

I would like to look at the issue of the computers just for a second.

MR. CHAIRMAN: Before you go on to that, can I make a comment here, Mr. Dumaresque? Just to interrupt you for a moment -

MR. DUMARESQUE: Sure.

MR. CHAIRMAN: - to try, if I might to put this into perspective as to what we are dealing with here. A breach of The Public Tender Act in itself is not a criminal offence, obviously. But that is the role of this Committee, I guess, to look at those breaches, to investigate them, to investigate what happened and to report to the House of Assembly and the House itself may well wish to issue some direction to the board, some very specific instructions to the board as a result of our hearings. Now that is a time consuming process. The purpose of the Act, I guess, is to eliminate the potential for serious wrongdoing in purchasing procedures of all government boards and agencies and departments. The whole object of the Act is to put in place a procedure that makes it very difficult for any improper action to be taken by any individual. There is where you could get into areas of criminal activity, but a breach of the act itself is not and there are no penalties prescribed. But obviously action can be taken on recommendation of this Committee or by the House of Assembly or by the departments actually, and directly the Department of Education, for example, could very well have intervened, if they were aware of it, and gave directions to the board that you were breaking this Act. In fact, there is correspondence in our file here from the minister where some of these matters were made known to the minister.

Also I would like to point out that we are talking here about two or three instances from, I do not know, a sample, probably a fairly small sample that the Auditor General looked at. I would assume if we looked at all of the contracts entered into over a period of time there would be many more instances similar to this sort of a thing. You know, I wanted to ask Mr. Shortall when these items were brought to your attention did you review other contracts? Did you find similar serious deficiencies in compliance with the Act? And what have you done about those?

MR. SHORTALL: We were aware before the Auditor General's Report of several instances where The Public Tender Act had not been complied with, specifically the Baker Flooring matter, and also the matter of the Come By Chance Oil. These are two examples. We are not surprised to find those covered in the report. And indeed as early as September 1990 the wheels were set in motion to upgrade our internal financial control procedures.

MR. CHAIRMAN: Also, as I pointed out earlier, I guess we are still in the educational process as it relates to the Act. If this board were brought back before this Committee next year with similar offences occurring from now until then, I think we obviously would have to take a much dimmer view and our recommendation to the House of Assembly would be much stronger I am sure.

Thank you. Mr. Dumaresque, do you want to continue?

MR. DUMARESQUE: Thank you. Just on this computer system. I notice from a number of the invoices that the training sessions and some of the servicing is quite costly. I am not sure if it is in here, but when the tenders came in for this particular system what would be the price differential between the first and second bidder? Was the local preference policy applied?

MR. SHORTALL: I will ask Mr. Lester to respond to that one, Mr. Dumaresque. He has the information with him.

MR. LESTER: Yes, the next lowest bidder was $370,000 compared to the $207,000. And yes, at the time we did apply the local preference policy but obviously in that regard there's quite a differential.

MR. DUMARESQUE: Yes. Because one of the things that I'm familiar with, having run through computer problems at times, is the cost of servicing, maintenance, training and so forth. It's obviously a lot better sometimes, certainly if not all times, to have your dealer as close at hand as possible for those types of things. I notice $395 a day for training. Would that be something that would be, as far as you're concerned, in the realm of reasonable cost and something that you're willing to continue with, or is there an opportunity in the future that you might be able to get the kind of maintenance on your machines in the city, or even within the Province?

MR. LESTER: The $395 a day was strictly for implementation training. The actual servicing and software support are done on a percentage basis in comparison - and I guess comparable to most other firms who do the same type of thing. The hardware maintenance is done locally through a local supplier.

MR. DUMARESQUE: Okay. Maybe I'd like to ask the final question to the Auditor General on an issue that she mentioned yesterday, that there's no audit function within the Department of Education. Did I read that correctly? Because I know in municipal affairs, for instance, whenever there's a water and sewer contract the contractor has to go and - I know in our case, those days - we have to go through almost three or four steps of the process to finally get a payment back to the contractor. There's an extensive audit, if you want, or certainly an analysis of a legitimate expense and legitimate claims. That type of thing is not in the Department of Education or - what is it?

MS. MARSHALL: That's correct. That's my understanding. I also understood that the Department of Education has made representation to obtain some staff that could carry out an internal audit function relating to the school boards.

MR. DUMARESQUE: Okay.

MS. MARSHALL: This area was looked at last year by the officials of my office. There is a report on page 115 of last year's annual report where they refer to inadequate monitoring and internal audit activity by the Department of Education.

MR. DUMARESQUE: To your knowledge is there a lack of a same type of function in any of the other departments?

MS. MARSHALL: I don't know off the top of my head which departments have the internal audit function and which don't. For example, the Department of Works, Services and Transportation, they do have an internal audit function. So does the Department of Finance. There are other departments which don't have an internal audit function. I don't believe the Department of Social Services has an internal audit function. So it would vary as you go from department to department. Some have it and some don't.

MR. DUMARESQUE: That's fine for me, Mr. Chairman.

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

MR. HEWLETT: Thank you, Mr. Chairman. With regard to the business of the fuel oil contract, as I understand my readings here, Mr. Shortall, the situation came to light because of a complaint from a contractor who presumably wasn't asked to bid, or - how did the matter arise and sort of come to the forefront?

MR. SHORTALL: I think traditionally the Roman Catholic Episcopal Corporation, for the archdiocese of St. John's, included the fuel oil contract for our schools in its overall contract. A decision was made, or it came to pass, that this was not going to be continued. We received relatively short notice of that. I think even though the letter which provided us notice was dated earlier in January it was late January before we actually got the thing. February and March are pretty serious heating months with bills and we felt the pressure of that and we had to act. We knew that our friends across the city in the Avalon Consolidated Board had just gone to tender with the Come By Chance, and we made an interim measure, and of course went to tender on the matter in the spring.

MR. HEWLETT: So are (Inaudible) -

MR. SHORTALL: I would think that the contractor who was supplying the Episcopal Corporation, I'm assuming, would have brought the matter to someone's attention.

MR. HEWLETT: So you're not aware of the detail of how the Episcopal Corporation was brought into - being in non-compliance with the act vis-à-vis the school boards.

MR. SHORTALL: I don't know. Mr. Lester, you may want to clarify that but I don't know the arrangements of the Episcopal Corporation at all.

MR. LESTER: My understanding, and it's purely an understanding, was that they did call tenders of sorts for their fuel delivery and a company did complain. They were the low bidder in that particular situation and the Episcopal Corporation did not choose them as their supplier. That was where the originating complaint came from.

MR. HEWLETT: Okay. To the Auditor General, Mr. Chairman. Obviously somewhere along the line then government or one of its agencies informed the Episcopal Corporation that with regard to the school boards under its jurisdiction that the Public Tender Act had to apply. Are you aware of the way whereby that took place? Is your department aware of how that occurred, the Episcopal Corporation brought into the light of day so to speak?

MS. MARSHALL: My understanding was that it was done through the Department of Works, Services and Transportation and it was that department that clarified the matter. There is no minister designated as being responsible for the Public Tender Act but all reporting to the House of Assembly is done through the Minister of Works, Services and Transportation. Usually enquiries, clarifications, or comments regarding the Public Tender Act are channelled through the Minister of Works, Services and Transportation and I think that is where the clarification comes in.

MR. HEWLETT: So a contractor who felt he was left out of the situation would pass a complaint onto the minister?

MS. MARSHALL: Yes, quite a few of them go through the Minister of Works, Services and Transportation.

MR. HEWLETT: So, is it fair to say that if a given contractor had not complained, or if your department had not done a spot audit a situation like this could have gone on for a number of years basically left untouched with nobody really being aware that they were in breach of any rules, presumably?

MS. MARSHALL: Yes, that is true. There are cases however where contractors may complain to the Minister of Works, Services and Transportation and there have been occasions where that department will designate officials of the government purchasing agency to carry out an investigation to determine if there has been non-compliance with the Public Tender Act, but it would be only in those isolated cases whereby somebody has brought something to their attention. They do not have a routine internal audit function to ensure that people or organizations are complying with the act.

MR. HEWLETT: Now, we are talking about the Tender Act 1984 so presumably the Episcopal Corporation or any such body of that nature that had school boards related to it were required to apply the details of that Act as of 1984. Is that how it worked?

MS. MARSHALL: My recollection is that the legislation was proclaimed in 1987.

MR. HEWLETT: So, from 1987 on, or whenever that legislation came into effect?

MS. MARSHALL: Yes, that is correct.

MR. HEWLETT: Apart from a complaint driven mechanism there appears to be very little in government, apart from probably a general information campaign or something to make bodies aware, especially bodies like the Episcopal Corporation which are in a fuzzy kind of area that had to comply.

MS. MARSHALL: That is correct. The Public Tender Act when it was brought in did not have any provisions for ensuring compliance. It does not have any provision for some organization to go out and ensure that the Act is being complied with. My understanding, based on some correspondence and discussions I had recently with the Deputy Minister of Works, Services and Transportation is that they are now looking at that area because at the time our office felt there should be some type of routine internal audit function. Because of the number of cases and deviations from the Public Tender Act that we were encountering during our audits we felt that there should be some sort of compliance group or some sort of compliance function put in place whereby there would be an internal audit activity taking place on all of these Crown controlled corporations and Crown agencies.

MR. HEWLETT: So we have a practice right now of people dealing through the Minister of Works, Services and Transportation but you say there is no statutory obligation that the minister is in charge of this particular thing?

MS. MARSHALL: That is correct. There is no routine internal audit function. The number of cases that go through the Department of Works, Services and Transportation and that are investigated on an individual basis would be very, very small.

MR. HEWLETT: Than you. Mr. Chairman, just as an observation. I spent fifteen years as an employee of the Crown and any time I had a complaint vis-à-vis tendering I always referred it to the Department of Works, Services and Transportation because I presumed, I suppose for want of a better phrase, that they were in charge, or someone over there was in charge. I think that is a matter our Committee should probably make a comment on because to have a very broad sweeping piece of legislation like that with no minister of the Crown directly and legally responsible, an act that has limited teeth, I think, is something our committee should really look at.

MR. WINDSOR: It is my understanding, and the hon. gentleman may wish to correct me, but it is my understanding that the Minister of Public Works through the government purchasing agency provides a service to other departments but is not responsible for all departments. Each minister effectively is responsible for what takes place in his or her department and any Crown agencies answering to that department, but there is an advisory service and assistance available both for the Public Tender Act and the local preference policy within the Department of Public Works, now the government purchasing agency. The local preference originally was within the Department of Development when I was in that portfolio, but that has been combined since I left. I think that is correct.

MR. CHAIRMAN: Mr. Reid.

MR. REID: I know Dr. Mulcahy has not been sworn in but I am just going to make this comment to her, she being the new Chairperson of the board.

MR. WINDSOR: One must be careful today.

MR. REID: For the past three years I have been sitting here as a member of the Public Accounts Committee, almost three I think it is, I missed a period of about six months. I was appointed to the Constitutional Committee and I asked to be removed from this Committee and then, of course, Premier Wells put me back on after. I just want to make a comment to you. It is Sister, is it not?

SISTER MULCAHY: Yes.

MR. REID: I have found in the past three and a half years, and I guess through personal experience over the years, being involved in municipal politics and a number of other organizations within my community and within, I guess, the Province, that when you find yourself in a situation where you become the chairperson of any group you sometimes have to assume some of the baggage, I guess, that is left behind by the previous chairperson.

Now that is not a derogatory comment, I just use the word baggage or excess baggage, problems that have occurred previous to you coming to the Chair. But I suggest to you Sister Mulcahy, that you are the type of person and I know Brian Shortall - I have known him now I guess for twenty years - and I cannot for the life of me in my remotest thoughts, cannot for the life of me see either one of you people, and it is not a reflection on your staff, either one of you people doing anything within the board as it comes to financing or general administration within your board in St. John's that would be contrary to the law, even though they are talking of not having any, I suppose avenues, whereby a group such as yours could be charged other than in the House of Assembly.

It is part of the law that we are dealing with here, when we are talking about the Public Tender Act and so on, and I am sure with the new Chairperson whom we have now that you will, along with Brian, and I tend to agree and I tend to believe in what Brian is saying, that there will be some things done in the near future to clean up some of the mistakes that were made previously, and I know you Sister Mulcahy will see to it, because if you do not, someone else will, eventually, end up in your position and then have to carry your excess baggage.

Thank you very much, sir.

MR. CHAIRMAN: Yes, Mr. Ramsay.

MR. RAMSAY: Thank you, Mr. Chairman.

Just a question to Mr. Shortall. On the document, page 16, 17 and 18, there is a letter from Mr. Lester. I bring to your attention page 17, No.8, the reference to the method of handling public tenders; the question that was asked that is in answer to, requested a description of how the board processes the public tenders received, outlining who receives them, who controls them, who has access to them, who is present when they are opened, how they are recorded when opened, et cetera. Is this answer dated August 4th, 1992 the current method that is used in response to that particular question as to public tenders?

MR. SHORTALL: Essentially yes, sir. By tradition there is a small exception to that particular practice in the instance of tendering for the construction of new schools or extensions of new schools, whereby a representative of the property and services committee would be present when the tenders are being opened, but essentially that is the process that we follow.

MR. RAMSAY: I am not sure what advice you received but according to information that I am privy to from past hearings et cetera, that statement in your letter there, is still, I would think, in contravention of the Public Tender Act in some respects, and the Auditor General can verify this or correct me if I am wrong. Public tenders are supposed to be opened in public as opposed to being opened with just staff members of an organization present. This gives no reference to either a public opening of tenders nor does it give preference to a public opening date, which is advertised.

I bring to your attention in an advertisement that you placed for the computer system on page 52 of the document, and also on that same page there is reference to a delivery of groceries contract to the Brother Brennan Environmental Education Centre, neither of which give notation to any public opening of tenders under the Public Tender Act, so I would submit and I would request initially, the Auditor General's comment on this observation of mine, and then a comment from Mr. Shortall.

MS. MARSHALL: Yes, that's correct, Mr. Ramsay. Under the Public Tender Act, if you go to Section 11 of the act, it specifies that tenders called under the act shall be opened in public at the prescribed time and place. Also if you go to the regulations under the Public Tender Act there are also further requirements there. For example: government-funded body inviting or causing to be invited tenders shall open the tenders in a place where the public is permitted to watch and at such times it shall be indicated in the call for tenders. And no tender may be opened unless there are at least two witnesses present who are acceptable to the government-funded body opening the tender.

MR. RAMSAY: So not necessarily staff people. Or staff people are acceptable.

MS. MARSHALL: Staff people are acceptable, yes.

MR. RAMSAY: But it does have to be advertised in the public.

MS. MARSHALL: Yes. The public -

MR. RAMSAY: And public notice given.

MS. MARSHALL: Yes, and the public are able to go in and watch the opening of the tenders and also see what the results are.

AN HON. MEMBER: (Inaudible).

MR. RAMSAY: Yes. Okay. Do you have a comment on that, Mr. Shortall?

MR. SHORTALL: Yes, I do. I certainly appreciate your suggestion that our advertisements should perhaps more clearly indicate the prescribed time and place when the tenders would be opened. We'll act on that advice. I should remind you though that our tenders are often opened in public and members of the public, as far as I understand, are welcome to come. I cite specifically tenders in the areas of snow removal or new building construction and so forth, where I myself have attended these sessions, and members of the public have been there. We will ensure that our advertisement indicates this more forcefully.

MR. RAMSAY: Because of the way that those advertisements are written, according to what you've commented, you haven't made any changes in the way that the advertisements are written. It certainly does have to be clear. Because even though there was no intent to breach the act I think the way those ads are written does in fact breach the act as well. So something to keep in mind and to be sure. I think the public, once they realize and see the majority of ads that go in for public tenders, having this noted there, there will be an expectation.

I know there are other instances where it isn't noted that the public can view this tender opening at such-and-such a place at such-and-such a time. Especially if there are business people who are probably in a similar field or whatever. They might want to attend just to see what the bids are and probably wonder if they should have bid a little lower or a little higher, whatever. They can make enquiries after the fact but oftentimes maybe just drop it and say: we weren't successful, without knowing they might have been fifty dollars off or some small amount. If they had changed their method of bidding maybe they would be successful at this kind if thing.

MR. CHAIRMAN: The whole purpose is to be there to protect the confidentiality of your bid to ensure that it is opened publicly and fairly, and the bids are sealed and all opened the same time and available for scrutiny. That's just part of the whole process.

Mr. Dumaresque.

MR. DUMARESQUE: One of the five on that particular page there, you see the Placentia and area health care complex, shows that tenders will be received up to October 9, up to 3:00 p.m. Public opening will be directly followed. That's the type of thing I guess that you're suggesting.

MR. CHAIRMAN: That also is the purpose of the sealed depository we spoke about yesterday, so that the bids don't necessarily have to be opened immediately following. It may well be that the people that you want to have at your opening are not available, that they're out of town at that particular time, and so the bids may close at twelve noon on Monday, the opening may be at noon on Wednesday, but they're in a sealed depository and opened in public and the envelopes are still sealed. It's all part of that process.

MR. SHORTALL: We'll undertake to revise our advertisements.

MR. RAMSAY: Okay. There is another thing I wondered about. In looking at school boards and school board offices, I know with the imminent restructuring, I suppose you could say, of school boards throughout the Province with the government's response to the Royal Commission report. Your board office and the number of students that you have in your system, I just wonder: how many office staff do you have in the way of assistant superintendents, program co-ordinators, et cetera. Do you have an approximate on that, or do you know the exact figures?

MR. SHORTALL: It is fair to say that our central office divides into the education side of the office and then the business office and so forth.

On the education side we carry five assistant superintendents as well as a number of program co-ordinators. We currently have sixteen program co-ordinators operating out of our central office for our school district here in St. John's. We have, as well, some teachers housed there who provide services to children with respect to education, psychology and so forth, visually impaired services et cetera.

On the business side of our organization it is headed up by the business manager and he would have a number of people working in the financial and purchasing areas as well as a maintenance service.

I will ask Mr. Lester and Mr. Royle to give you the information from their own departments. They can do it more accurately than I could. I am giving you a guesstimate right now.

MR. CHAIRMAN: Mr. Lester.

MR. LESTER: Yes, I guess the business side of the organization consists of our finance and purchasing departments as well as our warehouse. I believe, off the top of my head, we have approximately twenty-two people who work in that area, including our management and clerical staff, including the clerical staff who perform the office functions for our curriculum part of the division of the board.

I would like to defer to Pat to probably tell you about the -

AN HON. MEMBER: Secretaries.

MR. LESTER: Yes, okay.

Mr. Shortall reminds me about school secretaries. We have, I think, about forty-five or forty-six school secretaries in our thirty-nine schools, they work various hours. Some work for seven hours a day; some work for five hours a day, and that type of scenario, depending on the school and its size.

Mr. Royle can tell you how many maintenance people and how that division is established.

MR. CHAIRMAN: Mr. Royle.

MR. ROYLE: Yes, our school board has approximately two million square feet and thirty-eight schools. My department, construction and maintenance, I am the director. I have an assistant director and a supervisor of custodial services. The remaining staff are represented by a CUPE local. There are approximately 160 staff comprised of cleaners, janitors, carpenters, plumbers and electricians.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Okay. I just wanted to delve a little bit into the overall financial size of the board.

I note on your financial statements that the board has current expenditures on the order of $73.9 million, on Page 165 of our mini-document. Is it correct? Well the revenues are on the order of 74.4, showing a board deficit at the end of the year of 5.7 million.

I just wonder, the board deficit as you began the year was 5.9 and then, of course, you had a surplus of approximately 200,000 for the year, but your deficit of 5.7, now is that based on the board's debt in relation to the construction of some school buildings? I know there are some notes in the financial statements with regard to DREE schools, et cetera, that are set up on your own books as opposed to being governmentally done or through the CEC. Is that where that debt comes from?

MR. SHORTALL: Partly, but I will ask Mr. Lester to give you a response, if it is okay.

MR. CHAIRMAN: Mr. Lester.

MR. LESTER: The board deficit is made up - part of that 5.7 million you are looking at there at the end of 1991 is comprised of an allowance that is made in the statements for employee benefits and this type of thing which are accrued from year to year and expended in the year in which they are accrued - not in the actual time when they are paid out. I think that relates somewhere close to $2 million in that figure.

The rest, yes, relates for the most part to transfers made from operating to capital to cover portions of various construction programs which were undertaken over the last number of years by the board.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Okay.

On that area I wonder about bank loans that have been incurred during the period referenced in the letter that the Public Accounts Committee sent to you. I note on Page 13, number three on that same page, in the letter from Mr. Porter to Mr. Shortall, asked for an explanation as to why the bank loans increased over $11.5 million from 1986 through 1990, and the information relating to what the borrowed funds were used for. The response on page 16 noted that bank loans incurred during the period would have facilitated provision of facilities which were needed by the board, but for which funding was not readily available. It was deemed that borrowing this money would provide these facilities now, and thereby enhance the board's provision of services to our students.

I am wondering if, following the time at which the provincial government I think settled the debts of a lot of the school boards, I do not know if your board was involved in it at that time, if there were any further debts that had been incurred following that settlement by the provincial government. Now maybe someone could answer that or maybe I am off on a wild goose chase here, I do not know.

MR. CHAIRMAN: Mr. Shortall.

MR. SHORTALL: This specific question refers to some financial arrangements which were made to construct three new high schools in the board. At the time, the school board was receiving monies from the school tax and based upon anticipated revenues from the school tax, approval was received from both the Catholic Education Council as well as the minister of the day, who, enabled the board to proceed with that type of funding, of that financial arrangement, and it was an arrangement that we are currently in the process of retiring, but that is where it comes down to. I will ask Mr. Lester to comment on your other question because, whether or not from that initial time you talk of when government erased those particular debts, whether additional borrowing was done, I would suggest, yes but anyway, Mr. Lester -

MR. LESTER: I am not sure what this board received in terms of debt retirement back I believe in the early 80s, when the government retired the debt of the boards. Most of the borrowings which are done by our board since that time have been done on commitments from the Catholic Education Council and repaid according to the schedule of receipts from the Catholic Education Council.

Part of the borrowings to which your question refers, was comprised of $9 million which we borrowed as a long-term debt scenario, $8 million of it was that type of CEC provision in which we borrowed in the very short-term and retired as we received payments for the progress of our construction from the CEC, so I am not really aware of any just straightforward borrowing that the board did to facilitate construction that had not either come from the CEC or we had funded ourselves and repaid in one, two, three-year type of scenario.

MR. RAMSAY: You see, what I am trying to get at is, I note in the Royal Commission Report on Education, there was reference given to the fact that even though government had retired board debt and requested that no further debt be incurred by boards, debt had again grown to a figure of approximately $28 million to $30 million, something on the order of that in total, over the Province. I guess you people being representatives of one of the largest boards in the Province, I would suspect that if that was something that was done that you would account for a certain portion of that, I do not know - the information is not here specifically, and it is a general question of interest of course, because it does affect the financial situation according to the board and maybe the Auditor General could shed some light on that if they have any - Do you have anything on that ?

MS. MARSHALL: No, we do not have an analysis on that. Our primary concern was that you know, there was a significant bank indebtedness and given restraints on funding, which is in place now and which is likely to continue in the future, the board would have to come up with funds to retire this debt and that was the concern that we had.

MR. RAMSAY: Well we will just leave it at that.

MR. CHAIRMAN: Mr. Reid, wanted to interject just for a moment, did you not? Do you agree Mr. Ramsay? Mr. Reid.

MR. REID: A very quick question, Brian, maybe you can answer this. On page 176, current fund revenues, you show interest on investments of ($ inaudible), for 1991?

MR. SHORTALL: Yes.

MR. REID: What is your investment company?

MR. SHORTALL: Mr. Lester made reference to this yesterday and essentially it is interest which arises from cash on hand, if monies are received on a certain date and are in our banks while they are being expended, that is what that comes from, it is not the result of an investment portfolio as such.

MR. REID: So there is no investment as such? So where is this, in a bank?

MR. SHORTALL: I will ask Roger to respond.

MR. CHAIRMAN: Mr. Lester.

MR. LESTER: The greater part of that interest accrues on monies which are deposited in our account by the Department of Education to supply teacher payroll. The bank takes our three accounts, sums them up, and pays us interest on a daily basis on our total outstanding balance. Traditionally that payroll account has money in it to the tune of a couple of million dollars for maybe three or four days, depending on how long it takes peoples' cheques to clear. That is where the greater part of that interest accrues.

You have to remember that out of that $74 million, $54 million of it is teachers' salaries - just regular teachers - so that can accrue a fair bit of interest in the short period of time that it exists in the accounts.

MR. REID: So you do not have any investments at all?

MR. LESTER: None whatsoever.

MR. REID: None whatsoever? In any company? In nothing?

MR. DUMARESQUE: Why did it go from 105 to 202?

MR. LESTER: That was during the period of time when there was a significant increase in the interest rates.

MR. DUMARESQUE: Oh, I see.

AN HON. MEMBER: You make money on government money.

MR. LESTER: We make money on government money.

MR. CHAIRMAN: Good work if you can get it.

Mr. Ramsay, do you want to continue with your questioning?

MR. SHORTALL: In trying to finance education you take it wherever you can these days.

MR. RAMSAY: In cluing up what I had to say about that, I was concerned about the area. I did not know if it tied into the provisions that were there and the questions that were asked with regard to the bank loans. It is not clear to me as to what those bank loans represent that have been suggested in The Royal Commission Report on Education and how it may apply to a situation like this. I note that the Auditor General questioned the bank loans of the board, and I just question as to whether there might be any intertie between that and the situation that was brought up in The Royal Commission. So, unable to nail it down, I will just pass it off to someone else for questions, Mr. Chairman.

MR. REID: Mr. Chairman, if I may interrupt.

MR. CHAIRMAN: Mr. Reid.

MR. REID: I am satisfied that we have dealt with the Auditor General's Report, and rather than break at eleven o'clock for coffee, I think maybe you should be given the opportunity to ask around if everyone agrees or disagrees, and maybe you could clue up and we could get out of here maybe a bit earlier this morning than anticipated.

MR. CHAIRMAN: Is that agreed?

AN HON. MEMBER: So agreed.

MR. DUMARESQUE: I just have a couple of short questions.

MR. CHAIRMAN: I have some questions as well.

Since it is only five past eleven, perhaps we will continue on and perhaps we will finish in half an hour.

Mr. Dumaresque.

MR. DUMARESQUE: I just have a couple of questions. One is on the contingencies outlined in 174. I just wonder what the status is now of the claim with Fahey Construction and the board. Is that concluded?

MR. SHORTALL: No it is not. The claim is as the note describes. There are no legal proceedings ongoing with respect to it at the moment. It is there and we are waiting to see what happens as a result of it.

MR. DUMARESQUE: I notice there they said their intention to file. Did they file a counterclaim - Fahey Construction? Did they file a counterclaim?

AN HON. MEMBER: They gave intention. I do not know whether they actually filed a claim.

AN HON. MEMBER: No, there is a claim filed, but it has not gone anywhere.

MR. CHAIRMAN: Mr. Shortall.

MR. SHORTALL: It is filed, but that is it.

MR. CHAIRMAN: Mr. Dumaresque.

MR. DUMARESQUE: The other question is: What bank do you deal with?

MR. SHORTALL: The Bank of Nova Scotia.

MR. DUMARESQUE: Okay. Thank you.

MR. CHAIRMAN: Mr. Murphy.

MR. MURPHY: Was that tendered, Mr. Shortall?

MR. SHORTALL: We are presently going into a process where the business manager has been directed by the finance company to receive proposals from banks with respect to where we should place our account, and it is our intention, I should add, as a result of this process, that every so many years we would go to the market and receive proposals on that.

AN HON. MEMBER: Some good deals out there these days.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: Another school board did suggest that their banking costs went down tremendously by virtue of tender.

MR. CHAIRMAN: I do not want to tell you how much government's costs went down by when we changed a couple of years ago. It is frightening. Those things are negotiable.

Mr. Reid, do you have any final questions here?

MR. REID: No, no. I think, Mr. Chairman, you have a gist of how most of us have reacted, I suppose, and I think maybe you could sum up on behalf of all of us.

MR. CHAIRMAN: I want to wait to give Mr. Hewlett an opportunity too. There are a few questions I wanted to get into before we finish, and I will give Mr. Hewlett an opportunity.

Going back, just to talk about the computer thing, do I understand that this computer system is now in place, on stream, on line, now being utilized, the full system that you tendered for, Mr. Lester?

MR. LESTER: Yes, the system is in place. It is utilized to the extent that we are still in the process of hooking up some of our schools to central office. But outside of that, yes, it is in place and operating.

MR. CHAIRMAN: So all aspects of the programming that was requested here in these specifications are now in place?

MR. LESTER: Yes, they are.

MR. CHAIRMAN: Do I assume now that you have a good handle on physical assets? This is an issue we have not dealt with here. The Auditor General's Department identified some serious deficiencies in records of physical assets and no tags being used and this sort of thing. Do we now have a tagging system? Is every item computerized? Because once you have it connected with schools we are aware from previous conversation with other boards the difficulty when you are transferring chairs and musical instruments and things of that nature perhaps from one school to the other that it can cause you some difficulties in keeping track of where things are. The computerized system obviously would make that much, much easier if it is being fully utilized. You must have quite a number of data entry clerks, when I look at the detail here, when the records of students and the number of days that they are missing, powerful management tools not only for the board, but for principals as well. You know, I think it is very, very useful information particularly for students today. But it must be a tremendous job to enter all that data. Have you increased your data entry staff tremendously? And are you getting real benefits from this? Mr. Lester.

MR. LESTER: We have not increased out data entry, nor do we intend to in the future. Most of the entry is done at the school level. Take attendance as an issue, in the mornings secretaries are responsible to issue absentees, they just go into the system and the system will record if this particular person was absent on a particular day for whatever reason. There are a list of ten or a dozen reasons why a person would be excused or unexcused. From that perspective the bulk of the data entry exists in the initial stage of putting the demographic information and the student information into the system. After that even as students move from school to school the system transfers the individual people and their files from school to school, so never does it ever have to be entered again other than to update change and what have you of the various fields in the employees file.

MR. CHAIRMAN: How about the physical assets? What sort of a handle do we have on that now?

MR. LESTER: The system is capable of recording our assets. As of yet we have not been able to get out and do a physical inventory and get the things tagged. We are investigating or I am investigating right now some possibilities of how to go about that tagging process. There are a number of scenarios out there from a number to a bar code, all this type of thing. The initial inventory process I feel is not the major stumbling block. I think the major thing that we have to look at is how to maintain it after, it is one thing to mark it, but we have to make sure that we can then keep track of it into next year or the years to come, and as you said to have the process in place whereby the transfers are recorded from the school level, which is possible at this time. The hang-up right now, the thing that we are trying to get to grips with, is how do we get them in there initially and record and value every asset that we currently have out there from a number of avenues, whether it is new, ten or fifteen or twenty years old, what real value does it have? But it is an issue that we will have to deal with in the near future to try and come to grips with it.

MR. CHAIRMAN: Not to get back into the issue of purchase orders for carpets again, but we are getting into that area. We have already gone through that and established the deficiencies in how that was handled. Perhaps, Mr. Royle, you might want to comment on this. I assume, and I am making a presumption here, the standard of carpet is similar for each school otherwise you are going to have some very unhappy principals and teachers when they see a better carpet in somebody else's school. But I assume you have a standard for carpet and for flooring and for tiling and whatever the case may be, one spec that is used throughout. I assume you are not issuing a different spec for each project. Therefore, you should have a pretty good handle on what you need. You must have some concept of how much you are going to need in the run of a year. Is it not possible to get over the difficulties you might have, which I don't totally accept. I think the issue of the case that we discussed here illustrates some bad planning from the point of view of what you're going to do and sort of doing it on a haphazard basis. I think a great deal of the problem could be eliminated by better scheduling the work that you're going to do in various schools. I'm surprised that these decisions are made off the cuff. I suspect you're beaten black and blue from schools which are looking for these kinds of things to be upgraded. It seems to be a sort of a haphazard way of deciding: I think we'll go and do $56,000 worth of work in the next couple of months to upgrade a few schools around.

Have you ever considered requesting tenders for standing offers? Since you do have a fairly finely defined, I assume, specification for carpet and tiling and so forth. Could you not issue once a year a standing offer to bid on supply and installation of carpet and tiling, giving an approximate volume of work that you're going to...? Have you ever used that mechanism which then allows you, if you go into a school, or if you have damage due to storm or fire, or vandalism or anything else, that you now have a contractor who has already a standing offer available that you can pick up a phone and say: can you get in tomorrow and install 100 square feet of carpet in this particular place or whatever? Have you taken that approach?

MR. PATRICK ROYLE: No, Mr. Windsor, we haven't taken that approach. Possibly the reason that we haven't is that we do not know from year to year how much flooring, how much painting, we're actually going to do. A lot of our maintenance is breakdown maintenance. We don't have the luxury of preventative maintenance. Our budgets are very sparse in this regard. I think it's an excellent idea, because it would take a lot of pressure off our department in the sense that, as you said, if something came up, an emergency, we could just go with that contractor because we have a tender in place for so much, so many dollars per square yard of carpet.

MR. CHAIRMAN: The fact that you don't know how much you are going to do makes it even more important and more valuable a tool which allows you to work clearly within the ambit of the Public Tender Act.

MR. ROYLE: That's right. But you may have to (Inaudible) -

MR. CHAIRMAN: This provides the kind of protection the act is meant to give, and yet gives you the management flexibility that I'm sure you would need from time to time.

MR. ROYLE: Contractors may require a guarantee of so much for volume. That's my concern, but I think it's an excellent idea. We will look into (Inaudible) -

MR. CHAIRMAN: I'm sure your new computer could tell you the very minimum that you're going to be spending each year. If you call for that much, even. The bulk of it should still go on public tender. This concept is not meant to prohibit the requirement, or to eliminate the requirement for calling public tenders on work that's going to be done next summer. You should still go to tender for that bulk of work. But it gives you the kind of flexibility - and it's not only carpet - it could be carpentry work, electrical work, supply of any kind of fixtures, installation - anything that's standard you can have a standing offer. That speeds up the process.

We all recognize that the Public Tender Act can slow things down. We've had cases in government, and cases that have been brought before this board, where the Public Tender Act costs more because we lost an opportunity to get a special sale or a saving or something of that nature, that we had to go to tender whereas we could have negotiated with a particular supplier. Because we couldn't negotiate we had to go to tender, the prices came in higher. Those things will happen.

As long as you work within the Public Tender Act there are ways and means of taking advantage of those things, but not to get around the act. It's a matter of learning the act, I guess, and working within it, as we've discovered so many more times.

MR. ROYLE: I appreciate your comments. I think we can work towards that goal.

MR. CHAIRMAN: Thank you, Mr. Royle.

Mr. Hewlett, did you have any final questions?

MR. HEWLETT: Nothing further, Mr. Chairman.

MR. CHAIRMAN: Any final questions from other members of the board? Mr. Murphy.

MR. MURPHY: Just a quick comment on this fixed inventory. I have a soccer ball that I took from St. Bon's in 1954. It's well worn out and I don't want -

MR. CHAIRMAN: The archives are probably the right place to put it.

SOME HON. MEMBERS: (Inaudible).

MR. MURPHY: I don't want to receive any kind of an invoice from the school board for that soccer ball. So I just leave you with that. Thank you, Mr. Chairman.

MR. SHORTALL: Well, we were wondering where it was.

SOME HON. MEMBERS: (Inaudible).

MR. CHAIRMAN: Yes. It'd be a matter of interest.

MR. REID: That's not all he has, Brian.

SOME HON. MEMBERS: (Inaudible).

MR. CHAIRMAN: There being no further questions I want to thank the chairman, the board superintendent and the members of the staff for coming forward and giving us their evidence, and the benefit of their experience and knowledge in these particular issues. I thank the Auditor General and her staff for being here once again, as always. Members of the Committee, thank you for your diligence, and the staff of the Committee.

This portion of the meeting is adjourned and we'll be back this afternoon at 2:00 with the Health Science Complex.

On motion, the Committee adjourned.