The Committee met at 9:30 a.m. in Room 5083.

CHAIR (J. Byrne): Order, please!

I am going to introduce the Committee members first. I will introduce myself. I'm Jack Byrne, the Member for Cape St. Francis. I am the Chairman of the Public Accounts Committee. To my right is Tom Lush, the Member for Terra Nova, and he is the Vice-Chairman. Could we start up here with the Committee members?

MR. MERCER: Bob Mercer, the Member for Humber East.

MR. SHELLEY: Paul Shelley, the Member for Baie Verte District.

MR. FITZGERALD: Roger Fitzgerald, the Member for Bonavista South.

MR. JOYCE: Eddie Joyce, the Member for Bay of Islands.

CHAIR: Thank you.

Mary Hodder is also a member and she could not be here this morning. I would like to ask the Auditor General to introduce herself and her staff.

MS MARSHALL: Good morning, Mr. Chairman.

To my right is John Noseworthy- John is Deputy Auditor General with the office - and to my left is Mr. Claude Janes. Claude is manager with the Corner Brook office.

CHAIR: Thank you.

We have a number of witnesses here today, although one has not shown up yet. We have someone looking for the individual right now. I want to remind the witnesses that were here before that they are still under oath and sworn. We have four new witnesses to be sworn in: Mr. Andrews, Mr. Lee, Mr. Breen who is not here yet, and Mr. Bruce, so if the Clerk would do that.

Mr. Andrews

Mr. Lee

Mr. Bruce

CHAIR: Thank you.

When Mr. Breen arrives, and hopefully he will, you can swear him in at that time. There was no notice that he would not be here.

I think in the back of the room we have people from the Department of Education, Mr. Lewis and Mr. Thompson. Is that correct?

WITNESS: No, Mr. Lewis and Mr. Hatcher.

CHAIR: Mr. Hatcher. Thank you.

Who else do we need to introduce here today? We have Mark Noseworthy with the Committee, Elizabeth Murphy with the Committee to my left, and Kevin Collins doing the recording.

When we had our last sitting back in September the Committee ran into some problems with respect to what we felt in getting all the information. There seemed to be some problem with the overlap with the previous boards, the interim boards and current boards. In some of the answers we were getting, we were being told that it was the interim board that had made the decisions and people were only carrying out the decisions of the previous boards.

We did ask a number of questions that seemed to be a problem. We have, supposedly, people here from the interim board although Mr. Breen, I think the former chairman of the interim board, is not here. Hopefully he will show up. If he doesn't, I don't have to call the meeting again at some other time.

This hearing is as a result of the Auditor General's report concerning the Avalon East Board, some of the concerns and/or questions that were brought forward in the report. The witnesses are here for the Committee to get their views and opinions with respect to any concerns and/or questions the Auditor General brought up, and any other matter that may have come to light before the members of this Committee. Any questions could be pretty wide-ranging, as I said, and hopefully you will be able to address them. If not, if you cannot do it at this point in time, you can always report back in writing to the Committee.

With that I am just going to ask the Auditor General again if she would like to make any comments, and then somebody from the board itself if they would like to make a comment. Although you did do it before, maybe you would want to make a comment now.

MS MARSHALL: No, I have no comment.

CHAIR: Okay.

How about Mr. Shortall or Mr. Lester?

WITNESS: No comment at the moment.

CHAIR: Are there any other witnesses who would like to make a comment leading in?

Thank you.

What we will do now is go right into questioning. What I am going to do this morning is ask Mr. Lush if he would like to lead off with any questions.

MR. LUSH: No, not right now, Mr. Chairman.

CHAIR: Mr. Fitzgerald, would you like to lead off?

MR. FITZGERALD: Thank you, Mr. Chairman.

I would like to lead off. I don't know the gentleman's name sitting next to Mr. Shortall.

MR. LESTER: Roger Lester.

CHAIR: Did I not ask the witnesses to introduce themselves? I never?

WITNESS: No.

CHAIR: I'm sorry then. Could we do that, please?

MR. ANDREWS: My name is Steve Andrews, I am currently a member of the Avalon East School Board, was also formally involved in the interim board, and also past Chairman of the Avalon Consolidated School Board.

MR. LEE: My name is Bill Lee, I'm the former District Superintendent of the Avalon Consolidated School Board.

CHAIR: Just before we continue, could you turn your mikes on when you speak? There is a sheet of paper there. We would ask you to sign that and use any information that is requested on that.

MR. LEE: Do you have any trouble hearing me?

CHAIR: It is for recording purposes.

MR. LEE: I just wanted to know, because I would repeat it again if he did.

CHAIR: Sure.

MR. LEE: Do you want me to repeat it again?

CHAIR: Please.

MR. LEE: My name is Bill Lee. I am the former Superintendent of the Avalon Consolidated School Board.

CHAIR: Thank you.

MR. BRUCE: My name is Leslie Bruce, former member of the RC School Board and a former member of the Avalon East School Board.

CHAIR: Thank you.

MR. LESTER: My name is Roger Lester; I am Assistant Director of the Avalon East School Board.

MR. SHORTALL: Brian Shortall; I am Director of Education for the Avalon East School Board and I was also the District Superintendent for the Roman Catholic School Board for St. John's previously.

CHAIR: Thank you.

Before Mr. Fitzgerald asks any questions, I would just like to say that I expect there will be some questions asked here today that were asked - there has to be some overlap, some repetition, with respect to the last meeting. We will try and avoid that as much as possible. We had the Avalon West Board in yesterday and I expect that some of the questions that will be asked here this morning will be very similar to the questions that were asked of the Avalon West Board yesterday.

With that, Roger.

MR. FITZGERALD: Thank you, Mr. Chairman.

I would assume that everybody has copies of the correspondence that we have here. I am going to be referring to Volume II of the Avalon East School Board Public Accounts Committee.

I think I will start by asking the Committee members, the witnesses - and whoever wants to answer can - if they consider the Auditor General's report and the Kirby report as accurate documents as they relate to the workings of the Avalon East School Board.

CHAIR: Who are you addressing that to, Roger?

MR. FITZGERALD: Whoever would like to answer it. I am not going to address it to - I would assume there is a spokesperson.

CHAIR: We have Mr. Andrews. You are Vice-Chair now are you?

WITNESS: No.

CHAIR: No?

MR. SHORTALL: From the viewpoint of the Avalon East Board, we certainly have no quarrel with the information that is provided under the Kirby report, and certainly we have no concern with the findings of the Auditor General. Our response to the Auditor General's report is on record and we did our best at a previous meeting to respond to questions concerning the Kirby report, Mr. Fitzgerald.

MR. FITZGERALD: So they are both accurate documents?

MR. SHORTALL: We certainly will not quarrel with the information that they have provided.

MR. FITZGERALD: The other thing, Mr. Chairman, yesterday in most of our questions, and it seems like it is going to take the same direction here this morning, it seems like the Director of Education - in this case Mr. Shortall and yesterday Mr. Rideout - seems to answer most of the questions. I wonder if that is the way it should be, because a lot of the questions, a lot of the answers that we are going to be looking for, should come, I would think, from the people who made the decisions rather than from the people who received the benefits, from the concerns that are addressed here in those documents.

CHAIR: Can I address that, just before you go on?

Ms Legrow, who is Chairperson now, was, I understood, to be here, but for some reason or another she is not. I think she notified Mark of that. Mr. Andrews was with the previous Avalon Consolidated Board, Chairperson, and now is a member of the Avalon East Board. Mr. Lee, I think, was involved with the Avalon Consolidated?

MR. LEE: Yes, I was District Superintendent.

CHAIR: Okay, of the Avalon Consolidated. Mr. Bruce, you were involved with the -?

MR. BRUCE: A former member of both boards.

CHAIR: Both boards. Hopefully, we can get answers here. I expect that Ms Legrow ... It is too bad she is not here - for the current board anyway. I think Mr. Andrews should be able to address most of it.

MR. FITZGERALD: On page 7 of the document that I just referred to there is some confusion here on my part, and maybe I am not reading it correctly. In the second column there where it shows Mr. Shortall at step 19 receiving $85,596, including all bonuses, and I come down and see Mr. Lester at step 26 receiving $75,032, including all bonuses, I am not sure how to read this; because obviously there must be a great amount of dollar value in bonuses paid to Mr. Shortall because he is about eight steps below Mr. Lester, as shown here. The bonuses - there are some included in Mr. Lester's salary as well - I am wondering if he could tell us what bonuses are included in this particular figure. I think we have the amount at a column further down the page. Can you tell us what bonuses would be included to make up this salary, over and above the step 19 to the $85,596 which is probably a step 33 level.

MR. SHORTALL: Mr. Fitzgerald, first of all I want to point out that the steps referenced to, we are really looking at three different pay scales here when we look at steps 19, 18, 16 and 26. Step 19 has to do with the pay scale set for the Director of Education; it has a variety of steps within it. Step 18 and step 16 have to do with the salary scale established for the assistant directors of personnel and instruction or programming. Step 26 is taken from the salary scale that was outlined for the assistant directors of education responsible for finance and administration. The steps themselves are coming from three different sources, if you like. As a result, the pay scales themselves were of different levels as the directors had a higher pay scale than the assistant directors of programs and personnel, and the programs and personnel people had a slightly higher pay schedule than the directors of finance and administration. So, that is one reason for the difference in the numbers, Sir.

The other difference has to do - for referencing a lot of documentation that has been referred to at the previous hearing on September 29 and also in documentation of both of these volumes, the school board made a decision to place its director and assistant directors at the top step of the pay scale, step 33. The rationale for the board's decision in that regard is included in the documentation that has been provided previously and is included in these documents. There has been a fair bit of going back and forth between it and I believe the matter, at least from the board's viewpoint, was brought to a conclusion this past year when the Minister of Education accepted the current contracts which the boards had entered into with their senior executive staff.

CHAIR: Can I interject here? I would like to welcome Mr. Breen to the hearings. Could I ask the Clerk to swear him in please?

MR. BREEN: I apologize, Mr. Chairman. I thought it was set for 10:00 a.m.

CHAIR: Oh, I am sorry.

WITNESS: In that case you are early.

MR. BREEN: I thought I was.

Mr. Breen

CHAIR: Thank you.

Just for a point of clarification with respect to the question, Roger, that you asked with respect to the salaries. I think from the last hearings - and we have new board members here who were not at the last hearings - from my memory, I do not think there was a question with respect to how much the individual should be getting paid. It was just a process of how they would decide it. That is just for your own information. Is there anything else, Roger?

MR. FITZGERALD: I would just like to ask what the bonuses are. What is included in the bonuses that is included in Mr. Shortall's salary?

MR. SHORTALL: Actually, the salary which I have been paid is essentially -

CHAIR: Could you turn your mike on, please?

MR. SHORTALL: I am sorry. Excuse me, I thought I had it pressed on. I pressed the wrong part of the stand.

The differential has to do with the fact that the salary for the director and the assistant directors has been placed at step 33. The salary top up figure represents the difference between, I understand, step 25 and step 33.

MR. FITZGERALD: Reading down into the next column I see bonus from the Department of Education at $21,664. Then there is another bonus there which is being paid by the Avalon East School Board, I would assume, of $10,000. The base salary is $53,445. Am I correct in assuming that $31,664 is bonuses paid over and above the base salary that you receive?

MR. SHORTALL: Those two figures come from, as I say, the difference between the placement at step 25 and step 33, and also includes the augmentation which, in my particular case, I was receiving from my previous employer. The current employer of the Avalon East School Board felt it appropriate to continue that augmentation rather than to give me a reduction in pay.

MR. FITZGERALD: Turning over to page 8, I just want to question again the annual leave paid and car allowance paid. When I see annual leave paid I think of vacation pay. I think most people today when they are hired - and it may be different, that is why I want to ask the question - in your situation, whereby your annual leave may be different from your salary, wouldn't somebody working for the school board receive a salary and part of that salary entitle you to X number of weeks annual leave per annum?

MR. SHORTALL: It was the understanding - and I believe included in the policies and regulations concerning the provisions for remuneration for directors and assistant directors - that when the previous schools boards wound up their affairs on December 31, the incumbents, the people who continued as directors of education or assistant directors, were eligible to claim for up to fifty days unused annual leave. That was claimed for and paid for by the Department of Education, and that was in keeping with the regulations and provisions of the executive pay plan.

MR. FITZGERALD: So you transferred from one school board to another, correct?

MR. SHORTALL: No, I was declared redundant by the Roman Catholic School Board upon its termination in the fall of 1996. I went through a job competition and was the successful candidate for the position of Director of Education for the Avalon East School Board.

MR. FITZGERALD: So. in essence you were laid off.

MR. SHORTALL: I was not exactly laid off because I was recruited by the Avalon East School Board in September 1996 and I held two positions until December 31 when the Roman Catholic School Board went out of existence. However, several of my colleagues throughout the Province were declared redundant as of December 31 when their school boards went out of existence.

MR. FITZGERALD: Yet you collected your vacation pay from the former school board, or at least your benefits by taking vacation.

MR. SHORTALL: The regulations enabled me to do that at that time.

MR. FITZGERALD: Then the new school board supplemented what you would have normally gotten for the time frame that you went to work with those people for the one year period, or for the period that was remaining, to a tune of $14,444?

MR. SHORTALL: No, my understanding is that the annual leave paid to me had to do with the amount of dollars I claimed from unused annual leave which had been accumulated in an annual leave bank over my previous years as superintendent.

MR. FITZGERALD: It shows car allowance as being paid as well, and I would assume again that this is allowances paid in addition to the normal mileage charges that you would be reimbursed for at twenty-eight cents a kilometer. Mr. Lester received $3,000. The list goes on there. Mr. Shortall, do you feel that you should be getting a car bonus or a car allowance paid in addition to mileage reimbursement from the department or from the board?

MR. SHORTALL: Again, this is in keeping with the provisions of the pay plan that I am under. This represents the calculation of a flat dollar amount per month which I believe is in the amount of $85 and it does not represent any mileage claims whatsoever. That is something which people in my position, and assistant superintendents, program specialists for the school boards and so forth, are eligible for. It is part of the work conditions.

MR. FITZGERALD: The mileage would be in addition to that.

MR. SHORTALL: I do not claim mileage for miles traveled within the school district. The only time that I personally would claim mileage is if I used my private automobile for business purposes outside the school district, and that is not a frequent occurrence on my behalf. It is easier, given the taxes and everything else, for me just to claim my $85 per month. I do not claim my mileage for other reasons.

CHAIR: Mr. Fitzgerald, I don't want to interject here but I want to try to clarify something if I can. I'm going to need the Auditor General and maybe Mr. Breen to do this. Yesterday we had basically the same line of questioning. To me it is the process of how the salaries were set more so than what the salaries are.

I have a letter here dated October 25, 1996, from Minister Roger Grimes to yourself. The problem was from step 25 to step 33. That is where the problem seems to lie with respect to salaries and how the salaries got to step 33. I don't know if you recall the letter but I referred to it yesterday. It is in your files. It says:

"Dear Mr. Breen

"RE: Compensation Packages - Directors and Assistant Directors

"Attached for your information is the approved salary scales for Directors and Assistant Directors in your school board. Successful applicants for these positions should be placed on an approved scale at the step next highest to their current salary, but in no case above Step 33. I recognize that in many cases previous school boards provided employees with salaries which were in excess of the approved salary scale. Therefore, in placing former school board employees on scale, boards should consider the actual salary paid to the employee and not the approved salary."

Then it goes on to say:

"Details with respect to other benefits available to these employees are attached. However, I would like to highlight a few major points for your information:

"1. New schools boards do not have the authority to ‘top up' the approved salary for the new Directors and Assistant Directors."

Further:

"3. Through normal step progression, employees can advance to Step 25 of the approved scale. If an individual is appointed at Step 25 or above, step progression does not apply."

We heard yesterday, and I think I heard it the last time around, that some decisions were made by the interim board that were implemented by the current board. So I would like the Auditor General to refer to that on what her views were, and then if we can get an answer there.

MR. MERCER: If I could, before the A.G. responds?

CHAIR: Sure.

MR. MERCER: Mr. Chairman, I do not believe that letter is in the documentation which the witnesses have before them. It is not in mine.

CHAIR: Isn't it?

WITNESS: No, we don't have a copy.

CHAIR: Can you pass it out (inaudible)? Especially Mr. Breen.

The Auditor General, please.

MS MARSHALL: I am going to try and make it simple and not refer to the minister's letters. Yesterday I handed out this chart for the Committee members. If you look at District #10, which is the school board we are talking about, this was the review that we did early in 1997. When we calculated the salaries of the executive at the school board, including Mr. Shortall's salary, we found that the salaries were correctly calculated. We had no problem with the salaries they were getting paid early in 1997. After we did our review, I think it was around September 1997, the school board went back. I think they were aware that several other school boards in the Province were providing top-ups and they felt that their staff also should be receiving the same benefits, even though in my opinion they should not have been.

If you will look in volume 2, this one here, the Public Accounts Committee, at page 21, when I went through the material I think this explained for me what happened between the time I looked at the salaries and they were correctly calculated and people were put at the proper steps, and what happened so that they ended up on step 33. It seemed to be a conscious decision of the board that they were just going to move their employees up to the top of the scale, up to step 33, even though they did not have the authority to do so.

CHAIR: Thank you.

Mr. Breen.

MR. BREEN: I am just reviewing this letter. I can just say in a general term that the period when the interim board was appointed, to the time that we received an office and we hired staff, was a period of just total, general confusion. There were directives coming, almost by the day, from the Department of Education. We had entered into no formal contractual obligations with our senior staff. It was done by a handshake. It wasn't until probably a year later that we formalized these contractual arrangements.

I see the minutes of the meeting held on September 24, I do recall legal advice given at the time, and I would concur with what transpired here. That is all I can shed on it.

CHAIR: I am going to pass it on now; I think Mr. Mercer wants to ask a question.

What came out yesterday in the Avalon West, and I think it may be the same situation here, is that the board felt they were in a predicament with respect to what they were permitted to do and what they felt they had to do with respect to if you had an individual who was going to become the Executive Director of the largest board in the Province and take a pay cut, it didn't seem logical to them, I suppose.

MR. BREEN: Also, the current director left the board with, I think, on dissolution, maybe 18,000 students to a new board which took in five existing boards with a then increased population of 36,000 and change, and to take a pay cut. I agree; I mean, it was absurd.

CHAIR: Then you get into what is legally and technically correct versus what they felt was morally correct.

Who wanted to ask a question?

MR. FITZGERALD: Just to clue up.

Mr. Breen, yesterday we put forward much the same questioning. My question again is: I realize that it was a difficult time and it was all new paths that you people were leading in, but did you find that the Department of Education was helpful in trying to beat this new path? The other thing is: When you go and apply for a position, like Mr. Shortall did, wouldn't the salary for that particular position be advertised at that particular time -

MR. BREEN: No.

MR. FITZGERALD: - and whoever came forward would be paid the same salary, rather than advertise on a step in the HAY system and then have the board top them up after?

MR. BREEN: It was a quantum leap of faith for anyone who applied at that time for senior positions. I have said this before: This whole process was revolutionary versus evolutionary. It was driven from the top. It was driven on the economics of scale, cost saving. That is what drove this, and it had to be done today. There was no period of letting the thing try to settle; everything was right now. That is what drove it and that is what created the confusion, in my view.

MR. FITZGERALD: On page 8 of the same document that I was referring to, it goes to show a district paid salary and car allowance there. Then there is a note which says, "We note that this situation (i.e. payments based on old board bonuses) was corrected during 1997, however, it is our understanding that these amounts have not yet been recovered by the District." Is that an accurate statement? And if it is, is the district putting any effort into collecting the monies, or is it -

MR. BREEN: I resigned from the Avalon East Board in September of 1998. I could not answer that question.

MR. FITZGERALD: Could somebody else on the -?

CHAIR: Would Mr. Andrews be able to address that?

MR. ANDREWS: I have not been involved as heavily in the financial side of the board as you might perhaps expect. Certainly at this point in time I am not aware that there is any attempt to recover it. Mr. Lester or Mr. Shortall might be aware, but I don't think so.

MR. SHORTALL: My understanding is that the reference there in the mid-paragraph with respect to, "Assuming a four-step increase for each of these employees, this would translate into an additional $9,471 ..." That amount of money has been - I think the adjustments have been made to correct that particular thing; however, my understanding is that the references, the payments based on old board bonuses which were corrected during 1997, that these amounts have not yet been recovered by the district. That is something that has not been brought to point, and I would respectfully suggest that there may be counter viewpoints to the views of Mr. Kirby and company with respect to that paragraph as well, but that is something that has not become an issue at the school board yet, Sir.

MR. FITZGERALD: And the money hasn't been recovered?

MR. SHORTALL: At this particular stage it has not become an issue, Sir.

CHAIR: Okay.

Mr. Mercer.

MR. MERCER: Thank you, Mr. Chairman.

I would just like to start my questioning by making reference to the fact that at the last meeting on September 29, a request was made for the employment contracts of the director and the three assistant directors of Avalon East and, despite assurances that they would be provided to us, I have not seen them. Has the Committee copies of those reports?

CHAIR: We have not received the copies of the contracts, although they have been requested.

MR. MERCER: They have been requested but not supplied?

CHAIR: A couple of times, yes. Would anybody like to address that?

MR. MERCER: Is there any particular reason why these might not have been supplied?

MR. SHORTALL: I cannot explain why they haven't been. We have certainly made copies of the contract available to the Department of Education. I believe the Auditor General's office has certainly seen copies of our contracts. She certainly requested them. There is absolutely no reason, Mr. Byrne, why they would not have been forwarded to your Committee. It must merely be an oversight in communications between our offices. I will have them in to you this afternoon.

CHAIR: Thank you.

Auditor General, you have received them? Employment contracts.

MS MARSHALL: No, not the new ones, not the new contracts. We do have copies of the old contracts, and I believe some of them we had to go to the individual employees to get.

WITNESS: Yes.

MS MARSHALL: Yes, we did.

CHAIR: So, Mr. Shortall, we will receive those?

MR. SHORTALL: I will correct that immediately this afternoon.

CHAIR: Thank you.

Mr. Mercer.

MR. MERCER: Thank you.

I guess most of my questions will be to members of the interim board, of which I believe you were Chair?

MR. BREEN: That is correct.

MR. MERCER: At the meeting on September 29, we were also made aware of a letter which I had not seen before, and that was the letter to yourself from the minister of the day, dated October 25, and this was basically given as the rationale why the interim board moved to step 33 on the pay scale.

WITNESS: Excuse me, could we have the page number, please?

MR. MERCER: It is the one that was just passed out, the one that says: Dear Kevin.

WITNESS: Okay, very friendly.

MR. MERCER: The letter has been read into the record before; the first part. What is your interpretation of the first paragraph, "Successful applicants for these positions should be placed on the approved scale at the step next highest to their current salary but in no case above Step 33. I recognize that in many cases previous school boards provided employees with salaries which were in excess of the approved salary scale. Therefore, in placing former school board employees on scale, boards should consider the actual salary paid to the employee and not the approved salary." What do you understand by that instruction?

MR. BREEN: It is ambiguous, for sure. Just going back to that particular time, there was general confusion with that particular letter.

MR. MERCER: My interpretation - and I have not talked to any members of the Department of Education, or for that fact the minister - is that an employee of a previous board, when placed on the appropriate scale, the salary at the time was to be taken into account and placed on the next highest step on the appropriate scale; but the minister, in my view, gave the board the authority to consider not only the actual salary as was on the scale but the salary which was actually being received, which in my view would include the bonuses.

In other words, my view is that if someone was being paid $50,000 a year and a former board was topping it up with $40,000, through bonuses, the salary would be $90,000 and that is the salary that you would try to slot on the scale and move to the next highest step. That is my understanding of it.

MR. BREEN: That is a fair interpretation. I would interpret it in another way, in that you would not expect the successful employee to come in at less than he or she was making at the time of the previous engagement.

MR. MERCER: In my interpretation that is exactly what this paragraph is saying, that you should not provide a salary to an existing staff from a previous board with less remuneration than he was making before. Then, when you read the rest of the letter, things seem to fall in place with that interpretation.

The statement was also made that regardless of the salary that was being paid, plus bonuses, you cannot go beyond step 33. That is what the letter said. Then, the second thing goes on to say that, no, "New school boards do not have the authority to top up ..." I think that makes a little bit of sense because if the top-up is already included as part of the salary, why would the new school board want to top up an existing topped-up salary?

Anyway, that is my interpretation, having read that and not having had the opportunity to read it prior to September 29.

CHAIR: Bob, the Auditor General explained yesterday what they thought it was, and I think it is pretty well what you are saying now. Do you want to speak to that?

MS MARSHALL: Yes.

That letter is dated October of 1996. Actually, the school board went through and actually calculated the salaries in accordance with that directive. If you want to look at page 7 - I think either you or Mr. Fitzgerald referred to it earlier - about two-thirds down the page, you will see the names: Shortall, Cleal, Whalen, Lester, and Total. It says: Base Salary $53,445. This is the calculation that the board and the department went through in order to determine the new base salary of the employees. For the first individual it came up to $85,109, and the nearest place on the scale was the $85,596; so actually they went up $400 more.

Under the formula set by the Department of Education, nobody would have had a cut in pay if they had followed the direction of the department and the minister.

MR. MERCER: That is what my interpretation is of the letter of October 25. Some days later - November 1, I believe - the minister wrote to all chairpersons; and I presume, considering that the letter of October 25 was addressed specifically to you, I am just making an assumption that you decided to share that with all new chairpersons in the Province. To me, that letter of November 1 is consistent with the letter of October 25.

CHAIR: What page are you on now?

MR. MERCER: Page thirty-five. I don't think I need to read it but I believe it says exactly the same. The one point in contention apparently between November 1 and the next letter from the minister which is on page thirty-six, dealt with the issue of: yes this is what you are getting; this is where you should be on the scale. You have been saying that you wanted to put these people at step 25 and I have been resisting that, but in the letter of November 15 he relents and says you may top up, you may bring the salary of an individual from that which is calculated to be in place on the scale in accordance with the rules and bring it up to step 25. However, be it on your head that it is your responsibility to have done that.

Not defending the minister, but I see a consistency all the way through this correspondence from my perspective.

The information which was given in testimony on September 29 indicates that when the employees were hired - and we recognize that they were hired at salaries to be negotiated, that was in the advertisements - that by the time these other letters were received, those of November 1 and November 15, which appears to be less than a month, the deal had been done with your director and your three assistance directors, and the handshake had been given that they were to be at step 33. Is that my understanding?

CHAIR: Can I ask a question, because you are leading into something that I am confused about now.

If the minister is basically giving the authority to go to step 33 in certain situations, and the Kirby report is saying that they contravene the legislation, and the Auditor General said the same thing, where is the breakdown? Where is the problem here?

MS MARSHALL: I just want to clarify something for Mr. Mercer first. They did not move to step 33 until a year later.

MR. MERCER: Yes, I understand that.

The information given, and I think Mr. Breen mentioned it this morning as well, is that there was an agreement, a verbal understanding between the board and amongst the staff, that you will be of a certain salary. Whatever that salary was I am not exactly sure.

WITNESS: I am not either.

MR. MERCER: That is fine, I will get to that in a second. We will say for the moment that we don't know.

I can only assume that it would not be in compliance with the rules and guidelines set down by the minister if, in fact, the salary plus bonuses paid to these people by the previous boards put them at step 26, step 27, step 28, step 29, or whatever the case might be. They should have all been somewhere around step 25 unless previous salaries dictated they would be somewhat higher.

We also got information and evidence on September 29 that the staff accepted that, that was the way things were, and when the contracts were actually approved in September of 1997, they began to receive the new salaries, whatever was in the contract, in September of 1997. That is what we are told.

The Kirby report, on page 7, states that these salaries -

WITNESS: Excuse me, Sir, I have never seen the Kirby report.

WITNESS: Neither have I.

MR. MERCER: Okay, it is in the documentation which is before you, page 7. It is at the bottom of the page and handwritten.

Mr. Chairman, was this information in this document provided to the witnesses?

WITNESS: Excuse me, Mr. Chairman, I have not seen the Kirby report. This document that you handed out this morning is the first time I have seen it.

CHAIR: You should have received it before this.

WITNESS: All I got was a letter, nothing else.

CHAIR: Is that right?

WITNESS: The Kirby report is part of the Volume 2 document.

CHAIR: Volume 2. The Avalon East Board would have received that document. If they did not pass it on to yourself -

WITNESS: Where is it identified as the Kirby report in the document?

CHAIR: At the very beginning.

MR. MERCER: (Inaudible) table of contents. I guess that would be handwritten, page 1.

WITNESS: Mr. Chairman, I did receive that information when I received the letter from Mr. Noseworthy.

WITNESS: And the Auditor General.

WITNESS: It is probably just confusion where it is part of the document itself.

WITNESS: The table of contents identifies it.

CHAIR: It is included in the document.

WITNESS: That is a point taken, but I thought it would have been a separate addendum.

CHAIR: No, it is included in that document, the beginning.

MR. MERCER: I guess the point that I am coming to is that while the contract was signed - and again I have not seen the contract. I don't know what its effective date is. I don't know any of the details of the contract other than what I am reading and have read from testimony and whatever, but the Kirby report on page 7 states that, "A review of the records of the District indicate that the above personnel are being paid at step 33 of the approved salary scale with the District augmenting the salary top-up, effective January 1, 1997". So presumably there must be a retroactive clause in the agreement which also collaborates the Auditor General's information that when she did her audit back in early ninety-seven, everything was in compliance, the salaries were as she thought they should be, but subsequent to that the salaries were retroactively increased. Can you shed any light on that? Was that in the original contract?

MR. BREEN: What was the date of the new retroactivity?

MR. MERCER: Well, I can only assume that the contract being signed with the employees in September of 1997 - I think that is the testimony I have heard - and with the Auditor General and the Kirby report both saying that the salaries took effect January 1, 1997, I can only assume that there must have been a retroactivity clause in the contract.

MR. BREEN: It would sound reasonable to me. That was the date of their engagement. That was the date of the coming in of the new board.

CHAIR: But there was nothing documented at the time. You are talking about the handshake agreement, are you?

WITNESS: Well, yes -

CHAIR: Because that year - they did not have the agreements put in place until a year later with the new boards. It all falls back now to what was generally understood, with a handshake.

MR. MERCER: In actual fact, whether it be a reality or not, remuneration was paid by the new board with effect January 1, coming into effect with the new boards, at step 33, whatever the scale these gentlemen may be on, okay. So that is where we were as of, effectively, January 1.

At the time, the testimony that we have before us - or at least I have - is that there was confusion, but on legal advice this is what was done. Did anyone call the Department of Education to get their opinion before legal advice was sought?

MR. BREEN: I presume that was done. I cannot tell you a date but I am sure there were discussions with the department. There certainly were ongoing discussions with the department on many issues in this hiatus period.

MR. MERCER: It seems to me that, if the interpretation of the correspondence is correct, no member from a pervious board moving to a position with the Avalon East would have received a salary less than what they had previously received. I am not going to argue that they may not have been receiving a salary less than they should have, based upon the size of the board, the number of students and all that - that is another issue - but they should not have been receiving any salary less than. I am just wondering where they would make the quantum leap from going to where the instruction said you should not have slotted on the scale and then moving it to twenty-five and then, all of a sudden, to thirty-three. I am just having difficulty with the thought process that the board engaged in going to a step 33 this early in the process.

CHAIR: You would have to ask the current board that, I would think, wouldn't you?

MR. MERCER: No. The contract, as I understood, was negotiated by the interim board.

WITNESS: No.

MR. MERCER: With the staff?

MR. BREEN: The first signed contract, in my recollection, was entered into about one year later.

MR. MERCER: In September of 1997.

MR. BREEN: No, a year further down than that. (Inaudible) contract.

CHAIR: Mr. Shortall, would you be able to respond to that?

MR. SHORTALL: My recollection of the matter is that the actual signing of a contract did not take place until the fall of 1997. During the startup period from January 1, 1997 and on through the summer there were many major events taking place and the discussions of the terms of employment and the actual incorporation of those into a draft contract was carried out by the personnel committee over those particular months. With the summer vacation and with everything else that was ongoing, it was not until the fall of 1997 that these were actually signed. However, at the point of hiring in the fall of 1996 there was an understanding that the director and the assistant director certainly would receive no less than they had received in their previous positions, and also would receive some acknowledgment of the increase in workload and responsibility. I believe that it was that type of understanding which contributed as well to the decision by the school board to place the people at step 33.

MR. MERCER: That is essentially my understanding from the information I have. The boards, we were told yesterday, came into effect - the permanent boards - February 17,1998, so the interim boards were in effect when the contracts for the director and the three assistant directors were negotiated and approved. That is (inaudible) discussing the matter with Mr. Breen.

According to the information in the Kirby report again, the salary for the director, including all bonuses, they had calculated to be at step 19. That is what would have been the, quote, approved salary, in compliance with the minister's letter of October 25; it would have been at step 25. Subsequently, he went to step 33 by his letter of November 15, provided that you had your own funds to top that up, but we went from step 19 to step 33; and, based upon the handshake agreement, I assume that was done in late 1996. It was certainly done with effect from January 1, 1997.

I am just trying to understand how and why the board decided to do that; because at step 19, step 18, step 16 or step 26, whatever these people are, the individual in question would not be losing any salary. In fact, if they were placed upon the appropriate scale they would probably gain a few cents.

We went from those steps to step 33. Why did the board, in its wisdom, go to those steps? I am just trying to get enlightened, that is all.

MR. BREEN: I guess the board, in its wisdom, felt that in light of the responsibilities that these new individuals were undertaking that this was a fair and equitable remuneration.

CHAIR: Mr. Shortall.

MR. SHORTALL: I think, just further to Mr. Breen and to Mr. Mercer, I believe that there was an element in the compensation provided by the former school boards that was perhaps not considered when you just compare the salary on the scale. The former school boards, for example, the Roman Catholic School Board for St. John's - and I just speak for myself, personally - augmented my salary by an augmentation and also provided me with a car allowance. Those two particular amounts were not included, if you like, with the augmentation bonus. As a result, the current school board felt that it did not wish to see me lose these amounts of money so that was part of the motivation in maintaining the salary level.

I would ask Mr. Lester, perhaps, to elaborate on that a little bit further because he might be able to give you more specific references, Mr. Mercer.

MR. MERCER: Just before Mr. Lester does reply - the augmentation, I see that, but the car allowance, that would be another part of your contract; that would not necessarily have to be part of a salary package, of your salary.

If there was an additional augmentation, and I guess that is where I am still trying to elicit information and not put too fine a point on it, what was your salary at the time of the previous board? That would then very clearly tell us which step you should have been on, on the new scale.

WITNESS: Mr. Shortall will have to answer that; I can't.

MR. LESTER: If you look on page 7 of your information on the Kirby report, under the place there where it identifies the base salary, bonuses, and board bonuses - I will speak on my own case - in my $74,427, in addition to that the Roman Catholic School Board of St. John's was paying me another $3,000 that was not included here. I know we can say it was in lieu of car use - and I did not get paid mileage either - but it was part of our compensation package. When you come forward into the Avalon East School Board, the current allowance was $85 a month for your vehicle as opposed to the $3,000. In actual fact, I did lose $2,000 by taking this position. That is one of the reasons why my salary was up to step 33, to make up the loss of salary, and there is a similar situation with Mr. Shortall.

MR. MERCER: So in your new contracts there is no provision for a car allowance, use of your own vehicle, or compensation for that in any way, shape or form?

MR. LESTER: Other than the approved $85-a-month government allowance that I think all civil servants are entitled to.

MR. MERCER: Essentially then, just to clarify that point, the $10,000, the $2,000 -

MR. LESTER: I should explain that $20,000 to you as well.

MR. MERCER: I didn't notice that one until just then.

MR. LESTER: If you notice, I am not an educator, I am paid by the school board; however, I was paid in a similar fashion to the educators' pay scale which was made up out of two components, the top one being the base salary attached to a grade seven level on the NTA Collective Agreement, and the department bonus which was, I guess you would call it, a responsibility bonus that varied in amount depending upon school size and your position, whether it be superintendent or assistant superintendent, what have you. In my case, where I was paid 100 per cent by the school board, that bonus was paid by the board. That is why it shows up here as a board bonus, but it is not. Really, if you compare apples to apples, it should be up on the previous line with the department paid bonus to be comparable.

There is $3,000 that I was paid by the Roman Catholic School Board that is not included in that amount.

CHAIR: Mr. Mercer, are you getting - on this topic?

MR. MERCER: I am getting to my point now. The only point I am trying to make is why and how we went from the quantum leap of the interpretation of the minister's letter - which I think is fairly clear, at least from my perspective - why we went from those steps, which would have been calculated, to a step 33.

A little bit of the answer has now been provided in the sense that these are not the complete bonuses. The question that I guess someone is going to have to look at now is: Would that have put everyone up to step 33 or would it have left them at step 18, step 19, step 20, or whatever the case might be.

MR. BREEN: I can't answer that for you, Mr. Mercer. Suffice it to just say, to put this into some perspective for you, what was going on at that time. This was an interim board set up. We had to set up a central office. We had to consolidate the number of boards that were out there. We had to go through a registration process with the students in the district. We had then, on that registration, to hold public hearings. We had to designate schools as uni-denominational or interdenominational. This was all being done from scratch, and the very detailed questions you are here asking today were handled in many different ways.

We had a personnel committee taking after certain things. We had a finance committee looking after certain things. We had a program committee and a construction committee. It was a huge task to be done, and for me to be very specific with you here in the year 2000 as to what we did on October 25, or what the understanding, or what the minister - it is very difficult.

We were totally consumed as a bunch of volunteers, working morning, noon and night. That is all I can say to you.

MR. MERCER: I can appreciate your involvement with the larger picture and that these issues of detail and salaries perhaps received less attention than were intended to by others.

CHAIR: Thank you.

Mr. Joyce.

MR. JOYCE: I have one question, just for my own information.

Mr. Shortall, on page 7, when Mr. Fitzgerald mentioned to you that you were on step 19, at $85,596, and there are other people, say, on step 26, at $75,032, and it is on a different pay system and pay scale, on page 16 there was a letter sent back from Roger Lester to Mr. Byrne saying that now everybody is at step 33. Is it safe to say that everybody then was put on the HAY system and everybody was moved up to the top of their scale at step 33?

MR. SHORTALL: My understanding is that is accurate, Sir.

MR. JOYCE: Okay, so get everybody on the same system.

Thank you.

CHAIR: Thank you.

WITNESS: You are breaking now, aren't you?

CHAIR: It is so interesting, it is going so fast. Would you like to have a break for fifteen minutes or so, and coffee?

CHAIR: Order, please!

I would like to reconvene the hearing.

Before we go on, Mr. Shortall wanted to clarify a point on some of the last questions.

MR. SHORTALL: Thank you, Mr. Byrne.

I would like to clarify the reference on page 16 of Volume 2. This is the October 25, 1999 letter to you, Sir, from Mr. Lester, and it references Current Salary Paid to the Executive. I just wish to point out that those figures opposite step 33 reflect the base salary, the bonus, the car allowance, as well as the application of the 2 per cent increments.

CHAIR: Total?

MR. SHORTALL: Yes.

CHAIR: Thank you.

I think what we will do - sorry.

Mr. Breen.

MR. BREEN: I would like to clarify something, too, which one of my former colleagues reminded me of, in that when we were trying to come up with an equitable salary for the senior staff, two of us did meet with Mr. Grimes and we put forward our position to him at that time that we wanted to have some real input into the scale. At the time, we compared the position that we were offering our CEO to CEOs of the Health Care Corporation, of an ADM of Education who had just been hired, all on that scale 33. We never did get a response. For the record, I want to say that.

CHAIR: Okay. Thank you.

I think we are going to go with Mr. Shelley next.

MR. SHELLEY: Thank you, Mr. Chairman.

First of all, I just want to make a comment, and we made it here yesterday, (inaudible) the speed of what was happening here with the whole process, the neck-breaking speed, I think, is what we referred to yesterday.

WITNESS: Heartbreaking.

MR. SHELLEY: Heartbreaking and neck-breaking.

There certainly had to be some confusion at the time, and to dig into the specifics must be difficult. We all understand that and appreciate that.

My first question has to do with severance. It was noted that some $269,000 was paid out in severance to two former employees by the board, and that was some $110,000 in excess of what government policy allowed. Of course, the current board approved that contingent upon the minister's approval which, from what I understand, they never got. I would like to hear some comments from somebody to explain where that came about.

MR. ANDREWS: Basically our board was faced towards the end as the Avalon Consolidated Board, which faced towards the end of its life with the fact that we had a couple of contracts in place with its senior employees. We were a bunch of volunteers so we said: What do we do? What is the impact of this?

We contacted our legal counsel and went through the process of trying to understand just what our obligations were, how we should handle it, and what would likely be the least impact on the board and its whole situation. On the basis of that advice we negotiated a settlement with our two senior staff members. We understood that the department basically was not concerned about that but we felt we had an obligation. I guess the essence of what we ended up with was that we went to the Avalon East Board, indicated what we wanted to do, got their approval, and indicated to them that if the department - I guess that is through the minister - was not prepared to honor the contracts, that the Avalon Consolidated Board had access to private funds which it would use to make up the difference between what the department was prepared to pay and what we felt, based on our legal advice, was a reasonable settlement of the contracts.

MR. SHELLEY: That is $110,000 in excess of the government policy? You said private funds?

MR. ANDREWS: Yes, I did.

MR. SHELLEY: Could you explain that?

MR. ANDREWS: The Avalon East Board was administrator of a trust which had three different components, one of which is -

CHAIR: The Avalon East or the Avalon Consolidated?

MR. ANDREWS: Sorry, the Avalon Consolidated had access to these funds. One of those funds was referred to in our discussions as the Pitts Estate and, based on the advice of our legal counsel, indicated that those funds were available for what was termed general educational use. In the discussions and review with the legal counsel, the board felt that was an appropriate use of the funds to settle a contract which we had entered into in good faith.

CHAIR: Do you have any more questions on this issue?

MR. SHELLEY: Not on that issue, no. I think somebody else does.

CHAIR: We may as well stick with the issue, now that we are on it.

Roger.

MR. FITZGERALD: I would like to continue with that issue and maybe ask Mr. Lee how long he worked for the Avalon East School Board, or whatever the school board's name was at that particular time.

MR. LEE: The Avalon Consolidated.

MR. FITZGERALD: The Avalon Consolidated School Board.

MR. LEE: I am glad you asked me that, Sir. I was hired by the Avalon Consolidated School Board in 1989. Previous to that, I was the superintendent of the Conception Bay South School Board.

When I was hired with the Conception Bay South School Board, under the Schools Act, there was this general statement on a contract or how you could be employed. I never had a contract with the Conception Bay South School Board. I was not asked to sign one. Normal practice, letter of correspondence.

When I was offered the job with the Avalon Consolidated School Board, they asked me, as a condition of employment, to sign a contract for five years. Initially they asked me to sign it for one year, and you can imagine what I told them to do with it, but they asked me to sign a contract for five years. They asked me to sign a contract - I did not ask for a contract - and when they did they opened the doors, as far as I was concerned, because I sat down and I wrote down what I felt should be in a contract. I presented it to them. They presented it to their lawyer. Their lawyer came back with a legal document with everything in it that they were prepared to give me in relationship to what I asked. That was in 1989. One of the conditions of that contract was - and it was a five year contract, and this was a condition that I insisted go in it - that after a reasonable period of time there be an evaluation.

Incidentally, Mr. Chairman, my contracts are available. They have been made available to the Auditor General and, incidentally, I had to make them available to her. I want to talk about that, too. One of the conditions of the contract was that I wanted an evaluation done in which everybody who was working under me would have input into that evaluation, and that upon a satisfactory evaluation I would be guaranteed another five years.

In 1992, I went to the board and asked them to do an evaluation on me. This was two years into my mandate. They did an evaluation. I got a good evaluation, and they came back and wanted me to sign a contract. I said, yes, I want a contract but I want it for six years, not five. The reason I wanted six was because it would have brought me up to the age of fifty-five when I could retire. They agreed. It became effective in August of 1994, contrary to what was published in the paper based on sources from school boards. I signed that contract. It was a legal, binding, in good faith contract. The Department of Education knew it. I did not hold it a secret from anyone. I let any of my colleagues know that I had that contract, and I told them what was in the contract. I made it available to some of them, and some of them eventually got a contract. As a matter of fact, I was probably one of the first people in the Province in the superintendency who had that kind of a contract, and it was allowed to be done under the Schools Act. That was my understanding of the legal advice I received, and I will let the board speak for themselves.

In 1996, I was made redundant. I said to the board: What are you going to do, I'm redundant? You will get the redundancy package that the government outlined. I said: Oh, no, not a chance. Don't even talk to me about it. You have a contract with me with over four years left in my contract; now here is what I am telling you. You can do what you like with it, you can say what you like, but I want a settlement. If you don't give me a settlement, I will take you to court.

I told that to the Minister of Education. I requested a meeting. I sat with him. I said: I don't care what you are saying. I have a legally binding contract under the Schools Act. Now they changed the act, I am not denying that, but I am telling you that my contract was a legally binding contract. It was made in good faith by me, good faith by the Avalon Consolidated School Board. Where they got the money to pay me frankly was not my problem. I had nothing to do with that. The minutes of the Avalon Consolidated School Board can be reviewed if they still exist - but I kept some of them - and I can tell you that I did not sit in on any meetings. I had nothing to do with where the money came from. That is something that the school boards involved have to be responsible for, not Bill Lee. I did not do anything different than what has been shown in the courts in recent days with respect to what other individuals who had similar contracts did.

I am sorry to have said that like I did. I wanted to go on the public record as saying it because there is a lot of misunderstanding out there. No one ever came to me. The Avalon East Board never requested a meeting with me, whether they should have or should not have. The media never spoke to me once on this issue, and I am putting it on the record right now. I really appreciate the fact that you invited me to testify here today, because it is the first opportunity I have gotten in a public forum, and the first bit of respect I have received, in my opinion, with respect to the way in which I was treated.

I am sorry for going on, but I want to say this. As a matter of fact, last year I heard through the grapevine that the Auditor General was going to put into this report right here, the fact that I left the Avalon Consolidated School Board and I took a computer. Now it is not in there, but the reason it is not in there is because of what I had to do.

I would ask you to ask the Auditor General if what I am telling you is not accurate and correct. I had to provide the Auditor General with a copy of my contract because they could not find one in the records of the old Avalon Consolidated School Board. I can tell you, and I would stand up in front of anybody and tell you, that when I walked out of that office the records were in immaculate shape.

Another thing with respect to the computer is that I had the sense to keep a copy of the minutes and my receipt for purchasing that computer, and I had to present that to the Auditor General. The Auditor General and her assistant were in that meeting with me when I presented it to them.

With respect to the contract and the payout that I got, I am not ashamed of it, and I have made it available. The media that had to apologize for saying things about me and my contract that were incorrect were allowed to have that contract made available to them. We prepared. My lawyer said: If you want his contract, you can have it.

I got paid for no more than the fifty days of holidays that I was required to be paid for. The Auditor General knows that I am still owed for over 145 days of annual leave that I never, ever got paid for, which accumulated from the old Conception Bay South School Board and the Avalon Consolidated School Board.

That is all I will say at this point in time, and I appreciate the opportunity.

MR. FITZGERALD: Mr. Lee, I understand that you worked for the Avalon Consolidated School Board as a Director of Education for how long?

MR. LEE: No, Superintendent of Education, Sir. We never had the name of directors.

MR. FITZGERALD: Superintendent of Education.

MR. LEE: From 1989 to December 31, 1996.

MR. FITZGERALD: 1996. So you worked approximately seven years.

MR. LEE: Yes, Sir.

MR. FITZGERALD: Did you apply for the new position?

MR. LEE: Yes, I did.

MR. FITZGERALD: You applied for the new position and Mr. Shortall was the successful applicant?

MR. LEE: Yes.

MR. FITZGERALD: I have a real problem, and I don't blame you with going in and negotiating a contract.

CHAIR: Can I interject here? Because Mr. Lee did go on, I think, a bit more than the question.

MR. FITZGERALD: Maybe somebody from the school board who made the decision, or the school board principals who were here -

CHAIR: We can get into that; but, Mr. Lee, we certainly appreciate your comments and understand where you are going from on this. We are here basically to get to the facts as we would like to and as we understand them to be. I do not think there was any question from this Committee with respect to if you were entitled to what you received or what you did not receive. Our question here now, I think, as it applies to the trust funds, is going to be the process of where the money came from. Again, that has nothing to do with you.

MR. LEE: It has nothing to do with me, Sir.

CHAIR: In the meantime, I just wanted to put that there for you.

MR. FITZGERALD: That is why I want to direct the next question to the people, if somebody was here, who were part of making that decision. If they are, then maybe they can justify it or let us know the reason why.

From my understanding here, in reading this document, there was $185,254.55 paid out as a redundancy package to Mr. Lee. That is a fantastic amount of money when you see what is happening in our school system today, to give somebody with six or seven years of service $185,254.55 - two years' pay - because he left his job, competed, and was unsuccessful for another one.

WITNESS: Contract.

MR. FITZGERALD: I know it is a contract, but the people who are responsible for the contract have certainly put the wrong figures here, as far I am concerned, and it should never have been entered into.

Where did this money come from? Where did the $185,254.55 come from in order to be made available to pay the Superintendent of Education? The school board (inaudible) kind of money.

MR. ANDREWS: Basically, part of the money came from the provincial government because they had a settlement package that they offered any of the directors who were declared redundant, and the balance came from the trust fund that the board who was administering.

MR. FITZGERALD: So $169,022 probably came from a trust fund?

CHAIR: No, $110,000.

MR. ANDREWS: It was $110,000, I believe.

MR. FITZGERALD: One hundred and ten thousand dollars?

MR. ANDREWS: Yes.

MR. FITZGERALD: Mr. Andrews, do you feel that is a wise use of trust fund money? Do you feel that money was put in trust to pay this kind of expense rather than general education costs?

MR. ANDREWS: As I said earlier, we are a volunteer board. We sought legal advice to say what is the best way to handle this. As you have heard Mr. Lee say, he had a signed, sealed, contract. Based on the advice of our legal counsel, he indicated that in settlements of these kinds of contracts in other jurisdictions and in similar circumstances, the individuals in question generally were given at least two years settlement. In fact, in some other circumstances, ours being one of them, it was quite possible that if it had gone through litigation we would have incurred the cost of litigation plus we probably would have ended up having to pay possibly the full four years of the contract which would have been considerably more money.

The board looked at those things. Again, it took the advice of its legal counsel and entered into a settlement with Mr. Lee and Mr. Johnson.

MR. FITZGERALD: On page 13, Volume 2, Public Accounts Committee, Avalon East School Board, the last paragraph there says, "Another letter from the Avalon East School Board, signed by Roger C. Lester, Assistant Director Finance & Administration, to Department of Education indicate that Avalon East had made severance and redundancy payments to Mr. William Lee - $103,997.15 and Mr. Robert Johnson - $39,276.04. These amounts total $143,273.20. In his letter Mr. Lester advises the Department that the amounts should not be paid to the individuals, but should be reimbursed to Avalon East." Has that directive been carried out?

MR. ANDREWS: I guess I could ask Roger to confirm that, one way or the other. As far as I know it has.

MR. LESTER: Yes, Sir, that money has been recovered as indicated.

MR. FITZGERALD: So the money has been recovered from where?

CHAIR: To clarify that, I think I know the answer to that one. What had happened was that the board itself made the payment on the condition that the money would be forthcoming at a later date from the Pitts trust fund and that is what had happened.

WITNESS: That is correct.

MR. FITZGERALD: So it has been paid but it has been paid from the same trust fund that put the money there that I referred to earlier to pay the individuals their redundancy pay.

MR. LESTER: That is my understanding, yes.

CHAIR: It was only paid once from the Pitts fund.

MR. FITZGERALD: I don't understand why people would contribute any more to trust funds, after seeing the money used in this kind of a way.

CHAIR: I had a note made on this. This is one of the issues that I wanted to address also.

With respect to that trust fund, the question I have - and it goes back to the Avalon Consolidated Board, because from my understanding the material in the last hearing was that the Avalon Consolidated Board, before it disbanded, took that money and put it into private trustees, and then the private trustees, and I believe one or two of those private trustees may be here, the private trustees then agreed, I suppose, or the Avalon Consolidated Board agreed, before they put it into private trustees, that the money could be utilized to pay this severance.

Would somebody like to address that, and how that happened? What made you feel that you or the board had the authority to switch the money from the Avalon Consolidated Board, as a trust for general education, to private trustees to administer?

MR. ANDREWS: First of all I would like to point out, Mr. Chairman, that you are talking about monies which are not public monies. Therefore, as far as I am concerned and as far as my legal advice is concerned, this Committee has no jurisdiction to ask me to discuss it. However, we are not trying to hide anything so I am perfectly willing to do that, but I want to make it very clear from my point of view and my understanding of all of this that we are talking about private funds which have nothing to do with this Public Accounts Committee.

With respect to the matter of how the board handled it, the board at the time, prior to all of this going on, was somewhat concerned about was going to be happening with the new proposed interdenominational boards. The board expressed that concern to its legal counsel and said: What can we do about these funds? We are not sure that they will be administered in an appropriate manner, given that virtually all of these funds were set up and were the result of the schools in integration.

As a result of those concerns, and talking to our legal counsel, the funds are in a trust fund and the trust fund act provides for the substitution of trustees. We went through the process under the guidance and direction of our legal counsel and basically set up a separate trust and put in new trustees, with the condition that those trustees would have to be members of the new Avalon East School Board and would have to be representative of the faith involved in establishing the trust in the first place.

CHAIR: Just two things. One was with respect to the trust fund itself and the $110,000 that was paid out. It was a minute of the board, I believe, that it would be on a condition of approval of the minister, and I think Paul addressed that to a certain extent.

I would like the Auditor General to comment on the reason why she feels that the board never had the authority to put that money into private trustees, or am I reading you wrong on that?

MS MARSHALL: That is correct. There is a section in the Schools Act. At the time that the trust was transferred over to what I call private trustees, there was section in the Schools Act that basically said that all the assets in the possession of the old school boards should now roll over to the new school boards; so I felt that those trust funds should have gone over with the new school board when the new school board came into being.

The old Avalon Consolidated School Board did not agree with that. They had a legal opinion saying they could do what they did. Now, I also have a legal opinion that says they should not have done that, so we have two differing legal opinions, but I felt that the $573,000 should have gone over to the new school board.

CHAIR: So basically we have two acts. We have the Schools Act saying that it should happen and Mr. Andrews is saying that the trustees act is saying there was no need for it. That is why you have two different opinions, I suppose.

MS MARSHALL: No.

CHAIR: No?

MS MARSHALL: No, he has a legal opinion that says they could establish private trustees, but I have a legal opinion that says they should not.

CHAIR: Okay.

Mr. Lush wanted to comment on this.

MR. ANDREWS: Before you comment, can I make one comment?

CHAIR: Sure.

MR. ANDREWS: The point that you have to careful of here is that, if you look at the response that is in the Auditor General's report, the trustees have responded and explained that. Basically, they are saying that as far as they are concerned and as far as our legal advice is concerned, those funds were administered by the board. They were not owned by the board. They are not public funds. I want to reiterate that again. These were funds in trust. They are private funds. They were not considered an asset of the Avalon Consolidated School Board from the point of view of what was owned by the government and what was paid for by tax dollars. They were always audited and reported quite separately from the school board, so I want to make that very clear.

CHAIR: Thank you.

Mr. Lush.

MR. LUSH: I see two questions developing from there, from my amateurish mind. One was the usage of the funds. The Auditor General talks about the transferring of the funds, which is another question. The question that we are dealing with at the moment was the usage of the funds. Mr. Andrews says they are private funds, and I concur with that, so I think the question is the usage of the funds, and the stipulation put there was that it was for general educational purposes. That, in my view, gives a wide interpretation. Some people can put a narrow scope on it and say that it is supposed to apply to classroom instruction or something else, but general educational purposes can take in, in my view, a lot of things, certainly, which would include salaries of certain people, certain conditions.

There are two questions. One is whether the board had the right to do that, and they have indicated that they have sought legal advice on it, that they were private funds. The other question, as to whether they should be transferred to the new board, is something that is to be dealt with in the future.

Again, taking the legal advice from Mr. Andrews that they were private funds and not assets, we have to take that and look at it and decide which way we fall on that particular issue. The point is, there are two: one for the usage; and, secondly whether they should be transferred.

MR. ANDREWS: Just on the point of the usage - again I refer to the Auditor General's report because I think she has reported it in there - the trust fund had already been used in terms of salaries before. That is not an uncommon thing. The other point I wanted to make - I think I made it earlier but I want to reiterate it - is that we were looking at a situation where we had a signed contract with implications that were being laid out for us by our legal counsel. Our role as trustees, as school board members, was to try and minimize the impact on the overall benefit to the students of our system. We looked at that very carefully because, as I said earlier, the potential was there, based on what we were seeing, that if we chose to - I am going to be impolite here perhaps - if we had chosen to do what the government has done with the Cabot 500 people, we would have ended up in a serious litigation, at least in our view at the time, and we could have ended up paying out a heckuva lot more money, and the only source of money that we had was the trust fund. It was very evident to us that government was not going to pay any more money than they felt they could get away with. As a board, we felt that was unethical. We had a contract and, as far as we were concerned, a contract is a contract, is a contract.

CHAIR: Thank you.

MR. LUSH: That is what Mr. Bouchard thinks too.

CHAIR: Do any other Committee members have questions? Well, I have a few.

MR. FITZGERALD: On that topic?

CHAIR: No, on any topic. Do you have any others?

MR. FITZGERALD: Well, I would just like to ask a couple of quick questions. One refers to the Auditor General's report again on page 7 as it relates to Board Dinners and Gifts. The former boards spent approximately $60,000 from 1 July 1996 to 31 December 1996, which is six months, and the new board seems to be following suit.

CHAIR: Volume 1, is it?

MR. FITZGERALD: Volume 1 of the Public Accounts Committee, page 7.

According to the Auditor General, this is certainly outside of the authority that the school board has, or the Department of Education would allow in spending those kinds of sums on those kinds of activities. Maybe somebody would like to comment on that particular concern.

MR. BREEN: I would like to comment on that, if I could.

CHAIR: Sorry, which section was that?

MR. FITZGERALD: Page 7, section 12, I guess it is.

CHAIR: Twelve, okay.

Mr. Breen.

MR. BREEN: Mr. Chairman, my experience with these have been, in the main, functions to honour people with twenty-five, thirty, thirty-five years of service with the employer. That has been it. Certain boards have, at Christmastime, maybe had a dinner for the trustees. I think you would be probably surprised to learn that this Province is the only Province in Canada where school board trustees serve without remuneration. Every other jurisdiction pays trustees; some jurisdictions rather handsomely.

If you look at the total budget of a school board, and if you look at the amount of money that is even used for the trustees' portion of the dinner, it is minuscule. The other part is just being a good employer in terms of recognition for services done and good service rendered over the years.

CHAIR: Thank you. Roger?

MR. FITZGERALD: I have no problem with it, by the way. I just wanted to know how an arm, I suppose, of government, that is controlled by the Schools Act, can go out and justify - and if the trend would continue you are talking about $120,000, Mr. Lee, over a period of a year - it is there for six months - how you could continue spending this kind of money in contravention of the act.

CHAIR: Roger, the Auditor General wants to speak to that, and then Mr. Andrews.

MS MARSHALL: That was the point in my statement. There is no authority under the act for these types of expenditures. When I met with - well, it was the former Deputy Minister of Education on the issue, saying there was no authority, that if there is a desire there on the part of the department and the minister and school boards to endorse expenditures of this nature, at least put some guidelines in place and put some structure around it so that all of the boards are doing something on a consistent basis.

CHAIR: Thank you.

Mr. Andrews.

MR. ANDREWS: Yes, I wanted to speak on this one because it is one that I dealt with at the Public Accounts Committee about four or five years ago. I think Mr. Lee gave the Auditor General a response at that point in time and I am going to try to more fully support it.

Mr. Lee's response at that point in time was that if he had to make his decisions on expenditures on the basis what was in the Schools Act and what was stated as being allowed to be done, then nothing would ever get done at a school board, and that is quite true. The other thing that the members of the Public Accounts Committee should be aware of is that all school boards are set up under the Corporations Act, and the Corporations Act has a whole litany of things that a corporation is expected to do in order to function effectively. If the government, in its wisdom, feels that this is an inappropriate thing to do - and I would challenge that there are lots of departments within government who are using public funds to give retirement gifts to all of their various employees. If they are not, I would be very surprised. I can see the Auditor General shaking her head, but I happen to have seen enough retirees to know that is, in fact, happening; whether it is being called that in the assets of the department is another story.

In any case, having to have something stated in the act in order to do it, I do not feel - in talking to our legal advice, we do not feel - that is something that is necessary. This is a good, sensible thing to do for the school boards. The Avalon East School Board, in fact, has cut back from what it used to do.

Also, for the benefit of, and I guess to sort of accentuate what Kevin said with respect to school board trustees doing this for nothing, early on this whole process a number of our trustees started keeping records of how much time they were spending at this whole effort, and we started to discover very quickly that a number of us were spending more time as trustees than we were at our employer's jobs. It is a wonder that some of our employers didn't raise holy hell about it.

The other thing is, in case you are interested, for the retirement dinner, the only benefit that I get as a trustee is that my ticket got paid for, to go to the retirement dinner, but if I wanted to bring my wife or my girlfriend or anyone else, I had to pay. So it cost me $25 to go to the retirement dinner to recognize 150 or 200 people for twenty-five, thirty and thirty-five years of service.

I hope this never gets brought up at a Public Accounts Committee again. It is ridiculous and it should never be in the Auditor General's report again. I hope that the government listens to what the Auditor General has said. If they have a problem with it, go write something in the Schools Act; otherwise, tell us she doesn't need to worry about it any more.

Thank you.

MR. FITZGERALD: Money is important, Mr. Andrews.

Number 13 on the same page 7 of the Auditor General's report talks about a senior employee of District # 9 owing a total of $40, 587 to the school board and the Department of Education. It goes on to say, "No interest is being charged by the Department or the current Board." Is this amount of money still outstanding, or has it been refunded? I do not have any idea of what -

MR. ANDREWS: We are District #10.

CHAIR: That is another board.

WITNESS: Wrong board.

MR. FITZGERALD: I am sorry, Sir. I am in the right book but the wrong board.

I will go to corporate credit card. Why do we issue corporate credit cards?

CHAIR: With respect to that, there is a policy - I think I read in a document - that the Avalon East Board has adopted with respect to the corporate credit cards, but if anybody wants to address it, they can.

MR. SHORTALL: Essentially, Mr. Fitzgerald, the rationale behind it is that the Avalon East Board has two credit cards, one which I have been provided with and one which Mr. Lester has been provided with. It is essentially to facilitate the payment of expenses for dinner meetings, expenses which may be incurred on behalf of school board members, trustees at infrequent school board conferences, and other types of expenses which would be incurred. These expenses, as Ms Marshall pointed out in her report earlier, were not being completely recorded to her satisfaction and since receipt of her report we have revised our procedures totally, and I believe our practices over the past year have been quite in compliance with the suggestions which we have received.

These essentially cover incidental types of things: the cost of a meal at a committee meeting, for example. It may very well be that the NLSBA, the Newfoundland and Labrador School Board Association, may be having a meeting in Gander. We could have three trustees present at that meeting, and sometimes it is easier to have all of their three room expenses paid on a credit card rather than have a billing account set up to the thing in St. John's, or to have them pay it themselves and then enter a subsequent claim. (Inaudible).

MR. FITZGERALD: It seems to me, if you use your own personal credit card, that you would not have any problem getting somebody to bring back receipts when the thing came up for payment at the end of the month and it would do away with that.

Thank you.

CHAIR: Mr. Lush has something to say.

MR. LUSH: I just wanted make a couple of comments with reference to this issue of funds, the raising of funds, parties, and this sort of thing. I say this with all due respect to the Auditor General. The Auditor General got a look at the expenditures and everything is all black or white, no shades in her field, or in the field of the Auditor General. The Auditor General raises some good points, and I think it makes us all aware of probably what ought to be done as opposed to what is done.

Looking at the reality in Newfoundland, I don't think there is one group of people that pays less attention to merit, and that is in education. We don't have a lot of perks. I say we, and I should not say that - I have been out of the field for a long time - but I know that they do not have a lot of perks and they do not do a lot of things to build morale the way we do in companies. They do not have a lot of leeway. Then, looking at the board members, they work hard, and all for a volunteer effort, and they are to be congratulated.

I really do not know what we would do to satisfy the Auditor General. We had to legislate those things. They are a done now with a degree of common sense. There are a lot of things that, if we did them according to legislation, I don't know what we would do to the effect. For example, fundraising. I know that in fundraising in schools, much fundraising is done spontaneously and on the spur of the moment. Something is needed, the classroom teacher makes a great effort, and within a week whatever they raised the money for is done, is purchased. If you had to go through legislation with this, I am not sure you would ever get any of this stuff done. I think it would take the spontaneity out of it.

It is within our culture, a lot of those things that we do, but I think what the Auditor General has done is probably made us aware that maybe we do this with somewhat more discretion, realizing that we are dealing with public funds; but I am concerned, in talking about fundraising, in respect that we raise some suspicion in the public, because I do not think ever there is a dime that is mismanaged in education in terms of fundraising with teachers and all of those who attempt to raise funds because it is done generally for a specific purpose. The minute the money is raised, it is spent on purchasing whatever the impulse was that initiated the raising of the funds in the first place.

I can concur with many of the remarks that Mr. Andrews made. Thank you, Sir, for making them in such a frank manner. I can tell you that most of us around this table appreciate what volunteers are doing in education and are very grateful to you.

Thank you.

CHAIR: Thank you, Mr. Lush.

MR. MERCER: Just one last point of clarification on salaries. On page 16, Mr. Lester, you provided us with the salaries for the individuals at step 33.

CHAIR: Which volume?

MR. MERCER: Page 16, volume 2. In comparing those to page 7, which is the Kirby Report, is the only difference between those the extra 2 per cent that was granted in 1998? It appears to be. It looks like the 2 per cent has been added to your figures.

MR. LESTER: Yes, (inaudible).

MR. MERCER: Therefore on page 9 of the Kirby Report he has made a comment in there that there seems to be payment in excess of step 33. I would assume from that, based upon your figures and those which were given by Kirby, that there seems to be a difficulty with that comment in the Kirby Report.

MR. LESTER: Yes. None of our salaries are above step 33. I think that was the question that I was responding to in the letter from the last hearing. I clarified the point by putting in the exact scales that can be checked with payroll division with what we were actually being paid and that is the amount that is on everybody's paycheque.

MR. MERCER: Okay, so there are no additional bonuses to these salaries here?

MR. LESTER: No.

MR. MERCER: These are the salaries -

MR. LESTER: They are the exact salaries that were all being paid out (inaudible).

MR. MERCER: I just want to get clarification on the in excess of step 33.

CHAIR: Thank you.

Paul Shelley.

MR. SHELLEY: Just a quick question - because I asked it yesterday and really I am just curious to see how you would answer this compared to the other board - on capital assets. With so many changes going on, it was noted that the former and current boards did not have much control of this by the Auditor General. The other board told us about some ideas they have. What control do you have? Are you doing anything to control all of those assets, a ledger, tracking, or inventory, however you want to put it? Do you have some ideas to correct that?

MR. LESTER: Yes. Over the last year or two we have taken it upon ourselves as a project to tag and record all our assets. We do have a ledger. We don't have them costed at this point in time but we do have a listing that identifies where the assets are and what they are, and they are all bar coded and recorded by the school.

MR. SHELLEY: By the school?

MR. LESTER: By the school, yes.

MR. SHELLEY: Thank you.

CHAIR: Thank you.

I have a couple of comments and I have four issues I want to address. It shouldn't take too long.

With respect to Mr. Andrews' comments - and I certainly can understand where he is coming from, and Mr. Breen - I served on a local town council for seven years, volunteering my time for seven year. If a few of the councilors went to a Federation of Municipalities meeting in Gander or someplace like that it is going to be questioned. Volunteering your time, it took a lot of time, forty or fifty hours a week. So I can understand where you are coming from with respect to volunteers, but on the other hand, not to defend the Auditor General - because she is well capable of doing that herself - I think she has a certain job to do. She has certain regulations to follow, and when she is investigating any group, no matter who it is, if she finds something that is outside the act she has to make note of it. If the Auditor General wanted to speak to that she can later, in concluding comments.

There are two issues I wanted the Auditor General to refer to, and they were touched on here. One is the holiday pay over fifty days and the other one is the redundancy. I would like the board to address those two concerns that you had. Would you want to?

MS MARSHALL: The holiday pay, as we discussed yesterday, the Department of Education indicated that superintendents and assistant superintendents could get paid for up to fifty days of vacation pay. What we found was that some of the school boards paid more than the fifty days, which was against the regulation, but the other problem that I had with it is that because some boards complied with the minister's policy and some boards did not you have now inequalities in the system. While you find that some of those individuals got paid for all of their unused vacation, others only got paid for fifty days and effectively lost the balance, and some of those balances were fairly significant.

CHAIR: Would Mr. Andrews want to address that?

MR. ANDREWS: In terms of the Avalon Consolidated School Board on that particular issue, as far as I recall - and I checked the figures yesterday - our people were paid for the fifty days and nothing beyond that.

CHAIR: With the Roman Catholic School Board, Mr. Shortall, would you want to address that one?

MR. SHORTALL: If I can just confer with Mr. Lester for a moment, Mr. Chairman, I will just refresh our memories here.

MR. LEE: While he is doing that, Mr. Chairman, I would just like to reiterate again that I lost 140 days.

AN HON. MEMBER: (Inaudible) was made up on severance.

WITNESS: Not really.

MR. LEE: That was not part of my contract, sir, and you should read my contract.

MR. SHORTALL: Mr. Byrne, I am going to need some further information on section 10 on page 7 before I can respond to that particular question. It is not coming fresh into my mind which former board which now comprises District # 10 paid two employees $16,792. I would like to check my files and respond further to you, unless somewhere here has specific information that can jog my memory right now.

CHAIR: Would the Auditor General be able to comment on that or your staff?

MS MARSHALL: Yes, (inaudible).

CHAIR: Mr. Lee, can you tell how you lost 140 days, what they were?

MR. LEE: When I was with the Conception Bay South School Board and resigned in 1989, I was only paid fifty days like I am supposed to be, so there were days there I never got paid for.

CHAIR: Fifty holiday days?

MR. LEE: Annual leave.

CHAIR: Annual leave.

MR. LEE: There were excess days that I never used that I never I got paid for. When I went with the Avalon Consolidated School Board - and I did not respond to the question this morning about the accuracy of the Kirby Report, but I can tell you he is wrong on several issues there. I have the facts myself. I got them from the Department of Education, but that is beside the point now. Only in respect to me, he said I paid got paid for fifty days of the eighty-eight. In actual fact I had more than that accumulated. I have documentation from the Department of Education to verify that. If you add what I lost from the Avalon Consolidated and Conception Bay South boards you would come up close to 135 to 140 days. If people are concerned about the excessive amount of time I got, you multiply my daily rate times that and you will see that I did not get very much money. I can guarantee you that.

CHAIR: Thank you.

Mr. Shortall.

MR. SHORTALL: Thank you Ms Marshall for the information. That amount of money was paid by the Roman Catholic School Board for St. John's to Mr. Lester, in fact, and it represented an acknowledgment by the school board of the additional time which was required on Mr. Lester's behalf to fulfill his duties, and fulfill duties for the school board which essentially prevented him from taking accumulated annual leave. During the final two years of the history of the Roman Catholic School Board, as with all the previous boards, the times were very hectic. There were a lot of major things ongoing in education circles in the Province, and it was quite difficult for senior employees to access their due annual leave. With the termination of the school board in sight in early spring of 1996, the school board at the time took a decision to attempt to compensate this particular employee for the time which he was required to work on behalf of the board which essentially prevented him from being able to access his due annual leave during the previous number of years. At least that is my recollection, Mr. Chairman.

CHAIR: Thank you.

MR. SHORTALL: That would have been a minute decision taken by the school board at that day.

CHAIR: Thank you.

With respect to redundancy, do you have anything to say, Auditor General?

MS MARSHALL: The problems I had with redundancy - did you want me just to focus on the enhanced package we were just talking about or do you want me just to give a general overview?

CHAIR: (Inaudible) the specifics of the redundancy and what the problem was there.

MS MARSHALL: The redundancy package that we talked about here this morning was approved by the old Avalon Consolidated School Board. While that school board did approve the package, that old school board never did pay out that enhanced severance package. That enhanced severance package was actually paid out by the new board. We never did find a minute which indicated that the new board had actually approved the payment of that enhanced severance package, so while it was paid out it was never approved. It did not have board approval - at least nothing in writing - and it certainly never had the approval of the minister.

Can I just make one more comment on the enhanced severance package? The other issue that we identified was - I am not questioning the merits or whatever of the package that was given to Mr. Lee - but what happens is that if the policies are not followed then you do have inequities in the system. Some people would receive enhanced packages while others receive lesser packages.

CHAIR: That is obvious now.

Mr. Andrews.

MR. ANDREWS: Mr. Chairman, two points, I guess, in terms of the minutes of the Avalon East School Board. One of the conditions of this whole process, if I recall the minister's letter, was that the old boards were not to enter into any commitments or contracts without the prior approval of the Avalon East School Board. I have here - which you can get a copy of, I would assume, and I thought you would have a copy of - the minutes of a meeting of the Avalon East School Board held on Friday, December 6. There are two motions here. Basically the motions are that the Avalon East School Board approve the contract settlement as negotiated and approved by the Avalon Consolidated School Board for their former business manager, and the same thing for their director. It says: subject to the approval of the Minister of Education. It was also noted that with respect to Mr. Lee any bridging arrangements would be the full responsibility of Mr. Lee.

Those two motions were passed. What is not in this record, but I am perfectly prepared to say it was stated and the board members who were there - I don't know, Kevin, if you were even at that meeting - I informed them, at that point in time, that if the minister should not approve the full package - in other words, he would only approve the limit to (inaudible) government - that the Avalon Consolidated School Board had agreed that it would compensate the Avalon East School Board through the trust. That was the basis on which the Avalon East School Board agreed to proceed. They were not prepared to proceed if they were going to be out any money.

CHAIR: There is no actual written minute of that agreement other than to say that that one there is approved on the condition of the minister approving it.

MR. ANDREWS: No.

CHAIR: So there is no written agreement.

MR. ANDREWS: No, there is no written agreement and I do not know why it was not put there, because I was quite frank and up front with the board members that this is the way it was coming forward.

There was another point I was going to make and I have lost it. I will have to come back to it.

MR. BREEN: I would like to make a point to that too, Mr. Chairman. The Avalon East School Board was indemnified at that time by the trustees of the fund. Also, we engaged and got a third party legal opinion from O'Dea, Earle prior to concluding that transaction. We felt we had done what needed to be done to effect what the predecessor board had agreed with their employee.

CHAIR: Thank you.

Any further comments on that, Auditor General? Okay.

I noticed in the documentation - and I'm trying to find it here now, I made a note of it - there is a court case concerning one of the schools before the Avalon East School Board now. Do you want to comment on that? I am not sure if it had something to do with construction or not. I thought I had a note.

WITNESS: An old one?

CHAIR: Pardon?

MR. SHORTALL Mr. Chairman, does this have to do with one of the previous school boards?

CHAIR: Here it is. On page 39 of the Public Accounts Committee, volume I, Notes to Financial Statements, June 30, 1998, under Contingencies. It refers to the Avalon East School Board. The section reads: "The Board is named as a defendant in a legal action, in connection with construction of a school during 1986-1988 period, claiming that the Board is liable for certain progress claims, holdbacks, general damages and costs." This mentions $450,000.

MR. SHORTALL: I will ask Mr. Lester to respond to that. He has the information (inaudible).

MR. LESTER: There was, relating to the construction of a school on Bell Island back in that time frame, a disagreement with the general contractor on the site at the time. He was dismissed from the site and some new contractors sent in to complete the work. He sued us and we sued him. The result was that last year we settled out of court for the amount of holdback, the amount of contingency that had to be paid (inaudible) the trust to the lawyers for the (inaudible) the subcontractors.

CHAIR: What amount would that have been?

MR. LESTER: (Inaudible.) If memory serves me correct, somewhere in the $30,000-$40,000 range. It had been an amount set aside for the subs, not the full amount of the contract. This (inaudible) at the (inaudible) paid out.

CHAIR: One other question I have concerns travel. There was a trip taken I think by six, maybe eight, trustees, I suppose, and staff to B.C. to attend a convention of some sort, a national convention of the trustees, school trustees or what have you. I was told that the policy is that only two would travel. Could somebody explain the reasons why there six or eight? I'm not sure, I believe it may have been six. That was in 1998 I think.

WITNESS: What year?

CHAIR: Nineteen ninety-eight.

MR. SHORTALL: Nineteen ninety-nine.

CHAIR: It was 1999.

MR. SHORTALL: If it was 1999, the event in question was the Canadian School Boards Association annual meeting. The operating travel policy of the Avalon East School Board at the time is, as you indicate, that normally two individuals would represent the board at these conferences. The policy does allow for exceptions to be made to that and there was a conscious decision of the school board to increase the representation at that conference for the following reason. The current board chairman at the time, Ms Kathy LeGrow, had offered herself for the office of President of the Canadian School Boards Association. Her election would have taken place at that particular conference. The board felt at the time that it would be appropriate to have more than merely two board members present at the conference in Vancouver to assist and support her efforts in that regard. I understand that two additional board members were sent as a result of that.

Also, there were two other members present at the conference. One was paid for by the Newfoundland and Labrador School Boards Association, the other was paid for by the Canadian School Boards Association, so that would mean that there were six trustees present from the Avalon East Board. That is the reference. There were also two staff persons present as well. The budget for staff travel is a budget line that is identified in the annual budget of the school board. It is my responsibility to administer that, and our practice has been to encourage our senior staff to participate in at least one national conference during the year. The purpose of that is to give them an opportunity to liaise with colleagues in other jurisdictions in Canada and to ensure they have a current network of information with respect to practices in other jurisdictions. That I believe would account for the number up to eight. If it was nine it may be that we sent three trustees as opposed to two, but that's the general accurate reference, Mr. Chairman.

CHAIR: Basically there were six paid for by the Avalon East Board and two paid for by other sources.

MR. SHORTALL: Of the eight, yes, that would be correct.

CHAIR: Thank you.

I think Mr. Lush has a question.

MR. LUSH: First of all, a question about the fifty days annual leave or vacation pay. I'm not sure I understand that. The act says that those who qualify - the superintendents, the assistant superintendents, directors, whatever the terminology used - they may qualify for up to fifty days of annual leave. This fifty days, is this per year or is this per contract? (Inaudible) the total contract, one is allowed fifty days at the end of that contract, whether it be ten years, fifteen years? What is the interpretation of that?

MS MARSHALL: Do you want me to (inaudible)?

MR. SHORTALL: You go ahead, Ms Marshall.

MS MARSHALL: The fifty days refers to an accumulation. People will accumulate their leave, and then when they cease employment or when they went over to the new school boards the director from the department said: Those individuals can get paid for up to fifty days' leave that is on the books, you can pay them for that, but anything else has to lapse. They lose it. To go back to Mr. Lee's example, he said he got paid for his fifty days but then there was one hundred and some odd days that he just lost, he just got no compensation for them whatsoever. That is the policy on the fifty days.

MR. LUSH: If I could ask Mr. Lee this question. Because it seems to me the policy is clear that it is fifty days. On what grounds are you saying that the government owes you for 140 days or thereabouts?

MR. LEE: Mr. Chairman, I did not say that.

MR. LUSH: Okay.

MR. LEE: In relation to what has happened - and it has come out here today - with respect to other school boards -

MR. LUSH: Alright. So, for fairness -

MR. LEE: Because Mr. Andrews has already testified, and I can verify, that this board only paid fifty days. The old Conception Bay South School Board in 1989 only paid me fifty days, but I would suggest you check to see if that happened and continued as a policy when it was dissolved in December 1996.

MR. LUSH: Okay. (Inaudible) Auditor General (inaudible).

MS MARSHALL: That was still the policy. What happened was that some people got paid for more than fifty days and that was the problem that I had. I identified people who got paid for more than fifty days, and I am saying it is inequitable because some people did not get it.

MR. LUSH: All right. I am not finished. I just want (inaudible). Page 7 of the Public Accounts Committee documents -

CHAIR: Volume 1.

MR. LUSH: Which one do we call this one? The one labeled 3.8, Avalon East School Board. If this question has been addressed don't let me prolong this particular hearing. Item 14 at the bottom of page 7, concerning District # 10. It says: "Our review of District #10 identified several expenditure items which were of particular concern." The one I wanted addressed here is the first one where it says: "In May 1996, an executive of a former board received a payment of $42,555 as compensation for 2/3 of unused accumulated education leave." If that has been addressed we do not need to delay this, but if it hasn't I would just like someone to address that. Because my understanding - I see people laughing and maybe I've missed something, that it has been addressed and I have not been listening?

MS MARSHALL: We did discuss that at the last meeting. I think Mr. Shortall addressed it, so Mr. Shortall may want to address it again.

MR. LUSH: If it has been satisfactorily addressed to the Committee, I -

CHAIR: Just a quick response.

MR. SHORTALL: I can explain that for you, or at least elaborate upon it. I am the executive person in question. When I entered into employment by the former Roman Catholic School Board, as Mr. Lee indicated, I was recruited by the Roman Catholic School Board as their district superintendent in the fall of 1989. At that particular time, as Mr. Lee indicated earlier, personal service contracts for superintendents of education were not all that common in the Province. I entered into a personal service contract with the Roman Catholic School Board at that time and assumed duties as superintendent on January 1, 1990.

One of the clauses of that particular contract had to do with the provision of paid educational leave at the discretion of the school board, and there was a formula included in the contract which enabled me to accumulate credit for two-thirds salary or what have you, educational leave, so much for each year that I worked in the employ of the board. The idea being that at the end of the contract, or at some time in the contract, if I were to ask the board for this the board would have the option to make a decision whether or not they felt they would provide it to me or they would not. It was a "may clause," if you like. This particular amount in question represents a request on my behalf to the school board in the spring of 1996 for this educational leave credit. The board took a decision at that time to provide me with that particular amount of money simply because, number one, it had been accumulated under the provisions of the contract under which I was working; and, since it was a clause at the discretion of the school board, they felt that a subsequent school board may very well have different working arrangements if indeed I was to continue to be employed by a subsequent school board. There was no guarantee at that time. Also, the school board was concerned that should I not be successful and continue employment with the school board, the educational leave money would assist me in retraining myself for further employment.

These were the rationales, the arguments that were used at the day, and the board had the discretion, under the Schools Act of the day, to enter into that type of a contract. At its discretion, it made a decision that it would provide this benefit to me, which it chose to do.

MR. LUSH: My understanding of educational leave is that it is a program whereby a recipient of educational leave attends some institution for professional training. I am not aware - that is not to say that they are not common practice - this seems to be more of a separation package than something for educational leave. Am I correct? Again educational leave, in my perception, is being time off to attend an institution, to train, as you have indicated, for additional work or training in your field. That is my understanding of educational leave, and not a payoff kind of thing.

MR. SHORTALL: Mr. Lush, I would draw your attention to the phrasing on page 7 (inaudible) to the amount of money as compensation for two-thirds of unused accumulated educational leave. The amount in question was a compensation figure. It was not the exact calculation of the amount of educational leave to which I would have been entitled had the board decided to provide that particular benefit to me.

MR. LUSH: But this was a cash settlement?

MR. SHORTALL: Yes, it was.

MR. LUSH: It was a cash settlement.

Again, I am still not clear on this. Educational leave, in my view, or in the way that I have been led to understand - and I did have educational leave myself at one time - was to attend a university. In my situation it was to complete my master's degree. I could not have gotten a cash settlement in lieu of not doing that. If I did not do that, it was gone.

MR. FITZGERALD: Like sick leave; if you don't use it, you lose it.

MR. LUSH: Well, educational leave.

The question I am asking is: Are there other variations, other interpretations, of educational leave today that I am not aware of?

MR. SHORTALL: I think the point again in question is that this was unused accumulated educational leave credit, and because the board was going out of existence it would be absolutely impossible for me to take advantage of the paid educational leave in the dying months of the school board. The matters of completing the business of the board were such, and my responsibilities were such, that for me to be absent from the workplace at that particular point in time, unless it had been a matter of serious illness or something of that nature, would have been acceptable to the board.

I had entered into a contract in good faith in 1990. The contract was a three year contract at the time. It had been renewed for a five year period in 1994. My personal plans at the time would have led me to have taken a year off to complete studies with respect to a doctorate program which I had planned to do had the board itself not gone out of existence within 1997 or 1998, this type of thing. These plans were obviously rendered off the mark because the board was being dissolved, and to compensate me for the credits that I had accumulated there a decision was made for that.

I do not quibble with your normal definition of educational leave but I can only assume that the board saw, at that particular time, that there were some extenuating circumstances with respect to the remnant dissolution and their desire to provide me with some compensation for a benefit which I had worked toward, beyond which I would be unable to avail of.

MR. LUSH: Probably the more appropriate name - because educational leave is a separation package, would you agree?

MR. SHORTALL: I will not make any comment on that, Sir.

MR. LUSH: A final question: Where did this money come from?

MR. SHORTALL: This came from the school board resources, I would assume. The source of the money was the operating funds of the school board of the day.

CHAIR: Auditor General.

MS MARSHALL: It was reported because it was a most unusual item. There is no policy on this type of payment. We have been auditing school boards since 1992 and I have never seen this type of payment before.

CHAIR: Thank you.

Mr. Lee wanted to comment.

MR. LEE: Mr. Chairman, the rationale provided for this amount of money by Brian, and this payout, is - he indicated that he could have found himself in a certain position. I found myself in that position. I found myself in that position, and that was partly why the rationale which was provided - which the Roman Catholic School Board in St. John's used to pay Mr. Shortall what they paid him - was part of the rationale, I would suggest, that the Avalon Consolidated School Board used, whether you agree with it or not, to do what they did.

I also had in my contract a similar clause for which I did not receive any compensation, and I was hired with the Avalon Consolidated School Board prior to the hiring of Mr. Shortall.

Let me relate to you another incident, because I want to really get this stuff on the record. There is a perception out there, and whether this will change the perception is immaterial to me; I got it on the record. That summer of 1996, the board approved for me to attend an in-service or a professional development with one representative from every province in Canada in South Africa. It was going to cost anywhere from $8,000 to $10,000. It was approved by the board. Go back to the minutes; you can find it. I refused to go. I refused to take the money because we were going to be dissolved and I felt it would not be appropriate for me to take that money at that point and have somebody come back - and I know they have come back on other issues, but on that particular issue - and say: Why did you do that when you knew you were going to be dissolved in six months' time? We knew in July, May and June that we were going to be dissolved by the end of the month. I just want to put that on the record.

CHAIR: Thank you.

Mr. Bruce.

MR. BRUCE: Thank you, Mr. Chairman.

In defense of Mr. Shortall, I think he had planned long, long before they had even talked about reform, on going for his doctorate. Now, in the time it came, due to unforeseen circumstances, the board demanded that we needed his time. He therefore lost the fact that he would be a Dr. Shortall today instead of his master's. Therefore, he had no choice but to give up. We and the board, in our wisdom, decided to pay in lieu of this.

CHAIR: Yes, I think that was explained by Mr. Shortall. Thank you.

Mr. Fitzgerald.

MR. FITZGERALD: I will just make an observation, not a question, and I will probably repeat what I said earlier. I am not so sure that we have gone in a right line of questioning here, or the people who should be answering the questions are answering them. I don't think we should be here today asking Mr. Lee or Mr. Shortall to defend what they had written in a contract. The people who should be providing the answers are the school board.

While we might say that I am a volunteer and you must understand that, we all agree with that. I know what volunteering means, but by accepting the responsibility of being a trustee you do that from your own free will and you accept that responsibility knowing full well that you are going to be held responsible for the funds and the direction of funds that has been allotted to you and in your trust. I think the school board, the trustees, should be playing a much bigger part in explaining the questions as we put forward rather than the paid personnel on the school board.

CHAIR: Just to comment on that, I think that we have had the trustees here answering the questions. We had them here yesterday, and I thought they did a very good job of answering the questions. It is just too bad that the present chair could not be here today, for whatever reasons, but Mr. Andrews is -

MR. BREEN: Mr. Chairman, I think you have to look at this in the period of time in which it took place. These contracts were entered into with the two superintendents at the time, with no knowledge that the system would have been turned upside down in the year 1996. The initial contracts with Mr. Shortall, and the renewal thereafter, anticipated no change at the time. I mean if we were living in a perfect world we would have had this foresight as to what was coming down the pipe. We didn't. The trustees who negotiated those contracts did them with the employees involved, vetted through legal counsel, and they seemed to contain the conveyance that normal contracts with CEOs of major corporations, Crown corporations and private corporations, would have in place. Now we are faced with the disillusion of these entities and, certainly, certain things were done. They done above board, they were done by a minute of board, at public board meetings, and I have no problem with it.

CHAIR: Thank you.

Any further questions from the Committee?

MR. JOYCE: I would like to make a statement.

CHAIR: Okay.

MR. JOYCE: Again, it is easy for me, but when the old school boards were coming to - I had a good friend who was on the interim board, and I remember in particular one night that he came to my house at about 10:00. He was going to wring my neck, actually, for talking him in to getting on the interim board. I came home from a game of basketball and he just came from a public meeting where they were going to close the school five houses from me, and they were one street from him, and the people from the area were going to wring his neck. My name was never brought up but they were going to wring his neck.

MR. LUSH: You got him in all the trouble.

MR. JOYCE: I know the frustration that the volunteer board has gone through. I know the speed that things were done at. I know the amount of pressure that was put on publicly and, as Mr. Lee mentioned, in the media. I thank the members here today for their frankness. It is always nice to be frank. I am a firm believer that if we are going to look at something which anybody could take - if you microcosm anything, you could always find something wrong with it, and the Auditor General did a great job in her report. It is our job to get the answers.

My question to the panel today is more on a positive note. We will eventually make recommendations to the House of Assembly. What things can we put in there from your point of view, from the experts and from the volunteers who went through this, from the people who had to go through the public scrutiny on our behalf, what kind of recommendations would you make to us that we can help out the system itself and not just put in a report whereby we are just saying this was done and that was done, so we can make positive changes?

WITNESS: Not to go through this again.

CHAIR: Mr. Breen.

MR. BREEN: Mr. Chairman, I would like just a brief comment, addressed particularly to those members who sit on the government side of the House. This was driven by your government which you are members of and that you support in the House of Assembly and you continue to support. We were given an incredible task, and to think that we have come out of it with what we have here before us I think is a reflection on the professional staff and the work that the trustees have done, not only with this particular school board but with the school boards throughout the Island.

I am not familiar with how the health care system evolved into the concentration that it is today, whether they were given more lead time. They seem to have come out of it without as much public comment as we have, which would lead one to believe that maybe it was a more orderly process that they were engaged in. When you think of the election of an interim board and the massive reorganization that had to take place within a very short period of time, this, in my view, was a mammoth task taken on by these individuals and a job well done.

If you have any recommendation to your Department of Education, I would suggest you say to them: Be a little bit more precise in your directions, be a little bit more reasonable in your time frames and be consistent.

Thank you.

CHAIR: Thank you.

It looks like we are pretty well getting to the end of this, but with respect to the Health Care Corporation and the changes in the Health Care Corporation, we had the St. John's Health Care Corporation in here last year asking similar questions with respect to tendering. We got into a lot of specifics. We were out on the West Coast at the Western Health Care Corporation, I think, and we were scheduled to go to Labrador but a situation arose so that we could not go there. They have gone through it and in actual fact they have not completed it yet. We really do not know what is going to pan out at the end. There have been a lot of delays with the Health Sciences over there and the Janeway and what have you. They were prolonged, but in the meantime they were under our scrutiny.

I was going to ask anybody else if they wanted to have any concluding comments and then I am going to have a couple.

Auditor General?

MS MARSHALL: I would like to have one comment on the dinners and gifts comment in the report. As I indicated, is no authority for those types of payments, and aside from the fact that people may not agree with the comments they will be made in future reports unless there is some authority provided either in legislation or by ministerial directive.

CHAIR: Not to.

Thank you.

MR. LUSH: (Inaudible).

CHAIR: Yes. Are there any witnesses who would like to have a comment before we clue up? I thought Mr. Breen wanted to, but Mr. Andrews first.

MR. BREEN: No, I do not want to.

CHAIR: You are fine now? Okay.

Mr. Andrews:

MR. ANDREWS: I would just like to say I appreciate the opportunity of coming here today and I hope the Auditor General does not take any of my remarks personally. I know she does not. I have known her for a long time. I certainly have no problems here in terms of looking at the Auditor General's report. If this is all we have done and caused problems for people, given what we undertook two years ago, I think we have come out of it fairly well.

If I had any suggestion for you to take back, I would reiterate the comment that was made earlier. I think this Committee needs to put in front of the House of Assembly that getting volunteers to take on this kind of work in the future is going to be very difficult. You have to take an awful lot of abuse. Maybe my back is more alligator skinned than some of my peers but I watched, over the last two years, many of our board members take on an awful lot of stress. I am not that kind of an individual. I guess I have had four or five years - actually no, I started out having four or five years with the Avalon Consolidated School Board and ended up with nine years. Nonetheless, it is a very stressful business, and even now where we are through the worst of it, hopefully, it is still a tremendous amount of effort on the part of board members. As any of you who have been in education know, once you get into education, if you are not very careful it becomes an all consuming passion.

I think you can take away from this that government needs to seriously look at how they are going to keep the people willing to come to these boards. I think you need to look at what is being done in other jurisdictions. I realize that we are not a wealthy jurisdiction, but darn it all, this Province has a group of young people and if we want this Province to grow we have to keep them here, educate them here and do it well. If you want people who are in their thirties, forties and fifties now to take on that responsibility and drive it, you are going to have to compensate them some way.

We are getting into it right now, where people are coming to committee meetings and saying: I can't come, my employer is not prepared to tolerate this anymore. What it ends up as is people are not able to come even to a one hour lunch hour meeting. We have to push it off all into the late afternoon, into the evenings or on weekends, and as you start getting into weekends anybody with kids - as you realize, most of the people who are involved with school boards are generally people with kids - have commitments to the kids. When your kids start saying: Daddy, when are you coming home?, and some of these people are, I have listened to them, there is something wrong with that. Their employers have got to have some way that they can say: Look, if you want to take half the day off, that is fine. The individual has to be able to say: I can take the half day off and I am not going to be out of pocket.

I know that from experience because I can tell you, and I can show you the records that I have kept over the years, that I, like many others, have taken as much as a week to ten days out of what is supposed to be my vacation in order to effectively work with the school board and deliver the end product that you people have wanted.

If I can give you anything to take away that is one of the things I would say. Seriously have a look at that. Find some way to compensate them in one way or another. That has all sorts of implications, I realize, for other volunteer boards but I think you need to deal with it. Other than that, I thank you all for your courtesy and pointed questions, and hopefully we have given you the appropriate answers.

Thank you very much, Mr. Chairman.

CHAIR: Thank you, Mr. Andrews.

Is there anyone else? Mr. Shortall.

MR. SHORTALL: Mr. Chairman, in response to your question, as a professional working in education for quite a number of years in this Province it seems to me that most of the issues which we have encountered during this public accounts hearing, previous public accounts hearings and previous comments by Ms Marshall and her staff as to the goings on in the education sector over the last number of years relate to - and the government members may wish to keep this in mind - the transition preparations to ease the passage of the old system into the new system. They were insufficient. Time was not there, administrative resources were not there to enable the type of transitional planning which would have prevented the inconsistencies of policy, which would have prevented the ambiguities with respect to where people could or could not be placed on scales, and to enable the new school boards to come to grips with the fact that the interim Schools Act of the mid-1990s and the current Schools Act substantially fettered the traditional autonomy of Newfoundland school boards.

Under the previous schools legislation in the 1960s, 1970s and 1980s, school boards had considerably more discretion and autonomy than they currently have under the new act. That reality is a major variable in the situation we have before us now. Part of the problems which Ms Marshall and her officials have identified, a part of the root cause of some of the questions today, has to do with the reality and the fact that the transitional process was insufficient to enable all the variables to be totally analyzed before the change was made and that created a lot of questions, many of which are on these agendas. That is just a comment, from one who has worked in the system, I would make.

I want to join with Mr. Andrews, on behalf of the Avalon East Board, to thank you for the courtesy you have shown us today. If we have additional information, it would be our pleasure to provide it for you as best we can.

Thank you.

CHAIR: Thank you.

Any other comments?

As Chair of the Public Accounts Committee, I would like to thank all the witnesses here today, Mr. Breen, Mr. Andrews, Mr. Lee, Mr. Bruce, Mr. Lester and Mr. Shortall, for your time, for your frank answers to the questions to the best of your ability with the information that you had. I would like to thank the Auditor General and her staff, of course, for her presence here today, and their presence. I would also like to thank the Committee members and the staff of the Committee for being here today.

I just have a couple of comments. With respect to the volunteers - and that came up today and I referred to it earlier also - I know that you took on a massive job, the boards back a few years ago. Last fall, the fall of 1999, I suppose, was it? - anyway, in my district alone, I attended many, many meetings with respect to - the winter and fall of 1998, yes - the reorganization in my district. I attended meetings and I was fighting for it. I was believing it was right for my district, let me tell you. The board members heard it - Mr. Andrews, Mr. Lester, Mr. Shortall - and other members of the board at public meetings. I often wondered at those meetings: Why are they doing this? I can understand Mr. Lester and Mr. Shortall, they are being paid, but the volunteers. They took a hard time not only from the general public but from politicians, too, me being one of them.

I understand where you are coming from on it, but our job is to review the Auditor General's report - and any other group or organization that is funded by government - and any questions that come up. We are there to protect the public funds and what have you. That is what we are trying to do today, and at the last hearing back in September. There have been a lot of questions asked today, I think, good, legitimate questions that have been brought forth by the Committee members that basically originated through the Auditor General's report. I think we will be making a report as soon as possible to the House of Assembly, and hopefully education reform will be put behind us and people in the Province will benefit from what has occurred over the past couple of years. Everybody has their own views on that also.

I am going to say, once again, thank you for your time. I don't know if I mentioned two of the people from the Department of Education, Mr. Hatcher and Mr. Lewis. Thank you once again.

I would ask the Auditor General and the Committee members to stay back for a few minutes if they could. Hopefully we will be making recommendations in the near future in the House of Assembly that will be beneficial to the people of the Province.

Thank you.

The Committee adjourned.