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

CHAIR (Mr. J. Byrne): Order, please!

Before I get into the introductions, I would like to mention to the media that if you would like to take pictures or anything, do it now before we get into anything.

These mikes are new mikes, so any time you want to speak you have to press the button here on the front of your machine, and apparently I can cut you off at any time. Hopefully, I will not have to do that. I like precise, short answers because our questions are usually that way.

I would like the Committee to introduce themselves. As I said, I'm the Chairman of the Public Accounts Committee and the Member for Cape St. Francis. To my right is Tom Lush, the Member for Terra Nova. He is Vice-Chairman. We will start on the far end and come around if we could.

MR. MERCER: Bob Mercer (inaudible).

CHAIR: You need this for recording purposes, too.

MR. MERCER: I shall do it again, then. Bob Mercer, MHA for the District of Humber East.

MR. MANNING: Fabian Manning, MHA for the District of Placentia & St. Mary's.

MR. FRENCH: Bob French, MHA for the District of Conception Bay South.

MR. NOSEWORTHY: Mark Noseworthy, House Of Assembly.

MR. ANDERSEN: Wally Andersen, MHA for the District of Torngat Mountains.

MS HODDER: Mary Hodder, MHA for the District of Burin-Placentia West.

CHAIR: We have Elizabeth Murphy, Clerk of the Committee. Also, to our left here we have the Auditor General's office and her staff. If you would introduce yourselves, please.

MS MARSHALL: My name is Elizabeth Marshall. I am the Auditor General. To my right is John Noseworthy. John is Deputy Auditor General. To my left is Claude Janes. Claude is Auditor Manager of Accounts.

CHAIR: Now I'd ask the witnesses to introduce themselves.

MR. WHITE: My name is Brendan White, Chairman of Avalon West School District.

DR. RIDEOUT: Good morning. My name is David Rideout, of the Avalon West School District, and I'm Director of Education.

CHAIR: Thank you. In the back of the room I believe we have Mr. David Lewis,

Assistant Deputy Minister of Support Services; and Mr. Jack Thompson, Director of Financial Services for the Department of Education, I would imagine.

Anyway, let's keep her going here. We have to swear in the witnesses now and the Clerk will do that. Also, the Auditor General's people have to be sworn in because it is a new Committee.

Brendan White

Elizabeth Marshall

John Noseworthy

CHAIR: Thank you.

We do have another person here in the room, a person from VOCM. Welcome.

Basically, this hearing was called -

WITNESS: Mr. Chairman, we have two other gentleman who are expected. I think they are having a problem with parking space. Our Assistant Director of Finance, Mr. Eric Snow, and our Comptroller, Mr. Jim Doody, will be joining us if they find a place to park and they haven't gotten lost.

CHAIR: Yes.

When we speak we should identify ourselves for recording purposes, of course, and Hansard.

What we can do now is have opening statements, if the witnesses would like to make any opening statements. We will then go on to the Auditor General's Office, if they want to make any opening statements, and then we can get into the questioning. Hopefully, your counterparts will be here by that time. Would you like to have any opening statements?

Basically the Public Accounts Committee is here to hear from the Avalon West School Board with respect to the Auditor General's report that was produced March 31, 1999, which covered 1998. In that report there were a number of concerns.

We will just have these people introduce themselves now.

WITNESS: Sorry for the delay, Mr. Chairman.

CHAIR: No problem. When you speak, could you just press on your mike there? We just had our introductions, so if you could introduce yourselves we would appreciate it. We have two more witnesses.

MR. SNOW: Eric Snow, Assistant Director of Avalon West School Board.

MR. DOODY: James Doody, Comptroller.

CHAIR: Thank you.

Eric Snow

James Doody

CHAIR: Thank you.

I will make just another point before I get into the hearing itself. The representatives from the department are here as observers, basically, but there may be some questions that we might want to ask for clarification purposes. At that time we do ask that you come forward, sit at the table and be sworn in and answer the questions.

Back to what we had started. Would the witnesses want to make any opening statements before we get into the hearings? Because I believe you received the same information that we received before the hearings today. Is anyone going to make any opening comments?

MR. DOODY: Not really, Mr. Chair, other than to say that we are pleased to be here this morning to appear before you to give evidence on the matters that you have addressed in your letter to us. I don't know if Dr. Rideout has anything to add.

DR. RIDEOUT: I have just a very brief comment. We have reviewed the information that was provided. It has been helpful to us in terms of our operational establishment as a new district. We think that as we proceed during the day you will find that there are certain things that we have been able to do in light of the recommendations that were made. Hopefully, today will be an opportunity to have that kind of clarification for you folks and some further comment on it.

CHAIR: Thank you.

The Auditor General's Office.

MS MARSHALL: Mr. Chairman, I would like to just give an overview of the work we have done in the last two years on school boards.

The first review we have done since amalgamation was in 1997, and at that time one of the areas we looked at was executive salaries. That was reported in my 1997 report. There is information in that report that I would like to have handed out to the Committee members - I thought it would be informative - on Executive Compensation.

The second review I carried out was in 1998. Primarily, what I was trying to do was to make sure all of the assets and liabilities of the twenty-seven old school boards actually ended up in the ten new school boards and that there was nothing missing.

There were three problems areas that we identified, and I will just run down through those briefly. The first is what we call ancillary funds, and that would be things like canteen sales, fundraising events, and things like that. Primarily, the problem is that nobody really has a handle on how much money is out there in those funds. We have seen some funds that have hundreds of thousands of dollars in them. There is really no control over the funds, no processes, and of course we do not have any idea how much is out there.

The second problem area we identified was fixed assets in school boards. I was not so much concerned with the buildings because they are fixed, but furniture, equipment, electronic equipment, computers, those are moveable assets and none of the school boards are doing a good job of controlling those assets. There are no ledgers; so when the assets are moving from one school to another, or from one school board to another, nobody can really track them. We really could not tell whether all fixed assets of the twenty-seven school boards actually got into the ten new school boards.

The third area we looked at was compensation benefits. The biggest problem we identified there was that there were benefits that were paid within the school boards that were not in accordance either with cabinet direction, ministerial direction, government policy or departmental policy. As a result, some boards are paying compensation in excess of what has been authorized. What essentially has happened in the school boards is that you have a lot of inconsistencies now in the school boards. Some are complying with the policies and are paying certain rates while other school boards were not complying with the policy and are paying different rates.

That is basically an overview of the work that we did last year.

CHAIR: Thank you.

One point I want to make also, it came to my attention late yesterday afternoon that there was a report that had been done by the Department of Education entitled, Review of Retiring and Executive Compensation. It was done by Kirby and Company, Certified General Accountants.

It was late yesterday afternoon, about 5:00 p.m., when I managed to get a copy of this. The board members did not even receive a copy. I had copies done up for the board members this morning. I went through this last night, as late as 10:30 p.m. or 11:00 p.m. and there are some questions and concerns in this that may need to be addressed. I don't think it would be fair to pass them out and expect people at this hearing now to be able to ask questions on that. What I think we will do is continue on with the information that was sent out, that we all have received, ask any questions we want on that, and maybe reconvene at a later date, a couple of weeks down the road when we have proper time, have the board members review this report and do a proper assessment on it, and they may want to come back and ask further questions. If they do not, so be it; but there is a good chance that we will be reconvening at a later date.

Having said that - and I discussed that with the vice-Chair yesterday evening - I think that is fair. We may have some further discussions on that after we have the hearing completed today or whatever, or after we adjourn today.

I think what we will do from this point is go on, and go right into questioning. Basically, it has been suggested that maybe we go with the newest member of the Committee. I think the newest member is Mary Hodder. Isn't that correct? So I do not know if you would like to have any questions?

MS HODDER: (Inaudible) question. The Auditor General identified amounts of $81,262 in a trust fund and $256,855 in canteen funds that were recorded on the previous board financial statement, but only the $81,262 is recorded in the current board's financial statement. Can the board comment on this particular amount?

DR. RIDEOUT: Yes. In the response to Mr. Noseworthy of August 31, I alluded to some of the convolutions that occurred during the most intense period in educational history, as we have known it, during the restructuring of 1996-1997. At that time we had pretty well all of the Western Avalon Roman Catholic School Board collapsed into our district. We had all of the former Avalon North Integrated School Board collapsed into our district. We had a portion of the Seventh-Day Adventist School Board collapsed into our district, and we had a portion of the Pentecostal Assemblies Board of Education collapsed into our district.

When that occurred January 1, mid-year, there were various practices being held in each of those boards and we did not have a mechanism, as a new board, that allowed for an appropriate mechanism for reporting consistently amongst the schools of the four jurisdictions. Consequently, when the time came to do our reports - and in fairness to ourselves, you have to appreciate, I am sure, that December 31 we did not exist. January 1 we were responsible for everything. On top of that was an intense period of reorganization which led to twelve school closures in that June, and a number of other events that were preponderant, I guess, would be a very mild way to describe them.

At that time, how to report financial statements was not uppermost in our minds. It just was not something that was in the forefront until the time came for the year-end when we started to try to collect this data. At that time we realized that because of the practices that had been followed from September to December 31, and because we had not really established any new practices or procedures to replace that amongst all of the sixty schools that we were now responsible for, it would really not be possible to give an accurate picture of that.

The trust fund was a more precise figure that was provided by an independent source so we had that readily available and it could be reported. The other funds were not easily reported in that fashion. To be honest with you, at that time of the year we really did not know how to go about getting the information. Subsequently, when the Auditor General raised it in her report we recognized, as well, that it was a legitimate issue, that there are literally hundreds of thousands of dollars floating around in the system, and that there are no mechanisms for control on them. We all, who have had children go to school, know about the picture money, the textbook money, the sports money and all of it, which could easily be in excess of $100,000 per school sometimes.

That led to a concern for us, as administrative staff representing the board's interests and being able to speak to those kinds of questions, of course, and we began to conduct a review of the system to try to see what we could bring together, as a new board, that would unite all of the fragments that really were now a part of our new entity which was Avalon West School Board. That took a little bit of time because one of the things that happened in the restructuring that occurred, administratively we were reduced something like 60 per cent in staff - roughly about a 60 per cent reduction in administrative staff - and yet we had taken over a district that was significantly larger than we had before. However, our people did work together with our principals at the local level and we were very pleased to have a final policy approved and passed by the board last school year, the 1998-1999 school year, which was implemented and which we are now following.

That policy is intended to address the concern that you have raised. I do apologize that it has taken a year-and-a-half roughly to work through it but you have to realize that we are talking about school systems and principals and administrators that do not have a strong accounting, auditing background and we have had to try to train them and prepare them, and train secretarial support staff. We have had to try and introduce new computer technologies and accounting software package at each school we use. We are trying to streamline banking into one bank right now so that all of the schools really are with the one banking institution, and we are hoping that will allow us to call for proposals which will lead to lower service charges and things of that nature. So I am very pleased to report that one is being actioned rather aggressively by our board.

CHAIR: Can I just interrupt? One question popped into my mind: The policy that you say you put into place, is that available here? Is that there in the books?

WITNESS: (Inaudible).

CHAIR: Okay.

MS M. HODDER: Mr. Chairman, I will pass to the next questioner.

CHAIR: Thank you.

The next questioner - I would ask Fabian Manning if he would like to ask a question or two.

MR. MANNING: Thank you, Mr. Chairman.

I have a question concerning monies owed by staff. As of March 31, 1998, a senior employee of District 9 owed a total of $40,587 to the school board and the Department of Education. This amounts consisted of $8,973 owning to the board for cash advances; $31,000 owing to the board for redundancy pay repayment; $9,814 owing to the Department of Education for redundancy pay repayment.

I would like to refer back to the cash advances, if you could elaborate on why someone would receive a cash advance. Who authorizes this advance, and have they been paid back?

MR. WHITE: The reason for the advance?

MR. MANNING: Yes.

MR. WHITE: The $40,000 owed by the senior member of staff represents a combination of salary advances and redundancy repayment and severance pay.

The salary advance - when the employee was hired there was some dispute as to where his salary would be. He had not received any salary from government, I understand, from the time of hiring until January; so, out of common decency and common sense, the board paid him in advance, knowing that the money would be recovered - not in advance, but gave him salary advances before it was settled. He did not receive any salary until January but this account has now been paid in full.

The redundancy pay of approximately $19,000 - that was to be repaid once the employee concerned was rehired and terminated by the former school board that he had worked for. This too has been repaid, and it was through an agreement between the employee and the department where an agreed-upon amount would be deducted from his pay per pay period and included interest at government's cost of borrowing.

CHAIR: Can I interject a question here on this?

MR. WHITE: Yes.

CHAIR: I noticed there - is that the one where it was agreed to pay back $250 per pay period?

MR. WHITE: Yes.

CHAIR: Was there anything involved here with respect to this individual being able to pay that back with respect to working overtime, or anything of that nature, or was it just a straight $250 deduction out of his pay?

MR. WHITE: To that, I will go the assistant director or the director.

DR. RIDEOUT: I am trying to recall. My understanding is that that was that $250 per pay period. The agreement with the Assistant Deputy Minister at the time, who approved that arrangement, included interest at government's cost of borrowing. I received confirmation in August that that indeed had been repaid and at interest.

CHAIR: Auditor General?

MS MARSHALL: Yes, could I just make one comment on the interest? When we looked at this a year ago there was no indication that interest was included. We had had discussions with departmental officials and at that point in time they indicated to us that no interest was included and that the receivable system at the department was not set up to charge interest on the accounts. Since the departmental officials are here, perhaps they could probably confirm or indicate what has transpired since then.

CHAIR: Yes, that is fine. It is a good idea. Sorry, go on.

DR. RIDEOUT: Just to offer a comment before they do that. The letter from the Assistant Deputy Minister, in that regard, I believe was dated January 1997. It indicated that it would be at interest. The confirmation that we received was from Linda Dooling in August that it had been repaid. Vaguely, I know the interest rates were low at the time. Somewhere around 6 per cent was the amount that they had calculated for that period.

MS MARSHALL: We have a copy of the same letter. It is just that when we did the audit work there was no indication. We worked through the calculations and we did have discussions with departmental officials and they indicated: no, that interest was not in there. We had checked the calculation and confirmed that it was not in there. So something transpired in the interim.

CHAIR: Afterwards.

MS MARSHALL: Yes.

CHAIR: The letter that you are referring to, it was from the Deputy Minister you said?

MS MARSHALL: (Inaudible).

CHAIR: Sometime after the Auditor General did her report?

MS MARSHALL: No.

WITNESS: No.

MS MARSHALL: We had a copy of the letter, we were aware that it was in existence and that it referred to that fact that there was going to be interest charged, but when we checked the calculations and discussed it -

CHAIR: It wasn't.

MS MARSHALL: - with departmental officials they said the system would not accommodate it, so something must have happened in the interim. They did something with it.

CHAIR: Could the department officials probably clarify that for us?

You will have to be sworn in first.

David Lewis

CHAIR: Thank you.

You have heard the conversation. Can you add something to it for us?

MR. LEWIS: Yes, I can confirm that subsequently the department did calculate interest at the government borrowing rate and the interest was paid.

CHAIR: Fine. Thank you.

Back to you, Fabian.

MR. MANNING: (Inaudible) for now.

CHAIR: Okay, maybe we could go to my right. Mr. Lush, do you have any questions at this time?

MR. LUSH: I just want to congratulate the board for the fine job you are doing. As indicated by the superintendent or the director, it is a very challenging time in education, the greatest reform ever to take place in this Province, and we anticipate some growing pains. The benefit of all of this is that as a result of the Auditor General's examination we are all able to learn from it and do what is required to do. We can appreciate that at the time of integration some of these problems were not high on the agenda, that you had other things to get moving on. We appreciate that.

However, we are involved in the spending of public dollars so all of us have to take this very seriously. Again, as I said, we appreciate the complexity of the job that you are doing, and can certainly appreciate the difficulties when you had to bring together all of these boards, each with its own way of accounting or non-accounting, whatever the case might have been, and to try and bring order to what was, no doubt, a system that in terms of financial audit, particularly, was not very adequate.

So my general question to you, I guess, is in terms of the Auditor General's criticism of monies not being adequately handled or spent, and fixed assets not being properly documented - all of this kind of thing. What is your reaction now? Do you think that, as a result of these criticisms, you are getting the financial house in order and that you are administering the affairs of your board in ways that are acceptable to business?

MR. WHITE: I would answer that by referring you to two pages in the report, pages 12 and 14. Page 12, the financial position: we are quite pleased that the overall financial position of the current board was favorable compared to the combined former board's financial position in 1996. Not only have we reduced the expenditures more significantly in the current board's instructional and administrative budgets but also - the Auditor General has indicated at least, and we concur with that - the current board has a good working capital position and little long-term debt and we are poised to move forward in a positive way. I might add that I think this year it looks as if we are in a position to come forward with a balanced budget for the third straight year.

We are pleased that the Auditor General has identified certain things that need to be addressed and we are doing policy on those things, as Dr. Rideout indicated earlier.

MR. LUSH: Just for the interest of the Committee, I think maybe there may have been some surprises to certain people, probably to the business community in particular and to accountants and to people that generally have systems set up for administering monies, expenditures and revenues, whereas in education we had a history of not documenting everything. I suppose one of the reasons might have been, in schools in particular, we did not handle a lot of money and everybody took care of their own little thing. Fundraising was carried on and the money was spent for whatever reason that particular fundraiser was for; so the Auditor General mentions that in particular - fundraising - and canteen funds which again had a history, I would think, of not being very well documented and administered in the way that business would like to see it done.

What has the board done in view of these criticisms, particularly about fundraising and canteen funds?

MR. WHITE: Again just in a general way, as Dr. Rideout indicated, as a result of our own concern and the concerns raised by the Auditor General, we have now a comprehensive policy on fundraising, the canteen sales, et cetera, and the reporting of it. As he also indicated, our secretaries and our principals have been in-service trained to address those concerns as raised by the Auditor General. It is included in the package that the Auditor General has. I guess, Dr. Rideout, if you want to make some comment on it by way of detail...

DR. RIDEOUT: I think the point is well-made and well-taken with regard to the capital assets of a $60 million organization; however, I am not sure the picture is as bleak as it may be portrayed. What you have to realize is that when we took over there were sixty schools - buildings - fifty-eight buildings, sixty schools, two joint-service ones. I assure you, every principal in every school knew the capital equipment in that school by and large. Now they might not have known whether there were 236 shares versus 227, not that precisely, but generally, in terms of the major items, those items still remained in that school building at the time. There was no disbursement of the vast majority of the capital assets.

Now it is true that there was no inventory as such centrally located that we could point any one to. There is still no such inventory as such. I'm informed that we could produce such an inventory but it would probably cost us about $60,000 to do it in terms of person hours that would be required. From our perspective, as a board that is struggling to balance its budget every year, unless there is evidence that there is abuse in the system we are very reluctant to use $60,000 for that purpose. Now if at any point in time there is a provincial measure taken to try to address this throughout the Province, to have an inventory, then we would be very pleased to participate but in all honesty, $60,000 for us to do something of that nature is not something that we really have the flexibility for in our budget right now without cutting certain priorities.

The other thing I would just add to it is this. I guess the basic movement occurred from the closure of one of the previous school board offices. That was the Western Avalon Roman Catholic School Board office. They had a little office in Avondale. The biggest movement that occurred was with the capital equipment from their office into our office, which was the former Avalon North School Board office. So all of the equipment, when we took over, was already in the building of Avalon North, so we knew what was there by and large.

For Western Avalon, there was not an inventory that would satisfy an auditor I don't think of any kind, whether it was the Auditor General or just our own auditors. However, basically what happened at consolidation is that the people from that office moved into our office and they brought their equipment with them. James Doody came in as Comptroller. He brought the desk with him from his office, he brought the computer with him, so we did not purchase new capital items for those people who were coming in. We were able, as part of our plan, to retain all of our employees and not issue any layoffs as a result of that downsizing and the reduction which did occur. There was a computer inventory, I am told, that was a fuller, documented inventory that would be appropriate for any records of any school board, but the rest of the items were really a few desks, a few chairs, a couple of fax machines and filing cabinets, and those items were moved by our staff. It was our staff who went in and brought them to the new building. So I think there would be very little concern over anything that happened in that transition and move itself.

MR. LUSH: I expect as well that this had to be done with a great degree of care and sensitivity in terms of the board moving things from schools. Now a school that was closed, I expect that that was probably not too bad, but I'm thinking, in terms of your integration, that there were communities that felt they had a fair amount of autonomy over their school. The school board moving in to take out fixed assets to place in another school probably presented a bit of a difficulty. I am just wondering whether it did or not, and whether the board had to move rather gingerly and diplomatically in terms of redistributing furniture, fixed assets or whatever.

DR. RIDEOUT: Absolutely, and that still exists. Any time you are talking about a streamlining of the organization, any time you are talking about closing a school, for example, there is great sensitivity - that the piano was donated by the parish, and what do we do with it? - and all of those kinds of nuances come into play when you are dealing with something of that nature.

With regard to your other comment about the procedures which are in place, we met with our principals, and in no uncertain terms we laid out the expectations of the new policy that you have referenced in this document. We had resistance, and some of our administrators could appreciate the points that were being made and what we were trying to do as a system. We were really trying to create almost a new culture, and we are talking about a culture of accountability and responsibility which is really part of today's educational and public environment. It is a natural process.

Many of the principals were glad and welcomed that kind of direction because they were concerned that they were trying to, let's say, run a tight ship, if I may use a cliché, whereas a principal down the road might be a little bit looser in how he was handling his canteen operation. So we would have had a goodly portion of our administrators very supportive of this policy. We were very clear with them: This is not an optional activity for you. This is a requirement of the board which has responded to a concern which was identified, which it deemed to be legitimate, and as employees of the board you now have the obligation to ensure that these concerns are addressed adequately at your local school level so that we, as a district, can be sure that they are addressed from our perspective, too.

MR. LUSH: That's fine for now, Mr. Chairman.

CHAIR: Thank you. I think the Auditor General would like to comment on this. Before we get into that, it was mentioned earlier that you may have a balanced budget for the third year in a row. There has been really no audit of your assets, and that includes all the schools that would be in your jurisdiction, I would imagine. I'm no accountant by any stretch of the imagination, but to do a proper audit at the end of the year, and a balanced budget, wouldn't you need to have a good handle on the fixed assets within your jurisdiction?

My problem was, if you do not know what is in the schools - you say the principal may have a fair handle to a certain extent - but the board does not really know, so how can you come up with a balanced budget not knowing these figures?

DR. RIDEOUT: The comment by the chair of the board was with regard to operational funds.

CHAIR: Okay.

DR. RIDEOUT: The capital assets - and I will have to rely on my people for this as to how it is reported - really refer to the items that are fixed within the districts that were there in the previous districts. Like, you have a school building. We know that building is there. We know it is valued at a certain amount, we know it has roughly 400 desks in it and things of that nature. So it would be from that background that we would reflect that in our statements. That is my understanding.

CHAIR: Okay, it is just the fixed assets. Then get back into the material within the schools such as televisions, computers, projectors, desks. I mean, you have all these assets, I would say, and would they not be included in putting your budget together?

MR. SNOW: Mr. Chair, basically in terms of our operating budget for the upcoming or current, in this case, fiscal year, in our budget and in our actual financial statements for last year, we would be recording historical figures that have been recorded in previous years and any additional expenditures of a capital nature that would have occurred throughout the past year. It would involve an historical figure; it would not involve an accounting and balancing of the actual assets to that figure.

CHAIR: Further to the point you were making, it would cost you $60,000 to put this together. You really don't know, then, that if you spent that $60,000 that you could be in more money or assets than you think you have now today. So in actual fact that could be money well spent.

MR. SNOW: Mr. Chair, the $60,000 is a very rough estimate on our part to do a reconciling, if you will, of the actual fixed assets presently held by the board to the book values that we are carrying. In addition to an amount to do that initial reconciliation there is also the ongoing cost of maintaining a balancing, if you will, of the actual physical assets. The long-term cost of that, when you assess it, has a far greater figure than just the $60,000.

CHAIR: Thank you.

Just one more thing before I go to the Auditor General on this issue, and it is in conjunction with this I suppose to a certain extent. On page 5 of the information that was sent out - and we are talking about inadequate control over capital assets, which is what we are on to - below that in Figure 4, under Expenditure, they have Administration. For the six month period from July 1, 1996 to December 31, 1996 and for the next six month period we have, January 1, 1997 to June 30, 1997, is that $1 million difference there in administration costs? Would that be an increase? Could I assume from that that there could possibly be a $2 million increase in administration costs for the Avalon West Board compared to previous? No? Okay.

MR. SNOW: I am wondering, Mr. Chair, if you could repeat that because I am having difficulty finding the figure.

CHAIR: Under Expenditure in Figure 4, Administration, there is the second column, Former Boards, July 1, 1996 to December 31, 1996, for Administration, there is $7,400,000. In the first column, from January 1, 1997 to June 30, 1997, which is six months also, there is $8,392,000. There is $1 million difference. Why would there be an increase of $1 million in Administration in a six month period?

MR. SNOW: Mr. Chair, the former board was $7.4 million for six months. The new board was $8.4 million for six months, totaling roughly $16 million.

CHAIR: That is right.

MR. SNOW: The reason was the grants were cut. My reference to it being cut by about 60 per cent from previous years? The administration component of the grant was reduced somewhere in the vicinity of 60 per cent.

CHAIR: I'm missing something. That to me is an increase of $1 million for administration costs. Am I reading that wrong? Auditor General?

MS MARSHALL: I will try. In the first column you have for six months of 1997 and in the next column you have the six months before 1997.

CHAIR: That is right, yes.

MS MARSHALL: Those two added together will give you a full year. So if you are comparing $8.3 million with $7.4 million, you have to add the two together so you will get a full year of operations. You do not need to look at the difference, you look at the total, and the total is in the third column there, $15.792 million.

What I was trying to do in that figure - just to elaborate a bit further - was just give you an idea of how much it was costing to operate the former boards compared with the new boards, because we are tracking the costs. We are trying to see if the new boards are going to cost more than the old boards.

CHAIR: Are they?

MS MARSHALL: It is too early to tell, we are still working the numbers. As you can see from this schedule here, some of the numbers are starting to go down, as Dr. Rideout was saying.

CHAIR: Yes. Thank you.

DR. RIDEOUT: Actually, what I think you need to look at is the former boards over in column four, $18.7 million for 1995-1996. When we came on for half of the year and the other boards were on for half, it was down to $15.7 million and now we are down to roughly around $9 million. I am not sure of the figure now.

CHAIR: Okay, that is fine, I understand.

I want to get the Auditor General to comment on the discussion so far.

MS MARSHALL: The only comment I wanted to make with regard to capital assets is that you feel like everything is there and you are accounting for everything but if you do not have the inventory records, you do not know.

We did have one public sector entity last year where they had a similar problem with capital assets, they were not keeping a record, so we selected I think it was sixteen new pieces of computers that came into the entity in the past year and then we tried to find them. I think we could only find about half of them. Sometimes you feel like you have a good handle but if you do not have the records then you really don't know for sure.

The second point I wanted to make is that, with millions of dollars in assets, I think it is worthwhile to have somebody there to keep track of it, especially the moveable stuff. I am thinking like the computers, VCRs, electronic equipment and that sort of thing.

The last point I wanted to make is that some of the auditors are not issuing clean opinions now. If there is not good control over the fixed assets or you do not have your fixed assets record you will not get a clean opinion on your financial statement. I think I have seen some indication of that already. I think you are still getting a clean opinion but it is possible that your auditors might not be so willing to give you a clean opinion in the future.

CHAIR: Thank you.

DR. RIDEOUT: Mr. Chairman, we would love to have an inventory clerk. We would really appreciate having one. Our difficulty is, we do not have the wherewithal in our budget to have such a person. The computer one is an excellent example for us. We commenced this summer with hiring seven or eight students over the summer, trying to get a computer inventory done. We wanted them to go in and open up the computer, copy down the serial numbers of the various components in the computers that you would need to have recorded - the processor type, the speed and so on - so that if there were any tampering with that equipment we would know what should be there. We had probably about one-quarter of our schools done with the technology and we just ran out of time. Hiring the students was a relatively cheap way for us to try to do it but it was still at a fair cost to us overall.

We would concur that an inventory clerk, or someone of that nature, would be a valuable asset to our board, and I am sure to each of the boards, but the present funding mechanism is not sufficient to allow us to hire such a person if we are going to have a balanced budget for a fourth year.

CHAIR: Thank you.

Mr. Mercer, would you like to ask a question at this time?

MR. MERCER: Thank you, Mr. Chairman.

I just want to go back to the ancillary funds. The Auditor General states that, at least in the records of one of the collapsed boards, one of the former boards, they did do and did maintain on their statements canteen funds for some quarter of a million dollars. There was another block of funding in there dealing with scholarship funds. For some reason, however, the new board chose only to recognize the scholarship funds and disregarded inclusion of that on their financial statements of the canteen funds. What was the process by which you made that decision?

DR. RIDEOUT: I will refer back to my earlier comment in responding and just indicate that was part of the rationale. The other factor, I guess, is that we felt that even what one of the former boards had been doing was really insufficient because canteen sales are only a very small part of the funds the Auditor General was referring to. You have the textbook money, the picture money, the cold plate sale, the graduation fund, the sports fund, and all those kinds of activities, so we felt that even what that former board had been doing really was not sufficient in itself if we just had all of the schools reporting the canteen funds. That is why the current policy that we have implemented is attempting to report all of them, and that would account for more than just canteen funds; so it would be much more comprehensive than even what one of the former boards had in place.

MR. MERCER: I understand what you are saying, but I am still wrestling with the question that if you knew, at least in general terms, if it was $250,000 held by one of the boards in the form of canteen funds, and that there were primarily two boards that collapsed into one, why was there not some effort to find out what the other board might have had and then make some rational board decision as to how you were going to handle that, inadequate as it might have been. Something is sometimes better than nothing.

DR. RIDEOUT: I think, in retrospect, we could easily have sent out a form to principals and said: Please tell us what your canteen sales were. We could have reflected that in the statement in a very inadequate fashion, just as the canteen sales were reported previously. It may have been that would have been a good idea, if we had thought of it at the time.

MR. MERCER: In your initial response you indicated there were many other funds held by the schools; there were the picture funds, the textbook funds, and there was obviously a scholarship fund. Were there any other major blocks of money that you might have been aware of in your former life in working with the other boards that may not have been reported to the new board? Because I am assuming that pretty well everyone who now works with the board at some point in their lives worked with the former boards.

DR. RIDEOUT: The comment on the ancillary funding is not new to 1996-1997. That has been a concern amongst boards for as long as I have been around, which is about eighteen or nineteen years, that there is a lot of money changing hands in schools for which really there is no proper mechanism for accounting in the fashion that an auditor or an accountant might expect to see. I guess all that I could say is that it is almost endless, the number of funds that you can... In fact, the system that we have set up now has how many accounts to charge off those funds to? Roughly fifty or sixty activities for incoming funds where they can be recorded in different categories, and they would range anywhere from a basketball team trying to buy uniforms, to the prom. It is almost endless the kinds of things that schools are trying to raise money for to support their programs, generally extracurricular programs.

MR. MERCER: I guess the thrust of my question comes from the statement you just made, that there is a lot of money changing hands. When there is a lot of money changing hands, one would assume or one would think that there are some kind of internal record-keeping systems, whether they be formal, informal, auditable or not auditable.

What was the situation prior to the new board coming into place, and prior to your new policies which are now in there? All of these monies that were changing hands, how were they accounted for and so forth?

DR. RIDEOUT: Those policies would have varied from school to school, and the practices would have varied as well. I guess that is part of the difficulty that was identified in that there really was no consistent treatment even within the boards that we are talking about. That is why the policy that we have referenced here addresses that. I wish we had that policy when the Auditor General visited in 1997. I think it would have been in the public interest for us to have had it. Unfortunately, we did not then.

MR. MERCER: Just to move on a little bit further. Were there any funds within the District #9 and the two successor boards, predecessor boards, that were of a bequest nature, monies that were given to the boards, for argument's sake, for general educational purposes?

DR. RIDEOUT: That is the $81,262 that is referenced there. Those are scholarship funds given in trust for specific purposes, and the donor is very specific in saying this money is used for a scholarship for this purpose at that school.

MR. MERCER: Okay, that is the scholarship fund, but I am referring to the funds that may have been bequeathed to the school for a general educational purpose. Were there any funds like that? How would former boards and the present board have handled those kinds of funds?

DR. RIDEOUT: I wish there had been but there was not.

MR. SNOW: This is just to clarify a point, I suppose. The so-called canteen funds of $256,855 that was reported by the Auditor General and the $81,262 are two distinctly different types of funds. Obviously, the scholarship funds were bequests from former patrons of various schools et cetera who wanted to leave a perpetual memorial fund to provide scholarships for certain of their interests. The $81,262, those balances are easy to test by any auditor. It is a very simple procedure.

Not so with the canteen funds. The canteen funds of $256,855 represent a myriad, as Dr. Rideout as said, of different sources of revenue generated by schools from fund raising to pictures to textbooks to sales from the canteen et cetera.

I think this is the underlying question we are all trying to get at here: why were they dropped from the first set of financial statements of Avalon West when they appeared in a former board's statements? When we looked at it, and we looked at the discrepancies, and the fact that the other three boards - parts of them came together at least into Avalon West - were not reporting it, we really started to assess the meaning of reporting $250,000, probably even $500,000 if we had gone out, in the financial statements and what those figures represented to the readers of those statements.

When we looked at the audit procedures that would be necessary in sixty schools to verify where those amounts came from, how we arrived at $256,000 or $556,000, or whatever the case might be, we said: We just cannot afford to get into those kinds of costs right now in terms of paying an auditor to verify those underlying amounts. As a result we said we need some procedures that an auditor can rely on to reduce the costs of verifying these material amounts in a set of financial statements, and we decided that we cannot report this. It is a figure that is going to cost us a bundle of money to be able to verify if an auditor says: Look, you want an unqualified opinion in your statements, this is what I have to do. Quite simply, that is why it got dropped from the statements.

Our procedures right now, our fiscal policies that we have just implemented in the past school year, together with the in-service and the proposed monitoring that the board has approved - which also provides, I might add, for an internal audit function whether we engage external auditors to do that or whether we try to do it from in-house staff - I believe will go a long way to addressing the concerns raised by the Auditor General in her report.

CHAIR: I would like the Auditor General to comment. Do you think the policies and procedures put in place will go a long way to address your concerns?

MS MARSHALL: I have not looked at those policies and procedures in detail so I would not be able to express an opinion. The only thing I was curious about when I read it was: Will those funds now show up on the audited financial statements of the school board, or will they not? I think that goes back to a comment you just made, which has made me curious. I was assuming that they would all show up on the balance sheet but - is that so?

MR. SNOW: They will. We are not sure exactly how an external auditor will view those funds on the balance sheet, obviously; but yes, the intent is that we will be reporting those funds in our balance sheet.

CHAIR: Bob.

MR. MERCER: Yes, just to finish off on the issue of the scholarships versus bequests that would be for general educational purposes.

Has the board given any consideration as to how it would handle that? How would it handle that in its audited statement? Would it handle it on its own financial statement? Would it set up a separate group to handle it? How would you do that? Even though you have no money at the moment, you say you live in hopes and die in despair. How would you handle that were it to come your way? How would the board deal with that?

DR. RIDEOUT: Actually, I may have misled you slightly. We do have a little bit of money through an education foundation that we established about a year-and-a-half ago. We have been endeavoring to raise funds to support student scholarships and we probably have around $20,000 or so collected in that fund right now. That is a charitable organization, registered with Revenue Canada, where we keep the books for that purpose. If we were to have a major donor come forward and want to contribute funds for the kinds of things that you have referenced, I would expect that the education foundation is where we would find the place to park it.

MR. MERCER: How would that show up in your financial statements?

DR. RIDEOUT: I will defer to my financial people to respond to that.

MR. SNOW: Mr. Chairman, we have consistently reported the $81,262 as trust funds and appropriated funds in our financial statements right in the balance sheet. Additional funds raised for that matter that are held in trust would be recorded and reported in the same manner.

MR. MERCER: So, it would be on the balance sheet and financial statements of School District # 9?

DR. RIDEOUT: And we are actively looking for donors.

WITNESS: Looking in the wrong direction.

CHAIR: I think, before we go to next person to ask questions, we will have a ten-minute break for a cup of coffee.

CHAIR: Order, please!

We reconvene the hearing and we will get right into more questions. I think Mr. Andersen, to my left, is anxious to ask a few questions.

MR. ANDERSEN: Mr. Chairman, I do believe (inaudible) more patient.

CHAIR: Bob will pass for now and let you go.

WITNESS: (Inaudible).

CHAIR: Maybe it is up to me.

MR. MERCER: Go ahead, Wally.

MR. ANDERSEN: I won't hog, like the Member for Humber East.

It was noted that personal expenditures in the amount of over $1,000 - $1,367 to be exact - was charged to the corporate credit card. What has the board done to cut down on corporate credit cards being used for personal use?

WITNESS: What page, Wally?

MR. ANDERSEN: Page 8.

CHAIR: Page 8 and page 20, section 15.

DR. RIDEOUT: The $1,367 referred to - from time to time we would generally have trustees who would attend meetings of the Canadian School Boards Association or the Atlantic School Boards Association, their annual conference. Occasionally, the trustee - or if it were an employee - may have a spouse going with them and at the time the travel arrangements are made it is common for my executive assistant to make bookings for the trustee and spouse, or employee and spouse if they would be attending, and then that money has to be paid by the trustee or employee for their spouse to attend. My executive assistant just does the booking and leg work for the individuals concerned; then that is charged to the individual trustee or employee and they have to pay that amount to the school board. This is, I guess, a long-standing practice by the boards, and my understanding is that the $274 that is referenced there was repaid. It had not been repaid at the time of the visit.

The trustee or employee attending a conference, obviously their travel costs would be paid by the board. It would just be that I guess the executive assistant, my executive assistant, as a courtesy to the trustee at the time they are making the reservation for the trustee, would make one for they spouse so they could travel together - same seat, same airline, that kind of a thing - and there has never been any problem with collecting payment of that type.

MR. ANDERSEN: Thank you.

The Auditor General noted that the current board paid a car allowance to one of the board's executive staff at the rate of $450 per month. Is that to believe that the board is now complying with the government policy? Has there been anything recovered on these amounts that have been paid out?

DR. RIDEOUT: The background to that, I guess, when the employee referenced was hired by the Avalon West School Board, the chair indicated that there would be a car allowance provided as part of the compensation package, and that comment was based on the fact that the previous superintendents of the two main boards that had consolidated had been provided with such car allowances. One, I believe, was reported by the Auditor General as $400 a month; the other was about $300 a month, if I recall.

The executive of Avalon West School Board agreed that they would provide a car allowance of $450 as part of a compensation package, feeling that it was the practice of the previous boards, and the amount being slightly higher than $400 reflected the larger size of the district.

Subsequently, that was communicated to the Minister of Education somewhere around late December or early January and the minister responded that that would not be permitted under the new guidelines of the Department of Education. Upon that directive from the minister, the car allowance was stopped; it was not continued. However, the position that was adopted was that this was a commitment that was made and it was honored for that two month period until the minister's directive overruled. The short answer is, no, it was not recovered.

MR. ANDERSEN: Thank you, Mr. Chairman. I will pass for now.

CHAIR: Thank you.

With respect to that $400 for the car allowance, that was outside the guidelines and regulations at the time for the board, and it was only afterwards when the minister was involved that it was corrected?

DR. RIDEOUT: The problem we had during that period of time was that the board was not aware of exactly what was contained in the compensation package, and this was a matter for all boards in the Province. It was being addressed through the Newfoundland and Labrador School Boards Association and I guess it went on for a period of in excess of a year or so where there was ambiguity as to exactly what was in this executive compensation package that everyone was alluding to.

At the time that that decision was made by Avalon West School Board there was nothing, to their knowledge, that would preclude them, as an autonomous board, having the authority to make such a decision as part of the compensation package, especially in light of the fact that the verbal commitment had been given by the chair that such a benefit would be part of the compensation.

CHAIR: Would the Auditor General like to comment on that?

MS MARSHALL: Yes, I can make a comment on that. There was a conscious decision made by government, I believe it was in 1994, that indicated that all public sector boards and departments had to comply with standard rates for compensation within government.

CHAIR: Which were?

MS MARSHALL: Pardon?

CHAIR: Do you know what they were, the standard rates?

MS MARSHALL: I think it was $85 a month for a car. I think that is what it was, yes.

CHAIR: I thought that. I saw that, yes. Eighty-five dollars?

MS MARSHALL: Yes, $85 a month is the rate, I think, per month.

CHAIR: Per month?

MS MARSHALL: Yes.

CHAIR: Not very much.

DR. RIDEOUT: The thing I would remind the members of the Committee of, of course, is that this was an appointed interim board that took office in August 1996. They would not have been familiar with any of those details that transpired prior to August 1996. In the absence of such a comprehensive compensation package being made known to them - in fact, I know amongst the directors of education who were hired it was a fairly significant concern, because they were being offered contracts and they did not know what the salary was going to be.

CHAIR: Thank you.

Mr. French.

MR. FRENCH: Thank you, Mr. Chairman.

I have some questions today which I would like to ask the board and ,of course, they have all come out of the Auditor General's report. On page 6, number 5, it says: "Executive Salaries Not in Accordance with Cabinet Direction." It goes down through and says District #1, District #6, District #9, and District #10 paid out $162,504 which were not in accordance with government guidelines and which were not in accordance with Cabinet guidelines.

I want to know what measures have been taken to correct that. As I read it from the Kirby report, there are, I will call them, four senior officers for the Avalon West School Board. I would also like to know: Are these four officers now being paid over and above what the minister stipulated in the guidelines that were sent out to all the boards? If so, why, and is there documentation from the minister to give the school boards in this Province - not only West - but every school board in the Province the right to do this?

MR. WHITE: The question, as Dr. Rideout alluded to, as to the appropriate salary scale for the senior staff was never clearly settled when the senior administrators were hired. The Department of Education's position, and the former minister's position, was that the salaries could not be above step 25. It was our feeling, and on the advice of legal counsel, that we felt there was an order in council, 96-828, that would allow for salaries up to step 33 to be paid.

In several discussions that I had with the former minister, and on the advice of legal counsel, I requested that the former minister refer the issue to an independent court for a ruling. Our senior staff agreed to abide by the decision of the judge on that ruling. However, the dispute or the difference of opinion as to whether or not the salary scales could be kept was settled on February 19 of this year when the current Minister of Education, Minister Foote, approved the salary placements at step thirty-three of the approved salary scale. So -

MR. FRENCH: Could I just interrupt you here for a minute? Because I know there are some people here from the department. I firmly believe that the minister - entirely on their own, either he or she - does not have the authority to write such a letter. I don't think there is any minister of the Crown that, without Cabinet approval, has to write a letter saying that it is okay for A,B or C to break the law. What I want to ask somebody from the department is: Did the Minister of Education, at the time, have Cabinet approval? Because I have also seen the letter. Did the Minister of Education at the time have Cabinet approval to write such a letter? If so, could somebody show me the documentation where this happened, where this information came from? Because really and truly, as a member of the Public Accounts Committee and as a citizen of this Province, I want to see it. I'm not going to be pussy-footed around anymore where somebody says: I will get you the information. I want to see that particular piece of information, Mr. Chairman.

CHAIR: Thank you.

MR. FRENCH: I am not finished with my questions yet (inaudible).

CHAIR: I don't doubt it. Would Mr. Lewis want to respond to that, or Mr. Thompson? He has already been sworn in.

MR. LEWIS: In terms of the minister's letter of February 19, 1999, that letter predated my actual tenure with the department. I came on at the end of April. My understanding is that the letter was drafted on the basis of a legal review that was done by the Department of Justice on the issue of the salaries that would be paid to directors and assistant directors in school boards, and that the minister drafted a letter which recognized that the contracts that boards had entered into had been entered into in good faith and had agreed to stand by those contracts, on the understanding that all future contracts would be under the department's original interpretation of the OC and the legislation.

MR. FRENCH: Mr. Chairman, I may need some guidance here. Because it is my understanding that there is no department or lawyer that can give the minister this approval. My understanding of the law is that the approval for a minister to do that must be from Cabinet. So the question I'm asking is: Did the minister write the letter with the approval of Cabinet?

MR. LEWIS: To my knowledge there was not a Cabinet decision to draft the letter. I could stand to be corrected, but it is my understanding that there was not. The legal advice from the Department of Justice indicated that in fact the department was not out any money, that the board had been providing the difference between the department's original interpretation of the OC and the legislation, and that it would be the board which would have to take recourse against the staff if there was any action to be taken.

MR. FRENCH: I've seen the correspondence from the minister, and the minister grants the approval for the board to do this. I stand to be corrected by the Chair or by anybody else in this room, but again, my understanding is that it must be a Cabinet decision, and regardless of what the Department of Justice says it still must me a Cabinet decision. If it is a Cabinet decision, then I want to know why it didn't go to Cabinet? Why didn't the Minister of Works, Services and Transportation or the Minister of Municipal and Provincial Affairs, or whatever, have the right to have input into this? Because maybe some of them would not agree with it.

CHAIR: Bob, just to interrupt you. I don't think this man can answer the question why it didn't go to Cabinet. That would have to be from the ministers, I think.

MR. FRENCH: Well then, can I ask you, as a senior official of the department, to go back and put that question to the minister for me? I would certainly appreciate getting an answer.

CHAIR: I think if you want to ask that, ask it in the House yourself. That is what my approach would be on that (inaudible).

MR. FRENCH: I am asking it here because I've sat here over the last couple of years and I've asked questions, and I have received information in writing from various deputy ministers and assistant deputy ministers on particular points that I have raised. Some of them have been kind enough to write me back and not only supply me, but other members in the room, the information. So if I might, sir, I would like to ask you if you would go and see if you could prepare - and even if you can't, I would like a letter just saying that the answer is not available.

CHAIR: I think that really is a question for one of the ministers, from yourself directly. I mean, a letter to the minister.

MR. FRENCH: Unfortunately, the minister is not here, Mr. Chairman.

CHAIR: No, but I mean you could write a letter. That can be brought up at other times, I think. I do not think it is not fair to ask-

MR. FRENCH: I know where the letters go.

CHAIR: I don't really think it is fair to ask this man that question, why it didn't go to Cabinet. He is not in the position to answer that.

MR. FRENCH: To go back to the school board then, you people are relying on an answer that was given you, in this case, by Minister Foote?

CHAIR: Yes.

MR. WHITE: Not really. We were always of the opinion, and supported by our advice from legal counsel, that by giving them step 33 we were in compliance with the Order in Council you are referring to anyway. The minister's letter of February 19 merely approved what we were doing, what even the interim board had been doing. When we came on as an elected board, I was the first chair of the elected board, and at that time, the contracts had been entered into. As Mr. Lewis said, the contracts were negotiated and entered into in good faith during the tenure of the interim board. When the elected board came in to tamper with or to change the terms of the contracts in any way, we were advised again by legal counsel that this could be interpreted as a violation of the agreement and would be grounds for possible successful legal action against the board if we did that. I didn't feel, nor did the elected board feel, that we had any right to go back and tamper.

CHAIR: I have just a point of clarification for understanding on my part, just before I get into that, and this may help you. With respect to the pay scales when these individuals were being hired, it is my understanding that the directive from the former minister, which would have been Roger Grimes, was that a person could be hired on, on his pay scale up to step 25. If an individual was at a pay scale which was higher than step 25, which was step 33 we are talking about - I think some boards may have gone over that step 33 - then they could be possibly hired on at that level. However, they could not go beyond step 25 if they were hired below step 25. Some of the boards did hire people on at the step 25 and then bumped them up to step 33.

In my estimation, if you look at other boards, we have a couple of boards getting paid at step 33, some of the different positions, and we have other boards at step 25 and below. My question is: How fair is that to the other boards?

MR. FRENCH: Mr. Chairman, in the information that I have which came from the Auditor General's office, and I say to the Chairman of the Board, it says under 5:

"However, in a letter dated 15 November 1996 to the executive director of the Newfoundland and Labrador School Boards' Association, the Minister provided flexibility to the boards in placing executive staff at a step on the approved scale not in excess of step 25..."

So it does not matter what the board thinks or what Bob French thinks. The minister is saying to every board in this Province that we can pay a salary up to a step 25 and not beyond. Then my understanding for anything over and above that is it would require a Cabinet decision because it is clearly outlined by the Auditor General here.

The other question I have is this. Your four senior officers, are they now paid according to scale, or have there been separate negotiations outside of step 25? Are your four senior officers all paid over and above step 25?

MR. WHITE: All our senior staff are paid at step 33.

MR. FRENCH: They are all paid at 33.

MR. WHITE: As approved by the minister.

CHAIR: Again, what I have a difficulty with, with respect to this, is the previous minister was so vocal on this in the House of Assembly and in the media with respect to what he felt was the correct procedures not being followed with respect to directors and senior staff being paid at that scale. Then we have a new minister appointed and within a very short period of time it is okay. I think that is the point you are making.

MR. FRENCH: Again, I say to the ADM that I really would like an answer in writing to my question. Did it ever go to Cabinet or did it not?

CHAIR: Bob, with respect to that again, maybe in our discussions afterwards when we are discussing the recommendations of the report we can either make a recommendation and/or write the minister and ask directly.

The Auditor General would like to comment.

MS MARSHALL: Yes. I'm speaking now from my 1997 report because that is when I initially looked at the salaries. Back in 1996 how they established the initial salaries was Cabinet said that people were to be put on that scale at the amount that was closest to their current salary, wherever they fell. It was after that point in time I think the minister said you could have some flexibility to move up to step twenty-five, but those funds could not come from your grant funding, they had to come from other sources of funds. I do not recall any direction that gave you flexibility to go to step 33 unless you were already there when you started out in 1996.

CHAIR: Any comment from the board?

WITNESS: Do you want to comment on that?

DR. RIDEOUT: Just to say for the record that from our perspective we have been left in a very awkward and embarrassing situation whereby for two-and-a half years our compensation package and salary has been under dispute, through no fault of ours.

MR. FRENCH: I agree.

DR. RIDEOUT: We were hired under certain terms and people sold houses and relocated and all those kinds of things with certain understandings. We have never tried to be difficult on the matter. That is why when the chair of the board made the suggestion to the minister that we refer it to the court for a friendly judgment, we felt we would abide by, regardless of what had been signed in a contract, whatever the judge said was the correct interpretation. We would voluntarily abide by it because we felt what the board had done was consistent with the Order in Council of up to step 33. At no time did we even ask to go beyond step 33 because we felt that was not consistent with the Order in Council. I guess this is just to say that it has been awkward for us as senior staff to have our salary disputed for two-and-a half years. (Inaudible).

CHAIR: Yes, I can understand the embarrassment of being in the media so much.

A question I have to ask, and it just popped in my mind when you were speaking, was this. The salaries that are being paid to the senior staff, who makes the decision of the salary itself? Is it the board? If there were decisions made that the senior staff would get paid at step 33, are there any minutes of a board meeting of that nature where this was approved?

DR. RIDEOUT: My understanding is that the scale itself is created by the Department of Education and approved by Treasury Board, the original scale, and that varies from board to board depending on the size of the district.

Our points are based on various factors such as student enrolment and all of that. So the basic scale with 1 to 33 is provided to the board by the Department of Education. In terms of the decision on the placement, that was done by motion of the board.

CHAIR: It was done by a motion of the board. Would that be available to us? I think when I was going through some of my material that was there somewhere and I think it was mentioned. Now maybe it was not a motion of the board to pay these salary scales.

MS MARSHALL: I think that might have been in the Kirby report.

CHAIR: Okay. That may be in the Kirby report, that there was not-

DR. RIDEOUT: Mr. Chairman, I should say it was a decision of the board. Whether it was a motion or not, I would have to refer to the minutes to know for sure.

CHAIR: Or the minutes or a motion of where that was discussed and approved. I don't think that the people who were certainly looking at the time came up with it, but in the meantime that is something that we are going to have to get into at a later date I believe when we reconvene.

DR. RIDEOUT: I would add that at the time when the board reviewed its decision it actually had legal counsel to come out and meet with the full board and go through the details. There was a decision made then by the board - and I would assume it was by motion - that was unanimously supported to maintain the step 33 placement based on legal advice.

CHAIR: It is too bad that it has been in the media and that the people themselves will have to be defending this when it is really something for the board, or the board itself I would imagine.

Mr. French.

MR. FRENCH: As well, Mr. Chairman, as I come on down through 5 I say to the Chairman of the Board that it goes on to say: "District #1 and District #10 provided salaries to their executives above step 33. Effectively the salaries of these executives are off the salary scale. In District #10, the top-ups provided to executive staff were a combination of several compensation items as follows..." It goes on to list them.

What it says to me, whether rightly or wrongly, is that we probably paid $52,822 in salaries to somebody that we probably did not have the right to pay. Am I correct in assuming that or am I not?

WITNESS: Since we are District #9 I wouldn't comment on District #1 or District #10. I would hope that -

MR. FRENCH: Let's not split hairs here. Were they not all rolled into one?

WITNESS: No.

MR. FRENCH: No. Maybe they should have been.

WITNESS: District #10 is Avalon East.

CHAIR: That is right.

MR. FRENCH: Okay, well I will save that one for tomorrow because I do not intend to give up on this. I want an answer. I will say this quite honestly, because I won't talk behind anybody's back, I'm not happy. I'm not happy that a minister writes a letter. I don't know if there is Cabinet approval or if there is not. One minister says one thing and another minister says something else, and that does not sit well with this particular member. I want the questions answered. I have heard stories this morning of step 33. I heard that there are people probably in excess of $30,000 over and above where they should be.

WITNESS: Not Avalon West-

MR. FRENCH: No, no, but there are boards that are paying in excess and to me that is wrong.

Anyway, I will go on. I will go down to 7. It says "Compensation to Boards Not in" - and you can tell me if this covers you people or not.

WITNESS: No, we are District #9. It is District #1.

MR. FRENCH: All right, I will leave that one.

In District #9 there was redundancy pay that again was not paid within government policy. I think there was some $12,000 in District #9 that was paid in redundancy. Again, according to the Auditor General, these expenditures exceed termination benefits and contracts. I just wonder if that money is recoverable, and if it is recoverable, has there been any steps taken to recover it?

CHAIR: I think that has been addressed, has it not? Earlier?

MR. FRENCH: Not to me. I have not heard of it.

CHAIR: That $19,000 -

MS MARSHALL: That is the $12,000. It was a payment of $10,000 and $2,000 and I believe it was by a former board. Based on the information we have, no, it has not been recovered, and at the time of the audit it had not been included in the people's T4s either. It seemed to be just a retirement benefit.

MR. FRENCH: Should that not have been T4ed to the employee?

MS MARSHALL: It shouldn't have been paid actually but it was and then it should have been T4ed but it was not.

CHAIR: Would the board like to comment on that?

MR. WHITE: Mr. Chairman, the money was not paid by Avalon West. We are talking about transactions that took place under the predecessor board.

CHAIR: I think, basically, Bob -

MR. WHITE: We have no control, no authorization, or at least I do not believe we have, to go back and (inaudible).

CHAIR: The point that could be made here, I think, is that there would be policies and procedures put in place so that this will not happen with the present board. I think that is what -

WITNESS: It is the Avalon board.

CHAIR: Can I clarify something on that? Because on page 20, and in your response, from Dr. Rideout to Mark Noseworthy, section (c) says:

"The remaining balance for severance repayment is still a matter of dispute since the employee claims that the severance pay was an earned benefit to which he was entitled once his former employment was `severed.' It is his position that precedent was already established when several other individuals were provided this arrangement in the past. If the employee's position is accepted, then that amount would simply be deducted from the normal severance..."

The question I have to you now is: What about sick leave and seniority? If an individual was with the previous board, is hired on with the current board, and he or she received severance pay - of course to me, if you receive severance pay you are basically cutting your ties and you are starting out anew - would this individual be hired on with his seniority, sick leave built up, and the like? Can anybody address that? They have this at a few boards. We have this situation at a few boards.

DR. RIDEOUT: Yes. My understanding in that instance is simply as part of the teacher compensation package when you retire you are eligible for a severance payout that is, I guess, part of the compensation for all teachers in the Province, and senior administration of the districts - except for the AD of Finance - are governed by that particular package. If that, for example, were to amount to $25,000, just to use a figure, and if in a previous payout you were paid $10,000, then when you finally retire you are eligible for $25,000 minus the previous $10,000 which is $15,000. That is what I understand to be the position referenced there, that the severance was a right that was earned once the severance occurred and then that is deducted from any future rights under the severance once you are rehired. Am I clear?

MR. FRENCH: If I came from one school board, say, into the Avalon West School Board, and I had worked for ten years with a previous board, do I have the right to carry my benefits from one board to the other?

WITNESS: (Inaudible) similar to that one.

MR. WHITE: That is if you were transferring. In the case of this employee, this employee was severed; he had received his severance, and at a later date was hired by Avalon West, because Avalon West was an entirely new entity.

MR. FRENCH: So he or she would have no benefits to carry forward.

DR. RIDEOUT: Exactly.

CHAIR: That is the question I asked.

MR. WHITE: That is -

DR. RIDEOUT: Not in terms of the severance.

CHAIR: Oh. The Auditor General brought this up in a report. Would you like to comment on that to get this straightened out?

MS MARSHALL: Sure. Are we talking about the severance pay that is owed?

CHAIR: Yes.

MS MARSHALL: That is what it seems (inaudible).

In government, when you are severed or your employment terminates with a public sector organization you are given severance pay and you usually go on. If you are rehired within a certain period of time then you have to repay a certain portion of that severance pay when you come back on. In this case, when that employee came back on they had to repay a certain portion of their severance pay in accordance with some kind of defined formula or calculation or whatever. That is a standard government policy.

CHAIR: That was done, it was repaid?

MS MARSHALL: It was supposed to be repaid. At the time we did our audit it had not all been repaid, and I understand there was some sort of dispute with the Department of Education or with the school board as to whether that person was going to repay that severance pay.

In accordance with normal government policy, everywhere else in government when people come back and get a new job after receiving severance pay they do pay back a certain portion of the severance pay because they come back on.

CHAIR: Could you comment on that?

DR. RIDEOUT: I guess what is clouding it a little bit is the overlap of redundancy versus severance as two different issues. My understanding is that the redundancy is indeed an amount to be repaid. Severance is viewed as a different matter. While it may become a practice for it to be returned, it is my understanding that there have been previous instances where the severance was simply taken off the total sum owed at the end of one's employment. So, that if you had $25,000 owed you and $10,000 had been provided through another severance, then you only get $15,000 at the end of that period.

CHAIR: So if that individual was hired by the board, had his or her severance, was hired back in by the board, their sick leave and seniority and whatever else goes with it, would that still apply or are they starting out anew with the board?

DR. RIDEOUT: My understanding is that the seniority does not really apply. It is senior administration. Because it not like a collective agreement where you are governed by seniority in any sense. You are at the pleasure of the board. Seniority carries very little tangible benefit to you. The sick leave entitlement would have transferred.

CHAIR: It would have transferred.

DR. RIDEOUT: Yes.

CHAIR: I am still not clear if it was paid back or not, if the proportion -

MS MARSHALL: I understood from the Department of Education that at the time we did our audit it had not all been repaid, and part of the reason was that there was a certain amount in dispute. Some of it was being repaid but some of it was in dispute.

Whether it has all been repaid or not, I do not know. The Department of Education were keeping a tally on what was being repaid so they might be able to give some insight into whether it was all repaid or whether the amount in dispute was resolved or whatever. At the time of our audit there was an amount outstanding and I know some of it was in dispute, but I considered it to be a bona fide receivable of the government, it was split between the school board and the Department of Education and that the amount should have been collected.

CHAIR: Who is best equipped to answer that question? Someone from the department?

MS MARSHALL: The Department of Education should be able to tell you if the department collected their portion and the school board, the finance person, should be able to tell you if the school board collected their portion.

CHAIR: Okay.

DR. RIDEOUT: Mr. Chairman, in recognizing Mr. Lewis as being new to the position, I can answer it. There is about $14,000, I'm told, that is still in dispute as part of that severance package.

CHAIR: How much?

DR. RIDEOUT: About $14,000.

CHAIR: Still in dispute. How long a time frame are we talking here now?

DR. RIDEOUT: Since 1997, 1996.

CHAIR: Two years.

DR. RIDEOUT: The dispute is simply that the $14,000 would come from the person's entitlement at the end of their employment when whatever they should get in severance would be reduced by that $14,000.

CHAIR: I understand.

I think Mr. Lush had some questions.

MR. FRENCH: I am not finished yet, Mr. Chairman.

CHAIR: I'm sorry.

MR. LEWIS: Mr. Chairman.

CHAIR: I thought he was going to answer. Okay.

Mr. Lewis.

MR. LEWIS: I can just clarify that. From the department's perspective, this receivable has been addressed in that funds that were payable to the board on behalf of the individual were intercepted to cover the receivable. So from our perspective it is an issue now between the board and the employee.

CHAIR: Thank you.

Bob.

MR. FRENCH: It says on page 7 - and on page 18, page 19 and page 89 - that the Auditor General indicated that the former "District #9 boards made payments totaling $62,711" to employees for unused vacation time who were not declared redundant and who still worked with the board. Can the board respond to this?

MR. WHITE: Again, this is a former board, not Avalon West.

MR. FRENCH: You told me earlier that board number nine was rolled over into Avalon West. Do I understand you correctly?

MR. WHITE: No, board number nine is Avalon West.

CHAIR: It is Avalon West.

MR. FRENCH: Okay. Then would the former board not know what transpired with the other one?

MR. WHITE: The former boards, Avalon -

MR. FRENCH: Would your board not know what transpired with a former board? Would there not have been any correspondence between the board that you took over and your board?

MR. WHITE: No, because it no longer existed.

MR. FRENCH: So, we just take $62,711 and we say: That is gone and nobody is left responsible. Do I understand you correctly?

CHAIR: Just to interject here, the boards in the District #9 area did make the $62,711 before this board was incorporated, type of thing.

MR. FRENCH: Yes, I have no problem with that. Who is responsible now? Nobody.

MR. LUSH: It is one of the things we alluded to earlier, Mr. French.

MR. FRENCH: Yes, but I am not happy with that, Mr. Lush. There is $62,711 of our money gone somewhere and I would like to get to the bottom of it. I am not putting blame on anybody here, but I would like to know for my own piece of mind where it went, and it does not seem like anybody can give me an answer.

MR. WHITE: Mr. Chair, I can give you an answer.

CHAIR: Yes, it is Mr. (inaudible).

MR. WHITE: Those amounts are the annual leave payouts that were in accordance with the existing NAPE collective agreements and the approved benefits package for non-bargaining unit employees that existed with those two boards at the time that the payouts were made. It is as simple as that.

MR. FRENCH: So, these people's benefits - if I understand you correctly - when they went - because it says here: To employees for unused vacation time who were not declared redundant. So these people were not declared redundant; they were hired by Avalon West board. Am I correct?

MR. WHITE: At a later date

MR. FRENCH: Okay, so they would have been paid then?

MR. WHITE: Yes. It was paid out by the former boards. We had no control over what former boards did. I hadn't even been involved in trusteeship until the interim board came in and the former boards were long gone.

CHAIR: The Auditor General.

MS MARSHALL: Most of those employees went over with the new school board. In my opinion, their benefits, like their sick leave, went over with them. Their vacation time should have also gone over with them. There should not have been payouts except for payouts that were expressly provided for by the Department of Education, and for most of those there was no express authority from the department for it.

CHAIR: Yes, but the situation now that we find ourselves in, from my understanding, is that the present board took over from the group or the numbers of the boards that did this. With their vacation pay being paid to them, these people were hired on with the new board rolled over into it. Your problem was that the vacation pay should not really have been paid. It was up to fifty days, wasn't it? Is that this issue?

MS MARSHALL: The superintendents and assistant superintendents - that is at the senior level -

CHAIR: Yes.

MS MARSHALL: - they were entitled to be paid for up to fifty days. Anything in excess of fifty days was supposed to lapse and be lost to them. What we found was that in some cases people got paid for more than fifty days. I don't know if we gave the detail but you can see in the details, some got in excess of fifty days. Some people got paid for their fifty days -

CHAIR: Plus thirty-three -

MS MARSHALL: - then they took the leftover days with them and started to use those days. Those days should have been lost. They should not have been able to use them. So there were benefits paid out that should not have been paid, but almost all of those people went over to the new board.

CHAIR: The point I am trying to get at here now with respect to the executive, with the fifty days plus, this board will have to really account for that I suppose.

MS MARSHALL: No, it would depend upon which board made the payment.

CHAIR: Okay, so the only thing we can do now is to ask this board questions that apply to them.

MS MARSHALL: That's right.

CHAIR: The previous boards that were there - we cannot, as a Public Accounts Committee, call hearings on the previous boards now. I can understand Bob's dilemma here because he is saying some people out there now are not being accountable and cannot be accountable because of the system.

MR. FRENCH: Because they are still working for the new board, just rolled over.

MS MARSHALL: That's right.

CHAIR: Bob Mercer wants to make a point.

MR. MERCER: I am getting a little bit confused. It seems that no one has responsibility for anything. We have schools; we went through reform; we went through the former boards to an interim board, to the present board. Was there not and is there not something in legislation that provides for continuity and responsibilities? Can someone explain that to me, either you or somebody in the department?

CHAIR: Auditor General.

MS MARSHALL: You are talking about the new boards being accountable for the actions of the old boards. There is nothing that I am aware of whereby the new boards would be accountable for the actions -

MR. MERCER: So are we saying then that the former boards, the two in the Conception Bay area or Avalon West in the RC School Boards, whatever they did is done and we cannot hold them accountable? There was an interim board in place and whatever they have done, they cannot be accountable; the only board we can deal with is the board which is now in place?

MS MARSHALL: That is a legal issue that I would not be able to answer.

MR. MERCER: Can we get an answer on that, Mr. Chairman?

CHAIR: That is a question that we would have to put to the Department of Justice, I would imagine.

MR. MERCER: Because it seems to me that there is a continuity but it is not with the boards. There is a continuity obviously with the staff. There has to be some continuity in the whole process.

CHAIR: You would think so.

MR. MERCER: If it not with the boards it has to be with the staff.

MR. FRENCH: Mr. Chairman, on a point of order.

I don't know if we should really go any further until we do have, as Bob has said, some kind of a legal opinion of exactly who is responsible here. It is a waste of my time and everybody's time; it is a waste of the board's time. If I am going to propose questions to this board and they are not responsible, or they should not be responding, then why I am wasting the board's time and my own in asking the questions? If they do not have to answer me, then why ask the questions?

CHAIR: I suppose Bob, they have to answer if they can answer.

Fabian.

MR. MANNING: Just to follow up on Bob's point of order, the present board that is in place now, if I understand it properly, cannot be responsible for what some other board did in the past. So all we can deal with here are the actions, the finances, of this present board. To be asking questions here of what a previous RC board did. or what Avalon North Integrated did, is really spinning wheels; because these people are not at liberty, really, in my estimation, to answer those questions. Until we get a clear and concise ruling from somebody as to who we can ask the questions to, again I go along with Mr. French; we are spinning our wheels.

CHAIR: Okay, I want to make a comment on this. I think, because of the makeup of the previous boards, the present board and the whole educational reform, and the combining of the schools, there has to be some overlap here, and we are seeing that here now in the questions. The previous boards did do things that appear to be outside their mandate with respect to certain issues here. I think that we, as a Public Accounts Committee, can be asking questions to this board to make sure that these types of situations are not happening today with the present board and they have policies and procedures put in place so that it won't happen.

I think we are going to reconvene anyway at a later date, especially when you read the Kirby Report, I say to the members of the Committee here. You are going to want to come back and ask questions, and Bob, you will be probably a little bit more upset when you read that.

I think we can still go on with questioning here with respect to what is in the Auditor General's report which applies to the Avalon West School Board.

Tom wanted to make a comment.

MR. LUSH: Yes. I think it is a matter of trying to understand what has gone on here. I am not sure that everybody here doesn't understand, I am not making that accusation, but it is difficult. For example, in the question that Mr. French frames here under 5. What we are looking at here in the bold print is: Executive Salaries Not In Accordance With Cabinet Direction. We look at the coming together here of ten boards and it makes it complicated. The only questions this board can answer are those that are directed to District #9.

CHAIR: Exactly.

MR. LUSH: Their total overpayment was $24,502. That is all there was with them. We look at a total of $162,504, but that involved boards one, six, nine and ten. I think the board obviously can shed light on what happened. I do not think it is an exercise in futility. The problem comes - and I do not understand this, and Committee members have an onus and responsibility to try and understand it - that if, for example, there was a severance package or a vacation pay entered into with a previous board, with a board that integrated under this board, I can't see what responsibility this board has in trying to recover that.

You know, you cannot do that. That goes on all the time. The board is disintegrated. We have to understand that. Whose responsibility is it? It becomes, obviously, the Department of Education's. It is the Department of Education's responsibility to collect any overpayments, not this board. This board would never get on with its work if it had to get on with that kind of detail, going back and seeing what payments went to this teacher or that person. That is not their responsibility. Their responsibility is to get on with education in the most efficient and effective manner they can. So I think we have to understand here what we can question them about. You cannot get into questioning them about severance packages that were done by other boards. They came with them and their responsibility is to look into how it now applies to them.

So the question, Mr. French, or others who have that question, I think, as to are we collecting severance packages and whatever overpayments there were, can be directed to the appropriate people in the House or through whichever way you want to do it. I think we have to understand that this board can only answer what they have to deal with now. As the Chair put it, I think the lesson in this for everybody is to make sure we have the appropriate mechanisms in place so that this does not happen in the future.

Obviously, we are not going to have an integration in the future that is going to cause this kind of problem that we have had. We hope not, but all of the other things, the fiscal matters, putting in place with respect to fixed assets and various other items that we have talked about - canteen funds, other raising of funds - that we can have procedures in place. The ones on vacation pay and severance pay, these were quite unique under the circumstances and, as I said, not something that this board can address in totality.

CHAIR: Thank you.

MR. FRENCH: Mr. Chairman, on a point of order.

Again, I don't agree with Mr. Lush at all. If you do not want me to ask questions on this stuff here, don't give it to me. Don't sent a report up to my office, and then send this up to my office, have me sit down and read it and go through it, only to have me come in here and tell me: No Bob, you don't have the right to ask questions on that. Why did you give it to me in the first place? This to me is very upsetting. I received this stuff in good faith. I read it in good faith. I highlighted what I wanted to ask questions on, what were concerns to me as a member of this Committee.

If I am not to ask questions on the information that is here, then do not give me the information and, very simply, I will not ask them.

CHAIR: Bob, with respect to that statement, I think that you have to realize that when this information was being put together the Auditor General had to look at -

MR. FRENCH: I have no problem with that, Jack.

CHAIR: Okay, let me finish.

MR. FRENCH: I have another report here now that somebody else wants me to read. Tomorrow or the next day, Mr. Lush might say: Well, you cannot ask any questions out of that because there is no one here responsible for this. We have hundreds of thousands of dollars gone but nobody is responsible. What a crock of garbage, to me.

CHAIR: Bob, as I was saying, the Auditor General did a report and it was presented in the House of Assembly. For us to come in here and ask questions, we needed to know the background of what happened with respect to the twenty-seven boards that came down to ten. Most of the information is here. It is our responsibility to read it and to know what is going on within the report itself and then to ask the questions.

MR. FRENCH: (Inaudible).

CHAIR: I happen to agree with Mr. Lush on this issue. The only thing I do say is that I think it should be going further with respect to the board itself, with respect to rules and regulations and legislation that is in place. The board should know that if there are hiring practices within government, if there are people being hired and they have been paid certain vacation pay, and they are closed off one day and hired the next day, with respect to severance, redundancy, vacation pay, all of this should apply. That is what should be applied here. What we are saying now, one of the questions we have been asking: Is it being applied properly? I think all of that is here within the Auditor General's Report.

With respect to this report, that was the one that was done by the Department of Education that we did not receive until late yesterday afternoon, I think, when you go through that, again, it is going to be similar to this here. You are going to have to read it and basically assimilate in your own mind what is applicable to the Avalon West board and ask the applicable questions, and I think we are doing that.

DR. RIDEOUT: Mr. Chairman?

CHAIR: Yes.

DR. RIDEOUT: I think what the Committee is struggling with is what we struggled with -

CHAIR: Exactly.

DR. RIDEOUT: - with the overlap that occurred. Where the transition occurred January 1, in the middle of the school year, you had certain responsibilities that overlapped.

If you refer to page 19 of the document Mr. Noseworthy prepared for you, what you will see there is what I attempted to dig out of the records as a courtesy to the Committee, from the previous boards, and cite for you there what I understood to be the basis on which these boards made these payouts, and whether it is a part of the NAPE collective agreement that was referenced there, or the benefits package for non-bargaining unit employees. This is what I am given to understand forms the basis of the decision of the previous boards, so you may find that of relevance. We cannot speak to the whys and wherefores of the decision and the action, but this is provided hopefully as background that would at least assist you in understanding where those boards were coming from, from the records that we could garner.

CHAIR: I understand that.

Mr. Mercer.

MR. MERCER: Thank you.

A question for the Auditor General, just to begin with, and I ask this -

CHAIR: Before you get into that, with respect to Bob's point of order -

MR. MERCER: Oh, I am sorry.

CHAIR: I don't think it is necessary - and the Committee can vote on it if they want, and we will probably be adjourning shortly anyway - I think we can continue on with the hearing this morning as we had set out to do at the beginning when I made the statement with respect to the extra report and reconvening at a later date. I think there are questions that can be asked of this Committee, they are here and we should ask them. If anybody has any objections to that, so be it.

MR. FRENCH: Mr. Chairman, I do and I will be asking no more questions.

CHAIR: Okay, fine.

Mr. Mercer.

MR. MERCER: Yes, I think that is a question for Mr. French to take up with the Speaker.

In my background as a public servant - I spent some twenty-five or twenty-seven years there so I do know the rules of government reasonably well, and I was always in a managerial position - there were rules: Treasury Board regulations dealing with sick leave, annual leave, vehicle usage, so on and so forth. Am I of the opinion that the school boards are governed by those rules?

MS MARSHALL: Yes, that is correct. In 1994, Cabinet issued a directive which required all public sector bodies to comply with those types of rules. My recollection is that it was incorporated into the new Schools Act also.

MR. MERCER: So those being the rules - and I spent some twenty-five, twenty-seven years there, and I assure you, they were applied to the public service for many years prior to 1994 - but since 1994 onwards these rules apply to all of the corporate bodies, the school boards and so on.

MS MARSHALL: Yes that's correct, by direction of Cabinet.

MR. MERCER: I would presume then that was communicated to the appropriate corporate boards. Do we have any information to indicate that that was?

MS MARSHALL: I did do a review of that several years ago and it became obvious that many of the boards were not advised of that requirement.

MR. MERCER: Which may in fact answer my next question. Because my next question was this. That being the case, and that being the directive of Cabinet and Treasury Board, why would the boards - whether it is this one, the interim or the previous boards - feel they could do something that was outside of the rules? Why could you, for argument's sake, issue more than $85 a month for vehicle allowances? Why would you feel that you could go to step 33 when the minister clearly said step 25? I am just trying to get a feel of this. If the current board chair can't answer that, I'm sure the staff who were around at the time might be able to lend some insight into that.

DR. RIDEOUT: All that I can say and offer, I guess, is that the directive that came out in 1994, I understand, which I've not seen myself, but let's assume that that did go out to some authorities, between 1994 and 1996 obviously that was not being followed by the boards that amalgamated into Avalon West. I could not speak to why they were not following it, whether they were aware of it or not, because as the Auditor General has pointed out, those boards were paying those kinds of things as part of their compensation package. That is what was communicated to me as being a part of the package that I would receive at the time until the minister stated in January 1997 that it did not apply.

If you look at, just by reference, page 15 of your package, the very last sentence, the last three lines, the Auditor General says, "...we note that the current Board" - Avalon West - "is now complying with Government's policy..."

MR. MERCER: So in your former association with the former boards, you were not made aware, or you had no reason to become aware, of the policy of government in 1994 dealing with the remunerations and so on and so forth?

DR. RIDEOUT: I had not personally, no.

MR. MERCER: Is there someone from the Department of Education who perhaps could shed some light on that for us?

CHAIR: Please.

MR. LEWIS: I'm sorry, could you just repeat that again?

MR. MERCER: I guess the issue that has come up is that in 1994 the government of the day made a ruling that Treasury Board rules and regulations dealing with senior staff and management would apply to all agencies and corporate groups under the auspices of government and government departments and so on and so forth. The Auditor General is indicating that that may not have been communicated.

MR. LEWIS: In terms of the directive back in 1994, I would not be able to speak to that. I would have to get that information and get back to the Committee on it.

In terms of the new boards, when the boards were established the department did do an in-service with all board members. It went out and met with boards and reviewed the rules and the operating guidelines they have to operate under. It is our understanding now that the boards are complying with Treasury Board guidelines and so on. As boards contact us and ask specific questions - for example, is a salary increase applicable, when is it applicable, and those sorts of questions - the department provides direction to the boards on the basis of Treasury Board rules.

The boards have contacted us and asked for a copy of the personnel and procedures manuals of Treasury Board, and we have been following up on that. It is our understanding that Treasury Board is in the process of finalizing a personnel and policy procedures manual now which should be available some time during this fiscal year. Once that is available we intend to distribute that to all the boards and to provide an in-service on that as well.

MR. MERCER: Mr. Chairman, if I could ask Mr. Lewis: if you could, when you go back to the department, make a determination and provide the Chair with some information as to when the department became aware of the ruling from government, Cabinet, Treasury Board, whichever, and when that information may have been made aware or known to the various boards throughout the Province. Could we get some information on that?

MR. LEWIS: Yes, I am back here again tomorrow for the Avalon East board so I will endeavor this afternoon to have the files reviewed and to identify when we received the directive, and if and when the other boards were notified.

MR. MERCER: Thank you.

Just one last question before lunch, Mr. Chairman. I find it disturbing - perhaps there are reasons why I shouldn't, but I do find it disturbing - when the AG tells us that the polices and the procedures as prescribed by government were not followed by the previous boards, the Avalon West RC and the Avalon North Integrated,. I find that disturbing.

I also find it disturbing that ministerial directives respecting pay scales and so on are not accepted and that boards - whether it be this one or the previous boards - would then feel it is within the ambit of their authority to do something other than what is in those rules and procedures, and in those ministerial directives. I have some problems with that and perhaps the board Chair could share with me why, in his capacity as Chair, he would feel that the board would have authority over and above that which has clearly been delegated to it by government or through ministerial directives. Is there anything I am missing here in this loop?

MR. WHITE: Mr. Chair, I do not think that we were in violation. I think we were complying with the Order in Council, and we had legal advice from the Newfoundland and Labrador School Boards Association legal counsel that we were indeed complying with the Order in Council by putting them on step 33.

On February 19, the minister herself approved the salaries at that scale. So, I do not follow your argument.

MR. MERCER: I just wanted to follow up on that point. The Auditor General's information is clear, that the ministerial letter stated that you were not to go beyond step 25, and I believe step 33 is the top anyway.

Whether you agree with the minister or not is not my point. The point I am making is, if the minister, who I presume has some authority with respect to education in the Province in these matters, makes a statement, why would the board go against that decision even though it might feel it had information to support its case? Why would it not go along and do as the minister had instructed and then follow the procedures respecting arbitration and legal opinions, and if found to be correct in its original opinion the board would then allocate the additional funds as necessary? Why would you forthrightly go against the minister and say: You are wrong, we are right, we are going to do this; and then afterwards refer it to a panel to give a final decision.

MR. WHITE: We asked the former minister, who is the one we had the dispute with, to refer it to an independent judge or an independent court. Would you like for me to tell you the flowery language that the minister answered with?

MR. MERCER: I am sure the minister could be very flowery.

MR. WHITE: Anyway, the answer was no; but, based on the advice of our legal counsel, we felt that we were right and we had been given nothing other than the flowery language. Well, it is not fair to say that but we had been given nothing that convinced us that we should go back and renegotiate the contract or tear up the initial contracts that had been signed and to tamper with them. I don't think -

MR. MERCER: Your answer really is that it was already a done deal, the interim board had approved it and you were just simply following through on that.

MR. WHITE: It was our understanding, even at the interim board level, that the CEOs of the ten new boards would be compensated at a level - certainly they would not lose pay and that - but you have to realize too that they were coming from various positions. Like in our case, our CEO was hired to become the director of the second largest board in the Province. He had been coming from an assistant directorship with the one of the smaller boards. Now, if we had applied the formula that you are talking about now and put him on the next step he would be the lowest paid of all of the senior administrators in the Province, even lower than assistant director of the smallest board, and we didn't feel that that was fair. It was convoluted.

CHAIR: Can I interject here? Because we are getting into an area where we are asking questions to the board that basically, if the Committee members had the an opportunity to read the Kirby report, would give you probably a better understanding as to the questions you are asking, and maybe even rewording the questions that you might be interested in getting the answers to.

I think that, as we said earlier, probably the best thing for us to do now is break and reconvene at a later date, maybe a couple of weeks down the road, depending on a notification from Mark Noseworthy to the individuals. We would have, I think, a better understanding of exactly what the Auditor General was getting at with respect to this issue and others that are in that report. I think the Committee by then may have a copy of the report, or may or may not have one, and they would have an understanding of where we will be coming from, I would imagine, with the next set of questioning at the next hearing we have.

Unless we have people who want to continue on now, I suggest that we probably adjourn for a while until we reconvene at the call of Chair. People will be notified as to the time and place. It will be here more than likely. Does anybody have any objections to that?

Mr. Manning.

MR. MANNING: Mr. Chairman, just as a follow-up to an earlier conversation, when I look through the information we have, and mainly the questions that I'm sure not only myself have but other Members of the Committee may have, again I get back to the point that these people who are here today are not in a position to answer a lot of those questions.

I'm thinking over the next couple of weeks that the Chair, in consultation with the department, may have set up a meeting where we have somebody here who can answer those questions. Because when you look at the amounts of dollars that we are talking about here it is immense, and it isn't fair to have those people here, to be plugging away at those questions, for the simple reason that they are not in a position to answer them. Maybe in the next couple of weeks we can address that issue, because I don't want to be back here next week saying that we cannot ask questions again.

CHAIR: With respect to that I may make a point here now. The information that we have, the members of the Committee themselves should make sure they understand what is in this report. Because it is pretty direct. Prepare the questions that are applicable to the board. There are many questions that can be asked and I am sure they are prepared to answer. We can look at that at that point in time.

Before we adjourn, I do not know if anybody wanted to have any closing comments because it is not really closing comments, but in the interim, would the board want to have anything to say at this time?

MR. WHITE: No, other than we appreciate the opportunity to appear. It has been a worthwhile exercise for us. If you are not satisfied, certainly we will be more than anxious to appear again and provide you with the answers that you are looking for if we can provide them. Thank you.

CHAIR: Thank you.

The Auditor General.

MS MARSHALL: Just one comment, Mr. Chairman.

We were of the understanding that there were two reports from Kirby and Company. I have one which the department gave me last December but I have not seen a second report.

CHAIR: Thank you for that.

I would ask Mark Noseworthy to follow-up on that with the department. If there is another report, the Public Accounts Committee would like to receive it and have it in advance of the next meeting so we can have a chance to review it.

Dr. Rideout.

DR. RIDEOUT: Mr. Chairman, if you are expecting us to answer questions on two Kirby reports it might be advisable for us to have a copy of them too.

CHAIR: Yes. I mentioned that earlier. I'm not sure if we are at liberty to make these public yet. I would suggest that the board contact the Department of Education and request that they give you that report or those reports because you can tell them that you will be questioned on them at the next PAC meeting, which will be in the next few weeks. We have a person here from the department so I don't know if you can see that they could get a copy of the report. I don't know if we should give it out yet. If it was discussed at the meeting, I would. I would not have a hesitation.

Yes, Dr. Rideout?

DR. RIDEOUT: Mr. Chairman, just a comment. If there are specific items that you would like, such as a reference to whether there is a motion of the board about the salary placement and all of that, if Mr. Noseworthy could let me know, we can provide any and all of that information. We have files yay thick on this but we do not know what you want specifically. If it is anything like that he can free feel to contact my office and we will make sure you have it.

CHAIR: With that specific issue, I brought that up earlier, with respect to that motion with respect to the salaries: when it was approved, by whom and what have you. I think it would be appreciated if you get that to us before the next meeting but there is no way I can tell you what we want because it would come up at the meetings themselves, at the hearings, you know.

Having said that, I would like to thank the members of the board for coming here today, the representatives of the Department of Education, the Committee itself of course, their staff, and the lone member from the media down there, VOCM. Thank you for being here and we will get back to you on the time of the next hearings. Thank you.

By the way, before we go, could the Committee please stay because I want to have a quick discussion before we adjourn for the day?

The Committee met in camera, and adjourned later.