The Committee resumed at 2:00 p.m.

MR. CHAIRMAN (Windsor): Order, please!

First of all I will introduce the Committee members. On my immediate right, Mr. Danny Dumaresque, the Member for Eagle River; Mr. John Crane, from Harbour Grace at the far end; Mr. Melvin Penney, from Lewisporte, Mr. Oliver Langdon, from Fortune - Hermitage, and Mr. Alvin Hewlett, from Green Bay. Mr. Glen Tobin, from Burin - Placentia West has not been with us yet today, I had a note late this morning that he was detained and would be here for this afternoon's session, but we will continue on before he gets here.

I want to welcome everybody here on behalf of the Committee and perhaps the first thing I will do is ask the people involved to introduce themselves and I ask Ms. Marshall, the Auditor General, if she would like to introduce the people who are with her this afternoon.

MS. MARSHALL: Thank you, Mr. Chairman.

To my right is Mr. William Drover, Audit Principal with the office of the Auditor General, and to my immediate left is Mr. George White, Audit Manager responsible for the audit of the Janeway Hospital.

MR. CHAIRMAN: Thank you very much.

From the Janeway we have Mr. Baker who is the Chairman, I understand?

MR. BAKER: That is correct, Mr. Chairman.

MR. CHAIRMAN: Would you like to introduce the people who are with you this afternoon?

MR. BAKER: I will. Starting on my immediate left is Mr. George Tilley who is the Executive Director of the hospital; Kent Decker, who is the Controller of the Janeway Child Health Centre; Harold Spracklin is the Assistant Executive Director and Maxine Bennett, is our Materials Manager.

I might say, Mr. Chairman, I welcome the opportunity to appear today to answer questions which concern the audit of the centre.

MR. CHAIRMAN: Thank you very much.

I should say before I go any further a couple of administrative things. You are in the House of Assembly of course, and we are taking evidence and will ask the clerk momentarily to swear in the witnesses who are here for the first time to give evidence under oath. We are not a court of law, we are simply here to take facts and listen to your views and opinions; you are not on trial by any means and although this is considered basically an extension of the House of Assembly, we tend to be a little less formal than that, so please feel free to remove your jackets if you wish. Coffee is at the back of the room; we will take a break mid-afternoon, but help yourself at any time you wish to do so.

I would ask, for the benefit of the Hansard people who are transcribing all of this, to speak clearly into the microphones, and if I fail to identify you as you are recognized to speak, please identify yourself into the microphone, so that the people back in the Confederation Building who have to transcribe all this, know who is speaking to them. We can get away with it because they know us, they listen to us so much that they know our voices very well, so we will ask you to do that.

I do not see any news media here yet this afternoon; normally I would give them an opportunity to take photographs if they wish to at this point in time, they are not here so I will ask the clerk if he would administer the oath to the witnesses who are here for the first time.

SWEARING OF WITNESSES

John Baker

George Tilley

Kent Decker

Harold Spracklin

Maxine Bennett

MR. CHAIRMAN: Okay, thank you very much. Again, for the benefit of the witnesses, our purpose in being here is to gather information. As I have said many times before, I guess the Public Accounts Committee is the final step in the whole accountability process leading from your own internal auditing and financial controls to the Auditor General's report to the House of Assembly, your reports through your minister to the House of Assembly and ultimately I guess, the final step in the accountability process is examining any issues that have been of any concern expressed by the Auditor General, by the House of Assembly or by the committee itself. If the Committee chooses a particular topic, it has the right to do so within certain parameters and so we are simply here to complete that final process.

I will interrupt myself to welcome Mr. Glen Tobin, the MHA for Burin - Placentia West, I see you have arrived. I also want to welcome two representatives from the Department of Health, Mr. Chris Hart, the Assistant Deputy Minister and Mr. Roy Manuel, Director of Operations, who are here not as witnesses but as interested observers and are available to us no doubt if we have questions that we wish to refer to them, and we welcome them here this afternoon.

As is our normal practice, I will ask the Auditor General if she would like to make any kind of an opening statement on these topics. Ms. Marshall.

MS. MARSHALL: Thank you, Mr. Chairman.

We commenced an audit at the Dr. Charles A. Janeway Child Health Centre in March of 1992. The audit included a review of those systems and transactions relating to financial management, fixed assets and purchasing. Our review was designed to assess the following:

Whether the financial management system was adequate to provide information to management and the board for decision-making and control of revenues and expenditures, to determine whether transactions were in compliance with the Hospitals Act, Children's Hospital Management Act and other related legislation, regulations and by-laws. Whether the policies and procedures were adequate relating to the control and use of fixed assets and whether the purchasing system was adequate to ensure monitoring and control of the purchase function and compliance with statutory requirements.

As a result of the audit we reported the following: in the area of financial management; several aspects of financial management at the hospital require improvement. Weaknesses were noted in both the budgeting and reporting areas. The formal and informal examination of information could be strengthened between hospital staff, senior management and the board executive finance committees.

In the area of fixed assets; controls over fixed assets were unsatisfactory. Listings of furniture and equipment were incomplete and inaccurate. Physical counts had not been performed for several years and the tagging system which physically identifies assets was unreliable.

In the area of purchasing; there were significant deficiencies with the hospital's purchasing practices. The purchasing department exercised little control over the purchasing activities of several other departments. We have serious concerns as to whether the hospital's purchases were adequately controlled and are in compliance with the required policies and procedures of the board and legislation. Numerous cases of non-compliance with the Public Tender Act were noted.

Thank you.

MR. CHAIRMAN: Thank you very much. Mr. Baker or Mr. Tilley, would somebody like to have an opening statement here?

AN HON. MEMBER: I think Mr. Tilley has an opening statement prepared, Mr. Chairman.

MR. CHAIRMAN: Thank you. Mr. Tilley.

MR. TILLEY: Thank you, Mr. Chairman and members of the Committee. I say at the outset that we are certainly pleased to be given the opportunity to give some feedback pertaining to the Auditor General's Report and perhaps more importantly to give you some indication of what we have done in response and what we are in the process of doing. As you know the Auditor General's visit to the Janeway was the first in our twenty-seven year history. However, reviews of the Janeway's operations are not new to us. You have mentioned auditor's already and on an annual basis our external auditor's reaffirm our financial position and our operating statements. On a regular basis we present all our services in the hospital to a national body for accreditation purposes so that we strive to meet national standards. We have our own internal auditoring process by which we set our own standards and then in turn measure compliance with them. We provide regular reports to the Department of Health and there are other miscellaneous things that from time to time we try to verify and correct deficiencies in our system.

We have a very dedicated board of trustees who we endeavour to keep informed and give them information pertaining to inadequacies in our system. We see this review as being important to reassure the public that their tax dollars are being wisely spent. Secondly, to identify for us at the Janeway any deficiencies that we have overlooked, so there is no doubt that in the end we will all benefit from it. I would love to be here today and say to you that we have a perfect organization, but I cannot, and perhaps there is no organization that can stand up and say that. I can say to you with confidence that it is our effort to strive to become a perfect organization and that is why we welcome this review that is taking place.

When we were first made aware of the Auditor General's visit, we welcomed it, we opened our files to them and we made our staff available to answer all of their many detailed and extensive questions. So for us it was a learning experience but also interpreted and handled as a constructive one. Their focus for the most part was different from what we had experienced in our past, whether it be the accreditation body or whether it would be our own auditors and of course the focus was not on what was there but on what was not there. So, there is a lot that goes on at the Janeway that will never get acknowledged in reports such as this but that is not the mandate of it.

I will confess and I am sure as we all read the summary portion of the Auditor General's Report, we were concerned because the summary statements had given us reason to doubt our confidence that our policies and procedures were being adequately followed or doubt that we were not spending our money wisely. However, we have had this document now for several months and after we have had an opportunity to go through the details I am confident that all our practices are adequate - granted there are areas where improvements can be made. I am very confident that the purchasing practices of the hospital were such that we did receive the most competitive pricing that was available.

Aside from some issues, the thrust that I come away with, from this report, is in the area of documentation. There is no doubt that we are weak in this area and this is the area that we have already initiated action on in terms of focus.

So, Mr. Chairman, we will be delighted to, in turn, get into the details of the report.

MR. CHAIRMAN: Thank you very much for those comments. We certainly appreciate them and take them in the spirit in which they are given.

It indeed is probably one of the most useful functions of the Committee and these hearings, bringing attention to the Auditor General's Report, giving people such as yourselves, agencies such as the Janeway, an opportunity to have their say - perhaps to disagree with the Auditor General, and by all means feel free to do so.

We are interested in your opinions as well, and hopefully we will try to adjudicate to some degree that, I suppose; but it certainly is an opportunity for yourselves to tell the story of the Janeway Hospital.

I must say that I have had occasions to be there in the past and have found absolutely superior service there. I congratulate the board and your staff on the quality of service that you are providing to young people of the Province in that facility. I have had some very, very, good experiences there.

Having said that, perhaps we can move on. Maybe I will start with Mr. Hewlett perhaps this afternoon with some questioning.

MR. HEWLETT: Thank you, Mr. Chairman.

My question again is in a general area. With regard to public tendering today, does the board of the Janeway, or the administration of the Janeway, seek public tenders, number one, for things over $5,000? Have you a procedure whereby tenders are received and put in a sealed box, and these tenders opened at a specific time when witnesses are present, et cetera?

MR. TILLEY: Thank you, Mr. Hewlett.

I feel very confident that the Public Tendering Act today is implemented as required by, or outlined in, the legislation. The hospital has very extensive policy and procedure manuals, two of which are in front of us here. The one in the blue represents the materials management policy and procedure manual, but those manuals obtain their thrust primarily from the public tendering legislation.

For purchases that are over $5,000 we will: (a) go to public tender, or if there are items which have been identified as being a single source then, of course, we will go out and buy and today file the necessary exemption.

There are some areas specific to the items that were pulled out in this report that we still today believe that the decision not to file an exemption order was made in good faith, on our interpretation of the legislation. I guess in retrospect maybe we should have not even erred and we should have just sent it in automatically.

Your reference to submission of tenders, that is all done as prescribed in the legislation. It is provided for by a public opening in sealed envelopes, so I am very comfortable that it is in place today.

MR. HEWLETT: Thank you. I pass.

MR. DUMARESQUE: Okay, Mr. Hewlett. Mr. Langdon, are you ready to...

MR. LANGDON: Yes, I would like to follow up on that. I have an appointment outside at 3:00 p.m., so I have to leave.

Following up - being a little bit more specific than Mr. Hewlett - on the tendering that was listed on Page 10 of the booklet, purchases over $5,000. You were saying that in all good faith, whether you tendered or not, you believed that you got the best possible price for the service that you received; but that does not prevent you - the thing is, over $5,000 whether, I suppose, we like it or not, we have to follow the route.

Now looking at one particular item that is there, cabinets, on Page 10, the second last item, $6,575; and the hospital's explanation was that this supplier was the only one considered due to the quality of their work.

I only have to go on what is here. I am sure you got Nu-Way Kitchens, you got Mother Hubbard's, and you got many other people who could possible give you a better price than that, because it is the people's money that we are spending. I do not think, in my explanation, the way I see it, that is an adequate reason why you should not have gone to the Public Tendering Act.

MR. TILLEY: You are absolutely right.

MR. CHAIRMAN: Mr. Tilley.

MR. TILLEY: My understanding is, that quotation was obtained by the department head. There has been some subsequent dialogue and it was our hope that that would have been clarified. The specific purchase order at hand, in the first instance contained two invoices which were for separate projects, and of course each of them was less than $5,000. The second part of the explanation is that that particular organization was currently working in the Janeway as part of a tender that we had called to upgrade some of our nursing units, and one of the parts of that work was to upgrade a nursing station, so what we had done in our wisdom or lack thereof, is, because we were familiar with the quality of work, because that person had been brought in the public tender, we had extended the size of the project, so we had asked him to go to another nursing unit to do a similar upgrade.

In retrospect, it was not done in bad faith; it was not only a quality issue, but it was done based upon the availability of the individual and the fact that he had been brought in on public tender and the jobs themselves were different projects. I suppose we could have easily added it to the existing project and that would be the extent of it, but we chose for our own financial accounting reasons, to show it separately.

MR. LANGDON: In September of 1993, would the same thing have happened, knowing what you know now?

MR. TILLEY: I believe that the decision was made in good faith and judgement. Today, I think on the basis of what we have seen because of the report, I think we would err on the safe side when there is doubt, because I guess we entered a grey zone that we interpreted as being within our discretion to do that way, however, we have had many discussions since and unless we can get a legal interpretation to make it very clear, I think the safe side would be to go out and get competitive quotes which would not have required a public tender of course because each project was less than $5,000.

MR. LANGDON: Okay, it is pretty much following along on the same lines. On page 8, we are looking at tagging items; items that you buy apparently are being tagged as they come in to the hospital, but then that seems to be the end of it because you do not follow up on actual physical counting of the things, so how are you able to follow the things that you have - I am just asking a question, it could very well be pilfering, so how strict a control do you have on that?

MR. TILLEY: Again, in terms of the fixed assets, there are two issues on which we have always focused; one is the accounting of it and the other is the security of it and for an organization such as ourselves that has a fairly significant amount of public thoroughfare, then of course the security of it becomes very important.

We have known for some years that we needed to do a physical count of our inventory. We have had a tagging system in place but that has not been followed up on in terms of having an actual physical count done, so we recognize that and I guess it is a matter of while we did recognize it the reason we did not do it is because we got into other priorities.

From a security perspective however, two years ago we developed or installed an electronic surveillance program, which involves the surveillance by remote cameras of all ways to enter and exit the building. That was found necessary because we had some staff who lost money at late hours in the night, and also that we had some VCRs that were in patients' rooms disappear, so from a security perspective we believe that we have a mechanism in place, it is not foolproof by any means.

From an accounting perspective, we have our weaknesses, there is no doubt about that. We saw some problems in terms of the tagging system whereby, because we had not done a regular count, the tags either were misplaced or placed in areas where they were not easily accessible, such as on the back of a cabinet that might be 2,000 pounds in itself, so I accept that as an accounting problem but I am more comfortable with the security one.

MR. LANGDON: Okay. Just one more question, it is far along in the book on page 55, and I am jumping because as I said, I have to leave soon. I am looking at prepaid expenses. In 1991 there was $835,353 and in 1992 there was $1,098,180 and that seems to be quite a large figure. In times of financial restraint, would it not be more prudent to pay for expenses as they come due so that we could get the benefit of the money as opposed to someone else?

MR. TILLEY: Mr. Chairman, I am going to ask Mr. Decker if he is aware of the answer to that. Mr. Decker has only started with us as of May of this year. If he is not able to answer it then I will certainly try to get the information for him.

MR. CHAIRMAN: I should have pointed out earlier that any time you are asked a question which requires detailed information and you do not have it with you, you can feel free to take notice and provide the information to the board later on. It is quite acceptable.

MR. DECKER: I have a list of the prepaid expenses here for March 31st, 1992. The largest item on there would be Workers' Compensation for just about $900,000. In addition there is an item of about $110,000 that represents the maintenance contract on a CT scanner that would have been brought around that time. So I suspect these two items would be the reason for the increase over the prior year. The Workers' Compensation itself is greater than our total prepaids for the prior year or likely it is -

MR. CHAIRMAN: And you have to pay that up front, don't you?

MR. DECKER: You do or they start charging you interest, yes.

MR. CHAIRMAN: Mr. Tobin.

MR. TOBIN: Mr. Chairman, I have a question regarding the awarding of contracts or engineering fees, when you look at this engineering costs seem to be exceptionally high, particularly when you look to page 96 and 97, for the totals for the year. I am just wondering, what procedure does the board use now in the hiring of these consultants? How do you select them?

MR. TILLEY: Well the reference to the engineering consultants of course, is to health consultants, who the hospital have had an ongoing relationship with for many years. For the most part, in previous years, the extent of the relationship has been $3,000 or $4,000.

What we saw in the late 1980's early 1990's was a decision by the Janeway that the physical plant needed some significant upgrading. We were finding some major problems with our electrical systems. We had very unique problems in terms of construction because of the design of that facility as a military hospital and the whole nature of providing paediatric care changed.

In any event, we went to BFL because they were the engineers that were most familiar with all of the limitations of our building. They in turn designed, after meeting with our staff, a project, a multi-phased project which has taken four years in order to complete. When that got approved by the board then of course we used BFL in terms of a project management prospective. These projects were pretty significant and in fact really changed the face of the hospital. So we are now into the last component of that multi-year project that will probably be finished within two months. We used BFL because of the relationship that we have built up, their understanding of the building and the trust that we had in them. We had a person on staff that we called a project coordinator who monitored their activity daily. In fact that was his job, to make sure that everything that we are paying for is being done according to the job that is done, that productivity is there and being done to spec and so on. So I am very comfortable that we had an extra control system in place.

As you know, consulting is exempt from the public tendering legislation but it is difficult to develop the specification based on somebody's expertise. Having said that, we have, particularly since the audit that was done where we needed engineering expertise, we have tried to divvy up the workload to try to get some other indication of what other peoples skills are.

MR. TOBIN: So you are saying that you have a couple of months left on this major overhaul expenditure at the Janeway. So do you anticipate then that the consultants fees will go back to where they were, prior to taking up this budget?

MR. TILLEY: I definitely do. I guess no one can forecast what the future may hold. There are some areas in the Janeway such as mental health that is sort of tops on our list at the moment, where our physical facility just cannot handle it.

If we were able to get approval to proceed with a plant expansion, then I think this time around, because we have since developed a policy by which we adapt Treasury Board guidelines that were made available to us, but this time around we would go to our board, or seek an indication of how much this is projected to cost from BFL, and perhaps by then another firm, and then let our board make the decision; but clearly the $160,000 day in a fiscal year, is gone.

MR. CHAIRMAN: Mr. Penney.

MR. PENNEY: Thank you, Mr. Chairman.

I would like to go back to the public tendering for a moment. I have only been sitting on this board for a few months, and it seems that every agency of the Crown that comes before us, that is one of the concerns that was raised by the Auditor General - the fact that contracts are being awarded without tender invitations - and I see the same thing here again. Now it has been touched on by a couple of the members of our Committee this afternoon, but I would like to get just a little more specific.

You have to appreciate that the reason our Committee exists is for accountability of public monies. I have seen so many different reasons given by so many boards as to why this was purchased without tender - because there was nobody else to provide this services; because this was the only company that could provide compatibility; and, well, each separate room - what we required - was less than $5,000; therefore we bought them all separately as opposed to putting the entire hospital under one tender. So I have heard a lot of different answers to this.

Let us go back specifically to Page 10. Now it was already mentioned about the cabinets, but there are a few others there, like plaster - $7,556 for plaster - and the explanation is that the charge was to cover the cost of plastering at the hospital for the month of June. That is still no explanation as to why it did not go to public tender.

MR. TILLEY: That is correct. I guess the wording would have been the prerogative of the Auditor General. I am glad you picked that example, and in fact I would like to go through all of these if you wish.

The plastering that we referred to is not the plastering that we would attempt to do ourselves at home, as in a drywall plaster. This is a hard wall plaster, I suspect something like this building is made of. A lot of buildings in St. John's in the mid-sixties were plastered by a group from Montreal, and a lot of buildings, I suspect, are having the same problems that we are having.

The Janeway has been using Conway Plastering Limited. In fact, all of the hospitals that have hard wall plastering in St. John's have been using this particular firm. We have been using it long before the public tendering process came into place. When the public tendering process came in place, we had gone on and assumed that there was no other source for hard wall plastering. In fact, our maintenance crew said: There are no other individuals.

Because of the audit we went out and said to maintenance: Look, that is just not good enough anymore. We went to public tender. There was only one reply, from Conway's, and of course it happened; the hourly rate moved from $26 to $29 an hour.

I guess the individual knows who his competition is, or whether there is competition, and can afford that. That is a price we pay, but in the end we reaffirmed our belief that that was a single source issue and therefore was not in need of public tendering; but again, what we should have done back then is sent in the exemption notice.

MR. PENNEY: That was the second part of my question. One was that the contract was awarded without tender on this basis, and the second part is that the minister was not informed. Therefore there was no report made of it in the House of Assembly; but you have already suggested that should have been done, and we recognize that. That is fine when it comes to plastering.

The last one on Page 11 talks about medical supplies, and it said there was only one supplier for this purchase. Now over here in the back I see that that supplier was Hollister and the medical supplies in question are ID bracelets, certainly, you are not telling us that Hollister is the only company that makes ID bracelets?

MR. TILLEY: I will refer that in a moment to the Materials Manager, Maxine Bennett.

This is one of the three examples of the ten, that either combines a number of line issues which in themselves would have been less than $5,000, and in fact each of the line issues there are single source and I will let Mrs. Bennett explain that to you.

MS. BENNETT: I guess when we look at identification bracelets and you walk through adult hospitals there might be many different types of bracelets, but for paediatrics, we require something of a softer nature which does not irritate the skin or cut it, so Hollister is the only paediatric neonatal identification system we have found to date, as well as, the other items on there, are urine collection systems, which are very different from adults and the only source we have found to date, and a subsequent tender has proven that as well.

MR. PENNEY: Please do not misunderstand the questions. If in fact, these are the only supplies, well then they are the only supplies and if that is where you are going to get the quality that you need and is the only place you can get it, then that is what you should be doing, I am not questioning that.

Lets go to the next one up from that, Drugs, $6,500 for the drugs. Now I notice that that was a drug called EXOSURF, manufactured by Burroughs Wellcome Inc., is there a generic equivalent?

MR. TILLEY: No, there is not. In fact that drug was, up until about three or four years ago, on experimental status, which meant that the Janeway had it provided without charge. The drug basically is used to treat what we describe as neonates, which are children who are under a specific birth weight. The drug on average saves about 20 per cent of the children, who, prior to that were not saved. I confirmed it many, many times that there is only one source for EXOSURF, that is $650 a phial and what it does, it strengthens the lung so that it does not collapse when the child is breathing, so you are on the right track, Mr. Penney, that there is a single source, we believe it to be a single source but we failed on the documentation side.

MR. PENNEY: If in fact there is a single source as you say, and I do not question your reply, then I support what you have done, wholeheartedly, but there was nothing in here to suggest that to me that there was no generic equivalent and where tenders were not called, I had to ask that question. Now as a pharmacist myself, of course this is the sort of a question that would come to mind immediately, but having been out of the business for some five years now, this was a name that did not ring any bells with me and I did not know if there were generic equivalents made by five or six other companies.

Mr. Chairman, may I continue for a few more moments?

MR. CHAIRMAN: Mr. Penny, carry on.

MR. PENNEY: If we leave that for one second, I would like to go to page 55 of the report from your chartered accountant. I see there that your accounts receivables from the patients had increased by about 40 per cent from '91 to '92; is there any particular reason for that, was there some kind of a change maybe in your system of collections or your policy? This is up from $319,000 to $457,000.

MR. DECKER: I have a list of the receivables here for both years. There was an increase in several areas; the non-resident receivables increased by about $20,000; our GST went up by about $35,000, $36,000. There are some various receivables there for things like burn garments, this type of thing; that did increase by about $50,000 as well and basically it is spread over several different sources but there were no changes as such in collection policies.

MR. PENNEY: Okay, and the next line down, Due from other Funds, gone from a little over a half-a-million dollars to just about one million dollars in one year. What are those other sources and why such a big difference?

MR. DECKER: The other funds are various funds that are run at the Janeway Hospital Corporation. We have the Provincial Perinatal Fund, Provincial Genetics Fund, the Foundation is down there, the Janeway Hostel is down there, all in all we probably have around fifteen funds. What happens is; the expenses for these funds are paid out of the Janeway, receipts for the funds go into the funds bank accounts, we make a transfer from the funds to the Janeway to cover the expenses as needed. The only thing with that is that the interest earned on the funds go to the Janeway anyway, so it is just a cash management issue.

If you notice the cash and term deposits on hand would have been lower that year. I suspect part of the reason is because of the increase in funds, the receivable from funds. However, the cash would have been sitting in the bank accounts of the funds earning interest for the Janeway. Again, no difference in our overall cash management but on a line by line, within each financial statement there is a difference.

MR. PENNEY: Looking at the chart on page 85 it shows that admissions have gone down from 4,348 to 4,213 that is from 1991-92. Now I do not know what that percentage would be but I suppose you are looking at probably 18 - 20 per cent. I did not calculate it out but that is how much your admissions have dropped. Yet we come back to this financial statement and it shows that the outpatient income, that is insured services, has increased from $4,900,000 to $7,845,000. Now that is outpatient income increased by 57 per cent yet admissions are down by about 20 per cent, how could that be?

MR. TILLEY: I do not have my calculator here but it is not 20 per cent. It might be a couple of percentage points because you are talking about 135 patients on 4,300. So there is a slight drop there.

MR. PENNEY: I was making my calculation based on your graph. That is fair, I accept that.

MR. TILLEY: Of 438 was it?

MR. PENNEY: Yes, nevertheless, there is a drop in admission but a 57 per cent increase in income.

MR. TILLEY: The Budget, as I understand it, is allocated based primarily upon an inpatient or outpatient revenue and the prime determinate of that is based upon the actual volume of outpatients that we see.

Going back to page 85 again you will notice that on the second graph from the top on the left hand side which shows outpatient OPD visits, we had in fact seen almost a 3,000 increase in the volume. So I suspect that the bulk of that would be attributed to that.

MR. PENNEY: So you are seeing more patients but fewer numbers are being actually admitted into the hospital, more being seen on outpatient basis?

MR. TILLEY: That is the thrust, Mr. Penney, in the health care these days that we are trying to pursue with a vengeance. In years gone by there were people admitted to the Janeway for tonsillectomy that would take them five or six days and now we treat them for one night. There are other procedures that would have involved admission of a couple of days now we bring them in the same day and send them home again the same day. So, for us that is a cost effective way of pursuing it. Predictably, you would see that type of movement.

MR. PENNEY: I do not think you would get any objections to that comment from anybody in the Province. I think that is certainly the way to go. What are geographic secretaries?

MR. TILLEY: The Janeway is a teaching hospital and a significant proportion of our medical staff have cross appointments with the University and the Janeway. As part of the cross appointments they have a secretary. Half of the cost of a secretary is borne by the University and half by the Janeway. So, internally we appoint them GFT appointments for the medical staff, GFT secretaries who are their assistants.

MR. PENNEY: Okay, it was a new expression. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Crane.

MR. CRANE: Yes, getting back to the Public Tendering Act, I know that you are doing everything - and you feel you are doing everything for the benefit of the hospital on this and no doubt you are but one question was asked here earlier about - where do you keep those quotes now coming in, everyone on public tenders, while you are waiting to open them, do you have a locked box?

MR. TILLEY: If you do not mind, Sir, I will defer that to Mrs. Bennett.

MR. CRANE: Oh yes, anybody.

MS. BENNETT: What happens with them when they come in is they go into a filing cabinet and are withdrawn by the secretary at the public opening.

MR. CRANE: Okay, I guess you could call that a locked box.

I am not suggesting that you people do this but I am sure there are some times when it happens that people want to sort of tread around the Public Tendering Act, they will break up - like you have $6,500 cabinets there where you could break that down. You said there were four different jobs, right? So sometimes you could take a $10,000 one and break it into four different jobs and get around the Public Tendering Act by doing that, right?

MR. TILLEY: I guess, Mr. Crane, we have done it in reverse.

MR. CRANE: You could get yourself in trouble by not doing that, right?

MR. TILLEY: It was two specific projects rather than four, but we had decided on them as separate projects. We had received invoices, but one of our initiatives in the materials management department to try to make staff time more cost effective was to actually start combining invoices.

So, in retrospect, I guess I believed, up until somebody started questioning me on it, that we were right in not public tendering that and that we could, in fact, combine invoices on one purchase order, albeit it went over $5,000 because, in our minds, we thought that we could justify the decision.

I guess one can only go on trust. I believe that our staff are very astute in that regard. There is a way of going around every system, I am sure, but in the end I would rather take the safe route.

MR. CRANE: There is some problem with records less than $5,000 where you went out - maybe you did ask for three quotes, but you did not have the documentation to prove that, right? Have you improved on that any?

MR. TILLEY: Yes, the report refers to five out of seven, I think, if memory serves me right.

MR. CRANE: Yes.

MR. TILLEY: If I can just skip through it - seven out of nine, I am sorry.

MR. CRANE: Yes.

MR. TILLEY: Out of that seven, four were single source. Unfortunately, there was no documentation on the purchase order to that effect, so I would have expected the auditors to say: You need to get your act together and have that put there.

There were three other items that were purchased directly by department heads, and you have seen elsewhere in the report that we had allowed flexibility to our plant maintenance, plant engineering and pharmacy departments because of their purchases. We did that on the same expectation that they would get quotations and, in fact, in one case I am personally aware that the quotations were obtained. Where we fell down was that we did not have a strict policy which said where those quotations should be maintained. In fact, the plant maintenance manager had felt that there was no need for them and had subsequently discarded them. I, because of that one, speak with confidence that he had it.

I have a lot of confidence in our staff but, needless to say, because of this particular issue we have tightened it up even further.

MR. CRANE: So you feel sure now that all documentation is retained.

MR. TILLEY: Well, we have revised our policy which, in essence, says that department heads have to go through the materials management department in order to get a purchase order, and the purchase order would only be given if, in fact, the conditions of the public tendering process had been met.

We also have a policy which says right now that in terms of the quotations, rather than rely upon them being put on a separate piece of paper in a file, let's actually write them on the purchase requisition which gets maintained in a couple of places.

MR. CRANE: Fixed assets: The hospital has reported in its financial statements for March 31, 1991, gross fixed assets -land, building and equipment - of $29.9 million. Of this amount, $14 million represents the cost of major equipment.

Then it goes on to say: The hospital provided us with a fixed asset listing. The gross total value of fixed assets on this listing as at March 31, 1991 was $7.6 million. This is substantially less.

If you put the $14 million with the major equipment, and the $7 million, you get $21.7 million, so you get about $6 million, $7 million, or $8 million not accounted for, right?

MR. TILLEY: Yes.

MR. CRANE: And even right now with your security system you do not know if that is down there, if it is half gone, or where...

MR. TILLEY: It is a good question. We did an audit of our general ledger. We identified, within the space of thirty minutes, $4.5 million worth of equipment that we had bought that was not on our fixed asset listing. Coincidentally, they were predominantly pieces of equipment that would not have typically gone through our receiving bay. They would have been pieces of equipment such as our CT scanner which had been brought through the nearest entrance way to where that thing was going to eventually land.

The protocol in place, of course, is for our receiving clerk at the receiving bay to be responsible for the tagging system of our fixed assets, but we ran into a problem in that anything that did not go there was not picked up. Having said that, if we had been paying more attention to the fixed asset process, simply by reconciling our general ledger with our fixed asset listing, we should have picked up on that.

MR. CRANE: And you are working on that now?

MR. TILLEY: Well, the plan is this. We are now preparing to have a physical count done of all fixed assets in the facility towards the end of this fiscal year. From there we will have to start evaluating the assets that we list, and then we will have to work in conjunction with our own auditors to try to reconcile what difference there may be in terms of the values so that it will be done consistent with the recommendations from our own auditors.

We have in our policy that we will conduct an annual inventory. In retrospect, that has probably been there since the Janeway's policy and procedure manual was first initiated. That is totally unrealistic.

Mr. Decker has brought with him significant experience in the auditing industry, and to that end has given us some other opportunities to maybe do that on an audit basis rather than an entire physical count.

MR. CRANE: Thank you.

MR. CHAIRMAN: Thank you, Mr. Crane. Mr. Dumaresque?

MR. DUMARESQUE: Thank you, Mr. Chairman. I just have a couple of general questions because, after all, the members have looked at a lot of the specific questions on the public tendering contracts and so forth.

A couple of questions on your income as it relates to non-residents, I note that there is a $200,000 increase in one year over the other, in non-resident revenue. What exactly is that and why would there be such a difference in one year to the other?

MR. TILLEY: This is a broad explanation for those who are not familiar with it. The Janeway does invoice people who are non-Newfoundlanders and non-Canadians. We try to get some sense, on an annual basis, as to what the volumes will be. There are basically three sources of non-residents that we see; those that are travelling in the Province, children from St. Pierre and children from the Argentia naval facility. St. Pierre has been probably the biggest consumer. The dollar difference would be based solely on volume and as you predict, it would be unpredictable. When we budget, we try to budget on the conservative side so that we do not get caught at the end of the year, saying we are going to get $1 million in offset revenue, to only find out then they made $500. The St. Pierre situation, after we have looked into it in more detail, back at that time there were less flights in and out of St. Pierre than there are today. It is my understanding now that if there is a child that needed urgent care, that if the flight was heading to Halifax, then they went to IWK, if it was going here than it was to the Janeway. So it was just a stroke of luck as to which way they headed in.

We are currently having some discussions with the General Hospital to see what mechanisms we can put in place to sort of get those patients heading this way because for us it is a major revenue source.

MR. DUMARESQUE: So the normal process would be that you would send an invoice out for whatever level of care? It does not matter?

MR. TILLEY: No. We have taken it upon ourselves in the case of non-Canadians, because with Canadians there is an inter provincial agreement to set the rate, for non-Canadians, such as the people of St. Pierre and the people in the Argentia naval base, we have worked out an increased per diem rate for them. In our intensive care unit, where the cost of a patient day is almost double that of elsewhere in the hospital - we have a higher rate charge. We have had experiences where neo-natals have been transferred from St. Pierre, they spent thirty or forty days in the Janeway, and it has been proven to be a major revenue source for us.

MR. DUMARESQUE: Okay and there has never been a problem with payment or anything like that?

MR. TILLEY: No way.

MR. DUMARESQUE: Nobody has ever disputed anything?

MR. TILLEY: Never, no.

MR. DUMARESQUE: The hostel: I get a fair number and I am sure most rural members have a fair number of people coming in and using the hostel. I noticed a number of people from my riding have found it difficult to meet the cost of that hostel. I am familiar with the Ronald MacDonald House in Ottawa and I know after being there that the cost is significantly less at that place. I think it is ten dollars a day and you certainly can cook your own meals and do different things. The foundation also has a bank of airline points and so forth that they use to provide opportunities for people who find difficulty in meeting some of the costs and want to be with their children. They cannot do that here. I was just looking at the Children's Hospital Foundation, the hostel is not under that foundation is it?

MR. TILLEY: No. The hostel is a separate corporation that is governed by a board of directors of which 50 per cent are from Rotary and 50 per cent from the Janeway. The hostel was one of those that got advantage of back in the early - I guess it was ten or eleven years ago - a CMHC mortgage subsidy so that the mortgage is being paid at an equivalent of 2 per cent. There is a $1.2 million mortgage still outstanding on that building.

Your point about people expressing concern to you is one that we hear regularly. The price is another one that we hear regularly. Up until four years ago the room rate used to be twenty-five dollars a night and I should preface the comment by saying it is only cost recovery. Back a couple of years ago - I am not sure if it was a ten or sixteen week labour dispute - the hostel ended up signing a collective agreement which basically gave parity for the staff with that of their hospital counterparts. As a result of that the price went up significantly. If you have a good income and you are only in there for three or four nights, you can probably afford $120 for three or four nights. What we are finding is that a lot of people in the working poor, as we call them, who are not eligible for social assistance, would find it difficult to spend any length of time in that hostel. What we have done to try to respond to that is a couple of things; we have recently taken over six and we are about to go to nine apartments in the Janeway Apartment Complex.

I should say that we use those for the long-term families, we have families who would be there for six months. A number of families are certainly there for thirty, forty days. We will move them to the apartments and the average cost per night will come down to less than twenty dollars, in fact, in some cases, if we could get a single bedroom we could bring it down to around ten.

We have explored expanding the hostel but rejected it because in order to do that we would have to have the money drop down from somewhere and if that did not happen, then we would have to recover the cost of the mortgage payout in the per diem rates. The other thing that we are now in the process of doing is we are taking over what was formerly a common room to try to get more people in by turning it into a bedroom, so it is all being done with the objectives of trying to increase the revenue but at the same time when that occurs we will start lowering the per diems.

The Ronald McDonald House scenario is one that we have had a number of discussions about, and in fact only today there is an effort to try to meet with the Minister of Health to discuss it. The Ronald McDonald House though, works significantly differently than the hostel. They have a family-type setting in the house where they can accommodate six or seven; there are some that will have twenty rooms -

MR. DUMARESQUE: Yes, this one had fourteen.

MR. TILLEY: They have a live-in person whom they pay, a sort of family and the rest are governed by volunteers.

MR. DUMARESQUE: What kind of staff do you have over at the hostel?

MR. TILLEY: How many?

MR. DUMARESQUE: Yes.

MR. TILLEY: Roughly I would say there are eight to ten.

MR. DUMARESQUE: So the Ronald McDonald place up there has a full-time co-ordinator, administrator or whatever you would call him but they have the facilities there for you to use yourself so that is not the same as you have over here. What things do those six or eight or ten people do?

MR. TILLEY: Okay. Well, I should preface that the Ronald McDonald thing has a lot of volunteer input. The staff over there consists of desk clerks, the same as you would find in a hotel, a maintenance man and domestic workers, so they are there cleaning the rooms. If you walked into any of our thirty-one rooms I think it is, you would have two double beds, washroom, a kitchenette and there are laundry facilities available in a central location.

One of the concerns that we have with the Ronald McDonald thing, is in terms of whether the hospital staff might see it as contracting out and therefore presenting a problem, but I would like to think we could overcome that. Another problem is that if McDonald's had come in and said: okay, we are going to offer you ten dollars a night, then it is of course going to draw from the occupancy of the hostel and the worry that I got then is that we are going to end up having to increase the rates.

MR. DUMARESQUE: Increase the rates obviously. As you say the cost is attributed to the increased rate of administration and staffing. As I found up in Ottawa, you go there as adults and you are responsible for the cleaning of the room and you are responsible for the cleaning of the washroom and vacuuming and you are also responsible for your meals and the laundry is a coin-operated laundry machine, there is only one person. Yes, they have some volunteers, but the very few volunteers they might have would be used to maybe come sometime to visit somebody there who would like to talk to somebody in a similar situation. They have counselling volunteers and sometimes they have an airport run or something like that, but they do not have the kind of volunteers of maintenance and everything that you are talking about, and I am just wondering, if some concept like this were to take place over there, there is no reason why there should be a new facility, is there any reason why the hostel itself could not be taken under that umbrella or under the umbrella of the foundation?

MR. TILLEY: The preference would be that the hostel and McDonald's would come together, and in fact, I even suggested to McDonald's at one point in time that I would go to Rotary and get them to change the name if it meant that McDonald's would expand this place, because we can do it with the existing staff. McDonald's as a matter of policy do not want to dovetail with existing organizations and I think they have some difficulty dovetailing with the unionized environments.

The last discussion we have had with the people who are spearheading that, is perhaps to find a facility that is close by because there are a number of Newfoundland and Labrador Housing units down just over the hill from the Janeway, that McDonald's could in fact go and buy, so it is off the Janeway site but close enough and within walking distance, so my guess is that probably would be where they would end up going.

MR. DUMARESQUE: Just one final comment. I would like to say to you that I know over the last five years it has caused hardship to some of my constituents who have had to come in here. If there is any possible way of dealing with it, whatever concept can be arrived at, I would encourage you to certainly do so, and offer my complete support. I am sure all members of the House would like to see something like this. It would be a lot less cost to the people out there than it is now because, in my view, the cost of that hostel, and having the parents there with their child, is no less than having the care of that child taken under the taxpayer's expenditures. There is, I think, a solid argument to be made that why should we have a cost recovery on this aspect of care and not on everything else?

MR. TILLEY: You are absolutely right. In fact, as Mr. Penney pointed out, in terms of the outpatients, as we move to do that, we are putting more pressure on facilities such as the hostel. So you are transferring the expense, and the person ends up paying for accommodations next to the hospital.

As a concluding remark on the hostel, I am sure you are familiar with where it is, but again, if you would ever want to come down and visit inside and understand some of the mechanics of it, we would be delighted to host you.

MR. DUMARESQUE: Thank you.

Just generally on the financial situation of the Janeway at the present time, what is the overall deficit now, and how are you finding it? I know obviously everybody is finding it difficult, but could you give us an up-to-date picture of how you are dealing with the problems?

MR. TILLEY: Well, I guess you probably saw from these statements that the last of the statements here showed a deficit of $254,000; the year 1991 - $29,000; the year 1990 - $145,000 and the year before that, $385,000.

I am pleased to say that last year, 1992-1993, for the first time in several years, we recorded an operating surplus. We attribute that to a couple of things: (1) We have been getting more people on an outpatient basis; and (2) We have been finding opportunities to do things differently - some unique experiences.

One that immediately comes to mind is Exosurf, that we talked about earlier. As I indicated, it is a $650 drug. It has a shelf life of twelve hours when it is opened, and most neonatologists were prescribing it on a twelve-hour basis. Of course, when the nurse went to the bottle and said: It has a twelve-hour shelf life, and now it is 2:00 a.m., and that was administered 2:00 p.m., it was discarded.

We went to the neonatologists, and they looked at it and said: Well, why don't we prescribe it every eleven and one-half hours? Because that limit of twelve hours was really a conservative one anyway. So we ended up cutting our Exosurf budget practically in half.

We also, at the end of last year, made some very difficult staffing reduction decisions at the managerial level which involved elimination of managers in certain disciplines in the hospital and combined them under larger ones, under a single manager. So we feel comfortable then, that in the end that will be fine, but you will understand that they were difficult to implement and carry out.

Your question about funding: I feel that the Department of Health has been appreciative of our circumstances, albeit we lost $250,000 last year, but at the end of the year we showed a surplus position.

There will always be a need for other staff in the Janeway, so if somebody were to say, 'Here is another $300,000', I can tell you, I can put it to good use. The mental health area is one of those in which we are trying to build up resources, and again, we are in ongoing liaison with the Department of Health.

I feel comfortable, though, that based upon the circumstances as I know them today, our operating budget will be able to allow us to maintain the status quo.

MR. DUMARESQUE: Okay, I have no further questions.

MR. CHAIRMAN: Thank you, Mr. Dumaresque.

This is an appropriate time for a coffee break. I ask guidance from the Committee here. Do we have a lot of questions left? Do you want to take a break now?

MR. PENNEY: I have just two questions.

MR. CHAIRMAN: There are not a lot of questions left. Mr. Penney, go ahead. I have a couple of questions I will hold until the end.

MR. PENNEY: If I may direct your attention to Page 68 in this report, the last paragraph on the page, under `Cash Receipts', refers to an outstanding deposit of $5,000, regarding a receivable from one, Dr. Smith. It was receipted but had not been received - at least, that is the way I see it - because the recommendation is there saying that cash receipts should only be prepared and processed when funds have actually been received, and in this particular case, that did not happen. That can't be as blatant as it looks - there has to be some sensible explanation for this.

AN HON. MEMBER: Yes. Mr. Decker is going to try to give you that.

MR. PENNEY: Okay.

MR. CHAIRMAN: Mr. Decker.

MR. DECKER: In this situation, Dr. Smith had an account with us. He was in our dental department and he basically bought supplies and things from us and paid us on a monthly basis. He issued us a series of postdated cheques for $5,000, which we put in our vault. In our KIV files, we put a notice saying: once a month, go take the cheque, write the receipt and deposit it. Around the end of the year, one of the cheques bounced; the person receiving the money receipted the next cheque, and went out to get it but it wasn't there. They discussed it with the person responsible for Dr. Smith's account and they said: `Yes, we have contacted him and he is replacing it,' so he said: `Okay, the receipt is issued, then let it go through, and show it as an outstanding deposit.' In the following month, the new cheques were collected, it went in and it was fine, so it is just because of the year-end thing that this happened, an unique situation.

MR. PENNEY: Only at that particular point in time - the following month everything was corrected?

MR. DECKER: Yes, that is correct.

MR. PENNEY: Do we have very many accounts of that sort, like Dr. Smith's? How unique is this?

MR. TILLEY: It is unique. Dr. Smith is a paedodontist, who specializes in paediatric dental care; he works out of our facility but he has employed two staff which essentially were hired by the Janeway on his behalf, so we invoice him regularly and we invoice him for his supplies. His services are seen by our medical staff as being essential to provide holistic care because we get a lot of children in who have, over the years, major dental problems, so, Dr. Smith - we got into financial arrangements as we wanted some confidence that, in fact, our billings were going to be paid for and the decision was that we would get into postdated cheques.

MR. PENNEY: Are there any other doctors with whom you have gotten into a similar kind of arrangement?

MR. TILLEY: No, there is no other.

MR. PENNEY: The last question: How many dollars did the Janeway hospital receive from public donations last year, the telethon and from any other cash donations from grateful parents or corporations who sent you money in lieu of distributing Christmas gifts, those kinds of things? What would be the total number of dollars received?

MR. TILLEY: Off the top of my head, I can't give you the exact figure but I can tell you that most of our donations now go directly to the Foundation. We had a policy, in years gone by, where if anybody left money to the Janeway in his will, it went to the board fund, but as April of 1994, that is going to be all moved to the Foundation, because they have the mechanisms in place for adequate receipting and so on.

The Foundation would receive its sources of funding from either, In Memoriams, which are donations we receive in memory of somebody because they will say, you know, in memory, for the Janeway, donations may be made and, on average, that is about $30,000 a year, but it could go down to $10,000 and it can go up to $50,000.

The other, without a doubt, biggest source of donations is the annual telethon. This year, as an example, the tote board said $1.833 million. We won't receive $1.833 million; that is what people pledge, and invariably we will collect, on average, 70 per cent to 75 per cent of that. The projections at this moment are that we will receive something in the vicinity of $1.3 million or $1.4 million of that.

The other significant campaign the Foundation goes through is the annual Christmas appeal, and on average that puts in about $100,000 to $130,000, so if you add all of that up, the Foundation revenue this year - and last year was slightly different but not drastically - is about $1.5 million in revenue. It has, of course, expenses as well. With respect to the telethon, as you probably already know, there is a significant fee for CBC services; I guess that is the bulk of it; the next largest expenditure item would be telephones, for long distance charges and whatnot, so, in the end, the hospital probably passed over somewhere in the vicinity of $1 million. That million dollars then goes to our board of trustees, who use it as prescribed by the Foundation's mandate, which is to fund capital equipment, capital works initiatives and research.

MR. PENNEY: You obviously anticipated the next two or three questions I was going to ask because you answered them before I had a chance to ask them, and I thank you for that. Could you give us some idea what equipment was purchased out of last year's million dollars?

MR. TILLEY: Mr. Spracklin handles that, personally, but one major purchase that consumed a significant amount of funds last year was cardiac monitors that we have in our intensive care unit, in our operating room and in our post-op areas and that, in itself, was about $750,000.

MR. SPRACKLIN: The other major item that comes to mind is the replacement of our ultrasound equipment. This item was around $250,000 and replaced an older model ultrasound that was bought ten years ago, I guess, or something like that.

We have a regular ongoing program of replacing and upgrading our incubators and we would have up to as many as, probably eight or ten incubators in operation at any one time. It is like operating a laundry, I guess, while a baby is in one of those instruments, there is another being cleaned, because they can keep a baby in that for only forty-eight hours. Then, we always have to have a few on standby because at any moment we could get a call that there is a new neonate patient coming in. So, every year we are in the process of replacing those at the rate of two or three a year, depending on how much money we have available, and they, on average, run from about $15,000 to $20,000 each. So these are the types of things we are buying on a regular basis.

MR. PENNEY: The $1.5 million contribution, then, that results in a $1 million net contribution to you, is very, very significant to your operations, isn't it?

MR. TILLEY: There is no doubt about that. In fact, over the past ten years - I wish I had these figures in front of me - there has been something like $13 million or $14 million put into the Janeway because of public support. There has been a significant proportion that has gone towards capital works, as I described to you a little earlier, because of the BFL consulting question, where we made some major upgrades to our physical plant to try to make sure that we are able to respond for the next ten to fifteen or twenty years. But the Janeway is a tertiary care hospital, there is no doubt, it is high-tech. We have some pieces of equipment down there that are still operational from day one. We have some x-ray equipment that is twenty-six years, twenty-seven years old. We have other equipment that will outlive its usefulness in the space of seven or eight years.

One of the projects that we have taken on this year is to replace our c-arm which is a portable x-ray unit used in the OR - it is simply unreliable. When you are a surgeon who is trying to find out whether the bone that you have just set has been set properly and they go in and try to take a snapshot of that, only to find out that the darn thing is not working, I can tell you, I hear an earful, so we looked for reliable technology.

MR. PENNEY: Thank you, Mr. Chairman.

MR. CHAIRMAN: Thank you, Mr. Penney. Mr. Crane, no further questions from you? Mr. Hewlett, nothing? Mr. Tobin? Mr. Dumaresque?

MR. DUMARESQUE: Just one final question on 1991 versus 1992, on page 64. I notice you have $500,000 there now for Salaried Physicians as opposed to none the year before. Is there a move in that direction?

MR. TILLEY: We got into an arrangement with MCP whereby - because of the volume of patients that certain specialists were seeing, they were not able to justify an income on a fee-for-service basis. So what we have gotten into is a salaried arrangement with them, and we invoice MCP for their approved positions.

The question about whether we are heading in that direction, there is no right or wrong answer to that other than to say it depends on the circumstance. We have a lot of fee-for-service physicians who use our facility and, of course, when you are operating on that basis, you tend to move things more quickly. On a salaried basis, there is not the same incentive to go through the volumes, albeit, it takes away the fact that somebody can keep generating income on top of income and so on.

We have some specialties in the hospital that are essential to our operations: pathology, for example, neurology and anaesthesia, which we found to be more cost-effective to go on a salary basis. When you go on a salary, of course, they cut into the same benefit packages that staff does, so they get annual vacations. So, all of a sudden, we are going out looking for an anesthetist to cover for three or four weeks and we always have difficulty in getting some of those specialists. It is not a simple matter of going to the General Hospital and saying, `Have your anesthetist come down here' - most adult anesthetists would not want to anesthetize a child, because the circumstances are quite different. It just happens that at this point in time, in those areas, it has worked to our advantage.

MR. CHAIRMAN: Thank you, Mr. Dumaresque.

We have covered most of the items, I think, that are here, and I am not going to belabour them - just a few general comments. Every time we have a board here I seem to make a sermon as it relates to public tendering and the accountability function of that and the rationale for it. As I said to the group we had here this morning, it is not only important that procedures may be followed, they must also seem to be followed. In many cases here, there appears to be some serious weaknesses and I appreciate the fact that you have undertaken to address some of those. But it is very, very important that the Public Tender Act be followed. We have had many groups who have come before us, who basically said: But we could get better prices - for example, it was said to us this morning - by taking another procedure. That is not an excuse for not following the Public Tender Act. Government, itself, has found cases whereby following the Public Tender Act to the limit has resulted in a higher price, a higher cost to government, nevertheless, the public interest is protected and you can document that.

In many cases here, you have not been able to document the fact that for purchases less than $5,000, you did - you tell us you did - solicit three prices and choose the best one. Similarly, there were some cases here, I think, of over $5,000, where tenders weren't invited. By way of example, just look at the plastering tender here. There are actually four invoices, and your explanation given is that the charge was to cover the cost of plastering a hospital for the month of June. There is no rationale, no reason in the world that I can see, why tender could not have been awarded for that. It was more than $5,000 so it really should have been tendered.

I have to question whether, in fact, you received three prices on it. Since the work obviously was done and the four purchase orders were issued on the same day, 11 July, all of them to the same person, after the work was done, therefore, I can't see how there was any attempt to obtain three prices and choose the best price. I will give you an opportunity to respond to that, but if what I am reading into it is accurate, then that is a clear violation and is not following the Public Tender Act whatsoever or even inviting quotations; it is a blank cheque to that particular company. The other thing I would do is question - and maybe I am wrong but, you say that it is a single source, the only person who could provide that sort of hard plastering. Is that true? I find that -

AN HON. MEMBER: We have since confirmed that, Sir.

MR. CHAIRMAN: Mr. Tilley.

MR. TILLEY: We did go to public tender, after the Auditor General had completed the audit just to confirm that what our staff was saying was accurate and, in fact, they were accurate. It was a single source and the price per hour jumped.

MR. CHAIRMAN: Jumped - I realize that; you told us that already.

MR. BAKER: Mr. Chairman, that is the Conway family of whom we read in the newspaper, the only family in Newfoundland, apparently, doing that type of plastering. It is going back some three or four generations in the Conway family and they are the only people doing it. It is a very specialized item, apparently.

MR. CHAIRMAN: Nevertheless, the fact is, the purchase orders were issued afterwards. That doesn't provide much management and control if the work was done before you knew what the cost of that work was going to be. If you had issued four purchase orders on the first of June, to cover a quotation that was given in writing by that person or that company on the first of June for work that is to be performed this month, or if you had a standing offer which is something that we discussed this morning as well, a standing offer from that company based on a certain minimum and maximum number of hours, I think that would be a more acceptable approach.

I am going to ask the Auditor General to respond to my approach to that in a moment, to see if there is any problem from that point of view but, certainly, from an accountability point of view and a financial management point of view, knowing what costs are being incurred, why they are being incurred, would certainly appear to me to be far more acceptable than issuing purchase orders the following month for work that was done the previous month.

Am I going out of bounds here? I asked this morning and I ask again this afternoon: Do you have a problem or, is there a problem in the Financial Administration Act, with this hospital, for example, inviting a standing offer for plastering services with certain specifications and limitations on amounts that could be applied in this particular case?

MS. MARSHALL: Standing offer agreements are quite acceptable. I think you might have mentioned purchase orders being issued after the fact; that would not be an acceptable purchasing practice, but I would just like to say, in the area of public tendering, while I realize that there may have been valid reasons for not going to public tender, nonetheless, the Public Tender Act requires that a certain procedure be followed, in that, the House be notified of purchases which have not gone to public tender, so the hospital still did not follow the Public Tender Act.

MR. CHAIRMAN: No, absolutely, and this is what I said in my opening remarks, I think, that this is the final step in the accountability process. Unless the House of Assembly, and the Public Accounts is one branch of that, has access to the information, is informed of any exceptions that take place, then the Act has not been complied with. Do you want to comment, Mr. Tilley? By all means.

MR. TILLEY: Just to say, Mr. Chairman, that in fact, that is what we have entered into with the Conways, a standing offer; we have asked them to quote and give us an hourly rate for a specific period of time. We have also done that with other items that we use on a regular basis. Where we can't be specific in the volumes, we give them a range and then say: Give us a quote per unit or what have you.

MR. CHAIRMAN: Even with a standing offer you still need to have him provide you with an estimate of the number of hours that will be required for this particular piece of work, have that on file, have that documented, so you know we are committing ourselves for fifty hours work this month, or thirty hours work, or approximately. Some variation from that is acceptable, obviously, but you need to have that control, so that person who is sitting there trying to balance a budget knows how much has been committed.

MR. TILLEY: You are absolutely right.

MR. CHAIRMAN: So I don't want to belabour that, other than to say that the whole purpose of these hearings is to bring forward these things - these concepts.

There is no evidence here that I can see of any misappropriation, or any intent to misappropriate, or anything of that nature, in fact. The board seems to be relatively well adjusted, as I said earlier, but it is important to follow the procedures and to be able to document.

Obviously, many boards and agencies such as yourselves are before the Committee for the first time. As you indicated, this is the first time, I think, that the Auditor General's Department has audited your books in twenty-three years?

MR. TILLEY: Twenty-seven years now - this is the first time.

MR. CHAIRMAN: Twenty-seven years? So this is a new learning experience for you, as you said, as well. I think that is one of the important things that has come out of many of our hearings, that many boards and agencies are starting to realize the importance of compliance with the Act, the whole gamut of the accountability process, where the boards and agencies fit into it, where the House of Assembly fits into it, and our role and responsibility to taxpayers to ensure that taxpayers' money is spent in accordance with the wishes of the taxpayers and in accordance with the Financial Administration Act. If we have accomplished that today, then I think we have had a successful day.

With that, let me ask the Auditor General if she would like to make any closing comments. I think she just did a moment ago, but -

MS. MARSHALL: That's right, no further comments, Mr. Chairman.

MR. CHAIRMAN: Mr. Tilley, have you any further comment?

MR. TILLEY: Only, Sir, to say thank you for this, and, I guess, thank you to the Auditor General. Nobody likes to have their dirty linen washed in public, but we are a public organization and we have a responsibility to ensure that people view us as a very credible organization.

I have a lot of confidence in our staff and, as I said, this has been a learning experience. All the decisions were made in good faith. There are improvements that we can make, and we will make them.

MR. CHAIRMAN: Mr. Tilley, Mr. Baker, the staff of the hospital, the Auditor General, staff of the House of Assembly, and my colleagues, thank you all for your appearance today, and for your frankness and forthrightness in answering the questions.

On motion, the Committee adjourned.