The Committee met at 9:30 a.m. at the Glynmill Inn in Corner Brook.

VICE-CHAIR (Mr. Tom Lush): Order, please!

I think we are ready to start. The Chair, Mr. Byrne, is a few minutes late, so we will get started. I think everything is in order, is it? There is no swearing-in, or anything, of any new witnesses?

I will just start things moving with a couple of questions and then leave it to other members. I just want to go back to the top of the Auditor General's Report again, following on from the former chairman's remarks yesterday morning, when he mentioned `perception'. I want to make sure that members are given a chance to respond in a full manner to the Auditor General's remarks.

Perhaps we should make it clear here that I think, for the most part, the Auditor General's Report is in reference to the old board rather than the new one, and I want to make that distinction. The Auditor General's Report, in my view, is certainly a condemnation of the way the Board operated mainly in terms of its loans, in terms of the non-compliance with government regulations, and I think we have been certainly assured here that most of these things have been changed and that the new board is making every attempt to govern itself by the Hospital Act, which apparently was not the case previously, when the Board gave primacy to their own Act.

Having made that opening remark - and I would like for somebody to respond to it - I just want to ask the Board: they certainly must have been aware in the early 1990s of, not only the Provincial Government's determination, but the determination of every government in Canada to wrestle with its debt to get rid of its deficits, to have budgets that were balanced. Considering that, knowing that that was the determination of the government and knowing, too, in order to achieve a balanced budget that they had to have the co-operation of all Crown agencies - you could not have Crown agencies going off in every direction when it was the determination of the government that all agencies, health boards included, were to have balanced budgets. And certainly, this must have been an understanding of the health board here, and yet, we built up a debt of borrowing $4.5 million.

In view of that, I ask the Board: Do they believe that they were acting in accordance with government directives when they proceeded to build up a debt of $4.5 million?

MR. JOHN MULLINS: That is a well-put question, Sir.

I think we felt we did, and over the years, I think we made a concerted effort. And if you look at the public furore in this area in recent times - well, not very recent but the more remote recent times - you will see that we did make a lot of cuts and a lot of changes.

We explained how this debt was built up. I don't know how to respond to you. We could have, for example, I suppose, not put in the CT scanner; I suppose we could have not done that, despite the fact that a million dollars had been raised locally to pay for it. We had to put it in, you know, we had to get that money, it had to go in once we had it.

Now, if government put its third in, we put our third in and the public put its third in, but we just did not have that kind of a chunk of money at the time. As far as the other component of that debt is concerned, you are talking $4.5 million and the other big chunk in that, as Dennis went through in some detail yesterday, was mainly this question of various attempts to promote physician services in this area in Western, in particular, in the form of loans, particularly bursaries which were a very big item for a number of years, and again, I do not know what to say to you. We could have stopped that, I suppose, we could have not done that, you know.

Your point yesterday, or somebody's point, was should we not have stopped doing the fringe benefits things earlier? Perhaps we should have, but they were done for a reason in the beginning and we felt the reason was still valid. So, I do not know really, how to answer that question. Yes, I suppose we could have not done these things, you know, but that money went into services for the people of this area and the evidence is there to substantiate it, there is no question of that. So - that does not answer your question but I am not sure I can.

MR. LUSH: I was just wondering, you know, in building up and accumulating that kind of a debt, did the Board not have some plan in mind as to how they were going to recover this money?

MR. MULLINS: Well, the only plan - I am sorry; I interrupted.

MR. LUSH: No, that's okay.

MR. MULLINS: No. Obviously, the only way we could write off or amortize that debt was if there were substantial monies coming from the Department of Health, I mean, we could put some money into it because we had some minor resources. By that time, what ever money we had had over the year, the bulk of it, anyway, was gone into various good works or otherwise. But that is the only way I can see now, looking back on it, and I think that was recognized at the time and we were writing it off. We did have an allocation in our budget to write that off, which Dennis could explain in more detail, but it was there. So that was recognized, it was not hidden. It was wide open, everybody knew it, and there was money provided in the budget to write it off. I do not know what more I can say about that.

MR. LUSH: The Board certainly must have understood that if health boards and other Crown agencies were not following government directives and were not co-operating with the government in terms of operating in terms of operating debt-free and operating without deficits, that the Provincial Government was never going to be able to achieve its objectives.

MR. MULLINS: The question of deficits, as I said yesterday, and I do not know how to say it otherwise: deficits were common in the system, although officially I never knew that, because this information was never shared among boards. It was kept very close to people's chests, but one knew from hall-way conversations and so forth that there were deficits around. As I said to you yesterday, if you have a hospital going and you have a budget, you can see, you can project - when we knew this, we could project that we were hitting that budget or we were on budget or we were going over budget. And most years, in my time anyway, we were on or close to budget. It was only toward the end that we started to get deficits, as I recall, and I cannot remember the exact -

But the question remains: What do you do - what exactly do you do? If you have made a commitment - as I said to you yesterday, in negotiation at the beginning of the year, you were told, or, you made a commitment, either one and I take full responsibility, I am not going to sit here and say, the Department of Health dictated to us, at times they did but we agreed with what they said, after acrimonious debate, as we did in the case of the twenty-two beds. If we agreed to shut those beds and based our budget on it and they did not get shut, then a deficit starts building up and, not me, not God, not the Board or anybody else could stop that, it is a process.

What do you do, go and shovel people out on to the street? What exactly? You tell me, I do not know. I sat there at many, many meetings and I was familiar with what was going on, I do not know what to do. How do you turn this thing around once it starts? and, to compound it sometimes, you would hear that we did not get a budget until well along in the year, that was not uncommon, you would not have your budget until well into the year. It was not uncommon, that you wouldn't have your budget approved until well into the year. That wasn't unheard of, you know.

Again, I am not blaming anybody for this. Circumstances sometimes do funny things. What I am saying to you is that if you have a budget, so much of it is fixed. I know we can make a fuss and a racket about loans and the interest on them, and which fund it should be in, but that was not germane to the major problem. How do you turn this thing around once it starts? How do you turn it around - I don't know - without shutting major services?

MR. LUSH: A final question. In view of that - you, yourself, just mentioned loans and advances, this kind of thing - in view of those circumstances peculiar in that kind of a deficit, it seems to me that the public perception is that carrying on those kinds of programs of advancing loans to employees, and various other benefits, that this was a bit extravagant under the circumstances.

MR. MULLINS: Fair enough. The loans get a lot of play because they come up with a nice, big number, but the actual cost is nowhere near, obviously, the interest or some portion thereof that you can impute to that loan. The loans were all repaid, and we felt that the full range of loans we offered were done for very valid reasons, and there is no disputing that. The only ones that anybody around or any of you people were prepared to dispute are any loans we may have made to employees. I don't think any of you are going to stand on your heels and say we should not have helped doctors locate here. Is anybody going to say that? I don't think so.

Again, I understand what you are saying. I am very acutely aware of perception. My problem with perception is that there are substantive major issues here and, unfortunately, some of the less substantive issues are being mated with them, and that has been thoroughly confused. The question alone is (inaudible) nice big number. (Inaudible).

MR. LUSH: I cease my Chairmanship of the meeting now.

MR. MULLINS: I am sorry?

MR. LUSH: I cease my Chairmanship. Before I do, though, I am going to recognize the first speaker, Mr. French. Then I will give the Chairmanship over to the Chair.

MR. FRENCH: Thank you, Mr. Lush.

I listened pretty intently yesterday, and again this morning, to comments as to maybe what should we do; what shouldn't we do? Is this a large amount of money; is this not a large amount of money? I say, I have absolutely no problem with paying a fee to doctors to get them to relocate here, and I don't think anybody in this room has a problem. I guess I have a problem with personal loans.

Somebody mentioned here yesterday that doctors had not had a raise in so many years. Well, I can tell a few people that I know civil servants who would love to have been in that position. I know civil servants who take home less money today than they did five years ago, but they are living within the guidelines that the Government of Newfoundland and Labrador laid down, and I would suggest that this hospital board should have done exactly the same thing. Now, whether I am right or whether I am wrong, that is fine, but that is my opinion. I am going to stick to that opinion.

Perception is everything, and the perception I had on reading this report, to be quite honest with you, I don't know if my mind is really changed yet or not. And I am going to go so far this morning as to say that, no, it has not changed.

I am going back on a question because it was answered yesterday but it just leaves me still in a state of confusion. I am going back to the question: the Auditor General noted it during 1994-1995 and 1995-1996, the corporation paid $374,714 for engineering services for a capital project. I, again, want to know: number one, who received that money. And I want to know again, so that maybe I can be a bit clearer in my mind, why we did not go to public tender for that particular piece of work. I have been a municipal councillor. I know a little bit about engineering fees. I know my colleague to my right here certainly knows more about them than I do. I would just like to know why, again, we gave this out. I would like to know who got that contract. Again, it is totally outside of the Public Tender Act and I would really like to know exactly why it happened.

MR. DENNIS WATERMAN: If I may try to respond to that, Mr. French. As I mentioned yesterday, I certainly attended a number of those meetings where that situation was discussed, the whole project and the project you are referring to was the DVA unit. The committee, again was set up with representatives of DVA, representatives of the provincial Department of Health and representatives of the Board of Western Memorial Hospital Corporation, along with representatives of the Royal Canadian Legion in the Corner Brook, Western Newfoundland area. We essentially sat on the committee as advisors to the group.

The decisions that were made by that committee were joint decisions that were made around the committee table as all three parties were vested with the authority, as we understood it, to make those decisions around that table. The question of engineering fees, first of all, the disclosure as to who it was, was, Atlantic Engineering. It is a corporate firm. I cannot tell you for sure if all of the fees were paid then because I understand there was an architect engaged from St. John's - and I cannot recall at this point, but I can confer with some of my colleagues in the room if you want to know the exact answer. But there was an additional architect hired from St. John's from one of the engineering firms out there and I am sure, the cost of those architectural services was included in the $370,000 that you mentioned.

I guess the bottom line on that one is, the Public Tender Act as you know, is silent on that particular issue in terms of professional services, and the group did their own research work in terms of who was available locally, based upon the policy that we discussed yesterday as to how we distributed engineering and like services throughout the region. The firm, Atlantic Engineering was engaged to provide the preliminary engineering work on the DVA unit. For those of you who are not familiar with that, the DVA unit was a renovation of the old O'Connell Centre which is the old Western Memorial Building that was established back in the late 1940s early 1950s, with substantial renovation costs to redevelop the first floor and the basement floor of that unit and the total project cost came in somewhere around $3 million. All three parties had a contribution towards the cost of that facility.

The engineering work was carried out by the local firm at some point after a substantial amount of money was spent on that. At the committee level, there was a lot of discussion about it particularly with DVA and I guess the other parties involved as well, where there had to be additional engineering work carried out because the work that was done in the first place did not come up to the level of satisfaction or the standards that DVA felt should be in the unit. So, after a substantial amount of money had been spent, there was an additional architect engaged from the St. John's area who worked with the local engineers here in redesigning that and obviously, there was a substantial amount of additional cost generated in that project as a result.

MR. FRENCH: So this $374,000 was the total engineering cost for that particular project?

MR. WATERMAN: That is my understanding, yes. I do not recall the exact figure but I know it was in that range.

MR. FRENCH: Okay. Did I hear you correctly when you said this was a three-million-dollar project?

MR. WATERMAN: The final landed cost of this project was about $3 million.

MR. FRENCH: And that we shared, one-third, one-third?

MR. WATERMAN: Roughly. It was not exactly one-third, one-third. I do recall that DVA's contribution to it was $1.14 million, the Corporation committed I think it was $900,000 and the provincial Department of Health committed the balance of it.

MR. MULLINS: Just to make a comment on that - Dennis just said it but I participated in some of the earlier meetings on that and I was kind of gone from the scene toward the end of it but, the point about the change in the middle of this is significant in terms of the cost. We started out with one firm who did the design, which was not acceptable to DVA, as I recall, and another architect was brought in from St. John's who was more familiar, we were told, with DVA's requirements and so forth and so on, and there was considerable redesigning to meet the change and that (inaudible).

MR. FRENCH: Well, I guess hindsight is 20/20 really. If you had gone to Public Tender in the beginning here, then maybe you would not have had to bring in somebody else. Hindsight is always 20/20.

MR. MULLINS: Indeed it is.

MR. FRENCH: I would like to move on.

I also read from the Auditor General's Report, on page 177, Summary of Financial Information by Department. For each expense group it shows that outdated stock increased in 1994-1995 to $88,771 from $8,919 in 1993-1994. To me, anyway, this seems to be a massive increase.

I want to know, number one, has there been a procedure put in place so that we don't have this amount of drugs sitting around at the end of the year or at the end of a certain period of time we have to discard then. I guess another question is: Why did this happen? Why was this allowed to happen, where we would have $88,000 worth of drugs that we may have to - and the way I read it here, we certainly did have to get rid of them, and they were just outdated. I just want to know why we would have this amount sitting around. It was a massive increase from the previous year. I also want to know, has there now been an inventory management system put in place that would actually control the drugs that are now purchased for the hospital?

MR. WATERMAN: I'm sorry, can you give me the reference for the page on that? There are a couple of issues of inventory and I would like to respond to each, because there are two specific issues there.

CHAIR: Page 177.

MR. WATERMAN: One seventy-seven.

CHAIR: Yes, in the top heading, 1993-1994, and 1994-1995, you come down to Item 24, Outdated Stock, Drugs. The bottom line in 1993-1994 is $8,919, and in 1994-1995 it was $88,771. I think that is what he has referred to, Mr. French, was it?

MR. FRENCH: Yes.

MR. WATERMAN: On that particular issue, the question of outdated drugs is, I guess, as a result really of changing treatment protocols and so on by the various physicians throughout the organization. There is a procedure in place which, as much as we can effect that, when drugs are ordered and are not used for whatever reason, there is an attempt made to get credit back from the supplier. We charge these off when they are no longer in use or not on the active formulary of the organization. Any drugs that are surplus to that are considered outdated stock.

It doesn't necessarily mean that they are automatically written off or forgotten about. We do attempt to get credit back where credit is applicable, and many times when treatments change, that is quite possible, that we are dealing with the same drug company perhaps that is supplying a new treatment, as opposed to the old one, and quite often we are able to get some of these credits through. I can't say for sure that we have got them all through, but it is an issue that happens quite frequently. Again, the numbers are high, I will grant you that, at this particular point, but I would suggest that it is an uncommon occurrence, that these kinds of issues normally don't happen.

Our drug inventory is controlled substantially well. We have never had any major concerns about the physical control of our drugs or the accounting distribution for the cost of drugs. Our pharmacy department is well aware of the requirements, certainly in terms of any legal requirements in terms of narcotics and so on, and also in terms of what their obligations are in the level of drug inventories they are able to maintain, and how they handle any obsolesce in terms of stock and so on.

As a matter of fact, we go to great lengths at our particular organization, certainly at the time, and we continue to do so, to ensure that if stock is issued to the floor in terms of medications, and those medications are not all used for whatever reason, whenever and wherever it is practical those medications are restocked and reissued. We obviously have to take into consideration certain packages that may be open and not able to, but when there are those medications that can be used, we do in fact (inaudible) and we put them in at no charge, and they are reissued on a no charge basis when that prescription calls for it again.

We do take every concern, every control, over drug inventory and inventory cost. The level of drug inventories is monitored on an ongoing basis, and we try to keep our drug level overall at a certain point.

The question of what goes on the formulary is a question that is debated amongst the various physicians that are heads of various disciplines. They meet as a group and with the pharmacy group if they want to introduce a new drug. That drug has to be subjected to trials, but we have to have evidence that trials have been done so that the drugs are available. If it is a replacement drug, then certainly the drug that it is replacing, whenever and wherever feasible, is used up completely before that new drug is brought in.

We go to great lengths to ensure that we don't overstock on drugs, we don't incur any obsolescent costs, and if there are obsolete drugs that, for whatever reason, are no long being used, we try to get credit back from the supplier of them. I think our inventory procedures in terms of drug control are quite adequate. They have been tested many times by external auditors and external agencies such as the - the drug protection branch, I want to call it, but I am not sure that is the correct name, where they come in and do audits on narcotics and so on, and our procedures have been sound and we have never been subjected to any undue criticism in that area.

MR. FRENCH: Are you telling me, then, that in actual fact the outdated stock, some of that money was recovered by drugs being returned to suppliers? Is that what you are telling me?

MR. WATERMAN: What I am saying is that our normal procedure is that we will try and get credit for all of that. I would have to go back and investigate to see how much we actually got it for, but I would go out on a limb and say, yes, we have recovered some of it. I cannot tell you whether it was 10 per cent or 90 per cent, but if it is a salient piece of information we will certainly look into that. We can reply if you wish by a written submission.

CHAIR: That is certainly acceptable.

MR. FRENCH: Can I just ask the Auditor General: Did you find anywhere, when your people did the audit, any of this being recovered?

MS MARSHALL: Any credits (inaudible)?

WITNESS: No, we didn't look at that area. (Inaudible).

MS MARSHALL: (Inaudible).

MR. FRENCH: Then could I ask you, Mr. Waterman, if you get a chance, if you would go back and forward to the Committee, to Mr. Byrne, and he can certainly see that I get it. I am concerned as to if, indeed, we did recover any of our money, or if we did not.

Again, because it was pointed out here, I trust that there is some kind of a system now in place that would prevent it from happening again.

MR. WATERMAN: Certainly, Mr. French. It is not a new occurrence, as such. As I mentioned earlier, we have always been very, very selective and careful about procedures as they pertain to drugs and drug inventories, for a lot of obvious reasons. Certainly this built up as a result, I would think, of some major change in treatment that we will look into and certainly see whether or not the cost was recovered on that, and what credits we got on it. Then we will report that accordingly and, as always, we will continue to monitor drug levels and drug cost levels and ensure that the drug formulary and the drug inventory itself is basically relative to national standards, which is where we try to keep it.

MR. FRENCH: Because if you did in the end have to write off $88,000 then, to me, it's $88,000 we did not have for health care somewhere else. It is $88,000 that maybe we would not have had to borrow in the $4.5 million.

I have just one other question and then I will defer to somebody else. You said, or somebody said yesterday, you now have an operating line of credit of $13 million, I believe.

MR. WATERMAN: Yes, Sir.

MR. FRENCH: And we had bank loans, I believe, in the vicinity of $4.5 million; am I correct?

MR. WATERMAN: That is included in the line of credit.

MR. FRENCH: So that would now be included in their line of credit?

MR. WATERMAN: That is accumulative (inaudible).

MR. FRENCH: Has there been any forecasting done, say, to the year 2000 as to what the total deficit would be for the Western Memorial Hospital, or for the Western Memorial Board?

MR. WATERMAN: Yes, Sir. As recent as the Finance Committee meeting of three weeks ago, we delivered a forecast to the Board outlining where we were cash-wise, what our operating position was, what our projected deficit position was. We rolled in the additional $2.3 million that was committed by the Department of Health. We put forward a position as to how we felt the Board should deal with the $4.5 million one-time working capital infusion, and did a projection to the end of the current year based on where we were going and what the impact of this would be if there were no significant changes to the end of the upcoming year.

Obviously, we are looking at a projected deficit in the current operations this year of $5.2 million, which will be lessened somewhat by the $2.3 million that has been approved, which leaves us with approximately $3 million for the current year which would be reduced, if nothing else changed, to about $2.6 million next year. So if you project those numbers forward with the operation remaining constant and no other program changes being made, then obviously, our deficit is going to increase correspondingly to that.

Those numbers were presented to the Board with a view to highlighting the urgency of effecting an approach to the Department of Health and ensuring that we do get a debt management plan in place and get the organization back on some sound financial basis as soon as possible.

MR. FRENCH: So that is now being done, a debt management plan?

MR. WATERMAN: The debt management plan, we understand, will be coming from the operational review, but what we have said to the Board through the finance committee is: Let us go to the Department of Health now and get some things moving now in terms of covering off our position at the bank so that we do not have to continue on in this vein. First of all, let us get our cash position in order, and secondly, start looking at some programs that we can begin moving on now to get this thing back to some sense of normalcy.

We are very conscious that the situation is not an acceptable situation. It is not one we want to live with. Unfortunately, at this point, we have to wait for, I guess, our masters, basically, or funding masters anyway, to approve the kinds of things that need to be done.

MR. FRENCH: Is this being done in-house, or is it being done by the Department of Health?

MR. WATERMAN: The initiative has started in-house, and the Board at its last meeting has agreed we would approach the department to try to move on this. A letter has already been issued by the interim CEO on behalf of the Board to the Deputy Minister, I believe, encouraging some movement on this already within the last couple of days. So yes, we are aware, and it has been recognized it is an untenable situation.

MR. FRENCH: I will defer to another member now.

CHAIR: Mr. Smith.

MR. SMITH: Thank you, Mr. Chairman.

I would just like to take it in a different direction for a while, if we could. Because one of the things we have been listening to for the last couple of days in recounting events that took place over a number of years - and we have had admission that there were certainly practices identified by the Auditor General that the Board and the Board representatives are indicating or accepting were certainly questionable now in the light of day.

The question that comes to my mind is this. I recognize that a board would operate with a fair degree of autonomy, but during that whole period, what were your requirements in terms of reporting to the Department of Health? I mean, were you expected on an annual basis to provide audited statements, and how detailed would these be? Because one of the concerns that I have - and I recognize the need for a certain level of autonomy, but obviously, this case demonstrates, at least it demonstrates to me, that there is a need for a further check. Because obviously, in this instance here, just leaving it entirely in the hands of the Board has not been the answer, at least in this instance. I guess, as a representative of the general public, one of the concerns I would have is: What do we do, as I asked yesterday, to make sure that there is not a recurrence of this sort of thing? and what more controls we can put in place, if that is indeed necessary.

I guess before getting to that, could you just inform me and the Committee as to what were the requirements. What were you required to do in terms of reporting to the Department of Health during that period?

MR. WATERMAN: The Department of Health has prescribed a standard reporting that each organization is required to comply with on an annual basis, on a monthly basis as well. There is a monthly submission of information which generally goes from the organization into the department so that the department is able to compile its financial position vis-à-vis, I presume, its budget as it pertains to each organization.

Up to the time this particular audit was done we were certainly on line in terms of our monthly reporting. I grant you, because of circumstances we talked about yesterday, we are somewhat delinquent in it right now because of reorganization but, that is not necessarily salient to the issue.

The reporting requirements from the Department of Health require the submission of the annual audited statements of the Corporation into the department, a copy of the management letter from the external auditors, the HS1 and HS2 calculations. The HS2 is basically a financial report which is done on a national reporting format for Statistics Canada. A copy of that is submitted into the department as well, along with a detailed breakdown of expenditures by particular cost centres. That must obviously reconcile with the audited statement.

That information is filed on an annual basis. I think the Auditor General's department gets a copy of the statements and the management letter as well. I cannot speak for sure on that, but my understanding is that (inaudible). As I said, the monthly reporting does take place on a routine basis as well.

MR. SMITH: During that period, the independent auditors, I would assume, having tremendous respect for that group, would have picked up on some of the things that appear in the Auditor General's report. Can you confirm that?

MR. WATERMAN: Again, without being specific, (inaudible) but yes, I mean (inaudible) were certainly picked up. Again, those things were identified for the most part anyway. I cannot say that they were all, as per the Auditor General's report, identified. Many of the issues certainly were identified in management letters as well. So these management letters were -

MR. SMITH: We can assume then that the Board would have been aware on an ongoing basis that these concerns were being expressed by your external audit and these things would have been identified.

MR. WATERMAN: At the risk of generalizing, I can say some of these concerns certainly, but I cannot say these concerns in general. Because again, I am not sure which ones you are referring to specifically.

MR. SMITH: During that period in time, were there questions that were coming back from the Department of Health? Was the Board being challenged on some of these things? Was it being asked? What are you planning to do in this particular instance about some concerns here? Was there any follow-up from the Department of Health?

MR. WATERMAN: Yes there was. The follow-up was not necessarily of an official nature, but certainly, in discussions that we had, and periodically we would meet with officials from the Department of Health. We would talk obviously about budgets and various negotiations and so on in terms of the funding levels that were provided. Certainly, the financial situation of the Corporation was an issue which came up from time to time and we recognized that that had to be dealt with.

I certainly don't want to speak on behalf of the department, but I think it is fair to say the department recognized there were financial difficulties in that area. We had some discussions with the Deputy Minister on this, and I'm sure the correspondence indicates that there was some concession made by the Deputy Minister as an attempt, at the end of two particular years anyway, to help alleviate the situation.

CHAIR: Could I just ask a fairly quick question? The Department of Health's involvement from the financial analysis point of view: Is there a systematic or regular or consistent sort of relationship between the financial administration of the Western Health Care Board and the Department of Health's financial analysis division that would, I guess, generally have an overview of what the financial situations of certainly not only this Board but all hospitals in the Province would be? Do you meet regularly? Do you get together with the Department of Health, say, every quarter or every two months for a day or two days to go through the financial operations of the Western Health Care Board? If you do not, why not?

MR. WATERMAN: There is certainly a relationship between the Corporation and the Department of Health in that we certainly have many discussions back and forth on a formal and informal basis. In terms of a quarterly review as you suggested, where we sit down with the Department of Health, no, that hasn't happened on a routine basis. It has happened on a periodic basis from time to time -

CHAIR: Periodic. By periodic do you mean once a year or once every three years?

MR. WATERMAN: Probably it would be about once a year or so, and generally tied in with budget discussions.

CHAIR: It would be around your budget times in terms of - yes, okay.

MR. WATERMAN: Yes, and many other times on an ad hoc (inaudible) arrangement if issues came up. Certainly, the level of co-operation offered by the Department of Health has been great. We have never had any problems that way. We have often had problems in terms of determination of the numbers, and discussion and arguments there, but in terms of meeting with the department and the department being amenable to suggestions that we might put forward, I think the level of co-operation has been quite good. We certainly as a Board, and as, I guess, an administrative part of the Board, we have never had any major concerns about our relationship with the department in that respect.

CHAIR: Prior to the Auditor General's report, then, would it be fair to say that the relationship between the Board and the Department of Health would have been somewhat an arm's length relationship, inasmuch as the Department of Health would not have routinely or occasionally come in and looked at your financial situation and determined what had caused certain financial (inaudible) and made their own determinations. They would not have gotten that directly involved. Would that be a fair assumption?

MR. WATERMAN: That is a fair assumption - not on a routine basis, but - and again, I do not want to speak for and criticize the department, but there is an auditing program that the department undertakes. I guess, like all agencies and so on, that was not done (inaudible).

CHAIR: I am not looking for anybody to criticize the department. I am trying to determine for myself what was the nature of the relationship.

MR. WATERMAN: the bottom line -

CHAIR: Could some of the practices that the Auditor General had found in her report been picked up or uncovered or dealt with at an earlier date that may have caused some of the concerns raised here, and admittedly by the people before us called as witnesses, that may in fact not happen. I'm trying to get some understanding of what the relationship between the Department of Health and the Corporation was - that probably they would have seen some of this and raised red flags with the executive and possibly with the Board with a view of stopping it, you know?

MR. MULLINS: I would like to speak to that a little bit. It depends on what you are talking about. This is essential to what I said from the beginning here. If you are talking about the question of a deficit or negotiating a new budget, yes, we were very close. I do not know if `very close' are the right words for it. From a board's point of view, we would not be in every month to see the Minister of Health. I went in to see the Minister of Health on a number of occasions over the years when there was some particular issue, or generally around budget times when there were cutbacks in the air, and one went in and fought one's position, this sort of thing; or when there was some other issue that it was felt necessary you had to go right to the minister.

We did that many times over the years, but there was no routine for it. I do not know how there could be. At one time there were some fifty or sixty boards.

WITNESS: Thirty-seven. Whatever.

MR. MULLINS: The individual in that chair would not see very much if he were going to see everybody on a monthly or even a quarterly basis, you know, so there was no routine.

From the Board's perspective, obviously, I did not personally have time to be in there, anyway. The executives went in - I mean, there was hardly a day, I suppose, that there was not somebody from our senior management in St. John's at the Department of Health doing something or other, something related to health care. It hardly ever happened, I suppose, a day went by, but that was not the case with the Board members. We just could not do it.

So there was no formal system in place of routine regular checks. It was certainly my impression over the years, without a shadow of a doubt, the Department of Health was aware of the major issues facing us. They were not aware that an expense account was in arrears; that they were not aware of, in fact, I was not aware of it until a certain point - but that type of thing. The details of the loans, they would not have known.

CHAIR: That is more (inaudible) in terms of (inaudible).

MR. MULLINS: There are two layers of things here.

CHAIR: That is exactly right.

MR MULLINS: The second layer they would not have known - some of it, perhaps. There was an ongoing discussion, as Dennis outlined, some detail yesterday, on the question of salary augmentation, fringe benefits, et cetera. That went on for quite a period of time. There were exchanges of letters and discussions and so forth. I can remember meeting with a minister on that subject at one time some years ago. There was quite a bit of that sort of thing that would not have been routinely drawn to their attention, I do not think. I think I would be right in saying that.

The major issue of deficits, potential changes to the operation, bed closures and budget positions, I think we had a reasonable rapport with them. I think we knew roughly where we stood and what the problems were. I think, and that is fair, you know. At least it was from my point of view. Maybe I was completely wrong.

CHAIR: Fair enough. The Auditor General?

MS MARSHALL: Yes, I would like to make a couple of comments, both with regard to your questioning and Mr. Smith's questioning.

MR. SMITH: If I could, could I just ask you - because I have a couple of other questions and I wanted you to respond. Mr. Chairman, if I could, I would like to just complete my questioning. Because I think there may be some other things you might want to include.

CHAIR: Fair enough. Go ahead.

MR. SMITH: If I could just go back to the line of questioning that I was doing. You asked me to be specific, and I will be specific in terms of the external audit. Did the external audits picked up on the practice of salary advances and loans? Was that identified in any of the external audit reports?

MR. WATERMAN: Yes it was.

MR. SMITH: Now, did the Department of Health follow up with you at that point in time questioning these practices?

MR. WATERMAN: Not to my recollection. I don't recall it having been a subject that we discussed with the Department of Health.

MR. SMITH: You do not ever recall the Department of Health coming back and questioning that particular practice?

MR. WATERMAN: No, Sir, I do not, until such time, obviously, as the Auditor General's report became an issue. Prior to that, I do not recall it.

MR. SMITH: I would now defer to the Auditor General. The only other thing I would ask the Auditor General as well in terms of the review of the operation of this particular Board, that, you know, I guess the concern I have in terms of being able to make recommendations - because it appears to me that there is a concern here that there is a weakness inherent. And if we do not have a mechanism in place whereby these things can be picked up, and the only time is if your office comes in to do an audit, which is not going to be on a regular basis, we need - and, of course, this case has clearly demonstrated - that there is a need for an additional check and balance to try to ensure that this sort of thing is not happening on a regular basis.

It has been identified here, but we don't know, there may be indeed the other areas where this is happening. And if we are not picking it up until five or six years down the road, we have debt accumulating that ultimately the taxpayers of this Province are responsible for. I guess that is what we are about and that is what we are trying to deal with here. In light of that, I would ask the Auditor General if she could just speak to that issue generally.

MS MARSHALL: Sure, I can make several comments. First of all, we did not see any evidence that the issues that have been raised in my report were also raised by the external auditors. I am not saying that these (inaudible) -

MR. SMITH: They were not?

MS MARSHALL: We saw no evidence of that in our review. In fact, the external auditors did some special work for the Corporation back into the early 1990's. The date on the report is March 31, 1991 - it is a supplementary report to the Board of Directors - and there is nothing in that report which would indicate items similar to the items that I had disclosed in my report.

Another issue I would like to mention is that of the interface with the Department of Health. I have always been of the opinion that the Department of Health does not do enough detailed work within the boards of the various hospitals. While there may be interaction and discussion on various issues, I have always felt that there should be representatives of the Department of Health visiting the institutions and using detailed audit work.

I usually visit these organizations about once every ten years, so if I am not going out and doing the work, and the external auditors are not picking it up, then who is going out and reviewing the hospital boards?

MR. SMITH: I have a question for you. Does it surprise you that this was not picked up by the external audit?

MS MARSHALL: Yes, I was surprised. I was surprised that the Department of Health never picked it up.

I would like to make one more comment that I think is really relevant. The last set of audited financial statements that I have seen from this health care board is 31 March 1995. I have not seen any audited results on that corporation for the last two-and-a-half years, other than the work which I have done. The testimony here at this meeting indicates that the operating line of credit continues to increase, yet nobody has seen any audited financial statements. I cannot believe that for two-and-a-half years, given the contents of my report, and the financial position of the Corporation - even if everything was operating perfectly within a corporation and they only had a problem with their deficit and their operating line of credit, somebody should be reviewing the financial results of that corporation.

I have not seen statements. The Department of Health, I understand, has not seen statements. There is a special review being carried out on the Western Memorial Hospital Board, and that is held up because the audited statements are not available. I just find that is completely unacceptable. I do not understand why that line of credit is going up so much. I would really like to see a set of statements, and I cannot believe that nobody is demanding them.

MR. MULLINS: Just one minor comment. I think you have to recognize and keep in mind that there is a division here between the old regime and the new, and that distinction is about March, 1995 roughly, the end of 1995.

MR. WATERMAN: Can I make a comment on that?

CHAIR: Go ahead, Mr. Waterman.

MR. WATERMAN: I think we went through, yesterday, the reasoning behind where we are and why we have delays in the submission of financial statements. At this point, under the directive of the new Corporation, we did an audit - had an audit done, I should say - as of December 31, 1995, which was the termination audit of all the old boards prior to the merger. That audit has been complete. March, 1996, that was a nine-month audit, obviously.

In March, 1996, there was a consolidated audit done on the Western Health Care Corporation. That audit is essentially complete, with the exception of maybe one or two small issues which hopefully are out of the way at this point. We have met with the auditors recently to just go through those issues, so that audit essentially is complete.

The March, 1997 audit, which is basically the current year, I suppose, in terms of reporting requirements, is well under way. We set an objective that by the end of October we will have those finished and available to the Board.

The plan at this point was to submit these statements to t

the Board as an entity so that we can clear them all at the one time and get back on a current basis, and by the end of October or early November we should be in a position to do that.

There are a number of reasons why we are in delays on audits. I will not go back through those again, but I think I did state yesterday what they were, and it is a very unfortunate situation.

CHAIR: So you feel comfortable that the audited statements for the past two years - because the Auditor General makes a very valid point.

MR. WATERMAN: Absolutely.

CHAIR: And in terms of the concerns raised in her report - and I understand the structure has changed and there are a number of different institutions down there that are within the umbrella of the Western Health Care Board - but in terms of the continuing growth of a line of credit, in view of the fact and the circumstances surrounding the release of her report, you are comfortable that the audited statements she has referred to that we have not seen or nobody has seen will be ready by the end of October-November for the Board? That is correct, is it?

MR. WATERMAN: Yes.

MS MARSHALL: Could I make one final comment?

CHAIR: Yes, and then Mr. Waterman.

MS MARSHALL: If this were a board of directors of a private business, that board of directors would not be satisfied to wait a year-and-a-half for a set of audited financial statements. It is just not acceptable. I mean, this is public money. It is not acceptable.

WITNESS: (inaudible) an observation.

MR. WATERMAN: We have certainly talked to our Board. The whole of the Board is well aware of what the situation is. they are well aware of what the circumstances are. We have detailed our position with respect to these audits with the Minister of Health. She currently is fully aware of the position, at least in terms of correspondence having been filed with the department. While nobody is saying that this is right or acceptable, it is a situation that we have found ourselves in, and we have put a significant number of resources into trying to get this finalized. As I said, we are pretty well on track on it now, but it is unfortunate that it did happen this way.

We would certainly have loved to have been able to meet the requirements, but again, talking from hearsay more than anything, I am sure if you checked some of the other major corporations that have been established in the last year, a lot of those are going through a lot of the same issues. It is not a problem that is unique to this organization.

I would like to comment a little bit on a point that the Auditor General made earlier with respect to the special work that was done. That was done on a pilot project basis as commissioned by the Department of Health at the time to establish some additional reporting which would have been available to the Province, presumably, which would get beyond just the issues of financial reporting, but would look more into the substantive issues that are required to be available before settlements are done. The terms of engagement for the auditors were defined by the Department of Health. That was done on a supplementary basis, and the report for that was provided to the Board and to the department.

That was to be used, essentially, as a pilot for facilitating the settlement process between the corporations and the department. We engaged in that on a two-year basis, for which we received additional funding to pay the cost of it. At that point - again, I cannot speak for what happened to it, but it was discontinued and we cut back to just doing the regular audits. I believe that was the years that you referred to.

MS MARSHALL: But it did not achieve the results that were intended.

MR. WATERMAN: Again, I cannot speak for that, because, essentially, that was an issue which was decided upon in consultation with ourselves and the Department of Health of the time.

CHAIR: Could you elaborate on that for me, please?

MS MARSHALL: What they were looking for was supplementary information along the lines of the type of information I would gather doing my audit. Some of these loans actually existed back around that period of time, but the review never picked up the fact that the loans were in existence. So, effectively, the review did not achieve the objectives that were intended.

MR. WATERMAN: With all due respect, the objectives were established by the Department of Health at the time. The review, as we saw it, and my conversations with the Department of Health at the time, is that it did in fact meet their objectives. Whether they were in line with your objectives, I cannot speak for.

MS MARSHALL: Yes.

MR. WATERMAN: Certainly, there was a level of satisfaction at the point, at that time, that this supplementary audit did in fact address many of the issues that would have been used for settlement purposes. Whether they would have provided the kind of disclosure of information that you would need in order to compile this type of report, again, I cannot speak for that.

MS MARSHALL: The issue is, you know, when will information be provided on the Health Care Corporation if I am not in doing my work. I am only in doing it once every ten years. If the Department of Health is not doing any audit work, and the external auditors are not picking up the issues, then who is going to pick up the issues? Who is going to identify the problems?

MR. WATERMAN: Again if I may, Mr. Chair, I think we have complied with the reporting requirements in the past, certainly up to the time this particular audit was done. We had complied with the reporting requirements as set out by the Province.

CHAIR: Mr. Smith has one last question.

MR. SMITH: Yes, one more question for the Auditor General, if I could. Just following in line with that. As I suggested, Mr. Chair, I think we do have some officials here from the Department of Health, and I think it would be of interest to hear from some of these people shortly. Because I am really curious about this whole thing. I would ask the Auditor General: In terms of what we are hearing here now, in trying to give a level of comfort, I guess, to the citizens of the Province who have been watching this event unfold over the last number of months, to give them a level of comfort that this sort of thing is in hand, that we can control it, and from what I am hearing right now, personally, I do not have a level of comfort that we have the controls in place. I would ask the Auditor General if she has any thoughts as to what needs to happen in terms of trying to ensure that the controls are in place that would not allow or at least, would make it difficult for a repeat of this sort of thing in the future.

MS MARSHALL: Well, I think the Department of Health has a real role here to play. I think they should be visiting the hospital boards more frequently, carrying out audit work and reporting back to the minister. They are the agency that is providing the funding and they are the agency to make sure the money is being expended for the purpose intended. So I do not think they can just hand out the money and then, you know, not look for some sort of accountability from the organization in terms of financial statements and financial reviews.

MR. SMITH: On a regular, systematic basis?

MS MARSHALL: On a regular, systematic basis.

CHAIR: It is a good point. I would like to (inaudible) before we take a break because, recently, in your reviews as well, in the St. John's Health Care Corporation, it was discovered that the Department of Health's financial analysis of that Corporation had been minimal, they are non-existent over a three-year period.

Gerald, have you finished your questioning?

MR. SMITH: Yes, that is fine.

CHAIR: Okay. I do not know if you would like to comment on it, because it is a valid question and -

MR. MULLINS: (Inaudible).

CHAIR: - public dollars, $50 million or $60 million are being handed out to various corporate entities that are funded by public monies and there is no sort of framework in place for accountability or routine sort of interaction between the funding agency, being the Department of Health, and those people, in this case, yourselves, who are responsible for the administration of the money in terms of providing health care services. Go ahead.

MR. MULLINS: I make this comment.

If you wished the kind of detailed accountability that this lady is asking for, you can have it, but it comes with a price. Now, we at Western over the years - and I will address this at some point in this gathering because I have things to say in this area - we cut back in staff and amalgamated jobs and so forth and so on. I think the Department of Health has been likewise decimated. Now, if you want this, you can have it. You can have any detail of surveillance you wish, but you must be prepared to pay for it. It is not going to come by driving somebody from the Department of Health out here and expecting him to work around the clock. You have to put the staff there and spend the money to do it. And one of my regrets when I see all this break upon us now, one of my regrets in my term as Chairman, is that I went along with the idea of amalgamating and trying to cut back, and we should have put plenty of oversight and so forth in place and perhaps the Department of Health should do the same thing.

CHAIR: Mr. Mullins, may I ask you a question: What good are external auditors for if it is not to pick up those sorts of things?

MR. MULLINS: External auditors are not going to pick up, I do not think - look, I am not an accountant -

CHAIR: Well, what are we paying them for?

MR. MULLINS: I do not think they are going to pick up the kind of detail that you talk about here.

CHAIR: As a Corporation, we are going to spend x number of dollars of public funds to external auditors to come in to have a look at how we financially operate and to make recommendations to us. If they are not going to do that and provide that level of service, then what are we paying them for in the first place?

MR. MULLINS: Well, you have to look at how much you are paying external auditors. Maybe if you paid them a lot more you would get a lot more, you know. I am just saying that it is one thing to sit here and say the Department of Health should do this and do that but, that has to be paid for, you know, it has to be paid for.

CHAIR: I understand.

MR. MULLINS: The lady spoke about private industry; I have worked all my life in private industry and I know, I went through changes of ownership, boards and so forth, and I know the kinds of resources that went into doing some of these things. You know, they were fairly sizeable, believe me, and if you want that kind of stuff and that kind of detail and that kind of reporting, you have to put the systems in place to do it. Now, that is it. You can talk until you are blue in the face.

MR. SMITH: I would just like to make another comment on that.

All I would say to that, is that I guess what we have to look at - I mean, it is always a matter of choice. In terms of the Auditor General's report and where we are coming from today, it would appear to me that there has been a significant amount of money that over the years has been expended. There is debt that has accumulated, and if by paying this money up front, it means that we run a tighter ship, that we can get a bigger bang for the buck, then obviously, in the final analysis, to me, it is a good investment. And it is a viewpoint - I guess we could debate it, but obviously, it appears to me, as an outsider looking in on this, there are certainly concerns here.

I guess, the concerns we have, in this instance they have been identified. We know the problem in this area, we are looking at that and we are trying to redress that. The concern I have as a citizen of the Province is that, you know, is this being replicated elsewhere in the Province? Right now, the Auditor General cannot give me a level of comfort that we do not have other corporations out there who are in a similar situation, and that causes me concern. I think what we need to do, is to make sure that we have some controls, some checks and balances in place. At least we know, and knowing about it, maybe then we can do something about it.

MR. WATERMAN: Mr. Smith, I do not think anybody is going to argue with what you are saying. I do not think anybody in our organization has ever fought against the issue of controls, reporting, audits, whatever the case might be. I would like to make one comment, perhaps in defence of the external auditors. And this goes back to the question of legislation that we talked about yesterday.

The auditors will basically complete their audit based on the policies that are in effect and the legislation that is in effect governing those policies. A lot of the issues that we are talking about here, were issues that were approved by the Board under what it deemed to have authority to make particular decisions under. The auditors would complete their audit based on that and would report to the Board accordingly. The question now is whether or not that legislation was relevant or not. So I think in defence of the external auditors, they were perhaps caught in a bit of a mire on this, unknown to themselves at the time, as to which particular piece of legislation was relevant here.

MR. MULLINS: I think that is a valid point, but I stick to what I said earlier.

CHAIR: I feel for board members in situations as a - you know, throughout our process as a Committee, and in other sorts of things that we have looked at. I mean, we run into volunteers who have given, you know, umpteen hours of their time, energy and everything, back to the community in some way, without any real direction being provided in terms of: What is our job? What are we supposed to do? What is the nature of our doing? And, you know, the notion of restructuring that we have undergone and are continuing to undergo within the health care field, I mean, is massive, I understand that. But the question still needs to be asked and I still think that we have not come up with a sufficient answer in terms of, you know, what do we learn from the report here? Where do we go from today, forward with that, based on this hearing, if we are going to bring some sort of closure to the issue of number one, and some sort of assurance to the public in this region who depend on the service that, to the best of our ability, all of us, the service will be provided?

Now, what sorts of accounting mechanisms or accounting frameworks can we put in place and maybe, base - whatever comes out of the operational view may be the answer in terms of what it recommends. Who knows? We do not have that before us, unfortunately. But I am looking for a comment generally and even specifically in terms of maybe recommendations from yourself, Dennis, too, because you are the Financial Officer for the institution now. Where do we go from here to ensure that audited statements are completed in a timely manner and that the public has access to them, that management practices are transparent to the extent that people have an assurance of the service in health care that they expect, and are getting, and that we are getting the best bang for our dollar? Where do we have to go from here to ensure that happens, from your point of view?

MR. WATERMAN: I think what you have raised certainly are valid concerns, Mr. Chair. Certainly, they are issues that we have no argument against whatsoever and would support to the nth degree. There is no question that we will provide whatever level of accountability is required by whatever regulatory body demands it. We are a publicly-funded institution and we have an accountability to the public and especially to our funding providers. And if it is deemed that the level of reporting at this point, is not acceptable, does not provide for enough disclosure, we are certainly prepared to work with the Department of Health or any other agency that wants to -

CHAIR: It is not that it does not provide enough disclosure. I do not think it provides anything. I do not think this is unique to your board either, and do not take it as such, but I do not think that we have developed a system or some sort of systematic way that would guarantee that it would not take the Auditor General once every ten years - and the reason why she has to come in once every ten years is because there are over 200 agencies at your disposal -I mean, that it would not take the Auditor General's visit once every ten years to say: My God, we have problems here, and that somehow, as my colleague, Mr. Smith has said, these issues could have been identified earlier and as a result probably a better system of controls have been put in place.

I am not suggesting anything other than the fact that I do not know if we have anything in place yet. I have not heard that from the process yet today, that would give me that assurance.

MR. WATERMAN: Mr. Chairman, I think you are right in saying that the system has not changed in any dramatic way in the last year or two in terms of the reporting requirements. Certainly, we were co-operating with the Department of Health, and working with the Department of Health, in many ways, in trying to expand the reporting so that the accountability aspect is addressed more appropriately. We have introduced the new national MIS standards for accounting throughout the region. Our people have been working with the department people in establishing how that could best be done, the level of reporting that is required, the types of issues that should be disclosed with that, but I think that is only part of it. There are a lot of issues, certainly, that we need to be looking at specifically. And I do not think, speaking for the Western Health Care Corporation, that this Corporation is going to have any problem in living with that. Whatever level of reporting is required, in terms of full disclosure of any of these issues, I think we can certainly comply with that, and not only comply; we would certainly be prepared to work with the department in developing that kind of reporting.

In terms of the actions that are taken from that, certainly if the information is provided to the department through this kind of reporting mechanism, obviously, there needs to be some kind of a follow-up from time to time to ensure that not only is the Corporation meeting its own objectives, but those objectives are in line and interfaced with the department's objectives. I think that has to be done, and that is a question again, as Mr. Mullins referred to, of resources, not only necessarily on our part as a Corporation, but certainly on the Department of Health.

I understand they have many issues to deal with as well, and certainly, to add this to their level of issues would require, I would think, some additional resources on their part. So there has to be some kind of ongoing monitoring. Perhaps, as Mr. Smith has suggested, it might need to be done on a quarterly basis so that we can do some kind of an interim quarterly settlement type of process, not only settlement, but full disclosure of all of the issues that are contained in the financial position at that point. I do not think that would be a real problem.

Certainly, operating under the Hospitals Act, this Corporation is aware now of what its responsibilities are in terms of how it takes action and its accountabilities to the department and any other particular body. So I do not think we will find any problem in trying to comply with that. The question is how we develop that system so that it meets the requirements of everyone; and I would not want to point out what I am going to do there.

CHAIR: I am not so sure it is ultimately your responsibility. I think you are a stakeholder in developing that system, but I am not so sure that ultimately you are 100 per cent responsible to this corporation for doing it. I think you have a responsibility in terms of taking the initiative to do it, but equally - at least equally - maybe more, the Department of Health, in terms of all of the operations it finances, it is the largest piece of the budgetary pie in health care in the Province that had a larger role in developing this. So you are one institution of many in the Province that may be going through the exact same sort of contortions that, when an Auditor General visits: Well, what is all of this about and where do we go from here?

I understand the feelings associated with that, but I think you have a responsibility as a stakeholder in developing that system to ensure accountability for what public monies are given, but I think the Department of Health has to take a larger role and a leadership role in this area again to ensure the public that public monies are being expended properly and that health care, whatever we can purchase for those monies, that we are getting the best we can from that.

MR. WATERMAN: I think that kind of a program can be set up. How we go about doing it is something we need to sit down and discuss with the Department of Health, but certainly I think that can be done. It can be routinely reported. If we can pick what are deemed to be sensitive areas and report on those on a routine basis, I do not see any particular problem in doing that. It does call for an expansion in the level of reporting that is currently in place.

CHAIR: We are going to take a break in a few minutes because I know other committee members have a lot of questions, but Mr. Lush, I understand you are going this afternoon, so you can have a couple of quick questions and then we will take a break.

MR. LUSH: Thank you very much, Mr. Chair.

External audits and external checks aside, it seems to me that the points identified, the major management inadequacies identified by the Auditor General, fall under two main categories. They are these: One, that decisions were made without the approval of the Board, or without documentation that indicated the Board was involved in many decisions. Number two, if it weren't that way, it was that decisions were made in contravention of public policy, in contravention of government acts or the Hospital Act or whatever, for example, the tendering act.

Keeping in mind these two main categories under which the Auditor General identifies management inadequacies, based on that, I ask this question - I think it has something to do with the point that the Chairman was making: To what extent are Board members familiar with the act under which they operate?

MR. MULLINS: The Board members are in an awkward position. I cannot speak for all Board members. I was familiar with the act, having been around for quite some time, but I am sure some of our other Board members who are professional people who would - certainly, if someone were a lawyer, he would not have much trouble interpreting the act. But, in the main, I would say, yes, they are familiar with the act, but they do not eat and sleep with it, live with it every day.

For many boards, for myself, as I said yesterday, just repeating myself, as Chairman, I was consulted on a lot of things, I was on many committees, even though I was very busy in my own life. But for many Board members, this boils down to maybe a once or twice a month's operation. For them to come in and interpret all this, it is extremely difficult. This is a problem - and I said this yesterday, too - not only in public boards, but in industrial and private boards, very much a problem, an issue.

MR. LUSH: (Inaudible).

MR MULLINS: But for them to come in and interpret all this mass of stuff that is put before you and understand it, it is very difficult. It is a very difficult chore. In health care it is particularly difficult because, I mean, we are all experts in schooling, we all have somebody going to school or something or other, but when you are dealing with health care you are responsible for everything. We are here talking today about an accounting situation or a monetary situation. We could well be here talking about a major surgical or medical kerfuffle like, for example, they have in Halifax at the moment. Board members are equally responsible, it is right there in black and white, right up to their necks.

MR. LUSH: But in a very general -

MR MULLINS: How much do they know that?

MR. LUSH: In a very general sense, could you say that Board members are generally familiar with the general direction in which they -

MR MULLINS: Sure they are. They are conscientious, dedicated, interested people who want to do their best. The people we have had over the years, I have nothing but good things to say about them.

MR. LUSH: They would quite obviously be aware that there are certain requirements with respect to the Public Tender Act. Just about every Newfoundlander recognizes that stuff. (Inaudible).

MR. MULLINS: If you brought a - I'm sorry, I did not mean to interrupt.

MR. LUSH: That is okay. If there were a new board appointed today, would there not be some orientation and telling Board members: We are now operating this Board, we are operating under the rules of the Department of Health? It seems to me that every member would be generally informed.

MR MULLINS: That is correct. But, at the same time, how much can you absorb, as I said, on a once-or-twice-a-month thing? And that is the reality of it. You can say it is not, but it is the reality of it. If you were a board member and you attend nine meetings a year, say you miss two, which is quite reasonable, given your personal life and so forth, I mean, it does not take much to get you - and if you asked me, in all the years I served, to recite the Hospitals Act to you, I would have to run and get the bloody thing. I know generally what is in it but I cannot recite it to you, and I am sure there are many Board members who have seen it and that is all, you know.

Generally the people I've dealt with are decent, hard-working people who want to do a good job, who are keenly interested, but there is a limit to what they can do.

MR. LUSH: Boards operate in different fashion I am sure, in different regions, different places. How, would you say, Mr. Mullins, your board operates from the point of view that, the Board is totally in control, that it made the policies and that they were from the top down or, would you suggest that management had a fair amount of authority?

MR. MULLINS: Management had a fair amount of authority and it cannot be any other way. I mean, it is not any other way in industry; you look in industry - do not tell me that boards run things in much detail, I know differently, you know. Management runs the operation.

MR. LUSH: How would you account for the fact that the Auditor General suggests that many decisions were made without the approval of the Board and went on to say certainly without -

MR. MULLINS: The record may show that, but as I said again yesterday in my preamble, at no time did I feel, or did our board feel any lack of confidence in our executives or that they were doing anything they should not have done. I state that now, I stated it then, and I stand by it. I want to make another point and go back to a theme I started yesterday, then I will stop for a little while.

There are two things in that report, or one thing in particular, that you keep coming back to; everybody here has had a kick at it now - and that is the question of salary advances to a limited number of management personnel. If that were not in that report and if the question of Harry's expense account were not in there, it would be an entirely different situation we would be talking about. Everybody comes back to that issue, that one issue. You know, if you look at the things that have gotten a big play here, the Public Tender Act - you know, I could make the statement that as far as I can see, nobody is in compliance with the Public Tender Act if I can believe what I see in the press, the government included.

Now, I think we were in compliance with the Public Tender Act but we did not do a very good job of the paperwork. That, is my feeling on that, and there are a number of things here like that. But if you take out those two things, it changes the complexion of this report entirely. The question of deficit and debt, I mean, that was known -

MR. LUSH: But it was in contravention of the Act?

MR. MULLINS: Oh yes, but everybody who runs a deficit is in contravention. I would say, at one time on another, every board in the Province that ran a deficit was in contravention as I understand it; I think that is right. As I said yesterday, I do not know how you stop that, what the heck do you do? Shut the door, you know?

MR. LUSH: Well, I do not want to - that is -

MR. MULLINS: The Public Tender Act, too, I would make a comment - I am not very familiar with that, we have no such document in our private business, but to me, it looks like an excellent instrument for buying potatoes but perhaps not the best device in the world for buying, say, a CT scanner or something like that; but that is a personal observation and has nothing to do with the Board. Carry on.

MR. LUSH: The Board rationalizes its position, its stand for the actions it took, that is the right word. The government rationalizes its actions on the fact that it was operating under its own Act. Which Act takes primacy now?

MR. MULLINS: Well, the other one does not exist anymore, so it is irrelevant now.

The old Western Act arose, as I said yesterday, out of the drive to build a new hospital here in the 1940s, and a group of citizens got together, formed a board, raised money, browbeat the government - they were substantial citizens, had a lot of clout. Monty (inaudible) was the Chairman, you know, a substantial name in the Corner Brook district. And that board was unique in the Province. It had an unique make-up, it had one-third of its members elected, for example, and I do not think there were many boards in the Province that had elected members, but they did, and they had provision for certain groups in the community to nominate members. The minister always appointed. So it was unique in that respect and it was unique in its charter, as well, and I know we operated over the years according to that, and I think that grew out of the tradition that existed in the past. I was aware of the Hospitals Act and aware of the restriction there; nevertheless, we operated according to that Act in the substantial matters and particularly in the business of borrowing and debt.

MR. LUSH: A final question. You raised the very question that the Provincial Government and all governments have to deal with: In terms of the expectations of people, particularly in health care, what do we do? Do we throw our arms up in the air and say, we just have to let this debt balloon and burgeon, or do we take action?

MR MULLINS: I speak now as a private citizen, I am not involved anymore, but what I am saying again here - I do not want to get talking about what the government policy is going to be because we made salary advances to employees and to some senior management in Corner Brook. That is irrelevant to the major problem that exists with relation to health care. The standard answer which you would get from most people is you have to do things differently, but that is a kind of a pat, textbook answer. I guess that is what you are going to have to do. You are going to have to do things differently.

MR. LUSH: Well, we are certainly going to have to do them within our means, aren't we?

MR MULLINS: Yes, Sir. Yes, I am a taxpayer, (inaudible) -

MR. LUSH: We are going to have to do it within the budget, as given.

MR MULLINS: I am a taxpayer, and the tax situation in Canada, as everybody knows, is onerous, and in Newfoundland it is even moreso. I agree, absolutely, but I think we will (inaudible) let's flog everybody here about the expense account and beat the heck out of them, let's beat the heck out of them about the salary advances. But that is not going to solve your problem with delivering health care at a price you can afford. It is a major problem that has to be addressed.

CHAIR: We are going to take a fifteen-minute break for coffee, which is located just outside. We will reconvene at 11:15 a.m.

CHAIR (E. Byrne): Order, please!

We will now reconvene the meeting. It is a little bit later than anticipated, but we would like to get on. I am going to ask the three witnesses if they could just grab a set in the back of the room, because I have spoken with officials from the Department of Health and they are going to take, I guess, the witness stand there just for twenty minutes, or half-an-hour or so, to get into some questions vis-à-vis the Department of Health's involvement and ongoing involvement with the Health Care Corporation.

Before I ask our Clerk to swear you in, I just remind you that when you are sworn in you are operating under oath. If you are responding to any questions, or speaking, please state your name and position for the record each time so that our audio person and the publications that come out after will know exactly who is speaking.

Elizabeth, would you swear them in, please?

Mr. Kent Decker

Mr. Chris Hart

Ms Moira Hennessey

CHAIR: When we adjourned for coffee break, I spoke to officials from the Department of Health and they wanted an opportunity to, I guess, put a point of view across and address some of the concerns that had been made, so what we can do is just open up the floor to yourselves first. Take whatever time you feel necessary to address anything that you have heard in the public hearing here this morning. Certainly, then, any questions that may come your way will be entertained by members. The floor is yours.

MR. HART: Thank you very much, Mr. Byrne. My name is Chris Hart. I am with the department in the role of Assistant Deputy Minister of Finance, basically. With me, for anybody else who did not catch it earlier, is Moira Hennessey. She is representing the operational side of the Department of Health. She looks after issues such as staffing, nursing, and that sort of thing. Kent Decker is the Director of Institutional Financial Services.

We have been in the back of the room for the last day or so listening to the evidence, and I am glad to have the opportunity to put forward to the Committee the departmental perspective relating to this hearing. I was a little bit perturbed, I guess, in the sense that it was coming across as if the department had a very distant interest and there was a lack of involvement in terms of monitoring activities of boards, and that sort of thing.

I would like to say, just as a background, that I worked, prior to moving out to the Department of Health, with the Auditor General's office. I come from a strong accountability background and we are very cognizant of the importance of accountability of our funding that goes out to the boards. We do not believe that once the cheques are issued that is the end of the accountability process. We believe very strongly that we have to monitor within available resources and ensure that those funds are spent appropriately.

With that in mind, we have, over the last number of years, developed - and it is an ongoing process, I should say. We learn from instances like this and put in additional controls as we see appropriate. Some of the processes that we have in place right now I would like to carry you through.

One of the first things that we have done is develop a formalized reporting process, and I don't think that came across very clearly, but there is a special list of items that we require on an ongoing basis from the boards.

For example, we ask for copies of their audited financial statements and management letters, and management letters are probably more critical, in a sense, than the financial statements. The financial statements generally don't tell you the whole picture, but a management letter which accompanies the financial statements generally would point out any significant matters that were noted during the audit.

We would get those and we reviewed them, and if we see anything there that raises any concerns, we immediately review those and get back to the boards in question and ask. The other part of that, the Board itself has to respond to this management letter. If they get a letter in from their external auditors and there are any significant items raised there, the Board itself has to respond to those concerns. We ask for a copy of those responses as well. There is much other information that we ask for in the reporting requirement, but that is the primary thing.

We do not have a specific internal audit division in the department. Kent's area - as Director of Institutional Financial Services, he is responsible for the monitoring of health care associations, health care boards. As part of that responsibility, we do internal audits on an ability to do so. Obviously, we would like to do more, but we do have a three-year audit plan and we try to design that to make it as efficient as possible. We talk to the Auditor General's office to find out which audits it is doing so that we do not cross the same territory, so that we can get exposure to as many boards as possible.

Obviously, if resources were unlimited, we would like to be able to get out and do them every day. I think the Auditor General made a comment that we should be doing more detailed work at board level. Again, we have a staff, in Kent's area, of half a dozen people. I don't know what the audit department's staff is now, but it is difficult for her to get around once every ten years. You can imagine when you put in the audit duties in relation to all the other activities going, that is a very small part of what the Institutional Financial Division does.

We have a budget monitoring process where we get monthly reporting from each of the boards, and we do projections of where they are on an ongoing basis. We prepare for our executive - the minister, overviews of where the department is financially, not only on board-operated facilities, but all of our program areas, whatever they are.

I just wanted to make sure it is very clear that the department does take very seriously the accountability of these board expenditures. We had, as I said, been developing this and improving it since - I have been with the department for the last five years, and I think we have made some significant improvements in that whole monitoring process. Some of the new things that we are now in the process of doing, and this rose primarily out of this particular audit, one of the biggest concerns we had had here, I guess, apart from - a lot of the issues are significant, but you see them happening in most operations; public tender violations, which are generally lack of documentation rather than intent to circumvent the Public Tender Act and that sort of thing.

The ones that caused us the most concern were the use of board funds for personal benefit and not in compliance with policies and directives of the department. Those are the ones that really cause us concern. As a result of that, we have initiated an extension of our current audit where we will be doing a review of administrative areas within all boards within the Province. That will be designed to look at areas where it would be most susceptible to personal gain or personal benefit. We would look at areas of travel expenditures, corporate credit card usage, salary issues, salary supplements, that sort of thing.

I think that covers pretty well - just to give you an impression as to how the department is going in terms of monitoring these health care boards. One other major initiative, and I think I am going to let Kent speak to that - he has been more directly involved in it -that is the implementation of MIS guidelines, which essentially is a computerized system that ensures consistent and comparative information coming from all boards in all areas, not only consistent within the Province but consistent nationally, so that we can see and analyze how we are doing in relationship to other jurisdictions, and that sort of thing. Kent can probably add something to it in closing.

MR. KENT DECKER: I will just expand a bit on the MIS guideline system. It is a national system developed for health care that involves the reporting of financial and statistical information on a regular basis to the department. It compiles information on all the major cost area of an organization. It would have all of your salaries, all of your expenditures in different areas broken out. It is basically a cost-accounting system whereby we collect information not only of a financial nature but also of a workload nature, so it enables you to determine not only what you spent but what you got for that. For example, in a lab you would look at the cost of the lab but it would also provide you with the lab units produced. So it is a cost-accounting system that is based on national standards.

The system is nearing the final stages of implementation right now. It started about four or five years ago. All of the boards have adopted it through the Hospital Association of the Province, and we are at this point receiving electronic submissions from the boards on a quarterly basis.

It has been a fairly large project for us to implement. It has involved the complete writing of systems at our level to accept the information, and it has also involved a fairly extensive amount of work at the board level to determine how they are going to implement it to make sure it is consistent across boards and across the national standards.

We view this system as one of the main areas that we will be able to use to monitor the activities of boards, since it will be a standardized system that you can use to compare one board to the next. For example, if you are looking at the dietary area of a board you will be able to compare things like meal days and the cost per meal days across the Province, so you can get some idea of the efficiency of boards.

Again, that might not deal with issues such as management bonuses or loans or whatever, but it is an area that we feel will improve our monitoring of the boards through an evaluation of the efficiency of what is being done at the board level.

As I said, the system is nearing the final stages of implementation. Most boards are now at a stage where they are reporting to us electronically on a quarterly basis. As you can appreciate, the amount of information that comes over a system like that is extensive considering the number of GL accounts and things that you would have at a board level.

We also have committees in place that are looking at how we are going to use that information and what type of comparisons we want to look at, and when we will actually use the information. There are discussions as to whether or not this information should be available to all the boards in the Province. For example, a board might want to do a comparison of its lab to other labs in the Province. So we see it as a tool for boards, as well, to improve their own efficiency evaluation.

CHAIR: Okay.

MR. KENT DECKER: There are a lot of issues, I guess, I could get into covering the whole thing but I will probably now leave it to your Committee members for any specific questions.

CHAIR: Before we start questioning, does the Auditor General have any comments to make?

MS MARSHALL: Yes, just one.

Most of the things that Mr. Decker spoke about are things in process. This does not reflect what has gone on in the past, does it? Because we just finished an audit of the St. John's Health Care Corporation, and as a result of that audit we did look at involvement by the Department of Health, and we concluded that there has been very little presence with regard to the Department of Health in the health care boards over the last three years. Just to quote from that report, I have said: On-site financial reviews of health care facilities have been minimal to non-existent over the last three years. Audit coverage is not sufficient, and a multi-year plan has not been developed based on risk.

Some of the issues that you are identifying there are really things that you are taking action on now and which will apply in the future, but it is not reflective of what has gone on in the past. I would not want to leave that impression with the Committee, because I certainly have not been convinced that the Department of Health involvement in the hospitals has been sufficient in the past.

MR. HART: If I may respond to it.

CHAIR: Sure.

MR. HART: In terms of the Auditor General's comments, I would say, as I mentioned earlier, that it is an ongoing process we are continually trying to improve. For the most part, the elements of this monitoring process have been in place and have been done over the years. Even before I came to the department, the audits were going on. We prepared the schedule which shows our audit activity, and which was forwarded to the office of the Auditor General.

We did agree that over the last couple of years, our audit activity has been to a lesser extent than in earlier years, and the reason for that was largely because we were going through this major restructuring process. We were bringing all of the health boards across the Province together under eight new boards. We just felt from a management perspective it would be much better to let these boards get up and running and be operational before you get in and complicate their lives even more than they are already complicated. That was a decision that was made internally, that the extent of our audit would be better cut back there and our resources used in other directions to help facilitate this consolidation process.

I guess the newest initiative that is just now getting up and running is the MIS guidelines. These other issues such as reporting requirements, providing management letters, audited financial statements - actually all we are going out and doing now, that has been in place for a number of years. So the system is essentially in place and has been for a number of years.

CHAIR: Mr. Smith.

MR. SMITH: I do not want to be hogging the time from my colleagues I only want to get into - but certainly this is relevant to my line of questioning prior to our break. In terms of the concerns that were identified in the Auditor General's report, which of these was the department aware of? Which of these had the department picked up on prior to the Auditor General's report?

MR. HART: The Auditor General, I am not sure exactly when she started her audit, but it was sometime in the summer, I guess.

MS MARSHALL: Early in 1996.

MR. HART: Early in 1996.

MS MARSHALL: Yes.

MR. HART: Prior to that, if I can go through our reporting requirements. We had asked for a supplementary audit, as was mentioned earlier, from the external auditors. I think somebody referenced why we would even bother engaging external auditors if we do not get any good information from them. I think, in their defence, I would like to say that what you have to keep in mind is that they are primarily doing a financial audit, and that financial audit is designed to talk about financial controls in place and that sort of thing. What the Auditor General's office gets involved in largely is legislative compliance: compliance with policy and legislation and that sort of thing.

You had the external auditors management letters, which didn't really raise any concerns of the nature presented in the Auditor General's report. The supplementary audit that we requested clearly indicated that the Corporation was primarily in compliance with legislative, so we had no reasons to think there were any problems there at all.

The issue that came up that was probably one of the most serious findings in the report, the fact of these supplements, advance executive wages being paid - the minister of the day had issued a directive, as came up here earlier, back in 1991 or 1992. Basically, that directive said that the boards could not use board funds to supplement salaries or benefits of management staff, and as a follow-up to that, the department requested, on several occasions, responses from each of the boards in the Province asking if, in fact, there were any supplements at their boards and if so, to disclose them to us and that process did not reveal that there was in fact any of these items going on, so -

CHAIR: So, are you saying that you directly asked the management to report that to you?

MR. HART: We asked our boards to -

CHAIR: In this particular sense of the Western Health Care Board, were there any supplements and you did not receive any response or that you did receive a response?

MR. HART: We received responses from the Board in this particular instance, actually, I think, on three separate occasions - but I have to go back and check my files - and I think, under three different ministers, basically. I think the original one was Mr. Decker, I believe, and then later, Mr. Matthews, and Dr. Kitchen, I believe, was the other one. But in each case we pointed out clearly again, or the minister did, that the boards were expected to comply with this directive, and then we asked them to disclose any such arrangements that were in place, and there was never any indication of any executive advances or anything of that nature.

Now, maybe the Board did not construe those as being salary supplements, however, I have some problem with that interpretation. I mean, to me, that is a direct supplement.

CHAIR: I do not mean to be (inaudible) but it is an important question.

MR. HART: Yes.

CHAIR: So on three separate occasions, management and the Board itself were asked if there were any activity going on outside of the directive of the minister in terms of supplements to physicians, in terms of -

MR. HART: Not physicians, management staff.

CHAIR: To management - not physicians, just management staff, and there was no answer forthcoming? Is that what you are saying?

MR. HART: There was a response.

CHAIR: What was it?

MR. HART: I do not remember exactly, but essentially it was minimal disclosure of any such arrangements, there was no reference to advance salaries. There was no reference to personal use of credit cards but I guess at that time the credit cards were used for business purposes so there was no indication of any abuse of credit cards or anything like that. But there was no reference - the one that I think, probably in retrospect, should have been there was the issue of the program they had in place for advancing executive salaries on a six-month basis.

CHAIR: Thank you.

Gerald.

MR. SMITH: So basically, the short answer to my question is that the system that was in place prior to the Auditor General's report did not pick up on any of the irregularities that are contained in the report?

MR. HART: That is correct.

MR. SMITH: Okay. My other question is: You started off in your statement outlining for us some of the initiatives that are ongoing within the department. Can you give this Committee, and through this Committee, the people of the Province, some assurances that the action being taken by the Department of Health right now, will provide the necessary safeguards to ensure that these sorts of things are picked up on and we do not have to wait ten years before these things are picked up?

MR. HART: Thank you for the question.

We have a system in place that we feel is adequate to pick up any major deficiencies that may be going on out in the system but, at the same time, we are, as I said, continuously trying to improve those. The system is, as it has to be, I guess, based on a level of trust. When you ask a specific question or for a specific report, you anticipate that you will get the information you are asking for, but now, that has to supplemented by actually going out and auditing as well. So, to answer your question directly, I think essentially the system is adequate to ensure that this would not go on without some knowledge of the department.

MR. SMITH: One final question. In terms of the external audits, I mean, the concern has been expressed here today that at least with regard to this particular organization, the external audits were not providing the kinds of information that would have enabled people like yourself to pick up on this. Have steps been taken now to ensure that the audit requirements now are more reflective of the kinds of concerns that are out there, so that at least, in terms of your being able to do your work, that you will be able to pick up on that sort of thing?

MR. HART: Well, I guess it goes back to the external auditors reporting to the boards. They are independent auditors who report independently. It is only as a result of requiring, as part of their monitoring of the boards, that they provide us with copies of the audited statements and the management letters, that we have access to those at all. I think what really needs to happen there is that the boards should consider expanding the mandate of external auditors.

I think, in fairness to the external auditors - I mean, they are mandated to go in and do a review of the financial controls and a review of - that they receive value for the money they are paying out, that sort of thing. If they get a piece of equipment they look at the documentation and make sure that they are paying based on invoice and that sort of thing. As a normal course of action, they would not go in and look to see if there was a compliant issue with the Hospitals Act or with the Public Tender Act and that sort of thing. We can play a role in that, I guess, and we will in terms of our discussions with the Board, that is, to look at the expansion of that legislative side in the audit.

Now, another thing that we have talked about within the department is having some form of report from the Board to the department, confirming that they are in compliance with the appropriate legislation that governs those boards. That is a process that we have talked about as an enhancement to the current structure we have in place.

MS MARSHALL: Could I just clarify something for the benefit of the Committee?

CHAIR: Sure, go ahead.

MS MARSHALL: I still maintain that the reviews carried out by the Department of Health in the past (inaudible). I still maintain that if the Department of Health were reviewing the audited financial statements of the hospital as they came in, they would have seen that the hospital had this huge bank loan so they could finance the activities of the other funds, that they were, in fact, borrowing money to lend to the other funds.

The other issue is that if you look at the notes of the financial statements of the Board of Trustees Fund for the year ended 31 March, 1995, and it is on page 94 of the document, you will see that there is a receivables disclosed there, from employees and associates, of over half-a-million dollars. So it is there in the statements, and if somebody were going through the statements and analyzing them, they would have picked it up. It would have been picked up.

The other comment I have to make is, it did not come out during the audit of this hospital, but with regard to the Health Care Corporation, the information that is being retained or recorded at the Department of Health, while they may be getting a lot of information and recording it and using it and whatever, when we were looking at the St. John's Health Care Corporation, I was looking for two basic figures. One was the salary budget of the Health Care Corporation for 1995-1996 and also the budget for salaries for 1996-1997. I mean, those are very basic numbers. The Health Care Corporation could not give me those numbers and the Department of Health could not give me those numbers. So, while they may be retaining and recording information, adequate information is not being retained, and I still maintain that the oversight provided by the Department of Health is not adequate. It is not.

MR. HART: I understand the comments of the Auditor General and I guess just to clarify it, as I said, we are in a continuous process of upgrading our systems; I am not saying that it was perfect. One of the other aspects that we have implemented is a mode - essentially the reviews that we did, we have gotten more into the management letters which should highlight any significant issues. In terms of looking at a financial statement, we felt when we looked at it, that we could improve in that area and since then we have developed a checklist where we have actually gone through the audited financial statements and noted specific areas.

I am saying that the department has had in place a monitoring system that has been evolving over the last number of years, and we are trying to improve it continuously.

In terms of the receivables from employees mentioned there, $500,000 from employees and associates, that would not necessarily raise any concerns. There could be many valid reasons for it in terms of, as we talked about earlier, the recruitment of doctors and the employee assistance loans, and that sort of thing. So, by itself it would not necessarily cause one to be concerned. But as a result of this particular instance, what we have done, as I said, one of the other issues we have done, is we have developed this checklist to review financial statements, noting specific areas and looking for those specific areas.

CHAIR: Are you confident that, had the Auditor General not gone in and done an audit on this agency of the people, of the Crown, that you would have uncovered it yourselves as a department, uncovered the concerns that are raised, that have been raised?

MR. HART: I guess, in answer to that, I should say that the department undertook, itself, to do a financial review of the Western Health Care Corporation, and our review was driven -

CHAIR: When was this?

MR. HART: This was completed in - 1996, was it?

WITNESS: Yes.

MR. HART: October or November of 1996.

CHAIR: Was it after the Auditor General's report had been tabled, or previous to that?

MR. HART: It was prior to that.

CHAIR: Prior to that? Okay.

MR. HART: The reason we did it, that it came about, was as a result of discussions during the budget process with the Board, and they were identifying budgetary shortfalls and the fact that they could not - the briefing we got from them showed that they were projecting a deficit for 1996-1997 of some $4.5 million, and similar amounts over the next couple of years, and they had recommended a course of action that would be required to deal with those numbers.

We were not comfortable with service reductions. We felt that everything should be looked at before getting into direct patient care issues, so we decided to carry out a financial review of the Western Health Care Corporation. That was the main purpose for starting on the review. While involved in the review, the Auditor General's draft report came available to us again, so at the same time we were doing the financial review, we looked at some of the significant issues in her report, as well, to confirm the issues as we saw them, and some of the problems that were there. In terms of whether it would have been picked up or not, I guess that is a difficult question to answer.

CHAIR: Okay.

Previous to having any knowledge, or any documentation from the Auditor General's audited statements, did your own review pick up any of the concerns that subsequently became available by the Auditor General's Department?

MR. HART: Our review picked up most of the issues of the Auditor General's report and, in addition, some other ones as well that were not picked up.

CHAIR: So the department, then, had previous knowledge of the concerns that were raised by the Auditor General even prior to dealing with the Auditor General's report or speaking with the Auditor General, because of your own review.

MR. HART: Well, when we went through that review, and in conjunction with the Auditor General's report, the actions were taken forward to our deputy minister and then onward to the minister of the day; and at that time, as a result of that, there were actions taken by the department, including suspension of the individuals involved in relation to that. So the two reports were supplemental to each other basically. They were occurring almost coincidentally at the same time.

MS MARSHALL: But, Mr. Hart, I have to clarify, the Department of Health did not start that detailed review until we were in the Corporation and had identified a lot of these issues. I do not recall, ever, the Department of Health being in there and running a review parallel to our review.

MR. HART: No, I did not mean to say that we had. What I said was that our review was started by the budgetary problems that came forward to us. We wanted to go in and see for ourselves what was happening there, whether there were any suggestions we could make to improve their financial situation without impacting on patient care. At the same time, you know, having - I can tell you that I personally was not aware of the findings in your report. I made some efforts in terms of trying to monitor and see what is happening. You like to keep on top of it. There was no information relayed to me in terms of what the findings were.

CHAIR: Mr. Whelan.

MR. WHELAN: Yes, to the Auditor General. Over the past day or so you have been mentioning yourself that there are a number of records and quite a bit of information that was not readily available, or not available at all, to you. I am wondering, in light of that fact, are you completely satisfied with your own report?

MS MARSHALL: Oh yes. I stand by the report, and I would like to make some further comments on it, especially when I reflect on the testimony that has been heard here the last couple of days.

First of all, there is the impression that the loans to the employees were employee assistance loans.

MR. WHELAN: You mean they were not?

MS MARSHALL: No, they were not. There was $36,000 of the $137,000 of the employee loans that were employee assistance loans. The other $100,000 were loans. The $425,000 in loans to the doctors, regardless of what was said here at the meetings, no, there is no policy. There was no policy on loans to doctors, there was no policy on loans to employees.

CHAIR: No Board policy, you are saying? You did not uncover any Board policy.

MS MARSHALL: There was no Board policy. I would go further and say, even if there was a policy, the Board did not have the authority to use public monies to lend out to employees or doctors or anybody else.

With regard to the policy on salary advances, somebody quoted a 1983 policy. Yes, we saw the Board Minutes from 1983. Those Minutes reflect a one-time salary advance, in my opinion. In discussions that the Deputy Auditor General had with Mr. Waterman, he himself agreed that that did not cover employee advances over the long term. So there is a policy back in 1983 for a one-time advance, for advances for that particular year, and for some reason, that got stretched into being the authority to provide advances to executive employees in 1996.

MR. WHELAN: Could you be a bit more explicit about the types of loans that were given out, just to give us some idea as to what was done there.

MS MARSHALL: I cannot tell you what the loans were for, but some of the employee loans - you know, I can just give you dollar amounts. For example, there is one here: At the time we did our review the balance in the loan was - this for an employee - $22,948. There is another here to an employee, the balance is $15,234. Now, those are the large ones. There is one there -

MR. WHELAN: Would it be inappropriate to ask who these loans were given to?

MS MARSHALL: I cannot provide you with names.

CHAIR: No, well, I guess from the witnesses from the Health Care Corporation, Mr. Whelan. Those are questions you can put directly to the people who made decisions at the time.

MS MARSHALL: With regard to the loans to the doctors, there was mention of a policy saying you could lend the doctors $20,000. There are balances here to doctors for - there is one there for $50,000.

CHAIR: If I can cut in on the Auditor General just for a second. I am not trying to limit your comments, but in terms of the Department of Health's role, I just want to ask any Committee members do they have any more questions for officials from the Department of Health? Because I would like to continue, obviously, to give the Auditor General her time. But with respect to the Department of Health's involvement.

Mr. Byrne.

MR. J. BYRNE: Mr. Decker mentioned MIS program and efficiencies. Is that program strictly geared to financial reporting?

MR. DECKER: It is financial and statistical, so it reports the workload side of it as well.

MR. J. BYRNE: I had another question with respect to the efficiencies of the department. I know, in St. John's in the Health Care Corporation, the Janeway in particular, and maybe the whole Corporation, it has gone to a program-directed system as compared to a departmentally-directed system. I am just wondering, is that Province-wide now or is it going to be Province-wide? Because, I may be wrong in this, but I have some information that says, I think, another province, possibly Alberta, went with that system some years ago, and they are actually now trying to go back to departmental, is that correct, according to you people in the know, in that situation?

MR. DECKER: In terms of going to a program and going back, I am not familiar with what is going on in Alberta. I guess that is a management decision at the Health Care Corporation that I am not really familiar with.

MR. J. BYRNE: So it is not a fair question to ask you people.

MS HENNESSEY: We are Health you see, the Department of Health. I cannot comment with respect to what is happening in Alberta. I do not know, with respect, what is happening in this Province. The Health Care Corporation is the only corporation, the one in St. John's, which has approached the department with respect to changing to a program management approach.

CHAIR: Mr. French.

MR. FRENCH: Yes. If I follow this correctly, then you did say, I think, that at no time were these advances or whatever reported to you people. I have trouble with audit sometimes - this is in private industry - and the reason is because I was in a position at one time where somebody came in - a very reputable firm I might add - and, at the end of the day, said: What do you want in the management letter? I said: Write the truth. I don't care what you put in, don't tell me. Give me the letter when it is done - I don't want to see it. But the question to me was: What do you want? And I guess, at no time for advances were you people notified, and the external audit - I guess the question I am trying to ask is: I have a great deal of concern that if the Auditor General had not gone in, we would never have known what we know today. Am I correct in assuming that?

MR. HART: It is a difficult question to answer, Mr. French, but I think what happened here probably would have been picked up at some point in time, but it is hard to say exactly when that might have been. The Auditor General's audit obviously brought attention to it and whether it would have been picked up separately in our financial review, is difficult to say.

MR. FRENCH: Because, we heard here once today - I heard the statement today that, if it were not for these advances, nobody would care, or words to that effect. Well, I care. I have a great deal of concern for taxpayers' dollars, whether it is in Public Tender or loans to people or whatever, of buying things and so on. And, you know, when somebody can flick three or four figures here and say: Well, there is $10,000 or $15,000 - and you know, a budget as large as yours, somebody might say, well, it is insignificant, but it is not insignificant to me. I do not care if it is fifty cents, it is fifty cents that we did not have for health care in this Province. And since yesterday afternoon, I am going to say this, if it had not been -

WITNESS: (Inaudible).

MR. FRENCH: Yes, but had it not been for the Auditor General - and again I ask Mr. Hart this, and maybe he cannot answer me. Your department, the Department of Health request for information and so on - we would never have found out any of these things that were going on if the Auditor General had not gone in. Am I safe in assuming that?

MR. HART: No, I do not think so. I mean, you are asking a theoretical question in a sense, but I think the system would have picked it up at some point in time and I think it would have been picked up in the course of the financial review that we were doing. It was picked up there and I cannot even say now whether it was picked up - I would think it was as a result of having a look at the Auditor General's draft report, and we checked some of those areas as well.

One clarification I guess I would like to make here, which I think it is important to realize - and it was mentioned earlier in the testimony - is in relation to the board funds and the way that has been interpreted. A lot of discussion has gone on about board funds over the last number of years, long before I came to the Department of Health, and there are two schools of thought on it. One is that board funds are within the ambit of the Board and they can spend them in any manner they see reasonable. The other approach is that board funds are public funds for the most part and therefore should be subject to the same scrutiny. So I think a lot of the actions that the Board took were in relation to how they spent those board funds. Having said that, I think that even in this case there was no guideline that said they could not spend board funds in any manner other than very specifically it said they could not be used to supplement salaries.

CHAIR: Other than that there was no guidance given.

MR. HART: There were general guidelines in the Board of Trustees manual which indicated the types of amounts that went into those board funds.

CHAIR: Okay.

MR. HART: For example, they consisted of interest on advances, as came out yesterday. They included incentive amounts that - we had a program in place whereby if a hospital board had a surplus in a specific year, they would retain a portion of that surplus, and that surplus money would go into this board fund and then it could be used at their discretion. Since then it has come out in testimony, the department has issued guidelines on the appropriate expenditure of board funds, and that would include, for example, that board funds cannot be used for the personal benefit of the Board members or management. As a principle, we did not get down to the specifics as to how they should be done.

We also said that board funds have to be spent in accordance with departmental policy and Treasury Board policy, and any applicable legislation, and that sort of thing.

CHAIR: That was a directive to all health care facilities and health care boards in the Province, was it?

MR. HART: Yes.

CHAIR: Okay.

MR. HART: They were issued - I cannot remember exactly the date - some time ago, and a copy was provided to the Auditor General's office.

While I do not agree that it was an appropriate way that the funds were spent, I think this is the approach that the boards were using, that these were their own funds and they could basically do with them as they wished. My own feeling is that public money is public money and should have the same scrutiny.

CHAIR: How do you feel about the testimony that has been given that the Board felt, based upon years of practice and tradition, that they were operating under a separate Act, not necessarily the Hospitals Act, which probably gave them the authority - because this is what it seemed to me; I could be wrong, but - in their minds gave them authority to the discretionary use of board funds to supplement salaries for physicians or other things. How did the Department of Health view that over time? Because, obviously, the department, whether consciously or unconsciously, did not move - certainly that is the evidence before us - to say one way or the other that every facility operates under the Hospitals Act. How do you respond to that, as the Department of Health?

MR. HART: In answer to your question, all I can say is that when I came into the department, I was under the clear impression that the Board were operating under their own particular Act. It was only some time later that I became aware that the Hospitals Act was appropriate to the Board, and the Board should obviously have been complying with that. I do not think it is the department's responsibility directly. I think we have a role to play in it, but I think the Board itself should be aware of the legislation under which it is operating. At the same time, I know there were a number of decisions made.

One of the requirements of the Hospitals Act is that any major capital expenditures be approved by the minister, and I recall one situation where I had some discussion with officials who were looking to acquire some property, and the property extended over the period of the old Board and the period of the new Board - there were two properties involved. And the discussion was around the fact that the old Act applied in the first instance, therefore, all that was required was the director's approval.

CHAIR: Yes, exactly.

MR. HART: The new one, the Hospitals Act. So I can understand that they were operating on that understanding.

CHAIR: The Act that the Board thought they was operating under certainly sets out a different set of - or it gives the Board more latitude, I guess -

MR. HART: There is a less stringent approach.

CHAIR: Yes, obviously, than the Hospitals Act. So the Board did not feel it was their responsibility to give a determination under which Act. The Department of Health, I am to assume from your comments, feels that the Board should understand what Act it is under. Somebody must take responsibility for it -

MR. HART: Yes, I -

CHAIR: - somebody of something. Because the two Acts are completely different, and depending on which one applied, then our questions and our decisions and what we base our recommendations on coming out of this hearing process may be different.

MR. HART: Knowing what I know right now, my feeling is that the Hospitals Act applies. There is a section in the Hospitals Act that states that where this Act and the old Act contradict each other, the Hospitals Act shall prevail. I guess the department has a very big role there, but I do not think it would be mandatory that the department sit down and write the boards and say: This new piece of legislation is here and now you have to follow it. I think that is something that, in the normal course of business, they should be aware of. I was not with the department at the time this came about so I do not know what discussions went on in terms of - there was some discussion about consolidating the two Acts and that sort of thing. I was not privy to those particular discussions.

CHAIR: Okay, thank you.

MS MARSHALL: I think it is a relevant point that in the schedule to the Hospitals Act, the Western Memorial Hospital in Corner Brook is listed as falling under that Act. It is very clear that the Hospitals Act applies to Western Memorial Hospital.

CHAIR: Does anybody else have any questions for the department? Okay. Thank you very much for clarifying some of the issues for us.

MR. HART: Thank you for the opportunity.

CHAIR: I am going to ask the previous witnesses if they can come up again. I appreciate your coming back. I would just remind everybody that they are still under oath. I know that Mr. Byrne had some questions previous to the coffee break, and previous to the department officials taking the opportunity to present their testimony.

Mr. Byrne.

MR. J. BYRNE: Thank you, Mr. Chair.

Basically, a statement first. Having read the report and hearing the questions and answers with respect to yesterday and today, I am not sure if we are asking the right questions or if I am having problems with the answers. Because I do not know if we are getting at the root of the problem or situation the Board finds itself in today.

Having said that, I have a few questions. I may be seen to be repetitious, but I want to go back to this inter-fund again. I am not clear with respect to that. There was a fund there of $600,000 for investment purposes. With bank loans being obtained by the Corporation, I suppose, to give loans to certain individuals, and what have you, I would like to know why the money was not (inaudible) to take it from that investment fund itself? And who made the decision to do that?

MR. WATERMAN: The investment fund you are referring to is an investment that the Board makes through the sales of property here in Corner Brook. It was mandated that the money be established into a separate investment to be used at some point in the future for health care purposes on the West Coast, or in the Corner Brook area at the time. There is a piece of property down at the West Street area in Corner Brook which was sold to a private developer. That money was the bulk of that particular fund. There was another small investment - I should not say small - another investment included in that of $100,000-and-some-odd as well. That money was invested at the direction of the Board to be used once the Board formulated a position as to where it should be used. I can tell you that over time, that investment was subsequently put back into general funds.

MR. J. BYRNE: The question is why that money was not utilized instead of going out and borrowing and paying a higher interest rate basically than what you were receiving for this. Why was that not accessed at that time? Who made the decision?

MR. WATERMAN: We had a Board direction at the time to say that the money should be invested. It could only be used with the specific motion of the Board for whatever purposes.

MR. J. BYRNE: I know, Mr. Mullins, you are a volunteer, you contributed your time, but in light of some statements here it seems to me to minimize the practices of loans and advances and credit card usage over the period of time. To me, it seems to be a major concern of the public, certainly a major concern of the Auditor General's office, and I think it should be a concern here.

I wanted to ask Mr. Waterman - basically you said yesterday that all the loans had been repaid. Can you tell us how much money in cash actually came in since the Auditor General's report, and if it was the full amount repaid, or if there were some settlements with respect to, you know, somebody paying a certain amount, that it would be -

MR. WATERMAN: I cannot tell you the exact amount, but there have been no settlements as such at this point.

MR. J. BYRNE: So it is the full amount.

MR. WATERMAN: The full amount, plus - now as I indicated yesterday, some of them are under programs of repayment, and those payments are coming in on a routine basis.

MR. J. BYRNE: So we haven't received the full amount.

MR. WATERMAN: That is correct. Some of the loans, for the physicians, in particular, and the EAB loans.

MR. J. BYRNE: Mr. Mullins again. You stated a couple of times, or a few times actually, when there were questions put forward with respect to certain practices and policies of the department, that they may have been in error, or in hindsight, what have you. You made comments that you take full responsibility for that. My question is: What do you mean when you take full responsibility? Have there been any consequences of taking the responsibility for that? Could you expand on that?

MR. MULLINS: The only consequence was that I was kicked off the Community Health Board, that is all. That is enough I guess, you know, for a volunteer.

MR. J. BYRNE: With respect to the questions put forth -

MR MULLINS: (Inaudible).

MR. J. BYRNE: Pardon?

MR MULLINS: Go on, I will come back to it.

MR. J. BYRNE: With respect to the questions put forth this morning by my colleague here, Mr. French, with respect to the engineering firm - the name of the company was Atlantic Engineering, I believe - could anyone tell me who the owners and/or shareholders would be, and the name of the architectural firm that the work was probably sub-contracted to and the owners and/or shareholders in those companies?

MR. WATERMAN: I would have to get some of that information. I can tell you, Atlantic Engineering in Corner Brook, to the best of my knowledge, is owned by an individual by the name of Don Caesar. I can tell you that BFL engineering in St. John's were involved in the work and they sub-contracted to an individual by the name of Sandy Gibbons; I am not sure if he is a private entrepreneur or consulting engineer or whatever.

MR. J. BYRNE: Gibbons - he is, yes.

MR. WATERMAN: (Inaudible), we have no experience (inaudible).

MR. J. BYRNE: Page 5 in the Auditor General's report, under Human Resources, I am going to read you just a couple of sections. They are in the second column there. (Inaudible) questions for Mr. Waterman.

"Controls over the monitoring and approval of employee leave and overtime were weak in that sick leave and annual leave usage exceeded allowable limits, approved leave forms were not always used to record leave used and doctors' notes were not always obtained as provided under the collective agreements. The average hours of sick leave used per employee for the year ended 31 March 1995 was 132."

That is approximately 16.5 eight-hour days per employee per year. To me that seems to be high. It may not be. Can somebody explain to me why it would be so high, 16.5 days per year? And has any action been taken to reduce this type of leave?

MR. WATERMAN: Mr. Byrne, if I may address that one, certainly I do not argue with the figures, but in terms of our monitoring of sick leave usage, and the amount of time that we have put into trying to control sick leave usage, the number of initiatives that we have undertaken over the course of years in terms of the implementation of sick leave programs, we have spent quite a bit of time and effort in trying to do something about that. We recognize that the numbers are high; however, from information that has accumulated across the Province, there are certain facilities or boards that have better numbers but there are some that have worse. Certainly, I think we are somewhere in the middle in terms of usage.

I do not use that as any means of defence because I personally believe, and as an administrative group we believe, the numbers are high; however, the collective agreements do provide for pretty extensive sick leave provisions, and the ability to be able to monitor and discipline based on sick leave usage is pretty lame in the system right now. We have tried many, many systems of disciplinary approaches to it. We have ended up in arbitration court several times on it. We have lost these arbitrations in a lot of cases and had to go back to the drawing board and come up with new programs to try to control the amount of sick leave being used. It is a major issue with us, and we certainly spend a lot of time trying to control it.

In terms of the doctors' notes, the collective agreement certainly specifies that doctors' notes can be called for, but there is a normal practice on that. You do not call for a doctor's note for every time somebody takes a particular day off, because it is just not feasible, but certainly, if somebody goes over a two-or-three-day period you have the right to call for that doctor's note, and that does happen when it is felt, in the opinion of the manager who is responsible, that note is called for. But if you have a good relationship with your physician, in all due respect, you can stockpile those notes if you really want to in terms of justifying why you are off sick. If you have any kind of a chronic, long-term ailment, then obviously, it is not very difficult to get those kinds of notes.

I grant you that we did not use a sick leave usage form that was prescribed, and in this organization we have not done that in the past. We are taking steps to implement that now. We have a plan in place, a program in place, where that will be initiated, but it was not felt to be necessary. I guess it was not brought to our attention at that point in terms of having a usage form signed up, because again it would be another piece of paper after the event that perhaps would not be all that meaningful.

MR. J. BYRNE: I think I was probably more concerned with the amount of time taken off per employee, really.

MR. MULLINS: Could I just make one comment?

WITNESS: Yes.

MR. MULLINS: It did not come out clearly perhaps, then, but this is a system-wide problem. I think the provincial health association has made this - they had made, when I was close to it -one of their priorities, to try to do something about this, because it was a system-wide problem, a severe problem. I can say from my own experience that it is far worse, higher, than it would be in industry, that I am familiar with.

CHAIR: Dr. Watts wanted a little time.

DR. WATTS: I think you also should know that they changed the Workers' Compensation Act, which changed the way payment was. It made a difference in people using workers' compensation and using sick time, so they switched from using the workers' compensation to take sick time. It had been around thirteen days a couple of years before that, and before that about twelve-and-a-half. It has been going up, there was a big jump when the workers changes were made.

CHAIR: There is a direct correlation between that, eh?

DR. WATTS: Yes.

MR. J. BYRNE: The reason I asked that question is because I worked with the civil service for seven years back in the early 1980s and there were x number of days a person could take. To me it seemed to be really abused in that many people took it as part of an extension of their holidays sort of thing. I do not know if that is -

MR. WATERMAN: A lot of people do treat sick time as an extension, as a benefit, and use it accordingly.

CHAIR: If it is negotiated in the collective agreement, whatever way you wish to look at it, from an employee's point of view it is a benefit or it is a right, whatever, but it is a part of a negotiated settlement. Is that what you have said?

MR. WATERMAN: If you talk to any of the union executives, of course, they will obviously deny that, in fact, that is -

CHAIR: No, but in terms of what is negotiated. I am not looking for an opinion one way or another on this, I am just looking for fact. What is negotiated, with respect to sick leave, into the collective agreement?

MR. WATERMAN: Two days per month.

CHAIR: Two days per month.

MR. WATERMAN: With accumulation of 480 days (inaudible).

CHAIR: Okay. Yes, Dr. Watts.

DR. WATTS: Mr. Chair, I also could add that, you know, (inaudible) of the collective agreement says that they can borrow time in advance for this when they have used up their time. It was amazing. There was a certain segment of the population that continually was at the approval of the administrator that were continually coming back looking to borrow their time because they had used it up.

There is another large core of people who used hardly any time whatsoever, and this is not an unusual sort of distribution. One of the programs that was put in which probably would not meet the terms but which came from Board funds was to recognize those people who had not used it up, give them a cash payment of about $75 in recognition to improve it. That increased the number of people who were not using sick time whatsoever by about double the first year that it was on, and a little bit more increase the next time, then it plateaued off - but as a recognition of people who were not using that kind of off-time.

CHAIR: Okay.

Jack, have you a question?

MR. J. BYRNE: Yes, please. I have another question for the Auditor General. Actually, on page 18, in the first column, the second point, it says: "From April 1994 to December 1994, late payment charges amounting to $623 were paid on one employee's corporate credit card." It may seem to you that I am nitpicking here, but what is the Auditor General's view with respect to late charges being paid on a corporate credit card? Is it proper, is it allowed under legislation?

MS MARSHALL: No, it is not proper. The public purse should not have to fund that, it should be the responsibility of the employee.

CHAIR: Mr. Waterman, I am sure you want to respond to that.

MR. WATERMAN: I would just like to. I do not recall the specific issue, but generally I am aware of that. Certainly, in that circumstance the credit card was probably issued in the name of the Corporation, and we ended up paying that late charge on the fact it was deemed to be a corporate liability. Whether it was incurred according to the regulations or not, I will not comment on that.

CHAIR: Was that collected back off the individual?

MR. WATERMAN: Yes, I am quite certain it was. That was part of the recoverable. I cannot swear to that, Mr. Chair, but I am quite certain.

CHAIR: Before you start, one more question, and then we are going to take an hour break for lunch and reconvene at 1:30 p.m.

Go ahead, Jack.

MR. J. BYRNE: I am not sure who I should direct this question to. On page 16 of the report in the second column, third point down, halfway down, it says: "We note that change orders for $21,550, or 18%, on a $121,900 contract and $157,134, or 6%, on a $2,767,400 contract were approved by an assistant executive director rather than the Board, in contravention of the Act." Could Mr. Waterman respond to that? Because to me that seemed to be a pretty outrageous figure, pretty well beyond what was committed, I think.

MR. WATERMAN: I cannot comment directly on that. That is something I was not directly involved in. Again, I know of the issue through discussions and so on, but my understanding was that the particular assistant executive director in that particular area made those changes. I further understand that they were reported back to the Board. Whether they were documented or not, I am not aware of it.

MR. J. BYRNE: Were there any corrective measures taken with respect to that individual? Maybe the Auditor General would like to comment on this. Was there any disciplinary action taken, or letters on a file or anything like that, saying that this is not permitted?

MR. WATERMAN: No, other than the fact that it has been brought to his attention, and certainly a revised policy is in effect which covers these issues - is currently in place. Until it was brought to our attention, I guess, we were not aware that it was in contravention of government policy on that, but recognizing that, it is now.

MS MARSHALL: The Public Tender Act has specifications in it that once you get into significant items or significant deviations from the norm, it would have to go to a certain level in the organization. It is specified very clearly. In most cases it did not go to the Board for approval.

MR. WATERMAN: Again, I do not recall the specific projects on it, either, but I made a comment before, and I guess it is a good time to interject it now, that sometimes the way that decisions are recorded at the Board level do not necessarily reflect some of the matters that were discussed there. Again, I am not saying that is the right kind of thing, but actions have been taken as a result of decisions made, and probably not recorded (inaudible). I'm sure, knowing that individual, knowing the circumstances, that these changes would have gone through to the Board at some point. Whether they got documented appropriately I cannot say.

CHAIR: Go ahead, Dr. Watts.

DR. WATTS: I am not sure of the particular set of circumstances in this one, because it does not say (inaudible) and so on, but one of the problems we have had is having a quorum for the Board, in that there had not been any board members appointed for approximately three years, and we had a number of recognitions from the Board, in that the Act specifically required a certain number of people to come, so we were operating without a functioning board for a fair bit of the time because there just were not enough people to come and requests for appointments -

CHAIR: Government did not appoint board members for three years, is that what you are -

DR. WATTS: Yes.

CHAIR: What percentage of the Board was left unappointed?

MR. MULLINS: We were down at one time to six, if I recall.

CHAIR: Out of how many?

DR. WATTS: Nine.

MR. MULLINS: Six out of nine, but that, you know, again that looks much worse than it is. But the explanation, I think, for that, in fairness again to everybody concerned -

CHAIR: What was that?

MR. MULLINS: The changeover to a regional set-up for this was imminent although it took much longer in the event than had originally been anticipated. Because while we, out here in this region, were one of the proponents of regionalization, and pushed it, we were one of the last to be done. So there was a considerable span of time there when regionalization was sort of in the offing, and I think the decision was made not to proceed with new appointments when this was just over the horizon, but that time frame stretched, as human events often do. I think that explains it, but Harry's point is well taken. I think we missed four meetings out of - normally, in a year, we have nine and we missed four in one year. Normally, board meetings were held fairly punctually.

CHAIR: Okay. We will (inaudible) that.

MR. WATERMAN: Just to qualify that remark as well - because the meetings were called, but because there was not a quorum representative of the nine as is in the Act, meetings were, of course, cancelled for lack of quorum until such time as sometimes subsequent to that, the deputy minister presumably, through the minister agreed that a quorum could be established based on the number of members who were left. At that point, I think we were down to six, so as long as we could get a quorum of six, an active and valid meeting could be held. But prior to that, we cancelled a number of meetings because of the low membership.

MR. MULLINS: I do not recognize that item. It either has to be the scanner or the DVA in that order of magnitude. I just do not recognize it. I cannot comment on it.

CHAIR: Before we recess, I know that some people, certainly people involved in the process directly, are wondering what time we will conclude. I am not in a position at this moment to say it will be two o'clock or four o'clock, that certainly is up to the Committee, but when we get back we should be able to shed some light on that question. A number of people have asked me, in our view, when the hearings will conclude. When we get back at 1:30, a quarter to two, we will certainly be able to enlighten you in some respect.

MR. J. BYRNE: When do we reconvene, at a quarter to two?

CHAIR: At 1:45 we will come back, and if Committee members could stay, I would like to meet with them and with the Auditor General for a few minutes.

We shall reconvene the hearing. We remind all witnesses that they are still operating under oath, and we will proceed with some questions. In terms of time frame, I think the Committee still has a couple of issues that they would like to revisit based upon our own discussions, and I guess, depending on the answers, that will determine the length of time we are going to be here now. Mr. Whelan was the next person on the agenda before we left, so I will turn to him. Mr. Whelan.

MR. WHELAN: Thank you, Mr. Chairman.

I would just like to pick up where I left off, if I may. I was asking the Auditor General if she were completely satisfied with the report that she had done in light of the fact that there were a lot of things on record that she had not been able to avail of, and we went on from there. I was getting into this issue about the loans and I wanted to pursue that a little further. I do not know if it is appropriate to ask how much you have borrowed but I am going to do that anyway.

MS MARSHALL: It would not be appropriate for me to give names but I could certainly give some general information on the loans. I know I will be repeating some of the things I said this morning and I will also start at the beginning. There was approximately $137,000 in employee loans, and based on the results of our audit, we identified approximately $36,500 were employee assistance loans. So the remaining $100,000 appears to be general loans and some of them are fairly large -

MR. WHELAN: What type of general loans and under what conditions were they -

MS MARSHALL: There was no information as to what those loans were for (inaudible) in the documentation of the Corporation.

MR. WATERMAN: The staff at the Corporation just indicated they were personal advances and loans; they were not EAP loans.

MS MARSHALL: We do not know for what purpose the money was used.

MR. WHELAN: Were they sizeable loans and under what conditions were they issued?

MS MARSHALL: Well, some of them had the interest charged on them, others did not, and there are various terms of repayment. We looked at the balances that were outstanding as of the time we did our audit and some of the balances were fairly large. For example, there was one there for $22,000, one for $15,000 and one for $13,000. Those were the largest balances that were outstanding at the time we did our audit. Then there were other -

MR. WHELAN: When you say they are outstanding, to what extent, six months, a month, a year?

MS MARSHALL: No, some of those loans went back quite a ways, did they not?

MR. MULLINS: As far as 1990, some of them; payments were being made on them but that was the balance still owing, and there were (inaudible).

MR. WHELAN: For example, there is still $22,000 owing on a loan that was made in 1990? Is that correct?

MR. MULLINS: That may -

MS MARSHALL: That may have been a more recent loan.

MR. WHELAN: Could you be more explicit with regard to any loans here that are outstanding for any lengthy period of time that have not been repaid?

MS MARSHALL: If you would just open the schedule - sometime, back to 1991.

MR. WHELAN: Which one is this?

MS MARSHALL: It is the one for $22,000.

MR. WHELAN: And the balance remaining on it is $22,000?

MS MARSHALL: Yes.

MR. WHELAN: How much interest was charged on that?

MS MARSHALL: That one was 10 per cent.

WITNESS: (Inaudible).

MS MARSHALL: Ten per cent (inaudible).

MR. WHELAN: Is that the total amount now, including the interest owed on that loan?

MS MARSHALL: Yes. That was actually two loans that totalled $22,000. The one for $15,000 originated back in 1990. The interest rate on that one was 5 per cent, and that was semi-annually.

MR. WHELAN: Is that the balance owing on that - $15,000?

MS MARSHALL: Yes, that was at the time (inaudible).

MR. WHELAN: What was the amount borrowed at the time? Was $15,000 borrowed?

WITNESS: (Inaudible) the amount borrowed.

MS MARSHALL: No, we did not take that off the Corporation's records. That was the balance at that time.

Then there were other ones. Some of them went back to 1990, 1991, 1992, and the interest rates -

MR. WHELAN: So these are about seven years old now.

MS MARSHALL: Yes.

MR. WHELAN: You mentioned, as I stated before, that there are a number of records that were not available; management was not forthcoming with records, for whatever reason. Could you elaborate a little more on that? Were there certain things there that you wanted to see but you have not, up to this point in time, been able to avail of?

MS MARSHALL: One area which we looked at, but not 100 per cent, related to loans regarding employees of the Corporation. The balance of the loan of $30,000 originated back pre-1990, and it was comprised mostly of charges that came in on a charge statement. So most of those charges, as I said, were pre-1990.

Now, we looked at the charge statements for 1994 and 1995, and that is where we picked up the Japanese trip.

MR. WHELAN: The Japanese trip, was that charged to the Western Memorial Health Care Corporation?

MS MARSHALL: Yes, it was charged off as an expenditure of the Corporation.

MR. WHELAN: Was it a business trip, or...?

MS MARSHALL: We were informed that, no, it was a personal trip. I understand that the Corporation subsequently set it up as a receivable from the employee.

The point I would like to make is that there is a four-year period between April, 1990, and March, 1994, when we did not look at those charge statements. They were not readily available. I believe they were in storage at the time. So I would assume that the Department of Health or the Board of the Corporation would have somebody go through those statements and see if there is anything of a personal nature on them.

The problem we had when we looked at the statements, the charge statements, is quite often the accompanying charge slip was not available. You would get a statement and there would be very limited information on the statement, so all the information is not available.

MR. WHELAN: Basically, what we are saying is that we really cannot get to the root of it. We really do not know if they were personal loans, or why they were issued, or the conditions under which they were issued.

MS MARSHALL: That is right, or if there were any more personal charities or not, I do not know; we cannot tell.

MR. WHELAN: Mr. Waterman, would you like to make some comment on that?

MR. WATERMAN: Well, basically, on that particular issue concerning the $5,689, we are aware of that. If it was set up as an expense, it was certainly done in error and was -

MR. WHELAN: Which expenditure was this?

MR. WATERMAN: The $5,600 credit card issue.

MR. WHELAN: Okay. So what did that pertain to?

MR. WATERMAN: That was a trip to Japan, I think. That was a personal expense. It was supposed to have been set up as a personal expense initially, and if it was done otherwise it was reversed after and set up as a receivable, as a part of the recovery.

MR. WHELAN: So has that been paid subsequent to -

MR. WATERMAN: Yes, it has. That has been paid in full with the $36,000.

MR. WHELAN: There are a number of others here. For example, $22,000 dating back to 1990, I understand.

MR. WATERMAN: I would have to review those to find out exactly the nature of those. I cannot recall who they are and what they are for specifically at this point.

MR. WHELAN: They are fairly large expenditures.

MR. WATERMAN: Yes.

MR. WHELAN: It is a little bit frustrating when doing an inquiry like this, in the sense that you really do not get all the information you would like to be able to get. I agree with the Auditor General. I think there should be some way we could look into this further and get a clearer picture on what is going on. Because, speaking personally, when I leave here, I have a lot of questions - I know there have been a lot of questions answered, but there are still some questions left dangling, even after some of the things have been answered, that I would like to be able to get to the root of. Some of these figures on loans and that type of thing that went out. The Auditor General mentioned that perhaps the Department of Health should look further into it. Maybe there are some other avenues, but I do not know.

MR. WATERMAN: If I can, I should say there was - the program in place at the time allowed for the CEO and then the Board chair to make those kinds of decisions. If there were circumstances came up that they responded to accordingly, it was with the CEO and the Board chair. That was the policy, as such, that was accepted. I do not know if Dr. Watts can comment on any reason why they would not go back directly to the Board until it was done that way.

MR. WHELAN: One of the things that concerns me as well is that there is sort of an attitude taken towards this that is rather light. Personally speaking, when I go to any department, any minister, to look for something for my district, if I ask for $3,000 or $4,000 there is quite a to-do made about that. It seems to them that that is a lot of money. When we talk about $20,000 or $30,000 or whatever, the attitude seems to be, from the Board's point of view, that: Really, that does not matter too much, because we would have had this big debt anyway. I do not know if you would call it a lackadaisical attitude or not, but it is bordering on that, I feel. I have quite a number of concerns, and personally I would like to see some further investigation. I would like to see some more detail on these things sometime in the near future.

CHAIR: Mr. Mullins, you wanted to respond to some of the comments of Mr. Whelan.

MR. MULLINS: I want to make this comment, from the point of view of the Board, or my role in it. As far as I know, there were no loans made to senior management personnel, that I am aware of anyway. Apart from the salary advances, which were not treated as loans, as such, there were no loans made in that category. That has been left very vague here. Any loans that I participated in or was aware of, under employee assistance or to medical or para-medical personnel for reasons relating to their duties in the hospital, I do not recognize the numbers that are being quoted there for the years, but I do remember around that time several loans to doctors. I can think of one specific one which I will not mention. As far as I know, those were the loans that were made. I am not aware of any loan made outside of those, none whatsoever.

As far as the credit card business goes, those expenses were incurred, although it has been said here somewhere in some document or other that these were personal charges. There is one item there that was known to be personal. The rest, as far as I know, were charges that were accumulated on health care business other than Western Memorial that should have been accommodated in some other way, but in the end we ended up paying for it, and subsequently the individual involved paid for it. It is my view that in fact at the end of the day, he paid back a lot of money that some part of the health delivery industry owes him somewhere along the way, just through the fact that he got behind, record-keeping

got poor and so forth.

There is an inference here that there were loans made for other than those purposes, and there were not, to my knowledge. I am emphatic about that.

CHAIR: Dr. Watts.

DR. WATTS: I think there are a couple of issues that - what was called EAP - were basically ones that came from the EAP co-ordinator and were put forward as real problems. That was the person whom they could contact indirectly if they had problems with working. There were a number of other issues, people who came forward themselves, people who were providing services who got into, unfortunately, difficulties.

CHAIR: Can you speak up a bit, Dr. Watts? Can you speak up a little bit so I can hear you?

DR. WATTS: I am sorry. There were some people who got into difficulties financially and were going to be lost to the system if they did not get some assistance. So, they were set up as loans. They were, I suppose EAP, if you want to (inaudible).

CHAIR: The Auditor General has identified those at about $36,000.

DR. WATTS: No, this is separate.

CHAIR: Separate, okay, fair enough.

DR. WATTS: These are the... I would think - without having the numbers in front of me, it is very hard to say when I am not with them. The one at $22,000, I am quite sure, is that person who, if we had lost him, we would have lost a medical practitioner, which would have had a major impact on the service we were providing. There were a number of meetings held with members of the finance committee to talk about how this could be handled in securing the loan with mortgages and so on with the house.

Another was a para-medical person, and I do not want to identify him, because I do not think that is the point, but again, another service that if we had not been able to do something with it, the person was not going to probably be able to function or stay in the position. Again, discussions with the - and on that one I am not sure if it was the Board chair or if it was the finance committee, because I can't remember directly. But we talked about it and said, well, that seemed to be the solution again: Can we get some collateral to cover it off so that we do not lose that particular service, which would have had a major impact here. So although those are not called EAP because they did not come through the EAP co-ordinator, in many ways they were to provide the service which was to keep things going.

Another area where it would come is that we provided monies to people in training to get either practitioners for remote rural areas, or for particular specialities which we did not get. Part of the agreement they signed was that they would take on a commitment that if they did not return it, that would be then treated as a loan and had to be paid back. We had a couple of people who ended up going some place else and had to set up amortization amounts to pay off the amount of money. So then they switched into being loans.

MR. WHELAN: These loans were over and above the $130,000 that was identified by the Auditor General for that? Were they included in the $137,000?

DR. WATTS: Yes, I would think so.

MR MULLINS: If I may, gentlemen, just one thing.

CHAIR: Go ahead.

MR MULLINS: The term `employee' is used here, and it is mixed in with doctors, but I think part of the confusion there may be coming from the fact that some of the doctors are employees. It may well be in the system as an employee loan. Do you see what I am saying? What I am saying is, as far as I know, there were no loans of this nature made to senior management people, that I am aware of, beyond the salary advances, but they were made to doctors. I took part in that, personally. And, I mean, I do not want to paint a picture of a scenario for you, but what the heck are you going to do when you are going to lose someone you need? They are there and they say: Look, I am desperate and I have to do something.

CHAIR: It was felt at that time that had those loans not been provided the service would have been eliminated. Is that what you are saying?

MR MULLINS: It would have gone. It would have had to go, I mean. God knows where they would have gone, in some cases.

CHAIR: Mr. Smith.

MR. SMITH: Mr. Chair, I would just like to pursue one point. There seems to be an issue here, though, that - like, I do not have a level of comfort. I keep coming back to that. That is the only benchmark that I can use, as a person who has not been part of this process in any kind of a detailed fashion except for the past couple of days. In putting that in terms of the general public that is out there, and these are the ones right now who are asking the questions, I guess, through us. We are talking about a sum of approximately $6,000 that was picked up in the Auditor General's examination of the Corporation's books, that by the admission of the people here representing the Corporation, they were not aware of at the time, or at least it had slipped through. Somehow it was not picked up. It certainly was not recorded anywhere. It was not recorded as a receivable, I understand from the report.

The concern I have, and I am sure that the people out there are now asking, is if you are admitting to us today and yesterday that that $6,000 was there and you were not aware of it, and it was not picked up - well, it was not set up anywhere as a receivable. Had you not admitted that it did not appear anywhere as a receivable?

MR. WATERMAN: No, sir. I have not admitted that. I was certainly aware of that charge from the day that the statement came in and that I sent the charge slip out to the individual involved and asked him to confirm that it was personal, and my instructions were, at that time, that that was to be set up as part of an accounts receivable. How it got treated at the time, if it got charged off, that was certainly done in error, because it was certainly tentative and recognized that that was a personal charge.

MR. SMITH: Okay, so you can give this Committee a guarantee, then, that there would not have been, prior to that, in the period that we do not have the details of, and it was not under scrutiny when this audit was done, that there would not have been similar instances if we were to go back and look at previous years, or at least, you know -

MR. WATERMAN: I cannot give a guarantee, but as far as I know, everything that was there of a personal nature was accumulated and we did set up the $36,000 or whatever the number was, prior to the $5,600 coming in, and that was as a result of that, of setting up and the personal charges upon recognition. And, as Mr. Mullins said, in certain circumstances, in certain instances, some of that quite well could have been legitimate business expenses but were not identified as such and, accordingly, were set up as a personal charge.

MR. MULLINS: It was called a personal charge mainly because it was not known to be a direct hospital Western Memorial charge. It could have been for other health-related business and I will speak to that later, but that is what I am saying.

I should make another point if I may, about that. The inference here is that this came up as a result of the Auditor General, but I was first made aware of this in late 1994, probably in December. I can remember it was quite close to the announcement of the new Board, the kind of a milestone, when Dennis informed me one day at a finance committee meeting, that this amount was outstanding; and I did not know it was. Now, I should have, and I take full responsibility for that, but I did not know. And the action that we took and the Board took were two things. First, we put in place a system to make sure that money was collected, that there was no way it would not be collected, and we set up a system of accumulating it against (inaudible), and secondly, we drew up a procedure to prevent it from happening again.

Now, one can argue that this was not adequate, and that is fair enough, but that is what we did and that was in late 1994, very late 1994, if I recall. The personal item I was not aware of at that time, because I do not think it had happened right at that time. I do not know when I became aware of that, but it was quite some time later. That happened over -

CHAIR: The $6,000?

MR. MULLINS: Pardon?

CHAIR: The $5,600?

MR. MULLINS: Whatever it was - about that time, that happened, but I did not become aware of it until some time later, not that - I do not know what difference it would have made, but that is the action that we took at the time.

MR. WHELAN: Mr. Mullins, subsequent to the - I suppose, the Department of Health's investigation, there were two suspensions, and subsequent to that, one of the persons had been rehired. Who initiated the suspension and who initiated the rehiring?

MR. MULLINS: I cannot speak to the rehiring, I was no longer in the picture, but the suspensions, basically, were initiated by the Department of Health.

MR. WHELAN: Mr. Waterman, could you answer that?

MR. WATERMAN: Well, having been one of the two individuals involved in the suspension, I received my notice from the Board's Chair, Judge Legrow at the time, that he had been directed to do so.

CHAIR: That would have come from the ministerial level, would it?

MR. WATERMAN: I presume, I -

MR. WHELAN: Okay. And when were you notified that you were rehired?

MR. WATERMAN: I was notified by the Board, by the Chair of the Board again.

MR. WHELAN: And again, under the direction of the Department of Health?

MR. WATERMAN: I cannot speak to that, Sir - that was a decision that was made by the Board and at a meeting, obviously, that I did not attend. I was only informed of the outcome.

MR. MULLINS: Despite what you may think about board autonomy, major decisions like that are rarely made by boards in isolation, trust me on that.

CHAIR: Did you have a comment, Ms Marshall?

MS MARSHALL: Yes. The $5,689 was not set up in the records of the Corporation. We certainly could not find it.

MR. WATERMAN: Well, it was certainly recognized as a personal receivable from the initiation of receiving the charge, the statement.

WITNESS: One of the problems we have with this entire hearing is, there seems to be a divergence of -

CHAIR: Let the Auditor General finish first, okay?

MS MARSHALL: No. Mr. Noseworthy here would like to make a comment.

MR. NOSEWORTHY: I met with Mr. Waterman on 10 June 1996 to discuss the issue of a credit card and whether or not there were additional charges because we had found $5,689. And I wanted to know why the analysis only went 1990 in the first instance and whether or not he could assure that there were no other charges. He could not assure that.

CHAIR: No other personal charges?

MR. NOSEWORTHY: Yes, that no other personal charges were recorded. Because they did not pick up the $5,689, we were curious as to how things were slipping through. And, at the time, Mr. Waterman could not provide any assurance that in fact everything else had been picked up, so we walked away thinking that there could be other expenses.

MR. SMITH: But did Mr. Waterman not just answer in response to my question that they had in fact identified this prior to the work of the Auditor General's department?

MR. WATERMAN: Yes, Sir. I personally had identified that as being a personal expense of the individual.

MR. SMITH: Obviously, the evidence you are giving now is in conflict with what we are hearing from the Auditor General's people.

MR. WATERMAN: My instructions were that that was to be set up as a receivable. What happened from there, I am not sure, and I am not sure if the timing of the thing went over a particular year-end or whatever, but that was certainly identified as a personal expense and with the instructions (inaudible).

MR. WHELAN: What was the time frame, from the time that you mentioned that you had identified and set it up as a receivable to the time that you had been up there?

MR. NOSEWORTHY: Well, that was in April, 1994. That particular charge (inaudible) April 1994.

MR. WHELAN: You had identified it before that?

MR. WATERMAN: Yes, Sir, whatever the date that the statement was and I indicated that on the statement. I do not know if the AG's department has a copy of that there, but it was indicated as a personal trip to Japan by the individual involved.

MR. NOSEWORTHY: If we had an account analysis that was provided that brought the account receivable balance up to about $33,000 at that time, that makes it 1990, so we went to look to see what other procedures had been put in place to determine whether or not there were any other personal expenditures incurred on the credit card or any other purchases made through the hospital for personal purposes. We could not find the $5,689 as being recorded as a receivable from the employee, and Mr. Waterman could not provide assurance that in fact procedures were in place to ensure that other things did not slip through the cracks.

MR. WHELAN: So it was a four-year period?

MR. NOSEWORTHY: Well, I thought that -

MR. WHELAN: - or a six-year period.

MR. NOSEWORTHY: We started our audit in February 1996 and at that point there was no recording of the account receivable for $5,689 which was incurred on the statement in April 1994. I met with him in June, 1996 to talk about this particular issue, could not determine whether or not everything had been properly recorded and could not get any assurance that in fact every (inaudible) were in place to ensure that other personal expenses would be picked up. We felt we had picked this up, it was not recorded, and we felt that there could be similar items. Ms Marshall indicated we did not have the statements for a three- or four-year period. They were not readily available, but -

CHAIR: If I may, just for a second, interject. So it is your feeling and belief that had you not gone in, this would not have been picked up, to use your language?

MR. NOSEWORTHY: That is right.

CHAIR: Mr. Waterman says that is not the case because he identified it immediately.

MR. WATERMAN: It was certainly identified.

CHAIR: Why the wide divide of opinion? That is the question I have.

MR. WATERMAN: Whether there was some breakdown after the last meeting to finally getting a report into the records, again I would have to go back and check that point. Certainly it was indicated that it was a personal expense. The agreement that we had set up for the repayment of the $36,000, if I can go out on a limb without having it here, but I think we made a handwritten adjustment to that to indicate the additional expenses.

CHAIR: If you do not mind, once the hearing is concluded, because as I indicated up front, if there is any information that, for whatever reason, cannot be provided today, if you could make a note of it. Certainly I think that is a legitimate question that the Committee needs an answer on, and to provide that to us in writing within the next thirty days would be appropriate.

Mr. Whelan, do you have any more questions?

MR. WHELAN: No, other than to make the comment that on my part there seems to be a lack of confidence in the way that the thing was carried out. I am still really not satisfied even with the conclusions of the Auditor General's report. Because as she, herself, mentioned, she is not really happy with it. I, personally, would like to see some further enquiries made into the financial situation over the past number of years, at least back to 1989-1990.

CHAIR: I would like to address that. Because as a committee, depending on, amongst ourselves, what recommendations we would like to provide to government, to the Department of Health, that is an issue we certainly can look at.

Anybody else? Mr. French.

MR. FRENCH: On this particular issue?

CHAIR: No, any questions whatsoever on the -

MR. FRENCH: I have several more. I would just like to ask this question of the Auditor General. All the loans that were made, were they all made to doctors?

MS MARSHALL: No. They do not appear to be. I mean, there are names in the records, some are prefaced with "Doctor," but others are just names without "Doctor" in front. I am assuming that these were just current employees of the Corporation. So that is a combination.

MR. FRENCH: Okay. Mr. Mullins, did I understand you correctly to say that you were only aware of the ones that were for doctors?

MR MULLINS: What I said was that I am not aware of any loans that were made to senior management personnel - that is what I said. Because that inference is coming out here; it is because of the salary advance thing. The salary advance thing was an item to itself. As far as I know, no one (inaudible) -

CHAIR: Separate and distinct from loaning somebody money.

MR. MULLINS: That is right. That is a separate issue, and there is no question, that is on the record, that existed. There were no loans, that I am aware of, made to senior management personnel - now, that is just to clear it up - as far as I know.

CHAIR: Fair enough. (Inaudible).

MR. MULLINS: Unless I have missed somebody and have forgotten, but I do not think I have.

MR. FRENCH: You are saying -

MR MULLINS: I am sorry, but there is a lot of - under the heading of - if you are talking about loans to medical people, some of them, a lot of them, actually, were `fee for service' people who were not under our control, not employees. Some of them are our employees, and I suppose that would be documented as employees. I do not know. Some were paramedical personnel. Perhaps there were some nurses in there. There is a range of people like that who go all the way down to regular employees. That is over and above, now, the EAP loans, which were made to a wide variety of people. I do not know at this time, but certainly at other times we made loans to nursing students, for example, to help them get into - whether they figure in this, they would be minor anyway, but to make the point. So they are not all doctors, no.

CHAIR: Okay.

MR. FRENCH: Let me ask this question: All the loans that you have recorded were not to medical personnel?

MS MARSHALL: That is right. Some of them.

WITNESS: That is probably true.

MS MARSHALL: Yes. There is a schedule in the report, Figure 5; it is not that lengthy but I can give you an enlarged version.

MR. FRENCH: Where is it?

WITNESS: Page 8.

CHAIR: Do you have any more copies available for the witnesses?

MS MARSHALL: (Inaudible).

CHAIR: To make sure they have the same documentation that we have here, so we can sing from the same page in the same hymn book.

MS MARSHALL: It is exactly the same as what is in Figure 5 in the report. It is just an enlarged version, in case - I notice the photocopy is not -

MR. FRENCH: So, then, what you are saying to me is that indeed all of the loans were not made to doctors, and that indeed any other loans were made to senior personnel?

MS MARSHALL: No, not necessarily. Senior personnel - you will notice there that I have broken down executive for $34,849, but general employees of the Corporation was $113,687; plus, there was an amount owing from a former employee. These are not names that I recognize, so they were not executive. They were just regular employees of the Corporation.

MR. FRENCH: Are the EAP things excluded from this?

MS MARSHALL: No, the EAP is included.

MR. FRENCH: It is included?

MS MARSHALL: Yes, it is. It is included in the $113,687, plus in the $7,672.

MR. WATERMAN: The issue is the advances. I think that is tied in with the payroll advances, that number. Again, I cannot verify the number until I check it. I think that is the executive advances that we referred to earlier.

CHAIR: We may be saying the same thing but the headings are different, so I just want to be clear.

Under the issue of loans to executive members, $34,849, and then the issue advances, $32,888, are you saying that should be all advances on salary?

MR. WATERMAN: No, I am not saying that. I think the $34,849 refers to the personal account of the individual that I mentioned yesterday that was collected in full.

CHAIR: Okay.

MR. WATERMAN: That ties in with the $5,600 that the Auditor General has brought forward.

CHAIR: The $5,600 would be included in that as well?

MR. WATERMAN: No, it is not included in that amount, it would be added to that.

CHAIR: Added to that?

MR. WATERMAN: It has been recovered as well.

CHAIR: Okay.

MR. WATERMAN: My understanding is that the advances there now would be the payroll advance and the executive advances which were outstanding and would be recovered over the six-month period.

CHAIR: Mr. Waterman, how many people would we be talking about who would be... over time?

MR. WATERMAN: Well, up to eight people who could be -

CHAIR: Who would be considered executive.

MR. WATERMAN: Yes.

CHAIR: Okay.

Mr. French, do you have any other questions?

MR. FRENCH: I will just start with the executive. The loans and advances, a total of $67,737, has that all been paid back now?

MR. WATERMAN: Yes, Sir, the payroll advances have all been repaid in full, and the first one there, $34,000, has been paid as well.

MR. FRENCH: So there are no more loans out, or any advances, to any member of the executive?

MR. WATERMAN: No, Sir, we have discontinued that policy since certainly back in 1996 when it was brought to our attention that this was a source of, let us say, some problem. Whatever was outstanding at the time was repaid and there were no further advances issued on it.

MR. FRENCH: The doctors, $371,225, which are called loans, and I realize that there are probably some in there which would be for doctors setting up and so on. I have absolutely no problem with that. God knows, we have enough trouble attracting physicians and specialists to come into our Province now, and if we had to give them - I would not even care if it were a loan. If it were a grant, it really would not shake me a great deal. It is listed here as loans. What is in there? Is any of that left? I am not talking about the $20,000 that we may have loaned a doctor to set up a practice, or to buy equipment to set up a practice. I am not talking about that. Are there loans there to doctors that would have been made for purposes other than that?

MR. WATERMAN: Yes there were. At the time, there were two in particular, one of which I am not 100 per cent sure if it was paid off at that time. If it was not, it was certainly paid off sometime shortly thereafter. That was initially set up back about, I would say, seven to eight years ago, again as a recruitment measure for two physicians who were recruited into the community, and, after a fair bit of discussion and a motion of the Board, a loan of $80,000 was issued to the two physicians, a husband and wife, to set up practice in the city.

CHAIR: Eighty-thousand dollars each?

MR. WATERMAN: No, total.

CHAIR: Between them.

MR. WATERMAN: It could have been $85,000, but in the vicinity of $80,000.

CHAIR: Okay, that is fine.

MR. WATERMAN: That was used for them to set up. Both of these individuals were immigrants from another country. They had just gone through their Canadian upgrading program so that they could qualify for a licence in Newfoundland, and both really had nothing in terms of personal resources when they came here, other than the skills they brought with them. Since that time, they have repaid that amount in full. We did set it up on an amortization schedule. I think it was originally ten years, and it was paid back prior to the end of the ten years.

MR. FRENCH: Are those two people now -

MR. WATERMAN: If I may, there was one more as well, if I can just (inaudible).

MR. FRENCH: Okay.

MR. WATERMAN: There was another individual recruited from outside the country, who, for various reasons - he initially got the $20,000 advance when he set up, and for various reasons, having brought himself close to bankruptcy in some circumstances, the Board responded to him several times to try to help him out. We took mortgages on his property and so on as security against that. At one point the Board had advanced that individual approximately $70,000 as well. The $70,000 was not outstanding for a long period because we did have a mortgage on his property, and he subsequently sold this property, and we recovered everything with the exception of about $30,000, $35,000, thereabouts. He has been on a payroll deduction program ever since that time. That amount is being amortized over time to the point now where I think it is in the vicinity of between $10,000 and $15,000 still outstanding, and he is still continuing to pay on that.

CHAIR: Can I - because I want to ask a question on this? What would be the salary of the physician you are talking about?

MR. WATERMAN: In the first instance, the husband and wife team?

CHAIR: No, the other one.

MR. WATERMAN: The other one. His salary at the time would have been approximately $88,000 to $90,000, I believe.

CHAIR: What sorts of conditions would lead to a physician coming to the board or the executive and saying: Although I make $88,000 or $90,000 a year, I am in a position where I need a loan of $70,000? What would - because it seems that somebody had a gun to somebody's head in terms of: If you cannot provide me the money, I am out of here. Was it like that? How did it work? I mean, this is from a layperson's point of view.

MR. WATERMAN: No, it wasn't, Mr. Chair, I tell you, at this point. This is a matter of this individual coming back to the Board several times and requesting additional financial support. I can only presume that it is perhaps a cultural thing, coming from another country, coming to this country, perhaps taking on financial commitments that he was not able to stand up to. The Board did respond several times to him. He came back again, to the point where the Board said: Look, this has gone far enough. We think we have done as much as we can do to reasonably keep you solvent and -

CHAIR: What sorts of reasons would have been provided for a physician making, again, $80,000 or $90,000 a year, to come to the Board and say: I need an advance of $10,000 or $15,000 or $20,000, that would add up to, say, $70,000?

MR. WATERMAN: It had to do, as far as I can recall - and I am going back three or four years now - but as far as I can recall, it had to do with property acquisition, vehicle acquisition. I think he had, through his own personal credit cards, gotten himself into a bit of a financial bind as well. There were other issues, I think, having to do with other, let us say, financial commitments, that he brought forward to the Board. He requested some financial support. It was not done lightly, I can recall that.

CHAIR: I am not suggesting it was. It is just that it seems -

MR. WATERMAN: We did secure it with what we could on it, in terms of anything that the Corporation could nail down as being his personal asset, with any equity, and also, of course, in terms of any employment relationship with him and the payroll deductions or any severance pay, pension plan and so on, that he would qualify for if he were to leave kind of thing.

CHAIR: Dr. Watts, do you want to make a comment before I make another on it?

DR. WATTS: Yes. Well, first of all, if the person had gone (inaudible) there would have been major impact on service because it affected a number of various areas.

CHAIR: So the Corporation must have felt then, and you as CEO at the time, that there was somewhat of a gun to your head in terms of providing services.

DR. WATTS: Oh yes. Secondly -

CHAIR: If you did not provide the help to the physician, the service that the public may have depended on would have not been provided. Is that...?

DR. WATTS: Yes. Secondly, I know, the country he had come from, and this I got from some other areas, he had entered into an arrangement and it had not worked out, and to maintain his ability to go back to his home country and function - he was being bled very badly there because he had tried to set up practice on his own where they normally were state-employed. It had not functioned very well. If he did not pay that back, his ability to go back to his native country, if it did not work out here, was going to be severely restricted. So, he was caught between a bunch of hard places.

As Dennis has said, we met with him a number of times with the Board, and the Board agonized over it, because it was very difficult. We also knew that if we did not keep him, then our services would be severely curtailed.

CHAIR: Had he made any arrangements to go the bank? Did he provide any evidence to you that he would go to appropriate lending institutions like all of us have to go to? I mean, I cannot go my employer, which is government, and say: I need $40,000 to pay down my mortgage. I cannot go to government and say: I need another $10,000 loan. You can take it off my pension, whenever that may be, so that I can go buy a car. Was there any evidence that he went to the appropriate lending institutions? Was he turned down there?

DR. WATTS: Yes.

MR. WATERMAN: Yes, he was turned down. Basically, I even went and intervened on his behalf with the local banks to see if we could set it up that way. Of course, his credit rating was such that the local banks would not deal with it, which is why again we secured the thing through payroll deductions and second mortgages and these kinds of things.

CHAIR: As a result of exhausting every avenue, then, the Board felt it had no other choice, and made a conscious decision to pursue loaning the money to the individual in question to protect its service to the public. Is that the decision that you had to come to?

MR. WATERMAN: That is the bottom line on the decision, why it was taken that way.

MR. MULLINS: I was involved in this particular one. In particular I remember, because it came up again and again. That is exactly the case, you know. It is a troubling experience for a person from outside, a layperson, to sit and deal with these things. It is interesting but troubling, but what are you going to do, you know? You say your employer would not - my employer would not either, but then my employer did not need me as badly as we needed him.

CHAIR: No, I understand the point you are making. Whether I agree or disagree is not the point either, but I understand the point you are making.

MR. MULLINS: (Inaudible).

CHAIR: Did the Board contact the Department of Health through any of this to seek guidance on how they should handle this situation? Any officials?

MR. MULLINS: I certainly did not. Whether it was done by -

CHAIR: It probably would not be in your capacity as Chair, in terms of administrative dealing, to do so. How about you, Dr. Watts?

DR. WATTS: No.

CHAIR: You just made a conscious decision that this was what you were going to within the confines of your budgetary capability.

MR. WATERMAN: And the Western Memorial Hospital Act which allowed the Board to make those kinds of decisions. Whether it was relevant or not, it was certainly within the confines of that Act.

DR. WATTS: I know, in discussions with the department we were talking about some of the issues we had with recruiting, retention, and the types of problems we were running into, because part of it reflected that also being recruited to some other areas where they were willing to pay off some of these bits and pieces, we were always in competition with, say, Nova Scotia or some other place which might decide to pay some of this.

We were talking about issues that could be done, and we talked about this particular case as an example of the kinds of problems and what we have been doing to encourage or keep people here. It was not a question of asking for permission on its own. We talked about it as to what we had done.

CHAIR: Is this a specialist? Was this physician providing - what type of specialty?

DR. WATTS: I would prefer not to say, because I think that would lead to identification.

MR. MULLINS: It would identify him.

CHAIR: Fair enough, okay.

DR. WATTS: All I can say is that it would have a major impact on the provision of services, not only in the speciality of the person, but others who are dependent upon them.

CHAIR: On the service that was provided.

DR. WATTS: Yes.

CHAIR: Mr. French, you may continue with your questions.

MR. FRENCH: The two doctors to whom you loaned $80,000, are they still here?

MR. WATERMAN: Yes, they are.

MR. FRENCH: Are they working in Corner Brook?

MR. WATERMAN: Yes, they are.

MR. FRENCH: Are they still working under this Board?

MR. WATERMAN: Both of whom are fee-for-service people but working with privileges granted by this Board, yes.

MR. FRENCH: So when they worked here I assume, then, they worked for Western Memorial?

MR. WATERMAN: No, they did not work as employees of Western Memorial, with the exception that in the initial stages I think one of the physicians had to work on a salaried arrangement, again because of his particular qualifications, for a short period until he got his Canadian specialty certification which provided him the ability to work on a fee-for-service basis. Certainly, that was the plan from day one, that they would work fee-for-service.

MR. FRENCH: Did they work for any other institution that has since become amalgamated with -

MR. WATERMAN: Other than periodic consultation services, no. I think there was some consultation in their particular specialties, one in particular at perhaps Stephenville and Sir Thomas Roddick over there, but essentially, their practice was Corner Brook-based.

MR. FRENCH: But it would not have been at Rufus Guinchard?

MR. WATERMAN: No.

MR. FRENCH: I have a reason for asking that.

MR. WATERMAN: Not that I am aware of, anyway.

WITNESS: No, these are specialists.

WITNESS: Gentlemen, the point, I think, that might be made is that the nature of the specialities would be such that they would have served the whole region extensively. A large part of the practice could come from outside of Corner Brook while working in Corner Brook.

MR. FRENCH: You will have to allow me a bit of leeway on that one, Mr. Chairman. I am sure you know what I am talking about. You and I have had a -

CHAIR: (Inaudible). Did you want any more questions?

MR. FRENCH: Yes, I am going to carry on.

I guess, like my colleague, Mr. Whelan, I would, with your indulgence, Mr. Chairman, just make a brief statement and then I have a couple of more questions and that is it for me.

It is almost like, to me, a ship adrift, where the left hand really does not seem to know what the right hand is doing. I have had the opportunity, over the last day or so, privately, to speak with my colleagues, and some of them certainly are of the same opinion as I am.

I would like for the Auditor General - and again, Mr. Chairman, we will decide that, I guess, as a committee - to maybe to go back and have a look at some things. I would certainly hope that most of these things are corrected because perception, or call it whatever you like - because I can honestly say, as Mr. Whelan has said - I am not so sure that my head is still clear on this issue. I am going to need some more information before I can look at people who have come to me, not from where I live myself, from my own district, but from this part of the Province, who have questioned me on this report and health care. Believe you me, I have had lots of questions from this part of the Province, especially when I was out here.

I just have a couple of quick ones, and I will lump them all in together. On page 16 there is an item for the Corporation as to - I think there are five items, none of which went to public tender. There is one there that really intrigues me, nursing pins. Are we talking about a pin that somebody would stick in their sweater or something to wear saying that Bob French is an RN, or John Jones is an RN, or Mrs. Smith? Is that the type of pins we are talking about?

MR. WATERMAN: What we are referring to in that one is these are pins that are made for the nursing students that are affiliated with the Western Memorial Hospital School of Nursing upon graduation. They receive a pin that they wear which designates their particular school. Several years ago we had done a tender, basically, and I cannot say whether we complied with the Public Tender Act in this case. This goes back quite a ways - it probably even precedes the Public Tender Act - where there were calls for proposals for the design and supply of a particular pin. A particular die was made that conformed to our requirements at the time, and we continued to order the supply of pins for the school on an annual basis, based upon that firm and the die that had been made at the time. That is the reason why it did not go to public tender, because it had been done on that basis.

MR. FRENCH: It almost reminds me of a thing I saw in Works, Services and Transportation where they went out one time and bought letterheads, and said that if they could not get the letterheads the School of Nursing would not have opened. I remember saying to the minister at the time: Does our School of Nursing depend on letterheads? Because if it does, then we are really in bad shape, if we have to have that.

MR. WATERMAN: If I could make just a little further comment in terms of background on that one, too, Mr. French. Basically, as you are aware, the nursing students pay a substantial tuition fee and registration fee when they enter the school of nursing. The pin is part of the program that has to be produced. I guess the point is, although you cannot clearly define it, whether or not the pin was actually purchased from funds that were provided by the nursing students as part of their registration fees, or whether, in fact, it was part of the other costs associated with the program. It is difficult to say it is one or the other, except that I think it is traditional with every school of nursing that they do provide a unique pin. It is not a cheap thing either. Certainly, it is a well done pin which costs a substantial amount of money.

MR. FRENCH: I have no problem with the pin. I have a problem with the process in getting the pin. My problem is that, in my opinion, it should have gone to public tender.

Mr. Chair, I will concede to somebody else.

CHAIR: Okay. Are there any more questions? I just have a couple. Again, I think it is a difference of opinion. This morning, the ADM, Mr. Hart, indicated that they had asked the Board on three separate occasions to provide disclosure of executive advances or bonuses, with, and he said, I think, "minimal reply". Could somebody elaborate on that for me?

MR. WATERMAN: Well, I will take a shot at it, Mr. Chair.

CHAIR: Okay, and Dr. Watts -

MR. WATERMAN: Dr. Watts can certainly comment as well, but I know certainly the issue is not unknown to us, and we were aware that the minister wanted information from time to time based on how the Board was spending its private funds. Certainly, to the best of my knowledge, we did comply with that. I did not write the actual letter and I cannot verify that it was written, but certainly I did, from time to time, provide information for the compiling of that letter as to what we were, in fact, doing. I can say that the executive advances were never mentioned, as they were not considered as part of that program at the time. That, again, may have been an oversight on our part. It certainly was not an intent to not disclose it as such, but it was not deemed to be a benefit as such, the benefit being exactly the interest on the thing as opposed to the principal of the advance, where it was repaid on a six-month basis.

CHAIR: The last question with respect to what the Department of Health official had to say: What is your comment towards - and again it comes back to the Hospitals Act and the Western Health Care Act in terms of what the board perceived as was its overall operating guideline in terms of legislative. What do you reply to the Department of Health saying it is their opinion that it was up to the Board to know that the Hospitals Act was to take precedence over the governance - or which outlined the governance - of the board, and it was not the Department of Health's responsibility to inform the board of that? How do you respond to that? I keep coming back to it because it is an important point in terms of how people made decisions right here in terms of what authority they had to make them.

MR. MULLINS: Sure, absolutely; I think it is fundamental.

CHAIR: It is fundamental.

MR. MULLINS: I can make a comment as a board member. Since this discussion went on this morning there is a little bit of confusion here, the point being that the question of whether or not we considered ourselves under the Hospitals Act or the Western Health Care Act, I do not think that has any bearing on the business of salary supplements and benefits, and so forth and so on, and the question of spending board funds, because, as I recall, this was a system-wide problem, an issue, whatever the appropriate word is. Do you understand what I am saying?

CHAIR: Yes, I do.

MR. MULLINS: The question of being under the Hospitals Act or our own Act is germane to the business of borrowing and running a deficit - or not so much a deficit as incurring a debt. I think the two are separate. I do not think the fact that we were under or not under was an influencing or a major factor - I do not think, anyway - in the question of whether or not we had salary supplements.

Now, on the question of informing, I want to comment on that because I would -

CHAIR: Excuse me. While debt and deficit are unrelated, separate issues unto themselves, they are very directly related to the result.

MR. MULLINS: Yes, they are, but I just make the point that they are not the same thing.

CHAIR: No, but in terms of -

MR. MULLINS: One can lead to the other, but they are not the same thing. They are not synonymous. Although in some quarters they are thought to be, they are not.

What was the other thing I was going to say? I have forgotten now.

WITNESS: Your being informed as to -

MR. MULLINS: Oh, yes. That went on for some time. At first, in the early days, there was never any discussion on it. I do not recall it ever coming up as an issue at all. Then, I suppose, I do not know when, perhaps in the late 1980s maybe - and I stand to be corrected on that; if someone can show I am wrong I will readily admit - I do remember being asked. I remember sitting across the table in a room with a Minister of Health, whom I shall not name, but a good person, and he asked the direct question: Were we paying supplements? My answer was no. And we were not.

We discontinued supplements long before pressure was generated from the department to discontinue them. We never considered this salary advance to be a supplement. I did not. Perhaps that is an error. If it is, I admit it. That was not taken, at least in my mind, and probably not in anybody else's on the Board, as a supplement. Do you understand what I am saying?

CHAIR: Yes, well, I mean -

MR. MULLINS: Because he did not ask.

CHAIR: - the salary advance is just - the question, I think, that comes with that is that somebody made the decision to advance a portion of a salary to an individual, or however many, whether it was one or eight or a dozen, but you know -

MR. MULLINS: I don't recall.

CHAIR: - that was exactly that, an advance. It was not a supplement to an already pre-established contractual or any kind of a relationship.

MR. MULLINS: I do not know, over the years, how many were involved. Eight sounds very high to me, but maybe it was.

CHAIR: No, I just -

MR. MULLINS: I do not think all of them ever took it up - I do not think we did, but I do not remember now, truthfully. I am saying to you, I said in good faith that we did not pay salary supplements. Because the use of salary supplements, or we used to call them augmentation, was, I think, fairly widespread in the business back some years ago. We did it, and we were not the only ones. It was widely done to get people, same as we would loan money to doctors to get people. That may seem odd in this day and age that we would offer enticements to get people, and part of the genesis of this salary advance thing was to maintain - what is the word? peace and harmony, if you will, or to maintain our staff to keep them when times were difficult.

In recent years with all the retrenchment and everything we forget that there was a time when people were in very great demand and it was hard to get not only doctors, it was hard to get good staff people as well. If you come back to the very present you will see that the Board - and I am no longer a party to it - just advertised the position of CEO and could not attract a candidate at the salary being offered. That is the way I read it. Now they are gone the consultant route -

CHAIR: I want to get to that in a minute.

MR. MULLINS: - which is another way of - you can skin a cat in many ways. Do you see what I am saying? In order to get a person now, you are going to have to sweeten the pot, the same as you had to do with the doctors. And with the doctors, you are going to have to sweeten it a lot more before it is all over.

CHAIR: No, that is a -

MR. MULLINS: It was not just a question of bribing some people. We asked a lot of the people, and we wanted to satisfy them. We took on Burgeo and Bonne Bay, we cut back our staff, and we offered this as an inducement or whatever you want to call it, you know.

If I can go on. I do not want to go - I want to say something about Harry but I do not know if this is an appropriate time or not.

CHAIR: Feel free, go ahead.

MR. MULLINS: Harry came to us first as medical - he would blush, I am sure - but he came to us first as medical director, and when the administrator's job came open very shortly thereafter, he took both jobs. For all the years he has been at Western, he has functioned - he has done for us two jobs, medical director and administrator. Now, if you notice, in the current proceedings there are three jobs being advertised: medical director, administrator, and finance officer. He, for all these years, carried two of those jobs himself.

In addition to that, he played a major role in any aspect of health care in Newfoundland that you want to name. He was up to his armpits in it. He was also involved nationally. So, when I see him being denigrated in the press and elsewhere, it hurts me badly, because the man has made - and he can blush now - the man has made an inordinate contribution to health care in this Province.

When Dennis Waterman came to me and said: Look, Harry has this thing with his expense account, we set it up to protect ourselves, but that is as far as I was prepared to go. I think that man has made a tremendous contribution to us. Just in doing those two jobs he has saved us close to $2 million over the period of time. I think we owe him a debt that - and not to browbeat him. He has done a tremendous job for health care both here and in the Province. I had to say that at some point.

CHAIR: No, that is fair enough.

MR. MULLINS: It needed saying.

CHAIR: Do other Committee members have any other questions? I do not. Dr. Watts, I am sorry about that, go ahead.

DR. WATTS: Thank you, Mr. Chair.

What I want to talk about was with regard to the coming out of the Hospitals Act or not coming out of the Hospitals Act. When I came to Western Memorial -

CHAIR: Vis-à-vis the statements made by the Department of Health officials in terms of (inaudible).

DR. WATTS: Well, the whole (inaudible).

CHAIR: Okay, fair enough.

DR. WATTS: When I came to Western Memorial in 1978, in part of my orientation I was given to believe that we came under the Hospitals Act and the Western Memorial Hospital Corporation Act, 1947, because the two went together, and there were certain areas where it was overridden and certain areas that were not overridden. What I was not told was that these are the - and there are a certain number of specific duties which are laid out in the Western Memorial Hospital Corporation Act, 1947 which included the borrowing of money and raising of funds, as listed, which is separate. It is not included in the Hospitals Act.

The second thing was how our Board got selected, which was very different. As Mr. Mullins said earlier, there was an election for some of them, some were nominated by the company and by the City, and some were put forward by the minister. Thirdly, we elected our own chair and vice-chair, which is not what happens under the Hospitals Act. These were separate.

That was the way I was taught. They said it was our responsibility to find a way (inaudible) it. Our lawyer, who had been a Board member, certainly felt we were following it. I have great difficulty understanding how the Department of Health would be asking us would we be willing to come under the Hospitals Act, give up those areas, if they did not feel also that that is what it was. How much did we have to know, how much did we have to question whether that was true or not? We also were operating a health care system, and that had been the obvious thing that we operated under. If we were wrong, we were wrong, but no one had told us, including the department, that we were. Our legal people said that. So what were we supposed to do? Keep on navel-gazing on it? (Inaudible).

Why did they have to rescind our Act in the House of Assembly if it was already superseded by this other Act? So some people must have thought it was not quite as clear-cut as some people might think. I feel very strongly about that. If we did wrong, fine. Now, I will say, we made some mistakes. I made some very grave mistakes.

As a physician, I was taught that at times you do things because you do not have an awful lot of time to debate the issue. If somebody comes in clutching his chest, you do not start talking to him about the various options that you have. Do you want to have this, or do you not want to have that, because you have to make decisions. Someone who comes in with a tumour, half the time you sit down and do a lot of discussion. So, perhaps we acted. We did not put in place policies that were written, and I regret that we did not. So there were things we did that we thought met the need. When we addressed issues of providing loans to physicians and paramedical people, we did it to maintain a service level here, and I am darned proud of the service that has been given, not only at Western Memorial, but in the Western region, and I have no qualms about saying that. I think you heard Judge Legrow say they had very few complaints when it came to delivery of service.

I can remember giving an orientation to the Board and saying, would it not it be nice if we did not have to exist here, if we did not have to have hospitals? Should we not be doing things about prevention, education and so on, so that we put ourselves out of business?

It was a novel approach; but we were innovative in trying to provide services. Perhaps we let the operational side (inaudible). As I said yesterday, we made cuts, and we made cuts in some areas in which perhaps we should have gone on and had larger numbers of people, in the human resource area, in our administrative area. Because I have looked at some of the other organizations, the number of people they have had, and when we have had operational reviews from the Department of Health and they have compared us, they will take some other organization and say, well, you have more people on your floor than others. And we say, fine, but we took - and if you can remember, yesterday I said we put patient care first as our option - and I said, `We made cuts in our finance department, so can we compare to that same organization, how many people they have in their finance department?' well-knowing we had more. ...`Oh, well, no, you cannot use that.'

So they knew what we were doing. They knew the things we were operating under, and I do not think anybody did things badly. We were in tight times financially, and some of the things we did maybe did not work out as well. We invested in some people; they did not come back. We had things tied down that they had to pay back, and as far as I know, and I think Dennis can verify, nobody has reneged on not paying those back. We did not get what we wanted, but they provided the level of service.

The number of specialists, the number of practitioners we have in this area, has increased very significantly in the twenty years I have been more or less involved with it, and I think the service levels which are given there. We did not always - in things like the Public Tender Act, we were wrong. Tell us we are wrong, and make sure we put things in place.

You talked about governance. We had started in the process, before I left the organization, of going to a Carver thing which had limitations. Instead of saying what you could do it says what you cannot do, and what you have to report back, which makes it much easier for the CEO. I think whoever comes in as CEO, that is going to be much easier to do than saying, here are all of the things you can do, when the next thing is: Can I or can I not do? and you have to get approval. This is what your limitations are.

I think we have tried to respond to them, and on that I would like to say thank you.

CHAIR: There being no more questions, I would like to take this opportunity to thank the witnesses for coming and participating. I know you did not have much choice - I understand that - but in terms of answering the questions, on behalf of the Committee. Is Mr. Leeman here, down in the back somewhere? Mr. Kenny? Who is the Acting CEO of the -

WITNESS: Brian Lemon.

CHAIR: Would you be able to take about ten minutes - just a couple of questions?

MR. KENNY: Sure.

CHAIR: Okay.

I will excuse the witnesses with the exception of Mr. Waterman, because he is still part of the ongoing process. I thank Mr. Mullins and Dr. Watts for participating.

Rob Kenny

CHAIR: I felt it was certainly okay to ask you up, based upon the Chairman's offer of yourself yesterday. Could you just state your name and present position for the record?

MR. KENNY: My name is Rob Kenny and I am the Interim CEO with the Western Health Care Corporation.

CHAIR: I have just a couple of questions. Judge Legrow left me yesterday with a fairly significant report with respect to the Auditor General's report and recommendations and follow-up. I just wanted to look at a couple of areas, first of all.

I want to follow up in terms of the recruitment process for a CEO. Could you give an update on the challenges that you faced, where you are right now with that, and what you foresee in terms of a time frame when that will be completed?

MR. KENNY: Again, I guess to be fair to all concerned, I have only been in this position myself for a couple of months, as you might appreciate. I guess what I can give you is to the best of my knowledge. As you can probably appreciate, I am not involved in that particular hiring process.

CHAIR: No, I understand.

MR. KENNY: Just to state the obvious, I guess, on that part of it. My understanding of that process is that there was a request for proposals, the deadline of which was last Friday at 4:00 p.m. My understanding is that there were a number of proposals received, that they are being reviewed by the consultants and the Board, and that that is to take place, as far as I know, this week. I expect then that will lead to a short list and the remainder of the process.

The request for proposals, the advertisement, which was again public knowledge, referred to the fact that the people who take up their duties, who are successful, would be expected to be in place by December 1 of 1997.

CHAIR: So the request for proposals for CEO dealt specifically - there was a consulting firm engaged, a head-hunting firm, so to speak. Is that correct?

MR. KENNY: That is correct.

CHAIR: To look for appropriate professionals or people with background in administration.

MR. KENNY: Yes.

CHAIR: Okay. Have there been a number of individuals - because Mr. Mullins indicated, it seemed to me, that there may have been some trouble in finding a CEO. Is that true, or are there -

MR. KENNY: There had been an earlier process. At that time, I was in the position of assistant CEO for human resources, again, not involved in what would have been a Board selection process.

CHAIR: No.

MR. KENNY: The ad was run, as I recall, probably in March, to close sometime in April or May. Again, not having been part of that process, I can only assume that, for whatever reason, nobody was deemed to be successful. There could have been any number of reasons - as to whether there was a sufficient salary... again, just not having been part, it is difficult to be specific.

CHAIR: Fair enough. With respect to the report that Judge Legrow left me yesterday, would you have intimate knowledge of this report in terms of helping develop the policies, writing them up, getting them prepared for the Board? Would you be knowledgeable of what is in the report here?

MR. KENNY: The only thing I could (inaudible) -

CHAIR: Because if you have not been part of it, I am not going to waste your time or anyone else's in terms of your being part of it.

MR. KENNY: The honest answer I can give you is that there is a section in that report as it relates to human resources and the concerns raised. There were three or four policies there that I was responsible for delivering. That would be the extent of my knowledge.

CHAIR: Alright. I will leave it at that. I do not know if anybody has any concluding remarks. I do not know if the Auditor General would like to make some concluding remarks.

MS MARSHALL: (Inaudible).

CHAIR: I guess the process, so people understand, from here, from the Public Accounts Committee point of view, what we normally do, and what we will be doing, certainly, based upon all the testimony that has been received and the questions that we have asked, that prior to - this I think is our eighth or ninth hearing this year. We will be making recommendations to government based upon all groups or agencies that are coming forward.

In this instance, we will meet as a committee, review the evidence that has been provided and recorded, and make recommendations through the House of Assembly and through the Legislature based on what we have heard, and based upon all the evidence, documentation, et cetera, that has been provided to us.

If anything comes up from the witnesses' point of view, where, over the next number of days or weeks, you feel there may be other information that may be pertinent to our investigation, that would shed more light on some of the questions we have asked - certainly, we have requested some information that you send to us. I have made a note of that and I will follow up with yourself and Mr. Waterman. But any other information outside of that that you feel would assist, or again, give us more insight into why certain decisions were made, and the way they were made, certainly feel free to pass it on to us.

I guess, from our own point of view, we certainly would send out to the individuals involved in the hearing process, the witnesses - once the record is in its written form, Hansard form, certainly that will be sent out to you; and our recommendations thereafter, once tabled in the House of Assembly, certainly will be provided to you as well.

I want to just personally thank the witnesses for coming in and participating, and as well, the general public for taking the time to come forward and listen to this very important issue.

I will say to the people who are here from the general public as well, that certainly any member of this Committee, if you have any other concerns that you would like to articulate with respect to this issue, to myself or committee members, I certainly would encourage you to do so at any time. We can be contacted at our various offices at the Confederation Building at a 1-800 number, either that or certainly call collect.

With that, I declare the public hearing on this issue closed for the time being.

Thank you very much.