SEPTEMBER 29, 1999                                                        PUBLIC ACCOUNTS COMMITTEE


The Committee met at 10:00 a.m. in Room 5083.

CHAIR (J. Byrne): Order, please!

First of all, before we begin, please remember when you are speaking that the mikes have a button on the front that you can press so you can be heard and taped. Also, I can cut you off if I feel the answers or the questions are too long. We only have a certain amount of time.

I call the hearing to order.

MR. LUSH: It is always the answers; the questions are never too long.

CHAIR: I don't know, some questions are pretty long sometimes.

This hearing of the Avalon East Board before the Public Accounts Committee was called as a result of the Auditor General's Report presented this spring, March 31, 1998. My name is Jack Byrne, and I am Chairman of the Public Accounts Committee. I think most people here know me now. To my right is Tom Lush, the Member for Terra Nova, who is the Vice-Chair.

What we will do is go around the table and introduce ourselves. Then there are a few other little things we have to do beforehand. Witnesses have to be sworn in and what have you.

I am who I said, Tom is there, and Mark Noseworthy is to the right. What is your job?

MR. NOSEWORTHY: Mark Noseworthy, Executive Officer, Public Accounts Committee.

MR. FRENCH: Bob French, MHA for Conception Bay South, member of the Public Accounts Committee.

MR. MANNING: Fabian Manning, MHA for Placentia and St. Mary's.

MR. MERCER: Bob Mercer, MHA for Humber East.

MR. LESTER: Roger Lester, Assistant Director of the Avalon East School Board.

MS LEGROW: Kathy Legrow, Chair of the Avalon East School Board.

MR. SHORTALL: Brian Shortall, Director of Education, Avalon East School Board.

MS MARSHALL: Elizabeth Marshall, Auditor General (inaudible).

MR. JANES: Claude Janes, Audit Manager, Office of the Auditor General.

MR. NOSEWORTHY: John Noseworthy, Deputy Auditor General.

MS M. HODDER: Mary Hodder, MHA for Burin-Placentia West.

MR. ANDERSEN: Wally Andersen, MHA for Torngat Mountains.

MS MURPHY: Elizabeth Murphy, Clerk.

CHAIR: Thank you.

Elizabeth, could we have the witnesses sworn in?

Swearing of Witnesses

Brian Shortall

Kathy Legrow

Roger Lester

CHAIR: Thank you.

After we speak, could we turn the mikes off? I will be leaving mine on because we can operate six at a time, but I have been asked to make sure they have been turned off.

Basically, the Public Accounts Committee is a Standing Committee of the House of Assembly. We are here to be watchdogs of the tax dollars of the people of the Province of Newfoundland and Labrador. As I have said, we decided to have this hearing because of the comments in the Auditor General's Report this past year, and you are here just to answer questions that may be forthcoming from the Committee.

We will, at the end of the hearing, be making recommendations or a report to the House of Assembly some time in the near future. Basically what we will do from here is ask the Auditor General if she has any opening comments. Then the witnesses can have opening comments, if they so desire, and then we will just go on into the questioning.

Auditor General.

MS MARSHALL: I will not go into the same length that I went into yesterday morning but, for the benefit of the witnesses who are appearing just today, this review resulted from an audit of the reorganization of the twenty-seven school boards into the ten, whereby we made sure that the assets and liabilities of the old school boards actually ended up with the new school boards.

Again, similar to the Avalon West School Board, the three areas we identified were the ancillary funds, control of fixed assets, and compensation benefits.

CHAIR: Thank you.

Would anybody from the board like to make a comment?

MS LEGROW: Thank you, Mr. Chairman.

Just to comment that we are certainly here to cooperate in any way we can. We have attempted, at our board, to make every decision as transparent as we can and we would certainly commit to continue to do that. We would be pleased to answer any questions that you might ask us, or find the information should it be unavailable at this moment.

As you are aware, I am the Chair of the board, which is our governing body which determines policy, and we have a professional secretariat which is charged with the day-to-day administration and management of the organization.

We were pleased to cooperate with the Auditor General last fall with her report, and met with her, and also provided our response to her comments in December and responded as well to this Committee in August of this year at the request of your CEO; so we are ready, willing and able.

CHAIR: What we will do is just go right into questions. Yesterday we started off with Mary Hodder, so today we will start with Fabian Manning.

MR. MANNING: Thank you, Mr. Chairman.

With respect to the $573,000 in trust funds that were transferred to private trustees prior to the new board coming into effect, does the current board feel that this was in contravention of the schools act and that all assets of the dissolved boards were not transferred to the new board?

MS LEGROW: Thank you, Mr. Manning.

This board, upon realizing - because at the time we did not have access to that information when the boards came together; in fact, the records were quite sketchy at the time - we engaged the services of Benson Myles - Mr. Wayne Myles, in particular, is our legal solicitor - to investigate whether or not we should rightfully own these assets. His relationship with the board continues. There has been ongoing dialogue with the trustees and with their solicitor, and as yet we have been unable to reach a successful conclusion to the matter.

MR. MANNING: I have just one more for now. The current board paid $30,529 that was charged to two corporate credit cards. Of this amount, only $4,491 was supported by receipts. These amounts cover the period from January 1997 to June 1998. Of this $30,529, an amount of $5,124 was for meeting expenses which covered seventy-six restaurant charges. Would the board like to comment on this and the credit card usage overall?

MS LEGROW: Can you just itemize what you questions are exactly? You are asking me about the restaurant charges for board meetings and what else?

MR. MANNING: Basically, the -

WITNESS: Page 8.

MR. MANNING: The current board paid $30,529 that was charged to two corporate credit cards. Of this amount, only $4,491 was supported by receipts. Could you care to comment on that and the credit card usage overall?

MS LEGROW: I can certainly comment on the restaurant charges. As to the details I would have to refer to my staff since we, as board members, are not intimately acquainted with the specific amounts. We did review it as a board and we were satisfied with the explanations of our staff. We have since changed our policy and receipts are required now for all corporate expenses, but I would defer to Mr. Shortall on that.

CHAIR: (Inaudible) maybe the Auditor General would like to comment (inaudible) the details and then Mr. Shortall (inaudible).

MS MARSHALL: The primary concern that I had with the $30,000 was there was a lack of supporting documentation. Of the $30,000, there was about $4,000 that there were adequate receipts for. In review of other public sector entities, for example, Western Memorial Hospital, that was a problem out there. If people are submitting claims for reimbursement for that type of expenditure there should be the supporting invoice and there should be information, for example, on who is being entertained and the purpose of the entertainment. That would be in accordance with general government policy.

CHAIR: Mr. Shortall.

MR. SHORTALL: Yes. I should point out that even though the supporting documentation had not been attached to the expense claims, the expense claims had been submitted to the finance office of the school board and were itemized with respect to what the bills on the various AMEX charges or VISA cards were in terms of the monthly statements. You have a list of billings. Each one was noted for the accounting staff as to the reason for it. Unfortunately, the attached documentation, as Ms Marshall points out, was not attached.

We have since revised our internal financial procedures and effective July 1, 1998, for this current year, all expense claims and so forth carry with them the appropriate documentation and the information that Ms Marshall mentioned with respect to the purpose of the expense, the identification, the number of parties involved and so forth.

So we have incorporated into our procedures the concerns which were pointed out in her report. All I can say to you, further to what Ms LeGrow mentioned, is that there are two corporate credit cards, one held in my name and the other in Mr. Lester's name. These were used for the ongoing expenses of board meetings, committees, board travel, et cetera and there were many kinds of expenses there in addition to travel or hotel accommodations and so on. As a result, it wouldn't be unusual to find a high degree of meal charges, because with volunteer trustees there are a lot of meetings which are held during the evening at supper time, at lunch time, breakfast or traveling on the road and so on. This is why there were would a lot of those kinds of charges.

All I can say to you, Mr. Chairman, is that since it was brought to our attention by the Auditor General we have put into effect revised and improved and more stringent procedures. It was merely for expediency that the receipts were not attached and they will be in future, and we accept her observations.

CHAIR: I don't say you would have it with you, but the policies and procedures that you have put in place, maybe we should get a copy of that forwarded to the board sometime after the hearings.

MR. SHORTALL: Yes. I will ask Mr. Lester if he will do that and I am sure he will.

CHAIR: Okay. Fabian, do you have any more?

MR. MANNING: No, that is it.

CHAIR: Okay. Anybody on this side want to ask a question?

Mr. Andersen.

MR. ANDERSEN: The question I am going to ask refers to pages 6 and 27.

What procedure or authority did the board use in providing salary top ups here in the amount of $52,000 for senior staff?

CHAIR: Is your mike on?

MR. ANDERSEN: According to the Auditor General this was - I'm sorry. Do you want me start all over again, sir?

WITNESS: No, I got most of it (inaudible).

MR. ANDERSEN: The question is this. What procedure or authority did the board use in providing salary top ups of over $50,000 for senior staff? According to the Auditor General, this was higher than the formula approved by Cabinet. Could you respond to this?

MS LEGROW: Thank you, Mr. Andersen.

I am just going to refer you, as we did with the Auditor General, to a letter that we received on October 25, 1996 from the then Minister of Education, Roger Grimes. At that time we were in the process of hiring our new staff and were therefore looking for direction from the department as to how to proceed. It says:

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

We felt that we were legally authorized to pay our staff at a rate up to step 33. We also considered at that time that because of the units of work, and some of us were somewhat familiar with the Hay scale, that our board staff, being the largest in the Province, having the most units of work in terms of the number of students, the number of schools, the number of staff, relatively speaking we wanted to make sure that they were paid at a rate that was relevant to the other board staff that worked in the Province. The personnel committee of the day began the process of negotiating contracts with these people with the commitment at the time relative to this letter that they would be paid at about step 33. Subsequent to that, Mr. Grimes wrote us and discussed other steps on the salary scale, but at that time we had already made a commitment to our staff and we did not feel that we could step back from that commitment.

Early this year we received a letter from the Minister of Education permitting us to continue at this step for these staff only and that for any new staff that were hired they would have to be commensurate with the directives of the department.

MR. MERCER: Do we have a copy of that letter?

CHAIR: There is a copy of the letter from the minister in your report here, from Judy Foote the minister.

MS LEGROW: No, I guess he is referring to the one of October 25, 1996.

CHAIR: Do we have that? I do not.

With respect to that, I think there are a lot of people who want to ask questions on this. From my understanding of what had happened in reading the documentation - and also the Kirby Report that was done for the Department of Education, which confirmed or backed up what the Auditor General had said with respect to salaries - and with respect to the pay level, for example, there were different levels here. I will not get into names, but steps 19, 18, 16 and 26 would have been the pay scales. My understanding was that if previous employees of previous boards were to be hired they could be fitted into the scale anywhere up to step 25 and not beyond.

MS LEGROW: If you refer to this letter, which was the documentation we had at the time when we hired our employees, and if you recall that during September 1996 to December 1996 was when the old boards were beginning to dissolve and the new boards were being formed and we were hiring our staff - at that point I think we had hired Mr. Shortall - this was the document that we had to go by of the day. Then with the subsequent communication from the department, even though we had made a contract basically with our staff, the expectation was that we would have had to breach that contract because the rules of the game had been changed by someone else. We did not feel comfortable in breaching our original contract with our employees. Not only that, but there were other staff throughout the Province. Because of the anomalies of the day some people who were hired were coming in from Labrador to other parts of the Province because they had a Labrador allowance. It fixed their salary at a rate that might have even exceeded what Mr. Shortall might have been making at some point in time. Again, relevant to what was going on in the Province at the time, we did not feel that that was fair to our staff.

CHAIR: I have a lot of questions on this issue as we get into it. I am going to defer. Are you finished, Wally?

MR. ANDERSEN: Yes, I will pass.

CHAIR: Mr. Mercer wanted to ask a question.

MR. MERCER: I would like to see a copy of that letter. The information which is available to me is that the direction from the minister was that the board was authorized to go up to step 25 and that if the board wished to go beyond 25 it could do so using other funds. I presume other than government funds.

It is also my recollection, and I stand to be corrected by the AG, that salaries were paid at step 25 and that sometime after September 1997 salaries were moved to 33, which would seem to place that letter at variance with the facts that I know.

MS LEGROW: I can only -

MR. MERCER: Could the AG clarify that what I just said is...

MS MARSHALL: Yes, I can shed some light. We did a review in 1997, and when I reported in December of 1997 - I handed out the chart yesterday to you - the executive of the St. John's East School Board were being paid at what I consider the correct salary; but sometime between the time we did that review and when we went back last year the salaries had been increased.

MR. MERCER: Yes, that is my understanding of the information.

MS MARSHALL: Yes, initially they were paid the correct amount.

MR. MERCER: Which is somewhat at variance with what I just heard.

MS LEGROW: I am going to make a comment and then I am going to defer to the staff. My understanding is that the contract was signed with our staff. Even though we had a handshake contract in October of 1996, the physical contract was not signed, I don't believe, until September or October of 1997. At that point then the actual salary increases would have been implemented, but I will ask Mr. Shortall if he would just give the detail of that.

MR. SHORTALL: That is correct, Sir. In the fall of 1996 when the hirings were complete for the senior executive team there was an understanding reached and a handshake, as Ms Legrow pointed out, that the contract and the level of benefits would be at the Step 33 level. However, given the challenges of bringing the five school boards together, proceeding with the registration and the organization of the school district before - you might recall, in those days we were looking at registering every pupil for a denominational or non-denominational school - that massive piece of work, as well as the logistics of bringing an organization together for the first time in mid-year with existing staff, essentially diverted the energy and the attention of the school board from the completion of the senior executive contracts. As a result, they were not completed until the fall of 1997. At that time the arrangements which had been in place, negotiated - for example, in my particular case and Mr. Lester's particular case we continued to be paid at the level of benefit which had been negotiated by us with our former employer, the Roman Catholic School Board for St. John's, and in the fall of 1997 these arrangements were removed and the arrangements with the Avalon East board took their place. That accounts for the change in the salary level that Ms Marshall has identified.

Back in the days of the former boards, the schools legislation at the time empowered the boards to set the level of remuneration for their staff, senior staff particularly, and that in the case of the Roman Catholic board and many other boards involved a top-up over and above the level of salary identified by the Department of Education policy and regulations of those days.

This, I would remind the Committee with respect, was under a previous schools act which did give the school boards more autonomy with respect to the level of remuneration than the current act does.

CHAIR: Can I just interject? That letter that you just referred to, could I ask Mark to take that and get a copy for us?

MR. SHORTALL: Absolutely.

MR. MERCER: Just a couple of questions (inaudible). Would it be possible for the board to provide us with copies of the contracts in question, and the minutes of the board including those copies?

WITNESS: Yes, Sir.

MR. MERCER: Thank you.

CHAIR: Bob, you wanted a supplementary on this one?

MR. MERCER: (Inaudible).

MR. SHORTALL: The minutes of the board approving the current contracts?

MR. MERCER: The contracts on which (inaudible).

MR. SHORTALL: Yes indeed, absolutely. I believe we provided those but we certainly will get them for you.

CHAIR: I am sorry, I thought you were finished.

MR. MERCER: The information which I have is that the salary levels being paid presently are considerably in excess of the departmental approved - or the departmental scale.

CHAIR: Do you have your mike on?

MR. MERCER: Oh, I am sorry.

The information which I have indicates that the salaries currently being paid are somewhat high relative to that which was approved. I don't know, Mr. Chairman, if the members of the board have seen the Kirby report.

MS LEGROW: No, we have received no copy of the Kirby report.

MR. MERCER: Then it would not be fair for me to make reference to too much of the detail in that. I know the letter which you have there seems to be at variance to that, but it seems to me that the information which I have and which the AG has provided to us, was very clear in the statement that individual staff salary was to be rounded up to the next highest step on your Hay scale level, to a maximum of step 25. Any top-ups were to be done by the board with its own funds. What funds does the board have or would the board have to provide those top-ups over and above step 25, other than what I would call normal government allocation?

MR. SHORTALL: The Avalon East School Board would have no source of revenue beyond its grants which it receives from government. Obviously if salaries were to be enhanced from school board monies the monies would have to come from monies provided to the board in its annual regime of granting from government through the Department of Education.

MR. MERCER: Do we have that letter from the minister, the specific letter with -

MS MARSHALL: I don't have the letter here with me but the specific letter that I saw was the one dated October 25, 1996, in which he indicated that boards did not have the authority to top-up the approved salaries that were set by that formula approved by Cabinet. Then the next month, 15 November, he did provide the boards with some flexibility. He permitted them to appoint the new directors and assistant directors at any step on the approved scale not in excess of step 25, as long as the boards were prepared to fund the difference in salary from other funds.

MR. MERCER: So it seems to me that that letter, which comes after the letter of October 25, stipulates two things: one, salaries not to be in excess of step 25, and two, if you go beyond that you must use other funds.

MS MARSHALL: Correct.

MR. MERCER: So I am going to ask the question: What is your understanding of other funds? I've made an assumption, I may be completely wrong, but what would you assume that to mean?

MS. MARSHALL: I have not been able to identify anywhere anything that I would consider other funds because the schools boards receive all of their money from the provincial government, and anything that comes in by way of donation or whatever is usually specified as to what it is going to be used for.

The only thing that I have seen was in Labrador. They receive some funding from one of the mining companies and they consider that to be a source of other funds. That's the only -

MR. MERCER: Again, I appreciate your answer, that you are not aware of any other funds. I am aware of the dispute and the discussion going on between your board and the trustees of the trust fund.

MS LEGROW: But the funds did not come from there.

MR. MERCER: Okay. So they came from general government revenues?

MS LEGROW: Yes.

MR. MERCER: Thank you.

CHAIR: Bob French wanted a supplementary on this.

MR. FRENCH: Yes, just on the salaries here and in line with what Wally said. Again, in the information that we have from the Auditor General, I find it very strange that we seem to be getting into a lot of letters here. I don't know if I ran into trouble yesterday with another board or if I didn't. I have some difficulty with this because of what the Auditor General has placed in front of us as a committee. I'd read this to the chairperson of the board. Page 6 says:

"However, in a letter dated November 15 1996 to the executive director of the Newfoundland and Labrador School Boards' Association, the Minister provided flexibility to the boards" - in other words, Avalon East, Avalon West, whatever - "in placing executive staff at a step on the approved scale not in excess of step 25 as long as the boards had other funds to pay these salaries."

Now if there are other funds I would certainly like to know where they are. I would certainly hope that when kids are knocking on doors selling chocolate bars or you are giving a kid fifty cents to buy a bar or a bag of chips in a canteen, I would trust that that money would not be used to pay somebody's salary.

I would just like to know where the board felt, or where the board thought they had the authority, to go over a directive which was issued by the minister. I said this yesterday, I will say it again today, again for the record, my understanding is that the minister of any department does not have the right to grant that approval without authority of Cabinet. Yet the board felt, in its wisdom, that they could pretty well do what they like. I have difficulty with that. I do not think that the board or I or anybody else - it would be like us as MHAs in this room walking into the House of Assembly and saying: We should all get $2,000 a month car allowance and we should all be paid twenty-eight cents a kilometer. It does not make sense.

That is why when I read this information it does not make sense to me either. As well, as part of that supplementary, I would like to know the salaries. I do not like reading names but if you want me to I will. There are four senior executives on the staff of the Avalon East School Board. I would like to know: are the four of those today being paid at step 33 or are the four of these over and above step 33?

MS LEGROW: To my knowledge they are being paid at step 33. One of those staff is no longer with us, she is retired, and there has been a new person hired who will be hired at a rate commencing -

WITNESS: He is not at step 33.

MS LEGROW: He is not at step 33. He is hired at the government rate, our new director of program. I would ask Brian then to deal in more detail.

MR. SHORTALL: Mr. French, the other three directors are paid at step 33 and not above that. The rationale for that - if you would just forgive me - is that in the fall of 1996 - I would ask you to be mindful of the realities of that particular time. At that time we had brand new school boards appointed to take office and to begin to organize the new districts, September, October, November and December. The former boards were still in existence. The legislation governing the former boards gave those boards the autonomy to determine the level of remuneration for their senior staff. There was a lot of confusion as to what the powers of the new boards would or would not be. Most people assumed that the powers of the old boards would essentially be the powers of the new boards. There was new legislation and there was quite a trail of letters - as Mr. Mercer has pointed out - going back and forth between officials and ministers of the education department, the school boards' association, and so forth.

It was in that particular framework that the school boards made agreements with their staff as to placements on the scale. Subsequently, the letters that came, later in 1996 and through early 1997, clarified more distinctly the position of the Department of Education. At that particular time arrangements and understandings had already been reached. The legal advice which the school board was receiving was that it was within its justification to do what it had agreed to do. In February 1999 the present minister of education communicated to the Chair of the board that she was prepared to recognize the payments up to step 33 as long as new employees would be placed on the scale according to departmental policy.

Since that time, as Ms Legrow pointed out, one of the four people who were initially hired in the fall has retired. Her replacement has come to work and he has been placed at the appropriate level. I believe it is step 28 or step 29 of the scale. That was determined by officials at the Department of Education as to the placement he would be provided at the Hay scale. That was based upon his current salary in Labrador and where he would be placed as he changed scales there.

As you know, there are three payment scales depending on the size of the school boards. The scale he was on was for Labrador and the exact same step he was on that scale he was placed on on the scale that applies to Avalon East. So he is in line with the official policy.

MR. FRENCH: I have more questions but not on that particular issue.

CHAIR: I think Mr. Lush wanted to have a question on this.

MR. LUSH: Just a rather elementary question, really. I do not know whether all Committee members understand this step progression. Just what are step 25 and step 33?

MR. SHORTALL: In terms of dollars?

MR. LUSH: No, no. What are they?

MR. SHORTALL: It might be that Ms Marshall can probably give you a more thorough answer than I can on that particular one, but essentially the Department of Education, to my understanding, adopted a modification of the Hay scale to determine the classification and salary placement for employees. There were three scales identified to govern the payment of directors and assistant directors for the new boards.

MR. LUSH: So they were only for senior staff?

MR. SHORTALL: That is correct. Well, and also they would -

MR. LUSH: Teachers have their own pay scale.

MR. SHORTALL: The teachers have their own, and the support staff, governed by CUPE contracts, or student assistants by NAPE contracts, will be determined by those particular collective agreements.

MR. LUSH: So for people at the board office (inaudible)?

MR. SHORTALL: Non-unionized people at the board office would also be subject to a placement on this particular scale and I understand that Mr. Lester is in the process of achieving that at this particular time, and in communication with the department of classifications and pay.

MS MARSHALL: I am just going to go back a step. I just want to clarify something of what Mr. Mercer was talking about regarding salaries.

There was an act that went through to amend the Schools Act in the Education Act and it was assented to July 26, 1996. In section 103(1) that legislation says: "The minister shall... arrange for the payment of the salaries of directors, assistant directors... and all the salaries shall be paid in accordance with scales approved by the Lieutenant-Governor in Council." Those were the scales that were approved by a Minute of Council in 1996.

So it was back as far as 1996 that the government was setting the salary scales for the senior officials of the school boards.

MR. MERCER: You were going to answer the question of what the salary is at step 33. Could I have that answer? You can do it minus the 2 per cent. That is what I'm interested in.

MR. SHORTALL: I will ask Mr. Lester if he will give you that information. (Inaudible).

MR. MERCER: Where you were going to answer it I just thought you would have it at your fingertips.

MR. LESTER: No. Those scales have changed since they were put in place. On page 27 of your package there the scales are identified. At step 33 for the Director is $99,780; Assistant Director - Programs is $85,350; the same for the Assistant Director - Personnel; and the Assistant Director - Finance is $81,634.

They are the current scales.

MR. MERCER: Mr. Chair, can I have follow with one supplementary?

CHAIR: One more, because there are other people that want to ask questions.

MR. MERCER: These numbers which you have just read are at variance with the numbers I have in a report here from the Department of Education based upon salaries actually paid, based upon T4s, and they are on the low end. The T4 salaries are much in excess of that.

MS MARSHALL: I do not know the definitive answer but I would like to say that after the senior people were put up on step 33, the Department of Education were not aware they were at step 33 and gave them a step increase. It might have been probably about $1,000 or $2,000 each. Now whether that is what it is, I do not know.

MR. MERCER: Could we get some clarification on that message here? Because the number which I read here for - I will just give them for step 33 - is $99,780. The numbers which I read here for salaries based upon T4s is $123,000, less some overpayments which brought it back down to $108,000.

CHAIR: I do not know if that had to do with severance from the old board, redundancy, vacation or anything of that nature coming into the new board. Could the Director respond to that?

MR. SHORTALL: I suspect that the explanation is in that particular area. There were some unused vacation days that were attributed to that particular time and I would think that probably would have made the difference. Perhaps Mr. Lester can be a little bit more specific in that answer to you, Mr. Mercer.

MR. LESTER: To my recollection it was unused annual leave that was paid. That would have made a difference between the approved scale as for step 33 in the booklet and the T4 amount.

MR. MERCER: Having deducted the two amounts, the annual leave and the car allowance, the salary is still some $10,000 greater than the step 33.

CHAIR: I think, as we get into questions - because I picked up on that also and I will have a lot of questions as we go through - that will be highlighted or cleared up in due course when we get into - questions that I have anyway - and hopefully they will be able to get the answers.

MR. MERCER: Just lay it there for now?

CHAIR: Sure.

Mr. Lush had a point to make but before we leave this - and I am sure we will be coming back to it - I want to refer to the letter that Ms LeGrow referred to, dated 96-10-25. In the first paragraph it says: Successful applicants for these positions should be placed on the approved scale at the step next highest to the current salary but in no case above Step 33. I recognize that in many cases previous school boards provided employees with salaries which were in excess of the approved salary scale.

What I would like to know is: the staff there now, the executive staff with the board today - and apparently it was not done until September of 1997, I believe you said, and there was a handshake before that when the people were hired on; and apparently, according to Mr. Shortall, the previous legislation gave the previous boards the authority to set the pay scales - in the time leading up to the takeover by the new board, was there an increase given to staff members who are still existing with the board today which would allow them to fit into a higher scale with the new board? Do you understand my question? What I am basically saying is - I don't know if I am being too devious here - were certain board members setting themselves up for the new board, at a higher pay scale?

MR. SHORTALL: My understanding is that the school board, upon hiring, was very cognizant of the level of salary which the individuals received from their former employees. This salary, as I mentioned to you, was comprised of three components. One was the level of salary determined for superintendents and assistant superintendents under the former regime of legislation, as you are aware, and there was a placement on the teacher salary scale, wherever you would fit in on that, that was supplemented by a superintendent or assistant superintendent's bonus which was essentially determined by the size of the enrolment of the district and so on. That was one.

There was also, in the case of many of the employees - the four individuals in question - the former employees provided some additional compensation for automobile expenses. In the third case, there was also additional compensation provided by the former employer to compensate for the size of the districts and the complexity of the districts that these individuals were attempting to administer.

Those three components did provide a salary that represented what we would refer to - and I think the last letter of the first paragraph on the 96-10-25 letter to the Chair of the Avalon East board talks about the actual salary paid to the employee, and that actual salary was comprised of that.

The board was very mindful that people coming into these new positions would not receive a cut in pay, so they actually paid them the actual salary, which in many cases was at or above Step 25. I believe as well that the understanding was that when a person received an advancement, or went to another position, there was a step promotion level, I believe, Mr. Lester, that was calculated into that. So this was the background to the determination of the level of salary which would be provided the employees under the Avalon East board. The board wanted to ensure that their actual salary, from the three areas that I mentioned, was not cut.

Also, given the fact that the degree of responsibility had increased by, in some cases - in my particular case I was responsible for 18,500 students in September when I was hired by the Avalon East board, and took over on January 1, 1997. Actually, we worked for two employees through the fall of 1996 without any additional compensation. In January of 1997 we were responsible for 36,000 or 35,000 children. It was quite an increase in responsibility, so the board felt that it was appropriate to advance one step to compensate that on the scale as well. To my recollection, Mr. Byrne, that was the rationale the board used.

CHAIR: Auditor General.

MS MARSHALL: I just wanted to add some insight because we reported on this in 1997, and that was the chart that I gave to you yesterday.

Based on everything that we saw, this looked like it was quite accurate and was based on accuracy and that there was no inflation of the salary figures between that time and the time it ended up in the 1997 report.

My recollection, just to summarize, and Mr. Shortall can correct me if I am wrong, is that when we did the 1997 report the salaries at the Avalon East School Board were accurate and in accordance with the formula. There were some school boards that were significantly higher and I think that may have had an influence on what some school boards did between that time we did the first report and the time we did the second report.

CHAIR: I think what I am trying to get at, and Mr. Mercer referred to it, is the difference from the previous boards to the existing boards salaries - executive staff - the difference from point A, the executive staff now with the present Avalon East School Board. What is the total difference? From some of the figures I have seen there, it could be upwards to as much as $35,000 to $40,000 in any given year, if you look at all of it.

MS MARSHALL: That might be the difference between what they were paid by the old board and what they are now.

CHAIR: Exactly. Yes, that is what I am saying.

MS MARSHALL: Okay, but it was not initially. Initially it was only the matter of a couple of hundred dollars.

CHAIR: What I am saying is that between the fall of 1996 and September of 1997 when the contract was signed, and Ms LeGrow referred to this, there was somewhat of an increase that could be as much as 40 per cent or 50 per cent in salaries. Is that correct?

Mr. Shortall.

MR. SHORTALL: Mr. Byrne, I would love to say the answer to that was yes and I would be delighted if I had that kind of an increase. I asked for it at the time but I certainly did not get it, I assure you.

As I said to you, I want to point out the fact that I used to determine the actual salary these individuals received. The board was cognizant of that. There was no increase given by the former school boards that employed me, at an rate, and Mr. Lester I am sure, and also the person who has retired from the board, to beef up the salaries so that the Avalon East board would have a bigger base to compensate employees on. That was not the case. The actual salary was the dollars we received plus the car allowance plus the enhancement which the former employer received. That was calculated into a lump sum and then there was an additional step added on the scale to compensate for the increase in responsibility.

CHAIR: So what was that lump sum?

MR. SHORTALL: That lump sum came out, Roger, to be the amount of money that you reported on page 27, I am assuming?

MR. LESTER: That is correct.

CHAIR: Oh yes, that is there, I am sorry.

MR. FRENCH: Mr. Chairman, do we have a list of what the four senior executives are being paid? Can we get it?

CHAIR: It is there, listed.

Not to cut you off, but I want to get this one straightened out. Mr. Mercer, you referred to the T4s there.

MR. MERCER: Yes.

CHAIR: What was the total there?

MR. MERCER: When you total the T4s, it is $123,684. There were some overpayments which were recovered, which reduced that to $108,220; which is why I said it is about $10,000 higher than the top of the HL 33 scale.

MS LEGROW: I would just like to say that it is very difficult for us to respond to something that we do not have in front of us, and we have not had an opportunity to do our own research and investigation so I do not know that we can even give you the kind of answers that you want unless we really know what you are talking about. We do not have it; we have never received that report.

CHAIR: The Kirby report.

MS LEGROW: Yes.

CHAIR: But you do have - Mr. Lester referred to this - what did you say, one hundred and what total?

WITNESS: One hundred and twenty-three thousand six hundred and eighty-four.

CHAIR: The original salary was $85,000, I think, with the previous board. Is that correct, 85,000?

WITNESS: Yes.

CHAIR: So now it is up somewhere around $110,000?

WITNESS: Yes.

CHAIR: Fifteen and ten, that is $25,000; so, $25,000 compared to $85,000 is certainly 30 per cent.

MR. LESTER: Mr. Byrne, can I ask what year those T4s are? Is that noted in the report?

WITNESS: Ninety-seven.

MR. MERCER: Again, as I said at the outset, Mr. Chairman, I find it hard to use these numbers because, as Ms LeGrow has indicated, she does not have them; but at the same time I feel that I need to raise the issue.

MR. LESTER: That difference would have been Mr. Shortall's annual leave that was added in there, fifty days that he would have been paid by the department during 1997. That would have made the difference. The salaries I gave you were the 1999 salaries which included the increase. If you go back to step 33 on a grid, in 1997 it would have been fifty days' pay at that rate there. In 1997, $82,400 was step 33 at that time. So it would have been -

MR. MERCER: That's why I asked minus the 2 per cent. That is the question (inaudible).

MR. LESTER: Fifty days on that should bring you up to the $108,000 or close to it.

CHAIR: I'm okay for now on that issue. I'm sure we will come back to it, though.

I think Mr. Lush had a question or comment.

MR. LUSH: I have forgotten where it was now. On the pay scale again, what are the scales? We hear of two, 25 and 33. Are these the two areas of payment for senior staff, just 25 and 33? Are there other step progressions in between?

MR. LESTER: What it is is this. You have a grid like this that has thirty-three steps. Step 25 was the one we were talking about, and then step 33. I'm not sure of the percentage, but there are increments like a 1 per cent increase between each of those steps as you progress through. The formula is that if you are below step 25 you get annual increments of steps per year. Once you hit step 25 you are frozen at that step, or above step 25. You do not move any more on the scale. It is an actual grid that has a placement somewhere between step 1 and step 33.

MR. LUSH: I understand the progression but what I wanted to establish here is that this is only for senior staff, not people included on the NTA or on the principal's (inaudible). This is just for people at the board.

MR. LESTER: This particular grid here is developed solely on a point range and it is our directors' grid and nobody else's. There is a grid here for other assistant directors as well.

MR. LUSH: So who decides where you go on that grid?

MR. SHORTALL: My understanding is that when an employee is recruited the current salary that he receives is identified and then he is placed on the next higher step. Is that correct? Or there is a 10 per cent increase, something of that nature.

MR. LESTER: Yes, there is an implementation formula bay dependent upon where you come from, if you come from outside the public service or within the public service. So there are a bunch of factors that determine your actual placement on the scale.

If you were previously on the scale and, say, coming from a government department to a school board you will be placed on the same step you are currently on, on the existing scale, on the appropriate school board scale. There is criteria I guess that apply to it, depending upon where you are coming from.

MR. LUSH: Mr. Shortall mentioned that the new board, in determining their salary, looked at what the person received from an old board, which is sensible and logical. I think you mentioned three components. First of all, there was a superintendent's scale established by the Province. Then individual boards could pay above and beyond that scale. It makes some sense too. Where do these funds come from? You mentioned the three components, I think, that went into establishing the salary. The Roman Catholic school board used that in particular. Where do the funds come from to pay, let's say, your salary that was in addition to the superintendent?

MR. SHORTALL: My understanding, Mr. Lush, is that they would have come from the operating expenses of the school board. Speaking of the former Roman Catholic school board, there were no additional trust funds or anything of that nature. Monies would have been decided by the school board. They would have come out of the administrative grants provided the board to operate by the department.

MR. LUSH: Which came from the government?

MR. SHORTALL: Yes, which had to have come from the government.

MR. LUSH: Just a final question: Could you describe to the Committee how school boards were paid? How, for example, is the Avalon East School Board funded now? Your cheque does not come from the Department of Education, right? It would come from the Avalon East School Board, I expect. All cheques of people at the board, do they come from the Department of Education or do they come from the board?

MR. LESTER: It again depends on where you work. If you are a director or an assistant director, other than a finance person, they come from the Department of Education. In my case, as the finance person, it comes directly from the board. All of our support staff come from the board. Student assistants and teachers come from the Department of Education. So it is dependent upon what area you work in, I guess, your collective agreement, which one you fall under.

In the predecessor board - go back to the old RC board, superintendents were paid their teacher salary scale, basically, and their superintendents bonus by the Department of Education. Any augmentation over that would have been paid out of operating funds that the board had itself.

CHAIR: Mr. French has a question.

MR. FRENCH: Mr. Chairman, before I get into the question I wanted to ask, I have some difficulty with this salary business. I want to ask either the chairperson or the Director of Finance, as one member of this Committee: Could you supply me a list of where your top four executives, or what your top four executives are being paid? As well, would you also supply to me a copy of Step 33 on the pay scale, in writing?

MS LEGROW: We can certainly provide that but I think that information is on page 27 of -

MR. FRENCH: Well, when I add up what is on page 27, Madam Chairman, and what is in a report which unfortunately you do not have and which I am not really happy about, because - we went through the same thing yesterday with the Avalon West board. We are talking about a report that they did not see, and we have you people here today and we are talking about a report that you people did not see. To me, that is not fair to you people. I take exception to that because to me it is like somebody coming in blind and I am asking you questions because I was under the impression that we all had this, although I did not get it until yesterday morning, and you people have never seen it. It is not really fair. When I look at names and salaries here, and I look at page 27, there is a difference.

MS LEGROW: Yes.

MR. FRENCH: There still is a difference. I do not know if Mr. Shortall should be getting a raise because the way I look at it, he is owed almost $2,000 from page 27 and what somebody tells me he is being paid. I would like to ask Mr. Lester for a copy of what your four top executives are being paid and where they should be paid on Step 33, if I could have that in writing, because there is confusion between this report and what is on page 27. You do not see what I see, but there is.

CHAIR: Okay, Bob, can I interject something here? Because I find it more than passing strange that the Department of Education paid for a report that was done by Kirby and Company, which concerns the Avalon East board, the Avalon West board and a few other boards with respect to pay scales, redundancies, vacation pay, credit card and whatever.

I found out about this report the day before yesterday, about 3 p.m. I managed to get Mark to track it down and go over to the Department of Education and actually get it. We had it copied for the board members for the Committee yesterday morning. I cannot understand why the Avalon East board would not have a copy of that, why you did not receive a copy, or why you did not go looking for a copy, unless you did not know it was being done. I cannot see you not knowing it being done because -

MS LEGROW: No, Mr. Chairman, we knew it was being done because we opened our books for them and they were certainly in.

CHAIR: Exactly.

MS LEGROW: We were audited, I think, at that particular time by three different groups of people - I think our own auditors, the Auditor General, as well and Kirby and Company - so our books were wide open to anybody who wanted to come through and have a look at them. We were wearing our underwear in public on a regular basis.

I guess because so many audits were done, we were responding to so many audits and we had so many other things on the go, we did not know but the department might be using it for a different purpose.

CHAIR: With respect to that, we have the Auditor General's Report and that is what we called this hearing on, based on what was in this report. To me, the Kirby and Company report pretty well backs up and confirms most of the findings of the Auditor General with respect to pay scales, vacation pay, top ups and augmentation, whatever the case may be. I think what we will have to do is go ahead with this and I would suggest that you people request a copy of this from the Department of Education. Maybe we have representatives from the Department of Education here today.

We have it here. I am not sure if we should, as the Public Accounts Committee, give it to you but I think you should be able to get your hands on. I would expect the Department of Education, if they have it, that they should be able to get it before you leave here this morning.

MS LEGROW: I have no doubt that there is absolutely no skullduggery going on here. It would only give us an opportunity to defend ourselves appropriately if we had the actual facts and figures in front of us. Because of all of the auditing that has been going on there is no way, even if we wanted to, to engage in illicit top ups and that kind of thing. Even though we have had a disagreement with the Auditor General and with the department, we have certainly been forthcoming about our information and been honest about it and then at some points to agree to disagree, but in my opinion and to my knowledge there is absolutely nothing else going on here.

CHAIR: We would not be suggesting that. From my perspective, the fact is that - and I have a major problem with this - you spoke about difference of opinions. The previous Minister of Education, Mr. Grimes, was clear in saying that the step progression or the salary paid was not within the guidelines, it was not within Cabinet approval, it was not within his directive, and the Auditor General is saying that, and Kirby and Company are pretty well saying that.

The board has a different opinion. We have a new minister appointed and shortly after she is appointed she sends out a letter which is here in our documents - it was a very vague letter in my mind - basically smoothing the waters and saying everything is fine now, hunky-dory. You have two ministers in the same Cabinet who have a major difference of opinion. Who is right? That is what we are here to try to find out and get to the bottom of it.

MS LEGROW: Maybe another piece of information is that in our discussions with the department around the salary issue, because of the confusion in the letters that had come from the department, the confusion around what would be approved salaries given the various salary components that Mr. Shortall discussed earlier, we were prepared and indicated this to the department to go to court on the issue of the salaries. We mentioned that, I think it was last fall. Our solicitor felt we had grounds on which to do that. We felt as strongly about this as that. That was basically our last communique to the department on this particular issue prior to the minister's letter in February.

CHAIR: Again I want to stress that the previous minister was so strong on this, and I remember him being so strong in the media. The Auditor General went on what was the correspondence from that minister and what have you with respect to Cabinet directives and the minister's statements, and that is why we are here today. Yet we have another minister saying now that it is okay. We have you, the board, having their opinion, saying their legal opinion is correct. We are here now, as I said earlier, to find out what is really going on and who is right and who is wrong. We will be making -

MS LEGROW: I think you have to look at the timing though. Because when we informed the department of our intention of going to court if we had to, that was in late November or early December, whereupon Mr. Grimes was reappointed to another minister's position and Minister Foote took over. Basically, she inherited this situation.

CHAIR: There is no doubt. She inherited it, but that is the point. She inherited this situation which was certainly caused by the difference of opinion between the Avalon East School Board and the previous minister, and the audit done by the Auditor General, and the Kirby and Company report that was done for the Department of Education which was not made public, which we have our hands on now. The board really should have a copy of that.

Again, I see I think the Deputy Minister in the back, and hopefully he can make a call and get you a copy of this. If not, we should have some discussion as to if we should give it to you because we will not complete this hearing today from my perspective.

Mr. Shortall wanted to say something and then Fabian Manning wanted to ask.

MR. FRENCH: Just a second, Mr. Chairman. My question has not been answered.

CHAIR: I'm sorry.

MR. FRENCH: Could I get those copies in writing, please?

CHAIR: Yes, sure.

MR. FRENCH: Thank you.

CHAIR: Mr. Shortall.

MR. SHORTALL: Mr. French, we will have those delivered to you.

Mr. Chairman, one of my responsibilities under the schools act is to provide advice to the school board and to ensure that the board has proper advice when it is making its deliberations. From October, or from the fall of 1996, the Avalon East School Board was operating under the legal advice of its counsel. Its counsel was aware of all decisions which the school board was making at that time.

As Ms LeGrow indicated, our counsel felt that in a review of all the information and documentation from October 1996 on up until the fall that the board was on very sound legal ground in terms of the decisions that were made. We did indicate to the department that we were quite prepared to seek a resolution to the problem through the courts, if necessary. Several months, subsequent to that, we received the information from the current minister that you have just referred to.

CHAIR: With respect to that, just a comment, then I think Fabian wanted to say something. If we had two lawyers come in here today, sit in the back of that room, and I asked them what color was the wall down there, one would say green and the other would say blue and they would go to court and make a fortune. To my mind, again, we have, from a logical, sensible point of view and from the documentation that has been put before us, to make some decisions and recommendations as time goes forward after the hearings are completed. We need to be as thorough as we can be and I think that you are going to need a copy of that report.

Mr. Manning.

MR. MERCER: A point of order, Mr. Chairman.

CHAIR: Sure.

MR. MERCER: Mr. French has requested copies of certain documents for his personal use. I presume that will be sent -

CHAIR: For the Committee.

MR. MERCER: - to the Committee, to the Committees' Chair.

CHAIR: Sure.

MR. MERCER: Thank you.

CHAIR: Mr. Manning.

MR. MANNING Mr. Chairman, yesterday a discussion similar to the one we are having today was ongoing, and there was a comment made that there is a possibility of a second report that was carried out. I'm not sure if it was by Kirby and Company, but there was another report. I'm just wondering has that been confirmed, and if so, can we have a copy of that one also? Because we seem to be operating in a lot of gray area here.

CHAIR: Afterwards, yesterday, I spoke to Mark Noseworthy on this to request that report, if indeed there was a report. Apparently, there is one and they would be providing us with that report. We don't have it yet, so I will ask the Assistant Deputy Minister: when can we get our hands on that?

MR. LEWIS: (Inaudible).

CHAIR: You have already been sworn in.

MR. LEWIS: In terms of the first report, it is my understanding there was a report which covered the other districts, or some of the other districts, other than District #9 and District #10 which is the report which you referred to, which the Public Accounts Committee has been provided by the Auditor General.

I have not been able yet to get a copy of that report and to circulate it but I understand it exists, because we have referenced in our comments to the Auditor General that there was more than one report. I have checked around the department and to date we have not put our hands on it, but I was asked for it just the evening before last. I have people reviewing the files and I am sure we will identify that report. Because I was not at the department at the time I do not recognize it from sight. What I have been looking for is a report that looks like the report we circulated previously. We haven't found that one.

In terms of the release of this particular report to the school boards, I had a brief discussion with our solicitor with the Department of Justice on that yesterday. There are some concern in terms of releasing the report in its entirety because it refers to more than one district and it names specific names of individuals. In a release of the report to District #10, for example, the Committee may wish to provide only those sections of the report that relate to District #10 as opposed to providing them with a copy of the report that relates to other districts as well. I would just raise that caution.

CHAIR: Sure, that isn't a problem. What you are saying is, in the first issue the other report does not cover areas -

MR. LEWIS: District #9 and District #10.

CHAIR: So that is not an issue.

MR. LEWIS: Our standing is that this second report, based on a first report which was more broad-brushed of the various districts, identified specific issues with districts 9 and 10 and that resulted in the commissioning of this more detailed report on districts 9 and 10.

MR. FRENCH: When will the board receive this report? Because I believe we are doing exactly today what we did yesterday. It is like throwing water in the wind; it is blowing back at you. We are here asking people questions. We got this information in front of us and, in fairness to the board, they do not.

I think before we come to these hearings all our ducks should be in a row and the board should certainly have had this. Our Chairman should have had it long before he did. I believe that the board should certainly have had this report before they came here to get questions from me, from Mr. Lush, Mr. Byrne, Ms Hodder, or whoever. The board should have had it.

CHAIR: What we will do now, as far as I can see from the deputy minister, is that we can ask Mark to go out and copy the parts of the report that are applicable to the Avalon East Board and we can give it to them here today. When we adjourn today we will have to reconvene at a later date, again.

MR. FRENCH: I don't want to split hairs here but I don't know if legally the information that Mark would copy is what the board - I would much sooner see the information come from the department, where it should come from, not from here. The information that goes to the Avalon East School Board should come from the Department of Education, not from the Public Accounts Committee.

CHAIR: That's a good point. Would you see to that?

MR. LEWIS: I will take your direction back to the department and we will -

CHAIR: When can we expect the board to receive that?

MR. LEWIS: As soon as possible would be the best I can say.

CHAIR: Today? Tomorrow?

WITNESS: That would depend, I guess, upon what he takes from the department when he goes back.

MR. MANNING: Mr. Chairman, if I could, it was not a directive that you pass out this information yet. That has not been decided. Is that my understanding from what you just said? A few moments ago when you said that you had discussed it, you have not been told yet to pass this information to Avalon East?

MR. LEWIS: No, I have not.

MR. MANNING: No, so he has not been given that directive yet.

MR. LEWIS: We commissioned this report on the basis of the Auditor General's Report, confirming essentially the findings that she had found, and we provided the reports to the Auditor General. That is what the department has done to this point with that report. We have also submitted to the Department of Justice and had a legal review of it in terms of recourse.

MR. LUSH: I just have a comment. I think we are building this Kirby thing up to be - making a mountain out of a mole hill, really. This Kirby (inaudible) says nothing any more than what the Auditor General's Report says. It simply supports her, so I don't know why we are holding that up to be such a secret thing. It simply says -

MR. MANNING: A point of order, Mr. Chairman.

MR. LUSH: It simply says it supports the Auditor General on her statements that the pay scale was in contravention of the Schools Act. That is what it says, and I -

CHAIR: Fabian.

MR. MANNING: A point of order, Mr. Chairman.

I agree with what Tom is saying, but at the same time we were here yesterday asking questions referring to this report and our witnesses did not have it in front of them, number one. We would refer to a certain page and the witness would say: Well, I don't have that here. It is the same situation we have here this morning.

Whether it is the same or not, chalk of one and cheese of the other, the thing is that the paperwork, or the paper where we are deriving our questions from, these people are not privy to have this in front of them. Now they may have it in the Auditor General's Report but it may not be down to the scale that it is here. Therefore, they cannot (inaudible) when we ask a question. If we cannot get an answer to the question, what are we here for?

CHAIR: This is going to be an official request to the Department of Education, through you, that the Kirby and Company report, the sections applicable to the Avalon West board be given to them as soon as possible, and the sections with respect to the Avalon East board be given to them as soon as possible so we can continue on with our hearings. Hopefully we will get an answer back from you within twenty-four hours. Is that reasonable?

WITNESS: Yes, Sir.

CHAIR: Fine, that's all you can do.

MR. FRENCH: Mr. Chairman, if I might, I would just like to say that when we talk about the Kirby report and we talk about the Auditor General's Report, I looked at the salaries and on page 27 there is a difference in what Kirby is telling me that the executives are being paid. As a matter of fact, if what Kirby and them are saying is correct, on page 27 some of the chief officers at the Avalon East School Board are being underpaid.

MR. LUSH: I'm not one bit interested in what Kirby says. I believe these people. These are the people that are under oath, these are the people who are (inaudible).

MR. FRENCH: I also believe the Auditor General and what is in here, so (inaudible) -

MR. MANNING: Well, what do we have this for? Throw it in the garbage then.

MR. FRENCH: What do we have the Auditor General's report for if that is how you feel about it?

MR. LUSH: These are the people who are here to tell the (inaudible).

MR. MANNING: (Inaudible) garbage.

CHAIR: Order, please!

What we can do here now is continue on. I have reams of questions I can ask here based on the Auditor General's report, and I am sure other people around this table can ask questions. We can go until at least noon or so, adjourn, and reconvene at a later date when these people have the Kirby report and we can do a final questioning of the board. I think that is reasonable to expect.

MR. FRENCH: Mr. Chairman, I would like to move a ten minute adjournment at this time (inaudible) cool off a bit.

CHAIR: Yes, I was just about to do that, (inaudible) break. No problem. We will have a ten minute break.

Recess

CHAIR: Order, please!

We will get this hearing going again. When we took a break Mr. Manning was asking a few questions, so we will move on now to Mary Hodder.

MS HODDER: Thank you, Mr. Chairman.

The Auditor General noted that the current board paid $269,224 in severance to two former employees of a former board. This was $110,599 in excess of what government's policy was. The current board approved this contingent upon the minister's approval which was not forthcoming for these enhanced severance packages. The board paid these amounts anyway. Can the board provide the Committee the authority with which they did this?

MS LEGROW: Thank you, Ms Hodder.

The board did not actually pay the amounts. The amounts were approved by a previous school board, the board from which these employees were employed, and the monies for that amount were held in escrow.

CHAIR: Excuse me, your mike is not on.

MS LEGROW: I'm sorry, I thought it was on.

The monies were held in escrow and I guess what our board did was facilitate the transfer of those monies with proper T4s and that kind of thing for the former board.

MS HODDER: It is stated that the enhanced severance packages were paid with monies from the Pitts Trust Fund. According to an order of the Supreme Count of Newfoundland all monies in this fund were to be used for general education purposes. Does the board feel that enhanced severance packages fall under this description?

MS LEGROW: It would be quite fair to say, and both my colleagues here with me this morning will remember, that we were extremely concerned about this activity and it really precipitated our contact with Wayne Myles, our solicitor, on this particular issue. Mr. Myles indicated to us that he had great concerns about those monies being used for that purpose. Again I will reiterate that it was not our decision, it was the decision of the former board. He did say at the time that it would require an extensive legal audit in order to determine whether or not that was within the parameters of that particular trust. We did not have the monies at the time to conduct that kind of legal audit.

We reported the findings of our solicitor to the department and essentially that is where it is now. We just cannot afford to do the kind of auditing and to do the research to see whether or not that particular trust fund would permit that kind of expenditure.

CHAIR: Can I just interject? Are you finished?

MS LEGROW: Go ahead.

CHAIR: Okay.

I think the Auditor General may want to make a comment on this. On page 15 of the document you have in front of you, it says at the bottom of the diagram, "The Schools Act, 1996, states ‘a board shall not make a payment to an employee as a result of the termination of his or her employment or the abolition of his or her position except as approved by the Minister'. Since the Minister of Education did not approve these enhanced severance packages, the payments were made not only in breach of the applicable legislation, but also without approval of the current Board."

Would the Auditor General like to make a comment on that?

MS MARSHALL: Yes, I will probably make two comments. First, I would like to clarify: the gross amount of the severance packages were, in fact, paid out by the new school board. It was the trust funds then reimbursed.

MS LEGROW: As I said, the money was held in escrow.

MS MARSHALL: Yes, until the gross amount was paid out.

The concern that I had was that the severance packages were supposed to have been approved by the minister and he, in fact, refused to give his approval for the enhanced severance packages but they were paid out anyway.

The other issue that I had a concern about was that when the new school board approved those severance packages, the enhanced ones, they said they would approve them contingent upon the approval of the minister. Well, the minister wrote back and said no, I am not giving my approval, but it got paid out anyway. We could never find a board minute which said we are going to go ahead and proceed with this even though we did not get the approval of the minister. I think that was something I had requested several times, but I never did get that minute and I do not think any such minute exists.

MS LEGROW: To my knowledge, that minute does not exist. My understanding of the discussions of the day was that the motion was passed in December, prior to the new board taking over, and it was with the intent of having government monies pay out the redundancies or basically the payout of the salary contracts of the two staff.

The legal advice of the day to that particular board - my understanding is, and again this is only hearsay because I was not involved in it - was that if these two employees were to take their contracts to court, they would probably win in a court debate, in a court decision, the right to have their salaries paid out.

The motion of the board, the minute that existed for December, was on the assumption that public monies would be used to settle the contracts of these two employees. So in January or February when pressure was applied to the Avalon East School Board to do this, it was not with the view of using public monies. It was on the understanding that it was monies from the previous board that had already been held in escrow, that it was not public money that was to be used, and the cheque was written knowing that it was in escrow. There was a great deal of discomfort at the time, which is why we went to the Department of Education and alerted them to what had happened up front.

I just want to make sure now whether Brian or Roger want to add to that.

MR. SHORTALL: Yes, your recollection is accurate. The understanding clearly was given to the Avalon East School Board by representatives of the former Avalon Consolidated School Board in December of 1996 that these monies should be paid to these two former employees of that board; and should the minister or government not approve the full financial package, the trust fund would convey the balance of money to the Avalon East School Board so the board would not be out any money.

Indeed, as Ms LeGrow pointed out, there was an amount which represented the difference between the department-calculated severance benefit as well as the additional monies which the trust fund people put in an escrow account which was used to reimburse the board for the monies that were provided to those two particular employees.

The board did not feel it was actually spending public monies as much as it was merely providing a payment with the understanding that it was going to be reimbursed for the difference, which it was.

CHAIR: Just a quick question on that: What was the difference? The trust fund paid the difference for the severance package, which was an enhanced package that was not approved by the minister. To me, I don't know if that is a proper use of the trust fund money, for a starter. I am sure if people put money in trust, or made donations for the education of the children of the Province, that trust fund should be used to pay severance to people from the former boards. Would you agree or disagree with that?

MS LEGROW: I would just like to say I think your discussion should be with the people who made that decision. That had nothing to do with the Avalon East School Board. It was a decision made by that former board prior to the boards coming together. It was a decision that basically held through. The decision had already been made to expend trust fund monies prior to the Avalon East School Board being in operation, in effect. We really had no control over the decisions of that former board.

CHAIR: My next question: When was it paid out and under what directive, what minute? Am I getting things confused? There was no minute for that? Who, initially -

WITNESS: Who wrote the cheque?

CHAIR: Yes, but if someone wrote the check they had to be given the authority from somebody to write it. It is not the person who wrote the cheque.

MR. SHORTALL: As I indicated to you, in December 1996, assurances were provided to the Avalon East board that, should government not approve the enhanced severance package for these two particular former employees of one of the former boards, the trust fund monies would be used to compensate the Avalon East board for any difference. That assurance was clearly provided and is recorded in a motion that was provided at some date in December of 1996. Subsquent to that - and at that time as well, the Avalon East board had very little information about the trust fund as to what it was, the extent of it, the terms of reference, and all these other things that you have alluded to, Mr. Byrne, as to whether such a payment would be appropriate. We were not in a position to judge that.

As the weeks unfolded in January past, and we got ourselves into February, there were more and more questions along the lines that you have identified starting to come across the minds of the trustees. At that time - as Ms LeGrow has indicated - the firm of Benson Myles was retained to provide advice to the board with respect to these particular matters. However, almost parallel to that, based upon the fact that monies were placed in escrow to cover any difference between the approved payout from the Department of Education and the agreed upon settlement for these two particular employees, the cheques were provided by the Avalon East board for these two individuals and in a very timely fashion the trust fund provided the difference in monies; and the Department of Education, of course, provided the rest of the money in terms of the board's account as well, so there was no dollar difference at the end of the day.

I would ask Mr. Lester if he wishes to comment further on that from his perspective.

MR. LESTER: I will just add that there are some indemnities from the people who were the trustees of the trust fund of the day, indemnifying the board for the cost in the event that the minister did not approve the severance package - which we know he did not. It was on that, I guess, authority and understanding that the cheques were written and then consequently bills sent to the trustees of the trust fund to be reimbursed to the board.

CHAIR: Mr. Mercer.

MR. MERCER: I am hearing, in my mind at least, conflicting information and I just want clarification to begin with. The issue of the trust fund is another line of questioning which I would like to get into at a later date, Mr. Chairman.

The information which I have indicates that the Avalon Consolidated School Board, which is a predecessor board, did approve the enhanced severance packages. I believe the date that I have is - do I have a date? It was back in December. No, it is maybe a little earlier than that.

WITNESS: November 5.

MR. MERCER: November 5, that is the one I was looking for. That is fine. The board that was in place on December 6, which the AG referred to as the current board, approved and substantiated the decision of the Avalon Consolidated Board to pay these enhanced packages, but only on the condition that they be approved by the minister as per the Schools Act. Now that is the information which I have.

As I understand, the current board, on or about January 30, 1997 - those payments were made despite the fact that the minister had refused, in writing, to give his consent. So I am a little bit confused. Because if this board had approved the enhanced severance, subject to the minister approving it - I did not hear the board say that they were subject to getting it from some other accounts or whatever, but on the condition of the minister approving - and he did not approve, and it was subsequently paid, then where is the authority? Because it seems to me that if the board passed the motion saying: We do this on condition that, and the condition was not approved, then the motion is invalid. Where was the authority to pay?

CHAIR: The Auditor General might want to comment on that first. Do you?

MR. MERCER: Have I got my facts half right?

MS MARSHALL: No, you have your facts completely correct. We could not find the authority to pay. We could not find a board minute authorizing that cheque to be cut. The cheque was cut but there was no board minute and we requested on several occasions for a copy of the board minute and we were not provided.

CHAIR: Mr. Shortall.

MR. SHORTALL: I would respond. Ms Marshall is of course quite correct in her statement. There is not a specific exact board minute that directed that particular cheque to be cut, and you are correct Mr. Mercer in your observation. However, in the December 1996 school board meeting of the Avalon East School Board there were clear assurances recorded at that particular meeting that should government not authorize the enhanced severance - I should not say enhanced - the severance package for these two former employees of one of the previous boards that the trust fund monies would be used to make up the difference. With that type of an assurance, and with the indemnities which Mr. Lester mentioned - and the fact that these monies had already been identified and had been held and were being held in escrow - the cheque was cut toward the end of January for these particular people and the monies were reimbursed to the school board. There was no difference at the end of the day with respect to the school board's accounts.

I should point out, I think, that there was an analogy. I realize the amount of money now is quite different in the example that I am going to give you, but it is not unusual for school boards to create an account receivable to assist a school council, parent association or school to make a purchase, following which the balance would be made up by fundraising or by contributions from other sources.

For example, a school may wish to buy a number of computers. It is not unusual for the school board to place an order to that effect and bill the school and then receive monies from the school over the next two to four months based upon the proceeds of fundraising campaigns to pay off that particular educational investment. In that particular context it was the same type of thinking that we used in this regard. This would be an account receivable. We had an indemnification from members of the trust fund that the monies would be provided. The monies were held in escrow. We realized that. We knew the additional monies would come back and we felt that it would be an appropriate way to handle the requests from these two former employees of a previous board. Mr. Lester, I think that is a fairly accurate summary of what came to pass. We were satisfied that the Avalon East School Board would be out no dollars as a result of this particular transaction and the board was not out any money.

MR. MERCER: So are we saying that in the December meetings of the board a block of money, in excess of what the approved severance was, some $110,000, was physically earmarked and put into an escrow account specifically for severance to be paid to these people? Because that is my idea of an escrow account.

MR. SHORTALL: The Avalon East School Board, Mr. Mercer, did not do that but we were of the assurance that one of the former school boards, and the trust fund itself, had identified that particular amount of money and had done that with it. Also, we received statements of indemnity from representatives of the trust fund that this particular money would be forthcoming should this payment be made.

MR. MERCER: So you are saying that it was the Avalon Consolidated School Board, in December, who specifically earmarked that amount and put it in escrow.

MR. SHORTALL: I cannot speak for that particular former board, but it was either that board or it was the trust fund itself which made that particular determination. That is my understanding, Mr. Lester. I think that is -

MR. LESTER: (Inaudible).

MR. SHORTALL: (Inaudible) yours..

CHAIR: Just before Bob, I have a question. Basically, the decision to write that check was done at the executive level and not at the board level?

MR. SHORTALL: Our rationale for making it, Mr. Byrne, was at the December meeting, given the assurances that been provided around the table before the motion that Ms Marshall and Mr. Mercer referred to was carried - and we do have minutes and we can provide statements from the secretaries of that particular meeting that the assurances were provided to the board, that should the minister not approve the agreed upon severance package the trust fund monies would top up the difference. Further to that we understood that, as well, monies would be placed in escrow. Subsequently we received statements of indemnity from representatives of the trust fund before we considered releasing any monies which we did toward the end of January.

CHAIR: The Auditor General, then Bob French.

MS MARSHALL: Just to bring you right through to the end now. The new board paid the severance packages on January 30, 1997, without the minute. Then the trust fund reimbursed the board May 2, 1997. So, three or four months after they did get the money.

CHAIR: Bob.

MR. FRENCH: Somebody is out $110,000. Somebody spent $110,000 without approval. The Avalon East Board, as we know it today, had a word from what was the Avalon Consolidated School Board ,or the trustees: We will take this $110,000 out of ABC account and we will transfer it to you. I see two things wrong here. Number one, the minister did not approve it. Number two, some trust fund is out $110,000. Can you explain that to me? What trust fund is now out $110,000? Because somebody got $110,000 that, according to the Minister of Education in this Province, they should not have. That is how I see it.

MR. SHORTALL: Mr. French, I really cannot speak on behalf of the Pitts Fund. I do not have the knowledge and the understanding of it. There was a considerable degree of frustration on the part of the Avalon East School Board very early in its regime when it became knowledgeable of these particular trust funds and the extent of monies in those particular funds. The exact terms of the trust and so forth were not made available to us. That is why we, in February, contracted the services of Benson Myles to investigate this matter and provide advice to the board. That particular process is ongoing and the firm of Benson Myles has been meeting, only earlier this month, with the legal representatives of the trust fund to determine the future relationship, if you wish, between the trust monies and the Avalon East Board as a successor of the Avalon Consolidated Board, should there be any relationship, and we are waiting to see that play its way through.

MR. FRENCH: This particular fund, is this now in the hands of the Avalon East Board?

MR. SHORTALL: No, it is not sir. It is in the hands of a group of trustees and they are acting according to the various trust documents that -

MR. FRENCH: Would you have any idea of why the trust was set up? Was it for furthering education?

MR. MANNING: We do. General education purposes.

MR. FRENCH: Okay, it was for general education purposes. Somebody is out here $110,000. I realize that it is not your board but as I said yesterday, and I say again today, somebody has to take responsibility for this $110,000. Somebody is out $110,000. It was not done according to what the trustees - whether they had that authority or whether they did not have that authority, I do not know. I find it very strange that we would give $110,000 over and above what the government scale allows, and that is the part that bothers me. There is $110,000 gone which could have been used to help some child in Newfoundland to further their education and that fund is now short $110,000. That really bothers me, that this money would go to pay somebody over and above the severance package as laid out by the Government of Newfoundland and Labrador.

Some day in another area I will get the right to address it, but I think that somebody should really investigate this. I believe that we should have, through maybe the Department of Justice, some kind of a judicial inquiry to find out why somebody has the right to give that authority. I may be wrong but I don't think they do. I don't think the two people should be paid. I know that there were some funds paid back but I understand that this money that was paid was not part of the money that was recovered. Am I correct?

MR. SHORTALL: I'm not quite sure I understand your question.

MR. FRENCH: There were some funds that were paid out, I think, which were collected or somebody had to go back and recollect them. Am I correct in that?

CHAIR: I think I might be able to clarify that. What had happened was that the board paid out the money, the enhanced package, and they recovered it from the trust fund some time after because they had committed the money to them.

MR. FRENCH: My argument, Mr. Chairman, is that now the fund is out. Somebody is still out $110,000.

MR. SHORTALL: If I could, Mr. Chairman, and I hesitate to make any comment about the trust funds because we have no other relationship to them, but I would point out that in the responses of one of the former school boards to the Auditor General's report there are comments made by that particular board to the very point that you raised, and whether or not that board felt it had the authority, or the funds had the leeway, to provide monies for those kinds of purposes. I would refer you to those comments of that particular board. I'm not able to speak on it, on its behalf.

MR. FRENCH: I will close on this point, Mr. Chairman. I would just like to say to Mr. Lush that maybe you don't feel it is our concern. I feel it is our concern. I feel that we are out $110,000 here to the education process -

MR. LUSH: No, we are not (inaudible).

MR. FRENCH: Yes we are. There is $110,000 gone without ministerial approval. It may not bother you but it bothers me.

MR. LUSH: The minister has nothing to do with the trust fund.

CHAIR: The point here -

MR. FRENCH: But he is supposed to give authority.

MR. LUSH: You have to understand, he has nothing to do (inaudible). Only give authority to pay (inaudible) but he has nothing to do with the trust fund.

MR. FRENCH: He did not give authority to pay.

MR. LUSH: No, that is right.

MR. FRENCH: Yet it was done. That's the part that bothers me.

MR. LUSH: (Inaudible).

MR. FRENCH: It may not bother you but it bothers me.

CHAIR: Order, please!

The point to me here is this. The question has arisen if the previous board had the authority to do what they did with respect to that trust fund. There is a line of questioning there. I think again there is some overlap between the previous boards and this board. The point that Mr. French is making, I think, is the accountability. Who is to be held accountable for that? That remains to be seen. Mr. French referred to a judicial inquiry. That may very well be a recommendation of this Committee after the hearing is completed. Who knows? It depends on what evidence we find here and that is what we are here to do, to ask the questions, to get the answers and then to come up with some recommendations.

MR. MERCER: Mr. Chairman?

CHAIR: Not to cut you off, but there are some people to my left who might be wanting to ask a few questions. Because you have had a fair shake at it.

Mr. Andersen.

MR. ANDERSEN: This is not really a question but a concern that I have, somewhere along the lines but maybe not as strongly as Mr. French, to know that a board could go ahead and approve over $100,000 in severance, knowing that they did not have the approval of the minister. If I read down further, it says: According to an order of the Supreme Court of Newfoundland that all monies in this fund were to be used for general educational purposes. When I read the part of general educational purposes, I think one would have to agree that severance packages definitely would not qualify to be paid out.

This is just a comment. That is a concern that I have, that a board could go ahead without the minister's approval; and if they are well aware of an order of the Supreme Court of Newfoundland, to go out and do it. That part concerns me.

MR. FRENCH: It concerns me too.

CHAIR: That is the question, yes.

MR. FRENCH: That was the question.

MR. LUSH: Not the trust fund.

MR. FRENCH: Yes, it was the trust fund. Where did the money come from?

MR. LUSH: (Inaudible).

CHAIR: Order, please!

Mr. Mercer.

MR. MERCER: Just to follow through, it is clear to me that the board is not aware of the workings of the, quote, trust funds, unquote.

MS LEGROW: No.

WITNESS: That is correct.

MR MERCER: Therefore, Mr. Chairman, given the extensive commentary which we have here from the trustees of that fund, I think it might be appropriate that we, at some appropriate time when we reconvene, have a representative of that trust fund here so that we could ask some questions. Because the allegation, which I understand, that has been made with respect to the trust funds is that they represent private money to the directed as per the trustees who are in charge of that versus - and we have another group of monies called public monies. I think we need to explore that a little bit -

CHAIR: In my mind, Bob, with respect to that, it comes down to jurisdiction. If the PAC will have the authority to go out to a private trust, the question is: Did the previous board have the authority to put that money out to four private trustees? That is the question.

MR. MERCER: Mr. Chairman, I tend to agree with you on that point, were it not for the fact that the trustees were also members of the boards.

CHAIR: Previous boards.

MR. MERCER: Past and present.

MS LEGROW: No, there are no trustees - well, there might be one actually sitting on our board at the moment. I'm very uncomfortable with this because we have nothing to do with it, but there are people, both from the former board and from the trustees, who can certainly respond to your concerns.

MR. MERCER: The reason I just want to belabour this point, Mr. Chairman, is that the Auditor General did report that the $573,000, or whatever the number was , was on the financial statements of the previous board. They are not on the financial statements of the current board.

CHAIR: Because?

WITNESS: That is correct.

MR. MERCER: That is the `because' we have to get our mind around.

CHAIR: It is because the previous board decided to put that money in that trust to a private trustee so the present board would not have any control over it.

MR. MERCER: I'm not going to make that assumption but the previous board did in fact change the trustees.

CHAIR: Definitely.

Mr. Lush.

MR. LUSH: I think, again, the question that has to be addressed is: Where did the board get its authority to pay the compensation? That is the key. I think the trust fund is beyond our jurisdiction too. Number one, they were not permitted to pay the compensation, as far as we know. That is what the law looks like. The fact that they had a private trust fund, I think that is out of our jurisdiction. The boards had those funds. They were set up for certain educational purposes and the board of the day thought they had the authority to do with them what they could.

It might be a different form to deal with it but I do not think it is our jurisdiction to deal with that trust fund. As they said, they were there set up for a long time and boards thought they had a use for them. The people who set them up set them up for educational purposes. We might argue that was not general educational purposes, to pay somebody severance. That might be another area, but our question has to be: Who gave the board authority to pay the compensation when it looks like it was in direct contravention of certainly a ministerial directive? That is the question that has to be addressed.

MS LEGROW: I would just like to say with respect that having sat at the table when that motion was passed early in December of 1996, the board of the day felt uncomfortable with providing authority to pay these packages without ministerial approval, which was why the motion was stated the way that it was.

The piece that came with the monies coming from the trust fund - I do not even think it was exactly articulated that way, other than monies were held in escrow and there were monies available - that was a different thing. In terms of public monies, the board of the day, I think it is fair to say, actually made that as part of the motion, that it would not be without the thinking then that we were talking about public funds.

CHAIR: With respect to that, though, that begs the next question, to me. It is why the minister refused to give his permission or authority to cut that cheque. Obviously, he must have felt that the board did not have the right to use those funds in that matter. I am only surmising what the minister was thinking, but it seems logical to me.

MR. MERCER: What I understood Ms LeGrow to say was that it was her understanding - please, I don't want to put words in your mouth - when the motion was approved that the monies were to be coming from the government funds and that is why you put in the condition subject to. Is that what I heard you say?

CHAIR: Mr. Shortall.

MR. SHORTALL: If I can just respond, I recall the meeting of December quite well because we have gone over it many, many times as a result of the events that have come to pass since.

The rationale in providing the payment at the end of January to those two former employees was based upon an understanding that had been communicated to the Avalon East board by one of its predecessor boards that this amount had been agreed; and the assurances had been provided the Avalon East board that, if the minister did not approve, we should pay the money out on the understanding, the assurance, and the indemnification of individuals, that the monies would be provided to the board. It was on that basis that the cheque was cut. We were quite confident that while a cheque was issued there was a high degree of confidence amongst my staff as well as amongst the school board members who were aware of that, that this money - while a cheque was cut from the Avalon East School Board - the monies would be compensated in a very timely fashion, which they were.

MR. MERCER: That being the case, Mr. Shortall, I am just surprised that the motion approved by the board didn't reflect that.

CHAIR: Thank you.

Mr. French.

MR. FRENCH: I will move on to something else. One of these days we will get some answers.

Mr. Chairman, I would like to go to page 7. Down at the bottom of page 7: 14. District#10. The Auditor General writes, "Our review of District #10 identified several expenditure items which were of particular concern."

One of the issues she raises, she says, "In May 1996, an executive of a former board received a payment of $42,555 as compensation for 2/3 of unused accumulated education leave. This employee is still employed with the Board. There is no policy which permits a payment of this nature."

Again, if there was no policy, where does the board get the right to pay this money? Was that money out of general revenue which the board received from the government?

MR. SHORTALL: If I may, Mr. French, I can respond to that. In May of 1996, the former board in question was the Roman Catholic School Board for St. John's. The legislation which pertained to it at that time provided that board with the autonomy to determine the levels of remuneration for its senior staff. An employment contract had been entered into with this particular employee some years before that and it provided the board with the discretion to make such a payment in terms of the employment contract of the individual at that time. In May of 1996 the school board made a conscious decision to provide that particular degree of compensation. Again, it was done under legal advice at the time and it was certainly in keeping with the terms of the personal service contact of the individual involved.

MR. FRENCH: Was the money T4-ed to the individual concerned? As well, was the cheque written by the now Avalon East School Board?

MR. SHORTALL: No, Sir, the cheque was written by the Roman Catholic School Board for St. John's and it did appear on the T4 slip of the individual concerned.

MR. FRENCH: As well, if I go over to page 8 and carry on with 14. District #10, the Auditor General says, "In May 1996, a second executive of a former board received a payment of $16,252 as compensation for 2/3 of unused annual leave over 50 days. This employee is still employed with the Board. There is no policy which permits a payment of this nature.

Now, does that mean that somebody had annual leave of thirty days so they got paid twenty plus they got paid the fifty days from the board? Again, where does the authority come from to do this when the Auditor General says there is no such authority to permit such a payment?

MR. SHORTALL: At the risk of repeating myself, Mr. French, in May of 1996, the legislation that the former Roman Catholic School Board for St. John's operated under provided it - at least in that board's opinion - with the flexibility to make a decision of that nature. That decision was taken by the board, it was taken with legal advice, and the board felt that it had the authority to do that at that time, given the legislation which pertained to it. The specific question as to whether it involves the - you asked a question with respect to the actual composition of the days. Can you just clarify that for me?

MR. FRENCH: Well, okay. It says the $16,252 is compensation for two-thirds of unused annual leave over the fifty days.

MR. SHORTALL: Yes, over the fifty days. That is correct.

MR. FRENCH: Does that mean that the Department of Education would allow a board - any board - the right to pay up to fifty days, and after that there was no agreement where the board could allow a payment such as this to be made? Am I correct?

MR. SHORTALL: I believe you are correct, Sir. The understanding is that you can claim up to fifty days unused annual leave as you terminate your employment with the organization, and this particular monies represented two-thirds of the unused annual leave that existed over and above that fifty day level.

I would ask Mr. Lester if he wanted to elaborate on that because he is probably able to give you better figures than I can.

MR. FRENCH: Before you do, Mr. Lester - and I think I am clear on this - again, this is money that was paid out by the Roman Catholic School Board and not by the now Avalon East School Board?

MR. SHORTALL: That is correct, Sir. It would have been paid by the Roman Catholic School Board for St. John's and obviously was paid out from their operating revenues which were, as we pointed out earlier, provided by government, but it was paid by that particular board at that particular time and would have come up on the T4 slip of the employee in question at the end of the year.

MR. LESTER: I don't think I have anything further to add unless your analysis of how it came up is correct. It was the days over and above fifty days that the individual had, and the board agreed to pay two-thirds of them. They were leave days that could not be used for various reasons over the previous years.

MR. FRENCH: I do not know if it is fair to ask this question, Mr. Chairman, and I would ask you for guidance. Maybe it is not a fair question to this board, so I have to be very careful. Where did somebody get the authority - if there is no approval in legislation, as the Auditor General says - where did somebody get the approval to pay out almost $60,000?

CHAIR: I don't know if I should answer that, but to me it seems that the board is saying - or the previous board felt they had the authority under the legislation to do that. The question is, if there were no policies in place, my perspective, from what I am seeing - and I have to be careful how I word this - is that possibly the legislation was used in a manner, or interpreted in such a manner, to give them the authority to do that.

MR. FRENCH: If the Auditor General says there was no authority, I would like to just hear from -

MS MARSHALL: (Inaudible) no authority. I have never seen those types of payments before, only in that school board.

With regard to the annual leave, I can say there was a policy. We have a copy of a policy from the department back in 1989, which says that: Upon retirement or resignation, a superintendent or assistant superintendent shall be entitled to a payment of up to fifty days.

That was upon retirement or resignation; but when the school boards collapsed and went from twenty-seven into the ten, there was a directive issued by the assistant deputy minister. Again, this one is dated January 8, 1997, but I think there were ongoing discussions about this annual leave policy. It says: Directors and assistant directors who held the position of superintendent or assistant superintendent immediately before being appointed to their current position were entitled to receive payment from government for up to fifty days unused annual leave, or to bring forward up to fifty days unused annual leave.

It would be only up to fifty days, and people who had more than that just lost them to the system. So, in this case, somebody got paid for so much of their annual leave in excess of fifty days while other people in the system just lost them. There was no authority and there are inconsistencies in the system.

CHAIR: I think it would be fair to ask that the legislation, or the section or clauses of the legislation which the board felt they could utilize to make this decision, it would be fair to ask the director to provide us with that?

MR. SHORTALL: Absolutely, and it will be from the Schools Act which was operating in May 1996.

CHAIR: Exactly.

MR. FRENCH So there is, if I -

CHAIR: That is what the board is saying and the Auditor General is saying something different. That is the problem. We have to get that.

MS MARSHALL: I have not seen any authority for payment of that nature.

MR. FRENCH: Under the old system or the new?

MS MARSHALL: Under the old system or the new.

MR. FRENCH: Okay.

MS MARSHALL: In addition to that, I have never seen payments like that made by any school board since I have been auditing them since1992.

CHAIR: Thank you.

MR. FRENCH: I will ask this of the new school board. Is there now a procedure in place, Madam Chairman, that would govern somebody who would, some day down the road, end up with the fifty days or more? If somebody is there for the next two years, all of a sudden can Bob French or Tom Lush walk in and say: I would like to have some education leave and so I am entitled to whatever there is. What is the procedure now? Or is there one?

MS LEGROW: I would have to defer to the staff to respond to that.

CHAIR: Policy.

MR. SHORTALL: Ask Mr. Lester if he would respond to your question, Bob. I think he can do it.

MR. LESTER: Yes, Mr. French. Right now we are all governed underneath, what would you call it?, the public servants compensation plan. Well, it is the executive compensation plan, but it is the paid leave plan of government. So there is no cap on the number of days of annual leave that you can accrue but you do not accrue any other types of leave, i.e., compassionate leave or sick leave. We get x number of days a year, depending on your years of service, and it can grow to any number provided you take a minimum of ten per year. There is provision in that plan to pay the outstanding balance at the end of your career, or you can request payment for it, my understanding is, during that time frame.

CHAIR: Mr. Lush had a question (inaudible).

MR. LUSH: I just wanted to finish up on this. I think probably the two major concerns that the Auditor General had with respect to her review of the school boards were the retirement compensation packages paid to retiring superintendents and assistant superintendents as well as the salary calculations of the directors, assistant directors and so on.

Based on that, I just wanted a final question. From the Kirby report - because my feeling is that you do not need to know what the figures are to address what the Kirby report is saying. I said earlier that basically they had supported the Auditor General's position in terms of the salaries paid to the people I just mentioned.

I just wanted to ask a question and ask for comment on it. First, with respect to the salaries, after looking at the salaries - and, as I said, the figures are irrelevant. People know what their salaries are. I expect they do. I know what mine is. I look at the pay stub every time I get it to make sure there is no change; or, if there is a change, that it is upwards and not downwards. So I expect everybody knows what they are being paid. They know what their salary is, regardless of what the Auditor General says.

CHAIR: With the tax relief coming it will be upwards.

MR. LUSH: After looking at those salaries, the Kirby report says: It is our opinion that the aforementioned salaries are in contravention of section 12 of the Schools Act as approved by the Lieutenant-Governor in Council.

It goes on further. This is another one. He says: It is our opinion that all senior management personnel at Avalon East School Board are being paid in contravention of the Schools Act. All are being paid at Step 33 of the scale.

What is your reaction to that? Is the Auditor General wrong? Is the Kirby report wrong? On what basis does the Avalon - what is their authority for paying these salaries at that level if indeed they contravene the act?

MR. SHORTALL: Mr. Lush, as we indicated earlier, there was a considerable difference of viewpoint, I suppose, between the interpretation of the various pieces of correspondence which were coming out from the department over a number of months, in late 1996 and early 1997, on this particular topic. The advice the school board had been receiving from its council supported its view with respect to the decisions it made, and obviously there is another viewpoint which has been articulated here today and we were certainly aware of at the time.

We feel that the resolution to the matter was received in the letter from the current Minister of Education in January of this past year with respect to her recognition of the placement at Step 33, on the understanding that all future hirings would be strictly in accord with the departmental policy and practices. Since that particular time we have had an additional hiring at the senior executive level and that hiring was exactly in accord with the department practices and policies. In fact, the actual salary was determined in a conversation between myself and one of the Assistant Deputy Ministers at the department to determine the salary level for that particular purpose. The board is strictly following the directives of the minister from January 1999. We feel that her letter puts aside the difference of opinion which existed from the fall of 1996 and throughout 1997, up until that letter was received.

MR. LUSH: So you think you're right?

CHAIR: Obviously.

MR. SHORTALL: Yes.

MR. LUSH: Okay. The other one, the final one, is on the retirement package. Again, with a compensation package, the retirement package that Mr. French and others just concluded, the Kirby report says: As we were not permitted access to the relevant personal contracts for these individuals we are unable to express an opinion on these payments, other than to say that they are well in excess of what were permitted to be paid other retiring superintendents, et cetera.

MR. SHORTALL: All I can say, Mr. Lush, is to my knowledge I certainly was not asked by the representatives of Kirby and Company for information concerning the personal employment contracts of any of the senior executives of the Avalon East Board. I would ask Mr. Lester if he was given that kind of a request. As Ms LeGrow pointed out earlier, it was not our position to withhold information from people who were doing audits. This is the first time I realize we were asked for that information. Mr. Lester?

MR. LESTER: Yes, I know of being asked for the information. It was not available in files that existed in our office or at the old Avalon Consolidated office. My understanding was that Kirby and Company were going to make contact with the individuals themselves and ask if they could have copies of the contracts. They were not withheld by us. We just did not have copies of them to provide.

MR. LUSH: The second part, that they were well in excess, what is your view, and were you right?

WITNESS: (Inaudible).

MR. LUSH: No, they know.

MR. SHORTALL: Just let me clarify it, Mr. Lush. The first of my comments were that I was not aware that we had been asked. I was assuming it was information on the contracts of the existing executives. If we are talking about the two employees of one of the former boards that Mr. Lester has just alluded to there, I cannot comment on whether -

MR. LUSH: We are talking about three who were paid the compensation packages that amounted to - I have just forgotten now what, but it was a huge sum of money for three of the former Avalon Consolidated School Board.

MR. SHORTALL: I cannot comment. I am just assuming that the former school boards felt that they were correct in their particular decision at the time. There were three particular employees. Two in particular received additional monies. One, I understand, did not receive any additional monies over and above what he had already received from that particular board. So I can only assume the boards felt they were right. I hesitate to speak on their behalf.

CHAIR: Thank you, Mr. Lush.

Those questions from Mr. Lush basically originated from the Kirby report. He did hit on something that I had highlighted last night when I was going through this. I'm just sorry to say that you guys never had the Kirby and Company report which you will have in the very near future, I hope.

I think what we will do is pretty well adjourn for the day and say that we will be reconvening, I would say, within the next few weeks when you have a copy of the report and you can directly respond to the concerns that are in the report which basically are in conjunction with, or very similar to, the Auditor General's Report.

I would like to, at this point, thank witnesses for coming today and giving the answers to the best of your ability and the information that you have, Mr. Shortall, Ms LeGrow and Mr. Lester. I would like to thank the representatives from the department, down in the back, who answered a few questions today when need be, the Auditor General and her staff, Committee members, our staff, and the media.

We will be notifying you in the very near future of the time, more than likely it will be at this location, and adjourn for now.

Committee adjourned.