2010 Legislative Session: Second Session, 39th Parliament


SELECT STANDING COMMITTEE ON PUBLIC ACCOUNTS


MINUTES AND HANSARD

MINUTES SELECT STANDING COMMITTEE ON PUBLIC ACCOUNTS

Wednesday, November 17, 2010


10 a.m.


Douglas Fir Committee Room


Parliament Buildings, Victoria, B.C.


Present: Bruce Ralston, MLA (Chair); Douglas Horne, MLA (Deputy Chair); Kathy Corrigan, MLA; Guy Gentner, MLA; Spencer Chandra Herbert, MLA; Rob Howard, MLA; Vicki Huntington, MLA; Richard T. Lee, MLA; John Les, MLA; Norm Letnick, MLA; Joan McIntyre, MLA; John Rustad, MLA; Shane Simpson, MLA; Ralph Sultan, MLA


Unavoidably Absent: Lana Popham, MLA


Others Present: John Doyle, Auditor General; Stuart Newton, Acting Comptroller General; Josie Schofield, Manager, Committee Research Services


1. The Chair called the Committee to order at 10:05 a.m.


2.  The Committee considered the Auditor General's Report No. 10, 2008/09: A Major Renovation: Trades Training in British Columbia


3. The Committee recessed from 11:48 a.m. to 12:18 p.m.


4.  The Committee considered the Auditor General's Report No. 14, 2008/09: Grant Administration of the BC Arts Council; 2010 Olympics and Paralympic Games


5. The Committee recessed from 1:14 p.m. to 1:21 p.m.


6.  The Committee considered the Auditor General's Report No. 4, 2010/2011: Aspects of Financial Management, Managing Fraud Risks in Government


7. The Committee adjourned at 2:34 p.m. to the call of the Chair.


The following electronic version is for informational purposes only.

The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

select standing committee on

Public Accounts 


Wednesday, November 17, 2010


Issue No. 12

ISSN 1499-4259

[ Page 303 ]

WEDNESDAY, NOVEMBER 17, 2010


The committee met at 10:05 a.m.

[B. Ralston in the chair.]


B. Ralston (Chair): Good morning, Members. We have an agenda before us which, in the absence of any objections, I'm going to take as the agenda for the meeting.


The first item is a report by the Auditor General, A Major Renovation: Trades Training in British Columbia. We'll hear from the Office of the Auditor General and the Auditor General himself and Mr. Gaston. There'll be a response from Joseph Thompson, who's the executive director of the Ministry of Regional Economic and Skills Development — I think that's the latest incarnation — and Kevin Evans, CEO of the Industry Training Authority.


With that, I'll turn it over to Mr. Doyle to introduce himself and his team.


Auditor General Report:
A Major Renovation:
Trades Training in British Columbia


J. Doyle: Good morning, Members. I'm very pleased to be able to present A Major Renovation: Trades Training in British Columbia. It was published some time ago, but it's still very relevant and very important to go through these issues.


Skilled trades workers play a key role in British Columbia's economy. For example, trades workers build houses, schools, hospitals, roads, factories. They build and repair cars and trucks, and they ensure our homes have running water, electricity, heat and cable. We can't do without them. Public safety, a well-functioning economy and the quality of life are all closely linked to infrastructure built and maintained by the skilled trades.


It is therefore critically important that students in the trades receive proper training to ensure that they are able to do their jobs not only safely but also effectively. Apprenticeship is the common model for trades training and has been since the Middle Ages. Traditional apprenticeships involve a formal relationship between a master trade worker, a journeyperson; and a student, an apprentice.


Although new models of apprenticeship are emerging, most existing trades programs today involve about 80 percent of an apprentice's time being work-based and the remaining 20 percent being provided at school or on line. The length of the apprenticeship can vary by apprenticeship and by trade, but most programs require four years to complete. That includes both the in-school and work-based training time.


In 2004 the Industry Training Authority, a Crown corporation responsible for trades-training systems oversight, was created and directed to design and implement solutions to some key issues within the trades training system — namely, trades-training flexibility, industry involvement in trades training and improved outcomes for trades training. Since its creation the ITA has introduced significant changes intended to improve the trades-training system in British Columbia. Most notably, they have introduced the concept of industry training organizations, or ITOs.


ITOs represent a major change to the government structure of the trades-training system. How an organization like ITA chooses to manage change is critical to its success. Through the trades-training audit, we identified areas where change management could have been better implemented. I'm pleased to report that it's my understanding that all the recommendations that flowed from this particular audit have now been implemented or substantially implemented.


Sitting next to me is Malcolm Gaston, who's assistant Auditor General responsible for this area within the office. He will now give a brief presentation.


M. Gaston: Good morning, Chair and Members. The trades-training system is complex and is comprised of many different organizations and stakeholders. These include the ministry; the Industry Training Authority; industry training organizations, which are industry-directed entities that report to ITA and are responsible for developing and managing industry training programs within a particular industry sector; employer and labour groups and individuals who sponsor and train individuals; public and private post-secondary institutions and school districts that deliver trades-training programs; and, of course, the learners in the system: apprenticeship and pre-apprenticeship students.


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The purpose of our audit was to examine how well the government and ITA were leading and managing the trades-training system.


We concluded that while the provincial government and ITA had established a new model for trades training, they had not provided sufficient guidance and direction to its partners and stakeholders to put the model into practice. The ITA had not sufficiently consulted or collaborated with its stakeholders in developing its plans and strategies.


At the time of our report ITA's more recent efforts to improve communication and coordination were promising, but further improvements were still needed in a number of areas. As part of the report, we recommend that ITA develop, in consultation with key stakeholders, an action plan to address the issues identified in the report. I'll go over each of these now.


The trades-training system in B.C. depends on industry support and engagement to operate effectively. Recognizing this, the provincial government directed ITA
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to develop an industry-driven training system. To this end, ITA established industry training organizations.


We found that ITA launched the industry training organization model without adequate risk management planning or sufficient tools to support its implementation. We also found that ITA had not carried out a comprehensive needs assessment or broad-based consultation before launching the first three industry training organizations in April of 2005.


However, ITA did monitor industry training organization development and made adjustments to policies and practices as issues arose. We made two recommendations in this area: that ITA work with industry training organizations and industry to clarify roles and responsibilities and, secondly, to resolve issues relating to the funding model.


One of ITA's main responsibilities is to ensure that apprentices and other students receive appropriate training. We found the policies and practices that existed to manage quality had not been brought together and well defined to form a clear and comprehensive quality assurance program. We also found that effective methods have not been established to monitor training providers and apprenticeship sponsors to ensure compliance with standards.


We made two recommendations in the report to address these concerns: first, that ITA develop a comprehensive quality assurance program; and secondly, that ITA strengthen its compliance monitoring to provide greater assurance that training providers and apprenticeship sponsors are following program standards.


At the time of our audit in-school training accounted for about 85 percent of ITA's expenditures. We found that the ITA funding allocation decisions were consistent with its priorities but were based on inadequate or incomplete information about demand and delivery costs. We also found insufficient coordination of funding decisions between the ministry and ITA.


Finally, we found that while the ministry — in fact, two ministries: the Ministry of Advanced Education and the Ministry of Economic Development — had co-sponsored a review in 2007 of public colleges' capacity to meet demand for trades training, there had been no action plan to address the recommendations made.


We made four recommendations in relation to these issues, covering the need to better assess demand, capacity and cost of trades training and also the need to coordinate college funding for trades training between the ministry and ITA.


The last area covered performance reporting. We examined the accuracy of six of ITA's 12 public performance measures included in its 2006-07 annual report. We found that five of the six measures we examined were reported accurately. However, one measure, relating to youth apprenticeship, was inaccurately reported because ITA had not applied its own definition of "youth" when it calculated the result.


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We also found instances of poor disclosure of definitions and calculations for performance measures. These help the reader of any performance report to understand what they're receiving. And we encountered poor records management throughout our assessment.


We made three recommendations to address these issues. These include the need for better internal controls, improved disclosure of performance measure methodology and better records management.


The office has followed up with the ministry and ITA twice since the report was issued in November of 2008. Please note that for the purpose of the follow-up report, recommendations 10 and 11, which both relate to performance reporting, were merged into one. The slide that you have in front of you refers to the original number of recommendations in the report, which is 12.


As at the last follow-up, the self-assessment that we received, the ministry and ITA reported that three recommendations had been fully implemented, eight substantially implemented and one partially implemented. We understand that the presentation that we'll receive from ITA will provide an update on progress to date against the recommendations and that they now believe that all of these have been fully or substantially implemented.


This concludes our presentation.


B. Ralston (Chair): Thanks very much. I'll now turn it over to Mr. Thompson and Mr. Evans.


K. Evans: Thank you, Mr. Chair and Members. I'm Kevin Evans from the Industry Training Authority, and I'll actually be presenting on behalf of both the ministry and the Industry Training Authority. Joe Thompson and other ministry staff are here and will be providing me with detailed information that I might not have readily at hand with respect to the ministry.


Thank you very much for the opportunity to tell our story and to address the committee to discuss this very important and significant report from the Auditor General's office on trades training.


The Industry Training Authority was just three years old when the audit work began. It reviewed a period of time that was witness to more change to B.C.'s apprenticeship training system than ever before. The report was a fair and constructive reflection of some of the challenges associated with those changes, and I'd like to again thank the Office of the Auditor General for recommendations that have truly been helpful.


The Industry Training Authority and the ministry are fully committed to responding to all of the Auditor General's recommendations. To date, of the 11 recommendations, all have been fully or substantially
[ Page 305 ]
implemented, and we are closing in on moving those substantially implemented recommendations into the fully implemented column. So I'm very pleased to have this opportunity to provide you with a progress report on the actions taken to date and actions that are still underway.


Recommendation 1 — that the Industry Training Authority develop an action plan, in consultation with key stakeholders, to address the issues identified in the report.


This recommendation has been fully addressed. Following the report's release in late November 2008, the ITA canvassed key stakeholders impacted by the report's recommendations and circulated a draft action plan for input in March 2009. Two joint working groups and an industry training organization–ITA leadership advisory forum were formed to address the report recommendations — specifically, recommendations 2 and 4.


Recommendation 2 — that the Industry Training Authority Industry should consult with industry training organizations and industry to clarify roles and responsibilities and revise its policies and guidelines accordingly.


This recommendation has been fully addressed. The ITA engaged in extensive consultation with ITOs, both at the staff level and at the board level, throughout the summer of 2008, prior to the release of the Auditor General's report. This consultation resulted in clarification and confirmation of roles and responsibilities and revised policies and guidelines relating to industry training organizations.


ITOs were thoroughly consulted regarding the development in April 2009 of new funding agreements, called enterprise partnership agreements. These agreements provided a further dimension of role clarity by detailing respective responsibilities, accountabilities and deliverables.


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The '10-11 agreements contain a new section specifically on division of duties, with performance measures and milestones. An outcome of this work has been improved working relationships and protocols for communication. 


While I said that the recommendation has been fully implemented, ITA recognizes that maintaining an effective relationship between the ITOs and the ITA requires an ongoing dialogue regarding roles and responsibilities. In fact, tomorrow the ITA is hosting another half-day meeting of the ITA leadership council, consisting of the ITO and ITA board chairs and their respective CEOs, which meets quarterly and has roles and responsibilities as a standing agenda item.


Recommendation 3 — that the Industry Training Authority work with industry training organizations and industry to determine the costs associated with each required responsibility and ensure that the funding model is appropriate and sustainable. This recommendation has been substantially addressed.


Following consultation with the ITOs in August of 2008, a new budget framework for the purchase of ITO services was approved and implemented in April of 2009. It's worth noting to the committee that despite reductions in other areas of the ITA's operations in the September 2009 budget update, ITOs received a funding lift from $4.24 million in fiscal '08-09 to $5.64 million for '09-10.


The budget framework is now reviewed and refined each year to ensure that it reflects any changes in the contractual relationship related to the services that each ITO provides and the continuing evolution of roles and responsibilities. The framework has evolved into a fee-for-service model between strategic partners, which enhances clarity of roles and deliverables.


Further work is focused on ensuring that the input costs of the services purchased from the ITOs are accurately reflected in the price the ITA is paying for those services.


Recommendation 4 — that the Industry Training Authority develop a comprehensive quality assurance program to help safeguard the quality of trades training. This should include good best-practice guidelines on how to develop occupational analyses, program outlines and program profiles. This recommendation has been substantially addressed, and significant work has been undertaken on this recommendation since early 2009.


A comprehensive review and mapping of the program standards development process was undertaken, and a series of joint working groups were established, comprised of representatives of ITOs, training providers and the ITA.


In 2009 the review team developed updated guidelines and templates for developing program standards documentation. Work to develop a standards responsibility matrix and process maps for modifying existing programs, program development and development of examinations was also completed.


A complete set of guidebooks for standards and exam development will be completed by the end of this month, which provides detailed step-by-step processes and templates covering all of the program development areas referenced by the Auditor General in the report.


The focus of activity in implementing recommendation 4 will shift next month to consolidating all quality assurance initiatives into a comprehensive continuous improvement framework, identifying remaining gaps and developing supplementary quality assurance mechanisms as required. The ITA has budgeted funds for this activity in '10-11 and will again next year, as the work will continue into '11-12.


Recommendation 5 — that the Industry Training Authority should strengthen its compliance monitoring mechanism to provide greater assurance that training
[ Page 306 ]
providers and apprenticeship sponsors are following program standards. This recommendation has been substantially addressed.


Flowing from this recommendation, the ITA created a new senior executive position responsible for training delivery oversight, with continuous improvement a key accountability.


We are monitoring program standards compliance by training providers and sponsors by focusing on a number of key dashboard outcome indicators. If they start to flash red, we know we've got a problem.


One of them is apprentice satisfaction levels as measured by the annual apprenticeship student outcomes survey conducted in conjunction with B.C. Stats. In the latest survey, 93 percent of completing apprentices said they were satisfied or very satisfied with their technical in-school training, while 91 percent said they were satisfied or very satisfied with the work-based portion of their training.


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Another key indicator is exam pass rates. Roughly nine of ten B.C. apprentices write the final interprovincial Red Seal exam. In 2009 the pass rate for Red Seal trades was 78 percent for B.C. apprentices, compared with 62 percent for the rest of Canada, which speaks well to the quality of in-class and on-the-job instruction that apprentices in British Columbia are receiving.


We have also increased our capacity to analyze exam results for each level of an apprenticeship on a class-by-class basis, which enables us to pick up anomalies that may point to an issue related to training provider adherence to ITA program standards. The ITA is working closely with the Private Career Training Institutions Agency of B.C. to ensure that our designation process for private trainers adheres to best practices.


ITA has been working with other Canadian apprenticeship jurisdictions to develop a national framework for occupational performance standards. These standards will provide a benchmark that can be used in both the institutional and the on-the-job components of industry training to ensure that the learning and training activities align with the expected outcomes of industry. They will also support assessment that will provide a reliable and consistent signal of competency.


Based on a cost-benefit analysis and the assessed level of risk, we believe that a complaint-based system, in combination with the monitoring mechanisms I've outlined, is providing the assurance that program standards are being followed — which the Auditor General's report calls for. Now, that does not preclude enhancements being introduced as a result of the forthcoming comprehensive continuous improvement review.


Finally, in fiscal '11-12 we will be reviewing the level of support that is provided to employers and to apprentices and will be developing a plan of action to address any gaps that we find.


Recommendation 6 — that the Industry Training Authority, the industry training organizations, the Ministry of Advanced Education and Labour Market Development and the colleges work together to produce high-quality information for assessing the demand for trades training in British Columbia. This recommendation is fully addressed.


Currently wait-lists for in-school training are down to their lowest levels in years, due to decreased training demand related to the recession and the consequent decreased capacity of some employer sponsors to take on apprentices.


Meanwhile, significant progress has been made with respect to the province's ability to provide accurate labour market forecasting. The Ministry of Regional Economic and Skills Development has just launched its B.C. labour market scenario model. This model will provide both demand and supply information in 140 occupations covering 14 industries broken down by B.C.'s seven development regions. The model has the ability to run economic and occupational scenarios based on economic, demographic and labour force conditions in B.C.


The ministry also worked with the ITA and ITOs to produce an annual trades occupation outlook report, which the minister released just yesterday. It's now available on the WorkBC website. This report assesses trades-related supply and demand on a regional basis and is going to be very important to help us support our planning for next year's training delivery.


In addition, the ministry has launched a new comprehensive on-line service, the WorkBC web centre, which will benefit British Columbians seeking career and skills development information, employers looking to improve labour productivity, and skills-training service providers interested in emerging best practices.


Finally on this one, all of the ITOs now have websites providing labour market information to employers and potential apprentices in their seven specific sectors.


Recommendation 7 — that the Industry Training Authority, the Ministry of Advanced Education and Labour Market Development and the training providers work together to periodically assess the capacity of the trades-training system to meet demand and address any issues or opportunities identified. This recommendation is fully addressed.


Ensuring that we maintain sufficient training capacity is obviously extremely important. The ITA, the ministry and the training providers have been working together since 2007 to conduct periodic capacity assessments. Assessments such as the comprehensive review conducted in 2007 and the follow-up survey in 2008 will be completed as required.


Through the joint ITA and post-secondary presidents leadership council, we now have a mechanism to jointly identify when a more detailed survey is required over
[ Page 307 ]
and above the annual updates from institutions and the ongoing wait-list monitoring. I have to say that the urgency of a review in the near term has been diminished by what I mentioned earlier, and that's the recession-related reduction in training demand, which we believe is temporary.


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Recommendation 8 — that the Industry Training Authority and the Ministry of Advanced Education and Labour Market Development work with the colleges to ensure that funding decisions are informed by a proper understanding of what it costs to deliver trades training. This recommendation has been substantially addressed.


Prior to the Auditor General's report, the ITA made a commitment to work with the public institutions to ensure that funding decisions are informed by a thorough understanding of the full and actual costs to deliver trades training, but the trainers were not in a position to provide us with an accounting of those actual costs.


This summer, however, Trades Training B.C., which is a consortium of the public post-secondary institutions involved in trades training, initiated a study on the costs of delivering trades training, and the ITA provided input on the scope of that project, which will provide information needed to make informed decisions about funding and pricing of trades training. That report is scheduled for completion by the end of this month, and its findings will inform the development of the '11-12 training plans with the public training providers.


Recommendation 9 — that the Ministry of Advanced Education and Labour Market Development ensures that its funding allocations for public colleges for the purposes of supporting trades training are coordinated with the Industry Training Authority. This recommendation has been fully addressed.


The ministry continues to consult with the ITA regarding the ministry funding of trades-training seats to reduce program wait-lists for Foundation, which is preapprentice training. This coordinated approach in '09-10 and again in '10-11 precluded duplication of funding for Foundation preapprenticeship spaces across the system.


The ministry and ITA have also explored opportunities for improved information-sharing and coordination regarding capital requirements for trades training. As a result of these discussions, the ministry has asked the ITA to review requests submitted by institutions for trades-related capital projects and provide feedback to help inform the ministry's five-year capital plan. In future the ITA and the ministry will explore the feasibility of conducting a study to determine trades-training equipment needs.


Recommendation 10, and we're almost at the end. The Industry Training Authority should improve its internal controls that it applies to the calculation of its performance measures and clearly and explicitly disclose its performance reporting definitions, sources and calculation methodologies. This recommendation has been fully addressed.


The ITA is implementing a new information management system called ITA Direct Access. In addition to providing improved performance reporting, the new system will provide employers and apprentices with direct 24-7 access to their records as it is phased in over the next few months.


Issues related to the conversion to the new system that had affected the timeliness of the monthly performance reports have been addressed, and these reports are now being posted monthly on the ITA website with explicit explanation of the performance reporting definitions, sources and calculation methodologies.


In 2009 the performance measures were aligned with the ITA's new strategic plan and made less complex and more transparent.


Recommendation 11. The Industry Training Authority should improve its records management to ensure that it can easily access key participant information when needed. This recommendation has been substantially addressed.


In addition to implementing the new management information system, the ITA is now scanning and storing electronically any new non-transitory participant records, and this significantly enhances access to participant information when required over the old paper filing system.


This recommendation will be fully addressed when the ITA implements a comprehensive records management system, and work on this project will begin early in the next fiscal year.


That concludes our presentation. Again, thank you for this opportunity, and I look forward to having the opportunity to answer any questions.


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B. Ralston (Chair): Thanks very much to the presenters. I'm going to put together a list of questioners.


K. Corrigan: Thank you, Mr. Evans. It sounds like a lot of work has been done and a lot of progress has been made.


One of the markers of success that is not mentioned, other than just a real quick mention in the Auditor General's report, is the one that I want to ask about — how we're doing right now. On page 16 it's noted that the completion rate for apprenticeships is 10 percent above the national average. My understanding is that the completion rates are still a challenge, although I haven't talked to anybody about this real recently.


I'm wondering if you could answer two questions. First of all, what is the completion rate for apprenticeships? It's also mentioned in the same paragraph that we have a very high growth of apprenticeship registrations, which is terrific. How does the level of apprenticeships
[ Page 308 ]
that we have, on a per-capita basis, compare with the rest of the country?


K. Evans: Sure. Well, thank you for the question. The current completion rates in British Columbia are at 43 percent. We take a look at a six-year cohort of apprentices, so that is for the most recent six-year cohort. It's very difficult for us to make national comparisons, benchmark comparisons because jurisdictions have different ways of measuring completion rates. For example, in Alberta they do not even consider or include the first-year apprentices. At the Canadian Council of Directors of Apprenticeship we are working to come up with a common definition so that we can do these comparisons.


Suffice to say, the completion rates are a challenge across the country. A StatsCan report had it at about 51 percent. Using the StatsCan definition — that was the average — B.C. was at 53 percent. So whether it's 53, 43 — whatever definition you want to use — it can be and must be better, and we need evidence-based decision-making to chart our course.


In that end, the ITA commissioned the Canadian Apprenticeship Forum to conduct a study looking at all of the best practices across the country to address completion rates to inform our action plan. We'll be receiving that study next month.


We do know that one key area of concern is essential skills and that a lack of essential skills…. While there is no silver bullet — there is no one reason that can account for the completion rates — a lack of literacy, numeracy, communication skills, analytical skills have factored rather prominently, and we have moved aggressively to move forward the essential skills agenda.


The ITA has developed an on-line training tool that can provide information to apprentices and their sponsors for the specific essential skills requirements for 15 of the high-volume trades. This tool also allows them to identify the gaps in their essential skills competencies and the recommended remedial training that they can employ so that when they do get into their apprenticeship and they do get into technical training and are writing those level exams, they do have the essential skills required for success.


K. Corrigan: The second half of that question was: how does our per-capita enrolment or registration compare with the rest of the country?


K. Evans: Again, the data on that varies depending on what the denominator is. Some provinces use total population; others use workforce. I can tell you anecdotally that at the lowest end of the scale, in terms of Red Seal completion rates in the country, is Quebec. Alberta is perhaps the highest, and British Columbia is in second spot.


G. Gentner: To the Auditor General. Right away, in the executive summary, page 6, the Auditor General cites the various ministries this Crown has had to go through — Advanced Education, '05; Ministry of Economic Development, '07; back to Advanced Education. And now in 2010 there is Housing and Social Development.


I'm just wondering how colleges coordinate their efforts now with this new entity which this Crown is identified with. I'm interested to hear from both parties. There doesn't seem to be that consistency.


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The other part I want to talk about is this modular training. We went away from the original ITAC. The benefits of it were that it was a centralized effort as opposed to this sort of decentralized notion of the ITOs.


There seems to be a lack of funding. I believe it's on page 37, if I can. There's discussion of underfunding by the Auditor General. The ITO would receive $3.6 million on an annual basis, in contrast to the $1.7 million the ITA estimates it will be providing. Has that been changed?


I know we did get some figures from you, Kevin. But I just want to know. Those instances, those particular points…. It's a change of jurisdiction and how it's affecting the performance of the ITA, and it's the funding to the ITOs, or lack of.


K. Evans: Well, I'll begin. Just for the record, the ministry responsible now for the industry training is the Regional Economic and Skills Development rather than Housing or Social Development.


I know that industry is very pleased that industry training is back in an economic portfolio. Certainly, that's the view of the board of directors of the ITA. It's really not that much of a switch for us, because when I began the job, we were under an economic portfolio. Then we were in Advanced Education. Now we're back to an economic portfolio.


With respect to the working relationship with the various institutions, the colleges are now all covered under the Ministry of Regional Economic and Skills Development. We do have some universities that previously were colleges that we also fund, and we are in the process now of determining what issues, if any, will arise from the fact that we have two ministries responsible for post-secondary education in British Columbia.


John, did you want to respond to that question, or shall I go on to the ITOs?


J. Doyle: Keep going.


K. Evans: Okay. As I mentioned, the ITOs received a funding lift from $4.24 million in '08-09, the year the industry trades-training system took a budget hit of about 10 percent, to $5.64 million for '09-10. But I think it's not a complete answer to just say that we've given them more
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money. I think what's really important is that we're now looking more closely at value for money. We're taking a look at the services that they're providing and what their input costs are so that we can ensure that the pricing we are paying them covers their costs but also is providing good value for the taxpayers of British Columbia.


B. Ralston (Chair): John, did you want to add anything?


J. Doyle: Really, the question is directed at how the whole process has changed over a number of years, which we've reflected in our report. As the member knows, I don't comment on current situations unless I've actually conducted the work. So I think I'll leave it with the ITA to respond to that question.


Having heard it, I will also consider whether we need to do any further work to follow up this particular report at some time in the future, although I must confess that it's not high on my list at the moment.


S. Chandra Herbert: I'll just do two questions. They're somewhat related. The first one I think you've basically answered already, but if there's any other thing you think needs to be added, that'd be great.


Obviously, one of the concerns raised was that lack of consultation with stakeholders, that they weren't meaningfully involved. I understand now that's been addressed for this report. I guess the question I have, really, is: that level of consultation on these issues that have been identified in the report — will that kind of consultation continue as trades training changes over the next number of years, whether it's from government, industry, what have you? So that's one.


The second one, and it's a pretty obvious one — and I'm sure you'll say that yes, it is — is one of the key indicators for ensuring program standards compliance. You'd mentioned a couple…. Were the students, the apprentices, happy with the training they got? Is one of the key indicators also whether or not the employers are happy with the skills that people bring after their apprenticeships or their training?


K. Evans: Thank you for both those questions. As Malcolm showed you in his first slide, the industry training system in British Columbia is very complex and consists of quite a number of stakeholders. The answer to your question is that the industry training system in British Columbia is not going to move forward or succeed unless there is communication and collaboration between all of those partners.


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So enhancing our capacity to do that — again, I think, for the exercise we've gone through in implementing the Auditor General's reports, we have honed our skills in that regard — has got to accelerate.


I know that organized labour, in particular, is a group that feels that it has not been sufficiently consulted by the ITA in the past. I think they've been taking that position until fairly recently, and I understand their perspective.


There was a time in the startup phase of the ITA when labour was focused on turning back the clock to a time of the previous system, and the discussion was simply not constructive. The reaction to the Auditor General's report from organized labour was that the system was a big mistake and that the government needs to rebuild the system. Our view at the ITA was that that's a political discussion. Whenever we have, in the past, mixed politics with labour relations and training, it hasn't been a very successful outcome.


However, in the spring…. I have to give the organized labour movement great credit because they signalled that they were now focused on and interested in the future and building a stronger future training system. They convened a multiparty summit in Victoria which was highly successful. ITA participated in that. We are now reciprocating with a similar summit in the month of February. All stakeholders will be involved in developing that, including organized labour.


Since then, as well, we have formed an informal, over-Chinese-food caucus with labour, training providers, industry, industry associations and ITOs to discuss how we can build a better training system.


I would like to say that whether there was insufficient consultation at the beginning…. I concede that point. As I said, I can understand their perspective. I explained the reasons.


The ITA is now providing more support for union- and joint-based training providers than ever before. The ITA has provided approximately $3 million in '09-10 to eight union and joint training board trainers to purchase training seats for approximately 20 different programs. Finally, two union organizations are receiving this year over $1.4 million in labour market agreement funding through the ITA to deliver programming for women.


I think, to answer your question, that speaks to the fruits of the kind of consultation that we believe is absolutely essential for this system to work.


The second question is…. You were quite correct in predicting that my answer would be yes. I guess the real question is: so what are we doing to measure employer satisfaction? We do have an annual employer satisfaction survey that we do, and it is currently indicating high levels of satisfaction as well as indicating to us some areas where there is some work to do in providing supports for employers, particularly small employers.


When 98 percent of the businesses in British Columbia are small employers, what we are finding is that the traditional apprenticeship model does not fit easily with small employers. We are developing, with the ITOs, some prototype models that we hope will increase the engagement and participation of small employers.

[ Page 310 ]

R. Sultan: First of all, it's great to have you here. Seems like old times.


I just wanted to observe that when ITAC was rather abruptly dismembered when this present government came into power, perhaps some mistakes were made. I get the impression that the centre of gravity has been moved back closer to the original model than some of the initial directions indicated. It seems to me…. That's reassuring because, obviously, organized labour in particular has an important role to play in this whole system. So I'm encouraged by your report on that aspect.


The big question I had as I listened to the presentation, Kevin — having recently reviewed some numbers on the immigration flow into British Columbia and the fact that one in three of our citizens are now from some other country originally, one in three — was: how successful is your organization in providing services in a culturally sympathetic fashion to all of these people coming from different parts of the world to British Columbia? Are they equally participating in trades training? I guess that's really what it boils down to.


[1050]

K. Evans: Thanks for the question. It's a very important question, because I think we all know that the fundamental foundation to meeting our future labour demands in this province is going to be from immigration.


First of all, the way that the federal immigration laws are currently structured, more weight is given to immigrants who have either a financial or an academic background. They do not provide a number of points or emphasis on people with trades backgrounds. In other words, we are seeing fewer immigrants who actually have a trades background, but nevertheless, we do. I understand the Minister of Immigration, federally, is going to be adjusting that in the near future.


We're anticipating that, and we have invested over the last two years a great deal of time and energy. We have enlisted our national counterparts and other jurisdictions to develop something called MAP. It's an acronym for multiple assessment pathways.


Currently when an immigrant comes to British Columbia with skills in a trade, what they would do is to challenge the Red Seal exam. They would write an English or French multiple-choice exam. Now, first of all, it's English or French. Secondly, it's a multiple-choice exam, which has all sorts of biases, and not everyone is great at writing exams.


So we have been piloting in British Columbia and leading the way nationally with a series of assessment tools, which would include practical assessment, competency conversations, documentary review and, yes, perhaps a theoretical written component as well. We've already piloted with the cook program. We're piloting with heavy-duty equipment right now.


We are working, as I say, with our other jurisdictions to ramp this up so that we have these tools available for the high-volume trades, so that when we do have more immigrants who are coming into British Columbia with a trades background, we can set them up for success earlier and get them into the economy earlier and producing earlier, for the economy and for their families.


S. Simpson: I have questions in two areas. The first one relates to challenges. I believe — and I don't know what the number is now — the last time I looked about something in excess of 20 percent of the completions were through course challenges — people who had obviously brought a skill set and were able to challenge, and completed that way. It wasn't necessarily through having gone through a training program, but people largely out of industry who came in and challenged for apprenticeships and received their approvals through challenges.


That's fine, but what I wonder about is whether the ITA is comfortable with that number, or is that number growing, with challenges? And contrast that with the need to actually get more young people, more women, more First Nations — whatever — into skills training to provide them with the background to enter into industry and into these trades versus people who are there already at some level and are challenging to upgrade.


I'd just like your comments about whether you think that piece of actually providing the training to folks who can enter into the sectors and build good careers for themselves and good-paying jobs for their families versus people who are challenging up.


K. Evans: Right. Well, thank you again for a very important question. The actual numbers are that last year we had 1,407 challengers out of a system which had 41,800 registered participants. That's 41,800 going up through the apprenticeship stream and 1,407 coming up through the challenge stream.


S. Simpson: Out of how many completions?


K. Evans: Well, the actual number of certificates of qualification that were issued last year was 7,179. The figure I don't have here, but I can get for you, is what the actual success rate of the challengers was. I don't have the actual number, but I know it's in the range of 50 percent. It's actually quite low, because the challengers have not had the benefit, first of all, of writing an exam for a very long time and also the learnings that you get up through the apprenticeship stream.


There's no question that the preferred model is working up through that apprenticeship stream. But it doesn't fit everyone, and it's not necessary for everyone, which is why we have that challenge stream.


I know that there have been some concerns expressed that as we develop MAP and we enhance our ability for
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challengers to go that route, we are going to see this whole flood of people who are deciding to go the challenge route. Well, that hasn't happened on the cook trade that we've piloted because the new assessment tools are actually more rigorous than the exam. So we don't anticipate that happening.


S. Simpson: As a bit of a follow-up with that, is it your intention, though…? I've heard those concerns as well — that more and more people will be looking at the challenge route versus coming up through the skills-training route. What tools are you putting in place to be able to monitor and assess that, to just keep your own comfort levels that in fact those concerns aren't realized and that you're keeping the emphasis on the skills-training route?


[1055]

K. Evans: Right. Well first of all, let's not forget that those challengers just can't come in off the street and say: "I want to challenge." They have to have 2½ times the hours in the field, on the tools, than the apprentice has.


Clearly, we'll be monitoring those numbers. We'll be monitoring the total volume of challengers that are coming through the system and also what their pass rate is. If we see that there is a problem, it may be that we need to take a look at the front end, the gate. Is the gate too easy to walk through in the first instance?


But clearly it's something that we will be monitoring because, as I said, the outcomes show that the apprenticeship route…. It's a centuries-old mechanism. It works pretty darn well. It works well for a reason. So it's our intention to ensure that we maintain a very healthy balance between those two routes.


S. Simpson: This relates to the quality assurance issues that you addressed. I guess they were in, I think, recommendation 4. I'm interested in knowing what kinds of requirements you're working with around the private trainer designations and the requirements and how available that information is.


Again, I've heard some concerns about that, and of course, we've seen that in other areas — not necessarily in the areas you're working in. But of course, we've seen some problems with some of the private institutes and colleges around other areas where we know the ministries and others have had to intervene because of organizations that were less than reputable, it turned out at the end.


I don't know that that's at all the case with your folks, but what work do you do around requirements for private trainer designation, and how do you follow that up?


K. Evans: Sure. Thanks for the question. First of all, about 15 percent of the training in British Columbia is provided by private trainers, and 85 percent is provided by the public sector. We do have — it's posted on our website; perhaps we need to market our website a bit more aggressively — the procedures for a private trainer that wishes to be designated by the ITA. They are there. They are being used by private trainers. I have to say, we have not had a flood of demand from private trainers in the past 12 months. I think the market has kind of stabilized in that respect.


We have been working, as I indicated in my presentation, with the private career training and industry association — PCTIA — which is responsible for designating all private trainers in the province, both to ensure that we are adhering to their best practices with our designation policies and to look at whether or not there are some economies of scale. Currently there's some duplication between what we're doing and what PCTIA is doing, and we're talking to PCTIA at this time with respect to how we might enhance our designation process and also get greater efficiencies.


If I may…. You also asked a question about women and immigrants and aboriginals. Ten million dollars of labour market agreement funding is going to that this year. As I mentioned, $1.4 million of that is going to two union organizations. We absolutely need to enhance the participation of under-represented groups in this province if we are to meet the labour supply demands.


Women are very under-represented in the trades. The actual percentage numbers distort the fact because most women who are involved are in the service trades. They are not in, for example, the construction trades or the resource trades, and yet we are now learning what some of the key issues are. They are issues that require a pretty significant, but we believe worthwhile, investment on the front end.


Daycare is one example. Basic supports, transportation, shelter. We are now developing a case through our LMA spending which will, I think, provide a very, very impressive and persuasive business case that those investments are, in the long run, good for the province of British Columbia.


Aboriginals is a similar area. It's going to require some up-front investment in essential skills, in some life skills. It's not a lack of money with respect to aboriginals, federal and provincial. It's a question of focus, and we are endeavouring to identify what the best practices are.


In short, it is key to the future and also key to the social licence of the Industry Training Authority that we need to ensure that industry training in this province is accessible to all British Columbians.


S. Simpson: Just a follow-up on the question of First Nations. What level of discussion or collaboration or consultation are you having with the significant First Nations organizations in the province which would be paying attention to that?

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K. Evans: You know, we actually have developed kind of a modern-day miracle. It's called the aboriginal advisory council, and around that table are folks that don't normally sit at the same table.


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What I think we've been successful at doing is having some of the organizations rise above their own organization's agenda or justifying their own organization's existence — which unfortunately is a problem that tends to plague what some have referred to as the aboriginal training industry — to take a look at overall outcomes. We're starting to see the results of that.


Three years ago, I believe, 4 percent of the industry training participation was aboriginal. Today's it's 6 percent, give or take a decimal point. That's not the exact number. So we are seeing results in British Columbia, and I know that my colleagues in other jurisdictions are looking at what we're doing in British Columbia because we saw that there was a pathway to aboriginal training that was littered with failure. A lot of money had gone down that road, and not a lot had come out the other end with respect to outcomes.


We said that we are not going to take that road. We are going to take a look at what works and dissect what works and implement that on a broader scale. But I think the success of the aboriginal initiative is going to, at the end of the day, still depend on the willingness and the ability of employers to open their doors to aboriginal British Columbians. To do that, we need to build a persuasive business case, and that's what we're doing.


B. Ralston (Chair): Thanks very much. Vicki was next.


V. Huntington: I have two or three issues I'd like to bring up. First, did I understand that it is only now in the year 2010 that we're developing a comprehensive labour market analysis capacity, either within your organization or within the government?


K. Evans: The ministry has developed a labour market forecast scenario that is leading edge. It is borrowed from, I believe, Saskatchewan or another jurisdiction that has done this. There are only, I believe, two or three jurisdictions in this country that actually have this tool.


We have had, Vicki, a number of specific sectors that have had pretty sophisticated labour market information ability — the construction sector, for one, from the Construction Sector Council. But the fact of the matter is that what we have today we have never had before, which is the ability, as I mentioned, for all of those occupations at a granular level down to the trades in the seven regional economic districts in British Columbia….


I was up in Fort St. John yesterday sharing some of this information in the northeast. It is fundamental to them being able to do their workforce planning, and they're delighted now to have it.


V. Huntington: Just on that, if we have ministries responsible for the overview of economic development within the province, and you're telling us that only now are ministries becoming capable of forecasting the economic needs of the province in terms of labour and labour market training…. I don't understand. What are ministries doing if they haven't had the capacity to underpin all of their economic development work with facts and figures?


K. Evans: Well, of course the labour market supply information and demand information is one component of data that's used to do economic development planning. I'm obviously not in a position to comment on where we were five years ago, but I know that as long as I've been at the ITA and working with the ministry, it has been a priority that we develop this expertise and this capability, because it is essential to doing the kind of planning that needs to be done.


V. Huntington: I guess that's my point. It's nice to see it's finally being done, and I'm gratified to hear that. But it just amazes me that we've come this far and didn't have that capacity until just recently.


My second issue goes back to this continual revamping of a training system — the different institutions, the "let's start over again; if something goes wrong, instead of fixing, we'll try a new approach." Your approach, I'm glad to see, is starting to come together, and it sounds viable. Hopefully, it will succeed and carry on without major changes again. But what I hear in your discussion is an incredible number of layers of stakeholder organizations, participants. 


You have…. I'll just run through. You start with the ministry. Then there's the ITA, the ITO, the Trades Training B.C., your post-secondary leadership committee. There are the aboriginal advisory councils. There are the private trainers. There's the career training industry association. There are training boards. There are all the industry boards.


[1105]

It seems to me that what you're building is just, sort of, layer upon layer of these organizations. Is there any discussion among all of this complexity of labour information about collapsing some of this into a single comprehensive organization that can deliver what's needed to this province, or are you going to end up collapsing yet again under the weight of all of this — what's the word? — complexity, I guess?


K. Evans: I think everyone in the industry training system is acutely aware of the price we paid from the dramatic change from ITAC to the ITA. We essentially
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had two years, which was industry system limbo. I don't care which side of the House you're on or where you sit as a training provider or as an employer. I think everybody agrees the system needs stability. That's what we're dedicated to providing.


I don't know that it's accurate to say that we are building layer upon layer. In fact, those various constituent components already exist in the training system. They existed in the '70s and under ITAC, and they exist now.


The key is: how do we develop the mechanism so that they can collaborate and communicate, and ITA provides the leadership so that we are pointing all in the same direction? That, I believe, is the challenge, and I believe we're making progress in that regard.


V. Huntington: And those organizations are beginning to trust your capacity to deliver?


K. Evans: Well, there's nothing like results to build that trust.


Just one further comment on the….


V. Huntington: All right. Let's hope it doesn't collapse under its own weight here. That's my concern.


K. Evans: You know, it's obviously…. I started my response to your question by saying that the first consideration is that we need to have continuity. If we find that the complexity is in fact threatening that continuity, then we need to take a look at the complexity.


V. Huntington: Yeah. Finally, my biggest concern with this entire report and the discussion that surrounds it is that.... To me, it's a broader policy issue that I believe has to be looked at. Maybe this is an issue for the Auditor General to comment on.


What I'm sensing is that there's a habit within government — and I'm not saying any government; I'm just saying any government — to set up these organizations almost with the wave of a wand. "You go out and do A, B, C and D. This is your mandate. Go out and do it." I guess there's a budget that goes along with that mandate. But there is no overall best-practices guide, no structure given, no monitoring on how these organizations set themselves up, no expectation other than mandate delivery.


I guess this is where the Auditor General's report, I find, is so helpful. I don't think this is so much a problem of ITA, although you could question the management capacity that it had initially. But to me it's sending off, out there into the wild blue yonder…. It's like a ship with no guts in it.


I'm wondering if there's a way in which government as a whole ought to be looking at this issue and providing some better basis upon which to start all of these new Crown corporations and authorities that get lifted off and sent away every once in a while. I don't like to see this type of hollow shell just setting itself up for destruction, when it's really given no leadership by government, as a whole, in how to maintain its viability.


I wonder if there's any recommendation the Auditor General could make on how government could look at that problem.


J. Doyle: It's something I've noticed in a few situations that we've looked at, whether we've conducted the full audit or not conducted the full audit. But as you'd be aware, I don't usually comment unless I've actually conducted some work.


May I just say here, in this particular report, that we found there was confusion and difficulties in the early years of ITA. Then the CEO turned it around. There's just no substitute for good leadership, good direction, focus, attention to detail.


I think a lot of the change and the collaboration that has occurred has been due to the leadership within the organization and the quality of the staff within that organization.


[1110]

If there's any secret ingredient that needs to be in place, I suggest that that's it. Clarity of vision. Clarity of approach. Good staff with good leadership. That's straight out of a management textbook, I'm afraid.


Now, sometimes the situation is such that no matter how good the leadership is or how good the staff are, they will have difficulties because of the situation, and that does occur as well. I've not conducted any work in that particular area to assess new startups, but it's been an observation of mine that whenever a new organization starts with a mandate to bring around effective change there are always difficulties at the beginning, and the dust has to settle before the outcomes that are desired start to manifest.


V. Huntington: And I agree. This was beautifully turned around. It's obviously on a good course, and I compliment everybody for their response to the initial issues. But as government becomes ultimately responsible for the startup of a Crown corporation, is there no expectation, no manual, best practices, no monitoring of that initial startup to ensure that it is fulfilling a management best practice in the initial stages?


K. Evans: If I may, we do have the Crown corporations secretariat, and it is quite vigorous in sharing best practices between Crown corporations. I know I've learned a lot by what they've done — some of my colleagues in other Crown corporations. Whether or not I could have used a crash course for six months before I started the job — probably. But the fact is that on an ongoing basis there is that kind of interchange of best practices and success stories. Also, we learn from people's mistakes.

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R. Lee: Thank you for the very comprehensive presentation, Kevin. You mentioned about aboriginal youth training. I know that the BladeRunners are very successful — those programs. Community groups like SUCCESS run training groups like the roofing program, and of course, at high school you have the ACE-IT program — very successful. Those programs, I assume, would be ongoing in the future.


My question is on the Red Seal. We have a very high success rate. What's the secret of that? That's one question, and another question is…. This is the national standard, so people are very mobile. I think that the U.S. is using some similar program as well. The Red Seal is recognized in the U.S.


In terms of labour mobility, do we gain, say, labourers with Red Seal qualification, or are we losing Red Seal labourers to other jurisdictions? What's the mobility on the Red Seal labour with that qualification? So this is another question.


Another question that hit me when you did your presentation is…. You said that during the recession maybe the demand for training actually decreased, but some of the literature I read said that when you are in a recession, more people actually go into training instead. What's the answer to that?


K. Evans: Well, let me start with that one. You're right that it is counterintuitive, for the trades, that in a recession you would see a lessening demand for training. The reason for that is that an apprentice needs a sponsor. They need an employer, and if an employer…. Recessions are bad for apprenticeship — always have been. Apprentices are the first to be laid off. Employers are often not in a position to take on additional — or even keep — apprentices, as I mentioned.


In the last two recessions, in the '80s and the '90s…. Nationally we lost 50 percent of our apprentices in those recessions — both those recessions. So if history is…. We're already seeing in British Columbia — I have to underline this as a concern — a reduction in the number of training participants we have in the system and in the number of employers who are participating.


[1115]

It took ten years, in the previous recession, to get back to those pre-recession numbers of employers and apprentices. We do not have, in British Columbia, ten years to make that recovery. We know — the Conference Board of Canada tells us — that by 2015 we're going to be 160,000 positions short in this province. We need to address the issue of the impact of the recession on trades training.


With respect to the Red Seal's success, I believe it's an indicator that our instruction is to the standards, because the Red Seal exams are from the standards. That's why I think it's such an important indicator of quality assurance of instruction, both on the job and in the classroom.


With respect to other jurisdictions, I know that there are some…. The demand and awareness of Red Seal in the States, for example, is in pockets. It's not widespread, so we are not seeing an exodus of workers with the Red Seal to the United States.


If anything, right now the pressure is…. There are a lot of tradespeople in the United States that are looking for work, and we've got to be taking a look at that flow from south to north.


The actual mobility — and we've got data on this — of Red Seal tradespersons in this country is smaller than most would think. You know, Red Seal's been around for 50 years to promote mobility. Only about 4 percent of journeypersons actually move across this country to where the work is.


B. Ralston (Chair): I put myself on the list next. I wanted to thank you for the presentation, on both sides.


Kevin, I think you've answered one question I had. When one looks at the report, there's no mention of…. On the chart on page 26 there's a mention of labour, and that's it. On the list in the appendix, page 56, there's no mention of any labour organizations being part of the consultation process. I think that in your written presentation there wasn't either, so I'm glad you added what you said earlier.


Obviously, there are organizations like Local 170, I think it is — the piping industry. They just spent $7 million to build a training facility, and it's state of the art. The painters and glaziers have a finishing trades institute. Again, they're a training partner. They spent a couple of million on that. So there is a commitment by some parts of labour to intense training at a very high level.


I understand your wish to remove politics from it, but as a practical matter, you mentioned the two-year gap. The whole system just disintegrated, and there was a gap of two years where there was no training. There was no organization responsible. So I'm glad that you've been able to rebuild some confidence.


I guess my question is…. There were certainly some public statements earlier in this process, particularly in the earlier part of the decade, that the Red Seal process and the way in which it required training across all aspects of the trade was too cumbersome and that the output in terms of labour cost was too expensive. There was a view expressed that it was more important to train people to do certain modules.


One example I was provided with was…. Have a guy that can solder copper pipe horizontally, and I can pay him ten bucks an hour, as opposed to someone who's more skilled and would command a higher price in terms of their labour.


There was that debate. I understand that you're moving beyond it, but I just wanted to hear, on the record, your commitment to the Red Seal process as the method
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by which apprentices are trained and the standard to which they should be trained, as opposed to picking and choosing a few modules that might suit certain contractors in certain fields, particularly in construction, with the view to having them lower-skilled and therefore being able to pay them quite a bit less.


Perhaps that debate is over. Perhaps you've moved beyond it, but I just want a confirmation that that's the case.


K. Evans: No, I think the debate continues, but certainly, I can provide you with…. It's not only the ITA, but it's the province of British Columbia and the government of British Columbia that have committed to the Red Seal program. I'm the current chair of the Canadian Council of Directors of Apprenticeship, responsible for strengthening the Red Seal, and we will do that.


The question of…. I think it's sometimes euphemistically referred to as the dumbing down of the trades. It does continue. I'll give you an example.


The cook industry came to us and said: "Our training program is a mess. It does not reflect our realities. The fact of the matter is that there are some apprentices who work in kitchens, and they will not receive the scope of training that's required to actually get that Red Seal. The fact is that the structure of our industry is such that you've got different levels of cooks and restaurants, and we have individuals with different aspirations."


[1120]

We now have, because industry has asked for this and has now embraced this, a series of levels within the cook. The final level is the Red Seal. But there's nothing to say that someone who achieves their level 1 and is working at a certain category of restaurant is precluded at all from moving up if they desire to be a Red Seal chef. The other aspect of that is that we were asking people to study to be a Red Seal chef when they had no interest in being a Red Seal chef.


My answer would be that it is an industry-driven system, and we need to reflect the realities of the workplace. I think that one of the areas where this debate has raged most fiercely is in residential construction, where the residential construction industry has said: "You know what? We don't need full-scale carpenters for a lot of the work we do. What we need are framers. We need formers, and we need people who can do finishing work." The residential ITO has developed programs for residential construction framing technician.


At the end of the day, it's industry and the marketplace that are going to decide whether or not those programs are viable. I have to tell you that the residential ITO is having a challenge getting people into that program. It turns out that most of the young people who want to get into that field want to be a carpenter. If that's the case, and if we do not see movement in those numbers, the program is going to have a tough time sustaining itself. So the debate continues.


B. Ralston (Chair): I appreciate that. I was told that the example you might choose would be the cook-baker example, which seems to be the one that you've chosen. But I gather that certainly in construction, the debate is…. There is less industry demand, from what I understand, and there is certainly much fiercer resistance among a number of quarters, particularly some of the construction unions and some of the union contractors.


Your answer suggests that this is a moving target, that the commitment to Red Seal is then always subject to a market test. Is that what you're saying?


K. Evans: No. I mean, the fact that we've got residential construction framing technician does not diminish the importance or the significance of the Red Seal carpenter program. The two can mutually coexist. What I am saying is that I think we're going through, as the Auditor General said a moment…. When you're doing change, sometimes things need to settle.


When you take a look at the long-term needs, what employers are saying they're going to need from their employees, they need employees who are adaptable, who are multi-tasking, who can move from one job to another. They're looking for that full scope of trade that I think the advocates of the Red Seal that you're referring to are asking for.


It may well be that that's the way, when things settle down, the market actually determines we need to go.


B. Ralston (Chair): Thanks very much. I have one more minor question.


One of the features of the ITAC regime that I think was quite valued by a number of people — I know this was the subject of the conference, or one of the recommendations that came out of the conference that you held in Victoria last year with a number of representatives of employers and labour organizations — was the issue of apprenticeship counsellors.


I think that most people thought that was an effective idea and that it helped apprentices navigate through the system and led to ultimately higher completion ratios and more successful completion of the apprenticeship program generally. Is that something that you've taken a position on or are prepared to take a position on at some point in the future?


K. Evans: Our position is that we make decisions based on evidence-based research. To that end, it's been about six years now since we disbanded the counsellor structure. It is our plan in the next fiscal year to conduct a piece of research that will look not just at counsellors but look at the supports that are in place or are not in place for apprentices and for employers.


It seems to me that those who are advocating for counsellors are recommending a prescription to a problem
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that we have not yet defined. So let's define whether we have a problem, the nature of the problem, and then let's take a look at what the options are for a prescription. It may well be that counsellors are a viable option, but at the same time we're not standing still.


I indicated that we have introduced the ITA direct access system, which is going to give apprentices and employers a great deal more support. As well, we are in discussions currently with the Ministry of Social Development — which, as you know, has received the off-load of the EI responsibilities from the federal government and will be establishing a network in 2012 of approximately 80 regional employment centres. We are in discussions with the ministry to ensure that those centres have apprenticeship expertise on staff to ensure that employers and apprentices who need that face-to-face assistance will be able to receive it.


[1125]

Is that enough? We'll take a look at the results of our study, make that determination and act accordingly.


B. Ralston (Chair): I appreciate that response. Then just in terms of timing, this evidence-based study that you're engaging in — is there a target date for when a decision might be made, or is that not yet established?


K. Evans: It will be in our service plan. It's not yet established, but a date will be in our service plan so that we can be held accountable to delivering that report when we said we would.


K. Corrigan: I wanted to follow up a little bit more on the Red Seal program in the context of the comments that you made about pan-Canadian initiatives to strengthen the Red Seal program.


One of the concerns that we have expressed is to keep the standards up in the drive to harmonize, which is a good idea across the country. Particularly, I was concerned about the potential impact of the Trade, Investment and Labour Mobility Agreement and then the Labour Mobility Act in British Columbia and the agreement on internal trade.


One of the concerns, of course, was that when the mechanism is there to challenge training requirements by an employer or some investor, what could happen is that we could have a downward push of the standards. I'm wondering where we are right now with that.


K. Evans: Sure. Well, I believe the glass is half full. My view is that the AIT and TILMA are an opportunity for the Red Seal to demonstrate its relevance more than ever before. Even though the AIT and TILMA require governments to recognize the credentials from other provinces, it doesn't compel an employer to do anything.


An employer is now in the position of people coming to them from another province looking for a job, and if they don't have the Red Seal, they have this cornucopia of papers. An employer doesn't know what they're getting. With the Red Seal, an employer knows what they're getting.


My point is that with AIT and TILMA, employer demand to see that Red Seal is actually increased.


K. Corrigan: But I guess the concern is whether or not a challenge could be taken by an investor who wants to maximize their profit and doesn't want to have that level of training. You're not concerned about that?


K. Evans: I'm sorry. I'm not sure I understand the scenario.


K. Corrigan: Let's say, for example, there is a government contract for building, a municipal contract or a provincial or federal government contract, and bids go on, say, B.C. Bid. The person who can have the lowest labour costs could, therefore, have an advantage in the bid process, which is now required.


Is there not a natural tendency, then, for a push downwards of standards and thus lower wages, as opposed to keeping the standards up?


K. Evans: Well, I think you're actually entering the arena of debate with respect to compulsory trades in British Columbia.


K. Corrigan: Yeah, that's true.


K. Evans: Of course, we do not have compulsory trades in British Columbia.


K. Corrigan: That's right.


K. Evans: It was decided that those trades where there is a safety concern should be regulated by a safety regulator, either the B.C. Safety Authority or WorkSafe B.C.


We've not had compulsory trades in British Columbia since 2004. Have we seen a race to the bottom? Again, that is, with respect, certainly a political level of debate.


K. Corrigan: Yeah, fair enough.


K. Evans: From my seat, I can only say that we have not heard or seen that there has been that race to the bottom that some have feared.


K. Corrigan: Okay. Well, that's interesting.


I had one more question. I wanted to follow up on what our Chair was asking about the involvement of labour.


I'm really glad to hear that there has been this meeting and that there are going to be further meetings. I think it's a shame when labour is not at the table, and fully at
[ Page 317 ]
the table, because I think labour has a lot of knowledge and expertise to offer.


My question is: how many labour spots are there on the present ITOs?


K. Evans: There are seven. Two ITOs have determined that, and it's their decision to make. It's the ITO governance.


[1130]

In 2009 the ITA rescinded a policy that a majority of directors on the board of an ITO must be employer representatives. So the ITOs now have autonomy to do so.


The Resource Training Organization and the transportation industry training organization have decided to have labour representation on their boards because they believe that that's reflective of industry in their sector. I think that answers your question.


K. Corrigan: It does, but maybe I'll just ask for just a bit of elaboration. Seven out of how many spots? And do all of the ITOs have labour representation on them?


K. Evans: No, two of the seven do, and two of the seven who do have chosen to because, as I mentioned, they feel that that's reflective of their industry.


I can say this. I think that the seven representatives on the ITOs have managed to ease the concern of some that we would be getting back to stakeholder governance and back to the paralysis that we had during ITAC. They've done that, to their credit, by taking off their stakeholder hat when they come to the table. Sure, they bring a labour perspective, but their fiduciary responsibility is to that organization, not labour or their particular union.


That message is being heard, and other ITOs are seeing the results of bringing labour to the table and how it enriches the outcome.


B. Ralston (Chair): Sorry. I was just engaging in some side conversation here. Pardon me. There's an event of some political magnitude taking place outside this room today — not to detract from the important work we're doing.


R. Howard: I say this to try and again get some context in this. What we're dealing with is a very successful association, by many accounts leading the country in new and best practices. I really just have to say for the record that I have to take exception to some of the characterization of this — that it was no monitoring, no expectation, no thought, no guts and a hollow shell.


Well, that's obviously not true if we're dealing with something that is very successful. I think we all know that startups can be difficult and that transitions are difficult. When you have a startup and a transition happening all at the same time, they're challenging times. To chart a course through complicated structures and complicated relationships and vested interests is no mean feat. I think that where we are is a good place, and there are many, many good and positive stories.


To ask a question of Kevin: of the 12 issues that were identified by the Auditor General, were all 12 of these issues just a total shock to you, or did you have some of the stuff on your radar prior?


K. Evans: They certainly were….


B. Ralston (Chair): I love that expression.


K. Evans: Shock or radar?


B. Ralston (Chair): On the radar. It's been used a lot in the last year.


K. Evans: It was on my sonar.


B. Ralston (Chair): That's an elegant variation.


K. Evans: Yes, but I think that the Auditor General's office, with its experience and its perspective as auditors, certainly enriched our understanding and gave us a greater sense of the dimension of some of the issues that we were looking at.


It was a little bit frustrating at times, but I have to say that the frustration was helped by Malcolm's professionalism and good humour. They're going after stuff, and we're going: "We know. We know. We're working on it." And we're still working on it, but that, I guess, is about continuous improvement.


R. Howard: Yeah, I think that's my point, so thank you for that.


R. Sultan: What I found alarming, Kevin, was your observation that first, we are probably going to have, by some reasonable forecasts, a gap, a shortage, of 140,000 trained people in a few years' time. I'm not quite sure of the time frame.


K. Evans: It's 2015, according to the Conference Board.


R. Sultan: Okay. Secondly, in the last downturn it took ten years to recover the previous peak level of training activity.


[1135]

If we look in another area of advanced education — and I consider this, what you're doing, advanced education — the universities don't see these huge cycles. So people are trained to be English majors or philosophers or engineers or whatever. Some of them find employment, and some of them don't, but they don't seem to suffer these extremes of cyclicality.

[ Page 318 ]

I suppose, because you're sort of locked in to having an apprentice system at one basic element, you're sort of at the mercy of people on the other side. If their business is fluctuating, your production capacity fluctuates. I understand that.


It seems to me that this isn't a very good way to run this particular segment of our advanced education system. Have you given any thought or offered any speculations or vision on how to smooth out the training flow? This is really very disruptive and, frankly, inefficient.


K. Evans: Yes, we have. I have to say that the training providers have also done an awful lot of thinking there and shown some leadership there. How do they maintain their institutions when it's going up and down? This is the thing that keeps them awake at night from year to year.


I would note that we are called the Industry Training Authority, not the industry apprenticeship authority. While it has been necessary for us to stabilize the system and to ensure that we have a world-class apprenticeship system, I think that in the next couple of years we need to take a look at the fact that there are additional training paths to competency in the trades. I don't know what those are yet, and I don't know whether anything is better than apprenticeship.


We need to take a look at what other countries are doing, and I think we need to broaden what was the original intent of our mandate. We have to meet the original intent of our mandate, which was broader than simply apprenticeship training.


R. Sultan: Could you, for example, consider — of course, everything would have a price — paying people to train in an apprenticeship model, even if it's not necessarily tied into a particular construction project, if you get my drift?


K. Evans: As always, the MLA from West Vancouver gives me lots to think about. No, that's not something that I've given a great deal of thought to, but I think those are the kinds of ideas that we need to put into the hopper as we take a look at how we are going to meet those needs at 2015 and beyond, because it ain't going to get any better after 2015.


J. McIntyre: Mine is, I guess, maybe more of a comment and along the lines of Rob's comments, too, as we were sitting here listening to this discussion back and forth.


I just wanted to compliment you, Kevin, on excellent answers today. I think I learned much more from the back and forth and the questions from both sides of the House. I thought you had very excellent, knowledgable answers to, well, the whole situation.


I'm very heartened. Kevin knows personally that my son is actually doing an electrician apprenticeship through the union, and I was very heartened and delighted to hear the steps you've taken to engage organized labour and work together and figure this out together going forward. I was delighted to hear those answers.


Also, I'm particularly heartened about the opportunity for Red Seal to shine. It's been my view…. I've been a big supporter of TILMA and the internal trade agreement. I'm just absolutely delighted by your observations on that. I've been very concerned about the fearmongering that goes on about a race to the bottom, because I don't believe that's what's going on at all. I was really delighted with your response on that.


I'm also very heartened about looking at some of the groups who've typically had difficulties in the trades, like immigrants, First Nations and women. We know that, hopefully again, when we get this economy firing on all cylinders, we're going to need those very groups engaged and properly trained.


Particularly with the work we're doing on children and youth, through poverty hearings and things like that, we know that there's a gap in income between some of these groups. You know, it's very heartening to see that if they get trades and Red Seal and proper training, they'll be fully engaged in opportunities. We're asking immigrants to come to our country to assist, and it's a very important opportunity for them to get training and a good living wage.


Anyway, I was just very heartened by what you had to say today. I want to compliment and thank you for taking the direction of the Auditor General and continuing to improve, as you have.


Finally, to the comment that was made. I agree with Rob. I took some offence about an empty ship and an empty shell. When we ask people to take on these challenges, when we're making major change in government, leadership doesn't get there by accident. When we call on talented people like Kevin — and I think of Larry Blain and Partnerships B.C…. This government has embarked on a number of Canadian leading ways of doing things and looking at things.


We have called upon people who have experience. We're very lucky in government and through our agencies and Crown corporations to have people such as yourself, Kevin, who have taken on these assignments and have done a great job in moving forward and are still continuing to learn and strive for excellence.


[1140]

I want to put these comments on the record.


B. Ralston (Chair): Maybe just a caution to members on both sides. We're the Public Accounts Committee. We're ordinarily charged with trying to be less partisan rather than more partisan. In some of the comments back and forth maybe members should try and resist the temptation to do that. I don't think it really adds to
[ Page 319 ]
our proceedings here terribly much. I understand the urge to do it. I find myself subject to the same urges sometimes as well, but I remind myself that that's not the focus, and our work will be more productive if we don't head down that path so often.


As for compliments to Mr. Evans, well, it's clear that his time as an interviewer himself shows that he is able to not only frame questions well but to respond effectively to questions. So I agree with the comment.


S. Simpson: That ability to restrain is why you are the Chair and I'm not.


B. Ralston (Chair): You might have flummoxed yourself there, because I want you to be cautious in what you say.


S. Simpson: Always.


I think that the reality is…. I do appreciate the comments of Mr. Evans and the information that he's provided on the 12 recommendations. It is important. I think what we need to do is go back to the Auditor General and remember that this is a program…. It's about seven years now that this program has been in place in some incarnation or other. Seven or eight years?


K. Evans: Six.


S. Simpson: So it's not brand-new. It's been around for a while.


Clearly, what the Auditor General is telling us is that there were serious problems around direction. There were serious issues around whether the money, particularly going to the ITOs, was sufficient to allow them to do the job and serious questions about stakeholder involvement — broadly, the stakeholders who have a legitimate interest in these questions. I'm pleased to see, from the presentation of Mr. Evans, that some real progress appears to have been made on the concerns that the Auditor General identified in his report.


I want to go back to a question that comes back to the private trainers a little bit. I know that it appeared to me that one of the primary ways that the ITA makes an assessment here is through these surveys of students as to their levels of satisfaction with the training they're getting. Also, I think there are some common exams and the use of common exams and that, and those are tools.


The question I have is: is there any process here for or any direct monitoring of these private trainers — you know, maybe sporadic monitoring, efforts to send your folks or the appropriate people out to go and visit these sites and do an assessment for yourself as to whether they're in fact delivering at a level or seem to be functioning at a level that satisfies your expectations?


K. Evans: Right. There is at the front end. We need to be assured that they have competent, qualified staff, that they have the facilities, the standards and the curriculum. Then it's a five-year cycle. We'll go back in five years, when the designation term expires. In between there we're looking at those exam results. We're looking at those dashboard indicators that I talked about earlier to signal trouble for us.


ITAC staff was 155 people. The ITA staff is 55 people. The decision was made. Are we going to be spending money on inspectors in the field, or are we going to be spending money on subsidizing training seats and increasing the number of people who are skilled tradespersons in British Columbia?


Whether we've paid a cost for that in terms of quality, I think, is an interesting question. It was a question that the Auditor General posed. Again, we are going to be taking a look at evidence-based decision-making.


When we take a look at what a comprehensive, continuous improvement program might look like, that's one of the things that are on the table. Is what we have in place right now sufficient to provide the assurance that the Auditor General called for that the quality of the training is up to the standards?


S. Simpson: Just as a follow-up to the Auditor General, do you see the need to get that quality assurance and kind of provide that satisfaction or that sense of satisfaction around the quality and sustaining the quality of training — that that kind of visitation or monitoring or increased monitoring during the life of the designation cycle, the five-year cycle, is something that needs to happen over and above the steps that the ITA has already taken?


[1145]

J. Doyle: Thank you for the question. I've actually got quite a big background in education, not necessarily in trades training but in university-type education programs. I've also done inspections of trade training in Western Australia, as well, as part of my background.


I believe that it's an ongoing process to maintain quality, and there are numerous information feeds that can be collated by the ITA about what is happening within private and public training providers.


To get the right mix is always going to be a difficult call, and there's always going to be the occasional institution that provides difficulties. In general terms, I think it is possible on an ongoing basis to have a risk-based approach — which is a detailed, in-depth review on a cyclical basis, once in every five years — and also have the ongoing review of the quality of the programs and how they're being received by the various apprenticeships, apprentices during the intermittent periods.


That process doesn't have to be that expensive an exercise, but it still needs to be done on a regular basis. Now, the right mix, I think, is…. The strategy that's be-
[ Page 320 ]
ing considered is a good one: evidence-based. What are the key issues? How do we, or how do they, deal with collecting this information? What can they derive from the information feeds that they get?


It isn't all about how well an apprentice enjoyed the course. I've been on the receiving end of that at the university, and that didn't work either, because most of the people didn't want to be at the class. They wanted to do something else. I can't understand that, because I thought accounting was the most exciting thing ever.


But I think there are ways of monitoring the professionalism of these providers in a way that's not very expensive but is highly productive. Maintaining that database of information feeds is just a natural part of what we should all be doing when it comes to looking at quality and how it's delivered.


B. Ralston (Chair): Thanks very much.


I don't have any other questioners. What I'm going to suggest is that we…. I want to thank the presenters, and I think we'll recess now until 12:15. We'll take a slightly longer than routine recess, and we'll reconvene at 12:15.


The committee recessed from 11:48 a.m. to 12:18 p.m.

[B. Ralston in the chair.]


B. Ralston (Chair): The next item on the agenda is a report by the Auditor General, grant administration of the B.C. Arts Council and 2010 Olympic and Paralympic Winter Games. What I've suggested to the presenters is that we hear the Auditor General and his team on both aspects of the relatively brief report and that we hear both sets of responses before we turn to questions, rather than breaking it up into two separate sections.


With that, I'll turn it over to Mr. Doyle, and we can proceed.


Auditor General Report:
B.C. Arts Council Grants Administration and
2010 Olympic and Paralympic Winter Games


J. Doyle: This is a letter, not one of the traditional reports that we currently produce. The reason it's a letter is because…. Well, if we did it today, it would be a short compendium of two or three pages on each topic, but at the time, we were experimenting with different forms of reporting. In this particular case we felt that a management letter in regard to each of these two topics was sufficient and that we didn't need to go into a 25- or 30-page report in regard to either or both of them.


In December we will be producing a similar array of reports, but you'll see that they'll all be two or three pages within a body of work.


[1220]

Turning back to these two, the B.C. Arts Council administration. What we had was a suggestion from a member of this committee that we actually look at the B.C. Arts Council and see how it operated. So if you like, this was partially a request from an MLA, and it was partially also for my office to go and look at some of the smaller programs that currently exist within government. The goal was to get a better understanding of the grants program. From this initial grants analysis we went on to future grants analysis, which we discussed in the previous couple of days.


We looked at the B.C. Arts Council because they had been around for quite some time. We theorized that they should have strong and robust processes in place, and therefore, while small, it seemed like a reasonable place to start the process of review.


The Olympics and the Paralympic Winter Games. We'd already done some work in regard to this. My predecessors produced reports in 2003 and also in 2006 regarding the Winter Games. All those reports, although they had some different detail, had a similar message, which was a recommendation that the full costs of the games should be disclosed and that the risks associated with holding the games should be carefully considered to see whether or not they would impact on the declared budget.


The games are now over, and the current situation is that we are reviewing the documentation that is being made available to consider whether or not we need to do any future work in this particular area. I won't be able to conclude on that until perhaps mid-December or possibly early in the new year.


There was only one recommendation from this component of the work, although we did issue a draft report to government for them to comment on. The only recommendation as far as the letter was concerned was that government expand its definition of games-related cost to include all items that are reasonably attributable to hosting the 2010 Olympic and Paralympic Winter Games and to report publicly on those costs and the risks associated with them. Following this documentation, I think you'll all be aware that there was a lift in the estimates to deal with security, which was one of our major issues of concern at the time.


With me today is Russ Jones, assistant Auditor General responsible for financial audit but also for overview of both these two areas of work. And sitting to his left is Brent Blackhall, who is a senior manager within the office and has also been involved in looking at the Olympic work.


I'll now just pass over to Russ and Brent as a tag team to actually do the presentation.


R. Jones: Thank you, John, and good afternoon, Members. I'm going to take you through the B.C. Arts Council slides. They are going to be fairly short and to the point.

[ Page 321 ]

As John has mentioned, we were requested to take a look at the grant administration at the B.C. Arts Council. It is a small amount of money — it is only $13.9 million — but it assists the arts community in a number of ways, and we figured that it would be a good thing to take a look at. The Arts Council does have a long history of about 12 years of issuing grants, and so we expected to see some good processes in place there.


What we found was that there were well-defined eligibility criteria and a clear process for monitoring the use of funds by grant recipients. We also found that there was a lack of documentation in support of how the assessments against the criteria were being done and how the funding amounts were determined. And we also found that funding agreements were seldom used, which of course makes it very difficult to recover funds if the funds have been used inappropriately.


Then what we came up with, on the last page of the letter that we published, was a list of nine recommendations, which we have summarized here into seven. I will not go over those, because I'm assuming everyone has read them.


Just as a follow-up to what has occurred since the letter was released, the Arts Council has fully or substantially implemented six of those recommendations, and three of the recommendations have been partially implemented.


[1225]

B. Blackhall: Thank you, John, and good afternoon, Chair and committee members.


Our previous reports on the games in 2003 and 2006 looked at the costs and benefits associated with hosting the games and also the significant risks involved. We noted that there were several areas of risk in the estimates, both in the province's budget and in VANOC's budget, that could have resulted in further costs and also noted that the costs being reported at the time by the province were not, in our opinion, a complete picture of the total games-related cost.


Shortly after VANOC had completed its version 2 business plan in 2007, we began our follow-up project to look at the revised games estimates prepared by VANOC and of the province's revised estimates for its cost of hosting the games. The version 2 business plan was VANOC's final estimates leading up to the games and was subject to a detailed review by the province's internal audit and advisory services department with the purpose of assisting the province with its decision whether or not to approve the plan, which they did in early May 2007. Our work was conducted over both 2007 and 2008 due to our staff time commitments with our financial statement audits.


Regarding what we looked at, our review of VANOC's version 2 business plan consisted of looking at the operating revenue and expense estimates and also the venue capital cost estimates. We also reviewed the costs being budgeted by the province at a $600 million envelope and those being budgeted by government organizations, local governments and Canada. This work also involved looking at the post-games legacy plans that were being prepared and also plans by the province to achieve the economic benefits being forecasted from the games-related activity.


As a result of this work, we concluded that the full cost of the games was not being presented. There remained a fundamental difference of opinion between our office and government as to what constituted a games-related cost. This was covered at good length in our 2006 report. On the venue capital side, we found VANOC had done a good job in preparing cost estimates for those venue costs that were under its control.


As John already mentioned, the next step is that we're awaiting final reporting from VANOC, which is probably going to be mid-December. We'll take a look at that information and have any necessary discussions with management to determine whether we need to conduct any additional work on games-related costs and benefits.


We had one recommendation that came out of the summary report. John has already gone over that, so I don't think I need to repeat it.


That concludes our presentation.


B. Ralston (Chair): Thanks very much. 


I'm going to ask the representatives of the B.C. Arts Council to respond. I have Gillian Wood, who's the assistant executive director of B.C. Arts Council, and Murray Jacobs, the chief financial officer and director of Crown operations.


M. Jacobs: Good afternoon, Members. I am Murray Jacobs. I'm the chief financial officer for Tourism, Trade and Investment. I was the chief financial officer for the Ministry of Tourism, Culture and the Arts when this review was undertaken. With me is Sarah Durno. She's the senior arts policy and program adviser for the B.C. Arts Council, in case you have specific questions about the Arts Council afterwards.


This presentation was prepared by staff of the B.C. Arts Council. Gillian Wood, the exec director of the Arts Council, had hoped to be here today to present their response, but unfortunately, she's out of town, so she has asked me to present it on her behalf. She also asked me to pass along her thanks to the Auditor General and his staff for their thoughtful, considerate comments and their recommendations. 


She also wanted me to point out that the Arts Council program was already planning a number of the program modifications, so the Auditor General's report was helpful in that it provided assurances to the program that we're proceeding in the right direction, and it also gave
[ Page 322 ]
them a bit of an incentive to get on with some of these things.


[1230]

Time permitting, I'd like to provide a brief overview of the B.C. Arts Council programs to help put the recommendations into context. Then we can deal with the nine specific recommendations and what the Arts Council has done and is doing to address them.


B. Ralston (Chair): Certainly. Go ahead.


M. Jacobs: In general, the Arts Council staff agree on principles underlying the recommendations, and it was instrumental in supporting the council's strategic plan for the 2009-2013 period.


An overview of the Arts Council. It is an independent Crown agency. It was established by provincial legislation in 1996. Its intent is to support arts and culture in British Columbia, to create opportunities for people to participate in the arts and to provide an open, accountable and impartial process. Its mandate is to support the arts and cultural community by providing financial assistance, policy, research advocacy and public education, and the mission is to engage all British Columbians in a healthy arts and cultural community that's recognized for excellence.


Its core values include artistic excellence in all art forms; vibrant arts and cultural communities central to the creation of a healthy society; and breadth of artistic activity from emerging to established, from classical to experimental and from traditional to contemporary. It has a core value of inclusiveness, while respecting B.C.'s aboriginal arts and culture. It has a value of clear goals, developed in consultation with the arts and cultural communities, to guide short- and long-term operations, as well as fair and transparent administrative and adjudicative processes that adhere to the principles of accountability, independence, recognition of merit and equality of opportunity.


Just a bit of the core business at a glance. The council oversees 33 programs that support artists and arts organizations throughout B.C. In fiscal year 2009-10 the council managed 2,030 requests for financial assistance. These requests exceeded $40 million. The council provided awards totalling just over $10.93 million. These went to 1,069 organizations and individuals in 228 communities throughout B.C.


The legislation provides that there are up to 15 members appointed by orders-in-council to the council board. It's broadly representative. They're appointed by the Lieutenant-Governor-in-Council, who also designates the chair and vice-chair. In 2009, just after the review was done, their strategic plan included the following goals: to foster artistic excellence, strengthen community engagement, support the unique role of aboriginal artists and communities, and enhance financial and other services — in which part this review was very helpful in working on some of those initiatives.


The first recommendation was that the B.C. Arts Council ensure that all grant programs are advertised and that complete information is provided to and requested from applicants. This is fully implemented. There was a revision done to their website to ensure that program details are available to all interested artists and organizations. Funding provided is through programs that have full disclosure of these guidelines and have application forms that are available to all applicants. That was put in place in September of 2009.


The second recommendation was that the B.C. Arts Council put procedures in place to ensure that eligibility and need of an applicant is confirmed and documented. Again, this is fully, substantially completed. Each application is reviewed for eligibility, and ineligible applications are coded in their database. They're discussed by the council's management committee, and if they're deemed ineligible, applicants are informed that their request will not proceed to adjudication. In 2009-10 there were no ineligible applications that made it to the peer assessment process.


Recommendation 3 was that the B.C. Arts Council ensure that staff have skills to review and assess financial information provided by applicants. This is partially implemented.


[1235]

Just this current fiscal, in '10-11, the council required that 250 regularly funded clients use a new national database known as CADAC, the Canadian Arts Data. It's a web-based application dedicated to collection, dissemination and analysis of financial and statistical information about Canadian arts organizations. It's used throughout Canada, and it provides invaluable information about what's happening in the arts community, particularly of a financial nature. Training on this system has been provided to council staff. It's helped them with their review and assessment of financial information, and additional training is scheduled for early next calendar year.


The fourth recommendation was that the B.C. Arts Council adequately document for each application the rationale supporting decisions to support or deny funding and, where funding is granted, the justification for the amount approved. Again, this is fully or substantially implemented.


As part of the decision-making process, they have peer review panels score each request. They provide comments on the application's alignment with the assessment criteria. The scores, rankings and funding allocations resulting from each panel are signed off by the members of the panel and stored on line. There are clear records of this review process and detailed according to the stated assessment criteria, and these are maintained and available to each applicant.

[ Page 323 ]

Recommendation 5 was that the B.C. Arts Council enter into funding agreements for each large grant and all grants given out over several years. Again, this is partially implemented. Starting this current fiscal year, the council is reviewing all of their funding arrangements and issuing STOB-80 transfer agreements as opposed to grants wherever practical.


During '10-11 the council is reviewing its relationship with the large, regularly funded arts organizations to determine where transfers under agreement would work and what conditions might be considered to strengthen their ongoing relationship with these organizations.


Recommendation 6 was that the Arts Council ensure provision is made for the recovery of funds that are unspent or used for purposes other than those approved where funding agreements are used. Again, this is partially implemented. As noted in the previous recommendation, plans are underway to review all funding arrangements, and commencing this year transfer agreements are established wherever practical. Funding will be contingent on deliverables met. Actually, during last year the council did recover funds from three recipients where overfunding occurred.


Recommendation 7 was that the Arts Council ensure funding allocations are included in quarterly funding reports to the Arts Council board. This is fully implemented. There's a new system that ensures results of each competition are prepared for inclusion in the next quarterly meeting of materials for the B.C. Arts Council. The council board is provided with details of all awards provided with the council's funding on these quarterly meetings.


Recommendation 8 is that the B.C. Arts Council require proper documentation supporting the review of each grant file. Again, this is fully or substantially implemented. Throughout the audit it was kind of reiterated and reinforced that the paper file is the main record for each application, and there have been better processes put in place to ensure that each file is complete with required documentation, because these are available to the applicants if requested.


Recommendation 9 was that the B.C. Arts Council make efforts to recover any overfunding, and as mentioned previously, immediate action has been taken where it's been detected. There were three cases last fiscal where overfunding was recovered. These were cases where it was based on a formula based on population, and based on the timing of those grants there was a revised figure that came out later, and those funds were recovered from those three recipients.


That concludes our report back on the recommendations.


B. Ralston (Chair): Thanks very much. Then responding on the Olympics and Paralympic Games part of the letter is Doug Foster. I was told you didn't have a slide presentation as well.


D. Foster: I don't, Mr. Chair.


B. Ralston (Chair): Don't apologize.


D. Foster: I like trees, so I try to avoid….


I actually wanted to come here today to speak to the games. For people that don't know me, I'll give you a short background.


[1240]

I am Doug Foster, and I work with the deputy minister's office in the Ministry of Finance. I'm a career public servant, about 35 years now. In the last ten years of my public service I've had a number of files.


One of the largest files I've had is providing government oversight from the Ministry of Finance in relation to ministry activities, in relation to the leading up to and during the games, as well as our friends at VANOC. We bring this to a close, and I'm here today to talk about a 2008 report done by the provincial Auditor General.


You heard the Auditor General a little bit earlier referring to a short three-page document that the Auditor General filed with the Speaker's office at that time. I actually need to, in this conversation, explain a few things that the Auditor General did not tell you.


In December of 2008 — actually, the very late part of November of 2008 — there was a complete, full report done on the games to that point. That report in its final draft, ready to go to Queen's Printer, was given to the Ministry of Finance — in fact, the Minister of Finance — to review and provide a response. Staff of the Ministry of Finance had spent nine months working with the staff of the Auditor General on the creation of that report, a fulsome report.


At the eleventh hour, as the province was ready to provide its opinion, its response, the report was withheld and pulled back, and a simple three-page document went to the Speaker's office.


I would like you to bear with me, because I'd like to share with you something that the Minister of Finance wrote back to the Auditor General and, indeed, filed with the Speaker's office, and copies were provided to the Chair of this committee as well as the vice-Chair. It's a short one, and it says:


"Further to my discussion with you on December 11, 2008, I would like to restate my disappointment with your decision to withhold the release of the final draft of your report on the 2010 Olympic and Paralympic Games.


"As you may appreciate, staff in both your office and the province have worked together many hundreds of hours on a process that the province and, I believe, your staff believed would ultimately lead to the Auditor General releasing the full…report to the public that had been presented to us, along with our official response.


"As Minister of Finance, I have an obligation to ensure that taxpayer dollars achieve good value, especially in these uncertain economic times. I believe that a decision to end this review process without the benefit of releasing the final full report, along with the provincial response, does not represent the most responsible use of taxpayer dollars.

[ Page 324 ]

"I believe that your final report was well balanced and represents a significant step forward in our ability to work together in meeting a common commitment of providing the public with useful and relevant information on the 2010 Winter Games. This view is also expressed in the province's pending response to your full report." But we are unable to release that.


"I wish to reiterate our desire to continue to work together with your office in a positive way and ask that you reconsider your decision to withhold the release of the final report. The province stands ready to formally submit its response to you to accompany your report so that the two documents may be publicly released together, as practiced in many of the previous years.


"Sincerely,


"Colin Hansen, Minister of Finance"


I need to say that, because that is…. We've worked many years together, our office and the Office of the Auditor General. In all of my 35 years, about, of public service I have never seen this kind of practice, so my minister is very dismayed. We think that there's a wholesome story that reflects nine months' worth of work and the working together since the previous report in 2006 that the public won't hear.


Our first reaction was to release this report publicly. Unfortunately, our legal advice was that we could not and should not, because the accountability of the Auditor General is not to my minister but to this committee and the Legislature as a whole.


[1245]

While I cannot ask, other than in a letter to encourage the Auditor General to release the report, that's something that you may want to consider as a question later. I'm only telling you what I'm able to do and not do, other than it is frustrating to spend nine months on something and many, many hours of staff and not actually be able to see the result of that work.


That's my sort of preface to that, but I want to respond to the recommendation that was made.


In the report, that full report that has not been released, you would hear, once again, a reiteration by government in relation to this definition of games costs. If we were to go back to 2008, I said before this committee back then — and I have in previous years made the same statements over and over — that there are countless definitions of games costs, depending on where you're standing and who you are. Citizens have a definition; governments have a definition; interest groups have a definition; cities. You name it.


What can be said is that at the time of the awarding of the games the provincial government set down a definition. Some people may like it, or some people may not, but it was a definition nonetheless. It said that there is a financial commitment of $600 million, and these are the line items that make that up.


Later on that financial commitment was increased $165 million to recognize Canada's higher costs of providing game security. But the point about that is the province has been consistent on reporting on those line items each and every time. There are some people that say that you should throw the Sea to Sky in there, throw the convention centre in there. You can throw anything you want in there.


I'm amused by one. What was it? The city of Vancouver. A short while ago, in the summer, its council put out a report. You can see it on their website, and I found it curious in their report about games costs, because they were actually counting the cost of a swimming pool that was part of a larger development, leveraged off the games investment. I just sort of wondered: "What does a swimming pool have to do with Winter Games?"


The point I'm making is that there are so many definitions that at the time of the awarding of the games, the government said: "We're not going to get into the debate." People are going to choose what is a games cost, whether it's a direct or indirect games cost, and they're going to add or subtract. Government made it very clear.


Having said all that, what has been stated clearly by the province in each of its publications is that whether you agree or disagree on a games cost, all provincial spending, whether you believe it's games related or not, is actually recorded in the public accounts, which is fully reviewed by the Auditor General.


I can give you an update to all of this. We're standing here today. The public accounts came out in June of 2010. One day later, after the public accounts, we held a technical briefing and released a games cost report and other broader investments so that people could get an update about provincial spending to March 31. But what we also did in that report was provide a little bit more about what we got for it. That's available on the website from the Ministry of Finance, and it has been out there for some time. So that's the province's update.


The next missing piece we're waiting for now is for VANOC, and we've been hearing some releases about that. Once those two halves come together, I think then we have something larger to talk about. And even Canada. In my opinion, I'm not sure we'll ever find out the total cost of games security, but Canada will have its obligations to report on its activities for the games.


That's my direct response to the recommendation. There really was only one significant one there, but I thought it was useful to set some context about the report that we're talking about, whether or not it was actually the full report. 


B. Ralston (Chair): Okay. If I may make a few comments.


Firstly, the letter that you refer to that was sent to the Chair of this committee, my predecessor, Mr. Fleming. I've just asked the office here, the Clerk's office, to check to see if they have a copy, and they don't. So I wasn't aware of that letter.


Secondly, the report that we're dealing with is the report that's before the committee now. I may offer Mr.
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Doyle an opportunity to respond briefly, but what went on between you and the Auditor General's office I don't really think is terribly helpful to the deliberations of this committee. Obviously, you feel strongly about it, but this is the report that we have, and I really don't see a great deal of merit in getting into a debate and some finger-pointing about releasing the report or not.


Clearly, the issue of games cost was something. I was on the committee in 2006 when we considered the report. That was canvassed fully. There's clearly a strong difference of opinion between the Minister of Finance and the Auditor General on how to define games costs. I don't think that's been resolved, and there's not going to be agreement on that. So I'm not sure that there's any merit in rehearsing all those arguments yet again.


[1250]

I appreciate you expressing your point of view. I'm not condemning you for expressing your point of view. My advice to the committee is that, aside from hearing a brief explanation from Mr. Doyle, if he chooses to make one, about his decision not to release the report, we not engage in a lengthy investigation of why this report was or was not released. I just don't see that it would be very helpful to what we're here to accomplish in this committee.


With that, I'll open it to questions.


Mr. Doyle, did you want to make a comment?


J. Doyle: Anytime government tells me how I am to report, I will give them the same answer — that I'm an independent officer of the Legislature, and I am entitled to report in any way I deem fit.


I provided the government with a detailed report and then elected, because I wished to not create a frenzy of inappropriate discussion at the time, a simple one-page or two-page letter which identified that nothing much had changed. There were a few variations around the edge, but the recommendation, which has been the recommendation all along from my predecessors and myself, was that there should be full disclosure.


Now, full disclosure means full disclosure. You will notice that afterwards there was some additional disclosure regarding the $600 million.


As regard to the length of service of any particular member of staff and his observations regarding his own experiences, I think it's utterly and totally irrelevant to the exchange of information that should exist between an auditor and government.


I'll just repeat one more time that as an independent officer of the Legislature, I am not bound to publish anything in any shape or form that's been agreed by government. What I am bound to do is issue and bring to the attention of the Legislature matters that should be brought to their attention.


By saying there needed to be full disclosure, I don't think there were any surprises in that at all, because that's been the stance that my two predecessors had set up. Whilst there were some variations in some of the detail, that stance was continued into my mandate, and it's still my stance. When we finish going through all the documentation to see what has been made available to citizens in the next short period of time, if there are any gaps in that, then we'll address those gaps at some time early in the new year.


B. Ralston (Chair): Okay, thank you. I'll turn to questions from members of the committee, and I hope committee members will accept my advice in terms of how we might shape our questions. We do have the other aspect of the report here, which is the Arts Council.


S. Chandra Herbert: I'm hoping we might be able to spend just a little bit of time on the Arts Council one — at least a little bit of time, because I'm always interested in what they're up to — before we get to the matter of the Olympics report. I know there'll be a number of questions on that one. I can feel that.


I just wanted to acknowledge Jeremy Long, the former executive director of the B.C. Arts Council. I don't believe that he's been thanked in a forum like the Legislature or a public accounts committee for his many years of public service. Of course, Jeremy Long has now moved on, but I just wanted to take a moment to thank him for his service.


It was interesting to read through this report when it was first issued and then to look at it again. I thank the Auditor General and his staff for acknowledging that it's a small amount of money relative to the much bigger government entity. Indeed, we were talking yesterday about $20 million, I believe it was, going into an infrastructure program. We had our debate about the 11 handwritten pages to justify spending $20 million. So when I look at the Arts Council and how it adjudicates its decisions, I have a lot more faith than in the decisions we were talking about yesterday.


My question — I guess it would go through to Arts Council staff, probably — would be just around the matter of the documentation for the adjudications of who gets the funds. I know the Auditor General had acknowledged or mentioned that there'd been some debate or some concern raised about that documentation. Certainly in my experience, non-profit organizations who do apply are always frustrated with the sheer amount of documentation they have to provide on their end, justifying what funding they might receive or what investment they might receive.


I'm just curious if I can get a broader understanding of what that was about.


S. Durno: You're asking about what kind of documentation we keep from the peer adjudication process? Is that correct?


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S. Chandra Herbert: The question is just…. The Auditor General mentioned some concern around documentation. I'm just wondering what, specifically, that was about and how that's been resolved.


S. Durno: Previously there were some inconsistencies in the way that decisions were made at the peer adjudication process. Since then staff have taken steps to formalize that process and to make it consistent across programs. It's a very detailed and…. Basically, notes are taken by two or three staff members in each of the meetings, and the decisions are also quantitatively ranked. So we have that qualitative record and the quantitative record to go back to should any clients or members of the public wish to know.


S. Chandra Herbert: Great. Thank you. Just one more on that, and I guess this is jumping off from that over to the Auditor General's staff.


I just wanted to ask whether or not there are any remaining concerns about the adjudication process, the documentation and the evidence of how decisions are made. Or are you confident that the Arts Council is being accountable with how they spend public dollars?


J. Doyle: We've received feedback — as we've done in the follow-up, which is our traditional approach to all recommendations — that all these matters have been either dealt with or substantially dealt with. That's a self-assertion by the entity concerned, and we have not yet gone back to have a look at it, and frankly, I doubt if we would.


But I would point out that some of the recommendations are very similar to ones that we raised in later audits that we conducted in other organizations with regard to grants. In fact, we did this audit first, and then we moved into those other organizations because of some of the findings that we found here.


We do expect that those matters have been addressed and dealt with, but we haven't done any further work.


S. Chandra Herbert: I just wanted to say thank you to the Auditor and thank you to the B.C. Arts Council for ensuring that our public dollars are spent wisely.


K. Corrigan: Thank you very much for the report. The Auditor General has invited members to make requests for further reports in the past, so I'd like to take this opportunity to say that I think the taxpayers of British Columbia as well as this committee would benefit from an updated look at the numbers related the Olympics. In my work as critic for the Olympics I've found the 2006 Auditor General's report invaluable to get a handle on what the costs of the games were.


We don't need to go over old ground, but just a reminder of some of the things that the Auditor General included that were not part of, I guess, the definition of what the cost of the Olympic Games were. Those included such items as the VANOC secretariat and things like the Own the Podium program as well as some of the larger items that the Auditor General felt should be included, partially because they had been a requirement by the International Olympic Committee in order that B.C. would be successful in its bid. 


Apart from the arguments about what should or shouldn't be included, there are some that, to me, look quite obvious, and the Auditor General has rightly included them. However, some of those…. In the original reports there are blanks or perhaps updates next to some of the items.


I think, for example, it would be interesting to find out what the actual costs were related to provincial Crown sponsorship. We have had some of that information provided to us, but I would really appreciate the Auditor General's office taking a look and having a little bit of oversight. We have, we estimate, around $60 million worth of sponsorships for the Olympics. I would find it really useful to have the Auditor General take a look at that.


[1300]

In addition, we have items that we have found out about through the estimates process or question period. Items like the cost of tickets were not included in the government's $765 million. Items like the employee loan program, items like the costs associated with the volunteer programs, items like money to go to the one-year countdown, items like various events associated with the Olympics that in my mind are very closely associated with the Olympics are part of the Olympics and should be seen as part of the costs.


B. Ralston (Chair): Member, if I might just interrupt. The Auditor General has said that there will be a final financial report from VANOC at the end of the year. He is going to examine it with the view to whether he'll issue another report.


All the items that you raise are issues that have been part of a debate and debated by this committee at some length in the past, have been part of the political debate in the province, so to enumerate them here I don't think is really necessary.


We do have a report here. I sense a certain restiveness on the other side of the floor here, so I'm going to encourage you to move on to a question, please.


K. Corrigan: Fair enough. My only point is to say thank you and just to say that if the Auditor General is considering a final financial report, I would appreciate that and would welcome that.


B. Ralston (Chair): Do we have anyone else?

[ Page 327 ]

J. Les: Just a comment. Apparently, we're not that far off in having complete details on all of the budget issues around the Olympics, which, by the way, were very successful.


I look forward to that full accounting, as I'm sure every member of this committee does. So at the earliest opportunity I would welcome a meeting where we could examine the financial results of the entire Olympic experience. I don't think a rhetorical exercise today is necessary.


S. Chandra Herbert: I guess, just jumping off of the B.C. Arts Council report in terms of grants and the Auditor's discussion around other grants, I just wonder whether I could take an opportunity to suggest or request or put out the idea that we might also be interested in looking at the B.C. gaming grants and money that flows from gambling to charities and non-profits.


J. Doyle: I have received correspondence in regard to that matter, and it's currently under consideration.


R. Sultan: I had a question on recommendation 4 on the Arts Council. It was just to understand more fully the gist of the recommendation. "The scores, rankings and funding allocations resulting from each panel are signed off by members of the panel and are stored on line" — from which I might assume that they would be available on line to the world.


If that is indeed your recommendation, I would just suggest a little bit of sensitivity. Harkening to my own experience as honorary patron of an amateur orchestra — largely staffed, but not entirely, by seniors in West Vancouver — that applied for some money from one of the North Shore municipalities and got back a rather tart critique saying that it wasn't quite up to snuff…. I don't know whether it was the string section or the tubas that were out of whack.


This earnest, quite talented and very successful amateur group was quite crushed by this. It would have been so easy to say: "I'm sorry. We just don't have money for you this year, but we'll try to consider it more carefully next year."


I'm not quite sure if it would be like a professor putting all the grades on line and the attendance records. I don't think they do that.


S. Durno: Thank you for that question. The term "on line," I believe, refers to the fact that it's stored on our server. It's not actually on the website. The comments that the peer adjudication panel came up with and the rankings are available to us internally.


R. Sultan: Only?


[1305]

S. Durno: Yes.


R. Lee: Along the same lines are the criteria for choosing those projects. I understand that probably 50 percent of the projects are rejected because of the…. Last year you had 2,030 requests for financial assistance, and only 1,069 organizations and individuals got the funding, so it's about 50 percent rejection.


My question is: for those rejected projects, do you see a trend in the communities, and do you encourage them to change, for example, their programs or whatever — the composition of the members for the project and that kind of thing — in order for them to be successful in the future?


S. Durno: Yes, we certainly do. Just to clarify, that statistic — the 2,030, with a 50 percent success rate — includes organizations as well as individuals as well as scholarships. That's for post-secondary arts students or arts administration students who are applying for very small grants towards their tuition.


I think, especially when you're looking at our operating programs, that the statistics are much higher. But certainly, if people do apply to programs and it's deemed by the peer adjudication panel that perhaps the nature of the work they're doing would be better served by one of our other programs, then the staff would be in contact with those clients to encourage them to apply to a range of other programs that we offer.


R. Lee: Chair, if I may, a following question is…. There are many cultural communities in B.C., and some of them, I am sure, are not aware of the opportunity to apply for grants. Are you making any efforts in the council to reach out to the communities so that you get more quality applicants from a community, so that those projects that have the merit to be funded, have the opportunity to be funded?


S. Durno: Absolutely. We encourage other applicants that we do have to let other members of the community know that these programs are available. In terms of a formal PR strategy, we are working on that constantly and getting the word out and having as many people apply who are eligible for our programs as possible.


B. Ralston (Chair): Shane, and then that's it.


S. Simpson: Just a quick question. This relates to the Olympic question. As has been noted, VANOC will be reporting out final budget numbers sometime in the coming weeks or the next month or so. The Auditor General has reported on this twice already.


The question I have is: considering the work that's already been done — as John says, hopefully we'll get a chance to talk about this when we have that full infor-
[ Page 328 ]
mation — what's the expectation of the Auditor General of a further reporting, which he references in his comments here? What's the thinking on what the context of that might be? Is it a review of what's gone on before? Is it something different?


I'm just trying to get a sense of what the content or context of that report might look like. Has a decision been made about that?


J. Doyle: Thank you for the question. First of all, no, no decision has been made, because the form of any report, if there will be one, will depend very much on what is made available.


If I look at the information that has been made available and it seems to me that citizens can be considered well informed in regard to the costs and consequences of the Olympics and the Paralympics, then there is no need for further work. If they have not been informed or it is quite hard to draw all that information together, I may or may not feel that there's a need to actually draw those streams of information together and put them into one document.


Now, I can't make that assessment until a number of these reports have been published and are made available and interested observers have had a chance to go through them themselves.


I'd said earlier on that it might be mid-December. I was corrected by my colleague, who told me that the report wouldn't be ready until mid-December. Therefore, it probably won't be until early in the new year that I'll be able to form a view as to whether or not any further work or any additional reporting will be necessary.


[1310]

The object of the exercise…. I'll just quote from here, and where I'm coming from. It's straight out of the letter, and it's still valid. "One recommendation: that government expand its definition of games-related costs to include all items that are reasonably attributable to hosting the 2010 Olympic and Paralympic Winter Games and report publicly on those costs and the risks associated with them." That was before, but also after, the event.


Really got to be clear on this. It's expanding its definition to the definition that a reasonable citizen would consider it is — not some kind of narrow process which says: "This comes out of this particular bucket." And I think that's what citizens expect.


Now, it's actually quite difficult to get all that information together, but there's been plenty of energy and effort from different layers of government and from different individual organizations to actually bring information together and try to put them into one particular place. At the end of the day, I may consider that that's more than adequate and that no further work is required. But if I don't, then I shall be doing an additional piece of work to actually bring that information together. And that would be the structure and form of the report, if any, that would flow.


B. Ralston (Chair): Thanks very much. I don't see any further questions.


Oh, Mr. Doyle's got his hand up yet again.


J. Doyle: Sorry, Chair. I was just waiting till the end.


In the presentation made by the government in regard to the Olympics, it was suggested that I'd misled the PAC in that I had not informed you of certain aspects of the situation. One of the things that was mentioned was that I didn't mention that a draft report or a report had been produced and handed over to government. I think if you read Hansard, you'll find that I did. I did mention that a draft report was handed over. 


The other thing that was confusing about the presentation was that the three- to four-pager that I referred to was how we would report into the future, not how we reported in the past. Again, I think if you read Hansard, you will find that it's quite clear in the way that I expressed myself, because I usually read from a text, so I make sure that I know exactly what it is I'm going to say and how I'm going to say it.


I wanted to put it on record that I have not misled the committee, and I wouldn't wish you to think that I had.


B. Ralston (Chair): Okay. I really don't want to have a shooting match here.


D. Foster: No. Just my final closing comment, because I think it's a comment that the Minister of Finance would want to make sure was heard.


B. Ralston (Chair): And you are instructed by the Minister of Finance to make these comments here today?


D. Foster: I have already had discussions with the minister. I just need to make a fact point.


On an evening just prior to the Queen's Printer going into production, this ministry received a report. It was some 60 pages. We were invited for comments. We provided those comments. We believed that was going to publication. It didn't happen. That's the point I'm trying to clarify. That's a relevant piece here, because there was a lot more information in the report than what has been tabled.


The Auditor is free to say, "I have control of issuing my own reports," and he's right. All I'm suggesting is that the report that the province thought he was going to produce and release publicly isn't what was released. That's the only point I'm making — my closing comments.


B. Ralston (Chair): Well, thank you very much. Thank you both.

[ Page 329 ]

Perhaps we can take a recess of five minutes. We do have a fairly interesting report on fraud that we're going to deal with next, so I want to give some time for that. If we come back after a recess of five minutes, then I think we should be able to deal with that with sufficient time available. So we'll recess for five minutes.


The committee recessed from 1:14 p.m. to 1:21 p.m.

[B. Ralston in the chair.]


B. Ralston (Chair): The next item, and the final item today on our agenda, is another aspect of report No. 4, Aspects of Financial Management. This is the section entitled "Managing Fraud Risks in Government." We'll hear a presentation from the Auditor General and his staff and a response from Mr. Newton, the comptroller general.


I'll turn it over to the Auditor General.


Auditor General Report:
Aspects of Financial Management


J. Doyle: Thank you, Chair. "Managing Fraud Risks in Government" was, as you said, the final report in the compendium that was recently published.


Although auditing standards require me to consider the potential for fraud when I conduct a financial audit of government and its organizations, the scope of my work does not guarantee that I will always detect all fraud. By its nature, fraud can be difficult to detect, so the question always is: can all fraud be prevented or detected? The honest answer is that in all likelihood, no, it can't, especially in an organization as large and as diverse and complex as government.


However, that does not mean that fraud risks can be ignored. Management is still responsible to ensure that it has set up an appropriate framework to manage its fraud risks. Governing boards also have a role to play in ensuring that management is held accountable for the implementation and management of those frameworks.


What I expected to see was a strategic and well-coordinated approach within government. Although there were checks and balances, we found some gaps compared to our good-practice framework. Government has indicated that it agrees with our good-practice principles and will look forward to the guidance it prepares as we follow up on this work.


I plan to repeat this work in other parts of government. It's my view that all government organizations should have the same awareness of and appropriate responses to managing their fraud risks.


With me today I have assistant Auditor General Bill Gilhooly, who is responsible for this piece of work, and Brent Blackhall, who is senior manager within the office and who actually led the project. I'll now ask Brent to make a brief presentation.


B. Blackhall: Thank you, John.


Good afternoon again, Chair and committee members. In this report we looked at how well central government is doing in managing the risk of fraud. Government has a fiduciary responsibility to ensure public resources are protected from theft and misuse. In order to manage this risk, it needs to ensure it has assessed the potential for fraud in its programs.


Fraud can take place due to internal and external forces. While the vast majority of public sector employees are likely honest and trustworthy, government, like any employer, is nonetheless exposed to internal risks, such as theft of assets, falsifying expense claims and creating fictitious suppliers for payment. Outside parties can collude with employees on kickback and conflict-of-interest schemes. They can also act alone against the government by stealing services, falsifying eligibility claims and submitting bogus invoices for payment.


[1325]

Our intention with this work was to use government's fraud risk guidance to assess whether the risks were being effectively managed. Since government had not yet completed developing its own guidelines, we developed our own for the government context. We researched good practices and principles in other jurisdictions — such as the U.S., U.K., Australia and New Zealand — and used these to develop our principles.


In terms of our overall conclusion, we found that while there are certain embedded controls in place, government could be doing a better job in managing fraud risks by taking a more strategic and comprehensive approach. Some of the embedded controls in place include compliance and enforcement groups in several ministries, the corporate compliance and controls monitoring branch of the comptroller general's office, the internal audit and advisory services group, and other things like the oath of office and the standards of conduct.


We found that improvement could be made in having a more strategic or coordinated approach to manage fraud risks. A central fraud risk register would help government improve on its existing embedded controls and help in strategically designing appropriate risk mitigation steps. This centralized approach would help government ensure its resources are targeted at the highest risk levels.


We also found that preventative, deterrent and reporting measures could be improved. Government's recently amended criminal record check policy is a measure that should help in this area as it is implemented. Expanded fraud risk awareness training would also help.


Another useful tool would be a governmentwide fraud hotline. The Association of Certified Fraud Examiners reports that over 50 percent of all detected frauds came from this type of risk mitigation activity. Regular reporting of detected frauds and sanctions would also help in establishing an anti-fraud culture.

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Our findings suggest that government could improve its management of fraud risk by adopting the five good-practice principles we developed. This formed the basis for our only recommendation in the report.


This slide shows the principles, the first one being assessing the risk. The second one is assigning responsibility. The third one is implementing appropriate deterrent and preventative measures. The fourth one is implementing appropriate detective, investigative and sanctioning measures and then, finally, regularly reporting on performance.


As John mentioned, this is the first phase of work we're going to do in this area. In the next phase we're going to examine how the rest of the government reporting entity is doing in managing fraud risk relative to these five principles or alternative suitable ones that are implemented by government.


As also noted earlier, our work on this project resulted in a sole recommendation to government to adopt and implement the five good-practice principles. Government responded to our recommendation by noting that they agree with the intention of the five principles, and we understand that they are currently developing some guidance.


That concludes the presentation.


B. Ralston (Chair): Thank you. Then over to Stuart as comptroller general.


S. Newton: Thank you, Chair and Members, for the opportunity to respond on behalf of government. First, what I'd like to do is just provide a bit more information on the existing controls. As the Auditor General has mentioned, we do have embedded controls in our control framework, and I just want to go over those with you at this point.


All employees are required to take an oath of office, which includes a requirement for them to follow the standards of conduct. In the standards of conduct there are requirements in relation to reporting loss and requirements in relation to conflict of interest. Also, in the Financial Administration Act is a requirement for an obligation to report to my office transactions that government employees feel aren't meeting the requirements of the act.


Our existing transaction controls are built with fraud and error in mind. They have more than one person undertaking the work. They also have supervisory review and periodic review. As mentioned, there is a corporate compliance and controls monitoring group within the office of the comptroller general that takes a risk-based approach to expenditures and reviews the background in detail and support to ensure that the control framework is operating appropriately.


[1330]

They also are doing work on more real-time and more complete review of payment card transactions to get a complete review using data that has embedded checks to look for specific fraud types.


Various ministries have compliance and enforcement groups. Those have been around for quite some time, especially in areas where high risk is noted and a ministry has a concern. MSP audit is an example. There's also audit of assistance payments. Various other ministries have their own groups that have been working on being able to deal with the high-fraud-risk areas that they experience.


My former office, internal audit and advisory services, three years ago put together an investigative group with two certified fraud examiners, as well as staff, to be able to put more focus on fraud, both the fraud risk awareness as well as being able to follow up on areas where we have noted concerns.


As mentioned, there's the new security-screening policy, which gets to one of the areas that are in the principles — along with good reference checks, security checks for people in key designated positions.


We also have a series of management assertions in relation to year-end, where ministries are providing assertions back to our office in relation to a number of things, in which fraud is included.


We are looking through the detail in the report's recommendations, but in principle, we agree with the principles that are put forward. A number of them we have been working with.


Currently what we're doing within my office is taking the lead on developing a fraud risk management strategy for government. It's pulling together the elements that already exist and improving on some of them that are weaker.


I'm just going to briefly run through some of the things that we're working on in relation to that strategy.


Currently we have a loss policy in the core policy manual that does not explicitly deal with fraud. We are looking at updating that policy. In doing that, we're also looking at what other jurisdictions have in place for our fraud policy.


Key to any sort of cultural change or awareness in relation to fraud is training, so it's ensuring that employees within government have adequate training to understand or, I guess, notice something that's inappropriate, to know to dig a little bit further to see if there is a potential fraud. We're also looking at, potentially, more detailed training so that ministry staff can dig a little bit further when they do find a problem and assess whether there's fraud.


Prior to the start of the Auditor General's report one of the things that we had been toying with at internal audit and that we're currently having on our audit plan this year is a fraud risk assessment across government.

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Ministries prepare risk assessments, but one of the elements that we wanted to highlight going forward in the risk assessment process is…. Although fraud is a key risk listed in the risk assessment process, I don't know if it's focused on as well. By conducting a fraud risk assessment, working with ministries, I think we would be able to educate them more fully on how fraud is just a little bit different and needs to be focused on.


We have a number of preventative and detective controls in place. We do receive quite a number of tips, for want of a better word, both under the obligation to report to the comptroller general and standards of conduct. As well, internal audit does find issues, when they do their work, that warrant further follow-up. We're looking at being able to enhance that.


Since setting up the investigative group three years ago, we've been working fairly hard at trying to connect ourselves with the other areas within the province that deal with fraud and fraud risks, so the other fraud-monitoring groups within ministries.


Another key element that improves fraud awareness and helps in dealing with fraud is an increased focus on internal control, so internal audits and audit plans for the current year and subsequent years are putting a little more emphasis on good control and being able to review an audit for good control practices apart from what we have been doing. That re-emphasizes the point.


We're also looking at being able to clarify — in relation to the Public Service Agency's role, risk management branch's role and the office of the comptroller general's role, as well as the roles of the other investigative groups — as to how we coordinate when we know we've got a problem and how we share information.


The other piece is that we are looking at how to improve the loss-reporting requirements in policy that were noted that we weren't meeting.


With that, that's the end of my presentation, and I'm happy to take any questions.


[1335]

B. Ralston (Chair): Okay, thanks very much. I'm sure there'll be a few questions. Let me put together a list. Spencer, Guy. Anyone on the other side? We'll start with those two.


S. Chandra Herbert: I'm just curious. To government: I understand two of the recommendations…. One was a fraud hotline; another recommendation was protection for whistle-blowers. I wonder if the comptroller might be able to respond to those two points and what the thinking is at government at this stage on those.


S. Newton: Actually, as part of our project plan going forward to look at a fraud risk management strategy, we are looking into these areas to determine what we think needs to be enhanced. We certainly have avenues for people to report to the comptroller general. There are in the standards of conduct reporting requirements that also relate to the Auditor General as well. We need to review whether we think those are enough or not.


The issue with hotline — and this is what we have to work out — is that there are costs associated with setting it up. Is it the best avenue for getting tips? I know the stats show that 50 percent of the issues come through tips. We're experiencing that through a different way, through other internal channels. Certainly, a hotline would benefit people outside of government as well, so we, as part of this project, are looking into that to determine how practical or pragmatic….


There are areas within government that have tip hotlines. I believe there's one for tax fraud, and I think there's one in the resource sector, but I'm not entirely sure of the specific area. So we are looking at those in determining what would be our best avenues to get good information.


S. Chandra Herbert: Just on the whistle-blower point, I know it's been raised in the House, as well, as something that members may feel needs to happen. That was some years ago. I'm just curious if thinking has proceeded since then. Obviously, this has been debated and discussed before, in the past, so I'm just not sure what more needs to be done to think about it.


S. Newton: Well, I think we need to revisit it. I know when we were first dealing with the obligation to report — the changes to the FAA — one of the comments that was made was that the standards of conduct should protect an individual who is a whistler-blower internal to government because they're still required under the standards of conduct to be treated appropriately and fairly.


I think one of the comments at that time was that the whistle-blower protection might create almost a false sense of security in relation to whistle-blowers, but certainly, given our progress down this fraud road — looking at a better fraud risk management program — it needs to be revisited. I think we also need to include what avenues would be available for contractors or the public.


The public has various avenues. They do provide comments to my office. They do provide comments to their members, who do provide comments or concerns back to us. So there is that avenue. It would just be creating something more formal.


G. Gentner: The Auditor General states that among the most common causes of fraud are purchase card misuse by employees. I want to get into, I suppose, what is subliminal theft or what is tangible and what isn't tangible. I see some members opposite know where I'm going.

[ Page 332 ]

Can the comptroller or maybe the Auditor General define the difference between what is fraud and inappropriate expenditures?


S. Newton: I think fraud has an intention to deceive attached to it. There is an ability to misrepresent. I think the line is blurred between the two.


G. Gentner: So if I have a corporate card and buy some jeans for my personal use, that's fraud?


S. Newton: I would consider it that, and we would be reviewing to determine how we're going to deal with that.


G. Gentner: Okay. So what are the card usage protocols amongst the ministries? Are there some universal standards here, or does each ministry have their own?


S. Newton: No, there are central standards for the use of a purchase card. Individual purchase card holders sign agreements that state that they won't use them for personal purposes. They are required to review their purchase card transactions for problems that they identify.


There is a series of review steps above the purchase card holder to review their transactions to be able to ensure that they're appropriate. The continuous controls monitoring group within the office of the comptroller general also reviews the transactions and provides feedback to the ministries and the individuals around what they're seeing as far as problem transactions.


[1340]

If they're not getting good resolution from that, they do provide information to either my office or directly to internal audit and advisory services that has done follow-up work on those payments to determine whether they were indeed appropriate or inappropriate payments and provide that information back to the ministry to allow them to take the appropriate action.


G. Gentner: I think, Mr. Newton, you said that some ministries have compliance and enforcement groups. Which ministries don't?


S. Newton: I don't have a complete list. Compliance enforcement would be…. We've got it in the forestry sector in relation to forest practices. We've got MSP audit in Health in relation to Medical Services Plan payments. There was a group — I don't know the current name — in Housing and Social Development that had auditors that were reviewing income assistance payments. We've got tax auditors that are reviewing for issues in relation to appropriate remittance of tax. In the education sector I think there is a group in relation to loans and student loans and following up on those.


G. Gentner: The Auditor General suggests a centralized approach to fraud management is needed. So not all the ministries are involved with compliance and enforcement. How soon will we have a centralized agency, or when will all ministries have this type of strategy in place?


S. Newton: I don't believe it would be appropriate for every ministry to have a specific fraud group. We've got fraud groups that are set up to deal with a specific key risk that's been identified by the ministry.


If we're talking general fraud across the board, that's the broader program that we're trying to put in place. There are ministries that don't have…. Off the top of my head, I don't have a specific list. They don't necessarily have to have a fraud group or a compliance and enforcement group within the ministry.


We do have, centrally, the continuous controls monitoring branch to review that. We also have to set up, as part of our fraud policy, clearer roles and responsibilities in relation to what ministries staff have in their responsibility to deal with fraud.


It wouldn't necessarily be that they would have to have a group there, but in clarifying their responsibilities and centralizing the information that we get in relation to the problems that we're having, that gets us to a place where we are more centralized and strategic in monitoring what's occurring with fraud. So I wouldn't set one up in each ministry.


G. Gentner: Obviously, the comptroller general's office has complete faith in human behaviour in all ministries. The risk management branch has no mandate for monitoring or evaluating fraud risks in ministries, so how much fraud is actually occurring? Do you monitor it? Do you have an idea?


S. Newton: We have an idea in relation to the payment review work that we do. We have an idea in relation to the issues that we deal with in the internal audit and advisory services group. As far as the other groups, being MSP audit or tax audit, no, that's the coordination piece that needs to occur to be able to get to a centralized view of how much fraud is occurring in government.


G. Gentner: Can I continue?


B. Ralston (Chair): Well, it is relevant. I'm just wondering if there are any other questioners, because I don't want to…. I think these questions are relevant — they're on the report — but I don't want you to monopolize the questions if there are other people that have questions.


Okay, we'll let you continue, then.


Mr. Doyle, do you want to respond at this stage?

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J. Doyle: Just to observe that I actually didn't recommend that there should be a single service that conducted fraud examinations. My recommendation was that the risk management principles should be utilized however government wished to manage the fraud function within government. I didn't actually say that there should be one area.


The second thing is that the focus at the moment has been on financial fraud, but there are plenty of other types of fraud, like representation. I have many numerous, sometimes humorous, sometimes not so humorous examples where people have basically misled interview panels regarding their qualifications in order to get employment or have misrepresented themselves in some way.


There's also the diversion or the use of assets that belong to the government for alternative purposes other than those that have been expressed.


[1345]

The original question was: what's the definition of fraud? It actually is quite broad. It's not just financial. It's some kind of misrepresentation that gives a benefit to the individual concerned, whatever that may be.


B. Ralston (Chair): Okay, Guy, did you want to continue, then?


G. Gentner: Well, I'll take a break.


B. Ralston (Chair): Okay.


K. Corrigan: What I wanted to just ask, actually, following on what Guy was asking about, was the level of fraud and whether or not we have any idea. I was really astounded, in the Auditor General's report, that the Association of Certified Fraud Examiners in the U.S. estimated that the level of fraud in a survey of public sector, private sector, non-profits and government organizations was 7 percent of revenue, which seems incredible.


I just cannot believe that it would be that high here. I guess my question is: do we have an idea, and if we do, what kind of savings could be expected? What percentage could we save if we have implemented a really strong fraud strategy?


S. Newton: I don't have a calculation for what would be saved in implementing a fraud strategy. That's part of what we're doing right now in developing a strategy. We don't have a complete picture of what all the fraud would be.


We do approach it on almost an issue-by-issue basis. In relation to things financial, we've put controls in place to be able to deter, prevent or monitor for fraud.


We have not tracked, until recently, the number of instances of fraud, but within the internal audit function, where I was previously, we'd started to track the number of instances where we would get requests, and then also the disposition of those requests — whether they ended up being a preliminary assessment, whereby there is no issue, or something that went to an investigation that we conducted all the way through to whether or not we involved the police in the matter.


I think we have some statistics, given how long it takes for things to go through to a legal process, of what has gone through to court and been successful.


J. Doyle: It's always very difficult to work out what the savings would be. I think it's almost an impossible process, unless you get a megafraud that you identify. You can work out what the cost is but not what the savings are.


There is a series of principles when it comes to audit, particularly internal audit, which is that the cost of the controls should in some way relate to the avoidance of cost that may be incurred, and that those have continually got to be held in balance. Nothing can replace a good structure of internal control that is actively managed by line management, and nothing can replace the confidence that individuals can have to say: "I think there's something wrong here, and I need to tell someone about it."


Those are not necessarily very expensive things to do. They are a natural part of protecting of the assets that is in management 101. Some of these things that have been put into place do statistical analysis and overview of specific areas to try and detect aberrations in transactions and so on.


I don't think you can actually approach the issue from what the savings are. I think you need to approach it from the point of view of what's appropriate in the public sector.


There is a very low tolerance for fraud in the public sector. Most management within the public sector would think that someone removing a few hundred dollars would be quite inappropriate, whereas in the private sector you'd just be given a black bag and told to move on. In the private sector it's a big deal.


It's getting the balance right between what is useful and appropriate and is a natural part of everything that we do, and then what needs to be done in the way of overview, but I don't think we can approach it from the savings perspective.


K. Corrigan: Fair enough.


[1350]

V. Huntington: Firstly, I found the report extremely interesting and, I think, a very valuable one for government as a whole, institutions as a whole. Let me say again that this isn't pointing fingers at any government. It is a broad-based realization that there are principles
[ Page 334 ]
to protect institutions from fraud, and I think bringing these to the attention of government, of any institution, is incredibly valuable. Your report was very interesting to read.


I just wanted to ask a couple of questions aside from whether or not there was an intention of combining some of these groups so that you did have a one-stop shop sort of approach to it. But if that's not something that management thinks is the way to go, fine.


However, you did mention that you were looking at more detailed training, perhaps, within the ministries. But I thought that within the report itself that was identified as perhaps one of the problems, where the individual ministries were actually looking into and investigating some of these activities and were in fact creating more problems than good for the actual investigators themselves.


Could you comment on that?


S. Newton: Yes, certainly. The more detailed training would be in relation to what you should be doing if you know that there is an issue or you suspect an issue, which would then involve…. Do you want to dig a little bit further? Because you may have a responsibility. You've got an initial responsibility to understand what the issue is.


From there, you also have a responsibility to inform senior people within your organization so that they're aware. And if it involves your supervisor, there are ways to work around that or tell somebody else. But you also then have to know when you're over your head, and the training needs to be able to describe that.


On the one hand, the detailed training is how to deal with that. The high-level awareness is what the indicators are. So if people are aware of the indicators and they're aware of the rules and responsibilities and policy and they've got a little bit more training, at least in some of the central finance and admin shops, around how they want to deal with this when it comes in, then they know who the appropriate people are to start handing off to or entering into discussions with.


That would be the Public Service Agency in relation to employee issues, police, the Auditor General's office, my office. So that's where that more detail would come in. I certainly would not want people going out and investigating these, because it does create more problems.


V. Huntington: Thank you very much for that clarification.


The other concern I had was perhaps with the reaction to the proposed hotline or the consideration that whistle-blower protection is in place and how much further we should be looking at it.


Whistle-blower protection is not protecting many of the whistle-blowers in the system, and I think it does need serious consideration from perhaps your office, if that's the appropriate one, or from the Legislature, in another venue.


The hotline, to me, is absolutely critical for people to feel that they can comment anonymously if they have to. That is a part of whistle-blowing, and it provides that protection. It does, as you say, enable the public to bring things to your attention without feeling that the conflicts they have with ministry contacts are jeopardized.


One other thing. Each of the monitoring and compliance offices that you commented on is for public non-compliance — you're going after the public on financial matters, which is good — but a lot of this report also dealt with the concept and the probabilities of internal fraud, which is what is not being examined as thoroughly and in such an organized fashion, I would suggest.


I hope that we do manage to fix that part of it, that the risks, the principles, are taken into consideration and that you do manage to develop a good program for internal monitoring.


Just to the deputy and the Chair, yesterday I mentioned that I thought it would be interesting to consider whether this committee should be receiving the reports, in camera if necessary, from the internal audit and advisory services.


[1355]

I've had the opportunity to review a report that was available only through freedom of information. The issues are of importance and would be of significant interest to this committee.


I'm saying this because in the report, on page 57: "In B.C. the only government body providing fraud investigation work on a cross-government basis" — other than the various groups that the comptroller general has mentioned — "is the internal audit and advisory services." It may be the only way this committee can get a grasp on the 70 allegations that are indicated in the last three years.


What is the level out there that this advisory committee knows about and how much? And is there a systemic problem? Is there an area that needs to be reviewed more specifically, and how are things being tracked for their systemic nature?


I just was hoping that you and the Deputy Chair do review that issue.


B. Ralston (Chair): Thank you for that suggestion. Just off the cuff, I think we'd have to be assured that it was within the jurisdiction of this committee and our terms of reference. I think that's something that we can review. I'm not sure offhand whether we would have the jurisdiction to review reports that are generated somewhere else that aren't presented in a certain way.

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I understand your expression of a general concern and your wish that we work on this. The Deputy Chair and I will have to consider whether that's something that's properly the work of this committee or not.


Perhaps Stuart has something to add as well.


S. Newton: Just a cautionary comment in relation to the investigative report. Not all investigations result in a situation where a person has done something wrong, so merely the allegation is a problem. Of the work that we do, you can discount 30 percent right away because we've done a preliminary assessment, and there wasn't a lot of work needed to be done from there.


The other part is that, let's say we do find something, it still has to go through a proper process. If we find we've got a problem, there's internal work that happens in relation to employee discipline, and that has to run its course. If it's related to something more criminal, and we're dealing with the police, then there's the police and the court system as well, where the individual is presumed innocent until guilty.


These reports are completed long before some of the other processes occur. If you've made requests for internal audit reports, sometimes they're severed because they are currently with law enforcement.


The caution is that you may be getting information that really isn't useful for the discussion. There may be a better venue or way to have somebody come and present: "Here are the key concerns." Something like that, I think, still needs to be discussed as far as what the terms of reference of this committee are and the ability to get that information.


Just on the reports themselves, that's a bit of a caution that I wanted to mention.


V. Huntington: I appreciate that clarification. Are there trends? At any rate, I just leave that in your hands. Thank you.


G. Gentner: To the Auditor General. The Auditor General did not suggest that there was a needed centralized approach to fraud management. On page 54: "A centralized approach to fraud management will ensure there is organized approach in place to manage…." And on and on it goes.


Maybe I misunderstood the report. I can assure the Auditor General that I'm not the voice of the Minister of Finance. I'm not really challenging you. I'd like to get some….


J. Doyle: You actually said "a recommendation," and there was no recommendation. That's what I responded to.


G. Gentner: Okay. We'll call it a passive recommendation. Just so I got that one.


Now, to Mr. Newton: how many employee staff members and contractors have been charged for fraud or dismissed? Or how many contracts have not been renewed because of…?


B. Ralston (Chair): Did you want to put a time frame to that? I think that would be helpful.


G. Gentner: Well, I'm sure if they're doing monitoring, hon. Chair, it would have a number here.


S. Newton: As far as the number of employees dismissed due to fraud, that would be a question to ask the Public Service Agency. As far as dealing with employee discipline and dismissals, there is a lot of labour relations work that goes through there.


[1400]

The work that we've done in internal audit basically says: "Here's the problem. Here's what we've noted." And from there the ministry has to go through the process that they should be going through, which is dealing with their labour relations people in determining how to go forward.


In some cases we know, and in some cases we don't know. I couldn't give you a number that would be accurate. The Public Service Agency would be the better place to be able to provide you that answer.


G. Gentner: No, I would imagine you'd want to know how prevalent, if it is a problem, and you'd have some relationship with the public service to determine whether or not it's a major issue.


How many purchase cards has the office of the comptroller cancelled or disposed of?


S. Newton: The office of the comptroller general doesn't cancel or dispose of the purchase cards. It's a responsibility of the ministry and their card coordinator, when they have issues in relation to purchase cards.


G. Gentner: So again, there's no coordination, centrally-wise. It's done by each ministry — correct?


S. Newton: Yeah.


I took your point earlier. Apart from the recommendation as far as — or non-recommendation…. I do believe, from my personal perspective, having worked in internal audit and dealing with some of this stuff, that we do need a coordination of information related to this. I don't think it needs to be managed centrally, as far as there's one agency that deals with fraud, but the information needs to be coordinated centrally and shared.


To me, that would be very important, both for assessing risk in the work that internal audit does but also in assessing the policy work that may need to be done in
[ Page 336 ]
relation to…. It would be narrow financial management policy, but we do need to connect some of the financial and non-financial fraud risk information to get to a more holistic picture.


G. Gentner: Just one more question, hon. Chair.


"Transition limits above $5,000 require the additional approval of common business services, and approval for monthly limits of $100,000 must be attained from the office of the comptroller general." So you do have some relationship to what's being spent and what you authorize — correct?


S. Newton: If there is a request for a limit above $100,000, those requests would be dealt with very specifically.


In my role in the last three weeks, I'm not aware of any that have come through my office.


B. Ralston (Chair): There's been no rush since you joined?


S. Newton: Maybe they think I'm a little bit firmer, coming from internal audit.


G. Gentner: With that, maybe I'll submit some written questions, if there's no time that permits, hon. Chair.


B. Ralston (Chair): Thank you. I think that's probably an area worth pursuing.


J. Rustad: Thank you for the presentation. I'm not one of the people that think there's a problem under every pebble, but I am interested in history. I'm wondering: the system of controls that are in place…. Obviously, the Auditor General has done a report, and there have been a number of recommendations. The government has taken some steps around those recommendations.


I'd also like to look back at where we have come from. How has the system evolved over the last ten, 20 or 30 years in terms of monitoring and protecting against fraud? Perhaps that's a question to ask you as well as the Auditor General.


S. Newton: I can speak from my perspective that previously is limited to my internal audit role. There used to be a requirement for all transactions to have a number of steps occur within the ministry, with no central coordination or review of the transactions.


If you go further back, I think there used to be people in the comptroller general's office who actually signed cheques. So there used to be very central control. Then it was decentralized out to the ministries.


With the move to when we implemented the continuous controls monitoring group — it was called something different, previous — that eliminated a duplicate step that lived out in the ministries and provided a central view of, I guess, payment review processing to determine how compliant we are with existing payment standards. That's given us a nice central view of our compliance rates.


[1405]

I would say, too, that over the last four or five years we've become more fraud aware. This occurred when my predecessor started within this office and talked to me in my role in financial management branch at the time around beefing up loss policy, which was given its own chapter and enhanced a bit.


Then when I moved to the internal audit role, I was looking at how we implement more of an investigative capacity and how we start building awareness in relation to fraud and fraud issues.


We're on a continuum. I would say that we're in a much better place than we were three years ago. And with the recommendations we've received, we will be in a much better place next year, the year after, moving forward. I think part of it is getting attention on fraud as a key risk and understanding it more fully. I think, through our ability to respond to key fraud issues in the last two or three years, we have been able to raise awareness every time we go into deal with a particular issue.


I think that would increase with some central coordination of the groups to be able to share information. We've come quite a ways, and we do have a ways to go.


B. Ralston (Chair): Thank you. I wanted to pose a question. Sometimes an issue arises when….


J. Rustad: I think John wanted to comment.


B. Ralston (Chair): Oh, did he? Sorry. It's a rare occasion when the Auditor General wants to comment. I know I don't want to interrupt him.


J. Doyle: I was just going to use my 37 years' experience in the public sector to respond.


B. Ralston (Chair): Now, now we have left that behind. Just let go. Let go.


J. Doyle: Fraud is always going to be in the public sector. The issue is its magnitude and how you can fraud-proof, as much as possible, the system itself and also how you can help the public servants that work within the system to feel that they are not just swamped with red tape, just because of a possible fraud that may exist.


Getting the balance right is quite important. That's why a principle-based approach is just as important as the control framework that's in place.


A lot of fraud is about opportunity, and if the systems are poor, opportunity arises quite easily. A lot
[ Page 337 ]
of the opportunity arose because of silo-based financial decision-making, which is gradually being eroded with the introduction of shared services, but there are still plenty of silos out there within the government reporting entity.


You've heard recently about a fraud that was committed outside the public sector, in a not-for-profit, where a boys' football team was defrauded of a significant amount by a trusted key employee.


That's why, when I look at the management letter analysis that we conduct each and every year, and I see problems about segregation of controls — which is different people doing different parts of a financial process — I get very concerned because that elevates the fraud risk significantly.


I get even more distressed when boards of management respond: "Well, no, they're lovely people. We trust them." Well, I trust them too, but again, it's the situation of opportunity that's the issue. We need to make it so that people are not tempted and it just isn't worth going down that road and committing a fraud or some kind of deception.


Over the last 30 years, from my knowledge — and I've been an internal auditor a couple of times during that 30 years — what I've observed is that management has woken up to the existence of fraud, not just as a reaction to its discovery but to actually prevent it occurring in the first place. There has been a shift in the way that the control structures have been established and played out amongst different organizations. That's what we are talking about today — how to get that kind of idea out into the public sector.


I've also found that the multiple uses that people can have with cards need to be constantly monitored electronically so that, if there are issues or unusual transactions, they can be picked up quickly and dealt with. It is apparent that from time to time people use these cards inappropriately, and the fact that they can be picked up rather quickly and dealt with is quite important.


[1410]

I've got lovely stories, which I won't repeat except in camera, about different uses of credit cards that were quite novel and innovative and weren't picked up for quite some time because of the way that they were done and a little thing that occurred within the coding of the credit card transactions.


The big fraudsters are out there, and they're the really hard ones to find. But there are a couple of things that auditors know about that allow us to pick them up quite quickly. If you've got a member of staff that just does not take their annual leave — red flag. Quite a few problems are found when people go on annual leave and someone else has to take over and look at it.


If you've got someone that always takes short amounts of annual leave and doesn't really allow any replacements to take on their work — red flag. You've got a problem there as well. It doesn't mean to say that that individual is necessarily a fraudster. It's just a red flag. You need to investigate the red flags. If you've got systems where there is poor segregation — red flag.


Whose job is it to look at all this stuff? The answer is that it's management's. It's the management group that is currently being squeezed the most in order to deliver services. So the risk is actually going up even though the controls are improving as we go.


Now, some of the stats you see there are American stats in regard to who picks up these issues. They may not be directly relatable to the Canadian context. It's been my experience that Canadians are much more polite and much more honest than some other people in the world. As a result, there is probably…. It's part of the DNA to do the right thing. But we still need to be careful.


There still seems to have been inappropriate behaviour. Even if it can't be characterized as fraud, occasionally it can be characterized as unethical or misconduct. Those topics weren't addressed in here, but they were referred to in Stuart's presentation as ethical standards, about conflicts of interest. It is important that those issues are also brought in. It's about bad behaviour, not just about dollars or pencils or whatever it is walking out through the door.


It has improved, but the capacity for there to be problems with fraud still exists, and it still exists because of the structure and form of the public service and the service it delivers.


B. Ralston (Chair): Great. Thanks very much.


I wanted to ask a question that arises out of page 65 of the report. There's a section on corrective action. One of them is criminal referral, and it says: "...which may be a legal obligation. Legal counsel and senior management should be consulted before the investigation unit pursues this action."


The situation arises sometimes where fraud is detected. The person may even make a spontaneous confession. Yet there's a decision made not to refer the matter further, and the person is simply quietly dismissed. Is there a governmentwide policy that applies, to assist managers in making that decision whether or not to refer the matter on to the police for an investigation and possible prosecution?


Obviously, this is completely separate from any labour relations consequences. There may be dismissal, but that can also come with that kind of referral. My question is: is there a policy?


S. Newton: I'm not aware that there is a policy. I guess from my previous role, if we felt that something was criminal, we'd check with legal counsel, and we would involve the police ourselves, regardless of whether the ministry would involve the police.

[ Page 338 ]

As far as a requirement to, under the standards of conduct, if there is wrongdoing and the individual is aware of it, there is a responsibility — if it's criminal — to involve the police and to involve the Auditor General's office. There are a number of requirements in there.


Yes, it's there. I don't think it's part of a "here are your procedures on what to do." I think that's part of what we need to deal with in our roles and responsibilities in our fraud management strategy going forward.


B. Ralston (Chair): Certainly, my experience in another life was that sometimes organizations, businesses, where fraud is detected, for a wish to keep that quiet so that people don't know, so that there's no reputational loss, are anxious just to have the person dismissed, maybe even with severance. They're out the door, and there's no publicity given to that.


[1415]

Are you telling me that…? This sort of refers back to the issue of deterrence that was referred to a little bit earlier in the previous recommendation. Are you saying, then, that the decision that's made in government is not influenced by those considerations?


S. Newton: My experience in my internal audit role is that culturally, I think we've got issues in relation to wanting to put our hand up and say: "We have a problem." Most ministries work with the Public Service Agency in coming to a determination. I would say that there are a number of cases where we don't have something that's criminal but is still a problem.


I would have a personal view as to whether and what type of disciplinary action needs to take place. That would be outside of my purview to have happen. Labour Relations would come to some sort of a determination on what the appropriate action is. I think it depends on the nature of the issue, and I think it depends on the nature of the history with the individual.


I think it's a natural human tendency to not want to stand up and say, "We have a huge problem here," and call attention to it. To me that is a bit of a cultural issue we have to work through. That's where roles and responsibilities and clear sorts of information and guidelines would help us solve that problem. I don't think we're immune to that at all.


K. Corrigan: On page 58 there is a noted gap and weakness in…. One of the gaps in current government reporting practices is…. It says that section 35 of the Financial Administration Act requires the comptroller general to deliver a statement to the Treasury Board and Auditor General each year outlining, among other things, significant irregular government expenditures and payments and that the Auditor General's office has not received a report for the 2008-2009 fiscal year or recent prior years.


I notice that in the response from government on reporting there's reference to meeting the loss-reporting requirements in the policy, but that is a different item. I'm just wondering what the status of this particular section is. Has the Auditor General since received those reports? If not, what is government planning on doing about it, I guess, for both?


S. Newton: We submit a fraud questionnaire every year out of the comptroller general's office, combined with internal audit. In that, we are listing out known sorts of fraud or investigative issues that we are dealing with. That's what I am aware that we have provided in the last couple of years. Prior to that, I'm not sure. I wasn't involved in that process.


I don't believe we provided detailed lists of potential transactions, because I don't believe that we keep that list. I think it's embedded in our fraud response, from my understanding. So I don't have an answer for the '08-09. I would have assumed that it had gone, given that we prepared it. I'll have to follow up.


J. Doyle: We haven't received that response from the office of the comptroller general for a number of years. We have been concerned about it. Where it becomes more important this year than it ever has become important in previous years is that the international auditing standards, which we are now required to follow, put a greater emphasis on fraud, fraud detection and other aspects in regard to how fraud could impact the financial statements not only of entities but also of the summary financial statements.


In the absence of that information, that would mean that in our planning we would have to carry out additional work, at additional cost. We would need additional funds from government or from the budgetary process to carry it out when there's no need to give us those additional funds if we were just given the report.


Now, it seems to me that there's an issue — not from the comptroller general's office, about wanting to tell us what they know. It's a question of coordinating the information from right across the entity, putting it into one document and then passing it through to us.


[1420]

We would be happy if that was done on an annual basis. Even if the report was dated, you know, the end of December and we got it in time for our planning for our audit, it would be better than not getting anything at all.


As it is, and as you have correctly pointed out, it's a legislative requirement, not only for matters of fraud, but also suspicious transactions. It just beggars belief at the moment that there aren't suspicious transactions somewhere in government. But again, the issue is that all
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we're asking for is that that whole process is coordinated and brought together, and that would help us streamline our planning and audit process.


B. Ralston (Chair): I see Mr. Newton making notes rather furiously.


S. Newton: Absolutely.


K. Corrigan: Can I just follow up on that? I just want to clarify. Mr. Newton, from your answer, were you suggesting that the provision of the summary of government's fraud-related investigations would be in compliance with the requirement of section 35 of the act?


S. Newton: That's the only report, given my experience so far, that I've been involved with preparing to be able to get to the Auditor General. I'm not aware of a separate report going, and so my assumption was that that's what we were providing to meet that requirement.


Clearly, it isn't, from what I hear. So we will need to get that information to the Auditor in a timely fashion to be able to meet the requirements for planning for the audit.


R. Sultan: I would commend the Auditor General for bringing this topic to the table. It's interesting but a bit awkward for all of us to discuss in the sense that I think government, any organization, really doesn't want to have its dirty linen washed in public.


I'm afraid the reality is that years of being pounded, erosion of my naivety, have forced me to conclude that we've got an awful lot of hanky-panky, theft, fraud and defalcation out there in the world. I wouldn't say that it's any more common in the public sector or the private sector. I observe equal incidence in all sectors.


These estimates of the incidence of fraud and the dollar amounts involved are interesting, as you pointed out. Whether it's social benefit fraud at 0.5 percent in New Zealand, 0.6 percent in the U.K. — which more or less fits my impression of those two societies — or 7 percent by the fraud detectors in society who, of course, have an intrinsic interest in exaggerating it, we're talking about serious money.


For example, to choose the number 1 percent across the board in our government, we're talking a $400 million annual bill. Well, cut it by a multiple of four; we're still talking a lot of money.


A lot of it, of course, would be social-, health- or insurance benefit–related, and the newspapers are full of ICBC frauds from time to time. My wife worked in the Ontario WCB arena and reported to me the crazy games being played in order to get what we call WorkSafe benefits. Of course, the fact that we seem to have a rather large multiple of CareCards in circulation compared to the population is cause for us to wonder what in the heck is going on.


There is a lot of slippage in the system. How much of it is just sloppiness or people trying to make their way in the world under tough circumstances as opposed to outright criminal conspiracy is partly a matter of judgment.


I must also confess that I find the comptroller general's response a little bit diffident in the sense that I compare, again harkening — and bear with me — my previous bank experience. We had the bank inspectors, the dreaded strike team that would pounce on unsuspecting branches at random, lock the doors and go through the books and find, as the Auditor General has reported, that very diligent accountant who never seemed to take a vacation, except occasionally to fly her friends to Paris — and explained it all by having had a rich aunt die recently.


[1425]

Bankers, when they get together and trade war stories in the evening, are filled with these stories of employees, senior and not so senior, who managed to squirrel away money for their own account because there's so much money flowing through the banking system. The temptations are great. So they have a specialized unit just going after this stuff, and they recognize the suspects that Mr. Doyle's profile has outlined.


I don't sense that there is any really diligent effort — shall we say, a single-purpose, dedicated team — working on this stuff on the part of the government. I see the words in his report here, page 55: "Government does not currently have an overarching fraud risk management strategy." They're working on a strategy. They'll prepare it at some point. "Fraud has not been identified as a key risk in the internal audit and advisory services corporate risk assessment."


Then we go over to page 58. We find that when the internal audit people do go out, they do not always get very good cooperation on the part of ministry staff, with some bureaucratic response saying: "Well, it's our responsibility to report fraud, so please don't come and look for any. That's our job."


These are rather ominous signals that there perhaps is more cause for further investigation than we are naturally inclined to admit, so my question to the comptroller general is: have you ever considered setting up a special investigative unit dedicated to fraud, pure and simple, on a roving basis, with a mandate to go anywhere and look at anything?


S. Newton: We currently, within the internal audit and advisory services department, have four individuals who are an investigative unit. Currently they are responding to information that we received that
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we have issues that we need to go look in. They go in, based on the authority that the comptroller general's office has, to get whatever information they deem necessary, get whatever interviews that they need to have from employees or other individuals, to be able to resolve what comes to our attention. So we do have four.


I think that currently what we are doing is reactive, based on what we get as information coming in. It would be nice to dedicate more staff to that, to do something more proactive, which is the purpose of the risk assessment that we were in the process of working on this year, to then be able to target: are there other areas outside of the reactive work that we are currently doing that we could get this group focusing on?


So yes, we have it. The work currently is reactive. It needs to be more proactive. We've been working towards that. I think we're dealing with the balance between activities and resources.


Internal audit also identifies a number of other areas that are high risk, outside of fraud, that we need to look at, and so our annual risk assessment would have fraud included, but it wouldn't rank as high as some of the other issues that we're dealing with. Some of the other issues that we're dealing with may have an element of fraud in them if we did find a problem in that area.


To answer your question, yes, we've got something. No, it's not as proactive as what you're describing in the banking system. However, I'm sure the banking system itself would have had some degree of risk assessment attached to which branch we go into because what we are seeing might be a problem, or it may have been a tip as well.


We do a bit of that. The question always is with fraud: how much of an investment do you want to make? I think a coordinated strategy, at least, and a risk assessment would get us a better sense on: are we adequately invested in that area?


J. Doyle: I just wanted to observe that this particular topic is on my radar screen. Or is it a sonar screen? Whatever screen it is, it's on there. I think more resources need to be deployed until such time as there is a robust, mainstreamed system in place within the B.C. public service. I'm not sure yet what my contribution or my office's contribution to that will be, but I think it needs to be ramped up sooner rather than later, and I'm looking at how we can contribute to that process.


[1430]

Now, at the moment we've stopped at the guidance arrangements, but I think there are also areas that I mentioned at the beginning where we would be going into other areas within the entity that have not been looked at much.


We'll also be looking at the management letters, which is information on the ground from external auditors, fellow CAs who are looking at control weaknesses that exist within entities. From that we'll be able to estimate some kind of risk profile in regard to different organizations. Add to that the whistle-blowing tip line…. I'm happy to make a few comments about whistle-blower protection later. I have made some already before this committee on other occasions.


It seems to me that now that this is a topic, now that it has been reported on and now that I've mentioned that we are going to be doing some work on it, I think that we need to move forward. I think that the four people do a good job. It's just that, as has been described, they are reactive. They're not proactive. I don't think they have the same impact, Ralph, that your team of draconian inspectors would have had when it comes to banks, and maybe they shouldn't have.


There is a lot of fraud going on, and I'm not sure that we need to put that on the front page of newspapers. I think what we need to do is learn from those weaknesses and deal with them.


The fact that there is fraud when it comes to claims…. Is fraud the correct characterization? It could just be incorrect filling out of forms. It could be any number of different things that caused an overpayment or an underpayment. I think putting those things into perspective properly and putting the resources where the risks are is what's required, and I think there's a bit of thinking to be done into that situation as we go forward.


I would say that during the coming calendar year, if I were here talking again about fraud and where we are, I might be talking a little bit about what else we found and how we are progressing to try and improve the level of fraud within the sector. Indeed, I hope Stuart is here, either in this capacity or his previous capacity, doing the same thing, because I think it's important.


B. Ralston (Chair): Thank you very much. I don't have any further questions. I think people might be anxious to adjourn.


Before we do, I just want to make a brief comment on our next meeting.


Next Committee Meeting


B. Ralston (Chair): We're meeting on Tuesday, December 7. The IT Continuity Planning. Subject to discussion between the Deputy Chair and myself, we may be able to accommodate it at the end of that agenda, but we'll have a discussion about the agenda. 


The items that we're proposing at this point, again subject to a discussion, would certainly be report 5, Removing Private Land from Tree Farm Licences, the audit
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of the Agricultural Land Commission and Conservation of Ecological Integrity. Then, if we have time, the other one.


That may be subject to scheduling on that day, but I just wanted to advise members of the committee what to expect. I think that will then bring us up to date, in the sense that we will be current. All reports that have been issued will have been dealt with by the committee, subject to…. I think there's one due to come out tomorrow. Of course, we're always moving forward in terms of dealing with reports.


Unless there are any other items of business anyone wants to bring to my attention, then I'll entertain a motion to adjourn.


Motion approved.


The committee adjourned at 2:34 p.m.

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