Chair:	* Rick Thorpe (Okanagan-Penticton L)
Deputy Chair:	* Evelyn Gillespie (Comox Valley NDP)
Members:	* Pietro Calendino (Burnaby North NDP) * Rick Kasper (Malahat-Juan de Fuca NDP) * Joy MacPhail (Vancouver-Hastings NDP) * Steve Orcherton (Victoria-Hillside NDP) Glenn Robertson (North Island NDP) * Erda Walsh (Kootenay NDP) * Murray Coell (Saanich North and the Islands L) Gary Farrell-Collins (Vancouver-Little Mountain L) * John Weisbeck (Okanagan East L) * Jack Weisgerber (Peace River South Ind)
Clerk:	Kate Ryan-Lloyd
* denotes member present

[ Page 1303 ]

The committee met at 10:07 a.m.

R. Thorpe (Chair): Good morning, ladies and gentlemen. Just a couple of housekeeping items, if we could. I trust that all members of the committee got a copy of a letter that was sent to Mr. MacMinn with respect to the possibility of meeting with the Public Bodies Review Committee of the Parliament of New South Wales on March 2. I want to be very, very clear: that meeting is in Vancouver; it's not in Australia. Do members have an interest in meeting with this committee, or would you like to check your schedules and advise? Personally, as the Chair, I think that since they're going to be in British Columbia, we should extend them a courtesy. I'm adjusting my schedule so that I can meet with them. If other members of the committee would like to meet with them, could you please let me know? Steve, you have a question?

S. Orcherton: We've tentatively got a caucus meeting set for that date.

R. Thorpe (Chair): Oh, have we?

S. Orcherton: However, I think it would be interesting to meet with this group. I'm wondering if they're going to be in Vancouver just for the one day. Or maybe there's a way we can. . . . Maybe they're going to be in British Columbia for longer than just a second. Maybe we can work on a different. . . .

R. Thorpe (Chair): Good point, yeah. I'll ask the Clerk's office -- Kelly, you get to do this, do you? -- to check the flexibility of their schedule. If we can make alternative arrangements, we'll do so. That was the first item.

The second item is that right now we're scheduled to meet, I believe, March 15 and 16. There's been a request that we change those dates to March 8 and 9. I know that from the official opposition side, those dates are okay. Do the government members have a problem with the 8th and 9th of March?

S. Orcherton: I don't know. I think we'll have to check our schedules.

A Voice: Can we get back to you after lunch?

[1010]

Also, just to remind everyone, we will stop the committee work today at 11:45 a.m. to deal with the selection of a new auditor general, and that will be in camera. We'll stop promptly at 11:45 a.m., so that committee members can be updated.

Does anyone else have any other just general things?

Okay. So we'll move along. I thought what we would do. . . . I talked with the auditor general's office -- they talked to me quickly this morning -- and also talked with FRBC. They're in agreement with it, so we'll do the planning and accountability section. Then, when we're finished that section, we'll move into silviculture.

If we could have the auditor general make their presentation. . . . And to all presenters today, before you speak could you please make sure that you let us know who you are, so that Hansard can get that down. I'd ask all presenters to talk clearly into the microphone so that everything can be heard by all those. Thank you very much.

E. Dolhai: My name is Endre Dolhai. I'm a senior principal with the office of the auditor general. I would like to start this morning by conveying Mr. Morfitt's regrets. He had a prior speaking engagement in Vancouver today and for that reason can't be with us.

The committee will discuss today our 1999-2000 report 6, dealing with two audit projects in Forest Renewal B.C. Forest Renewal B.C. is a significant Crown corporation established in 1994 with a mandate focusing on forest resources and the forest economy. We carried out two audits in the corporation which addressed areas that are of fundamental importance to the achievement of Forest Renewal B.C.'s mandate. The first audit assessed whether Forest Renewal B.C. has clearly established where it wants to go and identified how it will get there and whether it has adequately reported on how well it is performing. The second audit assessed whether Forest Renewal B.C. is spending wisely on its silviculture programs.

Both of these audits were carried out under the direction of our assistant auditor general, Peter Gregory. The audit team consisted of Morris Sydor, principal; Norma Glendinning, project leader; Ian Aaron, project leader; and myself. We were supported by technical experts.

As usual, we will make a PowerPoint presentation on the results of the two audits. I will start with providing a short background information. . . . Norma Glendinning will then present our findings in the planning and accountability audit. Thereafter, I believe, the corporation will be making a presentation on the same audit. After the discussion has been completed on this particular project, then we'll move on to making a presentation on the second audit, which is the silviculture programs.

Before we get into the details of the two audits, we thought it would be useful to provide some background information. We will start with how Forest Renewal came to be. It all started with the establishment of the Forest Sector Strategy Advisory Committee in 1993. The committee had representatives from all the major stakeholder groups, and its chief focus was to establish a Forest Sector Strategy Advisory Committee for the province. The committee was instrumental in developing the Forest Renewal plan.

The plan was released in the spring of 1994, and its goals were to renew the land and keep the forests healthy, invest in the forest lands that generate much of the province's wealth, ensure sustainable use and enjoyment of the province's forests, ensure the continued availability of good forest jobs and ensure the long-term stability of communities that rely on the forests. The plan also proposed the establishment of Forest Renewal B.C. as the delivery agent for the new program.

In June 1994 the Forest Renewal Act was passed and Forest Renewal came into being. Its purpose is to renew the forest economy of British Columbia, enhance the productive

[ Page 1304 ]

Forest Renewal operates in a dynamic and challenging environment. The corporation's revenue can vary significantly, depending on harvest levels, the Canada-U.S. exchange rate and the lumber market. This means that the corporation must plan its investment expenditures without certainty regarding the size of the revenue it will have to support its plan. The government's response to the recent economic downturn was to decrease stumpage rates. This decrease has resulted in significantly reduced revenue. Recent downturns in the forest sector have resulted in an increase in the demand for Forest Renewal funds to help displaced forest workers, forest-based communities and the industry in general.

[1015]

As required by the Forest Renewal Act, the board of directors has set up five committees to provide it with advice on each of the following activity areas: land and resources, environment, value-added, workforce and communities. The corporation has also established a research working group to advise on research priorities and program implementation mechanisms.

The corporation has divided responsibility for its five activity areas into the following three operational business units: forest resources and environment, communities and workforce and value-added. It also has three support units -- finance and administration, planning and evaluation, and communications -- and six regional offices that report to the vice-president of forest resources and environment.

The corporation has two wholly owned subsidiary organizations: New Forest Opportunities and the office of the jobs and timber accord advocate. Both were created to fulfil Forest Renewal's obligation under the jobs and timber accord.

In June 1997 the province announced the jobs and timber accord. The accord was a commitment from government and industry to create more direct and indirect jobs in British Columbia's forest sector -- a total of 37,800 jobs by the year 2001. Besides the creation of New Forest Opportunities and the jobs and timber advocate, Forest Renewal was committed to creating 5,000 direct and 5,000 indirect jobs each year for the term of the accord, applying 70 percent of its total expenditures -- up to $300 million -- to land-based activities and setting aside $25 million for enhanced forestry management pilots in innovative forest practices agreements.

Forest Renewal grew quickly -- from 30 staff in 1994-95 to 200 staff in '97-98. For '98-99 there were 193 staff -- 71 in Victoria and 122 in the regions. For the same year, another 60 full-time-equivalent staff were employed by the subsidiary corporations. In February 1999, faced with revenue reductions, Forest Renewal announced a restructuring plan that will reduce its full-time staff across the province to 115 from 193 -- a 40 percent reduction -- but it will maintain offices in all of its regions.

The corporation uses a variety of different delivery agents to deliver its programs. For example, two of the corporation's largest delivery agents, the Ministry of Forests and the Ministry of Environment, Lands and Parks, had over 300 staff members who were funded by Forest Renewal for delivering the corporation's programs in '98-99.

Funding for Forest Renewal comes primarily from the stumpage paid by forest companies for the right to harvest timber on Crown land. A small amount also comes from investment income. Stumpage and royalty increases were implemented on May 1, 1994, to provide the funding for Forest Renewal. The expectation was that the corporation's revenue would average about $400 million per year; however, in response to a downturn in the forest industry, the provincial government lowered stumpage fees in 1998. As a result, the revenue provided to Forest Renewal has decreased dramatically -- from $534 million in '97-98 to $223 million in '98-99.

[1020]

Now we turn to the two audits of the corporation. The first audit looked at how the corporation plans for and allocates its investments and how it accounts for its performance. The second audit covered the corporation's silviculture programs -- that is, the enhanced forestry and backlog programs. Together, these programs received about 27 percent of the corporation's program expenditures in '98-99, and only one other program received more funding. Norma Glendinning will provide the presentation of our findings on the planning and accountability audit.

N. Glendinning: Good morning.

R. Thorpe (Chair): Just a second. If anyone's checking their book, besides following along here in your note. . . . What page would you be starting on in your book?

E. Dolhai: By the way, I forgot to mention that we have a lot of extra copies of the report here, should you require one.

We are starting on page 29.

R. Thorpe (Chair): Thank you.

N. Glendinning: I'm Norma Glendinning, project leader from the office of the auditor general. We'll start with our planning and accountability audit.

Our audit purpose was to assess whether Forest Renewal is adequately planning and allocating its program investments

[ Page 1305 ]

Accountability reporting is deficient and untimely. Forest Renewal is moving in the right direction by completing its strategic plan and by its commitment to improving its accountability reporting. We have structured our report to address five major components: the roles and responsibilities of those involved in the planning and allocating process; the strategic direction provided to all those involved in planning and allocating investments; Forest Renewal's business plan and investment allocation decisions; the funding principles, approval criteria and project approval guidelines provided to guide the corporation's investment allocation decisions; and the corporation's monitoring, measurement and performance reporting.

First, roles and responsibilities. We found that the corporation's staff are fairly clear on their roles and responsibilities. However, although Forest Renewal, the Ministry of Forests and the Ministry of Environment, Lands and Parks have all worked diligently to ensure that their staff are clear on their roles and responsibilities, substantive issues still exist -- largely because the mandates for these organizations overlap. For example, where Forest Renewal is expected to enhance the productive capacity of forest lands, the Ministry of Forests is expected to encourage maximum productivity of the forests. As well, while Forest Renewal is to create jobs, the ministries are to have regard for the immediate and long-term economic and social benefits. We believe that further effort is required to clarify the differences among these three mandates.

[1025]

Next we'll talk about the second element of planning -- that of providing strategic direction. The corporation's board of directors completed a strategic framework in early 1998. We found that the framework did not include completed performance measures and targets. Without these measures and targets, the corporation cannot know whether its expenditures to date have been linked to the corporation's intended results. On August 5, 1999, Forest Renewal announced the public release of a strategic plan that will chart Forest Renewal's direction for the next five years. Because the release occurred at the time this audit's report was being assembled for printing, we have not described or assessed it in our report.

Next we'll discuss the corporation's business plan. Given the absence of the strategic plan, Forest Renewal undertook a reasonable planning process for developing its 1998-99 business plan. The process was flexible and iterative, with funding being reallocated to meet key needs as they arose. Forest Renewal's 1998-99 business plan meets many of our expectations but lacks performance measures and targets. In making allocation decisions, however, the regions received little direction from headquarters. For land-based programs, the board simply directed all but one of the regions to allocate 45 percent of their total land-based funding allocation to the silviculture activities. As well, a specific job target was set for each region. However, there were no resource targets provided. Without resource targets to balance job targets, regional staff were unclear as to how to make trade-offs between resource and employment objectives.

To address these issues, we recommended that Forest Renewal enhance its business plan to ensure that it contains adequate accountability information and is linked to the corporation's strategic plan. Forest Renewal's board should also include both social and resource targets, both short-term and long-term, in the direction it gives to its staff for allocating program investments. Guidance should be provided about how these targets are to be balanced, so that staff can make informed trade-offs in their allocation decisions.

In assessing whether Forest Renewal had adequate guidance to make its investment allocation decisions, we looked at the corporation's funding principles and at the eligibility criteria and approval guidelines used for making program or project funding decisions. We will go over each of these in more detail.

First, the funding principles. Forest Renewal has established the following nine funding principles to help guide its program investments: first nations participation, regional equity, incrementality, wise spending, consistency with corporate mandate, community stability, jobs, sustainability and environmental values. The last five of the nine funding principles are restatements of the corporation's mandate and are not so much principles as rationales for programs. Consequently we will discuss only the first four principles in more detail.

Forest Renewal has managed the first nations funding principle well. The corporation has defined the principle and established a strategy for integrating it into its investment decisions.

For its regional equity principle, we found that Forest Renewal does not have the information it needs to assess whether its program investments are consistent with the principle. There is a policy statement that includes ten factors to be considered in determining regional equity, but there is no mechanism, such as a rating system, to ensure that the criteria are used transparently. Consequently it was unclear whether the allocation between regions was consistent with the regional equity principle.

We have concerns with how Forest Renewal has managed its incrementality principle. In 1997 the corporation broadened its definition of incrementality to include beneficial initiatives and took on a number of programs such as bridge replacement, resource inventory and backlog that were previously the responsibility of the Ministry of Forests. The result is that some funding decisions historically made by the Legislative Assembly are now being made by Forest Renewal's board. There is also less funding than would otherwise be available for the truly incremental programs the corporation was originally established to undertake.

We are also concerned with how the corporation has managed its wise-spending principle. We found that the cor-

[ Page 1306 ]

We recommend that Forest Renewal develop and use wise-spending guidelines and provide for an appropriate level of analysis, one that includes financial, economic and social considerations. The resulting information should be shared with the board for major investment allocation decisions.

Next we'll discuss the corporation's eligibility criteria and approval guidelines. We found that for most Forest Renewal programs, eligibility criteria have been established and used as a basis for determining project eligibility. However, the guidelines are often too general and need to be enhanced to allow staff to compare the value of competing projects. For land-based programs in particular, no one is required to assess the financial or economic viability of proposed projects. As a result, staff have incomplete information with which to make decisions on specific projects.

[1030]

The next area that we will look at is how Forest Renewal monitors and measures its performance. In 1998-99 the corporation began implementation of a new investment management system that will likely serve as an effective monitoring and management reporting system for financial and output information once it is wholly operational. The corporation has also recognized the need for conducting program evaluations on a periodic basis, and the framework of an evaluation plan is in place, although some enhancements are needed.

We also have concerns that the corporation is not monitoring the extent to which it is meeting the requirements of its major funding principles. Current information systems have provided sufficient data on the corporation's ability to meet its first nations participation principle but very little on its meeting the incrementality, regional equity and wise-spending principles.

To address these issues, the corporation needs to take a number of actions, including the following. Once fully operational, Forest Renewal should assess its investment management system to ensure that it meets the corporation's information management and accountability needs. Moreover, as it has with its first nations participation principle, Forest Renewal should measure the extent to which the corporation is meeting the requirements of its funding principles -- incrementality, regional equity and wise spending -- and report this information fully to the board and the public.

Forest Renewal should also enhance its current evaluation plan to include a detailed work plan with proposed evaluations that are clearly linked to the corporation's strategic objectives and accountability needs. The corporation should also ensure that the secondary impacts of its programs are included in the evaluation plan. Management should monitor and report on the progress of this work plan to its board.

The last area to review is Forest Renewal's reporting. To date, Forest Renewal has not reported adequately on its performance. As required by the Forest Renewal Act, the corporation prepares an annual report. We found that the corporation has not determined the accountability framework it should use to report on its performance and so has not identified the information it needs to exercise its accountability obligations. The annual report does not meet current accountability expectations for performance information or existing guidelines for annual report content. As a result, it provides incomplete information about Forest Renewal's performance and the factors affecting its ability to perform. Also, it is not produced in a timely manner. On average, recent reports have taken more than 12 months to issue.

To improve its reporting on performance, the corporation needs to develop an accountability framework that allows it to meet its accountability responsibilities. The framework should encompass information in three areas: operational, financial and compliance performance. The corporation should also enhance the content of its annual report to provide more comprehensible performance information and produce its annual report within six months of the fiscal year-end. This concludes our presentation on the planning and accountability audit.

R. Thorpe (Chair): Thank you, Norma.

E. Dolhai: I believe that the ministry has a presentation.

R. Thorpe (Chair): Well, we'll hear from the ministry or FRBC.

E. Dolhai: I'm sorry -- it's FRBC.

R. Kasper: Endre, there was a reference to revenues. When Forest Renewal was, I guess, first announced, it said it was anticipated that the average revenues would be $400 million.

[1035]

R. Kasper: I've gone through the book here, and even though you note that revenues were in fact decreasing, when you average it, it is $400 million. Am I wrong?

E. Dolhai: Well, over time, I guess.

R. Kasper: Yeah, over five years.

E. Dolhai: Yeah. But lately it has gone down substantially.

R. Kasper: Right.

E. Dolhai: So whether the $400 million will be. . . .

[ Page 1307 ]

E. Dolhai: Over five years -- yeah, that's correct. That was the thinking at the time.

R. Kasper: So am I right -- you know, when you look through the numbers that you put together -- that it is in fact $400 million?

E. Dolhai: I haven't figured it out. It would be close to that, I would imagine.

J. Weisgerber: On target, on budget.

E. Dolhai: Yeah.

R. Kasper: Actually, it's a little more than that, just a shade, I think -- $20 million or so.

E. Dolhai: I haven't added up the figures, but it would be.

J. Weisgerber: Just like balancing the budget, just for a long period of time.

R. Thorpe (Chair): Okay, we'll hear from FRBC, please. Go ahead, Roger.

R. Stanyer: My name is Roger Stanyer. I'm the chair and chief executive officer of Forest Renewal. With me this morning on my right is Al Gorley, who is the chief operating officer of the corporation; on my left is Mr. Des Gelz, who is the vice-chair of the board of directors and chair of the executive committee of Forest Renewal B.C. The presentation we have for you this morning is in a couple of parts. We will do an overview of the planning and accountability section of the audit and then briefly look at each of the recommendations and the state of affairs with the corporation and where we are with the recommendations specifically.

As an overview of the planning and accountability section, we think the auditor general and his staff have done a very effective job in identifying the major challenges we face in the area of planning and accountability. We work in a dynamic environment and have been undergoing constant and continual change and improvement since Forest Renewal was created just over five years ago. It is critical that we continue to evolve and improve, and we welcome the auditor general's perspective. We appreciate the auditor general acknowledging that we have made progress.

The audit itself is based on information available up to December of 1998. Since then we have continued to make significant progress that relates directly to the recommendations. Most importantly, we have released our strategic planning document, which guided our 1999-2000 business planning process.

[1040]

When we look at the implementation status, we have 19 audit recommendations. We believe that six are fully implemented and 13 are being implemented. The purpose of the presentation is to provide a snapshot of where we are in implementing the recommendations. Due to the extent of these changes in the first two years, we felt it would be most productive to walk the committee through an overview of our planning and reporting framework that is now in place.

As we say, there are 19 recommendations; six have been fully implemented and 13 are underway. The recommendations fall into three general themes of audit. I have used these themes to structure the presentation. These three themes also carry through to the silviculture audit, which will be discussed next. In fact, you may find that much of what I cover is relevant to the silviculture audit, and there is a significant amount of overlap in the recommendations and resulting action required.

The first aim of strategic direction is about identifying and communicating the corporation's goals, objectives, strategies and performance measures and targets. Regarding recommendations relating to strategic direction, there have been several key initiatives. In 1997, before the audit period, the board began a corporationwide strategic planning process to provide greater clarity regarding goals and objectives.

As the board's work on the strategic planning process, it also became clear that revenue streams would fall significantly, on a more or less permanent basis, in the near future. This was reflected starting in the 1998-1999 business plan. As the strategy developed further, we were able to put in place several key strategic initiatives that have fundamentally changed the organization's operating environment.

In the spring of 1999 we instituted an investment agency model. We put in an investment management system. Our business plan was based on strategy and performance focus. In the summer of 1999 we reported out on the accomplishments of the first five years, and as mentioned, we released our strategic plan document.

The strategic plan is our map to the year 2003. It specifically outlines our direction and outlines what we want and expect to achieve. There are seven strategic objectives that show us the areas that are important for this planning cycle and four corporate commitments that set Forest Renewal apart as they reflect stakeholder needs through core values. All investments must fit within the strategic plan objectives and investment principles. The commitments further guide the investment decisions.

The strategic objectives and corporate commitments are a product of an extensive stakeholder consultation. Forest Renewal was created out of a multi-sectoral initiative, the Forest Sector Strategy Advisory Committee, and we continue to follow this approach today. As a result of the various sectors working together to make decisions, we have a strategy that

[ Page 1308 ]

The resulting seven strategic objectives were based on a close scrutiny of the investment portfolio of the first five years. We assessed each investment area as to whether it was core to our mandate, whether the investments would be better made by other stakeholders and the likelihood that we could successfully transition out of the investment areas.

During this assessment process, we went around the province to determine our stakeholder views. This process confirmed the core businesses we would continue to stay in -- in other words, what activities would we continue to invest in? The first six strategic objectives relate to the types and outcomes that our stakeholders and board expect from our investments. The seventh is how we can improve our administration and management to optimize the impact of our investments while maintaining low administrative costs.

[1045]

R. Thorpe (Chair): Excuse me, Mr. Stanyer. Did you not mean to say that you wanted to increase the availability by 25 million?

R. Stanyer: Correct.

In addition to our seven strategic objectives, our corporate commitments frame our investment strategy. They represent core values derived from discussions with other stakeholders and provide additional parameters for staff in establishing investment priorities. While the strategic objectives may change over time, the commitments to constant investment decisions considerations will remain.

Theme 2, investment decisions. The investment decisions theme is about operationalizing the strategic plan through business planning and investment decisions.

I'll now move to the next slide, which is about how we operationalize the strategic plan. We have put in place five corporate investment principles to guide investment planning. Combined with the performance targets, the investment principles provide direction to staff on how to balance resource and social objectives.

For example, the first principle provides key direction to regional staff on prioritizing investment opportunities. This principle says that the highest priority for distribution of investments is to be based on the potential contribution to achieving the strategic objective. The second principle goes on to say that within the basket of highest-priority investments, a second order of consideration is how well the allocation will support the delivery of the investments through partnership arrangements. We then look at stakeholder participation and planning -- and individual investments will be assessed in terms of their potential for return on investments, including unit cost analysis -- and employment, being the last. The total annual employment is expected to be proportional. Significant deviations from historical data will be justified on the basis of changing investment mix, to meet strategic priority, to that created in previous years.

Each of our investment areas, such as value-added or silviculture, has tailored the same basic approach to building an investment to the specific investment area. Using land-based programs such as silviculture and watershed restoration as an example, I would like to illustrate how we build our investment plan. Issues and needs vary between locations. For example, the relative importance and impact of changes in timber supply factors vary. In some units the key is to increase the operable forest; in others we need to find ways to grow trees quicker.

Our staff meet with the stakeholders and ministry representatives at the local level to discuss the situation. As well as identifying resource priorities at the local level as they relate to each of the strategic objectives, they also collect information related to our corporate commitments -- for example, first nations opportunity and unit costs. Based on local resource priorities and costs, resource management plans are developed for the region. In the context of these resource priorities, staff incorporate information related to commitments, analyze and make final allocation decisions. Headquarters staff then roll these basic regional investment plans into the business plan for presentation to our board.

[1050]

The third theme of our presentation is how we assess the achievement of the targets in our plan in the overall pursuit of the strategic objectives. During the year, we have completed the implementation of a reporting system that allows management and the board to monitor at any time how we are performing in relating to each strategic objective. We can report on the investment levels and outputs, such as area spaced.

As well, our system collects information which helps in measuring outcomes -- for example, the estimated increase in harvest volume as a result of an investment in an activity such as spacing. To make these estimates, we have a set of factors or coefficients which we apply to activity areas, such as spacing, in each region. Thus a volume of 5,000 hectares spaced in the Kootenay-Boundary region can be used to estimate the incremental increase in a long-term timber supply. Each of our business units is carrying out business reviews to ensure that unit costs are in line and that we are making progress against our targets.

Our internal audit program, as approved by the audit committee of the board, has been implemented. It is examining our overall contract management system. We have in the past carried out audits to ensure that recipients of funding comply with the terms of the contract or agreement. As well, this year we have implemented value-for-money performance audits. These provide us with a formal, rigorous assessment of

[ Page 1309 ]

We are also developing a new evaluation plan for 2000-2001, based on the strategic plan and performance measures of work undertaken. Performance measures relating to strategic objectives will assist us in carrying out evaluations, as they provide a context and basis for assessing the programs.

Finally, as well as the formal auditing and evaluation activities, we continually receive valuable feedback from our stakeholders. Working together in partnership with all of our stakeholders is fundamental to Forest Renewal. This approach has moved the sector away from the interest-based arguments to solutions that everyone can support. In addition, our multi-stakeholder board and committees, myself and the rest of our management team spend a lot of time on the road each year obtaining feedback from our stakeholders on our investments. They make their views clearly known. One of the areas we get extensive feedback on is regional equity. As well, it provides useful feedback to us on the efficiency and the effectiveness of our delivery and management investments.

We believe we are near the front of the pack of government agencies with performance management. We have moved from a proposal-driven organization to a leaner, results-focused investment agency. We expect to continue to cover significant ground over the next year in improving our planning and reporting process. Of the 19 recommendations, as we say, six have been fully implemented, and 13 are being addressed to the extent that the corporation can practically do so. I will give you a quick overview of each of the recommendations.

R. Thorpe (Chair): Do we have a handout on the recommendations too?

Interjection.

[1055]

R. Stanyer: In the first of the recommendations, the auditor recommends that terms of reference for the board of directors "should be reviewed and updated to ensure that they are comprehensive and include current governance expectations. These are also to be incorporated into one handbook." The status of this is that the board members receive material including legislation, terms of reference for the board, terms of reference for all of the advisory committees, duties of a board member, Forest Renewal organization charts, the current business plan, the strategic plan and five-year report, 1994-99. And new board members are invited to attend orientation sessions for board members of Crown corporations put on by the Crown corporations secretariat. We believe that no further action is required on that recommendation.

The second recommendation: "Forest Renewal B.C. should further clarify the roles and responsibilities between itself, the Ministry of Forests and the Ministry of Environment, Lands and Parks to ensure that there is no duplication between these three organizations, and to ensure that forestry and environment priorities are managed in a coordinated manner." We are only one of the three government players. Ministry responsibilities relating to Forest Renewal activities are specified in service agreements. The new agreements are in place for 1999-2000. The regional resource management planning priority process has been revised jointly, and it has helped clarify the roles and responsibilities. Reductions in dollars available have caused some pressure points. We continue to address this at all levels, including in contract negotiations for 2000-2001. We will monitor the performance of each ministry under the service agreements.

"The board. . .should complete its strategic plan and have it reviewed and approved by government and reported publicly." The strategic plan is complete and has been approved by the board and was issued to the public in August of 1999. On the issue of approval by government, the Crown corporations secretariat has received direction from the Cabinet Committee on Crown Corporations -- and, by extension, cabinet -- that for Crowns over which the Crown corporations secretariat has purview, it is the responsibility of the boards of directors to approve the strategic plans. However, the Crown corporations secretariat has instituted an intermediate process, whereby Crowns bring what we call a strategic overview to the Cabinet Committee on Crown Corporations, which is a high-level strategic document that looks at major initiatives, deliverables, etc. The cabinet committee then discusses the overview and sometimes gives further direction, and then the corporation is left to develop a full strategic plan from the overview. While Forest Renewal is not under the purview of the cabinet committee, we will explore the possibility of taking a strategic overview to the committee prior to upgrading our strategic plan document.

"The direction given by Forest Renewal B.C.'s board to its staff for allocating. . .investments should include both social and resource targets. Targets should include recognition of both short-term and long-term objectives, and guidance should be provided about how these targets are to be balanced so that staff can make informed trade-offs in their allocation decisions." The strategic plan provides overall direction as to the key objectives and targets. We have five corporate investment principles. No. 1 is to provide explicit direction on priority setting. For example, it states that Forest Renewal B.C. investments will be allocated to business areas and activities based on their potential contribution to achieving strategic objectives and their costs. All other considerations are of secondary importance. We will continue with our ongoing improvement of decision tools for assessing trade-offs among investment strategies with respect to achieving strategic objectives and considering commitments. We are looking at other Crown corporations and at other jurisdictions to identify useful approaches and models to adopt.

[1100]

[ Page 1310 ]

"Forest Renewal B.C. should enhance its business plan to ensure that it contains adequate accountable information. For guidance on how to achieve this enhancement, the corporation should review the 'Guidelines for Crown Corporations for the Preparation of Strategic and Business Plans,' produced by the Crown corporations secretariat and 'Enhancing Accountability for Performance: A Framework and an Implementation Plan,' produced by the deputy ministers' council and the office of the auditor general."

Recommendation No. 7: "Wise-spending guidelines for Forest Renewal B.C.'s programs should be developed and communicated." In developing the strategic plan, six of Forest Renewal's original nine funding principles, including wise spending, were incorporated directly into the strategic objectives and corporate commitments. Strategic objective No. 7 -- increase Forest Renewal's effectiveness and efficiency -- focuses on performance management and cost efficiency -- for example, wise spending. Overall, the focus on analyzing return on investment for making investment decisions and the tracking and reporting against predetermined performance targets is the focus of this objective. An example of a key initiative under this objective is a quarterly business review process that includes a review of key cost indicators. Each region is continuing to develop a range of acceptable cost limits, taking into account projects involving partners such as first nations.

"Forest Renewal B.C. should ensure that an appropriate level of analysis -- one that includes financial, economic and social considerations -- is conducted and the resulting information shared with the board for major investment allocation decisions." The board is currently reviewing the level of information and analysis it requires for investment allocation decisions. This approach focuses on appropriate process and tools such as the strategic plan, local level plans and measurable results.

Investment analysis is being implemented to assist in making investment choices between major activities. We are reviewing the business planning and reporting cycle to clarify the information and analysis required at each decision point of the board. We will ensure that the board information requests are documented and that provision for this information is recorded.

"Forest Renewal B.C. should ensure that all of its programs have approval criteria and guidelines that, when applied, allow staff to compare the merits of one project over another. Guidelines should be updated to reflect the corporation's most current direction, and corporate priorities and principles should be provided in all programs and guidelines." Planning guidelines that reflect the strategic plan direction are in place for all investment areas. For example, resource management planning guidelines for land-based programs were revised in 1999 and reflect the strategic plan. Value-added has developed a return-on-investment tool for evaluating projects in the context of the value-added investment strategy. Upon completing implementation of performance measures, we will review and revise guidelines for existing programs to ensure that they are consistent with the strategic plan and provide a basis for comparing projects and making trade-offs between projects. We will audit programs to ensure that guidelines are consistent with the strategic plan and provide direction on corporate priorities.

[1105]

"Forest Renewal B.C. should review the purpose of the outputs report and ensure that the document satisfies the corporation's information management and accountability needs. Once the corporation has finalized its strategic plan, any subsequent reporting should be clearly linked to its goals, objectives, performance measures and targets. In particular, information about jobs must be more specific, put into context and linked to the corresponding strategic objective."

"Once fully operational, Forest Renewal B.C. should assess the investment management system to ensure that it meets the corporation's information management and accountability needs." Finance personnel and management have been working closely with the investment management system to resolve issues. We will develop an information management strategy linking various levels of performance measurement. We will conduct a post-implementation review of IMS once all of the performance measures have been developed and incorporated into the database.

Recommendation No. 13: "Forest Renewal B.C. should establish a current and formally approved audit plan for the corporation, and the progress of the plan should be monitored and reported to the audit committee." The internal audit plan was approved by the audit committee in September 1999. Internal audit work is underway, and based on the findings, an audit plan for 2000-2001 is being developed for consideration by the committee in March.

"As it has with its first nations participation principle, Forest Renewal B.C. should measure the extent to which the corporation is meeting the requirements of its funding principles -- incrementality, regional equity and wise spending -- and report this information fully to the board and the public." Forest Renewal's original funding principles have been incorporated directly into the strategic objectives and corporate commitments. For example, first nations participation, regional equity, employment creation and stakeholder involvement

[ Page 1311 ]

"Forest Renewal B.C. should continue to develop its performance measures and targets, including operational, financial and compliance measures, for both outputs and outcomes, and report them to the public once they are established." We are continuing to develop and implement the performance measure system, including incorporating outcome measures into the annual reporting.

"Forest Renewal B.C. should enhance its current evaluation plan to include a detailed workplan with proposed evaluations that are clearly linked to the corporation's strategic objectives and accountability needs. Management should monitor and report on the progress of this workplan to its board." The evaluation plan is in place and includes four work areas: corporate performance measures, program evaluation plans, program reviews and evaluations, training and communications. Recent program reviews and evaluations, such as those of the forest worker transition program, the forest community economic development program, the watershed restoration program, first nations participation, the value-added and technology transfer programs. . . . We are revising and updating the evaluation plan for 2000-01 to link with the audit plan and performance measures work.

[1110]

"Forest Renewal B.C. should ensure that its annual report is produced within six months of the fiscal year-end." The 1998-99 annual report will be released in early 2000. Release of the '99-2000 annual report to the public is expected by September 30, 2000.

"Forest Renewal B.C. should enhance the contents of its annual report to provide performance information as described in the joint report on accountability produced by the deputy ministers' council and the office of the auditor general, and in the deputy ministers' council 1997 report. . . ." Review and revision of the annual report content is underway. We will follow up with the office of the auditor general to ensure that we have addressed specific changes or enhancements that they are expecting. We will work with the Crown corporations secretariat to meet the new expectations arising from the Enns report. That concludes our presentation.

R. Thorpe (Chair): Thank you very much, Mr. Stanyer. I see Mr. Weisgerber wants to ask a question. If I could please ask a couple of questions first.

The six recommendations that are fully implemented -- do you have a post-audit procedure within the organization to monitor the effectiveness of those six that have been implemented?

R. Stanyer: Most of the six that have been implemented focus on accountability on reporting such things as a strategic plan and those areas. We will revisit the strategic plan on an annual basis, and therefore most of those recommendations will be caught in that review.

R. Thorpe (Chair): I just want to make sure. The 13 that are being implemented -- obviously those are at various stages of implementation, I would suspect. Do you have detailed workplans for each of those 13 recommendations that have to be implemented?

R. Stanyer: I think I'll ask Mr. Gorley to take that question.

A. Gorley: Several of these are overlapping or integrated as you read through both the planning and accountability audit and the silviculture audit. We have detailed workplans for blocks of recommendations as opposed to individual recommendations, because they tend to operate in blocks.

R. Thorpe (Chair): Do you have time lines within your detailed workplans, and who's responsible, etc.?

A. Gorley: That's correct. Incorporated within both our annual business plan in some cases and in other cases our operating activities for our management team, we actually have specific targets and specific individuals on the management team nominated to lead the processes.

R. Thorpe (Chair): When would you expect the last of the 13 that are being implemented to be fully implemented?

[1115]

R. Thorpe (Chair): Would it be possible for you to supply the committee with a copy of the detailed workplans for the 13 that you're working on?

A. Gorley: As I said, they're grouped into batches, so they won't correspond directly to what's in the report. But we can locate the individual plans as they exist in the corporation and bring them forward.

R. Thorpe (Chair): If you could make sure that they get sent to the Clerk's office, then we'll distribute them to all committee members.

[ Page 1312 ]

R. Stanyer: In the 1994 process Forest Renewal was not involved, because we weren't a corporation. My personal involvement was working in the Ministry of Forests, in the first instance.

Latterly in the Ministry of Labour, I chaired a group known as the secretariat for the Forest Sector Strategy Advisory Committee Advisory Committee. The secretariat was made up of government staff and staff within industry -- various associations such as the Council of Forest Industries and specific forest companies. The role of the secretariat was really in the development of the background material that the Forest Sector Strategy Advisory Committee used in their deliberations about recommendations to government. Part of that work was certainly economic analysis of the state of the industry and projections about the buoyancy of markets from 1995 going forward. There were a variety of opinions; I think a lot of it is available through the Forest Sector Strategy Advisory Committee recommendations and these kinds of things. But in reality the decision process was one that was taken by government, along with consultation of the Forest Sector Strategy Advisory Committee committee, which was made up of the chief executives of major forest companies and other stakeholders, so there was a fairly broad, comprehensive consultation process. I would agree that there was not unanimity around the size of the stumpage increase and how sustainable that was over the long haul.

J. Weisgerber: The next area that I want to look at is the idea that a Crown corporation, over a five- or six-year period, could raise and expend somewhere in the neighbourhood of $2 billion without a strategic plan. Prior to the involvement of the auditor general, I wonder whether or not this was an issue that had been raised either at the board level or within the senior management group at FRBC.

R. Stanyer: I'd like to take this in two parts. I'll give a bit of an overview and then ask Mr. Gelz to comment on what was going on around the board and the appropriateness and timing of the strategic planning exercise.

[1120]

As far as the strategy about how we then went forward and developed our own plan, I think Mr. Gelz, as I said, will have some words on that.

D. Gelz: I don't know exactly where to start with this one. I said publicly at the time when the auditor general's report was initially released that from my perspective -- and I think the perspective of many of the board members -- we didn't feel that we were in absence of a strategy or a direction. If you look at the history of FRBC's evolution after it was established in 1994, the five envelope committees basically went to work very shortly after that period of time. I was chairing the value-added one, for example, and we spent the better part of six months to a year attempting to review literature that existed about recommendations from previous committees and what not about where it would be appropriate for have emphasis for spending. I think it took the better part of a year for most of the committees to get a sense of what kind of appropriate policy-and-guideline framework would be appropriate for what we envisioned to be a bottom-up, proponent-driven kind of process.

If you put that in context, we know that the history of spending within FRBC in the early years -- as you've pointed out, Mr. Weisgerber -- was quite low. None of us were surprised by that, because when we created the guidelines, we expected to take the guidelines out to the public and to the stakeholder groups. We expected proposals, in fact, to start to develop from that and to be submitted. I think you'll find in the material that at one point in time -- I think by the latter part of 1997 -- we had something like 8,000 proposals that came forward, which ultimately represented about 3,500 different contracts.

We started this bottom-up proposal process to really get a sense of: were there new ideas out there? Were there new concepts? Did people have approaches to some of the kinds of issues that we've been dealing with in this province for 20 or 30 or 40 years that might be new, might be refreshing and might bring a different direction?

Again, we weren't clear whether we could spend the $400 million a year or perhaps the $2 billion. We wanted to go out and have a bottom-up process that would hopefully bring new ideas forward. The merits of the proposals that would be brought forward would be evaluated on the guidelines that have been identified, and we would more or less use the first couple of years of this process to course-correct as we saw what unfolded. Of course, the course correction was that we ended up with 8,000 proposals and 3,500 different contracts. We effectively recognized by '97 that the system wasn't going to be manageable in that format, and that resulted in the kind of more comprehensive strategic plan that you now see.

I'm not sure if that exactly bangs on your question, but I wanted to give you a sense of the developmental aspect of this.

[1125]

[ Page 1313 ]

R. Stanyer: I think that in the case of the game plan, the game plan that you saw as legislators was essentially the game plan that we saw as staff. The legislation was introduced and passed. The initial management of the corporation was provided by myself solely in the sense that I was appointed. Mr. Gelz and six others were appointed as the initial board of the corporation.

We then set out to build it in line with the recommendations or the mandate as found in legislation and as found in recommendations from the Forest Sector Strategy Advisory Committee committee, along with what we thought was a new approach to how decisions could be made at a more local level in the province. Quite frankly, we got to the point where managing, as Mr. Gelz pointed out, 8,000 proposals and 3,500 contracts was a lot more than could be done efficiently in the process.

One of the knocks that Forest Renewal took early on in the game was that we were too difficult to get funds out of. We didn't make any apologies for that. We had a rigorous review process -- probably too many reviews in the process. First of all, the plans need to be formulated by -- in the case of a land-based investment -- a legal entity, such as a forest company. They need to be supported by professional accountability and documentation on the people who were putting the plans together, and then that needs to be reviewed by the appropriate ministry at a professional level as to the validity of the plan in the first place. Then it needs to be reviewed by Forest Renewal as to whether or not it was going to meet the programs and guidelines that Forest Renewal had established. As Mr. Gelz points out, and we agree, it became a burden to continue on, and we could see our staff growing. Our administrative budget got up to about $26 million. In the scheme of things, on a $600 million investment, that's still a fairly low percentage number.

On the question of supporting 300 staff within ministries, it was decided fairly early on. . . . Remember the environment we were involved in at that point in time. Government was ramping up the Forest Practices Code. There was a lot of process going on relative to how we were going to get compliance with the code. Forest Renewal was ramping up an expenditure program.

Quite frankly, the expenditures that Forest Renewal was making needed to have support of government ministries, because they are, after all, the stewards of the land. Forest Renewal has no stewardship function within it. It doesn't make decisions about what happens on the land; it doesn't make decisions about what happens with allowable cuts; it doesn't make decisions about which is the best stream to restore and those kinds of things. They are made by field staff professionals. The line ministries, Environment and Forests, have the stewardship responsibility.

So somebody needed to pay for that additional staff. The same as we allowed industry an overhead allowance to put the planning and process in place to take advantage of the funding that was available, we made the same decision available for government: to approve the planning of getting the Forest Renewal work done. Well, that's how we got to 300 staff within ministries. That's how we got to administrative allowances for industry to carry on the work that Forest Renewal would fund.

[1130]

I'm wondering: was it simply the fact that there was no plan at all that you inherited? Was this notion of 20 or 25 staff something that some spin writer threw into the mix? I mean, did it have any factual basis? Was there any kind of organizational plan that would have substantiated that kind of projection early, at the announcement?

R. Stanyer: There was no organizational plan that I saw. As I said earlier, we were given the Forest Renewal plan that was approved by government. We were given the legislation and sent forth to deliver the mission.

One of the things that had not been taken into consideration and something that our board was anxious to get on with was the establishment of regional offices. We wanted to be on the ground doing the work in the regions where people could relate to us easily. I know that regional offices were not part of the original concept of how the corporation would function. So I guess, if there's anything that deviated from that, it would certainly be the establishment of a regional structure that put a lot more staff on the ground than would have been anticipated in the first place.

J. Weisgerber: So given that fundamental difference in approach that must have been evident almost immediately when FRBC was launched, what kind of a plan was there? I mean, what was envisioned? Do you have any sense of what was envisioned when the announcement was made, when they were talking about these 20 or 25 people? I mean, it seems so fundamentally different from what emerged almost immediately on the formation of the corporation. I guess I look at it because it's not only staffing. It seems to me that if there is that kind of dramatic evolution in the notion of staffing, there must also have been parallel changes in the planning, in the envisioned approach to program delivery, etc. The

[ Page 1314 ]

D. Gelz: I can't comment on the original vision, but I guess the parallel I would draw is that we really were in uncharted waters in terms of what. . . . There was a broad general vision of what FRBC was to be. The board at the time was left with the task of trying to develop the detail around that vision. If I draw a corporate example, you can start a company. You can know about the industry that you're in, and you can know something about the market you're in. But depending on a variety of different circumstances, you might not be absolutely clear about how quickly you're going to grow or what market circumstances may drive you.

[1135]

I think it's probably correct that there was a very broad vision at the time FRBC was announced. Whoever threw out a number of 35. . . . Frankly, I don't know where the number came from. At the end of the day, really, the board was in uncharted waters in terms of the structure and organization that it was going to have to put together to deliver the product that we envisioned from the original mandate.

J. Weisgerber: Let me just move from that to this issue of incrementality, because I think it's related. That was a pretty basic fundamental that started out with the announcement and appeared to be carried by the corporation; it came out as part of the early objectives and principles of FRBC. Yet within a very short period of time, we saw FRBC paying salaries of 300 staff people. That couldn't possibly have been part of the initial vision. Did that emerge from FRBC, or did it emerge from the Crown corporations secretariat or the cabinet office?

R. Stanyer: I don't think that when the corporation started, it was ever envisioned that government was going to cover the cost of any staff that were needed internal to government to approve Forest Renewal projects. That was never canvassed in anything that I ever saw about who was going to cover the cost of that. I think that, quite legitimately, Forest Renewal bore that burden, the same as we bore that burden in industry. You have to remember that the overwhelming majority, if not all, of the work that needed to be done and that was done by Forest Renewal was extra work. There was no obligation on industry or government to make these investments. They were a good idea, but under the land use planning and the stewardship programs within government and industry, there was no requirement to do this work.

Now, you can't just go and say, "We're going to spend 100 percent of it on the ground," because somebody has to monitor the work that is going on, and somebody has to approve the plans to make sure that happened. And as I say, there was no commitment going into it that either government or industry would cover the cost of planning or monitoring Forest Renewal work.

The strategy that Forest Renewal took was that it could have done one of two things. It could have ramped up with its own staff to do those kinds of jobs, or it could have capitalized on available staff or staff that would become available within ministries to do it. Remembering that Forest Renewal had no stewardship role in this thing and that the plans and projects needed to be approved by somebody in the Ministry of Forests or Ministry of Environment in any case, it made sense that we fund those organizations to do that part of Forest Renewal's work, as opposed to having our organization build up an even larger staff to do that kind of work.

[1140]

R. Stanyer: There are a. . . .

R. Thorpe (Chair): Excuse me, Mr. Stanyer. We are going to take a recess now, as some committee members are required on conference calls, and we do have some in-camera business that the committee is committed to doing. If you could just hold your response, I'm sure Jack would take the opportunity after lunch to remind you of his comments.

We're back at 1 o'clock, please. Thank you very, very much.

The committee continued in camera at 11:41 a.m.

The committee met at 1:04 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): A lot of high-powered people waiting here. Jack, do you have anything you want to continue with? Oh, yeah, just Roger's response.

[1305]

[ Page 1315 ]

However, in the ramp-up of the code, we had a lot of discussion with industry and government, and quite frankly, it was seen as a good thing for Forest Renewal to participate in that initial round of information-gathering. We served notice on the industry early on that while we would fund operational inventories in the beginning stages, it was not something that we would continue to fund over time. In fact, as we went through the restructuring in '98, it was one of the things that dropped off the table. Another example of the wrestling that we had to do with the incrementality issue was training around the Forest Practices Code, in the sense you would automatically ask: if the responsibility to gather the inventories is not incremental, then what would make training of the workforce incremental in doing that?

In about 1994-95 we spent, I think, about $18 million in training the industry workforce about inventory and compliance with the Forest Practices Code. At that time we had discussions with the auditor general's staff around our '94-95 or '95-96 annual report. I'm not sure just which of those it was. The discussion we had at that point was that a lot of what Forest Renewal is about is retraining the workforce. And one of the things that is difficult for the forest industry workforce, particularly on the solid wood side of the business -- whether it's manufacturing plants or harvesting; in this case, we were talking about harvesting operations -- is the fact that we have an older workforce. These people, in many instances, left school some considerable period of time ago, and the whole concept of entering into training is difficult for those people to come to grips with.

Clearly the advice we had from people intimately involved in the training process was that it is a lot easier for individuals to learn in a circumstance that is related to their job activities -- something that they are interested in and something that will be seen as a good thing for them to know. It's easier to get people emotionally in the right space to take on that kind of training than it is, for instance, to tell somebody in the harvesting side: "Your job is going to come to an end, and you'd better think about what you might want to do with the rest of your life." The emotional crisis that people are in, in those circumstances, is something that makes it very difficult for people to get in the right frame of mind.

So from the concept that the industry needs to have this additional knowledge to deal with implementation of the code to one where we can go through a mind-set exercise with the individuals involved around entering into retraining and skills upgrading -- all the kinds of things that we talked about as something that Forest Renewal wants to be involved in. . . . It was seen as a good and, if you like, incremental exercise to get people involved in Forest Practices Code training, because of the benefits that we would get out of it both as an industry and as individuals working in the industry. This was something they may need to know in their job in any case. But it provided that incremental benefit, in the sense that it got them into a classroom situation, got them back into a learning mode again -- something that in many cases they hadn't been involved in for a good number of years. After a lot of discussion with the auditor's staff, at the end of the day that was seen as a legitimate kind of thing to participate in.

[1310]

I think that in your area of the province particularly, it's. . . . Look at backlog silviculture. When Forest Renewal started the funding of backlog, we looked at what funding was going on for backlog silviculture at that point in time, and it was roughly in the area of $28 million to $32 million a year or something in that range, which industry was funding. Over time they would have dealt with the backlog issue.

Industry came along to us particularly and said: "Look, if you look at the area in the northern part of the province" -- considering that most of the backlog, 92 percent of it, I believe, is in the area north of Williams Lake and a significant amount of it is on the eastern side of the Rocky Mountains -- "and if you look at investment in silviculture activity in that part of the world, the best thing you can do is deal with the backlog silviculture, not-sufficiently-restocked areas." So at that point in time Forest Renewal announced the plan of $250 million over ten years that would fund the backlog program.

The caveat that we put on it at that point in time was that government would maintain their share of funding that backlog program. From that perspective, we would argue that clearly this was incremental in the work of Forest Renewal. It was accelerating the dealing-with-the-backlog issue. Subsequent to that, government took a decision to reduce their portion. But that did not. . . .

The Forest Renewal board took the position that, even if they are going to pull out of it, we're not going to stop our funding. We didn't pick up their share, in the sense that we didn't increase our funding; we kept it about what it was. It does mean that instead of dealing with the backlog issue in ten years, it will take us closer to 15 years to do that funding.

I guess there are a couple of ways of looking at whether or not what Forest Renewal picked up at the end of the day was incremental in that sense. One, you can say that government was funding it at roughly $30 million a year. We're funding at $50 million, so you can say that $20 million of that was incremental if you want to look at it that way. Or you can say that the $50 million that Forest Renewal was putting in to deal with it in a ten-year period is now going to take us 15 years. I don't know how you rationalize what the impact of the government was -- to stop funding their $30 million portion.

I think that gives you some flavour of how difficult for us incrementality has been. It's turned out to be a little bit easier

[ Page 1316 ]

J. Weisgerber: I won't enter into a debate about various incremental projects. I think, with respect to NSR lands, there had been huge areas identified under FRDA and FRDA 2 that clearly were not an obligation of industry. Any incrementality in that area was taking on government's role.

But just to go back briefly to the question of the 300 staff people that FRBC was funding in the ministries, my sense is that these weren't new staff. They weren't people brought in to particularly oversee or manage or evaluate functions. They were staff within the Ministry of Forests and the Ministry of Environment who had simply gone on FRBC's payroll. But they weren't new incremental staff. If you look at the staff numbers or even at the individuals, they weren't even new people, and they certainly weren't new numbers. It wasn't as if 300 new staff had been added to Forests and Environment. Their total staff components were shrinking, and FRBC still took responsibility for 300 of those staff people. I mean, that doesn't seem to me to be a sort of grey area of incrementality; that's simply government avoiding reporting those figures and those people as part of their FTE count and in reporting their salaries as part of budget expenditures.

[1315]

At that point in time -- once again, we were ramping up for the Forest Practices Code -- the Deputy Minister of Forests, who was on our board, made the argument to us: "Look, you have to pay for this delivery in any case. Nobody is going to give it to you for free. The industry isn't going to give you free delivery, and neither is government going to give you free delivery. So if you want somebody to do something for you, you're going to have to pay for it." His response to us was: "We're going to be doing a lot of hiring in the ministry around new staff to implement the code. So you're a bit ahead of us, Forest Renewal. It would make sense that we hire whatever additional staff we need in the ministry to deliver your programs. As you shift from government delivery to the private sector delivery, then we'll shift that staff into Forest Practices Code enforcement, which is where the staff will go at the end of the day."

I don't think that his plan worked entirely, but that was largely the direction in which we headed around that. In some cases, there were additional staff put on that were dedicated particularly to Forest Renewal projects -- more so in the Ministry of Environment than there were in the Ministry of Forests -- but they were identified as such. I think the auditor's staff took an exercise where they tried to identify particular staff within the ministries -- about what the name of the person is who works for Forest Renewal in the Ministry of Forests -- and clearly they found it difficult to do. We hired an outside consultant to do the same thing for us. The other side of the argument from the ministry's perspective was: "Well, yeah, in the Ministry of Forests we were funding between 150 and 200 staff." The ADM at the time argued: "You're getting a lot more than that number of staff, because we've got a lot more people than that working on it. Now, not everybody is working on it 100 percent of the time." Her view of the thing was that we were getting services out of the ministry that we weren't paying for. Our view -- and others' view -- was: "Well, maybe we're not getting full value for the dollars that we're putting in there."

In any case, the decision over time has been to shift out of ministry delivery to the point where they now deliver, I think, 15 percent or less of Forest Renewal activities. We have very clear standards agreements with them around what they do for us in the way of approving projects and the stewardship responsibilities that we pay them to do for us. They're a service provider, and we pay for the service. Clearly we bargain hard on those agreements.

J. Weisgerber: Just to finish this up, those 300 people continued to be ministry staff? You didn't actually pay them. You did some kind of a block transfer of funds to the ministry, and between you, you agreed without any particular or specifics that this money was going toward a certain number of staff to perform a certain number of functions? But you actually didn't have a payroll list so that you could know that within the ministry, you were paying six people in the Dawson Creek office, and those six people were the ones who were actually physically doing the things you were hoping were being done?

R. Stanyer: We had an agreement on the list of duties that were required. We negotiated an arrangement that would pay for that list of duties with less specifics around how many bodies it was going take. It was more around what we needed for them to deliver and some agreement on what the average cost of delivering each of the aspects of the plan. That was the method we used. No, we didn't have a payroll list or anything like that. We said: "In order for you to get $400 million worth of work on the land this year, this is what we think it's worth." They told us what they thought it was worth, and at the end of the day, we had an agreement.

[1320]

R. Stanyer: I'll let Mr. Gelz have a go at it, but before I do that, let me say this: we had clear understandings with the industry about how much we would pay for them to do exactly the same work. Industry bargained hard about their costs to deliver forest renewal. We had various experts. It was a staff decision. I wasn't particularly involved in it, but many others of the senior staff were, both with industry and the person who led it at that point in time -- a former chief

[ Page 1317 ]

We had the various accounting firms involved -- certainly the firms that had a lot of involvement with the industry. Pricewaterhouse did some work for us on it; I believe KPMG did work for us on these kinds of things. Pricewaterhouse, as you may know, does an annual report on the state of affairs of the industry. We had them extensively involved in the various aspects of this cost, so we knew what the deal was with industry, and we knew what we were asking the ministry to do for us. So the comparability of cost was not that difficult. There was a lot of work that went into it. It wasn't sitting around with the deputy minister kind of wrist-twisting over the last nickel, so to speak.

At the end of the day, there was that level of discussion when staff people couldn't agree on all of the elements that we were paying for, and the deputy minister and the chief executive of the corporation sat down and made the final arrangement. But believe me, there was tremendous input by everybody involved in the piece, from ministry staff and their view of costs. . . . We knew exactly how much it cost to put a ministry staff person on the ground -- totalled it right down to the pens and pencils -- and we knew roughly how many of those were needed. We based that on negotiations that we'd had with industry where we reached a bargain. So there was a lot of comparability.

R. Thorpe (Chair): Mr. Gelz, did you want to say something?

D. Gelz: It may help -- hopefully, anyway. There's an obvious catch-22 here. If you take the example that you're going to decide to restore 100 more watersheds in a given year than perhaps you've ever done before, given that the environmental and land-based responsibilities around how you restore that watershed are vested with the Ministries of Forests and Environment, clearly, if you're going to do 100 that you weren't doing before, there's a lot of work that's going to have to be done within those respective ministries to make sure that things are done in accordance with the guidelines that are provided. As Roger mentioned, this was all being done in the time frame when the Forest Practices Code was also just coming into play, and there was a lot of uncertainty around exactly how we -- by "we", I mean the industry and the ministry -- were going to go about implementing it.

The catch-22, it seems to me, is that more work will require more work within the regulatory bodies that are responsible. But I will say that there was a healthy measure of skepticism on the part of the board about how much of the work actually is FRBC work specifically and how much is getting funded for other projects that the Ministry of Forests or Ministry of Environment want, or whatever. I think you can go through that debate long and hard, and as Roger has indicated, we tried to find our own ways of testing that. I think the ultimate test was that we decided to opt out of a lot of the work that was being done by the Ministry of Forests and the Ministry of Environment and go to the multi-year agreements that are in place right now, where industry has inherited a lot of the responsibilities that in the early days the Ministries of Forests and Environment were performing.

The point Roger made was that negotiation was difficult in and of itself. Industry was reluctant to just take on a lot of those responsibilities, because there were legal issues and liability issues associated with a forester stamping this or stamping that, which create a lot of difficulty. I hope that helps in terms of just more watersheds being done. By definition, there's going to be more work, whether it takes 100, 200 or 300. We didn't know specifically. We evolved to a model that's currently in place, which downloaded more of that responsibility to industry, and even that was reluctantly done.

[1325]

R. Stanyer: No.

J. Weisgerber: No. Okay, then I misunderstood your response.

R. Stanyer: The point I was making on that was that when we entered into the arrangement with the ministry relative to paying for the work that Forest Renewal wanted done, the deputy minister, who was on our board at that point in time, recognized that as Forest Renewal shifted from delivering largely with government to delivering with industry, that would create an oversupply of staff within the ministries. Those staff would gravitate into Forest Practices Code enforcement. He could see a flow of activity that initially, while it was supporting the Forest Renewal work, would move into the Forest Practices Code, and to him that was a logical transition of what the staff would do. He wouldn't ramp up with a bunch of staff to do Forest Renewal work. Then, when the code was fully in, they would be excess to staff, and he'd have to let them go. He saw this as a way of helping us in the beginning stages and having a home for those people over time; that was the point to that.

E. Gillespie (Deputy Chair): Jack's questions have served to give us a bit of context for this audit. But I wonder if you could give some more information around the context of the audit. FRBC came into existence in 1994. I'd be interested in your expenditures year over year and what led you to the change in the way the corporation did its business in '97-98.

R. Stanyer: The first year of Forest Renewal, which was '94-95 -- and the legislation was passed in early June of 1994 -- it was early to late summer before we really had any activities going at all. Largely, what we did in that first year was work that government essentially had on the shelf. For instance, the watershed restoration program was originally put together by the Ministry of Environment, with a pitch to B.C. 21 that this would be a good initiative for B.C. 21 to take on. At the end of the day, they chose not to go down that road. It was a program that, ministry staff argued, was what they called open architecture. In other words, anybody could pick it up and deliver it, and they would be good people to start with the project. In that year in total, out of about $480 million in revenues, I think we spent about $37 million on the ground.

[ Page 1318 ]

The third year -- which was quicker than I anticipated -- we achieved what we thought would be about our full level. We were up to $396 million in the third year, which I thought was quite remarkable given the startup difficulties and all the rest of those things that we were going through.

The next year we achieved a high-water mark of about $596 million worth of investment.

[1330]

That was the model that we wanted to have, and we went through an intense exercise in 1996 to make that happen from that perspective. Then we saw a downturn in the industry coming. Without the stumpage intervention that government took in 1998, our projections were that the industry was going to cool off in 1997-98 in any case, particularly the Asian market. We began to build down to a business plan that would be more sustainable at $400 million. We recognized that in 1996 we were going to spend more than would be sustainable over time, but it was the right thing to do at that point in time. We made, as we say, the major structural changes in '97-98 and through '98-99, both in the delivery system and inside the structure of the corporation, to downsize and put us on the field that we're on today.

E. Gillespie (Deputy Chair): Did you have advice from the auditor general's office from the very beginning, in 1994, when you were setting up Forest Renewal B.C.?

R. Stanyer: We engaged the auditor general's office as our auditors of record in the first year of operation. We had advice from the comptroller general's office around the financial systems that Forest Renewal had. We had the comptroller general's office come in and look at our cost controls and give us advice relative to whether or not we were going to be able to account financially for all the dollars that we would be putting out the door.

E. Gillespie (Deputy Chair): Okay. I have one more question around. . . . We've talked a lot about incrementality, but there are two other aspects: regional equity and wise spending. Can you give us the FRBC view on regional equity?

R. Stanyer: It's a good thing we have Mr. Gelz here. He can talk a lot about regional equity from the perspective of where he lives in the northern part of the province. Regional equity was a major debate with the board early on. It was something that government clearly wanted Forest Renewal to have as one of its basic tenets of operation, although there was a lot of debate around both our board table and a lot of other parts of the B.C. community about what was really meant by regional equity.

You could take a situation whereby you had $100 and divided it equally amongst the six regions of the province, and that would be regional equity. You could have it equally as regionally equitable to make sure that as much as possible, you addressed the needs of particular regions. As an example of that, if you look at the southeast part of the province, which had a much higher activity in the forest industry 30 or 40 or 50 years ago than what they might have today. . . . To address some of the legacy that happened in that part of the world would be treating that region on an equitable basis, considering that, historically, their contribution to the well-being of the province may be higher that what it is today. It would be equitable to look at those circumstances in some way that benefited that region as well.

At the end of the day, with a lot of discussion and debate around the board. . . . I think the unsaid also needs to be pointed out -- the sense that many other people look at regional equity and say: "If you get $100 from my part of the province, I want that $100 back again." In other words, dollars in, dollars out -- some relationship to the spending that goes with the income.

[1335]

So the north was slower in getting up to speed, and in fact we have taken a lot of criticism from that part of the world -- some of it, we would say, not of our making, in the sense that if there had been a quicker uptake out of the north, the money would have flowed quicker into the north from that perspective.

We look at regional equity in a broader context. It's not just dollars in, dollars out. It also has to address the needs of a particular region, the needs of a particular community and the needs of the people who work in that community. As an example of that, if you look at the forest worker transition program, most of the dollars that were expended in that program happened to be in the lower coast and Vancouver Island. The reason for it is not because we have anything

[ Page 1319 ]

The other side of that is, that if you look at the inventory work as an example, there's been a lot more inventory dollars spent in the north than in the south, because that's where the needs are. So we say, that from an equitable position, we are addressing them. But the only measure is not dollars in, dollars out. It's broader than that.

E. Gillespie (Deputy Chair): Have you come to an agreement with the office of the auditor general about regional equity? Is there an agreed-upon definition?

R. Stanyer: I would say that there is not. That's one of the areas that we need to continue to do some work on.

E. Gillespie (Deputy Chair): The second one was wise spending.

R. Stanyer: Wise spending is something that we adopted, quite frankly, without a lot of debate around the board, as I recall. It was something that some people argue is kind of inherent in the process -- that you ought to be able to look at any of the activities you do and determine whether or not they're wise.

I mean, I think we accept the counsel of the auditor general that we should do more work on what we mean by wise spending, but also we believe that the performance management system that we have largely in place at the moment does address the issue of wise spending: to be able to project the kinds of outcomes and outputs that you're looking for. When we say that we're going to grow 25 million cubic metres more wood than would be the case if we didn't make these investments, I think we can compare those kinds of targets and determine whether or not the spending was wise and whether or not we accomplished those goals and targets at the end of the day.

We believe we have an investment management system in place that allows the board to assess what our productivity is to reaching those goals. We can report to the board on a virtually quarterly basis about the investments and whether or not the money is flowing to the places that are going to realize the targets we set for ourselves.

[1340]

R. Stanyer: I'm not sure. Maybe Mr. Gorley can talk more specifically to it. I think that we were happy with the audit, in the sense that there are a number of findings that we'll discuss with the auditor's staff over time and determine whether or not we agree with them at the end of the day.

One of the things that I think the board was happy with and that we were certainly happy with is that a lot of the directions the corporation is moving in were confirmed by the auditor's staff. The kinds of things that they see it's important for us to do we say are important too. We may have arrived at those conclusions independently, but we're happy they come out to be the same ones. It would have been much more distressing for us to have the auditor's staff go through and point us in a direction that was entirely different from where the corporation is going. From that perspective, we're happy.

A. Gorley: I think I would just confirm that. I arrived at Forest Renewal at about the same time that the audit was starting. What I found was that, also coming out of the board and management, there were a number of initiatives that, as the audit moved forward, seemed to be similar or parallel.

I suspect that the work in the audit probably focused some of the things we're doing a little differently than if the audit hadn't happened there. An example that comes to mind is the public reporting and the way we will design our future annual reports and those sorts of things. While they would have followed naturally from the strategic planning process, they probably will happen sooner and be more focused as a result of the audit.

R. Thorpe (Chair): I just have one quick follow-up here, Mr. Stanyer, and correct me if I heard you incorrectly. With respect to the recommendations from the auditor that Evelyn talked about, you said: "We will be discussing those with the auditor over time to see which ones we're happy with." Did I mishear you, or is that what you said?

R. Stanyer: If there was any miscommunications, it's the sense that we don't have an agreement between ourselves and the auditor about what we mean by incrementality, as an example. One of the things that the auditor's staff will be doing is a follow-up audit to this, to see how we're doing on implementing our recommendations. We anticipate working with the auditor's staff. We think there are some areas of clarification and that we have to understand more clearly what it is that they're getting at. I think they need to understand more clearly what it is that we're trying to say. I don't think we have any differences of opinion around these things. I think things like incrementality will come out in that discussion in a way that we do have an agreement around them.

R. Thorpe (Chair): Would it be possible for you, then, to provide to this committee a list of the areas in which you expect -- maybe I'd ask this in order of priority -- or see your organization working on with the auditor general to find resolution, agreement, whatever? Would that be a fair request of this committee -- to ask you to put that forward to this committee?

R. Stanyer: By all means, we'll be happy to do it.

R. Thorpe (Chair): When could this committee expect to receive that? What would be a reasonable time? Mr. Gorley, probably you're going to get to do the work.

R. Stanyer: Yeah, he is.

A. Gorley: I think a good deal of it is incorporated in some of the implementation plans we discussed earlier. But to get it in the way you've described, we would probably need a couple of weeks to make sure we had hit all the points.

R. Thorpe (Chair): That'll be great, if you can just make sure the Clerk's office gets it.

[ Page 1320 ]

[1345]

Also, when we go back and look at the Forest Renewal plan, the initial plan had basically five principles. Those five principles were pretty clear. One was: "Permanent investments will be used to sustain the public forests for the long term." The opening word there was "permanent." The second was "independent," and it says: "No money will go into general government revenues." The third was "equitable," which was: "Investments will be distributed fairly throughout the province." If I hear any more discussion about that portion after being on the Forests Committee. . . . I don't want to hear that discussion anymore, because we have certainly canvassed that to a large degree. "Effective," in that "All partners will take part in making the decisions on where the dollars are invested," and then "accountable" -- "The government will bear the responsibility to the public and to the taxpayers. . . ."

When we talked earlier about 300 people in the Ministry of Forests and money being transferred, as my colleague just mentioned -- not actual employees, but money being transferred to a ministry -- I see that no money going into general government revenues is a goal that was not met when this plan was introduced to the Legislature in 1994. I guess my first question would be: were the things that I just described -- pro formas, budgets, a business plan, the five guiding principles of this corporation -- put in place before you spent a dollar? Or did you evolve your business plan after you actually got into business? I'd be very curious to know what your feeling is about that. I think that part of this discussion is important for any government that ever decides that it's going to set up another Crown corporation -- how it should be set up. Mr. Stanyer, some of you were there at the beginning. I'm sure you could give us some input now as to what you think we should have done back then that may be different than what we would do today.

R. Stanyer: On the business planning side, in the first year, which was. . . . Well, I believe the act was passed for the corporation on June 2. I'm not sure what the date of royal assent was. As I said earlier, we didn't get started doing very much until late summer. From that perspective, the first year of operation was probably seven or eight months in that time frame. The first exercise the board took on was business planning for the 1995-96 business year. We went through that business planning cycle, starting in the fall of 1994, and completed it by around March, I think, of 1995.

I agree with you that that's certainly a little different than how a private sector business would come into being, but we aren't a private sector business. Government directed us to put it together, and we put it together as quickly as we could. From that perspective, the board had full input into what the business plan was as soon as the board was put together. We didn't receive the full board appointments until December of 1994, and there were seven of us who were put on the first board in July of 1994. That's how that came to be.

D. Gelz: Maybe I could just respond a bit to that. I mean, it's an unusual circumstance. We had more of an idea of what our revenues were going to be than we had any idea of what our costs were going to be. I recall getting into the early discussions about where we projected revenues were going to be based on stumpage formulas, etc. We had a lot of discussions about establishing principles around what we called the program continuity fund, which was to make sure that -- along the notion of permanent investment -- if we needed to establish an organization that could sustainably invest in the resource and in the mandate we were given over time, we wouldn't be $600 million one year, presumably, and $2 million another and not have any money left in the bank.

[1350]

One of the things that isn't fully appreciated, I think, in this whole endeavour around Forest Renewal was that we were trying to find ways to make decisions on the land base differently than they'd been made before. By definition, we had environmentalists, we had first nations, we had industry and we had government basically sitting in the room at the same time trying to look at some of these issues differently. So the drivers of the business weren't clear to us on day one. They weren't clear to us six months down the track. As I mentioned earlier, what we wanted to do is create these guidelines so that we could have a bottom-up process and let proponents -- whether they be from Dawson Creek or Penticton or wherever -- come forward and say: "Look, I've got a good idea about how we can do something different on the land base or something different in value-added that hasn't been tried before, and we'd like to put that in front of you." So I openly acknowledge that a typical business plan. . . . I've been involved in corporate and strategic planning in a number of businesses over 15 or 20 years, and while the principles are the same, the methodology that we put in place at FRBC in the beginning was different. We had a far more diverse mandate than any corporation ever would have had.

R. Coleman: Did that not make you nervous?

D. Gelz: Of course. Absolutely.

R. Coleman: Did you not review that and identify that through some sort of internal audit or control program to see

[ Page 1321 ]

D. Gelz: From my perspective as a board member, I think we were finding our way without. . . . Again, there was no blueprint. We were trying to create a blueprint that would work in accordance with the guiding principles that were provided.

From my perspective as coming from the business community, it wasn't as businesslike as I would have been accustomed to in a normal business setting. But the issues that we were dealing with were not purely businesslike either -- for example, when you were trying to deal with the whole matter of transition of the unemployed segments of the workforce. So we did not have perfect clarity, coming out of the chute, about how we were going to manage those variable. There was a certain degree, as there is in business, of understanding as you move along about how things are going to work, how you course-correct as you move down the track. But I'd have to say that, generally speaking, the board was very mindful of those principles.

R. Coleman: One of the concerns that the. . . . I'll tell you that as long as three and a half years ago, when I was sitting on the Forests Committee, I was questioning the outcomes and the measurements of this corporation and saying that you weren't doing it. Here in 1999, when it's in the auditor general's report, I hate to sound like I told you so, but I told you so.

I want to go back to the auditor general's review. One of his comments, on page 52 of his report, was that the responsibility of Forests and Environment is split between three organizations. In their view, "such a split has increased the time and effort required to plan for program investments." Did the failure to clarify the roles in Forest Renewal at the beginning, and the responsibilities and mandates, contribute to a number of inefficiencies in your own business ability to be successful and the creation of a larger bureaucracy? How would you have clarified those roles differently at the beginning in 1994 so that didn't occur?

R. Stanyer: I'm not sure that they created or contributed to inefficiency, in the sense that we didn't have proper cost controls on the things we were doing. I think there was a lot of competition between Forest Renewal's goals -- things that ministries wanted as their number one item and things that the other partners wanted as their number one item at the end of the day. So we had a lot of learning to do from that exercise about how to put systems in place that were complementary instead of competitive.

[1355]

R. Coleman: So is it not your opinion that you have significant overlap with other government organizations, like the Ministry of Forests and the Ministry of Environment?

R. Stanyer: I don't think there is as much overlap as people think there is from that perspective. I mean, when we look at the Ministry of Environment, our relationship with them is really in two ways. It is the delivery of the watershed restoration program, and it is their opportunity to exercise their stewardship responsibilities in the work that Forest Renewal does in the larger sense. So they deliver the watershed restoration program for us on the ground, and they interact with our other partners -- mostly industry -- on other work that goes on, on the ground. Does it comply with their part of the Forest Practices Code and other environmental constraints that they have on them? We don't have a lot of interaction with them other than the watershed restoration program.

R. Coleman: But wouldn't you consider it to be a significant overlap with the Ministry of Forests in that you're funding 300 employees of the Ministry of Forests?

R. Stanyer: Well, I guess overlap in the sense of interaction, but I don't think overlap in the sense of jurisdiction. I mean, I don't think that we are overlapping their jurisdiction. It's very clear what their responsibilities are, and it's clear what Forest Renewal's role is. So in the sense that there is a lot of interaction, there is that interface. But I don't say overlap in the sense of jurisdiction.

R. Coleman: How would your comment be relative to the goal, relative to independence and no money going into general government revenues and the fact that you're funding people within the Ministry of Forests from your initial goals? How would you react to that criticism?

R. Stanyer: In a technical sense, I'm not sure how the money flows. Whether it flows to general revenue or it flows to the ministry, I'm not sure. But clearly our view of moneys flowing to general revenue is that there would not be unallocated funds flowing to general revenue and that if we were going to flow money to other ministries -- which we do; not only those two ministries, but it may be through other mechanisms as well -- it is for specific purposes. In this case, it is to pay for the delivery of forest renewal work -- the same as we would pay the industry to deliver forest renewal work. So we've clearly negotiated what the terms are. We don't flow discretionary dollars to them that they can spend on other projects; they don't get any other funding. If it doesn't pay for the staff that they require to do forest renewal work, then. . . . I mean, that's all it's earmarked for; that's all it goes for.

R. Coleman: Was that work previously done by the Ministry of Forests before you funded it?

[ Page 1322 ]

R. Coleman: Was it the responsibility of the ministry to fund that work prior to Forest Renewal B.C.?

[1400]

That's exactly what we're talking about here within the Ministry of Forests or the Ministry of Environment. They're mandated to regulate certain areas. If you increase the level of activity by virtue of FRBC funding, then by definition, they've got to do the work. So it's back to the catch-22.

R. Coleman: I guess the next question would be, then. . . . Obviously, if you're funding forest renewal activities in the Ministry of Forests, you have overlapping -- something, whether it be mandates, relationships or whatever. From the beginning, did you have a way of establishing performance measures for the Ministry of Forests and for your own activities on the ground and being able to evaluate the outcome of those programs and to ensure that inefficiencies and duplications weren't taking place?

R. Stanyer: As I think I said earlier, as we set out to put the controls in place around those mechanisms, we had several inputs. We had private sector consulting firms work with us on those things. We had the office of the comptroller general. We worked with them around cost controls to see whether or not the things that we were putting in place were adequate and were going to catch those kinds of issues. Would we have the right mechanisms in place?

I think, at the end of the day, the auditor general's staff have given us clean audits in every year from a financial control perspective. I would think that issues like that would be dealt with, although I know that we have had discussions with the auditor's staff relative to how we could identify the number of FTEs or the number of specific individuals within ministries. Quite frankly, that has been a bit of a black hole for us, in being able to identify how many people we actually have working in the Dawson Creek office, as an example. But we clearly knew what we were funding the Dawson Creek office to do. How they chose to allocate the dollars to get the work done was kind of up to them to do.

R. Coleman: That comes back to the fact that I still think there's an overlapping mandate here. You signed memorandums of understanding with various ministries and adopted a set of guiding principles to address, I would hope, those overlapping mandates. So did you find that your steps, which were taken at the front end of the process, were sufficient to address those overlaps and to measure those efficiencies?

R. Stanyer: I think they were. It would be interesting to get Mr. Gorley's perspective. Mr. Gorley was the regional manager for the Prince George forest region when these things were going on. So he was pretty much involved from the ministry perspective, about how Forest Renewal dollars were allocated and the inputs that ministry had into the agreement that was subsequently agreed to between the ministry and Forest Renewal on funding what activities and how that was done.

When you go back to the whole question of overlap, we didn't look at it as overlap. We looked at it as purchasing services, the same as we would purchase services from private sector or from anybody else. They were a service delivery agent for us. We had a definite contract with them that said what the deliverables were, what they were expected to do and how they were expected to report to us on carrying out their activities.

R. Coleman: I suspect that Mr. Gorley's paycheque in those days came from what would be described as general government revenues, relative to this independence issue that was your original guiding principle. These memorandums of understanding and this duplication. . . . If you read through even the auditor general's report, where he refers to the split between three organizations. . . . Did they create difficulties in implementation? What difficulties did they create? In the future, if we do another Crown corporation, would we be able to ensure that we don't end up having the duplication and the inefficiencies that we may have experienced in this particular case?

A. Gorley: I'll try and touch on a number of the aspects of your question. You may want to come back to some specific parts.

[1405]

To clarify the kinds of arrangements that exist between Forest Renewal and the ministries, there are really two kinds, one of which we call a services agreement. That purchases the sorts of services that Mr. Gelz referred to -- the building inspector type services. So where we pay for the additional burden of regulatory work that has to be done, planning work that has to be done because of the additional work Forest Renewal is doing in a region, it's covered under a services agreement. Some of the staff and the ministries are therefore paid through that services agreement. The other kind of work is what we call a goals agreement, and in the first few years the goals agreements were the mechanism through which the ministries actually contracted directly for work on the ground. Those have reduced considerably in the last few years to a very small proportion now. But in those as well, just as with

[ Page 1323 ]

There were a number of questions. I'm sure I didn't touch on them all, but that is maybe a little bit of context.

R. Coleman: Well, maybe the simple question is: can you tell me that no money from Forest Renewal went to pay for normal functions of the Ministry of Forests that would normally come from general revenue?

R. Stanyer: I think that we can say yes, there were some incidents where we did that. In 1998-99, I think it was, the Deputy Minister of Forests came to us for two things: one, the fact that the ministry was no longer going to fund the backlog silviculture program, and Forest Renewal agreed that we would continue our funding of that anyway; and there was an additional $32 million that the deputy minister asked for, for road maintenance, rec site maintenance, forest health and -- I'm not sure what else -- some tree improvement money, I think. There were about four or five categories. But it was $32 million.

The deputy minister had a hole in his budget that he couldn't fill and asked us if we would fund that on a one-time-only basis. The board, after a lot of consideration, agreed that we would fund that $32 million. The only change to that was that the next year, when he had promised he wouldn't come back, he did come back, in the sense that he didn't spend the full $32 million in the first year and asked if he could carry it over into the second year. So it was a total of $32 million that went to other activities like road maintenance and those other issues that I named.

R. Coleman: So the door was opened. And once it's opened, the flow can get kind of interesting, I guess.

The comment of Mr. Gorley a minute ago relative to the speed of the ramp-up of this corporation and its applications. . . . I remember sitting in a banker's office one day, and he was explaining to me what overtraining was and telling me what I should do with my corporation if I want it to function properly in the future, which included taking a step back and relooking at my planning and taking a deep breath rather than letting it get away from me.

When you reach that position where you said you had this movement, did the board ever sit down as a group and say: "Whoa, we better take another look at this plan, because maybe it doesn't fit into the guidelines that we originally had"? Or in actual fact, as some people would like to state and some of the comments that I've read, did you not really have a full plan yet at that point in time?

[1410]

R. Stanyer: Once again, I'm sure Mr. Gelz would like to add something. But we started in the fall of 1996 on that exercise, and we brought in the gentleman who subsequently turned out to be the chief executive of the corporation, who led an exercise that first of all was all about developing what we referred to as a new land-based delivery system that brought us the multi-year agreements and eventually led to a whole new restructuring of the corporation. The board of directors was intimately involved in all of that decision-making process.

We recognized -- which I think was really quite early on, as I say, in the fall of 1996 -- that the way we were going was not getting us to where the original vision was. I think you make an excellent point about stepping back and taking a look at the whole thing, and that point in time was when we did it. Did it move as quickly as we would have liked to? No, it didn't move as quickly as we would have liked to, at the end of the day.

But we had, I think, a lot more momentum at that point in time than we recognized we had going for us. By early 1997, things were changing rapidly out there. One of the interesting things was that we had to revise the business plan about three times in six weeks, because while at the beginning of the year we set targets of how much investment we wanted to create, the wheel was going at a pretty good rate. We were overachieving ourselves virtually every week.

A lot of the consternation that board members had and, I think, that staff had, which led a lot of the impetus for change, was the ability of our partners to report. The service agreement we had with government ministries. . . . Part of the issue was timely and accurate reporting from that perspective. But did that mean that things were out of control or that there weren't proper costs controls? No. I say the answer to that is "not" -- it did not mean those things. What it meant was that people couldn't report as timely as we wanted.

I think Forest Renewal, quite frankly, took a lot of criticism for our inability from that side of it. But from our perspective, which was a lot of the impetus for change, it was that we wanted to deliver things in a different way, ways that were more accountable at the end of the day. I mean, we didn't enjoy having people say: "Well, you can't tell us what you spent your money on." The people that were spending the money couldn't tell us -- not that they didn't know. But it's that in order to roll it all up, you had to eventually find yourself in a forest district office sitting down with an actual plan and writing these things out. The steps of allocation were easier going down than they were reporting back up, from that perspective. We were not the least bit happy with that arrangement.

But at the end of the day, it didn't turn out as though the money was wasted from that perspective. There isn't an allegation of financial impropriety around this whole thing. It's a question: did we have the right systems in place to report? The answer to that is: clearly they didn't work as well as they were anticipated to work, at the end of the day. Sure, we got the reports at the end of the piece. We engaged B.C. Stats to do the work on the reporting side.

Since then, we've evolved to the point where we can manage it internally. We find it's easier and better if we have the control of those mechanisms ourselves, rather than paying a contract for somebody else to do that work for us. It works better if we handle it ourselves. We can collect the information

[ Page 1324 ]

[1415]

But at the end of the day, I can well remember having the discussions at the board level, saying that by year 3 -- "just watch" -- we're going to end up with X number of thousands of proposals, and we're going to end up with more demands on our funds than we'll have the ability to service. The challenge for us will be having a test that will allow us to properly separate the wheat from the chaff. Hindsight is always great. We shouldn't have gone to that level, in my opinion. We did, but it reflected the ramp-up you'd expect from a bottom-up, proposal-driven process. By '96 we understood that was a problem, and we got more engaged in the strategic planning process that effectively resulted in this summarized document that everybody has a copy of. Would it have been nice to have this a year earlier? I suspect that it might have been, but I know we couldn't have had it from day one, because we chose to go the bottom-up route rather than the top-down approach.

R. Coleman: I think you should have had it from day one, but hindsight is 20-20.

Before we get into the discussion of your strategic planning and your business planning, I'd like you to address the comment in the report that says: "Since its inception in 1994 until 1997-98, the corporation has spent about $1.2 billion without a strategic plan and clear objectives to guide program investments." I'd like you to address yourselves to that comment -- $1.2 billion from 1994 to 1997 without a strategic plan and clear objectives to guide program investments.

R. Stanyer: I would say that we did not have a single document entitled "The Strategic Plan." I think page 55 of the report does a pretty good job of showing the strategic planning that the corporation was involved in. There was lots of strategic planning going on at every level of the organization. Had it evolved into a single document called "The Strategic Plan"? The answer to that is no. But there's not an absence of strategic planning in which those things were going.

On the question of objectives and guidelines, I think that mostly we did have the guidelines in place. We had program guidelines in place very early on in the process. I think that the whole question of the objectives. . . . We did not have a lot of that work done. That culminated within the strategic plan that set seven strategic objectives for the corporation at the end of the day, remembering that the environment in which we were operating was one where Forest Renewal didn't invent the silviculture investment systems in the province.

We picked up the silviculture investment systems that were in place and used by industry and government going back many decades. We picked up and funded that continuing system. So I think the criticism is fair that Forest Renewal needed to do a better job on the objective side of things. I guess my response would be that if Forest Renewal didn't know what it was getting for its investment, neither did anybody else before us know what they were getting for their investment in the silviculture systems that were in place.

Quite frankly, I think Forest Renewal has come and brought this whole process miles ahead by establishing the systems that we have put in place now. We know more about silviculture investment and the outcomes than we've ever known historically, and that is largely as a result of the work done by Forest Renewal. We don't apologize for those things. I think that we brought the knowledge base along incrementally and a long way past where it would be if Forest Renewal hadn't been there. Quite frankly, as I say, if we didn't know what we were buying, neither did anybody else before us know what they were getting. We don't apologize for that.

[1420]

R. Stanyer: Well, I would say that we didn't wait for five years. If we started in 1994, making the investments. . . . By the late fall of 1996, we were into an overhaul of our delivery system. As I say, there was strategic planning going on in each of the area committees, as the diagram on page 55 shows, from that perspective. It's quite frankly not a simple exercise to take the level of investments and the diversity of things that Forest Renewal invests in and boil it down into a simple document in a matter of a few months' time.

It took a lot of work with all of our partners, including government ministries and private industry and the various interest groups around the province, to achieve some consensus. I think that if Forest Renewal had been a private corporation, the planning exercise would have been quite abbreviated from the one that Forest Renewal went through. If we didn't have to go out and work with all of our partners and try to achieve at least some level of understanding and consensus where we could, then we could have done it a lot quicker than what it took us.

Believe me, there were literally hundreds of people that had input into the exercise from start to finish. It was complicated and long -- much longer, I think, than a lot of people, including staff and the board, would ideally have liked. The product speaks for itself, and I think that it quite frankly is a leadership document in a lot of areas. We're pretty proud of it.

R. Coleman: The strategic plan announced in August '99 is going to have to be compared to something for its measurements in five years from now. How do you expect to determine any efficiency gains or measurements if you spent the first $1.2 billion, according to this report, without performance measurements and accountability measures in place? Are you

[ Page 1325 ]

R. Stanyer: I don't think we set out to measure what we did in the first five years. We produced a document last year that details our investments over the first five years, and we know how much we invested to achieve those investments. The document that we have is a forward-looking piece where we've set targets for what we want to achieve, going forward. We'll be measuring how we achieve that, and in the accomplishment of those things, we'll know again what it cost us to get there.

I think we would be able to look back and say that in the first five years, we achieved this much new timber volume, which we have some understanding of, and would be able to compare things from that perspective. There will be some comparability, but I don't think that it was something we directly set out to do, in saying: "Well, let's intensively measure what we did in the first five years and set all the standards for what we did then, as against where we're going to go in the next five years." It was done more from a prospective look into the future as opposed to a retrospective look behind.

R. Coleman: I don't think I have any more comment on that. I just think that I'm rather disappointed in that comment within this report. Frankly, I'm not totally satisfied with all the answers, but I want to move on now to another issue. That is the business plan.

[1425]

I guess my question around this, as we said, is: last Friday we started the year 1999-2000 business plan -- on February 11 of the year 2000 -- for consideration by the select standing committee. Past business plans were tabled anywhere from May 4 to August 19. What is the cause of these significant time discrepancies in tabling the business plans and the ability to get them to the select standing committee in a timely manner?

R. Stanyer: We don't have any input as to delivery to the select standing committee or the timing of the select standing committee's work. That's not determined by us. We're obviously ready to go from the day that we present the plan to the minister. The minister decides the timing of when the plan will be introduced to the Legislature. From that perspective, there have been. . . . We have not been very good at getting the plan out before the end of the fiscal year. This year we intend to do that. We were ready to go on the 1999-2000 business plan last May. We don't decide the committee's timing.

R. Coleman: Could you tell me why, up to now, you haven't been that good about getting that business plan out until between May 4 and August 19, when it's been presented in the past?

R. Stanyer: I would say that there are lots of technical problems that we've run into, in the sense that what we want to do in the business plan, as much as possible, is give an accurate forecast of what is going to take place within the year. We are trying to get it right down to how many kilometres of stream activity are going to be rehabilitated, how many hectares of land are going to be treated and all the rest of the targets and outcomes that we want to achieve in the plan. Quite frankly, there's a lot of work that needs to happen by others, outside of the Forest Renewal offices, in making that happen. We've got to get work plans in place. We've got to get on-site viewing done and do costing of various interventions and investments that we want to make. Quite frankly, there are a lot of weather factors and other external factors that drive those things.

Since the first year we have been working hard to move those dates forward. Ideally, we would want to have all of the on-land activity that needs to take place prior to the development of the business plan take place in the fall. Currently we're doing it through the winter and, in some cases, early spring. A couple of years ago, when we looked at the lateness of getting the plan. . . . I'm not sure; I think the latest that we have had it ready to go was around mid-June -- something in that range.

The exercise is to move all of our planning processes forward more. And quite frankly, in doing that, we are in competition with a lot of other activities that need to take place both in ministries and within industry, relative to other sectors of the business. There's competition for time and staff to do these kinds of things -- to move it forward -- but from our perspective, we want to have the plan ready to be presented at the first opportunity of the House sitting in the spring. That is our strategic goal, and this year we're going to make it.

[1430]

R. Stanyer: I'll let Mr. Gorley give some more detail, but the answer is generally yes, although within this constraint of

[ Page 1326 ]

A. Gorley: Yes, I would agree. I would also agree with the observation that we have to be careful to not delay unnecessarily, trying to get it perfect. Inevitably things will change during the course of implementation, particularly when we're dealing with a large number of companies across a big province. But we do have a business cycle in place now that, early in the summer, takes the initial size and scope of the business plan to the board. Then it involves periods of staff work and stakeholder consultation and returns to the board, so that by January we have what I would, I guess, term provisional approval from the board of the following year's business plan. What it takes from there until final publication is adding in some of the detail that comes in from licence holders or agreement holders and so on, with the expectation that, beginning with the one we're working on now and into the future, a final, published plan is available prior to the start of the next fiscal year. But in fact, the size and scope of the plan is known sufficiently far in advance and agreed to by the board sufficiently far in advance that the other planning can carry on. That, combined with the commitments in the five-year multi-year agreements, allows a much better cycle than existed in the past.

R. Thorpe (Chair): Based on what you just said there, Mr. Gorley, has the year 2000-01 provisional business plan in fact been approved by the board of directors?

A. Gorley: At its January meeting the board of directors looked at -- I don't think the term we used was provisional business plan -- all the major elements that will be in the business plan and gave approval, subject to a final approval of the board's executive committee later this month.

R. Thorpe (Chair): Does that plan include all of the performance measurements for going forward?

A. Gorley: It links the programs and activities for the upcoming year directly to the strategic plan that has been circulated and to the high-level performance targets that are expressed in the strategic plan. It then goes to the mix of outputs that will be required to achieve those -- for example, the number of hectares or number of kilometres and so on, as estimated. As we've discussed, those are likely to change as conditions change during the year.

R. Thorpe (Chair): Would it be possible for you, then, to supply to the committee an outline of the dates of your planning cycle that highlights the key points? I mean, I don't think the committee wants to know about all the regional meetings you have, but regional meetings generally -- just so we have a sense here of a disciplined process that's taking place. I think you're nodding yes.

A. Gorley: Yes.

R. Thorpe (Chair): Thank you.

My last question on this issue is: as the independent director, Des, are you pleased with the approval process -- as a member of the board of directors? Do you think it's timely enough? I'll just leave it at that.

D. Gelz: I'm much happier today than I was, certainly, a couple of years ago. I guess I'd have to say succinctly yes. Now I am.

R. Thorpe (Chair): Are there further improvements you want to see? What are they, if there are any?

D. Gelz: No, I think that over the last year or so, we've gotten ourselves into a cycle where we're reacting in a much more timely fashion. So I'd say I'm generally satisfied.

[1435]

The report points out that (l) there was an excessive focus on short-term job creation; (2) the basis for silviculture expenditure appeared to be tied to jobs, not resource objectives; (3) job targets were set, but resource targets were not; (4) expenditures were tied to an annual allowable cut level, not to the needs of the forests; (5) unrealistic job targets were set; and (6) land-based programs were shifted to meet short-term job demands. The auditor general expressed significant concerns that the job targets were the focus of the corporation at the time and that Victoria dictated targets to regions without consultation. Was the corporation's focus on jobs, and if so, why? Did the focus on jobs detract from your resource objectives?

R. Stanyer: I would say that coming out of the jobs and timber accord discussions, we used largely a series of coefficients. By this time we'd had a fair amount of measuring by B.C. Stats around how much money it costs to create a job by various activities. So we did some grouping of the dollars. For instance, we knew that in watershed restoration, it cost about $109,000 to create a job, and in some aspects of silviculture investment, it cost in the mid-$30,000 range to create a job. Now, there are a lot of reasons those numbers are different. But we had a pretty good understanding of what the inputs are, to make those numbers. So we had a good knowledge of how much money we were going to invest, first globally -- in the provincial budget -- and then by region.

We did the math and said to regions: "We expect that you should be able to produce this number of jobs with this level of investment." The way we would characterize it, it was a top-down, bottom-up process, as opposed to a directive from the corporate headquarters to staff as: "Thou shalt create this number of jobs." We put it out and asked: "Is this feasible? Can you do it with these resources, considering the mix of investments that each region would propose to have?" They know more about what their investments by mix are than we would at the corporate level. So we were putting out the information of what we thought the numbers of dollars invested ought to produce.

Where they came back is a question of whether or not it was a trade-off against resource objectives. We would hope

[ Page 1327 ]

[J. Weisbeck in the chair.]

One of the things that I think makes us happier at the end of the day is that now, the way we look at things is that return on investment in a larger sense is important. We have set the targets for the resource objectives. If that means we do more fertilization than pruning, then that's what will happen. We recognize there is a job trade-off in that decision.

I think, as we look back at the time that this work was being done, we were responding to the jobs and timber accord and the commitment that we would produce 5,000 jobs. The test that we were putting to it was: can we legitimately do that at the end of the day? We did not expect a trade-off between resource objectives and job objectives.

R. Coleman: But did this focus detract from it, in your opinion, or did it not detract from your resource objectives?

[1440]

[R. Thorpe in the chair.]

R. Coleman: Mr. Stanyer, you had a 5,000-job objective. Did anyone from the Premier's Office or any government agency outside of FRBC set those goals and tell you to achieve that 5,000-job objective? Or was that an internal discussion that took place, where FRBC came to the table and said: "We will try to create 5,000 jobs"?

R. Stanyer: It was very much an external objective from the perspective of government's discussions with the 19 major corporations around the jobs and timber accord. Myself and other staff were involved in those discussions, so we had a pretty good understanding of what was being asked of us at the end of the day. Through discussion with the industry, we achieved an accord around how much investment it would take and largely what return we could expect, both from a resource objective -- which was the industry's primary objective -- and how many jobs we could get out of that, which was the government's primary objective in the piece. The government very much handed it to Forest Renewal and said: "There. We think you can do this." But we were certainly part of the discussion.

R. Coleman: My next question is: were you asked or were you directed to create the 5,000 jobs?

R. Stanyer: At the end of the day, the government adopted the jobs and timber accord, so we took it as direction that we were expected to manage our affairs in a way that would produce this, as I say, with concurrence about what you could reasonably expect for $300 million worth of investment in the land.

R. Coleman: Were you specifically directed by a minister, the Premier's Office or anyone to accomplish this? Or did you just take the jobs and timber accord as direction?

R. Stanyer: I am really not sure. On our board of directors we had several people who were pretty close to the discussions that were going on: the Premier's deputy, the Minister of Forests and two or three people from industry. The board was kept pretty much up to speed with discussions as they were going on and what the impact on Forest Renewal would be. It certainly didn't come as any surprise to us -- what was going on -- and we knew pretty clearly what was going to be expected of Forest Renewal. Did we receive a formal, written direction? I guess I would have to check the record and see whether or not we did. I think we accepted it as something we could accomplish.

R. Coleman: Thank you. Maybe I could ask if we could have that checked out. I think it goes to the rub of whether this corporation is independent and whether, when it's making its investments, it's actually being allowed to operate as a corporation or whether there's some outside influence relative to its ability to do so. I think it certainly goes to my questions, because those consultations and job targets obviously spent some money that was within Forest Renewal. Does it meet within the mandate and the direction of Forest Renewal? I'd like to know where the direction is coming from to do this -- to create the 5,000 jobs.

R. Thorpe (Chair): I think Mr. Stanyer has suggested that he'd like to go back and check the record. In checking the record, perhaps he could check whether it was written, verbal or whatever. I don't know if there were minutes of meetings; I have no idea. Perhaps you could review your various records and then report back to the committee on that particular item.

Are you going to continue, Mr. Coleman?

R. Coleman: Thank you, hon. Chair, but I'm going to move off this topic.

R. Thorpe (Chair): Maybe, Mr. Coleman, we could let another member ask a few questions, and then we could come back to you if you have some more questions.

[1445]

I just want to go back to my earlier line of questioning, because I didn't take it all the way. We were talking about this dynamic environment and dynamic enterprise that was Forest Renewal in the early days. The period of the audit and the period of the change in the way of doing business as a corporation pretty much overlap. You've already mentioned at least how the audit helped to influence that change.

My question is: was the change driven by the knowledge that your resources would be about half of what you had been expecting? Or was it driven by the view that the proposal-driven system that you had was no longer manageable -- when you moved from proposal-driven to long-term planning?

[ Page 1328 ]

So we saw a substantial impact at that point in time. In fact, if you look back, our projections were very close to being right on. If you factor in the stumpage reduction -- add that back in to what our revenues were for that year -- you'll come out just about exactly at $370 million. We saw a trending down for a couple of years. We had to move to reduce our level of expenditure to meet that level of income, and we were driven by the burdensomeness of the proposal-driven system. So it's a combination.

E. Gillespie (Deputy Chair): Okay. Would you say that you've moved from being a dynamic corporation in a dynamic environment to being more stable? Would you project that both the style of organization that you have and your expected investments would be pretty much stabilized now?

R. Stanyer: Well, subject to the point that we intend to review our strategic planning and other important documents on an annual basis. . . . I mean, we think the whole business of growing trees should be a little bit more boring than it has been, from that perspective. I think we do have quite a level of stability in the corporation. I think that there is good support externally in some work that we've been doing on that side. Given that there will always be change, I think that we are in a much better position to know exactly what it is we want to achieve at the end of the day. I think that, for instance, our revenues are much more robust this year than we had forecast at the beginning of the year, but we're in a much better position as to what to do with those moneys and how to fill holes and rebuild the bank account and a lot of those kinds of things that we didn't need to know at the beginning of the corporation.

E. Gillespie (Deputy Chair): Finally, my last question is: what's the relationship between the superstumpage and the duty that would be applicable to B.C. products going into the U.S.?

R. Stanyer: We receive no money out of any of the duties that people pay on overages for going over the quota system. Ours is stumpage moneys only and no penalties.

E. Gillespie (Deputy Chair): If we didn't have the superstumpage, would there be further duties?

R. Stanyer: I think that's difficult for us to say. But it's pretty clear that the whole question of the softwood lumber agreement flows out of a belief by the Americans that wood in British Columbia is subsidized. It's pretty clear that the softwood agreement provides no backsliding, which means that subject to a bunch of regulatory work, the Americans would take a pretty dim view of eliminating the stumpage that creates Forest Renewal unless there was some other funding mechanism that would take that place. To simply reduce the cost to industry in total would not be in the cards, as we currently understand the American situation. What that holds for 2001, when the agreement expires, is, I guess, a subject of great debate within industry and government as we sit here.

[1450]

R. Stanyer: I think that with the downturn that the industry has seen over the last couple of years, there is a lot more understanding and commitment to the Forest Renewal process than there might have been in the early years. As I said, in the very early years in the northern interior there was a real inability to attract sufficient staff to do the work to get the plans in place to attract the money. That doesn't exist anymore. I think Mr. Gelz's corporation, which he recently left, and others are well committed to Forest Renewal. They all have staff in place that are dedicated to working solely on Forest Renewal activities and these kinds of things. I mean, the relationship we have with the industry for multi-year agreements is very good and works very well.

R. Coleman: I'd like to continue just briefly on some timber supply issues. The government has been aware for some time that many areas of the province are facing significant reductions in timber supply. All areas of the province have some challenges regarding the age and composition of their forests. However, instead of allocating land-based programs on the basis of highest and best in a land base, FRBC allocated funds on the basis of the annual allowable cut.

According to the auditor general: ". . .allocation by AAC should not be the main driver for the allocations because it does not address impending timber supply problems in a direct manner and limits Forest Renewal B.C.'s ability to allocate funding to where it is most needed. An alternative model would be to allocate program investments based on priorities, needs and capacity -- not on AAC."

I haven't seen a response from FRBC to that comment, and I'm just wondering what your response is.

R. Stanyer: Well, we had a lot of interesting debate with the industry before we settled on this method of allocating the funds. It was pretty clear that industry, in their view of fairness, is all about how much allowable cut each company has allocated to it. Their view of it very clearly is: "You get the dollars based on allowable cut, and therefore if I cut 6 million cubic metres, I contribute more to your pot than the guy who cuts 200,000 cubic metres." And quite frankly, they were very strong in wanting it allocated back on the basis of allowable cut. I don't think that in reality we could see an automatically better system that wasn't subject to a great deal more debate than that particular one.

The case of whether or not allocating the funds out on an AAC is the only source of funding is another question entirely. In fact, when we set up the multi-year agreements, we held

[ Page 1329 ]

As an example of that -- once again, the southeast part of the province -- the southeast contributes about 5 percent of our revenues but in fact over the years has received about 12 percent of the investment dollars. Now, there are a lot of people in other regions that don't like that very much, but in actual fact that is a case of meeting the need. There is more opportunity in the southeast and something that we can do something about.

So we allocate a large portion of it on the basis of AAC, and industry sees that as fair. The industry partner sees that as a fair way of the dollars in, dollars out argument that we've had. That speaks to regional equity and is a method of doing that. It isn't the total way, in the sense that we do reserve other funds to more directly meet resource needs in those areas that are short.

[1455]

R. Thorpe (Chair): Mr. Coleman, if you're going to change your line of questioning. . . . These gentlemen have been sitting down there for two hours, and I'm sure they'd appreciate maybe a five-minute break. So we'll take ten minutes.

The committee recessed from 2:56 p.m. to 3:10 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): In the interest of moving along, we're going to continue here. Mr. Coleman, I believe. . . .

A Voice: We don't have a quorum.

R. Thorpe (Chair): We don't need a quorum for this. There are no motions.

R. Kasper: We're not making decisions.

R. Thorpe (Chair): We're asking questions and getting answers. So Mr. Coleman, did you have some more questions?

R. Coleman: Sure. I just want to touch briefly on variances in expenditures. The auditor general found that there was substantial variance in the business plan in the 1997-98 forecast. The quote on page 70 of the report is: ". . .when we tried to compare the 1997-98 fiscal year business plan with the updated forecast that appeared in the 1998-99 plan, we discovered significant discrepancies." No explanation has been provided for these changes. Could FRBC tell me or give me an explanation of those -- the reason for those variances?

R. Stanyer: In some cases we're looking at, particularly in the early years, when we wanted to overachieve where we were at and try and get as close to a full spending pattern as we could, which was largely $400 million. . . . I haven't looked at these specifically. Maybe Mr. Gorley can give you a bit more. But in some cases we transferred dollars from one activity area to another, which the board did deal with. Al?

A. Gorley: I think Mr. Stanyer hit on the two main points. One is this issue of what was planned for, and then, in the course of changes, what actually got done -- the second one sort of reworking the business plan to a new set of themes and beginning to focus on this set of strategic objectives rather than the envelopes that previously existed. So it was kind of a shuffle in language, if you like.

R. Coleman: I want to move on to my dreaded word, the "incrementality" principle; I have some questions around this. But I just want to direct some comments first, before I ask the questions. The auditor general found that FRBC used some funds to pay for government or industry programs in direct, I guess we'd say, contradiction to its stated investment principles. I'll quote from the report on page 72, "In recent years, the corporation has broadened its definition of 'incrementality' and committed significant funding to programs that were the responsibility of government or industry," and further on, on page 72 and page 73, furthermore, "for land-based programs, there are no criteria with which to assess the financial or economic viability of proposed projects. . . ."

The auditor general documents the sequence of events that led directly to the government off-loading hundreds of millions of dollars in government programs onto FRBC. Programs off-loaded included such things as backlog reforestation, resource inventory programs, bridge replacement program, forest health, road and bridge maintenance, recreation sites and inventory.

I'll quote again from the report before I get to my questions. "Part of the reason is that [FRBC] has spent much of its reserves. . .on funding programs that were the responsibility of government, rather than maintaining the moneys for use during future years with reduced revenues."

My first question would be. . . . When FRBC was established, the plan clearly showed a smooth expenditure pattern. This plan was abandoned. FRBC now has significant year-over-year variance in expenditures. My concern is: why did this happen? And your comments relative to the auditor general's concern about government programs being off-loaded to FRBC. . . .

R. Stanyer: Well, I think our earlier comments relative to what, of government's, we spent really flow back to backlog silviculture, which we've talked about, and the $32 million that we also talked about a few minutes ago. I'm not sure what else the auditor's staff might have had in that envelope.

[1515]

[ Page 1330 ]

R. Thorpe (Chair): Does anyone from the auditor general's department want to make any comments on that?

A Voice: We're joined by Morris Sydor, who undertook the work. He may have a comment.

M. Sydor: Yes. I think I'd just like to clarify the difference. I think the figures we have on our reports talk to the amounts that the board authorized, and those were authorizations that would cover maybe a five-year period or such. Mr. Stanyer might be talking about a shorter period, and that's why he's referring to a $32 million figure. The figures that we reflect in our report total several hundred million dollars, as I recall. I think the difference is just one of the different time lines that we're talking about.

R. Coleman: I was going to get to the difference in dollar values, but thank you for clarifying that. Maybe I could just ask Mr. Stanyer or whoever wants to respond from Forest Renewal. I think that there seems to have been a reversal of direction in FRBC that resulted from paying for government programs. I'm just wondering if it's your observation that FRBC did. . . . Do you agree with the findings of the auditor general or disagree that the government off-loaded hundreds of millions of dollars in government programs on FRBC?

R. Stanyer: I've got to ask Mr. Gorley if he has any. Personally, I really don't know what we're getting at here.

A. Gorley: I may need some clarification on this as to whether it's different than the discussion that we had before around such things as backlog reforestation or the services agreements and those sorts of things that Mr. Stanyer discussed before.

R. Coleman: Maybe I can draw your attention to some of the pages of the report. On pages 75 and 76 of the report is contained my quote with regards to some of those funds. The one quote that sort of jumps out at me in the middle of the page is: "With the approval to transfer between $300 million and $400 million to government and with the approvals to provide funding for ministry programs in the amount of $376 million. . . ." It goes on from there.

My concern is that the principle here is that this was an independent agency; it's supposed to be an independent Crown. No money was supposed to go into general revenues. The auditor general has found that there's been an off-load of hundreds of millions of dollars onto your corporation. Do you agree that that's an off-load to your corporation, first of all?

R. Stanyer: Which one was that?

R. Coleman: The auditor general indicates in his report that several hundred millions of dollars in government programs have been off-loaded onto you. Do you agree with that?

R. Stanyer: As I look at the centre of page 75, there are roads and bridges, proposed $70 million over five years; backlog of $250 million; inventory, recreation and land acquisition, $400 million over five years and $56 million approved for inventory on March 13, 1997. I guess I would agree that some of those would be an off-load, and I would disagree with others. We've talked about backlog, so I won't go back into that particular area.

When we look at inventory, recreation and land acquisition, I would argue that they aren't off-loads from what government would normally do, in the sense that we talked earlier about paying for inventories relative to getting the Forest Practices Code up to speed. The corporation no longer funds inventory from that perspective. The $70 million on bridges -- we didn't spend $70 million on bridges; it was about $40 million, at the end of the day, and we didn't fund that any longer. I wouldn't argue with the gross numbers, but I would argue that the dollars don't equate. I would argue that we no longer provide funding for those activities.

[1520]

R. Stanyer: Yeah, I think you could say that.

Let me say about the bridges that it was an industry proposition that Forest Renewal should fund the bridges. There were a couple of aspects to it, some of which would fit within Forest Renewal funding and, I guess, some of it which wouldn't. We had a situation in the province where a number of bridges were due for replacement. Forest Renewal took the position that if the bridge needs to be replaced for environmental reasons -- upgrading of the watershed and these kinds of things -- then that would fit within Forest Renewal funding. Clearly some of these bridges would have fit within that context. But we did agree to fund other bridge replacements that weren't necessarily there, in order to maintain access to harvest, that the industry wanted us to fund. From that perspective, I guess we're guilty of accepting some off-load there.

R. Thorpe (Chair): I guess, Mr. Stanyer, that at best, your principles showed some flexibility.

R. Stanyer: You can say that.

R. Coleman: I'd like to just move on to a couple of. . . . I don't think we need to go any further than that. I mean, obviously we've well established that we're all concerned about Forest Renewal B.C. actually becoming just a funder of government programs rather than what its original directions were to be.

I'd like to just touch base on regional equity for a second. The auditor general found that while regional equity issues are supposed to be determined by a set of ten factors, reality is that each region's fair share of revenues has not been determined by FRBC. In fact, there doesn't seem to be any methodology for determining regional equity, just a set of ten factors. A quote from the report is: "It is therefore impossible to know whether investment allocations have been in keeping with its interpretation of the regional equity principle."

Has FRBC decided to vary the regional funding from revenue input? If so, who decides those variances? What

[ Page 1331 ]

D. Gelz: Let me take a stab at this one. There isn't a formula. There certainly is the annual calculation that the regions are very well aware of in terms of the in versus the out; as Roger indicated this morning, that's clearly used. In the case of the north -- the Omineca-Peace, for example -- the figures are emblazoned in my head. Basically we contribute about 31 or 32 percent, and we've received about 21 or 22 back.

I don't know whether it's appropriate to create a. . . . I guess somebody would like to approach this analytically and say: "Well, there are ten factors. Create a matrix, weight the matrix, and then away you go." I don't think that's an appropriate way to handle this.

There's a lot of subjective discussion that goes in, and examples have been given. We know there are certain areas of the province that have greater needs than others. In the lower mainland, the coastal area and the Kootenays, for example, it would well be appropriate to spend over what they were contributing in a given year. The target was to reach an average over five years. To my knowledge, we didn't reach that average. I think we have subjectively looked at all of these ten factors and had lots of debates at the board level about the appropriateness of the blend. That would be how I would respond.

R. Coleman: Well, it's not a perfect world, so you're not going to get perfection when you're going to try and accomplish that. I just wanted to hear your reaction to those concerns.

I want to move on now to some spending principles. The auditor general "found that the board received very little analysis with which to assess investment alternatives. . . ." Cost-benefit analysis or multi-criteria decision analysis were not utilized. Projects were approved with insufficient information regarding a region's need or their potential economic benefits. To quote from the report. "In most cases, only a cursory level of analysis was provided to the board before it made its decision to approve or reject a proposed program."

[1525]

R. Stanyer: I guess I would say -- and Des could certainly respond to this as well -- that we had a lot of debate about the level of analysis and input that the board needs to make a decision. I think that most of our board members, quite frankly, felt overburdened with the amount of documentation they were given, particularly in the early years, around funding decisions. And given the fact that most of our board are very familiar with issues relative to the industry, it didn't take a whole lot of extra knowledge or extra financial analysis to decide whether or not to do backlog silviculture. I mean, you'd make the decision on that. Most of the board are very familiar with all of the issues around those kinds of things. I think our board felt that they had enough knowledge, and I think that the canvass of the board by the auditor's staff showed that at the end of the day, the board was comfortable with the level of knowledge that they had.

R. Coleman: My next series of questions relates to the B.C. Stats report on job creation. The report takes serious issue with FRBC's failure to adequately determine or define if its strategic objectives have been met.

"The outputs report. . .does not provide sufficient information to help the corporation know how well it is meeting its strategic objectives. For example, one strategic objective is to 'create/maintain sustainable forest jobs,' yet the report does not show whether the corporation is making progress toward this objective. 'Sustainable' is not defined, and most of the jobs counted are dependent on continued funding. Similarly, there is no data on whether the jobs created were long-term or short-term or on the number of displaced workers employed."

What can FRBC claim with any degree of certainty that it has successfully fulfilled, relative to the jobs and timber accord numbers, given the findings of this report?

R. Stanyer: I think that in the jobs and timber accord, we can show very clearly that in the work that was done subsequent to the audit, we did achieve those numbers where we had that level of funding going out. The accord office itself has recognized that those numbers are no longer achievable on the strength of the resources that Forest Renewal is now able to put to the issues. We can't make it with the dollars we have to invest these days, so that number is being adjusted down.

In the case of the first part, where you talked about sustainable jobs at the end of the day, Forest Renewal has worked hard and continues to work hard -- and I think we're getting much better at it all the time -- at being able to predict accurately how much additional volume we have available that will contribute to more sustainable forest jobs in the future. As I say, our target for the next five years is to grow 25 million cubic metres of wood that otherwise wouldn't be there. On that basis, it's difficult to look 40 or 50 or more years down the road and predict the level of employment that that's going to create, because we don't know what harvesting systems or manufacturing will be in place at that point in time. But we can certainly point to the additional volume that would be available as a result of these investments.

It is true to say that the Forest Renewal jobs that we create in the short term are there only as long as the funding is sustainable, but isn't the purpose of the exercise to keep the money there and keep making that investment that is going to keep maintaining those jobs? We have not been satisfied with the continuity of employment that has come through the system, and we've been working hard to have people attend more than one job opportunity during the year.

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R. Coleman: The jobs and timber accord was quite specific in terms of what was to be created, and that was 21,000 new family-supporting jobs. How did FRBC measure that the jobs you were creating were new, long-term and family-supporting, to meet that goal?

R. Stanyer: As I said, we have not been satisfied with the continuity of employment that has flowed through the system and still work to try and ensure that people get more than one opportunity. We would ideally like to see them get what is considered to be a reasonable year's employment. The accord had a cursory view of what a reasonable year's employment was in that scheme of things -- the lower coast, 180 days, and other parts of the province, based on the average harvesting employment in those regions. Those are some goals to strive for, from that perspective, in creating that longer-term employment.

R. Coleman: Does the corporation have a plan in place now to accurately measure and determine whether those jobs are long-term in nature or how they're working out?

R. Stanyer: Certainly on the lower coast we do. In the rest of the parts of the province, we continue to work with industry and the implementing partners to try and achieve those objectives. But we have a plan that we work at on those things, yes.

R. Coleman: Thank you, Mr. Stanyer. I have a few more questions on another topic -- surprise, surprise.

R. Thorpe (Chair): Mr. Coleman, could I ask a couple of questions in that area, please?

Whatever numbers you report, are they hard numbers, or are they the result of statistical generation?

R. Stanyer: Two parts, once again. Where it's New Forest, we can report hard numbers and actual numbers of people and how long they work. For the rest of the province, they're coefficients based on investment dollars and what the inputs are to those, based on activities that take place.

R. Thorpe (Chair): Do I understand that you get those numbers from B.C. Stats? Is that correct? Or do you do your own calculations?

R. Stanyer: Up until this year we had been relying on B.C. Stats. Now we have put our investment management system in place, and that's where we get the information.

R. Thorpe (Chair): Would it be possible for you to supply this committee with the methodology you used to generate those figures? And could we receive that on a timely basis?

R. Stanyer: Yes.

E. Gillespie (Deputy Chair): We've been talking about land-based activities with respect to job creation. Do you look at the value-added work that FRBC is involved in with respect to job creation? In your job creation area, do you count that in?

R. Stanyer: As far as jobs and timber are concerned, we only talk about land-based activities in five areas.

E. Gillespie (Deputy Chair): Okay.

P. Calendino: Just on this line of value-added, I was about to ask the question before Evelyn did. You've been talking this morning and this afternoon about some types of jobs you have created through FRBC funding, like watershed restoration jobs, building bridges, silviculture, etc. I'd like to know, in terms of value-added. . . . You've probably given funding to some value-added companies around the province to create more jobs. I wonder if you keep a tab on how many value-added jobs are being created in the forest industry -- like furniture-making or some other type of thing.

[1535]

On the broader value-added investment, our money goes into several areas, but the two major ones. . . . We spend about $22 million a year. About $16 million or $17 million of that is in a training component. We run a training school in Abbotsford, and we have an outreach program whereby the staff from that school go to different parts of the province and put on training courses to ensure that the value-added industry has a skilled workforce from that side of it. Secondly, another $7 million or $8 million goes into a marketing program that looks at expanding market opportunities for B.C. wood products and value-added wood products. For that aspect of it, we measure the amount of dollar increase in sales of product. Then we can track that back on a broad basis as to what employment that may have stimulated in the industry.

P. Calendino: When we speak of value-added, obviously there are a variety of jobs that can be created in there. What I have discovered lately is that when we talk of value-added, we talk of siding, fencing or shingles, etc. I wonder if FRBC is also helping to create more permanent types of jobs like, perhaps, furniture-making. Before I entered into this politician's job, I used to hear people saying: "Why can't we create a manufacturing base in British Columbia? Why do we have to export our prime resources and raw material and bring back finished products from Asia, etc., etc.?" Is FRBC assisting in creating value-added jobs that help in creating a manufacturing base in British Columbia?

R. Stanyer: Yes, very much so, in several different areas. One of the things that we get out of the federal government -- from one of their staff at their offices out on Burnside Road -- is that we have had about three, I think it is, intensive looks at the value-added industry in the nineties. That sets the benchmark against which we compare our investments and how much the industry has expanded in each of those

[ Page 1333 ]

P. Calendino: I'll ask another question about job creation. In the last couple of years, the forest sector has obviously had a rough time. A number of forest employees, such as loggers and sawmill workers, did lose their jobs. Some figures that were thrown out in the Legislature were that up to 15,000 jobs were lost within the last two years. I'm not sure whether that figure is correct or not; there was probably a bit of an exaggeration in there. But I wonder, through the various programs of FRBC, how many of those employees you were successfully re-employing. You mentioned that you were employing some 1,200 on a part-time or temporary basis on the Island or lower Island or upper Island -- I forget where. But all across British Columbia, how many of those forest workers that lost their jobs were you successful in employing at least part of the time?

R. Stanyer: There are a couple of different parts to that question. One is how much Forest Renewal did directly stimulate, and I think we've talked about the answers to that.

The other part of it is that through the forest worker transition program, we offered people opportunities to retrain into other jobs either within industry or outside of the industry. There have been between 8,000 and 9,000 people that will have gone through that programming over the last three years, which ends at the end of March this year.

[1540]

R. Coleman: I want to move on to annual reports for a minute. In the auditor general's report -- and I quote from pages 95 to 96, where this is taken from:

"The greatest deficiency is the lack of performance information that could be used by the reader to compare Forest Renewal B.C.'s performance with its targets and previous year's performance. Rather, performance information is limited to the number of person-years of employment created per region and overall, and the extent of first nations participation. . . . " Further deficiencies stated in the report include the lack of corporate context, impact and interaction with other relative government agencies and policies and lack of information that key stakeholders would be interested in.

I have some concern about your annual reports being produced in a timely manner and in a manner that provides the information necessary to ensure the accountability process functions properly. In FRBC's response to the auditor general's report, the corporation claims to be committed to performance-based outcomes. When did you decide that you were committed to these outcomes, given the previous comments about greatest efficiency and a lack of performance information being there? You weren't performance-based previous to. . . . When did the corporation move to a better performance-based outcome?

R. Stanyer: Through the strategic planning process that started in 1997.

R. Coleman: So for the first five years of this corporation, we didn't have performance-based outcomes.

R. Stanyer: In the first five years we had targets as to what it was that we wanted to accomplish, both from the investment side and from the resource benefit that flowed from those investments. But we didn't have the same level of rigour as we now attach to the exercise -- that through the strategic planning process to set the strategic objectives and drive the performance measures, we will track how well we're doing against the plan.

R. Coleman: The government had made significant and precise claims about what FRBC would accomplish, yet the performance measures and reporting mechanisms were clearly not in place to adequately assess FRBC. Was the corporation worried about meeting government expectations? Was there discussion about how to assess whether expectations were too high?

R. Stanyer: I don't think so, in the sense that I think we would say that we had met the expectations in the general sense. Whether or not we had the ability to track them in an efficient manner is another question. I think that we certainly had the information available to us to -- if one had the desire -- show exactly where every penny was spent and to account for its contribution to the resource at the end of the day.

Quite frankly, I go back to what I said a couple of hours ago: we had difficulty in getting our partners sufficiently tuned up on delivering on the contracts that we signed with them. We didn't always get the best reporting out of ministries and industry as to exactly what was accomplished. That doesn't mean that they didn't know what they did, by any stretch of the imagination; it just says that they didn't report to us in as timely a way as we would have liked them to. And quite frankly, that's why we moved away from the B.C. Stats system and why we implemented our own investment management system -- so that we can handle these kinds of inquiries that come internally as much as they do externally.

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[ Page 1334 ]

I want to move on to the orders-in-council.

R. Thorpe (Chair): Excuse me, Mr. Coleman. If I could, I have a couple of questions in this area.

You've made reference two or three times now, I think, to some of the ministries not providing you timely and accurate information. Which ministries specifically?

R. Stanyer: Both Forests and Environment, but more so on the Forests side.

R. Thorpe (Chair): How are they providing you information today? Is it in a timely and accurate basis?

R. Stanyer: Yeah. I think we're doing quite well in the sense that a lot of the delivery that the ministries are providing, they no longer provide for us. We've streamlined our input process so that a lot of the activity that takes place is in an interlinked database. As inputs are made there, they flow directly to the corporation. So it's easier to track.

R. Thorpe (Chair): What kind of follow-up systems do you have in place? I don't want to go right down to the nth level of detail here, but what kind of systems do you have in place to identify that ministries -- let's just use the Ministry of Forests, because that's the example you've given -- are not providing information? What kind of follow-up mechanisms do you have in place to make sure you get the information you need to be able to manage your business?

A. Gorley: What we have in place now is, I think, a fairly simple contract management system. We approach our relationship with the ministries as if they're a contractor and providing us with the information is a contractual requirement. As the companies feed information into us on a quarterly basis -- and we have a deadline for that happening -- our investment officers track the receipt of that and in fact have to look it over and acknowledge its appropriateness before it is finalized in the system. The same happens for the ministries. So the ministries' information either is there or isn't there on the deadline. If it's not there, then we approach it as a contract issue and go to them and ask them to put it in.

R. Thorpe (Chair): Would you say, Al, that you have an aggressive follow-up system?

A. Gorley: I would say that we do now.

R. Thorpe (Chair): The reason that I'm asking this question. . . . I certainly don't want to relive other committee meetings in this area, but one of things that became apparent was the lack of aggressive follow-up -- although we didn't finish those discussions. So you're pleased that you have in place a program that allows not only management but also the board to follow-up on these things on a timely basis?

A. Gorley: I think that in recent months we've been quite pleased. As I said, it's very obvious when numbers aren't in the system, and we can go back to them and deal with it as a contract management issue. As a matter of course, staff now report to the board progress on the business plan during the course of the year. In order for us to do that, we have no choice but to be somewhat aggressive to ensure that the numbers are in there.

[1550]

One of the areas that we talked about here -- these ministries. . . . I took a note earlier, and I see it here now. Now that you're getting close to concluding your business plan and operational plan for the year 2000-2001, have you finalized all your contracts with the ministries?

A. Gorley: No. They're in the final stages of negotiation, but they haven't been signed off yet.

R. Thorpe (Chair): Is it your anticipation that they will be concluded before the end of the fiscal year?

A. Gorley: It is. Although if there were to be a glitch, the way the existing contracts are designed, work could continue for a short period while that happened. But our intent certainly is to have them done before the beginning of the new fiscal year.

R. Thorpe (Chair): Okay.

With respect to annual reports and performance measurements, are you leading or following the level of implementation that CCS is putting in place?

A. Gorley: To be absolutely fair, you would have to ask them. But we have been told anecdotally that we are amongst the leaders in Crown corporations, as of the last few months.

R. Thorpe (Chair): Is FRBC meeting its own expectations of implementation?

A. Gorley: In terms of setting specific performance targets and getting the measurement systems in place to do them. Being somewhat impatient, I would say that we would like to be doing better. But given the size of the project, it's very close to on schedule. We're very close to where we expected we would be at this point.

R. Thorpe (Chair): With respect to your performance measurements -- and hearing comments earlier about building up from the bottom and reporting back out, etc. -- how often do you share performance measurements with regions?

A. Gorley: I'm not sure if I'm clear on your question. Are you looking for how often we share results with regions?

R. Thorpe (Chair): Let me be clear here. I mean, we're talking about performance measurements. Maybe I shouldn't make an assumption. I would assume you're establishing them right down to your regional level so that you can monitor if it's a success, not so successful, or just "we didn't achieve it." Is that the case?

A. Gorley: Yes. What we're doing is. . . . The strategic plan, as you've seen, shows high-level targets. I'm speaking

[ Page 1335 ]

R. Thorpe (Chair): One of the things that I think Mr. Stanyer said earlier today is that when we get the system completed. . . . Are we waiting until we have a total information system completed before we start sharing or providing interim performance measurements, or are we putting them out as we have them in the hope of completing our system buildup?

A. Gorley: We began building the new information system. . . . It would be just over two years ago now, I think. Full implementation of what we would call the basic model was complete last September, but prior to that it was operating sufficiently that, for internal management purposes throughout the corporation and for information going to the board, we were able to use some of the information that was being put into the system. So I expect, as the auditor general's staff recommend, we will continue to make improvements to the reporting through the system, but in the meantime we're using the system operationally.

We've introduced a performance management program at the staff level such that our investment officers now track certain indicators on a regular basis, analyze them on a quarterly basis and then sit down and do business reviews with the companies that they deal with and discuss the necessary corrective measures in order to achieve the business plan. I wouldn't want to suggest that we have a fully implemented system, but the pieces are being put into practice as they're developed.

[1555]

A. Gorley: We tend to do it more on a quarterly basis, because we require the multi-year agreement holders to report in quarterly. They have a 30-day period after the end of each quarter to put their information in, so we look at it then.

R. Thorpe (Chair): How quickly after that 30-day period would you issue your report so that people can have timely information -- or as timely as possible?

A. Gorley: Well, the operating staff see the information as soon as it's on the system. The licensees are entering it directly into our system, so our operating staff have access to it immediately. It doesn't get rolled up for management purposes until it's all in and staff have had a chance to review it. At a senior management executive level, it would normally be, likely, 60 days from the cut-off period that we would see credible numbers.

R. Thorpe (Chair): Just so I can get a picture in my mind, let's say the first quarter is April, May, June. They have 30 days to report, so they report at the end of July. Senior management would not see a rollup until the end of September. Is that correct?

A. Gorley: The end of the first quarter would be June, to use that example. We would get indications, because our investment officers would see the information on the first or second day of July. They would have an indication operationally. However, senior management wouldn't see final numbers until 60 days after that.

R. Thorpe (Chair): On the investment managers side, are there flags in the system to identify serious variances as soon as they're reported in to the system?

A. Gorley: The investment officers will have been involved in approving the work plans that the companies submitted initially, so the reports are made against those work plans. If there's a serious anomaly, the operating staff would be aware of it quite early in the game, whether it's a cost issue or work not getting done that was expected to be done.

R. Thorpe (Chair): Within FRBC, then, if a serious flag goes up on an issue like this, does the investment person have a route to get it to senior management to identify that there could be a problem?

A. Gorley: The first thing that would likely occur is that the investment officer would deal directly with the forest company -- the agreement holder. If the issue was beyond their ability to deal with or couldn't be resolved at that level, it would go to the regional director, who can deal with senior company staff. If it was an issue beyond them, then it would come straight to the vice-president responsible for that business unit.

R. Thorpe (Chair): At what time and place and in what format do directors get a report on performance measurements?

A. Gorley: Our recent practice has been to do a business review or a report out at the first board meeting after each quarter. If we're well into the year and a good deal of activity has happened, then the report may be longer. If it's a less active quarter, the report may be shorter. But that would be the normal practice.

R. Thorpe (Chair): Would it be possible for the committee to receive a copy of a standard management performance report -- a standard performance measurement report that goes to the board? Would that be a possibility for us to see, just so we're familiar with what it looks like and how it works?

A. Gorley: I don't see any reason why we couldn't provide the committee with a copy of what we call our quarterly report.

R. Coleman: I just want to touch base on orders-in-council. The auditor general notes that orders-in-council issued as direction to Forest Renewal are not accounted for. There's no means outside of the Legislature to understand some of the direction government provides the corporation. Examples of OICs are on Skeena Cellulose, Empire Valley

[ Page 1336 ]

[1600]

In the case of land acquisitions, we have a program on protecting biodiversity in the province. Those acquisitions would require an order-in-council. However, in the case of Empire Valley, there was a different route that it went through. It came directly through the order-in-council process. In other words, we didn't ask for that.

R. Coleman: What impact did that have on your activities as a corporation?

R. Stanyer: It all fit within the business plan, so we didn't have to amend the business plan to include those investments.

R. Coleman: Did you ever have to alter your corporation activities as a result of OICs?

R. Stanyer: Not that I can think of.

R. Coleman: So the OICs were just giving you direction. Did you not have to, all of a sudden, change some of your staff complement to deal with some of these acquisitions that weren't on your plate?

R. Stanyer: Not particularly, because in the case of Empire Valley, they required a transfer of funds to accomplish the deal. In the case of moneys for the Skeena contractors, that required a transfer of funds to some banking institutions. It didn't require a lot of staff effort to handle those circumstances. I mean, we need to put the checks and balances in place for payments and those kinds of things, to ensure that the lending institutions had some guidelines, to operate, but none of those things were particularly onerous from a staff perspective.

R. Coleman: But you ended up just receiving the OICs and having to react to them, because government's basically in charge. What was the board's reaction? Did the board at any time question any of the OICs? Or did they just say: "They're orders-in-council. We have to follow through"?

R. Stanyer: I think Mr. Gelz can maybe speak to that.

R. Coleman: I look forward to that.

R. Stanyer: I mean, we as a board. . . . I think as individuals we all have our own personal perspective on these kinds of things. But quite frankly, as I say, the board has taken a position in the instance of investing in private corporations. It's not a decision that the board wants to take on. If government wants to do it, then government can direct us to do those kinds of things. If somebody comes directly to Forest Renewal and says, "We want you to advance us X number of dollars to keep our corporation from sinking," the answer will be: "We don't do that work. You should go and talk to the appropriate cabinet minister or somebody in government to hear your case. We don't want to hear the case." We don't deal with them.

D. Gelz: Yeah. The short answer from my perspective would be that I think there was a good segment of the board that weren't happy with it at all. But there was a lot of debate. I think Roger's overall characterization is correct: we didn't think it was appropriate. I can't recall every one of them, but I think there was a lot of heated controversy at board meetings about the initiatives. I'll leave it at that.

R. Coleman: I'm basically finished with this portion of the report before the silviculture program. I just hope that in the future, we aren't going to come in and look at a Crown corporation that, without some front-end planning necessary to control expenditures and ensure performance measures, goes out and spends $1.2 billion before we get to its first plan. I would hope that we also don't get the situation where a jobs and timber accord forces a corporation to adopt policies and output measures which are basically suspect or detrimental to what the corporation started out to do in the first place.

I think that when we bring something before a legislature and we outline its five principles, we should follow through on those principles. If we're going to change them, we'd best change them in consultation with everybody, rather than wake up one day and find out that we missed some of the marks.

Hon. Chair, thank you for your time on these questions today. I'll wait with relish for the silviculture section of the auditor general's report.

[1605]

R. Stanyer: That training was relative to Forest Practices Code implementation; all of it was delivered by external contractors.

J. Weisbeck: Okay. I have another question regarding your IT strategy. You had spoken about the investment management system, and I'd just like you to expand that a bit. We live in a digital world, and we're dealing with e-commerce and e-government. I'd be very curious to know how your stakeholders access information. Do you have information on line? What's available to them? Can they access applications to do various jobs? If they don't, do you have a plan in place to improve that?

R. Stanyer: We have our own web site, which contains annual reports and various other reports. It has a menu on it that gives people an idea of the information that Forest

[ Page 1337 ]

As far as employment is concerned, there is the employment that is directly within the corporation, which is handled in the standard government form. So jobs would be in Postings and those kinds of things for people to access. For Forest Renewal-funded employment, that is largely carried on by industry, and people would access that employment directly from our industry partner. In the case of New Forest Opportunities, it would be directly through their work. Forest Renewal would not direct employment, other than. . . . We may inform an interested job-seeker about where they might find employment that Forest Renewal funds, but we don't hire people on behalf of any company to do the work.

J. Weisbeck: Do you have any plans to expand the system into this field, where people can access more information using technology rather than face-to-face interviews and that type of thing?

A. Gorley: Quite frankly, in the last two years we've put our effort into building this investment management system, which should ensure that we are able to collect and make management decisions based on direct activities. In doing that, we have not put the effort that we would like to into getting on the leading edge of the kinds of things you're discussing. It's certainly something we've discussed at the senior management level as an initiative -- that once we feel we've stabilized the investment management system and that's working well for us and is in maintenance mode, so to speak, we would move on to increasing our electronic access for stakeholders or any member of the general public. But there is no specific plan in place at this point.

M. Coell: In your strategic objectives, objective 5 is to support forest workers through transition. For me, this has been an important part of your mandate right from the beginning -- dealing with people who had lost jobs in the forest sector and the retraining process. I just have a few specific questions re those people who were retrained and the methods you used to follow up on whether that training was beneficial, whether they actually got jobs and made that transition. I wonder if you can tell me how many people were retrained, probably, in each of the years you've been in operation at this point.

[1610]

I'm not sure when this was up to. Oh, it's updated to December 1, 1999. We had 13,000 individuals who had been deemed eligible for the program. There were 2,800 who had been re-employed. From that, 2,000 participants were currently in training, 4,000 participants had completed their training and another 1,000 are continuing to work on developing their back-to-work action plans.

M. Coell: With regard to the people who had completed the training, the 4,000, how many of those are employed at this point?

R. Stanyer: The survey that we conducted last fall said that about 80 percent of people who had gone through had found employment paying equal to or higher than the employment they had before.

M. Coell: Could you tell me what sort of mechanism is in place to follow those people over a period of years?

R. Stanyer: To the extent that we maintain contact through one form or another or have current addresses on file, we would periodically do a review of employment. But the program is over as of March 31, and we may do one or more follow-ups later on in the year relative to that. At that level of numbers, and the others who are remaining to complete, we would be interested to see how they made out.

M. Coell: I'll just add to that. I think that for accountability, it's really important that if we're going to spend money on retraining, we ensure that the retraining was effective and that it got people into transition. I would encourage you to continue on with that and to put more effort into follow-up and also, I think, to analyze that with the type of training that was given -- whether it was appropriate and whether it actually assisted someone in permanent employment.

R. Stanyer: One of the things that we did in this program -- which has been different from historical retraining programs -- was put a lot of intensity into what we referred to as a back-to-work action plan. We put people through a fairly intensive counselling process, whereby they had to do quite a bit of research on their own about the prospects of finding employment once the training was complete, instead of a menu-driven approach, which has been used historically, where you simply say to people: "Here is a range of courses that are available. What would you like to train for?" If we look at that historically, it has provided a lot of small-motor mechanics, a lot of people with air-brake tickets, a lot of people with first-aid tickets or welding courses or that kind of thing and, subsequently, not a lot of opportunity for employment at the end of it.

This process was really driven to: what are the prospects of you finding employment if you choose whatever it is you want to choose? We made sure that people put a lot of effort into being committed -- first of all to the process, and secondly to a good understanding of what the outcome was going to be. In that survey, over 90 percent of the people responded that the program had been a benefit to them, that they appreciated the opportunity and got a lot out of the opportunity to take the training. Secondly, as I say, the 80 percent number is historically a very high number against any other program that we're aware of, as far as getting employment. So it worked well.

[1615]

[ Page 1338 ]

R. Stanyer: We have, in effect, replaced the program. The forest worker transition program was really a training-driven exercise, giving people an opportunity to transition out of the industry, if that's what they wanted to do -- or skilled upgrading or other employment opportunities within the industry. But it was about funding training.

The replacement program is about helping people get re-employment. Therefore, it is the forest worker re-employment program. The objective of the program is to remove any barriers that may stand in the way of a worker taking an available job. If it means that the individual has to move some distance to take advantage of a job opportunity, we make it possible for those moves to happen. If at the end of the day, we have to participate in some skills upgrading or those kinds of things to facilitate the worker transitioning into a new set of skills or out of the industry, then we'll also contribute in that vein. But the first emphasis is about re-employment, wherever that employment opportunity exists, coupled very much with federal programming. We're very much about filling gaps as opposed to taking the load on and carrying the worker through a two-year period, as we did with the forest worker transition program.

E. Gillespie (Deputy Chair): I want to ask a question of the office of the auditor general. It sounds like we're a little bit all over the map right now and perhaps winding up. I want to ask a question about regional equity. I asked Forest Renewal B.C. about their view of regional equity, and they did say that there's no agreement at this time with the office of the auditor general about what would look like regional equity to the office of the auditor general. I'm wondering, Peter, if you can comment on that or if there's someone from the office who can comment on that.

P. Gregory: I think Endre Dolhai would comment on that for us.

E. Dolhai: I don't know whether the office of the auditor general can establish what regional equity should be. I guess our point is that the corporation -- since it has regional equity, incrementality and wise spending as major principles to drive their investments -- has to be clear on what they mean by it and then be able to report, measure and explain to people what it is and what the rationale is for them establishing it. I don't think it's our job to tell the corporation what those things should be. We're just looking at what the drivers are for the corporation's investments, and we're looking at whether they have been clearly established, measured and reported on.

E. Gillespie (Deputy Chair): This audit was done in '98-99. Is that correct? There's been an opportunity for FRBC to respond. Would your office have anything to say with respect to how things have progressed since that audit and since that response?

E. Dolhai: We certainly are quite pleased at the direction the corporation has taken. Certainly there is a lot more awareness about the need for being able to clearly establish, provide guidelines, measure and report on performance than when we started the audit.

E. Gillespie (Deputy Chair): What's your assessment of the strategic plan?

E. Dolhai: We haven't taken a very close look at the strategic plan, but it's certainly a step in the right direction. It establishes what their strategic objectives should be, and they have set targets and performance measures. It should be a good basis to report performance against.

[1620]

P. Gregory: Yes he will.

R. Thorpe (Chair): I would like to just follow up tomorrow on regional equity. It comes as a result of some correspondence that I know FRBC has received from the Northern Forest Products Association. In fairness, with respect to that, I'm going to leave that until tomorrow. We'll hear first-hand from the auditor general. As I understand, he met with representatives on January 27 on this subject. It would probably be fairer to have him comment on that in person, instead of some of us speculating.

R. Kasper: Just as a follow-up to what Evelyn has asked, Endre, does what you heard today meet and address some of the concerns that have been raised in the report?

E. Dolhai: A lot of things that have been said and the direction the corporation has taken -- as you could see from their presentation, we have 19 recommendations; six have been implemented, and they are working on the remaining 13 -- certainly tell us that they have accepted our recommendations, and they are moving towards implementing those recommendations.

R. Kasper: Okay. I'm not making a motion.

J. Weisgerber: I have a few questions, and perhaps Roger or any of the other members would look at page 19 of the report. That might be the easiest way for us to approach this next question. In the top paragraph on page 19 there's a description of New Forest Opportunities Ltd., etc. In that paragraph there are two references to coastal -- "to be expected to assist displaced coastal workers;" and then in the next sentence it goes on to say, "also delivers a forest worker transition program for the coast." And in that situation, "the coast" is in capital letters. From the perspective of a northern interior representative, are those references to coastal your references, or are they the references of the auditor general?

R. Stanyer: They would be the references of the auditor general.

J. Weisgerber: So you don't distinguish, under New Forest Opportunities, between coastal and interior workers if they're displaced?

[ Page 1339 ]

J. Weisgerber: Okay. So you have unemployed forest workers in various regions of the province. Do the solutions available to them or the training opportunities or job opportunities differ greatly -- or at all -- for those people who are in the coastal area as opposed to someone in a northern interior community?

R. Stanyer: Yes. On the lower coast the area that New Forest Opportunities Ltd. services, which includes Vancouver Island and the Queen Charlottes and basically the southern portion of the Vancouver forest region. . . . It doesn't include Prince Rupert and that area.

[1625]

[M. Coell in the chair.]

New Forest Opportunities flows out of the jobs and timber accord, which was an agreement between government and industry about re-employing displaced forest workers and first nations and other local qualified forest workers in conjunction with a collective agreement with the IWA. There was no agreement on the rest of the province about establishing a similar collective agreement or a similar delivery mechanism, so it is people within that geographic area that are covered by New Forest Opportunities Ltd. As far as job opportunities in the rest of the province, they are handled in a much more traditional environment. In other words, if you're a displaced forest worker, there may be some residual responsibility on behalf of your former employer. Or you may pick up further employment opportunities through the silviculture industry in the more traditional way: you know the contractor; you get an opportunity to go to work for him. There isn't a delivery mechanism that is comparable outside of the lower coast.

J. Weisgerber: Okay. I think that at times, as you've identified, while not as chronic unemployment in the forest industry, there certainly are areas where -- Fort Nelson at times may be a classic example. . . . I guess being unemployed there is just as painful -- perhaps more so, if it happens to be 40 below -- as it is anywhere else. I'm concerned, I guess, about whether or not my constituents are getting an equitable treatment under this program. Perhaps you could give me some assurances along that line.

[R. Thorpe in the chair.]

R. Stanyer: I think maybe Mr. Gelz might want to add a little bit to this. But I can say that the interests of government were to have a provincial program. I know that that's what they wanted, and I certainly know that that's what the IWA's interest at the end of the day was. However, industry objected strongly, and there was no agreement that a similar program would be accepted by industry. Therefore the issue of extending a similar arrangement to the rest of the province. . . . Negotiations carried on up until last summer some time and then withered on the vine, and no fruit was borne out of those discussions. So I don't really know what the status of them is. Forest Renewal was not involved in the process other than a general oversight as to what was going on. The discussions were between industry representatives and the IWA. We were a bystander to that and did not participate directly in that process.

D. Gelz: The circumstance and history, really, is different -- from the perspective of a number of people in the interior -- in this respect: there was not a heavy unionized environment that in a sense led to New Forest. Fundamentally, all the contracting that goes on is independent. The logging in the interior is essentially all independent contractor-based, as opposed to unionized IWA-based on the coast, which essentially was the history. So that had a lot to do with why New Forest was the vehicle put in place on the coast and why, in the interior, the perspective was that they didn't want to use a New Forest vehicle as the way to deal with their issues.

I don't think that, from the perspective of an interior displaced worker being dealt with in a way where the resources of FRBC would be made available to that person, should be significantly different anywhere in the province. But we haven't had as much difficulty as we've had on the coast, hence more of the focus.

J. Weisgerber: Well, I'm kind of interested in the answer to the question as well. Would a displaced union or non-union forest worker in the interior have available to them essentially the same resources from a Forest Renewal perspective as someone on the southern coast?

R. Stanyer: Certainly as far as the transition program or re-employment services -- those kinds of things -- the answer is yes, they would have identical services. In the case of opportunity to go to work for New Forest Opportunities Ltd., that would not exist.

[1630]

R. Stanyer: Yes.

J. Weisgerber: It seems to me that at one time, there was a concern about displaced workers anywhere in the province, particularly unionized workers, having a priority on jobs provincewide. Does that situation still exist?

R. Stanyer: There isn't a priority on the lower coast on unionized workers. The priority is displaced forest workers, without consideration of whether they were union or non-union. For instance, in the forest worker transition program, 30 percent were union and 70 percent were non-union -- without saying it was IWA or other forest unions. So when you look at the employment opportunity through New Forest, first consideration is displaced forest workers, second consideration is first nations and third consideration is other qualified local people.

[ Page 1340 ]

R. Stanyer: Outside of the coastal area they have no involvement.

J. Weisgerber: Okay.

R. Stanyer: Within the coast they are the employer of record for people who work on the land-based programs of Forest Renewal. Watershed restoration to some degree -- not all projects, but in-stream activities -- and the silviculture activities on the land are what they are the employer of record for.

J. Weisgerber: So outside of the coastal area there is no such activity. Silviculture activities are all private sector there?

R. Stanyer: Correct.

J. Weisgerber: They're not influenced at all by the employment or the selection or the category of people who are employed; that's the clear choice of the independent contract.

R. Stanyer: Correct.

J. Weisgerber: Okay.

D. Gelz: Again, there'd be nothing that would prevent the kind of informal arrangements that do go on, where if the silviculture contractor was working for a major employer and, for whatever reason, a mill went down. . . . There'd be nothing to prevent -- and this has happened -- circumstances where that employer went to its silviculture contractors and said: "For those individuals who are willing, able and interested in doing this line of work, could you make the employment available?" That sort of circumstance has occurred. I guess in that respect the interior said: "Leave us alone. We think we can deal with the issues that we have to deal with." Now, that's an arguable point. But that's effectively where the debate got to, I think, as of about last June or whenever it was that Roger reflected it. . . .

J. Weisgerber: Okay -- thank you.

R. Thorpe (Chair): I have a few questions. What is the latest annual report available to the public?

R. Stanyer: It's 1997-98.

R. Thorpe (Chair): If we're looking at providing more timely information because we're responsive to that requirement, do you think some work is required in this area? I see you shaking your head, so I assume that's a yes. What is being done to address this, to help restore credibility in this area?

R. Stanyer: You might say there's a lot of heat, and we hope that provides a lot of light at the end of the day. We are behind with our last year's annual report for information collection purposes. It is, I think, almost at the printers as we speak. So we expect to have it within the next couple of weeks. From that perspective, we are committed to getting this year's annual report out by September of the year 2000. Believe me, there will be a lot of heat.

R. Thorpe (Chair): Yeah, there could be a lot of heat to get it out on time. When that report comes out, do you just deliver it to the minister's office, or do you distribute it?

R. Stanyer: We distribute it.

R. Thorpe (Chair): Could you make sure, then, because I'm sure every committee member is interested, as soon as it's available. . . . I see Ms. MacPhail nodding that, yes, she's looking forward to receiving it.

With respect to your detailed annual strategic plan, other than your summary here, what is available to the public?

A. Gorley: In addition to the summary, which I believe you've got -- it's the fold-out one -- there is another document, which is a more comprehensive version of the strategic plan that puts a little bit more flesh on those bones. It's roughly the same size as our annual report.

R. Thorpe (Chair): When will the report for the plan for the year 2000-2001 be ready for distribution?

[1635]

R. Thorpe (Chair): The enhanced strategic plan.

R. Stanyer: It's ready now, anytime you. . . .

R. Thorpe (Chair): For 2000-2001?

A Voice: This is a five-year plan.

R. Thorpe (Chair): No, the annual plan, not the five-year.

R. Stanyer: Oh, the business plan.

R. Thorpe (Chair): Yes.

R. Stanyer: The business plan will be in the hands of the minister before the end of March.

R. Thorpe (Chair): So do you distribute that, or does that just go to the minister?

R. Stanyer: The minister releases the plan.

R. Thorpe (Chair): Okay. As the Chair of Public Accounts -- and I know all the members of this committee would be interested -- I would ask that you please pursue with the minister's office, as a request of this committee, that members on this committee receive it as soon as it's available.

Do you believe it would serve any purpose for the auditor general's staff to do. . . ? I know they always do follow-up audits. Could they be useful to the organization, to the board, to the public of British Columbia -- by doing a much more timely follow-up? Would that be of assistance to FRBC?

[ Page 1341 ]

Interjection.

R. Thorpe (Chair): I would trust that the representative from the auditor general's office. . . . I don't know if you'd like to make a comment. Certainly someone is suggesting to you that it might be useful. Do you want to make a comment on that, Peter?

P. Gregory: Only to say that we're quite capable and willing to do that. We have sort of an established pattern, but we can move that up, certainly, and we'll talk to FRBC about that.

R. Thorpe (Chair): Yeah. You know, it's nice to have established patterns, but I think that we're talking about credibility. We're talking about performance measurements; we're talking about perhaps, hopefully, someone leading instead of following in that area. Maybe this would be a very good example -- to step out of the box and to proceed that way.

P. Gregory: We'll follow up with Mr. Stanyer.

R. Thorpe (Chair): Could you also let the committee know what your intentions are in that area?

P. Gregory: Yes.

R. Thorpe (Chair): Thank you.

With respect to your audit committee of FRBC, who is on that?

R. Stanyer: The audit committee is chaired by Mr. Garry Merkel. Members of the committee are Mr. Donald Hayes. . . . I'll have to check. I don't want to mislead you on that.

R. Thorpe (Chair): While you're checking that, how often do they meet?

R. Stanyer: Not less than quarterly.

R. Thorpe (Chair): Are they also focused on the issue of performance measures?

R. Stanyer: Their primary focus is on the overall audit plan. As we report through on performance measures, they see that kind of thing. We have a fairly broad audit function that they oversee. Each of the multi-year agreements has an extensive auditing process within it, so they're focused on a variety of things. Certainly performance measures are something they do see.

R. Thorpe (Chair): When you are providing us with the information on who and how often, maybe you could also provide the dates of when they've met in the last little while and when they're scheduled to meet in the next little while going forward and also maybe a brief commentary on where performance measures fit in the scope of things that they're doing.

What I'm hearing today -- and what you're saying -- is that performance measures and accountability are a huge part of how you're changing your organization. I would hope that the audit committee would be focused on that just to help you pursue that goal. What role does internal audit have in this exercise?

[1640]

R. Thorpe (Chair): How often is the business plan -- strategic plan -- document reviewed in detail by senior management and the board?

A. Gorley: Speaking for senior management, it's a document that sits on the desks of most of senior management and is utilized on an ongoing basis. It is more formally looked at on a quarterly basis in preparation for reporting out to the board.

R. Thorpe (Chair): Okay. I'm jumping around here a little bit, but these are just some notes I've taken during the day. The value-added sector. It was talked about earlier that they've established return-on-investment criteria for decision-making. Who makes the decisions on investments with respect to the value-added sector?

R. Stanyer: The business unit itself. There is a couple of steps in that -- two or three, actually. The business unit conducts two or three business reviews in the year with various stakeholder groups. One group is the value-added advisory committee to the board -- and an expanded version of that, where they meet in the fall with various representatives of the value-added associations around the province and look at the next year's business plan for the business unit. So all of this input helps the business unit shape the plan. That plan is then brought forward to the board in the fall and is approved and then implemented by staff. They make decisions -- with Mr. Gorley and myself, if required, ultimately signing off specific kinds of proposals that would go forward.

Further, that business plan is also reviewed in the development by the implementing partners, a fairly broad group of people, such as B.C. Wood Specialties, Forintek, FERIC and a variety of other associations around the province that help implement the business plan. So we've got it from the perspective of what the needs are by industry, and we've got it from the perspective of what's possible by the delivery partners. We mesh those two together to ensure that we've got something that will work.

D. Gelz: Actually, just to add to that, this is one case where there is a matrix that's used. The value-added envelope committee developed a set of criteria that were. . . . I think this probably would have been in about '98. We had a couple of kicks at it, but I think the latest version that we're using was

[ Page 1342 ]

R. Thorpe (Chair): Could someone please provide us with a copy of that matrix?

I hate to ask the next question -- the dreaded regional equity question. How does it work in the value-added sector?

R. Stanyer: Considering that a lot of the dollars. . . . A third of the money is to support markets, so a lot of the delivery of that is external to British Columbia. Off-shore, continental U.S. and that sort of thing is where that happens. So we take a provincial view that everybody will benefit by the amount of that stimulation of the marketplace. Secondly, the next biggest piece of the value-added plan is training. There is open access throughout the province for access to the training centre in Abbotsford. Where it makes more sense to have the training centre moved to a particular operation -- as we've done several times by taking over plants on a weekend or evening basis or something like that and allowing opportunity for workers from a particular area, such as Vanderhoof -- it would draw people from Prince George and other communities adjacent to that. We can deliver external training as well, from that perspective. We measure as we go through the year what the regional equity of those kinds of things are.

[1645]

R. Thorpe (Chair): I guess that's why you look at the ROI as one of your key criteria, I assume, based on the discussions we've had. Has the auditor general's office reviewed your performance management system or the plan you're developing?

A. Gorley: The performance management system that we're developing and implementing was in the early stages when the auditor general's staff were on site doing the audit. I think it would be fair to say that they had a glimpse of the early stages of it but didn't have an opportunity to look at it in any kind of detail.

R. Thorpe (Chair): Do you think, as part of a follow-up, that it makes some sense to do that before we get a whole bunch further down the road, just in case?

A. Gorley: I don't have any doubt that we're going down the right road, but we're always prepared to have a little help along the way.

R. Thorpe (Chair): Al, just to follow that up, did the comptroller general's office have a look-see at the performance management system?

A. Gorley: Our comptroller has fairly regular contact with staff over there, but quite frankly, I can't say off the top of my head whether they have had a discussion directly on our performance management system.

R. Thorpe (Chair): The only reason I'm asking these couple of questions is because you seem to be committed to implementing it, and that's encouraging, because we've had many groups appear here that talk about it, but we don't see a whole bunch of results. If we're moving along, I just think it might be very, very important to involve these offices.

A. van Iersel: I just want to add to what Mr. Gorley said, in the sense that their comptroller came from the internal audit branch and was formerly a director there. So he's well experienced in providing internal audit services and in what to look for in terms of systems development and so forth.

R. Thorpe (Chair): One of the things that you talked about in your presentation under theme 1 of your strategic plan this morning was that all investments must contribute to objectives and be consistent with commitments. Again, how do you, inside, make sure you have the aggressive discipline in place so that this is adhered to, is not interfered with and flows right from the entry level, if you will -- where they come in -- right up through to the board level? Give me some degree of comfort on what your checkoff is on that and how aggressively you guard it and monitor it.

A. Gorley: I think it's becoming more rigorous as we put each piece of the performance management puzzle in place. It's very hard to have a checkoff if you haven't yet identified what the outcome or measure of it is going to be. But as those are put in place, then it becomes the operating procedure for our staff. To use an example of an area where we have a silviculture plan in place -- and we'll get into that when we discuss silviculture specifically -- that strategy for the local area would identify a set of suitable silviculture opportunities for that area. So anything that is on that list and has been identified in that plan as providing a return on investment to the timber supply would be an acceptable investment in that area if it meets the other criteria for Forest Renewal.

The system that we've got in place, then, based on those plans, is that our investment officers, regardless of which business unit they're in, look at a work plan that's prepared by the proponent -- and that work plan describes the activities, the projects, that are going to occur -- evaluate it based on the existing set of guidelines in the corporation and either approve it or return it to the proponent for adjustments. That's the front-end piece. Then, as Mr. Stanyer indicated, we have an audit process in the multi-year agreements so that over the course of a period of two or three years we would do an audit on every one of the multi-year agreements and look to ensure that in fact that's what's been occurring.

[1650]

[ Page 1343 ]

A. Gorley: That target is the result of at least a year, if not more, of intensive work with timber supply analysts and silviculture specialists, primarily within the Ministry of Forests but also some consultants. I think we want to be clear -- Forest Renewal wants to be clear -- that the 25 million cubic metres, from our perspective, is not necessarily allowable annual cut, because it's not within our purview to determine what gets cut. What we're saying is that the activities that Forest Renewal undertakes in the area of silviculture over the next five years will result in 25 million cubic metres of wood being available that wouldn't otherwise have been available.

Where that comes from is based on. . . . Although the provincial silviculture strategy has only been completed for a few months, obviously it was around a little bit before that in draft form. So based on the overall strategy for the province and the mix of activities that we expect to occur -- both what's happened historically on the land base and what we see evolving -- each of those activities adds something in terms of volume or value.

For example, the analysts went through the tree improvement program and estimated what volume increase would occur -- and some of that volume increase doesn't occur until 30 or 40 years into the future, until you harvest the tree -- as a result of planting with improved stock and provided an estimate of that. They estimated the backlog program, completing the backlog program within the time lines predicted, and said, "So, how many hectares of land would be in production that wouldn't otherwise be in production? How many cubic metres would that add up to?" -- and so on, down the list of potential silviculture activities. So there is essentially a linear relationship between the activities and the cubic metres that would be generated from those.

R. Thorpe (Chair): On page 11 of the strategic plan, under "Sustainable Harvest," you make the statement: ". . .investments in second-growth forests will stabilize the medium- and long-term sustainable harvest." Can FRBC explain what this statement means in quantitative terms? Specifically, can FRBC explain what the specific allowable annual cut will be over a specific time frame or not? I think you answered no to that, didn't you?

A. Gorley: Yes, I answered no.

R. Thorpe (Chair): With respect to page 10, you talk about the phasing out of investments to access harvesting areas. Can you explain how this issue has been strategically addressed and how the effect of this decision will be mitigated to avoid impacting the forest industry? Or has it just been decided to unload these costs on the industry?

[1655]

R. Thorpe (Chair): What are the annual dollars associated with that?

A. Gorley: The bridge replacement program -- I think we referred to it earlier -- was originally planned to be $70 million over a period. I think it was originally planned to be three years. Considerably less actually went into that.

R. Thorpe (Chair): On pages 17 and 18 in your strategic plan, you talk about increasing the sale of B.C. added-value firms by 10 percent over the expected growth of 20 percent over five years; that's on page 17. Can you explain what the source of the expected 20 percent sales growth rate is? Also, how did you get the 10 percent figure above the 20 percent?

A. Gorley: I can't give you the technical details -- my colleagues may be able to -- other than to say that it was done on the basis of a great deal of consultation with the industry. We really look at it very much as an industry-established target, rather than one established by us in isolation.

R. Stanyer: The mechanism around that was once again in reference to the work done by the federal government, particularly a gentleman in Victoria here, that benchmarks the industry and has kind of made an assessment in consultation with the industry about what normal growth would be and then factoring in this: "If Forest Renewal invested these extra dollars, what would be a reasonable expectation of return on those investments?" So it's a lot of work with industry, as Al says, and what we expect to get back out of our marketing initiatives, particularly from that perspective.

R. Thorpe (Chair): Is that also the way we got the $100 million into $150 million? On the top of page 18, it says $100 million "will generate an additional $150 million in value-added sector profits." Is that basically the same type of report or individual that was doing that work?

R. Stanyer: Yeah.

R. Thorpe (Chair): Okay. Given that your objective 7 is to increase FRBC effectiveness and efficiency, have you undertaken an analysis of the advantages or disadvantages of converting to a trust fund model, as I understand Alberta and Quebec have?

A. Gorley: We have looked at those models, particularly the Alberta model, because the forest industry has raised it as a possibility for us on a number of occasions and, I think it's

[ Page 1344 ]

[1700]

So to make what could be a long answer a little bit shorter, yes, we've looked at that. We've looked at the potential efficiencies that could be gained out of those, without adopting them sort of full package. I think they are influencing the evolution, for example, of our new land-based deliver system or multi-year agreement system.

R. Thorpe (Chair): Thank you, Al.

Des, with respect to being an independent board member, do you feel that you receive the timely information that's required for you as an independent board member to discharge your responsibilities? Or do you feel there are any shortcomings in information that is provided to you, especially as you're moving into this new model where performance measurement seems to be such a key component of evaluating the success?

D. Gelz: I've never experienced any problem with respect to a shortage of information. Now, whether it's the right information is, of course, I guess, the key aspect of that question. Again, as we touched on earlier, I think that the earlier part of FRBC's history was that it was more activity-oriented. We certainly weren't focused on the outputs, even as much as I think I vocally expressed during periods of time at the board; I think we're there now.

I don't feel any. . . . I guess, as Al expressed earlier, I'd like to see us get the information systems up and running, so that the kind of information that we get back is as timely as it can be, because when we do go through these quarterly reviews. . . . You've got to keep in mind that one of the issues that drives FRBC's activities, which we haven't touched on, is that there's a very seasonal aspect to what we do because of the weather circumstances in various areas of the province. So getting that information, for example, early in the spring so that we're ready to go in the fall is a critical thing.

So I guess I'll be more satisfied when. . . . I think I'd asked Al earlier today: when we look at the output measures, how far down the track are we with all these outputs in terms of being able to track them? Our sense collectively is that we're maybe somewhere between 60 percent and 70 percent. Clearly when we're at 100 percent or closing in on it I'll have a greater level of satisfaction.

R. Thorpe (Chair): Okay, I'll just leave it at that.

You know, you put in place six out of 19 of the recommendations; some are going to be bundled together. We're going to get a fair amount of information from you. That means that we've got 31.6 percent of the task completed. So again I want to thank you for your candid answers here today. Hopefully, you found it beneficial. I want to once again encourage you to lead and not wait for CCS. I just want to thank you.

I just want to know: Arn, do you have any comments or anything that you'd like to say?

A. van Iersel: Chair, I think the issues have been well canvassed. I personally have taken a lot of comfort in what the corporation has said about its business planning and its investment approach. Like everyone else, though, I would like soon to see the numbers in terms of the return that we're getting on this investment, so that's where I would leave it.

R. Thorpe (Chair): Peter, did you. . . ?

P. Gregory: No, I don't think I have anything to add. We will be following up with FRBC in terms of doing early follow-up work. At that point we can perhaps also discuss the performance management system and whether something would be useful around that. We will report back to the committee.

R. Thorpe (Chair): If no one has any other questions -- and I know this is unusual for this committee, but we too are making progress in our performance measures -- we're going to reconvene tomorrow morning at 9 o'clock. We'll start with silviculture. I want to thank all the staff that came from both the auditor general's and FRBC today. Thank you for your answers. We look forward to the additional information. Have a nice evening.

The committee adjourned at 5:04 p.m.

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