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 1345 ]

The committee met at 9:07 a.m.

R. Thorpe (Chair): We'll get started. George, I have a question of you from yesterday, but we'll wait and do that at the end. Or do you want to do it right now?

G. Morfitt: I can do it now.

R. Thorpe (Chair): Are you ready to do it?

G. Morfitt: I believe so, yes.

R. Thorpe (Chair): You as well as most members of this committee, I believe, and mayors and Mr. Stanyer and a whole bunch of other people have received quite a bit of correspondence from the Northern Forest Products Association. They are expressing a concern that you. . . . Well, instead of me trying to guess here, why don't I just read from Mr. Jadrzyk's letter of February 14 to me.

"Mr. Morfitt, you have received several pieces of correspondence. . .from [the] president of the Northern Forest Products Association objecting or taking exception to one of your recommendations on page 67. The recommendation deals with how FRBC funding is allocated to the regions of the province. You recommend that AAC should not be the main driver for allocations. Yet NFPA and many northern mayors, who also wrote you, object to this view and instead believe that FRBC funds generated from the north forests should be reinvested back in those same forests to ensure sustainability of those forests and the communities that depend upon them. In other words, they support using AAC as the main allocation mechanism for FRBC regional funding."

[0910]

We wrote back to Mr. Jadrzyk on that basis on December 15 and explained to him that he'd misinterpreted what we had said there and explained at some length exactly what our report was saying. In the meantime, Mr. Jadrzyk, as you say, had distributed his letter far and wide. As a consequence, we received 17 other letters from various communities, four chambers of commerce, 12 mayors and one councillor -- a whole variety of communities up in the north -- supporting Mr. Jadrzyk's letter, which he had distributed to them. We responded to each one of those, explaining our position and enclosing a copy of the letter that we had written to Mr. Jadrzyk. Mr. Jadrzyk then came down to our office not too many weeks ago, and we had a very good and useful meeting with him. He explained the concerns of the north with respect to regional funding, and I think he went away with a full appreciation of what we were trying to say in our report.

R. Thorpe (Chair): Thank you.

If we could move along now with the silviculture part of report No. 6 on Forest Renewal. . . . If the auditor general's staff would like to make sure that they introduce themselves for Hansard, and if everyone can make sure that they speak clearly into their microphones, including the Chair. . . .

M. Sydor: My name is Morris Sydor. I'm a principal with the office of the auditor general. With me I have Ian Aaron, who is a project leader. Both of us were involved in the silviculture audit, and Ian will be making the presentation this morning. The presentation is on the audit report on the silviculture programs, which starts on page 103 in the Forest Renewal report.

I. Aaron: Good morning. There are two categories of silviculture activities. One is basic silviculture, which consists of activities such as site preparation, planting and brushing. These activities aid in establishing a free-growing crop of trees. As this is a legal requirement of licensees, Forest Renewal does not fund these activities. Incremental or enhanced silviculture consists of activities such as site rehabilitation, spacing, pruning and fertilization carried out on free-growing stands. The purpose is to maintain or increase the yield and value of the timber.

These are discretionary activities and are not legally required. It is these activities that the enhanced forestry program funds. Backlog refers to land that is harvested or otherwise disturbed by disease, pests or fire, such that it is not satisfactorily restocked with commercial species within a reasonable time. Since 1987 there has been a legal obligation requiring licensees to achieve free-growing site status. In 1996, Forest Renewal approved a program to reforest these backlog lands that related to pre-1987.

[0915]

Fertilization is the addition of fertilizer to promote tree growth on sites deficient in one or more soil nutrients or to gain additional volume from good sites. It is the primary way of producing more volume. Fertilization can also affect the harvest timing, because fertilized stands reach merchantable size earlier that non-treated stands. The time reduction can be up to ten years or more on higher-quality sites.

In Forest Renewal's listing of eligible activities, juvenile spacing is described as a treatment to remove less desirable

[ Page 1346 ]

Between the enhanced forestry and backlog programs, Forest Renewal spent more than $400 million by March 31, 1999. Forest Renewal does not deliver the silviculture programs itself; rather it buys services from industry proponents and the Ministry of Forests. In this capacity and given the size of the program investments being made, it is therefore critical that the corporation spends wisely by being a prudent purchaser of these services.

The purpose of this audit was to assess whether Forest Renewal is spending wisely on its silviculture programs -- that is, spending to ensure economy, efficiency and effectiveness in the use of its funds. Our audit centred on the corporation's role in developing and managing the silviculture programs to ensure economy, efficiency and effectiveness. We also assessed whether the Ministry of Forests provides Forest Renewal with the information and tools the corporation needs to support its investment decisions. In addition, we looked at the extent to which Forest Renewal has identified how the silviculture programs are contributing to the achievement of the corporation's resource, economic and social objectives.

We concluded that significant improvements are required in several areas before Forest Renewal can demonstrate that it is spending wisely. While some initiatives in this direction are underway, there are still a number of matters which need attention. We found that Forest Renewal has not clearly identified what it expects to achieve from its investments in the silviculture programs. Thus Forest Renewal is unable to demonstrate that the activities it purchases are the right ones in the right quantities to do the job.

A provincewide strategic planning process, initiated by the Ministry of Forests and funded by Forest Renewal, is expected to provide the information the corporation needs to set measurable objectives. A recently implemented information system will soon be providing management with more timely information than it is currently getting. However, Forest Renewal still needs to develop systems to provide information about the effects of its programs on the forest resource and the economic viability of its program investments. In addition, the corporation needs to provide more complete information about the results of its job creation efforts.

We have structured our report to address the following six components: providing strategic direction and setting clear objectives, knowing what can be purchased, purchasing only what is needed, purchasing at least cost, knowing what services are actually provided, and knowing what is being accomplished. We will now provide an overview of our detailed findings and recommendations under each of these components.

We first looked at the area of providing strategic direction and setting clear objectives. We found that while the provincial strategy for managing the forest does not yet exist, there is widespread awareness of the need for one. Initiatives are underway that, if carried through, could lead to the development of such a strategy. We believe that existing plans and proposals, together with regional and subregional strategies, need to be consolidated into an overall provincial picture.

[0920]

Next we looked at whether Forest Renewal knows what activities should be purchased to meet specific objectives. We found that there is extensive information about silviculture treatments and their effects, but some gaps still remain and debate continues within the forest sector about the efficacy of some treatments. Information from the chief forester's determinations shows that some silviculture activities have little or no impact on the allowable annual cut, though they may meet other management objectives. Monitoring of growth and yield in managed stands is insufficient, and therefore not enough information is known about the real benefits being achieved. There is some information from recent studies about potential unintended impacts, but these are limited, and more research is needed.

For this area, we recommended the following. Forest Renewal should ensure that strategic-level enhanced forestry research needs are addressed in its planning of research programs. In addition, it should work with the Forest Productivity Council to identify growth and yield information needs and provide funding to ensure that such information is being adequately collected for managed stands. Forest Renewal should use the available information to a greater extent in making decisions about its investment level for various activities in the enhanced forestry program.

We next looked at whether Forest Renewal is purchasing only the activities needed to meet its objectives. We found that for 1998-99, Forest Renewal regions generally met their spending targets for the silviculture programs in their regional investment plans. However, the specified target exceeded the needs of some of the regions. As the backlog program is not linked to identified strategic needs, it is unclear why Forest Renewal is funding it. The decision to fund delivery of the program on behalf of the Ministry of Forests was made with insufficient information as to the need or benefits of doing so.

Because expectations as to resource quality or economic objectives were not clear, the work actually funded in either program may provide less benefit than had the corporation identified its expectations more clearly. The results of several ad hoc studies indicate that some work carried out under the corporation will likely have little or no resource benefit. Overall, Forest Renewal does not know if the right activities have been carried out in the right places.

For this area, we recommended the following. Forest Renewal should base future allocations of funds for silvi-

[ Page 1347 ]

Inconsistency in the funding for forest health raises concerns that the funding level for 1998-99 was not based on a reasoned consideration of the risks and opportunities involved with forest health activities. To address this issue, we recommended that Forest Renewal ensure that its funding of forest health activities is based on an adequate assessment of provincial forest health requirements.

Next we looked at whether Forest Renewal is purchasing the services at the least cost. We found that the creation of partnerships and the establishment of New Forest Opportunities has meant that services purchased by the corporation are not at the least cost. The corporation's tendering policies are less demanding than government policies, and the corporation has not indicated that unit cost guidelines are to be followed when approving work. Overall, this means there is a greater risk that costs will be higher under the new system than if ministry policies were followed.

[0925]

Next we looked at whether Forest Renewal is receiving information to know what services are actually provided. We found that Forest Renewal has satisfactorily undertaken activities to ensure that staff have sufficient experience and training in contract management. Contracts contain clear performance expectations as to outputs to be achieved and job targets to be met. However, there is no requirement for identifying the level of site quality acceptable to Forest Renewal. Thus there is no assurance that work is focused on areas where there will be sufficient resource benefits to warrant the costs. The reporting system requires quarterly and annual reports from proponents and captures the information that is in the workplans. The reporting system allows Forest Renewal to summarize costs and outputs in the reports that should meet the needs of all management levels. Ministry staff provide assurance as to the technical quality of the completed work through a sample-based quality assurance process expected to review 10 percent of completed work.

For this area, we recommended the following. Forest Renewal should ensure that it has information about the quality of the resource benefits it is purchasing. Acceptable limits should be incorporated into the agreements so that they become contractual obligations. Forest Renewal should assess the level of assurance it needs and ensure that the Ministry of Forests quality assurance review process has the resources to meet that requirement.

The last area that we looked at was whether Forest Renewal knows what the short-term results are and what the long-term outcomes could be. We found that Forest Renewal needs to conduct further monitoring to ensure that there is adequate information about the positive and negative short-term impacts of the programs. Without sufficient monitoring, there was insufficient information to support changes to policies or practices.

Forest Renewal's approach to evaluating actual outcomes needs to be updated and clarified. Information about jobs is limited to short-term results and needs to be improved and expanded to place the results into context and to address the projected long-term prospects. Furthermore, Forest Renewal has not asked for information from economic analyses; without it, the corporation cannot clearly identify whether there is a real economic return on its silviculture investments.

For this area, we recommended the following. Forest Renewal should work with the Ministry of Forests and industry to identify monitoring needs and implement the program so that the impacts of its funded activities are identified. Forest Renewal should reassess the evaluation needs of the enhanced forestry program to ensure that the corporation will be able to identify the actual outcomes of the programs it funds and relate these quantitatively to the forest-level outcomes. Forest Renewal should ensure that its reporting on job creation puts the short-term job creation into proper context and identifies the effects of its programs on the silviculture community and future harvesting and processing jobs. Forest Renewal should ensure that available analytical tools are used, so it can understand the financial and economic implications of its decisions. This concludes our review of our audit of the silviculture programs.

E. Gillespie (Deputy Chair): I just have a question. You talked about the resource -- the financial and the social aspects. There's no comment on the environmental aspects of the silviculture program. Do you look at that at all?

M. Sydor: We didn't look at that in depth. Certainly that's an issue that we would expect to be considered. But I think that under the Forest Practices Code, the environmental issues would be considered in terms of the work being carried out at that stage. There's an independent function that looks at that to ensure that environmental damage is not created by the work that's actually carried out and that there is compliance with those sorts of activities. So I think that from that standpoint, we didn't go into it in depth ourselves.

[0930]

M. Sydor: I think we were focusing on what Forest Renewal identified as being the main strategic objective linked to the enhanced silviculture program, and that is a sustainable harvest. So I think our main focus was trying to see what the linkage was between the activities carried out and whether those activities link into that particular objective.

E. Gillespie (Deputy Chair): I will just say that in my reading of the report, it struck me that there was no comment about environmental values. It seems to me that that's a very important part of the silviculture program as a whole.

[ Page 1348 ]

R. Thorpe (Chair): Morris, let me just ask you a couple of questions. Then we'll have FRBC's people come forward. You raise a lot of questions and a lot of concerns here. Since your work, has there been ongoing dialogue with FRBC on these issues?

M. Sydor: There has been dialogue with FRBC. In fact, you know, very early on -- even at the stage when they were reviewing the report -- we had meetings so that we could discuss the recommendations and clarify for them what we may have been asking. Subsequent to that, after the report came out, I know we've had meetings with Forest Renewal staff again as they're working on their recommendations, to try to get a clearer sense as to what our expectations may be and to bounce ideas off us as to whether they're heading along the right track. So in summary, I guess, yes, there has been communication with FRBC.

R. Thorpe (Chair): In your opinion, have your recommendations. . . ? In your sense from your meetings, is it being aggressively pursued?

M. Sydor: My sense was that they were looking at them very carefully. They agreed that the improvements were needed. They're trying to understand how they can do a better job, and certainly from what we've seen, they are looking at it on a recommendation-by-recommendation basis. Where it's clear what's expected, my sense is that they are trying to implement those; and where there is some lack of understanding as to what we may be expecting, we're having discussions with them about those. What do we mean? What can they do to meet the expectations of those recommendations?

S. Orcherton: Just a couple of questions, and then I'll be interested to hear what FRBC has to say as well. I just want to follow up on Ms. Gillespie's comments.

While the report, I think, is helpful in terms of the recommendations and focusing in on the economic value and what's driven at the end of the day, it is clearly hard to measure, because silviculture is a long process. Who knows what the value of timber is going to be 30 or 40 years from now? It's very hard to measure. The economic gain to the province as a whole, given that the process and given the markets. . . . And who knows what a 2-by-4 is going to cost 50 years from now? Maybe it'll be $100 for a 2-by-4. I don't know; I don't think anyone can predict that.

[0935]

M. Sydor: No, I don't agree with you.

S. Orcherton: That surprises me.

M. Sydor: I'll have to tell you why. There are a series of strategic objectives that Forest Renewal has. One of those does focus on environment values. Sustainable harvest is the one that's linked to the enhanced forestry program. When you talk about environmental degradation, you're obviously talking about the harvesting that has gone on and the lack of rehabilitation after those harvesting activities have been carried out. There is a watershed restoration program within that strategic envelope focusing on enhancing environmental values. At the time that we were planning these particular audits, watershed restoration was in fact one of the programs that we were considering looking at. It was a choice of going with enhanced forestry or watershed restoration.

I agree that environmental values are important, but they're in a separate stream of programs that Forest Renewal funds. At the time that we were making that decision, Forest Renewal came to us and advised that they had hired consultants to look into the watershed programs. They did have concerns about how well it was working and what kinds of requirements were needed. Recognizing that there would be a study done that would provide Forest Renewal with information about how that program might be improved or whether in fact it was already operating adequately, we were then able to make the choice more readily that we should focus on the enhanced forestry program and the environmental values there.

I agree that there may be some environmental values, but I think it comes down, as I say, more on the habitat side -- maybe some social values. But the main focus of the program, I think. . . . As Forest Renewal goes through its program, they will talk about volume and value. If there are environmental linkages, they're going to be peripheral. The main focus of the program is with regard to a sustainable harvest. Environmental degradation is being looked at through the watershed restoration program, and that's not one that we audited.

S. Orcherton: I understand the focus of your audit. I'm just expressing some surprise that you didn't get into the other aspect, because I think it is a piece that this program does deliver on. As I say, we've had these discussions before in this committee about performance audits and what value

[ Page 1349 ]

I'll leave it at that, and maybe some other people have some comments. I'll be interested in following up on this with FRBC people as well.

R. Thorpe (Chair): I don't know. George, did you want to make any comments on scope and how decisions are made? I think we heard Morris say that the decision where to focus this particular audit was done in cooperation or discussion with FRBC. It wasn't done in isolation by the auditor general's office. Did I understand that correctly?

M. Sydor: Yes, that's correct. I mean, at the time that we went there, we did discuss a lot of process -- how we go about identifying audits, identifying the ones that we think might be of interest to us and to them in terms of getting. . . . And it's at that time that it was identified that they were going to undertake their own work through a consultant on the watershed restoration program.

R. Thorpe (Chair): George, did you want to make any comments or not?

G. Morfitt: No, I think you'll hear more on this from Roger Stanyer, and we can have some more talk about it.

P. Calendino: Just one simple question: can you give me the time frame when you did the audit -- before I ask the next question?

M. Sydor: The field work was done mainly during the summer of 1998, and we carried through accumulating evidence into December 1998.

[0940]

M. Sydor: No, by 1999 we were reviewing our findings. In fact, in late December we were reviewing our findings with the Forest Renewal staff, making sure we had all the information. If there was more information, they had the opportunity to provide it to us. In 1999 we were at the stage of starting to draft our report.

P. Calendino: When you consulted with staff at FRBC or with the chief forester or with other people in the Ministry of Forests, did you make any changes to the report before you printed it?

M. Sydor: We made changes where more information was provided that caused us to look at what we had concluded earlier and maybe, you know, revise it. My recollection is that most of the changes tended to be -- in this particular report, in any case -- of a technical nature, clarifying the wording, making sure that we were making clear exactly what we were trying to say. So it was more by way of clarification of what the report contained than making major changes as a result of that communication.

P. Calendino: I'm looking on page 125, where you are recommending an incremental silviculture strategy for the province. It's my understanding that the chief forester had developed such a document by February of 1999, which was way before you actually printed the document and which could have given you information different from what you had collected. Did you make use of that document at all?

M. Sydor: No. Again, as you say, it's February 1999. By that time, we were already drafting our report. The audit had concluded. Some time had already elapsed in terms of conducting this particular audit. We had already had our clearance meetings and put our information into draft form. We were starting to formulate conclusions and recommendations. We weren't going to, I guess, extend the lines as more and more information came along.

The other thing with that February 1999 document is that it was an internal discussion document; it wasn't a completed strategy. So from my standpoint, I still viewed it as more of a draft that may or may not see the light of day. So in terms of the timing and the nature of that particular document, we actually didn't see it until May 1999, when we had a further clearance meeting with Forest Renewal and ministry staff. That was the first time that document was actually presented to us.

P. Calendino: In May, not in February.

M. Sydor: Not in February, no.

P. Calendino: But is it fair to say, then, that that document by the chief forester addressed most of your concerns regarding the incremental silviculture strategy?

M. Sydor: I think that document does provide a provincial silviculture strategy. I heard Mr. Stanyer say yesterday that there was a document a few months old. Maybe there is a public document now available that everybody has accepted. As I indicate, the February document that we were looking at was viewed as an internal document within the ministry and not a public document identifying an acceptable strategy at that stage.

P. Calendino: So you're not familiar with the chief forester's document?

M. Sydor: Not with the final version, no.

P. Calendino: Another question on the effectiveness of spacing. I think you make a comment that it's not considered generally very effective in increasing volume. On what basis do you make that assumption? Did you have qualified foresters give you that advice?

M. Sydor: We had an advisory committee assisting the audit. We had two members on the advisory committee. One of those is Dr. Gordon Baskerville. Dr. Baskerville used to be a deputy in the forests ministry in New Brunswick. He was instrumental in developing the provincial strategy for the

[ Page 1350 ]

In terms of our comments that we made in the report, Dr. Baskerville certainly had an opportunity to review our draft findings; he had an opportunity to review our draft report. As well, ministry staff and Forest Renewal staff had an opportunity to review that report. At no time did anybody say: "That statement that you have in there is wrong."

[0945]

M. Sydor: I think when you say "effective," we have to be clear about what you're actually trying to achieve by spacing.

P. Calendino: Increased volume. You're stating it is increasing volume.

M. Sydor: If we're talking about increased volume, the chief forester, in a number of his determinations for the AAC, is on record as saying that spacing does not generally increase volume in most cases. We're not coming up with a conclusion of our own. I think what we're doing is looking at the audit evidence and trying to identify what that shows. In the chief forester's mind, spacing does not increase volume.

P. Calendino: But did your other team, then, discuss this issue with Forest Renewal or the Forest Service to see whether spacing can increase? Perhaps it does not increase volume, but it does increase quality; and if it does increase quality, then it also reflects volume. If there's more quality, you're going to get more volume. And if you don't have quality in the trees, they die in the forest.

M. Sydor: Quality and volume are separate issues. You can have the same volume, whatever the quality is. Spacing is generally viewed as increasing the quality in a sense of providing trees that have greater diameter and from that standpoint may have more quality. But generally the volume does not change.

P. Calendino: So when you refer to volume, are you referring to volume of the cut or volume of increased growth of trees in the forest?

M. Sydor: Both.

P. Calendino: The two don't go together, though.

R. Thorpe (Chair): Could I ask all members, perhaps, if we could just have one meeting at a time here? It's a little hard to hear the witnesses when there are so many other meetings going on.

R. Kasper: My question deals with the purchasing at least cost. Now, there's a specific reference to Ministry of Forests and industry database information that deals with costs associated with silviculture activities. There's also a reference to the fact that the Ministry of Forests staff no longer have a role in the financial assessment of proposed projects.

In the report you noted that in the earlier years of Forest Renewal B.C., when it started up, the Ministry of Forests people actually carried out their traditional role as far as monitoring and implementation and reviewing the costs.

Then there's also a reference to the fact that the Ministry of Forests guidelines. . . . The costs that have been incurred as a result of Forest Renewal B.C. taking full ownership of this function or role have gone above those ministry guidelines. My question is: how old are those guidelines? Were they updated with current costs when you did your review? What methodology did you use to actually project from historical information that the ministry had? They're no longer involved; you said that in your report. And what are the current costs? Or was it just a guess?

M. Sydor: No, it wasn't a guess. At the time that we were doing our audit, the Ministry of Forests was updating those unit costs annually. In fact, at the time that we did the audit, we just went back two years, but we saw that each year, they were looking at what those unit costs were and providing the information to their districts, their field staff. When we say they're no longer involved, what we're saying is that they were no longer involved in terms of identifying what the financial measures are in terms of proposed work for Forest Renewal. But the Ministry of Forests staff still had a small component of Forest Renewal projects that they were responsible for implementing. So for their own purposes, they still had their own guidelines in place and would use those to assess whether the price being proposed by a contractor was reasonable or not. And they had an analytical tool available to tell them whether the work provided a financial return or it didn't. Taking all that information into account, they would then make the decision as to whether to go ahead or not.

[0950]

M. Sydor: It's based on actual costs.

R. Kasper: It's based on marketplace low bid?

M. Sydor: It's based on acceptable prices. Yes -- generally low bid.

R. Kasper: Yeah -- generally low bid within a certain time frame to complete the work and failure-to-do-so penalties. So you factored those in -- right?

M. Sydor: We didn't factor those in. What we were looking at was the Ministry of Forests. From their standpoint, they have factored all that in to identify what price guidelines should be used by staff, both on the coast and in the interior, for each of the regions, and we've identified in here what those were. As I indicate, those were fairly recent costs. They're updated by the ministry each year.

R. Kasper: But it's a very small activity compared to what it was before. Would you agree to that?

[ Page 1351 ]

R. Kasper: Okay. Just out of curiosity, in a review on these costs and these contracts, did you sort of look at or discuss the terms and conditions of the tenders -- the time frames associated with when the work had to be completed? The only reason I ask that question is because I've heard a number of complaints over the years that in some instances, depending on in which region a particular type of work has to be carried out, the time frame in which the work has to be carried out is relatively short, and it may lead to a crew actually spending more time in an overtime situation, which can artificially inflate the cost. Was there any discussion about those types of things?

M. Sydor: I don't think so, in the way you're projecting -- no. There was discussion at the time, again because we were changing to a new system. When you change to a new system, there are always startup problems and such. I think some of the concerns expressed to us were that windows of opportunity to carry out certain work were being missed. From that standpoint, there was some concern that maybe some of the work that had been planned for couldn't be carried out because we weren't able to process all the documents in the way we could. But I don't think we looked at it to the degree that you're suggesting. Did overtime or did moving that window of opportunity have any impact on. . .costs? I think that's something that the contractors themselves will take into account. Are we doing this at the right time of year? Is there much competition? If there isn't, I can increase my price a bit. You know, if there are a lot of other competitors out there, I'm going to have to drop it down. So there are number of factors that come into play. That's why what the ministry has is a consolidation of all these different factors. And those are guidelines; they're not carved in stone.

R. Kasper: Also, when you looked at this and you used the Ministry of Forests cost guidelines, did you further investigate or look at issues such as rates of pay, working conditions, compliance with labour standards and -- if it's a remote site -- what the living conditions of the workers were? When you looked at that information. . . . I'm assuming you would have, because if you were going to actually examine the cost guidelines and then make a comparison to what Forest Renewal is actually doing, and you were factoring in some social issues. . . . Did you look at the criteria and what their requirements for contractors would be if they changed? Did you do a comparison based on that?

[0955]

R. Kasper: Based on low bid -- right?

M. Sydor: Where are we today, based on what Forest Renewal is providing for? It's not necessarily low bid. Under Forest Renewal, there's opportunity for the licensees to select particular contractors that they want without necessarily going to tender. So it is a slightly different system.

R. Kasper: But the Ministry of Forests' is based on low bid, though -- right? So that's the comparison.

Interjection.

R. Kasper: I just have one other question. How much did it cost to do the audit -- $100,000, $200,000, $300,000?

M. Sydor: I think we'll have to get back to you on that. But yeah, the sort of figures you're tossing about are probably realistic.

R. Kasper: Okay, so it's between $100,000 and $300,000.

R. Thorpe (Chair): Why don't we just have you get back to us, instead of us throwing numbers around?

M. Sydor: Yeah.

R. Kasper: Well, I hear lots of numbers get thrown around here every meeting we have, so why be different?

M. Coell: So it's your turn today.

R. Kasper: Yeah, why not? I started out the morning right.

R. Thorpe (Chair): How's your coffee so far?

I think we'll move along now to FRBC. Thank you very much, Morris and Ian.

R. Stanyer: Good morning again. My name is Roger Stanyer. I'm chair and chief executive of Forest Renewal. Mr. Gorley will be making the presentation on silviculture. I would just say that Mr. Gorley, in addition to being the chief operating officer for the corporation, is a registered professional forester. He started work in government over 25 years ago and has held management positions within the Ministry of Forests, the last one being regional manager for the Prince George forest region. Al's experience in silviculture is long and varied, and he certainly is one of the better authorities that we have on silviculture matters. I'm sure we can have a very in-depth discussion on all these issues that have been touched upon to this point.

[1000]

[ Page 1352 ]

I'd like to start off by saying that as we said yesterday, we appreciate the work that the auditor's staff have done. It was timely, in that it supported a number of initiatives that we already had underway in the corporation and helped focus some that came along during the course of the audit. Also, for contextual purposes, I remind the committee that the audit was conducted, as we heard earlier this morning, in 1998. What it therefore reflects is activities that were occurring in 1998, but as the result of decisions and planning processes that were in place in 1997. That unfortunately puts us in a little bit of a time warp, because a tremendous amount of work has happened since that time. The focus of my presentation will be to talk about what has happened since that time and then specifically how that relates to the recommendations.

The Ministry of Forests defined silviculture as the art and science of growing trees. Because it's an art as well as a science, the practice of silviculture is complex. The investment decisions are even more complex when you consider all the things that come into play in silviculture decisions. I think, though, Forest Renewal has been clear from the beginning that our investments in silviculture were aimed primarily at growing more and higher-value timber. We've made some significant progress toward clearly demonstrating the soundness of the silviculture investments and in fact built upon the existing system that was in place before Forest Renewal was created. A key piece of that is the funding of the provincial silviculture strategy that was produced by the chief forester and discussed earlier this morning. This is an extremely important initiative, because nothing like that existed before. It now provides a framework and direction for policy and decisions around incremental silviculture.

The second key step is the solid planning process at the timber supply area level or the forest district level that is a combination of input by industry and government foresters. It is signed off ultimately by the Ministry of Forests and then sets a strategy for that piece of land. Those didn't exist previously and were not in existence at the time of the audit. Then there is the introduction of a performance management system to track against those, as we discussed yesterday.

Many of the concerns that the auditor's staff have raised are not new. Research and professional periodicals frequently discuss the issues involved in determining what the basis ought to be for making silviculture investments. We're not alone in B.C. in having an ongoing debate about this. It's happening wherever silviculture is practised. However, our major competitors in the timber business in the world do practise intensive silviculture, and we're often held up in comparison to some areas of the United States or Sweden for our practices. Certainly those areas practise intensive silviculture and apply the kinds of treatments that Forest Renewal has been funding in the last five years or so.

The government in British Columbia has funded incremental silviculture programs off and on for over 25 years, and as we said earlier, we picked up some existing structures, some existing programs, and have built upon those. We certainly agree that there are lots of unanswered questions, and we believe that Forest Renewal can play a key role in answering those questions and moving the whole science of silviculture forward.

The overall status on implementation of the audit recommendations is that there were 21 recommendations on the silviculture area. Five of those are fully implemented; 16 are in the process of being implemented at various stages. I will discuss each of those a little bit later. I'm following on the broad themes that got picked up in the previous audit on planning and accountability and were carried forward. My apologies for repetition, but in fact as you read through the audit report, you'll find that many of these themes slop back and forth between the two.

[1005]

Again, I want to point out that the three fundamental building blocks in this diagram, although they were being created, did not exist at the time of the audit. There was no provincial incremental silviculture strategy in place. The management-unit silviculture strategies, which we are now in the process of building -- and I believe we're about 40 percent through that process -- are new. We had not, at that time, produced our strategic plan, which provided a target of 25 million cubic metres of timber upon which to focus those activities. Those are all not only new but very critical building blocks in this process.

As I said, the provincial incremental silviculture strategy being one of the critical building blocks, it's quite a detailed, extensive document. It drew on the best knowledge of the profession, as well as the stakeholders. It defines some broad goals in silviculture strategies that are to be applied in British Columbia. It provides a framework that we can then apply at the individual forest or timber supply area level. It's supported by the best research and analysis available to the chief forester at the time. As I said, we continued to contribute to improvements. That document, although it was funded by Forest Renewal, clearly is a product of the chief forester's office and is direction to silviculture across the province, whether it's silviculture funded by Forest Renewal or by others.

The strategic objective, which we discussed somewhat yesterday, which drives all this -- and again, is new to this -- is under our strategic objective No. 1 -- sustainable harvest. The focus, as we've said, is to invest in the production of faster-growing, higher-quality stands of second-growth timber, and the target that's been set is production of 25 million cubic metres of wood that otherwise would not be available over the five-year life of the plan.

The core silviculture investments -- and I think the auditor's staff touched on this -- include enhanced silviculture, tree improvement research and backlog reforestation. What we are phasing out but were involved in investing in up until a year ago are forest health activities that occur in mature stands and the road and bridge program that we discussed briefly yesterday, which was in support of access to wood. The core is what we continue to focus on, because it supports the 25-million-cubic-metre target. The other activities are activities that we've been phasing out of.

[ Page 1353 ]

[1010]

I'd like to take a look at how we make investment decisions at the operational level each year, building on that management unit strategy. Each management unit obviously has quite different issues. For example, the relative importance of changing the timber supply or various factors in the timber supply may vary. In some places what's needed is an increase in the area of operable forest. In other places it's a question of trying to grow the trees to a certain size more quickly to close a gap in the flow of timber. The silviculture strategy adopted is one that's custom built for that particular management unit. The management unit scenarios are then rolled up into a regional investment plan and assessed in terms of their ability to contribute to the overall sustainable harvest target for that region, as well as an assessment of how that meets those four corporate commitments. That plan is then rolled up to a provincial business plan and subjected to a similar analysis in terms of things like regional distribution and how it adds up collectively to the strategic objectives. It then is taken to the board in a series of meetings -- as, again, we touched on briefly yesterday -- and in final form to the board as a business plan for approval.

The management unit silviculture strategies guide the resource investment priorities. Our information management system allows us to look at various scenarios and compare what should be accomplished by them. We also collect data on the relative impacts of investments. For example, we're approaching a point where we can rank activities such as spacing, fertilizing and backlogging in terms of the increased timber supply and what they will generate at any given level of investment. If we increase this one, what does that generate in terms of our objectives? If we drop that one and increase another one. . . . So there's some capacity being developed to test scenarios against the ultimate objectives.

There are, without question, some gaps in the information. There are gaps in the tools that can be used to cause this to happen. A good deal of Forest Renewal's investments -- not only in silviculture but under some of our other objectives -- are aimed at closing those gaps and developing better tools for doing this kind of work. So we're not suggesting that we're at the end of the road by any means; it's an ongoing process.

We do have the capacity now to collect the information into our own data system, so we can analyze it and incorporate what we learn each year into the decision-making process as we go along. And we certainly agree with the auditor general that as we obtain more information on the results of our investments, we can place more reliance on quantitative analysis than has previously been done. However, there are limits, and we feel that the extent to which quantitative analysis should drive investments has to be considered along with the more qualitative or broader objectives that are trying to be achieved.

[1015]

Our approach at Forest Renewal is to continue to monitor the debate, try and stay on the leading edge of the information and in fact contribute to increasing the information and the quality of the debate. But in the meantime, we will follow the chief forester's provincial silviculture strategy, which, when written, took into account the best information of the day.

I'll now move to knowing what's being accomplished, the measurement, the tracking of progress towards pursuit of the strategic objectives. During this year we've completed the first level of implementation of a new information management system; again, that was mentioned briefly yesterday. That system allows the board to monitor how we're performing; it allows management to track. The reason I say the first level is that it is fully operational, but we expect to make enhancements to it in terms of reporting and capacity as we go along. So it will likely be a continual improvement. We can not only report out on the level of outputs, such as how much area was fertilized in a particular area, but translate that into how that affects the outcome -- so how much did that fertilization affect the target of 25 million cubic metres? To do this, we've got a set of factors or coefficients that we can apply in each activity and each region and essentially make that calculation.

For employment, which is a corporate commitment we're also interested in tracking, we collect direct information from our proponents on short-term jobs created through our investments. We also work from coefficients for estimating long-term employment related to the investment activities in silvi-

[ Page 1354 ]

Just as a note of interest, I was advised this morning that our Prince George staff in the Omineca-Peace region are meeting with one of the major forest companies up there this week to in fact sit down and go through exactly that -- provide an assessment of where unit costs are at so far this year, where there might be issues and what might be improved as we move forward.

We do work closely with the Forest Service to ensure that the quality assurance work is carried out, as they've been retained to carry it out. The Ministry of Forests has contracted under a service agreement to provide what we call standards agreements, which set out the technical requirements for work that has to be done. They're also contracted under that services agreement to provide quality certificates. So they provide the technical inspection, if you like, to confirm for us that the work was done to standard. As noted yesterday, we are updating and negotiating those agreements.

This year we've expanded our internal audit program extensively. We're ensuring that all agreement holders retain an outside auditor to assess compliance with agreements. We've implemented performance audits of 14 of the major multi-year agreements this year. These performance audits include an extensive look at the silviculture investments and what's being accomplished there.

[1020]

Our evaluation plan has been updated to address silviculture outcomes. With the development of performance measures, this will assist us in actually evaluating the ability of programs to contribute to the strategic objectives. It's very difficult to do evaluations based on long-term outcomes without having those outcomes defined and the measures in place. Now that we've made progress on that, we are able to incorporate that into our management regime.

In summary, at the overview level we've made significant progress, we believe, towards clearly demonstrating sound silviculture investments by first of all funding the completion of the provincial incremental silviculture strategy by the chief forester; we consider this again to be an extremely important initiative. It's the first time that the province has had a silviculture strategy that covered the whole province and set out the approach that's to be taken.

Secondly, by putting a solid planning process in place at the local level that is signed off by the professionals at the local level, we have the opportunity to ensure that this strategy is customized to the forest level and that the best opportunities are chosen there.

Thirdly, we are implementing the internal performance measurement system. When I say "internal," that does extend to the agreements we have with major companies, so that we can contract this.

We've implemented five of the 21 recommendations, and over the next two years we will implement the remaining ones to the greatest extent that is practical. By that what we mean is that there will be a balance between how far you go with some of this stuff -- how far you go with quantitative analysis -- versus broad forest objectives, environmental and social objectives and so on and matters of public policy. We are committed to moving in the direction that the auditor general has recommended. There may be some issues in the detail, but we don't believe there are issues with the basic recommendations.

What I'd like to do now is just go through the individual recommendations fairly quickly and comment on where we're at with them. Then obviously we'll be happy to answer questions.

R. Thorpe (Chair): Do we have copies of what your status is?

A. Gorley: No. I'll just speak verbally to the status. I think we would obviously include that in the request you made yesterday to provide a report on status.

R. Thorpe (Chair): Thank you.

A. Gorley: What's on the screen are just the recommendations as quoted from the report, the first being that a strategy similar to that identified by the forest sector strategy be created. This is the recommendation that supports directly the provincial incremental silviculture strategy, and we consider action on that recommendation to be complete.

The second is: "Forest Renewal B.C. should identify its resource objectives in terms of expected outcomes, to show clearly what it projects the future resource benefits from these investments are likely to be." At the macro level, at the broad level, we believe the strategic plan does this. This will, however, have to be further refined by these individual management-unit-level silviculture strategies that are under development. They are approximately 40 percent done as of this date, and the target is to have them 100 percent complete by 2001. We will continue to have our dialogue with the auditor general's staff on how well that meets the intent of the recommendation.

The third recommendation was that Forest Renewal should identify its financial and economic objectives for silviculture programs. As we've discussed, we developed performance measures for silviculture activities, with a target of creating 25 million cubic metres. This will be gauged using the measures such as volume increase in treatment area and increase in economic value of the individual stands as that's added back to the commercial forest.

[1025]

[ Page 1355 ]

Short-term indirect and induced employment is estimated using provincial multipliers provided by B.C. Stats, and they're similar multipliers to those used by other agencies. The long-term employment generation is estimated using a multiplier that's supplied to harvesting and processing of each 1,000 cubic metres of timber supply. A number of multipliers have been developed by StatsCan, for example, and through Pricewaterhouse. If committee members are interested, I can certainly discuss that a little bit further. I have some more information on that.

"Forest Renewal B.C. should clearly define the extent to which it wants its funds to focus on social objectives and the extent to which it wants them to focus on resource objectives." The investment planning principles for 2000-2001 establish priorities regarding resource and social objectives. We said -- I think quite clearly -- that Forest Renewal investments will be allocated to business areas and activities based on their potential to contribute to the strategic objective and reasonable costs in contributing to that strategic objective. The other considerations will be secondary considerations. I believe that through the strategic plan and that planning direction we have given clarity to that recommendation.

"Forest Renewal B.C. should ensure that strategic-level enhanced forestry research needs are addressed in its planning of research programs." In addition, it should work with the Ministry of Forests to identify growth and yield information and ensure that such information is being adequately collected for managed stands. Forest Renewal has relied heavily on the Forest Productivity Council to advise us on growth and yield research needs and priorities. It is an area where we have made a commitment. Our board has made a commitment to maintain funding where opportunities are available to improve information on growth and yield. We're actually planning to have an assessment of growth and yield research needs done, so that we can set some priorities into the future.

In summary, we agree with the recommendation. There has not yet been confirmation of exactly how we will move forward on this in terms of methodology, and we will have to work with the ministry to confirm that. I'd like to point out that there is also an agency, the Committee of Forest Research Agencies, that is currently in the process of developing a strategy for forest research priorities in the province. We're participating with them and supporting them financially in that endeavour, with the expectation that the outcome will give us a clearer strategy in which we can make our investments.

"Forest Renewal B.C. should use the available information to a greater extent in making decisions about its investment level for various activities in the enhanced forestry program." While we believe that the implementation of the TSA-level plans is the tool to incorporate the best available information, we are using that information as those plans are being developed, and the management unit strategies will reflect those. In addition, we fund research and extension to improve that knowledge base and improve the use of those tools. We consider this recommendation to be essentially implemented, but one that requires ongoing refreshment or ongoing refinement. It's not something that you can say is done and walk away from it; it's something that has to be kept up.

[1030]

We consider this recommendation to be partly implemented, but again requiring some more work and refinement over the next year. We will continue our dialogue with the auditor general's staff to make sure that what we are doing is consistent with what they had in mind.

"Forest Renewal B.C. should base future allocations of funds for silviculture programs on an understanding of the opportunities, resource strategies and the unique timber supply situation within each region." I think I've spoken to this in terms of the provincial strategy and then the subordinate forest-level strategies, and as I said, they'll be complete by 2001.

"Forest Renewal B.C. should ensure that its funding of forest health activities is based on an adequate assessment of provincial forest health requirements." I need to be clear here that Forest Renewal strategy is only to make investments in areas consistent with our strategic objective. So we will make investments in forest health where that contributes to the 25 million cubic metre target in our sustainable harvest objective. But that excludes some forest health activities that are undertaken by the ministry or by companies. It's focused on second-growth stands. The appropriateness of those kinds of investments again will be determined as these timber supply area level plans are developed, because managing forest health presents an opportunity for impacting the sustainable harvest objective.

"Forest Renewal B.C. should ensure that its planning processes provide the corporation with qualitative and quantitative information about the potential value of the work it funds." I'm starting to sound a little bit like a broken record here, but again this one falls under the development of strategic-level targets and then the local TSA strategies, based on local timber supply goals, and the various performance measures that are needed to ensure that we're achieving these and to ensure that as the performance measures are fully implemented we can track them. Late 2001 is when we expect to be fully implemented on that. In the meantime, we are

[ Page 1356 ]

"Forest Renewal B.C. should more thoroughly analyze the implications of different funding scenarios for the backlog program." We agree that it's important to revisit and analyze decisions, see how you're doing and make adjustments, so we do expect to both revisit our progress and evaluate the success of our progress at mid-term. In addition, the appropriateness of addressing the backlog will be picked up in the timber supply area strategies, because again backlog is one of the tools, and the impact it will have on timber supply will vary considerably from management unit to management unit.

[1035]

"Forest Renewal B.C. should determine how it will obtain assurance that the moneys expended by proponents provide value for money." We have initiated several performance or value-for-money audits of specific multi-year agreements on a pilot basis this year. The results of the audits are expected to be in by the end of the fiscal year, so we'll be able to look at those. In addition, we've got a project going on -- as I did mention earlier -- to look at how well our contracts are designed and how well they ensure that we're able to capture this information. We are addressing this actively, first through a group of pilots. We'll see what they tell us; we'll make adjustments and then move forward.

"Forest Renewal B.C. should provide clearer direction as to the level of costs it is willing to accept to meet its social objectives." Staff in each region have developed a range of acceptable unit costs for silviculture treatments done by regular silviculture crews under regular conditions. We adopted or built on the information that the ministry was providing previously, but as we build our own database, we're able to refine this. Ranges have been developed based on actual cost data. We recognize that there are a variety of cost drivers in silviculture activities, depending on access, terrain, the need for camps, market pressures for labour and so on, and those have to be taken into account. But our staff are tracking and managing that very actively as of earlier this year.

An analysis of silviculture unit costs over the life of Forest Renewal, which is just being completed, indicates that costs are within range of historical costs. Where there are differences, the reasons for those differences are being identified. For example -- and this is a discussion we're having with the Forests Committee -- costs on the coast as a result of New Forest Opportunities have been identified and are being actively managed.

"Forest Renewal B.C. should ensure that it has information about the quality of the resource benefits that it is purchasing. Acceptable limits should be incorporated into the agreements so they become contractual obligations." Under our new model, we rely on our proponents and the Forest Service to select the sites based on the TSA plans that are being developed. The Forest Service district manager approves the stand management prescription for each site, so we hope that that provides a reasonable safety net. We will determine the nature and extent to which stand-level models are available and make sure that those are used in future investment analysis decisions. Under our services agreement with the Forest Service, we'll develop guidelines regarding minimum conditions on sites for various types of investments.

So we're continuing to consult with ministries, industry and professionals about how to apply the plans, the results-based standards that are being developed and professional accountability to ensure that there's in fact an effective, efficient approach to this issue. We are being cautious that we do not go down the road of creating a situation where we would have to hire a large number of additional staff in order to do this or require that the ministry hire a large number of additional staff to do this. We're looking for a plan, measurement and accountability cycle rather than what I would call a micromanagement cycle.

"Forest Renewal B.C. should assess the level of assurance it needs and ensure that the Ministry of Forests' quality assurance review process has the resources to meet that requirement." It was very closely linked to the previous one. The audits that I mentioned earlier will tell us whether we need to change the present level of assurance and resourcing. If so, then in our future negotiations with the ministries we will incorporate those requirements. The services agreements will reflect the necessary level of resources.

[1040]

"Forest Renewal B.C. should reassess the evaluation needs of the enhanced forestry program to ensure the corporation will be able to identify actual outcomes of the program it funds and relate these quantitatively to the forest-level outcomes." Again we agree. Silviculture programs will be evaluated as part of the 2000-2001 corporate evaluation plan.

"Forest Renewal B.C. should ensure that its reporting on job creation puts the short-term job creation into proper context and identifies the effect of its programs on. . .harvesting and processing jobs." I think here there's again some overlap with the previous discussion. We do now have the capacity to report on short- and long-term employment generation and will be doing that.

"Forest Renewal B.C. should ensure that available analytical tools are used so it can understand the financial and economic implications of its decisions." We are using these existing tools. We're focusing, as we've discussed at some length, on a performance management system that gives you the ability to measure. We're working with stakeholders to assess and develop additional tools as that can occur. I think that we would find, if we were to check the numbers, that

[ Page 1357 ]

That concludes my monologue. I think we'd be happy to discuss questions.

R. Thorpe (Chair): You would be happy also?

In your opening comments, you talked about the best silviculture practices. In your opinion, what jurisdiction in the world has the best?

A. Gorley: I don't have an opinion on which jurisdiction has the best, because I don't know what everybody else has got. I certainly have seen some of the reports on places like Sweden, the United States and New Zealand, which are often cited as having good silviculture practices. I think it comes down, in part, to this: what is it you're trying to accomplish?

Closer to home, I think there are some very good examples on some of the private lands held, for example, by Weyerhaeuser in the northwestern states, where they have a long-term management regime that is touted as being an excellent silviculture regime. Of course, the land use patterns, the ownership patterns and some of the objectives are different in B.C. because of the large proportion of public integrated-use lands, if you like.

So I couldn't give you a quick opinion on who is the best, but there are examples around, given a certain set of circumstances, of who's doing well. Certainly Sweden is often cited and, I think, Finland as well as places where they make very good use of activities like pruning and spacing and fertilizing in second-growth stands to ensure that they meet objectives for timber supply.

[1045]

With respect to the 21 recommendations, it doesn't appear to me after listening to your presentation that you take exception to any of the auditor general's recommendations, but you have left yourself a little bit of manoeuvrability with respect to implementation where practical. Do I sense that there may be a few areas that are going to require some more discussion between FRBC and the auditor general? If that is the case, could you give the one or two or three areas -- or five, I guess, if it's five -- and what they are and when that consultation will be taking place?

A. Gorley: I think it's fair to say that we have a basic high-level agreement on all the recommendations, and there is no issue there. There has not been a meeting of the minds in some of the detail. I think that the primary area that will require work is this issue of how much quantitative analysis you do at a stand level and how much you allow that to make the decision on whether you do or do not apply silviculture treatment, given the risk.

That is largely caught up in a much broader debate that's happening not only across the province but across the profession. It was only less than two weeks ago, I think, that the Western Silvicultural Contractors Association held a conference in Vancouver and started off with a panel on the value of enhanced silviculture. Well-respected speakers from around the province spoke to both sides of the issue and argued both sides of the issue.

We're having ongoing dialogue with the auditor general's staff on that. I'm not sure that we will ever actually have an absolute meeting of the minds on it, but we will get to a point where we can say: "Here's how we're going to do this." If it's consistent with the chief forester's approach and works for the industry, that's probably the best we can do.

R. Coleman: Needless to say, I have a few comments and a few questions. I want to refer you to page 177 of the report before I go on to my first question. There's a paragraph on that page that leads me, being a member of the Forests Committee, to have concern. I think it sort of crystallizes the situation we've been facing since 1996. I'll just read it to you. It says: "Similar concerns were raised during the review of the 1998-99 business plan. Forest Renewal B.C., however, has not provided any quantitative information about the returns it expects from its silviculture investments. To date, the select standing committee has had to accept, on faith, that these investments were worthwhile." That's a real concern if you're sitting on a committee of the Legislature, and that's exactly how that has operated.

I go back to Hansard. I did a Hansard review back to 1996, when the first questions were being asked about measurements and outcomes and what have you and how. The response of the corporation at that time was that they were working on it. I don't know whether the audit is a shot across the bow that wakes up the corporation so they finally decide they're going to actually do this stuff, or what it is. But if I were with this corporation, I'd have some concern that somebody had to do 21 recommendations on one area of my operation alone.

I want to go on further. To quote from the report: "Forest Renewal B.C. does not have clear goals and objectives for its silviculture programs. It has stated its resource objectives as outputs only -- that is, hectares treated; it has not specified outcome expectations -- what it expects to accomplish as a result of its outputs, such as increased yields or improved timber quality expressed in quantitative terms." In fairness, FRBC's strategic plan does address some of these concerns. However, this audit is about a corporation that has spent some $2 billion-plus before it had these goals and objectives in place.

The concern we have is that FRBC failed to carry out economic analysis of its investment decisions. The report points out that the board made investment decisions on backlog reforestation with insufficient information about the economic values of the program or the strategic need. The auditor general points out that the select standing committee has called on the corporation to identify its economic objectives. You can find that call for economic objectives over a number of years in debates in the select standing committee.

My first question to the corporation would be: why have you failed to ensure this through proper accounting, program objectives, outcomes, clear goals and objectives as stated in this report?

[1050]

[ Page 1358 ]

A. Gorley: Maybe I can start with a response, and my colleagues may want to add a historical perspective.

I think that the three building blocks I discussed earlier -- the creation of a strategic plan with specific targets, the creation of an incremental silviculture strategy and the ongoing creation of strategies that are in fact driven by the real timber-supply issues in each TSA -- do address that issue. I think your question is, in part: why wasn't that done sooner? A good deal of money was spent prior to that being in place. That's correct.

The only observation I can personally offer on that, having worked for 25 years with the Ministry of Forests before coming to Forest Renewal, is that during the 25 years, off and on, we were making investments in incremental silviculture as programs came and went. Although we always had in mind how that was going to have a positive effect on the forest in which we were operating, rarely were there those kinds of analyses done. The inventory information and the tools and the ability to use them simply weren't there. Forest Renewal picked up an existing situation and, in my view, has gone a long way to changing it. I think, without putting words in your mouth, that the question is partly: why did it take that much time?

R. Coleman: Well, it's partly why it took so much time and why the corporation went and spent $2 billion without having this in place to begin with. I think that's a real concern. I mean, this was $2 billion of taxpayers' money that was spent. I guess I'll go back to one portion of my question, and that was: why weren't the comments and questions of the select standing committee from 1996 to 1999 followed through? Why were those not followed through when they were asked of the corporation over that period of years?

R. Stanyer: I think they were followed through, quite frankly, in the sense that this is a developmental activity that we've been involved in. From the beginning of Forest Renewal, as we've pointed out a couple of times, we took over programs that others had developed. We didn't go through a tremendous quantitative analysis about the value of doing backlog silviculture. We accepted ministry recommendations on the value of doing that work, which had been researched considerably over quite a time frame and had in fact been funded in two or three different ways, with the province committing funds to it on a regular basis and the federal government committing funds to those activities. All of that work and hundreds of millions of dollars didn't get the job done.

There was still deemed to be 110,000 or so hectares that needed a couple of things done to them. One was the inventory analysis of exactly what was growing on those lands, how much of it has been sufficiently restocked through natural regeneration from the last classification and how much more is left to be done.

At Forest Renewal, we didn't believe that we needed to go through that rigorous analysis of why we would do these things. It is strongly supported by silviculturists across the province, in industry and within government that this is a good thing to do. From that perspective, Forest Renewal picked up the ball when there was an opportunity identified for us to do it. To retrace the steps that others had taken and reinvent the wheel, so to speak, we just didn't see the value in doing that. We questioned whether or not funding a backlog silviculture program fit within the mandate and principles of Forest Renewal. As a board, we reached the conclusion that it did fit, so we moved off onto doing those things.

[1055]

For instance, forecasting long-term employment benefits is very difficult to do, and you've got to question the value of doing that in any case. When you start looking out 30 to 40 years -- at the time that these stands will be harvested -- we have no idea of what harvesting systems will be used or what manufacturing systems will be used. It is far more valuable, in our minds, to create a forest crop that is similar to the current crops we are harvesting, in the inherent belief that wood will continue to be a desirable building product, as we look forward. If we're wrong on that, then I guess we'll make that wrong bet.

The other side of the equation is that if we are wrong, we will have reestablished crops on lands that were otherwise growing non-commercial species or were not the same kinds of species that were growing on there at the time of the last fire or whatever denuded the stands in the first place. It's a bit of a social bet and a bit of an economic bet, but it's very difficult to look 40 years down the road and say that we're going to employ X number of people harvesting or manufacturing these stands. We question the value of doing some of those things, and I think we've got to work a little harder with the auditor's staff on those kinds of recommendations.

D. Gelz: If I could add something to Roger's comment. I maybe look at this differently. If you look at silviculture activities -- if you take the backlog as an example -- I don't know whether people in general would question whether engaging in backlog-related restocking or silviculture is something that would necessarily be wrong. The test, I think, if you move down one level, is: if we have a range of these activities we can engage in, in the province, where would we best do them to achieve the best results? We have the tools effectively in place to make those kinds of decisions. Again, I guess my slant on this specific issue would be that I don't think you can question, at a general level, the need to move forward and do this kind of work. I think it's painfully obvious to the industry and to the public, generally speaking.

R. Thorpe (Chair): Just a point. By the feedback I heard last night and again today, most people thought that yesterday was a fairly productive day, and I think the afternoon was probably more productive than the morning. If we could maybe tighten up our answers and tighten up our questions, we could focus in on the issues and probably move through this. If both the questioners and the answerers could focus a little bit, it may be useful to everybody.

P. Calendino: And focus the questions too.

[ Page 1359 ]

P. Calendino: I didn't hear very long answers.

R. Thorpe (Chair): Carry on, Mr. Coleman.

R. Coleman: I'm not going to take exception with backlog reforestation being needed. My concern was the auditor general's comment about insufficient information and economic values or strategic need being made available to the board to make those decisions.

I want to move on to another question, and that is back to one of the original goals of Forest Renewal, which was independence. As you went through your presentation this morning, you referred again to two other things that were being picked up by Forest Renewal on behalf of the Ministry of Forests. One was the funding of the provincial forest strategy, and the other was the backlog program -- Ministry of Forests again. I'm wondering: is Forest Renewal starting to feel like it's basically an adjunct or ex officio Ministry of Forests rather than a corporation that's concentrating on its effective goals, as it was thought to be in the beginning?

[1100]

R. Coleman: The report outlined some serious concerns that job targets were significantly overstated relative to past performance. This corresponds to a shift in focus in the corporation to projects with high short-term job numbers. The report says: "In our view, the jobs funded by the silviculture program are not sustainable except, perhaps, with Forest Renewal B.C. funding." It further goes on to state: ". . .we found that the regional plans have no quantified outcome targets for enhanced forestry or backlog activities." It also went on to state that they felt the corporation focused too much on short-term job creation to the detriment of future jobs. My understanding is that Forest Renewal was supposed to create good forest jobs. The minister and the chair and the CEO of FRBC have all stated at various times that good, family-supporting forest jobs are being created. This report seems to show otherwise. Why?

R. Stanyer: I don't think you can look at Forest Renewal and look at the silviculture program only as the driver for the long-term employment situation. I think we have created a lot more longer-term family-sustaining jobs, for instance, with our investments in value-added than we necessarily have in silviculture. I agree 100 percent with the report that the short-term job creation Forest Renewal has done is only supported by Forest Renewal investments. That was as it was intended to be. If we ever move to a different tenure arrangement that provides for more incentive for private companies to make the investment, then I would argue that we would see the same kind of longer-term job creation that Weyerhaeuser has experienced in the United States -- which is funded by private investment and is very similar to the kinds of job creation that Forest Renewal supports in the province.

R. Coleman: Was this focus on some short-term jobs a direction that came from the ministry, or was it an internal direction of the board? Who was consulted in making that decision?

R. Stanyer: It's the only way we can measure the effect of the employment that we create. It's on an annual basis, and it's how many people worked on silviculture programs in any given year. That is the way we measure these things.

As we have said from the beginning of Forest Renewal, our preference would be to attack the culture of the forest industry in British Columbia and try and create a culture that has a lot more value placed on forestry work over the piece, from planting trees to harvesting the crop, as opposed to single-source employment such as: "I'm a truck driver, and that's what I want to be." We would like to see a cultural shift that values work, and you can move people through an employment strategy. We had been working hard, certainly on the coast, with New Forest to provide more than one opportunity for employment, and we can show, through New Forest, that that has had some effect. People are getting longer-term work under the New Forest arrangement than they were previously.

That arrangement does not apply in the interior, so we need to use different strategies. Mr. Gelz talked yesterday about companies in the interior wanting to take it as their own responsibility to try and provide employment opportunities for displaced workers and these kinds of things. In my mind, that doesn't speak to the desirability of multi-skilled workers and working in more than one phase of Forest Renewal-funded activities or privately funded activities on the forest land base.

R. Coleman: Were any silviculture plans ever altered or held up due to concerns surrounding the lack of jobs associated with the expenditure?

[1105]

E. Walsh: I just want to say that I appreciate the questioning that is going on. However, I've been waiting for about 20 minutes now to ask my question. I would ask the Chair that as committee members put up their hands, they please be recognized. What I did want to. . . .

[ Page 1360 ]

E. Walsh: Yes. I'll remind the Chair that I did have my hand up 20 minutes ago, and there's only been one questioner since then. But I'd like to continue my questioning to Mr. Stanyer.

R. Thorpe (Chair): We're trying to have cooperation here, like we had all day yesterday. It's too bad you couldn't have been here all day yesterday. If you would try to cooperate, we would move along.

E. Walsh: Yes. Mr. Stanyer, the jobs that have been spoken about in the auditor general's report. . . . He did make mention of short-term jobs. I would like to know, though, just hearing what you had to say about the long-term benefits, what some of the long-term benefits of those short-term jobs have been. I note some of the values that we are going to be deriving through these short-term jobs. You've answered some of those questions throughout, but I'd like you to try to put it a little bit more in closer context with regard to wildlife values and the future AACs -- some of those values that are important to the communities where silviculture work in fact has been taken on in the forests. Could you expand on some of those long-term values?

R. Stanyer: There are a number of reasons, as has been pointed out a number of times, for doing silviculture activities. One of the benefits that was pointed out by the auditor's staff, for instance, is wildlife habitat. One of the discoveries of Weyerhaeuser in the Pacific Northwest was that as they were pruning trees for growing more clear, higher-value wood at the end of the day, they discovered that spotted owls were taking advantage of that newly created habitat. The spotted owl is generally considered to be a bit of a clumsy flier and can't manoeuvre in a stand with a lot of side branches. As that new habitat was created, they found that the spotted owl was moving in. That allowed a much greater flexibility in harvesting old-growth timber in adjacent stands and therefore created, first of all, an immediate impact by more flexibility in old-growth harvesting, as well as the longer-term benefits of harvesting more clear wood out of the improved stands and creating greater wildlife habitat.

Those same kinds of treatments are regularly assessed in British Columbia relative to a variety of habitat situations, whether it's caribou winter range in the interior or such things as the spotted owl in the Fraser Valley and a variety of other kinds of things. So there are some cases where you can get a direct benefit and more flexibility on the immediate stand side, in old-growth harvest, as well as what you create in the longer term.

E. Gillespie (Deputy Chair): I thought I'd better ask you the same questions I asked of the auditor general staff. I'm looking at the recommendation here: "Forest Renewal B.C. should clearly define the extent to which it wants its funds to focus on social objectives and the extent to which it wants them to focus on resource objectives." Are environmental objectives social or resource objectives, or are they captured in there at all?

R. Stanyer: I think that in fairness to the auditors in this particular instance, what they did audit was silviculture activities. Silviculture activities are directly linked, from Forest Renewal's perspective, to resource investments and the return on that particular investment. Certainly there are social and environmental spinoffs to those activities, particularly social, in Forest Renewal work, where our act directs us to take into consideration the needs of first nations. We do identify first nations possibilities and how we might expand opportunities for first nations, particularly in capacity-building with them taking on more and more of this work as independent companies as opposed to being linked up with our multi-year agreement holders or existing only in the world of direct awards, which isn't necessarily the best way to do business in the longer term.

[1110]

E. Gillespie (Deputy Chair): Do you have a way of capturing or identifying the environmental objectives or environmental components? Do you have a way of evaluating and reporting on that?

A. Gorley: First and foremost, the role in our silviculture activities where we make investments is: you don't do activities that degrade the environment. That's pretty straightforward. Through the approval process, that's a bottom line. Secondly, we most directly focus on environmental improvements not through the sustainable harvest strategic objective but through the one we call sustainable forest management, where we collect better information and develop better tools to integrate various interests on the land base. The results of that work -- for example, models that help determine impacts of harvesting on habitat -- feed back into the decisions that get made on the silviculture side. So there is a feedback loop there, although it's not directly picked up under that strategic objective.

Also, when you step back -- and this is why we often argue that people not get their heads stuck at the individual stand level but step back and look at the whole forest -- and look at the forest, the silviculture activities. . . . When you make those choices that we're now talking about in these timber supply area level plans, the choices you make can take environmental concerns into account. For example, choosing to do a brushing activity on a particular area may not only cause the trees to grow more quickly but may cause the hydrological characteristics of the site to change; it may green up more quickly. As a result, you may have a positive impact

[ Page 1361 ]

The same with habitat. These plans I've been talking about to develop timber supply area level strategies actually occur in three steps. The first step is to develop an overall strategy for enhanced silviculture for the timber supply area. The second step is to go through and identify very specifically, on a geographic basis, where those activities are on a map that you can look at. The third step is to overlay the same information with habitat. As you conduct silviculture activities over the land base, you can see how that changes habitat. Therefore you incorporate habitat objectives into your silviculture activities, rather than just timber-growing activities. It's a bit of an emerging science. Again, in fairness to the auditor's staff, they were looking at the silviculture stuff, but the ability to incorporate environmental objectives is growing quite rapidly there.

[1115]

R. Thorpe (Chair): Mr. Coleman, did you have questions to continue?

R. Coleman: I certainly do. The report found that FRBC is focused on social objectives without determining how or to what degree resource objectives are to be foregone. The report states:

"Forest Renewal B.C. is not sure how much of its program investments are to address social objectives (to redistribute income) and how much are to focus on resource objectives (to create wealth)."

"Throughout the ministry and industry, there is a widespread perception that Forest Renewal B.C.'s primary interest lies in the social objectives it has set. We found documented evidence that supported these perceptions. In the last planning process, for example, the corporation direct regions to spend 45 percent of their total dollar allocation on silviculture. . . ."

These directions were not accompanied by any direction as to how the dollars were to be allocated between social forestry and a resource-enhancement forestry.

Could Mr. Stanyer tell us where the directives came from, what targets were derived and what was passed on to the regions?

R. Stanyer: There was a lot of debate, both at the board level inside the corporation at the management level, and external to Forest Renewal, within the industry and certainly around initiatives like the Forest Sector Strategy Advisory Committee. If you look at the recommendations of the Forest Sector Strategy Advisory Committee as an example, you will see that their recommendation was that 50 percent of the money should be spent on silvicultural activities. At the time they were making those recommendations, they were not considering such work as inventory or other kinds of non-silvicultural activities that might fall within the broader definition of enhanced forestry. They expected 50 percent of the money to go to stand-tending activities.

This was a guideline that was put out by the corporation that we expected people to react to. We put it out in terms of let's see if you can spend 45 percent of the dollars on silvicultural activities and what the benefits of those things would be. I say this very clearly: the 45 percent was never considered to impede a best-resource decision that would be recommended and made by the professionals in the field, whether it was a company forester recommending that this kind of activity take place that would subsequently be approved by a ministry forester or whether or not there was good value in doing that kind of work. Very quickly we got feedback from the Pacific region that we couldn't do 45 percent of the money in enhanced forestry, and therefore that didn't take place in that particular region. The rest of the regions assessed whether or not they could do it. They worked with ministry and industry partners, and at the end of the day, they either achieved or didn't achieve that result.

R. Coleman: I want to move on to some silviculture treatments and some questions relative to the report. First of all, a quote: "We concluded that Forest Renewal B.C. is unable to assess whether the activities being funded in the silviculture programs meet all of its expectations, because it has not provided direction about its resource and economic objectives." FRBC has defended silviculture investments in pruning and spacing by stating in the select standing committee debates that this direction came from the Forest Sector Strategy Advisory Committee. The auditor general found that there were no documents to support this suggestion. In fact, the committee was unsure about increasing the AAC and were concerned about spacing and pruning initiatives.

The auditor general found that FRBC did not make accurate statements to the select standing committee on where direction came from to place silviculture expenditures in more labour-intensive areas such as spacing and pruning.

Could Mr. Stanyer tell us what reports or debates or direction came from the Forest Sector Strategy Advisory Committee, and could he provide that to this committee?

[1120]

R. Thorpe (Chair): Thank you, Mr. Stanyer.

R. Coleman: The conclusion of the auditor general is definitive: FRBC failed to make adequate resource targets; where targets were identified, expenditures could not be linked to targets. Perhaps you could tell us what happened here and what influence of the jobs and timber accord had on this breakdown.

R. Stanyer: I didn't hear the question clearly.

R. Thorpe (Chair): Mr. Coleman, could you repeat the question, please?

R. Coleman: The conclusions of the auditor general are pretty definitive: FRBC failed to make adequate resource tar-

[ Page 1362 ]

R. Stanyer: What I said earlier was that Forest Renewal didn't invent the business of silviculture; Forest Renewal picked up the systems that were in place historically in the province. When we started the whole concept of Forest Renewal, we tried to buy into the strategy, as Mr. Gelz talked about yesterday, of building this thing on the basis that the people in the field know what needs to be done. We took their word for it. We expected that ministries would exercise their stewardship responsibilities and ensure, as Mr. Gorley has pointed out, that we weren't doing damage out there and that we were going to get real value returned on the work that we funded.

As we have evolved the corporation, we are very clearly moving away from that strategy into one that is much more strategically driven.

P. Calendino: I want to pick up on the questions just asked, and perhaps the auditor general can answer them. Is it that your staff did not find any written documents of set targets that's at question here? Obviously, from what I hear, they relied on what the ministry had been doing for years, and they found that that was something acceptable to continue doing rather than going and investing hundreds of thousands of dollars to have studies which would show the value for dollars on the investment and the possible return in the future. Is that the problem -- that your staff did not find documented information on that?

M. Sydor: I think the issue we're discussing is whether there were clear objectives for the types of activities that Forest Renewal was funding and the extent to which those activities should be carried out in the province. When we said that we didn't find targets, what we were referring to is the fact that we weren't able to see whether Forest Renewal had identified what it wanted to achieve so that you could then look at the activities actually being carried out and say: "Yes, there is a link. If we carry out these activities, we should get to that end objective." What we found instead was that in fact we were carrying out activities by identifying how much money we wanted to spend on them without saying: "What do we want to achieve as a result of those activities?"

As Mr. Gorley indicated this morning, they're revising their processes. They're identifying strategic objectives. He's talked numerous times about the 25 million cubic metres that they're shooting for. That sort of information was not in place at the time we did the audit.

The issue you're addressing, I think, in terms of what activities had been carried out earlier. . . . Yes, there is a 20-year track record of silviculture activities being carried out. They were being carried out at various funding levels throughout the years, depending on how much money was provided by the province, how much money was provided by the federal government and how much industry provided on its own. Those amounts changed from year to year. The activities tended to fluctuate, in terms of quantity, between them, but generally the activities now being carried out are still the same.

P. Calendino: Right. So would the difference between what the ministry would have been doing in the previous 20 years and what FRBC continued to do be nonexistent? They just carried on the process. What you actually did not find that would satisfy you is written paper setting out a specific target for a specific investment in silviculture. However, we heard from Mr. Stanyer there that they weren't operating in the dark -- that they knew what the outcome would be in the future, even though they could not quantify that.

[1125]

As we were discussing earlier this morning, there are questions of quality, and there are questions of quantity. There are questions provincially of where the money should be spent: where are we going to get the values? Should we spend the money where we're going to get the best values? Should we spend the money because we also want to meet resource values and social targets as well? There are a number of factors that come into play. But you can't make those decisions unless you identify what you want to achieve. So you're right from that standpoint: there wasn't anything in place in Forest Renewal at the time that provided that clarity.

P. Calendino: Well, perhaps Mr. Stanyer can answer whether they had clear objectives and what they wanted to achieve.

R. Stanyer: I think that in the broad context of the mandate of the corporation -- the legislation of the corporation -- we certainly saw our investments as consistent with those objectives and moved towards doing them. I think that where particular investments were made -- in spacing, as an example -- the outcome of doing that would be clearly identified by the foresters that planned to do the work and those that approved the work happening. Could we then roll that up and say: "This contributes X percent to the end outcome"? I think that a lot of the data collection and those kinds of things were lacking. I agree with that.

P. Calendino: But you were relying on what the foresters would tell you the needs were, and you were investing accordingly?

R. Stanyer: That is correct.

P. Calendino: Okay. Thank you.

R. Thorpe (Chair): I just want to follow up there. Mr. Gorley has stated -- at least I thought he stated, and I just would like him to clarify it -- that the recommendations, for the most part, that the auditor general has put here with

[ Page 1363 ]

A. Gorley: I think whether we did it on our own or as a result of the auditor's report, you're correct in summarizing that this process raises the bar in terms of being clearer about what long-term outcome you're trying to achieve, what steps you will take to achieve it and how you will measure and report on that and adjust as you go along.

R. Thorpe (Chair): And I understand that you endorse that process. Is that correct?

A. Gorley: Absolutely.

R. Thorpe (Chair): Thank you.

R. Kasper: Just out of curiosity, did Forest Renewal or the auditor general's department look at, you know, the measurements and outcomes with the FRDA program? We sort of referenced to the past that there was a program in place, and then as things changed, the Ministry of Forests slowly got out of it, and then Forest Renewal took over. So has anybody in their analysis ever looked at whether or not the FRDA program met its goals and objectives, to use as a basis for what is currently being done?

[1130]

M. Sydor: I'd just like to add to that. Mr. Stanyer spoke of FRDA 1; I'll speak of FRDA 2. There was a final evaluation done at the end of FRDA 2. In fact that report contains a lot of output information in terms of what activities were carried out and the quantities in terms of hectares by region across the province. But in sum what that report indicated was that it was unable to evaluate whether those activities would meet the objectives the province had in mind, because there was in fact no strategy in place at the time the program started. So it's almost very similar to the sort of situation that we caught ourselves in. We didn't see what we were trying to achieve from the activities that were carried out. Forest Renewal has obviously moved a long way. But your answer to FRDA 2 is: yes, there was an evaluation done, but it wasn't able to conclude as to whether the right mix of activities had been carried out, because we didn't have a starting point identified when we carried those out.

R. Kasper: Okay. Thanks.

R. Coleman: The report makes the following statement: "Given the goals laid out in the forest renewal plan, we have concluded that Forest Renewal B.C. has not met its obligations to keep the forest healthy." Given the time frame of the audit, I wonder if you could comment on your feeling about that quote relative to the period of the audit and the period that's come since the audit.

R. Stanyer: We generally view forest health issues as outside of our responsibility. We don't do much work in old-growth stands. We don't do much work in mature pine stands. In the interior, as an example of a forest health issue, the ones that we deal with are forest health issues related to juvenile stands, where Forest Renewal treatments can look after whatever forest health problem is there. But the major issues of mountain pine beetles and other infestations are outside of the purview of Forest Renewal investments.

R. Coleman: So this statement, in your opinion, refers to a broader area and not your obligations. It refers to Forest Renewal B.C. as not having met its obligations to keep the forest healthy, not the overall. I just wonder if you could comment on that.

A. Gorley: My comment on that would be that when we talk about a healthy forest, there may be a difference in terminology here. A healthy forest to Forest Renewal is not necessarily about individual healthy trees. Doing things like restoring watersheds, ensuring that there's information to manage habitats well and ensuring that there are vigorous stands of second-growth trees are things that Forest Renewal has done and continues to do and that are consistent with our strategic objectives. I think a healthy forest in terms of individual or groups of trees being healthy, such as not having bark beetles, I think was not intended to be directly part of Forest Renewal's mandate. Just as Forest Renewal was not in the business of fighting wildfires, we're not in the business of dealing with bark beetle outbreaks. But we certainly are in the business of healthy forests in a more holistic way, if you like.

R. Coleman: Maybe I could refer the question over to the auditor general and his department. I'd like to get an understanding of what you're trying to say here in the context of the report and the comment that comes from page 152, I believe, of the report. It's at the bottom of page 152. That's the preamble leading up to it.

[1135]

Secondly, as we've indicated in this section, there were changes in the way forest health issues were funded. Some issues that had been previously been funded by the Ministry of Forests, Forest Renewal took on; and then it backed away and made it the responsibility of the ministry again. What we were looking at was that mandate -- that plan-driven statement of keeping the forest healthy.

The second factor that came into play was that at the time we carried out our audit, the incrementality principle had

[ Page 1364 ]

Taking all those into account -- that there was a reference in the Forest Renewal plan to keeping the forest healthy and that the incrementality principle allowed Forest Renewal to decide what activities it would fund -- what we looked at when we went out and saw the program was that there was insufficient funding being provided and that, in fact, the ministry had to find funds to undertake forest health activities in the mature forest, as Mr. Gorley indicated.

As you all recall, this past year, during the summer, the minister came out with a news release indicating that there was another $9 million or $7 million being pumped into the forest health program because of the beetle breakout in the Chilcotin area and through other areas of the province. We looked at that as saying. . . . Forest Renewal had this opportunity, and it has this mix of activities within the enhanced forestry program -- there are about 12 or 13 different activities. Are we funding those activities in the right mix? Again, we get back to having a clear objective in mind so that in fact we're meeting what was expected when this legislation was set up and we were given a mandate to carry it out. From that standpoint, we concluded that in fact no, Forest Renewal had the opportunity to focus on forest health issues.

Related to that, we talked earlier about spacing and volume -- that sort of issue. I go back to the silviculture strategy that was referred to. I'm not sure what the final version has, but I know that in the draft -- and we did get that, as I indicated, in May 1999 -- there was a reference that we have an opportunity to increase the volume of the forest by 20 percent, and it listed two activities that we should focus on. One of those was fertilization. The second one was forest health initiatives. We had a lot of that information available, and we pulled it all together and said: "We think we can do a better job of forest health." This split of "We'll look at the mature forest and somebody else will look at the immature forest" provides a lot of opportunities for things to fall through the cracks and not get done. Several years ago the federal government moved away from its monitoring role, so there's been a bit of a gap over the past few years. Forest health is an issue that really needs some looking at.

R. Coleman: On that point, I'd like to ask you one more question. There were goals in the forest plan that were presented to the Legislature in 1994 -- how they were going to be achieved -- and then there were five principles. One of the five principles was independent, with no money going into general revenue. I don't see where you spent a lot of time on that, but do you have any comment on the fact that that goal, which was in the original Forest Renewal plan, seems to have shifted?

M. Sydor: No comment, I guess, other than what we provide in the report. I think we give examples where, as you point out, that principle looks like some flexibility was applied to its application. I don't think I have any other comments, beyond what we have in the report.

[1140]

A. Gorley: The situation as it currently exists is that the costs of individual silviculture activities are included in a workplan prior to approval and then monitored through the course of implementation by our staff at Forest Renewal. The information is available in the database. The situation as described in the report is different than the way it is today.

R. Coleman: Thank you. The report notes that multi-year agreements have provisions that lead to employing unskilled workers from target groups. This leads to higher unit costs. However, FRBC has not identified the extent to which partners should or will accept those higher costs. One of the quotes in the report is: "New Forest Opportunities management told us that its average costs were 14 to 15 percent higher than expected after approximately three months of fieldwork." Other proponents have stated that project costs are 30 to 50 percent higher.

What is the cost that the corporation and the Ministry of Forests are willing to accept, in terms of reduced outputs, to meet social objectives, which we understand is part of the mandate of the corporation? How are you going to determine what that balance is, and how are you going to convey it to your proponents?

R. Stanyer: Our target is that costs should not be higher than historically, except for reasons beyond the control of the licensee. By that we mean such things as the slope of terrain, the density of the stand and the complexities of the natural environment that people find themselves in. To that end we have recently concluded an audit of New Forest Opportunities silviculture costs for 1998 and work up until the fall of 1999. The results of that audit are that silviculture costs in the first year were about 35 percent higher than historically.

There has been some work on the rationale behind those higher costs. In some specific treatments -- as an example, brushing -- we can show that the biggest reason for the cost increase was the fact that there were more remote camp situations that needed to be taken into consideration, as opposed to the control period of a couple of years before, when there were fewer camp situations. So that fact would drive the cost.

We have not completely quantified the cost increase relative to the establishment of a collective agreement for those workers, but work done by Pricewaterhouse prior to the implementation of New Forest Opportunities as a corporation showed that the expected cost increase that actually occurred in New Forest was in the range of 2 to 4 percent higher than what would be expected by implementation of the collective agreement.

So there are two specific areas of cost increase. One is the 2 to 4 percent range that Pricewaterhouse predicted on the implementation of the collective agreement. The second one

[ Page 1365 ]

R. Coleman: The audit you referred to -- is that the KPMG report?

R. Stanyer: PricewaterhouseCoopers.

R. Coleman: The multi-year agreements provide output measures but no information on expected outcomes of the investments. The strategic plan of FRBC does have expected outcomes. It's unclear whether the strategic plan outcomes have commensurate follow-through with proponents to ensure that outcomes will be met.

I just want to quote quickly from the report. "We also noted that while the investment management system focuses on operational outputs (hectares spaced, hectares pruned, hectares fertilized), it says nothing about how effective the outputs are expected to be in achieving program objectives. Forest Renewal B.C., we concluded, still needs to access performance in terms of actual incomes." Given the strategic plan and given that comment in the auditor general's report, what is your status today with regards to that?

[1145]

R. Coleman: Thank you. I just want to touch quickly on the monitoring program, because there are a couple of comments in here that leave me with some concern, and I'd like to have them explained by Forest Renewal.

The quote from the report is: "Without sufficient monitoring, there is insufficient information to support changes to policies or practices. In addition, Forest Renewal B.C.'s approach to evaluating actual outcomes needs to be updated and clarified." I don't need to go on, on that comment. But the comment that came out of the report that I thought you could call shocking -- or it caused me concern -- was: ". . .the level of spending on silviculture programs is less for 1998-99 than what it was before Forest Renewal B.C.'s establishment in 1994." How can we possibly claim that Forest Renewal has achieved any success, when we put the additional cost onto industry, but we're actually doing less today than we were in 1994?

A. Gorley: Obviously the overall amount of silviculture done in the province is not controlled completely by Forest Renewal. So while the amount of silviculture work done by the industry has been relatively stable over the last few years, and the ministry has, from time to time, had programs that supplemented that and that have come and gone, Forest Renewal came in, as Mr. Stanyer described yesterday, with rapid-growth programs that did a considerable amount of silviculture as we ramped up and has now settled into what we would call a steady-state level. I think you would find that during that same time, some of the activities that were being funded through the Ministry of Forests and either done directly by them or contracted to industry declined. I don't take issue with the auditor's comment in terms of the net, but that's outside the control of Forest Renewal.

R. Coleman: Would it be safe to say that Forest Renewal basically became the replacement vehicle for this particular activity after it was put into place in 1994 and that the Ministry of Forests backed away from it, and that is why there's such a difference in the numbers?

A. Gorley: I don't know if I would conclude that so directly. The mix of activities that Forest Renewal is doing and the way they're being done is different than in the past.

R. Coleman: Just one final question, and it goes to this whole backlog issue. If in fact we were doing less in 1998-99 versus 1993-94, what is the long-term delay in catching up that we're actually putting ourselves into? How far down the road are we from delaying where we're actually going to catch up on our reforestation?

A. Gorley: In terms of reforestation, I don't think the current reforestation is an issue. In other words, logging that happens presently is reforested by companies within a specified time period. There is no backlog created. So the only backlog in terms of reforestation or the delay in reforestation. . . . I think Mr. Stanyer made reference yesterday to the original time period perhaps being moved out to about a 15-year span in order to take care of that backlog.

[1150]

E. Walsh: Just one question, and that is, on reading the report and listening to the questions and some of the answers: why should FRBC continue on with the programs that they have in fact been involved with?

R. Stanyer: I think that there is real value in the work that Forest Renewal does. I think that you have to look at something broader than solely our investments in silviculture. I think that the investments in silviculture. . . . As we move through the debate about which particular investments have the highest range of payoff, I don't think there is anybody that says it's all sunk money. For instance, if you look at some of the things we do, I think there is support from virtually every forester on the value of fertilization, and you do get more back out of it than what you put into it.

[ Page 1366 ]

I think that, as the auditors point out, we need to do a better job of quantifying why we do these kinds of things in a more transparent way than maybe what we have done in the past. As we move forward, I think we are always achieving a greater understanding of what the needs are -- certainly committees like this, the Forests Committee, the general public and the industry -- as we change the nature of our investments and have a greater understanding of the benefits we are trying to create and the value we actually are getting out of those investments. If you look at that only from a narrow silviculture perspective, I think there is real value in continuing that work.

I think that, pretty plainly, other jurisdictions in the world have resolved this debate in their minds a long time ago. I was in Sweden a couple of years ago. Believe me, the Swedish establishment laughs at British Columbia -- quite frankly, they do. They say: "The debates that you people have, we were over a long time ago. There is real value in doing this work." I think that conditions are different in B.C. than they are in Sweden in those kinds of things. But we've got to take into consideration the natural environment that we find ourselves in and our ability to influence the growth of stands.

When you look at the other activities of Forest Renewal, whether it's the added value that we are creating in the value-added industry or community investments and watershed restoration and those kinds of things, I don't find a lot of debate in other communities about the value of these things. I think that recent research we've done shows that there is strong public support for the activities that we are carrying on. I think that a lot of economists recognize the value of this. There will always be debate around the margins on whether or not we've got it right, but I think that in the middle, there is agreement that the kinds of things we do produce real value. I think there is a good case to be made for the continuing activities of Forest Renewal under the current regime of tenure systems we have and the way we manage our forests in the province. If we're going to change those things, then obviously I think you re-evaluate the needs of this corporation in that picture.

[1155]

A. Gorley: Yes, we're piloting an audit program with multi-year agreements. I'm not sure if I've got the exact number, but I believe it's 14 audits that we should have done by the end of this fiscal year.

R. Thorpe (Chair): Would it be your intention to have the auditor general review those with you to help facilitate the process in moving forward?

A. Gorley: It wouldn't be our intent in quite that way. We consider them to be part of our normal management process. However, I think the fact that they're done and the approach we've taken would be part of the discussion with the auditor general when we're talking about whether our system is working. So I guess, by way of clarification, I wouldn't see us referring the audits to the auditor general, nor do I assume that they would particularly want to see them. But in the process of our dialogue, I think that they would be part of the discussion.

R. Thorpe (Chair): Well, I guess I go back to my comments yesterday. I continually beat up on CCS, but this organization, FRBC, projecting that it wants to lead in many of these areas. . . . It would just seem prudent to me that. . . . We have a fairly critical but constructive report -- as both you and Mr. Stanyer have said -- so I don't know why you wouldn't want to do that. But I would ask: could you supply a copy of one of those pilot audits to this committee when they're completed?

A. Gorley: I see no reason why, once they're completed and signed off, that couldn't be supplied. If there's any information contained in them that is of concern from the point of view of a particular business, we would deal with that, but otherwise it should be fine.

R. Thorpe (Chair): I understand privacy issues and commercial issues and certainly would want to respect those very, very much.

With respect to the rest of your report. . . . Continually through your report you talk about the objective -- the goal of 25 million cubic metres over five years. But yesterday you said a couple of times -- and I asked for clarification -- that obviously the annual allowable cut is the domain of the chief forester of the province of British Columbia. What kinds of consultation have taken place or will take place with the chief forester with respect to this objective? The reason I'm asking that. . . . If that's our objective out here and we're trying to achieve it -- and I'm going to suggest that we are going to achieve it -- what are we going to do with it when we get it out there? Could you comment on that?

A. Gorley: We don't presume to predict what the chief forester will do with it as the statutory decision-maker on those matters. However, in arriving at the target, we did it in very close collaboration with the chief forester's staff. In fact a good deal of the analysis work was done by staff reporting to the chief forester. We were paying for it at Forest Renewal, but the staff were working directly with the chief forester to develop that target, on the clear understanding that it doesn't ultimately fetter the decision that gets made at the end of the day.

[1200]

[ Page 1367 ]

R. Thorpe (Chair): You said, when you were talking about planning and investment decisions, that you rolled it up to get the overall plan. I understand the concept. My question is, though: once we have all that, and we make the decisions and start doing it all, how do we roll down the results we're achieving to measure against? And how far down do we roll those? Is that clearer?

A. Gorley: I think so. Let's see if the answer reflects the question. The process is essentially a combination of top-down and bottom-up on both the setting of and measuring of. We go through the processes, as has been described here, of the broad target and breaking it out and then at the same time building it up from the bottom. The foresters in the field would look at what the opportunities are in the field, build that up and set the annual targets; so they would be added up and form a business plan. They would then go about reporting on that as they make progress. The reporting out in fact comes in from the bottom and is added up just like the planning is.

If your question is then, "If something is on target, how does that get recognized?" or "If off target, how does that get corrected?" what we do is first of all, at the investment officer level in the region, hold these reviews with the individual companies to make adjustments to the plan, make corrections and so on. Then, within the business unit, the vice-president responsible for forests and environment does business reviews with each of his regional directors, looks at the quarterly information that has come in, compares that to what the business plan was and discusses what adjustments or corrections would have to be made. That information is then provided to me, and we have the quarterly reviews with the board. I'm not sure if I've hit your question or not.

R. Thorpe (Chair): Did you consider that flow of information to be timely so that it can have a meaningful impact on what's happening, quite frankly, at the field level?

A. Gorley: There are some practical issues that do cause some grief, and I think Mr. Gelz referred to these earlier. The system is working considerably better than it has in the past and at a high level gives us information that is quite useful. But there are time lags in terms of a project happening on the ground, a company forester doing up the paperwork at the end of the month and then having 30 days to report that to us, us being able to analyze it and so on. So we're currently working. We're going to be renegotiating the multi-year agreements over the next year or year and a half. One of the issues we're looking at is whether there is a practical way, without adding a whole lot of cost, to shorten up the reporting period so that in fact it is a more timely feedback loop, because right now it's 60 to 90 days, which for some things is fine and for other things could cause missed opportunities.

R. Thorpe (Chair): Would you agree, then, that our goal has to be to get timely information, not so that we just have books and books -- well, I guess they're all on disks now, and computers, data banks of material -- but so that we could actually use the material to be more efficient in the field, more efficient in protecting the environment, whatever the matters are, and getting better value for money? That's what the goal has to be, is it not?

A. Gorley: I would agree that we all need to continue to strive to have good, timely indicators. The only caution I would put in is that they in fact be cost-effective. You don't spend so much money collecting information that you don't have it to spend on good investments.

R. Thorpe (Chair): I totally agree with that. With respect to your analysis for investment options, you make the statement about and you talked a little about critical information gaps. What are the critical information gaps you have?

[1205]

So those create gaps, some of which ministries have known about for some time and have been working on, and others which have been highlighted in the process of land use planning and so on. It's those gaps that we're working to close.

R. Thorpe (Chair): Again, I don't want a book this thick. But could I ask you to provide an overview, perhaps by the regions, of what you believe are the gaps in the critical information for making analysis on investment options? Could you provide the committee with that?

A. Gorley: We could. We wouldn't have it in a single list, because it is generated by timber supply area, based to a large extent on the LRMP process and the timber supply review process. But yeah, we can provide the committee with information on that.

R. Thorpe (Chair): That would be helpful, because. . . . Actually, you know, you must have something, because you've identified it here as an issue.

You talked about the coefficients for direct and indirect job creation. Again, I don't want to get into a discussion on the coefficients here. But would it be possible to provide the committee with the background on that, just so we can attempt to understand it? I know it's very complex.

A. Gorley: Yes.

J. MacPhail: You guys are going to be busy, taking all this in. You've got your work cut out.

M. Coell: They're looking forward to it.

J. MacPhail: Yeah, I can tell.

R. Thorpe (Chair): Oh, you're back. It's nice to have you back.

[ Page 1368 ]

I guess, as I said yesterday, I strongly believe in performance measures. I think we have to get there faster. Again, I would strongly encourage you to take the opportunity to consult very regularly with the auditor general and to use their offices to assist you in this area. I don't know whether you have any closing comments, Arn or George or Roger?

A. van Iersel: What I would like to say is that I too felt that Forest Renewal -- Mr. Stanyer, Mr. Gorley and the other gentlemen -- made a very good presentation and responded well to the auditor's report and, in my opinion, have put forward a very good framework for moving forward. I think the challenge, as was discussed numerous times this morning, is how to refine that system and gather the right information for making better investments. From my office's point of view, this is not a financial audit. But our internal audit resources are always available if needed to help the corporation.

R. Thorpe (Chair): George, do you have any comments?

G. Morfitt: Well, we'll certainly be coordinating with FRBC. We may even do another audit on FRBC -- who knows? -- especially on the environmental side, from the sounds of it.

A Voice: After you retire, George.

G. Morfitt: But in any case there will be a follow-up to this, as we always do. So you can be sure as a committee that you'll get more information about how they're making out with these objectives.

R. Thorpe (Chair): I'm sure you may want to check Hansard from yesterday afternoon. Your staff, I'm sure, will want to report to you. But, you know, when you mentioned a follow-up audit, I saw the great smiles that went across the faces of all the people here from FRBC, so apparently they want it sooner rather than later. Roger, I don't know whether you want to make a comment.

[1210]

R. Thorpe (Chair): We should note that we're finished ahead of schedule -- on time, under budget. Thank you very much for coming. The committee will reconvene at 1 o'clock, please.

J. MacPhail: Let's make it 1:15.

R. Thorpe (Chair): No, let's make it one. We were 15 minutes late getting started; let's make it one. Thank you very much.

The committee recessed from 12:11 p.m. to 1:04 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): What we're going to deal with is miscellaneous matters, Select Standing Committee on Public Accounts. Kelly, do you want to walk us through this?

[1305]

The first section of the report, which discusses the auditor general's annual report, begins at page 7. The first section discusses the role and functions of the office, including the auditor general's role, the scope of his work and how the work is carried out, how the office itself is audited, and financial and human resources for the office in 1997-98. On this topic, some additional information was obtained and put into the draft report regarding the 1999-2000 budget for the office. Comparative information regarding budgets for the legislative auditor offices across Canada as of March 31, 1999, was incorporated into the draft report as well.

The draft committee recommendations are found on page 13 of the report, and these are as follows:

1. "Your committee requests that the subject matter of the proposed new auditor general act be referred to the Select Standing Committee on Public Accounts for its consideration."

2. "Your committee recommends that the government review current levels of funding for the office. . .and ensure that the office has an adequate level of human and financial resources to enable it to carry out its auditing functions, including the conduct of performance and compliance audits and oversight of the work performed on behalf of the office by private sector auditors. . . .

3. "Your committee recommends that the government examine the feasibility of formalizing the process of periodic, independent performance and compliance audits of the activities of the office of the auditor general."

G. Morfitt: Yes, I do. I haven't seen these before. I commend Kelly for putting down something to discuss here.

Just a minor amendment on page 12 at the bottom. "The office of the auditor general of British Columbia is also chairing the council," should be "a task force of the council," Kelly.

K. Dunsdon: Okay. Thank you.

G. Morfitt: We're not chairing the council itself; it's just a task force of the council.

Now, on the draft recommendations -- just on No. 1, to do with the Auditor General Act -- the current situation is

[ Page 1369 ]

R. Thorpe (Chair): I thought I heard Kelly say that this is a recommendation that's been made in the past. Is that correct or incorrect?

K. Dunsdon: It's correct.

R. Thorpe (Chair): Is that correct or incorrect, George?

[1310]

I'm at your pleasure. I just thought I'd acquaint you with the current process. I don't know whether the committee would like to capture that process and have a review here; that would be fine too.

R. Kasper: Fred always used to raise this issue.

G. Morfitt: Yes.

R. Thorpe (Chair): So based on that longstanding. . . .

S. Orcherton: And then we'd adopt the report and move on.

R. Kasper: And we would always go along with it to appease Fred.

G. Morfitt: If you want my view, I think that if the process we found was being totally frustrated, I would table the draft act with the committee at that point in time. I haven't done that at this point in time.

R. Thorpe (Chair): Does "be referred to" suggest that it would only get out of here -- go the main House -- after we've discussed it? If that's the case, it's the government's responsibility to do that. Would it be better if that's what that's insinuating? Would it better that it be presented and just reviewed here, instead of being referred to? Does that give you any more comfort, George?

G. Morfitt: As a matter of fact, I'd be delighted to discuss the draft with the committee, just for your interest and involvement.

R. Thorpe (Chair): I think personally -- and I think Rick would, being on this committee for as long as he has -- that would be something. . . . It would be good to have this committee being supportive from both sides of the House with respect to that legislation -- once we've seen it, of course.

Is it the wish of the committee that we just alter the language here a little bit to "review and discuss with," instead of referring it to, say. . . ? Jack, do you have a problem with that?

J. Weisgerber: No.

R. Thorpe (Chair): Is everybody okay with that one? I see everybody shaking their heads in endorsement.

So we'll move on to No. 2. George, did you want to. . . ?

G. Morfitt: No. 2 looks just fine to me.

R. Kasper: Could I just add a comment?

R. Thorpe (Chair): Yes, Mr. Kasper.

R. Kasper: The purpose, as I see it -- just to make sure that the committee isn't doing something that it's not charged to do -- is perhaps to entertain an overview of any legislative changes that may or may not be up for discussion purposes.

A Voice: Yeah.

R. Kasper: Do you know what I'm saying? Just, you know, we. . . .

A Voice: It's more of an information. . . .

R. Kasper: Well, yes.

G. Morfitt: Yes, that's perfect.

J. MacPhail: It's for information only.

R. Kasper: Yes. You know, it's for information, and that's the intent.

R. Thorpe (Chair): Exactly. That's the intent. If it's all right with the committee, I'd ask Kelly to work with the auditor general and the comptroller general to make sure that they're comfortable with that wording as it comes forward. Arn, are you pleased with that? Are you happy? Are you onside?

A. van Iersel: Yes. I'd be happy to work with Kelly and George on it.

R. Thorpe (Chair): Thank you.

G. Morfitt: The second proposal, I think, is a reasonable suggestion. It doesn't imply necessarily any increase in resources but a hard look at what the resourcing is.

R. Thorpe (Chair): And No. 3 is suggesting that we have FRBC do an audit on the office of the auditor general. Is that how I read that? [Laughter.] That was a bit of a joke.

G. Morfitt: With regard to No. 3, I'm not certain what is intended here.

R. Thorpe (Chair): Where did this come from, Kelly?

[ Page 1370 ]

G. Morfitt: That's rolled into the draft revised act. There is a call for that in the draft. If the committee gets an information review of the draft revised act, that can be brought into that. But the proposal in the new act is that this be covered off and that there would be an external audit of the office from an economy, efficiency and effectiveness perspective.

R. Thorpe (Chair): But if that's the case, then this recommendation should be okay. If it is potentially going to be rolled into new legislation. . .

G. Morfitt: Well, it wouldn't be. . . .

R. Thorpe (Chair): . . .if and when it comes. . . . I think it's been coming for some time.

G. Morfitt: It may be the wording. I don't think the government examines the feasibility of formalizing. . . . If that means they change the act to include it, that's fine. The government itself wouldn't be doing anything else but that.

R. Thorpe (Chair): Again, if everyone has the intent of looking at a performance review, maybe we could ask your office, George, and Arn to work with Kelly again to draft up something that captures the spirit of what members have suggested and accommodates that, if that's all right with you.

[1315]

R. Thorpe (Chair): Yes.

R. Kasper: But it doesn't have anything to do with future legislation. It would fall within the framework of the existing. . . ?

R. Thorpe (Chair): Exactly.

G. Morfitt: Existing legislation doesn't call for it.

R. Kasper: I know it doesn't call for it.

G. Morfitt: So it would have to be something additional.

R. Kasper: But I'm just thinking that the purpose of the discussion was -- you know, to my mind: what's stopping it from happening? It's like a volunteer approach.

G. Morfitt: But who's going to implement it? Who's going to put it. . . ? The government can't do it.

R. Kasper: Maybe this committee could recommend it -- right?

G. Morfitt: Yes.

R. Kasper: That's all.

G. Morfitt: The government. . . .

R. Thorpe (Chair): I believe that's what this document is.

R. Kasper: Well, no. If I may, it does and it doesn't, because what George said is that the existing legislation doesn't make provision for it to happen. All I'm suggesting is that it should be worded in such a way where it does it, despite the fact that the existing legislation doesn't specifically make it mandatory.

G. Morfitt: Yeah. I think this is a report to the Legislative Assembly. I would, in the revised wording, take out reference to government here and just say the committee recommends that the feasibility of there being a performance audit conducted on the office of the auditor general be pursued -- or something.

R. Kasper: Okay. So you don't get caught up in the legislation issue.

G. Morfitt: Fair enough -- because who knows when that's going to happen?

J. MacPhail: He wants something separate.

R. Kasper: Separate, yes.

R. Thorpe (Chair): Is there anything else that we needed to put on there, Arn or George?

A. van Iersel: No, I'm comfortable with that. The Internet piece was just a report to the committee.

R. Thorpe (Chair): Yeah, we just kind of quickly skipped over that public accounts on the Internet on page 5. Is everyone satisfied with that?

R. Kasper: It was so glowing.

R. Thorpe (Chair): Is that a yes, Mr. Kasper?

R. Kasper: Yes.

R. Thorpe (Chair): The next report we'll go to is Y2K.

S. Orcherton: This is pretty straightforward. I don't know if you've had a chance to look at it.

R. Thorpe (Chair): No, I haven't. They haven't been circulated, have they?

K. Dunsdon: Unfortunately, no.

S. Orcherton: It looks pretty straightforward to me.

R. Thorpe (Chair): That's a great speedreading course you've taken.

S. Orcherton: Oh, I just looked at the recommendations, and they look straightforward.

[ Page 1371 ]

J. MacPhail: Could we have somebody go through the report again?

R. Thorpe (Chair): Kelly, would you like to walk us through the report?

K. Dunsdon: Yeah, I'll just go through the Y2K. This is the committee's tenth report for the third session. It's based on the committee's continued work regarding efforts made in B.C. to prepare mission-critical systems and programs for transition to the year 2000. The auditor general has done, I believe, two reports on this topic: one in 1997 and one in 1999. The committee reported on its consideration of the 1997 report in the committee's first report of the third session in June of '98.

The focus of this draft report here is work done by the committee on the Y2K issue in March, July and November of '99. During the course of its work, the committee heard from witnesses from the auditor general's office; the Information, Science and Technology Agency; Action 2000; Ministry of Health; Crown corporations secretariat; and the Ministry of Advanced Education, Training and Technology.

The first section of the report, which begins on page 5, discusses the history of the Y2K bug, the work done by the auditor general and the areas of focus for the committee during its deliberations on this topic in 1999. Pages 9 and 10 outline the role of the Action 2000 office, established by ISTA in 1998 to act as the focal point for coordination of the province's Y2K efforts, and describe some of the work done by the office to coordinate year 2000 systems remediation, testing, business continuation planning. Pages 11 to 24 of the draft report contain information received by the committee regarding remediation of mission-critical systems in ministries and government organizations. The auditor general had two recommendations in this area. The first one was regarding the harvest database system's library management system, and the second recommendation was regarding high-risk health authorities.

[1320]

The auditor general had also identified some concerns regarding systems remediation in advanced education institutions, and this is discussed on pages 22 and 23 of the report. The next section of the report deals with systems remediation in the utilities and telecommunications sectors and is found on page 24 of the draft report.

The auditor general's 1999 review of Y2K preparedness in B.C. focused largely on business continuation planning, and this is discussed on pages 25 to 32 of the report. This section discusses business continuation planning efforts in ministries and government organizations. The auditor general had made one broad recommendation with respect to business continuation planning, and that recommendation is quoted on page 25 of the draft report. That recommendation dealt with formal management sign-off of business continuation plans. As well, the auditor general had a specific recommendation regarding the harvest database systems plan and the completion of planning in high-risk health authorities.

The information received by the committee in November of 1999 indicated that the formal sign-off of business continuation plans had occurred as the auditor general had recommended. However, there is a draft committee recommendation contained on page 32 of the draft report that recognizes the fact that independent testing of business continuation plans had resulted in recommendations for improvement, and also recognizes that new mission-critical and business priority program areas will come into being in the future that may require some review in terms of business continuation planning. You'll see that on page 32 of the report there's a draft recommendation that reads: "Your committee recommends that the government continue to promote the completion, testing and ongoing improvement of all-hazards business continuation plans in ministries, Crown corporations and government organizations, including health authorities, advanced education institutions, school districts and municipalities, to ensure against future disruption to service delivery and operations."

The next section of the report. . . .

R. Thorpe (Chair): Just a sec. Does anyone have any comments on that recommendation? Is everybody okay with that? Arn?

A. van Iersel: Yes, we're comfortable with recommendation 1.

J. Weisgerber: I've got the uncomfortable feeling that agencies and governments generally spent huge amounts of money on this Y2K thing. I also have the suspicion that other -- particularly Third World -- kinds of agencies didn't do a darn thing, and the results weren't measurably different in either jurisdiction. I really wonder whether we're not encouraging another round of activity that would have some fairly serious cost implications.

R. Thorpe (Chair): Good point.

Anyone else have. . . ?

E. Gillespie (Deputy Chair): I think it was interesting that we did this work at the same time that we were doing the earthquake preparedness work. Pretty much everyone who spoke to us said that this all-hazards planning could be put into effect in the case of any kind of major disruption, whether it be Y2K or an earthquake or an ice storm. For that reason, I think it's worthwhile kind of keeping that on radar as something important to do within government entities.

[1325]

[ Page 1372 ]

R. Thorpe (Chair): One thing that I just have a question mark on is when we refer to municipalities. I just wonder what kind of expectation that's going to create for provincial government funding on moving these things. So should our recommendation be to continue to promote? Or is our thrust to give it to the government to consider the ongoing promotion? Obviously it has to be done within a total scheme of whatever the strategic thrust is and resources are.

J. MacPhail: It's the latter.

R. Thorpe (Chair): Any other comments?

E. Gillespie (Deputy Chair): I don't think this recommendation says that government has to do it; it says "promoting." When I think of the work that the Y2K team did in my own particular community, it was very much about education and informing people of the risks, then leaving up to municipal managers, business managers, etc., to make their own plans.

G. Morfitt: I support the current wording.

R. Thorpe (Chair): What is the wish of the committee?

M. Coell: I like the current wording.

R. Thorpe (Chair): Okay. We'll move forward. People have endorsed it.

K. Dunsdon: The next section of the report, starting at page 37, deals with legal liability issues, which were considered by the committee at its March and July 1999 meetings. It describes what legal liabilities were or are considered likely to arise in ministries and government organizations as a result of Y2K-related failures and what steps were taken to assess these.

The auditor general's 1999 report contained one specific recommendation regarding assessment of potential legal liabilities. It's quoted at page 35 of the committee's draft report and recommends that the Public Service Employee Relations Commission seek legal advice regarding potential Y2K-related failures of the corporate human resources information and payroll system. During the course of its meetings, the committee learned that PSERC had implemented the auditor general's recommendation regarding legal liability assessment, and because of this there are no draft committee recommendations on this topic.

The next section of the draft committee report, which starts at page 38, deals with insurance issues, which were discussed by the committee in March and July of 1999. The auditor general's report does not contain any recommendations on this topic. There are no draft committee recommendations in this report at the moment.

Pages 41 and 42 of the report discuss certification and verification of Y2K readiness. The auditor general had one recommendation in this regard, which is quoted at page 41 of the committee's draft report. Information received by the committee in November of 1999 indicated that ISTA had taken steps to coordinate implementation of this recommendation.

Y2K project costs are discussed at pages 43 and 44 of the draft report. Information received by the committee from ISTA, the Crown corporations secretariat and the Ministry of Health regarding costs have been estimates, of course, to date. So there's a draft recommendation in the report at page 42 that reads as follows: "Your committee recommends that representatives of the Information, Science and Technology Agency, Crown corporations secretariat and the Ministry of Health reattend before this committee no later than June 30, 2000, to provide information regarding the total direct cost of Y2K projects in ministries, Crown corporations and health authorities."

Other issues that arose during the committee's consideration of this issue, such as partnerships and coordination efforts, communications initiatives, private sector readiness and B.C.'s international trading relationships, are found on pages 44-48 of the report. The auditor general made no recommendations on these issues, and no draft committee recommendation is included in the report at this time.

[1330]

A. van Iersel: I would support recommendation No. 2, whether in person or tabled with the committee. I know that the Action 2000 office is updating all its cost figures now, so that should be just about ready.

G. Morfitt: Yes, I think that's an appropriate recommendation.

R. Thorpe (Chair): Okay. Is everybody onside with that?

E. Gillespie (Deputy Chair): The recommendation's fine. I'm going on to page 49, with the year 2038 bug. Maybe Kelly can tell us more about it after we deal with this recommendation.

R. Thorpe (Chair): Is everyone onside, then, with recommendation No. 2? Carried unanimously. Good.

K. Dunsdon: Did you have a question about that part of the report?

E. Gillespie (Deputy Chair): Yeah. What is it?

K. Dunsdon: When I was doing some research on the Internet, I was looking at the Gartner Group web site, and they were discussing this other bug that may be arising in the year 2038.

S. Orcherton: We don't want to hear about it. [Laughter.]

R. Thorpe (Chair): I think Steve has it. He's going to the doctor this afternoon.

S. Orcherton: More money. I was teasing.

K. Dunsdon: There's a bit of a discussion about this at page 49 in the conclusion, to emphasize that these computer

[ Page 1373 ]

R. Thorpe (Chair): Joy, would you be here to comment on that report in the year 2038?

P. Calendino: I plan to.

R. Thorpe (Chair): Well, we'll be with you in spirit.

S. Orcherton: I'm sure the committee will be summoning Joy as a witness.

M. Coell: And blaming her.

J. MacPhail: Blaming me for something, yeah.

R. Thorpe (Chair): Bring your membership. [Laughter.]

E. Walsh: I don't know what everybody's so worried about; it's only 38 years away. But one thing I did want to ask was: looking back. . . . I think this kind of goes into the future -- the 38 years -- and that is. . . . I know that Steve doesn't want to talk about this.

S. Orcherton: No, I want to talk about it, but I'll wait till you're done.

E. Walsh: The time-limited piece of legislation that was passed in the States -- what is that? And how would that legislation that they've passed down there, which protects governments and businesses from lawsuits that are launched. . . ? It protects them from any fallout. Did we look there to see what their legislation says? Clinton just passed it.

R. Thorpe (Chair): I have no knowledge in that area. Perhaps that's something we could pursue with Mr. Culbertson, who's our provincial expert on. . . . He's going to appear before June 30; that was the recommendation. Maybe through Arn's good offices, we could ask him to ask Mr. Culbertson to bring us forward a one-pager on each one of those subjects, as general information.

E. Walsh: Yeah. Well, I'd like to see the legislation.

R. Thorpe (Chair): I'm sure you can probably get it off the Internet.

K. Dunsdon: I have that in my file. I can look for it and give it to you.

E. Walsh: Through the Chair, I'd like to thank Kelly. I look forward to getting it.

R. Thorpe (Chair): Is there anything else, members? That's it with that report? Kelly, is there anything else? Is that it, or have we got something else?

[1335]

R. Thorpe (Chair): What is this report, Kelly? Oh, "A Review of the Estimates Process in British Columbia." Okay, why don't you walk us through that?

K. Dunsdon: Okay. The committee met on the topic of the estimates process in B.C. on five days in April and May of 1999 and heard from witnesses from the office of the auditor general, as well as Doug Enns, chair of the budget process review panel. Considering the auditor general's report, the committee focused its review on chapter 4 of the report, entitled "Issues Arising from Budget '96."

Based on the committee's work during this time, our office prepared a draft report and circulated it late in June 1999 to all committee members, to Mr. van Iersel and to Mr. Morfitt. Comments were received back from Mr. Morfitt and Mr. van Iersel regarding some minor technical errors in the report, and those have since been corrected. The first section of the draft report, which begins at page 5, summarizes the presentation made by the auditor general, which included an overview of the process his office used to carry out its review and his observations regarding Budget 1996, which are found on pages 7 to 10 of the report.

The next section of the draft report, which starts at page 11, discusses the conclusions reached by the auditor general as a result of his review. Chapter 4 of the auditor general's report. . . .

R. Thorpe (Chair): Just a second. Where did you say we go now? Page 11?

K. Dunsdon: Page 11.

G. Morfitt: We're a little out of sync.

R. Thorpe (Chair): Yeah, I think we're out of sync here.

K. Dunsdon: I'm talking about pages 7 to 14.

J. MacPhail: What's the problem?

R. Thorpe (Chair): The problem is that I was referred to page 11 for conclusions, and when I got there, it says "revenue." I'm just trying to get into sync here.

K. Dunsdon: I think what you were referring to was the conclusions. It's actually page 13, so I guess this has changed a little bit since I wrote my little speech here.

This section discusses the conclusions reached by the auditor general as a result of his review. Chapter 4 of the auditor general's report did not contain any recommendations, but the auditor general did present to the committee his views regarding weaknesses in the estimates process. Those are summarized here at page 13.

The committee agreed that members would have the opportunity to submit lists of written questions to the auditor general, and some members of the committee did so. Those questions and the auditor general's responses to them are contained in the next section of the draft report, which is found at pages 15 through 19.

[ Page 1374 ]

R. Thorpe (Chair): Did I understand that the comptroller general's office and the auditor general have had a chance to go through this in detail?

K. Dunsdon: Uh-huh.

R. Thorpe (Chair): Have you got any comments, Arn or George, on this? Then I see you, Steve. Yeah.

[1340]

R. Thorpe (Chair): So are you suggesting we should change that recommendation?

G. Morfitt: No. Well, you can leave it. It's inconsequential is what I'm saying.

A. van Iersel: Speaking to recommendation 2 first, I had made some contact with Dan Perrin, who came with Mr. Enns the first time. There are people that are prepared to come back. I think the intention was that they would come back and explain the detail of how they got to their recommendations. I understand that was their request of this committee. So No. 2 can be looked at in terms of the committee's pleasure as to when it should be scheduled.

In terms of item 1, I look to direction from the committee as to the best wording here. I can say -- not on behalf of, but as a Ministry of Finance employee -- that we are working through the various recommendations in Mr. Morfitt's report and what subsequently came out of the Enns committee towards the end of September. I don't know if I would be prepared to say that the Ministry of Finance has concluded on each one of the recommendations as to how they will be interpreted.

The first evidence that this committee would have seen is the revisions made to the quarterly report in terms that we've now fully accepted the summary as the accounts basis, as the bottom line for government. We're also including forecasts. In coming weeks, it will be clear that there will be more information, consistent with the Enns recommendations, that we'll be following.

But I think there is still some thought being given to things such as the expanded entity, including schools, universities, colleges. I couldn't suggest that a firm conclusion has yet been made, and I believe there is some consideration being given to talking to some of those entities about how they felt about it.

S. Orcherton: I don't have any problem with the recommendations at the end. I think they're wholly appropriate. I'm just curious about this piece that's been put in -- the auditor general's response to questions posed by committee members. There are a number of questions that seem to be put in somewhat selectively. Most notable for me is that one of the questions I asked is not there. I mean, the question I asked was a bit of a precursor, as I recollect. I don't have Hansard in front of me here, but it was around the budgetary process. I think I was asking George about -- you know, it is kind of a moving target -- what a good success rate is. Is it plus or minus 4 percent or 2 percent? As I recollect, the answer was 2 percent. If you were within 2 percent, that's generally not far off the mark. So I just am somewhat surprised that these particular observations are in the report. With some questions, clearly the Hansard record would. . . .

R. Thorpe (Chair): Steve. . . .

S. Orcherton: I'm just trying to finish what I'm saying here -- okay? Clearly Hansard is the record and will be relied upon, I think, in terms of our deliberations on this issue. This is -- I've never seen this before -- somewhat selective in terms of the questions that were posed by committee members. Clearly there were a lot of questions posed, mine being one of them. And that's just the one I recollect that's not included in this report.

R. Thorpe (Chair): Steve, these questions are the ones that all committee members suggested to them and made available to them. These were the questions that committee members put in writing. These are the written responses to the written questions.

[1345]

Some Voices: Exactly.

S. Orcherton: Which is my point. There was a lot of questions asked. Why are we singling some out?

R. Thorpe (Chair): It's because written questions didn't get verbalized -- right?

G. Morfitt: These are on the record. These would be in the files of the committee.

R. Thorpe (Chair): Quite frankly, one reason that they're not on the written record is because the committee got shut

[ Page 1375 ]

Interjections.

R. Thorpe (Chair): That's a fact. You can't argue with the facts. Those are the facts.

Joy, you wanted to speak.

J. MacPhail: I was wondering if maybe I could ask a question to the Chair. Are the auditor general's responses to the questions posed by committee members part of the Hansard record?

R. Thorpe (Chair): No, not to my knowledge.

R. Kasper: Those were read and written into the Hansard record.

P. Calendino: No, they're not.

R. Thorpe (Chair): Maybe the auditor could give clarification to that issue.

G. Morfitt: No, he can't. He can't remember.

J. MacPhail: Well, all right. Here's my. . . .

R. Thorpe (Chair): Obviously we need to check, Joy.

J. MacPhail: Here's my point, Chair. . . .

S. Orcherton: Why would they be in the report if only some people have received the answers?

J. MacPhail: Here's my point; I was going to make it earlier. The auditor general's report itself should stand as the record. While this report summarizes the presentation by the auditor general, I would suggest that the official record is the report itself and Hansard. I say that because there is a potential that any documents may be used in future business somewhere else. It would be our view that the accuracy of the auditor general is contained in his report as tabled and in any information that has been put in Hansard and had a chance to be reviewed by committee members. My suggestion would be that the written responses to the questions posed by committee members be deleted from the report.

R. Kasper: I think that in keeping with past practice on a number of reports where questions have been raised in a meeting session and responses either from a witness or from Mr. Morfitt's office. . . . If it's deemed by the committee to be significant, then it's generally accepted by the committee that those questions and answers be reflected in the written report to the Legislature. My only concern is that I feel there were some relevant questions that were raised orally in the meetings.

I asked Mr. Morfitt some questions which dealt with the response to his report, to specific pieces of legislation, and he responded. I felt that was an important element of his report as follow-up, and secondly, it should also be reflected in our report to the Legislature as far as what work the committee is doing. I had one specific question, and it was answered by Mr. Morfitt. I know Steve also had a question asked and answered by Mr. Morfitt's office.

I think there is a way that we can look at the Hansard record -- and perhaps the Chair and Deputy Chair may want to get together, if we're not going to get this done today -- and put some balance to the report.

S. Orcherton: I think you just rely on Hansard.

R. Kasper: We could sit here and pick this apart for a long time -- that's all.

J. Weisgerber: I think it's probably fair to say that these written questions are not part of the Hansard record. I think the simple solution is. . . .

R. Kasper: Well, just. . . .

[1350]

P. Calendino: Would you have done that ten years ago, Jack?

J. Weisgerber: Of course, we were so much more democratic ten years ago, we wouldn't have shut the thing down in the first place.

R. Thorpe (Chair): Is there anybody else wanting to say anything? I want to say something, but I want to give everybody else a chance.

This is obviously a controversial report, and everybody just received this. We are going to meet in a matter of a week and a half -- March 7. I wonder if it would not be productive for us to just take it away. I can talk to the Deputy Chair on this, and hopefully we can have a meeting of the minds on the issue and bring in Mr. Weisgerber's thoughts. Does that seem to be a constructive approach?

R. Kasper: That's fine.

R. Thorpe (Chair): That's fine. Does anybody else have any comments?

R. Kasper: I'm just giving you some direction. If you're going to meet and put something together, then I had specifically asked some questions of Mr. Morfitt in regard to the progress to date in response to the report by government. He answered that, and I would like those -- the question and the response, in a broad way -- included in the report. That's all I'm asking for. We've done it in other reports -- right? I want to see a balanced report.

R. Thorpe (Chair): Rick, if you could be so kind as to point out the Hansard portion, that would be most helpful.

[ Page 1376 ]

I don't have any problem with going away and reviewing this report. I think that's a good idea. I do have a little bit of concern, though, if everybody comes back with particular questions that they asked and got answers to in Hansard. We could end up with quite a hodgepodge of a report at the end of the day.

I flag that as a potential problem. I think that the report in most respects, with the exception of pages 15 to 19, appears fine to me, with a cursory glance over it. I wonder why this was never put in Hansard, because I think it should have been. It shouldn't be part of the report, in my view. But we should go in and review it all in totality, and come back and discuss it again.

R. Thorpe (Chair): Thanks for that support, and your points are well taken. What we will ask the staff to do, because there are some people saying it is in Hansard, and some people saying it isn't in Hansard. . . . Let us go through and systematically check to make sure what is in Hansard and what is not in Hansard, and then we'll report that back.

J. Weisgerber: Hansard is a record of the debate in the House and in those committees where Hansard reports. Hansard doesn't report written documents tabled in the House or in a committee, so the only way you're going to get this on the Hansard record is to read it into the record while the committee is in session. If you don't care about that, then you won't. . . . If you want it in Hansard, that's the way it's going to get there, in my opinion. We have Hansard here, and certainly I'm sure we can get. . . .

[1355]

J. Weisgerber: Why not?

R. Thorpe (Chair): Exactly.

E. Gillespie (Deputy Chair): Actually, knowing we were reviewing this, I did go to the June 22 Hansard, and it is here. What we have are the written questions and then a summary of the response. But Hansard is the official record that has the full response to all the questions. The question was read out and then a response given, and it's all in Hansard.

S. Orcherton: So it is in Hansard. So you just rely on Hansard, and that's the end of it.

J. MacPhail: Or the summary is.

R. Kasper: Then I'm writing out the one that I asked, because I thought it was relevant.

E. Gillespie (Deputy Chair): But it's already in Hansard.

R. Kasper: I know, but I'm making a point that I'd like it included.

R. Thorpe (Chair): I still would like to suggest, though, that this report is controversial and that we give ourselves from now to March 7 just to take the time and carefully read it. Not a whole bunch is going to happen in our worlds between now and March 7 -- I don't think.

Interjection.

R. Thorpe (Chair): In our collective worlds. I just think that may be the prudent thing to do. I thought we had agreement on that. . .

E. Gillespie (Deputy Chair): We do.

R. Thorpe (Chair): . . .and I think we do have agreement -- thank you -- from the Deputy Chair.

P. Calendino: It's something that's somewhat new to me. When we have reports of the auditor general, we go through the report. We debate it, and we recommend the report to the House. I haven't seen previously that we recommended a review of the auditor's report or a summary of the auditor's report. We don't recommend those things to the Legislative Assembly. I don't recall having done that before. We recommend the report.

S. Orcherton: Let's go away and review this and come back. We'll get it sorted out next month.

M. Coell: I would be interested -- and I don't know the answer to this -- in the committee's ability to have minority reports in. . . .

S. Orcherton: There is no ability for the committee to have minority reports.

M. Coell: I just wondered whether I could get that from the Clerk. Although I'm perfectly willing to take your word for it, I'd prefer to hear it from the Clerk.

Interjections.

R. Thorpe (Chair): Mr. Coell, would you please restate your request?

M. Coell: I just wonder what our position as a committee is on minority reports within the body of a. . . .

Interjections.

R. Thorpe (Chair): The Clerk's office will provide that information to the Deputy Chair and myself, and we will disseminate that to the committee members before we reconvene and, hopefully, when we are doing our work together. Okay? Does that satisfy everyone?

Any other comments from the comptroller general's department?

[ Page 1377 ]

R. Thorpe (Chair): From the auditor general's department? I guess that shake is a no. Is it, George?

G. Morfitt: It's a no.

R. Thorpe (Chair): That's it, I guess. We're going to reconvene on March 7. We're going to do interviews in the morning on the seventh. Kelly will arrange. . . . I guess we could actually just use this room. We'll do that in camera, of course, and then we'll start in the afternoon with the report on social housing. Then we'll go to an environmental report subsequent to that.

A. van Iersel: Pulp and paper mill effluent and standards of conduct in education and health.

R. Thorpe (Chair): We will go from nine till five each day. Is the committee in agreement with that? Thank you very much.

The committee adjourned at 1:59 p.m.

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