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) Hon. 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 1379 ]

The committee met at 1:32 p.m.

R. Thorpe (Chair): Good afternoon, ladies and gentlemen. Thanks for your patience with us taking a few minutes getting started here today.

"Social Housing: Governance of British Columbia Housing Management Commission and of Provincial Rental Housing Corporation; Managing Rental Housing Subsidies." Mr. Gregory, I understand that you and your staff are going to make a presentation first, and then we'll hear from B.C. Housing and the Ministry of Social Development and Economic Security. When witnesses are coming to speak to the committee, please identify yourself clearly for Hansard. I also ask that you speak into the microphones.

P. Gregory: Mr. Chair, as you indicated, this afternoon we'll focus on two audits dealing with social housing. The first deals with governance, an issue that is increasingly being recognized as a key contributor and prerequisite for good performance. In the second audit, the subsidy payments, we examined whether B.C. Housing is a prudent purchaser with social housing subsidies. I have with me at the table Mr. Errol Price, the senior principal with responsibility for the audit; and Tony Timms, the senior project leader who led the field team and will make our presentation today.

Our presentation is really in three parts: an introductory section that sets the stage for both audits and then one presentation for each of the audits. We'll start by providing the background information and our presentation on the governance audit, and we'll pause there. We understand that BCHMC and ministry officials have a presentation dealing with that first audit.

Just to let you know, our presentation this afternoon is done in a slightly different style -- somewhat less formal but we hope more interesting. We'd be interested to get your reaction to the new style after the presentation and see if you prefer it or prefer our more formal style. I'll turn it over to Tony.

T. Timms: Good afternoon, everyone. Welcome to our presentation on the audits that we did on social housing.

We carried out two audits that focused on provincial government agencies involved in social housing: the British Columbia Housing Management Commission, or B.C. Housing, and the Provincial Rental Housing Corporation, or PRHC. The first looked at the principal governance elements around the two agencies. The topic of governance is an important one to government in all of its Crown corporations and agencies, and particularly so in the case of B.C. Housing and PRHC, where the governance structure is more complex than is often the case. Housing involves both cross-government issues and harmony among the various levels of program delivery, and therefore clarity around the governance structure is an important part of success in achieving housing objectives.

The second audit covered how B.C. Housing manages the programs for paying subsidies to the not-for-profit and cooperative sponsors that manage social housing projects. Of the $200 million a year or so that B.C. Housing spends, about $125 million is spent on subsidies and rent supplements. We therefore decided to look at how well B.C. Housing manages its subsidy programs. The possible devolution to the province of nearly 45,000 units that currently are in the federal social housing portfolio heightens the importance of B.C. Housing subsidy administration working effectively.

[1335]

For its part, the Provincial Rental Housing Corporation, or PRHC, holds ownership of the provincial investment in social housing stock, carries out property transactions that add to or reduce the stock of land and buildings, and leases land to sponsors so that developments can be built.

These are challenging times for providing an adequate supply of affordable housing. According to 1997 statistics, there were at that time over 150,000 renters in B.C. who were in need of affordable housing. These were households that were having to pay over 30 percent of their income to secure adequate accommodation in their communities. Meeting this need is made difficult by two issues.

First, there is a lack of affordable rental housing stock for families, seniors, low-income urban singles and individuals with special needs. This is made more acute by there having been an increase in the number of single-person households, which has placed further pressure on supply. In the 30 years prior to 1992, the average household size decreased by nearly a quarter from 3.4 members to 2.6 members. And second, the high costs of land and development are disincentives for developers to build affordable rental housing units as more attractive returns are available from alternative types of construction such as condominiums. As well, renter incomes and prevailing market level rents have not been high enough to encourage the development of units built for rent. Much of the shortfall in conventional rental units is being filled by secondary suites and rented homes and condominiums. The availability of these units is becoming critical to helping the existing housing stock adapt to the changing requirements of the population.

How have governments responded to this challenge? In British Columbia there are three main groups of social housing programs: those wholly funded and administered by the provincial government, those administered by the provincial government and for which the cost of construction and operation is shared between the federal and provincial governments, and those programs wholly funded and administered by the federal government through its housing agency, the Canada Mortgage and Housing Corporation, CMHC.

The government of B.C. has no involvement in funding or operating these developments. However, over the past few years, the federal government has concluded agreements with a number of provinces that have resulted in responsibility for administering the formal federal portfolio being transferred to

[ Page 1380 ]

The primary vehicle for provincially led social housing developments is the Homes B.C. program. Under this program, which was started in the mid-1990s, the provincial government has funded new construction at the rate of 600 units per year and has recently announced its intention to build an additional 1,200 units over a two-year period. Developments under the program are owned and managed by not-for-profit organizations that receive subsidies from B.C. Housing to help finance shelter costs. We'll explain more about the subsidies in our second audit. The program covers families, seniors, urban singles and individuals who are at risk of becoming homeless.

The provincial government also provides funding for about 1,000 units under the supported independent living program, or SILP, that offer shelter support for those with mental disabilities. As well as subsidies, the provincial government has a number of rent supplement programs for needy groups, of which the shelter allowance for elderly renters, or SAFER, is the largest and most well-known.

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B.C. Housing spends nearly $200 million each year in delivering social housing programs. Rent subsidies paid to sponsors and rent supplements paid to individuals in private accommodation are by far the largest single component of B.C. Housing's costs. Shown in blue on the chart, they account for about 65 percent of the total costs, while salaries -- in purple -- and mortgage costs -- in green -- account for 9 and 7 percent respectively.

B.C. Housing's revenues are derived from three main sources. The provincial government provides about 46 percent, or $90 million, of B.C. Housing's income through the annual estimates process, shown in blue on the chart. The federal government contributes 37 percent, or $72 million, for its share of cost-share programs, shown in purple, while 15 percent -- shown in green -- is received from tenants occupying the 7,800 units that B.C. Housing owns and manages. The provincial investment in lands and buildings invested in social housing is held by PRHC. This investment amounted to $300 million at March 31, 1998.

We'll first look at the governance audit. Before we move into our report findings, we should point out that a reassignment of responsibilities for Housing occurred after the completion of our report.

On July 21, 1999, the Premier announced a cabinet reorganization. One outcome was that responsibility for Housing was transferred from the Minister of Employment and Investment to the Minister of Social Development and Economic Security. This minister assumed responsibility for B.C. Housing and PRHC as well as for government housing policy, which was reassigned to his ministry from the Ministry of Municipal Affairs and the Ministry of Employment and Investment. This change took place after our report was completed, and therefore its full implications have not been included in our assessment. We will, however, refer to it at times in our presentation where it seems appropriate to do so.

What is governance? Essentially it is the authoritative direction or control over an organization. In a corporate setting, it encompasses the roles, relationships, powers, direction and accountability of shareholders or their equivalents -- the board and management. It refers to who is in charge, who sets direction, who makes decisions, who monitors progress and who is accountable for the performance of the entity.

Governance has a significant impact on the performance of organizations in both the private and public sectors. In the public sector, governance of Crown corporations is made complex both by the many-faceted nature of government activity and by the sharing of many of the governance attributes and functions among the many parties to the governance relationship. In an environment where the governance roles are split between the Legislative Assembly, government and a board and where different levels of organization each have a role to play in program delivery, it is paramount that the respective roles, decision-making authorities and accountabilities be clear and transparent. These factors strongly influenced our choice of governance as one of the subjects to examine.

Our audit purpose was to assess whether the governance relationships and practices with respect to B.C. Housing and PRHC were sound. We looked at three main components of governance: first, the roles and responsibilities of those involved in the governance of B.C. Housing and PRHC; second, program direction, both provided by the government and developed by both those organizations; and third, how the organizations are accountable to their stakeholders for their performance. Our overall conclusion was that, first, roles and responsibilities of those involved in governance need to be clearer; second, the board of B.C. Housing needs to continue its work to strengthen its role in governance generally and in providing direction for the commission specifically; and third, B.C. Housing needs to provide more meaningful and comprehensive information about its performance.

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[ Page 1381 ]

PRHC has a board of directors which comprise the general manager of B.C. Housing and the senior management team of the commission. As well as being on the board of PRHC, the general manager is the corporation's president and as such reports to the board. However, in their B.C. Housing capacity, the other members of PRHC's board report to the general manager. The PRHC board reported to the Minister of Municipal Affairs and Housing. In practice, this function was carried out by the corporation's president. In addition, the Minister of Municipal Affairs and Housing had a housing advisory council comprising representatives drawn from a wide spectrum of housing activities including developers, social housing managers and advocates for those in need of affordable housing.

In May of 1998 the government reorganization resulted in a major change in the government's responsibilities affecting B.C. Housing and PRHC. Certain of government's responsibilities regarding housing were reassigned from the Ministry of Municipal Affairs and Housing -- which then became the Ministry of Municipal Affairs -- to the Ministry of Employment and Investment. The Ministry of Municipal Affairs continued to be the lead ministry for government housing policy and provided policy input on social housing matters to the Ministry of Employment and Investment.

The Minister of Employment and Investment became the minister responsible for B.C. Housing, and the general manager of the commission became part of the executive group of the Ministry of Employment and Investment. As well, the Minister of Employment and Investment became the minister responsible for PRHC, and the housing advisory council, which previously advised only the Minister of Municipal Affairs and Housing, was to advise both the Minister of Municipal Affairs and the Minister of Employment and Investment. This overview does not reflect the changes that arise from the January '99 cabinet reorganization. Although the implementation of these changes may address some of the issues raised in our report, these issues still substantially existed at the time that our report was published.

Having given a brief overview of the governance of the commission and PRHC, let's look in more detail at the first component: the roles and responsibilities of the governance players. Roles and responsibilities were not well defined for three main groups. First, there was no legislative provision that allows MLAs to review Crown corporation budgets, plans and actual performance. This does not affect just B.C. Housing and PRHC but all Crown corporations in B.C. Second, the roles of the ministers and the ministries were not well understood in all respects by those involved in the governance of B.C. Housing and PRHC. Third, the respective roles of the board, the chair and the general manager of B.C. Housing were not clear.

First we'll look at the Legislative Assembly, which acts as the shareholders' representative. There is no legislative oversight provision to enable the Legislative Assembly to systematically review the plans and performance of Crown corporations and agencies like B.C. Housing. In 1996 the Select Standing Committee on Public Accounts made a number of recommendations that were intended to allow for the review of Crown corporation plans and annual reports. However, these recommendations have not yet been implemented. Although there is the Select Standing Committee on Crown Corporations, it has no terms of reference and, other than for an organizational meeting, has not yet met to carry on business.

[1350]

Next we'll examine the role of the board. The board of B.C. Housing currently comprises 16 commissioners, who are appointed by the minister responsible for housing under the British Columbia Housing Management Commission regulation. Historically there have been some impediments to the board playing a fully effective part in the governance of B.C. Housing. The role of the board of B.C. Housing has not been clearly set out. As well, different ministers and deputies had their own views on how they wanted their relationship with B.C. Housing to be carried on, and the commission's boards were not always called upon to play a full role in this.

The fact that the entire board used to be appointed each year meant that where delays in appointments occurred, the commission functioned for various periods of time without the benefit of a board. As a result, the continuity of board oversight was disrupted, resulting in the board not being actively involved in many issues that one would expect boards to undertake. For example, it did not take a leadership role in setting the direction for the commission, nor in acting as an advocate for adding to and protecting the commission's resources. The current board is taking action to address these concerns. For example, it has appointed a governance committee to develop strategies for strengthening the role of the board in the governance of B.C. Housing. As well, board appointments are now made for periods of one to three years, which should provide more continuity to the board's activities.

There are also various concerns regarding the roles and responsibilities of the chair and the general manager of the commission. The general manager's role has three dimensions. As well as being the senior executive officer of the commission, the general manager was also an assistant deputy minister in the Ministry of Municipal Affairs and subsequently became a member of the executive group of the Ministry of Employment and Investment. The general manager is also the president of PRHC, reporting directly to the minister. This complicates the accountability of the general manager.

In late 1997 the government appointed a full-time chair to the board of B.C. Housing whose role overlaps into opera-

[ Page 1382 ]

Here we look at the governance of PRHC, and it may be useful to refer back to an earlier slide as we do. On the right of the chart we see the board of PRHC, comprising the general manager and the executive group of B.C. Housing, reporting to the Minister of Employment and Investment. Note, however, that there is no link between the PRHC board and that of B.C. Housing, and also that the board of PRHC comprises the senior management board of B.C. Housing. The general manager of B.C. Housing is the president of the corporation.

In looking at these arrangements, we concluded that the governance structure surrounding PRHC is inappropriate for two main reasons. First, the situation where the PRHC board members or B.C. Housing employees. . . . It results in the board members not being truly independent among each other or in their dealings with the PRHC president, to whom in their B.C. Housing roles they report. Second, the board of B.C. Housing has a legitimate interest in many decisions taken by PRHC -- for example, the location and specifications of the commission's headquarters. However, the board has no input into such decisions, as there is no line of accountability from PRHC to the board of B.C. Housing.

Next we'll talk about the second element of governance, that of providing direction. First we'll look at the plans for social housing. In 1996 the Ministry of Municipal Affairs published the government plan entitled "British Columbia's Strategy for Affordable Housing." The plan provides a good quality of information about the goals of social housing and the programs designed to enable those goals to be achieved. B.C. Housing prepared a strategic plan for the three years from 1997 to 1999. The commission is currently working on a further three-year plan to come into effect next year. The commission's current strategic plan is appropriately linked to the strategy for affordable housing.

[1355]

Legislation and regulations provide B.C. Housing and its board with broad powers to carry out government's social housing programs. From this, it's the responsibility of the board to develop its interpretation of the commission's mandate and to confirm with the government that this interpretation is consistent with the government's expectations for the commission. However, the board has not yet completed this task.

The board also needs to take a more proactive role in setting direction for the commission. This includes providing leadership and direction regarding the initiation and development of strategic plans. It also includes ensuring that appropriate short-term plans are prepared by the commission and monitoring activities against those plans.

The third element of governance is accountability. First we'll look at how well the agencies are meeting statutory reporting requirements. B.C. Housing is required, under its regulation, to deliver to the minister its annual report within 120 days of its fiscal year-end. However, for the past two years, B.C. Housing has not submitted its annual report to the minister within this time frame. As well, some information that B.C. Housing is required to produce if requested under the Financial Information Act, such as plans, has not always been available.

As PRHC is incorporated under the Company Act, it is not required to deliver an annual report to the minister. However, the corporation does comply with the act's requirement that financial statements be produced for tabling at the annual general meeting.

Reporting performance is a key element of accountability. However, B.C. Housing's annual report does not cover all aspects of performance. Furthermore, its actual performance is not compared with plans and targets. In part, this is due to plans and targets not having been set for all aspects of performance. As well, it does not deal with how well B.C. Housing has complied with legislation that governs its activities or with government standards for doing business. Although B.C. Housing is well placed to gather information about the sector as a whole, its role -- if any -- in doing this has still to be clarified.

External accountability information can only be as good as the internal information that's available. To be able to report and monitor meaningful accountability information, B.C. Housing needs a performance measurement system that captures all significant areas of performance. B.C. Housing's former performance measures have been limited, in that they have not covered all key areas of performance.

However, in recent years management has been attempting to develop a more meaningful system of performance measurement. The commission's planned performance measures are more comprehensive and should serve the needs of external stakeholders as well as those of management. Good measures are planned for operational and financial performance, but the framework is weaker in demonstrating how well B.C. Housing is meeting its compliance obligations. We encourage the completion of this framework and its speedy implementation.

To deal with the major challenges that it faces, B.C. Housing and PRHC should take a number of actions. The most important are the following. First, the commission should discuss with the government how the roles and responsibilities of the ministries regarding policy development can best be clarified for the benefit of all stakeholders. The recent reassignment of housing responsibilities has the potential to resolve this issue. The role of the board of the commission also needs to be determined and set out with greater clarity.

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[ Page 1383 ]

Fourth, B.C. Housing should support its strategic plan with annual business plans, setting out in detail specific expectations of corporate performance. This will provide a focus for planning, measuring and reporting performance, and enable B.C. Housing to comply more fully with the provisions of the Financial Information Act.

Finally, B.C. Housing should give priority to completing and implementing its performance measurement framework and use it to improve the accountability information that the commission provides in its annual report. That ends the governance presentation.

R. Thorpe (Chair): Are we now having a presentation from B.C. Housing?

Peter, do you have copies of that presentation?

P. Gregory: I don't believe we have them with us, but we can provide them tomorrow morning.

R. Thorpe (Chair): In the future, whenever you're making a presentation, can you make sure that we have copies of it for members, please?

K. Melliship: Good afternoon. My name is Kaye Melliship. I'm the acting executive director of the housing development division in the Ministry of Social Development and Economic Security. With me today are Jim O'Dea, chair of the board of B.C. Housing, and Peter Robinson, the CEO of B.C. Housing.

Just before we respond to the actual recommendations, my role, really, is to reiterate that the housing policy and social housing operations now both report to one minister -- in the Ministry of Social Development and Economic Security, which was created in July of 1999. One minister now has responsibilities for both the provincial housing policies and the social housing and social housing operations.

The auditor general has divided his governance recommendations into three components. Accordingly, we have actually organized our responses by these components. The way we're going to proceed is to address each recommendation that was made in the report. I'm going to address the first recommendation, and Jim O'Dea will be responding to the balance of the governance recommendations.

The first recommendation is one, I gather, that the auditor general put forward before regarding the Legislative Assembly's information and oversight needs. I guess our comment is simply that this is a recommendation to the Public Accounts Committee and has broader implications across government. Our comment, really, is just to acknowledge the recommendation at this stage.

I'm going to time the slides for Jim's response to the rest of the recommendations.

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A general comment, just to tell you some of the things that the board has been doing -- I go through it in detail -- is that the audit from the auditor general was taken very seriously by the board. There were numerous meetings between the members of the board in discussions around the governance of B.C. Housing, around some of the shortcomings and some of the lacks thereof. There's been much, much work done over the last couple of years, actually, just before the auditor general came to do the report -- and since then and at the same time as they were there.

I'll deal with each one of the recommendations. This is the recommendation under roles and responsibilities, which is No. 2. We are in liaison with the Crown corporations much more than we used to be. We're back and forth with them continually, getting information and finding out where their standards lie. They have been quite helpful to us in establishing our corporate plan and our strategies. We had a meeting with some of the staff from the Crown corporations secretariat in the spring of 1999.

The next recommendation from the AG's office was, in summary, a review of the ministry's role in housing legislation. We believe the ministry's role has been clarified, as Kaye just mentioned and as was mentioned earlier by Tony. The legislation is currently under review. There has been some discussion about new legislation. We are looking at the current legislation in conjunction with the ministry. We are looking at it through the policy division. The board of commissioners is both preparing a review for the minister of B.C. Housing and looking at PRHC, so that some integration can be done there. We're hoping that that will be probably done within the next few months.

This slide is probably not as graphically represented as the arrows, but this is a breakdown of the organizational structure right now. There's the Minister of Social Development and Economic Security, the minister responsible for housing. Under that minister is a deputy minister, which is over on the left. Then there's the B.C. Housing Management Commission, with Jim O'Dea as the chair and currently 13 commissioners. Also under the minister, reporting directly to the minister is the Provincial Rental Housing Corporation, with the president, Peter Robinson, who is also the CEO of B.C. Housing.

As mentioned and as presented by the auditor general, the executive committee of B.C. Housing are also the directors of the board of the Provincial Rental Housing Corporation. I'll be talking about that in one of the recommendations and about some of the changes that have been looked at.

Recommendations 4, 5 and 6 of the auditor general's report will be dealt with here. We are looking to define the role and support required to achieve more effective governance, and to review and clarify the roles of the chair and the general manager. They were the three recommendations. The status of those is that there is a board governance manual, there is annual board planning to set strategic directions, there are 1999 and 2000 corporate plans, and there are quarterly accountability reports. On the next four slides, I'll actually go through each of those four items individually -- first dealing with the board governance manual.

[ Page 1384 ]

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The annual board planning is set by. . . . We have another committee within the board. We have a corporate planning committee, which has been involved in putting together the board's annual get-togethers. We've had two of those so far. We set the plans last year for the organization, and there was a business plan set. Business plans were established and reviewed, and a review process and a quarterly process were set up for looking at those.

At the annual planning workshop, we ensure that all the priorities are reflected in the plan and that we set the strategic direction and define the measures of success. You can find some of the things that we also do within that by reviewing the auditor general's report, but just to go through them as succinctly as I can. . . . It sets a strategic direction in goals and provides direction for developing strategic and business plans and for reviewing and approving them; for presenting the corporate and business plans to the responsible minister; for appointing, dismissing and on a regular basis evaluating the performance of the CEO; for setting significant operating policies; for ensuring that the commission has adequate resources and an effective organizational structure, for safeguarding the assets of the commission; for monitoring and achieving goals and objectives; and for ensuring that accountability obligations are discharged.

There were, as I mentioned, the 1999-2000 and 2000-2001 corporate plans. The strategic direction has been set at the annual board planning sessions; that's been done. There are links between the board and government priorities in day-to-day operations. There's a measuring process set up for reporting the requirements and defining what those measures will be. The 2000-2001 corporate plan is near completion. The board has gone through it themselves; it's now at a staff level to come back to the board for final ratification and then presentation to the minister.

There's a quarterly accountability framework established that was adopted by the board in July 1999. It includes information on operational performance and quarterly financial statements. It provides the board, the general public and the government with information on how well B.C. Housing is carrying out its strategies and on the progress it is making in implementing its key goals and objectives as identified in the corporate plans and the strategic outcomes.

The seventh recommendation from the AG was to seek cost-effective ways of carrying out PRHC activities. The status of that is that the board is preparing recommendations to the minister of PRHC and looking at the structure within a new legislative package that's been discussed. The new legislation will integrate the activities of B.C. Housing and PRHC. In the interim, the board of B.C. Housing is also preparing recommendations to the minister on how PRHC should be dealt with between now and when there's a legislative package or new legislation pertaining to B.C. Housing and PRHC implemented.

[1415]

Direction No. 9, which is taken from the ninth recommendation of the AG, was that greater focus would be on performance expectations and results management. The current status of that is that it will be addressed through the governance manual and through the corporate plan. As I mentioned earlier, we did have measurement results for last year's corporate plan, and we do have them for this year. That's being done on a quarterly basis now and is available for people to review. Our original, by the way, just to let you know -- the quarterly accountability reports -- came through in May 1999, when we had our first annual board retreat to establish our corporate plans.

Direction No. 10, which is taken from recommendation No. 10, is the government approval, to be obtained by the board, of the commission's mandate and strategic plan. One of the things under this is that the powers of the commission and part of the mandate of the commission are actually detailed in the legislation that established the B.C. Housing Management Commission under the Lands, Parks and Housing Act. B.C. Housing was established under that, and that outlines all of the powers of B.C. Housing as an entity. We also do it through our corporate plans. Our 1999-2000 corporate plan was presented to the minister and accepted. Our 2000-2001 corporate plan has not been presented yet, but it will be presented within the next month for approval by the minister. Hopefully we will get that.

The next two recommendations are for timely and more complete annual reports. We agree, from a board level and from a staff level, that improvements are needed, and steps have been taken to ensure that the annual report that will be delivered this year will be delivered on time -- within 120 days of the fiscal year-end. When presenting all of these various goals, objectives and strategic outcomes, a review of these quarterly reports by the board and by the staff will ensure that we'll meet the reports that are required by legislation. That was brought up by the AG in his report.

[ Page 1385 ]

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Nos. 14 and 15: review and implement B.C. Housing performance measures. The strategic outcomes and the key strategic objectives are defined in the corporate plan, which you've all received a copy of. The 2000 one will be out within the next month. These are all tied to the key performance measures, the quarterly reports to the board and the information that the board is now requiring staff to provide so that we can make the decisions around the overall performance of the organizations that are coming forward.

That's the end of my presentation, and the subsidy is coming up. I think that the organization has moved a far distance, in looking at a lot of the things that have come from the AG's report. We'll answer any questions you want.

R. Thorpe (Chair): Thank you. First of all, can we make sure that we have a copy of that presentation, so Kelly can distribute copies to all members? Secondly, for the report we're going to do later, if you have a copy now, maybe we could get that and get the photocopies before we do that section. If you have that information, Kelly would be pleased to get it from you.

Who has questions?

E. Gillespie (Deputy Chair): How long has Homes B.C. been in existence?

J. O'Dea: Since 1994.

E. Gillespie (Deputy Chair): I believe it was in 1996 that we had the "Crown Corporations Governance Study." I sit here feeling quite frustrated that this governance study has been done and time and again it comes back that governance is the major issue within an organization. This audit doesn't point to particular performance problems but to governance, like how decisions are made and who has the authority and responsibility for making those decisions and how that is reported out. I did hear in your presentation that work had been underway for some time. But between 1994 and now, 1999, when both policy and management is brought under one roof. . . . Is that now -- starting July 1999. . . ? Is that when that governance work started shaping up?

J. O'Dea: No. Actually, it started before that. The government made a decision at the end of 1997 to give some direction to B.C. Housing -- that they wanted the board to take on more of a governance role. I believe that's one of the reasons why they did appoint a full-time chair, which created some problems also, as you saw in the AG's report. But the whole idea around that was to establish some governance for the organization, to bring in some of the accountabilities, to make sure that we did put together corporate plans, to make sure that the responsibilities. . . . And the way there was a problem with the GM wearing three hats. . . . He was trying to change that. So that happened around the end of 1997 and early 1998 and has been ongoing, and we're now into our second year of doing a corporate plan. I really can't answer about the two years before that. I think maybe somebody saw a problem and then dealt with it by putting in a full-time chair.

E. Gillespie (Deputy Chair): Thanks.

[1425]

E. Price: We didn't look at the question as to which was the best model. We considered that that was really a policy decision that was outside the scope of our work. What we looked up there for in the specific audits was the extent to which the chosen policy decision had been implemented effectively through the work of the commission.

R. Coleman: Thank you. It might be a suggestion, then, to B.C. Housing. . . . In your strategic planning and measurements, you might actually look at what you're delivering -- and I'll get into those costs in a second, as we go through this report -- and whether you're delivering enough product for the best value for your money or whether you're actually delivering it by the most expensive model.

Also, given some of these circumstances, the auditor general makes the comment that governments look for ways to maximize the number of units that can be built and supported by available funds. You've made that comment. I'd like to know what you meant by that comment and whether you have any recommendations in that regard.

T. Timms: We don't have any specific recommendations on that particular issue. I believe that some research has been

[ Page 1386 ]

R. Coleman: I think this report, when it talks about housing in British Columbia, though, has a significant impact on the discussions that lead to your accountability and measurements. In the early parts of this stage this report does identify some things that I'm sure the commission is aware of, and that is the number of renters that were in need in this province. Thirty-six percent of the households in British Columbia are renters, and only 5 percent of new construction is for rental purposes.

I'm just wondering if the commission has any plans or any initiatives as to how they can change that ratio as to what is actually being constructed -- rental versus sale. Have you come forward with any recommendations or programs that would encourage the development community to build some rental housing outside of what you're building in your 600 units a year? Do you see a way of getting better value for money in that particular sector -- once you decide?

P. Robinson: That question touches on a number of areas. Currently a lot of those. . . . We agree that the creation of new rental housing across the country is at a deplorable low right now; it is more of a national problem. A lot of the impediments to creating rental housing are in fact led by federal tax policy. In this particular province, we are looking at ways that we can do this. But again we're putting the resources that we have available at the moment primarily to those who are in greatest need. So when we're looking at private rental structure, we're looking at ways we can do research -- some policy analysis, working with municipalities, around some of the tools they have available. A lot of that is done through the ministry policy area. Where B.C. Housing can get involved is through the provision of some rental supplements to the private sector. There is a mixture of approaches that we can use.

[1430]

I guess the question would be: what federal tax policies specifically do you see that are negative toward the construction of rental housing -- seeing as you mentioned the federal tax policies?

P. Robinson: First of all, before I answer that, in fact I think we're going to be working with the rest of the provinces through Tex Enemark, who I think you know, to look at some of those issues at the national level. We're looking at things such as write-offs as to what you get taxed on in terms of your losses on a rental property and things like that. Kaye, you might have some more information from your policy research.

K. Melliship: We have seen research -- we haven't verified the research -- that suggests that it is a better investment to own a motel rather than to own a rental building. We'd like to verify that research. But also we are working with the other provinces to determine what the key issues are with respect to federal policy and rental housing.

R. Thorpe (Chair): Excuse me. Could you speak into the microphone? They're having a hard time picking up. Sorry.

K. Melliship: There has been research done -- not by government but by outside researchers -- that we'd like to verify that suggests that it is more advantageous to run a motel as a business than a rental apartment building. We'd like to verify that. But the way we're doing it is that we're working with the other provinces across the country -- in particular Alberta and Ontario -- which have an interest in really stimulating private rental development.

R. Coleman: While we're on that subject, which is the taxation side on the rental for construction. . . . I'm going to touch on rent supplement in a minute. But at the same time, has the commission looked into what many people are concerned about, which is the impending crisis in rental accommodation in our province? The fact that you talk about the new product, and you talk about the taxation. . . . None of you mentioned recapture on old product. I know of a number of projects that are presently basically up for demolition simply because of the recapture and the uselessness of making a reinvestment in the product because of the recaptured investment. It can't be sold. If it's sold, the taxation kills the investment. So we're losing rental stock. Have you done any analysis on that loss of rental stock, in addition to what needs to be provided?

P. Robinson: Certainly that's part of the research that's going on particularly around capital gains, which is one of the significant impediments. I'm not quite sure when that research will be finished, but it is a national priority right now for the various housing arms of governments across the country.

J. O'Dea: And what many of the companies that owned those types of projects are now doing -- for a few years they were able to do it -- is that they wouldn't sell out the project, but they sell out the company. When you sell out the company, there is no recapture. But they're getting to a point, now that they've been around long enough, that there is such concern about the companies that they have to sell. You're absolutely right.

One of the other things that's happened is -- I don't know if you saw it. . . . They sort of put it over into an appendix in Paul Martin's budget last week, where they're now going to allow a write-off on GST for rental housing in the same proportion as it's allowed for home ownership. So it's the first time that there's been an indication -- there is some knowledge anyway -- that they're seeing there's a problem with rental housing across the country being given treatment that's unequal to home ownership. So they've changed the GST to reflect that, which will be about a 3percent or 3.5 percent drop in the cost of rental.

R. Coleman: The auditor general's report goes on to mention that much of the shortfall in the conventional method

[ Page 1387 ]

Secondary suites -- I know, having done a couple of radio talk shows on the subject of housing -- are one of the hotter topics out there, as far as their management and their quality and how they're handled by municipalities. It's certainly a piece of the stock that's of concern. I'm wondering if the commission has done anything with secondary suite recommendations -- standardization or anything -- for the municipalities across the province.

[1435]

K. Melliship: We haven't done anything recently with respect to secondary suites. Our strategy, a few years ago, has been to change the Building Code so that it is. . . . There's a section of the Building Code now so that it's easier and more practical to create a secondary suite. We find that a lot of municipalities would plan and manage for secondary suites if they had more information on what other municipalities were doing. So we've produced two different guides targeted at municipalities. At the end of the day, it is largely a municipal issue. They must zone and permit secondary suites, so we provide educational material and informational material to encourage that.

R. Coleman: I just want to go to page 16 of the report, where the following comment is made: "In Canada, the National Building Code forms the basis of the building codes of provincial and municipal jurisdictions. In British Columbia, the Municipal Act empowers the Minister of Municipal Affairs to make regulations that establish a provincial code governing standards for the construction and demolition of buildings."

First of all, is that still the case? Is it the Minister of Municipal Affairs that is empowered relative to the Building Code in British Columbia, not the Minister of Social Development and Economic Security?

K. Melliship: The Minister of Social Development and Economic Security has responsibility for the Building Code in British Columbia.

R. Coleman: Are you empowered under the act to do that at this point in time, or is it by regulation?

K. Melliship: There are two sections of the Municipal Act that were moved to our ministry -- to our minister's responsibility -- and that deal with the Building Code.

R. Coleman: Okay. Now, this question will go back to the auditor general. Having made that comment in this particular report, would it be the opinion of the auditor general's department, having reviewed housing in British Columbia and making this comment, that the Building Code and the regulations to establish that code and that govern the standards of construction are the responsibility of the provincial government or the federal government?

E. Price: I'm not sure whether we can answer that question. Again, the focus of the audit was not the Building Code or the responsibility therefor. The sections from which you are quoting are really intended just to provide some background to set the context for the specific audits that we examined. I don't know whether you have any comments, Tony, specifically on the. . . .

T. Timms: No, I don't have any specific comments. Basically, yes, the commentary we had about the National Building Code was just explaining who sets the code, the responsibilities of the various governments in terms of it and how it's adopted provincially and locally.

R. Coleman: I would caution the auditor general and the fact that you've made this comment in this report. . . . I don't know how familiar you are with what is referred to as the leaky condo crisis in British Columbia. But in making the comment that the minister is empowered and that they've established the code and established the construction and demolition standards of buildings in this province, you've basically said that the provincial government has a responsibility back through the code. And if you have a responsibility back through the code, I suggest that at some point in time you may end up with one of these class action situations -- having to face the question and having to answer what that statement is. That would be my caution and my concern there -- that that statement is made. I mean, it's clear that that is going to be one of the issues. But when you have an auditor general's report that actually says that, it's down in writing, and I guess somebody's going to have to respond at some point in time.

E. Price: Well, maybe we can take that under advisement and come back to the committee. My understanding, from work that we carried out on earthquake preparedness a couple years ago, was that the National Building Code forms the basis and that there is the ability for the provincial government to add to or make specific recommendations in addition to the Building Code.

[1440]

R. Coleman: You might be aware of the fact that there are 20 jurisdictions on the lower mainland of British Columbia that also affect the implementation of that code. They seem to get some ability to play with the code on an individual municipality-by-municipality basis.

Let's go to the two models. I guess I'll call them the two models; I'm sure that the two gentlemen from B.C. Housing will understand. Basically B.C. Housing has built and is managing about 8,000 units of housing. They have approximately another 13,000 units that are under local sponsor groups, including municipalities, cooperatives -- I think it's actually 17,000, if you add in the cooperatives -- and community-based non-profit organizations such as churches, social clubs, service groups and that sort of thing.

Have you looked at the two models and seen which of those two models of ownership and management is the best from the standpoint of the commission? Do you find, even as

[ Page 1388 ]

P. Robinson: Let me just start by saying that any effective provincial housing policy has to have a variety of tools with which to solve local conditions. Those will change in communities throughout B.C. I think you laid out two there -- the portfolio that B.C. Housing manages directly as a landlord and the portfolio that is done through sponsors, and there's a number of programs there. There's also the third element that I'm sure you're going to get to in a minute, which is rent supplement. We truly say that in order to address local demand, you need a mixture of those. In some cases, the way in which you meet the specific need of a family or a person with a mental illness or some other issue affecting housing has to be dealt with in different manners.

With respect to the two portfolios, we found that, cost-effectively, they're about equal. If you do a true measure of directly managed, with the government as a landlord, versus an average of non-profits -- and there are big non-profits and little non-profits, so you have to do an average -- it comes out about the same. The primary difference is that the portfolio that's directly managed is the oldest stock. It was built under federal programs back in the fifties and sixties, whereas the non-profit portfolio tends to be a bit newer, from about 1976 on. Also, with the directly managed, we have the opportunity -- because we are the landlord -- to house people who need housing immediately on an urgent basis. It's a large portfolio. We can meet a high, high demand, which is usually at a crisis level. I guess I would say that all of these models are appropriate, and they form the basis of being able to meet local need.

R. Coleman: Having identified those two portfolios, later on in the summary there's also mention of the capital regional district and the Greater Vancouver regional district to also manage portfolios. Does it not concern you that there's some duplication? I think the GVRD actually has about 3,000 units under management as another government body, and then the CRD is another government body. Actually, the subsidies are all being managed through you. How do you see this in the long term with all of these different bodies managing housing, when you're having enough difficulty actually identifying how you will be operating?

J. O'Dea: We actually don't have a big problem with that happening at all, from a board point of view. Last year, when we were looking at our governance model and looking at the vision and core values and that of B.C. Housing, we came up with a vision statement which is: "Working together to create homes, choices and healthy communities." When you're doing non-profit housing, where people have very little choice in what they're going to get, having different types of non-profit groups. . . . Sometimes they're church-run. GVHC is a government-run non-profit; the same with the CRD. You have local community groups, and there are co-ops, so you have some different choices for people.

The models within those don't make it cheaper or more expensive, actually, to run. They all come out to be about the same on the running of them, whether they're run by a church group, a local service club or some other local community organization or co-op. So people actually do have a choice on what they can move into. They can select government housing; they can select co-op housing.

[1445]

In the history of social housing in B.C., there is the one comment that you've been constructing at an annual rate of 600 housing units per year. I believe that's since 1994. Have you achieved the 600 units a year, every year, since 1994?

P. Robinson: We have allocated at least 600 units per year. Of course, it takes a little bit longer than the allocation to actually build it out. A clarification: we have an allocation of 600, but if we can bring in the cost of the construction and the cost of the land at less than the value which was originally allocated, we can stretch those units further. In fact, we have delivered more than 600 each year since the program began for the same cost that it was originally conceived for the 600.

R. Coleman: You've achieved that every year?

P. Robinson: Every year we've allocated more than 600 base units.

R. Coleman: But delivered out of the allocations?

P. Robinson: Pretty well everything from '94, '95 and '96 has been constructed and occupied. There's a couple outstanding from '97 on, which got caught up in zoning processes or other difficulties, but it's about 18 months to two years from allocation to occupancy.

R. Coleman: I'll get through your summary portion, and then I'm sure some other members of the committee want to get into some of the recommendations on which I have notes and marks all over. So I'm sure I'm going to have a few questions there.

In the summary it says you spent $16.8 million for 2,858 units a year, which is the Homes B.C. units, and then $21 million for 12,500 seniors units under the SAFER program. On the SAFER program, are you sharing that cost with the senior government, and that's why you're actually able to deliver about six times as many units for seniors as you are under the Homes B.C. program with similar subsidy amounts?

P. Robinson: SAFER is a rent supplement program, and the basis on which it's allocated is slightly different. There is a band at which a senior is eligible for SAFER, below which you usually get assistance through one of our social housing programs. If I could characterize a typical SAFER recipient, they are not the lowest low-income; they form sort of the second or third grouping out of five groupings of seniors' incomes, but it's a very narrow band. So the amount of money can be

[ Page 1389 ]

R. Coleman: Have you done any analysis of the 2,858 units that you provided through Homes B.C. as to how many units you would have been able to deliver if you'd put that money into a rent supplement versus construction and ownership of those units?

P. Robinson: Yes, just on a very basic analysis, I'll give you an example. The 2,400 units that the provincial government announced back in June of last year is the equivalent of about $21 million of annual subsidy. For the same price, if we just go on these basic figures, you can say that you could support about 10,000 households under a rent supplement. The point is, though, that you then have to look at which is better over the longer term.

In the shorter term, you can certainly house more people under a rent supplement program. But over the longer term, as you pay down mortgages and pay off the subsidy to societies and that stock stays in the local community, the cost comes down. In fact, if you start stretching it out to 25 or 35 years, the cost to government is much less to do a supply program than a rent supplement. Nevertheless, we would say that you need both in order to meet local demand.

R. Thorpe (Chair): Mr. O'Dea, you want to make a comment?

J. O'Dea: It's sort of along the same lines, but it was with regard to SAFER. One of the problems that's created when you do a SAFER type of program is that you set a limit of $525 as your top end that you'll subsidize to. So many of the seniors, while they get a bit of money for SAFER, are still paying 40 percent to 50 percent of their income. It's not like a program that really. . . .The fact is that because it's a kind of rent supplement program. . . . If it's an open-ended rent supplement program, then over the long term it's going to cost just as much as putting housing in place. If it's a capped rent supplement program, then all you actually do is leave lots of people in the same position as they've been in already where they're paying 40 percent or 50 percent of their income.

[1450]

R. Coleman: If 7,500 more people were housed in the short term over a five-to-ten-year period, versus owning something over a 25-year period. . . . I don't know how you measure the social benefit of providing affordable housing for an additional 7,500 people versus owning the product over a 25-year period. I don't know how you balance those two. If you have people living in abject poverty paying 50 percent to 60 percent of their income in rent and you decide to build it rather than have the ability to house another 7,500 people or supplement them in place, I think that's very much a mug's-game argument you make relative to ownership versus supplementing people.

I think that the objective of a commission is to provide social housing for people. If you're looking at the ownership of the asset, what about the 7,500 people you've left standing on the side of the road for the next ten years while you pay down those mortgages? That's really the way I see it. Those families are being hurt socially and economically in the meantime.

P. Robinson: I agree that there's a lot of people who need affordable housing, and that needs to be met. The issue, when I said straight numbers. . . . It hides the fact that when we try to target those 2,400 units, primarily most of those units are going to go to individuals who cannot find private sector accommodation either because it's not affordable, doesn't exist or is completely inadequate for them.

If you look at this year's program, we're targeting most of our housing to folks that are. . . . There are a lot of singles that we're now targeting who would traditionally be called homeless or at risk of becoming homeless -- a group that traditionally has not been well served in the province. Really, the only way you can get to that population so that they're not on the street or sleeping in doorways or dumpsters is to get accommodation for them that's purpose-built. In most cases, that doesn't exist in some of the communities. We're trying to develop this. But, you know, no doubt you need all forms of assistance in order to meet an effective housing program.

E. Gillespie (Deputy Chair): I started out, really, with a comment out of frustration. The reason I feel so frustrated about it is because British Columbia is one of only two provinces that are continuing to build social housing. For that reason, if no other, it ought to be a pinnacle; it ought to be really a shining light that not only people in this province but other governments and people across Canada ought to be able to look at.

So when I see this statement on page 36 that says, just toward the end of the page, "Further, neither B.C. Housing nor any other government agency is reporting information that would assist legislators and others to understand the current state of the social housing sector in British Columbia," I want to know that the changes you are making and are recommending in governance, including the legislative changes, and in your reporting system -- quarterly reports and so on -- are going to give us that kind of information, so that we can work with it here in the Legislature. Also, that would be available to the public across the country.

[1455]

[ Page 1390 ]

So for any community -- anyone from local government or a non-profit sponsor or a local MLA who would come to us and say, "What is the housing condition in my community?" -- we can pretty well give that information now.

E. Gillespie (Deputy Chair): Good. Just one more question. Actually, it's probably best to the staff of the auditor general's office. On the next page, the discussion about ". . .no provision for the assembly to receive or review the plans of Crown corporations" -- do you see that changing with the change to summary accounts? Will that change in this year's budget and estimates process? Maybe Arn's the right one to answer.

A. van Iersel: If I may, I think there will be a change in focus as a result of moving to the summary account. We've seen this already in the government accepting that the summary basis is the right basis for reporting, in the last two quarterlies; it will also come out when the budget is released on the 27th. So the focus is very much on the summary basis. Both these entities that we're speaking of this morning are included in the consolidated statements and have been since the early eighties.

I think another example would be that the Crown corporations secretariat has moved to the Ministry of Finance, so that's now under the same deputy minister, Chris Trumpy. So I think we're seeing some of the effects in terms of the playing-out of the Enns recommendations and how they are changing the way in which government reports and different accountability structures. That's perhaps a longer answer than anticipated. But I think it's. . . .

P. Gregory: I might just add, though I haven't seen the material, that I think what we are talking about here is information that's specific to the plans of those organizations. I just don't know how much information legislators will get for that debate in the House on the broader spectrum.

A. van Iersel: If I could add, Chair, that too is under consideration. I think that over a period of time the committee and members of the Legislature will see just what the government has in store.

E. Walsh: Looking at the news release -- this is the auditor general's news release of November 25 -- and then the little handout, the little booklet that we got in the package this afternoon, it interested me to see that. . . . I'm just taking off from what Evelyn Gillespie said, and that is the effectiveness that. . . . The first sentence talks about the effectiveness of governance of the British Columbia Housing Management Commission and, of course, about risk. But then the AG's office goes on to state that the need for affordable housing is increasing at a faster rate than the availability here in the province. Then I look a little bit further on in the report, and I read about the challenges that British Columbians are facing -- those at risk or those that are becoming at risk -- in housing needs. Some of the challenges include increased housing -- the demand, the demographics, the geographics, declines in median income and increased construction costs to the private sector to try to meet some of these needs. Reading all this, it sounds rather dismal, especially for a program that I feel is a very good program for those persons who are at risk of becoming homeless or the people that require subsidies of any kind in housing needs.

Can the auditor general's office tell me whether, in your mind, the housing program that is in place right now, since the early nineties, is achieving the needs and the mandate that it set out to do in realizing the benefits to the people who require those needs, whether it be housing or subsidy? Has it reacted to that, and has it been a success? Or, as I'm reading it, is there a question as to its success?

E. Price: Well, let me try to answer those questions. Again, I would stress that the material to which you are referring in the background is really intended to set the context for the audits. I believe -- and Tony, you can step in here if I'm wrong -- that much of the information is drawn from material that's available and produced by the Housing Commission.

[1500]

E. Walsh: So with the information that you did receive and with the information that you had to put the report together, you can't tell me whether or not the program in fact has been a success.

E. Price: That was not the objective of our audit. As I say, the objective was, in part, to find out the extent to which the commission itself had a clear definition of what it was intending to do and a clear way of measuring its performance in relation to those objectives. In the absence of that comprehensive performance measurement system, we did not attempt to set out to measure that ourselves.

E. Walsh: One last one, then. Looking at the financial aspect and those moneys that have been allocated to the program, you would say, then, that the moneys that were expended toward this program and to the building and to the subsidies that those persons needed were in fact utilized in the best way possible. Is there any question that there was any better way to use the money that they did use than what it was?

E. Price: I think that to some extent that's getting into the subsidies audit, whereby we again looked at the processes that the commission itself had in place to answer some of those questions in terms of how the non-profit organizations are actually using the subsidies that are provided to them -- are they in fact assuring value for money? I don't know whether we could perhaps defer that question until we get into the subsidies audit.

[ Page 1391 ]

R. Thorpe (Chair): If I could just ask a couple of questions, please -- and whoever wants to answer. . . . Are you in agreement with all 15 recommendations, or do you dispute any of the recommendations in this first section of the auditor general's report?

J. O'Dea: I don't dispute any of the recommendations that were in there -- for the time that they were doing it at.

R. Thorpe (Chair): Do you dispute any of them now?

J. O'Dea: Oh yes. No, I mean. . . .

R. Thorpe (Chair): Which ones do you dispute?

J. O'Dea: Well, we're implementing most of them. About three-quarters of them are now implemented, so I would say that they're done. So if the auditor general was to look at us now and say the same things, I would say they're wrong.

R. Thorpe (Chair): But he probably wouldn't say that at this point in time.

J. O'Dea: That's right.

R. Thorpe (Chair): Were any of the three-quarters of the recommendations that you now have put into place -- or are in the process of putting into place -- cost-prohibitive to you?

J. O'Dea: No.

R. Thorpe (Chair): That was a no?

J. O'Dea: Yeah. It didn't cost anything extra.

R. Thorpe (Chair): Okay, that's fine.

[1505]

K. Melliship: I may have used the incorrect terms. The actual recommendation that the auditor general wrote was that government should take appropriate action to enable Members of the Legislative Assembly to consider the recommendations of the second report of the Select Standing Committee on Public Accounts. Perhaps what I was getting at was that the Select Standing Committee on Public Accounts would want to take the leadership in ensuring that the recommendation was implemented.

J. Weisgerber: Okay. I had understood that to be a reference to the 1996 recommendations of the Public Accounts Committee. Am I wrong?

K. Melliship: It says January 1996 in the recommendation. So, yes, you're correct.

J. Weisgerber: Okay. The only reason I'm asking. . . . I get a sense from Mr. O'Dea that most of the recommendations are in the process of being implemented, but from your comments I get a sense that you're anticipating some action or some direction from this committee. Is that the case?

K. Melliship: We may have misunderstood. We understood this to be a recommendation to government, not to this specific ministry or to B.C. Housing Management Commission. That's the way we interpreted that recommendation.

J. Weisgerber: Okay. Well, I just. . . .

R. Thorpe (Chair): Excuse me, Jack. Maybe we could have the auditor general bring some clarity to this issue for us.

E. Price: The recommendation was indeed that government take action. We were pointing out that the Public Accounts Committee -- twice in fact -- had made recommendations in its report to the Legislative Assembly back in 1996, in connection with the work that this committee had done at that time around accountability and related matters. We were pointing out that the Public Accounts Committee had made recommendations twice with regard to not only the nature of information being provided to the assembly but also the reference of such information to committees. So we were pointing out that those recommendations had been out there now for two or three years and that no action had yet been taken to deal with them.

J. Weisgerber: Again I'll ask the question. I get the sense from Mr. O'Dea and perhaps Mr. Robinson that following the release of the report, the corporation started to act immediately on those recommendations with an eye to implementing them. Yet I get a sense from the government side -- from the ministry side -- that it was interesting that the auditor general made these recommendations to government, and we'll wait and see what government does about it. There seem to be two quite contrary approaches to it. I'm seeking a bit of clarification on that.

K. Melliship: I take your point. If the auditor general was hoping that an individual ministry would take some leadership on the initiative, we would welcome their advice.

J. Weisgerber: I would have thought that that was implicit, but perhaps I'm wrong.

E. Price: I think that in this particular recommendation, it is true that it's not something the ministry specifically could act upon; it requires action at a higher level. It's something, I think, that the auditor general has spoken to on a number of

[ Page 1392 ]

[1510]

K. Melliship: That's incorrect.

J. Weisgerber: What is the relationship? The graph lost me; I'll be very candid. I know somebody is an assistant deputy, but I wasn't quite sure. . . .

J. O'Dea: Not anymore.

A Voice: It used to be.

J. Weisgerber: It used to be. Okay.

J. O'Dea: The CEO's position used to be called a general manager responsible to the board. It was an ADM responsible to the deputy minister, and it was the president of PRHC responsible to the minister. Currently the name has been changed. The individual now in the position is the CEO responsible to the board and is also the president of PRHC, which should change shortly.

J. Weisgerber: Given the accountability relationship that existed at the time of the report, it would seem to me that all of the pieces were there for the ministry to oversee the Crown corporation. Is that right?

J. O'Dea: The ministry doesn't really oversee the Crown corporation. The corporation sits as an entity and reports to the minister, and it has no reporting relationship to the ministry.

J. Weisgerber: So that relationship, then, between the assistant deputy minister, who is a CEO. . . . Was that a split? Were those two separate functions? Did that person spend half the time in the ministry as an ADM and half the time with the corporation?

J. O'Dea: No -- spent most of the time over with the corporation. I'm guessing at this, but I think it may have been some people's way of trying to link the general manager with the ministry. I think that one of the things that happened with the AG's report is they have basically said that whoever was thinking about linking it that way was wrong and that it should be delinked. The CEO should report to the board, and the board, as an appointment of order-in-council, should report to the minister.

J. Weisgerber: So do I understand, now, that the government's link to the corporation is through the Crown corporations secretariat? Is that now the link that exists?

K. Melliship: No, we both report to the same minister. The ministry, which has policy responsibilities, reports to the minister. The board of B.C. Housing reports to the same minister -- one minister with responsibility for the commission and operating programs and the same minister with responsibility for housing policy.

J. Weisgerber: On the screen that you put up, Jim, under the rules and responsibilities -- item No. 2 -- the response appears to be that B.C. Housing will liaise with the Crown corporations secretariat. Is B.C. Housing a Crown corporation or a commission?

J. O'Dea: I'll try and explain it in terms of the way that the auditor general explained it in the report, which was basically that for the purposes. . . .

[1515]

J. O'Dea: Pardon?

R. Thorpe (Chair): Why don't you just tell us what it is?

J. O'Dea: Well, we're incorporated under. . . . No, not incorporated. We're established under legislation as a commission. We are treated like a Crown corporation. For the purposes of the audit, I think what the audit says is that we were audited on the basis as if we were a Crown corporation.

J. Weisgerber: I'm trying to find out whether or not the organizational structure is such that a recommendation from the auditor general has to go to the Legislature and then depends on some kind of activity, either from Public Accounts or some other mechanism, to move either the ministry forward into some greater oversight role or the Crown corporation secretariat or the board of the corporation or commission itself. I find myself sitting here wondering. A lot of the recommendations have been implemented, but it's not as if, in an audit of a ministry, the ministry is able to respond directly to those recommendations. I don't know. I'm finding it just incredibly confusing.

E. Price: May I have another try at sort of explaining, I guess, the logic behind the recommendation? We're really pointing out in the report, I think, that this is a generic problem. It's not unique to this particular organization. We're talking about the ongoing ability of the Legislative Assembly to provide oversight with respect to Crown corporations. What has been pointed out in the past is that there is really no ongoing facility for the Legislative Assembly to do that. To the extent that moneys are provided to Crown corporations through ministry budgets -- through the estimates -- there has been in those cases, during the estimates debate, an ability to ask questions about the use of that money. But in respect of Crown corporation performance generally, there has not been that facility.

When this issue of accountability was discussed by the Public Accounts Committee back in 1996, these discussions were in connection with the work that the auditor general and the deputy ministers' council had done around enhancing accountability. The Public Accounts Committee itself made some recommendations to the Legislative Assembly about the information that should be provided both by ministries and by Crown corporations with respect to its annual plans. It also

[ Page 1393 ]

The provision of information is to some extent at the behest of the individual corporation and the individual ministry, but in a generic way, the issue that was discussed and recommended on by the Public Accounts Committee back in 1996 still sits out there. As we've heard today, there is the possibility that with the advent of the budgeting process now covering the whole entity, that may well change the nature of information that is given to the assembly and may to some extent change the nature of debate.

What this recommendation was intended to do is to point out that there had already been recommendations around how the Legislative Assembly should act with respect to Crown corporations. The reason that the recommendation was phrased in this way -- in that we recommend that government take action -- is that to act on the recommendations of the Public Account Committee, it would seem that the way to move that forward is likely for the Government House Leader to initiate some action.

I should go back to the Public Accounts Committee recommendation in 1996. I think there were some suggestions around a different committee structure, but I think that the overriding recommendation of the Public Accounts Committee was that the Legislative Assembly establish a special committee to review the whole committee structure of the assembly. So this recommendation was not aimed at the ministry. In this particular case, it was aimed at government in the more general sense.

J. Weisgerber: Okay, if I can understand it, then -- just to wrap it up -- the recommendations that start on page 42 of the auditor general's report and go through page 44 have been acted on and responded to by the minister responsible for housing and by B.C. Housing and are not in fact held in abeyance or in some kind of limbo awaiting action from the Public Accounts Committee or some other agency of government.

K. Melliship: That's correct. I'm sorry if I left you with that impression. Everything has been moving ahead, except that there has been no ministry initiative on recommendation No. 1. All the rest, working primarily through B.C. Housing, have been attended to.

[1520]

P. Robinson: We would say yes.

R. Thorpe (Chair): So would you explain to me, then, where you see that clear and concise oversight taking place?

P. Robinson: We see it on the basis that the board sets out its objectives and plans to staff, who communicate it to anyone who wants to see it; that our financial statements are open and available to everyone; and that we report on all of our objectives on a quarterly basis for anyone that would wish to see them. That goes both for PRHC as a company and for B.C. Housing as a Crown agency.

R. Thorpe (Chair): So would it be fair, in your opinion, that when a budget is tabled in the House -- if an allocation from a ministry to your organization takes place, for example -- then your supporting business plan should also be tabled at that time to coincide with the expenditure allocation? Would that be the start of the accountability and transparency process?

P. Robinson: Yes. In fact we will do that this year.

R. Thorpe (Chair): Thank you very much.

A Voice: Arn, you wanted to make a comment.

A. van Iersel: I was just going back to the earlier discussion, for absolute clarity on recommendation No. 1. The ministry cannot itself enact that recommendation. In fact, if we go back to the brief discussion we had on Enns, Enns also alluded to those recommendations in their report and to the three reports that were done collectively by the auditor general and the deputy ministers' council. So I think, again, there is going to be work done by the government as a result of the Enns report, and that will be coming out in time and will impact this particular recommendation and many of the others in terms of what information is presented in the Legislature or what's included and how it's reviewed. What I'm saying is that I think this recommendation will be addressed partly in response to the Enns committee report in the next little while.

R. Thorpe (Chair): Thank you for that, but I hope that ministries, people visiting from other high offices in these buildings, the auditor general and other people are hearing that the concerns that are being expressed in this oversight position are being expressed by independent members, members of the government and members of the official opposition. So it sort of seems to be fairly unanimous that from 1992 to the year 2000. . . . Somebody better start picking up the ball, because members on all sides of the House are saying: "What is going on?" It appears very little.

I just hope that people understand that it's taxpayers' money. They want accountability. They don't want promises of more studies, etc. They want results and they want accountability now. That's my little speech on that subject.

We'll move along with some other questions.

M. Coell: Let me preface my remarks and a couple of questions. In the early eighties I sat on the Capital Region Housing Corp. in its development. In those days there was. . . . I think the term "social housing" was new, in that we expected some social benefit, not just affordable housing. I'll give you an example: the mix of incomes and market housing as well as subsidized housing in one, with the idea of a little bit of cross-pollination taking place, with the potential for jobs and children playing, with different incomes -- this sort of social benefit that was expected. That seems to have disappeared in the last decade or so across the country, not just in British Columbia.

[ Page 1394 ]

I'm just wondering what sort of research you do on the people who have come in, for a variety of reasons. I mean, young people come in because it's the first home that they'll get, as their incomes are low. Single parents move in when they become single parents. Seniors move in because they've lost a job and don't have a pension yet. So there's a whole range of reasons to use social housing. I'm just wondering: are we following any trends to see whether the fact that we have social housing is helping people to move on and enter the housing market and move on financially?

[1525]

We haven't done that, but it is currently being looked at, on how to do it. There will probably be some discussion with the ministry also, about looking at other provinces and that, because we don't know if anybody else has actually done that kind of research.

M. Coell: I'm pleased to hear your comments. I agree -- success can be measured in many different ways. One of the other concerns that I have, reflecting on this report, is the idea now that it's just affordable housing and that you're going to be looking at those who would maybe be living on the street. If you're going to house 30 people who may have ended up on the street in one place, you're going to have a whole range of other problems, I suspect. You're going to need to see that the support is within that housing system, whether it be anything from alcohol and drug counselling to mental health problems as well. I just wonder what sort of. . . . If we're going in that direction, where it's strictly affordable housing. . . . And I agree that it's desperately needed in many parts of British Columbia. What other supports are we going to hook into there?

P. Robinson: In fact, all of the programs where we would say 100 percent deep-core. . . . Those are the individuals; there's no mixed income in that particular development. We are in partnerships with local health authorities or other government ministries to put program support in. That's critical. In fact, we've had some fairly significant successes with, for example, the Vancouver-Richmond health board. So it's not just housing 30 individuals in one building that all have a lot of problems, without the necessary supports to make sure that they are going to succeed in that environment. Program support is always available in those ones.

M. Coell: Just to follow up, what length of study or research are you going to do into the area that we've been discussing? And when would that be available?

J. O'Dea: We already discussed it this past weekend, actually, and our research people are going to put together a paper on it. When that's put together, if you're interested in getting a copy of it. . . .

M. Coell: I would be, yes.

J. O'Dea: I'll make sure. I mean, if the whole committee is interested, we could. . . .

R. Thorpe (Chair): Yes. If you'd just send it to the Clerk's office, they'll make sure it's distributed to all of the committee members.

M. Coell: Just summing up, I think one of the concerns that Canadians and British Columbians have is that we have spent literally billions of dollars on social housing over the last couple of decades. We haven't done that sort of research to identify what we were trying to achieve as success and measured it so that we can say: "Okay, for the next 20 years, what are we going to put our emphasis on, because we've seen success in these areas and failures in those?" So I'm pleased to hear that you're at least thinking along those lines and moving in that direction.

[1530]

So even with our limited resources. . . . We really picked up the proportionate share that the province did when both the federal and provincial governments were involved, back when you were with the Capital Region Housing Corp. Even at that, we've been able to keep abreast of the need. We don't make a dent in it. Our waiting list is still the same as it was ten years ago, but it hasn't increased. We've got to the individuals that were in crisis need. And as a result, if you look at Vancouver compared to Toronto, you won't see a large homeless population along the lines of Toronto. We don't have massive shelters. We're not having to react in a crisis manner, and we say that's because we put the investment into a variety of housing programs all the way along. As a result, Toronto's response now, as everyone knows, is just to create massive shelter complexes and not get to their root problem.

J. O'Dea: I would like to also say that we're just completing a study, probably in about six or eight months, on the Sunrise Hotel, which we bought last year. We're actually doing a study to look at the similar kind of thing that you were talking about earlier: what are the cost savings in actually providing social housing? Some of the people would go for emergency help like six times a year. Our guess is that once

[ Page 1395 ]

I was saying, when Peter was talking about it, that we know there have been increases not just in the homeless population in Toronto but also in crime. There's an increase in hospital emergencies and an increase in emergency grants from the social service system. So it's not just housing. It sort of goes right into the whole system.

We'll have a report finished probably in six or eight months, looking at some of the people who actually moved into the Sunrise a year ago and the effect and how much the decrease of them using the social service system is. We can get a copy of that, if you want.

R. Thorpe (Chair): With respect to your inputs on recommendation No. 3, roles and responsibilities, it says: "B.C. Housing's board of commissioners is preparing comprehensive review for the minister." When will that review be completed?

J. O'Dea: I'm trying to think when we'll be finished it. It'll probably be within the next. . . . It'll be within three months for sure. We're trying to get it done sooner, because it's really a review of the PRHC.

R. Thorpe (Chair): So it will be by June 30? Is that correct?

J. O'Dea: Yeah.

[1535]

E. Price: Sorry. I'm not sure which chart you're referring to. This is one of those in the response?

A Voice: Our chart.

E. Price: I think that this chart may go some way in terms of solving the problems, in that we talked in the report about the general manager wearing a number of different hats. I think that may have been resolved. I believe that this chart indicates that the PRHC governance problems that we pointed out have not yet been resolved. Is that. . . ?

A Voice: That's right.

E. Price: That's correct. The right-hand side of the chart is presented in a different manner, but I think it's similar to the chart that we provided in our report.

R. Thorpe (Chair): Would either the chair or the wearer of all the hats like to make comment?

J. O'Dea: We've always made sure that Peter, since he's been appointed, is not the wearer of all the hats.

What Errol said was right. We've made the changes that we could make. In appointing a new CEO who's not a general manager, we created the CEO position. We asked. . . . Or we didn't ask; we didn't say anything, I guess, about him being appointed as an ADM, which was done previously for the old GM, and we've been working with the past minister. I've already had one quick discussion with the current minister about PRHC.

There are about four different ways that it can come together, and it will probably be done in the next couple of months also, because. . . . I shouldn't say that. If the government decides that what they want to do is change legislation before bringing it together, then it could take some time. But if they decide that they'll do an interim measure, we've got about three or four legal opinions on what the best way to go is. We've got about three or four ways that the government could look at it, so they'll be given the options. But if they want to move with new legislation, then I guess it will be whenever the legislative presentations are. If it goes with something different than that and that doesn't require legislation, it can probably be done in about 90 days. Again, it can be done by the end of June. The decision will have to be made by the minister as to whether or not they want to go through the trouble that she has to go through in order to achieve what we're going to recommend or wait a couple of months longer and do the legislation. That really needs to be her decision.

R. Thorpe (Chair): Did anybody from the ministry want to make any comment? Kaye, are you. . . ?

K. Melliship: I think that we're waiting to see the options.

R. Thorpe (Chair): On both of those items we talked about, I wrote down June 30. So would it be possible for you to undertake, by letter form or whatever, to just report back to this committee on June 30 what progress you've made on those two issues? With respect to roles and responsibilities 4, 5 and 6, would it be possible for you to provide this committee with a copy of your board governance manual?

A Voice: Sure.

R. Thorpe (Chair): What is the distribution on the quarterly accountability reports?

P. Robinson: Currently it goes to senior management, all members of the board, the auditor general, Treasury Board, our minister and our ministry.

R. Thorpe (Chair): Does it go out to MLAs?

[1540]

[ Page 1396 ]

P. Robinson: A lot of the measurements are based on: did we deliver a program we were supposed to do? For example, a major capital asset maintenance program would be that there would be a three-year plan that identified buildings which were at risk and adequate moneys had been set aside to fix those up, and projects had been developed. It could be something as simple as how we measure our collection of rents. In other words, we have a standard that says that you have to collect 97 percent of the rents by two weeks into each month. We adhere to those types of things, and we report on them. Others might be that they're ongoing, because some of the recommendations would be to improve or to liaise, or they're objectives that strengthen social housing knowledge and capacity. So it's a mixture.

R. Thorpe (Chair): I don't want to put words in your mouth, Peter, but is it really an internal management tool where one of the byproducts is that you report to the board on your successes or your shortcomings? Is that what it is?

P. Robinson: Certainly we do that. What we try to do, with the board and the senior management and the staff of B.C. Housing plus other input, is take all of the various objectives surrounding social housing. If you look at this year's plan, for instance, implementation of all the auditor general recommendations is integral to our corporate plan. We'll try to put all of those together so that it's more than just an internal tool. Really, it's a government tool for how social housing objectives were met.

R. Thorpe (Chair): And how often are you going to report out against those?

P. Robinson: We do that every quarter in the fiscal year.

R. Thorpe (Chair): For instance, for your next quarterly report when it comes out, as a matter of interest, would it be possible for you to supply it to every member of this committee so that we can see how it's going and get a feel for what you're doing in those areas?

P. Robinson: Certainly, although I think it would be even better if we gave you the last quarter of the current year, because in the first quarter you're still pretty vague.

R. Thorpe (Chair): Why don't you give us both?

P. Robinson: All right.

R. Thorpe (Chair): The corporate plan for 2000-2001 is near completion. Hopefully, the budget is going to be tabled March 27. This would be from your earlier answer; I wrote this question down when we were going through it. I guess it'll be possible for us to get a copy of the detailed corporate plan as opposed to the summarized version. Would it be possible for this committee to receive that?

P. Robinson: Absolutely.

R. Thorpe (Chair): Thank you.

Recommendation No. 7. When do you anticipate the new legislation?

M. Coell: You can't comment on future legislation.

R. Thorpe (Chair): I didn't even think that you'd think about answering that. Maybe you didn't.

Your direction No. 10. Has the financial plan part of your corporate plan been approved by your board?

P. Robinson: I'm sorry. The financial plan?

R. Thorpe (Chair): I would think that the financial plan would be part of your overall corporate plan. Would it not be?

P. Robinson: I assume by that you mean our budgeting. . . .

R. Thorpe (Chair): Yes.

P. Robinson: Yes. It works in lockstep. When the estimates come up in the House, both the corporate plan and the budget are available for looking at.

R. Thorpe (Chair): Does your board approve it after, or have they approved it prior to. . . ?

P. Robinson: We follow a similar process to ministries, in that we start assembling our budgets back in the summer prior to the fiscal year in question. It wraps up through theirs, because we are -- as was mentioned by the auditor general -- a line item in the ministry's budget. By the time it gets to estimates, it's been approved by the board as well as by the ministry, as well as by the minister.

[1545]

P. Robinson: I haven't noted that. I see that the board and the commission have worked. . . . In every budget that I've seen, there's been consensus on the objectives.

R. Thorpe (Chair): With respect to your corporate plan and summary -- and I have to say that I've just read it very, very quickly, so I may have misread or not read it in the detail. . . . We've been talking about this report and accountability, and I've noted that you've accepted all of the recommendations of the auditor general. But in here, I don't see reference to performance measure reporting. Have I just not read it properly, or. . . ?

P. Robinson: Again, this was the summary. This was done so as to give anybody -- any of our non-profits, any Member of the Legislative Assembly -- just a summary of what we intend to achieve. It's put out prior to that year being implemented. The reporting on it is a separate document.

[ Page 1397 ]

P. Robinson: Yes, we could write that.

R. Thorpe (Chair): Yeah. I mean, do it only if you think it's a good idea. But I think that's what we're here talking about.

Does anybody from the auditor general's staff have any comments on any of the progress or recommendations or the status of where they are going with respect to the first part of this report? That's my first question to the auditor general's office.

Secondly, I know you do follow-up audits. But are you working hand in hand as we work through these things, more than just waiting for a year or two years down the road to do a follow-up audit?

E. Price: With respect to the first part of the question, the extent of progress, the information that was provided today in the form in which it was provided was the first time that we've seen it. However, I would say that I know that during the course of the audit and since the audit, both board and management of the commission have, I think, been working diligently to act upon the recommendations. During the course of the audit and I think since the audit was completed, we've met on a number of occasions with management and board to discuss recommendations in detail. All I can say at this point is that we believe that the commission and the board are moving in the right direction.

Right now the question of follow-up. . . . The process has been -- as I think you know, based on past experience -- that approximately 18 months after the audit, we have been asking the organization that was subject to the audit to provide a written update on where they are with respect to the recommendations. We carry out a review of that information to ensure that it's accurate and reasonable. That's been the process to date. Right now we're not working sort of within the commission or with the commission to ascertain the current status. Do you want to say anything about the follow-up process, Peter?

P. Gregory: All I might add is that I think Errol has described the formal part of our follow-up process, where we do, on a systematic basis, follow up on the recommendations and report back in an official way to the Public Accounts Committee. In a much less formal way, we're often involved with the auditor organization, having informal discussions around implementation and various options and that sort of thing. But we act in a more reactive way to that. I mean, we don't have a mandate to insert ourselves; but if invited, we're supportive and go out of our way to do that sort of thing.

R. Thorpe (Chair): But it would be in your mandate to ask for ongoing updates on progress every six months, wouldn't it?

P. Gregory: We could do that, yes.

R. Thorpe (Chair): I just think that when we let things go 18 months. . . . You know, we talk about things that we didn't talk about in 1992 or 1996. Maybe the auditor general's office could look at that and see if there's something you could do to have more of a regular routine so that people are reminded. If people aren't reminded -- and I'm not suggesting B.C. Housing -- other priorities come up, and off we go again. Maybe you could report back to us on that.

[1550]

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

E. Gillespie (Deputy Chair): Just a very quick question to B.C. Housing once again, and that is: do you reference the health goals that the provincial health officer has put out? Do you reference health goals in your strategic planning?

P. Robinson: We don't pick up specifically on a document that Health would have, but we certainly work almost weekly with health authorities to incorporate their objectives as they relate to housing and try to tie them together.

E. Gillespie (Deputy Chair): The provincial health officer does put out a report on provincial health goals. Those health goals are not Ministry of Health goals but health goals for British Columbians that are very broad-ranging, and appropriate housing is certainly part of that.

R. Thorpe (Chair): His name is Dr. Perry Kendall, and I'm sure he'd look forward to hearing from you.

M. Coell: In the report, the auditor general makes some comments about a confusion between the housing advisory council and B.C. Housing. I wonder if you could outline the role that the housing advisory council is playing, now that you've made some changes.

K. Melliship: The housing advisory council is a group of about 23 housing experts from a broad range of housing sectors, not just social housing. We have experts in housing law, construction and development, and representatives of municipal government. The purpose of that committee is to advise the minister on a wide range of housing policy issues. Sometimes they do discuss and provide advice on social housing, but their interests and the kind of discussions they have, have been far broader than just social housing.

M. Coell: So you don't see any confusion or duplication as it stands now.

K. Melliship: No, I don't. In fact, when necessary or when the council's interested, staff from B.C. Housing will attend meetings and provide information that they're seeking. So I think there's quite a good integration.

R. Thorpe (Chair): No other questions on this area? Okay, why don't we move to the section on an audit on the management of social housing subsidies?

P. Gregory: Just before we start that, Mr. Chair. . . . I find I misspoke earlier when I was asked whether we had copies of

[ Page 1398 ]

R. Thorpe (Chair): We'll follow the new graphics.

[1555]

B.C. Housing pays about $126 million each year in subsidies and supplements. Over $90 million of this amount is paid to not-for-profit sponsors that manage social housing developments. Managing this flow of resources well is key to achieving social housing goals. As well, the possible devolution to the province of up to 45,000 units in the current federal portfolio of developments adds to the importance of having good processes for managing subsidy dollars. Together these factors. . . . We felt that this is an important area that should be of interest to the Legislative Assembly.

Our overall conclusion is that B.C. Housing's processes provide reasonable assurance that subsidies are being paid in the right amounts, are being used economically and efficiently, and that agreed standards of service are achieved. However, although they have the capability of doing so, B.C. Housing's information systems are not used to provide, in one location, comprehensive information about sponsor performance. If the commission were to do this, it would be better able to demonstrate that those sponsors that need the most support receive priority over those that need less and to measure changes in sponsor performance over time.

How are subsidies calculated? The amount payable to each sponsor is determined with reference to two main factors: the economic rent for each unit and the rent recovered from the unit's occupiers. The total cost of operating a social housing development is apportioned among the units it contains. This apportionment determines the economic rent for each unit -- that is, the rent that will be charged to recover the costs of providing the accommodation.

In certain developments, such as those under the Homes B.C. program, some tenants may pay market or near-market rents. These tenants will not attract subsidies in the long run, as a general rule. Tenants not paying market rents will pay a rent based on their income. This will usually result in their paying an amount equal to 30 percent of their household income, although in some cases a minimum rent may apply.

The annual subsidy payable to the sponsor will generally be the amount by which the economic rents of units occupied by rent-geared-to-income tenants exceed the rents that those tenants pay. B.C. Housing pays the subsidy to the sponsors in monthly instalments.

We'll first look at how B.C. Housing gets reasonable assurance that resources provided to sponsors are used by them economically and efficiently. B.C. Housing uses three main processes to ensure that sponsors use subsidies economically and efficiently. The first involves reviewing how sponsors manage the costs that they control, such as administration, insurance and maintenance. These amount to about 29 percent of total sponsor costs. The second is getting the most favourable rates for mortgages, which B.C. Housing negotiates on behalf of sponsors. Debt servicing amounts to about 60 percent of total sponsor costs. The third is managing the amount set aside in reserves to replace capital assets, such as roofs and refrigerators, when needed.

B.C. Housing reviews sponsors' financial performance in two main ways. Sponsor budgets for future years are reviewed and approved by B.C. Housing staff to ensure that the budgets are reasonable in the context of the sponsors' operations. As well, B.C. Housing examines the sponsors' audited financial statements and other historical cost data to determine whether expenditures were consistent with budgeted costs and to identify items not eligible for subsidy.

[1600]

B.C. Housing negotiates new mortgages and renewals on behalf of sponsors. Total outstanding mortgages approximate $1.25 billion, of which about a fifth is negotiated or renewed with lending institutions each year. A difference of one-quarter of a percent in the rate for the annual tender would change annual interest costs by $600,000. B.C. Housing generally gets good rates for its mortgages and is mostly successful in meeting its performance target of 1 to 1.5 points below resident mortgage rates.

Although the commission staff have considerable experience in mortgage renewals, periodic access to mortgage specialists on an as-needs basis would confirm whether the commission's mortgage strategies continue to be the best ones and whether there are some packaging options that B.C. Housing might consider to get even lower rates.

Replacement reserves are a means of providing for the replacement of capital assets by accumulating and investing, over time, funds earmarked for that purpose. The model for replacement reserves used by B.C. Housing is reasonable, and it's based on that used by CMHC for its social housing developments across Canada. However, B.C. Housing needs to confirm periodically that the model still is the most economical way of managing capital asset replacements. As well, some of the assumptions included in B.C. Housing's model need periodic review to ensure that they continue to be appropriate or whether they need to be changed. For example, the model assumes that the amount of interest earned on the investments of the reserve approximates the effect of inflation on the cost of replacing the asset. It therefore does not specifically account for these items. However, with the recent low inflation rates, this assumption seems no longer appropriate and could lead to reserves being overfunded.

[ Page 1399 ]

As well, B.C. Housing should consider whether its goal of funding replacement reserves to a threshold of 100 percent of covered assets sets asides more funds than are needed to finance replacements as they occur. A threshold lower than 100 percent might still provide sufficient funds for replacements as they are needed, while releasing resources for new developments.

Next we'll look at how B.C. Housing satisfies itself that tenant rents are sufficiently accurate for subsidy purposes. In most cases, sponsors perform rent calculations for their tenants from data provided by the tenant. B.C. Housing has two main verification processes for obtaining assurance that rents are correct. First, the commission recalculates each rent calculation before entering the data into its information systems. Second, B.C. Housing carries out random audits of the information tenants provide to sponsors about their income and assets. Procedures for checking the calculation of rents are adequate.

However, because B.C. Housing checks every rent calculation, the extent of work being done is excessive to gain reasonable assurance that, for the purposes of the subsidy calculation, rents are materially correct. For example, some sponsors may have demonstrated competence in getting the calculations right the first time. Or there may be some types of rent calculation which are straightforward and not historically subject to error.

The audits of information that tenants provide about their income and assets are adequate in nature. However, the commission does not quantify the results of this work to enable an overall assessment of how much rents in total are likely to be misstated because of information provided by tenants. Knowing this information would give B.C. Housing assurance that the risk of error does not exceed the threshold that the commission is prepared to accept and ensure that the number of audits is sufficient to provide the level of assurance that B.C. Housing is seeking.

Next is the third component of this audit: the authorization and payment of subsidies. Procedures for the payment of subsidies provide reasonable assurance that sponsors receive the correct amounts. There are appropriate legislative authorities for paying subsidies, and the operating agreements with sponsors provide a contractual basis for making the payments.

The budget review process enables B.C. Housing to calculate subsidy instalments based on budgeted costs and estimated revenues. The actual subsidy payable is recalculated when audited financial statements of actual costs and revenues are received from the sponsor, and any differences are settled between the commission and the sponsor.

Finally, we'll look at how B.C. Housing ensures that agreed standards of service are being delivered. Operational reviews of sponsor developments are carried out every five years. The reviews cover maintenance practices and recordkeeping, finance and administration, and are intended to identify opportunities for improvements in the sponsors' practices for compliance with their operating agreements.

[1605]

Looking to the future, B.C. Housing can improve the efficiency and effectiveness of its subsidy monitoring procedures in a number of ways. First, the information gathered and produced during its processes needs to be better organized and accessible to the commission staff. Doing this would enable B.C. Housing staff to focus their efforts on those sponsors that need their help the most and would allow B.C. Housing to provide better information to stakeholders about its own performance and its managing and monitoring of the social housing sector. Second, B.C. Housing should reduce the recalculation of tenant rents to a level that is needed for reasonable assurance that they are materially correct. And third, all operational reviews need to be carried out on a timely basis and followed up more completely than is currently the case, to ensure that matters for correction are dealt with promptly. That ends the presentation on managing subsidies.

P. Robinson: If I may, Mr. Chair, I'll do the response.

R. Thorpe (Chair): Yes, go ahead.

P. Robinson: Again, following with the auditor general's report, we have divided this into the same areas that they looked at in principle, which were controllable costs, mortgage negotiations, replacement reserves, tenant rents and standard of service. I will be brief by saying that we agree with all of the recommendations, and they're all underway for being implemented. I would also be remiss if I didn't pass on a compliment to the auditor general.

When they came in two years ago to begin looking at us, they did so in a manner that said: "We want to also help you folks understand where your risks and your weaknesses are and work with you." We helped to define what that would look like. We knew that the biggest risk was around where the biggest expenditure was, so we were pleased that they were able to do that. Throughout the process, it was very collaborative. We picked up on their recommendations very quickly. They gave us feedback, and all throughout that process. . . . I want to pass that on as a positive statement to the team, under Tony, that came and did the work with us.

Now, on controllable costs 1 to 4 -- those recommendations -- basically, if they're not already implemented, we are in the process of doing those right now. The only caveat I would add to that is that because all of these subsidies are done through independent non-profit societies and co-ops, the onus is on us to make sure that we discuss the implications with them, if it has an impact on the way they manage their portfolios. It's not quite as simple as us just taking unilateral

[ Page 1400 ]

On mortgage negotiations. It's an absolutely critical point here, because as was pointed out, even a quarter point can make a difference. I think that B.C. Housing does a good job with its administration of its billion-dollar mortgage portfolio. We try to do a number of initiatives to do that. For instance, we do bulk mortgage negotiations on a monthly basis on either takeout or renewals of mortgages.

[1610]

On the next section, which is replacement reserves. . . . Again, a lot of money can be tied up in replacement reserves. The trick is to make sure, as was pointed out, that they're adequately funded, adequately used and adequately tracked. These moneys all belong to the non-profit societies and co-ops. In so monitoring, we have to make sure that we find the best balance between their being adequately funded and adequately used. But all of those recommendations are currently underway for follow-up.

On tenant rents, recommendation 8, we have already begun the process of following up on the number of rent calculations we do. If we were at 100 percent previously, we're moving to a figure of around 25 percent of cheques on a random basis and then followup with groups that are having difficulties. Far more importantly than just how we follow up on rents is the system by which rents are calculated. A primary focus for us is actually to simplify the system by which rents are calculated first, to make it less prone to error so that therefore not as much effort is made by the provincial government to verify those rents. That follow-up report on simplification of rent calculation will be done by the end of this month, and we can provide a copy if you so wish.

R. Thorpe (Chair): Would it be possible for you to. . . ? Perhaps other committee members know; I don't know. Could you just walk us through an example of the simplification of the rent calculation? Is that possible?

P. Robinson: Certainly. I can use as an example. . . . First of all, it can be fairly complex because the standard is that people pay according to their income, and they pay no more than 30 percent of their income for rent plus heat. But there's a variety of different income sources. They could be on B.C. Benefits, or they could be on a disability pension or unemployment insurance. They could be getting combinations of those, or they could move from one to another in a year. There could be a job that's taken on that's different. It can be very, very complex -- how we do this. Then there's a number of deductions and exemptions that we give within that process. So when you put all those together, it's no surprise that a number of non-profits say: "You know, this is a very complex system; we need to simplify it."

An example of one of the things we're looking at would be around something as simple as how we calculate seniors' rents. The bulk of the individuals in the seniors portfolio are on the same source of income. They could be on old age pension or guaranteed annual income or one of those. But it's very simple. The amount of money that goes to an individual or to a couple is the same in each case. So rather than do rent geared to income, we're thinking of going to rent on the door -- a standardized rent on the door that reflects what that rent geared to income would be. Then there is no more calculation. Individuals who are seniors who are already in there don't have to provide proof each year. Non-profit societies don't have to follow up. It's an example of what we're trying to do to streamline the process yet still not lose the fact that it has to be affordable for that individual.

J. Weisbeck: How much are you using information technology? There's a great problem in government as far as integration with different ministries. You've got a number of different registries throughout the province, so obviously there's real potential for fraud. How well are you integrated with some of the other registries to realize that possibly this individual's collecting funds from somewhere else or is defrauding the system?

P. Robinson: There are a number of ways we do that. First of all, we do not have a direct link yet into the. . . . We're working on it. I think it's one of the recommendations of another report that we work with the ministry, now that we're all under the same umbrella, to tighten up on how B.C. Benefits and individuals in B.C. Housing who are in receipt of B.C. benefits to correlate that information.

Our random sampling, though. . . . We do random audits of all our individuals just to see how effective the provision of information is. From time to time, it picks up individuals that, yes, are causing fraud, but it's at a rate which we consider to be quite low. We check about 25 individuals a month with a full audit, and yes, from time to time problems come up. More appropriate would be that the system self-polices. It's not a well-known fact that if individuals living in social housing suspect that their neighbour is defrauding the system, they usually tell us. We think that we're pretty up on that one.

Finally, the last recommendation had to do with service standards, recommendations 9 through 12. . . .

[1615]

R. Coleman: Peter, I just want to take you back for a second to that question from Mr. Weisbeck. He phrased the question relative to fraud. I want to phrase the question a little differently, because I don't know if the committee really understands how this whole rent calculation takes place.

[ Page 1401 ]

I'm familiar with an organization that runs 3,000 units of housing on the lower mainland and has every one of its sites completely linked just by e-mail. The changes are made electronically by e-mail. I know I asked the Chair this question a while back, and I'm wondering what progress you've made on getting electronic on that end, which is where the societies find their biggest frustration.

I would imagine your own Housing staff find it frustrating, because to be able to stay on top of your vacancies and the rent calculations, those forms that are coming in must require a massive amount of administration in your offices versus what you could do electronically. Reviewing this one portfolio that I had the opportunity to look at, I know that they can actually tell you the state, the maintenance period and when things were repaired in every single suite -- all electronically, because they've got it all linked. I'm wondering where the commission is with that kind of movement forward.

P. Robinson: On our own portfolio where we are the landlord, we are the equivalent of that organization. Our systems for calculating rent are fully done on an electronic basis. It's a little more difficult when we try to do the information from independent non-profit societies and cooperatives, so I'd like to report that we've had partial success in that recommendation from before. One of the recommendations, for example, has to do with entering. . . . One of the things we'll be doing, essentially, is creating electronic forms on our web site. Auditors and folks from non-profits and clubs can enter directly onto that, which then implements directly into our system.

So we are moving more to a form of e-information, if you would, to try to track that. The biggest sort of caution that we have to have, though, is that information is confidentially treated. We're being very, very sensitive at this point to how information is being transferred electronically.

R. Coleman: When you say you've been implementing that, you have that in your own stock. . . . This particular organization had smart-card or palm-pilot technology, where they could actually tell you when a maintenance person was in a suite. They would just download that every day from their staff into the computers, so they could actually look at their portfolio and say that unit XYZ in such and such a location had a maintenance person in it on such and such a date to do that type of repair. Are you at that level yet?

P. Robinson: We can do those reports, but we don't yet have the hand-held unit that the maintenance person would take out when they do their inspection. Certainly that information is tracked. We can tell what is done in any one unit at any one time.

R. Coleman: The societies are not in a position to do that, are they?

P. Robinson: No. But if we could pilot it with our own stock at B.C. Housing, we'd certainly want to transfer that technology out to all non-profits who wish to access it.

R. Coleman: Do you have a time frame for doing that, by the way?

[1620]

R. Coleman: Okay.

P. Robinson: I'll just finish off, then, with the service standards. Those are recommendations 9 through 12, and again, we agree with all of the recommendations. Some of them are already underway, and I basically have nothing else to add to the subsidy side.

R. Thorpe (Chair): Your endorsement of these 12 recommendations. . . . Are any of these recommendations -- I guess the answer is fairly obvious, or you would have said it -- cost-prohibitive?

P. Robinson: No, we think they're all. . . . There might be some short-term costs around systems reconfigurations, but in the long term this saves the commission money.

R. Thorpe (Chair): Does anyone have any questions?

E. Gillespie (Deputy Chair): I just have one question, and that is. . . . When you talked about controllable costs, you said that it's not something you can go out and do unilaterally and that you need to engage with your partners here -- your 1,000 partners. What has been the response from those partners to this package that you sent out?

P. Robinson: It's been quite favourable. To give you an example, we pulled in sort of the major groups back in January to make some announcements around our budget, and one of the things we had to announce was, for example, that all non-profit societies in the province were going to have to take a 1 percent cut to their manageable costs. We did that at the same time that we said we would take a 5 percent cut for our own housing, so that we would be seen to be taking the brunt as well. The response was: "Yes, we can do this. We understand the financial implications." So when they look at the issues that were brought up here by the auditor general about being efficient, they then say. . . . They've been very good at accepting this.

E. Gillespie (Deputy Chair): Thank you.

R. Thorpe (Chair): Anyone else have any questions?

The only request I would have with respect to these 12 recommendations and your agreement. . . . If we could get

[ Page 1402 ]

P. Robinson: Certainly. When we provide your copy of the 2000-2001 corporate plan, every one of the recommendations will have a date for implementation.

R. Thorpe (Chair): Perfect. Does anyone else have any questions? Does the auditor general's office have any comments to make?

P. Gregory: No further comments.

R. Thorpe (Chair): Comptroller general?

A. van Iersel: No, thanks.

R. Thorpe (Chair): Well, thank you very much to the auditor general and his staff and to B.C. Housing and the ministry for coming before the committee today. It's appreciated, and we look forward to hearing from you in the future. Good luck.

The committee adjourned at 4:24 p.m.

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