Public Accounts — Issue No. 10 — Wednesday, June 25, 2014 (HTML)

Rooms 1200-1300, Simon Fraser University, Segal Building
500 Granville Street, Vancouver, B.C.

Present: Bruce Ralston, MLA (Chair); Sam Sullivan, MLA (Deputy Chair); Kathy Corrigan, MLA; Marc Dalton, MLA; David Eby, MLA; Simon Gibson, MLA; George Heyman, MLA; Vicki Huntington, MLA; Mike Morris, MLA; Linda Reimer, MLA; Selina Robinson, MLA; Shane Simpson, MLA; Laurie Throness, MLA; John Yap, MLA

Officials Present: Russ Jones, Acting Auditor General; Stuart Newton, Comptroller General

2. The following witnesses appeared before the Committee and answered questions relating to the Office of the Auditor General’s Report Catastrophic Earthquake Preparedness (March 2014).

4. The Committee continued its consideration of the Office of the Auditor General's Report Catastrophic Earthquake Preparedness (March 2014).

6. The Committee continued its consideration of the Office of the Auditor General's Report Catastrophic Earthquake Preparedness (March 2014).

8. The following witnesses appeared before the Committee and answered questions relating to the Office of the Auditor General’s Report Working Capital Management Since 2010 (March 2014).

• Jim Hopkins, Assistant Deputy Minister, Provincial Treasury, Ministry of Finance

• Ian Aaron, Director, School District Financial Reporting, Ministry of Education

10. The Committee continued its consideration of the Office of the Auditor General's Report Working Capital Management Since 2010 (March 2014).

12. The following witnesses appeared before the Committee and answered questions relating to the Office of the Auditor General’s Report Information Technology Compendium (January 2014).

• Ian Bailey, Assistant Deputy Minister, Technology Solutions, Office of the Chief Information Officer

The following electronic version is for informational purposes only.
The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
PUBLIC ACCOUNTS


CONTENTS
Page
Auditor General Report: Catastrophic Earthquake Preparedness	363
R. Jones
P. Nyquist
P. Quealey
C. Filmer
C. Duffy
Auditor General Report: Working Capital Management Since 2010	393
R. Jones
C. Thomas
J. Hopkins
B. Gilhooly
I. Aaron
C. Fowler
S. Newton
Auditor General Report: Information Technology Compendium	408
R. Jones
D. Lau
I. Bailey

B. Ralston (Chair): Good morning, Members. On our agenda today we're going to deal first with the report of the Auditor General on catastrophic earthquake preparedness, from March 2014. The Auditor General is here, so I'll turn it over to him, and in due course we'll hear from members of the Ministry of Justice, who are going to respond to the report.

R. Jones: Thank you, Chair. Vice-Chair, Members, good morning. I'll quickly just update you. I got a note from Malcolm's wife yesterday saying that he's going home today, so that's good news. That's as much of an update as I can give you at this point in time, but I assume that is good news.

R. Jones: Today is going to be an interesting day, and we'll shake things up a bit right off the bat by talking about earthquakes.

Okay, back to more serious matters here. The issue of earthquake preparedness in B.C. has received significant attention over the years. In 1997 our office examined earthquake preparedness and found that the province was not as prepared as we thought it should be. Then in 1999 the Public Accounts Committee released its own report on the topic. Not only did it endorse our work; it also contained some additional recommendations. One of the committee's recommendations resulted in a seismic mitigation program. In 2011 my office reviewed this program in our report Planning for School Seismic Safety.

In this recent audit, though, our focus was on Emergency Management B.C., commonly known as EMBC, and how prepared it is for a catastrophic earthquake. Our conclusion was the same as our audit from 17 years ago. EMBC is not adequately prepared for a catastrophic earthquake, and neither the province nor EMBC have made preparation a priority.

As the majority of British Columbians reside in an earthquake hazard area, addressing this risk is paramount to ensuring that when an earthquake occurs, its impact is minimized and the province is able to lead an effective and timely response. That said, it is also important to note that preparing for a catastrophic earthquake is a shared responsibility where all levels of government, industry, non-profit organizations and individuals have important roles and responsibilities and need to be prepared. Ultimately, though, British Columbians need to take responsibility and prepare for a catastrophic earthquake to protect themselves and their families.

With me today I have Paul Nyquist, the engagement leader on the audit, and he will provide you with a brief summary of the report.

As Russ noted, in 1997 our office first looked at earthquake preparedness in British Columbia and found much room for improvement. Seventeen years later we revisited this topic and found that British Columbians are still at significant risk if a catastrophic earthquake were to happen today.

The picture on this opening slide is of Christ Church Cathedral in New Zealand after their 6.3 magnitude earthquake that struck in February of 2011. I've heard some discussions around the table about how similar that is to the Legislative Assembly we have in Victoria.

Also, I'd like to just highlight that we recognize this presentation reflects the results of our audit at the time we did our work and, also, that management has started a number of new initiatives subsequent to that report. We have not evaluated or audited those initiatives, and we'll leave it to management to speak to those, should the committee be interested in discussing them.

There are numerous examples of destructive earthquakes and tsunamis worldwide, resulting in years — and even, in some cases, decades — of recovery. Recent examples include Japan and New Zealand in 2011 and Chile in 2010. Annually, a few thousand earthquakes occur in and adjacent to B.C., and most of these are too small to be felt.

However, experts have recently estimated that there is a 12 percent probability of a catastrophic earthquake affecting B.C. within the next 50 years. Just to give some context, a catastrophic earthquake usually results in the total destruction of buildings, river courses and topography being altered and a high number of casualties and evacuees.

Preparing for a catastrophic earthquake is a shared responsibility, and the province's strategy is founded on an escalating response model. At the basic level, individuals are responsible for taking actions to protect themselves. When an emergency extends beyond individual capabilities, local authorities lead the response with regional coordination as necessary.

When local authorities are overwhelmed, the provincial government needs to take a strong leadership role,
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which is dictated in its legislation. In this situation, the province will be responsible for acquiring and deploying the necessary resources to help affected areas and for coordinating and leading a multi-agency response to meet established provincial priorities.

Finally, if the provincial government requires resources beyond its own capacity, it can ask the federal government or other jurisdictions for assistance.

Our audit focused on a catastrophic earthquake scenario where local authorities would be overwhelmed and the province would need to take a strong leadership role. The purpose of this audit was to determine whether EMBC could demonstrate that it was prepared to manage the effects of a catastrophic earthquake. While it is important to acknowledge that no jurisdiction in the world can be fully prepared, some level of preparedness needs to be achieved to reasonably protect the population, the infrastructure and the economy of the province.

We developed our expectations anticipating, in the 17 years since our original audit of catastrophic earthquake preparedness, that EMBC had had sufficient time to significantly improve its level of preparedness. We also expected EMBC to be reporting to the public and the Legislative Assembly about the state of readiness it had achieved in this time and the state that it was working towards.

Our conclusion was that EMBC could not demonstrate that it was adequately prepared to manage the effects of a catastrophic earthquake and that EMBC was not publicly reporting on the province's earthquake preparedness.

The province's response to a catastrophic earthquake will depend largely on the effectiveness of its plans and procedures that EMBC and other stakeholders have in place and in how well they are implemented. Our audit identified a number of areas that required attention.

We found that EMBC's hazard risk and vulnerability analysis was not sufficiently detailed or up to date and that plans and procedures did not consistently reflect best practices. We also found that EMBC's plans and procedures did not clearly describe all of the actions that the minister may need to undertake in a provincial state of emergency. Furthermore, EMBC was not adequately ensuring that all stakeholder plans are integrated into a coordinated provincial response, and lastly, EMBC's catastrophic earthquake training exercise and public education programs were inadequate.

Many of these deficiencies were identified by EMBC themselves in their after-action report, which followed their response to the recent 7.7 magnitude earthquake that struck Haida Gwaii in 2012.

As noted, our audit concluded that EMBC was not adequately prepared for a catastrophic earthquake. We also found, however, that this information had not been made public, increasing citizens' vulnerability. Neither EMBC nor the Ministry of Justice was reporting to the public or the Legislative Assembly about how prepared it was for a catastrophic earthquake. We expected that this reporting would have taken place, as it is important for transparency and accountability.

Preparing for a catastrophic earthquake is a shared responsibility, and all levels of government, industry, non-profit organizations and individuals have important roles and responsibilities. They need to be prepared. Therefore, increased government transparency about its preparedness allows British Columbians to understand the extent of their own personal vulnerability and make better-informed decisions about what their desired level of preparedness is.

Our 1997 audit reached a similar conclusion about the value of public reporting, where we noted that "the general public needs to appreciate the extent of their vulnerability if they are to be convinced to support public mitigation efforts and develop personal strategies for earthquake preparedness."

We identified a number of causes of the situation. Catastrophic earthquake planning has not been made a priority by government. Public funds are limited, and allocating resources to plan and prepare for a catastrophic earthquake that may or may not occur in the near term must compete with funding requests for immediate government needs such as health care and public education. Also, catastrophic earthquake planning had not been made a priority by EMBC.

EMBC has significant capacity constraints due to its very broad mandate. As a result, dealing with day-to-day emergencies like floods and fires consumes the majority of staff time, and adequately planning for a catastrophic earthquake has not been made a priority. Further, EMBC is provided with extensive authorities under its legislation and regulation. These are defined as either the obligatory "musts" or discretionary "mays," and we found that EMBC had not been fully applying these to achieve its mandate.

Further, EMBC had not implemented an effective managing-for-results framework, so it was not able to demonstrate or ensure that it was doing the most that it could with the limited resources that it has. For example, EMBC had not developed a catastrophic earthquake key performance indicator or target set. As a result, the organization was unable to objectively evaluate whether its actions and strategies were improving catastrophic earthquake preparedness.

As well, the province, our Office of the Auditor General, internal audit and advisory services and even this committee have invested considerable resources in assessing B.C.'s level of preparedness, identifying gaps in that preparedness and suggesting areas for improvement and recommendations. As noted in our report, many of these recommendations have remained unaddressed for the past 17 years.
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As a result, we developed a set of recommendations aimed at both the provincial government and EMBC itself. We differentiated between government and EMBC, as two of these recommendations are outside of EMBC's control. Those recommendations are to government and are foundational for EMBC being able to achieve their catastrophic earthquake mandate and to implement the recommendations that we have made to the organization itself.

We recommended that the government determine what its long-term catastrophic preparedness is and then ensure that EMBC has the necessary capacity to deliver on those expectations.

As you can see from the slide, the nature of the risk and the scope of the activities involved to mitigate mean that our recommendations suggested that government think in terms of five, ten or even 15 years rather than the usual one to three years into the future.

We had seven recommendations that we've provided directly to EMBC. Those recommendations started with coming up with a plan and the necessary subplans to achieve government's long-term goals and its direction. We also recommended that they identify and address any gaps in their plans and proactively monitor and evaluate their stakeholder plans and assess the readiness and capacity to deliver on those plans.

We also recommended that EMBC do regular exercises of its catastrophic earthquake plans to ensure that they can provide an effective and integrated response to a catastrophic earthquake and that they regularly monitor the effectiveness of their public education initiatives. Finally, we recommended that EMBC publicly report on the state of its catastrophic earthquake preparedness and the plans and achievements of the Inter-Agency Preparedness Council.

B. Ralston (Chair): Thanks very much. I'll now turn to Pat Quealey, who's the assistant deputy minister responsible for Emergency Management B.C. in the Ministry of Justice. I'm going to ask Pat to introduce the other members of his team that are here today.

P. Quealey: Thank you, Chair, Deputy Chair and Members. First of all, I have with me Chris Duffy. Chris is our executive director for operations and recovery transition. On my left, Cam is our executive director for plans and mitigation.

If I may, just as a matter of administration, I know we provided the committee, in advance of this testimony, a couple of documents — one, obviously, our presentation. But also, you should have a copy of our strategic plan.

In context, that strategic plan has been devised over the last three months. By intent, we have acknowledged and considered the recommendations that came from the Auditor General's report and incorporated them into our longer-term plan.

If you'll entertain it, I would like to refer to some of those elements as I describe our response to the audit, which is our primary purpose, but also to describe to you the way ahead and how that's meaningful.

B. Ralston (Chair): That's certainly…. It's not unknown for the Auditor General's report to have that kind of effect on the audited department. We're familiar with that process.

In general, the Ministry of Justice — to be very clear — and EMBC accept all the findings of the Auditor General's report Catastrophic Earthquake Preparedness. Frankly, we embrace those findings as an opportunity to improve.

Certainly, the Auditor General has recognized that preparing for a catastrophic earthquake is a shared responsibility. That said, EMBC accepts that we have a key leadership role in that regard.

We are taking immediate actions. I mentioned our strategic plan, and I want to assure you that we will address the key issues identified in the audit. Our long-term planning will address all of those issues. As I mentioned, we've provided you with our recently produced strategic plan. I want to emphasize, as well, that that plan has been made public. It is on our website and is shared with our stakeholders.

In responding to the audit report, the ministry has grouped recommendations. As Paul has mentioned, some of these are relevant specifically to government. We also take the opportunity to talk about how we can support their achievement.

Certainly, with respect to these recommendations, EMBC will work with its colleagues across government and external stakeholders to ensure that appropriate actions are taken. Clearly, in this regard, unity of effort in working with partners, both internal and external to government, is critical to our provincial success and resiliency. We will work together to make British Columbia safer in light of what is an imminent threat.

First steps — how we intend to do this. Taking the Auditor General's reports and the recommendation into account, specifically, we've undertaken three main areas of focus which are articulated in our strategic plan.

First is development of a long-term action plan for enhancing catastrophic disaster preparedness, focusing on an earthquake as a key threat.

We have undertaken an earthquake preparedness consultation, whereby we seek the feedback of the wider stakeholders in British Columbia. As the Auditor has indicated, this is an issue that faces all of us, and we all have responsibility to be prepared.

Finally, the third prong is a public education campaign
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focused on earthquake preparedness. At present we are doing a needs assessment as to what is the best method and how best to ensure that we share our knowledge, our responsibility and recommendations to the public on how to be best prepared.

Thus, to look at each of the recommendations specifically, recommendation No. 1 to government is regarding developing long-term goals. You'll see in our strategic plan that EMBC is in the process of developing a long-term plan. This is identified in our line of effort No. 2 under "Catastrophic earthquake preparedness." Our intent is that this articulates provincial goals regarding this preparedness and a phased approach for achieving it.

Certainly we can recognize that there have been issues in being able to move forward over the years, and that's acknowledged. So what we're going to do is approach this in a phased approach. Building on existing plans, we're going to focus on an immediate response plan. We will achieve that immediate response plan…. It's to be drafted by the end of this fiscal year.

I must highlight at this time that that method is being achieved through cooperation, which I mentioned before as being critical. Specifically, in the last few weeks we have formed an integrated planning team with the cooperation of other agencies.

To highlight those, we have Public Safety Canada; the Department of National Defence; the Canadian Red Cross; and internally, the B.C. Ministry of Health; as well as, obviously, EMBC staff — all working together on this integrated approach to achieving that phase 1 goal.

This team will expand and develop as necessary to include wider stakeholder engagement, inclusive of local authorities as appropriate and as when the junctures see this being most efficient and effective. But I emphasize that this is a team approach.

Regarding the second recommendation, about capacity, EMBC obviously will continue to look at ways to optimize and make best use of the resources we have. This, again, is reflected in our strategic plan and acknowledged as a challenge.

Our line of effort No. 1 is building organizational capacity, and you'll see in our strategic plan the key areas where we think we need to develop that capacity.

That said, as identified by the unity of effort we seek in our integrated planning team, that doesn't prevent us from optimizing, innovating, focusing and prioritizing, and we will do that. We'll work with our partner agencies and stakeholders to promote that alignment of effort, and I hope you'll see that by that initial planning team, we're already taking positive efforts to move forward.

In addition, I mentioned the consultative review with other partners to make sure that we have it right. This is not just EMBC's view on the way forward. We'll take this analysis and use it to better inform us on the way ahead.

Regarding recommendations 3 and 4, for a strategic plan requirement and the requirement to rank, identify and prioritize completion of plans, I'd like to highlight some of the actions in addition to simply developing a strategic plan that we've undertaken to improve in these areas.

In our strategic plan we've identified that preparation for a catastrophic seismic event is a priority. As well, you'll note in our mission statement that we've altered it to reflect the emphasis on leading management of a catastrophic event.

The Auditor General has indicated and endorsed that currently our model is one of escalation, and that's a traditional model. We'd like to highlight that in certain circumstances, particularly in a catastrophic event — one in which we will likely be overwhelmed and need to anticipate and be resilient to that event — the province will be required to take a leadership role and to take that role very quickly.

It's with that in mind that our new mission statement is reflected as above. We are responsible "for leading the management of provincial-level emergencies and disasters and also supporting other authorities within their areas of jurisdiction." Hopefully that resonates in acknowledgment that there is a team approach.

In that regard, our strategic plan outlines the deliverables that we will achieve. In doing so, that is how we are actively managing for results. As you know, it's a strategic plan, so it covers in gross motor terms what those are, but we are developing more detailed and specific workplans to outline those goals in more detail.

Regarding reviewing our program and identifying gaps, certainly we'll do so. I'd like to highlight…. You'll see on page 4 of our strategic plan our organization chart. One element within there which is new is our directorate of organizational learning. The purpose of that directorate is clearly identified in its title. We intend to learn. We intend to apply principles such as Kaizen and incremental learning so that as an organization we're able to identify those gaps, risks and how we can close them.

Certainly, there is an outward component to that as well. As we look to improve internally, we will also look to improve and be able to support our stakeholders in their responsibilities.

An example of this is also our requirement to support upward to our elected officials and to enable you to be able to communicate and fulfil your responsibilities as vested in the Emergency Program Act, and specifically government. Certainly, the Emergency Program Act identifies what those authorities are.

But as you can imagine, and I'm sure you can assess, there are specific things we need to consider in this catastrophic scenario, and we can spell those out and anticipate them in advance. We are going to work towards that and to provide that information such that the decision support requirements of our seniors of our leadership flow more easily and effectively on the day.
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Recommendation 6 speaks about reviewing and evaluating stakeholders' plans and procedures. Admittedly, this is a challenge in terms of balance, but again, we acknowledge we have a role to play. With that in mind, again it's a cooperative approach, and we'll determine — we're in the process of determining — what the best processes are to do that.

Certainly, there's a piece about promoting awareness and alignment of our plans and capacities. But we also acknowledge that we have a role to provide an example of what "good" looks like and support other authorities in developing those models to suit their needs and to suit the requirements, frankly, that we as a province have to be prepared and resilient. That is reflected in line of effort 4 of our strategic plan, entitled "Partnerships."

Similarly, line of effort 6, improving business practices and governance, will see us leading the review and update, as necessary, of the Emergency Program Act and the supporting regulations. Again, this will assist in providing clarity not only in the broader terms of that legislation but specifically as it relates to this specific threat.

I mentioned about providing models for other authorities. We'll also help develop the toolkits for local governments and also for other authorities in their emergency management programs.

We will support the expansion of regional emergency management arrangements. I'd like to highlight — I think the Auditor General highlighted it as well — that we have a good example regionally through the integrated partnership for regional emergency management that exists right now in the greater Vancouver area. That type of success is something to build from and look at other opportunities in the province.

Recommendation 7 focuses on exercises, ensuring effective integrated response. You'll note in our strategic plan, line of effort 3 focuses on that — training and exercises.

Our intention is that as capacity builds, we will develop regular earthquake exercises with stakeholders and certainly in a measured and progressive approach reach to better and better ways of assessing the plans that we develop.

Some examples in the last few months of where we have taken action to develop that are included. What I would like to emphasize here is that we're not resting on our laurels waiting for capacity. We're developing and innovating.

In March 2014 we deployed a team in conjunction with the Department of National Defence to Alaska to observe and, frankly, help evaluate — which is what came back to us from Alaska. They wanted us as a valued partner to evaluate their exercise.

This exercise was designed to test Alaska's preparedness if the 1964 earthquake and subsequent tsunami were to happen again. That was a very great learning experience. You'll see our report on that on our website shortly. Certainly, we have taken a lot of lessons to move forward in our organization as a result of that.

Looking to the future, in 2016 our intention is to participate in a Washington State exercise of similar design in terms of an impact to the state and requiring a regional response. It's early days in their planning process to develop that exercise, but we are participating actively in that development. We anticipate supporting and participating in the exercise as well.

Those are some indicators. I would like to add one other. We are working very closely with Canadian Red Cross. In September we'll be having an exercise that tests the auxiliary-to-government agreement we have with the Red Cross. We'll mobilize the emergency response unit that the Red Cross holds and that, in all likelihood, would support us in a catastrophic event in addition to the breadth of resources that the Red Cross has as an international movement.

All these things highlight that we're continuing to improve relationships with various partners. I mentioned some of our planning efforts, but that is not exclusive to groups that we know now. We're willing to look wider afield and to develop those so that we are best prepared.

Recommendation No. 8 focuses on measuring this effectiveness and measuring public preparedness. There are a number of lines of effort that will address this, inclusive of partnership and public education. We will assess and understand the issues that face us for public education — I mentioned the needs assessment ongoing right now — and develop a focused campaign to fill those gaps.

Finally, looking at recommendation No. 9 that we report annually. You'll see in our partnership line of effort and business practices and governance that we very much intend to do so.

We will produce an annual report to British Columbians on in-B.C. status and preparedness writ large. Inclusive of that will be understanding and assessment of earthquake preparedness specifically. This will certainly provide an opportunity to keep emergency preparedness at the forefront of priorities for all stakeholders. As Paul indicated, this is a wide body of stakeholders that all have responsibility.

In summary, as I said at the outset, the Auditor General's report on catastrophic earthquake preparedness is an opportunity for EMBC. It helps us focus our efforts and understand that in this circumstance we will have a key role to play, and we embrace that opportunity. By being resilient and better prepared for what we know is an imminent threat, we'll also be prepared for less catastrophic instances that face us on a more routine basis.

Finally, on behalf of the ministry, I would like to acknowledge the conscientious and thorough work carried out by the audit team. As Paul has mentioned, subsequent to the audit publication, we've also continued that
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relationship of development and continue to welcome thoughts — and criticism, frankly — of how we can continue to improve.

L. Reimer: Thank you very much for your report. I am wondering about the timeline for implementation. As you mentioned the end of the fiscal year for the plan, I'm just wondering what the timeline is on the earthquake preparedness consultation and the public education campaign. Is that something that's going to happen before the end of the plan?

P. Quealey: Thank you for the question. That's an excellent question. I mentioned the three elements that we're approaching. They're all being done concurrently. The intention is…. The consultation is ongoing. We should wrap up the stakeholder engagement by about the end of July. Subsequent to that, the development of the recommendations by the chair, Mr. Henry Renteria, will occur, and that will be fed back to government such that we can learn from that.

I want to highlight that Mr. Renteria and I and our team are meeting on a regular basis. We're not waiting for that report to take action. As he gets feedback and as the team gets feedback from our stakeholders, we are incorporating that into our activities for planning. We anticipate that that report will be available to government, probably, at the end of this calendar year for consideration and then move forward from there.

L. Reimer: Right. My second question has to do with best practice, if you like. I know you're working with Washington State, as an example, and you also mentioned learning from the tsunami and that sort of thing. That is sort of the gist of my question.

Are you looking at these catastrophes in other countries and learning how we can better adapt our own plan to ensure that it's very effective — other catastrophes that have already happened and their plans?

P. Quealey: Absolutely, yes we are. I'll let Cam describe a bit of his personal experience in doing so and partnering with other nations that have shared their learnings with us. The example of the exercising with other states in our region is a good example of that.

An organization and entity that exists here on the west coast is the Western Regional Emergency Management Advisory Council, which comprises Alaska, Yukon, British Columbia, Washington, Idaho and Oregon. In fact, we recently chaired, last month, that committee for the very purpose of learning from each other and sharing those practices. That, in fact, is what precipitated our involvement in this 2016 exercise.

L. Reimer: Yeah, but I'm referring also to those countries that have already been through a catastrophe.

P. Quealey: Absolutely. So I'll now ask Cam to talk about his experience working with New Zealand. We've had teams — just to describe, as well — learn from the Chile example, and we've sent staff to learn and bring back those lessons.

C. Filmer: Given the recent activity in the last few years — Chile, Japan, New Zealand — there's been a lot of areas for learning, and that has been occurring. In some cases we've had staff that have gone there. I think local governments, too, have sent teams in. I know that local governments had folks on the ground in New Zealand for upwards of a month, learning. So a lot of these other countries have opened the door to us to be able to go and learn. People like the Red Cross have done a very good job of both attending many of these areas and also then coming back to share.

The other thing that's happened is where people can't make these areas, both representatives of those nations have come here to present to us, and also their subject-matter experts have come and shared with us.

B. Ralston (Chair): Just before we move to the next questioner, you mentioned Mr. Renteria. Can you explain who that is?

P. Quealey: Henry Renteria is our chair of the earthquake consultation — that element of our three-prong development of our earthquake plan.

P. Quealey: Henry was appointed to the position — I want to say at the beginning of March — around the 10th of March.

K. Corrigan: First of all, just as an aside, is it possible for this committee to be provided with copies of the report that was done after the Haida Gwaii earthquake?

P. Quealey: I understand it to be the after-action report that we provided to the Auditor General?

K. Corrigan: I would assume it was. It's referenced in
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the Auditor General's report. Yes.

P. Quealey: I don't see any reason why not, but if you would allow me to look into that, certainly I can get back to you with a definitive answer.

I also wanted to talk about challenges. This, frankly, was — and I don't think it's a surprise — one of the more disturbing reports that's come before this committee, given the part of the world that we live in and the very clear message from the Auditor General, whom I thank for this very comprehensive report — and Mr. Nyquist as well. It is very disturbing to know that in this part of the world we are poorly prepared despite having more than one previous report saying that we were not doing enough.

I'd like to ask about personnel. I've read the plan and, obviously, this report and other documents as well. But the reality is that there can be all the plans in the world, but the budget for this part of the ministry is $6.2 million. Correct? That's according to the Auditor General's report; $6.2 million is the budget, and that's been about the same for the last several years. Correct?

P. Quealey: Our budget has…. I'll put it into context. If I may, as well, the detail of the budgetary expenses from the past are an area of study for me. I've been in this position for four months, so certainly, we'll do our best to answer in detail.

P. Quealey: In essence, the budget has changed over the years in the sense that there have been elements that have been added to the program, taken away from the program. So in my investigation and understanding, it's difficult to look at that over the course of time and be definitive and say it's been exactly the same or not. I can say in general that we've received the resources, we've allocated them best and optimized wherever we can.

K. Corrigan: Well, according to the report — and perhaps the Auditor General would have more clarity on this…. On page 18 it says: "EMBC's current operating budget for emergency activities is approximately $6.2 million. This budget is about the same as the budget provided to PEP," which is the provincial emergency program, "in 2006, despite a 10 percent population increase over the same time, a near doubling of B.C.'s property values and knowledge of the devastating impacts of recent earthquakes in Chile, Japan and New Zealand."

So if you are presently taking a look and evaluating that, that's another piece of information that I think would…. I certainly, as a member of this committee, would appreciate getting that analysis. I don't know if the Auditor General has anything to add on that in terms of capacity over time.

P. Nyquist: I'd be happy to describe how we came up with the $6.2 million figure, highlighting that it is an estimate. The budget in 2014 for EMBC was $26.7 million, and that included $12.2 million for the Coroners Service. Then there was $1.2 million for strategic business services and around $7 million, which is kind of a net flow-through for other programs. These are cost-recovery or shared-cost-agreement programs, which left a residual portion of $6.2 million for emergency preparedness and response.

Then in looking backwards to 2006, we looked at the budget estimates. So as Pat identified, there has been some change in scope of their activities and the like, but when we did that kind of higher-level comparison, that's how we arrived at those results.

P. Quealey: We certainly don't disagree. If I may add, the other aspect to the budget as it applies to emergency preparedness and response is that in the event of an emergency, we have access to contingency and we have access under the EPA. I would like to highlight that that aspect is certainly relevant as we look to how we respond and how we anticipate that need.

K. Corrigan: Thank you. I'll probably ask, later, some questions about the contingency under the emergency management act, but I won't get into that now.

I would be interested in knowing how many personnel, how many people, are in Emergency Management B.C., not including the Coroners Service or the fire commissioner's office or the other areas that don't have to do with Emergency Management B.C. Also, to make the point that not all of that $6.2 million goes directly to earthquake preparedness. It goes to all of the activities of Emergency Management B.C. Correct?

P. Quealey: Certainly, we include earthquake preparedness in consideration of all the work we do, so I think there's a nesting of those various activities. But our budget isn't divided based on hazard or threat.

K. Corrigan: And then, just finally — the last one. I know that lots of people have questions. Mr. Quealey, you've been in this ministry, in Emergency Management B.C., for four months, since March?

K. Corrigan: Since February 17. Okay, so just before
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this report came out.

P. Quealey: The report, I believe, was published on the 25th of March, so just before. Yes.

K. Corrigan: And obviously the ministry was fully aware of the report that was about to be published.

P. Quealey: The ministry has worked with the Auditor General and certainly has been aware of the report.

K. Corrigan: And Mr. Filmer and Mr. Duffy have been in Emergency Management B.C. for how long?

P. Quealey: MLA Corrigan, you asked a question about the number of people. It's 166 in Emergency Management British Columbia. To clarify, that is the branch that I'm responsible for, which includes the Coroners Service, the office of the fire commissioner and the emergency management business units that are led by these two gentlemen. I don't separate the team in the silos of activity because of title. We're all working across and together.

You'll see in the organization chart that there are a number of cross-functional activities occurring that aren't in this business unit, such as organizational learning, integrated public safety and our corporate support.

To give you a precise answer, because I think that's what you're driving at, in these two business units and the fire commissioner, it's 82 personnel right now. I don't have at the top of my head what the breakdown for the fire commissioner is to delineate, but it's in the order of approximately ten or so. I can certainly get that precision, but I wanted to give you a precise answer.

K. Corrigan: And about half are in the Coroners Service, right? About half of the….

S. Gibson: If we had a catastrophic earthquake this week, are we prepared for it?

P. Quealey: I would say this, in all honesty. As a province, no, we are not, and there's work we need to do to be better prepared. I would also put it in the context that being prepared for that which is catastrophic and will overwhelm us is an ongoing thing. There will never be that end state of preparedness where I will be able to answer your question and say: "Yes, we are." That said, that's not an excuse. I don't use that as a crutch to say: "Well, let's not move forward."

Hopefully, as our testimony has indicated, we do intend to move forward, and we do intend to be resilient. That emphasis on resiliency means that when we are overwhelmed — because this event will overwhelm us all when it's done on this scale; that is the nature of the catastrophic — our resiliency will prove that we're able to bounce back, that we're able to be adaptive, that we're able to gain support and move forward after we do so.

S. Gibson: I've been reading a book lately on the Vietnam War. It's a war that kind of intrigues me.

The author makes the point that one of the reasons so many young men died in that war…. There were 58,000 Americans who died, and 700 of those were Canadians in American uniforms. I think about 25 percent were under 22 years old. The reason why they were willing to go to fight in an impossible war under horrendous conditions was: "I'm not going to get killed." That's the basic philosophy of why young men get hurt and are in G.F. Strong clinic from motorcycle accidents — because "I don't get killed."

I use that kind of scenario not to over-intellectualize this, but all of us around this room don't really think we're going to get an earthquake right away. It's probably not going to happen tomorrow. But all of what we're talking about is about today and tomorrow. I think the gravity of the situation — Kathy made some points that I think were reasonable — is we all share that concern. I think the Auditor General made the point, and I have some sympathy with that as a government MLA. I think as a government we do take it seriously, but I think the Auditor General accentuated that.

A couple of questions. Do you find the fact that it's multi-agency is actually a negative thing? You mentioned Red Cross, Alaska, Washington State. I come out of a local government background. I was on city council in Abbotsford for many years, and our fire chief was our local preparedness guy. But I don't know whether he was talking to you guys or not or what he was doing. Did he go to meetings?

We've got all these layers. We've got the federal gov-
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ernment. We've got Department of National Defence. If I asked you to make a list for this committee today of how many folks are going to be involved in emergency preparedness for the big one, you'd probably come up with 30 or 40 names. Is that actually troubling because when it finally hits, we're going to say: "Okay, who does what, here, again"? That's my question.

P. Quealey: I do not view it as a negative, to answer the question directly. I view it as a necessity of the complexity of the environment in which we live. I mean that very specifically in that there are local authority jurisdictions that will be supported and necessary for response in this scenario. The capacity of any one organization is not sufficient and, in my personal assessment, will never be sufficient to deal with this on their own — hence, why our overriding theme must be one of unity of effort.

The challenge is — and this is what we are working towards — unifying our understanding and our framework for that response now so that when those various authorities are overwhelmed, we have an understanding of how to close those gaps and how to work together to support each other when we have critical gaps. We won't be able to do it alone, and therefore, we embrace that approach in the sense that there's a multiplicity of players here.

S. Gibson: The other thing, if I may, Mr. Chairman. Earlier on somebody mentioned the role of the public. One of the great traditions of our Legislature — we have both the government side and the opposition side here — is incredible accountability and, for the most part, very good transparency. But I view the public input as incidental to the public knowing what their role is.

I'm a private citizen, Simon Gibson — so what? Okay, so the big one hits. What's my role here? I don't really care about the size of the earthquake particularly or even what's happening around the corner. What I want to know is: how is it going to affect me, and what's my role as an individual citizen? That to me is maybe a dimension I personally would like to see accentuated a little bit more — again, not a criticism, just an observation, really. I don't know whether you have any comment on that.

P. Quealey: I absolutely concur. The role of the individual is key. We can cite examples — I don't know them by personal experience, but certainly in study and in sharing best practices from those who have experienced these things in recent time — of the role of the individual in grouping together and supporting neighbours — for example, in Christchurch.

Every catastrophe, every disaster has a context, but every one of them is local. Whether folks are thinking widely, as we are, about what this means provincially, there are people who are experiencing it emotionally, physically in their day-to-day lives.

If I may, I concur extremely with your point of view that that is what's important to the people of British Columbia.

Part of what we're doing is to incorporate that understanding and provide information, provide guidance that permeates to the individual level such that British Columbians not only understand what we will do but understand what they can do to be resilient — and frankly, also, that we can consider and understand what our vulnerable populations need for support, not just those who have the means to take care of themselves.

S. Gibson: Would I be able to ask one more question, Mr. Chairman, or would you rather…?

S. Gibson: It reminds me…. Actually, one of the characters reminds me of you just a bit, Bruce. No.

This is about Lions Gate Bridge — have you seen that? — where it's collapsing. How many of you have seen that scene?

Now, the reason I mention it is that what I would like to see…. This is just a request from me and nobody else, particularly. We're talking about getting ready. I asked that initial kind of salient question, perhaps, "Are we ready today?" and, fair enough, you said no. I appreciate you being candid. But if we meet next year, what are you going to tell us? You're going to say yes, right? That's what you're going for. That's your goal: yes.

My feeling is: is there something that we can do to simulate preparedness? Okay, we've seen that video clip of the Lions Gate collapsing, and everybody's getting impaled by…. It's pretty lurid, but it kind of shows, in graphic form, something that happens during a crisis, right? The bridge is shaking, and somebody falls off and gets hot tar splattered over them.

The point that I'm making is: could we do dry runs or simulations so that for somebody living in a neighbourhood, they understand visually what's going to happen if the big one hits? The more that we simulate the actual look of the event coming, the more people can be prepared for it — through computer graphics, and that kind of thing.

P. Quealey: Sorry. I think there were two elements, to be precise. Next year I will not categorically tell you that we are prepared, but I will say that we will be better prepared than we are today.

With regard to what we can do to simulate and learn,
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in our vernacular that is the training and exercises piece. That, as you've rightly stated, involves various levels of understanding and exercising. It can be done at the community level, it can be done at a much larger scale, it can be focused on specific functions, or it can be full scale.

I use the example of the Alaska exercise recently. That was a full-scale exercise where things were moving and actually functioning as they were intended to be on the day.

From personal experience, I had a great opportunity to travel in a Canadian delegation to Japan, where we studied and learned from our counterparts in their experience in the Fukushima Daiichi disaster. There are lots of learnings that we saw there about how to engage local population, mechanisms for understanding and development of a culture of preparedness so that communities would do this on their own and be willing and encourage that behaviour.

I think that's a great example for us so that we build that sense of resiliency at all levels.

D. Eby: To the Auditor General's office: have you had a chance to review the strategic plan, and do you have thoughts about whether it addresses the issues you have identified in this report?

P. Nyquist: We have had a chance to review the plan. We note, as well, that we will, as we do in all our reports, start our follow-up process six months after the report has been published. I am anticipating in September that management will provide a follow-up to our recommendations, and we will be able to kind of evaluate that.

D. Eby: On your first review, can you say whether it addresses the issues, assuming it's implemented?

P. Nyquist: It addresses a great number of the recommendations, and it also identifies that the intent is to address all of the recommendations. It hasn't specified the specific time period when that plan will be completed, but it does convey their commitment to create that plan.

R. Jones: I was just going to also mention that one of things we are trying to do on an ongoing basis now with all of our auditees is work with them after the audit is done. Instead of just sort of standing back for a year and waiting, we actually do engage. Pat mentioned that in his conversation. It's not that we just abandon them. We are keeping in touch.

P. Nyquist: We will be meeting with them prior to the completion of their response just to kind of talk about their response as well.

D. Eby: So we can now count some of the Auditor General's budget towards the emergency management budget for B.C.

Then to the Ministry of Justice, in my experience, the priority that government places on things is best articulated through the amount of money that is spent on it. This province has spent $11 million on a Bollywood awards show, $14 million on ads for the B.C. jobs plan, $1 billion on the convention centre. That puts emergency management at about the same level as the Basi-Virk legal expenses.

Clearly, there's some room for addressing budgetary issues. The question and the concern that I have is that in your reply to the Auditor General, you say that you will continue to use your existing resources to address this plan. I've heard from the Auditor General's office that it is, at first glance, a good plan. My question is: what will you stop doing so that you can implement this plan?

Clearly, you haven't been just sitting around for 17 years. You're addressing forest fires, mudslides, floods — all manner of emergencies. What is going to stop happening so that you can make this plan a reality? I assume that if you had the resources to do this, you would have done it much sooner.

P. Quealey: Thank you, Member, for the question. The context I'd like to answer that within is one that…. Being prepared for a catastrophic earthquake does not obviate the benefit of all the other activities or that it may serve to all the other activities that face us on a more routine basis.

The example I'd like to use is one key activity that we're developing called provincial coordination capacity. The design that we're looking at is: what is the best way, and how can we optimize in the full continuum or spectrum of our activities? To add clarity, what I mean by that is that in our mission, we've defined that we are responsible and will lead provincial-level disaster emergencies but that we will also support other authorities in their jurisdictions.

In some circumstances, and I'm sure you're very familiar with them in current time, we have a need to support local authorities in response in very small areas where they have capability gaps. Similarly, the other end of the continuum is one that I think is relevant here: the catastrophic earthquake that's going to have a widespread effect throughout the province, not just in the impact zone, and we need to be looking at that scale and scope.

We are looking at mechanisms to optimize our approach that apply both in that scale and currently how we do business today — again, that concept of continual improvement, which is our goal number one. That will be equally relevant in the small scenario and the large. It's just simply what application of resources will be needed along the way.

What we've done in our strategic plan is prioritize those activities and identify what will be done. That
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doesn't necessarily mean that other activities won't occur, but these must occur. That allows for — because we can't do it all — that focused prioritization but also forces us to be innovative, because we know we can't drop that other responsibility of supporting others.

D. Eby: Just a quick follow-up. You received this report from the Auditor General, put together the strategic plan. I assume the strategic plan is sitting on somebody's desk. Let's say it's sitting, for the sake of argument, on Mr. Filmer's desk.

Now it's his job to make sure that these actions are done. What was Mr. Filmer doing the day before the Auditor General's report came out that he has now, in addition to his existing responsibilities, added this strategic plan implementation? That is really the core of it, because I assume that you have staff members out at mudslides in the Kootenays and on the North Shore and forest fires in the north and so on.

So what was he doing before…? Or what were the staff members who are tasked with this now doing before this Auditor General's report came out?

P. Quealey: It's timely that the report came out when it did, in the sense that there have been numerous activities that have set foundations that will support as we move forward. Some of those include recent implementation development of our provincial emergency operation centre guidelines, operational guidelines, and the provincial emergency coordination centre guidelines. To add clarity, we have six regions in Emergency Management B.C., each of which is a provincial regional emergency operation centre that is a focal point for our support to local authorities in coordinating regional response and emergency management writ large.

Those guidelines are new, and that's a significant development in our organization's ability. That's an example. That has set the foundation which will allow things such as the provincial coordination capacity-building to move forward.

I would like to clarify that this doesn't sit on anyone's desk at EMBC. The management approach and managing-for-results approach that we are employing is one that is a collaborative cross-functional approach. It's not just looking at EMBC's responsibilities but providing opportunities for other organizations to provide feedback and support us, and the planning team is a great example of folks who have stepped up to do so.

Our management approach is one of a council, where we have representation from all elements of the management team inclusive of the regions and our executive directors and myself. That's an open forum of discussion, analyzing where we're headed and ensuring we keep on track and are very precise in our deliverables, and our dashboards for success are the way we're going to continue to do so.

V. Huntington: Mr. Quealey, you've been ADM for four months. Did you replace an existing ADM of emergency management, or is it a new function?

P. Quealey: My predecessor, who I hold in high esteem, was promoted on to another position. So there was a vacancy that resulted, and I competed for that position and was hired on by the government.

P. Quealey: Prior to joining government, I spent 25 years in the Canadian military.

P. Quealey: In varied ways. In the military there is not a specific field called emergency management. But perhaps I can highlight some of the activities that relate directly to that.

V. Huntington: I think I'm fairly familiar, unless other members of the committee want to hear some of those. So you haven't attended, say, Justice Institute emergency management courses — no diplomas or anything. It's just that military background.

P. Quealey: No. To clarify, I have post-graduate certificate from the University of Richmond, Virginia, in disaster science. I have a master's degree from the United States Command and General Staff College, which covers interagency cooperation as well as the numerous elements that directly apply to emergency management. Respectfully, I'm happy to share details, but I don't feel a great humility to talk about those.

B. Ralston (Chair): This is probably helpful to the committee, and those are impressive credentials. But this committee doesn't hire and fire anyone.

B. Ralston (Chair): We don't hire and fire anyone. But I think that's useful to get a sense of Mr. Quealey's im-
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pressive background.

V. Huntington: Well, that's all I wanted to know. You have a background in emergency management, and I'm assuming Mr. Filmer and Mr. Duffy do too. Is it from the Justice Institute or…? What is your background?

P. Quealey: If I may finish the question, I have been trained through the Justice Institute as well. I've taken numerous courses too. Because you asked that specifically, I wanted to give you a precise answer.

C. Filmer: For myself, a combination of a couple of degrees — geography and history but with a focus on humanity over time and also geopolitical, geosocial and demographic aspects of geography. A lot of training through the Justice Institute, and then I came up through the ranks over 20 years, 22 years and had a lot of hands-on experience over time.

C. Duffy: I spent the past six years in Emergency Management B.C. Prior to that, 25 years in the Ministry of Forests, in wildfire management specifically. I was on type 1 incident command teams for 11 years and spent quite a bit of time on a number of the systems and structures that are taught at the Justice Institute — for example, incident command system. I was part of the team that brought that into British Columbia and Canada and participated in a number of development pieces for the Justice Institute and some of the common platforms that are used across government in emergency management today.

V. Huntington: I'm assuming that over the years you've gone…. There are many conferences involving emergency management issues throughout the continent and internationally. I'm assuming you've gone to a number of those.

B. Ralston (Chair): Member, I think it's helpful to have a little bit of background, but I think, really…. If you could direct your questions to the report and the response of the agency to the report. I'm just a little uncomfortable with the inquisitorial nature on people's qualifications. I think you've covered that topic.

V. Huntington: I guess what I was getting to, Mr. Chair, is that it seems to me there has been a wealth of knowledge in Emergency Management B.C. Given the previous Auditor General's report and the specific nature of its recommendations at that time, what prevented the implementation of those recommendations, given the skill sets that you do have? How was it that we arrived at the position that we're in today?

P. Quealey: I want to be complimentary to the great work that's been done in advance. I think that needs to be understood. Certainly, we acknowledge and, as we've stated, we embrace those recommendations. But that doesn't pay justice, in my personal view — and I speak from four months of experience but also representing my team and the history of my team — to the great work that's been done and that has contributed to the resilience and the preparedness of British Columbia.

In the context of what we're doing now and where we're moving forward, it is a focus. We are focusing on the catastrophic, and we are focusing on the catastrophic for the reasons I articulated, in that it will better prepare us in the continuum of scenarios inclusive of that, which will require us to move quickly to lead.

The gradual…. It's a traditional model that is taught at the Justice Institute, as well, about incident command system. And it being an escalation, that relevance may quickly be turned on its head in the catastrophic. That's why we're focusing on that.

V. Huntington: I don't have a large background in emergency management, but I have enough of a background that I understand a lot of the jargon and a lot of what the planning involves.

You mentioned that in the last three weeks there has been the introduction of an integrated planning team. But there have been interagency emergency planning teams that have been operating within the province for quite a long time now, and regionally. I attended a couple of those conferences. So what is going to be different about the way in which you're starting to plan at the interagency level now than we've been doing over the past number of years?

P. Quealey: I can't cite different teams and what they've done, because I don't have that detailed knowledge. But I can compare to what you suggested in terms of the difference from a conference and a meeting and discussion.

This integrated earthquake planning team is focused on an operational output. So the planning guidance that I personally gave to that team was based on…. The end-state product cannot be philosophical, based on presenting issues and thoughts for further consideration.

The product must be practical. It must be implementable, actionable. Frankly, it must be actionable when this leadership has perished as a result of the threat so that those who continue on know what we meant to do and the key decisions that political leadership, for example, needed to take so that we could move forward.

I wouldn't offer, necessarily, that it's comparing difference, but that's what it's focussing on. I would suggest
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that the utility of that type of operational and pragmatic, practical type of plan will move us forward significantly, not only in the sense that it'll provide direction and guidance to those who must respond, but also, we intend to share that widely so that that framework supports other people, other organizations, to not only contribute but make their own plans that are cohesive with that.

Frankly, as I think is necessary, it shows where our vulnerabilities and lack of capacity exist so that there's a clear understanding of where those gaps will reside on the date.

V. Huntington: A lot of local governments — at the direction of the province, I believe, about ten or 15 years ago — developed fairly sophisticated emergency management plans, local ones. Has the province continued to work with these local governments? Are you putting in place new expectations for these plans? Do you know whether they cover catastrophic events? I think Delta's did. To what extent are you familiar with that planning that went on a few years ago? And have you kept up to date with it?

P. Quealey: I think a few years ago…. I'm not certain of the clarity. However, to answer your question in terms of what we have done for maintaining those linkages and supporting local authorities, absolutely. Each of those provincial regional emergency operation centres has a regional manager who's responsible for linking into those local authorities and supporting them in the development of their plans. To be clear, it is the local authorities' responsibility under the regulations to have those plans, but it is a cooperative activity.

Examples that I can cite most recently — and, frankly, related directly to the earthquake threat and tsunamis — include what our team has done in the Vancouver Island region through recent engagement and going to those local communities that are vulnerable to tsunami risk and talking about their plans, looking at vulnerabilities, gaining their insights.

That has been focused and specific at those who plan and engagement widening with the community. The consultation that we spoke of is also doing that, and it's an opportunity to look at this hazard specifically but broadly across various stakeholders, including local communities and local authorities. So yes, we are very much engaged.

As I mentioned, our intention, though, is to improve — EMBC improve. Hopefully, that'll assist the local authorities in their responsibilities improving, in that there are ways we can provide further good practice, best practice, informed practice of: "Here's what good looks like, and here's what we've learned as we've gone into that extra layer of detail now provincially — that this may be an emergent gap that you weren't aware of. Let's see how, together, we can close those gaps."

We are very much engaged and supportive of local authorities in that regard. The second part of our mandate and our mission.

V. Huntington: Thank you. Like others, I have lots of other questions, but I'm fine for now.

S. Robinson: The first question, I guess, is to the Auditor. In the report there's an appendix D, on page 43. The last item, 20.2, notes that back in 1999 there was a recommendation that representatives of the provincial emergency program re-attend before the committee. Do we know if that happened?

A Voice: We did our follow-up of this report, and I don't believe that this happened. I don't think it did.

S. Robinson: I guess, for me, given that 17 years have passed and, certainly, not much has happened, I'm hoping that when we do ask people to re-attend, we actually make sure that that happens. I think, from my perspective anyway, there was a fair bit of skepticism and concern about making sure that actions that are committed to actually do take place.

Part of what I've heard from my colleagues — certainly from Vicki — was this idea of competence versus capacity. I think she has demonstrated that there's certainly competence, but the question becomes capacity.

My next question is related to, from the Ministry of Justice, recommendation 2, where the Auditor General recommends that government ensures EMBC has the capacity necessary to address identified critical gaps. I'm assuming that the Auditor General identified that the issue isn't competence but is capacity. Then the response from EMBC is to use existing resources as efficiently and effectively as possible.

My question is: how will you know that it's not sufficient to achieve these goals? What information will you use to determine: "You know what? This is what we have capacity for, and these other things that the Auditor is saying we need to do, we can't do it"? I'd like to know what that line is and how the Ministry of Justice will identify when they are at capacity and when they will no longer be able to achieve goals.

P. Quealey: Thank you for the question, Member. Noting in our strategic plan, we acknowledge in our challenges that matching capacity to our requirements is a challenge. Further, in the line of effort entitled "Organizational capacity," we highlight the key areas that we see being critical to be able to move forward and fill capacity gaps.

Specifically, we've identified logistics management, operational-level planning, internal and external surge
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capacity and training and exercising. My job, in terms of that optimization and focus, given we've done this analysis, is to accept risk where it's acceptable in other areas and focus on building capacity in these areas. That's a continuing analysis.

For example, in order to be able to move forward and even be able to analyze some of our gaps, you see that we've established a directorate of organizational learning. I would suggest that that's proof in the pudding that we are moving toward that end.

That said, it's understood that we don't have infinite resources. That's why a lot of our activities and our goals are based on incremental success. I'll give an example. Understanding our responsibility and the competence of our team to engage with local authority and, frankly, be linked at the hip to do great work together…. We don't have innumerable people to do that on a day-to-day basis with every local authority.

Similarly, acknowledging the Auditor General's report indicating that we have a responsibility to audit more closely their preparedness…. Again, that is not something we can turn and do immediately tomorrow. However, we can acknowledge where we can move toward that end.

That's why we've indicated in our strategic plan and in today's testimony that we will move forward incrementally in a way that makes sense. Right now that is identifying what good looks like. What are the elements of a good plan for a local authority? And are they consistent relevant to the threats that they would face. And we'll work with vice audit.

I would argue that not only is that a good representation and fits our capacity challenges; it's probably the best way of doing business to ensure unity of effort and not be an imposing force but one that's working together towards a common purpose.

Under recommendation 8, there was a recommendation that EMBC measure the effectiveness of public preparedness initiatives, which is ultimately what I think we ought to be doing. But the action speaks to: "A long-term plan for catastrophic earthquake preparedness will include public education activities and monitoring of these activities." I just want to make the distinction or find out how you understand "monitoring" versus "measuring effectiveness."

P. Quealey: Thank you, Member. It's a great question, in my view, and I'm excited to answer it.

P. Quealey: I would like to delineate what we mean by that response in the context of…. Measuring effectiveness vice measuring performance are two separate but not mutually exclusive things. Certainly, our ongoing consultation and our public engagement needs assessment will help inform us about where those gaps exist.

I agree completely. A challenge is now: how do we measure effectiveness in moving forward? Measuring performance I would liken to the fact that I can fill this cup many times, and if that's the performance I've identified I will do, I'm successful. But if my intention is to make sure my colleague is not thirsty, the performance isn't necessarily relevant.

That is our challenge, and we acknowledge it — that effectiveness lies in a deeper understanding and isn't necessarily going to be quantifiable in the empirical sense. I would be loath to throw percentages and numbers to reflect something that is of such complexity to our society, to British Columbia. But we're not going to use that as an excuse either. We will look at ways to ensure we have a good framing and understanding.

Again, that goes back to: it won't be just our unitary vision. It will be based on feedback. I think one of the great ways to do so is that reporting out.

For example, one of the things that EMBC has contributed to over the years — the member mentioned conferences — is the Emergency Preparedness Conference. We've been invited and have taken up the opportunity this year to report out to British Columbians, at the Emergency Preparedness Conference, on our progress and give that opportunity for engagement, for feedback. I believe, perhaps, the Auditor was invited too.

That shows a great opportunity for us to have that engagement and frank discussion. Frankly, that will help indicate our effectiveness as well.

S. Robinson: Thank you. Certainly, in terms of this recommendation, in taking a look at public preparedness, I would hope that there would be some sort of measure that would identify that 20 percent of British Columbians know what to do, have an emergency preparedness kit — something that sort of indicates to us that we know that individuals are prepared in some capacity. I'd hope that that would be included in reporting out in some way. That would certainly help, I'm sure, in making decisions about where this goes next.

P. Quealey: Certainly, that's understood. Again, just as I reflected on our plans — they can't be too ethereal — we will ground it in tangible results for you as well.

S. Robinson: Great, thank you. My last question has to do with the mission statement. I guess I want to commend you. Three months to change a mission statement and come up with a strategic plan is pretty impressive. I've worked in organizations where it took 18 months to do that. So I appreciate that.
[ Page 377 ]

You have a previous mission statement and a new mission statement, and they're quite different. I just wonder if you could take us through how you understand how it's different, what the delivery at the pragmatic end looks like and how that changes things.

P. Quealey: Again, the words matter because they reflect intention and action. It's not necessarily a criticism of what is written in the past but, I think, a refinement which informs and hones our responsibility.

It's noteworthy that all elements of leadership are reflected in the previous mission statement, and you saw it in our articulation of challenges. Frankly, we've had that feedback from our stakeholders that EMBC has been challenged in defining its mandate. What we sought to do in this mission statement is to clearly identify what that mandate is and how it relates to other responsibilities.

That's why we're acknowledging that there is a provincial level of emergencies and disasters, where we will be responsible and we will have a lead role. Generally, those are things of nature, in that end of the continuum that we spoke of, that are quite vast and potentially catastrophic. They may not be that far to the end.

However, there's also that piece that we acknowledge that there's a responsibility to other authorities, where we are in a supporting role. That mission statement affords us the ability and focus to say at various junctures, "What role are we filling here?" as an event emerges. "Is this a supporting role, or is this a leading role?" You know, those lines get blurred. Certainly, we're always collaborating and working together.

What that allows us to do — and it goes to the previous member's question about capacity and what are we not doing — is to focus our energy. Perhaps in some circumstances where we can do many things, the question can be better applied whether we should and support others vice expend energy in areas that they have capacity or authority.

S. Robinson: I appreciate the explanation, and I just want to…. I guess one of the things that I'm — I don't want to say suspicious — concerned about is where there are capacity challenges and you don't see any more capacity coming, then sometimes you just change your mission to fit your capacity rather than saying: "This is the mission. We have to go find some more resources."

That's a little bit of caution. We'll be, I guess, following up around: as a result of this change, are there gaps now because there's no capacity? That's just where the question is coming from, and I appreciate the responses.

M. Dalton: In 1977, when I graduated, I worked in the provincial warning centre with the military. I was in the reserves. It was a underground nuclear bomb shelter. I was on a team of three. I was a teletype operator. Every day we used to get messages from Ottawa saying: "Such-and-such a bomb has landed in this part of…." I was in Alberta at that time. I wouldn't do the plotting but had connections with the media and with the RCMP. It was assimilated.

I'm glad to see that nowadays that is, I believe, a grain storage and that those days have passed. I know that definitely the biggest issue we're facing here is with earthquakes.

I'm just referring to some comments earlier as far as government investments in seismic upgrades. Just in my area alone, there has been a tremendous amount of investments regarding seismic upgrades. The first thing that comes to my mind — and I know it's not directly under us, but it's the Ruskin dam. That's a $720 million project. It was one of the oldest dams, and it's the oldest dam currently in B.C. Hydro's system. That's primarily to do just with seismic upgrade.

I know that the people down below — there's a lot of work that's been ongoing for several years, and it's a bit of a disturbance — do very much appreciate the investments being done, because it's for their own safety.

I know that, for example, a school a couple of years ago, Garibaldi Secondary School, had a seismic upgrade. It was about $24 million, primarily because of seismic issues. That is a part of the plan — school seismic upgrades in schools throughout British Columbia. That's an ongoing investment that is happening.

The Pitt River Bridge, a new bridge — all the new construction that we have is definitely a lot more aware with the seismic issues. Mission-Abbotsford Bridge — I believe that's about a $20 million seismic upgrade.

I know that you are involved in emergency preparedness, but there's a lot happening. It's not like there's nothing happening in British Columbia as far as investments, as far as dollars going into seismic upgrades. I think it's important to just be aware of that and take note that this is very important for the government: the safety of citizens. There are billions of dollars that are actually going into the seismic upgrades throughout the province.

Just one question, and it's a pretty simple one. You mentioned about the toolkits in the municipalities. I'm just wondering: what do those toolkits consist of? Is it just a plan? Maybe just elaborate a bit about that as far as directly with the municipalities and how it's being used elsewhere.

I do know that when I was teaching in the schools, on a yearly basis we would go through earthquake preparedness with the classrooms, especially with the elementary schools. Every classroom also has emergency preparedness kits, so there seems to be much more awareness of the seismic issues as opposed to a number of years ago, growing up.

I feel that there is definitely more of that awareness within the school system, but it certainly has to be expanded to the general population, as Simon mentioned
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earlier.

P. Quealey: Regarding toolkits, certainly there are many types of toolkits. I think the nature of the question, if I'm correct, is focusing on some of the more physical aspects of those. Certainly, on our website there are great examples of what a good preparedness kit looks like for an individual and wider. But also, that toolkit expands in terms of….

This is something that we're also looking to improve on and develop — the toolkits for planning and the toolkits for local authorities to understand a framework of what "good" looks like for their plans. So there's a combination of those things.

I think one of the tools that helps us in terms of raising that awareness and understanding what people should have — as individuals, communities, etc. — is the Great B.C. ShakeOut exercise that happens every year, where, through various partners…. Again, rightly cited, it's not just the EMBC as an organization within government that achieves this. It's widely supported by a multiplicity of participants. Some 690,000 participated in that drill last year.

Now, the drill itself is an action, and it's complete, but what it does to raise awareness and what it means — and I've been in organizations outside of this ministry that have participated — in terms of forcing and encouraging understanding of that threat…. "What would we do?" questions come up, and "Is our toolkit good enough? Do we have enough to last us for a number of days?" Those are the types of things that these types of activities encourage.

My answer, hopefully, echoes your assessment, Member. Thanks for the opportunity to raise that.

My suggestion would be…. If we had an earthquake at one o'clock today, EMBC would have three, four hours to plan an emergency response. So why not take those three or four hours now instead of waiting for the earthquake to happen, so that you have a bare-bones, concrete plan?

I think in the next reporting period, whenever you report out, the public, and probably this committee, would expect there to be some concrete things in terms of planning, rather than just reporting on process. We're talking, talking, talking about planning. I think we would like to see some kind of a plan. That would be my suggestion.

First question: integral to an emergency plan is a communications hub. Does EMBC have a situation room with banks of computers and TVs, communications around the province and an independent power source — a secure communications hub?

P. Quealey: The Provincial Emergency Coordination Centre is designed with that exact intent in mind. The purpose of that centre — it resides at our headquarters at Keating Cross Road in Saanich — is to be that hub for provincial-level coordination. And if I may highlight, it also allows for the attendance and incorporation of other non-EMBC entities to support that response. Its connectivity is through a number of different communication systems. It does have some redundancy in power.

In your earthquake planning, are you going to be commenting on physical infrastructure issues, not just things like public awareness? For instance, the federal government has warehouses throughout the country filled with blankets and beds and medical kits and so on. Are you going to be commenting about that kind of preparation work?

P. Quealey: Absolutely. The scale and the context in which our planning is occurring…. And if I may highlight, relative to the member's suggestion, we are working with every available resource. Specifically, I've dedicated specific staff to that. Yesterday, the day before…. That team is working today, so please trust that we have taken this extremely seriously.

That nature of complexity and logistic management is part of our consideration. Context — it harkens back to experience. The operational area for this response is not the impact zone. If an earthquake occurs here under us today, the operational area is all of British Columbia and all of the modes of transport and those strategic lines of communication that will support our response. That's the depth that we are looking at.

Of course, that's a complex problem. I think that has been part of what has stymied the collective we, not just EMBC, in the past. But we are working very closely with our partners, who have responsibility in that regard as well.

You mentioned the coordinated approach in terms of resources existing at the federal level. That's why Public Safety Canada, responsible for the federal response, is integrated into our team.

If I may add, looking at our headquarters, Public Safety Canada, day to day, is integrated there with us, too, and has two representatives that are permanently there.

My final question. In Chilliwack we're much more concerned about a catastrophic flood than a catastrophic earthquake. We're a little bit outside the main earthquake zone of Vancouver. Do you have a plan, or does EMBC have a plan, for a catastrophic flood that would
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inundate the Fraser Valley in a similar way to the High River flood in Alberta?

P. Quealey: That's an excellent question in the sense that what we build for the catastrophic earthquake is based on using what we consider the most likely worst-case scenario that we can imagine. We need to apply that to things such as flooding, which has equal representation. I would say what is different is that going to that worst case and scaling back to a freshet scenario that goes catastrophically bad — it's all relative; catastrophic for Chilliwack, catastrophic for the province — is supportive of that.

I would add, in the context of…. I know, using Chilliwack as an example, we count on those unaffected locales to be relevant to a catastrophic earthquake response as well. For example, the depth of our planning looks at: what are those hubs? Is it a Prince George? Is it a Kamloops? What are our expectations of those local authorities?

We need to articulate, once we've defined that with them, what those needs will be to support this response. So it's equally relevant to take that type of lens and model and apply it to various threats that may grow to the catastrophic — be it a flood, a fire or what have you. We learn and apply that to all threats.

B. Ralston (Chair): We'll continue our questions and debate on the report on catastrophic earthquake preparedness.

M. Morris: First of all, I'd like to say, Mr. Quealey, that I'm impressed with your answers so far, and your military background is obvious here — from my perspective anyway. I appreciate that, of course, with my background being a previous detachment commander and senior manager within the RCMP in the province here.

There are a lot of emergency plans that are in place already throughout the province. I know as a detachment commander I had to do emergency preparedness planning — exit routes out of communities, disaster planning for forest fires, floods and all the different types of things. Also, part of my role later on in life was to prepare for the eventuality of a breach of the W.A.C. Bennett dam, for an example of some of these other things. So I think the province is already very well served in that. I see Emergency Management B.C. as a coordinator for all of those different plans throughout the province here, which is a big job, a big role here.

I guess the question I ask is…. Back in my day we had the Don Bindons of the world that were part of the RCMP and a great link with emergency measures. I imagine the RCMP still has a coordinator with that today.

Do you guys work hand in hand with the provincial policing, with the municipal policing services in coordinating these plans? There's overlap between flood plans and fire plans and everything else that deals with a major catastrophe like an earthquake. It's not like we're building things from zero. We're already fairly well situated in the province here right now. Is that right?

P. Quealey: Absolutely correct. Those relationships are incredibly strong, both formally and informally. I would echo all the things you said but include the context that they occur at the detachment level certainly, at local authority level and at various levels in between.

Harking back to experience, I had the privilege of serving with the RCMP in their Integrated Security Unit and saw firsthand that interaction from another perspective — of what EMBC did at the time to cooperate and work in the public safety realm preparing for the Olympics.

So that's correct. That integration is inherent to the way we operate here in B.C. and supports how we're able to respond in more catastrophic scenarios.

M. Morris: Just going back to some of the comments about the capacity, I guess. You know, the capacity is a situation that all of us have to deal with from a management perspective in the different agencies, whether it's public or private. It's just a matter of redeploying resources to meet your high-risk situations and whatnot. But I'm sure that your predecessor and perhaps yourself have been working on business plans and that if additional resources are needed, those business plans are forwarded to the appropriate level for approval and integration into upcoming budget discussions.

P. Quealey: Absolutely, and as a result of our consultation, our minister looks forward to any recommendations we may have in that regard. As you can imagine, we are anticipating what those needs are. We've identified some capacity gaps, but we'll do more than just identify. We'll give recommendations of how…. Should resources be available, here's what we would like to develop and improve on.

M. Morris: Just one other point or one other comment, I guess, more than anything. The northern three-quarters of this great province of ours has about 8 percent of the population of British Columbia yet generates about 70 percent of the wealth. That's a serious consideration that needs to be taken into consideration in the event of a catastrophe — that the economy of British Columbia
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still has to be maintained to the degree possible to support everything that happens here.

Has that been incorporated into the broad perspective of your provincial planning?

P. Quealey: Yes, it has, and it continues to be. Again, speaking from experience, I had the privilege of visiting our regional staff in Prince George recently for a regional conference call related to spring preparedness. That's an example of the breadth which our organization's able to touch, both from industry and local authorities, in many ways in terms of just a cyclical preparedness. I can't cite the exact number, but it was well over 100 industry representatives on that call and using EMBC as that conduit and hub for information.

Again, it wasn't unitary. We had representation from Forests, Lands and Natural Resources, I believe Environment Canada — a number of different views supporting that integrated approach. So absolutely, that's acknowledged and necessary to consider the completeness of our province.

J. Yap: First of all, thanks to the Auditor General for this audit. I appreciate and acknowledge that government, acknowledged by ADM Quealey, has accepted all the findings and embraced the recommendations and is going to work on implementing the recommendations.

You mentioned, Mr. Quealey, that you had travelled to Japan to learn from the experience there. I think all of us can recall the catastrophic earthquake and tsunami in March of 2011, which happened at a time of day when I think many of us watched that unfolding disaster on virtually live TV. It's well known, and it's reflected in the report, that Japan is a country that lives and breathes earthquake and disaster preparedness — perhaps the model for the world on how to be prepared for earthquakes — and yet they were overwhelmed.

I'm interested in your learnings from that trip. What were some — one or two — of the key things that you took away from that, including what the Japanese shared with you that they could have done a little bit more to be prepared for that disaster?

If I may start…. The context in which I was able to participate in that journey was one, frankly, where I was not at the time, obviously, working with EMBC.

But I would like to highlight that that understanding of that trip — which was actually led largely by, at the time, the Department of Foreign Affairs and International Trade — came to light and, as a member of the Department of National Defence, I was able to participate because of a mechanism that EMBC had set up, which was the Seismic Safety Council, whereby various organizations, inclusive of academia, are able to share views, best practices and articulate those amongst each other so that we can learn. That was the opportunity created by EMBC for me to travel.

To answer your question specifically, the key things that I learned and that are relevant, particularly today, relate to communications and coordination and the culture of preparedness. As you cited, Japan has a culture of preparedness, and they were overwhelmed. But the resiliency that developed as a result — in my assessment only — because of that culture of preparedness, allowed them to be able to bounce back from that in what, I would argue, are relatively quick terms. In addition, when bad things happened, they were able to adapt and respond.

However, they identified and shared with us some gaps and areas that they can improve on. Those particularly that relate to communication were around integration at local prefecture level. Again, this is a perspective that I received. It's not my assessment; it's one that was given to me.

But it was identified that the prefecture integration with other authorities wasn't necessarily as close and consistent leading up to the event. Therefore, it was a bit of relationship-building sometimes occurring — depends on which prefecture, I guess, but certainly the point was poignant — during the event.

That in-advance preparation — and linkages to the military were highlighted as well — was very important to them, and they saw that as an area to improve. Similarly, the ability to share situational awareness throughout various levels of authority, local right up to the federal level, was an area to improve.

Now, I would suggest that that's going to always be a problem and a challenge, just because of dispersion and various inputs. But it highlights the necessity that, in times like these, the more we can integrate, the more that those key nodes of coordination — as the member said are critical — are established and understood, the better we will move forward. That's why the nature of our plan is also to consider that.

It's a unique scenario in that the consideration and deliberation for whether to integrate is going to be accelerated very quickly. This isn't an emerging threat that offers us the opportunity to consider that in full time. We need to look to doing that right away. That's why, hence, the planning is integrated as well, and we see those partners coming together very quickly and coordinating together in a very unified manner on the day.

J. Yap: A follow-up. I couldn't find it in the report, but from the perspective of the Auditor General's office…. The last audit was 17 years ago. I'm sure we're not going to wait another 17 years for another review. What is your timeline for your follow-up from the Auditor General's office?

R. Jones: Thank you, Member. Normally we will follow
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up within the year. What we will be talking about next is what that follow-up process going forward is going to look like. Probably in this case I would say what we would like to do is actually perform some audit procedures in regard to the recommendations.

Normally in our follow-up we ask for an update from the organization that we reviewed and ask them to say whether they've done any work on the recommendation, partially implemented it or substantially completed everything. We will look at that, then assess whether or not we agree with that self-assessment by the organization and report out, probably next spring.

K. Corrigan: I wanted to ask about EMBC hazard risk and vulnerability analysis, which the Auditor General said is not sufficiently detailed and not up to date. That's on page 22 of the report, about halfway down.

The report says: "However, EMBC's hazard risk and vulnerability analysis, developed in 1997, has not been updated since this time and is general in its content." It talks about the importance of identifying the hazards and risks and potential impacts of a catastrophic earthquake on the B.C. population, tourists, critical facilities, disaster routes and industry. It says there needs to be a more comprehensive and centralized inventory and mapping of the province's critical infrastructure than is currently available.

Then on the next page it says that it would have expected there would be information about the need for mass evacuation, shelter, critical infrastructure, food and water. Also, the plan does not "identify vulnerable geographic locations, populations and facilities/infrastructure."

This is, to me, a really important part of the work, to understand where we are vulnerable and how to deal with those vulnerabilities. I'm wondering if I could get a sense of how that work is going to be done and when it's going to be done.

P. Quealey: Thank you, Member. In terms of how it's going to be done, certainly it's been identified that we've had some challenges to do that in the manner that's described. There are 57 hazards that we've identified as being relevant and pressing here in British Columbia across the province.

What's difficult is that all of those hazards don't apply to every area, every local authority, every municipality. Therefore, it's not useful to simply say that and not consider those intricacies and the interdependencies in terms of capacity to respond to those hazards.

Our challenge is to look at work with local authorities to determine which of those hazards are relevant and how they are interdependent in terms of response and how we can support them — again referring back to the continuum model — in their response. But then in the catastrophic context, what is the cascading domino effect of activities that, worst case, could truly unfold?

So the how is, as I mentioned before, that we need to, within current mechanisms, look at developing ability for local authorities to assess those hazards and, frankly, update if there are emergent ones that we haven't identified. As stated in our vision, we want to be resilient to that and also identify and be aware of emergent threats and then build resiliency and capacity to respond to those.

It is a cooperative approach. There are a number of tools available that we are looking at incorporating and receive support from other organizations inclusive of federal organizations, Public Safety Canada. Also, Department of National Defence through the Defence Research and Development Canada has been extremely supportive both in the past and at present in helping us with best-practice analysis and the availability of actual physical and technical tools to support that analysis.

Some of the mechanisms we currently have in place and are continuing to develop relate around a critical infrastructure steering committee, which is chaired by EMBC and brings in multiple stakeholders to provide that assessment and help us understand those vulnerabilities.

I think the crux problem that we face — or challenge — is to link those and understand their dependencies and not keep it overly broad, because the relevance obviously is at a local level in the early stages at least of a response.

I turn over to Cam. Have you anything to add, Cam, based on your experience with those tools?

C. Filmer: I think there's some good stuff in place. There's a hazard risk and vulnerability analysis toolkit that local governments can use. The United Nations has certified that as an excellent tool. So at a local level — and that's supported by provincial and federal experts to help local governments out…. Integrated partnership for regional emergency management just did a regional hazard analysis for the Metro Vancouver area, so that's been a good advancement.

But per the audit, how do we bring that together in a more regular picture and to Pat's point on…? If you've got 57 hazards, how do you focus that? I think the how on that is still open for discussion.

K. Corrigan: One of the concerns that I have when there is discussion about other levels of government…. In my experience, having seen many reports with regard to all across government — actually more particularly even in EMBC — what seems to happen is that the provincial government in its planning essentially downloads onto local municipalities. My understanding is that provincial government has encouraged Metro Vancouver to essen-
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tially take all responsibility for planning for a catastrophic or even level 7 or 7.5 earthquake.

So my concern is that the provincial government, because of a constraint — to me a very severe constraint — of funding, is going to essentially try to tell local governments that they have to do the work without recognizing that particularly for some local governments, they just don't have the capacity to do that.

I think particularly of smaller communities, more rural communities. So I'm just wondering what level of responsibility the government is accepting in this. Or is there a plan to say, "Okay, local governments, we're going to create this tool. Now it's your responsibility; you go away" when they can't do it? Small communities can't do it.

P. Quealey: To answer the question in the sense of if it is our intention or if we perceive this to be an opportunity to download, absolutely not. Our approach is one of partnership. Cam mentioned the integrated partnership for regional emergency management for the greater Vancouver area. Emergency Management B.C. is an integral part of that. In fact, my boss, the Deputy Solicitor General, is the co-chair of that, with local authorities as well. We see that as a critical role, and that's been a longstanding forum for development.

As well, you mentioned Metro Vancouver and the city of Vancouver. We work very closely with them and in fact have sought their input. Right here — I have it with me today — is their strategy update for earthquake planning. Their team has been working closely with ours. Again, it goes back to that point of integration, of how we are supportive of each other in terms of levels of government. We will work together. We will acknowledge and we have acknowledged our provincial responsibility to integrate those effects. The value, as well, has added an understanding of what can be brought to bear from those various authorities.

Again, you highlighted well, if I may suggest, that there are vulnerable communities that we need to consider somewhat uniquely in circumstances and we need to be able to look to support them when these events emerge.

K. Corrigan: Getting to a real specific, I quoted about some of the areas that have not been identified, or that have not been sufficiently identified — for example, infrastructure. Are you saying that it's the responsibility of local governments to do the risk analysis, the hazard analysis, identifying what the critical infrastructure is and planning for how to deal with that critical infrastructure, like bridges, hospitals, water systems, sewage systems, food systems and all that kind of stuff? Is that a local responsibility, or is that a provincial responsibility?

P. Quealey: It's a cooperative approach. There are certainly ministries that have specific responsibilities provincially in those specific areas. We work together with local authorities because, certainly, what affects them in their specific jurisdictions includes provincial responsibility too. It is not a severing delineation. We work together in that assessment.

K. Corrigan: Okay. Just, then, to try to tie it down a bit more: in greater Vancouver — which I'm familiar with because I live there — who would be responsible for identifying bridges, for example? Let's just take an example.

Would it be the responsibility of the local government, or would it be the responsibility of the provincial government, because the provincial government owns the bridges? Who is responsible for saying: "This bridge is seismically safe" or "This bridge is vulnerable; if this bridge goes down, here's what our hazards and responsibilities are going to be"? I'm just trying to get a better example. Who is responsible for that work?

P. Quealey: In the specific context which you asked around bridges that the provincial government owns, the Minister of Transportation has been kind enough to provide me some insight as I develop my knowledge of the intricacies of their program. They've developed a comprehensive program in place to seismically upgrade bridges but also to assess the standards and assess the viability of those bridges in the event of a catastrophic earthquake. Clearly, in that response, through me they've indicated their responsibility in that regard for the bridges that they own.

D. Eby: This question is to the Auditor General's office. In your research and preparation for this report, did you look at Washington State, Oregon, California, Alaska — sort of direct comparators? In that assessment can you advise this committee about any key differences that you noted, in terms of their approach, that we should be aware of in asking questions of the ministry?

P. Nyquist: When we established our good-practice expectations, we looked at EMBC's own policies and their own expectations. Then we supplemented that by looking at an INTOSAI standard around disaster preparedness. As you've identified, we looked at Oregon State, Washington State, California, and what they'd identified as good practices. Then we also looked, even, at FEMA, which is the U.S. federal body responsible for this.

Then, when we had that collection of good practice expectations, we brought in our two subject matter experts to say: "Look, is this reasonable for us to expect this to happen or for this level to be met?"

We looked at all kinds of other jurisdictions to establish what the parameters were for our expectations. At the end of this exercise we tried to compare B.C. to other
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jurisdictions, and it became very difficult. In the U.S. the model is different because the federal government has a number of other bodies outside of the emergency response group that take on responsibilities — Homeland Security, the military, the Coast Guard. All of those bodies are, I think, well funded and have a role.

Our expectations are based on good practice in other jurisdictions. The comparability of the model that B.C. is using, relative to other jurisdictions…. When we tried to compare it, it was very hard because of a different model of how they plan to execute their responsibilities.

D. Eby: The reason I ask the question is my concern that we set out a model here for EMBC that's not achievable, not realistic, given that nobody else is doing it or nobody else has met that standard. Is it your assessment that other jurisdictions could come to this committee and say, "Yes, we are prepared for a catastrophic earthquake," based on your analysis of what happened there, as compared to the answer — the very frank answer, and I appreciate it — from Mr. Quealey that we're not ready?

P. Nyquist: First off, our expectations, we think, are reasonable. What B.C. should be doing is meeting its own expectations. We had thought that Washington State and the like would rate themselves as being reasonably prepared. I think representatives of EMBC may be able to answer this question better than me about how much money they spend, but they spend considerably more than B.C. does. They themselves have recently self-assessed themselves as not being prepared.

I guess it's a question of how you calibrate yourself and what you're measuring yourself against, but we as outsiders, our office…. I thought, "Okay, they probably look like they're reasonable," but they don't believe that they are reasonably prepared.

D. Eby: I have a school in my constituency called Bayview Elementary that everyone understands will pancake in the event of an earthquake, so seismic upgrading of schools and other facilities is very much front of mind.

Mr. Quealey, can you advise about how coordinating seismic upgrading for schools, bridges and so on falls within your ministry versus within the Ministry of Education or some other department?

P. Quealey: A mechanism that government has in place to coordinate, broadly, in those contexts, because it is interministerial in terms of responsibility is the integrated emergency preparedness council. Again, we have direct links, obviously, in provincial government to other ministries — specifically to Education.

Again, in my understanding and research with our colleagues in Education, I sought some facts and figures to better understand and articulate what has been done and what is being done. What has been provided to me is an understanding that government has spent or committed approximately $2.2 billion to seismically upgrade or replace about 213 high-risk schools since 2001.

To answer your question more directly, though, the linkage with EMBC is important in the sense that, going back to the member's question about how we know about vulnerabilities, internal to provincial government we need to understand that as well. It's not just the linkage with local authorities and, respectfully, not just the constituency. We need to have a broad understanding.

We cooperate with them, work with them to understand and are, frankly, working right now with the Ministry of Education to help build guidelines and support schools in their preparedness plans themselves. I can speak from firsthand experience with my kids going to schools here and knowing how the active role of volunteers plays in that through the parent advisory councils and things like that too.

D. Eby: I think the dual concerns of, obviously, the safety of the children attending school but also schools as assembly points in the event of emergency and so on are very much front of mind in my community.

The last question I have reflects the priority that I've placed on this. I think it's probably priority 3 or 4 after immediate response and stabilization of the scene and so on. I saw one of your slides mentioned the Legislature and the structure of governance going forward in the event of a catastrophic emergency.

Can you go into a bit more detail about if the Legislature building is significantly damaged — which looks like will be the case, based on the Christchurch example — what, if any, backup plans are in place to ensure the functioning of the Legislature in terms of the implementation of emergency laws and so on to respond to a crisis?

P. Quealey: That's a critical element of our planning. Existent today already are business continuity plans that exist within each of the respective ministries and are integrated through our shop to ensure that we have a good scorecard and understanding of where that business continuity planning lies. Tied to that directly in terms of ensurance of continuity of government and our ability to provide the resources for government to function is our ongoing analysis and development of: where are those spots, and how do we do that?

Right now we are working on providing the resources to allow for alternate sites to stand up and function, and that's a task, a key activity, that is ongoing at present. That will allow for — and it goes back to the member's point about being able to coordinate and communicate — that critical function to occur.

It serves as a focal point for if, for instance, the earth-
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quake of whatever nature it may be — crustal under Victoria, for example — brings down some of the infrastructure that's critical, we consider alternate plans to ensure continuity of government. Again, that consideration needs to also include here in the Lower Mainland and widely if we're affected in major centres.

B. Ralston (Chair): Just before you continue, the Committee Clerk can update specifically on what consideration is being taken of the impact of an event on the Legislature.

K. Ryan-Lloyd (Deputy Clerk and Clerk of Committees): Just to briefly note, for the information of members, that the development of a business continuity plan that addresses both emergency preparedness and business continuity is currently underway. The target timeline for completion of that project is this calendar year.

LAMC and a subcommittee called the finance and audit committee are working with the Office of the Clerk and the Sergeant-at-Arms' office to develop the details of that plan. We can discuss that in more detail, if members have an interest, at some other time.

D. Eby: Mr. Chair, that was a helpful interruption. That concludes my questions.

L. Reimer: My question is for Mr. Quealey. I believe that when you were speaking with my colleague next to me you mentioned that the emergency centre is located in Saanich. Did I hear that correctly?

L. Reimer: Okay. My question has to do with that. On pages 12 and 13 there's an outline of risky areas in our province, and of course, the Island is the riskiest. I'm just wondering: has there ever been any discussion about having that centre in another part of the province that would be at less risk?

P. Quealey: Certainly. Our responsibility in regard to our own business continuity planning and the continuity of EMBC to be able to fulfil its functions forces us to consider: where else could we function in the event our headquarters was rendered inoperable?

I mentioned previously that throughout the province there are six regions. In each of those regions is infrastructure in the form of a provincial regional emergency operations centre where we have staff permanently housed. Any one of those potentially could be a step-up location for us to operate from. But also looking to partners — we aren't fixed on ourselves only — certainly we have opportunities for other support. There's lots of infrastructure residing throughout the province that could help us.

B. Ralston (Chair): Perhaps if I could follow up, I think MLA Reimer has raised a very good point. On page 11 of your strategic plan you talk about the emergency call centre, I think under the headline "Deliverables." But you do say: "contingent to additional funding becoming available." I take it that this is to develop a redundant system in the event of a catastrophic event impacting the call centre. Maybe you could just elaborate on that.

P. Quealey: Keep in mind our strategic plan is meant to address the broad work that we need to do writ large in the future for EMBC. It's not necessarily focused on redundancy for a catastrophic earthquake. Some of these activities relate to integrating information systems that are relevant regardless of threat. These are generally technical in nature and relate to improvements over existing systems — always seeking to improve. Our responsibility, obviously, is to identify on-ramp activities should additional funding become available.

I would like to highlight, though, specific to this threat, that we are currently looking at developing and enhancing our provincial emergency notification system, which is certainly relevant, I would say, to all communities as we look to improving our response times. That, if I may offer, is something that is directly relevant to this threat, and we seek to improve currently.

B. Ralston (Chair): Just to be specific, because I don't think you addressed this directly: the emergency call centre transformation and integration. You were talking about the centre in Saanich; is that correct?

P. Quealey: If I may clarify. There are two main operational elements in Saanich. There's the emergency coordination centre that runs 24-7 every single day. We also
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have a Provincial Emergency Coordination Centre that activates based on need and the threat that we're facing and coordinating. So the emergency coordination centre is always operating.

M. Dalton: Thinking of a couple of recent earthquakes, one was in Chile and quite massive, at almost 8 or 9. I can't remember exactly. The level of damage and mortality was actually quite low. Compare that with Haiti, which maybe was a smaller earthquake, and 100,000 people died in that earthquake. Definitely, infrastructure is so important, preparedness — all these things. It makes all the difference in what happens to our society and loss of life.

We've been dealing a lot with the high-level planning, which is your role, Pat. I'm just wondering if you can give us a couple of scenarios — pictures, actually — of what would happen and response, really. Just ground pictures, dealing with communication, sanitation, water, food, transportation, fire…. Just spend a few minutes on what would actually happen.

Perhaps you could have one in the Lower Mainland, and if you want to make reference to, say, an earthquake that was in a more remote but still with a population. Could you give us a couple of scenarios — what would it look like, the response, some of the details? That would be appreciated.

P. Quealey: Thank you for the question, Member. Not to be trite but to be frank, it will be absolute chaos if this unfolds in a catastrophic scenario. There'll be significant mass confusion. There will be considerable constraints in responders to do what normally would be routine. The normal pathways for response will be likely impeded. There will be lack of situational understanding. And there'll be a requirement for a significant ability of people — individuals and organizations — to respond independent of further understanding. I think that is the key thing.

What we need to build, and continue to build, is resiliency. That resiliency will allow us to move beyond that confusion and gain a semblance of control and ability to make measured analytical and risk-assessed decisions to make sure we apply the resources we are able to focus in a most effective way. It is going to be devastating. It is going to be the worst nightmare of anyone if it occurs in this realm of catastrophe.

That doesn't mean we can't overcome it. And that highlights the need for this type of planning in a practical sense: what would result from that, as decisions are made at response level to save lives and to mitigate risk to prevent further damage and people respond in terms of the drills that they know or don't know. Again, "Drop, cover and hold on" cannot be emphasized too much.

From that, we will look to gaining situational understanding, and there are various mechanisms to do so. You highlighted Vancouver. I know the city of Vancouver has a great windshield guide for their municipal staff. We've used that, as well, and looked at that as an opportunity to share more widely to assess damage and to gain an understanding of what the effects have been.

Knowing from previous experience in responsibility, the military has taken those examples and incorporated them into their planning so that when they look at immediate surroundings and their tactical areas of responsibility, they have a common framework and ability to let us know what they're seeing.

The intent is that our first order of business, in addition to saving lives, is gaining understanding. That piece will not be easy, so the frameworks we build will be critical to that.

The way we frame that, and you saw it in our plan, is that there's an immediate response, which is going to be using the resources we have at hand and responding in the very tactical, visceral sense to what's facing us. Then we look to transition, as we gain understanding and ability to focus other resources that perhaps come in from other areas of the province, or indeed the country or neighbouring international vicinities, to help us.

Those mechanisms of thought are still spelled out and are being developed in more detail so that the decision points that we face are clearly articulated. An example I'd like to highlight, because you asked about response specifically, is our auxiliary-to-government agreement with the Canadian Red Cross.

Through that very important agreement, the full weight and resources that the Canadian Red Cross has, in terms of their linkages to the wider movement across the world, can be brought to bear in the sequence that they are able to do so. That agreement allows us to multiply our utility and our effectiveness, because that agreement allows them to move in very quickly to support us. That's one of the reasons why they're a partner in our integrated planning.

Those resources include things like field hospitals, logistics units and other things that will be integrated into planning. In honesty, we need to develop those plans to a level of fidelity where they clearly know what we expect of them and what those gaps may be.

I hope that paints a picture. It's not going to be easy. No matter what we build, the response initially will cer-
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tainly be chaotic. That's what we need to be able to rebound from.

M. Dalton: You mentioned about Red Cross, field hospitals, and evaluating the damage and the resources. That's one aspect. What about areas such as communications, and even food and water? Can you elaborate a bit more on these things?

P. Quealey: Absolutely. In the same context, the food and water that we currently have available to us, in terms of as individuals as we walk around today, may be all we have in that initial situation, in the sense that there's no guarantee that everything will be working as it previously was in terms of immediate potable water, etc.

Again, it further amplifies the necessity for individual resilience and consideration for vulnerable populations. Certainly, when we gain the understanding around where those gaps are, we can then focus additional resources for it.

Around communications, there is no guarantee that the communication systems we currently operate with will be functioning. Hence, the need is, as the Chair mentioned, for redundancy. I highlighted how, in the B.C. context, our provincial regional emergency operations centres will be critical. Even there, in those initial phases we can't be guaranteed that everything is going to be working.

So we need to consider and are considering and have been working on what we will do in those situations for redundancy — for example, provision of alternate communication systems to authorities, etc. Some folks are already well advanced in that regard for use of satellite phones and other implements. Again, even those can't be guaranteed, so we have to think through mechanisms.

That's communications in the technical sense. Communications, thinking more broadly in the command, control, coordination, intelligence, situational understanding perspective, again I think harkens back to that point of having a central focal point at various levels where authorities in those areas can meet and integrate to share understanding and dispatch resources.

It ties back to the member's point about the need to understand in the context of ICS, integrated command system, and how we respond. That is inherent to that type of training already, and that's something that we continue to build from, integrating folks together so that they can communicate.

M. Dalton: Your point about stand-alone, basically, because everything is cut, people have to…. Not only individuals, but organizations…. It's got to be self-contained and be able to go from there to be able to meet the needs. So thank you.

B. Ralston (Chair): We were scheduled to conclude this report at 11:30. There are still a number of questioners on, so I think we'll continue until noon at least. Then perhaps we can assess where we're at in terms of our afternoon agenda, because there are a number of items in the afternoon agenda. But at this point I propose to continue to our scheduled lunch adjournment at 12 o'clock on this topic.

S. Robinson: I appreciate the inclusion of the strategic plan. It allows us to sort of see what changes have been implemented. I have a couple of questions about that, if I might ask staff.

"Line of effort 2: catastrophic earthquake preparedness" on page 8 talks about the "Multi-year road map aimed at the enhancement of earthquake preparedness in B.C.," and notes, under the deliverables for 2015-16: "Extend the road map beyond March 31, 2015."

The Auditor General recommended a five-, ten-, 15-year road map, and it doesn't specify here. I just wanted to get a sense if there's some sort of idea…. Extend beyond 2015 is good, but does that mean five-year, ten-year, 15-year, something in between? What's the vision?

P. Quealey: Thank you, Member. It is fully our intention to extend our strategic thought into that realm, that temporal reference of five, ten, 15 years in terms of what we need to do relative to now on that point.

I mentioned earlier that part of our challenge is to understand complexity and to simplify it, and that's why we've taken a phased approach to this. This is direction to staff and our team as well as an outward articulation of intent, so we're clearly going to focus on that immediate response. With that in mind, my direction to the team has been to clarify and have a solid road map for that near-term perspective for us to give a foundation, at least, to build from.

I think that is part of what you might have mentioned earlier — the need for expectation management and working to capacity. It's within our capacity to do so now, but please trust that we will build that out further.

I also just wanted to ask about page 11. Deliverables for the integrated information systems speaks to "contingent on additional funding becoming available" and being able to do a whole range of projects.

Is that something in the near term that you'll be looking to identify — the need for additional funding in order to achieve these, or is this sort of a longer term? Because it's 2014 to '17, which is a bit of a span, I wanted to just hear if there was some recognition that these are beyond current capacity projects.
[ Page 387 ]

P. Quealey: These are beyond current allocation of funds, so therefore, yes, beyond current resources. Again, they're intended as should the funds…. We're constrained, like any other ministry, in terms of prioritization. We've identified these on-ramps as abilities should funds become available.

On page 20, "Review of Emergency Program Act and associated regulations," I note that there is a plan to "undergo a review of the legislation to identify areas for improvement." Given the new mission, I'm just getting a sense of how these two sort of play out. I have, I guess, a concern that there may be some downloading, I guess the vernacular is, onto other levels of government, typically local government. I just want to have a sense, with this change in mission, how this might play out. Is this part of that change in the mission?

P. Quealey: I would suggest that it's not necessarily because of the change in mission that we're doing so. It's our responsibility to cyclically do so.

It's been quite some time, I think, since the legislation has been amended, so it's our responsibility to ensure that it is amended and improved.

Again, the context in which we speak today around earthquake preparedness and response…. I don't want to give the impression that that is everything in the strategic plan. This is our job to do, regardless of that specific threat. And I'll say from the heart: we're not trying to download anything. Anything that we do that has impact will be considered and involve stakeholder engagement.

S. Robinson: Well, I appreciate that, but I also want you to appreciate that there are some of us who are just paying very close attention to what the impacts are. If there is some recognition that the capacity is stretched because of financial constraints, and yet there is a requirement to deliver certain end products and there isn't the capacity, then it's got to give somewhere. I'll certainly be watching very closely to see where that pops up.

S. Gibson: I guess a canonical phrase around here is "fully or substantially implemented." That's a phrase we hear around this table. And so my question to our Auditor General is: can you anticipate a time in the near future when you will be able to use the phrase "fully or substantially implemented" with regard to a catastrophic earthquake preparedness plan? Can you see, in light of what you're hearing today and the documents that you've been perusing…? In your professional capacity, do you see that you'll be able to use that phrase in the near future?

R. Jones: Thank you, Member. As an auditor, I don't like projecting, but…. In a number of programs across government — and this, I think, is one that's very similar — the plans are not ones that can be implemented right away. So in our language, yes, I would say something like this. I'm not sure how many years, but in the foreseeable future, it'll probably be partially implemented.

I don't think we'll be able to say it's fully or substantially implemented within a year. I would be very surprised, but I might be surprised. Who knows? But partially implemented isn't always that bad. This strategic plan sets out a three-year time frame, I think, so if it's partially implemented and moving along, we would have no hesitation, in our follow-up report, to say: "This is good. This is good news. They're making progress. Yeah, we're moving in the right direction."

I'm waffling a bit, but I wouldn't expect in the next year to be able to say it's fully implemented, no. Not in all cases, anyway. Some of these recommendations, possibly, but we'll see next year.

S. Gibson: Supplementary. You would say, then, that your window was a little longer. You'd say that within four to five years you'd likely be able to say, based on your intelligence and your expertise, that fully or substantially implemented will take a little longer, then?

R. Jones: In some of the recommendations, that's quite possible. I would hate to say right now which ones are and which ones might not be.

S. Gibson: My goal is not to pin anybody down or make people feel awkward, but obviously the original question, when I asked, "Are we ready right now?" and…. Fair enough, sir; you were transparent enough to say: "No." But I think all of us here want to be as well-prepared as possible. We're all in this together — right? — so that's the reason for my question, and I do think it's relevant. Thank you.

There's been reference to pieces that there's not money for, and I'm wondering…. I'm not sure what the process is for putting together budgets for particular parts of ministries. Is that something that you would do? Say: "In order to do these things that we want to do, we're going to put together a budget and make a request." Is that something you would do on an annual basis?

P. Quealey: The allocation of funds is not determined by anything we produce directly in the sense of the larger context. I would refer better to Treasury Board to answer that question. But certainly, in the sense of if there's a specific project that we are responsible to develop, it's a responsibility to outline the budget that would be re-
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quired to achieve that.

K. Corrigan: Have you done a budgeting process in order to accompany and inform the planning that you're doing? Have you done an estimate of how much it would cost to implement the plan that you have produced?

P. Quealey: At present state, we are planning. The budget for that, I say with great confidence to the taxpayers, has been absorbed in-house in the sense that our prioritization and innovative approach at getting support from other partners has allowed us to do it with our existing resources.

But what we need to do…. And it's a point well taken. As we look to implementation beyond that, my responsibility is to provide for government what that will cost if we want to do certain things. We haven't arrived at that yet in the context of the strategic plan but will continue to assess it and make sure that we provide that accurate representation to government.

K. Corrigan: I'm thinking of things like the reference to the emergency call centre transformation and integration in the report and the website and so on. And I appreciate that's for all of EMBC, not just catastrophic earthquake planning.

But as one small example, the Auditor General's report on page 18 references the report that was done after Haida Gwaii and the fact that EMBC noted that "the use of the provincial emergency notification system is cumbersome, resource-consuming and prone to errors." In my role as critic for public safety, I've received correspondence from municipalities saying they're very concerned about that system as well.

Planning is a good thing. But actually executing and implementing and doing the things that need to be done in order to be able to have a response are a different thing. For example, is there a plan to replace the provincial emergency notification system?

P. Quealey: There is currently a plan in place, and I have allocated funds from within my responsibility of budget to enhance and develop the current provincial emergency notification system such that there is an improvement in the responsiveness of our alerting system.

K. Corrigan: That will satisfy the concerns about it being "cumbersome, resource-consuming and prone to errors"?

P. Quealey: It's the intent of my direction to staff that it improves and addresses that concern. To what degree of completeness…. We are looking at it in a fulsome plan to extend beyond just the initial steps. Our current activity is within our abilities to improve. The intent of the end result of this project is that it is a more responsive alert to those stakeholders.

So in a short answer, if I may, we have taken that concern and acknowledged it and are working to improve.

K. Corrigan: I wanted to ask questions about what would happen if a provincial state of emergency was declared. The powers under the act are outlined on page 24: "control or prohibition of travel; demolition of structures; restoration of essential facilities; distribution of essential supplies; mass evacuation and shelter; price setting; and rationing of supplies for the duration of the state of emergency."

My question is: given that those powers contemplate the ability to actually execute those things beyond stating them, what capacity does the province have, or does the province intend to have, in terms of being able to provide for mass evacuation and shelter, distribution of essential supplies, rationing of supplies, demolition of structures and restoration of essential facilities? I mean, what capacity does the government have, or intend to have in the future, with regard to those specific powers?

P. Quealey: Thank you for the question, Member. Related specifically to the earthquake threat and the catastrophic context, it is our intention to refine the powers that are currently in the act and describe, under each of those authorities that government has, what we envision as relevant for consideration.

To answer that very clearly, what is a useful tool, by my experience, is a decision support template that identifies in time, as an event unfolds, when these decisions need to be made
[ Page 389 ]
to be effective and what they are and what their effect is.

For example, by a provincial declaration, certainly, these powers can be invoked, but not necessarily all of them may be relevant in a given scenario. By the same token, in the sense of a state of local emergency, we need to think of the utility of the declaration and how it supports and doesn't obviate the effectiveness of those local emergency declarations. It has to be done in concert with that in mind.

To answer your question about what we envision for being able to do so, that's exactly the nature of our problem and what we're working on right now. How — and you saw it as a key activity — do we support government in its decision-making process and support it in its analysis of what these powers mean, and how are they useful to this response? And we intend to do so specifically in this context.

In an earthquake, will it be useful to…? Or what will the effects be of controlling access in and out of British Columbia? Will it be positive, negative or a combination of both, and therefore, what decisions should be made instantaneously? What decisions need to be made with fuller understanding of the situation? That's an example only.

K. Corrigan: Okay, a quick follow-up. If the average person was reading these powers in the act, they would assume that the provincial government is going to take care of these things. It would assume that the provincial government is going to step in and provide for, for example, the mass evacuation and shelter of individuals, take leadership and be able to actually marshal the resources to do it and the restoration and all of those things, which are really important things.

I guess the question is: does the provincial government accept that they have, in the public's mind, the responsibility to be able to do that tomorrow, be able to do those things? And can the provincial government do those things now or accept responsibility in the future?

P. Quealey: I certainly accept my responsibility, on behalf of government, to be able to coordinate all effects related to an emergency at a provincial level. Concomitant to doing that is understanding what, of those powers, need to be invoked in a given scenario and recommending that to government. We will build that understanding and articulate that clearly for government to decide.

B. Ralston (Chair): Vicki is next, but before she starts, I think I want to suggest, since we're at about two minutes to 12, that we take the lunch break and we reconvene at one o'clock. You, unfortunately, won't be free to leave until after we finish, after one.

B. Ralston (Chair): Thank you, Members. We're continuing consideration of the report on catastrophic earthquake preparedness.

V. Huntington: I just have two issues I'd like to explore, one being — on page 30 — the responsibility to First Nations. I notice that even though there is a federal-provincial agreement, now quite old, a letter of understanding between the province and the feds, the province will assist First Nations in times of disaster or emergency. The response to the Auditor from EMBC was that you did not have the capacity to assist and that further discussions would need to be undertaken with the federal government.

I guess I'd like to know whether you've reconsidered that statement as part of your ongoing strategic plan and what you intend to do in the case of a First Nation community that needs assistance. I think we have a moral obligation to plan and assist and talk about dollars with the feds later. I don't think I would be satisfied knowing that the answer is: "We don't have the capacity."

What are your plans in terms of responding to the needs of a First Nation in a disaster emergency, or do you intend to just leave that to somebody else to consider?

P. Quealey: Thank you, Member, for the question. I'm not certain about what you refer to in terms of an answer that you suggested that we gave. But for clarity's purposes….

V. Huntington: I'm sorry. In response to what the letter of understanding between the federal and provincial governments…. In 1993 a letter of understanding between the provincial and federal governments states: "When immediate action is required to preserve life or property on Indian reserves and when local bands so request, the provincial emergency program will assist, support or arrange for such required emergency measures."

EMBC's response in this report was to the Auditor General that it does not have the dedicated capacity to assist First Nations and that further discussions with the feds….

I recognize that's 12 years, 15 years out of date, but still, I don't think the modern world would put up with us turning our backs on an emergent need in a First Nation.

P. Quealey: Certainly, and thank you for clarifying that. What confused me is in terms of the relevance in time. That's from 1993, I understand.

To highlight the responsibility and relationship from a moral, ethical perspective and the point you raise about British Columbians and everyone in British Columbia, our plans and the way we are working towards developing those plans are inclusive. It is not intended to differentiate between different peoples. It is to ensure that everyone who is residing in British Columbia is considered.

Certainly, there's some element there that remains consistent, in the sense that we're working very closely with Aboriginal Affairs and Northern Development Canada to ensure that. There's certainly a multiplicity of responsibility to work together for helping vulnerable communities, aboriginal communities, First Nations, etc., but we want to make sure that it is an inclusive approach and that no one is not considered in that regard. Our plans are intended to be inclusive and will ensure that there's due inclusion of First Nations, to answer your question specifically.

V. Huntington: So you will be approaching band councils or territorial councils in an effort to assist them if they don't already…. I'm sure many of them already have a basic emergency plan, perhaps with the neigh-
[ Page 390 ]
bouring local government, but you will be assisting them in that regard?

P. Quealey: In fact, to answer your question on approaching them, we already have. Part of our consultation has included outreach to First Nations communities to ensure that their views and their assessment of where we as a province and people in British Columbia stand are included. Indeed, like in any community or any series of communities, there are different levels of preparedness. That goes back to our requirement to have an overall understanding of what that level is and where those gaps are and to assist them appropriately, based on their assessment and their sharing of that with us.

V. Huntington: Just to finish this question, then — this statement from EMBC to the Auditor during this report that you don't have the dedicated capacity to assist First Nations during a catastrophic earthquake — you feel you can and will deal with that issue when necessary?

P. Quealey: I think the operant term there in terms of "dedicated capacity"…. Again, not knowing the exact context in which that was taken, perhaps the Auditor can help. But dedicated capacity may be the point of clarity, yes. We don't have dedicated personnel to that specific task, but that does not mean that we do not consider and not include First Nations in our plans — again, the proof being in our consultation.

C. Duffy: In response, let me just say that our staff throughout the province look to engage First Nations in seasonal preparedness, preparations in calls and on regional response calls and will assist in response, but I believe that the point on dedicated capacity is probably the salient one.

The one final issue I'd kind of like to discuss a little bit is the communication plans beyond the technical interagency communications in between your own emergency planning areas. One of the things that I noticed during my time in emergency management at the local level was a hesitancy on the part of the administration and on the part of first responders on the committee to want to develop a really thorough communication plan that involved proper outreach into community during a time of disaster.

Yes, the mayor and, yes, the Premier would be out there sending the message out. But the public, I think…. Research has shown and obvious indications throughout disasters have shown that the more information you can get out to the people, the better. They want to know the who, what, where, when. They want to know how to get home. They want to know what's going on in the other part of town. They want to know what's happening.

Yes, there'll be that hugely long period of confusion where people and the authorities are getting organized. But one of the things that I've always thought was missing in the planning stage was the administration of media agencies being part of the planning process so that they could understand your needs, and vice versa, and that whole system was flawless and seamless in terms of using every opportunity to reach the public. I think the public get forgotten for a big chunk of time during an emergency. I wonder if you could discuss….

I noticed communications, per se, is not noted on your chart. I'm sure it's there, but I wonder if you could elucidate on your thinking in that regard.

P. Quealey: Thank you for the question. I absolutely agree with your statement. The media, all the media and what it entails, is an ally and is a partner in this scenario and in all scenarios related to public safety.

It is important that we are sharing information and providing information so that it can be broadcast and inform the public in their decisions and in our understanding of what's going on. That is an example of how, from the ensuing chaos that will occur in something like this, we will bring order to that chaos together through that understanding. I couldn't agree more.

An example of where we've taken that to heart and acted on it is in the recent Haida Gwaii earthquake. Our organization, as soon as we had information, was providing that representation to the media and providing that perspective as soon as possible. In addition, in our notification systems right now, we include the media as a partner and provide that information like we would with local authorities to make sure that they're informed.

V. Huntington: This will be the last question. Are any elements of the broader provincial media part of your interagency management coordinating teams for disaster? I happen to think they should be. I think they're one of the most incredibly important parts of disaster management following. I don't know why they aren't part of the planning stage.

P. Quealey: In actual fact, they are, and we're always seeking to improve. There is an agreement, and I don't have it at my fingertips, with local media, certainly in the capital regional district. I forget when it was signed. Perhaps one of my colleagues can assist me. We agreed to share that information, and they agreed to broadcast information with us.

We're always looking for ways to improve that, though, and how to do it more broadly and how to incorporate, as I mentioned, the media as a partner in our planning — how we can do that together. We are, and we will do
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better.

M. Morris: Just a couple of comments. Kathy had mentioned something about mass evacuation plans and shelters and whatnot. I do know that forms part of every police detachment and every police operation's emergency preparedness plans — so evacuation routes, shelters.

I know, again, back when I was a detachment commander we got right down to the bus companies. Who had vans in town? Who had the different types of equipment that we may need in an emergency? There are a lot of detailed plans out there, which segues into my question to the Auditor.

How in depth did your audit go with respect to all the contributing agencies to EMBC, with respect to provincial policing, to the health regions, to the hospitals, to all of the other service providers that we have in the province? I do know that the health regions have evacuation plans and emergency plans in place. All the other public agencies do. Did you guys go back and review some of those plans to see how they interrelated to EMBC at all?

P. Nyquist: We did not ourselves go and try and reconcile those plans. We started out with our premise, applying a managing-for-results framework, saying: "If EMBC was tasked to do this function of ensuring integration and coordination of various stakeholder plans, have they got a system in place where they're monitoring that and proactively ensuring that it's happening?"

We didn't do it ourselves. We looked to see whether EMBC was doing it. We also looked at the meeting minutes for the IEPC, the Inter-Agency Emergency Preparedness Council, which is a subset of key representatives from important ministries on coordinating their plans to see what they were doing to proactively ensure that individual ministry plans are integrated and coordinated.

We also had a look at the emergency preparedness management regulation. At the back of that there's an appendix that defines the responsibilities for the various ministries in the event of an emergency, looking to see whether those were being followed up on.

M. Morris: I appreciate that. From my observations — and I guess I'm biased because of my involvement with the process before — I see this as more of….

The coordination or the management of all these plans throughout the province is probably what the real issue is. There are a lot of good, solid plans out there, but there needs to be some mechanism to bring it all together so that whenever that big green button is pushed, it's at the fingertips of the emergency operations centre.

K. Corrigan: I wanted to ask about logistical planning, and it's been referenced directly or indirectly several times. Is there a logistical planning person, somebody who is dedicated to doing that, within EMBC at this point?

P. Quealey: Thank you for the question, Member. At present no, there is not a dedicated person for logistics management. As we've identified in line of effort 1 in our strategic plan, that is a capacity area that we will seek to fill. I can say categorically that it is a top priority for us to do so.

K. Corrigan: So that would be an added person with that kind of expertise, who could then be the person that would say, in a community, "this is where water is" — or bottled water or all that kind of stuff. Is that correct?

P. Quealey: Looking at the function much more broadly in the context of the provincial level and the requirement, as Member Morris said, to coordinate broadly across various jurisdictions…. That would be more of the mandate of this function.

How we fill that with a person, a team, interagency cooperation…. We're still working towards fulfilling that. But certainly it is a priority.

K. Corrigan: It surprises me, given that we had a report 17 years ago — and there have been other reports and so on — on emergency preparedness generally, that we would just now be thinking about those kinds of logistical questions. Is that a function of resources?

P. Quealey: I can't really speak to that historical reference with any clarity. But I can emphasize that we acknowledge the necessity to consider that capacity and have done so and made it a priority.

K. Corrigan: I also want to ask a question about exercises. What kinds of exercises — not training, but the actual exercises — has EMBC either headed up or been part of in the last few years?

"Although EMBC has carried out some disaster exercises, we find that these only tested a limited range of roles and responsibilities and did not include a scenario where a provincial state of emergency is declared. Also, it is unclear whether these exercises are working towards an overall objective to ensure EMBC could coordinate an integrated and effective response."

I'm trying to get a better sense. If the Auditor General wants to comment on this question as well, that would be welcome. I'm trying to get a better sense of what exactly has been done and what is planned. I do see in the strategic plan that there is talk about exercises, but I'm not sure whether
[ Page 392 ]
that refers to having a full state of emergency–type of planning exercise.

B. Ralston (Chair): The member is referring to page 31, just below recommendation No. 7.

P. Quealey: What I'm going to do is…. Cam, I'll ask you to just talk about some of the historical exercises we've participated in and their function and what they've achieved for us. Then I'd like to comment on, in my presentation, some of the recent exercises we participated in and those which we intend to conduct and what they will achieve.

C. Filmer: Sure. Just looking at the last few years, if I could, I think it started off with, before the Olympics, Exercise Bronze, Silver and Gold, led predominantly by the federal government but in partnership with the province and others — according to our estimates, some of the largest exercises in Canadian history. We called Gold…. It was like the apocalypse. They hit us with everything they could over a number of days. Those were very, very large exercises that built to Gold, which was very sizeable, with a lot of people involved.

The U.S., Washington State in particular and now Alaska, has been very good to B.C. They've had an open door policy on inclusion with all of their major exercises. So on the cross-border side we've seen from other states, in particular, really great opportunity. We took part in Evergreen a couple of years ago. They allowed us to embed in their systems down there. They brought people up here. We got a really good insight into a very comprehensive system and could take lessons learned away from there.

We exercise staff in the field. Also, thankfully, local governments when they host their exercises, or industry or private enterprise, many times will ask us if we'd like to take part, and we attempt wherever possible to take part in those exercises.

C. Duffy: We had a fairly comprehensive exercise before the Olympics, in the fall of 2008, that activated all the team's members in the province, which are cross-ministry in all six of the regional emergency operations centres and the Provincial Emergency Coordination Centre.

I think, Pat, you've mentioned our participation just recently in Alaska Shield and in Cascadia Rising — so that current year and looking ahead over the next two years.

P. Quealey: Thanks, Chris. It gives a framework of what we've done, the purpose being to improve and to develop skill sets.

To add a little understanding of the types of exercises, which I believe was part of the member's question as well, we have a varying scale of types of exercises, depending on what we want to achieve. I think you'll see that in our strategic plan we refer to a number of those different types, and we have done them in the past as well.

Tabletop exercises are usually the basis where we start from in terms of true exercising. After we've developed a plan that has been scrutinized and considered by the partners who are going to support that exercise, it can happen at the local level, it can happen at the provincial level or, indeed, as Cam described, in certain contexts an interagency, multinational context, depending on the event.

Tabletop exercises allow for a number of things. Specifically, they allow authorities to understand the plans that staff have been developing in concert with them but also to test and adjust where there may be gaps in that plan. And it really allows for a much…. In a setting like this we would share the plan. It's been read in advance. We'd have a series of structured terms, we call them, where we would go through the scenario, and as it evolves — the military likes to call it war-gaming — we look at what the problems might be and then document those and work on the plan further.

Tabletop goes a great extent to understanding and describing, but we also look at things that are a little more detailed and truly test in the field. They can be functional exercises that focus on a particular element of the plan, or they can be full-scale exercises that will exercise across all of those functions, and in significant detail.

Chris mentioned, and I mentioned in my presentation, that one that EMBC has recently participated in was the exercise Alaska Shield, at the end of March time frame, where the state of Alaska asked for our participation as an evaluator. Also, we took advantage to observe, whereby the Department of National Defence regional joint task force in B.C. partnered with us, and we went together to learn from that exercise and come back and extrapolate from what we saw and apply that to our joint integrating planning. That's feeding into the team right now.

Other things Chris and I mentioned before as well. Cascadia Rising is the upcoming Washington exercise, which is another one we've been invited to participate in. We are in the scoping stages right now with Washington as to our participation, but it's our intention to take that exercise and test some of the planning that we're undergoing now. My intention is that by that time frame, you'll note, our immediate response plan will be done. We'll take that and test it in our support of that exercise.

P. Quealey: Alaska was intended to be a replication of the 50th anniversary of the 1964 quake. Cascadia Rising is…. Sorry, I should have better explained. Cascadia Rising is a Cascadia subduction zone exercise. What that is intended to do is to look at the effects of a significant Cascadia rupture and, hence, the catastrophic earthquake and tsunami effects that would occur along our whole western coast. So that is directly applicable to our planning as well.

We recognize there is capacity development to be done there as well. Again, back to Line of Effort 1, we've identified that, and we're going to continue to build on that capacity. We have some capacity already, but again, working in partnership with others is a great way to magnify our utility by working together.

R. Jones: I think one of the things to emphasize in this point as well was that we were looking at the amount of education that's given to the public and what exercises are done specifically to get the public engaged and understanding what to do.

One of the things that does occur every year is the one that's noted in our report called the ShakeOut. I guess the unfortunate part about that is that although it's held, only about 35 percent of the people that were surveyed by the British Columbia Automobile Association actually knew how to do it — the duck, cover and hold on.

That also needs, I think, to be a little more upfront — getting the public education out there, getting some exercises so that all of us know what to do if something happens.

K. Corrigan: I have one more question. Given the report comments that the performance indicators…. I can quote page 33. "In our view, neither of these indicators provide key stakeholders or the public with sufficient information to understand fully how well prepared the province is for a catastrophic earthquake" — and then it went on.

Given that, are you going to be recommending new performance indicators, or one indicator, for next year?

P. Quealey: Thank you for the question, Member. Reading the paragraph that it related to, it talked about the 2012 annual service plan and, specifically as an indicator of measure of performance, the percentage of temporary emergency assignment management system positions filled. Is that the context? And understanding, again, the Auditor's comment on the utility of these.

Harkening back, I believe it was Member Robinson that had asked a question related to performance measurement and measures of effectiveness. Yes, we will develop improvements in our measure of performance and effectiveness tied to the plan and how we measure them, both in the empirical sense and that which is relevant so it grounds it in the foundation, but also in the more comprehensive, analytical sense around effectiveness and what that truly means in our planning.

B. Ralston (Chair): I don't see any further questions. Is there anything you wanted to say in conclusion, Mr. Jones?

R. Jones: Just that, as I mentioned, I think, in my opening remarks, one of the key things that we mentioned when the report came out is that while the recommendations are for the government and EMBC, again just to urge all people in B.C. to look at their own situation and ask themselves whether they are ready and prepared to keep themselves safe and their families in case of an earthquake.

While the government is the lead area, it's incumbent upon all of us to be ready. I'm happy to hear EMBC saying that they're going to get more education, more toolkits and everything out there to help us get ready for that.

Well, thank you for the presentation and thanks to Mr. Quealey, Mr. Filmer and Mr. Duffy for presenting. I appreciate that. We hope that you'll be back sooner than in 17 years with an update.

We'll just stand down briefly. I'd ask members to just stay in their places while the next group sets up.

Given that this is extended a bit, we're going to switch the agenda because of the number of witnesses and move to Working Capital Management Since 2010. We'll deal with that, then with the follow-up item and then, finally, with the last item, which is the Information Technology Compendium.

B. Ralston (Chair): I'll call the meeting back to order after that brief recess.

We're now going to deal with the report entitled Working Capital Management Since 2010. I'll turn it over to the Auditor General, Mr. Jones, to begin the presentation.

This is a good report to do just before we talk about follow-up, because this is a follow-up that follows our
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new process, which is going back in and actually re-auditing a previous report which, as the Chair mentioned, was from 2010.

The office first looked at cash flow management in the college and school district sectors in August, 2010. We found that cash was being transferred to these organizations before they could use it, and this was costing government excess interest costs.

Through two self-assessments, we could see that government was making improvements to cash flow practices, but the outcomes anticipated in 2010 were still not being achieved. In August 2013 I determined that this topic would benefit from an expanded follow-up and reporting.

As a result, I asked my staff to prepare this report to not only follow up the original audit but to perform additional work to see if our recommendations should be expanded to cover other sectors of government as well.

This audit determined that further action was required with cash flow management in colleges and school districts and that action needs to be expanded to include the rest of government. As a result, this follow-up report has two new recommendations.

Today with me I have, on my far left, Chris Thomas, who was the engagement leader on this audit; Jason Reid, beside him, who's the executive director; and Bill Gilhooly beside me. I'll turn it over to them to take you through the presentation.

In our original report we found that most school districts and colleges were receiving cash from the province before they were allowed to spend it, because of government's legislative and financial control frameworks.

Self-assessments indicated modest improvements had been made to cash flow management, but cash and investment balances in the school districts, universities, colleges and health authorities — the SUCH sector — remain largely unchanged and accounted for 90 percent of the total of all of government. We should note that since the issuing of our follow-up report, there have been positive improvements in these balances.

As part of this report, we updated the analysis from our original report and adjusted for a change in accounting standards. To ensure that we could comment on issues beyond colleges and school districts, we conducted additional work to establish that the key issues identified are common to the entire SUCH sector. We limited our focus on certain operational issues that were in the original report, including investment policies and banking services.

While progress had been made on our 2010 recommendations, the underlying causes had not been addressed. Cash was still being provided to the school districts, universities, colleges and hospitals before it could be used. Government's major initiative to address our 2010 report was the creation of the central deposit program. This program allowed school districts to voluntarily invest their excess funds with provincial treasury instead of with a bank.

The program has reduced some of the costs associated with the excess cash balances, and increased participation could bring down costs significantly. However, when surplus cash arises from provincial funding, it would be more cost-effective if government only provided cash when it is needed and can actually be used by the entity.

Overall, government is still not managing the cash flows of the broader government reporting entity to achieve best value for taxpayers. There have been improvements in cash management, but cash is still being deployed to the schools, universities, colleges and health authorities before it is needed and can be used. It would be more cost-effective if government did not provide cash in excess of what organizations are allowed to spend.

The report contains two recommendations. First, we recommend that government fund organizations based on cash needs and that organizations be permitted to spend the full amount of funding received.

Second, we also recommended that government review and amend its accountability and monitoring requirements to improve the effectiveness of its cash flow management. We are pleased to see that government, in both its response to this report and the recent budget, has signalled its acceptance of these recommendations and is working to implement them.

B. Ralston (Chair): From the ministry, I have Jim Hopkins, the assistant deputy minister, provincial treasury, Ministry of Finance; Ian Aaron, director, school district financial reporting, Ministry of Education; and Colin Fowler, who's the chief financial officer, Ministry of Advanced Education. I'll turn it over to — by seniority and rank, I suppose — Mr. Hopkins.

J. Hopkins: Good afternoon, committee members. It's a pleasure to be presenting to you today on cash management in the province. At the outset, I would like to thank the OAG, the Office of the Auditor General, for the work that they have done since 2010 on this subject.

I think it has been a positive initiative, one which, through some positive collaboration with the office, as well as our collaboration with our SUCH-sector clients — the school districts, schools, universities, hospitals, etc. — has resulted in significant improvement in how cash is managed in the government reporting entity.

I'll frame the corporate response to the Office of the Auditor General's report today and ask my colleagues — who, as you mentioned, Chair, are coming from the Advanced Education Ministry and from schools, Education — to pitch in on questions that you may have that are specific to their sector. Each sector is different
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and had to be dealt with and managed differently because the cash balances which they are in possession of are generated from different sources. So it's worthwhile. If there are questions there, you may wish to put those directly to Ian and Colin.

Just to begin by saying the objective of cash management from the government's perspective is to ensure sufficient liquidity to enable entities to operate. That's a key principle. It's also to flow cash to entities in as close alignment to their need as you possibly can. That also would be a principle. Also very important is that cash that entities do have — and in this case there are significant balances in the SUCH sector — be deployed in a way that betters debt management.

Those are the three things that we were trying to solve for, when we looked at this cash management equation in government.

A key — it was mentioned — is the central deposit program. That really is the key program on which we are relying to leverage smarter cash management — and debt management, therefore. What we're doing is we're encouraging SUCH-sector entities to, instead of depositing their cash with the CIBC bank or ScotiaMcLeod, deposit it with the provincial treasury. That's who we are, in the Ministry of Finance.

We began this program as a pilot. I think you'll know that from earlier reports. We began this in December 2011 following the 2010 report and started to wade in with the school districts about looking at us as their banker. I should say it was not by edict. It was going to be by persuasion. We were going to show them a business benefit in using PT Inc. as your banker instead of CIBC.

Basically, the pitch to them was: "This is your cash. We respect that. We respect that you will, from time to time, want to draw on your cash reserves. We'll make sure that we build systems inside our treasury that will allow you pretty much immediate access. Probably not quite that afternoon, as you might get from ScotiaMcLeod, but two or three days later you can expect that you can draw down on your cash balance as and when you need." That was important.

The other one we did was we entered into legal agreements with these entities, which again respected their governance and their ownership of that cash. That was critical. Otherwise, we felt — given our discussions with some of the secretary-treasurers, in this case school districts — that that would not be part of a compelling case.

We had to show that we were really looking at doing something smart. They could pitch in to help us by depositing their cash, enabling us to use that cash to lower government's borrowing; lower the debt levels; lower debt service costs; lower, from a credit-rating perspective, an agency perspective, our debt-to-GDP ratio, which is a key metric that rating agencies look at, and therefore, put somewhat of a firewall around our credit rating.

I mean, this is not the only thing you do to retain triple-A credit quality. But it's all part of a bigger piece, and doing things smarter helped with our reviews by the rating agencies.

The other thing we did, which is what came out of the OAG report in 2010, is that through the centralized deposit program, we centralized investment management in provincial treasury.

There was a concern that was cited: "What business do these entities, who are school districts…? What expertise do they have in investing? Is there some risk that they could get involved in investing in things that they shouldn't be?" And there were a couple of instances, as you may know, back in 2008 around the meltdown where a couple of entities did get themselves involved in the wrong securities — asset-backed commercial paper being an example of that.

Anyway, this is all part of that too. So it's a positive in terms of centralizing investment management.

The other thing is that because the entities could always draw on their balance as and when they want, virtually, they were maintained liquid, which is what they also needed to do as an operating entity.

The other thing that we've been doing…. You can speak to Ian and Colin more specifically, but I'll tell you that there has been a lot of effort put into aligning the flowing of cash to these entities intra–fiscal year in alignment, as close as we can, to their requirements. That has actually improved. Again, to the OAG's recommendation, picking up on that, that is a by-product of that, and Ian and Colin can talk to you more about that if you wish.

The other thing we did which came out of the OAG report was more collaborative purchasing among SUCH sector entities. To the extent that treasury could pitch in on that, we have helped. One thing we're looking at, albeit it's still in development, is around banking services. We're trying to find ways where maybe entities like the 61 school districts could benefit by more cooperative purchasing as opposed to trying to do one-offs with each bank — better terms and conditions, perhaps, and better pricing. We pursue that. That's still ongoing.

Then, with respect to where we are today, over the last fiscal year, '13-14, we've been very busy in terms of building PT Inc., if you like, as the local banker for the SUCH sector. We ended March 31, 2013, with balances of about $137 million. We closed this fiscal year, March 31, 2014, at about $816 million, and we currently have balances among the SUCH sector of about $1 billion. That's made up of health authorities, who came in for $567 million. That includes all the health authorities. There are six of them. They've all agreed to participate under the conditions I mentioned.

There's $428 million from the school districts. That doesn't include all 60, but it includes 36 of the 60, and it includes all the major ones. I believe it includes all the major school districts.
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The post-secondary — I would point to that sector as one that has still got more work to do. We've got $7 million from that sector. I think we could do better, although, as Colin will explain to you, not all this cash is government money. It's tuition from students. It's from endowments. It's from third parties. So it's a little bit…. This is why I mentioned that the makeup of these cash balances does look a little different from one sector to the next.

This will generate significant interest. It will reduce debt and will reduce debt service cost saving as a result of having these balances on board and reducing how much government has to borrow. So it's a positive.

Another initiative — and it's talked about in the latest budget, in the February 2014 budget — was that government will move with the central deposit program, and they will also engage with entities in the SUCH sector around jointly funding capital projects. That's an initiative…. And again, the status of that in each of the sectors is different. Again, Colin and Ian can amplify on that if you want to learn more about it.

That would be a scenario where money is on balance, on deposit with the provincial treasury. A project comes up — say, a new school wing or whatever the project is — and perhaps a percentage of the project would be funded by the entity, by them drawing down on their cash balance, and the balance is done by the province. That might be a scenario.

It's important to appreciate that net-net really is no different from the central deposit program. It's just reusing the cash for a different purpose. Currently, we're using those same dollars to reduce how much we borrow. If a SUCH sector entity agrees in a joint arrangement with the province to construct together and fund a piece of infrastructure in their sector, the net effect on debt really is no different. But it's a different business arrangement, and that's one that the province is looking at.

The final point here is around the financial framework that governs cash. There are some budget, legislative and financial reporting issues that do impact how cash flows inside the sector.

One of the ones is that government…. They say that they're prepared to consider this proposal from the Office of the Auditor General, but they've been fairly clear that they're not supportive of school districts or individual health authorities going into deficit. That is the government's view on that.

Some of the cash that flows to SUCH-sector entities is for non-cash items. An example of that would be for amortization. Cash can, as a result…. In order to balance the budget, the entity has to use that cash and have it on its books as an offset. What can result is you can have cash then sort of notionally getting trapped in the entity itself. But that's a governance issue, and that's one that the government, I think, is saying it's prepared to give further consideration.

There are some challenges, though, in terms of how this would be reported. I think what government wants…. I've heard them speak about this. They're very clear that they want to be very transparent and simple — so that anybody that picks up the financial statements can understand them — and not add a lot of undue complexity.

The rating agencies would also…. They've always given the province a lot of marks for its transparency and simplicity of financial disclosures. Again, I think that would be something that the government would be balancing, as they might look at an initiative to further consider a different approach to the SUCH sector along these lines.

Wrapping it up, I believe that the government and the Office of the Auditor General are very much aligned in terms of our objectives. Again, I would just reiterate that I think we've benefited from the work that the OAG has done over the past few years, and government in kind has picked up a lot of the good recommendations.

I think we end up in the same place. We want to be in the same spot. We just may have gone about it differently than what, maybe, the OAG had initially envisioned. But the means is less important than the ends.

S. Simpson: I have to say I have some reservations about the recommendations of the Auditor General. I like the central deposit approach. It's an approach that allows and encourages some solution for both parties. I think that that makes some sense.

The concern that I have about the recommendations that I see here is that I know — I know this from conversations with my school district in Vancouver, and I anticipate this is true for other school districts, for other entities in the SUCH sector — that money is really tight for those organizations. And the interest off of this plays a role in how they look at how they support themselves.

You know, it's a fairly modest amount of money in some cases, I think, for individual entities. But I know, when I look at the cuts that were made by the board in Vancouver, some of those were pretty modest-looking cuts, because that's the challenge.

The question that I have for the Auditor General…. I have a couple of questions, but the first question really is: to what degree did the Auditor General's office look at the implications of doing this over and above the stricter, more narrow fiscal question and financial questions about financial or fiscal management that are addressed by the recommendations?

To what degree did you look at the implications of this for those organizations in the SUCH sector, and to what degree did you consult with them in making this determination?

R. Jones: I don't know that we actually consulted with any school district in particular. But the whole premise
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that we're looking at here is the fact that there is funding going out to school districts, health authorities, colleges and universities, where government has to borrow the money at 4 or 5 percent to get that money out there.

The money is out there to fund non-cash expenditures, as Mr. Hopkins pointed out, such as amortization. But the bigger ones are retirement obligations — anything where the cash isn't going to go out until sometime in the future. So that money is sitting there idle, other than it's being invested by the schools into…. In most cases, it was bank accounts at 1½ percent or 2 percent.

So the government was having to borrow it. Remember, this is all one big government. School districts and health authorities, whether they like it or not, are part of government. So we're having to borrow money at 5 percent for school districts and health authorities to earn 2 percent. It doesn't make a lot of sense to me.

This is why this central deposit program does tend to make some sense. The money will stay in there, and the government is basically paying them whatever the interest would be that they would have earned if it had been sitting in a bank account but not having to borrow it in advance. It just makes sense.

S. Simpson: Well, I think the central deposit makes sense, but that's not what I…. Correct me if I'm wrong, but the recommendations you're making don't suggest that. The recommendations that I see you making are suggesting that there be more rigid limits on how money is provided to those entities in terms of "when do you need it?" and provide it, then, immediately or as at-the-last-minute as possible. That's what I see being recommended, not more of the central deposit.

The concern I have is that this is all one large entity, the public service, and I think the central deposit provides some tool to ease the concern you have about interest charges that the government is having to pay on money they're borrowing. But it's also one big entity in terms of what a school district needs, or a health authority, and they're using that interest, quite frankly. I view that as part of their funding, in an indirect way.

They're using the interest on that money they're retaining. Maybe they can get a better interest rate by putting it into the central deposit, but they're using that to offset some of their costs. That seems to me to be absolutely a legitimate issue and a legitimate thing for them to do, unless the government decides that they're not going to allow that source of funding, and it's a legitimate source of funding.

So my question, again, is: was that a consideration as to how this affects the funding, when you consider direct and indirect sources, for those entities in coming to those recommendations?

R. Jones: Thank you, Member. I guess how I would react to that is if that interest is being used — which it was, to fund expenditures that school districts have or health authorities or whatever — then that should be in the budgeting process that's put forward to government each year, and government should be funding that.

I mean, it seems like a perverse way of funding health care or education, by paying out money ahead of time, borrowing it at a higher cost. To me, it should be just part of the budgeting process that the school districts and health authorities would put in to the ministry at the start of the year and get approved.

S. Simpson: Well, I'll just say there's a lot of perversity in how we fund those sectors, some of us believe. But this is a less explicit way to get at that funding. If you want to do it in a more explicit way…. But that's a government policy issue and a decision for budgeting by government as to whether they want to readjust that. My concern is what you recommend essentially takes or potentially takes money away from those sectors through this indirect funding source they have, of interest.

R. Jones: You're absolutely correct. It would take. Yeah, if our recommendation was followed, it would say…. One of the parts of that recommendation it talks about as well is there's certain legislation that wouldn't allow that to happen right now anyway in the education sector, because everything, I believe, has to be funded, if I'm not mistaken — or close to it.

B. Gilhooly: If I could just add to that, one of the premises of our report is we said that government should try and prevent these situations from happening by fixing the systemic issues that are at the very source of them. They shouldn't have to rely on interest earnings to fund the service. They should actually be getting full access to fund all the money that's been given to them for the services.

As we've talked about in our two reports, the funding that's allocated for services gets trapped, and this pooled money eventually…. Sometimes the interest earned on that ends up going to service areas, but I don't think it was ever the intention in the whole fiscal framework for that to be happening to the extent that it is.

S. Simpson: If they could be made whole in some way, I think that would be a positive thing, because I don't see your recommendations taking us to making them whole. That's just my comment.

K. Corrigan: I thank Shane for his comments, because they're very similar to the comments that I would make, having been a school trustee for nine years in the district
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of Burnaby. It was a fairly significant amount of money in the district of Burnaby. I don't believe…. As I recall, it wasn't just putting money in the bank. It was actually investing it, and we had a very skilled secretary-treasurer who seemed to do quite a good job with it. So really, essentially, it would be a clawback.

In those districts I know that the perspective of the Auditor General's office is, "Is it the overall most effective use of the money," but for the school districts it's their bottom line. It's "what are we getting every year, how are we managing to balance our budgets, and how are we getting the maximum amount of money that we can get?" I think it's a really legitimate concern.

I wanted to ask: if money is put in the central deposit program, what is the money that actually…? Is it like just investing in a bank account and giving good returns of 1½ or 2 percent? Are districts balking at that because they could previously actually invest? Or I thought I also heard you say that there is a separate investment function as well. I'm just trying to figure out exactly how it works.

J. Hopkins: It's just that the central deposit program, by virtue of its existence, is centralized investment management. That was my point. Before, it was quite…. Well, it still is. It goes on. But the SUCH-sector entities were investing, really, without many guidelines, although more recently there have been guidelines issued from the Ministry of Finance and also from the responsible ministries to ensure that there are some guidelines around investment.

This program — what it's really saying to these entities is: "Currently, you're investing at that 1½…." The rates are usually based off of prime.

We're saying to them, and they wouldn't be agreeing unless they believe that they were being made whole: "You're currently investing in a bank account or instruments with an external financial institution at X. We would rather have you put those same moneys with the province. We will use those moneys and return to you a return which makes you whole, compared to what you would have been yielding had you been investing with CIBC or Scotiabank." Then we are using those moneys to offset the government's borrowing requirement.

Where we would be borrowing…. Every year will be different. Currently the assumed borrowing rate for financing in '14-15 is 3.93 percent. That's the budgeted rate that we're expecting our portfolio to cost us in this fiscal year.

There's a benefit to the province in terms of expecting a lower debt service cost, but also, importantly, it's that we are borrowing less. The stock of debt has gone down, and then that looks better to people who look at the province in terms of affordability. Rating agencies like this as well.

K. Corrigan: You mentioned briefly the idea of joint funding of capital projects. There's been some confusion, although maybe it's becoming clear now, about exactly what type of funds would be involved. Maybe a little more explanation…. I've heard working capital, which is essentially cash, right? But my understanding from talking to school districts is that that's money that usually is planned for something. And this would be an added expense for school districts. I have concerns about that, obviously.

My question is whether or not there is a concern that if districts are now going to be asked if they have cash on hand — or it might be in the central deposit; it would include that, I would assume — they're going to say: "Well, that won't be happening anymore." You're going to lose your deposits in the central deposit because they're going to say: "We're going to figure out a way to spend it, because we're going to have to fund capital projects, which we've never had to do before to any great degree." Then the program is not going to be effective anymore.

I. Aaron: For school districts, we've had a number of conversations with districts when it came to sharing of the costs for a capital project. Primarily, it's been the Lower Mainland districts. They tend to be the ones right now with more of the upcoming capital projects. None of these have yet been a supported project by government, but it sort of comes up the list as far as the ranking.

Primarily Lower Mainland and primarily seismic-related projects. The way that we tend to begin the conversation with the school district…. Usually in the discussion it will be the superintendent, secretary-treasurer and those types of people. From the ministry side, we have admittedly old data that we start the discussion with.

We go to your last financial statements that have been audited — in this case June 2013 numbers. We then determine that we know where your cash is. We know what accounts payable you have to use to spend to keep your creditors at bay. We know what other items you've reserved cash for — whether it's a land capital issue where a developer in the municipality has said they've set aside money for a future school and that's cash held by the school district. So there are a number of claims for that cash.

We try to sort of get down to a dollar amount first,
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which is tentatively determined as being available. That starts the discussion. Then the discussion goes where the school district knows much better as to what their plans are. All of our school districts plan many years out, especially related to the capital projects.

As you mentioned, the government funds the big major capital projects, but school districts are left primarily on their own to deal with some of the smaller capital items. We have some annual facility grants, but by and large, they have to figure out how to find some of that money.

They plan that years out, and that's where we tend to come up with a smaller amount of cash that's determined as being available to contribute to our capital project. Districts have told us that this discussion with cost-sharing is delaying some of their plans for a capital project, because they're concerned that if we use this money for this capital project, it's not going to be available for something else.

So there has been that discussion ongoing, but we're still sort of very early days in a lot of the discussions. What the districts have said right off the bat is that we will contribute what we can to the central deposit program, and we've seen that quite a bit already. That's where they're still planning ahead. That money is still available to them, but it hasn't been converted into bricks and mortar, so to speak.

K. Corrigan: Just a quick follow-up on that. It sounds to me like the ministry would not be suggesting that if there was a project that was being saved for — a new school board office or something — then that money would not be pulled out as something that was available.

How about this one? I know in our school district what we have done in the past and what continues to be done is, because funding has been so difficult for the education system, the district has held money from one year to the next, saying "We are not going to spend all our money this year because we know that the budget is going to be basically flatlined next year. We want to smooth things out over a few years so we don't end up with huge cuts in any given year."

Would that money be considered safe from being pulled back for a capital project?

I. Aaron: That would be money that would need to be discussed as to what levels of priorities the district would have. What is a higher priority? What is upcoming for future previously planned operational or even capital priorities versus a new school, a new facility? It's part of the difficult discussions that we've been having.

School districts are the only part of the SUCH sector — schools, universities, colleges, hospitals — that have the benefit of being able to run a surplus in one year and roll it forward into future years. Because that future year…. They're actually in a deficit, just for that one year, but not an accumulated deficit. That's where we've seen secretary-treasurers do a lot of that planning. We're trying not to step on that, because it helps the sector manage, but it makes the discussions difficult.

K. Corrigan: Yeah, well, I mean, essentially what it is, is grabbing money away that would not have to have been paid by the school districts in the past, which is basically a cut.

B. Ralston (Chair): We may not resolve that one today. It's an ongoing discussion.

S. Sullivan (Deputy Chair): I was just wondering about the low cost of money now and the ultimate benefit that all this gets. Also, you've mentioned 2008, I guess — the problems. Those were some investments that went sideways. Some money was lost. Are we confident that we have guidelines in place to prevent that from happening again?

J. Hopkins: Following that episode…. Basically it was the asset-backed commercial paper, where there were a couple of Crown entities — ICBC was one; UBC was another — that purchased some of these investments, which, as you know, went sideways. They weren't as they were billed. They were compromised. There were losses.

It was, in my mind, a material number. I've forgotten exactly what the number was, but it was millions that were lost.

Following that instance, the Ministry of Finance — it was the Crown agencies secretariat at the time — did some research on what were best practices. There was a set of guidelines produced. It would be on the website, I think, for the Ministry of Finance. The ministries responsible for the various sectors…. I know in the case of Advanced Education there were some specific guidelines that have been issued on the investment side to help.

Currently, I think, in that sector alone about 97 percent of the money that's under administration has board-approved investment guidelines, which are all part of that interest in generating best practice.

You can never say never, for sure, but definitely a lot has happened around governance to protection.

B. Ralston (Chair): I think the other part of his question was about the low rate of interest. I would assume that that means the savings to government are less, because the borrowing cost is less. I think that's what he was…. Is that what you were getting at, Sam?

S. Sullivan (Deputy Chair): Yeah. I guess I was thinking it would be…. If we had a higher interest rate, this would be a much more material discussion. But right now,
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with interest rates so low, it must be pretty….

J. Hopkins: Not as much. We didn't approach this from sort of a…. It was an opportunistic…. I think we see this as being part of the landscape for now, in the low-interest-rate environment and in higher-interest-rate environments.

For example, the province of B.C. at 30 years would borrow at about 3.6 percent. That's pretty low, and to be celebrated, really. Take advantage of it. The government is doing that, but that's just where markets are. But there's still a positive spread between, say, 3.6 percent at 30 years and where, say, prime less 1½ or 1¼ percent is trading, which would be, like, 1½ percent. It's still a positive spread.

I've put myself on the list next. I just had the Clerk look up the loss at UBC. It was a write-down of $18 million on asset-backed commercial paper.

I think ICBC was less, and Fraser Health was quite a bit less, so it wasn't inconsequential.

I wanted to ask the Auditor General…. I think you had referred to this report as illustrative of the benefits, potentially, of more rigorous follow-up on Auditor General reports. I'm wondering if you can explain more specifically how this report illustrates the benefit of a more rigorous approach to follow-up.

R. Jones: Normally, this report, when we put it out in this year to the Ministry of Finance as a follow-up, would have been a self-assessment. The self-assessment would have come back. I don't know what it would have come back like. It probably would have been partially implemented or fully implemented or something, and we would have left it at that.

By us going back in, what we have done, I think, is that we've reinvigorated the discussion around the recommendations we had in the original report and got the discussion going again. We saw some very positive benefits from actually re-auditing the recommendations that we had previously put in place, much like we do when we do a financial audit and we have management letter points — where, if there hasn't been any progress in the first year, the audit committee takes a look at it and says, "Why not?" and then asks management to do something.

We look at it the next year and say, "Okay, they still haven't done anything," and more pressure is put on to get something done — if they're valid recommendations, which we thought they were. It just adds a bit more pressure to management to react to our recommendations.

B. Ralston (Chair): Certainly, the tone of the report is that without this intervention — if I could call it that — or this more rigorous re-audit, the ministry certainly, the sense is, would not have been motivated to make some of the changes that they've now made. Now, I don't know whether they would characterize it that way. That may be something that they would prefer to characterize as ongoing review, but certainly that's the sense and the tone of your report. Is that, in your view, one of the benefits of a closer follow-up process?

R. Jones: If that was the tone that came across, I don't think that was the way it was intended.

R. Jones: Yeah. I think what we were trying to get at was that, as I said, it stimulated the discussions again. We got into it in more detail than we probably did at the first blush, which was in 2010. Like in many cases when we discuss things with management, we got to a good point, I think, where management actually could see the benefits of some of the new recommendations we had put in place too. I'm just very pleased that management has acted upon the recommendations. I think they are very worthwhile.

B. Ralston (Chair): Well, certainly, I think the Finance Minister mentioned this in the supporting budget documents this year as taking credit for your work, in the sense that it saved, as I believe the calculation was, $20 million — which was nothing to sneeze at. It's certainly, I think, more than your annual budget, so you certainly earned your keep, if I could put it that way.

R. Jones: Thank you, Chair. Just one other point I was going to make was that I think it also has resulted in a much better relationship with treasury. Something that we've been trying to build on with all of government over the past year or year and a half is to add value to the taxpayers. I think in this case it has.

B. Gilhooly: If I can also add, the reason we started this up, too, is that we did the work in 2009, reported it in 2010 and did two follow-ups. We just wondered: was government moving fast enough on our recommendations? I understand they did the pilot, and that was a more stepped approach, but we just wondered. Each year that went by was another year of opportunity lost for those savings going forward. Over five years, those savings might have been as much as $80 million.

That's one of the reasons we wanted to step in, start a new discussion about that and find out some of the reasons, especially the reasons for some of the framework or upstream issues about why the problem will still happen in the future if there are not changes made to the mechanisms that are creating the problem in the first place.

That kind of gets at one of the questions the member
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had earlier about why they have to rely on interest revenue rather than being able to spend all the money that they receive for services. Those are some of the reasons we've decided to step in and raise the profile of this issue again.

J. Hopkins: I would just say again that the involvement of the Auditor General was quite positive. Right from the get-go it was a good 2010 report, and the updates and the collaboration that we've done in the interim have been good. I think we took the recommendation back in 2010 seriously back in 2010. We waded into the central deposit program, albeit that was by our design. Maybe a little different than was originally envisioned by the office, but again, I think we're getting to the same spot. We were quite clear in moving there.

You might have observed slow progress. But it was quite intentional that we weren't going to be…. The direction I had, and others here, was that we were not going to be doing this by edict. It was going to be done by…. This required building relationships, talking to people who don't always talk to the Ministry of Finance and have, perhaps, different images of what that ministry is up to. You've got to show your credentials.

We went through that process with them, and last year really got traction. As I say, we went from $137 million to $860 million in the space of a year, and we're now up to $1 billion. It probably will rise before this year ends. It's been good progress. We've benefited from the collaboration and got some good ideas from Mr. Francis and his group.

B. Ralston (Chair): I had one more question. You mentioned that on deposit, in addition to money that was to be allocated for operating expenditure by the entities, was also… I think you gave the example of tuition fees and endowments. If you're holding those for, presumably, universities and colleges, you're paying a competitive rate of interest, I assume, in order to remain an attractive option. Is that correct?

J. Hopkins: That's right. We've some good conversations with the big schools in the post-secondary world. We're hoping that soon we'll learn that we have some new deposits coming. So far we only have $7 million. But it's really not so much that it's blocking it. What we're offering…. Again, it's just like what we went through with school districts. You've got to take some time to build relationships and get standing with that group.

C. Fowler: Yeah. And I would just add to that. Provincial treasury started, I think, with the school districts first and pushed this process out. With the universities and colleges, we've really just started the conversation over the past few months with them. I think they'll see some benefits, especially your smaller colleges that are a lot like school districts in their size and sophistication of investment practices. They'll probably benefit the most from this and will probably be wanting to jump on board.

I think universities will also see some benefit. But what we see a lot of times with our bigger universities is that they can earn some of the same kinds of returns — this is a voluntary program — on their own. They have large investments. The endowments that you mention are quite sizable. They can earn some fairly lofty returns on their own. It's yet to be seen whether they'll also contribute, but I think some of our smaller colleges will be the ones that can benefit like school districts have.

B. Ralston (Chair): My final question is: do you draw on, in addition to your own expertise in, I take it, cash management…? Even then, do you draw on the expertise of BCIMC for some of their understanding of short-term money markets and investment returns there?

J. Hopkins: Well, we do, but you see we wouldn't want to put our money with BCIMC.

J. Hopkins: That would go against…. Then we couldn't use it for the purpose that we're wanting. But BCIMC are constant partners with us, and they're managing other portfolios. There's always that interchange and exchange on a lot of different investment fronts that BCIMC does for the province.

D. Eby: First of all, I'd like to say, with the caveats obviously noted by my colleague from Burnaby–Deer Lake, congratulations. I'd like to join my colleague from Surrey-Whalley in saying congratulations in your work on this. It seems like a very solid initiative that's saving taxpayers a lot of money, so congratulations on that.

In reviewing the report, one thing jumped out at me, which was in relation to school districts: the uptake. It wasn't 100 percent; it was around 60 percent. Certainly, an issue would be trust. In Vancouver our school district had a sizeable reserve that they used to make sure that if international students didn't show up one year, for example, they wouldn't run a deficit, because they're not allowed to. They were advised by the ministry, "Well, we'd like you to use this now for seismic upgrades," which was never the practice before.

I guess the question that I have is in relation to, essentially, deposit insurance. If I'm a school district and I put money in with the Ministry of Finance and then suddenly
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the policy changes, who's to say that I'm able to issue a cheque on my account anymore, or will it be seized by the government? Is there some kind of guarantee for me as a school board member that if policy changes, I'll still be able to access that money? I know I'll be able to go to the Bank of Nova Scotia and get it, but am I going to be able to go to the bank of the Ministry of Finance and get it?

J. Hopkins: Well, I'll turn it over to Ian there. But one thing that's important…. Again, when we've built our relationship, the important thing we felt was very key was that we deal with this on business terms. A legal agreement was built for, really, the benefit of all school districts, or reviewed by — I've forgotten the name of the organization — an association of school trustees, sort of a subset. They sort of gave blessing to the form of our legal agreement.

What that did was it respected the governance and, importantly, their ownership of the cash, and had practices built into it, protocols, around their ability to draw on it.

I. Aaron: To add to that, for the school districts, if they ever felt that they wouldn't be able to get their cash back, we would never have seen even a dollar.

As of yesterday, just to update one of the statistics, 38 school districts out of the 60 had a combined amount on deposit of $491 million, and there are a couple of Lower Mainland districts that are still sort of waiting. But there was that initial hesitation of: "What are they up to?" It's not quite the "government — we're here to help you." This was one of those that….

A few of the districts did…. Actually, I think out of the first six districts that put money on deposit, two of them were Burnaby district 41 and district 39, Vancouver. That created a lot of goodwill from the other school districts, sort of going: "Okay. Well, if they're putting in money, there must be some trust there." That's worked well.

Also, part of that trust was, and the business case of what Jim was saying…. We didn't want any school district to liquidate an investment that was making them more money than what they would earn through provincial treasury. That's also part of why it's not maybe that much more than $490 million right now.

There are some items where school districts have to set aside — other entities, also — money for employee future benefits, so this is something that's far out in the future, and no, it shouldn't be just sitting in kind of a cash chequing account. It should have a longer-term investment return and a greater interest rate. Those are right now still with the school districts investing that at banks — and very conservatively, I might say. All the secretary-treasurers are very conservative as to their investment practices.

D. Eby: I appreciate you raising that issue of the employee benefits obligation because that's my next question.

Page 14 and 15 of the Auditor's report sets out a little bit of a history around the implementation of GAAP rules for post-secondary, in particular. I can tell you, from my meetings with presidents at universities and colleges, the level of frustration around government reporting entity rules and their obligations to set aside money to guarantee future benefit obligations that would only not be guaranteed in the event of a calamitous economic collapse that would have bigger problems than simply SFU being able to meet their employee benefits.

For schools that have serious maintenance issues and obligations for students providing services, to set millions of dollars aside for a contingency that seems far-fetched, at best, is incredibly frustrating for them. And for students who want to have a student fee to pay a mortgage on a new student union building, not being able to do that because that guarantee brings in the government reporting entity rules is a rat's nest of problems. I can tell you that firsthand.

I see on page 15 that the Auditor General, I'm pleased, has identified, for one small piece of this, a potential solution for post-secondary schools. It's complicated, it's advanced, and it's above my pay grade, but it seems like it's a solution that doesn't create any problems for the consolidated revenue fund, doesn't create a deficit, addresses the balanced-budget legislation but allows universities and colleges the ability to deal with their future obligations in a way that's more constructive and doesn't tie up resources, doesn't strand this cash that could be used for practical things.

Can you advise on why it is the position of government that either this isn't workable or, if you think it is workable, why it hasn't been implemented to date?

J. Hopkins: Well, it basically goes back to, I think, government just saying at this moment that they'll consider it. They've been fairly…. Just as this describes it, it would result in the government organization going into a deficit, and government said: "We don't want to see that."

It's an interesting idea. Certainly, it's going to get consideration inside of Finance. I can't say where people are landing on that consideration at the moment, except just to say that the history behind it has been that the tolerance for entities — not just school districts but post-secondary as well as health authorities — has been low for deficits.

D. Eby: But this is a notional deficit created by a change in the accounting rules, right? This isn't the school spending more than it takes in. This was a change in how things are recorded on paper that creates a deficit on paper — and for the government creates no deficit whatever, from how I read this paragraph.

Can you advise what stage of consideration things are
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at? Is this sitting on somebody's desk for approval? Or this totally stalled out: it will not go ahead because of how the accounting language has been used — that this is a deficit, but it's not actually a deficit?

S. Newton: Just to be clear, there's a difference between expenditures and expense. There's a difference between cash and what gets funded, which is different from expenditures that somebody might incur. Best example — I'll use depreciation, because it's easy: a building is depreciated over a period of time. It's a non-cash expense so it's recorded in your income statement as an expense over time. Government is funding that on behalf of school boards when they're flowing out money to meet the budgets. That's what you would call a stranded-cash item.

In relation to employee future benefits, there's still the requirement — that would never go away — that that is an expense of a period of time that needs to be recognized. That won't change. What's being discussed is: what's the accountability mechanism between the institution and government for how they're going to hold them to account over a period of time? Typically, it's been a larger, categorical, no-deficit type of discussion.

The piece that has yet to be discussed…. I'm not party to the level of discussions. I know that when it was originally talked about two or three years ago that that mechanism would need to be looked at. That's the accountability mechanism between the ministries and the institutions for how they're going to hold them to account for how they spend. That's where your flexibility may be. They would still have their external financial reporting for summary purposes that wouldn't change. It would just be: if we're talking deficit in terms of no-deficit reporting, what is loaded into that calculation, and how we are going to do that?

The question would then be that if we're not going to hold you to account for expenditures related to employee long-term benefits, then maybe we're not flowing funds out for that either. Maybe the calculation for what gets funded has to change as well as the reporting back. Those have legislative implications that need to be dealt with as well. I can only speak to the accounting-mechanism side. I'm not too sure where those discussions are at in relation to ministries working with their SUCH-sector entities to clarify that.

D. Eby: As I read the Auditor General's report, it suggests to me that there is wasted money, that there is stranded money that is not being used to its best and highest capacity as a result of an accounting rule.

As I hear you, Mr. Newton, the suggestion is that there may be legislative implications and that it's a process. My question is: has that process started to have those conversations, address the legislative issues, and so on, to take advantage of the opportunity that's been presented here by the Auditor General's office?

S. Newton: I know it was originally discussed, but I'm not aware of where we're at with that level of discussions. That might be something that has to get dialled back to you.

D. Eby: If you could get back to the committee with any update on that, that would be very helpful.

D. Eby: I know it's a huge thorn in the side for presidents of universities and colleges and student unions as well.

L. Throness: A question for the Auditor General — a couple of them. Coming back to the school districts which hold $1.2 billion in cash and investments — I'm reading from page 12 — "the School Act requires the ministry to pay the districts 100 percent of approved funding by the end of June. Greater benefits could only be achieved with changing this requirement in the School Act."

Would better cash management to school districts require a change to legislation?

R. Jones: I guess that would be a question for government to address. I guess the only…. And it's getting back to David's question as well. One of the ways that I could see not flowing the cash out and still retaining the revenue that you need to have to not have a deficit on the books would be to set up a payable receivable — have the government set up an account payable and an expenditure. Have the school district have a receivable and revenue.

For those non-cash expenditures, then once those cash needs are required, you get the cash. You get rid of the receivable. That is a way of doing it without flowing the actual cash. That seems really simple to me, but….

R. Jones: Well, because it seems so simple, I'm not sure why it wouldn't work. But to me it's just a bookkeeping entry, if you get down to it. If the school districts have to be funded for every one of their expenditures, then that's a way of doing it. If they don't need the cash, you have a receivable until you need it. It just seems simple to me.

But as far as the legislation, that would be something government would have to answer.
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I. Aaron: If I may. One of the parts of the School Act says that if government has announced what the operating grants are — the $4.7 billion or so for school district operating grants — they must flow within the school district's fiscal year. So by June 30 they must flow.

Right now we're looking into seeing whether we can alter that legislation. But that always takes time. Right now there's a bit of a workaround solution to that, in that we have the central deposit program.

What we have been doing for quite a number of years is trying to flow the operating grants throughout the year in more of a percentage amount. For every two weeks we provide operating grants to school districts, we try to flow it to them in a manner that more closely represents how they spend their money. Over 87 or 88 percent of their expenditures is salary, so in communication with the school districts, they told us biweekly: "Here's about the percentage of money that we need throughout."

By the time June comes along, we've pretty much provided almost all of the funding. So we've been trying to get that dollar amount as low as possible, but there are some things that we don't know about until the end of the year. So there is some of that year-end funding.

Right now what can happen is that…. I think our last operating grant payment is about June 22 or 24 or so. The school districts are then able to, because the act says we have to provide them the cash…. They can then deposit it back into the CDP, and it's kind of in one pocket out of the other — kind of manner. So it gets to that without changing the legislation.

I. Aaron: We're looking into whether we need to or whether this solution is adequate.

L. Throness: My second question is to the Auditor General as well. We have all this money, and I think there's still about $3 billion sitting in accounts that's designated for education, but it's not benefiting students in any way. You know, you can only realize the benefit of the money if you actually spend the money on education, and it's not being spent right now. It's sitting in accounts. Perhaps it provides peace of mind for school trustees, but that's the only benefit. It may be a very expensive insurance policy for a school district.

Why should school districts be allowed to not spend all the money on education that they get? Like, there's a requirement for the government to give 100 percent of the school grants, but there's no requirement for a school district to spend 100 percent, and that seems to me kind of odd.

R. Jones: Well, and that's why, in our one recommendation, we say that they be permitted to spend the full amount. But the reason they're getting the money is because it is for a non-cash expenditure that they're required to be funded for. Once they get that and it sits there, it's in their…. Because it's a balanced budget, it's just cash that's sitting there.

If they were to then try and take that cash the next year, for example…. School districts are probably a bad example because they are allowed by ministers' letters to run a deficit, but if you were to take a hospital authority, for example…. If they were to take some of that funding and try and use it to — I don't know — bolster up expenditures in the acute area of the hospital the next year that wasn't budgeted for and created a deficit, they're not allowed to do that.

That's the problem. To just take that cash and apply it to operating expenses in the following year when it wasn't budgeted for in the budget that they get funded for, it could create a deficit, and they're not allowed to do that.

J. Hopkins: That's where the CDP program fits. Albeit there's a tremendous amount of machinery around the accounting, it's got…. From our perspective — from the treasury perspective, to sort of make it simple — we just said: "Well, let's not stare at this problem forever. Let's do something about it and put the cash…. It is what it is. It's there. Put it to work to a good purpose."

This is what this initiative is all about. You don't get yourself tied up in accounting rules that currently haven't been entirely our policy but are still on the burner, still being considered, perhaps. This is just a practical way of dealing with it, and it gets you to the same spot. And, you know, it just takes any cash that's there, excess cash, and puts it to a good purpose.

L. Throness: Yeah, but I would just point out that there's still a lot of money that's not being spent on students and on education that's just sitting there.

B. Ralston (Chair): I'm going to suggest that we, at this point, take a brief recess of, say, five minutes or so. We still have a couple of further questioners on this matter, and then we'll see. I'm thinking we may want to adjust the agenda again because I'm not sure that there will be time to consider both the follow-up report, which is only Mr. Jones presenting, and our other report, where we have a number of witnesses here, at least three. Perhaps I can briefly consult with the Deputy Chair while we take a quick break, and then we'll reconvene.

B. Ralston (Chair): We'll recommence continued questions on Working Capital Management Since 2010.

K. Corrigan: I just wanted to ask a question about magnitude. According to the report, there's $1.2 billion in cash and investments. The updated number in the central deposit program of that is about $491 million. So is it more than $1.2 billion now, or is that number up to date? Do we know or have a sense?

J. Hopkins: The current number is $1.3 billion. About $1 billion of it is for the SUCH sector — health authorities, schools and post-secondary. That's $1 billion, and then there's about $300 million that is for two Crown corporations that have put money on deposit with the provincial treasury.

K. Corrigan: Okay, so the report says that at June 30, 2013…. This is on page 12, towards the top, the second paragraph under "Central deposit program." It said that the $244 million, which it was then, in the central deposit program "represented approximately 20 percent of their total $1.2 billion in cash and investments." Are you saying that the money has reduced significantly? It's $1 billion now for all of the SUCH?

J. Hopkins: No, sorry. As I read the statement, it's talking about school districts — that $244 million. The school….

K. Corrigan: I'm not talking about in the program. I'm talking about overall — how much money there is overall, not deposited in the central deposit program. I'm talking about what the number is now. I don't know whether this is available. The $1.2 billion in cash and investments — what's that number, updated?

I. Aaron: Okay — just so we're kind of on the same bit there. That was June 2013 audited figures, so of course, school districts don't have the audited figures yet. That being said, I don't envision it to be too different for June 2014, as far as the total cash and short-term investments amount. It's probably not going to be too far off of $1.2 billion.

The number that would be significantly greater, the updated figure for June 2014 for the amount on deposit here last year — the $244 million mentioned in the report…. Today it's $491 million. I would expect it should be just a tick over $500 million at the end of the year.

Sorry I interrupted you, Mr. Hopkins. It was a different number that I was looking for.

It's good to get those updated numbers. It shows the success of the deposit program. And just a reminder. It's probably in the report somewhere, but I can't remember what we're at for education funding overall. What's the overall amount of money that goes to school districts — the range?

I. Aaron: Overall, non-capital grants would be…. I think it's just right around $5 billion annually.

I. Aaron: Yes, but that $1.2 billion will have been accumulated over time. It's not the same dollar. Their makeup tends to be fairly similar from year to year, whether it's money that's been set aside for future capital projects that the school district is internally funding or if it's an accumulated surplus that they're planning on spending in future years.

K. Corrigan: Right. I have no further questions. I just wanted to get clarity on the numbers, so thank you very much for that.

J. Yap: I'm interested in how, physically, the deposit program works. Does the entity have to actually open an account with a central deposit group?

Where I'm going with this is to ask a sort of follow-up question. Given technology today, with systems and software and where cash management is in the banking and financial services industry, would it not be fairly simple to create a kind of consolidating-type accounts system where the entity, say a school district or a university, would be…?

You've made mention that there's a growing level of trust in the program, and people are comfortable placing deposits with you. With that, and the technology that I assume is available to the province, is there not the opportunity to create a consolidator-type program where it's very easy to transfer money with you folks and, as needed, they can draw it out?

J. Hopkins: Well, I believe that that's basically what we have. In substance, that's really what we have. It is a central deposit program. As I say, it's preceded by an agreement, a legal agreement between the province and that entity. They have an account, an account number. They get monthly reports from our group. The banking and cash management branch is the name of the branch.

They generate reports in terms of income earned that month so that they have the ability, back in their respective entities, to account for what's happening on the
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interest income side of their deposits. Then, if there's a withdrawal within the month, we have the…. We ask for, I believe, three business days' notice, but if it's an emergency….

J. Hopkins: What we say is: "If you really need it, we'll do it overnight." We can deliver you the money, if it's of an emergency variety. We're not encouraging people to sort of test us and just draw money. If three days is good enough…. I think in most cases, if it's a sizeable sum, their forward planning would tell them that they need the money, and they could be telling us two weeks before.

We try to make it as service-friendly as possible. Probably CIBC could turn it around on the day, but heretofore, that's never been a problem.

J. Yap: I'm wondering: what is holding back some of the entities from participating? Could there be the element of relationships — that they've had maybe long-term relationships with people at the different financial institutions and there's some of that? I'm just wondering.

J. Hopkins: It might feature. One thing I think of is that our program is offering, basically, a savings account. It's daily interest. Like Ian mentioned, there are parts of their portfolio that may be better suited to longer-dated investment. We're not….

Our program to date…. Maybe that will be the next edition of it, but to date we focus on…. Really, it's a savings account program. It's for daily interest.

There are some parts of these entities' portfolios where they would prefer to be investing longer than two or three years, that term — or maybe five years or so. We don't have that offering available to them. There's a part of the portfolio that we're not actually getting access to currently.

J. Yap: Getting back to the first part of my question, in terms of the physical handling of this, the cash actually has to transfer over to an account with you?

J. Yap: With technology today, there's no ability to designate the funds held in account at a financial institution to become designated as part of your operation?

J. Hopkins: Probably the money is with CIBC. We use them all the time here now — or BMO. And they must transfer…. BMO will transfer that money to our account. We have relationships with all these banks, and they would just deposit it to our account, in the province's account. Then we can actually…. But we do need real money. It's not a digital entry. It's real cash. It has to be. We can then use it in lieu of borrowing and also give them a return.

J. Yap: It has to be a physical transfer of funds. It can't be a notional or a virtual transfer.

J. Yap: You made the comment earlier in your presentation that there are implications for the credit rating of the province — how we manage our cash. I'm wondering if you can expand further on that. Given that the cash balance, if it's not sitting in government, it's sitting in the balance sheet of an entity — say, in the SUCH sector — when it's completely consolidated, it would be brought into the asset side for the consolidated statements, right? It doesn't change the net borrowing, does it?

J. Hopkins: The cash balances aren't netted against our debt. Those cash balances, if they're with Bank of Montreal or Toronto-Dominion Bank or an external…. It's an asset, for sure, and you'll see it in the public accounts. But it's not netted against our debt. For purposes of calculating the province's net debt, we don't get the benefit of those assets.

J. Hopkins: Right. And what we do with those moneys is we use them in lieu of our planned borrowing requirement for government, either operating…. Although government now has balanced its budget, so we're not going to be doing that anymore. But we definitely have…. Government debt-finances capital for the SUCH sector. That money could be used to avoid incurring that debt.

What that does is it reduces the calculation of net debt, and from the rating agency perspective, then, you'll see the benefit in some of the credit metrics that they follow. For example, debt-to-GDP is a key one that they follow. Just a basic rule of thumb is that $200 million debt, plus or minus, moves our debt-to-GDP ratio by 0.1 percent. I also underscore, this is not….

J. Yap: On that point, would the rating agencies take that into consideration? That the real…. If you accounted for $4 billion sitting in the cash accounts of the SUCH sector that, really, ultimately are government funds, taxpayer funds that have that impact on the debt-to-GDP ratio.
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J. Hopkins: Debt affordability is a key metric that they use for opining on an entity's rating. The more affordable the debt burden, the better your rating. In this case we measure by debt-to-GDP. That's viewed positively.

J. Yap: Right. So when…. I don't know if you're directly involved in presenting to the rating agencies, but whoever it is, would they have a line there saying: "And by the way, we have $4 billion sitting in SUCH sector that, at the end of the day, could be considered taxpayers' funds"?

J. Hopkins: Yeah. Well, what we point out to them is…. The thing is that it's not, right? But what we can say now, because we do use the cash to reduce our debt, is we see the benefit of it in a more attractive ratio — lower debt-to-GDP. You know, they say: "That's a good result. We like that result."

I'll give you an example. Moody's put the province on a negative outlook in December 2012. We're still triple-A, and that rating is still triple-A, but the negative outlook was their observation that debt accumulation and, at the time, a slower economy was troubling them. To the point, debt accumulation, debt burden is something that they look at.

I don't want to overstate this, as this is not what the triple-A rating is sitting on, is the central deposit program, to be sure. But it's helpful, right? I mean, it's all part of things that government can do in terms of managing its fiscal plan and helping itself to a better rating.

M. Dalton: I met with one of the local school boards a couple of weeks ago, and one of the issues that they brought forward was funds being released in June and the problems they had with that for their budgeting purposes for the following year. My point around all this right here is that as far as the funds being released, is there a difference of opinion between the school districts and, say, the report of the Auditor General of when the cash should be made available?

I know that there are counts — September 30 and also, I think, January 31 — when the numbers are looked at and money is released. Maybe you can just address the issue of discrepancies between the school district as far as when the funds are released, and also specifically on the issue of the last release at the end of June.

R. Jones: I think I'll let Ian try this one first, because it's the way that the ministry does flow the funding.

I. Aaron: I'd be safe to say that all school districts would prefer if government provided the full amount that we announce on March 15 at the beginning of their fiscal year of July 1 — that everything goes. They would much prefer that. We, on the other hand, do not.

As you said, there are several big counts throughout the year, in that we fund students as they're coming in, depending on the programs that they're at. The biggie, of course, is the end of September — what students have arrived, what their composition is and the different various funding levels that they have. Then there is another one in December, another one in February for special needs students as they come in through the year.

Throughout the year it's continuous enrolment for distributed learning, so there's little bits of money that come out, additional funding — part of that overall $4.7 billion. Then there are other things that we….

That's sort of part of the holdback amount that we'll try to release, announce with specific dollars attached to it. Out of the $4.7 billion last year, I think there was maybe about a $55 million or $60 million holdback. That holdback is to be used for unexpected enrolment and composition issues that come out throughout the year.

I. Aaron: Yeah. So the districts are having difficulty in that they'd like to spend that as early as possible. But then there's the issue, of course, that if they spend it all too early and then more students come in before the end of June and there's no additional funding from the ministry, then they're on the hook for paying for the services to provide education for that student.

It's a bit of a…. We're trying to find a balance between the conservatism that everyone wants to have on this. That's where it's for that last payment in the year, that as long as the districts know that they'll get that last payment…. So they get all of the money that we have announced for them. They'll get it in the fiscal year. But if they don't need it yet, they can deposit it back with us with that central deposit program.

This is also for payroll issues. Because the bulk of their expenditures are on payroll, that last payroll in June — albeit currently for school districts it's a little bit less right now — then that's going to really only happen the first week and second week in July. So they really don't need that cash just yet. But there is that push-pull from the school districts and wanting as much announced and in-their-pocket funding as we can do. I don't know if we're ever going to get to a point where there's going to be a perfect match.

M. Dalton: Just one more topic right here. You mentioned, as far as our borrowing rate…. You said 3.6 percent and then 5 percent. So I'm going: "Wow." I mean, I looked at the five-year rate right now for borrowing. For a mortgage it's 2.5 percent. Is it really that level that our
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borrowing costs are? I would have thought that we would actually have a very preferable borrowing rate on a provincial scale, especially considering our triple-A credit rating. Is that our borrowing cost — 3.6 percent?

J. Hopkins: Yeah. It's the best rate you can get in the country, among provinces. Alberta might get that rate, but that would be it. That's a very good rate. It's about 20 basis points…. At 30 years, it's about 18 basis points lower than what the province of Ontario borrows. At ten years, it's about 19 basis points lower. The ten-year rate is 3 percent. The five-year rate is about 2 percent.

J. Hopkins: Yeah. It's the lowest among Canadian provinces. Alberta might be within a basis point of that.

J. Hopkins: Their debt-to-GDP ratio is quite a bit lower than the province of B.C. as yet — it's probably single digits — but rising, I think, given the way they're borrowing of late.

S. Sullivan (Deputy Chair): I'm just wondering about trying to…. Maybe we should cut this one off and move to the next one.

B. Ralston (Chair): Yeah, we're just getting there. I think that was the last question.

Just before we go, though, I did understand that B.C. Central Credit Union was also involved as one of the province's bankers as well — and, I thought, to a considerable degree. You've mentioned a number of commercial banks, but I thought B.C. Central was also involved. Is that not correct?

J. Hopkins: The province does business with B.C. Central, for sure. Yes, for sure we do.

B. Ralston (Chair): I was on a credit union board at one point, so I thought I'd bring that up.

Thanks very much, then, for that presentation. If members could just stay in their seats, we'll change over and we'll begin the next one. I don't see how far we'll get on it. We're running a little low on time, but as the vice-Chair has helpfully pointed out, we need to get on with it. Thank you very much.

B. Ralston (Chair): We're reconvened, and we're now going to deal with the Auditor General's report entitled Information Technology Compendium, dating from January 2014. I'll turn it over to the Auditor General to make a brief presentation and introduce the staff that have worked on this file.

R. Jones: Thank you, Chair. Before we get into this report, I just want to mention to all members that we're putting out a follow-up report tomorrow. So watch for that one. It actually has….

R. Jones: It'll be exciting. Believe me, it'll be exciting. It has five actual follow-ups where we did do audit work instead of just our normal self-assessments. So watch for that one. One of them is B.C. Hydro. One is looking at risk management in government. One is looking at the Agricultural Land Commission. One is looking at the timber management report that we did. The other one is a health benefits one, and then all the rest of the follow-ups.

If you wouldn't mind taking a look at it and providing me with feedback if you think the process is better, worse, the same, whatever. I took a little leeway before this meeting, and we did do a slightly different follow-up than normal.

R. Jones: The IT Compendium report. The government spends more than $500 million on information technology each year to deliver essential services. With technology comes risks, such as the risk of personal information being accessed. However, government must be proactive and ensure that sensitive information is protected, transactions are processed correctly and systems are free from lengthy interruption.

This compendium report contains three reports. The first one is an overview of capital spending. It's more of an information piece. The second one is a report on the status of general information technology controls. It's more of a self-assessment. The third one is an actual audit of web application security.

With me today I've got Cornell Dover, beside me, who's the assistant Auditor General in charge of the IT area, and David Lau, who's the engagement leader on this audit, this compendium, as well. Cornell and David will take you through the presentation.

There are three separate pieces of work in this compendium report. The first report is An Overview of the B.C. Government's Capital Spending in Information Technology. The second report is The Status of General Information Technology Controls in the Government of British Columbia. The third report is Web Application Security Audit.

The first report, An Overview of the B.C. Government's Capital Spending in Information Technology, reviews how investing in IT is an essential part of the government of British Columbia's fiscal plan. About $500 million has been spent annually on IT infrastructure and systems since 2008-09. Large multi-year IT projects in recent years included e-health initiatives, the integrated case management system and a gaming management system. These projects are summarized on page 8 to 9 of the report.

Implementing new IT systems is complex and costly. Government traditionally invests in IT infrastructure and systems through capital spending. Since early 2000 government shifted its procurement approach for large IT projects to one that undertakes a joint solutions approach with the private sector. Under this arrangement, government would not own the software licence or require upfront capital investment for implementation of the system. Instead, the system would be financed through the ministry's annual operating budget for the term of the vendor contract.

Government has invested a significant amount of public money in large IT system projects in recent years. This is an important area where our office plans to focus in our future work.

The second report in the compendium is The Status of General Information Technology Controls in the Government of British Columbia. IT is critical in delivering key government services such as health care, education and in processing billions of dollars in transactions each year. This involves handling sensitive information that impacts the daily lives of British Columbians.

British Columbians expect government to have controls in place that ensure the sensitive information that they collect is protected, transactions are processed correctly and systems are free from lengthy interruption — in other words, that government services are available when they need them. General IT controls help ensure proper development and implementation systems and help maintain the integrity of systems, data and operations.

The purpose of this project was to determine the health of general IT controls expressed in terms of maturity level that each entity in the B.C. government has attained for their computer systems and IT environment, particularly regarding confidentiality, integrity and availability. The entities covered in this project included ministries, Crown corporations, universities, colleges, school districts and health authorities. Although this was not an audit, we conducted the project in accordance with the office's internal quality standards and processes.

We asked 138 B.C. government entities to complete a self-assessment questionnaire adopted from the maturity model defined in the COBIT 4.1 framework, an internationally accepted framework for IT governance, management, control and assurance.

We compiled the results of the completed self-assessment forms and sent a management report to each entity, showing a comparison of their results with similar entities. We also sent a copy of the report to the government's chief information officer, summarizing the results by general IT control area and type of entity.

We focused on nine general IT control areas in COBIT 4.1 which are critical to maintaining confidentiality, integrity and availability of information and systems. These nine areas are explained in detail on page 12 of our report.

This is Exhibit 2 on page 14 of the report. It shows the number of entities that assessed themselves at each level per general IT control area. Overall, we observed that the average maturity rating for all nine general IT control areas is 2.9.

The average maturity levels between 2.2 and 2.9 were assessed for IT control areas such as assessing and managing IT risks; managing changes; ensuring continuous service; ensuring systems security; and monitoring and evaluating IT performance. The average maturity levels between 3 and 3.4 were assessed for IT control areas such as installation and accrediting of solutions and changes; managing third-party services; managing the physical environment; and managing operations.

Each year our office, along with a number of private accounting firms, audits the financial statements of every entity in the provincial government. It is the largest financial audit in British Columbia.

At the end of these financial statement audits, internal control weaknesses, including general IT controls, are communicated in a management letter to each government entity through senior management, boards and audit committees. We analyzed IT-related findings from audits of the financial statements in comparing results from self-assessments.

The analysis indicated that 70 percent of IT-related findings related to ensuring systems security. This is consistent with the results of the self-assessments in Exhibit 2, which show that the same general IT control areas have a below-average maturity level of 2.8. Thirty percent of the IT-related findings pertain to general IT control areas, such as managing changes, managing third-party services, ensuring continuous service and others.

Given our knowledge of the structure and complexity of certain entities from our annual financial and IT audit, we noted that certain government entities likely rated themselves too high or too low in certain areas. We plan to conduct further work in this area.
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We encourage each entity to take six steps shown here in this report. We also encourage the office of the chief information officer to continue assisting government entities in achieving and/or improving the maturity levels for the general IT controls.

We look forward to conducting these assessment projects annually to keep British Columbians informed about the health of government's IT controls. The information in this report will serve as the foundation for our work in succeeding years. For the next audit cycle, we will selectively review and validate completed self-assessment questionnaires. This will involve examining supporting documents and processes to corroborate the self-assessed maturity levels.

This report is the third and final report in the Information Technology Compendium.

The government of British Columbia uses its websites to interact with its citizens, provide program information and offer on-line services. On-line services include, but are not limited to, applying for the Medical Services Plan, social assistance, permits and licences; legal services; completing a land title search; and researching property assessments.

There are two important components of a modern website: web applications and web browsers. Web applications are programs embedded in a website and designed to perform specific tasks. The website is an environment that allows customization through a diverse range of web applications, such as web mail, a search function, registration forms and shopping carts.

Because web applications can capture confidential and sensitive user information, it is imperative that government has appropriate security measures to protect web applications from cybersecurity threats.

The purpose of this audit was to determine whether the government is effectively managing and securing public-facing web applications from cybersecurity threats. This audit focused on the overall governance function of the OCIO and, to some extent, the operational relationships between the OCIO and the ministries.

The government of British Columbia has approximately 1,500 web applications, of which 437 are public-facing. We scanned 80 of the public-facing web applications, which was approximately 20 percent of them. We carried out our work between September 2012 and July 2013.

We conducted this audit in accordance with the assurance standards recommended by the Canadian Institute of Chartered Accountants. We used traditional audit techniques for assessing the overall IT governance and management areas. We selected public-facing web applications hosted within the government network that were identified as business and mission critical and that had a high or moderate impact to the health, safety, security or economic well-being of British Columbians.

We observed that the OCIO developed and implemented policy and standards for the development of web applications in late 2012. Of the 80 public-facing web applications scanned, 56 had one or more critical, high or medium vulnerabilities.

We determined that public-facing web applications are not adequately protected from cybersecurity threats. These vulnerabilities could allow cybercriminals to access confidential information or cause malicious activity. There is also high risk for loss of confidential information and service availability.

Although the OCIO has taken some actions in addressing the security of web applications, they are not sufficient to protect web applications from cybersecurity threats.

We provided many recommendations to specific ministries to correct vulnerabilities noted in our website scanning.

We also made four recommendations to OCIO: incorporate a compliance review of web application development policies and standards as part of its annual review of ministries' self-assessments; establish a process to ensure the accuracy and completeness of its web applications master inventory list; work with ministries to facilitate regular vulnerability scans for all public-facing web applications; and establish a formal process to promptly investigate and follow up on results of vulnerability scans for all public-facing web applications.

This concludes our presentation of the Information Technology Compendium report.

Now I'll turn it over to Ian Bailey, who's assistant deputy minister, technology solutions, office of the chief information officer, from the Ministry of Technology, Innovation and Citizens' Services. That's a long title.

I. Bailey: Thanks very much. I did want to thank the Office of the Auditor General for the work that they have done with us. It has been a very effective working relationship on this audit, and it has allowed ministries to make material improvements in the security of their web applications. We look forward to continuing that effective working relationship and improving the overall security of web applications.

As I said, the report provides very valuable information for us. We take it seriously — the protection of all IT assets.

The first part was on the IT capital spending. The report correctly identifies that we do spend a significant amount of capital on IT, including large IT systems such as integrated case management and eHealth. It makes reference to alternate financing deals, where we are leveraging the investments of the private sector.

We have established a strategic procurement office
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within the office of the CIO that is looking at innovative ideas of leveraging that.

The Canadian marketplace is not as mature as some other jurisdictions, and we're carefully watching how the marketplace improves in order to leverage those much broader shared resources. It's critical that we ensure the privacy, security and legal implications of using private sector resources, and so we're going about that very carefully.

We have also established within government a very formal and robust IT capital review process. The office of the CIO manages the review, analysis and recommendation process for all IT capital projects. We assess projects for alignment with existing government IT architecture and standards and relevance to the latest improvements in information technology in the marketplace, as well as alignment with government direction. The office of the CIO makes recommendations to a council of deputy ministers that review all of these business cases and make recommendations for whether they go ahead or not.

The second report, on the maturity of IT controls, does provide valuable information for us to improve our information security program. I will say that we do have a very strong information security policy based on ISO 27002, which is really the benchmark for information security policy.

We also do an annual information security review with all ministries. They're required to assess their compliance with our information security policies, and each year we review three of those self-assessments to ensure that there's evidence backing up their assessments. We will continue working with our ministries to improve the overall security posture of IT in government.

Regarding the Web Application Security Audit, as I said earlier, this has enabled us to allow ministries to make material improvements in the security of their web applications. As the report points out, we did establish standards for ministries in the development of web applications in December of 2012, and ministries are now starting to achieve those security controls for their web applications.

The recommendations that the Office of the Auditor General has made — we accept those. We are busy working at implementing those recommendations, and I'll just go over the progress on where we're at in responding to those recommendations.

On recommendation 1, which was recommending that our office incorporate a compliance review of those new web application standards, our ministry is implementing web applications in compliance with the standard.

We are working closely with ministries right now on what an actual web application standard for our annual information security review should look like. We expect to complete that by September, and by November we'll have that implemented in what we call our AISR system, which is the tool that ministries use to report. We'll have that in place, and so for our next reporting cycle they will be reporting on their compliance with the web application development standard.

On recommendation 2: "We recommend that the office of the CIO establish a process to ensure the accuracy and completeness of its web applications master inventory list." We accept that. Right now we're working with ministries and our suppliers, such as HP, IBM, Microsoft and others, to ensure that we have the right requirements for implementing a new inventory list.

We'll make an implementation business case funding decision in September, and we expect to have this new operational system in place next year. Then we also need to work with ministries to implement all of the management processes to maintain that information.

Recommendation 3. "We recommend that the OCIO work with ministries to facilitate regular vulnerability scans for all public-facing web applications." Here we are developing a scanning standard that ministries can use, can follow, giving them detailed guidance on how to undertake a scan. We have established supply arrangements, so we have done procurement of services from security firms to provide this vulnerability scanning capability for all of their web applications.

After the ministries had remediated all the issues that the Office of the Auditor General had found, we in turn — the office of the CIO — procured services from security firms to assess all web applications across government. We have provided those scanning reports to the ministries, and we're working with them to ensure that all of the those vulnerabilities are addressed.

Recommendation 4. "We recommend that the OCIO work with ministries to establish a formal process to promptly investigate and follow up on the results of vulnerability scans for all public-facing web applications."

We have a documentation tool for doing security threat and risk assessments. All ministries are required…. Whenever they make major changes to systems or implement new systems, they have to document all of the security risks and all of the security controls that they are applying against those. They're required to do that for all applications.

We are introducing a new component into that tool where, when a scan is done, the results of that scan are put into the tool, and now ministries are required to report on how they have addressed those scans. We expect to have that in place January 2015. We're working closely with ministries on that item as well.

In conclusion, I just wanted to say thanks again. We have made these material improvements to the security of all the web applications in government, and we'll continue to improve on that. In addition, we're working closely with ministries on their compliance with information and security policy, and we're making good progress in the overall improvement.
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G. Heyman: There's not a lot of time left. I want to focus on two parts of the compendium. One is IT capital spending, and the other, if there's time to get to it, is the status of general IT controls. I'm somewhat troubled, not by the report so much or the response to it but by whether the report and the response actually get to some of the key issues that would concern value for taxpayers.

It seems to me the ministry talks about continuing to seek greater efficiency and return on investment by joint partnerships with the private sector and relying on ministries to essentially self-audit and working with them to improve those processes, but there's lots of evidence over the last while that neither of them are working particularly well.

Let me offer a couple of examples. There was a lot of concern a month and a half ago about problems with the integrated case management system. It was in the process of crashing repeatedly and putting vulnerable families at risk, making it very difficult for social workers and others to do their jobs. But the fact is that there's a long and troubled history with that particular system, including a significant cost overrun.

I think it was originally budgeted for…. It's currently budgeted for $182 million, I believe, with an additional $12 million to deal with some technical and corrective issues. There's some debate about whether that was an internal contingency in the original figure or not or whether that money is actually being spent on various staff support coming in from around the province to test the system.

Nonetheless, the original estimate for the project was $107 million. When the ministry originally was putting it out to tender, I believe one of the questions that the vendor asked was whether they needed to show that the system they were proposing was being used for similar purposes in other jurisdictions. The government simply said no.

The fact is that this system has repeatedly failed to do what it was purchased to do. If you look at materials that at one point were on the government website, the ministry website, there were different phases for the implementation of the project. I believe by phase 3 and continuing through to the current phase, it was targeted to be supporting 6,300 users.

In response to questions in the Legislature when the system was down at one point, I think both the Minister of Citizens' Services and the Minister of Social Development and Social Innovation said: "Well, it's back up and running. It's supporting" — I think one day it was — "2,300 users." Another day it was, "Okay, we're where we should be," and it was around 3,300 to 3,500 users, which is significantly below what was actually laid out in the implementation plan for the project.

That's one example of a significant cost overrun, repeated failures of a system and a failure of the contractor to be able to actually deliver what was anticipated by government.

Let me pause before I go on to other questions and simply ask Mr. Bailey if…. You said earlier that government is continuing to seek to increase return on investment by seeking joint partnerships with the private sector.

In view of this example and other examples that I'll get to in a minute — including BCeSIS, which eventually had to be replaced after an expenditure of significantly over $100 million, and a couple of other systems that went significantly over budget — why does the government continue to believe that you can achieve a greater return on investment by partnerships with the private sector?

Let me just throw in one other very significant example. A decade ago the Ministry of Health contracted with Maximus, in a very controversial move, to manage health records. There are other issues I'll raise about that particular contract in the context of general IT controls.

But the rationale that was given at the time, and I remember it very clearly, was that the government needed to do this because it could not afford to replace legacy systems that were aged and not functioning. By entering into this contract with Maximus, those legacy systems would be replaced at no upfront cost to the government.

Now, the Auditor General report, the name of which…. It had to do with health systems. I can't remember the exact name, but we discussed it a few months ago. It noted that, notwithstanding that this was part of the contract, only one legacy system was replaced in a timely manner. The other was replaced six years after the date it should have been, and the third one still wasn't replaced.

I'll offer these two examples and ask you to tell the committee what measures are being put into place — in terms of self-auditing or criteria around partnerships with the private sector that are supposed to increase return on investment, not decrease it — to ensure that we don't repeat these disastrous experiments in public-private partnerships that have cost taxpayers hundreds of millions of dollars and not delivered the services that they were contracted to do or that the public in B.C. require.

I. Bailey: First a point of clarification. You talked about repeated crashes of the ICM system, which is not true. It's not what happened. There were numerous, I would say, minor technical misconfigurations throughout the very complex network environment.

There was some network infrastructure within the Calgary data centre that failed, not directly part of the ICM system. That failed on…. I can't remember the date. I think it was April 28. That resulted in a reduced capacity. That switch failure resulted in reduced capacity of the ICM system.

On the following Monday, my understanding is that in order to protect the ICM system, because of this…. It was kind of a combination of reduced capacity and a lot
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of required use of the system. In order to protect the integrity of it, the system was shut down for several hours. Then we worked…. It was back up after, I think, four hours and was then made available in reduced capacity for, I think, two weeks. After two weeks the system was put back together, and we're back at full capacity.

It's a very complex environment involving desktop computers and the software on those. Those have to be configured properly. The network itself is vast. We have over 4,000 network end points on the system. It's a very vast and widespread network over the entire province.

There were some specific issues in certain locations. There were some other issues. There was a slight misconfiguration of the firewalls in the data centre that contributed. There was a number of contributing factors that led to that. We have improved that. We still have some improvements to make on that. Our ministry — the Ministry of Technology, Innovation and Citizens' Services — is going to be working very closely with Social Development and MCFD to get to that next level of reliability of that system.

It is not fair to just point out one supplier. It's a very complex environment involving multiple suppliers of desktops, networks. We have multiple suppliers in the networks. We have a different data centre provider, and then we have an integrator that is designing how the application should function. It's a very complex environment.

I, myself, am aware of Siebel case management systems being used for case management in other jurisdictions. I'm aware of that myself. I think when we get to the next stage we will have a very stable and effective system.

The system has been very effective in Social Development. I understand there have been challenges in MCFD. I don't work there. I don't have direct visibility into that. I'm just saying what I know as the assistant deputy minister responsible for the shared infrastructure.

In terms of leveraging private sector investments, I think that the focus has changed slightly. When I talked about the Canadian marketplace and services that are becoming available, I'm not talking about partnerships, per se, that are specific to a single implementation. I'm talking about leveraging the private sector services that are provided to many different private businesses and the public sector — provided those services are built in Canada, available in Canada, so that we can meet our privacy legislation. That's a change in focus, I think, in terms of partnership.

G. Heyman: No, it doesn't. As tempting as it is to engage in a discussion about whether, when a minister claims that ministry staff are doing it the old-fashioned way with pencil and paper, that constitutes a system crash or a minor interruption, I won't.

I asked specifically about the failure of a private sector contractor in two separate instances to deliver on deliverables in their contracts or to meet the implementation plan that was posted on the ministry website and if, in fact, in these significant examples of very costly contracts, people were not only not delivering but apparently getting away with it.

What you proposed as a form of self-audit or internal control that would ensure that taxpayers in British Columbia actually were getting a better return on investment, not a worse return on investment….

I. Bailey: I don't know the specifics of the projects that you talk about. I can't talk about the student information system, for example, that I think you referred to.

I did mention this IT capital approval process, which is new. I can't remember how many years it's been in place. It predates my time in this role. Maybe Stuart knows.

I. Bailey: Two or three years. So we do have a new process for evaluating these projects. I think these are the kinds of considerations that this process is going to…. Our office, the office of the CIO, is looking at what's happening in the marketplace, looking at these projects — all of the projects that are proposed — looking for opportunities for common services and for doing things in a different way. That is a new process that wasn't in place before.

G. Heyman: I'll ask one short question on security — general security of IT controls.

One of the reports from the Auditor General highlighted that while British Columbians have been continually assured that part of the contract with Maximus was that data would be stored only in servers in Canada and only be accessed within Canada, the Ministry of Health, in fact, had relied on the company itself to audit this and other factors of their performance and could not, in fact, offer real assurance that this promise to store Canadians' data in a secure manner within Canada was actually being kept.

I believe the Auditor General has been following up with the Ministry of Health, who said they were working on what they needed to do to gain assurance. But I'm assuming that is yet to be completed, or I probably would have heard from the Auditor General, given that I'd expressed an ongoing interest.

This has been going on now for ten years. It was raised in an audit over a year ago. It's still not fixed. Would you care to comment on the priority of assuring British Columbians that our data is secure, in light of this specific contract?

I. Bailey: I don't know the details of the specific con-
[ Page 414 ]
tract. That's within the Ministry of Health. I think everything that I've said today demonstrates that my office and the government consider the protection of personal information critical, and we're doing more and more to do that.

S. Gibson: My question has really been answered. I don't want to belabour it, and I think we're running out of time here. My question is really not as complex as my colleague's, but I will ask it, if I may, then.

One of the things we discussed when the system came in with regard to the social services…. That system came in last year, and I was privileged to be able to attend that meeting and meet with the staff. One of the issues that came up was…. I don't like to use the cliché, but in government we tend to have silos, and our desire to protect security and confidentiality often creates, sometimes fabricates, silos between ministries where there should be more openness.

I'm wondering, in your capacity, sir, are you always conscious of that? One of the desirable characteristics of a good government system is that ministries need to communicate with each other for the health and protection of vulnerable people in our society that would otherwise slip through the cracks because of the lack of communication between the various systems. That was really my only question. It's a brief one. I know you can probably answer briefly as well.

I. Bailey: I think you may know that the Freedom of Information and Protection of Privacy Act defines a public body as a ministry, and they're only able to share information through an information-sharing agreement. They need to keep the information that is in their custody about British Columbians separate from other public bodies' information.

That being said, where it's appropriate and they have the authority to share that information, we need to have processes and tools in place to enable that sharing. That does make the IT response to that quite complicated, because by creating these silos, as you say, it creates a barrier to sharing.

That is one of the objectives of the B.C. Services Card infrastructure: to safely enable that kind of information-sharing where it's appropriate, where it's authorized, in a safe way and in compliance with the legislation around privacy. The services card infrastructure is designed to do that. It's going to take some time, though, before all of the existing IT systems are able to leverage that. First, we have to register everyone with a services card, and then that has to be integrated with each government program in order to facilitate that.

S. Gibson: That's good. This is a supplementary comment as we close. I'm comforted by that, but I think one of the things is, of course, that in government the people that most often need help are often the ones that don't access the system or self-identify. That's always the challenge, I think.

I. Bailey: Yes. I think, though, that as a person enters a service…. Whether it's in Children and Families or Social Development or Health or Education, when they enter, when they're on-boarded into that service, that is the point in time where their correct linkages have to be set up. We're going to have some work to do over the next five years or so — I'm not sure how long it'll take — to ensure that those linkages are put in place to allow that information-sharing to happen very safely and securely. It's going to take some time to do that. That's not the way systems were built ten years ago.

B. Ralston (Chair): I'm going to have to intervene. It is four o'clock, and I know that that's our adjournment time. There are members who have flights, and I think staff have flights to catch and arrangements to make.

You'll be delighted to hear that you're going to be welcomed back again to finish this at a future date. Before we adjourn, I did want to say that we'll endeavour to arrange some future dates, likely beginning in September. So I'll be in touch with the vice-Chair and members of the committee to begin that discussion.

S. Robinson: I just wanted, perhaps, to put on the next agenda the frequency of meetings, if we can have a discussion. I'm finding it pretty frustrating that we're not having frequent enough meetings, and I'm concerned about the backlog.

B. Ralston (Chair): Point noted. Perhaps we can address that when we agree on our next schedule. Thank you very much.

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Chair:	* Bruce Ralston (Surrey-Whalley NDP)
Deputy Chair:	* Sam Sullivan (Vancouver–False Creek BC Liberal)
Members:	* Kathy Corrigan (Burnaby–Deer Lake NDP)
	* Marc Dalton (Maple Ridge–Mission BC Liberal)
	* David Eby (Vancouver–Point Grey NDP)
	* Simon Gibson (Abbotsford-Mission BC Liberal)
	* George Heyman (Vancouver-Fairview NDP)
	* Vicki Huntington (Delta South Ind.)
	Greg Kyllo (Shuswap BC Liberal)
	* Mike Morris (Prince George–Mackenzie BC Liberal)
	* Linda Reimer (Port Moody–Coquitlam BC Liberal)
	* Selina Robinson (Coquitlam-Maillardville NDP)
	* Shane Simpson (Vancouver-Hastings NDP)
	* Laurie Throness (Chilliwack-Hope BC Liberal)
	* John Yap (Richmond-Steveston BC Liberal)
	* denotes member present
Clerk:	Kate Ryan-Lloyd
Committee Staff:	Ron Wall (Manager, Committee Research Services)

Witnesses:	Ian Aaron (Ministry of Education)
	Ian Bailey (Ministry of Technology, Innovation and Citizens' Services)
	Cornell Dover (Office of the Auditor General)
	Chris Duffy (Emergency Management B.C., Ministry of Justice)
	Cam Filmer (Emergency Management B.C., Ministry of Justice)
	Colin Fowler (Ministry of Advanced Education)
	Bill Gilhooly (Office of the Auditor General)
	Jim Hopkins (Ministry of Finance)
	Russ Jones (Acting Auditor General)
	David Lau (Office of the Auditor General)
	Stuart Newton (Comptroller General)
	Paul Nyquist (Office of the Auditor General)
	Pat Quealey (Emergency Management B.C., Ministry of Justice)
	Jason Reid (Office of the Auditor General)
	Chris Thomas (Office of the Auditor General)

REPORT OF PROCEEDINGS (Hansard)

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REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
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