Public Accounts — Issue No. 20 — Thursday, June 4, 2015 (HTML)

10-20 ICBC Salon, Morris J. Wosk Centre for Dialogue
580 West Hastings Street, Vancouver, B.C.

Present: Bruce Ralston, MLA (Chair); Sam Sullivan, MLA (Deputy Chair); Kathy Corrigan, MLA; David Eby, MLA; Simon Gibson, MLA; George Heyman, MLA; Marvin Hunt, MLA; Vicki Huntington, MLA; Greg Kyllo, MLA; Mike Morris, MLA; Lana Popham, MLA; Linda Reimer, MLA; Selina Robinson, MLA; Laurie Throness, MLA

Others Present: Carol Bellringer, Auditor General; Stuart Newton, Comptroller General

2. The Auditor General informed the Committee that her office would be reviewing information related to an inquiry raised on June 3, 2015 by George Heyman, MLA and would provide an update to the Committee.

3. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Integrated Case Management System (March 2015):

• Len Dawes, Assistant Deputy Minister, Corporate Services Division, and Executive Financial Officer

• Rob Byers, Executive Director, Business Alignment, Information Services Division

• Kathleen Asher, Executive Director, Strategic Planning & Initiatives, Information Services Division

• Wency Lum, Executive Director and Chief Technology Officer, Information Services Division

5. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Follow-Up Report: Updates on the Implementation of Recommendations from Recent Reports (June 2014) — BC Hydro: The Effects of Rate-Regulated Accounting:

• Cheryl Yaremko, Executive Vice President, Finance and Supply Chain and Chief Financial Officer

• Janet Fraser, Senior Vice President, Energy, Regulatory and Business Planning

• Les MacLaren, Assistant Deputy Minister, Electricity and Alternative Energy Division, Ministry of Energy and Mines

6. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Follow-Up Report: Updates on the Implementation of Recommendations from Recent Reports (June 2014) — Audit of the Agricultural Land Commission

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
Other Business	735
C. Bellringer
Office of the Auditor General: Integrated Case Management System	735
C. Bellringer
A. Chiang
L. Barker
C. Dover
M. Zaranski
S. Newton
Office of the Auditor General: Follow-Up Report: Updates on the Implementation of Recommendations from Recent Reports	754
C. Bellringer
R. Jones
C. Yaremko
L. MacLaren
M. Sydor
C. Fry

B. Ralston (Chair): Good morning, Members. There is an agenda before us, but before we begin consideration of our first report, there was an item that was deferred to this morning’s agenda from any other business at the end of the meeting yesterday. I’ve had a discussion with the Auditor General, and perhaps she could just respond briefly to or summarize our discussion. I’d rather she summarized it than I did. That would probably be more accurate.

C. Bellringer: Yesterday the topic came up — not to get into the summary of what that was — of, in effect, the Patriot Act issue. I was wondering whether this was something that…. Was it a PAC request, or was it something that we would just consider whether or not we do?

There’s really no issue, from our perspective. We’d like to follow it up. We’re going to look into it. We’ll do something, and then we can let you know what we’ve found from that. If that isn’t sufficient for what you’re looking for, then perhaps you may want to revisit it. But at this point we are going to just go and ask some questions and find some answers. We’ll proceed with that and then let you know where it stands.

B. Ralston (Chair): Thank you. I think that’s satisfactory, so we’ll move on to the next item.

B. Ralston (Chair): The report we’re considering today is the IT audit entitled Integrated Case Management System. That’s a report that dates from March 2015. Let me introduce…. There are a number of officials here. The Auditor General is here, obviously, and Cornell Dover, the assistant Auditor General. Ada Chiang, director of the IT audit, will be carrying the presentation on behalf of the Office of the Auditor General.

A number of officials are here from the Ministry of Social Development and Social Innovation: for the record, Laurie Barker, assistant deputy minister, information services division; Len Dawes, assistant deputy minister, corporate services division, and executive financial officer; Rob Byers, executive director, business alignment, information services division; Kathleen Asher, executive director, strategic planning and initiatives, information services division; Wency Lum, executive director and chief technology officer, information services division.

From the Ministry of Energy and Mines, I think for the possibility of questions, Marcin Zaranski, executive director, transformation portfolio office. It looks like we’ve cleared out the information services division over in Victoria and moved them all here today.

In any event, I’ll let the Auditor General begin the presentation, and then we’ll hear from the ministry in due course.

C. Bellringer: The integrated case management system, or ICM as it’s commonly known, is used for the delivery of social programs and stores personal and, in some cases, highly sensitive information for more than 2½ million people. Ada will get into it in more detail momentarily.

During implementation of ICM, the implementation team ran into challenges. Unfortunately, this is a common occurrence with large IT projects. Whether in B.C. or abroad, private sector or public sector, large IT projects often struggle to meet their initial goals. This includes project management expectations, such as time, cost, scope and quality, as well as broader expectations regarding outcomes, benefits and value.

In our more recent IT audits of government’s large IT systems, including ICM, JUSTIN, CORNET, we are seeing common themes and challenges. We’re planning to release a report later this fiscal year where we will take a look at that and review what the common risks to IT projects are.

A. Chiang: Good morning. This is short presentation of our report on the Integrated Case Management System.

First, a brief overview about ICM. The integrated case management project was launched in 2008 as a partnership between three ministries: the Ministry of Technology, Innovation and Citizens’ Services; the Ministry of Social Development and Social Innovation; and the Ministry of Children and Family Development.

The project objectives were to integrate more than 50 aging legacy systems into ICM and improve information-sharing and case management across the social services sector. ICM is used for the delivery of social programs, such as child welfare, income assistance and employment services. ICM is a significant system that stores personal and, in some cases, highly sensitive information for more than 2.5 million individuals.

For many reasons, including the importance of ICM to so many British Columbians, we decided to audit two specific aspects of ICM. The first was access management. We chose this area to determine whether ICM was properly managed to protect client information from inappropriate access. The second area we focussed on was data quality management. We wanted to determine whether data was managed to ensure the quality of client records in ICM.
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During our audit, however, it became clear that we also needed to look at the project scope and cost of implementation. We conducted a review to determine whether the ministry completed the ICM implementation as initially planned.

Let’s look at our third area of focus around project scope and cost first. Overall, ICM has not met expectations. Government spent $182 million, and the system has not fulfilled key objectives. ICM was completed in November 2014, at which time government reported that ICM was completed on time and on budget.

However, we found that the project was incomplete. Only one-third of the legacy assistance initially identified for replacement was replaced. Legacy system replacement was a big part of the initial business case for ICM; yet in the end, these systems were only partially replaced.

The ministry reduced the scope of ICM implementation to stay within budget. This also means that ICM and the legacy systems must now run concurrently, which impacts cost. More importantly, this undercuts the original vision for a single, integrated system across the social services sector.

The reported project capital cost for ICM was $182 million. As with any systems implementation project, there were also operating costs associated with development, implementation and maintenance of ICM. Not all of these costs were available during our audit, as the project was not yet complete at the time. As a result, we were unable to confirm the figures for the capital and operating costs or determine whether they were within budget. Therefore, the report includes a recommendation for the Ministry of Social Development and Social Innovation to prepare the full costs for the life of the project.

Now let’s look at the two areas we audited: access management and data quality management. In our examination of access to ICM, we found that personal information was not fully safeguarded. Access to client information was not always limited to need to know. In addition, essential monitoring was not in place for detecting inappropriate access and activity.

The risk is that client information could be inappropriately accessed without the ministry’s knowledge. It is important to protect information from inappropriate access to prevent loss of privacy and ensure confidentiality.

Also of concern was the quality of client records in ICM. We found that information used to identify clients in ICM was not always accurate or complete and duplicate records existed. The ministry has processes in place to address data quality issues, including the establishment of a data quality team and the completion of a large-scale remediation prior to implementing the final phase of ICM.

While data quality was being managed, the ministry could do more to improve quality on an ongoing basis. Incorrect client identification could result in inaccurate record updates, and working through poor-quality data can reduce valuable time staff spend with clients.

In conclusion, the report contains eight recommendations, and they are presented on page 9 of the report. These recommendations summarize 46 more detailed technical recommendations that we provided to the ministry in October 2014. The ministry has indicated that many of the 46 recommendations have been addressed or are in the process of being addressed.

L. Barker: Yes. Good afternoon. My name is Laurie Barker. I’m the assistant deputy minister and sector chief information officer for the information services division. I’d like to thank the committee for the opportunity to provide context and an update on the audit conducted and our progress to date.

I’d like to thank the Auditor General for reviewing access controls and data quality as well as their feedback on the high-level scope and cost of the project. Many of the access controls and data quality findings validated the ICM phase 4 activities in progress at the time of the audit.

The ministry takes seriously security and access controls. We have taken a risk-based approach to the issues identified in the audit, and we have made immediate changes as the auditors brought those issues to our attention. Many of those issues were corrected prior to the report’s publication.

I’d like to provide some context and background for our sector as well as the ICM project itself. SDSI, or Social Development and Social Innovation, and CFD, or Children and Family Development, spend approximately $3.8 billion annually on key social programs and provide services to over 200,000 clients. After repeated calls to improve information-sharing, the ICM project was struck, which would enable transformation within this sector.

This was a key priority in government, and it spanned over five years — more if you consider the approval processes in government.

A deputy minister project board provided oversight for all aspects of the project. The Ministry of Technology, Innovation and Citizens’ Services — MTICS — runs government infrastructures such as networks, workstations, servers, etc. MTICS had accountability for the stability of ICM and was the initial lead of the project from 2007 until 2010.

The leadership then moved to the Ministry of Social Development and Social Innovation. This was because this project was about business transformation, not about
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technology. Children and Family and MTICS remained major partners as we went through this process.

As the audit pointed out, ICM was an ambitious and complex project. We had lessons learned through this process, as have other jurisdictions. We were developing both a transactional system as well as a system to support child welfare. We were one of the earlier jurisdictions to embark on this type of a journey. As I say, we had a variety of lessons learned along the way.

The changes to technology over the five years is very significant. When we started planning for this project, iPhones didn’t exist. There was no such thing as an app store. Like consumer markets, we had the same thing within the corporate infrastructure. There were many changes that we had to adapt and work through.

The Auditor General has pointed out that we only retired a third of the legacy systems. That is true. We retired approximately 17 systems and had five others that were partially retired.

Some of the systems, upon further analysis after the business case, were deemed inappropriate to move into ICM. For example, our helpdesk software was one of the softwares listed in the inventory of software deemed as candidates. We looked at that and determined that it was inappropriate for it to be migrated to ICM.

I wanted to give some more context from a business perspective of the transformation that ICM has enabled. In SDSI, employment programs were administered by multiple provincial and federal systems until ICM was launched in 2012. As well, clients were required to go into their local office to receive services. Now clients who travel for medical or other reasons can receive assistance from any office or any channel.

Clients who don’t or can’t go into their office can receive services by phone, through the web or in person. Clients now have more choice. Work can be moved around the province to adjust to operational demands. Prior to ICM social workers stored data in physical files. These files, when clients were mobile, had to be transported from one office to the other. Now front-line staff can access information as needed. These are just some of the benefits that the system has enabled.

As stated earlier, ICM has enabled service delivery transformation in SDSI and will also enable CFD’s streamlined intake. Clients no longer need to provide information multiple times. As well, front-line staff do not need to remember all of the eligibility rules as the business rules are now automated. As a result, we can roll out policy changes more quickly.

Front-line staff have more complete client information that is updated in real time. Bar codes on forms can be scanned, so they don’t have to manually update information. Tools are in place to support decisions both in eligibility and for the child protection practice.

In critical situations, front-line staff have tools to assist with assessments as well as automated alerts requiring further action. As the Auditor General pointed out, we have not replaced all of the legacy systems. However, we have completed a variety of projects that have improved the stability of many of those systems.

Infrastructure has been updated and migrated to the state-of-the-art data centre off the floodplain. The software currency has been updated, and layered security within the data centres has been improved. Monitoring has been updated and improved over the last five years. A great deal of the functionality has been migrated to ICM, which has enabled the transformation of case management responsibilities to the delegated aboriginal authorities.

ICM has also enabled us to consolidate payments to suppliers. For example, rather than paying each client’s supplier, we now can consolidate one payment rather than multiple payments. We’re considering doing more of this as we move forward.

The audit was conducted when the project was in mid-swing. The key to the timing is that the Auditor’s snapshot was taken in November of 2013, which was after phase 3 and prior to phase 4.

Phase 4 was a large implementation focused on key functionality for child welfare and supports for SDSI’s service delivery redesign and had a usability focus gleaned from lessons learned earlier in the project. Phase 4 also had a strong focus on security and privacy enhancements, which was a focus for each phase of the project.

The management report was issued a month before phase 4, and many of the key aspects of the findings were to be addressed in the final phase. I’d like to walk through our progress now.

Recommendation No. 1: “Ensure that access to ICM is based on defined business and security requirements.” As I indicated earlier, the system was not complete at the time of the audit. CFD was going through a transformation for standardizing job profiles. Prior to the standardization, exemptions were granted based on defined business requirements so that the child welfare practice needs could be met.

The standardization of those job profiles has been completed. It has reduced the number of profiles and, as well, has reduced the need for exemptions.

Recommendation No. 2: “Ensure that access to ICM is updated promptly and regularly reviewed.” Again, the system was not fully built at the time of the audit. Part of phase 4 was to implement automated security reporting.

Processes have been updated that align with that automation that was put into place with phase 4. Regular reviews are scheduled, and we continue to work with the ministries and service providers to promptly update access.

Recommendation No. 3: “Ensure that access to restricted client records in ICM is appropriately assigned only to those with a defined business need.” The social
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sector has a categorization of a restricted file that is above legislated requirements. It was felt by the auditors that too many staff had access to restricted files.

We worked with CFD and SDSI staff and have reduced the number of staff and accesses aligned to the business needs of the sector. At each phase those accesses were reviewed and updated.

One of the context points that I want to point out is that information-sharing and privacy have to be balanced in order for us to protect children. So as we ensure that individuals have access to that information, as clients are mobile, as changes occur, we have to balance both.

We have worked with the Office of the Privacy Commissioner and have done reviews. We have done privacy impact assessments. We have done a variety of measures to ensure that we create a balance that protects children and protects the privacy and information.

Recommendation No. 4: “Ensure that ICM system administration accounts are properly managed.” As indicated earlier, the system was under development, and there were more users with privileged accounts, as is necessary when you are building a system. After phase 3 the accounts were not cleaned up properly.

As a result of OAG’s findings, we immediately updated the accounts and disabled those no longer required. We have changed the way in which user accounts are managed. We thank the Auditor General for bringing this to our attention and for helping us clean up those particular accounts.

Slide 14, recommendation No. 5: “Conduct regular monitoring of ICM for inappropriate access and activity.” There’s a configuration within ICM that sets so that logging is automatically always turned on or always turned off. Originally, after phase 4, that was set to always have been turned off. For every user, as they came into the system, we needed to update that and turn logging on.

OAG’s review alerted us to the fact that approximately 1.5 percent of the users were not logging as expected. We added logging to those particular users and changed the overall default so that logging is always on. We want to thank the Auditor General for identifying this configuration gap and confirm that we have rectified the situation.

Slide 15, recommendation 6: “Improve system and review processes to enhance the quality of client records in ICM.” As a part of phase 4, we were in the process of building our data quality program. Data quality in these types of systems is an ongoing activity.

One of the tools implemented in phase 4 was an enterprise data quality tool. It improves the search functionality and reduces the number of duplicates in the system. For example, you now search on “John,” and the tool will include different spellings for John and include different ways of saying John — including Johnny, Jonathan, etc. This improves the data quality in the system and helps the front-line staff.

As well, we have worked with the ministries in businesses areas to increase data quality awareness. As a part of our division’s organizational redesign, we have created a new director’s position to manage data quality for the sector.

Slide 16, recommendation No. 7: “Implement a regular compliance program to assess, monitor and improve data quality in ICM on an ongoing basis.” Prior to the implementation of phase 4, there was an activity to clean up the legacy data. This activity was completed successfully.

Data quality is an ongoing operational activity and, as I said before, is common with large systems. We are implementing an ongoing data quality management program and continue to ensure its priorities within the system.

Slide 17, recommendation No. 8: “Prepare a full accounting of ICM capital and operating costs for the life of the project, consistent with details provided in the business case.” As we indicated earlier, OAG did a high-level review of scope and costs. We have completed the accounting of the capital project and are approximately $200,000 under budget. There are three major categories: vendor, staff and then other, which would include facilities, work stations, etc.

Core policy does not require for operating to be tracked for projects. We consulted with OCG for accounting treatment and have followed core policy regarding that treatment. Project operating costs are to be absorbed within ministry budgets, and we are currently working with OAG to complete a full audit of project capital costs.

As we have indicated, there have been some changes in the business case. As with other capital projects that were $50 million, ICM capital costs were tracked and reported back to Treasury Board monthly.

Slide 18 — this gives a breakdown of the capital costs. From 2007-2010, as I indicated, those costs were managed by MTICS. When the capital budget was transferred over, $42.9 million had been expended. The remainder of the capital cost is broken down by fiscal year, with a total of $181.6 million.

The next slide indicates the project costs, which were operating in nature, for 2014-2015. We have presented the most conservative interpretation of operating costs. For example, staff costs have been indicated for all the staff who were assigned to the particular project, although they would often be called back by the field for operational requirements. We did not produce time cards to track each function. Therefore, the cost may be lower than reflected here.

Best practices for system design and development is to have front-line staff articulate the business requirements, be a part of the design process, assist in or complete the development of training materials, lead the training of staff, complete the testing of the build and identify any defects and/or design amendments, which
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ensures the systems implemented meet the needs of the front-line staff.

We made some mistakes in phase 2, another large implementation. So we made adjustments and ensured a stronger focus on usability.

Staff involvement varied by phase as would cost. For example, phase 3 was the smaller implementation, so costs would have been smaller.

The ministry believes that we have achieved most of the desired benefits and have enabled both ministries to make the desired service delivery transformations. We have improved information-sharing in a privacy protected manner. We have replaced some of the aging and inflexible systems and have improved the reliability of those particular systems that remain.

Support for front-line staff has been provided with better tools and a simplification of business processes. We are able to respond to child protection concerns and manage the many changes to the technical landscape and adjust our change management processes. In phase 4 the feedback from staff was positive.

I’d like to thank the committee for the time to provide an update and would welcome whatever questions you may have.

B. Ralston (Chair): Thank you very much. Just before we turn to questioners — and I have Mike Morris, David Eby, George Heyman and Kathy Corrigan so far — I think it’s in your fourth slide you mentioned the DM project board. I take it “DM” is Deputy Minister. So do you sit on that board, then?

M. Morris: A lot of work. It brings back nightmares of when I was in the RCMP and we brought in the PRIME system, and this followed after PIRS. So I understand the headaches and whatnot that you went through with this project. Staff training and data quality was a headache that we had to endure as managers in trying to make sure that we had the right data in the system.

A question to the Auditor, though, is…. I’m curious as to why the audit took place prior to the completion of the project. You’re only getting a partial picture of what was going on. So I’m curious over that. Obviously, the ministry and all the technical people have done a lot of work since what was planned there. If you could just comment on that for me, please.

C. Bellringer: I’ll speak to it in general terms, and then if Cornell has something to add specifically on this particular audit….

We are trying more and more to look at things before it’s too late, if you will. The risk with that is that there’s a finger-pointing that then goes on to say, “Oh, you did this wrong,” when, in fact, something hadn’t been complete. We’re more interested in making sure something gets done right, and we’re not worried about who gets the credit for that. The reason for doing it is to be proactive in assisting with the…. We waited until the project was near the end of its various phases as opposed to the very, very beginning. But it was, indeed, a conscious decision to do it before it was complete.

Now, I don’t know on this one if there was more that you want to add that was specific to it.

C. Dover: Well, we had spent some time prior to doing the audit discussing it with the ministry. We provided the criteria that we were looking at as part of the scope of the audit, and they were satisfied at that time that we would be able to do that work. They felt at that time that the area that we were looking at, access control and data quality, was actually quite well managed, and that’s what we expected to see when we started the audit.

We did provide them with the criteria, we did discuss the criteria with them, and it was accepted at that time.

D. Eby: I’m looking at a website called integratedcasemanagement.gov.bc.ca, and it’s got something called an ICM fact sheet on it dated November 27. It’s a PDF file. In it one of the bullets says: “ICM had a capital budget of $182 million, and the project was delivered on track, on time and on budget.”

The part that I’m curious about is in appendix A of the Auditor’s report. There’s an April 2013 entry where the project board reduces the project scope and merges a couple of phases in order to meet the budget. In other words, they shrink the project to meet the budget, which is understandable if you have a fixed amount of capital to work with. Then in October 2013 the Treasury Board accepts the reduced project scope to merge the phases and remove requirements, and so on.

My question is: how do you get from that, where the project board says, “We’re going to do a smaller project for the same amount of money,” to a public-facing document that says: “This project was delivered on track, on time and on budget”? I’m not even getting into the additional $13 million or whatever it was that was requested by the two ministries beyond the project budget. It’s supposedly separate from the whole thing.

I wonder if the ministry could explain who prepares this PDF about “facts” about integrated case management? How does it get out there when, clearly, this project was not delivered on track, on time and on budget? It was reduced to meet the budget, and it was not delivered on track, certainly. I’m curious about how we get from what actually happened to what was told to the public.

We shouldn’t have to have the Auditor General come in to reveal these things. If a member of the public called
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the ministry, apparently they would tell them it was delivered on track, on time and on budget, when the truth was something quite different. I wonder if the ministry could explain how we get that gap between what actually happened, which is understandable.

I agree with Mr. Morris. It’s understandable. It’s a big project. But we need to be frank and transparent with the public about what happened and the release that’s facing the public here, which is not accurate.

B. Ralston (Chair): Just before you begin your answer, so that it’s clear for the record, the entry that’s being referred to in appendix A is at the bottom of page 29. That’s a reference to April 2013. Then the Treasury Board reference is over the page at the top of page 30, October 2013. Just so that’s clear.

L. Barker: It is my office that actually prepares those particular updates. When we prepared the update — you have a good point — we actually were talking about the revised and approved scope. I absolutely understand the concerns associated with the disparency between the two. That was a mistake on my part.

G. Heyman: I’m not sure where to start. Let me start with trying to understand what processes the ministry and the various ministries may have had in place to do due diligence on a project of such significant scope. Granted, it started out with a $107 million budget, which was increased to $182 million in 2010. Subsequently, there were some add-on dollars and some reduction of scope.

One of the original questions in requests for proposals for the software, questions from vendors, indicated that it was desirable that they show that the system they were proposing was being used for similar purposes in other jurisdictions — in other words, had a track record. Yet the answer to the vendor’s question from the ultimately successful vendor was: no, it had no track record.

In fact, as I understand it, there was some indication that this software was not known to be in any way suitable for this particular purpose, nor was it designed for this particular purpose. Perhaps you could explain to the committee and to the taxpayers who ultimately funded this project how the ministry or ministries could have a process in place to review proposals for a project of such importance and such substantial scope and award the contract to a vendor with no track record in the proposed use.

L. Barker: I’m just going to get the information. The process which we went through was a public RFP. It was publicly completed. Regarding the $107 million original number that was stated, that was prior to going out and actually testing the market. So the market actually spoke to the value associated with what the project would cost.

The software was selected, as I said, through a competitive bidding process, and the procurement requirements were identified through that particular process. There was a need for demonstrated experience in implementing similar projects in the social services sector. There was corporate capacity and long-term financial stability of the organization. There were product and service demonstrations and, of course, value for money.

When we went through the process where the RFP was evaluated in March of 2008, it was determined that that particular software was the place that we would end up going. And then, of course, we went afterwards and chose another.

I think one of the points is that we have seen…. There were two main software components. Both have been implemented, and both have had some technical challenges that are similar to our own. If you read Ontario’s review, which was recently reported, they had and have experienced similar issues.

I think it speaks to the complex nature, as indicated, of these types of projects. These are large change management projects. These are large culture change projects. And they are complicated. The product, I believe, as indicated by front-line staff experience after phase 4 and after the lessons learned, indicates a positive experience. We have, at the end of the day, transformed the way in which the work is done. We have offered choice to citizens as to how they can receive those particular services. We have put in an automated rules engine. A lot of the functionality that we wanted to have in has actually been implemented.

G. Heyman: As a follow-up…. I ask these questions because there will be projects of similar scope by this ministry and other ministries in the future. An independent review of ICM was commissioned by government from Queenswood Consulting. The review was released in 2013 in two parts, and the interim report pointed out that the complexity, potential risk and delivery challenges that the system would face were seriously underestimated. Clearly, they were seriously underestimated by government and the ministry.

My question is in two parts. What evidence did the ministry have of successful application of this software by the successful vendor to a similar purpose in order to make the decision to spend that amount of money on behalf of taxpayers for that system? And what changes, if any, has the ministry put in place with respect to any of its procurement programs for the future such that this amount of money or any significant amount of money might be spent in the future without a colossal failure to deliver the promised product?

L. Barker: I’m going to ask Marcin Zaranski to answer the question regarding Siebel because it actually predates my time.

M. Zaranski: Certainly. Marcin Zaranski. Thank you for the question. The process that the ministry went through in order to test the fitness of the software prior to its application was a very intense process in which we reviewed all of the requirements as they were stated by the sector ministries. There were about 600 requirements that were stated. Each one of those requirements was grouped and ran as part of a story that would test the fitness of the system.

There was a demonstration of the software in which each one of those requirements was evaluated, and we had determined that over 80 percent fit out of the box, before the solution was even configured. There was a long process to, of course, configure it, which was the cost that was stated. As the requirements were tested, the system was chosen for both its application to the sector needs as well as a potential for a broader application across government in other spaces.

G. Heyman: First of all, the second part of the question hasn’t been answered. I don’t know if you intend to answer it, and I have one more if you don’t.

G. Heyman: In response to the Queenswood review that government seriously underestimated the complexity, potential risk and delivery challenges that the system would face, what changes have you implemented in your procurement processes to guard against such serious underestimation in the future when spending large amounts of taxpayer dollars?

L. Barker: Regarding the procurement processes within government specifically, the province has implemented the strategic partnerships office, which oversees large IMIT procurements. There have been tools and templates and best practices associated with those particular processes to continue to improve our procurement processes.

There are other organizations that actually manage that particular process. Unfortunately, that is outside of my accountabilities. For overall procurement in government, that’s actually run out of the Ministry of Technology, Innovation and Citizens’ Services, so we can follow up on that and get some greater detail for you.

S. Newton: I can provide a bit of clarity on that, on the procurement stuff. Procurement governance lives in the office of the comptroller general. There’s also procurement services in the ministry of information and technology services, as well, that provides advice and guidance on procurement.

Every time a procurement of any sort goes through and there are issues or concerns related to that procurement, that becomes an element of discussion both at the advisory side, which is out of MTICS, as well as my office, looking at if there are things that we might need to do in relation to procurement policy. There’s also a government chief procurement officer and a procurement council that meets regularly to discuss procurement issues as they come up.

With something like ICM, any of those types of issues would be discussed in the IMIT community in relation to developing better, I guess, objectives and requirements at the ministry level, when they’re looking for something. It would also help inform the next IMIT procurement. It would also be discussed at procurement council.

We would also look at determining whether there were any policy changes that might need to be made. As well, the ministry of information and technology’s procurement services branch would also look at how to provide advice in the future to guard against some of the issues.

So in the chain of procurement, you’d never know if it’s a function of procurement policy, like equal access and fair opportunity to procure, or if it was at the requirement stage of development. But certainly, the learning from a lot of these is that the business case and the detailed requirements need to be clearer so that you can make a better assessment through the process based on your understanding of what you learned.

L. Barker: So like Marcin indicated, there were 700 business requirements that we actually mapped back. We had some principles at the beginning regarding trying to minimize customization. And the reason that we tried to minimize customization is the costs associated with maintaining a highly customized system. We had to balance that and actually adjust in phase 2 to fit better with the child welfare system.

I think, like I indicated earlier, we were one of the earlier jurisdictions to embark on this type of journey. So there were some lessons learned along the way.

Again, there’s a lot of difference from the old days, where you just simply updated one system for another. This was about major transformation. It was also about trying to fit a transactional financial service, where you determine eligibility and provide benefits, and also at the same time provide a case management system that works through the complexities associated with a clinical practice for CFD.

These are incredibly complex situations, and they are ambitious projects. There is no doubt about that. Regardless of the software chosen, again, it is about meeting the needs of sometimes very competing priorities within that particular project, which is why we had senior oversight for this particular project. Those were complex and very difficult problems to solution. We believe that at the end we were able to provide that functionality. We now have end-to-end child protection software
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in place that enables the work of the front-line social workers. We now have the ability to have an automated rules engine that assists with determining eligibility for benefits for citizens.

The majority of the service transformation and the majority of the work that we were trying to support the front-line staff with have been achieved.

G. Heyman: The report of the Auditor General notes that MSDSI did not properly manage access to protect client information from inappropriate access. As well, essential monitoring was not in place for detecting inappropriate access and activities. So there are two problems here: one that the management to protect against inappropriate access wasn’t in place, but inappropriate access could take place and the ministry would never even know. Therefore, the public and clients might not ever know that their personal information had been breached.

You said in your presentation that the ministry takes seriously security and access controls. Aside from this particular system, we’ve had protection-of-privacy legislation in British Columbia for close to 25 years. For a system of this importance and complexity to be set up and not actually have the access management and monitoring controls in place speaks to a lack of integration of awareness of the importance of the Freedom of Information and Protection of Privacy Act being incorporated into decision-making, oversight and the general culture of the ministry.

Aside from the actions you’ve taken with respect to ICM, have you taken some specific actions, or will you take some specific actions, to ensure that understanding and respect for the principles embodied in the act are now part of the culture of the ministry going forward?

L. Barker: Protection of government’s networks and data is a top priority for the ministry. I’d say that throughout the phase, we did privacy impact assessments. We did security threat risk assessments. We worked with the Office of the Privacy Commissioner and reviewed our processes and some of the complexity associated with what we were doing.

There is a program in place to continue to improve the awareness of security and privacy. It is an ongoing task. We also operate within government’s technology environment, which is protected with layers of security, including firewalls, intrusion protection systems and a government network.

We have worked very hard to ensure that citizens’ information is protected. As the Auditor General indicated when she released the report, there is no evidence that there has been a breach.

Marcin, do you have some additional information? Marcin managed a lot of the privacy aspects as we went through this particular project.

M. Zaranski: Certainly. There are actually four components to the way in which we managed privacy on the project. The first one was the planning, or setting out the methodology, through which we gathered the requirements, which included looking at the Freedom of Information and Protection of Privacy Act, as well as the Child, Family and Community Service Act, which governs a lot of the access at MCFD. We looked at relevant policies, and we also looked at other program-specific statutes that were relevant.

We reviewed access needs based on best practice, which dictates the need to know and the least-access principle, which means giving access to the least amount of information required for an individual to do their job.

We examined three aspects: the right to collect the information, the right to disclose the information to a third party and the right for that third party to indirectly collect the information. Then throughout all of it, we looked at use: what gives us the right to use that information for a given purpose? This is all compliant with how FOIPPA sets out its statutes.

We reviewed the proposed solution with legislative experts in both ministries. We also employed reviews from legal services, as well as experts from the office of the chief information officer.

We went through an extensive consultation process, as Laurie had mentioned, with the Office of the Information and Privacy Commissioner. In each phase of the project — we had four of them — we had over six meetings with the Privacy Commissioner’s staff to review how we were setting up access to ensure compliance with FOIPPA and the CF and CSA. We used outputs of this process as a basis for how we set out access control.

The second of the four components was implementation. This is where we put that solution into practice.

The third was sustainment, which was, frankly, where we ran into a few issues. This is where we found that the operational needs of the ministry didn’t comply exactly with a black-and-white chart that we had created for how these roles would be managed. This is where all of the exceptions arose.

The fourth and really important component was a review and adjustment. In phase 4 of the project, as in previous phases, we reviewed the access controls that were previously constructed, and we made adjustments as necessary. As Laurie mentioned earlier, there were a lot of processes in the ministry, in particular with the Ministry of Children and Family Development, where they were going through a very substantial transformation.

Based on the results of that transformation, we were able to simplify a few things. One of these key things was that child protection practice itself went through adjustments, which increased consistency of how the work is done in different areas of the province so that when we’re talking about a social worker, that social worker
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is called a consistent name or job title across the whole province, which makes it easier for us to apply consistent access controls.

The second, inherent in that, was the streamlining of the job roles themselves, which better allows for correct mapping and predefined profiles to be implemented as they were originally designed. Our variance in terms of how we’ve set out the system, how it was reviewed with the Office of the Information and Privacy Commissioner and how it’s being applied is much closer, and the need for exception is vastly reduced.

K. Corrigan: I wanted to just read an excerpt from the report on page 25. “We found that the Ministry of Social Development and Social Innovation, as the lead ministry for the project, had not accomplished legacy system replacement as initially planned. Of particular concern to us was that the ministry had not replaced the management information system, the core legacy system for both the Ministry of Social Development and Social Innovation and MCFD.”

That’s described in a sidebar as: “The key legacy system, built over 30 years ago, identified for replacement by ICM in the business case. Government has often described this system as antiquated, inflexible, aging and costly to maintain.” I think recently the then Minister of Technology called it, in the House, a creaky, rusty legacy system.

I note in the report that it is described as partially replaced, but the body of the report describes it as not being replaced. We also have 34 legacy systems that have not been replaced, 17 that have and five that are partially replaced.

Given that the scope of this project has been so scaled back that key deliverables, including, according to this report…. Maybe that has been completed — the replacement of the ICM. But given how much has not been delivered, what have been the consequences for Deloitte, the vendor?

L. Barker: As you go through a large project of this nature, what happens is you have a governing body by which you make decisions associated with scope and changes of the project.

As I indicated, the legacy system — the mainframe, MIS — has not been fully replaced. However, there have been a number of activities to improve the stability of that particular system, including the fact that it was refreshed. It was moved up to the state-of-the-art data centre. And a great deal of the functionality has actually been migrated over to ICM.

As a result of the governance associated with large IM/IT projects of this particular nature, those changes in scope were approved and within the governing bodies associated with that. This was not particular to a vendor but more particular to how projects of this nature are managed, and that change in scope was approved.

K. Corrigan: As a follow-up, somebody is responsible. Are you saying that the vendor was not responsible? You talked earlier about 700 business requirements. Were those business requirements met? I mean, somebody is responsible. It’s either the responsibility of the ministry, or it’s the responsibility of the vendor, or it’s some combination. I think that in fairness to the taxpayers of the province, if Deloitte did not deliver on what it contracted to do, then, the taxpayers need to be made whole.

My question, again, is: what kind of responsibility did Deloitte take? Was Deloitte penalized, or was there nothing in place that said you actually have to deliver what it is that you’ve promised to deliver? I’m trying to figure out exactly where the responsibility is and who paid for it.

M. Zaranski: There are a couple of aspects of it. One is that in terms of the requirements, I just wanted to clarify that the 600 requirements I had mentioned previously were used to guide the purchase of the system. Subsequent to that, we had over 3,000 requirements that were gathered through each stage of the project, which governed how it was configured.

With respect to scope, although there were some elements, such as the focus on legacy systems, that were removed from the scope based on direction from the ministries and sign-off from the Treasury Board, other scope was added. The scope that was added actually goes back to what Laurie was speaking about earlier. That scope was augmenting the system against a shift in principles from no customization, where a single design was to fit the needs of both ministries. After deployment of phase 2 we realized that that single design did not appropriately suit the needs of the Ministry of Children and Family Development — in particular, their child protection practice.

So there was new scope that was added into the project at the expense of replacing all of the legacy systems, which better met the needs of Children and Family Development. There was a balance that was achieved — or was felt to have been achieved — through the substitution. Therefore, Deloitte was not penalized for those changes, because they simply delivered that which we stated as the scope of the project at a given time. It wasn’t a single contract that we signed at the beginning that governed the delivery of the whole but, rather, a series of contracts under a contractual umbrella which was for each stage of the project.

L. Barker: I think that goes through the freedom-of-information process. I believe that if it is requested, those
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contracts are often made public. That is sort of the process associated with releasing government information.

K. Corrigan: Well, government can release anything it wants. Government does not, unless there’s…. If there are third parties involved, they have to check. But you’re basically saying: “FOI it, and we’ll see what happens and whether we’re forced to do it.” I’m asking as a member of this committee, a member of the Public Accounts Committee responsible for reviewing public sector expenditures. I’m asking to see the contracts.

L. Barker: I can absolutely go back, associated with that, and provide a response back to the committee. To be honest, I don’t have that information at my fingertips — how that particular process is done. I know that we’ve released lots of contracts. I just want to ensure that I follow appropriate processes within the province.

K. Corrigan: I wanted to ask about the access issues that were identified in the report and the concerns raised by the Auditor General in this really thorough and excellent report — the concerns raised about who had access to the system and the fact that there was inappropriate access and the controls were not in place that should have been there.

What I don’t understand is how it could be that in a very sensitive system where very sensitive documents were included and a large number of documents were included…. Two million people covered — that’s another mystifying number — in that contact list, apparently.

Given that there were previous audits of JUSTIN, PARIS and CORNET, all of which have been considered by this committee, where government supposedly learned the lesson about access to data, how can it possibly be that one part of government did not inform another part of government so it didn’t happen again? Those reports — I believe all of them, or at least some of them, with identical concerns — were released long before this audit was done. How could it be that that lesson about access and privacy and so on, protection of data, was not learned before this audit was done?

L. Barker: I think there are some significant differences between the particular audits. Access to systems is taken very seriously. We have, as I mentioned earlier, layers of control associated with that particular access. We were in development at the time. We did have system administration accounts that had not been cleaned up. We cleaned them up immediately. One of the things that we have taken is a variety of measures in order to ensure the security of the information.

I have family members who have and receive services from the ministry, so I take the security of this particular application very seriously. I am comfortable with the security of that particular application. Having said that, there are often times where this is a continual operational activity. We have conducted an extensive review of the JUSTIN audit, and we feel and found that the JUSTIN system had different vulnerabilities.

One of the things that I think we recognize within the technical landscape is that the sophistication of those trying to attack systems, etc., continues to grow, as does the technology to protect that information in that layered environment. We continue to work with the office of the chief information officer to strengthen those controls.

We have had independent reviews associated with security at each phase. We have had KPMG do a review. We have had others do reviews of the system’s security. We have had vulnerability testing associated with the security. We have done a multitude of tests to ensure that we continue to protect what is very critical and private information.

I think the number of records is indicative of the fact that we have a very long retention period for data — the 2.5 million records. One of the things that I have become aware of since I joined the ministry a year ago is that we offer a very wide scope of social programs to vulnerable citizens.

I myself have had family who have been subject to domestic abuse, who have requested benefits associated with child care. I have persons with disabilities in my family. I have persons who have seniors supplements in my family, etc. There are a lot of individuals who need this system occasionally for temporary relief in certain circumstances, and I think what is found is that often we don’t talk outside of our own private family about the amount of people who are actually accessing that system, so that’s why the number is as high as it is.

Marcin, is there something you want to add regarding the security and the efforts we took to ensure its safeguarding?

As the chief privacy officer, responsible for privacy during the execution of the project, I was the person responsible for reviewing other audits and making sure that the same vulnerabilities did not exist in ICM. When the JUSTIN-CORNET audit came out I had conducted a detailed review to ensure that we had met the criteria that were stated and the same vulnerabilities were not present.

Simply put, the issues that the Auditor General found during the review of ICM were a factor of a few components, one being, as Laurie had mentioned, that the system was partway during its design, so it wasn’t fully complete.
[ Page 745 ]

Implementation of privacy controls, just like other functionality, is done in stages, meaning that as functionality is deployed, security controls are deployed commensurate with the functionality in order to enable the correct operation and service delivery and balance that with the needs for protecting the information.

As far as the safeguards, as we had already discussed — numerous reviews with the Information and Privacy Commissioner’s office, the OIPC, and the CIO, chief information officer.

The access itself was a factor of all the exemptions that were needed to be granted, and those were based on operational needs. It’s difficult to say whether the access was inappropriate outside of the controlled accounts that we had already discussed. It’s simply easier to say that it did not comply with a table that we had designed and reviewed, because those exemptions were granted during the operation of the system.

In the last stage of design, in phase 4, we had implemented a full cleanup to ensure that those exemptions were minimized, as well as put a process in place that would minimize ongoing exemptions, because it’s easy to accrue them over a period of time. So that process is equally important and is a process which reviews exemptions periodically and ensures that we minimize them.

K. Corrigan: I know I’m probably finished, but I’m wondering if the Auditor General would want to respond on that or has any comment on that.

C. Dover: Yes. One thing I’d like to point out, though, is that although the project was not completed till November ’14, it was actually operational as of April 2012. So that means the system was being used, and at that time we would have expected to have proper security controls and access controls in place. That’s what we were evaluating when we went to do our audit.

L. Throness: A question for Ms. Barker. I appreciate that the scope of the project changed midway, and that’s a difficulty, but Deloitte’s is a very sophisticated group. Should they not have foreseen that? Should they not have gone through the complicated RFP process and told the government: “You know, there’s no way you can do this on this scope. It has to be broadened”? How could they have missed that? I ask that because don’t we guarantee future losses when contractors face zero risk?

L. Barker: I think, as Marcin pointed out, one of the things that we had indicated is that the contract was renegotiated at each phase. So there was a contract negotiated for phase 1 for analysis and design, another contract for build and implement, another contract for maintenance and support. We go into phase 2, and that process starts again. So for each phase, they met what was put into the contract associated with that.

As far as the complexity associated with these particular programs, I think one of the things that has to happen is that the vendors have to able to come in and determine the sort of cultural requirements that are needed as we go through this particular process.

As well, CFD was going through a large transformation around the practice, which was mid-swing. That risk was identified in the business case, and it was highlighted throughout the process.

This was an incredibly complicated process, and, as the Auditor General pointed out, an ambitious project. We understood that going in, and we identified that risk, because it is difficult to actually build a system as people are going through transformation.

That’s why, at the beginning of the phase, we started with Social Development and Social Innovation and focused on that particular aspect. As Marcin pointed out, we were, through the process, going through an iterative process associated with design.

I think Deloitte responded well to the changes. I think they took some risk with us. I can say that my own experience with that particular vendor was positive and that they were creative in the way in which we solutioned things.

As I said before, these are incredibly complicated projects. I think being able to predict what the future design is going to look like, understanding how that culture would actually receive those, understanding the usability changes and being able to predict what the technology changes will be over the course of five years is incredibly challenging. Most technology road maps are two to three years now because they are so complex.

Again, I think one of the things that we have learned in hindsight is that perhaps we would have written that business case differently. We would have emphasized more the service transformation, business transformation, front-line supports that we were trying to achieve, rather than the number of servers that we were trying to retire.

L. Throness: Well, I do think there are lessons that we can learn. There are many of these systems throughout governments across Canada, and there should be, perhaps, more sharing of risk in the future.

My second question is…. There are 34 systems that are not included in ICM, but is the bulk of the work now being handled by ICM? For instance, of the 34 systems, are they marginal? Are they not often used?

L. Barker: That is an excellent question. There are some systems, for example…. As I mentioned, that was a helpdesk system, so it was completely inappropriate for migration to ICM.

There are other systems that were identified that are used by two or three users. There are systems that were
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more around a process — Word document templates, etc. They didn’t hold the type of functionality that we were looking to move into ICM. Nor did they hold the new functionality that would enable the service delivery redesign and transformation that we were looking for.

Other than the mainframe — and the mainframe is one of the larger systems, although we moved that in part — I would say that many of those systems are certainly not the bulk of the functionality, if you will.

L. Throness: So of the 34 systems in appendix B, are there other systems that you would like to move into ICM, that would be appropriate to move in?

L. Barker: Yes, there are other systems that we would like to move in. The ministry has prioritized approximately ten to 14 of those particular systems. Those systems will go through the IMIT planning process within government and will be prioritized accordingly.

Government has a very large footprint, as you can imagine, for all of the applications that run the services to citizens, and there is a planning process that takes place to rationalize the application changes that are needed. Those additional systems will actually go through that process.

Some we are considering…. One we’re considering for the end of this year. There’s another system that was actually not supposed to be retired until after the implementation of ICM. We’re just looking at those systems and continuing with the analysis associated with those.

You imagine over the five years how many changes have happened, how many integrations have changed. For example, the corporate accounting system has been upgraded. There are many upgrades that have happened, so we can’t look at the planning process that was in place five years ago. We have to refresh and update that. There’s an annual process by which we do that, and we’re going through that process currently.

L. Throness: Okay. My final question is to the Auditor General. Reading from page 6 of your report: “The ministry responded positively and has told us that it has already addressed many of the deficiencies we summarize in this report.” Are you satisfied that the ministry has largely addressed its deficiencies now that the project is completed?

C. Dover: We haven’t had an opportunity to go back and verify that all the recommendations that have been addressed are actually addressed. We’ve just had some discussion with the ministry. So we can’t confirm yet that they’ve done the work that they said they’ve done.

L. Popham: I wanted to revisit a point that Mr. Eby made earlier, and that was regarding the announcement that was made about the project being on time and on budget. From what I understand, that’s a fairly significant announcement, and it was coordinated between MSDSI and MCFD. Ms. Barker has explained that it was in error, and that’s understandable. But I guess I would like to understand the process that leads to an announcement like that and who ultimately drives that announcement to happen.

L. Barker: It is my office that actually does all of the communications associated with ICM. As I mentioned earlier, I joined ICM approximately a year ago, so the revised scope had been determined at that particular time, and that’s what I was working towards. There’s a series of processes and approvals where members of my staff actually write it, and it is ultimately approved by me. The refined scope was something that we had met. I pleased with the implementation that we had done. As I said, we had the experience of positive feedback from the field, which was fantastic. It was a very intensive year as we launched that particular project.

There is a discussion that occurs for communications to get approved through the communication processes. We give those to government communications, GCPE, and they approve and then post those particular things. It was my approval that actually sent that through.

M. Hunt: My questions were mainly stolen by Laurie, but I want to re-ask one in a different way, because I think you got focused on a different part of the answer instead of the part that I was wanting.

It’s easy to sit there and give a stat, like there are 56 legacy systems, and you only did 17. But if I use a system…. I use the comparison to a book. There are books that are 50 pages long, there are books that are 100 pages long, and there are books that are massive. Okay? So using that kind of an analogy, in the 17 that have been replaced and the five that are partially replaced, do we have the bulk of the work covered in these, and the other 34 are actually smaller, more disparate, more disconnected types of systems?

L. Barker: I think the important thing…. Yes is the end answer, with the exception of payment. So if you’re looking at a book analogy, think of ICM as the library. There is a shelf left that is a significant shelf, with payment.

I think one of things that we were looking at and we focused on was child protection, and child protection has been placed into ICM end to end. That was the decision that we made when we changed scope.

We decided to focus on child protection and ensure that we had those supports in place for the front-line staff. So intake and assessment is in there. Child protection response, which is inclusive of the structured decision-making tools. Case management. Case documentation, including case notes, case recordings. Structured decision-making tools. Added the capacity to track chil-
[ Page 747 ]
dren and youth. Case planning information, including transition planning. Priority response. The date the child was last seen by the social worker. Enhanced tracking of children and youth eligibility information.

There was also within SDSI, electronic funds transfer, all of the case management, clients and service providers, bulk payment option for service providers, system supports for SDSI service delivery redesign, case contact and service provider information, improved assisted eligibility processes, implementation of the new eligibility rules for programs such as medical services, funeral supplements, hardship deductions and income exceptions. Forms, correspondence and report functionality were added and updating activity plans that support streamlined business processes.

This is the key functionality that we added into ICM. It was the key functionality that…. We were looking to provide supports for the front-line staff — again, in particular were the child protection supports that we wanted in ICM to ensure that we had a child welfare system in place that would help front-line workers ensure the safety of children.

M. Hunt: Now, if I can add a simple…. It’s most likely not a simple answer, as I’m going to ask the simple question. But that’s this. Now that we’ve got to where we are…. We’ve gone through all the pain that we’ve gone through to get to where we are, and we’ve done all the analysis to get to where we are today. In the rest of these 34, how many projects would those…? Now that we realistically look at this, how many different and separate projects would we think it would actually take to modernize or consolidate or whatever the word we want to use is for the other 34?

L. Barker: That’s a complicated answer, which I apologize for. It is how we approach IM/IT development. You could break the project and, for example, look at the mainframe from a modular perspective and just remove one modular at a time, or you could do a much larger project. Again, it’s a ten to 14 system. So it would be in that area.

Some of these would be fairly minor projects. The mainframe is the one significant project that would be outstanding.

L. Barker: There’s one underway currently, and there’s another one that we’re analyzing currently.

S. Robinson: I appreciate the challenges of shifting over a system and how there are so many bumps and turns along the way, especially when you have a change in protocols in one ministry that requires sort of a change in direction and having to shift priorities. Certainly, child protection, I think, is the right way to go in terms of shifting priorities.

I do have a question about communication about the shift and about how this project’s scope has changed and how it gets communicated to the public. I want to echo concerns raised by my two colleagues on either side of me around that. Even just looking at this report and looking at some of the slides, slide 17 talks about…. The key finding was: “The scope of ICM implementation was not fully completed as initially planned.” I think we can all agree that that actually is the case.

The response is that the “project capital costs were $181.6 million, or $200,000 under budget.” That sort of invites the question around: if we had to reduce the scope or shift the scope, was it truly under budget? Or did we have to just change the scope, and we didn’t spend all the money because the scope changed? To me, this is just about a communication.

I just want to draw to the “Closing Remarks” slide. Improve information-sharing; replace aging and inflexible legacy systems with a single, integrated case management solution; and support front-line staff. So the question for me remains: did that, in fact, happen as anticipated in terms of what was proposed and what was delivered? I just want to hear on that.

Then I have one question. I’ll just roll it in. It has to do with how you will be measuring the improvement of information-sharing and the support of front-line staff going forward.

L. Barker: I’m going to break this down into pieces. The first question, I think, is more around the legacy systems. The legacy systems and the component associated with that in the business case was not only the retirement of the number of servers or the number of applications, but it was also about replacing and improving some flexibility within the systems. And we have done that.

All of the case management, for example, has been moved off the mainframe into ICM. One of the things that we couldn’t do was the service delivery redesigns that we anticipated. It was very difficult for us to make policy changes. ICM enables that now through a rules engine. We can simply change that rules engine, and then that policy can be rolled out much easier.

Sorry. There were quite a few questions, so I’m just going to go through. How are we going to actually look at some of the benefits as we go through? Some of those benefits have already been achieved. Again, the ability to actually have consistent applications of eligibility — that has been achieved through the rules engine that has been implemented.

The ability for decision support tools to be in place. So when a social worker is trying to determine the severity and risk associated with a child, those tools have been
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put in place for that front-line staff. Those are very…. I would say those were sort of the two really primary issues that we were trying to do — ensure that on the SDSI side the front-line staff had those eligibility tools in place, and on the other side that social workers had those decision-making tools in place, so that end-to-end child protection. Those are in place.

S. Robinson: I appreciate that there are these tools in place, but I think, at the end of the day, we want to take a look at the outcomes. You can have all the tools you want, but if people aren’t using them properly, it doesn’t really matter what tools you have in place. At the end of the day, what we’re looking for is that we have an improvement in information-sharing. How will that be measured? Did we actually achieve that?

The other one that I’m looking at is “support front-line staff.” How will you know that front-line staff are actually supported with these tools, that it actually does make the difference that we’re proposing that they make?

M. Zaranski: Thank you for the question. There are a couple of components. First is: how do we look at who front-line staff are? We define that as those users of the system who actually interact hands-on or directly with the clients of the ministries. I just wanted to set that as a definition up front.

During the first phase of the project we put a discipline into place for benefit management. So we set out a framework through which we baselined where the sector was with respect to its information-sharing, with respect to supporting front lines with the tools that they had.

We used a variety of different metrics that we looked at. How many times do people have to do what we jokingly say is the Alt-Tab interface — meaning they switch between systems and re-enter the same information two, three, four, five, six times — to the present state, so that we can compare how many of those integrations have occurred and how has the work of the front line been simplified as a result? That’s on the metric of information-sharing and that kind of integration, if you will.

With respect to the other metrics, the same benefits framework looks at different themes where we have stated that we’re going to make improvements, whether it be in streamlining how information is accessed, providing better tools to the users of the system and other metrics. So we set baselines in place, and we measure progress during and after completion of the initiative.

L. Barker: Just to add one point, too. Once the implementation of ICM has taken place, which it did in November, there was a time by which we would go back and actually measure those particular benefits. These are difficult things to measure. That will take place over the next couple of years. With some things we have already been able to see those particular benefits. I mentioned earlier the policy rollout — those types of things. Some benefits we already know.

As well, from an information-sharing perspective, one of our greatest concerns was that a child needs to be mobile for medical reasons or the parents move, etc. — those types of things. That physical need to actually transfer that file was the way in which that was managed prior to this. That’s no longer necessary. We now have access for supervisors in the province so that they actually have that information at the right time in the right place for that individual. We know that that has been achieved.

V. Huntington: I have two or three fairly quick questions. Firstly, I’d like to follow up a bit on Marvin’s discussion of the level of satisfaction with the legacy systems and their integration. I think you said that you were satisfied that the bulk of the systems and what you were interested in having integrated was achieved.

But when you look at the numbers, where you have upwards of 60 systems that you’re attempting to integrate, less than a third of them have been integrated, or a third of them have been integrated, and of the remaining 34, you’re looking at prioritizing 13 or 14 at the moment.

Are you really satisfied that the bulk of the integration has occurred that you wanted to see and feel is going to be useful for the system at the end of the day? You have less than a third accomplished, and five of those are partially replaced at this point — 17 replaced, 34 not done yet, looking at 13 or 14 to prioritize over the next few years. What haven’t we integrated yet that’s going to be essential to the original design?

L. Barker: As we indicated, 17 are done. Five are partially done, and we believe that somewhere between ten and 15 are actually not suitable. I think the system that we’ve indicated is the mainframe system. That is the primary system that will be significant. I think, as well, the process that we’ve gone through is that approximately ten to 14 need to be removed.

Having been in IMIT for 25 years and understanding the complexity associated with these types of systems — replacing them and doing the migration projects, etc., that we have done — yes, I’m satisfied with work that we’ve done. I think the project overall was ambitious. I think that what has been achieved has been significant.

We have other jurisdictions who come and talk to us about what we’ve done, about the lessons learned that we’ve had along the way, about how they can learn from us and go through that journey themselves. I think other jurisdictions who have embarked on the same road we have, have experienced similar circumstances. Would I have liked to have done everything? Absolutely. We always like to get 100 percent.

Unfortunately, in this particular case, we made some decisions based on the changes to the project that we had to make, based on the risk that we identified at the beginning of the project, based on the assumptions that we made at the beginning of the project, where we identified that there was some risk associated with those assumptions. So I think that is what we’re looking to. In the future we have the child and youth mental health that we have to move, adoptions and then contract and payment. Those are sort of the primary functions that we have outstanding.

V. Huntington: Thank you. During the discussion of controlling access to the system — this is sort of at a more detailed level — you mentioned that you were working on security profiles, or had been, as a result of the Auditor General’s report. You were updating security profiles of suppliers more quickly, and you were developing a better process that reflected staff and agency role changes so that you could control access at that level. Have you achieved those?

Just to step back a little bit, what is the term “supplier”? Is it system suppliers? Is it service suppliers, maintenance suppliers or suppliers of services at the agency level? Who are we talking about in terms of controlling that access?

L. Barker: When I was talking about the suppliers…. By suppliers, I mean a supplier could be rent, could be hydro, could be…. There’s a multitude of suppliers of services to the social sector. When I was talking about suppliers, in that one of the works that was in progress, it was about that ability to do an electronic fund transfer. For example, 6,000 citizens who are within the system of SDSI consume Hydro’s services. One of the things that we’re looking at is making a single payment to Hydro, rather than 6,000 payments. That’s what I was referring to, and that actually has been achieved.

That was separate from the discussion around security controls and access controls. I think the other discussion that we had was the profiles that have been updated within Children and Families, that they were going through a transformation to determine the number of profiles that they needed, which basically means the number of job descriptions. I’m an assistant deputy minister. There’s an executive director. There’s a social worker. All of us, as per our job roles, have different access to that particular system because we have different jobs that we need to do within that system.

As a result of the review that MCFD had, they actually reduced those number of job profiles. That was implemented in phase 4 and completed. Those job profiles, in the way in which they’re done, have reduced the need to have exemptions.

Prior to this you may have had four people doing the same type of role but would have different job profiles. Then we would have to apply different access levels associated with that because it hadn’t been standardized. Now that it is standardized, that has been completed in phase 4. That access has been reduced from an exemption perspective.

V. Huntington: Okay. Can we just go back to the issue of supplier a little bit? When you were updating profiles of suppliers…. That quote — maybe it wasn’t meant specifically, and I’m misunderstanding it. You’re updating security profiles of suppliers. Now, why is that necessary if they don’t have access in any way to the system — do they?

L. Barker: No. What I was trying to articulate, and need to do a better job of, was that a supplier…. For example, Hydro — they have no access to the system. But we make payment to our suppliers. For example, landlords, we make payment to.

What we’ve done to try to improve the efficiency of the ministry is rather than making 6,000 payments to the same supplier, we now make one. Rather than having a number of cheques printed out to the same supplier, we now make one electronic fund transfer. That would be the difference. Suppliers do not have access to the system.

V. Huntington: So updating the security profile of the supplier isn’t really part and parcel of what you’re doing?

L. Barker: We have not actually updated the security profile. We updated the profiles of the staff in CFD.

V. Huntington: I’m not finished yet, Mr. Chair, but I think the gentleman wanted to….

M. Zaranski: If I may just add to that. There are actually three types of service providers, if you will, that we have in the system. One is the supplier, as Laurie has just described.

The other is an employment services provider. This is actually a service provider to the Ministry of Social Development and Social Innovation. Those service providers have access to the system just like our staff would because they provide services on behalf of the ministry, both from an intake perspective and delivery of services, and they use ICM for that purpose.

We then have a third group of service providers, which are in the autism and medical benefits areas, where we have a portal which sits on top of ICM and controls access so they can only see those requests very specifically made of them. If I request a wheelchair or if I request a hearing aid, for example, or something of that nature, then I can make that request of a specific supplier. They can log in, check what requests are made and action them, meaning provide those services.

Just to make those distinctions. The first area of suppliers specifically, like B.C. Hydro — no access at all to the system; changes to profiles of the staff who manage them.
[ Page 750 ]

The second area, with employment services who access the system as staff — certainly, streamlining to make sure that they were fully consistent. And just as part of the review through the process of the project, periodic reviews to ensure consistency.

The third area, the users of the portal who see a very small selection of things specifically assigned to them or things requested of them — minimal change is required because they can only see a very limited set of information.

B. Ralston (Chair): Before you continue, are you still on this topic? We’ve had about four or five questions on this topic. If you’re finished on that topic, then I’d like to move to others and you can come back and ask further questions.

V. Huntington: I can pursue it, but the one other quick question I have is…. Where you say the non-floodplain storage of the data is now non-floodplain storage — where is that storage?

L. Reimer: I had the same question as MLA Morris asked, and the Auditor General’s office has answered that. My question is with respect to the issuance of the management report in October 2014 and the phase 4 design phase and then implementation on November 24, 2014.

I understand that you’re in the process of making sure that the recommendations of the Auditor General’s office are implemented. You’ve also said that you’re pleased that the audit recommendations regarding access controls and data quality management validated the ICM phase 4 project.

My question to you is this. You probably received the audit management report. Were you able to make any changes to phase 4 of the project as a result of those recommendations?

L. Barker: The management report was issued in October of 2014, and no, we were unable to make any adjustments because we were actually implementing approximately a month later. However, the Auditor General and their staff found some gaps — like I mentioned, with configuration regarding logging — which they brought to our attention, and those we did change. There were certainly some tasks that were brought to our attention.

One of the things that I want to point out is that we didn’t wait until the management report came out, which I believe is why the Auditor General indicated in her report that we responded favourably — because we made immediate changes.

The audit actually started in October 2013. During that time, from an operational perspective, they presented some feedback, and that was absolutely incorporated and some changes made immediately.

B. Ralston (Chair): I had myself on the list next. It’s a more general question about the management of procurement of long-term IT contracts. The Auditor General’s office has, over the last five or so years, done a series of reports. I’m thinking of the Maximus contract, and there are some others for office systems — I think Sun Microsystems as well.

Reference has been made by Ms. Barker to a contractual umbrella and contract substitution underneath that umbrella. I suppose the question arises…. I understand this particular contract is six years. What is the bargaining position of the government as a purchaser, having entered into a long-term contract with a very sophisticated supplier and where the possibility of exiting the contract and going elsewhere is really very, very limited?

What are the levers to control a cost? It does seem rather notorious that in these kinds of situations the vendor has incredible bargaining power and the government a capacity to pay that’s well recognized, and just continues to pay. I guess my question for the Auditor General — and for Mr. Newton, since he’s in charge of procurement — is: is there a better way to deal with the procurement of these kinds of IT services over a long term in government?

The other comment that I would make in response to that would be…. Deloitte, for example, is a national firm — indeed, an international firm — and I think Laurie alluded to it as well. Is there some possibility…? I know that in pharmacare some of the provincial governments have combined their purchasing power to negotiate with pharmaceutical companies to get a better deal.

Some of these systems would seem to be, given the constitutional responsibilities of the provinces, duplicated in every province. Is there any effort to engage a kind of national consortium in terms of purchase of these kinds of IT services where, basically, the same service is being delivered — not in each province, perhaps less so in provinces that are much smaller, but certainly with the bigger provinces?

S. Newton: I have no problem starting. With the ICM contract specifically, because of the way it was phased — and Laurie talked about sort of a design and then implementation through several phases — there was always the opportunity in that contract, should government have concern, to stop at a point in time. The umbrella contract allowed for off-ramps.

In relation to…. I’ll go to your last question. and I think I missed the middle piece there, so I’ll beg your indulgence. Maybe you’ll have to ask me again. The gov-
[ Page 751 ]
ernment, through the new west partnership agreement, which deals with the western provinces, has been, in relation to that, looking at opportunities to gain some scale in procurement. Every jurisdiction has their own legislative idiosyncrasies — for want of a better word — that would need to be reconciled to allow some of those things to happen. But those are active, ongoing discussions through interprovincial trade.

The details of those I don’t have, but I do know that it’s a constant area of discussion. Procurement services division is also engaged in looking at what opportunities are available to source more broadly across jurisdictions. That is an active series of discussions.

B. Ralston (Chair): Well, I suppose…. What consideration has there been of a better way to structure these contracts that gives the government…? You mentioned an exit. One does not hear of exits from these contracts. It seems that once the fly is in the bottle, it never gets out.

S. Newton: I would say the structure is in place. It becomes a management decision throughout the contracting processes to determine whether you’re at a place to off-ramp or not.

Another sort of trend within government is getting better at…. I think the discussion was earlier that maybe we would have done some different things in the business case as far as how we would go procure. My personal opinion is that the business case is the determinant and the driver for success in procurement.

To the extent that more upfront work is done in business cases…. I know that is the case that, as far as something that’s trending, that is being worked on, you’re better able to (1) negotiate with a vendor and (2) be able to hold the vendor to account throughout the implementation process and be able to better evaluate the success of the procurement at the end. So that is the place where you would be able to better structure a deal.

C. Bellringer: The Chair’s question is a long one, with a lot of answers. One of the things I mentioned. We are looking at, across the board, what the various challenges are, and we’ll get into some of the details around that. Procurement and the contracting is certainly one of them.

I find it difficult to make a generalization without looking at specific contracts, but one of the things I have seen — and I’m not going to specify where — is: don’t renegotiate yourself out of your strengths. Where the government contract is strong, don’t renegotiate the contract and have that eliminated. So if the risks have shifted to the supplier, keep it that way. It’s a general observation at this point.

There are a couple of reports that we’re working on right now in various areas, not just IT, where we’re looking at some contracts. We’ll be looking at that, and you’ll get some reports on that over the next year and plus.

The cross-country issue is fascinating. I’m perplexed by why it is so difficult in ten jurisdictions with similar systems to not be able to come up with one system that works for everybody. But in every sector, time and time again, it doesn’t work, and I don’t understand why not.

In fact, on the equivalent to ICM, on the child welfare piece of it, we had done quite a bit of work in Manitoba. Again, it’s a bit of a flashback for me. Justice Hughes did an inquiry in Manitoba, and it was a commission into the inquiry on the death of a child, Phoenix Sinclair. I had to go before that committee and speak to the work that we had done, including a look at the child welfare system.

In Manitoba the outcome of that was that they had chosen to keep a legacy system that was quite antiquated and a real patched-together kind of system, but their decision had been to keep it and maintain it and try to work with it rather than to replace it. So they went down a totally different road and had different challenges as a consequence of that.

Part of my observation at the time, at the inquiry, was that we can track every dime at Manitoba Lotteries, but we can’t track the kids. The question posed was: was it worse than other systems that we were seeing out there?

We do get a broad look at various systems right across government, including through the agencies, boards, commissions, Crowns, and so on. Progress is a positive thing, and moving forward, but the devil’s in the details in terms of getting the contract right and executing it right.

I think the biggest issue is: which ones are you going to choose in that broad spectrum across all of government and across that entire government reporting entity? We cannot — no jurisdiction can — afford to replace every single one of them all the time, absolutely current. It’s a very, very difficult strategic decision that I’m glad to say I don’t have to make.

B. Ralston (Chair): I have Kathy next. I’m going to suggest we take a brief recess, and then we’ll come back to Kathy and then conclude on this report.

K. Corrigan: I have two more questions. The first one goes back again to the issue of access to the system and who had access and the controls for that. There have been a few questions on that. I wanted to follow up on that, particularly with regard to something that was said by Mr. Zaranski and then also the response by Mr. Dover, the assistant Auditor General.

When asked about the access issues that were identified in the report, I believe Mr. Zaranski that you said
[ Page 752 ]
it had to do with implementation and when particular systems were put into place. It sounded like you were talking about technical systems or technological solutions — that that was part of it. Then Mr. Dover pointed out, and rightly so, that the system was operating since April of 2012.

So we had a period of a couple of years, depending on what timeline you’re looking at or what functionality you’re looking at, where the appropriate technological safeguards were not in place. The report itself, though, talks as much about processes that were not appropriate as well.

I’m wondering if you could just clarify some of that. Were there technological solutions, privacy, safety and security solutions, that were deliberately not put in place at the time that the system was running, from April of 2012? That was seen as part of a phased implementation. Also, how much of this was to do with processes that were identified as not being appropriate?

L. Barker: I’d just like to answer a portion of that particular question and will let Marcin add to my response.

I think one of the things that was identified was, for example, that there wasn’t automated reporting. That was a part of phase 4. There was the ability to do manual reports. There was the ability to do ad hoc reports, but there wasn’t a regular automated report that was in place until phase 4. So I think that was one of the concerns.

From a process perspective as well, at the end of any large IMIT project you go from project mode to operational mode. In the process of that you solidify the last of those processes, and you do it in respect to what has been implemented. It is a continuous process. It isn’t a process that happens on a particular day. What happened is that as we went through this process, the system was implemented.

We had processes in place at that particular time for what was implemented at that particular time. Then, as we indicated, there were four phases. At each phase, there were new processes that were reviewed and developed and implemented. There were reviews on the new technology that was being added, that new functionality that was being added at each of those particular phases.

Each of those times, we had different reviews from a security threat risk assessment. We had privacy impact assessments done. They’re actually posted on the web. We had independent reviews. Oracle came in and did a review at the time, prior to the implementation of each phase, etc. So we had a multitude of safeguards associated with those.

M. Zaranski: Certainly. When I was referring to implementation, I was referring indeed to system implementation. As Laurie mentioned, we had a series of them. We had four major system implementations. At each stage of development, we kept augmenting security and privacy.

In phase 1 the group that we deployed to had a different system for discreetly tracking consent from clients. So in some instances where services are being rendered or in order for the ministries to run their services, they require a consent form to be signed by the client, which speaks to the fact that their information will be used in the delivery of those services, and it states the parameters of how the information will be used.

In phase 2, for example, we added the capacity for ICM to track how consents are managed. In that way, we kept layering on additional elements of privacy controls into the system as it was being built. And rightfully, as the Auditor mentioned, the system was operational. So in these different stages: phase 1 would be completed, that system would be deployed, additional configurations would be undertaken, and those would be deployed at those four stages that I had mentioned.

The key issues, I believe, that were being referred to are with respect to the exceptions to the process that were granted based on the operational needs of service delivery — in particular, those of child protection services. Through the process of the four phases we strengthen our processes around how those exceptions were managed and, through the profile redefinition in phase 4 — in particular, in MCFD — reduced the number of those and the need for the new ones that may arise in the future.

However, with respect to the actual hard system controls or the things that were baked in, those were envisioned, built in and implemented as of phase 1, meaning that role-based access, the least access principle or least visibility principle, was considered and built into the system as of phase 1 so that different groups would see different information based on the services that they would then deliver.

K. Corrigan: Just a follow-up on that. This doesn’t seem to square with the report, which found…. I’ll read some of the comments.

“However, we found that a number of other staff also had access to restricted records, even though their need for access had not been defined. We found that ICM was unable to prevent access to specific records for those staff who had already been given general access to restricted records. We found that the ministries had not reviewed access. As a result, there is a risk that client information held in restricted records could be inappropriately accessed without the ministry’s knowledge.”

“We found that Ministry of Social Development and Social Innovation did not proactively monitor for inappropriate access
[ Page 753 ]
and activity, and investigated security-related incidents only on an ad hoc basis.”

That may speak to processes more, but the report itself doesn’t seem to be consistent with the explanation that you just gave, that there was security. There were real security risks after implementation. I don’t know if the Auditor General wants to comment on that. The report and the explanation seem to be inconsistent.

A. Chiang: What we found was, as the ministry talked about, that the access model has been defined. The issue here is with the users — the actual access through the system. What we found is, as you pointed out…. We had looked at, in particular, the first one on finding 3 that you mentioned, on page 19.

We looked from the point of view of whether there is need-to-know access from the operational staff. I think that’s more…. For example, those would be users from the child welfare program who have access to it. We had numerous discussions with the staff, and we are satisfied that the users that have access to the system do need the information in order to do their jobs.

What we found though, was there are other staff that have access to the system. For example, there are the policy analysts that we use as an example in the report. They weren’t defined anywhere. The need for them to access the information wasn’t defined in the matrix or in the access model. That’s why we weren’t able, as an auditor, to conclude whether those were need-to-know or not. That’s one of the things we looked at.

In terms of monitoring, the issue here is yes, the system does have the logs that are able to log access. The deficiency here, as Mr. Zaranski pointed out, was on the reporting aspect of the system at that time. There weren’t any reports that could be generated from the system — ad hoc reports, of course. For regular systematic reports that show incorrect access, the system at that time wasn’t able to generate that to enable the system administrators, for their review, to monitor whether that access was correct or not.

I just wanted to go back to the contract. I notice that Ms. Barker said that we met the refined scope. Just to be clear, I think it’s acknowledged in the report and, I think, in here as well, that that was a reduced scope.

I wanted to just ask as a general question…. I’ve asked already to see the contracts, that the contracts be provided to this committee. But I also want to ask the general question: at the beginning of this process and when the contract for $182 million was signed — and I guess it was phased, but that commitment was, from the beginning, at $182 million — was there a promise of what was going to be delivered? Or did the ministry, the government, sign a contract saying: “We’ll figure it out later. We’re going to get $182 million worth of stuff, but we don’t know what it is”? Which of those…? Or is it somewhere in between? I’m just trying to get a better understanding of what was contracted for.

L. Barker: Absolutely. There was a master services agreement, which we called a SISA, a systems integration services agreement, that was signed that was for the broad scope of the particular project. It had some contractual language associated with governance, how issues would be managed, all of those types of situations. As well, it had the process associated with how that $182 million would actually be contracted for.

The original contract was more about roles and responsibility — an overarching framework for it, an overarching framework for how we were going to approach and move through some of the assumptions, who was accountable for which aspects of the project.

What happened is then the first analysis and design contract was signed. That was: for phase 1 and this particular set of functionality, what would be delivered? Those deliverables actually had a dollar value attached to them. For each phase, the analysis and design was done, a dollar figure attached to it. Build and implement, dollars attached to it. Then maintain and support what was built, dollar sign attached to it. That was done for each of the phases.

The larger contract was the framework by which we were going to move forward and the obligations under which that contract occurred. Then for each of the contracts, in order to mitigate risk and in order to enable us to have off-ramps to get out of the contract should we experience significant issues, that would happen.

That’s why, as we have commented earlier, the delivery in each of those subsequent…. We call them statements of work or SOWs. Each of those, which attached to the main contract, was delivered as per the deliverables, as per the dollar figure assigned to that particular work product.

B. Ralston (Chair): I’m going to try and suggest that we conclude about 11:30 because we have two other, somewhat briefer, reports to deal with before one o’clock.

V. Huntington: I’m wondering if the Auditor General has ever reflected upon or is considering reviewing whether or not these very high-level, complex integrations are worth the expense, the time, the risk to privacy and the risk to security. Or are there better, more finite ways of proceeding along the same trail?

C. Bellringer: I guess the quick answer to that is: yes, I’ve considered it. I’ve never quite figured out where to land with it. It’s like it’s the ultimate question on every contract. What’s it worth?
[ Page 754 ]

We do try to scope it within the specifics of what we then carve off and choose to look at and try to find a way to get at it as best we can. There’s no real simple answer that says: “Yes, it should have been that amount.” That’s where you get into the contracting process and getting competitive bids and all the different elements and break it down like that. That’s where we set criteria and so on. It’s a bit of a not quite straight answer to a seemingly simple question. We strive to find answers to that all the time.

V. Huntington: I don’t think it is that seemingly simple a question. Sometimes I listen to the discussion and think: “Gosh, maybe if the end goal had been a little smaller and we’d had two end goals, then we may have accomplished it more easily and with less money and with less difficulty in the long run.”

I just wonder if we’re trying to bite off too much because technology allows us to go that way.

S. Robinson: I want to go back to the very first question that my colleague David Eby had asked around the fact sheet that’s on the website. I want to, I guess, reiterate and acknowledge that this was done sort of in error — the comment about the project delivered “on track, on time and on budget.”

I want to know, if that was an error, what steps have been done to correct that. I mean, this is still…. I just pulled it up on the website, from November 27, 2014. It’s still there, so the message is still there. I want to know if there’s any intention to adjust that statement in public.

L. Barker: That’s actually an excellent point. We are in a process of doing just that, of updating it. We want to ensure this time — me, personally — that the information we release is not only accurate but that the public perception is in line with the conversation we’ve had today, along with the results of the final landing of that particular project, which happened in November.

As I mentioned earlier, we’ve had an organizational redesign that we just completed in March to address some of the issues associated with the Auditor General’s report. We also want to include some of those elements to ensure that British Columbians are confident in our ability to manage the security and privacy associated with this application and some of the other concerns raised.

B. Ralston (Chair): That concludes the questions. Thank you very much, Ms. Barker, and your team. You bore the brunt of it here today. And thank you to the Auditor General on that report.

I’d just ask members to stay in their seats so we can transition quickly to the next report, which should be the follow-up report on B.C. Hydro and the effects of rate-regulated accounting.

Office of the Auditor General:
Follow-Up Report: Updates on the
Implementation of Recommendations
from Recent Reports

B. Ralston (Chair): The next report we’re going to consider is a follow-up report, which should be an update on recommendations from recent reports. This particular report is B.C. Hydro and the effects of rate-regulated accounting.

From the Office of the Auditor General — the Auditor General and Russ Jones, Deputy Auditor General. From B.C. Hydro — Cheryl Yaremko, who’s executive vice-president, finance and supply chain, and chief financial officer; and Janet Fraser, senior vice-president, energy, regulatory and business planning. From the Ministry of Energy and Mines — Les MacLaren, assistant deputy minister, electricity and alternative energy division.

Welcome, all. I’ll turn it over to Russ or the Auditor General — one of you — to lead off.

C. Bellringer: We’re arm-wrestling over who gets to speak to this, because it is actually, seriously, a very interesting accounting issue.

There are basically two main issues in the original report that we issued from the office. It predates me. Certainly, the issue doesn’t…. I’m very familiar with it from other jurisdictions and actually sat on the Manitoba Hydro board and was chair of the audit committee for some years before I was Auditor. I’m deeply aware of the issues.

There is an accounting issue about whether or not in Canada you’re permitted to use rate-regulated accounting, which means it’s a little bit different than what the accounting would look like if you were just a normal public sector or private sector organization. If you defer things for purposes of setting rates, then it’s permitted to look that way in your accounting. That is currently permitted in Canada. It is the methodology that’s used in British Columbia. It differs across the country, but the permission is there and the following of that is still something that’s consistent with generally accepted accounting principles, or GAAP.

There’s that accounting discussion, and there’s an update on that that I’m not 100 percent sure that…. It has been changing. The landscape is going back and forth and all over the place, both internationally as well as in Canada. I would prefer to either ask Stuart or Russ to give you where it’s at today — or B.C. Hydro — in terms of the implementation dates, if there is a change anticipated on the horizon.

At the time of writing the report, there was an anticipation that it would be fairly immediate. That has not happened. The accounting at the moment is correct. You’ll get our opinion on public accounts where it’s included.
[ Page 755 ]

The second piece is the bigger piece, a much bigger piece, which is: how much can you defer without putting a burden on future generations? At what point does it become not affordable? That is, I think, the more interesting piece. It’s a big piece. I’m used to a system where….

I don’t know the BCUC, the Utilities Commission, process in detail in B.C. We have it on our radar to take a closer look at it, because I’d like to understand it better. That process of setting rates is where I would expect to see the discussion take place around another layer of oversight to whether or not the rate-regulated and deferral process and other things, including capital projects and all kinds of things that build into your rates — whether or not the public is protected.

With that, maybe you could just give where we are in Canada with the switchover to applying IFRS.

R. Jones: Canadian standards are…. They had, I think, given the utility companies, if I’m not mistaken, until April 1 of this year to move. But IFRS is still looking at whether or not….

B. Ralston (Chair): Perhaps you could just say what IFRS is. There may be some people who don’t know what it is.

R. Jones: Yes. The international financial reporting standards, which are the ones that most utility companies try to use because it’s the key one, has deferred the implementation or non-implementation for another year, because they’re doing a look at whether or not they think it should be allowed or not. It is currently still allowed in the U.S. The regulation, I think, that’s in place here in the province would allow B.C. Hydro to continue to use rate-regulated accounting. It’s complicated, but they’re doing it okay.

C. Bellringer: …where Canadian utilities would be required to change their accounting in order to comply with Canadian standards. There is no date set at any point in the future. They’re still discussing.

B. Ralston (Chair): Just so that it’s clear, then, if the utilities were directed by the Canadian accounting standard centres to move to full IFRS, then rate-regulated accounting would no longer be permitted. Is that what would happen?

R. Jones: Currently the international standards are looking at whether or not to allow rate-regulated accounting. If IFRS says yes and the utility companies are told by the government to use IFRS, which is for government business enterprises, then yes, they would follow rate-regulated accounting.

B. Ralston (Chair): Great. Then we’ll move over to representatives of Hydro and the ministry. Who wants to be first?

Thanks for having us here today. I thought we’d take the opportunity to just give a little bit of background information on regulatory accounting and then address some of the specific questions that I think were raised the last time this was discussed.

Some background on why B.C. Hydro uses regulatory accounts. For the most part, for rate-setting purposes, that follows financial statements and cost recognition based on what generally accepted accounting principles would require. In some instances there is cause for rate-setting to be different than those accounting rules would require. In that instance is when we would use regulatory accounts. As mentioned, these have been allowed in Canada and U.S. accounting rules, and most North American utilities will follow rate-regulated accounting.

Some of the circumstances that require a regulatory account are to better match costs and benefits for different generations of customers. Sometimes an accounting rule would require you to expense it in a particular year, but there is benefit in future years for ratepayers. We want to match so ratepayers are paying for those costs as they’re getting those benefits, not earlier.

As well, when we set rates we have to forecast our costs. Some of those costs are not controllable by B.C. Hydro — such as water inflows, which impact our cost of energy, or interest rates. If we have some variability on those costs, either positive or negative, we’ll capture those in a regulatory account to reflect in future rates.

Finally, sometimes there’s a large cost that would cause a significant rate impact in one particular year. In order to avoid having an increase in one year and then a decrease later, we’ll set up an account to help smooth that impact out so ratepayers have more consistency in their rates.

Moving to the next slide. There was some discussion around what the balances were in our regulatory accounts. At the time of the original audit the balances were $2.2 billion. As of the close of our recent fiscal year
[ Page 756 ]
they’ve increased to $5.4 billion. I’ll just take a minute to talk about some of the significant changes that have happened since that time.

As discussed, during that period B.C. Hydro did move towards IFRS accounting principles plus an allowance to use regulatory accounting. There were two significant impacts when we changed our accounting rules. One was around pension accounting, and the other was around what we could capitalize as property, plant and equipment as we construct a capital asset.

On the pension side, IFRS required — not too get too technical — that on a pension, actuarial experience gains and losses…. Those were previously booked over the service life of the employees. Canadian accounting principles did not require that adjustment to be booked on the balance sheet; IFRS did. In order to continue to include those costs into rates as we had been doing previously, we set up a regulatory account to offset that impact. The outcome of that was that the impact to ratepayers was the same under Canadian GAAP and IFRS, but it required us to set up a regulatory account.

On the property, plant and equipment side, IFRS had different rules around capitalizing direct or indirect overhead as you’re constructing a capital asset. B.C. Hydro, as you know, has a large capital asset program. IFRS would not allow capitalization of indirect overhead costs. It was a significant cost item for us, so again, to help smooth that impact on ratepayers so they weren’t hit with a large rate increase because of that change, we’re smoothing that impact in over a ten-year time period.

The next item is related to our non-current pension costs. This relates to our pension liability, which is really impacted by discount rates. I think that was mentioned in the last discussion. About a 1 percent change in discount rates will impact that liability by approximately $300 million, so it’s very sensitive to discount rates.

Between the period of March 2009 and March 2015 that discount rate has lowered by four percentage points, so it has been a very significant reduction. As you’re aware, we’re currently at historically low interest rates, so that’s had a negative impact on that pension account.

We’re not sure when, hopefully in the future, but those interest rates and discount rates will increase, and that account will naturally clear itself out. I’ll also point out that even though there was a negative impact from the discount rate, our pension funds have had very positive returns over the past few years, in excess of 10 percent. So that’s helped to offset that negative impact.

The other significant increase was related to Site C. Up until the time that government had made its final investment decision, we were capturing the costs related to Site C in a regulatory asset in order to not charge ratepayers today for an asset that they weren’t getting the benefit of. Now that that decision is made, those future costs will be treated as a capital asset in property, plant and equipment on our balance sheet, so there won’t be any further additions for Site C to our regulatory accounts.

The final large item. We have DSM up there. It stands for demand-side management, our Power Smart program. B.C. Hydro is investing heavily in conservation programs to help our ratepayers use less energy. It’s a very cost-effective way to manage our energy. We’re continuing to add to that account every year through our conservation programs, and it is one of our largest regulatory accounts right now.

When we originated this program about ten years ago, we had expensed those costs as incurred. It was actually the B.C. Utilities Commission that requested that we set up a regulatory account instead so that benefits could be spread over time as opposed to expensed as incurred.

That’s just a summary of the significant changes that have occurred in those accounts.

In terms of how we are managing our regulatory accounts, in response to the government review in 2011 of B.C. Hydro as well as the Auditor General’s original audit report, we have prepared a very comprehensive regulatory accounts report. It outlines the background, the history and the recovery periods for every one of our regulatory accounts and what our overall approach to managing them is. We filed this report with the Utilities Commission as part of our last revenue requirements application.

I’ll note that we are currently recovering balances, and 24 of the 26 accounts, representing over 90 percent of the balances, are built into our current rate structure in some form. Those are included in current rates. In the past fiscal year, in fiscal 2015, we recovered $500 million of those balances and are forecasting to do the same in this current year.

In terms of regulatory accounts and what kind of scrutiny they get, the BCUC approves all of the regulatory accounts as well as what’s allowed to go into them. B.C. Hydro is not allowed to set up its own accounts or put whatever costs it wants into them. It must all be approved by the BCUC. The BCUC also approves the recovery of each account and over what time period it will be recovered.

As part of our annual financial statement audit at B.C. Hydro, our external auditor, KPMG, very closely looks at all the additions and changes to all of our regulatory accounts. It’s a key item that they focus on and that they report to our audit committee on.

We also file an annual financial report and a semi-annual deferral account report with the BCUC which details all the changes in the regulatory accounts to give them a chance to look at those during the year. As well, they will review our regulatory accounts through our revenue requirements process. Our next application process will start this coming February, so they’ll have a chance to have full scrutiny of those accounts and what’s been placed in them.
[ Page 757 ]

I just wanted to take a moment to clarify something that often gets confused, probably because we had two exceptions to this. Our capital expenditures for assets that we’re building do not go into regulatory accounts. They are treated as a capital asset, as property, plant and equipment on our balance sheet. They are not costs that go into regulatory accounts, and our capital spending program coming up will not increase these accounts.

There have only been two exceptions to that. One is for Site C, which I mentioned earlier, and the other one is related to our smart-metering project, where certain costs that didn’t qualify to be added as a capital asset were included in here. We’re not adding to either of those two accounts any further, and we don’t expect that any further capital expenditures would go into a regulatory account.

Finally, just to look forward as to where we see right now our regulatory account balances will go. We do have, as I mentioned, a mechanism in place to recover on 90 percent of those balances. You’ll see that…. At the end of our ten-year rates plan we still expect to have a sizable balance of $4 billion in there. So even though we’re recovering on them, we are still adding new costs to those balances — in particular for our demand-side management program and some amounts still on the smoothing for the IFRS property, plant and equipment.

It’s not on the slide, but we had a look at…. Based on the current $5.4 billion of costs that we have in those regulatory accounts, if we did not add anything more to them and only recover them as the current mechanisms are set up, they would be at $2.6 billion by the end of fiscal ’24 and then down to $1.5 billion ten years following.

You’ll also see that we’re forecasting that in the end of ten years, most of those balances will be concentrated in five accounts that I have listed there — our demand-side management being the largest of them, capturing the costs that we spent on conservation programs.

I’ll also note that we do have a number of forecast variance accounts that I mentioned earlier. We don’t forecast to have balances in them, but there is some variability that could happen between now and then. We could also look at our demand-side management programs. We may spend more or less on those, so that balance could vary. But this is what our current forecast is for those accounts.

Those are all the comments I was going to make, and I’m happy to answer any questions.

K. Corrigan: Well, one of the issues that has been dealt with is the size of the rate-regulated accounts. What I don’t understand is why…. If this is supposed to be smoothing out the costs to taxpayers, you would assume that they wouldn’t keep going up. Now, I know now we’re talking about recovering some of it at least. But why is it…? Essentially, this is deferring costs. So it’s essentially putting a burden on future ratepayers, correct? At the end of the day, that’s what’s happening. Future ratepayers are going to pay these costs. Why is it…?

So maybe just a confirmation that that’s correct. That’s the point. We’re deferring costs.

C. Yaremko: Yes, we’re matching the costs to the benefits of future ratepayers, so these will be recovered in the future. That’s correct.

K. Corrigan: So future taxpayers, future citizens, are going to end up paying for the decision to defer the costs now. But my question is, then: why is it that we’ve kept adding to it over time? To me, it would be something that naturally, if it really is about smoothing things out, should go up and down and, in fact, at times be almost the opposite, right? But it’s just continuing to go up. At least it has so far. So why is that? I mean, does this go on forever?

C. Yaremko: The accounts have gone up over time, and we think we’re probably at a plateau for them right now. As I mentioned, in particular for our demand-side management costs, because we are continuing to spend approximately $150 million each year on those costs, even though we’re recovering on costs we’ve spent to date, we are adding new costs to that account as we go. Those are being recovered over their expected life of providing benefit to ratepayers, which is right now 15 years.

Some of the other ones, like Site C and the property, plant and equipment — we’re planning to recover those over the life of those assets, and our assets have a very long life, so on average they’ll be recovered over a 40-year period. So they’re going down more gradually than some of our other accounts.

K. Corrigan: But it seems to me that…. Is the real purpose of this to make it fair? Because that’s sort of what you’re saying, that whoever gets the benefit should have to pay for it. Or is the real purpose of it to make the books of B.C. Hydro better so that dividends can be removed from it?

C. Yaremko: The principle is that the ratepayers who are getting the benefit would pay for the costs. I guess the alternative, if we look at demand-side management expenditures…. If the commission hadn’t directed us to add those to a regulatory account, we would include them as a current year expense, which would be included in our rates, and our rates would be higher.

So there wouldn’t be an impact on our net income, but the rates would be higher because those ratepayers would be paying all the costs we incurred this year in this year, even if it had a benefit into the future.
[ Page 758 ]

K. Corrigan: One final follow-up. Aren’t the ratepayers right now getting the benefit of past expenditures? They’re getting the benefit of past expenditures, but they’re not having to pay for the costs right now. They’re getting it, really…. It seems to me that it’s a bit of a false way to do the books, because this will go on forever. You’re going to have people benefiting from what the past generation did.

C. Yaremko: Through the recovery that I mentioned earlier — the $500 million that we’re including in current-year rates — there is recovery of these costs that are sitting there today. We’re amortizing those over time, and there is a portion of that that current ratepayers are paying for. It’s sort of being drawn down over time and added to gradually over time for that particular demand-side management account, which is our largest account.

M. Hunt: Having been the chair of the finance committee in the city of Surrey for many years, I have had many arguments with our auditors over generally accepted accounting. These are mental exercises that only you accountants can actually do, because the rest of us can’t understand how a deferred cost is an asset. That’s an expense. We’ve paid the money out, but somehow it becomes an asset. Only with accountants does it happen.

I’m looking at exhibit 1 on page 43. That’s where we end up with what you describe as, in fiscal year 2024…. If I’m reading this chart correctly — and I want to make sure that I am reading it correctly — it comes to $4.1 million as being the total deferral/regulatory accounts. Am I correct? That’s the chart that we’re sort of alluding to here.

I’m finding it interesting. I think I’ve heard you a number of times say that, in fact, the number is coming down. But if I look at the graph and I run up from fiscal 2015, it actually goes up and over $5 million before it starts to come down. How can the graph going up be going down, when in fact it’s going up?

C. Yaremko: There are two parts to that. One is that we are recovering on the current balances, and the other part is we’re adding new amounts to those accounts over time. That’s why….

M. Hunt: True, but the total should be going up. That’s what the graph shows — the totals going up, not down, unless my eyes aren’t working right and I just can’t see things straight.

C. Yaremko: I think if you look at the graph, for fiscal 2015 you’ll see we’re near or at the high point.

M. Hunt: Well, I’d say the high point looks like about ’18, maybe starting in ’17 and running to about ’20 as the high point.

M. Hunt: Okay, good. I just want to make sure that my eyes aren’t deceiving me. Although we have the fancy name and although we call them assets, in fact what we’re doing is amortizing non-assets. That’s basically what it is. I’m new to this game, so I’m just figuring out the new terminologies and everything. I read through this, and I was sitting there going: “Man, oh man. I’ve got to get my head around this one.” But that’s the basic essence. We’re amortizing what are really non-assets.

For example, take Site C. They’re saying: “You’re not allowed to expense those as an asset. Therefore, you’ve got to expense them in another way.” I agree with you that they have a long-term effect. They have a long-term benefit. They should be paid over the beneficial period of that asset — no question. But for some reason, the rules are saying you can’t capitalize it. Therefore, you’ve created this account as a way of amortizing non-assets. Am I in the ballpark?

C. Yaremko: I wouldn’t call it a non-asset. But you’re correct that that’s a way that we can smooth it and recover it in rates over a period different than what the accounting principles would generally say.

M. Hunt: Yeah, I would agree with you. I would call it an asset. I would. But obviously, somewhere in the accounting rules, some accountant decided we’re going to not call it that.

C. Yaremko: Remember, the accounting rules do allow for the use of regulatory accounts for regulated utilities.

M. Hunt: Oh no, no. I’m not suggesting you’re doing anything wrong. Please, please, don’t get me wrong.

I am simply trying to get my head around this new pile of accounting stuff that I’ve never had to face before. Like I said, I have had lots of arguments with KPMG. Archie and I, every year, go at it over how these rules work. I just want to get my head around what’s happening here so I can more clearly understand B.C. Hydro.

R. Jones: That is exactly what the international financial reporting standards are trying to figure out. Are these assets, or are these liabilities? That’s the big discussion.

If the decision is that they’re not assets and liabilities, then the international standards will not allow rate-regulated accounting.

D. Eby: I’m with Mr. Hunt on this. This is very intense accounting stuff, and it’s difficult to understand. So I’m interested in the accountability by people who actually understand what’s going on here.
[ Page 759 ]

I see that the Auditor General did not audit this chart, so I’m interested in the KPMG audit of it, which is B.C. Hydro’s external auditor from what I understand from their presentation. Are those reports from KPMG, the audits of these numbers, publicly available?

C. Yaremko: KPMG will look at our current balances when they do our fiscal year-end audit. They wouldn’t necessarily have audited our forecast, but they’ll look at our current audit.

Yes, our financial statements and the audit report from KPMG are public documents.

C. Yaremko: We have not released our fiscal ’15 report yet, but our fiscal ’14 report is posted on our website.

D. Eby: The Utilities Commission has some role here too, and I was having a hard time teasing it out from the presentation. I wonder if there could be a bit more detail about that. Does the Utilities Commission look at this forecast? I guess maybe another way of asking the same question is: who is auditing this forecast, which seems critically important in terms of the future of the utility and its sustainability? Who’s looking at these numbers and saying, “Yeah. You’ve got it right,” other than B.C. Hydro?

C. Yaremko: Our regulatory account report was filed with the BCUC as part of our filing last year, so they have received it and have looked through it. They would not have done an audit per se of it, but they do have it. We have filed it with them.

D. Eby: Is there anybody who’s auditing these numbers, or is it just B.C. Hydro putting this out?

Not in terms of the forecast, but in terms of the accounts to the end of the year. The B.C. Hydro figures are brought into the public accounts, and we audit the public accounts. The B.C. Hydro numbers…. They have stand-alone financial statements. Those are the ones audited by KPMG.

One piece of it specific to this discussion that is looked at in some detail is whether or not the amounts in the regulatory accounts are recorded properly for accounting purposes. So there’s a look at them, but not in terms of the projections.

B. Ralston (Chair): I had myself next. I think the gist of the original report was that the trajectory of the rate-regulated accounts was very rapid. In comparison to other public utilities of comparable size in the country, the trajectory was upwards much more dramatically. The issue then became the degree to which those accounts would be recovered in the long run, understanding the principle of rate-regulated accounting to balance benefits and costs over generations. There was a sense in the original report that this was disproportionate compared to other public utilities.

The issue that’s been raised here…. I note the slides that we had back in the follow-up report said that the recommendation from the Auditor General was: “We recommend that government determine at the earliest opportunity how B.C. Hydro will recover the net deferred costs in its regulatory accounts.” Then there’s a bullet: “Examined B.C. Hydro’s report and inquired about it but did not audit it.” I appreciate there’s been a projection made here about how those accounts will be recovered, and there is some apparent recovery underway.

I guess the assurance that I would be looking for as a member of the committee would be an audit-level assurance, given the magnitude of the dollars involved, that indeed this projected recovery plan is one that meets some fairly stringent financial tests. Is there a plan to audit it on the part of the Auditor General’s office, or is there some other entity that would audit it? Would that be the Utilities Commission? What is the plan to verify the plan that’s being placed before us?

One of the things is that there is a way of auditing projections, but the audit opinion you’ll get is one that essentially says: “Looking at the assumptions” — hopefully, we would be able to say — “we don’t see anything that would indicate that those assumptions aren’t accurate and would result in the recoveries over time.” Because it’s looking at future-oriented information, basically, and projections, you’re not going to get the same sort of definitive assurance that you would on current financial statements.

B. Ralston (Chair): But the gist of the audit originally was a concern raised about those future projections — that the curve was inordinately steep, and it was posed to some financial peril, I suppose, in the long run. If one can raise that in an audit initially, why wouldn’t the same criteria be used to apply to the plan that’s prepared in response?

R. Jones: I think one of the things we were looking for was for B.C. Hydro to have a plan in place on how they were going to recover these amounts. At this point in time we were happy that at least now there is a plan that, as Cheryl has mentioned, sets out: here are, for each one of these accounts, the years over which these are going to be recovered.

C. Bellringer: My concern is not about this moment, because this moment is different from the moment we did the audit. I’m more concerned about the process of making sure that, over time, it is properly overseen. That is why we did select…. We haven’t yet finalized our coverage plan going forward, but in our draft we do have BCUC identified as an area that we want to audit.

I’d like to look at the process over this, as opposed to telling you that, as of today, here’s what the trajectory is doing. I’m not more concerned, but I’m equally as concerned about capital plans, in addition to regulatory accounts. All of those things are things of the future that need…. If there’s a great big huge capital plan that has a future spending in it, it’s going to impact rates very significantly.

C. Bellringer: I think the numbers across Canada that were quoted in that report are quite different today, because there are a number of huge capital plans in some of the jurisdictions that we were looking at back then. So it’s an ongoing thing. There has to be a mechanism in place for that to be looked at for…. You know, the public assurance can’t be us walking in and doing a single-point audit. I think it has to be reliance on the system that’s there overall to protect ratepayers.

G. Kyllo: The rate-regulated accounting, I think, is incredibly important. Things like…. Is it design-side management?

G. Kyllo: Demand-side management. Yes, thank you, initiatives like that. If they have to be entirely expensed in one operating year or like the smart-meter program, it would put so much pressure on the ratepayer that those types of investments and initiatives wouldn’t be undertaken.

The rate-regulated accounting — I’m hoping that the federal standard or the international standard will take that into consideration. If we don’t have the ability of forecasting and amortizing those expenses over time, it will really inhibit utilities to make those investments in things like the demand-side management and smart meters and those sorts of initiatives because it will have too big an impact on ratepayers. Am I correct in that?

G. Kyllo: Is that the argument that’s being made internationally by different utilities?

R. Jones: I mean, I’ve read the discussion paper, and part of the argument being made is that these deferred costs are like an account receivable. You’re going to recover them in the future, so they are really an asset to the organization. There’s the other side to it, too, which is that it shouldn’t be allowed to be deferred. It is a cost of the current year.

C. Bellringer: Stuart would probably point out that he’s not allowed to defer a whole bunch of things, because we don’t have matching in the public accounts. You don’t get taxes today and decide: “We’ll set those aside for expenditures tomorrow.” You have to show the picture at the end of the day as to what came in and what went out on an accrual basis. So it is a different kind of accounting from what we’re seeing in government accounts themselves.

I think that inconsistency is a huge issue. If you want to know where things are at, you don’t see it the same way when you look at the Crown accounts from where you look at the basic ministry accounts. They’re just shown differently. It’s permitted, but it’s something I’m not fond of. But we’ll influence it through the standard-setting process.

G. Heyman: I understand the rationale behind deferral accounts and rate-regulated accounting, but as the Auditor General has pointed out, under GAAP that’s not what governments are able to do. That leads to some, arguably, perverse decisions to not make investments that likely would save taxpayers money and be to the public good over the long term because of their impact on the annual statement. I guess we can all thank Enron for that.

My question for the Auditor General is…. Leaving aside the particulars about the specific deferral accounts, we’re left, because of the deferral accounts, in a situation where Hydro is establishing deferral accounts in order to, they say, more closely match the costs of an initiative with the beneficiaries of that initiative in the future. At the same time, that results in the ability of dividends to be paid out to government as shareholder. Now, if those dividends were not paid out, that might change the nature of what’s required in a deferral account and result in a different configuration of ratepayers’ amount of rates and beneficiaries.

I’m wondering if the Auditor General can comment on whether there is a different practice in other Canadian jurisdictions or other utility jurisdictions than the one we’re witnessing here in terms of the relationship of deferring costs to the future while paying out dividends in the present when, in fact, there are expenses — whether or not they’re being booked in this year or a future year.

C. Bellringer: If you look at each jurisdiction in Canada, you’re going to see a completely different structure, one from the other, as to how they’ve set up their relationship between government and the utility and the
[ Page 761 ]
way that they’re choosing to use that from a policy perspective to generate revenue. Some of them charge for helping them set up debt, so they have a debt charge. Or they have a water usage charge.

There are other ways that cash moves between government and the utility. It’s very much a policy call and an analysis that we wouldn’t get into, saying which one…. No one is better than the other. They’re all just very, very different.

Thank you very much for coming, and thank you for providing that further information. I have a sense there may be another chapter in this story to come.

One more report. I’ll ask participants in that to come forward. If members would not go too far, we can start right away, so we finish on time.

B. Ralston (Chair): We’re about to embark on a consideration of a follow-up report from the compilation of June 2014, and that’s the audit of the Agricultural Land Commission. Along with the Auditor General we have Morris Sydor, assistant Auditor General, and from the Agricultural Land Commission Colin Fry, chief tribunal officer. I’ll turn it over to the Auditor General, and away we go.

Good afternoon, committee members. I just have a brief summary to update us on the progress of this. In 2010 we carried out an audit to determine whether the Agricultural Land Commission was effectively preserving agricultural land and encouraging farming, adequately protecting the ALR from damage through compliance and enforcement activities and adequately evaluating and reporting on its effectiveness.

At that time we found that the commission was challenged to effectively preserve agricultural land and encourage farming, and we made nine recommendations to address those challenges. Of the nine recommendations in our 2010 audit report, the commission reported seven as partially implemented and two as fully implemented.

Our progress audit in June of 2014 found that the commission self-assessment was valid for all but one recommendation. The commission self-assessed recommendation 4, dealing with working with the Fraser–Fort George district to address some concerns, as “fully or substantially implemented,” whereas we found that “partially implemented” was a more reliable assessment of the progress made to date. The commission agreed with our assessment.

To wrap up, then, since the initial audit in 2010 there have been three follow-ups without an OAG assessment. This 2014 follow-up included an OAG assessment. At this time no further follow-up is planned by our office.

C. Fry: What I will do is go through a brief PowerPoint presentation to try and give you an update on the nine recommendations that were given in 2010. Morris has gone through most of these.

Basically, to set it out, the ALC’s primary mandate is to preserve agricultural land and encourage farming on ALR lands. As Morris pointed out, there were nine recommendations suggesting improvements could be made. I want to point out too to the committee that the commission agreed unanimously with the recommendations of the Auditor General. We’ve done four self-assessments since that time, and 2014 was the last one. I’ll let Morris’s comments stand on that.

On the last point here, I want to stress that the ALC is committed to continue working towards implementation of all recommendations in the coming years.

So we go to the key findings. The first one is the ALR boundary reviews — to ensure that they’re “accurate and include land that is both capable and suitable for agricultural use.” This was a recommendation that we fully supported. Since that time we had updated our 1981 methodology technical manual for conducting fine-tuning reviews, as they’re called.

We have now undertaken fine-tuning reviews, primarily in the East Kootenays. The reason for that is there has been a long-standing desire for over a decade from the commission to visit that area, to refine the boundaries. Part of that was precipitated by the number of applications we were getting that were being approved because of their poor land.

We have completed one review in the Elk Valley of the East Kootenays. We have now undertaken to the point that field work is being done in anticipation of public hearings in two other areas: the Kimberley area and the Cranbrook area. To bring to a conclusion in the East Kootenays, we’re planning to have the East Kootenays completely done by the end of this fiscal year.

We’ve also initiated contact now with other local governments in the Interior and the north to look at opportunities for further fine-tuning reviews in those areas. We are working closely with local governments, but we’re also working closely with other provincial ministries as well as agricultural stakeholders.

An interesting one is bullet 4. We’ve got a little subproject going on that is to not change the size or re-evaluate
[ Page 762 ]
the size of the ALR, but to identify land within the ALR that really has no use for agriculture. That may be major waterways, major road systems or developed areas in the ALR.

What we’re trying to do, through a more simple accounting process, is to turn around and say: “Yes, the ALR is accounted for at this size. But within it, the reality is there are lands that can’t be used for agriculture.” We just want to identify that so there’s a more realistic understanding of the available land for agriculture in the province. At the end of the day, the hope is that once the areas are fine-tuned, the boundaries will be more defensible.

We are not undertaking similar reviews in the south coast, the Island or the Okanagan. There’s a higher level of confidence on the ALR boundary in that area.

Number 2 is to seek government’s support to make changes that will allow it to more effectively preserve agricultural land through the application process.

A lot of this goes along with what your first audit this morning was, dealing with improvements to information management and technology. We have been developing, probably over the last three years, a new web-based application form. I can say that as of last Friday we have taken delivery of the product.

What we are trying to do now is…. We’re now getting the interconnectivity so that our system will now integrate with the flow of data between local governments and the applicants. We’ve got the car. We’re now putting the gas in it to start it up and start driving.

It is planned to go live in a couple of weeks. We have what’s called…. It’s a secret launch right now. We’re getting it right now to load it up as well as to do some final testing to make sure everything will be fine.

That’s very, very positive news for us. It will be more agriculturally focused in its information requirements, asking for information that is specific to agriculture. This is designed to have a better understanding of the application but is also teeing up our ability to make these assessments as we get further on into the recommendations of how we are preserving agricultural land and reporting out on our progress.

It’s going to be user self-help-based. It’s going to have a database automatically uploaded through the submission of the application, and it will improve efficiencies of the application process. This will allow staff who historically do manual paper shuffling to refocus on other aspects of our business. It will also provide more public awareness of the application work of the commission.

A long-standing criticism of the commission had been that we don’t know what’s going on or what’s on your plate from an application standpoint. While the commission, on its website, has posted its decisions, the criticism extended back to: “We didn’t know you were even considering it.”

This system, when it’s fully operational, will now post the data from cradle to grave when it’s received by the commission, so people can track the process. As far as understanding the outcomes, they’ll have the application material, all the other material that’s added to it, and the outcome.

A lot of these are going to be repetitive, so I can probably go through this one really quickly. The proactive planning in local governments is going on at a moderate level. But the portal coming in live will allow some of our planners that are primarily dedicated to processing of applications to look at more proactive work with respect to outreach to stakeholders and local governments, to look at planning and initiatives.

Morris alluded to the Fraser–Fort George regional district, the delegation agreement. Since that time, we have audited a delegation agreement. As a result of that review, there were recommendations for improvements on decision-making. We have had direct discussions with the regional district now regarding the revisions and further training. Hopefully, that moves us along to “almost complete.”

“Work with the Oil and Gas Commission to develop an action plan to implement the recommendations of the 2009 audit.” We have completed that, and that has culminated in a new delegation agreement between the Oil and Gas Commission and the Agricultural Land Commission with respect to…. Decision-making has been delegated to the Oil and Gas Commission to deal primarily with the majority of oil and gas development in the ALR.

The more significant improvement through this delegation agreement is that it’s now in the delegation agreement that greater consideration to agricultural impacts must be considered through their planning, reporting, monitoring and enforcing. It was signed early in 2013 and came into force later in the year.

This one is still an ongoing project to ensure that the ALC has a sufficiently robust compliance and enforcement program. What we’ve got right now is designated officials.

When we reported out last, there were more officials designated to work on our behalf in other areas of the province. These are primarily Forests, Lands and Natural Resource Operations officials, to get us eyes and ears throughout the province, to respond more quickly and to gather information on circumstances of suspicious behaviour or alleged infractions. That has worked well. The lion’s share of the activity of compliance and enforcement still rests down in the Lower Mainland.

Currently there are 26 members, because designating these individuals as officials means that if they happen to retire or leave the employment or change jobs, the delegation ends, and there have been some losses in that regard. We still have our compliance people working on new liaisons, and hopefully, we can increase that number in the very near future.

We have been trying to recruit a compliance and enforcement officer and new officers. As of December, we
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went to three officers, which was our highest complement ever for this big province. Regrettably, one of our officers left, which puts us back to two. It is our intent to recruit.

We’ve had some concerns or some issues with hiring a coordinator, which we believe is an integral part of the growth of this section. It has only been because of ongoing disagreement with the Public Service Agency regarding the classification level. I can also say that as of Friday, we’ve resolved that, so we’ll be moving forward now post-haste with recruitment for the compliance and enforcement coordinator and additional officers.

Our two compliance persons have also created an electronic on-line complaint system now to lodge complaints, to make it more readily accessible to the public to get concerns into us. It’s coordinated through a general e-mail account that can be managed now as opposed to individual staff getting contacted randomly. That’s a positive.

Prioritized completion of the data base. Completion of the data base is twofold — that is, actually entering historical data and also linking it spatially to maps that have identified the actual area where the applications have occurred.

Since the audit in 2010 the paper application history has been digitized. Our old paper format was used until that point. We have completed scanning of historical application files. That was a larger task than we thought. It was actually taking and digitizing historical paper documents from 41,000 files.

There was a process of vetting. I don’t want to leave the committee with the impression that every piece of paper was scanned. That would have been enormous. What we did is we culled out the more important, relevant documents and scanned them, and now we’re just waiting to be able to link them to access to the public through the website. I should also assure you that we still retain the hard-copy files. If there’s data that’s not complete, it can be retrieved, at least at this point in time.

Continuing with the digital verification of the mapping. So that everybody is clear…. You have a property in the Kootenays. It’s been applied for, in 1978, for subdivision. We’ve taken that file, and we’ve scanned the documents — what the proposal was, what the map was, what the decision was. Now what we have to do is create a digital mapping layer that says: “That’s where that property is.”

When it’s fully functional, an individual will be able to come in: “Is my land in the ALR?” “Yes, it is.” They can find it on a map. They can then run a report to find out: has there been any prior activity? If there has been any prior activity, they can then access the historical documents. That takes a huge burden off staff, to have people retrieving the boxes from off-site storage, figuring what’s in there, copying it, sending it out.

It’s enormous as far as its capacity. That is 75 percent complete. We have co-op students right now continuing on. We’re anticipating that to be completed, hopefully, by the end of this fiscal year.

The data entry continues to be the turtle in the race, the reason being that it is the hardest, most time-consuming aspect of cracking the files and entering the data. We work on that. I would wager to say we’re 25 percent complete on that. Once we have some more facilities for temporary staff, we will hire staff to speed that process up.

That will allow individuals, the commission, to start looking at the repercussions of decisions, the impact of decisions, over time. The robustness of that ability to do historical research is dependent on the data entry side of the equation.

I don’t want to leave any allusions to the fact that we’re going to have it all done. This is probably a two- to three-year horizon. But what we’ll do is we’ll start looking at the newest information, working backwards to the oldest, because we believe from 2015 back, as we progress backwards, is the most relevant period of time.

As I said, while incomplete, the historical documents have improved. For example, I was using them yesterday, looking at the history of a file. We have all the scanned images. Staff has access to them now, so the staff research side of it is quicker, because I can just pull up the map. I can pull up on the other screen the scanned images, and I can go through it, whereas before I’d have to go to a staff admin person and ask them to retrieve a box. That would take a day. Then we’d have to cull through it and then do what we want and send it off. It’s a huge savings already, internally.

The last two slides. I must admit, over the self-evaluations over four years, I’ve had a hard time trying to differentiate between the two, but it’s to “evaluate the collective impacts of its decisions on applications and its broader policy decisions.” I’m probably repeating myself, but once the historical data files and map verifications are complete, we’ll be in a better position now, at least internally.

I won’t extend that capacity to the public at this point in time, but at least we will be able to have the ability to do a certain amount of an assessment beyond what our capacity is now. This information forms the foundation for being able to carry out our analysis of impacts and decisions in policy over time.

To report out on the cumulative impacts, I go back to the comment — I believe it was slide 4 — on the portal. I heard it in one of the other presentations today. I thought our name was unique, but apparently there’s another one called a portal.

The portal will actually post, from cradle to grave, the information on the site. There won’t be that gap in understanding — publically, anyway — as to what we’re doing, how we’re doing it, and why we’re doing it. It will also provide the opportunity for public input, should that be desired. Everything will be disclosed.

The system is being developed. We’re working with IMIT in Victoria right now, prior to launch, to complete
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a privacy impact assessment to make sure that we’re not running contrary to any Freedom of Information and Privacy Protection Act issues.

We have always operated on the basis that application information as submitted is public information. But with the computer age, now we have to redact certain private information, contact information, and the system is being designed to do that automatically.

Throughout the system that’s being designed, we have prompts everywhere not to provide personal, private, medical or financial information, because we cannot redact that through all fields of the database. We’re trying to get the people in and of themselves, when they’re applying, not to provide us that information.

Just to conclude, my answer to 9 is pretty similar to the answer today. Once all this stuff…. We’ve made great strides throughout this. We will be able to be more open and transparent in our process. We’ll be able to provide greater self-access to information — to the general public, to academics, for ourselves. We believe we’ve been very successful.

To the committee, I want to stress the point that the staff of the commission has really embraced this new era of change as far as technology is concerned. It wouldn’t have been successful without the staff’s cooperation to not put their other work aside, to do this in addition to their other work. We have taken people that had no idea how to do contract management, how to work with contractors to build electronic systems, and we’re here three years later because of that.

We’ve had a good working relationship with the Office of the Auditor General. Substantial work to implement the recommendations has been carried out by the 20 staff. It hasn’t really increased that much. I’ll say that we have had some contractors and some temporary staff. Our co-op students were helping us.

The progress of implementing the recommendations over the last five years has resulted in significant improvements to the ALC’s work processes and establishes a solid foundation for continued enhancements.

To that point, we have already talked to the contractors, the actual builders of the product. We’re setting up another information meeting shortly after the portal goes live to now look at continued enhancements in version 2.

As I said before, a commitment I can give is that the ALC will continue to strive to complete the recommendations offered by the Auditor General over the next two years.

L. Popham: I’ve got a bunch of questions. I’ll just ask a couple, and then I can come back after other people have had a chance.

When I’m reading this follow-up report, it seems to me that, originally, when the first audit was done, compared to now, we’re dealing with almost a completely different animal — the Agricultural Land Commission and the reserve. There have been so many changes that have been done. A lot of the recommendations were based on a different way that things were running, including the way that the agricultural land reserve is now split into two different zones.

When we take a look at the mandate of the Agricultural Land Commission, it’s to preserve farmland and to encourage farming. Originally, the Auditor General weighed in and said that it wasn’t really able to fulfil its mandate because there was a funding problem and the way that things were working at that point.

If we look at the recommendations that came from the Chair after that report was put out, it was also based on a different animal. So when we look at some of these recommendations….

I’ll give one example: the compliance and enforcement recommendation. This recommendation was based on the whole province working under the same regulations. We now are going to have two sets of regulations. Although this is the last follow-up report, I guess my question is: should we start from the beginning and re-audit the Agricultural Land Commission at this point? Because I think we’re going down a path that…. It’s like apples and oranges right now, to me.

M. Sydor: Well, we currently don’t have it in our plans to do a particular re-audit. Typically, when there is a major policy shift by government, we give government an opportunity to run with that policy shift to see what impact it has on a program.

When I look at the recommendations, I think recommendation 8 is probably one that still applies, whatever changes are made. That one says to evaluate the collective impacts. Our view would be that, going forward, the commission would keep that recommendation in mind and assess how well the new model is working.

I recognize that there are two zones and there are going to be two sets of regulations. There are probably going to be changes in what other allowable activities are going to be allowed on agricultural land. Again, those are government policies. The question is, from a compliance and enforcement standpoint, if we go back to that recommendation: are the new policies being complied with?

Then overarching that is: what impact do those changes have on the protection of agricultural land? There certainly is an opportunity for us, going forward, to go back and have a look. But I think that’s probably in the future, and I’m not sure exactly when that would occur.

I think we’d have to look to see what is going on, what sort of information is coming back to the commission around the decisions that are being made by the regional panels that are established, and pull all that together and go back to recommendation 8 and say: “How effective
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is this new model? Is it meeting the expectations of the legislation that is in place at the current time?”

L. Popham: I guess that leads to my second question. Does it reflect the legislation that was in place at the current time of the original audit? Now we have a completely different model.

Another example I’m going to give is that when we look at government policy and government decision-making and the mandate of the Agricultural Land Commission to protect agricultural land, when we weigh in to say whether it’s doing that or not and we use these recommendations as a guideline to know whether that’s successful or not….

Recommendation No. 3: “The commission engage in proactive long-term planning with local governments to encourage farming.” I guess my question there is: when government makes a decision that, in this case, would affect the agricultural land reserve in a major way, an exclusion of agricultural land in the Peace River area…. When a decision is made by government to exclude that without consultation of the local government, how would that be reflected in the recommendation as far as saying whether it’s partially implemented or it’s completely failed?

I’ve got a letter from the Peace River district expressing their concern that they had no consultation in that exclusion. I understand that was by OIC, and that’s fine. But would the audit or a follow-up ever reflect that decision and its consequence to the agricultural land reserve?

M. Sydor: I don’t know whether our audit would do that directly. Again, I would look to the commission in its annual reporting to take account of all the decisions that have been made.

In particular, if there are decisions that are made that are outside of the normal framework under which decision-making is carried out, the commission would include that, again, under recommendation 8, evaluating what are the impacts of all the decisions that have been made around agricultural land in a particular calendar year for which they report. I don’t think it’s something we’d look at.

What we look at is: is the commission doing an adequate job on reporting on that aspect of it? Then if we found gaps in that, we’d try to craft a recommendation that would allow the commission to move forward in a better way so that legislators have the information they need to understand what is actually happening.

L. Popham: I’ll ask one more question, and then I’ll let other people take a shot at it. In the end, if the Auditor General were to make a statement whether or not the Agricultural Land Commission was fulfilling its mandate, would the big picture be looked at, or are we just shrinking the idea of what that mandate is?

If we haven’t protected land…. The exemption in the Peace River is one example. Our loss of agricultural capability due to carbon offset programs is another example. Do we look at the total impact of everything that’s going on, the cumulative impacts, and say in the end: “Sorry, it’s not fulfilling its mandate”?

C. Bellringer: Sorry, I’m having a little bit of trouble. It’s a bit hypothetical, because we’re not choosing to do that.

Where we are with this is actually an interesting dilemma with all of the follow-ups. We’ve done an audit. We follow it for a couple years, and then we back off, not because we think it’s unimportant but because we need to move on to something else.

We don’t have it in the draft plan at this point. It doesn’t mean a few years down the road we won’t put it back in. But if we were to design an audit, we would have to be very precise around how we’re going to choose to reach a conclusion, especially a broad one like that.

L. Throness: A question for the Auditor General. I was looking at the at-a-glance summary of the follow-up report and noting the nice graph there that shows 42 percent fully or substantially implemented, 2 percent no action taken. There was a follow-up report yesterday that had roughly the same figures. This includes the commission but many other entities as well.

I’m wondering. Auditor General, you’ve been everywhere. You’ve been in Manitoba. You’ve seen it all. Are you, roughly, encouraged by these results? Is this normal? What’s the state of the recommendation follow-up process, in your view?

C. Bellringer: Some things are slower than others. That’s where it gets really difficult to do a broad comparison across the country. We all write our recommendations quite differently. Some jurisdictions will put out a lot of recommendations. Others, and we’re one of them, limit the number of recommendations we’re issuing and keep them at a level that we are hoping will be of interest to this committee and at a public level.

L. Throness: Are you satisfied that the government is sort of clicking along at a reasonable pace in response to your recommendations?

C. Bellringer: I can say that for reports that we’ve issued since I’ve been here and that I’m most familiar with, I’m satisfied with the seriousness with which the organizations we’re auditing are taking the recommendations that we make. I think you will get better information through getting action plans so that you can see the timeline against that.

Sometimes at the time that we issue the report, we don’t actually expect government to have figured out exactly how they’re going to address the recommendation, but we do hope to get an honest conversation about wheth-
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er or not there’s agreement in principle with the need to move forward. When you get into the detail of “How are we going to do that?” then we certainly sometimes see a little bit of shifting and saying: “Okay. No, we’re not going to do it exactly as you recommended.”

The timeline that I’ve worked with for many years is that it usually takes about three years from start to finish to see a set of recommendations that come out of our office completely addressed. Very often the system has changed so much that they’re no longer relevant, and that’s a fair conversation. We just keep working towards getting there.

G. Kyllo: A couple of quick questions. How has the funding of the ALC changed, say, in the last five years? Are you funded at a higher level, at a lower level? How have you seen funding for your office and your capability, I guess, to deliver services change over the last, say, five years?

C. Fry: At the time of the audit — appreciate that I’m just doing this from memory — I believe our budget was somewhere just under $2 million. In 2011 the government provided us transitional funding while we were working towards the changes that were being planned.

Once the transitional funding came…. I think over a two-year period it was just under $1 million. That was to get us going now until some higher-level provincial policy decisions could be made. We took that money to start implementing these changes and started working on the database and the other projects that I mentioned earlier. That was money welcomed.

At the end of that, three years ago, stable funding was provided, which basically saw us go from just under $2 million to just over $3.5 million. That has allowed us to carry forward and continue working to transition, to improve our capacity and to hire staff.

G. Kyllo: A bit of a follow-up. With the increased funding and the fact that a lot of the implementations are going to be providing savings and economies of scale with respect to your ability to respond to files, do you feel that your office is currently adequately funded for the mandate that you have to fulfil?

C. Fry: It’s still a large mandate, as I said, to the extent that we’re dealing with 4.7 million hectares over the breadth of this province. From a planning perspective, I think we are well funded to get out there and deal with the applications in a different manner, like I’ve explained earlier.

But the proactive planning — I think we do have the capacity. It’s just that what we need is to free up not new money for those people but to free up their tasks. So not: “Do this, and do that.”

The challenges of everything else that we do…. It’s the application side of it. Plus, we have compliance and enforcement. We have planning. We have auditing of delegation agreements, auditing of the Oil and Gas Commission delegation agreement. There’s a lot of work. Appeals from the commission’s side of it on compliance and enforcement issues.

I think we can do some good things with the existing budget. What I always say: we could use more, probably. But at the end of the day, we’re more well positioned today than we were when the audit was done.

K. Corrigan: I just have one short question. With regard to recommendation 6, that the commission “ensure that it has a sufficiently robust compliance and enforcement program,” one of the solutions was that 33 Forests, Lands and Natural Resource Operations staff were designated as ALC officials in 2012.

I seem to recall from yesterday, as well, that Forests, Lands and Natural Resource Operations staff were designated to do environmental assessment work. My question is…. And this may not be within your knowledge, because it’s their FLNRO staff.

Are those field operators — I don’t know what they’re called, but those officers — getting overwhelmed with additional responsibilities, and are they the same people that have now been asked to do these other jobs?

C. Fry: No, they’re not being overwhelmed. We purposely are aware of and sympathetic to the fact that they could become overwhelmed.

We are complaint-based, so the lion’s share of the activity that may occur in the north or the Interior or the coast would be complaint-based. I must admit, we don’t get a lot of complaints from the more rural areas of the province. That said, we get a substantial amount of complaints everywhere else.

We have plans, on our own, internally, to grow to be able to meet the issues that deal with the south coast, the Okanagan and the Island but, I think, more reliant on the fact that these regional people that could share services…. I can cite an example.

We had in Surrey issues of trucks parking in the ALR. There were about 50 sites that we wanted to look at. Two people working from our office — it would have taken them quite a while to do. So we enlisted the services of some of our compliance designates, and we completed the site inspections in under two days, which then led to understanding what they were, identifying the priorities and then working with the local government to try and address them.

That’s how it works. We try not to burden them. It’s a reciprocal arrangement, though, as well. If there is need of our people, there could be delegation abilities to have them come and help out the other way. But right now it’s been modest and because we haven’t reached the growth of that section yet, that allows us to be a little bit more vigorous in establishing these other opportunities.
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K. Corrigan: A quick follow-up to that. I assume that these people are qualified to be designated to do this work — just confirmation of that. Then also, when you have the reciprocal agreements, do the wages or the cost come out of the ALC budget? How does that work?

C. Fry: There are no cost transfers. It’s basically…. Think of it as if we had a complaint from Prince George. If there was a serious nature to it, it would be incumbent on us to hop on a plane and go up there, in a not very timely response, with a designated person from that area.

We can get on the phone and say: “Can you go take a look and see if this is anything we need to worry about?” If they say, “Yeah, it’s a really big deal,” okay, then we go up. On the other hand, if they say, “It’s overblown,” or “It’s not of substance,” then we can respond that way.

I’m trying to get the efficiencies established that don’t require us to drop tools some place, get on a plane and do substantive travel, at a cost to the taxpayers as well. I’m trying to look at being more efficient.

Think of it also as the Forests, Lands and Natural Resource Operations individuals are probably going to sites anyway. All they’re doing is wearing a bunch of hats. It’s just a matter of saying that if you’re in the area…. We’re respectful of the fact that we don’t want to overwhelm these individuals. We haven’t to date. But where we have used them, it’s been more efficient, more cost-effective and the costs are borne by each agency.

V. Huntington: Could you describe the relationship with the Oil and Gas Commission, especially under the increased emphasis on agricultural impacts of the decisions? Is there an ALC official that sits on the panel during those discussions? What is the expertise of the OGC? What elements go into their decision-making about an agricultural parcel?

C. Fry: Well, our relationship is that we are the office of primary responsibility for what goes on in the ALR, and over the years we’ve had delegation agreements. It culminated in the most recent one in 2013, an updated delegation agreement.

I should back up a bit, just to indicate, too, that this was not just a recent event. The commission has always looked sympathetically to the oil and gas industry dating back to its inception, recognizing that it’s a significant economic driver in the province — temporary, albeit long-term, use of the land.

The commission has always had a position that allows the access to the resource — not unlike gravel extraction. Allow the access to the resource, but do it properly. Know what you have going on and the quality of the land, do your work, put the land back the way it was and then move on to bigger and better things.

We’ve made great strides, I think, right now to look at speeding up reclamation. For example, old school, you’d have single, vertical drilling — one well, five acres. Once they’ve done that…. Nowadays you can drill it. If it’s something you can produce, you put a pumpjack on it, you reclaim the rest of it, and the farmer has it accessed back.

Another big thing is that with the directional drilling now, you can avoid better quality agricultural land. In the new delegation agreement, it’s to say: “You now have the access to technology and the means, from an extraction standpoint, to maybe think of things you couldn’t think of before.” Rather than going into the middle of that canola field, maybe you might go on the treed area over there.

We still have oversight. We have not divested ourselves of that oversight, and that’s why it’s our intent to increase our ability to audit delegation agreements. Ultimately, at the end of the day, if we were asked, these are our decisions made by somebody else. We have to keep an eye on it to make sure that they’re in accordance with the delegation agreement and the terms in which we made that agreement.

V. Huntington: Is it possible for this committee, for instance, Mr. Chair, to request the Auditor General to audit some of those decision-making and delegation agreements?

B. Ralston (Chair): We can suggest, or we can do it by a motion. But we’re coming on one o’clock. There’s a commitment to adjourn at one o’clock, and I know a number of members have other commitments based on adjourning at one. If there’s a feeling that people would like to discuss this report further, then that’s something that the management subcommittee could take up and decide whether we want to invite people back or not.

I wouldn’t make that commitment here, now, without consulting with the committee. But we have had a relatively brief time in terms of our discussion of this follow-up report.

L. Popham: I would love for the commission to be invited back with the Auditor General. I don’t think that we had enough time to discuss this report. This is an extremely important report.

B. Ralston (Chair): Well, what I’ll say, then, is that the management subcommittee, which consists of myself, the vice-Chair, Mike Morris and George Heyman, will discuss that at a point in the future.

If there’s nothing else, then we’ll see you all when the House reconvenes in July. Thanks 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)
	David Eby (Vancouver–Point Grey NDP)
	Simon Gibson (Abbotsford-Mission BC Liberal)
	George Heyman (Vancouver-Fairview NDP)
	Marvin Hunt (Surrey-Panorama BC Liberal)
	Vicki Huntington (Delta South Ind.)
	Greg Kyllo (Shuswap BC Liberal)
	Mike Morris (Prince George–Mackenzie BC Liberal)
	Lana Popham (Saanich South NDP)
	Linda Reimer (Port Moody–Coquitlam BC Liberal)
	Selina Robinson (Coquitlam-Maillardville NDP)
	Ralph Sultan (West Vancouver–Capilano BC Liberal)
	Laurie Throness (Chilliwack-Hope BC Liberal)
Clerk:	Kate Ryan-Lloyd

REPORT OF PROCEEDINGS(Hansard)

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REPORT OF PROCEEDINGS
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