Public Accounts — Issue No. 29 — Wednesday, October 5, 2016 (HTML)

Strategy Room 420, Morris J. Wosk Centre for Dialogue
580 West Hastings Street, Vancouver B.C.

Present: Bruce Ralston, MLA (Chair); Sam Sullivan, MLA (Deputy Chair); David Eby, MLA; Marvin Hunt, MLA; Greg Kyllo, MLA; John Martin, MLA; Lana Popham, MLA; Linda Reimer, MLA; Selina Robinson, MLA; Ralph Sultan, MLA; Laurie Throness, MLA

Unavoidably Absent: Kathy Corrigan, MLA; Simon Gibson, MLA; George Heyman, MLA; Vicki Huntington, MLA

2. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Annual Financial Statement Audit Coverage Plan:

3. Resolved, that the Public Accounts Committee endorse the three recommendations listed on page 5 of the Financial Statement Audit Coverage Plan for the fiscal years 2017/18 through 2019/20, as required by sections 10 and 14 of the Auditor General Act. (Sam Sullivan, MLA)

4. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Progress Audit Report: Credit Union Supervision in B.C.:

• Tara Richards, Assistant Deputy Minister, Corporate Services, Executive Financial Officer of Finance, and Chief Executive Officer, Financial Institutions Commission

• Frank Chong, Acting Superintendent, Financial Institutions and Acting Chief Executive Officer, Credit Union Deposit Insurance Corporation

6. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Access to Adult Tertiary Mental Health and Substance Use Services:

7. The Committee recessed from 12:00 p.m. to 1:03 p.m. and from 2:10 p.m. to 2:28 p.m.

8. The following witnesses appeared before the Committee and answered questions regarding the Office of the Auditor General Report: Improving Budgeting and Expenditure Management in the Public Education System:

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

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE ON
PUBLIC ACCOUNTS


CONTENTS
Page
Auditor General Financial Statement Audit Coverage Plan	967
C. Bellringer
L. Moore
R. Jones
Auditor General Progress Audit: Credit Union Supervision in British Columbia	972
C. Bellringer
L. Moore
T. Richards
H. Wood
F. Chong
R. Jones
Auditor General Report: Access to Adult Tertiary Mental Health and Substance Use Services	987
C. Bellringer
J. Giles
D. Hughes
K. Glynn
L. Hatt
G. van der Leer
Auditor General Report: Improving Budgeting and Expenditure Management in the Public Education System	1007
C. Bellringer
R. Jones
D. Byng
Committee Workplan	1013

B. Ralston (Chair): This is a meeting of the Select Standing Committee on Public Accounts. We have an agenda before us, of which the first item is the Office of the Auditor General presenting the annual financial statement audit coverage plan. I will turn the floor over to the Auditor General and her staff to make that presentation.

Each year, as no doubt most of you, if not all of you, are aware, we are required under the Auditor General Act to table a three-year financial statement audit coverage plan. It is required to be presented to you for your consideration and approval.

The plan identifies which of the government entities we will be auditing directly, so those that will be audited by my office and which ones will be audited by private sector firms. We’ve prepared the plan in accordance with the requirements of the act. We also design it so that we can meet Canadian generally accepted auditing standards. That allows me to form a view on the government’s summary financial statements.

As you may recall from prior years’ discussions, the coverage levels don’t vary greatly year to year. The focus of our discussion this morning will be on the changes, but of course we’re happy to speak to any element of it that you wish.

We also expect that we are able to carry out the plan within a budget envelope that will be similar to that which was recommended last year by the Select Standing Committee on Finance and Government Services, so it doesn’t require additional resources in any way.

I just want to point out the difference between this plan and…. We also issue publicly a three-year performance audit coverage plan. The financial statement coverage plan is required under the legislation to be brought here. The performance audit coverage plan is not, but we make it public because we choose to do so. Last year was the first one that we issued publicly. This year we recently updated it.

This morning Russ Jones is here, the Deputy Auditor General, and Lisa Moore, executive director in the financial audit group. I’ll turn it over now to Lisa to provide you with a brief overview of the coverage plan.

As we have noted in past years, the annual audit of the summary financial statements is the largest audit performed in British Columbia and provides assurance on whether the financial statements present fairly the financial position operating results of the province. The opinion on the summary financial statements is the Auditor General’s alone. But in British Columbia, the audit of the government reporting entity is accomplished through the combined work of the Office of the Auditor General and private sector auditors.

Today we are seeking approval for three things: (1) the detailed plan as presented in appendix A, beginning on page 20; (2) for the Auditor General to continue as direct auditor of ten entities where the term exceeds five years, which is on pages 16 to 17; (3) for the Auditor General to continue as direct auditor for one entity outside of the government reporting entity, which is on page 18.

This plan meets professional requirements for audit coverage under generally accepted auditing standards and will allow the Auditor General to sign the audit opinion on government summary financial statements. These standards require us to be involved in the audit of all significant entities included in the summary financial statements.

Similar to prior years, we define our audit involvement with the 145 government entities as being either limited, oversight or direct. In deciding our level of involvement, we look at the risk involved of both the entity and the sector level as well as the capacity of our office. We also look at new organizations, for which we are entitled under our act to be the auditor for the first three years. There was one new organization this year, B.C. Clinical and Support Services Society, which we intend to audit directly.

We take the committee’s comment into consideration too. For example, last year there were comments about our level of direct involvement in the health sector. As you will see in this plan, we are increasing our involvement in that area by staying on as the auditor of Vancouver Coastal Health Authority and also taking on the audit of Interior Health Authority in fiscal 2018. As I noted above, we are taking on the audit of the B.C. Clinical and Support Services Society this year. In order to free up the resources needed to audit the additional health authority, we plan to change from a direct audit to an oversight role for the B.C. Pavilion Corporation in 2018.

The provision in our act to request approval for extending direct involvement beyond five years recognizes the need to manage inherent audit risk where necessary. In the plan, we have to balance the benefits achieved through auditor rotation with professional standards that require us to maintain appropriate knowledge and experience in order to fulfil our mandate. For audits that exceed five years, including ministry audits, we employ senior staff rotation and other safeguards as required by assurance standards to ensure that objectivity is maintained.
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In the preparation of this plan, we reviewed each appointment exceeding five years and considered if rotation to a private sector audit firm would be appropriate. We don’t think any rotation audits where we have been the auditor for more than five years is required. The rationale for our appointments exceeding five years is documented on pages 16 and 17 of the plan.

Turning now to the detailed plan, this is the table on page 13 of the report that summarizes our planned coverage for the next three years for the existing 145 entities for fiscal years 2018 through 2020. This is a rollup of the detailed plan as shown in appendix A of the report.

The first column shows the type of entity. The second column shows the expected number of entities of each type for the fiscal year ending in 2017. The remainder of the table shows our planned coverage by entity, fiscal year and level of involvement. For example, in 2017-18, we plan to have limited involvement in 17 of the 25 universities, colleges and institutes; have an oversight involvement in six; and directly audit two. As you can see from the totals, our levels of involvement do not change significantly between years.

To give you an idea of how our plan results in our overall involvement with government’s expenses, this chart shows that the Auditor General had either an oversight or direct audit involvement with 83 percent of government entity expenses for the 2015-2016 fiscal year. Our plan provides for a similar involvement in future years.

For school districts, 2019 is the last year that we audit school district 93, which is the Francophone Education Authority. In 2020, we take on the audit of school district 60, Peace River North. We also plan to have an oversight role in three school districts each year of the plan. We continue to rotate our involvement through the school districts.

In post-secondary, 2019 is the last year that we audit UVic. In 2020, we take on the audit of UBC. We also plan to have an oversight role in six or seven university colleges or institutes each year.

In the health authorities and hospital societies, we will continue to directly audit the Vancouver Coastal Health Authority through 2020. However, we will also take on the audit of the Interior Health Authority in 2018. And as previously mentioned, we’ll be auditing the new entity, the B.C. Clinical and Support Services Society, for the entirety of this plan. The B.C. Clinical and Support Services Society also involves us providing a service auditor’s report, which is an opinion on controls around the calculation of shared health costs.

We will have oversight involvement in four health authorities that we are not auditing in each year and one hospital society for the duration of the plan. These commitments represent an increase in our oversight in the health sector over last year.

Crown corporation audits. Our plan is to cease auditing Destination B.C. in 2018 and take on the audit of the Royal B.C. Museum in 2019. As previously mentioned, we also plan to change from direct audit to an oversight role for the B.C. Pavilion Corporation in 2018. We will have oversight involvement for nine other Crowns across the various sectors.

For entities outside the government reporting entity, we plan to continue with one engagement outside the government reporting entity — the provincial employees community services fund.

Each year we consult with organizations impacted by the plan that we will be taking on or ending oversight or direct audit coverage of. At this time, we have met with or contacted by telephone all the affected organizations. We will follow up with a formal communication once the committee has reached a decision on the plan.

That concludes our presentation. Today, again, we seek three approvals: (1) the plan itself, (2) to continue as the direct auditor for more than five years at ten organizations and (3) continue to be the direct auditor of one organization that is not part of the government reporting entity.

D. Eby: In the Auditor General’s message on page 3, there are a couple of separate mentions of the capacity of the Auditor General’s office and the ability to do audits. Obviously, there aren’t infinite resources for audits, so that’s sort of a commonsense thing — that you’d have to pick and choose where to focus your resources.

Given the fact that there are two separate mentions in this about limited capacity within the office — and given the concerns that were raised by the CEO of FICOM, on her departure, about a shortage of auditors and in your own audit of FICOM about a shortage of auditors — can you tell the committee whether you believe you have the resources within your office to do the audits that are necessary to ensure that there is a good balance between decreasing risk and wise use of public funds spent on auditors?

C. Bellringer: Our budget is brought before the Finance and Government Services Committee, and we get into a pretty lengthy discussion there around the details in our budget.

We do continue to have vacancies. We had some departures this year. We still have to fill the vacancies for those positions. We’re okay for the year in terms of…. Even with the existing staff, we’ve been able to move things around and get everything done that we are required to do within the financial statement coverage plan.

We haven’t yet found that we’re having trouble attracting new employees. Our salary ranges are prob-
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ably…. We’re actually looking to see a comparison with the market just to get a feel for whether it’s lower or okay. But we’re still attracting people. When we put a notice out that we’re looking for somebody, we’re still getting very good applicants, so we’re able to continue to choose.

Our biggest problem is the time it takes to go through all the steps you have to use. They’re all public servants, and we have to follow all of the various rules, so it takes a while to get things filled. So it’s more of a volume problem than it is being able to find people. We haven’t had the problem that FICOM had.

D. Eby: Just on that note, there was a specific note with respect to B.C. Pavilion Corporation, which says: “Based on taking on additional audits in the health sector, we’re ending direct involvement with this entity in order to balance our audit workload with our audit resources.”

Is it your feeling that it would have been preferential to continue with direct oversight for B.C. Pavilion Corporation if you had the resources? That’s on page 29.

C. Bellringer: No. At the same time, we’re trying to balance the amount of time we’re spending on financial statement audits with the amount of time the office spends on performance audits. So as an overall decision, the amount of time we want to spend on financial statement audits is to give you enough assurance on some of the larger organizations that we can do as well as have enough assurance for us to be able to sign off on public accounts. We don’t need to do that audit in order to achieve, we believe, both those goals.

There was nothing that we said: “Gee, if we had more resources, we would do this also.” I think our coverage…. We’ve had quite a long discussion through the year to just get a sense of…. It’s actually quite a challenge in all of the legislative audit offices to get that right balance between how many financial statement audits you do and how much time you have available for performance audits.

We feel that we’re in a good place with that. The level we’re at is the right one. We’re not trying to put more resources into financial statement audits.

R. Jones: We are going to continue to do oversight on Pavilion Corp. It’s just that we’re not going to audit it directly. We’re going to be continuing to do an oversight, which means we’re going to go and attend the board meetings and look at the work that the other auditors are doing.

D. Eby: My last question is just in relation to TransLink. I don’t know what your role is in relation to south coast transit — to TransLink in particular. I saw B.C. Transit in the list, and I was curious.

R. Jones: Thank you, Member. TransLink is outside of the government reporting entity, so it is not one that we can actually audit.

D. Eby: You asked for permission, in part of this report, to audit an entity that is outside the government reporting entity, which is the provincial employees community services fund. Is there a way that this committee could give you the authority to review TransLink’s financial statements?

R. Jones: We’re not sure. I mean, it is outside of our mandate at this point in time.

C. Bellringer: We can go back and take a look at their legislation to see what the audit appointment is and what the Auditor General Act allows. That’s the mechanism for you to make that approval. There is some description of it in there, but I can’t recall the details. We’ll go back and take a look at that.

D. Eby: Is it the same situation for a performance audit as well, or is that exclusively your jurisdiction for financial review?

C. Bellringer: We were only looking at this…. The comment was only around financial statement audits. When it comes to a performance audit, we have other things that we look at. For example, if there’s been any kind of an arrangement with the province, then we can look at how well the province is overseeing something. Or if there is a contract in place, then we can look at the details of the contract.

D. Eby: I’d very much appreciate knowing if there was some way that you could have a look at the financial statements of TransLink.

B. Ralston (Chair): Just before we move to the next questioner, my understanding was, in the performance audits, that your office had the discretion to follow the dollar. If there is a provincial dollar invested in TransLink, and there are many — hundreds of millions of dollars —
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you would, then, have the jurisdiction to follow those provincial dollars into that entity and conduct a performance audit.

C. Bellringer: It’s correct. The discussion that we sometimes get into as to how far that dollar, going in, then spreads…. We’ve not been challenged on it when we’ve chosen to go in. But at the same time, it appears to be…. We haven’t had to have an interpretation of the legislation yet. But it does appear to be only to look at the extent to which that dollar has been spent, as opposed to all of the dollars in the full organization.

B. Ralston (Chair): My experience is that you’re welcome with open arms wherever you go — at least formally. Perhaps not privately.

L. Throness: Just one question. I’m looking on page 17 of your plan, and I note that the Vancouver Coastal Health Authority is on a continuing audit basis.

I’m just wondering why the Fraser Health Authority would also not be audited on a continuing basis, given that it has 27,000 employees. Its massive $2.5 billion budget…. I’m just wondering why that also would not be a concern, on a continuing basis, to be audited.

R. Jones: Thank you, Member. One of the things that we do…. Vancouver Coastal is a direct audit that we’re currently doing, and it is very significant. We were supposed to have ended it this coming year, but they actually asked us to stay on as their auditors, which was a good thing. That doesn’t happen all that often, so that’s great.

All of the other health authorities…. We actually do attend all of the board meetings, and we look at the plans and the year-end report that the audit firms do and get into discussions with the audit firms around accounting issues and whatnot.

It’s not that we’re not there. We used to do Fraser Health a number of years ago and, in our rotation, decided to let one of the firms come in and do it. I think PricewaterhouseCoopers is currently doing it. We have a very good relationship with PwC and have access to their files and whatnot, so we are in touch with what’s going on.

We also felt that doing Vancouver Coastal gave us an entry into looking at the Lower Mainland consolidation that’s being done, which includes Fraser and Vancouver Coastal and PHSA, so we felt that we had enough coverage by doing that. So we’re not ignoring them.

I had a question myself just on page 17. This is one of the entities that’s selected for appointments exceeding five years, the Transportation Investment Corporation. There’s a brief rationale there, and I’m wondering if…. This is a Crown corporation responsible for the operation of the Port Mann Bridge and also responsible for the planned replacement of the George Massey Tunnel. Can you explain your rationale for seeking to continue to directly audit that entity?

R. Jones: We consider the Transportation Investment Corporation to be a very important entity. It is one of the ones that is consolidated as a government business enterprise versus a regular Crown…. Or not a regular Crown. It’s a government business enterprise, so it’s brought in on a modified equity basis into the public accounts. It is unique to this province, in terms of the fact that it deals with tolling on one bridge and, most likely, the George Massey bridge replacement as well.

We just feel that the significance in terms of the assets and the role that it plays in the transportation infrastructure in the province is why we wanted to continue to do the audit of it. We’ve been the auditor since its inception.

B. Ralston (Chair): Just for a non-specialist observer, what do you gain from a direct audit as opposed to oversight or some lesser form of involvement? What is the benefit that the office gains by a direct involvement in the way that you describe?

R. Jones: I would say part of the difference between a direct and an oversight involvement…. The largest difference is that every year, we will go in and talk to senior management. We will look more at their budgeting processes, just a more in-depth review of how the financial structure of the organization is set up and understanding the strategic direction that they’re going in.

Whereas from an oversight point of view, we don’t interfere with what the private firm is doing. We don’t tell them how to carry out their audit. What we do is we just ensure that we’re getting enough assurance from overseeing what work they’ve done for us to be able to rely on the work that’s been done.

B. Ralston (Chair): On page 21, again, a direct audit, is the board of education, school district 39, which is Vancouver. Can you tell me, given what you’ve just described as being substantial involvement in terms of a direct audit, how that is working, if you’re able to, with the audit that was ordered by the Minister of Education — a special audit?

What is the working relationship between your office and the firm hired to conduct — if I can call it — a special audit?

When the special audit was announced, I was able to meet with Peter Milburn at the time. We discussed what they were doing, and he asked my opinion on certain things. I wanted to make sure that what they were doing wouldn’t interfere in the financial audit that we were undertaking. We have been assured that we will get to see the report when it is available.

B. Ralston (Chair): So other than that preliminary consultation, are you receiving any reports? Or is there any direct involvement by your office as that audit goes forward — Mr. Milburn’s special audit, if I can call it that? What’s the working relationship, if any?

B. Ralston (Chair): That audit, then, is not focused at all on financial matters. That’s certainly not the public perception, if I might say so, or certainly of some of the media reports, although sometimes those can be inaccurate.

R. Jones: I think the closest it got to possibly an impact on what we were doing would be the look at the budgeting processes that they were undertaking. We also take that into account in terms of looking at budget to actual numbers in the financial audit, but we didn’t necessarily go into depth into the process that was being used to prepare the budgets.

On page 28, there’s a summary of what are called changes from the prior year plan, Kwantlen Polytechnic University. You state here: “We have determined that our continued involvement for an additional year would be beneficial as this university has been undergoing change in both senior management and the board of governors.”

Generally, in complex entities, there’s always a certain volume of change, so what specifically about the changes that are taking place at this university led you to the conclusion that the continued involvement of the Office of the Auditor General is required?

R. Jones: The continued involvement, we just felt, for one additional year, as stated here, was because there was a lot of change going on. Also, there were some transactions in prior years and some issues that were brought up around executive expenses and whatnot. Because it seemed to be relatively high risk in terms of the amount of change that was going on, we felt one more year would be sufficient.

B. Ralston (Chair): On page 27 — I only have a couple more of these — the Office of the Representative for Children and Youth. It is a direct audit in the plan going forward for the next five years.

My recollection, and this may have changed, is that in the presentations to the Committee on Finance and Government Services, before which independent officers come and present their budgets, that particular organization invariably — I think without fail — always came in under budget, and there was never any dissatisfaction expressed with the budgeting or accounting process undertaken by that office. So what’s the motivation for a direct audit of this entity?

C. Bellringer: This is one where we’re actually required to do the audit. It’s in their legislation, so it’s not optional.

B. Ralston (Chair): Lest we think that we’re avoiding scrutiny ourselves, perhaps you could explain the ongoing direct audit of the Legislative Assembly, which I know all members welcome.

C. Bellringer: I was just checking to see if there was a legislative requirement. We don’t believe there is. We’ve been asked to do it, so we do.

B. Ralston (Chair): Clearly, there’s some major change. I don’t want to rehearse the history of it, but obviously a major change in the entire accounting processes and public disclosure of many of the expenses of the Legislative Assembly. Many new systems are in place, including new finance officers and new public reporting procedures.

Is that such — or are those changes such — that the ongoing direct involvement is required rather than a slightly less direct supervision involvement in the Legislative Assembly? Obviously that’s your decision as an independent officer, but I’d be interested in your rationale.

C. Bellringer: I’m not sure that this is…. I haven’t checked this fact, but I’m fairly certain that there is not a Legislative Assembly across Canada that’s audited by anybody other than the Auditor General or not audited at all. So it becomes a bit of the sensitivity around Legislative Assembly operations.

It’s also just a component of the public accounts, so it’s not a separate corporate entity. In order for the assembly to be able to be accountable for their operations, they separate it out from public accounts and have a separate statement. But it’s not similar to anything else.

Having said that, the Representative for Children and Youth is the same situation. Our office, also — we get a financial statement audit done for our own office. Otherwise, when we’re doing the audit of public accounts, we’re effectively auditing ourselves. Both the RCY and Legislative Assembly are just components of public accounts.
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B. Ralston (Chair): Thank you for those responses. That concludes the questions I have.

S. Sullivan (Deputy Chair): This is, of course, the financial statement audit coverage. You mentioned the performance audit coverage plan that you also made public, and that’s a recent phenomenon. You said that last year was the first time, I believe. Where do we find that performance audit coverage plan?

C. Bellringer: The performance audit coverage plan was circulated to members, but it’s available on our website. We can certainly provide you with a link to it just so you can see where to find it.

It has the list of everything that’s currently on the go, with a description for everything where we’ve completed the planning. It also lists out the subjects that we’re planning to start within the next three years.

S. Sullivan (Deputy Chair): In the motion that we have — well, I want to pose — there is one entity outside the GRE, which is the community services fund, I guess. Has that group requested an audit?

R. Jones: Yes. That group did request us to do an audit. It’s because it’s completely funded by the employees of government.

Just one thing I’d add. With the way we also select the audits that we end up doing directly, we have to have enough of those audits for the staff to have training, if you will, prior to being able to do the public accounts audit. It’s complex, and it’s significantly larger than any of the other audits. So it provides our office with enough work for them to develop as auditors.

B. Ralston (Chair): Just to respond. The Clerk is reminding me that the performance audit plan was circulated by email to members of the committee. But I know, Members, we all get a cascade of email every day, so I’m sure that that may have been overlooked. But it was circulated at the time when it came out — I think the very day it came out.

Given that I don’t see any further questions…. What we’re being asked to do…. Sam has referred to it. There’s a proposed motion — maybe I could ask Sam if he could move it — which is required under the Auditor General Act in order to give support to the plan.

S. Sullivan (Deputy Chair): I move that the Public Accounts Committee endorse the three recommendations listed on page 5 of the Financial Statement Audit Coverage Plan for Fiscal Years 2017-18 Through 2019-20, as required by sections 10 and 4 of the Auditor General Act.

We’ll maybe stand down just very, very briefly. We’ll move to our next topic, which is the Progress Audit: Credit Union Supervision in B.C. I’ll leave some time for staff to rearrange themselves and to set up the presentation.

We’re dealing now with the Office of the Auditor General progress audit of a report entitled Credit Union Supervision in B.C., July 2016.

We have representing the Office of the Auditor General — just for the record, I’ll read these names — Carol Bellringer, Auditor General; Russ Jones, Deputy Auditor General; Lisa Moore, executive director, financial audit.

Representing the Ministry of Finance are Heather Wood, assistant deputy minister, policy and legislation; Tara Richards, assistant deputy minister, corporative services, executive financial officer of Finance and chief executive officer, Financial Institutions Commission; and Frank Chong, acting superintendent, Financial Institutions and acting chief officer, Credit Union Deposit Insurance Corporation. Those are long titles.

Welcome. I’ll turn it over to the Auditor General to present and, then, to be followed by a response from those officials from the ministry.

C. Bellringer: Lisa Moore will make the presentation on the progress audit in a moment. Before she does that, I just want to note that this is the second progress audit that we’ve conducted under the new joint follow-up process with this committee, although it’s the first one we’ve been asked to share with you.

Those we audit now submit action plans to you shortly after we complete an audit. The original audit took place before that process. You’re discussing those action plans alongside the original report. Then the auditees have to
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provide updated action plans annually. Separately, we review those action plans to determine if any require follow-up work like the one that we’re discussing today. We select a sample of those action plans to audit each year. We’re basing that on risk and dollar-value impact and more.

The one today is our review of the Financial Institutions Commission’s, or FICOM’s, assessment of its progress since our original report, which was issued in 2014. To sum it up, I’m pleased to say we agree with FICOM’s assessment. Given FICOM’s staffing challenges, in particular, as Lisa will describe in a moment, I’d like to thank FICOM for the work it’s done to address our recommendations.

I’d also like to thank FICOM and its oversight panel, the commission, and the Ministry of Finance for their support during this progress audit, especially the former superintendent, who was also chairing the Independent Advisory Group on real estate regulation during this audit.

There are 42 credit unions in British Columbia. Credit unions are particularly important in small or more remote communities where the major banks are often reluctant to establish branches. As of March 2016, there were more than 1.9 million members in B.C.’s credit unions, and they had over $58 billion in deposits.

The Financial Institutions Commission, or FICOM, as they’re more commonly referred to, is supposed to act as an early warning system for potential credit union failures. FICOM conducts reviews of the credit unions to establish a risk rating. This risk rating is then used to determine the degree of monitoring required by FICOM.

Our original 2014 audit on credit union supervision found that FICOM was not able to meet its goal of reviewing all credit unions every two to three years. In 2014, over 50 percent of FICOM’s reviews were over two years old. FICOM was short-staffed at the time, and we concluded that additional staff would allow for more timely reviews and, therefore, early identification of concerns so that problems can be addressed and the risk of failure mitigated. We issued 11 recommendations for FICOM, its oversight body, the commission and the Ministry of Finance.

This progress audit is to determine if the action plan submitted by FICOM, the commission and the ministry is accurate. Almost two years later, this progress audit shows that FICOM’s actions to address its staffing shortage are not working. FICOM has further reduced the number of credit union reviews it will do each year, and it will not meet its target of reviewing all of B.C.’s credit unions every two or three years.

Government pay scales limit FICOM’s ability to offer competitive salaries. FICOM requires specific skill sets and employees that are currently in high demand, and it struggles to hire the right people at the right level.

One of the things FICOM did to address our original recommendations was to work with the Public Service Agency. They recommended that FICOM hire an outside contractor to look at the staffing situation at FICOM. That contractor stated: “We believe the primary barrier to recruiting qualified talent is compensation, and the compensation problem is most acute in the senior levels of the supervision team.”

When we did the follow-up, FICOM’s current vacancy rate was 37 percent, up from 35 percent in 2014. The superintendent of FICOM left at the end of July this year for a position with the federal regulator.

This is not a funding issue. FICOM is funded entirely by credit unions and the other financial entities it regulates. Therefore, it can afford to pay competitive salaries without new funding from government. All FICOM needs is the approval from government to step outside current pay scales.

There’s a continuing risk to B.C.’s credit unions and its members if FICOM cannot do its job. It’s like having a smoke detector in your home but not buying the batteries. No batteries, no early warning system. Problems in even a few small credit unions can spread feelings of uncertainty and a loss of confidence across the entire system. FICOM has a sound framework in place for identifying potential risks to credit unions, but it needs enough staff to follow through on it.

Aside from staffing, our original report contained 11 recommendations on a variety of topics. To follow up on FICOM’s progress addressing our recommendations, we reviewed the action plan and self-assessment that FICOM submitted to the committee. We agree with FICOM’s assessment of its progress in addressing our recommendations.

Of the original 11 recommendations, FICOM has fully or substantially completed four of them and is well on its way with four more. These include actions such as ensuring consistency and documenting the work on the risk ratings and setting an appropriate target size for the deposit insurance fund. Due to staff shortages, hardly any work has been done on the remaining three recommendations, and two of those first require completion of FICOM’s operational plan for deposit insurance.

I’ll turn it over to…. Tara Richards is going to present on behalf of the group, then. Tara Richards is the assistant deputy minister, corporate services and the chief executive officer of the Financial Institutions Commission, just so we’re clear who we’re listening to.

It might be helpful, before I get into the presentation, just to provide a bit of clarity on roles. As you said, I am the interim CEO for the Financial Institutions Commission. That’s a role that was established following the departure of the former superintendent, who had accountabilities for the full statutory as well as operational roles at FICOM, as well as other statutory authorities as the registrar of mortgage brokers, the superintendent of real estate and the CEO for the Credit Union Deposit Insurance Corporation.

My role as an interim CEO is to support the corporate human resource functions, the finance, the planning and the IT functions, with a priority on addressing recruitment and retention. As also noted, I’m also currently the assistant deputy minister and executive financial officer of the Ministry of Finance, and I have similar corporate accountabilities there as well.

With me is Frank Chong, who is the acting superintendent of the Financial Institutions Commission and the acting CEO of CUDIC, which is the acronym for the Credit Union Deposit Insurance Corporation. Frank has the overall responsibility, statutory and regulatory authorities, at FICOM, and he’ll be speaking to a number of the recommendations in the progress report.

Also here with us is Heather Wood, who’s assistant deputy minister, policy division. She’ll be speaking to you on the recommendation on modernizing legislation.

B. Ralston (Chair): Just so that I’m clear, then, the division of labour between you and Mr. Chong is temporary. Ordinarily, that position is one position, then. Is that correct?

T. Richards: It has in the past been one position. It’s currently shared, myself with accountabilities for the operational and Frank with the statutory.

B. Ralston (Chair): Perhaps this will emerge in the questions, but there is an ongoing…. Is there a search being conducted for a new permanent CEO?

T. Richards: There is a search underway for a superintendent of financial institutions, and there is also the pending appointment of a new superintendent of real estate. Government made its commitment in June to establish a separate superintendent of real estate, and then we’re actively recruiting the superintendent of financial institutions.

B. Ralston (Chair): Thank you. Perhaps there’ll be further questions on that anyway. I shouldn’t interrupt you further. Please go ahead.

T. Richards: The progress report contains 11 recommendations, two that have been directed to the Ministry of Finance and nine directed to FICOM and the commission, which is the oversight body. The three of us will be providing an update and taking questions from the committee. We thank the work of the Office of the Auditor General, support the recommendations and the findings and are pleased to update as to progress.

Just by way of overview, they’re grouped for purposes of presentation into five themes: modernizing financial institution legislation and regulation, which is the first recommendation; increasing staffing capacity; improving supervisory practices; modernizing policies for deposit insurance funding; and developing detailed contingency planning.

I’m going to turn the presentation now over to Heather to speak to the first finding and recommendation.

H. Wood: Recommendation 1 in the Auditor General’s original report was that the ministry ensure, in its review of the Financial Institutions Act and the Credit Union Incorporation Act, that it also review the standards set out in the core principles for effective banking supervision and the core principles for effective deposit insurance systems.

At the time that the initial audit was conducted, the ministry was in the process of initiating the review of those two pieces of legislation. I am pleased to tell you the ministry has initiated the review. In fact, we have and are continuing to do substantial work, including substantial consultations, as part of the review of those two significant pieces of legislation.

We have, indeed, accepted the Auditor General’s recommendation and implemented it. We have incorporated in the review serious and strong consideration of the international core principles. One of the key objectives of the review has, in fact, been identified as the need to reflect international standards while also taking into account the particular needs and circumstances of B.C.’s financial sector and financial institutions, which, of course, are cooperative institutions as opposed to shareholder-based types of institutions, as with the banks.

I would like to point out that in addition to the international standards, there are other components of the review that the ministry considers. We consider these components in all of the policy and legislative reviews that we do of major pieces of legislation.

We consider input from stakeholders, including credit unions themselves and the Financial Institutions Commission as well, and members of the public and other interested parties. We also consider independent staff research and analysis, which includes the practices of other jurisdictions, particularly in Canada. There are a number of other key principles and objectives that were set out in the consultation paper, which I can provide more information about for you, if you like.

We are attempting to balance all of those key objectives and all of those considerations, along with strong
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consideration of the guidance that has been provided by these two international organizations.

We believe we have fully implemented this recommendation. I understand the Auditor General also agrees with our assessment.

T. Richards: Turning to the second area of findings, which is on increased staffing capacity at FICOM. Clearly, it’s acknowledged that FICOM has an appropriate supervisory framework for monitoring credit unions, but it’s been also acknowledged that it is constrained due to staff shortage. That is a recommendation that has been directed to the Ministry of Finance, but it is being jointly addressed with the Public Service Agency, the ministry and FICOM’s management team.

Increasing staffing capacity continues to remain a challenge. The Auditor General has noted that we have the appropriate framework, but our ability to effectively conduct under that framework is constrained. We are continuing to work together — the ministry, the Public Service Agency and FICOM — to recruit and retain top talent. However, we’re doing so in a continually challenging environment where the financial and regulatory skills and talent are in very high demand. Some modest progress has been achieved, and there is still much more to be done as we work together to implement a more competitive compensation plan and to implement our strategies on recruiting and retaining top talent.

As noted in the action plan, late in 2015, rates for our more senior supervisory roles — these are our deputy superintendent roles that report through to the superintendent — were increased by 20 percent. That has enabled modest salary growth in the subordinate leadership roles in the organization, in the order of magnitude of 10 percent.

We are making continued efforts to hire senior leaders in this area and are doing so even at present. We have been successful at recruiting one of the two supervision deputy superintendents, who are under that new compensation rate, and two managing directors, who are the next level of leadership. It’s those key roles that are critical to the stability in our organization and to be able to effectively direct the operations of the supervisory program. We continue, though, to face high vacancy rates in some of our roles, and we are actively recruiting to fill those vacancies.

Part of my role is to bring the resources of the Ministry of Finance to bear in supporting FICOM in its recruitment. We’re doing that at present, as well as working with the Public Service Agency to continue to address the recommendation around recruitment and retention and the stability of the organization.

In terms of the compensation framework, the province has very recently provided the public sector employers with some additional flexibility to manage compensation and a modest and measured sort of increase in the compensation, such that employers can now attract and retain employees. FICOM is currently assessing an updated compensation framework that’s being rolled out for the public service, and we’re working through its application.

Related to the other recommendation, the third recommendation, in this area around increasing the staffing capacity, there has been a significant amount of effort done. It flows through the work that was done with the consultant in 2013 and 2014 around our capacity challenges, to address a competency framework and a system that has been implemented in FICOM. What it is, is a system that clearly identifies the specific expertise and the competencies required of all of our supervisory roles. This system has better enabled FICOM management and leadership in order to hire and assess qualified staff, to hire them into roles within the organization, to manage their performance and to provide targeted training to staff.

F. Chong: Good morning. Tara Richards and Heather Wood provided you with an update on recommendations 1 to 3. I will specifically address the balance of the Auditor General recommendations.

Recommendations 4 to 11 focus on supervisory and deposit insurance matters. There are three broad categories: first, improving FICOM’s supervisory practices; second, modernizing policies for deposit insurance funding; and third, developing contingency plans for deposit insurance payout.

With regards to improving supervisory practices, FICOM has made progress towards enhancing policies, processes and tools, with the aim to ensure greater consistency on documentation. These include developing and enhancing supervisory manuals, internal policies on monitoring and updating of risk ratings, on-site review procedures for small and large credit unions, and a structured quality assurance process.

I’m also able to report that FICOM has implemented broad credit union sector monitoring and, with that, documenting internal practices and procedures on stress testing and early warning programs that support our risk assessments.

Recommendations 6 to 8 focused on modernizing policies for the Credit Union Deposit Insurance Corporation’s deposit insurance fund. Since the original Auditor General report, the commission has implemented policies to review the target fund range every four years and an annual review of the target fund point within that range. This practice is to ensure that the adequacy of the fund size is in line with international best practices for deposit insurance schemes.

Recommendations 9 to 11 focused on contingency planning for deposit insurance payout. Unfortunately,
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Helen del Val, the commission chair, could not be present today, but I would like to convey a message from the commission chair, on her behalf, on the status of payout planning.

As you may know, in the March 2014 report from the Auditor General, Credit Union Supervision in B.C., it was recommended that FICOM and the Ministry of Finance complete an operational plan for payment to ensure depositors, including operational protocols, a target time frame for reimbursing depositors and formal funding mechanisms, including backup funding options.

Staffing challenges have resulted in minimal work completed in this area. In March 2016, the commission formed a subcommittee and directed staff to make the development of a payout plan a high priority. At its next meeting, the commission will be provided with a plan of the work that will be undertaken to develop the operational payout plan. Additional resources are being acquired to develop a payout plan capability and capacity over the coming years to prepare for a possible payout scenario.

The commission and staff remain committed to expediting the payout planning work to ensure CUDIC is able to promptly pay depositors in an unlikely event of a credit union failure.

I would like to close the presentation with a couple of final points. Firstly, on behalf of FICOM, I would like to extend our sincere thanks to the Auditor General and her staff that undertook the audit of FICOM’s supervision of credit unions. The OAG observations and recommendations have helped us improve our practices as a credit union regulator and deposit insurer. They have also highlighted the unique staffing challenges that exist within FICOM.

FICOM is working closely with the Ministry of Finance to ensure that outstanding recommendations will be addressed. As the superintendent, I recognize FICOM’s acute staffing challenges and its impact on our supervision of credit unions. The Ministry of Finance has been engaged on the staffing capacity issues, and we recognize that it will take time to resolve.

Finally, I would wish to acknowledge FICOM staff for their hard work, dedication and overall resiliency. It’s not easy for my staff to do what they do while undergoing a period of renewal and staffing uncertainty. With that, I stand proudly by my staff and their important role in protecting B.C. credit union depositors and consumers.

D. Eby: I am curious about the structural issues that lead to the situation we find ourselves in. First of all, I wanted to thank FICOM and the staff at FICOM, as Mr. Chong did, for working so hard under very difficult circumstances — being short-staffed and having such a critically important role.

The structural issue, as it seems to me, is that industries — credit unions, the real estate industry, pensions, and so on — pay money in to government — the full cost of the anticipated cost of being audited, being policed, essentially. They are paying the full cost, and then the money that they pay in is not going into actually ensuring that those audits are taking place.

I’ve met with members of credit unions. It would’ve been great if the committee could have heard from the credit unions today, because their position is very clear. They want this to happen. They want that auditing to happen. They want people to have confidence. They’ve never had a failure. They want people to have certainty. That’s why they pay for the audits. But the audits aren’t happening.

The first question I have is: if the money is coming in for the audits and the audits aren’t happening because FICOM is short-staffed, where is the money going? And how much money is coming in to pay for audits that isn’t going into audits, because the salaries aren’t being paid?

T. Richards: Yes, I think it is recognized that there is a shortage of staffing, which does create capacity challenges in the organization. As you say, the organization is funded by recoveries of these, paid by the industry, for those oversight and regulatory and supervision accountabilities.

With the current staffing shortage, there is a surplus. There is a surplus that is returned to the consolidated revenue fund, which represents the surplus against the budget.

The amounts that are…. Typically, FICOM is running on an operational budget in the order of $20 million a year, and our recoveries…. Essentially, we’re meant to be a $1,000 vote, which means we’re meant to be cost-neutral. We recover for those budgeted expenses. But with the shortage of staff, we have a surplus in the order, range, of $3.5 million to $5 million on an annual basis. Last year, for the record, the recovery was $4.8 million.

With a significant push to continue to recruit to address those shortages, we are actively recruiting against a number of positions and have had some success — modest successes, as I’ve indicated — recruiting into a couple of our key roles. For the current year, our anticipation is that we will not return as much of a surplus to government, but at present forecasts, there will be, with the continuing staffing shortages, surplus returned.

D. Eby: I just want to make it clear that I don’t hold FICOM responsible for the situation that you find yourselves in. Clearly, the rules imposed by government around the salaries that you’re allowed to pay auditors — the outside consultant has confirmed it — are the reason why you don’t have those positions. And government, apparently, has an interest in understaffing FICOM, because almost $5 million that was supposed to pay for audits is now going into general revenue instead of going into audits.
[ Page 977 ]

My question is to the Auditor General. In your review, did you look at…? I mean, it may be outside the scope of what you’re permitted to look at, but I don’t understand why FICOM is not a freestanding entity funded by industry — an independent office, independent of the Ministry of Finance. The government can’t claw back the overages. But also, it would free FICOM up from the public service salary rules that are causing this problem in the first place.

It would also have the added benefit of avoiding any perception of political interference in that vitally important independent office. So why isn’t this thing independent? Why aren’t the industry’s payments for audits not going to audits?

C. Bellringer: In terms of the final decision around it, it’s clearly a policy call. Having said that, we did look at international best practice, and independent oversight is what is recommended.

R. Sultan: At the risk of, perhaps, being repetitive, I would just like to read…

R. Sultan: …some portions of the Auditor General’s PowerPoint summary and ask the head of FICOM whether she agrees with the accuracy of the statements made by the Auditor General.

Here’s what it says. Follow-up to the original report — the original 2014 report, Credit Union Supervision in B.C. — found FICOM “understaffed, unable to meet its goal of reviewing credit unions in a timely manner. We issued 11 recommendations.” There was a progress audit to determine if FICOM’s action plan was accurate.

Findings. “FICOM is still short-staffed. FICOM is still unable to meet its goal. Government pay scales limit its ability to offer competitive salaries.”

Now, this is the key point to me. It’s not a funding issue. FICOM can already afford to pay better salaries without any new funding from government. It just needs a green light from government. Wow. It can’t be more plain than that. Do you agree with accuracy of these statements from the Auditor General of British Columbia?

T. Richards: I do acknowledge that the organization is still short-staffed. We are running with vacancy rates considerable higher than where we’d like them to be, as the Auditor General acknowledged in the time of her review, in the order of 37 percent. We’re making efforts to address and recruit into a number of vacancy roles to return the organization to a more stable complement.

The statement with regard to are we unable to meet its goal — I think we are challenged, with our current capacity, to be able to proactively conduct our supervisory framework. That said though, and Frank may want to add to the response here, we have assessed, with what resource capacity we have, to be looking to….

He spoke to it in his update on the supervisory practice around our early warning and around our documentation and risk-surveillance activities, acknowledging that with the resources we have, we are leveraging them to best assess the risk and then, with the capacity that we have, monitor and examine that risk.

Yes, we do fall within government’s Public Service Act. It’s the legislative framework in which FICOM is established, and by extension, we fall within government’s public service compensation framework. That compensation framework is the one, though, that I’ve noted is being updated. It is what we are looking at to see if it’s going to be providing what has been acknowledged is a modest but measured increase in flexibility. So at present, we are working through that.

We’ve had some modest capacity to address some of the compensation levels, which was the work that was done with the Public Service Agency in 2015 to address some of our senior roles, and have recruited and continue to recruit into those roles. But it is correct. It is not a funding issue. It’s what has already been established. There are sufficient revenue and recoveries that come to the organization to conduct its operations.

R. Sultan: I take it you agree that it’s not a funding issue, and I presume you’re also agreeing that it just needs a green light from the government. Is that really what it boils down to?

T. Richards: I think working through this compensation framework will give us a sense of whether it’s going to address…. It will take time. I don’t want to suggest to the committee….

T. Richards: We are working through the application of the compensation framework now.

T. Richards: As I said, we’re working through the application of the framework.

R. Sultan: Well, just to elaborate further on the points already made by the Auditor General on our next panel, “Continuing risk to credit unions and their members if FICOM can’t do its job,” I would remind all of us on the committee who might think credit unions are that friendly little place down in the basement where you can go and get a car loan that that’s not quite the world of modern British Columbia credit unions. We have 42 credit unions,
[ Page 978 ]
$58 billion in deposits. These aggressive folks control, dominate and successfully market to about one-third of the retail banking sector in British Columbia.

So here we have a set of financial institutions accounting for about one-third of the retail side — which of course includes the very sensitive mortgage sector, as my friend from Point Grey has pointed out — in the third-largest province in Canada being administered by what some observers might say is a policy of benign neglect, saying: “Well, they’re good people. We don’t have to worry about it too much.”

Combine that somewhat, shall we say, hands-off approach with the impression that is still abroad in the credit union world that in fact all of their deposits are guaranteed without limit — without limit — by the balance sheet of the province of British Columbia. I guess we’ve gone over this territory before, but I was astonished, talking to a senior credit union person the other day, who said, “Well, that’s the way it is because the minister said so in the House,” which I think is actually true, unfortunately. But in fact, also, it’s not what the law says.

So my follow-up question is: are you taking any steps to further educate credit unions about the extent of the true insurance applicable to their deposits and asking them to make sure the customers of those credit unions understand that these deposits are not guaranteed without limit by the province of British Columbia?

B. Ralston (Chair): I have the follow-up question on that as well, because that was a statement made by Premier Campbell in a speech in 2008, at the time of the financial crisis. It was one of the ten points that he promised to the province, and it was instituted and is still in place, in my understanding. But you go ahead.

F. Chong: Just to address the particular question from the member, we do have specific rules around the advertising of deposit insurance to credit union depositors. As you are probably aware, the Credit Union Deposit Insurance Corporation does set out particular guidelines and rules to credit unions, and we enforce upon those particular rules. We make it very, very clear that that deposit insurance is backed by the Credit Union Deposit Insurance Corporation, and the government certainly may provide backing to the Credit Union Deposit Insurance Corporation, if required.

R. Sultan: I mean, are you saying that in terms of your own personal opinion as a citizen of British Columbia or as an official of the institution?

F. Chong: Under legislation, it’s very clear that government may provide backing…

…to CUDIC. It is CUDIC that provides the unlimited deposit insurance amount for members and depositors of credit unions.

F. Chong: And I may point out that we do have a fund that we review regularly, both on an annual basis as well as every four years, to determine the adequacy of that fund in relation to credit unions. So we ensure that that fund actuarially can meet the failure of the largest credit union.

FICOM has the dollars to do the audits. Why wouldn’t FICOM hire independent contractors to do some audits — at least a number of them, maybe not all of them — because it has that funding, rather than see the work undone?

T. Richards: Most recently, we are engaging external contractor resources for some of the targeted reviews we do with regard to our examination. I think the organization has, in the past, more extensively contracted out some of its supervisory work, but I think the experience had been the ability to, kind of, guide and direct that work and the quality of the work. I think they’ve assessed that a full outsourcing of the examination function hasn’t delivered the required adequacy or quality of the work, so the approach at present is to continue to engage. We do engage with external consultants for rather targeted aspects of certain reviews for certain credit unions.

L. Throness: My second question is…. The government has now agreed to increase salaries by 10 to 20 percent. I just wanted to confirm that you’ve not made efforts to hire under those new salary guidelines yet.

T. Richards: The reference to 10 to 20 percent was specific positions within which…. Under the existing compensation framework, government was authorized to then recruit positions, so there were key positions that we were given that authorization.

What’s progressed since then has been the overall…. Government operates under an overall management compensation framework, and that’s the framework that government’s currently just updated and we’re in the pro-
[ Page 979 ]
cess of applying. Upon examination and application of that framework, there will be the opportunity to recruit at compensation levels under that new framework.

L. Throness: So are you confirming, then, that you’ve not yet made efforts to hire under the new compensation amounts?

T. Richards: Correct. We are currently applying and assessing that framework to the recruitment. But as already indicated, on a process that was negotiated and agreed to with the Public Service Agency, there have been key positions, difficult-to-recruit positions, that FICOM was given approval to increase the pay scale for.

B. Ralston (Chair): In the findings of the Auditor General, there’s a reference to — and Ralph has referred to it: “It just needs a green light from government.” Just so that it’s clear — Ms. Richards from the ministry has talked about a new compensation of structure — is there legislative change or change by regulation that is required in order to effect that?

From the tone of the answer, it seems as though something more might be required. I sense that something is being tried but may not be adequate to deal with this. The report from the Auditor General is very emphatic: “It just needs a green light from government.” So what is the nature of the green light that is required in order to get this process underway?

T. Richards: To answer the question, there is no legislative or regulatory change needed to effect the updated compensation framework. The process is underway. We are applying the new framework and assessing it against FICOM’s positions. It is a process that’s led across the whole public service, so it’s a coordinated process. FICOM isn’t bilaterally undertaking this.

It’s in coordination with a full process led across all of the public service. It’s underway. It’s in progress. It just isn’t complete yet.

B. Ralston (Chair): The initial report was 2014. The crisis was…. I think it’s reasonable to call it a crisis, in the sense of 37 or 40 percent vacancies. We did have a hearing of the Public Accounts Committee where that was addressed.

We’re now some years from that report and that finding. What’s taking the time to implement the policy? You say the financial resources are there. The money is there. So why is it taking so long?

T. Richards: Just to clarify, the direction that government has provided around updating its management compensation framework has just been authorized. It was not. We’ve only been authorized through direction of the Public Service Agency in the last few months. We are underway in applying that.

The earlier identification of the challenges and the earlier progress that I mentioned as part of our presentation on certain roles — that was under the former compensation framework, and that was negotiated bilaterally with the Public Service Agency.

The current work that’s underway will be completed very shortly, and then we will be able to operationalize. But we are not waiting. We are actively recruiting new positions and having the opportunity to recruit and attract key talent and align that with the compensation framework as it rolls out.

B. Ralston (Chair): So the government delayed for two years, and you’ve had a couple of months to get this underway. Is that basically what we can conclude from your remarks?

T. Richards: No. I think government has considered…. I think the minister made comments with regard to this when he took some questions on the matter. Under the fiscal environment, and government recognizing the increasing compression and inequity and recruitment challenges across the public sector, it has moved to implement an updated compensation framework. As I indicated, that was most recently directed in the fall. That was parallel to the work that we had been doing to work with the Public Service Agency on our recruitment and retention challenges.

B. Ralston (Chair): The direction came in the fall of 2016? Just so I’m clear.

B. Ralston (Chair): Oh, okay. So the report came out in 2014. The direction was given a month ago. Is that correct?

B. Ralston (Chair): I just want to establish the timeline. Okay. Thank you.
[ Page 980 ]

I’ll move to other questioners. I have some other questions, as you might surmise, but I’ll defer to other members at the moment.

G. Kyllo: Just to follow up on MLA Throness’s comments, there’s nothing inhibiting you from contracting services out. You obviously have the financial or fiscal ability in order to contract out. I know the Office of the Auditor General quite regularly relies on independent contractors to undertake work of the Auditor General.

You’ve indicated that you had some concerns with respect to the ability of independent contractors to facilitate the work that’s necessary. Could you elaborate on that any further?

T. Richards: I’ll just make some general comments, and then Frank, I think, would like to also respond.

It was an experience where it was timeliness and quality, with diminished capacity in our resources to undertake a broad contracting out. I think the experiences — the application of contracted resources for some of the targeted reviews…. As you can appreciate, in an organization with a diminished capacity, the capacity to then oversee those contractors…. To some extent, we had to prioritize the resource capacity within the organization to effectively contract out that work.

F. Chong: I can add further to what Tara had mentioned with regards to our experience on the use of contractors. I think that from the surface, the use of contractors makes a lot of sense, especially in the time of staffing shortages. But one of our experiences generally, with regards to the use of contractors, has been around the quality and timeliness of the reviews undertaken by our contractors.

During 2014 to 2015, we had outsourced about 22 reviews to contractors. Only 13 were completed. There are a number of different factors that led to this.

Firstly, many of the contractors were not necessarily trained or experienced with regards to regulation and supervision, so a lot of our efforts were geared around training our contractors to undertake the work.

The other was the fact that they also had staffing challenges themselves — turnovers amongst their own individuals within the firm. We also experienced problems with the quality, as you may expect, with the use of contractors. Their primary goal is to get through the work as quickly as possible in order to get on to the next assignment. We were left with a considerable problem with having to go back on the files and correct many of their mistakes.

I would also say that with the use of contractors, the decisions are not necessarily made by them. Regulatory decisions cannot be made by the contractors; they must be made by FICOM. They were left, obviously, without any particular direction because we were short on staff.

Lastly, I want to point out that many of our credit unions, our regulated entities, had pointed out that they were not satisfied with the work and the relationship between themselves and the contractors. As you might expect, with regards to regulation supervision, there is an element of relationship-building between our office and the regulated entity. That builds trust, obviously, to be able to share information and to be able to communicate. There were no necessarily strong relationships between the contractors and the credit unions.

G. Kyllo: What dollar figure was set aside or expensed with contractors, say, in each of the years over the last five or six years? Are you seeing that there was a distinct decision made in 2014 that contractors were problematic for the reasons you’ve set out and you made a choice to not use contractors?

At the same time, we have challenges with hiring. I think it’s quite easy to point to remuneration as the reason or challenge for attracting new hires. But as you indicated, even contractors are having some challenges or shortages with meeting some of their own HR requirements.

If you could set out for me how many dollars were actually expensed on the contracting portion of your business over the last five years. Then, I guess, further, just to have a look at: really, is remuneration the challenge, or is it a lack of, maybe, focus on the new hires?

I appreciate there’s a lot of HR time — experience with bringing new recruits on and getting them trained and up to speed. But it seems if the financial ability was there, we obviously — I think all as a committee — are concerned that maybe the level of audits weren’t being completed.

You guys made a choice not to utilize contractors and, at the same time, have not been successful in attracting new hires. Yet the reason that you’re landing on is that it all comes down to remuneration.

F. Chong: I can answer that question. In terms of the costs and the overall number of contractors we brought forward, I’ll pass it over to Tara on that. But I would want to point out that in 2014 and 2015, we contracted out fully to outsource contractors, but in 2016, we made the decision to start co-sourcing with contractors. There’s a bit of a difference here.

The full outsourcing basically meant that we would pass along the full review file over to the contractors. In a co-sourcing arrangement, which we’ve started in 2016, it has allowed us to bring on specialized contractors with specific skills such as treasury or IT or lending. They would be able to partner with our existing staff.

There are a couple of reasons for that. One of them is to ensure that some of that knowledge gets transferred over to some of our junior staff. But at the same time, we can control the timeliness and the quality of those re-
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views as well. So we haven’t abandoned contractors altogether. It’s that we’ve moved from full outsourcing to more of a co-sourcing.

That said, I’ll pass it over to Tara on the costs involved with our outsourcing in 2014-2015.

T. Richards: Over the period of 2014-2015, as Frank indicated, which was a period in which we were more directly contracting out, expenditures were $2 million out of the operating budget for that period of time — engagement on credit union outsourcing contracts.

The current forecasts we have, with more of this co-source model, were in the order of magnitude of $770,000 as our start-up. So we are not expending as much of our budget with regard to, but it’s very targeted, specific contracting, as Frank has indicated, for a very targeted contract result.

T. Richards: I don’t have that information with me. I think ’14-15 represented quite a peak period of that full outsourcing model, so expenditures wouldn’t have been to the same extent. I think clearly it’s acknowledged the staffing capacity has been at a high rate of vacancy over that period of time, but I think 2014-2015 would have represented that peak period of expenditures.

B. Ralston (Chair): If you could provide an answer in writing to the Clerk of the committee it will then be circulated to the members of the committee. Thank you.

G. Kyllo: You indicated that in 2014-15, you expensed about $2 million in outsourcing. In the current fiscal, you’re anticipating only about $700,000. So the office has made a choice, or a decision, to not continue to utilize contractors nearly to the same level under a different model.

How did you determine that that decision was more advantageous, or better, to allow you to meet the goals and objectives of the office, rather than…? I would anticipate that if we’re not meeting the full requirement of the office as far as the number of audits, that you would be ramping that up, not reducing it by 65 percent.

F. Chong: I can answer that particular question. The decision with regards to pulling back on full outsourcing was made based off of the amount of time that we were spending, committing, to reviewing the work of outsource contractors. There was a considerable amount of duplication that was occurring at our senior levels. That took away attention from what we need to do and the focus on high-risk, key areas. So I think that generally it’s been our experience that with the use of contractors it has been more work for staff than less.

G. Kyllo: So your capacity is increased this current fiscal, even though you’ve reduced your reliance on the outsourcing?

F. Chong: Well, I would say that we had a number of on-site reviews that had to get done during the 2014-2015 period as a result of the Auditor General’s report. We had made a commitment to get through a majority of our institutions in order to catch up with the 24-36 month window for on-site reviews.

During the 2014-2015 period, we completed a considerable amount of reviews with the assistance of contractors, but I would caveat that with, that being said, we had considerable resources internally that were committed to just reviewing the contractors’ work and, in some cases, duplicating the contractors’ work.

B. Ralston (Chair): Okay. I think you have explored the area very thoroughly, but a final question, perhaps, then.

G. Kyllo: My observation would be that it’s, I think, a magnitude of about $5 million being turned back to general revenues. So you had the ability, I guess, of an additional $5 million that could have been expensed in order to meet your goals.

I would suggest that there largely would be the technical ability of contractors around the province that could have helped to facilitate — taken on additional work and helped you to achieve the goal. But there was a choice within the office to go to a model…. I’m not saying it’s a wrong decision, necessarily, but there was a distinct choice to focus on hiring and remuneration and not contracting the work out in order to fully satisfy the requirement of the office.

T. Richards: Yes. I think the current approach is we are leveraging contracted resources for very targeted aspects of the examination work and where we can then balance the capacity of the organization’s resources to conduct the work. At the same time, yes, we are prioritizing and focusing on recruitment and retention to address those vacancies. That is the current approach.

B. Ralston (Chair): I wanted to talk a little bit about the deposit insurance issues. In the initial report, there were some recommendations about modernizing policies for deposit insurance funding. I recall — and I know
[ Page 982 ]
CEOs of credit unions do, because I’ve spoken to them, several of them, fairly recently — that in October 2008, the Premier, at the height of the financial crisis, made a television address. One of the ten points that he made was a commitment to unlimited deposit insurance for credit unions. That came into place and is still in place.

What I think Mr. Chong has said is that the credit unions — and they’ve told me this — are not allowed to advertise that. In other words, they’re not allowed to use that as a marketing feature to potential members or customers. But the unlimited deposit insurance is in place.

Now, I understand that the ministry is reviewing that. I’m not clear what the outcome of that will be, and I don’t think the ministry is just yet either. But apparently officials in the Ministry of Finance are uncomfortable with that requirement because of the obvious open-ended financial risk and the way in which operations might be directed knowing that no matter what you do, you’re backstopped 100 percent.

What is the Auditor General’s view of what modernization of credit union deposit insurance means? Does that mean eliminating the unlimited guarantee? Or what else might it mean?

First, perhaps, to the Auditor General and her staff, and then a response from the representatives of the commission.

C. Bellringer: Similar to an answer I gave previously, it remains a policy decision. But there are international best practices, which I believe we refer to in the original report, that do recommend that there be, if you will, caps placed unless there’s an emergency or some kind of situation that warrants it to be higher.

L. Moore: The way I would just phrase it is that international best practice recommends that unlimited deposit insurance only be there in temporary situations — in financial crises and stuff like that. It’s not something that they would recommend as something that should be ongoing.

B. Ralston (Chair): So the current practice is disapproved of by international standards. Is that what you’re saying, then?

B. Ralston (Chair): Ministry of Finance, did you have any official there who’d care to comment?

H. Wood: Well, in the consultation paper that the ministry released as part of the Financial Institutions Act review, we posed four questions.

We are also reviewing the types of deposits that should be insured. There are many different types of deposits that are insured. In some provinces in Canada, certain deposits are not insured that we insure in British Columbia currently, and vice versa.

We are also asking about whether certain exemptions should apply if we do move away from unlimited deposit insurance — for example, for registered retirement savings products — which is what is done in a number of other jurisdictions in Canada.

We’ve also asked, more generally, if any other reforms are needed to B.C.’s policy with respect to deposit insurance.

The province does not have a new view or a new position on this. We are still in the process of reviewing the international standards, the feedback that we have received, the practices in other jurisdictions, the practices federally in Canada, and we will be providing policy advice to the Minister of Finance. But the policy itself is under a broad review.

B. Ralston (Chair): Thank you. That confirms what the credit union CEOs are saying.

The issue that arises as well is the general review of the legislation. I think it’s the Financial Institutions Act. Where is that?

Some, I guess, concern about the extension of that review is evident in some of the conversations I’ve had. When is that process going to conclude, with recommendations for legislation? The sense from the institutions that are most directly concerned by this is that there’s no specific deadline and it’s likely to extend into 2018. Is that generally the pace of your workplan at the present time?

H. Wood: The ministry released an initial consultation paper. It was very long, very extensive. It covered a very large range of issues.

I should clarify that the Financial Institutions Act applies not only to credit unions but also to insurance companies, so there are other aspects to this review beyond simply credit unions.

We have also now released, in March of this year, a summary of all the feedback that we received, both through the written submissions — of which there were 40 — to this consultation paper as well as significant in-person meetings with credit union stakeholders and other stakeholders.

What we would normally do, and what we intend to do for this review — and this is what we do for all reviews, particularly of major, complex pieces of legislation — is we will be producing a second consultation paper that lays out very specific policy proposals. They will be policy proposals, but they will provide the sector and the stakeholders with a much better sense of the ministry’s understanding of possible recommendations that could be put to the minister in the future.
[ Page 983 ]

The time frame you have noted is likely accurate and consistent with other types of reviews that we have conducted in the past.

B. Ralston (Chair): I do recall a review of the Insurance Act that took eight years from start to finish, including passing the regulations. This seems to be going at about the same pace, but that’s probably inevitable.

C. Bellringer: In our report, we do note that the initial consultation paper did not address the principle, which envisions putting FICOM’s operational independence into legislation.

B. Ralston (Chair): A couple of further questions. In the Auditor General’s report, there’s an issue about, I guess, what accountants call materiality. What’s said here is: “Problems in even a few small credit unions can spread… uncertainty and a loss of confidence.” But surely, in terms of the impact on the system, some of the…. Admittedly, consolidation has been the trend. I mean, the number of credit unions is down from over 100 to 42, and consolidation continues.

There are some particular credit unions, which I won’t name, which have been under supervision in the past, and the system has not been jolted by that fact at all. So why have you drawn that conclusion, rather than saying that it’s the big credit unions that really are the ones to be concerned about and where the major regulatory effort should be directed?

C. Bellringer: Sorry, Mr. Chair, where were you seeing that? I just don’t remember the context.

B. Ralston (Chair): Page 3. It’s on the slide. I’m reading directly from it. “Problems in even a few small credit unions can spread…uncertainty and a loss of confidence.” That’s what I’m quoting from, from the slide that was presented at the outset — slide 5.

C. Bellringer: It was a background statement, but I’m not sure what the context was as to why we had it in the report. That’s from the first report?

Mr. Chair, I’ll look for the context and talk it through and get back to you in a few minutes, if we can.

F. Chong: Yeah, if I may. I think, if I understand correctly — and this is something that we discuss quite often within our office — that even if there was uncertainty with a smaller credit union or mid-size credit union, that could cast doubt in the depositor’s minds with regards to credit unions in general.

The term that we use is “reputational risk,” with regards to the safety and soundness of the broader credit union system. We take that into account as well, recognizing that even with smaller credit unions, uncertainty can cast doubt even towards the system as a whole or even for larger credit unions.

R. Jones: I’ll try. You mention the concept of materiality. You’re correct. In terms of materiality, we always look at materiality from two different aspects. One is a quantitative materiality. But there’s also the qualitative side of materiality.

In this case, I would characterize it more from a qualitative aspect. It’s in the public interest to ensure that all credit unions are viable, because even if a small one goes under, the public interest and the public confidence could be affected. It’s more from looking at it from that aspect.

B. Ralston (Chair): Just for the record, for those who may be avidly following these proceedings, there’s no imminent danger for any credit union, big or small, of any financial collapse. Just so that we’re clear and we’re not spreading misinformation about the strength and the health of the credit union system here in British Columbia.

The next question I had, then, was about the application of international standards. The previous CEO, I think, was fairly emphatic about the application of Basel III, I think it’s called. That’s not a spice. That’s a city and a financial regime in Switzerland.

The question did arise from many of the smaller and mid-sized credit unions. They did not feel that international standards were particularly well-suited for their operations given that they’re really designed for large, multinational jurisdiction banks or major national banks. Is, in the legislative review, that being considered? And secondly, what are the implications for the financial soundness of the system were those standards to be not followed or applied in a more particular way?

H. Wood: Yes, the review is absolutely considering the application of those standards. In the paper that the ministry released in March of this year that summarized the feedback — on page 24, in fact — we have acknowledged the views and the concerns of the sector with respect to the application of, particularly, capital and liquidity standards and the view of the sector about the need for tailoring of those standards to recognize the different, unique circumstances of credit unions.

I would describe what I have heard as the desire for tailoring of the standards as opposed to exemptions or somehow inapplicability of the standards. I can speak to
[ Page 984 ]
that part of the question. I don’t think I’m properly placed to speak to the second question that you asked.

B. Ralston (Chair): That is a helpful answer. I think it does, again, reflect what I’ve heard.

F. Chong: I think that from a regulatory standpoint, whenever we’re issuing any particular guidelines or expectations to credit unions, we’re certainly considering what are best standards when it comes to the financial institutions. But, as Heather had mentioned, we do tailor and customize our regulatory expectations to credit unions in terms of the size, scope and complexity.

As an example, our residential mortgage underwriting guideline did take into account some of the elements of what was issued by OSFI B-20, as well as the guidance set at the Basel committee. However, we made it very clear that we would customize and tailor our regulatory expectations for credit unions.

B. Ralston (Chair): Well, clearly, post-2008 all financial institutions underwent extensive review, given the nature of the lapses and collapses throughout the financial world. That’s probably not too surprising.

One further question about review, also for the Auditor General again. There is a regulatory requirement for a cap on commercial lending for credit unions of 30 percent of their capital, I believe. Is that being reviewed, and what would be the implications for financial soundness of individual credit unions and the system?

H. Wood: The commercial cap is an issue that has been raised with the ministry as part of the consultations on the legislation, and yes, it is absolutely being reviewed.

In terms of the implications, that is in fact what we are working through, with advice and expertise from the regulator, in order to understand and to ensure that we have a balanced view of the request itself and the impacts that changing that cap in some way might have on risk in the system. I would say we’re working with the regulator to ensure we understand the implications of policy shifts in that area. But it is very much, I would say, an open issue for this review and one that is under serious consideration.

B. Ralston (Chair): Certainly, the view has been expressed that, given the compression of margins in the domestic mortgage market, the only opportunity for profitability for smaller credit unions may be to use their intimate knowledge of local businesses to lend to them and increase their overall profitability without hazarding the financial soundness of the operation. That is an ongoing discussion, I understand.

Finally, then, because I know we’re drawing close to our time on this, given that this review and action plan are back before the committee after a report in 2014 — some progress has been made; there’s still progress to be made — can the Auditor General say what would be her recommendation as to when the next review on the action plan should take place? I think it’s somewhat unusual given the areas that have yet to be fulfilled in the action plan.

C. Bellringer: Well, the next request for an update…. I think it actually falls into the…. You’ll get a new update soon, because this was requested last September. I did check in the office. The requests are going out. Stuart may have a better answer on the timing of that, but I think they’re going out fairly soon, so you’ll receive another action plan.

We have to go through all of the action plans and decide which ones we’re going to look at. I have to say, my reaction today was to say that from our perspective, another progress audit may not be as effective as giving some thought to another aspect — that we may go in and do a full audit.

B. Ralston (Chair): That’s a bit of a Delphic answer, but we’ll let that one sit.

M. Hunt: I was just concerned with the answers I heard to Ralph’s questions on recommendations 6, 7 and 8. I thought I heard, from the acting CEO of the insurance side of things, that it had been suggested that unlimited is not in fact the truth — that in fact there was some other cooperation that was needed from provincial government in order to make it happen and that that wasn’t the case. I know that, certainly, all kinds of dollars are there.

But I’m sitting there going: “If we’ve completed six and seven, which are determining what the target size is for an insurance fund, obviously we’re working on the basis of assumptions and certain numbers.” I guess I have to ask the question: from the insurance company’s perspective, what is the de facto limit?

F. Chong: To be absolutely clear, the deposit insurance limit is unlimited. That unlimited deposit insurance amount is provided by the Credit Union Deposit Insurance Corporation, and the government may provide backing to CUDIC. We provide….

F. Chong: CUDIC has a $578 million fund. That is a fund that is set aside to ensure that depositors are paid out in the event — a highly unlikely event — of a failure.

I would also point out that CUDIC provides coverage on a net-loss basis. So CUDIC and the regulator have powers with regards to being able to sell or transfer those deposits to another credit union. We are able to sell off the assets of a failed credit union. We are also able to work with other credit unions to resolve this institution.

To your point, deposit insurance payout is the very last resort. We have a number of different mechanisms to recover and resolve a financial institution.

M. Hunt: So from your perspective, having done 6 and 7, you’re absolutely confident of where you are.

F. Chong: I’m very confident, given the fact that we have an actual model, which is independent of the commission and of staff, that looks at various factors that needed to go into determining the fund size.

It’s our view that we set an appropriate fund, given a range of different adverse scenarios, to ensure that we can absorb one or multiple credit union failures.

M. Hunt: Continuing on that, there have been some discussions in the past of one of the credit unions…. I don’t know if this is public information, so I’m going to try to be careful how I say it.

B. Ralston (Chair): I’d prefer that you not name the credit union. I think it’s very….

M. Hunt: Consideration was being given of becoming a federal institution and working under the federal rules. If in fact such a thing happened, okay…. It is, at least in my understanding, hypothetical at this point in time. It’s being considered or possibly considered. Would there be an extraction from those deposit funds, those funds that are there to insure a failure? Would there be a withdrawal from those funds and those funds would be transferred to a federal insurance? Or would those simply be the cost of changing?

F. Chong: A credit union opting to continue into the federal jurisdiction would not be able to bring their funds that were provided to CUDIC to the federal jurisdiction. Those funds would be retained by CUDIC.

M. Hunt: So then if, in fact, it happened that some credit union should do such a thing, it would actually make the credit union system in B.C. even more stable.

F. Chong: It would bump up the overall fund itself for the rest of the other credit unions. That would be correct.

D. Eby: There was one thing that I really hoped to come away from today with, which was an answer about whether or not, as the Auditor General puts it, a “green light” had been given to hire the auditors necessary to do the job that FICOM’s been asked to do. I don’t think I’ve heard that answer. I think I heard Mr. Sultan raise a similar question, and I just didn’t get it.

To the Auditor General: what did you mean when you said that FICOM can do this, that they “just need the green light from government”? What did you mean by the green light? What are you looking for?

Then to the Ministry of Finance: has FICOM been given that green light as described by the Auditor General?

C. Bellringer: The ultimate test is whether or not you’re able to find appropriate staffing. I mean, really, at the end of the day, it’s not in place now. There have been examinations done that there’s some further information available as to what the compensation levels would need to be.

“Green light” meant that the restrictions at the moment within the Public Service Act did not enable FICOM to make any changes outside of that. We’re hearing some of them. I don’t know if they’re adequate or not until they try to do their recruiting.

D. Eby: Then to the Ministry of Finance: has FICOM been given that green light to do what’s necessary to hire up to the complement that’s required to do the job?

T. Richards: I think, as acknowledged, we are working under the current public sector compensation framework. We still are governed under that framework. So the application of that framework is underway. We’re working through that.

I think it does provide, as I think the minister has indicated, a modest and measured degree of flexibility. Will it immediately address the vacancy challenges? No, I don’t believe it will. I think it’s going to be a period of time. I think it is work we will need to do diligently, in cooperation with the Public Service Agency.

D. Eby: To the Ministry of Finance, to Ms. Wood: is there any reason why this continues? Is there any reason why we would expect a change two years from now, when we sit down and have the next progress report? Why would we expect anything to change if FICOM hasn’t been given the green light to do what’s necessary to hire the auditors they need? Why would we expect there would be any difference?

H. Wood: I’m sorry. I can’t speak…. I’m not working with FICOM on the operational issues. I am handling policy issues involving the legislation.
[ Page 986 ]

D. Eby: Whose decision is it to give this the green light? Obviously, it’s not Ms. Richards’s decision to give herself the green light to go outside the compensation framework she has to operate under. So whose decision is it? Why is that person not here in front of the committee to explain why it hasn’t been given? I think it’s totally….

T. Richards: As I said, FICOM is an entity that’s legislated under the Public Service Act. So it would be a decision of government to move the operational independence of the organization outside of government’s Public Service Act and its associated human resources and compensation framework. That said, I do believe the updated compensation framework is going to provide a measure of modest flexibility to start to address the compensation challenges and allow us to recruit.

D. Eby: I’m sure, Mr. Chair and Ms. Richards, you understand the lack of heart that I take from an idea of a modest level of flexibility to move towards addressing…. We need the auditors to do the job, and we need them now. The question is: whose decision is it to make that? You said it’s government; I assume it’s the Ministry of Finance. Is there somebody that can provide us with some reason why that green light hasn’t been given from a bureaucratic perspective, or is this simply a political decision? Is that what we’re being told — that this is a political decision?

T. Richards: I think we need to work through the application of the framework, assess its application and implement it — try to recruit under the increased compensation that that framework will provide, then assess and provide our feedback to government of whether it’s a satisfactory compensation framework that will allow us to fully address it.

I don’t want to leave the committee with the sense that it is solely the application of the compensation framework. We’re looking at a broad recruitment and retention strategy to attract talent to the organization. We know that compensation is a key determinant, but it is a comprehensive approach we are taking in addressing the capacity challenges of the organization.

D. Eby: One last question. On her way out the door, when she could speak freely, when she had another job lined up, when she was leaving the oversight of the Ministry of Finance — FICOM is entirely within the Ministry of Finance — the CEO of FICOM said: “I’ve been trying to get auditors in this office for years. Government hasn’t listened. It is an issue, and it needs to be addressed.”

That is an alarm bell for me. So my question, to anybody that can answer it, is: whose decision would it be to provide FICOM with the authority to pay the salaries that are required to hire the auditors to do the job that they are legislatively required to do to protect the public of British Columbia? Whose decision is that? Is it a political decision, or is it a decision within the public service and the Ministry of Finance? Is there somebody that can explain to us why that decision hasn’t been made?

H. Wood: Well, a decision to remove an entity from the public sector or from the application of the Public Service Act and, therefore, its compensation framework, would be a decision, likely, for the Minister of Finance and, I would expect, in consultation with others, including cabinet. We’d consider that to be a machinery-of-government type of decision.

It is more expansive than any one ministry, for example. There are corporate bodies that need to be involved in reviewing a decision such as that — to remove an entity from application of the Public Service Act. I think the Public Service Agency itself would be involved. There are other corporate bodies as well that have an interest in ensuring that accountability frameworks are established if you’re going to look at removing an entity from the application of the act, for example.

I would say that that issue is part of…. It is not directly related to the review of the Financial Institutions Act, but to the extent that we hear feedback about that issue and to the extent that it is linked to certain other core principles, then you can consider that to be an issue that is under consideration within the Ministry of Finance. It would take a lot of time and it would take a lot of work to establish an operational, independent new entity.

B. Ralston (Chair): I just had one final question for Mr. Chong. You mentioned, in speaking of accountability, Helen del Val, who’s the chair of FICOM — she’s, I believe, an appointed official — and is not here today. If there’s a personal reason she’s not here, I’m not particularly interested in that, but is that the case? Or is there some other reason why she chose not to join us here?

G. Kyllo: I’d just like to state that I think the credit unions should be commended for their commitment to community. There are a number of communities around the province where the only financial institution that is there, whether you look to Fort Nelson or, I believe, Tumbler Ridge…. I know in the community that I live in, Sicamous, we used to have two other major banks. The only banks that are still available in these small, rural communities are credit unions, and I think they should be commended for their commitment to the community.

B. Ralston (Chair): Great. Well, we’ll leave aside the discussion of their tax rate changing to being greater than
[ Page 987 ]
that of the chartered banks, given their intense community activity. That’s a discussion for another day. It sounds like they’ve got a supporter over there.

Thank you very much. We’ll now just take a moment or two to continue with the next topic. I’d prefer that members not go away. This is going to be a fairly major report, and we want to get started.

B. Ralston (Chair): We’re now going to deal with the Auditor General report entitled Access to Adult Tertiary Mental Health and Substance Use Services.

Representing, just for the record, from the Office of the Auditor General: Carol Bellringer, Auditor General; Russ Jones, Deputy Auditor General; Laura Hatt, executive director, performance audit; and Jessie Giles, manager, performance audit.

Representing the entity, the ministry: Doug Hughes, assistant deputy minister, health services policy division; Keva Glynn, acting executive director, mental health and substance use; and Gerrit van der Leer, director, mental health.

We’ll begin with a presentation from the Auditor General. I turn it over to her to begin.

Auditor General Report: Access to
Adult Tertiary Mental Health
and Substance Use Services

C. Bellringer: This is a large performance audit that we issued in May of this year. Within the wide spectrum of care, the area we looked at was for those people who need the most intensive specialized mental health and/or substance use services.

It’s critical that the services are available throughout the province and people can access them when they need to, so our audit focused on the management of access to these services by the Ministry of Health and the health authorities. The Ministry of Health is currently working with health partners across B.C. on a number of initiatives in this area. Our recommendations are forward-looking to assist the ministry and the health authorities to build a well-managed system that meets patient care demands now and in the future.

Although we focused on one aspect of a very complex system, we expect that our findings and recommendations may be relevant to other parts of the mental health and substance use system. We met with staff from across B.C. who work directly with patients, and we visited a number of facilities and assertive community treatment teams across the province. We received excellent cooperation from staff at the health authorities and within the ministry.

Morris Sydor was the assistant Auditor General who worked on this audit. He’s left the presentation in the very capable hands of Laura Hatt, executive director in performance audit, and Jessie, who’s going to do the presentation and has come back, actually, from parental leave this morning to join us because she was the manager in performance audit who spent a considerable amount of time working on this.

Mental health and substance use problems affect people from all walks of life. People with mental health and substance use problems may face stigma and discrimination, and they can face obstacles in education, employment and housing. The cost to individuals and government are high when people with mental health and substance use problems don’t get the services that they need.

Adult tertiary care is the highest level of care available in the province for people who need specialized mental health and/or substance use services. These patients are highly vulnerable and have substantial and complex needs. They may be homeless or at risk of homelessness, be frequent users of emergency services, have a long history of hospitalization and/or be involved in the criminal justice system.

Riverview Hospital was the central provider of these services. Starting in the 1990s, these services were slowly transferred out to the health authorities as part of the philosophy of providing care closer to home. Riverview Hospital was closed in 2012, but this audit is not about the closure of Riverview or the transition of care. It’s about the system as it is today.

We carried out this audit to determine whether the Ministry of Health and the province’s six health authorities adequately managed access to these services. We found pockets of good practice. But the health system as a whole needs to do more to ensure that people with serious mental health and/or substance use problems and illnesses can access the services that they need.

Work is underway to establish provincial standards and definitions. We recommended that the ministry collaborate with the health authorities to complete this work and clarify roles and responsibilities.

The ministry and health authorities need more information to know if services are meeting patient needs and to allow the system to better allocate its scarce resources. This means understanding where the bottlenecks are, assessing the current and future needs of patients and evaluating whether the programs are effective. We note in the report a number of good practices that can be shared among the health authorities.

Each health authority faces unique challenges in ensuring services meet patient needs. All health authorities are taking action to improve patient flow through facilities.
[ Page 988 ]

No provincial data exists that identifies service gaps. However, we found some people may not be well served by the current system. This includes patients with serious mental health and/or substance use issues as well as acquired brain injuries, developmental disabilities and/or a history of extreme violence or current aggressive behaviour.

These gaps in services are compounded by the lack of available resources for patients ready for discharge, such as appropriate housing, and pressures on other parts of the medical system, such as full in-patient psych units in hospitals.

Accountability for addressing all of these gaps and barriers does not rest solely with the health system. Coordination with other partners, such as Community Living British Columbia and B.C. Housing, is needed.

Some health authorities flow patients through facilities as quickly as possible, while others do not because they believe there are no step-down services available in their region. We are not looking for a one-size approach. But there needs to be some consistency to ensure fair and equitable access.

We are encouraged that the Ministry of Health has fully supported all of our recommendations and is already working with the health authorities in this area. Leadership from the ministry is important for ensuring that the momentum keeps going.

Overall, we recommended the ministry and the health authorities work together to clarify roles and responsibilities; improve informed planning around supply and demand of services; monitor and evaluate access to the services; evaluate whether these services are achieving sustained, positive outcomes; address gaps in services; fully identify and remove barriers to access and discharge.

We hope that all stakeholders in the mental health and substance use
[ Page 989 ]
system will consider our findings and recommendations.

B. Ralston (Chair): I’ll turn it over now, unless there’s any further comment from anyone there, to representatives of the ministry. I’m not sure who’s presenting. It looks like Mr. Hughes is going to present.

D. Hughes: Yes. Thank you, Chair. I’ll ask my colleagues Keva and Gerrit to jump in when required.

First off is…. The Ministry of Health and the health authorities would like to thank the Auditor General for reviewing how the mental health system provides access to intensive, specialized adult tertiary care mental health and substance use services. The timing of this review was good for us, as the ministry, because we had begun to work on some of these areas. The information helped us around developing what I would call a strong performance management system for tertiary care services.

As was mentioned by the Auditor General, the ministry and the health authorities fully support the recommendations of the Auditor General report. We are committed to ensuring that British Columbians have better access to quality tertiary care services that are effective, appropriate, safe, accessible and acceptable — so our dimensions of quality.

I won’t go into too much detail on some of the services that the ministry offers. It is the broad range of mental health and substance use services and supports, including health promotion, illness prevention and early intervention services as well as assessment, treatment and support services within the community and acute care and specialized tertiary care services.

That point is important — to recognize that the tertiary care services are part of the system of care for mental health and substance use services. Where it’s located is at the top end of our most expensive and our largest response to people with acute mental health and substance use issues.

The ministry recognizes that more needs to be done to enhance access to services and address service gaps for people experiencing mental health and substance use problems, including this population that we’re talking about.

Maybe to put this in the context of the population is that…. The way we look at it is that there are approximately 4.5 million people in the province. Of that, 800,000 are receiving mental health and substance use treatment, which is approximately 20 percent. That would be mental health and substance use treatment from a physician, in the hospital, through our mental health system with community care or in the care of a family practitioner or a physician.

The research tells us that about 135,000 of the population, which is about 3 percent, have a history of psychosis, depression, complex behaviours. So you start to get into a smaller population.

Of the 135,000, about 25,000 frequently visit the hospital. Of the 25,000 — this was some of the work we did looking at our report that was done on services for severe addictions and mental health issues — 2,200 to 5,000 are the most complex. They’re usually having two admissions to hospital. They’re in and out of hospital, complex behavioural and acute care issues, and usually involved with the criminal justice system.

When you start looking at the population of British Columbia, who we’re talking about, it begins to narrow down to a highly complex group of people who, for the most part, are coming through the acute care system into the tertiary care services that are being offered. It’s that piece of the work that we’re looking at, from our perspective.

The province and the health authorities have been making good strides in the area. At the moment, we spend $1.4 billion on mental health and substance use services. What we have done over the last period of time, in our planning for the system is…. It goes back to 2010, when the province released Healthy Minds, Healthy People as a guiding document for mental health and substance use services and policies in British Columbia.

As of March 31, 2015, 63 of 66 actions identified through Healthy Minds, Healthy People have been completed. Those actions were quite broad, encompassing everything from health promotion to tertiary care.

During the estimates in 2015, the Minister of Health committed to reviewing Healthy Minds, Healthy People and posting a refreshed plan. So we’re, at the moment, involved in a cross-government committee and a cross-government cabinet committee that’s looking at the refresh of Healthy Minds, Healthy People and looking at where we would go with the refreshed system.

In the interim, where the ministry is at is that we wanted to continue to improve the quality and management of key populations accessing the B.C. health care system and recognize the concerns raised by patients and their families about the availability of service and challenges in navigating the existing mental health and substance use service.

A number of those areas which we’ve looked at is what I call “high users” of the health care system. Those are the ones that we see are showing up in emergency rooms and lead to overcapacity issues with our hospitals. When you look at that, the high users are people with chronic, complex conditions — the frail elderly, people with dementia. Inside of that high-user group is the mental health and substance use population.

From the ministry’s perspective, we’ve identified that group as a group that we need to do more with in the community setting and the secondary system of care — that if we can provide levels of care there, it’ll have an impact on our hospitals, which would then free up some of the hospital beds for either surgical care or some of the most acute situations.

The Ministry of Health worked through the summer and the fall of 2015, developing a strategy paper, which is called “establishing a system of care for people experiencing mental health and substance use issues.” What we wanted to do, in part of our work, was refresh our policy proposition — coming from a patient perspective and looking at how best we go should about working with this population, including the whole mental health population.

So we have a paper, and when the Auditor General went through the report, they did identify pockets where there was good work. Over the last three years, what the ministry has been focusing its efforts on is: how do we learn from the pockets of good work that create a system?

The Auditor General talks about that. It’s that we need a system of care that is easy to understand, and people can know where to go to get the type of help — if that’s parents who are advocating on behalf of their children or users that need to come to the system.

We recognize — and that’s through the work of the Auditor General to help us move ahead on that performance system approach — that we do need to move to a system that is clearly understood, particularly by people, so they can access the supports that they’re needing.

The mental health and substance policy direction paper provides a standardized provincial framework to describe the tiers of service — and that’s in our triangle, which is in the report — clarifying the levels of service and their inter-connections within a system of care.

It focuses on simplifying and standardizing the delivery of mental health and substance use services across the province, increasing access to information on line to B.C. citizens. The Ministry of Health has an 811 HealthLink service. We’re currently in the process of upgrading that approach, so that people can get immediate help, either through crisis lines, but connecting into our on-line services that we have available; providing targeted interventions to high-risk sub-populations and expanding the capacity of assessment in general mental health and substance use supports within the primary care.

As part of the system of care, health authorities will work with community partners to establish inter-professional specialized care teams and associated services to better serve complex mental health patients, thereby improving patient experience through better value to coordinate comprehensive and quality services for this highly vulnerable population.

What we’re looking at in our model of care, our framework of care, is that patients — what we see — who are having early onset of mental illness will, for the most part, go to their family doctor, which we’re calling primary care services. Usually the family physician is then able to do some level of assessment but quickly will realize they need some specialized services to support them in their work.

What we’re doing at the moment is looking at our specialized services for mental health and substance use. What we want to do is really clarify the logic of how someone will access the specialized services, create a good assessment for what would be there and then look at the services based on the population. Then it would be clearly aligned with some service approaches to assist with whatever conditions the person is experiencing.

The connection in the system of care is having a patient accessing primary care services connected to specialized services, and the specialized services could be in the community or in our acute facilities or in our tertiary care services. So the tertiary care services are part of a system, and the access point is really interdependent on the secondary services.

In the spring of 2016, the ministry released a policy objective on mental health and substance use and an as-
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sociated strategy map to support the implementation of a system of care. That’s just what I was referring to earlier, around that system of care.

The documents provide system-level stewardship and direction for health authorities to ensure consistency in the implementation of the system of care. Over the summer, health authorities were directed to develop plans on how they will implement this system of care and the supporting components of primary care and specialized teams.

What we’re moving towards is — we have looked at the province, and we have 61 geographies — breaking our province down into geographies where, for the most part, we can get a good sense of who lives there and what the presenting challenges are that the people may have on health and, particularly, with mental health and substance use as a subset of that.

If we can understand our populations in those 61 geographies, we can begin, then, to look at what some of the appropriate services would be and how the services need to work at the local level. Then part of that is the attracting of our human resources, whether, at the local level, it’s clinicians or psychiatry or any of the tertiary care services that need to support that.

A local system has to be supported by regional systems that are working with health authorities on the regional response around how they can support people who are presenting with severe mental health and substance use issues, either in their community or accessing a regional support. In each of our health authorities we have regional centres of excellence. Then we also have a provincial system that we could use to support people, whether that’s coming into a provincial resource and then going back to their community. We are working on that model and getting clarity so that people can understand how the mental health system is working.

Particularly speaking of this population, some targeted interventions that we have been working on….

B. Ralston (Chair): I’m wondering if I might interrupt, Mr. Hughes. You haven’t advanced the slide, and I’m wondering, because it’s a bit detailed to follow: are you talking about the workplan that’s a couple of slides down, where you’ve talked about how you’re implementing the recommendations? Because there’s a fairly detailed series of slides about implementing the workplan.

I’m just wanting to assist in terms of making sure that the committee gets the narrative that you’re developing here.

D. Hughes: My intent was — I should have explained it — just to give a bit of an overview from the ministry’s perspective, then working into the presentation.

B. Ralston (Chair): Okay. Perhaps, just given that it’s a very comprehensive report — and I understand your passion for what you do — I think it might be more helpful to members if you were a little bit more focused on your specific response to the recommendations and how the ministry, under your leadership, proposes to address those.

What slide 5 lays out is the workplan that we have put together to respond to the recommendations, which will be in more detail over the next four slides. I’m going to ask Keva to go through those.

Basically, we’re looking at a two-year process to move ahead on the recommendations.

K. Glynn: As Doug mentioned, we have a 24-month action plan that’s divided into three phases.

The first phase is from June 2016 to December 2016. It is slide 6. Over the next six months, we’re looking at addressing a number of recommendations that are outlined on that slide. I’ll provide a little bit more detail.

In terms of recommendations 1 and 3, we’re working with the Provincial Health Services Authority. We’re collaborating with them to provide provincial guidance and coordination in the development of a provincial framework for tertiary care. We have a signed MOU — a memorandum of understanding — at this point with the Provincial Health Services Authority, which was part of recommendation No. 3, to clarify the roles between Provincial Health Services and ourselves, the Ministry of Health.

We’re also developing draft tertiary care standards. We anticipate that they will be finalized by that timeline, December 2016. We’ve hired a provincial coordinator, and we also have established a tertiary care working group under the collaborative leadership of PHSA — Provincial Health Services — and the Ministry of Health.

We’re also, with the guidance of that tertiary care group, drafting performance measures. Actually, these were developed prior, and we’re going through the process of finalizing those performance measures.

In terms of recommendation No. 2, which was around developing the initial baseline of indicators, I just spoke to that, actually. We’re working on that over the next six months. We have the draft, and we’re finalizing that.

Recommendation No. 5 was looking at the population and the population needs. We have contracted with the centre for addictions and research in mental health with Simon Fraser University. That work is underway to look at the 11 most prevalent diagnostic groups, which is inclusive of those that are receiving care through tertiary services. That work is underway and is expected to be complete in April of 2017. If you go back to the previous slide that outlines the phased approach, you’ll see that that has begun, and it finishes in April.
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Recommendation No. 8 was around developing a wait-list management plan. This is a complicated task, so what we’ve decided to do is divide it up into a number of phases. Our first phase begins now. We’re doing a lit review. We’re looking at other jurisdictions to see how they’re defining their wait-list, and we’re using that tertiary advisory committee, the provincial committee, to standardize how we measure wait times.

Phase 2 of our work plan is from January 2017 through to December — 12 months. In phase 2, we’re going to complete the performance management framework. That’s the common measures indicators and targets. We’re also going to establish a provincial network. That’s a network of clinicians who have expertise in tertiary care. The intent of that network is to share best practice around the support for tertiary clients who require tertiary services. That was also a recommendation of the Auditor General, that there’s increased information-sharing. So that’s our effort around No. 4.

Also in phase 2, under recommendation No. 5, that’s continuing on the population needs-based planning that CARMHA — the centre for addictions and research in mental health — is conducting with us.

We’re also, under recommendation No. 7…. I think a very helpful recommendation from the Auditor General was around the gap population, or what is called the gap population, within our sector. That’s people with acquired brain injury, developmental disabilities and people with aggressive and complex behaviours and how we support them.

There will be work, partly in collaboration with CARMHA and also through the tertiary network, to identify what those needs are and how we can better support those groups. It certainly is and continues to be a challenge. I think that if we can make progress on that, particularly around continuity of care for those cohorts, that’ll be a substantial improvement to the system of care.

Recommendation No. 10 in phase 2 was an established mechanism and infrastructure to support formal public reporting. This will build off our development of the baseline indicators, the work that we’re going to do over the next six months.

Once we’ve developed our baseline indicators, then we can select from those the ones that may be of the greatest interest and most reflective of the effectiveness of the tertiary care system for the public. That will be work that we do next year.

Phase 3 brings us through to the end. It’s the six months from January to June 2018. In phase 3, we’ll be completing some of the work that has happened earlier. You can see that from slide 5, if you go back into the overall picture of the workplan. In phase 3, we’ll be completing the provincial wait-list framework so that we’ll actually have a standardized approach to reporting out on wait-lists and also a standardized approach so that the public and patients and families understand how long an appropriate wait time would be.

Service gaps and emerging needs report. We’ll be developing a report based on the information provided to us through CARMHA. That report, we hope, will…. The intent is to look at: what are the population needs? Where are the gaps? And then from that, identify where the service gaps are and use that as the foundation to determine how we allocate funding, if there is new funding, going forward.

Regional and provincial evaluations. One of the recommendations from the Auditor General, which I think is very appropriate, is having health authorities and the ministry regularly conduct evaluations so that we can see how effective our services are for our clients and in terms of the system and in terms of the providers’ experiences. We will be, in part, using the indicators that we’ve developed but also working with a clinical network and with our provincial tertiary care working group to develop consistent evaluation or standardized provincial evaluation.

Finally, systemic access and flow barriers. I think we’ve all heard about the challenges around housing and supported housing. In particular, the Auditor General’s report pointed out that housing is one of the key issues around the access and flow. If people aren’t leaving our tertiary care system, it’s hard to bring in new clients.

This is work that we’ll be looking at, and I think it’s very helpful that the cross-government cabinet committee on mental health is also identifying a systemic and a cross-sectoral approach. Through their work, they’ve developed a 12-month action plan, and one of the components that we have put into that action plan is working with B.C. Housing and with other partners around identifying the barriers — we already know what the barriers are, I think — and then moving towards how we can support a more focused approach to housing.

In summary, in terms of the work that we’ve accomplished to date, of the ten recommendations, four of them we have made progress on since the report became public in May. Recommendation 1 is: work with the health authorities and PHSA to set provincewide direction. We have signed an MOU, a memorandum of understanding, with PHSA. We’ve also established a tertiary care provincial working group of experts. We’re working to develop…. Well, we have draft standards for tertiary care as well as draft baseline indicators to support tertiary care.

Recommendation 2 is another one. We’ve established the performance framework, which I just mentioned — the performance indicators in draft — and we’ll be working to finalize those by the end of the year.

Recommendation 3. Clarify the roles with PHSA to finalize the tertiary care standards. I’ve mentioned what we’ve done on that.

Recommendation 5. Identify adult tertiary care population needs. We have the prevalence study underway
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with the Centre for Addiction and Mental Health and research with SFU.

D. Hughes: In summary, very quickly, Chair, the ministry and health authorities support the recommendations. Improvements to patient experience and access to coordinated care are expected over six to 24 months. We thank the Auditor General for the collaborative approach to reviewing the mental health and substance use tertiary care services and providing recommendations to improve the system of care.

B. Ralston (Chair): Thank you very much. We’re going to adjourn at 12 for lunch, but we have time to begin our questions.

L. Throness: I’m most interested in the abuse of drugs and alcohol in this piece. The abuse drives some mental health; it drives crime; it drives poverty; it drives related health issues.

I call it abuse rather than use, as the ministry likes to use, because I don’t like the confusion that could result from calling the use of methamphetamines as benign as the use of aspirin or some other health-giving drug. I use the term abuse.

I’m dismayed that we are talking now about establishing a system to deal with this when you look at the mammoth problems over decades that our province has experienced, most notably the Downtown Eastside, just a few blocks away from here. I have a few questions related to that.

On page 23, it talks about the amount that is spent as $945 million a year. Is that $1.4 billion or $945 million? I thought that Mr. Hughes used the figure of $1.4 billion. Maybe I was wrong there. Could we clarify that?

D. Hughes: So $1.4 billion on the mental health and substance use system, including mental health and substance use. Health authorities spent approximately $13.6 billion for all health services, and of that, $945 million was spent on mental health and substance use services. I’ll go back to the chart.

C. Bellringer: It’s intended to be the same thing. I am wondering if it’s the year. We’re looking at 2013-14, and I don’t know what year your number is from.

L. Throness: I’m wondering how much of the $945 million is spent on harm-reduction services across the system, through our five or six health authorities. Do we have that figure?

D. Hughes: To the breakdown of the funding on mental health and substance use services, substance use contracted services is about $37 million, so it’s about $37 million of the $900 million. Our breakdown of expenditures in health authorities…. I have a list of those numbers, if that would help.

L. Throness: I’m thinking of methadone replacement, which is $57 million a year alone. Plus, I think Coastal Health spends about $30 million.

I’m wondering. Do we have a breakdown on harm-reduction services for drug abuse across the system, across the province? I would be interested in knowing that. Maybe you don’t have it right now, but maybe that figure could be supplied to the committee. Is that okay, Chair?

L. Throness: My final question is: what is the goal of the treatment of drug and alcohol abuse? Is it freedom from addiction, or is it the acceptance of addiction and simply the provision of harm-reduction measures for them, and is that the reason why we don’t have a system in place?

K. Glynn: To start, I liked your point around substance use and misuse, because I think that’s a fair point. I think substance use exists on a continuum from non-problematic through to problematic. That can vary from a recreational user through to a habitual user. That’s usually how we make that distinction.

L. Throness: What’s the goal of our system? Is it the freedom from addiction? I’m talking about addiction now, not just the occasional user. Is it freedom from addiction or the acceptance of addiction and the provision of harm-reduction services? So we don’t try and get a person off drugs. We don’t try and get them free from addiction. We simply say: “Your addiction is okay. We accept it. It’s socially acceptable. We just want to reduce its harm by providing needles and pipes and whatever we provide.”

K. Glynn: I think when you look at recovery and the definition of recovery, it is an individualized definition. What we would look at is that person. What is their quality of life, and what is their ability to engage with their family and to engage in terms of having a socially pro-
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ductive life? For some people, that does mean that they perhaps have an ongoing methadone…. They’re part of a methadone maintenance program, yet they’re also a productive member of society, and they’re contributing.

Our system of care looks to support people to move into being a productive member of society. For some individuals, that means that they’re sometimes using. For other people, that means abstinence. I think our services reflect that range.

L. Throness: So freedom from addiction is not regarded as the best health outcome in all cases.

K. Glynn: I would say that quality of life is considered the best outcome, so for some people — and it’s a very small proportion — there will be, likely, an ongoing addiction. If they’re able to manage that in a way that allows them to live a productive life, then there should be some supports in place for them, and I think our system reflects that.

S. Robinson: I have a number of questions. The first one, actually, is to the Auditor General’s office. I noticed, at the back of the report, as part of the appendix, there is a sample of outcome or evaluation tool, a potential…. Let me just pull it up here. It’s appendix C, “Sample Performance Measures.”

Now, I’ve been on this committee for three years, and I’ve never seen a sample performance measure. Is there a particular reason why in this report we saw included sample performance measures?

L. Hatt: Sure. I think that’s an excellent question. We were trying to provide…. As we mentioned, there were pockets of good practice across the health authorities, so some of them were measuring certain aspects of the performance measures here. We wanted to pull all of those together as a starting point for the ministry and the health authorities to consider in terms of developing a provincial-wide set of performance metrics around access.

S. Robinson: The ones that are listed here — were these ones that are currently being tracked?

L. Hatt: In some cases, yes, but not consistently across all the health authorities.

S. Robinson: I find that very interesting, because in the early 2000s, I worked for a contracted agency that did this work, and we were required by the ministry to actually have performance indicators. So I am to understand that contracted organizations and agencies of the ministry are required to provide performance measures to the ministry, but the ministry itself hasn’t been doing the same thing. Is that how I’m understanding this?

L. Hatt: At the time of our audit, we found that there were no requirements for the health authorities to be reporting to the ministry, except for bed counts, but not on a consistent set of performance measures across all the health authorities.

Now, some of the contracted agencies may be reporting directly to the health authority. We didn’t specifically get into that. We just wanted to identify that there are, potentially, measures that could be used provincewide as a way of tracking the system as a whole.

S. Robinson: It just leaves, for me, some questions now. Given that the health authorities and the ministry haven’t been consistently gathering performance measures, performance indicators, and we have…. I believe Mr. Hughes had listed the number of contracted agencies or suggested there were quite a number of them. That leads me to believe that there could be a whole bunch of services that we’re funding where really, there’s no consistent measure of any kind anywhere in the system that’s providing these sorts of services. Am I understanding that correctly?

K. Glynn: I think there is a distinction to be made between community-based substance use services, which tend to be contracted out, and then tertiary in-patient facilities. The way the data is collected is different, depending on whether it’s a contracted community base or whether it’s tertiary. This report reflects the tertiary in-patient services.

AIMS is the database that’s used to collect data for community-based substance use services. Then health authorities actually have their own mechanisms for tracking in-patient facilities that exist within their health authority.

S. Robinson: That’s helpful, but it’s also a continuum of care. I would imagine that they’re not distinct and separate — that people would perhaps be in tertiary, and then they would need support in the community and then go to a community-based service. There would be some sort of mechanism, given that it’s all funded by the Ministry of Health in the end. But there would be some consistency and some recognition that there needs to be some accountability in the system.

The fact that they’re different operationally might make sense. But really, in terms of accountability, I would imagine it ought not to, because it’s the same client base that we’re serving in different places at different times. But the mechanisms for tracking and making sure that we’re using tax dollars wisely — there doesn’t seem to be a consistent method even between those services.

Given where you’re going now, is there a conversation around how to track throughout the continuum of care? Or is it still completely separate?
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K. Glynn: I’d say two things. One is that AIMS as a database is something that we’re looking at completely revamping. It will be connected to the work that’s happening around the development of the performance indicators through this work around tertiary so that there will be a connection. There’s a confluence now of AIMS coming up — we’re taking that apart — and the work that’ll be done over the next six months around the performance indicators to look at that continuity of care and the system.

S. Robinson: I want to make sure I understand that it’s not just tertiary; community-based care will also, at some point, feed in.

K. Glynn: Exactly. That’s what the AIMS database collects — the community-based substance use services. So I’m saying that that community-based substance use will be connected to the tertiary performance indicators. Does that make sense?

G. van der Leer: Just a supplementary. The hospital database is actually reported nationally through CIHI. So the average length of stay, for example, or the number of people served in facilities is captured nationally and by province and by hospital.

We do compare how well British Columbia compares with other provinces. There are consistent indicators regarding…. For example, average length of stay is reported both provincially and nationally. The average length of stay is very comparable with the national average. We actually do monitor those components.

G. van der Leer: We have recognized that for tertiary care, we need very specific indicators, and work has already been underway to develop that information. It looks at, for example, the number of adverse events, the type of care people provide and patient satisfaction, as well as outcomes in terms of functioning levels.

B. Ralston (Chair): One further supplementary in direct response to that, and then perhaps we’ll come back to you. There are others who want to question, and I expect you have a number of questions.

S. Robinson: I do have a further one on this. That has to do with…. While I think it’s important to track the number of days that people are in tertiary care, at the end of the day — just to follow on what Laurie was commenting on — are people functioning better? They stayed 100 days or 400 days — it’s like, that’s great — but at the end of the day, are they functioning better? And is that the best use of tax dollars?

Can they function better at 100 days, or does it really take 400 days to get people to a better functioning place? I don’t know about anybody else, but that’s the data that I would be interested in. Is that the data that you’re planning to collect?

L. Hatt: We did make that recommendation around having more program evaluation that wouldn’t just address the flow issues but would actually look at patient outcomes.

Absolutely, if you don’t know if your system’s effective, it doesn’t matter how fast or slow you flow someone through. You need to know how well they’re doing at the end of the day. We did definitely make that recommendation for periodic evaluations of programs.

D. Hughes: We are working on that recommendation, where we have draft provincial tertiary mental health performance indicators developed. So that would be the implementation of those.

One of the indicators is around efficiency — efficiency of in-patient care, efficiency of community care. We recognize that we have to look at our system to collect the data and then be able to, for us, analyze the data. It is part of our go-forward, recognizing consistently across the health system that we haven’t been doing a good job. So we have to improve on that.

M. Hunt: I have a real frustration in that I see this as a wonderful program to spend money. But to me, the evaluation…. I thank the Auditor General for taking on this audit.

I have a friend — an acquaintance, in real terms — who has been very successful at this. I don’t think he has a residence outside a hospital. For the last several years…. He was first at the University Hospital, then he successfully moved to St. Paul’s. Right now he’s at VGH. He’s had a successful time of having residency in the hospitals, and I have no clue how much that is costing taxpayers. But I just have alarm bells going off, like: when do we say this person has succeeded, or do we suggest that there’s some other way?

I’m having a bit of a problem in recommendation 6 rolling over to next year when we’re dealing with evalu-
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ating effectiveness. I think we need to start evaluating effectiveness before we talk about needs. I can list a million and one needs, and I can send up a thousand programs. But if none of them are effective, all I’m going to do is spend money.

I think there’s a tremendous pile of frustration. I’m hearing it from Selina on her side of things. And we could say yes, she’s involved in the community side, not the tertiary side. Well, I can tell you from being involved in the tertiary side, that it’s a problem.

I’m so thankful that finally we’re actually going to set some standards and say: “Let’s get some production.” But let’s not just get production in volumes of numbers. Let’s get production on following and tracking individuals through the system so that we actually see: are we doing anything? Are we succeeding at all? If we’re not succeeding at all, then let’s find some other way to deal with this. Because I can tell you that this has just been an open pit into which we throw money.

But 6. How are we evaluating effectiveness in the creation of our performance management framework? What have we done? Are we just sitting there, coming up with a wonderful performance, and a year from now, we’ll finally conclude: “Well, this has just been a wonderful way to spend money, but let’s get working on programs and things that actually work”?

In terms of the draft indicators that we’re working on, we have some components here about how we’re identifying and how we would evaluate effectiveness. One would be in terms of outcomes — clients’ outcomes, and then more specifically, their clinical status and their functioning. Another would be on family and caregiver outcomes — measures in terms of the impact of mental disorders on the quality of life of family members and other carers as they support a person experiencing mental illness.

Then a third one around community tenures — so to your point about people being in different psychiatric in-patient facilities. It measures the extent to which the mental health services are effective in maintaining clients in the community without unnecessary hospitalization.

Those are the components that we’re looking at to measure effectiveness, or that’s what we’ve come up with so far.

D. Hughes: In response to your question around the acute care and people that are ending up in acute care. That’s where, in these sort of community treatment teams…. We have seen good results, particularly in the Vancouver region, by working with people in the community. It’s a model that has been well researched and proven to have good outcomes. We have focused a lot of our efforts there, trying to work with people, with where they’re at and providing the level of response, whether that’s clinical treatment….

Our goal is to not have people cycling through hospitals or treatment centres. It’s to try and work with what their presenting concerns are.

The system is…. In the past, I think that was the answer: come to emergency rooms, and people would be admitted. We’re really working to try and have a stronger community system in place.

M. Hunt: So in the process of evaluating the broad, we are also going to be tracking the individual? Both of them are going to be going on at the same time?

D. Hughes: Case-finding, which is looking at individual situations, is part of the approach that we’re using. Trying to understand…. Case-finding, pulling those files apart — someone, like your example, saying: “What happened there? What worked, and what didn’t work?” That’s part of the approach that we’re using.

B. Ralston (Chair): We’re going to recess for lunch. Everyone is invited back at one o’clock to continue this discussion.

B. Ralston (Chair): Good afternoon, Members. We’re continuing our consideration of the Auditor General’s report entitled Access to Adult Tertiary Mental Health and Substance Use Services. I have questioners who have indicated a wish to add their name to the list, so we’ll begin with David.

D. Eby: This past week in the B.C. Medical Journal, there was an article about children’s mental health in B.C. In particular, the question was asked in the article whether poverty was in fact the diagnosis for many children dealing with mental health issues. In particular, the authors, who are three doctors, as I understand it, who specialize in mental health issues in British Columbia, say: “We recommend screening for poverty with office-based interventions and accounting for income insecurity in all mental health diagnoses and treatment plans.”

I was noticing in the report that there was a specific discussion about the demographics of the people who are using the mental health system and the fact that some health authorities are collecting this demographic information, which would presumably include information
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about housing status, if someone is homeless or at risk of homelessness, income status, and so on.

It wasn’t totally clear to me from the report, though, whether or not that information was being collected consistently across health authorities and whether it was being used to address systemic issues that could get people out of the mental health system.

To the Auditor General, my question is: can you clarify for me whether the kind of demographic information that’s being recommended by doctors in the B.C. Medical Journal — for example, screening for poverty — is something that would be collected by health authorities, in your experience here, and, if so, whether anyone would actually read the reports that were generated by that demographic information if it was collected?

L. Hatt: I’m not familiar with the article, so I can’t comment for sure whether the screening information would be consistent with what was in the article. We did point out that there are a few health authorities that do use population information such as demographic trends and concerns around levels of poverty when planning for services, but it’s not consistent across all the health authorities. Again, that’s one of those pieces of good practice that we’re suggesting others should be doing.

D. Eby: In the report, it seemed to almost say that even if the data were collected, the health authorities didn’t have the ability — whether it was resources or the time or they hadn’t put priority on it — to actually read those demographic reports and implement the learnings from those demographic reports in the services they were providing.

Was I reading that correctly? They might have the information, but nobody is using it.

L. Hatt: Again, it varied between the health authorities. I think some were much more proactive in their planning and were using it, and some had just begun to use that information so weren’t at a point where we could comment on whether or not it was being effectively used to make decisions. But there definitely, overall, could be more use of that kind of information in terms of planning out their services.

D. Eby: For me, when I think about mental health…. It’s such a diverse group of people who deal with mental health challenges. There are people who suffer from occasional depression. Then there are people with long-term chronic illnesses that are totally disabling for them, and everything in-between. So it’s very difficult to talk about this group consistently and say: “Here are all the things that need to be addressed.” One of the problems with that is that often mental health is stigmatized as being related to violence or a threat to public safety or so on, when in fact the vast majority of mental health issues cause no threat to anybody, except for the person who is suffering from them.

With that said, I do want to ask you for some follow-up on page 36, where you say that one of the identified gaps in services for patients with significant needs is: “Patients with histories of extreme violence and/or current aggressive behaviour.” It seemed really unusual to me that this group would be a group that had a gap in services.

When you say that there were service delivery gaps for this group, what does that mean? Does that mean simply that they’re ending up in prison — they’re in prison on maybe an assault charge or something like that — and they’re not getting services, or does it mean that people are in the community? I ask this because there…. Even just in the last week, the VPD have been out saying that there’s a man out punching women randomly, without any cause, that they are linking to mental health issues. Seniors in my community, similar kinds of issues. There have been some very high-profile incidents.

I’m wondering about this particular category and if you could provide a little bit more detail about what you’re seeing in terms of the gaps in the services there.

J. Giles: When we were speaking about this population, we were really talking and looking at whether or not it was impacting flow. What we were hearing…. What I really want to make clear and what we talk about in the report is that the health authorities and the ministry haven’t really researched and investigated this group thoroughly. So we were really trying to understand this population. When we talk about it in the report, we were looking at it in terms of it impacting patient flow.

What we heard is that individuals were either getting into tertiary care…. They were taking up so many resources because of the need for the facility to be locked and to have so many individuals on hand when that individual was needing care. They were taking resources away from other individuals. There was no place for them to go, so they were stuck in tertiary care.

In terms of really being able to explore the entire population, we don’t have that much information because the health authorities themselves don’t have a lot of information. We were gaining this information mostly through interviews. It was anecdotal.

We’re recommending, which is something that we heard today…. It sounds like the ministry is looking at really exploring this population to understand the needs and what services they need and getting at that value for money. If they are being stuck in tertiary care, is that the right place for them to be? Is there another place for them to go?

D. Eby: Then to the Ministry of Health, in relation to this category of people suffering from mental health
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issues, I note it was in July a couple of years ago when a well-known comedian in Vancouver was almost shot in the head by a man who then ultimately committed suicide. That man, Dave Shumka, used the opportunity to raise the issue — this was three years ago — about people with mental health issues not getting adequate treatment in B.C. He said he wanted to “force politicians to take the issue more seriously.”

I would like for us to take the issue more seriously. Is the Ministry of Health taking the issue of mental health more seriously with respect to patients with histories of extreme violence and/or current aggressive behaviour? What specific things can you tell this committee about, aside from targets and plans?

G. van der Leer: First of all, thank you very much for that question. In 2012-13, it was recognized that a significant number of people are indeed aggressive, are complex in behaviours, often as a result of the combination of mental health and substance use disorders.

As a result, a SAMI initiative — people with severe addictions and mental illness — was initiated that resulted in a $25 million initiative. It led to development of assertive community treatment teams that have been effective, providing 24-hour services in the community in dealing with these very complex behaviours.

Success. For example, we saw reductions in the criminal justice system, reductions in police involvement, reductions in hospitalization. Some of the clients of these teams, after being stabilized, have actually been productive citizens and involved in competitive employment.

The costs of these programs are expensive. They’re about $1.5 million per team to serve about 85 to 100 people.

In addition, we recognized that some health authorities also required some tertiary care facilities where people could be stabilized. The Vancouver Island Health Authority took on the development of a tertiary care facility.

When it comes to substance use disorders, intensive case management programs are the most effective programs as well, so those programs were developed throughout the health authorities.

We’ve seen a significant impact on this population, because we are tracking the outcomes that are reported by the health authorities and see consistency.

The models that we are using are not new. They have been recognized internationally as evidence-based intervention through randomized control trials. We’ve seen consistent outcomes in terms of reductions of hospitalization throughout the health authorities.

We’re hearing from the community that this has really made a significant impact both in policing as well as in the community.

D. Hughes: I can add to that, if you’d like. In Vancouver, when we were looking at…. Then again, that was the work that we were doing with the city of Vancouver and Vancouver police department. We did look at a pathway, really, from the street to treatment for that population.

Part of that was working with Vancouver city police on a protocol, information-sharing, making sure that when they were involved with someone, they were getting background from the street workers — so setting up that flow.

Then if there was a decision to bring them to St. Paul’s, which is usually where they end up going…. We did look at an assertive outreach team working with the Vancouver city police. The work of that would be to pick up someone…. Where before, they were going to emergency — police would drop them off, and then they would be seen, stabilized and then discharged — what we said was that we needed somebody to actively follow that person back downtown and make sure they were connected to housing or to some of the services. So the assertive team was put in place.

Part of that, as well, is a nine-bed stabilization unit at St. Paul’s, and as Gerrit mentioned, the two new ACT teams. Then we were working with the inner-city youth team as well.

I wanted to talk just a little bit about…. This population is also involved with the criminal justice system. Some of the things that we’re doing there…. We work closely with Justice. The population that you talked about — a lot of them could be in our forensic services. Their severe behaviours could see that they would be in a provincial jail for a period of time. We have to look at them coming back out into the community.

A couple of programs that we have in there. The partners in change initiative. It’s an interministry partnership with PCSG. It will improve the continuity of care for adults — again, a contract with Corrections. So we have options for involuntary treatment under the Mental Health Act.

Again, we’re looking at that population who are maybe in remand or in forensic, needing a mental health assessment.

We’re working at how we can get that mental health assessment while they’re inside the facilities. There was a gap that was there that we began to address — and an ongoing interface with most police forces across the province. This is something we learned in the Vancouver area. We need to take it to the Surrey area, to some of the other places where the ACT team is. You need to have a strong relationship with the police that are the front line as well.

D. Eby: Then, as I understand your answer, there were some gaps and you’ve addressed the gaps within this population.

D. Hughes: In certain — this is where the report identified — pockets, I would say we’re doing a very good job.
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In other pockets of the province, we need to do a better job, particularly, I would say, in the Fraser region where we need to look at more ACT teams that would be available for that area. The ACT teams, at this point….

I think, Gerrit, we said we needed about 40 teams in the province. We’re at 20.

G. van der Leer: These ACT teams actually have different configurations for rural areas versus urban centres. They’re actually tailored to the population that they serve. The judges right now that have been following the population now see themselves as part of the treatment team when they are involved in criminal activities and actually look at the best solutions. It’s been a really effective model for this population.

The Centre for Mental Health and Addiction in the Burnaby Centre also has this very complex population. They’ve developed some specific beds that deal with a more complex behavioural and aggressive client population, often as a direct result of substance use with mental illness where the behaviour is so complex that even an acute care setting and emergency department cannot manage the behaviours. So we really need these very specialized services, which are the first beds in Canada where we actually are starting to focus on these types of services.

You mentioned the Fraser Valley. Where in the Fraser Valley are you proposing to locate these teams?

D. Hughes: We’re working with Fraser Health around where is best, which communities. We have a number of communities that have contacted us, the ministry, that would like to have ACT teams in their communities.

I’m just thinking of Abbotsford, for one, and Chilliwack. What we do is we work with the health authority to make sure that they are looking at that inside their budget, planning out around this system of care.

L. Reimer: The focus of the audit was on tertiary care. Of course, we have primary and community care and then secondary care as well.

I guess my question to the ministry is…. You’re working really hard to implement the recommendations of the Auditor General. Will you also be working at a similar type of framework for primary and secondary care?

K. Glynn: Thank you for that question. I think it’s really well placed because it is a whole system of care, and people who are in tertiary care also often require primary and secondary.

In terms of our plans for the primary and secondary, Doug spoke to it a little bit in our introduction. The Ministry of Health has put out policy papers on primary care, as well as on a mental health and substance use system of care. We’re moving forward over the next 18 to 24 months — but it’s already begun — to implement patient medical homes and primary care homes that, connected to those, would have mental health and substance use supports.

What that looks like…. We’re looking at a range of things, so operationally, it could look quite different in different communities. But it would meet a number of requirements, one of them being support around continuity of care, another being access to care and a third being around navigation — making it easier for people to figure out where to go and who to see. That’s one component.

In terms of the secondary system, Stephen Brown, our deputy, has put out a paper around the system of care and then, more specifically, around specialized care programs.

We have quite a few services that are doing a good job within our communities bringing those together in a more integrated way so that there’s clarity around accountability for the services that we’re providing and also making it clearer to the public how to access the services and then what to expect — standards of care, standardizing care across the province so that it’s, as we’re calling it, a branded system of care for mental health and substance use.

My second question is on the education system. Correct me if I’m wrong, but I think that if we catch and try to assist some of these children, students with mental health problems, earlier, perhaps they wouldn’t get quite into the complex care area that they wind up in.

I’m just wondering if there are any plans to do, for instance, what New Brunswick has done — that is, bring mental health services into our school system so that the services are right there. You don’t have to go and make an appointment with a psychiatrist in Vancouver. Everything is right there, based in the school.

K. Glynn: Specifically around education and locating services within the school, there are a couple of excellent examples within the province of that. One is brand-new. It’s at John Barsby secondary school on the Island. There’s another one at Belmont, and there’s another one in Sooke, where they’re integrating primary care, mental health and substance use services.

Through the Child and Youth Mental Health and Substance Use Collaborative, which is a provincewide initiative that’s funded by Doctors of B.C., that has been one of their areas of focus — bringing together educa-
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tion, health services, justice, child care, all of those components, and looking at ways to bring them together in a more integrated way. Across the province, there are 61 different local action teams, as they’re called, which are cross-sectoral, bringing people together to figure out exactly what you’re talking about: what’s the best way to deliver services for children and youth in those communities?

L. Reimer: My last question is with respect to a comment that had been made earlier about tracking clients in the tertiary care model. We’ve all had people in our offices with challenges, quite often families — parents, who are perhaps my age, with a young adult with mental health problems. What happens is the young adult gets well at one point and then collapses. Then the parents have to go through the process again to get them more help.

When you say “tracking,” you’re going to track them even when they’re well, as well as when unwell, to ensure that continuum of services? That’s my question.

D. Hughes: What we would be doing in each of…. When I talked earlier around the 61 geographies and around, in a certain geography…. A “geography” could be…. A best example is, say, in Victoria, the West Shore — that Langford-Sooke area. The mental health centre, we would expect, would then have a knowledge of what’s happening with those individual youths.

We have, actually, another initiative. There were five B.C. integrated youth centres opened up. What we’ve done with those is move the age of majority, for the system, up to 24. It’s always been a barrier, a transition barrier, from MCFD, say, to Health. So for planning purposes, we want to remove that and say: “We need to work together on that.”

Our approach is for that mental health centre to also be attached to the primary care services. We would see the primary care. Either the physician or primary care services would then be working with that person when they’re doing well, because they have episodes of where they’re needing care. And most physicians do. They do know, and the family will go back. I heard a story this last week around a young mother, trying to get help for her teenager with an eating disorder, and her journey, which was really a difficult journey.

The plan is to link that information that doctors have with the mental health. I think that’s where the gap is for us to address. It’s: how do we create those information-sharing protocols? We have developed information-sharing protocols as part of the work with the collaborative, around professionals talking to each other, creating those rules.

G. van der Leer: I just want to say that through the early psychosis initiative, we also have the school system keeping their eyes and ears open, so when they see unusual behaviours or symptoms of psychosis to link in with this mental health system and the primary care homes. That’s been a very effective system.

Historically psychosis was treated throughout the early 20s. Now we’re seeing psychosis being treated at the age of 12 or 13 — very significant impact. As a result, the youth now can continue on going to school and continue on living in the community, while before, they had to deteriorate to the point that they had to be admitted to Riverview. So we’ve seen very significant changes in the intervention.

With respect to those parents who have a young adult with a mental illness, there’s a lot of concern out there that they have. “Who will look after my child when I’m gone?” That’s another transitional piece.

Now, maybe there are other family members that can take over that role, but generally speaking, the parents of that child are really a huge support to the system, because they’re right there for that person. There are a lot of people out there that don’t have that support.

As the baby boomers age, you’re going to see that happening — where a lot of those parents are going to pass, and then their mentally ill child will have a challenge.

G. van der Leer: This was recently raised by the B.C. Schizophrenia Society as well. They have received $3 million to develop family networks so that families have ongoing support from a network of families so that the care will continue on through the efficacy of families. Also, FORCE has been very effective in dealing with youth and supporting families that way.

We really want to make sure that the family experience and individual experience improves, because often to build that relationship is so crucial in order to have a partnership. So there’s a lot of work underway in that way. But the Schizophrenia Society is just developing a whole plan provincewide to support families to make sure that when a family member for the first time experiences someone going into an in-patient type of unit, the family perspective is well reflected and that there’s a good plan, too, for the person to come back.

S. Robinson: Throughout the documents, there is comment that the devolvement of Riverview…. When did that devolvement start? I’m trying to recall, and I wasn’t sure if it was in here. Sort of late ’90s? I think ’90s. Is that accurate?

G. van der Leer: Actually, the devolvement started in the 1950s, when we actually had over 6,000 people living at Riverview.
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G. van der Leer: In 1997, the last version of the devolvement of Riverview took place. That was completed in 2012.

S. Robinson: So it was completed. It was quite a span of time to slowly move people out into the community.

My understanding — in reading some of the documentation and the historical documentation — was that the intention was to have community services available to support these folks as we devolved. And it was a long process. It took a long time. Even though it says it closed in 2012, it was closing for many years over that period of time.

I heard here, today, that the original response when someone was incapacitated and needed care was to go to the emergency department. And right now — I believe it was Mr. Hughes was saying — we’re working to have a stronger community system. But in ’97, that was the plan. Here we are in 2016, and we don’t have this community system.

I’m wondering if you can explain what the heck’s been going on all this time if that was the intention, and we don’t have it.

B. Ralston (Chair): I’m sure they can fashion an answer. I think it is a little bit outside the scope of the audit. I think the Auditor General did say expressly that the issue of the closure of Riverview was not the subject of the audit. Just with that caution, perhaps if the Ministry of Health people want to….

S. Robinson: Fair enough. I’m trying to understand the state of the tertiary care system.

B. Ralston (Chair): I understand that it’s an important part of the subsequent history, but I just want to be fair to the ministry and to the Auditor General. When it’s expressly not part of the audit, sometimes people aren’t prepared to answer detailed questions about that.

K. Glynn: I can start. In 2013, there was a provincial review of the devolution of Riverview and the extent to which the funds that had been provided to Riverview were continuing to be provided to tertiary care. That report indicates that the vast majority — I think it’s almost 100 percent — of those funds are actually continuing to be allocated to tertiary services.

The extent to which they’re in-patient tertiary or community-based…. I’d need to go back to the report and have a look.

Gerrit spoke to the development of the ACT teams, the assertive community treatment teams. There are now 20. That’s over a period of…. Well, Gerrit will know the exact number of years, but it is quite recently that we’ve developed those, as well as the intensive case management teams, both of which are intended to support the tertiary care population in the community.

G. van der Leer: Also, when the Riverview redevelopment took place to regionalize that through the local services, there were existing services around. The facilities were not developed in isolation. Actually, at Riverview, when they discharged patients, they went back to their home community. Of course, having a provincial facility did not give opportunities for families to make visits and to also do appropriate discharge planning.

There were a lot of support services already available. We learned, however, that some patients could be living in the community that, historically, have never lived in the community. Through provisions within the Mental Health Act, you have community orders so that people have to comply with treatment. That has been a very effective way of supporting this population.

It’s the actual evaluation that was done. Tracking of clients from Riverview to the community showed high levels of success in terms of functioning level, stability and, also, eventually moving into the community.

S. Robinson: The original response was to go hospital. Was that always the plan, or that wasn’t accurate? That was just a statement that was made earlier today. That’s what triggered it for me. The original response was to go hospital, and that’s why we’re working to have a stronger community system. I can take a look at Hansard later.

D. Hughes: To qualify that, what we’re seeing is increased pressure on the system from when Riverview devolved. The result is we’ve seen more people coming to emergency for that initial assessment. Some of that has to do with our primary care system — strengthening that up as well.

The Riverview redevelopment was really about the moving of the tertiary level beds out and then looking at that piece of it. Then the community system is…. I’d have to go back and look at the funding, but I know there was a child and youth mental health plan that brought money in when there was an expansion of child and youth mental health positions across the province.

Similarly, when I track the money that has gone to health authorities for the community clinics and the community services, there have been increases as well. So it is building the two and addressing the population. The population that was living at Riverview and the population we’re dealing with today are different, as well, so we’re needing to adapt to that.

S. Robinson: Is that growth also included, just population growth? I mean, we’re still 20 years since then. Have we also accommodated for population growth?
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D. Hughes: I would think, even through the opioid crisis that we see now…. We just see more complex drugs on the street and people that are presenting with more complex conditions. So the population has become significantly more complex.

K. Glynn: I wanted to clarify one component. The presentations to emergency departments — the drivers for that — are around anxiety, depression and substance use. We’re not actually seeing an increase in ED presentations for the tertiary population. That has remained static.

G. van der Leer: Although, we do see the criminal justice system now recognizing that when they’re dealing with complex behaviour, it no longer requires incarceration but actually treatment in the mental health system, which is really success. As a result, police bring people into the emergency department as a first phase, and we’re looking at ways to make that more effective.

Ultimately, when people are requiring treatment for mental illness and it’s very intense, they require them to be treated in designated mental health facilities. We have 25,000 unique individuals per year treated involuntarily under the Mental Health Act. Some of those clients require more care than what the acute care sector can provide.

That’s when they go into the tertiary care services and find there are some wait-management issues because some are staying longer than required in hospital in order to move forward. That’s something…. We need to really look at wait management to ensure the best, effective service for this population and not waste our acute care services for a population that’s waiting for a bed.

S. Robinson: I have one more question. I was reviewing the joint response from the Ministry of Health and the health authorities. I was surprised it was just one page, given that there were ten recommendations. There are just three paragraphs. I was just a little surprised. I thought there’d be more depth and more description when I first read this, when it first came out.

It refers to: “In 2015, the ministry released Primary and Community Care in B.C.: A Strategic Policy Framework” — it’s sort of in the middle of the response — “identifying individuals with mental health and/or substance use problems as a priority population.”

I went to that document from 2015, and it notes that one of the actions was: “Beginning in 2015, the Ministry of Health will begin a dialogue with PHSA regarding their respective roles and functions related to mental health and substance use. The intent will be to clarify roles and functions with respect to developing standardized treatment modalities for the major presenting mental health and substance use disorders.” That would also include “monitoring and evaluation of the services provided.”

So that was in 2015, and then this was done in 2016. I’m just wondering how things dovetailed. If that was started in 2015, how far did you get? Is this part of the same? Or are they completely separate, if I’m not reading…?

G. van der Leer: The audit was on ’15-16. It’s actually a complete partnership.

G. van der Leer: Yes, it’s a completely integrated approach. We recognize that you cannot look at tertiary care in isolation from the whole community mental health system of care. So while we’re focusing more on physician-attachment primary care homes, at the same time we’re looking at tertiary care. We’ve asked the Provincial Health Services Authority, during that period, to start looking at models and interventions to better support this population.

S. Robinson: So there was recognition by the ministry that they needed to sort this out. That was happening before the Auditor General came on site and said: “Let’s take a look.” I’m just looking at the timelines, so you were already there.

G. van der Leer: Yes. Excepting with the developmental standards and performance indicators — that work already was taking place and was recognized before as well. But it has not been completed. So we were recognizing that in order to really develop the regionalized tertiary care services, we want to make sure that there is an appropriate system of care and service framework, basically, that ensures some consistency throughout the province.

L. Throness: A question for the Auditor General. Your report identified gaps in services for unique groups, and there are many people in corrections institutions who have mental health issues. I’m wondering if you identified a gap in those, in treatment there.

L. Hatt: Yeah. We didn’t specifically look at the corrections system in terms of the number of people who are currently housed in jails and who have mental health issues. We were really just identifying gaps in services that would be served through the tertiary care system. Those three populations were the three that were identified throughout the province.

L. Throness: Okay, perhaps I can ask ministry staff, then. In correctional institutions, medical care used to
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be contracted privately, and I believe that’s changing now. Could you sort of summarize the change? And could you tell us whether there will be tertiary care offered in corrections facilities by the ministry?

D. Hughes: We are currently engaged in discussions with the PSSG — Solicitor General, corrections — around offering mental health services to people that are incarcerated. At this moment, it’s still contracted out. The Solicitor General is still contracting that as a contract service until such time as we can complete our model. We have a proposed model that we’re considering around how we would provide services.

When we look at that population…. I mean, it’s exactly as you’re identifying. There are people with severe addiction issues, severe mental health issues. We’re seeing a large portion with chronic disease issues, as well, so they’re needing primary care services.

The approach would be, for the medical, that we would continue to work with the health authorities around providing that level of services. Inside, as you can well appreciate, we have corrections. People have been incarcerated for a reason. They need to do what they need to do around health or housing. Then, what we want to do is make sure that they’re getting the appropriate support. So then, when they go back out of the community, they’re able to be more successful. They’re able to deal with….

We’ve also heard — and I think you are aware — that most people who end up going into a facility will detox. How do you support the detox process, as opposed to someone just going in and having to deal with that?

Those are the conversations we’re having. We just see that that’s a key area for us to work on.

L. Throness: But you do intend to provide tertiary care in corrections facilities?

D. Hughes: I look at it more for the population — of what we’re going to be providing. Classifying it as a tertiary care facility would mean they would have to…. This is where I go to legislative under the…. We want to offer the same approach that’s offered in our tertiary care facilities to people who would be in correctional facilities. Maybe that’s a different way of answering it.

R. Sultan: I wanted just to pass along a very personal story and to congratulate whoever has been responsible for the care of a fairly close relative of mine living all his life here in British Columbia. Mental issues. Substance-abuse issues. Violence issues. Skirmishes with the law. I predicted to the siblings of this man that I saw only the criminal justice system in his future.

Then a miracle happened. About two years ago, a team from Fraser Health sat down. About five people worked with him. He’s now a functioning adult. He has a modest job. He’s talking to his siblings without flying into rage. He’s been saved.

It’s easy for me to get very emotional, because I thought this guy was a goner. But they were saved by this team approach, which I assume…. Perhaps, he’s one of the candidates, one of the patients you’re talking about in your reports. So you might say I’m an enthusiast for what you’ve been able to do, almost miraculously.

I’ve been trying to understand the numbers a little bit better. It says here on page 23 of the Auditor General’s report that we’re spending on tertiary care about $126 million a year — adult tertiary care. I’m trying to get some feel for the numbers. I’m guessing, but this is probably not very accurate, that you’ve got 3,000 or 4,000 adults in that category. Would that be in the range of, more or less, a valid estimate?

D. Hughes: In tertiary care services in the province, we have 1,233 beds available. For tertiary care adult services, we spend $111 million.

G. van der Leer: That does not include assertive community treatment, the services that….

R. Sultan: Per client or per patient, then, what does it work out to? What’s the arithmetic?

G. van der Leer: In an assertive community treatment team, the cost is about $60 per day. That translates to about $1,800 times 12, so it’s about $20,000 per person. If we placed….

R. Sultan: I figured out maybe $40,000 per person. It seemed very low when I imagine the intensity of what you’re doing. I think of the frequency of visits with my relative, which is almost weekly, I think. You do that for 20,000 or 40,000 bucks a year? I mean, this is cheap, to salvage human beings, it seems to me, as opposed to putting them in intensive care or whatever in the hospital system.

G. van der Leer: If we don’t provide any services to people that are homeless that are living in the community with psychosis, we know the cost is anywhere between $60,000 and $80,000. So yes, assertive community treatment teams have been very effective.
[ Page 1003 ]

R. Sultan: Well, I’d say it’s a bargain. We should be spending more money on it, considering all the money we waste in so many other ways.

So then I come to Marvin’s point: you know, it’s a hopeless black pit of money here that we’re just pumping dollars into. His friend bounces from one critical care hospital to another around the Lower Mainland is the story I heard Marvin tell us today.

I think it caused me to ask: “What is the sustainability of the model?” As we look ahead, and I’ve been asking off the record: what’s the incidence? Are these types of people…? Is the incidence growing?

As we look into the future…. And Laurie shares with me the almost panic that I think some MLAs feel about the fact, with drugs and all the other social dysfunctions that we deal with in our constituency offices virtually every day, that the world is getting harder, tougher, less functional. I guess the question I ask as an economist is: can we pay for even the current level of service in the long term as you do projections into the future?

Then I’m just doodling. I say: well, these people, such as my relative, probably end up in three buckets. The lucky ones end up in your tertiary care world. Then there’s another huge component that end up in the justice system, and they’re put in jail for an unknown period of time. They’re discharged, and then they probably — many, many of them — are recycling in and out. So the prisons have become, as I think the police officers tend to tell us, mental health facilities in their own way big time.

Then we have people who are sort of in limbo. They’re lost. They’re neither in the health system…. They’re not in the justice system. They’re just out there stumbling around doing the best they can.

Trying to sort of forecast, from a population point of view, the numbers of people who might be in these three categories and looking ahead 25 years, is this going to be sustainable? That’s the bottom-line question. Or are we going to solve the equation by throwing more of them into jail?

G. van der Leer: Well, first of all, the actual prevalence rate of mental health and substance use problems has been fairly constant, both internationally…. It’s about 20 percent of the population. As we indicated, about 800,000 people are receiving treatment for mental illness, of which 85 percent are receiving treatment only from a family physician.

R. Sultan: So are you saying the incidence is not, in fact, growing? It’s high, but it’s not getting worse?

G. van der Leer: We’re recognizing symptoms earlier. We now have police officers recognizing, for example, that they have been dealing with mental health issues and substance issues versus incarcerating somebody. So we’ve seen, actually, for example, St. Paul’s dealing more and more with people with mental illness and police officers putting cameras on the individual linked directly with the emergency department saying: “Is this a person that we should be treating, and where should we go from here?”

It really has been a tremendous impact. But the actual incidence of mental illness prevalence rates nationally as well as internationally have not been making any change.

G. van der Leer: And the CARMHA project is actually used. We talked about it earlier in terms of, of all those 800,000 people that we’re dealing with, how many actually have particular disorders, in terms of level of severity, and where we need to have the biggest impact to support that population. But we’ve recognized that there are people with severe mental illness that are still not receiving the services they need, so there is a need for ongoing support for that population.

R. Sultan: So I take it you’re not pessimistic about our ability to keep up, to sustain this level of services.

G. van der Leer: Well, the World Health Organization is stating that 10 percent of the health care budget should be devoted towards mental health and substance use. We’re not there yet. But I think we….

D. Hughes: We’re $18 billion, so it would be $1.8 billion, and we spend $1.4 billion. So we’re pretty close around what would be seen as the funds to support it.

G. van der Leer: But the constant message that is being received nationally and internationally is the more you can go upstream, the more you can develop early intervention strategies, the more impact you have long term on the population. That’s why it’s so important that family physicians, the education system that we heard earlier, can recognize the early symptoms and can provide people with the care they need.

Not only early intervention. We also have, for example, Healthy Campuses, where students at the universities of Victoria and B.C. are getting already, right away, on campus the intervention they need, because anxiety disorder depression is a common feature among students.

R. Sultan: Could I ask the Auditor General whether she shares this general optimism that the system that we
[ Page 1004 ]
have designed here is sustainable in the long run without drastic reallocations of resources within government?

C. Bellringer: This is directly related to the recommendation we made about getting better long-term planning information. Certain of the health authorities didn’t try to proactively anticipate what the needs would be. You can’t do the projections without having the data.

L. Hatt: I also wanted to point out that one of the challenges that we’ve had that we also talked about is clearly defining the system of care for mental health. Your first step in understanding your capacity in building a system is understanding what those defined services in those service buckets are and who, likely, will be flowing through them. I think that’s where the building blocks of a system that you can actually measure sustainability at that level is…. That’s why we’ve made those recommendations, and that’s what the ministry was moving towards with developing the adult tertiary care standard. That’s a key piece: clearly defining what adult tertiary care is first.

R. Sultan: Well, I’m not picking it up from the dialogue or the report, but since you issued your report — and these are all very competent and impressive servants of the public — has the response been: “You’re right. We’re going to start doing some long-term projections here, from a population point of view”? Is that the response you’ve had? Or: “Yeah, thank you very much. We’ll work on it and think about it. Come back and see us in five years”? And probably things won’t really have changed in terms of being other than proactive to the people who show up in the ER.

G. van der Leer: The other part I was mentioning is that the determinants of health are crucial. We heard it earlier, in terms of income, housing, education. We know that if people have no access to housing, we’ll see more complexities. So it’s important that we work with the ministry for housing and the Ministry of Education to ensure the population is getting the appropriate intervention.

I think that’s an important feature that we cannot…. You can’t look in isolation at tertiary care by itself. You really have to look at those components. Employment rates, for example. People with mental illness, actually…. If you can move your hands, you can work. So we’re finding, sort of, that we need also a similar model that you have for assertive community treatment teams for employment rates. And there is some progress being made that way.

K. Glynn: I wanted to make a distinction for you. Your question around sustainability and the prevalence rates…. The prevalence rates around psychosis — I agree — remain stable. I think where we see a change is around anxiety, depression and, particularly, substance use. The combination of substance use with psychosis — I think that is where we’re seeing an unusual change. I think that’s where we need to strategize and be thoughtful around how we’re applying our resources, but specifically for tertiary mental health.

R. Sultan: Can you explain that a little bit better? I don’t really understand these terms you’re using very well. Give us an example of a person and what’s going on with that person using that language you have just given us.

K. Glynn: A person who is psychotic would be a person who is having hallucinations and who isn’t in touch with reality, just to put it in plain language. If they are in that state and they’re using substances, then that can accelerate or make it even more pronounced — the psychosis.

C. Bellringer: Sometimes at the end of an audit, we sort of step back and go: “There’s been no recognition of the concerns we bring forward.” Other times it’s completely fixed.

I’d probably characterize where we landed as cautiously optimistic. We certainly saw a parallel…. The concerns we were bringing forward had already been recognized in the ministry, and we were seeing action taking place. But clearly — many things still to be done.

S. Robinson: I have a couple of questions just on the key findings and recommendations section of the report. It notes, on page 32, that in 2005, there was a working group that was started “to establish mental health and substance use minimum reporting requirements to integrate the collection of data and identify trends.” Ten years prior to this, there was already some recognition, but, of course, different IT systems in different health authorities didn’t make that any easier. We’ve certainly looked at that, though it seems like Northern Health was on board.

Whatever happened to that? That was ten years ago. What was the impasse? What was the barrier?

G. van der Leer: First of all, presently, we are just finalizing the reporting of the minimum reporting requirements by all health authorities, and that information is
[ Page 1005 ]
flowing in. It’s being validated. By the end of this year, we actually will have complete minimum reporting requirements.

G. van der Leer: There’s a number of reasons for that. First of all, substance use services and mental health were not integrated at one time. So we had to require the integration of those two systems.

Secondly, as you said, each health authority developed regional systems that required some time for data to be reported in a common format. But the actual data elements have always been well recognized. It’s really the technology to bring it forward.

S. Robinson: I would have thought…. If this was actually a business, I think it would have failed a long time ago — 11 years to get your data into one place. It certainly seems like an exceedingly long period of time. In the meantime, we’re spending taxpayer dollars to provide service, but there’s no conversation happening between…. It’s the same client using all the services, especially when you look at Fraser Health and Coastal Health. They’re moving back and forth, and there’s no way to track.

I’m glad you’re moving forward, just disappointed that it’s taken so long.

D. Hughes: At each health authority level, I think what we tried to look at is: is this audit in context of the evolution of health authorities? You look at the evolution of health authorities over the last 14 years. As an entity, they’re fairly new.

What happened is that health authorities, for the first period of time, were quite autonomous. They were responsive to their boards. They were very responsive to local needs. What we’ve been trying to do is balance that out a bit, saying that there needs to be a system of care.

The level of reporting at the health authority would have been there around the management of their services and contracts, but where the point is, is that we don’t have the provincial system. That’s where we recognize that we don’t have that, and we need to do a better job of that.

We do recognize that, but there would have been local, regional health reporting that took place. That’s what led to the pockets of places where they had it more right than wrong, and then other areas where it’s just absent. How do we now knit that together?

This knitting of the mental health system has been a challenge for every jurisdiction that I know of across the country or internationally, around: how do we create this? How do we simplify this? Even this conversation today — how do you simplify this for people? It’s a huge challenge.

S. Robinson: Especially how you simplify it for the consumer, who, on the other end, perhaps doesn’t know bureaucratic speak and is trying to navigate a system while in the midst of a depression or anxiety or a psychotic episode. They know they need help. How do they navigate that, given their condition? We want to make it as easy as possible for these folks.

I have another question that has to do with a comment on page 33, where there’s a note that the health authority staff “explained that they have not had enough time or resources to engage in this work” — meaning the work of planning — “since the Riverview Hospital devolvement.” I’m just wanting to know if the ministry can explain what that might mean. It was about looking at demographic prevalence information and making sure that they were meeting needs, that they were adapting to a changing population and, I’m assuming, adapting to growth. We’ve been a growing province.

Then the health authority staff said that they didn’t have enough time or resources to actually do the work. That was the rationale provided by the health authorities. I’m just wanting to know if you can provide some comment about why that was the case and what’s different now that would allow that work to happen.

D. Hughes: I can’t speak specifically to who made the comment or what area of the province we’re talking about. At the local levels, the regional levels, they were focused in on just the transition of the beds, setting up the beds — that was priority — and working at that piece of it.

What we are doing now, though, is rebuilding that analytic strategy so that…. We do need to make it a priority. One of the ways that we’re doing it is in asking health authorities for their plans, their detailed operational plans. What we’re looking at, then…. We’re able to identify if they are doing the work that’s mentioned in the report. For staff to identify that as a priority…. I think their priority was focused on the people, as you mentioned.

The analytic strategy at the health authority — I’d have to look at each health authority being able to tackle that.

K. Glynn: I have one small point. In the 2013 report that looks at the devolution of Riverview, there was a portion of funding that was within Riverview that was specific to analytics and planning, and that analytics and planning budget wasn’t devolved to the individual health authorities. All the direct service funds were, but not that component, so that was a factor.

S. Robinson: Given that, I would have imagined that it would be the ministry’s responsibility to actually do that work, not the health authorities’. If they do service delivery, why would we expect them to also do the
[ Page 1006 ]
projections and the tracking? I would expect the ministry to take that responsibility. How has that decision been made?

D. Hughes: At this point, we are resetting that, around the relationship with health authorities, and we are accountable for setting the policy piece of it. Then around the implementation, we would work with the health authorities. The health authorities are implementing, and then we have a monitoring framework and then a performance management framework.

We have been working with the health authorities on that approach over the last three to four years. I think the report pointed out that we’re not as strong in that as we should be. So it is something that we’re very clear on going forward.

S. Robinson: I would imagine, to have all the different health authorities having to do their own research and analysis when…. It might be more efficient for the ministry to actually just do it for the province and then just send out the information to the health authorities. It doesn’t make sense to repeat this for every area. That, to me, is really not the best use of tax dollars.

G. van der Leer: That’s why we have work underway with Simon Fraser University, through the centre for applied research for mental health, to look at the prevalence rates of the various disorders and look at the various levels of severity so that we can actually look at the provincial and local and sub-local level in order to find out what the needs of that population are.

This work is led by the Ministry of Health, and we’ve recognized that we need to take the lead in this area.

S. Robinson: I really like this report, so bear with me. I read it, every single word.

Page 34, at the bottom, mentions: “One reason why the health authorities have not proactively engaged in more comprehensive capacity analysis is the perception that additional adult tertiary care funding is not available, so completing this type of analysis would be unproductive.”

That’s a perception. Here you have health authorities responsible for delivering service to a pretty vulnerable population, and their belief is that there’s no more money, so it doesn’t matter if you do an analysis. You could say that we need an extra 175 beds, and we won’t get the money for it, so we’re not even going to do the analysis.

I want to know if the ministry has some sort of rationale or advice or — I don’t know — something that would help deal with that perception.

D. Hughes: Over the past year and a half, we have looked at replacing the centre for mental health and addiction on the Riverview property, and that’s a $108 million project that’s going to see that. There’s a new $57 million Joseph and Rosalie Segal Centre in Vancouver. The money was made available for that. We are looking at the redevelopment of Royal Columbian to have mental health populations. That will be part of that. Then there are the substance use beds that we’ve been working on, around opening those up. That’s on top of the SAMI money, the $25 million, that was made available.

It’s disheartening to see when someone says that their individual health authority, possibly, hasn’t seen that. But as we go forward, we’re looking at the health authorities being able to identify these initiatives and these high priority areas — being mental health and substance use. We’re wanting to see more investments and looking at the health authorities, with their budget that they’ve been allocated, being able to identify where they’re going to make more of a difference.

One example would be in Vancouver, where they’ve looked at realigning some of their community clinics and setting up Raven Song as one of the specialized centres. So there is work that’s happening. I guess the only answer to that is that we need to keep proving that there is funding coming, and we’ll continue to do that.

S. Robinson: I just want to just correct you about the Riverview site. Those aren’t new beds. There are 17 new beds out of that. It’s a new building, but not new spaces. I think that that’s part of what creates this perception — when we misrepresent the number of actual new beds. It’s a new building, absolutely. It’ll be nice and shiny and really pretty. But it’s only 17…. I think it’s 17 — 13 or 17.

D. Hughes: We added about 30…. I’m trying to remember the numbers, because we added some group home beds as well. Then, as we enter into 2018, I think we were looking at more.

Again, we are focusing on the community side and ACT teams as being a priority. So the Riverview…. It had to be replaced, and I think….

S. Robinson: I get that, but it’s not new beds. Part of what…. The perception is: additional adult tertiary care funding is not available. People get jaded. I think that’s part of the culture of the organizations. I want to know what the ministry is doing to address that. If there’s no motivation, real motivation, to do this work, to actually have a vision, to have a long-term plan that people are committed to and saying, “We’re actually going to make a difference, because this is hard work. We’re actually going to make a difference….” If they don’t feel like they can, then I don’t know that we’re actually going to get good numbers.
[ Page 1007 ]

D. Hughes: Uh huh. The only other thing I would add is in the funding letters to the health authorities, in the increase in funding, is that it was to be specifically targeted to these types of initiatives. So there’s a listing of things, but it’s to use the new money to address these types of issues.

We have seen health authorities begin to implement new services. As opportunity comes up for the ministry, then we’re continuing to…. We see this as a high priority for us. The talk about sustainability of the system is that we cannot afford to build more hospitals. Big hospitals are very expensive. We need to invest more on the primary care side.

The other point I’ll make is when you look at emergency rooms…. And thank you, Keva, for clarifying that. It’s the mild to moderate, people coming in with anxiety and depression. That’s a gap in service. If we can’t address the mild to moderate, which are their secondary services, then it does put pressure upward. So that is where we’re focusing efforts to try and expand, either through telehealth or some virtual care types of services. But we recognize that we do need to increase that. That’s, again, the work with schools, if we can get to that. We need to broaden out our triangle so that we’re not as steep and provide more services in that area.

These are the conversations we have at the mental health working group, and that’s the leaders from all across the health authorities. The issue of expansion is key, but we need to base it on, again, the data and around the presenting needs of each community.

B. Ralston (Chair): I had myself as next on the list, and I don’t think I had anyone else with a question, so we’re getting near the end.

In the recent audit of the mining and the Mount Polley difficulties, there was an issue that arose at the hearing about the subject matter expert and whether that name would be disclosed. I note that on page 55 in this report, there are two subject matter experts, Vicky Stergiopoulos and Michael Trew. Can the Auditor General explain the thinking that went into the disclosure of these names and what their role was in doing the audit and preparing the report based on the audit?

C. Bellringer: This was the first report where we had made arrangements to disclose the names. We had to take that into account when we first contracted with them, to make sure that they were comfortable with it and that it was part of the arrangement.

They provide advice to us, and they don’t, in effect, sign off on the report or in any way endorse the report. They are providing advice to us throughout the audit. They participate generally. This is the case with almost all of our performance audits. They’ll help us with the planning. Then throughout the audit, we can access them. They’ll help review the findings with us, and they do look at the draft report to give us advice on that as well.

With that, I think, then, we can adjourn the hearing. We’re scheduled on the agenda to begin the next one at three. Anticipating that this might happen, we’ve arranged through Mr. Farkas, the assistant deputy minister, who happens to be here, to have Mr. Byng come at 2:30.

We’ll take a break, then, for 20 minutes. If he gets here earlier, we can start earlier, but I expect he’ll be here at 2:30. Then we’ll commence the next one at 2:30 rather than three. That would mean, happily, that we might finish earlier than we’d anticipated.

B. Ralston (Chair): We’re about to consider our next report, which is a report of the Auditor General, Improving Budgeting and Expenditure Management in the Public Education System — talk about topical — a report of May 2016.

Representing the Office of the Auditor General are the Auditor General herself, Carol Bellringer, and Russ Jones, Deputy Auditor General. Representing the Ministry of Education — the auditee — are Dave Byng, the deputy minister, and George Farkas, assistant deputy minister.

Thank you very much to Mr. Byng for coming ahead of schedule — and Mr. Farkas as well — which enabled us to advance our start time for our consideration of this report by the committee. We’ll get underway. I’ll turn it over now to the Auditor General to begin her presentation.

Auditor General Report: Improving
Budgeting and Expenditure Management
in the Public Education System

C. Bellringer: Thank you. Just a little history behind the report. We chose the topic because, through our financial statement audit work and combined with, in the past, news reports, we knew that some school districts were struggling to manage their finances.

Russ will take you through the report in a moment. At the end of the day, although we only looked at a few specific districts as part of the work — we didn’t audit them, specifically — any district can learn something from this report. It’s very much set out as a guide for them all. In particular, we would like to encourage all districts to look at the good practice guide that we’ve included in appendix A.

My thanks, as always, to everyone involved in this work. I will say that the two most senior staff members
[ Page 1008 ]
who worked on this have both left the office. One has actually moved into one of the school districts, and the other, Bill Gilhooly, who has been a long-term member of this office and author of many reports in the past, has chosen to retire. Our public thanks to Bill and to Jason. But Jason’s still out there in the system.

R. Jones: Thank you, Carol. Good afternoon, Members. I’m going to do double duty here and do the slides at the same time.

The province’s 60 school districts share about $4.7 billion every year to deliver education to over 535,000 students in the public education system. We only looked at budget and expenditure management in this audit, which is just one part of the overall funding and financial management equation in education. We did not audit any of the specific school districts’ budgets.

Changes in accountability since we completed our work are expected to provide more flexibility to school districts to set goals that are most relevant to their circumstances but also place greater responsibility on districts to plan and manage their finances. With this increased flexibility comes the need for more integrated long-term strategic and financial planning to help ensure better budgets that lead to well-informed spending decisions.

Through our ongoing audits in the public education system, we’ve seen cases where the Ministry of Education and some school boards were surprised by the districts’ unplanned overspending or budget shortfalls. In part, this is because some school districts were struggling to manage their finances. We looked at a sample of four school districts of various budget sizes and geographical areas to examine the processes and practices these districts used to develop their plans and budgets and then monitor and control their expenses. We also looked at the Ministry of Education’s role in overseeing and guiding the school districts.

Overall, we found that the four districts we looked at follow many of the good practices that we expected. We did find potential for improvement in a number of key areas. Districts could do more to communicate their strategic plans to stakeholders and better link their budget decisions to their goals and educational outcomes. They could also provide more information to their school boards so that trustees can make the best decisions possible. Finally, tighter spending controls would help to curb the risk of overspending.

Where government is concerned, the Ministry of Education is actively monitoring and guiding school districts. It could provide even greater direction to districts around the development of their strategic plans, and this would help the districts’ budget development process.

As Carol said, we have written this report so that any school district can learn something from it, hopefully. There’s always room for improvement when it comes to long-term planning and budgeting, engaging with stakeholders and improving scrutiny over spending. Six of the eight recommendations are for all districts to consider, and we’ve included a good practice guide and checklist at the end of the report to help school boards self-assess their management of budgets and expenses. It’s on page 20, I believe, of the report.

Looking at the recommendations we made in this report, two of the eight were for the Ministry of Education. The other six were for all the districts to consider. We’re pleased that the Ministry of Education has accepted our recommendations and has already taken action on some of them.

D. Byng: Thank you very much. Just by introduction, what I’d like to say is that we’re grateful to be here today to have an opportunity to speak to the Auditor General’s work. I suppose in a similar manner to our conversations last time we were here around the audit on aboriginal education, we are strongly supportive of the work of the Auditor General, and her findings and her staff’s findings.

Certainly, it’s brought us to the same place in terms of accepting all of the recommendations and moving forward from that perspective. As her staff member noted correctly, we’re engaged in actioning each of those recommendations, both within the ministry and with school districts across the province as well.

We do see this in a positive vein, and I would like to say that during the last two years of my term as the deputy of Education, I have seen increasing performance, if you will, around budget management within the school districts across British Columbia. I do think it is a focal point of theirs, and I think things are, as the Auditor General characterized, good and getting better. Certainly, we’re happy to be able to support that process as well.

On the second slide, with regard to the school districts that were sampled, we certainly were part of the audit plan and are in agreement that that was a good cross-section of school districts and representative of the overall health of the system.

We’ll move on to the third slide. We were grateful to read some of the key findings of the Auditor General around the ministry providing effective budget-related guidance to school districts. We would acknowledge, as well, that like usual, there’s always room for improvement — no question. We take the constructive criticism in that vein and are working hard in that regard.

We do think that we have a leadership role with regard to strategic planning, budget management, looking at expenditures and the alignment of them with school districts, even in a co-governance model. The province
[ Page 1009 ]
embraces that concept, and we are actively working with school districts in that regard. I’ll speak to a couple of areas in particular with regard to our action plan and how that is being undertaken.

With regard to strategic plans, it is certainly an area where we have some variability across the province, and we’re working in a very deliberate way with school districts across British Columbia to ensure that they all have strategic plans in place. I think one of the points that was noted by the Auditor General, which we strongly agree with, is that not only do these plans need to be in place and well understood within the organization; they need to be well understood by the public that they serve, as well, in their local community.

We also are strong proponents of aligning resources with your strategic plan. We’re working hard on that within the ministry, and we certainly expect to see school districts doing the same and then tracking expenditures such that they’re able to be married up against the budget process and the goals in the strategic plan. I suppose to that end, their long-range capital planning needs to fall in line with that as well. We’re seeing significant growth as far as numbers of students in the education system of British Columbia, and our long-range facilities plans need to line up well with that as well.

One of the other points I’d like to make is that there have been a number of reviews of school districts that have occurred in British Columbia even over the last couple of years that I’ve been the deputy minister. Most recently, of course, we’ve had the work being done by Liz Watson in Salmon Arm, in that school district.

One of the things that we’re doing as a ministry is actually compiling the results and the outcomes of the various reviews that have taken place, including this one, and looking at the common themes that have emerged. Even though we’re looking at it on a district-by-district basis, there are definite themes that are emerging.

We’re working in a very constructive and deliberate way with several of the sector associations to manage these issues effectively across the sector as a whole. We’re working with the B.C. School Trustees Association, the B.C. School Superintendents Association and the British Columbia association of school board officials or secretary-treasurers to really come together on a number of the recommendations that the Auditor General has brought forward and that we have seen as themes in other reviews as well.

In response to the report, of course, as we’ve noted, all the recommendations have been accepted by the ministry and are in the process of being implemented. Even though the school district–specific recommendations were made for the four sampled school districts, we do agree that they are more broadly applicable within the sector.

To that end, we have established two working groups: the school district financial health group, where we’ve got a number of professionals from across the system that have come together to review the recommendations and their implementation throughout the system as a whole; and then we have also established a framework for enhanced student learning — that’s how we’re referring to it — which really is going to drive reporting of performance in the system on a school-district-by-school-district basis.

We’ve done this with our association partners and school districts as a whole. I think it’s not good enough to just report on how we’re spending our money. We also need to be looking at whether we are achieving the outcomes that we’re setting out to. So that really is that piece as well. That work has been going on over the last year and is being implemented this year as well.

You will see us continue to not only put a strong emphasis on implementing the recommendations of the Auditor General’s most recent report but compiling that with the others that we’ve received recently as well.

In summary, what I’d like to say is that we’re getting very enthusiastic participation by our key stakeholder groups, the School Trustees Association and others. We appreciate their willing spirit to join us in the implementation of these recommendations, and we’ll continue to do that without delay.

J. Martin: One thing that in my discussions with the districts I always hear is the difficulty to be prepared for the actual enrolment number, which they don’t really know until early September, sometimes even later than that. Is there some confidence level that, moving forward with these recommendations, there might be an ability to be able to handle that kind of unknown a little more strategically?

D. Byng: First of all, I want to recognize and acknowledge the point that you’re making, because I think it’s a valid one.

One of the challenges that we saw last year, of course, is we had the transition from — I’ll speak, overall, around the province — declining school enrolment, a declining number of young people in the school system. We’d anticipated, based on birth rate projections, to see, a couple years out, numbers starting to climb again. Of course, we saw an increase in student numbers last year, and we’re projecting likely a fairly significant increase in student numbers again this year as well.

There’s a process in place that we undertake with school districts where each school district does its own analysis around what it expects to see in terms of enrolment increase. We also look at it from a provincewide basis as well. We combine the thinking of the 60 school
[ Page 1010 ]
districts together. Further to that, we’ve got some industry experts and economists and B.C. Stats that we work with as well to really try and hone, if you will, our expectations around numbers.

You didn’t ask this question. I’ll, perhaps, add to my answer just a brief amount.

D. Byng: Chair, I know I pledged to be short, but this, I think, will be of interest to the group as a whole. That’s my hope, at least.

We are expecting to see numbers continue to climb. There are a few drivers that I think are important for us to be thinking about as we go. We are seeing the birth rate increasing in British Columbia, so the number of homegrown kids, if you will, is increasing. Immigration numbers are increasing as well — so young people coming from outside the country into British Columbia.

The most significant one is in-migration from other parts of Canada into British Columbia, which continues to be strong. I think our economy and our low unemployment are real drivers of that.

Finally, which I take great heart in, we’re seeing young people stay in school longer. We’re seeing fewer kids dropping out. That’s a really good piece for us as well.

With all that in mind, we do expect to see the numbers continue to climb, and we’re working hard to refine our estimating in that regard as well.

J. Martin: Obviously, on a macro level, in the toolkit of a demographer, we can get a pretty good handle on this provincewide. I guess where the difficulty happens is not even just within a particular school district but within a particular school zone. I guess that’s very difficult because the birth rate analysis isn’t going to help so much. I mean, probably the construction industry and the real estate industry have a better read than the statisticians do on a particular neighbourhood’s growth.

Trying to give school districts a more sophisticated ability to predict what’s actually going to happen within, maybe, the six-kilometre radius around a particular school. What do you see for being able to enhance that type of projection?

D. Byng: We are working with them on bringing it down to that level of granularity, if you will. I’ll give you one good example that most of you will relate to, and that would be Richmond. While Richmond may, overall, have some declining student numbers — and there are areas of Richmond where you do have numbers of students declining, so utilization rates of schools may be declining as well — we’ve got other areas of substantial growth and pressure, particularly along the Canada Line and things like that, where we’re seeing high-density and multifamily housing starting to occur.

I completely agree with you that even in a district that may face declining enrolment or stable enrolment, you’re getting that variation within the district that we definitely have to plan for. So when we’re doing our capital planning and long-range facilities planning with the school districts, that’s exactly the level of detail that we’re getting into now.

S. Robinson: In a couple more years, there will be a changeover, possibly, of some school boards because they get re-elected every four years. While folks have good intentions, they often don’t have a background knowledge in how to do budgeting, how to do planning. There’s always this steep learning curve at the beginning.

I’m just wanting to understand where the challenges are. Is it at the school boards, or is there something going on with the superintendents and the professional side of the school system, where there is not clarity about how to do the budgeting? The school boards often depend on the professionals to help bring them along in making these decisions and doing it right, even though school boards are responsible. At the end of the day, they vote. But there’s a role that the professionals have at the table. Do you have a sense of where the challenges are?

D. Byng: Sure. Well, I think you raise a great point. We’ve been talking, actually, around — I’ll use this term — professional development within the sector as a whole. We do see a need to support folks in a governance role, most certainly, as well as people in management positions, whether it’s the superintendent or the secretary-treasurer and the like. Now, the secretary-treasurer is typically a professional. They’re generally accountants and so on, so they tend to know their business fairly well.

Having said that, having a good strategic plan in place that allows them, then, to do their work effectively is really part of the conversation that we’re having here today. I think there’s work, from that perspective, that the management teams can take on.

I will say this as well, and it’s not meant to be disparaging in any way. Elected boards tend to come with a variety of skill sets, particularly when we’ve got 60 elected boards around the province. Some may well be fortunate enough to have a lawyer and an accountant, and so on and so forth on their board that can then provide diverse professional opinions. But there are some boards where there may well be gaps in skill sets.

We have been working with the B.C. School Trustees Association around the type of professional support and training that can be provided to boards and board members to bring them up to a good level of competency, if you will, in these areas, as required, or, potentially, to be able to draw on folks like audit committees or professional advisers that the board may avail themselves of if
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they don’t have the knowledge around how we manage our way through a complicated capital piece of infrastructure, whatever it would be. They could get some professional advice in that regard. We are working quite proactively with the BCSTA on that with regard to the boards themselves.

S. Robinson: I would encourage helping the professionals. Even though they might professionally understand how to do budgeting or even how to do strategic planning, they may not be a great communicator.

Getting laypeople to understand how this work happens…. I was in local government and happened to have a great financial manager who was amazing around going through the budget. She knew it like the back of her hand and was able to go through, over and over again, until you understood all the different decisions that you were going to have to make. Not everybody who’s great looking at a computer screen and moving things around is great at communicating exactly what they’re doing and where they’re going.

I’m wondering if there’s an appetite to work with the professionals to help them in their job, which is to bring along their board, sometimes, and help inform them about the decisions before them.

D. Byng: Well, I would perhaps add to my answer a little bit to talk to you about a working group that we’ve got going on that involves each of the sector associations and is really focused on professional development and support — frankly, all the way from teachers to principals and vice-principals to your financial staff through to superintendents.

What we need to do as these people move through their careers is continue to support them and allow them to develop as fully functioning professionals as well as look at boards from a governance point of view. We are looking quite holistically at the system as a whole and each of the areas and the competencies that they require.

L. Throness: I have a question for the Auditor General. You audited the budgeting practices of four public boards. I would note that there are independent schools as well. They receive public dollars.

Have you ever audited their practices, and do they suffer from the same issues? Probably they’re not school boards in the same way, but have you ever looked at them?

C. Bellringer: We didn’t include them in this audit. But I don’t know if, going back, we ever have.

C. Bellringer: We certainly could. I mean, just as we could have chosen others. So we can put it on the radar going forward. But the quick answer is no, we haven’t.

L. Throness: Maybe there’s something we can learn from them or something they need to learn. It might be helpful.

R. Jones: I was just going to mention that one of the things we’ve been doing this year with the four school districts that we audit directly is offering, to each one of the boards, to go in and explain to them how they should be reading their financial statements. Most of them have taken us up on that.

We do try and demystify the statements for them. One of the concerns when the school districts moved into using public sector accounting statements was that they were so used to the old statements they had that they couldn’t figure out how to read the new ones. As I’ve tried to point out to them, they’re basically the same thing. They’re just packaged a little bit differently. Once you do that with them, it’s really good.

One of the other things we’ve been recommending for a lot of the school boards is to get an audit committee in place because a number of them don’t have financial expertise to ask the right questions of management. We think that’s critically important.

I have a question myself. Just look at recommendation No. 1: “Developing and communicating strategic plans that demonstrate how the priorities identified and the goals set inform both operational strategies and budget decisions.” That’s a recommendation for the ministry, as opposed to individual school boards.

Obviously, this is probably going to venture into the realm of policy. It’s probably more in the nature of a comment. One of the things that the ministry did — with political direction, one assumes — was to say that they were going to cut $25 million in spending. Very late in the budget process, that was added back in.

Probably my question would be to the Auditor General. If one can avoid that — and I appreciate that it may well be in the realm of ministerial decisions — in a budget process, I think it’s probably tautological that that would be better than to receive that kind of notice so very late in the budget process. Wouldn’t that be the case?

C. Bellringer: It’s a bit of a…. In any planning cycle, the sooner you know something the better. I think it sort of goes without saying.
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B. Ralston (Chair): I think that’ll suffice for now. I really am venturing into the — against my better inclinations, of course — area of policy.

D. Eby: Really, I understand the spirit of the recommendations for the school boards, and I support them entirely. Any support we can give to elected officials with varying skill sets is really critical.

The question that I have is whether there’s been any discussion about additional costs that these various recommendations would impose on already cash-strapped school boards. If you want to bring in an audit committee, presumably you’re going to have to hire some accountants to sit on that committee. If you’re going to do additional consultation with stakeholders, presumably you’re going to have staff members who are going out to do that consultation with stakeholders.

As I understand the discussion at most school boards, the discussion is on covering basic expenses as they stand, as opposed to expanding strategic planning and adding additional paid committees.

A question to both the Auditor General and the Ministry of Education. How do we balance what we’d like to see — which is greater support for these elected officials to ensure accountability for the public — with the reality of school board funding and the challenges of providing the basic services in a fluctuating funding environment?

C. Bellringer: I would say, generally speaking, that there was nothing in our recommendations that I wouldn’t absolutely expect of any organization. If you don’t have a good strategic plan and you don’t have a facility plan, you’re going to, probably, at the end of the day, spend more than you would if you had good plans. It’s a pretty general comment though. I couldn’t say at the detailed level whether that’s true.

The kind of support that we think the ministry can provide is that broader support. In fact, those smaller districts that don’t have the expertise at the same level as others — give them a helping hand, if you will, to just get them to get that capacity.

I’m not sure. I’m assuming the actual members of an audit committee would not be paid members, where they do have them. I mean, it’s no different than a board of directors or somebody who’s volunteering to help out in a not-for-profit.

I don’t know in the school districts if there’s a compensation issue for any kind of committee they set up.

R. Jones: I was just going to add that one of the school districts that we do had a member from the municipality actually do it for nothing. She decided that she should sit on…. She was asked. She did it, and she’s on the audit committee.

The suggestion is that school boards could find volunteers to help build that capacity. That’s what I understand. Okay.

R. Sultan: I’ve got a great idea for a new advanced education institute: trustee university. You run them through for two weeks, explain all about debits and credits before the school year — a great investment in the future of our province. Any takers? Has anybody tried?

B. Ralston (Chair): Municipalities do, I think. As a process of when you’re elected, you are invited to attend a…. It was a long time ago when I was first elected to a municipal council, but I understand that process still goes on.

For most organizations, big or small, continuous learning is part of what organizations have to do to keep their employees and their leadership up to standard. I don’t think there’s any shame in offering those kinds of programs, nor in taking them and embracing them enthusiastically. But again, that would be something that probably the ministry would have to budget for — maybe working in conjunction with the Union of B.C. Municipalities.

D. Byng: First, maybe I’ll back up one, if I could, only to reinforce…. To MLA Eby’s question — I think he did put it out to both of us — I was writing almost verbatim the same answer that the Auditor General provided. You know, the better the planning process is, probably the more effective you’re going to be with your budget process as well. And we would be certainly able to resource the recommendations to the ministry within our own budget that we’ve been allocated.

To MLA Sultan’s suggestion around a training regime for trustees, we in the B.C. School Trustees Association are marching down that trail at the moment, in fact. I believe the first four modules that have been developed already for that training are ready to go, and there are more underway now. Our expectation is that between the B.C. School Trustees Association and ourselves, we’ll be providing that type of support to folks in a governance role going forward.
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Anyone else? Any final comments? Any closing remarks from the Auditor General or the deputy minister? You’re done? Okay.

B. Ralston (Chair): Before we adjourn, I just wanted to say that the Deputy Chair and I will be talking, along with the members of the management committee — who are Laurie Throness and George Heyman — about scheduling another meeting, possibly in November. We have three reports to consider: the progress report on the effectiveness of B.C. community corrections; the report on the audit of mid-sized capital procurement in the post-secondary institutions; and the report that was just released this week, Getting it Right: Achieving Value from Government Information Technology Investments.

Those are three reports that are outstanding. We’ll endeavour, if we can, to arrange a meeting of the committee. That would seem to be a day’s work, but we’ll see what we can arrange. I know people’s schedules are busy and inclined to fill up rapidly.

Access to on-line versions of the report of proceedings (Hansard)
and webcasts of committee proceedings is available on the Internet.

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)
	John Martin (Chilliwack 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

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