Assemblée Législative de la Nouvelle-Écosse

Les travaux de la Chambre ont repris le
21 septembre 2017

Public Accounts Committee -- Wed., Oct. 15, 1997

[Page 1]

HALIFAX, WEDNESDAY, OCTOBER 15, 1997

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:30 A.M.

CHAIRMAN

Mr. John Leefe

DEPUTY CHAIRMAN

Mrs. Eleanor Norrie

MADAM CHAIRMAN: I will call the committee meeting of the Public Accounts to order. My name is Eleanor Norrie and as Deputy Chairman of the committee, I am filling in for the Chairman, John Leefe. We have with us today some returning members and some new members to the committee so I would ask the committee members to introduce themselves, starting over on my far left.

[The members introduced themselves.]

MADAM CHAIRMAN: Thank you all very much and welcome to the first meeting of the new session in the fall here. I thank you all for coming and I would ask now for the witnesses and those who are attending here on behalf of the Atlantic Lottery Corporation and the Auditor General, if you would like to start introducing yourselves, I would appreciate it.

[The witnesses introduced themselves.]

MADAM CHAIRMAN: Thank you all very much. I would first of all ask the Atlantic Lottery Corporation for their opening remarks this morning.

MR. CLUNY MACPHERSON: Thank you, Madam Chairman, for inviting us here today to speak about the Atlantic Lottery Corporation's activities. Actually, it is a pleasure to be here.

The Atlantic Lottery Corporation was incorporated under the Canada Business Corporations Act on September 3, 1976 as a joint, unique venture of the Atlantic Provinces. The mandate of the corporation is to profitably create, develop, market and manage lottery

[Page 2]

and gaming activities with integrity in partnership with the shareholder provinces. The Atlantic Lottery Corporation's shareholders are the Lotteries Commission of New Brunswick, the Nova Scotia Gaming Corporation, the Prince Edward Island Lotteries Commission and the Government of the Province of Newfoundland and Labrador. They each appoint two representatives to the ALC's eight member board of directors.

The board of directors has a mandate to determine policy and direct management with regard to the corporation's affairs. As an agent of the shareholders, it is the Atlantic Lottery Corporation's job to carry through board policy. Specific responsibilities of the board of directors include directing policies and making decisions on corporate matters including gaming activities, corporate organizational structure and annual budgets; meeting on a monthly basis; holding an annual meeting in the summer to discuss and approve the long-term directional plan of the corporation and to consider and approve the annual operating and capital budgets; and monitoring the corporation's internal controls and financial reporting systems with the assistance of the audit committee. The audit committee is made up of one board member representative from each province. Along with the board of directors, they monitor the corporation's internal control and financial reporting systems.

The reason I went to length to describe exactly what these responsibilities were is I wanted to clearly delineate that the responsibilities of the board of directors are to set policy and the responsibilities of management are to carry out that policy through operations.

In terms of the Atlantic Lottery Corporation, how it affects the people of Atlantic Canada, we like to think that everybody benefits from the Atlantic Lottery Corporation. All Atlantic Canadians benefit from the revenues generated from the sale of lottery products from the retailers who sell our products to the many suppliers and all citizens. All profits go to the four provinces and this money is used for programs and services for the citizens of Atlantic Canada. Specifically, more than 430 people are employed by the Atlantic Lottery Corporation on a full-time, part-time and casual basis throughout Atlantic Canada. The corporation's head office is located in Moncton, New Brunswick with regional sales and gaming terminal technology centres located in Dartmouth and Sydney in Nova Scotia and St. John's, Cornerbrook and Gander in Newfoundland. A network of 6,100 retailers in Atlantic Canada sell Atlantic Lottery products. About 2,200 are in New Brunswick, about 1,800 in Newfoundland and Labrador, about 1,800 in Nova Scotia and about 300 in Prince Edward Island.

Another way the Atlantic Lottery Corporation gives back to the community is through corporate sponsorship. The Atlantic Lottery Corporation sponsors a variety of community events that have mass appeal and that tend to reach all Atlantic Canada. There are many ways the Atlantic Lottery Corporation sponsors community events. It could be through gifts of time, services, monetary donations or donations of Atlantic Lottery Corporation promotional products. For example, the Atlantic Lottery Corporation sponsored more than 30 festivals, special events - like the Great Big Picnic, Atlantic Tour - and exhibitions in the Atlantic

[Page 3]

Provinces this summer and fall. Other sponsorships include the Children's Wish Foundation Atlantic Region, Wishmakers' Parades and a donation of sports bags to the Canada Games athletes in the Atlantic region. Upcoming sponsorships include the 1998 East Coast Music Awards which will be taking place in Halifax in late January.

In the 1996-97 fiscal year, the Atlantic Lottery Corporation generated $454.2 million in gross lottery ticket sales and $299.9 million in net video lottery receipts. Over $243 million was returned to players in the form of prizes and more than $287 million was returned in profits to the four provinces and in the same period, Nova Scotia received over $110 million in profits and almost $90 million in prizes.

Concerning the recent audit of the Atlantic Lottery Corporation, after following the proper procedures and respecting the Atlantic Lottery Corporation's by-laws, a joint audit of ALC was conducted by the Auditors General of Nova Scotia and New Brunswick in late 1995 at the request of the Nova Scotia shareholder.

At this point, Madam Chairman, I would like to move away from my formal remarks and just give some brief explanation of exactly what transpired during that time because I think there were people who felt that the Atlantic Lottery Corporation was fighting the Auditors General because we did not want them to come into our organization. We are a rather unique organization in that we are set up by the four provinces who set us up, as I said earlier, under the Canada Business Act. That leads us to believe that we are not a Crown agency. When the Auditor General demanded to inspect the books of the Atlantic Lottery Corporation, my understanding is he felt that he could do that under the fact that he saw the Atlantic Lottery Corporation as being a Crown Corporation. We didn't. We informed the Auditor General that if he chose to come in and do our books, or review our books, that the way that he would have to do it would have to be to ask permission of the shareholder of Nova Scotia and the shareholder of Nova Scotia would then instruct him to do so. That is actually what did transpire in the final analysis but there was a period where there was an attempt to consider the Atlantic Lottery Corporation a Crown Corporation.

One of the recommendations that the Auditor General had made was to suggest that some legal interpretation be brought to bear to find out exactly what the Atlantic Lottery Corporation is and as that is the mandate of the shareholders, we await their action.

The Atlantic Lottery Corporation actually welcomed the audit. It was pleased, but not surprised, that the Auditor General concluded that the integrity of the corporation and its games were not in question. I think this is probably one of the most important statements of all and that was one of the Auditor General's comments, in his report, that the ALC is an interesting and unique experience in interprovincial cooperation. I stress that because we are unique in that the four provinces are the shareholders and each of those shareholders bring to bear their concerns, their issues, but it has to be an organization of compromise because we cannot do something for the entire corporation that other shareholders may not necessarily

[Page 4]

support. We have to have consensus on major issues and for the last 20-plus years, we have been able to achieve that.

ALC has benefitted from the objectivity and perspective of the Auditor General's representatives and is committed to policies of continuous improvement in the vocal communication about its operations with the four provincial governments and all Atlantic Canadians. There have been, and continue to be, considerable time and resources invested by ALC to implement and update systems and practices to support the ongoing management and control of the corporation.

The Auditor General also characterized ALC's Board of Directors and management cooperation as significant in the conduct and completion of the audit. Twenty-two of the 30 Auditor General's recommendations are complete or are presently underway. Eight of these recommendations are outstanding shareholder issues and include R1, 2, 3, 6, 7, 9, 16 and 24. I am unable to speak to those particular issues or recommendations as they primarily rest with our shareholders and those are policy items, but I am able to speak to any of the recommendations that the ALC has completed or is working on.

One of the recommendations, for example, was that the ALC's annual report should include more sufficient and appropriate information on the performance of the corporation, especially in relation to its defined plans, budgets and goals and have wider distribution. ALC's 1996-97 annual report addressed a good majority of those issues and include a comprehensive review of the corporation's past year's performance and accomplishments, and its distribution was also increased. Further financial disclosure is being considered for the next fiscal year at operations.

Another recommendation regards the allocation of profits and I might add that this proposal is currently before the shareholders for their review. As I am sure you can appreciate, again going back to the issue of the four provinces working together with each other, it is a very difficult and a very contentious issue, but it is being dealt with and hopefully it will be resolved.

Once again, the board of directors determines the policies of the Atlantic Lottery Corporation and is responsible for carrying through board policy as an agent of its shareholders.

Madam Chairman, this concludes my opening remarks and I invite you to ask any questions pertaining to the Atlantic Lottery Corporation.

MADAM CHAIRMAN: Thank you very much, Mr. Macpherson, and I appreciate your comments and some information coming forward in your opening remarks. I am sure that members of the committee now would like to address some questions to you. I think the

[Page 5]

format we follow is that anyone who has questions would raise their hand. We will begin now at 9:47 a.m., just for everyone's information.

MR. RONALD RUSSELL: Madam Chairman, I wonder if you could, first of all, indicate to the committee, what is the time allocation you intend to follow this morning?

MADAM CHAIRMAN: My understanding is that if there is a time allotted, it will be equal time given to each member of the committee on the time allotted and I am just about to do the math. I think we go until 11:30 a.m. It will be about 10 minutes.

MR. RUSSELL: Mr. Cluny, if I may ask you a couple of questions. I would like to start, actually, (Interruption) Oh, Mr. Macpherson.

Mr. Macpherson, I would like to start where you finished up and that was with regard to profit allocation from the Atlantic Lottery Corporation. I was wondering if you could give some indication of what the present formula is, and whether or not the profit that is allocated to each province, is it made on a share basis of ticket sales as separate from VLT sales, or are all the profits lumped together and then a formula is applied which divvies up the profit between the participating provinces?

MR. MACPHERSON: Sales of the video lotteries go directly to the province in which those machines are operating. The profits of the traditional products are spread on a proportion based on the sales after, obviously, certain expenses have been removed.

MR. RUSSELL: That applies to the ticket sales of the national games as well?

MR. MACPHERSON: Yes, the 6/49, the Super 7, those games.

MR. RUSSELL: So, in other words, is it just a straight percentage of sales?

MR. MACPHERSON: Basically, yes.

MR. RUSSELL: Can you tell us what that percentage is?

MR. CARMEN MCAFFEE: In the case of Nova Scotia, the average is around 38 per cent to 39 per cent, or something like that, of sales, which is fairly close to the population. So, that is how that allocation is done. It is actually based on net sales. We take sales less prizes and we allocate the profits that are left over after we have adjusted for the video lottery profits, because the video lottery is run differently in the four provinces. Two of the provinces have coin operators or an intermediary and in the case of Nova Scotia and Newfoundland, it is run by the Atlantic Lottery Corporation, that is, we do the operations. So we adjust certain expenses, the major expenses for the video lottery, calculate the profit that is arrived at from the video lottery, then we allocate the remaining profit based on the net sales.

[Page 6]

MR. RUSSELL: You say at the present time that is approximately 39 per cent for Nova Scotia.

MR. MCAFFEE: Yes, I can give you the actual number in just a second.

MR. RUSSELL: Perhaps while you are looking that up you might consider also my follow-up question which would be, does that percentage change by month or is it for a fixed term?

MR. MACPHERSON: We use the actual percentage. So it would change, probably, very, very slightly, maybe by 0.1 or something but we use the actual percentage when we do the calculations.

MR. RUSSELL: So in effect the formula that we have at the present time is just strictly a percentage of the sales, and it is based on?

MR. MACPHERSON: Net sales.

MR. RUSSELL: You have a proposition at the present time going forward, Mr. Macpherson, to the board of directors which will change that, is that correct?

MR. MACPHERSON: We have a proposition that has gone forward that the board of directors have said that they are willing to consider. That doesn't necessarily mean they are willing to accept it. What you have to understand is that, as I said earlier, this is an organization that is premised on compromise and if a shareholder puts forward a proposition that markedly changes profit distribution and some provinces will suffer by it, then obviously those provinces that will suffer by it are going to want to take a real hard look before they are prepared to accept it. You have to understand that when the original shareholders' agreement was put together it needed consensus among all shareholders so that everybody felt that they were being treated equally. It would be very unwise for me to suggest to you how this will finally work its way out. But like any other interprovincial agreement, there is some give and take on both sides.

MR. RUSSELL: But you are suggesting that since it is before the board of directors it has to be unanimous, is that it?

MR. MACPHERSON: Yes.

MR. MCAFFEE: In answer to your question, the $110 million in profit was 38.4 per cent of the total profits of the Atlantic Lottery Corporation.

MR. RUSSELL: I take it then that that is a direct reflection percentage-wise to the sales?

[Page 7]

MR. MCAFFEE: Yes, the video lottery sales, as I said, are actual sales and then we make adjustments for certain expenses, for instance, for the cost of the terminals and the cost to service them, and so on and so forth. The profits which are left over are based on the net sales, that is sales less prizes. As I said, the total life-to-date profits of Nova Scotia is 39.9 per cent and the adult population of Nova Scotia as a percentage of Atlantic Canada is 39.5 per cent. So it actually works out to almost exactly equal to the population but that is just a coincidence.

MR. RUSSELL: That is just a coincidence, because the population does not factor anywhere into the allocation?

MR. MCAFFEE: No, it does not.

MR. MACPHERSON: But it does cause us some interest simply because of the fact that they are so close; it shows that Nova Scotians . . .

MR. RUSSELL: Gamble just about the same as . . .

MR. MACPHERSON: Exactly.

MR. RUSSELL: There are advantages, however, that accrue to the Province of New Brunswick that do not accrue to other provinces from the point of view that your headquarters is in Moncton and the majority of your staffing is in the head office in Moncton is it not?

MR. MACPHERSON: The answer would have to be yes.

MR. RUSSELL: How many persons would be employed in Moncton by the Atlantic Lottery Corporation?

MR. MACPHERSON: In our head office at the moment there are approximately 230 employees.

MR. RUSSELL: When a vacancy occurs in that office and you are looking for staff, what is the normal procedure that you go through?

MR. MACPHERSON: To advertise. Anything but clerical staff, it would be to advertise throughout Atlantic Canada.

MR. RUSSELL: That is done through the normal newspaper ad?

MR. MACPHERSON: Yes. As an example we recently had to increase a member of our legal department and that individual came from St. John's, Newfoundland.

[Page 8]

MR. RUSSELL: You said clerical; for instance, I would imagine that you have quite a large number of machine operators, computer operators, et cetera.

MR. MACPHERSON: But that is not clerical staff. Computer operators in our vernacular are people who are quite skilled in the operation of very complex, high-speed machines.

MR. RUSSELL: The recruitment for those positions would also be interprovincial?

MR. MACPHERSON: Yes and in some instances, because we would be looking for very highly technical, specialized people, we would actually go outside of Atlantic Canada. That happens rarely but, as I am sure you can appreciate, the computer operations of the Atlantic Lottery Corporation are extremely technical and way beyond my grasp and understanding but we have certain system design engineers that we sometimes have to go outside. I happen to mention this because I can think of one particular instance fairly recently where we needed somebody to help us bring our communications into line, and I am talking about the digital communications as opposed to analog communications, and one of the few people we could find in Canada came from Edmonton, Alberta. But that is very much the exception to the rule.

MR. RUSSELL: Your primary base is in Moncton and I know nothing at all about a headquarters for a lottery corporation but as I understand it, there would be various sub-departments within that particular operation. Has any thought ever been given to taking some of those operations and moving them to other participating provinces?

MR. MACPHERSON: We have studied two lotteries that have undertaken to do that; one was the Western Canada Lottery Corporation, which moved its marketing division to Stettler, Alberta, it was a major disaster. It didn't work and in actual fact has caused . . .

MR. RUSSELL: Why?

MR. MACPHERSON: Because you can't take one division and have them work remotely from the other divisions because the interaction between the divisions is extremely important. Another example I can give you is the Ontario Lottery Corporation, which a number of years ago decided that it would move its headquarters to the Soo. It did, it moved them all. This is my interpretation, I am sure there would be other interpretations but one of the reasons it failed was because they were so remote from the marketing support that they needed in Toronto in terms of advertising agencies, et cetera, that they have now decided to downscale and probably close the Soo offices.

MR. JOHN HOLM: There are a number of areas that I would like to pursue. The first one is the whole idea of the audits in the first place, if I could. I appreciate that the Atlantic Lottery Corporation is indeed unique and was set up under the federal Business Corporation

[Page 9]

Act and so on. However, accountability is extremely important. In order to have the public trust that it has to be deemed or seen to be, as well, having clear independent audits. I note in your opening remarks you described the audit process that is currently used, and that being, of course, that the committee is made up of one board representative from each province and along with the board of directors, they monitor the corporation's internal controls and financial reporting system. That still strikes me as an internal audit.

You also indicated that you are not a Crown Corporation. Now, I appreciate that there are limitations but that interpretation differs somewhat from the legal opinion that the Auditor General here in Nova Scotia received from the Justice Department in Nova Scotia, again, recognizing that there are limitations.

[10:00 a.m.]

My question is, first of all, do you have a legal opinion that would support your position that it is not, in effect, a Crown Corporation, and how do you counter the perception - maybe it is only in my mind - that at least the auditing being done is really an internal audit and not a fully objective one?

MR. MACPHERSON: Let me answer your second question first. We are very much audited by independent auditors. Keats Peat Marwick have done the audit on the Atlantic Lottery Corporation for the last 20 years.

MR. HOLM: But who do they work for?

MR. MACPHERSON: KPMG, they work for the Atlantic Lottery Corporation, but they are independent auditors who do the audit. Like any other business, you go outside and you have auditors come in to do an audit and they are recognized as being independent from your corporation. You may be paying them, but they are doing an independent, outside audit for you.

The other side of the question is that we didn't have any problem with the Auditor General coming into the Atlantic Lottery Corporation, if he went according to the proper procedure as we saw it. The proper procedure, at that time, was to ask the shareholder of Nova Scotia for permission to do so. My understanding is that they were reluctant to do it because of what you just described as their interpretation of the law.

My position had to be - because it was supported by the other shareholders - that we were independent, so if anybody wanted to have an audit done by the Auditor General of any of the provinces, all they had to do was say to the shareholder, would you ask us to go in and do an audit? Subsequently, the Auditor General for Nova Scotia, Mr. Salmon, asked the shareholder, the Nova Scotia Gaming Commission, to ask him to go in and do the audit and

[Page 10]

they subsequently asked him. He said, thank you very much, and he went in, with the Auditor General of New Brunswick, and they performed the audit that I just referred to.

MR. HOLM: I see some parallels, in a sense, between how the books of Nova Scotia are audited versus what is done in other jurisdictions. Here in Nova Scotia, of course, the Department of Finance hires their auditor - and I am not questioning the abilities, and so on, or the integrity of the auditor - but it is an auditor who is employed by the Department of Finance of the Province of Nova Scotia and is not a totally independent auditor, as is the case in all other jurisdictions. Here, it strikes me that the ALC is really parallel to the provincial structure, whereas in all other jurisdictions the Auditor General is the auditor for the government, as is the case nationally. It strikes me as not the most appropriate and it doesn't build the greatest confidence, and that could just be perception.

I am not saying that there is anything inappropriate happening, but it strikes me that whether you call yourself a Crown Corporation or not, there certainly are public monies involved that are being raised. The ALC is owned by the shareholders, which are the four public bodies, and you spend public monies; therefore, there needs to be a mechanism for proper independent auditing by the Auditor General, as a matter of right, rather than having to ask to go in.

My question is, are you aware of the board of directors dealing with this issue and is there any proposal on the table that would enable some kind of formal structure so that the Auditor General or Auditors General, by right, can come in and audit the ALC without having to go through the kind of things we did before? Right now, shareholders could obviously say no.

MR. MACPHERSON: Exactly. When we were formed, part of our by-laws included an article that said the shareholder has the right to ask for an audit. What the shareholders are going to have to do - and, again in an area of policy which makes me very uncomfortable because it is not my area; my area is operations - is, again, unanimously agree to change the by-laws. Now, when you have four independent governments working conjointly in an organization, what is attractive to one shareholder may not necessarily be attractive to another.

MR. HOLM: That really leads me right into the next point that I want to hit on, which is the whole idea of having to have unanimity. The corporation was set up, I believe in 1976. So, 21 years ago the size of the pie that was being raised and distributed was quite small compared to what it is today. We are talking megabucks now.

There is no alternate dispute resolution process, as I understand it, and one of the issues right now that was raised by the Auditor General in the audit is a dispute over whether or not Nova Scotia, for example, is paying more than its fair share of the costs of operation. The Auditor General has pointed out, in his audit, that Nova Scotia should be, if things are

[Page 11]

being done differently, receiving at least $5 million, if my memory serves me correctly, more than we are. So, in other words, we are subsidizing the others. You pointed out that there has to be unanimity and other provinces may not agree with changing formulae because it may not benefit them. Well, if Nova Scotia gets $5 million more then, obviously, somebody else is not going to benefit from it. So, it is not in their interest to make sure that we get our fair share of the revenues coming out of the corporation.

So, it strikes me that the ALC has to have some way to go to get ready for the next century. Most corporations, most bodies, even interprovincial bodies and even international bodies, like NAFTA, do have alternate dispute resolution mechanisms, can go to courts or so on. That strikes me as a serious failing of the ALC, that there is no other outside mechanism or body that you can turn to.

I wonder if you could tell me if anything is being done, being looked at, if there are any proposals being put on the table, to address this so that, in fact, when there are stalemates that it can be looked at, whether it be by the courts or some other independent body, to try to resolve disputes such as that, such as the leasing of your new spaces in Moncton which, in effect, prohibits the ability to regionalize and to spread your jobs across the Atlantic Region so that all benefit? So many of those things seem to be precluded by the fact that there is no dispute settling mechanism.

MR. MACPHERSON: This is a shareholders' issue. It would be very inappropriate for me to speak to it. It is not an issue of operations. It is an issue that has to be resolved by the shareholders among the four shareholders. So, I cannot answer your question.

MR. HOLM: Can you tell me, at least, if the shareholders are looking at that kind of thing?

MR. MACPHERSON: I know that they are looking at a number of issues that deal with those kinds of things, but I certainly could not know where I wish to be specific.

MR. HOLM: Certainly a number of what I see as the key recommendations that are contained in the audit report - I just flicked through the summary of the recommendations and - I noted the ones that you indicated you cannot comment on and, in my mind, some of those issues are the very key issues that we somehow have to get a handle on.

MR. MACPHERSON: Yes, but I am sure you can appreciate that those are very much shareholder policy issues, and it would be most inappropriate for management to tell the shareholders what to do.

MADAM CHAIRMAN: Thank you very much, Mr. Holm.

MR. HOLM: If there is time, I would like to come back.

[Page 12]

MADAM CHAIRMAN: Mrs. O'Connor.

MRS. LILA O'CONNOR: I guess I am a little disappointed because some of the questions I wanted to ask on the recommendations are some of the ones that you say you are not going to answer. I would like to follow up on what Mr. Russell said about whether it is necessary to do business under one roof and can other provinces have a portion of it and you say, no, and you gave examples. I find that difficult in today's age of technology, of faxes and everything we have that you are not close as a phone call, or close as your fax machine, that one department is not comfortable working under the roof with another department.

I would like to ask about some salaries. I understand you have approximately 400 employees? Is that correct?

MR. MACPHERSON: Approximately 430.

MRS. O'CONNOR: In today's times that all provinces have had wage restraints and freezes, have ALC employees had any raises?

MR. MACPHERSON: They had but, more importantly, two years before the governments in Atlantic Canada started taking action to hold back the salaries of their employees, the Atlantic Lottery Corporation initiated an action to do just that. We had 0 per cent and 1 per cent and I think we were approximately two years in advance?

MR. MCAFFEE: A couple of years of zeros.

MR. MACPHERSON: Yes, we had two years of zeros before the governments in Atlantic Canada started to implement wage restraints.

MRS. O'CONNOR: So, you are saying that in the last fours years there have only been 2 per cent increase in salaries?

MR. MACPHERSON: No, I am saying that two years previous to, I cannot remember the actual years, . . .

MRS. O'CONNOR: 1993?

MR. MACPHERSON: Let me see, in 1991-92, we had zero economic increase; 1992-93, we had zero economic increase; 1993-94, we had 1.5 per cent; 1994-95, we had 1 per cent; 1995-96, we had zero; and in 1996-97, we had 1 per cent. So, those are the economic increases that were applied to the Atlantic Lottery Corporation and I think, Mrs. O'Connor, that you will find that they will match, if not better, what has been done by most of the governments.

[Page 13]

MRS. O'CONNOR: Was that across the board or in specific areas?

MR. MACPHERSON: That is across the board.

MRS. O'CONNOR: That is across the board?

MR. MACPHERSON: That is correct.

MRS. O'CONNOR: So, then I take it you are on salary? So, you would have gotten a 1 per cent increase also?

MR. MACPHERSON: I would have received an economic increase of whatever the numbers were that I just read out.

MRS. O'CONNOR: When you advertise for positions, how do you make the selection?

MR. MACPHERSON: We have an interview process that we bring in the prospective employees, either into our offices in Moncton or we will travel to wherever the employees are resident at that time. They will go through a minimum of at least two interviews.

MRS. O'CONNOR: Are employees in proportion to the revenues of the provinces, or are most of them from one specific province?

MR. MACPHERSON: I don't think I can answer that question for you clearly, but let me just say that in Nova Scotia, we have a large number of employees in the segment of GTT, which is the Gaming Terminal and Technology; whereas in New Brunswick, we have a much smaller number. That is because in New Brunswick, the coin operators are there and in Nova Scotia, we do all the servicing and installing the machines ourselves. I would suggest to you, without looking at the hard numbers, that there is probably a slight skew in New Brunswick, but it is probably not as large as the people think it is.

MRS. O'CONNOR: I appreciate that any company can have bad debts, but I find that your bad debts are very low which I am pleased for. How could you have bad debts?

MR. MACPHERSON: Occasionally one of our retailers will purchase a product from us and bounce a cheque. In the case of the video lottery machines, we look to them to deposit the monies in their accounts and they may choose not to or they may choose to deposit the money in the account, write out the bad cheque, and then take the money out before. It is something we monitor very closely and are very strict. We have regulations that we apply to our retailers that say if you bounce a bad cheque, we are going to come after you not only to collect it but we are probably going to insist that if you don't make a deposit in your bank that we have access to to cover off not only that bad cheque but potentially bad cheques in the

[Page 14]

future, we will turn off your machine. We can afford to do that because we are not in competition with anybody. So, we can take some pretty rough measures.

MRS. O'CONNOR: What is the term of a board member and how often can a board member be reappointed?

MR. MACPHERSON: Again, it is the shareholders' discretion.

MRS. O'CONNOR: I would like to make a comment on one of the recommendations from our Auditor General. ". . . integrity is an important element or principle with respect to ALC's operations . . . A draft code of conduct policy giving guidance as to acceptable business practices was developed in 1994 by internal audit and passed on to corporate services for implementation. . . . the policy has never been adopted and the project has been put on hold.". Can you answer why, please?

MR. MACPHERSON: If you don't mind, I am going to ask Roger Blakney to answer that.

MRS. O'CONNOR: It is Page 24, Paragraph 64 in our Auditor General's audit report.

MR. ROGER BLAKNEY: The project was passed along to corporate services and corporate services have been working with a firm called, EthicScan. That has been approved by the board and it is being forwarded to the audit committee meeting at the end of this month for their consideration as well.

MRS. O'CONNOR: So, three years?

MR. BLAKNEY: Correct.

MRS. O'CONNOR: You are hoping to get it implemented by 1998?

MR. BLAKNEY: Hopefully before but, yes.

MRS. O'CONNOR: Okay, thank you. That is all for now.

MR. WILLIAM MACDONALD: Mr. Macpherson, your new building, I believe it was constructed in Moncton - are there eight board members?

MR. MACPHERSON: There are, yes.

MR. WILLIAM MACDONALD: Two from each province?

[Page 15]

MR. MACPHERSON: That is correct.

MR. WILLIAM MACDONALD: At the time of the construction, was that a unanimous decision by all board members?

MR. MACPHERSON: I don't believe it was unanimous but it obviously carried.

MR. WILLIAM MACDONALD: Who voted against it?

MR. MACPHERSON: I am sorry, sir, I don't recall specifically. Do you, Carmen?

MR. MCAFFEE: I don't attend the board meetings. I am not sure of all the deliberations.

MR MACPHERSON: I am sorry, sir, I can't answer specifically.

MR. WILLIAM MACDONALD: I think it was the two Nova Scotia representatives, if I am not mistaken. I wonder if you could clarify that for me and send us a note to that effect, if that is public knowledge.

MR. MACPHERSON: Certainly. We can review the minutes of the organization and report back to you. (Interruption)

I was just told that sometimes those items are not necessarily minuted in that detail because sometimes board members choose not to have abstentions minuted but we certainly will go into it and try and get the answer for you.

MR. WILLIAM MACDONALD: Is that a show of hands at those meetings or is it a recorded vote?

MR. MACPHERSON: Many times it is either approved or not approved. There are occasions but they tend to be the exception to the rule where a shareholder will say, I would like my vote to be recorded but that is definitely the exception to the rule.

MR. WILLIAM MACDONALD: You just do it, as other meetings, as a show of hands.

MR. MACPHERSON: Well, Aye, Nay, show of hands, whatever.

MR. WILLIAM MACDONALD: What is your overall cost for your administration, cost of operation and administration?

MR. MACPHERSON: I am going to defer that to Mr. McAffee, if I may.

[Page 16]

MR. MCAFFEE: Our total operating expenses, excluding some of our direct expenses, in 1997 was about $54 million.

MR. WILLIAM MACDONALD: Have any of the administration received increases since the wage restraint has been on in other provinces? Have you had your salary increased lately?

MR. MCAFFEE: That was a question, I believe, Mr. Macpherson had addressed.

MR. WILLIAM MACDONALD: You said the staff. That included the administration, did it?

MR. MCAFFEE: Oh yes, it includes everybody, all employees.

MR. WILLIAM MACDONALD: Of the three provinces that are into the VLTs, what province do you feel is the most efficient and the most secure with their operation of the VLTs?

MR. MACPHERSON: I would prefer not to answer that question because if I did, then I would be saying to two of my shareholders that they weren't doing it the right way and I don't think it is my position to do that. I, again, have to respect the fact that provinces choose to set policies as to how they wish to have operations run in their particular province and for me to be judgmental would be, I think, most inappropriate.

MR. WILLIAM MACDONALD: You probably know that it is Nova Scotia and you don't want to say it. (Laughter) The operation of the new building, is that costing you more to operate than the former building?

MR. MACPHERSON: Well, first of all you have to understand that we were in five separate buildings before we were brought together under one roof. So there were incredible inefficiencies that we had to contend with. This was an issue that was initially discussed the first time by the board approximately 10 years ago. It was an item that was debated quite extensively. A lot of work was done on it before a final decision was made. So it was not something that we went into lightly. Are there savings? The answer, I would say, is yes. Are they dollar savings? That could be debated because there are a lot of efficiencies to which we have not assigned a dollar value.

MR. WILLIAM MACDONALD: Another thing I was interested in, is there ever any talk of increasing the retailers' percentage of lottery tickets? Some of them depend on that revenue quite a bit in some circumstances. Every now and then I think about that. Has there been any pressure to do that?

[Page 17]

MR. MACPHERSON: Can I answer that this way, by saying that I have just described to you the difficulties that the provinces have with regard to sharing the revenues amongst each other so if I may put your question in the light of are any of the provinces interested in decreasing their own profits, you know the answer is probably not.

MR. WILLIAM MACDONALD: It is probably up to the provinces, then.

MR. MACPHERSON: Again, it is a shareholders' issue that would have to be addressed by the shareholders. There are, obviously, some products that we sell that have much higher commissions than others which can be much more profitable to the retailer. A case in point would be our breakopen tickets which have a commission, I believe, of 12.5 per cent which is obviously a lot higher than 6/49 which is 5 per cent.

MR. WILLIAM MACDONALD: Is there a limit to lottery terminals as far as outlets go? Do you have a limit on that? You say there are 6,000 now. Anybody who opens up a facility can get a permit and operate a lottery terminal in their business?

MR. MACPHERSON: Are you talking about an online lottery product or are you talking about the VLT?

MR. WILLIAM MACDONALD: The lottery tickets, 6/49.

MR. MACPHERSON: If an individual opens a store, what we do is we give them our passive product and once they reach a certain threshold, we will consider them for a terminal. We try and do it in a fair and equitable fashion and I think we actually do carry it out that way. So the answer is yes, there are possibilities. Now we think that because we have been in the business since 1982 that the market is pretty well covered. So the number of terminals we have out there is pretty much static because when a new business opens up, inevitably there is probably another one somewhere down the street or in the next town that has closed down.

MR. WILLIAM MACDONALD: The big prizes, do you think of making them smaller prizes? Say there is a $6 million or $7 million win, people always say to me, gee, why don't they have six winners instead of one?

MR. MACPHERSON: Yes, and I imagine those are the people who didn't win the prize.

MR. WILLIAM MACDONALD: Yes, probably, like me.

MR. MACPHERSON: Yes. The only thing I can say to you with regard to that is that as the jackpot goes up, our sales go up exponentially. So if you are voting with dollars, obviously the majority of people would much prefer to see the jackpots very high.

[Page 18]

MR. WILLIAM MACDONALD: Thank you, Madam Chairman.

MADAM CHAIRMAN: Mr. Huskilson.

MR. CLIFFORD HUSKILSON: Thank you, Madam Chairman. Mr. Macpherson, you had mentioned that there were some 430 employees, total. How many employees would be here in Nova Scotia? I don't recall hearing that.

MR. MACPHERSON: There are approximately 48.

MR. HUSKILSON: What would the average salary be for each, the average salary across the board?

MR. MCAFFEE: The salary, including benefits - benefits are around 12 per cent or 14 per cent - averages out around about $40,000. The reason for that is that we have, as Cluny mentioned, we have a fair number of people in our technical and information technology areas. About 30-some per cent of our employees, or a little bit higher, are involved in the technology side. As you can appreciate from everything that you hear in the papers these days about the shortage of information technology people, those affect our average salaries.

MR. HUSKILSON: So these employees, would they be spread all over Nova Scotia, or would most be in Dartmouth?

MR. MACPHERSON: No, they are spread all over Nova Scotia. I think I mentioned earlier that there is a regional office in Dartmouth and there is also another regional office in North Sydney.

MR. HUSKILSON: We were talking about shareholders; I believe you said there are two per province?

MR. MACPHERSON: There are two members of the board who are the representatives of the shareholder. There is only one shareholder, but each shareholder has the opportunity of appointing two representatives.

MR. HUSKILSON: Also you had mentioned, when there were major decisions to be made, do you have to have a 50-plus-1 per cent, or do all the members have to agree?

MR. MACPHERSON: It depends on what the issue is. I can't actually delineate each particular issue, but there are issues where you have to have unanimity; there are other issues where a simple majority is sufficient.

[Page 19]

MR. HUSKILSON: Going to community events, you were describing the community events that you sponsor. Who decides what events you sponsor?

MR. MACPHERSON: Senior management, usually. In the instance where significant dollars are involved, we will go to the board asking for approval of a specific event. A case in point would be - I can't remember exactly how many years ago, but I think it is almost 15 or 16 years ago - we initially decided to support the Canada Games athletes by giving each athlete a sports bag. If memory serves, that was an issue that was addressed to the board as a proposal that we go down that particular road.

MR. HUSKILSON: I see, so your community events would be sports-oriented?

MR. MACPHERSON: Not necessarily, no. A couple of years ago when the East Coast Music Awards was in Charlottetown, we started to work with the community and with the organizers. That subsequently moved to Moncton last year and both Charlottetown and Moncton were extraordinarily successful. We were asked if we would support it in Halifax late this January and we are doing it with considerable enthusiasm.

MR. HUSKILSON: When communities apply for this, how long does it usually take for a decision to be made?

MR. MACPHERSON: It would vary on the size and complexity of the request. I don't think there is any one time. Obviously fairly simple, straightforward donations or promotional materials are issues that either the vice-president of sales or his promotional director or possibly one of the regional sales managers could make very quickly, on the spot.

MR. HUSKILSON: Are many refused?

MR. MACPHERSON: No, not that many. Most of them are very reasonable. People are looking for either promotional events in the sense that they want our equipment for Rope the Calf or any one of the other number of little things we do. If we have that stuff available for that community fair, we will support it. I would say that the vast majority of them are supported.

MR. HUSKILSON: Just one last question. The facility, you lease it in Moncton, do you? What is the annual cost to lease that facility?

MR. MACPHERSON: I believe the cost is $25 per square foot and there is approximately 86,000 square feet. Is that correct?

MR. MCAFFEE: I think it runs around about $1.6 million per year, if I have the numbers right.

[Page 20]

MR. KEITH COLWELL: I would like to go back to the history of the economic benefits on the wages. You previously mentioned the increases. Could you restate that for me?

MR. MACPHERSON: The economic increases that were given to all employees of the Atlantic Lottery Corporation starting in 1991-92: 1991-92 was zero; 1992-93 was zero; 1993-94 was 1.5 per cent; 1994-95 was 1.0 per cent; 1995-96 was zero; and 1996-97 was 1 per cent.

[10:30 a.m.]

MR. COLWELL: Okay, that was a reply to an initial question that you made to Mrs. O'Connor. You neglected to mention merit increases. Could you give a little bit of information on that? That is cost to payroll, was that right across the board or is that individuals or individually identified?

MR. MACPHERSON: I didn't neglect to do it, I wasn't asked for it. The merit increases across the board to all Atlantic Lottery employees in 1991-92, and I stress these are merit increases, cost to payroll: 1991-92 was 1.8 per cent; 1992-93 was 2.6 per cent; 1993-94 was 2.9 per cent; 1994-95 was 4.2 per cent; 1995-96 was 4.3 per cent; and 1996-97 was 3.9 per cent.

MR. COLWELL: You didn't answer all of my question. The question was, was that across the board or is that aimed at individuals?

MR. MACPHERSON: It was aimed at individuals.

MR. COLWELL: So, basically, if there was somebody who didn't get a merit increase, somebody got a tremendously higher merit increase than the 2.6 per cent average that you show?

MR. MACPHERSON: That would be conceivable, yes.

MR. COLWELL: What would be the maximum merit increase that somebody got in percentage?

MR. MACPHERSON: I would guess 6 per cent. We operate under - I am not sure if you are familiar with this - the Hay system, which means that you have a range for an employee of approximately 80 per cent up to 120 per cent. That is a salary range. When we bring in an employee, we bring them in at the very low end of the range, so as they gain competency and efficiency in their job, they would go through the range up to possibly 100 per cent over a period of five or six years. The initial increases that an employee would get

[Page 21]

on the basis of merit, if they came in at 80 per cent, would obviously be higher as they get closer to the end of the range.

MR. COLWELL: I just did some quick math, and this is average, I realize that, so some people would do a heck of a lot better than this, but somebody who was making $50,000 per year in 1992-93 got a 2 per cent increase, 4.4 per cent, 5.2 per cent, using your numbers. When you compound the economic increase and the merit increase and you add them together, by 1996-97, that person would be making $61,644.36. That is quite a hefty hike; roughly, I think, around a 23 per cent increase in a very short time. Provinces are struggling to make budgets, wage roll-backs and all kinds of other things, and every penny that you take out of wages comes out of the share to the provinces and the taxpayers of those four provinces. I have a big concern over that. Could you explain how you justify that?

MR. MACPHERSON: We do two things at the Atlantic Lottery Corporation. As I said earlier, we bring in employees at the very low end of the scale and we allow them to grow through that scale. What is obviously very important to the four shareholders is they obviously maximize their profits. One of the ways of maximizing their profits is having a very good group of employees; if you don't pay your employees what is competitive in the market place, you are not going to keep them. So, I would suggest to you that the investment that the board of directors chose to make in the employees of the Atlantic Lottery Corporation was one that was well-founded. I think that our profits over the last five to six years more than ably demonstrate that.

MR. COLWELL: Profits are a percentage of efficiencies and the way you operate your operation, and they can always be increased no matter how you operate. So, that is just a real quantitative answer, I feel.

MR. MACPHERSON: I would suggest to you that maintaining that increase is a lot more difficult than one might suggest. If you just apply what you just said, you could quite easily go in there and cut the staff in half. The first year your profits may stay close to where they were, but inevitably they would go down.

MR. COLWELL: Possibly. Could I just ask you one other question? I doubt if you will answer it but hopefully you will. How much did your wages increase since 1992 to 1997, a percentage? I won't ask you what you make but what percentage?

MR. MACPHERSON: In the last?

MR. COLWELL: Since 1992 to 1997, each year? Were you above the . . .

MR. MACPHERSON: No, I am afraid to say I am well below it. What I will tell you is that I have been an employee of the Atlantic Lottery Corporation and have served as its President for almost 20 years. I am a good ways from the top of my scale.

[Page 22]

MR. COLWELL: Okay. On another topic, I have gone through the Summary of Economic Benefits. If you look at the Summary of Economic Benefits Atlantic Lottery Corporation is providing here, it looks like Nova Scotia is coming out on the short end of the stick, if you look at the shareholders' audit in 1996.

If you will look at that, total value of purchases and salaries were up in the $11 million mark which is 19 per cent of the total purchases and salaries. If you look at Other, you see that there is $23.7 million which is 40 per cent of the total purchases and salaries. So where is this other spent, Ontario, Quebec, outside the Atlantic Provinces? It must be because . . .

MR. MACPHERSON: Yes, so it is. Our tickets, for instance, are printed by a very sophisticated method which can only be done in Montreal. There is nobody east of Montreal that can provide those kinds of services for us.

A lot of our equipment which we use for our 6/49 on-line games is equipment that is only available, correction, was only available from the United States, from a company called G-Tech.

We, over the last two, three years, I guess, have been partnering with a company in Moncton called Spielo. We are in a contract with them to build approximately 3,000 new terminals over the next two or three years.

This means that the economic benefit is going to stay in Atlantic Canada. In actual fact, I am pleased to tell you that a very large portion or a good portion of that benefit is going to accrue to Nova Scotia because these machines are going to be assembled in Nova Scotia. We have sourced as best we can, Atlantic companies, to support us in this endeavour.

Let me boast a little bit. It is my ferverent hope that this company will be successful in breaking into the American market and reversing that trend over a few years so that the monies that we had to spend in the United States might now come back to Atlantic Canada.

MR. COLWELL: How does a company, a local supplier that, possibly, might be interested, for instance, in doing the printing, that would invest in the equipment and the technology to do that, what kind of assistance or help can the Atlantic Lottery Corporation provide in that? Would you be willing to do that or do you do that now?

MR. MACPHERSON: Well, we are not into the economic development business in that sense, therefore, we really do not have any funds that would support it. But one of the shareholders may choose to get a company that support. There is a company that I am aware of that was approached a number of years ago and who agreed that they could provide the facilities, I believe it was in Nova Scotia, itself. But the cost to the government at the time was considered to be prohibitive in terms of the economic support that they would have to give them.

[Page 23]

I would be absolutely thrilled if a company came forward and agreed to provide those services. In actual fact, I was very encouraged recently when a company in Newfoundland came to us with a proposal to print our break-open tickets for us. We print, I think, well in excess of 100 million break-open tickets a year.

This company took the initiative, realized that there was a niche to be filled, came forward and put in a competitive bid to us to provide those services and are successfully doing that.

MR. COLWELL: What kind of market intelligence can you supply a company, for instance, the company that came from Newfoundland, or wherever, it does not matter, but a company that is interested in doing a particular project and says, yes, we will develop the expertise, build, buy the equipment, whatever we have got to do; can you give them some information such as what you are paying now per ticket?

MR. MACPHERSON: I assure you, sir, we would give them as much information as we possibly could and support them.

MR. COLWELL: Very specific information?

MR. MACPHERSON: Without breaching contract, as specific as we can get.

MADAM CHAIRMAN: Mr. Archibald.

MR. GEORGE ARCHIBALD: It is with regard to head office that I would like to ask a couple of questions. The new head office, the cost for the office construction and renovations was about $16 million, the computer upgrades were about $31 million, and that comes to $47 million of which Nova Scotia is responsible and is going to be paying 40 per cent over time. I am just wondering what benefit, what study was done to show that there is going to be a greater return to profits to the Nova Scotia taxpayer prior to the board and your corporation entering into this expanded new head office?

MR. MACPHERSON: Well, I think that the second number that you quoted, the $30 million, I think that represents the new terminal that I was just referring to. So there would be benefits that would stem to Nova Scotia simply because, as I said earlier, these things will be assembled in Nova Scotia and there are other suppliers who are providing services to us in Nova Scotia to support that particular project. So there, obviously, were some benefits.

In terms of the $16 million that was used for the renovations in the new building, I can assure you there were Nova Scotia suppliers but at this point I don't think I have the numbers available to tell you what percentage of Nova Scotia's suppliers were actually represented in that number.

[Page 24]

MR. ARCHIBALD: Well, it is safe to say that the computer upgrades, the vast majority of the business, is going to go to people living in the Moncton area?

MR. MACPHERSON: No, not necessarily. As I say, . . .

MR. ARCHIBALD: It may not be necessarily but could you go through your records and furnish the committee then with a breakdown of the number of Nova Scotia businesses that benefitted?

MR. MACPHERSON: Well, it would not be my records that I would have to go through. I would have to go through the company that is producing these machines for us, called Spielo, and they would have to do the analysis of where each dollar was spent and the benefit to the individual province. So I can't undertake on their behalf to provide that information but I certainly will ask.

MR. ARCHIBALD: Thank you. What is the rental per square foot that you are paying for this?

MR. MACPHERSON: I believe I answered that earlier, I think it is $25 a square foot.

MR. ARCHIBALD: Is that the normal rate in the City of Moncton or is that high?

MR. MACPHERSON: Let me put it this way, when we went out for an RFP we had two if not three people come back and this was the competitive rate at the time.

AN HON. MEMBER: It is cheaper than the Sheraton.

MR. ARCHIBALD: Yes, it is cheaper than the Sheraton and probably equally as nice. One of the things though that is of concern to people is the fact that Nova Scotia bears 40 per cent of the cost and truly, Nova Scotians when you look at the employment levels, we aren't getting the benefit that they are from one of the other partners. When Nova Scotia asked to have a cost benefit analysis done prior to moving into a new facility, the board decided that wasn't necessary and went ahead anyway against the wishes of the Province of Nova Scotia, who, in fact, is paying 40 per cent of the costs. Could you explain why the board makes the decisions the way that they do without any thought or regard for the taxpayers of Nova Scotia, who are paying almost half the cost of this thing?

MR. MACPHERSON: No, sir I can't. Again, you are dealing with issues that are dealt with by the shareholders and their representatives. Those are policy issues and I really am not in a position to speak to them.

MR. ARCHIBALD: Well, the Atlantic Lottery Corporation is very independent of government policy, where Nova Scotia civil servants and Nova Scotia public employees have

[Page 25]

not had a raise since a long, long time, the Lottery Corporation has been going ahead with merit increases for the employees, the thought of the Nova Scotia board members on the corporation have been disregarded, there doesn't seem to be enough public scrutiny into the actions of the Lottery Corporation when it comes to the concerns of the Nova Scotia taxpayer. I do think that the audit by the Nova Scotia auditor was a good thing to do. Anyway, that is my question right now.

MADAM CHAIRMAN: Mr. Carruthers.

MR. ROBERT CARRUTHERS: Madam Chairman, rare though it might be, I think I have to agree with Mr. Archibald on these matters. I have some concerns. One, something very basic in regard to setting up a business is that this business would set certain goals within a particular time-frame - be it long-term or short-term goals - and say, now, this is what we want to accomplish over the next year or two. Then it would have some measurement system internally that would say, how are we doing towards our goal; are we getting to where we want to be? In reading the Auditor General's Report - and this is not unique to your outfit; it is common, especially when government has its fingers in things - I wonder if you could explain to us what kind of system you have, to set objectives; and, then, to measure how well you are doing towards those objectives?

MR. MACPHERSON: I think we have a very good system. I believe what you might be referring to, and I am going to take the liberty of jumping ahead here, there was a recommendation, R16, from the Auditor General that said, "ALC should move to a multi-year budget process, and continue efforts to enhance the contents and presentation of the supporting information in the Board's budget manual.". In actual fact, we have a multi-year strategic plan, but the board chose not to accept the suggestion of the Auditor General because they felt they wanted to approve annual budgets.

I am going to do something that I probably shouldn't do. I am going to suggest to you that the reason for this is the board recognized that the business we are in is very volatile, that things can change very quickly. They want to be in a position where they can react quickly, so it isn't to suggest that we don't know what we want to do or where we think we want to be in five years. That is presented in considerable detail and we are in the process of benchmarking some of those issues in a little more detail. The actual fiscal responsibility, they wanted to address that annually. They felt that five years was much too far out.

MR. CARRUTHERS: I would agree that it is the nature of this business that you must be able to adapt quickly and be flexible and I recognize your position that technically you are not a Crown Corporation. You have four governments and it is hard to say you are a Crown Corporation for one particular one, but it is still incumbent upon us, as legislators, to see that there is some accountability in a timely fashion. How could you convince me, as the member for Hants East, that the Atlantic Lottery Corporation can let me and my people know, in a timely fashion, that there are proper controls in place, that things are going along quite nicely?

[Page 26]

MR. MACPHERSON: There are a number of ways. As the shareholder, you have two board members you can ask to assure you that those things are being done; you have available to you the report of the external auditor of the Atlantic Lottery Corporation, KPMG, and they should hopefully be able to give you the same assurances; and occasionally as a shareholder - or regularly as a shareholder - you could ask Mr. Salmon to go in there and make sure that is being done.

MR. CARRUTHERS: I appreciate that and, actually, this has been quite a significant compliment to our Auditor General, this committee and our Finance Minister for having this worked out. It may be much ado about nothing because, in the end, the Auditor General did give us a report and it is an excellent one, certain recommendations are here, but I can't help but feel, when you mentioned with regard to pay increases and that you have to have good people if you are going to be competitive in the business world, and I agree with that. However, the employees of the Nova Scotia, Prince Edward Island and New Brunswick Governments also have that same task. Their pay raises, not in the overall sense but in an individual sense, have been held.

Simply put, I remember when I was in municipal government and 6 per cent and 5 per cent came in. We all remember that massive 6 per cent and 5 per cent, except for; it is always except for. What I mean by that is, we say there is a zero per cent increase in 1993-94. That just means that if somebody at $50,000 retired and you started somebody new, like you said, at the lower range of the scale at $30,000, there was a net saving of $20,000, which meant that the next fellow down the line, he could have gotten a raise of 6 per cent and you still come up with zero.

I have a little problem with that, I will be frank. I have a bit of a problem and I also have a bit of a problem with this competitive stuff. It isn't like Joe's Ticket Sales is down the street competing with you fellows. You have almost a monopoly, just like the power company and the telephone company. I think I would be remiss if I didn't state that I really don't think this kind of pay increase, in today's economy, is warranted. So, you are going to have to help me with this more than just to say you need to pay people in order to compete; so is the rest of the world out there doing that. Can you help me with that?

MR. MACPHERSON: I guess the only way I can help you with this is that earlier I mentioned the fact that we have a Hay system in place. If we hired every employee to the 100 per cent level, we would have zero increases throughout the organization, because they would have reached the top of the scale. They would have been deemed as being fully competent. I think it is irresponsible and I think it would be totally inappropriate for the Atlantic Lottery Corporation to do that, so we don't hire at 100 per cent. We hire somewhere in the 80's, usually as close to 80 per cent as we can, and we say to the prospective employee, as you demonstrate your competency, we will bring you up to close to 100 per cent which indicates to us that you are now a fully competent employee.

[Page 27]

It takes a lot of time. I didn't get anywhere close to that for over 15 years and I know very few employees who are actually at that level at the Atlantic Lottery Corporation. I would suggest to you that there are very few, probably less than 20 out of the 400 who have reached that and they are, generally speaking, employees who have been with us for a minimum of at least 10 years. As I say, do I administer this particular compensation level properly and efficiently or do I just go out and say, all right, we will hire each employee at what the market says is 100 per cent, is competent and go with it?

MR. CARRUTHERS: I can accept that, but I think it is important for us to understand that it clearly would not be appropriate to hire people at the 100 per cent level. As you say, everything would be fixed, and that would be an unwise business decision. I am going to accept your position; it is one that I personally always follow. I think you should hire at the low end of the salary range, because then there is an opportunity for betterment. So, I am going to accept what you say, but I think we have to recognize that when you happen to be a teacher or a person who is working for the Department of Tourism out there, it would be of some concern to them.

I have a responsibility to point out that when we see these numbers like zero, that is an overall thing and it is offset by loss of the higher income people, and that can happen in any business. So, I am going to accept that and I think what you are telling me is that it is a policy of your organization that when you hire people to start, you keep them quite low; I will accept that. I think it is important to point that out.

One last thought that I have had. I realize that you can't be spread out all over God's green earth when you are trying to run a business, I understand that, but I hope that you have procurement policies that are such that at that level, at the procurement level as opposed to the employment, there would be inequity of the four shareholders, somewhat based on population or size or the product that is offered, it might be reflected. Could I feel comfortable with that into your policies?

MR. MACPHERSON: We follow as closely as we can the Atlantic Procurement Act. I would suggest to you that pretty much every purchase that we make is as close as we possibly can. I know exactly where you are coming from. I have considerable sympathy for what you are saying. I personally happen to be a Newfoundlander. I was born, bred and brought up in Newfoundland and moved to Moncton almost 20 years ago when I joined the corporation. So, if I have a prejudice, it is probably to Newfoundland. Yet, Newfoundland probably benefits the least from the Atlantic Lottery Corporation in an economic sense.

MADAM CHAIRMAN: Just before we go around the questioners again, I would like to have an opportunity to say a few things. This being my first opportunity to sit on the Public Accounts Committee, I would like to, first of all, make mention of the fact that the Public Accounts Committee of the Province of Nova Scotia is to be commended for bringing forward the directive to have the Atlantic Lottery Corporation audited. I think a lot of things

[Page 28]

have come forward as a result of that. The Minister of Finance for the Province of Nova Scotia, I think, was an integral part of that.

A number of issues have been raised here that do point out that we think Nova Scotians maybe could benefit more profitably from the Atlantic Lottery Corporation than is presently the case. My understanding is, with 75 per cent of the recommendations now being addressed by the Atlantic Lottery Corporation, that maybe that may come about. The other 25 per cent is just the stakeholders and as you have stated, that is not within your jurisdiction, that other 25 per cent. I think it is incumbent upon the Nova Scotian stakeholder, the Province of Nova Scotia, to make sure that those recommendations are addressed by the province as well.

I want to just touch briefly on the VLT situation. I am not going to ask you to address any of the policy issues attached to that because that is not why you are here. You were reluctant to compare Nova Scotia with other provinces, but perhaps I could give you a question that has a lead-in answer to it. Would you say that Nova Scotia compares favourably with other provinces on our VLT program?

MR. MACPHERSON: I would say they compare very favourably.

MADAM CHAIRMAN: Could you give us the numbers of VLTs per capita in each province and how does Nova Scotia compare?

MR. MCAFFEE: In Nova Scotia, it's 230. You wanted a comparison of the other ones, is that what you asked?

MADAM CHAIRMAN: Yes, I would like to have the number per capita; how we compare as well.

MR. MCAFFEE: The number of video lottery terminals per capita is 230 in Nova Scotia. By comparison purposes, it's 142 in New Brunswick, 184 in Newfoundland and 147 in P.E.I. So, Nova Scotia has the lowest penetration. I should address that by saying that in the case of Newfoundland and Nova Scotia though, as a result of a decision of the government a number of years ago to only have them in licensed establishments, of course, you have less of a distribution than you have in New Brunswick and P.E.I. They have them in corner stores and so on. So, therefore, they have a higher percentage per population.

MADAM CHAIRMAN: So, the policies and the programs within the Province of Nova Scotia, in effect, compare very favourably, then. Whether VLTs are a good or bad thing, I am leaving that aside. It is just the fact that Nova Scotia does have the lowest per capita and the policies and the programs that we have here in the province determine that.

[Page 29]

As far as compliance rules with VLTs, you talked about automatic shutdowns if retailers are not complying. I think that is what you said?

MR. MACPHERSON: I would suggest to you that the compliance on the VLT issue in Nova Scotia is as high, if not possibly higher, than in other jurisdictions. There is obviously a great sensitivity to make sure that we, the Atlantic Lottery Corporation and our retailers, adhere very strictly to any of the rules and regulations that are brought forward. Things such as automatic shutdowns, banners on the screens, availability of information at sites on gambling problems, warnings that are posted, those kinds of things, we take that extremely seriously.

[11:00 a.m.]

MADAM CHAIRMAN: How does Nova Scotia's policy fit into that?

MR. MACPHERSON: Nova Scotia's policy fits into that extremely well. They have asked us to do a number of things that are innovative and we think, certainly, work towards lessening the problem.

MADAM CHAIRMAN: I think the only other thing I would like to refer to, as far as VLTs go, we all know there is no such thing as an illegal machine or a grey machine, as has been stated here in the House of Assembly, but we do know that some confiscations had taken place in the past, pre-1991. Can you give us the numbers pre-1991?

MR. MACPHERSON: I can't give you numbers. I can just give you some thoughts on it. There was a large number of these machines. They were quite prolific. In some areas, they were more prolific than others. They were under no control, no regulation. Many of them, we have reason to believe, were rigged and corrupted in ways that certainly did not play to the players' advantage, but I can't give you numbers.

MADAM CHAIRMAN: How many machines are there now presently?

MR. MCAFFEE: The number of VL terminals in Nova Scotia right now is 3,172. Those are the 1997 numbers.

MADAM CHAIRMAN: I think with that, now it is 11:02 a.m. Perhaps we can go through another rotation. I think Mr. Holm is first.

MR. HOLM: There are a number of issues. I will not be able to get to them all. First, I guess, just an observation. Hopefully, when the Premier is at the next Atlantic Premiers Conference they will address some of the issues, or agree to look at some of the issues, that you can't because they deal with the stakeholders and it seems like that is really where it is going to have to go in order to get some answers.

[Page 30]

An issue that I want to touch on, you may have seen in the press where I and a few others had raised issues a few years ago about the sale of offshore tickets, where tickets are purchased in Nova Scotia and other jurisdictions. Tickets do not actually leave the province but the numbers are sold to people in other jurisdictions. So, it may not be actually breaking the law because the ticket has not left the jurisdiction. My question is, does the Atlantic Lottery Corporation have a policy against retailers selling and providing ticket numbers to people who live outside of the jurisdiction of Atlantic Canada?

MR. MACPHERSON: This is a very sensitive issue because, first of all, I am not a lawyer, but my understanding is that our rules and regulations state that you cannot sell offshore, which actually means that you cannot mail a ticket to somebody living outside of the provincial jurisdiction. I do understand that there are certain technicalities that have allowed what you have just described to happen.

MR. HOLM: Well, it is my understanding that, yes, indeed you can, whether the number is purchased in Amsterdam, Saudi Arabia, Turkey, the United States or British Columbia for export somewhere else that, yes, a ticket can be purchased in Nova Scotia. It is in the interests of the Governments of Nova Scotia and the other Atlantic Provinces to have those tickets purchased here because, of course, the revenues are going to be gained. Those tickets that may cost me $1.00 may be costing somebody in Saudi Arabia or the United States or Turkey $10 or more for that $1.00 ticket. We all know that it goes on.

I know about the legalities and technicalities that if the ticket does not leave the province, it may not be in breach of the Criminal Code, but my question is, does the Atlantic Lottery Corporation have a policy against such a practice and do you monitor the retailers? Surely to Heavens you can look at your machines and see how many numbers, 6/49 and so on, are being pumped through them. I have raised on the floor of the House before some that had pretty inordinate numbers of tickets going through suggesting that, in fact, those numbers may be sold elsewhere, tickets remaining here but being sold to people in other jurisdictions. My question is, do you monitor retailers to find out if they are involved in that practice and if they are, do you shut them down?

MR. MACPHERSON: The answer to your question is, yes, we do monitor retailers but we will only shut a retailer down if we understand that they are in violation of the law.

MR. HOLM: So in other words, if they are not technically in breach of the criminal law but they may be in violation of the spirit of what was intended, then you allow it to go on?

MR. MACPHERSON: I can only answer your question by saying that we do monitor these retailers and if a retailer is in violation of the law, we will shut them down.

[Page 31]

MR. HOLM: Okay, so if I go out and I start a retail business and I get a 6/49 machine or what have you, and I enter into a contract with somebody in Amsterdam to sell 6/49 numbers for $10 apiece, they send me the numbers, I then have the tickets purchased though my machine here in Nova Scotia but the ticket remains in my shop here in Nova Scotia, I am not breaking the law but I am certainly in violation of the intent, I would suggest, of what the law says and, therefore, if I do that you wouldn't shut me down? So if I pump a million dollars worth of tickets through or whatever, the Atlantic Lottery Corporation will allow me to continue on my merry way, having the numbers provided overseas, so long as the ticket remains in Nova Scotia. Is that correct?

MR MACPHERSON: I am not a lawyer. I do not wish to be impertinent, but we would monitor you and if you were in violation of the law, we would shut you down.

MR. HOLM: But you don't have policies, and that is what I am asking you about, policies. I know what the law is and the Atlantic Lottery Corporation obviously does as well because this matter has been looked into by the RCMP and so on; I made sure that I brought it forward to them. My question is, though, does the corporation have a policy against such sales? Not law, policy.

MR. MACPHERSON: We have regulations that we operate with and, as I say, if you were in violation of that regulation, we would shut you down.

MR. HOLM: Do you have a regulation that prohibits that?

MR. MACPHERSON: We have regulations that prohibit it. We have regulations that prohibit you to sell something offshore, a ticket offshore, if you sell it offshore, but the (Interruption) In actual fact, Mr. McAffee just pointed out to me that on some occasions in the past we have written to retailers and have asked them if they are in violation of the law, if they are doing something that is outside of the law, if they are actually mailing tickets outside the province. If they come back and tell us they are not doing that, we don't have a leg to stand on.

MRS. O'CONNOR: I would be very surprised if a retailer would come back and tell you they are breaking the law. That would be a first.

MR. MACPHERSON: Well, that is one way of approaching it but as Mr. Holm just said, he has asked the RCMP to look at it. If the RCMP came to us and said, there is somebody doing something that is against the law, we would take action, very quickly.

MRS. O'CONNOR: I would like to ask a question and it may have already been asked when I was out and I apologize if it has. The space in Moncton, did that go to tender?

MR. MACPHERSON: Yes, it did.

[Page 32]

MRS. O'CONNOR: How many tenders were received?

MR. MACPHERSON: I believe there were two if not three.

MRS. O'CONNOR: Was that the lowest tender?

MR. MACPHERSON: Yes, it was.

MRS. O'CONNOR: You don't feel that $25 a square foot is high and you didn't retender?

MR. MACPHERSON: If we go to public tender and that is the best price we can get, then unfortunately we have to abide by it.

MRS. O'CONNOR: Okay, I guess it depends on what you write.

I would like to go back to the salaries, if you don't mind. Can I ask how long you have been in the position that you now have?

MR. MACPHERSON: Nineteen years and eight or nine months.

MRS. O'CONNOR: You say that you are not at the 100 per cent of the scale.

MR. MACPHERSON: I did say that.

MRS. O'CONNOR: Can I ask what percentage you are at?

MR. MACPHERSON: Apparently I am not in the Hay system.

MRS. O'CONNOR: You are not in the system. I didn't think so.

MR. MACPHERSON: Well, I was removed from the Hay system but I can assure you that my salary is within the salary that you paid the former Chairman of the Nova Scotia Gaming Corporation.

MRS. O'CONNOR: In reading over the human resources in the Auditor General's Report it says that, I believe that the Hay system was adopted in 1984 or 1997?

MR. MACPHERSON: In 1984?

MRS. O'CONNOR: Well, it was discussed in 1984 but I believe it became effective April 1, 1997?

[Page 33]

MR. MACPHERSON: Oh no, I think we were in the Hay system long before that, at least 10 years before that.

MRS. O'CONNOR: At least 10 years. In April 1, 1996, there were administrative, professional and management staff that received increases that were not in the economic increase. How many people in administrative, how many people in professional and how many employees in management received - well the administrative received a 3.3 per cent increase, professional 3.1 per cent increase and management a 7.7 per cent increase above the 1 per cent economic increase. Is this also plus the merit?

MR. MACPHERSON: I am not sure. Let me just give you some background on that. A couple of years ago management went to our board of directors and said, this is the situation with regard to our turnovers, our concerns about what is equitable pay in the market place. So they allowed us to go out and survey 34 companies in Atlantic Canada and what came back was that the Atlantic Lottery Corporation was below those other 34 companies in Atlantic Canada and they included public companies and private companies and the proposal was to make an adjustment which would bring us into par with those companies and that is why that particular per cent took place. I am not sure if it included the economic increase or not.

MRS. O'CONNOR: It didn't include the economic increase, the 1 per cent. What is the turnover rate of employees at the Atlantic Lottery Corporation?

MR. MACPHERSON: I don't know offhand but I could certainly find out that number.

MRS. O'CONNOR: Would you please. I think it is worthwhile to work for Atlantic Loto and not for anyone else.

MR. COLWELL: I want to get back to the salaries again, this is a great concern. In a time when, as I said, you had an approximately 23 per cent increase, that is on an average if you add up your economic increase and merit increases and you said that some of the people are already at top of the scale . . .

MR. MACPHERSON: Very few.

MR. COLWELL: Some of them are.

MR. MACPHERSON: Yes, out of 400 some of them are, but they are very few.

MR. COLWELL: So basically some of the people could have got raises probably 40 per cent or 50 per cent between 1992 and 1997? I think that would be typical with the number of people you have.

[Page 34]

MR. MACPHERSON: It certainly is not typical but I would not deny that there are possibilities that there could have been some employees at the lower end of the scale at the Atlantic Lottery Corporation who could have received those kinds of increases. But I point out and I stress the lower end of the scale.

MR. COLWELL: Yes, perhaps, but you have no information here to back that up. How much do you make a year?

MR. MACPHERSON: I make exactly what you paid your Chairman of the Nova Scotia Gaming Corporation.

MR. COLWELL: I am not familiar with what that is. What is it?

MR. MACPHERSON: $105,000 a year. I have been at my job, as I said a moment ago, as the President of the Atlantic Lottery Corporation for 20 years.

MR. COLWELL: Do you get expenses on top of that?

MR. MACPHERSON: If I travel, yes. I mean, do I pay for myself to come down here to see you today? The answer is no, I will be reimbursed.

MR. COLWELL: Are you supplied with a vehicle?

MR. MACPHERSON: I am supplied with a vehicle.

MR. COLWELL: What type of vehicle?

MR. MACPHERSON: 1993 Jeep.

MR. COLWELL: What other perks go with the job?

MR. MACPHERSON: That's it.

MR. COLWELL: There are no other entertainment allowances or anything like that?

MR. MACPHERSON: No.

MR. COLWELL: Nothing? And the only expenses you get is when you travel?

MR. MACPHERSON: When I travel I get the same rate as every other employee who works for the Atlantic Lottery Corporation. I get a per diem of $30 for my three meals, I get reimbursed for any other expenses that I may incur that are reasonable and those expenses are reviewed by the sitting Chairman of the Board of the Atlantic Lottery Corporation.

[Page 35]

MR. COLWELL: What is the mileage that an employee gets for travel?

MR. MACPHERSON: It is 29 cents per kilometre.

MR. COLWELL: So that is comparative to what the other provinces do?

MR. MACPHERSON: Very much so. I would like to point out to you, sir, with regard to our expenses and our salaries, we do pay very close attention to what is happening within the other provinces and what is happening within the region.

MR. COLWELL: That is good. Just back on the topic of economic input, impact on the provinces. Nova Scotia does very poorly on the purchase and salaries. Say the net revenue is 39 per cent yet we only receive 19.2 per cent benefit to the province when it comes to purchases and salaries. I have already asked you this question. I think this is something that has to be corrected. I see New Brunswick is in a reasonably good position. They get a little bit more back than they put in and P.E.I. is the best. They get probably almost five times back to what they put in. Again I go back to the fact, what is the Atlantic Lottery Corporation, in policy, trying to do to correct that for Nova Scotia to make sure we have more economic impact where we badly need it.

MR. MACPHERSON: Again, it is a policy issue that obviously has to be addressed by the shareholders but what we do as far as the purchasing policies of the Atlantic Lottery Corporation is to follow the Atlantic Procurement Act as very best we can and to the closest we can and that is a very competitive process and I am sure you are very much aware of it yourself.

MADAM CHAIRMAN: We all note the heat just came on, just to record that.

MR. RUSSELL: Mr. Macpherson, with regard to the property that you are leasing in Moncton, as I understand it, you are paying $25 per square foot by your own admission but on top of that, you are paying $16 million for property improvements to move in and take possession of that property.

MR. MACPHERSON: I am not sure of that number that you are using.

MR. RUSSELL: Okay, there are certain property improvements that have to be made before you move into that property. Are they being paid for by the landlord, by the owner of the property, or are they being paid for by the Atlantic Lottery Corporation?

MR. MACPHERSON: There are some improvements, obviously capital improvements, that are being made by the landlord but there are other improvements that have to be made by us. We have to buy the equipment that we are going to use in those facilities.

[Page 36]

MR. RUSSELL: But how about the building itself?

MR. MACPHERSON: We are trying to get the numbers for you here. First of all, I am not sure where the $16 million is coming from. It is not a number I am familiar with.

MR. RUSSELL: Okay, we are a little restricted for time. So, on top of those property improvements, whatever the number is, you are paying $25 per square foot?

MR. MACPHERSON: Yes.

MR. RUSSELL: And you have a 10 year lease?

MR. MACPHERSON: We have a 10 year lease, yes.

MR. RUSSELL: Is there any clause within that lease agreement that enables you to break the lease?

MR. MACPHERSON: Not that I am familiar with.

MR. RUSSELL: And this is a commitment by the board so that in the event, we will say one of the provinces decided to abdicate from the Atlantic Lottery Corporation, they would still be responsible for the remainder of that lease. Is that correct?

MR. MACPHERSON: Technically that would be my understanding. If they came to some form of agreement with the other shareholders, there may be another way out of it but I would suggest to you that if a province chose to get out of the Atlantic Lottery Corporation, the costs that they would incur in setting up their own would be considerably higher than any monies that they may have expended on the lease. We had an economic benefit study done recently which indicated that the cost to the four Atlantic Provinces to set up their own individual lotteries would be something in excess of $30 million.

MR. RUSSELL: Maybe that is so, however, there would be certain advantages, for instance, that would accrue to Nova Scotia with regard to purchasing and with regard to staffing.

MR. MACPHERSON: There would be certain advantages with regard to purchasing and possibly with regard to staffing. There would be considerable disadvantages as well.

MR. RUSSELL: Our disadvantage at the present time is that we are at the short end of the stick. In other words, as a majority revenue provider to the Atlantic Lottery Corporation, we are not getting our fair share of the operating expenditures and the staffing requirements of the Atlantic Lottery Corporation.

[Page 37]

MR. MACPHERSON: That is your opinion, sir. It is an issue that has to be discussed by the shareholders. I would suggest to you that there are probably a number of other items that go far beyond the reaches of the Atlantic Lottery Corporation that politically, from a point of view of the four Atlantic Provinces, would also have to come into consideration.

MR. WILLIAM MACDONALD: Sir, addiction to VLTs, are you concerned with that or do you leave that up to the provinces?

MR. MACPHERSON: From a corporate point of view, we are very quick to do what we can to bring about whatever policies the individual provinces would like to have incorporated into the program. It is, obviously, in our best interests to try to do everything we can to reduce the amount of concerns that people have with this particular program so that anything that we can do to improve it or to assist to relieve the fears that people may have of the program would be to our best advantage.

MR. WILLIAM MACDONALD: The dollars that the province has put forth for addiction and rehab and so on and so forth, that comes out of the province's budget rather than your budget.

MR. MACPHERSON: It is because each individual province has, as I am sure you can appreciate, different kinds of programs.

MR. WILLIAM MACDONALD: Do you have any idea if there are any effects that you can see that are good? Do you monitor it that close to be able to . . .

MR. MACPHERSON: We monitor it to the point where we have shutdowns, we have banners that come up on the screens indicating that this can be dangerous to your health and that kind of thing. In monitoring these machines, we feel that there have been certain improvements, especially when it comes to some of the shut-down programs that we have introduced but to be more specific than that, no, I couldn't.

MR. WILLIAM MACDONALD: What exactly do you mean by shutdowns?

MR. MACPHERSON: We shut the machines off at a pre-designated time. (Interruption) I am not sure in Nova Scotia exactly what the time is. The hours of operation for machines in Nova Scotia are from 10:00 a.m. until 2:00 a.m. so that if an individual is in a bar before 10:00 a.m., he can't play the machine, it is non-functional. If he is in the bar after 2:00 a.m., he can't play the machine because the machine automatically shuts down.

MR. WILLIAM MACDONALD: If an individual sat there for 12 hours and played the machines, is there anybody available to say, hey this is long enough? (Interruption) Like George Archibald or George Moody.

[Page 38]

MR. MACPHERSON: I would suggest to you that there would be a responsibility of the owner of the establishment but I would also suggest to you that you are talking about something that is a very great exception.

MR. WILLIAM MACDONALD: I appreciate that. Thank you.

MR. CARRUTHERS: It appears today that you taking a great deal of heat from us and I just want to say that generally speaking the Report of the Auditor General is a favourable one and I think I would be remiss if I didn't point it out. However, I was impressed with the Auditor General's Report and the work he has done and he came up, I know you referenced it earlier in your comments, with a number of what I consider critiques that are aimed at improving the business and these recommendations are summarized in Appendix 12 in his report.

I know you made some reference to that. They look like very reasonable recommendations. For instance, he mentions accountability to the Legislature. I understand that the shareholders must make the decision on many of these recommendations but some are management-oriented.

I wonder if you could just give us a little more detail as to how, as a corporation, you have looked at these recommendations from our Auditor General and over what time span you might plan on implementing some of these recommendations?

MR. MACPHERSON: Well, let me say from an overall point of view that irrespective of how we appeared originally when the Auditor General wanted to come in, we worked very closely with Mr. Salmon, and Mr. Black who is the Auditor General of New Brunswick. It was a very worthwhile and very beneficial operation.

As I think I said earlier in my opening remarks, 75 per cent of those items that were made as suggestions that we could work on immediately, we did. In many instances, we have already completed the work, adopted them and the balance of them, we are working towards the completion of them.

While the Auditor General was very complimentary to the Atlantic Lottery Corporation with regard to its operations, its management and its integrity, I would like to go on record as saying that the work that they did and the cooperation that we had with them was first class. I mean, it was very professional and it was a very worthwhile experience.

Having said that, we are now down to approximately eight items that are left that are issues that have to be dealt with by the shareholders. We are not in a position to deal with them and we will take our direction from the shareholders who, inevitably, will tell us what they want us to do.

[Page 39]

I believe there was one item that I addressed earlier that was in those issues that were shareholder decisions, wherein, the Auditor General said that we should have a five year budget and the board said, no, we want to do your financial budgets annually. We want you to have a five year strategic plan which is basically a compromise.

The fact that the Auditor General of Nova Scotia could make a recommendation to the other three shareholders and have them, together with management, accept 75 per cent of them right off the bat without even questioning it, obviously speaks to the integrity of that report.

MR. CARRUTHERS: Well, I agree and it is nice to end on sort of a good note.

I hope in the future - perhaps next year - that we are going to have an opportunity, perhaps, to interview and discuss matters with some of the representatives of the shareholders because there are questions that really can only be answered by them. I look forward to, perhaps, having that opportunity in the future. I thank you for your time.

MR. MACPHERSON: Thank you, sir.

MADAM CHAIRMAN: Thank you very much. Any further questions? If not, I would like very much to thank the Atlantic Lottery Corporation, Mr. Cluny Macpherson and staff, and observers for attending today. We have another issue that we have to deal with ourselves. We do thank you for your diligence, and for attending today and responding to the questions in a manner that was very polite and good information came forward. Thank you very much.

MR. MACPHERSON: Thank you, Madam Chairman, it was our pleasure.

MADAM CHAIRMAN: There is one issue here that has to be addressed. I have been given a letter addressed to Mr. John Leefe, Chairman:

"Please consider this as a request to have Mr. Ralph Fiske, former Chairman of the Gaming Corporation, to appear before the Public Accounts Committee at the next meeting, in order that this Committee may address concerns regarding the various contracts for which the Corporation is responsible. Mr. Fiske is the first and only person to hold the position as Chairman of the NS Gaming Corporation and as such is intimately aware of the reasoning behind the various provisions of the contracts and legislation governing the Corporation. In order to get a complete and accurate picture of this matter, it is essential to have Mr. Fiske attend Public Accounts.

Thank you for your consideration.

Sincerely, Ron Russell, MLA, Hants West."

[Page 40]

MR. RUSSELL: Madam Chairman, I so move.

[11:30 a.m.]

MADAM CHAIRMAN: Do I have a seconder?

MR. ARCHIBALD: I second the motion but you don't need one.

MADAM CHAIRMAN: Is there any discussion on this?

MRS. O'CONNOR: We discussed this at last week's meeting and by a letter that Mr. Fiske wrote, himself, he said in the letter that he felt that someone else should come in his place so I am not sure why we have this brought up again today when, like I say, we discussed it last week and it was in the letter from Mr. Fiske.

MR. HOLM: Madam Chairman, I had actually made the motion at last week's meeting that, in fact, Mr. Fiske be invited and that was defeated by majority vote. I would take exception, however, to the comment that was just made that Mr. Fiske said that he didn't want to attend.

MRS. O'CONNOR: I didn't say that.

MR. HOLM: I believe the wording, and I am going by memory in this, is that he expected - I think expected was the word - that we would want to invite a replacement as he was no longer the chairman. I don't actually have the letter in front of me but I think that was the wording that was used and I would not interpret that to say that he didn't want to appear. Regardless whether that is his wish or not, Mr. Fiske was indeed the head throughout its whole life, throughout the whole history of the corporation. I think that he does have extremely important information that can really only be made public through a forum such as a Public Accounts Committee meeting where we can ask the pertinent questions. I wholeheartedly support the request that was made by Mr. Russell and hopefully the committee will reconsider the decision that it had made previously.

MADAM CHAIRMAN: Any further comments?

MR. CARRUTHERS: Madam Chairman, I guess we would have to go back some time but just looking over our agenda I see that the next session does not have the advantage of a briefing session before it. (Interruptions) Well, that may be but maybe right now I have the floor and I just wonder, I can't recall why does everything else have a briefing session before it but not the Nova Scotia Gaming Corporation? Just refresh my memory. How did that happen? I think perhaps the Auditor General . . .

[Page 41]

MR. ROY SALMON: Could I speak to that? The initial discussion was that the audit of the Atlantic Lottery Corporation would be dealt with at two levels, first with the officials from ALC to deal with the management issues and then the issues that Mr. Macpherson was not able to deal with today in terms of the shareholder could be dealt with with the officials of the Nova Scotia Gaming Corporation.

MR. CARRUTHERS: Yes, I think that is probably it exactly. I just wanted to refresh my memory in that regard. It just seems to me that everyone else that we request to come, when we request them to make an appearance, all the other groups, we request it of them and they send the officials that they designate. We don't tell them who to send. We request that they send their officers to appear for examination in front of this committee. We have done it with everyone else and I see no reason to deviate from that pattern. If they feel that Ralph Fiske should come here, then they will send Ralph Fiske. If they feel that someone else should come - that is what we have done with everybody else. Why would we suddenly switch horses in midstream, 15 minutes before the next meeting and come up with this? We want to examine the Nova Scotia Gaming Corporation. That is the purpose. That is what we set on our agenda. I see no reason why they should be singled out any differently than the Atlantic Lottery Corporation. We didn't ask them to send that particular fellow who was here today.

MR. RUSSELL: Madam Chairman, Mr. Fiske, as the past-president is privy to the information, I think, that this committee would probably want to determine so I would suggest that Mr. Fiske and Mr. Fiske alone would be the source of the information for the committee members.

MADAM CHAIRMAN: As you may be aware, this was dealt with last week and there were a number of comments made regarding this issue. It was left at the last meeting that we contact the Nova Scotia Gaming Corporation and ask them to identify who they would send. It is my understanding that the Vice-Chairman is now the Acting Chairman, or standing in that stead, has been a member of the corporation as well as a representative on the ALC and she is the person who is intended to come.

So now are we ready for the question? (Interruption)

MR. ARCHIBALD: Obviously, the members of the committee are afraid to have Mr. Fiske come in. They think he may have something that you don't want the public of Nova Scotia, the taxpayers, to find out. Now, if this committee is trying to hide behind the letter and trying to hide behind the suggestion by one of the committee members that we should follow tradition and let anybody that they want to send, fine. Really and truly, it looks very much to me as though this committee is trying to take part in some kind of a cover-up of some information that they don't want taxpayers to know.

MADAM CHAIRMAN: I think that is a totally inappropriate comment to this issue. The Nova Scotia Gaming . . .

[Page 42]

MR. ARCHIBALD: Now, the chairman won't let anybody speak. You want to run the meeting. I can see that this committee is trying to hide and the chairman is one of the perpetrators of the hiding. (Interruption)

MADAM CHAIRMAN: That is out of order.

MR. CARRUTHERS: On a point of order. I take personal exception to that. That is an insult to a member of this House.

MADAM CHAIRMAN: Order, order.

MR. CARRUTHERS: I think that comment should go to the Speaker. As far as I am concerned, I don't care if Ralph Fiske comes or anybody else comes to the committee, God bless him. If he comes, more power to him. I don't see why we would deviate from this particular interview than we have done with anybody else. Because that member does not seem to like the fact that he does not get his way, (Interruptions) I consider that an insult to the members of this committee to imply such a thing. I would ask him to retract it. (Laughter)

MADAM CHAIRMAN: I fail to see any humour, Mr. Archibald.

MR. ARCHIBALD: I find it most ironic that the member feels that I am insulting when I am trying to stick up for the taxpayers and the well-being of Nova Scotia by making a simple request that we have Mr. Fiske attend this committee meeting. He would do no harm. He has a lot of information and this committee is simply here for the benefit of gleaning information on behalf of the taxpayers of the province. Mr. Fiske could help, aid and assist us in that adventure and I do not think that this committee does itself one bit of credit by trying to say that Mr. Fiske should not be here. I think that Mr. Fiske should be here.

MR. WILLIAM MACDONALD: Madam Chairman, Mr. Fiske is no longer with the commission. He has resigned. So, I don't see that it is really relevant anymore. I think that the next person in line should be the person to come to speak for the commission. Why should he come if he does not work for them anymore? (Interruption)

MADAM CHAIRMAN: Are you ready for the question?

MR. HOLM: As a final comment, I certainly believe that Mr. Fiske has a history and has the intimate knowledge of the corporation far better than any other individual who has been with the corporation throughout this period of time. I continue to believe that he is the most appropriate person to come here and that he has the wealth of information that we can ask. Certainly, in a public forum in the Public Accounts Committee, members and those who are invited guests are expected to speak openly and freely in response to questions. Madam Chairman, I would even request that on the vote that is to be taken on this motion that it be,

[Page 43]

in fact, a recorded vote so that members can very clearly state their position on who should be invited. (Interruptions)

MADAM CHAIRMAN: Are you ready for the question?

I guess I need a little assistance. Read the names.

[Ms. Stevens calls the roll.]

YEA NAY

Mr. Ronald Russell Mr. William MacDonald

Mr. George Archibald Mr. Keith Colwell

Mr. John Holm Mrs. Lila O'Connor

Mr. Robert Carruthers

MS. STEVENS: Mr. Huskilson is absent. For, 3. Against, 4. So the Chairman does not have to vote because it is not a tie.

MADAM CHAIRMAN: So, the vote is carried in the negative.

MS. STEVENS: That is right. The vote is carried in the negative.

MADAM CHAIRMAN: The next meeting date, if you will note on your agenda, is Wednesday, October 22nd in the Legislative Chamber of Province House, 9:30 a.m. to 11:30 a.m.

[The committee adjourned at 11:40 a.m.]