Legislative Assembly of Ontario

GOVERNANCE BY BOARDS OF DIRECTORS

CONTENTS

Tuesday 6 September 1994

Governance by boards of directors

STANDING COMMITTEE ON PUBLIC ACCOUNTS

*Chair / Président: Cordiano, Joseph (Lawrence L)

*Vice-Chair / Vice-Présidente: Poole, Dianne (Eglinton L)

Bisson, Gilles (Cochrane South/-Sud ND)

*Callahan, Robert V. (Brampton South/-Sud L)

*Crozier, Bruce (Essex South)

*Frankford, Robert (Scarborough East/-Est ND)

Marchese, Rosario (Fort York ND)

Marland, Margaret (Mississauga South/-Sud PC)

*O'Connor, Larry (Durham-York ND)

*Owens, Stephen (Scarborough Centre ND)

*Perruzza, Anthony (Downsview ND)

*Tilson, David (Dufferin-Peel PC)

*In attendance / présents

Substitutions present / Membres remplaçants présents:

Abel, Donald (Wentworth North/-Nord ND) for Mr Marchese

Jackson, Cameron (Burlington South/-Sud PC) for Mrs Marland

Wiseman, Jim (Durham West/-Ouest ND) for Mr Bisson

Also taking part / Autres participants et participantes:

Peters, Erik, Provincial Auditor

Clerk / Greffier: Decker, Todd

Staff / Personnel: Anderson, Anne, research officer, Legislative Research Service

The committee met at 1009 in committee room 1.

The Chair (Mr Joseph Cordiano): Members of the public accounts committee, welcome back to all. I guess this is the fall; we should get down to some serious work. When are we coming back, by the way? When are we sitting again?

Mr David Tilson (Dufferin-Peel): Hallowe'en.

The Chair: That's a fine date.

Mr Cameron Jackson (Burlington South): Are you asking us or are you asking them?

The Chair: I'm asking you; I haven't heard yet.

GOVERNANCE BY BOARDS OF DIRECTORS

The Chair: This morning we have on the agenda the issue of governance by boards of directors. This was something raised over and over again with respect to non-profit housing. I believe we have the auditor making a report to us this morning, so we'll take it from there.

Mr Erik Peters: Good morning, ladies and gentlemen. Just a quick overview on governance: The presentation will consist of a few introductory remarks, we have a tape to view that takes about 31 minutes, and afterwards I have some further comments on governance.

In Ontario there are several thousands of governing bodies -- our count is well over 7,000 -- responsible for organizations operating in health, housing, education, community and social services and many other government service and program areas. Each year these bodies administer a significant amount of public funds -- for 1993-94 that amount was over $30 billion -- as well as a vast array of human and physical resources.

The magnitude of the contribution that these organizations make to the physical, economic and social wellbeing of this province would be difficult to overestimate. Given the importance of these organizations in the life of the province and the fact that they are so heavily dependent on taxpayers' money, it is clear that the quality of their governance is an important issue and one which merits that time and effort be invested in its improvement.

In the private sector, boards of directors exercise significant influence on corporate policies and performance, and great care is taken to select board members who will make optimal contributions to the corporate wellbeing.

Comparable care should be applied in the public sector. Individuals appointed to serve on boards of directors or similar governing bodies ought to, and fortunately very often do, effectively serve the purpose of the organizations they govern and ensure that those organizations are performing well.

The recent events that led this committee to deal with the qualities of governance emphasize the importance of good governance in the administration of public resources. I am referring to the recent hearings of this committee on the affairs of Houselink Community Homes Inc and the Supportive Housing Coalition. It was as a result of those hearings that the committee made a number of very useful recommendations on service delivery for non-profit housing, involving quality of governance by the boards of directors of all organizations providing such services.

So the good news is that this committee has taken a first and important step towards dealing with governance. Specifically, the committee recommended:

"Ministries should reassess their program delivery mechanisms and the effectiveness of the organizations they have established as their service delivery agents to operate government-funded non-profit housing. Such a reassessment should be conducted to improve controls over these organizations and to make service delivery more economical and effective."

This presentation is intended to stimulate discussion as to the next steps this committee can take to improve governance in public organizations.

One such step is to consider the points made in the video which is upcoming. Its central proposal consists of six principles of effective governance. A brochure listing these principles is provided in the material distributed to you. That avoids your making copious notes or trying to write them down as the video proceeds.

Ms Dianne Poole (Eglinton): Auditor, I apologize for interrupting, but I was looking through the brochures. The CCAF: It never really identifies what those letters stand for.

Mr Peters: I was about to come to that one and introduce the tape. It's the Canadian Comprehensive Auditing Foundation. I am one of the governors of that foundation; it comes with the territory of my job.

After viewing the video, I would like to give you some additional information on governance and on the relationship between governance and accountability. I will also suggest to you some areas for discussion which may prove useful to your making further recommendations regarding improved governance.

Could we turn on the video, please.

Video presentation.

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Mr Peters: As you can see from the foregoing, the most critical element of good governance is the quality of people who are members of governing bodies. What qualities should be expected of a member? One would expect honesty, good faith, diligence, loyalty, absence of conflict of interest, skill, prudence and acceptance of responsibility. What qualities should the board as a whole have? One would expect making the right decisions, achieving the expected results, and fulfilment of its fiduciary and management duties. Let me focus for a moment on these two duties and what they mean in terms of governance.

Fiduciary duty: For many people, fulfilment of fiduciary duty means taking great care in handling money through cash controls, careful purchasing procedures, audits, spending money appropriately and safeguarding assets. Certainly all these activities fulfil fiduciary duties. However, they are not the fiduciary duties of a governing board -- they are not -- but rather those of management. A board of directors should essentially put its fiduciary perspective into a broader context and focus its attention on the results to be achieved by the organization; for example, by specifying the quantities and the nature of benefits to be produced, the recipients to be benefited and the acceptable cost of those benefits. Fiduciary responsibility, then, means getting value for value spent.

This does not mean a board can ignore its fiscal responsibility. However, a good board is aware that its job is not fiscal management but the governance of fiscal management. Therefore, the board job is not to do, but to set expectations and criteria for performance and to monitor performance against those expectations and criteria. In practice, this is often not done by boards of directors, which frequently get caught up with examining management reports and copious detail without having established criteria on hand. Monitoring is then often neither rigorous nor focused, and in these cases it actually works to disempower the chief executive officer and the management team when the board ought to be doing just exactly the opposite, namely, empower the CEO and the management team to take the action necessary to fulfil the board's performance expectations.

Managerial duty: Managerial duty includes supervising the chief executive officer, providing guidance and policy direction based on adequate knowledge, and complying with legal requirements such as properly maintaining the books, records and minutes, enacting bylaws, ensuring the proper election of officers and, last but not least, appointing an auditor.

Next I would like to describe briefly the way in which boards of directors fit into the accountability framework which you, this committee, have asked me to pursue.

(1) The Legislature or the ministry sets objectives and assigns the responsibility for meeting them to a board of directors. That's step one.

(2) Both parties agree on the specific results and the performance to be achieved, as well as how these results and performance will be measured. This step requires a performance contract or memorandum of understanding.

(3) The Legislature or ministry gives the board of directors the authority necessary to carry out its responsibilities and to achieve the specific results, or, in other words, it empowers the board to do its job.

(4) The board of directors then sets its objectives, decides on specific results and performance to be achieved by the organization. The chief executive officer is informed of these aims and is empowered by the board to achieve them.

(5) The CEO reports periodically on results achieved and demonstrates that responsibilities have been carried out appropriately. This process is termed "accounting for results."

(6) After receiving assurance through its objective and independent evaluation, the board of directors reacts to and acts upon the results that the chief executive officer has reported.

(7) Finally, coming full circle, the Legislature or ministry receives, in keeping with the reporting regime it has established, reports from the board of directors about the organization's performance.

That is the accountability framework as we see it.

At this point, I would like to let you know that legislative researcher Anne Anderson, whose assistance I gratefully acknowledge, and I have available on request the following resources on governance which you may find worthwhile.

One is a document entitled Unfinished Business, which is a report on the appointment process to boards of directors of federal crown corporations. It's done by Gérard Veilleux -- former president of the CBC, incidently -- of the Canadian Centre for Management Development. This report has several appendices, of which appendix C, the Code of Best Practice, authored by the Cadbury commission in the United Kingdom, is included in the folder which we have provided to you.

The second document -- I believe it has already been made available to you, but it could be made available to you again -- is Liability of Directors on Volunteer Boards, and it's done by Avrum Fenson of Ontario's Legislative Research Service.

The next document available to you is a document entitled Where Were the Directors? This is prepared by the Toronto Stock Exchange committee on corporate governance, the Peter Dey committee, and it's subtitled Guidelines for Improved Corporate Governance in Canada. It is a draft report, and it does cost money, $10 a copy to get.

The last document I wanted to mention to you -- and this may be also worthwhile for Hansard to note and I can turn a copy over to them -- is the script of the entire video you have just seen.

If you are interested in obtaining any of these items, please let either Anne or me know.

Among the handouts in your folder, I would like to highlight a document entitled Governance Information Check-Up. This document clearly links governance with effectiveness, which is a link that must be clearly established to improve governance. It has also, if you want to further understand accountability, a number of very good and sound questions that should be asked in respect of effective governance.

I'd like to conclude by identifying some of the issues related to governance that you may wish to explore as a committee and which could lead to future recommendations for improved governance.

First, what should the criteria be to determine if a program or service should be delivered by an organization run by a board of directors? In other words, which programs should be administered directly by a ministry, and in what cases should there be a board of directors appointed to deliver the service or deal with a particular issue?

Second, what kind of selection, election or appointment mechanism should be used for board members? As some of you know already, there is an appointments secretariat in the government which covers some boards but not all boards, and some discussion might be on the mechanisms that should be in place to do this.

A further question is, how should the knowledge and qualification requirements of board members be assessed? Who should do the assessing?

How should performance expectations and results for entire boards of directors be set?

Last but not least, is there an obligation by the government, central agencies or ministries to provide orientation and training for board members?

These are some of the points I thought you might want to consider in your deliberations.

I am firmly convinced that any action by the public accounts committee to improve the governance of the many organizations which deliver government-funded programs and services in Ontario will better the administration and the use of public funds and resources in Ontario.

That's the end of my presentation, Mr Chairman.

The Chair: Thank you, Mr Peters. I suppose we'll just take a list and go from there, unless members want me to apportion time to each caucus. How would you like me to go about this? We'll just take a list. Ms Poole.

Mr Jim Wiseman (Durham West): And an approximation of equality of time.

The Chair: I'll be fair.

Ms Poole: A list to be revisited at any time. How about that?

Auditor, thank you for your presentation. I think it was very well done and highlighted a number of the issues we've talked about on this committee over the last six or seven years.

The question I have for you relates to how you implement this plan. Prior to your term as auditor, under the mandate of the previous auditor, there were audits done of three universities; this was in the late 1980s. There was great objection by the universities about the government intervening to do an audit, and there were accusations that if the government had any type of direct role this would impede the universities' academic freedom. They were extremely reluctant, to the stage of getting legal counsel involved, to have the government have any role in the governing of their institutions.

In a way, this is the same message we heard on the video today, which is that the government should set the rules and then get out of the way. My concern, with the university example, is that there might be many agencies, crown agencies, boards, that aren't even willing to have the government set the rules. How do you see this working? How do you see putting this in place? Do you see it through the legislative framework, or do you see sending out a proposal to all the various agencies and boards in Ontario and asking for their input? How do you see it unfolding?

Mr Peters: Actually, in a number of ways. The first step in that particular direction has already been taken, fortunately, by this committee in November, when it dealt with the Task Force on University Accountability. That has pushed accountability by the universities to such an extent that they are now willing to deal with this issue, and we continue to work with that community. In fact, I met with the people from the Council of Ontario Universities a few weeks ago, and they have actually invited me to make this presentation to them in October, for further presentation to the various senates and boards of the universities. They're very receptive to this approach. That's one step.

Ms Poole: Just before you go on to the other steps, the universities themselves produced a paper on university accountability, but I still sensed there was some reluctance to allow the government to, in their eyes, interfere. In your recent meetings with the universities, do you sense that there is a willingness to move; that if government sets the rules, as long as they have the flexibility within those rules to act, they would accept that?

Mr Peters: There seems to be a significant push in that direction within the community itself, great interest in that, to answer that question specifically. To safeguard their institutional autonomy and their academic freedom, as they put it, they would certainly like to govern this, to the greatest extent possible, by themselves. We have had several discussions and there will be ongoing discussion to balance the rights of the funders of the university, namely, the government to a great extent -- some universities are up to 80% funded by the government -- as opposed to the rights of the faculty, the board, the senate, the students etc for autonomy and for their freedom. But this balancing act -- there will be some ongoing feature.

As you know, one of the concerns I expressed at the end of our last meeting when we had the university task force before us was that while this committee dealt with the task force itself, we've really not dealt with the accountability of the entire university system, for lack of another word. In other words, how, in the view of the Legislature, should the 17 universities work together as a system to avoid duplication of public funding given in the same areas, to ensure that the objectives are met at the university level as well as they are being met right now at the primary and secondary educational levels. There is still a gap, and that is something to consider in the future, whether somebody wants to take the next step of governing the universities to that extent, of installing a legislative accountability framework for universities. That would be my answer to your question.

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Mr Stephen Owens (Scarborough Centre): I think we have two different kinds of boards: the university board, the board for a ministry agency, and then there's the community-based boards. How do you get community-based boards to follow some of the best practices which are outlined but still maintain their community identification? How do you go about selecting membership? Do you have views on that? Do you have documentation we could look at from the non-profit, community-based, grass-roots -- however you want to call it -- perspective?

Mr Peters: I don't directly have information I can give you. This is in the outline. Copious documents on boards and governors are starting to come out. As the foundation said on the tape, and I echo that view, it's an area that really has not been addressed. Many organizations have addressed management problems and are telling management continually how to do things better, but very few initiatives have been taken to ensure that mechanisms are in place for the proper selection and appointment of board members. This is why I felt this would be one of the areas that discussion should be stimulated in.

Mr Owens: I'd also like to take a look at stakeholder participation on boards. For instance, we've been discussing, on and off, Metro housing. Where on that board, for instance, would tenants, if anywhere, play a role? Again, with some of the community-based non-profit agencies, wife assault shelters, where does the staff-client balance come in? Could we examine that in some manner?

Mr Peters: I think it will have to be examined in some manner, because what is happening very often, and this is something that afflicts many boards, is that many boards, instead of governing, have a tendency to deal with individual cases in great detail because they feel they can resolve individual cases, and the idea is if you resolve a sufficient number of individual cases satisfactorily you end up with a better institution. The problem with that is that in reality, that's not so. You solve an individual problem and that problem is resolved, but in the end you end up with no governance of the institution.

When some of the people we have been in contact with who have recently, for example, reviewed the activities of various boards, the first thing they told me -- this was in the non-profit housing area, for example -- the first view that was expressed when we discussed it was that they were actually alarmed at the extent to which the board dealt with individual cases as opposed to governing the institution and having the institution foremost.

Certainly the contribution that, for example, individual tenants in housing make to the board is worthwhile and is a problem identifier. But it should be initially a problem identifier to the management of the institution, and it should be the board's responsibility to ensure that the institution itself is run properly and have management accountable for fixing the thing rather than the board itself.

The Chair: On that point, if I may, I'd lie to follow it up with respect to a non-profit board. Ultimately, just to follow this through, the board is appointed in what manner? Let's take, for example, a non-profit housing agency. If we're to examine the criteria which are being used, many of these agencies are given a life as a result of their ability to bring forward a project, so at some point there has to be a screening process in place. We now have heard from the Ministry of Housing regarding changes that have been made with respect to that, but the details of which I'm still not familiar with. How is a board selected? Has any change been made to the way in which boards are selected?

Mr Peters: It's a good question. I do not have the answer to that here, handy. It may be worthwhile hearing from the ministry in more depth if you wish.

The Chair: What criteria are used? This is in the context of what we're dealing with.

Mr Bruce Crozier (Essex South): I just have a couple of general comments, something that somewhere along the line may bring out more discussion, or we may simply think about it.

The question of responsibility or accountability is one of the key elements when it comes to looking into this governance question overall. I suspect that too often the members of the boards themselves don't know who they're responsible and accountable to. If it's a board of education, is it to the students or is it to the parents or is it to the taxpayers? If it's public housing, is it to the tenants or is it to the ministry or is it to the taxpayers? I guess we're all ultimately responsible to the taxpayer, but I think that's one of the things that people are appointed to boards to do and don't really understand and that we should maybe explore a little more.

Second, I'm afraid that all too often appointments are made to boards with the idea primarily of filling the position -- in other words, you have to get your eight or nine or 10 or whatever number on your board of directors -- but that there isn't enough time and effort taken in either the appointment process or the election process. That's something I think we need to look at to give some advice to those responsible for appointing and selecting boards.

Just as a final comment at this point, I must say that with this video and the little time we've spent this morning, Mr Auditor, I have a better understanding of governance than I did in a full day of the session with police services boards. We could perhaps pass this kind of information on to them.

Mr Robert Frankford (Scarborough East): The video, at least to my mind, made it seem rather easy, that all the same rules generally apply and the same good practices would apply. But I think there are some fundamental differences between the private, for-profit sector and the rest: non-profit, government-based, whatever we want to call it. I'm sure it's not that easy in the private sector either, but at least you know you have accountability to your shareholders and to the bottom line, while in the other sector we are talking about a whole range of objectives which may well conflict.

So I don't think it's that easy, just to say you can define that there must be conflicts between the effectiveness of what you're doing and the amount you spend. I think we also have to be very careful of getting snowballed into thinking you can only have better programs if you spend more money. It's a very popular belief in health, certainly, and probably in every other field as well.

So there is this inherent mix of objectives, and it reminds me of what we as elected politicians are doing: We have to balance those things, and I don't think we can say there is only one objective that we're aiming at, that we're only fiscal accountants. We are into developing things for the broader public interest, which comes in many different directions.

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From that, one can even ask, should some of these things be more politicized, in a good sense? You know, because there is no one answer, let people apply for it and ultimately their accountability is at the ballot box. Sometimes this is semirecognized: Some boards, I think, have ex officio positions from municipal councils or whatever.

I'll give you one example. There's a community health centre in my area which has a local councillor on the board. I don't know, maybe this is ex officio, but I don't think so; I doubt if the ministry put that in place.

But that's the way it is. You could argue this for or against, but perhaps that's something which should be looked at more: the extent to which there should be established links, or even making some sectors which now are delegated by the use of non-profit corporations more directly accountable politically.

I would point out that in Scandinavia, the local health system is actually run by elected councils. Maybe this has advantages. At least, presumably, it gives an overall accountability framework and then provides a fairly universal approach as opposed to what we have here, which is rather piecemeal.

As was said, many of these local community non-profit approaches come about by local initiative. Some people decide they want to put up housing or whatever and they may well form the non-profit before a ministry is even involved; there's nothing to stop you doing that.

In response to Mr Cordiano's question about what the criteria for boards are, as far as I know, it all depends. The initiative can come centrally or it can come locally, that an organization can set itself up with its own bylaws and can put in its criteria for directorship or whatever. The ministry may dislike that and say, "No, this is an interim arrangement and we can't accept it," or they may just go along with it. I suspect that if you go out and examine what is out there, you'd find a huge range of things.

In these discussions, I keep on thinking of Houselink. What do we know really about what its objectives were and how it was set up and what was happening in practice in terms of the selection of the board? It probably was fully in accordance with the bylaws that were there. It may in fact have been quite good in some ways, but in other ways, obviously, there were problems and the organization became dysfunctional.

That question also arises: What do we do when things become dysfunctional in the public sector? Do we give the ministry the right to come in at any point and fire a board or do we do that only in very extreme circumstances? Do we give enough guidance -- and of course we also have to think of the board members as individuals. If they're voluntary members, if headaches start developing, the point is going to come at which they will just say: "Goodbye. This wasn't doing anything for me."

I just thought I would ramble a bit.

The other question, I think, is around information and openness. It seems to me that questions about open information, freedom of information, should be looked at more broadly, let's say, in hospital boards and universities. I would think there's a good argument for open meetings, freedom of information. Should we be looking at some recommendations on that?

Mr Peters: If I may make a comment, you have added another point to the agenda, in my view, which may be worth discussing, and that is the role of the boards themselves. In other words, in the government context, is it really necessary to establish boards that have a full governance role, or, in some of these community-based organizations such as the community health organization etc, is it worth following models that are used in other countries where, for example, boards are set up to have strictly an advisory capacity to the people who are actually running the institution or organization in itself?

For example, one that comes readily to mind is the German broadcasting system, which is run by executives and the board of directors is actually strictly advisory. They advise on programming, they advise on what the community would like to see or whatever, but they don't have a full governance responsibility, which is actually left with whatever the organizations are in charge. It's the superintendent of the network, or whatever, who has the principal role. This might also avoid, in a lot of cases we're finding here, the board getting involved in very copious detail.

If I think back on my term on the board of a hospital, it's surprising how much detail; the whole board getting involved, for example, in whether privileges should be granted to physicians, with really fairly little knowledge, basically, of what education is required, what the OMA requires of a physician etc. It's merely following a process as opposed to being involved and knowing the detail. Maybe the medical advisory committee is a far better body to advise the CEO of a hospital to whom he should grant privileges than the board as a whole.

The point is really that that is another very good question. In order to determine what the outcomes or results are of publicly-constituted boards, is it really necessary to have a separate organization?

From my perspective as an officer of you, of the Legislature, it strikes me that your wish, your objectives, the results that you as legislators want these organizations to achieve, should be really paramount, and it is up to the Legislature, through legislation, to determine which of these bodies should be fully governed, which should have advisory committees, which should have other bodies that might help them in carrying out their duties.

The Public Hospitals Act is a good example of that, where in fact the legislation prescribes the board of directors but it also prescribes the functions of the chief of medical staff, the medical advisory committee etc.

These are areas to consider in legislation. For example, to come back to Ms Poole's question on universities, for example, if and when legislation is contemplated to deal with the universities, it may be very much worthwhile to identify and clarify in the legislation the roles that each of these bodies should be playing in that environment.

Mr Jackson: I have a couple of questions in three areas. As to the first, I guess the trigger was Mrs Green, the director of education for Toronto, referring to who does the steering and who does the rowing. As someone who has spent 10 years on a school board and now 10 years here at Queen's Park, I have some concerns about the differences that school boards enjoy from municipal councils and other publicly elected boards. In a sense, we're talking about the same thing.

It strikes me that the position of the director of education is unique in this province, and I wonder if that's not an area where our legislation in Ontario causes, to a degree, part of that dysfunctia that may occur with school boards with too much power being vested; that school boards aren't really steered by trustees, and if they're not allowed to steer them they end up doing the work, and then the professional staff or management, if that's what we're going to call them, complain that the trustees are trying to do all the work, but that's the only role they've left them to do.

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Even though there have been, from at least one committee in the last 10 years I've been around, recommendations that we re-examine that -- one of those recommendations in fact came with support from the auditor's office prior to your arrival, Mr Peters -- it strikes me that if we're going to have school boards even a little more open and a little more public, meaning publicly disclosed, the role of the trustee can be strengthened by dealing with this duality, the role the directors of education have. That's not what's occurring in the municipal sector, where they have their administrative models, where they have a chief operating officer and a mayor and their roles are very clearly defined.

Could I get some comment from you on whether there's any room for this committee to examine, in a very specific way, this subtle difference which exists in Ontario, which I understand exists only in Ontario vis-à-vis the other provinces, in terms of the concentration of the power and the dual role that the directors of education hold.

Mr Peters: This issue we dealt with when we did our report on curriculum development as well, on special education, which already has had major ramifications, where in fact our view, and I won't part from that, is that curriculum development is impaired because the accountability framework is not clear. In fact, in the special education, we know already that we're not delivering as a province because the accountability framework is just so impaired that we can't deliver it.

The initial steps taken by this committee -- and with deference to Ms Poole, this is a further answer to her question as well -- is that this committee then looked at the role of the auditor in this, to begin with. My hands as Provincial Auditor are really tied, inasmuch as I can only look at accounting records of the school boards and we cannot look at other information which could be made available to deal with the dichotomy you're describing. That would be one way of dealing with it, but I would not consider it the preferred way of dealing with it.

The preferred way of dealing with it is really to clarify the roles and responsibilities and make proper segregation of duties in this particular regard an everyday occurrence rather than one there is some attention paid to whenever the auditor arrives; so on a day-to-day basis. That's a very important distinction that has to be made, the roles and responsibilities. That happens throughout.

School boards, like many other boards, suffer from two aspects, one of which is clearly on the tape: that the members come to the table with a totally different agenda than the wellbeing of the school board itself; they come with a particular issue.

The other one is that many school boards get involved in incredible detail. I know of one school board, for example, in trying to determine the distance from the building at which the students should be picked up, that spends endless hours discussing whether the measuring point should be the front door of the school or the back door. This getting into the sort of doing business as opposed to governing business is very difficult. That's why one of the solutions may be ultimately to give some of these boards more of an advisory role and give somebody the power to really do.

Mr Jackson: Then there has to be accountability. Once the power of the trustees or the authority of the trustees in one sense diminishes -- these are publicly funded institutions, and someone has to hold those with their hands on managing the system more accountable for the repercussions. In the private sector, the harshest form of course is that you lose your job when you've cost the corporation millions of dollars, but in many of these other organizations, publicly funded, that's not the case.

There's a second area I wanted to touch upon. Last week I was involved in Bill 163 hearings and the issue of conflict of interest in the new municipal guidelines was constantly being presented. A lot has been raised about the new rules on conflict of interest and why it does not extend to boards and commissions.

I wonder if there is any comment from the auditor's office with respect to that -- I assume your office was consulted about 163 and the rewriting of the municipal conflict-of-interest guidelines; maybe you weren't, but perhaps you could indicate if you were -- and if you have any comment about extending that accountability net to the kinds of boards and commissions which are being discussed here.

Mr Peters: First, we were not involved, we were not consulted, but we do have a view on it which I carry on. For example, at the federal level the conflict-of-interest guidelines are very clear: There are conflict-of-interest guidelines for governor-in-council appointments and there are guidelines for these boards and commissions which should be followed.

Mr Jackson: When I asked the question about the conflict guidelines -- and I hate to keep going back to the school board, but I raise the issue of teachers, for example. To be related to a teacher, to be an actual teacher of the neighbouring board, you could run for a school board. In my school board there are more trustees with conflict of interest than there are trustees without a conflict of interest, so they constitute a majority of the board. But the two substantive activities of any board are labour negotiations and the budget, both of which are intrinsically tied to teachers' salaries. Therefore, on any given day in Halton region, 10 or 11 trustees have to leave the room or declare a conflict.

When I asked if the Sewell commission, in its wisdom, dealt with this issue, they said no, that they had in fact been encouraged to stay away from that. I wonder if there isn't any room for this committee to examine that. And to be fair, let's just assume there is no conflict. What it does is disfranchises a substantive number of people whose sole purpose is to be democratically elected and contribute. You can look at that altruistic question, even if you don't look for shadows. I wonder if there may not be room, through the Chair, for this committee to examine that issue, because we're getting disproportionate representation of persons with a pre-determined conflict of interest for what constitutes the majority of the activities of a given board or commission.

The Vice-Chair (Ms Dianne Poole): Mr Jackson, as you've made that suggestion, when we are finalizing our conclusions on where we would like to head with the issue of governance of boards, perhaps that's something we can discuss as a committee. I assume you didn't want the auditor to comment on that particular aspect of what the committee should pursue.

Mr Jackson: No. That's why I suggested through you to the Chair.

The Vice-Chair: I'm just chairing until Mr Cordiano returns.

Mr Jackson: My final question has to do with the whole notion of conduct. In your verbal presentation following the video presentation you talked about the kind of person ideally suited to serve in the capacity of a board of a commission, and you talked about skill, honesty, prudence and acceptance of responsibility. I want to ask you about the question of conduct. I think conduct, for a public institution, is becoming as important as the issue of conflict.

For example, would we really want to recommend someone on a police board who has a criminal record? According to the rules, that's not a problem, but is it appropriate? Would we wish to, for example, appoint someone to the board of a children's aid society when they're a known paedophile? Those are questions, although sensitive and delicate -- I think somewhere we have to be asking the question, does this or does this not affect their performance and/or their ability to serve in a capacity when they're earning a per diem and they're charged with a legislatively based set of responsible guidelines?

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Finally, the responsibility lies with us as legislators who make the appointments. Where is that sense of responsibility if we willingly nominate, in a process which may be up for scrutiny but can't be changed -- I'm at a loss for a word here. The process is controlled by the government of the day, and there is public scrutiny but the outcome is still the same: that they can direct an individual to that position. Where is the responsibility and the link back to those who made the appointment? In my view that's as important. There is one that's going to court and I don't want to deal with it. It deals with the parole board, and I'd rather not comment on that one because it is going to end up in the courts. It shouldn't end up in the courts. But the issue is going to be, how did this person get appointed and why did they make such a terrible decision?

I wonder if there is any comment on that whole area about the issue of conduct, since you raised the issue of honesty, prudence, acceptance of responsibility, skills, yet this person's conduct may predispose them to not being as effective a contributor as they could.

Mr Peters: I would highly recommend this as an issue where this committee may want to make recommendations. There are different models; for example, some legislatures in Canada have created a committee that deals with a specified number of these questions, where they actually ask candidates for certain positions to appear before the committee to check this out.

Certainly it behooves every board of directors -- one of the first issues they ought to look into is a code of conduct for themselves so the role of the legislator is somewhat eased by being able to assess whether the organization does in fact have a code of conduct, and that there's also a mechanism in place that ensures that certain minimum standards are met in these codes of conduct as they are being set.

Mr Tilson: As each member speaks, it's quite apparent that the topics are rather overwhelming. The problem is that different governments have established that they can't handle everything so they appoint commissions or they appoint committees or they appoint boards. Hence the whole issue of accountability and how these people get on these boards and commissions has become more and more serious, particularly, more recently with this committee, with the non-profit housing issues.

And as Mr Owens said, there are so many different types of boards, such a variety of boards. There are people who sit on boards for nothing and there are people who sit on boards and get honorariums.

I don't know where we're going, Madam Chair, with respect to future debate on this topic, but I was particularly interested in two areas. One was the issue of performance contracts. And second, without getting terribly political, we've seen how rules and principles have been set and may or may not have been followed, codes of conduct have been set and may or may not have been followed, so you look at the teeth of those things.

Mr Peters, you've indicated that you may not want to get into the issue of the direction the committee should go, but it's such a massive topic and I would like to hear your thoughts specifically about where the committee should in the future be going in this area: the whole issue of accountable, accountable to whom; the whole issue of how people are appointed; what you do with them when they get there; the failure to act on information, and who says they're not acting on information and what do you do if they haven't acted? All of these, to me, are rather overwhelming questions.

I guess I have one question: We're all giving our thoughts on this topic, but where do you feel the committee would be prudent to go?

Mr Peters: It is a big topic, and I tried to cut at about five or six questions that the committee may wish to tackle in this particular area. Within that, there are certain subcategories.

One is that there's certainly quite a bit of work done already by the Management Board secretariat that can be a good foundation. I've brought some of them along, some of the things that may be worth looking at. For example, there are guidelines on establishment and administration of agencies; as to what a manager should do; there are directives on government appointees, etc.

One of the first areas that would be really worthwhile for this committee to consider is taking this good body of work that's in existence and start pursuing who is monitoring it, who is taking action on it, who is actually moving in the government to ensure that these directives and guidelines are properly put into practice. I have certainly been a strong supporter of taking action on that. That would be the first area.

The second would be to establish some sort of guidelines or make recommendations that guidelines be established for the roles of boards in terms of: What boards do we want to actually carry out work? What boards do we want to be, for example, advisory?

I'll give you an example that brought this to mind. When the term "social contract" was first brought out, the first time I encountered it was when the Ministry of Health approached hospitals and said community-based hospitals should have a social contract with their community. As a board, we had one heck of a discussion, to be frank with you. We knew we would have to sign it, but who signs for the community? How do you identify the people? Any contract needs two parties to agree on something. We are very often saying that we want to have a community-based organization, but how do we identify the community that is the other side of the contract?

Mr Owens: That is precisely where my questions were leading. How does one explore that in terms of the duties?

Mr Peters: It is a very difficult question.

Mr Tilson: The other issue, of course, is that once you create these boards, commissions, committees, whatever, if you try as a government to tell them what to do, whether you're talking about something like the Niagara Escarpment Commission -- which I support; I don't mean to be critical -- or a police services board, or the gambling commission, all of these things -- try to tell them they're going in the wrong direction. You've created these monsters, and I say that with respect --

Mr Wiseman: You'd better have respect for a monster.

Mr Tilson: Exactly. Then what are you going to do with them? I look forward, Mr Peters, to your suggestions about how we're going to deal with the monster.

Mr Peters: If I may go back to the point previously made about the Management Board directives, one of the mechanisms the Management Board has actually put into place is the so-called memoranda of understanding. They are in many cases quite good documents. The difficulty with them, and this is where my office and I are continually pursuing the legislative aspect of this, is that they are administrative instruments right now and there's very little in place to see whether these are actually followed.

What I'd ultimately like to see is that when, for example, an organization appears before the estimates committee, as one body, or the finance and economic affairs committee or in fact other committees before whom these bodies are supposed to appear, the legislative committee takes up the issue of the memorandum: "Maybe you have a copy of it. Can we take a look at it? Are you complying? Are you properly setting out the roles?"

There are exemplary memoranda right now being put into place, for example, on the capital investment corporation; in many respects very good stuff, but it just ends there. It ends up being an administrative instrument that does not benefit the Legislature, which gives these organizations funding and needs some assurance that they're doing the right thing and performing properly and achieving the results for which they're put into being.

That may be another step to go.

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The Chair: If I could just make a comment, with respect to a philosophical point of departure, I think most of these issues around governance and accountability, in fact the whole area of discussion or debate, really stems from the lack of consensus in society about what it is we're attempting to do, what objectives are priorities, who sets those priorities, and how decisions are made or arrived at.

Take, for example, the question of employment equity, or let's go back one step beyond that: pay equity. Pay equity was mandated to municipalities and other agencies, boards and commissions, and many municipalities came back and said: "That's fine. You want us to implement pay equity. Who's going to pay for it? We don't have the funds to do that." I remember the debate around that.

You can look at a variety of these controversial issues, and with most of the questions around governance, the conflicts arise from the fact that there is no political consensus or a political culture that exists that says: "We're doing the right things. We're going in the right direction." There are conflicts at every point. The same thing goes for the universities and colleges.

I think there's a question here around who is to set the priorities, the whole question of, does the Legislature of Ontario set the priorities? Quite frankly, that's debatable today, with respect to those issues; that's debatable among the groups who have to carry out and implement the mandate, in that larger, philosophical sense.

I think we ought to back up a few steps and say we have these governance issues. With respect to boards of directors, we can establish the tools, the frameworks in which to deal with the question of better governance, better accountability, and we can point to what that might be. But with respect to some of these very difficult political issues, I think you're going to have some resistance, which brings us back to the point about accountability and auditing functions. Ultimately, someone's got to measure what the outcomes are.

Ms Poole: When we come back to this issue in the fall and we're finalizing what direction we might like to take -- I'm presuming we're not going to be doing that this week, maybe erroneously -- when we do that and we're looking at, for instance, a couple of things the auditor has suggested, looking at Management Board guidelines and then guidelines for the role of boards, I'd like to also incorporate something about the necessity for training; that there has to be some training opportunity, particularly for a small board of directors who don't have all the opportunities that some of the larger ones do, to understand what the aims and objectives are of the accountability system, what the role of board members is. It could be done very inexpensively by way of video, perhaps some sort of agreement the board member signs that they have in fact viewed the video and read through the various guidelines and understand them.

Without that, I don't see how you can change the attitude, so when we do explore that further, I'd also like to take a look at what we could do to assist some of the boards that are smaller and not so formalized to understand the importance of governance and accountability and what their role actually is.

The Chair: I think it's just a question of trying to move forward with a report that makes some practical sense of this committee's deliberations. This afternoon we may want to explore what some of the parameters for a report are, what we may bring forward as recommendations for boards, agencies and commissions directly accountable to ministries of the government with legislation already in place. There is some sort of framework that currently exists.

I think one of the things we should have done was to ask a variety of sectors, housing being one of them: "What's in place now? What do you understand to be your accountability framework? What do you understand to be the issues facing your board or your agency or your particular area of responsibility?" If that's lacking, then obviously that has to be re-created, starting from scratch.

As we offer guidelines, offer recommendations around the report you've made this morning, Mr Peters -- and I think that's very useful as a practical point of departure. But apart from that, going back to the governance question, it's more a question of, what responsibility does the Legislature have? As we would discuss this, it ultimately has the responsibility for everything it mandates. How that breaks down is really an interesting question for further discussion, as we've already had that discussion around colleges and universities and quasi-public institutions. Are they accountable to the Legislature, and in what way are they accountable?

That's a question we are fully exploring as we go on, but in our report this afternoon perhaps we could get down to the business of what recommendations we might make around particular boards and how they govern themselves and some of the criteria which would be put forward for selecting board members. Can we discuss that further?

Mr Owens: Have you got a copy of those remarks?

The Chair: Let's discuss that this afternoon. I'm trying to frame it so we do something that results in a report that's practical rather than philosophical.

Ms Poole: Could I ask a question about timing? Mr Chair, while you weren't in the chair, the auditor made some suggestions in terms of what the committee could do to move forward. If I'm correct, I think he suggested we might look at Management Board guidelines and directives, and, second, to perhaps make recommendations for guidelines for the role of boards, that type of thing. Is that something we would do this afternoon, or is that something --

The Chair: I'm assuming that, unless there is further discussion around the points that have been made by the auditor, we would move towards trying to write a report making recommendations, unless we want further discussion this afternoon. It's up to you, really.

Mr Larry O'Connor (Durham-York): Last time, when we first started the discussion about having these hearings and deliberations on this, were we not mentioning the possibility of bringing in someone like the United Way that does a lot of work with volunteer groups and board development work, bringing in other people who may have some thoughts on development of guidelines? I thought we had had some discussion around that, briefly, when we were taking a look at some of what we may be looking at during this intersession.

The Chair: I don't really know how to answer that. It was agreed that the auditor would make his presentation this morning and in effect we would deal with the presentation on the basis that we would make some sort of report available from that.

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Mr Robert V. Callahan (Brampton South): Just as a curiosity, we're about to enter into a process which is called multiservice organizations. It's got some sort of acronym, MISA or something.

Ms Poole: MSAs, multiservice agencies.

Mr Callahan: I think this is of critical importance, and one would hope they have in fact examined this whole issue and determined how they're going to select people and how they're going to ensure that these people follow all the supposed guidelines in here, because that's going to be an organization that is going to be accountable for all the long-term care in this province.

I'd like to find out, is there in fact a pilot or ad hoc or -- what's the word I'm looking for? When you start out with a group that is at the head of all this, what do you call that? I can't think of the name of it.

Mr O'Connor: A working group.

Mr Callahan: A working group. Is there in fact a working group? It might be interesting to have one of those working groups come before us to get some feeling of how far ahead they've got in terms of dealing with the issues involved here. To bring in any organizations that are presently in existence, I don't think we're going to find out an awful lot from them. They either carry out their work properly or they carry it out badly. But I think it's important that we have something like this multiservice agency working group in to find out what they've got planned, because if they screw up, we're really in trouble.

Mr Jackson: On Mr Callahan's point, having spent two and a half weeks on Bill 173, the legislation he's referring to, my understanding -- and my information's only one week old from when I left that committee -- is that there is not a working group per se composed of persons who will form the board of directors of an MSA. In fact, such an entity doesn't exist. There are working groups pulling together the composition and determining the jurisdiction, the geography for an MSA, but in terms of people who now know today in Ontario whether they will be serving on a board of directors of an MSA, the answer is no, there aren't any.

In terms of the guidelines, as a legislative committee we were not given, as we are told they are not ready, the regulations around the appointment of these individuals. All we know is from the legislation, that they have to be a cross-section of users of the system and other vested-interest groups.

The final point I could share with Mr Callahan is that the Minister of Health holds absolute final say in terms of the composition and has an absolute veto right in terms of the board's makeup, which is a unique feature in terms of the development of one of these boards.

If that's helpful to Mr Callahan -- I share some of the concerns he's raised, but I don't think we could bring persons forward right now who fit the bill that I think he's looking for. But it does raise some very good questions which are being discussed in the social development committee right now, Mr Callahan.

Mr Frankford: Developing Larry's point about the United Way, which I hadn't thought about before, it seems to me you can also have funding of non-profits which certainly should be accountable but not necessarily government-funded. I would think it would be best to have general principles on whether that agency is adequately accountable. Let me think of universities and hospitals. I would imagine they might be saying: "We were around before there was government funding. We get substantial amounts from other sources, privately or from other levels of government. It's not that simple, to say we are going to act as though we're fully accountable just to the province."

The Chair: Mr Peters, you wanted to make a point.

Mr Peters: Just a brief one. There's a motion right now which this committee has passed that you would like to have public hearings on the potential amendment of the Audit Act, and that those amendments principally deal with the issue of having access to information from various institutions that receive provincial funding. In this connection, it may be worthwhile to formulate also some of the questions around governance of the institutions or organizations that may appear before you. That may be worthwhile in pursuing the matter of what audit regimes should be established, because the audit regime is part of the accountability framework within which these organizations should be operating.

Mr O'Connor: Following up on Mr Callahan's suggestion, there is a group working with the United Way and the Association of District Health Councils of Ontario around development of guidelines and policies for volunteers and some of the roles they could play in MSAs. It's new since the last time we were discussing this issue in this committee. The working groups as defined, working on the multiservice agencies, are broken up into four different working groups and there isn't one, as Mr Jackson suggested, that will end up being an MSA. So it would be hard to look at that, other than maybe some of the work being done on the governance issue, period.

Ms Poole: With reference to Mr O'Connor's point, I recall the discussion which I believe took place in the spring on this, and there seemed to be a consensus on the committee that we should have some input from representative community groups or agencies. I'm not exactly positive, and I don't have the Hansard before me, but it seemed to me we talked about putting forward some sort of proposal or suggestions for guidelines for the role of boards and then we invite certain of these representative agencies or advisory bodies to respond and perhaps some of them to appear before the committee. I wish I could be more definite, but I do recall the discussion and that we did intend to proceed in some way.

We could incorporate that with the auditor's suggestion and do it at the same time as the accountability framework. But I think it's somewhat important that we get some grass-roots feedback before we distribute a final report saying, "This is what you should do," when we may not have the practical experience to know, in certain instances, what would really work.

Mr Callahan: The unique situation with the United Way is that you normally get people involved in that, either heading it up or volunteering for it, who are people who come from business and have a pretty good understanding of how a board of directors works and how the rest of the operation works. That's why I don't think we're going to gain a great deal of information from them.

I think the problem we've got is that the boards we're talking about range from everything from soup to nuts, I guess, These people really are put on there for a whole host of reasons, because they happen to fit the criteria of the various things -- sex, age, cultural background and so on -- so you really don't have the same situation as you have with the United Way. The other thing is that on some of these co-op non-profit boards those people are in very serious difficulty. I have one in my community where the board of directors actually personally signed their signatures on a note to a bank and then called me. I said that was a very unwise thing to do because you are now liable personally for the debts of that non-profit corporation. When I looked at the Globe this morning and saw the number of non-profit housing out there and the number of groups it must entail -- these people may be at serious risk for their own personal finances in terms of the way they operate these boards.

I think it would be important to hear from maybe a selection from the non-profit boards where they've had some success and they have people on there who are familiar with the workings, maybe one that's been in existence for a considerable period of time, and then look at maybe one of the agencies that is in effect already. Unfortunately, I don't think the Y will help you. They might tell you what you do, but it's not for us to be educated on what you do. It's important that we learn what's missing so we can help these boards out.

The Chair: Thank you, Mr Callahan. Perhaps we could break for lunch. As I've suggested, and it was actually Ms Poole who made it more detailed in her suggestion, I think it would be useful to move forward and continue the discussion and also to make recommendations based on what we've heard from the auditor today regarding governance and best practice, perhaps coming up with a set of criteria for choosing -- these are just tools for choosing -- boards of directors, and then moving forward and getting some reaction and response and feedback from groups and organizations out there. And that's not the end of our work. We're putting that forward for purposes of discussion and then attempting to get the feedback and working towards a final report around the accountability framework and changes to the Audit Act.

Mr Owens: Just a quick suggestion in terms of how the non-profit sector, for instance, is set out: I believe the Canadian Cancer Society in its organization is probably a lot different from ABC housing co-op or ABC women's shelter in the community, so those two issues are not commingled. There's non-profit and then there's non-profit community-based. Is that making any sense? We can't compare the Canadian Cancer Society with the Emily Stowe shelter in Scarborough and look at the same kinds of corporate objections.

The Chair: That's something we should consider this afternoon when we further discuss this. We have a day and a half left to go on this subject, so I'm sure we'll have a full discussion around the matter. We're adjourned for lunch. See you at 2 o'clock.

The committee recessed from 1203 to 1413.

The Chair: We are gathered here this afternoon to examine --

Mrs Margaret Marland (Mississauga South): We are gathered together to pray.

The Chair: Well, we are doing that each and every day, I hope.

Mrs Marland: We are gathered together to pray for the last year of the Bob Rae government.

Interjection.

The Chair: Order, please. We left off this morning with a view to assembling ourselves this afternoon and our collective thoughts around the question of governance by boards of directors.

I think we need to continue with regard to the discussion we had this morning. There was a suggestion made by Ms Poole around guidelines and determining the criteria for the selection of boards of directors. I guess the first order of business is that we'll continue with that debate. At some point, our researcher, Anne Anderson, will accumulate that and put that in some form of initiative with respect to writing a set of guidelines establishing the criteria, and we can examine that tomorrow. We were discussing this before we started this afternoon and I think it would be a wise way to approach this.

Ms Poole: Just before we start talking about the guidelines for the role of boards and the criteria, I wonder if the auditor could let us know whether Management Board has any current guidelines for board members that have already been formulated that might be helpful to the committee.

Mr Peters: Yes, there are. There's a directive concerning government appointees. There is a paper on the establishment and scheduling of agencies, but I'm not sure -- we have some people from Management Board in the audience; they might be able to give me the status of that one. There's also a guideline on administration of agencies, and there is a manager's guide for the establishment and administration of agencies.

Ms Poole: It sounds like, while there is information about government appointees and administration of agencies, there wouldn't be any criteria, for instance, for boards of directors of non-profit cooperatives or that level of board involvement.

Mr Peters: Not at the Management Board level. Individual ministries may well have such a thing. For example, I know the role of boards of directors is outlined for hospitals in the Public Hospitals Act. So it would be ministry by ministry.

Ms Poole: So they would have crown agencies and also information about government appointees.

Mr Peters: That's right.

Ms Poole: So if we follow what both Mr O'Connor and I think Dr Frankford -- somebody else mentioned this morning the fact that we have different categories almost, that you can't treat somebody from a crown agency in the same way as you treat a director of a non-profit co-op. Is the suggestion, then, that we would come up with guidelines for the boards of directors that would be separate from others?

The Chair: I think that would be reasonable. This is for us to decide, but I think it was clear that we have to make a distinction between those two.

Mr Frankford: Dianne went along the path I was going to, the question of whether non-profit housing or a legal clinic, whatever, comes in the same category as a Management Board guideline agency. I think my question's been answered, but I would also have to follow along her questioning: Could we be setting some guidelines usefully?

The Chair: I would imagine it's appropriate to go back to what was presented to us this morning, that material, and then formulate in the discussion this afternoon what the criteria might be for those two different categories.

Mr Peters: I would just like to elaborate. The document I was not sure about is called Administration of Agencies 6-3, and it's a guideline. We had made it available to you last year, actually, when we were discussing the Workers' Compensation Board, and it is available to you if you would like it. I just wanted to confirm that.

As to the other question, if you ask my view, yes, there is merit in making a gradation -- is that the word? -- of the various boards, depending on the responsibilities the boards would like to have or that you would like the boards to have: full governance, advisory -- and in fact there are different stages of advisory. There might be expert advisory committees and there may be committees that have virtually just a general community standing of some sort, background like that. If that helps?

Ms Poole: Do you have a proposal?

Mr Peters: No, not directly. I encourage discussion of it, actually.

The Chair: If I may, Anne has outlined some items for discussion purposes, and she may want to take us through this, just to formulate our discussion.

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Mr Tilson: Mr Chair, could I ask Ms Anderson a question before you get into that?

The Chair: Please.

Mr Tilson: I can't believe that the wheel is being invented in this room on this topic. There must be all kinds of jurisdictions, particularly in the United States and Europe, as I think was mentioned, that have dealt with this issue. Has there been any research done or comparisons with other jurisdictions?

Ms Anne Anderson: I think only in terms of the liability of directors, but not much in the broader sense of governance of boards in general, that I've got. I can certainly look into it. I don't have it with me right at the moment.

Mr Tilson: It gets along the line of the question and answer series we were just talking about. We have everything from groups that have been appointed by municipalities, provinces, and now we're getting into all these other areas such as the non-profit corporation. Volunteers sit on that not-for-profit, yet they're making decisions with vast amounts of provincial moneys.

The question by Ms Poole to Mr Peters was that you might be able to break it down as to different types of committees or different types of boards or different types of commissions. I see all kinds of these groups, a large variety, a large spectrum. The prospect of writing standard rules and regulations or policies or codes of conduct or, I think the other term you used was some sort of performance contract -- to make a standard performance contract or standard rules of conduct to me is rather awesome, because of the wide range of different types of agencies and commissions etc. My point is that I can't believe this hasn't already been done somewhere.

Mr Peters: It is done in many forums. The difficulty is that each legislative assembly has a different set of structures to work with. This is why, in a way, if I could have any input to make it easier, these various steps of just describing what the framework should look like which they are fitting into might be sufficient for this committee, to just put that into being.

The point I tried to make is that the board is responsible that fiscal management is practised, but it should not do. It's the same maybe for this committee: not to get into the guts of the thing but just to establish a framework or make recommendations towards a framework which ministries or whoever wants to set up boards can use to establish how to go about it and what framework these organizations should fit into. When we say code of conduct, the question is not so much, "What is the content of your code of conduct?" but "Do you have one, and are you following it?"

Mr Tilson: I understand that. So you set up rules of conduct, or a framework, but then what happens? Let's say we have a housing group that does something this committee thinks is inappropriate. They may not think it's inappropriate.

Mr Callahan: We just did that a short time ago, not this committee but --

Mr Tilson: I take that as an example. Mr Callahan has mentioned that there are some examples. What would be the aim? Do you slap people and say, "Don't do that again"? I mean, "Don't go off to Berlin" or "Don't buy antique furniture" or "Don't do this with public moneys; you're not allowed to do that." In other words, so what? So you've got rules of conduct. So what? Big deal.

Mr Peters: The intent of those is actually that the government as a manager works with these and it detects these -- essentially, it really comes down to monitoring, taking action that these guidelines are being followed on a day-to-day basis. That is the role of the government itself. And then of course there's the audit function which also has to assess whether the whole process is working. So you have two: You have the day-to-day attention that ought to be paid to these matters by the ministries or whoever is given the funds by the Legislature to administer, and then there is the periodic or cyclical review, by my office, of the strength of the framework and where it has failed.

Mr Tilson: I would hope, Mr Peters, that not only would this committee be recommending that these skeleton rules of conduct or whatever be developed, but this whole topic is an example of where it cries out for an amendment to the Audit Act. You won't even be able to look at this stuff unless those amendments are made. You won't even know that these deficiencies are going on because you won't be allowed to look at it.

Mr Peters: That's correct.

Mr O'Connor: Well, I suggested hearings.

Mr Tilson: But if we're developing a report on this topic, Mr Chair -- and I know you've allowed me to overextend my comments.

Mr Callahan: He sure has. It's my turn.

The Chair: Please go on. You have the floor.

Mr Tilson: We have done that once, and I would hope that would be included in the form of a report, a recommendation that there be an amendment to the Audit Act.

Mr Peters: Actually, in your deliberations -- we had put into the 1993 report a chapter 2, entitled "Towards a Workable Legislated Accountability Framework," in which we outlined four steps my office wanted to take. As a committee we have not followed up on that, but if I can be so bold --

The Chair: We are working on it.

Mr Peters: -- I recommend that the thoughts that are outlined and the goals are incorporated in this discussion. We are outlining, really, a four-step process, of which this committee has already taken step one, which was to recommend that you give approval in principle that I pursue the establishment of a workable legislated accountability framework by the central agencies before any amendments are made to the Audit Act. At the time I came before you and said, "Look, if I audit this thing" -- but how about the day-to-day controls? I can bring to you on a cyclical basis where things have gone wrong and then you fix that one, but what is going on in the government every day to make sure, to use your example, that trips to Berlin are not taken or antiques are not purchased where they shouldn't be purchased?

Mr Callahan: I think the interesting part of this is the fact that when we got our teeth into this, and I think it was with non-profit housing, they suddenly came up with -- and you're going to think this is being political, but I'm not trying to be; it could happen to any government -- a policy handbook that was to be used with non-profit housing, I think it was. It suddenly materialized and people were supposed to read it before they got on these boards.

Well, there are not operating agreements. Half of these groups did not have operating agreements. And again I'm not saying that to be political. I'm simply saying it to indicate that when you can't get operating agreements -- and we went through this with the housing thing in Ottawa, where unfortunately a minister fell because there were things done that shouldn't have been done and probably wouldn't have been done if there was some sort of understanding of just how the whole things operates. David raises the question about this woman who literally ran MTHA. It was her own little bailiwick.

Mr Peters: Houselink.

Mr Callahan: Wasn't it MTHA? Oh, Houselink, right. I find it interesting that in this technological age something as simple as a video depicting in a theatrical form the way you conduct a meeting, the way you elect directors, the way you have an annual meeting, the way you have input from your members and so on wouldn't be the first step that would be taken. That could be done very easily. Send this out to all of these goody-goody boards and let them view it on the video machine.

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The second thing is that we now have -- and again I hope you won't think this is being political; I'm not trying to be, but it's a fact of life -- non-profit boards being required to report to the government once a year and pay a $25 fee, listing the annual meeting they last had, the directors who changed, even if there aren't any changes. I remember in the good old days -- no, I shouldn't say that -- the bad old days of the people to my left here when they required you to report. You had to report, and if you didn't report your corporation was dissolved. Maybe we've got to go back to that. Maybe we don't charge 25 bucks or whatever and just tell them to do it. Every time you changed directors, you had to send in a notification to the government, and somebody monitored it. We don't have that any more.

I think a lot of the true and tested processes we had in place before should be looked at first, as to what impact that had in terms of trying to keep these boards on the straight and narrow and perhaps give them enough working knowledge of how a board operates. I don't think we have to, as David said, reinvent the wheel. If we have to reinvent the wheel at this point, we're in deep trouble, because there are an awful lot of boards out there that are just operating by the seat of their pants. If that's the case, we're really in deep trouble.

In terms of amendments to the Audit Act, I agree, I think that has to happen, but we've been talking about this since you were brought on stream, Erik, and I'm sure your predecessor talked about it, and nothing has happened. That's essential. Otherwise, we don't even have someone we can send in, or who can go in if there are reports made, to check it out, so that means these people operate with impunity. They can do what they damn well please and get away with it.

If we're going to go into a lengthy report on how we're going to deal with this, I think we're just chasing our tail. We're going to have Anne burning the midnight oil to give us a history lesson which is probably all there already. I agree with David. There must be other jurisdictions that have had to tackle this problem.

The major concerns I have are more directly related to these boards, these groups that get together in a neighbourhood or in a cultural area or whatever and decide, "We're going to put up housing for our community," and they go ahead and do it. They call somebody up and say, "What do we have to do?" and they form a non-profit corporation and then they proceed to do it.

I think these are all marvellous people. I don't think they intentionally don't send in their operation agreements, but look at all the ones that were outstanding, and look at all the ones that were outstanding that caused the kerfuffle in Ottawa. These people didn't understand. You can't just put it together for your own community; it's got to be so much percentage for --

Mr Owens: There were a lot of other problems besides no operating agreement.

Mr Callahan: I know, but those are the ones that really give me a scare because there's a proliferation of them out there, and many of these people really are not involved in this on a day-to-day operation. They have no idea. They think they can meet and if one person's personality happens to be a little greater than the others, he or she takes over, and suddenly he or she is running the operation out of a shoebox and nobody else is involved; nobody else cares, really.

I'm getting something here right now. "Towards a Workable Legislated Accountability Framework." That's from your report, I gather, Erik.

I think we should keep it simple. If we get too extreme in terms of producing a massive report on this, and you then say to the people who are in these little groups, "Read this before you set up your board," they're going to say, "What?" Many of them perhaps have never read anything, and I don't say that in a disparaging way. Many of them may be just average, everyday people who work hard but aren't really interested in getting into long nights of reading or understanding.

I think a video would be the first start, if we could do that, give them the nuts and bolts of it through a video, and then try to have a reporting mechanism between those boards and some agency. It used to be Consumer and Commercial Relations, if I'm not mistaken, or whatever they called it in those days. It wasn't a matter of scrutinizing it. If it didn't come in, they sent out one letter to you saying: "Your annual return has not been received" or "Your quarterly return has not been received. If we don't get it within 30 days, your corporation is kaput. Take it off the wheel." That got a response. People did it very quickly. They got a lawyer in to do it, maybe.

I think that's pretty simple. And also, give Erik the ability to go out, if needs be on his own hook, or at our direction, and investigate whether these things are happening. I certainly don't want to sit around here and reinvent the wheel, and I think that's what we might be trying to do.

Mrs Marland: I'm wondering how Mr Peters would suggest we proceed now that we've got a copy of his 1993 report with all four recommendations in it. I think there should be a very uncomplicated, very straightforward formula for every publicly funded agency, and that includes private, non-profit housing. When those are being established, the only thing the public purse is doing is guaranteeing their mortgage. It's only once they start into operation with subsidized tenants that the public purse becomes involved again. But if any organization is going to receive public funding, either as a guarantor for a mortgage or direct subsidy or direct operating budget support, I think there has to be a basic requirement as to who boards of directors are and what their bylaws are.

Part of the seriousness of the problems that have been uncovered this spring -- not speaking about Houselink or MTHA because those are not private housing, they're public. But in the private non-profit housing, which is going to be one of the biggest focuses of public funding for the next 10, 20, 25 years and, starting next year, a $1-billion annual subsidy, each individual private corporation sets its own bylaws. In the case of the Van Lang Centre, its bylaws permitted it to have as few as five directors, a maximum of seven, elected by themselves. There was no requirement for them to be elected by members at large or even to be elected by the tenants in that particular development.

I personally was shocked when I found out that this was a publicly funded private non-profit housing corporation, built at the cost of $7 million or $8 million, where every one of 70 units is subsidized almost in total -- some of them are RGIs, but for the most part they were totally subsidized -- and yet the management decisions for the operation of that project were left in the hands of five people who elected themselves and could eliminate one or more of their number by a vote of the majority of five.

That's an example that, frankly, I don't think the majority of the people in our Legislature are aware of. I'm the first to admit, having had the Housing portfolio for two years now, I suppose, that I did not know there were private non-profit housing corporations in this province that set their own operating bylaws, when they were funded by government. I just assumed that if the government was the guarantor of the mortgage it would automatically say, "These are your corporation bylaws and these are how directors are elected." There are no rules. They set up their own corporation and write their own bylaws, and that is ludicrous.

Mr Owens: Margaret, are you talking about articles of incorporation or are you talking about bylaws that the non-profit --

Mrs Marland: Both, actually. The articles of incorporation also govern the bylaws under which directors are elected.

I don't pretend to know everything. When I found that out, I asked a number of members of the House of all three parties, and nobody else knew it either.

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The fact is that this kind of thing is going on with public funding and the end result is, as you've all been saying, that there is no accountability. It's our responsibility, and we owe it to the public to make sure immediately that there is a reversal of that situation.

Private non-profit housing corporations go back to when we were the government, so it's not that I'm dumping on the present government or the former Liberal government. I don't know where, in heaven's name, that was ever allowed to happen, the fact that it can get into such an entangled mess. If there had been a basic formula that everybody could understand -- and that's where it comes to the necessity for the guidelines -- no, they have to be more than guidelines -- for the policy to be so clear and so simple, because a lot of these organizations now are ethnic community groups, just in terms of non-profit housing. I know there are 500 other agencies that fall into this, but non-profit housing is the biggest consumer of dollars. The second one would be a lot of the social service boards.

The point is that you can't have a whole complex set of rules you have to comply with if you're going to borrow money from the government, not if people with different educational levels and different faculties with language have to understand. I'm sure it's very simple to set out what bylaws there have to be and who the directors must be, not being so specific that you say, "You must have a representative this, this and this," but just to say, "When you elect your directors this is how they're elected, this is how you hold an annual meeting, and this is how they can be changed."

That should be part of the operating agreement. Is that a possibility, Erik, that we do it through the operating agreement with the private non-profit sector, not just housing but psychiatric services and so forth, children's services? Could we do it through an operating agreement, that wherever there is provincial funding available to these agencies, the operating agreement sets out their incorporation and their bylaws?

Mr Peters: That is a fairly difficult question to answer. Specifically, at the moment there is such a thing out as a memorandum of understanding which sets out the responsibilities of -- the capital investment corporation is one good example. It sets out the responsibilities of the minister, of the board of directors, of the management, outlines the objectives, and something like this, we find, is very useful in the particular process.

Mrs Marland: Does it tell them how to elect directors?

Mr Peters: This, offhand, I don't know. I can't answer your question whether it goes into those particular specifics, but some process must have been followed in order to determine the boards of directors for some of the members of the various capital investment agencies.

In a more direct response to your question, I wonder if I may make a suggestion to you, for the moment backing off into the four steps that are outlined in my report, in which "[t]he second step of the action plan is to work with the central agencies to develop an effective and practical legislated accountability framework." I advised you in May of this year that we are not making exactly great progress. In fact, we're making none. I'm saying slow progress is being made.

Today I brought before you a number of points of what I would consider an adequate framework for these organizations. Shoot me down -- I'm not going to lose sleep over it if you do -- but is there a chance of taking those steps and that this committee in its report asks the central agencies, namely, treasury board and Management Board secretariat, to come forward and respond to where they stand and how they are proceeding and what their intent is to proceed with this sort of framework for the various organizations in the government? Just very quickly, to go over it -- I don't know whether I've spent too much time, but I can give you the seven points. They're very simple.

There should be a mechanism whereby the ministry, or the Legislature in some cases, sets objectives and assigns the responsibility for meeting them to a board of directors. Both parties then have to agree on the results and the performance to be achieved; that's this memorandum of understanding or operating agreement that you were just speaking to. Then the board of directors has to be somehow given the necessary authority to carry through. They have to be given a mechanism whereby they can assign this to a management of the organization, and they have to in turn have a performance agreement where they empower the management of the organization to perform to the parameters they are setting. Then there's a reporting mechanism for a CEO to the board. They make the action and they report back to the people who give them the authority. It is fairly straightforward cycle that could be established: setting objectives, performing to those objectives, achieving the results, and reporting back whether the results are achieved.

If we link that with, effectively, the directives and guidelines that, for example, Management Board has already put out there, a composite picture may emerge to the committee and it may then lead to specific action the committee could take to strengthen this accountability framework.

I am still of the view that you may wish to strengthen it by making it, for example, a regulation under the Treasury Board Act or Management Board of Cabinet Act so that some control can ensue.

Other action that could take place is, for example, that you form a liaison with other committees of the government: the general government committee, for example, the estimates committee, the finance and economic affairs committee, all committees which deal with and try to wrestle with similar issues.

It is a very broad-scope approach that would be designed to put the whole matter into a government context and would give this committee a way of approaching the whole subject, of getting it kickstarted, so to speak, that this proper accountability is put into place, and would be a practical way of doing it. That's the end of my plea.

Mrs Marland: All of that's fine with me, but you can't do any of that successfully unless you decide who the key people are and how they're going to be elected.

Mr Peters: Exactly. It becomes people-oriented. That's why in the other, the discussion should be: What mechanism has to be put in place for the selection, election if necessary, or appointment of directors? What are the qualities that should be looked for? Who assesses that those qualities are being met, and who assesses the performance? Oh yes, that's definitely part of the mix.

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Mr O'Connor: I'd like to add at this point that we try to narrow it down somewhat. I think we have to keep it open. If we intend to allow a non-profit group or board to evolve with true community spirit and continued participation, we can't define what their bylaws would be, and I don't think that's the intention here. But we can give them some guidelines for how they might better approach setting up a board or approach the community for more community involvement and participation, with increased accountability.

That's why I suggested earlier that maybe we want to hear from someone like United Way at some point. They are working with people right now around the multiservice agencies about how they might better utilize volunteers with a true community makeup and breakdown. At the same time, there will be accountability mechanisms put in that will be defined through the regulations. Draft regulations have been circulated to the social development committee, and you may want to take a look at those. I pass that on for Anne's knowledge.

Mr Tilson: Mr Chairman, we now are getting into another area. We started off with boards, commissions and agencies, but the other area we seem to be now touching on is where there are partnerships or arrangements or contracts, whether with for-profit or non-profit organizations, where the government enters into relationships. It could be the construction of highways or toll roads, it could be the running of gambling casinos, it could be the running of registry offices, or it could be running buildings owned by a non-profit agency, non-profit housing, which we've spent so much time on.

The whole issue of directing that there be a certain number of directors or public involvement -- maybe it's an oversimplification, but it should just be that whether you're building highways or whether you're building gambling casinos or whether you're building registry offices -- and those are the only ones I can think of; I'm sure there's a whole slew of others -- or whether you're putting up an apartment building, these groups just don't get that money, shouldn't get it, shouldn't be able to proceed -- we'll give the prime example, which I know is to the discomfort of the government -- without operating agreements. That's a terminology and there may other terminology. You just don't get the money. You can't do it, you can't build the highway, you can't put up the apartment building, until you have abided by the government's terms. It's as simple as that.

This is in a whole different area. Maybe I misunderstood what was going on, but this morning we seemed to be talking about the appointment of people to police service boards or the appointment of people to -- really, we should be setting up strict terms when people are getting money. It's just as simple as that, and we haven't been doing that.

We're determined to think of new, innovative ways of building highways and new, innovative ways of putting up housing. Of course, the Conservatives don't agree with that philosophy, but that's what's going on. That to me is the hard core. I don't know what your thought is with respect to these groups we're talking about, that was started off by Mrs Marland. Should we really be telling the group that's going to be building highways, "You're going to have to expand your board of directors"? They'd scoff at us. The answer is, "You don't get this money, you don't get this funding" or "this partnership" or whatever terminology you want to use, "until you have abided by our requirements," and when I say "our," I mean the legislature or the government.

Maybe that's an oversimplification, but if we start talking about expanding boards of directors and telling them what to do -- they have to do certain things or they don't get the money, but we're not going to tell them how to incorporate or all of that business. At least, that's the way I look at it.

I don't know whether you have any thought on that, but that seems to be going beyond what you started off with this morning.

Mr Peters: I had to get into it just on the basis that boards of directors are really a very important link in the chain of accountability that takes place, and one of the real problems we are starting to confront is: What are these boards of directors? Why do we feel they are part of the accountability framework? Can we justify them all or, actually, should they have the role that they have had?

I must confess -- I told Dr Frankford and I'll tell you a small anecdote of where I'm coming from on this. I served as a president of a community association at one stage, and our neighbouring community had a terrible accident in which a boy lost his hand in the snow removal machine for the ice in the skating rink that was operated. The community association had an insurance policy and the father of the boy who lost his hand tried to make a claim. Only then, after having paid premiums for many years, was the community association advised that they really had no standing, that they were not insurable, and because the insurance contract was made with a body that legally didn't exist, therefore no liability existed on the part of the insurance company, which nevertheless had collected premiums for many years.

Mr Tilson: With respect to the directors, you mean.

Mr Peters: With respect to the directors or as to what the responsibility was. That was way back in the late 1970s when this happened, but it led me to start questioning about the real role of these boards and what they're doing. Just not to leave it there, the solution was ultimately found: The city took over the liability insurance for all these boards and it was the city that assumed responsibility for these community associations, and therefore the insurance was put back into place.

But the point that struck me is, just what are these boards and what role should they fulfil in the accountability framework? For example, under housing, where the attempt is made to put on the board half tenants and the other half professionals, are the tenants really willing to assume the responsibility, or would they be better to serve in an advisory capacity and let professionals run the housing association?

Mr Tilson: Of course you know how they'll get around all that. They'll simply say: "We want you to sign an indemnification of the corporation so if there are any claims made against the board of directors, the corporation will indemnify. Otherwise, the directors won't sit."

You're talking about education and that's very important for the running of it, and that's your obligation as the auditor, to make sure these groups are spending taxpayers' money wisely. That's getting into the nitty-gritty of it.

But what I'm looking at is that in so many things, and now with this bill in the last session we've got these government corporations -- I don't know what you call them -- the one that created the three --

Mr Peters: Capital investment corporations.

Mr Tilson: That legislation has even added a further complexity to it.

Mr Wiseman: It might be more accountable that way.

Mr Peters: That is in the legislation. May I back up? There may be the seed of a solution here. In other words, and this would be part of this deliberation or the recommendation, the legislation that creates a board has established the criteria that says, "Yes, for this particular program or service we need to set up a board, and this is what this board ought to do." If this committee were to recommend that criteria be established to justify the establishment of a board or an organization to deliver a particular service, I think that would be already a step in the right direction.

Mr Tilson: I would agree.

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Mr Frankford: In response to the question about what happens in other jurisdictions, and it perhaps relates to what exists in particular jurisdictions, I would guess that historically we're dealing with the fact that private sector for-profit corporations are well established, understood their advantages and whatever. We also have, let's say, voluntary non-profits that don't relate to government, any number, of all sizes. The Ontario Medical Association I imagine is one.

Mr Owens: That's not non-profit.

Mr Frankford: They are, in fact.

But now we get into the question of what happens when government money comes into it. Probably governments from way back have seen this as a convenient way of getting things done and transferring funds, which is attractive enough, except what happens when things go wrong? It seems to me that we get into particular difficulties when you've got things delivering those services which really have to stay in place on a permanent basis, such as housing, but other social and health areas as well. If a housing board of directors screws up, do you evict the tenants and sell the buildings, or what? I don't think so. There's a real fundamental problem there, it seems.

On the other hand, one could imagine small-scale, one-time government grants to non-profits. I'm thinking, for instance, of a women's support agency in my riding which got a small, one-time grant for some educational stuff. It doesn't seem to me that that's really is in the same league as -- and that is obviously fairly accountable, and the mechanisms for doing that are quite easy to do. That's probably no different from research grants and all sorts of things governments do.

I'm just wondering if there is some fundamentally different group of agencies which are delivery vehicles for ongoing services.

Mr Peters: There are. The difficulty, to come back to your first example, where you raised the question of what happens if a board of directors of a non-profit housing agency doesn't do its job right, is that what actually does happen -- and this is where the big difference comes in -- the ministry then puts it under trusteeship and ends up paying anyway. That of course puts into question again, why did we have the board in the first place if they end up with virtually no liability if they don't perform? They just bow out or, as in the Metro Toronto housing situation, there's some public humility connected with it if they say they fire everybody on the board. But in the end it's the government that has to take back the operation and take over.

It is exactly that kind of situation where maybe this committee might want to raise the question of: Why use boards, or what kind of boards are you using? What kind of responsibility are these boards really assuming in running this particular government program? And how should we go about dealing with that particular situation? Again, it gets into the criteria question without getting into the details.

It was rather of interest to me that the Peter Dey report for the Toronto Stock Exchange -- you made the point that in the private sector everybody knows they're in place, but what caused this report was that they felt they weren't. That's why the title: Where Were the Directors? The rather interesting point also is that although this is bound and has pictures and it's a very nice document, it very clearly identifies itself as a draft report. I'm not privy to know why exactly it was not final, but it is a draft report. But it relates the various views of people on how, in the private sector, boards should really function.

If they, with their single bottom line -- did they do well profitwise or not? -- cannot come to grips with governance, of course this must be much more complicated in our environment. That's why sitting back and letting those who are dealing with these issues directly work out the guidelines and the skeleton framework and then report back on how it is going, how it is established and what it is achieving might be the way to go at this particular point in time.

The Chair: I wonder if everyone has had an opportunity to look at the handout that was put together by Anne Anderson, our research officer. I'm not really sure what the committee would like to do at this point. Would you like us to come back with something a little more elaborate with respect to this handout and have Anne do something over the course of the next day or so? Or shall we deal with this at another time?

Mr Owens: This serves as a good work plan. I think we've been struggling to define a work plan here today, so this is a good framework.

Mr Tilson: Mr Chair, on page 2, item 4, under "Accountability," I believe that should be broken into a fifth point. The amendments to the Audit Act don't involve just accountability but a number of things. I think that should be the emphasis. We keep doing it. You've written letters and we've made reports -- have we ever made a report?

Mr Peters: You passed a motion, which was passed on to the Minister of Finance, who is the sponsor of the Audit Act.

Mr Tilson: We've never said anything to the Legislature. This committee's never made a recommendation to the House. Would you do that sort of thing? I don't know. It seems to me we've tried everything to get the Finance minister's attention. Is he the one that makes that change? I guess he is.

Mr Peters: He's the sponsor of the Audit Act.

Mr Tilson: We've never been able to get his attention. It seems to me the only thing we haven't done is put it in the form of a report. I'm just recommending to Ms Anderson that the fifth point be the last bullet point; in order words, emphasis on the recommendations to change the Audit Act.

The Chair: It was our understanding that in fact steps had been taken and that perhaps the minister was tabling amendments. We have not been notified --

Mr Tilson: Where do you hear these rumours?

The Chair: I'm raising it so it may be confirmed or denied, but perhaps that would be the case: We could make that recommendation and we could put that in this report. It's up to the committee.

Mr O'Connor: The only thing I would add is that this committee be the standing committee that would be selected to hold public consultation on the act.

The Chair: That was the rumour, that we would be commencing hearings on the amendments.

Ms Poole: I had a further point which I wonder if we could add to the page. This morning Mr Jackson raised the conflict-of-interest issue. As members, we're all aware of the very rigorous conflict-of-interest guidelines that we must pursue. I find it quite ironic that $30 billion goes out in transfer payments and yet many of the administrators of those funds do not have their own conflict-of-interest guidelines in place. I wondered if we could just add that to the list of things we might discuss. Members may decide they wish this to be added or not, but I think we should at least discuss it.

The Chair: I think at this point it would be wise to have Ms Anderson go forward and write something. Is it possible for you to come up with something for tomorrow? That's probably too tall an order.

Ms Poole: Can you do our thinking for us?

The Chair: It's only the first day back from the long weekend.

Ms Poole: Think for us and then we can say whether we like it or not.

The Chair: Perhaps what we should do is give you a couple of days and deal with this on Thursday. I'm not suggesting you write a report. What I'm saying is that you come back with a set of options for directions in these areas -- from the discussions we've had, you could probably surmise where there is consensus on the directions we might move in -- rather than writing a set of guidelines or a set of detailed criteria, because I don't think that's what we wanted to come out of this. We would make recommendations around how to approach that.

If we deal with Thursday's agenda tomorrow and come back on Thursday and wrap this up, would that be acceptable? Good.

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Mr O'Connor: The only area I don't see on your list is bylaws and constitution. Constitution may not be necessary, but bylaws governing the board I would think would be something we'd want to make some suggestions or recommendations on. For the board to take on a true reflection of the community -- "board" is a pretty generic term at this point -- we can't, I don't think, develop any bylaws, but perhaps should take a look at rather generic bylaws or suggestions of what should be included.

When you talk about, for example, the numbers and term and what not for directors, quite often those are actually qualified through the bylaws. A bylaw may say that the term of a chair may only be for such a period of time and that it rotates so you don't end up with a whole new board once a year or once every third year, that you end up having to go out and seek throughout the community full new involvement.

Just the two areas: I don't know where we'd fit them in, but I think some of this covers what would be in bylaws or constitution.

Mr Callahan: I think I understand what you're saying, Mr O'Connor. I can see that if we're going to suggest there be model bylaws that have certain requirements in terms of who should be on the board and who shouldn't be on the board as to mix and so on -- equity, kind of like employment equity -- you're going to find it won't work. The experience I've had with most boards is that you couldn't get enough people together to do that, and more often than not, what happens is the existing board presents a slate and that slate is usually -- I mean, it's just like nomination meetings.

Mr Owens: Liberal nomination meetings.

Mr Callahan: I'm sure it's probably the same. You guys haven't had any yet, have you?

Mr Wiseman: We haven't done what you guys have done.

Mr Tilson: You walked into that one.

Mr Callahan: More often than not, that's the situation, and I think that becomes a real difficulty. You're going to find that if you put too many constraints on these groups, you're not going to be able to accomplish -- actually, you're going to destroy the democratic system which allows people to be on the board if they wish or not on the board if they wish.

Ms Poole: My only concern with that plan is that it puts quite an undue burden on our researcher, particularly as tomorrow she would have to be in committee with us all day finalizing the other reports. Would it be more appropriate if, instead of bringing something back Thursday, we gave Anne some time to contact various agencies and boards and see what criteria they have in place and do some research along that line, and then perhaps when the House comes back -- I don't know.

The Chair: Let me ask Ms Anderson what she thinks is possible and doable in a short period of time. If it's not, obviously we'll have to change the plan.

Ms Anderson: I think what I can get you on Thursday would be quite limited because, as Ms Poole says, I'll be here all day tomorrow with the other ones. I could expand what's here a little bit on the basis of what you said today. There wouldn't be a lot of time to do much additional work beyond that. In many ways, I could get you something that perhaps would be more useful later on.

The Chair: I was thinking what we would do is just establish a framework which we could then work on from there. We're not suggesting something that would be carved in stone and be submitted as a report. For the purposes of going further with this discussion, I think we should establish a more workable framework. We've got something here but it's not elaborate enough, so if we went one step further -- and if anyone has any suggestions -- I think more work needs to be done around some of these questions in establishing a framework for them, and then we could do more elaborate work. We could come back when we're sitting again, when the House meets, when we're given more time to deal with that.

Ms Poole: But the problem I have with this is that I think it's our job to answer these questions, not Anne's, and she doesn't have enough time before Thursday to add enough information about what the various options are. As far as I'm concerned, I would have no idea, for instance, what the length of the term should be, the maximum term, how many directors, what the criteria is, all this type of thing. If we gave Anne time to go to a couple of agencies, a couple of boards, a couple of non-profits -- perhaps as members we could feed her names of ones that are particularly good, that could provide her with the information about how it works in their particular agency or board. Then she could bring various options back, and then as members we could debate it.

The Chair: If you will forgive me, I don't believe that's the basis on which we ventured into this area. Ultimately, all we're doing is setting a framework, suggesting that we have broad parameters. For example, in establishing criteria, what we're saying is that criteria be established; we're not suggesting what those ought to be in detail. We're not trying to write a report that suggests that we have the right model for people to follow. We're not saying that. We're saying we're establishing certain principles.

I think the auditor's report was very clear about that. This morning's presentation outlined the framework. We need to just elaborate on what he's presented to us and to set that as something that we work with. I don't think we're going to sit here and establish what each board of directors should consist of, what each criterion should contain. We should just look at the general outlines of that.

Mr Owens: I wanted to agree with Dianne in terms of the time lines for Anne to bring the kinds of information I would want to take a look at. This is a fairly esoteric subject with respect to governance, and it's not an issue that we as members, or anybody else, come across on a regular basis. Looking at different jurisdictions, and we talked a lot about the differences between non-profit and non-profit community-based -- to look at the kind of textural issues you would need to examine.

I understand that you're saying we're not writing the report word for word in terms of the guidelines, but I think we need more in terms of having a clearer understanding of exactly what the hell it is we are talking about and the kinds of things we want to make recommendations on so they're real live recommendations.

The other thing, Joe, is that if you look at the ongoing investigation by Peat Marwick at MTHA, I have a touch of concern that if we send out guidelines with respect to board membership and accountability, that is somehow going to collide with the good work that's going on with Peat's.

The Chair: Let's try and put this in perspective. I'm going to ask Mr Peters to comment on what's been said. We have, as I said this morning, material that was presented to us, and standards that -- just to go back to our briefing notes that were given to us by Mr Peters.

Mr Owens: This is one model.

The Chair: Well, the auditor is the one who raised this issue with respect to governance in the context of his report, of which we all have a handout, and that's what we're acting on here. We're talking about a legislated accountability framework, and contained in that is the framework for governance and also establishing general criteria for ensuring that boards of directors are chosen along the lines the criteria have set out.

In many respects, we have heard that no criteria exists for the selection of those board members, that in some cases there's no accountability and that there's no understood framework between the receivers of government funds and those who hand out the cheques.

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Mr Owens: You can't make such a broad-based generalization, Joe. Come on.

The Chair: I'm just trying to give you the context of where we've come from and where we are today in trying to deal with this matter.

Mr Owens: That statement is simply not true.

The Chair: Mr Peters, would you comment on this, with respect to what it is we are putting forward, how it is you see our role unfolding here in making a recommendation around providing this kind of direction.

Mr Peters: The recommendation I would have is to focus on the framework rather than the detail. In setting the framework, one of the areas you might want to consider is essentially some of what would be unacceptable to this committee: set the parameters, rather than what to do, but also by setting guidelines of what is unacceptable, and some of them we heard around the table up to now, for example, such areas that it unacceptable if a report does not have a code of conduct, it is unacceptable if a board does not operate under bylaws -- in a generic fashion, which I think is more the role of the committee.

Mr Owens, just to give you a little more comfort, the summary of the tape was provided ultimately by John Palmer. John happens to be a partner and senior vice-chair of Peat's, and is actually on his way to heading the -- the bank inspector for the federal government; he's gone that way. I'm not sure their work will be at odds with any generic work on governance that this committee might want to do.

I would again recommend sticking to the overall framework within which boards should develop and to present a set of standards indirectly by saying that these are the matters that would be unacceptable to this committee. Examples other than the code of conduct and not having a bylaw would be: failing to meet reporting requirements to the various members in the accountability chain, making records not accessible or whatever to people who want to conduct work etc, just a raft of these issues -- in a way, to do it in the negative.

The other part is to deal with, as Anne outlined here in the document, the kinds of agencies: regulatory, advisory or operational. It would be unacceptable, I would suggest to you, to have a board operating in a framework where it has unclear objectives and where it has no idea to whom, for whom, it has a fiduciary responsibility. That has to be certainly made very clear.

It is to build an accountability framework and set the outside parameter of what is unacceptable. Admittedly, that takes a bit of further research to do. But rather than telling a board what to do, it might be easier for the committee to say to a board what not to do.

Mr Owens: I'm agreeing with Dianne that that's completely unreasonable to expect Anne to have pulled together by Thursday morning at 10 o'clock.

The Chair: No. That's not the intent here. The intent was for Anne to give us a kind of list, as she's done already. She did this over lunch, so I thought it was unfair for us to use this to guide any further discussion and debate. We could come back three months from now and deal with this item or we could ask her to set forward just a general outline of where we want to go from here. That's what I was thinking we might do and give her just a couple of days to do that, and then we could on Thursday quickly deal with this. It's not going to take up the whole day.

But having set that general direction about where we want to go, just as we were discussing it -- do we tell boards, do we tell agencies, what they ought not to do, or do we include what they should do? -- these are options she could lay out by Thursday, not in any detailed fashion but just posing those kinds of questions. We can then say to ourselves two months from now when we come back in the legislative sitting that we'll deal with this matter. As she continues to do more research around that question, we might have something ready for that time.

Anne, do you want to say something on that?

Ms Anderson: I'm just thinking that one way to do that is for me to flesh these out a bit with what the issues are that are contained within them, not to give the responses to them, so on Thursday you'll have put down on paper the issues you've heard of today and will perhaps have some idea of which ones you want to focus on in expanding and doing further research on and continue with.

Mr Owens: That's fine.

The Chair: That's it. We really should do that now because it'll give her time, during the time we're not sitting, to work on those areas.

Mr Callahan: I wonder if we could also see -- and I'm sure they must be available, because of page 14 of chapter 2 that's been handed to us. There are three documents. One was a white paper delivered to the British Parliament called The Citizens' Charter. I'm sure the auditor's office must have that document, since it's referred to. Another is U.S. Bill S.20, the Government Performance and Results Act of 1992. You must also have that, I would presume. Third, and it's unfortunate I didn't know about this when we were down at PEI, are the School Act, and the Health and Community Services Act. It might be worthwhile to have those to look at and see how they've dealt with it.

In fact, the Prime Minister of England -- and I think we can do it in a much less expensive fashion by simply getting the paper, unless others wish to do something otherwise. He indicated in his statement, "We believe that it will set a pattern, not only for Britain, but for other countries of the world." Let's become one of the other people.

The Chair: Can you make that available?

Ms Anderson: There are quite a lot of documents that come with The Citizens' Charter and I have a certain number of them. I can make the Prime Minister's speech available, anyhow, and probably some of the others as well.

Ms Poole: I have no problem with doing it as a generic framework. I was off base, obviously, because I thought we were headed down another path. The only thing I personally would like to see is to put it in a positive framework rather than a "Thou shalt not," ten Commandments version. It's pretty easy, if you're going to say, "It is unacceptable for boards not to have a code of conduct," instead to say, "Boards should have a code of conduct."

The Chair: We can worry about writing it in that language.

Ms Poole: It's just that if Anne's doing some sort of thing, I personally would prefer to do it in the positive as opposed to, "Don't do this, or we'll rap your knuckles." Sort of like a spoonful of sugar.

Mr O'Connor: Another question I had was the process we have now in place around the agencies, boards and commissions that we have set up here in Ontario. Does any other jurisdiction have that type of resource put into libraries to try to open up the process of public appointments? It is a new process and quite comprehensive, and I just wondered whether any other jurisdiction might have that.

The Chair: Any further debate? If not, we shall adjourn until tomorrow.

Before we go, can I just confirm that we will deal with the follow-up to this on Thursday and that tomorrow's agenda will be Thursday's agenda, which was to include final reports, the draft reports, and also our update on the unfinished reports of the past.

We're adjourned.

The committee adjourned at 1530.