This is page numbers 773 - 824 of the Hansard for the 12th Assembly, 6th Session. The original version can be accessed on the Legislative Assembly's website or by contacting the Legislative Assembly Library. The word of the day was development.

Topics

Return To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

Page 787

John Pollard Hay River

I'm not aware of any company or organization that hasn't filed under the payroll tax legislation, Madam Speaker. Thank you.

Return To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

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The Speaker Jeannie Marie-Jewell

Thank you. Supplementary, Mr. Gargan.

Supplementary To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

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Samuel Gargan Deh Cho

Thank you, Madam Speaker. I would like to ask the Minister whether he has spoken with Mr. Jerry Paulette who is the principle spokesperson for the Northwest Territories Treaty 8, on taxes, concerning the possibility of Treaty 8 citizens acquiring a tax remission order from the federal government.

Supplementary To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

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The Speaker Jeannie Marie-Jewell

Minister of Finance, Mr. Pollard.

Further Return To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

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John Pollard Hay River

Madam Speaker, I did ask Mr. Irwin for a copy of the letter he sent to Chief Paulette in this regard, and Mr. Irwin did not feel that the Government of the Northwest Territories should be privy to that information. So, I have not discussed it with Chief Paulette. As the Minister of Indian Affairs tells me, that is a matter between, as he said in his letter, governments. Thank you, Madam Speaker.

Further Return To Question 368-12(6): Companies Refusing To Pay Payroll Tax
Question 368-12(6): Companies Refusing To Pay Payroll Tax
Item 6: Oral Questions

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The Speaker Jeannie Marie-Jewell

Thank you. Item 6, oral questions. Item 7, written questions. The honourable Member for Yellowknife Frame Lake, Mr. Dent.

Written Question 27-12(6): Prior Years' Claims
Item 7: Written Questions

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Charles Dent

Charles Dent Yellowknife Frame Lake

Thank you, Madam Speaker. I have three written questions to the Minister responsible for the Workers' Compensation Board.

1. According to the WCB 1993 annual report, "prior years' claims" are down from $15.7 million in 1992 to $47.2 million in 1993. Is it correct that "prior years' claims" means monies paid in 1993 to those injured before 1993?

2. What proportion of people receiving payments under "prior years' claims" are permanently disabled?

3. How does the Minister explain the decrease in the amount paid under "prior years' claims" from 1992 to 1993?

Thank you, Madam Speaker.

Written Question 27-12(6): Prior Years' Claims
Item 7: Written Questions

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The Speaker Jeannie Marie-Jewell

Thank you. Item 7, written questions. Item 8, returns to written questions. Item 9, replies to opening address. The honourable Member for Yellowknife Centre, Mr. Lewis.

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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The Speaker Jeannie Marie-Jewell

Mr. Lewis's Reply

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Brian Lewis Yellowknife Centre

Thank you, Madam Speaker. I've scribbled a few notes because I'm aware that we're getting close to the end of this session, and people seem to always leave it to the last day before they say anything that they want to get off their chest. So I thought today I would make a brief reply to our Commissioner and his address.

I would like to thank, first of all, Mr. Norris for his service, Madam Speaker. He understood fully the new role that this position has emerged into, and I'm sure he was very proud to be our first aboriginal Commissioner and to become a very important part of our history because this, in fact, was a break from the past, the kind of role that he had to play. And we all want to thank him, I'm sure, for the dedicated service he gave us.

---Applause

Madam Speaker, this current territorial government has been a long process of evolution towards fully representative and responsible government. That, in my opinion, was achieved when Mr. Norris became Commissioner and we no longer had an Executive Commissioner with Executive powers. In fact, the new Commissioner filled a purely ceremonial role, and he did that with some quiet dignity and that's something we had expected and we hope will continue.

It's unfortunate, Madam Speaker, that as we became more responsible over the past few years, times have become more difficult economically for all Canadians. But in recognition of the emerging nature of our jurisdiction over the last 20 to 30 years, the territories were, on the whole, fairly well treated by the federal government in terms of the allocation of resources. It's unfortunate that when we began to sit as equals with our provinces in so many meetings with the federal government, this has suddenly changed. It's no longer quite the same way that it was.

The provinces have become more aware of the favoured status that we had over the years, and we began to feel the pinch. A good case is the allocation of social housing. At one time, we received almost one-third of the total allocation of the houses under the social housing program. Now this has been dismantled and, of course, we are the first to suffer.

Madam Speaker, because of the large federal deficit, this freeze on federal support to the north, in my opinion, has only just begun. Both Nunavut and the demand for political restructure in the west has already been criticized in the national press. We have a very small population and the cost of government per capital is very high compared to the provinces, while over the last few years our provincial colleagues have become very well aware of how well we have done during the time that we were under the patronage of the federal government.

Madam Speaker, if we had to respond to the demands for self-government in east and west, we must seek devolution of the necessary powers and resources from the federal government. I raised this issue on several occasions in the past, and I can't stress it enough today. We are reaching the period of time, in my opinion, where we will go beyond the time to really solve this problem. Many of us feel that when the time comes for us to divide and restructure, our budget will have shrunk so much that we just won't be able to deliver the goods to anybody and we will be against the wall for meeting those commitments we have made to the people we serve to devolve government where it belongs, in the hands of the people.

There is an understanding that the federal government has agreed to cover the extra costs associated with self-government in Nunavut and is prepared to negotiate with groups in the west. The powers to be divided, quite bluntly, are those held by this territorial government and those still remaining in federal hands that have still not been devolved. There is no agreement yet, Madam Speaker, on what extra costs the federal government will pay for division or for devolution from the territorial government. The fear is that the territorial government will be asked to pay for everything, leaving it a bankrupt, hollow shell that will inevitably collapse.

I ran for political office, Madam Speaker, on a platform of one public government for all people and have done everything I can to support it and help it survive. I respect those who want change. I should point out, though, that the changes in the past 30 years have been absolutely incredible. In fact, all I've seen is change. The task ahead now, Madam Speaker, is the management of change so that we don't get short-changed. That is the problem in a nutshell.

It should be the priority of this government to do two things. I've already established these twice in the Assembly, and it bears repeating because we must continue to hammer away at these issues. The federal government must devolve to this government, as a first priority, the remaining powers that Ottawa exercises on our behalf. Unfortunately, the federal bureaucracy seems to roll along, without diminishing. In fact, it seems to get bigger and stronger. Second, the federal Minister must indicate continued federal support for one public government in the north until the creation of Nunavut, at which time, there would be two public governments in the Northwest Territories.

The constitutional steering committee, establishing a coordinated restructuring of government in the west, has already agreed to the principle of one public government. But, in recent months however, Madam Speaker, the Inuvialuit, the Deh Cho and Treaty 8 people have pursued other possible, contradictory objectives. The Metis, a strong voice for constitutional reform, have recently, by resolution, supported the establishment of a territorial government for the Deh Cho, which contradicts the position they have taken with regard to the work on the constitutional committee.

I know that by making the points I am making, I can't avoid the criticism that my views are simply those of Yellowknife, Yellowknife's bureaucracy, Yellowknife business and so on. Madam Speaker, I know that that will be the view, that I'm expressing a very parochial, narrow point of view that won't be held up for close examination and come away unscathed.

I hope that Members will credit me with a wider vision than that. I personally believe that public government will survive. The issue for me is not the survival of public government, it is the fact that it will be a shell, with no real powers to do anything or accomplish anything that really matters. I would like to see government which is efficient, effective and affordable. In fact, the main theme in politics over the next decade, and I'm convinced of this, will be affordability. Everything has to stand that test, if it doesn't, it is not going to go anywhere.

Members will recall that I did not support the establishment of the Constitutional Development Steering Committee. This is not because I did not believe there was a need for change. I believed there were too many issues outstanding that needed to be clarified and sorted out before we got into the long, arduous process of constitutional development in the west. I didn't believe at that time that the time was right and I believe subsequent events have proven that to be a reasonable position for me to have taken.

Now, however, that the CDSC has been established, we should commit ourselves to keeping it going. Whatever the outcome of the conferences over the next year or two, we need a forum, outside of government, which is what this is, in order to continue talking to each other. We should commit ourselves, whatever happens over the next year or two, that what we have now we keep working with because we can't keep on chopping and changing and deciding this forum doesn't work or that one is a better one. We are not going to get anywhere unless we commit ourselves to a process and give it a chance, even if it takes longer than we want it to take.

Madam Speaker, a characteristic of this Assembly has been the domination of social issues on the public agenda. This contrasts with the previous Assembly which was dominated by concerns about environmental and, of course, economic issues. By contrast, the 11th Assembly was dominated by the political agenda of political development. My own view, Madam Speaker, is that many social problems will decline if people achieve a greater degree of economic self-sufficiency.

Government doesn't have to be the major role player, in my opinion, in economic development. It can help create the conditions for development and it can be supportive. The main responsibility, however, lies with the individual who can see economic opportunity and can use it. Government, in many cases, can help create those economic opportunities, but it boils down, in fact, to individuals and groups of individuals who have the will, the desire and the vision to take advantage of those opportunities and to run with them.

In the Northwest Territories we should recognize that oil, gas, mining and other major economic sectors will, in fact, not impact many of our small communities. They are highly significant in terms of any overall economic strategy of the various levels of government. These enterprises, however, are very large and they're subject to many fluctuations beyond the control of government. The cost of production and the price of the commodity drive the industry, and governments, I'm afraid, can't do very much about it.

To provide revenues for government, the primary industries such as mining, of course, will continue to be of paramount importance. In terms of economic development, however, small businesses are proving themselves over and over again as the main engines of economic growth. Just as an aside, Madam Speaker, I was listening to the radio about Bill Tait, who spent 10 years of his life to try to create an interest in Japan to get people to come and watch the aurora. A total of 10 years. That's the time that a little niche can be developed all over the territories in different areas in order to create industries.

So, although Yellowknife is a government town, it really also depends on those people who will dedicate themselves to a vision they will work at, even though they don't become very rich. They need to work at it over a period of time until they get some degree of success. There is no doubt in my mind, Madam Speaker, that the future development of the territories will depend heavily on the emergence of a private sector based on small business. To fully empower a population of only 60,000 should not be a huge, difficult challenge, if a commitment is made to the appropriate economic strategy.

I have said that mining will continue to have a major impact in Yellowknife. I believe this to be the case, whether there are diamonds or not. I think mining is going to be here for a long time to come. Yellowknife sits on one of the major gold caps in the world and the area will continue to produce gold and serve as a centre of the industry. Yellowknife gold mines have reported healthy earnings over the past five months, Madam Speaker, despite all the difficulties, and they are doing well.

Madam Speaker, I was an environmentalist when I was a very young man, long before the words environment and ecology were commonly used. Madam Speaker, I have found that my beliefs have not always served me well, politically. Industry automatically places all environmentalists among the lists of the enemy. For many environmental groups, no action by politicians to protect the environment ever goes anywhere near as far as it has to go. So, you end up being dammed by both sides, by the industry who figure that you should shut up and let the world proceed the way industry perceives it should, and you get dammed by the environmentalists who figure you are really being too wimpy and you should be much tougher on those engaged in industrial activity.

Madam Speaker, I am not a radical, since I really sincerely believe that Canadian technology can provide the key to sustainable development. I am committed to the idea of sustainable development and this government is committed to it. It is an official policy of this government, to support sustainable development. What I fear, Madam Speaker, is that northerners are not properly prepared for industrial development. If and when a decision is made to proceed with a major development, industry will be pushed, as it always is, into a defensive position. That is what happened with the Mackenzie Valley pipeline.

There is already evidence that the next major battle will be on the barrenlands in connection with the diamond mining industry. Any proposals for development will be presented as a major assault on the barrenland environment. Various groups, and it has already happened, especially the World Wildlife Federation, will be able to raise large amounts of money if, for example, the Barrenland Grizzly is publicized as the next victim of mining. It is a beautiful image which can, in fact, be used to promote the environmental cause.

It is for this reason that I have suggested the Premier establish a round table on the economy and environment. We should be ready for development when it comes and not moved by knee-jerk reactions because we always end up looking bad and the mining industry, by its own admission, are terrible communicators. They are good at what they do, but they don't understand politics or media. They just like to do the things that they have the expertise in and they do it well.

My fears were prompted by a letter recently sent by the World Wildlife Federation to the federal Minister of Environment in July. It raises many concerns and I will deal with them briefly, Madam Speaker. It gives you a hint of the kind of thing I am talking about.

In the letter from the president of the World Wildlife Federation, Madam Speaker, to the Honourable Sheila Copps, Minister of Environment, Mr. Hummel points out that a road from Yellowknife to Coppermine would bisect the Northwest Territories. It would cut it in two. This is specious reasoning, Madam Speaker. A road does not mean that we have a Berlin wall, where you have to be a pole vaulter to jump over it. All it means is that you have a way, so that if you want to drive somewhere you have somewhere to go and you don't get stuck in the bush.

So the idea that this is suddenly going to destroy all the Northwest Territories because you are going to bisect it is a specious argument, but the kind of argument that has been used by Mr. Hammell to argue against any kind of development because it will bisect the territory. We know that to be nonsense because animals cross roads. I have seen dozens of animals and Mr. Gargan will attest that animals cross roads, all the time.

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Some Hon. Members

Hear, hear.

---Applause

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Brian Lewis Yellowknife Centre

And he is always very careful to avoid them.

Madam Speaker, the letter to Madam Copps also pointed out that there would be a lot of hydroelectric dams. Well, we already have such projects, Madam Speaker. In fact, the only dams that have been proposed are two small dams which are already in the process of being utilized and which are being supported by the Dogrib people. In fact, we have already found that on that same river system, we have had dams supporting sustainable development for 30 years with no arguments.

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Some Hon. Members

Hear, hear.

---Applause

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Brian Lewis Yellowknife Centre

Yet, we have someone saying that these dams are going to do incredible damage to people. I find this a specious argument and hardly worth considering seriously. But it gives you the flavour of the concerns being raised, Madam Speaker.

The other concern is the flattening of wildlife sensitive eskers for airstrips. Madam Speaker, eskers, as we all know, are beds of gravel and we use them already. The argument that these are huge wildlife habitats that must be protected again is specious nonsense. There are no plans to use big eskers to develop long airstrips. It is a part of the environment and we have always used them as a source of gravel and will continue to with no damage to wildlife because it has already been going on for the last 50 years.

Madam Speaker, the other big argument is that there is going to be a huge port on the Arctic coast. Madam Speaker, we already have similar kind of developments at Nanisivik. We have it at Polaris. They are developed when you need a place for a boat to get into and to dock. We are not talking about Rotterdam, New York or Vancouver. We are talking about a place when a boat can tie up and we have already been doing it for the last 15 years. This proposal is no different from what we have already done in order to get access to those deposits in the two locations that I have just referred to.

Madam Speaker, my colleague Mr. Whitford has already talked about grizzly bears and I respect this and, in fact, I have some knowledge about this. It is an issue for people. People have respect for bears. There is a certain kind of mysticism. These are very important to people and we respect that. But, Madam Speaker, there is no evidence that the mining industry has been devastating the bear population. By the admission of the Department of Renewable Resources, of the 21 bears killed in that area last year there was one defence-killed bear by someone connected with the mining industry. They don't have a whole bunch of people going out with guns as entertainment every weekend shooting bears. It isn't allowed.

In fact, some people went to visit Lupin Mine not long ago and there were Members of the Standing Committee on Legislation on that trip. They were able to observe with their own eyes. When we landed at Lupin Mine, there were caribou grazing quietly along the airstrip. They didn't even look up, they just kept on grazing. There were even little white rabbits hopping all over the place. They have learned over a period of time that when those planes land, they don't knock the heads off the rabbits or the caribou. In fact, they stay away from them because they want to land on that airstrip and they don't want to land in the rocky area along the airstrip where those animals are grazing. Also, the people who go to those camps are not allowed to hunt those animals. They come right up to the kitchen and they are fed. They seem to live a very comfortable and contented life.

So, Madam Speaker, I am concerned that the exaggeration that is being placed by the World Wildlife Federation into the hands of the public on this issue is very weak reasoning and we should have some sense that we have to be able to sort out the things that are reasonable and the things that are ridiculous. The contents of this letter are ridiculous and on that note, Madam Speaker, I would like to sit down because I don't like to bore my colleagues. Thank you.

---Applause

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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Some Hon. Members

Bravo.

Item 9: Replies To Opening Address
Item 9: Replies To Opening Address

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The Speaker Jeannie Marie-Jewell

Thank you. Item 9, replies to opening address. Item 10, petitions. Item 11, reports of standing and special committees. The honourable Member for North Slave, Mr. Zoe.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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Henry Zoe

Henry Zoe North Slave

Thank you, Madam Speaker. Members of the Standing Committee on Public Accounts are pleased to present the report, Toward an Economic Development Strategy. Your committee has reviewed Tabled Document 52-12(4), 1993 Audit of the Department of Economic Development and Tourism; the NWT Development Corporation and the NWT Business Credit Corporation. Our report presents the results of our review.

Acknowledgements

Members of the Standing Committee on Public Accounts appreciate the cooperation of the Minister responsible for the department and corporations under review. Thanks are also due to officials form the Financial Management Board Secretariat, the office of the Comptroller General, the Department of Economic Development and Tourism and the two corporations that participated in the review by appearing before the committee and answering questions.

The Standing Committee on Public Accounts also acknowledges the organizations and individuals who provided information to the public review. Committee Members appreciate the thoughtful comments and documentation provided by witnesses and by those who prepared written submissions. Members of the standing committee considered all information contributed.

Some of the department's economic development officers also participated in the review process by responding to the committee's request for information. The committee would like to thank them for providing their perspective on the issues being considered. As well, committee Members would like to acknowledge the participation of the assistant auditor of Canada and his officials from the Edmonton regional office in the review. The assistant and his staff provided advice and assistance during preview briefings and in camera meetings of the committee. They also served as witnesses during the public hearing.

Executive Summary

The Assembly's Finance committee recently recommended that the Government of the Northwest Territories focus on social issues. The government was asked to assess its priorities and refocus its efforts on social issues. This does not mean that the government should abandon economic development. What it does mean is that we need to build a strong foundation of healthy, well-educated people.

We must invest in our future by investing in our people. These are long-term investments and the expected returns are also long term. Benefits should be forthcoming well into the future. The government should continue with economic development initiatives while, at the same time, ensuring that our people are able to respond to the opportunities created.

The pace of change in the north has been phenomenal. It has not been that long since most residents lived traditional lifestyles. With these dramatic changes have come enhanced expectations, many that result in a demand for public funding. Governments face many challenges in meeting the needs of their citizens. More than ever, governments have to channel limited resources into areas of greatest payback. This requires designing programs that cater to the needs of the community and provide the most useful benefits while, at the same time, preserving the overall interests of the taxpayers.

Madam Speaker, many people agree that government support of one kind or another is needed to stimulate and sustain economic development in the north. With limited resources, the government must focus and coordinate its economic development efforts. This requires a clear, central strategy and all participants must understand their role in achieving the best results. More detailed planning is required for the Department of Economic Development and Tourism. There is a real need for a broad, long-term economic development plan that clearly articulates potential opportunities; strategies for developing opportunities; and the costs and benefits associated with major public and private investments in different sectors.

Committee Members recommend three strategic directions for developing the economy of the Northwest Territories. First, the Government of the Northwest Territories should study the costs and benefits of focusing on small scale investments. The idea is to invest smaller amounts of money in a larger number of communities. Second, committee Members recommend that the Department of Economic Development and Tourism develop a comprehensive marketing strategy. Marketing information should be collected and distributed to people in the communities. People in the communities need to be aware of the outside market. They need to know whether there will be buyers for the products that the community produces.

Third, committee Members recommend that Economic Development and Tourism develop a comprehensive strategy to guide the development of parks and the tourist industry in the Northwest Territories. Worldwide competition for tourist dollars is fierce. With shrinking resources, governments have to assess where they are to invest their money and human resources to obtain the best results. The central issue is the appropriate role of tourism in an evolving economy. There has been a great deal of discussion about whether, in times of fiscal restraint, we should be spending money in the area of tourism and parks.

Committee Members discovered overlapping jurisdictions and inconsistent policies and guidelines governing the granting of financial assistance, across programs, in the department and the corporations. The government should develop a rational plan for the delivery of economic development financial assistance programs across the Northwest Territories. Committee Members noted a number of situations where clients who are potentially able to repay money granted are receiving assistance in the form of non-repayable grants and contributions.

The Government of the Northwest Territories could benefit from exploring the idea of repayable contributions. Repayment could be required in all cases where it is determined to be possible. The funding could then be "recycled," used to help others who require funding assistance. Cases where some businesses received financial assistance from several different programs were identified. Committee Members do not view this practice of "multi-dipping" to be a problem by itself. But they feel that information about the total amount of support provided to individuals and companies should be available to decision-makers.

The Department of Economic Development and Tourism commissioned an independent consulting firm to undertake an organizational review of the department. The consultants completed the review and submitted it to the department in the fall of 1993. In response, department managers made organizational changes. Some of these changes were taking place while the committee was reviewing the 1993 audit. Therefore, committee Members plan to monitor these changes and assess the results.

The primary organizational issue with the NWT Development Corporation is its relationship to the Department of Economic Development and Tourism. The Development Corporation has operated autonomously from the Department of Economic Development and Tourism and the rest of government. While recognizing the need for the Development Corporation to function autonomously, committee Members noted opportunities to integrate Development Corporation's and ED&T's contribution to the overall economic strategy.

The Business Credit Corporation (BCC) was originally set up to be an arm's-length corporation. However, it is not operating that way. The corporation's general manager now reports to the deputy minister of the Department of Economic Development and Tourism. Further, fiscal restraint prohibits BCC from setting up its own regional and headquarters structures with sufficient staff to run its operations independently. Committee Members feel strongly that a decision needs to be made about he desirability and feasibility of having the BCC independent of government operations.

The government has created a number of programs that specifically address economic development. Many other programs have been initiated and are funded through the federal government. However, all the money comes from government sources and it makes sense to look at the total funding for economic development as it if were one pool of money and people. Improved efficiency is one way of ensuring that the government will get the best value for money in economic development. Thus, the government should examine whether there are better, more efficient ways of achieving its objectives.

Many of the people who provided information to the committee pointed out the need to create a cohesive approach to economic development programs, a need to create one-window shopping. The client should be able to go to one place to get all the information they need about acquiring funding assistance. Whether it comes from different pots of money or not should not affect the client.

Along with one-window shopping, committee Members and presenters identified the need to develop more aftercare or follow-up services. Once funding assistance has been granted, there seems to be, in many cases, no follow-up service from the economic development officer, the department or the corporations. Aftercare service is required because many clients, although very proficient in their work -- for example, producing arts and crafts products -- are not experienced in the administration and management of the business. Often, there is no follow-up until the business is in trouble and, by then, it is too late to rectify the problem.

Committee Members believe that the government must develop a clear, government-wise economic development strategy. The Department of Economic Development and Tourism must then examine its mandate, policies, organization and programs and make adjustments to conform to the strategic direction established by the government. This assessment should include the Development Corporation and BCC. A key element of the economic development strategy is the development of accountability systems, systems that describe and monitor desired results. As well, there is a need to ensure that the information and expertise required to make effective decisions is available when and where it is required.

Members of the Standing Committee on Public Accounts made a number of recommendations to assist in creating an effective economic development strategy for the Government of the Northwest Territories. Madam Speaker, prior to proposing the motion for receiving the report of the Standing Committee on Public Accounts, my report is quite lengthy; therefore, I would seek unanimous consent to consider the report read as presented and printed in Hansard.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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The Speaker Jeannie Marie-Jewell

Thank you. The honourable Member is seeking unanimous consent to the report read in Hansard. Are there any nays? There are no nays. The honourable Member for North Slave, Mr. Zoe.

Recommendation 1

The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories, under the direction of the Department of the Executive, develop and implement a comprehensive economic development strategy that encompasses all government departments and agencies. The strategy should highlight major government initiatives such as income security reform and should cover the period 1995 until 1999.

Recommendation 2

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a territory-wide plan for long term economic development. Further, the committee recommends that the plan should address division of the territories in 1999.

Recommendation 3

The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories conduct a cost-benefit analysis to compare the value for money achieved from small as opposed to large scale investments. Further, the committee recommends that the government review and adjust its policies for issuing grants, loans and contributions, as required, based on the results of the analysis.

Recommendation 4

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a comprehensive marketing strategy that focuses on the collection and distribution of reliable market information.

Recommendation 5

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a comprehensive strategy to guide the development of parks and the tourist industry in the Northwest Territories. The strategy should be based on clear goals and objectives and accompanied by cost-benefit analyses of various strategies considered.

Recommendation 6

The Standing Committee on Public Accounts recommends that the government develop a rational plan for the delivery of economic development financial assistance programs across the Northwest Territories.

Recommendation 7

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism and the NWT Development Corporation examine ways to replace traditional non-repayable grants and contributions with repayable contributions.

Recommendation 8

The Standing Committee on Public Accounts recommends that the department conduct a comprehensive review of all conflict of interest guidelines currently in place and develop appropriate internal conflict of interest policies that are separate and distinct from those in place for all public servants.

Recommendation 9

The Standing Committee on Public Accounts recommends that Cabinet review its direction to transfer the parks program to the Department of Renewable Resources, and provide a report on this review and an implementation plan, if required, to the Legislative Assembly.

Recommendation 10

The Standing Committee on Public Accounts recommends that the government and the Department of Economic Development and Tourism assess the feasibility of maintaining the Business Credit Corporation as a separate corporate entity. The review should consider bringing the loan function of the Business Credit Corporation back into the department. The findings should be reported to the Legislative Assembly.

Recommendation 11

The Standing Committee on Public Accounts recommends that, in the interim, action be taken immediately to clarify the mandate and organization of the Business Credit Corporation and its relationship to the Department of Economic Development and Tourism.

Recommendation 12

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism identify client needs for follow-up services and develop a comprehensive aftercare program that meets these needs and protects the investment of government money.

Recommendation 13

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism, in consultation with the Department of Education, Culture and Employment, assess the AABED program to determine where it might be enhanced or improved.

The committee further recommends that based on this assessment, the departments enhance the existing program or develop a new program to provide training for affirmative action candidates in economic development. The new or enhanced program should include an "on the job training" component.

Recommendation 14

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism establish a plan that provides an effective cross-cultural orientation and training program for newly hired economic development officers.

The committee further recommends that individual training plans within the performance review and planning process require cross-cultural awareness training at least every fifth year.

Further, the committee recommends that senior managers within the Department of Education, Culture and Employment provide a model for the economic development officers by each participating in a program of cross-cultural awareness.

Recommendation 15

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism assess the effectiveness of visitors' centres, explore alternative uses and develop a strategy to guide future development and modification to existing facilities and programs. Further, the committee recommends that this strategy be implemented before any additional capital funding is requested for visitors' centres.

Introduction

The Legislative Assembly of the Northwest Territories asked the Auditor General of Canada to conduct a comprehensive audit of the Department of Economic Development and Tourism (ED&T). Auditors examined the organization during the spring and summer of 1993. They provided the first draft of their report to the Department in August 1993. Senior managers responded to the auditors' recommendations the following month. The auditors' report entitled 1993 Audit - Department of Economic Development and Tourism, NWT Development Corporation, and NWT Business Credit Corporation includes the managers' responses.

Auditors examined department programs focusing on the business development fund; arts and crafts; tourism and parks; and the economic development agreement. Because of their importance to economic development in the NWT, auditors also examined the NWT Business Credit Corporation (BCC) and the NWT Development Corporation.

Auditors completed the final draft of their report in October. The Speaker tabled the 1993 Audit report --Tabled Document 52-12(6) -- in the Legislative Assembly on December 7, 1993.

Members of the Legislative Assembly referred the report to the Standing Committee on Public Accounts for review.

When the auditors started their review, the government had just appointed a new deputy minister for the department, and the first full-time president of the Development Corporation. Concurrent with the audit, the new deputy initiated a review of the organization, and started to make changes based on that review. Development Corporation managers also responded to issues raised during the audit by developing new or improved policies.

Senior managers responded to a large number of the recommendations made both by the auditors and the consultant who reviewed the organization. In addition, the department recently completed a tourism marketing strategy. In response to policy and program initiatives occurring during and after the auditors' examination, committee Members noted and assessed changes and focused on finding solutions to remaining problems.

Economic Development In The NWT

The People And The Land

According to the NWT Bureau of Statistics, the NWT population is 62,900. The population is young and is growing rapidly. With a growing population, people will need jobs.

Modern communications, such as satellite TV, have helped to expose northerners to different lifestyles where consumer goods appear to be plentiful. This has influenced people's expectations.

The land mass of the NWT comprises one third of the area of Canada and is larger than many countries in the world. There are over 60 communities spread across this vast area. Many of these communities are remote, have very few inhabitants and no road access. Residents endure harsh climatic conditions. As a result of these and other factors, living costs are significantly higher in the NWT than in the provinces.

The NWT population is also surprisingly urbanized, especially in the western NWT where 68 per cent of the population live in the four largest communities. In the western NWT, almost half of the aboriginal population live in the four communities whose populations exceed 2,000 residents.

The Economy

As a result of its limited tax base, the Government of the Northwest Territories depends on the Government of Canada for about 80 per cent of its expenditure needs. Further, the active business community is small and entrepreneurial experience is limited.

The government sector in the Northwest Territories provides about 50 per cent of all jobs and government spending represents a major opportunity for local businesses. However, government funding, at all levels, is getting tighter and in recognition of tough economic times and federal funding cutbacks, the Government of the Northwest Territories has initiated fiscal restraint measures. Economic development initiatives must, therefore, line up with all other important government initiatives to access limited resources.

Many northern businesses could not survive without continued support from government, either as supplier or in some cases by ongoing direct subsidies. To many people, ongoing subsidies are not acceptable. Yet in some communities with fragile economies, some unsupported businesses may not succeed. The auditors offered the following illustration of this point.

"...the fishing industry in the NWT is able to harvest high quality products from both salt and fresh water. Yet to get the products to market, mainly in the south, at competitive prices sufficient to provide a reasonable income to the harvesters and processors will continue to require extensive subsidies. In 1992-93 the government budgeted over $800,000 for transportation subsidies to freshwater fishermen and other subsidies to saltwater fishermen."

The key to ensuring future fiscal stability for the NWT lies in the development of a stronger revenue base. The more revenue we as northerners can generate and control, the more we will be in control of our future.

With a developing economy, will come the need for trained workers. Therefore, another component of developing an effective strategy for economic development in the north will be to invest in training. The challenge lies in the present situation.

"The NWT Bureau of Statistics reports that 27 per cent of the population over age 15 have less than grade 9 education. High school graduation in the last few years has averaged about 200."

The Role Of Government

The pace of change in the north has been phenomenal. It has not been that long since most residents lived traditional lifestyles. With these dramatic changes have come enhanced expectations, many of which result in a demand for public funding.

Governments face many challenges in meeting the needs of their citizens. More than ever the governments have to channel limited resources into areas of greatest payback. This requires designing programs that cater to the needs of the community and provide the most useful benefits while at the same time preserving the overall interests of the taxpayers.

Strategic Focus

Elements Of Strategy

Many people agree that government support of one kind or another is needed to stimulate and sustain economic development in the north. With limited resources, the government must focus and coordinate its economic development efforts. This requires a clear, central strategy. And all participants must understand their role in achieving the best results.

Although the department and corporations under review have primary responsibility for economic development, all government departments and agencies share this responsibility through initiatives such as the business incentive policy. Specific individual departments must be actively involved because of the direct link between economic development and other government initiatives such as income security reform, the commercial fish marketing strategy, and the fur strategy.

The development of an effective economic development strategy includes measuring results. Initiatives in one area will have an impact on others. Governments must abandon their fragmented approach to providing government services. Individual departments can no longer afford to categorize and build fences around their particular areas of responsibility.

To be meaningful, the results of implementing new initiatives across government must be coordinated. For example, it is desirable that government investments or subsidies will create opportunities for people to reduce their dependence on social assistance. It is important to measure the reduction in social assistance payments when demonstrating the effectiveness of the investment or subsidy.

Observations - Organizational And Functional Review

The ED&T organizational and functional review contains a number of observations, based on interviews, about the strategy for economic development in the territories. These are presented below.

"Most clients interviewed indicated they were not clear on the department's strategies, goals and objectives, initiatives, means of implementation and accomplishments. Most staff members in both headquarters and the regions said they couldn't comment on whether the department's strategy was meeting client needs because it had not been evaluated since its introduction over three years ago.

...The strategy did not represent what people in the NWT would really want to do if they had control of department funds.

...Since no overall economic development plan weighing the costs and benefits of investing in one sector over another sector had ever been produced, no one knew what should be done -- including NWT residents and those critical of the Department's strategy.

...(Some interviewees) felt that sectoral strategies had to be revised, including those in tourism, arts and crafts, and renewable resources so that investments could be more targeted and focused on market opportunities.

Others said the strategy could be improved by involving other departments and agencies, such as Education and Arctic College, which could work jointly with the department to develop a business management program or aftercare program. They also felt Social Services should be involved as social assistance payments were often a disincentive to economic development.

Both clients and staff in the eastern Arctic said a new strategy is needed to reflect the growing reality of land claims and the establishment of Nunavut in the east. The new strategy should be flexible enough to dovetail with major political and government changes and also reflect the differences in opportunities and constraints to development between the western Arctic and Nunavut."

Goals And Objectives

Committee members were unable to determine the primary, overall goal of economic development in the Northwest Territories. There are two overall goals that, in practice, can be contradictory. One goal focuses on creating jobs. More citizens would be employed and feeling productive. Fewer people would be reliant on social assistance. Achieving this goal, however, usually requires continuous government funding.

A second goal directs the government to assist businesses to become viable and self-sufficient. Fewer businesses would rely on the government for survival. To achieve this goal, the government makes wise long-term investment decisions.

Both auditors and committee Members feel that the mandate for the department is based on some combination of both goals. We believe that it is not possible to develop coherent policies and programs with two different ideas of the organization's primary responsibility. In fact, this lack of clarity in the overall goal for developing the economy of the north underlies a number of the issues and problems identified by the audit and the committee review. These problems are illustrated below:

Problems Resulting From Conflicting Goals And Objectives

-ED&T's business development fund (BDF) provides for repayable contributions. However, the auditors noted that none of the contribution agreements they reviewed for BDF required repayments. Furthermore, the department's administrative cost appeared high in relation to financial assistance payments. What is the rationale for high overhead costs to provide "free" capital?

-The NWT Development Corporation Act has four main objectives:

create jobs and incomes primarily in small communities; stimulate growth of businesses; promote economic diversification and stability; and, promote the economic objectives of the GNWT. These objectives may contain conflicting direction for the Development Corporation. For example, does the Development Corporation make investment decisions based on creating jobs or does it focus on economic stability? Is the Development Corporation an economic development agency or is it a social agency? To determine whether the corporation is successfully living up to its mandate, these questions must be answered.

-As a business, the Development Corporation should make sound investment decisions. Given the competing and sometimes conflicting objectives, how do staff make investment decisions? The Financial Management Board requires the Development Corporation to consider the potential life of a project when it makes investments. The Development Corporation should develop targets for selling investments, which become profitable, to private investors. In making investment decisions, they should weigh the possibility of future divertment against the amount of subsidy required. Further, the Financial Management Board requires the Development Corporation to report this analysis in its operations plan (OPPLAN). However, the 1992-93 OPPLAN, reviewed by the auditors, did not contain information on the likely sale of investments.

-The Auditor General noted that the Business Credit Corporation has two potentially conflicting objectives. One is to stimulate the NWT economy (for example, create jobs, the second is to be a self-funding corporation. To stimulate the economy presumes that the corporation will take risks when lending money. To be self-funding requires strict financial management whereby staff approve only those loans that are reasonably secure.

-The Auditor General points out how these conflicting objectives create problems in applying eligibility criteria for loans. In their response to the audit observation, Business Credit Corporation Managers say BCC has developed operational guidelines for loans for debt restructuring and loans to third parties. The BCC is responsible for making business development loans to northern businesses to create economic development opportunities in communities where conventional lending agencies are not prepared to participate. Therefore, BCC's role is a blend of being a "lender of last resort" and a "development agency" for higher risk entrepreneurial ventures.

What We Heard

"In summary, the potential for economic development is to utilize all natural resources in the NWT to the fullest extent possible. We cannot settle for only primary production; we must insist on complete secondary production as well. Get the most out of the resource as is possible at the local level."

"If we are to consider long-term development, a diversified portfolio of opportunities must be identified. Long-term planning is essential for economic as well as social stability.

Ownership of resources must be the mandate of the government and the people of the north. Renewable and non-renewable resources must be inventoried."

Each community and region has access to some resources. These resources must be identified, inventoried and a plan for a sustainable utilization of the resource developed."

"In general, an opportunity developed by the community itself or by the individual himself/herself will be the most lasting and have the greatest impact. Government programs and initiatives seldom survive the test of time unless the community buys into the project. In other words, the project or business opportunity must be community driven. The GNWT may set the stage and facilitate the development but the community must want it!"

"Does this not point to a requirement for a more integrated approach to economic development by the whole GNWT rather than just one department? Which department inventories resources; which department identifies opportunities and which department plans for the sustainable use of the resources? Perhaps the GNWT knows the answers to these questions but they should share the answers with the public."

"...recapping my statements, I must reiterate what I feel must be the priorities of the Department of ED&T and the relationship to the Auditor General's report. I have laid these out in four phases. One, is increase communications within departments and communications with other departments to ensure communities receive the maximum benefit potential from each government dollar spent. Two, is ensure that EDOs are properly trained so the community has every opportunity to access ED&T programming. Three, is to simplify client access to ED&T programs and program dollars. Four, is to have a concrete proposal or plan of action to carry out the Auditor General's recommendations."

"We found that the audit wasn't really a total overview of the GNWT economic development and its corporations. It didn't really address how productive ED&T is. What have they done? What have they accomplished over the last three years while this government has been in office? Should it, the department, even be around? Do we need it? Are there other ways that we can address economic development which can be more effective?"

"I think the bottom line from our end of the table is this, we have to look at making this department more effective and more accountable and more suitable to our communities."

One respondent group suggested that the Department of Economic Development and Tourism be disbanded and the funds that would normally be used by the department be disbursed in an equitable fashion across the Northwest Territories.

What We Recommend

In their review of the 1993 Audit, committee Members did not find evidence that the government has developed a comprehensive, clearly articulated strategy to guide economic development. Committee Members feel that it is critical to develop a government-wide strategy promptly.

Recommendation 1

The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories, under the direction of the Department of the Executive, develop and implement a comprehensive economic development strategy which encompasses all government departments and agencies. The strategy should highlight major government initiatives such as income security reform and should cover the period 1995 to 1999.

Planning Departmental And Corporation Activities

What We Heard

More detailed planning is required for ED&T. Comments of the people who were interviewed as part of the organizational and functional review are summarized below.

Interviewees suggested the department's mandate should include territorial-wide planning. Interviewees felt there was a real need for a broad, long-term economic development plan that clearly articulated potential opportunities, their extent and location; strategies for developing opportunities; and the costs and benefits that would be realized with major public and private investments in different sectors. This would allow the value of one investment to be compared with the value of another investment from a cost/benefit perspective. As it was there was no such plan and no such information available.

What We Recommend

Committee Members agree that departmental managers should develop a long-term plan to

guide economic development activities.

Recommendation 2

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a territory-wide plan for long-term economic development. Further, the committee recommends that the plan should address division of the territories in 1999.

The 1993 audit notes that the Development Corporation needs a more detailed plan. The plan should set out a future direction for its board and management. As well, a detailed plan would provide the basis for longer-term strategic discussions with ED&T on economic development. In addition, Development Corporation management could more accurately inform the Financial Management Board about future funding needs.

Because the Development Corporation does not have a corporate strategic plan, there are no corporate targets or other specified goals that hold management accountable. The Auditor General made the following recommendation to address this situation. The Public Accounts committee concurs fully with the recommendation.

Development Corporation should:

1. Develop a strategic plan showing where it will interact with ED&T in the NWT economic strategy; and,

2. Set specific targets and goals for its overall operations on an annual and multi-year basis, showing where it plans to position itself in the NWT economy, and this plan should be approved by the board of directors.

Measuring Results

The Government of the Northwest Territories spends about $51 million a year on economic development. With this magnitude of resources at stake, the Department of Economic Development and Tourism needs to know if programs are having the required results.

The 1993 Audit report comments on results management as follows:

"Results can fall into several different categories, such as program operational efficiency and effectiveness which is concerned with the cost of producing outputs -- goods or services -- delivered by a department, and overall effectiveness, often referred to as outcomes, which is concerned with the extent to which the outputs achieve the program's objectives. Both types of results are important for managers and the Legislative Assembly to know. In a complex environment where money is tight, working economically and efficiently to produce results at the least cost is an absolute must."

Once the strategy and long-term plan for economic development in the Northwest Territories are known, it is important for the department to collect meaningful information on results. The information can be used to steer development activities. Managers and legislators need to know whether objectives are being met efficiently. Otherwise they run the risk of pouring money into unsuccessful areas.

Committee Members noted that the Development Corporation, in particular, needs to learn how to acquire meaningful information to calculate benefits. They need to measure the benefits resulting from spending money in the communities. For example, how many jobs are created and at what cost?

Although the Development Corporation told the committee that such information was being collected and analyzed, committee Members were not convinced that the information provided a clear, accurate picture of the results achieved by the corporation in its day-to-day operations. Members feel that the Development Corporation could benefit from expert advice in this area.

The committee is aware that there is a new audit and evaluation unit in the Financial Management Board Secretariat. Committee Members understand that this group is responsible for guiding results management across government.

During its review, committee Members asked the secretary to the Financial Management Board to describe the mandate, organization and resources assigned to this new unit. Committee Members were particularly interested in whether the unit's mandate extends to providing assistance to departments and Crown corporations with results management. The secretary to the Financial Management Board provided the committee with preliminary and follow-up information in addition to organizing a detailed presentation for committee Members.

Committee Members discovered that it is within the mandate of the audit and evaluation unit to provide assistance to the department and the corporations with managing results. However, the unit is in the formative stages of development and does not currently have the resources to satisfy the full extent of its mandate. Committee Members are aware that there is a large demand for the services that this unit is responsible to provide. They are very concerned about how these needs will be addressed while the unit obtains the necessary resources.

Committee Members will be monitoring the progress of the audit and evaluation unit in general. They will be particularly interested in assistance provided in the area of economic development.

Strategic Directions

Focus On Small Business

One of the points made over and over again is the need to focus on small business and on entrepreneurs. Committee Members noted that the potential for significant returns flowing from small businesses is great. They related examples where investing small amounts of money created jobs and self-sufficiency for people. If value for money is assessed, committee Members believe that these small investments would prove to be the most cost-beneficial.

In spite of this observation, the Development Corporation, in particular, has tended to fund big projects. Large projects create a relatively large number of jobs in a limited number of communities. While this strategy has been successful in some communities, committee Members believe that more could be gained by making smaller investments in a large number of communities.

One respondent has this to say about the issue of entrepreneurs:

What We Recommend

Committee Members feel that it is important to investigate the relative advantages and disadvantages, to NWT communities, of small versus large scale investments.

Recommendation 3

The Standing Committee on Public Accounts recommends that the Government of the Northwest Territories conduct a cost-benefit analysis to compare the value for money achieved from small as opposed to large scale investments. Further, the committee recommends that the government review and adjust its policies for issuing grants, loans and contributions, as required, based on the results of the analysis.

Marketing

The auditors noted that ED&T does not have an effective, overall marketing strategy that matches product to demand. They emphasized this need in their discussion of arts and crafts. They suggest that a marketing strategy should focus on maximizing benefits to the communities.

The Auditors noted that ED&T awarded several consulting contracts for more than $560,000 in 1992-93 and 1993-94. These contracts targeted international markets for NWT arts and crafts products. The auditors' observations about these contracts are summarized below.

"The contracts cover market research, advertising, putting on exhibitions in galleries, purchasing software to record retail sales, and purchasing a retailer's own sales information.

Most of these contracts include information that the contractors are to provide the division. The contracts often contain specific requirements, yet the division has not set up any procedures to ensure that the requirements are met...

As noted, previously, only about one-third of retail sale revenues return to NWT producers. We did not see any analysis comparing the significant marketing costs with the returns to NWT industry. Without such analysis, the department does not know if the costs are greater than the payback."

Committee Members feel that an essential element of the marketing strategy is collecting and distributing market information to people in the communities. People in the communities need to be aware of the outside market. They need to know whether there will be buyers for the products that the community produces.

The auditors noted that a marketing strategy is also required to govern the tourist industry.

"Deciding how much to spend on marketing NWT tourism is more complex than deciding how much to spend on parks for residents. The establishment policy requires the department to develop a healthy tourism industry. Obviously this has to be done with the resources made available by the Legislative Assembly.

The department does not know if it is getting the best return from its marketing activities. To be able to do this, it will need to know the total input costs plus what it achieves. Presently, the department does not know the total input costs because it does not analyze financial assistance payments to tourism operators and associations. To assess this would require knowledge of how much the government spends on tourism marketing through the department plus other departments and agencies, and what it gets in return. This means measuring how many tourists visit the territories and how much they spend in which areas and sectors. Presently, the department has only a limited amount of such information."

In the summer of 1994, ED&T produced the Northwest Territories Tourism marketing strategy -- 1994-95 to 1998-99. This strategy does not meet the conditions set out by the auditors. The author describes the data that the strategy is based on as follows:

"The last territorial-wide survey of the NWT's non-resident travel market was undertaken in 1989. This data is very "stale" and tells us nothing about the NWT's current customer base. Secondly, while the 1989 visitors' survey was professionally executed, in hindsight, it should have provided more data and information on the NWT's tourist visitors. Consequently, we've had to make some educated guesses about the status of the industry's current customer base.

It is important that the NWT undertake a detailed territorial-wide visitors' survey in the initial years of the new strategy's implementation. A more current survey will ensure that the marketing strategy is on the right track in terms of what products really drive tourism to the NWT and what markets hold the best potential for the industry at both the territorial and regional levels."

Given these qualifiers, the utility of the tourism marketing strategy is questionable, at best.

What We Recommend

Recommendation 4

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a comprehensive marketing strategy that focuses on the collection and distribution of reliable market information.

The Role Of Tourism

Worldwide competition for tourist dollars is fierce. With shrinking resources, governments have to assess where they are to invest their money and human resources to obtain the best results. The central issue is the appropriate role for tourism. There has been a great deal of discussion about whether, in times of fiscal restraint, we should be spending money in the area of tourism and parks.

Is tourism an economic development activity? If it is, then we should have cost-benefit analyses that demonstrate that tourism is effective in developing the economy of the territories. This would encourage Members of the Legislative Assembly to support tourism and approve money being spent in that area.

If the aim of tourism and parks is to provide recreational opportunities for citizens of the Northwest Territories, then the issue is somewhat different, and the way decisions about expenditures are made will also be different.

One respondent provided the following view of tourism as an investment.

"'Tourism' is a good investment for government, in times of restraint, as well as in the good times -- whenever these are -- if the word "tourism" is accepted in its broadest sense. Tourism includes culture, heritage, the environment, education and preserving a way of life; not just the dollars and cents or people counts used to measure success.

The investments have to be made, then the product has to be promoted. Investments have to be made in more than just facilities, it must also be made in people."

The Auditors noted the lack of a strategic plan for tourism in the Northwest Territories and provided the following comments.

"A strategic plan should set out what is to be done to attract visitors including the types of investment, both in capital assets and operating expenditures. The department produces a five-year capital plan but could not provide us with any kind of future-oriented strategic plan. Thus we have concerns that spending in the tourism program, both on capital assets and other costs may not produce optimum results. In particular, the department has no long-term plan setting tourism goals, and how individual projects, including parks and visitor centres will help to meet these goals. The cost of the tourism and parks programs has grown to an estimated $11.6 million in 1993-94.

In general, we found a lack of any strategic direction or plan with specific goals and objectives and time related targets for the department's tourism efforts."

What We Recommend

Recommendation 5

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism develop a comprehensive strategy to guide the development of parks and the tourist industry in the Northwest Territories. The strategy should be based on clear goals and objectives and accompanied by cost-benefit analyses of various strategies considered.

Economic Development Policies

Financial Assistance Policies And Guidelines

In February 1990, the government issued an "agenda for action" outlining an economic strategy. The agenda's economic strategy has different components and identifies the departments that are responsible for taking a lead role in achieving the objectives. For example, the strategy recognized the key role for the Department of Education, Culture and Employment in combating illiteracy and preparing people for work.

ED&T's responsibility, as cited in the Agenda, has four parts, as follows.

-Creating jobs and income opportunities in disadvantaged areas,

-Improving access to capital,

-Managing the buy north program, and

-Revising the business development fund (BDF)

The distribution, across programs, of funding provided to business in the fiscal year 1992-93 is shown below, taken from the 1993 Audit report, page 21.

Direct financial assistance to businesses in 1992-93: business development fund, $2.4 million; EDA, $7.5 million -- under the agreement, Canada is to provide 70 per cent of the total EDA funding over a five-year period; other ED&T contributions, $3.1 million; total ED&T assistance, $13 million. Development corporation investments and subsidies, $8 million; BCC loans, $5.1 million; total financial assistance, $26.1 million.

Business Development Fund (BDF)

The Department of Economic Development and Tourism provides financial assistance through the business development fund. The 1993 audit report describes the BDF as follows:

"BDF consists of a group of business contribution programs grouped under a single policy. The policy uses a life cycle model of financial assistance. Separate schedules cover each phase in a business life cycle. The policy has both general and specific provisions for each schedule. Some of the more significant general provisions are:

-Employment creation is the primary criterion used in assessing benefits of any proposed project.

-The BDF is not an entitlement program. An applicant does not automatically receive assistance just because the application meets all BDF's rules.

-Repayable contributions are permitted by the policy.

The amounts approved in 1992-93 by BDF schedule as follows:

Approved Assistance -- this combines assistance approved in 1992-93 part of which may be paid in subsequent years -- 1992-93 BDF: opportunity identification and research, $462,000; business creation, expansion or investment, $1.183 million; market and product development, $439,000; business skills, $113,000; business relief, $235,000; venture capital, $300,000; business bailout, $25,000; total, $2,757 million.

Economic Development Agreement (EDA)

The GNWT negotiated a new economic development agreement with the Government of Canada. This agreement became effective on April 1, 1991. The Department of Economic Development and Tourism and the Government of Canada's EDA directorate have joint control of this program under a series of EDA agreements and sub-agreements. Over the five-year life of the agreement, Canada will fund 70 per cent of the projects through the departments of Indian Affairs and Northern Development; Forestry; and, Industry Science and Technology.

The 1993 audit report describes the funding provided through the EDA as follows:

"The EDA directorate maintains contribution files on behalf of both Canada and the Government of the Northwest Territories. ED&T makes all contributions and recovers the federal share which it accounts for as revenue. The agreement has eleven sub-agreements or target areas:

Approved assistance in 1992-93: fine arts, crafts and souvenirs, $1,230 million cultural industries, $262,000; community sponsored development, $1.303 million; minerals, $1.591 million; agriculture, $681,000; wildlife harvesting, $185,000; fisheries, $1.365 million; forestry, $486,000; entrepreneurship, $24,000; tourism, $1,028 million; administration, $861,000; total, $9.016 million.

"Regional management committees consult the public and develop regional workplans. Thus, the EDA is quite proactive in identifying and targeting economic development opportunities. The EDA has two or three banking days each year when applications are received formally."

Other ED&T Contributions

The almost $3.1 million of "other ED&T financial assistance" for the fiscal year 1992-93 covers several small programs, including tourism associations; the arts and crafts tools and equipment grant program; a community works program; and, a commercial fishery's subsidy program.

Development Corporation

One of the main elements of the economic strategy was the

creation of a development Corporation to take advantage of, and enhance, the natural resources and skills in the smaller communities where the private sector has been unwilling to invest.

Development Corporation can buy or create businesses. Its investment guidelines, supported by the Financial Management Board, allow a maximum capital investment of $100,000 for each job directly or indirectly created. In addition, if subsidiaries lose money, Development Corporation can give an annual operating subsidy of up to $10,000 per job with FMB approval.

Development Corporation can become a minority -- less than 50 per cent -- owner in businesses which then become venture investments, and can invest up to $100,000 per job. It does not pay operating subsidies to venture investments.

Business Credit Corporation

The Northwest Territories Business Credit Corporation was created in October 1991 under the Northwest Territories Business Credit Corporation Act. Previously, the Department of Economic Development and Tourism delivered the loan program from the business loans and guarantees fund (BLGF). The 1993 audit report describes the transition from BLGF to BCC as follows:

"The government transferred all of the assets, liabilities, and contingent liabilities of the old BLGF to BCC and repealed the old BLGF Act. At 31 March, 1993 BCC had 261 loan accounts, one $42,000 guarantee and no bonds. It also had total loans and interest receivable of $19 million with an allowance for doubtful accounts of $7.3 million. Previously, bad debts were charged to ED&T but now they are a BCC cost."

BCC loans carry an interest rate set by the Financial Management Board. These are based on prime lending rates that are fixed for the long term. BCC management informed the auditors that the range of approved interest rates is not sufficient to support a break even position or to cover bad debts expense.

The auditors provided the following assessment of BCC's financial position:

A key objective of the financial assistance programs is that, all together, they should meet the needs of NWT business people. ED&T managers informed the auditors that the department and corporations have a "seamless wall of programs" from contributions to equity investments. Having a "seamless wall of programs" implies that, from the client's point of view, there is one place to go for financial assistance. And the entire range of services is available at that single location.

The auditors examined the idea of a "seamless wall of programs" and identified a number of problems. Following is an example:

"BCC cannot fund operations outside of the NWT by way of loans, but BDF can by way of contributions. This does not make sense from a fiscally prudent perspective. If financing an operation in southern Canada creates NWT jobs, with good prospects for profitability, then it may make sense to make a loan. Yet, presently, an NWT enterprise doing business in the south, even if it is prosperous, can get free money but not a BCC loan; but one that has been rejected

by a bank as too risky, can get a loan. Perhaps it should be the other way around.

What We Recommend

Committee Members are very concerned by the overlapping jurisdictions and inconsistent policies and guidelines governing the granting of financial assistance, across programs, in the department and the corporations.

Recommendation 6

The Standing Committee on Public Accounts recommends that the government develop a rational plan for the delivery of economic development financial assistance programs across the Northwest Territories.

Besides the need for consistent policies and guidelines, one EDO spoke of the need for information about other sources of funds.

"The use of, or access to, funding from sources other than the department, to some extent depends on our knowledge of requirements for using those sources. A comprehensive reference source of all funding available from all sources would assist economic development officers to quickly identify the best sources of funds for a given project and the requirements for accessing those funds. We can not access funds of which we have no knowledge."

Repayable Contributions

Committee Members noted a number of situations where clients who are potentially able to repay money granted are receiving assistance in the form of non-repayable grants and contributions. They also noted that other jurisdictions in Canada are reducing economic development funding and are investigating the idea of repayable contributions.

Committee Members feel that the Government of the Northwest Territories could benefit from exploring the idea of repayable contributions. Repayment could be required in all cases where it is determined to be possible. The funding could then be "recycled" -- used to help others who require funding assistance.

Recommendation 7

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism and the NWT Development Corporation examine ways to replace traditional non-repayable grants and contributions with repayable contributions.

Plain Language

The auditors noted problems in dealing with clients and processing applications for funding assistance. Many of the problems resulted from the wording of the policies, forms and applications. The auditors describe the problem as follows:

"We tested the BDF policy together with a BCC loan agreement, a BDF agreement, and the Economic Development Agreement with a computer readability program. The software measures the grade levels and how easy the documents are to read. In every case, the documents are difficult to read for most people. They all require an education level above grade 11 to be able to understand and most used vocabulary that may be too advanced for readers. The BDF and EDA agreements also use long sentences, too complicated for most readers to understand. Many governments are attempting to make services to the public less complex. In these types of communication where readers may not be well educated, simple communication is vitally important."

The audit report included the following recommendation about the issue of plain language.

Each policy and related agreement should be rewritten to simplify the language.

When department witnesses appeared before the committee, they said that they had begun to make significant improvements in the language used in communicating with clients. Committee Members believe that using plain language in policies, guidelines and application forms is a straightforward way to make improvements in the delivery of financial assistance programs. Committee Members will be monitoring the department?s progress in this important area.

Multiple-Dipping

The auditors noted cases where some businesses received financial assistance from several different programs. Committee Members do not view this practice of "multiple-dipping" to be a problem by itself. But they feel that information about the total amount of support provided to individuals and companies should be available to decision makers. The auditors provided the following illustration of this issue:

"Management told us that it is their normal practice to use BDF contributions to improve an applicant?s financial position to the point where he may qualify for a BCC loan. We saw no written policy to this effect. While this may not be inappropriate in all cases, clearly it is important for the staff of the various programs to share information and be aware of the potential impacts of multiple funding. For example, in one case, over a three-year period, one business received funding from Development Corporation and BDF, plus service contracts. In total, it received cash and offers of cash totalling $216,146.

In another instance, over a multi-year period, a business received or will receive a total of $2.6 million from a combination of Development Corporation, ED&T programs, and other government programs. We extracted this information from the government's financial information system, but it is not clear from the files whether the staff approving each payment knew about the others."

The auditors made the following recommendation about the practice of multiple dipping. Committee Members concur with this recommendation.

The department should:

1. Ensure that it has all pertinent details of funding applied for or obtained from other programs before finalizing its assessment; and,

2. Ensure that all conditions set out in the agreements are monitored and verified before releasing funding.

Processing Time

Both the auditors and the consultants who conducted the organizational and functional review, noted that the department and the corporations take a long time to process applications for funding. In some cases, the client had lost interest by the time that the application was processed.

Managers appearing before the committee said that they have made significant improvements in processing time. This was confirmed by some individuals making presentations to the committee. Changes expected to speed up the processing of applications include departmental reorganization and the delegation of approval authority to the regions.

One respondent who does not believe that processing time has been reduced had this to say:

"We were pleased to see the recommendation and management's acceptance of the comment regarding unreasonable time delays of financing for clients. It is our understanding that the departmental reorganization and delegation of authorities have been in place for some months now. Despite the reorganization, from our clients perspective, there has been no appreciable change in the turnaround time of a loan.

The issue which must be addressed is what tool can be developed and utilized to measure the success of the turnaround to clients. Such a tool must be developed to ensure that all clients are able to conclude their business transactions in a timely way. This measure must have built-in alerts to ensure that no applications go any longer than the "set" amount of time specified. The average 90 day period is far too long to wait for a decision."

The committee recognizes the efforts of the department to respond to this issue. However, Members want to ensure that the department continues to act on these concerns and will be monitoring application processing time.

Background Of Applicant

Normally when financial assistance is being granted, particularly in the form of a loan, the applicant's background is a very important factor in making the decision. However, committee Members identified situations where potential clients really need a second chance. The difficulty is -- how do you go about giving people a second chance while at the same time maintaining a set of funding criteria? The auditors made the following recommendation in this regard and the committee fully concurs.

The department, in conjunction with BCC and Development Corporation, should develop guidelines on when an applicant's past is relevant to current applications. There should also be procedures outlined on how to investigate such matters.

Conflict Of Interest Guidelines

Committee Members feel that there is greater potential in the area of economic development than in other areas of government for real or perceived conflict of interest to occur. The auditors had the following comments on conflict of interest:

"With a small business community in the north, government has to be alert constantly to possible conflicts of interest of individuals serving on boards, or as members of the Legislative Assembly, who need financial assistance for their business interests. Several of the cases we reviewed show ownership by people who may be in a position to influence approval of loans or contributions. While we have not seen any cases where this influence has been used, the mere association of public figures with government funding organizations may send the wrong message to the public...

Potential conflicts of interest exist in the operation of ED&T, BCC and Development Corporation. Employees may become aware of information or business opportunities which can benefit them personally. Members of the boards of BCC and Development Corporation are business people who may become aware of information or have other dealings with ED&T, BCC or Development Corporation. Appropriate conflict of interest guidelines are necessary."

The auditors reviewed the various acts, policies and guidelines applicable to the boards, senior management, and staff of ED&T, BCC and Development Corporation. They were satisfied that Development Corporation has a good conflict of interest framework in place for all levels. The Conflict of Interest Act applies to BCC's board and manager. BCC is developing a further guidelines for the board.

All ED&T and BCC employees are subject to a set of rules in the Public Service Act and regulations and the collective agreement. Provisions also include an oath of secrecy and prohibition of outside business or employment that conflicts with current duties. However, because employees have access to information that might benefit them personally, the auditors and committee Members all feel that it is necessary for the department to develop internal ED&T conflict of interest policies.

Recommendation 8

The Standing Committee on Public Accounts recommends that the department conduct a comprehensive review of all conflict of interest guidelines currently in place and develop appropriate internal conflict of interest policies that are separate and distinct from those in place for all public servants.

Organization And Mandate

Effective Service Delivery

Committee Members expressed concern about the relatively small proportion of economic development funds that flow to and stay in the communities. The consultants conducting the

organizational and functional review of ED&T and the Auditor General of Canada reported similar concerns.

The 1993 Audit report contains the following observation about administrative costs.

"We also noted that the department's administrative costs appeared high in relation to financial assistance payments.

In making any comparisons, management can allow for the fact that ED&T?s financial assistance spending should include EDA and BCC disbursements because the department incurs most of the delivery costs for these programs."

The Auditors made the following recommendation:

The department should review its administration costs in relation to financial assistance spending and compare this important measure against similar organizations on a regular basis.

The Report of the ED&T organizational and functional review includes the following observations:

"Department Should Become An Enterprising Department: The department is viewed as bureaucratic, ineffective and inefficient...Enterprising governments however, force themselves to work in partnership with the communities they serve to paint a vision of a desired future and then develop tactical and strategic initiatives that allow that vision to become reality. Enterprising governments identify opportunities for more efficient and effective operations, thus freeing up funds that can be redirected...

Another observation is that typically, governments are only concerned with the spending of money or how much they've got to spend, and their focus is on cost minimization. As a result, inefficient decisions are often made. Indeed, most government budgeting systems are a deterrent to enterprising governments since no incentive exists for cost efficiency and reduction. Thus, a must initiative for the GNWT will be to allow the Department of Economic Development and Tourism to redistribute all or part of budget savings and/or revenues earned."

Economic Development And Tourism

The Department of Economic Development and Tourism commissioned an independent consulting firm to undertake an organizational review of the department. The review was completed and submitted to the department in the fall of 1993. This review considered the following elements:

-The organizational structure of the Department;

-The function of headquarters and the regional offices;

-The department's approach to meeting client needs and expectations; and

-The department's funding policies to identify gaps, deficiencies and overlaps in programming.

The Standing Committee on Public Accounts examined the consultant's report as part of its review of the department. Committee Members found the consultant's findings to be consistent with the findings of the Auditor General. Department managers informed the committee that they have already implemented a number of the recommendations of both the consultant and the Auditor General. The following are examples of such changes:

-Some senior management positions in headquarters have been eliminated and some staff positions realigned.

-Headquarters is now responsible for coordinating territory-wide activities, developing economic sector strategies and implementation plans, and monitoring and evaluating policies and funding programs.

-An improved accountability system for all the department's funding sources has been introduced and a more effective program evaluation system will be developed.

-To keep clients better informed, the department is developing a public relations plan. More emphasis will be placed on "face-to-face" communication rather than printed promotional material.

-Program approval and expenditure authority has been delegated to regional superintendents. Most applications for funding assistance will be considered in the region and not forwarded to Yellowknife. Therefore, clients will receive a quicker response and decisions will be more reflective of local and regional economic circumstances. Committee Members are concerned that staff in the regions have sufficient analytic resources to make effective decisions at the regional level.

-Human and financial resources will be redeployed within the department to ensure that regions will be fully qualified to assume new program delivery responsibilities. Staff members who are assigned new duties will be provided training so they are fully capable of performing these duties and skillfully serving clients.

Given that the organizational changes were made recently and that further changes were being implemented while the committee was reviewing the 1993 audit, committee Members will monitor these changes and assess the results of all organizational changes.

The consultants in their report on ED&T organizational and functional review observed that the "department should become a client-driven organization." The reason for making this suggestion is that the department receives its funds whether clients are satisfied or not. Further, most clients have no alternative but to use the department's programs and services. The consultants offered the following:

"We can therefore conclude that the department should spend some time and effort on finding out what their clients expect from the department -- for example, through client surveys, client follow-up, community surveys, contacting clients directly, focus groups, meeting with business groups, and possibly introducing a complaint tracking system; in short, satisfying the customer. Research indicates that client-driven organizations increase accountability; depoliticize choosing and favouring one provider agency over another; stimulate innovation; give people choices between different kinds of services; waste less because they more properly match supply and demand; empower customers thus making them more committed customers; and finally create greater opportunities for equity."

Planned Transfer Of Parks

Some time ago, Cabinet directed the Department of Economic Development and Tourism to transfer responsibility for parks operations, planning and program development and related visitors' services to the Department of Renewable Resources. At the completion of the committee's review, this had not yet occurred. Although committee Members questioned the department on plans for this transfer, witnesses did not have answers.

Recommendation 9

The Standing Committee on Public Accounts recommends that Cabinet review its direction to transfer the parks program to the Department of Renewable Resources Department, and provide a report on this review and an implementation plan, if required, to the Legislative Assembly.

NWT Development Corporation

Concerning organization and mandate, committee Members feel that the primary issue with the NWT Development Corporation is its relationship to the Department of Economic Development and Tourism.

The government created the Development Corporation on August 24, 1990, as part of the government-wide economic strategy. The NWT Development Corporation Act has four main objectives:

-Create jobs and income primarily in small communities;

-Stimulate growth of businesses;

-Promote economic diversification and stability; and

The auditors noted that to date, Development Corporation has operated autonomously from ED&T and the rest of the government. The Minister responsible for Development Corporation is also the Minister of ED&T, and the Development Corporation Act allows the Minister to give formal direction to the corporation. The auditors offered the following as comment on the relationship of Development Corporation to ED&T.

"To date Ministers have issued three letters which give the board of directors general direction on where to focus its investments and in one letter to consider specific investments. However, the letters do not direct all aspects of Development Corporation's operations and still allow significant autonomy to the directors and management.

While we noted the autonomy and found no formal consultative process, Development Corporation management informed us that it has ongoing, informal communication with ED&T management.

There may be opportunities to better integrate Development Corporation's and ED&T's contribution towards the government's overall economic strategy. For example, ED&T's management has plans to identify and target specific sectors of the economy for assistance in the near future. To the extent that ED&T defines economic policy for the government, Development Corporation could participate in a more focused approach. If Development Corp and ED&T do not work closely, there is a serious risk that money could be wasted..."

The Auditor General of Canada made the following recommendation and the Standing Committee on Public Accounts concurs.

Development Corporation and ED&T should clarify their respective roles and working relationships.

The Public Accounts committee will be monitoring the response to this recommendation.

The report prepared by consultants on the ED&T organizational and functional review had some interesting observations on the mandate of the Development Corporation.

"Some of those interviewed thought the Development Corporation's mandate was wrong. Focusing on job creation while trying not to lose money would in the long run bankrupt the Development Corporation. They felt a more appropriate strategy would be to balance job creation with profit generation projects. They also questioned a number of Development Corporation investments as being impractical and out of touch with the marketplace. Others said the Development Corporation was competing with those already in business and better able to develop projects; for example, marketing arts and crafts."

NWT Business Credit Corporation

Committee Members feel that the main issue with the Business Credit Corporation (BCC) is that while originally set up to be an arm's length corporation, it is not operating in that way. The Corporation's General Manager now reports to the deputy minister of the Department of Economic Development and Tourism. The committee was informed that there are plans to have the Corporation's General Manager report to an assistant deputy minister.

The auditors had the following comments on the supposed independence of the Business Credit Corporation:

One of the reasons given by management for setting up BCC was to make it more independent of normal government operations. But there is a dilemma in how this was implemented. Fiscal restraint prohibits BCC from setting up its own regional and headquarters structures with sufficient staff to run its operations independently. Presently, the Corporation is totally dependent upon ED&T for all analysis and support functions. BCC occupies office space in the same premises as ED&T. All evaluation and administrative support is provided by ED&T except for direct loan administration performed by the BCC loan clerk. The BCC manager has a close working relationship with the Department and, while these arrangements may make economic sense in avoiding expensive duplication of services, they do not create an image of independence...

...From our review of BCC files, we noted several accounts that have a combination of BDF contributions and BCC loans. Staff consult the Deputy Minister on BCC matters and the BCC Manager uses the Business Development Services of ED&T to analyze applications. BCC has, but does not yet use, its own separate bank account.

Committee Members feel strongly that a decision needs to be made about the desirability and feasibility of having the BCC independent of government operations.

Recommendation 10

The Standing Committee on Public Accounts recommends that the government and the Department of Economic Development and Tourism assess the feasibility of maintaining the Business Credit Corporation as a separate corporate entity. The review should consider bringing the loan function of the Business Credit Corporation back into the Department. The findings should be reported to the Legislative Assembly.

Recommendation 11

The Standing Committee on Public Accounts recommends that, in the interim, action be taken immediately to clarify the mandate and organization of the Business Credit Corporation and its relationship to the Department of Economic Development and Tourism.

The auditors noted a problem with the mandate of the BCC as set out in the governing legislation. Section 32(1) of the Business Credit Corporation Act indicates that no loan should be made unless it can be repaid. On the other hand, Section 27(2) requires that a business be unable to obtain a loan from a financial institution on reasonable terms and conditions; or that there not be a financial institution in the applicant?s community. The audit report goes on to explain - A business that cannot obtain a bank loan would normally be considered a high risk. BCC has to face the same risk of non-repayment, but under section 32 must satisfy itself that the loan will be repaid. This dilemma may force BCC into only making safer loans, but that in turn may mean that it is not taking the kind of risks needed to stimulate the economy."

The 1993 audit report contains the following recommendation about the above issue. Members of the Standing Committee on Public Accounts concur with the recommendation, BCC should clarify its eligibility criteria including applications for debt restructuring and repayments of debts to third parties and assess the impact of the corporation's need to break even.

Programs, Roles And Responsibilities

Cohesive Approach To Programs

The government has created a number of programs that specifically address economic development. Many other programs have been initiated and are funded through the federal government. However, all the money comes from government sources and it makes sense to look at the total funding for economic development as if it were one pool of money and people. Improved efficiency is one way of ensuring that the government will get the best value for money in economic development. Thus, the government should examine whether there are better, more efficient ways of achieving its objectives.

Many of the people who provided information to the committee pointed out the need to create a cohesive approach to economic development programs -- a need to create one window shopping. The client should be able to go to one place to get all the information they need about acquiring funding assistance. Whether it comes from different pots of money or not, should be transparent to the client.

Aftercare Services

Along with one window shopping, committee Members and presenters identified the need to develop more aftercare or follow-up services. Once funding assistance has been granted there seems to be, in many cases, no follow up service from the Economic Development Officer, the Department or the Corporations. Aftercare service is required because many clients, although very proficient in their work (for example, producing arts and crafts products) are not experienced in the administration and management of the business. Often, there is no follow-up until the business is in trouble and by then it is too late to rectify the problem areas.

One respondent described their view of the need for follow-up services as follows:

"...the policy surrounding business counselling should be that ED&T must provide counselling to its business clients. If this is not provided, then the programs are simply setting the clients up for failure. If one of the main reasons why funding assistance is required is that financing cannot be obtained through conventional lending, then there is often a requirement for assistance with management of the business.

If the objective of Economic Development and Tourism is to promote business, then it must counsel its clients on business management matters. Such services should include complete business planning assistance, and should allow for ongoing management assistance for all aspects of the business. At the very least, ED&T should provide those services in the smaller communities with no access to people with business expertise.

Even when taking into consideration the potential liability factor, it is still important to provide entrepreneurs with expertise in the areas which they require it. Otherwise, business failure may cause greater losses to the GNWT than any potential lawsuit. Professional liability insurance should be sought out to protect the GNWT from this.

Development of resource materials for the clients would be a good way to address the needs of new entrepreneurs. Some topics might include:

marketing, financing, manufacturing. This approach is more practical management type of assistance than is currently offered by the GNWT."

One Economic Development Officer said that follow-up in some communities is hampered because some businesses are set up in clients' homes. The EDO may feel quite reluctant to bother someone in their home to monitor the business enterprise. In addition, some clients do not want to see the EDO once funding has been granted.

The auditors offered the following comments regarding aftercare services.

"Aftercare service is following up with clients after they have received the money. There are three important reasons to do this:

1. There assistance is repayable, the government should monitor the client's business to ensure that repayments are made when due.

2. To offer management help to maximize the chances of business success including sustaining jobs.

3. Allow ED&T to determine if its financial assistance programs are working.

...General service to the public, including business counselling, and aftercare are both important to develop the business community and to help the economic strategy to succeed. But EDOs told us that they spend, on average, about 11 per cent of their time on follow-up and aftercare. This may be insufficient to provide the kind of client service apparently needed.

The need for follow-up services was also noted in the organizational and functional review.

"All those interviewed agreed the mandate should have a broader, developmental interpretation including provision of aftercare and business management training to business clients. This would be especially helpful in the less developed communities of the NWT where opportunities for business development are limited and constraints to development such as the lack of a well trained and educated workforce and small markets are major impediments. Many of those interviewed felt that the Department?s mandate was sound in theory, but the lack of focus on business aftercare meant that many businesses failed even though they received adequate funding.

In this regard, most interviewees said that current training and aftercare programs available from other agencies were ineffective or inappropriate to the business community. Interviewees suggested the alternative of having the Department deliver aftercare and business training, or contracting this role to the private sector or a third party agency."

Committee Members feel that if the economic development of communities is to be successful, business services must be available to clients after funding has been granted.

Recommendation 12

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism identify client needs for follow-up services and develop a

comprehensive aftercare program that meets these needs and protects the investment of government money.

Affirmative Action Program

The Department of Economic Development and Tourism uses the Affirmative Action Business and Economic Development Education and Employment Program (AABED) for training potential EDOs and other affirmative action candidates. Under this program, the Department selects candidates for academic training, and helps to pay for their education. After graduation, candidates work on the job, under supervision, to see if they fit in and perform well in the program.

Committee Members recognize the importance of recruiting and training affirmative action candidates and believe that programs such as AABED can help the government to reach its affirmative action goals. However, the auditor's report clearly demonstrates that this program is not functioning as successfully as it could.

Recommendation 13

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism, in consultation with the Department of Education, Culture and Employment, assess the AABED program to determine where it might be enhanced or improved.

The committee further recommends that based on this assessment, the Departments enhance the existing program or develop a new program to provide training for affirmative action candidates in economic development. The new or enhanced program should include an "on the job training" component.

Communication

Committee Members feel strongly that EDOs should have a thorough knowledge of the community they are hired to serve. They must be familiar with its culture and language. EDOs must be able to communicate effectively with the people in the community they serve. Compulsory cross-cultural training for EDOs is one way to achieve this objective.

Recommendation 14

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism establish a plan that provides an effective cross-cultural orientation and training program for newly hired Economic Development Officers.

The committee further recommends that individual training plans within the performance review and planning process require cross-cultural awareness training at least every fifth year.

Further, the committee recommends that senior managers within the Department of Education, Culture and Employment provide a model for the Economic Development Officers by each participating in a program of cross-cultural awareness.

Conflicting Roles For EDOs

The role of EDO is central to developing the economy of the Northwest Territories. EDOs are the first level of contact between the government and the business community. Their work is very important and very visible. Committee Members are concerned that the expectations that the Department has of EDOs may be somewhat unrealistic. Some of these concerns are cited by the auditors:

"The Department expects EDOs to give advice and assistance, plus help to prepare applications. This is an advisory type of role. Also, they accept, analyze and recommend applications. This is more of a watchdog role. These two roles essentially conflict. It can be difficult to both critically evaluate and advocate, particularly where the recommendation is to reject."

One EDO had the following comments about the conflicting roles.

"There is conflict, as previously noted, between our role as advocate and assistance provider to our clients and our duties as employees of the Department. Literature which sets out clearly the responsibilities of clients to provide information and the requirements which the client must meet as well as the responsibilities and duties of the Economic Development Officer would help to reduce some of the tensions that arise in the dealings that occur among them."

The auditors believe that the Department should clarify the roles of EDOs. The committee concurs with this belief. In clarifying the roles, the Department must remember that giving help and advice to an applicant on how to apply for funding and assistance in completing documentation may be a reasonable role of EDOs. The auditors offer these words of caution:

"...there may be a cut-off point beyond which advice becomes business specific and applicants act on that advice in making investment decisions. There may be a risk to the Department if EDOs give this specific type of advice, which may be shown later to be faulty."

An EDO offers the following perspective on the issue of conflicting roles:

"I agree that aftercare service is important to the client and that more time should be spent assisting the client once the project has got under way. The first year of any business is probably critical as a bad mistake could severely endanger the continued operation of the business. There is the ever present danger that on occasion the wrong advice may be given to the client and the business may fail. The client may then possibly sue for damages for the wrong advice.

The audit report makes the following recommendation, with which the committee concurs.

The department should:

1. profile an ideal EDO candidate, take steps to recruit individuals who meet it, and provide them with appropriate training; and,

2. define clearly the role of an EDO and how they should interact with the region and headquarters.

Inventory Control And Management

Committee Members and the auditors noted some serious problems with the department's inventory control and management. These problems include the following items:

- The department acknowledged that it does not have the expertise in-house to choose art works for exhibition and yet this has been occurring.

- The department does not have the expertise in-house to evaluate much of its existing inventory.

- The department does not have accurate records of the condition of items in its inventory.

- The department is housing inventory in a number of locations, including a Winnipeg warehouse, but does not have accurate records of what is housed where.

The auditors made the following recommendation with which committee Members fully concur.

The department should:

1. update its arts and crafts inventory records, verify the existence of artifacts and assess the condition of each item; and,

2. ensure that staff are aware of existing inventories so that they may use them if appropriate for their program needs.

The auditors also recommended that:

The department should develop a policy covering any future purchases of arts and crafts.

Committee Members believe that this recommendation should read as follows:

The Department must develop a policy covering any future purchases of arts and crafts.

Visitors' Centres

The Department has spent about $10 million building visitors' centres. Committee Members have serious concerns about visitors' centres based mainly on the "cost per visitor" analysis presented by the auditor on page 53 of his report.

The auditors calculated the cost per non-NWT visitor by dividing the estimated annual cost of operation by the number of visitors per year. The cost per non-NWT visitor, as calculated by the auditors, ranges from $12 in Dawson City and $13 at the 60th parallel to $463 in Baker Lake and $688 in Rankin Inlet.

Some of the other problems identified include the following:

- The Department has built visitors' centres in areas where current or likely future visitation appears low.

- The Department advertises these visitors' centres poorly.

- Some are off the beaten track for typical tourists.

- Existing tourist centres do little to address the concerns noted by the department's 1989 study.

- The location of some visitors' centres is questionable. For example, the centre in Baker Lake is at the end of most canoe trips down the Thelon and Kazan rivers even though the 1989 study indicated that the first impressions of visitors are more significant in influencing tourist choices.

- Because some visitors' centres have few visitors, the main benefit may be the local employment opportunities created during construction and subsequent operation.

- Benefits cited for some visitors' centres include interpretative displays for local residents. Although this may be a valuable benefit to local residents it is certainly not in keeping with the stated purpose for visitors' centres.

Given all the questions about the cost-effectiveness of visitors' centres, committee Members believe that expenditure of capital funds on visitors' centres should be reviewed.

Recommendation 15

The Standing Committee on Public Accounts recommends that the Department of Economic Development and Tourism assess the effectiveness of visitors' centres, explore alternative uses and develop a strategy to guide future development and modification to existing facilities and programs. Further, the committee recommends that this strategy be implemented before any additional capital funding is requested for visitors' centres.

Reinventing Financial Assistance Delivery

The 1993 audit report on the Department of Economic Development and Tourism, NWT Development Corporation, and NWT Business Credit Corporation concludes its report with a section entitled "Reinventing Financial Assistance Delivery." Committee Members feel that this section of the auditor's report serves as a good summary for the Standing Committee on Public Accounts review.

A broad question is whether there should be four separate economic assistance programs or would it make more sense to consolidate some programs. This could improve efficiency, save money and increase effective service to the public. Presently, EDOs are less likely to steer clients towards BCC because of the perception of cumbersome paperwork, expensive client legal costs and a pervasive belief that BCC is acting like a bank with strict terms and conditions. BCC is caught between conflicting demands which force it towards fiscal conservatism. Because BCC is a lender of last resort, and because it is tasked with the two competing objectives, it may not be as flexible in stimulating the economy as intended.

Merging BDF and BCC would be relatively easy, both because their administrations are now highly integrated, and their programs are actually quite similar. The biggest difference between the two is repayment terms and related security.

A combined program could issue repayable contributions with less expensive compliance for clients. The government's investment can still be preserved by careful rewriting of the rules, and the terms and conditions can be simplified making them easier for the clients to understand.

Repayable contributions also offer more flexibility than loans. For example, a new business may need a repayment-free period to allow it to get started, and the agreement can be tailored towards this, giving managers and their clients more flexibility. The Economic Strategy had the objective of creating a new loan program to give flexibility in repayments.

To go along with any program changes, ED&T will need a cost-effective monitoring system to ensure that clients pay back assistance at the appropriate time, such as that in place now for BCC loans.

The auditor concludes his report with the following summary recommendation. Committee Members feel that this recommendation summarizes very well actions that the department should take.

The department should:

1. Review all programs to assess their effectiveness, on a cost-effective basis;

2. Define clearly what it means by economic development, and conversely what funding is not permissible;

3. Consider developing a less complex program of repayable contributions, with conditions tailored towards economic development objectives;

4. Develop appropriate systems to track contributions made and allow for accurate management of receivables; and,

5. Develop appropriate accountability systems emphasizing desired results, to cover all staff.

Motion To Receive Committee Report 16-12(6) And Move To Committee Of The Whole, Carried

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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Henry Zoe

Henry Zoe North Slave

Thank you, Madam Speaker. Madam Speaker, that concludes the report of the Standing Committee on Public Accounts. Therefore I move, seconded by the honourable Member for Kitikmeot, that the report of the Standing Committee on Public Accounts on the public review of the 1993 audit of the Department of Economic Development and Tourism, NWT Development Corporation and the Northwest Territories Business Credit Corporation be received and moved into committee of the whole.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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The Speaker Jeannie Marie-Jewell

Thank you. I am sorry, we don't have a quorum. Mr. Clerk, could you ring the bells?

Your motion is in order. To the motion.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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An Hon. Member

Question.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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The Speaker Jeannie Marie-Jewell

Question is being called. All those in favour? All those opposed? The motion is carried.

---Carried

Item 11, reports of standing and special committees. The honourable Member for North Slave, Mr. Zoe.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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Henry Zoe

Henry Zoe North Slave

Madam Speaker, I seek unanimous consent to waive rule 93(4) and have the report of the Standing Committee on Public Accounts that I just presented, placed on the order paper for committee of the whole.

Committee Report 16-12(6): Toward An Economic Development Strategy
Item 11: Reports Of Standing And Special Committees

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The Speaker Jeannie Marie-Jewell

Thank you. The honourable Member is seeking unanimous consent to waive the rules to allow the report of the Standing Committee on Public Accounts to be placed on the order paper for committee of the whole today. Are there any nays? There are no nays. The report of Standing Committee on Public Accounts will be on the order paper for committee of the whole today.

Item 11, reports of standing and special committees. Item 12, reports of committees on the review of bills. The honourable Member for Deh Cho, Mr. Gargan.

Item 12: Reports Of Committees On The Review Of Bills
Item 12: Reports Of Committees On The Review Of Bills

November 6th, 1994

Page 810

The Speaker Jeannie Marie-Jewell

Report On Bill 16