Department
of
Tourism,
Culture
and
Recreation
Introduction
The John Cabot (1997) 500th Anniversary
Corporation was incorporated under the
Corporations Act on 22 May 1992.
It was
established for planning and organizing the
celebrations to recognize the 500th anniversary of
John Cabot’s voyage to Newfoundland. As
Figure 1 summarizes, the total expenditures of
the Corporation
from its
incorporation in
May 1992 to 31 March 1998 were approximately
$14.6 million.
Figure 1
The John Cabot (1997) 500th Anniversary
Corporation
Expenditures by Category
May 1992 - March 1998
($ Millions)
Marketing/Master Plan
$4.0
27%
52%
Event Costs
$7.6
1%
4%
7%
7%
Final Concert $0.1
500 More $0.3
Summit of the Sea $0.5
Other $0.5
12%
Year of the Arts $0.9
14%
Festival 500 $1.1
25%
Regional Event Support $1.9
11%
Salaries
$1.6
8%
2%
Administration
$1.1
Source:
Notes:
30%
Matthew Visit $2.3
Travel
$0.3
Audited financial statements for the years ended 31 March 1993 through 31 March 1998.
(1)
The expenditures shown above for Event Costs and Marketing/Master Plan include the costs of salaries and related travel.
(2)
Administration expenditures include the costs of leasing and/or purchasing equipment.
188 Auditor General of Newfoundland
legislation, primarily the Public Tender Act
and the Guidelines Covering the Hiring of
External Consultants;
During this period, the Corporation received
funding of $14.7 million from sources as outlined in
Figure 2.
Figure 2
!
The John Cabot (1997) 500th Anniversary
Corporation
Sources of Funding
May 1992 - March 1998
($ Millions)
review expenditures for adherence to
applicable policies (e.g. travel rules,
Government compensation policies);
!
review the processes in place for the
generation of revenue from sponsorships
and merchandising; and
!
determine if the Province and/or the
Corporation has a process in place for
measuring and monitoring the economic
benefits generated from the Cabot
celebrations relative to the funding
provided.
Provincial
$10.7
73%
Other
1% $0.1
2% Anchor Events
$0.3
4%
Sponsorship
$0.6
20%
Federal
$3.0
Source:
Audited financial statements for the years ended
31 March 1993 through 31 March 1998.
In 1996, we completed our first review of the
expenditures of the Corporation for the period of
May 1992 to December 1995. This included a
review of expenditures to 31 December 1995 which
amounted to $7.0 million. A report outlining the
results of this review was presented to the House of
Assembly on 20 February 1997. During 1998, we
reviewed the remaining expenditures of
$7.6 million covering the period 1 January 1996 to
31 March 1998.
The Matthew
Conclusion
Scope and Objectives
We completed our second review of the Corporation
in September 1998. The review covered the period
from 1 January 1996 to 31 March 1998. The
objectives were to:
!
review the expenditures of the Corporation
to assess compliance with relevant
The Corporation has significantly improved its
management and financial control systems since
our initial review in 1996. Of the $14.6 million
spent by the Corporation to 31 March 1998,
$7.0 million was audited during our first review in
1996 while the remaining $7.6 million was audited
in 1998.
Auditor General of Newfoundland 189
Detailed Findings
Legislative Compliance
1. The Public Tender Act
We examined 27 purchases totalling $746,288 for
compliance with the Public Tender Act. We noted
the following during our review:
!
!
!
!
The Corporation received advice on a
continuous basis for most of the audit
period from the Government Purchasing
Agency, a division of the Department of
Works, Services, and Transportation.
Whenever a contract is awarded without a
public tender, the Public Tender Act and
Regulations require that the Corporation
inform the Minister of Works, Services, and
Transportation within five days of the
awarding of the tender. There were five
instances where the Minister was not
informed within the required five day
period. The Corporation indicated the
purchases were not made through a public
tender process because the purchases were
emergency requirements or were made
from sole source suppliers.
There were three purchases totalling
approximately $220,000 from sole source
suppliers for which the Corporation does
not intend to inform the Minister of Works,
Services, and Transportation as required
under the Public Tender Act.
The
purchases relate to the costs of hosting two
of the Anchor Events and hotel deposits
which were not recovered due to lower than
anticipated registrations at one of the
Anchor Events.
There was one instance where a purchase of
o ff i c e s t a t i o n e r y w a s m a d e f o r
approximately $15,000 which was not
tendered as required under the Act. The
explanation offered by the Corporation was
that it was uncertain of the total quantity of
goods that would be required and could
therefore not prepare adequate tender
specifications.
190 Auditor General of Newfoundland
!
We did not find any instances where the
Corporation did not comply with the Act
when making purchases under $7,500.
2. Guidelines Covering the Hiring of External
Consultants
In October 1995, the Corporation indicated that it
would follow Government’s policies relating to the
hiring of consultants. We examined four contracts
totalling $103,465 which were subject to
Government’s Guidelines Covering the Hiring of
External Consultants. The Corporation complied
with the Guidelines for the contracts examined.
3. Services not Governed by the Public Tender
Act or the Guidelines Covering the Hiring of
External Consultants
The Corporation acquired certain services that were
artistic in nature. An example of these services
would include hiring musicians to perform for the
Matthew Visit and the Festival 500. Under Section
2(g)(ii) of the Public Tender Act these services are
exempt from public tender.
Also, such
expenditures are not covered under the Guidelines
Covering
the
Hiring
of
External
Consultants
because they do not require the advice of a
professional person.
We examined the acquisition of seven services
totalling $436,051 that were artistic in nature. Our
review indicated that the Corporation used an
objective evaluation and selection process when it
acquired goods and services that were artistic in
nature.
Compliance with Government Policies
1. Employee Compensation and Benefits
During the period of 1 January 1996 to
31 March 1998 the Corporation had a staff
complement that ranged from 10 employees to 25
employees. Also, the Corporation was assisted by
employees from Government departments at no
cost to the Corporation. The total expenditure on
salaries and benefits during this period was
$1.1 million. Many of the Corporation’s employees
were hired on a contractual basis.
We examined 11 of these employment contracts.
Our objective was to determine if the employment
contracts were in accordance with Government
policies that were accepted by the Corporation.
Our review disclosed the following:
!
While the Corporation had adopted a policy
of using a pay scale similar to that used by
Government for its employees, it did not
use such pay scales. However, salaries paid
by the Corporation did not appear
unreasonable.
!
During October 1995, the Corporation
temporarily ceased operations and
terminated all staff. Shortly afterwards, the
Corporation resumed operations and rehired some of its former employees. In
addition, the Corporation also hired other
staff from resumes which it kept on file. In
most of the cases which we examined
involving employees which were hired
from resumes kept on file, no job
competitions were held. The Corporation
has indicated that vacant positions were not
advertised because of time constraints.
!
The Corporation paid its employees
approximately $34,000 for unused vacation
entitlements which existed at the end of
their employment contracts. However,
since the Corporation did not maintain
attendance records, it was not possible to
determine whether the employees had
unused vacation entitlements for which the
payments were made.
2. Travel and Entertainment
During the period of 1 January 1996 to
31 March 1998 the Corporation spent
approximately $658,000 in travel and entertainment
expenditures. We examined 20 travel claims
totalling $41,822 for compliance with
Government’s travel guidelines, which the
Corporation was instructed to follow by its Board of
Directors. For the most part, the Corporation
complied with the travel guidelines.
Generation
of
Revenue
from
Sponsorships and Merchandising
The Corporation received cash sponsorships of
$568,000 and in-kind sponsorships of
approximately $357,000. In soliciting corporate
sponsors the Corporation issued press releases and
approached certain corporations. Information
sessions were held with sponsors and potential
sponsors to outline the benefits of sponsoring the
Cabot Celebrations. Also, some corporations
approached the Corporation to offer to become
sponsors. Once a corporation agreed to become a
sponsor an agreement was signed with the
Corporation outlining the obligations of each party.
The Corporation received approximately $52,000
in revenue from royalties associated with the use of
its logo. Officials of the Corporation indicated that
the use of its logo was primarily for promotional
purposes and was not intended to generate a
significant amount of revenue.
The official
licensed supplier of merchandise using the
Corporation’s logo was selected as a result of a
request for proposals. Smaller companies and
individuals were permitted to use the logo for a
nominal charge. Non-commercial users, such as
town councils, were permitted to use the logo
without charge.
Measurement and Monitoring Economic
Benefits
One of the anticipated benefits associated with the
Cabot celebration was that it would provide the
Province with the opportunity to showcase its
tourism potential, resulting in increased revenue
from tourism activities during 1997 and in future
years. Therefore, it would be important for the
Province to measure and monitor the effects of its
investment in the tourism sector, particularly in
light of other upcoming tourism themes, such as the
50th Anniversary of Newfoundland joining
Confederation and the Viking Millennium.
Auditor General of Newfoundland 191
Our review indicated that the Department of
Tourism, Culture and Recreation accumulates and
performs analyses on a variety of statistics from the
tourism sector on a regular basis to determine the
impact of tourism activities on the Provincial
economy. The Department expanded its work in
this area so that it could more accurately determine
the impact of the Cabot celebration on the
Provincial economy. The Department has indicated
that it intends to use the knowledge gained from the
Cabot celebration to plan for future celebrations.
4. No Job Competitions
The nature of the festivals and events and the time
available
prohibited
the
Corporation
engaging in job competitions.
from
The Corporation
believes it used reasonable judgement in exercising
its responsibility by using qualified applicants on
file with the Corporation.
5. Unused Vacation
Unfortunately the Corporation did not comply with
Corporation’s Response
the
attendance
performed
in
reporting
Government
process
normally
departments.
The
our
Corporation exercised reasonable judgement in the
activities since 31 December 1995 in delivering a
payment for unused vacation given the large volume
very significant event in Newfoundland’s history,
of overtime and irregular working hours which
the 500th Anniversary of John Cabot’s voyage to
were not otherwise compensated.
I
believe
this
to
be
a
balanced
report
on
Newfoundland. I would like to personally thank you
for
the
conclusion
significantly
that
improved
the
its
Corporation
management
has
and
financial control systems since your initial review in
1996.
All
credited
staff
for
involved since
their
efforts
in
this
1995
area.
are
to
This
be
is
especially relevant given the nature of the events
and the difficulty in implementing such a program in
the environment in which we operate.
1. Office Stationary
While
not
publicly
tendered,
three
quotes
were
obtained and this contract was awarded to the
lowest bidder.
2. Public Tender Act reporting requirements of five
days
Once this omission came to our attention the Form
B’s were immediately filed.
3. Sole Source Purchases
The sole source purchases were initiated by the
previous
Corporation
and
our
legal
counsel’s
position is that the Corporation, up to the period
covered by this audit, was not required to report.
192 Auditor General of Newfoundland