RAE CORELLI November 3 1986


RAE CORELLI November 3 1986



It is late autumn in Ottawa, and the Canadian Broadcasting Corp., trying to muster national enthusiasm for its 50th birthday, is under siege by the weather and the politicians. Rain has penetrated the outer defences of the CBC’s six-storey head office building at 1500 Bronson Avenue: the roof leaks, and there are moisture blisters on interior walls. In the House of Commons, Conservative members of Parliament are demanding the head of network president Pierre Juneau—because the CBC, by its own admission, has lost track of $57 million worth of transactions. Meanwhile, at head office, workmen have begun repairing the walls. But it will take more than panelling to withstand the incoming shellfire from Parliament Hill.

Even as CBC public relations departments across the country were distributing glossy information kits heralding a half-century of Canadian public broadcasting, the billion-dollar corporation was in the biggest trouble of its checkered history: its leadership stood accused of mismanagement; its program creators fretted that even such prestige shows as television’s the fifth estate might fall to more budget cuts; thousands of employees were threatening to go on strike—and the corporation admitted that its brand new, multimillion-dollar central computerized finance system had been in a shambles for more than a year.

Item: On Oct. 15, two days before Juneau’s 64th birthday, the CBC released its annual report which contained a devastating letter from Auditor General

Kenneth Dye. Dye indicted the CBC’s new computer-based National Finance System (NFS)—which lost track of $57 million during the 1985-1986 fiscal year—for muddling the books so badly that he could not determine the accuracy of the report’s figures.

Item: In the Commons a day later three Tory MPs—Gabriel Fontaine (Lévis), Robert Pennock (Etobicoke North) and Paul McCrossan (York-Scarborough) —brought the long-simmering hostility of many Conservatives toward Juneau, a Liberal government appointee,

into the open. Pennock led the charge with the statement that the problems with the new accounting system demonstrated Juneau’s “blatant incompetence.”

Item: A Conservative member of the Commons committee on communications and culture, who asked that his name be withheld, told Maclean's that Juneau would be summoned before it, probably in November, to explain his

apparent “lack of management skills.”

Item: On Oct. 20 federal conciliation commissioner H. Carl Goldenberg released his report on the stalled contract talks between the CBC and the National Association of Broadcast Employees and Technicians.

NABET’s 2,200 CBC members—cameramen, videotape editors and radio and television studio crews—have been without a contract since June 27, 1985. Goldenberg, whose report left NABET free to strike after seven days, said that the CBC “has been rigid throughout the negotiations.”

But not all the tough talk came from Parliament Hill. On Oct. 15 André Bureau, chairman of the Canadian Radiotelevision and Telecommunications Commission, said that the CBC had “a responsibility to explain what services should be curtailed, maintained or expanded” in light of continuing government cutbacks and reduced appropriations from Parliament. The $857 million voted for 19851986 was down nearly $48 million from the year before. (The CBC earns an additional $220 million a year from commercials.) Bureau issued the declaration at the opening of the CRTC’s hearings on the CBC’s application for the renewal of its Englishand French-language television network licences, which expire on March 31, 1987.

Across from him in the hearings in Hull, Que., sat Juneau and a platoon of CBC executives, the tables in front of them bearing stacks of briefs and background papers. The embattled Juneau, who has been criticized by politicians and the press for his handling of the CBC almost from the day he assumed the presidency four years ago, replied to Bureau with the self-assurance of the wellbriefed bureaucrat. The CBC, he said, had prepared a five-year plan in response to requests from the CRTC and the Treasury Board. But a five-year plan was not much good, said Juneau, when the corporation had no idea how much money it would get from Parliament-even next year.

However, by projecting the trend in federal cutbacks since 1984—a total of $153 million so far—it appeared that revenues would be further reduced by $65 million in 1987-1988. Juneau warned

that if the predictions were accurate, the cuts would force the CBC to slash operations and management by “a crippling $26 million.” The only way the remaining $39 million could be accommodated, he said, was either to replace Canadian content with cheaper U.S. shows or discontinue such mandated services as the short-wave Radio Canada International. Those services are ones that the corporation was required, by the Broadcasting Act or federal orders-in-council, to provide. Changes in the CBC mandate, Juneau claimed, could be authorized only by the federal government.

government. Later in the hearings, an even more animated Juneau told the commissioners that despite the money squeeze, the CBC was optimistic. Its “first goal,” he said, must continue to be Canadian programming. He proposed that the corporation be given more money, not less, so it could double the hours of Canadian prime-time drama, produce more and better

documentaries, update its technology and replenish the diminished budgets of such current affairs programs as The Journal and the fifth estate. Attacks: But Juneau’s plea was overshadowed by the attacks in the Commons on his leadership and by the headline-making controversy touched off by the auditor general’s diagnosis of fiscal mismanagement within the CBC. Less well known is the way in which the corporation got into that trouble in the first place. But from interview’s with current and former employees at all levels, Maclean's has learned how the broadcasting agency wound up in the

worst management crisis it has faced since its birth in 1936. Juneau was deputy minister of communications when, on Aug. 1, 1982, Prime Minister Pierre Trudeau appointed him president of the CBC for a seven-year term. At that time the corporation had computers in Montreal, Ottawa, Toronto and Winnipeg to record how budgets were

handled by the CBC’s six networks—Englishand French-language television, AM and FM radio—and 10 broadcast regions which had jurisdiction over local programming and a major voice in how and where the money was spent.

Nightmare: But the computers were mutually incompatible; none could communicate with the others. If Winnipeg, the data centre for all of Western Canada, got a request for information from head office, it mailed off a printed reply which had to be deciphered manually in Ottawa. Said Stephen Cotsman, 38, who was named the CBC’s vice-president, finance, last April: “It wasn’t unusual for us to ask a simple question and wait six to eight weeks to get the answer because you would send a message across the country, and everybody would have to sit down and add it all up.” While that system might have been an accountant’s nightmare, the television and radio producers liked it: once they had their budgets approved, they were accountable only to their own regional directors.

But insiders say that Juneau believed that the system was sloppy. And early in 1983 Juneau was acutely embarrassed more than once when the system did not give him the information he needed quickly enough to answer routine parliamentary questions about CBC operations. On Nov. 15, 1983, he announced the appointment of Ronald Fournier, a 48-year-old certified general accountant and career public servant, as vice-president, finance. Fournier, who had held various finance and accounting posts with Public Works Canada, the department of Indian affairs and northern development—and, ironically, the auditor general’s office—set about centralizing the CBC’s financial structure in a way that would give head office far tighter control and, presumably, faster answers. The reformers were encouraged when, in 1984, the auditor general concluded a general audit of the corporation by recommending an overhaul of finance and accounting procedures to achieve greater efficiency.

Hardware: Fournier’s next step was new hardware: the CBC paid $2.5 million for an IBM 3083EX computer and hired a private Ottawa company, Canada Systems Group, to run it at a cost of about $1.2 million a year. The original schedule called for a start-up date of April 1, 1986, to coincide with the beginning of the fiscal year. But the finance division decided to proceed sooner on the grounds that the CBC urgently needed more reliable information about its financial resources to deal with anticipated budget cutbacks by the new Conservative government.

The computer began running in July, 1985, and the NFS was born. Overnight, the old system at head office was scrapped. And across the country, low-

er-level administrative personnel, such as the unit managers who control budgets of individual programs, were told to follow suit. But scores of them were skeptical and privately stuck with their desk-top calculators, keeping what came to be known as “hip-pocket accounts.” It was probably fortunate that they did.

By August, 1985, Winnipeg,

Toronto and Montreal had been plugged into the Ottawa computer. But toward the end of the year, it became apparent that something was drastically wrong with the NFS. Unit managers across the country were getting print-outs of electronic information from Ottawa on their budget positions that made no sense when compared with their own numbers. The sheets often made no mention of invoices that had been paid or else assigned charges where there had been no transactions. Programs were listed as having been broadcast when they were still on the shelf. CBC staff members began calling the NFS system NSF—banking parlance for “Not Sufficient Funds.” Declared one executive: “It was a God damned scandal.”

‘Monstrous’: Worried investigators in the finance division found that although the NFS central computer was devouring data endlessly, a lot of it was not being digested. Because of programming errors, the computer had all along been unable to recognize the electronic labels on certain entries and, like an overworked executive with a bottomless wastebasket, had been routinely tossing them into so-called “suspense accounts” with the result that they never appeared on the printouts. The dollar amounts, said Stephen Cotsman, “grew monstrous.”

By the winter of 1985 the corporation was under increasing pressure to find a way of surviving the latest government cutbacks—but the machine it had bought to help clarify its financial woes was inexorably compounding them instead. In January, 1986, Fournier suddenly resigned for personal reasons and subsequently became a senior executive with Saint John Shipbuilding Ltd. in New Brunswick. Asked to comment on his experiences at the CBC, he replied, “No comment.”

On April 4, Juneau named Cotsman, a slight, bespectacled MBA, to succeed Fournier. In an interview with Maclean 's on Oct. 14, Cotsman said: “I knew we had a problem, but I didn’t realize its magnitude until we began looking at these numbers in the suspense accounts, and they were in the tens of millions of dollars.” Ultimately, they reached $57 million. Cotsman said that although

head office had a general idea of where the corporation stood—“we were reasonably confident, for instance, that money ended up in television instead of radio”—it had no idea whether money went to the right places at the lower level. But the administrative officers

and unit managers in the field in many cases had the answers; they began supplying Ottawa with information from their hip-pocket accounts. Said Cotsman: “We were managing at the

Holes: Still, that collaboration began filling in the holes. To try to get the remaining bugs out of the system more

rapidly, Juneau appointed a task force of five private-sector chartered accountants on Aug. 28 to find shortcuts. They are expected to submit their report by the end of November. Said Cotsman: “When you try to put a major new system into a large corporation like this one, you’re almost bound to have hiccups. But when you try to push it in the kind of time frame we did, you’re going to have serious problems.” Critics have argued that the CBC’S biggest mistake was not keeping the old system functioning until the kinks were worked out of the new one. But Cotsman said that because his division had lost 25 head-office employees as a result of the cutbacks he probably did not have the manpower to run two systems. Users: But Auditor General 9 Dye, in an Oct. 15 interview on I CBC Radio’s As It Happens, deI dared: “The CBC is trying to rez spond with our recommendaI tions to improve their financial system. In trying to respond, they went about a new system without really bringing the users [chiefly, the network and regional budget controllers and unit managers] into the picture, without developing the system before they started using it, without checking it out and making sure it worked without a backup system.”

There was no evidence of abuse, said Dye. Management had simply taken “a course of action that didn’t work—and the person who made that decision has since left the corporation.” In his annual report, Dye added, “We have recommended to the corporation that because public funds are at risk and several months have already elapsed into the next fiscal year, these problems must be corrected immediately.”

Mandate: Throughout the controversy, the austere Juneau made speeches which defended the CBC and deplored the threat of political interference with the corporation’s independence. But he was dogged by speculation that the fiscal disaster at head office would somehow force him out. In an interview with Maclean's on Oct. 14, he said he would not quit. Said Juneau: “My intention is to fulfil my mandate—although from a personal viewpoint I could think of easier ways to spend the next three years. The president and the board of directors are the guarantees of the independence of the CBC. Therefore, if the president can be pushed around, the whole corporation can be pushed around.” But Pierre Juneau would be the last to deny that there were people on Parliament Hill spoiling to do just that.

—RAE CORELLI in Ottawa