All right. Now, do we find that people are continuing to call and say that they smell guess on a regular basis, whether they smell it or not, because they've recognized that, similar to 911, if you call with a man with a gun, the police are going to come faster, and if you call the Gas Works with a smell of gas, they're coming faster? And have we been able to determine just how widespread that kind of request is made in an effort to get quick service?
Unfortunately, with the tie-up on the phones in the past few months, that has actually gotten worse. More and more folks 00073 call the emergency line in an effort to get quicker service.
Okay. I can come back to some more questions later. Thank you.
I just want to pick up on what Councilman Kenney said. You talked, Mr. Stinson, about the service calls. I have gotten in the last couple of days a few calls relative to -- regarding appointments not being kept. And, you know, one lady had called me at home the other night to tell me that Sunday night, her daughter had made several appointments and then no one showed up. I had a lady call me on Election Day. They had turned her gas off and didn't come back to turn the gas on. I mean, in the last week, I've gotten several calls like that and they're not tied to the BCCS, are they?
But once they make the appointment, what is the process for getting 00074 -- 'cause at one point, I thought that you all had, you know, had improved on the appointment service, that once an appointment, you know, the appointment was kept. What's going on with that?
We've changed the dispatch system in conjunction with the BCCS to a brand-new system, and we're going through a lot of the same learning experiences that the folks in the call center are going through as well -- although it's nowhere near as complex as the BCCS. So it's getting over the hump with this new system in the service end of the business as well.
Mm-hmm. Mr. Hayllar, when the Gas Commission passed the Capital Budget, we ordered your auditor, Deloitte & Touche, to review spending of the IT system against the approved budget. Where is that, and have you --
We've had several meetings with Deloitte & Touche on this assignment. Much of the data has been done internally. They need to test it. I believe that that report is due 15 days after the annual audit is done, and we expect to make that deadline. 00075
And I'll tell you, I'm sure David Veman (ph.), the partner in charge of the audit, would be happy to talk to you or to your staff about any aspect of that.
But I'm asking you where PGW is in fulfilling the orders by the Commission.
On the $16 million, could you tell me, where was the money found to pay for the overrun?
Simply out of capital and operating expenses -- predominantly capital operating. They just drew on it.
All right. So what is going uncared for? If you're taking money from some other area, what areas are you not spending it on?
Certain elements of other IT initiatives were not done in order to make money for BCCS 'cause they consider it to be more important. I've mentioned several of them. The WAMs segment of the mobile dispatch center was not 00076 done simply because that money was not used toward BCCS.
So how do you plan to make up for this $16 million overrun?
Well, we need to determine what must be done over what time from the initial IT plans that we have to complete, and that's additional money that will have to be spent, what can be deferred, and we're working on that now, and I believe the Commission has asked for that information.
What controls have been implemented to ensure that spending authorization requests will be submitted to City Council and the Gas Commission in a timely manner to avoid violating approved spending authorizations in the future? 'Cause you overrun -- you have --
You're supposed to come back to Commission and Council. Have you done that in the past?
No, we have not. I believe that we're doing that in the fall. 00077
Because we're trying to get our arms around this issue as well. And while we know we have to come back before Council on the previous years' overspending on authorizations, we wanted to get this problem solved. It's just a matter of priorities. We know we have to do it.
So it seems to me that if you needed to go beyond the Capital Budget as approved, there would be some checks and balances if you come back to Council --
Well, do you think that's a prudent way to do business?
Mr. Hayllar, what is the cap on your authorization for spending without Board approval? 00078
I believe it's -- on contracts and vendor payments, I believe mine is a half million dollars, and everything after a million goes to the Board. (Mr. Hayllar confers with a colleague off the record.)
I'm sorry. I stand corrected. One of the things we did was reduce that. Everything above 500,000 goes to the Board now.
It's hard to believe that we could focus a lot of time on sending information through the mail and not have a system for how we spend money, the taxpayers' money within the system. There's an old saying that where there's no law, there's no 22 transgression. And there is no way we can understand that we can even pay a dollar to do mailing for the Eagles and not have a real system for how we spend money, who spends it, how far it 00079 goes, and where it starts and stops. With that, Councilman Cohen.
About the transition to the PUC next July 30th -- or June 30th.
Isn't there a pending legislation in Harrisburg to change that date?
There may be. We have opposed it, and I am told that the PUC is not interested in having it moved, so it's not -- it shouldn't be an issue.
You were told the PUC is not interested in taking jurisdiction?
Well, you said you were informed that the PUC was not interested in taking jurisdiction at all.
No, no, that's not what I said. I said that the legislation, which the Majority Leader of the House introduced, was not supported by either PGW or the PUC. I'm told it's not going anywhere, it's not going to move.
Well, that passed, but that had a history. Before it passed, there was a time when it was not passed. In the time when it was not passed, the story was, from good sources in PUC, that they were not interested in taking jurisdiction, that they did not feel as if they were in a position to do that. 00081
Well, I can't speak for them. They have given every indication that they're trying to discharge their responsibilities, but I can't speak for what their view is.
They will be responsible for the regulation of the Gas Works in much the same fashion as any other publicly-owned utility.
It's very much -- there is very much overlap. The difference -- big difference is that currently, the Gas Commission approves the Capital Budget before sending it to Council for approval and approves the Operating Budget. The PUC has not determined whether it even wants to do that or not. But in the law that has passed, they would have complete regulatory authority over rates and standards and performance.
And what is it that the PUC has not decided yet that it wants to do? 00082
Apparently, they are not -- have made no decision about whether they wish to have budgetary approval or anything like that, which is currently enjoyed by the Gas Commission. It's not an issue they've undertaken, to my knowledge -- or a discussion that they've undertaken.
Say that again? I did not get that. What is your understanding as to what they desire to do with respect to regulatory authority?
They will regulate -- the Philadelphia Gas Works sets standards and approves rates, as they do other utilities. The Gas Commission, in addition to that, approves our budgets, approves the Operating Budget finally and then approves a Capital Program and sends it to City Council. That component, the PUC does not -- in the legislation, does not have authority to undertake, and I don't know that they've made any decisions as to whether they want to do it or not.
It's not clear. What you're saying, Mr. Hayllar, is not clear. We're trying to find out the implications of a possible takeover. And also, coupled with that, ask us how all of this impacts the -- since we're dealing with Year 2000 cost overruns from 1999, we've got a lot of issues here that we're not clear on.
And I echo Councilman Cohen's continued questions. You're not being clear about the implications of the State takeover.
I apologize if it's unclear. The difference between the Gas Commission's authority and the PUC's authority is that in addition to standard utility regulatory work, the Gas Commission approves Operating and Capital Budgets. The PUC would only, at this point, take over the regulatory authority, and 00084 they have made no indication whether they wish to assume budgetary authority as well.
Explain regulatory. (Unintelligible; parties speaking over each other.)
Regulatory authority is approving the rates charged by the company, the structure of the company, the tariff of the company, the terms in which the company would have to conduct its business, information it would provide its customers. It could be as detailed as the size and format of a bill. It is all those materials that they can dictate to a utility. And that's the role they would assume as well as --
Does the Public Utilities Commission hold hearings in different parts of the State?
I believe they do. I know they have a hearing examiner in Philadelphia.
I don't know if they have hearings in other parts of the State regarding complaints. I'm advised that they do. Someone behind me said yes.
Well, our understanding is that they do very, very little of that, that generally, they require people to come to Harrisburg if they wish to testify orally. I understand further that they rarely hear oral complaints.
No, I do not. I have never been regulated by the PUC, so I don't know.
What will you do when the courts reverse the legislation and overrule it?
I don't think we have been advised or would advise that course of action, sir.
You know that people generally regard the City of Philadelphia as having been a coconspirator. We're not sure of whom. We know of Representative Perzel, but beyond him, we don't know whom.
We have all been on records as opposing the initial legislation.
Yes, you did. And at the same time, you conducted negotiations to let the State legislature know precisely how you 00087 would like to have it done, if it were done. But you opposed it, you know, like a puff of wind that blows away at the first --
I don't -- I don't think so. I think the Mayor went on record opposing it. We did have to make certain that the PUC understood the underlying structure of our debt so what they did would not cause our tax-exempt status of our bonds to be destroyed. That we did, and we told you that.
Because there is a case in Pennsylvania case law which asserts that once a contract has been entered into with the bondholder, it cannot be changed. And this certainly changes the guarantees given to the bondholders. So I would hedge my bets, were I you, at the outcome.
I recognize that your preparation of the case will be based, you know, on a strong reading of the law, and, you know, we will abide, as we do, by whatever the decision is, 00088 Councilman.
Assuming -- we don't know what's going to happen with the case, but assuming that PGW goes to the PUC in July of the year 2000, and given the financial situation and condition at PGW, do you plan to ask for a rate increase?
Not at this time. And that is not a hedged answer. I do want to do that.
Not at this time, not on November 11, 1999. We do not want to --
I can't tell you where we will be then. We have always stated that the last option is a rate increase. We do not want to do that.
Well, how do you 00089 plan to put your fiscal house in order, and when do you plan to do that absent continuing to borrow and go into debt? And at what point will PGW give an honest, clear-cut financial status of PGW?
I refer you to the Five-Year Financial Plan, which, in 430 pages, describes how we can avoid a rate increase in 2002 and stave off a borrowing in 2003. We recognize it's difficult and we recognize that we have different opinions on the quality of that work, but that's the best work we have right now.
You talked earlier about, when I asked you about coming back to Council, and you said something about coming back to us in the fall to clear up the 1999 budget?
No, there's some authorization expenditures, exceeded authorizations, from previous years, and we need to go back to Council to correct that.
Well, at what point do you begin to look at your books? And I 00090 don't know how you do that since you don't seem to have anybody over there that understands what they're doing, to say we're getting ready to exceed our authority and need to go back to the Commission, we need to go back to Council and get approval before we do this. At what point do you do that?
Well, when is that going to happen? Because in the fall of 1998, you said that you were going to put internal audit controls in place to monitor the spending. That has not happened.
But it's -- well, what needs to happen to control that portion of that piece that is not in place to control your spending? 'Cause evidently, someone over there is not in charge of what money is being spent. Somebody is not monitoring the process. And all I want to know is, at what point do you implement that piece where you'll know that there is a contract for a certain amount of money and that you shouldn't spend beyond that 00091 contract without someone knowing about it, that you, the CEO, understanding and knowing about what's going on at PGW?
We are doing that manually now, but with the piece that was taken out, we believe it can be done permanently and just a part of the procedure. Right now, it has to be watched. There's a lot of change that has to go over in the way people spend money over there. We recognize that, and much of that changes with.
So people over there will still be using their credit cards and still be --
Well, how do you know that other personal spending not going on?
I think the one thing people have been extremely cautious of over the there is the use of any credit or personal expenditures. It's being monitored very 00092 carefully.
But we can spend $16 million on the IT system, and nobody knows how it gets spent.
If people wish to conceal things, it can be concealed for a while, but then they get caught.
A series of things. There seems to be agreement on the part of both candidates that the senior-citizen discount will be preserved. Upon what does anybody base that prediction?
Well, that's a decision of the owners, and the Mayor is -- represents one of the strongest voices of ownership, as does Council.
(Inaudible, off mike.) Suppose there were a sale. Would the senior citizens' rate be preserved?
I'm sure it could be. 00093 I'm not sure it would be purchased with that as a permanent part of the structure of the company. I can't speak for a future owner but I know it's expensive, and I know if there were a sale, that would be something that they would look at as something they eventually would probably like to get rid of. It's one of the reasons we don't think a sale is a serious option, that the owners want the discount at least at some level.
Is there any other circumstance -- is there any other option other than a sale that could cause that to happen? Say the Public Utility Commission opted to --
I have been told by lawyers that there is a possible argument that a senior-citizen discount can be perceived as discriminatory against other people in the class, and I have been told that that senior-citizen discount would not be successfully challenged in front of the PUC. So I've heard arguments both ways.
But that would be the difference between making a sale attractive to a buyer and not making it. 00094
No, it's one of the many things that I think make the notion that PGW could be sold impractical. The largest -- I think the two largest -- three largest things that make the sale of PGW not probable is, A, because we do not have equity investment, we don't sell stock, all of our capital costs come through the sale of debt. Therefore, we have very high debt. If we sold the company and you then had to pay the debt from the proceeds, there would be very little left. Presumably the City would want the $18 million a year that PGW provides them. That would probably not happen. The buyer would most likely be a for-profit company. Therefore, the $900 million in tax-exempt debt would have to be converted to taxable debt. That's like with the 54-55 million premium on top of that. Finally, if the company were sold, I believe that, much as we see with PECO and the Chicago company it's merging with, there would be an effort to reduce the workforce. And I have no 23 reason to believe that the owners of the company, as embodied by Council and the Mayor, are terribly interested in seeing large numbers of layoffs that 00095 would be generated by a sale. I just don't think it's an option.
That's reassuring, as the Public Utility Commission does not take the bull by the horn and decide that it is, A, it is legal, that the law passes muster. And if that happens, the Public Utility Commission may be emboldened. They could care less about Philadelphia, don't they?
Well, aren't they used to making evaluations of the financial worth of the company?
And of its solidness as far as being a going concern? And wouldn't it be natural for them to view, from their prism of past experience, the concept that people ought not to -- maybe they ought to get little special consideration, but they ought not to get anything that would really help them?
Well, I can't project what they're going to do in that regard, 00096 Councilman.
Thank you. Do we have any more questions? (No further questions.)
All right. We have others who are here to testify with regard to this bill. Is there anyone from PGW's side? (No response.)
All right. I believe that we have Reverend Shine from the Black Clergy of Philadelphia and vicinity who is here, and certainly, we welcome him. (Reverend Shine comes forward.)
We're very happy to have you. Would you formally identify yourself for the record, Reverend. Thank you for coming.
Yes, Madam Chairman. Madam Chair and Councilwoman Tasco, Councilman Cohen, I have two regrets as I, Reverend Robert Shine, Chairman of the Civic and Social Committee 00097 of Black Clergy of Philadelphia and vicinity, and I come before this chamber with these two regrets: The first being that I have no 5 particular document to submit to the Chairlady; and secondly, that this chamber is not filled, not filled with citizens of our city to express their outrage over the recent information that we have received, first being brought to the public's attention through the news media. I am before you, Madam Chairperson, to express the outrage of a number of our citizens regarding the news that we received of the pending discharge of Mr. Gregory Martin from the position of Vice President and employment at the Philadelphia Gas Works. It is in the opinion of the clergy of this city, of whom I sit to represent this afternoon and for which I give thanks to you for permitting me to make this public pronouncement of outrage.
When we learned of Mr. Gregory Martin's pending discharge from the Gas Works, we looked at the history of those of African-American descent -- Mr. Jim Hawes, Mr. 00098 Gregory Martin, Miss Connie Bradford -- and we began to see a systemic nature pattern that had been in place, and we want to voice our opposition to what is now about to occur. We unanimously adopted a resolution at the clergy meeting to wholeheartedly support the retention of Mr. Martin as well as Miss Connie Bradford. It is in our good judgment and the reputation of the clergy that we believe we enjoy in this city to disclaim that the position taken by Mr. Ben Hayllar that Mr. Martin is soley responsible for the cost overruns, as has been alleged, thus resulting in his pending dismissal. We believe that he could not singularly have been responsible, given the knowledge that we have. That is, that a subordinate to Mr. Martin was given oversight of a project. That I am sure and am convinced, having been in the corporate community for 29 years, that as a subordinate to a senior vice president, that he was given -- this subordinate was given complete oversight of the project but not reporting -- didn't directly report to the vice president, Mr. Martin, but was to directly report to the CEO and President, once 00099 again, Mr. Ben Hayllar. If, then, Mr. Martin was singularly responsible and, therefore, singled out as the one that must be dismissed, then all who were on this project that called for the overruns should equally receive the same equal treatment. If justice and fairness and equality is to be administered in the positive sense, then it must also be distributed in the negative sense. We do not believe that PGW, and through its COO, Mr. Martin, that on this project, he be -- Mr. Martin be taken off or out of the loop of bringing in this particular project, that his responsibility, as one who has come to our city and has provided for us what we believe to be unimpeachable management. And that, certainly, there is always in every case some human misjudgment but that goes as far as any CEO as well. All of us are not perfect. But with what relationship our community has enjoyed with the management skills that were provided through PGW through Mr. Martin, we believe that this is an unacceptable, untenable action that was taken. And, therefore, it is our 00100 opinion to request of this body that any legislative bills or actions be held until such time as a more appropriate fact-finding can be held to ascertain for the public good; for PGW does, in fact, serve us and serve us well, but there are problems even there. And unless we're going to multiply the problems, then we believe that we should, first of all, in good judgment and good common sense, review the actions thus far taken that have allowed for these cost overruns. And, once again, Madam Chairman, I do not believe -- and I believe it is the unanimous opinion of the clergy -- that Mr. Martin could not, by any stretch of the imagination, be solely responsible for those cost overruns. The grounds for Mr. Martin's dismissal, which we believe is to take place in two weeks, we believe that they are unfounded grounds if it includes such a meager item as a security system at his residence. I indicated moments ago that having been in the corporate community for more than 29 years and having dealt with labor all that while, I understand well the potential that when you go through labor negotiations with management, 00101 oftentimes, it does occur that there is some indication of threats on the homes of management. Thus, security for their home and their family. Anyone would want to secure that. And, therefore, we believe that if his system was not appropriate for his comfort and his family's security, then I believe any man would take whatever action appropriate to provide for that and should not be held in harm's way for having done so.
That raises the question of the cost for the provision of that security system that was in question. How did that impact or impede upon the project, and how was that project then to be brought in? Again, referencing my own experience in corporate community, it is always anticipated that there will be cost overruns. There is the design community, there is the management, the project leader. And if the minds never get together, and I as a designer leave my design plan for the management to figure out the budget and then I leave it to someone else to vote on it without the consideration of all the other components to bring this project in on time, the vendor's 00102 consideration, the training of the personnel to operate a new system, the testings of the new systems going beyond the time constraint for going on line with the new system, all these are continued mounting expenses. Then there's the debugging of the new system and bringing over the data from the old system to the new system, which always has in itself some problems of conversion. And so I think that when we would separate and distinguish between the management ability and skills provided by Mr. Martin and the fact that there has been apparently been some mismanagement, it cannot be laid at the feet solely of Mr. Martin. And, once again, Madam Chair, Madam Tasco, and Councilperson Cohen, our unanimous conclusion, therefore, is that any legislation or any appeal for legislation from the management of Philadelphia Gas Works be delayed until such time as this matter is satisfactorily concluded with respect to Mr. Martin and Miss Connie Bradford. And I might add a third person -- Miss Lynn Fields. We would like to be observers of what 00103 action is to be taken. When I failed as Chairman of the Civic Committee and I owe to our organization and the peoples of our city and congregations, I owe to them an apology for my failure as chairman of this committee, and they have given to me that responsibility, when I did not first raise the concern at the dismissal of Mr. Jim Hawes. And let me say a point there, if I may. In my conclusion, once again, in the corporate community, the legal position that we have, and that is, when one is discharged, it is with the understanding, the clear understanding, that no letter would follow him to any potential place of employment that he or she may be seeking. Tantamount to that, perhaps no letter was, but when the news media in effect has the same effect, thus it would bode against anyone gaining gainful employment. Therefore, how so ever the media learned whatever was leaked to the media, whatever was given to the media, how ever the media learned through their own means, this had the effect, I then believe that it is a responsible agent acting responsibly to have put 00104 on notice to news media for the action that would misrepresent their position. Therefore, once again, I appeal to this body, this hearing committee, that you would give consideration that we might become more closely involved in observing what has happened, and then I would like the privilege to return to this chamber before another scheduled hearing and to provide an update of information that will come to our hands. Thank you, Madam Chair, for this opportunity.
Thank you very much, Reverend Shine. Are there any questions? (No questions.)
Thank you so much. We now have testimony from the Gas Workers' Union. We thank you for your comments and we will be making our own. Thank you. (Joe Given comes forward.)
Welcome. Please identify yourself for the record and make 00105 your testimony. Thank you, glad to have you.
Good afternoon. My name's Joe Given. I'm President of the Gas Works Employees Union. And I wasn't going to testify here today, I wasn't going to get involved with this politics but for Mr. Reverend Shine to imply that some of our union people threatened Mr. Martin is totally outrageous. He talks about being outrageous and responsible. I think that's an irresponsible remark from Mr. Reverend Shine to even mention that our members would threaten Mr. Martin. And as far as Mr. Hawes, my understanding is that he resigned. And as far as Miss Connie Bradford, she deals with two African-American union reps in her department, who are constantly saying that she was incompetent in that job. And I think it's totally irresponsible for him to imply that our union members would even think about threatening the CEO of PGW. Thank you.
Thank you, Mr. 00106 Given. Are there any other individuals here who would like to testify? (No response.)
All right. I think this will end or public hearing, and we will now go into our stated meeting. In fact, let me retract that. We also do not have a quorum so we will leave it in the public hearing phase, but let the Chair make these statements: Number one, we do not know -- this committee has no idea, nor obviously does PGW, about the cost overruns to the City to the tune of $16 million, nor have we received any information about how to correct it. Before we resume this hearing, we want information, specific information, on what PGW plans to do in that regard. Number two, a new audit plan was referred to by the Vice Chair of this committee. That was to be instituted in 1998. We have no 24 information with regard to that, and we want information before we will even continue 00107 continuing this hearing in that regard. And, number three, we are now dealing with the budget for the Year 2000. However, we have no information with regard to cost overruns even for 1999, and this committee does not intend to continue some of these unknown and, in my opinion, irresponsible acts to the taxpayers of this city with regard to information that we get. Let me say that many years ago, when former Congressman Lucien Blackwell was Chair of the Commission and they came before him for a rate increase, not only did he not allow it, but he insisted that the management folks at PGW take a 5 percent decrease. So we understand that in spite of all of these issues, that there are certain latitudes that everyone in their respective positions has. Now, we believe -- in fact, I neglected to ask Reverend Shine if he requested a meeting with PGW, and I suspect that he has and that it was not granted until after PGW chose to make certain actions. Let me say this: that we are here for the public good. We do not intend on any group of people, any race of people, any 00108 ratepayers to be disrespected, overlooked, or ignored under our watch. We expect that before again that this committee hearing resumes, that we have answers to those three issues, that we have some specific detail about costs in general, about how PGW deals with taxpayers' money, about how you deal with this audit process, who is involved, and what the levels of responsibility are. All of this, this committee expects to receive so that we can pass it out to members of the committee and other members of Council. With that, are there any other comments?
Thank you, Madam Chairwoman. I would just like to say that with regard to -- I may be mistaken in this comment, but I thought I heard that the information relative to the cost overrun was passed on to the District Attorney. If that is true, I'd like to know, on what basis was it passed? Was there an internal investigation to establish that there was some criminal activity associated with the cost 00109 overrun? And if there was not, I think we need to know why it was passed on to the District Attorney's Office to investigate prior to PGW doing any internal investigation to establish the responsibility for the cost overrun, and that runs to the responsibility of the PFMC Board.
So those are five issues that we've mentioned, to which we expect specific written documentation before this hearing will resume. And with that, Councilman Cohen?
Just one question. Following up Councilwoman Tasco, could we get an answer to your question now?
Mr. Hayllar, we would ask you to come back to the witness stand. (Mr. Hayllar returns to witness table.)
Councilman Cohen is asking an answer to the last question 00110 raised by Vice Chair Marian Tasco with regard to cost overruns being referred to the DA and why.
A legal question deserves a legal answer. (Abby Pozefsky comes forward.)
Madam Chair, I'm Abby Pozefsky, General Counsel for the Gas Works. We've been involved in an investigation with the District Attorney's Office for approximately the last year, and we have cooperated with the District Attorney in every request that the District Attorney has made. She asked for us to provide to her materials in which the cost overrun was described. Those were materials that had been presented to the Board at one of the executive sessions of the Board meeting. And as is our practice when the District Attorney has asked us for materials, we have passed them on to her, and we did so.
Could you tell us, how did the District Attorney know about the IT cost overrun? How would she know about that if that's an internal matter and as relative to the budget? How was she notified about it? How did 00111 she know about it? He would she even know to ask about a cost overrun? Who told her?
I'm not sure. The District Attorney, at this point, has interviewed and has had before the grand jury many of our Board members and many of our employees. In terms of how she actually learned about this particular cost overrun, I'm sorry, I just don't know the answer to that.
Mr. Hayllar said we should go legally, and we're doing that. Now, if you're the top person, then somebody's got to know.
We really don't -- I really don't know how the District Attorney -- I don't know how she got the --
When did she ask for the information on the cost overrun?
It was not a specific request for information respecting the cost overrun; it was a request for information respecting a Board meeting on October the 19th. 00112 And in the information that was provided to the Board for that meeting, there was information respecting the cost overrun. There was not a specific request for that.
So prior to October 19th, you mean the Board had no knowledge of the cost overrun? And this has been going on a long time with the IT system. There was no 21 information given to the Board, they had no idea what was going on with the IT system until October 19th?
What the Board knew prior to October 19th and what the authorizations 00113 consisted of were these. There was an initial authorization for the contract for $9.75 million, and that was in 1997 that that occurred. At that time, the contract request was reviewed by the Board and it was approved. The Board had a policy in effect at that time, which was changed last year, that if a contract was more than a million dollars, it needed to be approved by the Board. Last year, it was reduced to $500,000. In every month, in every Board book, there is -- any contract that is exceeding the amount of a $500,000 contract or a $500,000 overrun is supposed to be presented to the Board. The last that the Board saw with respect to the authorization on the SPL contract, which is the primary BCCS contract, was the authorization that the Board gave in 1997 for the $9.75 million.
Well, the Board submits to us a budget each year and it's supposed to be done as of last year. And any correspondence or requests coming to the Commission comes with a resolution. Does that mean they sent us a resolution with a budget that 00114 they hadn't reviewed? Wouldn't they have seen the cost overrun in the budget?
They certainly approved the resolution and they certainly saw the Capital Budget. The Capital Budget doesn't have a reference point back to individual contracts or individual projects with what was initially authorized and what is then subsequently authorized. In other words, there's no reference point, there's nothing that says $9.75 million, authorized $18 million and counting spent. So although the Capital Budget was approved, it was not approved with reference back to what the original categories of authorized spending were. And, again, the Board's assumption is that on individual contracts, they have demanded approval of anything over $500,000. And their assumption is that if there is an overrun, it's the responsibility of the CEO or the COO to come back to the Board with that information for an additional Board authorization.
Mr. Hayllar, since you were the acting CEO, why were we not informed and why was not the Board informed?