Showing posts with label public accounts. Show all posts
Showing posts with label public accounts. Show all posts

01 February 2009

Taxpayer cash in mysterious company unrecoverable

The provincial government will have to write off  upwards of $675,000 in taxpayers money sunk into a mysterious company in 2006 according to notes in the government’s audited financial statements for 2007.

In January 2008, Bond Papers first told you about $500,000 of taxpayer’s money given to a company called SAC Manufacturing and over the weeks after that the Telegram’s Rob Antle dug deeper.

The province’s innovation department released more details on the commercialization program to the Telegram once the SAC fiasco broke in the news.  SAC received the largest grant possible even though, as the innovation minister acknowledged at the time, the company reportedly had “cash flow issues.”

There’s was no news release about the money at all and when questioned on it later, then-innovation minister Trevor Taylor could not explain why his department didn’t issue a news release on the investment.

Antle reported the company received a provincial government loan of $175,000.  In December 2006, the company received a half million under the provincial government’s commercialization program.  Four months later the company had closed its Paradise, NL offices and relocated to Alberta.  By September 2007, the company had ceased operating.

There was no notation on the company’s failure in last year’s audited financial statements even though they were finished around the time the company went under and released to the public six months after it ceased operation.

There’s been no mention of the investment in either the 2007 or 2008 auditor general’s report.

SAC Manufacturing supposedly had developed a natural gas compressor but no other details have ever been made public.

-srbp-

27 January 2009

War gilt

What better way to invest your cash than buying up bonds that helped finance the British during the Great War but which still pay dividends twice a year.

That would be the 1914-1918 war.

In 1917, the British government issued bonds  - known as gilt for the gold edging - at 5% interest. The bonds had no maturity date. 

At least, one investor has been buying them up as a hedge against deflation. The bond issue, currently valued at US$2.9 billion, is unlikely to be redeemed and individual bonds currently trade for less than one pound sterling.

Aside from the curiosity of the notion of 90 year old bonds that are still paying out, this story is interesting for Newfoundlanders and Labradorians for another reason. 

The war bonds originally carried an interest rate of 5% but this was lowered – unilaterally – by the British government in 1931/32 to 3.5% during the early years of the Great Depression.  At around the same time, Newfoundland was struggling under its own crushing debt.

The debt was incurred partially to fund the war and partially to finance a disastrous railway spur line project in the early years of the 20th century.  In any event, Newfoundland was discouraged by the British from unilaterally reducing the interest on its debt since to do so – the British argued – would call into question the financial integrity of the empire.

-srbp-

18 January 2009

Money Talk

1.  From labradore, a post titled “Responsible Government”.

2.  From the Telegram, the editorial follows up on a story from the Saturday edition noting the difference between Jerome Kennedy’s take on the pensions business and that of his immediate predecessor.

It asks a question - So, why the huge difference between ministerial attitudes? – that is worth answering, or at least attempting to answer.

The difference has to do, in part, with the length of time in the job and the amount that one knows about the fundamentals of the job. 

Tom Marshall gave the answer any finance minister might give who understood his job and felt comfortable in the roll. 

The long-term effect of a drop in asset valuation is to force the government and maybe the unions to drop more cash into the fund.  As Marshall noted, over the long haul, the pension fund’s asset valuation has gone up and down yearly but has average over 10% growth since it was created in 1981 [See chart at left].

No big sweat in other words.

Jerome, on the other hand, left the impression huge mounds of cash might have to be dropped into the fund in the next “number of years”.

Big sweat, in other words, since most people would take the tone of his comments to mean more cash was needed in a hurry.

Kennedy’s shown this sort of thing before, this lack of understanding.  His answers to simple questions in the legislature last session – his first as finance minister – were overly aggressive, snarky and condescending.

What else is new, sez the wag in the gallery.  True, but look at the words and you get more the sense of a fellow who is anxious to make sure people don’t realize he doesn’t understand a lot of what he is talking about.

He is covering up, maybe temporarily, maybe as part of a pattern.

Another part of Kennedy’s interpretation versus Marshall’s has to do with the annual budget requirement to find some sort of theme for the farce known as “budget consultations.”  Last year it was a debt clock.  Tom Marshall talked a lot about dealing with the debt but in the end did virtually nothing about it all.  This year, Jerome didn’t have a lot of time to find something to use as a prop, as a theatrical device around which to frame all talk.

CBC’s piece gave him that prop, albeit at the last minute. 

A prop really isn’t necessary though, if any of Friday’s session in St. John’s is the guide.  The Board of Trade – predictably – called for tax cuts for businesses as the way to help get through the coming tough times.  otherwise, government should stay the course.

What that means exactly is unclear, since the current crowd have been spending like there’s no tomorrow and no paying down the public debt to any appreciable degree. Plus, as labradore notes, their entire debt pay-down thingy is merely designed to open up room for more public debt.  That hardly sounds like something the Board of Trade would endorse but yet it does.

The only thing more predictable than the always Tory Board of Trade was the Canadian Federation of Independent Business. Times are good:  cut taxes, says Bradley George.  Times are bad?  Cut taxes, says Bradley George.

Again, no concern for the drain on public resources represented by debt and the odds such debt would increase with all those tax cuts.  How will we pay for everything if we cut taxes and cut them again and then cut them thrice for good measure?

The shortcomings of both the Board and Bradley are evident since neither made any reference to the gigantic shortfall in revenues coming this year. They either do not know or care not to know about the billion or so that has to come from somewhere since it won’t be coming from oil and mining and forestry next year.  It is like the debt:  best ignored except to support action which does not occur.

The size of the “or so”part of that equation by the way would be increased, inevitably, by the size of their tax cuts but this is all of no concern.  The only crowd equal in irresponsibility to the business bunch would be the labour and “social” bunch.  Where the business crowd seek to  cut revenue, the other would boost spending in just about every direction simultaneously. 

The current administration enjoys the support of both business and labour, it should be noted. 

Of course, none of this consultation has to make sense, nor must it bear any resemblance to what is actually going on in the world. The purpose of the consultation farce is merely to allow everyone to recite their scripted lines and if it can be held at the hotel owned by a loyal supporter of the government, all the better.

The whole thing is like the annual Christmas pantomime in grade school.   Everyone must memorise the lines and say them, even if they do make sense only in the fantasy world of the moment.

There’s no requirement that the participants in the entertainment actually understanding what they are talking about either.

That, of course, is both painfully obvious and the answer the Telegram’s question.

 

-srbp-

25 November 2008

Three guys and a magic eight ball

The Premier's first scrum of the new House of Assembly session yielded a huge number of interesting points.  CBC has posted it for your viewing pleasure.

1. Back to the future.  There are echoes in this scrum of the infamous January 5 massacre in which the Premier unilaterally froze public sector wages in response to a largely overblown warning of imminent financial collapse. [Update:  "Premier vows public sector wage freeze". 05 January 2004.]

Most media outlets are going to focus on the possibility that government would abandoned its own wage hikes in the public sector if things got bad enough. CBC did already.  Ditto voice of the cabinet minister and NTV.

It's right there in front of your face and there is immediate news value in the conflict.  Remember what makes news?  Money, power and conflict for three and when you get into this sort of thing - a Premier warning public sector unions actively involved in collective bargaining that he might just yank back his own offer -  you bring together a nice package.  Hence this sort of quote is pure gold:

"You know if we get into several-hundred-million-dollar deficits, then that makes the whole question of collective bargaining a big issue," he said, answering reporters' questions after the first day of the fall session of the House of Assembly.

[Update:  This is not the first time the Premier has used a message about government finances to threaten unions.  He did it in late October with the nurses.  Meanwhile, go back and check the scrums and news reports when this massive wage hike was introduced or when the nurses asked for more cash.  How many times did the Premier and the finance minister talk about being able to handle the 20% wage hike they imposed?  Did they ever mention the possibility that they might not be able to manage it?]

2.  The Big Picture stuff is done.  That's almost a direct quote and no one should miss putting that fact together with the public sector bargaining threat noted above.  By Big Picture, the Premier clearly means revenue and spending projections for next year and looking out two to three years.  The only stuff left to do is the actual departmental allocations and the traveling farce called "consultations".

By Big Picture, you have to understand that all the numbers thrown around by the Premier aren't just ones he pulled out of his ear.  These are the numbers the provincial government is working with for its projections.

3.  What's the big thing about reading?  Danny Williams likes to mention that he is reading stuff, although he is never clear what he reads.  He said "books" in the scrum - economics books to be specific - and then switched to journal articles and magazines and anything else he could lay his hands on. 

Sarah Palin talked about reading too, at least until reporters started asking her what she read.  How long before someone actually asks the Prem for some specifics on what he reads?

4.  No coincidence at all.  Remember the comment here about the overwhelming similarity between Wade Locke comments and those of the Premier and his newly minted finance minister?  Apparently no coincidence at all since the Premier admitted that economists from the university are on the Hill consulting.

At some point, reporters will have to clarify Locke's relationship with the provincial government.

5.  "No one could foresee what was happening here."   No one foresaw the drop in oil prices according to the Premier. He is evidently not reading the right things

6.  PIRA.  That would be the PIRA Energy Group, a consulting firm to the international stars. Their prediction in July was that oil prices would drop, but remain above US$100 a barrel based on "strong medium-term oil market supply/demand fundamentals."

7.  Production.  Count how many times the Premier mentions oil production, the possibility of increased production over projections and the importance of oil production levels  - conservative estimates according to the Premier - to the government budget. 

We know the provincial government has built its entire financial plan on oil revenues.  It's a house of cards, as the current economic crisis shows.

The budget was based on anticipated oil production in 2008 of 120 million barrels. Statistics from the Canada-Newfoundland and Labrador Offshore Petroleum Board show that oil production this year has averaged 10.3 million barrels per month and is therefore on track to deliver total annual production in this fiscal year of 123.6 million barrels. 

The highest offshore oil production level was last year when it hit 134 million.  In order to get the higher production the Premier keeps talking about - and therefore equal last year's record  - there'd have to be about oil would have to average over 12 million barrels per month in the last six months of the year.

Next year, production is expected to fall by 15% and that would give 2009 annual production of about 105 million barrels.

Remember those numbers.  We'll use them again in a minute.

8.  There's a notional surplus... The provincial budget projection was for a $544 million surplus.  That's presumably on an accrual basis. The same figures turn up in the Dominion Bond Rating Service assessment. Here's the thing:  it includes $360 million in completely fictitious money from the 2005 federal transfer deal that has already been received and spent.

9.  and a cash deficit.  Every time someone says the province is on track to meet budget targets, people in the province should worry.  We've covered this dozens of times at Bond Papers because on a cash basis, budget targets means $794 million in new borrowing.

Based on the new numbers, we can revise our calculations from October slightly.

Over the first half of the year, let's assume oil averaged about $120 a barrel.  That's a figure the Premier has tossed out and it's a little higher than the $115 Wade Locke mentioned.  That gives about $1.26 billion in oil royalties in the first half of the year.

In the second half of the year,  we can safely assume oil at an average of CDN$72 (US$60 + 20% dollar premium) and CDN$87 (US$72.5 + 20% dollar premium) for the purposes of our calculations.  We can also anticipate that other revenue sources (taxation etc) are not going to outperform original projections by any great amount. If they were looking that good, the Premier wouldn't hesitate to use them to bolster public confidence.

On that basis, the provincial budget would come up - respectively  - $478 million and $320 million short.  Compared to the projected $794 million shortfall that's not a big amount.  Spending restraint and a little extra cash here and there could balance the books on a cash basis. 

Don't count on that, at least if the last two fiscal years are anything to go by. 

10.   Then there's next year.  If we hold the budget exactly as it is this year  - anticipated spending and revenue - and vary only oil, we can get a sense of how big a financial problem the provincial government has helped create.

Oil production is expected to come in at about 105 million barrels in 2009.  Peg oil pessimistically at CDN$72 (US$60 + 20% premium) a barrel and you get oil revenues about $500 million less than this year's estimate.

That projected $794 million deficit (cash basis) this year becomes $1.294 billion in the red next year.   Unlike previous years where the trend was positive and the budget figures were low-balled, odds are much higher that the low-balls turn out to be dead-on if not downright pollyannaish optimistic.

If AbitibiBowater closes its mill in Grand Falls-Windsor, and mineral prices fall off, that deficit number would get bigger not smaller. As well, the prospect that Rio Tinto might adjust its capital expenditure plans next year could reduce some anticipated activity in Labrador west.  All of that is just a local manifestation of the recession expected in the United States and Canada, our major trading partners.

Bottom line:  we aren't protected by some magic bubble. These are rough calculations, to be sure and the figures aren't readily available to allow a more accurate and detailed assessment.  At the same time, the people who do have that information aren't sharing the accurate assessments.  The Premier's scrum on Tuesday covered such wide territory that one could easily imagine the finance department is relying on three guys and a magic eight ball for its planning.

Thankfully that isn't the case, at least based on the well-earned reputation of the finance department officials for deadly accurate forecasting and sound budget management. That's pretty close to what PriceWaterHouseCoopers said in their financial assessment in late 2003.  Then again that was before the current crowd took over. Things haven't been quite as accurate or as clear since then.

Let's just pray that the future as suggested by the calculations here doesn't turn out to be as bad as it looks.  If the current political crowd took credit for the boom delivered by things beyond their control - like oil prices - they can hardly expect people to think that a major fiscal problem in government isn't also theirs to own.

-srbp-

28 October 2008

DBRS releases detailed NL rating report

Dominion Bond Rating Service released its detailed report on Tuesday to back the changed rating for the Government of Newfoundland and Labrador.

On October 22, DBRS upgraded the province's long-term debt rating to "A from A(low)" but adjusted the trending assessment from "Positive" to "Stable".  The short-term debt rating remained at "R-1(low)" with "Stable" trending.

The detailed report cites strengths, such as the reduced debt burden, growth of the offshore and a competitive tax position.

At the same time, DBRS cites several challenges. 

Consistent with comments by the province's auditor general, DBRS notes the heavy reliance of the provincial budget on oil revenues which, DBRS says "introduces volatility to the fiscal results".

DBRS also noted unfunded pension liabilities and potential dependence on federal government transfers as issues of concern:

(3) Unfunded pension liabilities remain sizeable, projected at just over $2 billion in 2007-08. The Province has made considerable efforts to reduce these liabilities, largely as a result of the 2005 Atlantic Accord and other special contributions to help improve the funding position of both the teachers’ and public servants’ pension plans. However, declining interest rates and the recent deterioration in equity markets are likely to further add to unfunded liabilities.

(4) Through growing resource revenues, the Province has seen its reliance on federal transfers fall from greater than 40% in the 1990s to roughly 23% in 2007-08 but is nonetheless susceptible to significant changes in federal transfer programs. Any drop in resource revenues could result in a reversal of this trend and return to greater dependence on federal wealth redistribution programs.

DRBS is forecasting small surpluses through to 2010-2011 when it anticipates expenditures will outpace revenue growth. The surplus for 2008, given in the earlier release as $291 million, is actually exactly the surplus forecast by the finance minister.  DBRS appears to have included an anticipated under-expenditure on capital account which makes up the difference.

However, it is important to note the difference in the accounting method used for the DBRS report and the finance minister's statement about a surplus compared to the figures presented in The Estimates.  The premier alluded to this in an interview last week but didn't explain it.

DBRS' revenue projections report money in the year in which it was earned.  Hence, it includes revenue from the 2005 offshore deal.  However, that money was already received in 2005 and has been spent.  It can't be received and spent twice.

The provincial budget documents (particularly The Estimates) account for this by deducting that amount in its calculation of borrowing requirements. The unaudited report on the Consolidated Revenue Fund (issued in August for Fiscal Year 2007) makes a similar adjustment as it reconciles a simple statement of revenues and expenditures with the actual cash flows.  Thus, an apparent increase in revenues of $1.4 billion becomes a borrowing requirement of $110 million once all the financial transactions have been accounted for.

-srbp-

17 September 2008

$794 million deficit: the ABCs of provincial government budgeting

If crude oil averages US$87 per barrel through the current fiscal year (ending 31 March 2009) and the government performs exactly as budgeted in every other respect too, the provincial government will wind up with a deficit of more than $794 million this year.

That's right.

Almost eight hundred million dollars in the hole.

It's not a state secret.

Your humble e-scribbler did not have to go through any contortions - mental or otherwise - to figure it out.

The figures are there, in black and white, in the provincial government's current budget.  Hidden in plain sight, you might say.

But no, some of you are saying, the provincial government is forecasting a surplus of a half a billion dollars. The media reported it in April and they've kept saying it so it must be true.

Yes, the did and they have.

But that isn't the official budget of the provincial government approved in the House of Assembly any more than all the talk by politicians about surpluses the past few years was accurate either.

That forecast was done separately by the department of finance and repeated by the finance minister countless times.  It is based - evidently - on the hope that oil would actually spend most of the year well north of US$87. They were hoping on oil revenues being almost double the $1.7 billion used to make up the budget. An extra $1.3 billion would wipe out the forecast deficit and leave another $500 million or so besides.

The recent drop in oil prices below US$100 could throw that hope out the window, coming as it does a little less than half way through the fiscal year.  Oil would have to drop quite a bit further than its current price in the mid nineties to wipe the anticipated surplus out entirely, but don't count on there being too much cash left in the till next April.

There are a couple of reasons for that beyond the drop in revenues compared to the Atlantic City dice roll projections. 

For starters, if revenues are already up by about $800 million or so, government might be able to bring in something close to a balanced budget. Any less than that and something's gotta give to stay in the black.

The other thing is that - contrary to the popular view - government hasn't actually produced a real surplus in three years.  Again, eyes are rolling, but all you have to do to see the truth is look at the government's annual financial statements.

Last year, for example, the government spent every nickel it originally budgeted, every penny of the $1.5 billion surplus and on top of that had to borrow another $88 million just to make ends meet.

Just to make it really plain, that table above is  taken from a Bond Papers post last June that lays the whole thing out in a picture.

This administration, like pretty well all the ones before, likes to spend public cash.  If there isn't enough coming in, hitting up the banks is just as good as money earned in other ways.

As the Auditor General pointed out in his report earlier this year, the provincial government has consistently boosted public spending based on the mountains of oil cash flowing.

They've  built the province's spending on some pretty shaky ground, namely highly volatile commodity prices.

At the same time, very little attention has been paid to paying down the large amount of debt - the accumulated deficits - that now runs upwards of $8.5 billion and is expected to climb higher this year.

That's the table at right, with the figures taken from the finance department's budget document, The Estimates.

For those of you whose mind has not just boggled into the "off" position, this has some pretty significant implications for what is going on in the province.

The province's finance minister told reporters today that salary expectations from groups like the nurses are based on high oil prices.

No, they aren't. 

High public expectations for new spending and public sector union salary demands are based on the government hype about its own financial plans and its own cash flows.  The people of the province believed all the stuff about surpluses and happy days finally being here. They believed because that is what they were told by politicians.

People have even been lulled into believing that the Hebron project - all $28 supposed billion of it  - is coming right along any day now. 

The reality is starkly different.

Oil revenues will decline over the next decade because of dwindling production and prices that are returning to something approaching the norm.  The three existing fields will be well on the way to shutting down by the time Hebron gets into production.

Rather than adding to current cash flows - as most people likely believe - Hebron will simply take up some of the slack from that dwindling production.  If construction starts on Hebron in 2012, the cash from its oil won't hit provincial coffers until about a decade from now.

The reality is that the next decade is going to be considerably more difficult than people imagined;  difficult that is for the provincial government.  They have made a rod to beat their own backs by creating a climate of expectations that simply can't be met with likely revenues.  At the same time - through the energy corporation and the equity stakes - they've committed to a steady stream of new government borrowing over and above what it may cost to sustain the existing spending levels after the oil money drops off.

There's nothing overly complicated about the whole business.  The information is readily available to anyone who cares to look.

Understanding what is going on today and what looks very likely to happen?

Well, that's as easy as A-B-C.

-srbp-

27 January 2008

Province invests in natural gas...quietly

Over the past two years, the Government of Newfoundland and Labrador has quietly invested in two local companies involved in the natural gas industry, according to information in the Public Accounts, Volume II.

In 2005, the province offered Trans Ocean Gas Inc $100,000 as an interest free repayable contribution to the company's research and development activities. Up to the end of March 2007, the province had contributed $90,000 and received 18,000 Class 'B' non-voting, non-interest bearing common shares. The shares must be redeemed no later than march 22, 2015.

No news release was issued by the provincial government or Trans Ocean Gas on the deal, but there is reference to the provincial government as an investor in a news story in The Independent. The company website does list the Department of Innovation, Trade and Rural Development as having a "strategic relationship" with Trans Ocean.

In 2006, the provincial government acquired 500 Class 'B' common shares in SAC Mfg Inc at a price of $500,000. The shares are conditionally redeemable based on after tax earnings and must be redeemed no later than December 19, 2016. According to the companies registry , SAC is based in paradise, Newfoundland and has two directors: Dana Clancy and Sandy Clancy.

The Canadian Trade Index website lists the company business as "manufacture/distribute/service natural gas compression packages". The company website, sacmfg.ca, appears to be inoperative. A listing at a 2007 Alberta oil and gas show lists the company with an Alberta address which has a 100 hp compressor package designed to produce gas from wells deemed uneconomical due to high water content.

Trans Ocean is not related in any way to SAC.

-srbp-

01 July 2007

The Persuasion Business: What the heck is public relations?

In 1999, I headed up the public affairs section of the Department of National Defence task force in Newfoundland and Labrador that would co-ordinate any military assistance to the provincial government in the event of problems caused by the supposed Y2K flaw in some computer programs.

We planned and trained nationally, regionally and finally at the provincial level. The provincial exercise took place on a weekend in the fall of 1999. All key staff members spent the weekend running an operations centre exactly as we would if needed.

The daily routine began with the commander's daily briefing, usually at seven o'clock in the morning. All department heads gave a summary of the previous day's activities, forecast what was coming and highlighted any issues that might need the commander's personal attention.

After each such briefing, known informally as morning prayers, the department heads usually grabbed a quick breakfast before beginning their shift. That first morning, a couple of my colleagues separately took me to one side to ask a simple question: "Is that what you do?"

"Yes", I replied, at first not quite sure what was coming next. I had given the commander an overview of attitudes in the key audiences we would be dealing with: the federal and provincial governments, views of key politicians at both levels of government, the news media and specific reporters, the public in affected areas, and internally among soldiers. Only after ensuring The Boss was thoroughly familiar with the situation did I give him what literally amounted to a 30 second discussion of my section's planned activities.

He didn't need more. In all the years I had worked for this individual, he had only wanted to focus on issues that might require his attention; he trusted the staff he had picked to run the show. The Boss wanted the lay of the land and any key ideas he'd need to put across. He wanted to have a good feel for specific people he would be dealing with. Everything else was ours to handle as department heads in co-operation with each other and with decision makers inside and outside our organization.

My whole briefing had taken only about 10 minutes.

As I looked at my colleagues, I slowly started to understand their question and their expressions of discovery. One of them, a professional with considerable experience throughout the Canadian Forces and the department including tours overseas on major operations, said he had never seen a briefing like it before from a public affairs officer.

He was used to public affairs (public relations) being all about dealing with news media. There were a certain number of media calls. We handled this many interviews. There is a news conference at such and such a time. The other stuff - the analysis - was a revelation to him.

His revelation was less a revelation to me as a reminder.

Most people don't understand what public relations is all about.

They think it is just about dealing with news media. They think of it as publicity. They think it is part of marketing.

It is all of that, on some level, but it is really so much more.

Public relations is the management function that plans, co-ordinates and executes communications efforts with people who are interested in what an organization is doing, in order to gain and maintain their support for the organization.

That's a definition I work with but there are others.

The Canadian Public Relations Society defines public relations as "the management function which evaluates public attitudes, identifies the policies and procedures of an individual or organization with the public interest, and plans and executes a program of action to earn public understanding and acceptance."

A lengthier definition holds that public relations "is the distinctive management function which:

  • helps establish and maintain mutual lines of communication understanding, acceptance and co-operation between an organization and its publics;
  • involves the management of problems and issues;
  • defines and emphasizes the responsibility of management to serve the public interest;
  • helps management to keep abreast of and to serve the public interest effectively, serving as an early warning system to help anticipate trends; and,
  • uses research and sound, ethical communications as its practical tools."


Take either definition and you have a good idea of what a public relations professional does.

One of the most important common features of each of those definition is the word "management".

With only a small amount of preparation, anybody can handle media telephone inquiries. In many organizations, including public relations departments in any company or government office, the business of talking a telephone call, arranging an interview, sending out information or even issuing a news release or holding a press conference can be handled by the literally thousands of competent administrative people. Heck, software programs these days come with template "press" releases and there's even a for dummies book on public relations.

The real challenging in public relations is managing. It is about planning, co-ordinating, leading, organizing and budgeting. It is about deciding and making the right decision inevitably takes training coupled with experience and judgement. Not everyone can do that.

One could say that a public relations practitioner helps decide who says what to whom, where, when, why and how.

If you take a closer look at those definitions a few simple ideas leap out.

First, communication is a two-way street. It involves sending a message and receiving one. The sending bit is perhaps the easiest of all. Most people figure that part out just by the action involved in sending out a news release.

But receiving? There is always feedback from people interested in what an organization is doing. Sometimes that feedback is a clue to something elsewhere in the organization that needs fixing. Sometimes that feedback isn't what the senior managers don't want to hear, but it is very important that they do. That's where public relations comes in.

Second - and related to that feedback thing - public relations often involves change in some way. Sometimes an organization has to communicate about change, like closing a business. Sometimes, the change comes as feedback from disgruntled employees or voters.

Third, public relations connects an organization with the public interest. That isn't just the interest of the public as a politician or public servant might look at it. Sometimes it is public interest in the sense of the greater good, but public interest may mean the benefit of a particular group.

Think about a health care administration. Its core business is providing health care needed by the people within its geographical area. Their interest - as a public - is getting the care they need when they need it. Seems obvious, right? Well, what happens when that care isn't what they want or need or, in some instances, what can actually be delivered within the budget provided by a public system?

Interests may clash, but the effective management of communication is supposed to help resolve those sorts of conflicts. Public relations involves establishing and maintaining "mutual lines of communication, understanding, acceptance and co-operation." That health administration needs to give people realistic information about its programs. its needs to know if its services are being received and when there might be a budget issue, people may need to understand why some programs are expanding while others, like say their local clinic, is having its hours cut or is being closed.

In a more concrete example, look at the recent controversy involving one health authority and breast cancer screening. Aside from the problem with faulty testing - bad enough as it is - cancer patients and their families were likely most concerned to know how big the problem was. Did it involve me or my wife or mother? The next most important thing to know was what was being done about it. How is the health authority dealing with the problem and doing what it is supposed to do: deliver the best possible care?

take it from a slightly different angle and you can see this idea of public relations as well. Those patients are ultimately responsible for their own care and they can't make proper decisions if they don't have all the information. They depend on the relationship they have not just with the health professionals but with the entire organization to help them deal with their illness. Holding back vital information erodes the relationship between the care givers and the people needing care.

On a wider level, though, what seemed like a small decision to deal with a handful of patients, ultimately affected a bunch of others. People who would never even think about breast cancer screening personally had to wonder what other tests for other diseases might be buggered up. Then comes the real acid for the relationship: what else haven't they been told.

Once the story hit news media, the problem became not just in the relationship between the health authority and its patients (and their lawyers), it became a gigantic problem in the relationship between those patients, as voters, and the politicians who run the whole government. Patients discovered that three successive health ministers had been briefed on the whole thing - including withholding some information the non-disclosure apparently - and did...nothing.

In the whole business of dealing with the damage, another entirely separate issue was dragged in. At a news conference to announce an inquiry into the entire breast cancer business, someone decided to do two things. First he or she decided to delay the news conference. Reporters coming together at lunch hour for one announcement were left cooling their heels for no obvious reason.

Second, that same person decided to stick the head of the local health authority in front of a microphone to announce that a radiologist had been suspended because of possible problems with his diagnostic ability. Remember the bit about other tests? Initial reports noted that radiology involves mammograms. As anyone over the age of 18 likely knows, are tests to screen for, you guessed it, breast cancer. Imagine the reaction.

Even though this radiologist had not performed mammograms - information correctly reported in subsequent days - the decision to announce this separate issue in the way it was announced linked one crisis directly to another issue and thereby magnified the whole thing to another level.

Mighty oaks from tiny acorns grow, indeed. Sometimes they fall on your head. Sometimes people wind up standing under a gigantic tree as it crashes from cuts they made to it.

Lots of information was handed out in this case, both initially and subsequently, but some crucial information - crucial as the patients saw it - was held back. The decision to hold that information back was taken by the senior-most levels of health care management and may have been done for what they took to be good corporate reasons. The communications people may well have advised a wider disclosure but as subsequent reports said, the information was held back based on legal advice.

Now in due course, we'll talk about the lawyer-public relations challenge, but think about that whole issue from a pure public relations perspective and you'll see the importance of effective public relations management. If you want people to support you, they have to know what you are doing. If you don't tell them, they can't know and, almost inevitably, they won't be overly supportive of what you are trying to do.

Get caught holding back or being thought of as holding back and support crumbles. Confidence erodes and, as the case turned out, the bosses of the bosses who held decided to hold back the information get more than a little annoyed or - when they join in the bad decisions - get caught up in a maelstrom of public concern.

No one likes unhappy people - disgruntled publics - especially politicians. As the case of breast cancer screening shows, badly handled public relations decisions - not necessarily made with the advice of public relations practitioners, by the way - can make a bad situation much worse. in fact, take a look at what happened compared to say the CPRS definition of public relations. How many of those key ideas got trashed?

When you get right down to it, public relations is essentially about relationships. So, against that background, next time we'll look at some simple ideas that underpin effective relationships, I mean, effective public relations:

Reputation and credibility.

- srbp -