The following electronic version is for informational purposes only.
The printed version remains the official version.

REPORT OF PROCEEDINGS
(Hansard)

SELECT STANDING COMMITTEE 
ON PUBLIC ACCOUNTS

WEDNESDAY, OCTOBER 4, 2000

                                                  * Denotes member present

 

Clerk:

Craig James

Committee Staff:

Kelly Dunsdon (Committee Researcher)  Josie Schofield (Committee Researcher)

[ Page 1559 ]

The committee met at 9:10 a.m.

R. Thorpe (Chair): Good morning, ladies and gentlemen. Noting that we have a quorum, maybe we could get started.

Before we get right into the agenda and look at part 2 of the financial management. . . . I was going through some follow-up materials last night and noticed that on June 27 the committee wrote a letter to the Government House Leader with respect to the Select Standing Committee on Crown Corporations, and that letter was signed by both myself and the Deputy Chair. In double-checking this morning with the Clerk's office, we've yet to have a response to that June 27 letter with respect to the Select Standing Committee on Crown Corporations. I think it would be most appropriate for this committee to follow up with the Government House Leader. And if everyone's in agreement, I'll ask the Clerk's office to send a follow-up letter asking for a response to our June 27 letter with respect to the Select Standing Committee on Crown Corporations. Does anyone have any objections to that?

I'd like to welcome everyone back to the Public Accounts Committee, and I'd like to welcome a new member, the member for Delta South, Val Roddick. We look forward to your participation in the committee.

Now we're going to look at "Government Financial Accountability for 1998/99, Part II -- Report on Province's Financial Management." Who do we have here as witnesses today, and where are we starting? Are we starting with the provincial treasurer, or are we starting with the auditor general?

A. van Iersel: Chair, if I may, we're now on part 2, and the auditor general has already made the presentation. So we have Mr. Bob de Faye, the assistant deputy minister from provincial treasury, and with him is David Morhart, the executive director. There are some slides that were previously provided to the committee, which they would now like to use and walk you through part 2 of the report -- our response to that.

R. Thorpe (Chair): Thank you very much. Please introduce yourselves and go ahead.

B. de Faye: Good morning, Chair and members of the committee. As Arn said, I am Bob de Faye, and I'm head of provincial treasury. To my left, I'd like to introduce my colleague Mr. David Morhart, who is executive director of the debt management branch.

The debt management branch is responsible for borrowing money to meet the financial requirements of the public sector. The branch also manages $34.4 billion in debt at the least cost and risk to the government and public sector agencies.

This morning Mr. Morhart and I will be responding to the auditor general's comments regarding debt indicators, which appear in part 2 of the "Report on Government Financial Accountability for the 1998-99 Fiscal Year." Let me begin my comments by thanking the auditor general, through the Chair, for providing the ministry with a sustained encouragement to enhance the timeliness, comprehensiveness and clarity of debt reporting in this province. I believe that the auditor general will acknowledge that his and his predecessor's advice and encouragement have not gone unheeded by the government.

Specifically, the government has taken several steps to increase the understandability and the amount of detail provided with respect to provincial debt indicators. Through a combination of paper and electronic publications, British Columbia's level of debt reporting is unparalleled amongst the provinces in Canada, and the government has made tremendous progress in meeting and beating the targets outlined in its five-year fiscal planning framework. In fact, in the 1999-2000 fiscal year, the year just ended in March, the government achieved three of its fiscal targets. The auditor general confirmed that the government recorded a surplus, and the debt-to-GDP and debt interest targets were significantly below target.

As well, as the minister has recently reported in the first quarterly report for fiscal year 2000-01, the government is projecting to balance its books again this fiscal year -- four years ahead of schedule. As a result, the provincial debt will show only a modest increase. As a result, I'm pleased to report that the province still retains the second-highest credit rating in the country, reflecting its relatively low debt burden and an increasingly diversified economy. This fact was acknowledged by all four domestic and international credit-rating agencies when they confirmed British Columbia's credit rating this spring.

[0915]

Our efforts in expanding the level of debt reporting are consistent with the government's recent commitments through the Budget Transparency and Accountability Act, which, as you're all aware, demanded a greater disclosure of planning assumptions and performance measures.

I'll now hand the presentation over to Mr. Morhart, who'll walk through some of the details regarding the provincial debt portfolio.

D. Morhart: Circulated to you was a package addressed from Arn van Iersel, giving our presentation by paper; I apologize that this wasn't done electronically. But we'll work through the paper today.

I refer you to page 7, and it begins with the provincial treasury response. The dates in here are out of date; it says April 2000, but read that as October 2000.

Looking at the first slide, which we entitled "Full Disclosure of Debt Information," I wanted to make a few comments. The first and foremost commitment of government and of our branch in particular has been to publishing an annual Debt Statistics report, which is released simultaneously with the public accounts. This document was released in August of this year. This report includes extensive information on individual debt issues, debt performance measures and indicators, and explanations of the changes in debt over time.

The genesis of this report goes back to fiscal '91-92, when the then auditor general first made recommendations as to the key measures and indicators recommended for disclosure in the public accounts. In response to the auditor general's '94-95 report No. 4 entitled "Value-for-Money Audit: Ministry of Finance and Corporate Relations -- Management of Government Debt," which we can provide copies of, the government released its first Debt Statistics report, releasing information

[ Page 1560 ]

on both the total and the taxpayer-supported debt of the province. Further, it bears noting that the Enns review panel acknowledged that the Debt Statistics report contains the standard fiscal and debt performance indicators, stating that it provides the public and the Legislature with a more robust picture of fiscal performance.

The government also discloses debt information in a number of other ways, including the annual budget and estimates, the public accounts, financial and economic review, the quarterly reports and monthly and annual legislative reports deposited with the Provincial Secretary and/or the Legislature. Copies of these latter reports are forwarded to several members of this committee.

The last and probably most exciting update that we provide is an expanded and user-friendly web site; it's at www.fin.gov.bc.ca/pt.htm -- "pt" is for provincial treasury. This is updated with details of each of our bond issues and our borrowing program throughout the year. So at any point, investors and the public can go and check on what debt securities are available and the status of the debt. This is also a useful point of reference for rating agencies and investment banks, and it's quite a highly used site.

Moving on to the second slide, entitled "Prudent Debt Management," I want to talk on a few aspects of the province's debt portfolio. The activities of the debt management branch, my branch, are overseen by a risk committee consisting of the Deputy Minister of Finance, the assistant deputy minister of provincial treasury and an external, independent member, who is currently Bob Fairweather, a former head of Vancouver Board of Trade and a respected investment banker.

The means by which we manage the province's debt portfolio are based on prudence. First we seek to manage the province's debt to ensure that our obligations are spread evenly across the maturity spectrum. Our policy is to contain the level of maturing debt in any one year to $2.5 billion. To put this in perspective, Ontario will be refinancing between $10 billion and $15 billion in maturities in each of the next several years, as a result of extremely large and routine issuance strategies that did not take into account the effects of refinancing risk in the future. We tend to spread our refinancing risk out over time so that we minimize the risk in any one year.

[0920]

Second, the province has maintained a low level of foreign currency exposure. As of March 31, 2000, we had a foreign currency exposure of 7.4 percent, almost evenly split between U.S. dollars and Japanese yen.

Third, we maintain a conservative level of floating rate exposure, currently 27 percent of our portfolio. This exposure is actively managed, depending on our view of interest rates. Thus, because of falling rates in the last while, we've increased our level of exposure because we can take advantage of lower costs. This has provided us with opportunities to fix our costs going forward or lower those in the near term if we felt that rates were falling.

Moving on to the next two slides, we have two charts that show both the level of debt to GDP and the debt interest costs for the fiscal year ending '99-2000. As Bob mentioned, the province still maintains an affordable level of debt, and this is measured in the percentage of gross domestic product as well as in terms of debt interest costs per revenue dollar. Each of these measures compares favourably across the country and has been acknowledged by investment banks and by the international credit-rating agencies.

The last item I want to discuss is on the slide entitled "Sinking Funds." This is in response to some of the comments made by the auditor general in their presentation. In June of 1999 the government discontinued sinking fund payments for its own government debt portfolio. As the auditor general's report noted, it was imprudent to inflate the province's borrowing requirements just to set money aside in sinking funds. That report concluded that the government's efforts to manage its debt maturities, through a combination of future cash flows and borrowing, made a lot more sense. This decision was made only after careful consideration and discussion with the credit-rating agencies and the investment community, all of whom fully supported the change in policy.

It's important to note that the government didn't change the policy with respect to Crown corporations and agencies. They continue to contribute annually to their sinking funds. In addition, the government has maintained its existing sinking fund balances, totalling $3.2 billion as of March 31, 2000. These will be used for the eventual retirement of the respective debt obligations for which they were established.

At this point I'd like to hand the presentation back to Arn -- he had a few concluding comments on the public accounts -- and then we'll open the floor for questions.

A. van Iersel: Thank you, David and Chair and members. You'll notice in your package that there are two other slides, which I was going to finish our formal response to the auditor general's report with. They're on page 9. I guess the first thing we want to talk about is the Budget Transparency and Accountability Act that was passed this spring, which has firmly set in place a number of requirements on the Ministry of Finance in terms of the production of financial reports. David has mentioned them. I guess one thing I'll mention -- because it hasn't happened to my knowledge before -- is that this year, in August, we were able to table the public accounts, the financial and economic review and the debt statistics report all on the same day. I don't know if that's going to be possible every year, but we've already been asked whether those will be accelerated. I've made a commitment in-house that we will try to get the public accounts out by the first of August. So we continue to try to move up the provision of financial information. Wayne is smiling at me. We still have to talk in terms of what the schedule looks like, but every year we're trying to make the information more timely, and we have to work together to find ways to do that.

The '99 public accounts. At the time we did this presentation, the public accounts, of course, were not yet out. As I just said, they are now released. We'd like feedback in terms of the changes that we've made in the public accounts. One thing I'll draw your attention to, since we're talking about debt, is that the public accounts now includes a debt section which includes the highest-level summary of total debt of the province. That's now an integral part of the public accounts, where it was previously a separate document. We still publish a separate debt statistics report, but we're looking at whether that should be rolled in, in its entirety perhaps, in the future. That's one thing that's under debate.

[0925]

[ Page 1561 ]

Going back to the initial part, which you heard some months ago now, my thanks to the auditor general's staff for helping us get out the '98-99 public accounts and the '99-2000 in such a timely way. Hopefully we haven't seen the end of it yet in terms of accelerating the product, and we very much want to hear from yourselves in terms of whether that public accounts document is meeting your needs or not. So that was it.

The other thing I'll just refer to, because it's a topical thing. . . . It's come up most recently, I guess, with respect to the Enns report and what is considered to be outstanding or not, relative to Enns. . . . We did include, as a point in time, where the SUCH sector is at in terms of the various jurisdictions. I guess it's now up to the committee to decide when it wishes to hear, in terms of the Ministry of Finance report on the progress made with respect to Enns and also the auditor general. . . . I think everyone knows that the Ministry of Finance report and the auditor general report came out just days apart last week, in terms of summarizing what was happening. So I have nothing further to say, other than to respond to questions as well.

R. Thorpe (Chair): Does anyone have any questions?

G. Farrell-Collins: Just a real quick one. First of all, on this chart, on the last page, can you fill in the blacked-out areas for me?

A. van Iersel: No. I'll provide a new one. In terms of. . . . What it should say is "Schools, Colleges, Hospitals" and "Health Authorities." 'Universities" would be the third block. The last block is "Health Authorities." So the answer for British Columbia is: no; no; we do not. For Alberta, the answer is also no; no. They have a similar issue there; it's been discussed at their Public Accounts Committee. In terms of Saskatchewan, for universities, I'll ask Wayne to fill that in. Wayne, do you know?

W. Strelioff: Is this for '98-99?

A. van Iersel: For '99-2000.

W. Strelioff: For colleges, yes; universities, no; health authorities, yes.

G. Farrell-Collins: Something out of 32, it says.

W. Strelioff: It's now 32 out of 32. It used to be three out of 32 -- the three largest. Now it's 32 out of 32.

G. Farrell-Collins: I knew he hired you for some reason. Fill in our blanks for us.

W. Strelioff: Thanks.

R. Thorpe (Chair): It looks like he was really impressed by your answer.

A Voice: There were many other reasons as well.

R. Thorpe (Chair): Is that it, Gary?

G. Farrell-Collins: Perhaps the auditor general can tell us. . . . In Saskatchewan, obviously, they've included the health authorities. Can you tell us why the universities have not been included, or is there a plan there to include them eventually? Are they phasing this in? Which direction are they going?

W. Strelioff: My understanding is that it's under examination and discussion right now. It has been under discussion and examination for quite a while. The previous provincial auditor did not put it on the table for a qualification kind of purpose, where the discussions are taking place. The new provincial auditor there will have to decide how best to handle that issue.

D. Zirnhelt: Arn, you mentioned that you were waiting for direction from this committee as to when a further progress report might be made on progress toward implementing Enns.

A. van Iersel: If that's the wish of the committee. I only mentioned it in the sense that the two reports -- one from the Ministry of Finance and one from the auditor general -- were just recently released. If the committee wishes to follow that up, we can arrange presentations in terms of talking about what those reports contained and, if you're interested, sort of explaining the differences, in terms of what each report says the status is. I think they're fairly consistent, but there are a few different. . . .

R. Thorpe (Chair): They may be fairly consistent in the way they review the various things, but I think that if one reads them carefully, one would note some differences. I believe the auditor general has in fact suggested amendments to the Budget Transparency and Accountability Act already. We can look at whether the committee would like to bring that here, but we do have a long workload here, and I think it would have to take its priority in that workload. That would be my view, anyhow.

[0930]

D. Zirnhelt: What goes on the list -- I understand that. I think it's a question of whether we have time. Maybe we should.

J. Weisgerber: I'm interested in this issue of foreign currency exposure. I'm interested in what appears to be quite a low exposure. I guess I'm wondering: why do we bother at all? If we're only going to borrow less than 10 percent of the funds in foreign funds, why don't we just borrow all of our funds domestically and take that out of the equation?

Secondly, I wonder how our percentage of foreign currency compares with the federal government, if anybody happens to know what's happening on the national scene.

D. Morhart: With respect to foreign currency exposure, the reason that we look in foreign markets is that we can often borrow more cheaply in foreign markets than we can in Canada. With a province the size of B.C. and annual requirements of $4 billion to $5 billion, if we raise everything domestically, the cost of borrowing necessarily goes up, because there's a lot of supply out there. The price for our product goes down, but the cost goes up; price and interest rates move inversely. We often look at the foreign markets because it allows us to diversify, and it allows us to take our products somewhere else and get good price for it.

[ Page 1562 ]

You asked specifically about the 7 percent that we had at the end of March and if that was worthwhile doing. I would argue that yes, it was worthwhile doing. Our major trading partners are the U.S. and Japan, and it makes sense that we have some exposure there if we can tolerate that. Ten percent is very conservative compared to other provinces and certainly compared to the federal government. The federal government is in a unique position because it does have foreign exchange reserve requirements, so it does take on more foreign exchange exposure.

If you look at other provinces, through the 1980s there were provinces such as Nova Scotia that took on upward of 70 percent foreign currency exposure. They did it because they were achieving lower rates in other markets, and it helped save them costs on their income statement. What that meant is that as those currencies changed, they realized tremendous hits on their financial statements.

What we try to balance out is the cost of the debt with the potential movement in the foreign currency and manage that risk. We feel that the 7 to 10 percent is a very good amount. The risk committee has actually imposed a 10 percent limit because most of our business is transacted or converted back through Canadian dollars, so we didn't want to incur too much. We've done a few things in the Japanese market where we've actually achieved negative interest rates; we've actually made money by borrowing there. There are advantages in going out there and doing these things, but we want to keep the risk in check as well.

J. Weisgerber: Thank you. I'm tempted to ask how you can make money borrowing, but I don't want to get off on a tangent.

R. Kasper: Did you borrow. . . ? The euro, you know, when it was high -- did you get exposure there?

D. Morhart: No, we've not borrowed in the euro to date since the euro was instituted.

R. Kasper: Let's just paint this scenario. If you had, when it was at its peak, factoring in the interest rates there and because of it dropping, would it have been a benefit?

D. Morhart: It would have been a benefit in that case, because as their currency depreciates, assuming that the Canadian dollar appreciates to the same degree, it would be cheaper for us to pay back that obligation.

R. Kasper: Just out of curiosity, what was a determining factor in not going there?

D. Morhart: We have to look at the economic fundamentals of borrowing in various markets and bringing money back into Canada -- either converting it to Canadian dollars or converting it to U.S. dollars, however we feel comfortable -- or taking an exposure position on the euro. When the euro was instituted a year and a half ago, there was a lot of feeling that it was overvalued. History has shown now that indeed the market has recognized it as being severely overvalued. We're questioning now if it's very much undervalued at this point, but at the time the euro market was offering what we considered cost-effective levels for us, it was plummeting, and we didn't think that the risk of a currency exposure would offset the savings we would get in borrowing in those markets.

[0935]

It becomes a call, from a market perspective, on our side. Euro rates have been going up. Part of what the European Central Bank has been doing is raising rates to defend the euro and slow down some of the growth that's happening there. If we would have benefited from a falling euro, we would have been paying probably more by a rising rate environment. We have to watch how those things move together.

R. Kasper: Okay.

M. Coell: Just following up on Mr. de Faye's comments with regard to the budget and the debt, to me it seems as if we've balanced the chequebook, but we're still borrowing money on our line of credit. I wondered: if we continue with the gains that Mr. de Faye has suggested, how long will it take to pay back the debt we're in? I'd be interested in either the comptroller or the auditor general's comments on. . . . At today's rates of interest and what we've borrowed, how long is it going to take to pay back $34 billion, if we make the same gains that we did this year?

B. de Faye: To answer your question, I'm not in a position to tell you how long it would take. It really depends on the extent of the surpluses of government going forward. It also depends on policy decisions of government with respect to spending or tax reductions or debt reduction. Those are political decisions that are to be made. This year the expectation is that the net increase in total debt will not be $2.2 billion but in fact will be reduced by 60 percent to some $870 million. While debt is not being eliminated this year, in terms of our projections, it's certainly being significantly reduced, and I think that's heartening to see. But I'm really not prepared to engage in conjecture on how long it would take to eliminate the debt, because there are too many variables involved in that calculation.

M. Coell: I realize that. I think what I'm trying to do is make a point. The amount of debt. . . . If you keep borrowing, you're never going to pay the $34 billion back. What I would like to hear from the auditor general or the comptroller general is: if we keep going down this line, how long does it take to pay back the debt?

A. van Iersel: As Mr. de Faye has said, it's very difficult for us to predict how much time it would take to pay down the debt or if it will ever be paid down. I guess one of the things we have to bear in mind here is that while the province may have surpluses, at the same time, from an accounting point of view, we're on full accrual. We are, obviously, building schools and hospitals and acquiring other capital assets which therefore need to be funded, and the province has to borrow for that.

So a lot of the explanation regarding the $52 million surplus that was tabled with the '99-2000 public accounts is that that's a true reflection consistent with what you'd find in the private sector, in terms of whether we had a deficit or a surplus. But at the same time, like a private company, we have to reinvest in our capital assets, and there is a considerable

[ Page 1563 ]

amount of that. So while you had a $52 million accounting surplus, the debt still went up. It was largely due to capital acquisitions. The other key factor here was that we had a significant rise in the warehouse account, which treasury uses to pre-borrow in anticipation of future needs. That's a market question.

So again, I guess, to answer your question, it depends, in terms of running surpluses, on what the capital program looks like for the province for the foreseeable future. If capital expenditures have worked their way through the system and there isn't an appreciable buildup in amortization, then we're going to see some of that debt go down.

[0940]

I think a big question, too, is: what's the affordability of debt? Whether or not you should actually aim for zero debt. . . . I know that the province of Alberta is obviously trying to get there, but in terms of an ongoing situation for provinces generally, you have to look to the measures that have been proposed by the Canadian Institute of Chartered Accountants and others in terms of how many cents per dollar you're spending debt accounts for. . . . What is it relative to gross domestic product? So there is some argument out there, and it's a value judgment, I guess, as to whether or not you should aim for zero debt.

I guess, to the extent that you had run significant surpluses and you don't have capital needs, you could do that. I think, as I said, Alberta has sort of made that choice to try and do that. But they're the exception, I would say, in terms of trying to get their debt down to zero. Just like a corporation -- few corporations, also, have zero debt. They have debt normally for capital acquisitions.

It's a little trickier when you're running operating deficits and that's causing you to borrow and that's adding to your debt load. That's another question.

R. Thorpe (Chair): Murray, are you finished?

M. Coell: I think so.

G. Farrell-Collins: Over the last number of years, I think, we've talked. . . . There's certainly been a certain amount of discussion in the public about the debt-to-GDP ratio and British Columbia's position relative to other provinces. That debate has tended to focus on the denominator of that equation -- on the amount of debt. What we haven't seemed to. . . . What hasn't come in as part of the discussion is our ability to service that debt over the long term and therefore the denominator, or the GDP.

On Monday, CIBC came out with a report which indicated that Alberta, a province of about three million people, now has a GDP greater than British Columbia, a province of four million people. Debt is one aspect of that. Our ability to service our debt and our debt-to-GDP ratio are not just affected by the amount but by the size of our economy. So I think that in British Columbia, if you compare us to a number of the other provinces, not only have we been increasing debt at a rate greater than virtually every other province in the country, but our GDP has been either declining or growing at a much smaller rate than the other jurisdictions for a period of time. That has had an impact on our debt-to-GDP ratio and our ability to service it.

I would be interested to hear how much of that debt-to-GDP ratio increase in British Columbia, relative to other provinces, is as a result of increased borrowing and how much of it has been as a result of an economy that hasn't been performing nearly the way the other provinces have, certainly for the last half a decade or so. At the end of the day, if you look at British Columbia relative to Alberta, as an example, the government of Alberta has to provide health care and education and social services for three million people with a GDP the same size that British Columbia has, and we have to provide all those services for four million people. In British Columbia that means we either have worse services or higher taxes or run bigger deficits.

How much of that change, relative to the other provinces. . . ? I know Manitoba is catching up with us; I think it has actually surpassed us in debt-to-GDP ratio, if the chart is any indication. Alberta certainly has overtaken us. Certainly a decade ago -- nine years ago, eight years ago; I think even five years ago -- we had the lowest debt-to-GDP ratio of anywhere in the country. Certainly we're heading in a different direction. How much of that has been as a result of poor economic performance in British Columbia over a sustained period of time?

D. Morhart: It's difficult to pinpoint exactly how much has been attributed to both factors, other than going back through a historical series and making a number of assumptions. I think it's fair to say -- based on the member's comment -- that the absolute level of debt has risen over the last several years, and the economic growth in British Columbia has been a bit slower than the other provinces. In '97 the Asian flu caught B.C. by surprise, and it's something that took us down to 0.2 or 0.5 percent growth. That was a lot lower than what people had anticipated, but it certainly wasn't a recession, as many people had predicted.

As a result, B.C. has been growing slower in the last couple of years than what other provinces had. Obviously the combination of slightly higher growth of debt and a slightly lower growth in GDP will push our numbers up. That is something that we talk to the rating agencies about, and obviously that raises some concerns for them. But coming from the absolute level of where we were, in their reports they note that relatively speaking B.C. is still one of the strongest; hence they have not changed their rating outlooks for us.

[0945]

To go back to other provinces, we could make a number of assumptions that if B.C.'s economy had grown at X percent, we would have been here or there. We can do some of those exercises, but I can certainly confirm that a rising level of debt and slower economic growth will mean a higher ratio and vice versa. As we see the economy picking up now -- and it's being recognized by the various banks and institutions that are reporting regularly -- we'll see this debt-to-GDP ratio stabilize and fall over time.

G. Farrell-Collins: I think that's. . . . I mean, things go up and things go down; I think we know that.

The real concern that I have, though, is not as much where we are; we are still among the top provinces as far as debt-to-GDP ratio. It's the trends that worry me. At a time when every other province, regardless of political stripe, seems to be making some significant headway with a growing

[ Page 1564 ]

economy and running significant surpluses -- Saskatchewan springs to mind as one -- British Columbia seems to be going in quite the opposite direction. It's really the trends that worry me, because momentum is everything. I mean, it's nice to be in a good position. We built that up over a hundred-and-some years. But one sees in the last decade a significant deterioration in British Columbia's financial status.

We didn't used to be tied for the second-best credit rating. We had the best credit rating in the country. We didn't used to be third in debt-to-GDP ratio; we used to be first. Provinces that in my opinion. . . . Alberta excluded, other provinces having far fewer resources as provinces, as economies, have been able to outperform British Columbia significantly over the last decade in improving their debt-to-GDP ratio, balancing their budgets, reducing taxes, improving services, etc. British Columbia seems to me to be going in the other direction.

Despite all the assurances that we hear coming from the government in various forms of documentation about our debt-to-GDP ratio and how we're in such good shape, I think that the bond-rating agencies obviously also look at the trend lines; they look at ability to service over the long term. They don't worry me as much as investors worry me, looking at those trends.

The example I gave was of three million people with a GDP equal to British Columbia's, which has four million people. As an individual taxpayer or as an investor, you have to look at those numbers and realize that somewhere down the line you're going to have either reduced services or higher taxes. That's the reality of it.

I suppose that, despite the assuring comments in Mr. de Faye's opening remarks today, I'm still very concerned about the trend lines. I don't think they're positive at all. We still haven't turned the corner on debt. We're still increasing our debt each and every year despite a very modest surplus this year. One still does not see. . . . Despite all the talk about an economic turnaround in British Columbia, we still have growth rates that are significantly lower than virtually every other province in the country. So 1.8 percent economic growth doesn't a long-term, sustained recovery make. We've got a lot of lost ground to make up. We've got about a million people's worth of lost ground to make up as far as being able to service their services.

Has the department looked at those trend lines? Is there any concern about those trend lines for British Columbia's economy?

D. Morhart: We're probably not the best people to ask about economic growth. That growth is monitored and reported by another division, called Treasury Board staff. Just in general, because I'm the one that's specifically talking with investment bankers and the rating agencies, the trend that has occurred over the last few years has been raised as a concern. The reports certainly have been written up in that regard.

[0950]

I go back to my comment that they remain comforted in that -- if I can paraphrase from Moody's report -- they did not move the province's credit rating last spring because they felt that the overall level of affordability was still stronger than most provinces. They recognized that the economy was not growing, but they realized that the diversification will help over time. So I can refer to those comments, and there are statements in the public record saying that there are concerns about the trend.

Looking forward, I think the minister has certainly indicated that as the province has made commitments around balancing the budget, going forward and helping it encourage economic growth, our own projections are that the debt to GDP certainly is going to be stabilizing, if not falling, very soon.

The absolute level of debt, as Bob indicated and Arn has alluded to, went up slightly this year because of capital spending and capital investment. Depending on the government's and future governments' decisions on what to do with surpluses and how they invest in capital, that will determine where debt goes in the future.

G. Farrell-Collins: Yeah, I'm aware of that. It's nice to hear that Moody's didn't downgrade us this year. They did last year.

D. Morhart: No, they didn't.

G. Farrell-Collins: Or the year before. We've had a number of downgrades over the last number of years.

D. Morhart: Sorry. Standard and Poor's and CBRS downgraded us last spring, but Moody's did not.

G. Farrell-Collins: While that's encouraging, I personally don't think it's cause for celebration when we're not downgraded. I would rather see us sort of restoring our fiscal status. But it's better than downgrading; no downgrade is better than a downgrade. I guess you've got to look at what you've got.

I agree that if we can sustain moderate or larger economic growth and if we can contain spending, then we perhaps are on track for improving debt-to-GDP numbers and improving fiscal outlooks. I get nervous when I hear government speculate about new billion-dollar spending programs when I don't know what the looming costs are of various other capital projects that are out there, given the track record of disclosure and performance on those capital construction projects. One wonders what's out there as well.

I mean, I think we're all glad to see that; we're hopeful that things will turn around. I do still think, though, that we've got a number of years to make up. Everybody else has been heading in one direction; we seem to have been heading in the other over the last decade or so. I'm certainly hopeful that we will be able to sustain it and that in the time ahead governments do maintain some fiscal responsibility and don't embark upon huge spending projects.

S. Orcherton: I've just got a few questions here -- it's on page 8 -- around the two graphs, mostly to help me understand this and get some additional information. There are six provinces here that are. . . . There's a comparative analysis on both the topics of low debt to GDP and low debt-to-interest cost. I'm wondering what the other provinces look like in terms of these types of analyses.

I'm also wondering: when you look at low debt interest costs for B.C., it appears we look like we're about 8 cents -- around that figure. From the Treasury Board's perspective and

[ Page 1565 ]

from the comptroller and from the auditor general, what are acceptable levels? Is Quebec's circumstance -- at just under 20, it appears -- acceptable? Or is there a red flag going up there? When would a red flag go up in terms of these kinds of questions?

B. de Faye: Well, if I may, Chair, the federal government's debt-to-GDP ratio right now is about 52 percent. The federal government's interest bite is about 26 cents on the dollar. The provincial government's interest bite in 1999 was 7.1 cents on the dollar of revenue.

If I can elaborate a little bit, it was 7.4 cents in the topic year that we are discussing this morning, 1998-99. I think the last time the former secretary to Treasury Board, Mr. McFarlane, was here -- the committee will probably remember that -- on October 26, there were specific questions around this and what was a reasonable amount. I think that at the time, his expressed view was that 10 cents on the dollar was as far as he was comfortable in going. And to date we're hovering around the 7.1 or 7.2 cents-per-dollar rate.

[0955]

S. Orcherton: Does the comptroller or the auditor have a comment on that? I mean, are we within an acceptable band here?

W. Strelioff: I'd like to comment a little bit.

R. Thorpe (Chair): Wayne, maybe we'll wait for the bells to. . . .

W. Strelioff: Okay. The net debt-to-GDP ratio, the one that you were focusing on, is a good one to focus and track; if it gets out of line, the markets tell you. The markets tell you by higher costs of borrowing and credit-rating changes. That's the signal that the world is saying the debt to GDP -- the capacity of the economy to sustain government activity -- is changing. So in terms of the ministry and our office, making sure you have this information to make your important policy choices is the key.

We also note that in previous years -- I think back in '95-96 -- the government of the day had a set debt retirement plan and goals: "Within X years here's our debt retirement plan." That's no longer on the table, so that's an important issue that certainly needs discussion and debate.

In the previous discussion I think one of the members asked: "When will all the debt be repaid?" Well, as my colleagues from the Ministry of Finance said, we're still increasing debt.

S. Orcherton: I'll follow up with a couple more questions. My assumption, looking at both of these, is that the other provinces which aren't on the graph are higher. Is that correct?

D. Morhart: Actually, they're in between. Some are between Saskatchewan and Quebec in both charts, and a couple are beyond Quebec. So they would be higher.

S. Orcherton: So the first four -- Alberta, Manitoba, B.C. and Ontario -- would stand.. . .

D. Morhart: They are definitely the lowest.

S. Orcherton: And then the others would factor in after that.

D. Morhart: That's right.

S. Orcherton: What kind of ability do you have to be able to predict in terms of debt-to-GDP ratios? My friend across the way was talking about Alberta. It's had an enormous change, I think, largely due to commodity prices in oil. We could hope that commodity prices in forest products and lumber would go the same direction at some point and benefit our circumstance. What kind of predictions do you get involved in around commodity prices, or do you just view those as circumstances that you can't necessarily predict? How do you deal with that? They do have an impact on these figures.

D. Morhart: Once again, Treasury Board staff is the group that actually makes these predictions, with the various ministries that are involved. They'll be talking with Forestry, and they'll be talking with Energy and Mines about where oil and forest products are going. They will make assumptions, and we put those assumptions into models that we use to predict where we're going forward. That's how we put those pieces together.

B.C. this year has done very well, as well, because of the high gas and oil prices. There has been a lot of new revenue coming in from those things. Those have been big benefits here -- not as big as Alberta's of course, but those have been positive things here. In forestry I believe lumber is off a little bit again this year. Commodity prices move around all the time, so we have to make assumptions in the models and then project, going forward, what that means for GDP growth and what it means for debt ratios.

S. Orcherton: I appreciate that there's a different arm inside of treasury that deals with these kinds of questions, but was there any notion, a number of months ago when we were looking at predictions, that oil and gas prices would be where they are today in the global marketplace? It seems to me, reading the media and talking to people in the industry, that this was not necessarily something that one was expecting.

[1000]

D. Morhart: It certainly was a surprise, and I think that if you look into the latest quarterly report. . . . Certainly the comments that our ministry has made is that we made certain assumptions. I believe our oil assumption was somewhere in the neighbourhood of $21 or $22. Alberta was using something like $18 (U.S.) per barrel. When it rose up to the high $30s and up to $40 at one point, that was a tremendous surprise and a big benefit to big oil exporters. A lot of it was unanticipated.

I think part of what this ministry's trying to do, and certainly speaking on behalf of Treasury Board staff, is that we want to be very prudent in the assumptions that we use so that when there are surprises, they are more on the upside than they are on the downside. Going forward based on the transparency and accountability legislation that has been introduced, our direction is basically to be more conservative on these things -- be realistic but conservative so that we have the positive surprises going forward.

S. Orcherton: One final point for clarification. I think the note I made is right, and I can always check Hansard later.

[ Page 1566 ]

Someone said that 10 cents on a dollar for the debt interest costs is where a flag would go up, and we're at 7.1 cents. Is that what I heard?

B. de Faye: Nearly a year ago the former secretary to Treasury Board opined that his comfort level was 10 cents per revenue dollar, that he didn't want to see it go beyond that. I believe one other member was talking about foreign currency exposure; that's a different issue. That's a limit set by the risk committee.

S. Orcherton: Is that a view that's shared currently?

B. de Faye: Ten cents on the dollar? I think it's a good threshold.

S. Orcherton: So it's a sort of target. In any event, there's a level of comfort at 7.1. Is that correct?

D. Morhart: Yes, there is. I think it's safe to say that the rating agencies, for instance, have commented that it's a very low cost per each dollar that we bring in. And with the five-year fiscal-planning framework there is a cap of 9 cents that's put out there, and we've been consistently below that. So I think that's where some of the former secretary to Treasury Board's comments. . . . Ten cents was his own flag within government.

S. Orcherton: Okay. Thank you.

R. Thorpe (Chair): But in fact, two out of the three rating agencies. . . . Last year a flag went up for them, and that's why they downgraded the province of British Columbia. Everybody has their own flags -- right? -- especially the rating agencies, and they're the ones who sort of set the tone of the game.

S. Orcherton: Can I make just one point on that? We don't have the rating agencies here today. We have Treasury Board, the comptroller and the auditor. That's why I'm asking questions of them.

R. Thorpe (Chair): That's fine, but that's why rating agencies issue releases and do downgrades and upgrades and status quos, and you can read about those.

D. Zirnhelt: Unlike the member who spoke before, I take some comfort in being at the head of the pack. Whether you're first or second or third, you're way above the average, and I think that should be some comfort. I guess the question, since we're talking about trend lines. . . . I heard you say that the trend has changed -- i.e., it's flattening; it's not increasing -- and I would take some comfort in that. But I would like you to confirm if that's a fact -- that the trend line is changing on the indicators that we've been discussing here.

And I'd like to point out that it would be very difficult to make a comparison with Alberta, which has windfall revenues from a commodity that seems to be in short supply. Certainly it's a high price and tremendous revenues. It would be wrong to try to hold out a hope that in British Columbia, which is dependent on other commodities -- more dependent on the sale to Asia, more dependent on exports to Asia, by a factor of 2 to 3, than most other provinces we're compared to -- somehow we would be like Alberta, with its windfall revenues.

[1005]

I think what is more suitable, though, is to compare to other provinces, Canada and the government of Canada. I think that if we have a debt problem in the country, it's the federal debt. And we know that took a very short time to build up. I think that in the case of British Columbia, we made some choices and had some considerations or some effects that were not predicted, and that is the Asian downturn. So I take comfort in the fact that there's been a correction without gutting social programs, without gutting social capital spending -- which is, by whatever definition, investment, too, in the province of British Columbia and, as we see, debts that in fact can go on the books and be seen as assets. I think that's a positive line.

That's the alternate view to what was expressed a little earlier. But the short question is: have the trend lines changed significantly in the last couple of years?

B. de Faye: I can confirm that pursuant to the release on September 14 of the first quarterly report, the projected growth in total debt of the province has been revised from $2.2 billion to $870 million -- a 60 percent reduction in that estimate. Further, with respect to the member's question around a change in the trend and the anticipated trend of growth in gross domestic product, the original forecasting estimate of the province was 2.3 percent, which again, in this document, has been revised to 3 percent.

M. Coell: I'm just going to follow up. The auditor general sort of answered my question when I asked how long it would take to pay the debt back if we stayed on the principles and the course we're going. He said we're still increasing debt, so that would mean you're not going to be paying back the debt. I'd like to know from the ministry or the auditor general: is there a plan to get to zero debt in a year? Are we following a plan? And is there a plan within government to start paying back the debt?

B. de Faye: Once again. . . . David has alluded to the fact that we come from provincial treasury and not Treasury Board staff. Because of that, there are two approaches to debt management. There is a strategic fiscal approach to debt management that has to do with plans that relate to fiscal decisions and political decisions with respect to expenditure and taxation rates. And then there is a technical discipline of debt management. We are involved in the technical discipline of debt management. We are concerned with risk and risk policies, with a maturity schedule, with foreign exposure coverage.

It's a long-winded answer, but I guess I'm coming to the point of saying that we are not responsible for the five-year plans. As a result of that. . . . And Treasury Board staff is responsible. Unfortunately, I believe there is no one here today from Treasury Board staff. I don't think it's appropriate for me to discuss those plans, because I simply work within the technical framework of debt management, not the public policy framework, the strategic fiscal framework.

R. Thorpe (Chair): Arn, can you answer that?

[ Page 1567 ]

A. van Iersel: I wonder if I may first, Chair, just alert the members to two pages in the public accounts that came out in August. I refer to a new debt section, because this is germane to a couple of questions. On page 94 there is the complete array of all provinces relative to debt as a percent of GDP. The highest is Nova Scotia. There aren't gradients on the graph, so I can't be totally precise, but the graph seems to suggest just over 50 percent.

Newfoundland is the next improvement on that and is about the same -- a marginal difference -- and the same with Quebec. Then, following in order, there is New Brunswick, which looks like it's just over 30 percent; Prince Edward Island, at about 30 percent; Saskatchewan, at about 30 percent; Ontario, as we see, again 30 percent; then British Columbia, Manitoba and Alberta. That's the complete picture as of the March 31 fiscal report.

The other thing that's in this debt section -- and we hope to build on it as I think we said earlier -- is trends. I think trends are important, in terms of where we've come from and where we're going.

On page 98 we list all the accepted measures of "what is the sustainability of debt?" -- the question that I think is being asked right now. We have debt to revenue, debt per capita, debt to GDP and the interest bite, which we spent some time on this morning. The interest bite relative to 1999 actuals has dropped, as has been said, from 7.4 to 7.1. That has happened, I guess, partly as a result of a little bit of a resurging economy and so forth. Those are statistics that we hope to build on, and that's the kind of feedback I would like to get from members in the future.

[1010]

I agree, though, that it would more useful if we had a longer history here. That's something I'm going to take away from here today. But the more difficult question is looking to the future. As we've talked about, that's a hard issue, because it really depends on what the policies are with respect to: are you running surpluses? How will those surpluses be applied? Will they be applied to debt? Will they be applied to new spending?

I think the only thing that we can say. . . . I'm sort of in the same situation as my colleague Bob de Faye; I can't speak for our Treasury Board staff folks, who are the fiscal planners of government, in terms of telling government what the future looks like in terms of revenues and expenses. That's a difficult job, I would say. But the government has said in its balanced-budget legislation that it is aiming for balanced budgets over time. We've had one; we're projecting another. It depends, really, thereafter. If there are continuing balanced budgets, then obviously the interest bite and so forth will come down. If that isn't the case, then that's going to suggest a different picture than what we're anticipating right now.

R. Thorpe (Chair): Arn, the question was: is there a plan? Is there a plan?

A. van Iersel: To my knowledge, we have a plan to balance the budget.

R. Thorpe (Chair): With respect to debt; I'm sorry. Is there a debt management plan right now?

A. van Iersel: I'm not aware of such a plan.

D. Morhart: If I may add, there is five-year fiscal planning framework that was tabled in last year's budget. Those targets are still the operating targets that we and the Ministry of Finance are using. Those called for an elimination of deficit by 2004-05. As we mentioned, that was eliminated last year, and we're projecting one this year. There were also projections in there as to how debt to GDP was going to be changing over time -- both taxpayer-supported and total debt. I don't actually have that document with me here, but it actually showed that it was levelling off by the time the budgets were balancing.

R. Thorpe (Chair): I guess my question is: is there -- I think this term's been used before in previous years -- a debt management plan, a separate document that we in this committee can look or the public can be aware of -- what the debt management plan for the province of British Columbia is, as we speak today?

D. Morhart: Again, the plan is the five-year fiscal planning framework, which includes an aspect of debt.

M. Coell: Just to follow up. The members of the provincial treasury said that there wasn't a plan. But now they say they're following the fiscal framework that was tabled in the Legislature. That's a short-term plan, and what I was getting at is -- and maybe the auditor general is the one I should be talking to -- if you follow that plan, is there one in adjunct to it that deals with the long-term $34 billion debt? Or do we just have a five-year plan with no plan. . .the debt at the end of the year? Whoever can answer that, I'd be pleased for some sort of an answer.

D. Morhart: Bob just pulled out of Budget 2000 on page 59. . . . It provides a synopsis of the five-year fiscal planning framework, of which there are projections of debt, deficit expenditure and revenue. All of these things tie together. I come back to the targets that we're working within on a five-year basis according to this framework and the assumptions that lie within this framework.

M. Coell: Thank you. That's what I was getting at. My main question was: does government have a plan after that to deal with the $34 billion in debt? I believe, at the end of that five-year period, you're still over $34 billion in debt. If there's no plan to deal with that, I'd like to know it, and I'd like to know it from you, the auditor or the comptroller.

B. de Faye: Through the Chair, if I may, to the member. I think, as the comptroller general has indicated and I can confirm. . . . Certainly to my knowledge there is no long-term plan for the elimination of debt by the province.

R. Kasper: I have a question.

[1015]

J. Weisgerber: My concern is that we've talked about debt and debt levels and the ability to repay debt based on our GDP, but we haven't talked much at all about interest rates. I have lived long enough to have been through some cycles where interest rates were three times as high as they are today. At about those same times the world price of crude oil was around $50 a barrel. It went down to $14 or $15, and everyone

[ Page 1568 ]

professed amazement when it went back up to $50 again. Interests rates were 20, 21 or 22 percent. I paid 24 percent. They're down to 7 percent now, and there appears to be the feeling that interest rates could never go back to 24 percent.

I worry, both on the national level and for our province, as to what plans are in place to try to make sure that we don't get caught in the interest squeeze that hurt western Canada, particularly, during the 1980s. Now, as I look at small businesses, they learned a lesson in the eighties -- those that survived -- that they haven't forgotten today. Capital expenditures in the oil patch, for example, are at a much, much lower level than they were in the boom years of the eighties. Those people who survived remembered the lessons that were learned in the 1980s.

When I talk to young people who are looking at buying a house, particularly in Vancouver, I say to them: "Don't look at whether or not you can carry the mortgage for the next five years. Think about what the mortgage rate is going to be when you go to renew." And I don't think that's a kind of wisdom that's unique. I think all of us have those kinds of conversations, particularly with young people who are getting into borrowing large amounts of money. I wonder how we can apply that kind of thinking -- the thinking that says to a small businessman, "Don't get back into the mess you were in, in the eighties," and that says to people: "Don't get over your head in a house simply because interest rates are in the basement today."

When I try and parallel that kind of thinking to what I'm hearing here today, saying, "Don't be alarmed. We're still well within the cushion range. We're only 7 cents on the dollar. Don't worry. We could go out and spend another $10 billion or $15 billion, because that would still keep us down around the 10 percent range," I just think that's incredibly shortsighted. I wonder what kind of planning there is. Or perhaps can you tell me, in the financial community, what the projections are over ten or 15 years in terms of interest rates? Why couldn't interest rates go back to the 1980 levels within the next ten years?

D. Morhart: If I may, the hon. member raises very good items for discussion. I think that economists around the world struggle to make the best predictions they can and make their recommendations to governments and to their businesses accordingly. I think what history has shown is that it's very difficult to predict the future. When we look at where the interest rates went in the early 1980s, we had the combination of a few events. We had governments that were running exceedingly large deficits. We had economies that were growing very slowly, and we had hyperinflation. I have to qualify hyperinflation: in Canada we were seeing inflation in the neighbourhood of 10 percent plus; that's very high for Canada.

Part of what's been happening certainly in the last seven or eight years. . . . The central banks around the world have been very effective at reducing the level of inflation, and that is the biggest factor for the relatively low nominal interest rates that we have right now. Inflation is very much under control. Actually, in B.C. inflation is lower than most of the rest of the country.

Now, why that is good is that lack of inflation reduces future expectations; that means that interest rates aren't expected to rise nominally very quickly. Looking forward, so long as central banks remain effective at controlling inflation and helping economies grow, we shouldn't see such high nominal rates as we did in the 1980s.

[1020]

Governments have benefited from lower rates. They've been able to reduce the amount of money that they put out for interest, and therefore they can put more money to other things, or they can put that money into reducing deficits or eliminating them. So they've very much benefited from the low interest rate environment. We see that in the U.S.; we see that in Canada and in provinces across the country, including our own. Our debt interest budget, you know, is not that different from what it was ten years ago, if you look at the absolute dollar level spent on the summary basis.

So, looking at those things, it's very difficult to predict where it's going in the future. Being an economist-in-training, I will never say "never." I'll never say that rates won't go up through the roof again. But given the current environment and the coordination between central banks, I think it's fairly safe to say that we don't expect rates to go up dramatically in the next while.

I think the more important question that the member raised, though, was: what is the tolerance of individuals for being able to carry a level of debt? That's something that all businesses and governments have to keep in mind.

Part of what we disclosed in this year's budget was the province's own sensitivity to interest rates. We showed that given a 1 percent change in rates -- so this is plus or minus -- it would have an impact of $68 million on our operating budget. We are very cautious in disclosing these assumptions, because if interest rates start to go up, that starts eating at government's available revenue left to spend on other programs. So government would have to come back and readjust its priorities if it felt interest rates were rising. So we have to disclose the sensitivities and be aware of where the consensus view on rates is going and try to plan accordingly.

J. Weisgerber: So we have a debt of $34 billion. And you say that a 1 percent increase in interest costs would be $68 million.

D. Morhart: That's $68 million on the government's portfolio, which includes schools and hospitals and all of the capital spending that we do.

G. Farrell-Collins: That's in one year.

D. Morhart: That's in one year; that's right.

R. Thorpe (Chair): But that's not on the consolidated data, is it?

D. Morhart: That doesn't include B.C. Hydro and those, but it does include the. . . .

R. Thorpe (Chair): So it's not on the $34 billion. Your $68 million is. . . .

D. Morhart: It's on $24 billion or $25 billion.

R. Thorpe (Chair): I'd just like to ask a question or two here, if I could. You talked about the number of indicators

[ Page 1569 ]

you're reporting against -- debt to GDP, debt service. I assume those are CICA recommended. How many recommended CICA benchmarks are there? Are we following and reporting against all of those CICA benchmarks?

D. Morhart: In general. . . . The auditor general has commented over the last several years that there were ten key benchmarks that they wanted us to look at, and we certainly have been reporting on all of those. As I recall from CICA discussion papers, there are a few other ones that aren't directly applicable to government; they're more targeted towards business. So I believe there are a couple out there that may not be reported here. But certainly the ones that are the most widely quoted and referenced are reported on consistently.

R. Thorpe (Chair): Does the auditor have any comment on that? Are we reporting against all of the recommended CICA reporting milestones or goalposts, whatever the correct terminology is?

W. Strelioff: My advisers say the indicators that we are reporting on were developed prior to the CICA coming out with their recommended indicators. There needs to be some work on making sure that all of them are reported, but the main ones are.

R. Thorpe (Chair): It seems that I'm getting a fuzzy answer here.

Would it be possible, then, for the auditor general and the comptroller general's office to maybe just -- so I don't have to belabour the point -- give a list of what the CICA recommended. . .are and what we're reporting against or comparing to and why we're not comparing to the others? Maybe you could send that to the Clerk's office, and they could circulate it to all members of this committee.

[1025]

A. van Iersel: I'd be happy to do that. As I said, on page 98 of the Public Accounts, you'll see the ones that we're currently using. I think Wayne is correct in that many of these coincide with what CICA has proposed. CICA, I must say, is itself thinking of changes. In recent discussions with the institute on another topic I asked what was going to happen in terms of performance measures, and this is a topic that the institute wants to come to in about another year's time, if I understand their planning correctly.

So I'd be happy to compare what they have. I think the world is going to change some more in terms of what the institute thinks needs to be reported. We're trying to get our thrust here going in terms of what we report, because we agree that there should be a broad band of measures beyond what we see here.

R. Thorpe (Chair): Arn, we will agree that things are going to change in the future. Actually, this committee can be unanimous on that, I would think. But I would like. . . . As things stand today: what are they? Are we reporting? Why aren't we?

The other thing that I just wanted to ask. . . . It's a general question, and then I'll let other members carry on. In reviewing the performance plan for the Ministry of Finance and Corporate Relations, which provincial treasury falls under, I find it shocking that there is -- unless I'm not reading this correctly -- significant reference to debt management in the Ministry of Finance's performance plan for the year 2000-01, given that it's the third-highest cost that government incurs. Have I misread this document, or is there. . . ? Are you aware that there are specific performance plan issues with respect to debt management for the province of British Columbia that I'm perhaps missing in reviewing this document?

D. Morhart: There are performance measures included in there, and they perhaps are more generalized in their statement from a division perspective. I could certainly look through the document and specify which ones are relevant. But we recognize that debt management is an important activity, and it's something that in many respects is easier to measure than some of the other stuff that we do in the ministry, because we can actually target specific measures. There was no intention to leave it out of there, and I can guarantee that it is in there. It just may be the wording around how it was delivered.

R. Thorpe (Chair): Thanks, Dave. You know, what it could be is. . . . This is obviously a rolled-up version, and perhaps at the provincial treasury level you have a very detailed performance plan. That being the case, I'm wondering if it would be possible to provide that to the committee through the Clerk's office. One of the things I'm getting at is that people are trying to get their hands around a comfort of how we're managing the debt, never mind what the level is, and perhaps if we had that level of detail, it would give members some more comfort. If that does exist -- and you say it does -- then I would be pleased if you could provide that to the Clerk's office, and we'll distribute it to the committee.

G. Farrell-Collins: I want to come back to Mr. Weisgerber's comment about interest rates. I've heard that figure tossed around -- that a 1 percent increase in interest rates is about $70 million. I'm assuming that's because (a) you're dealing with taxpayer-supported debt and (b) an increase in rates this year won't necessarily affect long-term debt. It doesn't affect the whole portfolio; it affects a small portion that's up for renewal in that fiscal year. Over time, in year 2 if that increase is sustained and then year 3 and year 4 if it goes up even further, it has a significant snowballing effect.

I think we would all be naïve to think that interest rates may never go up again, just like we would be naïve to think that oil prices will never come down or never go up or that lumber prices won't come down or go up. We all assume, when the economy's doing well, that we've figured it out and that we're never going to have another recession or depression. When housing prices are going up, everybody figures that they're going to stay that way and that their house is their investment for retirement. It doesn't work that way. I would be interested, if Treasury has gone beyond sort of the one-year snapshot and said: "Okay, what debt's up for renewal this year?" What would the result be of a 1 percent increase over and above what we're currently paying? Have you done any longer-term projections of. . . ? You know, what happens if we have a. . . ?

Let me put it this way. We have 7.1 percent, I think, as the debt service cost right now. I can't remember from the debt statistics what the average interest rate we're paying now is,

[ Page 1570 ]

but I assume it's in single digits, and I assume it's probably around 6 percent or something like that. Perhaps you've got it handy. If not, it doesn't really matter.

What if we saw a sustained jump in interest rates to 9 or 10 percent? It's a 50 percent increase in the costs. I don't know if you have the figure there.

[1030]

D. Morhart: The average rate in '99-2000 was 7.4 percent.

G. Farrell-Collins: So if we went to 10 or 11 percent or something -- which isn't unrealistic, looking at the last 20 or 30 years or so -- and had that sustained over a period of time, that debt service cost starts to climb. It climbs exponentially year after year as new debt comes on stream and old debt is retired. I know there are probably elements of the portfolio where the interest rate that we would be retiring is a lot higher than that, so there might be some downturning to it as well.

Over time, I think Mr. Weisgerber is correct that we have to be mindful of the fact that things don't always stay the same and that the larger the debt, the larger the exposure to that interest rate risk. I certainly hope we don't, but we may see another time when interest rates go up significantly above 7.4 percent for a sustained period of time. I wouldn't think it would be unreasonable to see interest rates of 10, 11, 12 percent sustained over a longer period, and that may well have an effect. I'm always a little concerned when I hear that $70 million figure, because I don't think it's reflective of the long-term risk of accumulated debt.

As we've seen from questioning here today, there's no real plan to pay off that debt in the next five or ten years, so we may see those risks down the line. I wanted to make that comment because I think the $70 million figure, while accurate, doesn't really disclose the long-term risk that we could be exposed to when we accumulate large amounts of debt over time.

R. Thorpe (Chair): Did you want to make any comment, David?

D. Morhart: Just in response, I don't disagree with the member. The figure that I quoted was a sensitivity for that budget year for the budget document that it was pertaining to. If the committee is interested in longer-term, sustained increases and analyses, we can certainly assist in that.

R. Kasper: I have two questions. Whether it's the $24 billion or the $34 billion, depending on if you include the Crown corporations, what is the annual amount of the debt that would actually be retired this year if you didn't have new borrowings? Let's say, for example. . . . Next year, if no new borrowings took place, how much of that amount would actually be retired? Without selling paper or doing anything like that, how much will be gone?

D. Morhart: The actual debt maturities over the next three to four years are $2 billion to $2.5 billion per year. So assuming no new borrowing, as the member suggested, that amount of debt would come off the province's books each year.

R. Kasper: So that's over a two-to-three-year period, or three-to-four?

D. Morhart: It's actually out to 2004-05.

R. Kasper: So 2004. But you said it's averaged at $2.5 billion.

D. Morhart: It's between $2 billion and $2.5 billion per year.

R. Kasper: Okay. That will naturally retire and be gone.

D. Morhart: Assuming no other new borrowing.

R. Kasper: Yeah, assuming there's no new borrowing.

D. Morhart: That's right.

R. Kasper: Okay. Now, how much of the amount that is used to retire the debt would go to that existing debt -- do you see what I'm getting at? -- based on the payments? You're basing that on the fact that there is an assumption, based on trends, that there will be increases to the global amount -- correct?

[1035]

D. Morhart: Uh-huh.

R. Kasper: So how much. . . ? If you kept your payments constant per year to 2004 and didn't borrow any additional money, then what would the retirement be, based on the payments? Would it still be $2 billion to $2.5 billion? Or could it actually be higher?

D. Morhart: Going back to the strict maturities and assuming no new borrowing, you could retire whatever is maturing at that point. If I'm understanding where you're going with the question, you can obviously then look at the impact of the interest rates and interest payments on those pieces of debt and then say: "Well, if we retire that debt, then we have this much extra in our expenditure budget that isn't being used." You know, on average, if you use the 7.4 percent, you can get a good proxy. I can't tell you off the top of my head exactly what interest savings would be generated by those retirements over the next couple of years. But I know for certain that some of them are in the low double digits, because some of them are early 1980s issues that are maturing.

R. Kasper: It's '80-81 -- right -- that's going to be maturing.

D. Morhart: That's right.

R. Kasper: During Jack's time -- or it may be prior to Jack's time.

D. Morhart: So we can certainly look at that if you're interested in knowing more about the actual aspects of the portfolio.

R. Kasper: Well, you know, I wouldn't mind, because some years ago I asked a similar question -- maybe close to five years ago -- and I was advised that it was pegged at

[ Page 1571 ]

about $300 million that was actually coming up as being retired on an annual basis. That's going back five years ago, maybe six.

My other question deals with the impact of moneys that are borrowed, and these are moneys that are borrowed not for operating deficit costs but for capital costs. Let's say, for a billion dollars of capital -- where you go and do a school or a road or whatever -- what is the impact on the GDP? Is there a multiplier effect? Do economists say that if there's an injection of a billion dollars. . . ? Is there a multiplier as to how that impacts on the gross domestic product within the province? And I don't know that. Is it dollar for dollar? Is it four times the amount? Is it two and a half? Somebody must know. You were an economist, weren't you?

R. Thorpe (Chair): David, do you know?

D. Morhart: I think there are differing schools of thought as to how much -- when government or business spends money in the economy -- it multiplies in terms of jobs, in terms of services purchased or goods purchased to produce products. So I think there's a lot of differences in thought as to how big those multipliers are. Again, it's something that I'm less familiar with in my current capacity. But I would think it depends very much on the type of investment you're making, how labour intensive it is, how product intensive it is, the types of materials that you bring in to do it. . . . So I think it would very much depend on the project itself. I can't give a clear answer on that.

R. Kasper: But is it fair to assume that -- and you know, I hate assuming things -- when there's that investment made, it does have a direct effect on the GDP if the province. . . ?

D. Morhart: Yes.

[1040]

R. Kasper: And there may perhaps be a significant multiplier applied to that investment. But I'll have to agree with you that it does depend on a wide range of factors: what the rate of employment is, how much raw materials or manufacturing materials are actually produced or purchased within the province, etc.

G. Farrell-Collins: Whether the ferry works or not.

R. Kasper: Whatever -- right?

But I think that one has to take into account that when you talk about debt as a percentage of GDP, you also have to factor in that some of that debt actually helped boost or massage the GDP even higher. And if that debt. . . .

G. Farrell-Collins: We should be in a boom, then.

R. Kasper: No, I'm just saying that. . . . I don't know anything about this. I look to these people. But I would hope maybe somebody could give me an answer as to what the relationship is between these things.

D. Morhart: Certainly, as I said, any expenditures made in the economy -- government, personal, business, all of those things -- are factored into gross domestic product.

R. Kasper: Right.

D. Morhart: So they all impact the economy. Some of them obviously have more of a snowball effect than others, and it really depends on the intensity of employment. It depends on the intensity of materials used, the time over which a project is built or assembled. So it depends on a whole number of factors.

R. Kasper: Well, could somebody maybe give me answer one day?

R. Thorpe (Chair): I'm sure you'll get an answer one day.

R. Kasper: Well, you know, I'd hope that. . . . There must be some chart there that says: "If you spend X, then it's going to generate Y." I'm assuming that.

A. van Iersel: Yes, I'll endeavour to go back to Treasury Board staff and talk to our economist, Chris Lawless, to give you an indication of the types of multipliers. As David has said, though, you can't rely on one figure. It depends on the nature of the investment, and I think we all understand that.

The other aspect of this is that to the extent that we have to borrow the money, you're taking moneys out of the economy, so there's another effect that's going. . . . So the question becomes whether the public sector use of that money generates a bigger impact on GDP than the removal of that money in terms of what it would otherwise have been used for in the hands of where it came from.

But I'm a reformed economist; I left economics many years ago to be an accountant, which I liked a lot better. But I will go back to Treasury Board staff. I'm sure we have information related to the multiplier effect.

The other thing I would like to comment on, because it was discussed earlier, is the impact of inflation. Obviously inflation, as I think everyone agrees this morning, could have a significant impact in terms of the debt service costs over time. But it will also have a positive impact, if you can ever consider inflation to be positive, in the sense that the GDP number itself, as we're talking now, will also increase. So for some statistics, like debt to GDP, there will be a negative in terms of the numerator and a positive in terms of the denominator. How that works out specifically is hard to determine exactly. But on the multiplier, I would be pleased to come back. I'll send, through the Chair to the member, an indication of what we have.

R. Thorpe (Chair): Yeah. But let's not forget, in looking at statistics, what inflation may or may not do. The people actually out there working, trying to survive every day -- inflation is not usually their friend. In fact, I think Greenspan yesterday at the Federal Reserve meetings gave a little bit of a warning that oil prices better slow down, or something better happen, or they'll be looking at something in their November meeting -- which, miraculously enough, is after their presidential election. It's amazing how those things work out.

I have a question, though, or a comment, because one of the things that I hear around the province as I travel around the province and in my constituency is: how do we have a surplus of $52 million, and yet our debt goes up $2.2 billion? Yet it's very hard, again, for the people that are paying the

[ Page 1572 ]

bills, the taxpayers of British Columbia, to look at a piece of paper that gives them a reconciliation of what is going on. So -- not in accountants' language but in the people's, who actually pay everyone's salaries here and all the expenses of running the province -- what are you doing to ensure that there is an understandable, readable reconciliation between operating and debt?

A. van Iersel: Chair, I presume that was addressed initially to myself.

R. Thorpe (Chair): To whoever.

[1045]

A. van Iersel: Okay. The difference, as I mentioned a little while earlier this morning, relates to a couple of things. First of all, the province is acquiring assets. As a matter of fact, it's building schools, hospitals, universities and colleges. And I think the capital plan. . . . I'm not in charge of the capital plan. So I would say we've been spending about $2 billion in recent years, annually, on adding to those facilities. Those assets are capitalized; that means that they're not reflected in expense. We've gone to full accrual like a private sector corporation has. So those assets aren't amortized. You build; it requires cash. You have to borrow. That impacts the borrowing.

But at the same time it doesn't show up in terms of the operating statement, except in the sense that whatever amortization period we pick, that asset is recognized over time. That's consistent with the philosophy that these assets aren't one-shot issues for us. They provide benefits over many years. And the amortization periods range from as little as ten years in some cases to as high as 40 years. So we're trying to amortize the benefits of those assets over their service life; that's one reason. You can have a surplus, but if you're in acquisition mode or construction mode, you're still going to see debt go up for that purpose. That was one of the big differences between the $52 million surplus and the change in debt over the two years.

The other one I mentioned earlier was the warehousing. I believe warehousing went up by approximately, between the two years, $600 million. So the treasury felt it was prudent to preborrow a significant amount of money. That money was borrowed; it shows debt going up. But also at the same time we have an asset, which is that those moneys, until they are needed, are invested in other assets. That's not an impact in terms of the operating statement, but it's another explanation of why debt has gone up.

There are other things too, in terms of prepaid expenses and the like. So there will always be cases where the accounting bottom line, from an expense base, doesn't equate to cash. That's because we left cash in the early 1980s. That, in a summation, is why the difference. . . .

We recognize that there's a need to do a better explanation -- and it's in my job jar -- in terms of coming up with a better table than what we currently have in the public accounts to explain the difference between the operating result and the change in debt. That's something we're going to work on for the next set of public accounts.

R. Thorpe (Chair): So you recognize, then, that it is important to have a better clarification. Is that. . . ? I don't want to make assumptions here. So you then. . . . And we're only going to do it for the next set of accounts. If we think it's a priority, why aren't we putting it in for the next quarterly results? Why are we not making this a priority? Quite frankly, when I attempt to read the documents, and I look at the thing and forget all the political rhetoric -- let's look at the cold, hard facts here -- I believe that the reports indicate that $380 million or so was spent on educational facilities, and $170 million or so was spent on health facilities -- of $2.2 billion. If we really are convinced that this money is all being spent on capital assets that have long-term value, why aren't we rushing out to provide that detailed reconciliation? I believe the September 29 report of the auditor general with respect to the implementation of Enns has said that the Budget Transparency Act should have an amendment made to it to ensure that this reconciliation takes place. If we're committed to providing the facts in a clear and concise way, why is it not a priority to get it done a.s.a.p.?

A. van Iersel: This information is available. What I'm advising the committee is that we want to make it more readily understandable. The information is already reflected in the public accounts. I think I mentioned already this morning that page 92 provides a reconciliation of the summary accounts deficit to change in taxpayer-supported debt. It's not that we're at all disagreeing with the disclosure of the information. In fact, it's already there.

I think the comment the auditor general made was that they would prefer to see this as an audited statement -- which I don't necessarily disagree with for the future, but right now it is not. Although it's not audited, the figures that make up this very document come from various parts of government that are audited. So while it doesn't have an audit opinion, in the sense that it's considered to be a formally audited document, in effect there's no disagreement as to what the numbers say or that they're not correct.

If you look at that, it talks about prepaid capital advances, what impact that has, the tangible capital assets and then net loan investment and other requirements, which explain the difference between the operating result and the change in debt.

[1050]

R. Thorpe (Chair): With respect, Arn, that's what a qualified accountant can take the time to read and attempt to understand. I'm talking about Mary and Fred, the constituents of British Columbia who pay the bills. They don't have time, nor do they have the training, for the most part, to go through all of that stuff. If we're talking about open and transparent, why aren't we laying it out in a very simplistic way for them to understand? That's my real question. If that is our intent, when is it going to be done? That's my next question.

A. van Iersel: As I said, in term of the public accounts, my workplan includes simplifying that chart so it is more understandable -- for next time.

R. Thorpe (Chair): Then from my perspective, I'd like a notation from you back to the committee about when we can expect that the public's going to be able to have that information in an understandable, easily read fashion.

Does anybody else have any questions? Did the auditor want to make any comments on that subject at all?

[ Page 1573 ]

W. Strelioff: Just a couple. That's one question I get asked a lot: how do you have a surplus and the debt increases? It's because of the three components to the answer. It's a really difficult explanation, particularly for accountants and auditors who quickly get into jargon and then just get lost in it and can't bring it up to a level that is clear. All of us need to do a lot of work on that.

R. Thorpe (Chair): I don't think for a second that there's anyone who's not for building schools, not for building hospitals, not for building the facilities that are needed to ensure we have a very competitive, leading-edge province. But I think people just kind of like to understand where their money is going, because they're the ones that are responsible.

M. Coell: I want to add to that. I think one of the problems -- and I hear it -- is that if at the beginning of the year you had a list of the 100 schools and two hospitals you were going to build and it was a billion dollars, that would be very believable. What's happened is that we've estimated our debt is going to go to $2.2 billion, and then it turns out that it's only $800 million. That's not having a plan to build capital assets and then building them, if your debt's going up and down during the year. I think that's what people get very confused about. There wasn't that list of capital projects that were actually built and that we went into debt for, or else it would be the same. It would be very predictable. Our debt situation hasn't been predictable over the last 15 years in this province. So I don't think that's what the residents see with debt.

R. Thorpe (Chair): Wayne, you look like want to make a comment.

W. Strelioff: No, I'm just listening.

R. Thorpe (Chair): Oh, okay.

Arn, did you want to make a comment, since you went to get a resource book?

A. van Iersel: We are making progress in terms of disclosing the capital investment that the province is making. I was going to see my colleague in terms of another document that has been referred to this morning as the reports that come out with the budget. Here, for the first time, we've disclosed major provincial assets and net debt estimates. We've shown what the assets are related to the debt, and that's on page 58 of that particular report.

Also, under the legislation that the government has passed this spring, there's a requirement now to disclose all capital over $50 million. That's the first step in terms of more disclosure of the capital plan. I don't disagree with the suggestion in terms of a need to put that out. There is a capital plan. That capital plan is managed through Treasury Board staff, a gentleman by the name of Al Sakalauskas. I can't tell you exactly what information is available because I haven't looked at it lately, but I believe there would be information available as to what is currently underway, what is planned, and so on and so forth. I think, over time, that you're going to see more disclosure of those assets, particularly where they're material, and we've used $50 million as a threshold for the starting point.

W. Strelioff: Just one other comment. There can be annual deficits and the total debt goes down, which is interesting. The key thing that you have to keep an eye on is to what extent the surplus or the deficit relate to building up or wearing down the infrastructure. Some of the provinces across Canada have reduced their debt and incurred balanced budgets but have worn down the infrastructure and now are faced with huge rebuilding obligations. So keep an eye on that as time unfolds.

G. Farrell-Collins: I think all of those are very valuable cautions, and I do think that the reporting of this debt information has improved over the last number of years. One of the concerns that I've always had is the misinterpretation or misrepresentation that's been put forward to the public at the political level that the reason the debt has gone up is to build schools and hospitals. That's really been the sales pitch that's gone out there. When one complains about the increase in debt or significant deficits, the question has always come back: well, then which hospitals and which schools aren't you going to build?

[1055]

I think what we found by looking at the somewhat clearer representations of debt over time is that the significant portion of the annual deficits that have been run have not gone into schools and hospitals for capital construction but have gone into a whole myriad of other things, including operating deficits, etc. I'm glad to see somewhat more clear debt statistics and reporting in the public accounts and the budget so that people can look at that more clearly and realize what the actual fact is. They can gauge how much of those deficits each and every year and how much of the billions of dollars of increased debt have really and truthfully gone into building schools and building hospitals, and how much has gone elsewhere.

I think it is improving, and I'm glad to see it improving. I agree with the Chair, though, that there is still some way to go.

R. Thorpe (Chair): Yes, David, do you want to say something?

D. Morhart: I was going to add to Arn's comment. On capital spending there's been a concerted effort by Treasury Board staff, in particular, to disclose a lot more about the actual projects underway. In the latest quarterly report, which was released in mid-September, on pages 30, 31, 32 and 33 there is detailed information on the various categories of capital spending -- education, health, transit -- and then they've actually listed the various projects that are underway. We're trying to take further steps in disclosing more of that, as a ministry.

R. Thorpe (Chair): Arn, is the detailed capital plan available to the public?

A. van Iersel: I don't believe it is.

R. Thorpe (Chair): I don't believe it is either, but I wonder if you'd check. It's kind of mind-boggling to me, looking back to public accounts where we used to have to disclose payments over $25,000 or something, that we don't publicize what the capital spending is, and I doubt there are very many projects under $1 million there. Can you check to see if it is

[ Page 1574 ]

available to the public, and let us know, if it is, how they have access to it, or if it isn't, why have we chosen to not make it accessible?

A. van Iersel: I'll do that, Chair.

R. Thorpe (Chair): Does anyone else have any questions or comments?

R. Kasper: So it's not that bad, eh, Gary? It's not all that bad?

G. Farrell-Collins: Which?

R. Kasper: This -- the debt.

G. Farrell-Collins: I'm glad to answer questions. I think I've made my comments here today. I think that the rapid increase in the amount of debt that we've seen over the last decade is a tragedy. I think British Columbia had a stellar record that we built up over a number of decades. We did have the highest credit rating in the country, the lowest debt-to-GDP ratio and the lowest debt service costs, and we're not there anymore.

In fact, everybody else is doing much better in an accelerating way. British Columbia continues to rack up debt, although we have had one $52 million surplus. I think I calculated, at the time that was disclosed, that it would take us about 680 years to pay off the debt we've accumulated in the last decade. So it's not as bad as it was two years ago, but it's got a long way to go before it's "not that bad." Thank you for the opportunity, Mr. Kasper.

R. Thorpe (Chair): Does anybody else want to lob any balls up into the air? If not, perhaps we could thank. . . . Yes, David.

[1100]

D. Zirnhelt: I've got a question, given the trend here. I could respond to Gary that it's about some choices, and I have to say that we've made some choices to invest significantly in capital in the province -- schools and hospitals. But I have a question, and perhaps Arn is the one to answer it. This year what portion of the spending is on capital assets, and what is in deficit or paying down debt on the operating side of government's accounts?

A. van Iersel: By this year we're speaking of the public accounts just released? As I said, the table on page 92 of the just released Public Accounts, for the year '99-2000, we had prepaid capital advances of $716 million. That is our method for funding schools, universities, colleges and hospitals. That was $716 million. We had tangible capital asset expenditures within the province itself. That is $1.236 billion. Then we had net loans. These are other items that are inconsistent with cash accounting, just the difference between cash and accrual. There's $209 million for that. In total, that's $1.974 billion.

G. Farrell-Collins: Or $2 billion roughly, $0.7 billion of which went to schools and hospitals.

A van Iersel: The other figure, Chair, if I may, that I have referred to. . . . At the end of the '98-99 year, the warehouse was at $658 million. As I said, it increased to $1.320 billion, so that's just over $600 million. This is the other explanation relative to why debt went up and we had a surplus.

D. Zirnhelt: The conclusion is that the significant portion of the debt this year has gone to tangible assets.

G. Farrell-Collins: The question that the member asked was how much went to schools, hospitals, etc. -- schools and hospitals, specifically, I think is what he said.

D. Zirnhelt: Tangible assets, because $400 million in roads is significant too. I mean, those are all investments in capital.

G. Farrell-Collins: That's fine, Mr. Chairman. But what I heard was the question: how much went to schools and hospitals? So maybe he wants to rephrase the question; then we know the answer because he has just given it to us.

D. Zirnhelt: I said tangible assets. I got my answer, and it is significant. Any increase to the debt has been offset by an asset.

R. Thorpe (Chair): I think, as always, that we should take the counsel of the people that have the technical expertise. Generalization in this area is a dangerous tool. The fact of the matter is that they have to be very technical in executing their job.

I want to thank Bob and David for. . . . Val, did you have a question? I'm sorry.

V. Roddick: I just wanted to make a comment as a new member re the capital assets. There are moneys, it is said, that are being spent on capital assets when jurisdictions don't need the capital assets. That's a tie. They need the cash. So if you're using the excuse to spend money on schools and hospitals when the hospitals can't even open because they don't have the staff and the schools don't need those buildings -- they need the ability to use the funds for programs -- you're not really grasping what's wrong with this province.

R. Thorpe (Chair): Thank you.

I'd like to thank once again Bob and David for coming and spending this time with us -- also Arn, for you and the auditor general -- for this segment of Public Accounts and say thank you very much. We look forward to receiving all of the information that various people undertook to deliver to us, and we'd appreciate getting that sooner rather than later.

You know, we're scheduled to go till noon. Maybe what we could do is just continue on with the agenda and actually get some things done here, if that's good with everyone.

E. Gillespie (Deputy Chair): Right now -- a little break right now?

R. Thorpe (Chair): Yes. We could take a five-minute break right now.

The committee recessed from 11:05 a.m. to 11:21 a.m.

[R. Thorpe in the chair.]

[ Page 1575 ]

R. Thorpe (Chair): Let's get started. The next item on the agenda is an item I asked to be put on, because we seem to be having some great difficulty in establishing agendas and, once we've got them established, actually having the meeting dates. I understand that from time to time things change in people's lives. But I think it's incumbent on this committee to understand that we're merely the tip of the iceberg here and that the staff and the ministries and the various departments and support people that are required to meet these deadlines and to set up meetings. . . . It's a horrendous exercise.

You know, we have been queried in the past about having a work schedule and a work timetable; we went through a great amount of effort to establish that from September on to early December. We've had one set of meetings cancelled, and I now understand that we're going to have another set of meetings cancelled.

I just thought that as a committee we had to have a discussion and an understanding of how we're going to work, if we're going to work in the future, because as I say, we're but the tip of the iceberg. We've got the staff in the Clerk's office, the comptroller general's staff, the auditor general's staff and all the ministry staff that have to be coordinated. We're not, in my opinion, working very efficiently or very effectively at this point in time. I'd appreciate an airing on this subject so that we know where we're going and when we're going there. And are we committed to having this committee work?

Evelyn, did you want to make any comments?

E. Gillespie (Deputy Chair): I would just say that I regret we've had to cancel meetings. I know that our staff try to work around the schedules of cabinet, the Premier and the various committees of the Legislature when meetings are scheduled for our entire caucus. But it is extremely difficult, as we all know, to get together for these committee meetings. I think that the commitment to two full days a month is a significant commitment that we need to work on.

R. Thorpe (Chair): Sorry. The commitment of two days a month is a commitment we have to work on or towards or. . . . I didn't quite understand that comment.

E. Gillespie (Deputy Chair): I am saying that, you know, we're here for October 4 and 5 for this month. I recognize that we have a lot of work to do, and we're here to do that.

[1125]

G. Farrell-Collins: In the time I've been on the committee, I think our workload has increased, and that has been an item for discussion in the past. I think it's probably increased as a result of a lot of interesting things that have gone on in the last couple of years and the number of reports that have been coming out of the auditor general general's office in the last number of years dealing with those problems. I think that has added to our workload to a certain extent.

As well, I think this committee has a propensity to perhaps not finish with things and request that items come back. I understand that there's a closing of a link that this committee needs to be part of in the accountability structure, but I do think the committee has to be more disciplined in what we take on itself as work. I think that's one of our problems, if it's a problem.

The other one is the one that was highlighted by the Chair. I think it's selfish in the extreme, quite frankly, that this committee sets up meetings, and it asks all the people in the Clerk's office, the people in the various ministries, the auditor general and his staff to clear their schedules on our whim and show up, prepare presentations, documentation, get the right people here, adjust their schedules, show up for these meetings or make plans in their schedules only to find out that the meeting gets cancelled at the last minute or sometimes a week in advance -- whatever it is. I find that extremely selfish.

I think we have to be more disciplined as individuals and more disciplined as a committee in setting our dates, sticking to them and in perhaps being a little more aggressive with our caucuses around the time that this committee has. I understand that not every member of the committee can be here for every meeting. We do need a quorum, and when members aren't available. . . . Certainly enough members can be available to have the meeting go ahead.

I find it very frustrating myself. I have constituents that I have to meet. I have other commitments, as all members of the committee do, with being an elected representative, and this constant to and fro of our schedule is disruptive. To be perfectly blunt about it, I don't recall the last committee meeting that the opposition requested to cancel. I don't know if that's happened recently. Perhaps the Chair or the Clerk will have a better estimate of that. To be honest, these cancellations seem to emanate from the government side of the bench. I know government is busy, but so is opposition, and as we get closer to an election, we're all that much busier.

I do think that we have to be more disciplined. We have to stick to our guns when we set out a schedule, and I think we have to be a lot less selfish with having everybody in government run around trying to meet our needs and us not living up to our end of the bargain. We need to have some determination and some discipline about these meetings.

I guess I want to ask if we're going to get that, because I'm getting pretty frustrated with it. I don't know what Evelyn thinks about that.

E. Gillespie (Deputy Chair): I have expressed myself already that we do inform our staff about all the committee meetings that our caucus members are committed to. Our staff works with that schedule, with the Premier's schedule and with cabinet's schedule in order to determine other kinds of meetings that need to occur. We've given as much notice as possible. Unfortunately, the two dates at the end of September were the only dates when our caucus could meet, and that's what we did. We've given three weeks' notice for the October 17 and October 18 meeting dates.

We are prepared to do the work in this committee. We have said that consistently. I certainly agree with you that we need to be disciplined, that we need to complete the work. We have a number of reports here that I think we'll be able to complete fairly quickly, and we might need to refine our follow-up process in order for that to occur more expeditiously.

[1130]

G. Farrell-Collins: It would seem to me that government knows when cabinet's going to meet, generally, unless there's some emergent issue. I know on our side that the Chair of the committee, who happens to be a member of our caucus, the opposition, is pretty adamant about working with Public Accounts and other committee agendas, as well, in our

[ Page 1576 ]

caucus. Legislative committees meet on a fairly regular basis. We have a structure to our caucus meetings. We plan them out in advance, and they come and go with some regularity. Perhaps it's a little more ad hoc on the government side; I don't know.

As a member of the Legislature and as a member of this committee I'm finding it really frustrating, and I think it's really selfish of us not to be able to deliver upon the schedules that we commit to because something happens or because there's a lack of discipline in another place, whether it's the Premier's Office or the cabinet table or the caucus chair, where these meetings are somehow arising -- caucus meetings, cabinet meetings, etc. -- and are stopping this committee from meeting.

I just think there's got to be better coordination and perhaps a little tougher advocacy from the representatives of the government side of this committee to ensure that we don't grind to a halt, because there doesn't seem to be a lot of focus at the government level on being disciplined about that. I just want to extend my frustration, and perhaps the Deputy Chair can be a little more assertive with her caucus about the timing of these meetings and the impact that their caucus meetings have on this committee.

I know that this is not a problem just with this committee. Over the number of years that I've been here, whether it's LAMC that I've sat on or whether it's other legislative committees that I've sat on, it seems to be an endemic problem that needs to be addressed, and I just find it really frustrating. I think it's unfair.

E. Gillespie (Deputy Chair): I can say with certainty that we are committed to these meetings of October 4 and 5 and November 7 and 8. We should take a look at the work we have to do and work it into that schedule.

R. Thorpe (Chair): Well, with respect to that. . . . Well, never mind, that wouldn't be constructive.

Does anyone else have any comments?

V. Roddick: Can I ask the member: are you not going to replace these cancelled ones? How can you possibly get through the work that's on the agenda that we've already shuffled -- and the disappeared one in September? Now you're going to cancel another one?

E. Gillespie (Deputy Chair): Unfortunately, we have had to give notice of cancellation of the meetings on October 17 and October 18 -- two days, nine to five. We've given ourselves to whatever schedule is required for those days. Two days in a month is about what our members can commit to these meetings. We know that we will also be doing budget consultations in the very near future, which a number of these members will also be involved in.

V. Roddick: As a new member. . . . I've sat on innumerable boards and dealt with municipalities and issues in my particular municipality, and it is absolutely impossible to carry on something as detailed as Public Accounts if you don't have a fixed schedule that you stick to. It's really, I think, most unfortunate that. . . . As far as my book shows, these are four days you've cancelled -- the ones in September and now two in October.

D. Zirnhelt: With respect to the last comments, it's also members of the opposition that have insisted on ramping up the agenda and requirements to the Public Accounts Committee, and I respect that. We're dealing with an increased workload, so we haven't been able to settle down as to exactly how many days a month. . . . I'm a new member too, and I find it quite a job to adjust my schedule to it. I think we should try; I think we have that commitment. If you think it should be four days a month or three days a month, fine. I understood the workload to be two days a month, but my point is that we have added significantly and keep adding to the workload. You notice this morning I didn't suggest that we add to the workload. We had an opportunity -- something I would like to see discussed at this committee -- but I would resist that in the interests of seeing us complete what we have in front of us.

R. Thorpe (Chair): With respect to the member for Cariboo South, at the urging of the Deputy Chair some time ago -- actually, while we were in session -- that there wasn't, to her satisfaction or the committee's satisfaction, a detailed workplan going forward, we spent an extensive amount of time together with the staff developing this workplan, developing these schedules, agreeing to these schedules, agreeing to these agenda items on these schedules. So this is not something that just happened to fall out of the air. This was agreed to between the Deputy Chair and the Chair and, quite frankly, David, had been circulated to committee members by staff some time ago. Quite often, as you know, it's very hard to keep up with all these changes.

I think your comment was not a fair comment, because we did work together to develop this workplan at the urging of the Deputy Chair.

[1135]

D. Zirnhelt: So I can be clearly understood, Chair, I'm saying that if you step back from it, there has been a huge workload agreed to whether we have a workplan or not. I acknowledge that there was an attempt to come up with a workplan. I'm saying that it is a significant increase in the amount of work that historically has been before the committee; that's my sense. I agree with that, and I'm saying that we therefore have to redouble our efforts to ensure that we budget the appropriate time and on an orderly basis. I'm not agreeing with the spirit of that; I'm just saying that it is not an easy task to do that. We'll have to keep trying.

R. Thorpe (Chair): You're right. It's not an easy task, and it only becomes harder as we cancel meetings.

G. Farrell-Collins: With all due respect, actually what you said, David, was that the opposition had been ramping up the workload of this committee. That's what you said. I mean, you can check the Hansard on that.

The reality is that the workload of this committee has been ramped up by lots of adventurous projects and endeavours that the government has undertaken over the last little while. We spent a huge amount of time looking at the auditor general's report into the mysterious vanishing balanced budgets prior to the last election. We spent a great deal of time on that. We've spent a certain amount of time, as well, on the fast ferry project -- not enough, in my opinion, but a significant amount of time on it.

[ Page 1577 ]

Neither of those are ramping up of the workload of this committee by the opposition. In fact, they're ramping up the workload of this committee as a result of cabinet decisions where you sat. Don't come across the table and blame us for ramping up the workload of this committee, with all due respect.

D. Zirnhelt: I didn't say blame; I said: Accept some responsibility that this is the way that you want to do business. I'm saying that we should just keep that in mind -- that there has been a ramping-up of the amount of time required by this committee. You have to accept responsibility for some of that, and fine. I'm not disagreeing that we shouldn't spend the time. It's hard to find the time, and I'm saying that we should find the time.

G. Farrell-Collins: Thank you. Actually, what you said was: "The opposition has been ramping up the time." You can check the Hansard on that. You can rephrase it now and say you didn't say that, but you did. I take some offence to that, because I would rather not sit here and go through two balanced budgets that disappeared and spend hours going through the debate. I wish we didn't have that debate. I think it erodes public confidence in all political parties and all people that get into public life. I'd rather not sit here and spend days going through the fast ferry fiasco and wondering what we're going to have to do with it in the decades to come and the problems that's creating for the Ferry Corporation. I'd rather not have to do that.

To say that we have to take some accountability and some responsibility for that. . . . I'll take our share of accountability and responsibility for items that we have asked to return to Public Accounts for follow-up. I think there's room all around to sort of minimize that. But I won't take responsibility for some of the other items.

As well, when we sit down and agree to a workplan -- when staff and the Chair and Deputy Chair take time to go through, look at the multitude of tasks that are before us, sit down together and spend days doing that to come up with a schedule and a workplan and items for those agendas and circulate those amongst the members of the committee and it's agreed to -- and members on this side and our staff and government and people in various departments of government make their plans, their agendas, their timetables around that as well, and then out of the blue a significant chunk of these meetings get cancelled, one has to ask whether the committee members are serious about doing the work or not.

If individual members can't find the time to allocate to the work, I can understand that. Some constituencies are more demanding than others, and some roles in government are more demanding than others. Perhaps, then, members can go and devote their time to those endeavours and do a good job of them and get somebody else in here who's willing to commit the time to actually get the work done. I find it very frustrating and very selfish for the committee to do that.

[1140]

R. Thorpe (Chair): It seems that the lines have been drawn.

As the Chair I don't want to be partisan, but within the opposition caucus with respect to Public Accounts, having been asked by the newest member about a potential conflict in her scheduling, I said that as a member of this committee, this takes priority. If Public Accounts is scheduled, as a member of this committee it takes priority over other caucus duties you have. So please act accordingly." I think that's what we have to do -- we have to try our very best to do.

The other thing that's very disturbing is that we say we're going to start at nine, and we don't start at nine; we lose 15 minutes there. We say we're taking a five-minute break; it turns into a 15-minute break or whatever. So if you can't make the meetings of the 17th and 18th for valid reasons from the government side or what the government at least believes to be valid, can we please commit to starting on time? Can we commit to working through lunches to try to pick up time and have lunch served here? We're here. If there's an emergency phone call, you can get a message delivered to you; you can go handle it.

Also, then -- the days we are here, the first nights -- can we consider working in the evening and putting in two or three extra hours, because we're all here -- getting these things done and trying to keep to the pace? If we're going to cancel dates, those are the things I would like to suggest. I want to hear back from the committee if we're committed to doing those things to pick up the time that we're losing.

E. Gillespie (Deputy Chair): Okay. I certainly think this debate has been, to this point, not particularly fruitful. But what I will say is that we are here October 4 and October 5, that we will be here November 7 and November 8, and that we will put our work into that time frame.

You know, the questions of working through lunch and working into the evening involve many other people and also involve all of the other activities that all of us are involved in, so I'm reluctant to do that. I think we need to establish a businesslike working pace here and carry on with that.

So if we could perhaps discuss our agenda within the four days that we have available to us this fall, that may be a way of moving on.

G. Farrell-Collins: Excuse me, Mr. Chairman.

R. Thorpe (Chair): Just one second, yes.

G. Farrell-Collins: I just have a question about the last comment: are we talking about only four days of work this fall -- two days in October and two days in November?

E. Gillespie (Deputy Chair): Two days in November -- that's what we have scheduled to this point.

R. Thorpe (Chair): Actually, we've decided. . . .

G. Farrell-Collins: Nothing in December.

R. Thorpe (Chair): No, we've scheduled December 5 and 6 -- I believe the dates are. Are you committed to those dates?

E. Gillespie (Deputy Chair): Yes.

R. Kasper: Unless something happens.

G. Farrell-Collins: Yeah, unless something happens -- exactly.

[ Page 1578 ]

R. Thorpe (Chair): Or if something doesn't happen; that also could be a reason, I suppose.

You know, I'm a little taken aback by the Deputy Chair's comments about not wanting work through lunch, suggesting that perhaps this hasn't been a fruitful discussion. I mean, we have to remember why we're having this discussion.

Also -- and I'd appreciate some guidance from the auditor general and the comptroller general -- it's my sense that we're in fact doing our public service a disservice by continuing to delay and not move on to these meetings when we're scheduled, and the fact that they've booked off their time. I think the best service we can do for them is to get through the reports that we have to get through as fast as we can, so they can actually get on with doing the other things that are very important in their workload. You know, unless I'm advised differently by the auditor general and the comptroller general, I would think that staff wouldn't mind -- the few that may be affected -- being here for an hour in the evening, so they can get it done, and they can move on with something else. I'd be interested in the comments of the auditor general and the comptroller general in that regard.

W. Strelioff: Chair, members, certainly advance warning on the timetable helps our office organize our work -- absolutely.

There's one other suggestion I have, and that is that my office has a better opportunity to participate in advising you directly on the makeup of the agendas when you decide on your meeting dates, because sometimes there's more recent information that's relevant to the agenda. But as far as your general question, certainly a set timetable does make our work more efficient.

[1145]

R. Thorpe (Chair): Thank you. With respect to inputs, I would expect -- and I'd be shocked if this isn't happening -- that on a day-to-day basis the auditor general's office would be liaising with staff and the Clerk of Committees office when stuff comes out, as early as possible, to say: "This report may be better this date. Or maybe we should do it here, because we know this that you don't happen to know." So if that's an assumption I've wrongly made, then I stand corrected. But I think you'd be doing a disservice to this committee if you're not talking with the Clerk's office as quickly as possible, because these things come out all of the time. They're pumped out. I have a hard time keeping up with them; there are so many that come. In that regard I ask you to overcommunicate with the Clerk's office, and I'm sure they'd appreciate that.

Arn, do you have any comments?

A. van Iersel: Only to say that it's really up to the committee to decide what the priorities are and when they wish to meet. Our office and the offices of ministries that are required will be here whenever necessary.

R. Thorpe (Chair): People are here in the evenings for estimates, aren't they?

M. Coell: I would hope that we would take the agendas from October 17 and 18 and move them to the 7th and 8th, rather than just not deal with those two particular items.

R. Kasper: I just have a question for staff. From the meetings that were scheduled for the 17th and 18th, what in particular -- i.e., the consideration of draft reports -- is in fact ready now? Where the staff have done the draft and we've discussed these things basically ad nauseam, it's just a matter of considering. I'd like to know: what is ready now? What could be actually given to us today and for tomorrow to actually deal with? For that matter, maybe there's something that we were going to be doing on November 7 or 8 that we could actually deal with tomorrow. I don't know. I throw that out as an option, and then we're not. . . .

K. Dunsdon: Maybe I could respond to that, because I'm the one that's drafting the reports. The way that I've planned out my work schedule is geared toward the agenda of the schedule of the committee. I've been focusing on getting the reports that are to be considered on the 17th and 18th done within a window of three or four days before those meetings. They're not done right now.

G. Farrell-Collins: As a suggestion, perhaps. . . . Those are the two reports: consideration of the review of the fast ferry draft committee report and the pulp and paper mill effluent monitoring report. My suggestion would be that Kelly continue to work toward those dates, if possible.

I don't know if anything's changed since the last cancellation. You may have rejigged your work schedule; I'm not sure. If it's possible to work toward those dates and let the members have those reports when they're available whether or not we're meeting, perhaps in the intervening time, when the very busy members of government have a spare moment or so, they could review those reports so that when we come on the 7th and/or 8th there is at least a possibility of, if we have time, compressing some of our work and getting one or both of those reports approved at that time. Perhaps we can make some efficient use of our other time, as opposed to sort of letting this hang until December or January or February, or whatever it's going to be.

R. Thorpe (Chair): I think that's a very good idea. I talk to staff on a very, very regular basis. They have a very, very heavy workload. Scheduling is very, very important. Since this change only came up, I believe, either late last week or early this week, it would be the hope, Kelly, of the committee that you could still target for those completion dates -- keep to those windows on the draft reports. That's not a problem, is it?

K. Dunsdon: I'll do my best to do that.

R. Thorpe (Chair): Thank you. You always do your best.

R. Kasper: Mr. Chair, I'm advising the committee that I won't be here until a little after 10 o'clock tomorrow. I thought I should let you know now, because in the event there is no quorum, then between your schedule of nine to five tomorrow you may not be able to make a decision until you have a quorum. I don't think that would pose a drastic problem.

[1150]

G. Farrell-Collins: There are more than four members of the committee on the government side, are there not? Does the Deputy Chair know which members will be in attendance tomorrow?

E. Gillespie (Deputy Chair): These members will be in attendance tomorrow.

[ Page 1579 ]

G. Farrell-Collins: Except for one.

E. Gillespie (Deputy Chair): Who will be here by ten.

G. Farrell-Collins: My concern is: will the committee be able to start at 9 o'clock without a quorum?

R. Kasper: What do we need for a quorum -- seven?

Some Voices: Seven.

R. Kasper: So you'll have seven.

E. Gillespie (Deputy Chair): We'll have a quorum.

R. Kasper: Except for me -- I'm just paying members a courtesy.

S. Orcherton: I'll be here as close to nine as I can -- 9:05 or 9:06, something like that. I've got to drop my kids off at school.

Interjections.

R. Thorpe (Chair): It appears we'd have a quorum. So, yes, we will meet at 9 o'clock tomorrow.

R. Kasper: I'm just paying members a courtesy.

R. Thorpe (Chair): Thank you very much. Would anybody want to start at 8:30? Is that a possibility? No? And you don't want to work through lunch. Is that correct?

E. Gillespie (Deputy Chair): I'm open to that; I have no objection to that.

G. Farrell-Collins: I can tomorrow; I can't today.

R. Thorpe (Chair): Okay. We'll work through lunch tomorrow.

A Voice: We're all busy, I think.

R. Thorpe (Chair): Everybody's busy; that's why it's important to stick to a schedule.

So what is the wish of the committee now? Are you going to break for lunch? We have lunch here in the Cedar Room. We can go get a sandwich, we can bring it in here, and we can work. For those who can be here, we should still have a quorum, and we can move on to the other items on the agenda. Is that the wish of the committee, or do you want to break?

R. Kasper: See, I have a question: how long do you think it's going to take to deal with this management of woodlot licence program? Personally, I don't have a problem with the draft report. So I'll throw a motion out that we adopt that report.

R. Thorpe (Chair): I mean, with some respect, that we should make sure that we look at the report again, just to make sure. There are members here that will want to excuse themselves as they have in the past on that report, I'm sure. Just to throw motions up. . . . I'm not sure it's the way we want to necessarily approach these subjects.

R. Kasper: Well, I thought this discussion was about moving things along, so whatever. . . .

R. Thorpe (Chair): Are we working through lunch -- yes or no?

A Voice: Tomorrow.

R. Thorpe (Chair): Tomorrow only, not today -- is that correct? I'm for working through lunch. So it's what you guys want.

G. Farrell-Collins: Is there any objection to working through lunch? I hate to make that motion, because I can't. But if you guys want to work through it, that's fine.

R. Kasper: I can't either. I've got to go.

R. Thorpe (Chair): We'll reconvene at 1 o'clock sharp.

The committee recessed from 11:53 a.m. to 1:09 p.m.

[E. Gillespie in the chair.]

E. Gillespie (Deputy Chair): I would like to call the committee back to order and begin our afternoon with a report back from the Canadian Council of Public Accounts Committees, the twenty-first annual conference. Will Kelly or Craig be. . . ? Okay. Craig, if you'd give that report, please.

C. James: As members are aware, the Canadian Council of Public Accounts Committees held its annual meeting in Halifax, Nova Scotia, in September. Unfortunately, the attendance from British Columbia was somewhat interrupted by the sitting of the House on the Sunday, as members will recall. As a consequence, no members attended the conference. Kelly Dunsdon was able to be there for the entire conference and did present, on behalf of this committee and the Speaker, a paper on the follow-up process that the committee had adopted and pursued over the course of this past session.

[1310]

I was fortunate enough to be there, as well, in my capacity as executive director of the CCPAC and spoke to several topics during the time I was there. Members will be aware, too, that the Canadian Conference of Legislative Auditors holds its annual meeting usually at the same time and in the same place for a variety of purposes. I believe that the auditor general is prepared to make a few comments about their conference as well.

E. Gillespie (Deputy Chair): Can I call upon the auditor general, then, to inform us about his conference?

W. Strelioff: Yes, you can. Thank you very much, Chair and members.

I've been at the annual meetings of legislative auditors now for about 15 years, so I've seen the community change quite remarkably over those 15 years in terms of working

[ Page 1580 ]

more closely together and sharing methodology, best practices and experiences to try to make sure we're not reinventing wheels as often as we once did.

One of the key items that we talked about relates to our role in adding credibility to the health performance report cards that are being talked about federally and provincially. As those discussions turned into a more real practice, we were spending quite a bit of time trying to figure out what the role of the legislative auditor should be in terms of adding credibility and how the practices are varying from jurisdiction to jurisdiction.

So the annual session went well -- lots of lobster for those who attended the Monday night social session that we came together at. The lobster was wonderful, the entertainment was wonderful, and the discussion among colleagues that we interact with during the year was great.

E. Gillespie (Deputy Chair): Well, thank you very much. I'm sure some of us didn't particularly want to hear what a wonderful conference we missed. It is regrettable that British Columbia was not able to send delegates to this conference. We have in the past had plenty to learn at that conference, and I think we have made significant contributions to the conference as well. I appreciate that Kelly was able to be there on our behalf.

Just before I turn the chair over, I would ask Craig to let members know how they can get information about the proceedings of the conference.

C. James: We also maintain, through British Columbia, the CCPAC homepage on the Internet. In about a month or so we should be able to put the transcripts of the proceedings of our portion of the conference on there for members have a look at, should they wish. Also, we will be assembling the papers that were presented and sending off a memo to members. Should they wish to have copies of them by title, we'll supply those copies of the papers that were presented as well.

E. Gillespie (Deputy Chair): Thank you very much. Now I'll turn it back to the Chair.

[R. Thorpe in the chair.]

R. Thorpe (Chair): Thank you very much, Evelyn. I trust the auditor general didn't have too much lobster when he was in Halifax. You know you have to be concerned about your cholesterol.

Now we're going to move to the consideration of the draft committee report "Management of the Woodlot Licence Program." The member for Cariboo South is excusing himself as he has done with other discussions on this report.

K. Dunsdon: The committee reviewed this report before, very briefly, on June 13 and again on June 27. On June 27 I was directed to get some more up-to-date information about the status of the Ministry of Forests' work in developing a woodlot licence transfer policy, an evaluation and award policy and completing its annual report. I've done that. That information is included in the copies that you have today on pages 7, 12 and 17.

[1315]

I was also directed on the 27th to draw up some committee recommendations. Those recommendations were to reflect areas where work is still needed to address recommendations made by the auditor general. So the copies that you have today have some draft recommendations included in them, and all of these have been circulated to members.

In July I did receive some comments back from the Chair about the recommendations, and he also required some clarification on particular parts of the report. For example, there was a comment about the costs of the program, which I've clarified. He also had a comment about the first draft recommendation. You'll see all the changes that were made to the report underlined in the report, just so you know what's different from the last version that you saw.

In terms of the draft recommendations, as I mentioned, they focus on the areas where the ministry hasn't fully implemented the auditor general's recommendations, and that was basically all of the 19 recommendations. The only area that could possibly be considered to be implemented is the development of woodlot licence transfer policy. I think there is a draft of that right now, although it hasn't been finalized. I believe it's gone to the minister for approval.

What I'll do now is just go through each of the draft recommendations, and maybe I can get some feedback on those from you.

The first one is found on page 2 of the report, and this is very similar to the auditor general's recommendation on the same topic. The committee's draft recommendation reads: "Your committee recommends that the Ministry of Forests continue its efforts to ensure that all stakeholders share a common awareness of the woodlot licence program." Now, the auditor general's recommendation is phrased exactly the same way, except that instead of using the word "awareness" they've used the word "understanding." I had a comment back from the Chair about that recommendation suggesting that perhaps that be changed to "awareness." I've made that change. I don't know if anyone has any comment about it.

E. Gillespie (Deputy Chair): I did actually put a question mark on that. Given that the context for that recommendation is really about understanding the use of "supplement," understanding the language, I don't perhaps appreciate the reason for the changing of the wording -- in particular of the wording of the auditor general's recommendation. It uses "understanding." It seems to make sense in this context.

R. Thorpe (Chair): The reason I put forward that suggestion was because a number of people I was talking to suggested to me that the awareness necessarily has to come before understanding, but I'm not going to get into that debate. If the committee wants "understanding" as opposed to "awareness," it's not a big deal for me. I just fed in my comments, as other committee members were asked to do.

What is the wish of the committee?

R. Kasper: Perhaps the use of "understanding. . . ." It may not be accomplished. Like, what are you trying to do? Are you trying to get people to understand all aspects of the program in detail -- all of the ramifications? That puts the onus on the ministry to ensure that that's the case. I think people should actually take it upon themselves to perhaps understand the program, but as far as the ministry making them aware of the program, that such a program exists, it is probably a lot more doable as far as accomplishment is con-

[ Page 1581 ]

cerned than getting people to fully understand the program. You know, that's a judgment call there, isn't it? Mind you, somebody could say that about what I just said.

R. Thorpe (Chair): I'm aware of what you just said. I'm not sure I understood it.

S. Orcherton: This could lead to a lengthy debate and put our agenda. . . .

R. Thorpe (Chair): No it won't.

[1320]

S. Orcherton: Let me offer a typical Canadian solution. Why don't we just say: "Share a common understanding and awareness of the woodlot licence program"? Then we can move on to the next recommendation.

R. Thorpe (Chair): Next -- that sounds good to me. Way to go, Steve. I'm getting the nod from the auditor general's staff, so I guess that's a green light to move on.

S. Orcherton: Unless you want to debate it further. . . .

R. Thorpe (Chair): No. We're aware of the issue, and now we'll move on.

K. Dunsdon: The next committee draft recommendation is found on page 4. It's regarding expansion of the woodlot licence program. The draft recommendation that I've included here reads: "Your committee recommends that the Ministry of Forests develop a long-term vision and strategic plan for the woodlot licence program based upon a thorough analysis of the social, economic and environmental benefits of the program and the resources likely to be available in the future."

This is similar to the auditor general's recommendation on this topic, except for the reference to "analysis of social, economic and environmental benefits." This was debated quite a bit during the committee's meeting on this topic, so I've included that to reflect those discussions. Also, when the ministry gave its evidence, there was some discussion of work they're currently doing about comparing the employability of woodlots to other types of tenures. I thought that might be appropriate, but I'll just put that out there for discussion.

R. Thorpe (Chair): Anyone have any comments? Of course, I'm encouraging the auditor general and the comptroller general, if they have any comments as we move through these quickly. Everyone agree with that?

K. Dunsdon: The next draft recommendations, on page 6, are talking about administration of the program. That recommendation reads: "Your committee recommends that the Ministry of Forests continue in its efforts to streamline the administrative requirements of the woodlot licence program to ensure they are consistent with the small-scale nature of the woodlot licence tenure and the revenues which are reasonably expected to be generated from the program."

That's similar to the auditor general's recommendation No. 4, although the wording is slightly different to focus in on evidence the committee received about the costs of administering the program relative to the revenues it has generated. My understanding is that this may be what the auditor general was implying in his recommendation when he talks about the level of risk the woodlots present.

R. Thorpe (Chair): Is that assumption correct, from the auditor general's office?

R. Jones: It is correct.

R. Thorpe (Chair): Thank you.

K. Dunsdon: The next area that I just want to draw everyone's attention to, where there is no draft recommendation, is the woodlot licence transfer policy. There was some information that there is a draft policy. It has not received ministerial approval yet. I have not included a recommendation on this topic. Committee members may feel that because that hasn't been approved yet, there should still be something on that issue.

R. Thorpe (Chair): Did the auditor general have a recommendation on that?

K. Dunsdon: Yes.

R. Thorpe (Chair): What was that recommendation -- just to refresh people's minds?

K. Dunsdon: That one read: "Ministry of Forests should formulate a clear policy on woodlot licence transfers."

R. Thorpe (Chair): Well, I'd like to suggest that if in fact the draft has been sitting on the minister's desk or around his desk since July 2000, the committee might want to make a recommendation that fits in with the intent of the auditor general and ask that the minister release this as soon as possible, so that people can actually get on with making decisions. But I guess we'd need a motion to do that.

M. Coell: Mr. Chair, does it need to go in the report? Or is that something we could just do, from yourself and the Deputy Chair -- a letter?

R. Thorpe (Chair): Personally, I think it should be part of the report. We also could send a letter. Some of our letters don't get replied to, but we could send one.

M. Coell: Well, I'll move that we add it to the report. But I think it would be worthwhile for the Deputy Chair and yourself to send a letter.

R. Kasper: Right, yes. Are we going to change the wording to say "as of October 2000," because now it says "as of July"?

R. Thorpe (Chair): No, it's been sitting there since July.

R. Kasper: Okay. But we're assuming it's still sitting there -- right?

K. Dunsdon: My understanding is that it is. So I will change the wording to make it more up to date.

[ Page 1582 ]

R. Kasper: Right, okay. Great.

R. Thorpe (Chair): Well, wouldn't we be saying that it's been sitting there since July, and this is now October, so therefore we'd like a decision?

R. Kasper: Well, I guess so.

[1325]

M. Coell: I think a nice "encouraged to make a decision. . . ."

R. Thorpe (Chair): I mean, it's been sitting there for some time, and we know that because those debates actually took place in the House, when the House was sitting.

E. Gillespie (Deputy Chair): The recommendation, then, is that the policy be approved and implemented. Is that correct?

R. Thorpe (Chair): As quickly as possible, since it's been there for some time. Was the motion also to have a letter go from the Chair and the Deputy Chair to the minister?

M. Coell: Yes.

R. Thorpe (Chair): Okay? Any comments from the auditor general's office?

No. Okay. Comptroller general's?

No, you're happy with that -- good.

K. Dunsdon: Moving on to the next one, this next draft recommendation goes to woodlot size; this is on page 8 of the report. That draft recommendation reads: "Your committee recommends that the Ministry of Forests continue its efforts to address limitations caused by current woodlot size maximums, to ensure that there are no impediments to the achievement of program goals." This is similar to a recommendation made by the auditor general as well. That one read: "The Ministry of Forests should consider ways to deal with administrative limitations caused by the current woodlot size maximums." So it's a very similarly worded recommendation. But it relates the purpose of the recommendation back to the issue of achieving the program's goals.

M. Coell: We're doing okay.

R. Thorpe (Chair): Everybody okay with that one?

A Voice: Yeah.

R. Thorpe (Chair): Okay. Next.

K. Dunsdon: The next one is page 9; this relates to the woodlot licence top-up policy. That reads: "Your committee recommends that prior to granting top-ups of woodlots the Ministry of Forests ensure that doing so contributes to the achievement of the program's goals and that licensees are meeting performance expectations." What this is really is a combination of two auditor general recommendations that say the ministry should top up woodlots only when doing so contributes to the achievement of the program's goals and ensures that licensees meet all performance expectations before granting top-ups. So this is really just a combination of those two.

R. Thorpe (Chair): Everybody okay with that?

K. Dunsdon: Next is cut control policy, the draft recommendation on page 10 that states: "Your committee recommends that the Ministry of Forests continue its efforts to ensure that the cut control policy is applied fairly and consistently to all licensees." This is the same as an auditor general recommendation that the ministry ensure that the cut control policy is applied fairly and consistently to all licensees. It's really the same thing, except it acknowledges the ministry's recent work to communicate the policy to district managers, by using the term "continuance efforts."

R. Thorpe (Chair): Everybody okay with that? No questions?

K. Dunsdon: The next draft recommendation is on page 13. I'm talking about the selection process, which was actually a large part of the committee's discussion on this report. That one reads: "Your committee recommends that the Ministry of Forests provide better provincial definitions for some of the key criteria used in the application evaluation process." This is the same as -- actually, identical to -- a recommendation made by the auditor general on that topic. You'll see also that there are six other recommendations on the selection process on that page.

The second one recommends that the ministry "ensure that staff and applicants have a good understanding of the application evaluation process and criteria." That's the same as the auditor general's recommendation No. 10.

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The third one on that page states: "The committee recommends the Ministry of Forests continue its efforts to develop a simpler, more objective application evaluation process." This relates to a recommendation by the auditor general, as well, except that it recognizes efforts the ministry has made to develop a new evaluation process. That work is being done with the B.C. Federation of Woodlot Associations. Initially, that was supposed to have been done by June of this year. It's now, I understand, being put off until the end of the year.

The fourth recommendation, on page 13, also on the selection process, is that the ministry "ensure that district offices comply with the predefined category weighting ranges when advertising woodlot licence opportunities." That's the same as a recommendation made by the auditor general.

Next is: "The ministry should ensure that all districts apply the 30-day review period process in a consistent manner." That is also the same as a recommendation made by the auditor general.

Next we have a recommendation that reads: "The ministry should consider ways to include, when applying the evaluation criteria related to private land that is to form part of a woodlot, an analysis of previous ownership of land and methods of acquisition."

Now, this was something that came up in correspondence that was submitted to the committee from various individuals

[ Page 1583 ]

and organizations around the Prince George area, who were concerned about the way the selection process has been working. There were concerns that professional foresters had some sort of previous knowledge or inside information about woodlot licences becoming available and obtaining land from the companies they work for at less than fair market value. That's what this recommendation goes to, and maybe someone from the auditor general's office might want to comment on that.

R. Jones: The only thing I'd like to comment: we took the aforementioned items that Kelly was just talking about into account when we were doing the review. Although there were indications that prior to 1994, when the expansion was to take place, that might have happened, we did not notice anything since then that would indicate that it was still going on. The Ministry of Forests has a wide-open policy at all of its regional and district offices that allows people to come in and find out when there are going to be woodlots advertised and where they're thinking of advertising them. Although professional foresters tend to have a distinct advantage in terms of the evaluation criteria, which is because they're professional foresters, we didn't see that there was any problem. Everybody had the same opportunity to go out and buy private land if they needed to put it into the system.

So the way that the current system is working, yeah, you would probably be penalizing people that maybe had the ability to go out and buy extra private land to throw it in, but there are maximums now about the amount of private land you can put in and the maximum points you can get from it. So I'm not sure that's a good recommendation.

R. Thorpe (Chair): So you're not sure that this is a good recommendation. Is that what I'm hearing?

R. Jones: Yeah.

R. Thorpe (Chair): Do we have any other comments from folks?

The auditor general is suggesting that this may not be a good recommendation, folks. Are we going to leave it in? Are we going to move on?

M. Coell: Well, maybe the staff could tell us if there's another way of dealing with this without just ejecting it all. Or would you just prefer to see it withdrawn?

R. Jones: I would prefer to see it not in there. I mean, we considered it when we were doing the audit, and if we had felt that it warranted a recommendation such as this, we would have put it in.

K. Dunsdon: Well, maybe I could just say that there was a lot of correspondence that came in on the issue. That's really why I've included this here.

R. Jones: There was a lot of correspondence from people in Prince George, yes.

K. Dunsdon: Yeah.

R. Thorpe (Chair): Well, you know, we are Public Accounts. We are not only to listen to the auditor general and the comptroller general but also to listen to the public. If we had a lot of input and calls and faxes from Prince George, then quite frankly, from my perspective, we should be listening to them.

Is everybody okay with that -- leave it in?

[1335]

E. Gillespie (Deputy Chair): It sounds to me, just listening to the two of you and taking another look at the report, that it's whether something is done or whether it's seen to be done. Certainly, from the correspondence received from the Prince George area, it's not seen to be done, or there's some concern that it's not seen to be done. So if there's a way of expressing it that acknowledges that the evaluation criteria must be seen to be open and the same for everyone, as they truly are. . . . I understand that there's some difficulty here. I understand you've done an analysis, and you've looked at that risk. But clearly there are some people who still feel that it's not seen to be done.

R. Jones: I totally agree that there were problems under the previous system before this current evaluation process was brought in. There were a number of people applying for licences that would have basically an agreement to lease private land that was contingent upon them getting a woodlot. So if they didn't get the woodlot, they didn't lease the land. And that was allowing them extra points to be able to get a woodlot. The current policy has definitely addressed that by saying, "You must own the land fee simple," although it doesn't say: "You can't go out and buy it from your employer, Northwood Pulp and Paper, the day before you apply." Some people did, and there's no doubt about that.

R. Thorpe (Chair): Well, how could we find some compromise language here that everyone could live with so that we can move on with this report? People are talking around the same thing. We want to make sure that we reflect the views of those folks in Prince George that took the time and effort. So what kind of compromise language can we find here? I throw that open to everyone at the table -- the auditor general and the comptroller general -- so that we can fix it now, approve it now, and we can get this report off our table here. Who's got some great ideas?

K. Dunsdon: Maybe one thing I should mention is that my understanding of the current evaluation process is that a history of good forest management practices on the land is something that's looked at. So if you haven't had a lot of recent involvement in that land or involvement that goes back a way, of course you're going to get less points in the evaluation process. Maybe that goes to the same issue. If somebody's just leasing land in anticipation of getting a licence, then they're not going to get as many points on that point, that criterion. So that might be something to consider as well. Is that a correct understanding?

R. Jones: Yeah. One of the things that we did suggest to the ministry was the fact that in the evaluation criteria, they don't take into account the fact that you may have purchased it two days before. So in sort of the back part of the three evaluation criteria, there's one about forest management on private land, and you can get just as many points if that land was managed well by the previous owner of the land as you

[ Page 1584 ]

could if you had had it for 30 years. So that might be a way of addressing that problem: rating it differently if you just purchased it versus whether you'd been tending it for the last ten or 15 years.

R. Thorpe (Chair): It looks like the auditor general. . . . Wayne, were you suggesting some language changes there?

W. Strelioff: Yes, I was going to. It's without a discussion with Russ. It's just the idea, "Consider ways to ensure previous ownership of land and methods of acquisition are assessed when applying the evaluation criteria." It's just a softer way.

R. Thorpe (Chair): Russ, is that based on. . . ? You're the person that's got the experience and background on this issue. Knowing that we want to reflect the concerns of the folks from Prince George, how would you massage this? And give us your recommendation. Would you agree with that approach?

R. Jones: I would temper it down a bit, yeah, maybe to that type of. . . .

[1340]

A Voice: With language?

R. Jones: Yeah, with language.

R. Thorpe (Chair): Give us the language.

R. Jones: I'm trying to think of some that would work.

K. Dunsdon: Is it maybe that it doesn't go so much to the evaluation criteria but more just, as Evelyn was saying, the perception of the evaluation process? It's really not so much the criteria. That's what the letters that came in seemed to reflect -- the perception that there's some kind of unfairness in the process.

R. Thorpe (Chair): So what would you change there, Kelly?

R. Kasper: Could I just say something?

R. Thorpe (Chair): Yes, Rick.

R. Kasper: Well, you know, either you stand behind the statement that the application evaluation process currently used by the ministry is adequate in ensuring the selection of the most suitable candidates for the woodlot licences or you don't stand behind that statement. If you stand behind that statement, then there is no need, in my mind, to have No. 12 there. If you go further up in the examples that were cited from the Prince George area, it's pretty damning. You know, that sends a pretty rotten message. That's fine; that's what was found. You know, you either stand by the statement or you don't. Otherwise, don't even include it.

Maybe we should have something there that it's an ongoing. . . . I'm not encouraging more reports, but it's an ongoing review of this thing, you know. Maybe that's what we should be recommending: the auditor general's office shall periodically ensure that the evaluation criteria related to private land, blah, blah, blah. . . . You know what I'm saying? We should get them involved in it, in our recommendation.

R. Thorpe (Chair): Well, in fact, they are going to be involved in semi-annual follow-ups.

R. Kasper: Yeah, I know. But maybe we should say that. I don't know; it's either you stand by the statement by the auditor general or you don't. I'm inclined that if they said that it appears to be adequate, then it appears to be adequate. And I think the gentleman said that earlier, because he said -- did he not? -- that No. 12 perhaps shouldn't even be included.

R. Thorpe (Chair): Yes, he did.

R. Kasper: So I think I would strike No. 12. I'll move to strike No. 12.

R. Thorpe (Chair): Do we have a seconder? Jack, thank you. All those in favour? Anyone opposed?

Motion approved.

A Voice: No. 12 is gone.

R. Thorpe (Chair): No. 13, which is now 12.

K. Dunsdon: The next draft recommendation is also on page 13. It's the last one on this topic. It recommends that the ministry consider the feasibility of including as a condition of woodlot licence agreements the requirement that licensees maintain a permanent residence close to the woodlot.

Now, this is also something that came up in the correspondence received from members of the public. Apparently one of the criteria the ministry looks at in evaluating applications is the proximity of permanent residence to the woodlot licence. To fulfil the management responsibilities that come with the licence, it's ideal if a licensee lives near the woodlot. But there was concern expressed to the committee about the selection process and particularly about instances of licensees moving away from the area shortly after they've obtained a licence. Apparently this is something that's been more common in the Prince George area.

[1345]

The ministry provided the committee a response to this concern, quoting the president of the local woodlot association, saying that the level of activity does not depend on the proximity of residence. However, it is one of the criteria used in the evaluation process that the ministry uses when it's deciding who gets a licence. So this is something else that I'm putting out for discussion.

E. Gillespie (Deputy Chair): That's a really tough one. It is one of the factors that are weighted in the award of the woodlot licence, but you cannot then bind somebody to stay in a certain location after they've been awarded the licence. So I think that's pretty difficult to address.

I'm wondering what "close" or "proximity" means. Is there a meaning that's within the guidelines that they work with?

[ Page 1585 ]

R. Jones: The guidelines. . . . Again, it's part of the evaluation process. If you are outside a certain distance -- and I forget exactly what that is -- you get zero points. So in theory if you get zero points, you're going to probably not have as great a chance of getting the woodlot.

Now, what has happened in the Prince George area -- and there is no doubt about it -- is that there are two or three people that have been awarded woodlots and then have moved to the Island. I can't imagine why they'd move here, but it's great. And they've got their sons or daughters or somebody else tending the woodlots for them now. They're fairly elderly. The way they were able to get the woodlots, of course, is because they had the land and the wherewithal. And now their sons and daughters are basically taking it over without having it transferred to them at this stage. It's very difficult, I think, to legally say that they have to maintain a residence close by. But I'm not a lawyer.

M. Coell: I'll move that it be withdrawn.

R. Thorpe (Chair): Seconder? Steve, do you want to say something?

S. Orcherton: I'd be happy with it being withdrawn as well.

R. Thorpe (Chair): So would you second Murray's motion?

S. Orcherton: Sure. But you were asking me if I wanted to say something first. I'll second it. And now can I say something?

R. Thorpe (Chair): Yes, you can.

S. Orcherton: It's just very difficult to make a definition of what "permanent residence" is. It's a little less difficult to talk about "primary residence." But it strikes me that the intention of this whole woodlot program is to try and generate some localized economic activities in an area. So notionally the idea is that you want people to live in the area who are partaking in these woodlot licences. But I don't know how you can possibly enforce that, at the end of the day.

R. Thorpe (Chair): All those in favour of striking 13? Anyone opposed? Toast.

Motion approved.

K. Dunsdon: We're getting closer to the end now. The next draft recommendation is on page 14. It discusses monitoring compliance with requirements. That refers to requirements that are contained in the licence agreement. That recommendation reads: "Your committee recommends that the Ministry of Forests ensure that woodlot licensees are held accountable for commitments made in their applications by enforcing the woodlot licence agreement requirement that such commitments be incorporated into woodlot licence management plans."

This is similar to the auditor general's recommendation, except that that recommendation uses the term "significant promises" rather than the term "commitments."

Some questions came up the last time we were reviewing this report -- I believe those comments were from the Chair -- about the subjectivity of what would constitute significant promises, so I've altered that language slightly to reflect those.

R. Thorpe (Chair): Everybody in favour? Okay. Next.

[1350]

K. Dunsdon: Monitoring silviculture requirements is the next recommendation, on page 15. That reads: "Your committee recommends that the Ministry of Forests continue its efforts to ensure that woodlot licensees meet their silviculture responsibilities." This is similar to an auditor general recommendation on the same topic, except that I've used the term "continue efforts" to recognize the work the ministry has done, since the audit was released, to review silviculture obligations and relate them to the granting of further rights, like transfers and top-ups.

Next is a recommendation on page 17, relating to collection of program information, performance measures and reporting issues, that reads: "Your committee recommends the Ministry of Forests continue its efforts to ensure that essential data is entered into its information systems in a timely manner." That's similar to auditor general recommendation No. 16, except again I've used the term "continue its efforts" to recognize that the ministry has updated data in one of its information systems and plans to do so with another system shortly.

Moving on to the next one on page 17, this one reads: "Your committee recommends that the Ministry of Forests place priority on finalizing a program evaluation framework, including performance measures, for the woodlot licence program." This is similar to the auditor general's recommendation, except that the committee's draft recommendation specifically refers to the inclusion of performance measures. This was done because when the ministry presented its draft evaluation framework to the committee in November, the auditor general expressed some reservations about their utility. I believe staff of his office were going to be working with the ministry to develop those measures further. The program evaluation framework, I understand, has been drafted but needs to be finalized. I don't know if there's any comment on that.

R. Thorpe (Chair): Any comments?

R. Jones: I guess the only comment would be that we haven't worked with them yet in terms of looking at those performance measures. But we certainly will when we go out to do the follow-up, and I'll address that in a minute.

K. Dunsdon: The second-to-last recommendation on page 17 reads: "Your committee recommends the Ministry of Forests provide comprehensive program performance information to stakeholders and the Legislative Assembly in a timely manner." This is the same as an auditor general recommendation. I do note, though, that at the last committee meeting that discussed this report the Chair had some comments about what is meant by the term "timely."

R. Thorpe (Chair): Well, I guess we'll just wait and see how they define "timely."

[ Page 1586 ]

K. Dunsdon: The last draft recommendation. . . .

R. Thorpe (Chair): Yes, Arn -- sorry.

A. van Iersel: I just want to make sure. The drafts I have don't have "Your committee recommends" as being inserted in this section.

K. Dunsdon: I believe. . . . Is that at the top of the page?

A. van Iersel: Under "Recommendations." In all the previous sections we've had "Your committee recommends. . . ."

R. Thorpe (Chair): That is actually correct. Mine doesn't have that either.

A. van Iersel: You were reading it, Kelly, but I noticed that it's not in this document.

R. Thorpe (Chair): On pages 16, 17, 18 and 19.

K. Dunsdon: Okay. I'll make sure that the report's changed to put that in there.

A. van Iersel: That was one very minor typographical thing. The other question I had is if the committee is interested in trying to nail down the timeliness. Is there not a time frame that could be given in these recommendations, an "as of when" date?

R. Thorpe (Chair): Well, we have tried to nail down stuff in the past. I just didn't want to get into a lengthy debate on what was a timely manner. I mean, I would think that if they're going to comply with Bill 2, Budget Transparency Act, that should be in their service plans, business plans, performance plans -- whatever they're going to be called.

Did you want to say anything, Wayne?

W. Strelioff: What you said makes sense, yeah.

K. Dunsdon: Okay. The last draft recommendation on page 17 reads that. . . .

Some Voices: We've done them all.

R. Thorpe (Chair): We've just done them all. Have we got 20?

E. Gillespie (Deputy Chair): We've got 19.

K. Dunsdon: There is one more about continuing efforts to ensure information, about costs attributable to the program is collected, to allow an assessment of financial results; that's the last recommendation.

[1355]

R. Thorpe (Chair): Well, there's something strange here. I've got No. 16 that says: "Continue efforts to ensure that essential data is entered into information systems. . . ." I've got 17, "Continue efforts to ensure information of all costs attributable" for assessments. That's what I've got as 17. And 18 is "performance measures"; we just talked about it. And 19 is "timely manner"; that's what my report says. And my report says that it was revised on October 3; that also is the one that Arn just advised us of. Those four do not contain "Your committee recommends. . . ." Correct, Arn?

A. van Iersel: Yes.

K. Dunsdon: Okay. So you're right: I've covered that recommendation already. So that's it.

R. Thorpe (Chair): Thank you. So then the rest of the report, the conclusions -- there are no changes from our last discussions. Then, of course, the appendix, the summary of recommendations, would just reflect the changes that we've talked about here today.

The one thing I wanted to mention to the committee when I was looking through some correspondence here, with respect to the draft policy that's on the Minister of Forests' desk or near his desk or somewhere in the office: we were advised that on June 7, in a letter from Doug Konkin. . . . So we may want to make reference to that, Kelly, when the letter from the Chair and the Deputy Chair is going to the Minister of Forests.

I guess the other thing that we would ask is: could the auditor general's staff bring us up to date on where they are with respect to. . . ? The introduction says: "The auditor general plans to verify this information in the fall of 2000, at which time the committee will give further consideration to the topic." So maybe you could just give us an update.

R. Jones: That was one of the things I wanted to bring up. The fact that the evaluation criteria are not going to be finished until the end of the year precludes us really from going in and taking a look at a part of the woodlot program -- and not probably one of the most important parts of it -- which we had some problems with, which is the evaluation criteria. I had it on a business plan to do this fall. I have now moved it to the spring. Hopefully, Forests will have their evaluation criteria done by the end of the year, and we can get in there and take a look at all the representations they're making; we do plan to do that in the spring if they have everything done. I'll try to push them along to that.

R. Thorpe (Chair): Again, people make undertakings, and I think it's incumbent upon all of us. If the auditor general's office or the comptroller general's office believes that this committee can assist in helping people pursue their goals in a timely fashion that they committed to, then please feel free to bring that to our attention, because that's one of the things that we talked about as a total committee: the need to move this stuff forward. With that, is there any other comment?

Yes, Steven.

S. Orcherton: There are just a couple of points. First, it's a good report now that we've gotten through some of the minor amendments. But just to draw your attention, Kelly, I was following through on the appendix, and I just noted that there are some numbering difficulties there -- just to draw that to your attention, and to also draw to the committee's attention that the question around 16, 17, 18 and 19 is dealt with fairly

[ Page 1587 ]

effectively, I think, in the appendix part where it says: "Your committee recommends that the Ministry of Forests. . . ." You've got them all divided under subheadings of different issues. So I think that the appendix works very well in that respect -- so, good report.

K. Dunsdon: Thank you.

R. Thorpe (Chair): We need a motion to approve this report as amended and discussed here. Is that correct, Kelly? Can we get a motion to approve this report as amended, so that we can move on and finalize it? Rick Kasper?

R. Kasper: So moved, yes.

Motion approved.

R. Thorpe (Chair): Thank you. And thanks, Kelly, for all your hard work. And thanks to the staff of the auditor general for all your input; it's appreciated.

So we're doing Forest Renewal B.C. now. Yeah, okay. Maybe we could just take a minute. And maybe one of you folks could let David know that we're finished this section.

The committee recessed from 2 p.m. to 2:04 p.m.

[R. Thorpe in the chair.]

K. Dunsdon: The FRBC planning and accountability committee draft report was distributed to all committee members at the end of last week. I hope that everyone today has a copy of that. If you don't, please let me know.

The report covers work done by the committee in February of this year. At that time the committee heard from representatives of the auditor general's office, Forest Renewal B.C. and the Ministry of Forests. The report also includes information sent in response to questions arising at the committee meeting. That information was also distributed to committee members.

[1405]

The auditor general made 19 recommendations to FRBC in the planning and accountability area, and the committee's draft report has been organized generally according to five main areas in which recommendations were made. Those are, first of all, roles and responsibilities; second, strategic planning; third, business planning; fourth, investment decisions; and last, performance monitoring, measurement and reporting.

What I'll do now is just go through each section of the report in a little bit more detail. I should also point out that the draft committee report does not contain any recommendations. I'm looking to the committee for some suggestions on those recommendations. But what I will do as I go through is just point out areas where FRBC considered the auditor general's recommendations to be implemented and where they did not. Perhaps someone from the auditor general's office could comment on the status of those or their view of the status of those recommendations.

R. Thorpe (Chair): Did we invite anybody from FRBC here today?

A. van Iersel: We didn't invite anyone today. But what I did do is my normal practice, still perhaps offside in the technical sense: as soon as I got the report, I sent it to Mr. Alex Mackie, who is their comptroller, and asked for their input. I didn't get that input until late yesterday, and I've since forwarded the input to Kelly. I don't think Kelly perhaps has even seen it, because it was this morning, actually, that I sent the note. So they do have some additional comments from their point of view.

R. Thorpe (Chair): Well, let me ask a question, then: do you have a copy of it?

A. van Iersel: I have a copy of the e-mail that. . . .

R. Thorpe (Chair): Are you going to voice their concerns as we go through here? If we're going to now go through a report, and they have concerns and they're not here to voice them, and it's sitting over in Kelly's mailbox and she doesn't even know it's there, we could be. . . . If there are serious objections or concerns, we could be spinning our wheels here a little bit, anyhow. So since you have it, we would ask you to represent their views.

G. Farrell-Collins: Are they substantive or clerical in nature?

A. van Iersel: They're a bit of each, actually.

R. Thorpe (Chair): Does the auditor general's staff. . . ? Did you receive this from FRBC?

M. Sydor: No, I haven't seen that.

R. Thorpe (Chair): Well, maybe what we could do here is take a minute and get a photocopy. Then everybody would have it, and then we would know what they were, as we try to address this in a comprehensive manner. Is that fair? Can somebody please get a copy and. . . ? Break for three minutes? Thanks.

The committee recessed from 2:08 p.m. to 2:16 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): Can we get going here again? With respect to this information from FRBC that Arn has now shared with us, can we all attempt to check it off as we go -- a collaborative effort here to make sure that we at least review all of their comments as we go through it?

K. Dunsdon: I'll just pick up from where I left off. I was just about to lead members through each section of the report. The introductory section, which starts on page 1, discusses the history of FRBC and its subsidiaries, New Forest Opportunities Ltd. and the jobs and timber accord advocate. There is also a discussion of events leading up to the creation of FRBC: the Forest Sector Strategy Committee, the forest renewal plan and the Forest Renewal Act itself.

On page 2 I've briefly discussed the organization of the corporation. It's divided into three business units: communities and workforce, forests and environment, and value

[ Page 1588 ]

added. Also on page 2 is a discussion of the jobs and timber accord of 1997 as well as a brief description of stumpage and how it relates to FRBC's revenue.

A brief description of the auditor general's review and the committee's review is on page 4 of the draft report, describing the scope of the audit and. . . .

R. Thorpe (Chair): Just a second, on page 3 -- since we're in fiscal year 2000-01, do we know what the anticipated revenues are? We must have those somewhere. Wouldn't we, Arn, just to reflect the most current information?

A. van Iersel: There would be a budget figure for 2000-01; I don't have that with me.

R. Thorpe (Chair): I'm just thinking that just to have the most current information here when we issue this report, maybe we could put that in there.

A. van Iersel: I believe the quarterly would have updated that as well.

R. Thorpe (Chair): Yeah. So maybe we could get that, Arn. Could I ask you to work with Kelly to make sure that we get the most appropriate information in there? Thank you.

K. Dunsdon: I did go to FRBC directly to get the figure that's in here, but I will attempt to get some more up-to-date information.

Roles and responsibilities of the corporation as it relates to the Ministry of Forests are discussed on page 5 of the report. That section starts on that page. This section discusses two areas, really. The first is governance information for FRBC board members, and secondly it discusses coordination between FRBC and the Ministry of Forests and the Ministry of Environment, Lands and Parks. There's a brief description of FRBC's board and its committees and a summary of the evidence that the committee received to the effect that the board needs more direction and information about Crown corporation governance. Also included in that discussion is FRBC's response to those comments. FRBC considers the auditor general's recommendation on this topic to be implemented.

In terms of coordination between FRBC and ministries, there's a discussion on pages 5 and 6 of the relationship between the corporation and the ministries. There is also a discussion of overlapping mandates and FRBC's work to address the auditor general's recommendation that roles and responsibilities be clarified to avoid duplication of effort. FRBC has advised, in a workplan that they submitted to our office, which was distributed to everyone, that implementation of this recommendation is still in progress.

[1420]

Now, strategic planning is discussed starting on page 7 of the report. At the time the audit was done, the corporation had not completed a strategic plan. However, since then it has produced a plan for 1999-2003, and this section briefly describes that plan, including the corporation's seven strategic objectives and why there were delays in producing it, which was something that the committee talked about at length. The section also focuses on the committee's discussions about staffing levels in FRBC. You'll see that on page 8. There were lengthy discussions about that as well as forest management funding models in other jurisdictions on page 10 of the report.

R. Thorpe (Chair): Just with respect to page 8 and the staffing: I was reading that over the last couple of days, and I had somebody go back and do some research on that issue. Just for the record -- and I don't know, Kelly, if you want to put this in your report or not -- on May 11, 1994, in the House, the minister responsible at the time said: "I indicated earlier that 20 or so employees is what I expect initially, perhaps 25 for long-term, ongoing operation. I don't see this agency requiring hundreds of employees." So it's interesting. That was the vision back then.

K. Dunsdon: On page 8 of the report, actually -- because this was something brought up during the committee's discussions -- there's a reference at the top of the page, in the second paragraph. . .

R. Thorpe (Chair): I see that now, yeah.

K. Dunsdon: . . .about those concerns that were expressed in 1994.

R. Thorpe (Chair): It's interesting to me, though, that there's no reference here that the minister responsible made that estimate of 20 to 25.

K. Dunsdon: FRBC considers the auditor general's recommendation on this topic -- strategic planning -- to be fully implemented due to their strategic plan for 1999-2003. However, representatives of the auditor general's office have advised that they haven't reviewed that plan in detail. I understand they may be reviewing that as part of their follow-up process that's currently underway.

The next section of the report deals with business planning in the corporation, starting on page 11 of the report. This section discusses the business planning process, the content of the business plan and its tabling in the Legislative Assembly. There's also a discussion of social and resource objectives as they relate to the allocation of program investments and allowable annual cut as it relates to allocation decisions. The discussion of the business planning process also notes that the auditor general found that process to be generally reasonable. There's also included in here a discussion, which is really something that was discussed at length in the committee, about whether the business plan has remained true to the investment principles that were identified in the 1994 Forest Renewal plan.

Social and resource objectives, on page 12 of the report, as they relate to program investments during business planning. . . . The auditor general had identified this as an area requiring some work by the corporation. The audit had determined that the corporation should have more direction to determine trade-offs between resource and social objectives. FRBC has advised that they consider this to be an area that they have fully addressed, because they have established new investment principles in their strategic plan. Those are talked about on pages 12 and 13, along with the discussion of job targets and the jobs and timber accord.

Now, allowable annual cut and how it relates to investment decisions is discussed on page 13 of the report. The audit

[ Page 1589 ]

had found that investment allocation decisions were heavily weighted on allowable annual cut criteria. There was a recommendation that allocations focus more on regional needs and cost-effectiveness. You'll remember that we were copied a lot of correspondence on this issue from the Northern Forest Products Association and then from the auditor general's office, as well, responding to those concerns. There is a summarization of those on page 14 of your report. FRBC has advised that they consider the recommendations in this area to be in progress.

[1425]

The content of the business plan and timeliness of its tabling in the Legislative Assembly is discussed on pages 15 and 16 of the report. The auditor general had recommended that more accountability information be included in the plan, and FRBC considers this to be in progress, because it's working to complete its performance measures and to address the requirements in the Budget Transparency and Accountability Act.

R. Thorpe (Chair): Arn, under the Budget Transparency and Accountability Act, when do organizations have to file their annual reports after the end of their fiscal year? Is it three months?

A. van Iersel: I believe it is now three months.

R. Thorpe (Chair): And the fact that FRBC hasn't tabled theirs yet for 1999-2000. . . . This note says it's at the printers. They haven't met that part of the Budget Transparency and Accountability Act -- the spirit of the act.

A. van Iersel: I'd have to check when that first came into force -- whether it was this spring or following that. I'm not sure about that. I'm trying to remember what the effective date is for starting that. I think it's later. I don't think it started this spring, because the legislation didn't get passed.

R. Thorpe (Chair): I think you may be correct there, but I thought there was also the fact that we were going to try to comply with the spirit. But maybe you could clarify that for us.

K. Dunsdon: The next section of the draft report talks about investment decisions. This is starting on page 16 of the report. This section is broken down into three main areas. First of all, FRBC's funding principles; next, analysis and information sharing about major investment allocation decisions; and lastly, project eligibility criteria and guidelines.

The corporation's funding principles are described, starting on page 17, and the committee talked about the wise spending, incrementality, regional equity and first nations participation funding principles, in particular. Those are just four out of seven funding principles that exist, but those were the ones that the committee focused on.

The auditor general had recommended that guidelines relating to those principles be developed and communicated. FRBC has advised in the workplan that they've submitted that they consider this to be in progress as its performance management measures are developed and implemented into the investment management system.

Page 18 of the report discusses the incrementality principle, which generated a lot of debate when the committee looked at this report. That principle means that the corporation's investments must be above and beyond what industry or government are already doing, are obligated to do. The auditor general did not make a recommendation on this topic, but the committee had a lengthy discussion of it.

I should also note here that I've received some feedback from the auditor general's office about a figure that was included on page 18 of the report, talking about Ministry of Forests roads and bridges, backlog and inventory, recreation and land acquisition programs. They have just clarified for me that in September 1997 a funding decision. . . . Only $300-400 million of the decision was rescinded, as opposed to all of it, which the sentence seemed to imply before. So I will make sure that I correct that, based on what the auditor general has advised me.

R. Thorpe (Chair): On page 18, the second-last paragraph. . . . I just wondered if somebody could refresh my memory there. My read of this is that the deputy minister sort of almost had control of the board with respect to this. I'm just wondering if anybody can refresh my memory on this particular issue here about this one-time funding thing.

M. Sydor: Well, I'm not sure about the use of the words "control of the board." But clearly, as is indicated here, it was a request from the deputy of Forests for funding for a program that they thought needed funding at that particular period, and there wasn't funding available within the Ministry of Forests budgets. It's a program area that I guess overlaps in terms of the strategic objectives that Forest Renewal had. So the board considered that particular request and thought that because it was a one-time request, they would support that particular request.

[1430]

D. Zirnhelt: Well, I'd just make the point that it is an area of overlap. There was -- I don't think there's any particular secret about it -- a request put forward to the FRBC board. If it was the deputy or the minister or a series of ministers, board members had to convince others that it was an appropriate decision. The board, as I recall, did make the decision.

R. Thorpe (Chair): You don't think that when these kinds of things come from that level, it has the potential to compromise the integrity of the board at all?

D. Zirnhelt: Well, I could offer the comment that you still have to convince the board, because the board may not agree with that priority. Or it may. In this case, they did agree.

K. Dunsdon: The regional equity and first nations funding principles are discussed on pages 20 and 21 of the report. I don't believe there were any auditor general recommendations on those topics. Page 21 talks about. . . .

R. Thorpe (Chair): I just had a question on 19. Let me just tell you: I guess it's the second paragraph from the bottom. It says: "Furthermore, the issue of whether appropriate controls were in place to ensure no duplication of efforts between ministry and FRBC staff was raised." Did we -- do we -- feel comfortable. . . ? I mean, Morris, you're the one that's managed this file. Do we feel comfortable that the controls are in place? And what are they? Or what's a recommendation to ensure that they are?

[ Page 1590 ]

M. Sydor: Well, I think the recommendation, you know, if we decide to pursue this, is probably accountability-based, in the sense of making sure that Forest Renewal understands what sort of system Ministry of Forests has, to ensure that Forests staff are working on Forest Renewal-related issues when they charge Forest Renewal for funding for the particular staff.

I think the issue at the time was: how does Forest Renewal know that in fact it's getting the services it is purchasing from the Ministry of Forests? Ministry of Forests staff have their own mandates to carry out. There is certain work that they may be doing for Forest Renewal. It may be that certain individuals are allocated 100 percent to Forest Renewal activities. It may be that they're carrying out a mix of functions. And they're trying to make sure that the systems are in place so that there can be some verification process that we've gotten what we've paid for -- okay? I think that's something that is part of the overall improvements going on in Forest Renewal that I think they were looking at: trying to get themselves assurance that in fact what they're purchasing is being provided.

G. Farrell-Collins: Mr. Chairman, while we're on this page, I note that the comments that were forwarded from FRBC through the comptroller general make some recommendations or have some concerns about some of the comments on page 18 -- about incrementality, some of the wording in the report. I wonder: do we want to deal with the report first and then come back to these recommendations? Or do you want to deal with it while we're here?

R. Thorpe (Chair): It doesn't matter to me -- whatever the wish of the committee is.

G. Farrell-Collins: It's just that I've read the comments by FRBC, and I don't. . . . They have two concerns. One is the reference to "increasingly" in referring to the top-up, and that is at the. . . . We're about six lines down from the second full paragraph under "Incrementality." It says: "However, increasingly the corporation has provided top-up funding. . . ." They have a problem with the word "increasingly"; I personally don't have a problem with that. I'm wondering if anybody else has a problem with the word "increasingly" being in there in the report as it is.

[1435]

A Voice: Which paragraph?

G. Farrell-Collins: I'm sorry. It's on page 18 under "Incrementality." There's a small paragraph, then there's a second paragraph that starts with "Concerns." And if you go down about six lines, it says: "However, increasingly. . . ." I think that's the reference they're talking about.

As well, they have a concern that our comments, where we say, ". . .this decision was rescinded due to criticism from stakeholders. . . ." They don't like that wording, and they would rather that it says something to the effect that it was rescinded because Forest Renewal refocused its strategic objectives. I think that's. . . .

R. Kasper: Oh, what a pile of crap.

G. Farrell-Collins: I'm glad the member for Malahat-Juan de Fuca said that, because that was my interpretation of it too.

R. Kasper: Really, you know, Mr. Chair, I get fed up hearing that whining. We heard whining from FRBC not only at this committee but at the Forests Committee. Unless there's a real glaring error or omission, they're getting hung up on semantics here -- a little word here and there. Now, perhaps that doesn't bode well, but I think it's real. Unless there's a substantive change or a glaring error or omission that the committee has failed to address or the auditor general's staff have failed to address -- or any other person -- I'd receive and file their stuff. That's my opinion.

G. Farrell-Collins: That would be my opinion as well.

R. Kasper: But I'm just one member.

D. Zirnhelt: I wasn't here for the discussion at committee and for all the cross-examination and everything. But I am prepared to offer what I recall. I think there was a coincidence of things happening. We had come off of very large budget years for FRBC. Do you remember? They were spending a lot. They ramped up, due in part to stakeholder pressure that there was money in the bank and it wasn't being spent. So they were taking on a wider range of activities, and some stakeholders like that. So there's push and pull from stakeholders on this. In terms of refocusing, I think it was in part due to the fact that there was criticism. I would have no problem suggesting that the language that says, "decision rescinded in part because of concerns of stakeholders, but understanding that FRBC also refocused its strategic objectives during this time. . . ."

When you go from $600 million to $300 million, you've got to refocus and set some priorities. As I recall, during this time there was a focus on the debate about doing your forest renewal -- in other words, enhance the forestry activities, the management of the forest environment -- as your primary objectives. The push and pull was, I think, real. So to be fair, that's my view of what happened.

R. Thorpe (Chair): My view is that you only have to get refocused if you got defocused. But. . . .

D. Zirnhelt: That's semantics.

G. Farrell-Collins: I don't really want to get hung up on it. I was just wondering how we're going to deal with it. Reading between the lines, I think everybody knows what happened. There was a big significant deficit. People were scrambling, looking for money in lots of places. We know from other reports of the auditor general that the surplus in Forest Renewal B.C. was one of the funds that was discussed at the time as a place to go for additional revenues. One way is to go and get revenues, and the other is to move program expenditures over to Forest Renewal B.C., and I think that's what this whole section is about.

So I tend to agree with the member for Malahat-Juan de Fuca. I don't see a big problem with what we had there originally. Those comments are an attempt to try and, perhaps, soften the words. There may well have been all sorts of other things in play trying to get the. . . . I'm sure there were. There are a number of programs here that ended up being funded by FRBC, but I expect there were a lot more requests made of FRBC than just the one that they approved to take up some of that incremental funding. I don't think there's anything inac-

[ Page 1591 ]

curate with the statements in the report as it's written. I think it is accurate. There may have been all sorts of stuff going on that we're not commenting on, but certainly what happened was that there was a huge amount of public pressure on communities to not "raid" the Forest Renewal fund in whatever manner. As a result, I think, they backed off a little bit. So I don't think it's inaccurate to have what we have there right now.

[1440]

R. Thorpe (Chair): Also, I think it's fair to note that I'm not sure exactly how long FRBC has had this report, but if they had real, serious concerns, they probably could have been a little more prompt in replying about it, instead of at one minute to 12, on the report. So I tend to support the wording that's on the page as it is now. Unless there's any strenuous objections, we'll move on.

K. Dunsdon: I believe I was on page 22 of the report. There's a discussion on that page about FRBC having established eligibility criteria and related guidelines for land-based projects it funds. However, at the time of the audit, it hadn't developed approval guidelines for non-land-based projects. The auditor general had made a recommendation on that topic which FRBC advised is still in progress.

The last section of the report deals with performance monitoring, measurement and reporting. It starts on page 24. This section really deals with seven main areas. First of all is the development of an accountability framework and performance measures and targets, which at the time of the audit had not been completed. You'll see that on page 24. Apparently FRBC is of the view that the recommendations on this are still in progress as they work to meet the requirements in the Budget Transparency and Accountability Act.

Pages 25 and 26 of the report talk about outputs. In the past FRBC had created an outputs report based on statistics provided by B.C. Stats. There were questions raised about whether that report has satisfied the corporation's accountability needs. The auditor general had made a recommendation on this topic. FRBC advised in their workplan that they consider this to be implemented now. You'll see their explanation of that on page 26, I believe. Also included in the discussion on this topic is the continuity of forest sector jobs and a bit of the discussion that the committee had about the role of New Forest Opportunities and the forest worker transition program.

The new investment management system of the corporation is discussed on page 27. The auditor general had called for a review of that once it had been fully implemented. The last information that I have is that it was almost fully implemented but not quite. So FRBC considers this to be in progress.

Page 27 discusses internal auditing. There had been a recommendation that the corporation approve an audit plan. That has now been done, and so the corporation considers that recommendation to be fully implemented.

Page 28 of the report talks about the corporation's effort to update its corporate evaluation plan and ensure that the secondary impacts of its programs are included in that. They consider one of those areas to have been addressed. I believe that's including the secondary impacts in the plan. I think they're updating the plan now, so they consider that part of the auditor general's conclusions to still be. . . . They're still working to address those.

Page 28 also talks about the extent to which FRBC has been able to track and report whether its funding principles are being adhered to. FRBC advised that they're still working on that area.

Page 29 of the report talks about performance reporting and the timeliness and the contents of FRBC's annual report. Also included in this section are discussions of new accountability reporting requirements arising from the Budget Transparency and Accountability Act. Also included in here is a discussion about accountability information regarding orders-in-council, which is something that was discussed at length during the committee meeting.

FRBC has taken the position that the recommendations in this area are all still in progress. I should also note here that FRBC's annual report for '99-2000 has been completed and is apparently being printed now and is expected to be released the week of October 9.

[1445]

Just in conclusion, on page 31 of the report, there's just a wrap-up by noting that there are ongoing discussion between FRBC and the auditor general's office about the recommendations. In particular, FRBC had advised us that there were two areas that they were still talking about with the auditor general's office. Those were related to social and resource objectives and analysis prior to major investment allocation decisions.

I see in the e-mail that I got today that they may take issue with one of those and consider one of those to have been complete and not requiring any more discussion with the auditor general's office. I think that was the issue relating to social and resource objectives. They consider that to now be complete.

Finally, the report refers to the follow-up that is being done by the auditor general's office.

R. Thorpe (Chair): Any comments? Arn, are there any things that, in looking at the document, you received from Forest Renewal that you feel we should go back and discuss?

A. van Iersel: I think the one item that isn't in dispute -- it's really a matter of fact -- is the reference to 70 management units; that's at the top of page 2. If that isn't correct. . . .

R. Thorpe (Chair): Page 2?

A. van Iersel: Well, page 2 of theirs. The reference is on page 13 of the report. They're saying that the corporation does not have 70 management units, so we're wondering about that particular reference.

R. Thorpe (Chair): Oh yes, here it is.

A. van Iersel: It's about halfway down the page: ". . .now includes an identification by each of the corporation's 70 management units of local resource priorities. . . ."

R. Thorpe (Chair): Did they give us the right number?

[ Page 1592 ]

A. van Iersel: They did not say. I was wondering whether it was related to the Ministry of Forests.

A Voice: What page was this -- 13?

R. Thorpe (Chair): Thirteen; right in the middle of the page. I guess the committee would say that we'd like the. . . . Yes, Morris.

M. Sydor: Forest Renewal only had six what we call management units, whereas Ministry of Forests does have. . . . I'm not sure whether 70 is the right number. That might have been the number that's in Hansard, because that might have been tossed out by a member. But they certainly have something in that range.

G. Farrell-Collins: Yeah. I'd just recommend, then, that we just take out the number 70 and leave it as is. It now includes an identification by each of the corporations' management units of local resources.

R. Thorpe (Chair): That'll pretty much do it, won't it? Was there anything else, Arn?

A. van Iersel: No. I think that from a factual basis, that was the only thing I see in their letter that needs to be picked up.

R. Thorpe (Chair): Morris, is there anything that you'd like to add?

M. Sydor: No. I understand their comments, and I think they're similar to some of the comments that they made in the past -- similar issues. I mean, there was a big discussion with the Northern Forest Products Association; we had a discussion at our office with representatives. There was a discussion around that here at the committee back in February. Again, they refer to it here. I think the report reflects accurately the positions that we ended up with at the end of the day after those discussions. Otherwise, I didn't see anything in the report that needed change.

R. Thorpe (Chair): Okay. So now we're into recommendations. Does anyone have any additional recommendations to the auditor general's recommendations? Kelly, help me here. The issue that I keep hearing about is the definition of regional equity. Has that been defined yet by anyone who should know what it's supposed to mean?

M. Sydor: Well, Forest Renewal certainly had a principal document that I think is available to everybody. They had set out some guidelines as to how that should be considered. I think what we were getting at was that the guidelines were fairly general. In fact, it was hard for board members to determine whether regional equity was being achieved.

We're in the process now of looking at their follow-up material as they indicate in this two- or three-pager that we just received. They did send material to us; we received it just at the end of August. We're in the process of looking through that. I would imagine that part of it would allow us to see whether they've made any substantive change in providing better information about how they'll be able to measure whether regional equity is being achieved. I think it is something that the board members felt they really wanted better information on, and I would anticipate that we'll see that they are working towards improving that. Whether they are there all the way now, I don't know.

[1450]

As Kelly indicated, a lot of the recommendations are underway at this time. I think that when we look at their recommendation, there are a lot of complexities involved. There's some overlap between the recommendations, and there are some very complex issues that they have to deal with. And regional equity -- I think that if it were a very easy thing to do just by adding up a few numbers, they would have done that long ago. So I think we'll probably see progress, but there'll probably still be room for improvement.

R. Thorpe (Chair): Did the auditor general recommendations. . . ? Sorry, I don't recall every one of your recommendations. Do you have a request in your recommendations asking for clarification of the definition of regional equity?

M. Sydor: I think that in those areas where we did talk about the four funding principles -- regional equity being one of those -- there was a recommendation suggesting that they needed improved directions as to how they would be able to assess whether they've achieved that. So yes, I think there was a recommendation surrounding that.

R. Thorpe (Chair): Does anyone else have any comments?

The other area that I have a concern about, and I understand that FRBC say it's not their place to worry about, is the tabling of their business plans -- service plans, performance plans, whatever the correct terminology is -- to the Select Standing Committee on Forests in a timely manner so that they can be dealt with. I understand that they're at least a year behind. One would wonder what that really accomplishes.

Did we have anywhere in the auditor general's recommendations that when FRBC is tabling that report with its minister and/or the House, it should be tabled immediately with the Select Standing Committee on Forests so that they can get on with doing their work on a very timely basis? Is that covered anywhere in these recommendations?

M. Sydor: We do talk about the timeliness. I don't see a recommendation identified here along the lines of what you're suggesting. I think that in the report we do talk about, as you've indicated, the problems with the timeliness -- the fact that the committee may be reviewing a business plan that's almost been completed -- and certainly that's an issue that has to be raised. If we haven't addressed it in our report specifically, I can certainly see that's something the committee might want to include in their report.

R. Thorpe (Chair):Well, if it's not in your report, then I would like to suggest to the committee that we do put that recommendation -- in addition to the auditor general's reports -- that FRBC/the ministry/the minister be required to table its performance plan/business plan to the Select Standing Committee on Forests at the same time or a day after it's tabled in the House and that there be some onus on that select standing committee to convene and immediately commence

[ Page 1593 ]

its review of such a business plan, so that we get people up to speed with what's going on, on a timely basis. I would like to suggest that recommendation.

G. Farrell-Collins: Can you run the first part of that by me again?

R. Thorpe (Chair): What I'm concerned about here. . . . I understand that the Select Standing Committee on Forests, in dealing with FRBC business plans, performance plans, is running at least a year behind. I understand that FRBC has said: "It's not really our responsibility to give that information to the select standing committee." I don't know whose responsibility it is.

A Voice: The House.

R. Thorpe (Chair): It's the House, but I just think, again, as Public Accounts, that if we want people to be dealing with stuff on a timely basis, we should be making our recommendations go to the House.

[1455]

G. Farrell-Collins: I think the appropriate place for the recommendation to go is from this committee. It's the House that has to charge the other committee with the job. Maybe just slightly different wording, ". . .this committee recommends that the House immediately charge the Select Standing Committee on Forests with the job of reviewing the business plan as soon as it's tabled in the House" -- some wording to that effect is probably the appropriate direction. We can't send a recommendation to another standing committee. We send it to the House, and the House makes the decision.

R. Thorpe (Chair): That's why you're the House Leader. You have a puzzled look, Kelly.

G. Farrell-Collins: I'd be glad to work with her on the wording.

D. Zirnhelt: Earlier you were asking about the tabling of the annual report of FRBC. It says here on page 29 that the auditor general recommends six months. You were suggesting that that might be overtaken by the Budget Transparency and Accountability Act?

R. Thorpe (Chair): Arn, correct me if I'm wrong, but I think it will be overtaken by the Budget Transparency and Accountability Act.

A. van Iersel: I believe, as we were discussing earlier, that it is three months.

G. Farrell-Collins: Yes. June 30 is the date.

R. Thorpe (Chair): This report was drafted prior to the Budget Transparency and Accountability Act.

One of the other things in the report that I noted near the end -- or my interpretation of what was written -- was that the board had a concern about OIC approvals. Morris, can you just talk to that a bit?

M. Sydor: It's not the board so much having a concern; it's more an accountability issue from our standpoint. There were a number of OICs provided to the board, which basically suggests that here's the way government feels you should go in a particular area or certain funding be provided. We didn't see that those were identified clearly in the annual report. And because the mandate, the governance, was shared between the board and cabinet, in the sense that it can direct Forest Renewal to conduct certain activities, we felt that from an accountability standpoint their annual report should include information on the OICs -- the amounts that were to be expended and the purposes for which those OICs were provided. So it was more that sort of information that we were looking for.

R. Thorpe (Chair): And that is in your recommendations?

M. Sydor: It's in the report. Whether there's a specific. . . . I think the recommendation may be more general in talking about the fact that the annual report should be in line with current accountability expectations. And again, I think that's going to be overtaken by the Budget Transparency Act, because I think that the expectations there will probably be more clear as to what ministries are expected to report in their annual reports. But this sort of issue may not be covered specifically. So I don't think we specifically recommended that; I think we included it within a broader umbrella. That was one of the examples of the sort of information we would be looking for.

R. Thorpe (Chair): Does anyone believe that we should be making a recommendation with respect to orders-in-council in this report, as Morris has just expressed their concerns?

R. Kasper: Well, if it's contrary to or out of sync with their business plan, then it should be noted. If there's a substantial change, then it just should be noted -- right? -- because if it happened in a previous year. . . . Do you know what I'm getting at? I don't know. Aren't they doing a plan that sort of does a three-year forecast? Is that right?

Some Voices: Yes.

R. Kasper: So they've got a multi-year business plan. And if there's something that is different than what their multi-year business plan suggests, then that should be identified when they do an update on that business plan -- right? Wouldn't you think. . . ?

R. Thorpe (Chair): When they file their annual report.

R. Kasper: Yeah, when they do their annual report. So if there's something out of sync with the business plan, it should be identified in the annual report.

R. Thorpe (Chair): So are you going to make a motion, then, that the committee recommends that orders-in-council regarding FRBC are reported in their annual report?

R. Kasper: Well, were they OICs that redirected the board or to do something that wasn't identified in their business plan? Or was it an expenditure that wasn't identified in

[ Page 1594 ]

the business plan? If it's those two things -- because I think you have to sort of put it in that framework -- then, yes, I'll make a motion to that effect.

Motion approved.

R. Thorpe (Chair): Good. Thank you.

R. Kasper: But not just any old willy-nilly OIC.

[1500]

R. Thorpe (Chair): Are you suggesting the government makes those kinds?

Was there anything else from the comptroller general's department?

A. van Iersel: With your permission, Chair, I'm going to pass on a couple of comments related to page 1. It concerns the words: ". . .an alternative mechanism has been used in an attempt. . . ." I think there's better language, in the sense that Forest Renewal B.C. is not so much an alternative to stumpage going into the general revenue fund, because we still have that. It's an additional item -- just a clarification, because the way it's worded now sounds like it's a replacement for stumpage going into the CRF, and that's not quite true.

The other comment I had, Chair, was that I did catch in my reading a typographical thing at the bottom of page 9, the last highlighted section called "Support forest communities experiencing major job loss." In my version it says: "This objective includes a plan tin increase. . . ." So that's a minor thing. I think the word should be "to" as opposed to "tin."

R. Thorpe (Chair): Fine. Great. Do we have any other comments, any other comments from the auditor general's department? No?

Do folks think they need to see this report again? Or can we move to a motion to pass this report as we've discussed, and it can get to its final stages? It's up to you.

E. Gillespie (Deputy Chair): I think we should see those two recommendations that have been added -- report. You know, you can go ahead and do all of the grammar, spelling, editing, whatever, but just those two recommendations to come forward. . . . They could come back tomorrow.

K. Dunsdon: Okay.

Interjection.

K. Dunsdon: Pardon me? Can I get it back tomorrow?

E. Gillespie (Deputy Chair): The recommendations -- the wording of the two recommendations.

R. Thorpe (Chair): Do you get the recommendations back tomorrow? Then we could finalize it.

K. Dunsdon: If I can have an opportunity to look at the Hansard and get it clear in my mind, then yeah.

R. Thorpe (Chair): Hansard, are you listening carefully? Okay. So our intent will be to try to get it finalized by close of business tomorrow. Okay -- super.

K. Dunsdon: Were there any other recommendations relating to the auditor general's recommendations, or just those?

R. Thorpe (Chair): I don't think so. The one that I would traditionally bring forward would be the follow-up, but that's now become part of the operating philosophy of the committee and of the follow-ups. Is that still working okay with you folks?

M. Sydor: Yeah. As I indicated earlier, the particular follow-ups for these two audits within this report are underway now, and that should be completed sometime in October -- this month.

R. Thorpe (Chair): So when will you be issuing something on that? At the end of the month?

M. Sydor: Probably before the end of the month.

R. Thorpe (Chair): Super. Good. Thank you.

We could just take a two- or three-minute break here.

The committee recessed from 3:03 p.m. to 3:04 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): The auditor general raises a question, and I guess we didn't formalize it: is the intent of the committee to endorse all of the recommendations of the auditor general and the auditor general's report, plus the additional recommendations from the committee? I believe that's the wish of the committee.

E. Gillespie (Deputy Chair): That's right.

R. Thorpe (Chair): That was the intent. Sorry about that. But thanks, Wayne, for bringing that to our attention.

The committee recessed from 3:05 p.m. to 3:13 p.m.

[R. Thorpe in the chair.]

R. Thorpe (Chair): Noting that we have a quorum, perhaps we could move on to the next item of the agenda, and Josie Schofield will lead us through the draft committee report on social housing.

J. Schofield: Good afternoon. I'm just going to basically describe very briefly what the report contains. The report contains a summary of the committee's response to the auditor general's report on the governance of B.C. Housing and the Provincial Rental Housing Corporation and on the management of subsidies by B.C. Housing.

The auditor general's office has reviewed the draft report which was circulated to committee members on September 28. The office has added an explanatory note on a key development in the budget review process. This is on page 5, if you look in your report, and it actually should be at the end of page 5 rather than the penultimate paragraph. I have cleared that with the OAG before the meeting today. As well, the office has made minor changes to the wording of the report, which are underlined in the text of the draft circulated today.

[ Page 1595 ]

The report begins with a description of the purposes and overall conclusions of the two audits. Then there is a summary of the issues raised by the committee followed by a brief discussion of the affordable housing challenge, which relies heavily on information in the auditor general's report. The remainder of the report focuses, obviously, on the two audits, and after presenting the auditor general's recommendations for each topic, there is a brief discussion of the audits' key findings and developments since March 2000.

[1515]

It should be noted by the members that the report does not contain any draft recommendations. There are, though, a few topics that do require further consideration by the committee. Under the first component of governance examined by the audit, "Clarity of roles and responsibilities," there are unresolved issues with regard to three groups: the Legislative Assembly, the ministry and B.C. Housing's board chair and CEO.

Under the second component of governance, "Setting direction and goals," there are a couple of concerns regarding B.C. Housing's strategic and business planning process.

Now, I'd perhaps ask the Chair: I don't quite know whether you would like me to be quiet for a moment so that the committee can talk, or should I draw their attention to the first concern, and then we could move from there?

R. Thorpe (Chair): I think you should just go through your list of your concerns and make your presentation. Then we'll ask questions at the appropriate time.

J. Schofield: Turning to the Legislative Assembly -- I'm really referring here to pages 4 and 5 of the report -- as the members know, the government's audit found that the Legislative Assembly has no clear oversight role in the governance of Crown corporations like B.C. Housing. This issue was discussed in March 2000. Now, the auditor general's recommendation at the end of page 4 directly affects the committee, because it refers to previous recommendations made by the Public Accounts Committee. And the summary on page 5 of the 1996 Public Accounts Committee recommendations is from the auditor general's report. I think they did quite a neat job of actually synthesizing the key points from 1996. So this first recommendation obviously requires some consideration by the committee.

The next concern, if you could turn to page 7. . . .

R. Thorpe (Chair): Just one second. Yes, Arn?

A. van Iersel: I just had one question in my mind. On page 5, the last sentence before "central agencies" says: "But the question of whether the MLAs will receive the specific plans is still under consideration." I was wondering whether the committee would feel that the passage of the BTAA would have now dealt with that. I realize that this is a version of events prior to that legislation passing, but with the BTAA, as we've discussed previously, the Crown corporations do have to table their strategic plans. It's an open question to the committee whether that's still felt to be the right wording or not.

J. Schofield: I wonder if I could just make a comment here. The insertion of the explanatory note by the auditor general's office, in fact -- if you read that as coming after the statement that you quoted -- updates what has happened since March. The paragraph you're referring to actually is based on the status of things in March. Your office has kindly provided me and the committee with an update with regard to that point.

A. van Iersel: So it's different now, then?

J. Schofield: Perhaps Tony. . . .

T. Timms: I'm Tony Timms; I was the senior project leader on this assignment. Yes, the original recommendation that we had was relating to the government pursuing the recommendations made by Public Accounts Committee. There were two main issues that we tried to focus in the report. The first one was the tabling of performance plans by Crown corporations and other agencies for the consideration of the assembly. The second point was providing an appropriate committee structure to enable the members of the assembly to examine these plans and ask questions about them. We felt that with the Budget Transparency and Accountability Act, the requirement was there for the tabling of plans, and that is in process at the moment.

[1520]

But I gather, according to the report on the implementation of the recommendations of the budget process review panel, which was issued in September, that although it recommended that sectoral committees be set up to look at these plans, the government has not taken any action on that particular recommendation yet.

So our feeling was -- in terms of our original recommendation, which predated the Budget Transparency and Accountability Act -- that probably one-half of that recommendation appears to have been subsequently dealt with through the legislation. But the second part, the establishing of appropriate sectoral committees to look at the plans, is still in progress.

G. Farrell-Collins: Having the performance plans tabled in the Legislature, if they're tabled in a timely manner -- i.e., before the estimates process begins or at least before the period of time allocated to the discussion of that particular program or that particular Crown or agency comes up in estimates -- is fine. That works if they're introduced and made available prior to that.

The only change that will result from the recommendation that was made in the Enns report, if the Legislature implements that recommendation in some form, is that rather than just coming up for discussion in Committee A or Committee B -- the big House or here, the Douglas Fir Room -- it'll happen in three committee rooms instead of two. That's really the only change that's there. Those items are still. . . . At least in the time I've been here, they have always been available for discussion in estimates.

It's been the rare occasion when a minister has declined to answer questions on a Crown or an agency with the argument that it's autonomous and we don't have anything to say about it. It's been rare that that's occurred. So provided that the performance plans are introduced in the House early on in a legislative session prior to the estimates getting well underway, or at least them coming up, then we will get that information, and it will be part of the discussion and debate.

[ Page 1596 ]

However, if a minister holds on to that plan and introduces it at a later date, which has been the practice with annual reports. . . . Generally, the annual reports are tabled in the Legislature the day after the estimates for that particular agency or Crown are completed. That's sort of been the tradition in the Legislature. As long as that tradition doesn't continue, then I think we will get that information. But we don't know. That falls in the hands of the ministers, I suppose.

A. van Iersel: I know what my problem was, Chair. I had a different version. That's why it wasn't connecting in terms of the changes. My apologies.

G. Farrell-Collins: My thought is that I don't think we need to change the wording as it is.

R. Thorpe (Chair): Is everyone else okay with it?

J. Schofield: The second concern relates to the ministry -- page 7. As the members know, the Ministry of Social Development and Economic Security now has sole responsibility for the housing portfolio, including social housing. And from the perspectives of B.C. Housing and the ministry -- and I wouldn't presume to speak for the OAG -- clarity of rules and responsibilities regarding the minister and the ministry has been achieved.

[1525]

However, the recent appointment of the ministry's senior housing official to the B.C. Housing board, which is documented in the middle of page 7 just before the heading "B.C. Housing Board" -- that is the update I'm alerting you to -- may result in a confusion of roles, particularly when there was discussion in the governance audit about the desirability of having independence from the ministry. The OAG may want to clarify this further than I will at the moment, but I thought this was something that the members needed to be alerted to.

Similarly, recent developments regarding the board chair of B.C. Housing as well as the CEO position raised similar concerns about accountability and the independence of relationships. There I am referring to page 9, paragraphs 3 and 4, just before the heading "PRHC Board."

R. Thorpe (Chair): When did that change take place?

J. Schofield: The transfer of the housing portfolio?

R. Thorpe (Chair): No, no. You're talking here about the chair and the chief executive officer being the same person, I assume. Is that correct?

J. Schofield: No, no.

R. Thorpe (Chair): Oh, I'm sorry. I misunderstood you, then.

J. Schofield: Perhaps I should give you a bit of background, then.

R. Thorpe (Chair): Thank you.

J. Schofield: B.C. Housing has a full-time chair, and it used to have a general manager who wore several hats, including being the acting CEO. The general manager position has been replaced by a full-time CEO in order to clarify staff roles. However, in the spring of this year the first person with the proper title of CEO resigned. And as far as I know, a successor hasn't been appointed yet. In the meantime, they appointed an acting CEO who happens to have been a former employee of B.C. Housing and is now director of the homeowner protection office, which is based in the same ministry as the housing portfolio.

With regard to the full-time chair of the B.C. Housing board, as I indicate in the penultimate paragraph in this section, he was appointed ADM in the Ministry of Community Development, Cooperatives and Volunteers in April.

S. Orcherton: I've just got a question here. This is interesting information that we're discussing. But we've had a report from the auditor general on this issue, and now we've got a draft report respecting the committee's deliberations on this issue. I'm wondering how you came to include all of this information, albeit interesting, in this report. Is this something you've turned your mind to? Or have I missed something here? I mean, is this part of the auditor general's report -- different people getting appointed to different roles in governance? Or was the auditor general's report just a broader question of governance and accountability and things? How did we come to get to this level of detail in your presentation?

J. Schofield: It was part of the task I was assigned. The committee discussed the auditor general's report in March 2000. Writing the draft report involved looking at development since that time, so that when the committee came to consider the draft report, they would be up to date with what had happened.

R. Thorpe (Chair): Kelly, did you want to say anything?

[1530]

S. Orcherton: Let me just follow up, if I can. I'm not averse to getting information, but I'm somewhat surprised that the information is embodied in a report of our deliberations and considerations of the auditor general's report, when much of what you're telling me -- I don't think, unless I've missed something here -- has been considered by this committee. Nor was I necessarily aware of any of these issues; nor was I aware that any instruction was given to prepare a report in this fashion. So I guess I'm just surprised at how we've come to this point, which is. . . . Like I say, unless I've missed something at this committee, I don't recollect having any discussions around these questions at all. This is all new information to me, and while it may be something of value for the committee to look at, I don't know how it can be part of this report around the auditor general's report on social housing, governance and management. I think we've gone into a new area here, perhaps unintentionally.

K. Dunsdon: Well, I think what Josie was trying to achieve here is really. . . . Roles and responsibilities were a focus of the audit. What we always try to do in our office is make sure that these reports are as up to date as possible. I think Josie was just trying to bring the report up to date, and it does relate to that part of the audit. Therefore we felt that it was relevant.

R. Kasper: Just out of curiosity, has there been any additional feedback, Josie, from the board? You know, have they

[ Page 1597 ]

sort of passed comment, or are they aware of some of the information that you're presenting? Or is that part and parcel of the source of information in response to the auditor general's report? You're trying to tie both together. I don't know.

J. Schofield: I haven't been in direct contact with the B.C. Housing board, although it is relatively public knowledge that the resignation of the first CEO was announced -- the competition and so on. But the reason that the information was included for the benefit of the committee members was basically because, if my understanding of the parts of the governance audit is correct, there was concern in the past about the confusion of roles, about the independence of the agency from the ministry. I do think that it is, in a sense, relevant information to know that in fact that is still going on, albeit on an interim basis. Perhaps it would be useful if the OAG could comment.

T. Timms: Yes. At the time that we did the audit, as members of the committee probably remember, there were a lot of things going on with regard to social housing and the assignment of responsibilities. In fact -- you probably recollect -- in our audit report as published we had a significant subsequent event, because between the time we completed our fieldwork and the time we actually published the report, we knew that the transfer of housing responsibilities from the Ministry of Employment and Investment to the Ministry of Social Development and Economic Security had taken place. So we felt that we should at least acknowledge that in our report, although we said that we hadn't sort of evaluated yet how the effect of the transfer was going to work out -- although we did mention that we felt it did have the potential to resolve a lot of the governance issues surrounding the assignment of responsibilities that we described.

So it was a difficult kind of situation. One was dealing with sort of a moving playing field, shall we say. To the extent that maybe we'd identified some of the issues that were in a place of transition and had alluded to some of them in the subsequent event, maybe it would be fair to the committee to get some sort of confirmation that those events did in fact take place and, you know, to reflect the committee's deliberations in its current report.

As you probably are aware, we are doing a follow-up on our social housing report at the moment, more or less running concurrently with the one on FRBC. We will in our follow-up be alluding to a lot of the events that have taken place since the publication of our report.

So I guess I was just offering that to sort of try and explain. It's a difficult issue to resolve as to how much to put in, which will inform the committee in its deliberations, and how much maybe should be set aside for the purpose of this document.

[1535]

R. Kasper: It's hard to shoot a moving target -- right? Is that what you're saying?

T. Timms: Yes.

R. Kasper: Okay.

R. Thorpe (Chair): Carry on, Josie -- sorry, Steve.

S. Orcherton: I had to step outside for a moment; I apologize.

But as my colleague here points out, it's hard to shoot a moving target, and I suppose that's accurate. But I think there's some responsibility on the committee to ensure that the target we're reporting on is the one that we've seen. You know, that's why we have follow-ups, and that's why we have those kinds of things occur, and there's reporting back to the committee. But some of this information, for me, is new information that I haven't had a chance to deliberate on. Or there has been no reporting back from the good folks that come and keep us posted on how things are going.

I just wonder, with a little concern, how appropriate it is for us to have, in our report on the auditor general's report, issues that the committee really hasn't fully turned its mind to. I'm not sure it's appropriate that some of the things we haven't discussed are included in the report. I find them interesting. I think we should probably have further discussions about them, maybe by way of a follow-up or something. But it just makes it a little difficult for me to approve a report that has issues in it that I haven't had a chance to canvass witnesses about. I'll leave it at that.

J. Schofield: If I could just add, "Responsibilities of the B.C. Housing board, its chair and general manager. . . " was part of the auditor general's report. So from my perspective, the two paragraphs that are of concern to Mr. Orcherton actually do fall under that rubric. It's just that the general manager's position has been replaced by the CEO position.

Fortunately, I just have one more issue. This is regarding strategic and business planning, page 12. Earlier in the year some committee members suggested that B.C. Housing's corporate plan summary could refer to performance measurement reporting and that its strategic plan could incorporate the province's health goals, particularly the one relating to appropriate housing. Now, as far as I can tell, having reviewed the document submitted by B.C. Housing, those specific suggestions haven't yet been acted upon.

Under this topic of strategic and business planning, if I could make a general observation, there was some confusion at the March meeting about the titles of the plans being produced by B.C. Housing. I think the confusion still lingers, because what they refer to as the corporate plan is in fact two separate documents. There's something called the corporate plan summary.

S. Orcherton: Excuse me. I'm having trouble following. You said you were on page 12. Can you direct me to where on page 12 we are?

J. Schofield: The first two paragraphs.

S. Orcherton: The first paragraph reads: "The auditor general's report pointed out that legislation and. . . ." That's my page 12.

R. Thorpe (Chair): That's my page 12 also. Have we got the same reports?

J. Schofield: The paragraph I'm referring to, just two paragraphs come before, "Government Approval of Mandate and Strategic Plan. In response, some committee members. . . ."

[ Page 1598 ]

S. Orcherton: I don't have a paragraph. . . .

J. Schofield: The report I'm talking from is the one revised October 3, 2000.

S. Orcherton: October what?

[1540]

R. Thorpe (Chair): My report is dated September 2000, so we've got different reports here, unfortunately.

K. Dunsdon: I handed out all of the revised reports this morning. They should be on everyone's. . . . Everyone should have them.

J. Schofield: My apologies, Mr. Orcherton. We weren't talking from the same page.

R. Thorpe (Chair): Okay. "In response. . . " is where we are.

J. Schofield: Where was I?

Under the heading "Strategic and Business Planning," my first point was that the suggestions made by the committee members have not been acted upon yet. The first paragraph on the top of page 12 documents the suggestions made by the committee members.

As well, there was some concern or some confusion about the names of the plans voiced at the committee meeting in March, and I was trying to explain that in fact when B.C. Housing talks about its corporate plan, it's really talking about two separate documents. There's something called the corporate plan summary, which focuses on strategic outcomes and objectives, and then there's the multi-year business plan, which fleshes out the details.

For the committee's attention, I think the auditor general's report does contain useful definitions of strategic and operating plans derived from the Crown corporations secretariat. In summary, those are the four areas which I think might require the attention of the committee.

R. Thorpe (Chair): Arn, do you have any updates from B.C. Housing or the other organization?

A. van Iersel: No. As I said earlier, I didn't have this particular version, so I haven't forwarded it to B.C. Housing for their look-see. I could do that after today, in terms of getting their feedback.

R. Thorpe (Chair): Can staff advise me: did B.C. Housing see the draft? Did anybody see the draft besides committee members?

K. Dunsdon: Yep. Our office forwarded a draft to Tony at the auditor general's office and also to Mr. van Iersel.

R. Kasper: But how about B.C. Housing?

J. Schofield: No.

K. Dunsdon: Well, normally, as we just talked about with the FRBC thing, I think usually Mr. van Iersel will. . . .

R. Kasper: But he didn't get it.

A. van Iersel: I don't have the version we're discussing now.

[1545]

R. Thorpe (Chair): But you received the September 2000. . . . I'm just trying to find out here -- get a handle on -- why we are not functioning as well as perhaps we should.

K. Dunsdon: I should explain that what happened is that we circulated the report to all the committee members and the auditor general's office and the comptroller general's office. The auditor general's office came back to us with some comments, which we like to have ahead of time so that we can draw members' attention to them during the meeting -- which we've done with the report you have today. All the changes that the auditor general's office suggested are underlined in the report. However, we didn't get a response back from the comptroller general's office, which would really be B.C. Housing's comments passed on through their office. So the report you have today just reflects the auditor general's comments.

G. Farrell-Collins: So that's the only way it differs from the version that Arn has: the auditor general's comments are included and underlined.

K. Dunsdon: Exactly.

R. Thorpe (Chair): Well, I don't know. . . .

G. Farrell-Collins: So has the September draft been forwarded to B.C. Housing?

A. van Iersel: No, it has not.

G. Farrell-Collins: We need that to happen, do we not?

R. Thorpe (Chair): Well, I think one of the things we've tried to do here at this committee is make things as inclusive and as up to date as we possibly can. Therefore, since that hasn't happened, I would like to suggest that the latest October report be sent to them immediately and that we have their feedback immediately, so we can attempt to move forward here. But for us to sit here and spin our wheels without having heard back from B.C. Housing. . . . I just don't think it gives the comprehensive picture that we're looking for. Would people agree with that?

But I guess what I really have to say. . . . And I don't know who I'm directing this to, so if the shoe fits, wear it. Again, we've had this agenda. Although some of the stuff has changed, we've generally known the subjects we were going to be talking about, and we've had drafts out for some time. I think we have to collectively make a better effort at making sure that we get feedback, so that when we do meet, we have the most up-to-date information. People are travelling from all over the province.

G. Farrell-Collins: I agree with that. I also think, though, that probably the various staff at various positions of the government are used to getting stuff ready for us, only to find

[ Page 1599 ]

out that we don't really need it because we don't end up meeting. I would expect that if sometimes this stuff doesn't go out and come back in a timely fashion -- we can talk about the FRBC one as an example -- some of that problem may rest with this committee. We've now educated the bureaucracy to the fact that this committee often doesn't meet when it says it's going to meet and doesn't need the documentation when we say we need it. So it's partly our fault, as well, I would say.

R. Thorpe (Chair): It's a collective problem.

R. Kasper: So is it possible to have this sent over to the B.C. Housing people today, and then we could maybe get it done tomorrow?

R. Thorpe (Chair): Arn, I know you didn't hear. Mr. Kasper has made this request, a suggestion: is it possible to get this information over to the appropriate people at B.C. Housing and see if they can turn it around a.s.a.p., with the hope that we may be able to deal with it tomorrow? I believe that's a real outside. . . .

G. Farrell-Collins: It's unfair to even ask. It would be nice if it happened, but I don't think we should even ask for that.

R. Thorpe (Chair): Well, we can always ask. They can say it's impossible. They may say "sure." What are we going to do then?

Arn, do you think you could possibly do that? I mean, it's reaching for the stars.

G. Farrell-Collins: Mr. Chairman, I personally don't think we should even ask. It's ten to four, and we want this thing back so we can deal with it tomorrow. I just think that it's beyond the realm of fairness to even ask them to look at it in that short time frame. We've had this for some time now, and I don't think that's fair. If we want to send it to them, we should send it to them and try to put it back on the agenda at some other time and chalk it up to experience.

R. Thorpe (Chair): That will be November. Arn, could you make sure that they get the latest report and get back to us?

A. van Iersel: Yes, Chair. If I can get this electronically from Kelly, I'll send it off tonight with whatever deadline you feel comfortable with in terms of a response.

[1550]

K. Dunsdon: I'll send you the version that was updated as of today.

R. Thorpe (Chair): That's a confidential document; remember that. I've been advised by the Clerk's office.

T. Timms: Actually, just to pick up on what we were talking about before in terms of the information included in the report, as you probably remember, at the time that our report was discussed by the committee, there were a number of questions put to Jim O'Dea, the chair, and Peter Robinson, the then CEO, about what developments had taken place after the report had been issued. They provided to the committee a binder here containing examples of certain materials. Because these were after the date that we issued our report, we would not have alluded to them, but of course they would be materials which in many places are reflected in the report that you have before you at the moment for discussion. The committee will need to take a view as to whether this material can legitimately be included in here or whether just the substance that we included in our report is the subject matter of the deliberations.

R. Kasper: Can I suggest something? There's probably a way to deal with this which can encapsulate the updates that have happened since we last met and we had the Housing people here. There could be some kind of statement scattered throughout where the committee notes that such-and-such has happened since the Housing Commission witnesses appeared and since the auditor general completed his report. It's a kind of all-embracing thing. Then maybe we could say that bearing this in mind, there's no need for the auditor general to do a follow-up report, because we did it for him.

W. Strelioff: If you defer it to November 4 or 5, we'll have our follow-up report ready for you. It will encompass some of the issues that you've been discussing today, and we can lock them up.

R. Thorpe (Chair): Noting that there are no other items on the agenda. . . .

S. Orcherton: Isn't there something else we can do? We've got 50 minutes -- right?

R. Thorpe (Chair): No, actually, you have 25. Remember our conversation?

S. Orcherton: No, but the committee has 50.

R. Thorpe (Chair): The staff had organized themselves for these items on the agenda today. As in the past, we bring people here, and they sit here for hours and waste their time. Maybe if we could have a motion to adjourn, that would give Kelly some time to work on that FRBC stuff that we talked about, with the hope of passing that tomorrow.

Now, I guess in trying to make tomorrow productive. . . . Does everyone have copies of whatever they're supposed to have copies of? And the latest issues?

S. Orcherton: Is there an agenda for tomorrow?

R. Thorpe (Chair): Yes, there is an agenda.

S. Orcherton: I haven't got one, so I thought it might be helpful for me to have one.

R. Thorpe (Chair): You've probably got five or six of them. We're starting with education tomorrow, and then we'll try to do some draft reports.

Kelly, has everyone received the most up-to-date draft committee reports for the three subjects that we have on the board for tomorrow?

K. Dunsdon: Yes. I believe that the committee's draft report on the auditor general's annual report for '98-99 is not

[ Page 1600 ]

on the agenda anymore. That's been taken off because that committee draft report is not completed. However, the silviculture part or the FRBC report is completed. It's on the agenda for tomorrow, and it's been circulated to everybody.

S. Orcherton: This agenda that I've just got, then, under 2, "Further consideration. . . ." The second one, office of the auditor general and report, is now off. So this is an amendment to this agenda.

A Voice: And the review of the estimates process.

S. Orcherton: The review of the estimates process -- is that carrying on, or is that off as well?

K. Dunsdon: That's continuing tomorrow.

J. Weisgerber: And those have been circulated, have they -- those reports?

[1555]

K. Dunsdon: The last time the committee looked at that report was actually February. There was some debate about the format of the report, and members decided to take it away and think about it and come back. And then there was a decision, I think, made to put it off until resolution of the litigation. So, really, the report that's going to be considered tomorrow is pretty much the same as the report that was considered in February. The only difference is that I've included information about the Budget Transparency and Accountability Act so that it's up to date. Tomorrow morning. . . . Well, it's been updated, and we were going to circulate it tomorrow. I was going to draw your attention to the parts that have been changed, which are very minimal.

J. Weisgerber: So you will be circulating reports tomorrow morning.

R. Thorpe (Chair): If it's at all possible, Kelly, could we get it printed off this afternoon, so that members that chose to can have the opportunity to review it this evening? Is it possible for us to do that?

K. Dunsdon: It is done -- yes.

R. Thorpe (Chair): Okay. So maybe we could get them and distribute them, and everybody will start from the same place tomorrow.

S. Orcherton: So we should be finished early tomorrow, then.

R. Thorpe (Chair): We may.

S. Orcherton: We've got one item off the agenda already, so. . . .

R. Kasper: Housing.

S. Orcherton: Really? Maybe there's something else.

R. Thorpe (Chair): We need a motion to adjourn.

Motion approved.

The committee adjourned at 3:56 p.m.

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