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

TUESDAY, DECEMBER 5, 2000

                                                  * Denotes member present

 

Clerk:

Kate Ryan-Lloyd

Committee Staff:

Kelly Dunsdon (Committee Researcher)

[ Page 1675 ]

The committee met at 9:10 a.m.

R. Thorpe (Chair): Good morning, ladies and gentlemen. We'll call the committee to order. Just to give everyone fair notice, some of the work we expected to do today and tomorrow. . . . Because of witnesses not feeling that they had all of the material necessary to make the most comprehensive reports to us, that's been struck, and we'll probably reschedule that some time in January.

Also, I think it's fair to say that the Clerk's office has been extremely busy with a number of other committees and with the finance and budget committee travelling around the province. There's a very, very good chance -- and we'll see how it goes today -- that we will not be meeting tomorrow. But the one thing I would like to do, between myself and the Deputy Chair -- and we've talked briefly -- is try to establish as soon as possible our meeting dates in January so that everybody can get those in their planners.

I guess we'll start with Kelly Dunsdon. Kelly, if you could give us an overview of the status of committee business with respect to a number of reports and follow-ups, please.

K. Dunsdon: First of all, I'd just like to say that the earthquake preparedness insurance issues follow-up that was expected to happen today has been postponed. The Insurance Bureau of Canada is preparing a study on the exposure of greater Vancouver to fire following an earthquake. They've contracted a consultant to do that study. They had expected it to be done mid-November. Now they're expecting it to be done mid-December, so they'd be happy to come and talk about that study after their report is released.

What I want to do now is just very briefly go through the status of the committee's draft reports. First of all is "Earthquake Preparedness," obviously -- the committee's report on that topic. The follow-up will be postponed until we hear further from the Insurance Bureau and the Ministry of Finance. The second draft report that's in the works is the Y2K final report, which is expected to be completed in mid-January of next year. The B.C. Ferry Corporation follow-up of "Fleet and Terminal Maintenance Management and Operational Safety" is also expected to be completed in mid-January of next year. "Standards of Conduct in the Education and Health Sectors" is also expected to be completed around the middle of January. "Government Financial Accountability for 1998-99" is 50 percent completed at this time, so I would expect that it would be done probably late January. The "Protecting Drinking Water Sources" follow-up. You'll remember that some witnesses came back on November 7 to talk about the drinking water action plan -- members of the director's committee. A report on that follow-up is just in progress now, and I would expect that it would be done in early February. The last draft report that's in progress at the moment is "Fostering a Safe Learning Environment." It's expected to be completed in mid-February as well.

R. Thorpe (Chair): Any questions of Kelly with respect to any of these reports that she's made comments on?

Well, I guess, Kelly, you will be putting the afterburners on to ensure that as many things can be completed for the committee in January as is physically possible.

K. Dunsdon: Yes.

R. Thorpe (Chair): Of course, if we have drafts ready to go, which the committee members have to review. . . . If we could get those out before whatever we decide is going to be our January meeting, that would be most helpful. Thank you.

No. 2 on the agenda is the status of written follow-up reports received from the auditor general.

[0915]

K. Dunsdon: Thanks. What you'll see in front of you today is a binder that our office has put together. The binder includes all of the follow-up reports that we've received from the auditor general's office under the new follow-up process. I think Morris Sydor may like to speak to this as well. He's here today.

First of all, I will go through all of the reports that we have received to date and that are in your binder this morning.

Just a bit of background for the new members: in the spring of this year the committee worked with the offices of the auditor general and comptroller general to develop a new, streamlined procedure to follow up on the status of recommendations made by the auditor general resulting from performance and compliance audits, as well as the status of the committee's recommendations made in its reports. According to the new follow-up procedure, after an audited organization has appeared before the committee, the auditor general's office will contact that organization to request a written progress update on the status of recommendations. Usually, that's required within a period of about five months.

Progress updates are expected to address the status of each recommendation made by the auditor general and the status of any recommendations made by the committee. The committee can also decide to call witnesses to receive follow-up information in person, which has happened on a few occasions to date.

Once the auditor general's office has received a written progress update, the information in it is reviewed to generally confirm that it is fairly stated. The progress update, along with the auditor general's review of it, is then forwarded to the office of the Clerk of Committees, the office of the comptroller general and distributed by our office to all committee members. That's the material that you have in the binder in front of you today. It's also been previously circulated, but just for your convenience, we've put it all together in one package.

It's expected that written progress updates and the auditor general's review of them will be tabled periodically in the House, generally on a semi-annual basis.

According to the follow-up procedure, upon reviewing follow-up material received, the committee may decide it wishes someone to reappear before the committee to provide further information or to provide that information in writing.

The purpose of my presentation today is to go over what the committee has received to date, so that the committee can decide if it wishes to pursue any further information about the recommendations.

First of all, there are three areas where follow-up has been done outside the written follow-up procedure, in accordance

[ Page 1676 ]

with the wishes of the Chair and the previous Deputy Chair. The first of those was "B.C. Ferry Corp. Fleet and Terminal Maintenance Management and Operational Safety." This is an auditor general's report that was originally issued in 1996, and a follow-up report was done in mid-1998. The committee reported on their consideration of it in mid-1999. You'll find this information, I believe, at tab 1 of your binder. Oh, sorry -- it's not in the binder, because it was done in person. But I understand that the auditor general's office is planning to send a follow-up package on this topic to the committee shortly.

The second item that was considered by the committee is "Earthquake Preparedness." This was a report issued by the auditor general in November of 1997, which contained 60 recommendations. The committee's own report was tabled in June 1999 and contained 24 recommendations additional to those made by the auditor general. The auditor general provided a follow-up package to the committee on the status of its nine strategic recommendations in May 1999, and then on May 16 of this year the committee heard from witnesses on this topic, particularly representatives of the provincial emergency program, the Ministry of Finance and the Ministry of Health. At that time the auditor general supplied the committee with a follow-up package indicating that none of the recommendations made by the committee had been fully implemented. More follow-up is expected to occur in January, when representatives of the Insurance Bureau and the Ministry of Finance appear before the committee.

[0920]

The third item. . . .

G. Farrell-Collins: May I just ask a question, Kelly? I'm sorry.

K. Dunsdon: Sure.

G. Farrell-Collins: I just want to be sure. . . . You explained that the reason for the delay in that presentation was the Insurance Bureau. Is that the only reason? Was the Ministry of Finance. . . ? Did they have any reason to delay it at all either, or was it just the Insurance Bureau?

K. Dunsdon: No, the Insurance Bureau contacted me originally, wanting to delay it. I did ask the Ministry of Finance to provide a comment as to whether they'd feel comfortable appearing and speaking about the insurance issue, and they said they felt the meeting would be more productive if they could see the draft Insurance Bureau report first.

G. Farrell-Collins: Okay. I was just curious, because we had a presentation, a follow-up from them at one point, and it didn't seem that much had been done. I just wanted to make sure that it was where the problem was, that's all. That's why I asked.

K. Dunsdon: Okay. The third follow-up that the committee has pursued by calling witnesses is the protecting drinking water sources issue. The auditor general's report on this topic was issued in 1999, and it contained 26 recommendations. The committee's report was tabled earlier this year and contained two recommendations additional to those made by the auditor general. One of those was asking for a six-month follow-up, which has occurred already, in November. And one was relating to MTBE testing.

The auditor general's follow-up package, containing a written progress report from the directors' committee on drinking water, was received by the committee in November of this year. The directors' committee considered three of the auditor general's recommendations to be fully implemented. The remainder of them were considered partially implemented or addressed by alternative actions. In particular, one that was considered to be addressed by alternative actions was the recommendation relating to the designation of a lead agency for drinking water in trusts. The directors' committee considered the committee recommendation relating to MTBE testing to be partially implemented. You'll see the information about that in your binder.

In terms of the written follow-ups that have been received in our office, we've received the following. First of all, "Crown Corporations Governance Study" -- this was a report done originally by the auditor general in 1996, which contained one broad recommendation: that the government review the current system of Crown corporation governance and develop a legislated model to cover the roles and responsibilities of all Crown corporations. A follow-up report was done by the auditor general in mid-1998. And the committee reported on the issue in mid-1999 and made five recommendations in addition to the auditor general's recommendation.

In June of this year the committee received a package from the auditor general, containing a written progress report from the deputy minister to the Premier and the auditor general's review of that information; you'll see that in the binder as well. You'll see that of the four recommendations made by the committee, two are underway, one is ongoing, and the other one has been addressed in the Budget Transparency and Accountability Act. The written progress update indicates that the auditor general's recommendation has been addressed in the act as well.

Secondly, the Vancouver Island Highway project follow-up has been received. The auditor general had made four recommendations regarding assessment of design, design management, planning standards and the opportunity for innovation within standards. The committee made two recommendations that were additional to those. In June of this year the committee received a package containing the written progress report from the ministry and the auditor general's review of that. You'll see that the ministry considers the committee's recommendation to be implemented, two of the auditor general's recommendations to have been implemented and the remaining two auditor general's recommendations to be in progress or of a continuing nature.

The third follow-up item is "Executive Severance Practices." This was a report issued originally by the auditor general in 1996. A follow-up was done in 1999, and the committee reported on it in mid-1999. The auditor general had made seven recommendations in his original report relating to severance guidelines, compliance with those guidelines and the reporting of information to the Legislative Assembly. The auditor general's 1999 follow-up report and the committee's consideration of it indicated that two of the recommendations remained outstanding. The committee's report tabled earlier this year recommended that those two recommendations be

[ Page 1677 ]

addressed and also made an additional recommendation relating to collection and analysis of severance information and exempt employment contracts.

[0925]

In June of this year the committee received a package from the auditor general containing a written progress report from the Public Sector Employers Council secretariat and the auditor general's review of that report. You'll see in the package that the secretariat considers both of the auditor general's recommendations to be implemented. Although this is isn't specifically addressed in the written progress report, the report does indicate that the secretary views the committee's recommendation about information collection as an ongoing recommendation that's in progress.

The fourth follow-up item that we've received is pertaining to loss reporting in government. The original report on this issue was released in 1998 and contained seven recommendations to address what the auditor general viewed as incomplete reporting of losses in the fiscal year ended March 31, 1997.

Recommendations related to timeliness and completeness of reporting and reporting to appropriate authorities. The committee's report on this issue was tabled in 1998. In June of this year the committee received a package from the auditor general containing a written progress report from the Ministry of Finance and the auditor general's review of that report. So you'll see in the written progress update that you have in your binder that the ministry considers six of the seven auditor general recommendations to be fully implemented and one relating to the publishing of annual summarized statistics of reported government asset losses to be partially implemented.

R. Thorpe (Chair): Excuse me. Arn, can you give us details on the one that's partially implemented?

A. van Iersel: In the binder that you have, it does include the ministry's response. Loss reporting is under the risk management branch of my ministry. They have now begun annual reporting of losses, but they expect to expand this to include the Internet, as it says here. So it's not complete; there will be more loss reporting through risk management in the future.

R. Thorpe (Chair): What's the target date for having that completed?

A. van Iersel: I don't know myself. I'd have to check with them. I'll do that.

R. Thorpe (Chair): If you could, thank you.

Sorry, Kelly, carry on.

K. Dunsdon: The fifth follow-up item I have here on my list that is also in your binder is the Motor Dealer Act. There was a report issued on this topic in early 1998. That contained 18 recommendations relating to registration of dealers under the act, operation of the motor dealer customer compensation fund and monitoring compliance with the act.

The committee's report in mid-1998 did not make any recommendations additional to those made by the auditor general. The auditor general issued a follow-up report on the status of recommendations in November 1999.

In June of this year the committee received a package from the auditor general containing follow-up information. You'll see from the report in your binder that the ministry now considers all of the recommendations made in 1998 to have been implemented.

The sixth follow-up report that we've received is relating to revenue verification for the social service tax. This was a report originally issued in June 1996, containing seven recommendations pertaining to identification of unpaid taxes, prosecution for non-compliance, management information systems and analysis of the gap between tax collected and tax due. A follow-up review was done by the auditor general in 1998. The committee tabled its report on this topic in 1999 and made an additional recommendation regarding efforts to consider social service tax revenue issues in the context of the underground economy.

In June of this year the committee received a follow-up package. You'll see from the written progress report that the ministry considers four of the seven recommendations made by the auditor general to be fully implemented and considers the others and the committee's recommendation to be in progress or ongoing.

R. Thorpe (Chair): With respect to that, out of the recommendations that are partially implemented, are there any that anybody could comment on, which they would deem to be significant? It has been some time now. What is taking so long to implement those? Does anyone know?

M. Sydor: I don't have that specific information with me, Mr. Chair. We didn't bring the specific reports with us, so I'm not able to address that point.

[0930]

G. Farrell-Collins: I was just wondering if somebody was going to, at some point, be able to answer that for us.

R. Thorpe (Chair): Morris, could you undertake to get that information for us?

M. Sydor: Yes.

R. Thorpe (Chair): Thank you.

Good point, Gary.

K. Dunsdon: Okay. The second-last follow-up report that we've received is regarding trucking safety. This was a report originally issued in December of 1996 containing 23 recommendations about measuring and evaluating program results, establishing trucking safety standards, removing unsafe trucks and drivers from the road and looking for better ways to achieve trucking safety. The committee also tabled a report on this topic in 1997. A follow-up report was done by the auditor general in 1998. The committee did its own follow-up report in mid-1999 and made four recommendations additional to those made by the auditor general. Those related to establishing a partners-in-compliance program similar to ones in other jurisdictions, expanding operating hours for portable weigh scales and use of national safety code information.

A progress report was received in April of this year and reported in another committee report that was tabled in the

[ Page 1678 ]

spring of this year. Then in June the committee received a follow-up package from the auditor general indicating that the corporation considers ten of the auditor general's recommendations to be fully implemented, nine to be partially implemented and three as being addressed by alternative action. One has resulted in no action, and that relates to a recommendation to look at shifting the focus of enforcement to moving violations, in particular by examining a U.S. model where this function lies with law enforcement and police agencies. I understand that ICBC disagreed with this recommendation. The corporation considers the committee's recommendation relating to National Safety Code information to be fully implemented, while the recommendations relating to implementation of a partners-in-compliance program and expanding hours for portable weigh scales are partially implemented.

R. Thorpe (Chair): Just one second. I know this is a subject that has been near and dear to Mr. Kasper. Rick, did you have any comments on this particular. . . ?

R. Kasper: No. It's all good stuff.

K. Dunsdon: The last follow-up package we've received is pertaining to social housing. The original report by the auditor general was issued in November of '99, containing 15 recommendations relating to roles and responsibilities in governance of the B.C. Housing Management Commission and the Provincial Rental Housing Corporation and the role of the B.C. Housing board. The report also contained 12 recommendations relating to the management of social housing subsidies.

In November of this year, when the committee was actually considering its own draft report on this topic, we received a package containing follow-up information. You'll see that in your binder. It indicates that B.C. Housing considers ten of the 15 recommendations made by the auditor general to have been fully implemented, four to be partially implemented and one to be addressed by alternative action. That's with respect to the governance part of the audit. With respect to the subsidies part of the audit, one of the 12 recommendations had been fully implemented, and the others are still in progress.

I forgot to mention one of the other follow-up packages we've received; that's the last one in your binder there. It has to do with FRBC planning and accountability and the silviculture programs. There are 19 recommendations about planning and accountability, 21 regarding the silviculture programs.

The committee received a follow-up package in October of this year, before its own report was approved, indicating that nine recommendations required further follow-up because they were either partially implemented or of an ongoing nature. That's with respect to the planning and accountability part of the audit. Of the 21 recommendations relating to silviculture programs, eight were found to require further follow-up for the same reasons. You'll see that at the last tab of the binder that you have today.

[0935]

Finally, I just want to mention that I've received information from the auditor general's office about follow-up packages that we're expecting to receive within the next couple of months: collection of overdue accounts receivable, standards of conduct in the education and health sectors, Y2K final report follow-up, pulp and paper mill effluent permit monitoring. These are expected to be forwarded to our office probably within the next month. "Managing the Woodlot Licence Program" -- the follow-up package on that has been deferred to the spring of next year pending finalization of an evaluation framework for the woodlot licence program. "Maintaining Human Capital in the B.C. Public Service" -- I believe Morris may want to speak to this one.

M. Sydor: I think that one in particular reflects, I guess, some of what we found as we had gone through the new process for doing these follow-ups. There are a number of reports that we haven't been able to meet the six-month window in, and there are a number of reasons for that. There are basically three factors that come into play. One is the ability of our office to have resources available at a particular time. The second factor is the particular state that an audit organization may be at with regard to implementing recommendations. As Kelly just indicated, there are a couple that we are deferring because the timing just wasn't right, even though the time had arrived. If we waited a few months, we would get better information and the committee can have a more complete discussion of where that particular audit organization is at.

The third one is the state of the Public Accounts Committee's reports. As Kelly indicated right at the beginning, there are a number of reports that she is going to be completing over the next couple of months. Some of those reports may have recommendations in them that we would include in our normal follow-up, and right now we are in fact following up a number of those. My sense is that we need to look at the process and maybe make some adjustments to it.

Speaking specifically to the human capital one, that one -- in terms of why we don't have a report at this stage -- gets back to one of the points I was addressing, and it's our capacity to have the resources available to do a follow-up at a particular time. The staff members who were involved in that particular audit are involved in new projects, and with the changes underway in our office, there were additional assignments involved as well. So we just haven't been able to devote somebody to carry out the particular review for that particular audit.

That one, in and of itself, tends to be a lengthier review than some of the others because we're talking about four ministries and PSERC. So there are five entities that are involved and that would require about a month and a half of somebody's time to go out and gather the information. We just weren't able to allocate somebody's time to get that complete. So the state we are at with that particular one is that we have a response in hand, but we just haven't been able to do the review work necessary to see whether the response is reliable and is information that the committee can rely on.

G. Farrell-Collins: I have a question. I've thought of this for some time since serving on this committee. My impression as an individual member of the committee is that over time, I think government has become better at responding to the recommendations that are made by the auditor general -- although there are some noticeable lapses -- and that this committee has taken it upon itself, in an attempt to ensure that those recommendations are in fact acted upon and the auditor general reports don't just end up on the shelf somewhere, to call for updates and progress reports on a fairly regular basis.

[ Page 1679 ]

I think the effect of that has been that the work of this committee has sort of snowballed, layer upon layer. There are times when we perhaps need to be a little more disciplined ourselves in saying: "Okay, that report has been around enough. It has been for the most part implemented, and we don't need another update." That's just my personal impression from watching the workload of this committee. I think the workload of this committee has also been affected by the number of reports the auditor general has been required to do because of the way public funds have been managed.

I'm just wondering, Wayne or Morris, if you have had any thoughts on that. I don't know if that's what you were commenting upon when you said that we needed to look at the structure of what we were doing.

[0940]

M. Sydor: That's certainly one of them. You're right; there have been a lot of reports. I think what we have seen over the last seven or eight months is that there has been some confusion at times as to the reports that we're looking at and the state that things are at and whether we should go with a follow-up or not. Part of that had to do with startup.

I think the guide is very good in terms of outlining the process on one level. What the guide doesn't do is get into the sort of judgmental decisions that you're referring to. At what point do we have enough information that we can say, "Well, we don't need to follow up this particular recommendation anymore" -- or, on a broader scale, this particular audit report?

I think that's one of the things that over the next few months we should have a look at. I know that in past reports, when we were reporting annually, we had a system within our office where we would look at the recommendations. Even if they weren't fully implemented, if we could make a judgment that they were far enough along that we were comfortable that the ministry was moving in the right direction and that doing another follow-up wouldn't provide any more substantive information to the committee, we would cut it off at that point.

I don't think it's clear in the current guidelines that we still have that capacity. But certainly at some point, the information that you're getting is of diminishing value. There's just so much more improvement they can make.

Some recommendations, as well, we've noted, tend to be fairly complex and take a few years to implement. And all you're getting is information saying: "We're working on it; we're working on it." So at some point, I agree, we need a system where we can both agree -- committee members and our office -- that we've gone as far as we should in this particular case, using our resources efficiently, because it is a big burden on the ministries as well.

Part of the delay in some cases has been that even though we sent a request out at a particular time, the people just weren't able to deal with it right away. So they put it aside for a month or a month and a half, and then they got back to it. So we've gotten all the responses we've asked for, but the timing hasn't been as we initially anticipated, because there are a lot of complexities involved on everybody's side.

G. Farrell-Collins: I know that I personally, right now, take a lot of time. I personally find that there are reports and updates where really nine-tenths or seven-eighths of the recommendations have been implemented, and we get a follow-up and another follow-up. Quite frankly, I would rather spend our time and have your office spend your time on those reports that seem to be dragging, like the earthquake preparedness one.

The interaction between the Ministry of Finance and the Insurance Bureau is one that seems to be taking a long time to move along. I'm not sure if that's because it's just complicated or if that's because there isn't a real will to move on it. I would rather see your office and our committee perhaps put more pressure where pressure's required, rather than have our time used going through the third iteration of an update. But I don't know what the Chair thinks about that.

R. Thorpe (Chair): Yeah, I have thoughts about that, but I'll listen to other people. Wayne?

W. Strelioff: Members, thanks. I also have been watching the follow-up process as an interested observer, in terms of it being new to me as well. I think the follow-up in general has put rigour to making sure that change does happen in government. So that part is very good, because quite often reports just sit on people's desks without the follow-up. Having people come in and explain publicly what's going on is a very good step.

Internally, we've been discussing possible changes to the follow-ups. One could be that the follow-up doesn't happen until the committee's report actually is finalized. Sometimes we do follow-ups while the committee still hasn't finished its report, and then we have a follow-up a week or a month after the committee's report has been locked in. That tends to get confusing and also tends to mean that you're addressing the same issue over and over again. So we should talk about that to see if there's a better way of handling it.

The other is the complexity. When you ask for a follow-up, the standard is six months. Well, on some recommendations that involve multiple agencies or multiple ministries, it may be that it should be longer. Right at the point of a decision to make the six-month follow-up, maybe the committee should discuss whether a longer follow-up should be considered, and maybe our office could provide a recommendation at that moment. So the standard could be six months, but there might be some issues that are more complex that would just require a longer time. And then, as you mentioned, when is enough enough?

[0945]

Internally, we talked about coming back to you, saying, "We think enough is enough. Perhaps circumstances have changed in the ministry. Let's just move it aside for now," as well as bringing to your attention issues or reports where it looks like things are being stalled. So there are ways of strengthening what seems to be, though, a good process for making sure that action happens.

G. Farrell-Collins: I served briefly on this committee shortly after the '91 election for about a year. When I came back to this committee about a year and a half or a year ago, I was pleased to see that the follow-up process was actually working. I think that initially a lot of these recommendations just went off into the ether; nobody paid any attention to them.

[ Page 1680 ]

I expect that having the committee follow up has increased the seriousness with which ministries take the recommendations that come from your office. But I do think that there needs to be some incentive there. For those departments that act quickly, we'll get out of their face, and they can get back to work. For those that don't, we're going to be all over them, and your office will be all over them. I'm just wondering if there's maybe a more efficient allocation of resources.

R. Thorpe (Chair): I'd just like to say a few words. First of all, if my memory serves me correctly, it was the member for Malahat-Juan de Fuca and myself who got quite concerned, at one Public Accounts meeting, that we'd been talking about the same things for a number of years and there didn't seem to be a whole bunch of action. I think that's probably where the spawning of the idea of follow-up came from.

It would be my view that once again it tends to be the Canadian way to get hung up on process. Perhaps we might want to focus some of our efforts on action and results. I would expect, from a personal perspective, that with the professional staff in the auditor general's office and the comptroller general's office. . . . When this thought was developed, I don't think anyone thought that this was the perfect solution to the situation. I think these things have to evolve.

So I would more than welcome whatever the next steps are to make it more efficient, to make it results-oriented, to make it action-oriented, not to get bogged down. I fully support "enough is enough." But things like, for instance, the protection of drinking water. . . . I don't think, as a committee, that we can keep our focus on that subject hard enough, and I think the public of British Columbia expects us to do that. So I would look forward, as I'm sure other committee members would, to the 2001 rendition of how the follow-up process is going to work, how it's going to be more efficient and improved. Improvement is a continuous process. I would look forward to the inputs from the professionals in the auditor general's office.

I am very concerned, though -- very concerned. And I would like some kind of an answer to this question. The first reason that came out of Morris's. . .was a lack of resources. I would like some explanation of what that meant with respect to not being able to keep on top of the follow-up -- the lack of resources. I don't know whether you want to answer that, Morris, or whether the auditor general would like to answer that.

M. Sydor: Let me answer first. I was talking about a specific project. I think that in the main, we've been able to accommodate all the follow-ups that we've sent out. The difficulty with that particular one, as I indicated. . . . The human capital one covered a specialized area. It covered off four government entities. It was a governmentwide audit. The staff members who were carrying that out are moving on to a new governmentwide project, looking at a very similar issue -- work environment issues.

I guess we made the decision that that was more important in terms of keeping up with that, trying to get that off the ground and dealing with the follow-up information at that particular time. And the nature of the audits are such that we can't pass it off to somebody else who may be available to carry out some work. You know, it's very specialized. You have to have knowledge of what went on beforehand, why you came to particular conclusions.

[0950]

So we want to make sure that when the follow-ups are done, they're done by the staff who have knowledge of the audit and why we came to the particular judgments that we did. And then, as well, as I indicated, there were other responsibilities that were required to be undertaken at that time. For that particular reason. . . . We're only talking about that one audit. I mean, generally we have been able to take staff and assign them to do follow-up work. We've responded in every other case.

R. Thorpe (Chair): So your comment was a one-off rather than a generalized statement.

M. Sydor: It dealt with that particular staff member and her specialization, her skills and her need to be on that. She wasn't able to do that. Again, our judgment was that we have to continue with the road that we're going on. We thought we'd be able to get her onto that at some later date, but it just hasn't happened.

R. Thorpe (Chair): Yes, Wayne. Did you want to say something?

W. Strelioff: That's correct. I've loaded up that person with a number of different responsibilities, and she's bogging down a bit.

R. Thorpe (Chair): So it's your fault.

W. Strelioff: It's my fault.

R. Thorpe (Chair): Thanks for that clarification, Morris and Wayne.

With respect to the. . . . And thanks, Kelly, because this is a very comprehensive document. In the nature of this committee, because we haven't gone through all the details of this, it would be my suggestion to the committee that we make this available through the Clerk's office to anyone from the public that would want to be kept up to date, instead of loading all of this onto the Internet. So if. . . . Yes, Morris?

M. Sydor: In that regard, I would just like to add -- I forgot to mention -- that we are in the process of developing our own semi-annual package; that will be out probably within the next week to two weeks. And we are going to be putting that on our Internet site. So we're basically going to be developing a similar package that we're going to have tabled, and that will be available to the public through our web site and to other Members of the Legislative Assembly.

R. Thorpe (Chair): Good. So if no one has any problems, I would ask Kate of the Clerk's office to make sure that this is available to those in the public that are interested in it, because we are Public Accounts.

Okay, what's next on the agenda here? It's the consideration of the draft committee report. Is that correct, Kelly?

K. Dunsdon: Okay. Today we've handed out another copy of the fast ferries report; you'll remember that the com-

[ Page 1681 ]

mittee considered this on November 8. At that time the Chair and Deputy Chair agreed to meet with staff in our office to discuss changes that they would like to see to the report. So the copy that you have in front of you today reflects those changes. I'll just go through those now.

The changes also reflect comments that I received from the auditor general's office and from the Crown corporations secretariat, which I did go through at the last meeting. No one had any objections to those.

The first change you'll see is on page 2 of the report. In response to comments I received from the auditor general's office, a statement that had read, "The decision to proceed with fast ferries was more a ministerial directive than a board decision," has been moved to be included with a point about lack of information as a key characteristic of government's failures, which is the way it had been worded and where it had been placed in the auditor general's report. I've also checked the content of this section of the draft report at the request of the Deputy Chair, just to verify that everything in there is reflective of the auditor general's report. I can confirm that all of the information in there is indeed reflective of that report.

On page 2 you'll also see that I've inserted some information to reflect the debate around Mr. Kasper's motion of January 25. In particular I've included the former auditor general's statement that he had not heard anything from witnesses before the committee that would cause him to change the content or findings of his report.

On page 5 of the draft report, in the second full paragraph, "The Crown corporations secretariat had disagreed with the statement that fast ferries were identified as the best solution without appropriate risk analysis being conducted," I've changed the wording in that to mirror that in the auditor general's report, specifically to read that instead of leasing a fast ferry for trials, the plan called for the immediate construction of three fast ferries.

[0955]

On page 5 of the draft report, the fourth paragraph, I've changed the last line to state that the auditor general's review indicated that while more information was provided, it was not in the auditor general's view a reasonable level of information supported by reasonable levels of analysis. This is based on the discussions the Chair and the Deputy Chair had in our office on November 8. I've also removed the incorrect references to resignation of the CFI board, on pages 12, 20 and 24 of the draft report, to make it clear that in fact the board was replaced for governance reasons, as cited by Mr. Rhodes.

On pages 20 and 21 of the report. . . . The auditor general's office had commented on a list on those pages under the section "Information Provided to the CFI and B.C. Ferries Board of Directors." The first list directly cites the auditor general's findings regarding three areas in which the board was provided with insufficient or misleading information. The second list, on page 21 -- that was in the original draft report -- elaborates on those points. Information in this list was taken directly from the evidence of various witnesses before the committee.

On page 20 of the report, third full paragraph, the last line has been changed to indicate that fast ferries were an acceptable option among a range of options, as mentioned by the Crown corporations secretariat.

Finally, on page 27 of the report, at the November 8 meeting of this committee I'd mentioned that the Crown corporations secretariat had provided a comment on the draft report to the effect that there was no reference under "Recent Developments" to the fact that there'd been legislative amendments to the Financial Administration Act and the Financial Information Act, in response to the Deloitte capital management process review. I have obtained some more information about those amendments, and I would propose including a brief paragraph about those in the report as well.

R. Thorpe (Chair): Where is that, Kelly?

K. Dunsdon: That's on the last page of the report, page 27: "Recent Developments."

R. Thorpe (Chair): So have you added a paragraph here?

K. Dunsdon: I'm just trying to get some direction on whether you'd like me to add more information about actions taken in response to the Deloitte report.

G. Farrell-Collins: I guess the question, though is: are the two paragraphs that are contained at the end of page 27 what you're talking about? Are you requesting a decision by the committee if they want more information?

K. Dunsdon: Yes.

G. Farrell-Collins: Which?

K. Dunsdon: Which what? More information?

[1000]

G. Farrell-Collins: What I'm asking is. . . . You made comment about the actions of the government relating to the Deloitte Consulting capital plan. What I'm asking is: do the last two paragraphs on page 27 reflect that comment, or are you asking if we want additional comment put in?

K. Dunsdon: I'm asking if you'd like additional comment.

G. Farrell-Collins: Okay. Thank you. I don't think it's necessary.

R. Thorpe (Chair): I don't know. Dan, do you have any views on that?

D. Miller (Deputy Chair): I don't think it has a material effect. If the report is more complete by including changes that have been made, I'm sure Kelly could just put that in -- a few sentences.

R. Thorpe (Chair): Well, we'd have to get. . . . Yes, Gary.

G. Farrell-Collins: I'd just read earlier, too, those last two paragraphs, and I think it does have that information. I don't know what additional information might go in. It seems to me that that's pretty clear. If somebody's got a suggestion, that's fine.

R. Thorpe (Chair): Yeah, if someone's got a suggestion. If not. . . . I mean, we are at the risk of having to bring back

[ Page 1682 ]

another draft and carry on and carry on. I did hear someone say earlier today: "Perhaps enough is enough." So unless anyone has any serious and loud objections, since it wasn't raised at previous meetings, I think we should just carry on as is.

D. Miller (Deputy Chair): Fair enough. I mean, the letter says in the last sentence that Kelly's obtaining more information and will include a brief paragraph unless you direct otherwise. So I'd take that pro forma and say "fine." But if the committee doesn't want to do it, then I guess I could be persuaded by that argument as well.

G. Farrell-Collins: I guess the issue is: if we put another paragraph in, then we've got to go and bring the committee report back for approval. I just think, for the sake of a paragraph, we might as well just approve it and move on. And then it's done.

D. Miller (Deputy Chair): Okay -- fair enough.

R. Thorpe (Chair): Enough's enough?

D. Miller (Deputy Chair): Gee, I don't want to get hung up on process, Mr. Chairman. I thought that actually the addition could be made without the report coming back. But I guess if it can't and you want to close the book, let's close it.

R. Thorpe (Chair): If there's no other discussion, then it would be. . . . Kelly, did you have any other things on the report?

K. Dunsdon: No, those are all the changes that have been made.

R. Thorpe (Chair): Thank you. Then we would need a motion to accept and adopt the report as presented. Do I have such a motion?

D. Miller (Deputy Chair): Yeah.

R. Thorpe (Chair): Thank you, Dan.

Motion approved unanimously.

R. Thorpe (Chair): Also, I need a motion for the Chair to present the report to the Legislative Assembly at the earliest opportunity. Do I. . . ? Pietro, thank you.

Motion approved unanimously.

R. Thorpe (Chair): Okay, the next item on the agenda is from the auditor general of British Columbia: a briefing on the mandate of the auditor general.

W. Strelioff: If you remember our report on the implementation of the recommendations of the budget process review panel -- the Enns panel -- in that report, I said I was reviewing the structure and capacity of my office to support the new directions envisioned by the panel, as set out in the Budget Transparency and Accountability Act. I also said in that report that I would ask you, as representatives of the Legislative Assembly, to confirm in legislation the authority and independence our office needs to effectively fulfill our responsibilities to you.

In that report on the implementation of the recommendations of the Enns panel, I also linked a proposal on legislative changes. That's the document that I think you have that's dated October 20. These changes to the Auditor General Act, which encompasses the mandate of our office, have been discussed within my office and with government officials for over 12 years. So from my perspective, I think the time has come to make the necessary amendments to make sure that our office is better able to serve the assembly in the future.

The proposals have a couple of main thrusts. It's designed to strengthen the role of the Legislative Assembly in ensuring how best to audit the government of the day, and the proposals are consistent with, and complement, the trend to a more accountable and transparent government as envisioned in the Budget Transparency and Accountability Act that has been recently endorsed by you.

[1005]

In addition to updating and modernizing the Auditor General Act. . . . Remember the Auditor General Act has remained largely unchanged for over 25 years; there are a lot of practices that have changed since then. So in addition to modernizing the mandate through the Auditor General Act, my proposals have two key thrusts. The first is designed to place the assembly, through my office, in charge of who audits government and for what purpose, instead of having that to be largely controlled by the government of the day. And the second proposal -- or the thrust of the proposal -- is designed to place the assembly, through this committee, in charge of deciding the resources allocated to my office for the purposes of helping you hold the government of the day accountable.

In general, the proposals are also designed to strengthen the independence of my office from the government of the day with respect to funding and staffing decisions. But the main thrust of these proposals is to place the assembly in charge of who audits government and the audit process, and to place the assembly in charge, through this committee, of deciding the resources allocated to the auditor general's office.

By themselves the proposals are revenue-neutral. However, as we discussed at the last meeting, I do share my predecessor's concern with the resources provided to my office and will be proposing an increase in our funding. From my perspective, our audit coverage certainly is weak, and I'm particularly concerned about our capacity to meet all of the advancing deadlines and initiatives contemplated in the Budget Transparency and Accountability Act.

I'm also worried about the increasing complexity of financial transactions and new information systems and just the ability or capacity of our office to meet the demands that come with the complexity of financial transactions and the new information systems that are abounding throughout the system. Also, I'm particularly concerned about the degree to which we can now assure you about management and accountability practices in our system of health and education.

[ Page 1683 ]

The changes proposed in this update to the Auditor General Act again are designed to strengthen the role of the assembly in holding the government accountable, place the assembly in charge of who audits the government and place the assembly in charge of deciding resources.

I do ask you, as a committee, to support my proposals, and I ask you to adopt a recommendation that officials of the Ministry of Finance and Corporate Relations work with the office of the auditor general to prepare a bill entitled A Proposed New Auditor General Act that could be introduced to the Legislative Assembly in its spring session. I also ask you to support the recommendation or request that you ask my office to provide the committee an update on the progress being made in preparing a new act.

That ends my opening comments on the mandate and the proposed changes to the act.

G. Farrell-Collins: This has been around a long time, in various formats. I really want to be on the record on this that I think it's long past time that we dealt with many of the issues that are here.

We have a real problem in this province, I believe, in that we've created these officers of the Legislature -- the auditor general being one of the first, but I think there are seven or eight now -- and they have absolutely no control over their budgets. I think having the auditor general go cap in hand to Treasury Board is wrong. The budget of the auditor general should be set by the Legislature. I believe the comment in this report that the auditor general come before the Public Accounts to present and defend his or her budget and that it be approved, amended and approved, or denied by this committee is a far better way to do it than to have to go to Treasury Board. Independence of the office is important, but there still needs to be some fiscal restraint and accountability, and I think that could be achieved by using that committee.

[1010]

I want to raise two other issues too, and those are sections 6 and 7 of the proposed new act. That's on page 13 of the document you presented here today and is the resignation, removal or suspension of the auditor general in 6 and the appointment of an acting auditor general in 7.

Section 6 is a pretty significant section. To remove or suspend an auditor general would be a pretty significant undertaking by the Legislature and, hopefully, would never have to happen. Section 7, the appointment of an acting auditor general, is also a serious appointment when that's made. We had a situation here, I guess it was very early in 1996, where our conflict-of-interest commissioner had expressed his wish to resign and get on with other things in his life. The Legislature wasn't sitting, and the new Premier at the time appointed an individual who was clearly unacceptable to a significant number of the members of the Legislature. I think that appointment lasted two days because of the opposition.

I noticed, in going through one of the appendices at the back of this document. . . . I think it's appendix 2, where you make reference to a number of other legislatures and what happens both with regard to the auditor general presenting and approving a budget. But as well, and more importantly, the removal and appointment of an auditor general are significant. In virtually every other jurisdiction, if the Legislature is not sitting, then it's incumbent upon. . . . It's no longer just in the purview of the Lieutenant-Governor-in-Council or the Premier or the cabinet to remove or appoint an auditor general.

But there's another check on that. In some cases, the Premier is required to consult and receive the concurrence of the Leader of the Opposition. In some cases, it has to be with the concurrence of a committee like this one -- Public Accounts or some appropriate standing committee. It's just not permissible for the Premier to wait until the Legislature is out and dispose of an auditor general that he or she is uncomfortable with.

I believe that kind of provision is something that could probably be and should probably be added to both section 6 and section 7 of your draft, so that there's some check on that, for the reasons that I've outlined. Perhaps you may want to review what exists in these other jurisdictions. There are many mentions of different options on pages 44 and on and, actually, previous to that the removal, as well, of an auditor general in various other jurisdictions. I think there needs to be another step in there.

This committee, for some time, has met outside of the House sitting. That's become sort of practice, although it does require approval. But it has become practice. I would think if there were an emergent issue where for some reason an auditor general needed to be removed, it would be smart to have this committee involved in that process, since historically it has been this committee that hires the auditor general. So there might be some merit in that, and the same with the appointment of an interim or acting auditor general.

As well, I have a question around the appointment for a six-year renewable term. When this issue last came before. . . . I'm trying to think: I think it was in 1995 or '96, where we reappointed your predecessor. . . .

M. Strelioff: It was '94.

G. Farrell-Collins: It was '94, was it? We reappointed your predecessor. At that time the auditor general made reference to his opinion -- fairly strongly held at that point in time -- that an auditor general should not be a reappointable position. He was of the opinion that a ten-year, non-renewable appointment would be better. I think he changed his mind as he got near the end of his 12 years. But I must say I wasn't convinced that that was necessary -- to have a non-renewable appointment. I saw the merit in it. I'm not convinced that it's necessary. I think the argument for non-renewable is so that the auditor general feels free to act as he or she needs to without any fear of losing their job at some point or not being able to continue in their job.

I would still need to be convinced that either a ten-year, non-renewable or a six-year, renewable appointment was the preferable process. But I'd be interested in your comments on that, if we could put in place some of the independence provisions that are in this act. If the auditor general became more individually accountable through the Legislature for his or her own budget, if the potential for removal of an auditor general were put in. . . . We'd have some safety checks put in there. What are your views on the ten-year, non-renewable versus a six-year or some other term renewable appointment? And I understand you sort of have an interest in this, but I'm curious as to your views.

[1015]

[ Page 1684 ]

W. Strelioff: Thank you, members. Your comments on the appointment and dis-appointment mechanisms. . . . I think you've made some very good points, and we'll go back and build in a proposal that completes the loop back to the Public Accounts committee. A lot of the thrust here is to move the control of the office to the assembly and away from the government of the day, and the dis-appointment and appointing an acting. . . . It seems to make sense that it should be brought back to the assembly, and the Public Accounts Committee seems a good mechanism.

Now, you asked about the term. On page 11 of this proposal, paragraph 2, subparagraph 4, is a change to the mechanism of appointment. The proposal in this legislation is that if I'm in year 5 or getting to the end of my year 6, and I advise this committee that I would accept a reappointment, this committee could actually make that reappointment without throwing it open for a wide-open competition. So it, the proposal, says: "Let's pause before throwing it open to a wide-open competition." And this committee can step in and say: "Yes, current auditor general, we would like to reappoint you." And this mechanism does that.

The six-year renewable versus the ten-year non-renewable -- my personal view is that it should be a ten-year non-renewable term. The reason I hold that view is that when a particular incumbent goes for. . . . When there is a renewable provision, and during the period before and after renewal the particular incumbent opens up the possibility that people will think he or she is reporting in a manner that contemplates that competition for renewal. . . . Whether it's real or not real, the perception can be there. That bothers me on the renewal side.

Also, the office itself is thrown into sort of a watching brief during that last year and/or the last year of the term, whether that person is going to be renewed or a new person is going to be brought in. An office itself is in a state of: "Well, what is the new direction?" The office tends to spin wheels during that period, and that's not a good use of the resources. Coming in, I've thought a ten-year non-renewable is better than the renewable.

I've also received arguments that underlie this recommendation, and that is that to appoint someone for a ten-year non-renewable is taking a lot of risk. The Public Accounts Committee, the assembly, is saying to a person: "We're willing to live with you for ten years. And perhaps a shorter period is needed, so that a change in direction might be needed." The assembly may say: "Yes, Wayne, we've seen you perform, and we think a change in direction is needed. And we would like to make that decision prior to ten years." So six years gives a more timely reflection on that. So there's a strong argument for the renewable idea, for a shorter term and then the renewable.

The other argument that has been presented to me is that it's very difficult for a person to. . . . The field of competitors is limited when you have to commit to a ten-year term. Out of a person's career, ten years is a long time. So the ability to attract a wide range of candidates would be limited if you're demanding a commitment to a ten-year term. Those two reasons have underlied the support for the renewable six years.

[1020]

A Voice: Could I just jump in?

R. Thorpe (Chair): Yeah. I've got Jack after myself and then Rick. I just want to ask one question on this discussion about the appointment of the auditor general. Should consideration be given to putting some onus on the auditor general -- the current auditor general of the day, whoever that may be -- to have to declare his or her intentions, perhaps at the end of the fifth year of a six-year term, so that the committee and/or the Legislature knows well in advance, so whatever actions have to be contemplated, there's time for contemplation? Would that be something that you think should be considered?

W. Strelioff: Chair, are you thinking that that should be in legislation? Or should that be part of the protocols that are established right through this committee and through the auditor general of the day to say: "Well, it's coming up to the end of the sixth year. Obviously you need to declare yourself"?

R. Thorpe (Chair): Well, I guess it would be my view that since this proposed section talks about the appointment, then why wouldn't we just put it in there? Because protocols and practices and pieces of paper change, and you know, people change, etc. Understanding change. . . . I mean, if we're looking at this and we're looking at putting things up and open for scrutiny for all concerned, to me it would seem fair that the onus should be put on that person -- and provide this Legislature and committee with a known issue to have to deal with.

W. Strelioff: From what I've heard and my brief sort of thinking through of the suggestion, I don't see any reason why that couldn't be put on the table.

J. Weisgerber: First of all, I like the idea that at the end of the fifth year, Public Accounts be advised whether or not. . . . I mean, I think this kind of waltzing up to decision day. . . . It frustrates the system.

Secondly, I would really be opposed to a ten-year term. I tell you, ten years is an awful long time. Even for somebody as old as I am, it's a long time. But it seems to me also. . . . I guess the question that I have is: is it anticipated in this legislation that there would only be one opportunity for reappointment?

W. Strelioff: Yes.

J. Weisgerber: Well, ten years is a long time.

G. Farrell-Collins: Eighteen is forever.

J. Weisgerber: Well, I'm not certain, though, that at the end of any given period of time, you should simply abandon the person you have because the time has run out. I'm not certain that if you have an auditor general that is unanimously supported by Public Accounts at the end of a 12-year period, that you should feel: "Well, that's it. We no longer have an option to again consider reappointing this person." If people serve well, they can serve over a long period of time. I question whether or not it's necessary. If an appointment once is all right, why is appointment a second time less satisfactory or less acceptable?

Over to you, Mr. Chair.

[ Page 1685 ]

R. Thorpe (Chair): At least, what I'm hearing you say -- what I think I heard you say, Jack -- is that if the committee was unanimous. . . . If there was one vote against, then that could be a block or a deterrent or whatever, but. . . .

[1025]

J. Weisgerber: Well, this proposed legislation requires unanimous support. I think that's powerful inasmuch as an auditor general. . . . It's pretty hard to curry favour with the entire committee. You know, you're going to have government, you're going to have opposition, you may have some renegade independent that's almost impossible to keep happy, others that are totally pliable, but. . . . The fact of the matter is, I think unanimous approval of the committee provides quite a safeguard. I just think that you shouldn't tie our hands, or tie your hands, to subsequent reappointments if indeed you have the right person.

R. Thorpe (Chair): Wayne, did you want to make any comments?

W. Strelioff: Yes. The proposal does contemplate only one renewal on the unanimous recommendation. I think the general thinking behind that is that all organizations need the renewal. You just need to have a change in leadership. It's healthy, even if you have a strong person that you support. I think the thinking -- at least my past thinking -- of the office, as well as the advisory group that we had in place discussing the period, concluded that organizations need to be renewed. And part of that is leadership, regardless of how much support the incumbent has. But that's obviously subject to your thinking as well.

P. Gregory: It was also consistent with the competing idea of a ten-year term certain, that at some point there should be a look beyond the incumbent for the auditor general.

R. Thorpe (Chair): Well, Jack Welch is chairman of General Electric. He's been there more than 12 years.

R. Kasper: Well, I've got a copy of the February '94 report when Mr. Morfitt was reappointed. There were two recommendations. One was that Mr. Morfitt be reappointed. "The second recommendation is" -- at that time -- "your committee unanimously recommends to the Legislative Assembly that the Auditor General Act should be amended to provide for a single-term appointment of ten to 12 years for an auditor general."

I'd like to just read the basis of the rationale: "During the course of its deliberations, and especially in the beginning, the committee was forced to rationalize a provision in the Auditor General Act regarding the potential reappointment of an incumbent." Then it goes on to name the section.

"There is a perceived impediment to the process of a legislative committee undertaking this task with an incumbent in office. Protocol and professional ethics in this environment can strain the relationship between the office of the auditor general and the Legislature and can hamper both the committee and the office in carrying out their respective duties. To eliminate uncertainty and compromise which may arise when future appointments are considered, the committee is unanimous in its collective view that, consistent with the trend in other jurisdictions in Canada, the act should be amended to provide for a single-term appointment of ten to 12 years for an auditor general."

 

"The committee believes that a term between ten and 12 years would strike an appropriate balance between the competing needs for continuity and renewal in the office."

 

Now, from my previous experience on other committees of selection, we have been advised by the Clerk's office that there is no impediment for a committee of selection to actually make a conscious decision to automatically reappoint an incumbent. But I guess in order to get comfort of the committee members and to sort of test the marketplace, the standard has usually been as it was in the case when Mr. Morfitt was reappointed. He applied, just like others applied, for the position.

[1030]

So that's why I left the room -- to get a copy of this. Thank you, Kelly, for doing that. Because, you know, I thought, if it's being discussed now. . . . I know Gary brought up that it's something this body has considered. To put it in context: I support it, only in the sense that if we look at Mr. Morfitt's performance and the changes that have occurred, there have been both continuity and an opportunity for renewal after the 12-year period. So that's my view.

R. Thorpe (Chair): Thank you very much, Mr. Kasper.

Gary.

G. Farrell-Collins: I think I forget my question now. I do.

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

Oh, you've remembered. Okay.

G. Farrell-Collins: Yes, I'm slow but I did remember.

Perhaps you can refresh me. Under the current act, it's only a 50-percent-plus-one vote of the Legislature required for an appointment, and it's two-thirds for a removal. Is that correct?

P. Gregory: I'll just look that up. The current act is in appendix 3, which you have.

G. Farrell-Collins: Yes, it's just 50 percent plus one -- section 2(1).

R. Thorpe (Chair): Any other questions? Wayne, is there anything else that you would like to say?

M. Strelioff: Well, as I said in the earlier comments, the general thrust of these changes is to move two principles -- that is, to make the assembly in charge of who audits the government and the process and for what purpose and to make the assembly in charge of the resources and funding of the office of the auditor general, which is consistent with the principle and your responsibility of holding the government accountable.

I have also said that I asked the committee to endorse two recommendations -- that you recommend that officials of the

[ Page 1686 ]

Ministry of Finance and Corporate Relations work with the office of the auditor general to prepare a bill entitled "A Proposed New Auditor General Act," that could be introduced to the Legislative Assembly at its spring 2001 session, and that the committee further request that the auditor general provide the committee, on a regular basis, with reports on progress being made in preparing the new act.

J. Weisgerber: On a number of occasions we have talked about expanding the responsibilities of the auditor general, particularly into areas of health boards and universities -- those areas that haven't fallen under the act, as I understand it. Is there any move in this act to broaden the areas in which the auditor general has a responsibility?

P. Gregory: There is a broadening of. . . . Well, I don't know if it's a broadening. Certainly it clarifies the responsibility of the auditor general to do work in those areas. I believe that under our existing legislation we also have a mandate that allows us to do work in those areas, and on occasion we have done that work. I think the more limiting factor is the resources available to the office. Certainly we have gone into school boards and done some work, and we have worked with colleges. We have done a limited amount of work in the health boards. I think probably the concern of the committee is the amount of work that is done that is available for consideration by the committee. But both the current act and the proposal would allow us to do that sort of work.

[1035]

J. Weisgerber: Just to follow up. Does the current act treat differently the obligation of the auditor general to deal with ministries as opposed to Crown agencies? Is it all a matter of choice with respect to the auditor general, or does the auditor general have more legislative responsibilities in areas of direct government activity as opposed to quasi-arm's-length activity -- Crowns, public agencies, publicly funded bodies?

P. Gregory: I think that's probably a matter of interpretation of our current legislation, which, again, is in appendix 3. The direction to look at ministries of government is in section 11, and sort of the performance, value for money and that kind of thing is under 11.3. The ability to look at public bodies is included in section 19, where it says: "The auditor general may examine the records and operations of a public body if the auditor general considers it necessary or advisable. . . ." So it's in two different sections at the moment. I suppose it might depend on whether one thought section 11 was more important than section 19, but they're both kind of there.

The new legislation brings some clarity around that and treats the audit universe, the government as a whole, as just one entity. So it has a slightly different approach to it.

W. Strelioff: One of the reasons I support the changes to legislation is to confirm that that is an expectation of the assembly, that you wish us to have a strong presence in the system of health -- not just within the ministry but within the health authorities and councils and societies, as well as within the education system. And this does it, but it also needs the accompanying proposal to you on what work we would be doing there and what would be the required funding.

One of the perspectives that I have as the new auditor general, given my past experience, is that we don't do much work -- we're not providing you much assurance -- on the management and accountability practices that are in place in the system of health or education, where the programs are actually being delivered. We focus primarily on the ministry's coordinating role, but the action is where the programs are actually being delivered in our health system and in our education system. These proposals confirm and endorse that role, which is really important, as far as I can see.

D. Miller (Deputy Chair): Mr. Chairman, just by way of observation, I have not, over the years, paid a heck of a lot of attention, actually, to public accounts or indeed the auditor general -- with all due respect. I suppose to some degree that's reflecting the realities of governing, the realities of running a ministry, versus the theoretical.

We've talked about a number of issues here. We discussed the independence issue at the last meeting: the suggestion that if the auditor general is to be truly independent, it can't rely on government for its funding, and the suggestion that that funding, in a sense, be determined by this committee. I think that there appears to be a bit of an appetite for that, and I note that in other jurisdictions. . . . There's a variety of circumstances that exist across the country and federally with respect to that question.

Mindful of the fact that, really, the auditor general ought to be. . . . I think the term you used, Wayne, was: "hold the government to account." I think you've got to weigh some of these issues. I think it's probably fair to say that with any ministry or agency, there's always a requirement, ideally, to have more resources. I think of some of the agencies of government that perform a very important function out there -- the Labour Relations Board, for example; employment standards officers. All kinds of people who work for government and provide a service to the public would argue -- and I think you'd be hard-pressed to disagree with them -- that they could use more money.

[1040]

We spend a great deal of time in government trying to help manage, from a personnel point of view, the kind of limits that you have to impose on yourself. And in some of those areas, believe me, it's very, very painful. If you start to deal with social services -- Children and Families, the ability of individual caseworkers to deal with their caseloads -- some very heart-wrenching kinds of situations exist out there.

I referred, I think, in the last meeting to the kind of balance that you have to bring to public expenditures. Clearly there has to be some control or some limits to expenditures. I have a bit of a concern, going back to the first discussion, that we spend a great deal of time in this committee asking for more reports. We've heard some testimony that the capacity of the office to continue to provide those reports on a timely basis is somewhat constrained.

We're suggesting that we in fact set the budget. I think we should maybe pause or give some thought to these broader questions. The temptation is always, I think -- I recall, when I was in opposition -- to want to do whatever one can to attack the government of the day. That's fair enough. That's healthy. That's part of our democracy.

I still hold maybe more of a traditionalist view that there are limits to expenditures in any office or any agency -- the auditor general, you name it. We ought to have some disci-

[ Page 1687 ]

pline as a committee in recognizing those limits, balanced against the need to have the auditor do the kinds of reports that we think are useful to improving the function of government. I've been listening to what people have had to say here. I'm not certain that that balance has been reflected.

Now, again, I confess, as I did at the outset, that I've not paid a lot of attention to these issues over the years. I've been preoccupied with other issues obviously. So I don't know. I don't want to feel any compulsion to rush to judgment on these questions, Mr. Chairman. There are some ideas contained in the auditor's report for changes to legislation. It appears to be a bit of a mixed bag across the country. I've not personally landed with respect to six renewable or ten non-renewable. Jack, it appears that you're on a committee that recommended ten, and just a moment ago you said you didn't like the idea -- if I'm listening to Rick correctly.

There's a limit to what any agency can do. We have to be very careful in looking at budget-setting, because if the suggestion is that budgets be set independently of the budget process, then where's the discipline? The budget process exerts significant discipline on budget-makers, because there's only a limited amount of money that's available. That has to be apportioned across a variety of functions, and every one of them, I can tell you, argues with some conviction that they really need more. But you can't satisfy that.

I think this is very complex. I don't think this is a simple issue, one of simple independence, as has been put forward. In fact, I would argue -- again, quoting, I think, the auditor's own report -- that of all the recommendations made, government has accepted 90-plus percent. From the experience over the last nine years, there does not seem to be much of a restriction on the auditor. In fact, I think governments, from time to time, if I'm not mistaken, Mr. Chairman, refer issues to the auditor general independent of any work they may do themselves or any work that the committee might request, which may be another example of the difficulties of having this committee prepare the budget.

Those are random thoughts, Mr. Chairman, but I think they are worth considering in the context of the auditor's report.

R. Thorpe (Chair): Thank you.

G. Farrell-Collins: I agree with some of the comments of the previous member. I guess I'm comfortable that this committee is as able to be disciplined as Treasury Board is on approving the expenditures or at least recommending the proposed expenditures from the auditor general to the budget-making process. I guess I don't hold the same concern that the member has that we or this committee, in some future version, would be unable to maintain that discipline as well.

[1045]

I want to come back for a brief moment. I think that what the auditor general was asking was that this committee move and pass a motion to have a draft bill prepared. I'm comfortable with that. I do think that unless this committee is going to start making specific recommendations on a ten-year versus a six-year or, you know, some other provision, that that draft should have options available to it. But my understanding is that you're suggesting that the bill be prepared to be introduced by the Ministry of Finance in the spring for passage at that time -- at our spring session, if there is one. Is that correct?

W. Strelioff: My proposal is that you ask the Ministry of Finance officials and my office to work together to prepare a bill that could be introduced in the spring session and that you ask my office to provide you with regular updates on the progress of that bill: what are the options being considered? And also, as we discussed earlier today, that follow-up mechanism, which makes sure action happens, rather than it just drifting away.

G. Farrell-Collins: I'm not sure that this committee is able to do that, that it's within our mandate. But if your office is preparing a draft, which you're certainly more than able to do, I think that if you're looking at the spring session, you would probably have to have some sort of transitional provision in the event that the ten-year non-renewable appointments were put in place.

In your case, I think you were hired on the understanding that there was a six-year renewable and that that should probably -- in my opinion, anyway -- continue to be the option. And after that, if the House, the Legislature, wanted, they could impose a ten-year single non-renewable term. There should probably be some transitional process in there.

W. Strelioff: We're recommending, as it says in here, the six-year renewable, but we should have an option for a ten-year that has a transitional. . . .

A Voice: Five and five.

W. Strelioff: I would think five for the incumbent kind of thing. In terms of the other comments that were made just now in terms of the funding, there are few mechanisms by which the assembly receives independent information about the performance of government. And one of those mechanisms is our office.

The funding proposal is designed to say: "Assembly, you should decide the extent to which you want that information coming from the office of the auditor general." The proposal says that it's not a good principle to have the organization that is being examined decide the extent to which that organization should be examined. It should be the representatives of the shareholders, or the representatives of the taxpayers, that make that decision. That's the key principle in terms of the funding.

Also, in terms of deciding who audits government and the process for auditing government, again, the proposal has the thrust of: it should be the assembly making that decision, not the government of the day. And that's what the key changes are going after, in terms of this proposed revision.

[1050]

J. Weisgerber: With respect to the issue of appointments, I think it's fair to say that members of this committee, myself included, are influenced a great deal by the processes which they've just gone through with respect to appointment. It's fair to say that the reappointment of George Morfitt was a complex and sometimes painful process, insomuch as you had an incumbent in place who was a candidate along with other applicants. And I think all of us who sat through that process felt uncomfortable about it and were genuinely desirous of finding a different mechanism.

I think also that people who perhaps have had the benefit of a couple of those processes recognize how difficult it is to

[ Page 1688 ]

make the right choice. And I think you could also, without any reflection at all on our current incumbent, decide that ten years is an awfully long time to make a decision based on a couple of interviews, which are usually much less than an hour in length. So that, combined with a short memory, I guess. . .

R. Thorpe (Chair): And getting shorter.

J. Weisgerber: . . .is the best excuse I have for that change in position. But having said that, I think it's a legitimate change in opinion on my part.

I too worry about the notion of government setting the budget for the auditor general. I worry about a mind-set in government that becomes the idea that six or seven people somehow anointed to Treasury Board are those people blessed with great fiscal wisdom, and that everybody else is going to be a spendthrift that kind of fritters away the public coin. So I would argue fundamentally with that. I would argue that just as vote 1 is a reasonably managed fund, so too has the assembly the ability to be fiscally conservative with respect to. . . .

I guess I wonder -- I'm kind of thinking aloud -- whether or not there might be some relationship between the size of the provincial budget and the funding to the auditor general. I once worked for an auditing division in a large corporation, and we simply got a percentage. Our budget for the auditing department was fixed, in that case at 1 percent of the purchases that were made. Now, I'm not suggesting that 1 percent is the right number, but I suspect that if one were uncomfortable with having to go cap in hand. . . . You might be able to look at expenditures of the province over the last two or three decades and the budget of the auditor general's department and find some relationship between the two that would fix a formula. I throw that open as perhaps a third alternative for funding.

D. Miller (Deputy Chair): Well, again, I think there's a variety of ideas. And no doubt that within each party there are probably differing opinions about these questions, whether it's the length of time of the appointment or. . . . I'm not certain with respect to the allocation of the budget. But really, I just wanted to re-emphasize a point on the budget side, which is. . . . Jack, I don't know if you're on Treasury Board, but as a former government minister, you'll appreciate what I previously said with respect to the kind of pressures -- the very real pressures -- that exist on the spending side and the very real pressure on Treasury Board or Finance to understand all of these competing pressures and to try to make rational allocation decisions.

[1055]

I guess the concern I would have is that this committee is not part of that process. We don't have staff. Having been, on the odd occasion, a member of Treasury Board. . . . Every spending request is subject to a fairly intensive analysis by Treasury Board staff. Now, at the end of the day governments will make the decision, but hopefully, it's made on the basis of a good analysis, and it's therefore an informed decision. I just have a bit of trouble -- I mean, I don't think it's the biggest issue in the world, believe me -- with this committee not having the benefit of Treasury Board analysis and their staff recommendations with respect to any expenditure item.

Fair enough; we can be disciplined, but we're not doing it in the broader context of the kind of competing demands for spending that exist right across government. That, to me, is the only difficulty. There are other independent officers of the Legislature.

So I just think that a little caution with respect to moving too quickly to accept that fundamental notion. . . . I do think it's a little more detailed than the simple notion that I think -- with all due respect, Wayne -- that somehow in order for the auditor general's office to be truly independent, it should not have to rely on government for its funding. I think it's a bit of an oversimplification.

R. Thorpe (Chair): Thank you, Dan. Just before I go to Gary, I have one question: does the auditor general have a position on how funding should be granted to other officers of the Legislature?

W. Strelioff: Members, I have been in discussion with other officers of the assembly, and I meet with them in January. This is one of the issues that they wish to discuss.

In general, I see the assembly. . . . When they have people reporting directly to them, the assembly should have mechanisms for deciding what they expect from those officers, and they should also have mechanisms in place to decide what resources should be allocated to those officers. So in the longer term I would recommend to other officers that they ask the assembly for similar types of funding mechanisms.

Now, in this proposal I think one of the members suggested that there be Treasury Board staff advice. This proposal does contemplate that the Minister of Finance attend this committee meeting or be invited to attend when resource proposals are being discussed. So it does contemplate the analysis or the advice of the government of the day in terms of deciding resources, and that does bring to the picture the fiscal realities of the province at that time.

I also point out that of course the majority of members on this committee are from the government of the day, and that's the way it's constructed. So it does bring that pressure to bear as well.

G. Farrell-Collins: A couple of points. First of all, I would -- and I do -- feel strongly that all officers of the Legislature should be able to have a venue to present annually, at the very least, to a committee of the Legislature and be held accountable for their performance; be able to make requests; be able to comment upon the work that they've done in the past; and to both defend and account for their fiscal expenditures. I think that just makes sense.

We had, at our Finance Committee meeting three weeks ago here in Victoria, the children's commissioner, who presented. She's been calling out in her reports, on an annual basis, for some way to report to the Legislature. It wasn't so much in her mind on a fiscal matter but just on an accountability matter -- somebody to talk to. I know what it's like when you take an employee and sort of send them off on their own and expect them to do stuff but they don't have anybody to talk to and they don't have anybody to report to -- no dialogue. I know she certainly feels frustrated tabling a report every year and it just sort of disappears; nothing happens with it. I suspect that the auditor general felt like that for many years, until this committee started meeting outside of session and dealing with these issues and follow-ups as well.

[1100]

[ Page 1689 ]

So I think we're moving along a progression, and I do think part of that requires members of the Legislature to take some risks sometime. I don't think it's a particularly big risk to have auditors or officers of the Legislature come and report to a standing committee of some type or other, and I think there are appropriate committees that could meet to do that and execute that function.

Certainly my experience in recent committees is such that government members seem to have no difficulty getting submissions from Finance of their views on matters before the committee. And I don't anticipate that members of Public Accounts, if Treasury Board was watching what the auditor general was putting together for a budget and they weren't comfortable with it, would have any hesitation in making that information available to government members and perhaps opposition members as well.

So I just think that there needs to be some progression on this, a more progressive approach to the roles of the auditor general and officers of the Legislature. And I personally don't think, as Mr. Weisgerber. . . . I agree with Mr. Weisgerber when he said: "Why do we somehow think that the only people who have divine wisdom on fiscal matters are those half a dozen or so people sitting around Treasury Board?" I believe that members of the committee can make those decisions just as well and have just as much ability to do so. And certainly it's not beyond the scope of the committee to ask the auditor general to go back or to ask other people to come in and look at the books. I mean, there's a whole huge range of powers that are available to members of this committee if they feel that there is a potential problem or that the auditor general's budget isn't being presented in a fiscally accountable way or is too large. There are all sorts of avenues that are available to members.

So I guess I just think that there's really no reason. . . . Although I do understand the cautions put forward by Dan that, you know, you do have to sort of take it in the whole scope -- right? Trade-offs are there. Do you put more money into child protection, or do you increase the budget of the auditor general? Those are real choices that I expect are made around Treasury Board. I think they're things that we need to consider, but they're also choices that are made in the Legislature on an ongoing basis. We do that when we go through the estimates process. There's at least some accountability and grilling.

There's no accountability and there are no questions around the officers of the Legislature. They go through on vote 1 -- or not vote 1 but the other votes. And there's nobody there to defend them. You can get up and ask the Minister of Finance; he doesn't have a clue. So even though he was at Treasury Board, chaired Treasury Board, and went through the process, he isn't prepared to answer any questions about the budget of the officers of the Legislature.

So quite frankly, I think that having this process in place -- or a process where officers come and present to committees -- would improve accountability, would improve the process of examining those budgets and examining the work of those officers and actually provide a check that doesn't exist right now. Despite the theory, I don't believe that the Treasury Board spends more than about three and a half seconds approving the budget for the auditor general. I bet it just comes through like the other ones, "Yes, yes, yes, this is what Treasury Board recommends. Yes, yes, no, 10 percent off everybody," or whatever the process is. I can't imagine there's any real analysis done, although I could be completely wrong on that. But given what I've seen in the past, I don't expect that that's the case.

D. Miller (Deputy Chair): Mr. Chairman, we're in grave danger of proving that trite old saying: "Work expands to fill the time available to do it." I don't know what else we. . . .

R. Thorpe (Chair): I do have a speakers list, actually. It's Murray, then Andrew -- okay?

D. Miller (Deputy Chair): Oh, okay. Sorry. I thought you recognized me.

M. Coell: I'm glad we're having this discussion, because I think it shows an important flaw in the Legislative system, with the officers who don't have anyone to report to. I think it's good that the auditor general has this committee and wishes to expand this committee's role.

I think that in some respects it's a bit of a philosophical argument, because at the end of the day, the government approves. . . . Those who have the most members in the Legislature approve the expenditures. This committee has a majority of government members on it, who tend to approve the expenditures, so I'm not convinced that having this committee approve a budget would be any different than having Treasury Board -- government -- approve the budget. It has the effect. . . . I think it would be important for this committee to review the budget and maybe make a recommendation to Treasury Board. That might be a middle-of-the-road way for us to view the suggestion from the auditor.

[1105]

A. Petter: The previous speaker sort of said some of the thoughts I was having, and that is that I think we can torture ourselves a lot worrying about: is it here or is it there? The fact is that there are good arguments all around this table. Treasury Board -- and the Legislature, for that matter -- have the full canvass of all expenditures and trade-offs in front of them. This committee does not.

On the other hand, this committee has a particular understanding of the trials and tribulations that face the auditor. It seems to me that there has to be some way in which the input of this committee can factor into those larger processes and provide, perhaps, for a more meaningful opportunity for debate in the Legislature and guidance to Treasury Board, in a way that we don't sort of choose one over the other.

I fear that what the previous speaker says is correct. That is that if in fact this committee became the decision-making body on this, that would politicize the process here in a way that would be counterproductive to the very goal that people seek, which is, I think, a full and fair airing of this in a less partisan environment. So I'm with the last speaker in some of his thoughts as to how we might want to proceed in the future.

R. Thorpe (Chair): Thank you. Dan, did you have anything else to say?

D. Miller (Deputy Chair): Well, really, it's more to the process. This is the second time we've had this discussion, in a

[ Page 1690 ]

way. I think there are genuine differences that are not necessarily partisan. The question is how to proceed. There's been a request made. Gary indicated that it may be beyond the purview of the committee. I suppose, you know, we could just have the auditor. . . . I think he should submit his report to the Ministry of Finance. I know he's met with the Minister of Finance already. And at least for this particular go-round, I suspect that government will have to decide whether they're going to revise the act and present a revised act to the Legislature. As Gary pointed out, there may not in fact be a full-blown sitting. Who knows. My advice is to carry on and try to beat the drum for the kind of changes you want.

R. Thorpe (Chair): First of all, with respect to your request for a recommendation from this committee with respect to legislation, it is not within the authority of this committee to do that. I've been advised by the Clerk on that.

Following up from the Deputy Chair, what I would suggest. . . . I mean, I think it's been a very worthwhile discussion here today and airing of views. I think it would be most appropriate for you to pursue it with the ministry and the minister responsible, meet with independent members and meet with the official opposition members to push this item forward on the radar screen. But with respect to this committee issuing a recommendation, that is outside the terms of reference of this committee.

I don't know whether you had any other comments, Wayne.

W. Strelioff: Just in general I thank you for your discussion and advice. Obviously this is important to me and the role of the office of the auditor general. I'll continue to "beat the drums."

R. Thorpe (Chair): I think it's fair to say that the members of this committee respect very much the importance of the independence of the auditor general, and those are the processes that we have in place to advance things. Again, I would encourage you to meet with ministry officials, government members, independent members and members of the official opposition to advance your agenda.

The next item on the agenda is a presentation from the comptroller general.

A. van Iersel: I'd like to inform the committee of some changes that we anticipate will be occurring at fiscal year-end, being March 31, 2001. I've discussed these with you as Chair of the committee and also with my colleague the auditor general. Copies of the initial briefing note and subsequent letter have been made available to members this morning. The note was actually sent out some time ago, but the letter was not, so you'll find it on your desks, I hope.

[1110]

Over the past three years our office, the OCG, has had some significant success in reducing the time it takes to prepare the public accounts. When I first arrived just over three years ago, the public accounts in that particular year -- I think it was '96-97 -- were tabled in January of the year following.

Since that time, we've made steady progress, with the most recent set of public accounts coming out August 15 of this past year. From my point of view, that should not necessarily be the end of it. Members will recollect a promise I made -- and I certainly hope to deliver on it -- that we are going to try to get the public accounts for the end of this particular year out by August 1, in terms of the OCG having completed its work. It's not our work alone. It obviously requires the cooperation of ministries and, again, my colleague the auditor general.

For 2000 and 2001 year-end, then, we have two objectives: to continue that acceleration of the public accounts I've been working on for three-plus years and also to maximize the efficiency of the new Oracle software which we have discussed here on a number of occasions. As of April 1 all ministries will finally be on the same software, and that has been the first time in many, many years for that.

The target for the current year, in terms of the scheduling of the public accounts, will be two weeks earlier than last year, as I mentioned -- August 1, a full month ahead of the budget transparency and accountability requirement which says that it's to be tabled no later than August 31. It's still one month behind the best province in terms of this particular function. The province of Alberta manages to produce its financial statements by June 30 of each year. That is our target -- to meet them in terms of the timeliness of the documents.

I won't bore you with all the differences between us and Alberta, but I would just generally say that we are much more complex than they are in terms of the number of organizations involved and what we report, relative to what they do.

To continue the acceleration, then, of the public accounts, we need to do something differently. You can't always just do things faster. You have to look at your ways of doing business and try and improve them. With that in mind, we have issued to ministries and to all those that have an input to the public accounts a new schedule for 2000-01. That just went out last week. It requires, for example, the consolidated revenue fund -- although not reported as a separate fund any longer, it's our main bank account, if you want to call it that -- a sign-off a full nine business days earlier than the previous year. That obviously translates into approximately two weeks. Ministries will therefore have to complete their year-end accruals more quickly than they have in the past.

The new Oracle software, as I said, will help us in this regard. It moves us to one financial accounting platform, and it's also moving us closer to private sector methods of year-end consolidations and reporting. The software, though, does not allow more than one fiscal year to be open. This is a difference. For the last few years, when it came to year-end, we have had our main statements perused off the Walker system. That Walker system will be shut down in the summer, once Oracle has been confirmed, and everything is running the way it should. Then we'll move to that platform alone.

Oracle has a harder cutoff; it doesn't have periods open. That means this is one of the examples where we have to do things slightly differently. The implications, without modifying the system. . . . Supply reporting will be affected, consistent with what I mentioned in the briefing distributed earlier. Most provinces that use the system in the same way that we intend do supply a reporting on a cash basis. Cash basis means that whatever has been paid, in terms of a cheque cut or other form of payment, by the hard close of March 31 will be in the supplier report. Any payments beyond that will be reflected in the general ledger -- I have to be very clear on that -- through various accrual entries, either individually or block accruals.

[ Page 1691 ]

To get any additional supplier reporting, there are options. One option is to go to a cash basis, like other provinces, and have it reported the following year, in terms of those that were not caught by March 31. The other is to try and find ways to use the reports from the new year, the new system, in April and try and match those with the reports for the prior year.

[1115]

It means, as always, that all expenses will be recorded, but for the accruals, the supplier reporting will be different. Supplier reporting is a public sector issue. It's done by most provinces, but it's not something that is done by the private sector. They don't have that particular need. We are looking at the option of building a special report on supplier payments, as I said, trying to get the system to tell us what input was put through in the month of April.

To give you a sense of what we're talking about here, in a typical year there is approximately $300 million in expenses of accruals that come through. That's significant in its own right, but it's also small, relative to the total budget. But there are many, many lines of code, and at the last estimate there were 200,000 line items that ended up going through the system. So you can appreciate that the individual accruals are often small accruals. But the supplier reporting impact will not affect, as I said, the general ledger. The associated expense, I wish to assure members, will be put in the right year. The GL will be adjusted accordingly as those payments come through in the month of April, after the accruals have been set.

As always, the auditor general and ourselves have year-end routines and processes -- as we always have -- to make sure that whatever comes up in the last month of the fiscal year and the next month are appropriately looked at to make sure that the entries get into the right fiscal year. That won't change in any regard.

As I say, I'm happy to report that we will be on Oracle. It's going to mean doing some things differently, but it's also going to allow us to get some benefits in terms of the timeliness and the information and the administrative savings in ministries in terms of what it takes to get the fiscal year-end closed off.

At this point, I'd like to sort of open it up to some questions that I'd like to respond to.

R. Thorpe (Chair): I have a couple of questions. Let me understand this. I have had, I think, two discussions with Arn and one discussion with Arn and Wayne on this subject -- just so people know. The accruals are going to be closed -- did I understand you correctly? -- nine days faster to achieve the two-weeks-faster for the results. Is that correct?

A. van Iersel: Yes, that's right -- nine business days earlier than last year. This has been an evolution. A number of years ago, as I said, we weren't quite so timely in producing financial information, and we allowed ministries to have much more time in order to get their accruals in. We found that that wasn't necessary; that's not best practice, as is done elsewhere. So we're now confident that we can do that quicker without jeopardizing any issues regarding the credibility of the financial information.

R. Thorpe (Chair): And your definition of credibility to the financial statements is the $300 million figure that you established? Is that correct or incorrect?

A. van Iersel: We have materiality levels which are much less than that throughout the process. We start with a very small level of materiality and work our way through. As we get closer and closer to the end process. . . . The $300 million is not our criteria in terms of whether it matters or not; that's simply the accrual amount from an average year. So there's $300 million set up in accruals, but as I said previously, we look ourselves, and we look with the auditor general, to make sure that all the entries get in, in the right year.

R. Thorpe (Chair): So even though you're cutting off nine days earlier. . . . I want to be clear. What dollar value impact do you estimate that is going to have on your accruals?

A. van Iersel: Well, I suspect that the accrual amount will be very similar, for the upcoming year, to that $300 million. It tends to climb gradually over time as the budget expands. Therefore there are more contracts, more expenses, that have to be accrued at fiscal year-end. But it's been a gradual growth. It's not a thing that bounces around significantly from one year to the other. This is a process change. It should not change the nature of the accrual process, nor what's included in that.

R. Thorpe (Chair): Correct me again if I'm incorrect; you work with this stuff every day. When I was first approached on this subject, it was that we had a problem in having our public accounts at the end of the year meet a combination of our cash payments and our accrued payments, because under the new Oracle system we can't achieve that. Was that originally how it was presented to me?

A. van Iersel: Close, Chair, in this sense. The Oracle system does not allow the payment module to be pointing to more than one fiscal year as being open at any point in time. What I was explaining to you at that time was that we get our information for supplier reporting out of the accounts payable file. Once we close a year in the Oracle software, you're then in a new year. The payments will flow in the new year, but the accounts payable file is then closed. We still continue to keep the general ledger open for the previous year to record those accruals as the actual invoices come in and payments are made, but in order to capture the accounts payable information, once the books are closed for the old year, we have to do that out of the new year.

[1120]

That's different than before, in the sense that previously the old books were. . . . You were allowed to keep them open for whatever period you felt necessary. But this software works entirely differently. In some ways it's a better control, because it ensures that people are not putting it in the wrong place.

R. Thorpe (Chair): Well, here's where I'm troubled. First of all, it was. . . . Again, I thought it had to do more with our public expenditures equalling whatever we publish in the public accounts. I'm concerned -- and I was concerned -- about the cut-off earlier and the materiality and the impact on the annual financial statements.

I've recently received a copy of a document dated November 21 on an internal report of an audit of the Ministry of Finance and Corporate Relations of August 2000. When I read this document. . . . I just want you to try to bring the two

[ Page 1692 ]

things together for me so I have a picture here. It says -- and this is an internal audit document from Ministry of Finance: "We found significant inconsistencies in the ministry's accruals and materiality." It goes on to say here that ministries were not following prescribed methodology for accrual.

If that's what is going on now, and now we're proposing to make this other significant change with respect to timing, what degree of comfort should this committee take with respect to your recommendation? And more importantly. . . . So that's one question to you.

A question to the auditor general: how are the auditor general and his staff going to safeguard that the shortening of the accrual period isn't going to have a significant impact on materiality with respect to the financial statements? Have you worked through how you're going to handle that stuff? So one's a question to you, Arn, and then a follow-up question to the auditor general.

A. van Iersel: Chair, would you like for me to respond first?

R. Thorpe (Chair): Sure.

A. van Iersel: I believe that what you're reading from is an internal audit report regarding the monthly expenditure reports and so forth. I didn't bring that with me today. But what they're talking about there is that we are trying to make ministries more consistent in terms of the accrual methodology. The accrual methodology is laid out, obviously, in our policy and procedures manual. What we're trying to do, though, is get more ministries to do accruals consistently throughout the year, such that period 13, the end of the year, is not such a big catch-up exercise in terms of the accruals that have to be made.

We test those accruals. There are some inconsistencies from time to time in some ministries. Some ministries accrue their expenses at a very detailed level, and in other ministries that isn't true. We're trying to get them more consistent by saying, "You should only have block accruals for these small amounts. For the larger amounts you need to have specific accruals that relate to the various suppliers and so forth," to enable them, ourselves and the auditors to check the accuracy of that information.

I don't believe there is a concern in that report relative to that the accrual amounts in total were wrong. I think it was that there are slightly different processes in terms of the accruals throughout the year and in terms of the way the accruals were done at year-end. We've since been working with ministries as part of this changeover to see that it happens.

R. Thorpe (Chair): My only comment on that, again, is that if we have problems on a monthly basis, I don't know how all of a sudden at a year-end we have a magical solution. So, you know, I've expressed that concern to you in the past. Anyhow, I guess I want the comfort from the auditor general, and I'm sure that the other committee members want the comfort from the auditor general, that stuff is not going to fall through the floorboards here with respect to these year-end numbers.

D. Miller (Deputy Chair): Mr. Chairman, I'm not quite sure what we need the comfort for. But carry on.

M. Coell: Mr. Chair?

R. Thorpe (Chair): Yes, Murray -- just one second, please.

M. Coell: Mr. Chairman, maybe before he goes out. . . .

Could you give us an example of something that maybe wasn't working and is going to be fixed by what you're suggesting?

[1125]

A. van Iersel: Well, the last item we were just discussing doesn't relate to this changeover -- that the preparation of accruals and the validity and the rigorousness of those accruals. . . . Regardless of what system you use, that's an issue that has to be continually monitored and dealt with.

As I say, part of our strategy over the last number of years, particularly when we're talking about capitalization and so forth, is to get ministries to do the accruals consistently month by month, and this is a good practice of private corporations. In effect what it does. . . . It means that there's less effort at year-end in terms of trying to remember all the accrual items that had to be done. So if you're consistent month to month in setting up your accruals, reversing out your accruals, at year-end it becomes a lot easier. And we are getting better and better at doing accruals. But this doesn't necessarily fix or hurt that process. The same tasks, the same processes on what's an accrual and what the rules are remains in this proposal as they did previously.

W. Strelioff: Members, I do support the proposal of the comptroller general. Remember that the proposal relates to a publication you received called "A List of Payments to Particular Suppliers." We're going to move -- or the proposal is to move -- to a cash basis on that list of payments made to suppliers. It doesn't change the rigour behind the surplus deficit calculations within the financial statements of the government; that still is there. We'll be examining it. It just allows for more time to be spent in terms of analyzing and managing those accruals and less time spent preparing a publication of the list of payments made to suppliers.

Now, one step in more of the longer term that I certainly strongly support is for the ministries themselves to prepare monthly or quarterly accrual financial statements, so that they're managing their finances in a more rigorous way month by month by month, rather than at the end of the year trying to tie it all together, which has been the practice in the past and which, of course, requires far more effort at the end of the year and less rigour and effort during the year.

So in terms of the rigour behind the accruals that are put in the financial statements of the province for determining the surplus deficit calculations, they're not changing, and we'll be trying to do our job to make sure they are as rigorous as possible. It's that list of supplier payments that you receive that will change. My understanding is that you can also ask for additional information if you're interested in a particular supplier.

R. Thorpe (Chair): Thank you, Wayne. Did I not hear -- Arn, correct me again if I'm incorrect here -- that you were going to cut your accrual period by nine days? Is that correct?

A. van Iersel: That's right, Chair. The accrual period is being reduced, as it has been in the past. It's part of the

[ Page 1693 ]

timeliness of the public accounts production. It's not inconsistent with what happens elsewhere, and we believe, because of the advances we're making in terms of the monthly accruals, that this doesn't represent an increase in risk.

D. Miller (Deputy Chair): A better system so you can shorten the time -- that's all.

R. Thorpe (Chair): So back to my question, which the auditor general did not answer: what safeguards are you putting in place, or what are you looking at putting in place, to ensure that in that nine-day cutoff of accruals something of a material nature is not missed? That doesn't just relate to the cash payments in the public accounts. They're cutting off their accruals nine days early. Have you guys looked at that, and have you got safeguards in place? Or are you working on putting the safeguards in place?

W. Strelioff: Members, we constantly crank up or intensify our audit effort, and the year-end accruals are always a sensitive point. But I also support that the more relevant the information is, the more timely it has to be. And there are trade-offs in terms of trying to do hard closes. With the advances in technology and better information and if we move to quarterly reports by ministries, that will be even better. But we are working on trying to make sure that the accruals that come in at the end of the year are as tight as possible.

R. Thorpe (Chair): Arn, could you just tell me: does the auditor general receive a copy of these internal audit reports -- in particular this one that I have with respect to month-end accruals and accounting transactions? Do they get that as a part of regular business?

A. van Iersel: We do share or make available all our internal audit reports to the auditor general. I can't recall off the top of my head whether the auditor general's office has looked at this particular one.

P. Calendino: Where did you get it?

R. Thorpe (Chair): We get them as a practice of protocol from the ministry, through freedom of information. That's where we get them.

Interjection.

W. Strelioff: Yes, we do receive the final reports.

R. Thorpe (Chair): Thank you. Any other questions? Okay. There's no other business on the agenda. A motion to adjourn. . . ? Thank you, Mr. Calendino.

The committee adjourned at 11:30 a.m.

[ Return to: Legislative Assembly Home Page ]

Copyright � 2000: Queen's Printer, Victoria, British Columbia, Canada