Second Session, Thirty-sixth Parliament
SELECT STANDING COMMITTEE ON PUBLIC ACCOUNTS
SECOND REPORT
The following electronic version is for informational
purposes only.
The printed version remains the official version.
Committee email: ClerkComm@leg.bc.ca
Second Report
Second Session
Thirty-sixth Parliament
British Columbia Legislative Assembly
March 25, 1998
Fred Gingell, MLA
Chair
March 25, 1998
To the Honourable,
The Legislative Assembly of
The Province of British Columbia,
Victoria, British Columbia
Honourable Members:
We have the honour to present the Second Report of the Select Standing Committee on Public Accounts for the Second Session of the Thirty-sixth Parliament.
This Second Report covers the work of the Committee during the period April 1997 through March 1998 on a variety of subjects arising out of reports issued by the Auditor General of British Columbia and the Public Accounts for the Province.
Respectfully submitted on behalf of the Committee.
| Mr. Fred Gingel, MLA Chair |
Ms. Joan Smallwood, MLA Deputy Chair |
Table of Contents
Composition of the Committee
Terms of Reference
Summary of Recommendations
Committee Meetings Conducted
Observations and Recommendations
The Committee was established on March 24, 1997 for the Second Session of the Thirty-sixth Parliament with the following terms of reference:
"…to examine and inquire into all such matters and things as shall be referred to them by the House, and to report from time to time their observations and opinions thereon, with the power to send for persons, papers and records …"
The list of Members comprising the Committee was adopted by the House on April 8, 1997 of the Second Session of the Thirty-sixth Parliament. The Public Accounts of the Province of British Columbia for the fiscal year ended March 31, 1996 was referred to the Committee by the Legislative Assembly. Reports published by the Auditor General and deposited with the Speaker during a period of adjournment of the House were deemed to be referred to the Public Accounts Committee. This method of referring documents enabled the Public Accounts Committee to continue working intersessionally.
That reports of the Auditor General of British Columbia deposited with the Speaker of the Legislative Assembly during a period of adjournment during the First Session of the Thirty-sixth Parliament be deemed referred to the Select Standing Committee on Public Accounts; and that in addition to the powers previously conferred upon the said Committee, the Committee be empowered:
| (a) | to appoint of their number, one or more subcommittees and to refer to such subcommittees any of the matters referred to the Committee; |
| (b) | to sit during a period in which the House is adjourned, during the recess after prorogation until the next following Session and during any sitting of the House; |
| (c) | to adjourn from place to place as may be convenient; |
and shall report to the House as soon as possible, or following any adjournment, or at the next following Session, as the case may be; to deposit the original of its reports with the Clerk of the Legislative Assembly during a period of adjournment and upon resumption of the sittings of the House, the Chair shall present all reports to the Legislative Assembly.
Matters most commonly referred to this Committee while the House is in Session are the Public Accounts of the Province of British Columbia, the Auditor General's public reports, and applications for the retention and disposal of government documents.
Section 13 (4) of the Auditor General Act states that:
"On being laid before the Legislative Assembly, the annual report of the Auditor General must be referred to the Public Accounts Committee of the Legislative Assembly."
The House has interpreted this subsection to mean that upon being tabled in the House in accordance with Section 11 (b) of the Financial Administration Act, the public accounts:
"be transmitted by the Comptroller General to the Minister of Finance and Corporate Relations not later than December 31 following the end of the fiscal year and be laid before the Legislative Assembly by the Minister of Finance and Corporate Relations within 15 days of the first available sitting after the transmission."
The public accounts are referred on motion to this Committee by the Minister of Finance. The practice in the House is for the Committee to receive the applications for the retention and disposal of government documents directly from the Public Documents Committee, "which consists of the provincial Archivist, the Comptroller General and three other persons to be named by the Lieutenant Governor in Council" (Document Disposal Act, RSBC 1979, C.95, S.3 (1)).
Strictly speaking, this Committee is afforded the opportunity to exercise its authority only within the confines of its terms of reference and instructions given to it by the House, which forms the basis of the work of the Committee. The Select Standing Committee on Public Accounts cannot direct the Office of the Auditor General to undertake any special inquiries without a special instruction from the House, since these specific matters have not been referred to the Committee. However, the Committee is able to ask the Auditor General to assist with research into any particular area being examined by the Committee. Research would not include the act of auditing unless that provision is contained within the Committee's terms of reference.
If research is interpreted by the Committee to mean "special assignment", the Committee might be precluded from requesting the Auditor General to respond according to the Auditor General Act:
| 16. | The Auditor General may undertake special assignments at the request of the Lieutenant Governor in Council, but the opinion of the Auditor General, is under no obligation to carry out any requested assignment if, in his opinion, it would interfere with the primary responsibilities of the Auditor General." |
Section 53 of the Constitution Act provides a legal framework around which the Public Accounts and other committees operate:
| 53. | (1) | A select standing or special committee of the Legislative Assembly may, if authorized by resolution of the Legislative Assembly, sit | ||
| (a) | during a period in which the Legislative Assembly is adjourned, or | |||
| (b) | during the recess after prorogation until the next following session. | |||
| (2) | A committee authorized to sit under subsection (1) must report to the Legislative Assembly on the matters referred to it following the adjournment, or at the next session, as the case may be. | |||
| (3) | A select standing or special committee of the Legislative Assembly authorized under subsection (1) may sit at time and places and examine witnesses and documents and hear representations from persons and organizations | |||
| (a) | as the Legislative Assembly, by resolution, may direct, or | |||
| (b) | as the committee (may decide,) there is no direction, by the Legislative Assembly, and | |||
| (4) | For the purposes of subsection (3), the committee | |||
| (a) | may compel the attendance of witnesses and the production of documents, and | |||
| (b) | has all the powers and privileges of the Legislative Assembly under the Legislative Assembly Privilege Act. | |||
| (5) | A warrant or subpoena issued by the chair of the committee has the same effect as if issued by the Speaker under section 3 of the Legislative Assembly Privilege Act. | |||
Sir Erskine May's Parliamentary Practice states that:
"A select committee, like a Committee of the Whole House, possesses no authority except that which it derives by delegation from the House by which it is appointed. When a select committee is appointed to consider or inquire into a matter, the scope of its deliberations or inquiries is defined by the order by which the committee is appointed … and the deliberations or inquiries of the committee must be confined within the limits so imposed."
Additional procedural guidance is provided to the Committee through Standing Order 71, which states, in part:
"(1) The Standing Orders of the House shall be observed in the Select Standing and Special Committees to the same extent as the same may be applicable to the Committees of the Whole House … Procedural matters arising in Committee shall be decided in Committee …
(2) A majority of the Members of a Committee shall be quorum, unless the House has otherwise ordered." (see: Parliamentary Practice in British Columbia by E. G. MacMinn, Q.C., 3rd edition, 1997, page 136)
The role of the Committee is described as not seeking to concern itself with policy; rather, its interest is in whether policy is carried out efficiently, effectively and economically. Its main functions are to see that public moneys are applied for the purposes prescribed by Parliament arising out of matters referred to it by the Legislative Assembly. (see also: May, 22nd edition, page 633)
Recommendation #1 (Management of Travel)
That the Ministry of Finance and Corporate Relations:
1.1 Review the recommendations contained in the recent Ministry of Finance and Corporate Relations Report to Treasury Board on Government travel, and take the necessary steps to reduce travel expenditures.
1.2 Develop both short-term and long-term strategies for collecting information to manage travel. Short-term strategies include better use of existing systems, such as those available through the Corporate Travel Card contract. Long-term strategies include decisions on developing travel components in the Government-wide Corporate Accounting System, or better using information systems offered by travel service providers.
1.3 Consolidate travel policies in one document and ensure they are available to all who travel or approve travel. In addition, a pocket version of the policies should be developed for easy reference by employees.
1.4 Monitor how travel dollars are spent, and through strategic planning, policy development and evaluation, ensure that value for money is maximized and travel policies are accomplishing what is intended.
1.5 Proceed with one or more airfare savings options identified in the 1994 study prepared for Cabinet as a means of reducing the cost of air travel, and continue to monitor the industry for new opportunities for savings.
1.6 Periodically obtain information on meal costs for the most frequently traveled locations in the province based on a level of service which it has defined, and compare the results to the reimbursement rates to ensure they are reasonable.
1.7 Consider the recommendation of the 1995 government travel review to remove rates as a bargaining item in the union agreements, and review the meal and incidental rates to determine whether multiple reimbursement rates are appropriate. It should also review the kilometric reimbursement rate to ensure that it is based on actual costs and reflects local conditions.
1.8 Continue to promote the use of its corporate travel card.
1.9 Review the cost/benefit of automating travel related systems, and take a comprehensive and integrated approach to the streamlining of expense processing, reimbursement, payment to suppliers, and information management of the travel function. This approach should provide direction and support to ministries currently attempting to carry out these initiatives on their own.
1.10 As recommended in the 1995 government travel review, develop a government-wide policy on videoconferencing and continue to promote its use across government.
Recommendation #2 (Forest Revenue System)
Your Committee recommends that the Ministry of Forests continue to implement their action plan pertaining to each of the recommendations outlined in the Auditor General's report.
Recommendation #3 (Timeliness of the Public Accounts)
Your Committee recommends that the Comptroller General determine a plan to meet a September 30th deadline for the issuing of the public accounts, with identification of actions necessary to meet earlier deadlines in the future.
Recommendation #4 (Corporation Capital Tax)
Your Committee recognizes the government's responsibility to administer all taxes equitably and that to do so requires appropriate procedures for examination and audit. As the costs would seem to be self-funding, the Committee recommends that the Ministry of Finance and Corporate Relations review its current practices in this area.
Recommendation #5 (Insurance Risk Management)
Your Committee recommends that significant claims and potential claims be appropriately disclosed as contingent, or provided for in the financial statements by the Ministry of Finance and Corporate Relations.
Recommendation #6 (Liability for Post-Retirement Benefits)
Your Committee continues its previous recommendation that these liabilities be included in the Public Accounts when it is practical.
Recommendation #7 (Loans and Guaranteed Debts Repayable Through Future Government Funding)
Your Committee offers no recommendation at this time, but suggests that this issue be included in considerations of changes relative to capitalization of tangible assets in the Consolidated Revenue Fund by the Ministry of Finance and Corporate Relations.
Recommendation #8 (Implicit Expenditures)
Your Committee endorses the recommendations of the Auditor General in relations to the Ministry of Finance and Corporate Relations.
Recommendation #9 (Contingencies)
Your Committee offers no recommendation at this time. (Ministry of Finance and Corporate Relations.)
Recommendation #10 (Corporate Accounting System)
Your Committee is keeping a watching brief on this project, is asking to be kept advised of progress by the Ministry of Finance and Corporate Relations, and is continuing to recommend secure long-term funding in order that the project reach a successful conclusion.
Recommendation #11 (Year 2000)
Your Committee noted the progress and urges continued attention by the Year 2000 Task Force. It asks to be kept advised of progress.
Recommendation #12 (Reporting of Provincial Debt)
Your Committee is encouraged by progress in this area and recommends the government make the changes recommended by the Auditor General.
Recommendation #13 (Tangible Capital Assets)
Your Committee notes the progress already made in capitalizing tangible capital assets and encourages further progress despite the inherent difficulties.
Recommendation #14 (Ethics Codes in the Public Sector)
The Committee recommends that the government endorse the recommendations by the Auditor General respecting ethics codes in the public sector.
Recommendation #15 (Privacy -- Collection of Personal Information by the Ministry of Health)
The Committee recommends that the government endorse the 15 recommendations appearing in the Report of the Auditor General on the matter of the collection of personal information by the Ministry of Health.
Recommendation #16 (Executive Severance Practices: Government Ministries and Crown Corporations)
16.1 Where working notice is not a practical severance option, the Public Service Employee Relations Commission's severance policy should identify alternative strategies.
16.2 As part of its periodic review of severance arrangements with senior executives at the Deputy and Associate Deputy Minister levels, government should consider both strengthening measures to control "double dipping" and providing terminated employees the option to receive either discounted lump sum payments or full salary continuance.
16.3 That Public Sector Employers' Council quickly approve the Crown Corporation Employers' Association guidelines, and require early submission of individual Crown corporation proposals.
16.4 As soon as possible, the Public Service Employee Relations Commission should computerize all employee severance information.
16.5 Employment contracts should contain severance provisions that reflect common law standards.
16.6 Where severance provisions are not covered under any collective agreement, Crown corporations should be required to report annually to the Legislative Assembly the number of severance agreements negotiated in the previous year and the range of equivalent months' gross salaries such arrangements represent.
16.7 Crown corporation severance arrangements exceeding sector guidelines should require approval by the Public Sector Employers' Council before finalization.
Recommendation #17 (BC Transit: Managing Operator Productivity)
17.1 Transit translate its overall goal for the Vancouver region of a yearly 1% improvement in productivity into measurable objectives for each of the major activities in Transit. Further, Transit ensure that the key performance indicators it uses can be seen to clearly measure progress towards attaining those objectives.
17.2 In the Vancouver region, Transit clearly assign responsibility for the attainment of objectives by setting sub-objectives and targets for individual business units and staff throughout the organization.
17.3 Transit provide the scheduling function in the Vancouver region with clear performance expectations and support the function in meeting these expectations. This support should come from the Board and other key stakeholders, as well as from management.
17.4 Transit determine the additional resources needed to enable the scheduling function in the Vancouver region to meet the expectations for its performance. These resources should be directed to the determination of vehicle running times and passenger load counts, among other things.
17.5 To help it evaluate the effectiveness of scheduling, Transit should retain records of run-cuts prepared as part of the scheduling process, both those adopted and those that were not, with explanatory notes about the basis of selection.
17.6 Transit implement a transit center operations system that supports decision-making, eliminates duplication of records, and reports on the efficiency of operations.
17.7 Transit explore whether or not there are opportunities for further efficiencies in the way in which daily work is assigned.
17.8 Transit implement a more effective system in the Vancouver region for monitoring compliance with the National Safety Code.
17.9 Transit implement a comprehensive strategy for attendance management. It should also define more clearly the goals and priorities of the attendance management process, and ensure that these are understood throughout the organization.
17.10 Transit conduct a review of operator attitudes to identify the factors most significantly affecting the levels of operator attendance in the organization. Every effort should be made to enlist the support of the union for the survey. On completion, the key results should be shared with all the interested stakeholders. As well, Transit should analyze the current balance of incentives and disincentives in the disability plan to see if the balance is appropriate.
17.11 The roles, functions and values associated with the attendance management program should be articulated more clearly and communicated to the managers and supervisors who administer the program.
17.12 Transit establish long-term goals for collective bargaining and strategies for achieving them. The goals and strategies should reflect the proposed development of the transit system as contemplated in the medium- and long-term service plans. Bargaining strategies must be linked to the budget process and to the overall mandate for negotiations.
17.13 Transit acquire a contract costing model to assist it in evaluating the impact of proposed contract revisions.
17.14 In future contract negotiations, Transit should ensure that the basis of measuring the success of the contract provisions be defined adequately and be capable of accurate measurement. For provisions which may be canceled by either party, success and measurement criteria should be set out clearly in the contract language.
17.15 Transit to ensure that performance information provided to different groups of stakeholders is accompanied by analysis that is consistent in content and relevant to the interests of the groups concerned.
Recommendation #18 (BC Transit: Its Success as a Market-Focused Organization)
18.1 Transit work with its regional transit commissions and the provincial government so that the various long-term plans and marketing goals are consistent and attainable.
18.2 The Vancouver region ensure that its action plans for service improvements clearly support its market goal.
18.3 Transit address in its key performance indicators all elements of service that are of importance to customers.
18.4 Transit assign responsibility for market-related key performance indicators to business units and individuals, in order to promote a stronger focus on customers and on marketing goals.
18.5 Transit provide units responsible for market-focused activities in Vancouver with organizational stability, resources adequate for the tasks assigned them, and sufficient ranking within the organization to clearly signal that Transit intends to be market-focused.
18.6 Transit appoint a senior executive whose primary responsibility is developing, maintaining, and advocating market focus throughout the organization.
18.7 Transit develop cost-effective methods of measuring, understanding, and addressing customer dissatisfaction and attrition, and consider including such measures in its key performance indicators.
18.8 Transit ensure that its print information is effective.
18.9 Transit work with its regional partners to ensure that decisions about bus stops and shelters maximize customer appeal.
18.10 Transit make full use of customer research in designing its fare structure, including research on price elasticity in the markets it serves.
18.11 Transit develop appropriate mechanisms for making decisions about vehicle type, design, and appearance that maximize customer appeal.
18.12 Transit regularly examine the relative cost-effectiveness of its various services (including specific routes) in attracting targeted markets such as car-driving commuters.
18.13 Transit extract maximum value from its existing market research.
18.14 Transit's development or modification of products and services should be supported by sufficient market research to give reasonable assurance that the products or services will meet customer expectations.
18.15 Transit work with its marketing research consultants to improve its ability to differentiate its customers in an action-oriented way.
18.16 Transit include market share as one of its key performance indicators.
18.17 Transit improve its external reporting through its annual reports by;
The Committee held 23 meetings on various topics arising out of reports issued by the Auditor General of British Columbia and in the preparation of the Committee's Report to the Legislative Assembly:
| Date | Location | Agenda |
| Tuesday, April 22, 1997 | Victoria | Public Hearings |
| Tuesday, May 6, 1997 | Victoria | Public Hearings |
| Tuesday, May 13, 1997 | Victoria | Public Hearings |
| Tuesday, May 27, 1997 | Victoria | Public Hearings |
| Thursday, June 5, 1997 | Victoria | Public Hearings |
| Tuesday, June 10, 1997 | Victoria | Public Hearings |
| Tuesday, June 17, 1997 | Victoria | Public Hearings |
| Tuesday, June 24, 1997 | Victoria | Public Hearings |
| Tuesday, July 8, 1997 | Victoria | Public Hearings |
| Tuesday, July 15, 1997 | Victoria | Public Hearings |
| Tuesday, July 22, 1997 | Victoria | Public Hearings |
| Monday, September 15, 1997 | Edmonton | CCPAC Conference |
| Tuesday, September 16, 1997 | Edmonton | CCPAC Conference |
| Monday, September 29, 1997 | Campbell River | Field Trip |
| Tuesday, September 30, 1997 | Penticton | Field Trip |
| Wednesday, October 1, 1997 | Fort St. John | Field Trip |
| Monday, October 27, 1997 | Ottawa | CCAF, Inc. Conference |
| Tuesday, October 28, 1997 | Ottawa | CCAF, Inc. Conference |
| Tuesday, November 4, 1997 | Victoria | Public Hearing |
| Tuesday, November 18, 1997 | Victoria | Public Hearing |
| Tuesday, November 25, 1997 | Victoria | Public Hearing |
| Tuesday, December 2, 1997 | Victoria | Public Hearing |
| Wednesday, March 25, 1998 | Victoria | Consideration of Report |
Observations and
Recommendations
Management of Travel
The audit assessed whether travel in the British Columbia government is managed with due regard for economy and efficiency. The audit examined:
The main findings of the audit were as follows:
Mr. Bob DeFaye, Assistant Deputy Minister, and Mr. John Mochrie, Commissioner of the Public Service Employee Relations Service, as well as other staff of the ministry, provided information to your Committee on the ministry's management of travel. They stated that the ministry remains committed to the continual improvement of the cost-effectiveness of travel management and accordingly the ministry welcomed the review of the Auditor General and the report's recommendations. The ministry has already made substantive progress in implementing the recommendations of the report.
Your Committee concluded its discussion of the report.
Recommendation #1
Your Committee recommends that the Ministry of Finance and Corporate Relations:
FOREST REVENUE SYSTEM
The Auditor General reported on his review of the internal controls in place to provide the Ministry of Forests with assurance that:
Your Committee was made aware of the following key points:
Recommendation #2
Your Committee recommends that the Ministry of Forests continue to implement their action plan pertaining to each of the recommendations outlined in the Auditor General's report.
TIMELINESS OF THE PUBLIC ACCOUNTS
The Auditor General, in his overview, discussed the timeliness of the Public Accounts. He mentioned that this year the Public Accounts were issued about ten months after the year end. He recommended they be issued on a more timely basis in the coming years.
The Comptroller General, Alan Barnard, agreed that a release in the end-of-September time frame would be a reasonable target over the next few years as the new Corporate Accounting System became more pervasive across government.
Recommendation #3
Your Committee recommends that the Comptroller General determine a plan to meet a September 30th deadline for the issuing of the public accounts, with identification of actions necessary to meet earlier deadlines in the future.
CORPORATION CAPITAL TAX
The Auditor General recommended that the Ministry secure resources and improve its systems and procedures for identifying delinquent taxpayers and conducting adequate field audits.
Your Committee was made aware that, although there has been a significant reduction in the number of unassessed returns, the ministry is still only able to audit half a percent of all returns. It was pointed out that each additional auditor produces an average of $500,000 in recoveries.
Recommendation #4
Your Committee recognizes the government's responsibility to administer all taxes equitably and that to do so requires appropriate procedures for examination and audit. As the costs would seem to be self-funding, the Committee recommends that the Ministry review its current practices in this area.
INSURANCE RISK MANAGEMENT
The Auditor General recommends that the government account for third-party insurance claims that are incurred but not recorded. Your Committee was made aware that the government does not record any liability for accidents that have occurred by the date of the financial statements but for which a claim has not been received.
Recommendation #5
Your Committee recommends that significant claims and potential claims be appropriately disclosed as contingent, or provided for in the financial statements.
LIABILITY FOR POST-RETIREMENT BENEFITS
The Auditor General recommended that a valuation of post-retirement benefits be prepared, and the estimated liability be accounted for in the financial statements of the province.
Your Committee was made aware that a new CICA exposure draft recommends the inclusion of post-retirement benefits as liabilities in the financial statements.
Recommendation #6
Your Committee continues its previous recommendation that these liabilities be included when practical.
LOANS AND GUARANTEED DEBTS REPAYABLE
THROUGH FUTURE GOVERNMENT FUNDING
The Auditor General recommended that the government change its accounting treatment of loans recoverable and guaranteed debts repayable through future appropriations. These amounts should be charged to the periods in which the loans or guarantees were made.
Your Committee was made aware that this is a problem in the Consolidated Revenue Fund statements only. Your Committee noted that the Auditor General had qualified the CRF statements on the basis that the loans should have been recorded as assets and the guaranteed debt recorded as a liability.
Recommendation #7
Your Committee offers no recommendation at this time, but suggests that this issue be included in considerations of changes relative to capitalization of tangible assets in the CRF.
Your Committee understands that the Auditor General and the Comproller General have reached an agreement on this issue.
IMPLICIT EXPENDITURES
The Auditor General recommended that the government continue to improve the procedures for identifying and quantifying all significant implicit expenditures, and to report them in its financial accountability documents, including the Estimates and the Public Accounts.
Your Committee noted that this report was a follow-up to recommendations in the two previous years.
Your Committee again discussed the concept in depth.
Recommendation #8
Your Committee endorses the recommendations of the Auditor General.
CONTINGENCIES
The Auditor General recommended that the government review and clarify its policy for the recognition of liabilities, including contingencies, to ensure consistency in their accounting treatment.
Your Committee was made aware that, although this recommendation appeared in the context of the Insurance Corporation of British Columbia, it is related to the inconsistent accounting treatment of contingencies and commitments in the financial statements of the Government.
Recommendation #9
Your Committee offers no recommendation at this time.
CORPORATE ACCOUNTING SYSTEM (CAS)
The Auditor General recommended that for the new CAS interface to be developed, tested, and made operational before April 1, 1999, work on its development must start immediately and a long-term funding arrangement for the CAS project must be sought to allow uninterrupted financing for the project.
Your Committee was made aware that the seven-year project had been scaled down to a general ledger and accounts payable system and a new system to accept transactions batched by ministries. Your Committee noted progress over the years.
Your Committee learned that the new version of CAS is "millennium-compliant"; that is, it has a process to eliminate Year 2000 problems.
Recommendation #10
Your Committee is keeping a watching brief on this project, is asking to be kept advised of progress, and is continuing to recommend secure long-term funding in order that the project reach a successful conclusion.
YEAR 2000
The Auditor General again examined this issue and urged that resources be committed to develop, implement, and test a solution.
Your Committee was made aware that ignoring the Year 2000 problem could result in failures of mission-critical systems and disruptions in government business and services. It was pointed out that it is not clear at this time if the government is liable should business functions fail on or before January 1, 2000. Your Committee heard that the new CHIPS system is "millennium-compliant".
The Auditor General informed your Committee of his continued review until the Year 2000 -- on a test basis -- of mission-critical systems with a view to provide assurance that no significant internal control has been compromised as a result of work done to make a system "millennium-compliant".
Recommendation #11
Your Committee noted the progress and urges continued attention by the Year 2000 Task Force. It asks to be kept advised of progress.
REPORTING OF PROVINCIAL DEBT
The Auditor General reviewed the reporting on the public debt. He believes that there is room for improvement in:
As well, the government should report on the impact on debt of changes in the Gross Domestic Product, a factor that the government can influence but not control.
Your Committee was made aware of substantial progress in reporting the public debt and disclosing key measures and indicators on debt.
Recommendation #12
Your Committee is encouraged by progress in this area and recommends the government to make the changes recommended by the Auditor General.
TANGIBLE CAPITAL ASSETS
Your Committee was made aware that the government has started to capitalize tangible capital assets in the summary financial statements and that the Auditor General had agreed that the three-year time frame to complete the recording of these assets was reasonable.
The Auditor General reported that land, buildings, specialized equipment and certain other tangible capital assets were recorded in the Province's financial statements in this first year of capitalization. To continue with capitalization of tangible capital assets, the Auditor General recommended that:
And that:
Your Committee discussed the difficulties in valuing government assets, especially land.
Recommendation #13
Your Committee notes the progress already made in capitalizing tangible capital assets and encourages further progress despite the inherent difficulties.
THE REPORTING ENTITY
SUMMARY FINANCIAL STATEMENTS
The Summary Financial Statements are annual general purpose statements, prepared by the provincial government, intended to present the financial position and results of operations of the Province.
GOVERNMENT RESPONSIBILITY
The Legislative Assembly delegates to the government, in legislation, the responsibility to determine the accounting policies to be followed in preparing the financial statements issued by the government and tabled with the Legislative Assembly as part of the annual Public Accounts of the Province. Both the Summary Financial Statements and the Consolidated Revenue Fund Financial Statements are included in the Public Accounts.
AUDITOR GENERAL RESPONSIBILITY
The Legislative Assembly requires the Auditor General, in legislation, to report to the Assembly whether, in the Auditor General's opinion, the financial statements prepared by the government present fairly the financial position and operating results of the government, in accordance with the government's stated account policies, and whether the financial statements are presented in a manner consistent with the previous year.
The Legislative Assembly also requires the Auditor General, in legislation, to report annually what he may consider to be inappropriate government accounting policies.
It has been determined by the auditing profession, and confirmed by the courts, that the auditor assurance that financial statements "present fairly" is the overriding responsibility of the auditor, separate from any assurance that financial statements are prepared in compliance with stated accounting policies.
1995/96 SUMMARY FINANCIAL STATEMENTS
(a) The government criteria for inclusion of entities in the 1995/96 summary reporting entity were consistent with prior years and with PSAAB recommendations:
"These financial statements include the accounts of organizations which are accountable for administration of their financial affairs and resources either to a minister of the government or directly to the Legislature, and are owned or controlled by the government."
(Accounting policy note to 1995/96 Summary Financial Statements.)
(b) The government, after due consideration, determined that certain health and education (SUCH) organizations met the criteria for inclusion and, accordingly, incorporated those organizations into the 1995/96 statements.
(c) The Auditor General, as a result of his audit, provided to the Legislative Assembly his opinion that the Summary Financial Statements, with the inclusion of SUCH organizations, "presented fairly" the financial position and operating results of the Province and, as well, were in accordance with the government's stated accounting policies.
1996/97 SUMMARY FINANCIAL STATEMENTS
(a) The government criteria for inclusion of entities in the 1996/97 summary reporting entity remain the same as in prior years and in accordance with PSAAB recommendations. However, SUCH organizations are specifically excluded from the application of those criteria.
(b) The government has determined that SUCH organizations (as well as any other entity) should be excluded from the financial statements if:
(i) the majority or its governing body is elected directly by the local taxpayers or appointed by government from persons nominated by local or inters group organizations or;
(ii) it is an advanced education institution.
(c) The Auditor General has reviewed the rationale advanced by government for the exclusion of SUCH organizations from the Summary Financial Statements, and had determined:
(i) Local authority: The existence of local authority does not, in itself, exclude an organization from meeting the criteria (accountability, and ownership or control) established by the government and PSAAB for inclusion in the summary statements. Consideration must be given, in respect of each organization, to the substance of the relationship existing between the organization and the government. Legislative provincial government operating control of SUCH organizations is currently both substantive and pervasive. The extent of control has not diminished between 1995/96 and 1996/97.
(ii) Advanced educational institutions: The fact that an organization is an advanced educational institution should not result in an arbitrary determination that the organization does not meet the accepted criteria for inclusion in the summary statements. That determination can only be made by examining the substance of the relationship existing between the organization and the government.
(d) By expressing no reservation of the 1995/96 Summary Financial Statements, the Auditor General conveyed that, in his opinion, the government's overriding criteria for inclusion were appropriate. The exclusion of SUCH organizations has a material effect on the Summary Final Statements. Consequently, and taking into account the governments previous inclusion of SUCH organizations in its financial statements, the Auditor General must consider whether, in his opinion, the 1996/97 Summary Financial Statements "presents fairly" the financial position and operating results of the Province.
The Ministry of Finance and Corporate Relations provided the Committee with the following views:
The Ministry and Treasury Board have the right and responsibility to set accounting policy for the Government of British Columbia, and that the committee should recognize the contribution they have made in advancing the presentation of financial statements over the years.
The Ministry, in turn, recognized the substantial role that the Public Sector Accounting and Auditing Board (PSAAB) has played in the process. The point at which the ministry and the government diverge from PSAAB guidance is where negative public policy implications are likely to result from implementation of their recommendations.
The PSAAB definition contains two tests to determine whether an organization should be included in the government reporting entity:
| (a) | the test of accountability; and | |
| (b) | the test of ownership or control. |
There are many complex and conflicting accountability relationships in the SUCH sectors. They are created by legislation, regulation, common law, tradition, common usage and voter expectations. The Ministry generally agrees that accountability is a reasonable test in determining the entity. However, an overly legalistic interpretation, based purely on a review of the legislation, may not give a sensible result and could well have negative public policy implications.
The test of ownership or control is a technical test. It depends on the issues of majority share-holding or right to appoint a controlling proportion of managing boards. This test relies on the existence of the control circumstances and does not require that the authority conveyed be exercised. This is a standard test in many organization structures and we accept its relevance in this case. This, as noted, is only one part of a two-part test.
The Auditor General's interpretation focuses heavily on legislative provisions which indicate that a high level of government control may be exercised over the SUCH sectors' use of its financial resources. It does not, in our view, recognize that many of those powers may only be used on an exception basis, nor does it recognize the degree of local autonomy over day to day operations. It does not appropriately recognize the complex nature of the accountability relationships in the SUCH sectors and ignores the strong element of local accountability in the governance structures. Evidence of control other than through legislative provisions was not provided to the Committee by the Auditor General or the Ministry for its consideration.
In your Committee's view, the heart of the issue is the division of accountability between the central level (provincial government and elected MLAs) and local level (locally nominated or elected boards.) Dual accountabilities exist and although the government has an annual accountability for the programs and activities of the SUCH sectors, local accountability must be recognized and respected.
The Ministry stated the decision to include the SUCH sectors in the 1995/96 Public Accounts was made to avoid a qualified audit report for that year on the issue of Fiscal Agency Loans. The time available to make that decision did not allow a full analysis of the wider implications of the decision. Since that time, further consideration has been given to the potential for erosion of local accountability as the governance structure adapts to the expanded reporting entity. In addition, as the expanded entity moves further from its traditional components, the Ministry believed there was a danger that the Summary Financial Statements would become less relevant to those interested in tracking government finances over time.
The Ministry therefore concluded that negative public policy implications for local autonomy and for the utility and accessibility of the Summary Financial Statements, which may result from inclusion of the sector, in fact outweigh any possible negative effects of a qualified audit report. The Significant Accounting Policies, stated in the Public Accounts, will be revised by the Ministry to clearly state that the primary accountability for the organization in the SUCH sector is at the local level and will be reported on that basis. Those organizations will not, therefore, be included in the summary reporting entity of the government.
The Committee accepts that the intent of the Summary Financial Statements is to shown the full nature and extent of the financial affairs and resources for which the government is responsible, including those relating to government enterprises and agencies. In this regard your Committee reviewed information provided by the Comptroller General and the Auditor General with respect to other provinces, and the extent SUCH sector organizations were included in each provincial entity. Your Committee noted a number of jurisdictions included some but not all of the SUCH sectors, others did not. However, it did note that the summary financial statements of other provinces were becoming more inclusive.
The Select Standing Committee on Public Accounts established for the Third Session of this Parliament will report further upon the Reporting Entity issue.
ETHICS CODES IN THE PUBLIC SECTOR
The Committee heard that some of the recommendations contained in the Auditor General's report on the subject have already been implemented by the Public Service Employee Relations Commission, and others are being studied by government officials in a satisfactory way.
Recommendation #14
The Committee recommends that the government endorse the ten recommendations by the Auditor General respecting ethics codes in the public sector.
PRIVACY: COLLECTION OF PERSONAL INFORMATION
BY THE MINISTRY OF HEALTH
The Committee heard that there is agreement with the Auditor General's recommendations by the Ministry of Health, the Ministry of Employment and Investment, and the Information and Privacy Commissioner.
Recommendation #15
The Committee recommends that the government endorse the 15 recommendations appearing in the Report of the Auditor General on the matter of the collection of personal information by the Ministry of Health.
EXECUTIVE SEVERANCE PRACTICES:
GOVERNMENT MINISTRIES AND CROWN CORPORATIONS
The review was carried out to determine the extent of severance costs resulting from the termination of employment of senior executives within government ministries and Crown corporations, as well as to determine whether the government has:
The main findings of the review were as follows:
John Mochrie of the Public Service Employee Relations Council [PSERC] and Marnie Mitchell of the Public Sector Employers' Council [PSEC] were in attendance and provided information to your Committee on this topic.
Ms. Mitchell presented a copy of the new Regulations, issued just prior to the meeting. She stated that the Crown Corporation Employers Association guidelines had now been approved by PSEC, and that new controls over severance packages were being introduced which would address the issues raised in the report. She also indicated that PSEC would provide reports on severance practices in the future, as recommended by the Office of the Auditor General.
Mr. Mochrie stated that the salary continuance policy did allow him to offer alternatives when it would be inappropriate to have the person work during the notice period. He went on to describe the activities undertaken to avoid severance costs for laid-off workers by attempting to re-locate them in the public service, and how PSERC attempts to arrive at a fair settlement when severance does occur.
Your Committee concluded its discussion of the report.
Recommendation #16
Your Committee recommends that:
BC TRANSIT: MANAGING OPERATOR PRODUCTIVITY
The purpose of the audit was to assess Transit's degree of success in maximizing the productivity of its bus operators and in measuring the results it has achieved. The audit looked for answers to the following questions:
The main findings of the audit were as follows:
Blair Trousdell, CEO, appeared on behalf of BC Transit. Mr. Trousdell stated that BC Transit agreed with the findings in the report on productivity. He stated that Transit had already identified the issues raised and were beginning to work on them. Transit has established goals to improve productivity, and has introduced an attendance management program, which has already resulted in reduced absenteeism. The Committee asked several questions with regard to productivity and absenteeism.
Your Committee completed its discussion of the report.
Recommendation #17
Your Committee recommends that:
BC TRANSIT: ITS SUCCESS AS A MARKET-FOCUSED ORGANIZATION
The audit looked for answers to the following questions:
The main findings of the audit were as follows:
Mr. Trousdell stated that BC Transit was also in agreement with the findings of this report, and that it was the focal point of a considerable amount of activity in the past year. A new senior marketing executive has been seconded from another Crown corporation with a mandate to develop a strategic marketing plan. This plan is now awaiting the approval of the minister. Mr. Trousdell went on to discuss the challenge of changing a culture which has been pervasive not only in BC Transit, but in the transit industry. BC Transit has begun to analyze its market groups and to focus on those with the biggest potential return, and is building internal key performance indicators to track its success.
Your Committee completed its discussion of the report.
Recommendation #18
Your Committee recommends that:
1996/97: REPORT 11
FOLLOW-UP OF PERFORMANCE AUDITS ISSUED
NOVEMBER 1993 TO DECEMBER 1995
The report contains the results of the Auditor General's follow-up work on nine performance audits issued from November 1993 to December 1995. The report provides information about the extent to which the recommendations arising in the performance audit report issued have been implemented by the organizations responsible. The audits were:
Ministry of Environment, Lands and Parks (1993/94 Report 1)
Ministry of Education, Skills and Training (1993/94 Report 2)
Ministry of Health (1993/94 Report 5)
School Districts (1994/95)
Provincial Agricultural Land Commission (1994/95 Report 2)
Ministry of Finance and Corporate Relations (1994/95 Report 4)
The Auditor General's approach was to ask the management of the organizations having responsibility for the matters examined in the audits to provide written reports describing actions taken with respect to the audit recommendations. The Auditor General's staff reviewed the reports to determine if the information reported was presented fairly in all significant respects. The Auditor General found that it was in each of the reports.
Your Committee discussed the follow-up reports for the following four audits:
MINISTRY OF ENVIRONMENT, LANDS AND PARKS (1993/94 REPORT 1)
HABITAT PROTECTION FUNCTION
In November 1993, the Auditor General reported the results of his audit of ministry processes to protect fish and wildlife habitat. The purpose of the audit was to assess the adequacy of the ministry's processes for protecting fish and wildlife habitat, and to determine the extent to which ministry management and the Legislative Assembly were provided with performance information. It examined issues important to the conduct of habitat protection. Specifically, it looked at the ministry's role and its processes for establishing objectives and priorities, providing advice to other agencies, and determining the results of its efforts.
The Auditor General made six recommendations designed to improve the management of the Habitat Protection Function.
Your Committee discussed the status of implementing the Auditor General's recommendations as described in his follow-up report.
The Ministry was represented by: Mr. Greg Koyl, Assistant Deputy Minister of Corporate Services; Dr. Jon O'Riordan, Assistant Deputy Minister of Environment and Lands regional operations; and Rod Davis, Manager of Habitat Protection and Environmental Assessment. Mr. Davis made a short presentation that addressed the points raised by the Auditor General in the original report, and along with Dr. O'Riordan, answered questions by the members of the Committee.
Your Committee concluded its discussions of the report.
MINISTRY OF ENVIRONMENT, LANDS AND PARKS (1993/94 REPORT 1)
REGULATORY PROCESS FOR SPECIAL WASTE
In November 1993, the Auditor General reported the results of an audit of government regulation of special waste in British Columbia. The audit was conducted to assess whether the ministry managed the regulatory process for special waste in a way that:
The Auditor General made nine recommendations to improve management of the Special Waste Function.
Your Committee discussed the status of implementing the Auditor General's recommendations as described in his follow-up report.
The Ministry was represented by: Mr. Greg Koyl, Assistant Deputy Minister of Corporate Services, Dr. Jon O'Riordan, Assistant Deputy Minister of Environment and Lands regional operations; and Ron Driedger, Director of Pollution Prevention and Environmental Remediation. Mr. Dreidger provided the Committee with information about the advances the ministry has made since the audit was done in 1993 and answered questions from Committee members.
Your Committee concluded its discussions of the report.
MINISTRY OF HEALTH (1993/94 REPORT 5)
THE TRANSFER OF PATIENTS FROM RIVERVIEW HOSPITAL
TO THE COMMUNITY
In May 1994, the Auditor General reported the results of the audit of how the ministry was planning the replacement of Riverview Hospital. The audit was focused on the transfer of patients that occurred between April 1, 1992 and March 31, 1993 -- the first year of formal downsizing. The audit was conducted to assess how the ministry had planned, implemented and evaluated the transfer of patients from Riverview Hospital to community-based programs. As well, the audit assessed the accountability information that the ministry had given Members of the Legislative Assembly about the transfer of patients and funding from the hospital to the community. The Auditor General made three recommendations to improve management of future transfers.
Your Committee discussed the status of implementing the Auditor General's recommendations as described in his follow-up report.
Mr. Bill Douglas, Director, Adult Mental Health, and Mr. John Herbert, Director, represented the ministry. Also in attendance was Mr. John Fox, Vice-President, Clinical Services and Community Partnerships, Riverview Hospital. Mr. Douglas provided further information about the action taken by the ministry in implementing the Auditor General's recommendations and provided answers to questions from Committee members.
Your Committee concluded its discussions of the report.
MINISTRY OF HEALTH (1993/94 REPORT 5)
PSYCHIATRIST SERVICES
In May 1994, the Auditor General reported that the results of his audit of how the Ministry of Health was ensuring psychiatrist services were accessible to the seriously mentally ill in a cost-effective way. Specifically, the audit assessed whether the ministry had:
The Auditor General made eight recommendations to improve management of psychiatrist services.
Your Committee discussed the status of implementing the Auditor General's recommendations as described in his follow-up report.
Mr. Bill Douglas, Director, Adult Mental Health, and Mr. John Herbert, Director, Finance and Management Division, represented the ministry. Mr. Douglas provided further information about the ministry's progress in implementing the Auditor General's recommendations and provided answers to questions from Committee members.
Your Committee concluded its discussions of the report.
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