Manitoba Committee Hansard — 5 June 1979 (Public Accounts Committee, Sitting 6, 31st Legislature, 3rd Session)

31-3-pa6

Manitoba — Debates (Hansard)

ISSN 0542-5492 Legislative Assembly of Manitoba STANDING COMMITTEE ON PUBLIC ACCOUNTS Chairman Mr. D. James Walding Constituency of St. Vital Tuesday, June 5, 1979 10:00 A.M. Office of the Queen's Printer for the Province of Manitoba

me: 10:00 a.m. Hearing Of The Standing Committee On Public .Accounts Tuesday, June 5, 1979 iAIRMAN: Mr. D. James Walding (St. Vital). ft CHAIRMAN: Order please. We have a quorum gentlemen. The comm ittee will come to order. :ttters before the commi ttee this morning are the Public Accounts and Bill No. 2,

An Act to Amend 3 Financial Admin istration Act. �- CHERNIACK: Mr. Chairman, when we were dealing with the Auditor's Estimates, the •mmi ttee on Supply insis ted that certain questions that were being asked should be held over · the Pu blic Accounts, and I wonder if we could get those dealt with now. As I recall it, there was a question of the method in which the Manitoba Agricultural Credit >rporation sets its reserve. t CRAIK: Well, Mr. Chairman, on a point of order.

The procedure this morning, I would :ommend to the Comm ittee, is that we deal with Bill No. 2, and then we'll ret urn to the Grey ok Accounts, and if there are questions emanating with regards to those matters at that time, 1y should be dealt with under that. t. CHERNIACK: I assume that was the point of order, Mr. Chairman, and on that point of order like to point out two things. Firstly, the meeting is called and the notice reads that it's called xder to deal with the accounts for the year ending March, 19 78, I think.

Yes, we're still dealing h March 19 78, and the refore that's the pu rpose for the mee ting, as publis hed by the notice which receiv ed. Secondly, clearly we were told that Publi c Accounts would be called soon, and we would be e to deal with the questions asked. Now, frankly it shou ldn't take too long to deal with it, although 1n tell from The Financial Admin istration Act that it is urgent. I'd like some sort of an understanding t if we don't finish today that we will adjourn for a period very soon before the session ends :omplete the Publi c Accounts or at least to deal with the questions that were raised.

The mini ster m't present when these questions were dealt with just this last week, and I think that if we deal 1 Bill 2 first, we 're entitled to an understanding that we will meet again to get these questions wered before the session ends. Is the min ister prepared to give that kind of an lertak ing? . CRAIK: Well perhaps I can ask, Mr. Chairman. The items in question, are they items that contained in the Grey Books? You made reference to Agricultural Credit Corporation . . CHERNIACK: Well, the Agricultu ral Credit Corporation is probably in the year ... I'm not !.

Let me clarify for the min ister, who wasn't here for the Supply Estima tes. =irstly, there is simply the question of how does the MACC establish a reserve bid when it offers )erty for sale? And I belie ve the answer is avai lable, and that's probably it. rhe other is, what arrangements have been made by the Aud itor for the audit, the audit by ate auditors of the Crown corporations which come unde r his legisla tive respon sibili ty. think those are the only ... I think there was a third; I don't remember, so I'm not sure that take half an hour to deal with that - not even that. CRAIK: Well, probably, Mr.

Chairman, I'll go back to my original comment. My recommendation 1at we deal with The Financial Adminis tration Act first and then we deal with the Grey Book the many items that are open in the Grey Book in going through the Grey Book. I think that 1terject ion)- well, I don't know how long. Let's have a go at the Financial Admin istration Act, n't know how long it'll take, but I would like to get it under way. it's critical from the point 241

Public Accounts Tuesday, June 5, 1979 of view of government admin istration; the other cert ainly is im portant from the point of viev the members, and then we'll take it from there. MR. CHERNIACK: Mr. Chairman, I mentioned that the Minis ter wasn't present last week w we dis cussed the Estima tes of the Provincial Auditor, so he doesn't know and, therefore, I VI him to be aware of the fact that we had certain questions to ask which were ruled to be mat that should be dealt with at the next meeting of Public Accounts. We were also assured that tt would be a mee ting soon of the Public Accounts; now it's here.

Now, following through from the Estima tes Comm ittee, it is the logical thing to deal with th matte rs that were laid over from Supply for Public Accounts. Now, I suggested to the min ister that, unde rstandin g as I do that he's anxious to get this through and I don't want to hold that up, that if he gave us an unde rtaking that we would 1 with these matters before the Session ends, that I would support his suggestion, but he hasn't d with that proposal of min e at al l.

So, I would like to ask him now: Is he prepared to unde r1 that we will deal with the question, the answers to the questions we raised in the Estimates w were deferred for this Comm ittee, deal with it immedia tely after Bill No. 2? That would take 1 of any problem of urgency in relation to Bill No. 2. MR. CRAIK: Well Mr. Chairman, Mr. Cherniack is certainly correct that I wasn't present in t1 dis cussions that he's making reference to. The Auditor's Report has been dealt with; the ma1 before the Comm ittee are impo rtant matters that other mem bers have to look at, which are contents of the Grey Books.

We've had I don't know how many meetings start ing, I believe before Christmas, that sta into the Auditor's Report. We've had many meetings dealing with it. Mr. Cherniack's now sugge� that we revert back to that open forum to deal with questions that he thinks that have com1 since that ought to be dealt with. I'm suggesting that as far as there are some other priorities that we want to deal with; s members want to deal with the Grey Book; the government wants to deal with Bill No. 2 beci of the urgency involved, and I would set them as a priority. When we are into the Grey Books, if the matters referred to by Mr.

Cherniack are an approp pla ce to look at them , we'll look at them then , but we're not setting aside the precedence to rE back to the form where we had three or four meetings, a wide-ranging discussion on all these mat plus the Estim ates process, to set aside the other items, and in particular The Fina1 Adminis tration Act, for that pu rpose. I have no intention of suggesting that there's any reluct1 in discussing the matters that are raised. All I'm saying is that the intention here would b recom mend that the Comm ittee deal first with the Financial Admin istration Act. MR. CHAIRMAN: Mr. Pawley. MR.

PAWLEY: Mr. Chairman, and to Mr. Craik, if Mr. Craik would read Hansard dealing witl Estimates of the Provincial Auditor, I belie ve he wi ll be satisfied that again and again govern1 members urged that this matter of the Manitoba Agricultural Credit Corporation be dealt wi Pu blic Accounts Comm ittee, and there was, I believe, a very clear, very definite commitmer the part of the government that the entire matter pertai ning to the Manitoba Agricultural C Corporation be dealt with in Public Accounts Comm ittee. So Mr .

Chern iack is not in fact sugge it; it was members of the government that suggested that this matter be dealt with in Public Accc Comm ittee. Now, in sayi ng that, surely Mr. Chairman, it is not too much then, in view of the representa that were made by government, the urgings upon opposition mem bers, that Mr. Craik, as Fin Minis ter, commit hims elf to satisfy members of the Legislature that in fact this matter will be with in this Comm ittee prior to the conclusion of the Session. If it can be dealt with througl Grey Books, fine. There's some doubt in that respect.

But if not, I believe that, in view o representa tions, the urgings, the interjections by government members while the Provincial Au was before the House, that there's a very clear moral commitment on the part of this governr and all we request so we can proceed on with the busine ss, it seems to me, is a very clear unequi' commitment by Mr. Craik, that inde ed this matter that was raised when the Provincial Audito1 before the Assembly, will in deed be dealt with in this Comm ittee prior to the conclusion o· Sessio n. 1 bel ieve that to be very clear, and I believe that Mr.

Craik, and I don't - the MembE Wolseley's be ginning to interrupt - Mr. Craik has acknowledged he was not there. I believe if Mr. Craik will read the tenor of the de bates while the Provincial Auditor was before the H he would be satisfied that there was in fact a commitment, that the whole thrust of the interve 242

Public Accounts Tuesday, June 5, 1979 om his side was, "Hey, this matter can be dealt with in Pub lic Accounts Comm ittee. Let it be �alt with there." R. CHAIRMAN: Mr. Wilson, Mr. Einarson, and Mr. Cherniack are on the list. Mr. Wilson. R. WILSON: Mr. Chairman, I had consid ered this somewhat of an apolitical comm ittee in a sense at we were exa mining the Grey Books today after Bill 2. I was instructed that because I had so raised a num ber of matters.

Some of the concerns that I had raised, just in the last several onths; I wanted to know about the fur trappers, I had talked to the Auditor about that, about the snowmobiles the former government had bought and what have you, and the loans that e outstanding, and I had also wanted to talk about the tendering and purchasing matters. I had 1ne over and I sat through all the meet ings on these eight or ten parcels of land that were tender ed 1t, and I, too, had encouraged a wider range of adver tising, but I see nothing wrong.

I have gone 'ough all that thing pert aining to MACC, I sat through all the mee tings, I see nothing to be gained deviat ing from the Grey Books which was the game plan for today. You know, all of a sudden it seems to me that we're throwing up the roadblocks of getting with the job of selling Crown land, which I've been urging for for a long time. And I would like see us continue with Bill 2 and then the Grey Books, and I'm sure that within the Grey Books �re may be a

section there which mem bers opposite, in their skil lful manner, can bring up the bject of MACC. I hope to be able to bring up my concern about the level of government use of taxis under ! Grey Books. I expect to bring up a num ber of concerns that I have under the Grey Books, cause I think there are expenditur es in those books which relate to those, and I think we'll be en an opportunity once we ge into them to fit that in. But if members opposite, like the Chairman of this comm ittee, had attended the MACC meetings, !Y would have the answers that they are seek ing. Those also are in Hansard.

So with all due :pect, I came here this morning to deal with Bill 2 in the Grey Books and I feel as a member this comm ittee that's what I was told we were dealing with, and I wo uldn't want to deviate from it. :. CHAIRMAN: Mr. Einarson. :. EINARSON: I would like to concur with comments that Mr. Wilson has just made, and if my ollection is right, that while we were dealing with the Provincial Auditor's report, we on the rernment side, did bring up some questions of some things that we thought were important, 11 don't deny that, as Mr. Pawley has stated.

But I thought we came in here with the unde rstanding t we were going to deal with Bill No. 2, and having done that, then if Mr. Cherniack wants to t1 with the MACC, I know they've brought this up a numb er of times, we have in the Grey Book Page 86 where that item comes into play and I think we could deal with it at that time. And 1 don't see any reason why we have to delay the proceed ings, Mr. Chairman, because I 1k time is of the essence and it's as imp ortant to the opposition as it is to us to get on with job of dealing with Bill 2, and then following that, I suggest, Mr.

Chairman, that we could deal 1 the matters that the opposition feel are im portant to them . . CHAIRMAN: Mr. Cherniack . . CHERNIACK: Mr. Chairman, let's clarify what we're talking about. Mr. Wilson said, "the game 1." The game plan was that we deal with the Public Accounts for the year ending March 31, B. it's on the notice, that was what we were brought here to deal with. After notice was given his mee ting, the Minis ter of Finance referred Bill 2 to this comm ittee.

If you 're going to follow game plan, and I'm not saying you shouldn't, but if you're going to follow it, then we should lealing with the Gry Books and the Publi c Accounts and then Bill 2. But the Min ister, for good ;on, wants to move Bill 2 ahead of every thing else, and I don't object, I agree. 3ut, all 1 asked was an unde rtaking by the Min ister that the que stions raised in Comm ittee of ply would be dealt with before the end of the sessi on. That's all I asked, a commitment and 1as not given it.

Now we are for tuna te that we have the chairman of Supply Comm ittee with oday in this comm ittee, and he is the one who ruled against the questions that we are asking, 1g that it should be a matter for Publi c Accounts. I don't have therecord but he has a memory 1 think that he will supp ort the fact that we were told that we would be able to deal with that ub lic Accounts. am willing to co-operate with the Minis ter in having Bill No. 2 first, providin g he unde rtakes 1e questions that we raised in Supply would be dealt with by this comm ittee before the end 243

Public Accounts Tuesday, June 5, 1979 of the ses sion. That's not un reasonable, Mr. Chairman, and he has not done that. If he would that there wou ldn't be any more problem. But if he doesn't make that commitment then it appE to me as if we were blocked in Committee of Supply from asking questions, which we thought v legitima tely posed , by being told that they would be dealt with this at this comm ittee, and if Minis ter does not commit himself to our being able to deal with it dur ing the session, then are being frustrated again.

And I don't think it's necessary and I think he could make the commitm and I don't think it will take as long to get the answers as it did to dis cuss this matter of 01 and procedure. MR. CHAIRMAN: Mr. Parasiuk. MR. PARASIUK: Thank you. The Member for Wolseley says that we had an opportunity , and even, Mr. Chairperson, had an opportunity to raise questions about MACC when we had the

M) mee ting. Well of course the question is, when did we have the MACC mee ting? We never n did. The MACC has not appeared before a legisla tive commit tee and if you recal l, Mr. Chai rper: when we were dis cussing the Minis ter of Agriculture's Estima tes, the Con servative majority stop ques tioning in that Estimates' review. They called the question.

They used their majority, and prevented the New Democratic Party opposition from asking further questions about the MA That was closure. lt was brought in right in this room, and it was done twice in a row, one sto even ing, and they used the tyranny of the majority to get their way at that time. We then � into Su pply. We were asking questions there when the Auditor's Estimates were up before the Ho That was our other opportunity to ask que stions. The chai rperson of that commi ttee ruled tha were not in order. That ruling was sustained by the Conservative majority.

So we are now t in Publi c Accounts with the session coming to an end very shortly and we are trying to use opportunity to raise very legitima te questions that we have been prevented twice from rai before. Now that's why I think it is im perative that we do get a commitment from the Minister tha will have an opportunity to raise these questions . Otherwise what you will see happening wil very strong fi libu sters in other commi ttees which didn't take pla ce because there were o opportunities.

But I don't think the Conservatives can cut off opportunities in every alternative . and then say, well you have th ose other opportunities, when they know darn well that tt opportunities aren't there. This is our last opportunity to raise critic al questions relating to the M, and I think it's necessary that we get that unde rtaken, that we get the opportunity to do s the next week or so. MR. CHAIRMAN: Mr . Craik. MR. CRAIK: Well, Mr.

Chairman, maybe it will straighten things away at least partially if I indi c that the intention is to go through the Grey Books entirely, and this has not always been the prae in recent years as some members here will realize that in many many of the years the Grey Be were never completed. The members were never given the opportunity to get through a multi of items that they would like to have rea ched.

The commit tee was not called and the Grey Be were never approved. lt is the intention of this government and determination of this governr that the commit tee will be called and the Grey Books will be gone through and that every me� will have an opportunity to raise whatever questions they want to from items in the Grey B Whether or not it wi ll be all comp leted dur ing this sessi on, I don't know, but we will attem� call the comm ittee as frequently as possible.

There are other commi ttees still to be called, IJ it's after the sessi on, it's after the session, but the commi ttee will be called and the Grey Be will be dealt with. MR. CHAIRMAN: Mr. Pawley. MR. PAWLEY: Mr. Chairman, I belie ve that what Mr. Craik is indi cating is fair enough insof< it proceeds. I belie ve that we could come to agreement in respect to this matter if Mr. Craik c in addition to indicating that the Grey Book would be completed, could undertake to move item on Page 86, to the commenc ement of the discussion.

This ought to be clearly the matte most concern and priority to opposition mem bers, to leave it on Page 86, could very well n that the matter will be dealt with at some time after the completion of the session . To us i matter of top priority and time is of the essence, and I belie ve it would be only reas onabl view of the Mini ster's declaration that they Grey Book will be completed, to move that item ah and I belie ve that if Mr. Craik could agree to do that, that I would think that we could corr an un dertaking and proceed on with Bill No. 2. 244

Public Accounts Tuesday, June 5, 1979 IR. CRAIK: Well there is of course any numb er of other items that other mem bers of the comm ittee ay wish to raise too that they may consider to be as equally imp ortant as the items raised by 1e Leader of the Opposition. The Grey Books, after all, still cover in the majority the final year ' the former gove rnment, and when he makes reference to the opposition wishing to exam ine a :�rticular item that we should bring to the front, there may be other items in the Grey Books that embers may wish to also consider a priority.

So I think that if we get into this, setting priorities ithin the Grey Books, we 're into a procedural harangue that's going to last much longer than this ,mmit tee is prepared to devote the amount of time to. So, all I am telling the member is that it's the intention of the government to deal with the Grey )Oks and if these items can be dealt with, which appear to be contained therein, they'll be dealt th. R. CHAIRMAN: Mr. Pawley. R. PAWLEY: Mr.

Chairman, I belie ve that the aspect that is quite different in respect to this m from other items that might be of concern to other members of the comm ittee, is the fact at this particular matter was not dealt with when the Provincial Auditor appeared before the 1sembly. lt was ind icated by government mem bers that it would be dealt with within this comm ittee. fact closure was moved twice in the Assembly with the argument that this matter could be very �11 dealt with in this committee.

I know of no other item that's wi thin the Grey Books in which 3re was so much effort, so much debate, so much concern that was expressed to the extent it closure was moved twice to prevent a dis cussion of this item. I would think that the very nature the surroundings that relate to the Manitoba Agricultural Credit Corporation item would demand :�t this item receive the earliest att ention, and by that, Mr. Chairman, it would mean moving it m Page 86, to Page 1. I know of no other item in answer to Mr.

Craik that is as current, that's been expressed with much concern and anxie ty by mem bers of the Legislature, as this particular item, and to leave 1t a point towards the end of the discussion of the Grey Book, or half way through the dis cussion the Grey Book - so we deal with it some time in late summer, fall, e, we whenever it b would ·arly and surely loose the imp ortance of this matter due to the current nature of the 1cern. l. CHAIRMAN: Mr. Cherniack. l. CHERNIACK: Wel l, Mr. Chairman, I differ from my leader to a slight extent only.

He is acc epting 1 fact that if we deal with the grey books we will deal with the points we have raised, which re not only the question of reserve bids on MACC but also the employment of private auditors, th of which took pla ce after March 31, 19 78, and the strict interpr etation of what the Min ister ; said would possibly justify, in the future, a refusal to deal with those matters as being matters t do not come within the time period of the grey book. So, Mr.

Chairman, I come back to what I belie ve was an unders tanding or a commitment or tatement in Comm ittee of Supply to the effect that the questions that were raised were out of ler in that Comm ittee but would be in odder and properly posed at Pu blic Accounts, and I have :ed the Min ister several times if he will make a commitment that those questions will be dealt 1. And, sort of unl ike my leader, I would say I would like a commitment from the Minis ter that nediately after we comp lete Bill 2 we will deal with the questions raised in Supply only last �k.

And, again, you know 1 actually would ask the Chairman of the Commi ttee of Supply, who ruled out of order, to confirm the fact that it was stated that we could deal with it when we came 1 Publi c Accounts. I think we have a right to call on him for suppor t of our contention that we ,ected, and have a right to expect that it would be dealt with by this Comm ittee and, as I say, >uldn't want to ask him to do it if the Min ister would only agree that we will have those questions '.lt with imm ediately after Bill 2.

But if he won't agree to that, then I think we ought to go on 1 the purpo se for which the meeting was called, which is Publi c Accounts for the year ending ·eh 31, 19 78, which is the first order on the agenda . . CHAIRMAN: Mr. Craik. , CRAIK: Mr. Chairman, Bill 2 is automatically referred to the Comm ittee when it's passed and ·e is nothing procedurally that in any way prevents us from dealing with Bill 2 ahead of the ,lie Accounts and, back to squar e one again, I suggest we have given you the undertaking that 245

Public Accounts Tuesday, June 5, 1979 the grey books are going to be dealt with. lt's an undertaking, Mr. Chairman, I will remind Y• that we were never able to get, period, from the former government. Mem bers for years were den the opportunity to get through the grey books and when they did get to them they didn't wa the time on the grey xooks that they did have rehashing the Auditor's Report. There is one other procedure that if the member has a grievance that he thinks requir es atten tion of the Auditor, he has the full right to go to the Auditor and ask for an examination it.

I think the members here all recognize that full wel l; that has been the time-honour ed proced used from time to time but not too frequently. lt is there. lt's not like there are not avenues proceed with a grievance, other than the procedure that has already been followed. So, Mr. Chairman, I suggest that we move on with Bill 2. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: Mr. Chairman, in the first place it doesn't help the Minis ter one bit to k• talking about the previous government and what was done before. lt won't help him.

I could rE him to the government before the previous government, the government of which he was a memt where Pub lic Accounts were dealt with in one half day once a year and completed, and the Opposi1 then accepted it. I was in the Opposition at that time. But that doesn't do any good. The Min il is careful to keep saying, "deal with the grey books." He has not answered directly my point i that is that questions asked in Estima tes were referred to this Commi ttee, and he has not yet s even once that those questions would be dealt with by this Comm ittee.

What he has said is 1 the grey books will be dealt with, and I point out to you, Mr. Chairman, again, that the questi asked in the Estima tes Comm ittee dealt with items which occurred su bsequent to March 31, 1� So a strict

interpretation of the grey book matter is that those matters didn't occur in that Y' ther efore somebody could move that it's out of order. Now, if the Minis ter would give an undertaking, which I think is in accord with the dis cusl in Estimates Commi ttee, then we could go on to Bill 2 by agreement. If the Minis ter won't ! the un dertaking and if the Chairman of the Estimates Com mittee will not confirm my staterr or deny my statement, then I say, Mr. Chairman, then we must proceed with Public Accounts they are the pu rpose for which this Committee was called.

The Minis ter is right that Bill 2 · referred to this Comm ittee. lt was not referred to this Comm ittee in priority to the busi ness of the Committee and if you want to stick to the business of the Comm ittee then Public Acc01 grey book comes first, un less the order is changed . Mr. Chairman, I really would like to call on Mr. Kovnats to give us his comments, becausE was the Chairman of the meeting which moved it over. Now, he doesn't have to ... Of cou he doesn't have to respond at all, but he is here and he was there and I think that we ough have clarification from him. MR. MINAKER: Mr.

Chairman, on a point of order. I think it would be out of order, Mr. Chairn for a Chairman of another Comm ittee to be called upon because he happens to be atte ndin g ano Comm ittee of the Legislature, to comment on his decision that he made while chairing ano comm ittee. I think that's out of order, Mr. Chairman, and I would like -(I nterject ion)- No, I tl it's out of order, Mr. Chairman. MR. CHAIRMAN: Yes, I have just been advised by the Clerk that it's out of order for any com mi to question or to reflect upon the ruling of another Chairman of any other commi1 -(I nterject ion)- May I finish?

However, any member of the Legislature is entitled to attend meeting and to so partici pate, if he wishes to. Mr. Cherniack. MR. CHERNIACK: Mr. Chairman, I want to make it clear - and it is a matter of privilege did not reflect on the decision of the previous commit tee. I may not have agreed with it, bu1 not saying it's wrong. I'm saying that because of the decision made at that commi ttee there a clear unde rstandin g that the matter would be referred to this comm ittee. Now, it's not in way a criticism of Mr. Kovnats as Chairman.

All I'm saying is, sinc e he was there, he will I heard and could confirm the unde rstanding that I received that that matter was a matter that w be dealt with in this comm ittee rather than his comm ittee. I want to make clear I am not critic his decision nor am I criticizing the fact that the commi ttee voted in his support. I'm just sa it happened . Do we have to deny that it happened or are we not entitled to ask if it happer Mr. Kovnats does not have to do anything. He is here as a member of this comm ittee and do• have to do a thing. 246

IR. CHAIRMAN: Mr. Kovnats. Public Accounts Tuesday, June 5, 1979 R. KOVNATS: Mr. Chairpers on, and I will take the opportunity of calling you Mr. Chairperson, really felt that it would have been out of order for me to respond to Mr. Cherniack. I am here st as a Member of the Legislatu re; I am not a member of this comm ittee and to reflect on and discuss the rulings that I made in another commi ttee would have been strictly out of order and at's the reason I have just kept quiet about it, and I'm here just as an obser ver this morning. elt that if I had made any comments that they would have been out of order.

Actually, my comments e in Hansard for everybody to read . So I don't think that I really have to reiterate on what I tve said in comm ittee. R. CHAIRMAN: Mr. Craik. Ft CRAIK: Mr. Chairman, Mr. Cherniack is right when he says that the order of business is 1tional. Bill 2 was referred after the comm ittee was officially called, but very obviously, as he has knowledged, is part of the committee's resp onsibility to deal with and the procedure of dealing th the matters is optional. I suggest that we get on with Bill No. 2. �- CHAIRMAN: Mr. Pawley. �-PAWLEY: Mr.

Chairman, I belie ve that we can't help but be increasingly concerned. Twice, the Mem ber for Transcona has ind icated, dis cussion of this matter has been blocked in 1mmittee. Twice in the House a closur e was moved in order to prevent a discussion on this matter. great deal of time was spent both in the Comm ittee and in the Hous e attempting to obtain ormation pertai ning to the entire process of tendering by the Manitoba Agricultural Credit ·rpora tion, and now, the Minis ter of Finance has not seen fit to provide us with any dertakings. I had assumed, Mr.

Chairman, when I had made my earlier suggestion, that we would move s item to the beginning - that in so making, the Mi nister might (

a) concur, and (

b) might in concurring, clearly acknowledge that the item in question would be dealt with within the context the dis cussion that had taken place in the House, and wou ld not, by a technicality, attempt to !vent a discussion. I belie ve the Min ister would be prepared to do that. I don't think the Min ister ely would be prepared to, through the means of a tech nic ality avoid that discussion. But I belie ve , Minis ter should clearly ind icate and in so indi cati ng, Mr.

Chairman, we'd be able to pro ceed . t in view of the Minis ter's refusal, refusal to provide any undertak ing, I bel ieve it's clearer and arer that the government does not desire that this matter be fully dealt with either in Commi ttee in the House, that there not be an exploration through the assistance of the Provincial Auditor to what has happened. I think it's a very deplorable state of affairs that we have arrived at respect to this item, Mr. Chairman . . CHERNIACK: Well, Mr. Chairman, the Minis ter has clearly not agreed that the questions asked be dealt with at all.

He keeps talking about the Grey Books and I keep sayi ng that the Grey )ks need not necessarily carry this su bject - there are two su bjects, there's also the priv ate litors for Crown corporations. Mr. Chairman, we're at a sort of a standstill. You have the agenda, you read it to us, you said t if we deal with the Public Accounts and with Bill No. 2, and I suggest that we proceed in ordance with the agenda which you read to us . . CHAIRMAN: Mr. Craik . . CRAIK: Mr.

Chairman, then we're down to the busine ss which we came here to do an hour and as 1 suggested to you when we sat down that we proceed with Bill No. 2. Now, if you tt any motions to that effect, then we shoul have a motion to the effect that we proceed with No. 2. CHAIRMAN: Mr. Mi naker. MINAKER: Mr. Chairman, I move that we proceed with Bill No. 2. CHAIRMAN: it's been moved that the Commit tee deal with Bill No. 2 as the first item of iness. v'lr. Cherniack. 247

Public Accounts Tuesday, June 5, 1979 MR. CHERNIACK: Mr. Chairman, I just want to say, in regard to the motion, that it is wrong force the Bill ahead of the unde rtakings, and I belie ve that they were undertakings and if 1 unde rtakings, they were clear unde rstandings, that the matters raised - I think it was last Fric in Comm ittee of Sup ply - would be dealt with by Public Accounts. We've not received unde rtaking from anyone that those matters would be dealt with by this Comm ittee at all. All we received in un dertaking is that the Grey Books, that is March 31, 19 78's Pub lic Accounts will dealt with.

No un dertaking as to whem, no unde rtaking as to how quickly, no unde rtaking that questions raised last Friday, I belie ve it was in Estimates, would be consider ed as part of the Pul Accounts. We are compl etely blocked again with our efforts to get at fact and truth which wo come from the Provincial Auditor. We're blocked from getting the questions on the record. On t basis, I really feel that the proposal by Mr.

Mi naker is obs tructive of our efforts to get at fa and obviously, I must vote against the motion to set aside the order of business by setting as Pu blic Accounts in preference to the Min ister's Bill No. 2. MR. CHAIRMAN: Any further discussion? Mr. Craik. MR. CRAIK: Mr. Chairman, this doesn 't deprive any mem bers of any options that may forthco ming. All we're doing is setting the order of procedure and the order of procedure is No. 2, and the Publi c Accounts. We 'll deal with the matters raised in due cou rse when tl arise. MR. CHAIRMAN: Any further discussion? Are you ready for the question?

Those in favour aye, and those against say nay. In my opinion, the Yeas have it. I declare the motion carrie QUESTION put, MOTION carried. MR. CHERNIACK: Sir, could we have a count for the record? A COUNTED VOTE was taken, the result being as follows: Yeas 5, Nays 4. MR. CHAIRMAN: The motion is carried. BILL NO. 2 - THE FINANCIAL ADMINISTRATION ACT AMENDMENT MR. CHAIRMAN: For the record, I will ask if there are any members of the public present wist to make representa tion on Bill No. 2? If not, we will proceed with the Bill, clause by clause. Secl 1-pass. MR. CRAIK: Maybe, Mr.

Chairman, it might help if I indic ated that the com bining of the reve1 in capital divisions - really, the sect ions that pretty well exclusively deal with that are Secti I, 2, 3, 4, 5, 7, 12 , I can give you these num bers slower if you want them - 13, 14, 15 , 17, 19 , etc., -{I nterjec tion)- Yes, if you want to make a note, I'll give them to you. They really c primarily with un ifying the reve nue and capital divisions .. MR. CHERNIACK: Could you do it slowly, one step at a time. MR. CRAIK: Okay, up to 5. 1 to 5 are all - 7, 12. MR. CHERNIACK: 12. MR.

CRAIK: Yes, 12 to 15 are all - 12, 13, 14, 15 and then 17, 18, 19 , 20. And then 23, 25 and then 30, 31, 39 and 49. A MEMBER: 39 to 49? MR. CRAIK: No, 39 and 49. They deal primarily with the com bining of the revenue in ca1 divisions. MR. CHAIRMAN: Are you ready to proceed? Mr. Cherniack. 248

Public Accounts Tuesday, June 5, 1979 III R. CHERNIACK: Mr. Chairman, on this point, the Minis ter in introducing the Bill, stated that !ight of eleven governments in Canada have converted to this system. I intended to if I didn't, >ut I think I asked that we have some kind of concordance, which would ind icate to us the chan ges >eing proposed here and how they relate to the other eight governments.

In other words, if the llini ster uses them as an example, could he clarify for us the dif ferences between them and the lifferences between their legislation and our proposed legislation, so that we would know whether 1deed it is the same or will differ in any imp ortant respects? tR. CRAIK: I think I'll ask Mel Anderson, the Comptrolle r, to sit in on the dis cussion as wel l, ecause he's dealing primarily with the intri cacies of the types of question that are asked. The ifferences that may exist or the simila rities in the detai l. I think, Mr . Chairman, I'll ask Mr.

Ande rson to reply dir ectly on questions such as this. IR. CHAIRMAN: Mr. Anderson. IR. ANDERSON: Thank you, Mr. Chairman. Mr. Chairman, we have a lot of data available on re reporting practices by all governments and the territories. lt's in dr aft form at present, but it's ·obably not quite in the form that Mr. Chernia ck has asked for as it relates to all the legislation. re would be prepared to take the practices as outlined here. We'v e di scussed them with the ·ovincial Auditor from time to time, but we haven't related them to various sect ions of ever ybody's gislation.

If that task is requested that would take a little bit of time to go through and oss-reference to everybody's legislation. What we've done is determined their policies and related our policies to theirs and translate ose with the Legislative Counsel and dis cussions with the Auditor into a legislation that would erefore provide the kinds of policies we wish to have in the province. Now I can make those ·ailable. R. CHAIRMAN: Mr. Cherniack. lt CHERNIACK: Mr.

Chairman, I wonder if the Mi nister would give permission for me to ask ·ect questions related to that and then we can see if we can just summar ize the thing. What 1ave in mind is to ask whether there are any particular di fferences between the manner of 3sentation in these other eight governments and propo sed here in relation to presenta tion. Any rnificant dif ferences. I'll take Mr. Anderson's word. You know, if he says there aren't, okay, but the same time if there are, I think we ought to know that. l. CHAIRMAN: Mr. Craik. 1. CRAIK: Mr.

Cherniack's first question was with regard to directing questions dir ectly. I think tt's a quite acceptable procedure. We're going to run into it repeated ly through the Act. I. CHAIRMAN: Mr. Anderson. :. ANDERSON: Signif icant differences in every

section of the Act: I would say that what we have 1e is attempted to conform to the majority of the provinces. There are certain dif ferences between ebec and Ontario, for ins tance, as in the accruals which you had raised from time to time. We :ussed with the Min ister . . . what we presented in the Act is a starting point on issues like ruals and the wording that we have in the Act, as discus sed with the Legisla tive Counsel, was ry and ensure that we conform with the majority of other provinces.

However, if it's interpr eted members from either side to have other meanings, then I think those are areas we can dis cuss >articular as we hit the areas. In general - and I would like to have Mr. Ziprick, perhaps if would like to take a minu te to confirm it- what we've tried to do is to conform and in some 3S provide better reporting as we've read it from a study that was done in the province itself by a which 1 have here with me of all study that was done across Canada - the government )rting practices.

Ne are not trying to get out of synchronization with other provinc es and we're trying to get best reporting practices we can for the Legislature. Mr. Ziprick, I think that you've been involved erms of at least us discussing some of these items with you. There are perhaps one or two ts, as 1 say, in the accrual area that there is dis cussion warranted, but in general, if you would me to make a statement, we are trying to conform to the other reporting practices of other ;dictions. 249

MR. CHAIRMAN: Mr. Cherniack. Public Accounts Tuesday, June 5! 1979 MR. CHERNIACK: Mr. Chairman, I want to make it clear that I'm not objec ting or opposed the whole concept as I understand it, but I think we need enough clarification on certain of specifics. Mr. Ande rson referred to the accruals. We' ll come to that and we'll certainly deal v accruals and I appreciate his bringing that to our atte ntion. I wonder if Mr. Ziprick could confirm - Mr. Ande rson invited Mr. Ziprick to comment on general approach and it would be helpful, I think, at this stage if he would do so. MR. CHAIRMAN: Mr. Ziprick. MR.

ZIPRICK: Well, the general approach by most of the other provinces is to report on a debt basis and this is organized for reporting on a net debt basis. Now there are different kil of arriving at accruals between provinces and those are specifics, but in general, on a net d basis, that's I think the way most of the provinces are reporting now. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: Mr. Chairman, then I would like to ask a couple more general questiom relation to the change.

The first is: How will assets be shown now in relation to the way they w shown before, where they were shown at a value equal to the debt against them? What cha1 would now occur under this new form of presenta tion? MR. ZIPRICK: Under the new form of presenta tion, the only assets that would show would the assets that are realizable and to the extent that they're realizable in cash from third par and the assets invested in Crown corporations to the extent that they are self-sustai ning. Any � of fixed assets created by the province would not be reflected on the balance sheet. MR. CHERNIACK: Then, Mr.

Chairman, that means to me tha the Norquay Building would be she at $1.00, I supp ose, just to keep a record that it is there. Is that correct? MR. ZIPRICK: Canada shows the fixed asset nominal $1 .00. Ontario for insha nce and Quebec not show $1. 00, and they do not list the assets in the pub lic accounts to back up that $1.0 0. that there is that di fference. MR. CHAIRMAN: Did Mr. Anderson want to comment on that? MR.

ANDERSON: I've listened to the dis cussion from time to time over writing off assets or set them up on the books and the past practice to set them up in relati onship to the amount of c outst anding. We looked at all of the different practices, that being a fund acc ounting method, wt the assets were recognized at a value equal to whatever debt was outstanding. We found that particular method of reporting was not dependent on any value that might be assigned to building. lt would depend on how the history of debt had been assigned and how it was reti so we could not conclude that that was meaningful.

What we then looked at were three meth of sett ing up the assets, and we concluded that if we write off the assets as the expenditur es made that what we would be doing would be reflect ing the economic im pact or expenditure in province at the time the expenditure was made to acquire that asset. The historical value - there is an awful lot of problem, I guess, in government acc ounting right now - the historical v or relat ionship to the assigned debt did not appear meaningful. The idea was to find out wh1 the economic impa ct that we've had on the province, in terms of acquiring assets in a perio' time.

The government has so many holdings hhat the market values are not significant. We t about a four or five page write-up that I would be prepared to give showing some of the differer between the various provinces and our rationale as to why we wanted to set them up, or v them off and just have them at a nominal value. MR. CHAIRMAN: Mr. Mill er. MR. MILLER: Mr. Chairman, what would happen is this: That the pictur e that one would gt that the government has debts, it has acquired debts but it has not assets, really, because either one dollar or in some jurisdictions it's nothing, it just doe sn't exist.

And what you gt a picture where the debt is there, it's an incumbr ance on the province, it is part of the public 1 with no offse tting asset to show for it. lt seems to me that these debts do, in fact, reflect 250

r-uum;; """'"''-'unu> Tuesday, June 5, 1979 ,f assets and from the point of view of the pub lic looking at it, or legislators looking atiit, to me seems strange and really not quite correct to simply look at every thing the government does s an expenditure and no corre spon din g asset,

whereas in fact the asset is there. The Norquay luilding, if it was put on the ma rket because the government didn't need it, would certainly realize 'lr more than whatever the book value is today, the depr eciated value. So that it bothers me that we look at government as somehow just as a body that expends 10ney but doe sn't have anything to show for it in the way of assets. �R. CHAIRMAN: Mr. Cherniack. IR. CHERNIACK: Could I just elaborate on what I think Mr. Mi ller is saying to just deal a little tore broadly.

Let us say in a year the government builds an office building or pu rchases that building n Broadway, the IBM Building, or pays out a bunch of welfare. The end of the year statements ould show an expenditure for both, unrelated to the fact that one is once spent it's disbur sed 1d is not a futur e asset; and the other is a building which is, as it was easy to purchase so it )Uid be easily sold without any great changes, and would be a continuing asset. Now, I often wondered about Mr.

Anderson's point, that it's unrealistic when you just show it > being the valued at the debt against it, because this build ing's replacement value is su pposed 1 be in excess of $50 million, probably much more than that now. -(I nterject ion)- You probably >uld n't build it at all. On the other hand, it's not saleable; it's probably not worth anything to 1ybody else. In any ev ent , it is not realistic to show it as being valued by the debt against it.

On the other md, it gives the impr ession, if it is never shown, that all the debt the province has accumula ted, hat is called "dead weight debt", has nothing to back it up as an asset. And what bothers me >out that is that we get to people talking about' well, normal acc ounting methods, the chartered :countants - what is it? - CICA recommends some special thing; and the bad thing for me that the pu blic should not get the im pression thattthey look at a government financial statement e way they would look at a pr ivate company's financial statement and expect to relate the two, : if they have any simi larity,

whereas, in my opinion, they don't, and that the debt acquir ed by e province under this new system reflects even more poorly the assets backing it up. Now, I know very well there have been, in the past, I remember when Mr. Spivak proposed one stage that we borrow $25 mil lion and use it to in crease pensions for a certain period of ne. Well, that really would never show as an asset un less we say, wel l, the people are living longer, if you finance education on a longer term.

There are unmeasurable assets that a province or a government creates, but there are clearly ncrete and structures which now will dis appear.

And I want to ask the Min ister, or anybody, how 1 you show at the year end, in some statement form, that the mone y spent during that year, a bstantial part of it, was money spent in an asset which will pay for itself over the next few years being a physical asset, to balance off the huge deficit that may have ac cumula ted in that year? government may be inclin ed not to build anything but to rent every thing, just in order not to 3ate that great big debt, because it won't show up as a comparable asset. And that's what concerns �-Mr.

Ziprick made the point, validly, that if you lend money to a Crown corporation that will ow as an asset. That corporation may not have any assets to back it up, like CFI, for example; ; still not clear. But seriously, a government that is concerned about its profile and showing a deficit or a surplus the end of the year might, under this syste m, hesitate to build a building and rent it, rather, m private enterprise, and the refore not show that big deficit. I'd like clarification on how that uld be dealt with.

Is there some way a statement could show, out of this year, the deficit acquir ed :ludes a building that cost so much, you know, an institution, a jail. You know, these things, we ow, last too long. I. CHAIRMAN: Mr. Craik and Mr. Ziprick. Mr. Craik, t. CRAIK: The only method - and it's really more of a question on my part, as well, in this 1ne ction is the only read ily available thing, without doing an appraisal, which I don't think you uld want to get into - is that there is an insurance value on all of these assets, which I guess nost cases is su bstantially under the replacement value.

But there is an insu rance value calculated 1ularly on these and would be available. lt might be a partial offset. 1 guess, then, the basic question would be as to whether or not, if the province did that, whether vould be in context with the normal practices across the country. As you say, Ontario shows o and Quebec shows zero and somebody else shows a dollar. Canada shows a dollar. Would 1ean anything, having done that? lt would probably be a fairly easy thing to do, I mean, in terms 251

Public Accounts Tuesday, June 5, 1979 of adminis tratively. -(I nterject ion)- There is an insu red value on I belie ve the indi vid buildi ngs. MR. CHAIRMAN: Mr. Ziprick. MR. ZIPRICK: Yes, I think it's quite clear, in this method of acco unting what you are doing you have bud getary expenditures, which incl udes all expenditu res.

Now, in presen ting the bud� there are certain expenditu res are of a kind that are not backed. up by physical assets, and th1 are the other expenditu res that are, and that's clearly segregated to show the total expenditr of the year as between what is not backed up by physical assets and the amounts that are Now, these physical assets are of value, but none of them are costed, like advances to a pul utility, where they are serviced through a dir ect user fee. These are all serviced through Consolida ted Fund and so any cont inuous acco unting.

If it's going to be meaningful to indic their value, you'd have to, as Mr. Craik pointed out, to go into some form of appraisal. Otherv. it becomes obsolete. Now, as far as being able to dis pose of them and dete rmine any kind of a di sposable va there again, so the question arises how useful is this figure. But the basic thing is that all expenditur es of the province that are going to be serviced from the Consolidated Fu nd, are budget expenditur es and they are segregated between the kind that are ongoing and would be conside r of an operating nature and the physical assets.

Now, that's all in the records and if somebody wan to accumu late those figures, they are there. But I don't see that they're that much use. MR. CHAIRMAN: Mr. Anderson. MR. ANDERSON: Mr. Chairman, I believe Mr. Cherniack's question related to: would there h statement that shows, out of the difference between the revenue and expenditures, how much � spent on assets of a lasting value? I can assure him that that kind of a statement will in fact available. MR. CHERNIACK: How? MR.

ANDERSON: When you're voting this year in the Estimates, you 'll notice there was an acco called "Physical Acquisition/ Construction of Fixed ssets ". We monitor to ensure that assets t have the kind of value that in the private sector they would keep track of the build ings so t they could offset the expense by depreciation against the revenues that it earns. We will keep tn of all of those assets and there will be a separate statement which will dis close what was b out of those particular acco unts.

So what we previously had broken into two areas, Current l Capital, however, the demarcation wasn 't qui te clear, but there would be a statement showing current types of expenditur es; those that are ongoin g every year and those that are for the acquisi1 of physical-type assets, so that you could go back and see. I think it will qui te clearly show e in this year 's reports if we have X num bers of dollars, a difference of expenditur es over rever there was so much spent on capital-type things and then you can conclude ... MR. CHERNIACK: That's very helpful what Mr. Anderson says.

We all know that there always been confusion as to whether certain items belong in Capital or in Current and they've been mo back and forth wherever there was any doubt, and then there was an arb itrary decision made the Min ister or the govern ment. So that that's one reason why I like this approach that we're tal� about, but at the same time I want to know that people don't ... the point I raised is real think a valid point. lt may be that a government may decide: "L et's not build this year so 1 we won't show a cu rrent defici t", you know, before an election; one might say, wel l, that we be bad ,

whereas formerly when we had the differ ential, you could still show a surplus and su bstantial construction for which you borrow. So Mr. Anderson, what he points out would be available for a current year at the end of year on the income and expenditure item, but may not show up in the . . . well, would not si up in the Balance Sheet at the end of the year, or certainly would not show up in following ye I'm wondering - and Mr. Craik made the point about insurable value which might be good altho Mr.

Ziprick pointed out: "Is it replacement; is it marketable value, or is it cost?" - and the insun value, as 1 recall it, our insurance starts at some thing over $5 mil lion and cuts off at someth 1 don't kno w, some figure like $15 million, I don't know whether each building is shown at s< kind of a value. Maybe it is; I'm not sure. But regardless of that, if it were shown at a valut some kind , if it's replacement cost or depr eciated cost, it would still have some place in Statem ent. So may 1 ask how would Mr. Curtis prepare a prospectus for the next loan when he kn 252

Tuesday, June 5, 1979 1at he is .showing $12 2 milli on deficit and a repeater year after year without being able to show 1at incl uded in that was a capital asset which will last for a numb er of years in the future? Would :>t a prospectus want to show that and how will that change the prospectus from what it looked ce the last time they issued one, and how would it look next time, as tar as the pros pective customer oks at it and compares it to prospectuses? How will it show the difference to show that inde ed .ere is no difference in the viability of the province or in its rating? R.

CURTIS: We would foresee that the prospectuses that we would-prepare would provide formation relative to the capital type of expenditur es made dur ing the year. There would be an 1alysis of construc tion, of capital during the yea r. R. CHERNIACK: During the one year? R. CURTIS: Yes. R. CHERNIACK: Mr. Chairman, I think this is a matter you could debate forever and as I say, l're not opposed toprinciple, at least I'm not.

Our Public Accounts are beginning to give more d more information and the Auditor through the years has developed more and more information . 1uld we make sure that this Comm ittee accepts it as a sort of a policy that information such contained in the prospectus should be put into Pub lic Accounts and in the Financial Statement that this kind of information, which may not be part of a balance sheet, would still show up 1se enough to the Balance Sheet so that it can keep a proper perspective of the physical assets a long lasting nature that are acqui red dur ing the last numb er of years, not just the current ar? t ANDERSON: The prospectuses that have been prepared in the past in joint consultation with � SEC have never incl uded details of the, if you wi ll, total capital assets of the province.

The 1uir ement has always been to break down the total expenditur es and the total rev enues and the )enditur es particularly between what was spent for things that have no apparent value and what � tangible things that you ... tangible versus intangible in prospectuses. We've . always had translate the Publ ic Accounts to that Statement on page 29, Changes in Financial Position so t we showed , if you wi ll, the bottom line of the province's operation and that particular statement s then put into prospectuses.

The new Publi c Accounts will show that particular statement in nanner which is very close to what the prospectus has requir ed in the past . CHAIRMAN: Mr. Mi ller. . MILLER: Mr. Chairman, I wasn't that particularly happy with the way it was done in the past I I can see I'm not going to be particularly happy the way it' s done now. Because it still bothers that governments are looked at as bodies that spend money and owe money. The tact that expenditure acqui res an asset is somehow lost in the shuffle.

The public funds are being used lrect the Woodsworth Building, the Norquay Building, jails, et c., that they are shown as a debt, obligation to pay for it, but the fact that one has acq ui red an asset, a considerable asset; take Norquay Building, if we put it on sale and the market was right, you could realiz e a considerable )Unt for it. But the government somehow is not conc eived as having any assets. rhe previous syste m, where it was written down to the point where it had no value nterjec tion)- Mr. Wilson says that nobody ever sells them ; that may be.

But I have always felt the pub lic is not being made aware of the fact that they have acqui red and own considerable 1ab!e assets, whether it be housing through MH RC or hospitals or dir ectly government owned dings; that somehow is lost in the shuffle. All that seems to come out is the fact that the arnment spends money and owes money and has really very little to show for it unl ess you nto details and try to explain it verbally, but it doesn't show on any financial statement or any ited report.

Now obviously, as I say, I wasn't happy with the system before and the present em, if anything, is going to aggra vate my concern rather than al leviate it. CHAIRMAN: Mr. Ziprick. ZIPRJCK: Mr. Chairman, the point that Mr. Mil ler raises is valid but it should be appr eciated there's a comparison between the commercial practice and the govern ment. And yet, in reality, 1ot comparable. he commercial practice, any assets that are acquired that have a lasting nature, are for pu rposes �nerating futur e rev enues. And so the expenditure is amortized as a cost against those future 253

Public Accounts Tuesday, June 5, 1979 reve nuess,

whereas the assets spent by the government are not. While they gener ate some fo of reve nue, they're not acco un ted for in that way, and revenues are raised by taxation. So tl you don't get the same kind of financial model as you have in the commercial sector. Now this area is signif icantly under debate in the Un ited States. They have done several � forma attempts at using commercial practices in the federal government ac counting. I don't kn whether it's going to materialize or not.

They are running into an awful lot of difficulties to L the depreciation methods and establish a surplus or a deficit based on commercial practic amortization of assets. In Canada, there has been a history established now, whereby 1 expenditur es are made on a bud getary basis, and that takes in the various day-to-day expen ditu1 on what would normally be consi dered operations, and on the fixed assets. And you arrive at · dif ference, the bottom line being how much you have to go outside to raise money to take Ci of this year's expenditures.

So that the bottom line is not a deficit or surplus on a year's operation in the province. just an indic ation of how much you've spent that you did not cover by tax money for that ye that you had to go and either raise it outside, or bring, if you had an accumulation of tax mon� collected in advance, you'v e brought them forward. So there's qui te a di fference.

And any atten that you make, like we were trying to do here, capital voting, and mix it up, creates all kinds misunde rstandings and all kinds of difficulties, because there's a fe eling then that maybe these , revenue-e arning assets in the commercial sense. They are not revenue-e arning assets in commercial sense. And then , the other kinds of expenditures, un der Educ ati on, for instance; education spent buildi ngs supposedly has a value.

But, in the economic produ ctive sense, education spent educating people probably has a much more economic value than the building s thems elves. you get into all kinds of measuring dif ficulties when you try to employ commercial practices. MR. CHAIRMAN: Mr. Mi ller. MR. MILLER: Mr. Chairman, recognize the difference between the commercial practice � govern ment.

The commerc;al, of course, is also concerned with their income tax at the end of year, and by using depreciati on, that can affect the impa ct of tax that particular year, and so tl gladly write it off, and their book value may show very little after 20 years of ow ning, let's s a factory, or any other commercial building. Now the point I was trying to make was that the public, as I say, views government not as own anything, but as owing constantly. it's simply expenditu res of money without realizing anything it.

The fact is that in the Norqua y Building, which is now written down probably to zero or cl� to zero, the fact is that gove rnment, if they had rented those premises from a private person a firm , would be paying a considerable rent on a squar e-foot basis for the premises. That doe! have to be done because the buildin g now is pretty well paid for; and if it isn't there's very li left.

So that in a sense it is not only an asset, it is a benefit; and the fact that it's owned by public, used for public purp oses, and the rent paid is today much less than if that building die exist, and one had to negotiate now for a 20 year term, or a 15 year term from a priv ately-owr building, the Richardson Building, or some thing similar.

So it has got a value, and it's that value that I think is now beingllost, and that the pub lic c� see and it just dis appears. lt somehow, as I say, it always leaves the government in a posit where, what it's doing is spending money, but not really acquiring anything of any value, measura value, that can be looked at, or can be seen on any stat ement. MR. CHAIRMAN:

Section 1 - Mr. Cherniack. MR. CHERNIACK: Just one point now, I think we've learned a good deal. I am now looking the balance sheet that appears on Pages 12, 13 of the Publi c Accounts, which shows the provi1 in balance. Almost to the item, Mr. Chairman, this is the balance sheet as prepared under the system, of course. And then, in the Auditor's Reports, on Page 14, he shows the net debt ba which I un derstand is the manner in which the assets of the balance sheet will be presented a the chan ges are brougut about.

The balance sheet of the province is in balance because, as I un derstand it, it has an a� of pub lic buildings, pu blic works advances, which are set up on the basis of what is owing by province on those assets, and ther efore it's in balance. When I look at the new system , it is in balance, it actually would appear to be bankrupt, if one ignored the assets, the physical ass' which are going to be ignored under this new system. And if you look at Mr. Ziprick's sample, the asset side has a net debt shown of $686 milli which would make it appear as if not only is it a dead-weight debt, but it has nothing to b 254

Public Accounts Tuesday, June 5, 1979 t up. And that makes sense under a provincial government accou nnting system, but anybody tccustomed to commercial financial statements could not unde rstand that. And I'm wondering whether there could not be a footnote right to the statement, sayi ng "p hysical tssets ac cumula ted over many years are not shown as an asset in this stat ement, but are ub stantially in excess of the net debt shown above" - some thing like that, which would not fool tnybody.

And you know we've had de bates over the last numb er of years which were never resolved, 'etween opposition and the government on both sides, no matter who's in govern ment. I remember rhen Campbell used to argue with Roblin about what is dead-weight debt, and what is self -liquidating ebt, self-sustai ni ng debt. it's im portant that people should not misconstrue a stat ement, and I mean 1at everybody can. And maybe my suggestion would make sense, with that kind of footnoting right on Page 1 would larify that. IR. CHAIRMAN: Mr. Anderson. IR. ANDERSON: Mr. Chairman, to clarify Mr.

Cherniack's point, that particular kind of statement ill be avai lable in the notes to the financial statements. Mr. Ziprick, in the past, in his audit reports 1s commented on the fact that the assets to the province, includin g that spent on hig hways, luc ation and physical construction of buildings are not reflected in the totality but that only tpenditur es relative to that particular year. However, in the new presenta tions that particular polic y 11 be made very clear, that the statements do not include all those types of things. R. CHAIRMAN: Mr. Ziprick. R.

ZIPRICK: I'd just like to add that this pro forma balance sheet, are figu res only, without any ttes and with proper notes it would have that kind of explanation, that this net debt is not anything uivalent to an operating loss on a balance sheet of a commercial corporation, bu t is represented the assets of various kinds that have been constructed over the years. �-CHAIRMAN:

Section 1- pass;

Section 2- pass;

Section 3- pass;

Section 4- pass;

Section -pass - Mr. Mi ller. l. MILLER: Mr. Chairman, the Minis ter earlier indica ted those claus es which dealt with reve nue )ital division, the com binin g of them. Are we going to deal with those in sequence or are we ng to just go clause by clause here, even though they cover different items? I. CHAIRMAN: Mr. Craik. :. CRAIK: I would think clause by clause . . CHAIRMAN:

Section 6 8. 1. Mr. Cherniack . . CHERNIACK: This is a very imp ortant one. The change, as I recall it, it's a new secti on, 8. 1. ,fter the close of books for the fiscal year, the Min ister may make such closing and adjusting ries as he considers necessary to show the financial condition in the most precise manner sible." 1 don't really care whether it's precise or not. lt's got to be a true financial condition 1 would really like to add the word to show the "true" financial condition of the govern ment, we're going to deal further on with dis cretionary powers.

In the first place, I don't think the ds "in the most precise manner possible" mean anything and I don't understand why it's in slation and I'm surpris ed that Legisla tive Counsel included it, because, you know, do you go :ourt on a thing like that? You say, "That's not as precise as it should be or could be"? So >uld say that I just don't think it's good draftsmanship and I say that with all respect and a tt deal of respect I have for Mr. Tallin, who I belie ve ... CHAIRMAN: Mr. Craik. CRAIK: On that point, Mr.

Chairman, the original draft said, "To show the precise financial lition of the government", which I thought was even more difficult, and so the change that you 're ng some difficulty with was the change that I made because I felt that - I think the original difficult to accept and it's made to read "in the most precise possible manne r". MILLER: That's not changed. That's still there. 255

MR. CRAIK: That's in now. Public Accounts Tuesday, June 5, 1979 MR. MILLER: . . . and you'r e adding to it. MR. CRAIK: No, that was - originally it read "as he considers necessary to show the preci financial co nditio n." That's even more difficult. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: Mr. Craik can 't - it's not good enough, because you're not changing 8 a1 8 does say "the precise financia! condition" is what your accounts should be maintained at, - it says that. You're not changing that. MR. MILLER: You 're not repe aling, you'r e just adding. MR. CHERNIACK: Mr.

Chairman, I'm not concerned with precision. I'm concerned with veraci I. want to see the true statement. I don't want a precise statement. I don't think it matters i1 takes more numb ers. MR. CHAIRMAN: The Chair is concerned with precision and would like one member to speak one time. Mr. Ziprick. MR. ZIPRICK: I could comment on this, that might be helpful. In that arriving at financial stateme1 you follow a set of acco unting policies.

And I think it's impo rtant that the acc ounting policies stated in the manner that these financial statements are prepared, and I would say that the financ position is stated in accordance with established acco unting policies. That's about as precise you can ever be. MR. CHERNIACK: Well, maybe Mr . Ziprick is suggesting to replace the words "in the most prec manner possible" by the words "in accordance with standard acc ounting practices ". 1 really de care, you know.

I don't want to be sidetracked from what is my real concern about this secti but it seemed to me that it didn't belong in legislation, and . if the Min ister wants it in legislat he can have it. I'll remove it the next chance I get. That's just a ... MR. CHAIRMAN: Mr. Craik. MR. CRAIK: I wrestled with the original wording, because I thought it was awkward, and I tr to ... MR. MILLER: You didn't repeal it. You just added to it. MR.

CRAIK: Yes, I added to it, and I'm wide open on this as far ... you know it really, in te1 of the ac counting, what you think is the most accu rate way of trying to make the statemen MR. CHERNIACK: That's the point, Mr. Chairman. I want to say "the true financial condition' "the accurate financial condi tion ." I don't care how precise or impr ecise it is. I want it to be t1 and I really would like to add in to show the true financial condition. I'd like that word "true' there. And you know, we're yet to debate the nature of the adjusting entries.

I don't care particul to have the Min ister's consideration determine it. I want it to be correctly shown, and it's re the Auditor's determination which counts in the long run, although the Minis ter does present ation. MR. CRAIK: I think, Mr. Chairman, if what I gather is correct, or if I'm interpreting corre1 whatever word it is we use there, is governed by what is done under

Section 10 of the Act, wt the contents are defined, the minimum of the contents are defined. lt's really a selection of word that best describes how those contents are reflect ed , so ... MR. CHERNIACK: Well, that's the exact point, Mr. Chairman. When we come to 10, I'm g1 to question very seriously the deletion of the words in Su bsection (

a) of 10, of, when it says stat ement", it says in the original, in the existing Act, "certified by the Provincial Auditor." Tt been removed , and we're going to go into that debate. 256

Public Accounts Tuesday, June 5, 1979 But l'm.j ust afraid that we're getting to the stage where the Min ister is going to determine the 'hole presentat ion. And, although it's been pointed out to me, in all fairness, I should mention 1at apparently, a similar

section appears in the present Act, similar to 8. 1, which is 38.3, and which oes say, "effect may be given after the close of a term for which appropriations are voted or Jthorized to such closing, and adjusting entries as the Min ister considers necessary to show the 1ancial condition of the government." So there is a sim ilarity, and I will not be bound by what is in the present Act to justify any 1peat in the new Act, but I see it was there, and I un derstand that there would be adjusting 1tries.

We're going to talk about accruals, which does bother me , but what does concern me is that e Auditor's certification is being removed, and now it's being left entirely to the Minis ter; and e other point is, there's no deadline. lt doesn't say how soon after the close of the books for e fiscal year the Minis ter shall make these adjusting entries. 1 don't really know, and . I was a Min ister of Finance. I don't remember the adjusting entries 1ich I made as I considered it necessary under 38.3, although I assume it was done, and I appro ved it.

So, I'm not sure just what they are, but I think there ought to be a deadline by which it must 1 done, and then I think it must be certified by the Provincial Auditor. And possibly the Minis ter 1uld like to dir ect his atten tion to that point I'm raising at this stage, rather than wait for 10., cause I think 8.1 and 10(

a) have a real connection. �- CHAIRMAN: Mr. Craik. t CRAIK: Mr. Chairman, as I understand it, there's no problem in having it in there, because ' already in The Aud itors' Act, and so that if it goes in here, it's in both Acts, so it doesn't really . we can leave it in. The Auditor is already requi red to do it by his Act. I. CHERNIACK: Do you mean the present o the new? We have yet to see the new one. l. CRAIK: The present; but if you are concerned, there's no problem leavi ng it in there. :. CHAIRMAN: Mr. Ziprick has a comment on that. Mr. Ziprick . . ZIPRICK: Yes, as far as the, Mr.

Chairman, the Provincial Auditor's res ponsi biliti es, as I lerstand them, they will not change, because the The Provincial Aud itors' Act states what the vincial Auditor's Report shall consist of on publi c accounts, and that is, in effect it is to examine publi c accounts and see that they'r e presented fairly and consistently on a policy consistent 1 the previous year. Now, in the former Act, there was a repe tition; the same requirements were he Provincial Auditors' Act and The Financial Adminis tration Act.

In this instance, they're leaving the specific requirements in The Financial Admin istration Act; and under (

g) just stating that ·e shall be a report of the Auditor. :>o that under 10(g), if you will note, there ... CHAIRMAN: Mr. Cherniack. CHERNIACK: Well, I think we're getting somewhere. In the first place, dealing with 8. 1, I would ly like to see the word "true" put in - I want to put an obl igation on them. CRAIK: Rather than "pr ecise?" CHERNIACK: Well, there's nothing there. lt says "the financial condition." I'd like to see "the financial condition." As to precision, I don't care.

The Minister can put it any way he lik es. :an say the true concise, or the concise true; but my point is that the obligation should be it be the true condition. -(I nterje ction)- 8. 1. . it says that if it showed the true financial condition 1e gover nment. Whether or not the, other phrase is left in is a matter of draftsm anship. I don't : it belongs, but, you know, I don't care enough. nd it does show in 8. 1 would be inclin ed to remove it, frankly, because it does appear "pr ecise cial condition" in the prec eding

Section that's in The Act now. So I would be inclined to remove m 8. 1, but 1 don't make a point of that. I do make a point to show the true financial condition; s one point I make. he other point I want to make is to ensur e that there's a deadline for the adjusting entries 1 made. You know, like, not after a certain date, and maybe that relates to 38.2 in the present 257

Public Accounts Tuesday, June 5, 1979 Act, where there seems to be that kind of a deadline. I wonder if Mr. Ziprick would agree. The present Act, 38.2, gives what appears to me to be, or to Mr. Mi ller, to be a dead line making these adjusting entries. MR. CHAIRMAN: Mr. Anderson. MR. ANDERSON: Mr. Chairman,

Section 38.2 refers to the payment process. 38.3 referred to mt more than that; other types of entries that might be required. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: All I want is some kind of an assurance that in the Legisla tion, as amend there will be a deadline by which time the Minis ter must make his adjusting entries - that's point I want assurance on or proof. MR. CHAIRMAN: Mr . Ziprick. MR. ZIPRICK: Yes, I could comment on the deadline. Under the present Act, there is no dead for making various kinds of adjusting entries internally.

There is a deadline specified under the as to when the payments mus t be cut off, and there's also a deadline when the receipts must cut off. But then, the transferring between accounts, there is no deadline, and it can go and and on. The only deadline is that the pub lic accounts must be repor ted on by December 31s t, there is no deadline. Now, the new Act leaves open the payments, and the rec eipts, without any specified dates, leaves that for the Minis ter of Financ e to decide, as a matter of acco unting policy. While I'm spea king, I may just add that

Section 8. 1, that in the most precise manner possi is somewhat inconsis tent with

Section 10, in that it says the financial position in accordance 1 the acc ounting policy stated in the government. So I think that by leaving it out, I would a� that it would make it much more clear, because then it would be to show the true financial condi of the government, mea ning, as stated und er

Section 10, in accordance with acco unting poli as stated in the pub lic accounts. MR. CHAIRMAN: Mr. Mill er. MR. MILLER: Well, Mr. Chairman, what I see here on the 8.1

whereas today, exis ting, ther a time limi t on the payments and on the fees. If I read this correctly, that is entirely now elimin1 and is left entirely to in isterial dis cre tion. Whether m some thing will be charged, paid and char to even an earlier fiscal year, or receipts which can be shown not in that current year but because it relates to somet hing that happened 18 months ago or a year ago, the Minis ter has dis cretion to move it around pretty well at his pleasure.

I think it makes for a much more dif f of any particular fiscal year because it may alter, in retrospect, it may alter 18 months or two y down the lin e if the Min ister has that kind of flexi bility. Right now there is a time limi t on recE and on payments, both; that, apparently, is now being elimi nated so there is no time li mit on e of the two. The min isterial .dis cretion is very He very broad here. lt's very wide. can do air anything he wants. MR. CHAIAN: Mr. Craik. MR. CRAIK: Well, I think we're on 10, now. MR. MILLER: No, no, that's 8; that's 8. MR. CRAIK: I was going to mention that the spelling . . .

There is further detail on what is requ if you go to

section 25 of the new bill, where it says, "Section 38 of the Act is repealed anc following is substituted ," and then it covers lapse, payments charged to any fiscal year, accounts. MR. MILLER: No, I was dealing with 8. 1. The closing and adjustments is left wide open. MR. CRAIK: No, that's really adjustments too. You're really talking about the cut-off date a end of the year and 25 does deal with that, as well. 258

�R. CHAIRMAN: Mr. Ande rson. PUblic Accounts Tuesday, June 5, 1979 tR. ANDERSON: Mr. Chairman, just to throw some light on why we have to have adjustments fter the close of year end, when we finish producing what we think are the records as they stand t that point, they're then su bject to audit.

Often we find activities that occur that we wer en't aware f that requir e adjustments, or the Auditor will bring some to our attention that requir e adjustments. nd when we dis cussed this with the legisla tive counsel, the idea here was cer tainly not to leave huge void or just make an adjustment but rather to have a vehicle that was quite clear that the urpose was to show the records in the true or the most precise, or whatever way you wish to escribe it, manner possible and that if that re quir ed adjustments because of the things that we 1und, then we would like the ability to make those entries.

And if you can suggest wording that ould do ... R. CHAIRMAN: Mr. Cherniack. R. CHERNIACK: Well, Mr. Chairman, I am not prepared to leave it to Mr. Ande rson or to his Jccessor - I mean the comptroller - to be able to find things later on and say, wel l, I want make certain changes. I would agree that if the Auditor dir ects that changes shall be made, specifically rec ommends it, then changes can be made after. But personally I am not sure that ere is a deadline at the end of the year, un less it appears somewhere else. I think that Publi c :counts may be printed, but that doesn't mean that we're bound by them .

Under the Act if you n make chan ges after that, you can still make changes after that. So I would like to have it clear that there is a deadline, that after the deadline if there are changes at must be made - which I can't visualize but I assume there must be, otherwise why push this that it should be either on the dir ection of the Auditor or by Order-in-Council, so that it comes t clear and known and it is apparent.

Now, I would lik e to suggest that there be a dead line and that it be within months after March in any year, that if it's necessary to re-open them that it be re-opened in a very publi c way, 1 say, either by the dir ection of the Provincial Auditor or by an Order-in-Counc il. Otherwise I belie ve - and I have to be shown that I am wrong - I do belie ve that the printing of this ok doe sn't in itself necessarily close the accounts of the govern ment. All this is is a report. Now, tybe I'm wrong; I hope I am. I. CHAIRMAN: Mr. Anderson. t. ANDERSON: Mr.

Chairman, in general, to be very specific as wel l, when the book is pub lis hed , records for that year are closed and finished and these entries, as alluded to in

Section 8. 1, uld only apply to that pub lication that was made in that particular year. If it were fo und, for instance, two years down the road , that there was some thing we mi ssed t should have belonged in there, that would be adjustment that reflects in the, I guess it would the 19 80 records, and it would show that it was for that period but that it would be processed )Ugh here. The idea is not that we would continue to open all of the records every time that found someth ing. And that happens in busi nesses, in other governments, in own indi vidual's ounting records . . CHERNIACK: Mr.

Chairman, for many, many years the Publi c Accounts came out way near end of the year. Efforts were made to shorten the time until now it's much shorter. But there othing that I am aware of that says when these accounts have to be printed. Mr. Ziprick says r have to be tabled by ddecember 31s t or, I su ppose, 15 days after the next session, so that r can be dragged on. But is there some thing in any Act that says that the printing of the accounts :es the books per force, or is it just a statement that can be changed? CHAIRMAN: Mr. Ziprick.

ZIPRICK: I think the key points here are: When are the expendit ures to be cut off and also n is the reve nue to be cut off, and this has to be ...

Either it's going to be spelled out in ;lation or has to be spelled out in the acco unting policies, and then it has to be adhered to. :1use if you start changing from year to year, then you 're going to have all kinds of problems. the idea of closing oft in the old Act the expe nditur es by May 15 th, as far as I can see, is asonably sound one and I don't think they wish to go beyond that date, and that is all the mditures that are known, received and applicable to the old year can be paid by May 15 th they can go to the old year. Anything that becomes known after May 15 th appl ies to the following 259

Public Accounts Tuesday, June 5, 1979 year. And I think that this kind of policy will have to continue because otherwise you could go and on and on getting all kinds of charges coming through that you would be putting into the year. Now, the amounts that come in until the Publi c Accounts are fina li zed is reflected and in su bsequent year it's sup posed to be stated how much that came in su bsequently applied to old year as an item.

Generally it's not unusually significant and it would just delay the Pu Accounts, so I think that the expenditure cut-off either should be in the Act or will have to in a policy dec sion on the acco unting policies. Now, the same way applies to reve nue. And revenue particularly has to be fairly clearly defined. For example, Ontario stick very closely to cash basis at a certain date. Queb ec take in an accrual position and the accrual position th' to be taken in is very clearly defined. And that also will have to be spelled out.

Now, having followed those, then tranfers internally between accounts, but some figure got i the wrong account and may show up in the Pub lic Accounts, well this obviously can happen, 1 you can have the Publi c Accounts printed and this particular account shows X-dollars, wel l, it ' su bsequently found that maybe a certain portion should not have been in that account but in se other accou nt. But having the cut-offs, having established at that point, I think it has got to very clearly defined and it's either going to be defined in the Act or defined in the policies has to be abided by fairly closely. MR.

CHAIRMAN: Mr. Anderson. MR. ANDERSON: Mr. Chairman, there are two impo rtant things that I'd like to point out, to con· and will add to what Mr. Ziprick said. In

Section 10(

e) it provides that the government will 1 be requir ed to provide a statement of any changes we've made from year to year in our accoun policies. The basic principle under which the state ments would be prepared would be annunci� in the acc ounting policies. Now Mr. Ziprick has raised the point that perhaps they can be put legisla tion. That is some thing that can be di scussed as we hit each of the areas. However, in 1 if we decide that we 're going to change any of those, it would be incumb ent that those reported. The next important

section is No. 9, where we've added that in the dir ectives that are iss the Minis ter will have to declare the date on which the books of the province for the fiscal ' are consid ered to be closed. I think Mr. Cherniack had raised, is there a point. Now, the di rect would declare the date that it's closed and then they would be pu blished. If it's decided that wished to try and legislate it, I know that's a little difficult because of the ci rcumstances tha1 have every year are somewhat different. Jun e 30th' I don't know, I just th row that out.

I don't k if there are any other provinces that have a legisla ted date of closing. Mr. Ziprick, you could cor me if . . . I don't think there are. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: Mr. Chairman' I must warn Mr. Anderson that I am not prepared to create great deal of fle xibili ty to the extent that I can stop it, the great deal of flexi bility that would the acc ounting procedures. This is an acco untability that goes much beyond any normal prac in commercial acc ounting or anywhere else.

I really bel ieve that we expect that there should be a very rigid manner of reporting so the public, the fellow in - I don't know, wherever he is, 200 miles away from Winn ipeg - kn that there is a procedure established. And that's why when Mr. Ziprick says: "E ither it shoul< in the Act or it should be an acc ounting policy of the govern men t", I say it should be in the and it should be clearly defined and it should not be determined by the government of the but should be determined by the government of the province and only changed by the Legisl� of the province.

So I want to come back and I want to sugg est very strongly that we change 8. 1 to take of the following: One, to state to show the true financial condition, and clearly the point of is to put the obl igation on the Minis ter to show not just what he considers necessary, but to s what he considers necessary for the true financial condition. That's num ber one.

Numb er two: there be a deadline and that will take us back to that 38 that we're going to deal with late where I would lik to have it unde rstood that it's going to be the kind of deadline there is the April 20th -May 15 th for receivables and expenditur es, and that any adjusting changes that date should be either, as I say, by the dir ection of the Provincial Auditor 01 Order-in-Council. Now Mr. Anderson pointed to 10(

e) and said: "That's new" ;-it's not new. it's new in the but it's been in the Provincial Auditor's Report for some little time now so that there's no eh 260

Public Accounts Tuesday, June 5, 1979 1 present at ion to the public. The only thing is, it says ins tead of the Auditor doing it, the Mini ster 'ill do it, and that's good. You know, I agree with that. But it's a change that the Auditor introduced imself, and you know, that's fine too, but we'll debate 9 later on. I don't think that there should be that kind of fle xibili ty. I think that there should be a clear-cut olicy stated in the legislation so that any change will appear in legislation.

And ther efore, coming :�ck to 8.1, which is what we're dealing with now, I would like to add the word "true" , show the :rue", add the the word "true" financial condition. I don't care about the "most precise" although would really take that out myself, and then insert a deadline and insert a change beyond the �adline to be in a very pu blica! way like the Auditor's dir ection or 0/C. Now I wonder if the Mini ster ould consider those suggestions. R. CHAIRMAN: Mr. Craik. R.

CRAIK: There's no problem with the "true"; it's just a question of which is the most appropriate >rd. it's a matter of sematics as far as I'm concerned but maybe the legal counsel would like advise on the interp reta tion, the difference between the word "true" and the word "pr ecise". ave no opposition to using the word "true" if it is a better term from both the legal and acc ounting ·int of view. t. BALKARAN: Mr. Chairman, I'm not so sure that the word "true" and "pr ecise" carry identical !aning; I haven 't got a dic tionar y before me, but true or the opposite of true is false, and precise inaccu rate.

If I had a choice, I would probably say the "accu rate financial position" as opposed "true" . t. CRAIK: Well, Mr. Chairman, I would think it's maybe then more an acc ounting decision than s anything else as to which is the most appropria te word to use. I can tell you that Mr. Tallin's t word was the word "pr ecise" and the word "pr ecise" bothered me not as an accountant but an engine er, because I know what it means in engineering terms. So I changed it to mean as ·ecise" as possible. But if "true" or "accurate" is better, well, maybe Dave Slake's bank, or ybe he can tell us what's accurate . .

CHERNIACK: In accordance with the factual state of affairs is what true is, so I guess that s accurate, doe sn't it? . CRAIK: We have now resolved that we'll just put in the word "a ccur ate" and remove all that iness about "in the most precise manner". , CHAIRMAN: Is the amendment then to su bstitute the word "accurate" for the word "pr ecise" he fourth ... ? CRAIK: We've . . . "to show the financial condition of the govern ment" and then just take that. So "accurate" goes in there.

CHAIRMAN: Then the im port of the amendment is to insert the word "accurate" after the word "the" in the third line and delete all words after the word "government" in the third is that agreed? (Agreed) CRAIK: I would welcome some more dis cussion on this matter of the closing date. I gathered , the discussions I have had that what we were essentially following here was the practice that I think, pretty universally used in the other jurisdictions or the other provincial governments the federal government as well. And that's really the reason for. ..

Here it's more again a � to bring it into line to the general acc ounting procedures that are used by the provinces. ren 't talked in detail to Mr. Ziprick about this.

I think we had one short discussion; I didn't that he was in - I don't think in dis agreement with it - but perhaps it would be more opriate if I asked you if, in your consultations with the other gove rnments, if I am right in that nption that the general pattern is to provide for the sort of clause that we've sugge sted here e new Act. ut I have to say that certainly whatever is done has to be, in the eyes of the Legislature, the way of telling the pu blic what's happening.

And if it's better to set a date with a provision :�ny deviation from that date for a particular reason has to be footnoted, that's another way ting it. That may give you the flexi bility to do what you want to do anyway. As the revision ·e, the date would not be spelled out except each year the Min ister would have to verify, or 261

Public Accounts Tuesday, June 5, 1979 the books would have to verify, the closing date. The alternative to that is to set the closing di and if there is a deviation from that, a footnote explaining why and in what case. -(I nterject ion: Or list exclusions, whatever. If there are any other comments that either Mr. Anderson or Mr. Ziprick would have frorr technical point of view, I'd appreciate it. MR. ZIPRICK: The other provinces; I'm not just sure to what extent it's spelled out in the legislati but it's very clear in their acco unting policies that are included in the Public Accounts.

They got specifically defined cuto ffs for receipts and expenditu res and they follow that consistently fr year to year, and it is very imp ortant to have that spelled out very clearly so every body unde rstar and then it's followed consis tently from year to year. I'm not sure as to whether it is embed< in the legislation or only as accounting polic ies in the Pub lic Accounts, I'm not absolutely st I have the fe eling that I've seen some of it embedded in legislation, now, whether that's been chan! or not, I don't know. MR. CHERNIACK: Wel l, Mr.

Chairman, when we complete, when we pass this Act, it should the best Act in Canada. You know, it will be the latest and therefore, it should benefit from best of all. And to me the best does not mean to facilita te the operation from the - I'm chom my words carefu lly, because you know, this should be a non-partisan thing. We want to pres as accurately as we can the operations of government and let me premis e my remarks by say I've worked closely with the admin istration of the Finance Department long enough to have utmost respect for their abil ity and their integrity.

But I'm not inclined to bend to create be flexibil ity for the department and you know I don't think any political leadership would do t it's necessary, I think, that it appear to be right as well as be right and I think it's wrong to h policies of a basic nature unspoken or und erstood in practice.

And therefore, I would like to it in legislation and I think it's good that it should be and that's why when we come to 38, going to question very seriously why there's all that flexibility opened up, how badly has it be We should have examples of how bad it was, that the dea dlin es in 38 should be removed . by the same token we should have a clear-cut reaso n, a pu rsuasive reason, as to why there sh� not be a deadline established in the legislation of 8. 1 and 10, along with 9, declaring the d You know, there ought to be a clear-cut aim that it must be done by a certain date and there� it cannot be changed, except as Mr.

Craik says, footnoting. Well, okay, footnoting is footna and that's better than nothing at all. But there should be a deadline with the footnoting so we all know that by a certain date everyt hing's done and all the creditors and all the people deal with government would know. MR. CHAIRMAN: Mr. Mi ller. MR. MILLER: Mr. Chairman, I would agree with that, and what Mr. Ziprick pointed out was in other jurisdictions there is a deadline, whether it's in the act or whether it's by polic y, but are consis tently followed. I can't agree with Mr.

Anderson 's suggestion that in (e), a statement of any change in accounting policies of the government from those followed in the prec eding fiscal year, that statement is sufficient. Because as I visual ize it, there could be a change from year to year even though the government would issue a statement or a statement would be issued, noneth� from one year to the next those dates might not be consistently followed.

So there should clear date for both receipts or revenue and for expenditures, and only changed by an abs< essential - there might be a reason for it but that should be clearly identified, either by the Auc by the footnoting and what have you, but there should be a target. Otherwise, I think we're im annual changes, even though they may be announc ed subsequently. There are the annual cha in the accounting procedures. MR.

ZIPRICK: The cut-offs for expenditures and reve nue is so crucial that I think it's very imp o that it be clearly defined and consistently maintained from year to year, because if you start char it around you get into all kinds of inconsis tencies and you 'd have to restate your positions to re it. So, I think it's quite im portant that it be clearly defined and un derstood, and my prefer would be for it to be in legislation. MR. CHAIRMAN: Mr. Craik. MR. CRAIK: Well, Mr.

Chairman, I was going to suggest then, with these comments, that pe1 we need to look at defining the cutoff date in both cases, expe nditur es and receipts, whic 262

Public Accounts Tuesday, June 5, 1979 lp rove over what it was if we're spelling out dates, and then the conditions or provisions under �ich deviations from that ought to be noted or first of all, if they should be done, taken, and so, how they should be noted. And if that were acce ptable, maybe we could ask the staff to draft around the concept of setting the dates out and defining as far as possible how any deviations )m that ought to be noted. R. CHERNIACK: Does that mean to leave 8.1 and 9; 8.1 , 9 and 38.

Now I'm getting confused th the numb ering. �-CHAIRMAN: ... is 25. �-CHERNIACK: Oh, yes. �-CRAIK: If you 're happy with the principle what we could do is have the - between the 1mptroller and the Auditor redraft it ... �. CHERNIACK: Yes, and bring it back to us. t CRAIK: . . . with the necessary sect ions to be changed. t. CHERNIACK: Oh, but we'll see them? I. CRAIK: Yes. I. CHERNIACK: Right . I. CRAIK: Yes. :. CHERNIACK: So we stand aside these sections that they're going to be dealing with . . MILLER: lt may affect other sect ions, but they would know what they are . . CHERNIACK: Yes.

Well then we lieave 8. 1 or

Section 8,

Section 7 we will deal with and pass. ;tion 8, we'll leave that then.

Section 6 is left, is it, Mr. Chairman? . CHAIRMAN: Yes . . CHERNIACK:

Section 6 is held. Our section, the Bill

section 6, which is 8. 1 . . CRAIK: Yes, okay. , CHAIRMAN: Is there any other dis cussion on

Section 6, 8.1 that is? . CHERNIACK: No, Mr. Chairman, we'll see what comes out and then de al with it. CHAIRMAN: Yes, fine. CHERNIACK: So 6 is held. CHAIRMAN: We 'll hold that and move on then to 6 ... CRAIK: We're ess entially redrafting it and then we'll come back for further study and �w. CHAIRMAN:

Section 7. CHERNIACK: Pass. CHAIRMAN: 7 -p ass.

Section 8, do you wish to hold that over because that would seem ave a bearing? CHERNIACK: I suggest that Mr. Craik propose that - I would sugg est it should be held with 263

a reconsidera tion. MR. CRAIK: Yes, right. Public Accounts Tuesday, June 5, 1979 MR. CHAIRMAN:

Section 9 will also be held over.

Section 10. MR. CRAIK: That will as well. it's the contents of the Publi c Accounts, because there ... A MEMBER: 10 is their rev enues. MR. CRAIK: That's the same, it will be ... -(I nterjec tion)- Yes. MR. CHAIRMAN:

Section 10 forward.

Section 11. MR. CHERNIACK: Well, let's see. I'm sorry, Mr. Chairman, I'm a little be hind in my notes. W1 holding 6, 8, 9, 10, now 11 - no checks in 11 . MR. CHAIRMAN: Su b-clause 19 (1) (g)(iii)- pass; 11- pass;

Section 12- pass - Mr. Chernia MR. CHERNIACK: Could we have clarification? I think it's fine, - did you say 12? MR. CHAIRMAN: 12 . MR. CHERNI ACK: 12 . I'm sorry, I'm ahead of you. MR. CHAIRMAN: 12-p ass;

Section 13. MR. CHERNIACK: Could we have clarification on that? The information I have, Mr. Chairn there's no real change in the meaning of the sec tion, that it's reworded to remove referenc' the trust and special division of the consolida ted fund. MR. CHAIRMAN: Mr. Curtis. MR. CURTIS: lt refers to the subdivision of the consolida ted fund . lt refers to the special divi� -(I nterject ion) - it's now special pur poses rather than special division. There is no special divi! Special division was trust. We combined it. MR. CHERNIACK: I see. MR. CHAIRMAN: 19 (5)-pa ss; 13- pass;

Section 14. Mr. Cherniack. MR. CHERNIACK: Mr. Chairman, I'd like to ... My own reference refers me back to 20. MR. CRAIK: it's a cu rrent account or the word "cu rrent account" is deeeted. MR. MILLER: Well, that deals with the com binin g procedu res MR. CHAIRMAN:

Section 14- pass;

Section 15- pass;

Section 16. MR. CHERNIACK: Could we just look at that a minu te? What does that say, what does it m What's the intent? MR. CHAIRMAN: Mr. Craik. MR. CRAIK: There's a redunda nce since the re fund of expenditu res made in prior years is rev which is provided in Su bsection 24. MR. CHERNIACK: That's a nice precise explanation, which I don't unde rstand. lt may be ace too, I just don't un derstand it. MR. CRAIK: That is the major one, because it's refu nds of revenue will not in future show 1 expenditure but will show as a reduction in reve nue. 264

I"'UDIIC ACCOUntS Tuesday, June 5, 1979 JR. CHERNIACK: Mr. Chairman, I raised that point when I spoke on this bill. 1 believe that up 1 now the practice has been that when a refund has been made of rev enue received in a previous ;cal year, that refu nd is shown as an expe nditur e in the year in which it is being refu nded ,

whereas a refu nd is made of revenue received in the current fiscal year, it's a deduction from revenue that curr ent year. Is that correct? Is that the present policy? R. CRAIK: Yes. R. CHERNIACK: Well, the answer is yes. This change says that we will now go back and, as >ee it, re-open the books. No, worse than that. We will say that because there is a refu nd to � made for previous year's revenues, we will reduce it from this year's rev enues,

whereas I belie ve > an expenditure. Now let's be more precise. Firstly, the government has voted to el imina te ccession duties. lt is qui te conceivable that this year there would not be any reve nue, but there uld be a ref und. And in that case there might even be a reverse rev enue, you know, like - �re's more being refu nded than there is received. So that's a technical problem. Why should I 1rry about that?

But I do think that it is proper that if a government decides or is bound in this year to make ·efund from previous year's revenues which are shown as revenues from previous year, that they � shown properly as the expenditure this year, not a reduction of this ye ar's rev enue. The vernment estima tes it will receive certain revenue from sales tax or from min eral taxes or whatever, ralties, and has to make a refu nd and then says, "We ll, we didn't receive that money." That's t true, Mr. Chairman.

The truth is, they received the money but they had to pay it out because a previous year's obl igations, and ther efore I think the principle is wrong and I don't even know at im pact or imp lications there are to doing it the proposed new way, except that I belie ve that principle is wrong, and that revenue received this year should be shown as revenue received ; year. Expenditu res by way of rebate for previous years are expenditures. Now, I don't know 3.t's wrong with what has been going on up to now and ther efore I don't know why it's justified bring this proposal forward . .

CRAIK: Perhaps I can ask a question, Mr. Chairman, myself. If a revenue refu nd is made he coming year, Air Canada settlement, whatever it may be, and on a suit where we lose a rt case and have to refu nd, wheth er; it went out as an expenditure or whether it was consider ed 1ss of revenue in the year in which the refund was made, it would still be shown in the accounts way or another. -(I nterjec tion)- .

CHERNIACK: But it's a revenue that you've thought was a revenue but isn 't, it wasn't a mue, and what you really have is that it's not - I would think in basic terms if you'v e had use of a reve nue which you aren't entitled to and you lost it, you shou ldn't show it as an enditur e, but simply show it as a loss in the rev enue, but since the books are closed, you can't >ack to the year in which it was collected. So the best you can do is show it as a loss in rev enue 1e year in which the books are open. CHAIRMAN: Mr. Ziprick. ZIPRICK: On this particular ... , Mr.

Chairman, I am guided more by as to whether the refund 1 obligation and is statutory and if it is, then it's not a budg etary expenditure, because it has e repaid and then the treatment is not that im portant, it has to be returned, that particular nue, and for that reason I like this other of reducing the rev enue because the refu nd is a statutory it must be made and it does not req uir e a legislative vote, so it would make it easier to just ce the reve nue. Just thinkin g back, I don't recollect the kinds of things being made that would undue impa ct one way or another.

But if it's a statutory, then of course it doesn't req uir e lative vote and it has to be made and any vote on the appropriations is really a meaningless On the other hand, if it requi res to be made it re quir es a vote by the Legislatu re, then it Id be in the Expenditure. CHAIRMAN: Mr. Cherniack. CHERNIACK: Mr. Chairman, in the first place, we do have items in the Budget that are tory, and they show up as an expenditure.

All the payment to all of us competent elected le is statutory; the debt is statutory; there's a good deal that's statutory in the mone ys voted. re just not presented for ... they'r e presented for debate, but you can't vot on them. 265

Public Accounts Tuesday, June 5, 1979 Secondly, as Mr. Ziprick, you know he used the words "it's easier", and I don't think it's pur pose to make it easier to do some thing. Our pu rpose is to make it as accurate as possil And is Mr. Ziprick suggesting that anything in the present system, up to now, has been wron! some way? -(I nterject ion)- No, wel l, if it's not wrong, Mr. Chairman, then since we have fi! years, and they close, then they should be closed. And then in the next year, to say, "We di( receive this money" is not true, Mr. Chairman.

Whether it's revealed or not ... you know, not suggesting it'll be concealed, although it could be, but I'm not suggesting it would be. lt cc be stated we received gross so much, we rebated so much from previous years, and we ne1 so much; so, you know, it would be shown. But it's not true, to show it as a reduced rever The fact is, the money came in. Now, why am I objecting to it? Firstly, because I think that, in principle, the present sys· is right. lt may not be easier, but it's right, it's correct. We got the money, and we show i1 rev enue.

We had to pay out the money because of statute, or Court Order, or convict ion. r the Mi nister has the right, under certain circu mstances he needs the supp ort of Lieutenant-Gov ernor-in-Council, but they have their right arbitrarily to say, "We belie ve there sh< be a rebate made," and we've done it in various cases. it's an expenditur e, because it's necessarily a statutory rebate, it's an arbit rary one based on the judgment of govern ment. V then, I think it should be shown that way as being an expenditure, and ther efore not balan off from a reduction of reve nue. And I must say, Mr.

Chairman, I think the logic is the way it has been. I don't see anytl beneficial either way, either from a devious way or any other way. I don't see why it's to be dt and I don't accuse anybody of wanting to do it impr operly, to make the change. I just don't tl it's correct to make the change, and I don't see the advantage to it. Now, Mr. Ziprick used the word "easier ", I really don't belie ve it's easier. MR. CHAIRMAN: Mr. Craik. MR. CRAIK: Well, I guess, Mr. Chairman, we have a di fference on this, and it's not a matte the easiness of it. I accepted this one as really being a more accurate way.

Take a typical ( - if Saskatchewan had had to pay back its hund reds of mil lions of dollars of tax that it colle' on oil royalties, or that the Federal Government Supr eme Court ruled was not their legitima te revE to the province, had the use of the revenue for a period of years, and then it was found it ill egal, and had to refund it; I think the Saskatchewan books, if they showed that as an expendi l would have been very much out of context with the true picture of the activities, financial activi of the Saskatchewan government. And the same thing would occur here, and does occur, but on a smaller scale.

We've g num ber of cases now that are before us that will come in.

And all we 're saying is that if we those cases because it is a tax that we ought not to have col lected as a reve nue, and hav pay it out, since we can't pay it out in the year in which it was collected, it's going to hav be dealt with in the year in which it happens, either as an expenditure, or a lost reve nue. since it's a repayment of reve nue, I think it's more accurate to tell the people of Manitoba we lost revenue which we shouldn't have had in the fi rst place, rather than trying to tell then spent X amount of dollars to repa y something that we shou ldn't have had.

There's nothing tangible that comes out of it. lt doesn't pay for a school teach er' s sala1 doesn't build a school; it doesn't build a hig hway; it doesn't do a thing. All it does is tell you you had access, use of a revenue that you weren't entitled to, and dis torts your books in the w dir ec tion. MR. CHAIRMAN: Mr. Cherniack. MR. CHERNIACK: Mr. Chairman, there are expenditu res made that are not for paying a teac salary, or anything like that. This is a debt, you know. A rebate becomes a debt either by la by di scre tion. And the point I made, which Mr.

Craik didn't deal with, was the arbit rary dec of the Lieutenant- Governor -in-Council that we think that a wrong was done and it's only righ1 just that a reba te be made. it's not requir ed by law. lt is under The Financial Admin istratior a rebate is made. And, therefore, it's not really a reduction of reve nue to the extent that it im properly collected before. lt was properly collected.

Now, his example about Saskatchewan: Supp ose the government decides to change its Su ppose the Minis ter brings in his Budget, and says, "I am now going to change the meth( collecting tax on a certain item ." Still the same item is being taxed, let's say royalties are I taxed, but the whole system of collection of royalties, or calculation of royalty payments is cha1 Does he then say that with that change, where he may increase or decrease the revenue expt 266

Public Accounts Tuesday, June 5, 1979 ------�----��----��---- � ·om previ ous years because of the change in policy, will still be affected by the fact that by decision, ither by a Court or by an outside source, or internally, a rebate has to be made fro previous 3ars? That wi ll dis tort the books considerably, because then it will show a reduction in revenue from new kind of app roach to taxation.

And that would be wrong because the revenue will have been lllected. lt seems to me that it is still correct to show it as an expenditure because it is money :tid out. lt's money paid out to a different person than the person from whom it was collected. ecause, let's assume that lnco - that's completed, isn't it, or is it still under appeal? Well, 1gardless - assuming that there is money now in trust, incide ntally which was set up correctly ; an expend itur e, I sup pose. lt must have been shown as an expenditure when it was set up in ust.

I don't know, I'm assu min g that. lt's sitting in trust, and it's going to be paid out. As a result that, the income that has been received from Sherritt-Gordon may be used to pay back lnco, · in deed the money received from general in come tax, or from law courts fees, or any thing, it's I money that blends into consolida ted reve nue that is paid out. lt would be wrong to say that this year's rev enue from royalties or from whatever tax the lnco taxed at , or the sales tax for for Air Canada, is to be deduc ted from this year's reve nue, when at kind of rev enue isn't available; it's not coming in this year.

So, I I really think that it's more accurate to show it as an expenditure, unless it is clearly moneys 'lle cted this year from one source, and rebated this year to the same source - then tha t is a ducti on. There's no question in my mind that is a reduction in rev enue. But, you 're mixing years, and it's not a good idea. We're not running a busi ness operation where u can set up an account for bad debts, or an account for contingent liabil ities. You don't do :�t with pub lic moneys, and I don't want to encourage that. �-CHAIRMAN: Mr. Craik. t CRAIK: Well, the dif ficulty is, Mr.

Chairman, that whatever you do, you 're mixing years. If ;hows as an expenditure, you can't avoid mixing the years, if the books are closed. And there's e case mentioned here where there's two things happening. There's a settlement that the vernment claims where it may gain reve nue, that's now ten years old. But, on the other hand, 're going to nave to have had a judgment against us in the other direc tion , but with regard to jif ferent matter, with the same, as it turns out the same company. Now, they'r e all from years di fferent from the year in which they're going to be settled. So, you 1't escape it.

And they're both reve nues. One's a gain in rev enue, and the other's a loss in revenue m a tax resu lting from a law suit. And those are going to be the cases which are the im portant �s. Well, 1 think it really comes down to that it's a case, not of convnience so much as it is, 11 my point of view, as accuracy. lt emana tes from the acc ounting people, but in looking at it, ppears to me that there is a great deal of logic. If you lose a revenue because you shouldn't •e had it in the first place, then it's logical to show it as a reduction in rev enue.

And since, in 1er case, the examples used about the powers of the L.G. in C., it will still requir e Order-in-Council eh will document it. lt's just a matter of how it shows in the books . . CHAIRMAN: Gentlemen, it's 12: 30, the time we normally adjourn for lunch. Do you wish to tinue and finish this particular item, or leave it over and come back to it on our next �t ing. Mr. Cherniack. , CHERNIACK: Well, Mr. Chairman, I don't know how quickly we can finish it. I don't know CHAIRMAN: This Section.

CHERNIACK: I don't want to feel that we must finis h it; tha t we can't eat until we finish it. ,n't know how much more dis cussion there has to be. When will we meet again? CHAIRMAN: Mr. Crai k. CRAIK: We're going to have to come back, Mr. Chairman, to review the other Section, so don't we leave it, and we'll try and

schedule a meet ing - it'll depend on whether Public Utiliti es available for Thur sday. But if not, we 'll try and arrange for it either tomo rrow or Thur sday. CHERNIACK: As soon as possible is fine. CHAIRMAN: Comm ittee rise. 267

Document details

Collection	Manitoba — Debates (Hansard)
Citation	31-3-pa6
Type	hansard
Volume / chapter	31st 3rd hansardpdf pa6.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	257ac640cf6b2d96388de36e1c6f92051c21eb8a

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