Fourth Session - Thirty-First Legislature of the STANDING COMMITTEE on PUBLIC ACCOUNTS 29 Elizabeth 11 Published under the authority of The Honourable Harry E. Graham Speaker \.�� Tuesday , 8 April, 1980 10 :00 "p.m. Printed by W. T.Matwichyna. Queens Printer, Province of Manitoba ISSN 0542-5492

Time : 10 :00 a.m. LEGISLATIVE ASSEMBLY OF MANITOBA THE STANDING COMMITTEE ON PUBLIC ACCOUNTS Tuesday , 8 April , 1980. MR . CHAIRM AN, Mr. D. James Walding (St. Vita l) : Order please . We have a quorum, gentlem en, the committee will come to order . I would refer honourable members to the Report of the Provincial Auditor . When we adjo urned last week we had reached Page 21, having passed Page 20 . Are there any questions or other com­ ments on Page 21? Page 21--p ass. Mr. Miller. MR. SAUL MILLER (Seven Oaks) : Mr. Chairman, to Mr. Zip rick .

The first item, Provincial Judges Court , Public Safety Building, and you indicate there that there has been a change in the backlog. What about the question of the driver 's licen ce, the suspension notices , and so on , and warrant for arrest? Has there been an improvement in the backlog there in the hand ling of it? MR . CHAIRM AN: Mr. Zi prick . MR . W. K. ZI PRICK : Mr.

Chairman , we have not updated the audit as su ch, but the information that we have so far , there 's been improvement in general and they 're working towards the notices for suspensions and the driver 's licence and looking into the whole system . So we ' 11 be following that up during the next audit . MR . MILLER : Mr. Zi prick , have you found that , in fact, people who are not paying their parking tickets or whatever other summ onses they 'r e getting for in­ fractions , are simply accumulating them , not paying the m and there • s no follow­ -up? Is that what the problem has been? MR .

ZI PRICK: There are of course some people that are paying promptly , then others there is no payment and the follow-up procedure is delayed . So in some cases when there is a follo w-up there 's paymen ts. In other cases of course there is no payments and then eventu ally there will be the warrant iss ued , but that 's a long time .

Now we appreciate that even in the most up-to-date situ ation there is a lot of warrants that will not be able to be served because the amounts involved are relatively small and if the warrants can 't be served in the first instanc e, it wouldn 't pay to spend a lot of money trying to enforce a warrant , and that 's not what we are suggesting or expect ing here . What 's fe lt is that if everything is moved up into a more current position , then there 's a likel ihood to be more warrants that could be served and more pay­ ments , and there 'd be just a better discipline in the whole system .

And in any event as far as the time is concern ed , whether you do it immediately or some time after , it still takes as much time to do it. So what is suggested , is that it be brought up-to- date . They are working towards bringing it up-to- date . I under­ stand they 'v e made significant progres s. There 's als o a me�hanization on some of the record keepin g which would expedite the situation and bring it in a more up-to-date positi on . So we 'l l be updating it during our next audit . MR . CHAIRM AN : Mr. Miller . MR . MILLER : No , okay on that one. MR . CHAIRM AN: Any further questions on Page 21? MR.

MILL ER : Yes . On the Manitoba Lot teri es Board I' m wondering whether th ere has been any change or improvement regarding the deficienc ies in the admin­ is trative and control capabilities and some of the procedures which resulted from - 33 -

Tuesday, 8 April, 1980 lack of staff. Has there been a change in that or is there anythin g of the •• I don 't know what dep artment this would be - I guess, what? The AG 's departm ent? MR . ZI PRICK: Mr. Chairman, yes , that 's right, that 's under the Attorney­ -Gener al 's department . There, again, we have not carried out a full follow-up audit on this de partment or that area, but we were advised that there has been improvements in the inspection staff, and that there 's a review being made to strengthen it substant ially . Now when we check during the coming audit, we will reassess it again .

At the present time, a more updated position will have to come from the de partment . MR . MILL ER: I notice where it 's sugge sted that the department is request­ ing additional staff on a term basis and full-t ime inspectors to be assigned on April 1st . So, you 'l l be looking to see whether, in fact, this occurs April 1st . That 's just a few days ago . MR . ZI PRIC K: Yes, Mr. Chairman, during the next audit we will be looking at all these things to see how much improvement has been made .

I' ve discussed it with the Deputy Attorney-General on one or two occasions and he apprec iates the seriousness of this situation and the amount of money involved, and the possibil­ ity of something seriously going wrong, if there is n't reasonable dis cipline in the inspection sytem . MR . CHAIRMAN : Mr. Hanusch ak . MR . BEN HANUSCHAK (B urrows) : Yes, Mr. Chairman, is it the respons ibility of the Provincial Auditor to enquire into the bona fides of the applications for licensing by the Lotteries Board? Do you do that type of a check? MR .

ZI PRICK : We check to see what, you know, the applicati ons, that they come in and they conform with the policy that 's set down either in regulations or in board direc tive . Now, as far as the policy is concerned, eith er in regulation or board directi ve, it 's a policy that we don' t take excepti on to . It 's a policy that 's been established ei ther by the governme nt or a body appointed by the gov­ ernment, as we ju st see that whatever policy has been establ ished, that it 's being follow ed . MR. HANUSCH AK : The reason why I' m ra�s�ng this questi on, Mr.

Chairman, is apparently there is some evidence within the operations of the Liquor Commission of some abuse from time to time in the area of occasional permits, you know the banquet permits area, where applicat ions are made for the holding of socials, basically for profit purposes as opposed to the intent for which that piece of legislation was des igned, that is, for family, community functions, organizations holdin g fund-ra is ing functions and that type of thing . So I would ask the Audi­ tor, Mr.

Chairman, whether he has seen any evidence of any similar abuse to the granting of lotteries lic ences because I would suspect that licences are granted to charities , to non-profit organizatio ns, and the like . Has he seen any evidence of anyone conductin g lotteries for personal gain, as it were? MR . CHAIRMAN : Mr. Zi prick. MR . ZI PRICK : Mr.

Chairman, as far as applicat ions are concerned and what the board approves is consistent with the policy, that it 's not to be for personal gain; that the rules that are set out are consistent with the law and the intent of the law and the applications that come in are being adhered to .

But of course the whole enforcement side of it comes into question through this inspect ion defic iency, and there we 'v e seen some evidence that alth ough the application comes in that fully declares as to how it 's going to be accounted for and taken care of and complies with the requirements in the spirit of the law, but then the actual performance there seems to be somewhat diff erent . This is where we have observed di fficulties and this is the area that we are sugge sting that needs strengthenin g . - 34 -

Tuesday , 8 April, 1980 MR. CHAI RMAN: Any further questions on Page 21? Page 21--p ass . Page 22. Mr. Miller . MR. MILLER: Mr . Chairman, on Page 22 , Financing of School Divis ions , this is not a new se ction, this has appeared before . As I understand it , Mr .

Zi prick, what you ' re quet ioning here , what you ' re concerned about is the difference in interest earned between the province and the municipality when they lend out their money - the excess money they have - versus the amount the school boards have to pay and the dif ference is about half a million dollars , between the lending rate and the borrowing rate. Am I right? MR . ZI PRICK: Mr . Chairman , that 's right , that 's one of the el ements . But the other ele ment is that there is a distorti on of cost s.

In other words , the school costs get tabbed with interest that really is in effe ct, in my view , a sub­ sidy to municipalities to some degree and a subsidy to the province 's financing to some degree . MR . MILLER: Well , when you say a subsidy , you mean the moneys earned by the municipality or the province in the fact that they have these funds to lend out on a short-ter m bas is , whether it be 90 days or what have you . So they are earning intere st at a higher rate than the school board , which has to borrow 37, or is it • • • I forget , $78 million.

They have to borrow it when in fact that money could be made available to them earlier by the city or by the municipalities or by the province. But of course then the interest earned by the cit ies or the province would be reduced considerably . So the revenues to the city and the prov­ ince would drop . MR . ZI PRICK: Mr .

Chairman , the net effect to the taxpayer , we est imate to be about half a million dollars or somewhere in the re , but as far as the gain by the municipalities from inter est , for money that they are retaining in slow paying to the school division s, is quite a bit more , and that is of course a revenue that 's arrived at purely by regulat ion, that 's a flow of money and not really con­ sistent with the system of paying and as a result , in my view , is a distortion of cos ts . MR . MILLER: Mr. Chairman, through you . Perhaps there are two possible answe r, one to change the

schedule of payment , the other could it be that if the money is known to be for education, payable to the school divisions , even though it is on a date set six months hence or four months hence, that the money should be made available to the school board at the amount owed , plus inte rest . In other words, any earni ngs of interest should pass on to the school boards . Would that resolve the problem? MR . ZI PRICK: Well, if this kind of accounting was established that would take care of the transfer of cos ts, but it would still not take care of the most efficient method of financing it, in my view.

There would still be a substantial cost incurred , financing through the banks in so many school divisions , and the earnings are not likely to be realized to the same extent . MR. MILLER: When you say there would be costs because of transferring through the banks, if a municipality had its funds , let 's say the city of Winni­ peg , which because of prepayme nts in January and other advances , they get consi­ derable funds between January and June and certainly get most of their funds by the end of June, they invest that .

They simply then owe the school division the amount that 's required plus the interest they 'v e earned. In other words, they don't make any money on the interest earned . Is there really a cost on this? To whom is that cost if the interest is made available to the school board? MR. ZI PRICK: Mr . Chairman , I just don 't follow why you'd want to do that , in other words if the municipality doesn 't retain the intere st , why would they want to retain the money? Why wouldn 't they turn the money over to the school division to pay the costs for the services that have been incurred , and not invest? - 35 -

Tuesday, 8 April, 1980 MR . MILLER: Mr . Chai rman, I' m just trying to recollec t. Not every mun�c�­ pality I suspect is in the same position at the same time to make advances. Some collect their moneys early, others do n't collect it perhaps until October . So you have that di screpancy as between municipal ities. Even the province has certain peak periods when the money flows in. So I am wondering whether a standard proce­ dure could be developed recognizing that municipalities have different cash flow periods , or the inflow of money to the municipal coffers, if they 'r e not all at the same time .

The refore I am not sure how a regulation would cover everybody because regulations tend to cover everybody equa ll y. Because what you 'r e saying is that the

schedule should be altered in such a way so that the school divisions will get their money on time to meet their needs which is Septe mber to June, irrespective when the year end is for the municipa lity or when their money comes in from their property taxes. Is it possible to set up this kind of pay syst em, when the inflow of money varies as between municipalities? MR. Z IPRICK: Mr . Chairman, I have revie wed the municipal cash flow as closely as I could on the bas is of the information that 's available .

Now the city of Winnipeg gets - the cut-off date is June 30th ; after that there is penalties - by and large, as you 'v e mentioned, gets most of its money by June 30th . I think there is maybe the city of Brandon, I am not sure whether they are June 30th, but the rural municipalities particularly are all October 31 st, and they basically get most of their money by October 31st, then penalti es flow . Now the way the

schedule is drawn up presently the first payment from the municipalities is July 31st, 20 percent, so some of the municipalities have to find some money one way or another alth ough on reviewing their financial state­ ments from what I can see, most of them do not have any difficulty because they still carry investments in the revenue account in Governmnent of Canada bonds and they are there from year to year, so there would only be an isolated municipality that would have any dif ficulty .

But anyway, end of July payment and the end of September payment the rural municipalities • • • their cut-off date has not ar­ rived yet, where the city of Winnipeg 's has . Then at October 31st, their cut-off date has arrived, that 's when they have received their money, then the next pay­ ment is November 30th . And then the last payment, 40 percent, is not until Janu­ ary 31st . Yet at December 31 st, after deduct ing the provision for uncollected taxes in total, there is only about 2 percent of the taxes that are uncollected at that particular point .

So that taking a look at the detail, there could be an odd municipalit y that there seems to be some difficulty in cash collections but there are not very many . MR . MILLER: You'r e saying that the first payment of 20 percent July 31s t, the money is really there because even though their date for final payment of taxes is not until October 30th in rural Manitoba, so you 'r e feelin g is the money is there in any case .

I suppose the money is there because they have collected their taxes the preceding October, they 'v e had to pay out 20 percent November 30th, 40 percent January 31st, so they still have money left over from the preced­ ing year which they have invested . Well, are you suggesting or do you feel th at the way to do it perhaps would be to have di fferent dates for rural versus, let 's say, Winnipeg or Brandon? Would that be one of the ways to do it? MR . ZI PRICK: Mr.

Chairman, that could be one of the ways or you could go on even six or seven months payment start ing at July 31s t, I agree that to advance the date for municipalities bef ore July 31s t could impose some hardships, and by not going up to the end of January would improve the situ ation. And then of course the Foundation grants are paid to the province, 60 percent of the municipal portion of the Foundation grant is paid by Sept ember 15 th, and then the remaining 40 percent is not paid until March 15 th . Now the Public School Finance Board in the meant ime make payments on a di fferent

schedule to the school divisions and then the amount of the interest charge is als o passed on to the school divisions through a charge to the Finance Board . So there is the two ele ments from the municipalit y . Then the province is in arrears, well, the esti mate this year is that the interest will run about $9 million and over a third of that will be applicable to the province 's cash flow which would be in excess of $3 milli on . - 36 -

Tuesday , 8 April, 1980 MR . MILLER: All right , but I want to keep the two separ ate; the provincial and the municipal . The January 31st is the final payme nts by the municipalit ies , but you have quite a stretch there, you 'v e got from February to July 31s t , which is what? Six months . Six month s, where the school divisions still are operating and still have a monthly payroll to meet and other costs to me et . By that time the final payment is made January 31 st , the first payment for the new year is not till July 31st , so you have a six -month period where the school boards are st rap­ ped for fund s.

That 's really where it 's at , it is in that si x-month period . MR . ZI PRICK: Mr. Chairman , the Public School Finance Board , the foundation levy , they start paying around the 25th of April, the first payment, and that 's • MR . MILLER: The Foundation grant , you mean? MR . ZI PRICK: Yes . And that 's 20 percent of the spring term costs that are establi shed for the Foundation grant , so that the school divisions would get their first cash flow some time in April so they 'd have to operate from January to , I think around the 25th of April is when the cheques go out from the school divisi ons . MR .

MILLER: Well, you kn ow, this is something that has to be resolved one way or another , sim ply , if nothing el se , to get this out of this book - I' m now talking to the Minister of Finance so that we 'r e not faced with it annually . I am wondering whether perhaps the province shoul dn 't consider establish ing a monthly cash flow to the school divi sions . You se e, with the school divisio ns , their fiscal year is January to December which doesn 't fit in with the provincial fiscal year.

I am wonderin g , howev er, if the province could undertake or could consider increasin g its flow of funds to the school boards rather than the first cash flow which is sometimes in April , and the balance of the previous year , March 15, whether they could n't start making payments in January , because I can see the criti cal months of the school board are Febr uary , March, April , May , June , where there 's nothing coming in from municipaliti es , or very little .

There is just the beginning of the Foundation grants coming from the province because I think you indicated that 60 percent of the Foundation grant was paid by September 15 . It 's we ll into the fiscal year of the school board . It may be the beginning of the school term but it 's we ll into their fiscal year. So I' m wondering whether the province couldn 't consider paying bi-monthly or even monthly to the school board , rather than afte r the fact, making advances.

Because I know right now they wait for the school boards to set their budgets and then they proceed to wait for the municipalities to set their budgets , establish the mill rate. I'm wondering whether the province couldn 't start treat ing the school division in a somewhat di fferent way and send them advances based on a pretty good idea - certainly not on the previous year 's requirements - and then adjustin g after June or sometimes in July , so that at least the provincial moneys would come in on time . As far as the munic ipalities are concerned , is it possible to set up the per­ centages paid?

In other words, instead of 40 percent January 31, make the 40 per­ cent in September or Novem ber so that you ' re increasin g the amount of the cash flow . Because as it is now, the highest percentage is paid January 31 , which is for the previous year , the previous year is really finis hed . MR . CHAIRMAN: Mr . Craik . MR . CRAIK: We ll , Mr . Chairman , we 'v e had some dis cussio ns with Mr . Zi prick on this matter and we are intending to take some action on those parts of it that we can with regard to the province 's cash flow . That part, I think, we can proba­ bly alleviate part of the problem.

The other is, causing the municipal ities to advance money earlier to the school boards and that involves some dis cussions with the municipal people in order to try and bring about some solution to that. We 'v e had some dis cuss ions in this regard actually about a year ago and I think we probably can see some possibility of bringing about some relief of the problem . - 37 -

Tuesday , 8 April , 1980 Advancing the payments earlier than April means shi fting fiscal years for the province if you move it ahead to January , February, March, and means shifting the payment s, out of the fiscal year , currently would be 1980- 81, you 'd have to shif t back to 1979- 80. Now I think maybe at one point in history that was done ; Janu­ ary , Febr uary , March, there were payments out of that fiscal year and they kept sl iding backwards unt il they got bulked up in April. To move backwards means always shi fting back in the other direction, so there 's kind of three parts to the problem.

And the case of the regular advance under the Foundation Program, I think we can look after that one dire ctl y because it 's a di rect respon sibil ity . But we appreciate the point that 's been made on a number of occasions by the Audito and of course by the school divisio ns and hopefully by a year from now that we 'v e solved part of the problem anyway and perhaps we can look forward to a di fferent comment . MR . MILLER : All right . I' m pleased that the Minister is going to try to resolve this in the way he 's mentioned .

But in addition to that , earlier on I indicated that perhaps nei ther the province nor the city should benefit interest­ -wise through the abilit y of loaning out moneys which properly are earmarked for the school divisio ns. If that incentive was remov ed , in other words, if any inter est earned had to pass on to the school board , I suspect that somehow the municipaliti es would pay on time because there would be no incentive to hang onto the money and earn a few extra dollars by lending out their moneys on short-ter m bas is.

And with interest rates being what they are , I can see that counc ils and the province are reluctant to part with any moneys on which they ' re earning 14 per­ cent . If that incentive was removed and any interest earned on moneys owing to the school divisio ns, or properly belon gs to school divisions , had in fact to be paid to the school divis ions - they 're acting as bankers for the school divisions and passin g the interest on to them - it would el iminate a lot of the inducement to de lay payments to the very last hour.

I recall they used to , lit erally on the. hour, they 'd come in just noon on that day or an hour before the bank would close to give the cheque for $100 ,000 because with drawing it earlier meant the loss of a few percent , and you 'r e dealing with , as you indicat e, very large sums of money . So I'm wonderin g if the Minister would consider that as well , requirin g the prov­ ince and the municipal counc ils to pass on any interest rates earned on the moneys earmarked for the school boar ds. MR. ZIP RICK : Mr.

Chairman , I'd just like to indicate - I didn 't before - that there has been discussions on this fairly recent ly , I'v e been involved and I notice that there are serious at tempts to correct th is, at least substantially alleviate the situation . MR . MILL ER: Pass on the comments for what they 'r e worth ••• MR . CHAIRMAN: Any further questions on Page 22? MR. CRAI K: Can I advise the municipal ities of your comments? MR . MILL ER : Sure , by all means . No , I do n't hide behind those things . They 'r e not going to like it , so • MR . CHAIRM AN: Page 22-- pas s; Page 23. Mr . Miller . MR .

MILL ER : With regard to the Post-Se condary Education shared -cost claims , I notice in the first paragraph that there was an amount receivable from Canada , with respect to claims under the agreement - that was the agreement that ended in 197 7 - and is between 15 and 20 at the time the report was made . Has that been finalized yet? Because apparently there 's some dispute - or not dis pute so much, I suppose a dif ference of opinion - as to what is owed . MR. ZIP RICK : Mr . Chairman , I haven 't checked it fairly recent ly , but to my knowledge it 's not completel y finalized as yet .

The calcul ation , as I note in - 38 -

Tuesday , 8 April , 1980 there , is quite involved because it takes in the whole of Canada , so some of the finalizat ion is not necessarily within the control of the province of Manitoba . MR . MILLER: I see . All right . In the next paragraph I notice that in the 1978-79 fiscal year there were payments made of $9 .1 million with respect to two earlier years , 1974- 75 and 1975-76. And there was, as wel l, the year 19 76-77 amounting to about $1 0. 8 million and an advance payment of 8 million has been received .

But I notice that later on in the paragraph you indicate that an amount of 11 .4 million was established and included in the amount receivable for revenue to be shown in yea rs , 1978- 79 . Am I right in that? Is that the way it 's been done? MR . ZI PRICK: Mr. Chairman , no , I think that this 11.4 milli on is an esti ­ mate for the total amount that 's anticipated to be received in the finalization . See , this agreemen t, as indicated in the first paragraph now expired March 31 , 19 77.

So that 1977 claim is the last claim and this 11 .4 is the estim ated reco­ very for this entire program when it all gets finalized . MR . MILLER: You mean 11.4 is esti mated to include that 15 or 20 million reflected in the first paragraph? MR . ZI PRICK: Yes , that includes the first paragraph and there 's been some more payments made , but I don 1 t think that the whole thing has been completely finalized as yet. MR. MILLER : Yes , all right .

Approximately 15 -20 mill ion was est imated for the year en ding March 31 , 1977 , and you say the 11.4 million , which you 'r e showing in this fiscal year , 1978- 79, includes or covers off that 15- 20 million? MR . ZIPR ICK: Yes , Mr. Chairman , that 15 to 20 million was a rough est imate before that was being cons idered . Now it 's been refined to 11 .8 million to be the estimate of the total recoveries when this program gets concluded . MR.

MILLER: What I find str ange , is in the same sec tion, one paragraph over another, in one case you say that it 's somewhere between 15 and 20 million dollars for the year ending March 31 , 1977 ; and in the very next paragraph , you indicate an amount of 11 .4 has been established . So that the first paragraph is really way off in its estim ate when you say 15 to 20 , when it 's only 11.4. MR . ZI PRICK: Mr. Chairman , there was 9.1 million that came in during the year.

Now, maybe we could have expressed it a litt le better , but this is a con­ tinuation from what was said last year , and last year this is what was est imated for this total program . Now for the 1977 , there was 9.1 million came in and it brings it down to this remaining est imate now. MR . MILLER: I see . With the payment of 11 .4, will that be all the moneys that are then expected to the date of the terminatio n of the post-se condary agreeme nt? MR . ZI PRICK: Mr. Chairman , to the best of the knowledge at that particular time , that 's what was anticipated would be receiv ed .

Now it could be a littl e more or could be a lit tle less, when all these final calculations come in , but on the best information available at that particular time , that 's what was expected to be rec eived to finalize that program . MR . MILLER: That would come in in 1980- 81, I as sume . MR . ZI PRICK: Some of it may have come in in 1980 ••• see we 'r e dealing with March 31, 1979 fiscal year . Some payments may have come in 1980 and the remainder will come in - I imagine it will be cle aned up in 1980- 81 . MR . MILLER: I se e. Okay . - 39 -

Tuesday , 8 April, 1980 MR . CHAIR MAN : Are there any further questi ons on Page 23? 23--p ass ; Page 24. Mr. Miller . MR . MILL ER : Yes I take it from these comments , because this is a year old now , that the financial information system has been developing . Can you indicate now , Mr. Zi prick, whether since this report was written that , firstly , that the department is on target for 1980- 81, that they will in fact move as you indicate here , and that they are meeting the timetables they 'v e establi shed and that you 'v e estab lished ? MR . ZI PRICK: Mr.

Chairm an , as far as the overall assess ment , at this point in time , the review of the total requirements has been made and has been estab­ lished . There 's progress be ing made in various areas . With re�ard to the est ab­ lishing of an accounting sy stem there is, effective the first of April of this year·, an account ing sy stem going in which will put the general ledger and other phases of accounting on comp uter. The Department of Finance could probably be more specific on where this thing stands now . MR . MILLE R: Okay , I' 11 ask the Department of Finance, are you • • • Mr.

Curtis, is the timetable in order? MR . CRA IK: Mr. Chairman, the program is on time and proceeding quite wel l; it was one of the major moves that was made by the government and we 'v e been quite sa ti sfied with the progress to date . We had some change-up required , our compt­ roller was very much involved in the organization of bringing this in, and there was been a change there . Having lost Mr. Anders on , who moved over to the Credit Union MR. MILL ER : When did that happen? MR.

CRA IK: About four months ago - two or three months ago, so there has been a change up there , but it 's coming along quite we ll and we 'r e quite satisfied with it . MR . MILLE R: All right . I notice here where No . 1, it says "Departmental Est imates : The 1980-81 Departmental Estimates will include quantified inputs and output s. These documents should be refined and made available to the Legislature to display not in the dollar amounts but the particulars of the quantified inputs and outputs ." Are you sayin g , Mr.

Zi prick , that it was intended that for 1980- 81, the present Est imates we 'r e now dealin g with , that we would get more than the typical legislative Esti mates that have always been put forward in the House? MR . ZI PRICK : Mr. Chairman , there was an object ives review program carried out and when this was undertaken that was the understanding that some of these quantified obje ct ives would be included ; but the obj ectives review program didn 't materialize as clear-cut as was anticipated, and I think that , as a resu lt , they were not included this year . MR . MILLER : Okay .

Then I ask the Minister of Finance, you were saying a minute ago that things are on target . Was this part of your target to have the departmental esti mates put forward in the manner proposed by Mr . Zi prick? MR. CRA IK: No , Mr. Chairman , we haven 't adopted that particular aspect as a target . Mr . Mill er will rec all , over the years, for the last eight or nine yea rs, we 'v e wrestled with di fferent options , I think in the early 1970s we looked at some various opt ions for presentation of Est imates to present things in a dif­ ferent manner .

I think we did a sample dep artment , perhaps , or the former govern­ ment did a sample de partment in that regard . MR. !!'!ILLER : There were two departm ents MR. CRAIK: We seem to keep coming back to the present things in a dif fer­ ent manner and I think we did a sample departm ent , perhaps, or the former - 40 -

Tuesday , 8 April, 1980 government did a sample dep artment . We seem to keep coming back to the tradition­ al method . At this point we haven 't adopted a target along the lines advocated by the Provincial Auditor ; alt hough I appreciate his point in his recommendat ion, we have not yet in terms of setting forth the estimates gone to that recommendat ion . MR . MILLER: I beli eve it was 19 72, maybe 1971 , but 1971-1 972, in that period , I believe at that time an attempt was made to introduce a new format , more detail and so on, and I believe there were two departments tried .

As I recall , I wasn 't in the Department of Finance at the time, but I recall there was a feeling of dis appointment that the Legislature did n't pick it up and sort of run with it , that they stuck with the old format , maybe because that 's what they were used to. It takes time to teach an old dog new tricks . You want comparisons with year over year and there weren 't any in this case .

So I am wondering whether it is the intention of the government for next year to perhaps try that sort of format , a more detailed format for all the departm ents and simply change the system entire­ ly , or maybe even experi ment with perhaps half a dozen to see whether they can't start weaning us away from the old legislative es timates. MR . CRAIK: I think as the internal systems develop as a result of' this we can probably then move on to looking at gearing it into presentation of more , different information to. the Legislature . That could still be a pos sibility as this develo ps . MR .

MILLER: I take it , Mr . Chairman , through you to the Minister , that he is not committin g himself to doing this but will consider the possibility of this kind of departmental esti mate. MR . CRAIK: I guess at this point it 's more or less been an approach of walking before we ran to develop the internal information syste ms and then we can look at different methods of presentation of the information for the Legislature as we ll.

Keepin g in mind the efforts that we have made in the past to look at diff erent syst ems and the fact that we keep revertin g back always to this fiarly simpl ified presentation that we currently have even though it may be considered to be lacking in written information , the esti mates process now is a pretty long and detailed process that we do go through . MR. ZI PRICK: Mr. Chairman , in my sugge stions here I'd like to just point out that I make the observation that the present estim ates, in

summary form, I think are good and should really remain that way because if you load up the esti ­ mates with all this other information , and without having a good

summary to work from , then it does become very unwieldy . What I have been sugge stin g is that each department have a backup to the esti mates that would show some of the information in staff man years and other kinds of information that are , by and large , read into the Hansard one way or another through the floor of the committe e room.

This I think could make it much more effective , in that it would be possible to study the implications of all these various changes , then it would preclude all this necessity for asking all these quest ions and placing all the staff man years on the record through these kind of qu esti ons . I would agree that the very complex kind of an est imate that 's going to be voted could create all kinds of problems. What I'm suggesting is that the present estimates and what are being voted have a

summary to them of what the programs are and in my view are quite adequa te , but what I'v e just mentioned there should be this backup which would provide all this other informat ion that would be readil y available . That doesn 't necessarily all have to be placed at the same time , as each dep artment comes in their particular details could be submitted for consideration and then that could be compared with their annual report on their performance accountabilit y afterwards. MR . MILLER: That 's what I gathered this meant , because that 's what I think we tried to do in 19 71-72 .

The regular estimates book was still there , the synop­ sis , in a sense , of every departm ent , but that two departments had an additional booklet . Was that not the way it worked? -- ( Interje ct ion)-- I see . You 'r e say­ ing therefore , that the present legislati ve est imates that are tabled should continue to be tabled because they are a syn opsis of the account s, of the spending - 41 -

Tuesday , 8 April , 1980 esti mates , but that the annual reports or the annual est imates of the department its elf, showing the nitty gritt y which I think you are correct in saying is eli­ cite d during the committee meetin g. In any case , what is this program for? How many people are in it? How is it doing? Etc ., etc . This type of information could be part of what you call de partmental annual repor ts. I notice here it says "they should be co-ordinated with the esti mates and public account s" .

You are saying here that not only should they be made available to members in committe e , so that perhaps the estim ates committee could move a little smoother than it does, and a lot of the information that is sought by opposit ion members would be made available through the accounts themselve s, but you are sugge stin g that also public accounts have access to them in conj unction wit h the esti mates review. Do I read this right? MR. ZIP RICK : No , Mr. Chairman , what I am suggest ing is that the esti mates in

summary form, and then of course in Public Accou nts , the

summary form is com­ pared . Then there is all this backup information that should be submitted in an organized manner as being what 's expected to be accomplished with the money that 's being voted by the department , then to get a complete cyc le of accountability this should be compared with the actual expenditure s. Now in the Public Accounts there is �only so much det ail ,

whereas in the departmental report there is much more detail and this is where I think that substantial comparisons of this more detail­ ed pe rformance should be made and the di fferences as to how things went , what was accomplish ed , should be explained .

I don 't know just how the Legislature find the dep artmental reports, but when I look at them by and large they emphasize the accompli shme nts, where there are problems they are very seldom referred to , so I think they 'd be a much more balanced kind of document and provide a complete cycle of accounta bility if you have the departmental backup and then that backup in accountability di splayed of actual performance in the departments annual report . Because if you are going to go beyond the summaries in the Public Account s, you 'd have a great big book of public account s.

There again you would get so much de­ tail that you would not have a pyramid to start from

summary form and work down , so that in order to be able to do th is, the Public Account s, of necessity , if they are going to be reason able at all , cannot go into all these things , but the de­ partmental report certainly could because they are , in my view , for that purpose , to indicate just what the departm ent 's obj ecti ves were and what they had accomp­ lished and what dif ficulties they had encountered during the year in not being able to accomplish what was expected . MR. MILLER : Mr . Chairm an , then what Mr. Zi prick is saying is quite di ffer­ ent from the kind of annual reports we get .

You ' re , in a sense , if I hear you corre ctl y , you 'r e somewhat crit ical of the annual reports which have been tradi­ tionally tabled in the House , which are issu ed by the department and of course paint a rosy pic ture of the great accomplishments, sort of looking back on the year and highlightin g the success es ; the failures are probably ignored . I can 't see a Deputy Minister approving a report which criti cizes the department . So I' m not sure really how the annual report will • • because we do get annual re­ ports.

Now sometim es , this year I belie ve , one of the annual reports came in after the esti mates of that department had been passed , unfortunately , so there was no way to look back at the previous year. But normally the report comes in and the committee deal ing with esti mates has the annual report . But my own experience is that the annual report doesn 't really give you the kind of backup information or background , which you indicate should be available to committe e , or to Public Accou nts.

So are you not in this sense , alth ough you don't say it , are you not being critical of the format of the annual report and perhaps the self -serving approach that 's being taken by de partments in iss uing the annual report . Are you not being critical without saying so? MR . ZI PRICK : We ll, I look at it this way . The annual report is presented to the Legislature ; I'm not sure ju st what role it plays and how useful it is to the Legislature . I don 't want to criticiz e that part .

But the part that we try to use it for and establish how performance had gone and where the di fferences had been and that , we don't find it too usef ul , just for the reason that you 'v e said . - 42 -

Tuesday , 8 April , 1980 I have access to the information and we can go and find the ir1formation otherwise , but the annual report for us has only a limited use . MR . MILLER: Okay , I am pleased that you said it so openly because frankly , the annual reports, my experience is that they are really not of much value . They are a retrospective view for one thing, they emphasize the successes and ignore the failure s, if there are any failures . The failures , if they 1 re found , are found during the esti mates review itself. So in a sense , are you saying , Mr.

Zi prick , that the annual report should be di fferent in format and different in content and diff erent in approach, more an evaluation of objecti ves and a measure­ ment of some kind , the successes of the previous year? MR . ZI PRIC K: Mr . Chairman , if there is going to be a complete cycle of accounta bil ity , that 's what is necess ary .

Now whether it 's in an annual report or in an expanded form of Public Accounts , but I would think that if the annual report , it costs quite a bit to make it up and that , and if it 's going to serve the purpose , at least that we would feel it should serve , it should be a balanced document that dis plays the accountab ilit y of the department for the money that 's been made available to them. It should be in a balanced form that explains the variances , both the good side and the bad side and whatever reasons that these dif ficult ies had taken pla ce.

Most of the time we don 't find that these are mismanagements, there are odd times that these are mismanagements, but most of the time there are things that arise because of changed circumstances or very explain­ able kind of situat ions . I think that this is the way that you really get ac­ countability is when you dis close both the positive side and the difficult side where some programs you run into difficulty of administration for one reason or another. MR . MILLER: I'm wondering , Mr .

Chairman , because I can see that this again will be a paragraph that may appear from now till doomsday , and in order to re­ solve it, I'm wondering whether Mr .

Zi prick perhaps couldn 't undertake to examine one or two annual reports and give a crit ique of how he thinks it might be pre­ sen ted , because he has the abil ity to go back to the department and chec k, look at the • • • in a much easier way than any member of the Legislature can , look at the actual operations of that department and give us a crit ique of whether in fact the report does reflect the actual operations ; not just the PR aspects of that opera­ tion , but the actual guts of the departmental operations .

And perhaps doing that , the department might then be encouraged to start using a somewhat different approach to their annual reports , because right now it is a PR job. It 's sent out not just to members of the Legislature , it 1 s sent all over Manitoba and perhaps other provinces and they put their best foot forward and try to show their best face, which is quite diff erent from what you think it should be . And I tend to agree that right now they 'r e self -serving . But if the Public Accounts is going to be abl e to use the annual report , then it can 't be the kind of annual reports we have now . MR .

ZI PRI CK: Mr. Chairman , I appreciate what you 'v e said but the Depart­ ment of Finance and the government is now in th e process of establi shing a much more effective accountab ility system . This is one ele ment in this accounta bility ; I am not sure just exactl y what route they are going to suggest and take , this is one of the routes , there could be oth ers . The reason that I repeated this is because last ye ar, prior years , I think it was somewhere in 1972 that I first made the observation that the accountability system was not very effective , or not effective at all .

And I did it in a fairly general way without any particular study . We ll, we still have not done any exhaustive study because I, first of al l, don 't have the manpower to do that kind of thing and I don 1 t consider it as my mandate to line up the sys tems . But this is somethin g that we could readily ob­ serve and could see that some of the present mechanisms could be changed and employed very effect ively to accomplish what seems to be needed . Now as I mention ed , the Department of Finance is in the process of establishing a management information system , an accountability system.

They 'v e analyzed the problems , I'v e taken a look at their analysi s, I think that they 'r e right on. We will be observing as to how the detail evolves to bring this about to obtain this - 43 -

Tuesday , 8 April , 1 980 cycle of account ability whereby you have your esti mates and then you come at the conclusion with the actual expend itures that will be compared with the esti mates and the variances explained as to why they occurred and the reasons behind them . MR . MILL ER : All right then, I'd ask Mr .

Curtis if he is in a position to respond whether the Department of Finance is working with other departments, be­ cause it 's really the annual reports of the other departments that are important , whether they are working with the other departments to alter their formats, alter their content, alter the PR aspect of the annual report so that it becomes a docu­ ment which can be used both in the est imates procedure and in the Public Accounts itself, in examining the previous year 's operation of the departm ent . MR . CURTIS : Mr.

Chairman, we haven 't as yet been working with the depart­ ments with their own repor ts . We 'r e working more with departments in establishing internal management financial sy ste ms, the first part of this review being the obje ct ives review which was carried out the first time this past year . We 'r e working towards inter nal syste ms which will pinpoint variances over those obje ct­ ives. I think it would probably be one of the latter steps to request or work with departments for changes in their own reporting system , their own external report s. MR . MILLER : The external reports. MR . CURTIS : Ye s.

MR . CHAIRMAN: Mr. Parasiuk. MR . WIL SON PARASIUK (T ranscon a) : Thank you . I'm sorry the Minister of Finance is n't here now, and I know that Mr. Anderson was the controller and I know he was very interested in establ ish ing the financial information systems and frankly , I was surprised that he left . I wonder if thesre is a new controller and who that person is. Is anyone in a posit ion to answer that questi on? MR . CHAIRMAN : Mr. Curtis. MR . CURTIS : Mr. Chairman, there has been no repla cement for Mr . Anders on. We anticipate in time that we will fill the position . The functions that Mr.

Anderson did carry on for the department have been di stributed within the depart­ ment and I think working reasonably well . It 's not an easy task to find someone with the background that Mr. Anderson had developed over the years with the province. MR . CHAIRMAN: Mr. Parasiuk. MR .

PARAS IUK : Wel l, my comment is that his leaving did seem somewhat precipitous then, and since we haven 't yet bulletined, as far as I can tell, for a new contro ller, it would strike me that there is a vacuum that exists within the government in this respect and I guess that 's something we will have to take up when we get to the Finance Minister 's est imates .

I do think it 's something that I don 't want to get involved in debating with the sta ff, but I do comment that I think there is some vacuum there and all doesn 't appear to be as rosy as in fact is being presented to us right now with respect to the systems . I think there are some very large di fficulties in place and that perhaps explains why Mr. Anderson left and why indeed that position hasn 't been filled yet . I would like to comment on Page 24, The Aud itor says that the Legislative esti­ mates are now sati sfac tory . Was there a time when they weren 1 t sati sfactory in your esti mation?

I have n' t been involved in these particular reviews that long . No . 2 on Page 24 . MR . CHAIRMAN: Mr. Zi prick. MR . ZIP RIC K : Yes, now, and as far as I am concerned, has continued to be sati sfac tory . Changes were made on a sample basis in two or three instanc es and - 44 -

Tuesday , 8 April , 1980 probably one of the reasons why the changes were found not to be too sa tisf actory is because they were maybe overloaded with deta il, without having the

summary . So that it 's always been in a

summary form for qui te a number of years . Now going back to , I don 't know , I' d have to go back to some period of time when there was just really one-lin ers , and there was not even any indication of the program, and as a result it was very condensed , I would say that that 's too condensed even in a

summary document . But I'm not sure how far it goes back and when that change was made. MR . PARASI UK: Okay . You see , I'd come across stat ements in the Auditor 's Report which are value judgemen ts , and that 's fair enough , I would expect the Aud itor to in fact give us his judgements on this. But I find the est imates unsati sfactor y even as a

summary and there are so me contradictions with the esti­ mates

summary that we receive right now . You will have a department which pos­ sibly has an expenditure of $1 .3 milli on, taking up the pages in the est imates

summary . And if you look at the Department of Health, for exam ple , spec ificall y - and I don 't have the est imates book in front of me but I' m just commenting from memory - I think somethin g like 30 to 34 mi llion dolla rs , health-oriented expenditures is summarized in two and a half pages and over $500 million of health expenditures is summarized in five lines.

And you have a situation where the Minister of Health will say , "W ell, we may be foldin g the Health Services Commission into the Depart­ ment of Health because after all the Executive Director of the Health Services Commission really is acting as Deputy Minister ," and you '1 1 find that if you look at the esti mates book , it wouldn 't reflect that at all. And there is that type of confusion that exis ts. There are certain large expenditures that are reall y not even broken down , and it might have happened bef ore , I do n't really care . I'm just saying that there are those contradictions in the esti mates

summary at present . MHRC is another example . I think those create some problems right now and I 'm wondering if the Auditor would just comment on the observations I have raised in this connec tion. MR . ZI PR ICK : Mr . Chairman, I appreciate what Mr . Parasiuk is saying , there are summa ries and I think what I am indicatin g is that it 's desirable that the�e continue to be summaries.

Now it 's the departmental backup that really wouitl explain what you are really looking for and what I 'm really looking for and I continue to make the observation that within the present context of the summarized est imates as they are and that particular public document , it 's very dif ficult to deter mine as to whether the money was actually spent for what the Legislature had voted for , because the

summary is quite general and of necessity it has to be· general unless you really get involved in a lot of detai l, but I appreciate that this backup would not necessarily constitute law but would certainly be a usefu� document to indicate what was intended to be accomplished with the money voted . Now I don 't know to what extent you 'd have to enlarge the summaries to display the kind of information that I have in mind and I'v e seen attempted at other places .

I'v e seen an est imate from across the line from one of the sta tes , that the detail backup can be quite effectively put together and can be very very use­ ful and displays very effectively what 1 s transpiring , what changes are taking place in the program and what direction the whole department is moving. MR. PARASIUK: Has the government given you any reason why they haven 't been able to provide these more detailed backups which conceivably could come out in the form of appendices? You know you can have a

summary document and you can have your appendices . Presum ably , one has to provide a fair amount of information through the decisi on-making process in order to arrive at the

summary in the over­ all governmental est imates process , which usually takes place towards the end of the calendar year . So that this information does exist . It just hasn 't been deemed advisable yet to put it forward in appendice form. Has the government , in fact, ever given you any explanation as to why they haven 't put it forward? MR. ZI PRICK : Mr. Chairman , no , I'v e had no specific explanation although I know , not just in this jurisdic tion , but in other jurisdictio ns , that that 's an area that there 1 s some apprehension as to what may happen when you disp lay so - 45 -

Tuesday , 8 April , 1980 fully and so openly all the information. I can appreciate the apprehension. My own feelin g is that that apprehe nsion , to the extent that it may exist , is not founded and will prove to be of no validit y .

I can understand that it 's a process that may take some time evolving , but I think it must evolve if there is to be the kind of evaluation and decisio n review at the legislative level that would normal­ ly be expected and as I indicat e, what should normally be expected of the Auditor to carry out to determine that the money was actually spent for the purposes they were voted by the Legislat ure . MR . PARASI UK: Yes , I can sympathize with what the Auditor is saying .

I think that politics ends up being a bit of a hide- and-seek game where the party in power in a sense tries to avoid the embarrassment of being held accountable for problems , and that 's part of the adversary system in the Legislature at the same time . We probably don't give sufficient kudos for governments actu ally achieving some of their objectives if they in fact state them. I think it 's possib le right now , and I think that information in fact exists and it exists virtually in exac tl y the same form that you sugges t, Mr . Zi prick. -- (I nte rjection )-- That 's right .

And I' m asking you if you 'v e ever seen a Min­ ister 1 s esti mates book? Each Ministe r has provided to him by his department a very detailed des cript ion - if the de partment is any good - a very detailed des­ cription of everything that you 'r e askin g for , Mr . Zi prick. And what you have in the est imates process , be it in this committee room or in the Legislature , is a particular game where the Minister sits there with his est imates book and acts learned - because he 1 s got it all there for him - and the opposition asks sup­ posedly probing questio ns .

I jus t wanted to ask you if you 'v e ever seen this and why in fact you couldn 't rec ommend that the Minist er 's esti mates book be in fact tabled? In fact, maybe we should require some procedures in the Legislature . I think if one is reading from certain docu ments , that if one is reading from those documents that they be tabled . And if the Minister then starts reading from his Minister 's esti mates book, then perhaps that document should be tabled for the rest of the members of the Legislature .

Or conve rsely , if he won 't table it , then he shouldn 't be allow ed to read it in the Legislative Assembly , then that person would have some di fficul ty , I think , getting through his or her esti mates. MR . ZI PRICK: Mr. Chairman , yes , I am aware of those books . We get copies of them . We use them . That 1-s what makes it possible for us to carry out the audit into any depth .

Now I think that last year , if I remember correc tly , I did suggest just exactly what you are now suggesting , that a lit tle bit of dressing up of the Minister 's book by taking some of the abbreviations out here and there and dressing it up and making it into a form of docum ent , and that would be a very suitable backup to this. Now , admittedly , it may be not quite far enough in line with what we 'r e talking now and what the Department of Finance are looking at and that is , to have in there output indicators so that you could measure performance on the basis of outpu ts.

There is very limited quantified output indicators in there as yet . But for the most part , those books would go a long way towards • • • And my exper­ ience , as a matter of fact, I think two years ago , I made an attempt to study the Hansard in the esti mates review and by and large I could see a reproduc tion of the biggest part of the Minist er 's book exce pt , that it 's in a very disorganized man­ ner and there 's no way that we could follow it. So real ly , rather than working from Hansard , we are working from the actual books themselve s. MR. PARASIUK: This is a follow-up on that .

You see , whenever a party is in governme nt , they usually complain that the esti mates process is taking too long . I can recall sessio ns that we 'v e had here or sessio ns in the Assembly where the government members of the committ ee have really become somewhat dis gruntled with the oppositio n, saying , "You 1 re taking too long , you 1 re dragging it out too long. " They in fact act as if it 1 s the opposition that in fact is causing the est imates process to take some time .

If in fact this is some type of elaborate stage show where one in fact goes through the process of trying to find out what exists already , is only known by one side or one-half of the actors in this whole stage , then don 't you think the est imates process could be speeded up and be made much more efficient if the material that the Minister has is presented to all - 46 -

Tuesday , 8 April, 1980 members of the Legislature? And don't you think then that we could have a much speeded up esti mates process and possibly a bette r discussion of the actual pro­ grams , rather than in a sense always fishing and being deflected and fishing again and then being deflec ted? MR . ZI PRICK: Well , Mr. Chairman , I think I state that in the last para­ graph in that

section , and it is where I point out , "As stated in my previous report , appropriate information syste ms would facilit ate the review of the esti ­ mates by eliminating the need for recording many of the particulars in Hansard . They would als o provide ef fec tive accountab ility to the Legislature and the government , res ultin g in improved efficiency and economy and effectiveness in government operation and enhanced public confidence ." MR . PARASIUK : Okay .

I' m wondering if the Auditor , since he does have some Minister 's est imates books from previous years , if in the future to in fact justi ­ fy these types of statement s, that it is possible - and it really only requires will, because I think of ten people come back with the argument that this might be too expensi ve , it 's too time-consum ing , etc. , etc . -i f the Auditor would be pre­ pared to , next year , or even this year , table some of the past Minister 's esti­ mates books so that we could in fact see whether what the Auditor is telling us is in fact true? MR . ZI PRICK : Mr .

Chairman , no , I would not be prepared to do this. I think that I point this out to the committee of a Legisla ture , and if the system is to be along the lines where the Minist er 's books will be made availab le , that should be decided by the Legislature and be part of the system . I don 't feel that I want to impose any kind of a system and it 's not my duty to impose any kind of a sy stem . Beside s, it would probably be not accepted because I don't feel that I should be imposing systems on the Legislature .

I' m recommend ing, and if the Legislature in its wisdom wants to accept them and carry it out , fine . If not , I'l l ju st cont inue to keep point ing out the problems . MR .

PARASIUK: We ll, in view of the fact that the Auditor indicated that he has access to Minister 's esti mates books , which he finds very useful , which pro­ vide information that he is recommending that we all have as members of the Legis­ lature in order to facilitate the est imates process , we do see the amount of time it takes and provide for a better informed discussion on the est imates , is the Minister of Finance prepared to table the past est imates book of the Ministe r , and if he 's prepared to facilitate what remains of the esti mates process at present in this current Sessi on, by tablin g , for example , the Minist er 's esti mates book for the Department of Educati on?

We 'r e just coming into the Department of Education . It obviously is a large and complex department and probably the est imates process would be greatly facilitate d if the Minister of Education tabled the Minister 's esti mates book . Is the Minister of Finance prepared to undertake to do that? MR . CHAIRMAN: Mr. Craik? MR . CRAIK: We ll , Mr. Chai rman, I think that would be ministerial dis­ cretion as to what information the est imates book , or otherwise they may wish to table . It would be an individual choice.

The members will probably recognize and , perhaps we should recall though that the est imates process does get into a lot of detail in the examination in the House . I rather like that second sugges­ tion that the Member for Transcona had , of the Minister not bringing in an esti­ mates book. I'd be prepared to att empt that one . MR .

PARASIUK: Ye s, I'l l ju st ask individual Ministers then, if it would be their intention - I'd just like to ask the Minister of Finance , if he 's prepared to table his Minister 's estimates book , when we come to the Department of Finance and when we come to the Department of Energy? MR . CRAIK: We ll, Mr. Chairman, with all the intricate notes , and sketch es , and dood les that I have in my esti mates book , it would take a translator to find - 47 -

Tuesday , 8 April , 1980 out what 's in there . So I don 't think it would be very helpful to the member for me to make that kind of undertaking. MR .

PARAS IUK: I' d be interested in the doodles , but I could appreciate the Minis te r's comments and then I'l l ask him if he would undertake to table the Deputy Minister 's est imates book \ which is really the carbon copy of the Min­ ister 's estimates book , and I know that the Deputy Mi nister doesn 't doodle ; he has to be a serious civil servant , he can't undertake frivolous activities like dood­ ling and I' m wondering if the Minister would undertake to table his - I guess he wouldn 't. MR . CRAIK: I think fundamen tally , Mr.

Chairm an , on that quest ion , there 's maybe a dis tinct ion that has to be drawn between the sort of executive role of government and the legislati ve role .

A lot of the information that may be con­ tained in a Minis te r's book , perhaps more so in some departm ents than othe rs, perhaps more so , in the case of Finance than in most de partment s, the fulfillin g of the executive respon sibilit y in government would be opened to serious challenge if that kind of information was simply all tabled , because it often contains information regarding thin gs that are being carried on , on a day-to- day basis, that are administrative that would be of no assi stance in eith er the short or long term , in the publi c inter est .

Because you 'r e often carrying on , say , negotiations and you have available inter nal information on negotiations you 'r e carrying on with other ju risdic tions , there 's all sorts of things that are contained and su ch. Really, you would have to classif y it as being executi ve-type informat ion, rather than targets-and- goals-type of informatio n which is what the Legislature , I think , preoccupies it self with. MR .

PARASI UK: Well , I would respectfully di ffer with the Minister of Fi­ nance with respect to his last answ er , in that I'v e seen the Minister 's books and they ce rtainly don't contain that type of daily ongoing material that might come through in the form of a few extra she ets that are handed to the Minister .

Secondly , because often the est imates books are prepared for the Minister in advance of the actual date of the esti mates being considered in the Legislature ; and I would agree with the posit ion taken by the Aud itor , in this respe ct, that the Minister 's esti mates books would provide a good start in meeting some of the sugge stions put forward by the Auditor in his report on Pages 24 and 25 .

I do think that there is a certain - I wouldn 't call it naivety - possibly false ex­ pectations - that I think should be cl arified with respect to the extent to which you can get very very cl ear outputs for governme nt activity , especially in a num­ ber of areas . Where it 's possible , I think it is important to establish outp uts ; but at the same time I think we should recognize th at there are certain areas of a government activity where it is n't that easy to establish output s, and that doesn 't make that category of activity then , sort of a secondary or second class cat egory of activi ty .

I think sometimes when you get caught up with the whole question of accountab ility, you get carried away with, you know, in a sense , hard programs or hardware programs. You say , yes , you know , here we are but we can - highway s, bridge constru ction, that type of thin g is good , clear , hard-type of programming in terms of output s; and then you have your social service-type of programming , which often doesn 't give you that type of cl ear definition of outputs.

There 's a tenden cy , even in the polit ical process , because the politici an thinks that the public is more aware of those hard programs , to accentuate the hard programs and de-accentuate the soft programs . I caution the Auditor in terms of not making that distin ction, of not indicating that often very valuable pro­ grams , that society thinks are valuable because of their value systems , are di ffi­ cult to quantify and yet indeed are very important for society . Often it 's dif fi­ cult as we ll to create outputs of one program against those of another type of program.

You know , we had a debate in the Legislature just a day ago or two days ago about the relative me rits of the so-called outputs of a $5 million flood protec­ tion system for Carman versus the merits of the outputs of padding the gynmasiums where we just had a death . How do you make those types of measureme nts? I think we do run into som e di fficulty there . - 48 -

Tuesday , 8 April , 1980 MR . ZI PRICK: Mr. Chairman , I appreciate what Mr . Parasiuk is saying and whatever is said here is said in the context fully appreciat ing that this kind of situation exis ts, and you put in quantified outputs where they 'r e reasonably usef ul . Other places , you don 1 t look for something that 1 s not useful and would just clutter up and create misi nformat ion.

But ju st the idea of stating that this is a program that is operated on this- and-this basis and the whole motivation of it is this way , without having any quantified relatio nshi p, in itself cl early demonstr ates just what the obje ct ives of the programs are . I think that the whole thing is put in this light because I fully realize that you cannot over-simpl ify all these operations and make them into mathem atical equations that will facili ­ tate accountin g .

That 's not the idea , the accountability is not accounting ; it 's a matter of indicating what 's expe cte d , what you anticipate in the best possible way , then carry on and see how it 's working , and how it 's been accomplished . MR . CHAIRM AN: Mr. Filmon. MR . GARY FILMON (R iver Heights) : Yes , Mr . Chairman . I have a number of comments to make on remarks by the Auditor and comments made in this Committee .

Spec ifically , on the matter of the annual report s, I can re�ognize the concerns of the Aud itor and also the Member for Seven Oaks , when he indicates that the reports might be a little more factual , and , not to say they 'r e not factual , but that they don 't always show all the informat ion and they tend , perhaps , to ignore some of the warts and the problems that departments have . I think there 's a dual role there and I'm a little troubled as to which way it should go.

But it seems to me that there 's a need for an annual report that it totally posit ive , upbe at , almost promotional , you might say , because you have to recognize that the dis tri­ bution is to other governme nts, to potential investors , to people interested in the province for very posit ive reaso ns . I think that there 's a need for that , and a report of that nature should still probably be produced by the departm ents.

But if the concern is that we 'r e not giving the Legislature an opportunity to assess the accountabi lity , the financial accountability of the dep artment , then that has to be addressed , I think in some way , by a revision to the esti mates process. That tie s in with the second comment that has been dis cussed here and that is , whether or not the informatio n that 's currently being provided through the esti­ mates process gives an opportunity for each member of the Legislature to assess how we 'r e doing .

It seems to me , that in business , what is done is that you look at this year 's budget versus last year 's figures and last year 's budget , and then you know whether or not you budgeted properly last year and whether or not you met your objectives financially . By looking at last year 's budget and last year 's actual figures - mind you , we do have a problem , don 't we , we don't have last year 's figures by the time we 'r e looking at this year 's esti mate s. So there has to be some reconciliation to that , but those are the kinds of things that you want to look at .

I' m amused by the reference to the game-playing in the esti mates process , and I think that taking away the Minist er 's est imates book would be another game that we 'd play and wouldn 't solve the problem. If the obj ect ive is to make the best decision possible through the esti mates process, then I think you have to give the people who are making that decision the most information you possibly can , the most useful information you pos sibly can . I can recognize the Minist er 's concern in getting into the executive responsibility and role in providing his whole book .

But we went through a somewhat similar situation on city council , where the chairman of the committee had a 600-page book and , particularly in Works and Operations where you 'r e dealing with two-thirds of the manpower of the city and 60 percent of its budget ever y year . You get into all the details of the man hours , the staff man hours of involvem ent , the materials component , the equipment ren­ tals, the over head factors and all those things that you had that weren 't in the esti mates , and there was a great urging for that .

Quite frankly , I was only too happy to try and comply , and over a period of a couple of yea rs , we did bring that in . Now , we did n't have all of the so-called executive information which may be slightly philo sophical and more set out into statements of objecti ves and what the intentions of the programs were , but we could get down to the staff man years and the components that went into all those . - 49 -

Tuesday , 8 April , 1980 It 's interest ing though, that it did n't necessarily result , in my view , in better de cis ion-making , because then what tended to happen was that people got mired into the details of arguing whether or not you needed 10 new shovels this year or whether you 'd make do with 5; or whether or not you could get an extra out of that IBM Selectric typewriter in that dep artment or whether you had to renew it.

It seems that the more details you give , the more some people are wanting to zero in on detai ls and argue those kinds of small policies and ignore the overall policy de cision , such as whether you went into a maintenance management program that capitaliz ed the value of maintenance expenditures on roadways versus going into renewal s, reconstru ctio ns, or those kinds of things ; or whether you got into evaluation costs and benefits of your snow removal programs , and all those things. You ignored them and you zeroed in on the detai ls .

I am suggesting that it 's not exactly going to solve all of the problems of the est imates ' process in the Legislature to go into more deta ils, but I, for one , can see that in working togeth er, perhaps the Deputy Minister in the department , the Ministe r , and the Auditor can bring you more of the detail out of the Ministe r's est imates that may help you to avoid having to grope for questi ons , but be able to zero in dire ctly on your questio ns , but I can assure you it won 't shorten the process. You 'r e not going to get the est imates through in a lesser period of time.

You ' re going to find that you spend so much time on the details to get through the est imates that you tend to lump everything together into one decis ion and "bang" , you spend 90 percent of the time on mean ingless detail and 10 percent on the really important policy decisi ons and you whip those through without even giving them their due considerations.

There are problems , but I can certainly suggest to you that the way to solve the problem is to make the information available and whether or not the membe rs of the Legislature make use of that information in consid ering the esti mates is certainly up to them. MR. CHAIRM AN: Mr. Hanuschak. MR. HANUSCHAK : Mr.

Chairman , I'm wonderin g whether the Aud itor has any comment to express on the me rits or the advisa bility of having a common fiscal year end for all departments and agencies of government , which by statute must file a report , because I am sure that the Aud itor is aware of the fact that the fiscal year periods vary from agency to agency. I would suspect that the majority do end their fiscal year on March 31 , but there are a number of exceptions to that. There are some that operate on a calen dar-year basis.

The Department of Educat ion, for example , and I am well aware of the rationale for that , I am sure there is some ju stif ication for it , it tables its report on the year ending June 30 , I believe. In a case such as that , I feel it does create a bit of a problem because even though it does report the activities of that particular agency or branch or department for a 12- month period , but there 's an overlap of whatever funds may have been appropriated to that particular branch.

What I mean by that , if I may use the Department of Education as an example, I would suspect that the next Department of Education report that we receive , which I don 't think has been tabled yet in the House , but it will be the one for the year endin g June 30 , 1979. Now that will cover a portion , nine months of that year will be out of the appropriation which has been audited and which is referred to in the Aud itor 's Report and Public Accounts presently before us , but it will als o include a 3-month period which has not yet been aud ited , because there 's no way - the fiscal year just ended a week ago.

So my quest ion to the Aud itor is , would there be any merit in standard izing the fiscal year for all departmen ts and agenc ies of government that the Legislature must review in order to get a handle on government 's expenditures? MR. ZI PRI CK: Mr. Chai rman , all the departments are now financially on fiscal year March 31. All the large Crown agenc ies are on the fiscal year-end March 31. The December year-end is used municipally and the school divis ions end the fiscal year , that 's why the public school finance board has it 's fiscal year end in December. - 50 -

Tuesday , 8 April , 198 0 Now I am not in a po si tion to comment as to whether it would be desirable to have municipalities and school divisions change their fiscal years , but as far as government agenc ies , where the impact on the government in any consequen ce , all their fiscal year-ends are March . Now for example , the Manitoba Forestry Re­ sources fiscal year-en d is the end of Septe mber .

Now it's a corporation that 's in the business of pulp and paper and its fiscal year in March makes it very diffi­ cult to check inventories that are out , and so the more desirable period is Sep­ tember in the fall when it is possi ble to do a good cut-off , but essentially it 's operating outside the government and the only thing that it does receive is an advance which can be read ily accountable to the government within the government 's fiscal ye ar. So as far as I am co ncerned , basically all the various larger agencies are now with fiscal year March 31 .

The only other things , there are the pension funds, and the pension funds are December because they 'r e tie d up with the salary report­ ing systems to the federal government and the earnings , and that facilitates the overall provincial-federal reporting of pensions . If they were March 31 , and I think at one time the Civil Service Superannuation Fund was March 31 , but it shifted from March 31 to December just to fac ilitate this other requirement . MR . CHAIRMAN: Mr . Blake . MR. DAVID BLAKE (Minnedosa ): Mr.

Chairman , I just want to make one or two comme nts in relation to the Member for Transcona 's remarks on the esti mate book . I think that the Member for River Heights kind of probably hit on the solution to speeding up the esti mates when he mentioned cutt ing down the number of shov el s, I think that would probably speed it up more than anything. But I think the more de tail you provide, the more opportunity for maybe nitp icking and smaller argu­ ments that you get into .

I think there was an example when the government changed , that in the first year of est imates , the opposition were armed with all the previous esti mate books and the previous program books , which provided them with a great deal more detail than they might have now , and I don 't think it really added that much to the dis cussion and the esti mate process in that particu­ lar ye ar. While it may be beneficial to get a little more detai led information , I do n't really think it would speed up the process of the esti mates that much. MR . CHAIRMAN: Mr. Miller. MR . MILLER : Mr.

Chairman , you know we have to separate the annual report from the kind of information that I think Mr. Zi prick is talking about . The an­ nual re port and I agree with Mr. Filmon, who agreed with me , that it is an upbeat document and it 's a PR document sent not only to the members of the Legislature but to the public general ly , and I wouldn 't want to deprive them of that particu­ lar instru ment . But I think that the point Mr.

Zi prick makes is with regard to having information available to members of the Legislature when they are reviewin g the estim ates, because what we are basically dealing with are a few short word s, particularly in Health for example , see four lines cover $5 or $6 million , not as a lump sum payment but made up in bits and pieces totalling $5 or $6 milli on. Mr. Blake says it did n't speed up the est imates in 1978 , because we had our House books from the previous year . I say to Mr.

Blake that if in fact the infor­ mation was available to the House it would have shortened the esti mates , because what was happening was that former ministers with House books were going back to the ir old House books and trying to get answers from the Minister , which would compare to their old House book , and since that wasn 't available in the printed estim ates , an atte mpt was made to check off almost line by line , but doing it th e hard way - How much is the Minister going to give to this organization? How much is the Minister going to give to that organizat ion? What about the other organi­ zations?

Why is there a drop here? - after the information comes out and it was a long arduous nitp�ck ing process , I agree with him . But if on the other hand , we had the information year over year , if this year it had been introduced then we wouldn 't have it this year yet , but for next year we could look back on the old one and see that there has been a change in the programs, there has been a change in emphasis of programs , there has been a change in the flow of grants, either they have been frozen or reduced or eliminated or increased , we 'd have that . - 51 -

Tuesday , 8 April , 198 0 Right now we have to stumble on it. We have to ask the right quest ion. It 's not - and I can't fault the Minister - nobody asks him, he doesn 't say it . You know , you did n't ask me , I didn 't tell you . I think what Mr. Zi prick is sugge stin g is that kind of information should be available in the House as an appendix to the printed esti mates themselves. He 's not suggest ing an est imate book of this size or legislative est imates of this si ze. I think it woul d facilit ate the work of the Legislatu re , I think it would speed it up . The point Mr.

Filmon makes on the number of sho vels, there is a danger of that and you can go too far on this sort of thing and I suppose there are some peop le, I don't care how many sho vels , frankly , they ever used and I am not the kind to ask that kind of questi on, but there are people who maybe would like to know this kind of informati on . I am sugge sti ng they ask it now anyways. Only now they are dragging it out bit by bit , and that is what takes time . You get a member who has a particular penchant for detail , that kind of gory detail that I am talking about , he 's going to ask it anyway.

The only think is that it 's going to take time , it slows down the ent ire mechani sm , it turns a lot of people off, I think it turns the Minister of f too , it turns the questioner off, it doesn 't make for an easy flow within the est imates procedure its elf .

So I would urge the Minister and the government to consider serio usl y , not necessarily tabli ng the House book that the Minister uses , but the kind of infor­ mation whereby by looking here at this new book and last year 's book , a member can say there is a change , there 's a change in emphas is, inst ead of either stumbling on it through esti mates or asking enough ques tions so eventually that information comes through. Mr.

Zi prick indicated that he read through Hansard a couple of years ago and lo and behold it was pretty well all there , and that is the year you were talking about , but it came out in bits and pieces and it came over days and weeks . Mr. Filmon wasn 't here , but you we re, Dave . So it was all there and I sugge sted if we had this information it would move a lot faster, in a much more constructive way and there would be far greater accountability to the publi c and to the Legislature generally , as to the actual direc tion the government is taking.

It is n't just dollar accountab ility , you vote two million, did they spend two million and one, or did they spend $1 .0 0 less than two million? It is n't just that sort of dollar accounta bility , which is an accounting accountabilit y . No one ever sugge sted that there is any misapp ropriation of funds or anything of that nature , I am not con­ cerned about that. It is the accountab ility of the program itse lf.

I recall in the last year and the year bef ore , to my surpr ise , comparing the right-hand co lumn was less than the left- hand colu mn , and after considerable discussion back and forth , back and forth, with my levell ing charges , the Minister responding , it turned out that the previous year had been underspent by a consi­ derable amount , which accounted for why there has been no increase this ye ar. Now , if I had known that I could have saved on hour of my time and one hour of the Minist er 's time and zeroed in on how come there was an over-expenditure , and that is the end of the dis cussion.

But that is n't available to us , so we have to sort of hunt , fish , prod , hope , and I guess , you know, bein g human the Minister 's back gets up , and he says it is enough already , and recovers a littl e as the hour gets later , 11 :00 o'cl ock, 11 :3 0, everybody gets a little cantanker ous, and the information just is n't avail­ able , which makes both sides of the House dig their fe et in. MR . CHAIRMAN : Mr. Blake on a point of order . MR. BLAKE : if this information were availab le , would you then be prepared to go back to the limitation of hours of debate on the esti mate s.

Is this what you are thin king , if that information were available to cut down the time then you would MR. MILLER : Mr. Chairman, in response to that , I can speak only for my­ self. I would be wil ling to entertain it , yes . I would be willing to entertain it, if in fact we had this ye ar, next ye ar, we had a couple of years , at that point in time I suspe ct , my own guess would be it would move faster . We would deal with policies rather that with numbers as we are now , half a staff man year , - 52 -

Tuesday , 8 April , 198 0 quarter of a staff man year, I mean it is nonsen se . We deal more with programs and policies and accountabil ity in that respe ct , and at that point I persona lly, myself , would seriously consider saying , okay , there are so many hours , that is what we deal with , but the information is here , you do n't have to spend three days just gett ing the infor mation from which you then launch your critic ism or whatever it is. So I would urge the government to seriously consider looking at this, it is a little late for this Session perhaps , alt hough not entire ly .

I think maybe some of the departments that we haven 't dealt with, that information might be compiled and given to the opposition , and we can see how it works . But certainly for next year that could be introduced as a matter of policy and I tell you I think the government would look good if it did that . I have to be very honest and tell you that , I think it would improve the Legislative proceed ings , I think therefore it would look better to the public and we have to be concerned how the public views the operations of the Legislatu re . MR . CHAIRMAN : Any further questions on Page 24?

Page 24-- pas s; Page 25. MR . MILLER : We just talked about that . MR . CHAIRMAN: Page 25- -pass ; Page 26 - Mr. Miller . MR. MILLER : Mr . Chairman , the very last line , "It should be in place by March 31st , 1980 , is it in fact in place? MR. CHAIRMAN: Mr . Zi prick. MR . ZI PRICK : Which page? MR . MILL ER: Page 26 , the very last line . I don't want to read the ••• it should be in place by March 31st , 19 80. MR . ZI PRICK: Mr. Chairman , yes obser vations are being methodically moni­ tored and followed up . MR . CHAIRMAN: Any further questions on page 26? Page 26--pas s. Page 27 . Mr. Miller . MR.

MILLER : On page 27 , the comput erization of the general ledger and the revenue , is that on track? MR . ZI PRICK : Mr. Chai rman , I referred to that previously and that 's one of the items that 's gone into effect commenc ing with April 1st , 1980 . MR . MILLER : So it has met the April 1st target? Fine . MR. CHAIRMA N: Any further questions on page 27? Page 27--pass ; Page 28--pass ; Page 29--p ass ; Page 30- -pass ; Page 31 . Mr . Parasiuk. MR.

PARASIUK : At the bottom of the page and over on to page 32 , we have the Manitoba Deve lopment Corporation , we have Fly er Industr ies , we have the -- ( Interjecti on )-- Let me de al with this one first because at this particular stage we 'v e ju st lost the senior management of Flyer Industr ies. We have a very severe statement here by the Aud itor .

You are saying that the financial manage­ ment of the Corporation is now substantially out of control when this is taking place, when we have a situ ation whereby Flyer Indus tries really should be doing very well because of the decreased value of the Canadian doll ar and the fact that the bus orders are very high . In this situation , I' m wondering if the Auditor has kep t up with what 's happened there and whether in fact he feels that the removal or the termination of the contract of the senior executive officer of Flyer Indus­ tries will in fact correct this matt er . - 53 -

Tuesday , 8 April , 1980 MR . ZI PRICK : Mr . Chairman , at the time we reviewed the situat ion , the difficulty with regard to the management information system was in a very bad sta te. We had found it very uns atisf actory the year before and it was in the same condition , if not worse , and because of it, there was no way that we could deter­ mine just what the financial si tuation was with regard to • • • they had large numbers of order s, but not having a costin g syst em, not knowing what the costs would be , there was no way that we could det ermine what the posit ion would be .

The reporting to the board that we found was very superficial and in the first instance the budget that the board approved was to be a profit in excess of $2 million, we ll then it was scaled down to half-a-mi ll ion-dollar loss , and then there was concern that it would be much more , so we were not in a posit ion to assess the situat ion at all . We brought all this information to the at tent ion of the government and the government had undertaken to • the Department of Finance put their senior people in and there were other senior people involved to evaluate the whole pro­ cess and correc t it .

We have been advised that there has been quite a few changes but as a matter of policy , we do n't want to work so cl ose that we 'r e working over peopl es ' shou lde rs. The government has undertaken to correct it, there is pro­ gress being made, the financial statements will be finalized in due course and what the result will be, we ll , I'm not quite sure at this point . We 'l l then re­ assess the whole posi tion again to see what acti on was taken and what this parti­ cular deficiency had created . MR .

PARAS IUK: Ye s, so what you are saying is that despite the fact that the market situat ion for Flyer buses improved tremendou sly , despite the fact that we were in a position to reall y have a profitable undertaking in the sense that the drawback with Flyer was sale s, that the management of Flyer did not really know what the marginal cost of an addit ional bus was and what the marginal return of an additional bus would be .

If they had such a poor accounting system, how were they making their bids and were there bids bein g made on the basis of some system which wou ld project a profit or were they just in a sense bidding without having any base to fall back on when they made their bids? MR. ZI PRICK : Mr . Chairman , that was one of the main diff icult ies .

As far as we are concern ed , they were making bids on est imates of costs and from what we could determine these est imates were proving to be not too reliable and when you 'r e bidaing on that basis , sure , you may acquire quite a number of contrac ts, but it 's a que stio n of, will you make money? And I think that the result that was becoming apparent was just indicat ing that , so that there was two elemen ts.

One element was that there was not a realistic costin g system to deter mine just what it does cost per bus , and then bid accordingly , and the oth er, the operations in themselves we found didn 't seem to be organized in a way to produce an efficient result . Now there I don't want to get too involved because we are not experts at that and our observation was just from the point of view that an accountant has expertise and that is the organization of inventory supplies and that sort of thing . MR .

PARAS IUK: We ll , you know , just to pursue the whole question of ac­ counta bility here , the way in which this type of corporation operates , is that you do have a board of directors of Flyer , conceivably the staff who are the technical people provide est imates to the board .

The board , I thought , had a cross-section of business people on it who understood the type of system that the Member for River Heights was talkin g about just a few minut es ago , that I think is somewhat understood in the system of both business and public administr ation , and I would have thought that this board of qualified people would be in a position then to determine whether in fact they were gett ing good technical material from the tech­ nical staff or not. Did you take these matters up with the board?

If I can recall the way you operate , you do take up your problems , or the prob­ lems that you rais ed , with the board , usually with the board chairman ; they are seriously dis cussed and people make adjustments accord ingly . The board is ap­ prised of what is going on and should conduct the investig ation . The Minister responsible also receives a letter , a copy of the letter that you send to the board . So it 's not as if this is happening just within a vacuum then. You have - 54 -

Tuesday , 8 April, 1980 the Minister res ponsible who is involved in this and you have the board , appointed by the Minister , that are responsible and that is who ultimately is accounta ble , because the staff are in a sense reporting to their board ; the board is reportin g through the Minist er here . Did you have meetings with the board? Did you have meetin gs with the Minister? Have you had meetings over the course of the year?

Because it strikes me that again the action on the part of the present senior executive officer of Flyer is again somewhat precipitous and we 'r e left now with a situation where it would appear that there doesn 't seem to be an ongoing manage­ ment structure for Flyer Industries , yet we do have Flyer with tremendous poten­ tial , given the American market, we have it providing potential in terms of jobs , we have it providing potential in te rms of employment , in terms of technological developm ents, and I' m wondering what role the board and the Minister played in this process of accounta bil ity . MR.

ZI PRICK : Mr . Chairman , the first time we got involved with Flyer Industries was I think about three years ago when there seemed to be some serious difficulties develop ing. We had taken a look at the situation in the management information and the reportin g to the board and the whole management system was absolutely unsatisf act ory . That lead to substantial tenders or bids at that time that we fe lt that were not based on any kind of realisti c cost . The whole matter was reviewed at that particular time , the whole situation was to be corrected .

The process went into a cl ean-up situa tion, to cl ean up the contracts that were then in exist ence to avoid any penal ties being paid and there were adj ustments made , and the then president that was in char ge , and I understood that was the respon sibil ity that he undertook, was to cl ean up the situation , and the matter of the cl ean-up was brought we ll into contr ol . It was cle aned up on the basis of the then expectations , but of course substantial losses were incurred .

Wel l, then there was a new manager had taken over and a board , and the whole operation was revved up again and they went into a sales process. We did not get involved , as I say , looking over their shoulders to see jus t what the situation was. It was agreed , understood , that it was unsat isfact ory be fore . We were of the opinion that the operations would be carried on in a sat isf actory manner . The point , when we went to take a look at it , to monitor the situation, this is what we found .

We immed iately brought it to the attention of the Minister and the chairman of the board and we 'v e had dis cussions with the chairman of the board and he apprec iated by that time that the estimates that were coming in, a $2 million profit and that , were unrealisti c , but it was a little late I guess to do anything about it after you 'v e had the te nder.

So the government is involved now and is trying to , again it 's in the process of stabi lizi ng it, and then if the operation is to continue , it should be continued on a basis that these kinds of systems , just as you say , will be in place and the board will be carrying out its function in that way and there will be that kind of reporting , but there just was not at the point that we took a look.

But it should be understood that I do n't consider it my responsibility to be involved and committ ed to do the managing of the situation and the monitoring , our object ivity on a post-review might be lost to some degree , and so I consider it my responsi bilit y to monitor it in that manner. Now as to how the progress is going now - there will be financial statements and they will be appearing before a committe e of the Legislature and I think that that 's when the matter will have to be reviewed . MR . PARASIUK : Well, I don 't expect the Aud itor to be involved in the day­ -to-day management .

I do expect the board , however, to play a role with respect to the management . The .chairman of the board , who I gather has since resigned , was indeed a chartered accountant who supposedly had business expert ise . I assume that other members of the board were in fact members of the business community primarily who had business expertise .

I gather that the composition of the board has changed somewhat now, that now we are in fact getting more , in a sen se , civil servants on the board , because it would appear that the business people on the board possibly haven 't paid sufficient atten tion to their functions as board mem­ bers. In fact , they might have been treating these appointments as a type of honorarium , without undertaking the detailed job that a board has to undertake , to in fact ensure that the work being done by the staff, on a technical basis, is - 55 -

Tuesday , 8 April , 1980 correc t. There are ce rtain checks that you put in place to ensure that . You look for some consisten cy , on what are es timates based? Those are questions that board members have to ask .

And I' m wondering whether, in fact , our experience to date shouldn 't give us some pause for refle ction , in that I know the general theory is, that if you take people out of a business community who have had experience in these areas and you appoint them to boards, they will be able to provide that type of business expert ise "f rom the real world" which would allow these Crown corpora­ tions to operate effe ct ively . And that 's the th eory of it and I think the re 's probably some truth to it. That only happens , though , if the board members take their job s serio usly .

And I'm wondering whethe r, in fact, so-called busine ss appointments to either the MDC board or particular boards of the subsidiaries have taken their job s as seriously as they should have, when they were appointed to those positions? And I think that 's somethin g that you should look into in terms of what 1 s being done when people are appointed to the board . Is there any orientation session given them so that they know what their particular function is ? Or are they appointed to the board and just say , "Well , gee , I' m appointed to the board .

I' m going to go to the next meetin g and also to sit there quietl y and catch the drift of what 's hap­ pening." Wel l, if not much is happening, you catch on to a drift that not much is happening . I don 't think the MDC , or I don 't think that Hydro , for example , has an orien­ tation as to what the functions of the board members are . I don 't think govern­ ment sits down sufficiently with appointees to boards to explain to them what their functions are . They jus t get appointed , they go of f to the next board meet­ ing and then they sort of get caught with that dri ft .

I think this is a particu­ lar example where we di d have a number of people . I know every government makes these announcement s, "Yes , we are puttin g a We 'v e str engthened the board . 11 You know, I 1 ve heard that said so many times now. "T he board has been str engthened and we 'v e picked out these people , those people , those peopl e" , and yet from what you 'v e said , it 's coming back to the staff to undertake those parti­ cular functi ons. Now granted , the staff should be undertaking those day-to-day functions , but surely board members should be monitoring - not you - but board membe rs .

And again , it 's the Minister 's responsibility for appoint ing the board , so he should be doin g that type of monitoring . I find it rather interest ing that now we have the government , in a sense , taking on the task that the business expertise didn 't seem to provide when the y were board members , and you have particular members from the Minister 's staff , I think. You have people from departments who are going on the board to try and deal with this problem because they possibly have a better perception of what the functions of a board member might be .

I just raise this because I think it 's very important for government to clarify what it expe cts of board members when it appoints them to boards. MR. ZI PRICK : On this matter of boards and operations , I agree to the point of what you sa id . There seems to be a feeling that there 's comparability between a board that 's operating out of a private company and a board that 's appointed to operate a Crown agency .

Now as far as a private company , there is quite cl early spelled out obli gations of a Board of Directors and they are undertakin g a liabil­ ity - personal liabil ity - if they are not carrying it out ;

whereas appointments to carry out government operat ions is an appointment by the government , and there is no laid-d own criteria anywhere as to what the responsibilities of the board are . It 's not only in this province but as far as I know that 's pretty gener al.

So I think it 's a good point that there should be a criteria laid out , but on the other hand you als o have to remember that you appoint a board member , you pay him some amount - but it 's not very large - and if you 'r e going to put him into an obligation where he 's going to carry personal liabiliti es and be accountable in that kind of a way , then it 's going to be a diff erent kind of a ball game . And besi des , in a government operat ion, accountabilit y does rest with the government . The government appoints the board .

In our operations during the audit process we look at the board as really government people that advise government more and carry on day-to-day operatio ns, a form of a Deputy Minister operat ion. Because first of all , there 's no clearly - 56 -

Tuesday , 8 April, 1980 laid down respon sibilit ies, as you say ; and second ly , it 's a question of how much can one expect of individual board members in this kind of situation? MR . PARASI UK: Yes . I couldn 't help but smile to myself when you indicate d that from your perspec tive the chairman of a board , or board members or the chair­ man, I would thin k operates as a Deputy Minister. I gather that Tritschler has in fact been very critical of that particular positio n ; that he would expect the chairman of the board somehow to act as some type of independent force on his own .

I think that when you say that the government ult imately is responsible or accounta ble , I think that 's the way in fact Crown corporations operate , and that 's why it 's important for government to appoint people who will in fact be committed to the obje cti ves of the organization and commi tte d to making sure that it works we ll rather than just sort of being appointed to the board as a type of sinecure . I think that 's a problem with Crown corporations at the federal level . There 's a bit of confusion .

You know, they have about four or five categories of Crown corporation in terms of their relative cl osene ss to the government . Some are completely independent . You can 't tell them what to do . Like the CNR , you can't even get any information as to the ir costs , and they operate as one form of Crown corporation , and then there are other forms of Crown corporation that perhaps are a bit cl oser to the government and the government can provide some policy direc­ tion to them through thei r appointments. But ult imately the government has to be held accountab le .

And in this respe ct, I think that the government - and this present government - has a very confused attitude to Crown corporations . I think it doesn 't feel very clos e to them , it feels uncomfortable with them, and it hasn 't adequately or accurately defined the reltionship of itsel f to them. There are some that exist by statute , that maybe they feel that they should have some involvement with - and that 's Hydro or Telep hone System.

Then there are others that exist as Crown corpor ations , that one gets the impressi on that they really aren 't that interested in them and would rather ju st sell them all out and get out of them . That 's been Morden, and that 's been McKenzie and that 's been Flyer . And in a sense , it 's easier to sell them out and get rid of them if they don'L work that we ll. I think maybe this government is trying to use bad performance of Crown corpor­ ations as some type of just ification for getting out of them as a rationaliza­ tion.

But you see , they 'v e been in office now for two-and-three-quarter yea rs , or two-and-a- half yea rs, and it 's important for government then to be held account­ able for the way in which it 's managed that particular corporati on. I note that the chairman of the board has resi gned . I note that the chief executive offi cer , present , has res igned . And I think that when we get to the descussion of the Minister 's Estimat es in this resp ect , we will have to ask him his particular reac tion to all th is.

They , in a sense , have been used as the fall guys for this and the way the parliamentary sy stem operates , the person account­ able is the Minist er, and we 'l l be going after the Minister in this respe ct . I do think you di d a proper job of raising these point s to the board and the Minist er. It 's unfortunate that the board didn 't pay specific at tent ion and didn 't do a number of these tasks on its own and that they had a number of busi­ ness appointments to it , a number of C.A.s on the board who could have been provi­ ding this ongoing monitoring function . MR . CRAIK: We ll, Mr . Chairman, Mr.

Parasi uk 's made one point which I agree with that the place to examine this further on th is line of examination is more appropriately with the Minist er ; and when the Minister has his accounts bef ore the committee , then that will be the time to go at it in some depth . Mr . Banman is the Minister reporting for it .

Ot' course , when the Provincial Auditor raised the question of the financial problems that were before the Crown corporation , my automatic response as Minister of Finance was to ensure that we took immediate acti on and immediate act ion, I think , was taken, and appropriate action, and of course it has led to a number of further dec isions . But because some people have shifted and changed and been changed, we 'd be open to more critic ism by membe rs like Mr . Parasiuk if we hadn 't, of course , taken that action.

And that 's the posit ion that it is in now - which started some years ago as has been identified by the Auditor. But I think just in general terms , Mr. Parasiuk has made the strongest possible argument here for this - 57 -

Tuesday , 8 April , 1980 type of an industry being primarily in the private sector. The government has no dis agreement with Crown corporations if they ' re a Crown corporation that are providing a natural monopoly type of function . But I think that the arguments that have been presented here this morning, the logical conclusion you can gather from the total collecti on of the arguments is that the place for a manufacturing industry is in the private se ctor .

Of course it takes your hardest core , even your regular people who believe in the soc ialist philosop hy have serious doubts about seeing manufacturing indust­ ries , particularly those that lend themselves to proprietors hip , being in the public se ctor. It takes a pretty hard-core so cialist thinker to advocate a small manufacturing indust ry being elsewhere than in the private sector. I think that argument has been made perhaps not intention ally , but indirectly by some of the members here this morning . But what will happen in the long run, we 'l l see . Hopeful ly , it will straighten itself out .

The various actions have been taken that colle ctively the board felt had to be done . I think Mr. Zi prick has indicated co rrectly that it 's not really the Auditor 's role to go in and establish productivity yardsticks and so on ; but the basic problem , as has been stated by the Minister, is that alth ough the orders are there , the productivity is running at a fraction only , required to reach the break-even point . And that is the root of the problem and has been the root of the problem for some time , is getting the productivit y level up.

The statement keeps coming back from the corporation that they 'r e bidding competit ively , but it depends on what you compare it to . If you compare it to your competitor it may be competit ive , but it 's not competit ive with your cost of production when you run into a negative return . Then it 's a question of what definition you use for a competitive bid , the sa les price being lower than the cost of production . It could be competit ive if they can get their product ivity level up to the 300 range per year .

At the present time it 1 s running too far under that target for it to even break even , and that is the problem that the management is addressing itself to. I don't agree that it 's a board problem . It 's a restructuring problem and perhaps it runs a little deeper than that . It probab­ ly means a problem that can 't be easily resolved until somebody 's dollars are riding on the line on an undertaking of that size. MR . CHAIRMAN : Gentlemen, we are nearing the hour of adj ournment . I think we might cont inue the dis cussion at our next meeting . Before we adjourn , Mr. Blake . MR . BLAKE : Yes .

I just wonder ed , with the agreement of the committee , Mr. Chairman , if I might make a motion that there seemed to be consensus on before , that the level of salaries reported in sup plementary account be raised to $1 5, 000 .00. So I would move that the salary level used to report employe es ' salary and the supplement of the Public Accounts be raised to $15 ,000 .0 0. Mille r . MR . CHAIRM AN: It has been moved by Mr . Blake . Is there any discussion? Mr. MR. MILL ER : Mr. Chairman , I have no obje ction but I'd like clarificat ion .

We recommended that the salary level used to report employee s' salaries be raised to $15 ,000 .0 0. Now , are we talking about the salaries of permanent staff? Are we talking about salaries of people on contract or on term? I'd like that clarified because at the beginning , the very first line , it sa ys , "Prior to 1959-60 , the salaries of all permanent staff were published in Public Accounts ." It was very low at that time and so the figure of $5 ,000 in 1963 was fairly significant .

What I' d like to make sure is that what we are passing to the $15 ,000 at this new level is only the permanent staff, and not somebody who may come in for two or three months and then out again. MR. CRA IK: Maybe I can ask Mr . Curtis just to clarif y it. MR . CHAIRM AN: Mr . Curtis . - 58 -

Tuesday , 8 April , 1980 MR . CURT IS: The idea of the book is to include the salaries of permanent staff. If it 's on a contract basis or on a consult ing bas is , then it would be in other parts of the book. MR . MILLER : I see , okay . All right. Then that 's understood , that we 'r e dealing only with the permanent Civil Service sta ff. A MEMBER: And term? MR . MILL ER: And term Civi l Service staff , but we 'r e not dealing with contract, or consulting, or anything of that nature . MR . CHAIRM AN : With that clarification , is the motion agreed to? (A greed ) Agreed and so order ed .

It brings us to 12 :3 0, gentl emen . There was an indication from the Government House Leader yest erday that if the committee did not finish its deliberations today , we 'd meet again on Thursday morning, in two days ' time at 10 :00 o' clock. The committee will adj ourn unt il Thursday , 10 :00 o' clock. - 59 -