Manitoba Committee Hansard — 15 May 1975 (Public Accounts Committee, Sitting 3, 30th Legislature, 2nd Session)

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Manitoba — Debates (Hansard)

Legislative Assembly of Manitoba HEARINGS OF THE STANDING COMMITTEE ON PUBLIC ACCOUNTS Chairman David Blake, M.L.A. Constituency of Minnedosa 10:18a.m., Thursday, May15,1975. Printed by R. S. Evans- Queen's Printer for Province of Manitob.,

l'viay 15, 1975 PUBLIC AC COUNTS COMM IT TEE 10:18 a. m. Thursday, May 15, 1975 CHAI RMAN. Mr. David Blake. MR. CH AIRMAN : Gentlemen, we have a quorum . We'll call the meeting to ord·: r. 53 The Clerk will dis tri bute two communica tions I have had, o'J.e from the Provinc ial Auditor pro viding us with some inform ation requested on the March 25th meeting. Another is a reprint of an

article on the role of the Commi ttee of Public Ac counts in the United Kingdom which has been provided to us by the Provincia l Auditor and it 's a very intere sting

article and I'm sure the members will get a great d·eal from it when they finish reading it. Our last meeting, we were on Page 5 of the Report of the Provincial Audi tor under Mani toba Mineral Re sou rces Ltd. and I had Mr. McGill and Mr. Spiva k on my list wh?n we ad journed. Mr. McGill, are you . .. ? MR. McG ILL : Mr. Chairman, if I had a question on March 25th in this respect, the mat ter seems to have escaped me for the mome;:J.t so I will pass. MR. CHA IRMA N: All right. Mr. Spivak. MR. SPIVAK: I r1on't think, Mr.

Chairma '1, it was restricted to Manitol:Ja Mineral Re- sou rces, I think it was on Page 5 and my questions were related to CED F as a matter of fact. MR. CH ERNIACK: Mr. Cha irman, we did ,Jass this you know. MR. CH AIRMAN : We haven't passed Page 5. MR. CH ERNIACK: We p:tssed everything d:Jwn to Ma'1itoba Mineral Resources. Now frankly, you know, on a point of order, I don 't know that we should be so rigid about it bllt if you look at this I think you will see that we were down to .. . '' Have we agreed to Page 5 down to but excl ud·\ng Manitoba Mineral Res ources Ltd ? "MR . CHAIRMAN : Yes -p assed Page 5.

Mr. McGill and Mr. Spiva k are on the list. " NoN I think that we ought to keep going but if Mr. Soivak wants to ask a quest ion then I think we ought to accommoda te him but not to the extent of reopei1ing the entire ques tion which has been passed and we're only on Page 5. MR. CH AIRMAN : Mr. McGill. MR. McG ILL: On the point of ordar. I thought we were on Page 5 when we left. We Nere not Page 6, we Nere on Page 5. MR. CH ERNIA CK: That's Page 5, Manitol:Ja Mineral Resources. If you read the minutes, it 's very clear. It was made clea r then. MR. CHAI RMAN: We were operatin g page by page were we not? MR .

McG ILL: Ye.s. MR. CHAI RMAN: Not item by item. MR . CH ERNIA CK: Yo1� read the end of it. MR . SPIVAK : Mr. Chair man, just on the point of order. I think that the statement that Mr. Cheraiack has made which is really a reference to Nhat he said and what you agreed to but you also agreed that two speakers were still on the list and while there may have been an under sta nding with Mr. Cherniad; as to that it included everything but excluded Manitoba Mineral Resourc es, I would sctgg est that the fact that we're both on the list related ·;o Page 5, not to Manitoba Mineral Resourc es. MR. CH ERNIACK: Mr.

Chairman, let me make thi s clear. I am not referring to min utes which may be com pletely false , I have learned that you ca n't rely on minutes as they ap pear in this building. However this is not minlltes, this is Hansa rd. Having said that, I p·?r sonally woald, you know, not object to letting Mr. Spivak express himself o:-� CE DF but I would hope that we are ;soing to hear from him and deal with it briefly and then go on bec ause I'm as clear as ca n be in my mind and my recollect ioll and [rom the Hansard that we had •3·Jmpleted CE DF. That' s my belief.

I am also under the impre ssi on that CE DF comes up again some where arou01d 18 or 19 or 20 something. MR. CH AIRMAN : Mr. Spiv ak. MR. SPIVAK: Mr. Cha irman, I know that CED F comes in on a number of specific items and tho se p:trticular items I would like to deal with not now but later. But I do have some gen eral questions on CE DF that I'd like to be able to pose to Mr. Ziprick if I may.

54 May 15, 1975 MR. CHAI RMAN: My booklet was not marked in any particular way. I had the last para graph under CEDF outlined which is the next item was Manitoba Mineral Resources, so as we're proceeding page by page I would think that a question on Pa ge 5 would be in order and therefore, Mr. Spiv ak, you may proceed. MR. SPIVAK: Mr. Zi prick, I wonder if you ca n indicate with respect to the audits that have been figured on CEDF, by yourself or by your staff or yourself, whether there is anything new to report to the comm ittee in addition to the info rmation that was supplied in the Auditor 's Report. MR.

ZIPRI CK: I'm not clear in what way. MR. SPIVAK: Well may I ask: has there been any additional work undertaken by the Pr ovincial Audi to r's office with respect to CEDF and its operations since the completion of this report ? MR. ZIPRICK: Well, yes. I indicated in the report that we made a report to the Minister about getting involved in more accounting and aud iting. We have taken a look at that area now and have com muc1icated back to the Minister again and it's being further looked at to see just how much more ac counting assistance will be provided and then the kinds of auditing that will be ca rried out.

MR. SPIVAK: Again, are you referring to the recipients of loa ns or are you talking about C EDF itse lf ? MR. ZIPRI CK: No, I'm talking about recipients of loans. As far as the CEDF we're con tinuing with the usual audit procedure. We audit at the year end and then we do some income work. So that's been going on in the usual sort of a way.

What I'm referring to here is in con junction with what I said in the report, that the matter was being considered by the Minister and he's asked us to do a further review, he's done that and we're looking into expanding or improv ing the acc ounting and the clientele and the auditing of the clientele. MR. SPIVAK: Are the record s of CEDF in order, that is the records of the Com munities Economic Development Fund ? MR. ZIPRIC K: The records of the Commu nities Economic Development Fund as such are in order, yes. MR.

SPIVAK: Have you discovered any problems of wrongdoing or issues of wrongdoing with respect to CEDF ? MR. ZIPRI CK: Not that I am aware of at the moment. MR. SPIVAK: Have any matters been brought to your attention at all in the recent peri od ? MR. ZIPRI CK: I'd have to review the file. You know, it may have been brought to my at- tention. I haven't been looking at CEDF now for the last month or so so I just cou ldn 't sa y that there haven't been but I'd have to take a look at the file. MR.

SPIVAK: Have there been any commu nic ations between the Attorney-General's of- 1 fice and yourself with respect to the records of CEDF in the recent period, in the last period of time ? MR. ZIPRI CK: Oh yes. Within the la st two months , there's been discussions, yes. MR. SPIVAK: With any question of wrongdoi ng ? MR. ZIPRI CK: Well the further checking into what we were looking at in conj unction with the specia l audits that we carried out. MR. SPIVA K: Have there been any references by the RCM P to yourself with respect to the reco rds of CEDF in the last couple of months ? MR .

ZIPRI CK: We have had discussions with the RCMP, yes. MR. SPIVAK: And there has been nothing brought to your attention that would indicate that there are questions to be asked with respect to the records of the CEDF ? MR. ZIPRI CK: No , not in connection with the records of the CEDF, no. MR . SPIVAK: Well , Mr.

Chairman, I have a number of specific ques tions relating to the other matters of the loa n issues in CEDF that have been referred to on Pa ge 18 and I would probably want to wait until that time when it would be more appropria te to deal with it but with the oppo rtunity possibly then of expanding, if I may at that point, into some other related mat ters with respect to the records of the CEDF. I should just ask a couple of general questions .

In relation to your audit do you normally or have you checked the minutes of the board meetings of the CEDF dealing with the loan ap plication and the com mitme nts of loa n moneys ? Have you checked that as against the ac tual disbur sements that have taken pla ce ?

May 15, 19 75 55 MR. ZIP RICK: Well all the various loans that are made are required to be approved by the board and the auditors would ascertain that the approval is there, yes. MR. SPIVAK: Has there been a situation in which more money has been advanced than was authorized by the board of directors of CEDF? MR. ZIPRIC K : I don't recollect anything being brought to my attention at this point. MR. CHAIRMAN: Manitoba Mineral Resources Ltd. - pass. Page 5-pass; Page 6 - pass; Page 7 - Mr. Craik. MR . CRAIK: Mr. Chairman, on Page 7 on Public Debt, a question.

First in the listing of the public debt here, is Swiss francs 20. 5 million. What impact did it have on Manitoba when the value of the franc went up here a few months ago. Was there a loss? r m kind of sort of looking at Mr. Anderson here thinking he might be able to answer. MR. CHERNIACK: r m sort of looking at Mr. Anderson too. MR. CHAIRMAN : Mr. Anderson. MR . ANDERSON: First of all let me tell you that the interest rate on that particular loan is six and a half percent. MR. CHERNIACK : Say it louder please! MR.

ANDERSON: The interest rate on that loan is six and a half percent which goes a long way to protect us against fluctations in the up and down value of the Swiss franc versus the Canadian dollar. The only actual cost there is by reason of the Swiss franc rising in a given year or at a given time, if that rise happens to coincide with one of our interest dates - and these things are paid annually - then for that particular moment in time we have to pay the Swiss franc holder in Swiss francs which we have to buy at a rate which is probably enhanced over the rate we originally borrowed at.

But it's only with respect to the interest payments of the year itself which are important enough but they're not large losses, and really when you look at your Eo called currency value loss or foreign exchange loss in terms of the saving that is evident in the interest rate you have secured in the first place, you still probably have come off reasonably well. On pay day, whi-�h is possibly what Mr.

Craik was talking about, if the issues had fallen due, the choice then is available to the government whether to renew the issue and keep it in Swiss francs against the more likely day when the Canadian dollar will show its inevitable strength against the Swiss franc or whether to pay it off at that time. And at that moment you have to consider as to whether it's better in the judgment of whoever is here at the time to pay the thing off or to renew it. MR . CHERNIACK : Mr. Chairman, I'd like to add on to that.

It's too seldom I think that we have an opportunity to discuss the financing that has to be done and it's a big part of the pro gram of government, long term financing, and I confess that when I was in opposition I knew very little and probably I didn't even know the questions to ask to learn about this. So possibly in response to Mr. Craik' s question r d like to elaborate a little bit to say that when we came into governmen t one of the early decisions we had to make was the coming due of a German Deutsc he mark loan which was short term. Stuart, it was three and a half? MR. ANDERSON: Three and a half years.

MR. CHERNIACK : A three and a half year loan which had been made by Gurney Evans in Deutsche mark and it came due within a year or so after we came into government and we were then faced with a much enhanced Deutsche mark in relation to the cost at the time of the loan. We were able, and as I recall it without any real difficulty, to roll it over. I think it was with different lenders wasn't it? MR. ANDERSON: Yes. MR . CH 8RNIACK : New lenders but in Deutsche mark at - you were saying a rate? MR. ANDERSON: Six and three-quarters. MR. CHERNIACK : Six and three quarters percent.

I remember at that time the Finance Department prepared a resume to show the cost of the money both for the three and a half year term, taking into account the enhancement of the Deutsche mark, and the effect on the roll over which extended the loan and therefore spread that increased value of the Deutsche mark over a longer period of time, related to a lower interest rate, and it worked out that it wasn't a bad deal at all as long as we could roll it over which of course we were able to do and with the credit Manitoba has there's no reason why it can't roll over from time to time.

When you borrow for Hydro especially you're borrowing for an asset which has a life expectancy of 50 and more years and you can never borrow for that length of time so there's really nothing wrong with a roll over say after 20 or even 25 years of a portion of the money.

56 May 15, 1975 (MR. CHERNIACK cont'

d) The other point is this Swi ss franc deal is a particularly good one and as I recall it Mr. Anderson got us into what they call a queue for the local market. Wasn 't that it ? MR . AND ERSON : The so-ca lled public market. MR. CHERNIAC K: The public market within Switzerland. It was not an outside Euro dollar or anything like that, it was the public market within Switzerland for which there was a lengthy waiting period and we hit it right as I'm proud to say we've done on a number of occasions.

We came in at a time when we were given the permission, I think there were only two or three a month that were allowed at that time, and we were one of tho se in that month. We did make what turned out to be a very good loan. Of course there were times - it could have been wrong any other month -b ut it so happens that this was a particularly good loa n. But in any event as Mr. Anderson says our relations with the international market and with the Swiss ma rket are such that there's no reason why it shouldn't continue to be possi ble to borrow and to roll over. MR. CH AIRMAN: Mr. Anderson. MR.

ANDERSON : I should have checked, Mr. Cherniack. Mr. Chairman, I ask to be forgiven. The rate was six and one-eighth percent, not six and a half on that other one. In the year in question when we came to pay the Swi ss holders at more valuable or more costly Swiss francs, if I ca n put it that way, the payment we made in interest that year amounted to a 7 percent value in Canadian dollar s. MR. CHERNIAC K: Because of the higher rate of ... MR. ANDERSON : Yes .

So it still ended up by being -i n other words the six and one eighth cou pon when supplemented or augmented by the enhanced value of the Swiss franc at the time cost us actually 7 percent to pay the interest off that year. MR. CH ERNIAC K: Do you remember what the rate was at the time of the borrowing of the six and one-eighth ? I mean the general rate. MR . ANDERSON : Oh in Canada it would have been about seven and three-quarters or eight percent. MR. CHAIRMAN: Thank you, Mr. Anderson. Mr. Cra ik. MR. CRA IK: Just for clarifica tion here.

When you're making payments here is the ac tual capital debt amortized over the period too ? Would you be making normally payments a gainst the capital as well as the inte rest. MR . ANDER SON : This particular one that we're looking at here, as I recall it, had no redemption features until the end of its life in which case it would be a roll over. I think there's a bit of confusion arisi ng here.

There were actually two Swi ss issu es but the other one was done on December 31s t, 1974, and that one has an amortizing feature in it st arting in , I be lieve, the sixth year of a fifteen -year loan so that there would be a cer tain amount of principal to be paid off year by year. That was a six and a half percent is sue which will show up in next year's balance sheets. This earlier one predates it by about I think two or three years. So we have two Swiss loans at the moment, one reflected here at six and one-eighth, the ather one at six and a half last year. MR. CH AIRMAN : Mr. Craik. MR.

CRAIK: What is normally done on borrowing like this ? Do you not amortize the - is it not normal to amortize the capital amount ? MR. ANDERSON : Oh we have our own sinking funds. We run the sinking fund regularly regardless of whether we have to pay anything off to the holder until payday or not. Under the terms of The Financial Administ ration Act governing loans we are obliged to set aside a sink ing fund and do our own accou nts in Ca nadian dollars and then we keep that money in vested and earning interest for us in the Ca nadian - normally in the Ca nadia n market. We occasionally buy U.

S. bonds when they show up in the after markets for our own sinking fund purpose s. But we'r e not like the municipal borrowers who tend to borrow on what they call a serial basis where there's a certain amount of principal and inte rest repayable every year. Most of our is sues, I think 90 percent of our issu es, are tho se where the entire amount falls due in 30 years, 25 years, 15 years or whatever. Some of them -a nd only some of them -h ave an am ortizing period that begins part way along in the history of the issue, the term of the issu e. MR. CHA IRMAN : Mr. Cherniack. MR. CH ERNIAC K: Mr.

Chairman, I'm just trying to recollect and I would like to ask Mr. Anderson . I'm under the impression that there was a formula established by Mr. Garson I think, Premier Garson, of aiming at I think it was a 24 -year ...

May 15, 1975 57 MR. AND ERSON: 23 year. MR. CH ERNIACK: ... 23 -year amorti zation but a continuing one and I figure it amounted to som ething like 3 percent per annum. MR . ANDERS ON : Yes, that 's right. MR. CHERN IACK: We haven't changed that have we ? MR . AND ERSON : On all our deadweight debts, so-c alled deadweight debt or general or direct debt for general purposes of the government, we 'r e setting aside enough to pay every is sue off within 23 years.

On our utility debts we tend to - well no we dJn 't tend to, we really are following utility practices in Ca nada, and we introduced the co:1cept of sinking fund for bJth Telephones and Hydro. We adopted the Ontario Hydro formula which is approximately a one perce:1t per annum sinking fund. In other words one percent of the principal of every issu e is put aside in a si nking fund and over a 40 -year period with interest at four percent, and Jnly four percent, that fund will pay off the origi nal deb:.

So the atility debt is working on a 40-year amortizing p8riod, the deadweight or general purpose debt is 23 years. MR. CH ERNIACK: But at a rate ca lculated which is lower than what we've been getting on our money before. MR. ANDERS ON : Oh yes. MR. CHE RN IACK : If the rate maintained itself then theoretically we ought to pay off sooner than that. MR . ANDER SON : Yes. We would have sufficient to dJ so. MR. CH AIRMAN: Mr. Cra ik are you finished ? Page 7--pass; Page 8--pass -M r. Craik. MR. CRAIK: On Page 8, Mr.

Chairma n, I gu ess the direct question is why dJ we gener- ally carry so mu�h spending authority whea it 's not needed ? Like in this case here, at the bot tom of the page, Unexpended Legisla tive Authority for Capital Purposes, a carry forward of $ 262 mil lion. MR. CHA IRMAN : Mr. Cherniack. MR . CH ERNIACK: I want to try and answer that but of coarse Mr. And3rson will correct me or elaborate on it. When we ask for authority and get it thea that enables a commi tment to be made on the basis of the authority. Now i t may not be paid but the commitme nt may be there.

And to a large extent the unexpended authority for the o:1going projects is a commi tted authority , that is an authority which enables the utility or whatever it is that it 's authorized for to be com mitted with programs to go ahead. That's why you will sometime3 find Unexpended Authority at a time when we may be asking for more capital authority. But it 's beca use that first pJrtion is already in the works and planned and we have to 1\:eep ahead ·Jf oursel ves, otherwise we could run out of money. It co'.lld happen.

Especia lly if there's a commitment say to spe:1d money and there should be authority to back it up. Sho'.lld :hat be elaborated on, Mr. Anderson ? MR. ANDERS ON : Well only to say that under The Financial Administ ration Act no officer of government whether civil servant or Minister or cha irma n of one of our utilit ies can commit the Governme:1t of Ma'1itoba to future payme:1t unl ess there is an authority from the Legisla ture, I'm only perhaps adding to what Mr. Cherniack has said.

The result is that if you're facing the si gning of a major contract, whether it be for a highway or a h:::> using project or a hydro plant with a contractor or some aspect of a hydro pla nt with a contractor , and it 's the first of February and you want to sign up for some�hing that's worth $2 5 mi llion, even though the mo'1ey will not start to move in cash until perhaps Oc tober of that same year, you have to lo :::>k to see whether you have a sufficient Ca pital Sup;Jly authority from the Legis lature �o d•:J so.

Otherwise you have to sit and wait until the Legislature gets through with a new Ca pital Supply bill. MR. CRAIK: I think that explains the -it 's a questio:-t of the size .Jf it, whether it 's -i t seems a pretty large amo,lnt of money, a quarter of a bill io:1 dollars ca rried forward, you know, from one fi sca l year to the next. Bu': I und erstand your expla'1ation. MR. CH ERNIA CK: If it's consi stent then it's really no: a lot. If it carries forward in that approxim ate amo:mt year by year I supp :::> se it 's ... MR. CRAI K: I understand your explanation.

It 's for p•1rposes of e:1tering into contr acts that may or may not fit themselves into the fiscal year pattern. MR. CH ERNIACK: Yes. MR. CR AIK: Yoa have to work ahead. MR . CH AIRMAN : Page 8--pass; Page 9-- pass; Page 10-- pass; Page 11--pa ss; Page 12- pass; Page 13 --pas s; Page 14--pass; Page 15--pass; Page 16 --pass; Page 17 --pass; Page 18 - Mr. Spivak.

58 May 15, 1975 MR. SPIVAK: Mr. Cha irman, now I would like to if I may deal with some of the matters of the Com munities Economic Development Fund and particularly the matters in the report. I wonder if Mr. Ziprick ca n indica te proc edurally what happened with respect to the audit that was undertaken by him with respect to the two compa nies of J. M. K. and R & M, that is both in terms of the amount of time and procedu rally what happened and the references that were made as a result of his investiga ti ons. MR. CH AIRMAN : Mr. Ziprick. MR. ZIPRICK: Well with regard to these two compa nie s, J.

M .K. had requested and obtained a loan for a certa in amount and there was a certain amount paid out on that loan and then they wanted to - we arranged an expand and as a result they needed a larger loan. They would not be granted a larger loan without co mplete refinancing and it was at this point that R & M Co n struction was established. So the portion of the assets that were - the first loan to J. M. K. that was spent on, was transferred over to R & M and as a result we did not go into the J. M. K. records. We concentra ted on the R & M records.

We carried out an audit on the R & M records which we reported on and we would have reported in more detail to the Legis lature but we found out that it was in litigation, civil litigation and we were advised by legal counsel that this could have some effect or be publicl y expressing a view that was under litigation and we were told that it would be unadvisa ble to do so, so we have refrained from giving the details in this report. Now the litigation as I understand it is in progress and evidence is being taken. MR.

SPIVAK: Ca n I ask you with respect to the litiga tion and the report, did you give the report to the government ? You may not have published it here but have you given the report to the government ? MR. ZIPRICK: Yes , a report was given to the government. MR. SPIVAK: Ca n I ask at what point did your office deal with the RCMP on this matter, in terms of timing ? MR . ZIPRICK: The RCMP came to see us -I just ca n't pinpoint the dates but we had al ready co mpleted our audit esse ntially when the RCMP came to see us for the first time. MR . SPIVAK: Then may I ask something.

There was nothing out of your audit that was responsible for the RCMP investigation taking place ? MR . ZIPRI CK: No. MR. SPIVAK: Did the RCMP ask you to compl ete another audit or to review your working papers? MR. ZIPRI CK: Yes, we had these discussions with the RCMP ; our working papers were made available; the auditor that was ca rrying out the audit had meetings with the RC MP and all the infor mation was made available to them. MR. SPIVAK: Now may I ask something. Your audit or audit examinatio:�. really was an examination of R & M, not an examina tion of J. M. K. MR. ZIPRI CK: That's right. MR .

SPIVAK: And an examination of CEDF with respect to . MR. ZIPRI CK: I should say the examination of J. M. K. only to tho se transactions that pertained to the expendi ture of money that they had received from the Fund. MR . SPIV AK: Yes, but it wasn 't a'l examination of the com pany . MR . ZIPRI CK: No. No it was not. MR. SPIVAK: In the case of R & M was it an examination of the co mpany or the sa me position , ju st an examination of the moneys they received from the Fund. MR . ZIPRI CK: No, in the case of R & M it was an examination of the comp any.

Our audit was geared towards the protection of public funds and the accou ntability of public funds. But in es se:-tce it was an audit of the whole company. MR . SPIVAK: In your statement in the Audit or 's Report you state, "While there was no evidence of crimi nality on the part of the offic ials either of the compa nies or of the F1nd" - do you really believe that you were in a pos ition to make that statement based on the inf ormation that you had received as a result of your audit ? MR.

ZIPRI CK: Well to the extent that we went into in our audit, and dJ.ring the course of our audit we found nothing of the nature that we would normally ask for crimi nal action. MR . SPIVAK: Have the RCMP discussed the contents of their examination or the details of their examina tion with you since they have com pleted their examinati on ? MR. ZIPRI CK: No. No. MR. SPIVAK: Was there any additional audit requested to be given or undertaken by you by the RCMP or by the Attorney-General 's office ?

May 15, 1975 59 MR. ZIPRICK: We had a discussion as toa further audit and I had indicated that as far as we were concerned if there was any evidence, further e;�idence that there was a misuse of pub lic funds in any way that we'd appreciate receiving that evideace and we would carry out an audit. But if it was just concern that some shareh:>lders were having difficulty and this was outside of public funds, that we were not or we did :�ot normally carry out any inspections and controls with regards to the protection of shareholders in private comp:�nies.

And this would be .:Jutside of our sphere and we would not want to get involved in that area. MR. SPIVAK: Well was there a formal request the;1 from the RCMP asking yo:1 for an additional audit to be undertaken? MR. ZIPRICK: There was a request that I approve that further auditing be carried o:1t at public expense. MR. SPIVAK: Yo:.t were not prepared to do that, is that right? MR. ZIPRICK: I was not prepared to carry out the audit but as far as approving is con cerned I said, well unless I was told as to the purposes and objectiv es of the audit I could not express an opinion on that.

So they'd have to deal with the Attorney-General's Dep:utment and [ind out from them. So I was �1ot in a position to say whether further auditing would be of assist ance to them or really was aware of what their difficulties were. All I was concerned abJut and it was not indicated that they had any further evidence that would show a lack of accountability of public funds because if there was any further evidence that we did rwt have, of accountability of public funds, naturally we are interested in it and we would want to p·.1rsue it. MR.

SPIVAK: Are you aware that another audit was completed by an acco:1nting firm? MR. ZIPRICK: Oh I know and that accounting firm has access to our records and b.as worked with our auditor. MR. SPIVAK: Are you aware of the findings of the accounting firm with respect to the audit they completed for the RCMP? MR. ZIPRICK: No. MR. SPIVAK: No:�e of the details have bee:::� give:::� you at all? MR. ZIPRICK: No. MR. SPIVAK: You're not aware of the details at all. MR. ZIPRICK: No. MR. SPIVAK: Have the RCMP discussed with you any of the conclusions of the other audit completed ·Jy the accounting firm on these companies?

MR. ZIPRICK: No. MR. SPIVAK: Did the audit undertaken for the RCMP include the Communit ies Economic Development Fund as well as the other companies? MR. ZIPRICK: No, essentially the audit ... MR. SPIVAK: Insofar as the Commu�1ities Economic De;�elopment Fund was involved in these .:;zlmp:mies. I doCJ't mean in terms of ... MR. ZIPRICK: No, the audits essentially centred around J. M. K. Coastruction. This is the way it was explained to me and the material pertaining to J. M. K.

Coastruction and R & M Co:1struction was removed from the Commu�ities Economic Development Fuad and I doCJ't know whether it's being s·.lbjected to further auditing or not. But to my knowled.se there was no audit carried :JUt on the Commu�1ities EconJmic Developme:1t Fund. MR. SPIVAK: During the course of your audit of R & M you had reference to the account ants whJ had not audited but who had been involved in the work. I'm assuming that's Dunwoody, Saul and Smith that you' re talking abo�lt. MR. ZIPRICK: Yes, that's right. MR.

SPIVAK: Did you have o�casion to examine or question the former accountants wh·')Se employment had b2en terminated, Hawkins and Company, whJ esse:1tially were the accountants for J. M. K. and the initial acco:1ntants for R & M? Did you have any conversation with them at all? MR. ZIPRICK: No we didr1't. MR. SPIVAK: You did not determine how the OP'ming balance sheets were set up with re spect to R & M by them, and their C•:Jmments at the time and their c.:mcerns on the opening bal ance sheets that were being set up at the time to CEDF ? MR. ZIPRICK: Well the Duawoody and Comp:my had substantial involvement.

They've carried out most of the audit work and information and we just dealt with Dunwoody and Company and picked .1p the information that the ...

60 May 15, 197 5 MR. SPIVAK: You never went back to Hawkin s and Com pany to determine two thing s: One, the accuracy of the original opening statements , fina ncial sta tements for R & M, and No. 2, the reasons why their services were termi nated. MR. CHERNIACK: He already said he hadn 't talked to them. So it's ... MR. SPIVAK: All right.

During your audit did you determine that there was a practice in which one of the loan officers or development officers for the CE DF was given blank cheques or cheques signed in bla nk to either be countersigned or to be okayed 'oy the General Manager of the Com mu:1ities Economic Developme nt Fund ? Did you find that as a matter of practice, of the procedur es ? MR. ZIPRICK: Well there was a joint control on the account, yes. MR.

SPIVAK: Did you fin d that ... in your examination were you able to determine whether cheques had been given by the si gning officers on behalf of the compa ny in blank to one of the loan offi cers to be then com pleted by either himself or by the General Manager or As si stant General Manager of the Fund ? MR. ZIPRICK: You know, this is getting into the detailed area that I'd have to take a look at the work papers and refresh myself on a ... MR . SPIVAK: Did you ever fin d an occa sion in which the payee and the amount were chang ed ?

That in effect had been struck out and an additional name or another name be placed and another amount placed :>Ver and above the original amount that had been writ ten. Did you find any cheques like that ? MR. ZIPRICK: There again it 's getting into the detailed area. As far as the audit is con cerned whatever ... there were acc ounting probl ems. Now ... MR. SPIVAK: But really what I am much concerned about - I appreci ate Mr. Ziprick that you ca n't recall every detail but then let me put it another way.

If you in your audit would have found that compa ny cheques had payees struck out, with other payees placed above that and a mounts str uck out with additional amounts placed above it, would you have baen alerted at that time to ':le conce rned or would you accept that as a normal practice and a normal course of handling an acc ount of a firm in which there are count ersi gning officer s? MR. ZIPRICK: Oh, it would be a matter of concern and further inquiry for explanations as to what happened. MR.

SPIVAK: If this had been brought to your attention or if you had seen this , would you have questioned as to who was responsible for changing the names of the payees and the amo•.mt on the cheques ? MR. ZIPRICK: Oh, yes. MR. SPIV AK: All right. Then I ask you, did you have occa sion to do this at all ? MR. ZIPRICK: Well, there again, it 's getting into the detailed info rmation. I didn't do it perso:1a lly. Now whether the auditor that was doing it, to what extent he questioned and what ever, he must have been generally satisfied because we didn't take is sue.

But it' s something that I'd have to review with the auditor that carr ied out the audit. MR. SPIVAK: But it would be fair to say to you that if this would have been brought to your attention, you would have been su fficiently concerned ':O at least examine it and to deter mine it and to be satisf ied with it and you would be aware of it in discus sing it with me. The fact that you're not aware of it now would lead one to believe that it either has not hap;:>ened or if it did happen whoever did the audit for you was satisfied with the explanati ons. MR. ZIPRICK: That 's right. That 's right. MR.

SPIVAK: Well, I wonder, in the course of the audit di d they determine how gen.eral the practice was for cheques to be signed in blank by the principal oft he compa ny and to be countersigned and ,Jompleted by one of the officials of the com pany!" MR. CH ERNIACK: Mr. Cha irma n, ma y I interject please. MR. CHAIRMAN : Mr. Cherniack, d:> you have a point of ord,3r? MR. CH ERNIACK: Well it 's as if I were bac!< in a courtroom and .listening to a cross examination. Mr.

Spivak said, was it very general a practice which he descr ibes and that the Auditor did aot say he knew existed at all and said he'd have to go back to find out. Mr. Spivak is now going on the assu mption that Mr. Ziprick has agreed that it was a practice and he's now askin g how general was it. So I'm beginning to think that we've got to watch just how the ques tions are put. MR. SPIVAK: I'm sorry. Well I thought that Mr. Zi prick was prepared to acknowledge that it was a practice and if he isn 't, I then put . . .

May 15, 1975 61 MR. ZIPRICK: Well I'm aware that the bank was under joint control but this changing of names and ... MR. SPIVAK: No, that was o:1e aspect of it. I am now talking ab:mt the general practice of having the principal or the signing officer of the company sign the cheque in blank with the payee and the amount to be completed by . . . MR. ZIPRICK: Oh I'm sorry, I'm not aware or at this mome:1t I'm not aware of the sign ing in blank neither. This is something that I would have to discass with the auditor. MR. CHE RNIACK: On a point of order.

I want to make sure that we are aot C•J:-tfusing this with a specific instance, I recall, of a letter bzing produced where certain cheques were . . . but I think that was in another . MR. SPIVAK: That's co-ops. This is not. I'm not talking about co-ops. We'll come back to that. MR. CHERNIA CK : Okay. MR. SPIVAK: I am now talking ab::mt the operation of R & M. I'm asking Mr.

Ziprick whether his audit and whether his investigation was able to d·2termine whether there was a prac tice that was followed in which cheques were signed in blank by one nf the signing officers with out the payee or the amount bzing completed, or forwarded to a development officer who in turn had �ne nf the officials of the C ED F complete that. MR. ZIPRICK : Well, as far as I'm concerned, it happens occasionally but it's not some thing that we approve of. When we see this kind of thin g happening we recommend that it be stopped because that's an unsatisfactory co:-tdition.

But in this specific instance were there any, how many, at this moment I d::m 't know, I'd have to consult with the auditor and the wor:Z papers. MR. SPIVAK: But again, Mr. Ziprick, appearing before this cnmmittee and knowing that this has beect one sort of a political issue that's been raised before - well the political issue that's been raised, I would assume that ... MR. CHERNIACK: Who raises a political issue ? MR. CHAIRMAN: Order please. I do:-t't think that's relevant. MR. SPIVAK: Yes. Mr. Ziprick, I'm simply ... MR. DILL EN: Let the Leader of the Op;;>osition indicate who makes a p'Jlitical issue of it.

MR. SPIVAK: Well Mr. Ziprick, Mr. Chairman, Mr. Dillen will be able to speak as mu�h as he wants and be able to say whatever he wants. I'd like to be able to finish my examina tion of Mr. Ziprick. My p::>int being, Mr. Ziprick, that if in fact . MR. CHERNIACK: I'm sorry, I do ... MR. CHAIRMAN: Mr. Cherniack, 0:1 a point of order. MR. CH ERNIACK: Ye.s. I object to the line of q•1e.stions and the fact that Mr. Spivak just said he is now examining the Provincial Auditor, continue the examination of the Provincial Auditor.

I thought the Auditor was here as an independent auditor whose re.3ponsibility is to the Legislature and who reports to the Legislature and assists this Committee in establis hing what ever information it needs. If Mr. Spivak is co:-tducting a cross-examination of the Auditor which I believe he's doing, then you know there comes a limit to at least the good manners . MR. SPIVAK: Mr. Chairman, on the p::>int of order if I may. MR. CHAIRMAN: Mr. Spivak, 0:1 the p:Jint of order. MR. SPIVAK: Mr. Cherniack has just contradicted hims.elf. He .3tarted by saying I was examining him then he says I'm cross-examining him.

If I'm a member of the legislative com mittee and I am, I think I have a right to ask ceetain specific questions. An audit was completed by Mr. Ziprick. My questio:Js relate to the audit. Ano<;her audit has been ufldertaken by a chartered accountant firm for the RCMP, it was not completed ·'ly the Provincial Auditor. I believe that - and this is a belief a'ld I say this at this time - that there will be a su'Jstantial dif ference in the findings of the two audlts. I ask Mr.

Zipric!z whether he has - appearing before this Committee the issue that I've just raised in my examination, if it hasn't sufficiently been of sufficient importance . . . if it was of importance he would ''le aware of it. He has indicated to me that he's 'lOt and it hasn't been brought to his attention and he hasn't that as a d·3tail, a matter that he knows. He will try and get the information. And I would then suggest, Mr. Chair man, and I think Mr.

Ziprick will ackn::>wledge that that would mean that that matter either was a very minor matter to begin with or it's a matter that has been at least satisfied to the satis faction of the people within his department. And I think that that is the acknowledgement that I'd like to get from him at this particular time. MR. ZIPRICK : That's right. There's no doubt if there was something of that nature that was needed -i nquiry and that - these inquiries would be gone into and the information

62 May 15, 1975 (MR. ZIPRICK cont'd) ..... obtained and the explanations obtained. MR. SPIVAK: I wonder, Mr. Ziprick, if you can indicate when you examined J.M.K. and R & M that in the course of examining what had taken place and I appreciate that you did not complete the full audit of J. M. K. , there was any concern that what had taken place had in fact been a conspiracy to defraud the creditors of J. M. K. MR. CHER NIACK: Mr. Chairman, now I really object.

Because we have here the state ment from the - the statement that we are revi ewing, Page 18 where he says that there is liti gation, civil litigation taking place. He's not in a position to report observations concerning operations of these companies. Now if Mr. Spivak wishes to proceed to ask questio:1s of the nature he's just asked then it may -I don't know anything about this litigation but it may jeop ardize a proceeding which is ongoing now. Mr. Ziprick said evidence was being taken now. I'm not aware of it. But I think that we have to be cautious not to prejudice the litigation that is taking place.

Aside from the fact that I have a feeling that it's not in order to discuss mat ters that are in or which may be matters for court review . MR. ZIPRICK: This is a point -we have issued a fairly detailed report on various items and we'd be pleased to make it available but there is no doubt that there are observations there of the kind that would have some - something that the court has been asked to judge on and if it's this committee's wish or whatever the authorities are that it can be released, that's fine. But I would:1't want to release it and be brought before the court as being in contempt of court. MR.

SPIVAK: All right. Now let's understand the court case. The court case you're talking about is a litigation between shareholders, creditors and the companies or is the govern ment involved in the court case itself? MR. ZIPRICK: I understand that it's the government, the shareholders and the creditors and officers of the companies. MR. SPIVAK: And so the government is involved in the court case itself. So you're sug gesting that the information that you may give may prejudice that court case. MR. ZIPRICK: Well I may be prejudging the situations that the judge has been asked to decide upon. MR.

SPIVAK: Well then let me put it in another way. If there was a concern, if there was a concern with respect to the question that I asked - I don't have to repeat that from the point of view of the recard - would your audit or would your investigation have stopped where it had or would it have gone further? MR. ZIPRICK: Well I would just like to re-emphasize that when we undertook the in vestigation it was purely to determine the accountability of public funds.

The position of the shareholders and the arrangements that the shareholders made as to how and und.�r what co:l ditions they would subrogate their rights and transfers and this. We didn't feel we had an obli gation to protect their position. It was up to them to be concerned. So we carried out an audit to determine the accountability of public funds and what happened to public funds.

Now-as I understand in the discussions with the police and the audit firm and to insure that there was no duplication of effort that's why we made all our information available, it's being ca-ordinated, and the whole investigation that is being carried cm now is in the area, not of accountability of public funds but in the area of difficulties between individual shareholders and individual people vis-a-vis the o:1e against the other not being properly treated. Now this area, we don't feel that it's within our area of requiring to audit. MR. SPIVAK: Mr.

Ziprick, isn't it fair to say that the investigation that is being under taken which you are aware of deals not just with the matters that you have talked about but with, in effect, the actions of government officials as well? And not in relation to the specific issues between shareholders and creditors but with respect to their actions and the exercise of their power with respect to these companies. MR. ZIPRICK: As far as the government officials in carrying out the accountability of public funds we've gone into and we've made the observations.

As far as the whole rela tionship af the sharehalders and government officials and I've studied it very carefully at length because I was very concerned and I read :he various representations that were made to determine what steps I should take in carrying out the investigation. I came to the conclusion that if I had moved into that area, I would be carrying out an inquiry that was really beyond the scope of just ac countability of public funds.

It was in an area of relationships in handling of private money and I was concerned that to carry it through I probably wouldn't come to anything conclusive in any event because there will be various statements and so it would wind up in court anyway and

May 15, 1975 (MR. ZIPRICK cont'd) ..... as a result I made the decision rightly or wrongly that I was not going to go into that area. And this I understand the p:Jlice are now pursuing. 63 MR. SPIVAK: But then there has been no communication from the RCMP with respect to any of the matters since that time, since you've come to this conclusion other than ... MR.

ZIPRICK: I made it fairly clear to the RCMP th:J.t anything o':her than accountability for p�blic funds I was really not interested in because I have ao jurisdiction and no concern as to whether a shareholder was fairly treated ::Jr not within the context of the Co mpnies Act op eration. MR. SPIVAK: But even if the action of a public official was wrong, was wrong and was criminal in nature - and I'm not suggesting it is - but even if that actio'1 was you still would not feel that there was a respo:J.sibility 0:1 your part to investigate that matter further. MR.

ZIPRICK: If the actions of officials whe:-� we were investigating, we saw a:J.ything criminal in nature in handling of public funds or anything in that area, we'd certainly take ac tion. We, in no time, pass up any observations that are of a criminal nature witho:It following them up. MR. SPIVAK: All right. Now can I ask has the RCMP report, that's the first report completed on Schmidt Cartage, have the contents of that report been given to yo:.t? MR. ZIPRICK: No. MR. CHERNIACK: What's that got to d:J with it? MR. SPIVAK: The further investigation that's been requested - it relates to this as well Mr.

Cherniack - the further investigation that was requested by the law officers of the RCMP, have those matters been related to you as the reaso:-�s why the investigatio n was to be under taken? MR. ZIPRICK: Investigations in what area? MR. SPIVAK: There is one RCMP report that has now been tabled with the Attorney General's Office. The Attorney-General's law officers have asked Eor a further investigation from the RCMP.

The co:J.tents of that repc:>rt, the nature of the further inve.stigation of the RCMP which I understand is completed and has now been tabled back with the Attorney-General, has that not been communicated to you? MR. CHERNI ACK: No, we don't know that it has been tabled. MR. SPIVAK: Well I'm sctggesting it has. MR. CHERNIACK: Well if it has then ... MR. SPIVAK: I'm asking whether the contents of the report, the nature of this new in vestigatio:J. by the RCMP has in any way been commurlicated to you at all. MR.

ZIPRICK: No it hasn't and I wo:.tld:� 't exp2ct it to unless there was S•::Jme concern ab�mt the accountability of public funds. MR. SPIVAK: Buc let's assume for the sake of argume:Jt that -- (Interjection) -- Well, Mr. Chairman, I must say that in this issue we have the question of h::Jw the Provincial Auditor perceive.s his responsibility, the q·�estion of how the government -- (Interjedio:J.) --No, there's no fishing expeditio'1. Be lieve me, the fish has already bae:J caught. -- (Interje ctio:J.) --No, no. Well you just pro::luce the RCMP report a'ld you' ll see . MR.

CHERNIACK: Oh if you've see;'! it why ask him ah:nt it. MR. SPIVAK: Because I think it's basic to understand the Provincial Auditor's percep tion of how he sees his resp::msibility, the perceptio:J. of the governmeat as to how they see their responsibility in cllrecting and bringing to his atteation any informatio'1 that th'Jj may be seized of that would deal with public accountability and with the issue as he sees it. I'm again saying to yo:1 Lhat as far as I can see from what you're saying you have C•::Jmpleted yo·�r work.

Yo'� are aware that the RCMP have inveatigated this matter or are still investigating it, yo·� are aware that another group :>f chartered accountants have bee;"t brought in to comp�ete an audit which you conside<· as matters dealing in the private sphere as opposed to the public sphere and you are not at this point involved because there is no further involvement within the public sphere. MR. ZIPRICK: That's my understanding. MR.

SPIVAK: Wo·.1ld there !:le in your opinion an obligation on the part of the gover;Jment, if they are seized ,::Jf informatio:J., that there is a further involvement in the p·�blic sphere to have brought this to your attention. MR. ZIPRICK: I would say so, yes. MR. CHAIR MAN: Page 18 ...

I 64 May 15, 1975 MR. SPIVAK: No, Mr. Chairman. In the investigation of these matters and I think gen erally the whole problem area of the accounting that is undertaken with respect to the loans given in the north and the whole problem of accountability recognizing the remoteness of the area and the difficulties involved, you have made a number of recommendations part of which spill over to 19.

But I wondered, did you as a matter of the audit itself of CEDF, did you have oc casion to check the minutes of the meetings, the loan applications that were completed and re late them to the dispersement of the loans - and I'm not now just talking about J. M. K. or R & M, I'm talking about the whole range of CEDF loans - and the procedures that were followed with respect to the dispersal of public money and the way in which the public money was funneled through to achieve the objectives set forth in the original loan application. MR. ZIPRICK: Yes.

Well this is, of course, the part of the regular audit of the CEDF is to determine that loans - examine loan applications and determine the purposes of the loan and then see that the loans are properly authorized by the fund directors and then that the money is being dispersed in accordance with the terms, where the difficulties that we have observed here and then a more in-depth study of the situation is in the monitoring situation after the money goes forward and the money is being expended and particularly in the working capital area.

And the area where it's for specific purchase of an asset greater or whatever have you that's fairly easy to substantiate because the money is advanced and then there is an evidence of invoice and a possession of a grader. But in the working capital area particularly that's where the monitor ing situation of how and the control over the money is difficult and there's where some reason able accounting is necessary and accounting expertise; and then in auditing to insure that the moneys have been accounted for and then there's an attest position to say that they have been used for the purposes they were intended.

And this is where the whole area of difficulty comes in and this is the area that we've recommended action and that action is being looked into about providing a better accounting by way of a service bureau or whatever other means, and then to carry out an audit. As I see it once there is good accounting and accountability, the audit in it self won't be a difficult thing. It's the expertise in the maintenance of the effective records and this is the area that'::. being worked on now and being looked into. MR.

SPIVAK: Can you indicate whether it was the practice of the CEDF to basically act as countersigners on the cheques of the companies who received moneys by way of loans from us? MR. ZIPRICK: Well this is a matter of assessment when the loan is first agreed to and in some instances later on and the question of accountability. If there is concern to insure ac countability, it's not unusual to have the account under joint control. As a matter of fact I would say that it happens quite fr equently. MR. SPIVAK: But did it happen in many cases with respect to CEDF on the basis of your audit, do you recall? MR.

ZIPRICK: I wouldn't want to be unduly specific without checking back but my recol lection now is that it does happen. MR. SPIVAK: Is the practice to allow the principal or the signing officer to sign it in blan1-c? MR. ZIPRICK: The blank is not a part of the system and if it's used it's outside of the system and any time we'd observe that kind of a procedure, we would certainly take exception to it. MR. SPIVAK: Right. Have you observed it with respect to CEDF in other than the audit of J. M.K. and R & M. MR. ZIPRICK: Well there again I would have to check with the files and the auditors.

Not to the extent that an issue has been made, not that I can recollect. MR. SPIVAK: Did you do an audit of Schmidt Cartage? MR. ZIPRICK: No. MR. SPIVAK: Were you asked to do an audit by the government of Schmidt Cartage? MR. ZIPRICK: No. MR. SPIVAK: Nor by the RCMP? MR. ZIPRICK: No. As a matter of fact Schmidt Cartage other than the ordinary review of accounts, when the difficulties became apparent it was already in receivership and the Re ceiver was carrying out a full audit and as a result we didn't duplicate, we weren't going to duplicate the work that he was doing. MR.

SPIVAK: Did you receive a copy of the Receiver's report in connection with Schmidt Cartage?

May 15, 1975 MR. ZIPRICK: No, I didn't. MR. SPIVAK: There was no com munication to you in connection with that. Did the RCMP re quest any information or any assist ance with respect to Schmidt Cartage? 65 MR. ZIPRICK: No, because we had no involvement other than examination of the files over at the Communities Eco nomic Development Fund. MR. SPIVAK: Did the RCMP complete another audit on their own in conn ection with Schmidt Cartage? MR. ZIPRICK: No, I dJn't know that. Schmid·.; Cartage wasn't discussed. MR. CHAIRM AN : Page 18 --p ass; Page 19- Mr. Spivak: MR. SPIVAK: Mr.

Chairman, well I think the Aud.itor should be given an opportunity to explain exactly what the ... well I think a combination of two things. How the Co-operative Loan and Loan Guarantee Board ::Jperated with respect to the loan guarantees that were under taken. I know he indicates later on the amouflt of arrears that appears to be in existence.

And I think it would be impvrt ant for this committee and I would hope for the Legislature to under stand exactly how they operated and to indicate as well whether he's had the opportunity of checki ng their minutes to determ ine the authority given by them with respect to various loan guarantees that have been undertaken. MR. ZIPRICK: Yes , well there again it's a regular audit proced11re for each guarantee to examine the particulars of the guarantee and then to examine the minutes to see that it's been properly approved and the guarantee given. S•J that is part of the regular audit proced11re anyway.

And as indicated in the report that, of course, as far as the approval in minutes, and that by and large it was all approved with I think about one exc eption. But as far as the monitoring situation afterward s, we found it to be not very satisfactory. MR. SPIVAK: Do you know what the nature of the arrears are at this particular time with respect to the amo'.lnts that have been guaranteed? MR. ZIPRICK: The March 31, 1974, I know the balances at that time. Now I don't know just exactly how the accounts stand individually at this point. MR.

SPIVAK: Yo'.l don't know what the total amount of arrears would be at this point. MR. ZIPRICK: No, no. They are being worked on, in various stages o£ work, that there has been one or two -I think only one payment made on the guarantee and there' s some others being worked on. But I couldn' t relate it in any detail. MR. SPIVAK: One of the problems, Mr.

Chai rman, that we have is that in relation to 19, it sort of spills over to 20 and partially 21 and I'd like to be in a position to ask direc tly on the Co-operative Loan and Loan Guarantee Board and sort of spilling over to the others because I think that's the only way we can deal with it. MR. CHERNIACK: Mr. Chairman, cauld we assume that pages 19, 20 and 21 are ane thing. MR. SPIVAK: We ll that's fine but it involves different aspects of it and if we can deal with them in different aspects, that part' s all right. MR. CHERNIACK: I d::Jn't know ab::Jut other members 0f the committee, I don't mind. MR.

CHAIRMA N: Is the committee in agre ement with this? MR. CHERNIACK: But when passed, we will have passed all three pages. MR. CHAIR MAN : It deals with the one department. MR. SPIVAK: Well, all right, that's fine, o'my . I wonder if yo:1 can indicate whBther you have completed your audit of the PEP Pr ogram referred to on Page 2i). MR. ZIPRICK: No, it 's not completed yet. As a matter of fact some of the information is still being . . . MR. SPIVAK: We ll are you in a positio:1 to indicate to the com mittee anything with re spect to your a·.1dits at this pr)int? MR.

ZIPRICK: I can give yo:1 a brief resum e ·:>f the position of the PEP Program, the 1973 program of $50 0, 000. It involved 24 co-operatives, 12 ,Jf which received $ 2•)3, 000 is satisfactor ily accounted for already. Twelve .Jthers for $1 85, 000 is still nJt fully acco:Inted for and still being worked on. There was administra tio':l expenses that were spent by the de partment from this portion of $3 7, 000 .

Now that's been of course audited in the normal C•Jurse and there's 45, 000 of that still on hand in cash under the control of the depa rtment and $3 0, 000 is on hand in co-operatives but the collectibi lity of which may be d::JCibtful because they are in financial difficul ties and have '.lsed the moneys as part of the working capital. S•J that pretty well gives a

summary of the 1973 program.

I 66 May 15, 1975 (MR. ZIPRICK cont '

d) The 1974 program was handled in a different way and it 's reasonably satisfactory. The re's 29 co-operatives that received grants for a total of $ 329 , 000 and the monitoring has been pretty good but the 1974 program is not finalized. Some of the work is still progressi ng. Now the re 's 171, 000 of that 500, 000 pertaining to the 1974 program that's still on hand and this is being used , I understand, for a 1975 program. MR. SPIVAK: Can I ask, of the $1 80, 000 that remain unaudited or incomplete, are the records available to you or are you attempting to reconstruct those records ? MR.

ZIPRICK: The department is attempting to reconstruct. There are some records but they 're incomplete and that's where the difficulty is. The 1973 program just much like the others has presented an awful lot of difficulties in accounting. MR. SPIVAK: Ca'l I ask Mr. Ziprick, why should those records be in the state that they are if they were trust accounts operated by departmental officials. MR. ZIPRICK: No, not ... well the money was turned over to the co-operatives and in some instances the co-operatives, the depart mental officials were more directly involved than in other instances.

Bu t in every case it was a co-operative operation, and just like the remainder of the co-operative records, in some co-operatives these are also quite unsatis factory. MR. SPIVAK: Were the government officials not countersigning officials on the cheques on these trust accounts ? MR. ZIPRICK: I am not sure. In many cases they were but I couldn't say right now with out checking th rough the files as to whether it was completely in every instance. MR.

SPIVAK: Bu t in those cases where the government officials were the counte r signing officials on the cheques, can you indicate that those records are intact or are those records also in the . . . MR. ZIPRICK: No, there were difficulties in both areas. As you know, in South Indian Lake, it was government officials were involved and the records are in a very very poor state of affairs so that it doesn 't go that where government officials were involved that the records were satisfactory. MR.

SPIVAK: With respect to this particular problem and in terms of your position, was it of concern to you that records in which the government officials were countersigning officers were in the state that they were? Was it of concern to you in terms of the accountability that you perceive is the responsibility as far as the Provincial Auditor is concerned? MR. ZIPRICK: Oh yes, that 's right. MR.

SPIVAK: In the course of the examination, did you determine that it was a matter of practice, again in the case of the trust accounts, to have cheques signed in blank by the officials of the co-operatives and then to be completed by the departmental people? MR. CHERNIACK: Mr. Chairman, haven't we been through this? MR. SPIVAK: No, that was on CEDF. This is another one. MR. ZIPRICK: We are aware that it was done but there again it 's not a proced llre that we recommend or really approve of. But we !m ow it was done. MR. SPIVAK: Was it done extensively in the case of the PEP grants? MR.

ZIPRICK: I'd have to check with the auditors, you know, how extensively . MR. SPIVAK: Has anything as a result of your investigation with respect to the PEP grants been referred to the RCMP or the Attorney-General? MR. ZIPRICK: No, other than certain accountability matters for instance in South Indian Lake which involves PEP grants. They are now being considered by the Department of the Attorney-General and ourselves for further accountability and I guess there 's a few others. But only in conjunction with the entire operation but not specifically as PEP grants. MR.

SPIVAK: Now let me understand correctly with respect to the issue on account ability. As an example, if a PEP grant or a PEP trust account had been set up and money was spent for a specific item, you would have attempted to try and reconstruct and determine that the cheque had been issued for an account payable to so and so, and once you'v e estab lished that you're satisfied with it because you have seen the dispersem ent of the money for the purpose consistent with what was supposed to happen with respect to the trust account.

But did you follow through to determine and check whether the material that was purchased was ever delivered, was supplied or was ever used?

May 15, 1975 67 MR. ZIPRICK: In the one instance that we did a complete audit of the co-operative, we did attempt to determine these kind of procedllres. In the others, we'd have to check with the various auditors that are carrying out the audit. But of course the ... MR. SPIVAK: We ll when you say .. . which auditors are you talking about? MR. ZIPRICK: Well, you see, the co-operatives are being audited ·Jy other auditors. MR. SPIV AK: During that pe riod of time they were being audited by the officials of the Department of Co-operative Development in the main. MR.

ZIPRICK: Well the 197 3 and this wh·Jle position, a firm of chartered accountants was brought in in addition to a qualified auditor that's on staff of the d= partment and they 've both been carry ing out audits. Some have been car rying out audits and some co-operatives have been audited by the departmental auditor and some have been audited by this firm of char tered accountants. MR. SPIVAK: You'r e talking now in terms of checking on the PEP grants itself as one aspect. MR. ZIPRICK: Well, you see , the 1973 PEP grants they were paid over to the co-operatives and the money was with the co-operatives .

So to carry out an audit ofthe grants could only really be done in conjunction with the audit ofthe co -operative . So that in carrying out , for instanc e, the South Indian Lake co-operative audit , the special audit they wer e doing,w e were also taking a look at the PEP records. An auditor that's let 's say doing another co-operative and let 's say that it 's the firm of chartered accountants, they in addition to auditing the co-o perative money and re cords, the co-op grant was to be audited at the same time and a report given. There are reports 0:1 some, there aren't on others as yet.

So that when the money went forward to a C·J- operative , the PEP money went forward to a co-operative, then it became part of the co-operative and this is where in some instances we lm ow that they have used the money as part of wor!<ing capital instead )f whatever it was designated [or. In this instance I don 't know, I'l l have to determine what the accountability will be. MR. SPIVAK: Did you reco mmend any disciplinary action with re.3pect to the matters that you have audited in connection with this ? MR. ZIPRICK: No, we just indicated the difficulties and expected solutions and correc tions.

Whether that would include disciplinary action or not would be the decisi on of the Minister and the department. MR. SPIVAK: You would perceive your resp:>nsibility as not being one to rec ommend dis ciplinary action. All you do is present the facts to the governm ent and the government is to act. MR. ZIPRICK: Our positi on is that we would present the difficulties, we would suggest in broad terms what shauld be and what's expected to be to accomplish good account ability, and then we'd expect the governmen t and the officials to carry it out. MR.

SPIVAK: Under normal circumstances you would normally have never examined the PEP accounts once the money had been transferred )Ver to the co-operatives. MR. ZIPRICK : And that applies to other PEP mo:1ey. The way for instance when PEP money goes forward to the City of Winnipeg, let' s say, to be administered. The mo:1 ey goes forward to another e:1tity that is controlled and audited and there 's also a notice goes out to the auditor from the department saying - or the auditor is aware, I'm not sure whether it is direc t notice -that there is this PEP mo:1ey.

Now the a'.lditor dllring the course of an a'.ldit, let's say the City of Winnipe g, will verify that the PEP mo:1 ey was used [or the purpose it was i.nte:1ded and then he would sup;lly a report. And if there wet"e any difficulties that he couldll 't account for, he'd qualify the report, then we would examine the qualifications and working with the depart ment would determ ine what other action should 'oe nec essary to account. But we would llot go to, let 's say the City of Winnipeg or the other municipali ties, and d·J that portion of the audit.

That would be lef t to the auditor to do in conjunction with the audit of the accounts as a whole, and then report back that the money has been used [or the p'.lrpClses it was inteilded and it was fully accounted [or and if there was a lack of accounting in some area, he wo·.1ld indicate in his re port what difficulties he'd encou ntered. MR.

SPIVAK: But in the million d•Jllars that's involved in two per iods , acknowledging that you know that the mo�ey was transferred to separate trust accounts, acknowledging that the money was paid Jut for either services or goods and you've been able to re.:)o�struct some on invoices b;J.t in many cases you haven 't or the other auditors haveil't, the fact is that you are not in a position to indicate to this committee that the goods were either delivered Jr were even used for their purpose.

I I 68 May 15, 1975 MR. ZIPRICK: Well to the extent that there's been accountability, I was ... MR. SPIVAK: But let 's understand exactly the degree of accountability that is within your capability and I don't mean it in any reflection with respect to yourself, I'm talking in terms of the kinds of things that you do.

With respect to a million dollars of PEP account handled sep arately but in many cases with the direction and approval of the officials of the Department of Co-operative Development, recognising that you have been able to trace moneys that have been spent and invoices in some cases that have been provided, you are now in a position to confirm that the goods that were purchased or the services that were purchased actually either took place or were delivered or were even used. MR.

ZIPRICK: Like for instance taking these 12 projects for which there is satisfactory accountability now of PEP money, part of that accountability would involve seeing that there is an acknowledgement, if it was a delivery of the material, that there was a receipt of these ma terials acknowledged as to what was construc ted; if it's payroll that there's payroll and that the people have worked and have received pay.

So in those situations, although I personally didn't do it, but the auditors that were involved, it would be a requirement as part of their regular audit to insure that they are satisfied, and if not it would be brought to the attention. So that where it is stated there is accountability, it also includes that if it was spent on materials that in fact there's evidence that those materials were received and have been used. Now as to how effective the program is and how effectively managed it was is another area.

But as far as the purchase and the receipt and the payment being made for materials that would be part of the audit I'm sure that that payment was not made or when it was made that there was evidence of receipt of goods. If it was for payroll that there was a payroll and that these people did work. Now when we get on to the effectiveness of that work and its programs and that that gets into another area. MR. SPIVAK: Are there a.'1y cases in which material has in fact been purchased but not utilized and is now being stored? MR.

ZIPRICK: Well we observed in South Indian Lake that there was material on the site and it was there. I don't know whether it's still there. It was not taken care of very effectively, I can say that. MR. SPIVAK: But you're not aware of any other material that's been purchased under these programs and which at this point the material has not been utilized :J:.It is being stored at this stage? MR. ZIPRICK: I d::m't know that. We'd have to consult with the p,8ople that were involved verifying other accounts. MR.

SPIVAK: Well I wonder then if I could lead from there to the questio::t of the loan the amount of the guaranteed amount that's in arrears now. I assume that - you may not be in a position to give us this information today, you may have it - I wonder if you would be able to indicate to the committee at the present time what the nature of arrears would be under the guarantee - Co-operative Loan and Loan Guarantee Board. MR. CHERNIACK: Mr. Chairman, surely that's a matter for an Order for Return. I mean the Auditor does an audit, he d,:>esn't do a report on current accounts.

An Order for Return surely would give that information. MR. SPIVAK: Well the only reason I think this becomes into an issue, Mr. Chairman, is because last year the Minister indicated that there were no arrears in the statements in the House. The Auditor has indicated and I quote, "a substantial portion of the guaranteed amount appears to be in a position requiring payments to be made to the lenders. " MR. CHERN IACK: Mr. Chairman, I'm sorry . . . MR. SPIVAK: I wond·�r if I can complete my point of order then Mr. Cherniack can com plete his. MR. CHE RNIACK: Sorry. MR.

SPIVAK: And I think that there is a substantial variation between what the Minister said in the House and what the Auditor said in his report and I recognize that an Ord,�r for Return can be requested. But I think it also has to d:> with the

interpretation of what is owing under a loan guarantee in the nature of the guarantee itself. And I wondered whether it would be in a position for the Auditor to give us an up-to-date report if he can. And I say this be cause I would rather rely at this point on the Auditor's information than on the information that was furnished by the Minister. MR. CHAIR MAN : Mr. Cherniack, on the point of order.

May 15, 1975 69 MR. SPIV AK: Well the statement was wrong last year. MR. CHER NIACK: Mr. Chairman , on the point of order. I don 't know anything about the statemen t that was made; I don 't know anything about the contradiction. All I do lmow is we're dealing with a report which is dated as of March 31, 1974. There has been ample oppor tunity to discuss what additional efforts have been mad� by the Auditor to go beyo::td this date. I don 't think we'v e been limited to this date. But surely it is still the aui it function we're talk ing about, that is accountability of records presented. And if Mr.

Spivak has an allegation that there is any contradiction betwee n what the Minister said and the Au:litor said, this is not the forum for it. MR. SPIVAK: No, I agree. MR. CHERNI ACK: So let me finish, let me finish. Therefore it 's up to Mr. Spivak now, if he wants to know information of arrears as of today, to find out from the govern meat. If he wishes, having received that information, to submit that information to the Auditor for his re port in due course when he makes the audit, yo:1 know, I think that he would do that.

He 's shown that he 's q•.1ite prepared to ask questions direct and has a right to ask them. But at this stage to ask the Auditor to report on someth ing which is not yet audited - I presume not yet audited - I think is beyond the scope of the Au:litor and cert ainly of this commit tee. MR. CHAIRM AN : I agree we are discussing the 1974 report. We'v e been brought I think up-to-date by the Auditor in many cases, much more earlier information than the 1974 report.

If that inform ation were re adily available and if it would expedite the affairs of this committee fine, but it just may not be readily available in view of the audit not being completed for 1975. So an Order for Return would seem to 'o·e the route to take to get the up-to-date inform ation from the Legisla ture. MR. SPIVAK: All right. If I may, Mr. Chairman, I'l l refer to some other matters.

In your statement, you stated on Page 20 that the rate of interest charged by the lend ing insti tutions may also be questioned when in a number of instances and in view of the loans being fully guaranteed by the Province of Manitoba. I think this is an unusual statement from the point of view of Provincial Auditor and I wonder if yo·.1 can explain that in a little bit more de tail. MR . ZIPRICK: The kinds of interest that were being charged from, on the basis of o:�.r assessment, wo:�.ld be mo:-e if the lending agency was taking some risk b:�.t in this case being fully guaranteed, there is really no risk.

All they were doing is carry ing out administrative function that the rates that were being charged - and d:m 't ask me about the specific rates be cause there again I wouldn't want to just be guessing - but they were substantially higher than the prime rate or thereabouts that wo·.1ld seem to be warranted in this kind of situatio::t. So we brought this matter to the attention and it is being reviewed and there has been som e adjust ments, I u-�dersta nd. MR. SPIVAK: May I ask and can you indicate whether the rates of interest were the normal rates of interest being charged ·or were they higher than normal.

I mean are you sug gesting that it should have been less than normal ? MR. ZIPRICK: Just in a general way, they wo:1ld be more in line if ther e was no guar antee or not the kind of guarant ee. In other words they were in line with ... MR. SPIVAK: With high risk rates ? MR. ZIPRICK: Not a real high risk b:1t it was running probably three per cent I think, around three percent or so over prime. MR. SPIVAK: I'd like to -w e' ll de al with I guess Southern Indian La\:e and the Co-op Fede ration when we go on to the other pages.

I wonder if you can indicate whether there is any additio:-�al infor matio::t to be furnished to the committee in connection with Kee- Noe-Zae. MR. ZIPRICK: The last we were checking, I don 't think that there is still a comp�ete decision as to who or how the re cords were going to be unscrambled and to see what co:1ld be acc.omplished. That 's my latest information but it may be not completely up-to-date at this p:.Jint. MR. SPIVAK: The Loan Guarantee Board gave a loan of $ 83, 500 in connect io::t with Kee-Noe-Zae. Is that right ? MR. ZIPRICK: That 's right. MR .

SPIVAK: Did you determine at the time that th9 loan was granted the basis under which the loan guarantee was undertaken ?

70 May 15, 1975 MR. ZIPRICK: Yes. MR. SPIVAK: And was it satisfactory? Was there a basis to believe that at the time that the loan guarantee was undertaken that it was based on a rational decision on the part of the board itself ? MR. ZIPRICK: As far as it was reported to me, there was no problems in that area. MR. SPIVAK: I'd like to now then just deal with the basis on which the Co -opera tive Loan and Loan Guarantee Board loaned money. It loaned money or guaranteed mo'ley to a loa'ling institution for mooeys advanced to one of the co- op.,ratives.

Did it undertake to determine be fore the guarantee was givea insofar as you 're concerned, in terms of your examination, are you satisfied that the guarantees that had been given had been based D'l reasonable probability of repayment? MR. ZIPRICK: We weren't satisfied with the kind of evaluations that were being mad·� at the time of guarantees. MR. SPIVAK: That would apply to the full range of guarantee s, not just the o'le specif ically. MR. ZIPRICK : That's right. MR. SPIVAK: So that the Loan Guarantee Boa rd was loaning money and you weren't sat isfied.

Did you bring this to the attention of the government at all? MR. ZIPRICK : Well, yes. All these matters were reviewed and discussed and .. . MR. SPIVAK: But your dete rmination, or the expression of co'lcern that you've just given came about as the result of this recent review. This did not come prior to this tim e, is that right? MR. ZIPRICK : Yes. You see it's a situation that was building up. To start with there was very very little activity and the loans were fairly small.

Now when you're deal ing with small loans of $1 0, 000, the kind of inquiries that you carry out before you make a loan are different than whe:J you' re getting into much larger loans. So it jumped, if I remember cor rect ly, in 1973 went up quite substantially and this is where the difficulties seem to have arisen mostly in that getting involved into these bigger kinds of loans there was a need for a more in depth inquiry and a more in-depth monitoring and ... MR. CHER NIACK: Like they did for CF I. MR. ZIPRICK: This did not happen as well as it should have and it wasn 't gea red up.

Now the concerns in the Legislature came around and at the same time there was concerns coming from the auditors and, you know, I wouldn't wa::1t to start saying well it arose from this or it arose from that. The whole situation became apparent and was being acted O'l. MR. SPIVAK: Caa I ask, were you aware at the time of the existence of the Co- operative Feder ation? MR. ZIPRICK: No, the Co-op erative Federation didn't come to our attention until an ex am ination of the board minutes.

We noticed that there was a loan guaranteed to the Co- operative Federation and the auditors started wondering well, you know, what organizatio 'l is this and this is when inquiring he became aware of this operation. MR. SPIVAK: So that the loan to the Co-operative Feder ation or the que3tion of the Co-op erative Federation really wa.3 brought to your attention as a result of the examination of the minutes of the Co -opera tive Loan Board. Is that right? MR. ZIPRICK: That's right. MR. SPIVAK: In determining wh.o i.t was do you have the date at the tim e that that loan was first guaranteed? MR. CHE RNIACK: Mr.

Chairman, that's really a matter that could be obtained through the Minister either by question -- (Interjection) -- Well, it was answered. I don't know what it has to do with the audit function. Obviously ... MR. SPIVAK: Well I think it has a great deal to do with the audit function frankly. MR. CHERNIACK: But the date is available, it was given. MR. SPIVAK: Well I accept that, the answer is in Hansard, that's right. Well I wonder now if you could ... MR. CHAIRM AN: Mr. McGill. MR. McG ILL: Mr. Chairman, I just wanted to ask through you to Mr.

Ziprick with re spect to the shortage of inventory of Gardenhill Indian Crafts, did that shortage take place within the space of one year? MR. ZIPRICK : I'm not sure whether it took place within one year. It became apparent as a result of the audit that was carried out at this point. But to give you the build-up and that,

May 15, 1975 71 (MR. ZIPRICK cont'd) ..... we'd have to go to the work papers and determine the kind of information . . . MR. McGILL: But you did conduct an audit the pre vious year. MR. ZIPRICK: No, we have never conducted an audit of Gar denhill. The audit that was being conducted in this report here is the report of the auditors that were retained by the de partment, a firm of chartered accountants. MR. McGILL: I understood that there was a departmental auditor involved in that oper ation. MR. ZIPRICK: Yes, there was an audit in the preceding - there were audits in the pre ceding year.

Whether there was any ind icatioCJ. of a shortage in the preceding year or not I couldn't say right at the moment. I don't have that informatioYJ. MR. McGILL: What action is now being taken, Mr. Ziprick, to pursue this matter of the shortage of inventory? MR. ZIPRICK : Well this matter has been brought to the Attorney - General 's attentioCJ., the department's, and the question arises as to, you know, whether the directors involved should be questioned lnd what explanations and to what extent it should be purs,.Ied and to get as much information about this shortage as possible.

That's in progress now and I understand the department is working with the Attorney-General and are getting more information and we are monitoring it as it's coming in. MR. McG ILL: Did yoa, as a result of this disclosure of shortage make any specific rec ommendations to either the department or the Attorney-General or the Department of Co- oper ative De· 1elopment in the matter of how this matter should be . . . MR. ZIPRI CK: No, we dldn 't make any specific rec ommendations.

We were satisfied that just to try and carry out more accounting or auditing verific ation was in a normal sort of a way -w ould be non-productive, that it required some more pointed inves tigation and so that was why it was taken up with the Attorney-Ge neral 's Department and working on the basis of legal advice.

The department, and of course with our observatioCJ. and assistance wherever it's req'.Iired to determine how far it should be goCJ.e into and I guess if it was felt by the Attorney General's Department that a police inquiry would be needed, I think that this would be the co urse of action that could be take:�. But so far I understand it hasn't been taken. MR. McGILL: Will you take any further action in this matter? MR. ZIPRICK : Well, you know, we're staying with the situatio:�, seeing what is davel oping and if it gets reasonably acco unted for then of course naturally there wo'..lld ·oe no further action.

If we get to the end of the line and it's apparent that any further actioYJ is just a waste of public money to pursue, that you �an 't really find out and ;his is the decisioYJ, well it will be reported as that and that's as far as we 'll go. On the othet· hand, if anything points that further action is nee d·ad in the line of inquiry including a police inq•.1iry we would insist on it, yes. MR. McGILL: If by the time your report is compiled for next year no action has beea taken , will you continue to bring this to the attention of the committee? MR. ZIPRICK : Oh yes, yes.

We'll monitor - items that we report we will monitor to their con clusions and then indicate what conclusions have been arrived at. MR. McGILL: Was there also a d.aplrtmental auditor involved in the Cr ane River Fe edlot Co-operative audit? MR. ZIPR ICK: Wen it 's either a departmental auditor hired on staff or the auditor is re tained by the department but -n o, I think that in this case, in the Crane River, it was the au ditors that were retained by the department and not the departmental auditor. But I know the d.epCity is here, I guess he could ·�onfirm it.

I'm sorry that my auditor that was in charge of this is ::m a course in Ottawa this wee!< and as a result he is not here today. So I am a little short on detailed infor matio:� and I'm going quite a bit by rec ollection but I think the Crane River one was audited by the firm tha: was retained by the department. MR. McGILL: To your knowledge, has any actioCJ. b2 en taken in law to determine the re sp:m sibility for this shortage up to this point by ... ? MR. ZIPRICK: Well, the Attorn eys -General are looking at it and the department has been pursuing to get more information and the matter is being looked at.

Now as to what the views of the Deputy Attorneys-General are on that,I haven't been briefed lately. We've talked to him just in a general way not very long ago and he indicated that he was going to get an up-to-date report from his officials before too long and we would sit down and review the situation and see where we go on from there. But all I'm aware of now is they're working on it.

I I 72 May 15, 1975 MR. McGIL L: But no official action has begun to your knowl edge. MR . ZIPRICK: You mean an official inquiry of the board of direct ors ? Not to my knowl edge but there could well be because he wouldn 't consu lt with me if he was going to undertake these kinds of inqui ries and there's no reason why he should. The respons ibility is there. MR . CH AIRMAN : Mr. Graham. MR. GRA HAM : Mr. Chairman, I think most of my questions have been asked by the Member for Brandon West. I had one other though.

If any of these various operations are placed in receiversh ip and liquida tion occurs you still continue to watch it through to its fin al conclusion, do you ? MR . ZIPRI CK: Yes, we would see now in this case whatever the acti ons. One is we will not agree to release payment of money on a guarantee without asce rtaining that there is docu mentation to have the right to take action against the assets that may be existing and whatever recoveries, and then we follow through to see whatever action that's been done that the pu blic interest is protected as much as possible.

And any recoveries that can be made have been made. MR. CHA IRMAN : Mr. Spivak. MR. SPIVAK: Mr. Ziprick, I may have missed an t'.nswer to this question and if I have I apologize, I was just out for a moment. Can you tell me when were these matters referred to the Attorney -General's office, the approximate time. MR. ZIPRICK: I think it was somewhere around, oh, probably September or in there abouts but I'd have to check the files. MR . SPIVAK: You've had no communica tion from them on ... ? MR.

ZIPRI CK: Oh, we've had several meetings, we've had several meetings since that time and as a matter of fact the auditor that's in charge of thi s, he's working with one of the Attorney -General's officers on an ongoing basis. They'r e communica ting back and forth on an ongoing bas is. As points come up, they 'r e in commu nica tion. MR . SPIV AK: I just wanted to confirm one point, and I again get mysel f into a position where I don 't waY�t to pat you in a pos ition of answering questions that the Minister or the gov ernment should.

But with respect to the Co -operative Loan and Loan Guarantee Board, the only amount I can see that has been authorized over $1 00, 000 has been the Southern Indian Lake amo:mt. I'm sorry, no , there's one earlier than that. There was one in March 31 st of 19 72, it was $1 65, 000, and in fact ... I'm sorry there were three in that period of tim e. My point being -- (Interjection) -- No , no I want to ask Mr. Ziprick, at the tim e my under sta nding was that there was a limit of $1 00, 000 for the ability of the Co-opera tive Loan and Loan Guarantee Board to authorize or guarantee a loan. These loans are higher.

Did you de termine at the time whether the minutes provided authority from the government for these spec ific amounts? MR. ZIPRI CK: Well, we would check to see whatever . . . you see, these limitations are of course internal and not legis lated and whatever limitations that are put on inte rnally , we are generally aware of these limita tions. We follow through to see that they 'r e complied with, and if they wouldn 't be co mplied with , we'd report . But to my knowledge whatever was acted upon , there was approval of the government . MR . SPIV AK: All right.

So there was approval of the government on these either spe cific or by allowing the internal arrangemen.ts to be altered. MR . ZIPRI CK: Yes. MR. SPIVAK: But I mean what I'm saying to you at this point and I put it to you this way, the only check that the public has with respect to how this operates is yours elf. We can ask questions and we can get the docum entation but the only check as to whether this has happened, accor ding to what ever internal arrangements exist, is yourself. You 'r e the only one who has ac cess to it, we do'l 't have it.

So therefore, and again , I want to be sure that you 'r e sure that the internal arrangements were alte red, in these cases satisfactorily , and I assume that what you're saying is that you're prepared to acknowledge that at this point. MR . ZIPRI CK: Yes. The procedure is that first of all, the money has to be allocated to the department from a legisla tive vote and so there's a limit that we consider as a legis lative limit. Now the Legisla ture d::>es n 't vote in this instance spec ific mo:�.ey, it 's one of these gen eral capital votes and then it 's allocated.

Now to the extent that it 's allocated, we consider that as a legisla tive alloc ation and as to whether there's legisla tive approval or not, provided that limit is not exc eeded, then the board would be complying with the legisla tive requiremeats.

May 15, 1975 73 MR . SPIV AK: But not necessa rily with the internal arrangements. MR. ZIPRICK: Then there' s internal arrangements just as there are Management Com mittee of Cabi net requir es $2 3, 000 and :)Ver approval, there 's limitati on s placed on this. No vv we see that these internal arrangements are being complied with and if they 're not being com plied with, we'd oring it to the attention of the p9ople concerned ind ica ting that they 're not being complied with. MR . SPIVAK: Wo:.tld you normally bring that to the committee 's attention though ?

If an internal arrangement is not being complied with you would bring it to the government's atten tion and they would take whatever corrective action is nec essa ry and that would normally not be reported to this committee then. MR. ZIPRICK: No , it would only be repe>rted to the Legisla ture if the whole thing showed an overall weakness and there was concern about the overall op9ration.

But jus t because there was, you know, in som e instances maybe lack of imme diate approval and subse quently the gov ernment had approved it and laid de>wn whatever requir ements they needed and these were being complied with, we would take no further action . MR. SPIVA K: Th9n can I ask when the audit was undertaken with respect to the mill i.on de>llars that was guaranteed to Southern Indian Lake, the add itio:m l guarantee and I guess there was $3 00, 000 that was cancelled, did you determine the authority , the interna l and external authority for that ? MR .

ZIPRICK: A mi llion, I thought it was $8 00, 000. MR. SPIVAK: Well, I'm just referring back to the report of April 22 nd, 1974, which would be your statemeat I guess in which - I'm sorry I gue ss it is not your statement; it 's the statement of the Dep artment. The

schedule for the year shows additional guarantees of a million dollars for Southern Ind ian Lake. MR. ZIPRICK: Oh, yes, but that's the way - a balancing process. I don 't think that there was ever - the total was for a million dollars. There was a number of items sn yo'.l total - see there's ca ncella tions also of $ 300, 000, so yo'.l'd ·rrave to determine the order of the ca ncel lations to see whether there was at any time a wh:>le million.

I am ne>t aware of it ever being a million but it could be, we'd bave to check beca use, you see, you 'd have to determine that the order that the ca nc ella tions came in to determine vvhat the maximum was at any one tim e. MR. SPIVA K: I appreciate that but in terms of authority , the minutes I would assume and I think this is probably what was indicated, would indica te a guaranteed potential of a mil lion, not necessa rily that a million was commit ted. MR. ZIPRICK: Yes. MR.

SPIVAK: So the minutes would indica te a millio'1 potential even though $3 00, 000 may have been cancelled ·:>ut when it was finally determined the actual amo·.nt that was to be undertake:J.. Otherwise, you know, I see no point in the million being ind icated. My pe>int being, at this stage , di d the minut es indicate a million wh'.ch I believe this would probably be the case, was probably the ca se. Did you determine the authority for the Co- operative Loan Board guaranteeing a mill ion, both the internal authority and then of course ... ? MR .

ZIPRICK: I would think the auditor would follow that thro'.lgh, yes. MR . SPIVA K: Would you accept an actio:1 by the government by Order-in-Council which would be retroactive to cover this as sufficient from your point of view to take care of the in ternal matter ? MR. ZIPRICK: I think you co' .lld, yes. MR. SPIVAK: So that it 's poss i ble - I'm not suggest ing that this ha ppened - but it would be pos sible for an action to take place which was not within the internal arrang ements b::tt which subseq uently was clarified to be permis sive !Jy the Ca binet and that would be satisfactory to you. MR.

ZIPRICK: That's right. MR. SPIVAK: And you would [eel no o':Jligation to or feel that there is no obliga tion O'J your part to rep-ort it to the Committee or to the Legisla ture ? MR . ZIPRICK: No, not . . . It would depend •J'J the .::: irc umsta nces but if there is, you know, discussio'Js were going on or som ething like that and the formal ap;Jrovals were s0me time.3 a little later we would co'1sider them, that it 's fine.

Novv if there was ;1o discus sio'1s and the thing was really -t hen we 'd take a look at, you kn.ow, how much control d·Jes the gov ernment have over the department and if we were concerned that there wasn't too good a con trol, we would certa inly make an iss ue not so much abClut the items but the items as indicating a very weak system of control.

I I 74 May 15, 197 5 MR. SPIVA K: Well if the general practic e, internal practice was to have $1 00, 000 as a limit and a millio� dollars ca me through , then I would assume that you would basica lly check to know that it was handled properly in the beginni ng, not necess arily retroactively. MR. ZIPRI CK: That's right. MR . CH AIRMAN: Page 20-- pass. MR . SPIVAK: Well I think what we have to - on the next page we deal with Southern India n Lake Co- op Fisheries which really starts on 21 and goes through to . . . MR. CHAIRMAN : On 21 and go on to 22 ? MR.

SPIVAK: Well, on the assu mption that we're dealing -- (Interjection) -- Yes, that's right. MR. CHAIRMAN : Agreed ? (Ag reed) MR . SPIV AK: Well, Mr. Ziprick, have you been able to find the records of Southern Indian Lake yet ? MR. ZIPRI CK: No, they 're still incomplete to the last time I checked, and that was I guess prior to this preced ing meeting, I don 't think I chec! <ed . MR . SPIVAK: Who 's fault would that be ? MR . ZIPRI CK: What's that ? MR. SPIVAK: The fact that there are no records or the records are incomplete. MR . ZIPRICK : Well it 's a good question.

There is a board ·::>f direct ors, there were of ficials and the allowing of this kind of thing to go on. It 's a most unus ual situation, I agree but . MR. SPIVAK: Is the responsi bility really that of the bo'l.rd Gf di rectors of the .�a-operative or is it really the Department of Co -operative Developm e!lt ? MR. ZIPRICK: Well, in technical terms, this is an incorporated com pany under The Companies Act and the board of directors are responsible to insure that these things are main tained. MR. SPIVAK: But as the Provincial Aud itor now h.lving had the opportunity to review it, are you not . . . ? MR .

CHERNIACK: Mr. Chairman, I would like to interru pt on a point of order. MR. CH AIRMAN : Mr. Cherniack on a point of order. MR . CH ERNIACK: Yes, the last paragraph under this item on Page 23. It 's your re sponsibili ty to ... the questions. MR . SPIVAK: Well, Mr. Chairma n , ... MR. CH ERNIACK: "Matters of cash deficiencies and .lack of ac countabil ity have been. re viewed by the Department of Co -operative Developm ent and the Attorney -General's Department are under further considera tio n.

" I leave i.t at that because I don't know any more ab·::> ut this than I read here and I just feel that it should be made clear that there may be ce rtain mat ters which should not be discussed at this stage. I do� 't know whether there are or not and I suppose Mr. Ziprick d::> es, but since Mr. Spiva k has been following a practice and a method of cross -examination, I think we should be conscious of the fact that there are other responsibil ities beyond those of just answering all sorts of question s. MR. CHA IRMAN : Mr. Spivak, on the point of order . MR. SPIVAK: Mr. Cha irma�. just on the point of order.

This brings in the question of a very serious problem. The only check and ·::> alance on a number of things that happen with the government is the legisla tive proc ess or police power. Police power is in the hands of the Attorney-General and I think an argument and a very goGd argument ca n be made and >¥ill be made as to whether that protection is sufficie nt, based not just on the inf ormation that's been supplied here, but 0::1 the whole course of conduct with resp ect to a whole series of matters in which allegations of wro::�gdJing co! lcerns have been brought to the attention of the Attorney General.

And if this legisl ative commi ttee is not going to have the opp::>r tunity of asking its offic ial, and Mr.

Ziprick as Provincial Auditor is an official of this Legislature, questions relating to his investigation and determinations and we are going to be met with the answer that the matter is being considered by the Attorney -General and then to a large extent thi s com mit tee, the Legis lat ure, will be st onewalled in a way which -- (Interjecti on) -- Yes, I say "stonewalled " in a way in which the accuracy and the truth, the accuracy and truth :::>f the state meats and of representations will not be known.

We are facing a situation in which serious questions have been asked with respect to the handling of public moneys, not only in the Department of Co -operative Development, in other areas. And we are entitled to rec eive answe rs and, you know, the gratuitous use of the fact that the matter is before the Attorney-General as a means of sort of stifling a discussi on and

May 15, 1975 75 (MR. SPIVAK cont' d) ..... accura te in formation being pcese:-�ted, I think is in dic ative of a tone with res pect to the whvle approach to the question of proper accou ntability whi ch is the matter which will be discussed not just within this com mittee but within the Levis lature and I would assume for several sess ions to come unless .there's correc tive actio:J..

I feel it incum bent upon myself to say to you, sir , and to the Provincia l Auditor that I think we are entitl ed, recog nizing that I acc ept his discre tio� as to those matters which he may very well believe are matters to be considered within the inv estigatory p:>wer of the Attorney-General because of in formation that he has that we are not aware vf, but I would leave it to his di scr etion as to wheth er the answers that we are asking sho'.1ld in fact, or the questions we are asking should in fact be answered.

I suggest that there is a course of cond.1ct with respect to these matters that is very very revealing with respect to the attitude of the government, and I am not prepared and I say this to Mr. Cherniack, I am not prepared to simply sit here and [ind the use of a refer ence to the courts, the use of the matter of the AttorDey -General as being a means to prevent inf ormation which is proper info rmation from being brought here. And .30 I put the question again to Mr.

Ziprick, I ask him in effect whether in reality the control of the Southern Indian Lake Co- op was really in the hands of the Department and not those people who technic ally were the people involved or who, from all practical purposes, had left control to the departmental officials. MR. CH AIRMAN : Mr. Ch erniack, I feel on the pDint of order that the line of questioning, if there is some answers that the Provincial Auditor may feel would je.:>pardize in any way any considera tio:1s that are before the Attorney -General's Departm ent, he ::: ould so indica te to us and pro':la bly not answer the question.

But any questions that he feels might provide additional infor mation on the particular point under considera tion, we would cer tainly welcome them from him. Mr. McGill on the p·:>int of order. MR. McG ILL : On the same point of order, Mr. Cha irma n. I think this difficulty arose out of Mr. Spivak 's question about who Nas responsible for the lack of re:::ords at South Ind ian Lake and I think Mr. Ziprick 's reply was that it was a good question indica ting that he felt that that was a question that was worthy of considera tion. So I think that we should proceed on this line of que stioning and ce rtainly Mr.

Ziprick I think is prepared to enlarge upo:J. the answers which he has given in his rep.:>rt. MR . CHA IRMA N : Mr. Ch erniack on the point of order. MR. CH ERNIACK: Mr. Chairma n , fir stly I am perfectly satisfied with both your com ment and Mr. Spiv ak's statem ent that he will accept the discr etion of the Provincia l Auditor. Until he said that, I did n't think he was prepared to do so. He a aid that he d:.>es n 't think this com mittee sh:Juld be pl·e vented [rom obtaining info rmation and certa inly info rmation to me is the kind o� info rmation the Auditor has available and ca n give us.

But he Nas ask ing the Auditor for an opinion as to blame, he sa id who's to blame for this ? And it was there where it was no longer a question of in for ma�ion but a question of an opinion as to who is to ':!lame Nhich I as su me, and I ca n only assume it because I d:m 't know what it is, but I read here that som ething is under considera tion as to accou ntability by the Attorney-General's Department.

Now if that means that a charge may be laid against someo�e, who is to blame, then surely the Provincial Aud itor should not be asked [or an opi nion to give now which may affect a po s sible charge and the trial. That was my point. It had nothing to do with info rmation. Of course, it puts him in a hell of a pos ition but the Provincial Auditor is in a po sitio:� to answ er on it. B•1t I make the point that I objected not on the question as to inform ation but on the question of opinion which may relate to crimi nal liability . I don't know whether it does, I d::m 't even know whether that's being investigated.

Therefore I agree with Mr. Spivak 's statem ent towards the end Jf his comm ent that he would rely on the dis cre tion of the Provincia l Audito r. I would too. Let me als· J say that Mr. McGil l's interpr etation of a response sayinE; that's a good ques tion, is both novel and literal. Because Nhen I hear som ebody say well that's a good question , it 's like saying well I'd like to know the answer mys elf. Ho vvever if Mr. Ziprick considers it a good, valid and worthwhile question he can respond ... MR .

CHAIRMAN : Well, ge::1tlemen, pos sibly we can pro::: eed and aGcept the Provincial Auditor 's judgment on whether he should answer the question or not. MR. SPIVAK: Well, again just on thi s, I jus t d:.> not accept what Mr. Chernia c!� says, that I ca nnot ask a question as to who is to blame. I recognize that if we are now talking in a general way or in a specif ic way of a person and in the matters being under inv esti gati on, I

76 May 15, 1975 (MR. SPIVAK cont'd) . . . . . accept Mr. Zipric k's statement that the matter is under inve s tigation and there is nothing I can deal with it. Bu t if, in fact, the answ er is a much more general one, that I find that the problem areas are problems that have really come about as a result of the lack of organiza tion and proper handling by the Department of Co- operative Development, the:1. I think that inf ormation is rather pertinent and ... MR. CH ERNIAC K: There again that 's already stated here. MR. SPIVAK: Well it 's not. No, it 's not stated.

There is an indi cation that there has been di fficulti es, there's an indica tion that records weren't maintain ed, there's an indica tion with reapect to the use of the power-of-attorney but I am more inclined to find out from Mr.

Zi prick his general obs ervations with respect to the very impor tant ques tion as to whether, leaving aside the technical legal structure which says that the co-opera tive itself existed as a legal entity by itself, whether he is prepared to acknowl edge to this committee that for all in tents and purpCJses its operation was really handled by the Departm ent of Co -operative Develop ment and the off icials and that in effect the expenditure of moneys came about as a result of their actions with very little if any input by the people who we;:oe the representatives of the co-opera tive. MR .

CH ERNIACK: You see, Mr. Chairman, Mr. Spiva k started out sayi ng the kind of thing you sa id and ;he kind of thing I agreed to, that in a ge:1.eral way these thing s can be ques tioned, but now he's asking Mr. Ziprick to respond specific ally that it was departmental offi cials that di d cer tain things which he alleges were ... and I'm sa ying that that is clearly a request to Mr. Zipric !< to start pointing fi ngers at people who may or may not be charged and I remember you trying to get names o•J.t of the Minister and the Minister refused to give names. I believe it was the same . . . MR .

SPIVAK: Not it wasn't. No, no. MR . CH ERNIAC K: Oh, it was not the same problem. Well it was a similar problem. And, you know, I'm prepared again to leave it to the discre tion of Mr. Ziprick but not to ma_ke it appear as if he is required, in a reasonable way, to answer questions which are related to invest igations of pos sible crimi nal action. MR. CHAIRMAN : Mr. Spivak, proceed. MR. SPIVAK: No, Mr. Chairman, on the point of order.

I again say that there is a de libera te attempt to preve;::Jt inf ormatio:1. from being given to the Legisla ture and the attempt is in the mista ken belief that because a matter is referred to the Attorney-General, it automatic ally precludes any inf ormatio:1. being supplied. The fact is ... inf ormation being supplied or even judgments given. You know, Mr. Chairman, we have a funny situation. All of the matters that we di scuss are all referred to the Attorn ey-Ge:1.eral, and frankly we see very little action by the Attorney General.

There is, as far as we ca n see, there's been a few meetings and we can trace histori ca lly the timing that has taken place, you know, with respect to these matters. And one gets a very di stinct impres sion of what this legis lative sessi on is going to be all about. It' s going to be discussi ng matters which cannot be dealt with because the mat ters have been referred to the Attorney-General who .lt this point isn 't acting on anythin g, so because he doesn 't a,:;t 0:1. anything nothing is going to happen. So all that is required is for Mr.

Cherniack or ot hers to esse ntially say the matter can't be de alt with because it 's being considered by the Attorney General. And if this is the case then the continual stonewa lling will prevent any ability, any ability on thi s. And that's why, Mr. Chairman, the question that I have put is an accura te one. If Mr. Zipri c!< believes that there is an individual to be charged - I don 't know that that 's the ease - then believe me if that would prejudice the situation then I can accept his answer.

B ut that woald ·,H� the only condition in which he would I think have any right to refuse a comme !lt, a co mment that he as Provincial Auditor and as the official representing this legisla tive commit tee and :; his Legislat ure, reporting to us is the O'lly way in which he could avoid answ edng di rec tly a judgm e!lt that may be before him. Now his judgment may be the direct opposite to what I'm saying, I don 't know that. But I don 't want in any way -- (Interject ion) -- What ? MR. CH ERNIAC K: Yo•J. d·on't accept his discr etionary ... MR.

SPIVA K: I accept his discre tion but I want it clearly understood with respect to the eaveat. -- (Inte rjec tion) -- No , it was a caveat, that Mr. Cherniack ... MR. CHERN IAC K: Oh, come off it. MR . SPIVA K: .. . has basica lly sa id that as long as a matter is being considered by the

May 15, 1975 77 (MR. SPIVAK cont 'd ) ..... Department of the Attorney-General that the matter ca n't be an swered in any way. And I say to Mr. Ziprick, it ca'l only not be answered if in fact he is aware or believes that there will in fact likely be cri mina l charges in one or many cases and then that would have to be excluded. Otherwise, th ere's no p:>int to this wh:>le exercise. MR. CHAIRMAN: We 'l l proceed on the ori ginal understandi ng that Mr. Ziprick wollld .1se his discre tion in answering the q•.1estion and if he can rememb•3r the question. Mr. Ziprick. MR.

ZIPRICK: You know the point of blame, this is the whole situation. There's a cor poration , direct ors, official s, the department was involved and this whole point at is sue, we could specula te and think of these different ap;:�roaches. Now as far as if the re's going to he any attempt at recovery or bringing anybody dir ectly into accou ntabi lity , and this is a highly legal matter, and :his is why it 's before the Attor;1ey-General's Department.

As to whether any of the dir edors should be brought to ce rtain acc ountability or any of the offici als and the arrangements of the department with the direct ors, what legal sta tus and obligations there :1re, this is the kind •Jf thing we don 't know. All we know is that the kind of records and the kind of accou ntability and accou nting and business operations that you 'd normally expect in this kind of operation wasn't there. We ca n't establish an acc ountability at this p0int, not comp�etely. It 's being pursued further.

Now as far as the Attorney-General's Departm ent is C·:J:tcerned, they 're acting on it. I'm not in a posi tion to say how fast they should go or shouldn 't go but I ca n say this. That if it comes to next time to report and we haven't, in our judgment , received the kind :>f attention that should have been rece ived and the kind :>f inf ormation that we should be bring ing to the attention of the Legi sla ture, we ca n't bring, we will so indicate. And we will try to indica te as to why we're not able to bring it. But at this point, I ca n honestl y say that the Attorney -General is working on it.

Now whether it 's fast enough or not, I woul d1' t wa'lt to express an opinion at this time. It 's som ething that is being worked 0'1. As to what will come out of all this, well as I say it 's a good =1uestion. We'l l have to wait and see. MR. SPIVAK: When you talk in terms of di rectors, Mr. Ziprick, are yo: .1 talking about directors of the co -operati ves or the dir ectors of the department ? MR. ZIPRICK: The directors of the co -operativ es. They were legal directors and they were acting as directors of the co-opera tive. Now how much input they had •Jr didn 't have I, you know ... MR.

SPIVAK: But are you seriously , are you serio usly ... this committee because I think this is very important beca use this has been intr oduced by yourself, are you seri ously in any way puttin g into question their posi tion with respect to any legal lia bility on their part either cr iminal or civil. MR. ZIPRICK: I don't know. But this is why the wh•Jle thing has been. referred to the Attorney-General. That's why we did e�'t pursue.

In a normal ca se of an audit of thi s nature, this is where we'd have searched for inf ormation from the direc tors, because it 's so compli cated and that we felt that we did n't wan: to act on our own and search that info rmation. So we're waiting for the direc tion of the Attorney-General's Departme nt to see where do we go from here. But as far as I'm concerned, it 's not co mplete and it ca nnot be left in that state , that there's got to be better accou nting. And as I understand it, the Attorn ey-General, the Deputy Attorney -General fully agrees with me and we will try and obtain a better accounting.

Now as to who is really respo::t sible, you know, I can specu late in many ways but these are real legal matters and will have to be pursued in that way. d!lte ? MR. SPIVAK: When was the matter referred eo the Attorney-General ? Do you know the MR. ZIPRICK: No, bat it would be some time in the summer or . MR. SPIVAK: Of last year. MR. ZIPRICK: Of last year. MR. SPIVAK: Have the RCMP people been. broaght into this matter ? MR. ZIPRICK: No. MR. SPIVAK: Based :>n the kind ·:Jf investiga tion that you believe sh :r.1ld ·Je andertaken, would it n::>t be �or mal in the cour se of events to have the RCM P involv ed ?

MR. ZIPRICK: Well , you see, I know the feeling of the Deputy Attorney-General as far as the RCMP is CO'lcerned. He always takes the view that the RCMP should not be used to do bookkeeping or account ing work and so b·3fore the RCMP are brought in, he always feels that there should be some evidence that some form of a crime has been commi tted and until this

78 May 15, 1975 (MR. ZIPRICK cont 'd) ..... would become apparent, that somebody has commi tted a cr ime, he doesn't normally bring in the RC MP and I subscri be to that view mysel f. I fully agree that we shouldn 't use the police in every opportunity to get at other people unless there is some reasonable evidence of a crime ! because that would be carrying things too far. MR. SPIVAK: Well, Mr. Ziprick, you're suggesting though that the matter was too com plex for you in your normal auditing proc edure to be able to follow through.

An inve stigatory work had to be d::me and you therefore referred it to the Attorn ey-General. Yoa say that it should not be dealt with by the RCMP , you agree with him, because it 's not cr iminal in nature. Then what. really you're asking ... MR. ZIPRICK: I did ·1ot say it was not of criminal nature. We ha ven't se en, I haven't -- ma ybe the Attorney-General has more inf ormatio:� now. If you really want to know how far the Att orney-General has progres sed, maybe you should have the Deputy Attorney-General here to explain what the position is because I am not monitoring his ongoing position. MR .

SPIVAK: That would '::Je a very good idea, Mr. Chairman, but the thing that I would like to understand is if the Attorney-General is not going to have the RCMP inv es tigating this matter and the matter is one of invest igating of acco unting procedures, why would n't the Pro vincial Auditor in the first place have completed it ? W as it too mueh work to be done with re spect to your staff ? MR. CH ERNIACK: I heard him say it was a legal problem. MR. ZIPRICK: It 's not a matter of acco unting.

If it was a matter of books and whatever have you that we would carry it out, but it 's getting d::Jwn to really questioning people and getting information from people and taking it, do you take that evidence under oath or don 't you. Who is going to take it ? And I know I've got powers to take evidence under oath but I would use it only very very ca refully. I wouldn 't go and just say, well you know I've got some concerns here, I'm goi.ng to take evidence under oath.

So if the question arises if we're going to start in that direction and take evid· ence under oath, be fore I start I would want to know the legal posi tion, the kind ::Jf approach that we should take and then carry it out without any hesita tion ri ght to its conclusion. But this is the whole point at iss ue. If it was just a matter of getting more books and vouchers the moment more vouchers or b:�o' �s become available we are there and we are chec king it and bringing it up-to-date.

But the quest ion here is not more books , it 's getting at inform ation from pr')ople and to take that inf ormatio'l I think the people should be warned properly and be taken in a proper manner. This is where the Attorney-General 's Department is looking into and going to give guida nce. Where it stands, I wouldn't want to in dica te what the Attorney-Generals are doing. I think that they should - if you wa_'1t a report, you should get it from them. MR . SPIV AK: Well jus t one other question . MR . CHERNIAC K: Committee rise. MR . SPIVAK: Fine, committee rise. MR. CHAI RMAN : Commi ttee rise.

We'r e on Page 21 -S outh India n Lake Co- op Fisher- ies Ltd. when we resume our next meeting. Agreed ? (Agreed) Co mmittee rise.

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Collection	Manitoba — Debates (Hansard)
Citation	30-2-pa3
Type	hansard
Volume / chapter	30th 2nd hansardpdf pa3.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	977334cc302d4e7c1fb2e6becec930d9bd1ae986

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