vii THIRD REPORT – Presented March 17, 1993, S.P. 73 Mr. Swenson, Chairman of the Standing Committee on Public Accounts, presents the Committee’s report as follows: Your Committee respectfully requests from the Government a response to this report within 120 days. Your Committee held several meetings to discuss an

interpretation of its order of reference from the Legislative Assembly and furthermore outlined a number of operating principles and practices to be followed in the fulfilment of its mandate. Your Committee completed its deliberations on the Provincial Auditor’s Annual Report for the year ended March 31, 1991 and th e Public Accounts of Saskatchewan for 1990-91. Your Committee held 17 meetings during the Second Session, Twenty -Second Legislature to complete the review of certain departments and agencies.

CHAPTER 1 – OBSERVATIONS Strengthening Public Accountability (.01-.04) 1) Your Committee considered the Provincial Auditor’s concerns about strengthening public accountability and that the first important step for the Government to follow is to plan, manage and account for its operations as a whole. Financial Plan for Government (.05-.07) 2) More speci fically, your Committee agreed in principle with the concept of the need for a multi -year financial plan for the Government.

Recommendation 3) Your Committee recommends that the Government study the implications and issues related to the achievement of this goal. 4) That, as to the matter of an annual financial plan showing proposed revenue -raising programs and spending programs of all government organizations and the matter of a multi -year plan for all government organizations this Committee recommends that the O ffice of the Provincial Auditor, the Crown Investments Corporation and the Department of Finance undertake discussions on this issue, and return to this Committee with a joint report.

During these discussions, the Committee asks tha t the advice of the Institute of Chartered Accountants of Saskatchewan and the Provincial Audit Committee be sought. Financial Reports (.08-.10) 5) Your Committee noted that the Government had moved forward with reporting financial results of the Government as a whole by publishing

summary financial statements for the Province in the 1992 Public Accounts. Annual reports for Government Organizations (.11-.14) 6) The Committee noted the Provincial Auditor’s comments that significant improvement had been made in terms o f preparing a report for each Government organization and making them public. Recommendation 7) Your Committee agreed with the Provincial Auditor’s recommendation that the Government provide to the Legislative Assembly, information about the objectives o f making and keeping investments in mixed corporations and recommends that the Legislative Assembly instruct the Crown Corporations Committee to study how the above recommendation should be implemented.

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CHAPTER 2 – APPOINTED AUDITORS Recommendation 8) Your Committee examined the Provincial Auditor’s concerns about the delay in receiving on a timely basis, the reports and working papers of an appointed auditor, delays which ultimately affect public accountability. 9) Your Committee recommends that the Government work cooperatively with the Provincial Auditor by involving him in the process of choosing appointed auditors, establishing audit plans, maintaining solid communications through frequent audit updates, and ensuring that the Provincial Auditor ha s sufficient time to comment on the final audit report prior to its public release.

CHAPTER 3 – FINANCIAL MANAGEMENT REVIEW COMMISSION Commission’s Recommended Accounting Principles (.11-.14) Recommendation 10) Your Committee recommends that the Govern ment adopt the accounting principles and reporting standards established by the Public Sector Accounting and Auditing Committee (PSAAC) of the Canadian Institute of Chartered Accountants (CICA) and encourages the Government to move towards the use of these principles for the preparation of financial plans and budgets.

Crown Corporation Accountability (.20-.21) 11) Your Committee reviewed some of the Commission’s recommendations which stressed the need to strengthen the ability of legislators to hold Crown corporations accountable.

Recommendation 12) Your Committee agreed to recommend as follows: * Decisions to create Crown corporations should be properly reported to and debated by the Assembly; * A mandate for each Crown corporation should be prepared and provided to the Assembly, setting out the corporation ’s purpose and accountabilities; * Crown corporations should have the same public reporting requirements as do Government departments unless otherwise stated in the mandate of the corporation; * Financial statements for each and every subsidiary within the purview of the Crown Investments Corporation of Saskatchewan should be provided to the Assembly on a timely basis.

Specific Objectives, Expected Costs and Management Plans (.22-.27) Recommendation 13) To enable legislators to better assess the relative merits of transactions or commitments before they are entered into by the Government, your Committee recommends that the Government set out clearly specific objectives, criteria to be used to determine whether those object ives are being achie ved, expected costs and a manag ement plan for each significant transaction and commitment.

CHAPTER 4 – CORPORATION ACCOUNTABILITY Tabling of Financial Statements (.01-.10)

ix Recommendation 14) Your Committee recommends that all Government corporations table annual financial statements in the Assembly, including those where the Crown owns less than 100 per cent of the issued share capital. Equal Accountability (.11-.23) Recommendation 15) Your Committee recommends that: The Public Accounts should include the financial statements for all Government corporations; All Government departments, agencies, and Crown corporations reporting to Treasury Board provide a list of persons who have received money; The Legislative Assembly ask the Crown Corporations Committee to consider whether those corporations designated under

Part II of The Crown Corporations Act should report the same kind of information as is required by departments. Crown Corporation Dividends (.24-.29) 16) That the Committee notes the Auditor’s comments but points out that there are now annual financial statements which report on all government financial activity, therefore, enabling the Legislature to hold the Government accountable. Furthermore, the Committee notes the Provincial Auditor is now the sole Auditor for Crown Investments Corporation.

CHAPTER 5 – ACCOUNTABILITY PROCESS Recommendation 17) Your Committee recommends that the Provincial Auditor Act be amended to require the Board of Internal Economy to approve the spending plans of the Provincial Auditor.

CHAPTER 8 – BOARD OF DIRECTORS PAY AND EXPENSES Recommendation 18) Your Committee recommends that agencies obtain proper authority for pay and expenses of directors.

CHAPTER 10 – CONTROLS OVER INFORMATION SYSTEMS 19) Your Committee recommends that: * The Government should establish a policy on the timing and the frequency of security audits of any service bureau in order to ensure the protection of data files and programs; * Government organizations improve their controls over the access of computer programers to government records; * Government organizations should have adequate written and tested contingency plans.

CHAPTER 16 – DEPARTMENT OF ENERGY AND MINES Payments Requiring Authority (.07-.14)

x 20) Your Committee reviewed the comments of the Provincial Auditor concerning a payment to NewGrade Energy Inc. relating to royalty remissions granted to producers who supplied natural gas to NewGrade. By terms of the remission orders, producers were required to assign to NewGrade their right to the remissions made. In the opinion of the Provincial Auditor the payment to NewGrade in the amount of the remissions constituted a grant to NewGrade and, according ly was made without proper authority.

The Provincial Auditor also reported this matter in his Annual Report for 1989-90. 21) The Department advised the payment was part of assistance committed to the NewGrade project by the Province for a minimum period of 15 years under terms negotiated with the other parties involved in the project.

Recommendation 22) Your Committee reiterates its recommendation made in its Report to the Assembly (S.P. #62) dated May 25, 1992: That, if the remissions of natural gas royalties is to continue to be paid to NewGrade Energy Inc. the amount to be provided should be included in the Estimates and presented to the Legislative Assembly for their consideration.

CHAPTER 12 – CROWN INVESTMENTS CORPORATION OF SASKATCHEWAN (CIC) Public Accountability (.04-.11) 23) Your Committee reviewed the Provincial Auditor’s comments that CIC’s financial statements are not fairly presented. The Provincial Auditor believes the financial statements inappropriately mix CIC’s financial results with the financial results of “Part II” Crown corporations such as Saskatchewan Power Corporation. Recommendation 24) Your Committee recommends that CIC prepare financial statements that show how it managed th e assets entrusted to it by the Assembly.

Lack of Authority for Program Expenses (.12-.15) 25) Your Committee considered the Provincial Auditor’s concerns that the expenses of the Community Bond Program were paid out of the Saskatchewan Diversification C orporation (SDC) instead of being appropriated and paid out of the Consolidated Fund. Recommendation 26) Your Committee recommends that the Consolidated Fund pay the expenses of the Community Bond Program.

Lack of authority for Various Transactions (.16-.36) 27) Your Committee reviewed the Provincial Auditor’s concerns about the apparent lack of authority for share purchases, loans, advances, assistance and loan guarantees transacted by two subsidiaries of CIC, i.e. SDC and CIC Industrial Interests Inc. (C IC III). Recommendation 28) Your Committee recommends that CIC obtain proper authority for share purchases, ad vances, loans, assistance and loan guarantees before undertaking such transactions.

CHAPTER 19 – DEPARTMENT OF FINANCE Public Accountability (.08-.31)

xi 29) Your Committee examined the Provincial Auditor’s comments that the department should prepare the Government’s financial statements and the financial statements for the Consolidated Fund for the year ended March 31, 1992 using recommended accounting principles of the Canadian Institute of Chartered Accountants (CICA). 30) Your Committee notes the Gove rnment prepared

summary financial statements for the year ended March 31, 1992 using CICA’s recommended accounting principles except that unfunded pension liabilities were not recorded. The Committee was informed that the Government still intends to establ ish a Pension Review Commission as was indicated in the 1992 Budget Address. 31) Your Committee also notes the Government is moving toward accrual accounting in the Consolidated Fund for the 1993 -94 fiscal year.

Appropriation Control (.32-.42) 32) Your Committee reviewed the Provincial Auditor’s commen ts that changes were needed to The Financial Administration Act to ensure Crown agencies return unspent appropriations to the Consolidated Fund. 33) Your Committee was advised by department officials that amendments to The Financial Administration Act are being contemplated to clarify that Crown agencies are not required to repay unexpended appropriations from the Consolidated Fund. However control of public money will be retained by allowing the recovery of unspent appropriations under Order in Council authority.

Special Warrant Lacks Authority (.43-.47) 34) Your Committee reviewed the Provincial Audito r’s concerns that an Order in Council authorizing a Special Warrant for payment of $13,600,000 to SPMC did not meet the conditions required for the issue of such Special Warrant