Public Accounts — Issue No. 5 — Tuesday, January 26, 2010 (HTML)

Present: Bruce Ralston, MLA (Chair); Douglas Horne, MLA (Deputy Chair); Kathy Corrigan, MLA; Guy Gentner, MLA; Spencer Herbert, MLA; Rob Howard, MLA; Vicki Huntington, MLA; Richard T. Lee, MLA; John Les, MLA; Norm Letnick, MLA; Joan McIntyre, MLA; John Rustad, MLA; Shane Simpson, MLA; Ralph Sultan, MLA

Others Present: Cheryl Wenezenki-Yolland, Comptroller General; Josie Schofield, Manager, Committee Research Services

Witness:

• Andrew Imlach, Director of Communications and Research, Commonwealth Parliamentary Association and Editor, the Parliamentarian

2. The Committee continued its consideration of the Retention and Disposal Applications submitted by the Public Documents Committee.

Witness:

• Gary Mitchell, Provincial Archivist and Chair, Public Documents Committee

3. The Committee adjourned consideration of the Retention and Disposal Applications submitted by the Public Documents Committee

4. The Committee considered the Public Accounts of the Government of British Columbia for the fiscal year ended March 31, 2009.

Witnesses:

• Cheryl Wenezenki-Yolland, Comptroller General

• Carl Fischer, Executive Director of Financial Reporting and Advisory Services, Office of the Comptroller General

• Jim Hopkins, Assistant Deputy Minister, Provincial Treasury

• Larry Swanston, Senior Manager, Reporting and Analysis, Provincial Treasury

5. Resolved, that the Comptroller General advise the Select Standing Committee on Public Accounts as to the estimated cost to her office of compiling the information on the magnitude of the province’s contractual obligations and the quality of the available data, as requested by individual Members of the Committee during the course of its meeting on January 26, 2010.

6. The Committee adjourned consideration of the Public Accounts of the Government of British Columbia.

7. The Committee deliberated in-camera upon its Report to the House for the First Session of the Thirty-ninth Parliament.

8. Resolved, that the Report be adopted as amended and that the Chair and Deputy Chair approve the final draft before it is presented to the House.

B. Ralston (Chair): Good morning, members. I wonder if I could call the meeting to order. Thanks very much for convening here in the Douglas Fir Room. We have an agenda that's….

We'll begin with our first item on the agenda. I'd like to welcome Andrew Imlach, who is the director of communications and research for the Commonwealth Parliamentary Association and the editor of the Parliamentarian. He's going to briefly explain what it is that he does and also make some comments about the public accounts process in different Commonwealth jurisdictions but, I think, beginning principally with Great Britain. He'll be open to your questions after that.

A. Imlach: Thank you very much, Mr. Chairperson. Good morning. It's an honour to be here. I would like to extend to you the greetings of the president of your association, who is the Hon. Kenneth Marende, the Speaker of the National Assembly of Kenya; and the chairperson of your association, who is the Hon. Mohd Datuk Shafi, who is the Minister of Rural and Regional Development in Malaysia.

We are pleased to have this opportunity to talk a little bit about the Commonwealth and the public accounts committee and its role in the democratic process, because it may be far more important than you realize.

In February 2006 there was a meeting sponsored by the Commonwealth Parliamentary Association and the World Bank for public accounts committee members from a number of countries. That meeting was held in Australia in conjunction with La Trobe University. At that meeting the Ghanaian Public Accounts Committee members who were there…. This was four Public Accounts Committee members, four Auditors General and the four committee Clerks. One of the things that the Ghanaian delegation agreed to do was to open its meetings to the public.

There was nothing in the Ghanaian constitution or their standing orders that prevented them from meeting in public. It had just never been done. So the Public Accounts Committee had been meeting for many years in private.

They agreed in February 2006 to change this if they could. They went back to Accra and managed to convince the Speaker and the parliament and the government that this would be a good idea. They agreed that it should be done. They returned to this meeting at La Trobe University in Australia a year later, saying that they had received agreement that it would happen, but that it couldn't happen at the moment because there was no facility for the media to do that.

I was at that meeting, and I thought: "Yeah, right. That's never going to happen." It's one of these things where: "You can do it when we can let you do it, but we can't actually let you do it."

I was wrong. In October 2007 the Public Accounts Committee of the Ghanaian Parliament began holding public hearings. The result was staggering. It was televised on Ghanaian national television on the state broadcaster for the first morning of their ten-day hearing. The state broadcaster didn't show up for the rest of the time. The Ghanaian Public Accounts Committee thought that was probably because the government didn't like what was going out on television.

Ministers and senior civil servants were being questioned severely by the Public Accounts Committee in relation to losses that had been sustained by the government, which totalled something in the order of 600 billion cedis. This was money lost in embezzlement, misappropriation, the failure to account for travel funds, payroll fraud and a number of other areas where the government in the previous two years had not been performing well.

There were instances of criminal activity evident, but no charges had been laid against civil servants or ministers. The national television left. The private broadcasters and the private media stayed and covered the ten days of the public hearings. The national television broadcaster returned on the last day when their own accounts were being assessed.

Most of that time was spent being attacked by the Public Accounts Committee members for failing to cover the other nine days. They made weak excuses about, "Well, I didn't know," and they weren't expecting to have to do this, so it hadn't been scheduled, and it was very expensive for them. They were told in no uncertain terms that if they didn't cover it the next time they met in public that there would be a parliamentary censure.

The upshot of this was twofold — well, threefold, I guess, actually — 300 billion cedis were recovered. Prosecutions which had been lost, files misplaced, nothing done, were suddenly resumed or put forward, and the Attorney General, a member of the Public Accounts Committee, had to formally apologize to the Public Accounts Committee and to parliament for failing to proceed with the prosecutions in a timely fashion initially.

Perhaps the most important result of this hearing was an enormous increase in the public perception of parliament. People were speaking openly about how wonderful it was that parliamentarians were calling ministers to ac-
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count, were grilling ministers. People on the street were saying that this was amazing. They had never seen ministers being attacked like that and being criticized and being unable to answer questions. Ministers were held to account.

The chairperson of the Public Accounts Committee, shortly after the process began, received anonymous threats. A number of his colleagues on the committee did as well. But they pursued it. The result was an enormous improvement in the public perception not just of the Public Accounts Committee but of parliament.

This is one of the reasons that the World Bank supports public accounts committees and supports our work with them, supports your work with them, and uses this public accounts committee process as one of the tools that it brings to governments who are in financial and economic difficulties when it does a restructuring.

The World Bank has done extensive studies which show that there is a direct correlation between parliamentary scrutiny, a reduction in corruption and an improvement in other government services. More corruption means a higher rate of infant mortality. More lawful governance produces higher rates of literacy. More corruption means worse health care, especially for low-income people who cannot afford to pay the corruption fees that come along with going to the public health system.

Corruption they view simply as a regressive tax. The public accounts committee is one of the methods that it recommends to fight corruption in countries which are experiencing that problem. And it's not just corruption.

Of course, in British Columbia I would suppose this would be the case. I'm not suggesting there's no corruption here — there's corruption everywhere — but very minor instances of it, I would think. But here in British Columbia what you would see from the Public Accounts Committee, according to the World Bank studies, is an improvement in governance: more efficient governance, better outputs, better outcomes. That's what the World Bank tries to do. That's why the information that the CPA, through you and your parliamentary colleagues, have put out to the World Bank is a vital part of their economic restructuring programs with all countries.

One of the things that I would like you to think about as you conduct your business is that this is a Commonwealth way of doing things. The Americans don't do this. In the United States the review of public expenditure is done. There's an audit and all that, but it's done in Washington through committees which are looking at many, many other things and, we understand, spend very little time looking at public accounts, which don't get votes, they think, and aren't interesting and aren't fun to pursue or advantageous to pursue from a political point of view.

France doesn't do this. France has a Cour des Comptes, a court of accounts. They're only looking for corruption, and it's done at the judicial level. This is a Commonwealth thing, and it's spreading beyond the Commonwealth, thanks to the work of the CPA and the World Bank. It started a hundred and fifty years ago in the United Kingdom when Gladstone established the first public accounts committee. The English Parliament established it, the House of Commons, under Gladstone's direction.

It wasn't quite a world first. Another country — I think it was Denmark — had a public accounts committee a year or two before that, but it was a combined parliamentary and, if you like, in today's terms, a civil society group which reviewed public spending. But Gladstone thought that this should be done by parliament as part of its scrutiny process, and an important part. He said that it's dry and often uninteresting, but it's vital to do. So it was established, and then from Westminster it was exported around the Commonwealth.

A number of Commonwealth countries do it differently from you and from most of the Commonwealth. New Zealand follows more the American system, where the accounts of a ministry are reviewed by the select committee which is charged with overseeing the work of the ministry. It also looks at the budgets, and it's all done on a ministry basis — a ministry-by-ministry, departmental-committee by departmental-committee basis.

Victoria, in Australia, and Samoa are among the few countries which combine the role of public accounts committee with that of an estimates committee. In Victoria the Public Accounts and Estimates Committee looks at the estimates every year in detail, in the kind of way that other committees in other Commonwealth Houses do it, and then they turn their attention to the public accounts work. They function in much the same way that you do.

This is an example of the Commonwealth's love of diversity. There is no one best way. There are a number of good ways of doing things in all areas, and there's an acknowledgment in the Commonwealth that some processes suit some countries, some jurisdictions, more than others. Some public accounts committees meet in public; some don't. Some broadcast their proceedings; others don't.

Some are chaired by the opposition. In Canada and the U.K. it's the common thing to be chaired by an opposition member. Australia doesn't do that. None of the Australian states do it. India doesn't do it. Those are both vibrant, very advanced, sophisticated parliamentary democracies. They don't do it. They do it with a government chair.

The role of the Auditor General in relation to the committee is different in Commonwealth jurisdictions. In some places the Auditor General is the chief adviser to the committee. In others the Auditor General is the chief witness, and in still others the Auditor General is both. In some jurisdictions the public accounts committee is
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involved in the appointment of the Auditor General. In some countries they have a role in setting the budget of the Auditor General, and this is seen to be, in Commonwealth terms, a very vital part of the process of reviewing public accounts committees.

In Malawi they have a significant problem with their Public Accounts Committee. The problem isn't with the committee. It's with the Auditor General. The Auditor General has a limited budget. He hires accountants, who begin the process of reviewing government accounts. We're not quite sure how this happens, but if any of these accountants show much potential or any promise, they suddenly get offered government jobs, and the Auditor General doesn't have enough money to pay them to stay in his department, so he loses them.

Malawi also has a problem with its committee system in general. It has 40 committees, so if you're going to tick boxes and say, "Do they have a committee system?" yes, they do. But 40 committees and four committee Clerks — so effectively, the committees don't meet.

This is one of the things that we have been working with the World Bank Institute and other organizations to promote in the Commonwealth. That's the direction of parliament, or the control of parliament, over its own administration so that parliament determines what it needs, not the government. This happens in many places. It doesn't happen in all.

In Australia, in Canberra, the Parliament of Australia's budget goes through the Minister of Justice. In New South Wales the spending by parliament is controlled by the Treasurer. The Treasurer recently in New South Wales cut back all government departments, including cutting back payments to the parliament. Parliamentarians complained that this was inappropriate because, although government spending had been cut, the role of parliament had not been reduced.

In fact, you could argue that the role of parliament had become even greater because there was an additional component for them to have to review, and that's how the cuts were being made and implemented. They argued with the Treasurer that parliament's budget should not be affected in this way. Part of that argument was successful, not entirely.

But in other countries it's completely different. In the United Kingdom the Public Accounts Committee's work and the Auditor General's work is beyond the purview of government. It is controlled by parliament. The Auditor General is completely separate from the government, and its budget is not controlled by them. This, of course, raises questions about auditing the Auditor General.

I understand that here in British Columbia you have a method of doing that so that the Auditor General is held to account. In Alberta they have a method of doing that, but that's only to hold the Auditor General's office accountable for financial auditing — nothing more than that. We are looking in a number of places at the possibility of having one Auditor General audit another Auditor General, so perhaps in Australia the Victoria Auditor General's office would audit the office of the Western Australian Parliament's Auditor General.

These are some of the difficulties that are being faced. Money is a problem. A reporting culture is a problem. In many developing countries there are still secrecy requirements left over from British times, colonial times, which have served the purposes of the new governments and have never been corrected. So there is on the part of civil servants a secrecy requirement, not a requirement for openness. We have, therefore, been working with Commonwealth parliaments to promote freedom of information and access to information so that that culture is changed.

In some public accounts committees in some countries the minister never appears; it's only civil servants. In others the minister is called to account.

But the theory that we promote with the World Bank and our work with public accounts committees is that, while ministers may be called to account before a public accounts committee, it's not meant to be a partisan political affair. Everyone is working in the best interests of the government or the governance of their jurisdiction, and improved administration, improved efficiency, improved outputs are important parts of governance for everybody, party politics aside.

A number of public accounts committees — and I'm not familiar with yours to know if yours is one of them, but I suspect it probably is — are looking beyond financial audits and even looking beyond output audits to a performance auditing system where you are looking not so much at outputs as outcomes.

One of the stories that we are told at our Public Accounts Committee meetings in Victoria is that there was an enormous reforestation project undertaken by the Victorian government. Hundreds of millions of dollars were to be spent planting hundreds of thousands of trees. The output, the financial management were impeccable. The money was spent where it was supposed to be spent, all the trees were planted, the boxes were ticked, and it was a success.

However, moving on to outcome audits, the Public Accounts and Estimates Committee was concerned that of all the trees that have been planted, more than 80 percent died. So the outcome was ineffective. The program didn't work. This is the kind of thing that we are trying to encourage parliaments and public accounts committees to move towards — to look at the real effectiveness of the work that they do.

One of the points that we make in our dealings with public accounts committees which are being developed in parliaments that haven't got them or haven't used
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them very much is that what you do has a huge knock-on effect. It stops a lot of things from going wrong because people don't want to be called to account before the public accounts committee, to be pulled up before parliament and have a ministry shown to have been ineffective, inefficient, unproductive.

So a lot of what you do may only feel like touching the tip of the iceberg, but you're in fact shaking the whole structure and making sure that everybody stays in line because they know that they will be held to account if they don't, and they could be caught out.

This is part of the preventive work that all public accounts committees do. We are encouraging them to overcome what for many countries is their biggest problem. That is that they are reviewing accounts which are very old, sometimes seven or eight years old. The Auditor General doesn't have the facilities, the staff or the resources to do the accounts on time.

Even though they're required, they're not produced on time. They're produced many years late. The Auditor General produces the reports. The committee looks at reports which are then seven or eight years old. Nobody can remember why things were done. It's just too long ago. Nobody cares.

One of the things that we encourage parliaments to do is catch up and provide resources for their Auditor General and their public accounts committee so that they can catch up and do things currently. Some of them still rely on one report a year. The Auditor General produces his report of all departments. It lands with a thud on the table of the House, and the public accounts committee then has this huge document or number of documents before it.

We've been encouraging them to look at reporting throughout the year so that the public accounts committee has small reports to look at and receives them throughout the year. This is a more effective way of working. It ensures that things are done on time — or helps to — and it helps to give the members, relatively speaking, fresh information.

We encourage the exchange of information among public accounts committees. I know your Committee Clerk has been helpful to us on a number of occasions, including attending seminars that we've put on for other places on the financial propriety in parliament and on the effectiveness of public accounts committees.

This is an important part of the parliamentary process throughout the Commonwealth, and it's an area where the Commonwealth really does lead the world. Countries which have no tradition of public accounts committees, no understanding of this, no realization of why this is done, are adopting the Commonwealth model — the model that you are working in and that you are developing so that you continue to evolve the parliamentary scrutiny of finance through the work of the public accounts committee.

Indonesia is establishing one. Laos and Vietnam — countries with no Commonwealth connections — are following the Commonwealth lead.

I can say, as a Canadian working in London, that I am proud of the work that Canadian committees do all across the country. I encourage the Canadian committees — nationally, federally, provincially and territorially — to assist their colleagues in other countries to understand the process, to realize that there are limitations to it and there are things they can and can't do and things they shouldn't do, and that this is a valuable part of the parliamentary process and the parliamentary scrutiny of public finance.

This is a community of parliamentarians. You are part of it, and we hope you continue to contribute to it — you as a committee — as this Legislature has in the past.

You have, I hope, seen issue 3 of last year of the Parliamentarian, which has several articles in it about public accounts committees in other countries. I've got a couple of other CPA publications here, short ones, which I've got a few copies of that we could make available to anybody who wants it.

There is a report on the role of public accounts committees, which came out of our first meeting in 2006 at La Trobe. It's called Parliamentary Financial Scrutiny: the Role of Public Accounts Committees.

More recently, we've produced recommended benchmarks for democratic legislatures. Included in the benchmarks are public accounts committees and their functioning. One of the recommendations we have is that there shall be an independent, non-partisan, supreme or national audit office whose reports are tabled in the Legislature in a timely manner. The supreme or national audit office shall be provided with adequate resources and legal authority to conduct audits in a timely manner.

We have just recently concluded a Pacific islands' review of our benchmarks, and they have strengthened…. These are small Pacific islands — Cook Islands, Nauru, Papua New Guinea — countries which are struggling with a parliamentary system to get it going. They have actually strengthened the Commonwealth benchmarks and made the wording stronger to ensure that a parliament has the resources, the Auditor General has the resources and the committees have the resources to do the reviews which they are charged with doing.

One of the benchmarks that they added in the Pacific was one which reads: "The oversight authority of the Legislature shall include meaningful and timely oversight of accountability institutions, such as election commissions, human rights commissions, anti-corruption commissions, ombudsman, information commissions and the offices of Auditors General."

This was an addition that the Pacific islanders thought was important, because they realized through the work
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of the CPA and the work of you and your colleagues around the Commonwealth that this is an important contribution to the improvement of governance in the Commonwealth. It's done in different ways in different places, but the theory is the same. The effect is much the same everywhere, and it is an important part of parliament's scrutiny of the executive and, more specifically, parliament's scrutiny of finance, which is vital part of the parliamentary process.

So when members of other parliaments and legislatures, even those in Canada, come to your committee with requests for information or want to know how you do things — particularly, for example, how you are auditing the Auditor General — we hope that this information will be forthcoming, that you will support other countries in doing this very important work and that you follow what they do.

The Commonwealth Parliamentary Association works on the principle that no one parliament gets everything right and that it is very important for you to follow how others adapt what you do because they may well find adaptations that could be useful for you. They may also be looking at things which will cause you to look not at what you do but at the way you do it, so that you can see a difference and find a different way of doing things to make your work even better.

I'll just conclude with something that's not at all related to public accounts committees. The election of Speaker in Ottawa was changed to follow a more Westminster-style procedure where members voted in the election of Speaker by secret ballot, and the elections were not simply the ratification of an executive appointment or even an executive nomination. In Westminster there's a very strong tradition that the executive does not interfere with the election of a Speaker.

Canada followed that lead. It then changed the way the voting is done and a number of procedures about the election of a Speaker. Westminster has followed that and changed its procedures. It's all part of the cross-pollination amongst parliaments so that everybody learns from everybody else, because everybody has something to offer. It's not just the big parliaments. It's not just the national parliaments. Most of the CPA is composed of non-national parliaments. We have more than 175 branches but only 54 countries. So you'll see that the vast majority of parliamentarians and our branches are at this level.

We hope that you contribute to their development and follow what they do, both through our publications and through your own contacts, so that you can see what they do and perhaps find a better way of doing what you do.

B. Ralston (Chair): Thank you very much. I'm sure that what you've said provides some inspiration for members in placing our work in a broader context. Of course, while this is not strictly a public accounts committee, comparisons of parliamentary practice are very much in public view these days when the issue of prorogation — that arcane parliamentary term — has become part of the common political discourse in Canada at the moment.

I won't invite you to comment on that. I'll open it up to questions from members on public accounts.

R. Sultan: Yes, a fascinating exposition and a great pep talk for all of us, I must say.

My question pertains to the length of tenure of an Auditor General in the various governments and the various public accounts committees you examine and consider around the world. Is there a finite period of time when turnover is really to be highly recommended? In other words, one should not stay too long in these jobs — five years perhaps. What is your opinion on that?

A. Imlach: My opinion is that of other Commonwealth countries. In some places a five-year term is the norm. In other places ten years is considered a valuable period to have an Auditor General. In some cases the appointment is at pleasure, and Auditors General have been in post for many years.

Before I went to the CPA, I was formerly a newspaper reporter with the Edmonton Journal. I recall that there was a movement then to change Auditors every five years so that you brought in a fresh approach on each occasion. We have seen that work well in some places and not so well in others, where the fresh approach puts everybody back five years. They find that they're starting to redo everything they did five years before.

We have also seen instances where, particularly in developing countries where the options for employment for people like Auditors General are somewhat limited, it tends to be people who are at the end of a career and are coasting to retirement.

To say that there's one way isn't a Commonwealth answer. You tend to look at practice, and you see a number of people who have been Auditors General for many years and highly successfully. Sometimes longevity breeds the kind of veteran status that makes an Auditor General more unassailable. Sometimes it means the Auditor General has become too cozy with the government.

R. Sultan: If I may just push you a little harder. There's undoubtedly great variety, but in terms of outcomes, could you generalize what your conclusion is as to perhaps the optimal form?

A. Imlach: I'd like to resist, but…. I would think five years isn't long enough. I would think something like
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ten years — somebody who is going to be there long enough that they don't spend the first third of their term learning how things work.

Of course, in many countries familiarity with the parliamentary system is not widespread. Democracy is not very deep in terms of understanding on the part of the general public. People often come in with very little understanding of the parliamentary side of the Auditor General's work, so they spend some time getting used to it. They then spend the last 18 months or so trying to find their next position — generally speaking, a position in government.

In many Commonwealth countries the only place for an Auditor General to go is back into the civil service. That, I would say, is probably not desirable. It's not desirable from a parliamentary perspective because you don't want to be sitting here as members of a committee knowing that your Auditor General is looking to the people that he's scrutinizing for his next job, so a longer tenure would discourage that sort of thing.

R. Lee: Thank you for the long comparison between different jurisdictions. You mentioned about, in some jurisdictions, the ministers also appear before the public accounts committee. In those jurisdictions, do they also have a separate estimates process?

R. Lee: What kinds of questions are different — you know, before the committee and in doing the budget estimate process?

A. Imlach: I guess the cardinal difference would be that they are looking, in the public accounts committee process, more at administrative performance — how the money was spent rather than how the money should be spent. The position in public accounts committees that we try to make clear to all parliamentarians who are beginning this process is that the argument over whether you should be spending the money for political reasons is not part of your process.

It's sometimes hard to differentiate between whether the money should be spent for policy reasons or whether the money should have been spent because what you did didn't work. That can overlap in the policy area, but the difference between the two…. In Victoria this is very important, where you have the same committee doing, effectively, both jobs.

There is a strict tradition of a very strong demarcation between looking at what politically you think should be done in the future and looking back at what has been done to see if it was done properly. That's where they try to remove partisan politics from the ex post review of public spending to see how it actually worked.

Whether you think they should have done it in the first place becomes immaterial. It's whether it did what they said it would do and if it did it well enough, and you confine yourselves to that. You don't go to the next step and say: "See, we told you, you shouldn't have done that in the first place."

Now, that can go into the House, but in the public accounts committee the tradition — and this is certainly the case at Westminster and in Victoria in Australia — is a strict demarcation. You draw the line. You don't say on a partisan basis: "See, you shouldn't have done this." You say: "This didn't work" or "It did what you said it would do" or "You tried to do what you said you would, but it didn't work."

Whether it was because of administrative shortcomings or because it just wasn't practical or didn't work for other reasons, you don't then take the process from what from an outsider's point of view may be a very small step to the next step by saying, "See, we told you so," and scoring political points off it. The idea is to make sure, through the public accounts process, that what the government said it would do, it did, and that what it did had the effect that it said it would without looking at the policy behind it.

R. Lee: To follow that up, Chair. Then how long — how many days — would those accountability sessions be under the oversight of the public accounts committee? We have not many sessions in this committee. If the ministers come in and do all those inquiries…. Usually, how many days would that be?

A. Imlach: Having the minister present usually would not be a major part of the process. The minister would be present, in most of the jurisdictions that I'm familiar with, for a day or perhaps two days. Civil servants could be in front of them, including both at the top level and below that. A much longer process could go on for a couple of weeks with one ministry if there was a significant problem or series of problems, but the minister would not be involved the whole time.

The Westminster tradition used to be that the minister was responsible for everything. Ministerial accountability meant that the minister of the day is responsible for everything that that department has done or is doing.

It's now recognized that departments are far too big for that. You need to go down into the administration to look at the kinds of accountability problems, the kinds of performance problems that you often encounter in the administration of public policy — things that the minister cannot be expected to be responsible for,
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so isn't therefore, and doesn't attend for most of the meetings.

The minister would probably start the process and then turn it over to what you would call your deputy minister, which in most other Commonwealth jurisdictions is called a permanent secretary. The heads of departments within a department would then take over most of the questioning and answering questions, so the minister is not there for much of the time.

S. Simpson: Thank you, Mr. Imlach. That was a very helpful presentation. I know that since joining this committee, I've been trying to get my head around a little bit more about the role of this committee and how it relates to other work that's done.

It certainly seems to me that the committee — particularly in challenging economic times, though at all times — has a critical role in terms of reinforcing public confidence around government and administration at times when sometimes that's called into question at all levels, and not exclusively in British Columbia. At all levels, people want to know how their tax dollars are being spent and what that all means, so I appreciate the comments.

I also appreciate your response to the questions from my friend across the way about the discrepancy. I was going to ask that question, as well, about the difference between the estimates process versus the public accounts process and how those are different.

I think your answer makes eminent sense — that there's a difference between sort of the political policy question of estimates versus "What did you actually do, what did you spend, and what did you get for it?" and that those are very different questions and that it is probably appropriate for a minister or senior ministry officials to answer them in different ways in different places.

The question that I have is…. We have here, as best I can tell, with the public accounts process gone from a place where, in fact, the Public Accounts Committee used to inquire into the whole gamut of issues related to public accounts in the province — that would include reviews with ministers, with staff and that — to a place where largely, not exclusively but largely, now we review the work of the Auditor General and reports of the Auditor General tabled with the Speaker. That's largely what the committee does.

In terms of us being able to do our work and get at those value-for-money issues and those other issues, the question I have is: does it make more sense, based on experience elsewhere, to broaden the mandate again of the committee, in terms of its actual practice, to look more diligently at those public accounts questions rather than being a committee that essentially reviews the work of the Auditor General?

A. Imlach: That's one of the areas that we see as an area of growth for public accounts committees. On some occasions the public accounts committee will meet with the Auditor General at the beginning of a review process and contribute their thoughts on areas where it thinks the Auditor General should be spending a bit more time investigating things.

Some Auditors General have a relationship with committees that doesn't allow that. They produce their report, and that's it. It's up to the committee to then do what it wants with the report.

In other cases sometimes the public accounts committee will direct the Auditor General to look at a specific thing. This is seen in the jurisdictions that do this as not a political advantage but a parliamentary advantage for the Auditor General.

You as representatives of the community are perhaps in a better position to tell the Auditor General where things have gone wrong, where they should be having a close look because the way a program is being administered in your constituency isn't really very good. This is something that the Auditor General is not going to know, and it's important as part of the democratic process — this is what some parliaments consider it's important for — for them to be able to say: "Look, we're the representatives of our community. Our community is saying that this isn't very good, so we think you should have a look at that."

In some cases Auditors General will not do that, but in other cases there are examples where Auditors General will listen, will take on the advice that they're given by the political-level people — by you — and in still other cases it goes even further so that the Auditor General has to do some of the things that the committee says.

In bicameral parliaments such as Nigeria, where there are two public accounts committees — one for each House — the two committees will meet together. They also meet separately. They do their work separately, but they first meet together so that they aren't doing the same things, and they can therefore cover more ground. So this is a way of helping that.

Some of our parliaments have more than one public accounts committee. Tanzania, for example, has two. One is for the public accounts of the national government, and the other is for the public accounts of the municipalities, because national money is spent by the municipalities. This is probably not politically acceptable in this kind of jurisdiction, but in Tanzania that's what they do.

The parliament reviews the public accounts of the municipalities to ensure that their money has been spent properly by the municipalities. Still others have a public accounts committee for quasi-governmental organizations — Crown corporations, what they call in Africa parastatals, where the government has money in a company. The public accounts committee itself doesn't review this, but they have a separate public accounts
[ Page 86 ]
committee for these public undertakings, and it reviews. So you have an expanded public accounts committee process from that point of view.

G. Gentner: Thank you, guests, for being with us today. It's very, very informative. Briefly, can you give us examples…? You know, the auditing practices are changing in the world. I just found out last meeting how the world now is taking on different procedures.

How do some parliaments or public accounts committees deal with the disagreement of interpretation by (a) the Auditor General and (b) the government or the comptroller-general? How do you resolve that? Is there an appeal board when they reach an impasse? I'm sure we're not the only public accounts committee that finds this problem. Is there an arbitration in trying to find some resolve? How do we go to there?

A. Imlach: I think, from a Commonwealth perspective, I would turn that back on you. I'm personally not an accountant, but this is an area of development within public accounts committees. It's something that all Commonwealth countries are striving to overcome.

In many cases a public accounts committee and an auditor general will criticize a government practice. The government says, "So what?" and continues to do it — whatever was criticized — and doesn't change. They do so at their public peril.

If it's found that repeatedly they've been told to do something…. There are examples we have seen throughout the Commonwealth where a public accounts committee and an auditor general will say that a certain practice isn't good. "You should change this," and the government says no. Every year they come back, and they say, "We told you before that you should change this. It's still not working. We think you should change this," and the government still says no and takes the heat for it.

But in many cases, of course, it's in a society where the niceties, the more esoteric arguments about accounting, don't really translate into votes or into performance assessment by the people or by parliament. We haven't yet resolved a way of doing this. It's to issues like this that we look to parliaments and to jurisdictions such as British Columbia, which has a well-established and advanced process, and hope that you can come up with answers for that kind of question.

My experience, for example, with African parliaments would be that their answer to that would be to legislate, to make the dictates of the auditor general effectively law, to make there be a constitutional or a legal obligation on the part of the government to do what the auditor general says. The auditor general then gets it wrong. What do you do with the auditor general? How do you oversee the overseer?

These are all areas where the Commonwealth is still trying to develop the next stage of answers as accounting and performance review becomes more complex and looks further than simple financial audit about whether the money was actually spent by the right department in the right program. Then you broaden the area for debate, and we hope you will contribute to that debate by finding ways through it that help you.

B. Ralston (Chair): Thanks very much. I'm sure the Auditor General's staff is encouraged by the prospect of legislation to enforce their opinions, but we'll see whether that becomes part of our practice here.

J. Rustad: Thank you very much for your presentation. Your story about the trees that had a very low survival rate reminded me of a time when I was working in the field back in the mid-'80s where trees were being planted that were already dead. That was part of a process. We moved away from that process and went into a new process in '87 where the private sector took on that responsibility, and now they've got a very good success rate in terms of the survivability.

Having said that, that isn't the reason…. There are a number of questions that have come up. I note that we're over time, so I don't know, Chairperson, how much time we have for this. But there are a number of questions that have come up that I'd like to ask you about.

In particular, your comment just around the auditor general and, you know, who kind of audits the auditor. In this province, of course, we have a financial audit, but what we don't have is a value-for-money or a performance audit that is a process that checks the Auditor General. I'm just wondering. Have any other jurisdictions contemplated that?

I've got one other train that I'd like to go down as well. But if you have a moment or a thought on that.

A. Imlach: Mr. Chairperson, I'm not aware. There may well be some. We have 175 jurisdictions. I don't know how they all work. There may be some who do that. I'm not aware of it.

B. Ralston (Chair): Just before you proceed on your next question, I think the Clerk might have some comment on your question. I don't think your assumption is entirely accurate. Perhaps he can correct me.

C. James (Clerk Assistant and Clerk of Committees): Just for the information of members, in British Columbia, under the Auditor General Act — and I stand to be corrected — the Select Standing Committee on Finance
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and Government Services, which is considered "the committee" referred to in the Auditor General Act, is required to appoint an auditor for the Office of the Auditor General.

Furthermore, the Select Standing Committee on Finance and Government Services is also empowered to instruct the auditor so retained to conduct a performance review of the office.

J. Rustad: Interesting. I know that the financial audits have been done, but I don't know at any time that the secondary component, which some people would call the primary component, has ever been performed in this province.

B. Ralston (Chair): The Chair of the Finance Committee is sitting right next to you, so maybe you can confer later on.

So the other thing that I wanted to ask about comes back to your initial story that you had. I apologize. I can't remember the country that you were referring to, where the public accounts process exposed some rather significant corruption that was in that process. You made a comment that there's corruption everywhere.

Corruption, of course, in this province and in this country is illegal. If there is corruption here, it should be pursued vigorously. When you say that and you're painting all parliamentarians, all governments, with that kind of a brush, it's a pretty damning brush to say. So I'm just wondering if you've got evidence with regards to saying that there's corruption everywhere.

The question I also had around that jurisdiction and that example, where the public accounts came up and exposed this challenge, is: does that particular jurisdiction also have an estimates committee? For example, in this province when the House breaks into committee, there's an opportunity for any member in the House to ask questions on estimates of every minister, including issues from public accounts. It's a very rigorous process that, actually, a fair bit of time is spent on. I'm wondering if that process is also in place in that particular example that you gave.

A. Imlach: Yes, Mr. Chairperson, the example was Ghana. Yes, they have an estimates process. They look very carefully at all spending plans by the government.

I was not intending to say that I have evidence of corruption here. The point I was trying to make was that we often tend to think that corruption is a problem confined to developing countries or a number of developing countries. Yet we know it isn't. There are prosecutions in Westminster that result from the Public Accounts Committee work.

You have — what? — hundreds of thousands of employees. You can't hope to pretend that somewhere something doesn't go wrong. I wouldn't suggest that any country was perfect. I'm sure it happens. I would think that it probably happens everywhere.

I go to work every day in London and walk through the Palace of Westminster. You wouldn't think it happened there, but we have seen highly publicized cases that you're all probably painfully familiar with, where MPs have been accused of corrupt practices. That, of course, is a brush that tars all of you.

We don't, for a moment, suggest that politicians and that parliamentarians are automatically corrupt, but there are…. You have 17,000 colleagues just in the Commonwealth. We would like to think that they were all honest, but we know from experience.... And some of the people that I've been passing every day in the halls at Westminster prove that that's not the case. They're the exception.

I'm sure that there are very odd exceptions in a province like this, where it isn't customary. When you go, for example, to renew a driver's licence or to get seen at a hospital, you don't have to pay somebody for what they should be giving you as a right. That's not the kind of endemic corruption that we see in some countries — in countries that just add it as a tax, effectively. You don't get a passport unless you slip the officer some money. I know that doesn't happen here, and I wouldn't suggest that it happens in a lot of Commonwealth countries, but it does happen. It's part of the society in places.

There's also non-financial corruption — tribal corruption or communal corruption. In Pacific islands, for example, you have a communal duty to provide traditional services and to help your fellow tribe member, your fellow community member. Your fellow community member takes priority over other people.

Well, that's fine, unless you're…. If you're dealing on a personal basis with people, that's not a problem. But if you're a government officer dispensing driving licences and a member of your community comes and joins the end of the queue, culturally you've got to go and say to that person: "Please move to the front. Here's your licence, because I have to do this for you as part of my cultural tradition."

In many places that would be perceived as being a corrupt practice — that a member of one community got favourable treatment. There's no financial incentive. Nothing changes hands. But that's the kind of administrative culture that you see in many countries where they're trying to adopt the kind of public service approach that is common here with the kind of community requirements, the community culture that exists in, say, some of the small Pacific islands.

Corruption everywhere? Probably at very minor levels. There are dishonest people. It's sad, but there are. I'm
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not suggesting that it's worse here or better here. I didn't want to suggest anywhere — based on the British experience, where one would have thought that you wouldn't find it — that there is no corruption.

We see it every year. The Public Accounts Committee in the United Kingdom reviews work by various ministries, and prosecutions follow. It's not common. It's not massive in any sort of systemic scale, but it happens. Public Accounts Committee work and the Auditor General's work in the United Kingdom does lead to prosecutions.

B. Ralston (Chair): Thank you very much, Mr. Imlach, for those very full and detailed answers and for bringing your international perspective to bear on the work that we do here. Thank you very much for coming. You're welcome to return at any time. On behalf of the committee, thank you very much for your presentation.

I'll now turn to the next item on the agenda: Gary Mitchell, the provincial archivist and chair of the Public Documents Committee. Draft resolutions that Mr. Mitchell will speak to have been circulated, and they are before you.

B. Ralston (Chair): Before we begin consideration of the resolutions, I did have some questions, Mr. Mitchell, briefly. For example, in resolution 1 there's a recommendation that the retention and final disposal be amended in accordance with the classification system 2008 amendment. Someone, on my behalf, did endeavour to look at the records. Her comment was that without making a line-by-line comparison, which was very difficult, it's difficult to see just what those amendments are and the effect that they have on what is actually retained.

Is it possible to explain, briefly, what the 2008 amendments were and how they differed from previous practice?

G. Mitchell: It would probably not do service to the schedule if I tried. I could, when I return to the office, find…. We have a table of concordance that would show the changes. I think it would be easier to reply in that way.

B. Ralston (Chair): I understand the difficulty, because there is some complexity, and that's the problem that she faced. But I mean, faced with the committee being asked to pass a resolution, I'd certainly feel more comfortable if there was at least a high-level explanation of the differences between past practice and the amendments. Are you able to do that?

G. Mitchell: What has happened over the last three to four years is that public servants in the corporate records management branch have sent to the Public Documents Committee amendments that, based on experience within the line offices, are showing that records retentions were not meeting the operational or in some ways the evidentiary requirements of the ministry and the corporate government.

So what they're doing is trying to streamline this to make it easier for their colleagues to administer the schedules — i.e., reducing the number, consolidating the number of retention periods to, say, a dozen or a dozen and a half from 20 or 30 — to make it easier for records staff to administer the records schedule, therefore making it easier for us to identify records that have value.

Within each program area that decision would be made by corporate records and ministry staff, and that would be presented to us in a hearing before the committee. Then my colleagues and I would look at it to make sure that the evidentiary, legal and financial values that we are required to review have been met and that there's no harm to the corporate government or to the longstanding value of the record.

That would really be the framework in which our colleagues in corporate records are working, trying to streamline the system and trying to find avenues to make it easier to administer these schedules, which actually can be very complex. So for each schedule, to be honest, I'd have to go and look at their presentation to give you an overview that I think would answer your question more fully.

B. Ralston (Chair): Just to continue, in some cases the number of documents or the documents chosen might be augmented from previous practice, based on your opinion as the chief provincial archivist of the value of the record to reflect the values that you are, I suppose, obliged to look it. Would that be a fair…?

G. Mitchell: Oh, Mr. Chairman, I assure you that when our colleagues bring these schedules forward to the committee, there is no diminution of the value of the record for expediency's sake.

I mean, it's extremely clear to our colleagues when they bring it forward and to my colleagues on the committee that the protection of evidentiary, legal and financial values of these records, which document the Crown's obligation to its people and document how a program is established and maintained and whether or not it meets its mandate…. These values are retained, and they are not lessened through this process. So the schedule is returned to the ministry and to their senior executives for further review.

The key we have is to make sure that these values are maintained and acknowledged by our colleagues, and that we try and reduce the bureaucratic processes that
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many ministries put up to maintain their records and try and streamline it and give people a heightened sense of the value and the liabilities they incur by not protecting valued records.

B. Ralston (Chair): What steps do you take to ensure that future review of these records that are retained will be accessible to the public or prospective historical review in the long run?

G. Mitchell: Well, the committee, by mandate, is required to present the schedule. Once we've approved that the schedule does meet the values that we feel are contained within it, we're required by mandate to come forward to your committee.

We'll say, for argument's sake, that the committee recommends to the parliament for approval, but parliament approves the schedule. It is incumbent upon the line ministry and the corporate agencies responsible for the management of information to ensure that these schedules are maintained and to report any issues that they have with it through their chain and bring it back to the committee.

Our committee has no jurisdiction beyond the recommendation of the schedules to Public Accounts and parliament. The auditing and the oversight return to the executive government through its corporate agencies.

B. Ralston (Chair): Just to follow a little bit further, then. In what form would records…? Say we're looking at resolution 1. In what form would they be? If they're digital records, given the pace of technological change, what's the provision to make sure that those records are accessible, given prospective technological change — say, in 25 years — should some historian or other public official wish to review those records?

G. Mitchell: According to the schedule, the ministry that has created it or holds the records on behalf of the executive government is required to maintain these records so that they continue to have a use within the line office and are required by corporate policy to maintain these records in a form that they can continue to be used for the life specified in the retention.

If the record has further value beyond its normal use within a ministry and is transferred to the Archives, it would be transferred in a standardized format which the Archives would then incorporate within its holdings. Depending on any restrictions based on privacy or legal restrictions, we would make all of those records available in a digital format through our e-archives program.

So the question…. The ministry is responsible until they are transferred to the Archives. Then Archives staff will put it into a standardized format for use by the public.

B. Ralston (Chair): Given that's a standard format, how do you anticipate technological change that may make the present form of digitized records obsolete or at least difficult to access sometime in the future?

G. Mitchell: Well, from the archival point…. I mean, the key for us is having all of the records brought into the archival holdings in a standardized format from which we can move platform to platform, so that we're not trying to move multiple platforms to a single technologically advanced platform.

Our colleagues across Canada and within Europe have found that moving to a standardized format and then moving that from platform to platform is working quite well with very minor, if any, loss in the transfer process — to the information. There is some loss whenever you replicate, but they have found it to be less than 1⁄₁₀ of a percent.

B. Ralston (Chair): Is there an internationally recognized best practice or standardized process that you follow?

G. Mitchell: Here it's a best practice. The International Standards Organization is moving towards a standardized archival format for digital records and also for replicating them, but they have not been approved yet.

B. Ralston (Chair): Is that something that you, as the archivist, are following now or you propose to follow in the future?

G. Mitchell: Myself and all my colleagues in Canada are following the ISO standards because we regularly adopt those and then move into a best-practising situation with our colleagues on the government side to ensure that both are being met, so that records that we get are in that platform and also that valued records are protected.

B. Ralston (Chair): Thank you. Those are all the questions I have. Are there others who have questions?

R. Sultan: I'm looking at the document which describes the resolutions for records retention and disposal authorities, tabled on the 30th of November, 2009. I see in the second paragraph the declarative statement is made: "No government record may be destroyed except upon the written recommendations of the PDC and the approval of the Executive Council or the Legislative Assembly."

Then there follow these resolutions pertaining…. For example, resolution 2, the accommodation of real estate services within the Ministry of Citizens' Services and then moving right along to resolution 3, Emergency
[ Page 90 ]
and Health Services Commission, Ministry of Health Services.

I mean, if all government records must be preserved except on written authority otherwise, why do we need special resolutions to these rather unique subsections of government?

G. Mitchell: Well, Mr. Chairman, the Document Disposal Act indicates that valued records — records that have evidentiary, legal, historic and financial value to the government and, therefore, to the citizenry — have to be maintained by government. The issue that comes up is that, within each line office, people need to have clarification on what is valued, as opposed to what has no long-term value.

This legislation has been empowered in British Columbia since the second session of 1933. Since that time it has…. It was apparent into the early '80s that the maintenance and protection of valued information was not being systematically or consistently applied across the public service. So in the early 1980s amendments were made to the Document Disposal Act to codify a records schedule — i.e., that values would be assigned to information created or received by government and that those values would adhere to every format and in every office of the government.

From separating out valued from valueless records, the Crown reduced its liabilities — it also reduced much of its floor space — and gave a heightened awareness to their public service that certain types of records had to be better and more carefully cared for and maintained than other records.

For instance, records relating to a citizen's interaction with child welfare or adoption would be held in a restricted filing room or in sealed cabinets and not maintained on open desks or on open countertops, to protect both the children and the families involved, and of course, to protect government — that they are honouring the confidentiality of their actions — whereas items relating to either public release forms or general publications could be kept in secured office space or in secured filing areas but not to the high level of security that would be required.

By doing so, by having these schedules promoted, then government could begin to take action to ensure that valued records are protected to their level of value and that other records weren't, enabling us, quite honestly, to destroy hundreds of tonnes of records that had been maintained over decades. In this process now, coming forward to the committee, we take a look at every program area and go through them to clarify what records, from a corporate point of view, have value.

The women and men administering these programs have to acknowledge that value and ensure that these records are protected in the corporate good. That means that to do due diligence to that, we go program by program, ministry by ministry. One that you mentioned would be the areas that look after public buildings and public lands held in trust or used for the public service.

Those women and men working in that area, by doing this schedule, are now very aware of what records they have to preserve and look after over time, as opposed to those records that have very little value to the ongoing administration of government. Those records should be confidentially destroyed over time.

We are highlighting those areas where records must be protected over time on behalf of all of us, and our colleagues are being held to a higher standard of accountability than they were previously. So that's why they're all subjugating down, and this will continue.

G. Gentner: I'm just wondering, hon. Chair. To dispose, I would assume, means for the most part destroying — correct?

G. Gentner: So when we're talking about the destruction of the financial management records in a ministry of the government of B.C., the destruction of a combination of real estate services, the Ministry of Citizens' Services, the destruction of emergency health service commission operational records, the destruction of the performance accountability in the Ministry of Health Services and — the interesting one — the final disposition of the Conversation on Health, Ministry of Health….

Have operations or the Archives done a cost analysis of how much it's going to cost to simply maintain them and maybe put a seal on these records for 30 years?

G. Mitchell: Mr. Chair, I'll reply as archivist and as chair of the committee. When records management was formally instituted within government, cost analyses were done on the cost of maintaining records and active office space. I mean here in the capital region as opposed to warehousing in a records centre. And then also the cost of warehousing…. I suppose, at that time, microfilming; today we would call it digitization.

The cost return on a microfilm…. If records are to be held for 50 to a hundred years, then microfilming and digitization are cost-effective. For preservation it's not as cost-effective if it's less than that. It may be advantageous for providing access. So you may digitize a record to provide the public with more ready access to the information, but a cost analysis would show that it's more costly. You have to balance the two off.

G. Gentner: So within your current budget, can you maintain these records over the long term?
[ Page 91 ]

G. Mitchell: Well, the Archives of the province…. With the budget that we have, we can hold and maintain our current holdings and provide digitization for access. Digitization for preservation — i.e., digitization-for-preservation strategy — has not received — how do I put it? — international approval yet. The ISO has not set these standards, and the industries have not moved towards a standardized approach. So when we digitize for preservation, we essentially are gambling. We haven't moved into that area as much as we'd like.

So the budget of the Archives…. We can maintain the current archival holdings and maintain a level of access to that, which we believe accommodates public demand.

G. Gentner: So excuse me. If I have this correct, cost isn't driving the disposition here.

G. Mitchell: On the Archives side, no. On the side for our colleagues and public servants that worked in the ministries, proper records management is very cost-effective. As they move into digital — well, we're moving into the creation of information in electronic and digital form — space will be a cost savings. A long-term preservation will be costly for them.

Therefore, they have to have a much stronger idea of what records have value, which ones they should keep in a digital form and which valueless records they should destroy in digital form.

I mean, one of the great dangers we have is that, of course, if you saw 70,000 boxes of paper records, you would question that we have a problem in maintaining records, and we should whittle it down to ensure that the most valued records are kept. If you had 70,000 files in digital on your laptop, you'd never know that you may have an issue. You have one, but you may not know it.

That's the great challenge that our colleagues in government have, trying to ensure that digital records of value are maintained, and those that are not are destroyed according to schedule in an appropriate manner.

G. Gentner: Just one quick comment, if I can. Digitize it or microfiche it or just stack them in boxes. Either way, the records are there maybe 50 years from now for a history student who wants to do a thesis on the Conversation on Health. I think those are very valuable records either way. It's a question….

I don't think what is coming before us today is one of savings, per se. I think there seems to be an arbitrary decision as to what is of value and what isn't of value. Frankly, I'm not here to drill down and find out who has the historical knowledge to make those decisions. I'm just a little leery about destroying any final record, having been an undergrad in history, at the very least. I worry about this.

B. Ralston (Chair): Before I move to Kathy Corrigan, any comments on that, Mr. Mitchell?

G. Mitchell: To be candid, the government and parliament cannot keep all of the records its public servants create. The cost to it would be extraordinarily high over time. As an archivist, I would be afraid that over that time period, public servant colleagues would no longer differentiate between valued records that have long-term value and records that don't. They would treat them all the same, and therefore there would be, over time, a higher propensity to destroy than to preserve.

B. Ralston (Chair): Last question, then, or at least the last one I have notice of, from Kathy Corrigan. I see that Vicki Huntington has one, so she'll be next.

K. Corrigan: My question is…. I'm trying to get a sense of what would happen in a concrete way, maybe using the example of resolution 5 on the Conversation on Health. With this process, could you give me an idea of what you believe would be preserved?

I think all of us are familiar with the Conversation on Health, so we have some idea of what records there probably are. Would you, for example, expect that all the submissions that citizens made to the Conversation on Health would be determined to be valuable documents and would be preserved? What other types of documents would you think would be retained in the archives in some form?

G. Mitchell: My recollection is that the ministry proposed that all of the information submitted to their hearings, as well as documentation relating to the creation of their final report and information that would support the creation of their recommendations on programs, would all be maintained so that in the future there would be lines of research available for people to see.

What was the discussion within British Columbia on the matter? How did the public service react to those discussions? How did they formulate the decisions to move forward? What approvals were granted or not on those recommendations, and then how were those recommendations implemented or passed on to other operational areas so that, fundamentally, the public can see how accountable that program area was to their recommendations?

That's very helpful. Using that example again, how is it that we can be assured that the decisions that are be-
[ Page 92 ]
ing made are not influenced by political considerations — possible embarrassment? How can we be sure that the information…? What is built into the structure to ensure that this process is a non-political one and that information that perhaps would be sensitive or would be embarrassing to whichever government is in power…?

That there'll be no taint of politics associated with the decisions — is that built into the committee structure that you have in terms of retention?

G. Mitchell: Within the committee, there's myself and the comptroller, and we have a senior barrister and solicitor from the Attorney General sit on the committee. We hear representations from senior public servants on why they want these schedules to move forward and how they justify the retention periods that they have brought to us. So it's all within the professional public service that these schedules are created.

By policy, prior to submission to the Public Documents Committee, the forms are required to go through the public service hierarchy within that agency. The deputy minister or senior ADMs are required to sign off that they acknowledge that they support the schedule and the accountabilities that come with it. So within the process there is no reference to the ministerial level.

B. Ralston (Chair): Thank you. Then the last question — the genuinely last question. Vicki Huntington, go ahead.

V. Huntington: One question and one comment. If I understand it, Mr. Mitchell, these amendments are basically changing the definition of "valued document" — i.e., the definition of what evidentiary, legal or historical content is of value.

G. Mitchell: It sets a time period. For those values, it sets a time period of how long that information must be maintained. It doesn't change….

G. Mitchell: It doesn't change directly. It just acknowledges that that record has a long-term value.

V. Huntington: And those acknowledgments are found in the concordances attached…?

G. Mitchell: The acknowledgments are found within the record retention period. The retention periods are assigned to a defined records group or a records class. So our colleagues can take a look, for instance, for argument's sake…. We'll say minutes of a ministerial committee. Records have to be kept, you know, five years within the office area. Then they're transferred to Archives. Our colleagues know right from the creation of the document how long they have to protect it and what happens to that record, so there's no ambiguity to that.

V. Huntington: Thank you. I really appreciate the specific nature of your comments. They've been very helpful.

Mr. Chair, I would suggest that the recommendations are no doubt very reasonable and that the amendments are probably reasonable. But for me it's more a matter of principle, and I would like to have some sense of what these amendments are and suggest that we see or review perhaps one or two tables of concordance so that we could have a sense of exactly what it is that we are resolving.

B. Ralston (Chair): Well, I think that's a suggestion. We'll see whether that's something that the committee is prepared to countenance or whether the committee wishes to move forward. I feel like a rock star on the last world tour here, because I have Shane Simpson saying that he would like to ask another final question — so a final, final question.

S. Simpson: Just a question, and this is in regard to…. We'll take as an example resolution 5 around the Conversation on Health. The Conversation on Health occurred three or four years ago — whatever it was. It was fairly recent in those terms. So is there a timeline here that records would be retained for a period of time before they would even be considered for disposal? And is three years that time?

I've got to say that I share some of Vicki's concerns and would like more information before voting to support this. But at this point I'd like to know: if this resolution 5 passed, what happens there? Do those records get maintained for a period of time, or is it reasonable that three years after an event took place, the disposal of those records would start to occur?

G. Mitchell: A schedule can be proposed at any time. Conceptually, it would be great that if a ministry is moving into a new program area, they begin immediately to look at the types of records they'll create, give thought to the long-term value of these records and propose a schedule so that their colleagues, when they're creating records within that program, have a very clear idea of what must happen to these records and how they must protect them.

Typically, however, as we've moved forward to implementing a records management process, depending on the ministry, you can have a delay in people proposing a records schedule with those identified values. From the creation point to the time they think of advancing a schedule, the records cannot be destroyed. They have no legal authority to do so.
[ Page 93 ]

If approved by Public Accounts and parliament, a schedule gives the individuals administering these programs the legal authority to protect valued records and to destroy valueless records over the retention period set. So upon the approval of parliament, you don't see people just dumping things in the confidential shredder.

What they do is.... They have to review their processes to make sure that they've identified all the records with value and that they're protected in such a way to ensure that they survive in that area until they're transferred to the archival holdings, where greater public access would be permitted.

You have a situation where the schedule gives people a stronger framework in which they can work and a stronger, heightened awareness of what they're obligated to do on behalf of their ministry and also on behalf of the greater society. So it does, I believe, hinder people indiscriminately destroying or destroying records in a needless way or in a way that doesn't provide due diligence, because the records are identifying the value being expressed. Then the records must be maintained.

It's very hard to argue against a schedule, the approved schedule. They have accountabilities that they have to meet within their line ministry for doing so.

G. Mitchell: Once the schedule is approved by the committee and parliament, then it's up to the line ministry and the executive government to adhere to them. Audits are performed by several different agencies as to how records and information are being maintained, not by public documents.

B. Ralston (Chair): Thank you, Mr. Mitchell. In view of the perhaps surprising and inordinate interest that your presentation has generated, I briefly conferred with the Deputy Chair. I take it that there's no urgency to passing these resolutions.

A couple of members of the committee have expressed some reservations. I think they might benefit from perhaps a meeting either with you or with the committee, at least, to satisfy themselves that they have performed their due diligence before we proceed with these resolutions. That would be my preference, unless there is some great urgency to proceed with these resolutions today.

G. Mitchell: There's never a great urgency, as long as people are willing to learn more about my world.

B. Ralston (Chair): You've certainly piqued people's interest in a way that I wouldn't have thought possible. I don't want to make light of it at the same time, though, because I think it is an important area of interest certainly for ongoing preservation of the public records. There's a public value there that's very important.

G. Mitchell: No. To be honest, one must always bring humour to one's work, because as you can imagine, we have millions and millions of cubic feet in our public service awaiting my attention. It's always the desire of the Public Documents Committee to have its resolutions approved before the House rises, usually at the end of session. There's a great deal of time left, I hope, for that.

To be honest, to have the opportunity to talk to committee members individually or in small groups about this process is a great opportunity. You can also visit your Archives and see what does happen.

To be honest, Mr. Chair, with your background, I find it surprising that you'd find records retention really intriguing. Knowing your father….

B. Ralston (Chair): He did spend many years in the archives, so certainly there is a family affinity there. But that's not why I'm doing it, I can assure you. Although I am probably more conscious than many of the value of the archives.

Perhaps, then, we can make the arrangements through the Clerk, and those committee members who want to meet further will set up a meeting. We can deal with that in the near future. I'm sure this can come back at the next meeting of the Public Accounts Committee, and we can deal with it then.

G. Gentner: Maybe we can just have a hands-up for who would be interested, since we're here now. Mr. Mitchell can arrange a meeting.

B. Ralston (Chair): Yeah, I suppose so. I sense an interest. If people don't want to be put on the spot, that might be…. People have busy schedules, so that might not be necessarily the highest priority, but I sense that there are at least three or four.

If there are more, then we'll arrange it. That would be a no-budget field trip, so that would certainly be in keeping with the financial temper of the times.

B. Ralston (Chair): Oh, you've got a question. I thought you were signalling your wish to go to the Archives.

J. Rustad: I'm just curious. Are you talking about meeting with the archivist, or are you talking about an actual field trip to go and visit the Archives? I'd be quite
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interested in going and having a look and actually doing a visit, if that's what the will of the committee would be.

B. Ralston (Chair): I'm sure we could meet with the archivist in the Archives. That might be…. I can see he's animated even just by the prospect.

R. Sultan: Before Mr. Mitchell leaves, I just wanted to put on the record a question I have. I'm not asking for a response today or to occupy any further time of this committee, but I am very curious as to what in fact is a record. What is the definition of a record?

We'll move on to the next item. If we could just take a minute, and we can change positions here. If we could stand down just briefly.

B. Ralston (Chair): Thank you, Members, and welcome back. We're going to begin with the next item on the agenda: consideration of the public accounts for the last fiscal year.

When we adjourned last time the comptroller general was mid-presentation, so I'm going to ask her to resume. I understand she has — and we've been provided with — the brief of the slides that she proposes to present. I think she's about halfway through.

After that, we'll begin questions. I doubt that we will have provided enough time, given the time at which we're adjourning today, for all the questions, but we'll begin then. In addition to that, we have the draft report to the House to consider, which will take some time as well.

With that, I'll turn it back over to Cheryl Wenezenki-Yolland, the comptroller general.

C. Wenezenki-Yolland: As indicated, before Christmas we had a long day of discussion on the public accounts. We were partway through the presentation. We had discussion about the Auditor General's report, their reservations. I believe that when we left off, I was just about to actually kind of walk you through the document of the public accounts and familiarize most of you with the content, where to find things and what type of information it's sharing with you.

I think there are a number of new members, so it's a great opportunity to share with you this document that my staff and I spend a great deal of time preparing. Also, I think there is a lot of information in here that individuals may or may not be aware of and can help you in your work as the Public Accounts Committee.

I'm hoping that you've brought your Public Accounts from the previous presentation. We did bring a box and distribute these. The Chair is showing me that he has his.

B. Ralston (Chair): Just perhaps before you go further, you might want to introduce your colleagues as well, just so that they're here for the record.

C. Wenezenki-Yolland: I will. I have with me today Carl Fischer, who is the executive director of financial reporting and advisory services. It is he and his team that spend a great deal of time compiling the financial statements on your behalf.

As well, I have Larry Swanston, who is the manager of reporting and analysis for the debt management branch. He is the individual that spends equally as much time compiling the debt summary reports that form part of the public accounts and is here to assist me with any questions or speak to any details that you may have.

I also have a few members in the gallery, so depending on the nature of the questions, we may ask them to come forward as well.

I will proceed. As we were partway through, I was just going to walk you through the Public Accounts. The core part of the public accounts is the financial statements, which are in this document here. As you go through the document, there are some very important parts of the document. At the very first part, you will see the Minister of Finance and myself, as we submit the financial statements for government to the Legislature on your behalf. Working through the document, you will see that one of the first parts that you come to is on page 11.

What page 11 does for you is provide some very high-level highlights of what has happened this year — key things that may have changed and that are affecting the public accounts or typically points of interest, because there may have been some significant shifts or differences. On that page, what you'll find there is that we have highlighted the surplus for the year, which was $78 million compared to a budgeted surplus of $50 million. So we've put that on the front page. It tends to be a point of interest. People immediately want to know where the surplus or deficit was and how did it compare.

We've also highlighted a few other areas where we saw some real significant change in the last year. Taxation revenue was highlighted on that page of the document,
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where we saw some significant decreases in our taxation revenue — $1.2 billion compared to the prior year, so certainly down and indicators of the slowing economy.

The point of the highlights is to bring those sorts of things immediately to the reader's attention. We also have highlighted there for you some significant investments that the government has made in the last year — where we had investments in infrastructure of $1.9 billion — and also highlights of the provincial debt, which is a common measure that is often referred to in the public. We saw an increase of $3.3 billion in provincial debt which was predominately to finance capital infrastructure.

We also have highlighted a few significant economic indicators on that page: what's happening with GDP and how B.C. compared to the national average, which is also consistent with some of the trends we saw in our revenues; and also the credit rating of the province, which is a key indicator of the overall financial health as perceived by parties external to the province — where we have maintained our triple-A credit rating for the province.

An important point about some of the highlights and the next section that I just want to walk you through, which is the financial statement discussion and analysis. These areas of the financial statements are not audited directly by the Auditor General, but they are provided to the Auditor General.

That's important for you to know because when we are publishing financial information, if we are giving you additional information at the same time as the audited financial statements are coming out, we are required under our professional practice to provide that to the auditors, because that information must be consistent with any financial information we are providing that is audited.

If for some reason the information that was provided was inconsistent with audited financial statements or there were any concerns there, then the Auditor General would need to highlight that for you in his opinion and in his discussion. So while it's not directly audited, it is absolutely reviewed to ensure that what we're presenting is consistent with the financial information that he has audited and provided an opinion on.

Financial statement discussion and analysis. This is a very useful part of the public accounts. It tries to take some of the more detailed numerical information that you would find in the core of the financial statements and to present trends over multiple years, to do some comparisons to other jurisdictions and to basically provide a bit of a story about what the financial results of government mean. Those go through — it's quite a long section — pages 12 to 28.

It covers quite a few very significant areas. You'll see a discussion of some of the key economic information in the first section where it gives you some comparisons of real gross domestic product, unemployment rates and some expenses and revenues on a per-capita basis.

It then goes on to also provide a very high-level comparison of the surplus and basically a breakdown of the surplus between the self-supported entities and the core programs, on page 13. It does not only a comparison to the budget, but it also does a comparison at a high level to the previous year. So it's a very high-level summary of more of the detail that you'll find in the public accounts.

There is also a very high-level discussion of what that is and how that breaks out. So you can see the surplus of $50 million that was budgeted for the year, and you can see the actual result, which was the $78 million. You can also see it compared to the prior year, where we had a $2.8 billion surplus.

It does also break it down by major categories of revenues and expenditures so that you can see whether the changes or shifts in the surplus are a result of revenues not being as planned or whether it's a result of expenditures not being as planned. So very high level and then supported by all the details in the financial statement.

Working through the financial statement discussion and analysis, on page 14 you see a very thorough discussion of trends and major components of revenues with year-over-year comparisons. We do have five-year comparisons of revenues with a number of indicators to show what's happening with revenues. You are welcome to ask whatever questions you would like in that regard, but certainly the information is there for you, and you can see what has been happening.

That goes on at quite some length, breaking it down between our own source revenues, transfers that we rely on from the federal government and also taxation revenues.

Starting on page 17, you have a similar type of trend information that presents the expenditures by the major categories as well as year-over-year comparisons, so you can see what has been happening with the expenditure patterns of government and where the major components are. For example, some of the components that you would see there are health, education, social services, natural resources — so where the money is being spent and how it has changed over the last five years.

We also have as an indicator a comparison of expenditures to GDP. All of these indicators give a brief description of what they mean and why they might be important to you or why you might want to be aware of them. What that shows you is what the relationship of spending is relative to what's happening with the gross domestic product — so how sustainable those expenditures are over time given what we're seeing happen within our economy.

Each chart gives you that type of description. You can put your own value judgments on it, but we do try to ex-
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plain in some simple words what it means and why that might be important.

Moving through the financial statement discussion and analysis, a couple of other key areas to highlight are around page 20 and 21. There's a much more fulsome discussion of the surplus to break it down as to how that differed from budget. So if we were budgeting the surplus of $50 million, and we ended up with a surplus of $78 million, what was different between those two numbers.

There is a table that breaks down and shows you where we saw a decrease in taxation revenue. We saw increases in natural resource revenue, decreases in investments and earnings, interest savings. It really starts to try to break that down and explain what the differences are between the budgeted results or what you discussed in estimates debate versus the actual results.

We also have a discussion of the major components of net liabilities, which is found on pages 22 to 23. This is a very important discussion. What it does is show how the province's financial position overall has been changing over time. Again, it gives you some five-year trends. It breaks down the major components in shifts between what the financial assets are relative to liabilities, and it gives you a good understanding of what type of coverage the province has in relation to those liabilities.

It also goes on to do some explanation of non-financial assets, which is your infrastructure — your schools, universities, hospitals — and what has been happening with your infrastructure and the investments in that area. There's a very good table on page 23 that talks about the change in capital stock and specifically highlights the increases that have been made in that area over the last several years.

There is also some discussion…. I don't want to go through all the tables, because we would be here for a very long time, but there is some very high-level discussion on the provincial debt that is also provided for you on page 25 and has the indicator of taxpayer-supported debt to GDP, which is communicated in the budget and also presented here in the Public Accounts and shows the trend over the last several years.

The point of that measure is to really demonstrate what is happening in regard to debt. A declining ratio, which is what we currently have, means that the debt will not grow faster than the economy, which is important because it talks about the burden and affordability. That's what that really gets to.

There is also a very good discussion on page 27 at a very high level just about some of the risks and uncertainties that exist within the financial statements but also what government has to manage on an ongoing basis in relation to managing its finances and its budget. There are a number of risks that are outside of the control of government. The important point here is that they have to plan for and build mitigations into their plans to address these risks.

A lot of them are economic factors. There is a good discussion there. Economic factors would be such things as commodity prices, personal income, retail sales, population growth, unexpected shocks — disasters, the sorts of things that they can't necessarily plan for but that they do have to have an ability to manage and address those situations when they occur.

There is a table provided that also tries to give some indication of the sensitivity of financial information to some of those key economic indicators. One example off the table — and you're welcome to look at the table yourselves — would be lumber prices. What they show there is that an increase of $50 U.S. for a thousand board feet could have a financial impact of $50 million to $100 million in the financial statement. It's an attempt to show some of the sensitivity that occurs as a result of the risks that government faces in managing its financial plan.

Then we get into the core of the financial statements, which is presented starting on page 29. You will see that one of the first things you would come to when you go into those is a statement of responsibility. There are a couple of important pieces there, because that statement of responsibility is signed by the chair of Treasury Board, but it talks about the role of myself as the comptroller general in preparing these financial statements on behalf of government. It also talks about the role of the Auditor General in providing his independent audit opinion on the financial statements.

Then, I wanted to highlight for you, it talks about the role of the Public Accounts Committee, just at a very high level, and that we table these financial statements in the Legislature and that the Select Standing Committee on Public Accounts reports to the Legislature with the results of their examination, their review and any recommendations they have in regard and with respect to the financial statements and the audit opinion.

That, I think, is very important in setting out the context so that when citizens are reading these financial statements, they have the benefit of that information and how these financial statements are presented within the Legislature, in the parliament, and the individuals involved.

Then you would come to the audit opinion of the Auditor General. It's right up at the front of the financial statements. We had a discussion last time, so it is not my intention to speak to the detail of the audit opinion at this time unless you have some specific questions that you want to raise later, but you can see that it is there and signed. The way we work with the Auditor General's office is that they do review our financial statements right up to the last point before we push the publication button, so there is a confirmation that everything they have reviewed is in fact what we actually publish and table
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within the Legislature. That's important from an accountability perspective.

Then you move into the core of the financial statements, and this may be familiar to some of you. We have our consolidated statement of financial position. For those of you who are older-school, it used to be called a balance sheet in the olden days when I first started my accounting. We've changed the name since.

Here you have a breakdown of all of the detailed components of the financial position of government, with all of your assets — which includes all of your current assets, which is your cash and your temporary investments, and goes right through the different components. You can see the amounts that we have that are due or payable to the government.

You can also see then, when you move down to the liabilities, the amounts that are payable by the government and, by major components, who they're payable to.

Moving into net liabilities, which is really important because net liabilities shows you clearly, from a liquidity perspective, where the government is at. If you took all of the financial assets that we have to date and then you took all of the current liabilities that we have to date, what is the net liability position of government? You can see, midway down the page, the balance of where we are for 2009 versus the prior year.

Then we go on to include our non-financial assets, which is your large infrastructure — your schools, hospitals, etc. — and other non-financial items like prepaid program costs, etc., and we work down to an accumulated surplus or deficit. Now, I think the accumulated surplus or deficit is very important. It shows that, overall, the province of B.C. is in a positive position with an accumulated surplus.

That has been building, and it represents the accumulation of net operating surpluses or activities over the last several years. We did move into a positive position — I believe it was in 2003. Up until that point the province was actually in an accumulated deficit position. Overall, you can see that it is quite a strong financial position.

Also, supporting each of these items are very detailed schedules, and there is a column there that is titled "Note," and it has a number. You can go to more detailed notes supporting the discussion or a breakdown of each of those items.

The next statement is your consolidated statement of operations, historically known as your income statement. It presents for you the government's revenues and expenditures. It also provides a comparison to the budget that would have been debated during the estimates process so that you can see how a government actually performed relative to the budget or to its plan.

It also provides for you a comparison to the prior year, so you can see if there were any significant shifts or changes by the major categories of revenues or expenditures. Then you can see that it works down through to the surplus or deficit for the current year with those comparisons — so more detail than the highlights and the financial statement discussion and analysis, and again supported by many detailed notes in the back of the financial statements that will provide you a lot more detail to support each of those items should you wish to pursue it.

Also, the high-level statements include a consolidated statement of change in net liabilities. Again, very important, as I said before, because it does show you the current position of the government from a liquidity perspective. It basically does a reconciliation from the surplus back through to the net liability position that is presented on the balance sheet. So it does a reconciliation between the operating statement and the balance sheet amount of net liabilities and the major components.

Then you have a cash flow statement, which is a normal component of all financial statements. Government is no different. It basically presents for you the incoming or uses of cash throughout the year and breaks it down by operating transactions, capital transactions and investment transactions. It goes on to show some of the major uses, financing transactions. You can see exactly how we use our cash. It's a different way of presenting the information, other than the balance sheet.

Moving into the notes of the financial statements, which is where you start to really get some discussion about how the financial statements are put together. You have note 1. The notes are an integral part of the financial statement. They do provide details.

There is a huge amount of information in the notes to explain how government reports, their basis for reporting — to provide additional details, to provide breakdowns, to provide further comparisons, most of which are required by generally accepted accounting principles. But we also, in our statements, do in some cases go in excess of what is required under the accounting standards, because it is useful information to provide.

Note 1 provides you the core basis of accounting for government's financial statements. It tells you broadly who is in government's financial statements. It does provide a very detailed schedule for you on pages 79 and 81, if you want to look sometime and see all of the entities that make up the summary financial statements of government. There are a huge number of them. I don't know if it's 140 or 150 at this point. It changes on a regular basis. But there is a significant number of entities there.

It tells you about the principles of consolidation. There we talk about the fact that for Crown corporations…. We have taxpayer-supported Crown corporations, and then we have self-supported Crown corporations. They're accounted for on a different basis. Taxpayer-supported entities are consolidated on a line-by-line basis, so you
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will see those numbers directly reflected within each of the line items of the financial statements.

Self-supported Crown corporations, however, are consolidated on an equity basis, which means that they will just show up as an investment that is held by government on a net basis. You would see the net investment show up.

They are reported, but they're consolidated on those bases. That basis of accounting is consistent with GAAP and is audited by the Auditor General. He provides you with his opinion on that.

Then we go into quite a bit of detail about specific accounting policies in regard to how we define our sectors: definitions of revenues, expenses, assets — all the major components. You're welcome to read through all of those notes. I encourage you to do so. Carl does it every night to his children, I understand.

There is some very good information, and it may help you. If you see something on the balance sheet or some components that you don't understand, it may actually provide you with some definitions to help explain it. Not everything in the financial statements is, unfortunately, in layperson language. Accountants do create some of the language, so it may not always be so straightforward. The explanations and definitions are intended to actually help you understand that information.

We do have a note around uncertainties. When we are compiling the financial statements — this is note 2, found on page 49 — we do have to make some estimates at the time that we are doing our reporting because we may not have absolute and complete information. But there may be enough information that says that government has a liability or an obligation, so we would want to recognize that. We would have to make some estimates so that we can present our financial situation fairly at the end of the year.

The measurement uncertainty note is to identify for you those most significant areas where we do that estimation and to give you some context of the potential sensitivity or range of impact that a shift in those estimates may have on the financial reporting.

You would see some notes there, as an example, around personal income tax and the fact that everyone may or may not have all of the filings in. We may have to do some estimations at the end of the year, so we disclose what the potential is for an error in that estimation.

B. Ralston (Chair): Just if I might interrupt, I think the lunch is available. Rather than stand down for people to take that, if people could individually head over there and pick up something, I think we'll just continue on. I think that was the decision that we made. It may be slightly distracting to our presenter, and I apologize in advance. I think that's probably a more efficient use of our time rather than stopping.

C. Wenezenki-Yolland: Okay, back to the Public Accounts and the discussion of the notes. I can see I have a very engaged audience, so I will continue. There are a few more notes that I think are worthy of highlighting, just based on the types of questions that we do get when people are looking for information.

Note 7 you will find on page 51. I had mentioned the different bases of consolidation and that we have the self-supporting Crown corporations. We do consolidate them on a net investment basis. Those are disclosed for you in more detail in note 7. You can see the entities in that note. For example, you'd find B.C. Hydro, B.C. power corporation. Those would be some examples of what you would see there — basically a reconciliation of the net investments that we have in those corporations.

It also shows you significant changes or what the makeup of the changes is in that investment between the last fiscal year and the current fiscal year.

There are also very detailed operational statements for those Crown corporations in the back of the Public Accounts, on pages 90 and 91, so there's a lot more detail that you can see on those organizations should you desire to drill down a little further into those. Then, of course, each of those entities also publish audited financial statements, which we would have received in order to prepare the Public Accounts, and all of those are available to you publicly, so you can even go further into the detail of those entities should you so choose.

On page 58 you will find employee pension plans. Pensions notes are often of interest. You can find those on page 58, where we have provided the detail. There are a number of pension plans. You will see a note regarding the members' superannuation account that is discussed there.

Then we have other pension plans. Those are pension plans that are held outside of the four core pension plans that we have for the public service. The four core pension plans are the college pension plan, the public service pension plan, the municipal and the teachers' pension plans. Those are the core ones that are part of the public sector, and all of those plans are managed under joint trusteeship. There's quite an extensive note on those.

The other ones that are disclosed there are smaller in nature, but we are disclosing them so that we are compliant with our generally accepted accounting requirements. They are typically held by other entities. An example would be B.C. Hydro, which does have a very specific pension plan that is held by that organization. It would be fully disclosed in their financial statements, but it is outside of the normal public service pension plan, so there is some disclosure there. That note continues through pages 58 and 59.

On page 60 you can see the current valuations of the four major plans that are provided there with their cur-
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rent accrued obligations as well as the planned funds. Then you can see the net position of those obligations at March 31. There are also full statements and details of each of those plans available through the web link, and it's provided in those notes.

Note 17 is a discussion on the taxpayer-supported debt, and it gives you a detailed breakdown — well, a high-level breakdown but more detailed. It discloses what we have in short-term promissory notes and what the profile is of the bonds and debentures, and it goes on to also provide you with some high-level information around the effective interest rates of the debt portfolio.

You will also find in that note that we have some disclosure of capital lease obligations, which are included in our taxpayer-supported debt, and some of the more significant items are disclosed there to provide what the major capital lease obligations would be.

You also have the GAAP requirement on the following page, page 62, which discloses for you the five-year aggregate payments required to meet retirement obligations.

We have the next note, which gives you the detail of the self-supported debt, again breaking it down in far more detail about what it is, what the currency is, where it is. Going over to the next page, again with the aggregate payments required to meet any retirement obligations….

We also have quite an extensive discussion on risk management of derivatives, which are financial instruments and investments. There are tables there, as well, that provide some specific details of where and how those are held, as well as some discussion on the major area of risks. They are typically interest rate risk, foreign exchange risk and credit risk. There's quite a lengthy discussion on all of those for those who are very interested in financial instruments and derivatives and exactly where government has those investments.

B. Ralston (Chair): Just before you leave that one…. In this slide you say it discloses the amount of foreign exchange risk that cannot be effectively mitigated by hedging. In just a quick look at that, I couldn't find that number. Perhaps you could just point me to it.

C. Wenezenki-Yolland: If you go to the very bottom of page 65, you have a discussion in the bottom of the note there. It talks about the unhedged foreign currency debt exposure, then continues on to the next page and starts to go through quite a thorough discussion of unhedged foreign debt exposure and how much in years.

B. Ralston (Chair): So the limit is set by policy, and it's within the policy guidelines. Is that the conclusion to draw there?

Okay. Note 24 — again, a very full discussion. Well, not a full discussion, but the accumulated surplus and deficit. We are required, under generally accepted accounting principles…. If we are required to make any adjustments to the opening balances of accumulated surplus/deficit, then we will disclose that.

So on page 68 you have a very itemized list of any adjustments that were required. All of this has been audited and validated by the Auditor General. All restatements are for accounting purposes because of changes that may have occurred. It may have been a change in accounting policy. There are a number of reasons why that may be necessary, and those are provided for you.

Note 25, "Contingencies and contractual obligations," is often an interesting note. People are often interested in contractual obligations, so we do provide discussion of those significant items at a high level.

We did have a detailed schedule on contractual obligations that we did make available this year. The link is provided in the Public Accounts for people who want to have that detail. We're not required under GAAP to provide that information in the Public Accounts, but it has been an area of interest, so we have made a subsequent schedule available to people.

You will see discussions on contingent liabilities. A common type of contingent liability that a number of people may be familiar with would be litigation.

It may be that the province may have some legal action filed against it. It's underway, so we would want to have a disclosure that the potential for that liability exists. But it is contingent upon some future action to, basically, confirm that that'll happen. So there is quite a discussion. It breaks them down by litigation, environmental cleanup.

Aboriginal land claims is another area that we have provided quite a bit of information on in regard to contingent liabilities and has been an area of interest in the past.

We also have highlighted commitments. Now commitments are not necessarily required to be disclosed under GAAP, but we have highlighted the Olympics commitment, because that has certainly been a topic of great interest of people in the past, and what that is.

On page 73 you see a breakdown of contractual obligations and contingencies by the major sectors and the payments that would be expected in future years. You can see what the longer-term obligations of the province would be in regard to those sectors for those obligations.

Another item to draw your attention to would be significant events. This is note 31 on page 75. Significant events are interesting. What happens in this context is that when we close the financial statements…. Actually, it's significant items that have happened that we want to
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bring your attention to. Often we actually agree on what these are going to be with the Auditor General's office, or they can be areas of discussion about what we should be highlighting here.

One that we did highlight was asset-backed commercial paper. It is an event that has occurred that is not something that would be typical or that we had seen in the past, but because of the magnitude of it and the unusual nature of it, it was worthy of putting in a note and drawing to people's attention. That's on page 75.

J. Les: On the question of asset-backed commercial paper and our exposure to that — and referring back a few pages to some of the investments backing our pension funds, which I see have decreased somewhat significantly — how much more of that kind of thing are we exposed to?

I've been following with interest the degree to which…. The major banks in the United States, for example, have literally hundreds of trillions of dollars' worth of what I guess, given recent experience, would have to be considered to be dodgy financial investments.

C. Wenezenki-Yolland: Well, in the context of asset-backed commercial paper — the exposure that government currently has — all of it is disclosed here for you in this note.

As to what might happen in the financial markets of the future, as the comptroller general I don't really think that's my place to extrapolate. But certainly in regard to government's exposure and what we have, we have that fully disclosed in this note here.

C. Wenezenki-Yolland: What I'll do is.... I would like to ask the ADM, if I can, of provincial treasury to actually address that. If you want to talk about the specifics of the investments, he can give you some more details about the investment portfolios and what's occurring.

B. Ralston (Chair): Sure. I think that would be helpful in response to the question.

C. Wenezenki-Yolland: So I'd introduce Jim Hopkins, who is the assistant deputy minister of provincial treasury.

J. Hopkins: Good afternoon. As for your question with respect to ABCP and the pension funds, through I would say adroit investment analysis, the B.C. Investment Management Corporation declined to buy the third-party asset-backed commercial paper.

So to their credit, I think, they weren't convinced that they frankly understood — to put words in their mouth — what the sales pitch was and what their reward for taking that sort of somewhat unknown risk or poorly explained risk really was. It was — you'll recall, perhaps — at the time a fairly anemic added return you got for a risk that was not very well explained.

Anyway, they did pass on buying that asset class for their pension funds or for any other government-held investments. There were, as the notes explain, a couple of entities outside the orbit of BCIMC, funds not under their management, that did buy some assets. This is the third-party asset-backed commercial paper as opposed to the bank-owned asset-backed commercial paper, which proved to perform just fine.

B. Ralston (Chair): Just on the topic of asset-backed commercial paper, because I did ask a number of questions publicly at the time. I think, as you say, BCIMC is to be commended for not taking the plunge there. But the valuations that you give…. Certainly, now that the Purdy Crawford process has ended and there is a secondary market created, I don't think that write-down is realistic. I think it's more in the nature of 50 or 60 percent.

I suppose that would actually fall into the fiscal year that we're in as opposed to the previous one. I presume there is some effort to accurately reflect the true market value of those assets now rather than the more optimistic write-down I think they took at the time.

J. Hopkins: Well, you'll see that there was an initial write-down, I believe in '07-08, and then an additional. As you point out, the evidence was that the assets were more stressed than they were reported on at the end of '07-08, so there was an additional write-down taken in '08-09. The audit certainly will be the responsibility of the audit committees of those various entities — ICBC, UBC — to recalibrate what they think of the investments they're holding, whether or not further write-downs are necessary.

B. Ralston (Chair): As I recall, UBC had the bulk of it. I think they had initially a valuation of $125 million. Is that part of the process then? I know they don't receive all of their revenue from government, but would you be in communication with them about their audit policy and their treatment of that asset?

C. Wenezenki-Yolland: In the case of UBC, we are always in discussion with them around their financial statements and what is happening, because we do consolidate them on a line-by-line basis. They will be taking
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the advice, though, of their board and their audit committee in that regard, and their financial statements will be audited by their auditor prior to them being submitted to us. That would be the process that we will go through to get assurance that the values presented are appropriate for that fiscal period.

Moving through the notes, a new note to bring to your attention this year is note 36, which basically talks about regulatory accounting, because we do have a regulator, which is the B.C. Utilities Commission, that regulates a number of entities, both public and private entities.

However, they do regulate entities that are consolidated within our reporting entity. B.C. Hydro would be an example. Because they are both in our reporting entity, we have provided a note that talks about the regulatory relationship. That's just in the spirit of transparency and full disclosure.

It also goes on to talk about what the implications would be from a financial perspective based on some of the decisions that have been made as a result of the rate regulation of those entities. We provided this note based on the discussions we had with the Auditor General last year. It is there for you with that disclosure.

A final note of interest is the subsequent events note. This is important because when we're closing the financial statements…. We do close the financial statements. They are as at March 31. We go on to agree with the Auditor General on a date of what we call substantive completion. But sometimes there are some events that will occur where something is significant enough. It's happened after the financial statement date, but it's before we actually publish the Public Accounts.

Because of the significant nature of those events, we do provide them as a note. The details would be reflected in the next year's financial statements and not in the current year, but certainly they would be areas that may come into question because the event would have happened prior to the release of the public accounts.

There are a couple of items there that are disclosed. One is B.C. Hydro and Power Authority, which announced a purchase of one-third ownership interest in Teck Resources. The second one is in regard to the Maa-nulth First Nations final agreement and that being ratified by the federal government. That agreement will be reflected in next year's public accounts, and those are both presented there for you.

There are a number of detailed schedules that are also provided in the final materials of the public accounts. One I had talked about was the reporting entity. There is the list of the reporting entities and who's in the reporting entity for you on page 80. You can see them all listed by the sectors so that when you're looking at the financial statements and you're seeing some sectoral-level reporting, you know where they are and who makes up those sectors and who's in the financial statements. It is quite an extensive group of organizations.

Then you will also go through, and you are provided with, some sectoral reporting. It basically attempts to break the statement of financial position down by the major sectors, which are health, education, social services, debt servicing and natural resources. Then it continues on to break it down by others: transportation, general government and protection of persons. You can see that type of reporting. It's intended to provide more information.

You will see a similar type of sectoral reporting for both revenues and expenditures — again, by sectors. All of that is in the detailed schedules for you.

You'll also find detailed schedules that break down the operations for the self-supported Crown corporations that I'd talked about as well as detailed schedules of tangible capital assets — so where the infrastructure investments have gone during the past year.

There is also supplementary information that is outside of the public accounts, which is available for you, and is published as part of the public accounts. We had brought them last time. I'm not going to go through them because it would take a very long time. But you do have consolidated revenue fund financial statements that are available on the website.

There is a lot of detail in these statements for you. They do basically provide you with a comparison of the ministries' actual expenditures relative to their appropriations. Sometimes we get questions: where can I find details on a ministry-by-ministry perspective? You can find those in these.

We do have these schedules delivered to the MLAs' offices. The Sergeant-at-Arms delivers them to all MLAs as part of when we table the Public Accounts. They're also available for you on line, as some people would find it easier to navigate.

Another item is the consolidated revenue detailed schedule of payments. If you want to get very detailed, you can go right down to every payment that we have made in the past year. The payments are listed by major categories — who was paid — and they will also identify the ministries that made the payment. Again, it is available on line, which some people find more useful, because you can do searches and get different types of views of the information in that regard. That is also made available for you as part of the public accounts.

At the back of the Public Accounts you will find the debt summary report, which is on pages 121 to 133. That is to provide you with as much detail as we possibly can at a summary level of the actual debt — what the makeup is of the debt and how we attribute the debt to different operations or capital by various categories.

We've had discussions before about taxpayer-supported debt and self-supported debt, and you'll notice
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that a number of the schedules are presented in that regard.

The other point is that the Auditor General does provide an audit opinion on the summary of provincial debt and key debt indicators, so the information is audited by the Auditor General. His opinion is provided on page 128 of the Public Accounts and the debt summary report. It is reviewed, it is audited, and it is, therefore, your information, supported by a whole number of indicators.

K. Corrigan: I was just putting myself in the lineup for when you're finished your presentation, not on that particular slide.

C. Wenezenki-Yolland: I think that's it. We're at the end of the document. So that's the general makeup content — where you find things.

B. Ralston (Chair): Okay. I'm not sure that we'll finish questions today, but we have until about 1:15, because we do have to deal with the proposed report to the Legislature.

K. Corrigan: That was a great presentation — very helpful, I can certainly say, as a new member of the Public Accounts Committee. I, too, will be spending my evenings reading this document, I absolutely assure you. Carl and I will. It's very interesting, very helpful.

I have a number of questions related to note 25, the contingencies and contractual obligations, and I'm wondering if I might be able to go through them.

B. Ralston (Chair): Perhaps before you begin, maybe I can compile a list, then, if there are other questioners.

K. Corrigan: The first one is a small one on page 72. I note that you say that contractual obligations related to the Olympic Games commitments are included in section D of this note, but I don't see a breakout anywhere of that. I'm just wondering if you could explain where that is in section D, or if it is or where I can find that?

C. Wenezenki-Yolland: I'm going to let Carl answer that for you. He can tell you.

C. Fischer: Contractual obligations of government are included in note 25. Specific contractual obligations of VANOC in relation to the Olympics, which is an independent organization, would not be included. Government may enter into contracts or agreements or obligations with third parties in the normal course of business which are related to the Olympics.

For example, if there are security measures or transportation issues, those obligations would be included in the function or sector that they relate to. So if it is, say, a transportation obligation, it would be included in the transportation sector. If there were, for example, an obligation related to the health sector, it would be included in the health sector.

We do have a detailed schedule of contractual obligations, which attempts to provide more specific focus on large or significant obligations. That's available on the website. The link is provided here below. I think it's also included in your printed copy of schedule C or D, which was provided as part of your package. All the details that we are able to provide are there.

K. Corrigan: You know, I have looked at that. I don't recall that there was any reference to the Olympics. It has been one of the difficulties that I've had, certainly, as the critic for the Olympics — trying to find out exactly what obligations the province has with regard to the Olympics. That's why I asked the question. It may be in there, but I don't recall seeing specific reference to the Olympics in that detailed schedule.

C. Fischer: We can certainly respond to any other questions we have. The working papers for contractual obligations, you can well imagine, are quite extensive. We have, I think, about 4,000 queries and questions going back, which we have to compile into a usable, readable format. So if there are specific questions, we're pleased to work with the ministries and agencies and come up with the answers.

K. Corrigan: Is it possible to break that out and find out what the obligations are with respect to the Olympics?

C. Fischer: Yes. If I understand the question correctly, it is: can you please provide a list of contractual obligations related to the Olympics on the part of government? We can do that.

B. Ralston (Chair): Just before you proceed further. On page 72, in the third paragraph, it says: "Contractual obligations related to the Olympic Games commitment are included in section D of this note." Then I take that your answer was that it is there, buried in each of the general areas. So your commitment that you're making is that you will excavate the Olympic-specific commitments from those broad categories and compile them in one place. Is that what I'm understanding there?
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C. Fischer: We would work with the agencies and ministries, collect the information and provide the member with a list of any Olympic obligations that are included in the note.

B. Ralston (Chair): What time frame do you think would be reasonable to put on that?

C. Fischer: It's difficult to commit to a time frame. My preference is to get things turned around really quickly, but when dealing with other ministries or agencies in order to ensure that we're complete, we do have to give them sufficient time.

I would think that within two weeks would be a sufficient period of time to cover everything off.

J. McIntyre: I'd just like some clarification of that, because when you say "Olympics-related...." There has been an ongoing debate about what is Olympics-related. One Auditor General put the Sea to Sky Highway in; another Auditor General didn't. It's been going back and forth.

Could I clarify that that is either VANOC-related commitments or…. I'm not comfortable with some just broad definition of "Olympics-related." I mean, is that Canada Line? Is that…?

We could go on and on, so I'm not sure exactly what you're committing to when you say something as broad as "Olympics-related" and how that's defined. If there's a very specific definition in here, I'd like to know that and know what we're asking for. Otherwise, I'd like to see that modified to "VANOC commitments" or something like that.

B. Ralston (Chair): With respect, I don't think that was the member's request, but I think the official can answer for himself.

C. Fischer: We would only be able to report on the contractual obligations of government. We would have to report on those items that are identified as Olympic-related commitments. There is a list on page 71 of those things that are included as Olympic costs of government within the current funding envelope of the province.

VANOC will also provide financial statements through the website, and they will include contractual obligations there as well.

B. Ralston (Chair): Thanks very much, and that information will come forward to the Clerk of the committee and be distributed to all members when it's available.

K. Corrigan: I wanted to ask a couple of questions about a comparison of the amount of oversight of contractual obligations as opposed to the amount of oversight of debt. According to these statements, the amount of the total contractual obligations at this point is $52 billion. The current level of debt is approximately $38 billion. Those obligations are just as real to the taxpayers of British Columbia as the debt, which is much lower.

I am wondering what the rationale is to have the reporting and the analysis of what the contractual obligations are — what the rationale is for it being such a lesser degree of oversight. I am wondering whether your office is considering, as these contractual obligations have become so significant, ramping up the amount of work that is done to oversee and report on the contractual obligations.

C. Wenezenki-Yolland: If I could ask the member to expand a bit more about what you mean about difference in oversight regarding debt and contractual obligations, and what you're seeing there that's causing you to think that there's some difference in the oversight.

K. Corrigan: Well, I guess if you just look at the number of pages that are devoted in the reporting and the degree of specificity that there is in the reporting about the contractual obligations. If you look at the financial statements….

Look at the reporting that you just went through at the back of the financial statements. There are — what is it? — about 15 pages or so on the provincial debt, analysis of it, what kind of debt it is, change in the provincial debt, what it is all about and debt-to-GDP and all sorts of things, whereas with these contractual obligations, which are much larger, we have a few pages in the statements.

We spoke last time about breaking it down more, and we really appreciate — I really appreciate, personally — that now the more detailed schedules are available on the website. But I think that the amount of oversight that is going into the debt seems to be much greater than these contractual obligations.

C. Wenezenki-Yolland: In the context of contractual obligations, there is, as you've indicated, more information provided, which we have done because of the changing nature of contractual obligations. But as to the issuance or entering into contractual obligations, the same level of oversights apply whenever you enter into a commitment or an expenditure on behalf of government, whether it is a contractual obligation or commitment or in the case of a debt.

In regard to discussing and reporting them in the context of debt, contractual obligations are treated differently than debt obligations. But I think presenting them in the context of GDP and some of the other indicators that we have…. It wouldn't necessarily be of the
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same type of relevance to contractual obligations to present them in that same way.

K. Corrigan: I guess my point is that this has become such a significant item, and I think it's very important that the public has the comfort of knowing that these obligations are looked at very closely. Just on that rough basis of the number of pages and the amount of analysis that is done and the fact that, for example, those more detailed schedules are not included in the reporting, for the future I think maybe it's something that could be considered. I think sometimes just the number of pages that are included will somehow alert people as to the importance of it.

Can I ask another question about the contractual obligations? Last time we also had a discussion about the current materiality level for contractual obligations, and you pointed out that it is $50 million.

The Auditor General had said that there was a concern about the $50 million because if you had a number of entities that had a contractual obligation that was just under $50 million, he said that you could end up potentially with up to, say, $500 million — nearly half a billion dollars — of contractual obligations that were not reported. It's not like it rounds off. Something's going to be a little high; something's going to be a little low. This is all under-reporting if they're not included because there's nothing that's overreported.

I'm wondering if your office has done any work to estimate how much of the contractual obligations are missing, because they do not miss the $50 million threshold. Could you estimate what it is? I'm wondering if you would consider estimating and letting this committee know how much that is or if that work has already been done.

C. Wenezenki-Yolland: I'll let Carl answer that question, as he compiles the information for this note.

C. Fischer: The stated materiality limit is, as you said, a limit. It's a guide. We do use professional judgment, and we are responsive to the Auditor's questions and queries about the significance of either individual obligations or groups of similar contracts which might be very close. At $49 million, we would certainly include them. Also, if there is a specific significance to a particular contract or group of contracts, we would include that as well.

We do, every year, take a look at the full spectrum of what we can identify as contractual obligations. We do use that analysis to determine what is the most representative or manageable break to make. We work in conjunction with the people who prepare debt reporting and budgets to make sure that we're taking a consistent, principled approach.

We could take a look and try to describe the information that you've requested. That will take a little bit of time because we will have to dig back through the last few years.

In terms of a general response to the question about contractual obligations, last year was the third year that reporting on contractual obligations was required in Canadian GAAP. It's been challenging at times to try and deal with concepts. The guidance is fairly new, and we, like other jurisdictions, are just now getting to a place where we are comfortable.

We can certainly provide some information. But as always, there will be limits to the information that we can provide.

K. Corrigan: The Auditor General said at that last meeting — I was looking at it a couple of days ago: "My view is that all significant contracts should be listed, and then the decision should be made about what should be included or not included." That is different than gathering them together and saying: "Okay. It either meets the $50 million threshold or not."

Are you saying there is some flexibility in the way that you look at it, that there's not simply a hard-and-fast rule there, or just simply that you could find that information for me?

C. Fischer: Yes. Certainly there's always flexibility. We call it professional judgment, and it's part of the ongoing debate between the preparers in the Ministry of Finance and the auditors in the Office of the Auditor General because in accounting, particularly in accounting for some more conceptual areas like contractual obligations, it's very easy to have two or three or a thousand different perspectives on how the information is best represented.

K. Corrigan: Well, I thank you for that, and I thank you for any information you can provide. I'm going to go on to my next question, if that's okay.

D. Horne (Deputy Chair): Just on that point before we leave it. I guess the concern I have is that the member's comments perhaps suggest that there may be contracts of a material nature and in a gross sense that have not been reported. Obviously, with the way that we do prepare financial statements, I think it's just to make it clear…. With the Auditor General's report as well, the Auditor General's report ends, except for his reservations, and says that the financial statements represent a full, true and plain disclosure of the financial position of the province.

So in your opinion, going back to the member's statements, is there any material nature of contractual
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obligations that, using the presentation you currently use, are not currently disclosed?

C. Wenezenki-Yolland: I can speak to that. In my opinion, and also based on the review of the Auditor General, there is no material misstatement or misdislosure in the financial statements. We have captured all of the material contractual obligations and reported them accordingly.

K. Corrigan: Well, just a follow-up on that. Your definition of "material" is whether or not it's worth more than $50 million. So I guess what I'd like some clarity on, then…. Are you saying that where the contractual obligations in a ministry in one contract or across a group of similar contracts is less than $50 million, sometimes it will be considered material and will be included?

C. Wenezenki-Yolland: Based on some professional judgment, that may happen, yes, as described by Carl Fischer.

K. Corrigan: Okay, so then the definition is not hard and fast, and it's quite possible that if you consider it to be material, it will be included if it's less than $50 million. I appreciate that, but I would appreciate perhaps a look and reporting back to this committee about contracts that aren't included. I think that would be really instructive to me, because…. Those were the comments of the Auditor General, not me, and he was the one that mentioned the possibility of up to half a billion dollars.

B. Ralston (Chair): Just before you move on, perhaps I could ask a question then. Is that threshold of materiality at $50 million set by Canadian GAAP? Was that something that you as comptroller general had decided? Ultimately, the decision on how to apply that criterion, then, is decided by yourself? So perhaps just: what's the origin of the $50 million?

C. Wenezenki-Yolland: In the context of generally accepted accounting principles, they do not actually define materiality. They go at great length, and you learn all about the concept of materiality, but it is based on professional judgment that you do to determine materiality.

They don't set thresholds. They would give you some indication of whether something is material. Typically the way that is defined is if a layperson were to look at it or an independent person of a different view were to look at it, would it cause them to make a material, different assumption or decision based on the information? Using your professional judgment, you have to determine what's the appropriate degree of detail and information included.

In the context of $50 million, that is the accounting policy that we've had in place since we undertook to incorporate this note. We do need to have some kind of general context to guide our practice, but based on our professional judgment, it doesn't mean that if we see something material, we close our eyes to it. That threshold is set as a matter of practice within our office as the policies that we set for these notes and disclosure of materiality.

B. Ralston (Chair): Just as a comparative, how do other provinces…? You've mentioned that this Canadian GAAP had only required disclosure for some three years now. How do other Canadian provinces and your counterparts in, say, Alberta or Ontario decide on what dollar value to put on materiality in this context?

C. Wenezenki-Yolland: In the context of other jurisdictions, you would have to look at the size and scope of the jurisdictions because, as you can imagine, with the nature of a territory such as the Yukon versus somewhere like British Columbia or Ontario, the materiality level is going to be quite different just because of the size and scope of the budget.

Those organizations, as well, would determine their levels of materiality based on their judgment and their organizations. There are also discussions around materiality that occur even between my office and the Auditor General's office. When we set out to actually start the financial statements at the beginning of the year, you have to make some determination around what issues they will raise to us based on the materiality and the significance.

The $50 million figure is actually a common figure that we've used in other areas of determining materiality in the past for the province. So I can't tell you specifically what Alberta's materiality level is or Ontario's, but I can tell you that they would go through some similar process and discussion in setting that level.

B. Ralston (Chair): On that specific point? I apologize to Kathy, but I think it's probably easier to group the questions around specific topics.

V. Huntington: Is it possible, then, to include in the note on contractual obligation the gross contractual obligations of each ministry that fall below your material contract — your level of materiality, if I can put it that way — so that the public could be able ascertain what a ministry's or even the government's obligations were in a gross format?

C. Fischer: I think it would be very challenging to aggregate that amount of information and meet the test of completeness, because it would include everything, including every lease agreement for every photocopier.
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V. Huntington: I think maybe what we're saying is that you can redefine the level or define a minimum, or the committee could help you define a minimum, that could be included in that.

C. Wenezenki-Yolland: In the context of contractual obligations, I think it's really important to understand what they are, as well, because they are different than debt, for example. When we sign a contract to lease a photocopier, there is a service that has to be provided before government actually has an obligation to pay. So one of the differences between contractual obligations and debt is that a contractual obligation is something that we are going to pay in the future, provided we get the appropriate service.

One of the earlier comments was: "Why can't you treat them the same?" Well, they are actually quite different. While we do have these contracts that government has entered into, and they do represent future commitments on behalf of government, they also represent future services or products or goods that the government will also receive in return for those contracts.

I think the point that Carl has raised is quite valid. When we are talking about it, we are talking contracts for photocopiers, computers and any type of contractual obligation that you might enter into. So we do need to establish some level of materiality in compiling that information because, in the absence of a computer system that has every contract in it that is ever signed, it is really, as you can imagine, quite consuming to try to go through those and identify all of those contracts and all of those payments. So there is some consideration of what is reasonable in that context.

V. Huntington: I guess where some of our concern is…. Is $50 million the reasonable amount? Or is there another way to look at how you provide that information below the $50 million level to the public?

I'm not looking for a description of the cost of pencils, but I am looking for a level of materiality that seems, even on a gross basis, more reasonable, or at least for information's sake attached to this note.

K. Corrigan: I guess at the end, you know, my final comment on this is: I understand that you have to have a level in order to make the books manageable, but if the comment of the Auditor General is that, at the end of the day, you could end up with half a billion dollars which is unreported, that as an aggregate would appear to be significant and material to the people of British Columbia, even though the individual components aren't. I think that's why I'm asking the question.

I don’t know how that can be addressed, but it sounds like you've made a commitment to go back and look and provide some information on what kind of significant — what I might consider significant — components there are that would add up so that we could get some kind of estimate of what is being missed. I agree that we don't want to ask about every contract, but if the Auditor General is saying it could be $500 million, how do we know that we're not missing $500 million worth of obligations?

C. Wenezenki-Yolland: In the context of missing those obligations, if there were material numbers that were missing in this note, then there would be some disclosure of that. There are processes in place in order to capture all of that information from all of the entities that we do consolidate.

I do agree that if you took all the aggregate of every single contract out there in every organization, they may add up to a material level. We still do need to provide some kind of guidance and guidelines to the entities when they're submitting the information to us for consolidation, because we can't manage the nature of some of those, the detail that you would get, otherwise.

S. Simpson: I have a question, as it relates to this topic as well. I appreciate that nobody wants to be out there counting pencils, but following up on the last comment of the member for Burnaby–Deer Lake, is there a way that we can determine what the aggregate value of these is, without getting into a level of detail that's unduly onerous for you to do your job?

It's speculative, I'm sure, but if the Auditor General is saying that when you add the pieces up, it's maybe $400 million or $500 million of commitments that, in fact, are not reported because individually they fall under the $50 million level, is there some way of knowing what that number is so that we can say, "Look, the rough or general, aggregate number of what we're not reporting out here is X millions of dollars," or whatever that total might be, so we'd have a sense?

And then that number, if it's a significant number…. I'm sure members of this committee and others will say, "Well, we're now looking for some explanation of where $400 million or $500 million went" — or $100 million. I have no clue of what that number will be.

But I think there is some responsibility to say: "Okay. We accept that we aren’t going to get a level of detail about those individual components because of the nature of the contractual obligations and the size of the individual obligations." But some aggregate number, so we know what the big-ticket item looks like, would be a valuable number, and I'm wondering if that's possible to do.

C. Wenezenki-Yolland: In the context of coming up with that number, the reason I'm cautious is just knowing
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what it takes to try to get that type of information, because it is a fully manual process that organizations have to go through to compile all of that information. In that context, there would probably be required some degree of estimation, and it is challenging to find a place that everybody can agree on the appropriate basis of estimation for providing that information.

There is always a possibility to go back and try to do some quantification, but I'm still not convinced that we will land in a place where everybody will be happy with how it's estimated and how it's quantified, based on the amount of information and how we have to get the information to support that.

S. Simpson: I appreciate that. I'm just trying to get a sense of what the scale of the number we're talking about here is, because I don't know.

R. Lee: I believe that all those concepts of obligation sometimes are a snapshot. For example, when government negotiates a labour contract, the number would change. So over time you cannot have a very accurate number — say, this month will be different from next month because government entered another contract. So I think that number may not be as significant….

R. Lee: Yeah, contracts. I mean, anytime. This week would be different from next week because of negotiations with the labour unions — that kind of thing.

B. Ralston (Chair): Are you foreshadowing an increase, then? That's an interesting bargaining strategy.

R. Lee: No. I think it's difficult to get an accurate number. It's only a snapshot. To put in so much effort for the comptroller, I think, is a little bit difficult.

J. McIntyre: No, I think you have to be very careful of what we're asking for here, because, first of all, these have been presented. They've been accepted into our Deputy Chair's point earlier. This has been accepted as a reasonable thing.

If we're asking the comptroller general's office to go back and incur time, effort, dollars, staff time, back to all the ministries and all sorts of things, and we're hearing from the officials that they're not confident about what this will really mean and what we'll do with it, I'm not very supportive of what….

I think this conversation has kind of gone a little bit out of hand here. So I'm not totally in favour. Unless we have a better understanding of the costs, time and what we're asking and the reliability of the information, I'm not in favour of asking these people to go back to this depth of information at this stage.

B. Ralston (Chair): Well, I'm sure they'll exercise their professional judgment, as they've said, in what information they replied to the committee on. In terms of the fluctuations, just to return to page 73 and the actual reported contractual obligations, there are very huge swings in obligations. I'm looking at Health, down from $1.5 billion to $500 million over the course of one year. In Transportation there's a significant drop as well, and the overall consolidated number is down from $4.048 billion to $2.132 billion.

Perhaps a better way of expressing it, and the one that might help the committee, is: is that committed expenditure…? You know, when the government goes to put together a budget, is that $2.1 billion, approximately…? The government is obliged to pay that, and that's one of the building blocks of the budget going forward. Would that be another way of expressing it?

C. Fischer: The obligation doesn't exist at the reporting date. As one of the members mentioned, the service has to be provided. If you look at the two biggest amounts, transportation will be in relation to construction contracts for highways development. The other one is in the natural resources and economic development sector. The majority of that is in relation to B.C. Hydro's power purchase agreements with power suppliers across the province and other places.

Until those things actually occur, there is no transaction to record. When they do occur, in the next year or any other year out to perpetuity…. The other thing to remember about contractual obligations is that they do run to perpetuity, so some of these are very, very long-term estimates of what it will cost to build and operate a highway or purchase power from a power supplier over the next 20 or 30 or 40 years. When you take out those big building blocks — the highways and the power production — it becomes a much more manageable scope.

The guidance in Canada is that we should make an estimate and disclose the long-term obligations, but I think everyone agrees that if you go beyond the near
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term — say, five years — the power of estimation rapidly diminishes, and even actual results — how much power is going to cost, how much is going to be delivered, how the environment or any other factor changes — will impact what's ultimately paid.

One thing we do know is that as every year occurs, and we do have the experience of a transaction to record, it will appropriately be recorded as an expense or a capital investment and will flow through the financial statements, which are much tighter, much more defined, because they deal with past transactions and events rather than future estimates of economic results of contracts or agreements.

B. Ralston (Chair): Just if I might comment. I think your suggestion — I'm not quite sure how you put it — that it doesn't quite exist is not entirely helpful. I'm reading from Public-Private Partnerships. It's an OECD publication, and it says:

"Thus, the obligation to pay the private partner is akin to a contingent liability, the difference being that in the case of a contingent liability the payment is contingent upon an unexpected event, while in the case of a 3P contract it is contingent upon an expected event. Therefore, in principle the future payment obligations of a P3 contract can be treated as a liability calculated as the present value of future payments weighed by the probability that the private partner will deliver according to the specifications of the contract."

To say, when you sign a 30-year contract, that beyond five years you're not certain what the contingent liability might be seems to me to be, at least, if I could put it, an infelicitous way of putting it.

C. Fischer: I think the OECD is referring to the capital construction portion, which is typically three to five years for a major infrastructure project. The longer-term elements of any long-term agreement, including P3 contracts, are the executory elements like maintenance and operations and capital rehabilitation, which are more dependent on what occurs between now and the end of the 35-year agreement. You can make an estimate, but….

B. Ralston (Chair): I'll share the document with you. But they're not…. They're referring to the long-term obligations. They in fact say…. They refer specifically to "the long horizon for P3 projects, often 20 to 30 years," so they're not contemplating short-term construction contracts.

I think the point is that those kinds of contracts lock in government expenditures, and in a time when a government might be faced with across-the-board reductions, those contracts are relatively impervious to cuts unless there's a renegotiation provision in those contracts.

I think that if we have $52 billion in obligations, there's some obligation on behalf of this committee to make those kinds of inquiries. To say that they don't exist — if that's what I took you to be saying — I don't think is quite the best way to come at it.

C. Fischer: I should clarify. I don't think they exist in terms of transactions that can be accounted for in traditional accounting. That's why they're disclosed separately as future estimates in the notes to the financial statements.

B. Ralston (Chair): What's suggested here is that they're a contingent liability based on expectation that the P3 contractors will likely deliver, but it's not certain. Is that not an accurate way to describe it?

C. Fischer: That's not consistent with Canadian accounting guidance. That's why they're reported separately as contractual obligations rather than contingent liabilities.

R. Sultan: The conversation has drifted into an area that I was busy making notes about raising myself, so I'm delighted to shift away from the accounting for the last pencil spent on the Olympic Games to some bigger risks and exposures.

It seems to me that this committee does have an obligation to the taxpayers of British Columbia to make sure that not just the direct expenditures impinging on our tax dollars this year but the longer-term exposure to risk and liabilities of the taxpayers in manifold areas….

Since it's difficult to precisely quantify many of these things, I suppose, at best, we might hope for some order-of-magnitude guesstimates by informed people such as the office of the comptroller general.

(1) For example, the unlimited guarantee of credit union deposits. What's the implication of that? What's the exposure of that for the taxpayers of British Columbia?

(2) As has already been mentioned, the trading profit and losses and exposure to litigation and allegations of misconduct in that litigation-prone place called California on the part of Powerex. I don't know if that has all been put to bed, but the numbers were huge at the time, and I haven't heard much about it recently.

(3) What is the risk exposure to pension and long-term health obligations and entitlements incumbent on the taxpayer of British Columbia through the various agreements with government employees? I don't really understand that very well, and I think the taxpayers perhaps deserve a broader interpretation. Maybe it's very, very slight. I just don't know.

(4) As has already been mentioned today, the portfolio risks taken by investment managers at some of our institutions of advanced education. I just wonder how many other budding MBAs wish to display their skill at investing in curious things when, at the end of the day, it's the taxpayer of British Columbia that's going to pay the tab.
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I think of my old alma mater of Harvard hiring the best and the brightest to manage its $40 billion and ending up, at the end of the day, with about $20 billion, thereabouts, and with great consequences. Their vast scheme to transform the entire city of Allston into sort of a suburb of the university has been abruptly cancelled, and we're left with a great big hole in the ground because there's no money.

(5) I was a bit surprised to read the other day that litigation related to health care in the United States is now consuming 1 percent or 2 percent of the entire gross domestic product of the United States. While we don't have as advanced a legal civilization up here as they do, are we on the same path, and what is our exposure? It seems to me we are the ultimate insurer of our population's health, and I imagine those lawyers trained in the United States would be delighted to grab a piece of it.

(6) Finally, what is our risk exposure to our various Crown corporation operations, including ferries; including B.C. Hydro; and including, as has just been pointed out by the Chair, the risk transfer arrangements that have been entered into on behalf of the British Columbia taxpayer with respect to major capital infrastructure projects?

It seems to me the dollar sums that are potentially involved here are vast. The likelihood of any one or, heaven forbid, all of these things coming true is, I hope, very remote.

But I think we're entering a world where perhaps the accounting profession has to be a little less concerned about getting the pennies right on expenditures this year and point out to management, to this committee and to the taxpayers of British Columbia the longer-term consequences of what we're up to, because I think the dollars are huge, and we have seen many examples in recent economic history of being caught by surprise.

R. Sultan: I think the interruption was opportune. It was time for me to say that I've said my piece. Thank you, Chair.

B. Ralston (Chair): No, I wouldn't expect that, but just in terms of the general point about exposure to risk.

C. Wenezenki-Yolland: Yeah. I think, in general terms, in the context of talking about the public accounts today, some of this needs to be kind of kept in the context of what this report is — the financial statements. They are backwards-looking. They are historical. They are what has happened.

There are lots of opportunities to have discussions around risk and potential future risks and some very broad risks, as was identified by the member. That, I do believe, is something that…. As financial professionals, we do have an obligation to be bringing that information forward for discussion, for consideration.

I'm just not sure that the backward-looking financial statements — which are, quite frankly, the public accounts and reporting on, "This was government's plan, and this is what they did relative to the plan" — are necessarily the right place to try to build in all of that information in order to have that discussion. There may be more appropriate forums through which that type of discussion can be had.

B. Ralston (Chair): I'm noting the hour. We do have another item on the agenda. So perhaps if we could conclude on this topic by way of questions…. Obviously, we're not going to conclude on our discussion of public accounts today. So I'll take any questions on this point, and then we'll move to the next item on the agenda. So John Rustad, and then we'll go back to Kathy.

J. Rustad: I'm just concerned, in particular, about what Joan had asked around the effort that would be required from questions that come from this committee. What I am wondering is: when there is a question that comes forward that would require a significant amount of effort, particularly effort that would be required to bring a certain amount of certainty or, you know, confidence in it….

Rather than asking the question and having them go and do that, that should, obviously, come as a request from the committee by motion. I would like to suggest that we request from the comptroller's office what that cost would be and what that effort would be, have that come back to our committee, and then we can have an informed discussion as to whether or not we want to undergo that expenditure of both time and expenses to fulfil those requests from individuals.

Chairperson, I'd like to suggest that from this discussion — and do this by way of motion — that the comptroller's office come back to us with an estimate of what that time and expense would be for a discussion by the committee to be able to approve them to go ahead and answer that question.

B. Ralston (Chair): Well, I think the motion is in order. I do sense a certain micromanagement on the part of the committee. I think we can rely on their professional judgment. If it's going to take a lot of work, then it's going to take a lot of work, and they'll tell us. In any
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event, the motion is in order. Is there anyone who wants to speak to the motion?

K. Corrigan: Yeah. I mean, if it's going to be thousands and thousands of dollars' worth of time, I suppose…. But I agree. I think we can rely on their professional judgment. What I was originally asking was to get some kind of sense of the magnitude of the amount of money that perhaps is not being reported.

The Auditor General of this province, not us on the committee, was the one that said that it could potentially be as much as $500 million. If the member from West Vancouver is suggesting that $500 million is not something that we should put a little bit of time into digging up, then I would disagree. I think the people of this province have a right to know what the magnitude is. If it is, in fact, somewhere in the range of half a billion dollars, that's a lot of money that could be under-reported in terms of future obligations.

Finally, in terms of the nature of these obligations, I think if you ask the taxpayers of British Columbia whether or not they cared that there is a contract, whether or not in financial terms, in accounting terms, it was a liability or an obligation or whatever…. They look at the contract, and they say: "As far as I'm concerned, I'm going to be paying, and my kids are going to be paying, that contract for the next 30 years."

I think there are even legal cases, like the case of Robson, which made it very clear that the accounting standard is perhaps different than what the legal standard is in this area. Certainly, in that case, the B.C. Court of Appeal said that these are obligations, and they are liabilities, whether or not they are in accounting terms.

So I think it's important. I agree. I don't want to waste taxpayers' money. Everything that we are doing is about looking after taxpayers' money. But I think it's important that if there is a possibility of under-reporting of up to half a billion dollars, we need to dig into it a little bit more. I think that's our job in looking after the taxpayer dollars.

J. McIntyre: I am speaking in support, as I originally raised the issue. One thing I meant to say at the time, and now the member opposite has raised it again, is that I didn't interpret the Auditor General…. I don't think the Auditor General was implying that there was a half-billion dollars of unreported income at all. I remember the conversation. He sort of pulled a figure out of the air and kind of almost laughed, like, "Oh, there could be ten times 50," or something like that.

It was completely hypothetical, so for some of the members here today to imply that that was a number the Auditor General had fixed on or could be as big as or could be as small as…. I think we've gotten carried away on that note.

Also, I think the whole issue of these contracts…. I mean, when we're looking at different ways of delivering service…. I'll use the Sea to Sky Highway as an example. The length of that contract, I think, goes out to $1.89 billion for 25 years or 30 years or whatever it is.

We could start saying that we have an obligation. If we were procuring in the traditional way, we could say: "Oh, the Ministry of Transportation has an obligation to maintain highways around the province for the next 25 years." That's billions and billions of dollars that our grandchildren and our children will be paying for.

I think we're just really…. We've gotten off track here in terms of…. As the comptroller general said, this was backward-looking for a particular year, budget versus actual. We have an obligation to do the proper things, which is to look at our debts and liabilities and revenues. But I think we've gotten off track here, especially if it does cost.

I'm supporting the motion, because if it does cost…. We don't know what we're asking for, and all I asked for is that we get an estimate for what we're asking for. I do support it. It's not the privilege of one member to ask the comptroller general or any witness to go to all sorts of lengths. It should be a decision of the committee.

G. Gentner: Mr. Chair, I just wondered what the time frame of reporting back to us will be. Can we add something to the motion?

B. Ralston (Chair): It's not included in the motion, but perhaps the comptroller general could give a…. If this motion were to pass, how rapidly or slowly would you be able to produce a response for the committee?

C. Wenezenki-Yolland: In the context of an estimate of time required, just for clarification?

G. Gentner: I would like to amend the motion that within the next meeting the comptroller general report back her findings to this committee.

B. Ralston (Chair): With respect, I think the next meeting may not take place for two weeks. Probably
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this is the more rapid way to get an answer. We haven't agreed on a meeting schedule yet, but I think we should probably — my suggestion would be — just go with the two weeks.

C. Wenezenki-Yolland: Just to clarify, what is it that you're wanting me to bring back — an estimate of the amount of time required to undertake this or…?

B. Ralston (Chair): There's wording of the motion, and you'll have to be guided by the motion. We'll provide you with a copy of the motion if it passes.

B. Ralston (Chair): We'll provide you with a copy of the precise wording of the motion, and we'll go from there.

I'm going to let Vicki ask one more question, and then we're going to go to the next item.

V. Huntington: Mr. Chair, just for my edification, when we receive comments such as the member opposite made with his six points, how are those collected for further discussion by the committee? Those are extremely important comments, and they are, I think, partially what this committee is all about.

I'm not sure whether the purview of the committee is to look at those issues in a broader fashion and provide instruction or guidance to ministry officials or the comptroller general.

I firmly and deeply believe that this committee is best operated and should operate as a non-partisan point of view in looking at the books of this province and the expenditures and revenues of this province.

Unless we take into consideration comments such as that, we aren’t doing justice to what this committee is all about, ultimately. Perhaps you could explain to me how we go beyond just the detail of the books and into these broader, more important issues — not more important but equally as important issues — in the long run.

B. Ralston (Chair): Frankly, the kinds of questions that were posed are the kinds of questions that I, as Chair, think the Public Accounts Committee should be asking, particularly in the context of reviewing the public accounts.

I think this is where the answers should come. Obviously, I don't think the motion that just passed requires a costing of the responses to that, and frankly, if that were to become the practice, I think important questions by members might very well be blocked by that kind of approach.

I'll leave it with the staff, and the Deputy Chair and I will confer on allocating further time for discussion of the public accounts. Hopefully, those will be questions that we'll be able to address in the time that we have available.

I think we all understand that our time here is not infinite — I don't mean that in any cosmological sense — but guided by the pressures of time and other obligations that members have. Nonetheless, that is an important focus of this committee, and that's really a big part of its job. I hope that we'll get to those questions and that we have time to deal with that.

B. Ralston (Chair): With that, I thank you for that question. Perhaps, then, we can thank the comptroller general and the other staff, Carl and Larry, who've come. We'll invite them back another day.

If we could now move to a discussion of the…. We'll move to the issue of the draft report to the House.

Just for the record, then, we're adjourning but not completing the consideration of the public accounts. That will return at a future time of which members will be notified.

Once the report has been circulated, according to the practice we'll go in camera for consideration of what is a draft report. I'll wait until all members have a copy of the proposed draft, and then we'll go in camera.

Does everyone have a copy of the report, then? I'd accept a motion to move in camera for the consideration of the draft report of the committee.

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Chair:	* Bruce Ralston (Surrey-Whalley NDP)
Deputy Chair:	* Douglas Horne (Coquitlam–Burke Mountain L)
Members:	* Rob Howard (Richmond Centre L)
	* Richard T. Lee (Burnaby North L)
	* John Les (Chilliwack L)
	* Norm Letnick (Kelowna–Lake Country L)
	* Joan McIntyre (West Vancouver–Sea to Sky L)
	* John Rustad (Nechako Lakes L)
	* Ralph Sultan (West Vancouver–Capilano L)
	* Kathy Corrigan (Burnaby–Deer Lake NDP)
	* Guy Gentner (Delta North NDP)
	* Spencer Herbert (Vancouver–West End NDP)
	Lana Popham (Saanich South NDP)
	* Shane Simpson (Vancouver-Hastings NDP)
	* Vicki Huntington (Delta South IND)
	* denotes member present
Clerk:	Craig James
Committee Staff:	Josie Schofield (Manager, Committee Research Services)

Witnesses:	Carl Fischer (Office of the Comptroller General)
	Jim Hopkins (Assistant Deputy Minister, Provincial Treasury)
	Andrew Imlach (Commonwealth Parliamentary Association)
	Gary Mitchell (Provincial Archivist)
	Larry Swanston (Provincial Treasury)
	Cheryl Wenezenki-Yolland (Comptroller General)


contents
Page
Commonwealth Perspectives on Role of Public Accounts Committees	79
A. Imlach
Records Retention and Disposal	88
G. Mitchell
Public Accounts Overview	94
C. Wenezenki-Yolland
J. Hopkins
C. Fischer