The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

Public Accounts Committee -- Wed., Jan. 31, 2001

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HALIFAX, WEDNESDAY, JANUARY 31, 2001

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIRMAN

Mr. Russell MacKinnon

MR. CHAIRMAN: Good morning, ladies and gentlemen. Welcome to today's Public Accounts Committee meeting. This one should be a relatively short committee meeting. We are dealing with the finalization of the 1999 annual report. I believe all members should have had this particular draft report in their possession since December 18th, just before Christmas. So with that, I will put it on the table for consideration.

I believe there was only one recommendation that was, essentially, provided in the entirety of the report and that was the one that was dealt with within the House with a resolution, I believe, that was put forth by the honourable member for Sackville-Cobequid, dealing with CBCEDA.

With that in mind, are there any interventions on it or can we have a motion to approve? At that point, I guess, all members sign off. Is that not the process?

MR. JOHN HOLM: Are you looking for a motion?

MR. CHAIRMAN: Yes.

MR. HOLM: So moved.

MR. JAMES DEWOLFE: I will second the motion.

MR. CHAIRMAN: Would all those in favour of the motion please say Aye. Contrary minded, Nay.

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The motion is carried.

The report is accepted.

Now, I believe the process is, all members sign off on that, is that not correct, Mora? Okay, so we will be passing that around.

I guess that concludes the official agenda.

Mr. DeWolfe.

MR. DEWOLFE: I am just wondering if I could mention at this point, while we are signing the papers being distributed, that Mr. John Chataway will be joining the committee on a permanent basis for the next session. I would hope that all members would welcome him to the committee.

MR. CHAIRMAN: Absolutely. Welcome, John. I believe you will find this committee most entertaining and a very productive committee.

Mr. Taylor.

MR. BROOKE TAYLOR: Mr. Chairman, also for the committee's information, Mr. Jim DeWolfe, the MLA for Pictou East is the Vice-Chairman of the committee and of the Tory caucus, for Public Accounts purposes.

MR. CHAIRMAN: Very good. So noted. Welcome, Jim, to your new position. With your experience that will be an asset, for sure.

MR. CHAIRMAN: Mr. Holm.

MR. HOLM: I know this is not on the agenda but yesterday, at the Human Resources Committee, we heard about intellectual property. I know that the Auditor General, who is with us here today, is aware of the comments and the questions about intellectual property and I am just wondering if, with the agreement of members of the committee - and I know that a lot of the members of this committee were present yesterday at the Human Resources Committee - if we would be interested in hearing just a couple of remarks from the Auditor General about the whole issue of intellectual property and the concerns regarding ability to use that as collateral for loans and so on, particularly within the music industry that we heard about yesterday.

MR. CHAIRMAN: Yes, Mr. Holm, that is an excellent point. In fact, Mora and I had spoken about that just moments before you raised it. With the approbation of the committee, we can recognize the Auditor General. Perhaps, Mr. Salmon, if you would like to offer your thoughts on that, it would certainly be helpful to the committee.

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MR. ROY SALMON: Thank you, Mr. Chairman. I am not totally familiar with the nature of the conversation that took place in that committee yesterday but as I understand it, the issue is one of looking at the assets of an entity for purposes of valuing the entity, either in terms of selling it or, in fact, valuing the entity for purposes of extending credit to the entity in the form of a loan by a bank or a financial institution. That issue goes well beyond the issue of intellectual property. It goes to what is an entity worth in terms of future earnings potential or asset value on a break-out basis.

If you go back to first principles, in terms of accounting, and determining what should be on a balance sheet of an entity, the standard has always been assets recorded at cost, or if you could determine that the assets were worth less than cost, then writing down from cost. It has never been a principle of putting an asset on a balance sheet at a value that wasn't represented by its cost.

When you get to the question of intellectual property, it becomes one of, was it acquired through purchasing it or was it acquired through developing it internally? If it is developed internally, how do you value it?

Generally, the principle has been, you could value it but you would not put it on the balance sheet. So as a lender, a financial institution could look at a particular entity and value its intellectual property on its own for purposes of determining whether it was an entity that they were willing to loan money to based on that value. The entity itself would never value the intellectual property and put it on its balance sheet.

I understand there have been some developments in the United States. I am not aware of the exact nature of those. The matter is being examined by the Canadian Institute of Chartered Accountants, in terms of the issue and how that would impact on Generally Accepted Accounting Principles for purposes of accounting.

Now, I don't know whether that answers your question or just makes it more complex for you but that is the substance of it because there are two basic principles in accounting; assets valued at cost and the matching principle, which is, you match costs against revenues on a period by period basis, so that if you bought a building that was to be used to generate revenue, for some period of time you would value that as an asset on your balance sheet and over time charge a portion of that cost against revenues through depreciation.

In the case of intellectual property, if you bought it and it had a cost, and that cost was going to generate revenues over some period of time, it would be the same principle. You would put it on the balance sheet and write the cost of it off over the period of time against revenues.

MR. CHAIRMAN: Mr. Holm.

MR. HOLM: I don't understand it well enough to be even asking the questions. I say that up front. But if, for example, an artist or somebody who had developed something, had developed some music, produced that music and they had the rights to that music, that would

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then classify, I guess, as something that has been developed in-house. If, by owning those rights, that those rights could then be sold so that somebody else could, if they wished, reproduce that music or resell that, I don't know if that is intellectual property. It is classified, I guess, as intellectual property but it is more than intellectual property. It is actually a tangible asset. Now, what value you put on it, as you correctly point out, I don't know how you would evaluate that.

Is there anything that would stop a financial institution under the accounting practices from lending money to the owner of that intellectual property because it doesn't fall within the so-called standard practices of GAAP?

MR. SALMON: Nothing. It is up to the financial institution to value the assets of a business for purposes of determining whether or not they want to invest in it. We see it now worldwide in the stock market with the so-called dot.com companies. Those involved in high tech, Internet activities, or whatever. Those companies have their shares on the open market, trading at values that are in no way reflected by either their balance sheets, their assets or their profits. It is based solely on their ability to generate revenues and perhaps make profits sometime in the future.

The general public and financial institutions are buying those shares at very high values that are not reflective of tangible assets. So it is the same issue.

Now, in the case of your music, there were some costs incurred in developing that music; salaries, et cetera, of the people who were involved in writing it. So there was a cost but that cost might be one very small fraction of the actual value. So that if you sold it, that results in big profits, or could. That is where the value is reflected, in the profits.

MR. CHAIRMAN: Any other interventions on that particular issue? Mr. Langille.

MR. WILLIAM LANGILLE: What properties are you talking about that the government would have for intellectual value?

MR. SALMON: I didn't come prepared to answer that question and I'm not sure that you could establish intellectual property as an asset of this government. There is the brain power of the people who work in it.

MR. CHAIRMAN: There are a lot of people who would agree with that statement. (Laughter)

MR. SALMON: Mr. Langille, I was speaking more generally in terms of the private sector and people who are in the business of developing concepts, ideas and assets that could generate revenue.

MR. LANGILLE: Yes, thank you. I just wanted to clarify that, that you were speaking about private sector. Thanks very much.

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MR. CHAIRMAN: Mr. Taylor.

MR. TAYLOR: No question, Mr. Chairman, I was just advising you that the discussion had concluded. I'm just being helpful. I'm just trying to be helpful, Mr. Chairman. (Laughter)

MR. CHAIRMAN: Okay, thank you, Mr. Salmon. Any other business before we conclude? Mr. DeWolfe.

MR. DEWOLFE: Mr. Chairman, I do have one piece of business that I would like to bring up. I would like to rescind a motion put forward during our January 17th meeting, if I might, that would provide this Public Accounts Committee with an in camera briefing by the Auditor General prior to the report being tabled. I so move.

MR. HOLM: Could I hear that again?

MR. CHAIRMAN: Perhaps if you could read that a little bit louder for the members of the NDP caucus. They didn't quite catch it.

MR. DEWOLFE: Yes, Mr. Chairman. I wish to rescind the motion that would provide this Public Accounts Committee with an in camera briefing by the Auditor General prior to the report being tabled.

MR. CHAIRMAN: Is that just for this year or is that for all future briefings.

MR. DEWOLFE: Well, it is for this year, Mr. Chairman.

MR. CHAIRMAN: On the question? Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

MR. CHAIRMAN: Mr. Taylor.

MR. TAYLOR: Now, Mr. Chairman, obviously, it is a given that we would facilitate a public hearing where the annual report would be made public at that time. Do you need a motion to that effect?

MR. CHAIRMAN: No, it is customary - as well, too, just on that, I felt it wasn't appropriate that I made an intervention from the Chair while the motion was on the floor but it has been, as I understand it, the practice since the fiscal year 1994-95, that the Auditor General has consistently - with the exception of maybe one year for agenda rationale - briefed the Public Accounts Committee in camera, prior to the tabling of his report. Am I correct on that, Mr. Salmon?

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MR. SALMON: That has been the practice. I believe you all received a copy of a letter that I wrote to Mr. Dexter in response to his letter last week. The practice has changed in the last two years because my Act was amended; prior to 1998 I could only table my report when the House was sitting. Therefore we had experienced some very lengthy delays, in fact, in 1993 I think it was September before my report was tabled from the previous year. My Act was amended in 1998 and it now allows me to have my report deemed tabled by delivering it to the Clerk.

I have no difficulty with the motion that was just approved but what I would propose is that we would agree on a date that I would table my report with the Clerk and we would establish a specific time that I would do that and I would brief you for an hour prior to that time, so that when your in camera meeting ended, my report would be public immediately. You would therefore have one hour advance notice on the media, et cetera of what is in my report, prior to them seeing it.

That is equivalent to what the practice was prior to that, I would brief the committee at 1:00 p.m., the report would be tabled in the House at 2:00 p.m. by the Speaker and be immediately available for Question Period. You have the equivalent in what I am proposing and that is what we did, I believe, last year.

MR. CHAIRMAN: Is that agreed?

MR. TAYLOR: Just for clarification, Mr. Chairman, I understand the Auditor General's intent, relative to going in camera and then tabling henceforth, so to speak. However, I am not clear, we just approved a motion by my colleague, the member for Pictou East. Mr. Chairman, I guess I am looking to you for . . .

MR. CHAIRMAN: Perhaps I would put it to the members of the committee, if the honourable member for Pictou East would clarify what the exact intent of his motion is, what are his objectives. Would that help?

MR. DEWOLFE: Let's face it, Mr. Chairman, there have been some accusations that we are trying to remain in camera on issues and that is not our intent. We feel that we have an open-policy government and we want to be transparent and open. This is certainly in keeping with some comments that Mr. Dexter made at a previous meeting that there should not be in camera sessions with regard to this public report.

MR. CHAIRMAN: I believe perhaps there may be a misunderstanding here then. What the Auditor General is stating, and he can correct me if I am wrong, is that he would like to brief the committee immediately before he tables, one hour before; it would be a one hour briefing just to give us an overview of what is in the report and then before the committee members even leave that room, he tables his report and it is public, period. That doesn't preclude any of the public deliberations that generally take place, post tabling of the report, which we did every year.

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MR. TAYLOR: Just for my own curious way of thinking, Mr. Salmon, in the past didn't we - I don't know how many years ago - carry out a public session where you, for the first time, to the Public Accounts Committee, disclose and furnish members of the Public Accounts Committee with copies, out of camera, your annual report?

MR. SALMON: Absolutely, after it was tabled.

MR. TAYLOR: Yes, you tabled the report and then a public session was held.

MR. SALMON: Yes.

MR. TAYLOR: Immediately.

MR. SALMON: Yes.

MR. TAYLOR: I think that is the intent of the honourable member's motion.

MR. SALMON: Well, I am prepared to do both. I am prepared to brief . . .

MR. TAYLOR: Yes, we understand that.

MR. SALMON: . . . as I have in the past, in camera, just prior to tabling and I am prepared to have a public discussion of the report with you, when you have the report, immediately after tabling. I am prepared to do both or either.

MR. TAYLOR: Okay, or either, just again for clarification, Roy, could I ask you what do you see are the drawbacks or difficulties with tabling it, holding a public session immediately?

MR. SALMON: There are none. The advantage of doing it in camera is for you . . .

MR. TAYLOR: I understand that.

MR. SALMON: . . . so you have an understanding of it before others do.

MR. TAYLOR: We are not sure that we believe that is exactly the way we would like it and we don't know, Roy, if that is fair.

MR. SALMON: Well, that is for you to judge. I am trying to give you an advantage. (Interruptions)

MR. HOLM: I have a couple of questions. First of all, Mr. Auditor General, when you were making your proposal earlier, before we got into this last round of questioning, you were suggesting a one hour briefing prior to the tabling. Were you suggesting that that briefing would be in camera or would it be possible to have that briefing prior to the actual laying it on the

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table? Secondly, when you were making your comments I maybe heard incorrectly but I heard a preference from what I thought you were saying, the way that you would like to handle it and so if there is a preference on your behalf on how you would like to handle it, I would like to know that. I am also just wondering from the Tories if they are indicating that when the budget comes down that they would not be interested in having the budget information provided to Opposition caucuses in advance as they have done in the past?

MR. ROBERT CHISHOLM: Or the media.

MR. HOLM: Or the media.

MR. SALMON: Mr. Holm, I have no preference but I will not brief in public prior to tabling, I am precluded from doing that. As a benefit and service to this committee I am prepared to brief, in camera, for one hour, just prior to tabling but that is for the benefit of the committee, I have no preference.

MR. HOLM: Thank you.

MR. DEWOLFE: Mr. Chairman, I believe the motion has been passed and that motion stands.

MR. CHAIRMAN: Is there . . .

MR. TAYLOR: A motion to adjourn?

MR. CHAIRMAN: Not quite, we are very close. Is there anything to preclude the Auditor General from briefing members of the Public Accounts Committee, in camera, individually or collectively in the same one hour session prior to? It would seem a bit irregular but I am just trying to address the NDP and the Conservative concerns. If individual members of the Public Accounts Committee wanted to meet with you one hour prior to - whether some or all - is that an option?

[9:30 a.m.]

MR. SALMON: I don't see any distinction between that and briefing the Public Accounts Committee but those members may not take the report with them or speak to it prior to tabling.

MR. HOLM: Can I just ask for clarification. The committee - as I understand it - has voted that there will be no in camera briefing session an hour or anytime before the tabling of the report. That is the position, right? Is that what was passed on Mr. DeWolfe's motion?

SOME HON. MEMBERS: Yes.

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MR. HOLM: So that was Mr. DeWolfe's motion. Am I now hearing suggestions that some individual members . . .

MR. CHAIRMAN: No, it was a question to the Auditor General, it wasn't a suggestion, there is a distinct difference.

MR. HOLM: I know but what was the answer? I want to be clear. So there will not be any individual briefings? I don't think there should be individual briefings.

MR. CHAIRMAN: The question was to the Auditor General. I wanted to make sure . . .

MR. HOLM: No, I am directing it through you. I don't think there should be any individual briefings of members, one, two, or select members, if the whole committee is not going to be briefed. That is just in fairness to the whole committee and that is what I am trying to get at.

MR. SALMON: I am sorry, I think I misunderstood the motion because I thought the motion was that there would be an in camera briefing. The motion was that there would not be an in camera briefing?

MR. CHAIRMAN: Yes.

MR. SALMON: I am sorry, then I misspoke. I would not be prepared to brief individual members if the committee had voted that there would not be an in camera session.

MR. CHAIRMAN: On that note, the meeting is adjourned.

MR. HOLM: Just before we do, I guess the only other thing was that the Auditor General had made a point about wanting the committee and his office to arrange a time when the report would be tabled and I understood, immediately following the tabling, a public briefing to the committee?

MR. SALMON: If the committee so wishes.

MR. HOLM: So I think that brings up the next question, obviously, I think it should be relatively easy to coordinate a meeting immediately following the tabling of the Auditor General's Report so the next question is, does the committee wish to have a public session and a briefing with the Auditor General, an initial one and then maybe a follow-up one later on as well, immediately upon the tabling of his report?

MR. CHAIRMAN: If my memory serves me correctly and with some assistance here, it generally takes about two meetings to go through the report, is that correct?

MR. SALMON: It has in the past.

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MR. CHAIRMAN: It certainly was last year for sure. If that is the wish of the committee, if somebody was willing to put a motion and we will try to arrange that on our agenda to make sure there isn't an overlap with other potential witnesses and we will coordinate that with the Auditor General's office.

MR. TAYLOR: I'll put that to a motion, Mr. Chairman, that we hold a public hearing on the Auditor General's Annual Report.

MR. CHAIRMAN: Commencing immediately upon the tabling of the report.

On the question. Would all those in favour of the motion please say Aye. Contrary minded, Nay.

The motion is carried.

That doesn't create too much difficulty for you, Mr. Auditor General?

MR. SALMON: No problems.

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MR. CHAIRMAN: On that note, the meeting is adjourned.

[The committee adjourned at 9:30 a.m.]