The Nova Scotia Legislature

The House resumed on:
September 21, 2017.

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HALIFAX, WEDNESDAY, MAY 15, 2002

STANDING COMMITTEE ON PUBLIC ACCOUNTS

8:00 A.M.

CHAIRMAN

Mr. William Estabrooks

VICE-CHAIRMAN

Mr. James DeWolfe

MR. CHAIRMAN: I would like to call this meeting of the Public Accounts Committee to session, please. I'm aware of the fact that we do have a busy day outside of this committee meeting this morning, with a number of other commitments by various members of our committee. I'm sure Mr. Salmon and his staff have a busy day ahead, too. So, we're going to stick very clearly to our usual guidelines of being out of this historic Chamber on time. I see you smiling at me, Ms. Morash, so you know that I am probably going to try to do my teacher act, right? Anyway, it's nice to have Mr. Salmon and his staff here again. I think we should go through our customary introductions, however, just for the matter of the record. I would like to begin with the member for Halifax Fairview.

[The committee members introduced themselves.]

MR. CHAIRMAN: Mr. Salmon, for the record, would you like to introduce your staff please.

MR. ROY SALMON: I'm Roy Salmon, Auditor General. On my left is Mr. Claude Carter, Deputy Auditor General; on my immediate right is Elaine Morash, Assistant Auditor General; and on her right is Alan Horgan, the other Assistant Auditor General.

MR. CHAIRMAN: We welcome you back, incidentally, and thank you for your co-operation in the inherent change of schedule. Mr. Salmon, do you or members of your staff have some introductory comments?

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MR. SALMON: No, Mr. Chairman. Once again, we're here to answer any questions members of the committee care to ask with regard my last annual report.

MR. CHAIRMAN: Thank you, sir. We're going to go, based upon that direction, directly to the questions. It's 8:02 a.m., and the next 20 minutes is yours Mr. Steele.

MR. GRAHAM STEELE: Unlike the last time you were here, Mr. Salmon, I would like to zero in on a specific chapter of your report, as a matter of fact, two chapters, the chapters dealing with the Department of Environment and Labour.

Ten years ago the Westray Mine blew up and the inquiry that resulted from that discovered, among many other things, a deficiency in the system of safety inspections, that the inspectors were not vigilant enough, that when orders were issued they were not necessarily complied with, that when the inspectors did go to the site they didn't necessarily see, weren't allowed to see, the problems that existed, they weren't necessarily allowed to speak to miners who had things that they wanted to say. Collectively, what it meant was that the Department of Labour, as it was at the time, was unable to detect and correct safety problems at the mine, and we all know what the result was.

Ten years later it's disturbing to me, to say the least, to read your office's audit of the Occupational Health and Safety Division of the Department of Environment and Labour, because the deficiencies that are outlined there are not just minor deficiencies, they are major deficiencies in the way we go about ensuring occupational health and safety in Nova Scotia, major deficiencies. In fact, not in this report but to reporters afterwards, you were quoted as saying something along the lines of we have to be careful that another Westray doesn't happen and that it could - which is a pretty shocking thing 10 years after Westray, to think that some of the lessons appear not to have been learned.

I would like to ask you some specific questions about that chapter of your report. Maybe I will start by inviting you to speak generally about your comment, that I hope I'm not misquoting, that Westray could happen again. What is it that you and your office found in your audit that would lead you to say something like that?

MR. SALMON: I will turn it over to Mr. Horgan after I make some general comments. I think our concerns focused primarily on the issues of inspection to determine compliance with regulations and laws, not just in terms of environment and labour but also in terms of food inspection and some other areas, occupational health and safety.

The basis on which an inspection program in these areas is designed, the adequacy of processes of risk assessment and determination of where the risks exist, and although we saw signs and some indications that some risk assessment was taking place, we didn't consider that to be adequate or complete. Therefore, because, in all areas of our government we're faced with limited resources, those kinds of processes are necessary to make the best use of

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the limited resources that are available. We didn't see that that was taking place. Maybe Mr. Horgan could elaborate to some extent.

MR. ALAN HORGAN: What Mr. Salmon has just said is a good recap of our general concerns about the inspection regimes at the department. Much like many government programs, so often there's much more work than resources available. That really is a call to departments to develop systems that are as efficient as possible. In developing efficient systems, there's a need for a few things. One is to develop your priorities, to focus on those priorities and have adequate information to know that you are focusing on the proper priorities and, in fact, getting the job done.

We identified some weaknesses in each of those areas. The risk assessment, which is needed to develop priorities, is somewhat fundamental at the department. We found their information systems to be in need of strengthening in order for them to have additional information. We identified some areas where, perhaps, they could develop more efficient systems.

MR. STEELE: Doing occupational health and safety inspections means that you have to identify which employers you want to inspect, and you have to actually do the inspections. Then if deficiencies are found, you have to issue orders. If orders are issued, you then have to make sure that there's compliance. According to this report from the Auditor General's Office, there are deficiencies in each of those areas. I would like to start at the top and sort of lead you through those, and ask you to elaborate on what you found. I'm looking at Mr. Horgan, but if you want to toss it back to Mr. Salmon or anyone else, please feel free.

Let's start with this issue of how it is that the department goes about identifying which employers to inspect. If I'm understanding the report correctly, the information systems available to occupational health and safety are deficient, so that they don't even have any systematic way of identifying where the highest-risk employers are. Would you care to elaborate on that?

MR. HORGAN: At the time of our audit, the main source of information for determining what employers exist in Nova Scotia were the databases at the Workers' Compensation Board. However, the Workers' Compensation Board, in its legislation, does not cover as many employers as the Occupational Health and Safety Act does. There are a number of businesses other than what is addressed by the WCB. We identified that as one particular weakness. I believe they are addressing that, and they're developing access from their department to the Nova Scotia Business Registry, which will be a comprehensive database of all businesses in Nova Scotia, which will be accessible from a number of different departments for regulatory means. However, that was one concern and I think that is kind of along the lines of what you were asking.

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MR. STEELE: So they're using as their main database a system that only covers a portion of the Nova Scotia workforce. They're planning to implement a new information system through the Nova Scotia Business Registry which isn't in place yet. Meanwhile, if I'm understanding the report correctly, the occupational health and safety division still has no reliable, systematic way of identifying which places are most in need of inspection. Then the report goes on to say - and I'm reading from Page 145 of the report here, Paragraph 9.28, "If the Department continues to perform inspections at the same rate as in 2000-01, it could take more than 10 years to perform an inspection of all businesses in Nova Scotia." So even if they identify who it is they want to inspect, it is still going to take them a very long time to do it. I wonder if you could elaborate on that part of your report, about your findings there?

MR. HORGAN: Well, our findings are exactly as you described. The number of businesses in Nova Scotia is quite large compared to the resources available at the department to do inspection work. They have identified that it could potentially take 10 years, and to me, that highlights the need for risk assessment and prioritizing their inspections. If it's going to take a long time to get to every business, then you would want to get to the high-risk businesses first and get to the high-risk businesses more frequently than some of the others. For example, a number of the businesses that would go into the total mentioned here would be small businesses with one or two employees; it would include low-risk workplaces, perhaps, like law offices and architectural offices and such. There's an understanding that yes, inspection work may want to address some of those, but they're quite low on the list of risky workplaces. I think the key to the finding is that because of the amount of resources they have it is going to take a long while to get to them all, so they do have to get to the high-risk ones sooner rather than later.

MR. STEELE: They need to get to the high-risk ones, but they don't have any systematic way of determining who the high-risk employers are. Then later in your report, when you get down to the matter of actually issuing orders, what really struck me in reading this part of the report is the very high percentage of files that are inadequately documented. For example, your office looked at 65 initial and follow-up inspections and found seven instances where the review of the internal responsibility system was not well documented - seven instances. There may be some overlap with the first category or maybe not - seven instances where the checklist for the Occupational Health and Safety Act was not completed.

To do a sampling - and I assume you did a relatively random sampling - and to have 14 instances of non-compliance out of 65 when you're dealing with such an important area as occupational health and safety, to me it's just extraordinary that we could have that percentage of inspections that are not up to scratch. Then later on in the report it says that out of 65 inspections that were studied by your office, three instances where additional compliance orders should have been issued and three instances where a general order was issued rather than a separate order for each deficiency. So maybe there's some overlap there or maybe there isn't.

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[8:15 a.m.]

But again, another six out of 65 inspections where there should have been either more orders or better orders issued, it is extraordinary that the percentage of - I will call it the failure rate - the failure to meet a minimal standard of adequate inspections should be that high. What really concerns me, and this is what I want to get onto next and ask you to elaborate on, is down at the bottom of Page 146. This is where orders are actually issued - this is where the division has actually figured out who it wants to inspect and has actually found the resources to inspect and has actually gotten around to issuing an order for compliance with the Occupational Health and Safety Act. Rather than me reviewing it, I wonder if you could elaborate, Mr. Horgan, on what you and your team of auditors found when you looked at the rate of compliance with orders that had been issued?

MR. HORGAN: I think the nature of our finding here is not so much on the rate of compliance but on the rate of follow-up and the ability of the department to determine if there was compliance with orders issued. We noticed that there is not as much follow-up as we would hope there would be. When an order is issued, we believe it is important for the department to return in a reasonable period to make sure the directions they gave the business are followed. In many cases businesses are only required to report back in writing what they have done, as opposed to being subject to a physical reinspection. Even in cases where they are required to report back in writing how they have complied, that, very frequently, is not being done and we believe that is a concern.

MR. STEELE: The numbers that are recorded here on Page 146 of the report at Paragraph 9.37 are extraordinary, they are absolutely extraordinary. This is where the division has actually gotten around to issuing orders and you and your auditors examined 60 files. Of those 60 files there were 23 cases that you found where businesses did not submit documentation to confirm compliance with the orders issued. There were six where businesses did submit documentation that did not confirm compliance, and another four where there is inadequate follow-up. That is astonishing, it appears that out of the 60 sample files that you and your auditors looked at, half gave no indication that the order had actually been followed-up on - half. That's astonishing and I would think that anybody who is worried about occupational health and safety in Nova Scotia has a lot to worry about when, in your sample, half of all files gave no indication that the orders that had been issued had been complied with. I was wondering if you would care to elaborate on that and if there was anything you wanted to add to that particular finding? Were you astonished when you found this rate of non-compliance?

MR. HORGAN: Well, we are concerned. We do see it as a substantial weakness.

MR. STEELE: Maybe I can direct this to Mr. Salmon. In all the reports of the Auditor General that I've read over the three to four years I have been involved with - Mr. Salmon, you've been the Auditor General for, it must be 10 years now, give or take a year or two -

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in my few years of reading the Auditor General Reports in detail, I don't recall ever reading any statistic in an audit showing that degree of non-compliance. Is it fair to say this is one of the worst findings you can recall or are there others that have been worse?

MR. SALMON: I would say that in terms of my mandate to address issues of due regard, free economy, and efficiency, I would not classify this as one of the worst. But we are concerned with the adequacy of the processes of inspection in occupational health and safety and in food safety. Those are concerns but I wouldn't classify these as the worst findings we've dealt with over the last number of years.

MR. STEELE: Perhaps for another day I will save the question of what the worst findings were, because if a rate of non-compliance of half in occupational health and safety is not the worst, I think I would be afraid to see what the worst finding was.

Mr. Horgan, you had something else you wanted to add?

MR. HORGAN: Yes, I just want to mention that you can't necessarily equate these findings with non-compliance. These findings are telling us that the department doesn't know about the state of compliance on the orders issued, because they're not following up or the business is not reporting back. You can make some assumptions, but we would not know based on this audit whether in the case of the 23 instances where business did not submit documentation, some or all of the orders may have been complied with. A number of these businesses have Occupational Health and Safety Committees which have both employer and employee representation. There are forces within a company that would motivate a company to comply with certain orders, so we really don't know - this is more a matter of whether the department knows whether its orders are being complied with.

MR. STEELE: It reminds me of a parole board that releases prisoners out into the community and when somebody asks them what the recidivism rate is, how many crimes have been committed by people released on parole, the parole board says the information we have is none - but the only reason they can say that is because they don't keep track of what crimes are committed. The analogy is, maybe there has been compliance, maybe there hasn't, but the division has no idea, and that's got to be of concern to everybody.

MR. CHAIRMAN: Would you like to comment on that analogy of recidivism? I would like to welcome the member for Lunenburg West, and the next 20 minutes go to the members of the Liberal caucus.

MR. DONALD DOWNE: Welcome back to the Auditor General and his staff. On Page 24 of the budget - B24, pardon me, of the budget - it points out that the provincial borrowing has increased to $2.74 billion from the original forecast of $1.063 billion. The reason for the increase is borrowing for pre-borrowings for future years. My question to the

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Auditor General is, has the Auditor General received an explanation as to what the pre-borrowing amount entails?

MR. SALMON: I will turn it over to Mr. Carter.

MR. CLAUDE CARTER: Have we received any notice or information?

MR. DOWNE: Detail on pre-borrowing. They're pre-borrowing a fairly substantial amount of money - in excess of $1 billion plus - the question is would they not normally explain or give to check into additional pre-borrowing, pre-borrowing of the budget?

MR. SALMON: Mr. Downe, with regard to the budget, I will have to repeat what I said at the last meeting. Our mandate with regard to the budget is to review the revenue estimates. So in terms of seeking information on the rest of what is in the budget document, we would not have focused on it because it's not in my mandate. We would address that issue when we got to the financial statements or if we determined to do more substantive work on the treasury management area.

MR. DOWNE: Is it within the guidelines of GAAP to pre-borrow for future years? Are they allowed to do that under GAAP, pre-borrow?

MR. SALMON: That's not an issue that would be addressed by GAAP; that's a policy issue, not an accounting issue.

MR. DOWNE: Not an accounting issue whatsoever? Turning to the issue of GAAP itself, under the GAAP guidelines, which you have spoken about quite articulately and quite well about the virtues of GAAP, and I concur in many ways . . .

MR. SALMON: Not in all ways?

MR. DOWNE: No. Well, we will find out after this line of questioning is over whether or not we both agree on everything in there as being perfect.

Is there room under GAAP to hide from the public or keep things hidden from the public with regard to either revenue, or expense, or money being put aside? That's a very important question.

MR. SALMON: I agree with you, it's a very important point and I would argue that full compliance with GAAP would not permit hiding anything.

MR. DOWNE: Are we in full compliance with GAAP currently?

MR. SALMON: To my knowledge, yes.

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MR. DOWNE: Would you know otherwise?

MR. SALMON: Would I know otherwise? I believe that our audit work on the financial statements of the province would identify any significant deviations from GAAP.

MR. DOWNE: So if the minister has $7.5 million set aside at the Bank of Montreal in a fund for health that should have been spent last year for capital, you would have known that there's money that was to be spent and in fact is in another fund outside right now?

MR. SALMON: It wouldn't be outside.

MR. DOWNE: You knew of that particular fund then?

MR. SALMON: I don't know which fund you're referring to.

MR. DOWNE: It's a health fund, it's $7.5 million left of a $15 million-plus fund from the federal government for capital expenditures and it was to be spent this year, it was supposed to have been spent already. It's currently in a health fund from Ottawa, in the bank - well, it's under the control of the provincial government. You wouldn't be aware of those?

MR. SALMON: We haven't done an audit this year yet, Mr. Downe.

MR. DOWNE: No, no. That was last year's money that was there. I'm talking about 2001-02.

MR. CARTER: Yes, we're just starting the audit on the government's financial statements on that. The matter that you talk about did come up during the 2000-01 audit of the province because that money actually started to become available in that year and it was a matter that we looked at in our audit of 2000-01. The disposition of that right now, I couldn't talk about in detail other than to say that if there was a concern with it, we would have considered that in forming our opinion on the financial statements. I think that it's important to recognize that when you form an opinion on a set of financial statements, the focus is on, presents fairly, and the concept of materiality is involved in that. There are normally certain issues that the auditor may have with the financial statements, some of which offset each other so that it doesn't impact the bottom line. There may be a residual difference of opinion between the auditors and the preparers and the auditor then assesses that difference in terms of, does it impact presents fairly.

MR. DOWNE: Are there any other funds that you've been tracking since they've taken power, that there's still these funds out there that we're not aware of that you might have been able to track and follow?

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MR. CARTER: I'm not sure that I would characterize things like that as funds. There are items that arise in any financial statement audit that are identified for future consideration. Certainly, there's at least one other instance like that that we had concern with, with respect to the 2000-01 financial statements that we will be monitoring again this year.

MR. DOWNE: What was that?

MR. SALMON: That was a $5 million distribution in trust to the Nova Scotia School Boards Association to fund the implementation of SAP in regional school boards. We took issue with that in terms of it didn't at that time represent an expenditure. But, again, you must appreciate that a $5 million error, if you want to call it that, or difference, doesn't impact the

auditor's opinion, it presents fairly the financial statements.

[8:30 a.m.]

MR. DOWNE: Well, if it was my financial statement, $5 million might make . . .

MR. CARTER: No, I realize that. I'm not suggesting that it's inconsequential, it's a lot of money, but in terms of whether or not the reported financial position of the province is misrepresented, it is not very significant.

MR. DOWNE: I want to table an article from the April edition of Canadian Business where they talk about the top 10 ways public companies hide the true state of their finances, and could the government not use the same methods is the question. In this story they talk about how the governments under different accounting procedures, they're referring to GAAP, can find ways to leverage their money or to hide their money, or to deal with it in a different way. For example, on Page 2 of the story, they talk about the term "the big bath".

You probably have read about that or have heard about that - the big bath; in other words they write off everything. The companies will write off depending on the circumstances, everything they can possible write off - you know, including the kitchen sink - even inventory, they will write the whole thing off and then after they write it down, write it off, then later that inventory or other assets will then become part of the positive cash flow position of the company and it's not really showing up as a receivable or it's not discounted off the loss of the company. Do you believe that that's possibly being done in the Province of Nova Scotia under GAAP?

MR. CARTER: As an auditor with a healthy degree of skepticism in looking at any devaluation of any loan balances or loan accounts, we are certainly very concerned about under and over provision and we recognize that what you're dealing with are accounting estimates, and there's a lot of room in accounting estimates for there to be differences of opinion or exercise different degrees of conservatism at different points in time which can have a significant impact. So we watch that very carefully.

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Do I believe that in the past there's been a concerted effort to inflate provisions? The best answer I can give is, no, I don't believe there were. If there were, they weren't successful or they didn't get implemented because we ended up with positive conclusions on those provisions.

MR. DOWNE: One example given in the budget, the government says that it's making a small profit from Sysco and you will know in the budget that is currently before us that they're talking about some $14.7 million profit from Sysco. In reality, there was no profit because, obviously, the writedown of Sysco included a $470 million writing off in the year 2000 - they wrote off about $470 million. So if they wrote off $470 million of Sysco in the year 2000, how can they talk about a profit from Sysco this current year of $14.7 million? How can they do that under GAAP?

MR. CARTER: That particular transaction, not as it relates to the 2002-03 budget, but more as it relates to our audit of the 2001-02 financial statements, is on our issues list to follow up on, so I can't comment specifically. I haven't looked at what's behind the $14.7 million and looked at in relation to what was included or not included in the provision. So, I'm sorry, I can't be more definitive than that, because I haven't done an update review of the activities of the closure of Sysco to see whether or not we're talking about something that is new and applies to 2001-02 or is it something that is, in fact, 2002-03, or is it something that should have been accounted through the provision that has already been set up.

MR. DOWNE: I guess the term big bath by big corporations is one issue, the accounting of the province is another, and when you write down $470 million in the year 2000, you write that down and then in the year 2002-03 you say we're going to sell off the scrap metal from Sysco and we're going to receive about $14.7 million of additional revenue to the Province of Nova Scotia - and that is a revenue stream, that's what you do check is the revenue streams of the Province of Nova Scotia - is that acceptable under GAAP, is that a legitimate revenue when they've already taken a huge bath of $470 million write down in the year 2000, you know?

MR. CARTER: Look, I'm sorry; I can't be more specific right now other than to say that it's an issue we're going to be investigating as part of our 2001-02 audit of the province's financial statements.

MR. DOWNE: Is it conceivable that it's not an appropriate process to take the big bath, as it were, by government, be able to hide $14.7 million, and for a future year to be able to receive a revenue stream under GAAP? Is that the concept of what GAAP is all about? I thought it had to do with a whole different structure than that.

MR. CARTER: The way you phrase that, the answer is, no, it's not acceptable. What I can't respond to right now, because I don't have the information, is what exactly is behind that $14.2 million. The fact that it has been identified - we identified it as soon as we saw it

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as an issue for this year's financial statement audit - in itself should indicate that we have some concern about what year it's being reflected in and how it's being portrayed.

MR. DOWNE: Yes, well, as I understand it, it's being reflected in revenue this fiscal year we're in now, and we all know what happened in 2000 on the write down, the big bath, as it were, on Sysco, $470 million. The minister yesterday was talking about the tremendous debt that previous administrations left and, well, part of that is what he's talking about here in Sysco and NSRL. In fact, when they sold off NSRL, I understood they took the revenue stream from the sale of NSRL and put it to the debt. They didn't bring it in as a revenue stream; they kept it as a revenue stream on the second tier of the sale. It seems to me that that was actually supported by yourselves as the way they should be dealing with it?

MR. CARTER: By the second stream of the sale, you're talking about?

MR. DOWNE: Well, when they first dealt with NSRL, they wrote it off and so on and so forth and then part of the deal was conditional. I believe it was so many months later that they would be able to finalize the final transaction of the sale of NSRL and where they received additional revenues from that. And that, instead of coming into the current, I think it was $140-odd million, if I recall correctly, somewhere in that vicinity. The following year, instead of that going into the revenue stream for the province, thus putting the province in a surplus situation, they took that money and put it directly to the debt or they put it somewhere else. They didn't put it into general revenue, that's for sure.

MR. CARTER: No, it has all gone to general. It has all gone into the calculation of the annual surplus or deficit for the 2000-01 year, except for the part of the sale that didn't go forward.

MR. DOWNE: Yes.

MR. CARTER: And some of it, I believe, has been sold in the past year or was disposed of in the past year.

MR. DOWNE: Right, and that revenue trail . . .

MR. CARTER: That revenue will go through the statement of operations. So to answer your question on that one, I mean there's no way, as far as we know, that you can sell or dispose of an asset and take the proceeds of that disposal and directly apply it to net direct debt. You have to work it through the statement of operations.

MR. DOWNE: In the Budget Speech from the minister himself, on Page 58, he talks about the net income of government business enterprise being estimated at $22.5 million. I recall asking the question of staff, what's the breakdown of that? And I think I used the figure of $14.7 million; $14.5 million represents the sale of Sysco.

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MR. CARTER: Yes.

MR. DOWNE: The net income is now part of the sale of those facilities, and the scrap iron, steel and so on and so forth that's there is now part of this government's net revenue stream. They're using it as a revenue stream. If it is legitimate, if it is the right way of dealing with it then, you know, it seems like a double standard here, and if it is right, well, fine. If it isn't, then this government is in a deficit situation to the tune of some $12 million, and that's why it's a significant issue to have clarified at some point, because if you can do it one way and then you can do it another way or another way, it's no different than the big corporation baths that we talk and you hear companies going down because they have been able to do all sorts of innovative accounting procedures and I'm trying to clarify that point.

MR. CARTER: I'm trying to walk a fine line between what our mandate is and what we've looked at. The reason that it became an issue for us is what you allude to, is that we would have thought that any subsequent cost or income stream as a result of the disposal would have worked through the provision that was set up in the prior year, but I caution you, that's the principle. What we haven't been able to do yet or haven't done yet, and we won't do it until we start the government financial statement audit in the next couple of weeks, is get the background information on what their rationale is for putting it in the 2002-03 year. I haven't seen that so I can't judge that.

MR. DOWNE: Yes.

MR. CARTER: But in principle we would have thought that any revenues or additional costs would have worked through the provision.

MR. DOWNE: Of the $470 million?

MR. CARTER: That's right.

MR. CHAIRMAN: Mr. Downe, you have just under a minute.

MR. DOWNE: I have another minute. Are the books of the province prepared on a fully consolidated basis? I have only got a minute and I've got another . . .

MR. CARTER: Sorry, okay. They're prepared in accordance with Generally Accepted Accounting Principles for the public sector in Canada in a way that presents fairly in all material respects. There are certain small entities that for convenience purposes it's easier to deal with them on a net basis.

MR. DOWNE: Can you elaborate on the fact that incomes, for example, in the hospitals, incomes from either their Tim Hortons, or their other facilities that they sell products in, don't show up as a revenue stream, but do show up at the end of the year? It's

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confusing sometimes when the budget of the Department of Health comes out for a hospital and yet they are able to make all sort of sales that don't show up, but they do show up at the end of the year. Can you explain why we aren't privileged in knowing what their projections of those revenues are, and are part of the actual budget, when they lay it down before us in March?

MR. CARTER: In a nutshell, for financial statement reporting, there are Generally Accepted Accounting Principles. For presentation of budgets there is not equivalent generally accepted budgeting principles. Jurisdictions are moving towards consolidated budgeting, in other words presenting their annual budgets on the same basis that they present their financial statements so that there would be a consolidation process during the budget process. Nova Scotia is not there yet. What they've done is taken the first step of a two-step process in that they've put in a consolidation adjustment in their budget to get down to a consolidated bottom line. So what you've got is an annual surplus or deficit that's presented on the same basis as the financial statement, but the components are not displayed on the same basis that they will ultimately be reported for financial statement purposes.

MR. DOWNE: It's a hidden income check . . .

MR. CHAIRMAN: Excuse me, Don, I've given you some leeway already. Sir, have you finished there? Are you finished with your answer?

MR. CARTER: Yes.

MR. CHAIRMAN: Okay, great. It's coming up to 8:44 a.m. The next 20 minutes I will turn over to the government caucus. I understand the member for Pictou East will be leading off.

MR. JAMES DEWOLFE: Good morning, ladies and gentlemen. I guess I'm going to go back to my old favourite, the balanced budget approach, and again I keep coming up with new, or new to me anyway, points and I noted that there's the GAAP, the Generally Accepted Accounting Principles that Canada has and there's also a U.S. version of GAAP. Could you tell me the difference in those two or is there a difference, the U.S. Generally Accepted Accounting Practices, which version do we use?

MR. SALMON: We're using the Canadian version, the principles established by the Canadian Institute of Chartered Accountants. I would not suggest that there are major differences with U.S. principles. There is a major effort going on to move to international or world-wide principles of accounting as well as world-wide principles of auditing, standards of auditing. I'm involved in a committee of the Canadian Institute of Chartered Accountants dealing with auditing. We have a process in place of reviewing every pronouncement that comes out of the international organization and we are attempting to harmonize. The U.S. is

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moving in the same direction so there's a growing level of co-operation among standard setters in accounting and auditing internationally to harmonize.

[8:45 a.m.]

MR. DEWOLFE: Going with the method that we have applied, Generally Accepted Accounting Principles, keeping in mind it's a first step, how long will it take to reduce the provincial debt to a more manageable level? Currently, it's not very manageable in the state we're in today in this province, fiscally. So how many years are we looking at to get it to a more manageable state?

MR. SALMON: To what extent do you want to raise income taxes and lower expenditures on health care and education?

MR. DEWOLFE: Or grow the economy. There are other ways . . .

MR. SALMON: Or grow the economy. You're asking a question that no one can answer.

MR. DEWOLFE: It's a very tough one; it is. It's a tough situation that we're facing in the province. In your report, there is a theme for improved communications. It's indicated that it's important that government must promote public awareness and understanding of fiscal conditions in this province and the tough decisions that have to be made and the risks that are involved and so on. In your mind, what would be the most logical route to take? What steps could we take to ensure that the public becomes more aware of what's happening? It's difficult to tell people that, yes, we have to belt tighten. We have to do this, but they don't really understand these huge amounts of money, this huge debt that we have. That's my assessment. I know in my area that it's hard to grasp those large numbers.

MR. SALMON: Yes, it is. I agree with you. I don't know what the answer is. I get, on a regular basis, telephone calls or letters from concerned citizens about specific issues asking me to go in and audit why somebody who is a recipient of workers' compensation or is paying Pharmacare premiums or is involved in similar transactions and feels they've been overcharged $3,000 or $2,000 or have been double-billed on their Pharmacare premiums and want me to go in and audit that. I'm dealing with $5 billion of expenditures and revenues and I've got 27 staff. Do you in this House want to give me 270 staff so I can do all this audit work? I'd be quite happy to receive that kind of a workforce, but it's just not feasible. The same principle applies to Mr. Steele's issue in terms of Environment and Labour, in terms of the number of inspectors. How much can we afford? But in terms of the communication issue, I agree with you. People don't grasp what $5 billion is.

[Page 15]

MR. DEWOLFE: Mr. Salmon, how important is it to ensure that the people in the province understand that they have to lessen the expectations they have of government with regard to the services? How important is it for them to understand that government too has to live within its means as they do and as they manage their households?

MR. SALMON: I believe it's very important. The real challenge is getting the message out there in a way that people can understand and can relate their demands for services against what they are willing to pay in the form of various forms of taxation. It is trying to equate a government operation to a household operation. The difficulty, in my mind, and it's not just Nova Scotia, it's right across probably every country with a democratic system, is the cynicism about government and the fact that there's a view that governments are wasteful; the decisions are made for political purposes not rational business purposes. That cynicism probably will never be dealt with, but we have to find our way around that. To be perfectly frank with you, one of the reasons for that cynicism are the activities that take place in this House, which are for political purposes. I'm not suggesting it's any one Party versus any other Party, that's the system.

MR. DEWOLFE: I understand where you're coming from because I sit over there and quietly listen to what goes on around me and I tend to agree with some of your thoughts on that. Political grandstanding, I guess, is the order of the day in this House. Certainly, while our achievements since we took power are numerous, they're not particularly limited to fiscal matters, but future accomplishments are probably dependent on the direction that we've gone and I guess I'm referring to achieving a balanced budget and trying to regain some fiscal stability within the province. So I guess it's important to remember for all of us that the balanced budget wasn't achieved easily and it's not the road Nova Scotia has been going down the last 40 years, but I guess we reached the point where we can't go any farther in that other direction so we had to put the brakes on and say, whoa, let's try to achieve some balance here and stability within the province.

So it was a turning point, the budget, and I think you would agree that it's a start to head in the right direction. I know the Opposition has a lot of negative things to say about it and some feel that the timing wasn't right and that we should have waited another year. In my mind, our Party's decision was that we couldn't delay it any longer, we had to start. I was just wondering what your thoughts are on that with regard to the timing and should we have waited or did the time come?

MR. SALMON: I think we should have started a long time ago. You can look back to 1993, certainly the strategy and the objective at that time, as I recall it, was the same. However, we weren't under full GAAP. The true story was not being portrayed in the financial statements and so people were misled, in my view, but the objectives were the same, to balance the budget, but because we didn't have the full story, what was set as the objectives were not what the objectives should have been. So moving to full GAAP has resulted in better communication of the situation and perhaps better communication to the

[Page 16]

people of this province, but I don't want to portray it as a former government having any different objectives than a current government.

MR. DEWOLFE: We're just referring to governments of the past. We have to put that behind us and start in a new direction. Getting our finances in order is certainly an important turning point in this province and one that ensures the future of our health, education, and public services that most Nova Scotians demand and indeed deserve.

MR. SALMON: I'm sorry, Mr. DeWolfe, but I cannot portray it as a new direction. I think the direction has been there.

MR. DEWOLFE: It just wasn't adopted.

MR. SALMON: It wasn't based on full information and full disclosure.

MR. DEWOLFE: Which GAAP allows for.

MR. SALMON: Yes.

MR. DEWOLFE: So the GAAP in other words makes your job as the Auditor General easier because . . .

MR. SALMON: It doesn't make my job any easier, it just results in full disclosure.

MR. DEWOLFE: Okay. All right, thank you. I appreciate your answers because, as you can understand when talking with me, it's not an area of expertise that I shine in but I am very interested in since getting into this job four years ago. It's quite a learning experience and I know there are others around, former Finance Ministers and so on sitting in this room today.

AN HON. MEMBER: He balanced the books.

MR. DEWOLFE: My colleague has suggested that the books were balanced at that time too, but I think a better balance is in the air today, and I will turn future questions over to my colleague, the honourable member for Kings West.

MR. CHAIRMAN: Mr. Carey, you have six minutes.

MR. JON CAREY: Mr. Chairman, I think in your report it strongly indicated improved relationships with so-called third party spenders in the province, or organizations such as school boards and health authorities and universities, that type of thing. I guess my first question would be what percentage of government money ultimately goes to those organizations, do you have that information?

[Page 17]

MR. SALMON: Who wants to deal with that?

MS. ELAINE MORASH: I think it's roughly two-thirds or in excess of two-thirds. It's a huge amount.

MR. CAREY: So it's certainly a large percentage of what is actually spent. I think from an accounting standpoint, how would you suggest - we always run into the problem of wanting local control, and input certainly is important from communities and school boards and that type of thing, but do we have satisfactory guidelines and controls in place to, I guess the word maybe is to "police" these organizations? Certainly, it's important that we have them, but if we have to be responsible, where is the balance from an accounting standpoint that you see, and do we have it?

MR. SALMON: There is a balance that has to be achieved. These entities such as hospitals and school boards have auditors, they produce financial statements, they negotiate their budgets with the Departments of Health or Education, and they submit their financial statements. We have the right to go in periodically and review their operations. But there certainly is an issue of the adequacy of control that is exercised by the government over those organizations. We've seen examples recently of problems in school boards and now in a college. Certainly, there is an issue there in terms of establishing the right relationship and the right controlled environment that allows the government, through the minister, the deputy minister and the staff, to exercise the right degree of control and establish the right balance of responsibility between the parties and accountability back from a school board or a college or a university or a hospital to the government. That's the struggle we're going to have to go through. My role is the oversight of that and trying to comment on weaknesses and problems and advise on ways to achieve that right balance.

[9:00 a.m.]

MR. CAREY: Are you actively participating? Are you requested to get involved in the ongoing process or do they wait until such time as you have audited something and found problems or signify that things are okay?

MR. SALMON: We offer to advise, occasionally we're requested to participate or advise. We have a very good working relationship with the departments of government from that perspective. Again, I'm limited in terms of my resources as well.

MR. CAREY: Just to maybe continue on that a little bit. Is there enough input from all departments, do you get information from all sources, I guess is what I'm trying to say? For example, the district health authority or the school boards, do they ever contact your department to see maybe that they should be doing certain things in an efficient way to make sure that they're staying within the guidelines?

[Page 18]

MR. SALMON: It works both ways. They advise us of what they're planning to do and seek our advice. Sometimes they just come to us and seek our advice. But there is very regular communication between my office and the departments of government.

MR. CAREY: So do you foresee that there are going to have to be major changes? We've had these problems sort of surface lately that were kind of shocking to everyone. Do you see something major having to be done, or is this something you think that people will now be more careful?

MR. SALMON: I am not sure I would characterize it as major, but there is a need for change and some of that is attitudinal and behavioural change on both sides.

MR. CHAIRMAN: Thank you, Mr. Carey. To allow for a wrap-up at the end and a couple of items of business, I would assign 14 minutes each to the caucuses. So it's 9:04 a.m. and the next 14 minutes go to the honourable member for Halifax Fairview.

MR. STEELE: Mr. Chairman, I would like to turn back to the Department of Environment and Labour. In the last round of questioning, I focused on the Occupational Health and Safety Division. I would like to turn now to Chapter 10 of your report, which deals with the Public Safety Division of the Department of Environment and Labour and that deals with elevators and lifts, boilers and pressure vessels, power engineers and the Office of the Fire Marshal. In your summary of what's going on in this department, it says this:

"There are numerous instances of non-compliance with public safety legislation . . . There is no formal risk assessment process to determine inspection frequencies or select individual inspections . . . The documentation prepared to support an inspection varies considerably within the Division, and in many cases was inadequate or non-existent. Documentation submitted by companies to support their compliance with orders issued is often inadequate . . . Annual reports lack substantive information on the performance of the Public Safety Division . . ."

That's a pretty damning indictment of what's going on in the Public Safety Division, which we all know, by its name alone, is very important. What on earth is going on in the Public Safety Division of the Department of Environment and Labour that those kinds of deficiencies could be found in an audit?

MR. SALMON: I will turn it to Mr. Horgan.

MR. HORGAN: The concluding remarks that you were referring to, you probably note, are very similar to the nature of the findings that we had in our audit of the occupational health and safety. There are similarities between the manners in which the two programs operate. The overriding problems, I believe, are almost identical. There are resource issues,

[Page 19]

where there is an extremely high number of businesses and pieces of equipment that need to be looked at; information systems are inadequate in that not all businesses or pieces of equipment are recorded and information systems are not tracked; the inspection work being conducted, there's a lack of prioritizing.

As you mentioned, there's not much in the way of risk analysis, so the inspection is done on a somewhat piecemeal basis. There's difficulty in maintaining regulations so that they're current and address the issues of the day. As with the occupational health and safety audit, the audit of public safety found that the department has considerable difficulty keeping regulations up to date. Each of those items create a program that has, I believe, difficulty in meeting its own objectives.

MR. STEELE: I will tell you, after reading these chapters of the report, I don't feel very safe. This division is there to ensure public safety. If anybody in Nova Scotia is safe, it's seems that it's more by good luck than good management, because it sounds like there's not an awful lot of good management going on in that department if you can have this long list of deficiencies. Let me put you on the spot, Mr. Horgan or Mr. Salmon. Based on your audit, what would you say are the top one or two areas where the public should be concerned about its safety?

MR. HORGAN: In conducting the audit, I didn't draw any conclusions about one program being particularly worse than another. They have difficulties in many areas. Not all elevators are being inspected as frequently as possible. There are areas of non-compliance with the Fire Prevention Act. There's a lack of follow-up of compliance orders with respect to inspection of equipment. There are concerns across the board.

MR. STEELE: I want to draw your attention - to go from the general now to the very particular - to Page 165, and in particular to Paragraph 10.24, where there's a reference to certain amusement devices that, in the department's opinion, it is not their responsibility to inspect. Those include bumper boats, go-carts and waterslides. Then at the end of that paragraph there's a sentence that says, "there are reports of accidents and injuries attributed to these devices." I'm wondering, if I put my nearly 4-year-old boy on a bumper car, are you suggesting, Mr. Horgan, that those kinds of amusement devices are not being inspected by anybody in Nova Scotia right now, and that people have been injured on those kinds of amusement devices?

MR. HORGAN: I think that's a fair way of putting it. The department conducts its inspections of amusement devices in accordance with some specific codes, namely the Canadian Safety Association Code. Based on their interpretation of this code, that code does not cover certain amusement devices. We could not see why the focus should be on what is and is not covered by the code when the actual legislation covering amusement devices has a definition, and that definition seems to cover other sources of amusement, namely the

[Page 20]

bumper boats, go-carts and waterslides. We could not see why they would not extend their inspections to cover those, especially considering that there are some reports of accidents.

MR. STEELE: What information do you have, Mr. Horgan, about accidents or injuries on these uninspected amusement devices?

MR. HORGAN: All I can say is that in doing our audit, we were informed by the department that they have received reports of accidents. I can't comment on the prevalence of them or how serious they are.

MR. STEELE: Going back then to the Office of the Fire Marshal, I'm referencing here, in particular, Paragraph 10.43, this report says something similar for this aspect of public safety as it said about the Occupational Health and Safety Division. It says, " . . . during our testing of a sample of inspection files, we found that the documentation submitted by companies to support compliance with orders issued is often minimal or non-existent."

Now, this isn't quantified in quite the same way that it is in the chapter on occupational health and safety where you say you looked at this many files and here's how many instances of non-compliance or lack of documentation you found. I wonder, Mr. Horgan, if you could comment on that aspect of your report, that is to what degree of a problem do we have here in the Office of the Fire Marshal with inadequate or non-existent documentation?

MR. HORGAN: I think it's very comparable. The rate of reporting on compliance matters is quite inadequate, and I would think it's much in line with the experience of the occupational health and safety program. I would again suggest that this is an indication that the department does not have information or is not seeking to obtain enough information on a property owner's fulfilment of a compliance order, and that is not necessarily indicative that compliance orders are not being complied with but, we, as auditors in the department, just aren't aware of whether their orders are being fulfilled.

MR. STEELE: Again, all I can say is, to me, it is simply astounding that in a department that has no way of prioritizing inspections or discovering where the high risks are, or it has inadequate resources to do them anyway, so that they're not even meeting legislative inspection requirements, that when they do get around to issuing an order, if it's on the same scale as the Occupational Health and Safety Division, at least half the time they have no idea whether their orders have been complied with or not. That is astounding, and something that I think everybody in Nova Scotia should be concerned about, if we know that the watchdogs have no idea whether the orders they issue are being followed through on.

Along the same lines, in a different chapter, there's discussion of the food inspection services. Mr. Salmon, you referred to that in passing earlier today. I wonder if you could indicate to the committee your assessment of the risk to Nova Scotians arising from an

[Page 21]

inadequate food inspection program? What is the degree of risk, and where in your assessment is the greatest risk?

MR. SALMON: I will turn it to Mr. Horgan, if I could.

MR. HORGAN: To summarize it at a very high level, I would suggest that the problems that we experienced in the occupational health and safety program and the audit of public safety are not nearly as prevalent in the food safety inspection program. The food safety inspection program had some weaknesses, but our concerns were not of the same magnitude.

[9:15 a.m.]

With respect to inspections of the food service establishments, they are in fact pretty close to meeting their own standards for doing inspections. We noticed that their follow-up experience is considerably better. Our main concern was that they are tightening their standards, which is a good thing - not so much that they're tightening it but they're examining their standards. They're involved with their other food safety systems across Canada developing similar guidelines, and in strengthening their standards they are now attempting to perform many more inspections of restaurants and cafeterias and such than they had in the past. We expressed some concern that the resources they have and the system they have now will probably have some difficulty in meeting the new inspection standards, but that is yet to be seen.

MR. STEELE: Do we have a particular problem with food safety at daycares?

MR. HORGAN: The problem that we identified was a lack of coordination and a lack of standard for the inspection of food safety at daycare centres, which is not the same as there being a problem with food safety. This audit really couldn't comment specifically on the safeness of food there or elsewhere. But the systems are in need of improvement mainly because the inspections at daycare centres were not, at the time of our audit, conducted by the food safety program of the Department of Agriculture and Fisheries. They were conducted by another department. There was a lack of communication and coordination between the two departments, so that the standards used for inspecting daycare centres were somewhat lower and the information they used to determine where daycare centres existed and were in need of inspection was not nearly as complete. The system was weaker with respect to those entities.

MR. CHAIRMAN: I will turn the next 14 minutes over to the member for Cape Breton West, Mr. MacKinnon.

[Page 22]

MR. RUSSELL MACKINNON: I, too, would like to continue with the Department of Environment and Labour - I have a passing interest as some may know. Has anyone from your department, Mr. Salmon, had any occasion to interview any of the senior directors in the department during the course of the audit?

MR. SALMON: I will turn it to Mr. Horgan.

MR. HORGAN: Yes, we have.

MR. MACKINNON: Did you have occasion to interview the director of field services?

MR. HORGAN: I believe we would have as part of the audit, yes.

MR. MACKINNON: But you're not sure?

MR. HORGAN: I would be relatively sure, but I was not the person doing the field work for our audit, so if your next question were to ask who that person is, I'm not too sure I could give you a name . . .

MR. MACKINNON: Meaning within your department.

MR. HORGAN: The name of the . . .

MR. MACKINNON: I'm not sure if there even is one, that's why I'm a little perplexed by your organizational chart.

MR. HORGAN: We interviewed each of the senior management . . .

MR. MACKINNON: The last one I knew who was there was transferred over to the Department of Finance, and then eventually to P & P, and then took retirement and went to work as a researcher for the NDP caucus, so the cycle of life continues.

MR. HORGAN: Yes. On Page 153 of our report, we have an organization chart, an abbreviated one, for the Occupational Health and Safety Division and I mentioned there's a director of field services and a director of central services, and so yes both of them would have been interviewed as part of the audit.

MR. MACKINNON: If they have one.

MR. HORGAN: Oh, they do have one.

MR. MACKINNON: So there is a director of field services?

[Page 23]

MR. HORGAN: Yes, there is.

MR. MACKINNON: On Page 162, on the public safety side, I notice there are one, two, three, four, five, six paragraphs that essentially, in short form, condemn the performance of that department. I think that's being polite. To take a few quotes, "In many instances, the Division has not been able to comply with the frequency of inspections specified in legislation or policies." In many cases, the documentation " . . . was inadequate or non-existent." The final one, ". . . annual reports lack substantive information on the performance of the Public Safety Division, and do not fulfil their potential as accountability documents." I'm a little concerned because the first thing that came out of the Department of Environment and Labour after this report came down was they fired the deputy minister. During the course of your audit, did you have any occasion to interview the deputy minister?

MR. HORGAN: Yes, we did.

MR. MACKINNON: Did you get a comfort level that he seemed to have control of issues within the department or is this merged department just a bit overwhelming for one deputy minister?

MR. HORGAN: I couldn't provide a . . .

MR. MACKINNON: You didn't get a sense of that one way or the other?

MR. HORGAN: One way or the other.

MR. MACKINNON: It would appear that the whole theme of this report shows the Department of Labour has a lot of things to correct and I'm somehow wondering if perhaps downscaling or downgrading the department by merging it to the extent that they did with the Department of Environment was actually a constructive initiative in the final analysis. My sense for the short time I was there is that a lot of changes have taken place and things were happening for the better and things were really starting to take form, but then this merger took place and then we had an amendment to the legislation that brought in a sunset clause, and there were numerous instances of - well, accusations of political interference, particularly in the Amherst area and so on. I'm just wondering if there's some type of environment starting to develop, excuse the Freudian slip, whereby inspectors are somewhat intimidated by the political process from going out and putting 150 per cent into their job description. That, in essence, is starting to show up by the lack of detail, the lack of proper reporting, recording, inspections and so on.

MR. HORGAN: The nature of our audit tests wouldn't enable us to determine that exact characteristic, but I can say that we saw no evidence of such a thing as political intimidation at the level of the inspector. I'm not saying it can't exist, and we can't really

[Page 24]

conclude one way or the other, I can just say no instances came to our attention of that kind of thing.

MR. MACKINNON: That's important because obviously, I'm speaking to the issue of the Westray situation. My sense is that through the election campaign, the present government body when it was running for election indicated to the general public that they were going to make the business environment more user friendly and by doing that they were going to cut a lot of red tape and they were going to make it easier for businesses to operate in Nova Scotia. With that, seems to be - my sense is - a relaxing of the environmental and labour laws of this province and if not relaxing them in one case, then it's kind of soft-pedalling when the inspections take place. Well, don't go out and issue a fine or a citation if you can get away with it. Generally, that's good to encourage businesses to do things in a positive light, but if that sense, that policy direction, that tone is stamped within the department at a high level, then naturally, inspectors are going to do their level best to meet their due diligence, but at the same time, meet the political obligation. I'm not sure if I'm being clear.

MR. HORGAN: I think you are and one piece of information that may help put some light on that is, we have a chart on Page 155, Exhibit 9.3. This is in the chapter on Occupational Health and Safety. The second chart is on compliance orders issued and it's clear from the chart there is a strong upward trend in the number of compliance orders issued over the last five years. So that would indicate that . . .

MR. MACKINNON: Things are improving.

MR. HORGAN: Well, there's different ways of interpreting the figures. I would imagine the management of the department would rather that trend to go down but go down because there are no safety infractions at any of the businesses. I don't think any inspector particularly wants to issue a compliance order, they want to go in and do an inspection and find out everything is just great and that the safety of the employees is ensured. However, if there are problems, well then it's the duty of the inspector to issue compliance orders and there's definitely a five year upward trend in that happening.

MR. MACKINNON: I noticed one of the policy commitments made by the Conservative Party when they were running for election was that they were going to combine the Occupational Health and Safety Division of the Department of Labour and the Workers' Compensation into one entity. Was any of that issue discussed during the time of your audit as a resolve to perhaps some of these problems within the Department of Labour?

MR. HORGAN: At the time of our audit no decision had been made by the department on that specific issue.

MR. MACKINNON: Was it discussed?

[Page 25]

MR. HORGAN: It was mentioned to us as something under discussion but that's about the extent of it.

MR. MACKINNON: In what context?

MR. HORGAN: Just in the context that there is some consideration that . . .

MR. MACKINNON: So it is being actively considered?

MR. HORGAN: It was being considered at the time of our audit but no decision had been made.

MR. MACKINNON: I'm just curious as to whether the removal of the deputy minister from the department, in fact, actually resolves the issues in this audit? The signal I've seemed to receive is that by removing the deputy minister the government was correcting the problems that were in the audit. The way I read it is that they were saying the deputy minister was the source of the problem, not themselves. In fact, the minister himself, during estimates, indicated he had no knowledge that the deputy minister was being removed from his position until after the fact but yet, Cabinet documents show that he's one of the ministers who signed off and made the decision. So that's very dangerous at a very high level when you have the chief executive officer for the department saying one thing and doing another. How does that permeate down to the inspection level, to all the senior staff, and the employees in the department when you don't have a confidence level that your chief executive officer is being straight with you? How does that establish confidence in the day-to-day operations within the department and with the general public?

MR. SALMON: My comment would be that no one has come to me and indicated that there is a connection between the departure of that particular deputy minister and this audit. I have no knowledge that there is any connection. I have no knowledge of any of the reasons for his departure.

MR. MACKINNON: Well, let's be a little point specific here then in regard to your comments on the fire marshal's report, saying that they were untimely, incomplete, and inaccurate. That's pretty condemning, the fire marshal is in charge of fire safety for the entire Province of Nova Scotia, for every citizen, for every home, for every business. To have that type of audit report come out, that, to me - as my colleague for Halifax Fairview has indicated - seems like we are operating on luck, not good management. When you indicated you interviewed these senior directors, did you get a comfort level that each one of these directors were in control of their divisions?

MR. CHAIRMAN: Mr. MacKinnon, you have two minutes remaining.

MR. SALMON: I will turn that to Mr. Horgan.

[Page 26]

MR. HORGAN: The directors and senior management that we interviewed at the Department of Labour, both with respect to occupational health and public safety, we found to be very hard-working individuals, very sincere and serious about their programs and very concerned about the resources they have available to conduct their work. I would say that one of the things that impressed us on these audits is how well our audits were received and the responses that management of the two programs prepared and allowed us to include at the end of the chapters. You will find that each of the responses is quite lengthy, perhaps more lengthy than we normally receive, but good in that they provided in-depth comments on how they will proceed to correct some of the deficiencies that we have identified in our audits. That shows how seriously they took the audit and that they're going to take upon themselves the initiative to correct the problems.

[9:30 a.m.]

MR. MACKINNON: I realize my time is expiring here, but in essence, a lack of resources is a major problem?

MR. HORGAN: It is a major problem. That is one of the problems. There are, perhaps, concerns about information systems. If you don't have the information you need, it's perhaps difficult to do what you want to do.

MR. MACKINNON: If you don't have the resources, it's hard to put that in place.

MR. HORGAN: Well, that's very true and then prioritizing, there are a number of issues, but resources is a significant one.

MR. MACKINNON: Yes.

MR. CHAIRMAN: The next 14 minutes go to the members of the Progressive Conservative caucus, the government caucus, and I'm under the direction that the member for Kings West will lead off.

MR. JON CAREY: Mr. Chairman, I will just be taking a few minutes and then passing to my colleague, but the occupational health and safety - going back to Mr. Steele's observations - it's obvious that we have a large diversity of views on what is safe and what isn't. I certainly agree that we need to have things in a proper manner for safety and protect as many people as we can, but drawing the line on personal responsibility and what government should dictate, I think, is something we have to arrive at a balance on. You know, if you're going to put your child in a bumper car situation, I think you have to evaluate whether it's safe or not. I'm not sure I need a government inspector to tell me that.

[Page 27]

I know several years ago there was an accident, I think it was out by the airport, where a flagperson working for DOT was killed. Now, naturally a loss of life is a serious situation, and I certainly don't support any unsafe measures. However, because of the various views that we have in society, we now, when we want Transportation and Public Works to fix a pothole out in my area, for example, which is very rural in some of it - I will use Dalhousie as an example, where you might get a car every half hour or something on that highway - we have to send three flagmen and one person to fill the hole. The costs are just astronomical to do the maintenance, and I know from accounting, probably that doesn't enter into your expertise, but we sometimes seem to go to extremes. How do we get a balance, and do you ever have an opportunity to suggest that maybe what works out by the Halifax Airport doesn't work somewhere back in the sticks? (Interruption) Well, I'm sorry, but it's my area and I think it's kind of remote.

MR. SALMON: My office cannot get into that level of detail or make those kinds of judgments. I agree with your opening statement that we all have a personal responsibility for our own safety and protection. I certainly would not have expected a policeman to be standing on the corner and protecting my house when it was broken into, and the fact that I put a security system in after the fact indicates that, you know, I should have done it much sooner. But whether there should be two flagmen - I mean I get annoyed when I drive down the street and there's construction going on and people are standing around doing nothing, or that's the appearance, but from an audit perspective and in terms of the mandate of my office, we just could not ever make those kinds of judgments.

MR. CAREY: I understand that and I'm not suggesting that you should, but certainly I think somewhere we have to find a balance, and again, when we're talking of the businesses that don't get inspected as regularly as some people think they should, I can speak with a little bit of knowledge on the fire marshal situation. Since, I think it was 1975 or 1976, all municipalities were, by legislation, to have fire inspectors, however, many municipalities never chose to do that and it was never enforced. So even though the fire marshal maybe is the end of the line on reporting and so on, I am aware that all communities pretty much have fire departments that do inspections and so on, and they may not directly report to the fire marshal as such, but I think we would be alarmists if we thought that there isn't a reasonable degree of fire safety, being checks and balances, throughout the province.

Now, I'm not speaking about metro, I'm talking about rural Nova Scotia, but I know that every community that I'm familiar with has some people who are vigilant about these types of things. So I think we would be overreacting to think that the fire marshal can have the staff and so on to check on every little situation, but I believe they are being done and I think that maybe you get some indication of that, I'm not sure, but . . .

MR. SALMON: Perhaps Mr. Horgan would comment on that.

[Page 28]

MR. HORGAN: One of the concerns with respect to fire safety, and it applies to some other areas of safety, is that when legislation was being drafted and enacted many, many years ago, whereas many of these Acts are quite old, they saw fit to put inspection requirements, numerical inspection requirements right in the Act, especially with regard to fire safety so that there is a requirement that schools, theatres, nursing homes, be inspected a certain number of times each year.

The trend towards legislation these days is not to put strict numbers in the Acts, but to allow for some latitude on the regulatory body to determine what is the appropriate inspection regime so that they can apply risk. I mean the perfect example would be that highway situation that you mentioned. I'm not too sure what the legislative situation or the regulatory situation is right now, but one extreme is that regulations would indicate how many flagpersons are required and at what distances. Another would be regulations that require a very safe working environment that is to be determined through a rigorous process so that it can change based on traffic patterns, the speed of cars on the highway and such.

I believe the new fire Act, which I believe was just recently enacted - I'm not entirely sure - does exactly that, it takes out of legislation some of the numerical requirements and replaces them with a due-diligence type of a situation where it's up to the regulatory bodies to determine what is the appropriate inspection regime.

MR. CHAIRMAN: I believe the remaining time for the government caucus will be used by the member for Chester-St. Margaret's.

MR. JOHN CHATAWAY: Mr. Chairman, I certainly appreciate sitting in for Mr. Morash today, especially when I said Kerry, who are we talking to today, and he said the Auditor General and his staff, and I very much appreciate that because it's very, very important, the function that you do in government. I have certainly learned some things today and maybe just some general questions. We have, I believe, an $11.6 billion debt in Nova Scotia, what would that be per capita?

MR. SALMON: I saw a number, about $11,000 per person in Nova Scotia.

MR. CHATAWAY: I just read it was $12,380, and I think that's very important. That's a simple thing that all Nova Scotians should understand. What if we didn't have $11.6 billion that we owed to everybody? Do you have any opinions on the size of that per capita debt compared to other provinces in Canada and things like this? I think you've said this before.

MR. SALMON: It's one of the highest. I think there may be one other province, on a per capita basis, that's higher.

MR. CHATAWAY: We are near the top of that column.

[Page 29]

MR. SALMON: Very definitely.

MR. CHATAWAY: Oh my goodness, yes. That's why I think this government was elected, partly because I think we asked the people - economically, what we've got in this province - we have two problems. We have a deficit every year; every year we have a deficit, and then we have debt. I think we were saying we can't deal immediately with this because it's a long-term problem, but in 2002 we can have a balanced budget.

When you think about it, in the last 40 years any provincial government in Nova Scotia has always set out a budget and then gone up to the bankers or the bond-makers or all these people, oh, next year we're going to have a great time; we're going to have a good year, but just lend us a bit more money now, just lend us a bit more money. So now it's $11.6 billion overdrawn. We finally stopped that. It's certainly taken some definite - Mr. Auditor General, if we owed half of that, half of $11.6 billion, what would the interest rate be? Would we still have to borrow money to pay our debts and improve things and things like that? How would that influence the rate we pay for borrowing money?

MR. SALMON: If the debt was half of what it is, the interest charges each year would be half of what they are. That would free up approximately $500 million a year that could either be treated as a surplus to further reduce the debt or used for needed capital improvements or used to meet demands for health care and education. That's the issue that I tried to discuss in my report; we're spending 18 per cent of revenues to pay interest on the debt.

MR. CHATAWAY: Also, if we had half of that debt, would we not get a better interest rate on the money we were borrowing then? Would that influence the rate we borrow money at?

MR. SALMON: I would assume that if the debt was half of what it is, the bond-rating agencies would look much more favourably on the province, the credit rating of the province would be better than it is, and therefore the interest rate that would be paid would be lower than it is.

MR. CHATAWAY: I understand that many provinces in Canada - please correct me or give me more information if you possibly could. Our debt, compared to our GDP, we are about 46 per cent; we are the highest in Canada. What's the average across Canada, their debt compared to their GDP?

MR. SALMON: Unless Mr. Carter can dig it out, I don't have that information off the top of my head. Certainly, if we haven't got it here, we can provide it to you.

[Page 30]

[9:45 a.m.]

MR. CARTER: I think that information is included in the document, A Balanced Approach to Surplus and Debt Management, that the government released a few weeks ago. We are 46 per cent and the average is about 26 per cent, the means. Manitoba and Saskatchewan are in the middle at about 26 per cent, followed by P.E.I. at 30 per cent and New Brunswick at 31 per cent, Newfoundland at 43 per cent and Quebec at 44 per cent, and we're 46 per cent. So that's the information that the government has released. We haven't audited that, but we have no reason to believe that it's materially incorrect.

MR. CHAIRMAN: Thank you, Mr. Chataway. Looking at the time constraints we have with a few items of business, I would call upon Mr. Salmon or members of his staff to make some concluding comments at this time, if you would.

MR. SALMON: We've appreciated the opportunity to be with you at this session and the previous one, and hope that we've been able to answer your questions. We've certainly tried to the best of our ability to provide you with whatever information you've asked us for. Thank you.

MR. CHAIRMAN: Well, thank you, the pleasure is ours and on behalf of the committee, I would like to thank you personally and the members of your staff for the professional way that you conduct yourselves and I look forward to working with you in the future as elected officials in the province. You can remain at your place because I would like to turn right to these matters, if I could.

Some points of information that should be forthcoming from Mora, who has received the information, the Department of Health has brought back to us information that we have requested and it will be distributed within the next couple of days, hopefully, right, Mora? We are still awaiting an updating on the conference this summer for members of Public Accounts that's scheduled for St. John's, Newfoundland, August 25th or thereabouts. The issue was whether we would have three representatives or two, and that's a budgetary decision. We will inform the committee as soon as possible when that is forthcoming.

More importantly, we would like to take a few moments at the next meeting, if we could, and if respective caucuses could bring forward their wishes to me, on an informal basis would be acceptable. Our next session is next Wednesday when we have the Water Task Force in and we are looking to further witnesses or suggestions of further witnesses, or what is the wish of each caucus with regard to the activities of Public Accounts after next Wednesday? I would recognize, on the latter topic I assume, Mr. DeWolfe.

[Page 31]

MR. DEWOLFE: Mr. Chairman, I know it would be the wish of our caucus, after the exhausting session that we've gone through this past couple of months, that we have an opportunity to spend a little more time in our constituency and perhaps we could consider any future agenda items to be dealt with in the fall session.

MR. CHAIRMAN: I would recognize the honourable member for Cape Breton West, on this topic I assume.

MR. MACKINNON: Yes, Mr. Chairman, actually, we haven't even gone two months, so I guess maybe being accountable is stressful for some people. We've been missing a lot of Public Accounts meetings as of late and we seem to be setting a very dangerous trend here. We're having less and less meetings. I think we're missing a lot of opportunity to deal with some very vital issues, certainly ones that have been addressed in the Auditor General's Report. I agree with the usual summer recess and so on, but to start shutting down the Public Accounts Committee in the third week of May I think is absolutely unacceptable. I think each caucus should, at the end, submit another list of additional witnesses for the end of next session and have them circulated prior to so each caucus can review and put some additional names up.

MR. CHAIRMAN: Not to cut you off, Ms. Stevens has a list of potential witnesses

and she's quite prepared to begin to make the contacts, but you have be aware of course that we can't wait until next Wednesday to do that. We have to make sure that the schedule will go ahead. Are there further comments on this topic? I recognize the honourable member for Halifax Fairview.

MR. STEELE: Mr. Chairman, I'm taken aback at the suggestion that we should just call a recess in the meetings of the Public Accounts Committee until next fall. This is a very important committee. There's lots of work to do. The NDP caucus has a long list of topics we would like to cover and I know the Liberal caucus does as well. As for the session being exhausting, I would have hardly thought it would be that exhausting for backbenchers on the government side. But, nevertheless, that's what we were elected to do. We were elected to sit in the Legislature, we were elected to sit on this committee, as well as doing our constituency work.

There are 31 members on the government side and I would think that if some of those members want to go back to their constituencies, fine, they can find substitutes. From among the 11 NDP caucus members, I know we will have no trouble filling these seats and we're prepared to sit for as long as we need to to do the job that we were elected to do. So I will be circulating another list in advance of next week's meeting in the full expectation that this committee will be meeting throughout the summer and into the fall, and not calling a break until the fall.

[Page 32]

MR. CHAIRMAN: Thank you. Are there other comments on this topic? It is my understanding that we are looking forward to receiving direction from the committee through me and then I can bring it to Ms. Stevens' attention so that she can set up, if it's the wish of the committee, further witnesses.

The honourable member for Lunenburg West.

MR. DOWNE: Mr. Chairman, I concur with my colleagues here. I think the message has been clear that there are a number of areas on the agenda that we have yet to explore and others that we want to add. I believe that the normal time for recess is somewhere around June or July. Maybe our secretary can inform the committee when the normal recess period has been taken in the past as being the benchmark. But taking an early recess to me flies in the face of the opportunities that we all have to explore issues of concern.

MR. CHAIRMAN: The honourable member for Sackville-Beaver Bank.

MR. BARRY BARNET: Mr. Chairman, as long as I've been on this committee, this has been sort of a perennial debate, whether or not we adjourn in May or June or whatever. As I understand it, there's been a lot of discussion about this. In fact, there is no normal practice with respect to this committee. In some cases the committee has met in extended times, some they haven't. If you look back over the record, it's basically at the direction of the committee itself.

In addition to that, we've also talked about how other jurisdictions and their Public Accounts Committees work. Often what they do is they mirror their Public Accounts Committees around the sessions of the Legislature , they only meet during those sessions. We certainly don't want to do that. We believe that it's important to bring some of these issues to light and to examine the accounts of the Province of Nova Scotia. But at the same time, I will say that we are almost as repetitive here in the Public Accounts Committee as we are in the Legislature of the House and that means that we're dealing with the same things over and over again.

MR. CHAIRMAN: Excuse me, I don't mean to cut you off. I know we have commitments at 10:00 a.m. and I would like to bring the matter to some head, just basically where we're going here. I'm aware of the fact, based upon my experience, that we have sat through to mid-June. In fact, there have been circumstances in the past, Ms. Stevens has informed me, that this committee has sat in the summer. Now, I need some direction from the committee and I'm going to recognize Mr. DeWolfe.

MR. DEWOLFE: Mr. Chairman, this committee is all about compromise and coming to some sort of a consensus. We're willing to be a bit flexible on that and perhaps in doing so we could look at perhaps an agenda item for the week after next and perhaps next week

[Page 33]

we can come with future agenda items to discuss. Through you, Mr. Chairman, to Ms. Stevens, what do you have on the books right now currently that we could look at?

MR. CHAIRMAN: Mora can answer for herself, but having read her lips and listened to what she said, we've got lots of stuff. However, Mora, do you have something to add?

MS. MORA STEVENS (Legislative Committee Coordinator): We have a number of items that had been approved at our last agenda-setting session, everywhere from fishing rights, Pharmacare, the new energy department of the Petroleum Directorate. So there are lots of things, and tentative contacts have been made. It's just a matter of confirming the bookings, but it's when the recess is going to take place. It's just a matter of being able to schedule our research and things like that. That's all we're looking for, is just some kind of date because I can book right through, it's just a matter of when the committee determines that they would like to recess for the summer.

MR. CHAIRMAN: Thank you for that direction. Mr. DeWolfe.

MR. DEWOLFE: Mr. Chairman, I'm just looking at the calendar here. May 22nd is next week, the following is May 29th and then we're into June. I would suggest that we have Ms. Stevens try to book someone for May 29th and then at our next meeting we also have some agenda items that we could put forward from each caucus for further discussion and we will make a decision on that date where we go from there.

MR. CHAIRMAN: To expedite matters on that, I was wondering if perhaps I could have the list in advance of the meeting and have them circulated so that we could look at prospective witnesses. Is that agreed? It is agreed, fine.

Are we prepared for a motion of adjournment? I'm sorry, I apologize, Mr. Hurlburt, the member for Yarmouth.

MR. RICHARD HURLBURT: Mr. Chairman, I would like to have some verification on this conference that the committee is going to. Who is going to it and are there rules and regulations, procedures here of this committee of who goes and who does not go?

MR. CHAIRMAN: Those are the questions that we've asked and the person with the expertise is Ms. Stevens. So, Mora, if you could respond to Mr. Hurlburt, I would appreciate it.

MS. STEVENS: Every year there is the Canadian Council of Public Accounts Committees Conference. Traditionally the invitation is for the chairman, the vice-chairman and the clerk because there's a Clerks Conference at that time. We have sent anywhere from the chairman to the vice-chairman to three members. We've asked - it was at one of the budgeting meetings - to actually have it built into our budget for the chairman, the vice-

[Page 34]

chairman and the clerk as well as a member of the Third Party. Now, what happens is if the chairman cannot go, he would pass his invitation on to another member of his caucus. If the vice-chairman cannot go, then another member of that caucus would go, and the Third Party and so on.

So it has been the tradition to have the Parties represented. We held the conference here in 2000 and, of course, all of our Public Accounts Committee members went. So it's just a matter of getting the actual invitation now. We know the dates are about August 25th, but actually getting the paperwork and finding out, then it goes to the committee members and it's determined within their own caucuses who they would like to send, but again it is for the chairman, vice-chairman and a Third Party member.

MR. HURLBURT: So it's not up to the caucuses, it's up to the chairman and the vice-chairman, is that what you're telling me here?

MS. STEVENS: No, the invitation is for the chairman and the vice-chairman, but if they don't want to go, you know, it's a caucus decision within the members of the committee I would think.

MR. CHAIRMAN: Mr. Hurlburt, before we continue I would like to recognize Mr. Salmon on this topic.

MR. SALMON: I just would like to add for clarification that this conference is held jointly with a conference of the Canadian Council of Legislative Auditors. We have a joint session of the two groups together and then separate meetings. All of the social activities are joint. It is an excellent opportunity for MLAs to meet among themselves across the country as well as with the legislative auditors. Membership is not limited. As many as would like to go can go. It's the cost that's involved. It rotates from capital city to capital city among 12 really because the Northwest Territories, we were up there in 1998 and we hosted it here in Halifax in 2000.

[10:00 a.m.]

MR. HURLBURT: Mr. Chairman, why I brought the topic up is I just do not feel that it's fair to all committee members if the chairman and the vice-chairman are the only members who go to these conventions, that there should be a draw or some mechanism put in place so that every member of the committee has an opportunity to go to these conventions. How can you learn if you do not get a chance to go to the conventions and see what other provinces and territories are doing in our great country?

MR. CHAIRMAN: Point made. Mr. MacKinnon, do you have something to add to this conversation, because we're beyond the time.

[Page 35]

MR. MACKINNON: Yes, Mr. Chairman. Ultimately it's the decision of the committee who we send, but historically it's always been the chairman and the vice-chairman. That's because the vice-chairman always represented the Official Opposition. There are instances where members from the Third Party have been invited, and more than one member from the government caucus or even the Opposition. It's ultimately a decision of the committee, with the approbation of, in this case, the Speaker's Office, because the Speaker has to approve the funding. It's something I would recommend each caucus have a discussion on, and then we could come back and fine-tune it.

MR. CHAIRMAN: Mr. Hurlburt, we can, of course, bring this up at a further time, when we get more details from the Speaker's Office. I would like to have a motion for adjournment, if that's possible at this stage.

MR. MACKINNON: I so move, Mr. Chairman.

MR. CHAIRMAN: We stand adjourned. Thank you, again, Mr. Salmon and staff.

[The committee adjourned at 10:02 a.m.]