HANSARD

NOVA SCOTIA HOUSE OF ASSEMBLY

COMMITTEE

ON

PUBLIC ACCOUNTS

Wednesday, October 13, 2010

LEGISLATIVE CHAMBER

Department of Finance

Printed and Published by Nova Scotia Hansard Reporting Services

PUBLIC ACCOUNTS COMMITTEE

Ms. Diana Whalen (Chairman)

Mr. Leonard Preyra (Vice-Chairman)

Mr. Clarrie MacKinnon

Ms. Becky Kent

Mr. Mat Whynott

Mr. Howard Epstein

Hon. Keith Colwell

Hon. Cecil Clarke

Mr. Chuck Porter

[Mr. Jim Morton replaced Ms. Becky Kent]

[Mr. Leo Glavine replaced Hon. Keith Colwell]

[Mr. Allan MacMaster replaced Hon. Cecil Clarke]

WITNESSES

Department of Finance

Mr. Byron Rafuse, Associate Deputy Minister

Mr. Robert Bourgeois, Financial Accountant

In Attendance:

Mrs. Darlene Henry

Legislative Committee Clerk

Ms. Ann MacDonald

Assistant Auditor General

Mr. Gordon Hebb

Chief Legislative Counsel

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HALIFAX, WEDNESDAY, OCTOBER 13, 2010

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIRMAN

Ms. Diana Whalen

VICE-CHAIRMAN

Mr. Leonard Preyra

MADAM CHAIRMAN: I'd like to welcome everybody today to our meeting of the Public Accounts Committee. This morning's meeting is a continuation of last week where we began with representatives from the Department of Finance and had an in camera session where we could talk about the actual structure of the Public Accounts and how they're put together essentially. This week again we're going to continue that and have actual questions based on the Public Accounts from last year. Before we begin our meeting, I'd like to begin with an introduction of members.

[The committee members and witnesses introduced themselves.]

MADAM CHAIRMAN: Thank you. As is our custom we'd like to begin with a few introductory comments from our witnesses today who are here with the Department of Finance. Perhaps you could give us just a little recap of last week and where we're at before the questioning begins. Mr. Rafuse.

MR. BYRON RAFUSE: Thank you, Madam Chairman and good morning to everybody. As you'll recall, last week we went through what I call a workshop format about the Public Accounts and what is included in them. We primarily focused on Volume 1, the statements and section on financial discussion. There are two other volumes with the Public Accounts, Volume 2 which has the audited statements of every agency that we consolidate. We also talked about the consolidation process and how we determine what entities are controlled from an accounting perspective, why we consolidate them and the process we use to consolidate.

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We also talked briefly about Volume 3, the document that some people refer to as the Supplement to the Public Accounts and it lists the individual payments made to individuals by department over certain thresholds. That is a requirement under the Finance Act that we produce payments coming out of the consolidated fund. Reference set Volume 3 is an unaudited document, but it does have tie-ins back into our audited statements.

As well in Volume 1, we talked extensively about what's included in the financial discussion portion of it which is the first section of the book. We did give everybody the handout we provided last week which lists the primary sections of Volume 1, the first section on the financial statement discussion side, it starts on Page 9. We got into how it explains certain highlights of the consolidated fund and some variance analysis from the original estimate. First of all, it lists some things on the consolidated financial statement format and then it talks about the consolidated fund format and why we have a difference there. The consolidated fund being the format that you're more accustomed to, that is in the format of the Estimates Book and why there needs to be a difference in those two formats, the primary purpose is for appropriation purposes or giving a government authority to spend, where the consolidated statements show the net effects of all the entities that we consolidate.

We talked a bit about how, when there are inter-family transactions, or transactions between the consolidated statements how they need to be eliminated upon consolidation. An example we used was when the Department of Health gives money to a DHA, that's not an expense from a consolidated perspective, it's an inter-family transaction and we need to eliminate those things. The consolidated statements generally are focused on revenues that come in from outside the government reporting entities and expenses when money goes out, generally speaking.

Then we went into the actual statements that are required under PSAB. There are four statements that were required under our accounting rules. I gave a general explanation around what PSAB is; it's an independent body that sets accounting standards for public sector entities in Canada. Governments do not set their own accounting policies, they do follow a robust set of accounting standards set by this independent group. It's different than private sector accounting standards and there are good reasons why that is the case. The statements that we produce are our financial position which is more commonly known as a balance sheet; changes in statements of operation, what people refer to as an income statement; a cash flow statement, and a net debt statement and the notes accompanying.

That is just a general recap of what we went through. I would be receptive to any questions or follow-up questions you have from that session, or go through that again - what we did last week - if you prefer, or just take general questions about aspects that are included in the Public Accounts.

MADAM CHAIRMAN: Thank you, Mr. Rafuse. I do think it's worth noting that this is the first time our Public Accounts Committee has actually invited the controller and staff

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to explain the Public Accounts to us in more detail, so it is an opportunity for us to have this meeting today. I'd like to begin with our usual format which is 20 minutes for each caucus, beginning with Mr. Glavine for the Liberal Party.

MR. LEO GLAVINE: Thank you to Mr. Rafuse and Mr. Bourgeois for coming last week and taking us through some of the process that we don't hear, or I haven't heard much about as the Finance Critic, so I was very pleased with the session last week.

That being said, I was just wanting first to go back and take a little bit of a background look at something now which we hear so much about, and that is GAAP accounting. That has become one of the acronyms which is very much embedded in our thinking. I was wondering, when did the province switch over to GAAP accounting?

MR. RAFUSE: The province started the process in 1999, in earnest, when we took on the process of consolidating all our major entities. Prior to that, health authorities or what they referred to at the time - I don't know what they referred them to before the health authorities, but they were other entities - weren't consolidated on the statement, so that was the first kind of process in 1999. Over the next several years we moved in incremental steps - we took on TCA accounting in the early 2000s and finally, the last of it would have been the effects of pension accounting or post-retirement benefits requirements. I think that all finished in about 2003 and since that time, our statements have been prepared on a GAAP compliant basis from about that period of time.

MR. GLAVINE: So there was that incremental approach, as you've outlined here. So today then we can say we're at total compliance when it comes to GAAP implementation?

MR. RAFUSE: Yes, you can say that. The audit opinion says that they do present fairly the financial results of the province, in accordance to Generally Accepted Accounting Principles.

MR. GLAVINE: Would there be any exceptions in terms of ministers or senior bureaucrats, in terms of anything that's away from the normal GAAP processing?

MR. RAFUSE: There are instances which I would deem to be immaterial, for which the Auditor General and ourselves may not be fully on the same page, but it's not such that we would be considered to be noncompliant. We do have ongoing deliberations about certain organizations - should we treat them as a partnership or not? - and the like. I would say that we consider ourselves fully GAAP compliant.

MR. GLAVINE: Due to the accounting error, I was wondering if it was okay here to go back and take a look at some of those correct numbers? What was the increase in net direct debt over last year, 2009?

[Page 4]

MR. RAFUSE: The error that occurred totalled $87.7 million, so that amount actually flows through on a lot of statements, including the net direct debt. The number that is published here should be increased by $87.7 million.

MR. GLAVINE: So accumulated deficits then as well?

MR. RAFUSE: Yes, it impacts the accumulated deficits, obviously, the deficit number itself. It also impacts some receivable numbers because that was recorded as a receivable from the federal government, and likewise some total revenue numbers.

MR. GLAVINE: One of the areas that I must say, as an MLA explaining provincial debt to people, in fact, $12 billion or $13 billion doesn't often seem to resonate as much as something like the net direct debt per capita; that is a number that many people can indeed associate with. What was the variance over last year, 2009, in net direct debt per capita?

MR. RAFUSE: You mean from a result of the changes in the error?

MR. GLAVINE: Yes.

MR. RAFUSE: On Page 17 of the Public Accounts, we do reference the net direct debt per capita, that number there, this is before the error changed. I haven't got that calculation in front of me, but if you think about it on the size of the debt that would have a kind of very immaterial impact on the net direct debt.

MR. GLAVINE: Net direct debt as a percentage then of gross domestic product, would you have that figure now?

MR. RAFUSE: That number is at 38 per cent in the book, and that has not materially changed as well.

MR. GLAVINE: On Page 17, it is stated that the increase in GDP was mostly offset by the increase in net direct debt. What is the significance of the measure of the net direct debt as a percentage of GDP?

MR. RAFUSE: Net direct debt is a measurement that has been devised by PSAB, it's a measure of - really it shows how much of the current liabilities, the current debt of the province needs to be recouped from future earnings.

As a percentage of GDP, it is shown there for the purposes to give you some context. Some governments use that for their marker, for their measure whether or not they are doing well on their net direct debt or number, as opposed to an absolute number.

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MR. GLAVINE: Why is nominal GDP used, because we have a GDP at market prices, as opposed to real or GDP chained to like a 2002 deficit?

[9:15 a.m.]

MR. RAFUSE: Nominal GDP was determined by our economics group as the most relevant measure to use in relation to our debt, so we use that figure from them. These figures come from our economics and statistical group.

MR. GLAVINE: What is the figure for the net direct debt expressed as a percentage of real GDP?

MR. RAFUSE: Of real GDP, I'll have to get back to you because we wouldn't produce that in this book but we could get that number for you.

MR. GLAVINE: Okay. On Page 18, it highlights additional lending by the Industrial Expansion Fund, among others, increase the entry under loans receivable by a combined $157 million. What portion of the $157 million is due to additional lending by the IEF?

MR. RAFUSE: The IEF lending is listed separately so you can see all the lending that was created by the IEF further on in the book, so you can see the portion of that there.

MR. GLAVINE: What is meant by additional lending? Would the $75 million increase in lending capacity in the IEF, which happened late in the fiscal year, March 2^nd - IEF was increased by $75 million one day after a loan of $75 million to Northern Pulp for a land buy. Would this be included in this term or is this money that went out by way of loans over and above what was expected for this year?

MR. RAFUSE: This would have been the total amount of loans given this year, not over and above what would have been expected.

MR. GLAVINE: Okay, total amount. Does the Finance Department make any assumptions about non-repayment on loans receivable?

MR. RAFUSE: There are two looks about our receivables. The actual management in charge of a particular fund, I need to make a determination about whether or not that loan can be serviced. In the IEF, in this case it would be the management team in the economic development group. We also look at, from a consolidated perspective, when we look at it whether or not their assumptions had been reasonable, as their auditors and our auditors would look about whether or not an appropriate adjustment has been made for all our receivables or loans.

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MR. GLAVINE: What is the relationship of this entry to loans receivable expansions, which appears on Page 19 under liabilities?

MR. RAFUSE: Sorry, on Page 19?

MR. GLAVINE: Yes, the relationship of that entry to loans receivable expansions, which appears on Page 19, liabilities.

MR. RAFUSE: Liabilities expansions.

MR. GLAVINE: Yes.

MR. RAFUSE: I'm not seeing the term expansion, that's what is throwing me off, sorry, sir.

MR. GLAVINE: I have missed a page. It is highlighted in the commentary at the top, loans receivable expansions in a year.

MR. RAFUSE: So that would have been the increase in loans receivables, yes, so the difference would have been recorded as an increase in the liabilities.

MR. GLAVINE: So it is an increase.

MR. RAFUSE: Yes, it is.

MR. GLAVINE: What exactly are these, loans receivable expansions? You could have some, I guess, explanation of that for the committee.

MR. RAFUSE: Well we have an on-lending program through various programs, the IEF being one, the Housing Development Corporation, the Municipal Finance Corporation, those would all be loans receivable. We would loan to those organizations that would on-loan to others, so that would be part of that. We wouldn't have any direct lending, no.

MR. GLAVINE: So does that involve a significant number of loans? What amounts are we talking about?

MR. RAFUSE: Yes, it is significant. The Municipal Finance Corporation - I think, on average there are over $100 million they loan to municipalities in a given year - $150 million and the like - and the IEF would be a number as well. I think later on, or there is a schedule of all the outstanding loans that these organizations would have.

MR. GLAVINE: On Page 23, in terms of debt repayment, what do we actually mean by debt repayment? According to figures in 2010, $1.9 billion of debt was issued and it was

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$752 million in debt repayment. However, the net direct debt of the province rose by $788 million, as corrected. During this same time period, due to TCA spending, an operational deficit was posted by the NDP of $329.6 million. So when we say debt repayment, what are we actually counting?

MR. RAFUSE: As we would have made loans previously that came to maturity during the fiscal year 2009-10 we would have made a debt repayment. Sometimes they are repaid through sinking funds and sometimes they are refinanced and repaid through additional debt issuance.

MR. GLAVINE: So it doesn't seem that debt repayment then comes close to meaning the same thing as paying down the debt.

MR. RAFUSE: No, it does not.

MR. GLAVINE: Is there anything in these documents which outlines any paying down of debt?

MR. RAFUSE: Well net direct debt is - the figure is supposed to be more encompassing than just the matured debt or the amount you have borrowed. It's a measure of all your liabilities, so paying down or reducing your net direct debt requires that your surplus is greater than your net investment in TCAs; basically the best way of doing it. So you have to have a surplus larger than that to be able to say that your net direct debt has decreased. It's not a measure of what you've borrowed and what you've paid back, the debt measure is something different than that.

MR. GLAVINE: In terms of the information given under revenues of the consolidated fund, can you correct and clarify where the changes due to the corrected $87.7 million would appear or is it kind of a blanket number or will it actually appear throughout the document?

MR. RAFUSE: If you turn to Page 25 which shows the sources of revenue for the consolidated fund, you'll see the $87 million appears in two areas. Personal income tax would be the $73.9 million out of $74 million and the other amount would be under our prior year adjustments.

MR. GLAVINE: Looking at variance analyses now, on Page 26, the very next page, under personal income tax analysis on Page 26 it states, "Personal Income Tax (PIT) revenue was $120.6 million or 6.8 per cent higher than estimate . . . The increase was driven by stronger growth in salaries and wages as a result of labour market conditions improving following the global recession."

In fact, personal income tax was only about $33 million, $120.6 million minus $87.7 million, $32.9 million over estimate and it was a decrease from the previous year. Just how

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accurate is that analysis, in light of revenue being less than 30 per cent of what was originally stated?

MR. RAFUSE: Just for clarification, it would be $120.6 million minus the $87 million as opposed to the full amount; the $13 million would have been a prior year. It remains to be higher than the estimate that changed in the error, as about a 3 per cent change in it. So it is higher than estimate but still lower than the previous year, yes.

MR. GLAVINE: How robust do you feel about the assertion that market conditions improved and actually drove an increase in salaries and wages?

MR. RAFUSE: This comparison here on the variance analysis is compared to the assumptions made in the estimate, so the revenues were larger than the estimate and therefore those assumptions are valid. Further on in the book you'll see where it does a variance analysis from the previous year, on Page 29, and there is a slightly different perspective on that.

MR. GLAVINE: How is personal income tax and, indeed, other items in the Public Accounts documents analyzed?

MR. RAFUSE: Well personal income tax and corporate tax is quite complicated. When we close our financial statements for any given year, the year in which we were closing this case was 2009-10, we are still trying to determine the actual amounts for previous years. In fact, we get updated amounts from the federal government for five years previous. Therefore, it is based on the best information we have at the time, the best information provided to us by the federal government that collects this on our behalf.

We do make adjustments based on the information given to us by the federal government. We have what we refer to internally as our revenue model, where we believe we have better intelligence about the effects on Nova Scotia, more local intelligence, and we will adjust it accordingly, but it is the best estimate at the time. We do record it as our actuals because we are required to do so. That's why you'll see, in both sources of revenue, something referred to as prior year adjustments. Those are the adjustments that we receive in the current year that are applicable to previous years because we have better information from them. It is a complicated business.

MR. GLAVINE: That leads me to this area which seems a little bit confounding and that is, you state that labour market conditions push growth in salaries and wages, or put differently, to what extent was this growth actually stronger, given that you now know that there was, in fact, a decrease in revenue on a year over year basis and only showed minimal improvement over the estimated figure. Yet job figures of the unemployment rate in Nova Scotia hover between 9 per and 10 per cent for quite some time.

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This doesn't seem like it would indicate strong growth in the labour market. I'm just wanting a comment on that.

MR. RAFUSE: These numbers are based on the size of the pool of income. It doesn't talk necessarily so much about income level or employment levels as about the overall size of the pool of what people have earned. So the two can be . . .

MR. GLAVINE: There can be a discrepancy.

MR. RAFUSE: Yes.

MR. GLAVINE: I'm not sure, Madam Chairman, how much time? Just two minutes, so I'll start with tobacco tax and HST. Revenues under tobacco tax were 17.8 per cent higher than estimate. Are there factors and assumptions built into an estimate model? That's something I'd like to know.

MR. RAFUSE: Yes, the estimates for tobacco revenue are supplied to us through Service Nova Scotia and Municipal Relations. They do have an estimation based on the consumption levels. They do have it down to that kind of level where they do projections based on consumption levels and the tax rate.

MR. GLAVINE: So what I was really getting at is this, was the price elasticity of tobacco in your model kind of over-estimated perhaps, in your opinion?

MR. RAFUSE: I think they are still analyzing as to why the difference would be but there is, as you know, an impact associated with - legal tax sales have to be factored into this.

MR. GLAVINE: And how is estimate modelling for HST changes similar or different to that of the tobacco tax?

MR. RAFUSE: Different models - the HST model looks at general consumption patterns, as opposed to a specific one for a specific product, so that would be the difference.

MR. GLAVINE: So what factors then, and assumptions, or what would be a couple of examples, then, of assumptions taken into account when modelling for the HST increase?

MR. RAFUSE: It would be general purchasing power of individuals, as opposed to, say, a habit. That would be the major factor, the major difference in the two.

MR. GLAVINE: I'll stop there, Madam Chairman, my time is up, because I had a different topic to start on.

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MADAM CHAIRMAN: That's a good spot. It's 9:27 a.m., so we'll turn the floor over to Mr. MacMaster for the Progressive Conservatives.

MR. ALLAN MACMASTER: Thank you, Madam Chairman. I would like to thank the Department of Finance for making themselves available to answer some questions today. All my questions are related to the budget and the historical budgets of the province. One of the first questions I'll ask just to establish, there has been some question about whether the budget has been balanced in the past. We've had an Auditor General's Report confirm that the 2009 budget was going to be balanced and further support from the firm of Deloitte. Would you say that the budget was balanced in 2009?

MR. RAFUSE: The actual result in 2009?

MR. MACMASTER: This would be the budget before this actual budget that we're looking at today.

MR. RAFUSE: The results from 2009 show a surplus of approximately $26 million, yes.

MR. MACMASTER: If we look over the past year, could you quantify the amount of debt that has been added through the past year of activity to the province's books?

MR. RAFUSE: Can I just ask you to specify which debt measure are you looking at, net debt or a matured debt, sorry?

MR. MACMASTER: I'd be looking at big ticket items that would account for - I could think of one, the operating deficit of the budget of the past year. I can think of other capital expenditures that have added to the gross debt of the province.

MR. RAFUSE: For the past year, 2010, the deficit of the province is, as we stated, $329 million, so accumulated deficits would have gone up by that amount. Net debt figure added by $87 million is certainly at $13.1 billion, yes, so both of those numbers rose in 2009-10.

[9:30 a.m.]

MR. MACMASTER: The $13.1 billion, that is up from how much last year?

MR. RAFUSE: Let me get my debt figure here, $12.3 billion.

MR. MACMASTER: So about $1 billion?

MR. RAFUSE. Yes.

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MR. MACMASTER: And if we add that with the deficit we'd be looking at about $1.2, $1.3 . . .

MR. RAFUSE: That would be included in the effects of the deficit, yes.

MR. MAC MASTER: So it's about $1 billion. Could you tell us a little bit about how long it will take the province to pay off that added billion dollars of debt, if we look at it as the $1 billion?

MR. RAFUSE: To reduce your net debt your surplus has to be greater than the investments you've made and non-financial assets, which in most places would be your TCA.

MR. MACMASTER: Yes. So right now and throughout the history of the province, since we started running deficit budgets years ago, the province puts down about $1 billion a year on interest payments on the debt?

MR. RAFUSE: Approximately, yes.

MR. MACMASTER: Which I think would be the fourth-largest expenditure of government. And it's a fair response because it is hard to answer that question because we don't know when the province can start running surpluses again to start paying down on the debt, but we do know that over the past year there has been $1 billion added to the debt. Would you say that is correct?

MR. RAFUSE: The net direct debt figure has the changes in it of about that approximate amount, yes.

MR. MACMASTER: Not too far back we had a government that put down royalties that were achieved through the Atlantic Accord on the debt and I believe it was to the tune of about $830 million and I think that was in 2008?

MR. RAFUSE: It began previous to that, but the Accord money, the $830 million by the Finance Act was required to go to the debt, yes.

MR. MACMASTER: And that was a lump sum that Nova Scotia received from negotiations with the federal government in recognition that there were past royalties that had accrued but were never delivered to the province. Would that be correct?

MR. RAFUSE: Yes and the $830 million, although received in a lump sum, was recognized over the life of the agreement not in the one fiscal year.

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MR. MACMASTER: Yes. So if we look over the past year, the $1 billion of debt that has been added has really eliminated the benefit of that lump-sum payment on our debt, hasn't it?

MR. RAFUSE: Those amounts have accrued over the life of that agreement, the debt number has changed last year as we indicated.

MR. MACMASTER: Yes, and I respect the point you're making because the $830 million, while it came in physically in one year, it actually accrued over many years. I guess the point I'm trying to make is that the decision was made in prudence to take that lump sum in one year and put it down to pay off the debt. Would that be correct?

MR. RAFUSE: It was used over the life of the agreement to pay down the debt. It decreased borrowing costs in the particular year we received the money, yes.

MR. MACMASTER: Yes, okay. So we've seen quite a bit of debt added to the province over the past year. Is there anything - and I appreciate trying to keep the questions focused on what we're discussing today, but I do believe it's all related - that the department has seen in the economy over the past year that would cause such a swell in debt for our province?

MR. RAFUSE: The debt increase is a by-product of two aspects, the deficit and the investment in TCA, those are the two products that cause the debt to go up.

MR. MACMASTER: And the deficit was $330 million and some of the other figures that would make up the rest of the $1 billion would be from increased expenditure on roads, that type of thing, capital investment?

MR. RAFUSE: Yes.

MR. MACMASTER: And I recognize there's some value to that investment over time, it's not just here and gone in one year. As far as our economy goes, there's nothing that's significant that has happened in Nova Scotia that would require some kind of exceptional case for spending more money?

MR. RAFUSE: No, I'm not aware of that.

MR. MACMASTER: Thank you. I'm just trying to sum up for the benefit of anybody who may be watching today. I've tried to make the points that the budgets were balanced up until the past year. The government has chosen to add $1 billion to our debt and we don't know how long it is going to take to pay that off, but it's a significant amount of money and there have been no significant events in our economy in Nova Scotia that would require such a swell in our debt and such a strain on future Nova Scotians to pay this debt.

[Page 13]

If we might look at some of the revenue side of the ledger, over the past year a significant source of revenue comes from the federal government, it's about 40 per cent. Would I be correct in saying, from some of my investigation I've discovered that the federal government has actually protected the province to some degree by ensuring that the amounts that we receive from equalization are no lower than they have been in the previous year? Would that be true? If you'd like to offer any commentary, it would be appreciated.

MR. RAFUSE: The amounts we receive in equalizations are set in agreement and to the life of the agreement are not subject to fluctuation.

MR. MACMASTER: I do know that in the case of Health and Social Transfers, which are a significant component, they're actually legislated to grow by 6 per cent for Health and 3 per cent for Social Transfers. I guess the point I'm trying to make is that the amounts we're getting from the federal government have been protected for the province and that's a source of stability for our budget. Has the department any analysis on the increase of taxes? We've seen the increase in the HST this past year be put into legislation. Has the department any information that might indicate that would be harmful for our economy and harmful with respect to - if we look at the past year - the state of the province's finances? How will that affect the future?

MR. RAFUSE: The future impact, I can't speak to. The amount of revenue associated with a change in income tax was built into the revenue model and associated with the 2010-11 estimate and accordingly the amount that is expected is incorporated there. These, obviously, would not be impacted by the numbers we're talking about today.

MR. MACMASTER: Okay. And that change will mean about an extra $225 million in revenue for the province?

MR. RAFUSE: I don't have that in front of me, but that sounds it.

MR. MACMASTER: Okay. One of the things when I look at these figures that concerns me, and I trust the figures are all accurate, is the future of our province if we have - and I would appreciate it if you had any commentary - a declining population, which we do have now. We have flat GDP growth, which a lot of it is related to the fact that our population is not growing; we have high tax rates, we have some of the highest taxes in North America; and we have a smaller private sector relative to other provinces. If we don't see a lot of growth in our economy in the next few years, based on what we've seen last year, is there any hope that there will be any changes in our economy that might result in increased government revenue that would come from sources outside of increasing the tax for Nova Scotians?

[Page 14]

MR. RAFUSE: I don't think it would be fair for me to comment on a projection about where that would head, I could speak to what it was in the past from an actual perspective.

MR. MACMASTER: Could you provide some commentary in the past from your experience on that?

MR. RAFUSE: The revenue projections have been fairly close to what we predicted they would be. As you can see in the variance analysis, although the numbers can vary, they do for the circumstances, the predicted value of those are fairly consistent.

MR. MACMASTER: So over the past number of years the trend has probably been that the province's revenue, we've not seen periods where it has spiked because of a significant, economic event, things have been pretty stable, but kind of flat growth. Would you say that would be accurate?

MR. RAFUSE: I wouldn't say flat growth. The models we have to predict revenues have good, predictive values and they generally tend to be where we predicted them to be.

MR. MACMASTER: Yes and I've actually noticed, and it would be a credit to the department, that your economic forecasts are often more accurate than anybody's, so I give you credit for that. If we look back and I know we're looking at this past year, would you say one of the things that governments have tried to do in the past to balance budgets would be to look at both sides of the ledger to see how much money is coming in and how much is going out, and try to, when they've attempted to balance budgets, they've looked at both sides and tried to make changes on each side of the ledger to come to a balanced budget? I know over the past number of years, in 2002-03, Nova Scotia had its first balanced budget in 40 years. I remember at that time some comment being made that the government was trying to adjust on the expense side of the ledger to establish a balanced budget. Would you say that has been the case over the last number of years?

MR. RAFUSE: Your operating position is a by-product of a lot of moving parts, the two broad categories would be your revenues and your expenses, so yes, you have to look at both of those to achieve that objective.

MR. MACMASTER: Have there been any significant changes on the expense side in the past year, increase or decrease?

MR. RAFUSE: In 2009-10?

MR. MACMASTER: Yes.

MR. RAFUSE: The expenditure patterns are listed, as they do them from revenues, by department. I don't think the expenses, per the estimates, were lower than anticipated or

[Page 15]

lower than the original estimate, but I don't think there were any major changes, I don't think.

MR. MACMASTER: So there were no efforts to reduce the costs on the cost side that we can see from looking at the past year?

MR. RAFUSE: On Page 32 of the Public Accounts, you can see the actual results from 2009 and the actual results by 2010, by government department.

MR. MACMASTER: Madam Chairman, how much time do I have left?

MADAM CHAIRMAN: You have six minutes.

MR. MACMASTER: Thank you. If we look back - and we talked about this earlier today - at the 2009-10 debt - actually I'm going to skip that until my next round because I think it may take longer. Is there anything that you see that concerns you about the present budget as we've seen it over the past year, as we move forward into the future?

MR. RAFUSE: No, the budget is a policy document, so I'm not going to speak to a policy document.

MR. MACMASTER: I can appreciate it would be difficult for you to comment on that, but I did want to ask the question to try to raise awareness of it. What would we need to do if we wanted to move back to balanced budgets? If we look over the past year we were at about $330 million deficit. Is there anything you would see looking at what we've seen over the past year that would suggest there is an area where we could go to return to balance?

MR. RAFUSE: That would be a projection on my part as to how to do that. As I said, your operating position is a by-product of two major categories, revenues and expenses.

MR. MACMASTER: So revenues aren't going up and expenses aren't going down.

MR. RAFUSE: Those are the two major by-products of your operating surplus, those have to change.

MR. MACMASTER: And thus we're continuing to run deficits.

MR. RAFUSE: Those create your operating surplus. It is possible to reduce your net direct debt with still having an operating deficit, that is possible.

MR. MACMASTER: Yes, but likely not so in Nova Scotia.

MR. RAFUSE: That is a projection, that would be a policy projection.

[Page 16]

[9:45 a.m.]

MR. MACMASTER: Yes, okay. Have there been any - and actually, I'm kind of running out of questions here because the answers are short.

MR. RAFUSE: Sorry, I'm always short with my answers.

MR. MACMASTER: Out of respect for where you sit, it's difficult for you to answer some of these questions because I think they move almost beyond the policy into division of government and they're hard for you to answer, so I apologize if I'm putting you on the spot too much today. I guess the reason I am asking these questions is I'm trying to make points that relate to the future health of our province because from some of the things we've seen over the past year, there have been decisions made in government that are going to negatively affect the future of Nova Scotians. We've seen it with an increase in our taxes, the increased budget, the debt. The increased debt is going to mean we have a future liability that I think we've established today. We don't see anywhere in the near future where we're going to be able to pay it off so I don't think it's the right direction that we should be going in.

One of the things, and I just mentioned this, is the HST which was increased by 2 per cent. That's going to bring in extra revenue to government but it is going to come out of the pockets of Nova Scotians. Is it true that that accounted for the entire inflation increase in the province for the month of July?

MR. RAFUSE: I don't have that information in front of me. That would be current year activity and I came prepared to talk about last year's Public Accounts.

MR. MACMASTER: Okay. So some of the only economic growth we're seeing in the province driving inflation is taxes, which is kind of sad. Can you tell us a little bit about interest rates in the past number of years? We've had a period of low interest rates. What would the increase - and I think this is a figure that has been used in budgets in the past if there's a projection - if interest rates were to increase by 1 per cent, what effect would that have on the province and specifically, on the interest payments that we pay each year?

MR. RAFUSE: We do look at the impact interest rates will have on our interest rates and exposure we have. It doesn't necessarily mean that if interest rates go up that our actual costs do go up because a lot of our debt is fixed and long term. It would impact the amount which we would borrow for future borrowings. We do look at that. As we go through the book, in the debt section we do talk about our interest rate risk and exposure - I'm looking at Page 42. A pure increase in interest rate doesn't necessarily mean - because it's all around the timing of when our debt is due or when we borrow.

[Page 17]

MR. MACMASTER: I've read a figure in the past, and I can appreciate that you have varying maturities on the bonds issued by the province, but I heard a figure of about $15 million increase if there was a 1 per cent increase in rates.

MR. RAFUSE: I'd have to get back to you on that but that measure, that metric is maintained when we look at borrowing.

MR. MACMASTER: Madam Chairman, I think I will conclude with that. My time is up anyway.

MADAM CHAIRMAN: Your time is up so that's good. You had some good questions there all the same. I'm going to turn the floor over to Mr. Whynott for the NDP. There's 20 minutes for your questioning.

MR. MAT WHYNOTT: Thank you very much, Madam Chairman, and I'll be sharing my time with one of my colleagues here today. Welcome and thank you for coming. I think this topic in particular is an important one for Nova Scotians to understand where government was and where it's going.

It is interesting, even since you came last week, in our workshop session, I had the opportunity to attend three law classes at the local high school in my riding and trying to not only explain what my job as a legislator is, going through some of the interesting financial situations that the province has been in over the past number of years and again, where we're going. In fact, since then, which was last Thursday, I've had four parents - seeing them in the grocery store or what have you - whose children, Grade 11 and Grade 12 students, who have actually engaged their parents in discussion around deficits and debt. I may not be the most articulate when it comes to this but most certainly I think it's a good, positive thing to engage our young people in what this means and how it will affect them over their lifespan. That's really what government is committed to do, to ensure that we make life better for all Nova Scotians and moving this province forward is an important step.

The commitment to get the province back to balance is an important one. We saw that commitment through the Back to Balance tour last Fall, again to engage Nova Scotians to understand the complexity of the issue and how this government is going to ensure that we have a bright future for all Nova Scotians. That commitment, through the consultations, the first government in most recent memory to have done consultation like this.

We constantly heard through those, and I know in particular the two that I attended, health, education and growing the economy, I know were the top three issues that I heard. People understand the role that government can play. I know I take this philosophy that government can play a positive role in people's lives, so putting that all in perspective, we have to make sure that we're moving, we do live within our means. Government must do that.

[Page 18]

One of the things we heard, I know I heard and I think that some of my colleagues even heard, that we have to spend our money smarter. We have the money in our budgets but we have to spend it smarter. I constantly hear that on a regular basis and I talk to constituents about that. I just wanted to make those few points before asking a few questions.

I think the other interesting piece of this is I think it's a responsible thing for myself, as a legislator, to ask the question of people, okay, well if this, then how do we pay for it? Or, if this, then what - maybe we don't cover that program or specific policy initiative. That's important to ask people that because not only as a province, families also must look at their bottom line, the money coming in and the money going out. For a province to actually look at that and to ensure that we do that, it's a very responsible thing. I just wanted to make those few comments.

I guess as I mentioned before, all Nova Scotians understand why a lower deficit is a positive step forward, especially in their own budgets. I just wondered, can you explain why the deficit is lower than expected, in 2009-10?

MR. RAFUSE: The biggest factor was that the original 2009-10 budget anticipated a deficit around $592 million. In actual fact the deficit came in at the $329 million range. That's the major contributor as to why the debt is less than predicted or less than included in the original estimate. All the other things that affect that, capital spending was pretty well on target, as was projected. There are some other things that do affect that but that's the major reason right there.

MR. WHYNOTT: Okay, so would you agree that the province set a budget and we stayed within that budget?

MR. RAFUSE: The budget actually was - the targeted deficit number was actually - the actual deficit was less than targeted, so yes.

MR. WHYNOTT: And how much was that, again?

MR. RAFUSE: The original estimate for 2009-10 anticipated a deficit of about $592 million. The actual deficit was $329 million.

MR. WHYNOTT: So what is the variance there, do you know offhand?

MR. RAFUSE: It's $250 million.

MR. WHYNOTT: So, again, just going back to my comments that I made before, I mean that's a positive step forward to get our province back to balance, to ensure that we live within our means. Thank you.

[Page 19]

Can you tell us more about how revenues went up and what that means for Nova Scotians?

MR. RAFUSE: Revenues were higher than anticipated in a number of areas. If I turn back, starting on Page 25, where they are listed in a schedule of the actual revenues versus the anticipated revenues, primarily they are in areas of - personal income tax was higher than anticipated, as was tobacco income tax.

There are a number of other areas that showed some influxes up and down, including some changes from the previous years, from new information, primarily around the personal income taxes side of the house as well. All of those were greater than originally anticipated.

MR. WHYNOTT: Can you discuss that personal income tax portion a little bit and why that went up?

MR. RAFUSE: The personal income tax revenue that we record is a product of two things, it's a pool of earnings and then our proportionate share of those. The pool was larger than anticipated, our proportionate share I think was pretty well constant so the pool was larger than anticipated.

MR. WHYNOTT: Thank you. On Page 39 of the Public Accounts booklet, it says that $23.8 million of additional appropriations were approved in 2009-10. How does that compare to previous years?

MR. RAFUSE: Previous years? That is the lowest amount of additional appropriations that were approved in the last 10 years, since 1999-2000, the numbers, in fact, that I have in front of me. They were from a high of $650 million to that $23 million.

MR. WHYNOTT: So that was the lowest that it has ever been in the last 10 years?

MR. RAFUSE: Since 1999-2000.

MR. WHYNOTT: Since 1999-2000, interesting, okay. So again, we're going back to how a government can live within it means. Thank you for that answer.

Can you explain a little bit more about what an additional appropriation is and why they are needed?

MR. RAFUSE: The process is when an estimate is tabled in the House and passed, that gives the government the legislative authority to spend money, the appropriation. Through the course of the year governments may make decisions to exceed that amount or programs by just natural intake to a program or to a department may cause it to go over that amount. An additional appropriation is the aspect of the Finance Act that allows it to put in

[Page 20]

legal spending authority to spend monies. We call them additional because they were done after the original budget, as opposed to at the time. So they are increases to appropriations that were originally passed by the House.

MR. WHYNOTT: Thank you, Madam Chairman, that's my 10 minutes so I'm going to pass it over to the honourable member for Kings North.

MADAM CHAIRMAN: Mr. Morton.

MR. JIM MORTON: Thank you and I'd like to say thank you for the primer you provided us last week in the workshop. It was very helpful and I appreciated the opportunity to be part of that. I think this is an opportunity again this morning to learn more about a complex matter and I think it is also an opportunity for those people who might be watching this, Nova Scotians who are interested in how the finances of the province work to get a better impression of how their money is being used and accounted for.

I know this is important to people. I've had an opportunity to talk to Nova Scotians, particularly in the constituency that I represent, for a number of years. Certainly one of the issues that is at the top of mind for many people is a concern about how government spending works. I am quite clear that people in Nova Scotia are interested in having a system which clearly accounts for how their funding is used and certainly an interest in finding a way for us to get back to balance. The issues are complex and the numbers are large and I think maybe sometimes that makes it more difficult for people to get their heads around what this is all about. Maybe that was brought home to me again yesterday when there was an announcement by the federal government that the deficit for Canada is $55 billion, the largest in the country's history. All of that, even in recessionary times, must make it even more difficult for Canadians to be confident that we have some hope of moving in a better direction.

I'd like to ask just a few questions that have, I guess, mostly to do with process. The first one I guess maybe just comes back to those comparisons, thinking about the federal government. Can you talk a little bit about how our Public Accounts compare to processes used in other provinces?

[10:00 a.m.]

MR. RAFUSE: First of all, the underlying foundation to the Public Accounts, which is the Generally Accepted Accounting Principles, and for governments in Canada, that's the ones that are set out by the Public Sector Accounting Board, PSAB, those are the same rules that we use that every senior government in Canada uses and we use the same rules. In fact, the PSAB set of rules are the same rules that are used by all school boards across the country. They will now become the rules for all government not-for-profit organizations. In our world that would be the health authorities and the like, so they are the same underlying principles.

[Page 21]

Therefore, from that perspective they are comparable because we use the same accounting rules.

The rules are different than they are for public sector because governments are different. They are comparable from the perspective, too, that within those rules there are certain requirements preparers must do and the preparers must produce the four statements we talked about and I characterize them as an income statement, balance sheet, net debt and cash flow statement. You will see the same requirements in all senior government, they do produce the same statements and they attach the schedules and notes. They are also comparable because as issues arise, I and the people who work in the Department of Finance who are responsible for preparing these, we will call our colleagues in other provinces and say okay, we have an issue here, how are you dealing with it? Are you accounting for it from this perspective? We actually have a mechanism which allows us to do that electronically, where we can pose questions to one another as to how that is best done. So from that perspective it is comparable.

You'll see the best comparability in what we refer to as Volume 1 because that has our statements in it and also the financial discussion portion of it. The financial discussion analysis portion of it, there is guidance from PSAB as to how you should do that, so everybody is following the same guidance. It is not what I refer to as GAAP, it is something they refer to as a statement of recommended practice, so they tell us how we should do this if we choose to do that. So those types of analyses are quite comparable from province to province.

Where it gets less comparable is the nature of governments from one province to another are different. When we spoke last week about all the energies which we consolidate into our financial statements, we consolidate them because from an accounting perspective we control them, therefore, we need to include them in what is referred to as the Government Reporting Entity. What is included from province to province may and will change. I'll give you the primary example that highlights this; in the Province of Nova Scotia we don't deem to control universities from an accounting perspective so we do not consolidate universities. Other provinces, their relationship with their universities are different so their universities are included in the consolidated statements of the province and so from that perspective they are different. That takes away an element of comparability but if you think about it, the statements are supposed to represent entities which you control, then they are comparative, we just don't control our universities from an accounting perspective. That generally is how our statements will be comparable from senior government perspective from one to another.

Now that municipalities are following PSAB rules too, there is a greater level of comparability if you wanted go to - although smaller, they are comparable because the bases of accounting for senior governments and municipalities are the same as now. Previously they were not.

[Page 22]

MR. MORTON: Thank you, that was helpful. You may have been touching on this in the last part of your response, but in the glossary there is a term that is identified as Government Reporting Entity. Could you comment a little about what that is and how it works?

MR. RAFUSE: The Government Reporting Entity is all the entities which we include in the consolidated statements of the province. We do list those on Page 83 of the document where we list all the entities, big and small, that we are deemed to have control from an accounting perspective. Why it's important is that rather than just taking all the audited statements from all those entities and just sort of combining them all together, there is a process of eliminating entries between ourselves. I compared it last week, and I think that is the best way to look at it, as the consolidated statements are viewed as a family and when a parent gives money to a child, that doesn't change the wealth of the family, it doesn't create a revenue, it doesn't create an expense. We need to eliminate all those inter-family transactions when we produce our consolidated statements. The example I gave last week was when the Department of Health gives an operating grant to a district health authority, that in itself is not a revenue or an expense, those type of entries are eliminated What's important is when money comes into the family or revenues from outside of that family and when expenses occur outside, when the DHAs spend that money is what's important. So the government reporting entity tries to capture that as all the entities which are being represented in these consolidated statements.

MR. MORTON: Thank you. I think I have the chance for one other question before I pass it along. I know you also touched on this last week, but I wonder if you could tell us a bit more, at least to the general public, what a structural deficit means?

MR. RAFUSE: It's funny, I don't think there is an accepted term for structural deficit and actually, I've worked on a PSAB task force where we try to define that or at least come up with a definition for the basis of measuring it. Generally speaking, a structural deficit is one that occurs that is ongoing, not one that's subject to variations and fluctuations on either side of the equations, either from an expenditure or from a revenue perspective, is one that is sort of a constant there that is not subject to end-year fluctuations or variabilities.

MR. MORTON: Thank you. I think I will pass it along at this point.

MADAM CHAIRMAN: It's really just about 30 seconds left.

MR. MORTON: I guess what you're saying, just to clarify what you're saying about a structural deficit, I was thinking about in terms of local terms, a structural deficit might have occurred in a household if your income was at a certain level, but your mortgage had actually increased and you no longer had enough income to cover that additional cost?

[Page 23]

MR. RAFUSE: From a year-over-year basis, yes, that would be more a structural deficit, as opposed to this year we decided to go on a vacation.

MR. MORTON: Yes.

MADAM CHAIRMAN: Good explanation. Is that good, then? I'll pass it on if you like because there are just 10 seconds. That would be back to Mr. Glavine and for our last round we'll have just 11 minutes, that allows for some time at the end of the meeting for committee business, thank you.

MR. GLAVINE: I stepped out there for a moment and I had the booklet with me, I'll depart for a moment from my planned questions. Over the past number of years, the past three in particular, provinces gained considerably from the offshore licence for fishers. In one sense that bodes perhaps poorly for the industry, but yet it has been a benefit at a time of tight revenues for the province. Is there any trend line that you see developing based on where we've been for the past few years?

MR. RAFUSE: The revenues from offshore forfeitures is actually one in which we've had a lot of discussions with our auditors about the ability to provide trend analysis. Our policy on revenue recognition and around forfeitures is that we recognize them when notice of forfeiture is provided or we know it's going to be provided. There has been a hesitancy to include those in the Estimates Book because really it's hard to predict them until the end of that deposit. There is a trend as you can see when companies put deposits down and you know the level that is out there but, for the most part, those have been depleted over the last little while. So that would be the trend that they have gone down.

MR. GLAVINE: Just one further little point. Are these lump sum payments to the books of the province, some companies pay them out over a period of time? How is that actually collected?

MR. RAFUSE: It's recognized in lump sums, they give notice that they're forfeiting their deposit or claim to that particular area.

MR. GLAVINE: Just to go back again to another topic, pre-borrowing. On Page 41, it states, "The Province of Nova Scotia borrowed $1,835.2 million in long-term debt in 2010. This amount was slightly below the budget estimate of $1,968.0 million, but given the improvement in the budgetary situation in 2010, resulted in pre-borrowing for future years."

Given that the improvement in the budgetary situation was less than stated, how has pre-borrowing changed?

MR. RAFUSE: The amount we borrowed was based on the projection. It still resulted in what we would characterize as pre-borrowing, our cash needs for last year were not what

[Page 24]

it was anticipated, so there was the ability to have some borrowing in advance. So, yes, that statement is still accurate even though the deficit number has changed. It gets a little complicated because borrowing needs are based on our cash flow and our cash needs as opposed to what we recognize as an accrual perspective in the Public Accounts. So they look at it slightly differently than we do.

MR. GLAVINE: How much pre-borrowing did the province actually end up doing in 2010? Is the figure we have here exactly as . . .

MR. RAFUSE: Yes, that would be an accurate figure, yes.

MR. GLAVINE: Is there a material benefit to pre-borrowing?

MR. RAFUSE: It depends on your view on where you think interest rates are going and the carrying costs of pre-borrowing money associated with that. There may be a benefit if you think interest rates are going up to pre-borrow, it all depends on your view of interest rates.

MR. GLAVINE: Is this happening on a continuous basis through a fiscal year? Is it done quarterly? How is it managed from the Finance Department's perspective?

MR. RAFUSE: The department does have a borrowing plan that is embedded into the Estimates Book; it's based on the cash needs from projected expenditures. The borrowing itself, I wouldn't characterize that it would be done on a regular basis. It's done as the opportunity arises and when it's opportune for the province to borrow and where our views would be on changes in the market and also on our cash needs as well, so it's based on a number of factors. It also includes the borrowing patterns of other jurisdictions - there are some provinces in this country who are in the market every day - so it's all about timing sometimes.

MR. GLAVINE: While it's an ongoing process for the Finance Department, there are some risks with this as well. Of course, obviously, they're generally offset by the benefits then that pre-borrowing does provide?

MR. RAFUSE: The borrowing plan, they look at the risks associated with the timing of the borrowing. There's also a governance panel committee that looks at the borrowing plans and the timing of it to give their perspective on the risks associated either from a timing perspective, or pre-borrowing, or going too late in the markets, there are some times when you can't go to the market. All those kinds of different views are looked at, and there is a risk and reward associated to the timing of any borrowing, yes.

[Page 25]

MR. GLAVINE: Looking at the data collection which is, of course, the forte of the department, what is the process of data collection for the production of the Public Accounts documents?

[10:15 a.m.]

MR. RAFUSE: The preparation of the Public Accounts is headed up from the government accounting section of the Department of Finance, which Robert Bourgeois is representing today, they are a section that works for the controller's office. The sources of information that is included in the Public Accounts comes from various areas. The financial information from the consolidated fund comes from our own financial system. The information associated with consolidated entities comes from those entities themselves and it's not just their financial statements, but they do complete consolidation packages which have additional information associated with that.

The debt information included in here comes from our liability section, the economy section comes from our statistical economical section. The spending analysis and trends, we receive primary from departments through Treasury Board. The job of government accounting is to take all that information and put it into a format that's not only representative, but also can present itself and make it subject to audit purposes. So it is a variety of sources that are pulled together, including some of our revenue sources which come from the federal government, through our revenue section as well and other areas that may have revenue generation responsibilities.

Primarily, in the Province of Nova Scotia, consolidated revenues are generally the Departments of Finance and Service Nova Scotia; they are the two departments. Energy, to a large aspect, too, from a natural gas forfeiture perspective, that information comes from the Department of Energy. So it comes from various areas and government accounting pulls it all together.

MR. GLAVINE: So then, are there reporting deadlines for departments and other government reporting entities that you would base your timelines on?

MR. RAFUSE: The actual process to pull together the Public Accounts, the planning for that generally begins in the December/January time frame. We sit down with our auditors and also, internally, about certain milestones and deadlines that have to be met, then we look at our projected date of when we would like to release. In the last number of years, we have tried to release earlier than the legislative requirement of September 30^th. This year we released on July 29^th and that will continue to be our planning kind of date; it does create some challenges. If you look across the country outside of Atlantic Canada, that's generally where most provinces are at at this point.

[Page 26]

In between, there are a number of milestones and requirements when people have to have certain information in, departments have to have their entries in and closed at a certain time, and certain information in to auditors. There is generally a requirement from the consolidated entities to have their audited statements in to us by June 30^th and there are other kinds of milestones and cutoffs in that to allow this document to be prepared and allow sufficient time for it to be audited.

MR. GLAVINE: In looking at reporting in time for Public Accounts documents and so on - and maybe this is not related, but - one of the real dilemmas that I know in the time period I have been here, over seven years, is timeliness of DHA budgets. Is that related to the global Health budget, or is it more at district levels that we seem to be confounded each year as to where the DHAs are going with their budget plans?

MR. RAFUSE: The global departmental Health budget would be subject to the estimates process that is in the House and that time frame is generally in the Springtime, for the global department budget. The aspects in the district health authority, that's a separate matter. I have a perspective here because I used to work at the Department of Health on that. There are requirements under the Health Authorities Act about when budgets are done and a business plan. It does take time to work through that process, but that's sort of a separate kind of process.

MR. GLAVINE: How often . . .

MADAM CHAIRMAN: Excuse me, your time has elapsed now, Mr. Glavine, I'm sorry.

MR. GLAVINE: Thank you, Madam Chairman.

MADAM CHAIRMAN: I'd like to turn the floor over to Mr. MacMaster.

MR. MACMASTER: Thank you, Madam Chairman. In our last discussion, we established that there was $1 billion added to the debt, which would be about $1,000 for every Nova Scotian. It would be about $2,500 for every employed Nova Scotian and if you looked at that on a pre-tax basis, it would be well over $3,000 for every person who is working in this province.

I'd just like to drill down a little bit more. We know that $330 million of that $1 billion figure is from the deficit. I believe, and perhaps you can correct me if I'm wrong, but I believe $0.5 billion would have been put into the NSGEU pension plan?

MADAM CHAIRMAN: Is that your question?

MR. MACMASTER: Yes.

[Page 27]

MR. RAFUSE: The back transfer to the pension plan occurs this year but that would not impact the net direct debt figure.

MR. MACMASTER: So that is not included in the $1 billion.

MR. RAFUSE: No, it would not impact. If it actually had occurred last fiscal year, which it hadn't, it would not have impacted that number.

MR. MACMASTER: What number would it impact?

MR. RAFUSE: It would change our statement of liabilities. It would change it from one liability to another. It really would change it from one and move it around on the balance sheet.

MR. MACMASTER: Okay, so financing of it would show up as an extra interest expense?

MR. RAFUSE: If the money was borrowed, it would show as an increase in our matured debt and then it would show as a decrease in our pension obligations on the balance sheet. If you did borrow it, it would have an impact on debt servicing charges, yes.

MR. MACMASTER: Okay, well I was thinking I guess I have another $500 million to find then because I thought that was part of the $1 billion.

MR. RAFUSE: If you turn to Page 61, Statement 3, it shows the major aspect of how the debt changed, where the net direct debt number changed.

MR. MACMASTER: So you're looking at, I guess the two largest figures would be the deficit and . . .

MR. RAFUSE: TCA spending, yes.

MR. MACMASTER: And what would the TCA spending consist of?

MR. RAFUSE: That would be all the capital projects done by government, primarily the biggest chunk of that, I think $350 million, is TIR, roads and the like. This is a consolidated impact so it would be the capital spending of all the entities which we consolidate as well.

MR. MACMASTER: Was there an expenditure of about $100 million for land in there, too?

[Page 28]

MR. RAFUSE: I believe that the land purchases last year were about that. Yes, there would be.

MR. MACMASTER: So we've got $350 million for roads, $100 million for land, we've got $330 million for the deficit. That puts us at $780 million. Do we know where the other $220 million?

MR. RAFUSE: Yes, I'm going to actually turn you back to Page 37, which shows you the capital spending by department, that $632 million of actual spending on capital.

MR. MACMASTER: I'm sorry, what page was that on?

MR. RAFUSE: Page 37, that was spending by department. The actual projects, as on Page 77, and in Schedule 7 will show you the types of access that were purchased, between lands, buildings, machinery, vehicles and the highway expenditures.

MR. MACMASTER: And that page you just referenced?

MR. RAFUSE: Page 77. You can see under additions, you can see the type of assets that were purchased last year, broken down into categories, the lands at $115 million.

MR. MACMASTER: Okay, so those figures you figure total about the $1 billion.

MR. RAFUSE: The actual increase in the net direct debt is $800 million, just to be more precise.

MR. MACMASTER: Okay. With this added debt, we've seen recently that our Nova Scotia bonds were downgraded by rating agencies, I believe. What effect will that have on the cost to borrow for Nova Scotians to pay off the debt?

MR. RAFUSE: The change in rating does not necessarily have an impact on our borrowing cost. To date, that hasn't impacted it at all.

MR. MACMASTER: Over time, I understand that if the outlook for - well, I guess over time if the government continues to run deficits, a bond-rating agency might lose confidence in that government's ability. If a bond is perceived as being more risky, the issuer has to raise the coupon to reward the investor for the added risk. Is that something that could happen if we continue to see deficit budgets?

MR. RAFUSE: That would be speculation as to where the bond-rating agencies would be going in our rating. There's no reason to believe that is the case. I think the rating now is they are saying stable.

[Page 29]

MR. MACMASTER: If we look back historically, when John Hamm started to balance budgets, I think it was at that point in time that our bond rating actually went up. It improved because of the improved economic conditions and the prudent fiscal management of the province. Would that be correct?

MR. RAFUSE: Our rating had improved for a number of years, yes it had.

MR. MACMASTER: Another piece of information I came across was that five years ago equalization accounted for about 33 per cent of Nova Scotia revenues. If we look over the past year, it accounts for about 40 per cent. Would that be correct? So we've actually been receiving, on a percentage basis, an increased amount of our revenues from the federal government?

MR. RAFUSE: The equalization amount specifically itself is set in an agreement so it is set in stone, until the end of the agreement. Your question was whether or not we are more reliant on . . .

MR. MACMASTER: My question would be, would it be true that it has increased over the last number of years, that it has become a larger component of our revenues? I guess what you said there is, are we more reliant? I guess that would be the same question I'd be asking.

MR. RAFUSE: I just have the last two years. The figure for equalization has been stable in the last two years and our overall revenues slightly down, so the percentage would be about the same. To go back further than five years I'd have to go back and get some further analysis.

MADAM CHAIRMAN: Could I ask that that's something you provide to the committee after this meeting?

MR. RAFUSE: We certainly could provide that. Five years, do you think, Madam Chairman?

MADAM CHAIRMAN: Mr. MacMaster?

MR. MACMASTER: Sure.

MADAM CHAIRMAN: Five years would be good.

MR. MACMASTER: Over the past year, looking at these figures, have there been any discussions with the federal government around trying to improve the amount that we get in equalization?

[Page 30]

MR. RAFUSE: The equalization agreement, I think it expires, I'm thinking two years, but I think 2014 it is and the discussions, they are starting that process. That would not be just the Province of Nova Scotia, that's a process with all federal, provincial, territorial discussions.

MR. MACMASTER: Okay. Madam Chairman, how much time do I have remaining?

MADAM CHAIRMAN: Two minutes, just under.

MR. MACMASTER: One of my colleagues had asked the question about what is a structural deficit and they compared it to a home, say, an average Nova Scotian household. It is an interesting comparison because most Nova Scotians, if they're taking in the same amount of money, if their expenses are going up they have to reduce their expenses or, if they're taking in less money, they have to reduce their expenses that much more.

I guess one comment I'd like to make to that is when Dr. John Hamm came to government he didn't complain about a structural deficit. He went to work for Nova Scotians and he reduced the debt of the province, he balanced the budget again and was starting to put Nova Scotia on the right track towards a more prosperous future.

Would you say it's true, that much like for a Nova Scotian household, if the government wanted to balance the budget it would need to do the same things that a Nova Scotian would have to do and that would be look at revenue, look at expenses and match them?

MR. RAFUSE: The estimate is a policy document and it requires choices and I'll leave that to the government to answer about what choices they are going to make or wish to . . .

MR. MACMASTER: Sure, but just from a technical perspective, if you were going to balance the budget you would have to make revenues and expenses match.

MR. RAFUSE: Technically speaking, that is a balanced budget.

MR. MACMASTER: A very simple question, but sometimes difficult for people to understand and I think also for (Interruption) well, the member has just said: Tories, they're looking for Tories. We understand balanced budgets, we gave Nova Scotians eight of them until you came to office.

I guess, Madam Chairman, my point is a very simple one and it's also for Nova Scotians to understand who don't understand all this talk about billions of dollars and how to balance a budget. It is really simple, it's about making choices to put your expenses in line

[Page 31]

with your revenues, or, say, your household salaries in line with the cost to run your home for a month.

So with that, I will ask one final question, Madam Chairman. I think this just sums everything up; if we looked at one ratio, debt to GDP, over the past year has that shown a trend to grow? If it has, it shows that since this government has come to office, they have started to increase the debt of the province.

MR. RAFUSE: The ratio, on Page 17 of the books, shows the ratio in 2009 to be 36 per cent, in 2010 to be at 38 per cent.

[10:30 a.m.]

MR. MACMASTER: Thank you, Madam Chairman, I rest my case.

MADAM CHAIRMAN: Okay, it's not a court of law, but thank you very much. The last session is for the NDP and it would be Mr. MacKinnon, 11 minutes.

MR. CLARRIE MACKINNON: Thank you very much, Madam Chairman. I'll try not to be political in my questions. My friend from Inverness, I'd just like to say that we are on our way back to balance.

One of the things I'd like to talk about is - my good friend Mr. MacMaster was talking about the highways and bridges and land purchases and so on which, as a rural MLA, I think as all MLAs in the province really appreciate some of the things that were done under the stimulus funding. They are actually, although expenditures, they are also assets as well, so would you like to comment on that?

MR. RAFUSE: Certainly. The way we account for these is that these assets, as we build them now, we recognize the expense of those over the years, with the exception of land. Land does not have an amortization associated with it so it does not depreciate over time so it doesn't actually show up on your operating statement when your purchase line is an increase in your inventory of land purchases. That's a recognized way of accounting for this, that you show the expense of those types of things over the useful life of that asset, or in most terms for a public sector organization as for ourselves is the life for which that asset provides a service to Nova Scotia; if we look at it from a service perspective as opposed to a useful life perspective.

MR. MACKINNON: Thank you very much. I'm going to share my time with the member for Halifax Chebucto so I'm going to be fast. This is a three-in-one question. First of all, I'd like to say how much I appreciated last week because it was a great learning experience to have so much time with you, and thank you for that.

[Page 32]

Why do we have prior year adjustments? How do they work? How many years can you actually go back?

MR. RAFUSE: Before I answer the question, I would just extend the invitation to any member of the committee, if you want to have that session again or you want to go through any material, feel free to make that request.

Prior year adjustments are a by-product of a notion that certain sources of revenue - primarily for us that's for corporate income tax and personal income tax and, to some degree, the HST - are subject to several years to be able to determine the exact amount. When we produce our Public Accounts we are required to record an entry based on the best available evidence that we have in front of us.

We know that that's not complete because there is a time lag, the ability to go five years back in revenues so when we close the books for 2009-10, and we do that in July, our collector of that, the federal government, is still working with individuals and corporations back to five years. If an amount changes from the fiscal year previous to that, we record that as a prior year adjustment. It is actually a reflection to give the readers of our statement a feel about how much those revenue changes are from a current year perspective and that would be the amount we record there, and how much is related to adjustments or re-estimations from previous years. That, as I say, can continue for a number of years past that - about five years - so that allows individuals and corporations time to deal with Revenue Canada on their issues associated with their taxes owing from that perspective. That's why we have prior year adjustments.

MR. MACKINNON: Thank you very much. We have seen improvement in debt servicing fees. Could you explain or elaborate on those improvements?

MR. RAFUSE: Debt servicing costs are a byproduct of the level of debt but also the way in which you structure your debt. We have, for a number of years, been taking a more strategic look at the structure of our debt, trying to ensure that our maturity dates are staggered out so that we're not getting into great need of cash in any fiscal year. We actually project that out for the next 30 years, as to when certain maturity - when debts become mature.

We also take advantage of opportunities - interest rates are at low levels now so we take a strategic look at between our short- term interest rates and our long-term interest rates. The overall effect of all those things is it has reduced the overall debt servicing cost that we do incur. I think we mentioned earlier that is a rather substantial amount that is incurred by the province but we take a more strategic view of that in the last little while.

MR. MACKINNON: Madam Chairman, since the round is only 11 minutes, I'll leave the last five minutes to the member for Halifax Chebucto.

[Page 33]

MADAM CHAIRMAN: Thank you. Mr. Epstein.

MR. HOWARD EPSTEIN: Mr. Rafuse, I also want to thank you for the education seminar you conducted last week for the committee. It was a very helpful exercise. The questions I have this morning are really followup to some small aspects of what you touched on last week.

I'm wondering if we could start by talking a little bit about sinking funds. They seem to appear in a couple of different places in the volume of the Public Accounts. I see in the glossary that you gave us, that there's actually a definition offered. A sinking fund is characterized as being an investment fund established by government for the purpose of reducing debt. The explanation goes on a little bit but that seems to be the essence of it. Could we start by that - that's really what a sinking fund is. It's a kind of savings fund, is that right?

MR. RAFUSE: Sinking funds are essentially that. They are less in vogue now than they used to be but it used to be a requirement for when you went to the market and borrowed, that whoever you borrowed from, was that you need to start putting some cash aside every year, so that when this bond or this debt becomes mature, you're going to have the cash available to you. That's really what a sinking fund is - cash put aside so that you can meet a future obligation on debt repayment purposes.

MR. EPSTEIN: Yes, to take a simple family parallel, if a family has a mortgage and they start putting a little money aside from their paycheque in the hope of being able to pay down in a lump sum a bit of their mortgage principle from time to time, is that kind of the general point we're looking at?

MR. RAFUSE: Yes, that's correct. We don't pay monthly instalments on our debt, we pay a maturity debt, we pay off the bondholder.

MR. EPSTEIN: The first thing I wonder, then, about a sinking fund is what prompts the requirement for a sinking fund. A moment ago, you made passing reference to the demands of the marketplace - that is, some bondholders might essentially require a government entity, like the Province of Nova Scotia, to have a sinking fund. Is that still the case? If so, can you tell us something about when the bond market actually asks for that? In addition, I'm wondering if there are any statutory requirements for sinking funds?

MR. RAFUSE: Not statutory requirements that I'm aware of. Most of the sinking fund requirements come out of the covenants of the actual debt issue itself, where the person we are in debt to will require us to do that. They are not in vogue any more because I think the market is more mature now, not just for the province but generally speaking. As well, a lot of people look at the view as, why would we make this entity put cash aside for future debt which may, in fact, cause them to have to go out and borrow more money to do that?

[Page 34]

So it would seem to be very circular or almost defeatist in that nature. That's why the maturity of today's markets, I don't think we have that requirement. We do it, on occasions, we do put money aside but of our own good management practices.

MR. EPSTEIN: So can we expect to see sinking funds cease to exist over time, as the marketplace no longer demands it?

MR. RAFUSE: You should probably see it as a requirement to do a sinking fund. It would still be good management practices of organizations to put cash aside for future obligations and we impose that on ourselves, as cash allowed us to do so.

MR. EPSTEIN: So then could you tell us a little bit about how the sinking funds operate, what happens to the cash that is put aside?

MR. RAFUSE: The cash that is put aside is restricted and it is put in investments that allow some return on the money.

MR. EPSTEIN: Yes, and so I'm really wondering what kind of investments the province would actually put its money into in that case.

MR. RAFUSE: I actually think we put it into other government bonds but I think there's a listing of what our sinking fund holdings are.

MR. EPSTEIN: Is that right? Is it in this volume? I have to say I didn't see it.

MR. RAFUSE: If not, I'm sure we can get that. I think there's generally a listing of what our sinking funds and investments are. We certainly can get that for the committee if it's not there.

MR. EPSTEIN: I'm sorry, did I hear you actually suggest that some of this money is put into the province's own debt?

MR. RAFUSE: No, other governments.

MR. EPSTEIN: I was going to say, it wouldn't make sense.

MR. RAFUSE: We may hold our own bonds, too; that's not unheard of. We've had a lot of discussions with our auditors about that.

MR. EPSTEIN: I guess one of the things I wondered was, especially given your comments earlier when you talked about pre-borrowing - is pre-borrowing considered a form of sinking fund as well?

[Page 35]

MR. RAFUSE: Not necessarily. Pre-borrowing would be an indication that you've gone to the market before your cash needs would indicate that you had and you've done that for a number of reasons, either to take advantage of the opportunity the market is providing to you or . . .

MR. EPSTEIN: That means low interest rates, does it?

MR. RAFUSE: Or interest rates lower than you anticipated or lower than you think they are going to go, or it might have been that you may have borrowed anticipating a cash outflow that didn't necessarily occur. That would, by default, create a borrowing situation. If your deficit was less than what you thought it was going to be, then you may have borrowed money in anticipation of a debt at a certain level and if it doesn't occur, then, in fact, you pre-borrowed. You borrowed more than your requirements told you that you had to.

MR. EPSTEIN: And that money would also be put into safe securities, like other government bonds.

MR. RAFUSE: We would put it into safe securities, yes.

MR. EPSTEIN: Okay, and you are kind of resisting the characterization of that as a form of sinking fund. The reason I asked that really was because the discussion of pre-borrowing seems to appear in the sinking fund sections.

MR. RAFUSE: It might be that it would be in short-term holdings and short-term investments and that wouldn't characterize it as a sinking fund investment, so that might be an accounting error maybe. But yes, it would be put into like a T-bill or something like that.

MR. EPSTEIN: Okay, thank you. We're out of time, are we?

MADAM CHAIRMAN: We went a little over, I thought that was interesting for all of us to hear a full discussion on that. Thank you very much, Mr. Epstein.

That concludes our rounds of questioning. I'd like to give just a moment to Mr. Rafuse, if he'd like to sum up or have any comments for our committee.

MR. RAFUSE: I'll just say thank you to the committee and as I said earlier, if there's any follow-up in the workshop we had last week, certainly feel free to put those questions in my direction. I'd be happy to answer them.

MADAM CHAIRMAN: Thank you very much, Mr. Rafuse. I'd certainly like to echo the comments made by a number of the members here about the value of the session last week and again having the opportunity of you coming today to answer questions about the

[Page 36]

Public Accounts. I think it has been useful to the members and a number of the members are newer members of the Legislature, it helps to give us all, I think, a deeper understanding. As members of the Public Accounts Committee, what we had discussed earlier as members was that our focus is on the Public Accounts and as we have different witnesses that represent programs or departments, we try to drill down and understand their spending and whether or not there is value for money in the work that has been done and in the money that has been spent.

I think this has helped to increase our capacity and our understanding of the financial accounts. I do thank you for that and also for your offer to either return to the committee or to have individual members contact you if they have questions so I think that will help us all as well.

I have a list of four items that were requested and you may not have noted them in the sort of passage of the questioning, but we do have four for you. One was from Mr. Glavine on the percentage of net debt to GDP, the real GDP I think it was, and Mr. MacMaster had two questions as well as the final one here on the sinking funds, from Mr. Epstein, so we'll give you this list as well. I certainly thank you for that.

We have a little bit of committee business today so I'll give you an opportunity to leave, if you'd like; you don't need to stay. Thank you again for joining us, we really enjoyed it. I hope that this becomes at least a meeting that we do every year as the Public Accounts are tabled. Thank you.

For the committee members, on our agenda, it refers to the annual report, which is still outstanding. I think we had agreed d would be looked at by the Subcommittee on Agenda and Procedures, so that is something that needs to be finalized and signed off on by members of the committee. On that note, I would just ask again, we've been talking about it for a couple of weeks now but if any members wanted changes, perhaps you'd speak to your representative on the subcommittee. That way we can discuss it there and finalize it quite quickly, so that would be very good. We also have before us a schedule of upcoming meetings, so you can see the clerk has been scheduling what was voted on last week. That has been done and it's there for your information.

[10:45 a.m.]

Thirdly, I believe we have a motion before us which was circulated earlier in the meeting. I wanted to thank the member, Mr. Glavine, for circulating that in advance. That is something that we have discussed at Agenda and Procedures as well, that as much as possible, any member going to make a motion would try and give advance notice to the committee. With that, I'll turn the floor over to Mr. Glavine.

[Page 37]

MR. GLAVINE: Thank you very much, Madam Chairman. Having served on the Public Accounts Committee for three years, I know the importance of this committee to be timely, to be responsive to developments that occur on an annual basis. So with the present situation around Burnside, I'd like to read into the record the following motion:

Whereas Nova Scotians have recently learned that thousands of prisoners sentenced to jail time were, instead, being sent home from the Burnside correctional facility and that some of these criminals have been, in fact, sexual offenders; and

Whereas the current Justice Minister and the previous Justice Minister have both publicly acknowledged to be unaware that these weekend passes were being granted; and

Whereas Nova Scotians deserve to know what offenders benefited from these temporary absences, what types of crimes they were found guilty of and whether they re-offended while out of custody;

Therefore be it resolved that an emergency meeting of the subcommittee on agenda setting convene immediately following the witness presentation today, to report back to the full Public Accounts Committee, today, Wednesday, October 13, 2010, for approval of an emergency supplementary meeting of the Public Accounts Committee for the purpose of calling witnesses, including Marian Tyson, Deputy Minister, Department of Justice, and Sean Kelly, Director of Correctional Services, Department of Justice, with regard to temporary absence passes being granted to convicts.

MADAM CHAIRMAN: Thank you very much. There is a motion before the committee. Is there any discussion on the motion? None at all? Yes, Mr. Preyra.

MR. LEONARD PREYRA: I'm assuming the motion was seconded?

MADAM CHAIRMAN: I think I saw a hand rise, I'm sorry, yes. (Interruptions) Oh comments, okay. In fact, Mr. Heb.? We don't need a seconder, that's right. In fact, that's why I didn't ask. No seconder is required, the motion is in order. Mr. Preyra.

MR. PREYRA: I would like to propose a friendly amendment to the motion, Madam Chairman. In the third line, in the "Therefore be it resolved", I would like to strike out "today" and replace that with the word "on" and it would become, on Wednesday, October 22, 2010.

The effect of that would be that we would refer it to Subcommittee on Agenda and Procedures and we would be willing to meet after, but we would report back at the next opportunity or meeting of the Public Accounts Committee.

MADAM CHAIRMAN: Thank you. Mr. Glavine.

[Page 38]

MR. GLAVINE: Yes, Madam Chairman, so accepted.

MADAM CHAIRMAN: Very good, I think that's a friendly amendment so thank you very much. Do we need to vote on the amendment? We'll just include it in the motion, you've agreed to it so we'll have that vote. Mr. MacMaster, you had a comment about the motion?

MR. MACMASTER: Yes, I'd like to just draw attention to the second paragraph. After consulting with my colleague, the previous Justice Minister, I think we just wanted to make a point. I think this is a good motion, it is timely and it involves the security of Nova Scotians. It focuses on the need for departments to have the tools at their disposal to do their job to help protect Nova Scotians, so I think it's valuable being put forth at this time. I think we have to be careful about putting blame on people.

I know the previous minister and that administration inherited the plan for that very facility that's located in Burnside from the administration before that, so I wanted to put that point on the record. Perhaps we could sanitize that second segment of the motion, if it met with the approval of my colleagues here?

MADAM CHAIRMAN: Did you have proposed wording for that amendment?

MR. MACMASTER: I think I would just say, whereas if it's current and if it's about today then we would just place it in the hands of the current Justice Minister and say, "Whereas the current Justice Minister" (Interruption) I think what I would say to that is, as we know whoever is in administration of the day is responsible. I think the purpose of this motion is not to put the blame on the minister, but just to state the fact that the minister has acknowledged that he's unaware of what has happened and that's the whole reason why we wanted to bring the department in here. So that's why I would . . .

MADAM CHAIRMAN: So you would suggest just striking any reference to the previous minister?

MR. MACMASTER: Yes, because I think it is irrelevant at this point in time because he's no longer the minister.

MADAM CHAIRMAN: Well, your point is taken. Mr. Glavine.

MR. GLAVINE: I'm just reiterating here what has already been publicly stated and acknowledged. I think it has been an ongoing matter, is why the reference is here. We really want to hear what the department has to say here. It wasn't the intent to cast aspersions here in any kind of condemning nature towards either of the Justice Ministers, but rather to find enlightenment as to what is taking place in the department. In fact, it could be very much a case of the department doing their work and perhaps not informing ministers with all the

[Page 39]

detail around this issue. I think that is why we're calling, not for the ministers to come back here, but rather department people to provide enlightenment to the committee.

MADAM CHAIRMAN: Mr. Glavine, would you be agreeable to removing any part of the second clause, given the fact that your aim in presenting this is to have the subcommittee look at the matter? Is it materially a problem?

MR. GLAVINE: To make sure the department is available to this committee and to work toward unanimous consent, I don't have any problem with that. I think the committee would like to examine the department on this issue.

MADAM CHAIRMAN: Mr. Preyra.

MR. PREYRA: I'm quite happy to have that clause removed, Madam Chairman, but once we remove that clause all that's left is the third whereas and it seems to me that's a question this committee can ask without the need of a hearing.

MADAM CHAIRMAN: The difficulty we have is the Public Accounts Committee seems to be the only committee that hears these kinds of questions, so that is why these kinds of unusual things that surface where the requests come from different caucuses to this committee is because we don't have a justice committee and we don't have a health committee, so they tend to arrive here at the Public Accounts Committee. With or without that clause, are you comfortable? Which way do you want to go is really what I want to know so that we can vote on this?

MR. PREYRA: Thank you, Madam Chairman. I do want to point out that the Public Accounts Committee is essentially there to examine the Public Accounts and expenditures, so it's not clear that this fits with the Public Accounts Committee. At the moment, all we're being asked to do is refer it to Agenda and Procedures for this type of discussion. I'm wondering, rather than trying to wordsmith the resolution itself, that we get to the substance of it and make a decision about whether or not we'll bring it to the Public Accounts Committee.

MADAM CHAIRMAN: So we can just put the question.

MR. PREYRA: Yes, I think we should just put the question.

MADAM CHAIRMAN: I think that might be the wisest thing to do. You've made your point, Mr. MacMaster, and if we just put the question as written with the one amendment, so it will read now that it would return next week, any decisions of the subcommittee would be brought back next week to the Public Accounts Committee?

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

[Page 40]

The motion is carried.

I thank you for that. The members of the subcommittee will please stay behind and, in fact, it was good that we stopped our witnesses somewhat early so that there was time for that. I think all the other meeting information has been dealt with.

We are adjourned, thank you very much.

[The committee adjourned at 10:54 a.m.]