HALIFAX, WEDNESDAY, FEBRUARY 26, 2003
STANDING COMMITTEE ON PUBLIC ACCOUNTS
8:00 A.M.
CHAIRMAN
Mr. William Estabrooks
VICE-CHAIRMAN
Mr. James DeWolfe
MR. CHAIRMAN: Good morning. I would like to welcome - I was going to say guests but I don't know - our witnesses. As per usual, I'll ask our MLAs to introduce themselves in a moment. Note that this is the only item of business and we will be allowing Mr. Salmon and his staff as much time as they need. No, we are not going to keep them to the 12- to 15-minute guideline, although Roy tells me that it will be in the 20-minute range. I'm not going to, one way or the other, hold you to that, Mr. Salmon. Then we will divide the time up appropriately. We will be going right to the limit at 10:00 a.m. with a wrap-up from our witnesses.
We will not be meeting for the next two Wednesdays as some of you will be taking various breaks to islands in the sun or, as I said, islands in the snow. So our next session will be Wednesday, March 19th, at which time in this Chamber we will be having witnesses from the Sport and Recreation Commission. Could we have our introductions begin, please, with my colleague, Mr. Steele.
[The committee members introduced themselves.]
MR. CHAIRMAN: Mr. Salmon, could you, for the record, introduce, or allow them to introduce themselves, the staff who are here with you today.
1
MR. ROY SALMON: Thank you, Mr. Chairman, and good morning members of the committee. I am Roy Salmon, Auditor General. To my left is Claude Carter, the Deputy Auditor General; to my right, Elaine Morash, Assistant Auditor General; and to her right, Alan Horgan, Assistant Auditor General. These are the people who manage my office.
If I could start, Mr. Chairman?
MR. CHAIRMAN: Please. Thank you.
MR. SALMON: As you've heard from me before, we, in our office, are very strong proponents of good accountability and have been promoting better reporting by government, by government departments and agencies over the last number of years. We have previously reported on our performance in a chapter of our annual report to the Legislature but made the decision, as have other audit offices across this country, to make this more visible by producing a separate report both in terms of how we have judged our own performance and also to lay out, in more specific terms, our plans for the upcoming year.
One of my major objectives here this morning is to seek your advice as to how you view the performance of my office, and myself, and to seek your comments on what we plan to do and whether or not those plans meet your objectives because you are my client. I work for you, the nine of you on this committee, representing the 52 members of this Legislature. So we really want to have that kind of a dialogue with you with regard to how well we are serving you and how well our plans meet your expectations.
In putting this document together, we have attempted to follow the format that Treasury and Policy Board have laid out for the rest of government in terms of their expectations of how departments and agencies should report. The one exception is that because of my reporting schedule with the December 31st deadline for my annual report, all my plans are on a calendar year basis as opposed to the fiscal year basis that departments and agencies follow. We do consider that what we've put before you in the last couple of days is still a work in progress. We are still working on how to make all of this better, improve the quality, working on the indicators, et cetera.
Just to give you an overview of the structure of this, there is a brief introduction, which is a short message from me outlining what we've been attempting to do, a description of the role of my office; then the two major parts, the report on performance and then the plan for 2003 and then a number of appendices.
Just an overview of the role, to describe the role of the office within the government accountability structure. Dr. Smith earlier referred to me as the department of the Auditor General. We don't consider ourselves to be a department of government. We are the Office of the Auditor General. My reporting relationship is to you, the Legislature, not to a minister. We are different. We are independent of government and work for the Legislature. We follow
rules of professional conduct laid out by professional bodies, the Institute of Chartered Accountants of Nova Scotia, the Canadian Institute of Chartered Accountants and then in the report we describe the type of audits we do. Really, they can be broken into two types. We do audits of financial statements and we do broad-scope or so-called value-for-money audits that are intended to provide assurance that the way government manages taxpayers' dollars results in achieving value, that there is due regard for economy and efficiency.
We attempt to highlight our performance, discuss quite a number of accomplishments, in our view, that we have achieved. Particularly, we conducted special audits of health performance indicators, as did all my colleagues across the country, and we collaborated with them. Elaine attended numerous meetings of our colleagues across the country, discussing how best to achieve this and to achieve some level of consistency in conducting those audits, and worked extensively with the Department of Health on how they were going to report and how we were going to audit. Secondly, we were requested by the Executive Council, through the Minister of Environment and Labour, to conduct an audit of the Workers' Compensation Board and its governance structure.
During the year, we conducted 22 audits of financial statements, as well as 12 broad-scope or value-for-money audits. We also outline in the report some other accomplishments. We had five students attempt the CA examinations last September, three of those five were successful, and so the level of the human resource complement was raised. We had a number of activities within the legislative audit community. We hosted a meeting here in Halifax of our counterparts in the Atlantic Region, and we include Quebec in that. So the five provincial auditors met, discussed a number of issues, and made progress.
Through the Canadian Council of Legislative Auditors, which is very active in doing research and studying issues of common concern, we took a leadership role. Claude Carter hosted a meeting of all of the legislative audit offices - representatives from them - on issues around how to audit gaming operations and lottery operations. We've been very active in that area.
In my 2001 report, in the chapter that dealt with these issues, we laid out six goals and a number of priorities. This report outlines what we believe we have achieved in moving forward against those. I would not say that we have completed any, they are still all a work in progress, but we are making progress.
I come back to this issue of the health performance indicator report issued by the Department of Health. We believe that our efforts there, and I don't confine that to just my office but right across the country, that effort was groundbreaking in how to audit performance information that is non-financial. How to audit that, how to report on it was invaluable in moving us forward to being able to add credibility to this important information that comes forward to Legislatures.
[8:15 a.m.]
That effort required a tremendous amount of co-operation across our community. We continue to learn how to work better, together, even - if I could put it this way - how to communicate through conference calls and to make valuable use of that tool in working together. So we believe that that has made a substantial contribution to moving us all forward in auditing in these areas.
The history of value-for-money or broad-scope auditing has been what I would describe as direct reporting, that there were no performance reports coming forward. As an auditor, we were providing information that was otherwise not available. But as governments move forward to provide this information directly, through performance reports, the role of the auditor changes to providing assurance that the information that's coming forward is credible. This health performance indicators report is a step in that direction. I hope that our report is another indication of how that will be done.
Moving forward, we report on the financial performance of the office. We did not overspend our budget. Our budget was $1.92 million. We did not overspend it. We have either come in on target or have underspent our budget every year that I've been in place. Usually our underspending results from the fact that we have delays in staffing, people leave; we refill the positions but it takes time. The key issue for us is that our budget is virtually all salaries; 85 per cent of the $1.9 million is salaries. Therefore, we are very dependent on our staff and on keeping our positions filled.
We've laid out our performance indicators. We have nine indicators in four categories. We are generally pleased with our performance, but there's always room for improvement. We will continue to strive to improve. Our major issue is that we don't believe we're able to do as many audits as need to be done in order to fulfill the mandate. When we did an analysis of the major entities that have been audited in the last five years, 45 per cent of the entities have not been audited in five years. We've conducted broad-scope audits in 38 per cent of the entities; we've conducted financial-statement audits in 12 per cent of the entities; and we've conducted both financial-statement and broad-scope audits in 5 per cent. But it's the 45 per cent that concern us.
Our business plan that I'm coming to lays out our plans in terms of how we hope to rectify that situation. Let me just highlight the business plan. It starts on Page 23 of the report. We lay out our mission, our vision, our mandate, how we are organized and what our major challenges are. I don't think I need to go over that again. We've discussed some of that with you before. We've retained our six strategic goals that were laid out a year ago. We've developed 13 priorities related to those strategic goals.
Our highest priority is to obtain the resources we need to address these problems, particularly the number of audits that we're able to perform. Really, the issue is twofold.
When I arrived here in 1992, I had 32 staff. I now have 26 staff. I've been provided enough resources that I can maintain the 26. But the world is getting much more complex: more complex systems, more complex issues. In addition to my complement of professional staff to do audits on an ongoing basis, I need the ability to, on a contract basis, acquire specialists, like actuaries when we're doing pension plan audits, like engineers if we're getting into construction issues such as highways, and similar-type situations.
We've been in the process of discussing these issues with the Treasury and Policy Board. Don't get me wrong here, I know that there are fiscal issues here, that there are resource issues here, that there is a need to balance the budget, and I don't want to hold myself out as being special or different than anybody else, we've all got resource problems. I just want to point out to you the difficulties that I am faced with in trying to serve you the way I feel you should be served. I'm not here complaining about how I'm being treated by the government, I understand their problems, but I do want to point out that there are areas where I feel I should be doing work that I'm not able to do.
The government did recognize that because my budget is 85 per cent salaries, with what was done in the last year in terms of compensating staff through pay increases, that if I had to absorb those cost increases out of my budget, I was going to have to cut staff. They recognized that and they've dealt with that issue. But I'm not where I feel I should be.
We will continue to seek ways to improve the efficiencies within the office, to improve how we report to you people. We will continue to work with my colleagues across the country to develop ways to report in a more effective way. The Canadian Council of Legislative Auditors is working on developing seven common indicators of performance against which we could report. I would invite you to review my report. I hope you will find it useful, and we would be very grateful if you could give us advice on how we could better serve you. Thank you, Mr. Chairman.
MR. CHAIRMAN: Thank you, Roy and your staff. I'm sure we're going to have an interesting dialogue during the next hour and a half. I will turn the first 20 minutes of that discussion over to the MLA for Halifax Fairview.
MR. GRAHAM STEELE: Mr. Chairman, I guess I will start by saying that I have personally, and I know our caucus does, and I'm sure the majority of Nova Scotians have a high regard for the Office of the Auditor General. It's because of that high regard, probably, that more and more work has been loaded onto the office over the years. It's crucial to the well functioning of our system of government, I believe, that we have an independent and effective Auditor General in order that citizens can have an independent view of the government's finances. Your office deserves a lot of credit for what it has done.
It's still somewhat incredible to me that it's only within the last couple of years that our government's financial statements have been done on the basis of Generally Accepted
Accounting Principles. I noticed the former member for Lunenburg West took credit for that in the news release announcing his resignation. Today's government likes to take credit for it because they're the ones who actually implemented it. But I think, probably first and foremost, Mr. Salmon, you and your office deserve the credit for it because you've been talking about it for a long time and consistently, persistently reminding the government that it could do better than it was doing up until very recently.
Maybe one more thought before I ask you a question, and that is that one of the things about the Auditor General's Office that causes me to tear my hair out - and you can see what effect it has had on me - is that sometimes what you say is couched in such careful and deliberate language that it's not always exactly clear what it is that you're getting at. For example, if the sky is falling and people all around are saying, oh my God, the sky is falling, you might say something like we have concern for the future viability of the sky. (Laughter)
You've been very careful this morning to couch in very careful terms what you're getting at, but there's one thing I heard that caused me a great deal of concern. What you said was - and it was up on the slide - ". . . unable to do as many audits as we believe are required to fulfil mandate of AG Act." Now, to me that's extremely serious. You're given a mandate by the Auditor General Act, and what you're saying is that because of resource constraints, you are unable to fulfill that mandate. Let me ask you a very direct question, and I hope that I will get as direct an answer. Do you need more money to do your job? And if you do . . .
MR. SALMON: Yes.
MR. STEELE: Thank you. It couldn't be any more direct than that.
MR. CHAIRMAN: Is that clear enough for you? (Interruptions) Or chicken little . . .
MR. STEELE: This is the second week in a row I've gotten very short and to-the-point answers, and I'm just not used to it in this committee. Okay, so you need more money. In order for you to fulfill your mandate under the Auditor General Act, how much money do you think you need?
MR. SALMON: I believe we've laid that out in the business plan. What's the answer, $200,000?
[8:30 a.m.]
MR. CLAUDE CARTER: Well, we're talking three or four staff.
MR. SALMON: Yes, we are talking four to five staff and if you took an average of $40,000 to $50,000 for four to five staff, you are talking $200,000 to $250,000. We probably need another $100,000 for contract resources. We are talking about $300,000 to $350,000 per year.
MR. STEELE: Now in your performance report and business plan, which is very helpful, you point out, as you did again this morning, that almost half of major government organizations have not been audited by your office in the past five years. Then in the business plan portion you refer in particular to areas that need to be audited more because they are currently receiving inadequate attention and you refer specifically to school boards, district health authorities, universities, government information technology and Treasury management. What are the risks that we're running by not adequately funding your office in order that these entities can be properly audited?
MR. SALMON: What are the risks? The risks are that something could be going wrong in those areas that would be unknown. I can't quantify that but I can tell you that if areas are not audited, there are risks that things are going wrong and are unknown. Are there more Strait crossing school board situations out there? I don't know because I haven't done enough audit work. Are there things going wrong in universities that we don't know about? I don't know. The risks are that we don't know.
MR. STEELE: Do you have an opinion on whether the lack of resources, which probably would have been known to the school boards, could have had an impact on the improper financial practices that were clearly taking place in at least a couple of school boards because they knew they weren't going to be audited any time soon by your office?
MR. SALMON: I wouldn't make a supposition along those lines. Recognize that these organizations do have auditors of their financial statements but they don't have audits of the type that we do. I'm not sure that many of them would even recognize that the possibility of my office going in is a reality. Many of them are very surprised when we call and say we are going to come and do an audit.
MR. STEELE: You've pointed out this morning that everybody in government is subject to budget constraints and you've also pointed out in your report that the Auditor General's budget is set the same way as everybody else's is. It's a vote of the House, it's included in the Estimates Book, just like everything else. So your office is more or less treated the same way as everybody else.
MR. SALMON: Correct.
MR. STEELE: There is a brief reference in your report to the fact that in some other provinces the budget for the Auditor General's Office is set in different ways, that it's not necessarily treated as just another vote. I wonder, could you elaborate on that for the
committee and indicate whether you have an opinion on whether that would be appropriate in Nova Scotia?
MR. SALMON: I believe it's more appropriate for some committee of the Legislature, whether it's this committee or the Board of Internal Economy or some other vehicle to deal quite separately with those organizations that are set up independent of government. I think there's a risk to government of being seen to control agencies that are intended to be independent. In some other jurisdictions, there is a mechanism where budgets of the independent officers of the Legislature are discussed and determined and it seems to work in a more effective way.
MR. STEELE: I suppose one option is somehow that the budget of your office would be debated and voted upon by this committee, by the Public Accounts Committee. The problem with the Internal Economy Board, of course, is it meets in private which is not a very helpful way, I think, to set any aspect of the government's budget. It, as far as I know, doesn't keep minutes. If there are minutes, they are certainly not public. So the logical place for that to happen, if it happened in Nova Scotia, would be here in this committee.
Now my experience with the committee, of course, is the way they are set up is they are dominated by a government majority which does what it wants anyway and that it's not really a place to do anything that the government hasn't elsewhere decided it wants to do anyway. Are you aware whether other provinces set up their Public Accounts Committee differently to avoid that problem?
MR. SALMON: No. I'm a believer in the principle of parliamentary democracy and the division of responsibilities between government and the Legislature, that the 52 members of the Legislature represent their constituencies. Out of those 52, a government is elected and there is a division of responsibility. From day one, what I've preached in this committee is a non-partisan forum. I had that discussion way back in 1992 or 1993 when there were Cabinet Ministers and Leaders of Opposition Parties sitting on this committee and said that's not appropriate. It should be members from the backbenches and it should be non-partisan. For the most part, I believe this committee has operated over the last number of years in that fashion. From time to time it switches but it has been, over the years, an effective committee because it has taken that view.
MR. STEELE: You talked about discussions that are ongoing with government. Have there been any discussions with a representative of the government about the process by which your office's budget is approved?
MR. SALMON: No.
MR. STEELE: Have you proposed any changes to them?
MR. SALMON: I've suggested there might be better ways but we have not gotten down to brass tacks in terms of details on doing it in a different way.
MR. STEELE: Can you tell us at what level are the discussions proceeding? Are you dealing with the Minister of Finance, are you dealing with the deputy minister?
MR. SALMON: I'm dealing with the Deputy Ministers of Treasury and Policy Board, and Finance.
MR. STEELE: What's the nature of the reaction that you've got from the government so far about your request for additional funds in order to fulfill your mandate?
MR. SALMON: Sympathy and a clear recognition that this is a problem being faced right across government and they are being faced with requests from other government departments who are also being given sympathy.
MR. STEELE: Is there any sympathy for the idea that the Office of the Auditor General is different, because it's an independent officer of the Legislature?
MR. SALMON: There is a recognition that the office is different, but also a view that it's very difficult to deal with the finances of the office in a way different than other departments are dealt with, and I understand that.
MR. STEELE: I'm sure you see the difficulty with the fact that you have to go to the very people who are ultimately responsible for the entities that you're auditing in order to ask for money in order to be able to fulfill your statutory mandate. Does that cause you any concern?
MR. SALMON: Yes, it does cause me concern, but I understand the structure and I'm trying to work within it.
MR. STEELE: Let me change the topic for a moment here. One of the things that happens in our office, from time to time, is an individual will call us and raise an issue with us with financial implications. They will say, why don't you raise this with the Auditor General, or they may say to us, we've already called the Auditor General's Office. I assume that you get a number of direct contacts, either by phone or e-mail, with citizens raising a variety of concerns.
The problem is that there's no real outlet for that kind of concern. Your office doesn't have the capacity to look into individual allegations of misappropriation of funds or misspending. So what it leaves is a whole area that's not dealt with. I understand why your office can't deal with it, but I'm just wondering if you have any ideas about where can a
citizen go who has a concern about an individual case of misspending or misappropriation of funds?
MR. SALMON: That's a very good question, because you're right, we get a lot of calls, a lot of e-mails, a lot of letters on what - to be fair - I have to characterize as minutiae, very small issues. I don't have the capacity to deal with them. I'm not sure you could set up an organization that would have the capacity to deal with those kinds of things. The best vehicle is for the individual to take it back to the source. If it's a workers' compensation issue or if it's a health care issue, there should be the capacity within the organization responsible for the transaction to deal with it and provide a satisfactory answer. There is the Ombudsman. But again, I'm convinced that the Ombudsman is probably overwhelmed with similar requests and issues. There really isn't a satisfactory answer for you.
MR. STEELE: I understand your office is dealing with a government with a $5 billion-plus budget, and to your office these individual concerns are minutiae, they're about very specific situations. But in some cases, citizens know a lot about it, and they have a concern about it. In some cases, there's probably a little bit of truth to what they're saying, but there is no real outlet. We can't do it because we can't go and look at an entity's books. The Ombudsman really doesn't deal with financial matters. So there's this whole area where citizens can't find anybody who is willing to look at what needs to be looked at, because often management is perceived to be the problem not part of the solution.
You've said you get a lot of contact from citizens. Would you say there's any theme to this contact? Are there particular agencies that seem to be a particular source of problems, or is it all over the map?
[8:45 a.m.]
MR. SALMON: I really don't have an answer for you. The cost of investigating some of these issues may far outweigh the issue itself. That's one of the problems.
MR. CHAIRMAN: It's just coming up to 8:46 a.m., and the next 20 minutes belong to the Liberal caucus.
The MLA for Richmond.
MR. MICHEL SAMSON: Mr. Salmon, I just want to follow up on a few of the questions on your mandate and the scope. One of the things that was interesting and one of the issues that did come up was regarding the Millennium Fund. I remember it was suggested that it be sent to your office to see whether the province had appropriately spent federal money in the spirit of why that federal money was actually sent. I remember, if I recall correctly, at the time you indicated that that was beyond your mandate, and that you were not
in a position to be able to review any federal funding that did come to the province. I was wondering, could you maybe provide a better explanation of why that was the case?
MR. SALMON: As I recall the issue, it was raised by the foundation that was set up by the federal government to administer this fund, that Nova Scotia was not complying with the terms and conditions. As far as I was concerned, if that was an issue with regard to the federal funding, then it was an issue for the federal Auditor General, not for me.
MR. SAMSON: I'm a bit concerned about that, and the reason is - we have heard recently about the discussions with the federal government about more health care money coming to the province - the issue of accountability and making sure that any money directed towards child care or towards diagnostic equipment is actually spent on those specific items. I can appreciate the fact there is a federal Auditor General, but considering the importance of this to the average Nova Scotian to make sure that money that is coming from Ottawa for priority areas that they've identified is actually going there, I'm wondering if the time has not come where you as the provincial Auditor General would assume some sort of role in being able to provide Nova Scotians with a sense of security, I guess, that federal money that is coming to Nova Scotia is being appropriately spent by the Province of Nova Scotia.
MR. SALMON: If the federal government enters into a contractual agreement with the province and lays out terms and conditions as to how money is to be spent, then I would audit against those terms and conditions. In the case of the Millennium Fund, there were no terms or conditions. There was nothing contractually agreed as to how the province would spend that money.
MR. SAMSON: I guess about the foundation, many of us would have a different interpretation than what the government provided on that money being reinvested in student aid, but I will defer to your interpretation of that. One of the other subjects I wanted to touch on was how important a role do you see your office and your position as being there to provide a form of educating the public about the state of this province's finances?
MR. SALMON: Well, certainly I believe it's an important role, and that's what we attempt to do through the annual report and through testimony before this committee that is made public. Yes, the office has a role in attempting to explain to the people of this province the state of finances and the state of management, if I could put it that way, the quality of management within the government.
MR. SAMSON: The reason I ask that, as you know there has been a lot of discussion lately about deficits and debts and the government claiming that they are going to have a balanced budget, is what they have been claiming they were going to achieve. I am curious, the focus, even the media seems to have stuck on this particular aspect. What concerns do you have over the fact that the government is continuing to add approximately $100 million a year to the debt of the Province of Nova Scotia?
MR. SALMON: You are referring to the change in accounting policies related to tangible capital assets in that even though the budget, on an operating basis, is balanced, capital expenditure investment adds to the debt. I think it's important to also realize, though, that in calculating the operating surplus or deficit, one of the expenses is depreciation of those capital assets. So there are non-cash implications there. If you invest $100 million in capital investment and are recording as an expense $30 million in depreciation, your surplus for the year, if it's $50 million is actually $80 million cash. So there is an offset there in terms of the impact on the net debt. Yes, I've said repeatedly over the last number of years that the debt load of this province is far too high, and that situation was created years ago.
So there's a balancing here of the need to provide adequate services through capital investment and managing the debt. It's a balancing act.
MR. SAMSON: More specifically, I want to, and that's part of the confusion, that the government seems to be trying to lull Nova Scotians into forgetting completely about the debt and just trying to focus on the actual budget and the deficit. On April 17, 2001, the Premier of the province rose in the House and he said - this was before they introduced their budget last year, "Mr. Speaker, what I will confirm is that a year from now this government will introduce a balanced budget, and from that day onward the debt of this province will no longer grow." Is that a true statement?
MR. SALMON: I can't answer that because I don't know what the budget is going to look like this year.
MR. SAMSON: Well, I guess I will put it to you this way. Is the debt of the Province of Nova Scotia no longer growing? Did it stop after the budget of last year? Because basically he said once I table this, from this day forward, the debt will no longer grow. Is that an accurate statement, that the debt of this province has all of a sudden stopped growing?
MR. SALMON: I can't answer that question. I haven't done an audit of it.
MR. SAMSON: Have the interest charges on the debt of this province suddenly stopped accruing which is increasing the debt of this province?
MR. SALMON: I can't answer that question. I haven't done an audit.
MR. SAMSON: So you need to do an audit in order to tell - how much money do you expect will be added to the debt this year under the budget that was put forward by the government, under the new general accounting procedures, and tangible capital assets that they were intending to put directly onto the debt?
MR. SALMON: I audited the financial statements for the year ended March 31, 2002. I have not done any audit work on the financial statements for the year ending March 31, 2003, so I cannot answer your question.
MR. SAMSON: Okay. I'm not trying to be overly difficult here and it seems to come down to a question of common sense without getting a specific number. We know that under the new procedures, the government is capable of spending money on certain infrastructure without putting it directly on the books, instead being able to put it onto the debt under the new accounting procedures. If that is the practice, is it not safe to say that the debt of this province will continue to grow while that practice is being undertaken?
MR. SALMON: If the financial statements for March 31, 2003, reflect a balanced budget on an operating basis but the province also invests in capital expenditures that are greater than the amount of depreciation charged as an expense, then the debt will grow.
MR. SAMSON: So until you see the numbers at that specific time, you won't be able to make a determination whether the debt has grown or not.
MR. SALMON: Correct.
MR. SAMSON: But at that point, in looking at the numbers, when can we expect you to be able to come back to us and tell us and be able to give us a definite answer to that question?
MR. SALMON: That's in the hands of the government in terms of when they produce the financial statements for the year ending March 31, 2003, and when I'm able to complete my audit. I completed my audit last year in October.
MR. CARTER: It was actually early December.
MR. SALMON: The financial statements were issued in early December. So sometime between October and December of this year, I can give you an opinion on whether or not the debt has grown.
MR. SAMSON: So it will take that long before we can expect that.
MR. SALMON: It takes the government, the Department of Finance, quite a number of months to complete the financial statements and allow me to carry out my audit.
MR. SAMSON: Since this government has come to office, have they given you any indication, or have you seen any sort of examples where they have indicated any sort of a strategy or any attempt to look at debt management and to address the actual debt of the Province of Nova Scotia?
MR. SALMON: I believe that over the last seven or eight years, significant progress has been made in terms of debt management. It's far more under control now than it was 10 years ago.
MR. SAMSON: Are we in a position or are we even moving toward a position - for example, the federal government, I believe, has put an additional $40 billion onto the debt of the federal government. Are we anywhere near a position where the Province of Nova Scotia can start looking at paying down the debt of this province?
MR. SALMON: You are asking me to forecast the future. The only way I can phrase it for you is that I believe that financial management in this government, in this province, is in far better shape than it was 10 years ago. That's been a gradual improvement and so I don't want to single out any one government for that. It's been a gradual improvement. We were in terrible shape in this province with the amount of debt we had in foreign currencies. That is now under control through a debt management strategy related to the use of derivatives, hedges, a whole range of very complex issues, which comes back to my issue of my ability to audit all of that because it's so complex but it's far more under control.
[9:00 a.m.]
MR. SAMSON: I appreciate your comments about the need for a balanced budget and that. I want to refer you to a bulletin that came out from the Public Sector Accounting Board in January 2003. It was referring to the importance of government reporting and it said:
"Education is needed so that users understand that an annual surplus does not mean that the government has profits and cash that it can now spend. Unless users look at a government's gross and net debt positions and the sources and uses of its cash in addition to its annual results, they will never truly understand whether the government is doing a good job in managing the resources they have entrusted to it and whether their future is being mortgaged to support the present."
I guess the question that comes down to us is, in your analysis in looking at the debt of this province, where the debt is at, where the province is prioritizing and its financial position, are we in a good position now, or are we simply mortgaging to support the present situation that we have now?
MR. SALMON: I don't think we're mortgaging it now, we mortgaged it in the 1980s. The debt problems were hidden because of inadequate financial reporting for many years. We've rectified that problem, so the extent to which this province is mortgaged is visible now. Whether people understand it or not is a good question. Some accountants don't even understand it. But there are indicators, there are other factors. The extent to which the economy improves, the extent to which GDP improves, those are factors in determining
whether or not you can sustain the level of debt you have. It's a problem now, but it can get better without paying down the debt, because you can sustain it. I'm not an economist and I don't want to forecast the future.
MR. SAMSON: I guess the question comes down to how concerned we should be about this debt, if that's the case. The federal government is obviously quite concerned and is trying to make payments on their debt. They've obviously made a massive investment of cash in different social programs, while at the same time putting billions of dollars towards their debt. What should we be doing here in Nova Scotia? We have a government that's telling us that this year we're going to have a balanced budget and we're going to have a surplus, and if we're going to have that surplus, well, don't worry about the debt, pay no attention to it, we're going to provide a tax cut instead, with the extra money that we have.
As the Auditor General of this province, my question to you is, is that what this province should be looking at, providing tax cuts in the face of the enormous debt that we have, or should we be focusing our efforts on addressing that issue?
MR. SALMON: You're asking me to comment on policy issues that are outside of my mandate. I have continually expressed concern that this province's ability to provide the level of health care and education that citizens of this province are demanding is impeded by the level of debt charges that have to be incurred because of the debt. That's an issue that has to be recognized. How it's dealt with is a policy decision that I'm not prepared to comment upon.
MR. SAMSON: I appreciate the difficult position you find yourself in, Mr. Salmon. You've talked about your responsibility to us as the 52 MLAs and your responsibility to this committee. We look to you not to comment on policy but to be able to give us an idea of where the priorities of this province should be when it comes to financial issues, and what areas we should be focusing on. You've done that through your reports, highlighting different areas where there are concerns and where there are issues that need to be addressed, which is why I feel it is appropriate for you to make comment on such an important issue as the debt of this province.
Is it something that we and Nova Scotians should be concerned about to the point that we demand that the government start addressing and rectifying it, not simply stopping it but actually dealing with and paying it down, or should we be sitting back, saying that a tax cut, from your perspective as Auditor General, would provide a better financial picture and a better financial situation for our province and the people we represent?
MR. SALMON: I'm not prepared to comment on whether or not providing a tax cut is a good or bad idea. I will say, though, that I have concerns that the debt load of this province in relation to the financial resources of this province is too high. It's one of the highest - the second-highest - in the country in relation to GDP, and therefore debt is an issue,
debt charges are too high in relation to gross revenues, and I believe that's an issue that needs to be addressed.
MR. CHAIRMAN: It's coming up to 9:07 a.m., and the next 20 minutes belong to the government caucus.
The MLA for Kings West, Mr. Carey.
MR. JON CAREY: Mr. Chairman, I think generally when people are thinking about audits and the Auditor General's Office, they think of finances, money, number-crunching and that type of thing. When you get to the non-financial audits that you mentioned, such as at the Health Department, can you give us a little information - I know it's a broad area, but can you give us a little information - of what you're really looking for when it isn't actually financial, and the change of attitude that maybe your staff - the training or whatever - they may have to change their thinking, or maybe they don't? I'm trying to get a handle on it, between financial and non-financial.
MR. SALMON: Maybe the best way to try to outline that for you is if I ask Ms. Morash to give you a bit of an overview of what we did and what we were trying to do with the health performance indicators.
MS. ELAINE MORASH: Certainly. I will talk first about the health performance indicators, but it is only one of the non-financial kinds of things that we do. We basically have two kinds of audits that we do. We do attest audits, where we go in and we give an opinion on a report. That would be like a financial-statement audit, where we go in and give a short-form audit opinion. That is actually what we did for the health performance indicators. The Department of Health prepared a report, and we gave a short-form assurance or attest-audit opinion on it. Basically what we were trying to do was to tell the user whether or not they can rely on the report that was produced by the Department of Health.
So when we went in what we were looking for was whether there were systems in place to produce this report, to produce the report that met the following criteria, whether in fact it was accurate, whether it was reliable, whether there were quality assurance processes in place to lead to the ability to have confidence in the graphs and charts and indicators that were put in that report. Certainly we had not a lot of expertise in the reporting of health performance, but with our colleagues across the country, we were able to acquire some of that expertise. For example, the federal Auditor General's Office has a person on staff with a Ph.D. in statistics, and we were able to communicate with him and to utilize his expertise in forming our opinion on that particular report.
Now, the second kind of thing that we do is when we go in to do what we call a broad-scope or a value-for-money audit, we're looking at a certain department or a program within a department to see whether it's managed with due regard for economy and efficiency.
We're not going in and auditing the financial statements at that point, but rather we're looking at the management of the program and whether it has good management. So this is something that may or may not have financial implications.
For example, we sometimes go in and look at how the human resource function is managed within a department, so that that draws on the knowledge that we have in that area. We try to find generally accepted criteria or standards that we can look at to evaluate whether or not that human resource function is being managed appropriately. Most of us have general business backgrounds through our education and through previous work experience. Many of us have worked with CA firms at some point in our careers and that kind of thing. So we've had exposure to good management practices outside of the financial area as well as inside the financial area. I'm not sure if that addresses your question, but I'm just trying to talk about some of the difficulties that we encounter.
MR. CAREY: I think, in general, the average citizen would not think of you as doing that type of auditing as such. Further to the audits, you said that about 45 per cent of the things that you feel should be audited are not audited, how do you decide what is audited?
MR. SALMON: We have a process in our office, a set of criteria, and we do long-range planning. Each of these three people has responsibility for a portfolio of departments. The office is divided into three areas. We take all of the entities in each portfolio, we apply the criteria to each of those entities, and we rank them. We attempt to audit, over a reasonable period of time, those that are most material or significant. The situation we're in is that with the resources I have we can't get into all of them within what we consider to be a reasonable period of time, which is five years. We attempt to deal with the most significant ones on a priority basis.
MR. CAREY: At this point in time, would your department know who they're going to be auditing in the next year?
MR. SALMON: Yes, we've laid that out in the business plan.
MR. CAREY: Would the people being audited know that? The people who are going to be audited, how much advance warning do they get?
MR. SALMON: Several months, if not a year.
MR. CAREY: I'm sure, as you've indicated, even though the government has continually increased or given you some extra funding each year, it's not adequate. As we would say in all departments, we would like to be able to give more. When you are selling your department, asking for more funding - I assume when you do an audit, normally you find problems and make suggestions as to how to correct things, as we have seen through various things that you have provided to us. I think the school boards were a good indication of that.
In general, do you have any numbers that would justify you asking for more money and getting more money, where you saved money for the government?
MR. SALMON: Well, Mr. Carey, I have to go back about seven years, when we did an audit of the Atlantic Lottery Corporation and identified that the way the Atlantic Lottery Corporation was accounting for their expenditures that Nova Scotia was entitled to an additional $5 million a year that was, at that time, going to the other provinces, and that's forever. We identified that, and through negotiations Nova Scotia rearranged that arrangement with the other provinces and gained $5 million a year, forever. My budget's $2 million a year. That tells me that we generated $3 million a year, forever, for this province.
[9:15 a.m.]
MR. CHAIRMAN: That's a nice example of value for dollar. Thank you, Roy.
MR. SALMON: That was one staff member in my office who found that.
MR. CAREY: I believe that more auditing needs to be done and support funding for it. I think the selling feature that you just mentioned - and I was wondering if you had any other dollar figures that you would care to share with us, where . . .
MR. SALMON: I'm sorry, I'm having difficulty hearing you.
MR. CAREY: That was significant and the province is very thankful. Say in the last two or three years, do you have any that you would like to share with us?
MR. SALMON: In the last two or three years, not in terms of concrete dollars.
MS. ELAINE MORASH: There was one several years ago, and I don't have the exact figures in front of me, but we were asked to go in and audit the teachers' group insurance plans. These were plans that the province was contributing to and that were administered through a board of trustees, through the Nova Scotia Teachers Union. When we went in to do that audit, yes, there was some question as to ownership of some dividends that had gone into that plan. It was a significant amount of money, in the millions. The last that I heard of what had happened with it, it was still under negotiation in terms of whether the province was going to recoup any of these funds or not. There was a significant amount of funds involved in that particular audit that the ownership was not clear on. They were funds that the province had not seen evidence that the funds had actually come into the trust, and had the evidence been there, the province should have been able to share in some of those funds.
MR. CAREY: I'm sure that you find efficiencies and so on that you can't put in dollars, but are improvements that are actual savings to the group that you've audited.
MR. SALMON: Yes. One other very specific one, and this went on for a long period of time, but when the province decided to go into P3 arrangements for school construction, we got very involved and I can't quantify it but I believe that through our involvement we influenced the negotiation of better deals.
MR. CAREY: Just going through the information that we had been provided, I noticed a topic from your department where fringe benefits were itemized. Can you tell me what fringe benefits are in your department?
MR. SALMON: They're the same as for every other public servant in the government, pension benefits, health insurance, Canada Pension Plan, those sorts of things.
MR. CAREY: That would be the same in any business.
MR. SALMON: They would be exactly the same as any other public servant in any department. It amounts to something like 15 per cent (Interruption) 14 per cent to 15 per cent of salaries.
MR. CAREY: I think it was $140,000 or $150,000. Before I pass to my colleague, you would like - under an ideal situation - to have more staff, and you've indicated four to six, maybe. Is that correct, a four to six staff increase?
MR. SALMON: Four to five additional staff would get me back to the level of 32 that it was 10 years ago, plus some funds to be able to hire specialists on a need basis for particular areas, debt management, pension plans, people who could help us in those areas, and in some cases, going into health. We might want to hire a doctor to give us some advice, or a pharmacist or someone like that.
MR. CAREY: I believe that was what I was leading up to. The budget of Nova Scotia, so much of it is taken for health and education. Do you have specialists or would you be contemplating hiring full-time people whose training leads them in that direction rather than maybe the staff of accountants or whatever, the requirements that are there now?
MR. SALMON: My strategy is to have a complement of experienced auditors, and if we decide to do an audit in a particular area that requires specialist expertise, to go out and hire someone on a contract basis for a short period of time, to help us; not an auditor, a specialist in a field who can give us advice, can review the documentation and advise us whether the decisions we're making about the quality of management in that particular area are reasonable.
MR. CAREY: I appreciate your information. I will pass to my colleague, Mr. Hendsbee.
MR. CHAIRMAN: The member for Preston. You have five minutes, so don't load up on all kinds of questions in the last two minutes.
MR. DAVID HENDSBEE: Mr. Chairman, I will take your advice accordingly. First of all I would like to ask for a clarification in regard to the amount of unaudited entities, you said 45 per cent, 22 entities have not been audited by your department. There's an old business adage about time management where 80 per cent of the revenues may be coming from 20 per cent of your clients, whereas you only have 80 per cent of your clients providing 20 per cent of your revenues. In comparison to that, could you tell me, of those 22 entities, how much is that in relation to the global budget of the province? You talked about doing the most significant or most material departments first and priorities. So of those 22 entities that have not been done, what percentage of the budget does that represent to the province?
MR. SALMON: We just don't have that information.
MR. HENDSBEE: Perhaps that could be provided at a later time.
MR. SALMON: We can attempt to.
MR. CARTER: I think it's very important - again, we were talking about financial matters and how you shouldn't take just one indicator, focusing on just the surplus or deficit is one thing, but there is more than one indicator. There is more than one criterion that we use. The amount of money spent or the amount of revenue is relevant to the selection of an audit, but so also is the amount of the assets and other resources. An example of that is the Treasury management area, where there is over $30 billion worth of Treasury instruments. We haven't been back in there since 1997. It's certainly an area that we've suggested is something that this House should be very interested in, in terms of how well it's managed.
MR. HENDSBEE: But if I could have a clarification to my question at a future time, I would appreciate that. Now I want to talk briefly about - let's examine your complement of auditors. Currently, as of December 31st, you have 28 people in your department, three of them are students. Looking at the degree of expertise and the professional designations, out of those 22 who have designations, four people have two or more designations. I just want to go through the designations and clarify for the record, those positions.
You have 15 chartered accountants; you have three CMAs, certified management accountants; two CGAs, certified general accountants. Now these ones I'm not familiar with, you have one FCGA, could you tell me what that is?
MR. SALMON: That's a certified general accountant who has also earned his fellowship, which is an award for distinguished service.
MR. HENDSBEE: You have three CISAs.
MR. SALMON: Certified information systems auditors.
MR. HENDSBEE: One LLB.
MR. SALMON: A lawyer.
MR. HENDSBEE: That's what I thought it was. One CIA, and it's not an FBI person.
MR. SALMON: CIA is a certified internal auditor.
MR. HENDSBEE: And one FCA, which is yourself.
MR. SALMON: That's me, a chartered accountant with a fellowship.
MR. HENDSBEE: Now you talk about the need for more complement of your staffing. You would like to have four or five more. In which capacity would you like to have those?
MR. SALMON: If I had the funding, I would use it to hire university students, put them onto either the CA, CMA or CGA programs and train them to move up through the ranks.
MR. HENDSBEE: In regard to staff training and professional development - I see in your report anywhere from 6 per cent of your time has been put on that for your staff. How much more expertise would you like your staff to have? And my last question would be, if you don't have enough expertise in certain areas, how many external auditors do you use or contract out for?
MR. SALMON: How much . . .
MR. HENDSBEE: External auditors that you may use from time to time. Do you ever contract for any of these services from time to time?
MR. SALMON: Yes.
MR. HENDSBEE: And how much . . .
MR. SALMON: We contract on an agency basis with a number of CA firms to do financial-statement audits for us.
MR. HENDSBEE: And my last question would be, the competitiveness of your salaries to the private sector, in comparison, how on target are you with the general economy?
MR. SALMON: Like everybody else in government, the private sector is far ahead.
MR. HENDSBEE: Far ahead.
MR. CHAIRMAN: I appreciate the fact that you're giving me 10 seconds to make this quick announcement, because we have more 10-minute rounds which will take us very close to our time. I don't think it's necessary, Mr. Salmon, for you to have a wrap-up today, is it?
MR. SALMON: No.
MR. CHAIRMAN: Let's go back, again, through the caucuses at 10 minutes each. I will turn the next 10 minutes over - it's just past 9:27 a.m. - to the MLA for Halifax Fairview, Mr. Steele.
MR. STEELE: Mr. Salmon, I know you said that you were looking for some suggestions and advice, and we've done our usual thing here, which is mostly asking you questions. So I'm going to take a minute or two at the top here to offer some very general advice from my perspective. The first thing is that to me, to my ear, it's a very serious thing when anybody says that they don't have the resources to fulfill their statutory mandate. That's something that happens a little too often in government. The Americans have a phrase for it that I quite like, they call it an unfunded mandate, where a Legislature will tell somebody to do something but not give them enough money to actually do it. So it's on the books that it's being done, but it is not in fact, in the real world, being done. That's a real problem.
It causes me double concern when I hear that coming from the Office of the Auditor General, that in your opinion you don't have enough resources to do the job that you are mandated to do by Statute. That's because the Office of the Auditor General is so very important. To me, it's not an exaggeration to say that it's one of the pillars of the proper functioning of government. In the past couple of years, I've had the opportunity to travel to the former Yugoslavia twice to talk to new parliamentarians there about our system and how it works, not to say they should be like us but just how it works. It's given me an opportunity to reflect on why it is that our system works, more or less. I was able to identify six, what I thought of as, pillars of government, and if you don't have these six things functioning, you don't have a good, open democracy.
One of them is the Office of the Auditor General, which many emerging democracies don't have. They don't have government financial statements. What financial statements they do have are completely untrustworthy. When the citizens can't know whether the reports of government finances are accurate, you can't have a properly functioning debate and democracy. So that's my first piece of advice, that you need to say that. If you feel you can't fulfill your mandate, you need to say that loudly and clearly and often.
MR. SALMON: Is that not what we did today?
MR. STEELE: I think you did today, and I'm saying that it's great to hear it today. Maybe you've been saying it before and I just didn't catch it. It's great that you're coming here today and saying it, and I would encourage you to say it as often as you can because your office is so very important.
[9:30 a.m.]
The idea has been raised today of an alternative process for the Auditor General's Office to have their budget reviewed and/or approved. I think I would say, in terms of a suggestion, that's something that this committee should look at very seriously. I think that, without having discussed it with our caucus, our caucus would look favourably on the idea that the budget of the independent officers of the Legislature are different and need to be treated differently, not just like any other budget.
Given the fact that this committee is dominated by government majority, the government will have its way, but at least bringing it to a committee like the Public Accounts Committee, it will allow us to deal with the budget request in public, which of course is not something that happens now. What we see is what the government has approved. We don't see what your office has proposed, and we don't see or hear any of the discussion that goes between what your office has proposed and what the government actually approves. I think we would look favourably on an alternative process and would be interested to hear from the other caucuses whether they would as well or whether they're satisfied with the existing process.
Finally, I would just say that your office depends a lot on its moral authority. It gets a moral authority from its independence, from its expertise and its effectiveness. If ever anything happens that interferes with those foundations of your office, then we need to hear about it and we need to hear it clearly and loudly, because without any of those things, your office would lose the authority that it does have.
Having said that, I just wanted to have one quick line of questioning, and that's not about your budget this time but about your powers, your statutory powers. Do you feel that the powers that are granted to you by the Auditor General Act are adequate for you to do what you have to do?
MR. SALMON: Yes.
MR. STEELE: Has the authority of your office ever been questioned in any particular audit?
MR. SALMON: When I arrived in 1992, one of my major objectives was to get amendments to the Auditor General Act to become the auditor of the financial statements of this province, because I did not have that authority. The audit was conducted by a private sector public accounting firm under the Provincial Finance Act, and that private sector public accounting firm reported to the Minister of Finance not to this Legislature. I felt that that was totally inappropriate. I met with the government of the day in 1992, who announced publicly that they would change the Auditor General Act. Then there was an election in early 1993 and a change of government, and it took me until 1997 to get it changed. The Act was finally changed and I became the auditor of the financial statements. I would suggest that my authority was questioned up until 1997.
MR. STEELE: Since 1997, has there been any case where your office's authority has been questioned?
MR. SALMON: No.
MR. STEELE: I hesitate to do this, I don't like to do this, but I'm going to do this. When I asked the question originally, I heard Mr. Carter quietly say yes. I'm just wondering and I will pose the question to him, just to ask him what he's thinking of.
MR. CARTER: These are matters, again, prior to 1997. We didn't do the audit at ALC on our own mandate. We knocked on that door, were turned down, and it took a year and a half before we were requested by the Gaming Corporation to do the work on the Atlantic Lottery Corporation. The issue is, how do you exercise a mandate of an Auditor General in Nova Scotia in New Brunswick? That issue is still out there. If we were to go back and knock on ALC or any other interprovincial entity that has offices outside of Nova Scotia, we can't inflict our mandate on them. They have to be willing to be audited.
The other issues, back in 1991, 1992, we were doing an audit in HR and looking at some material there. We were also trying to get access to some information on the Business Technology Advisory Committee, BTAC, which used to be EDPAC. We had to go through a process, I guess an act of Solomon, with the Deputy Minister of Justice, who said that we should have access to HR but not to the BTAC information. But again, those are prior to 1997.
MR. STEELE: Let me pursue this question of the out-of-province entities. I wonder, Mr. Salmon, if you could elaborate on that a little bit. There's a number of federal-provincial entities, and just off the top of my head I think of the Canada-Nova Scotia Offshore Petroleum Board and there are others. There is a number of Maritime or Atlantic entities, such as the Atlantic Lottery Corporation. Do we have a problem there with the auditing of agencies that cover more than one province? Should we be concerned?
MR. SALMON: We have been able to work our way through any of those issues. As Mr. Carter has indicated, it did take us a year and a half before we were able to get into Atlantic Lottery Corporation, but we did get there. We have not had similar problems with other federal-provincial arrangements or other entities inside or outside the province.
MR. STEELE: So do we have a problem in terms of your authority to audit the entities in which Nova Scotia is a partner, do you think?
MR. SALMON: I don't believe so. Through co-operation and consultation, sometimes it takes a bit of time, but we've been able to manage our way through that. I don't think you could write a piece of legislation that would give me a mandate outside the Province of Nova Scotia.
MR. STEELE: Just one quick question, your staff member who found the $5 million a year, did they get a raise?
MR. SALMON: He has a different job in another department. (Laughter)
MR. CHAIRMAN: The MLA for Dartmouth East.
DR. JAMES SMITH: I just have a couple of short questions to revisit a couple of the items brought up earlier. I want to apologize for calling you a department. I just wanted to get you at a bigger table where you can fight for all this money and get the expert advice and help you need. Also there are others who would say that some of the departments still operate, even though they're a department, independently of government, but that's another issue. (Laughter)
My colleague, Mr. Samson had spoken earlier about the Canadian Institute of Chartered Accountants and their report of January. Just to take that step further, they did speak about education being needed so it's understood that an annual surplus does not mean that the government has profits and cash it can now spend. I too would like to reiterate about the Premier's comments, although maybe misguided, that the debt will not grow, but the fact is that the Minister of Finance has said on many occasions that we now have more money to spend on education and health. Various ministers of government have done that.
We look at Enron and the issue of disclosure, a lot of this arose from accountants, consulting firms that were not being as forthright. So when these things are happening, they are turning around principles of accounting and yet they're public messages that are political and maybe policy, do you feel that the government is adequately informing the people of Nova Scotia about the true state of the finances of this province when they say the budget is now balanced, we can now have more money for health and education and all the things that Nova Scotians value? Do you think that's a role of government? Is it your role to comment on that?
MR. SALMON: There are two key documents produced by the government. One is the annual financial statements, and we've come a long way in the last number of years in terms of the quality and completeness of information in those financial statements. The second key document is the Budget Address, accompanied by the estimates. This is the only province or government in this country in which the Auditor General gives an opinion on the reasonableness of the revenue estimates included in that budget. That has been in place since 1993. I agree that the complexity of those documents makes it hard for a layperson to read them and understand what they say but I would also say that that is the best the government can do and we support the way that information is presented but it needs to be studied and understood.
One of the suggestions I was going to make to this committee is that on May 12th people from CICA involved with setting standards for public sector accounting and reporting are coming to Halifax to make a presentation for most of the day. It's been set up primarily for my staff. We are inviting financial officers from government departments and internal auditors but we certainly could make room for members of this committee if they had an interest in attending and being exposed to what they are doing and perhaps gaining a better understanding of accounting and financial reporting matters. We will provide you with lunch if you would like to come. So I will just throw that in and we will have further communication about that. Trying to expose the taxpayers of Nova Scotia to that level of understanding is a mammoth undertaking.
DR. SMITH: That's a fair comment and I accept that. The other one was one that I had intended to bring up but it's been brought up already a bit, the Auditor General's Report on health outcomes. This has certainly been a challenge across the country. On the home care, and without getting too specific, all records required to audit the data had not been retained by the Department of Health. Do you think that has been improved now? I guess maybe my question might be going to Ms. Morash on that. Out of this report, are there indications, and do you have evidence that there are some changes in the way business is being done in these areas where records are not being actually even kept in some areas like home care?
MS. ELAINE MORASH: Certainly the home care area was the weakest of the provincial systems that we looked at as part of that project. There were many different national systems that were used to record the outcomes for certain other programs but there were some provincial ones and home care was certainly the weakest of those. We haven't gone back to revisit to see if they have made improvements. Certainly at the time they indicated that they would be making changes in the Home Care Program to ensure that there were better information systems and that the necessary documents would be retained in the future. So yes, it is my understanding that the systems are being improved but we haven't audited that.
MR. CHAIRMAN: Mr. Samson, three minutes.
MR. SAMSON: Mr. Chairman, I wanted to, just for clarification purposes, in one of my questions I did indicate the statement made by the Premier last spring where he said we are introducing a balanced budget and that the debt will no longer grow from this day forward. Is it fair to say that we are going back into the House March 27th, we are going to have a Throne Speech, we are going to have a budget and technically we could go to a summer election and still have to wait until October before we know whether the Premier's statement was accurate or not. Is that a safe assessment to say?
MR. SALMON: That is correct.
MR. SAMSON: Quickly, I know you have been doing some audits of different departments. I'm curious about specific programs, especially programs that touched Nova Scotians and one of the timely ones which I'm curious whether you have ever looked at or whether you would consider looking at, for example, is the oil rebate program that has been put forward by the government. We've certainly been made aware of the fact that the program in the last few years has certainly not had the success it was intended to have.
[9:45 a.m.]
I guess I'm curious, and I'm sure many of my own constituents would be curious, to see whether the Auditor General has looked at this or whether you could look at this to see how many people were eligible for this, how many people received the benefit, and even whether your department could look at what sort of increased revenues have come as a result of higher fuel taxes and oil taxes. For example, the Minister of Finance tells us that it's a negative growth. He's saying that even though gas prices go up, well it's costing the government more money to gas up their own vehicles, so it's a negative growth.
I know back home in Richmond County, you won't find one person who believes that statement. So I'm curious as to whether your office has looked at this or whether you would be willing to look at the oil rebate program and look at what sort of impacts higher gas prices and oil prices are having on the provincial revenues, so that Nova Scotians have a better idea of what the true state is rather than just the Minister of Finance telling us it's a negative growth.
MR. ALAN HORGAN: I can tell you no, we haven't looked at either of those particular areas in the last little while, neither the oil rebate program nor the ramifications of higher tax revenues from gasoline sales, but I would thank you for bringing that to our attention as being a specific interest that you have. I will certainly consider it in the planning of future audits, to see if they fit into the priorities that we're establishing.
MR. SALMON: If that's an issue that you wanted to pursue or there are similar issues like that that this committee wants to pursue, it would be appropriate to call the Department of Finance to come and appear before you to explain the background to those kinds of issues.
MR. CHAIRMAN: It's almost 9:48 a.m. The next 10 minutes belong to the government caucus.
The member for Pictou East.
MR. JAMES DEWOLFE: Mr. Salmon, we now have in Nova Scotia one of the most open and transparent accounting practices, indeed, in the country. I'm talking about the move toward Generally Accepted Accounting Principles. Having said that, I think most would agree that this government has done more to ensure the accountability of spending the taxpayers' money than any other government in the history of this province. Having said that, I wonder, could you give us some indication of what more we could be doing to improve the accountability of the government for the taxpayers of Nova Scotia?
MR. SALMON: I would suggest that financial reporting is one thing, and we've come a long way over the last number of years, starting from 1993 onwards, it's just been a gradual improvement year by year. Where improvements can be made would be in the area of performance reporting. The report on the health indicators is an example of that, and what I guess I would describe as the first step in that direction. It's not going to be an easy task. There's ongoing research being conducted by our Canadian Council of Legislative Auditors, by the controllers, by other bodies, in terms of how best to report on a government's performance.
Alberta, a number of years ago and continuing, has made efforts to report on the quality of education and the success of the education system. We need to do more in those areas to allow people to judge and make comparisons, jurisdiction to jurisdiction, on the quality of our various programs and performance. The issues around the environment, the school systems, health, and so on, that's where I would urge government to focus.
MR. DEWOLFE: Performance reporting.
MR. SALMON: Performance reporting, like this.
MR. DEWOLFE: So, we've talked about areas where we could maximize our efficiencies. What direction are you moving in with regard to maximizing the efficiency of your operation within the Auditor General's Office?
MR. SALMON: We are working with our colleagues across the country on better auditing processes, doing better risk management in terms of our audits to minimize the number of hours it takes to do an audit, trying to utilize information technology to a greater extent, and we've made an awful lot of progress in that area but we can still improve. There's a number of areas in which we can get better value for dollar, value for money, in the way we do our audits and where we audit in terms of the criteria we use to determine where to spend our scarce resources.
MR. DEWOLFE: Another area, since 1999, well since this government was formed, your office has in fact received budget increases each year. Isn't that an accurate statement?
MR. SALMON: Yes, we have.
MR. DEWOLFE: Which is notable considering the current fiscal situation faced by the province. Indeed, most departments have lost ground with regard to their working capitals and their budgets. I think, contrary to some of the comments that were made by the Opposition today, this indicates the government's commitment to the importance of your mandate. I expect that that will continue. We do understand the importance of the job and the role that you play for the taxpayers of this province.
You've indicated ways that you're going to maximize the efficiencies, you've indicated ways that you're going to attempt to do that. But the efficiencies of audits, are you talking with your colleagues across the nation to find better ways of maximizing the frequency of audits? Obviously you can't audit every one of those 40-some per cent that you're not touching, but that's not really your mandate, to do everyone. You determine which ones would be best audited. What are you doing with regard to that?
MR. SALMON: We have ongoing discussions with our colleagues across the country. We review their procedures. We've moved to a system of what we call peer review, where one office comes in and reviews the work done by another office, and makes suggestions for improvement. I agree with you, we can't audit everything. Our concern is doing enough to fulfill the mandate. All we're saying is we're concerned that we don't have enough coverage.
MR. DEWOLFE: Certainly we would all like more funds to work with, every department would, and indeed our office would.
MR. SALMON: Yes, absolutely, and I'm not suggesting that I should be treated any differently than the rest of government.
MR. DEWOLFE: Mr. Chairman, I know my colleague, the member for Preston, is chomping at the bit to ask a few lengthy questions and receive short answers.
MR. CHAIRMAN: He's got a minute and a half and I'm holding him to it.
The member for Preston.
MR. HENDSBEE: Mr. Chairman, in regard to some of those outside agencies, one I would like to ask about is the CCRA, the former Revenue Canada. Since the harmonized tax, we now have our federal agency collecting our sales taxes here. Do you believe it would be more efficient for us to have more tax collectors in this province, either hired by ourselves or through the CCRA to work for us or perhaps some more auditors to see that we are having
a better bang for our buck from the CCRA and we are getting proper revenues being collected?
MR. SALMON: We have an arrangement with the federal Auditor General to give us an opinion on the quality of CCRA's processes and systems in terms of tax collection and we rely on the work that the federal Auditor General does. I really have no opinion as to whether or not more tax collectors would result in more taxes. We expressed concern that within Nova Scotia with regard to gasoline taxes that there wasn't enough auditing being done. That was in my last annual report but I distinguished that from any comment on CCRA.
MR. HENDSBEE: In light of the federal scandals?
MR. SALMON: Well, I can't comment on the federal scandals but the federal Auditor General is certainly doing a good job at picking them out.
MR. HENDSBEE: I believe my time has expired.
MR. CHAIRMAN: I'm glad you can tell time. Thank you, David, and I appreciate that. I understand the fact that, of course, you had some questions and I'm glad you had some time.
On behalf of the committee I would like to thank you, Mr. Salmon, and of course thank Mr. Carter, Mr. Horgan and Ms. Morash for their attendance today. Your continuing professionalism is a reflection on your work. I also note that Monday, May 12th - a good day for some of us perhaps, because of it being Monday, although we could be in various states of readiness at that time - we look forward to a notification on that May 12th invitation. (Interruption)
Yes, go ahead. Any comments of conclusion.
MR. SALMON: With regard to May 12th, our intent is to run a session in the World Trade Centre from 8:00 a.m. to 3:00 p.m. so you would be welcome to attend all or any part of it. We will be providing lunch that day. It would be an opportunity for you to meet some of my other staff and financial officers in departments and people from CICA. I would also like to say that we really appreciated the opportunity today to bring this forward to you and have this kind of a discussion with you. It allows us to talk about the office and how we operate and what some of our concerns are. I thank you very much for your indulgence in having this meeting.
MR. CHAIRMAN: I call for a motion of adjournment.
MR. HENDSBEE: I so move.
MR. CHAIRMAN: We stand adjourned.
[The committee adjourned at 10:00 a.m.]
