HANSARD

Printed and Published by Nova Scotia Hansard Reporting Services

Ms. Maureen MacDonald (Chair)

Mr. Chuck Porter (Vice-Chairman)

Mr. Alfred MacLeod

Mr. Keith Bain

Mr. Graham Steele

Mr. David Wilson (Sackville-Cobequid)

Mr. Keith Colwell

Mr. Stephen McNeil

Ms. Diana Whalen

[Mr. Alfred MacLeod was replaced by Mr. Patrick Dunn.]

[Mr. Stephen McNeil was replaced by Mr. Wayne Gaudet.]

[Ms. Diana Whalen was replaced by Mr. Harold Theriault.]

In Attendance:

Ms. Mora Stevens

Legislative Committee Clerk

WITNESSES

Office of the Auditor General

Mr. Jacques Lapointe

Auditor General

Ms. Elaine Morash

Assistant Auditor General

Mr. Alan Horgan

Assistant Auditor General

Ms. Angela Cook

Audit Manager

HALIFAX, WEDNESDAY, JANUARY 24, 2007

STANDING COMMITTEE ON PUBLIC ACCOUNTS

9:00 A.M.

CHAIR

Ms. Maureen MacDonald

VICE-CHAIRMAN

Mr. Chuck Porter

MADAM CHAIR: Good morning, I'd like to call the committee to order, please. Today we have with us the Auditor General and members of his office to speak to the report of 2006. We will proceed in the usual fashion with introductions from members.

[The committee members and witnesses introduced themselves.]

MADAM CHAIR: I want to just tell members of the committee, watch for your light. Hansard is trying to figure out where different people are speaking from, and I think they probably have that sorted out now. Nevertheless, watch for it. If you want to be on the record, I think it's good to have the light on.

Good morning, Mr. Lapointe. We will open the floor to you for some opening remarks, and then we will proceed with the usual method of questioning from the members.

MR. JACQUES LAPOINTE: Madam Chair, thank you for the opportunity to meet with you today to discuss my report. As you know, my December 2006 report was tabled in the House on January 10^th. This is a second report issued for 2006. In addition, I also issued my 2005 performance report and 2006 business plan, an opinion on the revenue estimates included in the budget, and an opinion on the government's consolidated financial statements.

In keeping with my role to contribute to improve public sector accountability and performance, the report contains recommendations for improvements in each area audited, a total of 29 recommendations. It also includes responses received from the audited organizations. These responses do not always concur with our findings, but for the most part they accept the recommendations and indicate an intention to take action on them. The report represents some very high-quality work done by my staff, and I want to acknowledge their hard work and their professionalism. I wish to recognize, as well, the co-operation we received from staff in departments and agencies throughout the conduct of our audits.

The report deals with audit work completed by my office in the second half of this year. Its eight chapters include audits completed at the Department of Finance, Public Service Commission, the Department of Health and some district health authorities, Justice, and Transportation and Public Works. The report also includes a chapter on our follow-up audits, completed in 2003, and a chapter with summary comments on my office's annual review of financial statements and management letters of government entities.

My three senior staff, Claude Carter, Alan Horgan and Elaine Morash, were responsible for and deserve the credit for the high quality of work found in the report. I'm sorry to say that Claude is ill today and can't be here. Angela Cook is here in Claude's place. Angela is our manager in charge of financial audits, specifically the revenue estimates and consolidated financial statements. Angela, Alan, Elaine and I will be happy to answer any questions you have.

MADAM CHAIR: Thank you very much. The floor is now open to Mr. Steele of the NDP caucus. You have 20 minutes.

MR. GRAHAM STEELE: Thank you very much, Madam Chair. I want to thank you, Mr. Lapointe, and your staff for another very interesting report, lots of food for thought in here. I'm not going to spend a lot of time today on the single topic chapters, because I believe the committee will be returning to those in future sessions. What I would like to start with today is this issue of access to information, and then I'm going to move on to the Commonwealth Games bid. I would also like to spend some time on the issue of the year-end spending in the last couple of days of March 2006.

Let's start with the access to information. This is dealt with very briefly in your report, on Page 20, Paragraphs 2.36 to 2.38. It's dealt with very briefly but, in my view, and I think in the view of many members of the committee, this is very significant, very troubling that your office should be denied access to information that you feel you need to do your job.

What I would like to start with then is simply an open-ended question. You say in your report, Paragraph 2.36, ". . . we were not provided access to certain information requested." I would like to ask you to elaborate on that and specify for the committee, what information did your office want that it was denied?

MR. LAPOINTE: The information specifically referred to there referred to information during the course of the revenue estimates review and the government financial statements review. I believe that in getting into more detail on that, I'd like to pass that initially to Angela Cook, who I believe can provide more detail.

MADAM CHAIR: Ms. Cook.

MS. ANGELA COOK: I can give you some examples of information that we requested that was denied, beginning with the revenue estimates review. During our planning of this assignment we indicated that we were going to expand the scope of the review from the traditional total ordinary revenue figure that is disclosed in the budget. We were going to expand that to include all revenue, as defined by the Generally Accepted Accounting Principles, which meant that it would bring in recoveries, fees and other charges, and other revenues into the scope of our review.

Now, we requested some information related to this new revenue in order to conduct a review, and access to some of the information that we requested was denied. The Department of Finance did not feel that the expanded scope was within our mandate and, as well, they were concerned because some of the information requested would require us to have some knowledge of the budgeted expenses and they did not want to provide us with that information.

MR. STEELE: To your knowledge, this denial by the Department of Finance, did that go right up to the deputy minister level?

MS. COOK: Yes.

MR. STEELE: This may be better directed to Mr. Lapointe. What, in principle, does your office do when a unit of government raises some objection to producing information for which your office asks? How do you handle that?

MR. LAPOINTE: We handle that by referring them to the sections of the Auditor General Act that provide our access to information. The access to information is for any information we feel we require in order to conduct our work. It is not limited. Quite often we'll find that people at staff levels simply are not aware of the facts and that straightens the issue. Sometimes it's more difficult, but that's our approach to it and that's what we employed in this case as well.

MR. STEELE: Now, this is a case where, notwithstanding the statutory provisions basically giving you free access to any information that you deem to be necessary, we have a case here where the Department of Finance said no, they disagree with you and as I understand it, in the end never did give you the information you were looking for. Is that correct?

MR. LAPOINTE: I would say that's correct, the information in relation to the revenue estimates we're talking about here we did not see and, as a result of that, we qualified the opinion on revenue estimates, which was the scope limitation.

MR. STEELE: Is there any other department or unit of government, other than the Department of Finance, that has denied access to information sought by your office?

MR. LAPOINTE: I wouldn't want to give a definitive answer for all time, but I'd say recently in the issues we're dealing with here would be Finance and Treasury and Policy Board.

MR. STEELE: And what information has been denied to you by Treasury and Policy Board?

MR. LAPOINTE: Can I ask Angela to deal with that as well?

MS. COOK: With regard to our financial statement audit, we had some denial of information from Treasury and Policy Board. One of the procedures that we complete as part of our audit is to review the systems and controls around the monthly management monitoring of the budget and forecast, and in order to do our work we trace the flow of information from the departments to Treasury and Policy Board and then the reports that are created by staff at Treasury and Policy Board that are used for further use.

We were told that there was budget information included in a PowerPoint presentation to Cabinet. We requested to review the presentation and that request was denied. We are also advised that there is a staffing report prepared from a monthly summary of full-time equivalent staffing information that is gathered through the monthly monitoring process and that report is provided to the Public Service Commission. We requested to look at that report and again were denied access due to confidentiality.

MR. STEELE: Now, Mr. Lapointe, my understanding is that it's your office's position that you will continue to work with the Department of Finance and Treasury and Policy Board to try to resolve these difficulties. I want to say today that frankly, I don't think you're being tough enough with them. I think that as long as you and your office treat this as a matter of negotiation, they win, because as long as negotiation is underway, your office doesn't have the information you're looking for.

I'd like to quote to you, for the record, Section 10 of the Auditor General Act, and I've given copies to the clerk so that she can distribute it to members of the committee. It says, "Notwithstanding the provisions of any other Act, every officer, clerk or employee of an agency of government shall provide the Auditor General with such information and explanation as the Auditor General requires and the Auditor General shall have free access, at all times, to the files, records, books of account and other documents, in whatever form, relating to the accounts of any agency of government."

Now to me that seems pretty clear. The most important point about it is that it says you can have access to the documents that you require, and what disturbs me about this particular part of your report is that the Department of Finance and the Treasury and Policy Board seem to think that the information you've requested is a matter for some debate or negotiation. Whereas the Act says very clearly that if you want it, you get it, and if they have an objection they can register an objection with you, explain their objection, have some discussion with you perhaps about what you're going to do with the information, but they do not have the right, by law, to withhold information from you.

Now given that statutory provision that I have just quoted to you, why is it that you are treating this refusal of access as a matter to be discussed and negotiated with those departments, rather than laying down the law with them?

MR. LAPOINTE: Mr. Steele, I would say that, to begin with, I agree with your interpretation of that section of the Auditor General Act, that it is worded to give me unlimited access to information in the government.

[9:15 a.m.]

As to my approach to dealing with access issues, perhaps I'm not being tough enough, but I would say that my approach to it is simply that I want, first, to initiate discussions with senior management involved in order to clarify the issues and to put everything on the table, and to put the issue on the table with them and to see where it goes. I'm not categorizing that as a negotiation, but a discussion. My approach to it is, first, to report it in my report, and then to initiate discussions as a follow-up, which I will be doing fairly shortly, in the next few weeks.

MR. STEELE: The Auditor General Act contains no dispute resolution mechanism. It contains no process for you to follow to deal with disputes, and I would suggest to you the reason why there is no dispute resolution mechanism is because the Legislature never contemplated that there would be this kind of dispute. The Act says that if you require the information, you get it - no debate, no discussion, no negotiation. Well, I'll leave it there and just say that I really think your office needs to be tougher about this and make it clear to those departments that if they have an objection, they can register it but they cannot express their objection by refusing to give you the information.

I'd like to turn, then, to another part of Chapter 2 of your report, and that is concerning the commitment letter for the Commonwealth Games. When you met with us in camera, and then again when you held a news conference for the release of your report, you had indicated that you were not comfortable actually releasing that letter. Late last week, the Premier's Office did release the letter, and I've given copies to the clerk and I've asked her to table them. It's a letter dated November 28, 2005. It's signed by John F. Hamm, it's on the letterhead of the Premier of Nova Scotia. The operative paragraph reads as follows:

"If Halifax is selected in the fall of 2007 as the host of the 2014 Commonwealth Games, the Province commits to funding the Games as equal partners with the Municipality as outlined in the bid budget. The Province's financial commitment represents 24.8 % of the total Halifax 2014 Games budget as submitted to Commonwealth Games Canada."

Mr. Lapointe, my first question to you is simply, could you state for the record, what is the difficulty that your office had with the way this particular letter was treated, from an accounting point of view?

MR. LAPOINTE: The difficulty that we had with this was one of the approval process. This is a commitment by the government for funding. The rules of the Provincial Finance Act, specifically in Section 59C, indicate an approval process for this kind of commitment. It involves the request going to the Minister of Finance and from there through to an Order in Council, prior to it going out. That process was not followed, and that was our issue.

MR. STEELE: What is the purpose of that process? What do we lose when the process for making this kind of financial commitment has not been followed?

MR. LAPOINTE: We lose accountability and clarity in the process; in fact, a requirement - and by accountability, I mean a requirement to follow the due process as outlined in the Provincial Finance Act.

MR. STEELE: In this portion of your report, on Pages 18 and 19, Paragraph 2.35, it says, ". . . we specifically inquired as to the existence of a financial obligation related to the 2014 Commonwealth Games bid." Now, does that suggest that you believed that there was a commitment out there? What caused you to specifically inquire as to whether such a commitment had been made?

MR. LAPOINTE: As I recall, it was simply part of the general inquiries about commitments in the course of a review or an audit. We examined possibilities and followed through on them. It wasn't any specific thing that pointed us in that particular direction.

MR. STEELE: You go on to say, "It was indicated to us, by various staff throughout government, that there was no financial obligation related to the Games." Who, and which units of government, told you that there was no commitment?

MR. LAPOINTE: Who told us there was no commitment? I can't recall exactly who that was, but it would have been staff primarily in the Department of Finance. We were dealing with the financial statements.

MR. STEELE: So to the best of the knowledge of the Department of Finance, there was no such commitment. Then you go on to say, "Late in the audit process, a letter dated November 28, 2005 and signed by a member of the Executive Council was discovered and brought to our attention by staff." Now this is quite astonishing, that a commitment that could run into the hundreds of millions of dollars was not known by the Department of Finance and surfaced very late in the audit process, apparently to the surprise of Finance staff. What do you know about the process by which this letter was "discovered"?

MR. LAPOINTE: I don't have any knowledge of how it was discovered. I only know that when it was found, it was brought to our attention at that time. I don't know if anyone has any more detail on that.

MS. COOK: No, I don't.

MR. LAPOINTE: It was brought to our attention by the Department of Finance, and they indicated that they had simply just found this out and were equally surprised by it.

MR. STEELE: Now, as a result of this letter being "discovered", a note was added to the Public Accounts for 2005-06, but, really, it says nothing. It simply says, on Page 93 of the Public Accounts, Note 12 to the financial statements: "The Province has communicated its intention to provide a level of financial commitment as it relates to the 2014 Commonwealth Games. The potential commitment, if any, cannot be determined at this time as the international bid and Games budgeting processes are yet to be finalized." which of course tells us precisely nothing.

We know now that there is a letter committing the province to 24.8 per cent of the total budget. We don't know what the total budget is, but we can certainly surmise it is in the hundreds of millions of dollars. It's likely to be anywhere from $800 million to $1 billion, somewhere in that range. So this is a commitment on the province's part of something like $200 million to $250 million. Granted, Halifax may not win the Games, so there may be no commitment at all, but is that vague note in the notes to the financial statements, is that really sufficient from an accounting point of view to capture this commitment that has been made?

MR. LAPOINTE: From an accounting point of view, the status of this letter and the commitment is that it's a contingent liability. That is fairly clearly defined in the accounting standards. In fact, I can read you the definition of a contingent liability . . .

MR. STEELE: It's not so much the definition I'm after, it's the lack of information. We know that the province's share is going to be something like 24.8 per cent, give or take a little bit, and we know the Commonwealth Games budget, give or take a little bit. So, within certain bounds, we know that the broad range of the province's commitment is going to be $200 million to $250 million. Why could that information, why should that kind of information not be provided to members of the Legislature? Why is it such a secret?

MR. LAPOINTE: The prevailing facts around this was simply that the nature of a contingent liability and what the Finance Department, how it interpreted the situation, is that there was sufficient uncertainty about it. This was a commitment to fund an undetermined amount of something which may or may not occur - that, by definition, a contingent liability. The uncertainty of it - the existence of it and the uncertainty of it is what they disclosed in the financial statements. They could have disclosed more or less, but we judge that in fact they have met the requirements of accounting in this case.

MR. STEELE: I'm going to table an article from the Halifax Daily News from last Saturday, January 20^th. The headline is, "Province's Games pledge isn't guaranteed" and the subheading is, "Hamm's letter was intended as a bargaining chip for 2014 Commonwealth Games bid".

Now with a very liberal paraphrasing of what is in the article, the essential position of the province, it now appears to me, is that this wasn't a commitment at all, it was simply necessary in order for the Halifax bid to go forward. They had to show something from the province but that it's really not a commitment at all, that it could change. Those quotations are from Scott Logan, the CEO of the Games bid and also from Barry Barnet, the Minister of Health Promotion and Protection.

In your view, very simply, this letter of November 28, 2005, that is referred to in your report, is this or is this not a financial commitment on the part of the province?

MR. LAPOINTE: We felt that this was a sufficient financial commitment to warrant disclosure. However, as to the firmness of it, it is not for me to say - things change over time. All we knew was at the time the level of commitment that was made was a sufficient commitment by the province as to warrant disclosure in the financial statements. The uncertainty of it meant that it needed to be disclosed as a note.

MADAM CHAIR: Thank you. Time has expired.

Mr. Colwell for the Liberal caucus. You have 20 minutes.

MR. KEITH COLWELL: Thank you very much, Madam Chair. First of all, I want to thank the Auditor General and the staff for the fine work they do in the province on behalf of the Legislature and the people of Nova Scotia. It is a difficult job, especially when you run into roadblocks in some areas with government getting information that you rightfully should have without hesitation.

I want to continue on with the line of questioning and get some information again on this Commonwealth Games letter that was sent by Premier Hamm, committing 24.8 per cent of the total cost. Now this bid process, when this was going on - which is going on at the present time - is eating up a substantial amount of money, I understand. I don't have any idea how much, but a substantial amount. Is the province in that, to your knowledge, to the 24.8 per cent tune now for the pre-Games bid process?

MR. LAPOINTE: I don't think it is for me to say whether the government is committed or to what extent or how much - that really is not my issue with this whole letter. I have two issues; one was that the proper process had not been followed and that was my primary concern and that was what I reported. It could have with a letter on the Games, it could have been a letter on any other commitment. My concern was that executive commitments needed to follow proper process. The other concern that we had was appropriate disclosure of it as a contingent liability in the financial statements and that was followed. As to any issues around this, it is really not for me to say.

MR. COLWELL: The contingent liability on this issue and again, it is hard to say whether - I'm told - the Games are awarded and if they are awarded to Nova Scotia, this is a substantial amount of money that has to show up some place in our books. Whn the Premier of this Province - even though he didn't follow the proper process in this system - writes a letter and commits to spending hundreds of millions of dollars on a proposed bid or actually on the Games - because that's really what he committed to, if they are given to Nova Scotia - should that be accounted for in the present financial statements, say the year that is coming, this year in the budget, to allow for that? That's quite a significant hit on the provincial budget and that could potentially not balance the budget.

MR. LAPOINTE: This would not be accounted for as a liability until such time as it is actually confirmed and committed to, so at the present time it is simply a contingency and with uncertainty. There would be no accounting at this time and no accounting until such time as a firm commitment is made, the bid is won, and negotiations are concluded as to what governments are paying for what and then a commitment actually exists at that time.

At that point Finance has to look at what is the appropriate way to record whatever is committed to at that time.

MR. COLWELL: I fully understand that but in reality, in terms of the government actually preparing their books and getting ready for things and trying to balance the books as they do, this is a real serious concern to move forward with, and with a real possibility that it could happen. Basically, it is $0.25 billion, that's a lot of money, possibly more because the price seems to go up every time you talk to somebody or hear about it. It could mean that some future government, whoever it may be, might be sort of hit with this and not be able to balance the books down the road - that could be. Is that a fair assessment of what could possibly happen? There are a lot of "coulds" in here, a lot of possibilities.

[9:30 a.m.]

MR. LAPOINTE: Well there are a lot of possibilities, I mean depending on everything from getting the Games to not getting them. The concern in the future, when and if a commitment becomes firm - at that point, proper accounting has to be taken care of. At the present time, I should reiterate that my only concerns are the processes followed around the letter, and that was really what I was reporting. I did not have an issue with the accounting of it because it was properly accounted as a contingent liability and that was part of the discussions we had with the Department of Finance when this came out. Those are the only concerns I would have with it right now.

MR. COLWELL: I want to go on to another topic now. In Section 2.4 of the report, deferred revenues, I would like to deal with the wait times reduction fund, if I may. In 2004-05, the federal government gave the Province of Nova Scotia $122 million in wait time reduction funds. We have used only $18 million each year for over the past two years, for a total of $36 million. So if I understand this correctly, there are still $86.1 million sitting in a fund in the provincial accounts somewhere.

Is there any assurance that this money will not be swallowed up by some other fashion or other or some place else other than wait times, or spent outside of the health care system all together? To put it another way, is there any accountability or reporting mechanism in place to ensure that this money is being spent for the purpose intended?

MR. LAPOINTE: I think I'll ask Elaine to answer that question.

MS. ELAINE MORASH: That money came forward as part of a First Ministers Accord on Health. There was a 10-year plan on strengthening health care that was agreed to by all of the First Ministers. So the process for distributing that money was that it was transferred to a trust fund and then the provinces removed the amount from the trust funds as they decided on how it was going to be spent and as they made the expenditures. So the $86 million is currently sitting in the trust fund.

In terms of accountability mechanism, this area of federal-provincial relations, I guess, is quite sensitive in terms of how much accountability the provinces have to the federal government for expenditure of these funds. Basically what happens is that as the funds are expended, usually the provincial governments make press releases, they make announcements in terms of how the money is being spent. That is more or less the substance of the accountability that exists on these funds, that it is basically the provinces announcing how the funds are spent, as they are spent.

You may recall that the diagnostic and medical equipment fund is a similar kind of arrangement and that the Department of Health made several announcements when they spent the money from those funds. So basically that's the kind of accountability. It is the provinces reporting publicly to their citizens on how the funds are being spent and the federal government, I guess, has access to those public reports and that's the nature of the accountability.

MADAM CHAIR: Mr. Colwell.

MR. COLWELL: So basically what you've indicated is that there doesn't seem to be an agreement, if I understood that properly, between the federal and provincial governments to audit this and go through it to make sure the money is spent where the federal government negotiated that it should be. I know in the past, the province has taken a lot of money that has come in and spent it in other places.

MS. MORASH: That's correct. It's a different kind of federal-provincial agreement. You're probably more familiar with the ones that would govern something like infrastructure spending, for example, where there are firm agreements, where they include audit provisions in the agreements, the details are all there. These federal-provincial transfers for health care were not governed by the same kinds of formal agreements with detailed accountability requirements. Rather, what they were was a joint press release by the First Ministers at the conclusion of a meeting on health care, and the accountability is not as formalized as it is in a standard federal-provincial agreement that you would be more familiar with. I guess they are the product of the sensitivities that come from federal-provincial intergovernmental relations on health care, and who has control of health care, which is the provinces, and who provides the funding and what it's there for.

I think the purpose here was to maintain the flexibility of the provinces to spend the money for those aspects of health care where it was required. All the provinces are in a different situation in terms of what they need to do to be able to reduce wait times. For some provinces, it's to buy more equipment; for some, it's to hire more staff. They're all in different situations, and at the end of the day, my understanding of what happened was that they wanted to maintain the flexibility of the provinces to spend the funds where

it was most required in their individual health systems, and that's why the agreement took this form.

MR. COLWELL: On another topic, but somewhat related, the funding for additional early learning and child care, which was received in 2005-06, was in the amount of $20.4 million. The government did not use a single dollar of this amount - the money could go a long way in helping early childhood learning programs. Did you have any discussion with the department as to why they did not use one single dollar of this federal transfer?

MR. LAPOINTE: I don't believe we have, no.

MR. COLWELL: I just want to clear the record then. In 2005-06, last year, the provincial government received $20 million from the federal government for early childhood learning that was allowed to sit in a bank for the entire year. Were you aware of that? Is it still sitting in that account; is the money still there or not?

MR. LAPOINTE: As far as we know the money is accounted for, as you see it here. It was not spent. That's why it's still deferred.

MR. COLWELL: When you go through these things, the federal-provincial agreements, the Auditor General basically has to wait until the money is spent, or not spent, before you can report on it. Is that correct?

MR. LAPOINTE: I'm not sure that's exactly right. We report on it to the extent - in this case, we were looking at it from the accounting point of view to make sure that in fact monies were recorded in accordance with the way they are currently being spent or deferred, or not spent. We were simply looking at whether they were being treated correctly and reported correctly. That is our concern in terms of a financial statement audit. That's all we were doing here.

MR. COLWELL: With the funds like this, and in this case it's $20 million, there's $86 million in the wait times, when they do the financial statements for the province, how would they account for those? Would they account for those as an asset that would make the books look like they're balanced more than if they had spent the money? How would that affect the financial statements of the province? That's over $100 million. How would that affect the financial statement from year to year in the province? Would it make it look like the books are balanced, although they may not be?

MR. LAPOINTE: It wouldn't affect the balance of the books. It's recorded as an asset, which is what a deferred revenue is. It shows up as a debit on the balance sheet, if you prefer, as a balance sheet item, and then becomes an income statement item as it's spent. As they spend the money to cover these expenditures, the revenue that's shown

here goes from the - liability is what I meant to say - from the liability section on the balance to income, so the income shows up only when the matching expenditure is there. That's the meaning of the numbers that you see in front of you. It's a deferral of the recognition of the income until such time as the related expenditure occurs.

MR. COLWELL: So I can understand it in general terms - because I'm not an accountant, of course, I'll leave it to the experts such as yourselves - basically, that money has no impact whatsoever at the present time, when it's just sitting in an account, or whatever it is, in the financial statements of the province until it's actually expended?

MR. LAPOINTE: That's correct.

MR. COLWELL: And when it is actually expended, it's just an equal transfer, it's money in and money out, sort of, on paper.

MR. LAPOINTE: That's right.

MR. COLWELL: I just want to clarify that, because there has been some issue over the last several years about how the province has balanced the books and changed the process they used to actually balance the books. If you looked at the old system that was used forever here, indeed, they may not have balanced the books. I've had an opinion from the Auditor General's Office that verifies that, in past meetings, prior to your coming to the province.

There has been a lot of discussion. We had a discussion, too, about the different recommendations that the Auditor General's Office has put forward to different departments on things they should be tightening up, really solid recommendations as far as I could see. In the past three years, only 48 per cent of those have been completed. Do you feel that this is prudent, where 52 per cent of these recommendations are still not completed? Would you like to see it move further and faster in other areas? It's important - I feel it's important, because if your department is identifying things that should be handled better, I think it would be worthwhile spending the resources in government to make those things happen for the sake of Nova Scotians, and accountability.

MR. LAPOINTE: I would say - that's Chapter 7 you're referring to - I was in fact disappointed in the results of this follow-up, that these are recommendations from three years ago. Overall, less than half were in fact fully implemented; others were in process to some degree or other. My recommendation was that the recommendations made need to be more rigorously addressed by the government. I feel that more action does have to be taken to ensure that the recommendations made in the Auditor General's Reports are in fact acted upon more rapidly and more rigorously. I also recommended in the report that the government in fact, in whatever management area, needs to take a more rigorous

approach to monitoring and following up on implementation of these recommendations, and perhaps should be reporting to the House on actions taken.

MR. COLWELL: I just want to clarify this. You can make the recommendation, but the government can decide whether or not they want to move forward with them.

MR. LAPOINTE: That's correct. It's up to the government to decide whether to implement the recommendations, to agree with them or not, to implement them, to defer them, or not to implement them. That's government's decision. We merely make our recommendations to the departments and to the House, and then it's up to government to decide yes or no and to what extent.

MR. COLWELL: Has there been any unwillingness from the government or any discussion with your office from any government department that says, no, we don't believe in your recommendation, it's not something we think we should do, and here are 25 reasons why? Have any discussions like that happened?

MR. LAPOINTE: There is a certain percentage, 7 per cent, we report in the chapter where the department simply does not agree. Now, I would expect that there would be cases where there's a disagreement about our recommendation, there may be cases where, as time goes on, the situation changes and is no longer applicable, or situations where the resources are such and the priorities are such that, well, other things have to happen first and our recommendations are a lower priority and have to happen a little bit later.

As a rule, we very seldom get total disagreement with our recommendations or our right to make recommendations, and we don't get into conflicts, as a rule, of that nature. We are discussing these recommendations during the course of the audit, and as part of meetings with management. It's a pretty well-accepted practice that Auditors General make recommendations like this, it is part of our role, part of my role in fact to add value to the operations of government to help the taxpayers of the province get more value for their money. We do this by making recommendations to improve the operations of the public sector. Nevertheless, it remains up to management and the government to decide to what extent to implement the recommendations we make.

[9:45 a.m.]

MR. COLWELL: I truly appreciate the recommendations that you do make to government and I feel that they're very appropriate and it's unfortunate that government, for whatever reason, doesn't want to put them in place as quickly as they possibly can.

Just an opinion from you or your staff. Is there a willingness for government to really start to work with the Auditor General's Office to ensure we have better

accountability for the public and, indeed, for this Legislature to move forward, or is there a reluctance? You know, with only 48 per cent of the recommendations over three years implemented, it looks like there may be some kind of reluctance overall from government. Do you sense that, do you feel that, or do you feel that they're really trying to move forward and do everything they can to make themselves more accountable to the people of Nova Scotia?

MR. LAPOINTE: I can't say that I sense a reluctance overall to deal with our recommendations, I don't think that's the attitude we get from management in the departments or the agencies. As a general rule we get good co-operation, good understanding and a recognition that we are, in fact, working for the public good.

Differences will occur in specific cases with specific recommendations, but overall I would have to say no, we're not seeing and we're not feeling a general reluctance in the public sector or the bureaucracy to work with our recommendations - there's certainly no intention to hinder.

MR. COLWELL: So in general, you're reasonably satisfied with it.

MADAM CHAIR: I'm sorry, time has expired.

Mr. Bain, you have 20 minutes.

MR. KEITH BAIN: Thank you, Madam Chair, and good morning and thank you again for appearing before the committee this morning. I understand Nova Scotia is the only province where the Auditor General reviews government revenues, is that correct?

MR. LAPOINTE: That is correct.

MR. BAIN: Why is that?

MR. LAPOINTE: This goes back historically in this province and I have to admit that I was not here when the decision was made to give us that mandate. I don't know if any of my colleagues can shed more light on the historical event. I think we're going back quite a ways. As I understand it, there was a decision made, whatever years ago it was, to add this to our responsibilities in the Act and it was an attempt to - regardless of the motivation - it added considerable accountability in the government process by taking a whole section of the budget and adding some credibility to it.

In conversations with my colleagues in other provinces, they certainly feel that this is an advantage here in Nova Scotia, that it's an improvement in public accountability.

MR. BAIN: So as an advantage, just because of the accountability side of it, or is it more in the process the way government does business? Or what advantages are out there for both government and all Nova Scotians?

MR. LAPOINTE: By having an opinion from the Auditor General on the revenue portion of the budget, it adds credibility to the estimates. It's not a full audit opinion, you understand, you can't audit that kind of prospective information, but by having us look at the methodologies and the estimates used and the consistency, it simply adds credibility to that section of the budget.

MR. BAIN: Thank you. Mr. Lapointe, I believe this is the first full report that you have completed. I'm just wondering, did you follow the exact same procedures in doing your audit as your predecessor?

MR. LAPOINTE: Yes, pretty well. We're following the same procedures that we have in the past. The Office of the Auditor General in this province is a quality operation and has been for some time. They do good audit work and certainly are continuing to do so.

One change of direction that I'm putting in is reducing the time period for follow-ups from three years to two years. Essentially, yes, we're following the same procedures that we have in the past, the same methodologies - continually improving them, you understand, but that's what we've been doing for some time.

MR. BAIN: So I guess you ask for the same information, the same way, the same format as it has always been done, is that fair?

MR. LAPOINTE: Yes, I would say that, well not perhaps it has always been done. As I say, we continually, are constantly changing methodologies to adapt to best practices. The audit standards change as well and then we have to adapt to them. They recently changed to include more emphasis in the financial statement audit, more emphasis on reviewing internal controls and more emphasis on quality assurance processes internally which is, frankly, adding a lot more time to our work in completing a financial statement audit, and that is not just us, that is across the land. With that kind of methodology improvement, it is simply a case of keeping up with standards as they go along.

MR. BAIN: So I guess it would be fair to say there is like a basic footprint that you follow and just go from there?

MR. LAPOINTE: Yes, there is. I would add - I am thinking of the different audits, I might have been on the two audit reports, but in terms of the financial statement audit and the revenue expense audit, one difference in process this year had to do with

a review of the revenue estimates. That partly fell out of a change in the standards that I felt we needed to change the way we were doing things. I did, in fact, when I came, indicate that I was looking at all revenues that would be defined as revenues according to audit standards, and that included all the recoveries and user fees that had been netted against expenses in the past. They had not really been part of the audit and this was a considerable sum. This was a significant change in our approach in that particular audit.

MR. BAIN: Okay, and you did mention that it was done differently. Can you give me some examples of other things that might have been done differently as well? Just in the basic scope of the audit.

MR. LAPOINTE: That would be the most significant difference. As I say, that was a change of approach - I suppose partly from me coming in and partly from the standards changing and our need to re-evaluate how we were looking at the revenues. The review of those different revenues would have been the single most significant change.

MR. BAIN: So have any of those changes caused difficulties with departmental staff, because they have been used to doing things one way and now they are being asked to do it a different way - does that create some problems?

MR. LAPOINTE: That particular change certainly did and that specific review of those particular revenues is what led to the qualification in my opinion on the revenue estimates and to the access issues that we have been discussing on the information backing up the revenue estimates in those areas, the recoveries and user fees and so on. So yes, that particular change caused that issue to arise.

MR. BAIN: So if there are changes, and that one specifically, has your department provided any guidance - I'll call it guidance - to departmental staff to help them in providing the information to you in the way you prefer to have it?

MR. LAPOINTE: Well, we always provide guidance in letters of requirement and so on, at the beginning of an audit and through the audit, as to what we require, what documents we need to see and by what time. We did that in this case, certainly.

MR. BAIN: I guess what I'm getting at, though, if it is a different process, if there is some direction - say, listen we are going to be doing this differently now, we'd like it if you would do, and here's a good way to do it. Do you see where I'm going?

MR. LAPOINTE: Yes, well there were discussions with the department during the course of the review on this. So I would say, looking back, that, yes, it was communicated throughout the course of the review, what our new requirements would be.

MR. BAIN: Are there times your department and government can agree to disagree?

MR. LAPOINTE: Well, we can always agree to disagree.

MR. BAIN: But are there specific times when that has happened?

MR. LAPOINTE: There are always minor issues during the course of an audit. Minor accounting issues, for instance, in trying to decide how a number is treated in an accounting sense and what's included and what isn't and how some of these things are calculated. There are always a lot of these issues; significant ones must be dealt with or else you get a qualification. As a rule, there are always minor ones left at the end where we agree that we have different interpretations of small things, and at a certain point you just cut and, when you reach your deadline, produce the audit.

At that point, we list the differences, as long as they are minor they don't affect the opinion. That's the normal course of events in any audit engagement anywhere, and, yes, there are some like that here. These are issues which are not significant enough in total to be material and therefore cause a problem overall. Some of them wind up, hopefully - more often they get resolved by the next audit. That's, again, a normal course of events during the audit.

MR. BAIN: You noted in your report, that investigation identified $6,493 in cash losses at the Department of Justice. What exactly were those losses?

MR. LAPOINTE: I'm sorry, identify it again.

MR. BAIN: It's $6,493 in cash losses - what cash loss?

MR. LAPOINTE: I wouldn't know off the top of my head what that would be. I know that there are always minor losses like this reported to us. It's our responsibility, we're supposed to report them all. Off the top of my head, I can't tell you what . . .

MR. BAIN: Okay, if systems had been in place, could that have been avoided, to eliminate some of those cash losses, if there are systems in place to prevent things like that from happening? Are there systems in place to prevent it from happening?

MR. LAPOINTE: There are systems in place throughout government; internal controls to prevent losses from occurring. These could be - again, without knowing the nature of the losses - it is impossible to create a system of internal control or procedures of safeguards that can completely prevent, in any organization, every loss or every error or even to prevent minor fraud. It can't be done - well, it can be done at an impossible expense. So, in the design of internal controls, an organization like this one does a cost

benefit analysis as to how far to go with the controls, and determines to accept a certain amount of risk and, ultimately, a certain amount of loss to an organization. This is a very large organization with a lot of money flowing through it in different ways. Things will happen. The controls are there to prevent them, but they cannot be foolproof.

MR. BAIN: If I could continue with the Justice Department, the deficiencies you identified in Correctional Services reporting systems, would you say they impact on the safety of Nova Scotians, those specific deficiencies that are there?

MR. LAPOINTE: No, I could not say - I would never conclude that this loss would have a public safety impact, just to the very size of it.

MR. BAIN: To your knowledge, is the department doing anything to rectify the weaknesses and strengthen the system since that has been pointed out?

MR. LAPOINTE: I don't have any specific knowledge about that particular event or that particular occurrence. I don't know if I can tell you any more about it than what I have here. I'll ask Alan to deal with this.

MR. BAIN: That's fine. Thank you.

[10:00 a.m.]

MR. ALAN HORGAN: Perhaps I could get a little clarification - you were referring to the systems of the department. Do you mean computer systems?

MR. BAIN: The reporting systems, that's basically their system of reporting and whether or not any deficiencies that would be identified would have any impact in Justice - I'm just using the Justice Department as an example.

MR. HORGAN: With respect to the reporting systems, generally - I mean, we did find a number of weaknesses relating to the way they report on performance. That relates mostly to their ability to manage these operations. Management requires good information, and it requires information that defines what you want to achieve and whether you are achieving it. That's where we found them to be weak. In a very general view of the issue, if a program is not appropriately managed - well, that could cause problems. From just the point of view of whether they are providing appropriate information to the public, I think that's more a matter of accountability and internal management.

MR. BAIN: That's fine. With respect to the access to information, do you concede that Cabinet documents enjoy a special privilege?

MR. LAPOINTE: I think that's an issue. At this point, my review of the Act indicates that I have full authority to see everything, and at different times I have in fact reviewed information which has gone to Cabinet. No, I would have to say that right now the indication is that I have access to everything.

MR. BAIN: So all documents should be able to be accessed by your office?

MR. LAPOINTE: That's right.

MR. BAIN: You also note in your report that you're unable to conclude that the system for reporting wait times for cancer specialists was adequate due to anomalies. Can you explain what these anomalies are, and any recommendations you've made to remove them?

MR. LAPOINTE: I'll ask Elaine to answer that question.

MR. BAIN: I was looking right at Elaine. (Laughter)

MS. MORASH: That relates specifically to Cape Breton, that comment. What it has to do with is errors, mathematical errors that were found when we tried to verify the wait time that came from the Cape Breton Cancer Centre with respect to wait times for a radiation specialist. So, they were anomalies, errors, miscalculations - however you want to state it.

MR. BAIN: So there have been recommendations made to . . .

MS. MORASH: That's right, we made more detailed recommendations. We didn't put all of the detail in here, but basically there were some recommendations that were made to try to improve the quality control over that process so that these kinds of innocent errors aren't made again. It was just innocent miscalculations.

MR. BAIN: In general, if a Nova Scotian consulted the government Web site regarding wait times, are they getting an accurate picture of what's really going on?

MS. MORASH: We can't generalize, because we didn't look at all 40 of them. We only looked at three, and that had to do with the resources that were available to our office. For two of the three, yes, that's generally the case with the exception of these miscalculations in Cape Breton.

For the third one - which is wait times for MRI - we can't tell, and the reason is because this is a prospective calculation, it has to do with when the next date is with three available appointments, and that information is discarded after they do the calculations. Basically, we can't verify it. So what we've recommended to them is that

they have to keep some of the support, even if they have to just print a screen for us so that when we come in later we can verify that that is in fact what the screen said at that point in time. Basically, for that third one, we've had to say we can't verify it because the information is not kept.

MR. BAIN: And that sounds like a corrective measure that has taken place, but when you say that to have a paper trail, we'll call it, I guess, how long would they keep that paper trail? From one audit to the next, or . . .

MS. MORASH: We've asked them to keep documentation for a year. I guess the big thing here is that this is a brand new process for us and for the preparers of the information as well. These are clinicians, they're technologists who are preparing this and they're not used to the requirements of audit. They've never been audited before, these are not financial records. So at this point it's kind of a growing process.

What we're saying is, well, we think it's good that Health is asking us to go in and verify this information, we will probably be asked in the future to verify it again, and what we're doing is saying, well, could you please keep the support for a year, fully realizing that we might not be in every year but at some point we may be in to verify this information and the support should be kept. So it's just a growing pains kind of thing.

MR. BAIN: And as a result of that, more adequate information is available to the general public, I guess. It's a more clearly defined wait time?

MS. MORASH: That's right, I think this is still very much a work in progress, there are still standards being defined in terms of how wait times should be measured. But the province has really made some wonderful progress in terms of putting that Web site out there, adding 40 wait times to it, and it's just something that has to grow and evolve, but it's good progress to this point in time.

MADAM CHAIR: Thank you very much. The time has now expired.

Mr. Wilson from the NDP caucus. You have 15 minutes in this round.

MR. DAVID WILSON (Sackville-Cobequid): Thank you, Madam Chair. I want to go back - I know we don't have a lot of time with this - to the review of the system to collect wait time information on the Health section, especially around the background information that you gave around the Wait Times Reduction Fund that came about back in, I think, 2004 at the First Ministers meeting, where they decided and acknowledged the need to address wait times across the country. Of course, our province was involved in those meetings and are to receive around $122.6 million over the next few years.

It states also in your background information that approximately $86 million has yet to be used towards that goal that the First Ministers had in 2004. What I'm trying to figure out is around accountability, transparency of using these funds. The First Ministers across this country decided that wait times, access to care is important and we need to put money towards that. So in the budget or the estimates that we'll receive in a couple of months, probably, or maybe less than that, will we find somewhere in those estimates a line indicating the amount of money that has been spent from the Wait Times Reduction Fund by the province?

MS. MORASH: I really don't know, that's a question for the Department of Health and the Department of Finance. I really don't know what their plans are with respect to showing how the monies in that fund will be expended.

MR. DAVID WILSON (Sackville-Cobequid): I understand that, I know a lot of my questions will be, hopefully, directed towards government and the Department of Health, but maybe a bit of clarification if you can. I know you'll answer what you can.

In the past, I know this agreement came into effect in 2004, I believe the 2005-06 budget, was there a line last year that would have indicated that, if you can acknowledge that or remember?

MS. MORASH: I really don't know.

MR. DAVID WILSON (Sackville-Cobequid): From my understanding and my interpretation of it, we don't see that line. We can't actually find in the estimates for Health where the money is going from this fund. That is a great concern of mine, definitely, especially when - and I think it's a concern, and it will be a concern of Nova Scotians, when we see and hear that more money is being spent in health care into this open, black hole of health care.

One of the criticisms I know I've had towards government, and our caucus has and many Nova Scotians have, is, where is this money going? Is it actually going to hopefully reduce wait times here in the province? So I guess with those questions I'll move into the other area in your health review.

I understand it was not an audit, it was a review of wait times and the data that they collect in that. It was around some of the recommendations, so I just want a few clarifications on why you made the recommendations. One was around Recommendation 4.3 in that section, around reporting wait times for referrals to radiation cancer specialists. You had indicated that it needs to be more comprehensive information, such as what types of cancer should be reported on the wait times for cancer care. Why did you make that recommendation?

MS. MORASH: We made that recommendation because there are differences among the wait times related to different types of cancer. Our point is that if an individual was checking the wait time Web site to find out how long they are likely to have to wait to get their particular condition treated, then it makes sense from our perspective that the wait times show more detail rather than less so that it doesn't represent an average which masks the differences, but that it be more informative for the public so that they can look and say okay, I have bone cancer, for example, and therefore my wait for bone cancer, I could expect to wait x number of days.

MR. DAVID WILSON (Sackville-Cobequid): I don't know how detailed you looked at it, but there are significant changes between types of cancers on the waits, so that's why I would assume this recommendation?

MS. MORASH: That's correct.

MR. DAVID WILSON (Sackville-Cobequid): Now, I believe that the Department of Health asked your department, your office, to look at wait times because of their concern around accuracy and reliability of the data that they show on their wait times list. Is that correct?

MS. MORASH: That is correct.

MR. DAVID WILSON (Sackville-Cobequid): So with the recommendations that you have made, like Recommendation 4.3, has the Department of Health given you any indication on a timeline where they will implement some of these recommendations, or is that something we're going to have to wait for in a review, because I think the Auditor General stated earlier that you're going to be reviewing recommendations on a two-year basis. Did they indicate to you, as of yet, their appetite or their ambition to - especially around wait times information or data - how long they'll implement changes to hopefully react to some of the recommendations your office made?

MS. MORASH: They responded to each one of our recommendations and that response is on Pages 49 and 50 of our report. Basically they said they agreed with all of the recommendations and have indicated that they're going to implement them, but they haven't given us a time frame. We didn't ask for one.

MR. DAVID WILSON (Sackville-Cobequid): I think I'll jump back because I missed one of my questions on the cancer wait times. I believe it's stated in here that there was a monitoring committee set up, maybe several years ago, that actually made recommendations to government around the recording of wait times and cancer, that they should define each cancer and hopefully report on that. Why do you think government hasn't done that? Is it an issue of funds or just an issue of maybe not the support in that area to bring forward or respond to the recommendations from the committee?

MS. MORASH: I think it might be better to ask the question of the Department of Health but I'll tell you what I understand, because we asked the same question. Basically the response was that there's a communication issue with respect to how much information should go on a Web site, what a Web site should look like, what's the appropriate level of detail to put on a Web site, so it was an issue between the Department of Health and the government's communications advisers in terms of what's the appropriate level of detail to reflect.

Basically that provincial wait time monitoring project steering committee was made up of clinical people, people representing the district health authorities and a number of physicians on the committee. That committee believed that more detail was better. I think it's fairly common in the communications area that less detail, if you're communicating to the public, is sort of where communication strategists are. So it's that kind of a delicate balance, I think, that they need to arrive at.

MR. DAVID WILSON (Sackville-Cobequid): Ironically that seems constant that those health providers or professionals who are on the front line usually have good suggestions and have good input, and hopefully government will recognize their interests. So I will pass the rest of my time to my colleague.

MADAM CHAIR: Thank you. Mr. Steele, you have until 10:22 a.m.

[10:15 a.m.]

MR. STEELE: Thank you very much. I've distributed to all members of the committee a resolution that I would respectfully ask be considered by the committee at the conclusion of the question-and-answer session. I would like to take minute though to read it now, because I do have a question for the Auditor General, flowing from this resolution. For the purposes of Hansard, I'd like to read it, Madam Chair. It goes as follows:

"BE IT RESOLVED that the Public Accounts Committee

(A) expresses its concern about the access to information issues raised by the Auditor General in chapter 2 of the December 2006 Auditor General's report, specifically in paragraphs 2.36 to 2.38;

(B) affirms its view that sections 10 and 14 of the Auditor General Act give to the Auditor General unrestricted access to any information that the Auditor General deems necessary to carry out his statutory mandate;

(C) affirms its view that any unit of government disputing the Auditor General's access to information may express its concerns in writing to the Auditor General, but under no circumstances should that unit of government withhold the information sought by the Auditor General; and

(D) directs its Chair to write to the Premier, the President of the Treasury & Policy Board, and the Minister of Finance to draw this resolution to their attention."

Mr. Lapointe, my question for you, flowing from this resolution, is very simple. If this resolution were to be passed unanimously by this committee today, would you find that helpful in your dealings with the government concerning access to information?

MR. LAPOINTE: That's a good question, pretty direct. I think given that I will be beginning discussions with government on the issue of my access and following up on my report, I would certainly say that an expression of support like this from the committee would have to be helpful.

MR. STEELE: Perhaps we can deal with that again, Madam Chair, at the conclusion of the question-and-answer session.

Mr. Lapointe, I'd now like to turn to another matter raised in Chapter 2 of your report, Paragraph 2.35 on Page 19. This concerns some $45 million in spending, the bulk of which took place in the last few days of the fiscal year, at the end of March 2006. Now I would say that everybody on this committee knows what's going on here. The government did their year-end calculations, figured out how much money they had left over when everything was added in, and then, in a mad rush to spend the money before the end of the fiscal year, $45 million flowed out in a matter of days. You don't have to agree with that characterization, but I'd be surprised if anybody on this committee disagreed that's what's going on. Why did you raise this in your report? What is your concern about the way this was done?

MR. LAPOINTE: The specific concern that we were raising in the report had to do with, in relation to the expenditures, compliance with the Provincial Finance Act. We spent quite a bit of time looking at this during the course of the audit for the simple reason that we found a conflict or discrepancy in the Act. Section 13 required that if appropriations are being exceeded with an expenditure that the expenditure not be made. However, the Act also gives, in Section 28, the right of government to approve, after the fact, with Order in Council, up to 90 days after the issuance of the financial statement.

I felt that these two sections of the Act are in conflict with each other and make it very hard for Finance staff to comply, in fact, impossible to comply, because if you're

dealing with one you're not dealing with the other. That is the issue we had with this. That is why we put it in here in our recommendations, specifically to amend the Provincial Finance Act to eliminate that discrepancy.

MR. STEELE: Would you go so far as to say that considering this mad rush of year-end spending is contrary to Section 13 of the Provincial Finance Act, would you go so far as to say that this spending was illegal?

MR. LAPOINTE: What I would say, what I said in the report, that's in contravention of the Provincial Finance Act. The difficulty is that it is also, at the same time, in compliance with the Act because the Act also gives the right to approve expenditures up to 90 days after the fact. That makes it an inappropriate situation and one in which it is impossible to comply. What we are recommending is that the Act be, in effect, cleaned up.

MR. STEELE: My last question, because I know I have only one minute left, is more of a comment than a question. In Paragraph 2.28 of your report on Page 17, you make a reference to the importance of policy manuals as a key financial control in the operation of government, in order to ensure consistency, in order to ensure adherence to rules.

I have to say that in the course of our research into this question of leases for ministerial vehicles, we discovered that the Procurement Branch is, in fact, not following the policy which stipulates that any lease must be no more than four years and no less than three. They have kind of adopted a practice of authorizing two-year leases, even though that is not in the policy, the policy has never been changed.

Now this is something that we'll have a chance to pursue in a few weeks when those people appear before this committee, but I would like to ask you now, how many policies are you aware of that have been changed without the policy manual having been rewritten?

MR. LAPOINTE: That would be a very large question to answer. I would only really be able to tell you that if we did an audit of the area. Right now I would say that we don't know. We know that some update was required and that is what we were referring to in there but I don't think I can really answer that question.

MADAM CHAIR: Thank you very much. The time has now expired.

Mr. Gaudet, you have 15 minutes, until 10:37 a.m.

MR. WAYNE GAUDET: Thank you, Madam Chair. I want to focus this morning on access to information. I always understood that the Auditor General always had free

access to government files and records in order to carry out their duties. As the Auditor General indicated in his report on Page 12, and again here this morning, requests for information on the review estimates, a request to a presentation made to government members was also denied. I am trying to better understand who these requests were made out to. Were they made out to directors, executive directors, deputy ministers, ministers?

I guess my first question would be trying to find out basically who turned down these requests. Maybe someone could elaborate on that, please.

MR. LAPOINTE: I would like to ask Angela to answer that question.

MS. COOK: With regard to the revenue estimates, that would have been through the deputy minister. With regard to Treasury and Policy Board, there was some denial of information at the executive director level. I am just not sure about all of the pieces of information that were at the executive director level but some were.

MR. GAUDET: Okay, so I am understanding that the Deputy Minister of Finance turned down requests and the executive director at Treasury and Policy Board denied your requests. Were there any reasons given by these individuals as to why they did not want to release this information to the Office of the Auditor General?

MS. COOK: With Treasury and Policy Board, it was Cabinet confidentiality. As I had said before with revenue estimates, they didn't feel that the expanded scope was part of our mandate and they had a concern with us having access to budget expense information. I assume that would be from confidentiality but that was never stated, that I can think.

MR. GAUDET; Mr. Lapointe, you indicated earlier that you are going to have some discussions with the appropriate staff for not releasing information to your staff. I am just curious, why weren't those discussions held at that time, when requests for information were made?

MR. LAPOINTE: Discussions were held throughout the course of the revenue estimates and review, and the financial statement audit, by my staff, by me, there were requests back and forth, a lot of issues around all of this. The discussions that we're initiating now, as a result of - the end result of those was my report. As a result of my conclusions on access here, we agreed that we would sit down and discuss, as a result of my report, discuss the issue overall. So it is really just a question of progressing down the road.

MR. GAUDET: I'm confused, Madam Chair. As I indicated in my opening comments, I always understood that the Office of the Auditor General has access, has free access to all government records and files, in order to do their job. Hearing that the

Deputy Minister of Finance - if there is someone within government who should understand what the role of the Office of the Auditor General is it should be the Deputy Minister - was not willing to co-operate with your office really upsets me.

Madam Chair, when I hear that the Auditor General is having difficulties in obtaining information from this government, are you surprised? I'm not surprised. Everyone can recall in Nova Scotia, back in 2003, the Canadian Association of Journalists said that this government was the most secretive government in all of Canada. Time and time again, let me take you back in history, we all remember Potatogate, for this committee trying to get information out of government. Pages and pages of information were submitted to this committee, blacked out, erased.

We can remember the Magic Valley file, again more information not provided. I can recall, since I have been on this side of the House, the Opposition trying to find out information from this government on most days is practically impossible and we just went through an exercise a few weeks ago in this House.

Again, to the Auditor General, I'm hearing that the Auditor General is going to have some discussions with appropriate staff but I'm not hearing that the Auditor General is going to be meeting with the Premier, with the Minister of Finance, to try to find out why the government is reluctant in providing free access to government records and files.

So I guess my question to the Auditor General is, are you planning to make any attempts to meet with the Premier or the Minister of Finance or with any Cabinet Minister to try to find out why government is reluctant to provide free access to government documents or is there any discussion within Treasury and Policy Board, in order to make your job and your office staff's job easier? I am just curious, are you looking at pursuing making contacts directly, either with the Minister of Finance or with the Premier himself?

MR. LAPOINTE: I'll tell you, where I've taken it so far is simply to decide to meet with the senior people at Treasury and Policy Board, and Finance to put the issues on the table with them, and to see if it can be resolved. There are matters of principle that I want to establish and matters of practice. If the issues are resolved there then I won't need to go any further. I haven't taken it beyond that stage, to be honest. I've taken it to the point of saying, let's sit down and meet with the people at that level, and we'll see where it goes from there.

[10:30 a.m.]

MR. GAUDET: Madam Chair, I even hate to bring this up. When I looked at the information that was circulated earlier, under the Auditor General Act, again, it confirms

that the AG's Office has free access to all government files and reports and records, but, yet, for whatever reason, the Auditor General's Office and staff don't have free access. Certainly we'll have time at a later date to review if the Auditor General has been successful with his discussions in meeting with different people within government, and I hope including elected members, to try to rectify this problem that has certainly been arising, probably too many times, lately.

I'm just curious if it's a matter that should be pursued by the House. I think I will close by indicating to the Auditor General that this is a matter that certainly interests me very greatly. It's something that I would like to pursue at a later date, to find out how successful Mr. Lapointe has been, and his staff, in dealing with government, and if it's a matter that needs to be pursued by us at a later date. With those few comments, Madam Chair, I will turn whatever time is left to my colleagues.

MADAM CHAIR: Before we resume with questioning - and I'll take account of this in the time for the Liberal caucus - I wonder if you would permit an introduction by the member for Hants West.

MR. CHUCK PORTER: Thank you, Madam Chair. Today, we have a group of Brazilian students visiting us here in Nova Scotia, specifically out in Hants West, in my constituency. I would like to welcome them all here, and I hope they enjoy - although it's not the full sitting of the Legislature, it is a very interesting committee. We meet weekly here. Welcome to the House, and I hope you enjoy your time here and your visit in Province House. It's nice to see you all. (Applause)

MADAM CHAIR: Welcome to our guests.

Mr. Colwell, you have until 10:38, 10:39 a.m. I'll give you some leeway.

MR. COLWELL: Welcome to our guests in the gallery today. It's always nice to have people here to see the Legislature in action.

I'm going to follow along the lines of my colleague with access to information. This is a really important topic, and it's a topic we've discussed in one way or another in this committee, probably for the last couple of years. We don't seem to be getting very far. Now as far as the committee is concerned, I think there's the issue of making sure that, in some cases, Cabinet confidentiality is protected - to protect people outside the province. It could have a negative effect on businesses or individuals, whatever the case may be. Having said that, I think that that should be limited, very limited.

Again I'm going to ask the Auditor General - we've already asked this - access to information. When the committee is denied access to information on certain topics, there may be a good reason for that, and if someone can explain it, we could accept it.

Now, the Auditor General not getting information, that's a whole different topic. As far as I'm concerned, there's not a document in this province that this government has, or any government had, that the Auditor General should not be entitled to review, get detailed information on, and then decide what kind of recommendations you move forward with.

When you do look at the recommendations the Auditor General makes, they're usually specific but they don't identify people, they don't identify individuals or anything like that. So indeed, there's no risk and there wouldn't be a risk with the code of ethics that you work under as professionals, that any information that would harm anybody would ever be released. So that's not an issue as far as I'm concerned, and government shouldn't be concerned.

I really am upset about the fact that there are documents that you're not privileged to. I know when we had discussions prior to this meeting, you indicated to us some letters they would show you and then take away again rather than giving you copies or giving you time to review. This has got to be upsetting to your staff. Under the Act, as far as I know, you can get all this information. How do you intend to correct this? Is this something you have to bring back to the Legislature to make sure that we reinforce your right to get this information? How do you want to proceed with this, because this has got to stop.

MR. LAPOINTE: I agree that it has to be dealt with. I suppose I'm new in the role, but I was surprised at the situation. I did feel that it is one that cannot really continue. It has to be clarified and dealt with. I can in fact keep this committee informed and I should, given your level of interest in the topic. I think that what I need to do now is to proceed and have those conversations, and see if perhaps it can be resolved easily. If it is, then it is no longer an issue. Can I or can I not, and my staff, see the documents that we need to see?

There is a difference between, as you say, the documents that we see - and we see confidential information of various kinds all the time - and what we disclose. We cannot disclose confidential information, but quite often we need it in order to do our work. I need to get those matters of principle established, and get the understanding throughout the levels of government and the levels of the Public Service about our role and our ability to see things. To some extent, I find that at a low level, it is an issue of understanding and communication, and we have to do that, too. It's kind of a multi-level problem. There are people who have never been audited. They're simply doing their work, and auditors come in and say, we'd like to see these various things. Perhaps if I was in that job, as an analyst or something, I'd hesitate to let it go, too.

There has to be information out there about our role, at that level, as well as the issues being dealt with at the top level. I think that my next step is simply to proceed and see if it can be dealt with, and then to let this committee know how that's proceeding.

MR. COLWELL: I appreciate your answer, and I think that we have to sort of lay this down in a policy that when people change, the policy won't change again. I don't mean in your office, not at all your office, but in government. If you get a really stubborn deputy minister who just doesn't want to give you information, there should be a way that you could deal with that, deal with it easily, get the information and then move forward. I'm sure lots of times when you do finally get to see confidential information, questions that you might have had may be gone and may not even be an issue. So you have to see the whole picture. If you can only see a little bit of the picture, you don't understand what's in the picture.

I'm going to ensure, and our caucus will ensure we'll do everything we can to help you get to a position where you can get all this information, which I think is critical for the people of Nova Scotia, as my colleague has already outlined, and to make sure that we know that the province has had the best financial management we can possibly get. Thank you.

MADAM CHAIR: Thank you. Time has expired.

Mr. Porter, you have 15 minutes, until 10:54 a.m.

MR. PORTER: Thank you, Mr. Lapointe and your group, for coming in today for some discussion. I'm going to pick up on a couple of issues that my colleague touched on earlier, and some of the others have as well. That is the percentage, the recommendations. You were clear, I think, about the 48 per cent that have been rectified in the last three years - 7 per cent, there may be some disagreement on, and we'll come back to that. But that leaves about 45 per cent, if I've done my math correctly, that you haven't really talked about. The perception that you left us with, perhaps, is that nothing has gone on with that other 45 per cent. I wonder if you could maybe inform this committee, for the public record, exactly where the other 45 per cent are as far as either nothing has happened or there's some progress, under construction, if you will - where are we?

MR. LAPOINTE: There was 48 per cent completed, 34 per cent that were still in progress, different stages of progress from beginning to just about done. I listed in the report that there were other levels, too, as well, that you could say are in progress. A small percentage, 2 per cent, said they were in the planning stage and they were just starting to look at it, and others had nothing to date. Another 5 per cent said they planned to take action, nothing done but planned to take action.

There was a small percentage, only 1 per cent, that indicated that it was simply not appropriate, the situation had changed, and certainly that's understandable, which left another 7 per cent in the position of not intending, for whatever reason, to implement. As to what those reasons are, it could be a variety of things, and I can't really say off the top of my head. That's where that stands. There's quite a variety of situations in dealing with the rest.

MR. PORTER: Thank you for that. I guess I just wanted to make sure that that was clear to the group here, because it wasn't really talked about; we only talked about what was complete. In fact you have mentioned there are, within that other percentage, things that are almost complete, things appear to be progressing along fairly well. Would that be fair to say, in the majority of the balance?

MR. LAPOINTE: I don't really have a lot of detail. The part that's in progress, I don't have a detailed analysis of the extent to which they're in progress, or breaking it down. We have some information on that, but off the top of my head, I don't have the ability to tell you that most of it is almost done or most of it is just starting or whatever degree it would be inside there. All I know is that that percentage is in progress, to some extent or other.

MR. PORTER: So we can't speak negatively, in all honesty, about it either then. We couldn't, in a negative light, say that it's not going well. You certainly couldn't say that it's going fairly well, but you can't say that it's going poorly either.

MR. LAPOINTE: No, all I can say is that that percentage, that 34 per cent, are moving at the present time.

MR. PORTER: Now that 7 per cent is kind of an interesting number, and one I've had some interest in. You talked about maybe multiple reasons why that 7 per cent is what it is. My question might be - these people all work with numbers, accountants, call them what you want and forgive my ignorance as far as terminology goes in the profession, but they're all professional people, numbers people, your audit staff. You would come in and have an opinion, and the staff doing the work on a daily basis and have been doing the work on a daily basis - would this maybe fall into a difference of opinion? I just want clarity on that. They would think perhaps differently than your staff think - no, this is the right way, although you say it's this way - is that sort of where we're going? I'm just looking for some clarification on the 7 per cent, if it's possible.

MR. LAPOINTE: I'll ask Elaine to talk about this.

MS. MORASH: Most of those recommendations are ones that we made to the universities. During 2003, we audited four universities, and so one recommendation, the same recommendation would have been made to all four universities and is counted as

four recommendations. So the numbers are sort of skewed towards the audit that we made of universities, the number of recommendations is bigger. Universities are not a part of the provincial government reporting entity. Sure, they receive a portion of their funds from the province, but they have strong boards of governors, strong management teams, and they are not always in agreement with the kind of recommendations that we make.

So, by far, the large majority of those 7 per cent fall in the university sector, and if you refer to Pages 96 to 98 of our report, where we show the detail of the individual recommendations, and then we showed the status, you'll see that many of the university recommendations are, "Do not intend to implement recommendation". For example, we made nine recommendations to Dalhousie University, and of those nine, five are "Do not intend to implement."

MR. PORTER: Thank you for that. Back again, I want to go back a little piece on the cash losses. There was a question earlier from my colleague about $6,500. I was somewhat intrigued - it didn't seem to be a big deal to you. Maybe I misread what I was getting out of the answer but obviously the million dollar tickets are big deals, we make a lot of noise, and so we should, appropriately so, about that. Maybe I put together something wrong, an innocent error with some of the terminology I heard. You were still on those lines as well when asked about reporting; so we were not able to find the $6,500, we don't know where that is? That answer wasn't clear to me when the question was asked, cash losses, I just wanted some more clarity on that.

[10:45 a.m.]

MR. LAPOINTE: The particular loss we're talking about, that would be in Chapter 2, was one that we were reporting and that it was discovered by Internal Audit. Internal Audit does, in fact, investigations as part of their role, on an ongoing basis, and they are more directly involved in this kind of activity than we are. They have an investigation mandate. This was one that they found that we were aware of and so we were reporting that fact and we were simply putting it down, but this was one of their findings, in fact.

MR. PORTER: Just on Correctional Services and reporting systems, do the deficiencies you identified in the Correctional Services reporting system impact on the safety of Nova Scotians? Maybe we talked about that, I just wanted it cleared again, was your answer that they did impact?

MR. LAPOINTE: I'd like to ask Alan to deal with that question.

MR. HORGAN: With respect to their reporting of information, most notably performance information, information indicating whether they are achieving their goals,

I would say that does not have a direct impact on public safety. Public safety would be more directly impacted where certain policies are not being followed, specifically policies related to direct service issues with respect to how offenders are monitored or how correctional facilities are run. Those would be areas where it would be more likely to impact public safety and worker safety, than anything with respect to reporting of performance information.

MR. PORTER: Okay. No jurisdiction in Canada undertakes the verification of offender assets, cash flow and financial commitments. In your report, however, you recommend that financial information provided by offenders be subject to a verification process. Is there a specific reason why Nova Scotia should provide this information while other jurisdictions do not?

MR. HORGAN: I can't speak to other jurisdictions. The government seeks financial information from offenders so that that information can be entered into the decision-making process of the courts. The courts will decide what sentences to lay and is relevant whether offenders have the financial means perhaps to pay a fine, is there value in laying a fine if the offender does not have the financial means to pay it.

Our question in doing that audit was, when gathering this information, why just rely on the reporting of the offender? We thought there are certain situations where it would not be all that difficult to verify. What you can do is ask the offender to bring in a piece of information. So with respect to something like, are you employed and what is your salary, they could just simply bring in a pay stub. It is not as if the department would have to do an investigation to verify it, it could be a matter of just bring in some information, stuff like that. Is there money in your bank account? If they say well, yes, there is a certain amount, bring in a bank statement, and it wouldn't be all that time-consuming for the department, using that kind of level of verification.

So we recommended that, owing to the fact that it may not be that onerous to do certain things like that, and we as auditors are always looking to have information as accurate and as verifiable as possible, we made those recommendations.

MR. PORTER: An interesting perspective, I think. You also recommended that pre-sentence reports prepared by staff should be reviewed and signed off by a supervisor. Did your audit uncover something that leads you to believe that staff do not adequately prepare these reports?

MR. HORGAN: No, we did not see anything to suggest that the reports were not being prepared in accordance with their own policies, except for that one matter with respect to their not meeting the time frames, in every case, with respect to the reporting. We reviewed the reports with respect to what else should be in them and we found that based on our testing, there's general compliance.

Our recommendation was more with respect to just principles of good management, that when an important process is occurring in many different types of business situations or government situations, that there be a level of review. One thing that was impressed upon us is that pre-sentencing reports are very important. This is information that goes to the courts to help them decide on the sentences levied against offenders, which is a very important public function. So we asked what kind of review process is being used and they indicated that they review reports prepared by people new to performing that function, but they don't necessarily do it for others, and we suggested that we thought a more rigorous review process might be appropriate.

The question that comes out of that is whether we're saying or implying that every pre-sentence report should be reviewed before it goes out the door and there are so many that do that, the department would see it as being very onerous. We're not suggesting that every one be reviewed, but that they just have a system maybe of spot reviews or identifying which ones may be of higher risk and having those reviewed.

MR. PORTER: So are Crown Prosecutors and Legal Aid lawyers, for example, wrong then when they indicate that pre-sentence reports are generally timely and meet their needs, or are they quite accurate with that?

MR. HORGAN: Basically what they're saying is that when they get the report, even though it may not be three days before a court date, that is sufficient for them, and that's good. What they're saying is that it meets their needs.

What we were doing from an audit point of view was auditing towards their own policies, which is a standard focus to our audits. We will determine what a department wants to do in certain functions and then we will go in and see if they are actually doing what they intend to do. Their policy for pre-sentencing reports is that they should be submitted to a court at least three days before a sentencing date. They missed that on about 25 per cent of the ones that we tested.

Now the surveying, as you brought up, indicated that may not have been a great concern to both Legal Aid lawyers and public prosecutors.

MR. PORTER: Do you advocate removing from probation officers the discretionary powers they possess around land breach charges?

MR. HORGAN: Definitely not. In our report we even acknowledged that discretion is there, that it is valid. Our understanding is that it is even expected by the courts. The courts, as explained to us, do not expect that every little violation of a term or condition, a conditional release or an intermittent sentence, should resolve in an offender being brought back before the court to answer for certain violations. For example, perhaps an offender was supposed to show up for a meeting at a specific time

and they were an hour late, you don't expect someone to be brought before the courts for that.

Our issue there was that we noticed with a number of cases where there were what they refer to as breaches to terms and conditions, that there weren't proceedings carried out, proceedings usually being a recommendation to the public prosecutor to bring someone before the court to explain why the terms and conditions weren't followed. There was no documentation in the files to indicate how they exercise this discretion. We understand there's discretion, but we would kind of like to know well, in this specific case, why did you feel it was not appropriate and in this case you did feel it was appropriate? So our finding was more of a matter of sufficiency of information for our review.

MADAM CHAIR: Thank you very much. The time has expired for questions. I would invite Mr. Lapointe to make any concluding comments that you would like to make.

MR. LAPOINTE: Madam Chair, to conclude, I would once again simply like to thank the committee for this opportunity to appear before the committee and to discuss my report. The Public Accounts Committee does play a vital role in the governance framework of this province, and I'm pleased to be able to assist you in some small way in fulfilling your mandate.

MADAM CHAIR: Thank you very much and thank you to all of the members of your staff. It's always a pleasure to have you here. We have a motion that has been circulated and read into the record. Perhaps, just formally, that can be moved, Mr. Steele.

MR. STEELE: I move the motion, and given that I've read it into Hansard previously, I don't see any need to read it again. I think it speaks for itself.

MADAM CHAIR: Is there further discussion on the resolution?

Mr. Colwell.

MR. COLWELL: Madam Chair, I agree, and we will agree with this resolution. It's unfortunate that we have to bring this resolution forward. I think it shouldn't even be an issue. Unfortunately, the government has decided that they want to make this an issue and not provide the information to the Auditor General's Office, and I don't believe that's acceptable, whatsoever. We look forward to supporting this fully, as you move forward, and support the Chair in her efforts to write to the Premier to see if we can't get this thing resolved easily.

MADAM CHAIR: Is there any further discussion?

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

The motion is carried.

You also have in front of you a report from the Subcommittee on Agenda and Procedures, and I'd really like to, at this point, thank the clerk, who was able to turn around a meeting that we had at 8:30 a.m. to get this report out to us today. I'd like to ask a member of the subcommittee to move this report.

MR. COLWELL: I so move.

MADAM CHAIR: Mr. Colwell, thank you. Is there discussion on the report?

Mr. Steele.

MR. STEELE: I'd like to thank the members of the subcommittee for their report - I believe this is the third week in a row they've met - and the clerk for producing it so quickly. I note for the Auditor General that three of the topics on the list are chapters from the most recent report, so we will be revisiting this report in detail at a later time.

I do have a reservation about one of the topics, Madam Chair, and that is Nova Scotia Power Incorporated. Needless to say it's a very important entity, but it is a private entity; it's not part of government, not subject to audit, not part of the government's budget estimates or Public Accounts. The clerk has advised me that Nova Scotia Power has recently appeared before the Economic Development Committee, which I think is the best place to deal with those kinds of issues. I'm simply at a loss to understand what role the Public Accounts Committee, which looks backward at the operations of government, has in dealing with Nova Scotia Power.

To frame that discussion, I'd like to move an amendment to the report, that the topic Nova Scotia Power Inc. be deleted.

MADAM CHAIR: There is an amendment on the floor. Is there further discussion on the amendment?

Mr. Colwell.

MR. COLWELL: I don't agree with the amendment. I think that Nova Scotia Power, although it's not a government agency, it has a major impact on the economy of Nova Scotia and how Nova Scotia performs economically in Canada, in the world, when we look at power rates and the issues around that. I don't see any difficulty with bringing them in here to discuss that. There have been a lot of issues around Nova Scotia Power recently, and that's why we originally put it on the agenda.

MADAM CHAIR: Mr. Porter, or any members of the PC caucus.

MR. PORTER: I guess in looking back now, I tend to agree with Mr. Steele on this, actually, where it is not specifically a group that should come before this committee. Perhaps it will come again before another committee, more appropriate. We would support the amendment at this time.

MADAM CHAIR: We have an amendment to delete Nova Scotia Power from the witness list. Is there any further discussion?

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

The motion is carried.

The amendment is carried and Nova Scotia Power will be deleted from the witness list.

So now the report, we're back to the main motion on the report as amended. Any further discussion? Hearing none, I'll call for the question.

Would all those in favour of adopting the report as amended please say Aye. Contrary minded, Nay.

The motion is carried.

The report is adopted and we now stand adjourned until next meeting, when we have Heather Foley Melvin in front of us.

[The meeting adjourned at 11:01 a.m.]