1996 ANNUAL REPORT, PROVINCIAL AUDITOR
CONTENTS
Thursday 17 October 1996
1996 annual report, Provincial Auditor
Ministry of Finance
Mr Bob Christie
Mr Robert Siddall
Committee business
STANDING COMMITTEE ON PUBLIC ACCOUNTS
Chair / Président: Mr Dalton McGuinty (Ottawa South / -Sud L)
Vice-Chair / Vice-Président: Mr Mike Colle (Oakwood L)
*Ms Isabel Bassett (St Andrew-St Patrick PC)
*Mr Marcel Beaubien (Lambton PC)
Mr Dave Boushy (Sarnia PC)
Mr Gary Carr (Oakville South / -Sud PC)
*Mr Mike Colle (Oakwood L)
*Mr Bruce Crozier (Essex South / -Sud L)
*Mr Gary Fox (Prince Edward-Lennox-South Hastings / Prince Edward-Lennox-Hastings-Sud PC)
*Mr Steve Gilchrist (Scarborough East / -Est PC)
*Mr John Hastings (Etobicoke-Rexdale PC)
Mr Gerard Kennedy (York South / -Sud L)
Ms Shelley Martel (Sudbury East / -Est ND)
Mr Dalton McGuinty (Ottawa South / -Sud L)
*Mr Gilles Pouliot (Lake Nipigon / Lac-Nipigon ND)
*Mr Toni Skarica (Wentworth North / -Nord PC)
*In attendance /présents
Substitutions present /Membres remplaçants présents:
Mr Ted Arnott (Wellington PC) for Mr Boushy
Mr David Ramsay (Timiskaming L) for Mr Kennedy
Also taking part /Autres participants et participantes:
Mr Erik Peters, Provincial Auditor
Clerk / Greffière: Ms Donna Bryce
Staff / Personnel: Ms Elaine Campbell, research officer, Legislative Research Service
The committee met at 1008 in committee room 2.
The Vice-Chair (Mr Mike Colle): Under the rules of procedure we're allowed to begin. We've got more than six members here, and I know we don't have a member from the third party but I think we'll commence our inaugural meeting for this session.
It is our intention today to have the Provincial Auditor give us a review of the Ontario annual report and its significance to this committee. We have two Ministry of Finance officials here, Mr Siddall and Mr Christie, to respond to some of the auditor's review comments about the annual report. The latter part of the committee session will be taken up in trying to determine our schedule and the areas of investigation and review for the committee as a whole as a result of the auditor's report.
If we can begin with Mr Peters giving us an idea of the place the annual report has, as far as the committee is concerned, and why he feels it's significant for us to include this as a first step this year.
1996 ANNUAL REPORT, PROVINCIAL AUDITOR
Mr Erik Peters: I'm going to walk you through the annual report and talk about some of the significant features of it. I have taken on that responsibility because, when we met in subcommittee, we didn't really get a chance to give the Ministry of Finance enough time to prepare for a presentation. I'd like to just walk through some of the more salient features of the report, and it's really your call if you would like to interrupt with questions or go to a rotation after. It's as you wish to proceed, Mr Chair.
Just to give you an outline to make that discussion a little better, I would like to go page by page, because it's a short document, to highlight some features of the report as to what has been put in.
The annual report was sent out with the agenda and it looks like this. It is somewhat different from the public accounts of the province, which looked very similar in size. One is called the public accounts of Ontario and one is called the annual report. The main feature that makes this distinctive is essentially that it deals with far more than just financial statements. The financial statements are part of it, in condensed form, but it also deals with an economic analysis of the province and with financial highlights in addition to the financial statements. This is what distinguishes it.
I'm very pleased that the annual report has been prepared by the Ministry of Finance and tabled together with the public accounts. In 1995 we recommended in my annual report that an annual report be prepared and that it have five components: indicators of Ontario's economy, and that is now provided in the annual report -- implicit implications on the public accounts are presented; we asked for a discussion of the success in meeting the budgeted deficit target, and that is provided in the annual report; we asked for an analysis of Ontario's debt load, and that is provided in the annual report; we asked for an analysis of the significant revenue and expenditure variances, and that is dealt with in the report; and financial statements and an auditor's report should be presented with it to give the assurance that was given on the public accounts, and that is also provided. I will discuss that with you a little later.
Almost within days of my report becoming public the Ontario Financial Review Commission made very similar recommendations. In their November document they did two things: They first asked that for presentation they use pie charts, and they did, to show sources of revenues and major spending by category. They asked for management representation, they asked for a report of the Provincial Auditor, they asked for a summary of the significant accounting policies, and that's done; financial statements on an accrual and consolidation basis, and that is done; and notes and schedules to the statements, which have been summarized, so that is done. In other words, the Ministry of Finance has complied with that.
They went a little bit into the quality of it, and that has been largely done. They asked that it be written in a way that is clear, straightforward and easy for a non-technical reader to understand. They asked that it take no more than 10 to 12 pages, with which we have big problems -- we have a few more pages than that; to include summary of financial highlights, and that is done; to outline both in words and graphics the performance of key indicators such as economic growth, the annual and accumulated deficit as a per cent of GDP, public debt trend analysis, tax rates etc, and most of that is contained in the report.
What we are discussing, first thing out, is really quite a success story in the government's presenting itself better to the public, having better accounting and better accountability. It was a lot of hard work by the Ministry of Finance and my staff to put this out in time, but we did it.
I would like to highlight a few things with you. The first page I would like you to turn to in the annual report, if you don't mind bearing with me, is the five-year summary on page 15.
Page 15 is a five-year review of selected financial and economic statistics. Some of the factors provided are rather interesting. The revenue analysed in the pie chart is only for the current year. We don't necessarily have a trend revenue as to how much over those five years the province collected in personal income taxes, corporation taxes etc. That may be, ultimately, something that is coming.
At the moment the significant feature of this is that over the five years the revenue of the province increased by about 20%. It went from $40 billion to $48 billion in that period. The programs and capital expenditures -- I'll get into capital expenditures in just a moment, the significance of their worth and how they are treated in government accounts -- have stayed virtually flat. In other words, in 1992 it was $47.4 billion. They differ by about $9 million, by odd coincidence. They went up a little and down a little but stayed flat.
One of the most significant features in the expenses is the next line, the public debt interest, which doubled in that five-year period. It went from $4 billion to $8 billion.
One unusual item occurred this year: restructuring and other charges. They are carefully analysed in the report, and we will go through that in a minute. You can see that total expenditures, only because of those two factors, have jumped from $51 billion to $57 billion, while the deficit, largely because of the 20% increase in revenue, has actually decreased from about $11 billion in 1992 to $8.7 billion in the current year under review.
In the meantime, what impact did this have on Ontario's debt? It almost doubled it. It went from $51 billion to $96 billion. The Province of Ontario Savings Office stayed relatively stable. Other liabilities doubled but they hiccup from year to year, depending on the circumstances and the method of payment used: which was paid off and which was prepaid. It is not a particularly significant swing.
Let me talk about the Ontario Hydro line for a moment. Ontario Hydro features, in these accounts, in two ways. Under "contingent liabilities" you also see a line that is described as "Hydro." The government is involved with Hydro's debt in two ways. The smaller way is where the province has actually borrowed on behalf of Hydro and flowed the debt through its accounts and directly to Hydro. In other words, it has a liability on its books to pay somebody the debt but at the same time has a receivable from Hydro in the same amount. That's directly reflected in the accounts, as you will see in a moment in the statement of financial position.
However the big debt, the part that went from $28 billion, peaked around $32 billion and is now at $29 billion, is the Hydro debt that the province guarantees, and they do that for a fee. There is an annual revenue that the province earns from guaranteeing that debt, but it is essentially guaranteed, which helps Hydro to reduce its interest rate because it's an additional security feature when people in the public are looking for the debt, that the province has supported that.
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Below that we are getting into areas that are a little bit outside the normal financial reporting and that's a very welcome disclosure. What has been the gross domestic product of Ontario at market prices? In 1991-92 it was $278 billion; now $313 billion, or approximately an increase of 13%. It's interesting to see that our revenue increased by 20% when the GDP increased by 13%, so the government has taken its slice out of the gross domestic product.
The personal income per capita of Ontarians at the same time has remained relatively stable, as you can see, from $23,500 per annum to $24,000 currently. Another very important indicator is what Ontario's debt looks like as a percentage of gross domestic product. That's one of the indicators that, for example, rating agencies and other people are looking at very closely to see what was the capacity of the province to borrow and what is the ability of the province to repay its debt. That has increased by about 65% from 1991-92 to the current year. It jumped very significantly between 1992 and 1994 and then has maintained its rise, but at a less steep degree between 1995 and 1996.
That is a little bit of a five-year summary of our past financial history which I thought was a very useful part to give the public and to give you as legislators.
I very quickly want to review with you the financial statements themselves, this being the committee on public accounts, and I'm just going to follow through in the sequence in which it is there, if you wouldn't mind bearing with me and switching to page 18.
As you know, I have given a clear, unreserved, unqualified audit opinion on the public accounts this year. The question an auditor always has to face is, if you give one opinion on the public accounts, what kind of opinion do you give a second time around? So professionals -- not to confuse the public, because they don't know which counts, so there are big differences made in the two opinions.
Essentially, at the federal level, for example, the Auditor General gives the federal government, when they prepare the annual report, an opinion that says the summary of financial statements fairly present. Unfortunately in a way -- I shouldn't even say "unfortunately," but I couldn't quite do that this year because one of the key financial statements was not included in these condensed financial statements. I have a copy of it for you to take a look at as to what it was.
I should confess to you that I didn't do that with any regret or that I am very concerned about that. It is just a matter of completeness. A set of financial statements should include a statement of changes in financial position, and I just very quickly want to walk you through the significance of it. There is really only one.
You will see that the operations used up the deficit for the year in terms of cash, of $8.7 billion, but at the same time, as you see a little bit further down, if you go to the line that says "Cash Provided by Financing Activities," there's debt issued by the province and you see that although we had only a deficit of $8.7 billion, we went to the market and borrowed $11.1 billion. This gives you the answer as to what did we do with the cash and the answer's really straight down below it. Simply we increased our cash holdings by virtually the same amount, by the excess, by $3.3 billion.
Again, with the financial background that I have, I would praise the Ministry of Finance for doing that. That has been something because as interest rates tumbled, it's really worthwhile going to the market at low rates and building up the cash reserves of the province.
Mr David Ramsay (Timiskaming): This is a long-term loan then, is it?
Mr Peters: Mostly long-term, yes.
The Vice-Chair: Excuse me, Mr Peters. As questions arise, I think it might be better just to field them as we go along rather than hold them all to the end. It might be a bit more pertinent that way.
Mr Gilles Pouliot (Lake Nipigon): I have several. I'm just as equally proud in terms of background. Imagine, you're commanding, you're the number one person here, sir. You were very quick off the mark on questioning and it's your tenure. The potential liabilities on Highway 407 because of the partnership, nowhere in your report do you mention that of the marketplace, the fact that the province borrowed the money in lieu of, in this case, the successful bidder, Highways International, being anywhere from 60 to 75 basis points cheaper, which will be reflected on the tolls. Of course you don't mention that.
You use words such as "strange" vis-à-vis our administration. Then you commend the government for borrowing $3 billion, grosso modo, more than it needs to service the rollover. You should also caution the government, as we gaze into that crystal ball, that if they had waited four months more and borrowed this morning, the rates are at a 38-year low. The thing is the borrowing capacity was exceeded, was surpassed by $3 billion. I'm a person of very moderate means. If I see suits on sale and I need, let's say, three, because they're on sale I might buy six suits. That way, look at the money I will save.
Nine and a half months into the government, page 15, total expenses keep rising. We have nine and a half months of ruling by decree and regulation, ie, the less fortunate, the welfare recipient -- they took it big time, Mr Peters -- and yet expenses keep going up. That should have been highlighted. So you can go one, two, three -- we respect your science. We're looking for consistency.
The Hydro debt -- and you knew, sir, that it went beyond rumour that it was a plan of the government to possibly privatize Hydro. The only thing at stake when you wrote your report was when they were going to do it and what components of the $42 billion weren't an asset. So, you see, on the 407 the province could be on the hook for the $1 million. The original contract was $929 million, the province with its broader shoulders assured the borrowing.
What about Ontario Hydro, should they sell? The province is on the hook for the major portion of the borrowing, which is in addition to your deficit on page 15 and, meticulously, I draw your attention not to the first instance of $38 billion, but to the big amount, the mother lode here, which is $29 billion. The parallel is filled with validity and it should have been made in your report. I thank you.
Mr Steve Gilchrist (Scarborough East): On a point of order, Mr Chairman: Mr Pouliot is asking Mr Peters to speculate about government activities that have nothing to do with whether or not the financial statements were prepared according to generally accepted accounting principles. I thought that's what we're here to discuss today, the strict financial interpretation of what happened last year, not whether or not we might privatize Hydro, not what might happen as a consequence of your contract to build Highway 407.
The Vice-Chair: Mr Gilchrist, it's not a point of order, but I think your point pertaining to what we're dealing with here today --
Mr Gilchrist: With all due respect, if it's an item on the agenda, it is a point of order.
Mr Pouliot: We're talking about small business paying the taxes, Mr Gilchrist.
The Vice-Chair: Just in terms of what we're here for today, I think what we should try and do is be very specific in our questions. I think we can get through a lot more in terms of the productive information-sharing session with the auditor. You've asked a series of questions, but I think one key question, if I could ensure that certainly from my emphasis and that of the committee, is this comment about increased cash holdings being beneficial. I would like that cleared up.
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Mr Pouliot: It's a question of if you would have waited four months, you could have saved --
The Vice-Chair: Okay, Mr Pouliot. Would you let --
Mr Pouliot: Commend the government for something that happened yesterday --
Mr Peters: If I may deal with two questions. Certainly there's one factor that I want to air immediately. In my report I am abundantly clear, Mr Pouliot, that the reason the province took over the financing was because the financing costs would be lowered for the entire project. That is very clearly stated in chapter 3.18 of my report, so I'd like to put that on the record.
As to the cash, that has been a methodology used by the treasury for the last five years. It did not come in with the current government. In previous years, we had significant fluctuations in the cash holdings. They have moved from, I think, $5 billion in the previous government to $8 billion at one stage.
All I'm saying is that nobody has a crystal ball to be able to project future interest rates. I think everybody who's in the market speculates that interest rates normally decline in years -- it has been the history -- when there is a presidential election in the United States. Privately, many people schedule their refinancing of their mortgage into that period because they always know that's a good point.
Speculating on future interest is not -- but it has always been a fiscal policy of this government to have sufficient cash on hand to meet its obligations and to increase it.
Mr Pouliot: My problem since there's nothing --
The Vice-Chair: Mr Pouliot, wait. I think it's the auditor's turn here. We'll give you an opportunity.
Mr Peters: The others are really policy statements on which I'm merely presenting to you the facts as reflected in the annual report. I've no rancour as to -- in fact it may be a good question as to why it was done. I'm merely pointing out that it was done and what it has done to the finances.
The Vice-Chair: I just want to make sure we get it on the record either now or later. I think it's very important to list the advantages of having increased cash holdings. I think you mentioned that it has been done for the last five years. You mentioned it was a beneficial undertaking to the financial state of the province for doing that. You commended them for doing that.
Mr Peters: Correct.
The Vice-Chair: Why? How does it work?
Mr Peters: The way it works, one of the other features is the deficit itself is not the only cash drain that the government faces. The government also has to be very careful how it manages its debt and some debt matures in big amounts in one year and smaller amount in other years.
To allow the flexibility when they go to the market -- I'm not sure, and maybe either Mr Siddall or Mr Christie knows the date, but I know we have one year coming at us where we virtually have to roll over 25% of the province's debt in one year. About $23 billion is the number that sticks in my mind. When these are coming at the province, it's far more advantageous for the province to face these with cash in the bank than being on the last dollar and having to go out and borrow necessarily at very high rates.
The Vice-Chair: Okay.
Mr Gilchrist: As a question to the auditor, would I be safe in assuming that $3 billion has already been rolled over? We're talking about March 31. That was the cash position of the government. That much debt has already been refinanced.
Mr Peters: I can't answer that question, but maybe the officials from the ministry can.
The Vice-Chair: Mr Christie, maybe you can add to this.
Mr Bob Christie: Sure. I can't give you the figure as to how much debt would have been refinanced to date in this fiscal year, but the figure for retiring debt next year is on the order of $6 billion.
Mr Gilchrist: By "next year" you mean the year --
Mr Christie: Sorry, relative to the 1995-96 year that we've been discussing, the 1996-97 year that we're in at the moment, the projected --
Mr Gilchrist: Given that we're within two weeks of the six-month period --
Mr Christie: If it retired evenly, then roughly half. I might add, the normal level of retirements that we've experienced over the last several years of debt rollover has been more in the order of $2 billion. It's $6 billion, as I say, this year, and we will experience a higher level over the next several years, largely as a result of some of the shorter-term borrowing that was done in the early 1990s after the onset of the recession and the impact of that on Ontario's borrowing requirements. So the point that the auditor is making pertains not only to this year but to a succession of upcoming fiscal years.
Mr Gilchrist: The debt that we're rolling over this year, have you before you there an average percentage of the interest rate that the debt will retire in?
Mr Christie: No, I don't have that. The bulk of the public market debt that's being rolled over this year is a five-year debt that was borrowed in late 1990-91. To the best of my recollection, interest rates at that time were certainly higher than they are now. So that will have an impact on our public debt interest cost, which has been taken into account in terms of our projections on this year.
Mr Pouliot: What troubles me is the size vis-à-vis the requirement. There is nothing callable here. If there were, it's market, it's premium, you'd have to pay the price. You have enough volume, but what strikes me, because I can't help but make a relationship that you use the extra, the supplementary borrowing. It may not be all that unwise, but the debt is structured in such a way that there is no bargain by borrowing more because of the interest rates. You service the heart of the debt. The supplementary, if you were to use for cash flow, for current, makes some sense, but you have 13%. Your relationship between GDP increase -- you have a 20% increase, Mr Peters, or 13%? No, a 13% increase.
That I take with a grain of salt for the moment, because it has to be factored in over a longer period because there is very wide fluctuation between the revenue that the state takes or doesn't take and increase and/or decrease in GDP and because you have to factor in seasonal export market. There's a lot of fluctuation there when you talk about revenue.
I see in your expenditure of $57 billion -- what I'm saying is that you took a chance. It's an invitation you couldn't resist because you borrowed more. It's not unwise to do it for your current, to pay the bills, but your expenditures keep going up and up. When all is said and done, if you work in a time span of more than six months you're just as liable to say, "We commend the government but it was revenue-neutral," that when all was said and done with the excess $3 billion that you did not need, even if you factor in that you use it for cash flow, be very careful. It's not cause for celebration; indeed, it could be cause for caution when you do it in the future. That's all.
The Vice-Chair: We'll let Mr Peters continue.
Mr Peters: A fair point.
The Vice-Chair: It is a fair point, Mr Pouliot.
Mr Peters: You have to look at one or the other thing. We can't go into fiscal policy as to what you want to borrow domestically, what you want to borrow in foreign markets and how the exchange rate works and whether you're better off doing Canadian.
Certainly one thing I can share with you is that I had a meeting with some bankers the other day and the province's treasury received high praise from those bankers as being one of the best they are dealing with, and this was a large international bank. They had a bit of a turnover in staff, but I think overall the treasury seems to be doing its job.
The next part, if I can go back to the annual report, "Management Representation." That's why we're talking about these points that are being raised. It's actually the management that is responsible. Mine is just an opinion on these.
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The Vice-Chair: That's page 19.
Mr Peters: Page 19 indicates it's as recommended by the -- I assume that the Ontario Financial Review Commission recommended that management explain its responsibility, and particularly the second paragraph is very clear in what they are assuming: "maintaining systems of financial management and internal control to ensure with reasonable certainty that the transactions recorded in the financial statements are within statutory authority, assets are properly safeguarded and financial records are reliable in preparation of the province's financial statements." That's management's responsibility that this is based on.
If we just flip over for a moment -- and some of the discussion that I thought this would engender has already taken place. The statement of financial position indicates the liabilities of the province and the so-called financial assets of the province. One of the points I thought I would raise with you at this particular stage is why are we talking only about the financial assets but not about the tangible physical assets that the province owns, the infrastructure and all of those things.
This is because the focus of governments is largely on what is called the net debt number, which is called on the statement the accumulated deficit. If that is where the focus is, then if we spend a dollar on building a road or a dollar on paying a school board for education, it's still a dollar spent and the government had to look after: "How do we get those two dollars? What do we fund them from? From the taxes or from borrowing, or which way do we go about it?" The focus has been largely on the cash flow, if you will, in this.
In the private sector, as you know, physical capital assets are acquired to earn a profit, and because you don't earn the profit in one year you amortize these over the years in what you call the useful life of those assets, which will contribute to the profit-making capacity. That has been the traditional accounting view of physical capital assets.
That view started to change largely through the charities. The charities were starting to complain, "If people give us donations and everything else and we buy a car in a certain year and that car will last us five years, why do we have to write off that car in the first year and show everybody that we had a huge cash flow when nobody has really measured what is called the service value of that vehicle or of what they are doing and which earns us longer."
The concepts are changing and what is coming at all governments is actually this famous PSAAB that many of you have heard about, the Public Sector Accounting and Auditing Board. Currently, actually this month, an exposure draft is going out to the public by PSAAB of a way in which the value of the physical, tangible property owned by the government can be recognized.
That is one of the future -- looking a little bit forward -- potential events that can happen where eventually you may look at a statement of financial position which will not only include the financial assets of the province -- of the provincial government, and that's one other distinction I want to make in just a moment. You will also be able to include the cost of capital spending and take that over a number of years, and that's coming at us.
Why I made that quick distinction between the government and the province is one other conceptual -- and I hope I can convey that message clearly; ask me questions if I don't. When a corporation enters into any financial transaction, that transaction will have an impact on the wealth of the corporation as a whole. It either increases the profit or loss or ultimately the equity of the shareholders in that corporation.
Governments don't work that way; for example, when the government invests $400 million in building a new road or something like that, it is the public that will be using it, not the government itself. So the financial statements of the province, although we call them the financial statements, the public accounts of the province of Ontario, measure essentially the wealth, if you will, of just the government, not the province as a whole.
That is why we are measuring here only the financial assets of the government, and we've called them the assets of the province. Everyone in this room and everyone outside this room knows that the wealth of this province of Ontario is in this room, and it's therefore not reflected in these accounts. By taking the capital assets which are funded by the government into it in the future, we are taking a little step towards more fairly representing the wealth of the government.
Mr Gilchrist: While we're on that topic, in other words, there's nothing in the statement of financial position that reflects our ownership, for example, of the Ministry of Environment and Energy building at St Clair and Avenue Road.
Mr Peters: No.
Mr Gilchrist: So all government assets are basically expensed.
Mr Peters: With one exception, and that's a very important one, and I was going to get into that when I was going to discuss with you the reporting entity.
If the government has created a business enterprise that essentially earns its revenue from the outside, then that asset is reflected on something called the modified equity basis, but essentially it is drawn in. For example, at the moment the cost of Highway 407, the construction cost to date, to get back to Mr Pouliot's point, is actually reflected as an asset in the statements through the investment the government has in the Ontario Transportation Capital Corp.
It is there because of the hope, and this is why this careful analysis is taking place, that the toll revenue will actually pay for the asset. It's not to be funded out of the tax base, but it's to be funded by earning toll revenue. The same as, for example, the terminals that people are betting at for the Ontario Lottery Corp are included in here because they are an asset of the lottery corporation. The same with the liquor control board: its buildings are already in the assets base of the corporation.
Mr Gilchrist: That's just the $2.114 million shown there.
Mr Peters: That's right.
Mr Gilchrist: So it's quite conceivable that there are myriad other assets available for disposal that are not reflected in the books of the province.
Mr Peters: The assets that we currently have identified for disposal are included in here because they're considered financial assets. Once they are identified -- here, for example, we have the Ontario Realty Corp. Some of its assets, that is, those assets which are held by the realty corporation for sale, the real estate sale, are included in here at an estimated value of lower cost or net realizable value. So they are reflected.
Mr Gilchrist: The other question I have is on the expense side of things: Are you comfortable with the fact that to write off a bad debt is not listed as a separate line item? Presumably things such as non-repayment of student loans are being lumped under education and training. Income taxes we don't collect. Who knows where that would be, maybe under general government or under public debt interest. Would you not be more comfortable if that was stated as a separate line item so that the people of this province could see how much of legitimately expected tax revenue is not being collected for people that for various reasons --
Mr Peters: It's a very good point. The amount of the write-off itself is actually in the public accounts. It is on schedule 5. The province discloses its provision for doubtful accounts as a separate line item, so it is available for reading. It just doesn't happen to be in the annual report because these are condensed financial statements.
Mr Gilchrist: No, but my question was the significance of that number. You don't think that should be shown even in a condensed version of expenses?
Mr Peters: Essentially not, because it is condensed, because the public is actually expected to read the annual report in connection with the public accounts. So we won't reflect everything in it.
Mr Gilchrist: Fair enough.
Mr Peters: What we do, though, is that in arriving at my opinion, there's a very careful evaluation of this and I think our representative from the Minister of Finance can attest to the manifold discussion that goes on to make sure that this amount is fairly presented.
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Mr John Hastings (Etobicoke-Rexdale): How would we treat, then, Province of Ontario Savings Offices? Are they considered a modified equity example?
Mr Peters: Yes, they are. If you look at page 20, you'll find that the deposits that the public has made with POSO are actually reflected as a liability and the assets that we are holding for them are actually included in our cash. They are things that we are holding.
Mr Hastings: What would happen if those offices are located in buildings owned by Ontario Realty? Then Ontario Realty assumes the asset?
Mr Peters: It depends very much on the ownership of the office and what is -- POSO, as I understand it, as an operation -- my memory fails me right now. I'm not sure whether the Ontario Financing Authority, which actually has taken over the operations of POSO, reflects the capital assets of the savings offices in its books. I don't think so.
Mr Hastings: Most of them would be in rental offices.
The Vice-Chair: I think Mr Christie may be able to clarify that.
Mr Christie: I was just going to make the point that most of the POSO branches are leased or rented, with the exception, I believe, of the one in the Macdonald Block, for example, which would correspond to the example that the auditor has used with respect to the ORC. But a number of others, many if not most of the others, are in private buildings.
Mr Hastings: Most of the other agencies then, it depends on whether they're a schedule A, B or C as to whether they'd be included in modified equity?
Mr Peters: Yes. Well, the dependency is really on what their source of revenue is. If they are fully funded by the province, then their assets are taken out. I wanted to get into that in just a moment. If their source of revenue is outside the government entity, then the assets are reflected as a financial asset of the province.
Essentially, if you allow me to just lead into this, there are three kinds of organizations; we categorize these government organizations into three categories. One is called our government service organizations. Again I did not bring the list along, but to give you an example -- they are listed in the public accounts, and examples that are listed are the Crop Insurance Commission, the Northern Ontario Heritage Fund Corp, the Ontario Financing Authority, and this year, for the first time again, the Ontario Realty Corp. They are all considered so-called government service organizations and they are taken in on a line-by-line basis and any capital assets, for example, actually written off to expenditure on this consolidation, on the merging with the consolidated revenue fund.
Then there's a second category which are the so-called government enterprises, and those are government enterprises which earn revenue from outside. I mentioned some of them already: the Ontario Lottery Corp is one, the liquor control board is another. Ontario Clean Water Agency, Ontario Casino Corp, Toronto Area Transit Operating Authority, GO Transit are government enterprises, and there the government does reflect in the statement of financial position its equity in those organizations, and the dividends they paid are included in the revenue of the province.
Mr Hastings: Do you include entities such as the Ontario Science Centre and Ontario Place?
Mr Peters: Good question. Offhand, I don't know which way they are --
Mr Robert Siddall: The list that's in the financial statement is the list of the major agencies, but all agencies are included, including the science centre; they're included in the government's financial statement.
Mr Gilchrist: Would it be possible to get a detailed listing of that schedule?
Mr Siddall: Yes. I've got it here. The financial statements I've got here as well.
Mr Gilchrist: It would show broken down by entities.
Mr Siddall: It would show the major --
Mr Gilchrist: No, I'm concerned more now about --
Mr Siddall: Oh, about all the agencies in the province?
Mr Gilchrist: Things like Ontario Place and the science centre.
Mr Siddall: Yes, we can get that to you.
Mr Christie: We can get you the details.
The Vice-Chair: If we can continue, I think Mr Peters has about 15 more minutes to go.
Mr Siddall: Could I just make one point? Maybe it would be helpful in terms of showing the impact exactly on the financial statements of the two examples that Mr Peters has brought forward.
The Ontario Financing Authority is, as Erik said, a service organization. The assets of the financing authority would therefore be included in the province's financial statements on a line-by-line basis, so as Erik has mentioned, the deposits with POSO are shown for the year 1996 as $2.2 billion. The example of Highway 407, all of their assets and liabilities are knitted together and an equity position is brought forward into the province's financial statements. That equity position is included with the equity positions of other government enterprises and it's included as a financial asset under investment in government enterprises of $2.1 billion. So I think that should give you an example of the two types of organizations that Mr Peters was referring to.
Mr Peters: Just very quickly to touch on the last one, and then I want to get into the statement of operations very briefly with you. The third category of the so-called trusts, those are organizations that are remaining outside, where the government has some policy influence but really they're funded outside.
The most classic example of that is the Workers' Compensation Board, which is outside the government. These financial statements do not include the unfunded liability of the Workers' Compensation Board, on the basis that the government has essentially created a trust which is operated by the employers in the province for the injured workers, and that is that trust arrangement. The financial position of the Workers' Compensation Board is displayed in the public accounts by way of a note, but the financial transactions of the Workers' Compensation Board, unless they are administering a government program, which they, for example, as of now do -- the Workplace Health and Safety Agency's work I think has been taken over by them, which they funded already all along to a great extent.
The other organization I thought I'd mention very quickly is Ontario Hydro itself. Ontario Hydro is a somewhat strange organization in terms of its ownership. It is incorporated under the power act -- I forget the exact title of the act -- but under that act there is really no equity provision made. The formation of the organization, if you look at the financial statements of the municipalities, you find that most municipalities claim they own a piece of Hydro. For example, the city of Toronto says it's around $400 million, if I remember correctly; Mississauga says $110 million. Mr Hastings might know Etobicoke's number. I don't know offhand.
The organization itself, technically the best way to put it is that Ontario Hydro is essentially owned by the ratepayers through the municipalities. It's very convoluted. If Ontario Hydro gets into the position of earning more revenue than it needs, it is supposed to allocate those excesses to two reserves. One is called the income stabilization reserve, which is designed to minimize fluctuations in the power rates, and the other one is a debt redemption reserve, which obviously they need if they have $29 billion, plus the $3.8 billion, so $33 billion worth of debt on the books.
So Hydro is excluded from these financial statements because the province does not have an equity in it. It's as straightforward as that. There's no equity shown.
It's also a revenue earner. The ratepayers are paying a bit of the guarantee fee anyway, for a small consolation that it is, and it earns about $100 million for water rights, usage of water or something like that. But essentially there's no equity shown. The Ontario Financial Review Commission had the legal department of Ontario Hydro before it to clarify this situation and that was essentially what they confirmed, that there was no equity. It is on that basis that both the Ministry of Finance and my office have agreed that Ontario Hydro is not directly in the financial statements of the province.
The Vice-Chair: There's a question. Mr Pouliot, then Mr Hastings.
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Mr Pouliot: Just one small clarification. On page 29 under "Toronto Area Transit Operation Authority," it is noted that the Toronto transit authority is inclusive of GO Transit. I see your "CRF" at the bottom of the page, left side, page 28, the deficit position of $68.3 million, your commitment. Is that directly reflecting the cost of the lease-back arrangement made by Ontario Hydro?
The Vice-Chair: What page is that?
Mr Pouliot: Both 28 and 29. Page 29 is the heading, and 28 is the item.
The Vice-Chair: You're in the financial statements.
Mr Pouliot: Yes, but Mr Gilchrist has raised assets.
Mr Peters: No, those are the operating results of the transit authority, not necessarily the debt. But you're allowing me to make another very quick point, and that is that some of these organizations are not necessarily organizations where 100% of the revenue comes from outside the government. There are some of these who receive subsidies, and GO Transit would be certainly an example. I believe the numbers, 25% comes from government grants, something like that.
Mr Pouliot: But on the operation of GO Transit, 100% of rolling stock, the fare box, an estimated 70% from consumers straight to the fare box. That's their relationship. The remaining 30% is straight from government, from our pockets, from general revenue.
Mr Peters: I don't know the exact percentage. There's a current movement. Probably in the current year the Ministry of Finance is going to carry out an evaluation of this situation along with us, because the definition of a government enterprise has changed a little bit under the PSAAB accounting rules and we have to see what the impact on the financial statements of that change in rules is. They have gone from virtually sustainable to being able to sustain all the operations, in a nutshell, the difference. As you can tell, it's a nuance that we have to deal with. But it may result in some of the organizations that are currently business enterprises losing their status.
The Vice-Chair: Mr Hastings just wanted to ask a question before we get too far along.
Mr Hastings: How do you account for or have any reference, Mr Peters, to all the art that's held in this building and in other places like McMichael -- separate? Stuff you see on the walls around here and a lot more that's in appropriate storage, I presume -- do you just ignore that or is it counted into property?
Mr Peters: No, it's an expense, because the assembly is part of the government operations, so also works of art are expended as they are charged to the bottom line when they are acquired.
Mr Hastings: What about ones that were acquired 50 years ago?
Mr Peters: They're still --
Interjection: Not assets?
Mr Hastings: Even if they were donated?
Mr Peters: No, it's not an asset.
Mr Hastings: All considered debt?
Mr Peters: If you want, it's written off as acquired.
Mr Siddall: The exposure draft that Mr Peters was referring to just deals with tangible assets. It will not put the type of assets that you're talking about in terms of monuments, works of art, on the province's books.
Mr Peters: If we can flip over to the statement of operations and accumulated deficit which you'll find on page 21. There is a discussion of the financial highlights, of course, later on, but it outlines the sources of revenue and the trending, personal income tax, retail sales tax etc. It summarizes the expenses essentially by major function, like it shows the expenses on health, on social services, which is largely Comsoc, education and training, the public debt interest -- and you can see where it is now in the positioning, the fourth-largest expenditure -- resources and economic development, rolls in quite a number of ministries into that, justice rolls in, essentially the Attorney General's and Solicitor General's operations, and then there's general government, which are quite a number of ministries and the operation of this building and the assembly and things like that.
Then we have an unusual item, which is "Restructuring and Other Charges." That comes from, again, an accounting rule to a great extent. If governments make the decision to downsize, governments are asked to recognize in the accounts the costs associated with that downsizing when the decision is made, not when the expenses are actually paid out. So a large portion of this $1.3 billion -- and that is analysed on page 11, if you wouldn't mind flipping with me very quickly to that. It's a bit of an unusual item and you might want to --
The Vice-Chair: Mr Pouliot has a quick question.
Mr Pouliot: Under "Restructuring and Other Charges" -- and I'm hanging on to your every word; in fact, I can quote verbatim -- the second-last item, "$30 million for termination of the former MPP pension plan," that is supplementary to what is already in LARA, the Legislative Assembly retirement allowance, right, in the existing plan? What's happening now is that Price Waterhouse, under its sanctity, has gone to the market and it has to bid on the non-active, people who have retired before I would have, and then the active members. So it's two different pots: One is annuitized and the other is option to lock in and partly annuity. The thing is, $30 million won't even cover --
Mr Ramsay: Your pension.
Mr Pouliot: -- the annuitized.
I don't depend on these people here, thank you.
Does that factor in the $52 million or thereabouts already in LARA? Because my understanding is that when you blend both, the responsibility will entail closer to $90 million than $30 million. I take it, therefore, that this would be a supplementary charge.
Mr Christie: This is a provision for the additional costs over and above what's already provided for in the LARA account. As you know, the LARA account did not try to capture unfunded plan liabilities or things like that. It wasn't an actuarial estimate of the liabilities; it was the annual deposits to the account. There was, in essence, an unfunded liability on termination of the former plan and there had to be a provision made to cover that on the conversion of the liability.
Mr Peters: The big two portions are the first two. One deals with the provision for early retirement for civil servants, and the next portion is the $400 million for employee severance charges net of pension costs. Those two would be fairly directly linked to that decision of downsizing, so about $850 million. There are some other unusual items. There was a landmark decision on corporation tax which cost the government $310 million. That was put into this amount.
But I thought one of the other matters on this that would be of interest to you is that in the public accounts there is another breakdown of the expenses. It's shown in something called schedule 2 of the public accounts. It gives a little more of a flavour in the generic sense as to what our expenditures look like. If you look at the first two captions, "Salaries and Wages" and "Employee Benefits," you'll find that the government spends 9.4% of its expenditures on public servants; in other words, less than 10% goes into that category of total expenditures. The other ones are fairly small.
But you realize -- and this is one of the points I'd like to make to you; this is why, for example, we discussed proposed amendments to the Audit Act -- that transfer payments represent 70.2% of the government's expenditures. That includes a wide variety of expenditures. That includes all the expenditures of welfare recipients. They are called transfer payments for this purpose. That includes fee-for-service charges by the physicians. That is fairly large, about $6 billion or $7 billion. That includes the organizations we have been talking about in the proposed amendments to the Audit Act -- payments to the hospitals, school boards, municipalities, universities. All of that is in there. But I thought it would give you a little idea of the magnitude of the kind of money that flows from the government, either to individuals or to organizations, in pursuing legislation that is on the books of the province.
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Interest on the debt you can tell is 14.5%.
Those are just the big ones. There are two ways of breaking it down, and both of them are informative and interesting. How much we spend on health and how much we spend on education is a good breakdown. It's good to know, but it's also good to know what the characteristics of the payments are, whether they're transfer payments or whether you're paying salaries to individual public servants.
With that, I want to very quickly go back to some of the economic highlights, which are the very unusual features of this report, and just point them out to you, showing the trend. Page 2 shows some of the economic indicators. For example, the first bar chart on page 2 shows the comparative growth in gross domestic product, comparing Ontario and Canada from 1990 to 1995. With the exception of maybe 1992, we are either worse or better than the rest of the country. That gives you that picture.
The other one is the comparative real output growth, and this is over a two-year period in this particular case. You can see that in 1994-95 -- which is the last year for which statistics were available at the time when this was published, because we have a March 31 year-end; many of them are really done on a calendar year basis and other bases -- Ontario's growth is higher than that of any of the G-7.
The inflation that we suffered in that period, or the degree of inflation -- I shouldn't use valuative adjectives like "suffering" or whatever, but that's what we incurred -- is a very unusual item, of course, in 1994, and that was because of the way the CPR basket is put together. Tobacco products play a big role in that, and the upshot of it was that the tobacco tax cut significantly reduced the CPI because of the weight it had in the basket.
Job creation is another statistic that the government wanted to put out. It shows, on page 4, the job creation in the province, relatively flat in the last two years, 1994-95, at 71,000, but it is positive.
As to the financial highlights -- and this really deals with statistics that link financial data with non-financial data -- with the ratio of Ontario spending to gross domestic product you can see there was a steep increase. We're now heading back down in terms of the ratio that is occurring.
Pages 6 and 7, as recommended by the Ontario Financial Review Commission, present our sources of revenue and expenses by major category in the form of a pie chart, but we largely have gone through that. It's a graphic display that is fairly useful. It's open for questioning.
From page 9 on is really the discussion of the government's financial performance, of the changes that occurred in the deficit and revenue, what role tax revenue played in it, what the individual components of the tax revenue were, where we stand as far as transfers from the government of Canada are concerned -- how much we got -- and how much we get out of the various programs we have. "Other Revenue" analysed the income from government enterprises. I've mentioned that to you.
On page 10 there's a little bit of detail. I'm doing a little bit of a flying overview here. The changes in the expenses are analysed out. We talk about the restructuring expenses. Then there's an analysis of the provincial debt which shows how much is owing to the public, owing not to the public, owing in currencies other than US dollars and in US dollars. The Ontario debt-to-GDP ratio is also shown, on page 12.
The government talks about prudent debt management and the financing initiatives that are launched, and then concludes with a bit of a discussion of Ontario Hydro.
With that, I think I've taken up about as much time as you probably ever want to spend on this subject, but in conclusion, I'd really like to again raise the point with you that this additional financial information is good for the government to have. I consider it good information for the members of the public accounts committee to have. I don't mean to sound patronizing, but one of the things that has happened over the years is that although it has been the standing committee on public accounts, the public accounts committee has only discussed these in moments of crisis, like when I had to qualify the opinion a few years back. I thought that it was actually time, when better disclosure was happening, when that would be a point to bring up to the committee.
Mr Hastings: In the big report, the thick one, Mr Peters, could you give us a status report at all regarding the discussed amendments to the Audit Act that we recommended last June 13? Without disclosing confidentiality, where are we with the finance ministry on those amendments?
Mr Peters: I believe the committee had set a date of September 26 for an action plan by the Minister of Finance, and I think on that very date the minister delivered a letter to the Chair of the committee as to where he stood. I'm not sure whether that has been shared with the committee members or not. It indicates, as I indicated in my press conference, that the Minister of Finance agrees with the principles that were outlined but expresses somewhat of a concern about timing, because of the restructuring of the transfer payment system that is currently under way, and would like to see this come forward when that is resolved to see what the audit regime over those transfer payments actually should be.
I should tell you -- and I don't think I'm betraying a confidence -- that I met with the Minister of Finance on the issue. There were two points raised. I felt, and I believe the Minister of Finance agreed, that regardless of the restructuring, there would always be transfer payments made by the province with strings attached. Regardless of what happens, some sort of control regime will have to be put into place as we go along on this.
The second part that was raised -- it's certainly a very valid point, and we didn't spend very much time on it in committee -- is that I never had the intention of auditing organizations that received minimal amounts of their revenue from the government. It would have to be a goodly percentage. Offhand, and this is certainly subject to further discussion, I think the cutoff may be at least at 50%. They must receive 50% or more from the province before we look at them. That was just an overall discussion. It stemmed from the discussion of finding out what is happening in the system. As many organizations, for example, increase the proportion of externally earned revenue to what they get from the province, they may ultimately fall off the audit regime.
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Mr Hastings: On an unrelated but significant matter, I didn't see anything in the report on this: As we go through downsizing and restructuring and as offices fold into other ministries, whatever you have, how are we keeping an account of inventory, particularly of computers, both the laptop type and 386s and 486s? I raise this question because I've had a couple of constituents come to me alarmed about how stuff is moved out, sold off. In more than one ministry, and I won't name them, there doesn't seem to be any controlling mechanism or reporting in place: When an employee leaves, does she or he get an opportunity to buy a laptop computer, as an example, or is it given away? There seem to be conflicting stories on how that kind of thing is handled, and I suppose it reflects in other areas of property that employees get to use while they are in the employ of the public service. I wonder whether you are concerned or have had this brought to your attention. Have you issued or can you issue any MOAs or cautionaries as to how this is to be handled?
Mr Peters: We have not examined this area. It would differ from ministry to ministry. In my own shop we keep very close tabs on the computers, who has them and where they are located. We have an inventory list that we keep. I trust that the ministries would do the same.
The effort to take account of inventory, which we reported on in 1995, was from our perspective considered unsuccessful. The government spent something like four point some-odd million dollars to count computers, about 60% of my budget. I was astounded by that, spending that kind of money on just counting computers, and the inventory that was produced had the shelf life of a banana. The inventory that was produced was simply not maintained at that particular point.
Mr Gilchrist: Let the record show that was the early in the 1995 year.
Mr Pouliot: That was all changed, Steve. It's all changed now.
Mr Peters: How this is controlled in the individual ministries, I couldn't answer the question.
Mr Hastings: Do you think there ought to be some sort of standardized approach to this without spending a lot of money? For example, if you're going to get rid of computers that are out of date, and people are buying stuff before year-end, should that stuff be sent out to school boards? There are hundreds of schools in this province that hardly have any type of computers. I don't want to go off on a tangent --
The Vice-Chair: If I can interrupt, Mr Hastings, I think this is something we could bring up, certainly, in terms of direction from the Provincial Auditor to departments. We might be able to have some guidelines from him at least to conserving first of all, and come back.
Mr Hastings: Fine.
The Vice-Chair: I just want it to be a bit more macro here in terms of getting through this, but I think it's a very good point in terms of inventory and the auditor's interest in inventory control.
Are you finished with your overview now?
Mr Peters: I've finished with the annual report. If there are any questions --
The Vice-Chair: I wonder if the gentlemen from the Ministry of Finance would have any other comments to make.
Mr Christie: I think Erik has been very thorough, and we thank him for his kind comments. I reflect again that people have worked very hard to do some of the things that are done here, as he's noted, as has his office. The only thing I'd add is that the purpose of this annual report was, as the financial review commission noted, to communicate better with the people who are concerned about Ontario's finances. So if there is any advice, if there's anything that people would like to see included in this that wasn't included, obviously it would be very helpful for us to have your input on that and make this a more useful document to the Legislature and to any others who are interested.
Mr Siddall: Just following up on Bob's comments, I think part of the reason why it has been difficult to bring forward public accounts to the public accounts committee is the size and magnitude of the information we produce every year in public accounts and which all of you get in your boxes. One of the major objectives of trying to do an annual report was to get a document down, as Erik said, to within 20 to 30 pages and provide a lot more narrative around the numbers so we're not just producing a document that has a lot of numbers in it and doesn't have a context around it. Hopefully we've accomplished that.
The Vice-Chair: I want to thank you, Mr Siddall and Mr Christie, on behalf of the committee for coming here and making yourselves available. I think you can pass on the committee's appreciation for coming up with this very manageable, clear and concise overview of a very complex matter with the Provincial Auditor's help. It is commendable that it is quite understandable in terms of the pie charts, graphs and brief and pointed explanations. I think it's very positive because it helps us to understand, and the general public could pick this up and find it very useful too. I want to pass on to the minister our appreciation of that. Thank you.
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COMMITTEE BUSINESS
The Vice-Chair: In the second part of the meeting we hope to determine the areas we're going to examine in the course of the coming session in the public accounts committee. We recall that in the last session we dealt generally with two major areas of concern: parole and the tax gap.
One of the things we wanted to put forth from our subcommittee discussions is that we'd like to try, in this session, to cover more areas that have been raised in the Provincial Auditor's report in a more sort of rapid-fire manner; in other words, spend a bit less time with more areas, though, so we'd be able to touch -- I think in the last session we were going into two or three selected areas. The objective this time might be to try to cover off a greater number of areas of concern raised by the auditor and perhaps not to spend as much time in one or two so we can familiarize ourselves with more areas, more ministries and activities of various ministries. That was the general consensus of the subcommittee.
With that in mind we should try to set up a schedule of areas of, we might say, concern for this committee so we can give staff some idea of calling witnesses and preparing background material for the committee. I don't know whether you want to leave the actual areas up to the subcommittee or deal with them now or whether you want to make some comments on the direction of the committee and what areas and how much time we spend on selected areas. It's really up for discussion.
Mr Gilchrist: Just as an aside, perhaps we could have a summary of our future subcommittee discussions brought forward for the benefit of other members of the committee.
The Vice-Chair: Okay.
Mr Gilchrist: I've noted, in descending order, six areas of interest and I'd be pleased to propose them. In large measure they are ranked by the dollar impact to the taxpayer. My first choice is section 3.04, Ministry of Community and Social Services, given that that was a total expenditure of $3.4 billion. I can go through the list if that's a good starting point.
My second choice would be 3.18, then 3.07, 3.13, 3.05, 3.17. Two of them are Comsoc, the next one is colleges of applied arts and technology, Ontario drug benefit program, Ontario Realty Corp and Highway 407.
Not to denigrate in any way the work done on other sections, but for example on 3.06 the Provincial Auditor came out and said it was totally satisfactory; 3.08, OTAB, has been eliminated since the report was done; 3.10 we dealt with quite exhaustively in the context of the 1995-96 public accounts report, namely, tax collection. So those three, I submit, are totally inappropriate for us to consider.
I'd be pleased, on behalf of our members, to consider the dollar value of any other sections. But when you look at 3.02, for example, $80 million on agricultural technology labs in the overall context of a $50-billion-a-year government, I don't know if that's the best use of this committee's time.
The Vice-Chair: If I could comment on behalf of my caucus, I don't have any problems with those selections. I think you're quite correct that some of them are quite obvious. I don't really want to spend any time on the Liquor Licence Board of Ontario, where it seems to be fairly copacetic in terms of the auditor's report except for a few comments.
The only one I'd like to add that our caucus have some interest in is 3.09, the environmental standards and sciences division which, maybe not in pure dollar terms but in terms of direction and changes that are taking place in that area, is of concern.
In terms of your comments on 3.10, Mr Gilchrist, I would think it would be helpful in terms of a follow-up. One question in my mind is, you made recommendations in terms of certain initiatives and I'm just wondering where we're at with that. It being an area in terms of the magnitude, the tax gap itself and government's approach to dealing with that, I would like for us to keep some time on it just to put it in the context of where we started off last time and ensure that the thing we were concerned about so much was the follow-through on all this as we made recommendations and where they are now. I would like to keep a running account of the measures taken and not taken and so forth.
Mr Gilchrist: With that qualification, Mr Chair, I agree with you completely. You will recall that when we discussed it the last time, we allowed a time period for the ministry to react to what we had proposed. I recall they had come back and told us they had already hired a number of auditors and more were to come, but perhaps this would be an appropriate one, well down our list, to give the ministry a few more months to put in place.
The Vice-Chair: I think that's no problem for us.
Mr Bruce Crozier (Essex South): You were speaking on behalf of our caucus and I'm kind of speaking on my own behalf. You mentioned that 3.18, which is 407, is an ongoing project, one where there seems to be I think some misunderstanding. Since yours was in descending order I would --
Mr Gilchrist: It was my number two choice, though.
The Vice-Chair: He did mention that.
Mr Crozier: Oh, all right. Thank you. When you said two Comsocs I put Comsoc at the beginning. So it is your second choice. Thank you very much. It is a full plate, so I'd like to see that right where it is.
The Vice-Chair: The auditor would like to make a short comment.
Mr Peters: I really appreciate the depth to which you've gone. Just by way of explanation, one I may want to bring to your attention again, although 3.08 was entitled "Ontario Training and Adjustment Board": We deal with three programs in there which the Ministry of Education and Training is taking up. Particularly the apprenticeship program could be a job generator in the province in the way it is handled.
It has an additional feature in it that you might find interesting to discuss, which is federal-provincial cooperation in this whole area of training: We are spending some training money, the federals are spending through the Department of Employment, we are spending money now through the Ministry of Education and Training. Are we doing the right thing and are we getting the right end product out?
We started out doing it as OTAB, but what happened is that the key programs we were looking at, regardless of who administered them, were really a significant -- I just wanted to bring that to your attention because you made the comment that because it was OTAB it was gone.
The second one is one that I confess to you is fairly close to my heart, and that is 3.14, and that's the independent health facilities. This would allow the committee to deal with the privatization of health services in some way and how this is handled, because the independent health facilities are handled by the private sector and what role should the government cost-effectively play in ensuring quality of service. We have the Scarborough incident where people contracted hepatitis, and they ultimately had to be shut down. One of the concerns that we raise is that the inspection which is done by the College of Physicians and Surgeons -- there is some significant improvement involved. I just wanted to raise it with you as a point of interest, although the program is spending close to $400 million. I just wanted to raise it with you as another program area where it might be of interest. In a way, we had hoped to be helpful through the report to the Ministry of Health to cope with this sort of situation.
The Vice-Chair: Sorry to cut you short, but we probably have to go and vote. I don't have any problem with that. I think it's something that will be of value to us, and that's why I think this approach might enable us at least not to get totally into that area but at least be familiar with it to make certain there will be directional changes.
Mr Pouliot: Our party would certainly wish to address on the same parallel as you've mentioned, general assistance recipients, and I think it was not highlighted but certainly noted in your report as forever more vigilance. I'd like to blend it with 3.10. I see here that the Financial Post -- page 135 of the big book -- and Carleton Opinion Marketing and Public Affairs Surveys Inc indicated 26% of all small business owners admitted spending business money for personal purposes to avoid tax. That's more than a quarter of the survey, so maybe a little more vigilance. What it will yield in terms of dollars when we looked at -- some people say tens of millions -- it's pretty hard to collect, but certainly people must know that there is more vigilance and that they have a responsibility as well. In terms of the intake, in terms of the take, it's like mine. I have never made the money I think I will and I spend more than I think I should.
The Vice-Chair: I'm sorry to interrupt, but time is being of the essence here. Do you have any problem with that order giving direction to staff here that we hope to begin, I guess, with Comsoc as our first item on the agenda, with witnesses etc, and then second, we'll be dealing with the 407 in that order. The others we'll determine in subcommittee in terms of -- finance, for instance, is going to be a timing thing, so we'll have to put that a bit later on down in the agenda etc. I think we'll be able to handle that and then report back to the committee as a whole in terms of the actual sequence over the next number of months and so forth.
Mr Hastings: The area of the training is one I agree with completely, and whether we're getting real value there. I'd like to suggest to the auditor that staff get reports of other countries, the Organization for Economic Co-operation and Development, as to how good our training is from other perspectives.
The independent health facilities -- I'm wondering if you could include in a crossover in that where you have Comsoc institutions that have a health-related function in terms of the disadvantage, whether we're getting value there.
The third one is, could we get an inventory of the way property is disposed of by the various ministries and could we come up with some specific guidelines of how that's to be done? Down the list, months out from now into next year.
The Vice-Chair: We'll deal with that in committee and take your comments certainly.
Interjection.
The Vice-Chair: I think the subcommittee will decide that, because it's a bit too difficult in this setting to decide exactly, considering the number of witnesses and the time frame here. I think it would be better if we do it in subcommittee. That's my suggestion anyway.
Mr Gilchrist: I would agree, and I think the auditor, from the somewhat quizzical look on his face, has some concerns about whether that information is perhaps already contained in there or whether this would be a new research project. Would that be a fair assessment?
Mr Peters: I think the best way probably to handle it is to ask the ministry to come up with what work they have done. It may be a line of questioning that the committee may want to pursue with them when the ministry comes before them.
On the second one, Mr Hastings, if I may just add, my office can under the Audit Act accept tasks from the committee under section 17, on resolution by the committee, so some of these additional concerns you might want to bring forward along those lines. I just want to alert you to that possibility when you raise the points you are raising.
Mr Pouliot: It might be of benefit to the point Mr Gilchrist raised vis-à-vis the 407 -- it would be not only appropriate, but from my point of view desirable to have the expertise from the Ministry of Transportation and perhaps enlist Price Waterhouse in its overseeing capacity to keep the system on stream, because it's quite intricate, it's very, very interesting, and they could save us a lot of time and give us the right chronology and develop the team for us to answer pretty well every question.
Mr Gilchrist: I wonder if it's appropriate to suggest that Comsoc may need -- rather than my assuming, ask Mr Peters what time period he thinks would be necessary to array the forces to deal with section 3.04 as the first item we've agreed to discuss. Could it be done by next week or would it be more appropriate to suggest two weeks from today?
Mr Peters: You see, the reports we have filed have been in the ministries' hands since about May or June, so I would not consider it an unusual hardship, but it would be advisable to advise them at the earliest opportunity. If the committee made the decision now, to advise them this afternoon would be appropriate. To wait any longer would not be fair to them.
The Vice-Chair: I guess we will try again for next week to get it started, and I think what's required then is for the subcommittee to meet probably early next week for a short period of time, but on the other hand, we're giving direction that we want to get started on the Comsoc for next Thursday.
Clerk of the Committee (Ms Donna Bryce): With the main subcommittee meeting this week, could people get organized this afternoon?
The Vice-Chair: Yes, I'm here this afternoon. Mr Pouliot, are you here this afternoon?
Mr Pouliot: There are only 16 of us.
Mr Gilchrist: In terms of next week, I don't think there's a need for the subcommittee to -- if it's the agreement of all present today that we proceed, assuming Comsoc staff can make themselves available for next Thursday morning, then I would make that recommendation.
The Vice-Chair: Yes. We can start on that and get going.
Mr Gilchrist: Let's do that, and at some point next week we'll have the subcommittee meeting and be in a position to report on the rest of the sequence by the time we get to Thursday.
Mr Peters: May I raise just a brief procedural point? In the past, committees have found it fairly useful to meet in camera for about 20 minutes or half an hour ahead of time and to walk through my report, that I walk you through the report, in order to provide a little bit of background and to raise some questions that you may have of me or that you may be uncomfortable raising on the record.
The Vice-Chair: Perhaps we can do that by starting a half-hour earlier next Thursday.
Mr Peters: A half-hour earlier? I would use the first half-hour.
Mr Gilchrist: I think Mr Peters is saying take the first half-hour of the committee.
The Vice-Chair: Oh, okay.
Mr Peters: And invite the ministry to show up at 10:30.
The Vice-Chair: Okay. The first half-hour will be taken up with in camera discussion with the auditor.
The committee adjourned at 1144.