The Committee met at 10:00 a.m. in the Colonial Building.

MR. CHAIRMAN (Mr. Hearn): Let me welcome you all here, the people from the Auditor General's Department, Mr. Carew and his staff. Today is a bit different perhaps from our regular Public Accounts Committee meetings, usually we are zeroing in on some bad boys in certain departments or agencies trying to find out why they did all these terrible things according to the Auditor General. Half of the time we find out that the Auditor General was not correct in his assumptions - I am only kidding.

We have had some good debates since we started, good discussions on points raised about the accounts of the Province and why certain things are done and why they are not, and why certain rules are not perhaps sometimes complied with exactly. Sometimes there are good reasons, and what have you but today is a little bit different. Basically, it is more or less an information gathering session rather than trying to zero in on any real mistakes or oversights, I suppose, made by departments or agencies and it is a matter of disagreement as to how the financial statements of the Province are handled.

The Auditor General's Department feels that there are certain omissions in the general accounts of the Province and the Comptroller General and undoubtedly Treasury Board feel the method they use in accounting for monies of the Province is the proper way to do it. We have had arguments like this before and quite often we find out there is merit on both sides, but when the issue is raised over and over, then we think perhaps sort of a public hearing, a public discussion on the matter enlightens the people who are on the sidelines saying: look what is going on here and why is there disagreement or why are certain things not accounted for in the accounts of the Province or whatever is published.

So, we thought it would be a good time to have a frank and open discussion on the topic and consequently we have invited Mr. Carew and his staff to come and certainly people from the Auditor General's Department. We try to run our meetings very informally. We let the Auditor General have his say first in relation to the comments he has raised in his yearly Report, then we give the Opposition a chance to respond, and the Department or agency a chance to comment, then usually we throw it open to Members of the Public Accounts Committee, to people from either group of witnesses who want to comment and hopefully, as I say informally and as orderly as possible, get all the facts and figures on the table, then as we do our report at the end of the year we will make our own comments.

A couple of things we have to do first before we get into the hearings and that is the swearing in of people who have not appeared before this Committee before.

I would also like to take the opportunity to introduce to you the Members of the Public Accounts Committee who are here today. Staff member, Elizabeth Murphy on my left is our acting research person. Elizabeth is Deputy Clerk with the House of Assembly and does a tremendous amount of work for our Committee at all times. Bill Ramsay to my left is the Member for LaPoile; on my right Alvin Hewlett the Member for Green Bay; Glen Tobin the Member for Burin -Placentia West; and the Deputy Chair now is Aubrey Gover the Member for Bonavista South. The last time, I think, when we met publicly, Mr. Hogan was the Deputy Chairman. Bill Hogan has since been elevated to Cabinet and Mr. Gover is now the Deputy Chair.

So, with that I will ask Elizabeth to swear in anybody who has not been sworn in. I will ask both groups to introduce the people with them and go on from there.

Mr. Bernard Carew

Mr. Raymond Gruchy

Mr. Ronald Williams

MR. CHAIRMAN: Now, Mr. Hart if you would like to introduce, for the sake of all the people here, the members of your committee.

MR. HART: (Inaudible) and audit manager, David Hill; when you are ready I am going to ask David, as we have been doing recently, to read an opening statement which we have prepared.

MR. CHAIRMAN: Okay, first of all, I would ask Mr. Carew if he would introduce his people.

MR. CAREW: Mr. Chairman, on my left is Mr. Ray Gruchy, Assistant Comptroller General and on my right, Mr. Ron Williams, Director of Government Accounting; John Martin, the Assistant Director of Government Accounting.

MR. CHAIRMAN: Thank you very much. When you are speaking, I would ask you to get as close to the microphone as you can; this is not for amplification but strictly for the record, so years down the road as you do your research, you can check into what you said and because some of your voices may not be familiar to our secretaries, unlike the House of Assembly, we ask you to identify yourselves.

I will try as I introduce each person, but the point is when we get into a to and fro situation, I am sure during the day there will be times when somebody mentions something that triggers a response or a comment and your name may not be clear, so if you would just mention your 'Jones', type of thing and go on from there.

With that, I will ask Mr. Hart, to have his staff, whatever, comment on the comments and just again to reiterate, the discussions today are I suppose, because of a disagreement in relation to procedures, certainly we are not talking about, as I say, anything that the Auditor General has perceived as being wrong with the accounts, with the bottom line of the Province at all; it is a matter of the procedures used in determining, I suppose, the financial state of the Province and it should make for some interesting debate.

So, Mr. Hart, if you would-

MR. HART: Yes. Basically, I guess the reason we are here this morning is, as you mentioned, it deals with a professional issue.

We advocate in the Department of the Auditor General that the Province would be better served were it to use what is known as 'The Accrual Basis of Accounting', and we will explain this a little later for those who do not quite understand what it all means.

Presently, the Province is using a cash basis, or a modified cash basis as they call it; there are basically two different concepts, cash or accrual, and we will explain both shortly. We have prepared a written statement to present our position and I will have David Hill, the Audit Manager, read that.

MR. CHAIRMAN: Thank you. Mr. Hill.

MR. HILL: Thank you, Mr. Chairman; my name is David Hill.

The Province prepares its financial statements on a 'cash basis of accounting', modified in accordance with the Financial Administration Act, 1973. This Act provides for the inclusion of revenue from the Government of Canada relating to the current or prior fiscal years, if received within thirty days from the end of the fiscal year.

Also, invoices received for payment by the Comptroller General of Finance within thirty days from the year end, which pertain to liabilities existing in that year end, are charged to expenditure in the year in which the liability was incurred. In accordance with the accounting policies used in the preparation of the public accounts, the balance sheet or statement of assets and liabilities, is prepared, using net direct debt basis.

The objective of this presentation is to show the Province's net direct debt rather than the accumulative amount of assets and liabilities. The Province's net direct debt consist of total direct debts, less the value of accumulated assets such as accounts receivable, loans advances and investments; assets which are not considered to be convertible are not value.

The Province's Financial Statements present the transactions of the consolidated revenue fund; as a result, the assets, liabilities and operating results of Crown Corporations, Boards and Authorities are not included, except to the extent their transactions impact on the consolidated revenue fund.

In 1981, the Public Sector Accounting and Auditing Committee or PSAAC as it is commonly called, through the Canadian Institute of Chartered Accountants, was established with an overall objective to improve and harmonize financial reporting, accounting and auditing in the public sector in Canada.

To meet this objective, PSAAC issued statements that recommend standards for good practice and financial reporting, accounting and auditing in the public sector and also initiates research studies on public sector accounting and auditing matters. The public sector accounting statements and recommendations apply to all governments, unless their application is specifically limited in individual PSAAC statements.

Our review of the 1989-1990 public accounts disclose that there are a number of areas dealt with in the recommendations of PSAAC, which have not been fully implemented by Government. We note in particular that a number of specific PSAAC recommendations relating generally to the adoption of the accrual basis of accounting have not been fully implemented. The majority of the other provinces and the Government of Canada now comply to a great extent with these recommendations.

PSAAC has also issued recommendations on accounting for and presenting the transactions of crown corporations, boards and authorities and Government's financial statements. As previously indicated the assets, liabilities and operating results of these entities are not presently included in the financial statements except to the extent there transactions impact on the consolidated revenue fund. PSAAC has also issued recommendations on accounting for employee pension obligations in Government financial statements, the most significant of which would require the Province to record unfunded employee pension liabilities.

In our 1989 annual report we noted that the comptroller general had advised us that the implementation of these PSAAC recommendations were in the initial stages of study. In February 1990, a committee consisting of representatives from Treasury Board, the Department of Finance, and Works, Services and Transportation was established to review PSAAC accounting statements and recommend which policies Government should implement in what time frame. Our office has been invited to attend the committee meetings and to participate in its research which is at a preliminary stage.

We strongly support the process of establishing an interdepartmental committee to review accounting issues relating to the public accounts. To date this committee has not issued any recommendations. In our view the effectiveness of this committee would be significantly improved if additional resources were allocated so it could meet its objectives in a timely manner.

In conclusion, the recommendations of the public sector accounting auditing committee of the Canadian Institute of Chartered Accountants are designed to improve financial reporting by all Governments in Canada. The adoption of these recommendations will not only significantly improve financial reporting by governments, but also make the financial reports of all governments more comparable from year to year and from jurisdiction to jurisdiction. Thank you, Mr. Chairman.

MR. HEARN: Thank you very much. Any other comments, Mr. Hart?

MR. HART: No. I guess I will jump in when necessary as we go along.

MR. HEARN: Thank you very much. Mr. Carew, would you like to make an opening statement as the Comptroller General?

MR. CAREW: Mr. Chairman, we do not have a formal opening statement as such. Our views and I guess the views of the government to a certain extent were expressed in the departmental observations on the report of the Auditor General which was tabled in the House at the same time. I do not intend to go through the motions of reading that, but rather we will respond to any particular questions or comments that the Auditor General and his staff or the members of the committee may bring forward.

I will say that I agree with your opening remarks, this is not an area where there is a great deal of disagreement. While we may not agree with the Auditor General on every detail of PSAAC's recommendations, by and large there is no serious disagreement. The difference, I guess, is in matter of timing of priorities in an area or at least a time where we are under severe fiscal restraints.

The resources we would like to devote to upgrading our accounting and presentation of public accounts and so on have to necessarily take second or third place, but we are moving, albeit somewhat slowly towards most of the objectives outlined in PSAAC. We have maybe some slight reservations on PSAAC's recommendation that the accrual method is all that much better than the system that we are now using, but this is a fairly minor thing because I think for reasons of conformity with all of the other jurisdictions we probably will bring it in in the near future.

I might just note in passing that, I will give you an example, Ontario which is a fairly large jurisdiction, the largest obviously outside the Federal Government, still operates almost identically with our method, and they have at the moment no plans to change it in the immediate future. But here again, the differences in what we call the modified cash basis and what some provinces call the modified accrual gets into a sort of splitting hairs. I just want to emphasize again that we do not have a disagreement with the Auditor General on this. As I said it is purely a matter of timing. Another example I will give you before I stop and pass it on to somebody else is that the question of recording the unfunded pension liability, which we have recorded and shown it as a note to the balance sheet for some years now, we intend to bring it into the body of the balance sheet and formally record it as a liability this year, subject to any legal or legislative impediments that might turn up, we do not see any at the moment. As for full accrual, I think, that is maybe a year or two down the road. I think I will stop there because we may want to get into further detail later on.

MR. CHAIRMAN: I have just one question before we throw it wide open. What difference does it really make to the Province as to whether or not you are using the method you are using or whether or not you have full accrual? I am talking about, I suppose, the economic effect on the Province in relation to our markets and what have you. Is there any effect on your method of accounting?

MR. CAREW: Other than uniformity with other jurisdictions I do not think it has much effect. For example, our financial advisors have not been very forceful in asking us to go to a change in financial statement presentation. From our conversations with Ontario and the other jurisdictions, the financial community has not, as a general rule, taken this thing up because, number one, I think they regard it as an argument among accountants. I think by and large they feel that under the present method of presentation you can get all the information you want. You may have to dig a little bit for it or move around back and forth. For example, our presentation of the accounts of boards, Crown corporations, and that type of thing in a separate volume is under review and my own feeling is that, particular in a small jurisdiction like Newfoundland, we should have all that in one volume, and as far as consolidation is concerned, well that depends pretty well on bringing in the accrual method anyway, although not necessarily. I do not think it has any significant effect, certainly not on the economic view of the Province, the financial view, or anything else for that matter. It is largely a matter of uniformity with all Governments in Canada.

MR. CHAIRMAN: Mr. Gover.

MR. GOVER: Thank you, Mr. Chairman.

I have some general questions for the Auditor General's Department and then I want to move more specifically on to one of the issues of concern in these set of comments. I understand when the Auditor General reviews the financial statements of the Province he has to express an opinion in accordance with generally accepted accounting principles along with the other criteria that have to be used. I notice that PSAAC is a committee of the Canadian Institute of Chartered Accountants and I notice on Page 35 of the report the statements and recommendations that PSAAC issues apply to all governments unless their application is specifically limited by the PSAAC statements. I take it from that, and you can correct me if I am wrong, that the statements by the Public Sector Accounting and Auditing Committee of the Canadian Institute of Chartered Accountants form the basis for the generally accepted accounting principles used in determining whether our financial statements accurately reflect the financial situation of the Province. is that not correct?

MR. CAREW: That is basically correct, yes.

MR. GOVER: So, the statements issued by PSAAC form the body of these generally accepted accounting principles, and what we have here in this comment, or the substance of the comment, is that a number of these particular recommendations are not being followed by the Government of Newfoundland and Labrador in the presentations of its financial statements. Is that correct?

MR. CAREW: That is correct.

MR. GOVER: Specifically, I suppose, one of the ones that concerns me, although there are a number here, is public sector accounting statement No.5, dealing with the employee pension obligations of the Government on the financial statements. I take it that this particular statement, statement No.5, is not being fully complied with.

MR. CHRIS HART: No, right now the Province discloses by way of a note to the financial statements the unfunded pension liability. PSAAC would require that that be actually recorded as a direct liability, in addition to other things. That is the major thing we are talking about.

MR. GOVER: Yes, but I take it from page 73 of your report, the reporting of the unfunded liability in a note to the Financial Statements -

MR. CHRIS HART: Is not adequate disclosure.

MR. GOVER: That is one issue.

MR. CHRIS HART: Yes.

MR. GOVER: But there is also another issue which is reported on page 73 to this effect: the statement of revenue and expenditure does not reflect the actual value of pension benefits earned by employees during the year. It reflects the Province's contribution to the pooled pension fund on a cash basis in accordance with existing accounting policies as disclosed in note one of the Public Accounts.

MR. CHRIS HART: That is right.

MR. GOVER: So I think we understand what the unfunded liability issue is about. But what is this particular issue about?

MR. CHRIS HART: The second issue deals with the recording of the expenditure. The first issue is the liability that arises as a result of transactions of the pension fund over the years. The second one deals with what would be the cost per year of pension for government. And under PSAAC the cost that would be reflected would be the actual pension earned by retired employees in that given fiscal year, not the year that it was actually paid. The present government accounting just records actual payments of pension in the year that it is paid as an expenditure and that is what goes through the statement of revenue and expenditure. PSAAC would have it recorded as the liability became due. So right now as we are sitting here there are people out there who are earning pension they are entitled to, every year service that they put in there is a pension amount earned. Under PSAAC and under the accrual basis of accounting you would be reflecting your cost at the time they are earned not when they are actually paid. This is one of the basic differences in cash, and accrual basis of accounting.

One thing I should mention here that may clarify things for you somewhat: last year in the 1990 Public Accounts there was a $21 million payment to the teachers' pension fund over and above normal payments. This was money put back in to cover part of the deficiency of the teachers' pension fund. This $21 million then, because the Province is under a cash basis of accounting, became an expenditure, a current account expenditure for the year, so therefore the Province's financial statements, if you want, or their income statement, revenue and expenditure, showed $21 million less than it would have, had that decision not been made to put that $21 million into the fund.

So those are the sort of gyrations you get into, and that is, I guess, where we have concerns with it. There are fluctuations caused by other than economic decisions. We believe economic factors should determine the bottom line in a set of financial statements, other factors are certainly going to be there, but they should not affect the bottom line. Under accrual accounting that $21 million would have reduced the liability which would have been set up under accrual accounting.

MR. GOVER: Yes.

MR. CHRIS HART: It would not have appeared as an expenditure.

MR. GOVER: Let us just go back. The two are somewhat related are they not? Because what we are saying here is that as each second ticks off employees in the public sector are earning pension benefits which are not payable today or are payable at some point in the future.

MR. CHRIS HART: No, that is right.

MR. RAMSAY: They are a liability.

MR. GOVER: They are a liability. And that future liability is not reflected in the financial statements directly. The only thing that is directly affected is the actual cash payout.

MR. CHRIS HART: When it is paid it is reflected -

MR. GOVER: Yes, to cover pensions.

MR. CHRIS HART: Yes, under current accounting practices it is only recorded as paid. Whereas accrual accounting would have it recorded when actually earned.

MR. GOVER: So is this future value of liability, this future liability is that reflected in a note to the financial statement?

MR. CHRIS HART: Yes.

MR. GOVER: It is.

MR. CHRIS HART: Yes.

MR. GOVER: Okay.

MR. RAMSAY: (Inaudible). Is it reduced according to the expenditures made? If there is a given pension expenditure in a year -

MR. HART: Yes.

MR. RAMSAY: - is that then deducted from the pension liability?

MR. HART: No, because the pension liability is not set up. So any payments that are made are just charged directly to expenditure, and there is no recognition if you want in a sense in the accounts of the Province as to what the liability is.

MR. GOVER: So with the $21 million that was paid into the teachers pension plan last year, there is an expenditure out of current revenue -

MR. HART: Of $21 million, over and above the regular pension payments to employees or ex-employees.

MR. GOVER: So there is an expenditure, but there is no corresponding reduction in liability?

MR. HART: No, because the liability is not set up anyway. The note reveals the amount of the unfunded pension liability so presumably when that $21 million was paid it would reduce the unfunded pension liability and the next time there is an actuarial adjustment, certainly the liability would be reduced by that amount. But because the actual pension liability that exists today is not booked anywhere, it is not shown as a liability of the Province, well then when that payment of $21 million is made there is no liability account to apply it against and reduce that liability down. So, all you are seeing is the notes to the financial statements, which reveal the amounts of the unfunded liability just for the reader for disclosure purposes. But from a financial statement point of view the only thing that you are going to see in there actually recorded is a $21 million expenditure shown as expense for the year.

MR. GOVER: So, I guess what we are talking about here is the ability of a lay person, the reasonably intelligent or the reasonable taxpayer, being able to pick up a set of these statements and see what the financial position of the Province is. If that is what we are trying to do, and I think that is what we should be trying to do since it is the taxpayers money, the number of notes at the end of the financial statements make it more difficult for the average taxpayer to understand what is happening, is that correct?

MR. HART: Well, the notes are an integral part of these statements and are designed to clarify it rather then confuse it, I suppose, but I can see where you are coming from. One of the recommendations that PSAAC makes is that notes should not take the place of proper accounting treatment for actually booking a transaction that has taken place. You cannot get away with disclosing anything by way of a note that is outside the actual body of the statements.

MR. GOVER: That is my point. If I was the average citizen and I picked up the Public Accounts of the Province and I started going through it, just by going through the statements I do not get an accurate financial picture without understanding the notes attached to the statements.

MR. HART: That is our position, I guess, pretty well. The problem from our point of view, Mr. Gover, is that we have to follow generally accepted accounting principles and PSAAC has been established now to make recommendations relating to government financial statements. We believe the Province should be given adequate time, we cannot just expect these recommendations to be made and implemented fairly quickly, there has to be enough lead time to get them in. But there comes a time when we are going to be put in a position where as a professional auditing firm, if you want, we are going to have to make a decision as to whether we in fact would have to consider qualifying the financial statements of the Province, which we would be very reluctant to do obviously because that would effect their rating and so forth and we would have to be on fairly strong grounds. But where most of the other Provinces have now adopted accrual accounting to a large extent, I think one exception mentioned was Ontario, but Ontario has tended in the past to be a little bit on their own in some regards, I guess, all you have to do is look at their budget this year as an example.

We believe that generally they have been accepted now throughout Canada and the Federal Government have qualified the financial statements of Canada for a couple of years and this year past was the first year the qualification was dropped in a couple of years. They qualified partially on the basis that they were not following all of the PSAAC recommendations.

MR. GOVER: I understand, that goes back to the first questions that I asked. So, your governing organization has made recommendations and these recommendations are not being completely followed which is putting you -

MR. HART: Yes. What I am trying to do by mentioning it in our annual report is to give the Department of Finance reasonable notice that it is a concern with us and they should take whatever measures they feel are necessary, if they agree. I do not think there is any basic disagreement, as they said, it is primarily on the timing. I understand it is going to take some time but there are others that really when it comes down to it at the end of the year it would be simply a matter that they have the information there, just make a couple of journal entries so to speak. It is not a massive undertaking, in that regard, you know the bulk of them. There are a number of issues that are going to take some more study but we will get into those later I am sure.

MR. GOVER: I only have a couple of questions and then I will conclude, but just to boil it down, this problems amounts to this, right now what the financial statements primarily reflect is the amount of money paid out to current pensioners and the amount of contributions going in by the Government and by people paying premiums.

MR. HART: I did not catch your question.

MR. GOVER: The expenditure side is what is going out currently to pensioners.

MR. HART: Yes, what is currently being paid to pensioners?

MR. GOVER: And what is being reflected as going in is employees contributions, current contributions, and the Government's contribution.

MR. HART: Yes, Government is matching the contributions of employees.

MR. GOVER: And what the statements do not really adequately reflect, according to PSAAC, is the future liability that is accruing.

MR. HART: Well, it has to be paid in future but it is a liability that is earned right now, today, and if you have ten years service with Government you are entitled to -

MR. GOVER: And according to PSAAC these are not adequately reflected in the statements as they presently are presented.

MR. HART: Exactly.

MR. GOVER: Exactly.

MR. HART: Okay.

MR. GOVER: Now, my next question is for Mr. Carew. Mr. Carew indicated that next year the unfunded pension liability will be brought into the statements, which I guess is in keeping with the recommendation put forward by PSAAC, but what about the second issue, which is that the actual value of pension benefits earned by employees during a given year should be brought into the financial statements as well? That is the second issue.

MR. GRUCHY: I guess we have discussed a lot of different things here and I think it is coming down to a situation where you are looking at the balance sheet which looks after the unfunded liability and your statements of revenue and expenditure which looks after the cost of service, if you like, for pension purposes. The balance sheet of the Province now, as we determine, does note the net unfunded liability for pensions, and as Mr. Carew stated earlier we will be recording that on the balance sheet this year unless prohibited by legislation. The expenditure side, looking at what it actually costs, like we are all accruing pension here now, people who are eligible for pensions, that gets more accurately reflected in the pool pension fund. There is a separate set of statements which are used for the pool pension fund. The amounts that are shown in the Public Accounts are the contributions that are made to the pool pension fund, so that expenditure does get shown, but what does not get shown is, for example, what would my pension be is I were to get to retire and collect a pension, I guess. That depends on a number of actuarial valuations, actuarial studies, and this information is a highly specialized area. As I said, that is not reflected in the Public Accounts, it is just the contribution that is made to the pool pension fund that is reflected there. The pool pension fund does take into account any actuarial costs and so on that may be required to fund the pension for all civil servants, that type of thing. I do not know if that clarifies it or confuses it a bit.

MR. GOVER: I think it does when you are saying that the pool pension fund is a separate set of statements.

MR. HART: That is correct.

MR. GOVER: I understand what the objective here is, that instead of being a separate set of statements that should be brought directly into the financial statements of the Province. Is that correct, Mr. Hart?

MR. HART: Basically, the way I see it, is that the separate set of statements for the pool pension fund is just set up as a trust account, if you want, to ensure that the pension contributions are going into this fund and it is a way of just keeping it separate from other Government accounts, but the concept of costing, what the cost is for Government, is the issue that PSAAC is talking about. PSAAC is saying that you should show, as your cost for the year, the cost of pensions earned in the year, and not what is actually paid. What is happening today, as I said, is that it is only recording the actual payments going out. As an example, as I said, $21 million was paid in 1990, so that made the current revenue account look $21 million worse than had that decision not been made. It could just as easily have been nothing paid in or it could have been $100 million, and that is the whole issue with us, the fluctuations that can take place under this present system. If you are on an accrual basis that does not happen because the payment gets charged to a liability and reduces the liability, and the expense of the province is what is actually the cost for that year. Whether it is paid, not paid, partially paid or whatever, it does not matter, it is what is actually earned, and that is basically the theoretical difference in cash accounting and accrual accounting. That is the whole issue at stake here.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: I suppose, to be the devil's advocate, if we take this money, this $21 million or so, that could possibly be used under cash accounting in a manipulative form as far as trying to change at the end of the year the relative version of what the province's financial position looks like, if that $21 million, as you say, the day after the financial statements were closed off was entered into the next years. So therefore you could make the province actually look $21 million better than the previous year and then in the next year spend the $21 million that you have in surplus, and it does not show up until that year's expenditure later on another twelve months hence. So it can be manipulated a lot more easily than accrual accounting, is that correct?

MR. HART: Well, I certainly would not use that word because it is not one that I like, but I guess the whole point is that under a cash basis, if money is received or paid one day after the fiscal year ended it has the effect of distorting it from one year to another. Under an accrual basis you reflect what is actually earned and what is actually payable, and therefore you get rid of those fluctuations.

MR. RAMSAY: But in general, like with accrual, the balance would be there, but under cash because a lot of it is not shown unless it is shown under - if we note, in the public accounts - is it the notes at the beginning there? I forget what you called it.

MR. HART: Notes on the financial statements.

MR. RAMSAY: No, not the notes on the financial statements. Excess of revenue over -

MR. HART: Excess of assets over liabilities? The second statement.

MR. RAMSAY: Yes, I remember you mentioned it in that other meeting.

MR. HART: Yes, okay.

MR. RAMSAY: That aspect of the whole thing, unless you reflect on that you do not really get the full picture from a stand point of the public disclosure I guess.

MR. HART: One of the other problems, it is all inter-related, but the statement of revenue and expenditure is basically on a cash basis modified in a number of ways. The balance sheet, they attempt to show that on an accrual basis, except the unfunded liability is not reflected there, but generally speaking it is on an accrual basis. So you have your income statement on a cash basis and you have your balance sheet on an accrual basis, and this other statement in between called the excess of assets over liabilities is an attempt - not an attempt, it reconciles what happened from the cash basis back to the accrual basis.

So if you were under an accrual basis of accounting you would not have to go through this reconciliation process, it would automatically happen. Your second statement, instead of being called an excess of assets over liabilities would almost be like a statement of retained earnings in ordinary business practice, and a lot of expenditures now that go through that are not highlighted in the current account of the Province, and you know really when you look at the current account revenue and expenditure you should expect to be able to determine how a province performed for that year because that is the figure that generally most people look at. Now what is happening in this case is there are a number of expenditures that do not show up in that because of not being on the accrual basis of accounting in part and also -

MR. RAMSAY: They might be (inaudible) because they do not affect the consolidated revenue fund. Is that correct?

MR. HART: Let me just give you an example. When a province goes out and borrows loans to cover its needs for a fiscal year, it often borrows in the US market or the Japanese market, or wherever, and in doing so they may run into a situation where there are currency fluctuations, so when they actually have to pay that, quite often there will be a foreign exchange gain on the transaction or it may be a loss on the transaction; it could be either.

Now when there is a gain or a loss, those are not reflected through the current accounts of the province; they are reflected through this excess of assets over liabilities, and really, it is a cost or a gain, one or the other, it does not really matter in my opinion, but if you want to know the true picture of how a province did in that year, that is part and parcel of where it stood.

Another issue with this is in terms of the province putting money in sinking funds to pay off these debts when they become due; now all of the interest money that is being earned in that sinking fund is not being reflected as a revenue of the province, so that is revenue that would ordinarily, under accrual accounting, be there and make the picture look better. So there are all these little things that could add up to a significant amount or, they may not in a given year, you do not really know, but unless you reflect them all in that respect, you know, you are going to have these fluctuations.

MR. RAMSAY: I have just one more question, Mr. Chairman, before you recognize someone else.

Concerning the year end again, just to revisit that, I note in your statement in the first paragraph you mentioned that invoices received for payment by the Comptroller General of Finance within thirty days from the year end, which pertain to liabilities existing at year end - okay, so the key point is 'received'.

Invoices received pertaining to liabilities existing; now there could be liabilities existing with no invoices received that are not charged, and I am just wondering, in this case if the invoices are received they are charged to expenditure in the year in which the liability was incurred, so in cases like that you would have those invoices that make it let us say, in time, because I know there is usually a rush, a government wide rush to get your travel claims in, to get your different invoices in place within the thirty day period.

If you fail to, and seek payment afterwards, that payment is then reflected in the next year's -

MR. HART: In the following year, yes.

MR. RAMSAY: - financial statements.

MR. HART: The thirty day rule is put there to recognize that there are expenditures which take place and are not paid for, and that is where the modified cash - so it is not cash completely, if it were cash completely whatever was cut and paid at the end of March, that would be the expenditures that are shown, but the Financial Administration Act contains the provision for the thirty days.

But now that thirty day rule really helps in terms of ordinary services that are provided and expenditures that take place, but there are many other major things that happen outside of that. I think last year when I looked at it there was $12 million in, as you said, vouchers that did not make the Comptroller General's desk or did not get reflected, so there was $12 million that will be charged in the following year, but now it is offset somewhat by the fact that in 1989, there was $14 million, so your net effect is basically $2 million, but this fluctuates from year to year.

But now one good example that you might understand clearly is in terms of the Province's loans again. In most enterprises at the end of the year what they will do will be to determine how much - a loan payment may take place, let us say on March 1st of the year, so then you have the rest of the month of March costing an enterprise that is not actually paid until April 1st. Now the interest on that long term debt is very significant in the Province's case; it is shown on the balance sheet because they reflect that on an accrual basis, but in your revenue and expenditure, that interest expense does not get reflected in the financial statements.

Last year in 1990, there was $166 million of interest owing at the end of March that did not get shown as an expense for that year, and again there is an offset from what is there for 1989 as well, because in 1989 the same situation existed; in that year there was $159 million owing and $166 million in 1990, so there was a $7 million effect last year alone that under ordinary accounting policies would have been charged to expenditure, so those are the sort of things that you are getting into by not being on an accrual basis.

MR. RAMSAY: Yes, okay. Thank you, Mr. Chairman.

MR. CHAIRMAN: Mr. Carew, any comments on the observations just before we move along to the next line of questioning?

MR. GRUCHY: I think as the Auditor General pointed out there are a number of items that do not get through the revenue of expenditure statement but I think it is most important to note that Schedule L of our Public Accounts does highlight and point out all of these accruals that we were just talking about, like the March vouchers which are paid after April 30 and interest expense on debenture and other debt, for example if the payment was made on March 1 and this type of thing.

So, for the informed reader of the Public Accounts they can easily take the excess of expenditure over revenue on a cash basis and adjust for the accruals as shown on Schedule L to come up with an accrued revenue and expenditure statement. I should also note the reason why we are doing it this way is because we have certain restraints that are imposed on us by The Financial Administration Act. The Financial Administration Act, which is the guide to financial accounting, reporting and administration in the Province, dictates that we do certain things and for that reason we are presenting the public accounts in this light. In other words, doing an excess of expenditure over revenue on a cash basis and then using a separate statement to do the accruals. That is one of the reasons for it.

So, I guess, as was mentioned earlier we are moving towards getting these accruals in the actual cash statement of revenue and expenditure. But again it will require legislative change to The Financial Administration Act to do that. I would like to note that all of these disclosures are made in the financial statements and an informed reader can calculate what the accrued net expenditure over revenue would be. Does the Auditor General agree with that, except for the pension part of it?

MR. HART: No, the information is contained in the volume that is commonly known as the Public Accounts but the financial statements themselves on which we express an opinion do not include all of those schedules, including Schedule L. Schedule L is in fact a schedule of accruals and it discloses the figures that I just mentioned, but I mean you should not expect a reader, informed or otherwise, to have to look at a financial statement and then go back and make all of those adjustments themselves. We are professionals and we should be providing that information in as readily available and readable form as we can without expecting someone to have to take them and go through all of these calculations themselves.

There is another issue which I noted when I was looking through, an accounting issue, that goes through the excess account and that is when the Province makes investments in various organizations they end up on the balance sheet as an asset of the Province. However, when that asset for whatever reason turns sour or becomes uncollectible - we have had a couple of good examples over the last couple of years, we have had Newfoundland Enviroponics Limited in which the Province lost $22 million and last year, I think it was, the Bay Verte Mines, an investment of $32 million in that one. Those costs do not get reflected in the statement of revenue and expenditure of the Province again. They go through this excess account. So, you cannot readily look at the current revenue and expenditure account and determine the actual position of the Province in terms of how it performed for that year. Again, that is another separate accounting issue. Those are the types of things that cause us all sorts of headaches.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Thank you, Mr. Chairman. I must confess I have two university degrees, but not one in accounting or economics or whatever, and I dread my monthly bank statements.

MR. CHAIRMAN: This is to your advantage.

MR. HEWLETT: So I am trying to hang on intellectually to what is going on here, by my fingernails, I suppose.

The Auditor General's people said something to the effect that they might be put in a position where as a professional group they would have to qualify the public accounts of the Province. But at the same time Mr. Carew's group has indicated that our financial advisers and whatnot were generally well apprised of our total situation and we are not sort of ringing any alarm bells. But I am wondering of Mr. Carew or his group there, if such a qualification did take place based on the accounting notions of the auditors and so on, would it possibly in effect lower the Province's rating or change it in some way that it could damage the financial position of the Province or would, this may be a judgement call in your case, would it be a situation where the money people in New York look at it and say: well nothing is changing this year until now except there is a statement issued by the Auditor General to the effect that what has been going on and is still going on is not being reflected in a certain accounting way. Would it seriously impact us?

MR. CHAIRMAN: Mr. Carew.

MR. CAREW: Mr. Chairman, it is a bit hypothetical, but it would depend obviously on the nature of the qualification by the auditor. But if it were simply a technical qualification that the accrual method is better or non-compliance with PSAAC and so on, we have had these, they are not qualifications, we have had them in the report. I would be speculating if I said it would affect our credit rating, for example, I do not think it would. I think what would affect our credit rating seriously would be if a qualification were to the effect that a significant liability were omitted and not disclosed, there were some serious deficiencies in recording or handling of our monies, and so on. But to answer your question I am not certain that it would. The Government of Canada's accounts were qualified, I think the year before last and so on, I do not think it had a serious affect on the credit rating. I would think the budgetary position of Canada would have a far greater effect on the credit rating than the - but I again wish to emphasize that we do not want any qualifications to the audit report, and we agree with what the Auditor General is saying. As I said it is simply a matter of getting the thing done and it does take a couple or three years to convert from the cash system that we have had since 1899, I guess, over to a full accrual system. We will get there. The question is how much money are we going to have to devote to resources? I will give you an example. In our branch of the controllers office which looks after financial controls and so on we have about eighty positions, I guess, and only three of these eighty are directly involved in the production of the public accounts themselves. Now we bring in extra resources at the end of the year, and so on, and we move them from other departments, but if we had say another $100,000 or $150,000 to hire two or three more professional accountants on a full-time basis to devote to this type of research and development of the public accounts, we would probably have reached, right now, the position that we may not now until another two years.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: One other point, I do not know who should answer this, there has been a lot of talk about the unfunded liability of our pension situation. But for my own clarification are pensions today paid out of the general revenue of the Province or are they paid out of this pooled fund to which employees make contributions and the government makes lump sum cash contributions or is this a matter of handling on paper? Are pensions actually paid from the general revenues of the Province as such?

MR. CAREW: No, they are paid from the pension fund. The Province pays the money into the pension fund and all the pensions that are paid out to the pensioners come out of the pooled pension fund.

MR. HEWLETT: I would gather that the problem that we have at the current time is that there has been considerable liability accrued by the actual cash value in that pool at the moment. If everybody were to retire instantly, theoretically speaking, then there would be insufficient funds in that pool to pay out the pensions and so on.

MR. HART: Yes, that was the reason for the note being put in there which details when the fund under the present rate of contributions is likely to be in a deficit or surplus position and it breaks it down into the various funds. I would agree with the Auditor General that certainly that should be shown in the body of the accounts rather than in a note, and we will certainly do that subject to any impediments or otherwise.

MR. HEWLETT: One other question, Mr. Chairman, the Auditor General mentioned Newfoundland Enviroponics a little while ago. A lot of businesses I guess in Newfoundland over the years have been started or at least been allowed to survive through the use of guaranteed loans from the Government. If the Government guarantees a loan to company X is that shown anywhere in our accounts per se or does it only become a thing on paper once it goes into default and someone has to pay it back? Is a guaranteed loan an outstanding liability and showed as a potential debt of the Province?

MR. HART: (Inaudible) liability in there adequately disclosed in the public accounts now and only when you have to pay up on it do they become an expenditure of the Province. A good accounting practice would have those reflected as contingent liabilities not as actual, because there is no way of knowing - it is a potential liability but it is not an actual liability as opposed to the pension liability which is a known existing liability. An advance to XYZ company could turn into a cost but hopefully it will not.

MR. HEWLETT: Where would a contingent liability lie, so to speak, in an accrual method of accounting?

MR. HART: It would be identical as cash or accrual because under an accrual basis you reflect liabilities when they become due, so a loan to a company outside the Province would not result in any liability until such time as it became apparent they could not repay. Maybe there might be a slight difference in timing if for example it became apparent that a company may not have the ability to meet its obligations and pay back the money to the Province, the Province might become aware of that and set up what would be called a provision for that, and then that would be reflected in the accounts for that year rather than wait until it is actually paid out a year later or something like that. So, that would be the only slight possibility of a difference.

MR. HEWLETT: Thank you.

MR. CHAIRMAN: Mr. Ramsay.

MR. RAMSAY: It is the same now in cash and accrual based on the contingent liabilities but as was noted with the Newfoundland Enviroponics, as Mr. Hewlett mentioned, when it is paid out there is a variation from cash and accrual. Is that correct? When the payment becomes due.

MR. HART: No.

MR. RAMSAY: When the payment is made. Now, you noted there was a provision in the financial statements of assets over liabilities or liabilities over assets or whatever that allowed for the various things like the interest from the sinking fund or whatever, that was in a different area. On an accrual basis would that also be the place where those figures would be entered.

MR. HART: I guess what you have to do is look at the type of liability we are talking about. In terms of pension it is money that is owed. There is no question about it, the money is owed, it has to be paid down the road somewhere. In respect of a contingent liability, the reason it is contingent is because the Province has guaranteed that if that company cannot pay its obligations then it will move in and pay them itself. So, in 90 per cent of the cases the Province never has to get involved at all. You cannot book that liability because it is not an existing liability. It is only when facts or circumstances make you aware that yes we have a problem here, if they are put into bankruptcy or something like that then you can sit down and make a reasonable judgement that okay this looks like it is going to cost us $20 million. At that point in time under an accrual basis of accounting you could sit down and set up what is called a provision for a poor investment or a doubtful account. What I am saying is the only difference would be in timing, and the timing difference should only be in respect of maybe a year at the most on a contingent liability. So contingent liability is contingent upon some other event happening, whereas in an actual liability there is no question.

MR. RAMSAY: My question basically was that once the amount is paid in a case like that against a contingent liability, is it then, like the way the clientele's statements now are, you know like Newfoundland Enviroponics or whatever, a fish plant that had a loan guarantee, when that amount became payable is it reflected under accrual accounting the same way that it is reflected in here, or in a similar manner?

MR. HART: Going back to the example, I said if they recognized the problem existed a year earlier and set it up as a provision, then when it was actually paid the following year it would be charged back against that provision so you would see it going through the income statement in the year that they recognized the liability existed. But if they did not recognize it at all it would be the same exactly with an accrual and a cash.

MR. RAMSAY: Okay, so where the Newfoundland Enviroponics one is in this thing, or like you said whatever of that kind of debt is in here, it is there but it was not as an expense in the given year.

MR. HART: No, well that is not an accrual basis problem versus cash, that is just an accounting treatment. It has nothing to do with the accrual versus cash. What they did from an accounting point of view is they said we paid the money out but we are not going to show it as a current account expenditure, we are going to show it in a separate statement in the excess of assets over liability statement. It is not a non-budgetary item or whatever, it does not form part of the current accounts of the province. To me, I think regardless of the nature of the expenditure, a good accounting statement would have the whole picture in one statement rather than isolated in different places, and most people focus on this current account position of the Province, so I think it is important to know what -

MR. RAMSAY: What it means.

MR. HART: Right. If you had a situation where the Province had to pay out massive amounts of money because of bad investments, well then those should show up as costs of your current account, in my opinion.

MR. CHAIRMAN: We will now take five or ten minutes to get a coffee and stretch our legs, then we will come back and see if there is anything else.

MR. CHAIRMAN: Order, please!

Just to kick it off again, a couple of comments that were raised probably zeroed in on some of the problems. Mr. Carew mentioned the unavailability, I suppose, of personnel to put all the plans in place to try to switch to the accrual method as quickly as we would like to do. Was your division hit by the recent cutbacks?

MR. CAREW: Mr. Chairman, I think if you were trying to get a travelling claim out of the government you may have seen recently that things slowed up quite a bit. We were cut quite a bit in the government accounting section, and like all government departments we were not excepted. We are managing to get out payments on time and so on, but we have absolutely no money at all for - I hesitate to class this as a luxury item but it certainly is an item that has to be put on the back burning in order to get the day to day payments out on time and do the things that we were required to do, so, you know, I am not using this as an excuse or saying that we were unjustly penalized in staff cuts. The cuts were not as harsh, I guess. as other departments had to endure so, we are living with it.

MR. CHAIRMAN: But it will have an effect on what you can do like anybody else certainly.

MR. CAREW: Oh certainly, yes.

MR. CHAIRMAN: One other thing; in June, 1990, I noticed there was a committee set up with representatives from Treasury Board, the Department of Finance and Works, Services and Transportation, to review the PSAAC accounting statements and to make recommendations; how active has that committee been, is its work ongoing or has it been put on the shelf?

MR. WILLIAMS: I am Chairman of that Committee and we have had in the last year I believe, two meetings; at the present time we have a sub-committee actually doing an assessment of where the other provinces are, and how they handle the conversion from the cash basis to the accrual method. That process is rather slow because of the lack of devoted resources to it and that is where we are at this present time.

MR. CHAIRMAN: But it is still there?

MR. WILLIAMS: It is still there, yes, we are plodding along.

MR. CHAIRMAN: There is one other point. Treasury Board has been mentioned here and Treasury Board undoubtedly plays a fairly important role in all of this and we were contemplating having perhaps Treasury Board appear with you, then we said well, we will have an open discussion first and then if we thought it necessary, invite some people in from Treasury Board.

What part does Treasury Board or the President of Treasury Board perhaps, play as to the decision you make, as to how you do the accounting for the Province? If you decided to go to the accrual method, have they got to give you permission, can they say 'no', we want you to stay the way you are, how instrumental are they in any decisions you may make?

MR. CAREW: Mr. Chairman, under the Financial Administration Act Treasury Board has the ultimate authority as to the form and content of the public accounts. In practice Treasury Board has not issued directives and so on, which they have the power to do; they have, sort of unofficially delegated to the Comptrollers Office I guess, pretty well all the authority over the form and content of the public accounts. But a radical departure from the cash to the accrual method of accounting, with all the effects that that has, as a one shot affair anyway, on the Province's financial picture and so on, obviously we would not do it ourselves without approval from Treasury Board, and I would think that a major decision like that would probably require Cabinet approval as well; but on the day to day issues of recording and so on and format of the accounts, no, they pretty well let us carry the ball there.

MR. CHAIRMAN: Mr. Ramsay?

MR. RAMSAY: Mr. Carew, with regards to the overall financial position of the Province, I note as a politician that we often stand and we say that we are $5.2 billion or $5.3 billion in debt and then we say, on top of that, there is a $2 billion in pension and then there are other debts and liabilities, what is the case, you know, once it is all added together, is there an approximate figure that the Province's debt actually is, that may eventually be reflected in the public accounts?

MR. CAREW: The only thing I can say to that really, is that the Province's total debt is reflected in the public accounts; it is there, as I said, you may have to dig a little bit for it.

MR. RAMSAY: (Inaudible).

MR. CAREW: No, no, it is there.

AN HON. MEMBER: (Inaudible) liabilities over assets.

MR. CAREW: That is the net debt; the net picture, but here again, that is a peculiar government concept because in a normal commercial business or corporation you would look at it and say, well, whatever your bottom line figure is, your surplus or deficit, but when we have this net debt concept, we show all the Province's liabilities, certainly the main direct and indirect debt and so on, but we do not show all the assets.

MR. RAMSAY: (Inaudible).

MR. CAREW: Oh no, no. They are recorded in another statement but again they are shown as a nominal figure of one dollar, I think or $1,000 whatever it is there.

In prior years, going back prior to the 1970s, we showed these as an integral part of the balance sheet, you know we listed roads, bridges, hospitals and all sorts of fixed assets. Now we only show them as a memorandum account, but they are shown, nevertheless, as part of the public accounts.

MR. RAMSAY: With regards to assets, something from an accounting perspective, in a business assets are taken and depreciated for tax purposes to try to determine the actual residual value of an asset. In public accounting you are talking about something totally different because you have something that does not have a business reflective value. You are talking about a bridge, as Mr. Hewlett mentioned, and you are talking about a school or whatever, and I suppose residual value is always very, very minimal. Maybe this is one more for the Auditor General, your comment on it as well, if you were taking an asset and then using depreciation things on it, would there be an accurate picture of the assets to go against the given liabilities or the debt, because if you are in business there is a corresponding value to the asset, but in the public accounting sector you are talking about something that is a little bit different and could we end up with something that is showing this huge liability that does not necessarily correspond with the asset value.

MR. CAREW: Yes, there are several ways of looking at it. I suppose the textbook definition of depreciation is an orderly method of charging the cost of an asset to the various periods during which it contributes to the earning of revenues. Now obviously you do not have that in Government because if you build a road or certain other public works or infrastructure it does not necessarily contribute to the earning of revenue, you are giving a service to the public. What we do, of course, under the cash method is when you pay for it you expense it then, you charge it off completely in the year in which the disbursement -

MR. RAMSAY: (Inaudible).

MR. CAREW: Whether or not we would advocate bringing in depreciation in the case of assets, certain assets are depreciated, for instance assets in crown corporations and agencies or so on which are of a quasi-commercial nature, they follow normal commercial practices, but how do you determine the useful life of a road and so on? These problems come up and they are presently being studied by another - I do not know if Ron is on that - the committee on fixed assets which is carried mainly by public works and services and so on.

I guess the main reason, other than the legal aspect, which I think perhaps is lost sight of sometimes in why we use the cash method. The Financial Administration Act is dealing principally with compliance with the Budget, and it is an old Act. It started, as I said, back in 1899 and has been amended since, but the fundamentals of how you record your cash payments and receipts have not really changed in nature in the Act, at least, since it was originally constructed so the Act itself needs a major reconstruction, which is in the plans right now. We are discussing it with Treasury Board this very week as a matter of fact, and we have certain drafts ready for submission to Treasury Board, and they have their drafts and so on. It is a co-operative effort to try and get a major revision to the Financial Administration Act, hopefully for the coming session of the House. I am not that optimistic, but I would certainly hope that we would have a major draft amendment ready if not for the fall session, the spring session.

MR. RAMSAY: Or even (inaudible).

MR. CAREW: There has to be. Well there is a big chunk taken out of it now with the new Auditor General's Act, so the time is right to bring in a lot of these new and more modern things because we are pretty well hog tied on this cash method to a certain degree. There may be enough if you want to bend the rules and interpret the things rather loosely and bring in accrual, but I do not think that we could depart from the present system until there are major change made in the legislation to authorize us to proceed in that manner.

MR. RAMSAY: Mr. Hart could you comment on that as far as the assets and how that would reflect on the public versus the private accounting methods. I know it is public accounting but when we look at assets and that sort of thing using accrual would not - or is it PSAAC that has to address this matter?

MR. HART: The issue of asset accounting, particularly infrastructure and that sort of thing, is one that I think even PSAAC have to wrestle with. They have issued some guidelines on it I think but it is still not as clear cut as the other issues of setting up pension liabilities for example.

AN HON. MEMBER: (Inaudible).

MR. HART: That is a research study, yes. They have had a research study on it, they have not even issued a pronouncement on this section on assets because they still have a committee that is wrestling with it. My own feeling on the thing is that with assets of that nature I would not be in any major rush to have Government go out and start setting them up and depreciating them because there is no purpose in doing that, I think.

MR. RAMSAY: Putting them in how, at cost at the value of a dollar or what way would be the best way of doing it?

MR. HART: Well, if they were going to establish them at all my feeling would be that they just record them at cost. As far as whether they depreciated or not then I think is really insignificant. The only reason you would reflect them there at all at cost would be just to control them more than anything. If you have them at cost then you would set up your subsidiary ledger and for whatever cost is there, there would be a breakdown as to what it consisted of and it would be a means or mechanism of just having control over all of the fixed assets of Government, all of your calculators, computers and that sort of thing.

Even regular accounting practices are not designed to value assets at their market value or their replacement value, even in ordinary accounting terms fixed assets are reflected at cost which may or may not be equivalent to what their true value is. You could have a piece of land that you bought back in 1920 that is showing on the balance sheet for $10 or whatever, but today is worth $1 million, even regular accounting would not change that. The idea of doing that is primarily to amortize the cost of the asset over a period of time. It is a method of allocation not evaluation, I guess, is the way it has been expressed in text books. So, the issue of fixed assets is not a burning issue with us. We are more interested in looking at and seeing changes in respect of reflecting liabilities that we know there are going to have to be payments made out for and respecting interest earnings that are actually being earned as we sit here today on the sinking fund that are not being shown as current account revenue and the work on both sides.

Another one that we have is at the end of the year for example there may be a significant amount of money owing from retail sales tax collections, they are not reflected as revenue of the Province until the year they are actually collected.

Again, there are issues going both ways, but I think in the end if you go with the accrual basis of accounting there are limitations even with that, but I think you could end up with a much more meaningful set of financial statements that would give the reader a fuller picture than he has today, rather than having to go through various gyrations to build up those figures himself.

MR. RAMSAY: Mr. Chairman, I just have one more if I could.

There has been talk of the two different issues and we mentioned this in the in camera session, consolidation of the public accounts plus the issue of accrual accounting versus cash accounting. Maybe if I could get a comment from the Comptroller General about that? I know they are related but they are necessarily, I guess, two different issues. You did mention something about the consolidation that you would like to see in a small jurisdiction like this everything brought together and likewise I know the Auditor General has feelings on it and maybe get it on the record as to how you feel we should proceed over the next while and how Government should approach the two different issues.

MR. CAREW: Well, Mr. Chairman, I think it is a laudable objective to go towards consolidation and obviously if you have the consolidated balance sheet the format shows your overall position quite concisely and so on, but there are a lot of practical difficulties. The first one, of course, is that the issue of accrual accounting, you could conceivably have consolidation without accrual accounting but it would be very, very difficult. So, we would look at consolidation as a step beyond going full accrual.

Some of the other practical difficulties are, and this brings us into another aspect, the timeliness of the public accounts. Under the existing system a lot of those accounts that are in Volume 11 of the Public Accounts the boards, agencies, Crown corporations, if you will note some of these are, I think, up to two years old when they get in because of lateness in getting these financial statements done and in to us. So your consolidation would be marred to a certain extent by the inclusion of some subsidiaries and so on of accounts which are not up to date at all.

MR. RAMSAY: It certainly would bring everyone into line in reporting in a reasonable period of time.

MR. CAREW: Yes, I think it probably would. It would be a target date which you would have to meet. It might be a stick we could use to beat some of the Crown corporations into getting their accounts in on time. We agree with it absolutely. It is a good objective. When we will reach consolidation, it will not be in my time certainly, but I think it has to follow the full accrual to be practical about it.

MR. RAMSAY: Because you cannot mix the two methods together.

MR. CAREW: You know you would have to make an awful lot of assumptions, and I would not want to be the poor devil of an accountant who was given the task of consolidating them.

MR. CHAIRMAN: Mr. Gover.

MR. GOVER: Yes, it seems that there is an agreement between the Auditor General and Comptroller General on, I guess the two major issues, one is that we should move to an accrual basis, the question of timing and legislative changes, and secondly as Mr. Carew has indicated, following accrual there seems to be an agreement that consolidation would probably be a good idea. And these are the recommendations made by the Auditor General and at least in principle there is agreement from the Comptroller General that we should move in that direction on those two issues.

So I would just like to switch for a second from those two issues with respect to the financial statement to one that I have always been interested in, and that is the Auditor General has commented on page 83 of his report about the presentation of the Estimates. The Estimates detail expenditure on behalf of government departments, actual dollars laid out by the government to individuals or organizations. But, of course, as legislators we all realize that a significant amount of expenditure conducted by the government is tax expenditure. Expenditure which while it does not require the outlay of cash from the government to individuals and organizations by granting a tax exemption or a deduction or preferential rates, it is in fact a transfer of resources from the government to these organizations because it is revenue foregone by the government.

I do not think in the financial statements of the Province or in the preparation of the estimates there is any information really which details the impact of these exemptions, deductions and preferential rates on the revenue foregone to the Province and who benefits exactly from these particular exemptions, deductions and preferential rates. So I wonder in the future presentation of the financial statements of the Province and the estimates is any consideration being given to outlining tax expenditure? I mean I can remember several Federal elections ago when the NDP leader at the time accused the Federal Government of promoting corporate welfare bums, by the creation of what the public views as loopholes. And I think that if we are going to give people a special exemption or corporations in particular, the impact should be outlined for the members to see and to be debated in the House of Assembly. So in future is there any consideration being given to outlining the impact of these exemptions in either the financial statements or the estimates?

MR. CAREW: As far as the financial statements are concerned I think it would be extremely difficult to quantify tax expenditure, certain ones you could, and we already do, for example, where we write things off and remit interest and that type of thing. But as to quantifying, for example, the cost of exempting domestic fuel and electricity and that type of thing, I do not think there would be much problem in showing that in the estimates. I think to a certain degree in this past year's Budget Speech that was outlined and certainly in the white paper or whatever colour paper it was that government issued recently which was under discussion I think until the 30th of July, they go into quite a lot of analysis of the effects of, you know, exempting certain items or certain classes of people and so on. I would think the proper place for that would be in the estimates or in the budget document, because it would be extremely difficult to work that into the accounting system. You would have to make a lot of suppositions and, you know, guesses really.

MR. GOVER: Okay assuming that to be correct, I have no reason not to, is there any consideration been given when the estimates are prepared for a particular department, I suppose, in particular, in this case the Department of Finance to outline what tax expenditures the Province is making?

MR. CAREW: I really do not think it is within my authority or ambit of my mandate to discuss. That is another thing that should be addressed really I think to Treasury Board.

MR. GOVER: Treasury Board.

MR. CAREW: Yes. I do not have any policy authority at all.

MR. GOVER: That is more in the policy authority of Treasury Board to determine that.

MR. CAREW: I would say so, yes.

MR. GOVER: It is an interesting thing especially as you indicated when we are in a period of tax reform, and when these things come up for debate in the House of Assembly it is one thing to debate actual expenditures from the government to individuals or organization, but, of course, whenever you change a tax law it has some impact somewhere, especially when you grant an exemption or deduction or a preferential rate someone benefits. And I think that we should move to a system whereby when we start to grant these type of exemptions and deductions that the legislators are in a position to debate who should benefit from these deductions and whether the deduction is a worthwhile thing or not. I mean, for example, if you broaden out the base of the retail sales tax, obviously when you broaden out the base people are going to pay taxes who hitherto have not paid them so it is going to have some impact on certain user groups and it would be important to, I suppose, having some information to debate when that comes up. So I guess some time in the future we will have to have Treasury Board here or when Treasury Board is here we will ask them about that particular prospect since it does not appear to be within your particular jurisdiction.

MR. CAREW: If I might, Mr. Chairman, in addition to Treasury Board, of course, the other side of the Department of Finance which comes under the deputy minister handles the tax policy. All I do in my capacity is collect it. They consult us obviously when they are making changes as to the effect potential change may have on administration of a tax statute. But we stay clear deliberately really in this office of being involved in the policy end of it.

MR. CHAIRMAN: One key issue I guess, when we talk about the accounts of the Province, liabilities and whatever, is the Teachers' Pension Fund. What effect is that really having on the accounts of the Province, and as it grows, unless it is addressed one way or another, what effect might it have in relation to determining the real state of our finances within the next few years?

MR. CAREW: Here again that is a sort of a border area for me, but as far as the effect on the financial statements is concerned, the note that we have here now, does disclose what is going to happen if the contributions are not jacked up in so many years time and so on, so presumably, if we go and disclose it on the balance sheet, the net unfunded liability for pensions and so on, we would adjust it accordingly as we make estimates of what the additional cost is going to be.

Other than that, the effect on the Province's overall financial picture is sort of getting into the policy area again, because it is a policy decision as to whether Government is going to change the rate of contributions and so on.

MR. CHAIRMAN: If we reflected the debt of the Province as suggested by the Auditor General, what would our current account deficit look like this year? Would there be any great effect on -

MR. CAREW: I could not answer that question without some research, but you know, we would have to do a fair amount of calculation to arrive at that figure, and I would hesitate to give you a figure off the top of my head because -

MR. CHAIRMAN: But would there be a severe increase in our deficit?

MR. CAREW: I think there would certainly be an increase in the accumulative deficit over the years -

AN HON. MEMBER: There is a timing thing.

MR. CAREW: Yes, it is the timing that makes me a little bit hesitant. You know, how much would you charge, for instance, to the past fiscal year when you recognize the fact that there is one fund likely to go into a deficit position in a couple years time; I think the teachers and the uniformed services, possibly the MHAs, may be a little bit shaky now that the general service fund is in a relatively healthy condition; again, that is just off the top of my head and looking at last year's figures.

There is no question that the recognition in the accounts of the liability for pensions and if you go on full accrual basis, until such time as the fund builds up you are going to have an increase in your deficit or a decrease in your annual surplus as the case may be, because you are going to have to make some charges in there to bring the fund up.

MR. CHAIRMAN: Why I asked that, and I undoubtedly will play a part in any change over because the final decision is undoubtedly a political one. If any quick change to accrual would result in a severe change, a negative change in your deficit position, the ideal of any government is to come out at the end of the year with a balanced budget or a surplus or whatever.

Certainly a balanced budget, because of the financial state of the Province, the last couple of years we have seen severe reductions in staff and in programmes and in whatever, perhaps without a choice, to address the deficit.

If, because of a change in our method of accounting, our deficit or paper deficit is going to be looked upon, or our current account as reflected in the current account statement would be reflected negatively more so, an increase or a dramatic increase, then undoubtedly Government would have to take even harsher measures to try to control that current account deficit. So undoubtedly, that would be a major factor in deciding how you are going to reflect the accounts of the Province, because, what I am saying is, if tomorrow you could decide yes, let us go to the accrual method, and then we realize that by doing so, it is going to add an extra $100 million to our current account deficit -

AN HON. MEMBER: On paper.

MR. CHAIRMAN: On paper, yes. Well, it is there anyway. It does not matter, as we say, but when the budget comes down - well, the budget this past year showed a $120 million deficit, whatever.

MR. RAMSAY: I see. I hesitate to question the Chair, but you are implying that that would then we used as an excuse to make further cuts.

MR. CHAIRMAN: No, no, not really. I am not trying to play games with it, I am just trying to be realistic about the whole thing as you would look upon it from a government perspective, you know, small `g' type of thing. As we realize, there is a $120 million deficit this year and we hear people saying, `Oh, you know, what do you expect because of Sprung and so on.' The effect of Sprung is not reflected at all anywhere in that $120 deficit as the amount of money that was written off because of Sprung, because of the way the accounts were handled. But if these things did happen and if, as I say, with the new accrual method we had to bring in a budget that showed a deficit of $220 million -

MR. RAMSAY: They would not look (inaudible).

MR. CHAIRMAN: Exactly. No government would want to do the like of that, so what do you do? You have to try to address it in some way to cut that deficit. We saw the effect on everyone of having to address the present deficit, because of just changing our methods. People only see what is there in black and white. They do not know anything about the notes or anything else, generally speaking.

MR. RAMSAY: I think what you are saying, though, is -

MR. CHAIRMAN: What I am saying is, what effect would it have on any government, forgetting who is in power. What would the government in power have to do to show the people, when a budget is brought down, that, look we have a balanced budget or a surplus? Because right now people generally, when we talk about budgets and deficits, 95 per cent of them or maybe more, have no idea of the real financial state of the Province. Probably I should add, they could not care less anyway. The point is, what they see and what they hear is what comes down budget time.

MR. RAMSAY: So, you are looking at perception?

MR. CHAIRMAN: Exactly, moreso than reality. Of course, it is perception upon which you win elections and politicians make points.

MR. RAMSAY: Then you look at the real things in order to correct that perception.

MR. CHAIRMAN: So, whereas the final decision of going to one method or another is a political one, I think the timing of it and the effect upon current account standings would be a major decision on how fast you switch methods, because of the effect it could have, unless it is not going to have an effect. It seems, perhaps, if our true debt is reflected there would be.

MR. RAMSAY: Just a comment: In my mind, as was mentioned when I asked Mr. Carew about the total debt, and basically it is all in there, it would only have an effect on the bottom line figure that it shows at a given point in time, which, as you say, any person now can take the five point two and add two points, whatever, and all of these things, and the only one little figure that would become a political football, one way or the other, would be the current account deficit for a given year. If you went the way Ontario did, where they added their current and capital together - whereas here we just talked about a $120 million current account deficit, up there they went to $9.6 billion based on capital and current combined. So, they bear the brunt, I suppose, of combining the two. If we combine our two we are up to $600 million, I think it is.

MR. HEWLETT: What if you added in liabilities on top of that?

MR. RAMSAY: Well, there you go, yes.

MR. CHAIRMAN: You are into a $1 billion deficit a year for Newfoundland.

Any comment on that.

MR. HART: I guess, from our perspective, I understand how the process works and that sort of thing, but I believe that we can make much better informed judgements and decisions if we have everything reflected as it should be. I think this paper figure versus the way it is presently done may cause you to make one decision rather than if all the facts were laid out, if you reflect the actual pension costs and the actual interest costs. At some point in time you are going to have to deal with it, whether it is this year or next year or two or three years down the road sort of thing. It enables you to make a more informed judgement right up front, by having all of the facts laid out to look at and then make whatever decision you feel is appropriate at that time. I certainly cannot agree with the concept of fooling yourself, I suppose, by looking at one set of figures and forgetting about these other things that are over here. When you go out and borrow money to pay for the Province's financial position, certainly they become a factor then. You are going to have to consider the investments that were written off, that will have to be taken into account in the total overall borrowing. So really to me it would be much more sensible to be dealing with a complete picture as far as you can within one account.

MR. RAMSAY: Mr. Chairman, I have a question for Mr. Hart. You talk about knowing how the process works. When budgetary decisions are being made in given departments, I know they reflect on what they feel their given budget will be and then I guess Government itself has to decide, based on all of these synopses that are put forward, what decisions should be made or even by directive prior to that saying that is what we think you should do. So you, Mr. Hart, think that the decision process may end up being flawed by virtue of the method by which current accounting practices dictate that we keep our books.

MR. HART: Well I think it would be a better process if the accrual basis of accounting were used. Not just the accrual basis, but that is one study. I am speaking of the accounting practice of not reflecting write off of investments, for example. That has nothing to do with cash or accrual that is just an accounting policy. If investments were charged to current account expenditure as they were written off, then you would have a better picture of the overall position, and if interest earnings on the sinking fund were reflected maybe one would offset the other, but certainly at least you would know, you would have the whole picture, you would not be operating in isolation of these other factors that are affecting the fiscal position, but are not reflected in the document that you are looking at. This would never happen in private concerns out there somewhere if a board of directors were sitting there looking at a set of financial statements trying to make some decisions about how much dividends are going to be paid next year and that sort of thing. They would never operate, I do not think, on a piece meal set of figures, they would have -

MR. RAMSAY: One figure (inaudible).

MR. HART: - all the information relating to the fiscal position. Now certainly if they had a major write-off of an investment, that would certainly take some importance in their decision as to whether or not they were going to pay dividends for the current year or if they were going to buy new plant for the year and that sort of thing. If you forget about that loss on foreign exchange, for example, that may have occurred on raising an issue, if you do not reflect that, you are fooling yourself, in my opinion, by not taking into account all factors.

MR. RAMSAY: And that may be not by design, but (inaudible).

MR. HART: Not by design, but when you sit down and look at your statement of revenue and expenditure, to me an informed reader would say this is it, this is what we are dealing with. We have this surplus or this deficit which we have to work with, whereas if you take into account the foreign exchange losses and the write off of investments and sinking fund earnings and that sort of thing, well maybe it will affect the decision.

MR. RAMSAY: What would the true figure have been for last year? Has that been calculated? You cannot, I guess, because you have never been factoring in those, so if you do it in one incident it just totally fools it up.

MR. HART: There are so many things that come into play that I would not even hazard to guess that.

MR. GOVER: I think that is an important point that Mr. Ramsay raised and Mr. Hart, that the financial statements, as they are presently put forward could lead someone to an incorrect understanding of the problem. And I think that is one of the reasons that there is almost a $2 billion problem in the four pension plans.

AN HON. MEMBER: (Inaudible).

MR. GOVER: That is just one example, a $2 billion problem in unfunded liabilities because when you look at a cash basis you are looking at what you are doing today, you are not looking at what your liabilities are going to be tomorrow. And if I am looking at managing my affairs on my outlays today and ignoring the fact that in the teachers plan, say there is a $1.1 billion unfunded liability, what that means is that when the plan runs out of money, it might be ten years from now, that either teachers are not going to get their pensions to the extent they thought they were going to get them or the Province is going to have to generate $1.1 billion out of its current revenues, which means significant programme cuts in other areas.

So, by looking at the short-term or ignoring the long-term implications of the decisions we are making today, and politicians, I mean, being one of them, I suppose we have a failing in that we tend to look at the short-term and deal with the immediate problems because we might not be in office ten or fifteen years down the road when the problem is actually going to come up. So, if we went to accrual, politicians would be more compelled to deal with these problems today rather than put them off to the Government that follows them, be it of the same party or not. That is what accrual accounting would do better than cash, would that not be correct?

MR. HART: Yes, I believe, that plus a change in some of the other accounting policies.

MR. RAMSAY: Some do not necessarily tie into the accrual accounting.

MR. HART: Not necessarily, like the investment one that we talked about that has nothing to do with an accrual basis, it is just a way of reflecting.

MR. CHAIRMAN: Mr. Hewlett.

MR. HEWLETT: Yes, just one point that came up mentioning Newfoundland Enviroponics. Your average, say listener to an open line show might call in and make an expression of opinion with regard to the current budget difficulties and say: well part of the problem that Dr. Kitchen had to wrestle with this year is that we had to pay $20-odd million or whatever for that particular project. But in terms of the current account budget, which is generally what the person on the street hears about, reads about, talks about, that particular $20 million expenditure is not in the current account estimates, is it? Does it only show in a write-off of bad debts or something in another section of the Budget?

MR. HART: It would affect it in the sense that the borrowings that the Province has to make would certainly have to be taken into consideration -

MR. HEWLETT: That would be rolled into the borrowings -

MR. HART: - and therefore that would have an impact on the overall financing and cost.

MR. HEWLETT: Where do we pay for the borrowings? Do we take money out of current account to pay on the borrowings as such?

MR. HART: The interest expense on borrowings is reflected through the current account, and I guess that is why I was advocating that if you are reflecting the interest expense on money that you borrow, well then it would be a fairly logical process that if you take some of that money and invest it and earn interest on it to repay the borrowings, well then the interest earnings should appropriately be shown as a revenue of the Province.

MR. CAREW: Mr. Chairman, if I might interject. On that question which is being raised on not bringing gains and losses and so on into current account on the operations of the sinking fund and so on, we are governed there by the Budget. If Government and the House, presumably, because the House approves the Budget, decides this is a non-budgetary item and shown as non-budgetary, we have to show it that way in the public accounts. We cannot deviate from what is in the Budget. From an accounting standpoint we would probably agree with the Auditor General that it should be shown there, but it is not because of any disagreement on that. It is simple that we are governed by the Budget because when accounting principles conflict with legal principles or legal requirements obviously the legal requirements take precedence. So, here again you have to have this amendment to The Financial Administration Act to correct a lot of these things before you even consider going to accrual.

MR. CHAIRMAN: Number one, we have a lot of players. We have yourselves and, of course, the Auditor General, who is the watchdog and his comments are only based upon proper accounting principles as perceived by him. Yourselves, who because of the position you are in do not necessarily disagree with the proper accounting positions. Then you have Treasury Board, who basically direct, I presume, the principles you use, or approve them for any major departures from them; and, of course, Government or the House actually being the overall maker of laws and a lot of it probably comes back to your comment on - it is time for a new Act - which is being worked on, I understand. As times change, procedures change, and requirements change, laws have to change to keep up with them. The only thing is, I guess, in our jurisdiction as well as in many others everything else seems to change a lot quicker than the laws and by the time you get the law changed a number of other things have already changed ahead of it and away you go again.

It is after twelve and some of you probably have other things on. I am not sure whether there is anything else pressing.

Mr. Ramsay, do you have -

MR. RAMSAY: I just have one - if it is too long, you can cut me off - about the pension liability versus service costs, and that has been discussed here already. The liability amount on pensions is, I would say, $2.3 billion as an amount. Am I to understand - and it took me a while to get my head around it - that that is actually the cash amount missing from pensions, or does that amount reflect the actual cost of future liabilities on pensions?

MR. CAREW: No, what we are talking about really, I think, is the unfunded liability which is not recorded. It is the estimated cost of meeting future pension obligations.

MR. RAMSAY: Okay. So, it is not an amount missing from the coffers as far as contributions go, which is usually, I think, some $200 to $300 million on some pension funds. You know, it is a smaller amount missing, but the actual liability is much higher because of obligations incurred.

MR. CAREW: Yes, it is a reflection of the fact that for years various governments in succession, prior to 1967, took nothing from the employees, but from 1967 onward they deducted from the salaries of the public servants and so on. Up until 1980 these monies were just junked into the general revenue, and not until 1980 did we start seriously - when I say we, I mean the Province as a whole - putting money into the pension fund to cover some of this. We have not, obviously, put enough in to cover the long-term obligations.

MR. RAMSAY: Yes. Mr. Hart, this is where the confusion came and why I asked this question, because you mentioned about the actual cost, say in a given year, of future pension obligations not being taken note of. I guess, in turn, that figure of total pension liability would be adjusted in a note. Each year, I guess, as wages increase and therefore also the amount of deductions for pensions and fees or whatever, increases, is that another matter that you speak of?

MR. HART: They are two separate issues really. The $2.3 billion is a calculation done by actuarial people as to the amount of liability that exists at a certain point in time for services already performed by employees that will have to be paid at future periods. So, at that last date of adjustment that was the liability that was there then, I would imagine. I cannot remember the date that that last one was done, but it was probably a year or so ago.

MR. HEWLETT: It is a wide and growing figure.

MR. HART: Yes. So it is not getting any smaller, unless some of the money is being paid back into it.

Now, the second one I was talking about, which is a separate issue, is the annual growth in that should be reflected basically as an expenditure, because the annual growth in that would be a reflection of the cost for that given year of the pension fund. So, if the pension fund goes from $2.3 billion to $3 billion well then $700 million would be basically the annual cost. Now, obviously there would be other factors taken into consideration, but that is generally how it would work. It is growing annually and that annual growth in cost would be what, under PSAAC, is -

MR. HEWLETT: Do you find (inaudible)?

MR. HART: Well, you know, I use $700 million as an example. It could be $2.3 up to $2.4, say, so $100 million maybe, or it could be a lot less than that, I do not know. But whatever the rate of growth in that is it should be reflected as a cost. If you were to book that liability, the liability that you booked, the $2.3 would not be a current account expenditure, because that would be resulting from past periods.

MR. RAMSAY: Contingent liability, I guess?

MR. HART: Not contingent, no. I mean, it is an actual liability, but it would be set up as an adjustment to your opening surplus or deficit position. It would not affect the current account. The current account would only be what happened from the date that you implement it, I presume. That is the way I would consider recording it, anyway, because a lot of people might think that, if you pick up this $2.3 billion now that is just going to blow the top right off the current account deficit. No, that would not be the case. That is there, whether we like it or not. It would not be reflected as part of next year's current account. If we decided today to book that debt we would not then throw that in as part of the current account situation.

Once you have done that and once you have made the decision from here on end we are going to reflect the actual cost of that, well then whatever the growth in the liability was from the date you book it to today, then that would be your cost which would be reflected in the accounts for that given year, because each year there are new employees contributing to the pension so that is driving the cost of it up -

MR. RAMSAY: And maybe, that only upon the time that they become vested at ten year service.

MR. HART: Yes, and there was a $21 million payment that went into the pension fund, possibly there could be other payments and that would reduce that liability, so those things would not affect the cost, it would only be the actual cost earned by service performed by employees.

MR. RAMSAY: That is fine.

MR. CHAIRMAN: Any further comments, Mr. Hart, anything in summation?

MR. HART: I would just like to say that basically, our office and the office of the Comptroller General have a good relationship and a good understanding of the problem.

There is general belief I think, that the accrual basis of accounting would offer a much more informed set of financial statements and much more realistic, but there are problems in its implementation and there are legislative changes that will have to take place and we are bringing it to the forefront now I guess, largely because professional requirements dictate that we do.

We cannot ignore the fact that these generally accepted accounting principles are there and other jurisdictions have basically - the bulk of other jurisdictions have implemented much more of the recommendations than we have here, so we can see a problem coming down the road. I would like to work together with the Comptroller General. The last thing we would ever want to do is issue a qualification on the financial statements of the Province. Whether it would have an impact or not, who knows?

Nobody likes to see it there, but unfortunately or otherwise, we may be in a situation where we have to seriously consider that, but I think we are working together and we have a good common understanding of the problem and I am hopeful that we will see some major moves in that in this current year coming up.

MR. CHAIRMAN: Mr. Carew?

MR. CAREW: Mr. Chairman, I really do not have much to add to what Mr. Hart has said, we basically agree on the objectives. I think perhaps there is a little more emphasis on timing from the Auditor General's point of view on bringing in full accrual, but by and large our objectives are identical. I realize his position and I am sure he realizes mine, that we are hampered by two things: the legislative changes that have to be made, and here again it is a matter of time and the resources available to actually carry it out from within our department; once we solve these problems I do not think we will have to wait too long for these things to come.

MR. CHAIRMAN: And hopefully, the committee that has been set up can push along, and undoubtedly our own recommendations will be along the line of trying to move things as quickly as possible, so in the end everybody will be happy.

I think we have had a relatively good hearing. Certainly everybody here has a better understanding of the problems faced in trying to show the actual financial standings of the Province and the complications involved. Hopefully some of it will get out and I thank the media for being here, those who are here, and it will give people generally a chance to understand more fully exactly where we are and why we are there.

Thank you both for coming. We are hoping tomorrow that we will be able to deal with the student aid, we had them set for Thursday, we thought this might take a couple of days but it was not as contentious as some people thought it might be.

We will try to get the student aid people moved up to tomorrow rather than break and come again Thursday, so we will have to let you know this afternoon and we will let the press know also. I do not think it should be a problem, but if there is we will let you know anyway.

So, once again thank you for coming and hopefully we will not see you again. We say that because we have said to some of the groups who have been here, in fact student aid I guess, is our first example, last year, when we had people in, if they had not made any movement within the year type of thing, we would bring them back for accountability.

Just before we go, I would ask the Members if they would approve the minutes.

On motion, minutes adopted as circulated.

MR. CHAIRMAN: Thank you very much.