Chapter 1
Observations

Table of Contents

Provincial Auditor Saskatchewan
1996 Fall Report

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The Government's financial condition is improving but remains fragile

.02 For six years, the Government has provided the Legislative Assembly with financial statements that account for the Government's total financial activities. Those statements are called the Government's summary financial statements.
They show the Government's financial condition is beginning to improve but remains fragile.

.03 For many years, governments chose to spend more money than they raised in revenues. As a result, the accumulated deficit increased to nearly $10.7 billion. During the last two years ended March 31, 1996, the Government chose to spend less money than it raised in revenues. As a result, the accumulated deficit decreased slightly to $9.9 billion.

.04 In Chapter 2, Understanding the Finances of the Government, I show trends in the Government's revenue raising and spending for the last six years. I also set out several key indicators that can be used to assess and monitor the Government's financial condition. This information should be provided in an annual report, if and when the Government decides to publish one. I think the Government should publish an annual report.

.05 During the five years ended March 31, 1996, the Government's revenues increased 22% while its spending increased 4%. The difference in these growth rates helps explain the slight decrease in the Government's accumulated deficit.

.06 The Government continues to carry out a significant portion of its responsibilities through Crown corporations, e.g., SaskPower, SaskTel and the Liquor & Gaming Authority. During the last five years, the Government's corporation revenues increased by 31% and their spending increased by 28%.

 

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1996 Fall Report

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.07 During the same five years, the Government's general revenues increased 18% and the Government's general program spending actually decreased 4%. General revenues include income taxes, sales taxes, royalties and Federal government transfers. General programs include agriculture, education, health, social services and transportation.

.08 In Chapter 2, I describe the Government's financial condition in terms of three factors - - sustainability, flexibility and vulnerability, and in terms of several key financial and economic indicators. The indicators are:

• the Province's gross domestic product;
  
• the Government's accumulated deficit;
  
• the Government's annual surplus or deficit;
  
• accumulated deficit as a percentage of gross domestic product;
  
• debt costs as a percentage of total revenues; and
  
• Federal government transfers as a percentage of total revenues.

.09 Recently, each of these indicators show improvement. Therefore, the Government's financial condition has improved. However, the Government's financial condition remains fragile because of the size of the annual deficits accumulated over the past many years, the percentage of revenues required to service only the debt, and the percentage of revenues that are vulnerable to changes in Federal government transfers.

.10 I encourage all readers of my Report to examine the information in Chapter 2.

 

The Government should publish a complete financial plan and an annual report

.11 Currently, the Government does not publish a complete financial plan showing all of its planned activities. Therefore, legislators and the public do not know what total revenues and total expenses are planned, and whether the Government plans to incur a surplus or deficit for the Government as a whole. Without such essential information, how does the Government explain its many resource allocation choices and decisions? For example, does the Government plan to increase or decrease its accumulated deficit? And, how do legislators hold the Government accountable for those decisions?

 

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1996 Fall Report

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.12 The Government does provide a partial financial plan referred to as the budget or estimates. In this partial plan, the Government sets out what spending it plans to carry out using the revenues to be recorded in the General Revenue Fund. The Government usually records about 60% of its revenues in this Fund. To some extent, the Government controls and decides the financial results of this Fund by transfers to and from other government funds and corporations.

.13 In Chapter 2, I explain why my Office thinks the Government should provide legislators with a complete financial plan and what information should be included in such a plan. I also explain why the Government should provide legislators with an annual report and what information should be included in such a report.

 

The Workers' Compensation Board needs better management systems and practices

.14 In my 1996 Spring Report, I said my Office would audit the Workers' Compensation Board (WCB) directly for its year ended December 31, 1995. I had concerns about my access to the WCB. Since 1988, we have relied on the work of an auditor appointed by the WCB.

.15 In Chapter 3, Workers' Compensation Board, I report the results of our audit. I had good cooperation from the WCB and its appointed auditor in carrying out our work.

.16 The WCB faces many important questions from its stakeholders. Stakeholders are asking - is the current structure of the WCB's compensation program still relevant, how does the WCB control its costs, and how does the WCB ensure its assessments of injuries are consistent and fair?

.17 The WCB needs strong and reliable management systems and practices to address these questions with confidence. I think the WCB needs to strengthen its management systems and practices significantly.

.18 The WCB should strengthen how it tracks and estimates compensation costs and should develop the expertise needed to estimate these costs reliably. The WCB also needs to either adjust its rate setting process to comply with the law or seek appropriate changes to the law. The WCB advises it is working on these issues.

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1996 Fall Report

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.19 Because of weaknesses in the WCB's management systems and practices, I am concerned with the reliability of the WCB's 1995 financial statements. I plan to continue our direct audit work at the WCB.

 

The Crown Investments Corporation is strengthening its investment management systems and practices

.20 In 1992, the Financial Management Review Commission expressed concern with the quality of the investment management systems and practices of the Crown Investments Corporation of Saskatchewan (CIC). I concurred with those concerns.

.21 CIC manages large investments of public money totaling nearly $2 billion. Those investments include the HARO Financial Corporation, the Bi-provincial Upgrader, Cameco Corporation and Saskferco Products Inc.

.22 During the past year, my Office worked with officials of CIC to audit their investment management systems and practices. We agreed on a framework of good practices. We then examined their systems and practices.

.23 In Chapter 4, Crown Investments Corporation of Saskatchewan, I report the results of our examination. I conclude CIC has strengthened its investment management systems and practices. However, CIC should:

• state specific measurable objectives for each investment;
  
• set out in writing its program for managing each investment;
  
• follow its existing policy of taking an ownership position when the risks of a loan or investment are high; and
  
• strengthen how it monitors its investment in HARO and HARO's subsidiary, Crown Life.

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.24 In Chapter 3, I also identify several opportunities to improve how CIC carries out its other significant responsibilities.

 

Public disclosure is a necessary ingredient for proper accountability and public confidence

.25 In my Reports, I often include recommendations intended to strengthen public disclosure. I think public disclosure is a necessary and important ingredient for proper accountability and public confidence in our system of government.

.26 In Chapter 5, Department of Executive Council (including the Electoral Office), I describe my concerns with the system used by the Electoral Office to ensure the public lists of all donors to political candidates and political parties are correct.

.27 In Chapter 6, Accountability Information Required, I point out that many government organizations do not provide necessary elements of public disclosure. Some organizations do not ensure all of their financial statements are tabled in the Assembly. Some do not provide a list of all persons who receive public money. And, some do not provide a comparison of planned and actual results in their annual reports.

.28 I think the Government's use of public money should always be public. If there are circumstances when a government thinks public disclosure is inappropriate, I think the Assembly should decide on those circumstances. The Standing Committee on Public Accounts is the appropriate forum for discussing and recommending to the Assembly when public disclosure is inappropriate.

.29 I am often reminded that public disclosure is important for three reasons. First, public disclosure serves to remind all government officials they are spending money that is entrusted to them by the public. Second, public disclosure adds rigour to decision-making as it ensures those who spend public money know their use of that money will be public. Third, public disclosure ensures the public knows who has received their money

Provincial Auditor Saskatchewan
1996 Fall Report

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Examples of government organizations improving practices

.30 I think it is important to point out examples of organizations that are strengthening their management and accountability systems and practices.

.31 In Chapter 11, Department of Education, Training and Employment, I note SIAST has addressed many of the concerns I had with the quality of its management information systems and practices. I hope SIAST continues to strengthen its systems and practices so it can handle the many important issues related to providing an effective education and training program.

.32 In Chapter 6, Department of Health, I point out that the Twin Rivers District Health Board is developing an information system designed to measure and report on the cost and effectiveness of its services. We are helping and encouraging this initiative. If successful, this District will be an industry leader. Such a system is a prerequisite for making prudent resource allocation decisions and for ensuring those decisions result in services that improve the health status of Saskatchewan people, in a cost effective manner.

.33 In Chapter 16, Saskatchewan Transportation Company (STC), I note STC is taking important steps to improve its management information systems and practices. STC is moving through the difficult transition from an old and out-of-date revenue system to a new one. A successful transition is important to STC's decision making.

 

My Office is also accountable

.34 Sometimes, people ask me about my Office's accountability. In Chapter 9, How we are accountable, I describe the mechanisms in place to ensure I fulfill my accountability obligations, i.e., reporting on and answering questions about how I carry out my responsibilities. Those mechanisms include publishing planning and performance reports, providing many opportunities for government officials to challenge what I report, and attending many public meetings with legislators to answer their questions.

.35 All of my reports to the Assembly are public. Last year, I issued the following reports:

• report on the Financial Statements of Crown Agencies issued in March 1996;

 

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• 1996 Spring Report issued in April 1996;

• report on the 1995 Financial Statements of CIC Subsidiary Crown Corporations issued in May 1996;
  
• 1995-96 Annual Report on Operations, including the audited financial statements of my Office, issued in June 1996;
  
• 1997-98 Business and Financial Plan of my Office issued in October 1996; and
  
• this 1996 Fall Report issued in November 1996.

.36 If you wish copies of any of my Reports to the Assembly, please contact my Office at the following address:

Provincial Auditor Saskatchewan
1500 Chateau Tower
1920 Broad Street
Regina, Saskatchewan
S4P 3V7

Phone: (306) 787-6398
Fax: (306) 787-6383
E-mail:prov.auditor.pas@govmail.gov.sk.ca

Provincial Auditor Saskatchewan
1996 Fall Report

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My colleagues at the Provincial Auditor Saskatchewan are:

Provincial Auditor Saskatchewan
1996 Fall Report

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