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report of the AUDITOR GENERAL for the year ended 31 March 1981 British Columbia. Legislative Assembly 1982

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 report of the
AUDITOR GENERAL
for the year ended 31 March 7 987
m)
Province of British Columbia
Office of the Auditor General
 British Columbia Cataloguing in Publication Data
British Columbia.   Office of the Auditor General.
Report of the Auditor General. — 1980 -
Annual.
Report year ends Mar. 31.
ISSN 0708-5222 = Report of the Auditor General
(Victoria)
1. Finance, Public - British Columbia — Accounting -
Periodicals.
HJ9921.Z9B73 354'.711'007232
 Province Of Office Of the 8 Bastion Square
British Columbia Auditor General victoria
Province of BriBf Columbia British igoiumbia
V8V1X4
The Honourable Hugh A. Curtis
Minister of Finance
Province of British Columbia
Sir:
I have the honour to transmit herewith my Report
to the Legislative Assembly for the fiscal year
ended 31 March 1981 for submission to the Assembly
in accordance with the provisions of Section 10(1)
of the Auditor General Act, R.S.B.C. 1979,
chapter 24.
Erma Morrison, F.C.A.
Auditor General
Victoria, British Columbia
7 April 1982
  Table of Contents
Highlights  1
Parti:
1. Legislation  7
2. Government Accounting Policies  8
3. Improving Accountability  10
: 4.    Reports and Comments on the Financial Statements  12
5. Comments on Internal Control  19
6. Status of Findings and Recommendations Contained in
Previous Annual Reports of the Auditor General  20
7. Public Bodies  30
Part 2:
8. Financial Management and Control Audits in Ministries  33
Part 3:
■9.   Comprehensive Audits.  95
Part 4:
10. General Matters  157
■Appendices  167
  HIGHLIGHTS
Highlights
Landmark achievements were made during 1981 in providing a foundation and developing procedures to improve public accountability through:
• enactment of the Financial Administration Act;
• approval and application of a body of accounting policies recognizing current
circumstances and needs; and
• revision of the financial statement format to provide broader financial reporting and
disclosure.
II commend the extensive effort involved in taking these major steps.
While much has been accomplished in providing these new accountability measures, a
reautionary note should be struck: results must be tested, particularly during the early
■periods of implementation; reviews of appropriateness must be maintained; and, with due
■regard to consistency in application, flexibility should be retained so that adaptations may
■be made in the light of reassessment or changing circumstances.
In this initial year of application of new policies and expanded disclosure in the
Bnancial statements, I have taken issue with one major item—the exclusion of the Capital
Einancing Authorities from the consolidated reporting entity. In my opinion, because these
ttinancing Authorities are so closely associated with existing government programs, they
Khould have been consolidated. The net debt of the Authorities amounted to approximately
K1.3 billion at 31 March 1981.
The evaluation of financial management and control activities in ministries has con-
Rnued this year. Special audits in this particular area have now been conducted in eight
larger ministries, representing about 70% of government revenues and expenditures. As a
Kesult of these audits a number of deficiencies were identified which are common to many of
■he ministries examined. Many of these problems have been recognized by management of
Rhe ministries and central agencies concerned, and corrective action has already been taken
or is being developed. My staff will continue to monitor these developments to assess
MWiether the actions undertaken are adequate to establish a satisfactory degree of control in
; the area of financial management.
A report is presented on a comprehensive audit of the Ministry of Environment focusing
■Sn its Waste Management Program. A summary is presented with recommendations made
■fto and responses received from the Ministry.
In November 1981 the Minister of Finance tabled in the Legislative Assembly a
Response to the 1980 Report of the Auditor General". I welcome this response as official
Hocumentation of progress made in dealing with recommendations contained in my Report
of last year.
I
 REPORT OF THE AUDITOR GENERAL
The contents of this Report have been discussed with the appropriate officials to ensure
that they concur in the accuracy of the material presented, and to provide them with an
opportunity to discuss their views on the conclusions drawn.
I acknowledge with appreciation the cooperation of the officials in ministries and
public bodies audited by my Office, as well as the efforts of my staff in the conduct of their
work.
^^T7^^^^-
ERMA MORRISON, F.C.A.
Auditor General
Victoria, British Columbia
31 March 1982
ikj
   PARTI
Table of Contents
Parti:
1. Legislation     7
2. Government Accounting Policies     8
3. Improving Accountability  10
4. Reports and Comments on the Financial Statements  12
Reports of the Auditor General on the Financial Statements  12
Comments on the Financial Statements  15
5. Comments on Internal Control  19
6. Status of Findings and Recommendations Contained in
Previous Annual Reports of the Auditor General  20
7. Public Bodies  .. 30
  SECTION 1, LEGISLATION
Legislation
[1.1 The Financial Administration Act, S.B.C. 1981, Chapter 15 was passed by the
Legislative Assembly in 1981 and has been proclaimed in force. I welcome the
enactment of this new financial legislation, and commend officials of the Ministry
of Finance and others involved for their thoughtful and concerned approach to its
development.
1.2 The new legislation replaces the Revenue Act and Financial Control Act which
were outdated and had caused me considerable concern as discussed in my
previous Reports. The new Act provides for stronger administration and control of
the financial affairs of the Government by clearly assigning responsibilities and
specifying procedures for management of the financial function.
[1.3 The part of the Act having to do with organization identifies the key roles in financial
administration and fixes the responsibilities for the major financial operations of the
Government. The powers, functions and duties of the Treasury Board, the Minister
of Finance, other Ministers of the Government and the Comptroller General are
defined. The legislation clearly states the authority for central direction in financial
administration throughout the Government.
1.4 The Act deals with revenue and defines the Consolidated Revenue Fund. Controls
over revenues have been strengthened by clearly assigning responsibility for the
collection, management and banking of public funds.
1.5 The authorities required for payments out of the Consolidated Revenue Fund and
trust funds are prescribed in the Act. Authority is also provided for Treasury Board to
control expenditures and to direct the method of recording commitments against
appropriations.
■1.6 The Act deals with the treatment of assets including all loans, advances and equity
investments of the Province, and requires that adequate records of assets of the
Government be maintained by the ministries responsible for their custody and
control.
B.7 Borrowings and guarantees by the Government are also covered by the legislation.
There are strong provisions regarding guarantees by the Government of the debts of
other borrowers, with the requirement that no guarantee shall be given without the
authority of an Act of the Legislature. The Act also provides that regulations may be
made to control the incurring of financial obligations by Crown corporations.
1.8 The Financial Administration Act establishes the framework for strong financial
management and control. The development and application of appropriate policies
and procedures will be the key to the attainment of these objectives. I hope that the
work of my Office will contribute to the achievement of these goals.
 Government Accounting Policies
2.1 This year the Government initiated major changes in its accounting policies and]
financial statement presentation.
2.2 One significant change was the presentation of consolidated financial statements!
These consolidated statements present a grouping of the financial position and]
results of operations of 35 major Crown corporations and agencies with those of tha
Government, and constitute a valuable expansion of the financial information
formerly presented.
2.3 In particular, the inclusion in the consolidation of the two "service corporations"!
British Columbia Buildings Corporation and British Columbia Systems Corpora-]
tion, relieves a concern I have had since becoming Auditor General. These two]
corporations carry on functions formerly performed by ministries of government!
with the Government as almost the exclusive user. Under the accounting policies in]
place prior to the 1981 fiscal year this particularly close relationship was nog
evident from the financial statements of the Government, resulting in a deficiency
in presentation of financial information.
2.4 My major concern with the Consolidated Financial Statements is in regard to tha
exclusion of the three capital financing authorities from the consolidation, a|
described in Note 1 (d) to the statements. These three financing authorities area
• British Columbia Educational Institutions Capital Financing Authority;
• British Columbia Regional Hospital Districts Financing Authority; and
• British Columbia School Districts Capital Financing Authority.
All of these provide capital financing to the Province's universities and other post!
secondary institutions, regional hospital districts, and school districts. The net debt
incurred by these authorities to provide this financing amounted to approximate!^
$1.3 billion at 31 March 1981.
2.5 These financing authorities are Crown corporations which are controlled antal
managed by the Government. Their activities support specific Government pro- •<
grams. More than one-half of the funds used to service the debt of the authorities ill
provided by the Province. In addition, the Government guarantees the debt of botral
the primary borrowers and the financing authorities.
2.6 In these circumstances it is my opinion that the capital financing authorities shoulOTl
have been included in the consolidation.
2.7 I also direct attention to another exclusion from the consolidation. In accordance I
with stated accounting policy the financial statements of the Workers'Compensa- e
J
 isBjpn Board of British Columbia are not consol idated because the Board "carries on a
quasi-insurance activity funded by contributions from employers and it is not
intended to be run on commercial lines." The non-consolidation of such entities
where they are self-financing and actuarially sound is, in my opinion, appropriate.
However, I note that the actuarial estimates of the required reserves of the Board
exceeded the funded reserves by $390,657,000 at 31 December 1980, and
$509,756,000 at 31 December 1981. I suggest that the decision to exclude the
Workers' Compensation Board from the consolidated financial statements be reassessed each year.
2.8 In addition to the preparation of consolidated financial statements, other significant
changes have been made in keeping with current trends in public sector
accounting:
• A modified accrual basis of accounting is used instead of a predominantly
cash basis.
• Only those assets that represent financial claims by the Government on
outside parties and inventories held for resale to outside parties are recorded. As a result of these changes certain investments, loans and advances are now recognized as realizable assets of the Consolidated Revenue
Fund, and the carrying value of fixed assets has been reduced to a nominal
amount on the financial statements.
• In order to present the activities of the Consolidated Revenue Fund, the
operating results and financial positions of the General and Special Purpose
Funds are aggregated in the combined financial statements.
12.9 I am generally pleased with the newly formulated accounting policies and financial
statement presentation, which I consider to offer improved financial disclosure.
The application of these policies over a period of time may indicate areas where
refinements would be beneficial or where opportunities exist for further
improvement.
 10        REPORT OF THE AUDITOR GENERAL
Improving Accountability
3.1 The responsibility of the legislative assembly to hold the government accountable i
for its management of the public purse has become more important in this period of
continued growth in government spending. The public's perception of accountability by government goes beyond the traditional requirement for accurate and
complete accounting for public funds, and for information as to whether expenditures have been made for the purposes sanctioned by the legislature. The public]
now expects to be assured that value has been received for money spent.
3.2 The assembly plays a key role in the cycle of accountability. Through a process of]
study and debate it examines and authorizes the government's budgetary plans as]
presented in the estimates. When budget measures are before the assembly, legisla-l
tors have the opportunity to question the proposals put forward, to demand further]
information and explanations, and to express views on the policy issues involved.
3.3 At a later stage in the accountability cycle, the legislative assembly is expected to
review the performance of the government in carrying out its plans, and to satisfy!
itself that appropriate standards of administrative and financial management have!
been maintained. These functions are normally performed on behalf of the assem-j
bly by the public accounts committee.
3.4 The legislative auditor is also involved in the accountability cycle. Through anj
examination of the government's financial statements, and reporting on otheil
matters considered to be of interest to the legislature, the auditor provides informa-i
tion that can be of assistance to the assembly, and thence the public accounts!
committee in the performance of their functions.
3.5 The achievement of accountability hinges on a mutual understanding of the roles of
all those involved in the process, and the coordination of the activities of eacrl
toward that common goal.
3.6 Until recently, research and study into the functioning of public accounts commits
tees and legislative auditors in Canada have been limited,with the result that littla
information has been available on their operations or interrelationships. Also, witHI
a limited exchange of ideas on these issues there has been no agreement in Canada £
on how public accounts committees and legislative auditors might best operate to c
maximize their effectiveness and to improve accountability.
3.7 In 1981 a research study titled "Improving Accountability—Canadian Public A<5|
counts Committees and Legislative Auditors" was published by the Canadiaffll
Comprehensive Auditing Foundation. The study examines the activities of publial
accounts committees and legislative auditors in Canada and provides detailedjl
comparative descriptions of current practices in the various jurisdictions. The I
 SECTION 3, IMPROVING ACCOUNTABILITY        11
advantages or disadvantages of these practices are pointed out, and where one
appears particularly worthwhile it is described in detail.
•The study provides timely information on the responsibilities and operations of
public accounts committees and legislative auditors in Canada, and highlights
those approaches considered to be most advantageous. I commend this study as
worthy of notice, particularly in light of the current perception of public
accountability.
 REPORT OF THE AUDITOR GENERAL
Reports and Comments on the Financial Statements
4.1 An important part of the Auditor General's responsibility is the examination of the
financial statements prepared and presented annually by the Government, and the
expression of an opinion as to whether the statements provide a fair presentation of
the financial position and operating results of the Government for the period in
accordance with stated accounting policies.
4.2 This section of my Report pertains to those financial statements, my reports thereon,
and to matters which arose during our examination of the financial statements
which I consider warrant further comment.
Reports of the Auditor General on the Financial Statements
4.3 This is the first year that the Government has presented consolidated financial
statements in addition to statements pertaining mainly to the Consolidated Revenue ;
Fund. Accordingly, two reports containing my audit opinions have been issued and j
included in the Public Accounts. The reports are dated 30 September 1981, the j
date on which my staff completed its field work on the audits, and are reproduced]
hereunder. The relevant sections of the Public Accounts to which these reports
pertain appear for the convenience of the reader in Appendix III to this Report.]
REPORTS OF THE AUDITOR GENERAL ON THE FINANCIAL STATEMENTS INCLUDED
IN THE PUBLIC ACCOUNTS OFTHE PROVINCE OF BRITISH COLUMBIA FOR THE YEAR
ENDED 31 MARCH 1981
To the Legislative Assembly of the Province of British Columbia
Parliament Buildings
Victoria, British Columbia
I have examined the financial statements of the Combined General Fund and Special
Purpose Funds (Consolidated Revenue Fund) of the Government of the Province of British
Columbia for the fiscal year ended March 31, 1981 as presented in Section B of the Publics
Accounts, and the related supplementary statements contained in sub-sections B26 through!
B61. These financial statements are:
Balance Sheet.
Statement of Net Equity.
Statement of Operating Results.
Statement of Changes in Cash and Marketable Securities.
Notes to Combined Financial Statements.
 SECTION 4, REPORTS AND COMMENTS ON THE FINANCIAL STATEMENTS        13
With respect to the supplementary statements, I did not examine and do not express an
opinion on the figures reported in Combined General Fund and Special Purpose Funds
Revenue by Sources (B28) and Expenditure by Functions (B31) for the fiscal years ended
March 31, 1977 through 1979.
My examination was made in accordance with generally accepted auditing standards,
and accordingly included such tests and other procedures as I considered necessary in the
circumstances. I have received all the information and explanations I have required for the
purpose of my examination.
I report in accordance with section 7 of the Auditor General Act. In my opinion, these
financial statements present fairly the financial position of the Government of the Province
of British Columbia as at March 31, 1981 and the results of its operations and the changes in
its financial position for the year then ended on a combined basis in accordance with the
stated accounting policies as set out in Note 1 to the financial statementsTThis is the first year
of implementing the accrual basis of accounting, and comparative figures for the year ended
March 31, 1980 on an accrual basis are not presented in these statements; however,
opening balances for the 1981 fiscal year have been adjusted to give retroactive effect to the
change. I also report that, in my opimrn, the figures presented for 1981 on a cash basis are
consistent with those for 1980.
I emphasize that this report is limited under section 7 of the Act to an opinion on
presentation of the financial statements in accordance with the stated accounting policies of
the Government. Under section 8 of the Act I report separately on other matters resulting
from my examination that I consider should be brought to the attention of the Legislative
I Assembly. That report will be presented at a future date.
^fch^? o^/yj*
<^s'^
ERMA MORRISON, C.A.
Auditor General
mVictoria, British Columbia
BO September 1981
'■!	
 14        REPORT OF THE AUDITOR GENERAL
To the Legislative Assembly of the Province of British Columbia
Parliament Buildings
Victoria, British Columbia
I have examined the Consolidated Financial Statements of the Government of the
Province of British Columbia for the fiscal year ended March 31, 1981 as presented in
Section C of the Public Accounts, and the related supplementary schedules contained in
sub-sections C24 through C26. These financial statements are:
Consolidated Balance Sheet.
Consolidated Statement of Operating Results.
Consolidated Statement of Changes in Cash and Marketable Securities.
Notes to Consolidated Financial Statements.
My examination was made in accordance with generally accepted auditing standards, j
and accordingly included such tests and other procedures as I considered necessary in the ]
circumstances. I have received all the information and explanations I have required for the
purpose of my examination.
I report in accordance with section 7 of the Auditor General Act. In my opinion, these]
financial statements present fairly the consolidated financial position of the Government of
the Province of British Columbia as at March 31, 1981 and the consolidated results of its!
operations and changes in its consolidated financial position for the year then ended on a
consolidated basis in accordance with the stated accounting policies as set out in Note 1 to
the financial statements.
Since it is not feasible for me to verify the comparative figures for 1980, I have nofl
examined and do not express an opinion on them. Consequently I do not express an opinionj
with respect to the consistency of the accounting bases fol lowed as between the fiscal years!
1980 and 1981.
I emphasize that this report is limited under section 7 of the Act to an opinion on!
presentation of the financial statements in accordance with the stated accounting policies of
the Government. Under section 8 of the Act I report separately on other matters resulting
from my examination that I consider should be brought to the attention of the Legislative
Assembly. That report will be presented at a future date.
sfo*r~*r?""''''~
ERMA MORRISON, C.AJ
Auditor General
Victoria, British Columbia
30 September 1981
 SECTION 4, REPORTS AND COMMENTS ON THE FINANCIAL STATEMENTS        15
Comments on the Financial Statements
4.4 During the examination conducted by my staff to support the opinions I express on
the financial statements, many matters are brought to my attention. These may
concern the application of the Government's accounting policies, compliance with
laid down procedures, or the observance of good business practices.
|4.5 Most items, while important in the context of a single ministry, are not of sufficient
magnitude and/or concern to be detailed in this Report. These are dealt with in a
less formal way with the management of ministries concerned.
.6        However, some items are considered of sufficient importance to warrant presentation in my Report and accordingly are described hereunder.
lAPPLICATION OF NEW ACCOUNTING POLICIES
B.7 As noted previously in this Report, new accounting policies were followed in
preparing the financial statements of the 1981 fiscal year. As may be expected with
a change of this magnitude, many transitional difficulties were encountered. The
Comptroller General and his staff are to be commended for their efforts in meeting
the demands placed upon them in producing the financial statements in the new
format.
4.8 While I am generally pleased with the new accounting policies themselves, I have
some concerns about the manner in which these policies have been applied in this
initial year.
4.9 One of these relates to the allocation of revenue and expenditures to accounting
periods. The Government bills and records as revenue in one fiscal period some
receipts, such as petroleum and coal lease payments, that clearly apply to the
following fiscal year. A more appropriate accounting treatment would have been to
recognize revenue in the period to which the transaction applies. Revenue received
in advance should be deferred to a future period. The stated accounting policies
should clearly indicate the treatment of receipts applicable to future fiscal periods.
4.10 According to stated accounting policy, expenditures for all goods received and
P services rendered during a year are included in that fiscal year. In some cases
expenditures, such as "GAIN" Income Assistance Program payments, relating to
the following fiscal year have been made prior to the current fiscal year-end and
included in the accounts of the current year. For reasons similar to those already
given in regard to recording deferred revenue, payments made in advance should
be recorded as prepaid expenses in the current year and as expenditures in the
following fiscal year.
L
 16        REPORT OF THE AUDITOR GENERAL
4.11 During the audit my staff encountered cases where the stated accounting policies
had not been complied with. These situations arose during this transitional period]
because accounting staff either did not perform a sufficiently thorough analysis of
the accounts or did not recognize the characteristics of a transaction which would]
dictate the appropriate accounting treatment. These difficulties indicate that con-i
tinued diligence is required in future in the application of the new accounting
policies. I have brought such cases of inappropriate accounting treatment to the
attention of officials responsible for financial statement content, and have been
advised that steps will be taken to ensure future compliance with accounting
policies.
DELAY IN DEPOSITING CASH RECEIPTS
4.12 On 16 March 1981, the Ministry of Agriculture and Food received a cheque fori
$415,000, of which $374,000 related to premiums under the Farm Income AsJ
surance Program. The cheque was not deposited until 7 April 1981, and was not]
recorded as revenue of the year in which it was received.
4.13 Since the Province is required to match the premium portion ($374,000), govern!
ment expenditure on the program was understated by that amount for the 1981]
fiscal year.
4.14 The delay in depositing this cheque had the following effects:
• the funds were not immediately available for use;
• the requirement for prompt deposit was not met;
• the recorded assets were understated at 31 March 1981; and
• expenditures were not made in the proper fiscal period.
UNRECORDED ASSET
4.15 Accounts receivable of $2.8 million arising from a sale of land to a municipality aril
not included in the accounts at 31 March 1981.
4.16 Three parcels of Crown land were sold to a municipality in 1977 and 1978 for $2.8 j
million. Payment is due in 1982 and 1983, but may be deferred five years under!
certain conditions. The only record of the receivable is a memorandum account!
kept by a regional office of the Ministry of Lands, Parks and Housing.
4.17 This asset should have been set up in the accounts and included in the financial
statements of the Province in accordance with stated accounting policies.
Jfc
 SECTION 4, REPORTS AND COMMENTS ON THE FINANCIAL STATEMENTS        17
PROVISION FOR LOSS ON LOAN
4.18 In my 1978 Report I referred to advances totalling $2.5 million made to a borrower
in December 1975 under the authority of the Industry and Small Business Development Act. At the date of preparation of that Report the repayment terms of the loan
agreement had not been met, and my staff was unable to find any agreement or
authority for delaying repayment. It was recommended that steps be taken to either
enforce the terms of the loan agreement or to obtain authorization for deferral.
4.19 At the time of preparation of my 1979 Report a refinancing proposal was in process
that would enable the debtor to meet his obligations to the Government.
fc.20 A year later I was advised that there had been no change in the situation, and
reported accordingly in the Status of Findings and Recommendations section of my
1980 Report.
fct.21 It is now three years since this matter was first raised in my Reports and there is no
indication that the situation is likely to change in the foreseeable future. I suggest,
therefore, that a realistic appraisal be made of the net realizable value of this loan
and that an appropriate provision for loss be made in the accounts of the
Government.
■MORTGAGE INTEREST—PROVINCIAL HOME ACQUISITION FUND
E.22 Interest on mortgage assets of the Provincial Home Acquisition Fund is calculated
on individual mortgages semi-annually based on the anniversary dates. At 31
March 1981, between one and five month's interest had been earned and received
on most mortgages but was not recorded as interest revenue. As a result, revenues
and assets of the Fund were understated by approximately $4 million at the year-
end.
INTEREST ON ACCOUNTS RECEIVABLE
4.23 Interest amounting to $4.5 million was collected during the 1981 fiscal year on
overdue accounts receivable arising from timber sales. This amount was included
in the financial statements as part of timber sales revenue. Because the amount is
significant and does not represent actual timber sales revenue, it should have been
disclosed separately as interest revenue.
|CCRUED INTEREST—CROWN LAND FUND
g24 Interest earned pursuant to an agreement between the Province and a municipality
has not been accrued. As a result, interest revenue and assets of the Crown Land
Fund are understated at 31 March 1981.
 4.25 The agreement was made in 1975 and funds totalling $4 million were advanced by ;
the Province in 1977 and 1978. Although the agreement states that interest will
accrue at the rate "specified from time to time by regulation pursuant to Section 43 ]
of the National Housing Act", the interest revenue has not been recorded in the]
accounts. The entire amount of principal together with accumulated interest is due]
1 January 1984.
4.26 In order to reflect accurately the Fund transactions on the stated basis of accounting!
the loan receivable should have been increased by $1,508,000, the amount or!
interest accrued at 31 March 1981. Accordingly, the interest revenue for the 1981
fiscal year was understated by $573,000 and surplus of prior years by $935,000.
UNEXPENDED BALANCE OF APPROPRIATIONS
4.27 In March 1981 the Ministry of Lands, Parks and Housing transferred a total of $2
million to two lawyers to hold in trust for the Province. These payments were in
respect of grants to nonprofit societies to assist in the construction of low rentaH
housing units. In my opinion, since construction had not commenced on either oil
the projects at 31 March 1981, the payments to the lawyers did not constitute a valiM
expenditure of the 1981 fiscal year and this portion of the vote should have lapsedB
Expenditures for the 1981 fiscal year are therefore overstated by $2 million.
4.28 In my 1980 Report I commented on similar transactions total I ing $2.8 million in tha
1980 fiscal year, and recommended that all monies remaining in these trusn
accounts be returned to the Consolidated Revenue Fund.
4.29 The cumulative result of both years'transactions is that Net Equity at 31 March 1981 I
is understated by $4.5 million, the amount remain ing after disbursement of appro><s|
imately $300,000 to societies in the 1981 fiscal year.
4.30 In July 1981, in response to the recommendation in my 1980 Report, the Ministrffl]
began to arrange for the return of funds from the lawyers. By September 1981 tha]
remaining funds in the amount of $3.1 million plus interest had been returned to the]]
Consolidated Revenue Fund.
 SECTION 5, COMMENTS ON INTERNAL CONTROL        19
Comments on Internal Control
5.1 Systems of internal control are used by management to ensure, as far as practical,
the orderly and efficient conduct of business. Internal control systems are intended
to safeguard assets, control expenditures, ensure the efficient collection and control of revenue, and produce accurate and reliable accounting information.
s5.2 My previous Reports have contained comments arising from reviews of the internal
controls in the main revenue and expenditure systems of the Government. These
reviews were conducted to gain sufficient information to make an assessment of the
quality of the internal controls in these systems. Our previously reported assessment was that the control systems were not adequate to meet the requirements of
sound financial management.
E.3 After making this assessment and recognizing the lack of appropriate internal
controls in these systems, we undertook a series of audits designed to assess the
broader aspects of financial management and to identify possible causes of the
control deficiencies previously found. My 1980 Report contained the results of the
four such ministry audits conducted in that year. The three audits completed in
1981 are covered in Part 2 of this Report. A fourth audit was in progress at the time of
preparation of this Report.
E.4 On reviewing the results of these audits we have noted that some deficiencies in
financial management and control are common to several ministries. Our remarks
in this regard are contained in Part 2 of this Report.
B-5 The Government has taken several major steps during the year that should lead to
improvement in internal controls. As noted previously in this Report the Financial
Administration Act, which provides for stronger administration and control of the
financial affairs of the Government, was enacted. This Act provided a basis for
establishing a set of financial policies which were approved by Treasury Board and
are contained in the Treasury Board Financial Administration Policy Manual. These
policies, issued in December 1981, give direction and guidance to ministries and
are intended to ensure that the objectives and provisions of the Financial Administration Act are achieved.
 20       REPORT OF THE AUDITOR GENERAL
Status of Findings and Recommendations Contained
in Previous Annual Reports of the Auditor General
6.1 This year my Report includes three sections which deal with the current status of
audit findings and recommendations contained in previous Annual Reports. This ':
section contains items which arose as a result of the audit work of the Office
undertaken in order to express an opinion on the financial statements of the
Government. Comments of the ministries with regard to recommendations result- i
ing from financial management and control audits completed last year are included j
in Part 2 of this Report, and comments of the Ministry of Human Resources on the]
recommendations resulting from the comprehensive audit reported in the 1980
Annual Report are included in Part 3.
6.2 The information provided on the current status has been drawn from various]
sources. The status of audit findings and recommendations contained in this section]
of the Report has been determined by my staff in the course of this year's audit. The]
current year's comments provided in regard to recommendations made in the]
financial management and control audits and the Ministry of Human Resources
comprehensive audit are those of the ministries involved. We have reproduced]
their comments in our Report but have done no audit work to verify these state!
ments. Follow-up work will be performed on these audits on a cyclical basis.
6.3 During the year the Office of the Comptroller General undertook to review an™
document the Government's progress toward improvements in the management of t;
the Province's financial affairs as called for in my previous Reports. This process!"
culminated with the Minister of Finance tabling in the Legislative Assembly a report K
titled "Response to the 1980 Report of the Auditor General" which outlines actional
the Government has taken in reponse to my 1980 Annual Report. I am pleased that Ie
this initiative has been taken, and believe that such monitoring should foster titneff
action on the improvements recommended.
 SECTION 6, STATUS OF FINDINGS AND RECOMMENDATIONS        21
Status of Findings and Recommendations
Contained
in Previous Annual Reports—General
Status as at Date of
Sectio
i,
Preparation of the 1981
Report
Paragraph                     Subject
Annual Report
GENERAL
1979
2.3
Recommendation that the financial
The recommendation was fol
statements be finalized by 30 Septem
lowed. Draft financial state
ber of each year and transmitted to the
ments were received on 30
Auditor General forthwith.
September 1981.
LEGISLATION
1978
5.2
Recommendation that existing obsolete
The Financial Administration
1979
3.3
financial statutes be replaced by im
Act, S.B.C.'l981, Chapter 15,
1980
1.7
proved legislation to meet current and
was passed and proclaimed in
anticipated requirements.
force in 1981; previous legislation was repealed.
COMMENTS ON THE FINANCIAL STATEMENTS
1978
6.14
Deficiencies and ambiguities in content
Following a detailed study by
1979
5.6
and application of stated policies war
the Ministry of Finance, Treas
1 1980
2.2
rant a thorough study of the Govern
ury Board approved in August
ment's acounting policies and financial
1981 new accounting policies
statement presentation. A full and clear
and financial statement presen
body of stated accounting policies
tation for the 1980/81  Public
should be formulated, approved by
Accounts.
Treasury Board, and applied consis
tently in the government accounting
process and in its financial statement
presentation.
1  1978
8B.17
Treatment of holdbacks is not consistent
The treatment is now consistent
with stated policy on expenditures.
with the stated accounting policy.
S 1978
8B.17'
Deferral of revenue from sale or lease of
No longer of concern, since
Crown lands not consistent with stated
amounts now involved are not
policy on revenue.
significant.
 22        REPORT OF THE AUDITOR GENERAL
Status as at Date of
Sectior
i,
Preparation of the 1981
Report
Paragraph                     Subject
Annual Report
1978
8B.18
Suspense accounts not reconciled or
Considerable improvement.!
1979
5.22
cleared regularly.
No    longer   a    significant
problem.
1978
8B.20
Effective control is not maintained over
securities lodged as deposits.
Securities Section is generally
being used as the safekeepingl
agent for security deposits. Tha
internal control systems main!
tained by the ministries are!
generally still inadequate.
1978
8C.14
Steps should be taken to either enforce
the repayment terms of the loan agreement for the $2.5 million advance or
obtain authorization for deferral.
No significant change, (seta
also 1981 Report, Section 4.) 1
1978
8C.29
Stated accounting policy regarding
fixed assets should be clarified.
Policy now clearly stated inf
Note   1    to   the   financial
statements.
1979
5.14
Recommendation that the University
Endowment Lands balance in Special
Purpose Funds be used to repay advance account in the General Fund, as
required by the Act.
The balance of the University
Endowment Lands Administra!
tion Account ($4,184,887) has;H
been fully provided for as a
non-recoverable advance. The 3
balance in Special Purpose s
Funds remains.
1980
3.6
Recommendation that the quoted value
of marketable securities be disclosed
whenever   these   values   can   be
ascertained.
Market values are now disclosed.
1980
3.12
Accounting and control procedures
should be improved to ensure the accuracy of the reported asset balances
titled:
• General Fund: Taxes and Other Accounts Receivable—Land sales
(principal)
New procedures developeda
but not fully implemented at
the time of our audit.
 SECTION 6, STATUS OF FINDINGS AND RECOMMENDATIONS
23
Section,
Report   Paragraph
Subject
Status as at Date of
Preparation of the 1981
Annual Report
• Special Purpose Funds: Other Assets—Crown Land Fund—Real
Estate.
1980 3.14 Limitations placed on the Auditor Gen-
• ; eral of British Columbia under the
Federal-Provincial Fiscal Arrangement
and Established Programs Financing
Act, 1977 (Canada), prevent verification
of income taxes payable to the Province.
1980 3.21 The unexpended balance in the account
titled "Long term disability fund—Public Service" should be corrected to conform with the provisions of the Supply
Act, or alternative legislative authority
should be provided to recognize formally the existence of these unexpended fund balances.
1980 3.24 Recommendation that provincial
monies held in lawyers trust accounts be
returned to the Consolidated Revenue
Fund and properly accounted for.
1980 3.27 Write-offs of non-recoverable expenditures of the Crown Land Fund should
receive Order in Council approval.
1978      9.8      Inconsistent treatment of accrued interest in calculating net guaranteed debt.
■ 979 5.27 Comment that the schedule of guaranteed debt would provide better disclosure by showing:
• maturity dates, interest rates and
redemption features;
The account is now reconciled.
Costs of land sold in previous
years have been removed from
the records.
Limitation still exists. A Legislative Auditors' task force, which
includes British Columbia representation, is continuing work
regarding verification and proposals to provide audit assurance, (see also 1981 Report,
Section 10.)
Legislative authority has been
provided to transfer voted expenditures to the "Long term
disability fund—Public Service" and to hold the funds for
future use.
Situation recurred in 1981. (see
also 1981 Report, Section 4.)
Corrective action was taken
after the 1981 fiscal year end.
1981 write-offs approved by
Treasury Board. The new Financial Administration Act prescribes procedures for all writeoffs.
Appropriate accounting treatment now in effect.
The schedule of guaranteed
debt in Note 16 to the Com-
 24
REPORT OF THE AUDITOR GENERAL
Report
Section
Paragra
ph                     Subject
Status as at Date of
Preparation of the 1981
Annual Report
bined Financial Statements
now refers to Section F of the
Public Accounts where this in-   j
formation can be found.
• the fair market value of investments
held by the sinking funds.
Now shown in Note 16 to the
Combined Financial Statements.
INTERNAL CONTROL SYSTEMS
1978
1979
1980
7.4
6.19
4.7
System of internal control over the disbursement of Provincial funds fails to
meet generally recognized standards.
Comments on internal control 1
matters are contained in Part 1,
Section 5 of this Report.
1978
1979
1980
7.20
6.19
4.7
Deficiencies in payroll system.
Comments on internal control
matters are contained in Part 1,
Section 5 of this Report.
1979
1980
6.6 and
6.22
4.6
Deficiencies in the collection and recording of revenue are serious enough to
warrant immediate study and corrective
action.
Comments on internal control
matters are contained in Part 1,!
Section 5 of this Report.
1980
4.14
. Recommendation that all ministries take
steps to ensure that everyone receiving
monies on behalf of the Province is
made aware of the requirements that all
such monies are to be deposited to the
credit of the Minister of Finance in an
account authorized by the Minister of
Finance as required by statute.
Ministries
MINISTRY OF AGRICULTURE
This requirement is nowclearly!|
stated in the new FinancialK
Administration Act.
1979
7.5
Field audit capacity should be established to monitor payments continually
under the Agricultural Credit and Farm
Income Assurance Programs.
An internal auditor was ap- 1
pointed in September 1980 and  F
has reviewed claims under theji
Agricultural Credit and FarrrM
 SECTION 6, STATUS OF FINDINGS AND RECOMMENDATIONS        25
Status as at Date of
Sectior
,
Preparation of the 1981
1 Report
Paragraph                     Subject
Annual Report
Income Assurance Programs.
The results of these reviews
confirm the need to monitor
payments under these as well
as other similar programs being
administered by the Ministry.
MINISTRY OF THE ATTORNEY GENERAL
[ 1978
8F.5
Investigative teams, rather than individ
Ministry policy calls for a team
[ 1979
7.14
ual investigators, should be used by the
of at least two investigators to
Public Trustee to inventory and receipt
take an inventory of trust assets.
trust assets.
Management states that there is
insufficient staff to allow full
compliance with this policy.
1 1979
7.16
Uniform guidelines and improved pro
The Ministry has developed an
cedures for fee collection by the Public
accounting system which is
Trustee should be developed.
intended    to    incorporate
guidelines and procedures for
fee collection by the Public
Trustee. The Ministry anticipates implementation will
commence by August 1982.
1979
7.10
The Ministry should formally document
The Ministry has drafted spend
and follow procedures for making pur
ing and payment authorities to
chase commitments, and approving
conform with Treasury Board
and checking payments.
Financial     Administration
Policy.
MINISTRY OF CONSUMER AND CORPORATE AFFAIRS
■1979
7.19
Concern that the division of respon
The division of responsibilities
sibilities for internal audit coverage of
continued in effect at the date
the Liquor Distribution Branch between
of this Report. The Financial
the Comptroller General's and the
Administration Policy issued
Branch's internal audit groups may not
recently by Treasury Board pre
be appropriate to meet the needs of the
scribes the internal audit re
Branch.
sponsibilities of ministries and
the Comptroller General.
 26
REPORT OF THE AUDITOR GENERAL
Status as at Date of
Section
Preparation of the 1981
Report
Paragra
ph                     Subject
Annual Report
MINISTRY OF ENERGY, MINES AND PETROLEUM RESOURCES
1980
4.20
Procedures for receiving, reviewing and
Procedures formalized and   ]
accepting bids for petroleum rights
documented during the year.
should be further improved by formaliz
Guidelines now have been es-   1
ing and documenting procedures and
tablished for additional senior   ]
by ensuring participation of additional
staff participation in evaluating
senior staff in the process.
bids.
MINISTRY OF FINANCE
1978
11.16
Weaknesses in internal controls and ac-
Manual procedures for author-  1
and! 1.18 counting records of the Securities
izing investment transactions  1
1980
4.17
Section.
still require improvement. Firm   1
policy in this area needs to be 1
developed and enforced.
1979
7.24
Recommendation that major improve
Systems development to im- 1
ments in fund accounting and reporting
prove the securities system and
practices of both the central accounting
to integrate it with the central
and Securities Section systems be im
accounting system is con- 1
plemented without delay.
tinuing. Many systems im- 1
provements have been noted
since the date of preparation of
my 1979 Report.
MINISTRY OF HEALTH
1979
7.30 and
Expenditure control weaknesses noted
Comments on internal control II
7.31
in the expenditure verification process.
matters are contained in Part 1,H
Payroll weaknesses exist.
Section 5 of this Report.
1979
7.34 to
Revenue controls generally were inade
Comments on internal controljl
7.37
quate to ensure that all revenues due
matters are contained in Part 1,
were collected and properly recorded.
Section 5 of this Report.
1979
7.38
The system for administering and con
Improvements   have   beenW
trolling patients' trust accounts should
noted. Reconciliation of pa-«|
be upgraded, with particular attention
tients' trust accounts remains afl|
being given to reconci I iation of patients'
concern at two institutions.
trust accounts.
 SECTION 6, STATUS OF FINDINGS AND RECOMMENDATIONS
27
Section,
! Report   Paragraph
Subject
Status as at Date of
Preparation of the 1981
Annual Report
11979 7.39 Hospital construction funds of
$142,000 received from the Federal
government in 1971 are still not transferred to revenue.
The Ministry has expended
most of the funds and has indicated that it intends to transfer
remaining balance to revenue.
1979 7.40 and Recommendation with respect to the
7.41      conflict between legislation and accounting practices concerning the Hospital Insurance Fund.
No change.
Ii 979   7.42 to   Recommendation with respect to the fi-
7.44     nancial reporting requirements of the
Emergency Health Services Commission.
The Emergency Health Services Act has been amended to
reflect the current practice of
the Commission.
■ 979 7.45 Actions to overcome shortcomings in
financial controls within the Emergency
Health Services Commission:
• collection of accounts receivable
should be actively pursued.
• reconciliation procedures controls
should be strengthened over both
advances and reimbursements to
the operating units of the Commission.
Some improvement noted in
1981.
Procedures have been improved and now meet acceptable standards.
1980 4.26 Patient maintenance accounts receivable at Provincial government hospitals
should be recorded in the financial
statements of the Province along with an
appropriate allowance for loss.
A coordinated policy for adjustment,
collection and write-off of hospital
charges receivable is necessary to ensure that the hospitals' accounts receivable records reflect amounts considered collectible and that revenue is
collected promptly.
The receivables deemed collectible are included in the
1981 financial statements.
Some improvement noted in
1981.
 28
REPORT OF THE AUDITOR GENERAL
1
Status as at Date of
Section
,
Preparation of the 1981
Report
Paragraph                     Subject
Annual Report
MINISTRY OF HUMAN RESOURCES
1979
7.52
Guidelines and procedures should be
established to ensure that all ministries
making expenditures shareable under
the Canada Assistance Plan provide the
Ministry of Human Resources with information necessary to make claims.
Guidelines were distributed to!
all ministries on 30 September*
1981.
MINISTRY OF LANDS, PARKS AND HOUSING
1978
8D.5
The Housing Fund's (now Crown Land
Records now in agreement.   ]
and8D.6 Fund) recorded costs of $15.4 million
1979
7.54
and 7.55
for federal/provincial partnership projects does not agree with the Canada
Mortgage and Housing Corporation
cost records.
1979
7.57
The reporting requirements for housing
cooperatives and nonprofit societies
should be enforced to achieve efficient
financial management of the housing
grants program.
Program now administered by.
the British Columbia Housing i
Management Corporation ofj]
which the Auditor General is
not the appointed auditor. Wa|
have   not   yet   determint^n
whether the Ministry has adcal
quate assurance that these re-«
porting requirements are being 1
adhered to.
MINISTRY OF THE PROVINCIAL SECRETARY
1978
8B.12
and
8B.13
The statement of accounts of the
Queen's Printer has not been certified by
the Comptroller General as required by
the Queen's Printer Act.
No change.
1978
8B.14
Need for improvements in inventory ac-
Systems development proposal i
and
counting systems of the Queen's Printer.
approved by Treasury Boardtf
8B.15
and design work begun.
 SECTION 6, STATUS OF FINDINGS AND RECOMMENDATIONS       29
Section,
j Report   Paragraph
Subject
Status as at Date of
Preparation of the 1981
Annual Report
1979     7.63     Accounting records and procedures of
the Lotteries Branch require further im-
11979     7.25
provement for control purposes.
Investment of $350,000
First Citizens Fund
recorded.
n 1975 from
improperly
Changes in the ticket distribution system and improvements
in accounting records have
eliminated concerns.
Investment now correctly recorded in the accounts.
Public Bodies
5.2      Recommendations that the financial     Financial statements now in-
statements of public bodies audited by    eluded in the Public Accounts,
the Auditor General be included in the
Public Accounts.
BRITISH COLUMBIA EDUCATIONAL INSTITUTIONS
CAPITAL FINANCING AUTHORITY
1980 5.10 Should obtain debentures from educational institutions as required by
legislation.
No change. (See also 1981 Report, Section 7.)
 30       REPORT OF THE AUDITOR GENERAL
Public Bodies
7.1 Under provisions of the Auditor General Act, the Auditor General is eligible for
appointment as auditor of any Crown corporation, Crown agency or public body.
At 31 March 1981, in my capacity as Auditor General, I was the appointed auditor
of 30 public bodies as listed hereunder:
tish Columbia Assessment Authority
tish Columbia Energy Development Agency
tish Columbia Educational Institutions Capital Financing Authority
tish Columbia Harbours Board
tish Columbia Health Care Research Foundation
British Columbia Heritage Trust
British Columbia Institute of Technology
tish Columbia Place Ltd.
tish Columbia Power Commission Superannuation Fund
tish Columbia Railway Company Pension Fund
British Columbia Regional Hospital Districts Financing Authority
tish Columbia School Districts Capital Financing Authority
College Pension Fund
Creston Valley Wildlife Management Authority Trust Fund
Health Facilities Association of British Columbia
Knowledge Network of the West Communications Authority
Legal Services Society
Medical Services Commission
Municipal Superannuation Fund
Pacific Vocational Institute
Provincial Capital Commission
Provincial Rental Housing Corporation
Simon Fraser University
Teachers' Pensions Fund
Transpo 86 Corporation
The University of British Columbia
The University of British Columbia Health Sciences Centre
University of Victoria
Workers' Compensation Board of British Columbia
Workers' Compensation Board Superannuation Fund
7.2 During the year we performed our initial audits of the accounts of the British ;ji
Columbia Energy Development Agency, British Columbia Place Ltd., Knowledge 9
Network of the West Communications Authority, and Transpo 86 Corporation.
7.3 As recommended in my 1980 Report, the financial statements of all public bodies \h
of which I am the auditor, together with my auditor's reports thereon, are now I
published in the Public Accounts—Volume III.
 I 7.4 The principal objective of the audit of a public body is to enable the auditor to
express an opinion as to whether the financial statements provide a fair presentation
of the financial position and operating results for the period under review.
■7.5 In addition, it is customary to advise management whenever systems of internal
control are considered weak, or certain required procedures are not properly
followed. Wherever such circumstances arise, our concerns are communicated
directly to the management of the organization involved. Normally, corrective
action on these matters is taken promptly, and there is no need to mention in detail
items of this nature in my Report.
: 7.6 However, a problem with regard to financing authorities mentioned in last year's
Report continues unresolved. The British Columbia School Districts Capital Financing Authority, the British Columbia Regional Hospital Districts Financing Authority
and the British Columbia Educational Institutions Capital Financing Authority are
Crown corporations which lend money to school districts, regional hospital districts, universities and colleges. The financing authorities borrow from various
sources and lend the funds to these entities on identical terms. They are required by
legislation to obtain debentures of the borrowers as security for their loans.
W.7 At 31 March 1981 loans totalling $183.3 million had been made by the Authorities
for which no debentures had been received. However, Letters of Undertaking to
issue debentures had been obtained. I reported on a similar situation in my 1980
Report in connection with loans of $56.8 million of the British Columbia Educational Institutions Capital Financing Authority.
W-8 I am informed that legal difficulties have delayed the issuance of these debentures.
Nevertheless, appropriate steps should be taken to comply with this requirement of
the relevant Acts.
7.9 The introduction of consolidated financial statements in the Public Accounts this
year has resulted in the need for me to rely on the work of public accountants who
serve as auditors of many Crown corporations. The excellent cooperation received
in this regard is appreciated.
Mk_
  Part 2
Financial Management and Control Audits
in Ministries
  If™
SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       35
Table of Contents
[Part 2:
8. FINANCIAL MANAGEMENT AND CONTROL AUDITS IN MINISTRIES
Introduction  37
Deficiencies Frequently Encountered  39
Improvement Efforts  41
Current Year Audits
Ministry of Environment  42
Ministry of Forests  42
Ministry of Health  53
Status of Recommendations from Previous Annual Report—
Financial Management and Control Audits
Ministry of Education  60
Ministry of Finance  72
Ministry of Human Resources  80
Ministry of Lands, Parks and Housing  86
  SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        37
Financial Management and Control
Audits in Ministries
[introduction
18.1 This part of my Report summarizes the findings of eight financial management and
control audits carried out in ministries of the Government of British Columbia
during 1980 and 1981.
[ THE NEED FOR A STUDY
8.2 Each of my Annual Reports, since 1978, has emphasized the need to strengthen and
improve financial internal control systems throughout government. Our audit work
in the initial years revealed control weaknesses in the systems used to account for
and process financial transactions. However, as we pointed out when we introduced financial management and control audits, even if internal accounting and
processing controls are provided for in systems and reliably adhered to, satisfactory
psffihancial control does not necessarily result. This is because contemporary accepted definitions of internal control extend beyond requiring that day-to-day
controls be present. These definitions emphasize the importance of planning,
budgeting and reporting systems in achieving adequate control. These definitions
also acknowledge the need to consider internal controls in the context of the
environment within which they operate.
j. SCOPE AND EXTENT OF REVIEW
8.3 Accordingly, as part of introducing the comprehensive audit approach to this
Office, we initiated broadly based audits of financial management and control in
ministries. These reviews addressed the following areas:
• the role, organization and staffing of the financial function;
• planning, budgeting and budgetary control;
• financial accounting and reporting systems;
• controls over revenues, expenditures,assets and liabilities; and
• internal audit.
8.4 We focused our attention on matters that lay, for the most part, within the responsibility and authority of ministry officials to remedy. As explained in the 1980
Report, we have not dealt extensively with areas in which central agencies have
responsibility for either providing guidance and direction, or performing control
functions. Where we identified common deficiencies in such areas, we have noted
them for possible study as part of an organized extension of audit coverage.
 8.5 In carrying out these audits of financial management and control, we reviewed
documentation describing the ministries' policies, procedures and systems. We
interviewed staff at all levels, both at Headquarters and in regional and district]
offices, to find out how they had applied these policies and procedures in practice. ]
We then compared what we found against control objectives and audit criteria]
which we felt were appropriate. Since our audits were intended to emphasize the
broader issues of financial management and control, we did not include a detailed
examination of transactions in our approach.
MINISTRIES AUDITED
8.6 We have now completed audits of financial management and control in seven
ministries:
• Education
• Finance
• Human Resources
• Lands, Parks and Housing
• Environment
• Forests
• Health
The audit of an eighth ministry, Transportation and Highways, was in progress at the!
time of writing.
3.7 Collectively, these Ministries account for over 70% of both the revenues and
expenditures of the government. Precis of our observations for the three audits!
completed in 1981, together with our recommendations and the ministry responses!
to them, are included in this Section. Our 1980 Report included a precis of ourl
observations and a listing of our recommendations for each of the first four audits!
These recommendations are reproduced, along with updated ministry responses,
as part of this Section.
8.8 Our audits have revealed a recurring pattern of deficiencies in financial management and control. These deficiencies are summarized in paragraphs 8.10 to 8.23.1
8.9 The success of our audit work depended greatly on the assistance of ministry
officials, and their willingness to candidly discuss financial management anew
control issues with us. Throughout these audits, ministry staff at all levels gave us
theirfull cooperation. We would like to express our appreciation for their coopera!
tion and assistance.
I
 r
SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        39
Deficiencies Frequently Encountered
ROLE, ORGANIZATION AND STAFFING OF THE FINANCIAL FUNCTION
8.10 The audits have led us to conclude that there had been insufficient recognition of
the full benefits that financial management and control could and should provide to
ministry management. Financial management had tended to be seen mainly in
terms of processing and recording transactions, and ensuring that statutory expenditure allotments were not exceeded.
,8.11 We found that financial management and control could have been enhanced
significantly if there had been greater recognition of the role financial officers
should play in:
• providing guidance and direction to operating managers who have significant financial responsibilities;
• assessing the financial and control implications of planningand operational
decisions; and
• providing managers with the type of financial information they need to
operate their programs more efficiently.
8.12 The organization, reporting relationships and staffing of the financial function
reflected the limited role which financial management was expected to play.
Generally, we found a need for ministries to review the reporting relationships and
lines of authority of their Senior Financial Officers so that they could provide more
effective and complete leadership, direction and guidance in all financial management and control matters.
.13 Our review of the staffing of the financial function in ministries showed that, while
many financial officers had had long service in government, personnel with formal
accounting qualifications (which would include training in control concepts and
computer systems) were in limited supply in most ministries. We noted that ministries typically needed to develop better assessments of their financial management
and control requirements in order to determine whether their financial functions
were adequately staffed with appropriately qualified personnel.
.14 Generally, we found that ministries needed to supply clearer guidance and direction, both to operating managers and to financial staff, so that these employees
would clearly understand the role that financial managers could play in helping
operating managers to discharge their responsibilities. Operating managers often
did not ask for help or advice on financial or control matters. Accordingly, they did
not have the benefit of advice from qualified financial staff when -they made
decisions having financial or control implications.
 40        REPORT OF THE AUDITOR GENERAL
8.15 We found a number of instances in which operating systems had been implemented
without providing for essential controls or safeguards. Such problems might have
been avoided had advice been sought from financial staff at an early stage.
PLANNING, BUDGETING AND BUDGETARY CONTROL
8.16 With few exceptions, ministries had either not developed, or were in the initial
stages of setting up, strategic and long-term planning processes. Such processes
would help them to:
• identify, assess and select from alternative approaches to achieve their
objectives;
• reliably forecast their funding requirements;
• plan staffing actions; and
• assess whether program managers' plans were integrated with ministry
objectives.
Without long-term planning, annual budgets and forecasts lack focus, may rely]
unduly on existing spending patterns, and may overlook past inefficiencies.
8.17 Where ministries did have strategic and long-term planning processes, there was a]
need to provide for input from the Senior Financial Officer to ensure that financia!
implications and control requirements were given early consideration.
8.18 With few exceptions, there was a need for ministries to supplement their budgets
with operating plans which specify the activities to be performed and the results to]
be achieved for the money allocated to them. Ministries that lacked these plans
were limited in their ability to compare what they had accomplished through their]
activities with the resources they had spent, and to take prompt corrective action!
where needed.
FINANCIAL ACCOUNTING AND REPORTING SYSTEMS
8.19 The accounting systems in use did not generally provide operating managers wit™
reliable financial information they needed in a format they could use. Consequently, managers often ignored the reports they received and, to compensate!
tried to produce their own.
CONTROLS OVER REVENUES, EXPENDITURES, ASSETS AND LIABILITIES
8.20      Our audits confirmed the continued existence of weaknesses in control oveal
revenues, expenditures, assets and liabilities. The nature and extent of improvej
ments required are reflected in the recommendations we have made.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS
41
INTERNAL AUDIT
8.21
In complex, decentralized operations, internal audit is the key to assuring senior
management that its management and control systems and procedures are both
suitable and are operating reliably and consistently. In many organizations internal
audit also provides senior management with independent assessments of operational efficiency and economy.
8.22 We found that several ministries had recently established internal audit functions.
However, we concluded that there was a need for all ministries to more comprehensively assess their internal audit requirements and to provide internal audit
groups with appropriate mandates and independent reporting relationships if ministries were to achieve full benefits from the internal audit function.
CONCLUSION
8.23 ln those Ministries where we have carried out these audits, the nature and extent of
deficiencies are such that significant improvements are required before financial
management and control can meet desirable standards.
Improvement Efforts
.24 The Ministries we audited generally recognized that deficiencies existed and that
improvements were needed. Ministries had been giving increased emphasis to
financial management and control matters in recent years and were receptive to
suggestions that would enable them to achieve required improvements.
■.25 In Part 1 of this Report we acknowledge and comment on a number of initiatives.
We are also aware of a number of other central agency initiatives intended both to
provide guidance and direction to individual ministries and to improve overall
government control.
8.26 We have not yet reviewed or assessed these initiatives. However, the fact that
initiatives are being taken is significant in itself. We are pleased to see that deficiencies which have been of concern to this Office since its formation are now being
recognized and are receiving attention.
K.27 It is unrealistic to expect, however, that the improvements necessary to achieve
acceptable control can be realized easily or quickly. Success in this task will
depend on management's acceptance of the need to make further improvements. It
will depend also on resolving complex technical problems and, of equal importance, ensuring that staff both accept and use improved control systems.
 42        REPORT OF THE AUDITOR GENERAL
Current Year Audits
Ministry of Environment
8.28      Our review of financial management and control in the Ministry of Environment
was carried out in conjunction with the comprehensive audit of the Ministry's
Waste Management Program. Paragraphs 9.189 to 9.231 set out our observations i
and recommendations.
Ministry of Forests
REPORT PRECIS
8.29 The Ministry of Forests is responsible for managing the forest and range resources of j
the Province of British Columbia. In the 1981 fiscal year, the Ministry processed
approximately $410 million in revenue through more than one million separate]
transactions. Its direct expenditures amounted to $163 million. In addition, indi-J
rect expenditures of $81 million were allowed as credits against revenue for work]
carried out under Section 88 of the Forest Act.
8.30 In 1978, the Ministry of Forests Act, the Forest Act and the Range Act were
introduced. This new legislation laid the foundation for the Ministry's organization!
which emphasized the decentralized delivery of programs. As a result, major!
changes occurred in the Ministry's organization and many new positions, or!
positions with changed responsibilities, were created throughout the Ministry*
These changes presented the Ministry with a number of financial management and!
control challenges.
1.31
The Ministry has recognized the need to meet these challenges and has begun to
make improvements in financial management and control. It has taken the essential]
first step of providing the Assistant Deputy Minister-Finance and Administration,
who is the Executive Financial Officer, with a mandate to address all areas of!
financial management and control. He is supported by the Comptroller, who headsl
the Central Financial Group at Headquarters.
.32 Up to the time of our audit the Central Financial Group had, to a large degree,
concentrated on meeting day-to-day priorities, such as processing payments andl
the mechanics of preparing budgets. The Central Group had had limited success in!
such areas as providing guidance and support to decentralized financial staff!
designing accounting systems and procedures, and providing financial analysis!
and advice to operating managers.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        43
1.33 At the time of our audit the Ministry had initiated a review to determine both what
improvements to financial management were needed, and what its long-term
objectives were. However, the Ministry had not yet prepared a detailed plan setting
out what it would have to do to meet those objectives. Neither had it assessed
whether it had the right number of properly qualified staff to enable the financial
function to fulfill its defined role.
:.34 We noted that the Executive Financial Officer had extensive non-financial responsibilities. We also noted that there was limited availability of staff within the
financial group with skills, such as electronic data processing and systems design,
which are appropriate to a decentralized organization. Given these facts, we are
concerned that the Ministry's ability to attain its goal of effective financial management and control may be adversely affected.
;:35 We noted in our review that the Ministry had made progress in integrating its long-
term planning with the preparation of its Estimates. There was, however, still room
for improving the way in which the cost implications of long-term plans were
reviewed. There was also considerable scope for improving the reporting of financial information and integrating it with performance information in order to enable
the Ministry to monitor progress against planned expenditures.
i.36 We also observed that control over transactions needed improvement. In particular,
we noted weaknesses in controls over:
• the completeness and timeliness with which revenue is billed;
• the validity of amounts offset by licensees against timber revenue payable;
and
• the handling of cash receipts.
■.37 We believe that the Ministry could derive considerable benefit from a strong
internal audit function. In a large, decentralized ministry, such as the Ministry of
Forests, a strong, independent internal audit group could provide important assurance that systems and procedures are operating efficiently and effectively.
Although the Ministry had established an internal audit function, it had not yet
comprehensively assessed its internal audit needs. We also noted that the Internal
Auditor reported to the Ministry Comptroller. This reporting relationship did not
provide the degree of independence necessary to enable internal audit to fulfill its
proper role.
|-38 During and after our audit field work, we noted that management was working to
improve financial management and control, and was addressing many of the
problems noted in our audit. Our review indicated that many improvements are
required, and we have concluded that the Ministry will need to devote substantial
effort over an extended period of time in order to bring these changes about.
8.39 The recommendations we have made are listed below together with the Ministry's
response and comments.
 44       REPORT OF THE AUDITOR GENERAL
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
Ministry Comments
MANAGEMENT OF THE FINANCIAL FUNCTION
8.40 The Ministry should review the Executive Financial Officer's non-financial responsibilities to determine whether they detract
from his primary responsibility, the financial
management and control function.
The Ministry developed the role
and responsibilities of the Assistant Deputy Minister, Finance and
Administration, who is the Minis-!
try's Executive Financial Officer, at]
the time of reorganization. The]
Ministry is satisfied that these responsibilities fully address the fi-l
nancial management and control!
function.
8.41 The Executive Financial Officer should complete the development of a comprehensive
plan to help coordinate and control the activities required to achieve necessary improvements in financial management and
control in the Ministry.
Agreed. Such a plan will be com!
pletedinMay, 1982. In July, 1981,1
the Executive Financial Officer of!
the Ministry began the develop!
ment of a comprehensive Finance!
and Administration 5 Year BusiJ
ness Plan, outlining goals, objecB
tives and strategic plans supports
ing the Ministry of Forests 5 Yearl
Forest and Range Resource ProS
gram. Financial management objectives are an essential part of this
plan and will be implemented by a
Ministry of Forests Financial Mans
agement Task Force reporting to
the Deputy Minister of Forests.   ]
8.42 The Executive Financial Officer should review the non-financial responsibilities of the
Finance and Administration Managers and
the Accounting Officers to determine whether
these responsibilities detract from the financial management and control function in the
regions.
The organization of the Regions
Management team, of which tha
Finance and Administration Mara
ager is part, is structured as a "mm
ror-image" of the Headquarters
Executive Committee. The Regional Finance and AdministrS
tion Manager has regional respoH
sibilities for finance, personneB
technical services, etc. TheMinia
try developed the role and respora
sibilities of the Regional Financej
1
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       45
MINISTRY OF FORESTS!
Recommendations and Ministry Comments
Recommendations
Ministry Comments
i.43 The Deputy Minister should issue a policy
statement to all staff which clearly defines the
afunctional relationships and responsibilities
that exist between the Central Financial
Group, Headquarters Branches, and the regional and district financial officers.
and Administration Manager and
the General Accounting Officer at
the time of reorganization. The
Ministry is satisfied that these responsibilities fully address the financial management and control
function.
Treasury Board has recently issued
policies dealing with the management of the Financial Function.
Within this context, the Ministry
of Forests is developing policy in
this area. This policy will respond
to Treasury Board direction and be
"tailor-made" to fit the Ministry's
needs. This policy will be finalized in June/July, 1982.
18.44 The Executive Financial Officer should
strengthen functional relationships between
central, regional and other financial officers
to improve the consistency and reliability of
financial management and control
throughout the Ministry.
These functional relationships will
be clearly spelled out in the policy
outlined in 8.43. Quarterly meetings with Regional Finance and
Administration Managers are currently conducted by the Executive
Financial Officer and guidance,
direction and training to all Ministry Financial Officers is ongoing.
[8.45
L
To avoid duplication and omissions in record
keeping and other financial tasks, the Executive Financial Officer should define and clarify the respective financial responsibilities of
the regional and district staff.
Agreed. The Ministry's Financial
Signing Authorities Matrix, which
comprehensively addresses
spending and payment authorities
throughout the Ministry, has been
developed and vyill be implemented in April, 1982. Although
these elements comprise the major financial management responsibilities, the responsibilities/authorities matrix will be developed
further and broadened in 1982.
 46
REPORT OF THE AUDITOR GENERAL
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
Ministry Comments
8.46 The Ministry should carry out a comprehensive study to determine its financial staff requirements at all levels. The results of the
study should be used as a basis for ensuring all
financial positions are filled by appropriately
qualified staff.
The Ministry is currently review-1
ing in depth the general account- i
ing and administrative functions ■
and organization in the Vancou-1
ver Region. This report will be fi- I
nalized in early May, 1982. De- j
pending on the results of this
study, the review could be expanded. Additionally, staffing
complements for the financial
function are being addressed in ]
the Finance and Administration ]
Five Year Plan previously referred
to.
8.47 The Ministry should review and assess the
training needs of its financial staff and, where
training needs are identified, should develop
a training program that will enable them to
carry out their financial duties more
effectively.
The Ministry's Human Resources
Planning, Training and Develop- •
ment Program is continually re!
viewing and planning in this important area. To date priorities
have been,  in large part, to
provide training and development!
to all new managers throughout!
the Ministry, as a result of reorgan-1
ization. Priorities will again be re!
viewed in the near future, parS
ticularly with respect to the finariS
cial function.
8.48 The Central Finance Group should develop a
comprehensive financial accounting manual
that documents policies, procedures and systems. The manual should be distributed
throughout the Ministry.
A Financial Policy and User's Proa
cedure manual is under develops
ment, as planned, and will om
available for distribution
throughout the Ministry in Ma»
1982. The manual will include all
current Ministry of Forests finartS
cial policies, and subsequent adS
ditions, together with detailed
procedures.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       47
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
^Ministry Comments
PLANNING, BUDGETING AND BUDGETARY CONTROL
.49 The Ministry should make provisions for more
involvement by the financial function in the
review of the cost information used in preparation of its five-year plans in order to improve
their reliability.
As a result of the recommendations of a Ministry Task Force on
the 5 Year Program and Budget
Interface, the Ministry will meet
this requirement this spring
th rough the development of standard input documents in support of
all 5 year program and annual
budget proposals at the activity
level. These documents will contain a record of estimating methods plus basic input and output
measures and will be subject to
increasing challenge by the Ministry's central finance group, and the
Executive Financial Officer.
]8.50 Financial staff should review and challenge
all budget submissions before they are forwarded to the Ministry's Executive Committee
and included in the annual Estimates.
The standard input documents
noted in 8.49 will provide the information base required to improve this challenge role.
.51 The Ministry should ensure that the annual
budgets are reflected in operating plans. It
should provide guidance and direction to responsibility centre managers in developing
such plans, so that they can monitor and assess program results in relation to the budget.
K.52
L
The Ministry should develop a policy and
procedures for reporting of variance analysis
in order to promote accountability and encourage corrective action when activities deviate from plan.
As a result of 8.49 there will be a
direct link between operating
plans of the Ministry and the budget. In addition, the development
of the 5 Year Program will place
increasing emphasis on T.S.A.
(Timber Supply Area) planning alternatives which are developed at
the District operating level.
Variance analysis is ongoing and
will be developed further. Some
time ago the Ministry's Executive
Committee introduced the
monitoring of actual results versus
planned goals on a quarterly basis
for the Ministry's Silviculture Program. This will be expanded to
other program areas in 1982. Ac-
 48        REPORT OF THE AUDITOR GENERAL
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
Ministry Comments
.53 The Executive Financial Officer should review the cost effectiveness of the present sys-
tem of recording and reporting of
commitments.
countabilities are being strengthened by the introduction, beginning in October,  1982, of an
Employee Performance Manage- ]
ment System. Annual achieve- j
ments are compared with planned ]
goals and reported in the Ministry's Annual Report. Variances are j
analyzed internally and used in]
decision making.
Treasury Board Financial Admin-;
istration Policy requires each Min-)
istry to record and report commit-!
ments. Current Ministry procedures are being reviewed in line
with the response to 8.43.
ACCOUNTING AND FINANCIAL REPORTING SYSTEMS
.54
i.55
The Executive Financial Officer should implement a complete and coordinated reporting
system. The system should take the information needs of all levels of management into
account.
To ensure that expenditure transactions are
correctly and completely processed, computer transaction reports should be checked to
the original input.
Agreed. The Ministry is currently
developing one facet of this com!
plex system, and will continue tq]
develop a comprehensive finarS
cial management system in thefu!
ture, consistent with resourca
availability. In the interim, Minis!
try expenditures are monitored I
monthly using the Financial Mara
agement Reporting System in usa
government-wide, together witM
other financial management rea
ports. The original plan was to I
build a system around the prcM
posed Financial Systems Networal
sponsored by the Ministry of Fa
nance; however, with the "shelB
ing" of the latter, plans must be :
altered significantly.
Agreed. This process will be»
strengthened further.
 1                                                                                      1
SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        49
MINISTRY OF FORESTS
■Recommendations and Ministry Comments
Recommendations
Ministry Comments
8.56
Central Finance should establish a policy that
Agreed. Regular analysis and rec
requires regular analysis of all suspense ac
onciliation of all suspense ac
counts to ensure that errors in the accounts
counts is currently carried out.
are detected and corrected.
8.57
The Central Finance Group should ensure
Agreed. Where unnecessary du
that subsidiary and independent accounting
plication has been identified,
and financial reporting systems do not dupli
steps have been taken to eliminate
cate or overlap each other unnecessarily. The
same  and   this   process  will
Group should also ensure that records are
continue.
compared to verify that the information they
contain is accurate.
FINANCIAL CONTROL OF REVENUE AND EXPENDITURE
8.58
The Ministry should institute appropriate,
The revenue/billing system was
cost-effective controls to ensure that all docu
identified as a priority area for re
ments used in the billing process are ac
view by the Ministry Internal Au
counted for.
dit function. Very recently, the Internal Audit Division of the Office
of the Comptroller General indicated their intent to conduct an
internal audit of this same system.
Consequently, a joint.cooperative
review will be undertaken, starting in April/May, 1982 for completion in August, 1982.
18.59
The Central Finance Group should review the
controls in the revenue system to determine
As per 8.58
whether they are adequate.
IffiCTION 88 CREDITS
| 8.60
The Ministry should complete a comprehen
A Procedures Manual has been
sive manual covering the policies and pro
completed for control and admin
cedures that regions and districts should fol
istration of proposals, adden-
low in controlling work carried out by
dums, amendments to adden-
licensees under Section 88 of the Forest Act.
dums, cost claims, inspections
and adjustments to cost claims.
This manual is to be reviewed star
ting in May, 1982 and updated.
 50
REPORT OF THE AUDITOR GENERAL
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
Ministry Comments
8.61
8.62
8.63
.64
8.65
To ensure that costs allowed for projects are
reasonable, the branches should develop
guidelines for estimating costs for Section 88
projects.
The regional manager should review and approve all projects before work on them begins. All addenda should be reviewed for accuracy and completeness, and approved by
regional managers before the addenda are
presented to licensees.
The Ministry should develop guidelines that
define the circumstances in which a licensee
may begin work on a Section 88 project before an addendum has been signed.
The Ministry should determine the extent to
which standardization of schedules can be
achieved. Standard schedules should be approved by legal counsel to ensure that they
meet legal requirements.
To assure the Ministry that the quality and
completeness of the work carried out under
Section 88 are satisfactory, the Ministry
should inspect projects. The branches should
specify the depth and frequency of inspection
required, taking into account the value and
type of projects and the risk involved.
The Ministry should devise cost-effective systems and procedures to ensure that cost
claims are valid.
Branches are developing provincial guidelines, consistent with
Section 88 Policy. These
guidelines will be finalized and
implemented in July, 1982.
Present procedure provides for the]
Regional Manager's technical ex-j
pert to review each addendum for]
the Regional Manager's approval,]
prior to its presentation to the]
licensee.
From time to time emergency situations require work to com-]
mence prior to signing an addenl
dum or an amendment. Informal
guidelines permit this on the au!
thority of the Region, with imme!
diate follow up with the necessar!
documentation. The Ministry'!
practice in this area will be re!
viewed again in May/June, 19821
All technical branches are preparl
ing standard, province wida|
schedules and the majority ara|
now in place. These will be reviewed again in May/June, 1982]
The inspection requirement SI
being reviewed by the concerned
Branches with the objective of dta|
veloping a provincial standard in.;
1982. This standard will take infflj
account the value and type of prta]
jects and the risk involved.
Procedures require the Cost Claiffll
to reflect the Addendum and all
projects must have a final inspec-)-:
tion before they are closed. Wra|
regard to compliance, reference is
made to 8.68.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        51
Recommendations and Ministry Comments
MINISTRY OF FORESTS
Recommendations
Ministry Comments
18.67 The Ministry should protect its right to audit
cost claims by including a provision for audit
in its agreements with licensees.
18.68 The Ministry should set up systems to monitor
district and regional compliance with established policies.
IASSETS
8.69
Central Finance should institute appropriate
controls over cash receipts to ensure that they
are promptly deposited and recorded.
.70 Central Finance should reconsider its policy
of charging interest from the statement date
rather than from the invoice date.
With the requirement that the Cost
Claim must comply or agree with
the Addendum there is no need for
an audit of the Cost Claim. If the
inspection determines that the
work is completed according to
the Addendum then the I icensee is
compensated as stated in the Addendum. With regard to cost
claims which are based on actual
costs, this recommendation will
be given serious consideration.
Ministry policy is such that Headquarters Branches are responsible
for monitoring regional and district compliance with policies and
procedures. The Ministry's Valuation Branch is visiting four Districts in the Vancouver Region to
monitor implementation of the
Section 88 manual at the field
level. Visits will be made to all
Regions in May and June to monitor regional compliance with the
Section 88 Manual and to determine any necessary changes in
policy, procedures and forms.
In accordance with the Ministry's
interim internal audit plan, the
Ministry Internal Auditor is presently reviewing these controls.
The recommendations will be implemented in 1982.
The Ministry of Finance is at present reviewing government policy
in this area. Jointly, the benefits
and related costs of policy alternatives will be developed and form
the basis of any future direction.
j	
 52        REPORT OF THE AUDITOR GENERAL
MINISTRY OF FORESTS
Recommendations and Ministry Comments
Recommendations
Ministry Comments
.71 The Ministry should review its billing procedures and accounting cut-offs in order to
reduce unneccessary delays and improve
cash flow.
8.72 So that management has reliable information
on accounts receivable, Central Finance
should prepare aged analyses of accounts receivable that do not include Section 88
credits.
8.73 Central Finance should develop a policy for
the regions to follow in recognizing doubtful
accounts.
8.74 To provide an effective and efficient system
for controlling assets, the Ministry should develop, document and communicate a policy
covering this area. It should specify the assets
to be controlled, the levels of control required, the control systems and procedures
and ongoing monitoring responsibilities.
INTERNAL AUDIT
8.75 To provide the Internal Auditor with the independence he needs to carry out his duties, the
Ministry should change his reporting
relationship.
8.76 The Ministry should determine which areas
require internal audit coverage and develop a
plan, in consultation with the Comptroller
General's Audit Group, showing how the
Ministry's needs will be met.
Cash flow is of continuing concern. Further improvements,
where possible, will be addressed]
in the review referred to in 8.58
and 8.59.
Agreed. Accounts receivable will
be reported on a "gross" and "net"
basis in future.
Agreed.    A
developed.
policy   wil
be
As previously planned, a com!
prehensive review of the Minis!
try's asset management and con!
trol practices was started in Februl
ary, 1982, with completion date]
targeted for July 30, 1982. Red!
ommendations will include tha
matters referred to in recommerS
dation 8.74.
Agreed. The reporting relations
shipof the Internal Auditorwill b|
altered such that he reports dH
rectly to the Executive FinanciO|
Officer.
A detailed internal audit plan w^|
presented to the Executive Finar9
cial Officer in January, 1982. Thral
plan was developed with regard to >.
the Master Audit Plan of thai
Comptroller General's Internal
Audit Division. The plan is under 9
review in conjunction with the ac- I
tivities outlined in 8.58 and 8.59li
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS        53
MINISTRY OF FORESTS
Recommendations and Ministry Comments
1 Recommendations Ministry Comments
8.77      The Ministry should consider broadening the Accepted in principle; however,
Internal Auditor's mandate to include reviews the priority at this time is the re-
of the cost effectiveness of non-financial view of financial management
functions. systems.
Ministry of Health
REPORT PRECIS
8.78 The Ministry of Health is responsible for providing a broad range of health care
services throughout the Province. In recent years, health care costs have been
increasing both in absolute terms and in relation to other government programs.
Five years ago health expenditures were $858 million, representing 24.5% of total
government expenditures. For 1982 it is expected that Ministry expenditures will
reach $2 billion, or approximately 30% of the government's total expenditures.
During the past two years costs for Hospital Programs have exceeded the estimated
amount. In 1981 these costs were $170 million over budget. Such increases and
overruns have directed attention to the Ministry's need to accurately forecast and
control costs.
8.79 Our review focused on Hospital Programs and Long-Term Care, which account for
about 65% of the Minittry's expenditures. Almost all of this amount was paid in
direct grants to hospitals and other non-government agencies that provided these
services. Because of the high initial cost of health facilities, and the significant cost
of operating them over their lifetimes, adequate systems of financial management
and control are essential to both the planning and delivery stages of ministry
operations.
B.80 When we were planning our audit, we learned that the Ministry had commissioned
a number of studies during recent years. These studies revealed significant deficiencies in the role that financial management had played in the Ministry and in the way
that important aspects of the role had been organized and carried out. Our review
of this material together with interviews with Ministry personnel allowed us to form
an assessment of financial management and control. Because the Ministry accepted our assessment, and because major organizational changes were underway,
we did not feel justified in employing more extensive audit procedures.
8.81 We concluded that the full role that financial management should play in the
Ministry has only recently been understood. Until 1981 no senior financial officer
had been designated responsible either for advising the Deputy Minister on the
financial implications of policy and operating decisions, or for overseeing financial
management and control throughout the Ministry.
J
 8.82 As a result, the Ministry's Central Financial Group had not played an active enough
role in coordinating and directing financial management and control efforts in the :
Ministry. For example, the major program divisions had established their own
financial units without guidance or direction from the Central Financial Group.
They had also designed their own informal accounting systems and related
procedures.
8.83 As noted earlier, health care services are provided primarily by non-government ]
agencies. Of major concern was the absence of an effective budgeting and monitoring system which would allow the Ministry both to properly evaluate requests for'
funding from these institutions and to monitor whether the funds were spent for
approved purposes. Accordingly, analysis of operating results did not always detect
unfavourable trends early enough to permit the Ministry to take appropriate corrective action.
8.84 We also found that ministry management had not had the benefit of an internal
audit assessment of the operation of its systems and procedures for maintaining]
financial management and control. While some internal audit coverage had been
provided by ministry staff and by the Office of the Comptroller General's internal!
audit group, the Ministry had not comprehensively assessed its own internal audit!
requirements. Accordingly, the Ministry was unable to assess whether the audit!
coverage provided satisfied its needs.
.85 At the time of our review, the Ministry was reorganizing its operations and develop-!
ing procedures to strengthen financial management and control. For example, the!
Ministry was refining the criteria used to evaluate budgets submitted by non-!
government agencies and was developing improved information systems and analytical techniques to monitor their performance. Further, an internal audit function!
was included in its reorganizational plans.
.86 It was evident that management had recognized the need for a wide range o|
improvements and that it had taken steps to remedy certain inadequacies
However, management had not developed a comprehensive plan for coordinating g
its responses to the many recommendations contained in the studies it had p
commissioned.
8.87      The recommendations we have made are listed below together with the Ministryg
response and comments.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       55
Recommendations and Ministry Comments
MINISTRY OF HEALTH
■Recommendations
Ministry Comments
{MANAGEMENT OF THE FINANCIAL FUNCTION
lfi.88 To enable the financial function to provide the
necessary support to management, the Ministry should explain the role of financial management and control to all staff.
Agreed. A Ministry of Health Financial Administrative Policy
Manual is underway and as each
policy is completed, it is being distributed within the Ministry.
The Ministry should designate an individual
responsible for developing a comprehensive
action plan to coordinate and control the
many improvements that the Ministry has
identified as being necessary to strengthen
financial management and control.
Agreed. Responsibility for development of a comprehensive
action plan has been delegated to
the Executive Financial Officer.
..90 To determine whether the Executive Financial
Officer can devote enough time to financial
management and control matters, the Ministry should closely monitor the demands of his
other administrative and operational
responsibilities.
The Ministry is of the opinion that
the Executive Financial Officer
will be able to devote sufficient
time to financial management and
control matters despite his broad
range of administrative and operational responsibilities.
'.91 The Ministry should clearly explain to other
financial personnel within the Ministry, the
role of the Central Financial Group, stressing
its responsibility for providing guidance and
direction on financial matters.
Agreed. With the reorganization
of the Financial Services Division
direct and functional responsibilities for financial matters will
be clearly delineated and circulated within the Ministry.
;.92 The Ministry should further refine its estimate
of the number and qualifications of financial
staff it needs to achieve effective financial
management and control.
The new organization of the Financial Services Division recognizes the need to upgrade the
quality and quantity of its staff.
;;93 The Ministry should implement policies and
procedures that will satisfy its staff development requirements and the training needs of
its financial personnel.
Agreed. In-house and external
staff training programs are being
developed for implementation in
1982/83. The Performance Appraisal process is identifying individual training requirements on
an annual basis.
 REPORT OF THE AUDITOR GENERAL
MINISTRY OF HEALTH
Recommendations and Ministry Comments
Recommendations
Ministry Comments
3.94 The Ministry should develop a comprehensive financial and accounting manual so that
financial policies and procedures are available, in a useful format, to all personnel who
need them.
The development of a comprehensive financial and accounting manual is already underway,
however, this is an extensive un- j
dertaking which is being addressed on a priority basis.
PLANNING, BUDGETING AND BUDGETARY CONTROL
8.95 When developing its strategic and operational
planning process, the Ministry should make
certain that the financial function participates
fully. The role of financial management and
control in this planning process should be to
ensure that:
• the financial implications of proposed
strategic and long-term options are reliably costed; and
• alternatives selected are within funding
limits.
8.96 So that it can estimate and control costs more
closely, the Ministry should establish
guidelines for each funded agency. These
guidelines should:
• identify approved programs;
• specify levels of service;
• establish cost guidelines;
• distinguish between fixed and variable
costs; and
• specify timing, format and content requirements for budget submissions.
8.97 The Ministry should develop an effective process for reviewing and approving the budgets
that non-government health care agencies
submit. As part of this process, the Ministry
should:
• compare submissions with guidelines;
• advise agencies of budget changes and
of their impact on operations; and
• inform agencies of approved budgets
and obtain their concurrence.
Agreed. The Ministry is reallocat-!
ing its staff resources to enable an
expansion of the Financial Serv- ]
ices Division so that there is adequate financial participation in the
strategic and operational planning
process.
Agreed. The establishment of!
funding and service guidelines for!
most programs delivered by
funded agencies will continue to
be developed towards meeting
these objectives on a priority
basis.
Revisions have been made to tha
programs where necessary, anca
will continue to be made in tha
future to ensure the effectiveness
of the budget review and approval
process.
 SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       57
MINISTRY OF HEALTH
Recommendations and Ministry Comments
I Recommendations
KStiBistrv Comments
[8.98 The Ministry should monitor payments to
non-government agencies against plans and
budgets. As part of the monitoring process,
the Ministry should:
• assign responsibilities and allocate appropriate staff resources;
• identify performance indicators;
• establish standards against which actual
performance can be measured;
• develop timing, content and format requirements for reporting results;
• formulate policies and procedures that
permit timely analysis of variances, using
appropriate techniques; and
• develop policies and procedures to ensure that preventive and corrective action is taken to minimize variances.
■ACCOUNTING AND FINANCIAL REPORTING SYSTEMS
Agreed. Improvements to the system of monitoring funded agencies will proceed as quickly as additional, appropriate staff resources can be allocated to this
function.
[8.99
The Ministry should revise its chart of accounts so that it meets the needs of all health
programs and provides for more meaningful
accounting and reporting of operations.
K.100
The Ministry should review its financial reporting requirements and should determine
the most cost-effective method of satisfying
them so that the various responsibility levels
of management receive meaningful, appropriate and timely information.
The Ministry's chart of accounts
have been revised and are being
continually updated to reflect
changes in Vote structures, programs and information needs. The
lack of flexibility of the Comptroller General's Financial Management Reporting system has
been a limiting factor.
The Ministry is currently carrying
out a review of its financial reporting requirements and all manual
accounting systems now being
maintained. Due to the size of the
task and staff limitations, any new
systems or modifications to existing systems will take considerable
time to implement. They will
however, be addressed on a priority basis.
 58
REPORT OF THE AUDITOR GENERAL
MINISTRY OF HEALTH
Recommendations and Ministry Comments
Recommendations
Ministry Comments
8.101 If the Ministry is to retain its current manual
accounting systems, the Senior Financial Officer should review them to satisfy himself that
they incorporate appropriate controls,
provide complete and accurate information,
and that duplication of other systems is
minimized.
8.102 Any new systems or modifications to existing
systems should be implemented only with the
Senior Financial Officer's approval. A cost/
benefit analysis should support new systems
or major modifications to existing ones.
8.103 When developing new systems, the Ministry
should establish appropriate development
standards to ensure that adequate operating
controls are provided for when the system is
being designed.
EXPENDITURE AND REVENUE CONTROLS
8.104 The Ministry should identify all revenue
sources and ensure that accounting controls
over them are adequate.
.105 The Ministry should document and regularly
review all policies and procedures for delegating commitment, spending and payment
authority.
ASSETS
8.106
The Ministry should determine which of its
assets require control and should establish
policies and procedures to ensure that asset
controls are both appropriate and consistently
applied.
Same comment as for 8.100.
Same comment as for 8.100.
Agreed. The Ministry is develop!
ing control standards to compl)!
with Financial Administration Poll
icies established by Treasury!
Board.
All revenue sources have been!
identified and improved accounts
ing controls and receivable col!
lection procedures will be inita
ated on a priority basis.
Financial signing authorities poH
icies and procedures are presentlwl
being   documented    by   thp|
Ministry.
Agreed. The need for further de- s
velopment of policies and pro- I
cedures to ensure adequate asset fe
control, is being addressed on a ■
priority basis.
 r
I
SECTION 8, FINANCIAL MANAGEMENT AND CONTROL AUDITS       59
MINISTRY OF HEALTH
Recommendations and Ministry Comments
I Recommendations
Ministry Comments
[INTERNAL AUDIT
8.107
The Ministry's internal audit needs should be
assessed to determine whether the mandate
and reporting lines of the proposed organization are appropriate, and whether it has
enough independence to carry out its role
effectively.
3.108 The Ministry should ensure that the internal
audit role includes assessing both the financial function and the management and operating systems in the Ministry.
The review of the financial function as well as management and
operating systems in the Ministry
is the mandate of an independent,
internal audit group which will report directly to the Senior Assistant Deputy Minister. The Internal
Monitoring Section of the Financial Services Division is primarily
responsible for ensuring compliance with established policies
and procedures.
Same comment as for 8.107.
 60
REPORT OF THE AUDITOR GENERAL
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   Table of Contents
Parts:
|9. COMPREHENSIVE AUDIT
Ministry of Environment—Waste Management Program  99
Introduction  99
Summary of Audit Observations  105
Program Management and Accountability Information  109
Controls in the Waste Management Program  120
Financial Management and Control  132
Manpower Planning  138
Summary of Recommendations and Ministry Responses  143
Status of Recommendations from Previous Annual Report—Comprehensive Audit
Ministry of Human Resources—Income Assistance Program  150
  SECTION 9, COMPREHENSIVE AUDIT        99
Ministry of Environment—Waste Management
! Program
[introduction
PREFACE
B.1 This section of my Annual Report presents the findings of our second comprehensive audit of Ministries in the Province of British Columbia—the audit of the
Ministry of Environment. We focused on the systems and procedures necessary to
deliver the Ministry's Waste Management Program. We also reviewed certain
Ministry-wide functions.
B.2 This project is part of the continuing development of the comprehensive audit
approach described in Part 2 of my 1979 Report to the Legislative Assembly.
B.3 Once again the audit team had the support of a small advisory team made up of
senior personnel who have been involved in the development of comprehensive
auditing. Because of the technical nature of the issues involved, we supplemented
the advisory team with a senior consultant with extensive experience in Waste
Management issues. We also contracted for necessary non-financial skills.
B.4 We greatly appreciated the help of the Ministry's executive and staff. We conducted
our audit while they were restructuring the Ministry's programs and organization.
Despite the demands that our work placed on thei r time, they showed interest i n our
audit and gave us their full cooperation.
9.5 We have provided the Ministry with supporting documentation for this section of
my Annual Report. It is intended to help management both to review and respond to
our findings, and to take corrective action where necessary.
9.6 Managers already knew about many of the deficiencies that we noted. In many
cases, they were working to correct them even before our audit had begun. In other
cases, management started work to correct problems during our audit.
AUDIT SCOPE
9.7 OBJECTIVES: We designed our audit to allow us to report on the quality of the
Ministry's systems of management and financial control. Specifically, we wanted to
find out:
• whether these systems were providing reasonable assurance that ministry
programs were being delivered reliably and efficiently; and
ll
 • whether the Ministry had provided the Legislative Assembly with enough
financial and operational information to allow Members to assess how the
organization was carrying out its responsibilities.
9.8 We focused on the Waste Management Program because controlling pollution is
central to the Ministry's mandate. Further, although the direct costs of the Program
are relatively small, they represent only a fraction of its total cost. The Ministry has ■
estimated the annual cost of the program may exceed one hundred mill ion dollars if j
costs to industry are included.
9.9 SCOPE: Under section 8 (2) of the Auditor General Act we examined the extent to
which ministry officials had established performance measurement systems that
would allow them to assess and improve program performance where it would be
reasonable and appropriate to do so. We then established the extent to which the
Ministry had reported information that would indicate how it was managing its
programs.
9.10 Our review of the Waste Management Program concentrated on key elements of
systems that would help the Ministry to:
• identify and assess waste problems; and
• direct and control the Program.
9.11 We also examined the Ministry's financial management and control systems. The
purpose of our review was to assess the role of financial management in the Ministry 1
and how important aspects of the role were organized and implemented. In
particular, we wanted to determine the extent to which financial managementj
systems helped managers to determine the costs of their activities, allocate theirl
resources, and control assets, liabilities, revenues and expenditures.
9.12 Because the Ministry depends to a great extent on skilled personnel to operate itsl
programs, our audit included a review of manpower planning systems. These are!
the systems for ensuring that the right number of appropriately qualified staff are in I
the right place at the right time.
9.13 APPROACH: Our field work was carried out during the June to December 1981
period. We reviewed documentation that described the Ministry's objectives,!
policies, operations and systems. We interviewed ministry staff at all levels atl
Headquarters and in four regions. To enable us to better understand the Ministry's!
operations, we attended as observers a limited number of meetings between minis J
try staff and officials from organizations that discharged wastes into the environ-1
ment. Finally, we selected and reviewed a sample of pollution control permits and!
related files and reports.
9.14 At the conclusion of our field work, we reviewed our findings with ministry
personnel and conducted follow-up work as necessary.
 9.15 Our audit was designed to allow us to assess whether the Ministry's systems and
procedures could provide reasonable assurance of efficient and reliable program
implementation. It was not designed to uncover specific instances of inefficiency,
error or abuse.
[MINISTRY OVERVIEW
19.16 HISTORY: The Ministry was formed in 1975, and in December 1978, assumed its
present responsibilities.
K.17      ROLE: As defined in the Ministry of Environment Act, the role of the Ministry is to:
"... manage, protect and conserve all water, land, air, plant life and animal
life, having regard to the economic and social benefits they may confer on the
Province."
B.18 ENABLING LEGISLATION': To carry out this role the Ministry administers 20
enabling Acts, including:
• Environmental Management Act
• Fisheries Act
• Pesticide Control Act
• Pollution Control Act
• Water Act
• Wildlife Act
It is also involved in the administration of 35 other Acts.
B.19 The Pollution Control Act is the key enabling legislation for the Waste Management
Program. It established a Pollution Control Board and a Director of Pollution
Control authorized to:
• "determine what . . . constitute(s) a polluted condition;
• prescribe standards regarding . . . waste materials . . . discharged;
• conduct tests and surveys to determine the extent of pollution;" and
• issue permits, without which a " . . . person shall not, directly or indirectly, discharge . . . waste material."
K-20 DELIVERY SYSTEM: In 1979, the Ministry decided to adopt a decentralized delivery system. Eleven programs (excluding administration) were defined. Of these,
seven were to be delivered, in whole or in part, through eight regional offices under
the direction of Regional Directors. Exhibit 1 sets out these programs as they are
described in the 1981-82 Estimates and shows the resources allocated to them for
the 1981-82 fiscal year.
 Exhibit 1
MINISTRY PROGRAMS
Resourcing 1981, 82
Established
$000        Positions
Air Management Program - Provides for the management of the air as a resource so that a
clean and healthy atmospheric environment is maintained for British Columbians, now and
in the future, and assists in the management of British Columbia's other natural resources by
providing atmospheric information and interpretations. 958
Coastal and Estuary Management Program - Provides for the development and implementation of a program which promotes the sensitive and orderly planning, assessment and
management of British Columbia's coastal and estuarine environments in the long term
based on an understanding of the natural attributes of these environments. 918
Fisheries Management Program - Provides for the production of the maximum economic,
cultural, recreational and scientific benefits for present and future generations of British
Columbians by: maintaining all native and desirable introduced species of fish at optimum
levels of distribution, abundance and health, participating in Federal/Provincial Salmonid
Enhancement Programs, protecting or enhancing essential freshwater habitat, and providing an equitable distribution of opportunities for a wide variety of uses of fish. 7643
Marine Resource Program - Provides for the management and economic development of the
oyster and marine plant industries and regulation and development of the fish processing
sector of the British Columbia commercial fishing industry. The program provides services
for these responsibilities under the British Columbia Fisheries Act and the Fish Inspection
Act by representing the province at international fisheries negotiations, and by functioning
as a liaison between provincial and federal agencies whose activities affect marine
resources. 2153
Pesticide Control Program- Provides for the administration of the Pesticide Control Act. 486
Terrestrial Environment Management Program - Provides for the development and implementation of a program which promotes the sensitive and orderly planning, assessment and
management of British Columbia's terrestrial environments in the long term based on an
understanding of the natural attributes of these environments. 4806
Waste Management Program - Provides for the administration of the Pollution Control Act, the
Litter Act and waste management programs including the recycling of derelict automobiles.   6077
Water Management Program - Provides for the administration and control of the use of
surface water and the administration of the Water Utility Act, Dyke Management Act and
dam safety inspections. 19876
Wildlife Management Program - Provides for the maintenance, diversity and viability of
species representative of the major biophysical zones of land capability and biological limits
of each species, and ensures wildlife is available in sufficient abundance to meet the social,
recreational, ecological and economic needs of society. 6073
Provincial Emergency Program - is responsible for developing throughout British Columbia
the capability to cope and deal with disaster and emergency situations with minimal disruption of essential services. 7523
Survey and Mapping Program - provides aerial photographs, control surveys, primary base
mapping and program co-ordination services. 6110
Services & Support Programs
Administration
Premises costs
Data Processing charges
Environmental Laboratory services
5735
7692
2242
2764
122
78
81056
1497
 SECTION 9, COMPREHENSIVE AUDIT        103
9.21 Regional Directors are accountable for delivering these programs within their
regions. They are assisted by regional managers, who are responsible for delivering
specific programs.
9.22 For each program, whether delivered through the regions or directly from Victoria,
there is a Program Director at Headquarters. He is responsible for advising the
Ministry Executive on program goals, objectives and priorities. He is also responsible for preparing program budgets and monitoring program performance.
9.23 Headquarters staff operate specialized programs and provide technical expertise
where these are not required on a full time basis in the regions. Headquarters staff
also provide administrative and support programs and services such as finance,
personnel, building, computer and laboratory services. In addition, the Conservation Officer Service provides enforcement support for all programs.
9.24 At the time of our audit, decentralization was still proceeding and was scheduled
for completion in late 1982. Exhibit 2 presents a summary chart showing the
Ministry's organization as it was in July 1981, shortly after we had begun our field
work.
Exhibit    2
Ministry Organization
DEPUTY MINISTER
ASSESSMENT AND
PLANNING
DIVISION
ENVIRONMENTAL
MANAGEMENT
DIVISION
REGIONAL
OPERATIONS
DIVISION
ADMINISTRATION
DIVISION
Assistant
Deputy
Minister
BRANCHES: each
headed by a
director
• Assessment
■ • Planning
• • Terrestrial
Studies
- • Aquatic Studies
■ • Air Studies
■ • Environmental
Laboratory
- • Surveys &
Mapping
Assistant
Deputy
Minister
BRANCHES: each
headed by a
director
• Fish & Wildlife
• Marine Resources
• Waste Management
• Water Management
• Pesticide Control
Assistant
Deputy
Minister
Director,
Provincial
Emergency
Chief
Conservation
Officer
8 Regions
Executive
Director
BRANCHES: each
headed by a
director
• Personnel
• Financial
Services
• Computing Services
 9.25 THE PERMIT SYSTEM: The primary strategy for managing wastes in the Province
has been to control pollution at the point where it is discharged into the environs
ment. Control is exercised through a system of permits. At the time of our audit, I
there were approximately 3,000 active permits on file.
9.26 After a series of public inquiries, the Pollution Control Board published "Objectives" for discharges from particular sectors of industry. The Objectives established!
guidelines for determining permit conditions. The guidelines cover the characters-j
tics of allowable discharges and the effects that discharges should have on concentrations of contaminants in the receiving environment.
9.27 The Objectives are not considered as prescriptive standards. Instead, they are
intended to be applied flexibly, taking into account the particular circumstances of
each case.
9.28 Under the Pollution Control Act, the onus is upon dischargers to apply to the!
Ministry for a permit before releasing contaminants into the environment. All!
discharges are subject to the legislation unless specifically exempted. Exemptions!
defined in the Act and Regulations include:
• the burning of leaves or foliage for domestic purposes;
• emissions from motor vehicles;
• small domestic sewage operations; and
• traditional farming operations.
PERSPECTIVE ON FINDINGS
9.29 To help put our findings and conclusions into perspective, this section outlines
certain factors that are characteristic of the Ministry's operations. Such factors affecS
the type of systems and controls necessary to deliver programs both reliably ana
efficiently. We recognize that the need for controls must be balanced against thein
costs and other factors that management considers important. Further, a del
centralized delivery system requires that controls allow sufficient decision-making
authority to managers. At the same time, however, they must be able to assura|
senior management that this authority is being exercised appropriately.
9.30 Our purpose in the following paragraphs is not to indicate what is an appropriati
level of control. Rather, it is to set out some of the considerations that must be takeOTI
into account when determining what level of control is acceptable.
9.31 OVERLAPPING JURISDICTIONS: The Ministry shares the field of environmentllj
protection with many other agencies at the Federal, Provincial and Municipal i
levels. In addition, the Ministry's programs themselves are highly interdependent, ii
 SECTION 9, COMPREHENSIVE AUDIT        105
9.32 TIME FRAMES: Many of the Ministry's activities, such as bringing dischargers up to
the highest level of treatment specified and collecting and analysing information on
contaminant concentrations, are long-term in nature.
9.33 COMPLEXITY OF ISSUES: The environmental issues the Ministry deals with are
complex and involve both scientific and social factors. In some cases, complexity is
compounded by scientific uncertainty (as is the case for the long-term effects of
non-lethal doses of certain contaminants). The Ministry must sometimes make
decisions whose effects can only be completely assessed following long-term
monitqring by qualified, trained staff.
9.34 In addition, some decisions are influenced by non-technical considerations. For
example, the Pollution Control Board Objectives set out different levels of acceptable concentrations for most types of discharge. The Objectives specify that all
discharges should ultimately be brought up to the most stringent of these levels. This
is true even where requiring a less stringent level might not result in unacceptable
concentrations of contaminants in the environment. Clearly, decisions to require a
higher level of treatment in such cases, and the timing of such decisions, involve
economic and social factors. These decisions become more complex in situations
where discharges raise concentrations of contaminants in the environment beyond
acceptable limits, but where the discharger claims to be unable to bear the cost of
installing more pollution control equipment. The Ministry must then balance the
possibility of environmental degradation against the social and economic hardships that could result, if for example, a discharger were to shut down a plant or
other facility.
§9.35 In summary, the Waste Management Program is complex, long-term in nature and
involves considerable interaction with other agencies and programs. These factors
mean that the Ministry must lay great stress on the judgement of its staff. They also
emphasize the importance of clearly defined responsibilities and a planning framework to guide the Ministry's progress towards long-term objectives.
Summary of Audit Observations
INTRODUCTION
9.36 The diversity of the Ministry's programs and the need to integrate organizational
units that were previously part of other Ministries have created a challenge for the
Ministry in developing cost effective and reliable systems of management and
financial control. This challenge has increased with decentralization.
9.37 Our audit focused on the Waste Management Program. It showed that management
had recognized the need to develop better control systems and had taken steps to
that end. Over the last two years, the Ministry has developed statements of goals
 and objectives. These statements are necessary if the Ministry is to set clear
expectations of performance. It has also initiated a strategic and operational planning process, and has been attempting to define reliable measures of performance
that would allow senior management to better monitor and control program
performance.
9.38 While the Ministry has made progress, we have concluded that it must continue to
devote substantial effort to completing these systems. Until they have been completed, the Ministry's procedures will not provide management and the Legislative
Assembly with appropriate assurance about the efficiency or reliability of the Waste
Management Program. Nor will they provide such assurance about the effectiveness of day-to-day controls over program implementation. We have also concluded
that the Ministry will have to further develop its financial and accounting systems
and controls and its manpower planning systems before they can contribute fully to
the efficient and economic management of the Ministry.
9.39 An important observation was that management had identified most major areas
requiring improvement. Many of these areas had been identified and considered
when the planning for decentralization was underway. Others had been explored
in later studies.
PROGRAM MANAGEMENT AND ACCOUNTABILITY INFORMATION
9.40 DEFINING PROGRAM STRUCTURES AND OPERATIONAL OBJECTIVES: The
Ministry had developed statements of the goals and objectives of each of its
programs. These statements required further development and clarification before
they would describe clearly the results the Ministry wanted to obtain. Until it has
clear statements of intended results, the Ministry will have difficulty in holding
managers accountable for their performance and in defining the information
needed to monitor and improve performance.
9.41 The Ministry had recognized that, particularly with decentralization, it would
require more complete management information to monitor program performance. It had assigned primary responsibility for developing performance measurement systems to program directors. We found that the Ministry must devote
substantial further effort to this task.
9.42 REPORTING PERFORMANCE AND ACCOUNTABILITY INFORMATION: Because
performance information sytems are still being developed within the Ministry, it has '
not yet been able to report the results it obtains, relative to program goals and 1
objectives, for the funds it administers. The Ministry has been taking steps over the j
past three years to show more clearly the objectives of expenditures in the Estimates
and Public Accounts and pf^vide-ali Annual Report on its activities. Until these
three documents are better linked, and include appropriate performance informa- ]
tion, they will not clearly demonstrate how well the Ministry has managed the funds]
 SECTION 9, COMPREHENSIVE AUDIT        107
entrusted to it, and which it causes others to spend as a result of its regulatory
activites.
9.43 MANAGEMENT AND ACCOUNTABILITY INFORMATION IN THE WASTE MANAGEMENT PROGRAM: This can be illustrated with reference to the Waste Management Program. Its key operational objective is to prevent unacceptable concentrations of waste contaminants in the environment. The Ministry has been
measuring the concentrations of contaminants at selected sites in the Province for
many years. However, the usefulness of the measures that have been taken would
be improved by better overall control over data selection and collection and more
precise specification of acceptable levels.
9.44 The Ministry needs other performance information, both qualitative and quantitative, to enable senior management to monitor and improve the performance of the
Waste Management Program. Certain information was available; for example, the
Ministry measures and reports the number of permits issued. In addition, complaints and comments from the public, together with personal contact, provide
senior management with information on the operation of the Program. However,
these types of indicators alone do not serve as the basis for a complete assessment of
how the Waste Management Program was operating. The Ministry has recognized
the need for better quantitative and qualitative information on key aspects of
program performance.Information such as backlogs of identified sources to be
controlled and the compliance status of current permit holders would assist the
Ministry in assessing program performance and allocating resources. Linked to
estimates of the cost of installing pollution control equipment, it would assist in
ensuring that cost effective regulatory strategies were adopted.
B.45 If information of this type were gathered and included in the Ministry's Annual
Report, Estimates and Public Accounts, it would allow a better assessment of the
Ministry's performance. While there are limitations on the accuracy that can be
reasonably attained for some of these measures, we feel that they are necessary to
improve accountability, feasible and probably cost justified. Regulatory bodies in
other jurisdictions have developed and published such measures.
CONTROLS IN THE WASTE MANAGEMENT PROGRAM
9.46 With the increasing complexity, maturity and decentralization of the Program, the
Ministry has recognized that it needs more formal control over program implementation to provide senior management with assurance that the program is being
carried out reliably and efficiently.
9.47 In particular, the Ministry needs to:
• explain its policies in a clear fashion to both its staff and dischargers;
• provide for more formal program planning;
 • ensure that permits provide a sound basis for controlling discharger
performance;
• exercise better control over dischargers' performance reports and Ministry \
verification; and
• develop a consistent approach to non-compliance situations.
FINANCIAL MANAGEMENT AND CONTROL
9.48 In recent years, the Ministry has taken action to provide a stronger role for financial
management and control in its affairs. A suitable role has been defined, additional j
positions have been established and filled and new financial procedures j
developed.
9.49 We noted areas in which the financial function could contribute further to the!
economic and efficient management of the Ministry. Particularly, there were oppor-1
tunities for the financial function to improve the quality, reliability and timeliness ofl
financial information and to provide appropriate guidance to operating managers in j
ensuring the adequacy of controls.
9.50 INTERNAL AUDIT: In a decentralized organization such as the Ministry of Environ J
ment, a well directed, independent internal audit group has an important role tol
play in indicating to management whether or not the systems and procedures it hasl
established are operating satisfactorily. The Ministry had established and filled arm
internal audit position. However, the Ministry had not yet received the full benefit ol
internal audit, because the internal auditor had been diverted to other tasks.
9.51 In addition the Ministry could obtain greater benefit from internal audit if it were tea
strengthen the independence of internal audit and improve its methods of reviews
ing and approving audit plans and reviewing audit findings.
MANPOWER PLANNING
9.52      The Ministry was taking action, primarily through increased training, to ensure thM
it had sufficient trained staff available, where and when needed. We found that
there was a need for further development of systems to plan for the deployment anra
training of available manpower. Because manpower represents the largest single
component of the Ministry's costs, such systems are necessary to provide assurance! j
that its operations are efficiently run.
 SECTION 9, COMPREHENSIVE AUDIT        109
CONCLUSION
! 9.53 As we stated previously, managers were aware of most of the major problems we
noted and were looking for solutions. In many cases, action intended to resolve
them had been undertaken prior to the start of our audit. These problems need to be
successfully resolved if the Ministry and the Legislature are to have reasonable
assurance that the Ministry's operations are being carried out reliably and
efficiently.
19.54 Resolving some of the issues facing the Ministry will not be easy and will likely
require considerable time. First, the task of clearly defining and communicating
ministry objectives, policies and procedures to guide its staff will require careful
attention from senior personnel. Second, there are technical challenges to be met in
defining information requirements and designing cost effective systems to obtain
information not now available. These tasks will place demands on the Ministry's
finite supply of skilled resources. Finally, many ministry staff will have to acquire
new skills and approaches to help them use performance information to improve
efficiency, as it becomes available.
Program Management and Accountability Information
[INTRODUCTION
B.55 This section of our Report deals with the extent to which the Ministry has established satisfactory systems and procedures for producing information that would
assist it in controlling and directing its programs. These systems and procedures
would allow the Ministry to:
• measure how well its programs were achieving their goals and objectives;
and
• assess the performance of managers and hold them accountable for their
success in implementing its programs.
9.56     The section also deals with the adequacy of the information that the Ministry
provides to the Legislative Assembly.
3  EXTENT OF EXAMINATION
I 9.57 Before we could examine the quality of the Ministry's program management and
accountability information, we had to assess whether the Ministry had clearly
defined and explained the activities necessary to deliver its programs and the results
these activities were intended to produce. We also assessed whether measurable*
operational objectives and performance standards had been established. To do this
Hi
 we had to clearly understand the Ministry's programs, their operational objectives*
and how they were carried out. Accordingly, we worked with ministry staff to learn I
about their activities and the outputs or products of these activities. We alsol
considered the results they were intended to produce and, finally, how the achieves
ment of results contributed to attaining the programs' operational objectives.
9.58 We reviewed the extent to which the Ministry has reported, through the Estimates*
Public Accounts and Annual Reports, information that would indicate how its!
programs were being managed.
9.59 Because our audit focused on the Waste Management Program, we reviewed tha
feasibility of measuring that Program's performance against objectives and perforj
mance standards. We then examined the Ministry's current systems and procedures
for measuring the performance of the Program and using that information to
improve performance.
9.60 In accordance with the provisions of the Auditor General Act, we did not evaluate
the effectiveness of the Waste Management Program. To do so would have require™
us to ask whether or not it had been effective in meeting more broadly defined or;
ultimate objectives. These include protecting the health of people, fish and wildlife*
and matching the quality of the environment to the social and economic needs oj
the population. In the government of British Columbia, program evaluation is 3:
responsibility of Deputy Ministers, in cooperation with the Treasury Board and i/S
staff.
DEFINING PROGRAM STRUCTURES AND OPERATIONAL OBJECTIVES
9.61 When plans were being developed for decentralization, the Ministry recogniz^
the need to clearly define its programs, their operational objectives and perfojaj
mance standards. Clear definitions were necessary so that it could assess actual i
performance against objectives and performance standards. The Ministry couffl]
then use the results of the assessment to direct and control its programs and holli
managers accountable for the results they obtained.
9.62 The Ministry had produced statements of goals and objectives for each of its
programs and had recognized that measurable objectives and performance mffll
sures were then largely non-existent. Accordingly, it assigned program directors it
primary responsibility for defining performance measures and for designing systems and procedures to collect and use them.
9.63 Stating program goals and objectives represented an essential first step toward
improving accountability and performance. However, we concluded that th^l
statements needed to be further developed before the Ministry could use them as a
basis either for measuring and improving program performance, or for holdffll
managers accountable for the results they achieve.
 9.64 This is because in some cases, the Ministry's descriptions of program goals and
objectives did not yet accurately describe what the programs should be doing.
Accordingly, the Ministry's written descriptions of its expectations for programs
conflicted with what managers could reasonably be held accountable for. Therefore these descriptions could not yet be used as the basis for assessing performance.
i 9.65 Further, program goals and objectives still tended to emphasize activities to be
carried out rather than the results that activities were intended to achieve. Only
rarely were expected results expressed in measurable terms. In our review of
material supporting 1982-83 budgets, we found that 2 of 11 programs had expressed the results they hoped to achieve in terms that would allow subsequent
performance to be compared against targets.
9.66 It had been recognized that managers would need help both in defining measurable
goals and in designing performance measurement systems. The Ministry had
considered acquiring in-house expertise to provide functional guidance and assistance in these areas, but had decided to rely on training in the form of individual
attendance at courses and seminars. In addition, goals and objectives have been
reviewed annually as part of the budget preparation and review process. We noted,
however, that these steps had resulted in uneven improvement in the clarity with
which programs had been defined and their objectives specified.
B.67 We also found that review procedures and timetables to control the implementation
of performance measurement systems had not been developed.
9.68 We recognize the difficulties involved in clearly defining and measuring program
performance. Nevertheless, it is particularly important that the Ministry complete
development of reliable measures of performance so that decentralization is accompanied by appropriate accountability.
B.69 The Ministry has recently taken steps to speed development of clearer statements of
goals and objectives, and performance measurement. In December 1981, the
Ministry began to review the goals and objectives of the Coastal and Estuary
Management and Terrestrial Environmental Management Programs. Goals and
objectives for these Programs had been particularly difficult to state clearly. In
addition, individual managers have been experimenting with alternative approaches to measuring performance. We concluded that strengthened functional
guidance and direction and more specific timetables for resolving existing deficiencies would enable the Ministry to better coordinate development of improved
systems for measuring performance.
9.70 The Ministry should complete development of its statements of goals and objectives
so that they clearly identify the measurable results managers should be held
accountable for. The Ministry should complete development of systems for measuring performance and should establish target dates and review procedures to control
their development.
 112        REPORT OF THE AUDITOR GENERAL
9.71      The Ministry should make functional guidance and direction available to program
directors to assist them in developing performance measurement systems.
INFORMATION CURRENTLY REPORTED TO THE LEGISLATIVE ASSEMBLY
9.72 Although the Ministry publishes a large number of special-purpose reports and
papers each year, the primary vehicles for informing the Legislative Assembly and j
the public about its activities and performance are the Estimates, the Public
Accounts and the Annual Report the Ministry provides. The information contained
in the Estimates and Public Accounts includes a brief statement of program objec-j
tives, together with summarized data on estimated and actual expenditures. The]
Annual Report contains information on the nature and intent of Ministry programs,]
describes activities carried out and presents statistical information in summary]
form.
9.73 Over the last three years, as the Ministry has been developing its statements of!
program goals and objectives, it has taken steps to reflect this development in the
Estimates and Public Accounts. Clear linkage of expenditures with the objectives!
they are intended to produce is an essential step towards improved accountability.!
As previously stated, however, performance measurement systems are still being!
developed. Accordingly, the Ministry has not yet been able to report the results it
obtains, relative to the goals and objectives of its programs, for the funds it
administers. In addition to developing and reporting reliable measures of prograrrl
performance against goals and objectives, a number of other improvements are
needed before these three documents will, in our opinion, provide adequate insighl
into the performance of the Ministry in delivering its programs.
9.74 The format of the Annual Report should be consistent with the way in which thai
Estimates are broken down. Up to the time of our audit, the Annual Report f|
presented information on activities on an organizational basis which was not jit
always consistent with, or adequately linked to, the Ministry's programs. This
inconsistency contributes to the difficulty of linking or associating program perfoal
mance with expenditures. The Ministry intends to remedy this problem before Ml
issues its 1981-82 Report.
9.75 Further, the Ministry could improve disclosure by ensuring that program objectivSI
stated in the Estimates and Public Accounts were the same as those developem|
internally. For some programs the published objectives have been phrased in terrS
of the legislation administered. Where the Ministry has developed statements tha
indicate its operational objectives in administering legislation, it would be more
informative to use these. In addition, there were opportunities to improve the ri
completeness and accuracy with which the costs of individual programs are if
determined and reported.
 9.76 For the Waste Management Program, important information the Ministry could
provide would include trends in concentrations of contaminants in the environment against acceptable limits, compliance levels, compliance costs and trends in
the amount of specific contaminants discharged. We recognize that there are
practical limitations to some of these measures. For example, measuring compliance costs would necessarily involve approximations and estimates, and
monitoring concentrations of contaminants in the environment would have to be
highly selective to be cost effective. Nevertheless, these measures have been
reported in other jurisdictions, and we believe they are feasible, and probably cost
effective. If information of this type were gathered and reported, it would allow a
better assessment of the Ministry's performance and assist Ministry managers in
directing the Waste Management Program.
fl.77 The Ministry could also provide additional information in its Annual Report that
would provide insight into the Ministry's performance. Historical information
covering several years, comparing and analyzing Ministry expenditures and outputs, would be particularly useful in providing a general picture of significant
performance trends.
B.78 The Ministry should ensure that its Financial and Performance Reports to the
Legislative Assembly are compatible so that program expenditures can be compared with objectives and performance.
B.79 The Ministry should report performance information to the Legislative Assembly in
enough quantity and detail to indicate the extent to which Ministry programs are
reliably and efficiently delivered.
BHE WASTE MANAGEMENT PROGRAM: PERFORMANCE AND ACCOUNTABILITY
^FORMATION
9.80 STRUCTURE AND OPERATIONAL OBJECTIVES: Because our audit concentrated
on the Waste Management Program, we examined in more detail both the feasibility of measuring its performance, and the Ministry's current systems and procedures for doing so. Exhibit 3 displays the operational model of the Waste
Management Program that we developed, and which the Ministry agreed accurately reflected the Program's structure and operational objectives.
9.81 Program structure: The model shows that a logical relationship exists between the
activities, products and results intended to contribute to attaining the operational
objective.
 114
REPORT OF THE AUDITOR GENERAL
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 SECTION 9, COMPREHENSIVE AUDIT        115
B.82 Definition of responsibilities: As noted earlier, many agencies share the field of
environmental regulation. Further, some of the activities shown in the model are
carried out, in whole or in part, by other organizational units in the Ministry. For
example, the Assessment and Planning Division carries out many of the research
and special studies activities. Similarly, monitoring of concentrations of contaminants in the air is now the responsibility of the Air Management Program. In
addition, until December 1981, the Pollution Control Board (which we did not
audit) carried out the task of defining acceptable limits for concentrations of
contaminants in discharges and in the environment.
9.83 We found that the Ministry has reached formal agreements on the respective
responsibilties of the Waste Management Program and other programs (of the
Ministry and other agencies) in a number of areas where they interact. For other
areas of interaction, the process of clearly defining responsibilities has still to be
completed. For example, while the respective responsibilities of the Air and Waste
Management Programs for monitoring airborne pollution were finalized in late
1981, the same had not yet been done for Waste and Water Management. In
addition, we were told that the Waste Management Program did not always have
formal input into determining the terms of reference for studies of waste-related
problems undertaken by the Assessment and Planning Division.
9.84 The Ministry should clearly establish respective responsibilities in remaining areas
in which the Waste Management Program interacts with other Ministry programs or
with programs of other agencies.
9.85 Operational objectives: Our analysis of the Waste Management Program and
responses from senior officials led us to conclude that its key operational objective
is to: prevent unacceptable concentrations of waste contaminants in the environment. As noted in paragraph 9.60, our audit did not examine other, higher level
objectives that underlie the Waste Management Program. We concerned ourselves
instead with the potential for measuring and reporting on the extent to which the
Ministry was meeting its operational objective. We also looked at the extent to
which the results of certain key intermediate goals could be measured. These goals
are intended to contribute to meeting the operational objective. These intermediate
results are discussed in paragraphs 9.105 to 9.113.
* 9.86      Knowing how well the Ministry was achieving its operational objective of limiting
concentrations of contaminants in the environment is important. Information on
Hrae extent to which the Ministry was meeting this objective would serve as an
indicator of how well its key strategy for controlling pollution (the regulation of
wastes at the point of their discharge to the environment) was working.
9.87 The importance of this information is accentuated by the fact that for a number of
reasons, a significant portion of all pollutants discharged may not be amenable to
control through permits. First, estimates, in the Province and elsewhere, have
 116       REPORT OF THE AUDITOR GENERAL
shown that non-point sources (such as runoff from farms and roads) can contribute!
significantly to concentrations of contaminants in the environment. Secondly,!
discharges from some individually small but numerous sources or points are not!
covered by permits because of the impracticality of administering them. Finally,!
pollutants from many sources are discharged into municipal sewer systems. Insuchl
cases, these discharges may contain contaminants that the municipal sewage!
treatment cannot cope with. Bringing these different types of discharge sourcesl
under control through a permit system presents jurisdictional and administrative!
difficulties.
9.88 Accordingly, reliable measures of the level of concentration of contaminants in the
environment are important. They would allow the Ministry to identify circum-i
stances in which either modifications to control strategies are required, or morel
stringent permit administration is called for.
9.89 Feasibility of measurement and reporting: The feasibility of measuring conS
centrations of pollutants in the environment has been demonstrated both by the!
Ministry and by regulatory bodies in other jurisdictions. As well, a variety of
techniques has been developed for reporting this information. For example, both
the Ontario counterpart of the Ministry and the Environmental Protection Agency in
the United States publish information on trends in concentrations of the mosfj
common air contaminants in selected centres.
9.90 In 1977, the Ministry published a "Trend Study" showing 10 year trends in conS
centrations of selected pollutants at 24 air-monitoring sites, and at 14 waters
monitoring sites in the Province.
9.91 In summary, the feasibility of measuring concentrations of contaminants in tha
environment is well established. Difficulties arise in ensuring that measurements
produce meaningful information cost-effectively. In order to meet these criteria tha
location, frequency, extent and reliability and precision of measurements must ba
controlled and related to the intended use of the information.
9.92 MINISTRY SYSTEMS AND PROCEDURES—MEASURING CONCENTRATIONS:
The Ministry has carried out, and has required others to carry out, extensivaj
measurements of concentrations of pollutants in the environment at significant, buaji
undetermined cost. The usefulness of these data has been impaired because:
• Controls over selecting the data to be collected have not ensured that all
needed data of appropriate quality and only needed data were collectedSl
• Acceptable concentrations have not been established in measureableterrgal
for all the contaminants that the Ministry has identified as requiring control
• The Ministry has not developed procedures for interpreting and reporting I
the information in readily understandable form.
 SECTION 9, COMPREHENSIVE AUDIT        117
9.93 Control over data selection and collection: We found that responsibility had not
been assigned for ensuring that the Ministry's needs for information on concentrations were identified and reviewed and that the measurements actually taken
cost-effectively satisfied those needs. The selection of measurement sites and the
frequency and extensiveness of measurement were left, with limited central guidjpi
ance, to the discretion of local staff. Monitoring sites were primarily based on the
location of major discharges although, as mentioned earlier, substantial amounts of
some contaminants can come from non-point sources.
9.94 More recently, in the face of budget cuts, local managers have been reducing their
monitoring activity. Managers have had limited guidance on criteria to use in
deciding where to make these reductions. Because the reductions were not centrally coordinated, management lacks assurance that monitoring of concentration
levels is being maintained in a cost-effective manner.
9.95 Defining acceptable limits: In this Province, acceptable concentration limits, both
for discharges and for the receiving environment, were established by the Pollution
Control Board after a series of public inquiries had been held. The level of acceptable concentrations in discharges has been defined in quantitative terms for most
contaminants dealt with in the Objectives. The Ministry had decided not to set
Provincial standards for acceptable environmental concentrations of most of the
contaminants specified in the Objectives. This was especially true for water.
! 9.96 Uniform (or single-value) standards for acceptable concentrations of some contaminants in water are widely seen as scientifically inappropriate and may lead to
treatment that is not cost-effective. For a variety of reasons, the acceptability of
concentrations may vary from one site to another. However, without defining
acceptable limits for concentrations in specific terms, the acceptability of observed
concentrations and the Ministry's operational performance cannot be reliably
assessed. Accordingly, a combination of Province-wide and site-specific standards
may be necessary.
19.97 The Ministry has recognized the need for more extensive and precise definitions of
acceptable concentration limits, preferably related to specific locations. It also has
recognized that setting these limits will require cooperation with other agencies,
and possibly, further input from the public. At the time of our audit, the mechanisms
to meet these needs had not yet been decided upon,
9.98 Interpreting and reporting the information: The Ministry has gathered a great deal of
data on actual concentrations of contaminants in the environment. However,
mechanisms have not been developed to organize these data and report to senior
management on whether concentration levels were exceeding acceptable limits.
(Exceptions to these findings were cases where the Ministry had undertaken major
studies to prepare management plans.)
 118        REPORT OF THE AUDITOR GENERAL
9.99 Ministry initiatives: A good example of the way the Ministry has recognized and
defined problems is provided by a study to define the information needed to support
the Ministry's planning thrust. This study, reported in August 1981, identified the
information required to make planning decisions for environmental management
(including waste management). It also assessed whether information of appropriate
quality was available in the Ministry and identified deficiencies to be overcome.
After the study had been completed, the Ministry formed an Environmental Information Systems Committee with executive level participation. The committee's
purpose was to review the Ministry's information requirements and recommend
systems and procedures to improve both the availability and quality of the Ministry's
data.
9.100 In addition, the Ministry has recently assigned responsibility to the Director of the |
Air Management Program for designing and coordinating the network of air sam-J
pling stations. A proposal for coordinating the Ministry's air-monitoring activities
has been prepared and was under consideration. However, the responsibility for!
monitoring concentrations of contaminants in water has not been similarly]
determined.
9.101 The Ministry should assign ongoing responsibility for the design, operation and I
review of its network of water quality monitoring stations.
9.102 The Ministry should set up procedures to report on the results of monitoring ambient j
concentrations against acceptable limits.
9.103 MINISTRY PROCEDURES—OTHER PERFORMANCE INFORMATION: In addition
to having information on concentrations of contaminants in the environment,the|
Minstry needs other quantitative and qualitative information. Such information!
should allow senior management to determine when and how the emphasis of the
Waste Management Program should be changed, or staffing levels adjusted, so that
the Program may be delivered efficiently. It would also allow managers to be held!
accountable.
9.104 Such information would include indicators of workload, levels of service, the
quality of work done, and results obtained (for example, compliance rates or trends
in the introduction of certain contaminants into the environment).
9.105 Ministry management was receiving certain information that could help in operatj
ing the Program. For example, management receives information on the number of
permits administered and issued by each region. In addition, complaints andJ
comments from the public, regional visits by senior managers, the results of
appeals, group meetings of waste managers and discussions of individual situations^
all play a role in providing senior management with information on the operation of
the Program.
 SECTION 9, COMPREHENSIVE AUDIT        119
a.106 However, these indicators did not allow a complete assessment of how the Waste
Management Program was operating. In general, we found that:
• Measures to monitor performance of the Program had not been fully
developed.
• Levels of acceptable performance against which to judge actual performance, whether in terms of activities or results, had not been established.
• Systems to accumulate and report available performance information to
senior management had not been established.
E.107 Development of measures: At the time of our audit, ministry officials were redefining the information they required in order to determine whether the Program was
being delivered consistently and efficiently. We found that senior management did
not yet have reliable information on performance for key areas such as:
• the backlog of identified dischargers to be brought under permit or otherwise controlled;
• the compliance status of current permit holders; and
• the extent and frequency with which the Ministry inspected dischargers.
9.108 We also found that the reliability and usefulness of the performance information
that had been reported to senior management was limited by two key factors. First,
the measures in use were too general to provide reliable indications of either the
amount of work involved in achieving a result or the significance of the result
obtained. Second, the Ministry had not established what would constitute satisfactory performance, either in terms of level of activity or results. Without such
benchmarks it is difficult to hold managers accountable.
9.109 The Ministry has set standards of performance for some activities. For example, it
had set a target for each region to process twenty permits per year. However, while
managers distinguished between significant and insignificant discharges in permit
administration, the Ministry had not established consistent criteria for making the
distinction, and did not reflect this distinction when reporting results against the
target.
9.110 We appreciate that each case represents a unique set of circumstances. It is clear
that the small size of the organizational groups and high judgement levels preclude
rigid time standards for activities or mathematical formulae for assessing the
significance of individual cases. Nevertheless, it should be possible to classify the
Ministry's inventory of dischargers into meaningful groups based on their significance. This classification system should reflect an assessment of the volume of the
discharge, the nature of the contaminents and the sensitivity of the receiving
environment. A consistent classification of dischargers according to their significance would help the Ministry to interpret performance information and enable it
to use this information to better direct and control the Program.
 120        REPORT OF THE AUDITOR GENERAL
9.111 We also noted that mechanisms had not been developed to report information
available in regions to senior Ministry staff. For example, we noted that some]
regions had developed information on the extent to which they had verified and]
inspected dischargers under their jurisdiction. However, the mechanisms to report!
this information had remained largely undeveloped.
9.112 The Ministry should develop ranking mechanisms for dischargers to allow it to
better assess the significance of the performance information it receives.
9.113 As a basis for Ministry action where warranted and for better allocation of resources,
the Ministry should develop systems and procedures for measuring and reporting
performance of the Waste Management Program, against long and short-termi
rxpectations.
Controls in the Waste Management Program
INTRODUCTION
9.114 This section in our Report deals with the operational and management controls that:
Ministry officials had established for the Waste Management Program.
EXTENT OF EXAMINATION
9.115 Our audit examined the principal activities associated with delivering the Wasa
Management Program. Activities included were:
• program planning;
• identifying discharges and dischargers (inventory maintenance);
• permit application and amendment review;
• monitoring discharger performance; and
• enforcement and compliance.
9.116 We considered the circumstances under which each activity was carried out. ml
addition, we looked at the types of controls which might be appropriate to ensuring)|
that the program was being carried out reliably and efficiently. Guidance anil
supervision are dealt with separately in this section of the Report because they are
key controls over activities that involve high levels of judgement. All the princiSI
activities of the Waste Management Program require that staff exercise considSI
able judgement.
 SECTION 9, COMPREHENSIVE AUDIT        121
WRITTEN GUIDANCE, SUPERVISION AND REVIEW
9.117 Written guidance: Up to the time of our audit, the Ministry had relied on the
Pollution Control Board "Objectives", together with some circulars on specific
topics and supervisory contact, to ensure that staff and dischargers alike clearly
understood its policies and procedures. The Objectives and the circulars were also
intended to help ministry staff in exercising their judgement when administering
permits and reviewing and negotiating permit conditions.
K.118 Taken together, we found that the Objectives and the circulars tended to stress
technical matters, but had not clearly set out the Ministry's approach to strategic and
non-technical issues. In particular, they did not provide clear guidance on the
manner in which staff were to approach such topics as:
• identifying and flagging significant dischargers;
• clearly defining those to be brought under control;
• considering financial and other information about the discharger when
writing and administering permits;
• identifying non-compliance; and
• responding appropriately to different types of non-compliance situations.
B.119 In the absence of clear written guidance, we noted inconsistencies in the way the
Program had been implemented in different regions. For example, in one region,
instructions had been issued that legal action should be initiated in all cases where
unregistered discharges were discovered, regardless of mitigating circumstances.
In other regions, no formal instructions covering legal action had been issued.
However, we were told that it would only be considered as a last resort if the
discharger could not be persuaded to apply for a permit.
B.120 Developing policy and procedures flexible enough to allow staff to use discretion in
dealing with local conditions (and, at the same time, ensure that dischargers are
treated consistently and equitably) will not be easy. Given the highly judgemental
nature of the program, procedures cannot be specified to cover every situation.
However, clear guidance should be available to ensure that the factors to be
considered in the Ministry's approach to individual situations are set out for the
guidance of both staff and dischargers.
K:121 At the time of our audit, the Ministry was preparing a policy and procedures to
guide staff in carrying out the Program.
9.122 Supervision and review: Managers at all levels in the Ministry had extensive
knowledge, on a case-by-case basis, of individual dischargers who had been
identified as causing problems. Accordingly, the judgements that subordinate staff
had reached in such cases were subject to extensive reviews. However, this type of
 122        REPORT OF THE AUDITOR GENERAL
review was applicable primarily where staff had concluded that a situation was
either serious or significant enough to consider taking action, or where a complaintl
had been received from the public. Procedures did not always provide for review of
judgements where staff had concluded that situations involving non-compliancel
were not significant enough to warrant action. In the absence of clear guidance,!
different staff members used different criteria for assessing the significance of non-j
compliance situations. As a result, staff did not follow a consistent approach tol
notifying managers and section heads of problem dischargers.
9.123 We noted that the job descriptions of managers and other material stressed the
technical and professional aspects of their roles. Given the nature of the judgements J
that must be made, this is clearly their major responsibility. However, the necessity
of carrying out professional and technical reviews on a case-by-case basis must bel
balanced with the need for routine supervision and monitoring of the activities ofl
staff.
9.124 The Ministry has identified a need to provide a better balance between the profes-1
sional and technical aspects of managers' jobs and their supervisory role. At thel
time of our audit, it was working to provide more training for its managers, to meet I
this need.
9.125 The Ministry should complete the development of policy and procedures for the
Waste Management Program.
9.126 The Ministry should continue its efforts to improve the managerial and supervisorm
skills of its section heads and managers.
PROGRAM PLANNING
9.127 The nature of the Waste Management Program is such that results tend to ba
achieved over long periods of time. In addition, the costs of achieving results are!
largely external to the Ministry, since they are primarily borne by dischargers. Thesa
factors high light the need for careful long-term planning to ensure that the Program
addresses the most important problems first and in the most cost-effective manners
Plans also play a crucial role in establishing what results the Ministry expects ifS
managers to achieve.
9.128 During what was seen as the Program's first phase (identifying all major dischargers
and bringing them under permit), formal planning was not seen as necessanw
because of the centralized delivery system. In the circumstances, this initial approach appears to have been not unreasonable.
9.129 However, by 1979, the first phase of implementation had been completed, to thai
extent intended. Senior management informed us that in future, the thrust of the
Waste Management Program would be directed toward bringing existing permffl
 SECTION 9, COMPREHENSIVE AUDIT        123
holders into better compliance with their permits and addressing non-point sources
of pollution. The Program would also be aimed at upgrading the treatment of
discharges to meet the higher standards described in the Objectives as being
ultimately desirable. In addition, the Ministry has developed two sub-programs,
Resource Recovery and Environmental Safety. The former is intended to promote
the conservation of energy and resources, the latter to institute more stringent
control over particularly hazardous or persistent pollutants.
M30 In view of the increasing complexity of the Program, the time frames over which
results'are to be obtained, and the separation (as a result of decentralization) of
responsibility for program implementation and program design, we concluded that
more formal program plannning would be appropriate.
1.131 The Ministry had also concluded that it required more formal long-term planning
and had developed an approach based on geographic areas, or strategic planning
units. Forty such planning units had been designated and, at the time of our audit,
plans for the first three were being prepared. Plans for the remaining units are to be
prepared over the next five to six years. The Ministry had recognized that more
formal program plans would also be necessary and that program plans would have
to be integrated with geographic plans. Mechanisms to do so had not yet been
designed.
Iffi.2 However, before it can develop program plans that identify the most cost effective
options open to it, the Ministry needs to further develop its information base. We
found that the Ministry did not have reliable information available on:
• pollutant discharge estimates—including both point and non-point sources;
• complete inventories of known dischargers, whether or not permitted;
• the breakdown of current permits by level;
• estimates of the cost to dischargers of upgrading their discharge treatment to
meet different levels of treatment; and
• the compliance status of current permit holders.
• 133 The Ministry has developed some of this information on a local basis, either as part
of joint Federal-Provincial studies, or in preparation for strategic area plans.
However, even on a local basis, the Ministry lacks detailed knowledge of discharges not covered by permits. Nor does it have estimates of the cost of installing
pollution control equipment. Because it does not have this information, the Minis-
: try cannot assess the cost effectiveness of the various control options open to it. For
instance, a recent study of pollution problems in the lower Fraser River acknowledged that there was insufficient data to estimate and compare the costs of alternative methods of controlling indirect discharges.
 124       REPORT OF THE AUDITOR GENERAL
9.134 It should be noted that there are practical difficulties in gathering or estimating and
using some of this information. For example, expenditures on pollution control
equipment can also improve plant efficiency. Consequently, not all such expenditures are properly chargeable to pollution control. Nevertheless, consideration of
the costs of pollution control is essential to identification of cost-effective control
strategies. We also recognize that cost-effectiveness is not the only criterion that
affects the selection process; however, the costs involved are significant and should
be considered to the extent that it is practical to do so.
9.135 To ensure that the Waste Management Program identifies the most cost-effective
control strategies, the Ministry should determine the information it requires to
support long and short-term program planning. Where this information is not
currently available, the Ministry should set up procedures to collect it.
9.136 The Ministry should develop a formal Waste Management Program plan to guide
implementation of the program in the long and short-terms. Funher, the Ministry
should develop mechanisms for integrating program plans with geographically
based plans.
IDENTIFICATION OF DISCHARGERS AND DISCHARGES
9.137 Under this Province's Legislation, the onus is upon dischargers to identify them-J
selves to the Ministry before discharging pollutants. Since the installation of pollu-j
tion control equipment involves costs to the discharger, there is a risk that not all!
dischargers will identify themselves. Accordingly, we looked for systems and!
procedures that would provide assurance to the Ministry that all dischargers had!
done so.
9.138 In the initial phases of the Program, between 1967 and 1971, dischargers wera
required to register themselves. The Ministry had set up a master inventory on
dischargers. As dischargers were considered for permits, they were checked off tha
inventory. With certain exceptions, such as some placer mines and tank vents
(which the Ministry does not consider significant enough to bring under permit), thia
list has now been cleared.
9.139 The Ministry has relied on informal methods to identify new or unregistered :
discharges. Examples of such methods include contact with other government
agencies, local knowledge and, in particular, complaints from the public. A varietal
of methods were being used to log and control information on unregistered discharges at the regional office level. The Ministry's central inventory had not been i
updated to reflect unregistered discharges known to local offices. We concluded ~>
that this has weakened the Ministry's control over unregistered discharges.
 r
SECTION 9, COMPREHENSIVE AUDIT        125
9.140 We also noted that the Ministry's inventory of discharges under permit had not been
updated promptly when dischargers closed their operations.
9.141 The accuracy of the Ministry's inventories of dischargers and permits also affects its
ability to allocate its resources efficiently. Senior managers did not know either how
many unregistered dischargers regional offices had to deal with, or how many
active permits regional offices were administering.
■9.142 The Ministry should institute procedures to update and maintain its inventories of
dischargers to include identified discharges and to flag dischargers that have closed
their operations.
[APPLICATION AND AMENDMENT REVIEW
[■9.143 Permits, which specify the amount and characteristics of allowed discharges, are
central to the Ministry's strategy of controlling pollution at the point of discharge to
the environment. For two reasons, it is normally easier to control discharges by
means of a permit which specifies discharge characteristics than it is to enforce
standards for ambient concentrations of contaminants. First, it may be difficult to
prove that ambient concentrations of a contaminant have come from a specific
source. Second, discharges may be so diluted in the receiving environment that it
would not be possible to accurately measure their concentrations.
3 9.144 Further, the Objectives specify as policy that discharges of the same type should
ultimately conform to uniform standards. Because some discharges are not significant enough to affect ambient concentrations, this policy may not be the most
efficient approach to preventing excessive concentrations of contaminants in the
environment. However, there are other factors to be considered, including equitable treatment of dischargers. Because of the importance of permits, strong controls
are needed to ensure that they provide a sound basis for program administration.
I 9.145 Either the discharger or the Ministry can request amendment of permit conditions.
Amendments might be required to reflect a change in a production process or to set
more or less stringent permit conditions where experience has shown that the
original requirements or standards were inappropriate. A permit would also be
amended where discharge treatment was being upgraded to meet the more stringent standards set out by the Objectives as being ultimately required.
9.146 We reviewed the type of information considered by the Ministry in adjudicating
permit applications and reviewing existing permits. We also reviewed the controls
it had instituted to ensure permit quality and consistency.
 126        REPORT OF THE AUDITOR GENERAL
9.147 INFORMATION CONSIDERED: We found that the permit files we reviewed had
taken into account the following:
• the production process responsible for the discharge;
• the amount and characteristics of the discharge; and
• the environment that would receive the discharge.
9.148 The files did not also reflect consideration of the discharger in terms of his ability to
pay for initial or additional pollution control works, future plans for expansion or j
previous performance record in other parts of the Province. There are a number of
situations where such information may be relevant. For example, the Ministry]
requires performance bonds or security deposits where it considers there is a risk!
that a permitee may abandon works or where the Ministry has doubts about the!
appropriateness of treatment and wishes to ensure that funds are available to!
provide corrective facilities if necessary. Consideration of the discharger would!
assist in making a consistent assessment of such risks.
9.149 Information on the background of the discharger may also be relevant in enforcing
permit conditions. While no statistics were kept, we were frequently told that!
dischargers have, for economic reasons, requested deferral or cancellation of plant!
modifications that had been agreed to. If the Ministry is to reliably assess such
requests for delay, particularly when general economic conditions do not provide al
useful overall indicator, it needs more assurance as to theirvalidity than itnowhas.1
9.150 QUALITY CONTROL: To ensure that permits would be of appropriate quality, the
Ministry had instituted extensive review procedures. Until December 1981, all
permits were signed by the Director or the Assistant Director of Pollution Control.
Permits were signed after extensive referrals of applications to other agencies for
comment and after as many as four levels of internal review of the permit file. In
addition, most applications are advertised and are subject to appeal to the Board or
to the courts.
9.151 Despite the extensive review procedures, we found that permits as written did not
always provide a suitable basis for establishing control over dischargers. Permits did
not always specify the characteristics of the discharge that was allowed in terms that j
would allow performance to be enforced. For example, we found instances ofj
permits which specified that the discharge should be typical of a particular industry
operation.
9.152 We recognize that, in part, variations among permits reflected changes in the
Objectives over time and experience gained with earlier permits.
9.153
The Ministry has recognized that many of its current permits need to be revised so
that they can provide a sounder basis for monitoring and enforcing discharge*
performance. To ensure that the review process is carried out cost-effectively, iti
 should concentrate on revising the permit conditions controlling the most significant discharges.
fe. 154 The Ministry had establ ished a goal of reviewing al I permits over a five-year cycle to
provide for an ongoing review and updating of permit conditions. Approximately
two-thirds of the permits that we reviewed had been written or reviewed within the
last five years.
B.155 In addition, particularly with decentralization, management has recognized that it
needs to know whether the permits it issues reflect appropriate standards. Accordingly, the Ministry has identified the need for a selective, systematically applied
quality control review of permits. Such a review would provide managers with
reliable, current information that would indicate whether permit decisions are
being made in accordance with Ministry policy, and on the basis of appropriate
information.
B.156 The Ministry should reconsider the extent to which it obtains information on the
background of dischargers for the purposes of issuing and administering permits. As
a minimum, it should develop alternative approaches to verifying the reasonableness of requests based on economic grounds to delay or defer negotiated abatement
agreements.
B.157 The Ministry should introduce a selective and systematic permit quality review
function.
9. 158    The Ministry should institute a selective program of review of current permits based
on significance and need.
MONITORING DISCHARGER PERFORMANCE
j 9.159 Surveillance, or monitoring of discharger performance is essential. Through
monitoring, the Ministry can identify dischargers who are failing to comply with
their permits. It can then take action to remedy the situation. The Ministry uses three
main forms of surveillance:
• It monitors the concentrations of pollutants surrounding the discharge.
• It reviews the results of samples taken from the discharge and tested by the
discharger.
• It inspects dischargers' premises and samples their discharges.
9.160 INFORMATION SUPPLIED BY DISCHARGERS: Under the terms of their permits,
dischargers may be required to monitor discharges and periodically report the
results to the Ministry. Two purposes are served by having dischargers monitor their
discharges. First, it makes dischargers aware of theirown performance and empha-
W—
 128       REPORT OF THE AUDITOR GENERAL
sizes their responsibility for controlling their discharges. Secondly, it alerts the!
Ministry to non-compliance situations.
9.161 Controlling report submission: We found that controls over the submission on
discharger information needed to be strengthened before they could provide
assurance that discharger reports were being received on a complete and timely
basis. We found that the central computer at Headquarters was not programmed tea
identify missing reports. In the regions we found that procedures for determining]
whether discharger reports were received on time varied. Sometimes, and particularly for permits covering small volume discharges, the Ministry had relied on
the staff member responsible for administering the permit to ensure that a report was
due, without adequate bring forward systems.
9.162 Administrative penalties for failure to supply specified information are commoS
features of regulatory programs that depend, partly or wholly, on the regulate™
parties to submit information. For example, there are prescribed penalties for
failing to file income tax returns or information forms. The Pollution Control Am
does not establish administrative penalties for failure to supply information.
9.163 Data submitted: Our audit indicated that in the absence of administrative penaltieS
and because of weaknesses in the Ministry's procedures for detecting and following p
up missing information, dischargers commonly ignored requirements to supplg|
information.
9.164 We reviewed the information supplied in a 12 month period for a sample of 13©JD
permits. Since the central computer records held little information on these permits, we obtained all available information for the 69 of those permits that had
unconditional reporting requirements and clearly specified discharge characterisa!
tics. The Ministry had received complete reports from dischargers for approximately 15 percent of these permits, and partial information on another 25 percenajl
There was generally more complete submission of information for high volunBI
discharges than for low volume discharges.
9.165 The failure of dischargers to supply information specified in their permits may mean
that they have not carried out the required monitoring, or it may simply refleMiT
failure to report the information to the Ministry. In either case, its control ove'ri
discharger performance is seriously weakened. The Ministry will become aware ob
non-compliance situations only when it detects them during its own inspectionsi
(which are generally less frequent than the monitoring required of dischargers)fll
when the Ministry receives a complaint.
9.166 Recording information on the computer: For some time, the Ministry has beer)
attempting to develop a policy covering the selection of discharger data for submgl
sion to its central computer system. To develop this policy, the Ministry must resolve
questions regarding the intended use of the data and reliability considerations
 SECTION 9, COMPREHENSIVE AUDIT        129
Until this policy has been implemented, the criteria that regional managers use to
decide which discharger data to submit to the computer system will vary. In some
cases, regional staff submitted discharger data to the computer if they thought the
data were reliable. In other cases, the significance of the discharge or the availability of staff time to input the data determined whether or not it would be
submitted.
B. 167 The Ministry should set up procedures for identifying overdue and missing reports
from dischargers.
B.168 The Ministry should complete the development of its policy covering the submission of discharger data to Headquarters, and should set up procedures for controlling the completeness of data submission.
B.169 MINISTRY INSPECTION AND VERIFICATION: The Ministry inspects dischargers'
premises to ensure that they are maintaining and using pollution control equipment
properly. It also takes samples to test whether discharges are in compliance with the
conditions specified in the permit.
IS. 170 We found that schedules of proposed Ministry inspections had been developed on a
local basis. We noted, however, that these schedules were not always kept up to
date to reflect inspections actually carried out. Moreover, senior management was
not kept informed of the level or extent of inspections being done.
g171 We found, in general, that individual Ministry inspections were reasonably well
documented. The inspection reports we looked at showed that supervisors had read
them and provided guidance to their staff on the basis of the review.
9.172 The Ministry has not established policy governing the extent and frequency of
inspections. The permit administration files we reviewed (those where the permit
clearly specified discharge characteristics and there were unconditional reporting
requirements) showed, as might be expected, that the Ministry's inspection and
sampling activities tended to focus on larger dischargers. The Ministry had taken
samples related to permit conditions for approximately 40 percent of high volume
permits and 26 percent of lower volume permits.
|' 9.173 The Ministry should establish policy governing the extent and frequency of inspections. Further, it should ensure that inspection coverage provided is reported to
senior management.
COMPLIANCE WITH PERMITS
&174 Using the data available, including both Ministry samples and discharger submissions, we reviewed the compliance status of 69 permits where the permits clearly
specified discharge conditions. (Some permits for operations such as refuse sites
 and septic tanks may not specify such conditions.) Our sample showed a high
incidence of permit violation.
9.175 Extent of non-compliance: The Ministry had complete data on 9 permits, and partial!
data on 30 more, out of our sample of 69. The 39 permits for which data (whether ol
not complete) were available, represented21 out of 23 high volume permits and 181
out of 46 low volume permits in our sample. No data were available on thel
remaining 30 permits (2 high volume, 28 low volume). We recognize that partial!
data submitted may or may not accurately represent the characteristics of dis-1
charges. Further, volume alone does not provide a reliable indicator of the signifi-1
cance of a particular discharge.
9.176 Because the Ministry had not established criteria for determining when non-1
compliance is serious, we developed our own. We classified a violation as "sea
rious" when one or more permit conditions were exceeded for more than 4j
consecutive months during the year, and where the concentration of contaminant
in the discharge averaged more than 50 percent above the permit limit set by thel
Ministry. The four-month period was selected to allow for seasonal changes. Tha
"more than 50 percent" figure was an arbritrary one.
9.177 Using the above criteria, we classified 14 of the 39 permits (where we were able tol
assess compliance) as seriously violating permit conditions.
9.178 In assessing the significance of permit violations, three factors should betaken int™
account. First, the environmental impact of permit violations has not been deters
mined. To reliably assess the impact of violations on concentrations of corS
taminants in the environment a number of variables would have to be assesses
against criteria. As a minimum, consideration would have to be given to:
• the receiving environment at the time the permit was violated, and its
sensitivity to additional loadings of contaminants; and
• other discharges, both point and non-point, to the same environment.
9.179 Second, as previously mentioned, bringing dischargers into compliance is a lonS
term activity. Therefore, knowledge of discharger performance over a number on
years is necessary to assess fully the performance of the Program.
9.180 Third, a gross violation of the conditions of one permit may be less significant than a
minor violation of the terms of another permit for a similar discharge.
9.181 However, two things are clear. First, permit violations run contrary to the operSI
tional objective of preventing excess concentrations of contaminants in the eritji
vironment. Second, the Ministry needs more reliable information on the extent and)
severity of violations of the permits it has issued. Unless it has such information, the
Ministry will have difficulty in reliably assessing the emphasis it should place oral
enforcement.
 SECTION 9, COMPREHENSIVE AUDIT        131
9.182 The Ministry should ascertain the extent and severity of non-compliance with
permit conditions, and should develop and implement procedures to bring dischargers into acceptable compliance over a reasonable period of time.
ENFORCEMENT
9.183 The Ministry's efforts to enforce its permits serve two important purposes. The first,
and most important, is to reduce the incidence of non-compliance. This can be
done by various means, ranging from persuading dischargers to comply with the
terms of permits, to punishing those who do not. The second purpose of enforcement is to enhance the credibility of the permit system by showing those dischargers
who might be tempted to ignore or abuse the system, that the risk of punishment is
real.
9.184 Ministry staff have a range of enforcement options available to them. As far as
possible, the Ministry tries to negotiate solutions with dischargers, without invoking
its statutory powers. However, the Ministry does have the power to order dischargers to install abatement equipment. It can also seek fines in court and order
plant closures.
L9.185 The Ministry has not developed a clear policy on appropriate responses to noncompliance. Instead, it had tended to rely on negotiation and persuasion as its
primary means of achieving compliance. The analysis of our sample of permits
indicated that a more stringent, structured approach may be required.
9.186 In the lower mainland, an environmental enforcement team made up of conservation officers and Waste Management staff has recently demonstrated an alternative approach, involving more use of legal sanctions. The Ministry has decided
that in future, the Conservation Officers will provide enforcement support for all
programs, including Waste Management. Up to the time of our audit, the Ministry
had not yet fully defined the role Conservation Officers were to play in enforcing the
Pollution Control Act.
p.187 Our findings point to the need for the Ministry to develop a clear policy on the type
of response it expects to non-compliance. This policy should provide graduated
responses to situations of varying significance. Such a policy would provide for
more consistent and equitable treatment of dischargers across the Province. It
would also enable senior management to hold their staff accountable for local noncompliance.
9.188 The Ministry should develop a clear policy and procedures to guide staff in their
responses to non-compliance.
 Financial Management and Control
INTRODUCTION
9.189 The Ministry's 1981-82 budget of $81 million in net expenditures, and $46 miilionl
in revenues is not large when compared to that of other ministries. The largest single!
element of its expenditure budget is the cost of its staff. Together, salaries and related!
costs, such as travel, account for approximately 60 percent of the expenditure!
budget. However, the diversity of Ministry programs and their interaction, together
with a decentralized delivery system, does introduce an element of complexity to!
the task of achieving effective financial management and control.
EXTENT OF EXAMINATION
9.190 We reviewed the role financial management plays in the Ministry and how imporl
tant aspects of this role are organized and carried out. We wanted to assess whether!
the Ministry had defined an appropriate role for its financial function and if thel
financial function was appropriately organized to fulfil that role. In our review of the|
operations of financial management, we reviewed the strengths and weaknesses ofi
financial management and control systems and procedures to find out if they couldl
provide reasonable control over Ministry budgets, revenue and expenditures, andl
over assets and liabilities.
9.191 We also reviewed the role and organization of internal audit in the Ministry. The
Ministry had established an internal audit function in 1978, and accordingly, we
wanted to see whether it was organized in such a way that it could indicate to
ministry management whether or not the Ministry's control systems and procedures!
were operating effectively.
MANAGEMENT OF THE FINANCIAL FUNCTION
9.192 In recent years the Ministry has taken a number of steps intended to strengthen
financial management. For example it has designated as its executive financial
officer the Executive Director, Finance and Administration. It has also establisheiW
and staffed the positions of budget and financial review officers and has instituted al
more formal system of budgetary review.
9.193 ROLE: The role assigned to the financial function is Ministry-wide. It includeS!
appropriate responsibility for accounting, control of assets, liabilities, revenueal
and expenditures, budgeting and budgetary control and the provision of financial t
information and advice. The Executive Director is supported in carrying out thg
role by the Director of Financial Services, 4 financial officers and 22 staff. Ij
addition, 17 administration officers provide direct financial support to regionaflj
branch and program directors.
 fe.194 In practice however, during this period while the Ministry has been reorganizing
and consolidating its operations, the financial function had not played an important
enough role. Its limited qualified staff had been more involved in day-to-day tasks
than in ensuring that financial responsibilities were clearly understood throughout
the Ministry, that managers received the type of financial information they needed
and that financial controls throughout the Ministry were appropriate.
p.195 Managers did not always recognize the role that the financial function could and
should play in advising them on the design of systems and ensuring that these
systems both contained appropriate controls and showed the costs of their activities. In a number of cases, systems with financial or control implications had
been implemented without input from the Senior Financial Officer.
B. 196 The Ministry had identified the need to establish clearly the respective responsibilities of financial and operating managers in providing sound financial management and control. Accordingly, it has given priority to developing a financial policy
that will set out these responsibilities.
B.I 97 STAFFING AND TRAINING: The quality of financial management depends on the
experience and skills of financial staff. The Ministry provided us with profiles of its
financial staff. According to these profiles, many staff members had been with the
government for some time, although they were relatively new to the Ministry. Two
financial officers, the Director of Financial Services and one branch administration
officer, held recognized accounting designations, which include formal training in
assessing control requirements in systems.
6.198 Up to the time of our audit, the Ministry had not identified the training needs of its
financial officers as a group, and had provided limited training related to the
ministry-specific requirements of financial officers' jobs.
B.199 Because of a shortage of appropriately qualified staff, the Ministry had assigned the
task of developing financial procedures to its internal auditor. We concluded that
this staff shortage had contributed to the fact that the financial function had not
played an active enough role in ensuring that sound financial management practices were in place throughout the Ministry.
B.200 During our audit, theMinistry prepared a review of thestaff resources itwould need
to implement the Financial Administration Policy introduced in December 1981 by
Treasury Board. However, this review needs to be further developed to:
• specify the skill levels required for financial staff; and
• include a comparison of requirements with existing staff.
■•201 GUIDANCE AND DIRECTION: At the time of our audit the Ministry had not yet
provided sufficient clear guidance to financial and non-financial staff on financial
systems and procedures. Written guidance had been fragmented and incomplete.
 As a result, staff, particularly in the regions and branches, were unclear about whal
financial procedures to follow. A number of approaches had been used to provida
informal guidance to staff while decentralization proceeded. As a temporary meal
sure, the internal auditor had been providing guidance pending issue of an accounting procedures manual. This manual was in draft at the time of our audim
Substantial portions of it were issued after we had finished our field work.
9.202 The Ministry should complete and circulate its policy covering the role offinancim
management; the policy should specify:
• responsibilities of operating and financial managers; and
• lines of direct and functional authority.
9.203 The Ministry should further develop its assessment of the number and quality ofstam
it requires to provide effective financial management and control, taking into
account both skill levels required and available staff.
9.204 The Ministry should ensure that the training requirements of financial staff aim
determined and satisfied.
9.205 To provide appropriate guidance to staff using financial systems and procedures, the
Ministry should complete the documentation of existing systems and procedures
and the development of its accounting procedures manual. The developmetm
process should include an assessment of the appropriateness of existing controM
against requirements.
PLANNING, BUDGETING AND BUDGETARY CONTROL
9.206 PLANNING: The Ministry has adopted the modified Zero-Based Budgeting process
developed by Treasury Board for the annual Estimates of the government. As
mentioned elsewhere in this Report, the Ministry had not yet developed its short
and long-term operational and manpower planning processes to the point at which j
they could be integrated with budgets. Integration of planning and budgeting;
processes would help management ensure that resources were allocated efficiently.
Accompanied by reliable reporting of performance indicators, integration of tjS
planning and budgeting processes would enable the Ministry to exercise more
complete and effective budgetary control.
9.207
BUDGET PREPARATION: The Ministry had issued directions and timetables^
guide the preparation of the 1982-83 budget. In addition, training sessions were
held with administration officers and advice was given on an individual basis to
responsibility centre managers who have prime responsibility for budget preparation. Managers generally felt that this had been useful and that the budget preparation process had been facilitated as a result. Our review of material supportffl
budgets indicated that 1982-83 material had improved over that of the previoB
	
 SECTION 9, COMPREHENSIVE AUDIT        135
year. However, there remain considerable variations in the quality of the submissions, which indicates that continuing guidance may be necessary in this area. For
example, regional Waste Management Program submissions:
• varied greatly in their length, the amount of supporting material provided,
and the manner in which they were compiled; and
• reflected few tangible measures of output that would allow future comparison of actual performance against plans.
9.208 BUDGETARY CONTROL: The usefulness of the Ministry's financial reports for
budgetary control purposes has been limited by:
• untimely reports; -
• an inappropriate level of detail in financial reports (both too much and too
little);
• a failure to reflect costs that are committed or spent, but not yet paid; and
• the fact that financial information has not been associated with available
performance information to permit meaningful variance analysis.
9.209 The Ministry has been working towards improved budgetary control. For example,
a manual system had been designed and partly implemented to record and report
unpaid expenses. Operating managers were designing other systems to meet their
individual budgetary control needs. For example, the Regional Operations Division was attempting to develop a reporting format that would combine available
performance information with expenditure information to allow more complete
budgetary control. Another example is a project cost and control system designed
by the Assessment and Planning Division. We noted, however, that these developments were undertaken without involving the Senior Financial Officer.
K210    The Ministry should integrate its emerging planning processes with its budgeting
process.
9.211 The Ministry should review the quality of current budget submissions. Depending
on the results of the review, it should provide specific and targeted guidance to staff
involved in the budget preparation process.
9.212 The Ministry should ensure that the Senior Financial Officer is involved in the
development of budgetary control and other systems with financial implications.
ACCOUNTING AND FINANCIAL REPORTING
9.213 The main accounting system used in the Ministry is the Financial Management
Reporting (FMR) system. This system assigns costs to Ministry-designated responsibility centers.
 136       REPORT OF THE AUDITOR GENERAL
9.214 Our audit indicated several shortcomings in the FMR system. At the time of our
audit it did not allow the Ministry to completely identify all costs associated with
major ministry activities, functions and programs in a timely fashion.
9.215 The FMR system is not well adapted either for producing detailed project cost
information, or for accounting for the costs of specialist support units that serve
more than one program. Examples include the Aquatic Studies Branch, Conservation Officer Service and the Provincial Laboratory. The Ministry needs a
reliable basis for allocating the costs of such units to programs so that the actual
costs of operating individual programs can be accurately determined. The Ministry
has certain information available to do this and has developed systems that will]
provide a basis for allocating the costs of the Conservation Officer Service and the
Provincial Laboratory to programs. In other cases, the Ministry has still to develop
its systems to provide such a basis.
9.216 The Ministry should complete development of accounting systems that will allow it
to allocate support costs to programs where it is reasonabe to do so.
9.217 Where costs cannot be practically allocated to programs, the Ministry should
develop consistent and supportable methods for prorating such costs.
CONTROLS OVER REVENUES, EXPENDITURES, ASSETS AND LIABILITIES
9.218 In the last two years, the Ministry has strengthened control over a number of areas.
For example, the Ministry has strengthened its review of billings for accommoda-i
tion and computer services and has obtained credit for overcharges. We noted
further instances in which control could be or was being improved. Our specific!
suggestions are as follows:
9.219 The Ministry should strengthen controls over revenue collection activities by
providing more supervision, increasing the use of control accounts and reporting!
regularly to management on revenue generated.
9.220 The Ministry should provide a reference file of names, sample signatures and areas
of spending authority to staff who pre-audit expenditures.
9.221 The Ministry should complete its review of weaknesses in its control over payroll
costs. As an interim measure, the Ministry should clearly establish that responi
sibility centre managers are responsible for the accuracy of recording leave takeru
and for leave benefit costs.
9.222 From time to time, the Ministry should arrange to have pay cheques distributed on aj
"surprise" basis by persons independent of those who usually do so.
 9.223 In the interest of promoting economy, the Ministry should complete the development and implementation of policies and procedures for acquiring and controlling
its assets. These policies and procedures should address:
• the levels of control required for different types of assets;
• year end valuation procedures for assets held for resale; and
• ongoing monitoring procedures and responsibilities (such as utilization
reports and physical inventory counts).
9.224 In order to ensure that recoverable cash advances may be adequately controlled,
the Ministry should regularly review outstanding advances.
9.225 The Ministry should finish implementing its commitment accounting system in
those areas of expenditure where it is cost-beneficial to do so.
•INTERNAL AUDIT
19.226 In a decentralized organization with diverse programs, such as those in the Ministry
of Environment, a strong internal audit function could provide management with an
independent assessment of whether or not controls are operating reliably and
effectively. Experience has shown that this assessment can be most reliably
provided if the internal auditor is independent of the groups he is auditing, has an
appropriate reporting relationship and if the Ministry adopts appropriate procedures to plan audit coverage and deal with audit reports.
9.227 The Ministry has appointed a Financial Review Officer, who reports to the Director
of Financial Services. He is responsible for developing, implementing and maintaining internal audit and financial review programs, and for conducting reviews
and audits of specific areas within the Ministry. During 1980, he prepared a number
of reports, primarily on revenue and cost recovery systems. However, he has been
increasingly assigned to other tasks, including the design of accounting systems and
providing guidance to regional administration staff.
K.228 The internal audit group of the Office of the Comptroller General has prepared a
plan to provide audit coverage of the Ministry and has reviewed it with the Director
of Financial Services. However, the Ministry had not comprehensively assessed its
own internal audit requirements. Accordingly it was not in a position to assess
whether the Comptroller General's proposed coverage would adequately meet its
internal audit needs, or what further developments the Ministry should undertake.
■9.229 Because the internal auditor reports to the Director of Financial Services he is not
independent of those on whom he reports. Further, we believe that the Ministry
would obtain greater benefit from its internal audit if it provided for an audit
committee to review internal audit coverage and reports.
 138        REPORT OF THE AUDITOR GENERAL
9.230 The Ministry should comprehensively assess its internal audit requirements and
develop a plan to meet those requirements, taking into account the audit coverage
proposed by the office of the Comptroller General.
9.231 The Ministry should provide reporting relationships that will ensure the indepen-1
dence of its internal audit function. It should provide a suitable forum to review j
internal audit coverage and the results of internal audit reviews.
Manpower Planning
INTRODUCTION
9.232 This section of our Report deals with the extent to which the Ministry has estab!
lished appropriate manpower planning systems. These systems should enable!
management to arrive at short-term and long-term estimates of the number of staff
with particular skills that the Ministry will need to deliver its programs. Manpower!
planning systems should also allow management to compare current and future!
requirements for properly qualified staff with their availability, both within and!
outside the Ministry. Sometimes, a long or short-term surplus or deficiency of staff]
with appropriate skills may exist. Where this is the case, sound manpower planning
callsfor staff tobe either trained, recruited or redeployed. In essence, it ensures thai
the right number of qualified staff will be available, when and where they arel
needed.
9.233 We reviewed the Ministry's manpower planning systems because, like many other!
organizations, it depends to a large extent on skilled manpower to deliver its
programs. The current move to decentralization has accentuated the need fori
effective manpower planning to acquire, retain and deploy appropriately skilled!
personnel. Further, since manpower costs consume the largest proportion of thel
Ministry's budget, manpower planning is essential to maintaining effective budgel
tary control.
9.234 A recently issued ministry policy has recognized that "... the management of
(the Ministry's) human resources is the most critical factor in the attainment of its.
organizational goals and objectives."
EXTENT OF EXAMINATION
9.235 Our audit was designed to assess whether the Ministry had adequate systems fofl
determining the number and type of staff needed to deliver its programs. We also!
wanted to know whether appropriate systems were in place both for recruiting anca
deploying staff, and for providing them with training and development programs*
 SECTION 9, COMPREHENSIVE AUDIT        139
9.236    The audit was not designed to assess the efficiency or utilization of the Ministry's
current staff.
i 9.237 We reviewed Ministry-wide manpower planning systems and procedures and how
they were operating in the Fisheries, Wildlife, and Waste Management Programs,
both at Headquarters and in two regions. We then assessed the design and operation of the Ministry's systems and procedures against criteria that we felt were
appropriate.
9.238    These criteria were based on those developed, tested and accepted in other
jurisdictions. The criteria are as follows:
• Manpower requirements should be based on operational objectives and
work plans.
• The availability of human resources should be forecast.
• Action plans to resolve differences between manpower requirements and
availability should be developed.
• Manpower planning should be integrated with other management
functions.
• Responsibility for manpower planning should be clearly assigned and performance monitored.
K.239 The small occupational and organizational groups typically found in the Ministry
might not always require sophisticated systems and procedures. The Ministry
agreed with our conclusion that these criteria would, nevertheless, be applicable to
varying extents, to the organization.
BASIS FOR MANPOWER PLANNING
B.240 Manpower requirements, including the numbers and ski I Is of staff and their training
and deployment, should be based on the services the Ministry plans to deliver. We
have already referred in our Report to the fact that the Ministry's long-term and
operational planning systems and performance measures were still in the development stage. Until these systems are developed, become operational and are used as
the basis for manpower planning, the Ministry will lack reliable assurance that its
staffing represents the most efficient use of available resources. In the Ministry's
decentralized operating environment, staffing deployments cannot be easily or
quickly changed. Therefore, it is particularly important that manpower requirements be addressed in the medium and long-term to ensure the efficient use of staff
and control natural pressures to increase their number.
9.241    In the absence of more formalized systems, ministry managers have based manpower allocations on available information and their personal knowledge of situa-
 "I
140        REPORT OF THE AUDITOR GENERAL
tions. Section 3 of our Report has already discussed the limitations of available!
information. Accordingly, some of these decisions have, of necessity, been some-J
what arbitrary.
RESPONSIBILITY FOR MANPOWER PLANNING
9.242 In 1981, the Ministry issued a policy on staff development. It stipulated the!
responsibilities of ministry staff for:
• identifying staff training needs;
• formulating and implementing training, development, and career patra
plans to meet those needs; and
• evaluating the results of training.
9.243 At the time of our audit, however, the Ministry had not issued a policy covering
other manpower planning functions. In particular, it had not clarified the respecthS
roles of program directors and Regional Operations staff for reviewing the skills!
number and deployment of staff needed to carry out planned program activites ira
the regions. In the absence of ongoing reviews, there is a danger that manpowOTl
costs will be perceived as fixed in the long-term as well as for the short-term.
9.244 As the Ministry develops its strategic and operational plans, it should use them as ll
basis for determining manpower requirements.
9.245 The Ministry should issue a comprehensive policy that clarifies responsibility for all
components of the manpower planning process.
TRAINING AND DEVELOPMENT ACTIVITIES
9.246 The Ministry carries out two kinds of training and development activities: it cofSI
ducts training for managers who have manpower planning responsibilities; it also I
provides training and development for other staff, covering various job-relateajj
topics.
9.247 TRAINING FOR MANAGERS: When the Ministry was planning to decentralize ill
operations, it concluded that its managers would need training in management is
techniques and methods appropriate to the new situation. For example, managers
would need skills in planning and performance evaluation. Such skills, it was felt, l9
would be necessary to maintain accountability as decision making became more
decentralized; these skills would also be useful to managers carrying out man-i6
power planning functions. Accordingly, the Ministry provided them with the oppor- oc
tunity to acquire training in these areas. Usually, individual managers took thisrl)
training by attending courses and seminars. However, the Ministry did notprovideji'
 SECTION 9, COMPREHENSIVE AUDIT        141
additional guidance for managers on a regular basis; nor did it provide continuing
on-the-job support. As a result, almost all the managers that we interviewed
expressed concern about being able to acquire the skills they needed to cope with
the new kinds of managerial functions resulting from decentralization.
■9.248 The lack of Ministry guidance and on-the-job support for managers after their initial
training period may have affected the ability of some to address manpower planning issues. We found that some managers were unable to adequately assess the
numbers and skill levels of staff that they would need to deliver their programs.
B.249 In some instances, managers did not base their assessment of the type of staff they
would need on an analysis of operational objectives and the activities required to
support them. For example, in the Waste Management Program, as noted earlier,
dischargers often asked for more time in which to meet their permit conditions.
They frequently justified their requests by citing their inability to pay for the
necessary pollution control equipment. The Ministry, however, did not have staff
who were trained to assess the reasonableness of such requests.
B.250 The Ministry should provide more extensive in-house and continuing Ministry-
specific training and guidance to managers in the skills necessary to enable them to
carry out their manpower planning responsibilities effectively.
E.251 TRAINING FOR NON-MANAGERIAL STAFF: We were told that historically, and in
common with other ministries in the B.C. public service, the Ministry of Environment had relied on attracting and retaining qualified professional and technical staff
rather than on training and developing its existing staff. More recently, in response
to changing circumstances (decentralization) and the limited availability of
qualified staff, the Ministry had increased its emphasis on staff training and development. This change is evidenced by a proposed increase in the training budget.
1^252 We noted that these proposals provided for a system to identify not only the direct
costs of instructor time and materials, but also the indirect costs of staff attendance
at courses. This is one aspect of the cost of training that is frequently overlooked, but
is important to the full review of the cost effectiveness of training.
9.253 TRAINING NEEDS IDENTIFICATION: The Ministry has concentrated on satisfying
individual training needs. To this end, it has introduced a scheme that encourages
individuals to assess their own training needs in consultation with their supervisors.
9.254 The Ministry was also trying to identify group training needs and ensure that course
offerings would reflect these needs. At the time of our audit, the Ministry had just
begun to develop methods for determining group training needs. It had also taken
the first steps to ensure that course offerings would address these needs.
I-!—
 9.255 An example of the importance of identifying group training needs is provided by thel
experience of the Waste Management Program in writing permits. While staff!
lacked documented analysis or records, they estimated that approximately ten!
percent of permits were rejected at each level of review. The fact that up to four!
levels of review took place, would indicate that an analysis of the reasons for the!
rejection of permits might provide useful information on group needs.
9.256 We noted that ministry policy requires both program and regional directors tol
prepare a staff development plan which identifies training and development needs.
However, the Ministry had not developed the mechanisms to ensure that thesel
plans were prepared on a regular basis, and that courses were developed andl
offered in response to identified needs. We also found that some managers did not!
yet clearly understand their responsibilities under the Ministry's training and del
velopment policy. Specifically, they did not understand their role in developing and
selecting courses, i.e., in ensuring that the courses offered addressed training!
needs. At the time of our audit, the Ministry had not developed a means of resolving]
this problem—either by instituting user committees to monitor course develop!
ment, or by otherwise encouraging input from the regional and program directors!
9.257 We realize that this ministry policy was new at the time of our audit, and that it wiH
take time to develop the systems and procedures needed to implement it.
9.258 COURSE EVALUATION: The Ministry's efforts to evaluate courses was limitecl
primarily to soliciting comments from trainees who had taken instruction. Evalual
tion procedures did not include an ongoing review to determine whether individual
or group training had improved trainees' on-the-job performance. We feel that j
meaningful course evaluation should include an assessment of the extent an
employee's performance at work has improved as a result of having undergona
training.
9.259 To obtain maximum benefit from its current training efforts the Ministry should:
• establish mechanisms to provide regional and program input into traininml
course design and selection; and
* establish evaluation mechanisms to determine the extent to which the
training offered improves the on-the-job performance of those who hawU
undergone training.
M
 SECTION 9, COMPREHENSIVE AUDIT
143
Summary of Recommendations and Ministry Comments
MINISTRY OF ENVIRONMENT
■Recommendations
Ministry Comments
[PROGRAM MANAGEMENT AND ACCOUNTABILITY INFORMATION
B.70
The Ministry should complete development
of its statements of goals and objectives so that
they clearly identify the measurable results
managers should be held accountable for.
The Ministry should complete development
of systems for measuring performance and
should establish target dates and review procedures to control their development.
Agreed—Care must be taken to
recognize qualitative as well as
quantitative values in measuring
performance as reliance on the
latter will not necessarily lead to
protection of the environment.
K.71 The Ministry should make functional guidance and direction available to program directors to assist them in developing performance measurement systems.
j|9.78 The Ministry should ensure that its Financial
and Performance Reports to the Legislative
Assembly are compatible so that program expenditures can be compared with objectives
and performance.
Agreed—Management training
programme is under development.
Agreed—The 1981/82 fiscal year
activities will be reported in a consistent form.
9.79     TheMinistry should report performance infor-    Agreed,
mation to the Legislative Assembly in enough
quantity and detail to indicate the extent to
which Ministry programs are reliably and efficiently delivered.
9.84 The Ministry should clearly establish respective responsibilities in remaining areas in
which the Waste Management Program interacts with other Ministry programs or with programs of other agencies.
Agreed—The first agreement in
Canada regarding joint spill response actions has been signed
with Federal Agencies and the
Ministry. Other agreements are
under development.
9.101 The Ministry should assign ongoing respon- Agreed—Responsibility for each
sibilityforthedesign, operation and review of function is being confirmed con-
its network of water quality monitoring sistent with Ministry planning
stations. strategy.
 144
REPORT OF THE AUDITOR GENERAL
MINISTRY OF ENVIRONMENT
Recommendations and Ministry Comments
Recommendations
Ministry Comments
9.102
9.112
The Ministry should set up procedures to re-    Agreed,
port on the results of monitoring ambient concentrations against acceptable limits.
9.113
The Ministry should develop ranking mechanisms for dischargers to allow it to better assess the significance of the performance information it receives.
As a basis for Ministry action where warranted
and for better allocation of resources, the
Ministry should develop systems and procedures for measuring and reporting performance of the Waste Management Program,
against long and short-term expectations.
Agreed—Recognizing the sensitivity of the environment in spe-j
cific parts of the province may require that greater attention be!
given to certain discharges thatl
may be less significant elsewhere.•
Agreed—As part of Ministry]
reorganization a programme eval-j
uation and policy group has been]
established. The 1977 Environmental Quality Trend Study is nowl
ready for the 5 year review.
CONTROLS IN THE WASTE MANAGEMENT PROGRAM
9.125 The Ministry should complete the development of policy and procedures for the Waste
Management Program.
9.126 The Min istry should continue its efforts to improve the managerial and supervisory skills of
its section heads and managers.
9.135 To ensure that the Waste Management Program identifies the most cost-effective control
strategies, the Ministry should determine the
information it requires to support long and
short-term program planning. Where this information is not currently available, the Ministry should set up procedures to collect it.
9.136 The Ministry should develop a formal Waste
Management Program plan to guide implementation of the program in the long and
short-terms. Further, the Ministry should develop mechanisms for integrating program
plans with geographically based plans.
Agreed.
Agreed—Management Training
Programme is under develop!
ment.
Agreed—A ministry informatiofS
systems committee was estabS
lished mid 1981 and is well ad!
vanced in this issue.
Agreed—The strategic planninafj
process now under way in thaH
Ministry is expected to provide the ri
basic elements of this integratioSB
 I
SECTION 9, COMPREHENSIVE AUDIT        145
Recommendations and Ministry Comments
MINISTRY OF ENVIRONMENT
[Recommendations
Ministry Comments
©.142 The Ministry should institute procedures to
update and maintain its inventories of dischargers to include identified discharges and
to flag dischargers that have closed their
operations.
Hl56 The Ministry should reconsider the extent to
which it obtains information on the background of dischargers for the purposes of issuing and administering permits. As a minimum, it should develop alternative approaches to verifying the reasonableness of
requests based on economic grounds to delay
or defer negotiated abatement agreements.
IM57 The Ministry should introduce a selective and
systematic permit quality review function.
.9.158 The Ministry should institute a selective program of review of current permits based on
significance and need.
KB67 The Ministry should set up procedures for
identifying overdue and missing reports from
dischargers.
9.168 The Ministry should complete the development of its policy covering the submission of
discharger data to Headquarters, and should
set up procedures for controlling the completeness of data submission.
The Ministry should establish policy governing the extent and frequency of inspections.
Further, it should ensure that inspection
coverage provided is reported to senior
management.
182 The Ministry should ascertain the extent and
severity of non-compliance with permit conditions, and should develop and implement
procedures to bring dischargers into acceptable compliance over a reasonable period of
time.
Agreed — Presently being developed where cost effective as
part of decentralization.
Agreed—However, the main consideration in the issuance of permits must remain the protection of
the environment.
Agreed. See 9.113.
Agreed.
Agreed—Some regions have already accepted this function.
Agreed.
Agreed—However, the policy
should not be too rigid such as to
interfere with the initiative and
judgement of Regional Managers
and their awareness of site specific
problems.
Agreed — Already being addressed.
 146
REPORT OF THE AUDITOR GENERAL
MINISTRY OF ENVIRONMENT
Recommendations and Ministry Comments
Recommendations
Ministry Comments
9.188
The Ministry should develop a clear policy
and procedures to guide staff in their responses to non-compliance.
Agreed—The initial policy andl
procedure is now in place.
FINANCIAL MANAGEMENT AND CONTROL
9.202
The Ministry should complete and circulate
its policy covering the role of financial management; the policy should specify:
Agreed—The policy framework is
presently under development!
consistent with Treasury Board!
• responsibilities of operating and financial managers; and
policy.
• lines   of   direct   and   functional
authority.
9.203
The Ministry should further develop its assessment of the number and quality of staff it
requires to provide effective financial management and control, taking into account
both skill levels required and available staff.
Agreed.
9.204
The Ministry should ensure that the training
requirements of financial staff are determined
and satisfied.
Agreed—Key positions are curW
rently being analyzed for training!
needs.
9.205
To provide appropriate guidance to staff using
financial systems and procedures, the Ministry should complete the documentation of existing systems and procedures and the development of its accounting procedures
manual. The development process should include an assessment of the appropriateness of
existing controls against requirements.
Agreed—The accounting proa
cedures manual is now complete!
Control procedures are to be :
reviewed.
9.210
The Ministry should integrate its emerging
planning processes with its budgeting
process.
Agreed.
9.211
The Ministry should review the quality of current budget submissions. Depending on the
results of the review, it should provide specific
and targeted guidance to staff involved in the
budget preparation process.
Agreed. .
 SECTION 9, COMPREHENSIVE AUDIT
147
[Recommendations and Ministry Comments
MINISTRY OF ENVIRONMENT
■Recommendations
Ministry Comments
|9.212 The Ministry should ensure that the Senior
Financial Officer is involved in the development of budgetary control and other systems
with financial implications.
Agreed.
19.216    The Ministry should complete development    Agreed.
of accounting systems that will allow it to
allocate support costs to programs where it is
reasonable to do so.
K.217    Where costs cannot be practically allocated    Agreed,
to programs, the Ministry should develop
consistent and supportable methods for prorating such costs.
B.219    The Ministry should strengthen controls over    Agreed—A revenue manager is
revenue collection activities by providing    being appointed in recognition of
more supervision, increasing the use of con-    substantial increases in revenue,
trol accounts and reporting regularly to management on revenue generated.
K.220 The Ministry should provide a reference file of
names, sample signatures and areas of spend-
ing authority to staff who pre-audit
expenditures.
|.221 The Ministry should complete its review of
weaknesses in its control over payroll costs.
As an interim measure, the Ministry should
clearly establish that responsibility centre
managers are responsible for the accuracy of
recording leave taken and for leave benefit
costs.
w222 From time to time, the Ministry should arrange to have pay cheques distributed on a
"surprise" basis by persons independent of
those who usually do so.
Agreed—A file now exists.
Agreed—There are weaknesses in
the Leave Management System to
be corrected.
Agreed.
 148       REPORT OF THE AUDITOR GENERAL
MINISTRY OF ENVIRONMENT
Recommendations and Ministry Comments
Recommendations
Ministry Comments
9.223 In the interest of promoting economy, the
Ministry should complete the development
and implementation of policies and procedures for acquiring and controlling its assets. These policies and procedures should
address:
• the levels of control required for different types of asset;
• year end valuation procedures for assets held for resale; and
• ongoing monitoring procedures and
responsibilities (such as utilization reports and physical inventory counts).
9.224 In order to ensure that recoverable cash advances may be adequately controlled, the
Ministry should regularly review outstanding
advances.
9.231 The Ministry should provide reporting relationships that will ensure the independence of
its internal audit function. It should provide a
suitable forum to review internal audit
coverage and the results of internal audit
reviews.
Agreed—An asset control system
is under development.
Agreed—Level of cash advance!
should be regularly reviewed.
9.225    The Ministry should finish implementing its    Agreed,
commitment accounting system in those
areas of expenditure where it iscost-benefical
to do so.
9.230    The Ministry should comprehensively assess    Agreed,
its internal audit requirements and develop a
plan to meet those requirements, taking into
account the audit coverage proposed by the
office of the Comptroller General.
Agreed.
MANPOWER PLANNING
9.244    As the Ministry develops its strategic and op-    Agreed,
erational plans, it should use them as a basis
for determining manpower requirements.
 SECTION 9, COMPREHENSIVE AUDIT
149
IRecommendations and Ministry Comments
MINISTRY OF ENVIRONMENT
{Recommendations
Ministry Comments
19.245    The Ministry should issue a comprehensive    Agreed,
policy that clarifies responsibility for all components of the manpower planning process.
[9.250 The Ministry should provide more extensive Agreed,
in-house and continuing Ministry-specific
training and guidance to managers in the
skills necessary to enable them to carry out
their manpower planning responsibilities
effectively.
19.259    To obtain maximum benefit from its current    Agreed,
training efforts the Ministry should:
• establish mechanisms to provide regional and program input into training
course design and selection; and
• establish evaluation mechanisms to
determine the extent to which the
training offered improves the on-the-
job performance of those who have
undergone training.
 150
REPORT OF THE AUDITOR GENERAL
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   SECTION 10, GENERAL MATTERS        159
Table of Contents
Part 4:
10. GENERAL MATTERS
Organization and Activities of the Audit Office  161
Introduction  161
Staff Resources  161
Organization  161
Professional Development and Other Activities  162
Time Management Systems  162
Accounting and Auditing Research  162
Legislative Auditors' Task Force on Income Taxes  163
Canadian Conference of Legislative Auditors  163
Canadian Comprehensive Auditing Foundation  164
Public Accounts Committee  164
Advisory Council  165
  General Matters
Organization and Activities of the Audit Office
[introduction
10.1 The year 1981 was a relatively stable period in the development of the Office of the
Auditor General. Although there has been little change in the number of persons
employed and the general plan of organization, continued progress has been made
in enhancing the technical capabilities of the Office and extending the scope of its
audits.
ISTAFF RESOURCES
■10.2 Our staffing situation continued to cause concern during the year. A country-wide
shortage of appropriately qualified accountants, a sharp rise in the cost of housing
in Victoria, and occasional difficulties with salary levels have combined to limit the
number of staff we were able to attract. Nevertheless, the Office has been able to
maintain its staff strength at 70, including 36 professionally qualified accountants,
and 25 employees enrolled in courses of study leading to professional accounting
designations. Approximately 20 professional positions remain vacant.
■0.3 The inability to meet staffing objectives has somewhat limited our capacity to
examine and report on some aspects of my mandate. New avenues are being
explored in our recruiting programs, and it is hoped that those factors beyond our
control which inhibit our recruiting efforts will be of lesser concern in the future.
The Office's commitment to its student training program continues, as this is seen to
be a preferred long-term source of trained staff available to the Office.
ORGANIZATION
■ 0.4 The basic plan of organization established in late 1979 continues to serve the Office
well. Responsibility for the audit work in individual ministries and the public bodies
closely related to them had been divided among each of three audit divisions. A
fourth audit division was formed during 1981 and work assignments adjusted
accordingly.
I
p.5 Divisional responsibilities are assigned to the following senior members of my staff:
Frank Barr, Gordon W. Dawson, Raymond L. Hunter and Robert B. Wallace. In
addition, Michael S. Weir, a partner in MacGillivary & Co., served as an audit
director responsible for comprehensive auditing projects. These audit directors,
together with the Deputy Auditor General, Robert J. Hayward and myself, constitute
the Executive Committee of the Office.
 162        REPORT OF THE AUDITOR GENERAL
PROFESSIONAL DEVELOPMENT AND OTHER ACTIVITIES
10.6 During the year the Office embarked on a professional development program. Thel
program, which embodies various subject areas including accounting, auditing
and management techniques, is designed to maintain and enhance the technical
expertise of my staff. Such a program is necessary to ensure that staff members stayl
abreast of ongoing developments and continue to carry out their work assignments
with professional competence.
10.7 Members of the Office take an active part in professional and community affairs*
Through this involvement my staff contribute to the development and promulgationj
of knowledge on accounting and auditing in government, enhance their own skillsl
and benefit the Office in various ways. During the past year staff members of thel
Office have:
• participated as panelists and discussion leaders at the annual conferences on
the Canadian Institute of Chartered Accountants and the Canadian Comprehensive Auditing Foundation.
• served on various committees of the Canadian Institute of Chartered Ac4
countants and the Institute of Chartered Accountants of British Columbia.1
• lectured on accounting, auditing and business subjects at post-secondar^
educational institutions and at the newly-formed School of Charterer
Accountancy.
I appreciate the efforts made by those involved in these activities.
TIME MANAGEMENT SYSTEM
10.8 The operation of an audit office is a labour-intensive activity. Virtually the entira
budget of the Office of the Auditor General consists of salaries or expenses closelw
related to salary expenditures. It is important that proper means be established to
measure and evaluate the efficiency of audit operations.
10.9 During 1981 a new computerized time reporting system was introduced in tha
Office. This system, which accumulates and analyses the time of all professional
staff and direct audit expenses, has helped to monitor time and cost budgets, andtta
allocate resources to areas where the most benefit can be derived.
Accounting and Auditing Research
10.10 In recognition of the growing importance of financial reporting at all levels omj
government in Canada, the Canadian Institute of Chartered Accountants has estaba
lished the Public Sector Accounting and Auditing Committee (PSAAC). This is a\
 SECTION 10, GENERAL MATTERS        163
research committee formed to review public sector accounting theory and practice, and issue guidelines and recommendations where they are considered
appropriate.
10.11 The committee is made up of representatives from both the public and private
sectors from acrosstanada. I was invited to serve on the committee, and have been
actively involved in its work since its inception.
Legislative Auditors' Task Force on Income Taxes
10.12 The Government of Canada, by agreement with the Province of British Columbia,
collects income taxes on behalf of the Province. The agreement provides that the
Auditor General of British Columbia may examine relevant books and records in
order to permit her to report in respect of payments made to the Province. However,
it limits the scope of this examination and prevents the Auditor General from
examining the income tax data filed with returns and, consequently, from verifying
the calculations of provincial income taxes assessed on behalf of the Province.
10.13 Since most other provinces have similar agreements with the Government of
Canada, and the Auditor General of Canada is not restricted in any way in the scope
of his examination, the Legislative Auditors of Canada established a task force in
1979 to review the audit work of the Auditor General of Canada with a view to using
that work to satisfy the audit requirements of the provincial auditors with respect to
income tax revenues.
■10.14 During 1981 I was asked to join the legislative auditors of Canada, Alberta and
Ontario as a member of the task force. Since then members of my staff have been
actively involved on the project. At the time of presenting this Report, a report of the
Task Force with respect to the 1981 fiscal year was not complete.
Canadian Conference of Legislative Auditors
■10.15 The Canadian Conference of Legislative Auditors, an informal association of the
auditors of the senior governments of Canada, facilitates the sharing of information
important to the legislative auditing community. This takes various forms including
an annual conference, cooperative audit and research projects, and regular direct
exchange of information by the various audit offices.
RO.16 The 9th annual meeting of the Conference was held at St. Andrews, New Brunswick
in July 1981. Among the speakers and participants were: The Honourable Richard
B. Hatfield, Premier of New Brunswick; T. Patrick Reid, Chairman of the Public
Accounts Committee of Ontario; Kenneth M. Dye, Auditor General of Canada;
Harry G. Rogers, Comptroller General of Canada; and James J. Macdonell, Chairman of the Canadian Comprehensive Auditing Foundation and former Auditor
General of Canada.
 164        REPORT OF THE AUDITOR GENERAL
10.17 Senior officials of the Public Accounts Committees of Canada, the provinces and!
the territories also held meetings at St. Andrews. A joint session of the two groups!
afforded a valuable opportunity for the exchange of views on a number of subjects]
of common interest.
10.18 The Conference will hold its 1982 meeting in Victoria.
Canadian Comprehensive Auditing Foundation
10.19 The Canadian Comprehensive Auditing Foundation is a cooperative association ofl
legislative auditors, public accountants, management consultants and others who!
share a common interest in the development of improved methodologies to incor-1
porate value for money considerations into the audit process. The Foundation
carries out research, conducts training programs, and promotes the exchange ofl
information and views.
10.20 This Office has been involved with the Foundation since its inception, and con- !
tinues to participate actively in its affairs including a panel presentation at thel
second annual conference of the Foundation in Toronto. The subject of the discus-1
sion was the first comprehensive audit performed by my staff in the Ministry ofl
Human Resources. I continue to serve on the Board of Governors of the Foundation.
Public Accounts Committee
10.21 The Annual Report of the Auditor General, after being tabled in the Legislative
Assembly, is referred to the Public Accounts Committee which is composed of al
wide cross-section of Members of the Assembly. The Committee has based most oil
its discussion in recent years on matters contained in the Auditor General's Report*
10.22 My last Annual Report was tabled in the Legislative Assembly on 31 March 1981.
Discussion of matters contained in that Report began at regular meetings of tha
Committee on 22 April and continued to 24 June 1981. In all, the Committee me8
10 times in 1981, and discussed matters arising from the Report at all but one
meeting. I attended all Committee meetings at which matters contained in the
Auditor General's Report were discussed.
10.23 The report of the Public Accounts Committee was tabled in the Legislative Asserim
bly on 6 July 1981.
 SECTION 10, GENERAL MATTERS        165
Advisory Council
BlO.24 I wish to acknowledge the valuable contribution made by the following senior
members of the accounting profession who have served on the Auditor General's
Advisory Council during the past year:
Michael J. Ashby, F.C.A.
Arthur Beedle, F.C.A.
Harold G. Craven, F.C.A.
Ronald W. Park, F.C.A.
Denham J. Kelsey, F.C.A.
IRo.25 Mr. Dennis F. Culver, F.C.A., who served for three years as a member of this
Council, was elected president of the Canadian Institute of Chartered Accountants
in September 1981. I am pleased that this professional association has seen fit to
recognize in this way the contribution Mr. Culver has made in so many ways to his
profession and community, and I congratulate him on this honour.
    APPENDICES        169
fable of Contents
Appendices
II Sections of the Auditor General Act Relevant to the
I Responsibilities of the Auditor General  171
III Public Bodies, of Which the Auditor General was not the Appointed Auditor,
I Whose Financial Statements are Included in Section F of the Public Accounts  175
III Sections B and C of the Public Accounts  177
  APPENDICES        171
Appendix I
lections of the Auditor General Act Relevant to the
Responsibilities of the Auditor General
EXAMINATION OF ACCOUNTS
6. (1) The Auditor General shall examine in the manner he considers necessary the
ftcounts and records of the government relating to the consolidated revenue fund and all
Riblic money, including trust and special funds under the management of the government,
Bid to public property.
(2) Notwithstanding any other Act, the Auditor General
(a) shall be given access to the records of account and administration of any
ministry; and
(b) may require and receive from any person in the public service, information,
reports and explanations necessary for the performance of his duties.
REPORT ON FINANCIAL STATEMENTS
7. (1) The Auditor General shall report annually to the Legislative Assembly on the
linancial statements of the government, including those required by section 40 of the
iffiinanc/a/ Control Act, respecting the fiscal year then ended.
(2) The report shall form part of the public accounts and shall state
(a) whether he has received all of the information and explanations he has
required; and
(b) whether in his opinion, the financial statements present fairly the financial
position, results of operations and changes in financial position of the government in accordance with the stated accounting policies and as to whetherthey
are on a basis consistent with that of the preceding year.
(3) Where the report of the Auditor General does not contain the unqualified opinion
raquired under this section, the Auditor General shall state the reasons why.
EN N UAL REPORT
8. (1) The Auditor General shall report annually to the Legislative Assembly on the
work of his office and call attention to anything resulting from his examination that he
^nsiders should be brought to the attention of the Legislative Assembly including any case
where he has observed that
(a) accounts have not been faithfully and properly kept or public money has not
been fully accounted for;
(b) essential records have not been maintained;
(c) the rules, procedures or systems of internal control applied have been
insufficient
(i) to safeguard and protect the assets of the Crown;
(ii) to secure an effective check on the assessment, collection and proper
allocation of the revenue;
 172        REPORT OF THE AUDITOR GENERAL
(iii) to ensure that expenditures have been made only as authorized; or
(iv) to ensure the accuracy and reliability of the accounting data; or
(d) public money has been expended for purposes other than for which it waa
appropriated by the Legislature.
(2) In the report the Auditor General may also include an assessment
(a) as to whether the financial statements of the government are prepared in
accordance with the most appropriate basis of accounting for the purpose on
fair presentation and disclosure; or
(b) as to whether any program being administered by a ministry is being adminl
istered economically and efficiently. ,
TRIVIAL MATTERS
9. The Auditor General need not report to the Legislative Assembly on any matter ha
considers immaterial or insignificant.
SUBMISSION OF ANNUAL REPORT
10. (1) A report of the Auditor General to the Legislative Assembly shall be submitter
by him through the Minister of Finance.
(2) On receipt of a report of the Auditor General, the Minister of Finance shall lay tha
report before the Legislative Assembly as soon as possible.
(3) If the Minister of Finance does not lay the report before the Legislative Assembly on
the first sitting day following the receipt of the report by him, the Auditor General shall
transmit the report to the Speaker and the Speaker shall lay the report before the LegislatiiS
Assembly.
(4) On being laid before the Legislative Assembly, the annual report of the Auditor
General shall be referred to the Public Accounts Committee of the Legislative Assemble
SPECIAL REPORT
11. The Auditor General may at any time make a special report to the LegislatrH
Assembly on a matter of primary importance or urgency that, in his opinion, should not be
deferred until he makes his annual report.
OTHER REPORTS
12. The Auditor General may at any time make a report to the Minister of Finance, the
Treasury Board, the Lieutenant Governor in Council, or any public officer on any matter that
in the opinion of the Auditor General should be brought to his or their attention.
SPECIAL ASSIGNMENTS
13. The Auditor General may undertake special assignments at the request of trap;
Lieutenant Governor in Council, but he is under no obligation to carry out any requested
assignment if, in his opinion, it would interfere with his primary responsibilities.
 r
APPENDICES        173
ISTAFF IN MINISTRIES
14. (1) The Auditor General may station in any ministry a person employed in his
office to enable him to more effectively carry out his duties, and the ministry shall provide
[the necessary office accommodation for a person so stationed.
(2) The Auditor General shall require every person employed in his office who is to
■examine the accounts or the administration of a ministry pursuant to this Act to comply with
Rny security requirements applicable to, and to take any oath of secrecy required to be taken
ftiy, persons employed in that ministry.
BNQUIRY POWERS
15. The Auditor General may examine any person on oath on any matter pertaining to
Kis responsiblities and for that examination the Auditor General has all the powers, protec-
nion and privileges of a commissioner under sections 12, 15 and 16 of the Inquiry Act.
■PUBLIC BODIES
16. (1) Notwithstanding any other Act, where the Auditor General is not the auditor of
a public body,
(a) the public body shall, on the request of the Auditor General, supply the
Auditor General with a copy of all financial statements and reports relating to
the public body;
(b) the auditor of the public body shall, on the request of the Auditor General,
within a reasonable time, make available to the Auditor General, all working
papers, reports and other documents in his possession relating to the public
body; and
(c) the Auditor General may conduct examinations of the records and operations
of the public body he considers necessary or advisable to carry out his duties
under this Act.
(2) Notwithstanding any other Act, the Auditor General
(a) shall be given access to the records of account and administration of any public
body; and
(b) may require and receive from any officer or employee of a public body
information reports and information necessary for the performance of his
duties.
SlGIBILITY AS AUDITOR
17. Notwithstanding any other Act, the Auditor General is eligible to be appointed the
Iguditor, or a joint auditor, of a Crown corporation, Crown agency or public body.
TRANSFER OF AUDIT DUTIES
18. The Lieutenant Governor in Council may transfer to the Auditor General the duty
Bposed by any Act on the Comptroller General to conduct an audit.
  APPENDICES
Appendix II
[Public Bodies, of Which the Auditor General was not the
[Appointed Auditor, Whose Financial Statements are Included in
Section F of the Public Accounts
|[. British Columbia Buildings Corporation
^ritish Columbia Cellulose Company
British Columbia Development Corporation
[British Columbia Ferry Corporation
British Columbia Housing Management Commission
[British Columbia Hydro and Power Authority
tish Columbia Petroleum Corporation
tish Columbia Railway Company
tish Columbia Research Council
tish Columbia Steamship Company (1975) Ltd.
tish Columbia Systems Corporation
iDiscovery Foundation
I Housing Corporation of British Columbia
■nsurance Corporation of British Columbia
Rtetro Transit Operating Company
KJcean Falls Corporation
.Pacific Coach Lines Limited
IKcience Council of British Columbia
IKurrey Farm Products Investments Ltd.
MRS. Holdings Ltd.
Jniversities Council
I ;|Urban Transit Authority
  APPENDICES        177
[Appendix Ml
Sections B and C of the Public Accounts
■The material which forms Appendix III is an excerpt from the Public Accounts of British
[Columbia for the fiscal year ended 31 March 1981.
  PUBLIC ACCOUNTS 1980/81
SECTION B
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
CONTENTS
Page
■mible on Accounting Policy  B 3
port of the Auditor General  B 5
Bince Sheet  B 7
element of Net Equity ,  B 8
Element of Operating Results  B 9
Element of Changes in Cash and Marketable Securities  B 10
Nss to Combined Financial Statements  B 11
Supplementary Statements
Siement of General Fund and Special Purpose Funds Operating Results for the
fiscal Year Ended March 31, 1981  B 26
siement of General Fund and Special Purpose Funds Revenue by Major Sources
T>rthe Fiscal Year Ended March 31, 1981  B 27
Siement of General Fund and Special Purpose Funds Expenditure by Major
"(Functions for the Fiscal Year Ended March 31, 1981  B 27
) ement of Combined General Fund and Special Purpose Funds Revenue by
I Sources for the Fiscal Years Ended March 31, 1977 Through 1981  B 28
> ement of Combined General Fund and Special Purpose Funds Expenditure by
I Functions for the Fiscal Years Ended March 31, 1977 Through 1981  B 31
> ement of Combined General Fund and Special Purpose Funds Expenditure by
Objects of Expenditure Classification (Grouped) for the Fiscal Year Ended
ilarch31, 1981  B 36
dement of Special Purpose Funds Transactions and Balances for the Fiscal Year
:; Ended March 31, 1981  B 38
Ms of General Fund Revenue for the Fiscal Year Ended March 31, 1981  B 40
f ijpry of General Fund Expenditure by Ministry for the Fiscal Year Ended
I March 31, 1981  B 43
Simary of General Fund Expenditure by Appropriation  B 44
  PUBLIC ACCOUNTS 1980/81
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
PREAMBLE ON ACCOUNTING POLICY
This year's Public Accounts mark a change to the reporting of revenue—except for
Income tax revenue—and expenditure on an accrual accounting basis. In prior years the
trash basis of accounting was used, modified to allow for certain receipts and payments
\ made to April 30 of the following fiscal period to be included as revenue and expenditure
5 of the prior year. With accounting on an accrual basis, accounts receivable and expendi-
Iffires incurred during the fiscal year are reported, regardless of the date of receipt and
loayment, whereas when accounting on a cash basis, only revenue received and payments
r made during the period are reported.
In addition, the activities of the General Fund and Special Purpose Funds, compris-
r ing the transactions and balances of the Consolidated Revenue Fund, have been combined
rin a single set of financial statements for reporting purposes. Other accounting policy
I changes have been made and these are described in Note 1, "Summary of Significant
i Accounting Policies". In order to present this information in a manner that maintains the
: reporting of expenditure against the authority provided by the Estimates or supplementary statutes and special warrrants, and also to present some comparison with prior years,
IBie figures for 1980/81 have been prepared on both an accrual and a cash basis, with the
comparative figures for 1979/80 on a cash basis. Where possible, all accounting policy
Kjustments have been disclosed separately.
In the Combined Financial Statements, the transfers between the General Fund and
: Special Purpose Funds have been eliminated, but General Fund figures have been
reported separately in order to ensure the reporting of General Fund expenditures is
insistent with the legislative authority.
The effect of the changes in the accounting policies is described in Note 2,
RUhanges in Accounting Policies", together with a breakdown of the effect on the
Kstated net equity at March 31, 1980.
  PUBLIC ACCOUNTS 1980/81 R5
REPORT OF THE AUDITOR GENERAL
ON THE FINANCIAL STATEMENTS
INCLUDED IN THE PUBLIC ACCOUNTS
OF THE PROVINCE OF BRITISH COLUMBIA
: the Legislative Assembly
I of   the P rovinae   of  British   Columbia
mliament  Buildings
Imtoria,   British  Columbia
Imave examined the financial statements of the Combined General
l.nd and Special Purpose Funds (Consolidated Revenue Fund) of the
kvernment of the Province of British Columbia for the fiscal
'■ar ended March 31, 1981 as presented in Section B of the Public
Ireounts, and the related supplementary statements contained in
IB-sections B26 through B61.  These financial statements are:
Balance Sheet.
Statement of Net Equity.
Statement of Operating Results.
Statement of Changes in Cash and
Marketable Securities.
Notes to Combined Financial Statements.
I.th respect to the supplementary statements, I did not examine
Ira do not express an opinion on the figures reported in Combined
Smeral Fund and Special Purpose Funds Revenue by Sources (B28)
id Expenditure by Functions (B31) for the fiscal years ended
lirch 31, 1977 through 1979.
[■examination was made in accordance with generally accepted
Braiting standards, and accordingly included such tests and other
rocedures as I considered necessary in the circumstances.  I
uve received all the information and explanations I have
IRiired for the purpose of my examination.
report in accordance with section 7 of the Auditor General
•■t.     In my opinion, these financial statements present fairly
^financial pojafttion of the Government of the Province of
:itish Columbia as at March 31, 1981 and the results of its
)erations and the changes in its financial position for the year
len ended on a combined basis in accordance with the stated
.■counting policies as set out in Note 1 to the financial
Rements.  This is the first year of implementing the accrual
isis of accounting, and comparative figures for the year ended
irch 31, 1980 on an accrual basis are not presented in these
'.atements; however, opening balances for the 1981 fiscal year
ive been adjusted to give retroactive effect to the change.  I
.so report that, in my opinion, the figures presented for 1981
H cash basis are consistent with those for 1980.
 B 6 PROVINCE OF BRITISH COLUMBIA
I emphasize that this report is limited under section 7 of thi
Act to an opinion on presentation of the financial statements!
accordance with the stated accounting policies of the
Government. Under section 8 of the Act I report separately cS
other matters resulting from my examination that I consider
should be brought to the attention of the Legislative AssemblS
That report will be presented at a future date.
^C(Z£yr?.
ERMA MORRISON, F.C.A.
Auditor  General
Victoria,   British   Columbia
SO   September  1981
 PUBLIC ACCOUNTS 1980/81
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
BALANCE SHEET AS AT MARCH 31,1981
1981
Accrual Cash Cash
Basis Basis Basis
(Note 1) (Note 2) (Note 2)
ASSETS                                                    $ $ $
[and short-term deposits (note 3)       514,736,436 514,688,081 1,030,976,433
Srketable securities (note 4)       236,440,991 238,421,675 31,582,414
Hints receivable (note 5)       356,852,098 156,309,996 218,226,692
Hrom Crown corporations and agencies (note 6)       137,959,164 82,599,769 73,898,590
Bfories (note 7)         37,829,254 2,106,599 1,948,621
irtgages receivable (note 8)       182,929,682 181,057,553 213,904,364
Bfiient in and advances to Crown corporations (note 9)       295,286,045 295,286,045 359.917,953
Brty under development (note 10)         69,634,858 68,345,722 74,100,102
investments (note 11)       332,101,290 354,072,605 178,004,820
fed assets (note 12) , '.    I 2,888.685,270 2,601,850,257
2,163,769,819 4,781,573,315 4,784,410,246
LIABILITIES
Hits payable and accrued liabilities  250,234,225 194,862,864 181,058,837
J matured debt (note 13)  209,247,790 209,247.790 235,347,790
459,482,015 404,110,654 416,406,627
NET EQUITY
|Buity(note 14)  1,704,287,804 911,909,737 1,257,621,788
IB surplus (note 2)  — 3,465,552,924 3,110,381,831
1,704,287,804     4,377,462,661     4,368,003,619
2,163,769,819     4,781,573,315     4,784,410,246
UST FUNDS UNDER ADMINISTRATION (note 15)
Berannuation and pension funds    3,134,161,266 3,134,161,266 2,624,339,352
fflftfunds    2,037,152,002 2,037,152,002 2,050,444,957
5,171,313,268 5,171,313,268 4,674,784,309
•NTINGENT LIABILITIES
buaranteed debt (note 16)    8,287,209,507     8,287,209,507     7,817,426,763
IwBer (note 17)             	
The accompanying notes are an integral part of these financial statements
Approved on behalf of the Ministry of Finance:
L. I. BELL
Deputy Minister of Finance
D. R. ALEXANDER
Comptroller General
 B 8
PROVINCE OF BRITISH COLUMBIA
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 B  10 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
STATEMENT OF CHANGES IN CASH AND MARKETABLE SECURITIES
FOR THE FISCAL YEAR ENDED MARCH 31,1981
Balance—Beginning of Year s
As previously reported on cash basis:
Cash and short-term deposits  1,030,976,433
Marketable securities  31,582,414
1,062,558,847
Accounting policy changes  1,576,061
1,064,134,908
Operating Transactions
Revenue  5,802,725,042
Expenditure  6,059,459,587
Net Revenue (Expenditure)     (256,734,545)
Plus: non-cash items included in net revenue (see below)        36,839,826
Used for operations  (219,894,719)
Financing Transactions
Receipts:
Repayment of loans and advances        96,750,701
Repayment of investments         5,799,760
Mortgage principal repayments       46,415,710
Property sales—net         4,465,244
153,431,415
Disbursements:
Loans and advances        17,548,674
Debt retirement        26,100,000
Mortgages issued        16,441,028
Advances re: Housing Initiative Program Agreement      186,404,475
246,494,177
Used for financing transactions  (93,062,762)
Decrease in Cash, Short-Term Deposits and Marketable Securities  (312,957,481)
Balance—End of Year
Cash and short-term deposits      514,736,436
Marketable securities      236,440,991
751,177,427
Non-Cash Items Included in Net Revenue
Change in accounts receivable  6,767,295
Change in inventories  (1,990,666)
Change in accounts payable  32,063,197
36,839,826
The accompanying notes are an integral part of these financial statements.
 IfT
PUBLIC ACCOUNTS 1980/81 B  11
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981
Significant Accounting Policies
■ EpKriNG Entity
These financial statements include the accounts of the Consolidated Revenue Fund and of certain funds
wsited with and administered by the Minister of Finance pursuant to various statutes. They do not include
accounts of Crown corporations, except to the extent of investments or advances which are carried at the
■|f r of cost or underlying net book values. Separate consolidated financial statements of the Province have
in prepared which include the activities of certain of these entities. (See Section C).
IBor purposes of these financial statements the accounts of the Province are presented as one Consoli-
led Revenue Fund, which is comprised of:
General Fund—this includes the main operating accounts of the Province; it includes all transactions of
the Government not otherwise earmarked by legislative action, including the accounts of the
British Columbia Liquor Distribution Branch, the Queen's Printer and the Purchasing Commission; and
Special Purpose Funds—these include earmarked revenues and funds set aside from the General Fund
I    for specific or special purposes.
In addition, the accounts disclose, on a memorandum basis, Trust Funds Under Administration, which
ciprisc monies administered by the Government but over which it has no power of appropriation and
i.udes trust deposits, sinking funds, certain assurance funds and superannuation funds.
BffirpLES of Combination
The accounts of the Special Purpose Funds have been combined with the General Fund after adjusting
tfffito a basis consistent with the accounting policies as described below. In order to maintain the reporting
jCreneral Fund expenditures consistent with legislative authority, inter-fund revenue and expenditure
lisactions from these various appropriations have not been eliminated from the General Fund accounts
[(tailed in Section B), but they have been eliminated from both accounting entities upon combination.
Ens of Accounting—General Fund and Special Purpose Funds
The accrual basis ofaccountingisused which, for these financial statements, is specifically expressed as
fows:
VfSevenue:
Taxes on income are recorded on a cash basis because of the impracticality and uncertainty involved
: in their estimation. With this exception, all other revenue received into the General Fund and Special
j Purpose Funds and to which the Government is entitled is recorded in these accounts and, at year-end,
1  where the Government has a legal claim upon outside parties, all amounts are recorded provided the
amount has been billed.
i: Expenditure:
All expenditure, including the cost of fixed assets, has been recorded for all goods received and
jigvices rendered during the year and, at year-end, where the Government has recorded its obligation to
I iSEts'c'e Parties> the amounts are recorded provided an invoice has been received or the expenditure can
I be reasonably estimated. Accumulated employee sick leave, vacation and other entitlements are
recorded as expenditure in the accounts when they are paid.
| Assets:
All assets are recorded to the extent that they represent claims of the Government upon outside
parties or items held for resale to outside parties as a result of events and transactions prior to the year-
1 end. Consistent with the reporting of fixed assets as expenditure, they are recorded at a nominal value of
$1. Rental payments for leases which transfer the benefits and risks incident to the ownership of certain
assets are reported as expenditure at the dates of inception of the leases.
■ All liabilities are recorded to the extent they represent claims payable by the Government to outside
■ parties as a result of events and transactions prior to the year-end.
 B 12 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
Basis of Accounting—Trust Funds Under Administration
These Funds are maintained on the cash basis whereby revenues are taken into the accounts in the fiscal
period in which they are received and expenditures are charged when the actual payments are made. This
basis of accounting has no effect on the operating results of the Government.
Foreign Currency Translation
Assets and liabilities denominated in foreign currency have been translated to Canadian dollars at the
exchange rate prevailing at the year-end. Adjustments arising as a result of foreign currency translation are
charged or credited to expenditure at the time the adjustments arise.
Cash and Short-Term Deposits
Cash balances are shown after deducting outstanding cheques issued prior to the year-end; those issued
subsequent to the year-end relating to the previous year are included with accounts payable.
Marketable Securities
Investments in marketable securities represent temporary investments and they are recorded at the lower
of cost or market value.
Accounts Receivable
Accounts receivable represent only valid accounts receivable from outside parties. Provision is made
where collectibility is considered doubtful.
Due From Crown Corporations and Agencies
Amounts due from Crown corporations and agencies represent short-term investments and advances
which will be realized in the following year. No provision for doubtful collection has been considered
necessary with respect to these accounts.
Inventories
Inventories comprise items held for resale and are valued at cost; inventories of supplies are charged to
the respective programs when the cost is incurred.
Mortgages Receivable
Mortgages receivable comprise mortgages secured by real estate and repayable over periods ranging up
to twenty-five years; provision is made where collectibility is considered doubtful.
Investments in and Advances to Crown Corporations
Investments in and advances to Crown corporations represent long-term investments and are recorded at
cost, unless significant impairment in value has occurred since the aquisition date, in which case they are
written down to recognize this loss in value.
Property Under Development
Property under development is comprised of all property which will eventually be sold to outside
parties; such property is recorded at original cost together with related development costs incurred since
acquisition less a provision for future losses.
Other Investments
Other investments include loans, investments and advances which are considered to be recoverable;
they are recorded at the lower of cost or net realizable value.
2. Changes in Accounting Policies
Subsequent to the year-end, Treasury Board approved new accounting policies to take effect in the
preparation of the Public Accounts for 1980/81 and subsequent years. In order to provide a sound basis for
comparative purposes and to present the figures in a meaningful manner, these accounting policies have been
applied retroactively for financial statement purposes and the net assets at April l, 1980 have been restated.
In these financial statements, figures using these new policies have been prepared and disclosed under
the "accrual basis" column. Figures have also been prepared in accordance with the accounting policies in
effect in prior years ("cash basis") for the year ended March 31,1981 with comparative figures on the same
basis for the year ended March 31, 1980.
M
 IF
PUBLIC ACCOUNTS 1980/81 B  13
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
2. Changes In Accounting Policies—Continued
In previous years the cash basis of accounting, modified as described below, was used to report on the
Stewardship of the Government with respect to taxes and other revenues raised and funds appropriated and
expended for Government programs. On this basis, revenues were taken into the accounts in the fiscal period
m which they were received and expenditures were charged when the actual payments were made.
Under the basis used in prior years, payments for fixed assets, recoverable loans and advances, transfers
to other funds and investments in Crown corporations were recorded as expenditures. Furthermore, certain
modifications were made at year-end to the cash basis used in determining the operating results, including:
Bhe establishment of accounts receivable for monies received in April under cost-sharing agreements with
rother governments and of accounts payable for all payments made in April; the inclusion of net income of
certain Crown entities—the British Columbia Liquor Distribution Branch and the British Columbia Systems
Corporation—and of working capital advances made to certain Crown agencies—the Queen's Printer and
the Purchasing Commission; and the accrual of interest payable at the year-end on unmatured debt. Finally,
certain items recorded as expenditures in determining the Revenue Surplus for the year were reinstated as
assets, on a memorandum basis, to a Capital Surplus account.
; In accordance with the Government's new accounting policies, the Capital Surplus account has been
removed and appropriate adjustments made to the net equity as at April 1,1980. The effect of the changes in
accounting policies on the net equity of the Consolidated Revenue Fund, as restated, is as follows:
MR equity as at March 31, 1980, per 1979/80 Public Accounts..
Reclassification of certain Special Purpose Funds	
Accounting policy adjustments:
Items previously recorded in Capital Surplus:
Accounts receivable	
Due from Crown corporations	
Other investments	
Other items:
m Accounts receivable	
■ Accounts payable       (10,100,503)
■ Inventories	
K Fixed assets	
m Advances re: Housing Initiative Program Agreement....
Net equity as at March 31, 1980, as restated	
1 The effect of the changes in accounting policies on the operating results for the fiscal year ended March 31,1981 is as
Iffflrows:
Special Consolidated
General                   Purpose Revenue Fund
Fund                      Funds Total
Net revenue (expenditure) for the year—cash basis     (496,737,586)       124,925,535 (371,812,051)
Debt repayment adjustment        26,100,000             — 26,100,000
(470,637,586)        124,925,535 (345,712,051)
Net accounting policy adjustments      (108,410,508)        197,388,014 88,977,506
: Met revenue (expenditure) for the year—accrual basis     (579,048,094)       322,313,549 (256,734,545)
Genera]
Fund
Special
Purpose
Funds
Consolidated
Revenue Fund
Total
$
309,388,866
$
945,288,357
2,944,565
948,232,922
$
1,254,677,223
2,944,565
309,388,866
1,257,621,788
458,519,073
71,605,591
1,897,671
458,519,073
71,605,591
1,897,671
171,483,194
(10,100,503)
7,645,665
(3,945,656)
200,000,000
5,732,996
(199,437,470)
177,216,190
(10,100,503)
7,645.665
(3,945,656)
562,530
1,206,493,901
754,528,448
1,961,022,349
Qi
 B 14
PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
3. Cash and Short-Term Deposits  1981  1980      ]
Accrual Cash Cash
Basis Basis Basis
Cash                                                                                                 $ $ $
Cash overdrawn at chartered banks in Canada     (193,467,785) (193,467,785) (116,849,36a
Cash in banks in England             124,893 124,893 59,2891
Cash in banks in United States              106,831 106,831 143,6921
Cash on hand              105,261 56,906 13,893
(193,130,800) (193,179,155) (116,632,483
Short-term deposits       836,205,461 836,205,461 1,315,141,483
643,074,661 643,026,306 1,198,508,99a
Less amounts applicable to Trust Funds       128,338,225 128,338,225 167,532,5tM
Total cash and short-term deposits       514,736,436 514,688,081 1,030,976,433|
Other than statutory requirements or administrative policies which specifically provide for the maintenance of separate bank accounts, the Government's cash balances and short-term deposits are all held in
General Fund bank and investment accounts. This facilitates cash management and administration, although
interest due to funds other than the General Fund is allocated or paid to those funds at market rates. At yeS
end, balances applicable to funds outside the Consolidated Revenue Fund are deducted from the General
Fund balance and reported in the other fund accounts.
4. Marketable Securities
B.B.C. Mortgage Ltd	
Canadian Dominion Leasing Corporation Ltd.
notes	
Canada Treasury bills	
Export Development Corporation	
First Canadian Investment Limited	
Globe Realty Limited	
Government of Canada bonds	
Hydro Quebec notes	
Province of Newfoundland Treasury bills	
Province of Quebec Treasury bills	
Province of Saskatchewan notes	
Province of Saskatchewan Treasury bills	
Roylease Limited	
Roymor Limited	
Scotia Leasing Limited	
Scotia Mortgage Corporation	
Tordom Corporation	
Lower of Cost
Market
or Market
Value
Cost
Value
Cost    j
$
$
$
$
1,923,644
2,000,000
1,923,644
—
14,494,622
15,093,853
14,494,622
2,442,4ffl
130,673,547
131,162,142
130,673,547
9,090,6003
—
NK9BI
—
49.364
30,247.985
30,990,456
30,247,985
—     j
11,432,013
11,430,564
11,430,564
—     j
3,574,000
3,544,400
3,544,400
—    j
—
—
—
20,000,000 )t
4,890,457
4,885,550
4,885,550
—     :
6,769,749
6,759,870
6,759,870
—     .
9,884,113
9.880,900
9,880,900
—- jfl
4,875,148
4,870,700
4,870,700
—   .,
4,156,153
4,153,446
4,153,446
—   '
2,960.954
3,000,000
2,960,954
—
865,015
900,000
865,015
—  ^
984,772
984,690
984,690
—     3
8,777,559
8,765,104
238,421,675
8,765,104
236,440,991
—    i
236,509,731
31,582,41'*;,
 PUBLIC ACCOUNTS 1980/81
B  15
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
5. Accounts Receivable
■government of Canada—
ft Shared-cost programs	
ft French language program	
(Eitish Columbia municipalities—re: shared-cost programs 
Taxes receivable (net of provision for doubtful recoveries of
~t $838,230)	
Ember royalty and stumpage and grazing fees	
ra:hool districts, library districts, improvement districts, water
■ districts, co-operative associations, local areas and other	
KTjnisterial advances and sundry agencies (net of provision for
■doubtful recoveries of $625,925)	
flfrade accounts and other receivables of the—
BCrown Land Fund	
■ British Columbia Liquor Distribution Branch	
m Queen's Printer	
[&:crued interest receivable	
JEand sales—principal	
mater and power licence fees	
Mpurtfees	
Bgindry fees	
Miscellaneous accounts receivable	
6. Due From Crown Corporations and Agencies
jMtish Columbia Assessment Authority	
^tish Columbia Buildings Corporation	
JMfish Columbia Development Corporation	
jjgtish Columbia Ferry Corporation	
lattish Columbia Housing Management Commission..
;Bntish Columbia Hydro and Power Authority	
[Bmxish Columbia Liquor Distribution Branch	
Jtotish Columbia Petroleum Corporation .......
JBntish Columbia Place Ltd	
(British Columbia Railway Company	
Ijffitjsh Columbia Steamship Company (1975) Ltd	
i^gsh Columbia Systems Corporation	
H matrance Corporation of British Columbia	
Sjgiical Services Commission of British Columbia	
vletro Transit Operating Company	
Public Service Superannuation Fund	
I Jrban Transit Authority	
ii Workers' Compensation Board of British Columbia	
I 3ther agencies	
Accrual
Basis
$
80,249,081
129,625
3,499,488
142,484,373
12,350,377
4,151,442
24,332,605
702,657
252,350
28,029,483
1,110,672
2,240,907
5,181,431
5,067,120
5,344,686
356,852,098
Cash
Basis
36,891,056
129,625
3,499,488
25,454,860
16,351,385
41,725,801
4,151,442
24,054,761
252,350
1,110,672
2,240,907
447,649
156,309,996
Cash
Basis
22,013,696
733,031
1,806,542
21,646,090
112,355,270
36,066,147
3,679,623
17,274,881
318,857
1,301,642
117,065
913,8
218,226,692
Accrual
Cash
Cash
Basis
Basis
Basis
$
$
$
2,280,671
2,280,671
2,262,391
17,448,860
366,705
321,368
14,403
14,403
9,241
2,490,852
1,738,621
2,011,230
55,041
55,041
—
27,585,498
26,020,269
18,313,238
—
4,479,407
5,868,415
41,984,837
6,016
—
(1,496,435)
—
—
38,078,168
38,063,082
40,258,690
26,005
26,005
2,630
1,983,074
1,709,942
359,906
(2,248,666)
1,334
9,892
1,587,305
77,961
936,503
627,903
627,903
—
1,239,771
1,239,771
—
20,813
20,813
71,704
1,789,337
1,789,337
439,830
4,491,727
4,082,488
3,033,552
137,959,164
82,599,769
73,898,590
 B 16                                                 PROVINCE OF BRITISH (
COMBINED GENERAL FUND AND SP
(CONSOLIDATED REVE
NOTES TO COMBINED FINANC
FOR THE FISCAL YEAR ENDED MAR
7. Inventories
Ministry of Finance, Purchasing Commission	
:OLUMBIA
ECIAL PURP
NUE FUWffi'
IAL STATEMEI
CH 31,1981 —
1981
0SE FUNDS
frs
Continued
1980    1
Accrual
Basis
$
28,741,009
5,725,129
2,896,116
467,000
37,829,254
1981
Cash
Basis
$
361,412
1,745,187
Cash   |
Basis   1
$
324,369 c
1,624,252
8. Mortgages Receivable
Crown Land Fund—first mortgages, fully secured,
up to 25 years and interest rates varying from 49
Provincial Home Acquisition Fund—first and seco
pursuant to the Provincial Home Acquisition Act
Conversion and Leasehold Loan Act, fully secure
of up to 5 years and interest rates varying from 8%
of provision for doubtful recoveries of $200,0(X>
9. Investments In and Advances to Crown C
with terms of
to 19%
nd mortgages
and the Home
d, with terms
to 15'/4%(net
2,106,599
1,948,62*1
1980   5
Accrual
Basis
$
21,646,519
161,283,163
182,929,682
1981
Cash
Basis
$
19,574,390
161.483,163
181,057,553
Cash   1
Basis   9
$
20,140,493 j
193.763,87:
213,904,36
1980
orporations
British Columbia Buildings Corporation	
British Columbia Cellulose Company	
British Columbia Development Corporation....
British Columbia Ferry Corporation	
Shares
$
2
42,500,000
5,849,700
1
5
1
2
633,511
1
Advances
$
166,346,873
9,003,480
18,838,693
4,909,475
10,000,000
37,204,301
Total
$
166,346,873
2
51,503,480
5,849,700
18,838,693
4,909,475
1
5
10,000,000
1
2
37,837,812
1
Cash Basis.)
$
203,984,10 .1
7I.500.0C
5.849.7C
18,838,651
3,000,0(,0
10,000,01 X
6.699,71..'(
38,045,9' 1
50,0   1
1,949Jfi^
359,917lj||
orations. T    i
In addition
j investing idt
ts.
British Columbia Housing Management Commission	
British Columbia Steamship Company (1975)
Ltd	
British Columbia Systems Corporation	
Housing Corporation of British Columbia
Provincial Rental Housing Corporation	
Surrey Farm Products Investments Limited
T. S. Holdings Ltd	
Urban Transit Authority..	
48,983,223        246,302,822
(a) Recorded Investments
The above amounts are the Province's recorded investments and advance
entire issued capital stock for each of the above recorded investments is owned
number of other Crown corporations and agencies exist in which the Provinc
Crown corporations and agencies are listed in Note 1 to the Consolidated Fi
295,286,045
s to Crown corp
by the Province.
; has no recorde
lancial Statemen
 PUBLIC ACCOUNTS 1980/81 B  17
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
9. Investments in and Advances to Crown Corporations—Continued
IB) British Columbia Railway Company
i   The Province holds the entire issued share capital of the British Columbia Railway Company and,
pursuant to the British Columbia Railway Finance Act (formerly the British Columbia Railway Construction
j Loan Act), guarantees the payment of the principal and interest on all monies borrowed by the Railway. The
Iratoric cost of the shares was $ 185,572,900 and, at March 31,1981 the amount of the debt guaranteed by the
Province (net of sinking funds) was $713,226,540.
I   During the year ended March 31,1980, in view of the cumulative deficit of the Railway, the Province's
r investment was written down to one dollar.
I   During the year the British Columbia Railway Finance Act was amended to allow the Government to
provide $70 million to be applied against the debt service charges of the Railway for its fiscal year ended
I January 2,1981. The Government has provided $70 million from the General Rind to be applied against debt
ISvice charges of the Railway during its fiscal year ending January 1, 1982, and intends to provide for the
|^>t service charges on an ongoing basis.
f  The Railway's debt service charges for each of the next five fiscal years ending March 31,1982 through
(1986 are estimated to be $109.9, $79, $77.6, $77.6 and $77.6 million respectively.
Iff) Ocean Falls Corporation
I The Province, through Ocean Falls Corporation, is the owner of the newsprint mill and townsite at
Ocean Falls, which were acquired in 1973 for a payment of $789,952. In subsequent years, the Province
made additional advances to the Corporation which, together with accrued interest, approximated $12
million at March 31, 1980. Because of continuing losses incurred by the Corporation, both the investment
i. and advance were fully provided for in the 1979/80 Public Accounts and written off by Order in Council in the
1980/81 fiscal year. After the debt to the Province had been forgiven, the Corporation had outstanding
Irajgations of approximately $36 million at March 31, 1981.
E No provision has been made in these financial statements for the existing liabilities of Ocean Falls.
However, in order to prevent the accumulation of interest on the Corporation's loans, arrangements have been
made with a financial institution in the 1981/82 fiscal year, under which the Government maintains a deposit
account equal to the Corporation's loan. No interest is to be earned on this deposit. In turn no interest is to be
charged on the Ocean Falls loans. This arrangement will be maintained until a final evaluation of the
■ Corporation's business is made.
■ There are outstanding claims being pursued in the courts against the Corporation for alleged failure to
meet contractual obligations following the decision to cease operations in June, 1980. The Corporation
'jjSputes any liability under these claims. No provision has been made by the Corporation in estimating its
liabilities and no provision has been made in these financial statements.
I  (d) Housing Corporation of British Columbia
t| The operations of the Corporation are in the process of voluntary liquidation and the investment at
March 31,1980 has been recovered. Pending dissolution the investment has been written down to a nominal
value of $1.
|   le) T.S. Holdings Ltd.
f Effective March 31, 1981 the Company distributed its remaining assets to the Province (as sole
shareholder) in satisfaction of its share capital and retained earnings and was struck from the Register of
Companies on that date.
If) Thompson-Okanagan Transit Ltd.
f;  The advance of $50,000 was repaid to the Province upon dissolution of the Company at March 31,1981.
(g) Urban Transit Authority
£.' An operating advance of $ 1,949,681 outstanding at March 31, 1980 was repaid to the Province in the
31980/81 fiscal year.
 n
B  18 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
10. Property Under Development
Crown Land Fund—real estate-
Accrual
Basis
69,634,858
Cash
Basis
68,345,722
Cash
Basis
74,100,102 I
11. Other Investments
Accrual
Basis
Investments— $
British Columbia Regional Hospital Districts Financing Authority bonds  22,000,000
British Columbia School Districts Capital Financing Authority
bonds  59,071,501
British Columbia Resources Investment Corporation1  25,020,361
Kootenay Dehydrators2  100,000
Loans under the—
Farm Product Industry Act  2,225,613
Ministry of Industry and Small Business Development Act3  19.531,896
Agricultural Land Development Act  16,990,418
Oyster Seed Program  44,496
Advances—
CityofPenticton  150,000
University Endowment Lands3  —
British Columbia Central Credit Union under Housing Initiative
Program Agreement  186,967,005
332,101,290
Cash
Basis
$
Cash
Basis
22,000,000
22,000,000 0
59,071,501
47,025,219
100,000
59,071,5(11
45,206,2gl
100,000}
2,225,613
19,498,353
16,990,418
44,496
3,752,l«j|
27,890,5® I
15,191,4?sl
45.420
150,000
4,184,88718
562.53C
178,004,82(8
1 4.84 per cent interest, 4,654,955 common shares at market value (accrual basis).
2 35.9 per cent interest, 2,000 Class A common shares at cost, and entire issued capital stock of 98.000 Class B common shares at cost
3 Net of provision for doubtful recoveries aggregating $35,968,017.
12. Fixed Assets
Fixed assets are carried at a nominal value of $ 1 having been recorded as expenditures when purchased
On a memorandum basis, fixed assets, other than highways and the Songhees Reserve (land) account, an
depreciated on the straight-line method over a 40 year period. Highways were placed on the books at Marcl
31, 1926 based on mileage classification and average value determined by the then Department of Public
Works. No value has been determined for approximately 76 million hectares (293,000 square rniles-H
Crown land which is comprised of parks, forests and all other publicly held land in the Province. No valueffl
been determined for office equipment, furniture and automobiles which have been recorded as expenditure
when purchased.
Gross
$
Highways  2,510,053,781
Bridges  465,785,424
Wharves  203,250
Ferries and ferry landings  42,044,358
Buildings  24,110,559
Songhees Reserve, Victoria  773,690
Accumulated
Depreciation
Net
$
$
—
2,510,053,781
138,437,415
327,348,009
203,240
10
9,705,217
32,339,141
5,939,920
18,170,639
—
773,690
2,244,847 >K:
309,240,fi|
s
28,55>SN
18.429.5C
3,042,971,062 154,285,792
!,685,270     2,601,85(9
 PUBLIC ACCOUNTS 1980/81 B 19
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAfflENDED MAgCH 31,1981—Continued
13. Unmatured Debt I98i I980
$ $
©wince of British Columbia bonds      209,247,790        235,347,790
=========     =====
|«The bonds bear interest at 9'/s per cent per annum and are repayable in nine annual installments of
|§26,100,000 each commencing on May 1, 1979, through 1987, plus a final $26,547,790 on May 1. 1988.
I The Province has the right at any time to redeem the bonds in whole or in part. As at March 31,1980 and 1981
the total unmatured debt was held in the investment accounts of the Public Service Superannuation and other
■mist Funds.
14. Net Equity
! Net equity is represented by assets which have been appropriated for specific purposes and assets which
IB? unappropriated and available for future appropriation.
\ Unappropriated assets are comprised of the cash, short-term deposits, marketable securities, accounts
I receivable and inventories less accounts payable and accrued liabilities of the General Fund. All other assets
lor the General Rind less unmatured debt, and all assets less liabilities of the Special Purpose Funds are
considered to be appropriated.
15. Trust Funds Under Administration
I These comprise monies held in trust for third parties which are administered by the Government but over
which the Legislature has no power of appropriation and they include trust deposits, sinking funds, certain
■assurance funds and superannuation funds.
1981 1980
I Trust Deposits $ $
Courts  41,147,448 35,228,635
Intestate estates  27,172,001 21,786,756
■Bong term disability fund—Public Service  16,246,722 10,335*222
I   Long term disability fund—Crown corporations  3,443,582 2,283,435
Official Committee  47,212,557 32,855,355
HHjfficial Guardian MM  9,922,416 8,087,984
IBpther ■  29,794,871 366,559,474
174,939,597 477,136,861
r Sinking Funds
British Columbia Buildings Corporation '.zW.  5,735,100 3,317,512
Iftritish Columbia Ferry Corporation  17,629,635 20,698,377
IBritish Columbia Hyro and Power Authority  467,390,192 411,141,419
•British Columbia Railway Company  139,229,543 118,431,893
I■British Columbia Regional Hospital Districts Financing Authority  90,910,745 70,087,999
IBritish Columbia School Districts Capital Financing Authority  295,779,843 240,938,748
Kfreater Vancouver Sewerage and Drainage District  19,660,831 22,451,440
KHher H  9,445,599 7,573,489
1,045,781,488 894,640,877
Superannuation and Pension Funds
Public Service Superannuation Fund  982,343,070 823,384,647
Municipal Superannuation Fund  987,225,852 833,613,321
Teachers'Pension Fund  740,455,223 613,069,104
Epllcee Pension Fund  50,843,221 37,928,219
iDgtish Columbia Hydro and Power Authority Pension Fund  263,891,507 224,318,343
JOjitish Columbia Power Commission Superannuation Fund  24,416,744 23,239,083
British Columbia Railway Company Pension Fund  54,207,200 42,994,894
■gFembers of the Legislative Assembly Superannuation Account  2,252,338 1,811,372
"porkers' Compensation Board of British Columbia Superannuation Fund  28,526,111 23,980,369
3,134,161,266 2,624,339,352
s%cellaneous'   816,430,917 678,667,219
5,171,313,268 4,674,784,309
I See Section G of the Public Accounts for a list of these accounts.
 B 20 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
15. Trust Funds Under Administration—Continued
(a) Trust Deposits
Trust Deposits are the funds which are administered by the Government under statutes such as the
Patients Property, Estate Administration or Infants Acts. Patient accounts for some Government institutiorS
as well as surplus working capital funds for several Crown corporations are also administered in this sectioS
(b) Sinking Funds
Sinking Funds are the accumulation of installment payments and interest earned for the purpose of detra
retirement at some future date. The amount and number of installments as well as the type of securities m
which installments and interest earnings may be invested, may be specified in the debt issue.
(c) Superannuation and Pension Funds
The Government manages the administration of and is responsible for employee contributions to certara
superannuation and pension plans in accordance with the following Acts and Regulations:
Pension (Public Service) Act
Pension (Municipal) Act
Pension (Teachers') Act
Pension (College) Act
Legislative Assembly Allowance and Pension Act
British Columbia Hydro and Power Authority Pension Fund Regulations
British Columbia Power Commission Superannuation Fund Regulations
British Columbia Railway Company Pension Fund Rules and Regulations
Workers' Compensation Board Superannuation Fund Plan
The Government is responsible for the employer contributions, and has statutory responsibilities wffll
respect to unfunded liabilities under the Pension (Public Service) Act, the Pension (Teachers') Act and the d
Legislative Assembly Allowance and Pension Act. The Government has no statutory responsibilities wiffl
respect to unfunded liabilities under the other Acts and Regulations noted above.
Summarized actuarial balance sheets of the pension and superannuation funds are set out on ^
following page.
(d) Miscellaneous Trust Funds
Miscellaneous Trust Funds include those accounts which have been established by statutes to protect the
citizens of British Columbia. Included are the Workers' Compensation Board, Crop Insurance, Land
Registry Assurance and Travel Agents Assurance Funds.
tl
 PUBLIC ACCOUNTS 1980/81
B 21
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 B 24 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
16. Contingent Liabilities—Guaranteed Debt—Continued
Gross outstanding debt as at March 31, 1981 includes accrued interest of $228.3 million. In previous
years gross outstanding guaranteed debt was reported exclusive of accrued interest. In order to reflect tha
change, gross outstanding guaranteed debt as at March 31, 1980, previously reported as $8.2 billion, has
been increased by accrued interest of $213.7 million.
Debt payable in United States currency is recorded in Canadian dollars at the rate of exchange prevailing ;
at March 31,1981, and the comparative 1980 guaranteed debt has been restated in Canadian dollars at the rate
of exchange prevailing at March 31, 1980.
Sinking funds comprise cash and investments recorded at cost, plus accrued interest of $23.1 millioj
with the exception of item 9 which is shown at an adjusted value equivalent to the gross outstanding debt. Thai
market value of these sinking fund investments was approximately $838 million at March 31,1981; however,
these are not considered to be temporary investments, since it is generally the Government's policy not (9
redeem them prior to maturity, at which time the par value is realised. Sinking fund investments were I
previously reported at par value and in 1981 sinking funds would total $1.1 billion if par value were to be aseW
for investments. In order to reflect this change for 1980, net sinking funds included in the comparative figurS
as at March 31,1980 have been reduced from their par value of $910.3 million to their cost of $904 million
The Government has guaranteed debt securities issued by local governments, Crown corporations aim
agencies, and the obligations of other enterprises under certain Government programs. This debt is generally
self-sustaining, although that issued by School and Regional Hospital Districts and Educational Institutions
is serviced in part by contributions from the Government through existing grant formulas. In 1980/81 these
contributions were approximately $112.4 million or 60 per cent of the total debt costs payable. The debt of the
British Columbia Railway is not recorded as direct debt of the Province since the Government is providing fia
the debt service charges of the Railway on an ongoing basis. In 1981 this amounted to $70 million.
As a result of overall Government financing policies $3.9 billion of the guaranteed debt is held in
investment accounts included in these financial statements and in other Provincial public sector superannuation and pensions funds. Canada Pension Plan funds made available to the Government ($2.7 billion) are also
invested in these securities but are subject to redemption on six months' notice by the Federal Minister of
Finance.
Subsequent to the year end there have been additional net debt issues guaranteed by the Province
totalling $994 million.
17. Contingent Liabilities and Commitments
The Government has various contingent liabilities outstanding in the form of litigation, indirect
guarantees and outstanding claims. Because such amounts are uncertain, no liability has been recorded in
these financial statements.
In addition, at the end of each year the Government has a number of general commitments outstanding
for ongoing programs and operations. Such future expenditures are charged to the appropriation in the year in
which the work or service is performed. These include a liability for credits frozen under the Government
former sick leave plan which is estimated at a maximum of $97 million.
18. Workers' Compensation Board of British Columbia—Unfunded Liability
The Workers' Compensation Board of British Columbia, established under the Workers' CompensatuwJk
Act, delivers compensation and preventive medical services, sets and controls working conditio!®
throughout the Province and provides education and rehabilitation services to injured employees. The BoaM
funds its operations from assessments on businesses throughout the Province.
The Board is required in each year to provide capitalized reserves under the Accident and Silicosis
Fiinds sufficient to meet future payments of compensation accruing in future years in respect of all injuries
occurring during the year. Provisions have proven to be insufficient and at December 31, 1980 cumulate
actuarial liabilities exceeded the funded balances by approximately $380 million. The balance of m
unfunded liability has increased to the point that it now exceeds one year's total class income. At this time, the
Board considers that the deficiencies will be recovered from future assessments by 1986.
J|
 PUBLIC ACCOUNTS 1980/81 B 25
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED MARCH 31, 1981—Continued
19. Subsequent Events
|a) Amendment to the Resource Investment Corporation Act
During the 1981 spring and summer session of the Legislature the Resource Investment Corporation Act
was amended to enable the Terry Fox Medical Research Foundation to hold more than 1 per cent of the issued
and outstanding voting shares in the British Columbia Resources Investment Corporation. The amendment
squires that the voting rights attached to the shares held in excess of 1 per cent may not be exercised and that
py shares which may be transferred by the Government to the Foundation, may not be sold or transferred
although they may be mortgaged, charged or pledged.
|b). Provincial Debt Repayment Act
Under the Provincial Debt Repayment Act the Legislature authorized the expenditure of $26.1 million in
the 1981/82 fiscal year to reduce the Provincial unmatured debt of $209,247,790.
|c) British Columbia Railway Company—Tumbler Ridge Branch Line
The British Columbia Railway Company has begun construction on the Tumbler Ridge Branch Line for
pe North East Coal Project to be completed in 1983 at a total estimated cost of $500 million. The
government has expressed its intention to make appropriate financial arrangements to ensure that the British
Columbia Railway Company fully recovers the project's capital costs.
 B 26 PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
STATEMENT OF GENERAL FUND AND SPECIAL PURPOSE FUNDS OPERATING RESULTS
FOR THE FISCAL YEAR ENDED MARCH 31,1981
 1981  1980
Accrual Cash Cash
Basis Basis Basis
(Note 1) (Note 2) (Note 2)
GENERAL FUND                                             $ $ $
Revenue ;.!.'.'    5,699,889,486 5,811,925,591 5,515,443,92oJ
Expenditure.,   6,278,937,580 6,308,663,177 5,327,317,12»
Increase (decrease) in net equity for the year      (579,048,094) (496,737,586) 188,126,799M
Balance of net equity from April 1976 to date—
Beginning of year    1,441,841,691 544,736,656 356,609,85'H
Adjustments re:
Deficit at March 31, 1976funded     (209,247,790) (209,247,790) (235,347,790l
Debt repayment       (26,100,000) — —
1,206,493,901 335,488,866 121,262,06^
End of year       627,445,807 (161,248,720) 309,388,866
SPECIAL PURPOSE FUNDS
Revenue
Transfers from General Fund       520,549,982 520,549,982 392,967,8lS
Interest on investment and loans         72,286,304 63,799,670 62,939,00M
Other receipts        43,210,016 41,790,304 25,761,56M
636,046,302 626,139,956 481,668,388
Expenditure
Transfers to General Fund         12,660,764 12,660,764 2,324,25M
Grants      233,369,761 230,385,034 182,459,58M
Administration and other expenditure         67,702,228 258,168,623 20.624.13 J
313,732,753 501,214,421 205,407,97M
Net increase in funds      322,313,549 124,925,535 276,260,41M
Balance of funds
Beginning of year       754,528,448 948,232,922 671,972,510
End of year    1,076,841,997 1,073,158,457 948.232.922M
RECONCILIATION TO STATEMENT OF NET EQUITY
General Fund—balance :...-       627,445,807 (161,248,720) 309,388,866
Special Purpose Funds—balance    1,076,841,997 1,073,158,457 948,232,92m1
Net equity—end of year    1,704,287,804 911,909,737 1,257,621,788
 PUBLIC ACCOUNTS 1980/81 B 27
COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
(CONSOLIDATED REVENUE FUND)
[STATEMENT OF GENERAL FUND AND SPECIAL PURPOSE FUNDS REVENUE BY MAJOR
SOURCES
FOR THE FISCAL YEAR ENDED MARCH 31,1981
Estimated  *2*>       1980	
[    Cash Basis                                                                                           Accrual Basis            Cash Basis Cash Basis
1981                                                                                                    (Note 1)                  (Note 2) (Note 2)
$                                                                                                           $                            $ $
General Fund—
E;905,000,000         Taxation       3,007,904,660     2,966,363,673 2,673,868,887
1,180,000,000         Natural resources          862,370,360        988,202,065 1,298,036,393
364,629,000         Other         430,351,922        444,822,022 323,192,061
I 274,000,000        Contributions from Government enterprises Ml          293,115,747        313,971,707 244,310,996
6,076,000,000         Contributions from other governments       1,106,146,797      1,098,566,124 976,035,589
[5,799,629,000            Total General Fund revenue      5,699,889,486     5,811,925,591 5,515,443,926
Special Purpose Funds—
Taxation                 666,224               666,224 671,364
Other revenue         635,380,078        625,473,732 480,997,024
Total Special Purpose Funds revenue         636,046,302        626,139,956 481,668,388
STATEMENT OF GENERAL FUND AND SPECIAL PURPOSE FUNDS EXPENDITURE
BY MAJOR FUNCTIONS
FOR THE FISCAL YEAR ENDED MARCH&1,1981
1981       ^^^B 1980
B  Estimated 	
Cash Basis Accrual Basis Cash Basis Cash Basis
1981 (Note 1) (Note 2) (Note 2)
j $ $ S
General Fund—
■260,475,289        General Government  253,551,740 253,967,497 241,538,445
■290,483,951         Protection of persons and property  286,122,737 286,934,274 262,056,886
471,971,214         Transportation and communications  577,315,553 581,929,247 515,718,281
E341,000,715         Health and social services.,..  2,499,905,310 2,497,321,493 2,015,715,164
K53,455B|2        Recreation and cultural services  71,251,811 71,327,798 60,300,036
■301,482,003         Education  1,317,935,924 1,322,152,082 1,199,078,679
■ 349,868,708         Natural resources and primary industries.. 504,176,773 507,655,091 322,921,033
116,039,423         Trade and industrial development  116,709,210 126,684,544 104,728,548
91,484,885         Housing M  86,504,825 86,522,261 268,611,031
■388,299,222         Aid to local government  380,107,283 381,988,016 203,650,786
I   19,500,000        [interest on public debt  19,299,398 45,399,398 47,781,023
84,000,000         Advances and grants  94,197,784 97,059,500 39,562,420
■ 31,568,048         Other expenditure^,  71,859,232 49,721,976 45,654,795
P799,629,000            Total General Fund expenditure  6,278,937,580 6,308,663,177 5,327,317,127
Special Purpose Funds—
General Government....s>  1,309,447 1,309,447 1,041,212
Protection of persons and property  75,621 75,621 40,352
Transportation and communications  8,107,737 7,013,685
Health and social services  3,802,954 3,790,536 3,138,658
Recreation and cultural services  11,750,441 12,100,441 9,679,697
Natural resources and primary industries.. 47,687,346 46,041,186 9,134,209
Trade and industrial development  13,185,789 13,198,938 936,577
Housing  31,433,475 222,801,059 24,809,361
Aid to local government  173,104,611 173,104,611 145,064,345
Advances and grants  11,641,105 10,144,670
Other expenditures £M:  11,634,227 11,634,227 11,563,565
Total Special Purpose Rinds
expenditure  313,732,753 501,214,421 205,407,976
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 PUBLIC ACCOUNTS 1980/81 B 35
A GUIDE TO STATEMENT CLASSIFICATION OF EXPENDITURE BY OBJECT
(pages B 36 and B 37)
The following are details of the types of expenditures included in each of the object classifications:
I Salaries and Wages
Salaries and wages for persons in established and temporary positions and allowances and expenses for
i Members and Officers of the Legislative Assembly.
luravel
Travelling expenses of public servants on government business and members of Boards, Commissions,
etc. Also includes lease and operation of motor vehicles used for staff travel and relocation purposes.
BEervices
Fees and expenses for services rendered by professionals, by British Columbia Systems Corporation
I and by Boards, Commissions, etc. Also includes costs associated with advertising and publications.
Utilities, Materials and Supplies
I   Office operating expenses, materials and supplies, and purchases of office furniture and equipment.
Acquisition of Physical Assets
Acquisition of land, buildings, works, machinery, equipment and motor vehicles.
I Mentals
[    Lease or rental of land, buildings, aircraft and equipment from outside suppliers including British
Columbia Buildings Corporation.
Grants, Contributions and Subsidies
i   Payments, other than for goods and services, made for the purpose of furthering ministerial programs.
Other Expenditures
I   All other expenditures not otherwise classified including interest on deposits, loans and advances,
(transfers to special purpose funds, and supplementary personnel costs.
■Recoveries
■  Cost recoveries in cash or by transfer billings to other votes.
 B 36
PROVINCE OF BRITISH COLUMBIA
COMBINED GENERAL FUND
(CONSOLIDATED!
STATEMENT OF COMBINED GENERAL FUND AND SPECIAL PURPOSE FUNDS
FOR THE FISCAL YEAR
Ministry
Salaries
and Wages
Legislation  5,062,537
Auditor General  1,539,546
Ombudsman  709,167
Premier's Office  403,776
Agriculture and Food  13,600,760
Attorney General  107,185,902
Consumer and Corporate Affairs  10,466,241
Education  12,447,963
Energy, Mines and Petroleum Resources  8,401,440
Environment  37,099,387
Finance  41,173,253
Forests  99,061,051
Health  126,110,006
Human Resources  100,293,068
Industry and Small Business Development  5,106,324
Intergovernmental Relations  867,748
Labour  21,166,262
Lands, Parks and Housing  29,017,543
Municipal Affaire  2,429,885
Provincial Secretary and Government Services 30,176,111
Tourism  2,570,769
Transportation and Highways  163,536,401
Universities, Science and Communications  2,286,304
Statutory Appropriations	
Other Expenditure	
Special Purpose Appropriation Act, 1980  12,958,379
Special Funds Act, 1980	
Forest and Range Resource Fund Act	
Less: Transfers to Special Purpose Funds	
Special Purpose Funds  816,811
Less: Transfers to General Fund  fjgg2g$K
Combined Expenditure—Cash Basis  834,486,634
Accounting Policy Changes  (16,547)
Combined Expenditure—Accrual Basis  834,470,087
Comparative— 1980 Combined Expenditure—
Cash Basis  753,448,077
Utiliries.
Materials H
and
Travel
Services
Supplies
$
$
$
32,738
88,673
725,811
200,248
285,263
79,855
66,923
114,228
101,329
125,214
4,369
68,131
1,480,913
2,400,483
2,705,04ffl
4,108,720
70,340,966
12,398,395
501,505
2,231,322
895,210
661,942
9,588,020
11,976,893
916,393
3,582,339
871,667
3,958,661
8,489,964
4,564,240
959,455
10,562,729
3,124,7ia
5,994,504
26,150,666
20,630,308
4,221,957
38,757,576
29,473,987
3,165,337
55,519,291
7,180,7|j
533,347
4,121,141
464,586 .
151,557
439,463
280,854
1,849,553
2,737,900
1,290,261
1,570,652
2,734,320
5,455,2^
206,226
698,667
139.968
1,070,744
12,048,765
20,391,261
345,540
5,900,155
1,580,141 1
8,191,758
11,146,427
73,171,5^1
152,423
746,124
2,947,778
300,391
611,204
1,587,148
12,074,641 H
48,078
41,125,592
(205,275)
40,920,317
34,678,914
6,202,743
279,426,520
(138,129)
241,011,381
562,5^1
210,507,676
(745111
209.762iBal
186,092,767
1 Represents advance re rural school taxes ($153,064,416 recovered).
2 Includes $19,299,398 interest on public debt, $13,989,942 interest on deposits, $32,608,855 of loans and advances under variousl
statutes ($32,444,978 recovered), and $481,709, of sundry expenditure.
j Transfers to Special Purpose Funds of $520,549,982 include Agriculture (Farm Income Assurance) $9,749,982, Municipal Affairs
(Revenue Sharing Fund) $176,200,000, Statutory Appropriations $150,000,000. Special Funds Act, 1980 $38,000,000, and ForesMl
Range Resource Fund $146,600,000.
4 Transfers of $41,774,133 include (a) revenue to the General Fund of $12,660,774 composed mainly of recovery of Vancouve^ffll
Victoria Trade and Convention Centre Fund balances of $12,500,000 and (b) recoveries of expenditure to General Fund vot^ral
$29,113,359 consisting principally of recoveries to various Forests votes of $23,949,141 from the Forest and Range Resource Fund
—
 PUBLIC ACCOUNTS 1980/81
B 37
AND SPECIAL PURPOSE FUNDS
REVENUE FUND)
: EXPENDITURE BY OBJECTS OF EXPENDITURE CLASSIFICATION (GROUPED)
ENDED MARCH 31,1981
Acquisition
Grants,
of
Contributions
Other
1   Physical
and
Expendi
Less:
Total
[     Assets
Rentals
Subsidies
tures
Recoveries
Expenditures
$
$
$
$
$
$
1,948
66,345
67,500
81,404
6,126,956
218,118
25,400
2,348,430
148,346
1,139,993
787
463
602,723
883,442
4,833,293
30,101,392
16,518,469'
(1,614,568)
70,909,224
1,657,442
37,904,250
9,630,687
11,658
243,238,020
115,437
1,484,357
232,670
15,926,742
349,413
2,412,659
1,014,614,081
156,324,044'
(171,486,711)
1,036,888,304
544,651
1,780,277
1,220,712
3,921
17,321,400
13,955,331
10,557,755
3,412,673
5,206
(325,971)
81,717,246
294,795
5,658,906
13,993,185
66,379,9032
(34,099,861)
108,047,077
| 12,369,525
26,036,539
1,671,100
115,729
(29,264,728)
162,764,694
4,475,385
30,660,745
1,502,833,634
4,554,338
(11,059,903)
1,730,027,725
1,130,322
17,460,255
571,926,068
230,559
(2,394,920)
754,510,752
15,022
685,546
20,762,606
22,564,224
54,252,796
156,046
86,980
120,731
(14,328)
2,089,051
247,445
2,162,828
15,834,757
11,118,677
(1,009,047)
55,398,636
1,354,558
3,135,257
24,011,801
76,734
(2,492,173)
64,863,911
410,028
145,048,965
176,899,776'
325,833,515
945,922
9,583,989
12,386,231
128,071,974
(28,283,168)
186,391,829
83,117
722,343
692,223
40,632
11,934,920
■65,622,649
42,957,912
73,024,604
376,172
(49,630,318)
488,397,190
711,376
17,654,390
265,920,909
7,296,199
(2,548,642)
292,519,388
83,501,609
150,000,000'
233,501,609
10,914,693
2,100,000
15,962,471
51,149,716
31,174,171
25,700,705
26,100,000
38,000,000'
146,600,000'
(520,549,982)'
(7,389)
161,348,575
38,000,000
146,600,000
(520,549,982)
1  6,299,541
523,473
230,385,034
256,376,219
501,214,421
(41,774,133)"
647,642,917
29,113,369
(305,118,358)
(12,660,764)
B)2,207,037
248,388,615
4,058,000,219
6,276,666,852
688,190
39,136
(33,916,056)
(213,359,546)
30,446,477
(217,207,265)
1152,895,227
248,427,751
4,024,084,163
434,283,371
(274,671,881)
6,059,459,587
R31,147,171
230,088,591
3,293,775,383
425,495,227
(255,980,224)
5,139,757,287
 B 38
PROVINCE OF BRITISH COLUMBIA
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 PUBLIC ACCOUNTS 1980/81
r> 9
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CO    &
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■SSI
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rj4r!   •£
■L-^-t
 1,287,000,000
526,000,000
680,000,000
199,000,000
28,000,000
1,000,000
72,000,000
47,000,000
23,000,000
17,000,000
14,000,000
10,000,000
1,000,000
2,905,000,000
452,000,000
250,000,000
62,000,000
20,000,000
52,000,000
12,000,000
6,000,000
4,000,000
858,000,000
40,000,000
234,000,000
15,000,000
1,530,000
970,000
291,500,000
7,500,000
16,000,000
7,000,000
1,180,000,000
3,800,000
4,400,000
8,100,000
2,500,000
2,800,000
9,000,000
2,400,000
25,000,000
1,300,000
750,000
Revenue
Policy
Revenue
(Cash Basis)
Changes
(Accrual Basis)
$
$
$
1,369,211,996
—
1,369,21 l,99fl
456,608,866
—
456,608,866
726,251,917
31,723,030
757,974,9^
195,362,249
7,173,911
202,536,1OT
28,536,417
447,358
28,983,773
16,763
—
16,763
71,739,328
2,915,466
74,654,793
52,867,281
(190,585)
52,676,6sl
25,227,674
67,376
25,295,Ci5|
17,196,825
288,168
17,484,993
15,224,412
263,533
15,487,945
6,035,987
—
6,035,987
2,083,958
(1,147,270)
41,540,987
936,688
2,966,363,673
3,007,904,660
PROVINCE OF BRITISH COLUMBIA
DETAILS OF GENERAL FUND REVENUE
FOR THE FISCAL YEAR ENDED MARCH 31,1981
Source
Taxation Revenue—
Personal Income	
Corporation Income	
Social Services	
Gasoline	
Motive-fuel Use	
Fuel Oil	
Cigarette and Tobacco	
Corporation Capital	
Property	
Insurance Premiums	
Hotel and Motel Room	
Pari Mutuel Betting	
Succession and Gift	
Total Taxation Revenue	
Natural Resource Revenue—
Minerals—
Petroleum and Natural Gas—
British Columbia Petroleum Corporation	
Permits and Fees	
Petroleum and Natural Gas Royalties....
Mining Tax	
Mineral Resource Tax	
Mineral Land Tax	
Coal, Minerals and Metal Royalties	
Miscellaneous Mining Receipts	
Forests—
Logging Tax	
Timber Sales (net of allowance for road
building, reforestation, etc.—
$80,859,192)	
Timber Royalties	
Grazing Permits and Fees	
Miscellaneous Forests Receipts	
Land Leases, Rentals and Fees	
Water Resources—
Water Rental and Recording Fees	
Wildlife Act—Fees and Licences	
Total Natural Resource Revenue
Other Revenue-
Sales and Service Fees—
Land Sales	
Motor Vehicle Lien and Search Fees	
Medical Services Recoveries	
Ferry Revenue	
Ambulance Service..	
Forest Scaling Fees	
Land Clearing Receipts	
Land Registry Fees	
Sheriffs' Fees	
Publications Service Branch	
220,075,000
(11,748,667)
208,326,333 (
156,459,474
—
156,459,474 \
50,904,912
(8,088)
50,896,824 !
10,173,247
785,070
10,958,3jal
84,712,742
—
84,712,701
10,358,140
(3,071)
10,355,069
5,249,914
—
5,249,981
8,317,143
—
8,317,143
535,275,816 1
546,250,572
(10,974,756)
45,309,833
246,267
45,556,100)
329,678,480
(96,152,526)
233,525,9m|
13,706,404
(3,840,155)
9.866,249
1,447,193
—
1,447,193
809,395
(50)
809.345
390,951,305
(99,746,464)
291,204,841 8
9,750,349
(232,262)
9,518,0870
35,035,705
(14,878,223)
20,157,482).
6,214,134
—
6,214,13-11
862,370,3^1
988,202,065
(125,831,705)
3,407,137
41,290
3,448,42:
5,164,381
—
5,164,381.
9,351,461
(208,860)
9,142,60
3,115,428
—
3,115,421 •.
3,556,801
353,521
3.910,32
9,085,999
—
9,085,99! 1
2,658,962
(2,658,962)
—
36,299,084
—
36,299,08   ',
1,319,674
1,082
1,320,75
1,080,071
(7,642)
1,072 Jail
 PUBLIC ACCOUNTS 1980/81
B 41
DETAILS OF GENERAL FUND REVENUE
FOR THE FISCAL YEAR ENDED MARCH 31,1981— Continued
;   1,950,000
2,500,000
;   5,500,000
70,000,000
70,000,000
5,950,000
E 2,400,000
\ 1,900,000
I 2,000,000
f   9,300,000
I 1,000,000
150,000
I 2,340,000
t 4,960,000
1100,000,000
115,000,000
145,000,000
' 9,600,000
t 3,750,000
' 13,350,000
t' 4,300,000
;   5,500,000
fell ,479,000
134,629,000
. 364,629,000
Source
Other Revenue—Continued
Receipts from Beautiful British Columbia Magazine	
Miscellaneous Parks Receipts	
Miscellaneous Sales and Services	
Licences and Permits—
Motor Vehicle Licences and Permits	
Companies Branch	
Electrical Energy Inspection Fees	
Fire Services Act—Fees', etc	
Law Stamps....	
Liquor Licensing Branch—-Permits and
Fees	
Mobile Home Regisuy	
Probate Fees	
Camp-site Permits and Park Use	
Miscellaneous Licences and Permits	
Fines and Penalties	
Interest from Investments	
Miscellaneous—
■' s .Institutional Maintenance Receipts—
Maintenance of Children	
Other Maintenance Receipts	
Miscellaneous Revenue—
Insurance Claim Receipts	
Superannuation Branch—Cost Recoveries	
Other Miscellaneous Receipts	
Recoveries from Special Purpose
Funds—
Vancouver Trade and Convention
Centre	
Victoria Trade and Convention
Centre	
Recovery of advances to Urban Transit Authority	
Recovery of advances to British Columbia Assessment Authority...	
Recovery of funds granted to Provincial Capital Commission re Trade
and Convention Centre	
Standard Brands—Note Settlement..
Total Other Revenue	
Revenue
(Cash Basis)
$
Policy
Changes
$
Revenue
(Accrual Basis)
$
1,958,014
1,532,792
7,566,324
(44,973)
37,454
1,958,014
1,487,819
7,603,778
86,096,128
(2,487,090)
83,609,038
81,370,166
7,400,167
2,919,202
1,919,797
2,310,655
190,972
1,010
81,561,138
7,400,167
2,920,212
1,919,797
2,310,655
11,764,787
1,152,072
43,314
2,402,966
5,878,245
(31,440)
172,651
11,764,787
1,152,072
11,874
2,402,966
6,050,896
117,161,371
333,193
117,494,564
15,101,190
(392,877)
14,708,313
155,166,494
(2,011,111)
153,155,383
10,069,641
3,849,206
(730,954)
207,659
9,338,687
4,056,865
13,918,847
(523,295)
13,395,552
5,464,887
23,961
5,488,848
6,119,511
25,138,019
(3,439,529)
6,119,511
21,698,490
50,641,264
(3,938,863)
46,702,401
10,000,000
2,500,000
12,500,000
2,131,904
2,126,000
2,000,000
1,897,671
10,000,000
— 2,500,000
12,500,000
(1,949,681) 182,223
(2,126,000) —
2,000,000
(1,897,671) —
(5,973,352) 14,682,223
(14,470,100)       430,351,922
 B 42 PROVINCE OF BRITISH COLUMBIA
DETAILS OF GENERAL FUND REVENUE
FOR THE FISCAL YEAR ENDED MARCH 31,1981—Continued
Accounting
Revenue Policy Revenue■
Estimated                                           Source                                        (Cash Basis) Changes (Accrual Basffl
t            Contributions From Government En-               $ $ $
terprlses—
240,000,000         Liquor Distribution Branch         280,410,865 (5,862,118) 274,548,7ffl
30,000,000         British Columbia Buildings Corporation...          32,038,842 (14,993,842) 17,045,oij|
4,000,000        British Columbia Systems Corporation             1,522,000  1,522,00m
274,000,000                      Total Contributions from Government Enterprises  313,971,707 (20,855,960)       293,115,7^
Contributions From Other Governments—
Canada—
636,900,000             Established Programs Financing  638,388,000 638,388,000 (
302,700,000            Canada Assistance Plan  312,856,926 312,856,9^1
Other Shared-cost Programs—
38,000,000                 Adult Occupational Training  37,137,877 3,017,266          40,155,1^1
4,600,000                 Water Planning and Management  4,740,706 345,198            5,085,904 (
32,500,000                 Economic Development  29,446,335 10,626,752          40,073,0871
11,200,000                 Transportation and Highways  11,357,186 1,294,500           12,651,6^1
20,500,000                 Other Federal Payments  25,501,148 (5,539,468)         19,961,680 j
1,046,400,000 1,059,428,178 9,744,248      1,069,172,4^
1,500,000             Percentage of Power Corporation Tax.... 5,235,620 5,235,631
2,100,000             Statutory Subsidies  2,116,848 —                     2,116,181
1,050,000,000                        Subtotal, Canada  1,066,780,646 9,744,248      1,076,524,894;|
26,000,000 Municipal and Other Governments share of
              Joint-service Programs  31,785,478 (2,163,575)         29,621,90g|
1,076,000,000 Total Contributions from Other
                           Governments  1,098,566,124 7,580,673     1,106,146,731
5,799,629,000 Total General Fund
Revenue  5,811,925,591 (112,036,105)    5,699,889,486§
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