MEETING STATUS: PUBLIC LEGISLATIVE ASSEMBLY SESSION: 62/1 Motion No: PRINCE EDWARD ISLAND Year: 2004 VERBATIM TRANSCRIPT OF HOUSE COMMITTEE PROCEEDINGS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - COMMITTEE: STANDING COMMITTEE ON PUBLIC ACCOUNTS DATE: Tuesday, February 17, 2004 SUBJECT(S) BEFORE THE COMMITTEE: Consideration of the 2003 Report of the Auditor General to the Legislative Assembly. NOTE: This Transcription has NOT been edited nor subsequently compared with the original tape. It is intended to provide an indication of Committee discussion only and is NOT certified by the Legislative Assembly to be a true copy of the discussion. COMMITTEE MEMBERS PRESENT: Ronald MacKinley, Chair Wayne Collins Wes MacAleer Jim Bagnall Cletus Dunn Wilbur MacDonald Dr. David McKenna Hon. Robert Ghiz MEMBERS PRESENT: Richard Brown GUESTS: Colin Younker, Auditor General Allan Moore, Audit Director Jane MacAdam, Audit Director STAFF: Marian Johnston STANDING COMMITTEE ON PUBLIC ACCOUNTS Tuesday, February 17, 2004 10:00 a.m. Tape No. 1 Guests: Colin Younker, Auditor General Allan Moore, Audit Director Jane MacAdam, Audit Director Ron MacKinley (L) (Chair): Sorry, I’m late but I seconder? got tied up. So let’s call it to order and the agenda is to continue with the Auditor’s Report. Is that Wilbur MacDonald (PC): I second it. okay? So we can start where we left off. Ron MacKinley (L) (Chair): All in favour? Honourable Robert Ghiz (L): Number 2, approval of agenda (Indistinct). Honourable Members: Aye. Ron MacKinley (L) (Chair): Have you, alright? Ron MacKinley (L) (Chair): Motion Carried. Honourable Robert Ghiz (L): Okay, so can we Congratulations. So now, we’ll go onto Mr. put it on the agenda (Indistinct). Younker. When you left off with this, some of Do you approve of being on the agenda then? us–there’s some new members elected here–two of them. Probably what we’ll do though is just Ron MacKinley (L) (Chair): Other business. continue where the committee–is that okay–where Alright. we left off? At a later date or at the end, if you want to go back over some of the previous Honourable Robert Ghiz (L): No, but it has to questions, we can. Is that okay with the be put on this agenda. committee? Ron MacKinley (L) (Chair): It would come under Unidentified Member: (Indistinct) number 5, other business. Marian Johnston (Committee Clerk): This is Honourable Robert Ghiz (L): Okay. what we did last time. Ron MacKinley (L) (Chair): And at that time. Ron MacKinley (L) (Chair): Yeah, page 15 - 3.5. Honourable Robert Ghiz (L): I’ll be able to Cletus Dunn (PC): I was wondering if the introduce it. auditor could sort of bring us up to speed on the first part of the section and why we’re involved with Ron MacKinley (L) (Chair): . you’ll be able to credit unions and sort of sets the groundwork for introduce it. Election of vice-chair, I thought that. where we’ll continue on. Is that fair? . Ron MacKinley (L) (Chair): Yes, that’s alright, Marian Johnston (Committee Clerk): We have whatever you want to do. Alright. to elect a vice-chair, that’s the way we left it. Colin Younker (Auditor General): The reason Ron MacKinley (L) (Chair): Alright. why we looked at the governance structure of the Credit Union Deposit Insurance Corporation was Wayne Collins (PC): I’d certainly like to move we were asked by Executive Council under an the nomination of the representative from order dated November 13, 2001. They asked us Montague-Kilmuir as our vice-chair. to review the regulatory framework for the credit unions of Prince Edward Island with particular Ron MacKinley (L) (Chair): Have we got a emphasis on the governance structure of the 1 Credit Union Deposit Insurance Corporation, and Colin Younker (Auditor General): The insured then report our findings and recommendations to deposits as of September 2001 were 370 million. the Attorney General who shall convey them back to Executive Council. Our report was forwarded to Richard Brown (L): And that includes RRSP’s? the Attorney General as requested. Colin Younker (Auditor General): That would After this request, our report was forwarded–a little be all the insured deposits. history, CUDIC was formed in 1992. In the late 1980's, the credit unions had been seeking to put Richard Brown (L): So that’s a guarantee, the themselves on the same footing as banks as far as Credit Union Deposit Insurance Corporation. insurance went. So amendments were made to the Credit Unions Act in 1992, and that included Colin Younker (Auditor General): The Credit the establishment of CUDIC which guarantees the Union Deposit Insurance Corporation, it’s a Crown repayment of insurable deposits in the credit corp. unions on levels established in the act. Further, the act states that government should ensure that Richard Brown (L): It’s a Crown corp which is the obligations of CUDIC are carried out. That really a guarantee of the province then. was the background on the report. Colin Younker (Auditor General): The province The other thing is the–the other factor was the is obligated under the act to insure guarantees are credit unions had grown in size. Their insurable carried out. deposits in 1992, were about 108 million and had increased to 370 million in 2001. Richard Brown (L): Thank you. Jim Bagnall (PC): They’re all guaranteed now? Colin Younker (Auditor General): So under the current regulatory framework, there’s four parties Colin Younker (Auditor General): Guarantees within the credit union system. There’s the credit are up to $60,000 on members’ deposits, and the unions themselves of which there’s ten; the Credit RRSP’s are guaranteed in full. Union Central, the Registrar, and the Credit Union Deposit Insurance Corporation. Dr. David McKenna (PC): That’s the 60,000 in one credit union, could you have another in four or The act defines the requirements for incorporation five credit unions? and operation of the credit unions. The Credit Union Central provides the financial and banking Colin Younker (Auditor General): Sixty services for member credit unions, acts as a trade thousand per member of the credit union. So if association in providing services to the credit you were a member of one credit union and you unions, approves the by-laws for credit unions, and deposited 60,000 there, that would be insured. has a role in credit approval. It is also charged And if you were a member of another credit union, with the administration of the act in PEI. it would be insured as well. The Registrar of credit unions is appointed by the Lieutenant Governor in Council and he has certain Jim Bagnall (PC): How does that compare with responsibilities under the act as well. And then the the banks? fourth party established is the Credit Union Deposit Insurance Corporation. Its objects are outlined in Colin Younker (Auditor General): The same as the act and relate primarily to the monitoring of the banks. The only difference is the RRSP’s are credit unions and the administration of the deposit guaranteed in full and the RIF’s. Registered insurance fund. Each of the ten credit unions pays Retirement Income Funds. an annual assessment based on insurable deposits which is used by the corporation to Richard Brown (L): Whereas at the banks, augment the Deposit Insurance Fund in the they’re not. The Canadian Deposit Insurance running of its operations. (Indistinct) not the credit unions. So how much is on the hook there? Do we know how much is out We had started to discuss some of the principle on RRSP’s under the credit unions? findings when we were here last time. And our 2 first recommendation was that the Credit Union Act chairman is, has got to recognize the person in should be revised to require board members to order to turn the system on, so go ahead. hold office for a specified term. This is the board members of CUDIC. Under the current Wes MacAleer (PC): Who were the two requirements of the legislation, there’s no set term appointees by the minister? appointment for board members. The exception of one member resigning in 2001 Board of Directors Colin Younker (Auditor General): The two consists of the same members originally appointed appointees are Bill Harper and Edison Shea. in 1992. Ron MacKinley (L) (Chair): Mr. MacDonald? The other boards established by the act, the boards of the credit unions and the Credit Union Wilbur MacDonald (PC): Could I ask you, Colin, Central have by-laws which set the appointment just to speak up a little. I think the people in the term at three years with the opportunity for re- back are reaching to hear you too. appointment. Thus we made the recommendation that the act be revised to require the CUDIC board Ron MacKinley (L) (Chair): I can’t hear him. members to hold office for a specified term. Wilbur MacDonald (PC): I’m having a little We looked at the eligibility of board members and trouble. This thing doesn’t give sound, does it? our recommendation from that was that the eligibility requirements for the appointment of Sound Technician: It only gives sound at your members to the Board of Directors of the Credit station. Union Deposit Insurance Corporation should be established and should be specifically exclude Colin Younker (Auditor General): The employees of credit unions, Credit Union Central additional recommendation we made was that the and CUDIC. guidelines and the desirable qualifications and attributes of perspective board members should be The reason for that recommendation, there was an developed and considered in the nomination individual nominated by Credit Union Central to the process.