PACP Committee Report

David Christopherson
Chair
Standing Committee on Public Accounts
House of Commons
Ottawa, Ontario
K1A 0A6

Mr. Christopherson:

Pursuant to House of Commons Standing Order 109, on behalf of the Government of Canada, I am pleased to provide the Government Response to the recommendation of the Eighth Report of the Standing Committee on Public Accounts:Public Accounts of Canada 2011.

Over the course of the last year, officials from the Treasury Board of Canada Secretariat (TBS) have discussed with the Office of the Auditor General the observations made in the Public Accounts of Canada 2011 concerning capital expenditure items. TBS has also discussed the interpretation of a capital expenditures vote with departments and developed a common definition of capital items.  The definition was finalized and communicated to Chief Financial Officers of capital-intensive departments on May 25, 2012. 

The common definition of a capital expenditure is based on the definition of a tangible capital asset used in the preparation of the Government-wide and departmental financial statements:

Capital Expenditures Vote – This type of Vote is used when the aggregate of capital expenditures equal or exceed $5 million. Capital expenditures are those made for the acquisition or development of items that are classified as tangible capital assets as defined by Government accounting policies. For example, the acquisition of real property, infrastructure, machinery or equipment, or for purposes of constructing or developing assets, where an organization expects to draw upon its own labour and materials, or employs professional services or other services or goods. Expenditure items in a Capital Expenditures Vote are for items that generally exceed $10,000; although an organization may select a reduced threshold to be applied to different capital classes. 

The common definition will provide greater clarity and direction to departments, resulting in consistency of practice between departments in the determination of capital expenditures. 

While some departments are already using the common definition of a capital expenditure, for others, it represents a significant implementation effort requiring changes to departmental policies, financial systems and costing and planning processes. Departments will also need to communicate these changes to their employees and conduct any necessary training. 

Departments not already using the common definition have been asked to provide a high-level implementation plan to the Secretariat by the end of August 2012. Full implementation of the common definition is expected to be phased over the next few Main Estimates cycles.

I would like to take this opportunity to thank you and the members of the Standing Committee for your work.

Yours sincerely,

The Honourable Tony Clement, P.C., M.P.