HAFF Committee Report

This theme contains three proposals that aim to engage Parliamentarians in a dialogue on how best to improve the form and content of reporting to Parliament on Government spending plans and the use of funds in relation to these funds.11 These include:

1. Review the effects of accrual accounting on the presentation of information in the Public Accounts, and explore other opportunities that may exist to improve and rationalise the financial information provided in the Public Accounts.
2. Explore the merit and feasibility of integrating the principles of accrual accounting in the budgeting process and of providing spending information in the Estimates and related documents to reflect and support this integration, drawing on best practices and lessons learned from other jurisdictions, and in consultations with parliamentarians. Further, to explore the merit and feasibility of having Parliament authorize expenditures on a full accrual basis.
3. Improve the spending information provided to Parliament in the Main and Supplementary Estimates, by

• providing a clearer link to, and greater consistency with, overall spending plans in the budgets; and
• examining ways to align more closely spending information with the results to be achieved with these funds, together with exploring ways to simplify and enhance supporting information in order to better explain how the government is using its resources to achieve results instead of providing information on operational inputs based on standard objects.

The federal government is currently engaged in the Financial Information Strategy, a government-wide initiative that aims to introduce full accrual accounting throughout all its operations and reporting. With the exception of the Estimates, all accountability documents will report financial information on a full accrual basis.

The Office of the Auditor General and the Treasury Board Secretariat, given their expertise in the area of financial and performance reporting, were both invited to discuss and comment on the proposals found under the fourth theme.

In general, the representatives from both agencies indicated general support for the proposals.

Mrs. Barrados reiterated the Office of the Auditor General position that the government should introduce full accrual appropriations to ensure that the federal government departments plan, manage and report on the same accounting basis.

In a consultation paper on reforming Estimates to full accrual basis, the government has recently indicated that the adoption of full accrual appropriations appears to offer many benefits. The Office of the Auditor General considers this a positive development and made the following observations and suggestions for the Sub-committee to consider:

• there is an underlying need for rigorous accounting rules and conventions that are consistently applied.
• there is a need to develop quickly a detailed and practical (risk based) strategic work plan.
• a practical pilot or demonstration model should be developed to ensure that the details of what is being proposed are thought through and will work in practice;
• set up regular and frequent liaison and exchange with other jurisdictions to anticipate problems and develop practical solutions; and
• the government should be specific about the types of behaviours it wants to encourage among its managers and should be aware of the incentives required to achieve these behaviours.

The representatives for the Treasury Board Secretariat also indicated their support for the outlined proposals. The current move to full accrual accounting is well underway and should be fully completed by the deadline date of April 1, 2001.

As for the second proposal, there seems to be a general consensus about exploring the merit and feasibility of converting the budgeting and appropriations process to a full accrual basis. This consensus emerged from a consultation process that involved the Treasury Board Secretariat, government departments and the Office of the Auditor General. While there is general support for aligning the accounting basis for budgeting and supply with that used for financial statements, some concerns were expressed in regard to the capacity to cope with carrying out budgeting reforms at the same time that full accrual accounting for financial reporting is being implemented.

Departments would like to undertake more detailed consultations to deal with the numerous issues related to systems, legislation, training and the cultural aspects of introducing full accrual accounting, budgeting and appropriations. These issues must be carefully considered in determining whether these reforms should be undertaken and how fast they can be implemented.

The Sub-committee acknowledged that the submitted proposals under this theme are intended to assist parliamentarians in carrying out their duties, especially regarding budgeting and the business of supply, but many parliamentarians do not fully realise the implications of going to full accrual budgeting and full accrual appropriations. While there has been a consultation process set up for departments to discuss these issues, however, no such mechanism has been established in order to obtain feedback from Members of Parliament. Clearly, more information and time are required before parliamentarians can decide about the desirability and feasibility of full accrual Estimates and appropriations.

The Deputy Comptroller General for the Treasury Board Secretariat, Mr. Richard Neville, offered to share their knowledge and thoughts with parliamentarians, perhaps in the form of more bilateral consultations to explain the mechanics and principles behind full accrual budgeting and appropriations. Mr. Neville emphasised to the Sub-committee that the current proposals were essentially recommendations to review and explore the merits of accrual based Estimates and supply.

The Sub-committee wondered how much time would be required to complete the consultations with parliamentarians. The witnesses for Treasury Board indicated that they would like to finalize the consultations by the end of October or November 2000.

The Sub-committee recognizes the complexities of the issue involved and believes that more consultations between government and parliamentarians are required to better understand the full implication of the proposed reforms to reporting to Parliament. The Sub-committee therefore recommends:

The Sub-committee enquired whether the Standing Orders needed to be amended to permit the implementation of full accrual appropriations. The Committee therefore recommends:

The Sub-committee enquired as to the feasibility and desirability of going through with full accrual Estimates and appropriations. Some wondered if it was possible, perhaps as a transitory measure, to maintain different sets of accounting bases, one for financial reporting and another for budgeting and supply. Mr. Neville said that such an approach was feasible, but it would unduly complicate the presentation of information to parliamentarians and it would require considerable effort and resources for the departments to ensure the reconciliation between accountability documents such as the Estimates and the Public Accounts.

Mr. Neville indicated that on the question of accrual budgeting and appropriations, the large majority of the consulted departments clearly indicated that accrual budgeting and appropriations should be implemented, but the timing of the implementation is crucial. Some departments consider the simultaneous move to full accrual budgeting and supply together with full accrual accounting may prove be too ambitious. Some estimate it may require an additional 18 to 24 months in order to complete the full implementation.

Also, the Office of the Auditor General of Canada and the Standing Committee on Public Accounts both endorsed the move towards full accrual accounting, full accrual budgeting and appropriations. Mr. Neville’s own opinion is that accrual appropriation and budgeting would probably be more beneficial, but ultimately, it is Parliament’s prerogative to decide whether such a move is to be implemented.

Considering the above, the Sub-Committee recommends the following: