Financial Procedures

Introduction

The financial cycle is the annual process through which Parliament:

  • analyzes the government’s financial priorities;
  • considers the budgetary policy and the raising of revenue (through ways and means);
  • scrutinizes projected public spending (through estimates); and
  • ensures the proper accountability of expenses.
The image shows the interdependence of the executive and legislative branches with respect to fiscal measures.

Parliamentary Review and Approval

The Business of Ways and Means

The business of ways and means is the process by which the government obtains the necessary resources to meet its expenses. It has two essential elements: the presentation of the budget and the motions which lead to the introduction of tax bills.

To change taxation, the government introduces ways and means motions in the House of Commons. These motions outline the proposed changes, which are authorized by Parliament through the review and approval of legislation, such as budget implementation bills.

The Business of Supply

The business of supply is the process by which the government submits its projected annual expenditures for parliamentary approval. It includes consideration of the main and supplementary estimates, interim supply, motions to restore or reinstate items in the estimates, appropriation bills, and motions debated on allotted days.

To spend public funds, the government must request Parliament’s authorization through the review and approval of appropriation bills. To help Parliament understand and scrutinize its spending plans, the government prepares and presents main and supplementary estimates.

An Overview of the Financial Cycle

The financial cycle begins on April 1 and ends on March 31. To better understand Parliament’s role in the financial process, it can be helpful to identify activities that occur before, during and after the fiscal year.

Illustration with months in order progressing upwards and grouped by the themes Before a New Fiscal Year, During the Fiscal Year and After the Fiscal Year. Starting from the bottom, grouped under the theme Before the Fiscal Year: September: Finance Committee pre-budget consultations (Asterisk: Commencing the first sitting day in September of each year, the Standing Committee on Finance is authorized by the Standing Orders to consider and make reports upon proposals regarding the budgetary policy of the government. If the House does not sit, consultations are postponed.); December: Finance Committee report; March: Budget: Main estimates, Departmental plans, Interim supply. Continuing from the bottom and working upwards, grouped under the theme During the Fiscal Year: May: Supplementary estimates (A) and Consideration of estimates in committee; June: Approval of full supply/End of supply period; October: Economic and fiscal update; November: Supplementary estimates (B); December: End of supply period; February: Supplementary estimates (C); March: End of supply period. Continuing from the bottom and working upwards, grouped under the theme After the Fiscal Year: October: Public Accounts of Canada; November: Departmental results reports

Before the New Fiscal Year

Finance Committee Pre-budget Consultations

In the fall, the House of Commons Standing Committee on Finance holds pre-budget consultations during which it seeks the views of Canadians on recommendations it should make to the Minister of Finance for the government’s upcoming budget.

Budget

The government’s statement of its fiscal, economic and social policies. It is usually presented once a year, although there is no requirement for an annual presentation.

Budget Speech

A presentation made in the House by the Minister of Finance introducing the government’s plans concerning fiscal, economic and social policy (the budget).

Budget Debate

A debate on a motion approving the government’s budgetary policy. The motion is moved by the Minister of Finance at the beginning of the presentation of the budget speech.

Graphic showing the mace, accompanied by text describing the chronological process following the budget speech. It reads: Presentation. Minister of Finance makes budget speech. A member of the official opposition moves the adjournment of debate. The House is adjourned until the next sitting day. Debate. Day 1: Debate resumes. An amendment and a subamendment are usually proposed. Day 2. Debate continues. The subamendment, if any, is put to a vote at the end of the day. Day 3. Debate continues on the amendment, which is put to a vote at the end of the day. Day 4. Final day of debate. At the end of the day, the question is put on the main motion.

Estimates

The departmental expenditure plans consisting of main estimates, tabled annually, and supplementary estimates, tabled as required. Consideration of the estimates is a major component of the Business of Supply.

Main Estimates

As the budget is a financial plan and does not provide authorization to spend funds, the government tables its main estimates for the coming fiscal year on or before March 1.

The main estimates present the government’s spending plans for each federal organization and provide items that will be included in an appropriation bill for Parliament’s approval. It is important to note that the main estimates are prepared in late fall, and thus generally do not include spending items announced in the budget. They are best read in conjunction with the departmental plans.

Main Estimates in Committee

Once the main estimates have been tabled in the House of Commons, estimates votes (an individual item of the estimates indicating the amount of money required by the government for a particular program or function) are referred to the relevant standing committees, which have the opportunity to review the estimates votes and to vote and report on them by May 31. Committees can approve, reduce or reject estimates votes, but cannot increase them. The Standing Senate Committee on National Finance also reviews and prepares reports on the estimates.

Departmental Plans

The departmental plans set out the results that departments intend to achieve with the resources provided to them; they also outline the human and financial resources allocated to each program and sub program.

Interim Supply

Before the beginning of the fiscal year, the House of Commons approves interim supply. As full supply is not granted until June, the government needs authorization to spend funds during the first three months of the fiscal year. Thus, interim supply is usually three-twelfths of the amount outlined in the main estimates.

Graphic showing the mace, accompanied by text describing the chronological process followed in the study of the estimates. It reads: 1. Tabling of estimates in the House and referral to appropriate committees; 2. Committee consideration of estimates (votes may be adopted, rejected or reduced); 3. Estimates reported back from committees to the House; 4. Motion(s) and vote(s) (opposed items); 5. Motion and vote (unopposed items) and adoption of estimates; 6. Consideration and adoption of appropriation bill; 7. Referral of appropriation bill to Senate and royal assent.

During the Fiscal Year

Supplementary Estimates

As the main estimates do not include the government’s complete spending needs for the year, such as unanticipated spending requirements or items announced in the budget, the government also presents supplementary estimates to Parliament.

The government tends to present supplementary estimates in May, November and February; each set of supplementary estimates receives an alphabetical designation–A, B or C. Supplementary estimates are also referred to committees for review and receive approval through an appropriation bill at the end of the relevant supply period.

Approval of Full Supply

In June, the House of Commons approves full supply, which is the amount laid out in the main estimates, less interim supply.

Supply Days

The House of Commons has three supply periods during the fiscal year when it considers the government’s spending plans. These supply periods end on 23 June, 10 December and 26 March.

During each period, the opposition parties are allocated “supply days” (also known as “opposition day” or “allotted day”) on which their motions take precedence over government supply motions. There are 22 supply days in each calendar year which are divided amongst the opposition parties in proportion to their representation in the House.

At or near the end of each period, the House of Commons votes on whether it agrees, or concurs, with the spending plans, also called estimates, and the associated appropriation bills that are before it. These are then sent to the Senate for review and approval.

Economic and Fiscal Update

In the fall, the Minister of Finance presents an economic and fiscal update. It provides mid-year information on the country’s economic growth and the state of the government’s finances.

After the Fiscal Year

Public Accounts of Canada

In the fall, usually in October, the government tables its public accounts by way of a report prepared by the Receiver General for Canada. This report outlines the government’s actual spending and revenues during the previous fiscal year.

The public accounts also provide a snapshot of the government’s financial position at the end of the fiscal year–its liabilities, assets and net debt.

The Auditor General presents an annual audit of this document to the Speaker, which is tabled in the House and automatically referred to the Standing Committee on Public Accounts.

Departmental Results Reports

Also in the fall, the government releases departmental results reports for each department and agency. These reports describe achievements relative to the expectations outlined in the corresponding departmental plans. They are tabled by the President of the Treasury Board on behalf of the responsible ministers and are considered referred to the appropriate standing committees.

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