Opening Statement to the Sub-Committee on Improved Financial Reporting to Parliament of the Standing Committee on Procedures and House Affairs

Thank you, Mr. Chairman, for the opportunity to speak to this Sub-committee on a subject of great interest to the Office of the Auditor General. We are pleased that this Sub-committee has been struck and asked to address a number of very important issues. The Auditor General has been supportive of the government’s efforts to improve reporting to Parliament, while urging it to make faster progress.

In 1997 we reported on the government’s efforts to improve reporting and we are currently conducting a government-wide follow-up audit, the results of which will be included in our November Report. The Auditor General also appeared as a witness before the Sub-committee on the Business of Supply when it looked at the supply process. That Sub-committee’s hearings led to some of the proposals the government is now discussing.

This Sub-committee has been asked to consider four themes related to improved reporting to Parliament. I would like to briefly address each of these.

Tailoring Estimates information for parliamentary needs

Our Office has supported the changes made to the Estimates by the introduction of the fall Departmental Performance Reports and spring Reports on Plans and Priorities. We think this has been a positive change.

We support the focus on results and results commitments as the basis for reporting to Parliament. However, there is a need for

• clearer and more concrete statements of the results departments are to achieve, so that members can better judge how well programs are doing and not just what they are doing. Too often, we find quite loosely worded statements of what is intended, statements that do not indicate clearly what is to be done, by when and how;
• better explanations of how activities undertaken are contributing to the reported results, supported by appropriate evidence. This is a challenge, but it must be addressed if reporting on the performance of federal activities is to be meaningful; and
• more balanced reporting that discusses problem areas and what is being done to improve them. This, too, is a challenge, but without more balanced reporting the credibility of the reports is considerably reduced.

Improved information is needed on the costs associated with the results the government is achieving. Members and the public need to know how much it has cost to achieve the reported results.

Parliamentarians need more tailored information on results, and we welcome efforts to provide it. However, in our view the government needs to pay more attention to ensuring that the information it provides on results is both reliable and meaningful – that it provides more than just data.

Streamlining and consolidating reporting for Parliament

We see significant opportunities for improvement through electronic reporting and we encourage the government to continue moving in this direction. We suspect that e-reports will inevitably become a formal part of the Estimates.

E-reporting allows for convenient and accessible linking of all results-based departmental and government reports. Cascading reporting should allow members easy access to both high-level information on programs and detailed information on specific operations of interest to members. The move toward e-reporting should be made in consultation with Parliament to ensure that members are equipped to take advantage of these opportunities.

As a further element of streamlining, one we suggested several years ago, there is room for some cyclical reporting in areas of stable mandates and workload. Results achieved in these areas do not change rapidly, and Parliament can probably be kept adequately informed on a less frequent basis than annually.

Reviewing and strengthening parliamentary review processes

Considering ways to strengthen the parliamentary review process is perhaps the most critical of the issues addressed by the Sub-committee. The Committee’s own Report on the Business of Supply concluded that parliamentarians are discouraged by rules and structures that do not facilitate (and sometimes unintentionally hinder) the conscientious scrutiny of proposed expenditures.

Over the last few years, our Office has participated in several symposiums and roundtables with members on the subject of reporting to Parliament and we have also had discussions with government officials. Through all of this, a number of suggestions have emerged that the Sub-committee may want to consider:

• making the current reporting regime a permanent feature of the financial procedures of the House, while still encouraging innovation and experimenting with improved approaches to reporting. At present, by resolution of the House adopted in April 1997, the current form of the Estimates is a pilot with no permanent status;
• expecting standing committees to review the Estimates referred to them and to report on their review. At present, if not reviewed by a committee, Estimates are nonetheless deemed to have been reviewed;
• making the membership of standing committees more stable. In view of the need for continuity and the development of expertise in examining the Estimates, the present high turnover of committee chairs and members impedes effectiveness;
• looking at the possibility of better tracking committee questions and concerns, in light of the often short tenure of committee members, perhaps with the assistance of the Parliamentary Research Branch and greater use of technology. This would give new committee members ready access to the questions and concerns already raised with officials, and their responses;
• as others have recommended over the last few years, having a House committee periodically review new initiatives to improve reporting would give Parliament an ongoing role in reviewing existing procedures. This committee could track the nature and results of standing committee reviews of Departmental Performance Reports and Reports on Plans and Priorities;
• considering, in light of the trend toward e-reporting of the Estimates, how Parliament and its committees can best deal with this development.

Of particular importance, the Sub-committee may wish to consider how standing committees can effectively engage departments and consult with them in reviewing statements of results commitments, and discuss how they will demonstrate their achievements against those commitments. If committees had this kind of involvement, departments might be more diligent in reporting back what they have accomplished toward their results commitments.

Improving information to Parliament on the government’s expenditure plans and the use of funds in relation to these plans

The government has decided to introduce accrual accounting for all of its key accountability documents except Estimates and appropriations. Over the years, the Auditor General has recommended that the government also introduce accrual appropriations so that government managers would plan, manage and report on the same accrual basis.

The government has issued a consultation paper that concludes that the adoption of accrual appropriations appears to offer many benefits, and my Office’s reaction to that paper is therefore positive. We have, however, provided several observations to the government:

1. There is an underlying need for rigorous accounting rules and conventions that are consistently applied.
2. There is a need to develop quickly a detailed and practical (risk-based) strategic work plan.
3. 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.
4. There is a need to establish regular and frequent liaison with other jurisdictions, such as the United Kingdom and Australia, to help Canada anticipate problems and develop practical solutions.
5. The government should be specific about the behaviours it wants to encourage among managers and should be aware of the incentives needed to achieve these behaviours.

Thank you for hearing our views. We would be glad to answer any questions you may have.