Opening Statement to the Standing Committee on Public Accounts

Report and Observations of the Auditor General on the 2004-05 Financial Statements of the Government of Canada

4 October, 2005

John Wiersema, FCA
Deputy Auditor General of Canada

Mr. Chairman, thank you for inviting us to this hearing on the 2005 Public Accounts, to present the Auditor General's report on the audited financial statements of the Government of Canada. With me today is Frank Vandenhoven, the Principal responsible for the audit of the summary financial statements of the Government of Canada. The Auditor General would have liked to have met with you today but she is, unfortunately, unavailable. She is attending a meeting which was arranged a year ago of the governing Council of UNESCO, a UN agency which we audit.

I congratulate the Committee for holding a hearing so soon after the Public Accounts were tabled. The Public Accounts are a key accountability report of the government. I understand that the Comptroller General will be explaining some of the key messages contained in the government's summary financial statements to the Committee.

The Auditor General's report on the financial statements is included on page 2.4 of Volume 1 of the Public Accounts. Her opinion provides Parliament with assurance that the government's financial statements are fairly presented in accordance with its disclosed accounting policies. It is a “clean” opinion. Our Office has been able to issue such an opinion on the government's summary financial statements in each of the past seven years.

Mr. Chairman, I would like to commend the government. These are a good set of financial statements, which provide good financial information to parliamentarians and to other Canadians. It is our view that Canada is among the world leaders when it comes to financial reporting by a national government.

Since the release of the government's financial results, there has been some discussion about the accounting for some transactions. In particular, the accounting for the payments related to the offshore revenue accords signed with Nova Scotia and Newfoundland and Labrador has drawn some comment. These payments amount to some $2.83 billion. They have been reviewed by us and we have discussed how they should be accounted for with government officials.

We concur with the government's decision to recognize these payments as expenses in 2004-05. This properly reflects the non-recoverable aspect of these upfront payments. This accounting treatment is consistent with the accounting for similar transactions, such as Canada Health and Social Transfer supplements and other transfers to provinces, which are recognized as expenses on the same basis.

The Auditor General's report no longer identifies other matters requiring Parliament's attention. This is a change from previous years and reflects developments in the last year related to the two items we had reported in prior years.

The first issue we raised in previous reports involved our concerns about transfers of money to foundations. We have dropped this item from the audit report this year due to improvements instituted and proposed by the government as well as the relative insignificance of transfers to foundations during the year ($535 million).

The second issue we raised in previous reports involved the Employment Insurance Account. Amendments to the Employment Insurance Act that received Royal Assent in June 2005 changed the method of setting premium rates. As a result of these amendments, we no longer have a concern that the intent of the Act is not being met. We will be discussing this issue more fully in our November Report.

With regard to next year, the Committee should be aware that a new accounting standard issued by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants on the government reporting entity will come into effect for 2005-06. This standard changes the requirements for determining which organizations should be considered to be part of the government for purposes of financial reporting. This will have implications for our ongoing discussions with government on foundations and for other entities currently not included in the government reporting entity. We continue to discuss this issue with the government with a view to resolving it before finalizing the 2005-06 accounts.

These matters are discussed in more detail in the Auditor General's observations, which are found starting on page 2.27 of Volume 1 of the Public Accounts.

Mr. Chairman, this concludes my opening statement. We would be pleased to answer any questions that the committee may have.