GOVERNMENT RESPONSE TO THE TWELFTH
REPORT OF
THE STANDING COMMITTEE ON PUBLIC ACCOUNTS
RECOMMENDATION No. 1
That the
Government of Canada complete without further delay, its internal review and
public consultations concerning the premium rate-setting mechanism of the
Employment Insurance Program, and submit a copy of its findings and
recommendations to Parliament and, in particular, to the Public Accounts
Committee.
RECOMMENDATION No. 2
That the Government of Canada
provide clarification and disclose to Parliament and to the Public Accounts
Committee what constitutes an adequate level of accumulated surplus in the
Employment Insurance Account, the time required to reach that level, and the
factors considered when setting the premium rates.
The Employment Insurance Act has two
provisions on how to set the premium rate: revenues should be sufficient to
cover program costs over an extended period of time; and premium rates should
be kept stable over time. The Standing
Committee on Finance recommended that the Government undertake a study in order
to change the provisions. These
provisions were suspended for 2002 and 2003.
In
the 2003 Budget, the Government announced that the Department of Finance, in
co-operation with Human Resources Development Canada, would provide Canadians
with an opportunity to present their views on the rate setting process. Interested parties can provide submissions
to the Government until June 30, 2003, either by mail or through the Human
Resources Development and Finance Canada websites. In addition, senior officials of both departments will be meeting
with key stakeholders, including the Commissioners of the Canada Employment
Insurance Commission and the Chief Actuary of Insurance HRDC. The results of these consultations will be
used in establishing a new-rate setting process, effective 2005, including the
factors to be considered in setting premium rates and the role of the
Employment Insurance Account.
The
Government will prepare and make available a summary of the major
recommendations applicable to the rate-setting process received during the
consultation process. The Government
will make available submissions from those individuals who indicate their
approval to make their submissions public.
Further
details on the premium rate-setting process were recently included in the
Government’s response to the Second Report of the Standing Committee on Public
Accounts.
RECOMMENDATION No. 3
That relevant
officials from both the Office of the Auditor General and the Office of the
Comptroller General participate in the Public Sector Accounting Board (PSAB)
projects on clarifying the interpretation and application of the financial
reporting requirements of government reporting entities and government
transfers, to ensure a clearer and more consistent interpretation of the intent
and requirements of the PSAB guidelines.
The
Office of the Auditor General of Canada and the Treasury Board Secretariat are
participating in the PSAB projects clarifying the interpretation and application
of the financial reporting requirements of government reporting entities and
government transfers. That being said,
it might be useful to provide a brief outline of the standard-setting process
followed by the PSAB.
The
Public Sector Accounting Board is authorized by the Board of Directors of The
Canadian Institute of Chartered Accountants (CICA) to issue Recommendations and
guidance with respect to matters of accounting for federal, provincial,
territorial and local governments. The
PSAB issues such Recommendations and guidance to serve the public interest by
strengthening accountability in the public sector through developing,
recommending and gaining acceptance of accounting and financial reporting
standards of good practice.
Officials from the Office of the Auditor General and
Treasury Board Secretariat have the opportunity to participate in the
development of accounting standards since it is the people who prepare, audit
and use government financial statements and reports that develop the PSAB’s
standards. Governments do not appoint
members of the PSAB or its task forces; the PSAB recruits
individuals. Furthermore, all the PSAB
Board and task force volunteers serve as individuals and not as representatives
of their governments or organizations - a policy which allows for a full and
open debate on issues.
The PSAB has a network of associates who provide their views
at each main stage in the development of its accounting standards. The
network is representative of all regions of the country and of the views of
users, preparers and auditors of government financial statements, reports and
information. Generally, representatives
from both the Office of the Auditor General and Treasury Board Secretariat
participate as associates. However, as with members of the task force
developing any standard, associates provide their views as individual
professionals and not as the official representatives of the government, firm
or organization with which they are associated.
As
the last step before a final standard, a public Exposure Draft reflects
consideration of the research conducted by the staff and outside consultants,
input from the PSAB and its task force, and any previous due process
feedback. It is at this stage that
officials from Treasury Board Secretariat and the Office of the Auditor General
can offer opinions as representatives of their organizations. Exposure Draft proposals will usually become
the final standard unless consensus on them cannot be reached.
RECOMMENDATION No. 4
That both the Office
of the Auditor General and the Office of the Comptroller General prepare an
annual report detailing the progress achieved in clarifying the guidance of the
PSAB concerning the accounting treatment for reporting entities and transfers
to these entities, particularly regarding the accounting treatment of
foundations, and that the first report be tabled in Parliament no later than
31 December 2003.
The standard-setting process of the PSAB,
and the Government’s consideration of the standards in developing its own
accounting policies, is an on-going process.
As new standards are issued, they will be considered by the Government
and opportunities for the engagement of parliamentarians and of the public
provided through such means as the Budget and the tabling of the Public
Accounts of Canada. The Office of the
Auditor General provides periodic reports on these matters through its
Observations on the Public Accounts of Canada and its regular reporting to
Parliament.
RECOMMENDATION No. 5
That the Treasury
Board Secretariat prepare an action plan together with a detailed
implementation timetable, to finalize the verification and audit of the
outstanding elements of information required to complete the implementation of
full accrual accounting, thus enabling the federal government to produce full
accrual-based summary financial statements. That the Treasury Board Secretariat
prepare the action plan and detailed implementation schedule for tabling in
Parliament no later than 31 December 2003.
RECOMMENDATION No. 6
That the
Government of Canada begin presenting full accrual-based summary financial
statements in the Public Accounts of Canada, 2002‑2003.
Since
the release of the Public Accounts of Canada, 2001-2002, the Government
of Canada and the Office of the Auditor General have been working very closely
to finalize the verification and audit of the outstanding elements of
information required to complete the implementation of full accrual accounting,
thus enabling the federal government to produce full accrual-based summary
financial statements.
This
enabled the Minister of Finance to announce in Budget 2003 that the
Government’s financial statements will be prepared on the full accrual basis of accounting. This will commence with Public Accounts
of Canada, 2002-2003 which will also include a retroactive restatement of
prior year results, due to this accounting policy change.
As in
every year, the Treasury Board Secretariat, Department of Finance and Public
Works and Government Services Canada will be working closely with the Office of
the Auditor General to ensure a successful tabling of the Public Accounts of
Canada.
RECOMMENDATION No. 7
That the
Government of Canada convert the Canadian Expenditure Management System to full
accrual-based budgeting and appropriations. That the government advise
Parliament and the Public Accounts Committee when the decision has been made.
RECOMMENDATION No. 8
Once the decision
has been made on full accrual-based budgeting and appropriations, that the
Treasury Board Secretariat immediately prepare an action plan, together with an
implementation timeframe, and table both documents to Parliament and the Public
Accounts Committee.
Adopting
the integration of full accrual-based budgeting and appropriations into the
Expenditure Management System could have far reaching implications for
government and for Parliament. For
example, it could involve changing the form and content of the information
presented to Parliament or what Parliament actually votes on. It involves issues of transparency and
accountability to Parliament and there are questions on whether the changes
would strengthen or weaken Parliament’s authority.
The
extent to which the integration of accrual information into the Government’s
Expenditure Management System could improve decision-making also has to be
assessed. For example: what biases might it introduce; how could it
change the roles of the key players; would additional controls and reporting be
necessary? These are not easy questions
to answer. The Government is not
prepared, simply as a matter of principle, to agree to the concept of an
accrual-based budgeting and appropriation framework.
Unlike
accrual accounting, there is no international consensus on the adoption of
accrual budgeting. Those countries that have implemented accrual budgeting have
adopted tailored accrual tools to meet their specific needs as they implement
much broader reforms. Moreover, where accrual budgeting has been implemented,
it continues to evolve in light of lessons learned. We continue to take
advantage of the experience of others.
Treasury
Board Secretariat is committed to stakeholder consultations, which have been
underway at the officials level since the spring of 2002. What is clear from
these consultations, as well as from the experience of other jurisdictions, is
that prudence is required and Treasury Board Secretariat is committed to
assessing the various options, and their broader ramifications before taking a
decision. The results of these consultations will be provided to Ministers and
Parliament.
Parliamentarians
are key stakeholders and Treasury Board Secretariat will be entering into
consultations with them at the appropriate time. Once the government has taken a decision on accrual budgeting and
appropriations, the Secretariat would be pleased to advise the Public Accounts
Committee of the results. As an interim
step, the Secretariat hopes to brief the Committee on the current status of the
consultation process and the issues that have been raised in different forums.
When
the decision is taken on each of accrual budgeting and appropriations, Treasury
Board Secretariat will be in a position to assess the requirements and
resources needed to make the specific changes and will develop an
implementation plan including specific actions required and timeframes. When this is completed, the Secretariat
would be pleased to share this information with the Public Accounts Committee
and Parliament.
RECOMMENDATION No. 9
That the Treasury
Board Secretariat, in collaboration with the Office of the Auditor General of
Canada, explore ways of simplifying and streamlining the presentation of
financial information contained in the Public Accounts of Canada and the
Annual Financial Report. That the Treasury Board Secretariat and the
Office of the Auditor General prepare a joint report describing possible areas
for improvement in the presentation and explanation of the consolidated
financial statements of the Government of Canada.
RECOMMENDATION No. 10
That the Treasury
Board Secretariat, in collaboration with the Office of the Auditor General of
Canada, develop a primer or elementary text to assist parliamentarians and the
Canadian public in making sense of the information contained in the Public
Accounts of Canada and the Annual Financial Report.
The
Public Accounts is prepared under the joint direction of the President of the
Treasury Board, the Minister of Finance and the Receiver General for
Canada. The Annual Financial Report is
the produced by the Minister of Finance, using information from the Public
Accounts.
The contents of the Public Accounts have
evolved as a result of legislative requirements, new accounting policies and
requests from parliamentarians. Meeting
all these requirements has resulted in an admittedly complex document. While the summary of significant accounting
policies contained in the notes to the summary financial statements explains
some of the concepts used in the preparation of the financial statements, it
does assume a certain understanding of economic activities and
accounting.
As part of the implementation of full accrual
accounting, some changes are being proposed for the Public Accounts of
Canada, 2002-2003, including the use of electronic links between
sections. Further rationalization and
streamlining is possible, but would be part of a longer term, more
comprehensive project that considers all stakeholder and legislated information
requirements and available technology.
Following previous suggestions by
the Auditor General and working closely with her staff, substantial
improvements have been made to the Annual Financial Report. The Annual Financial Report already includes
the measures discussed in the CICA document, Indicators of Government
Financial Condition, as well as comprehensive budgeted-to-actual comparison
and analysis. The indicators are
included in presentations to the Standing Committee on Public Accounts
following the tabling of the Public Accounts of Canada. These presentations also provide an overview
of the Public Accounts along with highlights of the key financial results and
trends.
Treasury
Board Secretariat and the Department of Finance will consult with parliamentarians, parliamentary committees and the
Auditor General in the development of plans to improve the reporting of
financial information. This will
include the best means to assist parliamentarians and the public in
understanding this information.