PACP Committee Report
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House of
Commons Dear Ms. O’Brien: Pursuant to Standing Order 109 of the House of Commons, and on behalf of the Government of Canada, I am pleased to enclose the Government Response to the recommendations of the Tenth Report of the Standing Committee on Public Accounts entitled: Public Accounts of Canada 2009, and request that this response be tabled in the House of Commons. Yours sincerely, GOVERNMENT RESPONSE TO THE TENTH REPORT OF THE STANDING COMMITTEE ON PUBLIC ACCOUNTS: PUBLIC ACCOUNTS OF CANADA 2009 RECOMMENDATION 1 – Accrual appropriations That the Government of Canada improve the information provided to parliamentarians by adopting accrual appropriations as soon as possible. As noted in the plan provided to the chair of the Public Accounts Committee (PAC) in February of 2008 by the President of Treasury Board, a project to implement accrual budgeting is underway. A key objective of the project is to add corresponding accrual-based future oriented financial statements in Reports on Plans and Priorities (RPPs). The following sixteen departments and agencies are now including accrual-based future oriented financial information in their RPPs.
All remaining departments and agencies will include a future-oriented accrual-based Statement of Operations in their 2011-12 RPPs. In addition, the new Treasury Board Accounting Standard 1.2, which becomes effective for 2010-11 departmental financial statements, requires a comparison of actual results to forecast revenues and expenses, all reported on an accrual basis. The issue of accrual appropriations is complex. Adopting accrual appropriations is not an issue of providing additional information to Parliamentarians; it is a change in the manner in which Parliament exerts financial control. Currently, parliamentary control is applied to the level and broad uses of funds expended from the Consolidated Revenue Fund through the control of votes. Accrual appropriations move away from controls over the amount of cash spending to controls over the amount of expenses incurred by the Government. There is no international consensus on the benefits of accrual appropriations. Australia, long seen as forerunner in this area, has noted at recent OECD Public Sector Accruals Symposiums that under accrual appropriations there are “problems with the way agencies manage and report on appropriations” and “perceptions that accrual appropriations have led to a loss of transparency.” As a result of its experience with accrual appropriations, Australia's 2010-11 Budget announced changes to the appropriation framework, moving to fund agencies on the basis of their cash needs. For the federal government in Canada, the implementation of accrual appropriations would entail significant costs to change numerous reporting processes, modify departmental and central financial systems and enact changes in the Financial Administration Act (FAA). The Government maintains that the most prudent approach is to continue with implementation of the original plan to expand accrual budgeting and examine very carefully the benefits and costs of changing the basis of appropriations. After departments and agencies have had experience in preparing accrual information, an evaluation will be conducted in 2012-13 to assess experience to date and the benefits and costs of accrual appropriations. The President of Treasury Board will ask interested parliamentarians to establish a Parliamentary Working Group to participate in the evaluation process. The experiences of these parliamentarians in using the new accrual-based future-oriented and historical financial statements and their views on changing the basis of parliamentary control over Government spending will be integral elements in the evaluation. The President of Treasury Board will report the results and recommendations of the evaluation to Cabinet and Parliament. RECOMMENDATIONS 2 and 3 – Reporting and disclosure of errors That the Comptroller General disclose to the Public Accounts Committee all errors and other concerns in the Public Accounts of Canada prior to the commencement of the Committee’s hearing on the matter. That the Receiver General for Canada develop and implement, prior to the tabling of the next Public Accounts of Canada, a current, clear, and effective manner for reporting errors and miscalculations in those documents. To address this particular concern, the Government agrees to inform the House of Commons Standing Committee on Public Accounts, by way of e-mail to the Clerk of the Committee, any known errors in the published version of the Public Accounts of Canada prior to the commencement of the Committee hearing. A new section on the Public Accounts of Canada Web page will be created, entitled “Errata” where all corrections of errors will be displayed. Disclosure on the Website in the affected section will clearly indicate to readers any corrections made. RECOMMENDATION 4 – Losses to the Crown That the Comptroller General of Canada provide the Public Accounts Committee an update by 31 December 2010 on actions taken by the five departments to improve their systems of internal controls in order to prevent losses of public money and property due to offences, illegal acts, or accidents. The losses and associated recoveries of public money and property, whether through offences, illegal acts or accidents, will continue to be disclosed in the Public Accounts of Canada by all departments and agencies. The PAC recommendation refers to the five departments who represented the majority of the losses of public money in the Public Accounts of Canada 2007-2008. Sections 80 and 154.01 of the FAA and section 750(3) of the Criminal Code were amended in December 2006 as a result of the Federal Accountability Act to provide for more severe penalties for losses stemming from illegal acts. The Directive on Losses of Money or Property, which took effect on October 1, 2009 requires all losses to be investigated and reported to responsible law enforcement agencies and to Parliament through the Public Accounts. Several initiatives will result in improved internal controls over financial reporting and financial management. The Government has implemented a financial management governance and policy framework to ensure strong financial management of public resources. The Treasury Board has approved Policies on Internal Control, Governance, Internal Audit and Resource Management, Information and Reporting, all of which will result in strengthened controls over financial reporting, oversight and governance. The Treasury Board Policy on Internal Control, which took effect in April 2009 requires an annual risk based assessment of internal controls related to financial management that allows management and users of financial statements to have reasonable assurance that:
As a result of the Treasury Board Policy on Internal Control, Departmental Performance Reports (DPR) will contain links to an annual risk based assessment on the state of internal controls, commencing with large departments in the fall of 2010. The five departments representing the majority of the losses of public money in the Public Accounts of Canada 2007-2008 are aware of the requirements of the Policy on Internal Control. |