The Accounts of Canada
The financial role of the House of Commons does not end with voting supply or authorizing measures to raise revenue. The House also acts as a “watchdog” to ensure that federal money is spent in the amounts and for the purposes authorized by Parliament.495 This monitoring function (often described as “closing the loop”) is delegated largely to the Standing Committee on Public Accounts, which examines and reports on the Public Accounts of Canada, as well as on all reports of the Auditor General of Canada.496
The Public Accounts of Canada
Under the Financial Administration Act, the Receiver General497 is responsible for ensuring that accounts are kept for each department and agency of the Government of Canada. These accounts must show all expenditures made under each appropriation, all government revenues, and all other payments into and out of the Consolidated Revenue Fund,498 together with the assets and liabilities, the contingent liabilities of Canada and the related reserves that are deemed necessary to present a fair picture of the country’s financial position.499 The accounts of each individual department and agency are rolled up into the Accounts of Canada.
Each year, the President of the Treasury Board tables a detailed report of the financial transactions of all government departments and agencies, entitled the Public Accounts of Canada. The report must be tabled500 on or before December 31 following the end of the fiscal year to which the accounts apply or, if the House is not sitting, on any of the first 15 subsequent sitting days.501 As a matter of tradition only, the Public Accounts are addressed to the Governor General.
The fundamental purpose of the Public Accounts of Canada is to provide information to Parliament and thus to the public, which will enable them to understand and evaluate the financial position and transactions of the government. Two constitutional principles underlie the public accounting system: that duties and revenues accruing to the Government of Canada form one Consolidated Revenue Fund; and that the balance of the Fund, after certain prior charges, is appropriated by the Parliament of Canada for the public service.502
Responsibility for the form and content of the Public Accounts of Canada rests with the President of the Treasury Board503 and the Minister of Finance.504 The financial statements are prepared under the joint direction of the President of the Treasury Board, the Minister of Finance and the Receiver General for Canada.505 By law, the Accounts must include, for the fiscal year to which they apply: a statement of all the government’s financial transactions; a statement of all expenditures and revenues; a statement of the assets and direct and contingent liabilities of Canada; the Auditor General’s opinion on the Accounts, pursuant to the Auditor General Act; and whatever other accounts and information the President of the Treasury Board and the Minister of Finance deem necessary to represent fairly the financial position of Canada at the close of the year.506
Since 2004, the Public Accounts of Canada have been divided into three volumes. Volume I presents: the financial statements of Canada on which the Auditor General has expressed an opinion and provided observations; an analysis of the financial statements and a 10-year comparison of financial information; analyses of revenues and expenses, and of asset and liability accounts; and a variety of government-wide summaries of revenues, expenditures, loans and investments. Volume II presents the financial operations of the government, segregated by Ministry. Volume III provides additional information and analyses, such as the financial statements for revolving funds, transfer payments and public debt charges.507
Until 1993, the third volume of the Public Accounts also contained financial information on Crown corporations. That volume was replaced by the “Annual Report to Parliament: Crown Corporations and Other Corporate Interests of Canada”, a consolidated report on the businesses and activities of all parent Crown corporations and other corporate interests of the Government of Canada.508 The annual report was prepared by the Treasury Board Secretariat for the President of the Treasury Board, who tabled it in the House.509
In 2012, Parliament adopted amendments to the Financial Administration Act which modified the reporting requirements for Crown corporations in an effort to improve the availability of quality and timely information to the public. The change eliminated the requirement to table the “Annual Report to Parliament on Crown Corporations and other Corporate Interests of Canada”, and to have it attested by the Auditor General of Canada. That information is now made public by the President of the Treasury Board in an online format on a quarterly basis.510 Individual Crown corporations are still required to table their annual report on the operations of the corporation pursuant to the Financial Administration Act.511
The Auditor General of Canada
The Auditor General of Canada is an officer of Parliament appointed by the Governor in Council under the Auditor General Act to audit the Public Accounts of Canada and investigate the financial affairs of the federal government.512 The Auditor General holds office during good behaviour for a period of 10 years and the term is not renewable.513 The position was first established in the Audit Act, 1878.514 That legislation was replaced in 1886 and in 1931 by the Consolidated Revenue and Audit Act,515 which, in turn, was repealed by the Financial Administration Act, 1951.516 Initially, the Auditor General was responsible only for auditing expenditures, before they were made (prepayment audit) and after they were made (post-payment audit). In 1977, Parliament enacted the current Auditor General Act which broadened the Auditor General’s mandate beyond attesting to the accuracy of the government’s financial statements to examining how well the government managed its financial affairs.517
In 2006, Parliament adopted the Federal Accountability Act, which gives the Auditor General of Canada the authority to audit recipients of funding from the federal government.518 The Auditor General now has the authority to audit recipients of most federal grants and contributions to determine whether obligations under the funding agreement have been complied with, whether money has been used with due regard to economy and efficiency, whether satisfactory procedures to measure and report on the effectiveness of activities are in place, whether accounts and essential records have been properly maintained, and whether due regard has been given to the environmental effects of expenditures.
As auditor of the Public Accounts of Canada, the Auditor General examines the government’s financial statements to ensure that the information is presented fairly, in accordance with stated accounting policies, and on a basis consistent with the previous accounting year. Additional responsibilities for special examinations of Crown corporations are set out in the Financial Administration Act.519 The Auditor General is empowered to undertake whatever examinations and inquiries are deemed necessary to produce the reports required under the terms of the Auditor General Act.520
The Office of the Auditor General carries out three types of audits: attest audits; compliance audits; and performance audits on value for money. Attest auditing verifies that the government is keeping proper accounts and records and that it is presenting its overall financial information fairly.521 Compliance auditing ensures that the government collects and spends only those amounts of money authorized by Parliament and only for the purposes approved by Parliament. Finally, performance auditing assesses whether or not government programs were run with due regard for economy, efficiency and their environmental effects. The audits also assure Parliament that the government has the means in place to measure the effectiveness of its programs where it is reasonable and appropriate to do so.522 Since 1995, the Office also has been responsible for evaluating the extent to which department activities meet their environmental and sustainable development objectives.523
Where such an assignment does not interfere with the primary responsibilities of the office, the Auditor General may also be asked by the Governor in Council to inquire into and report on any matter related to the financial affairs of Canada or to public property, or to inquire into and report on any person or organization that is seeking or has received financial aid from the Government of Canada.524
Auditor General Reports
The Auditor General must report annually to the House of Commons, drawing the House’s attention to any cases where:
- accounts have not been properly maintained or money not properly accounted for;
- the accounting procedures used are insufficient to safeguard the collection and spending of public money;
- money has been spent without due regard for economy and efficiency, or other than for the purposes appropriated by Parliament;
- appropriate procedures to measure and report program effectiveness have not been implemented; or
- expenditures have been made without due regard to environmental and sustainable development issues.525
The Auditor General Act requires that each annual report be submitted to the Speaker of the House of Commons on or before December 31 in the year to which the report relates and that, upon receipt of the report, the Speaker table it forthwith. If the House is not sitting at that time, the annual report is tabled on any of the next 15 sitting days of the House.526 At the request of the Auditor General, the Speaker has frequently agreed to table the report in the House at a predetermined time.527 Once tabled, the report is automatically referred to the Standing Committee on Public Accounts.528 Prior to the tabling of the report in the House, the Auditor General typically gives a briefing on its contents to members of the Standing Committee on Public Accounts, at an in camera session. In addition, the Chair of the Committee will normally invite Members to a lock-up session,529 during which they may examine the report to be tabled later in the day and be briefed in advance by officials. A lock-up session for the media is also normally arranged.
Changes to the Act introduced in 1994 authorized the Auditor General to make up to three reports each year over and above the annual report, any special report on matters of pressing importance or urgency, or any special report on the funding of the Auditor General’s Office.530 Where such an additional report is to be tabled, the Speaker must be advised in writing of the subject matter and the report itself is submitted to the Speaker 30 days after the notice is sent, or after any longer period which may be specified in the notice.531 The Speaker is required to table the report forthwith, or if the House is not sitting, on any of the next 15 sitting days of the House.
Since the enactment of the 1994 provisions, the Auditor General’s annual report is submitted to the House of Commons in several volumes. The first is usually tabled in the winter and follows up on progress made by the government in responding to recommendations contained in previous performance audits. The second volume is tabled in the spring, and the third in the fall.532 Since 2010, it has become the practice to table two volumes, one in the spring and the other in the fall.533 Each volume contains individually numbered reports534 presenting the results of various performance audits (formerly known as value-for-money audits) of departments and agencies. Alongside the Auditor General’s reports there may also be reports from the Commissioner of the Environment and Sustainable Development.535
The Standing Committee on Public Accounts
Under the Standing Orders, all reports of the Auditor General, as well as the Public Accounts of Canada, are deemed permanently referred to the Standing Committee on Public Accounts as soon as they are tabled in the House.536 Since 1987, the Committee has also been responsible for scrutinizing the annual estimates of the Office of the Auditor General.
Since 1958, the Committee has been chaired by a Member of the Official Opposition, while the membership reflects the proportions of the various recognized parties in the House.537 The Committee’s main functions are to ensure that public money is spent for the purposes authorized by Parliament and that sound financial practices are encouraged in estimating and contracting, and in administration generally. The Committee does not concern itself with the appropriateness of government policy; rather, it focuses on the economy and efficiency of its administration. The Committee regularly reports its findings to the House. The reports typically state conclusions and recommendations on matters pertaining to the improvement of managerial and financial practices and controls of government departments, agencies and Crown corporations.538