:
Thank you very much, Madam Chair.
I believe you have all received a copy of my motion, which reads as follows:
Pursuant to Standing Order 108(3)(c), that the Committee devote the next two meetings to a review of the detailed budget cuts announced by the Treasury Board on September 25, 2006.
Madam Chair, this is really just a detail, but to improve the quality of the French version, I would like to replace the word “coupures” with the word “compressions”. It in no way changes the meaning of the motion.
I will be very brief, but I would like to explain my rationale in tabling this motion.
We all know that in the last fiscal year, the Government posted surpluses of more than $13 billion. We also know that for the last ten years, the Government has considerably increased its operating expenditures. Now the Conservative Government is making draconian budget cuts based on ideology by attacking groups and programs that provide a counterweight to the Government's position. The examples that come to mind are the Court Challenges Program and advisory and advocacy groups that focus on the Department of Revenue.
Very often, the cuts involved affect projects and programs that, however small, are very important to civil society and, I would venture to say, to the health of our democracy. In my opinion, that is very much part of our mandate in this Committee, and I'm sure colleagues will recognize that. Indeed, the Government has a duty to explain why it decided not to invest $25 million in the textile and clothing industry, which is currently facing major problems as a result of globalization.
The same question arises with respect to the $20 million that were not invested in fisheries and oceans. Across this vast country, we are all affected. Some $14 million has not been allocated to the Food Inspection Agency, even though the agricultural industry overall is greatly concerned by such issues as the new disease affecting potatoes, the avian flu crisis, and mad cow disease. I could add to this already long list a $50 million reduction in programming aimed at Aboriginal Canadians.
I should also like to point out, as regards the agencies and departments that it is our role to critique, that Public Works and Government Services Canada has decided to apply spending reductions of $45 million, primarily to the Real Property Program. My position is that we should invite the Minister and Deputy Minister to explain how it has come to this. As for cuts in additional funding for real property management renewal, there we're talking about $5 million, as well as a $40 million reduction in the revolving fund surplus.
I hope my colleagues will agree that it is critical that we review these issues. For Treasury Board, we're talking about a $9 million cut in funding for the School of the Public Service, an $83 million cut for the Human Resources Management Agency, and $18.5 million worth of cuts to government-wide initiatives. We know that governments have often boasted about being able to save money through such initiatives. I'd like to know how we managed to save $18.5 million.
Madam Chair, I hope all colleagues will agree to carefully study these budget cuts. In closing, I would just like to suggest that we do this in two ways. First of all, I am suggesting that we review the overall situation. To that end, we could select a number of witnesses and hear from them. The idea is to determine how and why all these budget cuts were made.
Also, in order to study this in greater detail, I would suggest that we invite senior officials, including the ministers responsible, respectively, for Public Works and the Treasury Board Secretariat, so that they can explain how they arrived at budget cuts of the magnitude I have just mentioned.
Thank you, Madam Chair.
:
Madam Chair and members of the committee, on behalf of Canada's chartered accountants, I want to thank you very much for the opportunity to speak to you today on the accrual basis of financial reporting.
My name is Ron Salole. I'm the vice-president of standards at the CICA. My colleague, Martha Denning, is a principal with the Public Sector Accounting Board.
I've spent 30 years in standards, 25 with the CICA and five with the New Zealand Institute. Martha has been a principal for 15 years. So between the two of us we've got 45 years of experience in standard setting. My comments will come from that perspective.
Let me tell you just a bit about the CICA and the boards, and then I'll deal with the accrual basis of accounting. The CICA, together with the CA provincial institutes and the order, represent approximately 71,000 CAs and 9,500 students in Canada and Bermuda.
It conducts research into current business issues and supports the setting of accounting, auditing, and assurance standards for business, not-for-profit organizations, and for government. It issues guidance on controlling governance, publishes professional literature, develops continuing education programs, and represents the CA profession nationally and internationally.
Our mission is to provide relevant, reliable information and decisions in a global context. We have strong business skills. We act with integrity and objectivity. Our commitment to excellence in the public interest is enforced through rigorous self-government and public oversight.
The CICA's standards group comprises the following entities, activities, and people. It has three boards, oversight councils, members, and staff. Canadian standards for financial accounting and reporting and for assurance and related services are set by three boards: the Accounting Standards Board for commercial organizations, companies, public and private companies, and not-for-profit organizations; the Public Sector Accounting Board that Martha is involved in that sets standards for the public sector; and the Auditing and Assurance Standards Board that sets auditing and assurance standards.
Each board is supported by its own professional and administrative staff and each is accountable to an independent oversight council that represents the public interest.
Madam Chair, with your indulgence, what I thought I might do for five minutes--I don't know that I'm going to need more than that--is to focus on some myths about accounting and the accrual basis of accounting and try to dispel them. Then I will deal very briefly with budgeting and try to draw some comparisons. I will then talk about another issue that I think you are going to be concerned with, and that is change management.
The accrual basis of accounting, financial reporting itself--or accounting, if you like--is a practical occupation. One of the best accounting minds in Canada, Ross Skinner, is the second candidate in an accounting hall of fame--yes, we do have a hall of fame, even in accounting. He said this about accounting:
Accounting is a practical occupation. It has little point unless it serves a purpose. Some people — a small minority — find some satisfaction in the symmetry of a balanced set of accounts. But for most people the value in accounting lies in the information it conveys.
It's very practical. That is one of the things I'm going to say about it. It's practical. It's there to serve a purpose. It's not an objective.
The principal thing it does is try to tell people what happened, the way it happened. It is not trying to tell people what they would have liked to have happened, what they wished happened. It is trying to tell people what actually happened, warts and all. It's trying to say that if this transaction occurred, if this event occurred, let's report it, warts and all. It's reporting and it is historical. It is not looking forward necessarily. It's telling it the way it is--not the way people want it to be or the way people like it to be, but the way it is.
The accrual basis of accounting is the best way we've developed, internationally, globally, to be able to do that. It portrays a picture and says here are the transactions and events that occurred in this particular period. Here's the balance sheet, the statement of the financial position. It tells you what its assets and its liabilities are, and it tells you what the changes in those assets and liabilities are. We focus on setting standards for that, because we can come up with some rigid, well-based, well-grounded principles, and we reason from them.
On one side, research shows that financial reports prepared on the accrual basis of accounting historically also happen to be the best predictors of what is likely to happen in the future. That's why the stock markets use historical financial statements that look at what happened in the past in order to come up with their judgments on what is likely to happen in the future. That's a research finding, and it may or may not necessarily happen.
However, there are some limitations on financial reporting that proceeds on the accrual basis of accounting. You have to understand those limitations.
It is one-dimensional. If, for example, you are an engineer and you're going to build an outhouse in the back of your garden, you'll still need three-dimensional drawings in order to do it. Sophisticated models being built today using computer activity use three-dimensional models. Financial reports of the government are in one dimension and one dimension only. They give you a picture; they do not have depth. For management purposes, people need additional pieces of information. A key piece of information for any organization, whether in the private sector or in the public sector, is cash management--being able to predict what their debts are going to be and how they're going to pay them and manage them. You cannot overlay your cash management, though, on an accrual basis of accounting. That has its own purpose. Its purpose is to provide you with that picture and tell you what happened, tell you what transactions and events occurred. Cash management has a different set of skill sets, and it has another objective.
Budgets tend to be the most important documents a government prepares, because they look into the future and say what we plan to happen--I was going to say what we hope is going to happen. But it is a futuristic look at what's going to happen.
From my perspective as a standards setter, I say that accountability can only happen if you compare a budget with what actually happened a year later. The only way you can have accountability and the only way you can have comparability is if both of the measures you have can be compared like to like. If they are on different measurements, you aren't comparing apples with apples anymore. Accountability can only be achieved if the budgets and financial statements have been prepared on the same basis, and accrual accounting is the best way you can tell what actually happened and the way it actually happened.
The difficulty with budgets, if they're not prepared on an accrual basis--or even what is contained in them or not contained in them--is that we haven't got standards for what the transactions or events that you're going to be including in that budget ought to be. That's because it is future-oriented financial information. It is what the government wants to be able to do, expects to be able to do, but it hasn't happened. Until it happens, the standards saying how you're going to report are not there, but being prepared and developed on an accrual basis of accounting is definitely possible, and a number of jurisdictions have already done that.
One of the things we in standards setting have to deal with--and whether we deal with it very well is sometimes debatable--is this whole issue of change management. Generally speaking, people don't like change. They don't even like new standards. We hear an awful lot, and I'm always bombarded by people who come to complain about standard overload, because we've issued a new standard.
The new standards we issue are not there to make anybody's life difficult. It's more that some economic event, some commercial event, or some complex types of transactions have occurred in the marketplace. Some people say they don't know how to account for this, and they ask what the best way is to account for this. We are developing new standards all the time to try to deal with those complex problems.
I think what we have is very small in comparison to what the Government of Canada will have if it moves estimates from a cash basis to an accrual basis. It's not unmanageable; it is manageable. I think at the end of the day, if it does move, it will make for better decisions, because everything will be done on a similar basis.
With that, Madam Chair, I will stop.
I would be more than happy to answer any questions from the committee.
:
Absolutely. It's a good question.
Budgets are future-oriented information and therefore the basis on which they're prepared is built on what we call assumptions. Depending on those assumptions, you can have some very significant results.
I know you have a CMA, and therefore you know that one of the things management uses is the cost analysis--the differences between budget and actual, on a daily basis, to be able to say this didn't go the way we planned, we have to correct it, or we made more or less. It's part of the management tools.
But I'm not a hundred percent sure that I would say budgets have the same elevation in business that they do in government. If you look at government, you tend to see that the single financial document that is focused upon by the media, by government itself, or by declarations, happens to focus on the budget. Public accounts don't get the same level of scrutiny or the same level of interest from everybody else.
The reverse is true in commerce. The budgets are used as a management tool to be able to manage the company on a day-to-day basis, but they don't publish them. They don't have to account for differences, look at variances, or look at variance analysis. The accountability is a little different.
In developing our standards for the public sector, we've said accountability is much more important in the public sector. The best way to get accountability in the public sector is to take the budget and say you're going to be accountable by explaining what the differences are and what actually happened. It's a year later, but it is still going to be a good accountability report.
:
Do you know what the implications are? In the course of your career, you have surely dealt with businesses or organizations that have made this type of change.
Mr. Alghabra, I realize that we have completed half the work, but in order to get through the second half, resulting in full implementation, will it be possible, in spite of the problems associated with this, to avoid running into major issues?
You talked earlier about determination and understanding. And you have just pointed out that making decisions with this information will be a whole different ball game. But in some cases, even when there isn't a lack of good will, implementation can be seriously compromised. In addition, if there is the possibility of a mutiny -- something we really can't imagine happening within the federal government, now can we? -- the consequences could be extremely serious.
I'd like to know whether, to your knowledge, in Government organizations that have implemented these kinds of measures in the past, the process was a success. So, in spite of the fact that it was a lengthy and challenging process, did people say, once it was all over, that they had made the right decision?
:
In the private sector this problem doesn't exist. They don't focus on estimates on a cash basis. But I do want to caution you, going back to something I said earlier, that financial reporting on an accrual basis of accounting by itself probably doesn't give you enough information. You'd need to have good cash management practices in an enterprise. But that's private sector.
In the public sector, have any jurisdictions been able to do this? A few. I don't want to portray a picture of it being simple to do, but New Zealand, about 20 years ago, was a jurisdiction that was near bankruptcy. They went through a whole reform program, and this was part of that reform program.
It's amazing what you find when you look at history and you research what actually happened. You find that when you're really down to having to survive, you come up with new mechanisms that help you with that survival. And it's easier to do it then; otherwise, you're not going to be able to survive.
Given the lack of crisis that, say, New Zealand had about 20 or 25 years ago, the energy won't be there to say, yes, now we're going to try to survive. New Zealand didn't find it difficult. They found it extremely useful. They became very successful. They made some very significant decisions on what the future was going to be.
So that's a good example of a jurisdiction that has applied it successfully. Australia is the other country that has applied it successfully, and with good results.
That said, I know that a number of jurisdictions in particularly the European Union, such as the United Kingdom and France, are insistent that for estimates, the cash basis is the only basis on which they can do it. Then they go through the reconciliations to be able to provide transparency and accountability. But I don't think it is as good as the New Zealand and Australian models.
Within Canada itself, British Columbia as a province has gone completely to the accrual basis for everything. My understanding is that at the moment, the Province of Manitoba is contemplating it. I don't know that they've made a decision, but they are certainly considering it.
:
Madam Chair, that's quite comfortable. What goes around comes around; it will all balance out in the end. Thank you.
Welcome to our guests. I'll tell you, I'm pleased. I won't say I dreaded today, but I will tell you that I expected almost a textbook approach--accounting 101, etc.--and I'm actually very refreshed that you've brought some reality and some real-life application to this. Thank you very kindly for that. I'll just follow up on it.
I sensed that this could almost be simplified in a way into desirability--do we want to go there? The second portion would be the obstacles to making that happen.
Dealing with the first part, the position of desirability, I'm actually just going to quote a comment you just made, which I actually take great solace in, because I've personally listened to the Auditor General at great length--I certainly wouldn't say ad nauseam, but at great length--on this issue.
You said that accrual accounting really is “the best predictor of what will happen in the future”. In other words, with accurate information you are much more capable of making intelligent decisions. And for us, as a government making decisions, the more accurate our decisions are, the better our public is served.
So I think the desirability of accrual accounting is real, and I thank you for highlighting and accenting and cementing that process even more.
As well, you mentioned that the budget is the most important element worthy of government focus. I think most of us around this table are in concurrence and recognize that. So once again, thank you for that.
Then we come around to the second part of the equation--why haven't we done it? You mentioned a number of potential obstacles, the one, of course, being the intangible. You referred to it as change management, where people habitually, and just by nature of the beast, resent change.
I'm wondering, if I were just to ask you to, in your own mind, quantify.... We're going to discuss some real obstacles, but one real obstacle is just having an internal decision and an attitude to make that change. Do you think most of our problems of resistance to making this happen have been in an attitudinal direction, or have they been focused on the application of real problems?
:
Okay. Thank you very kindly.
Dealing once again with not real but talk-around points, I'll call them, on this with respect to benefits versus the actual cost of implementation, I have not actually seen, or we have not been exposed to, with our witnesses yet the actual real cost to a government of going to accrual. Is it going to take one year? Is it going to take seven years?
We've had some indication of that, but I'd like to see some dollar figures attached to this at some particular point. Is the cost going to be $250 million? There were figures bandied about, and yet there didn't appear to be anything near unanimity on this because there didn't seem to be a complete answer as to what extent we should go.
What I'm trying to suggest here is, shouldn't we have a clear focus before we are going to be able to actually cost it effectively? Right now, estimates are coming through based on many possibilities. I would much prefer to have a clear focus.
As an example, the research people here have come up with a great many obstacles, just with the treatment of tax revenue alone being a problem, whether it's underground market, whether that's factored in there, or whether it's the timing and the amount of taxation. Shouldn't we have a clear sense of direction on all of the obstacles and what we plan on doing with it, and then arrive at a cost factor? Would that be a reasonable way to approach this?
I don't know if I've confused the issue with you or not.
:
Thank you, Madam Chair.
Good morning, guests. Thank you for helping us navigate the rocky shoals of accrual accounting.
Those of us who are not accounting specialists don't come with predetermined positions one way or the other, except that we want to make the best decisions possible on behalf of the country. So we really value your expertise and guidance.
There were some background documents prepared for us on this. In looking at the big picture of the pros and cons, it seems there are many advantages. For example, the portfolio of property seems to be a very strong, favourable clarity in terms of budget versus the actual outcomes. So there is better information.
There is one argument by critics of this system, and I would like to get your view on this. I quote from our briefing documents. It says opponents of the adoption of accrual budgeting also note that accruals introduce
a great deal of technical complexity into budgeting, thus making it less transparent and less understandable. Accruals also offers new opportunities for manipulation that are of a different nature than in cash budgeting....
Finally, critics note that the benefits of accrual budgeting do not outweigh the implementation costs of training staff and upgrading systems.
Could we get your views on that?
:
I'm not going to disagree with any of that, but I'm going to go back to a couple of comments I made earlier, because I think the context has to be understood.
I firmly believe, and I think it is well and generally accepted, that the accrual basis of accounting for historical cost statements is the best way we can tell the story of what transactions and events happened with a particular organization--be it a company, a not-for-profit organization, a hospital, a church, or a government.
The accrual basis for accounting is the best way we can tell the story of what happened. The cash basis has been totally rejected as a basis to be able to do that. It cannot do that. It's incapable of doing that.
Once you've made that decision, and you've accepted that--and those are the only standards we have--then the second piece, to get transparency and accountability from a governance point of view, is you need to compare what actually happened versus what somebody said a year ago they wanted to happen. The only way you can get true comparability is if those two bases of measurement are the same. If they're not the same, then you can't get that measurement.
The cash basis of preparing your budgets opens up possibilities for manipulation that are very simple. You just forget that you've got a drawerful of invoices and you don't pay them. Then that's it, you've made your budget.
Are there complexities with accrual-based budgeting? Of course, there are. Are there possibilities that people can play games? Sure there are. Are they different? Sure they are. Are they more complex? It's difficult to be able to say whether they're really more complex. If the transaction or the event they're supposed to capture is complex, then I defy anybody to tell me how you can have a simple way to capture an event or a transaction that is really complex by a simple method. So, yes, sometimes the events and the transactions are complex and you have to be able to get a mechanism, a measure, a rule--because that's what it is, we're measuring things--that will cope with that complexity.
The way I come at it is to say that if you want transparency and accountability, you have to be able to compare like with like. Preparing budgets on an accrual basis is a little better than doing it on a cash basis and doing the reconciliation back to accrual.
That's the way I would answer that question.
:
I'll try, because I'm not familiar--or as familiar as you, for sure--with it. You actually do it, so you must be comfortable with what you're doing.
The way I would respond is that one of the other things we're doing in the public sector accounting board is looking at how to better handle what we call results management, looking at outcomes. I think the Government of Canada has some really incredible, good stuff in that. We're looking at objectives and at outcomes.
To my way of thinking, if you are able to say, “Look, in order to achieve that outcome, here's the total picture on an accrual basis of what's actually going to be the cost, the deliverables, the outcome,” as opposed to saying, “This is multi-year funding”, or “This is going to be spread over two or three years”, if you get the total picture you might be able to make better decisions. Then you would be able to say, “Here's what it's going to cost me to achieve that outcome; is it worth it?” You might be able to make better choices. But I don't speak from deep knowledge on this, I have to confess.
One of the points I want to make is that there is a big difference between funding and cash management, and accrual accounting and reporting on what actually happened. I can't emphasize more that those two shouldn't be mixed. You'll do both better if you can look at what the objective of each is going to be.
When you're doing your vote and getting the authority, which is very important--that's probably the most important job that parliamentarians have to do, giving the authority--you have to be able to try to make sure that it's value for money.
:
Thank you for coming today. I appreciate it.
With your involvement with the standards department, I'm sure that once the government continues to move in this direction--as many of us around the table hope--you'll probably be busy with a few things in trying to explain to our bureaucracy how to account for a number of things.
I'm going to ask questions specifically with regard to capital assets. Obviously we have our heritage sites. We also have our parks. There are a lot of things that we, as a government, as the Canadian people, have every intention of keeping forever, with no intent to divest at any time. Is it common practice for these to have current market value? If so, obviously there's cost involved in trying to track that from year to year: the current property values, comparisons, and those types of things. How do you account for that? Or maybe different jurisdictions account for that. It's going to become one of the issues we're going to have to deal with.
If we try to maintain a current market value, there's obviously a huge cost involved in that, but if we don't, then we have a liability option for these things, and then, on the books, it looks like a deep hole that we continue to waste our money in.
There's a real balancing act there. I'm just wondering if there's a way, maybe in the standards, to get away from the high cost of having this on the books, but still have it on the books, so that it gives us a clear picture of what the current situation is.
:
That's a real beauty, and we haven't been able to crack it.
We don't have the same problem as the European countries. Our heritage assets are very young compared to those in Europe—the Coliseum or whatever the items are—and they haven't cracked it either.
I think it illustrates very well one of the limitations of financial reporting. Financial reporting is good at telling you what happened, when it happened, and what transaction and event occurred. It tells you that story.
I think for things such as collections, museums, heritage assets, one has to almost go outside of the financial statements and say, we don't want to burden the financial statement. This is my own personal view. We haven't cracked it.
People are talking as we speak. I've just received a draft paper from the International Public Sector Accounting Standards Board talking about heritage assets. We're in the middle of trying to decide whether fair market values make an awful lot of sense.
The tendency is not to include them in financial statements for the reasons you've stated. It's costly. You might as well not.
But we can handle it outside of the financial statements. We can look at ways to keep that stock of heritage assets, such as collections in museums, alive and ensure that the maintenance and development of those assets are maintained. I think it's going to be outside.
:
Thank you, Madam Chair.
In a good number of reports, the Auditor General states that accrual accounting is the method to use. Several meetings have demonstrated that progress has been made towards implementing a system of accrual accounting across the federal government, but that there is still a lot of work to be done.
Once again, Mr. Salole and yourself, as well as other experts we have met with, are demonstrating that accrual accounting ensures greater transparency as regards the collection and use of public funds by the government. Accrual accounting may also prompt the government to spend less in certain areas and make more appropriate decisions. And all of that benefits taxpayers.
We have covered the topic quite thoroughly. My colleagues asked very relevant questions about both technical and more general matters. My question is more general.
As you mentioned earlier, New Zealand and British Columbia, which is a province of Canada, have experience with some of the more technical points. In your opinion, what more should the federal government be doing to ensure that it has a system of accrual accounting that is just as good as the one used in other countries?
British Columbia doesn't have an army, but New Zealand does. There are things related to military spending that we could look at, if only to see how you move from cash accounting to accrual accounting in an area like that.
If the will were there, what else would Canada have to do to implement accrual accounting in a reasonable amount of time?
:
To answer that as well as I'm sure you would like, I'd have to have a more intimate knowledge of what has been done now and what's left to do. I think you probably have experts within government who could probably give you a better feel for the specifics.
Ron has mentioned that a sea change is needed in the culture--for example, “This is what's been given to me and I have to spend it,” as opposed to a fuller picture of, “These are the resources I've been given to achieve these outcomes.” The way of managing has to change.
There will be inertia when people have been managing a certain way for a very long time. The countries that have adopted accrual budgeting and that seem to have had some success with it have also done significant public sector management reform at the same time. They've changed how they give resources to the departments and how they hold them accountable. They hold them accountable for results, and in order to be held accountable for results, you have to have a good picture of what it costs to achieve those outcomes.
That is what accrual accounting gets you--a better picture of the costs. Here are all my resources, this is what I'm using up in this particular year, and this is what it's costing me out of my resources to achieve that particular outcome. And until management focuses on outcomes rather than spending, it's not going to be as effective a change. Reconciliations at year-end do not promote that type of change.
I'm thinking back to a number of years ago, when Alberta decided to implement wholesale change. I remember their comptroller coming and speaking to us about taking the Nike approach, namely, “Just do it.” That's what they were told: “Just do it, just get it done, and this is when you have to get it done by.”
So it was the leadership at the top that made it happen, that said it was going to be pushed down, that said how much time would be given to do it. And I think leadership is needed, really. I won't comment on whether that is or isn't here now, because I don't know, but definitely leadership from the top and a different focus in operations is needed. For example, multi-year estimates and multi-year appropriations help with that.
:
Good morning. I will be making my comments in French.
The purpose of the presentation was to explain the accounting process using the accrual method.
As regards accrual accounting, what connection can be made between the accounting entity and consolidation of government activity overall? Will moving to accrual accounting mean that there is a more comprehensive view of overall government activity? For example, I'm thinking of certain foundations that may not necessarily be consolidated or companies with hidden deficits. Could you comment on that?
Second of all, this morning we talked about vigilance in accounting. Accrual accounting did not allow the private sector to avoid financial scandals. There are mechanisms available, such as the ones put in place by the Auditor General. Will they make her life more difficult or more complex in terms of auditing the Government's financial statements? In your opinion, will steps be taken to avoid situations where figures have been tampered with?
You commented on assets. How do you determine the value of the Parliament of Canada in terms of assets? Some of Canada's assets have a heritage-related value. These are interesting and realistic challenges. Do you see any other challenges, including those related to military assets?
There are three points here: the accounting entity, consolidating the foundations, and the vigilance that will be required of the Auditor General because of this change in accounting systems.
And in closing, could you tell us how you intend to evaluate government assets?
:
I will do my best to answer all of those for you.
The government financial statements right now consolidate all government organizations that are controlled by the government. That's the standard, and the Government of Canada follows the standard. They get a clean opinion on their financial statements. At the year-end, financial statements include the whole of government, as we would call it.
I believe—and I can't tell you for certain, but I believe—that the Government of Canada also budgets on that basis, so they have a consolidated budget to a certain degree. I can't say absolutely, but I believe they have something that resembles a consolidated budget. Whether the entities for the budget and the financial statements are exactly the same, I can't say.
The foundations themselves are tested against criteria as to whether they're controlled or not. Some are in the government's reporting entity and some are out. There are very clear criteria about what you'd look at to decide whether they're in or out. I think the government has changed its relationship with some of them in the recent past, and therefore some that used to be out are now in. I know it's been a very big issue for the Auditor General, because money has gone out of government and has sat there. It seems to be out of the control of government. But if they're able to meet the criteria for them to be out, they're out.
I would say that the idea of an entity is part of accrual accounting. I think all of the entities use accrual accounting when they're put into the statements, and I think you get a better picture of the whole of government.
I'll try to paraphrase your second question, just to make sure I understand it properly. I think you're talking about some of the scandals there have been with the federal government, or maybe you were talking about the private sector ones and wondering if something similar could happen. Is it more along that idea? Yes?
The first thing I should say is it wasn't really a standards issue. It was more that they weren't being applied. The correct standards were in place in the U.S., where Enron happened, but they were not applied right, and it wasn't really caught. They were extremely complex transactions, and it just wasn't caught soon enough.
I know that one of the issues with the federal government here is not that the controls weren't in place. I think, based on what I know, it's that some of them weren't being followed. I'm not sure accrual accounting or standards will help any more than they already do. The more information you have, particularly if it's summarized and analyzed in a way that will help you make good decisions, the less likely you are to have those issues, but in the end it comes down to controls and whether people follow them.
I think the right controls were in place and just weren't followed.
With respect to the heritage assets, I don't know how to help you on that one. It's a difficult topic, coming up with a value. I suspect if you talked with different evaluators they'd come up with different values.
The property they sit on will have a very high value. The value of the assets themselves...? I don't think all of it is quantifiable, so I'm not sure you're ever going to come up with a value that's truly going to reflect its value to the particular country, whether you take into account tourism revenue or other intangibles. I can't really answer definitively.