GOVERNMENT RESPONSE TO THE FOURTH REPORT OF
THE STANDING COMMITTEE ON PUBLIC ACCOUNTS

 

 

 

 

 

RECOMMENDATION 1

 

That Treasury Board Secretariat include in its Departmental Performance Report, a section containing information on the government-wide progress of both the Financial Information Strategy and the Modern Comptrollership Initiative, emphasizing results achieved, identifying significant outstanding challenges and describing corrective measures together with their implementation timetables.  That Treasury Board Secretariat begin reporting the government-wide progress report for both initiatives in its Departmental Performance Reports for the fiscal year ending 31 March 2003.

 

GOVERNMENT RESPONSE

 

The successful implementation of the Financial Information Strategy was reported in the Treasury Board Secretariat Departmental Performance Report in 2000-2001.  As part of its core responsibilities, Treasury Board Secretariat continues to support the Financial Information Strategy implementation through its ongoing review and introduction of accounting policies, training and review of the quality of financial data.  The change in management practices required to realize the full benefits of the Financial Information Strategy is now part of the longer-term process of Modern Comptrollership implementation. 

 

The Government agrees that the Treasury Board Secretariat should report on government-wide progress of the Modern Comptrollership Initiative.  Treasury Board Secretariat did report in its last Departmental Performance Report (2001-2002) the early results of the government-wide implementation of Modern Comptrollership Initiative, and will continue to do so throughout the life of the project. 

 

The Treasury Board Secretariat guidance for the preparation of Departmental Performance Reports also includes a section dealing with Government-wide Initiatives and Management Issues.  This section stresses the importance for departments and agencies to provide Parliamentarians and Canadians with information on cross-cutting themes and key management initiatives that underpin achieving Results for Canadians.  In particular, the guidance suggests departments and agencies highlight the measures they have taken to create a culture and environment conducive to instituting Modern Comptrollership. 

 

RECOMMENDATION 2

 

That the Government adopt the integration of full accrual-based budgeting and appropriations into the Canadian Expenditure Management System.  That the Government advise the Public Accounts Committee when the decision has been made.

 

RECOMMENDATION 3

 

Once the decision is made to move towards full accrual-based budgeting and appropriations, that Treasury Board Secretariat immediately prepare an action plan together with an implementation timeframe and table both these documents at the Public Accounts Committee.

 

GOVERNMENT RESPONSE

 

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. 

 

Unlike accrual accounting, there is no international consensus on the adoption of accrual budgeting.  Those countries that have implemented accrual budgeting have adopted specific accrual tools to suit their specific needs and to help them implement much broader reforms.  Moreover, some countries have indicated that their accrual budgeting frameworks are not yet proven and may be subject to change in the context of lessons learned.  We intend to learn from their experience. 

 

Treasury Board Secretariat is committed to stakeholder consultation, which has been well underway since the Spring of 2002, but is also committed to take the time required.  The results of these consultations will be provided to Ministers and Parliament.

 

Once the government has taken a decision on accrual budgeting and appropriations, the Secretariat would be pleased to advise the Standing Committee on Public Accounts of the results.  As an interim step, Treasury Board Secretariat could also brief the Committee on the implications of accrual budgeting and appropriations, as part of the consultation process.

 

When the decision is taken on 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 Standing Committee.

 

 

RECOMMENDATION 4

 

That Treasury Board Secretariat carry out an internal review of the resources available to the Secretariat, departments and agencies, and compare that with the total amount required to complete the Financial Information Strategy and the Modern Comptrollership Initiative and ensure that there are sufficient resources to accomplish the task.

 

RECOMMENDATION 5

 

That Treasury Board Secretariat prepare an action plan, together with benchmarks and implementation timetable for the completion of all outstanding elements of the Financial InformationStrategy.

 

RECOMMENDATION 6

 

That Treasury Board Secretariat prepare an action plan, together with benchmarks and implementation timetable, for the completion of the Modern Comptrollership Initiative.

 

GOVERNMENT RESPONSE

 

Both the Financial Information Strategy and the Modern Comptrollership Initiative are about modernizing management and providing managers with the necessary tools to make well-informed decisions.  The Government's announcement of the introduction of full accrual accounting will also improve accountability, transparency and decision-making.  The systems implementation associated with the Financial Information Strategy is now complete at a total cost of $600 million, spent by both departments and Treasury Board Secretariat.  As part of its core responsibilities, Treasury Board Secretariat continues to support the Financial Information Strategy implementation through its ongoing review and introduction of accounting policies, training and review of the quality of financial data.  The change in management practices required to realize the full benefits of the Financial Information Strategy is now part of the longer-term process of Modern Comptrollership implementation. 

 

Treasury Board Secretariat has also moved to modernize other existing, and introduce new, management policies over the past four years.  Some notable examples are the renewed Internal Audit and Evaluation Policies introduced in April 2001, along with the creation of Centres of Excellence within the Treasury Board Secretariat for both of these functions. 

 

Over the course of the Modern Comptrollership Initiative (1998 – 2004), the Treasury Board will have allocated a total of $45 million to support government-wide implementation.  Pilot departments and agencies invested approximately $30 million in response to the $10 million distributed by Treasury Board for the pilot phase alone, and all now sustain their implementation efforts through their own internal reallocations of resources.  By March 2004, when the current mandate for the central funding of the Initiative by the Treasury Board comes to a close, it is expected that all departments and agencies engaged in Modern Comptrollership will have completed their baseline assessments of the state of management practice in their organizations, and that most will have established costed action plans to address the weaknesses identified.  Consistent with current guidance, these departments and agencies are also expected to re-allocate internal resources to meet these requirements. 

 

The Treasury Board Secretariat’s Strategic Plan for the Implementation of Modern Comptrollership was forwarded to the Chair of the Standing Committee on Public Accounts on 28 August 2002. 

 

RECOMMENDATION 7

 

That Treasury Board Secretariat provide clarification on the desired outcomes of all the key areas of the Modern Comptrollership Initiative.

 

RECOMMENDATION 8

 

That Treasury Board Secretariat complete the development of the accountability and reporting framework to assist in monitoring and evaluating departmental progress toward achieving the desired comptrollership outcomes according to their target dates.

 

GOVERNMENT RESPONSE

 

The objective of the Modern Comptrollership Initiative is to ensure that the government-wide commitment to the vision of Modern Comptrollership becomes self-sustaining by March 2004, when the current mandate of the Treasury Board Secretariat project office comes to a close.  The strategy is to ‘embed’ the principles of Modern Comptrollership as widely as possible by then -- in the management agendas and practices of as many departments as possible, in the awareness of as many managers as possible, in management curricula and core competencies, and in the policies and the modus operandi of the Secretariat itself. 

 

The Treasury Board Secretariat has completed the development of a Results-based Management and Accountability Framework for the Modern Comptrollership Initiative.  This provides managers in departments, agencies, and at the Treasury Board Secretariat with a framework for monitoring and reporting on the Initiative. 

 

This Results-based Management and Accountability Framework is the latest in a series of tools developed by the Treasury Board Secretariat to guide the implementation and assessment of the Modern Comptrollership Initiative:

 

Ø      The Modern Comptrollership Capacity Check is a tool for departments and agencies to use in conducting baseline assessments of the state of management practice in their organizations as they embark on Modern Comptrollership, and to identify priority areas for improvement under Modern Comptrollership Initiative.

 

Ø      The Guidance for Developing Action Plans for Federal Departments and Agencies Implementing Modern Comptrollership outlines the essential elements for management improvement action plans to address the findings of the Capacity Check. 

 

Ø      Treasury Board Secretariat has also drafted Towards Management Excellence: Comptrollership Practices, which incorporates elements of the Office of the Auditor General’s Financial Management Capability Model and the Modern Comptrollership Capacity Check.  It also updates these models in terms of concepts of risk and human resources management.  The purpose of this document is to provide departments and agencies with practical guidance in the development and implementation of their integrated management improvement action plans. 

 

 

RECOMMENDATION 9

 

That Treasury Board Secretariat prepare a progress report on the status of the merger of the Financial Management Capacity Model with the Capacity Check Model.

 

GOVERNMENT RESPONSE

 

Work on developing an updated model of Modern Comptrollership expectations has progressed well.  The draft model, entitled Towards Management Excellence: Comptrollership Practices, incorporates elements of the Office of the Auditor General’s Financial Management Capability Model and the Modern Comptrollership Capacity Check, and updates concepts of risk and human resources management.  The purpose of the model is to provide departments and agencies with practical guidance in the planning, development and implementation of their integrated management improvement action plan.  Treasury Board Secretariat’s objective is to support the continuing implementation of Modern Comptrollership and create the conditions for government-wide long-term sustainability and on-going improvement of management practices. 

 

Treasury Board Secretariat has been consulting with the Office of the Auditor General, departments and agencies so as to improve the model as a tool, with a view to making it available to departments and agencies early in 2003-2004.

 

RECOMMENDATION 10

 

That the Treasury Board Secretariat prepare an action plan, together with an implementation timetable, to finalize the implementation of its full accrual accounting policies, thus enabling the federal government to present consolidated full accrual financial statements.  That the action plan and implementation timetable be tabled in Parliament and the Public Accounts Committee no later than 31 March 2003.

 

GOVERNMENT RESPONSE

 

The Minister of Finance has announced that the Government’s financial statements will be prepared on the full accrual basis of accounting.   This will commence with Public Accounts 2003 which will also include a retroactive restatement of prior year results, due to this accounting policy change.

 

RECOMMENDATION 11

 

That Treasury Board Secretariat immediately start to revise its policy on departmental financial statements to ensure that departments and agencies record all relevant liabilities, costs and asset valuation allowances in order to produce auditable financial statements that provide useful and reliable financial information.

 

GOVERNMENT RESPONSE

 

The Treasury Board Secretariat has already devolved to departments the recording of certain transactions previously recorded centrally.  For the first time ever, all departments and agencies prepared accrual-based financial statements for the 2001-2002 fiscal year.  The statements of departmental corporations were included in the Public Accounts 2002 Volume II, Part II. 

 

Secretariat officials are continuing to work with departments and agencies, and in consultation with officials from the Office of the Auditor General, to determine the extent to which other liabilities, expenses and allowances need to be included in departmental financial statements, as well as discussing how and when these amounts can be included.  The Public Sector Accounting Board of the Canadian Institute of Chartered Accountants does not have an accounting standard dealing with departmental financial statements.  As such, more time is needed to analyse and discuss the technical requirements for departments.

 

The Secretariat expects to issue more guidance on this subject during the next fiscal year.