OGGO Committee Report

CHAPTER ONE — INTRODUCTION

The House of Commons Standing Committee on Government Operations and Estimates was established to examine government spending, either directly through the Estimates documents or indirectly through the examination of government operations. The Committee’s review of government spending and operations is fundamental to holding the government to account on how public funds are spent. To this end, ministers and their senior officials are called to appear before the Committee to answer questions on spending for which they are responsible. Therefore, the Committee has developed a particular interest in, and knowledge of, issues of government accountability in relation to financial management.

In order for the Committee, to properly assess government spending plans it is important that information on policy intentions and on the formulation and implementation of programs be clear and transparent. To achieve this transparency, budget and estimate documents must fully disclose all relevant information in a timely and systematic manner. A key element in achieving transparency in government finances is the accounting basis selected for reporting and budgeting exercises. Traditionally, the government has used a cash based accounting system. In recent years the Canadian government as well as other governments (both provincial and foreign) have moved towards the implementation of accrual based accounting systems.

Past Canadian governments have committed themselves to change over to an accrual based accounting system for government financial activities. During its regular review of the estimates in the spring of 2006, the Committee heard from the Auditor General that there has been a “… continued lack of progress in implementing accrual-based budgeting and appropriations”¹. She emphasized that this inaction has “impeded departments' integration of accrual-based financial information into their regular decision making”². At the time she observed that:

The government has responded by studying this issue since 1998 without ever establishing a clear position as to what direction it will take. After having studied this issue for eight years, it is, in our opinion, time for the government to take a position on this matter. The Public Accounts Committee has recently urged the government to implement accrual-based budgeting and appropriations. The support of your Committee would help reinforce for the government that parliamentarians have an interest in seeing this matter resolved³.

She also reminded the Committee that:

The lack of progress in resolving this important issue and the weaknesses in internal controls are the chief reasons for the unsatisfactory progress in improving financial information in departments and agencies. I believe that this lack of progress also contributed to the choice of the less cost-effective option noted in paragraphs 7.24 and 7.25 of chapter 7 on the acquisition of leased office space which we discussed with this committee at its meeting on June 8⁴.

In view of these comments, the House of Commons Standing Committee on Government Operations and Estimates felt that it needed to take action on the matter of introducing accrual accounting in government appropriations. Subsequently, it recommended in its Third Report:

That the Committee's fall agenda be set aside to extensively study the implementation of accrual accounting with view to make a recommendation to the House of Commons prior to December 2006.⁵

The Committee began its hearings on accrual accounting in September 2006 in the hope of providing some guidance to the government in resolving the remaining obstacles to the implementation of accrual based budgeting. The results of the Committee’s work are presented in this report.

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1	House of Commons Standing Committee on Government Operations and Estimates, Meeting No. 9, Evidence, Tuesday, 13 June 2006.

2

Ibid.

3

Ibid.

4

Ibid.

5	House of Commons Standing Committee on Government Operations and Estimates, Report 3 — Implementation of Accrual-Based Budgeting and Appropriations (Adopted by the Committee on 15 June 2006; Presented to the House on 21 June 2006).