18. Financial Procedures

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. ^[398]  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. ^[399] 

Under the Financial Administration Act, the Receiver General ^[400]  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, ^[401]  together with whatever assets, liabilities and related reserves are deemed necessary to present a fair picture of the country’s financial position. ^[402]  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 tabled ^[403]  on or before December 31 next following the end of the fiscal year to which the accounts apply; or, if the House is not sitting, on any of the next 15 sitting days of the House. ^[404]  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 underly 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. ^[405] 

Responsibility for the form and content of the Public Accounts of Canada rests with the President of the Treasury Board ^[406]  and the Minister of Finance. ^[407]  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. ^[408]  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. ^[409] 

Currently, the Public Accounts of Canada are divided into two volumes published in three separately bound books. Volume I contains the opinion of the Auditor General; the financial statements of Canada on which the Auditor General has expressed an opinion; a 10-year summary of the government’s financial transactions; analyses of revenues and expenditures, and of asset and liability accounts; and a variety of government-wide summaries of revenues, expenditures, loans and investments. Volume II is divided into two parts: the first gives details of the government’s financial operations, segregated by ministry; and the second provides additional information and analyses, such as the financial statements for revolving funds, transfer payments and public debt charges. ^[410] 

Until 1993, the Public Accounts included a third volume which contained financial information on Crown corporations. Volume III has been 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. ^[411]  The Annual Report is prepared by the Treasury Board Secretariat for the President of the Treasury Board, who tables it in the House. ^[412] 

The Auditor General of Canada is an officer of Parliament, appointed by the Governor in Council under the Auditor General Act, to audit the accounts of Canada and investigate the financial affairs of the federal government. ^[413]  The Auditor General holds office for a period of 10 years, or until the age of 65, whichever comes first. The term is not renewable. The position was first established in the Audit Act, 1878. ^[414]  That legislation was replaced in 1886 and in 1931 by the Consolidated Revenue and Audit Act, ^[415]  which, in turn, was repealed by the Financial Administration Act, 1951. ^[416]  Initially, the Auditor General was responsible only for auditing expenditures; before they were made (pre-payment 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. ^[417] 

As auditor of the 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. ^[418]  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. ^[419] 

The Office of the Auditor General carries out three types of audits — attest audits, compliance audits and value-for-money audits. Attest auditing verifies that the government is keeping proper accounts and records and that it is presenting its overall financial information fairly. ^[420]  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, value-for money auditing assesses whether or not government programs were run economically and efficiently, with due regard to their environmental effects. They also assure Parliament that the government has the means in place to measure the effectiveness of its programs. ^[421]  Since 1995, the Office has been responsible also for evaluating the extent to which department activities meet their environmental and sustainable development objectives. ^[422] 

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. ^[423] 

The Annual Report

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; or
• appropriate procedures to measure and report program effectiveness have not been implemented. ^[424] 

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. ^[425]  At the request of the Auditor General, the Speaker has frequently agreed to table the Report in the House at a predetermined time, usually just before “Members’ Statements”, although there is no requirement that it be tabled at that time. ^[426]  Once tabled, the Report is automatically referred to the Standing Committee on Public Accounts. ^[427]  Prior to the tabling of the Report in the House, the Auditor General typically gives a briefing on its contents to members of the Public Accounts Committee, at an in camera session. In addition, the Chairman of the Committee will normally invite Members to a “lock-up”, ^[428]  during which they may examine the Report to be tabled later in the day and be briefed in advance by officials. A lock-up 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. ^[429]  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. ^[430]  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 has been submitted to the House in several volumes; the first of which has been tabled in the spring, a second in the fall and a final volume in November or December. ^[431]  The final volume tabled continues to be known as the “annual” report and contains the sections on “Matters of Special Importance”, as well as follow-ups to previous audits. Each volume contains a foreword from the Auditor General, in addition to the individually numbered chapters ^[432] reporting on the various studies undertaken and the value-for-money audits of departments and agencies. Audit notes and observations may be included in any or all of the volumes, where deemed appropriate.

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. ^[433]  Since 1987, the Committee has also been responsible for scrutinizing the annual Estimates for the Office of the Auditor General.

Since 1958, the Committee has been chaired by a Member of the Official Opposition, while the parties are represented in proportion to their voting strength in the House. ^[434]  The Committee’s main functions are to ensure that public money is spent for the purposes authorized by Parliament, that extravagance and waste are minimized 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 focusses 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.