Thank you for the precision.
On page 5 we talked about the three cycles, the three main importances of the financial function: budgeting, financial management, and financial reporting.
When we look at page 6, different information is used for different functions for different users. When we're talking about planning and budgeting, planning and budgeting is for before the action takes place and for proposed activities for a future period, expressed in financial terms. It's for internal and external users.
Financial management will include a wide variety of information required, with focus on providing the specific information required for specific situations--for example, decision-making, oversight, and control--and it's primarily for internal users.
Financial reporting is to provide information on the financial results and financial situation of an entity. General purpose financial statements and special purpose financial reporting take place. It's primarily for external users.
What is key here is that we have different information for different users, because they have different needs. External reporting would want to know what you've done globally, but then internal management would want to know what you have done specifically for certain programs or certain activities. It's okay to have different bases of accounting, depending on whether you're internal management or external management.
We've looked at page 7, and as Doug Timmins has made reference to, this is a comparison of how the basis of accounting works either at the aggregate level or at the departmental level. We see here that for some we have accrual, and some others are near-cash. The estimate is near-cash, the RPP is near-cash, capital planning is on an accrual basis, but the departmental level is done in near-cash. So even though a lot of progress has been made over the last eight or nine years since 1996, and since 2003 in particular, and a lot more accrual has been introduced in management, we still have different bases. This is where some confusion happens, when we have different bases of accounting for reporting or management.
Probably one of the most important slides I'd like to focus your attention on, as I mentioned before, is page 8. This is where the needs of Parliament need to be clearly addressed, but also, Parliament needs to tell us what it wants us to focus on. Do you want us to focus on cash, or do you want us to focus on resources? I would say that resources, which includes cash, would be a good decision. But you need to expand the focus of parliamentarians, not just on cash but also on the appropriation of the full resources.
When you look at the financial systems, at the blue box, this is where you have most of the accrual information. The grey or the green slide is where you have the near-cash or near-accrual kind of data. Because you ask us to report to you on cash or near-cash for the appropriation, we do the accounting for both. We do the accounting for financial reporting, which is in blue, and we also do the accounting for appropriations, which is in green here. There are some differences between those two. So you see that volume I of the public accounts, which will be tabled very soon, is prepared on an accrual basis. Volume II is where we reconcile all the authorities.
All the authorizations and appropriations voted by Parliament are presented more on a near-cash basis. That is where we review the differences. That means doing a reconciliation. Last year, in the Public Accounts of the Government of Canada, note 5 or 6 in the financial statements referred to a $32 or $33 billion reconciliation between the Public Accounts and appropriations. This is a large amount to reconcile between financial statements prepared on essentially a near-cash basis and some prepared on the basis of accrual accounting. It is an important note to look at, because it indicates that the reconciliation can involve a large amount.
It's a big number between those two bases.
On page 9 is an overview to indicate what the current votes are, the annual cap on near-cash amounts for three types of expenditures. Normally there's the operating vote, the capital vote, and the grants and contributions vote, votes 1, 5 and 10, but it varies from department to department, meaning that you have limited information for financial and expenditure management on efficiency measures, reallocation decisions, departmental stewardship, and dysfunctional decision-making. As the Auditor General said, during the year the department will be managing on a cash basis, and at the end of the year they will have to reconcile every number on an accrual basis--instead of doing it throughout the year, managing this on an accrual basis, as everybody else does.
So the current financial management does allow for management on an aggregate fiscal framework, which is done on an accrual basis, but at the departmental level this is a bit more complex. That's the way Parliament has decided to exercise its control, more on the cash and not on the resources.