Thank you, Madam Chair.
I want to begin by thanking you for inviting us to participate in a briefing designed to assist the Committee as it considers an issue raised in our May 2006 Status Report. In Chapter 1, “Managing Government: Financial Information”, we discussed the need for the government to address the issue of accrual-based budgeting and appropriations at the departmental level.
With me today are Mr. Douglas Timmins, Assistant Auditor General and Mr. Clyde MacLellan, Principal, who are both responsible for that audit.
This Committee's initiative to do an in-depth study of accrual-based budgeting and appropriations is an excellent idea. It follows a series of recommendations by the Public Accounts Committee that the government implement accrual-based budgeting and appropriations. I hope the presentation today will enhance your understanding of the concepts and issues surrounding this matter.
As I said in my opening statement to this committee on June 13, the concepts of accrual accounting, accrual-based budgeting and appropriations, and accrual-based financial information can be difficult for non-accountants to understand.
For that reason, we provided the Committee with a copy of a presentation that my Office and Treasury Board Secretariat had given to parliamentarians when the government issued its first set of full-accrual summary financial statements.
We have incorporated elements of that presentation into our briefing today. It illustrates accrual accounting concepts, explains the benefits of using this form of financial information, and highlights key points with respect to the matter of accrual-based budgeting and appropriations.
Although the government has implemented accrual elements in its government-wide budgeting activities, I noted in my opening statement of June 13 that departments and agencies are not using accrual financial information effectively. This is because their budgets and appropriations are based largely on the cash method of accounting. Also, in my opinion, the failure to use accrual information was a factor when departments chose the less cost-effective option for office accommodation, as noted in our chapter on the acquisition of leased office space. As you will recall, we discussed that matter with the committee at its June 1 meeting.
While we recognized in our financial information chapter that a department's cash requirements and cashflow management will continue to be important information for Parliament, we concluded that Parliament would be better served if it also received information in the estimates and appropriations based on accrual accounting. Such an approach would make the process more consistent with the one used in the government's financial reporting of results.
The government has been studying this issue since 1998 but hasn't established a clear position on the direction it will take. I believe it is time, after eight years of study, that the government decides. This committee's study and consideration of the issues should reinforce for the government that parliamentarians have an interest in seeing this matter resolved, and that they wish to know how government plans to manage and implement the necessary changes.
Madam Chair, this concludes my opening statement. With your permission, I would now like to ask Doug Timmins to present the overview of accrual-based budgeting and appropriations. As I said earlier, I hope this presentation will enhance members' understanding of the concepts, issues, and possible resolutions with respect to accrual budgeting and appropriations at the departmental level.
After the presentations, we will, of course, welcome any questions the committee members may have.
Thank you.