We're talking about the day-to-day decisions, like whether we should build a new prison. We can build a new prison. We can pay it back in three or four years. You may get a different decision, depending on whether you're looking at it on a cash or accrual basis.
Turning to the advantages of the status quo of the cash base, I always think it's good to present the other side of the coin as well. Aside from pensions and capital assets, there may not be that big a difference between cash and accrual. In Ontario, we found that there was significant training across the whole system. When we first brought in the full accrual basis, it was almost Accounting 101 at the ministry financial level. That's what it took to get it across.
We had to make a significant investment in technology to put in an enterprise-wide financial system. But according to the feedback I've had, access to this information has resulted in better decisions.
Accountants are in short supply. Recently, I had a chat with a couple of the departmental finance people. I asked them, “You've been running with this for a couple of years. What's your perspective on it?” The feedback from them was that it required a significant amount of training. They needed a higher capability of people in the financial accounting area. They said they needed more time to do their month-end and year-end closings. They indicated, though, that they felt they had moved up a notch.
With respect to other advantages of the status quo, at the central agency finance level, they're getting better information. I hear mixed messages from the departments. I think more would say they like it better. But I also got some feedback saying, “Boy, we understood cash was easy to use.”
The other thing you have to consider is whether the people in the department have the right mindset and motivation. If they've been using cash for a long time, are they still going to be thinking in cash and then making the accrual adjustments?
Here's something I got from the deputy minister of finance in Ontario. We were chatting about it and he said, “Accrual accounting--it's not that easy to understand, and when it comes to the estimates process, if it becomes too complex, it almost reduces transparency to the non-accountant.”
I'll try to sum up now. At the end of the day, it is important at the departmental level to ask which way of accounting is going to promote the best business decisions. Always ask which is going to give you the best information to make your decision.
Second, I feel that it carries some risks to have a basis of accounting for your fiscal public reporting different from what's used in the departments. But there's a trade-off. Full accrual is probably going to cost you more, especially initially, because of the information technology infrastructure investment you may need. You have to have some fairly good accounting skills. You've definitely got to do some upfront training to get everybody up to speed. But at the end of the day, I feel that you're going to get better information for decision-making.