Government Operations Committee on June 13th, 2006

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

The thing is, implementation will take place in a year or two years--is that correct?--if there was a decision made, which I guess is another issue altogether. Once a decision is made, how long will it take to implement? I know that timeline hasn't been given and there's been confusion with respect to that. In your best estimate, how long would it take to implement if a decision was made?

[David Moloney]

The study mentions three to five years.

[The Chair, Liberal, Diane Marleau]

Would it be possible for you to table that report with us?

[David Moloney]

The President of the Treasury Board has not yet been briefed on the study. We hope to be able to do so very soon.

[The Chair, Liberal, Diane Marleau]

When was this study completed?

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

That's a good question. When was the report published?

[David Moloney]

It has not been published; it was received on March 31.

[Navdeep Bains, Liberal, Mississauga—Brampton South, ON]

Of this year. I thought it was done a couple of years ago and it was three to five years. Based on a couple of months ago, the analysis indicates that it will take three to five years to implement accrual accounting.

In closing, my view is that this is a no-brainer: we need accrual accounting. There's overwhelming evidence to support that it is the best methodology for accounting treatment to make the best economic and viable decisions. My only concern is that there seems to be a reluctance in terms of a decision to be made on the implementation, based on the studies that have been conducted. We've reached a point where we all acknowledge that.

My view, based on the discussions that have taken place, is that the implementation costs are far less than the overall savings the government would encounter for years to come due to the fact that we have accrual accounting. I think the case has been made very clear, and I want to go on record as saying I'm as concerned as Mr. Kramp is, as he has indicated in his remarks, that we should now make a decision, that we have to find a way to do it. If it's a special committee, if further analysis needs to be done, or if you need direction from this committee, we should have that take place as soon as possible.

At the end of the day, there is really no debate. Everyone seems to be in agreement that accrual accounting is important and that it needs to be used to make the best viable economic decisions on behalf of taxpayers. I just wanted to conclude by saying that.

[The Chair, Liberal, Diane Marleau]

Mr. Wallace is next.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Madam Chair.

I'm not sure it's quite as black and white as the previous speaker has said.

Madam Fraser, you've been beating this drum for a while now. If the government's decision is not to proceed in the direction you're looking for, from a policy point of view, can you give it up?

[Sheila Fraser]

If the government clearly makes that decision, yes.

[Mike Wallace, Conservative, Burlington, ON]

You do agree it's a policy decision. You'd really like to see the government make a decision, one way or the other.

[Sheila Fraser]

Quite frankly, after eight years of study there should be a decision. I would find it very unfortunate if the decision was to not proceed with this. I would hope there would be a rationale and valid reasons, but if that decision is made, then that decision is made.

[Mike Wallace, Conservative, Burlington, ON]

The report that was talked about here has been received, but not presented to the President of the Treasury Board. You, Mr. Moloney, gave us some hints of what's in that report earlier in your presentation.

Is that an accurate statement--that what you said to us earlier in your presentation was some of the results of the PricewaterhouseCoopers report, which hasn't been briefed to the Treasury Board yet?

[David Moloney]

Those were precisely the results.

[Mike Wallace, Conservative, Burlington, ON]

Would it be fair to say that study is not as conclusive as Ms. Fraser is on the accounting item?

[David Moloney]

The study is not conclusive in terms of the point at which.... Let me start again. The study suggests there is value in increasing the use of accrual. The study is not conclusive as to the point to which one should proceed.

[Mike Wallace, Conservative, Burlington, ON]

I know business uses accrual accounting, and it certainly helps for depreciating assets, tax purposes, and financial management, but they are able to plan longer.

Let's be honest. We're in a political environment that happens to change on occasion, fortunately. That is part of the dynamic here; that's part of the issue. It's not just about....

I've been on a municipal council where we debated issues. We had a ten-year forecast that we approved as a council. We actually committed future councils to expenditures, and so on. Since I'm new here, does that really happen? When we pass the budget, are we really...? What's the difference here in terms of assets, and so on?

I want to use the example you used with the environmental piece. The government has not actually approved spending that money on the cleanup. You book the cash--you book the liability--waiting for an answer from here. If we were in the other method, you would have actually taken the charge right now on that, whether or not the government had decided to clean it up or take it to court or whatever. Is that correct?

[Charles-Antoine St-Jean]

Yes, to a large extent that is correct. In the books of the Government of Canada we have statutory appropriation. The expense is recorded--again, the statutory appropriations enable us to book it in the financial statement--but there's no authority yet to pay the amount. It is for Parliament to make that decision in the budget.

[David Moloney]

I will add that we are extremely rigorous in reminding departments that they cannot spend a penny without Parliament's having voted in the year, so even when a government makes an announcement of an intention to spend within the year--let alone in future years--unless those funds were specifically provided in the main estimates, departments must wait until the supplementary estimates. Multi-year budget plans are just that: they must be voted year by year.

[Sheila Fraser]

Two points of clarification: under the accrual accounting reporting, the environmental liabilities are recorded. There are cases--for example, the Sydney tar ponds--where there is a formal agreement between the Government of Canada and the Province of Nova Scotia as to what costs the Government of Canada will assume to clean that up. It's not simply that Parliament will decide whether you want to pay this or not. There is a formal commitment and a formal agreement that the government will pay x dollars to clean that site up.

Parliament will vote on the cash, so next year the government will spend, say, $10 million. Parliament votes yes, you'll spend $10 million, but there's a formal commitment for $200 million, so that $200 million is booked as a liability. But you are only actually seeing the $10 million cash; you don't see the $200 million that has actually been committed. If you move to accrual appropriations, there would be some form of seeing that actual commitment. I think you'll have to pay that, unless you somehow go into breach of contract.

There are many commitments like that. They are formal commitments. There are, obviously, a lot of programs that are ongoing but could be stopped, I guess, year to year, but there are already many commitments that have an impact over several years. I think this is the point the chair was trying to get at earlier.

[Mike Wallace, Conservative, Burlington, ON]

One final piece, Madam Chair, that is unrelated--and I know there's a motion around that I'd like to speak to when we get to the end.

I was slightly surprised that on page 30 of chapter 1, at 1.38, you say of the 11 large departments and agencies, you found that 16 of the 22 senior financial officers and senior full-time financial officers now have accounting designations, up from eight in 2002. I cannot understand why they all would not have.... How do you get the job without having a...?

[Sheila Fraser]

This is progress, though. There has been progress made.

[Mike Wallace, Conservative, Burlington, ON]

That's like putting me in charge, which wouldn't necessarily be progress. I actually do not understand how part of the job description isn't...if you're a senior financial officer for a department, I don't understand why some sort of CGA, CAA, some sort of accounting designation, is not required.

[Charles-Antoine St-Jean]

Again, I'm very much unbiased, but to make sure our senior financial officers have a professional designation doesn't mean it's very popular by asking for it, but I've been pushing for it and I'll keep pushing for it.

I'm also reminded that last year--and it's not helping my case, but let's be very candid--the CFO of the year in Canada was an MBA who didn't have his professional certification. They are throwing all this back at me, so I'm pushing for it and we're making progress. I'd like all of them to have this; I've announced the CIC program and the CMA/CIPFA program to bring that further. It's been thrown back at me. Last year the CFO of the year was not a professional accountant.