Evidence of meeting #12 for Government Operations and Estimates in the 42nd Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was budget.
A recording is available from Parliament.
Liberal
Francis Drouin Liberal Glengarry—Prescott—Russell, ON
To build on Mr. Blaney's point, what's the negative impact of not moving toward accrual-based accounting and sticking with cash-based accounting? As accountants, can you tell us what is the negative impact of accrual accounting that we would see?
Principal, Public Sector Accounting, Chartered Professional Accountants of Canada
I'm sorry. What's the negative impact of not moving to accrual accounting? Is that what you're asking?
Vice-President, Standards, Chartered Professional Accountants of Canada
The first thing I would say is that if you're not focused on an accrual basis, you're not focused on the long term.
It's easy to make decisions for the short term on the next period you're working on, such as the next budget period for the next fiscal year, for example. It tends to not be focused on making long-term decisions or managing things in the long term for the commitments you made, or the resources you have, like the pension example. You have more of a tendency to not focus on those things and think about the long-term impact.
I would say, from my perspective, one of the negative impacts of that is we end up downloading additional debt or liabilities to future generations as opposed to taking care of some of those and planning for those commitments starting today.
We have to be aware that when we make decisions, we're making commitments not just for today, but for down the road as well.
Conservative
The Chair Conservative Tom Lukiwski
Thank you very much.
We'll go to a five-minute round. We have a number of speakers.
Mr. McCauley, you're first up.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Thanks for joining us. You're delightfully informative so far. Thanks very much.
I realize you're not experts on what they have done in B.C. and Ontario, but I'm wondering for Ontario, because it's the larger, how long it took for them to transition from our way to their way.
Vice-President, Standards, Chartered Professional Accountants of Canada
I know the approximate timelines. The recommendation to do this was made in 1995. There was an Ontario Financial Review Commission in 1995, and there was a recommendation out of that for all three—the public accounts, the budget, and the estimates—to move to full accrual accounting. They were all on a cash basis.
To move all three of those, it was 2002-03 that the financial statements and the budget were moved to a full accrual basis, and it was one year later that the estimates were moved. From the time of the decision to the time of full implementation of all three pillars of the cycle, it was nine years to fully complete it.
Vice-President, Standards, Chartered Professional Accountants of Canada
Now, recognize that's for all three.
Vice-President, Standards, Chartered Professional Accountants of Canada
You already have two of those three in place.
I think that's important to recognize, because in Ontario, there was an enormous change in some of the financial systems that were needed to be implemented. Without knowing the details, some of those you quite likely already have.
Conservative
Kelly McCauley Conservative Edmonton West, AB
Do you know if Ontario or B.C. ran into huge stumbles along the way, or was it a relatively orderly transition? I realize they are going from three, and we're looking at one.
Vice-President, Standards, Chartered Professional Accountants of Canada
Yes.
Conservative
Kelly McCauley Conservative Edmonton West, AB
I'm trying to think in the future for us and if there are any risks.
Vice-President, Standards, Chartered Professional Accountants of Canada
I don't know the details of those transitions. We do have a staff member who works with us, who was working in the Province of Ontario at the time. He spoke to me about it and talked about the culture change. In the end, once it was supported and recommended, and once they had planned for it appropriately, he felt it went reasonably smoothly.
There were some challenges along the way with the culture change a bit. Planning for the long term, as opposed to the short term, is a bit of a shift in how you manage. Once they got through that education process with their program managers and their elected officials, they were able.... Now, apparently, it's quite well understood.
Conservative
Kelly McCauley Conservative Edmonton West, AB
We talked about the difficulty of moving over because the way we're doing things here is so entrenched. I realize it's like trying to move the Titanic away from the iceberg.
Is it us, the people around the table? Is it the public service? Is it all of us? Or is it just because that's the way we've always done it is the entrenched part?
Principal, Public Sector Accounting, Chartered Professional Accountants of Canada
I think that's what it is. It's the way it's always been done, and you're right that it's a big ship to turn.
My understanding is that a lot of retirements are coming up in the public service and a lot of new people coming in and they may be, if they came from a business background.... I understand some hiring in the federal public service for finance people has come from business. They may be familiar with accrual accounting, and it may not be something that they're as used to. In fact, they may still be learning how government does stuff.
I think you have an opportunity.
Conservative
Conservative
Kelly McCauley Conservative Edmonton West, AB
I probably don't have much time, and it's a very difficult question to answer, but cost-wise there's retraining, but these are people who are already here. It's not like we're going out and hiring brand new people or we're training them on a new piece of equipment.
Do you think there will actually be a noticeable bump in actual new costs, or can we assume it will mostly be offset by savings in other efficiencies we'll find?
Vice-President, Standards, Chartered Professional Accountants of Canada
It's difficult for us to answer that.
Conservative
Kelly McCauley Conservative Edmonton West, AB
The reason I'm asking this is that it makes sense to go forward with this. It just seems logical, which is probably why we haven't done it, but my fear is that we're going to end up with another Shared Services type of thing where we'll have costs and costs and costs thrown on us to stop it.
Vice-President, Standards, Chartered Professional Accountants of Canada
I think the challenge for us answering that is not knowing the systems you have.
Conservative
Vice-President, Standards, Chartered Professional Accountants of Canada
Because you have two of three pillars in place already, it would be my intuitive sense that there are already systems in place that would make this fairly straightforward to shift.