Mr. Chair, thank you for the opportunity to discuss our audit of the financial statements of the Government of Canada for the 2010 to 2011 fiscal year. As I noted, I am accompanied today by Louise Bertrand and Tammy Squires, the two principals who were responsible for the audit.
We are pleased that the committee is holding this hearing on the public accounts of Canada. This is an important accountability report of the government. The Comptroller General will be explaining to the committee the key points in the government's financial statements. I will focus on our audit opinion and observations.
Canadian standard-setters have adopted the International Standards on Auditing as the new Canadian auditing standards. The purpose is to ensure high-quality audit practices in Canada that are comparable with those of other countries. The standards came into effect this year, and we used them to audit the government's financial statements. Adopting these standards resulted in a number of changes, including the format and wording of the auditor's report.
Our independent Auditor's Report on the 2010-2011 financial statements can be found on page 2.4 in volume I of the Public Accounts of Canada. For the 13th consecutive year, we have issued a “clean” audit opinion. Mr. Chair, this is a major accomplishment. We commend the government for its efforts and due diligence in preparing these statements.
I would also like to draw your attention to two items we have noted in the observations. First, I would like to address the question of parliamentary votes and the granting of spending authority. Two principal types of votes are used in Parliament to grant such authority: the capital vote and the operating vote. The issue relates to how departments and agencies charge their capital expenditures against these votes. Under current government guidance, significant capital expenditures are being charged to operating votes even when departments have a capital vote. As well, some entities that do not have a capital vote incur capital expenditures in excess of the $5 million threshold, which is used to determine if an entity should receive a capital vote or not.
In our view, the Treasury Board of Canada's secretariat needs to asses the circumstances in which capital votes are required, and the factors that determine which expenditures are to be charged to capital votes rather than operating votes. Doing so will ensure the framework is clear and remains relevant, in order to support parliamentary authority and government accountability to Parliament. The secretariat has agreed that such a review would be timely, and that it would conduct one during the next year.
Next, as a matter of principle, I would like to underscore the importance of having accounting standards that are developed and promulgated by a recognized and independent standard-setting body. The Public Sector Accounting Board of CICA, the Canadian Institute of Chartered Accountants, has promulgated a set of public sector accounting standards which is applicable for all levels of government, as well as government organizations.
The government's financial statements are prepared in accordance with stated accounting policies that conform to these accounting standards. Canada is a world leader in preparing high quality summary financial statements of a national government largely because we follow these standards.
We note that the government has issued a set of accounting standards, known as Treasury Board Accounting Standard 1.2 or TBAS 1.2. All departments listed under section 2 of the Financial Administration Act have to follow these government standards in preparing their financial statements. The government has full discretion to provide additional direction or guidance on financial reporting to departments and other government entities.
But, like the whole of government financial statements, the underlying accounting principles ought to be consistent with the public sector accounting standards. At present, there are some differences between TBAS 1.2 and the generally accepted accounting principles for the public sector.
We are currently working with the Secretariat to resolve these differences and hope to complete that this month. The observations also highlighted a number of other issues that we have reported in the past, including accrual based appropriations which we discussed with this committee last Monday. They are listed on pages 2.37 and 2.38 in volume I of the Public Accounts.
We thank the Comptroller General and his staff, as well as others in the departments who were involved in preparing these accounts. A great deal of work was involved, and we appreciate the cooperation and assistance provided to us.
Mr. Chair, this concludes my opening remarks. We will be pleased to answer the committee's questions.