Thank you, Mr. Chair. I will start on slide 2. The deck is available on screen, and I believe members have copies, as well.
The purpose of this deck it to provide background information on the Public Accounts of Canada, some quick highlights of the financial results—the Auditor General has already mentioned his observations, so I will not touch on those very much—a little bit of information on appropriation and lapses, which is always an important topic. We'll stop it there, and then turn it over to the committee for questions.
Slide 3, just to situate us in terms of where we are in the financial reporting cycle, we are at the end of the fiscal cycle. Public Accounts of Canada and the soon to be coming departmental reports are the last phase in terms of providing accountability documents to Parliament on the performance of the government.
This follows a series of financial reports that starts with the budget, the estimates, and mid-year updates that take us all through the cycle. There is a list of those reports on the far right side of this slide. That will give you a sense of what is out there. The one thing that is not on there is the Treasury Board Secretariat InfoBase that I already mentioned. It's an additional source that people can use.
Public accounts are a whole-of-government reports. There is a mix of accrual information and modified cash information. If it's of interest to members, we can talk about what's what. The budgets and the financial statements of Canada are done on a full accrual basis. The estimates and related departmental spending are done on a modified cash basis. That's why we have that mix.
I will take you to the next slide. In terms of the three volumes of the Public Accounts of Canada, this is a significant amount of information that is made public.
Volume I is the financial statements of the Government of Canada, and that includes the audit opinion of the Auditor General. It also includes additional information on the major elements of the financial statements of the Government of Canada.
Volume II is the companion piece to the estimates. If you are interested in how departments discharge their parliamentary appropriations that were granted to them, volume II provides information on spending department by department, including the lapsed or unspent authorities that were available during the year.
Volume III is a mix of information that is provided for accountability purposes. You will see audited financial statements for some other organizations, as well as things like losses of public money, claims against the crown, and ex gratia payments. Finally, I should also indicate that for volume III there is additional information online that we don't print simply because of volume concerns. There is additional information that is available online that is not printed.
The next slide is on roles and responsibilities.
I point this out because it is not generally well understood: the Government of Canada prepares the financial statements, and it is our job to do so.
It is the Auditor General's job to audit those financial statements. The financial statements are prepared by the government. That involves my office, the receiver general, as well as the departmental financial management community.
It is the government's choice as to which accounting policies it will use, and I will talk more about that in a moment. The Auditor General audits those financial statements. It is a source of confusion, as in some countries the Auditor General actually prepares the financial statements, but in Canada, North America, and most G7 countries, the government prepares and the auditor audits. You do have this independent verification of the financial statements themselves.
I do have to say a few words on accounting standards themselves. We have independent accounting standards in Canada. They are set by the Public Sector Accounting Board. The government follows those standards. This is important in terms of assuring yourself that you have a high quality set of financial statements. They are prepared based on the Canadian public accounting standards that are independently set. If the government chose not to follow those standards, my friend to the left of me would have something to say about that in his audit opinion. It is a choice, but the government does choose to follow those standards.
Where my office gets involved in preparing additional policies, we want to make sure that departments and agencies implement those accounting standards on a consistent basis. My office will prepare accounting direction to departments on just how to implement the independent accounting standards, or the government accounting policies to ensure consistency across the board.
If there is a gap in Canadian public sector accounting standards, there are other standards out there that we would refer to, and they are on the far right of this slide.
The international public sector accounting standards provide a good set of standards we can refer to when there are holes in our guidance, or gaps. On the private sector side, there is an international set of standards as well. This is important for two reasons: one, it is an additional set of guidances we can refer to if we're seeing a gap; and two, some of our crown corporations actually follow those standards. So they do have an impact on the government reporting entity.
Turning to the actual financial results for the 2016-17 year, on this slide you will see a summary of what you will see in the financial statements themselves. This is on the revenue and expense side. You will see presented here the initial budget for 2016-17 as well as the actual budget for 2016-17 and then for the previous year. It's accounting standards that require us to produce it in this format. The reason I'm highlighting the budget for you is that it is the initial budget that must be disclosed in the financial statements. The Department of Finance updates that budget throughout the year as economic circumstances change, and as new spending decisions are made, but it is the initial budget that must be disclosed in the financial statements. You will see here that the initial budget on the revenue side was $287 billion. The actuals came in slightly higher than that, although slightly down from the previous year. We can talk about why that might be later on. If you look at the expense side, you will see program expenses, which are the expenses of our departments and agencies. The budget was $291 billion. The actual came in slightly below that at $287 billion, but it was higher than the previous year's figure of $271 billion. For those reasons, the annual deficit came in at $17.8 billion, which is lower than the initial forecast of $29.4 billion. You will see the previous year comparative figure for 2015-16.
That just gives you a sense of what you can compare the results against, the initial budget as well as the previous year's results, to see what actually happened.
On the next slide we move to the balance sheet, or the statement of financial position. What you will see here is just a comparator against the previous year. There is no requirement to budget for things like accounts payable. You don't have to disclose that sort of thing. The budget applies to the revenues and expenses. The disclosure you will see here is versus the previous year. You will see the liabilities are up over the previous year. That is typically what happens when you run a deficit—liabilities go up. On the asset side, you can see on the financial asset side, that is, assets that are either cash or that can be turned into cash, we are running with more assets than we were in the previous year. I believe the Auditor General already mentioned the net debt figure. You will see that towards the bottom of the slide, as well as the accumulated deficit.
On the next slide is the actual government reporting entity itself. It's probably not well understood that it includes departments and agencies but also crown corporations. It gives you a breakdown of what is in here to give you relative size, by expense. You will see the enterprise crown corporations in the upper right-hand corner. They are crown corporations that basically are supposed to be self-sufficient, such as Canada Mortgage and Housing Corporation. From an accounting standards perspective, this group would follow private sector accounting standards. From an operations perspective, they are at arm's length from the government, but they are still part of the financial statement entity, so we consolidate those and the Auditor General audits them. In the bottom half of this group you will see our departments and agencies. Then, in the upper left-hand quadrant, you will see what is called our consolidated crown corporations. Those are crown corporations that rely on government financial support. In here you will see VIA Rail, our museums, and the Canada Foundation for Innovation, just to name a few.
That is the federal family from an expense perspective in terms of what's in these financial statements.
On the next slide, on the Auditor General's observations, he has already mentioned that he has three: pay administration, management estimates specifically on discount rates, and National Defence, which is inventory. Some of these observations have been with us for a number of years. If you have questions on his observations, I would suggest you direct them to the Auditor General. If you have questions on just what the government is going to do about these, those would be for this side of the table and we'd be happy to take questions on the plan or the progress...because National Defence has been with us for a while, we could tell you what the progress has been and what the plan is going forward.
On the next slide we have total voted budgetary authorities. This gets back to what Parliament actually voted in terms of departments' abilities to spend. This gives you a breakdown of the larger departments to give you a sense of where the money is. As I've said, these are the main players: National Defence, Indigenous and Northern Affairs, Health Canada, and Global Affairs Canada. It just gives you a quick overview of some of the bigger departments, in terms of their spending authority, and what was actually used during the current year, so actual spending.
The next slide we should spend a couple of minutes on, which is on lapses. We've only highlighted the significant lapses here. Lapses are often a topic of interest to this committee. I would highlight two things for the committee.
Number one is the lapsed number itself. You'll see for the big ones, and I'll just pick Public Services and Procurement at the upper right-hand corner, where you'll see a lapsed number of $510 million. Below that, you'll see frozen allotments of $233 million. It's a little bit of technical jargon. The point here is that there is the lapse, which means how much money Parliament voted versus what the department actually spent. There's always questions about why they didn't spend the full amount.
I would remind you that it's actually illegal to overspend what Parliament votes. We had no departments that overspent this year. There is always going to be some amount of lapse. There are some departments that are chronically higher lapsers than others because of the nature of their business. We're happy to talk about that.
The reason I'm highlighting frozen allotments is to give you a sense of the planned lapse. Sometimes partway through the year something happens where a department knows it can't spend the money. A decision is made and the department is told not to spend the money. It might be a budget cut, like one placed on travel, which was one we put in place a couple of years ago, and also one on professional services. We freeze money.
When you see a frozen allotment, if you're trying to understand what happened with the department, it's important to ask how much of it was planned versus how much of it was frozen or not frozen. It is to give you a sense of whether it is really just program money that wasn't spent or whether there was something else going on there, so in fact, it was actually a planned lapsed. That's why we have now disclosed these frozen allotments for you here. That is new information that has been available in volume II for two years now in the frozen allotments, which gives members a better sense of what's really at play, in terms of departmental spending and the results that they achieve.
I'm happy to talk about these during the actual meeting, if members have questions on the lapses.
Since I mentioned Public Services and Procurement, I'll tell you the big part of this lapse was around slower spending than initially planned on the parliamentary precinct. That's just an example of a lapse.
I think I'll stop there. There is an annex here of definitions, if you are interested in some of the technical terms. I'm happy to refer to those.
I'll leave it to you, Mr. Chair.