That, in the opinion of this House, the government should take immediate measures to ensure that the Financial Information Strategy is fully and completely implemented.
Mr. Speaker,I am pleased to speak on behalf of the people of Cariboo--Chilcotin on Motion No. 437
What is the financial information strategy? This strategy consists of implementing accrual based accounting practices to the full cycle of financial accounting in our federal government. It would ensure that the accrual based accounting method is used in the three major stages of the financial operations of our federal government.
The first stage is the federal budget itself usually presented to the House in February. During the second stage appropriations are presented in the spring. Those are the estimates that tell us how the policies announced in the budget would be paid for. In the third stage the public accounts or the financial reports of the departments are presented in the fall. These figures detail the previous year's spending and are the accounting record.
The budget and estimates are forward looking. They are the spending plans that would be implemented by the government. The public accounts delivered in the fall detail exactly what was spent and on what it was spent. The aim of the financial information strategy is to ensure that the same accounting language is used in all three stages. As it is now it is difficult for parliamentarians to compare what they voted on in the spring with the actual results that are presented in the fall. There is a translation needed for the facts and figures presented in the public accounts in order to compare them to what was in the estimates.
Accrual basis is the revenue that is recognized when earned. Expenditures are recognized when they occur not when the cash changes hands. For example, revenues are recognized at the time of sale for the service or the merchandise, and expenses are usually recognized at the time their benefits are received not when the cash is paid.
Cash basis on the other hand is when the revenue is recognized when it is received. Expenditures are recognized when they are actually paid. In other words, revenues are recognized and recorded only when the cash is received and expenses are recognized in the period when the cash payments are made. There is a major difference here. The cash basis does not amortize expenditures whereas the accrual basis does.
Problems arise when we compare these apples to the traditional oranges. While four important accountability documents, the budget, the public accounts, reports on plans and priorities and departmental performance reports, are all moving to a full accrual based accounting the government has not yet announced any plans to ask parliament to appropriate resources on the same basis. We are still speaking in accounting languages that do not always tell the same story.
This leaves out the fifth important accountability document, the main estimates and the associated appropriations. Departmental planning, managing and reporting on what resources are consumed to achieve desired results would significantly increase once the whole process moves to a full accrual basis with ministers, deputy ministers and government managers leading the way to this new basis of being accountable.
Appropriating funds on a full accrual basis is currently the missing link in the government's plan to move to full accrual accounting. Accrual based accounting practices would not only eliminate confusion but would help departmental managers on the frontline estimate the costs of what they must do and accurately judge how they fared once the work was done.
The financial information strategy will allow departmental managers to work with a whole new mindset. Instead of merely receiving a lump sum of money to accomplish a task, they will be able to more accurately predict how large a sum they will need. At the end of the task, they will be able to more clearly account for how much their efforts cost and thereby get a more accurate picture of what value they received for the money spent.
What is the history of the financial information strategy? Believe it or not, the FIS was initiated in 1989 and then relaunched in 1995. It needs to be fully and completely implemented. That is what is not happening.
It offers the following benefits. It gives government managers better financial information to use in making day to day decisions. It offers the advantage of modernizing federal government accounting by bringing it in line with the private sector and other public sector jurisdictions. Perhaps most important, it will link the cost of programs to the final results.
The weakest link in the traditional accounting chain of events is our limited ability to know what the government actually accomplishes with the money it spends. We need to measure outcomes realized from the inputs. We need to know what we get for the money that is spent.
All my motion asks for is that the financial information strategy be fully and completely implemented because that was the intent of the original plan. The word immediately is used because it has been 13 years since it was first decided that the strategy was desirable and it has been 7 years since the Liberal government deemed it to be desirable.
Progress is being made. The government has great expectations for the financial information strategy, as do taxpayers who are aware of this. The public has a significant interest in seeing this strategy embraced in all government departments and yet there is still a great deal of work to be done. The public wants this work done because it is our tax dollars for which we are seeking maximum value. The motion is easily supported by all sides of the House.
The FIS is not an easy thing to implement. I am not saying that this is something the government can say that it will do it today and that it will be done. It is not a simple thing to do. Looking at the totals of the estimates that each department has provided, the FIS is estimated to cost about $635 million to implement . However the funding is petering out and yet the work is not completed.
My motion is a friendly reminder and a gesture of encouragement for the government to follow through on the completion of this project before further moneys need to be allotted to get the job done and that taxpayers can begin to reap the benefits promised by this strategy.
I want to encourage all members participating in the debate today to remain non-partisan, positive and encouraging in their remarks. The debate should be aimed at encouraging the government to go ahead with the completion of the financial information strategy. Completing the implementation of the FIS is a difficult task, as I have said, but there is much work to be done.
The Treasury Board Secretariat is faced with choosing a model for full accrual based appropriations and budgeting. For example, we do not know if this should be a big bang effort where everybody starts all at once when they are prepared to do that or whether this should be more gradually phased in. The government has not made that decision. The departments are ready and prepared but decisions need to be taken by the government for this process to go on to final completion.
I want to use my time here to encourage the government to go ahead and do this. Once the FIS is fully and completely implemented there may even be problems or fine tuning to complete the job then. We understand that and are prepared to be supportive at a later date of doing that as well.
As I said, there will be problems but even the Auditor General of Canada cannot predict the problems that may be encountered, the modifications her office may recommend or what the treasury board itself will want to consider. However the auditor general insists that the movement to full accrual appropriations is budgeting is worth this effort.
In his 1997 report, entitled “Accounting for Results”, the President of the Treasury Board re-emphasized this call for improved financial information for management decision making by stating:
In general, however, existing sources of information do not answer questions about the cost associated with specific results. Although conclusive information linking costs and results is often difficult to obtain, improvements are being made through the government's Financial Information Strategy. The Strategy aims to enhance government decision making and accountability and to improve organizational performance by providing more complete information on the costs of programs and activities.
Parliament controls the public purse through the granting of supply, setting limits on the amount of money available to managers to acquire resources. It does this by approving the Appropriations Act which identifies, by spending a authority, the amount of money available to the government. As a result, departmental planning, managing and reporting are primarily concerned with spending money to acquire resources.
However governments do not exist to acquire resources. They exist to deliver programs and services. In doing so, they consume or use resources. For example, a government may acquire a building in a particular year to help deliver a program over many years. In doing so, a portion of the building's cost is consumed each year following.
How much does it cost to finance the purchase? How much does the maintenance cost? What are the benefits derived from the building once the government has purchased it? Does the capital value of the building appreciate or depreciate?
Those are all elements that would be recorded in the accrual based accounting to give a clear picture of the government's performance and the cost of that performance.
Accordingly, a far better basis to plan, manage and report departmental operations is to focus on the cost of resources consumed, not just the cost of resources that are acquired which requires full accrual accounting as envisioned by the financial information strategy.
Another example of the importance of using full accrual accounting is seen when we consider that the government makes no distinction between a $25 million outlay, for example, to renovate a building that would provide benefits for perhaps 15 or 20 years and a yearly $4 million outlay to lease equivalent space in a private building. Those are things that managers need to know and to understand when they are determining costs. Accrual accounting would encourage these kinds of distinctions to be made in decision making.
In 1995 the former minister of finance announced the government's intention to adopt full accrual accounting for the preparation of the annual budget and for reporting back to parliament on financial results in the Public Accounts of Canada.
In 2001 the Standing Committee on Public Accounts issued two reports urging the Treasury Board Secretariat to act on the issue of accrual based budgeting and appropriations.
In the departments, managers are prepared to present accrual based financial reporting but they are only part of the financial reporting process and not all parts of this process are ready for the financial information strategy. The government needs to implement accrual based budgeting and appropriations throughout the whole system and lead the way in doing this. There needs to be one set of books, not two sets of books as is necessary now.
Finally I want to speak to a unique situation that I am in, in presenting this financial information strategy to the House today. Last week, as a favour to a Liberal colleague in the House, I was asked to trade my time for this speech with his time which was to be presented this morning.
The problem is that even today I do not know whether or not my motion is votable. That is a unique situation. I would like two more hours to debate this and to have a vote on it but that is not to be.
Later I will be asking members to consider this unique situation and to give unanimous consent to the granting of further time to discuss this and then to vote on this important piece of business that the government needs to consider.