ARCHIVED - Forging Stronger Links - Changing the Basis of Appropriations in the Government of Canada

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FORGING STRONGER LINKS

CHANGING THE BASIS OF APPROPRIATIONS IN THE GOVERNMENT OF CANADA

DEPARTMENTAL SFO CONSULTATION QUESTIONS

GENERAL

As noted in the consultation paper, its purpose is to prompt discussion on whether to change the Estimates and appropriations to a full accrual accounting basis so that appropriating, budgeting and reporting would all be on the same basis.

Intuitively, it appears reasonable that these financial management mechanisms should all follow the same basis of accounting. However, there are a number of factors that need to be carefully considered before a decision could be taken. Having a better appreciation of the implications of such a change, or of a decision not to change, would enable everyone to have a much higher level of confidence in the overall concept. It is understood that the current central agency budget mechanisms (e.g. re-profiling, carry-forwards, Vote 5) would remain in effect.

Fundamental to any decision is the need to keep the ultimate objective of the Financial Information Strategy in mind...better information for more effective decision-making, improved performance and accountability.

We would appreciate and welcome any comments or questions you might have on the accrual appropriations concept and the example included. In addition, your specific feedback on the following questions would be of great assistance. Your feedback should take into account the collective views of your department including but not limited to those involved in: Estimates; Public Accounts; Real Property; and, Materiel Management.

SPECIFIC QUESTIONS

1. Should appropriations for capital assets be voted on an acquisition (expenditure) basis or on an obligation (commitment) basis? Should this be applied consistently to all types of capital assets (e.g. buildings, equipment, capital leases) as outlined in TBS Accounting Standards? Should the same basis be applied to lending related appropriations? Should specific voted appropriations be required for individual capital/lending initiatives above a certain threshold amount, in addition to a voted appropriation for the aggregate of items below such a threshold?
2. Should non-tax revenues be respendable (net voted) on an "as received" basis or on an "as earned" basis? Would the proposed mechanism, that the balances of such receivables be subject to a non-lapsing appropriation limit, help to ensure more effective receivables management?
3. To encourage more effective asset management of financial (e.g. receivables, advances) and non-financial (physical) assets and to better reflect the cost of delivering goods and services at the departmental level, should there be an imputed cost of capital appropriation to departments?
4. Should gains on the disposal of capital assets be respendable on a net voted basis? If respendable, should this only apply to capital acquisitions as an increase in voted capital appropriations?
5. Should departmental Estimates be supported by a three-year pro forma set of financial statements highlighting planned revenues and expenses as well as cash requirements?
6. Certain accounting transactions, which are not currently charged to appropriations (e.g. vacation and severance pay accruals), are recorded centrally and will be devolved immediately to departments with the implementation of FIS and accrual accounting. Other accounting transactions (e.g. allowances on loans and investments, statutory accruals) will continue to be recorded centrally through the Valuation of Assets and Liabilities, at least in the short term. Should the recording of these other transactions be devolved to departments in advance of any change to appropriations or at the same time?
7. The Financial Information Strategy and accrual accounting are being progressively implemented across departments and agencies assuming the current accounting basis of the Estimates and appropriations. The implementation date for the government as a whole is April 1, 2001. Reflecting on your department's state of FIS implementation readiness (people, policies, systems), and your ability to respond if a decision is taken to adopt the accrual basis of accounting for the Estimates, for which fiscal year would you be prepared to submit your Estimates and supporting three-year pro forma financial statements and to subsequently report and manage your actual results?
8. How much lead-time would you require in order to be in a position to prepare your Estimates on an accrual basis once a decision is taken, any necessary legislative changes are made and detailed specifications are confirmed?
9. Recognizing the uncertainties that may exist at this date regarding its implications, do you believe that the Estimates should be prepared and appropriations voted, on the same basis of accounting as that to be used for the Public Accounts (i.e. full accrual accounting policies based on Generally Accepted Accounting Principles)? Please provide your rationale.

Please forward your completed questionnaire and any further comments or questions by March 10th to: Mr. Bernie Eisener, Senior Advisor - Financial Management and Accounting Policy, Treasury Board Secretariat, L'Esplanade Laurier, 8^th Floor, West Tower, 300 Laurier Avenue West, Ottawa, Ontario K1A 0R5. Telephone 957-2527; Fax 952-9613; Email Eisener.Bernie@tbs-sct.gc.ca

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