SIRP Committee Meeting

SUB-COMMITTEE ON IMPROVED FINANCIAL REPORTING TO PARLIAMENT OF THE STANDING COMMITTEE ON PROCEDURE AND HOUSE AFFAIRS

SOUS-COMITÉ SUR L'AMÉLIORATION DES RAPPORTS FINANCIERS AU PARLEMENT DU COMITÉ PERMANENT DE LA PROCÉDURE ET DES AFFAIRES DE LA CHAMBRE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 30, 2000

• 1537

[English]

The Chair (Mr. Paul Szabo (Mississauga South, Lib.)): We're resuming debate in the Subcommittee on Improved Financial Reporting to Parliament, a subcommittee of the Standing Committee on Procedure and House Affairs, a reference from the Standing Committee on Procedure and House Affairs.

Mr. Sauvageau.

[Translation]

Mr. Benoît Sauvageau (Repentigny, BQ): I know that you are aware and conscious of that problem, but there is something I want to point out. Right now, two committees are sitting simultaneously: Public Accounts and our committee. As far as possible, it would be a good thing to ensure that such situation does not occur again, because many members of Parliament are members of two committees. If we want to have a quorum and follow up our work effectively, we must take into consideration that it's hard for us to attend two committee meetings at the same time. I think Mr. Godin has three committee meetings today. He has four of them simultaneously. I just wanted to point that out.

[English]

The Chair: I understand. We probably have two more meetings of the subcommittee.

[Translation]

Mr. Benoît Sauvageau: Are they going to take place at the same time?

The Chair: No, not at the same time. Those are the two meetings we still have to hold.

[English]

I do understand your point. I wasn't aware of it. We do have a meeting scheduled for tomorrow as well, at 3:30, and also, I believe, in this room. Our final meeting should be early next week, but we'll make sure there is no conflict.

[Translation]

Mr. Benoît Sauvageau: Thank you.

[English]

The Chair: We have authority to commence the meeting and to receive witnesses where there's a quorum of three.

I understand Mr. Godin also has this conflict as there's another meeting going on immediately across the hall. I understand, but the important thing is that the information is on the record and that the transcripts are available to all the members for their edification and for discussion for our report.

Thank you for your support.

Today we're welcoming Mr. Richard Neville, Deputy Comptroller General of the Treasury Board of Canada, to address this issue.

Welcome. You may want to introduce those who are with you so that we will be able to direct our questions appropriately.

Mr. Richard Neville (Deputy Comptroller General, Treasury Board of Canada): Thank you, Mr. Chairman, for the opportunity to appear before the subcommittee and to share my views on the improved reporting to Parliament project.

As you mentioned, I do have two colleagues with me. Mr. Andrew Lieff is the senior director of the expenditure operations and estimates division. Mr. John Morgan is the senior director of the financial management and accounting policy division.

• 1540

I support the draft proposals as submitted by the Centre for Collaborative Government and believe they identify a number of good opportunities to improve accountability and transparency through better reporting to Parliament.

In particular, I'd like to address the fourth theme, identified by the centre as “improving information...on government's expenditure plans and the use of funds in relation to these plans”. The government is well on the way towards implementing the financial information strategy and full accrual accounting for reporting on the results of fiscal year 2001-02. This will fundamentally change the way in which the government presents its financial position and the results of its operations.

It will also lay the foundation for changing the way we manage and are held to account by focusing more on the resources consumed in the delivery of services to Canadians rather than the resources acquired to deliver services. This provides a much more accurate assessment of what it actually costs to operate programs and achieve results.

[Translation]

The form and content of the Public Accounts of Canada will need to be reviewed and rationalized to ensure generally accepted standards of financial reporting in a full accrual accounting environment are achieved. To ensure a solid framework for financial reporting, we will base our accounting principles on those developed by the Public Sector Accounting Board of the Canadian Institute of Chartered Accountants. These standards apply to the public sector in Canada and will help to determine what the financial statements of the government of Canada will look like and to ensure a consistent application of accounting rules within the federal government.

[English]

With respect to budgeting and supply, we have initiated our consultations on whether to adopt accrual accounting principles for the estimates and appropriations. A discussion paper was released for comment to all federal departments and agencies and to the Office of the Auditor General.

Feedback on the paper was positive, particularly on the need to more closely align the accounting basis of the estimates and appropriations with that used for the financial statements. However, concerns were expressed with respect to the capacity to cope with budgeting reforms at the same time that full accrual accounting for financial reporting is being implemented.

Departments would like more detailed consultations. In addition, a number of issues have been identified in the areas of systems, legislation, training, and the cultural aspects of introducing accrual budgeting and appropriations. All of these need to be carefully considered in determining whether these reforms should be undertaken and how fast they can be implemented.

Through discussions with our counterparts in other countries and provincial governments, we know that any introduction of accrual budgeting needs to be well thought out and planned to be successful. We continue to learn from their progress and will be discussing their experiences with them later this year.

It is from these discussions that we hope to further refine various models of how we might best introduce accrual budgeting concepts into the estimates process. We need to ensure that the right incentives are provided to encourage the right behaviours, such as effective, long-term asset management. This will help the government to better deliver services to Canadians and to demonstrate good stewardship of the resources entrusted to it.

[Translation]

As we move down this road, we must continue to find ways to improve and streamline the information provided to Parliament in the Estimates. I believe that effective accountability and transparency can be achieved through a clearer link between planned spending and spending authorities, with the financial and performance results actually achieved. Although a decision has been taken to adopt full accrual accounting for the Budget and financial statements of the government of Canada, the similar decision to adopt the full accrual basis of accounting in the supply side of the equation, that is the Estimates and appropriations, has not yet been made. Accordingly, we will need to review how financial information is presented in the Public Accounts to ensure expenditures charged to authorities remain linked to the government's financial statements in a full accrual accounting environment.

[English]

Thank you for the opportunity to share my views with you. I'd be pleased to answer any questions you might have or to hear any ideas on how best to achieve what I am certain is our mutual goal of improving reporting to Parliament.

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The Chair: Thank you, Mr. Neville.

Are there comments from others, or are they here as support?

Mr. Richard Neville: It's my understanding that Don Lenihan, who's the director of the Centre for Collaborative Government, will also be making some opening comments.

Mr. Donald G. Lenihan (Director, Centre for Collaborative Government): Yes, Mr. Chairman, I was going to make a few comments, if that's possible. Thank you very much.

I just want to take a minute. As you know, I appeared before this committee a couple of weeks ago, and at that time I undertook to provide the final version of the background binder with the full set of proposals in it, in French and English—and I take it that's now been distributed to everybody—including of course the proposals to improve the information on government expenditures.

I did want to say something about the spirit of those proposals, less the technical side; I'll leave it to my friends here from the Treasury Board to say something about that.

First of all, in the broadest sense, they're certainly consistent with the earlier proposals we looked at in the other three themes. Let me just remind you very briefly of what the first three themes were, to contextualize this a little bit. First, we were talking about tailoring information for parliamentarians; second, about streamlining and consolidating information for Parliament; and third, about strengthening parliamentary review processes. These proposals are very much in the same spirit.

As I was working on some of the background material for this, three words came to mind that I think sum up this spirit.

One is they're really directions in which government wants to go, more than anything. I don't take them in the spirit of something that's final and firm and complete; on the contrary, I think the language is pretty clear there.

Secondly, again very much in the spirit of our discussion about a new partnership, or working towards a partnership, between public servants on the one hand and parliamentarians on the other, it seems to me the message in here is very clear, and it's one of an invitation for discussion and engagement on the changes that are proposed or being considered. That's a very important move forward in terms of where parliamentarians and public service ought to go, and I welcome that.

Finally, it sounds to me very much as if the spirit is one in which there's room for pilots or opportunity for proposals, shifts and changes, and broad discussion.

So let me just say that for my part, I'm very pleased to have included in the background briefing book and to have done the work we've done on the part of our organization, and I hope they're taken in that spirit by the committee.

Thank you, Mr. Chairman.

The Chair: Thank you.

[Translation]

Mr. Sauvageau, do you have any questions for the witnesses?

Mr. Benoît Sauvageau: Yes. My first question is for Mr. Neville. Mr. Lenihan, you are here, but this question is not for you.

You said in your presentation that you agreed with the draft proposals submitted by the Centre for Collaborative Government.

For your department as for any other government department, given the number of public servants that we have, why are we often—not too often, but often—not able to find original solutions within the government? Why is it so often necessary to go outside to get new ideas? Is it because of the climate that prevails in the workplace, or because we are very, very conservative? What's the reason for that?

Mr. Richard Neville: That's a very good question. First of all, concerning new ideas within the government, there are quite a few of them which come from the public service. It's not that the will or the ideas are not there, but, once in a while, it's a good thing to get opinions and ideas from outside and to consider them.

In this particular context, we must say that we have some sort of partnership. Ideas are shared. Some of them come from the government side while others come from the private sector. Most of the time, it's all the same. There is a right balance between new ideas and the way they are developed and presented. I don't fully agree that new ideas which are interesting for us, at the federal government, were always originally launched by the private sector. I would say that, most of the time, new processes are established by the government itself, but we still like it very much to work with the private sector to make sure that those ideas are well-received and well-based. Then, we can go ahead with suggestions.

• 1550

Mr. Benoît Sauvageau: I have another question. I don't know whether it's for Mr. Lenihan or for you.

I had a look at the draft report. To make it easier for the public, would you suggest that in some way a separate report should be made for each mission or objective? Let's take the example of Indians affairs. Industry Canada has a section of Indians affairs, as well as Environment Canada, Health Canada and Heritage Canada. Let's assume that someone, for some reason, would like to inquire into that matter. What he is interested in is Indian affairs, but it's not only the Department of Indian Affairs which deals with Aboriginal people.

I am giving that example, but there are several others. I have nothing against the Department of Indian Affairs and Northern Development, nor against specific sections of any department, but I think that this is a good illustration of what I want to point out. Would it be appropriate to include in your reports specific missions for every department, so that citizens and parliamentarians who want to do more extensive research on any issue can do it?

Mr. Richard Neville: I am going to answer first, Mr. Chairman. Of course, we are here for several reasons, but one of the main reasons why we're here this afternoon is to listen to you and hear any suggestion you want to make. In that context, we have discussed that issue and as you can see in the documents which were submitted to you, a different way of presenting the information is being suggested. Currently, only inputs are reported, and we are looking for a different way which would be based on results. It would be a different way of giving the information. We are going to consider that proposal more closely. Our objective is to better inform parliamentarians.

[English]

Mr. Donald Lenihan: You pose a very good and far-reaching question. Obviously I would speak from the point of view of my own organization, and I'll try to make it very brief, just because otherwise we would talk for a long time.

If we look at some of the early parts of the proposals in here that talk about the need for more horizontal coordination and reporting and so on, they address exactly that issue: How far down that road should we go? And the “we” here is the royal “we”—Canadians.

The step being proposed in these proposals is that we actually look towards at least some sort of common reporting and some sort of horizontal reporting. It strikes me as a step in the right direction. There surely are good reasons for keeping what look like similar activities separate in different departments. At the same time, surely there are lots of linkages. It just seems to me one of the problems we face over the next five, ten, or fifteen years is to figure out how to manage those linkages horizontally more. And the first step in that direction surely is to try to report more clearly and more effectively on them.

[Translation]

Mr. Benoît Sauvageau: Thank you very much.

[English]

The Chair: Ms. Catterall.

Ms. Marlene Catterall (Ottawa West—Nepean, Lib.): On the accrual accounting, you mentioned that your consultations have begun and that a discussion paper was released to all federal departments, agencies, the Office of the Auditor General, and all kinds of other people all around the world. What's your process for consulting with Parliament? Because that's who the information is for.

Mr. Richard Neville: Well, that's one of the reasons we're here as well today.

We're at the point where we've started consultations with departments and with the Office of the Auditor General, as mentioned. Those consultations have given us some results. In terms of the accrual accounting per se, we've gone further than just the consultations. We're at the point where a decision has been taken by Parliament, by the government, to proceed.

Ms. Marlene Catterall: There's a difference there.

Mr. Richard Neville: Yes.

Maybe I can just specify that on April 1, 2001, we will be implementing accrual accounting across all departments and agencies. So for the year 2001-02 we'll be reporting back to Parliament on a full accrual basis.

• 1555

With respect to the accrual budgeting, accrual appropriation issue, which is still in the process of consultation, on that we've moved to the point where departments have given us their views, along with the Office of the Auditor General, and we're here today as part of the process of discussing with you what your thoughts are, where you are, what you are expecting, and concerns you may have. We have not, at this point in time, finalized our position. We're still very open to discussing the alternatives as well as how to proceed.

I will say, though, that the comments from departments, as I said earlier, were positive in the sense of wanting to move ahead. The percentages were in the 80% to 90% range. The question was timing and the actual process of how we would be doing it. They certainly left us with some questions that are to be resolved, and I think at this point we still have a bit of homework to do. We certainly would like to hear from you, and it's that kind of a discussion we're hoping to have this afternoon as to what your views are.

Ms. Marlene Catterall: I think if that's the kind of discussion you want to have, then we'd need a different kind of presentation, because I would suspect that there are very few members of Parliament, myself included, who have more than a basic grasp of what accrual accounting is. And if you want a discussion with Parliament about.... I see you're still in the process of deciding whether to adopt accrual accounting principles for the estimates and appropriations—in other words, what Parliament has to deal with. If we're to decide whether that would be a helpful measure in terms of Parliament or not, then we need a lot more time and a lot more material than we have in front of us today. All I have here is generalities, and I'd need to know....

I hope the report we have to do next week isn't going to have to give recommendations on this, because we just haven't had time to look at whether that's a good idea for Parliament or not.

Mr. Richard Neville: I have a couple of points, if I could, Mr. Chairman.

Obviously it's a complex issue, and I appreciate the fact that you recognize this. We'd be more than willing to meet bilaterally and give additional information and share the concepts and the principles in order to assist parliamentarians.

I will also suggest as part of this process, and what may become obvious this afternoon, is we do need more discussions. I'm available, and so is my staff, to pursue that. And if we come out of this with the conclusion that we have to discuss this further, I'll still be very pleased, because I'm looking for input into the process. As I said earlier, we have not taken a decision yet as to how to proceed, so we're certainly at the point—

Ms. Marlene Catterall: We're losing track, sir. The accounting—

Mr. Richard Neville: Yes, there's accrual accounting—

Ms. Marlene Catterall: —and then there's the appropriations and then the reporting to Parliament.

Mr. Richard Neville: That's right.

Ms. Marlene Catterall: So I'll go back to my original question, because it sounds to me like you haven't considered a process of consulting with Parliament and when you would like to do that before you make decisions.

Mr. Richard Neville: With respect to the accrual budgeting, accrual appropriations, we certainly have not finalized our position on that, so—

Ms. Marlene Catterall: No, no.

Mr. Richard Neville: On that part, I'm saying.

Ms. Marlene Catterall: Yes. The process of consulting with Parliament before you finalize your decisions is what I'm interested in.

Mr. Richard Neville: This is what part of the process is.

Ms. Marlene Catterall: It's part of it, but it sounds like you haven't really thought it through. I don't think a half hour or an hour before this small subcommittee is really going to do it. You have a process for consulting with departments and others. It sounds to me like you don't have a thought-out process for consulting with Parliament.

Mr. Richard Neville: Okay.

Ms. Marlene Catterall: And if we're talking about partnerships, as we were earlier....

Mr. Richard Neville: I don't know how much more open we can be. We're at the point where we have consulted with departments. They have given us their views. They've said that there are some problems still to be ironed out. We're in the midst of trying to do that.

As we're doing that part of the exercise, we're now at the point where we feel we'd like to share our knowledge with parliamentarians and our thoughts and to proceed to the next step, which is consultation.

This may be, if I could, Mr. Chairman, the first step in the consultation process, with obviously more to take place. If it means that we should spend time bilaterally or have a separate meeting to explain the mechanics of what we're trying to propose and the principles we're trying to put forward, then by all means, that should proceed. But I would not—

• 1600

Ms. Marlene Catterall: I think it's something we should have a pretty good discussion on. For instance, you note that this discussion paper was released for comment, but I don't know that there's been a discussion paper circulated to members of Parliament with specifically what the issues are with respect to reporting to Parliament and what it would look like, and how it might help Parliament and what some of the drawbacks might be and so on. There's no vehicle for Parliament, or a subcommittee even, to focus on what the issues are.

Mr. Richard Neville: I really thought this meeting here this afternoon was the first step in that process—

Ms. Marlene Catterall: Okay.

Mr. Richard Neville: —to start bringing all of you up to speed. I wasn't planning on getting too technical—I thought we'd stay at the principles—but we can do that.

I want to also leave you with the thought that we have not gone any further than that. Certainly this was the first meeting to start the process. We certainly expect meetings to continue.

The good news is that I don't think we've taken any decision at this point.

Mr. Andrew Lieff (Senior Director, Expenditure Operations and Estimates Division, Planning, Performance and Reporting Sector, Treasury Board of Canada Secretariat): I think what I'd like to add, just to underline what Mr. Neville said, is that one of the outcomes we might see from this report is in fact a recommendation that the process of consultation be enshrined in the work of the subcommittee and that this be a forum for those kinds of consultations.

As much as you, from our side we want to listen to what your needs are. After all, they're your documents. We don't always know in government what's most relevant to you. We like to listen to those comments as we're going. We have a number of concepts and a number of issues we want to deal with for the management of government. I think there's a lot of room to have those dovetail with the kind of information you need to understand on the expenditures of government and to hold us accountable for that, which is your legitimate role.

I think we'll only do that through a process of discussion, through education.

Ms. Marlene Catterall: We understand expenditures.

Mr. Andrew Lieff: Yes. Absolutely.

So one of the things I think we're hoping is an outcome is to have you appreciate that the directions we want to move to, in terms of improved reporting to Parliament, make sense in principle and that we have an ongoing process.

Ms. Marlene Catterall: I'm saying to you right now, I don't have a clue whether it makes sense or not, or beyond real generalities what those directions are and what they would mean to me in the decision-making mode.

Mr. Richard Neville: Mr. Chairman, if I could, I'd take a few more minutes to explain.

If I were to try to explain to you what has been put forward at this point, in terms of what will happen in the public accounts for the year 2001-2002, and then try to relate that to the estimates as we have them today, that might be at least a starting point, just to put on the table what the issue is.

With the introduction of accrual accounting—and we've never had a full accrual accounting in the federal government before—we'll be moving to a new way of recording our expenditures and reporting to Parliament transactions that have not been traditionally reported in that manner. Where we've been basically expensing the costs as we purchase specific items, for capital, for example, we will be changing that to actually transactions where we'll be just booking the expenditures as we use those particular assets. So we'll be having a closer relationship between the cost associated with the services being provided.

That means we'll be putting onto the balance sheet of the federal government, for the first time, fixed assets, financial fixed assets, which will be significant in terms of the value. We expect they'll be quite significant in terms of the value. Therefore, again, we'll be bringing to parliamentarians' attention and to managers' attention across government assets that should be better managed than we had been traditionally doing.

By going to the full accrual accounting basis and basically showing that to parliamentarians in the public accounts for the first time for the fiscal year 2001-2002, we create a situation where, for reporting purposes, parliamentarians would have, as is the case today, the budget speech coming out in February on a full accrual basis. We would have the estimates, the blue book, not on a full accrual basis, but partial accrual. Then we would have the reports on plans and priorities, which come out very shortly thereafter, on a partial accrual basis. Then moving through the year on a full accrual basis for transactions, they'll be reporting in the public accounts. In the departmental performance reports we'll have documents that will be part full accrual and part partial accrual, because of the estimates.

• 1605

So we will not have a very fluid and consistent approach to how we report to Parliament. The issue we're faced with is that the budget, the public accounts, and the financial statements we're trying to prepare will all be on a full accrual basis, yet other documents parliamentarians use—i.e., the estimates—will not. So there's an inconsistency. The issue there is how to resolve that from the parliamentarians' perspective, and from the perspective of those of us who are trying to provide you with the best information possible.

I'm trying to be very succinct in two minutes on what the issue is—

Ms. Marlene Catterall: It's not an issue you can be two minutes on—

Mr. Richard Neville: No, I realize that.

Ms. Marlene Catterall: —if any of us want to understand what we're doing.

Mr. Richard Neville: But I want to get your feelings and listen to you, as to where your thoughts are, at least at this stage of the discussion. Then we can come back and share with you more information and take it down to the next level.

Ms. Marlene Catterall: I guess I would start with the discussion paper. I have another whole line of questioning, so you may want to go to back to Mr. Sauvageau for a while.

The Chair: Mr. Lenihan probably would like to make a comment here.

Mr. Donald Lenihan: Thank you, Mr. Chairman. I would like to just make a couple of comments here, very much from a point of view of empathy or sympathy.

I said in my introductory comments that I thought these were very much consistent with the other proposals and the spirit of the proposals in the other part of the background briefer. I said things like “directions”, “discussion”, and “engagement”. It's really worth looking at the language in the three proposals themselves.

The language isn't about “let's do this”, with the one exception where there is talk about “reviewed and rationalized”. There are things like “let's review”, “let's consider”, “let's think about” and “let's talk about.” That's what the whole thing is about, and that's what I took to be an invitation to engagement. In other words, I think—that's why our logo is on this background briefing book—it is essentially an invitation to enter into a discussion to try to answer at greater length the kinds of questions you're asking.

As someone concerned about public administration and where it's going, you know you're not going to learn about those changes in five minutes, and I know I'm not. On the other hand, they are hugely important. The right place to start is to begin to actually express a common interest and desire to have that discussion.

The Chair: Ms. Catterall.

Ms. Marlene Catterall: What I'd like to come back to, then, if we're talking about dialogue, is the predecessor of this committee produced a report, and it's been about a year now since the government responded to that report, maybe a bit more. It said, basically, “There are some good ideas, and we'll be implementing them”. I would like to know how far the recommendations in that report have been implemented.

Mr. Richard Neville: You've seen the outcome of those recommendations, with us being here today and the proposals that have been in front of this subcommittee for the last few weeks. We have tried to propose some changes, and we're looking at ways of implementing them that would meet your needs. So in large part, what you're seeing here today is the direct result of those recommendations—unless you want to look at specific recommendations.

Ms. Marlene Catterall: I guess I'm trying to get something concrete I can grapple with. With all respect, we went through the whole process and the subcommittee worked for over a year to make some very specific recommendations. I guess I'd like to know a little more specifically what progress we've made on which of those recommendations are within the mandate of the government. Frankly, I've haven't seen a lot, in concrete terms.

Mr. Richard Neville: Mr. Chairman, could I ask Mr. Martin Ulrich to deal specifically with the question at hand?

Ms. Marlene Catterall: Maybe he needs to give us something a little more in writing on that.

The Chair: Mr. Martin Ulrich, please.

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Mr. Martin Ulrich (Director, Results Measurement and Accountability, Treasury Board of Canada): My name is Martin Ulrich. I'm the senior director of the results measurement and accountability group that works in Rick Neville's area. We were part of the staff that helped the government provide the response to the Catterall-Williams report.

In doing this analysis and the proposals you heard earlier, we took two sources of information. One was the 52 recommendations in your report, and they're all listed here. Another was the recommendations that came out of the committees that were chaired by Mr. Ianno. Based on those, we identified the kinds of changes that we felt could be put in place immediately. There isn't a perfect correspondence to that, but we would be absolutely happy to share that documentation with you.

Ms. Marlene Catterall: I'd like to see that.

Mr. Martin Ulrich: My own opinion is that it is a very significant set of actions, consistent with your recommendations. The financial framework material you're talking about today was not really in your recommendations; it was referred to obliquely, but it wasn't really there. So the material you're talking about today is new, in some sense.

The government identified that in the president's report last fall, when they said, in their response to the committee report, that while they couldn't put these recommendations into practice in detail, other than the ones that affected certain aspects of the process having to do with confidence, many of them were quite consistent with the government's own view on what should be done, and they would come back to Parliament with some actions on that.

In that report to Parliament last fall, all of the recommendations, with some tailoring, are the ones you're now seeing here. Therefore, I would say we've gone a long way down it, but your report was so comprehensive that we still have an awfully long way to go. So this is not a one-shot process, by any means.

Ms. Marlene Catterall: As I recall, on accrual accounting specifically you said “We just don't have time to deal with that”. It's a fundamental change, and we, as a subcommittee, certainly don't have time to deal with it before next week. But it's important, I think, that a group of parliamentarians understands where we're heading on that and how.

Mr. Richard Neville: But I'm pleased to hear you're willing to go down that road with us. The objective here is to try to get a better understanding of what your needs are. As I said earlier, if we have the resolution today, or in the report, that you're willing to do that and pursue it, that's what we're looking for.

Ms. Marlene Catterall: I'd certainly like to see the discussion paper. I don't know if it's prepared in a way that is useful to members of Parliament, for example.

Mr. Richard Neville: We'll take a look at the discussion paper in the context of how best to present it, so it is meaningful. It may need some tailoring, but we certainly can do that—

Ms. Marlene Catterall: Thank you.

Mr. Richard Neville: —to move us to the next point. It may even be better to have, over and above that, a one-on-one meeting with you, or any member, to share the concepts, the principles, and some of the mechanics that are involved, because it is a complex issue. That's apart from accrual accounting. Accrual accounting is one part of it, and then accrual budgeting, accrual appropriation, is another part.

The Chair: Are you finished for now?

Ms. Marlene Catterall: Yes.

The Chair: I want to pick up on this a little. It's kind of a complex discussion that's going on here, but there are some things, if you chunk it into pieces. First of all, the financial reporting for the fiscal year 2001-2002 will be on a full accrual basis.

Mr. Richard Neville: That's correct. That's the intent for the fiscal year 2001-2002, which begins April 1, 2001. But we will not be reporting to Parliament until October.

The Chair: So accrual accounting is not going to be an option, in terms of whether parliamentarians want to understand it or not. It's going to be accrual accounting.

Mr. Richard Neville: The decision on accrual accounting has been taken by the government to report, but that's only one part of the whole equation.

The Chair: Absolutely. It's going to give us the actuals on an accrual basis.

Mr. Richard Neville: Correct.

The Chair: The issue becomes one of looking at the government performance relative to the estimates, which may be prepared on the same, similar, or maybe even a totally different basis. It's really the variance analysis, actual versus budget, that is going to be the challenge for parliamentarians. In an ideal situation the estimates as well as the financial reporting should be on the same basis.

• 1615

Mr. Richard Neville: That's the debate. The departments have told us that they feel it should be on the same basis. Other countries have made that decision as well. But we haven't arrived at a final decision on how to do that and whether it's even the best scenario at this point. That's why we need the input from parliamentarians to determine whether they'd like to keep what they have as the estimates and the way in which they are presented to Parliament, or having seen the options and understanding them, whether there is a better approach.

Ms. Marlene Catterall: What would be the timeline for doing that, though, for seeing the options and...?

Mr. Richard Neville: We're certainly thinking as soon as possible.

Ms. Marlene Catterall: Let's face it, Parliament is sitting for another three weeks. In terms of your progress and what you have to do, when would you need some feedback from Parliament? We aren't going to be back until mid-September.

Mr. Richard Neville: I was hoping to have some feedback as soon as possible. If that meant the next three weeks, that would be ideal, realistically. If that isn't the case, I'd be willing to continue discussions in the early fall.

Ms. Marlene Catterall: That's not the mandate of this committee.

Mr. Richard Neville: No, but again I'm back to if we have the green light to continue discussions, I think that would be appropriate for our needs.

The Chair: Let's nail down some principles. We know that the financial reporting for the 2001-2002 year is going to be on an accrual basis. The first choice of anybody would be that the estimates would have been prepared on the same basis, so that when you do your performance evaluation compared with the estimates, you know you're dealing with apples and apples. They've been crafted using the same principles.

In the event that you are unable to have the estimates done on a full accrual basis, that means that in addition to having actual variances, you will also have to include an adjustment for the difference in cash accounting versus accrual accounting. It's going to be sloppier, but it's not impossible to do the variance analysis.

Mr. Richard Neville: Correct. First of all, to answer your question, it would be onerous, but it could be done. That's clear. The majority of the departments have also said to us that they would not like to see the introduction of accrual appropriations at the same time as we introduce full accrual accounting, because that would be too onerous on them in terms of the capacity requirement.

The Chair: You've made it clear in your testimony that this is an area of concern.

Mr. Richard Neville: It's an area of concern to us and to departments. In all fairness, if you look at what other countries have done, the red flags are certainly there to think that through before a decision is made to go at the same time.

The Chair: From the feedback you've received from the departments, are they going to have some due care take place for them to do the financial reporting on an accrual basis? You talked about systems changes, etc. Is this process of transitioning to full accrual financial reporting going to cause them a transitional workload?

Mr. Richard Neville: Yes. That's part of the financial information strategy, which we referred to in the opening remarks. It moves us to having a better matching of financial and non-financial information. It also brings us to the point where full accrual accounting will be part of the reporting to Parliament. I'd say that the majority of departments have had to put in play new financial systems, and in order to do that, as you can appreciate, a big change in the actual infrastructure in departments is required. More importantly, a significant change was required in the central financial systems of Public Works and Government Services Canada. That change has already taken place. They had that up and running on April 1, 1999.

• 1620

Along with that, a significant number of departments made the transition in what we refer to as the first wave. So April 1, 1999, was the first wave. We brought departments in, and in terms of systems, they are now fiscally compliant and ready to start on April 1, 2001, with full accrual accounting. The second wave of departments was April 1, 2000. Again a significant number of departments were transferred and became fiscally compliant. That leaves us with the third wave, the balance of departments coming in on April 1, 2001.

All that is to say that we've made a significant number of changes in departments in order to accommodate the capability of having full accrual accounting on April 1, 2001, but there are still some departments that will have to become fiscally compliant next year.

For those departments that have done it, it's really a scenario where a lot of effort has been put into individual training capacity and ensuring that the policies have been developed and that all of the system interfaces with Public Works and Government Services Canada have been put in place. We are pleased at this point with the progress. It's a matter of finalizing it all by April 1, 2001, so that we can start at that particular point.

The Chair: Would it be fair to say that in the ideal both the estimates and the financial reporting should have been converted to accrual at the same time, if you were going to do it in a general case?

Mr. Richard Neville: In a perfect world, if you could just make things happen and there would be no negative repercussions, I think that would be the ideal.

The Chair: That would be the ideal scenario because you're dealing with apples and apples. It's the cleanest, and it makes a lot of sense.

There doesn't seem to be any disagreement at this point that to try to achieve that for 2001-2002 carries with it high risk.

Mr. Richard Neville: High, high, high risk, but I'm still—

The Chair: I'm sorry, it carries with it high risk. Do you agree?

Mr. Richard Neville: Yes, very high risk. But I'm still at the point of consulting, in the true sense of the word, with you—and I stress that, consulting with you—to see where you're coming from in terms of concepts and thinking. As parliamentarians, do you realize the implications of going to accrual budgeting and accrual appropriations? It means that you'll be leaving the cash approach—partial accrual, if you wish, what used to be pure cash—you'll be leaving that world where for several years now you have been accustomed to seeing the estimates presented to you in a certain format.

The Chair: Could you just stop there? This is really important. I appreciate Ms. Catterall's intervention as well. What you're saying is that we'll be leaving the cash, what we've been accustomed to.

Mr. Richard Neville: Yes, which is partial accrual.

The Chair: What we've been accustomed to is that you may have paid for two years of services in year one, and the next year you pay for no years of services because you've already prepaid a year. So we're accustomed to erroneous financial information. That's the case. We are accustomed to erroneous financial information, and wouldn't it be awful for us to move away from that?

Quite frankly, the whole principle of the matching concept, which is fundamental to good financial accounting, says let's get one year of revenue and one year of expense in the same year. That's why you have accrual accounting, so that no matter when the cash flowed, the revenue and expense are matched in the same year in which they belong. So you understand all kinds of neat things.

Mr. Richard Neville: I wonder if I can—

Ms. Marlene Catterall: Not quite.

• 1625

The Chair: Okay, I understand that, but I want to bring in a little bit of the concept of.... The clerk made some comments relevant to what you've been asking in terms of whether parliamentarians are ready.

We explored the whole issue of the current involvement of parliamentarians, through committees and through their other work, with the estimates, with the review, and the priorities—how many committees actually do reports and how many have been deemed to be reported. You may have some specifics, but it appears to me that very few committees, quite frankly, are doing good work on the estimates.

In fact, I have a feeling that's one of the reasons why the Catterall-Williams report pursued the possibility of establishing a permanent standing committee on estimates, to make sure that we did have parliamentary review, at least to the extent they could do it, and maybe bring the focus to some of the principal issues within the estimates. In fact it probably could become one of the most powerful committees on Parliament Hill simply by virtue of the fact that it would clearly be requisitioning virtually every cabinet minister to the table to be accountable. It would be where the thrust of that was. The government response to that report was to reject that, for various reasons.

Parliamentarians aren't involved in the process now. If they aren't involved in the process now, and haven't for a variety of reasons.... It's not that they're not interested. We don't orient members of Parliament on the estimates and how to use them, how to read them. We don't tell them how important that tool is. So it's very difficult now to say “Geez, are you guys sure you want to move to accrual?”

If they're not interested in the estimates by their actions in committee already, then maybe the question is moot.

Mr. Richard Neville: You've raised a couple of issues. Can I go back to a technical one?

The Chair: Please.

Mr. Richard Neville: At the front end of your comments you said that accrual accounting is matching cash with revenues.

The Chair: No, not cash with revenues.

Mr. Richard Neville: Sorry. I thought you said that. I stand corrected.

The Chair: It's revenue and expenditures.

Mr. Richard Neville: We see accrual accounting as being more than matching expenditures with revenues. Within the expenditures themselves, it's matching the utilization of resources with the products or services being delivered. I want to make sure we're crystal clear on that.

Within the expenditures themselves—

The Chair: First of all, matching revenue and expenditures is in a traditional accounting sense. In an ordinary business that's why they do accrual.

Mr. Richard Neville: Fine.

The Chair: Government accounting is slightly different, understandably.

Mr. Richard Neville: No, I had no problems with the expenditure versus revenues; I just thought I heard “cash”, and I wanted to be a little more precise.

Within the expenditures themselves, you have a scenario where we want to ensure there's a matching of utilization of the expenditures with the services—

The Chair: Get them in the right accounting period.

Mr. Richard Neville: Right. Exactly.

The Chair: Yes.

Mr. Richard Neville: On that point—and I'll come back to your second point in a moment—I would ask Mr. Morgan to expand on that.

Mr. John M. Morgan (Senior Director, Financial Management and Accounting Policy, Comptrollership Branch, Treasury Board Secretariat): Certainly.

Right now the Government of Canada follows a modified accrual accounting, which is a little bit different from the estimates process. The estimates is partial accrual. The difference between partial accrual and modified is that we make certain allowances for provisions on assets that are on the financial statements of the government that are provided for centrally. We also make some accruals for things like severance pay and vacation pay that hasn't been paid out but has been earned, or there's a liability. So we make a few adjustments there.

As we go down, moving from partial accrual to modified accrual to full accrual, the real focus—and certainly, I agree with you, in the government sense—is to match the expenses in the period to which you provide the services. One of the best ways in terms of the capital of the government, fixed assets and so on, is to try to spread their costs over that period to which they're actually delivering services to Canadians. So it's a much better way of reporting.

Ms. Marlene Catterall: In other words, I may not see that we spent $10 million on a building this year, or are planning to.

Mr. John Morgan: That's right.

Mr. Richard Neville: Well, we would still show that, but it would not be in the same format as it was traditionally. What you will see in terms of the reporting is the utilization of that building in terms of costs versus the usage that you had in terms of results.

The Chair: You'd say “capital” program, though.

Mr. Richard Neville: Yes.

The Chair: Which would include the $10 million building.

Mr. Richard Neville: You would see it, yes, but not in the same—

Ms. Marlene Catterall: Have we sorted out what's capital and what's not? I mean, are bullets capital, or the tanks?

• 1630

Mr. Richard Neville: We have a policy that would be capitalizing—

Ms. Marlene Catterall: Bullets?

A voice: No.

Mr. Richard Neville: —all assets over $10,000 in all departments with the exception of one, National Defence, where we would be capitalizing assets over $30,000. Over and above that, because accrual accounting implies more than just fixed assets—it involves setting up inventories and prepaid expenses—with respect to inventories we would be setting those up based on generally accepted accounting principles.

So whether it would be National Defence or Correctional Services or the RCMP, in their stock of inventories, which would probably include bullets, they would be setting them up.

Again, if they make a large purchase...and they do. Let's say they purchase $300,000 worth of bullets this year and they consume only $50,000 worth. You shouldn't be charging against the uses this year the $300,000 expense that has been incurred; you should only be showing the expenses that have been used specific to the utilization of that particular commodity.

Ms. Marlene Catterall: But how does anybody ever know what you're really doing if you don't account for what you actually spent?

Mr. Richard Neville: Oh, that's where you.... Well, it's because—

The Chair: That's the whole bit about cash versus accrual.

Mr. Richard Neville: Yes.

The Chair: If you want to know how much cash you spent, then you do your books on a cash basis. If you want to know what kind of economic value you expended, you use the accrual basis.

Mr. Richard Neville: Exactly.

Going back to the question at hand, we would be showing the utilization this year, which would be $50,000, against the actual usage of the bullets and in terms of the results you would get. That's a fair matching of cost with results. We still would have in our records, and share with parliamentarians, the total expenditures for the year in terms of a cash basis. We'll still be showing that. I mean, we're not planning on not having that. But it would give parliamentarians and those who are utilizing the financial statements and departmental reports better information with which to manage. We don't have that today.

Mr. Andrew Lieff: I would just add the comment that we're talking on a couple of levels here. The most fundamental level is information to parliamentarians—whether you appropriate that way, budget that way, or just provide supplementary information. I think one of the things we want to have a dialogue on is what information is the most relevant regardless of the official model we choose. Right now we have a variety of different types of information in reports on plans and priorities and the estimates, depending on the purpose of that particular document.

Ultimately, each of those documents is to support and explain to parliamentarians the expenditure plans of government. We actually get that spending authority through appropriations. You can have a whole discussion on what information you need to understand the expenditures of government and what makes the most sense in terms of appropriating. Ideally, they'd all be on the same basis.

I think what we really need is a dialogue on, first, what information is most relevant. If you use the private sector model, you have three basic pieces of information. You have the statement of worth, which is your assets and liabilities and your changes. You have an income statement, which is akin to your matching of expenditures and revenues. Then you have your cash. You need to know what your liquidity is at any point in time, and what your investment potential is, based on the cash you have and that type of thing.

I think we need to struggle a bit with some of those concepts in terms of the various documents. What's most relevant, and what's the best way to appropriate, to have it simple and easy to understand? Frankly, I think we need to talk to you about that. I think we could wind up having very complicated statements that provide perfect matching but that nobody will be able to understand.

Mr. Richard Neville: I'd like to address the second part of your question. You mentioned that if parliamentarians are not interested in the first place, this may be a moot question. I think it's a question of providing better information so that it makes it more interesting, more relevant, because then I think you have a more interested, participating group.

• 1635

I may be a little idealistic in saying that, but I certainly think we should be providing better information, and better information should give you the interest.

The fact that we have not been showing parliamentarians the true value of the fixed assets we have.... If you don't see it—out of sight, out of mind—you just don't really appreciate what we have in terms of those assets and how to manage them. Similarly, I couldn't imagine being in a corporation environment where you don't know what your fixed assets are and you're trying to run a business. You would not be able to compete at the end of the day with your counterparts.

I think we've come to the point where we're realizing more and more that as senior managers in government, we have a responsibility to manage the assets of the crown. Therefore, we should be at least identifying them first. Then, once you've seen them and you understand more fully what's involved, you'll be in a position to better manage them. The same, I think, holds true for parliamentarians. We haven't been sharing that. We haven't been providing that information. Once we do, I think it will be that much more meaningful.

I think we have a bit of road each way to go. We have to provide more, and I think parliamentarians have to be more involved.

The Chair: Okay. I think the Clerk of the House reflected the same view, that the important thing is that the estimates are prepared and they're there. Everybody knows they could be looked at. We probably should report in the best fashion that will give the best available quality of information, so that if, as, and when a parliamentarian wants to look at them, they will be in the best form possible. I think that should be what we're pursuing.

Mr. Richard Neville: That should be the overriding principle.

The Chair: Absolutely, where we're dealing with the ideal.

Tomorrow we're going to hear from Professor Dobell on some of the feedback here from the Parliamentary Centre, from parliamentarians, on how they felt about this as well. I have a feeling we're going to hear the frustration. There are many reasons for those frustrations; it's certainly not totally about the estimates. There are things like five official parties tending to make committees a very difficult system to sustain simply because of the number of bodies required.

I want to be absolutely sure on this question of the accrual on the budgeting side. I think Ms. Catterall is quite right, there isn't a comfort level generally with parliamentarians about maybe moving better piecemeal. Would it bother you if the committee basically said to do one thing very well, and then we'll work on the next piece?

Mr. Richard Neville: I'm really looking for a green light from this subcommittee to pursue discussions with you, with parliamentarians, to try to come up with a recommendation we're all happy with. I think what may be missing here is the basic knowledge of what accrual budgeting implies, what that actually means. I'm willing to provide whatever resources are available.

The Chair: I think it's fair to say it's quite unlikely to be able to achieve that in the time provided.

Ms. Marlene Catterall: Yes. I'm looking back at our mandate again, and it's two parts of that four-part mandate. One is tailoring estimates information for parliamentary needs. I personally don't think we'll be in a position by later this week to prepare a report that does that. And in regard to improving information to Parliament on the government's expenditure plans and the use of funds in relation to these plans, this subcommittee simply hasn't had an opportunity to become familiar enough with where we are.

If you want us to recommend that you go on consulting with parliamentarians—that's why I was pushing you a little bit on this—how would you propose to do that? You know what you've done with departments and agencies. What would you propose to do with Parliament?

I don't necessarily need an answer right now, because there's another more important point bothering me. As I see your general comments on the results of your consultations, I'm thinking that in the last seven years a huge amount of pressure has been put on the public service for all kinds of reasons that we don't need to rehash. I think we're starting to see, in some places, some not-so-positive results of that pressure.

• 1640

What I read between the lines of what you're telling me in the feedback you've had is a great deal of concern about having to go through this again, having to do something different again, and that there's not enough time, not enough resources, not enough ability to think this through and work with their people and get it going. That's what I'm feeling as I read your very general comments. And 2001 isn't very far away.

Are we again putting more pressure on people on top of the pressure that's been there for a few years now? Does it have to be 2001? Would it be done better and with less pressure if we're a year later?

Mr. Richard Neville: Let me reassure you on that point.

We're talking about accrual accounting, and at this point the government's intentions are that we will implement that on April 1, 2001, for the year 2001-2002. On that, departments have come on board. As I've said, wave one and wave two are already through the gate. We are now looking at wave three, which is the balance of departments. So with that initiative—which is part of the financial information strategy—I think we're well on our way.

On the question of accrual budgeting and accrual appropriations, when we went out to departments, 94% said clearly to us that we should go the extra step and put in place accrual budgeting and accrual appropriations—94%. However, they did say to us to give them at least one year from the date you're going to announce that—give them at least one year, and 18 months to two years would be even better. But 52% said one year, and 28% said between 18 months and 24 months.

So I'm hearing from departments a cautionary note that once a decision is taken, if we were to take that decision, they still would like to see a time lag between the date we announce it and the actual implementation date.

I think it would be very difficult, almost impossible, to put in play accrual budgeting and accrual appropriations for the 2001-2002 fiscal year. Just to make that clear, I think it would be very difficult. But we still want to come to the point of making a decision on whether we want to do this. The year we implement it is something else. It's just “do we want to do this?” And we have not come to that final conclusion.

Ms. Marlene Catterall: Okay, and that's why I was asking you earlier what your timeline is. If you really want to get some understanding, among a group of parliamentarians at least, and some thoughtful recommendations as to how maybe a couple of things have to be blended in terms of what parliamentarians need, what would be your timeline, given certain possible dates of implementation, and how do we get to that timeline for you?

Mr. Richard Neville: Realistically, we would like to have consultations finalized with parliamentarians by the fall.

Ms. Marlene Catterall: By when in the fall?

Mr. Richard Neville: This fall.

Ms. Marlene Catterall: By when? Don't forget, Parliament doesn't come back until after the middle of September. Committees aren't set up.

Mr. Richard Neville: Being optimistic, maybe the end of October. But I'm realistic, so maybe the end of November.

Ms. Marlene Catterall: And that would allow you to implement when?

Mr. Richard Neville: Well, that would allow us then to make a decision, a recommendation, and then a decision to come in a formal recommendation. It would not be.... I would think the earliest would be a year or two from that point in time.

But you're ahead of me. I'm still at the point of trying to get consultation, getting your views as to whether we should go down that road or not, and if we do, how do we do it?

Ms. Marlene Catterall: I don't know, because I don't know yet where that road takes me.

Mr. Richard Neville: Yes. I hear you.

Ms. Marlene Catterall: Give me a consultation phase.

Mr. Richard Neville: But I hear you saying you want to go down that road, as well.

Ms. Marlene Catterall: Oh yes, I want to at least explore it—

Mr. Richard Neville: Explore it.

Ms. Marlene Catterall: —and see what it's going to mean. Because, like Paul, I'm concerned that Parliament doesn't pay enough attention. Frankly, I think one of the main problems is we never let you present what's in your estimates. How could you possibly expect us to know what's there and to make use of that information?

• 1645

The Chair: Let's be clear that there is no question that the budgeting is going to be done on an accrual basis eventually. I don't think it's optional, is it?

Mr. Richard Neville: Well, it's Parliament's will. I mean, we may make a recommendation, but it's Parliament's will.

The Chair: It surprises me, because earlier we had that little conversation about how the ideal would be—

Mr. Richard Neville: No, I—

The Chair: —that the budgeting and the reporting are going to be done on the same basis so that you can do variance analysis without having to explain the difference attributable to different bases of preparation.

Mr. Richard Neville: The public accounts committee of Parliament has endorsed going to accrual accounting and has also endorsed going to full accrual budgeting and appropriation. The Office of the Auditor General is certainly of that view as well. We've expressed our views: that in the ideal world, that would be the way we should proceed. But I just want to put on the record that it's Parliament's decision.

But if you want to say it in the context of what would be ideal, in terms of what we see as the best scenario at this point, it would be to pursue discussions, and it would probably lead to a decision to go with accrual budgeting and appropriation, yes, full accrual appropriation.

The Chair: Who are the other users of our financial information, other than parliamentarians?

Mr. Richard Neville: You have a lot of academics out there who are very interested. You have the media. There are certain individuals in the media who make it a point to understand our financial statements and comment on them, and they're qualified to do so.

You have a lot of the rating agencies. You have the international organizations, whether it be the OECD, whether it be the World Bank or IMF. You have a number of other countries that are very interested because comparisons are made; we all try to keep abreast of what each other is doing.

There are a tremendous amount of users out there, over and above the parliamentarians per se. Now I say “tremendous” in the sense that there's more than just one group. People keep thinking that maybe there are only one or two groups. There are probably six or seven or eight groups out there that are very interested in our financial statements.

The Chair: So we can't simply look at what MPs might like to see, quite frankly. We have to be sensitive to the fact that comparability on an international standard is also an important objective to achieve.

Mr. Richard Neville: For sure.

There are ten other countries, large and small, but quite a number of them are large, who have made the decision to go to full accrual accounting. A number of those have also made a decision and have already implemented a full accrual budgeting and accrual appropriation basis, so—

The Chair: Okay. So I ask the question again—

Mr. Richard Neville: —I want to keep track of that.

The Chair: Is moving to accrual accounting on budgeting optional?

Ms. Marlene Catterall: The cat's among the pigeons—

Mr. Richard Neville: Yes.

You're putting it in black and white. I would say that we don't have to go to accrual budgeting, accrual appropriations. We can live with what we're proposing at this point, but it means reconciliations on the part of the departments and it means more work, and I don't think it gives the best information to parliamentarians. We can still do it.

Ms. Marlene Catterall: Yes, and we may have to in fact do a hybrid, because basically accrual accounting is a very good management tool. It's also a good way of matching the resources you've used with what you're trying to achieve. But in terms of accountability, which is Parliament's role, both accountability and saying “yes, here's how much you can raise and here's how much you can spend”, Parliament may need a bit of a hybrid in having another track of information that goes along with estimates based on—

Mr. Richard Neville: Or parliamentarians may tell us that they would prefer to see a dual track for a period of time.

Ms. Marlene Catterall: Yes.

Mr. Richard Neville: That's an option. That's more work, as you can appreciate, but maybe it raises the comfort level of parliamentarians.

Mr. Chairman, if you're asking me if at the end of the day it is inevitable, that's a hard question to answer. Do I see that it would probably be more beneficial having accrual appropriations, accrual budgeting, in play? Yes, I probably do. But I also am very sensitive to what parliamentarians are wanting to see at the end of the day from their perspective. I certainly will go with what is recommended.

• 1650

The Chair: We're going to have an interesting discussion on this among the members of this committee. I'm glad you put on the record that there are more users than simply members of Parliament.

Mr. Richard Neville: There are.

Ms. Marlene Catterall: But the main purpose of the estimates is Parliament.

The Chair: Now we have this problem. It's most important to the members of Parliament, but unfortunately the members of Parliament don't use it.

Mr. Richard Neville: Well, I'm back to the idea that we should be providing the best information possible.

The Chair: Sure. I continue to agree with you there.

Ms. Marlene Catterall: We should give you a chance to present it.

The Chair: That means that we have another area of recommendation. How do we bring members of Parliament up to the level of understanding, knowledge, and ability to use that tool?

Mr. Richard Neville: I like that analogy. I think there's a bit of coming together, of parliamentarians having a better understanding in getting to that point in terms of their knowledge factor and of us providing the best information. I think we can provide better information than we're doing today. So we have to come to the table as well.

The Chair: Now, just for my information.... In the financial reporting moving to full accrual accounting, as Mr. Lieff laid out, you'll have a balance sheet, you'll have a P and L, and you'll also have a statement of sources and uses of cash so that everybody can track the cash. If we're moving in that direction, theoretically are we prepared to go back and capitalize current assets and in fact set up a surplus for the Government of Canada with regard to assets that have been previously written off that should have been capitalized?

Mr. Richard Neville: There are two things I'd like to point out. Maybe I should have pointed this out earlier, so I apologize.

When I was talking about the financial information strategy and saying that we will be FIS-compliant effective April 1, 2001, that also means that each department of government will be required to prepare its own financial statements. They have to be auditable—not audited, but auditable.

Therefore, again from the management perspective of that department, they'll see for the first time some significant.... First of all, they'll see financial statements for the first time for their department, which we haven't had previously. Then they'll start seeing capital assets, a number of financial assets on the balance sheet, which are not there presently. We think that over time they'll start managing them, which is what we expect, and therefore get better results.

To get back to your specific question, if we capitalize the assets, the moment we capitalize those assets, Mr. Chairman, what we in fact are doing is restating the accumulated deficit. We have expensed those all through the years, and therefore in our $579 billion deficit today, our accumulated debt, if you wish, we've built in the expenditures as they were incurred. Once we set up the assets on the balance sheet, we will be restating that $579 billion by whatever amount will be set up so that we will have an asset component and then we'll have the balance as the accumulated debts.

The Chair: It will be really interesting. When most Canadians see a balance sheet, all it shows is that other than some nominal financial resources, we have an accumulated national debt of just under $600 billion. They see that we're bankrupt. Yet if you were to capitalize the assets—and I think the Fraser Institute actually did that pro forma, excluding land value—the value of Canada's assets was something in the neighbourhood of $3 trillion. I suspect that's on a current value basis as opposed to a historic cost basis.

Mr. Richard Neville: Yes. We will be doing it on an historic cost basis—

The Chair: I'm sure you will.

Mr. Richard Neville: —which will be significantly less. Having said that, I think it's still a number that will be important and will be managed from that point on.

The Chair: Understood.

We really appreciate the dialogue. I think it's helping to bring a couple of critical issues that we have to deal with as a committee. Are there any other matters that you wanted to raise with us or point out to us that we have not touched that you feel we should know about or you want to alert us to?

• 1655

Mr. Richard Neville: Yes. I was going to touch on proposal 4.3, which is for improving and streamlining the information provided to Parliament in the main and supplementary estimates. We were hoping to start a dialogue on how we can more closely align the budget document and the main estimates and the supplementary estimate documents. I'll ask Mr. Lieff to comment on that.

Mr. Andrew Lieff: At a higher level, we have a tremendous amount of information available in the various estimates documents. As you mentioned, it's not really being used by parliamentarians. So I think there are a couple of things.

We would like an opportunity, if parliamentarians were interested, to engage with them in part of that orientation process. What is the information that is available? Secondly, we have some ideas about how we could make that information more relevant by having greater consistency, or as much consistency as possible, going from the government's expenditure plan as set out in the budget, through the estimates, through the RPPs and DPRs. I'm sure there would be ideas of parliamentarians as well.

I think there are some simple things we can do. First of all, we could put some chapeau tables on some of those documents to put them in context. Right now, appropriations and a lot of the information in support of appropriations is based on inputs as opposed to directed to results. I think a dialogue about that might help us decide that we could drop some information and add some other information. Really it would have to be in a dialogue as to what's most relevant. We have our own ideas about that.

That's another part of the dialogue, quite apart from and perhaps in parallel with what we're talking about in terms of accrual budgeting. There's still a tremendous amount of information there, and I think we can do a little better at being relevant if we.... Part of it is an education process.

The Chair: Yes. The problem will always be how to make a telephone book look like something other than a telephone book.

Mr. Andrew Lieff: Exactly.

The Chair: Thank you for you input.

Colleagues, were there any final matters?

Thank you very much, Mr. Neville, and your colleagues, Mr. Lenihan, Mr. Lieff, and Mr. Morgan. We appreciate your input.

We're adjourned.