ARCHIVED - Government Response to the Ninth Report of the Standing Committee on Public Accounts

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Recommendation 1

Decisions about accounting issues be based on accounting standards and policies not legal opinions.

Decisions regarding the accounting treatment of transactions for reporting in the government's financial statements are based on accounting standards and policies.  Decisions regarding the accounting for the use of spending authorities provided by Parliament involve the interpretation of legislation. While legal interpretations are influenced by accounting standards and policies, they must respect legislative provisions as provided in the Financial Administration Act.  In this regard, the advice of legal counsel is sometimes sought prior to making a decision.

Recommendation 2

The Treasury Board Secretariat issues a statement of agreement with the opinion of the Auditor General of Canada regarding the proper recording of the Canadian Firearms Information System II (CFIS II) delay costs in fiscal year 2003-04 and issues a clarification to ensure that this type of accounting error does not occur again.

The Government recognizes that this was a complex issue with differing interpretation and accepts the interpretations of the Auditor General of Canada and the support of this interpretation by the Standing Committee on Public Accounts.

The Policy on Payables at Year-End has been re-drafted as part of the Government of Canada's review of its financial management policies.  The Office of the Auditor General of Canada has been consulted during this process. In addition, all departmental Senior Financial Officers were surveyed at year-end so that any transactions requiring interpretation were brought to the attention of the Comptroller General of Canada.  This information was shared with the Office of the Auditor General of Canada and it is the Comptroller General's intent to repeat this exercise for 2006-07.

Furthermore, as required by the Federal Accountability Act, departments are in the early stages of forming their own independent audit committees.  One of the roles of these committees will be to enquire about and discuss the accounting and reporting related to transactions undertaken by the department.

Recommendation 3

The Treasury Board Secretariat develops a clear protocol for resolving disagreements on accounting standards and policies between the Comptroller General of Canada and Deputy Heads.

A protocol for obtaining advance audit opinions from the Office of the Auditor General of Canada on transactions has been established by the Comptroller General of Canada.

Policy proposals under consideration in the area of financial information and reporting would require the Chief Financial Officer of a department to seek advice in writing from the Comptroller General of Canada in cases where it could be reasonably expected that an accounting treatment of a transaction could lead to a material misstatement, an inappropriate application of authorities or a qualification in the external audit report.  Should the Comptroller General of Canada not agree with the proposed accounting treatment, this disagreement will be communicated in writing to the Deputy Head, the Secretary of the Treasury Board and the President of the Treasury Board. Deputy Heads, as accounting officers under the Federal Accountability Act, will make the final determination of the treatment in the departmental accountsasthey are responsible for the signing of these accounts.

Recommendation 4

The Comptroller General of Canada has the final word on the interpretation and application of accounting standards and policies within the Government of Canada.

As mandated by the Federal Accountability Action Plan, a committee of deputy ministers is reviewing and providing recommendations to strengthen and streamline the Treasury Board financial management policies.  The revised financial management policy suite will clarify the role of the Comptroller General of Canada in providing accounting policy direction.  This role would support Deputy Heads who, as accounting officers under the Federal Accountability Act, are accountable before parliamentary committees for signing departmental accounts and measures taken to comply with government policies.

Policy proposals under consideration would require that, in cases where the Comptroller General of Canada does not agree with an accounting treatment of a department, this disagreement would be communicated in writing to the Deputy Head, the Secretary of the Treasury Board and the President of the Treasury Board.

Recommendation 5

The Government of Canada continues its movement towards financial statements for all departments and agencies.  That the Treasury Board Secretariat provides the House of Commons Standing Committee on Public Accounts with a timeline for this project and reports progress in its departmental performance report.

The government already tables departmental financial statements in Parliament.  Starting with fiscal year 2005-06, departmental financial statements were published in the Departmental Performance Reports for all departments as defined in Schedules I, I.1, and II of the Financial Administration Act.  While the majority of these financial statements are unaudited at this time, work is underway, in consultation with the Office of the Auditor General of Canada, to enable the audit of the departmental financial statements commencing with larger departments.

Recommendation 6

The Auditor General of Canada be the external auditor for departmental financial statements.  That the Office of the Auditor General of Canada be given adequate funds and, if required, a clear legislative mandate to do so. Parliamentary appropriations should be included in the audit program of those statements.

It is the intent of the government to have departmental financial statements, audited by the Office of the Auditor General of Canada.  It is the view of the government that current legislation permits the Auditor General of Canada to perform this work and discussions between the Office of the Comptroller General of Canada and the Office of the Auditor General of Canada have commenced.  At present the Office of the Auditor General of Canada is providing audit opinions on some departmental financial statements.  It is also recognized that increasing the number of departmental financial statements audited by the Office of the Auditor General of Canada may require an increased budget for the Office of the Auditor General of Canada.

Recommendation 7

The Royal Canadian Mounted Police records CFIS II development and delay costs against annual appropriations as they are incurred.

For the year ended March 31, 2006, the Office of the Auditor General of Canada reviewed and accepted the accounting treatment for costs related to this contract. On April 27, 2006, prior to the Service Effective Date of the contract, the government issued a stop work order on the part of the contract related to the development of the CFIS II system.  In the event that future costs are incurred in relation to the CFIS II, they will be recorded and reported as required by Treasury Board policy and charged to appropriations as incurred.

Recommendation 8

If it becomes apparent that there was a failure to comply with Treasury Board's Policy on the Management of Government Information, serious sanctions be imposed, up to and including dismissal from the public service.

The Treasury Board Policy on the Management of Government Information requires that decisions and decision processes be documented.

The Treasury Board Policy on the Management of Government Information states that federal institutions must actively monitor management practices and controls, take remedial action where significant deficiencies are encountered or improvements are needed, and inform the Treasury Board of Canada Secretariat of significant management concerns in a timely manner.  Policy proposals under consideration would further clarify that Deputy Heads are accountable for ensuring that decisions and decision-making processes are documented to account for and support the continuity of departmental operations.