Discussions were held in Ottawa, March–April 2001. The staff team, consisting of Messrs. Young (head) and Craig (FAD), met with officials from the Ministry of Finance, Treasury Board Secretariat (TBS) and Office of the Comptroller General (OCG), Statistics Canada, the Auditor General, and the Canada Customs and Revenue Agency (CCRA). It also met with staff of the Dominion Bond Rating Service (DBRS), financial market analysts, and officials from the provinces of Alberta and British Columbia.
There are 10 provinces, 3 territories, and approximately 5,500 local government arrangements in Canada; for details see Finances of the Nation, Canadian Tax Foundation, 2000. For details on general government statistics and its operations see the Fund’s Special Data Dissemination Standard (SDDS) for Canada http://dsbb.imf.org/country/can/ggobase.htm
Nonfinancial public enterprises and public financial institutions are referred to as commercial or enterprise Crown corporations in Canada; noncommercial Crown corporations are referred to as departmental or “appropriations-dependent” Crown corporations.
Using data from federal, provincial and local governments’ public accounts, as well surveys of universities, colleges, school boards, and health and social services institutions, Statistics Canada standardizes financial statistics for differences in cash and accrual accounting, the definition of the government sector universe, and the recording revenues and expenditures on a gross, rather than net, basis. See Financial Management System (FMS), Statistics Canada, Public Institutions Division, System of National Accounts, January 2001.
The Public Sector Accounting Board (PSAB) estimates that governments in Canada have adopted 80 to 85 percent of its recommendations for common accounting practices. See Survey of Government Accounting, Federal, Provincial & Territorial Governments, Public Sector Accounting Board, August 2000.
See CICA Public Sector Accounting Handbook, Canadian Institute of Chartered Accountants, March 1999.
For a discussion and reconciliation, albeit somewhat dated, of the differences between the public and national accounts measures of deficits and debt see “Measuring the Financial Situation of the Federal Government,” Quarterly Economic Review, Department of Finance Canada, September, 1989.
On the equity method of accounting, a government’s investment in a government business enterprise is recorded in its financial statements. On a modified equity basis, the equity method of accounting is modified only to the extent that the enterprise’s accounting principles are not adjusted to conform with those of the government (see CICA Handbook, section PS 3070). Use of the modified equity basis has the effect that a government’s budget balance is not affected by the timing of dividend payments from its Crown corporations.
The OECD’s Regulatory Checklist for Improving the Quality of Government Regulation, 1995.
Sections 151 and 152 of the Financial Administration Act (FAA).
See Crown Corporations and Other Corporate Interests of Canada, 2000, Treasury Board of Canada.
These programs were over $40 billion or 4 percent of GDP in tax and cash transfers in 2000-01. The transfers for equalization and territorial formula financing are unconditional. For the Canada Health and Social Transfer (CHST), provinces must adhere to national standards for health care under the Canada Health Act, including comprehensive scope, universal coverage, and portability; the federal government can withhold payments for user fees and extra billing.
The tax collection agreements and federal/provincial roles in income taxation are detailed in the paper’ Tax on Income’ which was included in the document “Administration of Provincial Taxes: New Directions,” January 25, 2000.
For the federal government, this will change with the adoption of full accrual accounting and the expensing of capital assets; the depreciated value of capital will be recorded as assets. The government had intended to move to full accrual accounting in the fall of 2002 with the release of its final audited financial statements for 2001-02. In the December 2001 budget, it was announced that the introduction of full accrual accounting would be delayed for at least a year; the government cited the need to verify and audit certain components of the information needed to move to accrual accounting as contributing to this delay.
Nonbudgetary or internal sources of financing can be significant; in 1998–99 nonbudgetary transactions resulted in a net source of funds of $8.6 billion or 1 percent of GDP for the federal government.
The main tax legislation at the federal level is the Income Tax Act, the Income Tax Application Rules, the Customs Act, the Customs Tariff Act, and the Excise Act.
Supplementary Estimates are used to obtain authority for revised spending levels that Parliament is asked to approve in an appropriations act, including expenditures required to meet contingencies; they also provide Parliament with information on changes to statutory expenditures. Supplementary estimates are a normal part of the process of obtaining parliamentary approval for changes to appropriations; they differ from a supplementary budget in that they do not involve a change in the fiscal policy stance.
For the federal government, contingent liabilities include loan guarantees for enterprise Crown corporations, contingent liabilities of consolidated Crown corporations, insurance and guarantee programs of the government, callable share capital for international organizations, liabilities for native land claims, and claims for pending and threatened litigation. Most provincial governments also publish annual data on contingent liabilities.
Some additional funds are also available for “Program Integrity” to meet shortfalls in funding that have arisen from periods of restraint and which are needed to ensure that programs are sustainable. The adjustments, generally small, require Cabinet approval on the basis of recommendations from the TBS.
There is a legal requirement in the FAA to present audited accounts to Parliament by December 31 following the fiscal year ending March 31 but the authorities have made an administrative decision to meet a September/October deadline.
Financial requirements or surplus correspond to the budget balance plus nonbudgetary transactions and constitute borrowings or retirement of market debt on capital markets.
The TBS also releases evaluation reports on selected performance issues during the course of each year and is piloting a mechanism by which up-to-date planning and performance information will be available on-line.
Concerns about the sustainability of the Canada Pension Plan (CPP) led to passage of legislation in 1998 to put the system on an actuarially sound basis. Contribution rates are gradually being increased from 6.4 percent of contributory earnings in 1998 to 9.9 percent in 2003 at which point the ratio of assets to expenditures is expected to remain constant over the long run.
See Dang, T.T., P. Antolin and H. Oxley (2001), “Fiscal Implications of Ageing: Projections of Age-Related Spending,” OECD Economics Department Working Papers No. 305.
OECD Best Practices for Budget Transparency, OECD, Public Management Service, September 2000.
Canada is a signatory to the World Trade Agreement on government procurement as well as the procurement provisions of the North American Free Trade Agreement. Governments in Canada also adhere to the provisions of the Agreement on Internal Trade. All three agreements require the use of the on-line electronic tendering service, MERX, for government contracts in excess of $2 million.
The federal government public service employment arrangements are set out in several pieces of legislation. The FAA empowers the Treasury Board to act as employer and to set job classification and employment standards. The Public Service Staff Relations Act governs collective bargaining. The Public Service Employment Act gives the Public Service Commission, an independent agency reporting to Parliament, responsibility for oversight of the appointment to the public service on the basis of open competition and the principle of merit. Responsibility for these policies is delegated to the heads of ministries and agencies, under the oversight of the Treasury Board and the Public Service Commission.
Ongoing revisions to the national accounts have made direct comparisons with the public accounts data of limited value. Statistics Canada will provide this information but only with a considerable lag.
Some of this information is available in the Main Estimates and Public Accounts, the latter within six months of the end of the fiscal year in each of the last two years, and providing the suggested data would need to take account of the interlinkages between the two sets of data.