Speaking Notes for Charles-Antoine St-Jean

Speaking Notes for Charles-Antoine St-Jean

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Speaking Notes for Charles-Antoine St-Jean

Comptroller General of Canada

at the 20th Annual International Conference

of the

International Consortium on Governmental Financial Management

Miami, Florida

May 9, 2006

Good morning, ladies and gentlemen.

And in honour of the international nature of this conference: Buenos días y bienvenido. Bonjour et bienvenue.

I’d like to congratulate the International Consortium on Governmental Financial Management as you celebrate your twentieth annual conference.

This is a fitting occasion for all of us to look back at the achievements of the last twenty years and reflect on the lessons we’ve learned. It’s also an opportunity to look ahead and chart our course for the next twenty years.

Speaking from the Canadian perspective, there have been major changes in public sector financial management. In fact, change is the rule, not the exception.

If I explained all the various changes to our financial systems, I’d have to talk about the Expenditure Mangement System, or EMIS, and about the PPBS, the PEMS, then the ZBB and ZBOP, MYOPs, and even, apparently SOBs (single operating budgets).

Today things have changed again in financial systems, and we talk about PAAs, RMAFs and RBAFS.

Don’t worry: I won’t try to explain all of those acronyms, even if I could.

I just mention them to make the point that financial management has been in constant evolution over the last twenty years.

That’s not a bad thing. Rather, it reflects the efforts of the public sector financial community to adapt to new demands and find better ways of doing things.

It shows a commitment to continuous improvement.

And that commitment is vital because the work you do is so important.

All of us who work in public sector financial management have an opportunity, each and every day, to promote the strategic, ethical, and efficient use of taxpayers’ money.

And this, is turn, has a real impact on the well-being of the citizens we serve.

So it’s important to maintain our commitment to continuous improvement.

This morning, I’d like to talk about some of the broader influences that have affected how we work, and then I’d like to focus on a few significant accomplishments in financial management in the Government of Canada.

From there I’ll talk about the way forward, the challenges, the focus on accountability, and give you a very brief overview of some of the main initiatives that my office is engaged in to strengthen financial management and internal audit.

Looking Back

Technology

In looking backwards, I’d like to start by going more than thirty years back.

I’m dating myself by telling you this story, but I’ll take that chance because it is an interesting example of how very much things have changed in the world of finance.

When I started my university studies in accounting in 1972, my parents gave me a wonderful gift. A gift that every accounting student in that day and age would be excited to receive: I’m talking about a pocket calculator…and it cost as much as a fully loaded personal computer today.

Does anyone still remember those?

By comparison, today’s students can hardly imagine starting university without a personal computer.

They arrive on campus with cell phones, blackberries, and iPods. They are permanently wired in.

On the government front, we didn’t start seeing personal computers in departments until about twenty years ago. And even then, only a few were made available in each department – for staff to experiment with and learn on.

Ten years later, in the mid-nineties, the Internet was peaking peoples’ interest, but its use was not widespread.

It’s hard to believe that’s only ten years ago.

Transparency

Before the use of the computer became so prevalent, it was harder to gather information about government.

The public service worked in a more opaque environment.

Twenty years ago, it was much harder for the public to get information.

In 1983 Canada adopted the Access to Information Act. Prior to that there was no statutory protection of the right to access government information.

Before the Internet and extensive use of e-mail, we had fewer opportunities to see what our colleagues and counterparts in other parts of the world were doing.

It’s fair to assume we were facing many similar challenges, but there was far less sharing of best practices, and fewer opportunities to learn from one another.

The widespread use of the Internet has made government much more open.

And it has had a huge affect on the way we manage information, including financial information.

Accomplishments

We’ve certainly come a long way from twenty years ago when systems were largely paper-based.

And not surprisingly, processes were cumbersome, time-consuming, and labour intensive.

Of course, over the years, enhancements were made, new approaches were implemented, and the financial, planning and reporting processes became more useful, productive, transparent and informative.

In short, we’ve seen constant improvement over the last twenty years. Let me mention a few examples.

Public Accounts

One key accomplishment came in 2003 with the adoption of accrual accounting for the preparation of the Public Accounts of Canada.

These accounts reflect the financial position of the Government of Canada at year-end, as well as the results of operations and changes in net debt and cash flow.

In addition, they contain details of expenses and revenues for all departments along with a significant amount of supplementary financial information and analyses.

With accrual accounting we can now really show the full scope of government—the resources, obligations, financing, costs, impacts of activities, as well as the costs of consuming assets over time.

And this more complete picture makes it possible for Parliament to hold the government more accountable for the stewardship of its assets.

It also helps improve decision-making within departments by making managers more aware of the assets under their control.

It highlights the need to consider such issues as maintenance requirements, replacement policies, the identification and disposal of excess assets, and risks such as loss caused by theft or damage.

It’s certainly not an easy transition from modified accrual accounting to full accrual accounting, but I think the benefits outweigh the costs.

The government’s financial statements are audited by the Auditor General of Canada. She then provides an independent opinion to the House of Commons.

And I’m glad to report that last year, for the seventh consecutive year, the Auditor General gave an unqualified opinion (i.e. a “clean” audit opinion) on the Government's financial statements.

Which gives us a lot of credibility in dealing with financial institutions, both domestically and internationally.

Balanced Budget

Another positive piece of news on the financial front is that for eight consecutive years Canada has been in the fortunate position of running a surplus.

It hasn’t been easy. It’s the result of a dedicated, concerted effort to balance our books.

It’s a fortunate position to be in, but there are ongoing pressures to reduce expenditures.

In fact, in the 2006 Federal Budget of Canada, which was delivered last week, the Government committed to restraining the rate of spending growth.

This decision means that departments will be looking to the financial community to support spending reductions by identifying savings and promoting a focus on value for money.

Transparency

Now let’s look at some of the progress we’ve made in the area of transparency.

Transparency has become a defining word for government, and financial reporting is no exception. The public we serve is keen to know how tax dollars are spent.

Today, for example, we proactively disclose information on hospitality and travel expenses, contracts over $10,000 and reclassification of government jobs. This information is posted on departmental websites and is readily available to anyone.

We are now working towards proactive disclosure of government grants and contributions.

As a first step, departments and agencies will be required to disclose grants of $25,000 or more their websites. Once we’ve made sure our systems work effectively, they’ll be required to disclose grants and contributions of $10,000 or more.

More specifically, they’ll have to identify the name of the recipient, the recipient’s location, the date of the award, the purpose, and the grant or contribution value.

Another important source of information about departmental operations are the annual reports submitted to Parliament.

Every year, departments and agencies prepare individual expenditure plans, which are called the Report on Plans and Priorities.

These reports provide the details of planned expenditures over a three-year period. They outline the department’s main priorities and indicate the expected outcomes, the programs to be carried out, and the planned results.

In other words, they link financial resources to results.

At the end of the fiscal year, each department produces its Departmental Performance Report – anaccount of the results achieved as measured against the expectations set out in the Report on Plans and Priorities.

Taken together, these departmental reports are a vital tool not just for departments to plan, monitor and evaluate their activities, but also for reporting performance results to Parliament, and to Canadians

Also this year, for the first time, the performance reports will include the departments’ unaudited financial statements. Eventually these statements will be audited.

My office has a project underway at the moment aimed at ensuring that all large departments’ financial statements are audited by the Auditor General of Canada by 2009.

It’s a big project, and we are working closely with departments to help them get ready to sustain an effective audit.

In the area of transparency, it is also worth mentioning the role of the Office of the Auditor General.

The Auditor General of Canada provides Parliament with independent information, advice and assurance to help hold the government to account for its stewardship of public funds.

In addition to looking at the accuracy of financial statements, the Auditor General was given a broader mandate in 1977 to examine how well the government manages its affairs.

For example, the Office conducts value-for-money audits.

These audits look at whether programs are delivered economically and efficiently, and whether measures are in place to determine their effectiveness.

To quote the Auditor General, the job of the Office is “to give parliamentarians independent and objective information that helps them hold the government accountable for how it spends public money.”

The Office also plays an important role in maintaining the confidence of Canadians in government. In fact, our current Auditor General, Sheila Fraser, is sometimes described as a Canadian folk hero.

Looking Ahead

That’s a brief snapshot of where we’ve been and where we are now when it comes to financial management in the Canadian public sector.

Now, let’s turn our attention to some of the challenges ahead.

In doing that, I’ll limit my comments to the following topics: demographics, managing information, and rebuilding public trust.

Let’s start with the demographics, where the challenge facing us is a very real one.

Like many other countries, Canada faces an aging population.

This is due to two factors: low birth rates and improved life expectancy.

It’s expected that the ageing of the population will accelerate around 2010 as the baby boomers begin turning 65. We are in much better position than our European and Japanese friends, but we must focus our attention on this issue.

Given projected retirement rates over the next few years, we’ll have to do some serious recruiting to compensate for the expected attrition.

Recruiting youth and recent graduates is key to workforce renewal.

So we need to understand this demographic group better, and figure out what they are looking for in a workplace and a career.

Within the financial community, we face a particularly challenge when it comes to finding accountants.

It’s been describe as a “war for talent.”

Accountants are in high demand as private and public sector scandals in North America have led to more oversight, new rules and increased complexity in financial management practices.

The Sarbanes Oxely Act is a case in point. Companies are looking for people with specialized experience and expertise to help them comply with the new regulations and requirements.

If we can’t offer the salaries that the private sector can, we need to make sure that we offer something comparable in terms of security, benefits, professional development and career advancement.

My office is working on a number of initiatives to help make sure we can both attract and keep the skilled finance and audit professionals we need.

Managing Financial Information

A second challenge we need to deal with is managing information.

The revolution in technology has made it possible for us to gather lots more information, but we haven’t quite figured out how to deal with the overload of information.

In the case of the public sector financial community, our challenge is to produce financial information that makes sense to Parliament and to Canadians.

For example, if the Departmental Performance Report that I mentioned earlier is the instrument departments use communicate with Parliament, then our job is to make sure the communication is as clear as possible.

Parliament receives literally hundreds of statutory reports from over 200 government organizations. In fact, the list of these reports alone runs to over 100 pages.

There are over 90 Reports on Plans and Priorities and Departmental Performance Reports, as well as reports from some 40 Crown entities.

It sometimes difficult to link plans to results, and to determine the links between the different kinds of accounting methods used.

We know from consulting with Parliamentarians that they want simpler, more integrated information, with more context and analysis. And they want to see better links between programs, resources and results.

So we need to think less about providing data, and more about providing information.

And not just to Parliamentarians. Canadians also want to know how their tax money is being spent.

Building Trust in Government

Which brings me to the last subject I want to focus on, and that is gaining and protecting public trust in government.

The Government of Canada recently introduced legislation entitled the Federal Accountability Act, and an action plan to support the legislation.

The overarching intent of the proposed legislation is make sure that everyone in government is held responsible for their actions – from the Prime Minister and Ministers to public servants and organizations that receive government funding.

The Prime Minister has said he want to build a “culture of accountability.”

The Federal Accountability Act and Action Plan contain dozens of measures, and amendments to about 70 statutes. They touch virtually every part of government.

Let me give you a few examples.

In the area of political reform, the Act would limit individual donations to a registered political party to $1,000.

It proposes to ban contributions from corporations and unions, and prohibit cash donations of more than $20.

The Act also sets out stronger powers for the Auditor General.

She will be given authority to inquire into the use of funds that individuals, institutions, and companies receive under a funding agreement with any federal department, agency or Crown corporation.

There’s also protection for whistleblowers in the proposed Act.

The proposed changes will provide even further protection to allow Canadians to report wrongdoing in the federal government without fear of reprisal.

And public servants will have direct access to the Public Sector Integrity Commissioner to report wrongdoing in the workplace.

Now accountability is not only about more rules.

In fact, the government recognizes that too many rules can paralyse the bureaucracy. It can also make it difficult for outside organizations that deal with the government.

With this in mind, we’ll be working to identify barriers to access for recipients of government grant and contribution programs. We want to find ways to work together smoothly, and effectively.

We’ll also be reviewing our financial management policies.

Our aim is to determine whether they promote effective control, accountability and transparency.

Here too, we want to avoid unnecessary or unproductive requirements for federal departments.

In other words, we don’t want more rules, we want the right rules.

In fact the Action Plan commits the government to reducing management policies by up to half.

These are some of the main aims of the Federal Accountability Act. Many of them complement the ongoing work that my office has been engaged in with a view to strengthening financial management and internal audit.

In the Office of the Comptroller General of Canada, we will be continuing with a number of initiatives to prepare ourselves for the challenges that lie ahead.

For example, we are moving forward with implementation of the new Policy on Internal Audit. It is recognized internationally as best-in-class for the public sector.

One important element of the policy is the establishment of independent audit committees. We will now have citizens with financial expertise, from outside government, serving as members on our audit committees.

We’ll work to significantly strengthen financial management systems in departments and central agencies, including systems for accounting, asset management, procurement.

We’ll continue to assist departments in preparing for the auditing of financial statements.

We’ll keep the focus on developing a new, strengthened role for departmental comptrollers.

We’ll be active on the recruitment and development side as well. Making sure we can attract the people we need, with the right skills and experience to help us meet increasingly stringent standards.

Managing Expectations