To determine the origin of this accounting error, we examined the adequacy of the accounting for CFIS II costs incurred in 2002–03 and. We reviewed the accuracy of the information reported to Parliament by the Canadian Firearms Center in the department's performance report and in the Public Accounts of Canada (Volume II). In our view, this decision was inconsistent with the government's policy on year-end payables (PAYE) and accounting for appropriations, as stated in Volume I of the Public Accounts of Canada.
On the basis of these three simple principles - in which the Parliament's control over the state treasury is located - the government annually lays in the House its estimates of the spending plans for each federal. The House of Commons claims its privilege on the basis of section 53 of the Constitution Act, 1867, which has also remained unchanged since Confederation. Essentially, Parliament's control of the public purse lies in the House's ability both to limit government spending for the year on each identified area of activity and to hold the government accountable for meeting those spending limits.
The financial role of the House of Commons does not end with voting provision or authorizing measures to raise revenue. This explanation of the financial role of the House of Commons in paragraphs 4 and 6 is based on Marleau, Robert; and Montpetit, Camille; 2000. They are also responsible for the accuracy and completeness of the departmental financial results reported in their departmental.
The purpose of our audit was to assess the appropriateness of the Government's accounting of CFIS II costs in 2002-03 and in 2003-04 and the Government's management of the decision not to request additional funding through supplementary estimates in 2003-04.
Observations
- Chronology and actions. In order to understand how all of the key decisions with respect to expenditure reporting were made, we looked
- Chronology and actions. The Canada Firearms Centre was established as a separate department in April 2003, reporting to the
- No debt incurred for services rendered before the fiscal
- Government also considered terminating the contract. Treasury Board Secretariat officials also told us that at the time, termination of
The first error occurred in 2002-2003, when the Department of Justice did not record any CFIS II costs incurred in that year as part of its expenditures against the Department's appropriations. In 2003-2004, when the Center became aware of unrecorded CFIS II costs in 2002-2003, it sought advice from the Finance Council Secretariat on the correct accounting treatment of these costs. 39 million in 2002-03 expenditures, actual spending by the Canadian Firearms Center would be $117.3 million.
For this reason, and as CFIS II costs continued to rise unexpectedly, the Center became concerned that if it were to record all CFIS II costs incurred during 2003-2004, it would exceed the approved appropriation. At the same time, the Secretariat's accounting officers were asked to look for an accounting approach that would avoid the need to record all CFIS II costs incurred in 2003-2004 and thereby, if possible, avoid the need to prepare additional estimates to serve. Senior accounting officers of the Treasury Board Secretariat continued to insist that all CFIS II costs and other estimated liabilities incurred in 2003-04 should be recorded and deducted from the Centre's approved allocation for that year.
A meeting was held in mid-February 2004 to discuss whether the Center should record all CFIS II costs incurred that year and whether to recommend that his Minister submit additional estimates as a result. Ultimately, it is the responsibility of the Center Commissioner to decide whether to recommend to the Minister for PSEPC that additional assessments be submitted, and the Commissioner told us that on the basis. The Center also disclosed the existence of an unrecorded liability in its Departmental Performance Reports for 2003-04 and 2004-05 (see paragraphs 1-3).
In February 2005, TB Ministers granted effective project approval for the redesign of the Canadian Firearms Information System CFIS II and a related contract amendment. Our opinion is supported by our analysis of the government's arguments in the following paragraphs. Accordingly, the contractor agreed that it would do extra work on CFIS II and incur delay costs at the behest of the Center and of PWGSC, the contracting authority.
Treasury Board Secretariat officials told us that they do not believe that the agreement is in principle a legally binding agreement because it was only evidenced by a Record of Decisions, signed by PWGSC alone and by none of the other parties— the Center and the contractor do not. 2 of the CFIS II contract, signed on 23 December 2003 (see Extract 4), clearly recognized the agreement in principle. We do not agree with this argument because it disregarded and contradicted the existence of the requirements of the Treasury Board's LBS policy.
In our view, such a significant change in interpretation of the FAA and a Treasury Board policy should have been immediately reflected in government practices. Treasury Board Secretariat officials relied on that section of the PAYE policy to justify recording the $21.8 million liability as a central offset in the summary financial statements of the Public Accounts of Canada, prepared on a full accrual basis of accounting, rather than vs. Appropriation of the center.
Conclusion
Throughout the period in question, Treasury Board of Canada Secretariat staff, including those in the Office of the Comptroller General, worked closely with officials from the Canada Firearms Center and the Department of Justice. This collaboration was necessary to ensure a clear understanding of the facts and applicable legal and policy requirements so that informed recommendations and decisions could be made. The scale of the discussion and review reflected the overriding need to ensure that all legislative authorities were fully respected.
However, the Secretariat wishes to note the steps and considerations that were taken into account, which led to a different interpretation of the legislative and political requirements in this area. The Center sought advice from the Treasury Board Secretariat on the appropriate accounting for the CFIS II contract in January 2004. Accounting policy advice was provided on the application of the TB policy on year-end debt (PAYE) based on.
The Comptroller General met with officials from the National Audit Office as part of the 2004 audit of public accounts to discuss the accounting treatment of the CFIS II contingent liability. The National Audit Office subsequently announced orally that it had no problems with the accounting of this case. Regarding the ongoing accounting of development costs, we will review the matter with the center and the National Audit Office to ensure correct accounting treatment in the public accounts for the end of 31 March 2006.
The Comptroller General concluded a protocol with the Office of the Auditor General for "preliminary decision making on the audit opinion", whereby in writing. The effective date of the new internal audit policy on April 1, 2006 will provide the Office of the Auditor General and departments with a timely forum for discussion. The Federal Accountability Action Plan requires that the results of the review be submitted to the Chair of the Finance Council by the end of the 2006 calendar year.
Fourth, bringing a greater degree of accuracy and transparency to the government's accounts. The Comptroller General has launched a three-year initiative to have all financial statements of the largest departments and agencies audited annually by March 31, 2009. In conclusion, the Secretariat recognizes and accepts the Auditor General's position on these errors and is taking appropriate and far-reaching measures to minimize recurrence of these circumstances.
About the Audit
We expected that if there was a reasonable possibility that expenditure incurred in pursuit of the objects of a vote would exceed the permitted limit, the government would seek supplementary estimates in accordance with the principle of parliamentary control of the public purse. We expected that all significant decisions made and key meetings held by government officials would be properly documented in written records, in accordance with the Treasury Board's policy on the management of government information.
