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4.3. Budget execution

4.3.1. Apportionment of expenditure authority

At the beginning of each fiscal year, following a directive issued by the Treasury Board, the deputy head of each department prepares a division of the appropriation into allotments and submits the division to the Treasury Board (FAA, Art. 31). Where a division is approved by the Treasury Board, the allotments shall not be varied or amended without the approval of the Board.

4.3.2. Cancellation of budget authority and other in-year expenditure controls

There is no statutory provision to grant power to the executive, notably the Treasury Board, to cancel appropriations approved by Parliament. However, the FAA provides the Treasury Board with the authority to freeze appropriations approved by Parliament. When the government considers it prudent to reduce or cancel part of any appropriation, supplementary Appropriation Acts also may be used.

4.3.3. Emergency spending, excess spending and contingency funds

The law does not regulate the use of the contingency reserve fund established by the government in each year’s budget as a result of prudent economic assumptions. According to a Cabinet decision, the fund can only be used to compensate for forecasting errors and unpredictable events. It may not be used for new policy initiatives. If recourse is not made to the contingency reserve funds, they are automatically applied to deficit reduction in their entirety.

When a payment is urgently required while Parliament is not in session and there is no available appropriation for payment, the Governor General in Council, on the report of the President of the Treasury Board, may, by Order, direct the preparation of a special warrant authorising payment to be made out of the Consolidated Revenue Fund (FAA, Art. 30). A special warrant is deemed to be an appropriation for the fiscal year in which the warrant is issued. Every such warrant shall be published in the Canada Gazette within 30 days, and a statement showing all warrants issued and the amounts of those warrants shall be laid by the President of the Treasury Board before the House of Commons within 15 days after the commencement of the next session of Parliament (Art. 30). Where a special warrant has been issued, the amounts appropriated shall be deemed to be included in the Appropriation Acts (Art. 30).

4.3.4. Transfer and virement of appropriations within the year

Where a division of appropriation into allotments is approved by the Treasury Board, the allotment is not permitted to be varied or amended

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without the approval of the Treasury Board (FAA, Art. 31). In practice, the operation of transfers between appropriation lines depends on the nature of appropriations. Transfers between operating expenditures are permitted provided Parliament is notified, whereas transfers between operating expenditures, investment and programme funds are possible only with parliamentary approval. Appropriations can be reallocated from one programme to another with the approval of the Treasury Board.

4.3.5. Cash planning and management of government assets and debt

The FAA requires the Department of Finance to publish annually a debt management report and a debt management strategy. The debt management report provides a comprehensive record of the federal government’s debt operations in the previous fiscal year. It must be tabled in Parliament within 45 sitting days of the tabling of the public accounts (Art. 49). The debt management strategy provides information on the federal government’s planned management of debt for the coming fiscal year. It must be tabled before the end of the current fiscal year (Art. 49). Departments are required to keep accounts to show clearly the status of their assets as well as direct and contingent liabilities of the government (Art. 63). Data on financial assets, including international reserves, are included in the public accounts and the debt management reports.

4.3.6. Internal audit

Following directives issued by the Treasury Board, the deputy head is required to ensure, by an adequate system of internal control and audit, that the allotments provided are not exceeded (FAA, Art. 31). The deputy head shall establish and maintain records respecting the control of financial commitments chargeable to each appropriation (FAA, Art. 32). Ministries and agencies are required to audit and evaluate their programmes and operations so as to assess whether the management framework is well designed and working as intended. Internal audit policy and standards provide departments with a basis for carrying out cost self-assessment and improving quality.

4.4. Government accounting and fiscal reporting

4.4.1. The accounting framework

The FAA and regulations of the Treasury Board govern the accounting framework. The FAA states that, subject to regulations of the Treasury Board, departments are required to keep accounts so as to show expenditures made under each appropriation, revenues, and other financial transactions into and out of the Consolidated Revenue Fund (Art. 63). Without changing legislation,

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the government has presented its financial statements on a full accrual accounting basis since 2003.

4.4.2. Government banking arrangements

The law requires that all public money be deposited to the credit of the Receiver General, the chief financial officer of the federal government, who receives all revenues from the government and deposits them in the CRF (FAA, Art. 17). The FAA empowers the Receiver General to establish accounts for the deposit of public money and the Treasury Board to make regulations prescribing the manner in which public money shall be paid to the credit of the Receiver General.

4.4.3. In-year reporting

There are no legal provisions requiring the government to publish in-year reports on budget execution. However, throughout the year, monthly financial statements are published in the Fiscal Monitor. Results for each month and the year to date are compared with the same amounts during the same time period of the previous fiscal year.

4.4.4. Annual accounts and reports

Annual public accounts are required to be prepared by the Receiver General for each fiscal year and to be laid before the House of Commons by the President of the Treasury Board on or before 31 December following the end of that fiscal year (FAA, Art. 64). The public accounts need to be in such form as the President of the Treasury Board and the Minister of Finance direct. By law, the accounts are required to include:

●A statement of the financial transactions of the fiscal year, the expenditures and revenues for the fiscal year, and such assets and liabilities that, in the opinion of the President of the Treasury Board and the Minister of Finance, are required to show the financial position of the government at the end of the fiscal year.

●Other documents and information relating to the fiscal year as are deemed necessary by the President of the Treasury Board and the Minister of Finance to present fairly the financial transactions and the financial position of the government or as required by the FAA or any other Act (FAA, Art. 64.2).

●Contingent liabilities of the government.

●The opinion of the Auditor General on the accounts (AGA, s. 6).

In practice, the public accounts are in two volumes and provide a comprehensive report of budget execution. The accounts show the sources and uses of funds for each appropriation. The sources are broken down by

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several groupings – the main estimates, the supplementary estimates, adjustment and transfers, and transactions of previous years. The uses of funds are split between those used in the current year, lapsed or overexpended, available for use in subsequent years and used in the previous year. Volume I contains the summary report and financial statements. It provides a comparison of revenues and expenses in the budget. Volume II contains details of revenue and expenditure. It reports on the use of spending authorities (estimates) and reconciles expenditures (spending) to expenses (accrual).

The Minister of Finance voluntarily (i.e. there is no legal requirement) provides an Annual Financial Report to Parliament, which provides an ex post report on budget implementation. This is a short statement and is supplemented by condensed financial statements of government transactions. These financial statements are also audited.

4.4.5. Reporting of fiscal intentions

There are no statutory provisions requiring the government to report longand medium-term fiscal strategies and objectives to Parliament and the public. Unlike other Westminster countries, Canada has not adopted a legal approach to comprehensive disclosures (compare the Fiscal Responsibility Act of New Zealand). However, the budget and the Economic and Fiscal Update provide Parliament with the shortor long-term fiscal intentions of the government.

4.5. External audit

4.5.1. Managerial, financial and operational independence

The Auditor General Act 1977 (AGA) governs the general principles and procedures for external audits by the Office of the Auditor General. The AGA does not specify any parliamentary involvement in the appointment of the Auditor General. This position is appointed by the Governor General in Council (i.e. the head of the executive) for a non-renewable ten-year period and the holder may be removed by the Governor General in Council on address of the Senate and House of Commons (AGA, Art. 3). Each year, the Auditor General prepares an estimate of the sums that will be required to fulfil the responsibilities of the office. The provisions of the FAA with respect to the division of appropriations into allotments do not apply in respect of appropriations for the office of the Auditor General (FAA, Art. 20). The office has the freedom to recruit its own staff and set the terms and conditions of employment for staff in accordance with Article 15 of the Public Service Employment Act.

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4.5.2. Institutional coverage of audits

The Auditor General is required to examine several financial statements, as specified in the FAA (Art. 64) and any other statements that the Treasury Board or the Minister of Finance may present for audit (Art. 6). These include a statement of the financial transactions of the fiscal year, expenditures and revenues for the fiscal year, and the assets and the contingent liabilities of the government (FAA, Art. 64).

The Office of the Auditor General audits most areas of government activities, including:

●Federal government departments and agencies ranging from small boards to large, complex organisations whose activities extend across Canada and overseas.

●Crown corporations (for example, the Canadian Broadcasting Corporation, the Royal Canadian Mint). Under the FAA, most Crown corporations must undergo a value-for-money audit every five years (in addition to an annual audit of their financial statements).

●Departmental corporations.

●Areas of responsibility shared by more than one department, such as immigration.

●Issues that affect the entire government, for example, personnel matters or the use of computers.

4.5.3. Types of audit

Pursuant to the AGA (Arts. 17 and 7.2.f) and the FAA (Part X), the Auditor General conducts several types of legislatively-authorised audits:

●Performance audits of departments and agencies. These examine whether programmes are run economically, efficiently and with due regard for their environmental effects, and also whether the government has the means to measure their effectiveness.

●Attestation audits of the summary financial statements, to verify that they represent fairly the government’s overall financial situation. Only the Government of Canada financial statements contained in section 2 of volume 1 of the annual accounts is audited. The other financial information is not explicitly audited although the Office of the Auditor General may look at aspects of it during the course of its work.

●Financial audits of Crown corporations, territorial governments and other organisations to determine whether their financial information is presented fairly and whether they comply with legislative authorities.

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●Special examinations of Crown corporations to determine whether their systems and practices provide reasonable assurance that assets are safeguarded, resources are managed economically and efficiently, and operations are carried out effectively.

In addition, the Auditor General reports annually on the extent to which departments are meeting the objectives and implementing the plans set out in their sustainable development strategies, which they have been required to prepare under amendments to the AGA in 1995.

4.5.4. Powers of investigation

The AGA contains provisions and powers for investigation (Art. 13). The Auditor General is entitled to free access, at all convenient times, to information that relates to the fulfilment of his/her responsibilities, and to require and receive such information, reports and explanations as he/she deems necessary. He/she may station persons employed in the Office of the Auditor General in any department, and that department shall provide the necessary office accommodation. Furthermore, the Auditor General may examine any person on oath for matters pertaining to any account. For the purpose of any such examination the Auditor General may exercise the powers of a commissioner specified under Part I of the Inquiries Act.

4.5.5. Reporting obligations and publication

Since 1879, the principal instrument for reporting has been the Auditor General’s Annual Report to the House of Commons (AGA, Art. 7). The observations of the Auditor General on the government’s financial statements are also included in the public accounts and complement the Auditor General’s annual audit report. The Auditor General may also make special reports, including:

●where the Auditor General considers that the matter is so important and urgent that he/she should not delay in reporting it until the presentation of the next annual report (Art. 8);

●where he/she considers that amounts provided for the office in the estimates submitted to Parliament are inadequate to enable him/her to fulfil the responsibilities (Art. 19).

Since the amendment of the AGA in 1994, the Auditor General may produce up to three reports per year in addition to the annual and special reports (Art. 7). In any given year, these reports contain the results of:

●Comprehensive audits of federal departments and agencies, and of issues that cross department lines.

●Government-wide audits.