The Honourable Scott Brison

President of the Treasury Board

Government of Canada

House of Commons

Ottawa Ontario K1A 0A6


Dear Minister

Congratulations on your re-election to the House of Commons and your appointment as President of the Treasury Board.  We welcome your appointment to this key Cabinet position and are confident you will serve it well.  

In your election platform, your party promised to restore transparency and integrity to the budgetary process.  One of the commitments was to ensure consistency between the Estimates and the Budget/Public Accounts. Currently, there is a difference of about $40 billion between the two sets of spending numbers. We, along with others, have raised this issue that needs on numerous occasions.  The present inconsistencies between the Estimates, Public Accounts and Budget is confusing and misleading to Parliamentarians, financial commentators and the public at large.


In January 2013, the Treasury Board Secretariat released a “Report on the Assessment of Departmental Accrual Budgeting and Appropriations”. It concluded that the issues were too complex, too costly and would lead to more confusion among Parliamentarians. It recommended that the Estimates remain on a modified cash basis of accounting.   As a former member of the House Finance Committee, we are sure you would find this conclusion somewhat surprising, given earlier conclusions of the Finance Committee on the usefulness o Estimates information.

We strongly encourage you to bring clarity to this issue.  We fully recognize that this will not be easy and that complete harmonization may not be possible.  However, it is time for the Estimates to be reformed and be more consistent in coverage and accounting standards to those employed in the Budget and in the consolidated financial statements in the Public Accounts.

We have attached a paper outlining the issues as to how we see it.  We will be closely monitoring action in this area and hope that a satisfactory resolution will be in place for the 2016-17 fiscal year.

We would also urge you to work with the Minister of Finance to commit to a budget date no later than mid February. This would allow the Estimates to be based on the economic assumptions in the budget.

Sincerely yours:

C. Scott Clark                                                                                     Peter T. DeVries




      Consistency Between the Estimates and Public Accounts/Budget

If you ask the Minister of Finance or the President of the Treasury Board on how much the government intends to spend, you will get two widely different answers. In recent years, the difference between spending in the Budget/Public Accounts and the spending in the Estimates has been about $40 billion annually..  


The Budget is the most important policy document of the Government.  It primarily sets out the Government’s fiscal objectives for the upcoming five years, including forecasts of revenues, expenses and the balance (deficit/surplus).  The consolidated statements in the Public Accounts present the final audited financial results and compares these to the Budget’s forecasts for the year in question. 


The Estimates are of two types: the Main Estimates and Supplementary Estimates. The Main Estimates are tabled on or before March 1st, while the Supplementary Estimates are tabled throughout the course of the fiscal year.  Under the Financial Administration Act, expenditures made by the government require Parliamentary approval and this is done through the Estimates.  


The difference between the Budget/Public Accounts and the Estimates has been debated for several years.  Most of the discussion has been centered on the different accounting basis used. Although governments are considered sovereign entities, which can set their own accounting standards, the Budget and Volume I of the Public Accounts primarily follow the accounting standards recommended by the Public Sector Accounting Board (PSAB), which recommends the adoption of accrual accounting.


 Accrual accounting recognizes the effect of transactions and events in the period in which the transactions and events occur, regardless of whether there has been a receipt or payment of cash.  Accrual accounting recognizes a liability when the obligation or condition(s) underlying the liability is partially or wholly satisfied.  


In contrast, the Estimates do not follow PSAB’s recommended use of accrual accounting.  Instead, the Estimates use a modified cash basis of accounting, primarily recognizing expenditures when the payment is actually made. Volume II of the Public Accounts are primarily on a cash basis, comparing the Estimates approved by Parliament to what was actually spent.

In January 2013, the Treasury Board Secretariat released its long awaited “Report on the Assessment of Departmental Accrual Budgeting and Appropriations”. It concluded that the issues were too complex, too costly and would lead to more confusion among Parliamentarians. It recommended that the Estimates remain on a modified cash basis of accounting.  


However, the use of different accounting concepts accounts for only a small part of the difference between the Budget/Public Accounts and the Estimates.  We have identified three main sources of difference between the Budget/Public Accounts and the Estimates: accrual accounting (already discussed); the universe covered; and the lapse.



Table 1: Reconciliation Between the Estimates and Public Accounts: $ millions







Main and Supplementary Estimates






Sources of Difference






     Refundable Tax Credits



       Children Benefits






     Consolidated Specified Purposes Accounts



       Employment Insurance Benefits



       Employment Insurance Administration






     Consolidated Crown Corporations



     Internal expenses









   Accrual Adjustments



     Tangible Capital Assets



     Public Debt Charges



     External Revenues Netted Against Expenditures



     Canada Revenue Agency



     Provision for Valuation












   Lapse/Amounts For Use in Future Years






     Amounts for Use in Future Years









   Net Adjustments






Public Accounts



Numbers as originally published; totals may not added due to rounding


The table above attempts to quantify these differences for the fiscal years 2012-13 and 2013-14, using information contained in the Public Accounts.  Detailed Public Accounts data for 2014-15 are scheduled for release once Parliament resumes sitting. No attempt was made to compare the Estimates to the Budget as this would require forecast information from the Department of Finance. However,  presently, neither TBS nor Finance provides a reconciliation of the differences between the Public Accounts/Budget and the Estimates. The last time such a reconciliation was published was in the 2007 Budget.


Main and Supplementary Estimates include the authorities approved by Parliament. This is made of two parts: statutory programs under which authority for spending is granted through existing/enabling legislation and vote/appropriated spending for which Parliamentary approval is required each year. The final audited financial outcome is shown in the Public Accounts line.  The net difference between the two is $35.4 billion in 2012-13 and $37.6 billion in 2013-14.  The use of different universes accounts for virtually all of the difference between the Public Accounts and Estimates.

The universe covered by the Public Accounts/Budget is much more comprehensive than that of the Estimates. Under PSAB accounting standards, Refundable Tax Credits should be considered as part of spending rather than netted against tax revenue. Although the tax system is used to determine eligibility and the amount of the benefit, it does not affect a taxpayer’s overall tax liability. In other words, the tax system is used to deliver a spending program, not to determine one’s tax liability. For example, the Canada Child Tax Benefit is considered as spending in the Public Accounts and Budget but not in the Estimates. Refundable tax credits amount to about $15 billion a year.

The Public Accounts/Budget also includes the expenses related to Consolidated Specified Purpose Accounts, as the government yields ultimate control over these accounts (i.e. it sets the benefits, premium rates etc.). Under PSAB accounting standards, such control means that these expenses should be included as part of budgetary transactions. The Estimates exclude the activities of these accounts arguing that the benefits and administration costs are charged to the specified purpose accounts rather than to the department responsible for its stewardship. The largest of these programs is the Employment Insurance program - both benefits and administrative costs, totaling about $20 billion.  

The Public Accounts/Budget includes the gross financial transactions of consolidated Crown corporations, whereas the Estimates only include government transfers to appropriate-dependent Crown corporations. Again, given that the government exercises control over these Crowns, PSAB accounting standards recommend that they be included in the government universe. This reduces the Estimates by about $4 billion.

The above differences account for nearly the entire difference between the Public Accounts/Budget expenses and spending in the Estimates. There is no reason why the universe of the Estimates cannot be on the same basis as the Public Accounts and the Budget. By doing so, it would permit scrutiny by Parliament of important components of spending currently largely ignored.

Under accrual accounting, capital spending is amortized over its useful life, whereas under cash accounting, capital spending is accounted for as required. Under cash accounting, the cost of capital has a direct hit on the budgetary balance while under accrual accounting, it is spread over a number of years. The impact of this difference in accounting standards is relatively small. Yet most of the debate on the difference between the Budget/Public Accounts and Estimates has been centered on the treatment of capital.

The Estimates do not include the amortization of discounts on Canada and Treasury Bills and amortization of premiums and discounts on all other debts on public debt charges.  These are included in the Public Accounts/Budget.  This difference amounts to about $3.2 billion per year.

The Public Accounts/Budget include provisions with respect to certain liabilities, such as environmental liabilities, potential losses resulting from court cases, potential losses on loans and loan guarantees, etc. even though no cash payments have been made. In the Estimates, only the cash payouts are included. The net impact varies from year-to-year. This is a sensitive area, as a number of these liabilities are under negotiation and release of such information could affect the outcome. However, showing a net number rather than the individual components should protect the confidentiality of the individual components.

In the Public Accounts/Budget, an adjustment is made for taxes in dispute and likely not to be collected.  No such adjustment is included in the Estimates.  This amounts to about $4.0 billion per year.

The Public Accounts/Budget presents expenditures on a gross basis, whereas the Estimates reports spending on a net basis. For example, the Royal Canadian Mounted Police (RCMP) provides policing services to a number of provinces.  Charges for these services are netted against spending in the Estimates but included as part of “Other revenues” in the Budget. This lowers the Estimates by about $4.5 billion but raises the Public Accounts/Budget expenses by a comparable amount. Putting the Estimates on a gross basis provides a more comprehensive picture on the total costs of the program and allows for better oversight by Parliamentarians reviewing the Estimates.  Again PSAB recommends presenting expenses on a gross basis.

TBS has argued that there is an additional cost in presenting spending on the accrual basis of accounting. However, departments are required to present their spending plans on both a modified cash and accrual basis of accounting. As such, the information is readily available and would not represent an incremental cost.

Under the Financial Administration Act, departments and agencies can only spend funds/appropriations approved by Parliament. In order to ensure that they do not exceed their appropriations, they usually wind up spending less than what they were appropriated. To ensure effective financial management, departments and agencies are allowed to carry forward a certain portion of their operating budgets and virtually all of their unspent capital budgets.  In addition, there are other factors which could result in them spending less than appropriated, such as delays in implementing new programs, less than expected take up of new programs, etc.  As a result, departments and agencies always spend less than what they were appropriated, thereby resulting in a lapse. The lapse in recent years has averaged between 8% and 12% of total voted spending. About $2.0 billion of the annual lapse can be carried for use in future years.

The difference between the Public Accounts/Budget and the Estimates is much more than just the accrual of capital, which to date has been TBS’ prime reason for rejecting compatibility between the two sets of spending numbers. We strongly support putting the Estimates on the same accounting basis as used in the Public Accounts/Budget by adopting the accounting standards recommended by PSAB. This would eliminate the confusion between the Public Accounts/Budget and Estimates.  In addition, it would provide for more in-depth scrutiny of the Estimates by the respective Parliamentary committees.

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