Budget 2000
Ministry of Finance and Corporate Relations
Honourable Paul Ramsey, Minister
Reports
This electronic version is for informational purposes only.
The printed version remains the official version.
  Report E: IMPROVING BUDGET TRANSPARENCY
AND ACCOUNTABILITY:
IMPLEMENTATION OF THE BUDGET PROCESS
REVIEW PANEL RECOMMENDATIONS
 

Background

A year ago, the Auditor General made a number of recommendations to improve British Columbia's budgeting and Estimates process.

One of those recommendations was that the government seek expert advice on legislation to reform the governance of the budget and Estimates process. In response, the Minister of Finance and Corporate Relations established the Budget Process Review Panel in April 1999, chaired by Doug Enns, FCA. The panel's mandate was to review "input to the budget process, scope of the budget and information provided in the budget plan and actual results."

The panel's September 27, 1999 report (Enns Report) to government and the Legislature made 26 recommendations, ranging from creating new legislative committees to requiring three-year plans from government agencies. A copy of the panel's full report is available at http://www.reviewpanel.gov.bc.ca/index1.html

This report outlines the government's response to the panel's recommendations and changes being made to improve budget transparency and accountability, many of which are contained in the Budget Transparency and Accountability Act introduced with Budget 2000.

General Response

Upon release of the Enns Report, the government announced that it accepted in principle the panel recommendations. The detailed discussion below indicates how and when the recommendations are being implemented.

The Enns Report recommended improvements in five key areas:

In summary, while there have been some departures in specific details from the Enns Report recommendations, in spirit all of the elements of the report are being or have been implemented.

Detailed Response

The following is a detailed response to each of the 26 recommendations.

A More Transparent Process

A transparent process is one that the public can understand and to which the public can contribute. The Enns report indicated that transparency was a key principle adopted by the panel, and government has also made enhanced transparency one of its main objectives.

Transparency will be improved through changes such as implementation of effective, public and all-party pre-budget consultations. However, that is not enough. To fully implement these changes will require the Legislature to undertake fundamental reform. Government is fully prepared to make significant changes as part of a cooperative multi-party effort of the Legislative Assembly.

1. Pre-Budget Consultation Document

Panel Recommendation:

Legislation should require that a pre-budget consultation document be released by the government by October 31st of each year as the basis for pre-budget consultations, including updated economic and fiscal forecasts and key issues that need to be addressed in the budget. The panel recommended that this be implemented in October 2000, with consideration given to a delayed implementation in the fall of 1999 for the 2000/01 budget.

Government Response:

Implementation Schedule:

2. Pre-budget Consultation by Select Standing Committee

Panel Recommendation:

A select standing committee of the Legislature should be established with a legislated mandate to undertake budget consultation on the basis of the pre-budget consultation document, with results reported to the minister by December 31st, beginning in the fall of 2000.

Government Response:

Implementation Schedule:

3. Budget Timing

Panel Recommendation:

Legislation should require the annual budget to be introduced by the third Tuesday in March each year, unless that is during an election campaign or less than 30 days after a new government is sworn in, in which case the budget must be introduced as soon as practicable, beginning with Budget 2000.

Government Response:

Implementation Schedule:

4. Estimates Debate through Sectoral Legislative Committees

Panel Recommendation:

Sectoral legislative committees should be created in accordance with the 1996 recommendations of the Public Accounts Committee, and the sectoral committees should conduct the Estimates Debate and review plans and annual reports of Ministries and public bodies, beginning with Budget 2000.

Government Response:

Implementation Schedule:

5. Special Warrant Requirements

Panel Recommendation:

To increase the use of Supplementary Estimates and discourage the use of Special Warrants, legislation should require a public report to be released whenever a Special Warrant is approved. The report should state when the issue arose, what options were considered and why the Special Warrant was chosen. If a Special Warrant request exceeds 2 per cent of total voted appropriations, the report must also include revised fiscal forecasts.

Government Response:

Implementation Schedule:

Reliable and Credible Budget Forecasts

Unless budget forecasts are reliable and credible, the budget process will not be effective as a vehicle for setting government direction and policy or as a mechanism for holding government accountable for its performance.

Government accepts the need to put strong measures in place to enhance budget reliability and credibility. As the detailed responses below indicate, government has accepted the panel's advice about continuing the Economic Forecast Council and ensuring full disclosure of assumptions and policy decisions.

6. Economic Forecast Council

Panel Recommendation:

The Economic Forecast Council should continue to be used as a mechanism to disclose how the budget economic forecast compares to various private sector forecasts developed at the same time.

Government Response:

Implementation Schedule:

7. & 9. Disclosure of Assumptions

Panel Recommendation:

7. Legislation should require that budget documents disclose all material assumptions and policy decisions underlying the economic, revenue and expenditure forecasts, at least to the level of detail in the 1999/00 budget.

9. 

Legislation should require that budget documents disclose whether any factors have been included to make fiscal forecasts different from what the government believes is the most likely result, and the amount by which the forecasts have been adjusted.

Government Response:

Implementation Schedule:

8. Confirmation of Forecast Assumptions and Adjustments

Panel Recommendation:

Legislation should require the Secretary to Treasury Board to attest that there has been complete disclosure of the material assumptions underlying the forecasts and adjustments to them.

Government Response:

Implementation Schedule:

Improved Accountability for Results

The panel made a number of recommendations related to increasing accountability for program results. These recommendations reflect the global trend in government accountability from financial accountability to a broader focus on responsible stewardship over the use of public resources.

The government supports this trend and has taken some initial steps. The Auditor General and government deputy ministers issued a joint plan in this regard in 1995 but, while work has continued since then, not as much progress has been made as had originally been planned.

The government appreciates the panel's recommendations and believes that, with renewed government commitment, the changes being implemented as a result of the panel's recommendations will result in a significant step forward in this important area.

10. Government Strategic Plan and Annual Report

Panel Recommendation:

Legislation should require that the government publish a high-level, long-term strategic plan with annual updates, prior to or at the same time as the budget, as the basis for accountability for results for the provincial public sector; and publish an annual report of performance against the plan, beginning with Budget 2001.

Government Response:

Implementation Schedule:

11. Ministry/Agency Performance Plans and Annual Reports

Panel Recommendation:

Ministries and public bodies in the government reporting entity should be required to publish annual three-year plans that focus on accountability for results and annual reports that indicate the actual results for the year compared to the year's plan, to be phased-in over five years.

Government Response:

Implementation Schedule:

12. Standard Key Performance Indicators

Panel Recommendation:

The government should encourage and participate in interjurisdictional efforts to develop standard key performance indicators for the province as a whole and for specific program areas, and to establish benchmarks for such performance indicators.

Government Response:

Implementation Schedule:

13. Summary of Performance Plan Information as Part of Budget Documents

Panel Recommendation:

Legislation should require that, over a five-year period, the government phase in summary business information (mission, vision, strategic direction, key goals and expected results for the coming year) into the Estimates or budget documents for major programs delivered by ministries and non-commercial Crown corporations.

Government Response:

Implementation Schedule:

14. & 15. Increase Managerial Flexibility and Use Performance Management Techniques

Panel Recommendation:

14. As accountability for results is phased-in and shown to be effective, the government should reduce input controls such as staffing limits, transfers among expenditure categories, contract approval thresholds and travel approvals. The government should publish a plan to reduce input controls with the 2001/02 budget.
15. The government should consider increasing the use of performance management techniques for the management of programs and activities throughout the province, but the panel is not recommending a specific time frame, approach, or programs or activities to which performance management should apply.

Government Response:

Implementation Schedule:

Improved Accounting

As the panel's report indicates, "Accounting is a complex technical area but it is vital that the financial information that the government provides . . . fairly represent(s) the substance of the Province's financial affairs and that people trust the information. Like budget forecasts, financial information must be reliable and credible to be useful in holding the government accountable."

Government is in full agreement with the need to ensure reported financial information is trusted. In fact, British Columbia has been in the lead among Canadian governments in implementing accounting policy changes, such as moving to a full accrual basis of accounting including capitalization of assets.

As discussed below, all of the panel's recommendations are being implemented, albeit with some adjustments to the details. The one exception is that there are no plans at this time to include school districts, colleges, universities and health authorities (the SUCH sector) in the government reporting entity.

16. Apply Generally Accepted Accounting Principles

Panel Recommendation:

Legislation require that financial information provided by the government be prepared in accordance with Generally Accepted Accounting Principles, with any material variance from the accounting profession's written guidance explicitly disclosed. The legislation would continue to require that the government's accounting policy be established by Treasury Board. To be implemented for 2000/01.

Government Response:

Implementation Schedule:

17. Reconciliation of Surplus/Deficit to Debt

Panel Recommendation:

Legislation should require the summary financial statements to include a statement that reconciles the surplus or deficit with the change in debt, beginning with Budget 2000.

Government Response:

Implementation Schedule:

18. Enhanced Auditor General Role in Accounting Policy

Panel Recommendation:

Legislation require that the annual report of the Auditor General include an assessment of whether financial information provided by the government is prepared in accordance with the most appropriate basis of accounting for the purpose of fair presentation and disclosure of the economic and financial substance of provincial public sector activities.

Government Response:

Implementation Schedule:

19. Summary Reporting Entity

Panel Recommendation:

Legislation should require that the reporting and budgeting entity must be the Expanded Summary Entity, which includes the Consolidated Revenue Fund (CRF), Crown corporations and other agencies, and those SUCH sector public bodies that meet the Generally Accepted Accounting Principles criteria for inclusion in the entity. The budgeting entity should be expanded to be the same as the entity currently used in the Public Accounts (i.e. the Summary Entity) for the 2000/01 budget. Beginning with the 2001/02 budget, the budgeting and reporting entities should be expanded together to phase-in inclusion of the SUCH sector, consistent with Generally Accepted Accounting Principles, over several years.

Government Response:

Implementation Schedule:

20. Accounting Policies, Including Consolidation of Crowns

Panel Recommendation:

Legislation should require the Estimates and budget information to be prepared in accordance with the province's accounting policies, including policies on consolidation, beginning with Budget 2000.

Government Response:

Implementation Schedule:

21. Change of Focus from the Consolidated Revenue Fund

Panel Recommendation:

Legislation should ensure that, beginning in 2000/01, significant fiscal indicators are reported on the basis of the government reporting entity and no longer reported on the CRF basis. However, for comparability in reporting against previous budgets, the CRF indicators may also be used for the next two years.

Government Response:

Implementation Schedule:

22. Revenue and Expenditure on both Gross and Net Basis

Panel Recommendation:

Legislation should allow specific revenue and expenditure items to be reported net of offsetting costs and income, but the aggregate amounts of revenue and expenditure should be reported on both a gross basis (without netting associated costs or income) and on a net basis, beginning with the Budget 2000.

Government Response:

Implementation Schedule:

Better Presentation of Information

In addition to making the information associated with the budget process more reliable and credible, the panel has made a number of recommendations about the presentation of the information to make it more accessible. That will improve the understanding of what government is doing and why, thereby enhancing transparency and government's accountability for results.

Government has accepted the panel's recommendations in this area, with some minor adjustments in the specific details. For example, although British Columbia has had a plain language policy for public documents for some time, this policy is reaffirmed in this legislation.

23. Comparable and Understandable Reports

Panel Recommendation:

Legislation should require that ministry and government body plans and annual reports be comparable over time within the same organization and across similar organizations; that Quarterly Reports provide revised fiscal forecasts; and that all budget process documents be in plain language and include summaries.

Government Response:

Implementation Schedule:

24. Legislated Release Dates for Reports

Panel Recommendation:

Legislation should set specific dates by which various documents are required to be made public (see Table E1). In addition, there should be a legislated requirement for public bodies to provide information to the Ministry of Finance and Corporate Relations.

Government Response:

TABLE E1

Implementation Schedule:

25. Capital Project Budgeting and Disclosure

Panel Recommendation:

Proposed reforms to capital budgeting should be implemented by legislation in accordance with the principles proposed by the Auditor General, including closer integration with the process of developing operating budgets; and more disclosure of proposed capital projects, including amounts, objectives, business cases and performance targets for individual major projects. Budget documents should provide disclosure about ongoing projects and the amount approved for new projects but need not provide details of new projects not yet announced. Disclosure for those projects should be made when they are announced.

Government Response:

Implementation Schedule:

26. Annual Implementation Report Card

Panel Recommendation:

Legislation should require the government and the Auditor General to both report annually to the Legislature on the implementation of this report beginning in 2000 and continuing until implementation is complete, and legislation should also require a scheduled independent review of the budget process in eight to ten years.

Government Response:

Implementation Schedule:

Legislation Issues

Panel Recommendation:

Although not a formal recommendation, the Enns Report comments on the need to ensure that the legislation recommended in the report does not have the unintended consequence of generating litigation to block legitimate government policy initiatives on the basis of a perceived defect in process, such as a missed deadline for presentation of the Estimates. The report indicates that it supports the concept of consequences for failure to comply, such as being required to publicly report the reasons for that failure, and legislative provisions that limit legal actions based on defects in the legislated process.

Government Response:

Conclusion

The Final Report of the Budget Process Review Panel has provided government with considerable valuable advice on how to improve the budget process. As indicated, government has implemented or is implementing virtually all of the panel's recommendations, at least in principle. In some cases adjustments have been made to specific parameters, which is to be expected when such a comprehensive and interrelated set of initiatives are implemented. The small number of these adjustments is a credit to the work of the panel.

The work required to fully implement these changes cannot be done overnight. Many of the elements are being fully implemented in Budget 2000 but some of the initiatives, such as those related to improved accountability for results, will take several years and changes to corporate culture as well as to legislation and procedures. One of the most significant changes required is reform of the Legislature, in which the government is inviting the participation of the full Legislative Assembly. As a result, timing of implementation for at least that initiative is not solely in the government's hands. Also, this is a process of continuous improvement that must continue to evolve beyond the specific measures discussed here.

The government is confident that the changes being made now will lead to a significant improvement in transparency and government accountability that will benefit the people of British Columbia.

Topic Box
CONSOLIDATED REVENUE FUND AND THE SUMMARY ACCOUNTS
Topic Box
BUDGET 2000 CONSULTATION PROCESS

 

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