CONSOLIDATED REVENUE FUND AND THE SUMMARY ACCOUNTS

Historical Context for the Consolidated Revenue Fund

Government spending is authorized by appropriations approved by the Legislature. The constitutional basis for appropriations can be traced to the 1688 British Bill of Rights which established the principle of Parliament's control over taxes. From this concept of revenue control evolved the parliamentary right to approve public expenditures. The British Consolidated Fund Act of 1787 introduced the concept of a Consolidated Revenue Fund into which public moneys were paid.

In Canada, federal and provincial Consolidated Revenue Funds were established under the Constitution Act, 1867. References to the Consolidated Revenue Fund are also found in the British Columbia Constitution Act and Financial Administration Act.

The provincial Financial Administration Act (FAA) requires all revenues of the government to be paid into the Consolidated Revenue Fund. Revenues of the government generally exclude revenues earned by Crown corporations, however, dividends paid by Crown corporations are included in Consolidated Revenue Fund revenue.

The FAA also states that money must not be paid out of the Consolidated Revenue Fund without the authority of an appropriation.

The Estimates have traditionally been constructed to discharge the constitutional obligations to disclose government revenues being paid into and government expenses being paid out of the Consolidated Revenue Fund.

Revenues have not been debated by the Legislature. However, in keeping with the principle of parliamentary right to approve expenditures, Consolidated Revenue Fund budgeted expenditures are debated and voted upon by the Legislature. Passage of a Supply Act provides final legislative authority for the government to make payments from the Consolidated Revenue Fund for the purposes and in the amounts set out in the Estimates.

Summary Accounts

The role of government has expanded significantly in recent years and government now delivers many services through entities that are not part of the Consolidated Revenue Fund. Consequently, the Consolidated Revenue Fund no longer represents the full scope of government activity.

Therefore, commencing with the 2000/01 fiscal year, the Estimates are being prepared on the Summary Accounts basis. The Summary Accounts combines the Consolidated Revenue Fund with the operating results of Crown corporations and agencies. The Summary Accounts Estimates will accomplish two objectives. First, it will disclose the budgeted bottom line for the more broadly defined government reporting entity; and second, it will continue to disclose Consolidated Revenue Fund expenses for the purposes of Legislative approval and Supply Act and FAA requirements.

Definition of the Summary Accounts Entity

The Public Sector Accounting Board (PSAB) is authorized by the Canadian Institute of Chartered Accountants to issue recommendations and guidelines with respect to accounting matters in the public sector.

PSAB recommends that provincial government reporting entities include organizations that are accountable for the administration of their financial affairs and resources either to a minister of the government or directly to the Legislature, and are owned or controlled by the government.

The government's Summary Accounts includes the Consolidated Revenue Fund plus Crown corporations, but does not, at this time, include the schools, universities, colleges and health authorities (SUCH sector). The SUCH sector is excluded because organizations within the section are governed by independent representatives who are accountable for the operations of those organizations. Further consultation with the SUCH sector regarding the governance implications of including the sector in the government's Summary Accounts will be required.

Provincial grants to the SUCH sector fund most or all of the shortfall between SUCH sector external revenues and sector operating costs. The net profit/loss in the SUCH sector is therefore effectively captured in Consolidated Revenue Fund expenses. Consequently, inclusion of the SUCH sector in the Summary Accounts would have minimal impact on the Summary Accounts bottom line. For the previous three years, inclusion of the SUCH sector would have slightly reduced the Summary Accounts deficit.

In addition, much of the SUCH sector's capital spending is reflected in the government's Consolidated Capital Plan and is therefore included in taxpayer-supported debt in the Consolidated Revenue Fund and Summary Accounts.

In the Auditor General's opinion, adoption of the PSAB recommendation would result in the inclusion of the SUCH sector in the Summary Accounts. The Auditor General has qualified his opinion on the government's Summary Accounts financial statements as a result of the exclusion of the SUCH sector.

Consolidation

For reasons of transparency and simplicity the Estimates discloses the Summary Accounts deficit by adding the net income/loss of Crown corporations and agencies to the Consolidated Revenue Fund operating result.

The Estimates also distinguishes between self-supporting Crown corporations and agencies (those that operate independently of government funding) and taxpayer-supported Crowns and agencies (those that are in some way dependent upon government funding).

The Estimates disclosure provides readers with a clear understanding of the three major components of the Summary Accounts (Consolidated Revenue Fund; taxpayer-supported Crowns/agencies; and self-supported Crowns/agencies) and each component's contribution to the Summary Accounts bottom line.

PSAB recommends full consolidation for Crown corporations and agencies that are, in full or in part, financially dependent upon the government (such as British Columbia Transit and the British Columbia Ferry Corporation). Full consolidation would result in the intermingling of Consolidated Revenue Fund revenues and expenses with those of the taxpayer-supported Crown corporations and agencies. For example, ferry and transit fares and ferry cafeteria sales would be included with income tax and resource revenues in the government budget. Similarly, the cost of operating ferries and buses would be included with direct government expenses.

Full consolidation would be less transparent in that it would blur the distinction between the Consolidated Revenue Fund, for which government has direct day-to-day responsibility, and Crown corporations and agencies, which are the direct responsibility of independent representatives.

The Estimates consolidation method and full consolidation produce the same surplus/deficit.

Public Accounts

The Public Accounts has, for a number of years, included a Summary Accounts financial statement that fully consolidates taxpayer-supported Crown corporations and agencies.